<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 3, 1998
REGISTRATION NO. 333-56233
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
NATIONSRENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7353 31-1570069
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
ORGANIZATION)
</TABLE>
450 EAST LAS OLAS BOULEVARD, SUITE 1400
FT. LAUDERDALE, FLORIDA 33301
(954) 760-6550
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JAMES L. KIRK
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND PRESIDENT
NATIONSRENT, INC.
450 EAST LAS OLAS BOULEVARD
FORT LAUDERDALE, FLORIDA 33301
(954) 760-6550
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
STEPHEN K. RODDENBERRY LEIGH P. RYAN
AKERMAN, SENTERFITT & EIDSON, P.A. PAUL, HASTINGS, JANOFSKY & WALKER LLP
ONE S.E. 3RD AVENUE, 28TH FLOOR 399 PARK AVENUE, 31ST FLOOR
MIAMI, FLORIDA 33131-1704 NEW YORK, NEW YORK 10022-4697
(305) 374-5600 (212) 318-6006
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
--------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------------------------
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share.............................. 14,950,000 $12.00 $179,400,000 $52,923(1)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The registrant previously paid $29,500 of this filing fee on June 5, 1998
with the initial filing of this Registration Statement, $15,281 of this
filing fee on July 9, 1998 with Amendment No. 2 to this Registration
Statement and $8,142 of this filing fee on July 22, 1998 with Amendment No.
3 to this Registration Statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS SUBJECT TO COMPLETION, DATED AUGUST 3, 1998
13,000,000 SHARES
(LOGO) NATIONSRENT(TM)
COMMON STOCK
All of the 13,000,000 shares of common stock, $0.01 par value per share
(the "Common Stock"), offered hereby (the "Offering") are being offered by
NationsRent, Inc. ("NationsRent" or the "Company"). Of the 13,000,000 shares
offered hereby, the Company expects that certain trusts for the benefit of
family members of H. Wayne Huizenga, a director of the Company, and certain
associates of Mr. Huizenga (collectively, the "Huizenga Investors"), will
purchase, for investment purposes and at the Price to Public set forth below,
shares having an aggregate initial public offering price of $25,000,000
(2,272,727 shares assuming an initial public offering price of $11.00 per share,
which is the midpoint of the estimated range set forth below). The balance of
the shares will be offered to the public. Prior to the Offering, there has been
no public market for the Common Stock. It is currently estimated that the
initial public offering price will be between $10.00 and $12.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The Common Stock has been approved for
listing on the New York Stock Exchange ("NYSE") under the symbol "NRI," subject
to official notice of issuance.
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
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<S> <C> <C> <C>
Per Share....................................... $ $ $
- ---------------------------------------------------------------------------------------------------------------
Total(4)........................................ $ $ $
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares expected to be purchased in the Offering by the
Huizenga Investors at the Price to Public, with respect to which the Company
will receive the full proceeds and no underwriting discounts or commissions
will be paid by the Company or the Huizenga Investors.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting." With respect to the
shares expected to be purchased in the Offering by the Huizenga Investors,
the Company will receive the full proceeds and no underwriting discounts or
commissions will be paid by the Company or the Huizenga Investors .
(3) Before deducting expenses of the Offering payable by the Company estimated
at $2,000,000.
(4) The Company has granted to the Underwriters a 30-day option to purchase up
to 1,950,000 additional shares of Common Stock on the same terms and
conditions as set forth above solely to cover over-allotments, if any. If
this option is exercised in full, the Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------------
The shares of Common Stock are offered, subject to prior sale, when, as and
if delivered to and accepted by the Underwriters, subject to certain conditions
including the approval of certain legal matters by counsel for the Underwriters.
The Underwriters reserve the right to withdraw, cancel or modify such offer and
to reject orders in whole or in part. It is expected that delivery of the shares
of Common Stock will be made against payment therefor on or about ,
1998 at the office of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New
York 10167.
------------------------------
BEAR, STEARNS & CO. INC.
BT ALEX- BROWN
DONALDSON, LUFKIN & JENRETTE
NATIONSBANC MONTGOMERY SECURITIES LLC
The date of this Prospectus is , 1998.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 3
NATIONSRENT
MARKETS AND LOCATIONS
68 locations
10 Markets
Southern Michigan (2 locations)
Central/Northern Ohio (19 locations)
SW Pennsylvania (1 location)
Ohio River Valley (5 locations)
Louisville/Lexington KY (3 locations)
SW Ohio/Kentucky (5 locations)
Indianapolis/Northern IN (9 locations)
Florida Panhandle (6 locations)
Florida Gulf Coast (4 locations)
Texas/Louisiana Gulf Coast (14 locations)
[PHOTO OF EXTERIOR SIGNAGE]
[MAP OF LOCATIONS]
------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON STOCK
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. SEE "UNDERWRITING."
<PAGE> 4
[Photo of exterior of location]
[Photos of rental equipment]
[Photos of interior of location]
[Photo of training session]
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the consolidated financial statements and the notes thereto ("Consolidated
Financial Statements") and the pro forma consolidated financial statements and
the notes thereto appearing elsewhere in this Prospectus. Unless the context
otherwise requires, all references to "NationsRent" or the "Company" include
NationsRent, Inc. and its subsidiaries. Unless otherwise indicated (i) all
information contained in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised, (ii) the description of the business of
the Company reflects all equipment rental businesses acquired by the Company as
of the date of this Prospectus (collectively, the "Acquisitions") and (iii) all
historical share information contained in this Prospectus has been adjusted to
reflect a 2,500 for 1 split of the Common Stock which occurred on June 2, 1998
(the "Stock Split").
THE COMPANY
NationsRent is one of the fastest growing equipment rental companies in the
United States. The Company has acquired a core platform of equipment rental
businesses concentrated in selected markets and intends to build a network of
nationally branded locations. NationsRent expects to become a leading provider
of rental equipment in each market it enters by acquiring platform businesses
and opening or acquiring additional locations concentrated around those
businesses. The Company believes that this "cluster" strategy enables it to (i)
increase profitability in its acquired stores and (ii) achieve profitability in
its newly opened locations more quickly than its competitors.
The Company's locations offer a comprehensive selection of high quality,
well-maintained rental equipment, including backhoes, bulldozers, skid steer
loaders, aerial lifts and work platforms, compressors and generators. The
Company markets its products and services primarily to a broad range of
construction and industrial customers, including heavy highway contractors,
general contractors, subcontractors, manufacturing plants and distribution
centers. The Company also sells used and new equipment, spare parts and
supplies, and provides maintenance and repair services. Since its formation in
August 1997, the Company has acquired 16 equipment rental businesses operating
in Florida, Indiana, Kentucky, Louisiana, Michigan, Ohio, Pennsylvania, Texas
and West Virginia. The Company operates 68 locations and for the year ended
December 31, 1997, on a pro forma basis after giving effect to the Acquisitions,
the Company had revenue of $213.8 million and operating income of $36.7 million.
NationsRent is capitalizing on the current dynamics in the equipment rental
industry. According to industry sources, the United States equipment rental
industry grew from an estimated $614 million in revenue in 1982 to an estimated
$20 billion in 1997, which represents a compound annual growth rate of more than
26%. This growth has been driven primarily by construction and industrial
companies increasingly outsourcing their equipment needs to reduce investment in
non-core assets and convert costs from fixed to variable. According to industry
sources, the United States equipment rental industry is expected to grow to an
estimated $40 billion in annual revenue over the next five years due to the
overall growth in the economy and a continuing trend from sales to rentals. In
addition, the United States equipment rental industry is highly fragmented, with
more than 20,000 companies. According to industry sources, the 100 largest
equipment rental companies have a combined market share of less than 20%, no
single equipment rental company in the United States has a market share greater
than 3% and more than 90% of equipment rental companies have ten or fewer
locations. NationsRent believes it can take advantage of the fragmentation in
the equipment rental industry and the absence of an equipment rental company
with significant market share to achieve a leading market position by creating
an integrated network of nationally branded locations offering broad product
selection and superior customer service.
3
<PAGE> 6
COMPETITIVE STRENGTHS
NationsRent believes it has several competitive strengths that will enable
it to continue to increase growth and profitability, including the following:
Strong Market Position. The Company believes that, by implementing
its "cluster" strategy in each market it enters, it can achieve a leading
market share and increase revenue from existing customers. The Company
believes this strategy will enable it to more effectively serve its
customers, broaden its customer base, pool rental equipment inventory,
offer a broader selection and greater availability of equipment and
maintain a high utilization rate. By offering a full range of rental
equipment from each location, the Company believes that customers who
currently utilize multiple rental equipment providers will prefer to fill
their rental needs through the NationsRent network of locations. In
addition, NationsRent believes it has other advantages relative to smaller
operators, including greater purchasing power and a lower cost of capital.
National Brand. NationsRent is in the process of entering selected
markets with the goal of establishing a nationally recognized brand
throughout the United States. All NationsRent locations will be supported
by the Company's national branding strategy including a distinctive store
format and marketing program. The Company believes it will be able to
increase revenue by establishing a brand name known for consistent quality
and an extensive supply of rental inventory in a customer-oriented
atmosphere. The Company expects this branding strategy to enable it to
expand its customer base to attract a broader range of customers, including
large customers with operations in a variety of geographic markets.
Focus on Customer Service. NationsRent is differentiating itself from
its competitors with innovations designed to increase customer
satisfaction. The Company seeks to offer more convenient access, faster
check-in and check-out procedures and shorter required lead time for
rentals than its competitors, as well as on-time equipment delivery and
pick-up, on-site repair service, 24-hour customer assistance and a library
of audio, video and written instruction materials for equipment usage and
safety. In addition, as part of the Company's plan to provide one-stop
shopping to customers, each location sells parts and supplies to complement
equipment rentals and sales.
State-of-the-Art Management Information System. The Company is
customizing a state-of-the-art management information system capable of
monitoring operations at several thousand locations. This innovative system
is being designed to track customer purchasing patterns and demographics
for use in gaining market share in new and existing markets, consolidating
equipment purchases, maximizing utilization rates and reducing overhead
expenditures. This system will provide management with real time revenue,
inventory, financial and customer information, facilitating rapid and well
informed decision making. In addition, this system will permit customers to
reserve and rent equipment and access their account information from their
own computer terminals via the Company's internet website. To develop its
customized system, the Company has assembled a team of management
information specialists who have previously developed systems for
Blockbuster Entertainment Corporation ("Blockbuster"), the world's largest
video rental company, and Wal-Mart Stores, Inc. ("Wal-Mart"), the world's
largest retailer.
Distinctive Operating Format. In connection with the development of
the NationsRent national brand, the Company has designed a format for its
locations which it believes will help differentiate NationsRent from its
competitors. Distinguishing characteristics of this format include
drive-through lanes, clearly marked equipment aisles and attractive, well
organized and clean store facilities. The Company expects that its larger
locations will typically be on a 6 to 12 acre site in a heavily-trafficked
area with a 20,000 to 40,000 square foot facility housing a reconditioning
center and a broad selection and extensive inventory of equipment and
supplies. The Company expects that its smaller locations will typically be
on a 2 to 6 acre site in a high-visibility commercial area with a 7,500 to
11,000 square foot facility housing at least one drive-through lane,
maintenance and delivery capabilities and inventory and supplies that are
targeted to the customer base in that area.
Experienced Management Team. The Company believes it has one of the
most experienced and growth-oriented executive management teams among
publicly-traded companies in the equipment rental
4
<PAGE> 7
industry. James L. Kirk, the Company's Chairman, Chief Executive Officer
and President, founded OHM Corporation ("OHM"), a NYSE listed company, in
1969 and served in various senior executive positions with OHM, growing it
into a leading environmental construction company with an inventory of
heavy and light equipment having an original cost of over $100 million. In
addition, the Company will benefit from the experience of H. Wayne
Huizenga, a director of and investor in the Company, who serves as Chairman
and Co-Chief Executive Officer of Republic Industries, Inc. ("Republic")
and who co-founded and served in various senior executive positions with
Waste Management, Inc. ("Waste Management") and Blockbuster, each of which
is a leading consolidator in its respective industry. The other members of
the Company's senior management team have previously worked closely with
Mr. Kirk in senior management positions at OHM, and other key employees and
consultants of the Company have worked with Mr. Huizenga in various
positions at Republic, Waste Management or Blockbuster. The NationsRent
management team is supported by operating, marketing and business
development managers with an average of more than 15 years of experience in
the equipment rental industry.
GROWTH STRATEGY
The Company's objectives are to increase revenue, profitability, market
share and stockholder value by building a nationally branded network of
locations that offer a comprehensive selection of high quality rental equipment
in convenient and accessible locations to customers in the construction and
industrial markets. Key elements of the NationsRent growth strategy are as
follows:
Acquire Leading Companies. NationsRent seeks to acquire leading
companies in each market it enters to implement its "cluster" strategy and
position the Company to achieve significant market share. The Company
targets businesses that have one or more of the following characteristics:
(i) strong positions in their geographic market; (ii) experienced local
management teams that will continue to work with the Company following the
acquisition; (iii) high quality equipment rental inventory; and (iv)
physical and operating characteristics that are suited to conversion to the
NationsRent format. Once the Company has entered a particular market, it
seeks to acquire additional rental businesses in that market or adjacent
markets with locations and equipment selection that complement its existing
operations, thus enabling the Company to further penetrate that market. See
"Business -- Acquisitions."
Convert Acquired Locations. After making an acquisition, the Company
intends to convert acquired locations to the NationsRent format by (i)
branding acquired locations and rental inventory with the NationsRent logo,
colors and distinctive store appearance, (ii) increasing the breadth and
depth of rental inventory, (iii) linking the location to the Company's
customized management information system and (iv) implementing the
NationsRent customer service approach. The cost of converting an acquired
location to the NationsRent format will vary depending on the physical
properties of the acquired location and the condition, breadth and depth of
rental equipment inventory at such location, which are factors considered
in the selection and pricing of acquisition candidates. The average cost
incurred by the Company through March 31, 1998 to convert acquired
locations to the NationsRent format was approximately $0.9 million per
location, which costs primarily related to increasing the breadth and depth
of rental inventory.
Open New Rental Locations. Once NationsRent has established a
presence in a particular market, it seeks to open new locations in that
geographic area or adjacent areas to enable it to offer a greater selection
and availability of equipment, maximize its equipment inventory utilization
rates and achieve economies of scale. The Company believes that this
strategy will allow its new locations to achieve profitability at a faster
rate than its competitors because these locations should (i) more quickly
generate revenue as a result of the pre-existing market presence, name
recognition and referrals from existing locations and (ii) have lower
overhead costs due to the sharing of service, maintenance, administrative
functions and personnel with the Company's established locations. Since
August 1997, the Company has opened six new locations. The Company does not
plan to open any additional new locations in 1998. However, the Company
continues to evaluate the need for new locations as it acquires equipment
rental companies in new markets. The cost of opening the Company's six new
locations has varied depending on whether the Company has leased or
purchased the underlying real property, the size of the location and
5
<PAGE> 8
the breadth and depth of inventory at each location. The average cost
incurred by the Company through June 30, 1998 to open new locations was
approximately $2.9 million per location. The Company's new locations have
on average achieved profitability within approximately five months of their
opening.
Further Penetrate Industrial Rental Market. The Company believes that
the equipment needs of industrial customers are underserved by the United
States equipment rental market and, as a result, there are significant
opportunities to further penetrate this market segment. NationsRent
believes that by offering a comprehensive selection and available supply of
rental equipment throughout an integrated nationally branded network of
locations, industrial customers will become increasingly aware of the
advantages of equipment rental relative to ownership, including reduced
capital investment, reduced storage and maintenance expense, and greater
access to the most modern equipment. The recent acquisition of The
Bode-Finn Company ("Bode-Finn"), which has served industrial customers for
over 40 years, has established the Company as a leading provider of rental
equipment to industrial customers in several geographic markets.
ACQUISITIONS
In furtherance of its growth strategy, NationsRent has acquired 16
equipment rental businesses with 65 locations. See "Business -- Acquisitions."
These locations are concentrated in two regions, as set forth in the following
table:
<TABLE>
<CAPTION>
DATE NUMBER
REGION MARKET SERVED ACQUIRED BUSINESS ACQUIRED OF LOCATIONS
- ------ ------------- ----------------- -------- ------------
<S> <C> <C> <C> <C>
Midwest Central/Northern Ohio Sam's 9/97 5
R&R 12/97 2
Central 1/98 8
Bode-Finn 5/98 1
Ohio River Valley Ashland 11/97 2
Titan 12/97 2
Bode-Finn 5/98 1
Indianapolis/Northern Indiana C&E 12/97 6
RFL 4/98 1
U-Rent-It 5/98 1
Jobs 6/98 1
Southwest Ohio/Northern Kentucky Bode-Finn 5/98 4
Jobs 6/98 1
Louisville/Lexington, Kentucky Bode-Finn 5/98 2
Jobs 6/98 1
Southwest Pennsylvania A-Action 6/98 1
Detroit, Michigan J. Kelly 7/98 2
Gulf Coast Southwest Florida Naples 4/98 2
Revco 4/98 2
Florida Panhandle General Rental 7/98 6
Southeast Texas Associated 7/98 4
General Rental 7/98 7
Louisiana Associated 7/98 3
--
Total: 65
==
</TABLE>
RECENT DEVELOPMENTS
The Company recently entered into letters of intent to acquire nine
equipment rental businesses with aggregate annual revenue of approximately $70.0
million and a total of 25 equipment rental locations. Each of these acquisitions
is subject to a number of closing conditions, including the execution of
definitive purchase agreements, and there can be no assurance that any of these
acquisitions will be consummated.
6
<PAGE> 9
The Company's unaudited historical results of operations for the three and
six months ended June 30, 1998 and the unaudited pro forma results of operations
for the three and six months ended June 30, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA AS ADJUSTED(1)
------------------------------ ------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
THREE MONTHS SIX MONTHS JUNE 30, JUNE 30,
ENDED ENDED ------------------ --------------------
JUNE 30, 1998 JUNE 30, 1998 1997 1998 1997 1998
------------- ------------- ------- ------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenue.............................. $35,359 $44,398 $57,899 $66,895 $102,366 $115,293
Gross profit......................... 12,268 15,317 18,330 21,648 31,536 36,786
Operating income..................... 4,554 5,399 9,523 9,885 14,094 15,468
Net income........................... 1,200 1,293 4,317 4,052 6,025 6,141
Earnings per share:
Basic.............................. $ 0.04 $ 0.05 $ 0.10 $ 0.09 $ 0.14 $ 0.14
Diluted............................ $ 0.04 $ 0.05 $ 0.10 $ 0.09 $ 0.14 $ 0.14
</TABLE>
- ---------------
(1) The pro forma as adjusted results of operations for the three and six months
ended June 30, 1997 and 1998 give effect to the Acquisitions, the Founders'
Additional Contribution, the Private Placement, certain borrowings under the
Credit Facility and the Offering as described in the "Pro Forma Consolidated
Financial Statements" as if such transactions had occurred on the first day
of the period presented.
Pro forma for the Acquisitions, the Company's total revenue increased $9.0
million or 15.5% and $12.9 million or 12.6% for the three and six months ended
June 30, 1998, respectively, as compared to the same periods in 1997. Pro forma
rental revenue increased $5.2 million or 17.7% to $34.4 million and $9.7 million
or 20.0% to $58.5 million for the three and six months ended June 30, 1998,
respectively, as compared to the same periods in 1997. This increase was
primarily due to increased capital expenditures and improved operations at the
locations owned by the Company for the entire three and six month periods in
1998, as well as overall growth in the industry. The Company owned six of the
Acquisitions for the entire second quarter, completed seven of the Acquisitions
during the second quarter and completed three of the Acquisitions subsequent to
the second quarter. For the six businesses the Company has owned since January
1998, pro forma rental revenue increased 32.3% and total revenue increased 21.8%
for the six months ended June 30, 1998 as compared to the same period in 1997.
Pro forma operating income increased $0.4 million or 3.8% and $1.4 million
or 9.7% for the three and six months ended June 30, 1998, respectively, as
compared to the same periods in 1997. As a percentage of revenue, second quarter
pro forma operating income decreased from 16.4% in 1997 to 14.8% in 1998 and
decreased from 13.8% in the first half of 1997 to 13.4% in the first half of
1998. Such decreases were due to corporate overhead expense totaling
approximately $1.7 million and $2.1 million for the three and six month periods
in 1998, respectively, that did not exist during the same periods in 1997. The
overhead expense is primarily related to business development activities,
operations management, sales and marketing, accounting, systems development and
other administrative functions. Excluding the overhead expenses, pro forma
operating income as a percentage of revenue would have been 17.3% and 15.3% for
the three and six months ended June 30, 1998, respectively. For the six
businesses the Company has owned since January 1998, operating income (exclusive
of corporate overhead) increased 52.8% for the six months ended June 30, 1998 as
compared to the same period in 1997.
The Company was incorporated in the State of Delaware in August 1997. The
Company's principal executive offices are located at 450 East Las Olas
Boulevard, Fort Lauderdale, Florida 33301 and its telephone number is (954)
760-6550.
7
<PAGE> 10
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company......................... 13,000,000 shares(1)
Common Stock to be outstanding after the Offering........... 43,118,694 shares(1)(2)
Use of proceeds............................................. To repay certain outstanding
indebtedness. See "Use of
Proceeds."
NYSE Symbol................................................. "NRI"
</TABLE>
- ---------------
(1) Does not include 1,950,000 shares of Common Stock which may be issued by the
Company upon exercise of the Underwriters' over-allotment option.
(2) Does not include (i) 5,000,000 additional shares of Common Stock reserved
for issuance in connection with options that may be granted under the 1998
Stock Option Plan that the Company expects to adopt prior to consummation of
the Offering (the "1998 Stock Option Plan"), (ii) 1,087,571 additional
shares of Common Stock reserved for issuance in connection with certain
outstanding options, (iii) 72,727 additional shares of Common Stock reserved
for issuance in connection with certain outstanding warrants (assuming an
initial public offering price of $11.00 per share, which is the midpoint of
the estimated range set forth on the cover of this Prospectus) and (iv)
4,453,636 additional shares of Common Stock reserved for issuance in
connection with certain convertible promissory notes of the Company
(assuming an initial public offering price of $11.00 per share, which is the
midpoint of the estimated range set forth on the cover of this Prospectus).
See "Management -- Stock Option Plan," "Description of Certain
Indebtedness -- Promissory Notes" and "Description of Capital
Stock -- Warrants and Options."
RISK FACTORS
Prospective purchasers of Common Stock in the Offering should carefully
consider the risk factors set forth under "Risk Factors" beginning on page 10
and the other information included in this Prospectus prior to making an
investment decision. See "Risk Factors."
8
<PAGE> 11
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
HISTORICAL(1)
------------- HISTORICAL(1)
------------- PRO FORMA AS
AUGUST 14 PRO FORMA ADJUSTED THREE
(INCEPTION) AS ADJUSTED THREE MONTHS MONTHS ENDED
THROUGH YEAR ENDED ENDED MARCH 31,(2)
DECEMBER 31, DECEMBER 31, MARCH 31, ------------------
1997 1997(2) 1998 1997 1998
------------- ------------ ------------- ------- -------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue....................................... $ 9,305 $213,848 $ 9,039 $44,467 $48,398
Gross profit(3)..................................... 3,892 76,632 3,050 13,206 15,138
Operating income(3)................................. 2,527 36,742 845 4,571 5,583
Interest expense.................................... 760 9,358 808 1,882 2,228
Income before provision for income taxes............ 1,767 28,026 160 2,941 3,601
Net income.......................................... $ 1,001 $ 16,256 $ 93 $ 1,708 $ 2,089
Basic earnings per share............................ $ 0.04 $ 0.38 $ 0.00 $ 0.04 $ 0.05
Diluted earnings per share.......................... $ 0.04 $ 0.38 $ 0.00 $ 0.04 $ 0.05
OTHER DATA:
Gross margin........................................ 41.8% 35.8% 33.7% 29.7% 31.3%
Operating margin.................................... 27.2% 17.2% 9.3% 10.3% 11.5%
Rental equipment purchases(4)....................... $ 2,461 $ 97,858 $ 19,584 $27,802 $42,447
Amortization of goodwill(3)......................... 166 3,734 259 933 933
Depreciation and other amortization................. 1,644 25,391 1,264 5,664 6,625
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------- AS ADJUSTED
AS OF AS OF
MARCH 31, 1998 MARCH 31, 1998(2)
-------------- -----------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SELECTED BALANCE SHEET DATA:
Rental equipment, net....................................... $ 49,063 $201,829
Goodwill.................................................... 41,388 149,349
Total assets................................................ 102,778 403,688
Total debt.................................................. 52,230 155,076
Stockholders' equity........................................ 32,094 209,834
</TABLE>
- ---------------
(1) The Acquisitions have been accounted for as purchases and, accordingly, the
operations of the acquired businesses are included in the statement of
operations data and other data from the date of acquisition.
(2) The pro forma as adjusted statement of operations data for the year ended
December 31, 1997 and the three months ended March 31, 1997 and 1998 and the
pro forma as adjusted selected balance sheet data as of March 31, 1998 give
effect to the Acquisitions, the Founders' Additional Contribution, the
Private Placement, certain borrowings under the Credit Facility and the
Offering as described in the "Pro Forma Consolidated Financial Statements"
as if such transactions had occurred on the first day of the period
presented, and in the case of the pro forma as adjusted balance sheet data,
as of March 31, 1998. See "Use of Proceeds," "Risk Factors -- Substantial
Leverage," "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Certain Transactions" and
the Company's pro forma and historical financial statements and related
notes.
(3) The amortization period for rental equipment depreciation ranges from two to
ten years. The amortization period for goodwill is 40 years.
(4) Rental equipment purchases represent the purchase price of rental equipment
inventory acquired during the period.
9
<PAGE> 12
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to the other information contained in this
Prospectus, prospective investors should consider the following factors
carefully in evaluating an investment in the Common Stock offered hereby. This
Prospectus contains "forward-looking statements" relating to, without
limitation, future economic performance, plans and objectives of management for
future operations, and projections of revenue and other financial items that are
based on the beliefs of, assumptions made by and information currently available
to the Company's management. The words "expect," "estimate," "anticipate,"
"believe," "intend," "plan" and similar expressions and variations thereof are
intended to identify forward-looking statements. The cautionary statements set
forth in this "Risk Factors" section and elsewhere in this Prospectus identify
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to differ
materially from those expressed in or implied by such forward-looking
statements.
LIMITED OPERATING HISTORY
The Company was formed in August 1997 and commenced operations in September
1997 with its acquisition of Sam's Equipment Rental, Inc. and Gabriel Trailer
Manufacturing Company, Inc. (collectively, "Sam's"). Accordingly, the Company
has only a limited operating history upon which an evaluation of the Company,
its growth strategy and its prospects can be based. The Company's prospects must
be evaluated in light of the risks, expenses and difficulties frequently
encountered by companies in the early stages of development. Although the
Company has experienced growth in revenue and net income recently, there can be
no assurance that growth or profitability can or will be sustained or that the
Company's strategy of building a network of nationally branded equipment rental
locations will lead to growth or profitability.
ACQUISITION AND INTEGRATION RISKS
Since its inception in August 1997, the Company has acquired 16 equipment
rental businesses operating 65 locations in nine states. The Company intends to
continue this rapid growth by continuing to make acquisitions, opening new
locations and converting acquired locations to the Company's format. There can
be no assurance that the Company will be able to identify acquisition candidates
or suitable new locations or obtain financing for acquisitions or internal
expansion on satisfactory terms, or at all. In the event that suitable
acquisition candidates are not identifiable or to the extent that acquisitions
are prohibitively costly, the Company may be forced to alter its growth
strategy. The Company's growth strategy presents the risks inherent in assessing
the value, strengths and weaknesses of growth opportunities, in evaluating the
costs and uncertain returns of expanding the operations of the Company, and in
integrating acquisitions with existing operations. The Company expects that its
growth strategy may affect short-term cash flow and net income as the Company
increases the amount of its indebtedness and incurs expenses to open new
locations, make acquisitions and expand its rental inventory. As a result, the
Company's revenue and operating results may fluctuate. There can be no assurance
that the Company will successfully expand, that any acquired businesses will be
successfully integrated into the Company's operations or that any expansion will
result in profitability. The failure of the Company to successfully implement
its growth strategy may have a material adverse effect on the Company's
business, financial condition, results of operations or prospects or the market
price of the Common Stock.
The Company's anticipated growth will place significant demands on the
Company's management and its operational, financial and marketing resources. In
connection with acquisitions and the opening of new locations, the Company
anticipates experiencing growth in the number of its employees, the scope of its
operating and financial systems and the geographic area of its operations. The
Company believes this growth will increase the operating complexity of the
Company and the level of responsibility exercised by both existing and new
management personnel. To manage this expected growth, the Company intends to
invest further in its operating and financial systems and to continue to expand,
train and manage its employee base. There can be no assurance that the Company
will be able to attract and retain qualified management and employees or that
the Company's current operating and financial systems and controls will be
adequate as the Company grows or that any steps taken to improve such systems
and controls will be sufficient. The failure of
10
<PAGE> 13
the Company to successfully integrate and manage its growth may have a material
adverse effect on the Company's business, financial condition, results of
operations or prospects or the market price of the Common Stock.
There may be liabilities that the Company fails or is unable to discover in
the course of performing due diligence investigations on each company or
business it has acquired or seeks to acquire in the future, including
liabilities arising from non-compliance with applicable federal, state or local
environmental requirements by prior owners and for which the Company, as a
successor owner, may be responsible. The Company seeks to minimize the risk by
conducting such due diligence, including environmental reviews, as it deems
appropriate under the circumstances, but there can be no assurance that
reasonable due diligence efforts will result in the identification of all
existing conditions or risks. The Company also generally seeks to obtain rights
to indemnification from each seller of acquired businesses or properties, which
indemnification obligation may be supported by deferring payment of a portion of
the purchase price or other appropriate security. However, there can no
assurance that such indemnification, even if obtained, will be enforceable,
collectible or sufficient in amount, scope or duration to fully offset the
possible liabilities associated with the business or property acquired. Any such
liabilities, individually or in the aggregate, could have a material adverse
effect on the Company's business, financial condition, results of operations or
prospects.
DEPENDENCE ON ADDITIONAL CAPITAL FOR FUTURE GROWTH
The Company's ability to remain competitive, sustain its growth and expand
its operations through new locations and acquisitions largely depends on its
access to capital. In addition, the Company must make ongoing capital
expenditures to update and maintain the condition of its rental equipment
inventory in order to provide its customers with high-quality equipment. To
date, the Company has financed capital expenditures and acquisitions primarily
through private equity, bank financing, vendor financing and the issuance of
promissory notes. To implement its growth strategy and meet its capital needs,
the Company plans to issue additional equity securities and incur additional
indebtedness in the future. In addition, the Company may seek to increase its
$265 million revolving credit facility (the "Credit Facility") from time to time
after consummation of the Offering. The Company intends to use the net proceeds
of the Offering to repay borrowings under the Credit Facility and may in the
future issue additional equity or debt securities to repay additional
outstanding amounts under the Credit Facility. Borrowings under the Credit
Facility mature and must be repaid in full in July 2001. There can be no
assurance that any of such increases or any additional capital, if and when
required, will be available on terms acceptable to the Company, or at all.
Failure by the Company to obtain sufficient additional capital in the future
could force the Company to curtail its growth or delay capital expenditures,
which could have a material adverse effect on the Company's business, financial
condition, results of operations or prospects or the market price of the Common
Stock.
The Company's ability to finance future acquisitions, new locations and
internal growth is currently limited by the covenants contained in the Credit
Facility, including a number of covenants that, among other things, restrict the
ability of the Company to dispose of assets or merge, incur debt, pay dividends,
repurchase or redeem capital stock, create liens, make non-rental equipment
capital expenditures and make certain investments or acquisitions and otherwise
restrict corporate activities. The Credit Facility also contains, among other
covenants, requirements that the Company maintain specified financial ratios,
including minimum cash flow levels and interest coverage. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Business -- Growth Strategy"
and "Description of Certain Indebtedness."
SUBSTANTIAL LEVERAGE
The Company has a substantial amount of indebtedness. As of March 31, 1998,
on a pro forma basis after giving effect to the Acquisitions, an additional
equity contribution of $17.4 million from the Company's founders (the "Founders'
Additional Contribution"), a $27.6 million private placement of shares of Common
Stock (the "Private Placement"), certain borrowings under the Credit Facility,
the Offering and the application of the estimated net proceeds therefrom
(assuming an initial public offering price of $11.00 per
11
<PAGE> 14
share, which is the midpoint of the estimated range set forth on the cover of
this Prospectus), the Company would have had total indebtedness of approximately
$155.1 million.
The degree to which the Company is leveraged could have important
consequences to holders of the Common Stock including, but not limited to, the
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or general
corporate or other purposes may be limited; (ii) a substantial portion of the
Company's cash flow from operations will be dedicated to the payment of the
principal of, and interest on, its indebtedness; (iii) the agreements governing
the Company's long-term indebtedness will contain certain restrictive financial
and operating covenants that could limit the Company's ability to compete and
expand; and (iv) the Company's substantial leverage may make it more vulnerable
to economic downturns, limit its ability to withstand competitive pressures and
reduce its flexibility in responding to changing business and economic
conditions. See "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Description of Certain Indebtedness" and the Consolidated Financial
Statements included elsewhere in this Prospectus.
COMPETITION
The equipment rental industry is highly competitive. The Company's
competitors include large national rental companies, equipment manufacturers,
regional corporations, smaller independent businesses, and equipment vendors and
dealers who both sell and rent equipment to customers. Some of the Company's
competitors have greater financial resources, are more geographically diverse,
and have greater name recognition than the Company. There can be no assurance
that the Company will not encounter increased competition from existing
competitors or new market entrants, such as equipment manufacturers, that may be
significantly larger and have greater financial and marketing resources than the
Company. If existing or future competitors reduce prices to gain or retain
market share and the Company must also reduce prices to remain competitive, it
could have a material adverse effect on the Company's business, financial
condition, results of operations or prospects. Additionally, existing or future
competitors may seek to compete with the Company for acquisition candidates or
new locations, which may have the effect of increasing acquisition prices and
reducing the number of suitable acquisition candidates or expansion locations
which could have a material adverse effect on the Company's growth strategy, its
business, financial condition, results of operations or prospects or the market
price of the Common Stock. See "Business -- Competition."
SEASONALITY AND QUARTERLY FLUCTUATIONS IN REVENUE AND OPERATING RESULTS
Many of the Company's current locations are in the Midwest region of the
United States. During the winter months of December through March, the Company
experiences a slowdown in rentals to construction customers as a result of
adverse weather conditions. In addition, the Company's revenue and operating
results have varied throughout the year and are expected to continue to
fluctuate in the future due to a number of factors, including (i) general
economic conditions in the Company's markets, (ii) the timing of acquisitions
and new location openings and related costs, (iii) the effectiveness of
integrating acquired businesses and new locations, (iv) rental patterns of the
Company's customers and (v) price changes in response to competitive factors.
The Company incurs various costs in establishing or integrating newly acquired
or opened locations, and the profitability of a new location is generally
expected to be lower in the initial months of operation.
LIABILITY AND INSURANCE
The Company's business exposes it to possible claims for personal injury or
death resulting from the use of equipment rented or sold by the Company and from
injuries caused in motor vehicle accidents in which Company delivery and service
personnel are involved. The Company carries comprehensive insurance subject to
deductibles at levels it believes are sufficient to cover existing and future
claims. Although the Company has not experienced any material losses that were
not covered by insurance, there can be no assurance that existing or future
claims will not exceed the level of the Company's insurance or that such
insurance will continue to be available on economically reasonable terms, or at
all.
12
<PAGE> 15
ENVIRONMENTAL AND SAFETY REGULATION
The Company's equipment, facilities and operations are subject to certain
federal, state and local laws and regulations relating to environmental
protection and occupational health and safety, including those governing
wastewater discharges, the use, treatment, storage and disposal of solid and
hazardous wastes and materials, air quality and the remediation of contamination
associated with the release of hazardous substances. Certain of the Company's
existing and former locations use and have used, substances, and currently
generate or have generated or disposed of wastes, which are or may be considered
hazardous or otherwise are subject to applicable environmental requirements.
In particular, the Company stores and dispenses, or has in the past stored
and dispensed, petroleum products from aboveground storage tanks and, in certain
cases, underground storage tanks at its locations. The Company also uses
hazardous materials, including solvents, to clean and maintain equipment, and
generates and disposes of solid and hazardous wastes, including batteries, used
motor oil, radiator fluid and solvents. In connection with such activities, the
Company has incurred minimal capital expenditures and other compliance costs
which are expensed on a current basis and which, to date, have not been material
to the Company's financial condition. Based on currently available information,
the Company believes that the possibility is remote that it will have to incur
material capital expenditures or other material compliance or remediation costs
for environmental and safety matters in the foreseeable future. There can be no
assurance, however, that environmental and safety requirements will not become
more stringent or be interpreted and applied more stringently in the future, or
that the Company will not identify adverse environmental conditions that are not
currently known to the Company. Such future changes or interpretations, or the
identification of such adverse environmental conditions, could result in
additional environmental compliance or remediation costs not currently
anticipated by the Company, which could have a material adverse effect on the
Company's business, financial condition, results of operations or prospects or
the market price of the Common Stock. See "Business -- Environmental and Safety
Regulation."
DEPENDENCE ON EXECUTIVE OFFICERS AND DIRECTORS
The Company's future success depends to a significant extent on retaining
the services of certain executive officers and directors. The Company does not
maintain key man insurance. The loss of the services of key employees or
directors (whether such loss is through resignation or other causes) or the
inability to attract additional qualified personnel could have a material
adverse effect on the Company's business, financial condition, results of
operations or prospects or the market price of the Common Stock.
SIGNIFICANT STOCKHOLDERS
Following the Offering, the officers and directors of the Company,
including H. Wayne Huizenga, will own approximately 36.4% of the outstanding
Common Stock (34.9% if the Underwriters' over-allotment option is exercised in
full). In addition, H. Family Investments, Inc., a Florida corporation
controlled by H. Wayne Huizenga, Jr., Mr. Huizenga's son, will own approximately
27.8% of the outstanding Common Stock (26.6% if the Underwriter's over-allotment
option is exercised in full). Additionally, the Huizenga Investors are expected
to purchase in the Offering an aggregate of $25.0 million of Common Stock, which
will represent approximately 5.3% of the outstanding Common Stock (assuming an
initial public offering price of $11.00 per share, which is the midpoint of the
estimated range set forth on the cover of this Prospectus) or approximately 5.0%
if the Underwriters' over-allotment option is exercised in full. As a result,
the officers and directors of the Company will, together with H. Family
Investments, Inc. and the Huizenga Investors, be able to exercise a controlling
influence over the outcome of matters submitted to the Company's stockholders
for approval, including the election of directors.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the consummation of the Offering, the Company will
have 43,118,694 shares of Common Stock outstanding (45,068,694 shares if the
Underwriters' over-allotment option is exercised in full), including 30,118,694
outstanding shares of Common Stock presently beneficially owned by existing
stockholders. The 13,000,000 shares of Common Stock to be sold pursuant to the
Offering (14,950,000 shares if the Underwriters' over-allotment option is
exercised in full) will be eligible for sale without restriction under the
Securities Act in the public market after the consummation of the Offering by
persons other than affiliates
13
<PAGE> 16
of the Company. Sales of shares by "affiliates" of the Company, as the term is
defined in Rule 144 under the Securities Act ("Affiliates"), will be subject to
Rule 144. The Company and the officers, directors and certain security holders
of the Company, who will beneficially own in the aggregate outstanding
shares (or securities convertible into or exercisable for shares) of Common
Stock immediately following the consummation of the Offering, have agreed with
the Underwriters (the "Lock-up Agreements") not to offer, sell or otherwise
dispose of any shares of Common Stock or any security convertible into,
exercisable for or exchangeable for shares of Common Stock for a period of 180
days after the date of this Prospectus without the prior written consent of
Bear, Stearns & Co. Inc., except that (i) stockholders may make transfers as
gifts if the donee agrees to be bound by a Lock-up Agreement, (ii) certain
security holders will be permitted to pledge or margin their shares in a bona
fide loan transaction with a third party lender, (iii) the Company may at any
time and from time to time issue shares of Common Stock to third parties as
consideration for the Company's acquisition from such third parties of equipment
rental businesses and (iv) the Company may issue options pursuant to the 1998
Stock Option Plan and shares of Common Stock upon the exercise of certain
options granted to non-employee directors. The Company may issue shares of
Common Stock in connection with acquisitions prior to the expiration of the
180-day lock-up period. The Company is not aware of any officer, director or
other security holder that plans to offer or sell any shares of Common Stock
prior to the expiration of the 180-day lock-up period.
Following the expiration or waiver of the foregoing restrictions on
dispositions and any applicable holding periods under Rule 144,
outstanding shares of Common Stock owned by existing stockholders will be
available for sale in the public market pursuant to Rule 144 (including the
volume and other limitations set forth therein). In connection with the Private
Placement, the Company agreed to use its reasonable efforts following
consummation of the Offering to register for resale shares of Common Stock
issued in the Private Placement. In addition, in connection with certain of the
Acquisitions, the Company has agreed to register for resale the shares of Common
Stock issuable upon exercise of certain warrants and upon conversion of certain
convertible promissory notes. Prior to consummation of the Offering, the Company
intends to file a registration statement to register for resale on a continuous
basis from time to time, subject to the Lock-up Agreements, 34,645,057 shares of
Common Stock, 30,118,694 shares of which are held by the Company's existing
stockholders and 4,526,363 shares of which are issuable upon exercise or
conversion of outstanding warrants and convertible promissory notes (assuming an
initial public offering price of $11.00 per share, which is the midpoint of the
estimated range set forth on the cover of this Prospectus). The Company intends
to cause this registration statement to become effective prior to the
consummation of the Offering and to maintain its continuous effectiveness,
including through filing post-effective amendments, indefinitely. The purpose of
this resale registration statement is to provide liquidity to the selling
stockholders named therein, some of whom will have the ability to pledge or
margin their shares of Common Stock in connection with a bona fide loan
transaction with a third party lender. The shares of Common Stock covered by
this resale registration statement will be freely tradeable subject to the
Lock-up Agreements, which prohibit the selling stockholders from selling or
otherwise disposing of any shares of Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of Bear, Stearns &
Co. Inc. In addition, the Company intends to register on a registration
statement on Form S-8 shares of Common Stock reserved for issuance upon exercise
of options that may be granted to certain employees and non-employee directors
under the 1998 Stock Option Plan and otherwise. The Company may also from time
to time file registration statements covering the issuance and/or resale of
shares of Common Stock which may be issued in potential future acquisitions. See
"Management -- Stock Option Plan," "Description of Certain Indebtedness --
Promissory Notes" and "Description of Capital Stock -- Warrants and Options."
No prediction can be made as to the effect, if any, that market sales of
shares held by the Company's existing stockholders or future stockholders, or
the availability of such shares for future sales, or market sales of shares sold
in the Offering pursuant to this Prospectus or the availability of such shares
for future sales, will have on the market price of the Common Stock from time to
time. Sales of significant amounts of Common Stock in the public market could
materially adversely affect the market price of the Common Stock or could
materially impair the Company's future ability to realize capital through an
offering of equity securities. See "Shares Eligible for Future Sale."
14
<PAGE> 17
DILUTION
At an assumed initial public offering price of $11.00 per share (which is
the midpoint of the estimated range set forth on the cover of this Prospectus),
purchasers of shares of Common Stock in the Offering will experience immediate
and substantial dilution of $9.60 per share in the net tangible book value per
share of Common Stock from the initial public offering price. See "Dilution."
Investors may also experience additional dilution as a result of shares of
Common Stock being issued in future business acquisitions and as a result of the
issuance and exercise of stock options. See "Shares Eligible for Future Sale."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained after this Offering. The initial public offering price will be
determined through negotiations between the Company and representatives of the
Underwriters. There can be no assurance that future market prices of the Common
Stock will equal or exceed the estimated range set forth on the cover page of
this Prospectus. After completion of this Offering, the market price of the
Common Stock could be subject to significant variation due to fluctuations in
the Company's operating results, changes in earnings estimates by investment
analysts, the success or failure of the Company's growth strategy, and changes
in business or regulatory conditions affecting the Company. In addition, the
stock market has from time to time experienced extreme price fluctuations which
have often been unrelated to the operating performance of the affected
companies. Such fluctuations could materially adversely affect the market price
of the Common Stock.
ABSENCE OF DIVIDENDS
The terms of the Credit Facility restrict the Company from paying dividends
on its Common Stock. The Company does not expect to pay dividends on its Common
Stock in the foreseeable future. See "Dividend Policy."
EFFECTS OF YEAR 2000 ISSUE
The Company's management information system is being developed to ensure
that it is Year 2000 compliant. Although the Company does not believe it will
suffer any major effects from the Year 2000 issue, there can be no assurance
that the Company, or any business acquired by the Company, or any of the
Company's customers or vendors will not experience interruptions of operations
because of Year 2000 problems. The Company expects to convert all of the systems
of the businesses it acquires to the Company's system as soon as practicable
after each acquisition is completed. There can be no assurance, however, that
all such systems will be converted prior to December 31, 1999. Although the
Company does not expect to incur significant expense to address the Year 2000
issue, Year 2000 problems might require the Company to incur unanticipated
expenses and such expenses could have a material adverse effect on the Company's
business, financial condition, results of operations or prospects.
USE OF PROCEEDS
The net proceeds to the Company from the Offering (using an assumed
offering price of $11.00 per share and after deducting underwriting discounts
and commissions and estimated expenses of the Offering payable by the Company)
are estimated to be approximately $132.7 million ($152.7 million if the
Underwriters' over-allotment option is exercised in full). The Company intends
to use the net proceeds from the Offering to repay a portion of the outstanding
borrowings under the Credit Facility. Outstanding borrowings under the Credit
Facility currently bear interest at approximately 8.69% and will mature and
become due and payable in full in July 2001. The funds borrowed under the Credit
Facility were used to complete acquisitions, make capital expenditures and
provide for working capital and general corporate purposes. See "Description of
Certain Indebtedness -- Credit Facility."
15
<PAGE> 18
DIVIDEND POLICY
The Company has not paid any dividends in the past and presently
anticipates that, following the completion of the Offering, earnings, if any,
will be retained for the development of its business and that no dividends on
the Common Stock will be declared in the foreseeable future. In addition, the
terms of the Credit Facility restrict the Company's ability to declare or pay
dividends. See "Description of Certain Indebtedness -- Credit Facility." Any
future dividends will be subject to the discretion of the Company's Board of
Directors and will depend upon, among other things, future earnings, the
operating and financial condition of the Company, its capital requirements and
general business conditions.
16
<PAGE> 19
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of March 31, 1998 (i) on a historical basis, (ii) pro forma for the
Acquisitions, the Founders' Additional Contribution, the Private Placement and
certain borrowings under the Credit Facility and (iii) pro forma for the
Acquisitions, the Founders' Additional Contribution, the Private Placement and
certain borrowings under the Credit Facility and as adjusted for the Offering
(including the application of the net proceeds therefrom as set forth in "Use of
Proceeds") (assuming an initial public offering price of $11.00 per share, which
is the midpoint of the estimated range set forth on the cover of this
Prospectus). This table should be read in conjunction with the Pro Forma
Consolidated Financial Statements and the Company's Consolidated Financial
Statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Notes payable to financial institutions................... $26,100 $168,358 $ 35,618
Senior equipment obligations and other notes.............. 9,097 62,968 62,968
Subordinated promissory notes............................. 5,943 7,500 7,500
Subordinated convertible notes............................ 11,090 48,990 48,990
------- -------- --------
Total debt........................................ 52,230 287,816 155,076
------- -------- --------
Stockholders' equity:
Preferred Stock, $0.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding........... -- -- --
Common Stock, $0.01 par value, 250,000,000 shares
authorized; 25,000,000 shares issued and outstanding,
30,118,694 shares issued and outstanding pro forma, and
43,118,694 shares issued and outstanding pro forma as
adjusted(1)............................................ 250 301 431
Additional paid-in capital................................ 30,750 75,699 208,309
Retained earnings......................................... 1,094 1,094 1,094
------- -------- --------
Total stockholders' equity........................ 32,094 77,094 209,834
------- -------- --------
Total capitalization.............................. $84,324 $364,910 $364,910
======= ======== ========
</TABLE>
- ---------------
(1) Does not include (i) 1,087,571 shares issuable upon the exercise of
outstanding options with exercise prices ranging from $2.96 to $6.69 per
share and a weighted average exercise price of $5.33, (ii) 5,000,000 shares
reserved for issuance in connection with options that may be granted under
the 1998 Stock Option Plan, (iii) 4,453,636 shares issuable upon conversion
of certain convertible promissory notes, (iv) 72,727 shares issuable upon
the exercise of outstanding warrants and (v) 1,950,000 shares of Common
Stock issuable upon exercise of the Underwriters' over-allotment option. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management -- Stock Option Plan," "Certain Relationships and
Transactions," "Description of Certain Indebtedness -- Promissory Notes" and
"Description of Capital Stock -- Warrants and Options."
17
<PAGE> 20
DILUTION
DILUTION TO INVESTORS IN COMMON STOCK
As of March 31, 1998, on a pro forma basis, after giving effect to the
Acquisitions, the Founders' Additional Contribution and the Private Placement,
the Company had an aggregate of 30,118,694 shares of Common Stock outstanding.
Net tangible book value per share of Common Stock is equal to the stockholders'
equity less the net book value of goodwill and identified intangible assets,
divided by the number of shares outstanding. After giving effect to the sale of
13,000,000 shares of Common Stock in the Offering and the application of the
estimated net proceeds therefrom (assuming an initial public offering price of
$11.00 per share, which is the midpoint of the estimated range set forth on the
cover of this Prospectus) as described under "Use of Proceeds," the pro forma
net tangible book value of the Company as of March 31, 1998 would have been
approximately $60,351,000 or $1.40 per share. This represents an immediate
increase in net tangible book value of $3.80 per share of Common Stock to
existing stockholders and an immediate dilution in net tangible book value of
$9.60 per share of Common Stock to new investors purchasing shares in the
Offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price per share............. $11.00
Net tangible book value per share before the
Offering.............................................. (2.40)
Increase per share attributable to new
investors(1)(2)....................................... 3.80
Pro forma net tangible book value per share after the
Offering(1)(2)............................................ 1.40
------
Dilution per share to new investors(2)...................... $ 9.60
======
</TABLE>
- ---------------
(1) After deduction of estimated expenses of the Offering payable by the Company
(including the underwriting discounts and commissions).
(2) Assumes that none of the Company's options, warrants or convertible
promissory notes outstanding at March 31, 1998 is exercised and that the
Underwriters' over-allotment option is not exercised. See
"Management -- Stock Option Plan," "Description of Certain Indebtedness,"
"Description of Capital Stock -- Warrants and Options" and "Underwriting."
If the Underwriters' over-allotment option is exercised in full, the
dilution will be $9.22 per share.
COMPARISON OF CAPITAL CONTRIBUTIONS
The following table summarizes, as of March 31, 1998, on a pro forma basis,
after giving effect to the Founders' Additional Contribution, the Private
Placement and the Offering, the differences between existing stockholders and
new investors in the Offering with respect to (i) the number of shares of Common
Stock purchased from the Company, (ii) the total consideration paid to the
Company and (iii) the average price paid per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders..................... 30,118,694 70% $ 76,000,000 35% $ 2.52
New Investors............................. 13,000,000 30 143,000,000 65 11.00
---------- --- ------------ --- ------
Total........................... 43,118,694 100% $219,000,000 100% $ 5.08
========== === ============ === ======
</TABLE>
The table above assumes that none of the Company's options, warrants or
convertible promissory notes outstanding at March 31, 1998 is exercised and that
the Underwriters' over-allotment option is not exercised. See
"Management -- Stock Option Plan," "Description of Certain Indebtedness,"
"Description of Capital Stock -- Warrants and Options" and "Underwriting." If
the Underwriters' over-allotment option is exercised in full, the Average Price
Per Share to Existing Stockholders, New Investors and Total will be $2.52,
$11.00 and $5.34, respectively.
18
<PAGE> 21
SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA
FINANCIAL INFORMATION AND OPERATIONS DATA
The following selected consolidated financial information summarizes (i)
the statement of operations data and balance sheet data for Sam's (the
"Predecessor Company") for the fiscal years ended March 31, 1994 and 1995, and
the selected balance sheet data as of March 31, 1996, which have been derived
from the unaudited consolidated financial statements of the Predecessor Company
not included herein, (ii) the statement of operations data for the Predecessor
Company for the fiscal years ended March 31, 1996 and 1997 and the five months
ended August 31, 1997 and the selected balance sheet data as of March 31, 1997
and August 31, 1997, which have been derived from the audited consolidated
financial statements of the Predecessor Company included elsewhere in this
Prospectus, (iii) the statement of operations data of the Company for the period
from August 14, 1997 (inception) through December 31, 1997, and selected balance
sheet data as of December 31, 1997, which have been derived from the audited
consolidated financial statements of the Company appearing elsewhere in this
Prospectus, (iv) the consolidated statement of operations data of the Company
for the three months ended March 31, 1998 and the selected balance sheet data as
of March 31, 1998, which have been derived from the unaudited consolidated
financial statements of the Company included elsewhere in this Prospectus which,
in the opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the Company's results of
operations and financial position at such date and for such period, and (v) the
pro forma consolidated statement of operations data for the twelve months ended
December 31, 1997 and the three months ended March 31, 1997 and 1998 and
selected pro forma balance sheet data as of March 31, 1998, which has been
derived from the unaudited pro forma consolidated financial statements included
elsewhere in this Prospectus. The other data has been derived from the
consolidated financial statements referred to above for the applicable periods.
The selected consolidated historical and pro forma financial information and
operating data presented below should be read in conjunction with the Company's
Consolidated Financial Statements, the unaudited pro forma consolidated
financial statements and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this Prospectus.
19
<PAGE> 22
<TABLE>
<CAPTION>
PREDECESSOR COMPANY THE COMPANY(1)
------------------------------------------------ ------------
AUGUST 14
APRIL 1 (INCEPTION)
FISCAL YEAR ENDED MARCH 31, THROUGH THROUGH
----------------------------------- AUGUST 31, DECEMBER 31,
1994 1995 1996 1997 1997 1997
------ ------ ------- ------- ---------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Equipment rentals................. $5,376 $7,237 $11,871 $15,328 $ 8,515 $ 7,410
Sales of equipment, parts and
supplies........................ 1,768 2,367 4,302 4,177 1,205 1,895
------ ------ ------- ------- ------- -------
Total revenue............... 7,144 9,604 16,173 19,505 9,720 9,305
Cost of revenue:
Cost of equipment rentals,
excluding depreciation.......... 2,549 3,442 4,380 6,029 2,193 2,196
Rental equipment
depreciation(3)................. 598 1,842 2,053 3,465 1,848 1,526
Cost of sales of equipment, parts
and supplies.................... 1,919 1,156 4,491 2,791 984 1,691
------ ------ ------- ------- ------- -------
Total cost of revenue....... 5,066 6,440 10,924 12,285 5,025 5,413
------ ------ ------- ------- ------- -------
Gross profit....................... 2,078 3,164 5,249 7,220 4,695 3,892
Selling, general and
administrative expenses......... 865 1,634 2,972 3,564 1,683 1,081
Non-rental equipment depreciation
and amortization(3)............. 53 162 180 238 115 284
------ ------ ------- ------- ------- -------
Operating income................... 1,160 1,368 2,097 3,418 2,897 2,527
------ ------ ------- ------- ------- -------
Other (income)/expense:
Interest expense.................. 162 239 583 866 580 760
Other (income)/expense, net....... (96) (353) (196) (203) 62 --
------ ------ ------- ------- ------- -------
66 (114) 387 663 642 760
------ ------ ------- ------- ------- -------
Income before provision for income
taxes............................. 1,094 1,482 1,710 2,755 2,255 1,767
Provision for income taxes........ 438 593 732 1,128 939 766
------ ------ ------- ------- ------- -------
Net income......................... $ 656 $ 889 $ 978 $ 1,627 $ 1,316 $ 1,001
====== ====== ======= ======= ======= =======
Basic earnings per share(4)........ $ 0.04
=======
Diluted earnings per share(4)...... $ 0.04
=======
OTHER DATA:
Gross margin...................... 29.1% 32.9% 32.5% 37.0% 48.3% 41.8%
Operating margin.................. 16.2% 14.2% 13.0% 17.5% 29.8% 27.2%
Rental equipment purchases(5)..... $ 8,799 $ 8,101 $ 1,775 $ 2,461
Amortization of goodwill(3)....... -- -- -- -- -- 166
Depreciation and other
amortization.................... $ 651 $2,004 2,233 3,703 1,963 1,644
<CAPTION>
THE COMPANY(1)
-------------------------------------------------
PRO FORMA AS
PRO FORMA ADJUSTED THREE
AS ADJUSTED THREE MONTHS MONTHS ENDED
YEAR ENDED ENDED MARCH 31,(2)
DECEMBER 31, MARCH 31, ------------------
1997(2) 1998 1997 1998
------------ ------------ ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Equipment rentals................. $112,080 $ 5,911 $19,479 $24,048
Sales of equipment, parts and
supplies........................ 101,768 3,128 24,988 24,350
-------- -------- ------- -------
Total revenue............... 213,848 9,039 44,467 48,398
Cost of revenue:
Cost of equipment rentals,
excluding depreciation.......... 38,006 2,661 8,143 10,172
Rental equipment
depreciation(3)................. 24,313 1,076 5,384 6,274
Cost of sales of equipment, parts
and supplies.................... 74,897 2,252 17,734 16,814
-------- -------- ------- -------
Total cost of revenue....... 137,216 5,989 31,261 33,260
-------- -------- ------- -------
Gross profit....................... 76,632 3,050 13,206 15,138
Selling, general and
administrative expenses......... 35,078 1,758 7,422 8,271
Non-rental equipment depreciation
and amortization(3)............. 4,812 447 1,213 1,284
-------- -------- ------- -------
Operating income................... 36,742 845 4,571 5,583
-------- -------- ------- -------
Other (income)/expense:
Interest expense.................. 9,358 808 1,882 2,228
Other (income)/expense, net....... (642) (123) (252) (246)
-------- -------- ------- -------
8,716 685 1,630 1,982
-------- -------- ------- -------
Income before provision for income
taxes............................. 28,026 160 2,941 3,601
Provision for income taxes........ 11,770 67 1,233 1,512
-------- -------- ------- -------
Net income......................... $ 16,256 $ 93 $ 1,708 $ 2,089
======== ======== ======= =======
Basic earnings per share(4)........ $ 0.38 $ 0.00 $ 0.04 $ 0.05
======== ======== ======= =======
Diluted earnings per share(4)...... $ 0.38 $ 0.00 $ 0.04 $ 0.05
======== ======== ======= =======
OTHER DATA:
Gross margin...................... 35.8% 33.7% 29.7% 31.3%
Operating margin.................. 17.2% 9.3% 10.3% 11.5%
Rental equipment purchases(5)..... $ 97,858 $ 19,584 $27,802 $42,447
Amortization of goodwill(3)....... 3,734 259 933 933
Depreciation and other
amortization.................... 25,391 1,264 5,664 6,625
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY THE COMPANY
------------------------------------------------- -----------------------------------------
PRO FORMA
AS ADJUSTED
AS OF MARCH 31, AS OF AS OF AS OF AS OF
------------------------------------ AUGUST 31, DECEMBER 31, MARCH 31, MARCH 31,
1994 1995 1996 1997 1997 1997 1998 1998(2)
------ ------- ------- ------- ---------- ------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Rental equipment, net............ $3,244 $ 8,907 $14,722 $21,789 $21,886 $30,619 $ 49,063 $201,829
Goodwill......................... -- -- -- -- -- 36,686 41,388 149,349
Total assets..................... 5,888 10,948 17,423 27,614 29,088 79,157 102,778 403,688
Total debt....................... 3,595 5,871 9,944 16,100 16,559 42,928 52,230 155,076
Stockholders' equity............. 1,206 1,862 2,840 4,467 5,768 26,001 32,094 209,834
</TABLE>
- ---------------
(1) The Acquisitions have been accounted for as purchases and, accordingly, the
operations of the acquired businesses are included in the statement of
operations data and other data from the date of acquisition.
(2) The pro forma as adjusted statement of operations data for the year ended
December 31, 1997 and the three months ended March 31, 1997 and 1998 and the
pro forma as adjusted selected balance sheet data as of March 31, 1998 give
effect to the Acquisitions, the Founders' Additional Contribution, the
Private Placement, certain borrowings under the Credit Facility and the
Offering as described in the "Pro Forma Consolidated Financial Statements"
as if such transactions had occurred on the first day of the period
presented, and in the case of the pro forma as adjusted balance sheet data,
as of March 31, 1998. See "Use of Proceeds," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Certain Transactions" and the Company's pro forma and historical financial
statements and related notes.
(3) The amortization period for rental equipment depreciation ranges from two to
ten years. The amortization period for goodwill is 40 years.
(4) Earnings per share data is not included for the Predecessor Company on a
historical basis as such information would not be representative of the
capital structure of the Company after the Offering.
(5) Rental equipment purchases represent the purchase price of rental equipment
inventory acquired during the period.
20
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's consolidated results
of operations and financial condition should be read in conjunction with the
Consolidated Financial Statements, and the unaudited Pro Forma Consolidated
Financial Information and the "Selected Consolidated Historical and Pro Forma
Consolidated Financial Information and Operating Data" included elsewhere in
this Prospectus.
GENERAL
NationsRent is one of the fastest growing equipment rental companies in the
United States. The Company believes it can take advantage of the fragmentation
in the equipment rental industry and the absence of an equipment rental company
with significant market share to achieve a leading market position by creating
an integrated network of nationally branded locations offering broad product
selection and superior customer service. NationsRent expects to become a leading
provider of rental equipment in each market it enters by acquiring platform
businesses and opening or acquiring new locations concentrated around those
businesses. The Company believes that this "cluster" strategy enables it to (i)
increase profitability in its acquired stores and (ii) achieve profitability in
its newly opened locations more quickly than its competitors.
NationsRent seeks to acquire businesses that have (i) strong positions in
their geographic market, (ii) experienced local management teams that will
continue to work with the Company following the acquisition, (iii) high quality
rental equipment inventory and (iv) physical and operating characteristics that
are suited to conversion to the NationsRent format. Since its formation in
August 1997, NationsRent has acquired 16 equipment rental businesses with 65
locations in Florida, Indiana, Kentucky, Louisiana, Michigan, Ohio,
Pennsylvania, Texas and West Virginia. The aggregate consideration paid by the
Company in the Acquisitions is approximately $222.7 million and consisted of
approximately (i) $166.2 million in cash, (ii) $7.5 million of subordinated
promissory notes, (iii) $49.0 million of convertible subordinated promissory
notes and (iv) warrants to purchase approximately $800,000 of Common Stock at
the initial public offering price. The cash portion of the consideration paid
has been funded with equity contributions and borrowings under the Credit
Facility.
After making an acquisition, the Company intends to convert acquired
locations to the NationsRent format. The cost of converting an acquired location
to the NationsRent format will vary depending on the physical properties of the
acquired location and the condition, breadth and depth of rental equipment
inventory at such location, which are factors considered in the selection and
pricing of acquisition candidates. The average cost incurred by the Company
through March 31, 1998 to convert acquired locations to the NationsRent format
was approximately $0.9 million per location, which costs primarily related to
increasing the breadth and depth of rental inventory. Once NationsRent has
established a presence in a particular market, it may open new locations in that
geographic areas or adjacent areas. Since August 1997, the Company has opened
six new locations. The Company does not plan to open any additional new
locations in 1998. However, the Company continues to evaluate the need for new
locations as it acquires equipment rental companies in new markets. The cost of
opening the Company's six new locations has varied depending on whether the
Company has leased or purchased the underlying real property, the size of the
location and the breadth and depth of inventory at each location. See
"-- Liquidity and Capital Resources." The average cost incurred by the Company
through June 30, 1998 to open new locations was approximately $2.9 million per
location. The Company's new locations have on average achieved profitability
within approximately five months of their opening.
The Company derives its revenue from (i) equipment rental (65% of total
revenue for the three months ended March 31, 1998), (ii) sale of used equipment
(13%), (iii) sale of new equipment (11%) and (iv) sale of spare parts and
supplies, maintenance and repair services (11% in the aggregate, no single item
of which accounts for more than 10% of total revenue). The growth of rental
revenue is dependent on several factors including demand for rental equipment,
the amount and quality of equipment available for rent, rental rates and general
economic conditions. Revenue generated from the sale of used equipment is
affected by price, general economic conditions and the condition of the
equipment. Revenue from the sale of new equipment is
21
<PAGE> 24
affected by price and general economic conditions. Revenue from the sale of
spare parts and supplies, maintenance and repair services is primarily affected
by equipment rental and sales volume.
On a pro forma basis after giving effect to the Acquisitions, equipment
rental revenue as a percentage of total revenue increased to 50% in the three
months ended March 31, 1998 from 44% for the three months ended March 31, 1997.
The Company expects the proportion of equipment rental revenue as a percentage
of total revenue to continue to increase as it expands rental equipment
inventory at its locations and as it targets acquisition candidates with
equipment rental revenue as a percentage of total revenue of greater than 60%.
On a pro forma basis after giving effect to the Acquisitions, the percentage of
equipment rental revenue to total revenue has been impacted by the high
proportion of new equipment sales generated by Bode-Finn. Equipment rental
revenue as a percentage of total revenue, excluding Bode-Finn, was as follows:
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------
1997 1997 1998
------------ --------- ---------
<S> <C> <C> <C>
Equipment rental revenue................. 60.2% 48.1% 57.5%
Sales of equipment, parts and supplies... 39.8 51.9 42.5
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
The principal components of the Company's cost of revenue include
depreciation of rental equipment, costs of new and used equipment sold,
personnel costs, occupancy costs, repair and maintenance costs and vehicle
operations. Rental equipment depreciation is calculated using the straight-line
method over the estimated useful life of such equipment. The range of useful
lives estimated by management for rental equipment is two to eight years and is
depreciated to a salvage value of zero to ten percent of original cost. Certain
lift equipment is depreciated over a ten-year period.
Selling, general and administrative expense includes management salaries,
advertising and marketing, travel, administrative and clerical salaries and data
processing.
Non-rental equipment depreciation and amortization includes the
depreciation of fixed assets that are not offered for rent, amortization of
leasehold improvements and amortization of intangible assets related to the
acquired businesses.
The acquisitions completed in 1997 have resulted in a significantly altered
cost structure of the Predecessor Company primarily due to changes to owners'
compensation, depreciation methodologies, interest expense and real estate
costs. The Company believes that the pre-acquisition historical results of the
acquired businesses are not indicative of future results. As such, the following
discussion focuses on the historical and pro forma results of the Company.
22
<PAGE> 25
The following table sets forth, for the periods indicated, information
derived from the historical and pro forma consolidated statements of operations
of the Company expressed as a percentage of total revenue.
<TABLE>
<CAPTION>
HISTORICAL
AUGUST 14 PRO FORMA THREE MONTHS ENDED MARCH 31,
(INCEPTION) YEAR ----------------------------
TO ENDED PRO PRO
DECEMBER 31, DECEMBER 31, ACTUAL FORMA FORMA
1997 1997 1998 1997 1998
------------ ------------ ---------- ----- -----
<S> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals.................... 79.6% 52.4% 65.4% 43.8% 49.7%
Sales of equipment, parts and
supplies.......................... 20.4 47.6 34.6 56.2 50.3
------ ------ ------ ----- -----
Total revenue................ 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
Cost of equipment rentals, excluding
depreciation...................... 23.6 17.9 29.4 18.3 21.0
Rental equipment depreciation........ 16.4 11.4 11.9 12.1 13.0
Cost of sales of equipment, parts and
supplies.......................... 18.2 34.9 24.9 39.9 34.7
------ ------ ------ ----- -----
Total cost of revenue........ 58.2 64.2 66.2 70.3 68.7
------ ------ ------ ----- -----
Gross profit........................... 41.8 35.8 33.8 29.7 31.3
Selling, general and administrative
expenses.......................... 11.6 16.4 19.5 16.7 17.1
Non-rental equipment depreciation and
amortization...................... 3.0 2.2 4.9 2.7 2.7
------ ------ ------ ----- -----
Operating income....................... 27.2% 17.2% 9.4% 10.3% 11.5%
====== ====== ====== ===== =====
</TABLE>
PRO FORMA RESULTS OF OPERATIONS
Pro Forma Three Months Ended March 31, 1998 as Compared to
Pro Forma Three Months Ended March 31, 1997
Revenue. Total revenue for the three months ended March 31, 1998 increased
8.8% to $48.4 million from $44.5 million for the three months ended March 31,
1997. This growth in revenue primarily resulted from a $4.6 million or 23.5%
increase in rental equipment revenue, primarily at locations owned by the
Company for the entire first quarter of 1998 and at locations of Associated
Rental Equipment Management Company, Inc. ("Associated"). Rental equipment
revenue at Sam's, R. and R. Rental, Inc. ("R&R"), C&E Rental and Services, Inc.
("C&E") and Titan Rentals, Inc. ("Titan") increased $1.3 million or 32% as a
result of the Company's investment in rental equipment since such businesses
were acquired. Rental equipment revenue at Associated increased $2.9 million or
67% as a result of opening two additional locations during 1997. Such increases
were partially offset by decreases in equipment sales, primarily at the
Associated locations.
Gross Profit. Gross profit for the three months ended March 31, 1998
increased 14.6% to $15.1 million from $13.2 million for the three months ended
March 31, 1997. Gross margin increased from 29.7% to 31.3%. This margin
improvement was primarily the result of the aforementioned increase in equipment
rental revenue, which historically has produced higher margins than sales of
equipment, parts and supplies.
Total Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended March 31, 1998 increased
10.6% to $9.6 million from $8.6 million for the three months ended March 31,
1997. The increase in selling, general and administrative expenses was primarily
attributable to (i) the addition of the corporate expenses of the Company in
1998, (ii) increased revenue, and (iii) additional locations that were opened by
Associated and Central Rent-All, Inc. ("Central") during 1997.
23
<PAGE> 26
Operating Income. As a result of the foregoing, operating income increased
22.2% from $4.6 million for the three months ended March 31, 1997 to $5.6
million for the three months ended March 31, 1998. Operating income margin
increased from 10.3% to 11.5%.
Pro Forma Year Ended December 31, 1997
Revenue. Total revenue for the year ended December 31, 1997 was $213.8
million.
Gross Profit. Gross profit for the year ended December 31, 1997 was $76.6
million, or 35.8% of total revenue.
Total Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1997 were $39.9 million,
or 18.6% of total revenue.
Operating Income. Operating income for the year ended December 31, 1997
was $36.7 million, or 17.2% of total revenue.
HISTORICAL RESULTS OF OPERATIONS -- PREDECESSOR COMPANY
Fiscal Year Ended March 31, 1997 ("Fiscal 1997") as Compared to
Fiscal Year Ended March 31, 1996 ("Fiscal 1996")
Revenue. Total revenue for Fiscal 1997 increased 20.6% to $19.5 million
from $16.2 million in Fiscal 1996. This increase was primarily attributable to a
29.1% increase in equipment rental revenue. Equipment rental revenue increased
as a result of the increased selection and availability of rental equipment and
from the opening of two new locations during Fiscal 1997.
Gross Profit. Gross profit for Fiscal 1997 increased 37.6% to $7.2 million
from $5.2 million in Fiscal 1996. Gross margin increased from 32.5% in Fiscal
1996 to 37.0% in Fiscal 1997. This improvement primarily resulted from increased
margins on the sale of used equipment.
Total Selling, General and Administrative Expenses. Selling, general and
administrative expenses for Fiscal 1997 increased 20.6% to $3.8 million from
$3.2 million in Fiscal 1996. As a percentage of total revenue, these costs were
19.5% in Fiscal 1996 compared with 19.5% in Fiscal 1997. The increase in
selling, general and administrative expenses was primarily attributable to
additional administrative staff hired and growth in business volume during
Fiscal 1997. In addition, the Company incurred additional non-rental
depreciation expense attributable to an increase in property, plant and
equipment as a result of the two locations opened during Fiscal 1997.
Operating Income. As a result of the foregoing, operating income increased
63.0% from $2.1 million for Fiscal 1996 to $3.4 million in Fiscal 1997.
Operating income margin increased from 13.0% in Fiscal 1996 to 17.5% in Fiscal
1997.
Other Expense. Other expense for Fiscal 1997 increased to $0.7 million
from $0.4 million in Fiscal 1996. This increase was primarily attributable to an
increase in debt and related interest expense which resulted from the Company's
increased financing of rental equipment asset purchases.
Income Tax Expense. Income tax expense was $1.1 million for Fiscal 1997,
compared to $0.7 million in Fiscal 1996. The Company's effective tax rate was
40.9% for Fiscal 1997, compared to 42.8% for the same period in Fiscal 1996.
Net Income. Net income for Fiscal 1997 increased 66.4% to $1.6 million
from $1.0 million for Fiscal 1996 for the aforementioned reasons. Net income as
a percentage of revenue was 8.3% for Fiscal 1997 compared with 6.1% for Fiscal
1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses of cash have been the funding of acquisitions
and capital expenditures. To date, the Company has funded its cash requirements
with (i) $48.4 million of equity contributions from the
24
<PAGE> 27
founders of the Company, (ii) $27.6 million of proceeds from the Private
Placement, (iii) the use of equipment leases and (iv) borrowings under its
Credit Facility.
NationsRent's historical net cash provided by operations was $3.7 million
and $8.6 million for the period from August 14, 1997 (inception) to December 31,
1997 and the three months ended March 31, 1998, respectively. On a historical
basis, net cash used in investing activities was $35.0 million and $24.7 million
for the period from August 14, 1997 (inception) to December 31, 1997 and the
three months ended March 31, 1998, respectively. Cash used in investing
activities in 1997 was primarily a result of cash consideration of $34.1 million
for the acquisition of businesses, net of cash acquired. Historical cash used in
investing activities for the three months ended March 31, 1998 was primarily the
result of $19.6 million of purchases of rental equipment. Cash provided by
financing activities was $32.8 million and $15.2 million for the period from
August 14, 1997 (inception) to December 31, 1997 and the three months ended
March 31, 1998, respectively. Historical cash provided by financing activities
during 1997 was primarily a result of a $25 million equity contribution by the
founders of the Company. Cash from financing activities for the three months
ended March 31, 1998 was primarily provided by borrowings under the Credit
Facility and an additional equity contribution by the founders of the Company.
In March 1998, the Company entered into the Credit Facility, as amended in
July 1998, with a syndicate of lenders to provide for up to $265 million of cash
borrowings and letters of credit. The Credit Facility has a three-year term
scheduled to expire in July 2001. The Credit Facility can be used to complete
permitted acquisitions, make capital expenditures, enter into standby letters of
credit, or for working capital and other general corporate purposes. Upon
consummation of the Offering, borrowings under the Credit Facility will bear
interest at either the BankBoston base rate plus a percentage ranging from 0.00%
to 0.50% or, at the Company's option, the Eurodollar market rate plus a
percentage ranging from 1.50% to 3.00%. The percentage over the BankBoston base
rate or the Eurodollar market rate is based on the Company's financial
performance as measured by the total funded debt ratio (the "Pricing Ratio").
Prior to consummation of the Offering, the base rate loans bear interest at the
BankBoston base rate plus 0.75% or, at the Company's option, the Eurodollar
market rate plus 3.00%. The Credit Facility is secured by a security interest in
substantially all of the assets of the Company. The Credit Facility also
imposes, among other covenants, a tangible assets to senior debt covenant, a
restriction on all of the Company's retained earnings including the declaration
and payment of cash dividends, consent requirements on certain acquisitions and
a restriction on the ratio of total funded debt to earnings before interest,
income taxes, depreciation and amortization. The proceeds from the Credit
Facility were used to repay substantially all of the notes payable to financial
institutions that were outstanding at December 31, 1997. The Company plans to
use a portion of the net proceeds of the Offering to repay such indebtedness as
described under "Use of Proceeds."
The Company's short-term cash requirements for its existing operations
consist of: (i) capital expenditures to maintain, modernize and expand its
rental equipment inventory, (ii)working capital requirements, and (iii)
operating activities such as repair and maintenance of rental equipment,
merchandise inventory and other operating activities. The Company estimates that
equipment expenditures for its existing locations will be in the range of $90
million to $100 million, net of proceeds from used equipment sales, over the
next 12 months. In addition, the Company believes that it will be required to
make equipment expenditures in connection with new acquisitions. The Company
believes that following the completion of the Offering it will be able to
finance its short-term cash needs through borrowings under the Credit Facility,
the use of equipment leases and cash generated from operations. The Company
estimates that such sources will be sufficient to fund the cash required for the
Company's existing operations for at least 12 months following completion of the
Offering.
The Company has opened six new locations within identified "clusters." The
Company estimates that the aggregate capital costs associated with each such new
location will be in the range of $2.0 million to $4.5 million. The Company
believes that cash generated from operations and borrowings under the Credit
Facility will be sufficient to fund these costs without additional debt or
equity financings.
The Company plans to continue its acquisition strategy and expects to
finance future acquisitions using cash, capital stock, notes and/or assumption
of indebtedness. To fully implement its growth strategy and meet the resulting
capital requirements, the Company will be required to increase amounts available
under the
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Credit Facility, issue future debt instruments or raise additional capital
through equity financings. There can be no assurance that any such increase to
the Credit Facility will be available or, if available, will be on terms
satisfactory to the Company or that the Company will be able to successfully
complete any future debt or equity financings.
The Company is customizing a state-of-the-art management information system
that it expects will be operational in the fourth quarter of 1998. The Company
estimates the total cost of installation of such system at the Company's
existing locations will range between $5.0 million and $7.0 million and believes
cash generated from operations and borrowings under the Credit Facility will be
sufficient to fund these costs. The Company expects that the incremental costs
of installation of such system at additional locations will not be significant
on a per location basis.
SEASONALITY AND FLUCTUATIONS IN OPERATING RESULTS
The Company's revenue and income are dependent upon activity in the
construction industry in the markets served by the Company. Construction
activity is dependent upon weather and other seasonal factors affecting
construction in the geographic areas where the Company has operations,
particularly in the Midwest. Because of this variability in demand, the
Company's quarterly revenue may fluctuate, and revenue for the first quarter of
each year can be expected to be lower than the remaining quarters. Although the
Company believes that the historical trend in quarterly revenue for the second,
third and fourth quarters of each year is generally higher than the first
quarter, there can be no assurance that this will occur in future periods.
Accordingly, quarterly or other interim results should not be considered
indicative of results to be expected for any other quarter or for a full year.
Operating results may fluctuate due to other factors including, but not
limited to (i) changes in general economic conditions including changes in
national, regional and local construction or industrial activities, (ii) the
timing of acquisitions and opening of new locations, (iii) the timing of
expenditures for new rental equipment and the disposition of used equipment,
(iv) competitive pricing pressures and (v) increases in interest rates.
The Company will incur significant expenses in opening new locations, such
as employee training, marketing and facility set-up costs. Initially, new
locations may generate lower operating margins than established locations and
may operate at a loss. In addition, when the Company purchases new rental
equipment, the depreciation related to such equipment may contribute to
near-term margin decline, because such equipment may not initially generate
revenue at a rate that is sufficient to match such increased depreciation
expense. As such, the opening of new rental locations and the purchase of new
equipment to expand the Company's current rental equipment inventory may reduce
the Company's operating margins during a start-up period.
INFLATION
The Company does not believe that inflation has been a significant factor
to the cost of its operations or the operations of the Predecessor Company.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The Company is required to adopt the provisions of these
Statements in fiscal year 1998. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components in a primary financial
statement. The Company is currently evaluating the reporting formats recommended
under this Statement. SFAS No. 131 establishes a new method by which companies
will report operating segment information. This method requires disclosure of
information which is based on the manner in which management organizes the
segments within a company for making operating decisions and assessing
performance. The Company continues to evaluate the provisions of SFAS No. 131
and, upon adoption, the Company may report operating segments. In April 1998,
the American Institute of Certified Public Accountants issued Statement of
Position No. 98-5 ("SOP 98-5"). SOP 98-5 requires that all non-governmental
entities expense costs of start-up activities, including pre-operating,
pre-opening and organization activities, as those costs are incurred. In the
opinion of management, the adoption of this statement will have no impact on its
statement of operations.
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BUSINESS
GENERAL
NationsRent is one of the fastest growing equipment rental companies in the
United States. The Company has acquired a core platform of equipment rental
businesses concentrated in selected markets and intends to build a network of
nationally branded locations. NationsRent expects to become a leading provider
of rental equipment in each market it enters by acquiring platform businesses
and opening or acquiring additional locations concentrated around those
businesses. The Company believes that this "cluster" strategy enables it to (i)
increase profitability in its acquired stores and (ii) achieve profitability in
its newly opened locations more quickly than its competitors.
The Company's locations offer a comprehensive selection of high quality,
well-maintained equipment, including backhoes, bulldozers, skid steer loaders,
aerial lifts and work platforms, compressors and generators. The Company markets
its products and services primarily to a broad range of construction and
industrial customers, including heavy highway contractors, general contractors,
subcontractors, manufacturing plants and distribution centers. The Company also
sells used and new equipment, spare parts and supplies, and provides maintenance
and repair services. Since its formation in August 1997, the Company has
acquired 16 equipment rental businesses operating in Florida, Indiana, Kentucky,
Louisiana, Michigan, Ohio, Pennsylvania, Texas and West Virginia. The Company
operates 68 locations and for the year ended December 31, 1997, on a pro forma
basis after giving effect to the Acquisitions, the Company had revenue of $213.8
million and operating income of $36.7 million.
The Company currently serves over 70,000 active accounts primarily in the
construction and industrial segments of the equipment rental industry.
Construction customers include heavy highway contractors, general contractors,
speciality contractors, subcontractors, excavating contractors and trade
contractors (such as electricians and plumbers). Construction customers rent
equipment for all manner of construction activities, typically on a daily,
weekly or monthly basis, with relatively little lead time due to their need to
react quickly to changes in project scheduling. Industrial customers include
operators of manufacturing plants, petrochemical plants, distribution centers
and transportation facilities. Industrial customers typically rent equipment for
maintenance-oriented purposes on a weekly or monthly basis and are more likely
to place orders for rental equipment in advance of their regularly scheduled
maintenance requirements. In addition, the Company rents equipment to homeowners
and other general rental customers.
INDUSTRY OVERVIEW
According to industry sources, the United States equipment rental industry
grew from an estimated $614 million in revenue in 1982 to an estimated $20
billion in 1997, which represents a compound annual growth rate of more than
26%. This growth has been driven primarily by construction and industrial
companies increasingly outsourcing their equipment needs to reduce investment in
non-core assets and convert costs from fixed to variable. According to industry
sources, the United States equipment rental industry is expected to grow to an
estimated $40 billion in annual revenue over the next five years due to the
overall growth in the economy and a continuing trend from sales to rentals. The
Company believes that this trend toward rentals will accelerate as a result of
the many advantages of equipment rental relative to ownership including reduced
capital investment, reduced storage and maintenance expense, increased
flexibility to accept projects due to wide selection of available equipment,
greater access to the most modern equipment without the need to make large
capital expenditures, and improved productivity by having access to equipment
that suits a particular job.
The United States equipment rental industry is highly fragmented, with more
than 20,000 companies. According to industry sources, the 100 largest equipment
rental companies have a combined market share of less than 20%, no single
equipment rental company in the United States has a market share greater than 3%
and more than 90% of equipment rental companies have ten or fewer locations.
The Company believes the recent trend toward rapid consolidation in the
equipment rental industry should continue as a result of (i) increasing
competitive pressure on small, independent operators from the growing number of
regional and national companies with greater access to, and a lower cost of,
capital and
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other related operating efficiencies, (ii) increasing demand by customers for a
broader selection and greater availability of rental equipment and (iii) limited
number of alternative exit strategies for many of the owners and principals of
smaller independent companies. The Company believes that this consolidation
trend, the fragmented nature of the industry and the absence of an equipment
rental company with a significant market share present substantial opportunities
for the Company to achieve a leading market position by creating an integrated
network of nationally branded locations offering broad product selection and
superior customer service.
COMPETITIVE STRENGTHS
NationsRent believes it has several competitive strengths that will enable
it to continue to increase growth and profitability, including the following:
Strong Market Position. The Company believes that, by implementing
its "cluster" strategy in each market it enters, it can achieve a leading
market share and increase revenue from existing customers. The Company
believes this strategy will enable it to more effectively serve its
customers, broaden its customer base, pool rental equipment inventory,
offer a broader selection and greater availability of equipment and
maintain a high utilization rate. By offering a full range of rental
equipment from each location, the Company believes that customers who
currently utilize multiple rental equipment providers will prefer to fill
their rental needs through the NationsRent network of locations. In
addition, NationsRent believes it has other advantages relative to smaller
operators, including greater purchasing power and a lower cost of capital.
National Brand. NationsRent is in the process of entering selected
markets with the goal of establishing a nationally recognized brand
throughout the United States. All NationsRent locations will be supported
by the Company's national branding strategy including a distinctive store
format and marketing program. The Company believes it will be able to
increase revenue by establishing a brand name known for consistent quality
and an extensive supply of rental inventory in a customer-oriented
atmosphere. The Company expects this branding strategy to enable it to
expand its customer base to attract a broader range of customers, including
large customers with operations in a variety of geographic markets.
Focus on Customer Service. NationsRent is differentiating itself from
its competitors with innovations designed to increase customer
satisfaction. The Company seeks to offer more convenient access, faster
check-in and check-out procedures and shorter required lead time for
rentals than its competitors, as well as on-time equipment delivery and
pick-up, on-site repair service, 24-hour customer assistance and a library
of audio, video and written instruction materials for equipment usage and
safety. In addition, as part of the Company's plan to provide one-stop
shopping to customers, each location sells parts and supplies to complement
equipment rentals and sales.
State-of-the-Art Management Information System. The Company is
customizing a state-of-the-art management information system capable of
monitoring operations at several thousand locations. This innovative system
is being designed to track customer purchasing patterns and demographics
for use in gaining market share in new and existing markets, consolidating
equipment purchases, maximizing utilization rates and reducing overhead
expenditures. This system will provide management with real time revenue,
inventory, financial and customer information, facilitating rapid and well
informed decision making. In addition, this system will permit customers to
reserve and rent equipment and access their account information from their
own computer terminals via the Company's internet website. To develop its
customized system, the Company has assembled a team of management
information specialists who have previously developed systems for
Blockbuster and Wal-Mart.
Distinctive Operating Format. In connection with the development of
the NationsRent national brand, the Company has designed a format for its
locations which it believes will help differentiate NationsRent from its
competitors. Distinguishing characteristics of this format include
drive-through lanes, clearly marked equipment aisles and attractive, well
organized and clean store facilities. The Company expects that its larger
locations will typically be on a 6 to 12 acre site in a heavily-trafficked
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area with a 20,000 to 40,000 square foot facility housing a reconditioning
center and a broad selection and extensive inventory of equipment and
supplies. The Company expects that its smaller locations will typically be
on a 2 to 6 acre site in a high-visibility commercial area with a 7,500 to
11,000 square foot facility housing at least one drive-through lane,
maintenance and delivery capabilities and inventory and supplies that are
targeted to the customer base in that area.
Experienced Management Team. The Company believes it has one of the
most experienced and growth-oriented executive management teams among
publicly-traded companies in the equipment rental industry. James L. Kirk,
the Company's Chairman, Chief Executive Officer and President, founded OHM,
a NYSE listed company, in 1969 and served in various senior executive
positions with OHM, growing it into a leading environmental construction
company with an inventory of heavy and light equipment having an original
cost of over $100 million. In addition, the Company will benefit from the
experience of H. Wayne Huizenga, a director of and investor in the Company,
who serves as Chairman and Co-Chief Executive Officer of Republic and who
co-founded and served in various senior executive positions with Waste
Management and Blockbuster, each of which is a leading consolidator in its
respective industry. The other members of the Company's senior management
team have previously worked closely with Mr. Kirk in senior management
positions at OHM, and other key employees and consultants of the Company
have worked with Mr. Huizenga in various positions at Republic, Waste
Management or Blockbuster. The NationsRent management team is supported by
operating, marketing and business development managers with an average of
more than 15 years experience in the equipment rental industry.
GROWTH STRATEGY
The Company's objectives are to increase revenue, profitability, market
share and stockholder value by building a nationally branded network of
locations that offer a comprehensive selection of high quality rental equipment
in convenient and accessible locations to customers in the construction and
industrial markets. Key elements of the NationsRent growth strategy are as
follows:
Acquire Leading Companies. NationsRent seeks to acquire leading
companies in each market it enters to implement its "cluster" strategy and
position the Company to achieve significant market share. The Company
targets businesses that have one or more of the following characteristics:
(i) strong positions in their geographic market; (ii) experienced local
management teams that will continue to work with the Company following the
acquisition; (iii) high-quality equipment rental inventory; and (iv)
physical and operating characteristics that are suited to conversion to the
NationsRent format. Once the Company has entered a particular market, it
seeks to acquire additional rental businesses in that market or adjacent
markets with locations and equipment selection that complement its existing
operations, thus enabling the Company to further penetrate that market.
Convert Acquired Locations. After making an acquisition, the Company
intends to convert acquired locations to the NationsRent format by (i)
branding acquired locations and rental inventory with the NationsRent logo,
colors and distinctive store appearance, (ii) increasing the breadth and
depth of rental inventory, (iii) linking the location to the Company's
customized management information system and (iv) implementing the
NationsRent customer service approach.
Open New Rental Locations. Once NationsRent has established a
presence in a particular market, it seeks to open new locations in that
geographic area or adjacent areas to enable it to offer a greater selection
and availability of equipment, maximize its equipment inventory utilization
rates and achieve economies of scale. The Company believes that this
strategy will allow its new locations to achieve profitability at a faster
rate than its competitors because these locations should (i) more quickly
generate revenue as a result of the pre-existing market presence, name
recognition and referrals from existing locations and (ii) have lower
overhead costs due to the sharing of service, maintenance, administrative
functions and personnel with the Company's established locations.
Further Penetrate Industrial Rental Market. The Company believes that
the equipment needs of industrial customers are underserved by the United
States equipment rental market and, as a result, there
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are significant opportunities to further penetrate this market segment.
NationsRent believes that by offering a comprehensive selection and
available supply of rental equipment throughout an integrated nationally
branded network of locations, industrial customers will become increasingly
aware of the advantages of equipment rental relative to ownership,
including reduced capital investment, reduced storage and maintenance
expense, and greater access to the most modern equipment. The recent
acquisition of Bode-Finn, which has served industrial customers for over 40
years, has established the Company as a leading provider of rental
equipment to industrial customers in several geographic markets.
ACQUISITIONS
In furtherance of its growth strategy, NationsRent has acquired 16
equipment rental businesses with 65 locations. These locations are concentrated
in the regions set forth below.
THE MIDWEST REGION
Central/Northern Ohio
In September 1997, the Company acquired Sam's, which has five locations in
the Central/Northern Ohio market that rent primarily light to heavy equipment to
construction and industrial customers, and has been operating in this market for
more than 35 years.
In December 1997, the Company acquired certain assets of R&R, which has two
locations in the Central/Northern Ohio market that rent primarily heavy
equipment and generators to construction customers, and has been operating in
this market for more than ten years.
In January 1998, the Company acquired certain assets of Central, which has
eight locations in the Central/Northern Ohio market that rent primarily light to
medium equipment to construction and industrial customers and homeowners, and
has been operating in this market for more than ten years.
In May 1998, the Company acquired Bode-Finn, which has one location in the
Central/Northern Ohio market that rents and sells primarily medium to heavy
equipment to industrial customers, and has been operating in this market for
more than 40 years.
Ohio River Valley
In November 1997, the Company acquired certain assets of Ashland Rental and
Sales, Inc. ("Ashland"), which has two locations in the Ohio River Valley market
that rent primarily tools and loading equipment to construction and industrial
customers, and has been operating in this market for more than 45 years.
In December 1997, the Company acquired Titan, which has two locations in
the Ohio River Valley market that rent primarily construction equipment,
generators, compactors and light towers to construction customers.
In May 1998, as part of the acquisition of Bode-Finn, the Company acquired
one location in the Ohio River Valley market that rents and sells primarily
medium to heavy equipment to industrial customers.
Indianapolis/Northern Indiana
In December 1997, the Company acquired certain assets of C&E, which has six
locations in the Indianapolis/Northern Indiana market that rent primarily light
to medium equipment to construction customers, and has been operating in this
market for approximately 40 years.
In April 1998, the Company acquired certain assets of R.F.L. Enterprises,
Inc. ("RFL"), which has one location in the Indianapolis/Northern Indiana market
that rents primarily forklifts, scaffolding and dumpsters to construction and
industrial customers, and has been operating in this market for over 35 years.
In May 1998, the Company acquired certain assets of U-Rent-It Company, Inc.
("U-Rent-It"), which has one location in the Indianapolis/Northern Indiana
market that rents primarily light and lift equipment to construction customers,
and has been operating in this market for almost 40 years.
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In June 1998, the Company acquired Raymond Equipment Co., doing business as
Jobs Rentals ("Jobs"), which has one location in the Indianapolis/Northern
Indiana market that rents and sells primarily heavy earth-moving equipment to
construction customers, and has been operating in this market for more than 40
years.
Southwest Ohio/Northern Kentucky
In May 1998, as part of the acquisition of Bode-Finn, the Company acquired
four locations in the Southwest Ohio/Northern Kentucky market that rent and sell
primarily medium to heavy lift equipment to construction and industrial
customers.
In June 1998, as part of the acquisition of Jobs, the Company acquired one
location in the Southwest Ohio/Northern Kentucky market that rents primarily
heavy earth-moving equipment to construction customers.
Louisville/Lexington, Kentucky
In May 1998, as part of the acquisition of Bode-Finn, the Company acquired
two locations in the Louisville/Lexington, Kentucky market that rent and sell
primarily medium to heavy equipment to construction and industrial customers.
In June 1998, as part of the acquisition of Jobs, the Company acquired one
location in the Louisville/ Lexington, Kentucky market that rents primarily
heavy earth-moving equipment to construction customers.
Southwest Pennsylvania
In June 1998, the Company acquired A-Action Rentals, Inc. ("A-Action"),
which has one location in the Southwest Pennsylvania market that rents primarily
medium to heavy equipment and compressors to construction customers, and has
been operating in this market for more than 35 years.
Detroit, Michigan
In July 1998, the Company acquired J. Kelly Co. ("J. Kelly"), which has two
locations in the Detroit, Michigan market that rent primarily light to medium
equipment to construction and industrial customers, and has been operating in
this market for 25 years.
THE GULF COAST REGION
Southwest Florida
In April 1998, the Company acquired certain assets of Naples Rent-All &
Sales Company, Inc. ("Naples"), which has two locations in the Southwest Florida
market that rent primarily light to medium equipment to construction customers,
and has been operating in this market for approximately 30 years.
In April 1998, the Company acquired certain assets of Revco Equipment
Rentals, Inc. ("Revco"), which has two locations in the Southwest Florida market
that rent primarily medium to heavy equipment to construction customers.
Florida Panhandle
In July 1998, the Company acquired certain assets of General Rental, Inc.
("General Rental"), including six locations in the Florida Panhandle market that
rent primarily light to medium equipment to construction and industrial
customers.
Southeast Texas
In July 1998, the Company acquired certain assets of Associated, which has
four locations in the Southeast Texas market that rent primarily heavy equipment
to construction customers.
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In July 1998, as part of the acquisition of General Rental, the Company
acquired seven locations in the Southeast Texas market that rent primarily light
to medium equipment to construction customers.
Louisiana
In July 1998, as part of the acquisition of Associated, the Company
acquired three locations in the Louisiana market that rent primarily heavy
earth-moving equipment to construction customers.
OPERATIONS
NationsRent is one of the fastest growing equipment rental companies in the
United States. The Company has acquired 16 equipment rental businesses with 65
locations in Florida, Indiana, Kentucky, Louisiana, Michigan, Ohio,
Pennsylvania, Texas and West Virginia, and as of June 30, 1998, the Company had
opened six new locations and had closed three of the locations it acquired. The
Company's operations primarily consist of (i) renting a broad variety of
equipment to construction and industrial customers, (ii) selling its used
equipment inventory, (iii) selling new equipment as a distributor or dealer on
behalf of several nationally known equipment manufacturers and (iv) selling
parts, supplies and merchandise and providing repair and maintenance services to
complement its equipment rentals and sales.
Equipment Rentals. The Company rents on a daily, weekly and monthly basis
a broad variety of equipment primarily to construction and industrial customers.
The Company's rental inventory includes such equipment as aerial lifts and work
platforms, air compressors, backhoes, boom lifts, bulldozers, ditching
equipment, forklifts, generators, high reach equipment, pumps and scissor lifts.
The mix of equipment offered from each of the Company's locations varies based
on the needs of the local market.
The Company is implementing a program to make ongoing capital investments
in new equipment, engage in periodic sales of used equipment and conduct
preventive maintenance. This program is designed to increase equipment
utilization, enhance resale values and extend the useful life of equipment. As
of March 31, 1998, on a pro forma basis for the Acquisitions, the Company's
equipment rental inventory had an original cost of over $250 million and an
average age of less than 36 months.
NationsRent has developed operating initiatives that it plans to introduce
at all of its locations to offer its rental customers more convenient access,
faster check-in and check-out procedures, reduced equipment downtime and shorter
lead times for rentals than its competitors. For example, all of the Company's
new locations are being designed with drive-through lanes to speed up equipment
loading and unloading. In addition, the Company's rental equipment is being
outfitted with universal trailer hitches designed to accept a broad range of
towing mechanisms to ease customer transport of equipment. To reduce the
downtime associated with flat tires, the Company fills the tires of equipment
used in areas prone to flats with foam instead of air. The Company's rental
locations also will offer equipment delivery and pick-up, on-site repair service
within two hours of customer request, 24-hour customer assistance, and a library
of audio, video and written instructional materials for equipment usage and
safety.
Used Equipment Sales. The Company periodically sells used equipment to
adjust the size and composition of its rental equipment in response to changing
market conditions and to maintain the quality and low average age of its rental
equipment. The Company attempts to balance the revenue obtainable from used
equipment sales with the revenue obtainable from continued equipment rentals.
The Company is generally able to achieve favorable resale prices for its used
equipment due to a preventive maintenance program and practice of selling used
equipment before it becomes obsolete or irreparable. The Company believes that
the proactive management of new equipment purchases and used equipment sales
allows it to maximize utilization rates and respond to changing economic
conditions.
New Equipment Sales. The Company is a distributor of new equipment on
behalf of several nationally known equipment manufacturers. The Company has
dealership arrangements in certain geographic areas with various equipment
manufacturers as a result of the Acquisitions. Typically, dealership agreements
do not have a specific term and may be terminated by either party upon specific
events and/or written notice. In the future the Company may continue, amend or
terminate dealership arrangements, if any, of businesses it acquires or it
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may enter into new dealership agreements or arrangements, depending on market
conditions in the area and other factors.
Parts, Supplies and Service. The Company sells a full complement of parts,
supplies and merchandise to its customers in conjunction with its equipment
rental and sales business. NationsRent provides repair service to rental
customers and, as part of the Company's focus on customer service, it plans to
respond to rental equipment service requests within two hours. The Company also
offers maintenance service to customers that own equipment and generates revenue
from damage waiver charges, delivery charges and warranty income. The Company
believes that revenue from parts and service is more stable than equipment sales
revenue because of the recurring nature of the parts and service business. The
Company also believes that during economic downturns the parts and service
business may increase as customers postpone new equipment purchases and instead
attempt to maintain their existing equipment.
MANAGEMENT INFORMATION SYSTEM
The Company is customizing a state-of-the-art management information system
capable of monitoring operations at several thousand locations. This innovative
system is being designed to track customer purchasing patterns and demographics
for use in gaining market share in new and existing markets, consolidating
equipment purchases, maximizing utilization rates and reducing overhead
expenditures. This system will provide management with real time revenue,
inventory, financial and customer information, facilitating rapid and well
informed decision making. In addition, this system will permit customers to
reserve and rent equipment and access their account information from their own
computer terminals via the Company's internet website. To develop its customized
system, the Company has assembled a team of management information specialists
who have previously developed systems for Blockbuster and Wal-Mart.
CUSTOMERS
NationsRent currently serves over 70,000 active accounts primarily in the
construction and industrial segments of the equipment rental industry. On a pro
forma basis after giving effect to the Acquisitions, the Company's top ten
customers represented approximately 6% of the Company's 1997 revenue and no
single customer accounted for more than 2% of the Company's 1997 revenue. The
Company's customers vary in size from large Fortune 500 companies to small
construction contractors, subcontractors, machine operators and homeowners.
The Company does not provide purchase financing to customers. The Company
rents equipment, sells parts and provides repair services on account to
customers who are screened through a credit application process. Customers can
arrange financing of purchases of large equipment through a variety of creditors
including manufacturers, banks, finance companies and other financial
institutions.
SALES AND MARKETING
NationsRent maintains a strong marketing and sales orientation throughout
its organization in order to better understand and serve its customers and
increase its customer base. The Company undertakes sales and marketing
initiatives designed to increase revenue and market share and build brand
awareness. The Company prepares marketing analyses which address key business
issues such as market/industry history, opportunities, company philosophy, sales
trends, consumer behavior trends, distribution channels, pricing issues, target
markets, advertising and media analysis, competitive situations and selling
strategies. Based on the results of its analyses, the Company develops marketing
and sales strategies. To assist the Company in implementing its marketing and
sales strategies, NationsRent has retained a store design and merchandising firm
and plans to retain a national advertising agency.
The Company's district operations managers are responsible for training,
supervising and directing the selling activities of the NationsRent salesforce
in their markets. In addition, district operations managers are also responsible
for overseeing the mix of equipment at their locations, keeping abreast of local
construction and industrial activity and monitoring competitors in their
respective markets.
33
<PAGE> 36
NationsRent employs approximately 95 equipment rental salespeople who
utilize targeted local marketing strategies to address specific customer needs
and respond to competitive pressures. To remain informed of local market
activity, salespeople track construction projects and new equipment sales in
their area through Equipment Data Reports, F.W. Dodge Reports and PEC Reports
(Planning, Engineering and Construction), follow up on referrals and visit
construction sites and potential equipment users who are new to the area.
TRADEMARKS
The Company has applied to the United States Patent and Trademark Office to
register the service mark "NationsRent."
STORE LAYOUT AND DESIGN
Many of the Company's locations are situated in high-visibility commercial
areas and are designed to offer easy and convenient access to customers. The
Company expects that its larger locations will typically be on a 6 to 12 acre
site in a heavily-trafficked area with a 20,000 to 40,000 square foot facility
housing a reconditioning center and a broad selection and extensive inventory of
equipment and supplies. The Company expects that its smaller locations will
typically be on a 2 to 6 acre lot in a high-visibility commercial area with a
7,500 to 11,000 square foot facility housing at least one drive-through lane,
maintenance and delivery capabilities and inventory and supplies that are
targeted to the customer base in that area. Depending on the type of equipment
rented at a particular location and the needs of the local market, the Company's
locations may include (i) sales and administrative offices, (ii) a customer
showroom displaying equipment and parts, (iii) an equipment service area and
(iv) outdoor and indoor equipment storage facilities.
34
<PAGE> 37
PURCHASING
The Company purchases equipment from vendors with reputations for product
quality and reliability. The Company's size and the quantity of equipment it
purchases enable it to purchase most equipment directly from manufacturers
pursuant to national purchasing agreements at lower prices and on more favorable
terms than many smaller competitors. The Company seeks to maintain close
relationships with its vendors to ensure the timely delivery of new equipment.
The Company believes that it has sufficient alternative sources of supply for
the equipment it purchases in each of its principal product categories. The
Company primarily acquires its rental equipment inventory by purchase rather
than lease. The Company selects the type and quantity of rental equipment to be
purchased for each of its locations based on the expected needs of the local
market. The Company determines rental rates for each type of equipment based on
the cost and expected utilization of the equipment, and adjusts its rental rates
at each location for demand, length of rental, volume of equipment rented and
other competitive considerations. The following table summarizes the primary
suppliers of certain of the Company's rental equipment:
<TABLE>
<CAPTION>
PRODUCT CATEGORY PRIMARY SUPPLIERS
---------------- -----------------
<S> <C>
HEAVY
Articulated Trucks Caterpillar/Volvo
Bulldozers Caterpillar/Komatsu/John Deere
Excavators Caterpillar/Komatsu/John Deere
Scrapers Caterpillar/John Deere
Track Loaders Caterpillar/John Deere
MEDIUM
Aerial Lift Platforms Terex/Genie
Backhoes New Holland/Caterpillar/Case/John Deere
Compaction Equipment Ingersoll Rand/BOMAG
Forklifts JCB/Ingersoll Rand/Lull
Knuckle Boom Lifts Terex/Genie
Semi-Pneumatic Forklifts Hyster/Komatsu
Wheel Loaders Volvo/Caterpillar
LIGHT
Air Compressors Ingersoll Rand/Multiquip
Concrete Mixers Whiteman/Essick
Light Towers Ingersoll Rand/Coleman
Power Generators MQ Power/Ingersoll Rand
Skid Steer Loaders New Holland/Bobcat/Case
Trenchers Vermeer/Ditch Witch
Troweling Machines Whiteman/Bartell
Vacuum Pumps Thompson/Godwin
GENERAL RENTAL
Arrow Boards Allman Bros./Amida Industries
Concrete Buggies Miller/Whiteman
Concrete Saws Pardener/Stihl/Olympic
Electric Hammers Bosch/Harper
Plate Compactors Multiquip/BOMAG
Sand Blasters Lindsey
Submersible Pumps Surumi/Multiquip
Welders Lincoln/Miller
</TABLE>
COMPETITION
The equipment rental industry is highly fragmented and competitive. The
Company competes with independent third parties in all of the markets in which
it operates. Most of the Company's competitors in the rental business tend to
operate in specific, limited geographic areas, although some larger competitors
compete on a national basis. The Company also competes with equipment
manufacturers which sell and rent equipment directly to customers. Some of the
Company's competitors have greater financial resources and name recognition than
the Company.
35
<PAGE> 38
ENVIRONMENTAL AND SAFETY REGULATION
The Company's equipment, facilities and operations are subject to certain
federal, state and local laws and regulations relating to environmental
protection and occupational health and safety, including those governing
wastewater discharges, the use, treatment, storage and disposal of solid and
hazardous wastes and materials, air quality and the remediation of contamination
associated with the release of hazardous substances. For example, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, provides for, among other things, the remediation of sites from
which there is a release or threatened release of a hazardous substance into the
environment and may impose liability for the costs of cleanup and for damages to
natural resources upon past and current owners and operators of such sites. In
addition, the Federal Water Pollution Control Act of 1972 regulates the
discharge of pollutants into streams, rivers and other waters and may require
the issuance of discharge permits to the Company. In addition, the Occupational
Safety and Health Act of 1970 authorizes the promulgation of occupational safety
and health standards which apply to the Company's facilities and operations. In
addition to federal environmental and safety regulations, the states and certain
localities in which the Company operates have their own laws and regulations
governing solid waste disposal, water pollution and, in most cases, releases and
cleanup of hazardous substances as well as liability for such matters, which may
be applicable to the Company's facilities and operations. Certain of the
Company's existing and former locations use and have used substances, and
currently generate or have generated or disposed of wastes, which are or may be
considered hazardous or otherwise are subject to applicable environmental
requirements.
In particular, the Company stores and dispenses, or in the past stored or
dispensed or the facilities at which it operates in the past stored or
dispensed, petroleum products from aboveground storage tanks and, in certain
cases, underground storage tanks. The Company also uses or operates locations
which in the past used, hazardous materials, including solvents, to clean and
maintain equipment, and generates and disposes of solid and hazardous wastes,
including batteries, used motor oil, radiator fluid and solvents. In connection
with such activities, the Company has incurred minimal capital expenditures and
other compliance costs which are expensed on a current basis and which, to date,
have not been material to the Company's financial condition.
Additionally, in connection with acquisitions of equipment rental
businesses, the Company has undertaken Phase I environmental audits of
substantially all locations that the Company will continue to operate following
the acquisition and expects to continue to do so before acquiring any additional
sites. Although the Company does not currently maintain comprehensive insurance
covering environmental liabilities at all of its sites, certain of the acquired
businesses do have coverage on storage tanks located at their sites. Moreover,
each of the equipment rental businesses acquired by the Company was required to
provide indemnification to the Company with respect to environmental liabilities
associated with such businesses. Based on currently available information, the
Company believes that the possibility is remote that it will have to incur
material capital expenditures or other material compliance or remediation costs
for environmental and safety matters in the foreseeable future. There can be no
assurance, however, that federal, state or local environmental and safety
requirements will not become more stringent or be interpreted and applied more
stringently in the future, or that the Company will not identify adverse
environmental conditions that are not currently known to the Company. Such
future changes or interpretations, or the identification of such adverse
environmental conditions, could result in additional environmental compliance or
remediation costs not currently anticipated by the Company, which could be
material to the Company's financial condition or results of operations. See
"Risk Factors -- Environmental and Safety Regulation."
EMPLOYEES
As of June 30, 1998, NationsRent employed approximately 1,000 persons. None
of the Company's employees is represented by a union or covered by a collective
bargaining agreement. The Company believes its relations with its employees are
good.
36
<PAGE> 39
PROPERTIES
The Company's corporate headquarters are located in Ft. Lauderdale, Florida
in leased premises. Certain of the Company's property and equipment are subject
to liens securing payment of portions of the Company's indebtedness. The Company
leases the real estate for all but two of its locations and also leases certain
of its equipment. The Company believes that all of its facilities are sufficient
for its current needs.
LEGAL PROCEEDINGS
The Company is a party to pending legal proceedings arising in the ordinary
course of business. While the results of such proceedings cannot be predicted
with certainty, the Company does not believe any of these matters are material
to the Company's financial condition or results of operations.
37
<PAGE> 40
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The table below sets forth the names and ages of the executive officers,
directors and certain key employees of the Company as well as the positions and
offices held by such persons.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
James L. Kirk............................. 48 Chairman of the Board, Chief Executive Officer and
President
Gene J. Ostrow............................ 43 Executive Vice President and Chief Financial
Officer
Philip V. Petrocelli...................... 39 Executive Vice President
Kris E. Hansel............................ 40 Vice President and Controller
Pamela K.M. Beall......................... 41 Vice President, Secretary and Treasurer
H. Wayne Huizenga......................... 60 Director
Harris W. Hudson.......................... 55 Director
Gary L. Gabriel........................... 55 Director
Thomas H. Bruinooge....................... 54 Director
KEY EMPLOYEES OF ACQUIRED BUSINESSES
Thomas C. Richardson...................... 38 Manager, District Operations
Randy W. Elliott.......................... 34 Manager, District Operations
Charles J. Raterman....................... 70 Manager, District Operations
William O. Tracy, III..................... 48 Manager, District Operations
Troy L. Gabriel........................... 32 Manager, Business Development
Michael D. Meenan......................... 44 Manager, Business Development
Michael Nordberg.......................... 51 Manager, Business Development
</TABLE>
Executive Officers and Directors
JAMES L. KIRK is a co-founder of the Company, together with H. Family
Investments, Inc. and Mr. Ostrow, and has served as the Chairman of the Board of
the Company since August 1997 and as Chief Executive Officer and President of
the Company since April 1998. From 1985 to February 1998, Mr. Kirk was Chairman
of the Board, President and Chief Executive Officer of OHM, a NYSE listed
company.
GENE J. OSTROW is a co-founder of the Company, together with H. Family
Investments, Inc. and Mr. Kirk, and has served as its Executive Vice President
and Chief Financial Officer since August 1997. From August 1997 to April 1998,
Mr. Ostrow served as Secretary and Treasurer of the Company. From March 1997 to
October 1997, Mr. Ostrow was Vice President of Corporate Development of OHM.
From November 1994 to March 1997, Mr. Ostrow was a Senior Vice President,
Corporate Finance with Raymond James and Associates and from July 1996 to March
1997, Mr. Ostrow was co-head of that firm's mergers and acquisitions practice.
From October 1993 to November 1994, Mr. Ostrow was Vice President and Chief
Financial Officer of Ecoscience Corporation. Mr. Ostrow was employed by OHM and
its affiliates from February 1986 to October 1993 in various positions,
including Vice President and Chief Financial Officer of OHM from February 1986
through September 1991, and as Executive Vice President and Chief Financial
Officer of NSC Corporation (an affiliate of OHM) from July 1988 through October
1993. Mr. Ostrow is also a Certified Public Accountant.
PHILIP V. PETROCELLI joined the Company as Executive Vice President in
February 1998. From August 1993 to February 1998, Mr. Petrocelli was Vice
President -- Western Region of OHM. Before joining OHM, Mr. Petrocelli was a
Regional Director and acting Vice President-Analytical Labs with IT Corporation,
a provider of engineering services, since September 1988.
38
<PAGE> 41
KRIS E. HANSEL joined the Company as Vice President and Controller in March
1998. Prior to joining the Company, Mr. Hansel served in various positions of
increasing responsibility at OHM since 1988, most recently as Vice President and
Controller. Prior to joining OHM, Mr. Hansel was General Accounting Manager of
WearEver-Proctor Silex, Inc.
PAMELA K.M. BEALL joined the Company as Vice President, Secretary and
Treasurer in April 1998. From June 1985 to April 1998, Ms. Beall served as
Treasurer of OHM and in various positions of increasing responsibility at OHM,
most recently as Vice President and Assistant Secretary. Before joining OHM, Ms.
Beall was General Manager, Treasury Services for USX Corporation, and previous
to that she was with Marathon Oil Company. From November 1996 to February 1998,
Ms. Beall served as a director of NSC Corporation, an affiliate of OHM. Since
May 1996, Ms. Beall has served as a director of System One Services, Inc.
H. WAYNE HUIZENGA joined the Company as a director in June 1998. Since May
1998, Mr. Huizenga has served as Chairman of the Board and Chief Executive
Officer of Republic Services, Inc. ("Republic Services"), a leading provider of
non-hazardous solid waste collection and disposal services. Since August 1995,
Mr. Huizenga has served as Chairman of the Board of Republic, which owns the
nation's largest chain of franchised automotive dealerships, is building a chain
of used vehicle megastores and owns National Car Rental and Alamo Rent-A-Car.
Since October 1996, Mr. Huizenga has served as Co-Chief Executive Officer of
Republic and from August 1995 until October 1996, Mr. Huizenga served as Chief
Executive Officer of Republic. Since September 1996, Mr. Huizenga has served as
the Chairman of the Board of Florida Panthers Holdings, Inc. ("Panthers
Holdings"), a leisure, recreation and entertainment company which owns and
operates certain luxury resort hotels and the Florida Panthers professional
sports franchise. Since January 1995, Mr. Huizenga also has served as the
Chairman of the Board of Extended Stay America, Inc. ("Extended Stay"), an
operator of extended stay lodging facilities. From September 1994 until October
1995, Mr. Huizenga served as the Vice Chairman of Viacom Inc. ("Viacom"), a
diversified entertainment and communications company. During the same period,
Mr. Huizenga also served as the Chairman of the Board of Blockbuster
Entertainment Group, a division of Viacom. From April 1987 through September
1995, Mr. Huizenga served as the Chairman of the Board and Chief Executive
Officer of Blockbuster, during which time he helped build Blockbuster from a
19-store chain into the world's largest video rental company. In September 1994,
Blockbuster merged into Viacom. In 1971, Mr. Huizenga co-founded Waste
Management, which he helped build into the world's largest integrated solid
waste services company, and he served in various capacities, including
President, Chief Operating Officer and a director from its inception until 1984.
Mr. Huizenga is the brother-in-law of Mr. Hudson.
HARRIS W. HUDSON joined the Company as a director in June 1998. Since May
1998, Mr. Hudson has served as Vice Chairman and a director of Republic
Services. Mr. Hudson has served as a director of Republic since August 1995 and
as Vice Chairman of Republic and Chairman of Republic's Solid Waste Group since
October 1996. From August 1995 until October 1996, Mr. Hudson served as
President of Republic. From May 1995 until August 1995, Mr. Hudson served as a
consultant to Republic. From 1983 until August 1995, Mr. Hudson founded and
served as Chairman of the Board, Chief Executive Officer and President of Hudson
Management Corporation, a solid waste collection company, which was acquired by
Republic in August 1995. From 1964 to 1982, Mr. Hudson served as Vice President
of Waste Management of Florida, Inc., a subsidiary of Waste Management and its
predecessor. Mr. Hudson also serves as a director of Panthers Holdings. Mr.
Hudson is the brother-in-law of Mr. Huizenga.
GARY L. GABRIEL joined the Company as a director in June 1998. Since
September 1997, Mr. Gabriel has provided consulting services to the Company on
operational and business development matters. From January 1978 to September
1997, Mr. Gabriel served as President of Sam's, which was acquired by the
Company in September 1997. In 1961, Mr. Gabriel co-founded a predecessor company
of Sam's.
THOMAS H. BRUINOOGE joined the Company as a director in June 1998. Mr.
Bruinooge is an attorney who has been in private practice since 1968 and has
practiced with the firm of Bruinooge & Associates since 1987.
39
<PAGE> 42
The executive officers of the Company are selected by and serve at the
discretion of the Board. The directors of the Company hold office until the next
annual meeting of stockholders and until their successors have been duly elected
and qualified.
Key Employees
THOMAS C. RICHARDSON has eight years of equipment rental industry
experience and joined the Company as Manager, District Operations in September
1997. Since February 1990, Mr. Richardson has served as Vice President of
Operations of Sam's.
RANDY W. ELLIOTT has nine years of equipment rental industry experience and
joined the Company as Manager, District Operations in December 1997. Since
January 1989, Mr. Elliott has served in various positions of increasing
responsibility with C&E, most recently as Vice President of C&E, which was
acquired by the Company in December 1997.
CHARLES J. RATERMAN has 42 years of equipment rental industry experience
and joined the Company as Manager, District Operations in May 1998. Since 1956,
Mr. Raterman has served in various positions of increasing responsibility with
Bode-Finn and since 1989, has served as the President of Bode-Finn, which was
acquired by the Company in May 1998.
WILLIAM O. TRACY, III has 27 years of equipment rental industry experience
and joined the Company as Manager, District Operations in December 1997. In
1971, Mr. Tracy founded Titan and served as President until the Company's
acquisition of Titan in December 1997. Since December 1997, Mr. Tracy has served
as Vice President of Titan.
TROY L. GABRIEL has 11 years of equipment rental industry experience and
joined the Company as Manager, Business Development in September 1997. From 1987
to September 1997, Mr. Gabriel served in various positions of increasing
responsibility with Sam's, most recently as Vice President.
MICHAEL D. MEENAN has seven years of equipment rental industry experience
and joined the Company as Manager, Business Development in January 1998. From
August 1991 to January 1998, Mr. Meenan was Chairman of the Board of Directors
and President of Central, which was acquired by the Company in January 1998.
MICHAEL NORDBERG has 28 years of equipment rental industry experience and
joined the Company as Manager, Business Development in April 1998. Prior to
joining the Company, Mr. Nordberg served in various positions of increasing
responsibility at Naples, most recently as Chief Executive Officer and
President, from 1984 until the Company's acquisition of Naples in April 1998.
COMMITTEES OF THE BOARD OF DIRECTORS
Prior to consummation of the Offering, the Company intends to establish an
Executive Committee that will have the same powers and authority as the Board of
Directors of the Company (the "Board"), subject to the limitations of the
Delaware General Corporation Law (the "DGCL") and the Company's Certificate of
Incorporation, as amended (the "Certificate"), and Bylaws, as amended (the
"Bylaws"). Prior to consummation of the Offering, Messrs. Kirk and Huizenga are
expected to be appointed as the members of the Executive Committee.
After consummation of the Offering, the Company intends to establish an
Audit Committee and a Compensation Committee, each composed of two independent
directors. The Audit Committee will recommend the annual appointment of the
Company's auditors, with whom the Audit Committee will review the scope of audit
and non-audit assignments and related fees, accounting principles used by the
Company in financial reporting, internal auditing procedures and the adequacy of
the Company's internal control procedures. The Compensation Committee will
administer the 1998 Stock Option Plan and make recommendations to the Board
regarding compensation for the Company's executive officers.
40
<PAGE> 43
COMPENSATION OF DIRECTORS
The 1998 Stock Option Plan, which the Company intends to adopt prior to
consummation of the Offering, will provide for an automatic grant of options to
purchase 50,000 shares of Common Stock to each member of the Board who is a
non-employee director at the time of the Offering and to each member of the
Board who joins the Board as a non-employee director thereafter. In addition,
the 1998 Stock Option Plan will provide for an additional automatic grant of
options to purchase 10,000 shares of Common Stock at the beginning of each
fiscal year to each non-employee director continuing to serve on the Board at
such time. All options granted automatically to a non-employee director will be
fully vested and immediately exercisable. In addition, each automatic grant of
options to a non-employee director will remain exercisable for a term of ten
years from the date of grant so long as such person remains a member of the
Board. Each automatic grant of options to a non-employee director serving on the
Board at the time of the Offering will have an exercise price per share equal to
the initial public offering price, and each automatic grant thereafter will be
exercisable at a price per share equal to the closing price of a share of Common
Stock on the NYSE, on the date immediately prior to the automatic grant date. In
addition to such automatic option grant, the Company expects to reimburse
directors for their reasonable expenses incurred in connection with their
attendance at Board and Committee meetings.
In September 1997, in connection with the acquisition of Sam's, the Company
entered into an agreement with Gary L. Gabriel pursuant to which Mr. Gabriel
provides certain consulting services to the Company. See "Certain Relationships
and Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year ended December 31, 1997, the Company had no Compensation
Committee or other committee of the Board performing similar functions.
Decisions concerning compensation of executive officers were made by certain
executive officers of the Company. It is contemplated that the Board will
establish a Compensation Committee consisting of non-employee directors
following consummation of the Offering. See "-- Committees of the Board of
Directors."
EXECUTIVE COMPENSATION
The Company was formed in August 1997 and did not pay any compensation to
its Chief Executive Officer and did not pay salary and bonus in excess of
$100,000 to any of its executive officers for the period from August 14, 1997
(inception) to December 31, 1997. The following table sets forth the annual base
salaries that the Company expects to pay for the year ending December 31, 1998
to the named executive officers below (the "Named Officers") and certain options
to purchase Common Stock which the Company has granted or intends to grant to
the Named Officers:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON STOCK
UNDERLYING
NAME ANNUAL BASE SALARY OPTIONS
- ---- ------------------ ------------
<S> <C> <C>
James L. Kirk................................ $250,000 250,000(1)
Gene J. Ostrow............................... 200,000 100,000(1)
Philip V. Petrocelli......................... 200,000 346,472(2)
Kris E. Hansel............................... 125,000 112,569(3)
Pamela K.M. Beall............................ 125,000 117,505(4)
</TABLE>
- ---------------
(1) The Company intends to grant these options upon consummation of the
Offering. These options will have an exercise price per share equal to the
initial public offering price and will vest over a four year period at the
rate of 25% per year commencing on the first anniversary of the date of
grant.
(2) These options have an exercise price of $5.77 per share and vest over a four
year period at the rate of 25% per year commencing on February 24, 1999.
These options become immediately exercisable upon a change of control of the
Company (as defined in the option agreement related to such options).
41
<PAGE> 44
(3) These options have an exercise price of $6.66 per share and vest over a four
year period at the rate of 25% per year commencing on March 9, 1999. These
options become immediately exercisable upon a change of control of the
Company (as defined in the option agreement related to such options).
(4) These options have an exercise price of $6.38 per share and vest over a four
year period at the rate of 25% per year commencing on March 19, 1999. These
options become immediately exercisable upon a change of control of the
Company (as defined in the option agreement related to such options).
The executive officers of the Company receive health benefits which do not
exceed 10% of their respective salaries. These benefits are also provided to
other employees of the Company. The Company may pay bonuses and issue additional
stock options to the Named Officers during 1998. See "-- Stock Option Plan."
STOCK OPTION PLAN
Prior to consummation of the Offering, the Company intends to adopt the
1998 Stock Option Plan pursuant to which employees, directors (whether or not
employees), independent contractors and consultants of the Company will be
eligible to receive stock options. The 1998 Stock Option Plan is intended to
promote the long-term financial interests of the Company by encouraging eligible
individuals to acquire an ownership position in the Company and to provide
incentives for performance. The 1998 Stock Option Plan, which is expected to be
approved by the Board, will be effective upon consummation of the Offering. Upon
consummation of the Offering, the Company intends to grant to certain employees,
pursuant to the 1998 Stock Option Plan, options to purchase an aggregate of
972,273 shares of Common Stock at the initial public offering price.
401(k) PLAN
The Company intends to adopt a 401(k) Retirement Savings Plan (the "401(k)
Plan") to provide retirement and other benefits to employees of the Company and
to permit employees a means to save for their retirement. The 401(k) Plan is
intended to be a tax-qualified plan under Section 401(a) of the Internal Revenue
Code of 1986, as amended.
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION
The DGCL authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of the directors' fiduciary duty of care. The Certificate
limits the liability of directors of the Company to the Company or its
stockholders to the fullest extent permitted by Delaware law. Specifically,
directors of the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit. The inclusion of this provision in the Certificate may have
the effect of reducing the likelihood of derivative litigation against
directors, and may discourage or deter stockholders or management from bringing
a lawsuit against directors for breach of their duty of care, even though such
an action, if successful, might otherwise have benefited the Company and its
stockholders. This provision has no effect on any non-monetary remedies that may
be available to the Company or its stockholders, nor does it relieve the Company
or its directors from compliance with federal or state securities laws.
The Bylaws provide that the Company shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit (each, a "Proceeding") by reason of the fact that he is
or was a director or officer of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another entity,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with such Proceeding. In addition, the Company intends
to obtain director and officer liability insurance that insures the Company's
directors and officers against certain liabilities.
42
<PAGE> 45
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the Common Stock immediately prior to and immediately following
consummation of the Offering by (i) each person known to the Company to
beneficially own more than 5% of the outstanding shares of Common Stock, (ii)
each director of the Company and each Named Officer, and (iii) all directors and
executive officers of the Company as a group. Unless otherwise indicated, each
such stockholder has sole voting and investment power with respect to the shares
beneficially owned by such stockholder. Percentages of shares beneficially owned
are based upon 30,118,694 shares and 43,118,694 shares of Common Stock to be
outstanding immediately prior to and immediately following the consummation of
the Offering, respectively, plus for each person named below any shares of
Common Stock that may be acquired by such person within 60 days of the
consummation of the Offering upon exercise of outstanding options or other
rights.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
BEFORE THE OFFERING AFTER THE OFFERING
--------------------------- ------------------------------
NUMBER OF NUMBER OF
SHARES OF PERCENT OF SHARES OF PERCENT OF
NAME COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
---- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
H. Family Investments, Inc.(1)....... 12,000,000 39.8 12,000,000 27.8
450 East Las Olas Blvd.
Ft. Lauderdale, Florida 33301
James L. Kirk........................ 12,000,000(2) 39.8 12,000,000 27.8
Gene J. Ostrow....................... 1,000,000 3.3 1,000,000 2.3
Philip V. Petrocelli................. 111,276 * 111,276 *
Kris E. Hansel....................... 37,092 * 37,092 *
Pamela K.M. Beall.................... 92,730 * 92,730 *
H. Wayne Huizenga.................... 1,632,047(2)(3) 5.4 1,682,047(3)(4) 3.9
Harris W. Hudson..................... 463,650 1.5 513,650(4) 1.2
Gary L. Gabriel...................... -- -- 385,455(4)(5) *
Thomas H. Bruinooge.................. 37,092 * 87,092(4) *
All executive officers and directors
as a group (9 persons)............. 15,373,887 51.0 15,909,342(5)(6) 36.4
</TABLE>
- ---------------
* Less than 1%
(1) H. Family Investments, Inc. is a Florida corporation controlled by H. Wayne
Huizenga, Jr., the son of Mr. Huizenga. The number of shares of Common Stock
beneficially owned by H. Family Investments, Inc. does not include an
aggregate of $25.0 million of Common Stock expected to be purchased in the
Offering by the Huizenga Investors because H. Wayne Huizenga, Jr. does not
share voting or dispositive control of such shares and disclaims beneficial
ownership of such shares.
(2) Does not include shares over which Messrs. Kirk and Huizenga have been
granted irrevocable proxies by purchasers of shares in the Private
Placement, which proxies expire upon consummation of the Offering.
(3) These shares are held by Huizenga Investments Limited Partnership, a Nevada
limited partnership controlled by Mr. Huizenga ("HILP"). The number of
shares of Common Stock beneficially owned by Mr. Huizenga does not include
shares of Common Stock held by H. Family Investments, Inc. or an aggregate
of $25.0 million of Common Stock expected to be purchased in the Offering by
the Huizenga Investors because Mr. Huizenga does not share voting or
dispositive control of such shares and disclaims beneficial ownership of
such shares.
(4) Includes 50,000 shares of Common Stock issuable upon exercise of options
which the Company expects to grant to non-employee directors of the Company
under the 1998 Stock Option Plan upon consummation of the Offering, which
options will be immediately exercisable.
(5) Includes 335,455 shares of Common Stock issuable upon conversion of
convertible promissory notes in an aggregate principal amount of $3.69
million, which are convertible at the initial public offering price
(assuming an initial public offering price of $11.00 per share, which is the
midpoint of the estimated
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<PAGE> 46
range set forth on the cover of this Prospectus). See "Description of
Certain Indebtedness -- Promissory Notes."
(6) Includes 200,000 shares of Common Stock issuable upon exercise of options
which the Company expects to grant to non-employee directors of the Company
under the 1998 Stock Option Plan upon consummation of the Offering, which
will be immediately exercisable.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In August 1997, the Company was founded by H. Family Investments, Inc. and
Messrs. Kirk and Ostrow (collectively, the "Founders"). H. Family Investments,
Inc. is a Florida corporation controlled by H. Wayne Huizenga, Jr., the son of
Mr. Huizenga. The Founders committed an aggregate of $48.4 million in equity
capital to the Company which was funded at various times from September 1997
through June 2, 1998 as required to complete acquisitions. Prior to consummation
of the Offering, the Company intends to register for resale, subject to the
Lock-up Agreements, under the Securities Act and applicable state securities
laws the shares of Common Stock held by the Founders. The Company intends to pay
any registration expenses incidental to such registration, excluding
underwriters' commissions and deductions.
On June 2, 1998, the Company sold an aggregate of 5,118,694 shares of
Common Stock in the Private Placement for aggregate proceeds of $27.6 million.
The table below sets forth the officers and directors of the Company who
participated in the Private Placement and the number of shares of Common Stock
acquired in such transaction:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
NAME COMMON STOCK
- ---- ------------
<S> <C>
H. Wayne Huizenga........................................... 1,632,047(1)
Harris W. Hudson............................................ 463,650
Philip V. Petrocelli........................................ 111,276
Pamela K.M. Beall........................................... 92,730
Kris E. Hansel.............................................. 37,092
Thomas H. Bruinooge......................................... 37,092
</TABLE>
--------------------
(1) These shares are held by HILP.
The Company has agreed to use reasonable efforts following the consummation
of the Offering to register for resale under the Securities Act and applicable
state securities laws the shares of Common Stock issued in the Private
Placement. The purchasers in the Private Placement also have the right to
include in such registration statement other shares of Common Stock, if any,
owned by them on the date of the Private Placement. The Company is obligated to
pay any registration expenses incidental to such registration, excluding
underwriters' commissions and discounts. This description is qualified in its
entirety by reference to the Subscription Agreement entered into by each of the
purchasers in the Private Placement, a copy of the form of which will be filed
as an exhibit to the Registration Statement.
In May 1998, the Company received an unsecured subordinated loan in the
amount of $17.4 million from HILP. This loan represented bridge financing to
complete certain acquisitions until the Founders could fund the final portion of
their original capital commitments. The principal amount of the loan was repaid
on June 3, 1998 from the Founders' Additional Contribution. Interest in the
amount of approximately $124,000 accrued on this loan and was paid by the
Company on June 3, 1998.
In September 1997, the Company acquired Sam's for $23.4 million from Gary
L. Gabriel, Troy L. Gabriel and certain trusts controlled by them. A portion of
the purchase price was paid by the Company to Gary L. Gabriel and certain trusts
controlled by him in the form of (i) unsecured promissory notes in the aggregate
principal amount of approximately $2.6 million which bear interest at the rate
of 8.5% per annum, (ii) an unsecured convertible promissory note in the
principal amount of approximately $0.7 million which bears interest at the rate
of 6.5% per annum, and (iii) unsecured contingent convertible promissory notes
in the aggregate principal amount of $3.0 million which bear interest at the
rate of 6.5% per annum. For a
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<PAGE> 47
description of certain of the terms of these promissory notes, see "Description
of Certain Indebtedness -- Promissory Notes." As part of the Sam's acquisition,
the Company entered into certain leases on four properties used in its
operations from TTG Properties, an Ohio general partnership ("TTG"), of which
Gary L. Gabriel and Troy L. Gabriel are general partners. Each of the four
leases to which the Company and TTG are a party commenced on October 1, 1997 and
end on September 30, 2002, with three automatic five-year extensions and grant
the Company the option to purchase the leased premises at any time prior to the
lease termination at a fixed price. The aggregate monthly rental payment to TTG
under the leases on the four properties is $40,000. Also, in connection with the
Sam's acquisition, Sam's entered into an agreement with Gary L. Gabriel pursuant
to which Mr. Gabriel provides certain consulting services to the Company. This
agreement has a three year term which automatically renews for an additional one
year term. This agreement provides for an annual salary of $100,000, and use of
a leased vehicle and up to $30,000 of rental equipment per year. The agreement
provides that if Mr. Gabriel's services are terminated at any time without
cause, he will be entitled to receive one year's annual salary as severance. In
addition, the Company intends to enter into leases of certain facilities in
Findlay and Mansfield, Ohio, from TTG.
The Company has entered into certain contracts for building construction
with Alvada Construction, Inc., an entity controlled by Mr. Kirk's brother. The
aggregate amount payable under these contracts is approximately $1.7 million.
The Company currently leases the office space and parking for its corporate
headquarters from Panthers Holdings. The monthly lease amount payable by the
Company is approximately $20,000, which amount includes a share of the operating
expenses for this location based upon estimated usage. In addition, the Company
licenses from Panthers Holdings the use of an executive suite at the Broward
County Arena, which is operated by Panthers Holdings, for a fee of $95,000 per
annum for a term of seven years. The Company may also enter into a sponsorship
agreement with Panthers Holdings for certain sponsorship, marketing and
advertising services. Mr. Huizenga is Chairman of the Board of Panthers Holdings
and controls a majority of the voting interests of Panthers Holdings. Mr. Hudson
is also a director of Panthers Holdings.
In addition, the Company may enter into a license agreement with Pro Player
Stadium, a professional sports stadium in South Florida which is owned by Mr.
Huizenga, for the use of an executive suite at Pro Player Stadium for a fee of
up to approximately $120,000 per year for a term of up to three years.
With respect to transactions discussed in this section, no independent
determination has been made as to the fairness or reasonableness of the terms
thereof. The Company believes, however, based on its prior experience, that the
terms of each transaction were as favorable to the Company as it could have
obtained from an unaffiliated party.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary description of the Credit Facility, certain
promissory notes and related registration rights is qualified in its entirety by
reference to the Credit Facility, the promissory notes and the registration
rights agreements, copies of which will be filed as exhibits to the Registration
Statement of which this Prospectus is a part.
CREDIT FACILITY
The Company has established the Credit Facility with a syndicate of lenders
and BankBoston, as agent. Under the Credit Facility, the Company may borrow up
to $265 million on a revolving line of credit which can be used to complete
permitted acquisitions and make capital expenditures and for working capital and
other general corporate purposes. Borrowings under the Credit Facility may be in
the form of base rate loans or at the option of the Company, Eurodollar loans.
Upon consummation of the Offering, borrowings under the Credit Facility will
bear interest at either the BankBoston base rate plus a percentage ranging from
0.00% to 0.50% or, at the Company's option, the Eurodollar market rate plus a
percentage ranging from 1.50% to 3.00%. The percentage over the BankBoston base
rate or the Eurodollar market rate is based on the Company's financial
performance as measured by the total funded debt ratio (the "Pricing Ratio").
Prior to the
45
<PAGE> 48
consummation of the Offering, the base rate loans bear interest at the
BankBoston base rate plus 0.75% or, at the Company's option, the Eurodollar
market rate plus 3.00%. Interest on the Eurodollar loan is payable on the last
day of the applicable interest period which may be a one, two, three or six
month period at the option of the Company. The Credit Facility is secured by a
first priority security interest in all assets of the Company except for
purchase money interests, chattel paper and general intangibles not assignable
by law or by terms of license. Borrowings under the Credit Facility mature and
become due and payable in full in July 2001.
PROMISSORY NOTES
In connection with certain of the Acquisitions, the Company has issued
unsecured subordinated promissory notes in an aggregate principal amount of
approximately $56.5 million. An aggregate principal amount of approximately
$49.0 million of such promissory notes are convertible (the "Convertible Notes")
into shares of Common Stock at a conversion price equal to the initial public
offering price and bear interest at rates ranging between 6.50% and 8.50%.
Certain of these convertible promissory notes become pre-payable by the Company
following the Offering based on the achievement of certain target trading prices
of the Common Stock over specified periods. The remaining promissory notes in
the aggregate principal amount of approximately $7.5 million are not convertible
into shares of Common Stock, bear interest at rates ranging between 6.50% and
8.50% and are pre-payable without penalty.
Upon consummation of the acquisition of J. Kelly, the Company issued
Convertible Notes in the aggregate principal amount of $2.5 million (the "Kelly
Notes") and entered into a registration rights agreement (the "Kelly Agreement")
with the stockholders of J. Kelly (the "Kelly Holders"), granting piggyback
registration rights with respect to the Common Stock into which the Kelly Notes
are convertible. Upon consummation of the acquisition of Associated, the Company
issued Convertible Notes in the aggregate principal amount of $10 million (the
"Associated Notes") and entered into a registration rights agreement (the
"Associated Agreement") with the stockholders of Associated (the "Associated
Holders"), granting piggyback registration rights with respect to the Common
Stock into which the Associated Notes are convertible. Under the Kelly Agreement
and the Associated Agreement, if the Company proposes to file a registration
statement with respect to the Common Stock (other than in connection with the
Company's initial public offering, acquisition shelf registration statements or
employee stock option plans) any time after the later of the first anniversary
of the Kelly Agreement or the Associated Agreement, as applicable, or six months
after the date of the Company's initial public offering (the "IPO Date"), then
upon the request of the Kelly Holders or the Associated Holders, as applicable,
the Company will use its reasonable best efforts to register for resale under
the Securities Act and applicable state securities laws the shares of Common
Stock issuable upon conversion of the Kelly Notes or the Associated Notes, as
applicable. The Company has also entered into a registration rights agreement
with the principals of Bode-Finn (the "Bode-Finn Holders"). See "Description of
Capital Stock -- Warrants and Options." The Company is obligated to pay any
registration expenses incidental to such registration, excluding underwriters'
commission and discounts. The Kelly Holders, the Associated Holders and the
Bode-Finn Holders are expected to enter into Lock-up Agreements with the
Underwriters. See "Shares Eligible for Future Sale."
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The Certificate authorizes capital stock consisting of 5,000,000 shares of
preferred stock, par value $0.01 per share (the "Preferred Stock"), and
250,000,000 shares of Common Stock. Immediately following the Offering,
43,118,694 shares of Common Stock (45,068,694 shares if the Underwriters'
over-allotment option is exercised in full) and no shares of Preferred Stock
will be outstanding. All of the shares of Common Stock that will be outstanding
immediately following the Offering, including the shares of Common Stock sold in
the Offering, will be validly issued, fully paid and nonassessable. The
following summary description of the capital stock of the Company, including
certain warrants, options and convertible promissory notes and related
registration rights, is qualified in its entirety by reference to the
Certificate, the Bylaws and the agreements
46
<PAGE> 49
governing such instruments, copies of which will be filed as exhibits to the
Registration Statement of which this Prospectus is a part.
COMMON STOCK
The holders of the Common Stock are entitled to one vote for each share on
all matters voted on by stockholders, including elections of directors, and,
except as otherwise required by law or the Certificate, the holders of such
shares will possess all voting power. The Certificate will not provide for
cumulative voting in the election of directors. Subject to any preferential
rights of any outstanding series of Preferred Stock created by the Board from
time to time, the holders of the Common Stock will be entitled to such dividends
as may be declared from time to time by the Board from funds available therefor,
and upon liquidation will be entitled to receive pro rata all assets of the
Company available for distribution to such holders. See "Dividend Policy."
PREFERRED STOCK
The Certificate authorizes the Board to establish one or more series of
Preferred Stock and to determine, with respect to any series of Preferred Stock,
the terms and rights of such series, including (i) the designation of the
series, (ii) the number of shares of the series, which number the Board may
thereafter (except where otherwise provided in the applicable certificate of
designation) increase or decrease (but not below the number of shares thereof
then outstanding), (iii) whether dividends, if any, will be cumulative or
noncumulative, and, in the case of shares of any series having cumulative
dividend rights, the date or dates or method of determining the date or dates
from which dividends on the shares of such series shall be cumulative, (iv) the
rate of any dividends (or method of determining such dividends) payable to the
holders of the shares of such series, any conditions upon which such dividends
will be paid and the date or dates or the method for determining the date or
dates upon which such dividends will be payable, (v) the redemption rights and
price or prices, if any, for shares of the series, (vi) the amount, terms,
conditions and manner of operation of any purchase, retirement or sinking fund
to be provided for the shares of the series, (vii) the rights and the
preferences, if any, of shares of the series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, (viii) whether the shares of the series will be convertible or
exchangeable into shares of any other class or series, prices or rates of
conversion or exchange and all other terms and conditions upon which such
conversion or exchange may be made, (ix) restrictions on the issuance of shares
of the same series or of any other class or series, (x) the voting rights, if
any, of the holders of the shares of the series and (xi) any other relative
rights, preferences and limitations of such series.
The Company believes that the ability of the Board to issue one or more
series of Preferred Stock will provide the Company with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs which might arise. The authorized shares of Preferred Stock, as
well as shares of Common Stock, will be available for issuance without further
action by the Company's stockholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed or traded. Subject to certain
exceptions, the NYSE currently requires stockholder approval as a prerequisite
to listing shares in several instances, including where the present or potential
issuance of shares could result in an increase in the number of shares of common
stock or voting securities outstanding by at least 20%. If the approval of the
Company's stockholders is not required for the issuance of shares of Preferred
Stock or Common Stock, the Board may determine not to seek stockholder approval.
Although the Board has no intention at the present time of doing so, it
could issue a series of Preferred Stock that could, depending on the terms of
such series, impede the completion of a merger, tender offer or other takeover
attempt. The Board will make any determination to issue such shares based on its
judgment as to the best interests of the Company and its stockholders. The
Board, in so acting, could issue Preferred Stock having terms that could
discourage an acquisition attempt through which an acquirer may be able to
change the composition of the Board, including a tender offer or other
transaction that some, or a majority, of the Company's stockholders might
believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then current market price of such stock.
47
<PAGE> 50
WARRANTS AND OPTIONS
In May 1998, in connection with the acquisition of Bode-Finn, the Company
issued warrants (the "Warrants") to the Bode-Finn Holders to acquire a number of
shares of Common Stock equal to $800,000 divided by the initial public offering
price at an exercise price equal to the initial public offering price. The
Warrants are exercisable for the period commencing 18 months after the IPO Date
and ending on the fifth anniversary of the IPO Date. In addition, in connection
with the acquisition of Bode-Finn, the Company issued Convertible Notes and
entered into a registration rights agreement (the "Bode-Finn Agreement") with
the Bode-Finn Holders pursuant to which the Company has agreed that, if it
proposes to file a registration statement with respect to the Common Stock after
the IPO Date, then upon the request of the Bode-Finn Holders, the Company will
use its best efforts to register for resale under the Securities Act and
applicable state securities laws the shares of Common Stock issuable to the
Bode-Finn Holders upon conversion of the Warrants and the Convertible Notes held
by them (the "Registrable Securities"). The Bode-Finn Agreement also provides
that at any time beginning six months after the IPO Date, Bode-Finn Holders
holding at least 25% of the Registrable Securities may request registration of
not less than 50% of the outstanding Registrable Securities held by each
Bode-Finn Holder requesting registration. The Company is not required to effect
more than two registrations pursuant to this provision. The Company is obligated
to pay any registration expenses incidental to such registration, excluding
underwriters' commissions and discounts. The Bode-Finn Holders are expected to
enter into Lock-up Agreements with the Underwriters. See "Shares Eligible for
Future Sale."
The Company has granted to certain employees of the Company options to
purchase an aggregate of 1,087,571 shares of Common Stock, at exercise prices
ranging from $2.96 to $6.69 per share and a weighted average exercise price of
$5.33, which were granted outside of the 1998 Stock Option Plan. These options
vest over a four year period at the rate of 25% per year commencing on the first
anniversary of the date of grant. These options become immediately exercisable
upon a change of the control of the Company (as defined in the option agreements
related to such options). Upon consummation of the Offering, the Company intends
to grant to certain employees, pursuant to the 1998 Stock Option Plan, options
to purchase an aggregate of 972,273 shares of Common Stock at the initial public
offering price. See "Management -- Stock Option Plan."
INDEMNIFICATION
The Certificate provides that the Company shall indemnify each director,
officer, employee or agent of the Company to the fullest extent permitted by
law. The Certificate limits the liability of the Company's directors for
monetary damages in certain circumstances. The Bylaws also provide that the
Company may purchase insurance on behalf of the directors, officers, employees
and agents of the Company against certain liabilities asserted against or
incurred by them in such capacity, whether or not the Company would have the
power to indemnify against such liabilities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Boston EquiServe.
48
<PAGE> 51
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the consummation of the Offering, the Company will
have 43,118,694 shares of Common Stock outstanding (45,068,694 shares if the
Underwriters' over-allotment option is exercised in full), including 30,118,694
outstanding shares of Common Stock presently beneficially owned by existing
stockholders. The 13,000,000 shares of Common Stock to be sold pursuant to the
Offering (14,950,000 if the Underwriters' over-allotment option is exercised in
full) will be eligible for sale without restriction under the Securities Act in
the public market after the consummation of the Offering by persons other than
Affiliates of the Company. Sales of shares by Affiliates of the Company will be
subject to Rule 144. The Company and the officers, directors and certain
security holders of the Company, who will beneficially own in the aggregate
outstanding shares (or securities convertible into or exercisable for
shares) of Common Stock immediately following the consummation of the Offering,
have agreed with the Underwriters pursuant to Lock-up Agreements not to offer,
sell or otherwise dispose of any shares of Common Stock or any security
convertible into, exercisable for or exchangeable for shares of Common Stock for
a period of 180 days after the date of this Prospectus without the prior written
consent of Bear, Stearns & Co. Inc., except that (i) stockholders may make
transfers as gifts if the donee agrees to be bound by a Lock-up Agreement, (ii)
certain security holders will be permitted to pledge or margin their shares in a
bona fide loan transaction with a third party lender, (iii) the Company may at
any time and from time to time issue shares of Common Stock to third parties as
consideration for the Company's acquisition from such third parties of equipment
rental companies and (iv) the Company may issue options pursuant to the 1998
Stock Option Plan and shares of Common Stock upon the exercise of certain
options granted to non-employee directors. The Company may issue shares of
Common Stock in connection with acquisitions prior to the expiration of the
180-day lock-up period.
The Company has reserved for issuance (i) 5,000,000 shares of Common Stock
issuable in connection with options to be granted under the 1998 Stock Option
Plan, (ii) 1,087,571 shares of Common Stock issuable in connection with certain
outstanding options, (iii) 72,727 shares of Common Stock issuable in connection
with certain outstanding warrants (assuming an initial public offering price of
$11.00 per share, which is the midpoint of the estimated range set forth on the
cover of this Prospectus), and (iv) 4,453,636 shares of Common Stock issuable in
connection with certain outstanding convertible promissory notes (assuming an
initial public offering price of $11.00 per share, which is the midpoint of the
estimated range set forth on the cover of this Prospectus).
Prior to the Offering, there has been no market for the Common Stock of the
Company. The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on market
prices prevailing from time to time. Nevertheless, sales of substantial amounts
of the Common Stock of the Company in the public market, or the prospect of such
sales, could adversely affect the market price of the Common Stock.
In general, under Rule 144 as presently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least one year has elapsed since
the later of the date shares of Common Stock that are "restricted securities"
(as that term is defined in Rule 144) were acquired from the Company or the date
they were acquired from an affiliate (as that term is defined in Rule 144) of
the Company, as applicable, then the holder of such restricted shares (including
an Affiliate) is entitled to sell a number of shares within any three-month
period that does not exceed the greater of 1% of the then outstanding shares of
Common Stock (approximately 431,187 shares immediately after the consummation of
the Offering, assuming that the Underwriters' over-allotment option is not
exercised) or the average weekly trading volume of the Common Stock on the NYSE
during the four calendar weeks preceding such sale. The holder may only sell
such shares through unsolicited brokers' transactions. Sales under Rule 144 are
also subject to certain requirements pertaining to the manner of such sales,
notices of such sales and the availability of current public information
concerning the Company. Affiliates may sell shares not constituting restricted
securities in accordance with the foregoing volume limitations and other
requirements but without regard to the two-year holding period requirement.
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<PAGE> 52
Under Rule 144(k), if a period of at least two years has elapsed since the
later of the date restricted shares were acquired from the Company or the date
they were acquired from an Affiliate of the Company, as applicable, then a
holder of such restricted shares who is not an Affiliate of the Company at the
time of the sale and who has not been an Affiliate of the Company for at least
three months prior to the sale would be entitled to sell the shares immediately
without regard to the volume limitations and other conditions described above.
In connection with the Private Placement, the Company agreed to use its
reasonable efforts following consummation of the Offering to register for resale
shares of Common Stock issued in the Private Placement. Prior to consummation of
the Offering, the Company intends to file a registration statement to register
for resale on a continuous basis from time to time, subject to the Lock-up
Agreements, 34,645,057 shares of Common Stock, 30,118,694 shares of which are
held by the Company's existing stockholders and 4,526,363 shares of which are
issuable upon exercise or conversion of outstanding warrants and convertible
promissory notes. The Company intends to cause this registration statement to
become effective prior to the consummation of the Offering and to maintain its
continuous effectiveness, including through filing post-effective amendments,
indefinitely. In addition, the Company intends to register on a Registration
Statement on Form S-8 shares of Common Stock reserved for issuance upon exercise
of options that may be granted to certain employees and non-employee directors
under the 1998 Stock Option Plan. The Company may also from time to time file
registration statements covering the issuance and/or resale of shares of Common
Stock which may be issued in certain potential future acquisitions.
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<PAGE> 53
UNDERWRITING
Each of the Underwriters named below (the "Underwriters"), for whom Bear,
Stearns & Co. Inc., BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and NationsBanc Montgomery Securities LLC are acting as
Representatives (the "Representatives"), has agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company the
aggregate number of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ----------
<S> <C>
Bear, Stearns & Co. Inc.....................................
BT Alex. Brown Incorporated.................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
NationsBanc Montgomery Securities LLC.......................
----------
Total............................................. 13,000,000
==========
</TABLE>
Of the 13,000,000 shares in the Offering, the Company expects that the
Huizenga Investors will purchase, for investment purposes and at the Price to
Public set forth on the cover page of this Prospectus, shares having an
aggregate initial public offering price of $25.0 million (2,272,727 shares
assuming an initial public offering price of $11.00 per share, which is the
midpoint of the estimated range set forth on the cover of this Prospectus). The
Underwriters will not receive any fees or commissions in connection with the
sale of such shares to the Huizenga Investors.
The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to approval of certain legal matters by
their counsel and to various other conditions, including the purchase by the
Huizenga Investors of $25.0 million of Common Stock. The nature of the
obligations of the Underwriters is such that they are committed to purchase all
of the shares of Common Stock offered hereby if any are purchased.
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock offered hereby directly to the
public at the public offering price set forth on the cover page of this
Prospectus. The Underwriters may allow a selected dealer concession of not more
than $ per share, and the Underwriters may allow, and such dealers may
reallow, concessions not in excess of $ per share, to certain other
dealers. After the Offering, the offering price and concessions and reallowances
to dealers may be changed by the Representatives.
The Company has granted an option to the Underwriters, exercisable at any
time during the 30-day period after the date of this Prospectus, to purchase
from the Company up to 1,950,000 additional shares of Common Stock to cover
over-allotments, if any, at the public offering price set forth on the cover
page of this Prospectus (less underwriting discounts and commissions). To the
extent that the Underwriters exercise this option, each Underwriter will be
committed, subject to certain conditions, to purchase a number of the additional
shares of Common Stock proportionate to such Underwriter's purchase obligations
set forth in the foregoing table.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act or will contribute to payments the Underwriters may be
required to make in respect thereof.
Each of the Company and the officers, directors and certain security
holders of the Company have entered into Lock-up Agreements with the
Underwriters with respect to the sale of shares of Common Stock. Under these
Lock-up Agreements, each of the Company and the officers, directors and certain
security holders of the Company has agreed not to offer, sell, agree to sell,
grant any option for the sale of or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any security convertible into,
exercisable for
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<PAGE> 54
or exchangeable for Common Stock without the prior written consent of Bear,
Stearns & Co. Inc. for a period of 180 days after the date of this Prospectus,
except that (i) stockholders may make transfers as gifts if the donee agrees to
be bound by a Lock-up Agreement, (ii) certain security holders will be permitted
to pledge or margin their shares in a bona fide loan transaction with a third
party lender, (iii) the Company may at any time and from time to time issue
shares of Common Stock to third parties as consideration for the Company's
acquisition from such third parties of equipment rental companies and (iv) the
Company may issue options pursuant to the 1998 Stock Option Plan and shares of
Common Stock upon the exercise of certain options granted to non-employee
directors. After the expiration or upon a waiver of the Lock-up Agreements, such
persons will be entitled to sell, distribute or otherwise dispose of the Common
Stock that they hold subject to the provisions of applicable securities laws.
At the request of the Company, the Underwriters have reserved
shares of Common Stock for sale at the Price to Public set forth on the cover of
this Prospectus to certain officers, directors, employees and other persons
designated by the Company. The number of shares of Common Stock available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares not so purchased will be offered by
the Underwriters to the general public on the same basis as the other shares
offered hereby.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial offering price for the Common Stock
was determined by negotiations between the Company and the Representatives.
Among the factors considered in such negotiations were the results of operations
of the Company in recent periods, estimates of the prospects of the Company and
the industry in which the Company competes, an assessment of the Company's
management, the general condition of the securities markets at the time of the
Offering and the prices of similar securities of generally comparable companies.
The Common Stock has been approved for listing on the NYSE, under the symbol
"NRI," subject to official notice of issuance. There can be no assurance,
however, that an active or orderly trading market will develop for the Common
Stock or that the Common Stock will trade in the public markets subsequent to
the Offering at or above the initial offering price.
Certain persons participating in the Offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Common Stock
during and after the Offering. Specifically, the Underwriters may over-allot or
otherwise create a short position in the Common Stock for their own account by
selling more shares of Common Stock than have been sold to them by the Company.
The Underwriters may elect to cover any such short position by purchasing shares
of Common Stock in the open market or by exercising the over-allotment option
granted to the Underwriters. In addition, such persons may stabilize or maintain
the price of the Common Stock by bidding for or purchasing shares of Common
Stock in the open market and may impose penalty bids, under which selling
concessions allowed to syndicate members or other broker-dealers participating
in the Offering are reclaimed if shares of Common Stock previously distributed
in the Offering are repurchased in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize or maintain the
market price of the Common Stock at a level above that which might otherwise
prevail in the open market. The imposition of a penalty may also affect the
price of the Common Stock to the extent that it discourages resale thereof. No
representation is made as to the magnitude or effect of any such stabilization
or other transactions. Such transactions may be effected on the NYSE or
otherwise and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Akerman, Senterfitt & Eidson, P.A., Miami, Florida. Certain attorneys
at Akerman, Senterfitt & Eidson, P.A. currently intend to purchase shares of
Common Stock in the Offering. Certain legal matters in connection with the
Common Stock offered hereby will be passed upon for the Underwriters by Paul,
Hastings, Janofsky & Walker LLP, New York, New York.
52
<PAGE> 55
EXPERTS
The financial statements of the Company, Gabriel Trailer Manufacturing
Company, Inc., R. and R. Rental, Inc., C & E Rental and Service, Inc., Titan
Rentals, Inc., The Bode-Finn Company, RFL Enterprises, Inc., Naples Rent-All &
Sales Company, Inc., Raymond Equipment Company, Inc., The Florida Panhandle and
Southeast Texas Divisions of General Rental, Inc., Associated Rental Equipment
Management Company, Inc. and Revco Equipment Rentals, Inc. included in this
Prospectus and the Schedule of the Company included elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
certified public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the shares of Common Stock offered hereby. This Prospectus, which
constitutes part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is hereby made to such Registration Statement and the
exhibits and schedules thereto. The summaries in this Prospectus of additional
information included in the Registration Statement or any exhibit thereto are
qualified in their entirety by reference to such information or exhibit. The
Registration Statement, including all exhibits thereto and amendments thereof,
has been filed with the Commission through EDGAR.
On the closing date of the Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, will file reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information, as well as the Registration Statement and the exhibits and
schedules thereto, may be inspected, without charge, at the public reference
facility maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Seven World Trade Center, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such materials can also be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005 or on the Commission's
site on the Internet at http://www.sec.gov.
53
<PAGE> 56
NATIONSRENT, INC.
INDEX TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
NATIONSRENT, INC.
Introduction to Pro Forma Consolidated Financial
Statements............................................. PF-2
Pro Forma Consolidated Balance Sheet at March 31, 1998.... PF-3
Pro Forma Consolidated Statements of Operations for the
year ended December 31, 1997........................... PF-4
Predecessor Pro Forma Consolidated Statements of
Operations for the year ended December 31, 1997........ PF-5
Acquisitions Consolidated Statements of Operations for the
year ended December 31, 1997........................... PF-6
Pro Forma Consolidated Statements of Operations for the
three months ended March 31, 1998...................... PF-7
Pro Forma Consolidated Statements of Operations for the
three months ended March 31, 1997...................... PF-8
Notes to Unaudited Pro Forma Consolidated Financial
Statements............................................. PF-9
</TABLE>
PF-1
<PAGE> 57
NATIONSRENT, INC.
INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following pro forma consolidated financial statements of the Company
present the pro forma consolidated balance sheet at March 31, 1998 and the pro
forma consolidated statements of operations for the year ended December 31, 1997
and the three months ended March 31, 1997 and March 31, 1998. The pro forma
consolidated financial statements give effect to the Acquisitions, the Founders'
Additional Contribution, the Private Placement, certain borrowings under the
Proposed Amended Credit Facility, and the Offering. The pro forma consolidated
balance sheet at March 31, 1998 gives effect to the transactions and events
described above as if they occurred on March 31, 1998. The pro forma
consolidated statements of operations for the year ended December 31, 1997 and
three months ended March 31, 1997 reflect the Acquisitions as if they occurred
on January 1, 1997. The pro forma consolidated statements of operations for the
three months ended March 31, 1998 are comprised of the historical results of the
Company, which include the results of operations of all businesses acquired
during 1997 and the first quarter of 1998 (consisting of Sam's Equipment Rental,
Inc. ("Sam's"), Ashland Rental and Sales, Inc. ("Ashland"), R. and R. Rental,
Inc. ("R&R"), C&E Rental and Service, Inc. ("C&E"), Titan Rentals, Inc.
("Titan") and Central Rent-All, Inc. ("Central")), and reflect the results of
operations of all businesses acquired in the Acquisitions subsequent to March
31, 1998 as if they occurred on January 1, 1998. All of the businesses acquired
by the Company in the Acquisitions are collectively referred to herein as the
"Acquired Businesses."
The pro forma consolidated financial statements are based upon available
information and certain assumptions considered reasonable by management. The pro
forma consolidated financial statements do not reflect the potential cost
savings the Company may have achieved had the Company owned the Acquired
Businesses for the full period. Accordingly, these statements are not
necessarily indicative of the actual results of operations that might have
occurred, nor are they necessarily indicative of expected results in the future.
The pro forma consolidated financial statements should be read in
conjunction with the Company's Consolidated Financial Statements and
management's discussion thereof contained elsewhere in this Prospectus.
PF-2
<PAGE> 58
NATIONSRENT, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL OTHER
COMPANY RFL BODE-FINN NAPLES JOBS REVCO GENERAL ASSOCIATED ACQUISITIONS
---------- ------ --------- ------- ------- --------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents........... $ 650 $ 390 $ 887 $ 87 $ 1,342 $ 71 $ 6 $ 3,912 $ 288
Accounts receivable,
net................... 4,214 170 7,250 448 2,198 269 1,655 4,888 1,921
Inventories............. 1,864 181 4,856 957 752 52 247 749 3,237
Prepaid expenses and
other assets.......... 2,150 -- 849 55 397 50 19 462 700
Rental equipment, net... 49,063 1,333 21,921 866 33,705 1,693 11,610 66,135 8,228
Property and equipment,
net................... 3,315 198 990 145 2,868 303 374 5,392 797
Intangible assets
related to acquired
business, net......... 41,522 -- -- -- -- -- 3,361 -- --
-------- ------ ------- ------- ------- ------- ------- ------- -------
Total assets...... $102,778 $2,272 $36,753 $ 2,558 $41,262 $ 2,438 $17,272 $81,538 $15,171
======== ====== ======= ======= ======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable........ $ 10,192 $ 1 $ 3,922 $ 565 $ 883 $ -- $ 1,315 $ 1,274 $ 1,850
Accrued expenses and
other liabilities..... 4,943 55 5,095 173 328 12 1,893 2,275 540
Debt.................... 52,230 743 15,839 171 23,469 1,336 12,338 67,781 8,387
Income taxes payable.... 675 -- -- -- -- -- -- -- --
Deferred taxes.......... 2,644 -- -- -- -- -- -- -- 513
-------- ------ ------- ------- ------- ------- ------- ------- -------
Total
liabilities..... 70,684 799 24,856 909 24,680 1,348 15,546 71,330 11,290
Stockholders' equity
Treasury stock.......... -- -- -- (329) -- (150) -- -- (145)
Common stock............ 250 10 125 51 630 1 -- 1 82
Additional paid-in
capital............... 30,750 -- -- 7 -- 131 -- 25 316
Retained earnings....... 1,094 1,463 11,772 1,920 15,952 1,108 1,726 10,182 3,628
-------- ------ ------- ------- ------- ------- ------- ------- -------
Total
stockholders'
equity.......... 32,094 1,473 11,897 1,649 16,582 1,090 1,726 10,208 3,881
-------- ------ ------- ------- ------- ------- ------- ------- -------
Total liabilities
and
stockholders'
equity.......... $102,778 $2,272 $36,753 $ 2,558 $41,262 $ 2,438 $17,272 $81,538 $15,171
======== ====== ======= ======= ======= ======= ======= ======= =======
<CAPTION>
PRO FORMA OFFERING PRO FORMA
ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents........... $ (2,861)(a) $ 4,772 -- $ 4,772
Accounts receivable,
net................... -- 23,013 -- 23,013
Inventories............. -- 12,895 -- 12,895
Prepaid expenses and
other assets.......... -- 4,682 -- 4,682
Rental equipment, net... 7,275(b) 201,829 -- 201,829
Property and equipment,
net................... (7,368)(a) 7,014 -- 7,014
Intangible assets
related to acquired
business, net......... 104,600(c) 149,483 -- 149,483
-------- -------- -------- --------
Total assets...... $101,646 $403,688 -- $403,688
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable........ $ (1,315)(a) $ 18,687 -- $ 18,687
Accrued expenses and
other liabilities..... (1,893)(a) 13,421 -- 13,421
Debt.................... 105,522(d) 287,816 (132,740)(i) 155,076
Income taxes payable.... -- 675 -- 675
Deferred taxes.......... 2,838(e) 5,995 -- 5,995
-------- -------- -------- --------
Total
liabilities..... 105,152 326,594 (132,740) 193,854
Stockholders' equity
Treasury stock.......... 624(f) -- -- --
Common stock............ (849)(g) 301 130(i) 431
Additional paid-in
capital............... 44,470(h) 75,699 132,610(i) 208,309
Retained earnings....... (47,751)(f) 1,094 -- 1,094
-------- -------- -------- --------
Total
stockholders'
equity.......... (3,506) 77,094 132,740 209,834
-------- -------- -------- --------
Total liabilities
and
stockholders'
equity.......... $101,646 $403,688 $ -- $403,688
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-3
<PAGE> 59
NATIONSRENT, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ACQUIRED ACQUISITION PRO FORMA OFFERING PRO FORMA
COMPANY BUSINESSES ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
---------- ---------- ----------- --------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals.......................... $18,367 $ 93,713 -- $112,080 -- $112,080
Sales of equipment, merchandise, parts and
supplies................................. 4,622 97,146 -- 101,768 -- 101,768
------- -------- ------- -------- -------- --------
Total revenue........................ 22,989 190,859 -- 213,848 -- 213,848
Cost of revenue:
Cost of equipment rentals, excluding
depreciation............................. 5,669 32,290 47(a) 38,006 -- 38,006
Rental equipment depreciation.............. 3,701 27,659 (7,047)(b) 24,313 -- 24,313
Sales of equipment, merchandise, parts and
supplies................................. 3,538 71,336 23(c) 74,897 -- 74,897
------- -------- ------- -------- -------- --------
Total cost of revenue................ 12,908 131,285 (6,977) 137,216 -- 137,216
------- -------- ------- -------- -------- --------
Gross profit................................. 10,081 59,574 6,977 76,632 -- 76,632
Operating expenses:
Selling, general and administrative
expenses................................. 3,391 35,313 (3,744)(d) 35,078 -- 35,078
118(e)
Depreciation and amortization of non-rental
property and equipment................... 690 2,060 (950)(f) 4,812 -- 4,812
3,012(g)
------- -------- ------- -------- -------- --------
Total operating expenses............. 4,081 37,373 (1,564) 39,890 -- 39,890
------- -------- ------- -------- -------- --------
Operating income............................. 6,000 22,201 8,541 36,742 -- 36,742
Other (income)/expense
Interest expense........................... 2,497 9,535 8,861(h) 20,893 (11,535)(h) 9,358
Other (income)/expense, net................ 12 (954) 300(i) (642) -- (642)
------- -------- ------- -------- -------- --------
Total other (income)/expense......... 2,509 8,581 9,161 20,251 (11,535) 8,716
------- -------- ------- -------- -------- --------
Income before provision for income taxes..... 3,491 13,620 (620) 16,491 11,535 28,026
Provision for income taxes................. 1,466 5,508 (49)(j) 6,925 4,845(j) 11,770
------- -------- ------- -------- -------- --------
Net income........................... $ 2,025 $ 8,112 $ (571) $ 9,566 $ 6,690 $ 16,256
======= ======== ======= ======== ======== ========
Basic and diluted net income per
share.............................. $ 0.08 $ 0.32 $ 0.38
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-4
<PAGE> 60
NATIONSRENT, INC.
PREDECESSOR PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
PREDECESSOR PREDECESSOR COMPANY ADJUSTMENTS PRO FORMA
JANUARY 1, 1997 APRIL 1, 1997 TO INCEPTION TO TO PREDECESSOR HISTORICAL
TO MARCH 31, 1997 AUGUST 31, 1997 DECEMBER 31, 1997 AND COMPANY COMPANY
----------------- ---------------- ----------------- -------------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals.................. $2,442 $8,515 $7,410 -- $18,367
Sales of equipment, merchandise,
parts and supplies............... 1,522 1,205 1,895 -- 4,622
------ ------ ------ ----- -------
Total revenue................ 3,964 9,720 9,305 -- 22,989
Cost of revenue:
Cost of equipment rentals,
excluding depreciation........... 1,280 2,193 2,196 -- 5,669
Rental equipment depreciation...... 794 1,848 1,526 (467)(b) 3,701
Sales of equipment, merchandise,
parts and supplies sold.......... 863 984 1,691 -- 3,538
------ ------ ------ ----- -------
Total cost of revenue........ 2,937 5,025 5,413 (467) 12,908
------ ------ ------ ----- -------
Gross profit......................... 1,027 4,695 3,892 467 10,081
Operating expenses:
Selling, general and administrative
expenses......................... 970 1,683 1,081 (343)(d) 3,391
Depreciation and amortization of
non-rental property and
equipment........................ 25 115 284 (47)(f) 690
313(g)
------ ------ ------ ----- -------
Total operating expenses..... 995 1,798 1,365 (77) 4,081
------ ------ ------ ----- -------
Operating income..................... 32 2,897 2,527 544 6,000
Other (income)/expense
Interest expense................... 229 580 760 928(h) 2,497
Other (income)/expense, net........ (50) 62 -- -- 12
------ ------ ------ ----- -------
Total other
(income)/expense........... 179 642 760 928 2,509
------ ------ ------ ----- -------
Income before provision for income
taxes.............................. (147) 2,255 1,767 (384) 3,491
Provision for income taxes......... (59) 939 766 (180)(j) 1,466
------ ------ ------ ----- -------
Net income (loss)............ $ (88) $1,316 $1,001 $(204) $ 2,025
====== ====== ====== ===== =======
Basic and diluted net income
per share.................. $ 0.04 $ 0.08
====== =======
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-5
<PAGE> 61
NATIONSRENT, INC.
ACQUISITIONS CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
R & R C & E TITAN RFL BODE-FINN NAPLES JOBS REVCO GENERAL
------ ------ ------ ------ --------- ------ ------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals................ $2,409 $4,506 $1,927 $ 966 $20,212 $2,262 $12,651 $ 2,129 $7,238
Sales of equipment, merchandise,
parts and supplies............. 2,107 2,768 3,042 2,077 41,038 3,805 8,307 495 1,876
------ ------ ------ ------ ------- ------ ------- ------- ------
Total revenue.............. 4,516 7,274 4,969 3,043 61,250 6,067 20,958 2,624 9,114
Cost of revenue:
Cost of equipment rentals,
excluding depreciation......... 1,398 1,846 1,303 463 4,978 1,707 2,423 1,004 4,018
Rental equipment depreciation.... 631 766 302 261 7,266 440 4,520 613 942
Sales of equipment, merchandise,
parts and supplies sold........ 1,808 1,791 2,043 1,472 28,584 2,967 6,150 223 1,204
------ ------ ------ ------ ------- ------ ------- ------- ------
Total cost of revenue...... 3,837 4,403 3,648 2,196 40,828 5,114 13,093 1,840 6,164
------ ------ ------ ------ ------- ------ ------- ------- ------
Gross profit....................... 679 2,871 1,321 847 20,422 953 7,865 784 2,950
Operating expenses:
Selling, general and
administrative expenses........ 715 1,417 824 209 16,597 518 2,373 312 1,495
Depreciation and amortization of
non-rental property and
equipment...................... 76 157 16 23 257 45 212 25 407
------ ------ ------ ------ ------- ------ ------- ------- ------
Total operating expenses... 791 1,574 840 232 16,854 563 2,585 337 1,902
------ ------ ------ ------ ------- ------ ------- ------- ------
Operating income................... (112) 1,297 481 615 3,568 390 5,280 447 1,048
Other (income)/expense
Interest expense................. 80 101 34 92 1,602 23 1,846 122 704
Other (income)/expense, net...... (30) (61) 7 (15) (348) (52) -- (3) --
------ ------ ------ ------ ------- ------ ------- ------- ------
Total other
(income)/expense......... 50 40 41 77 1,254 (29) 1,846 119 704
------ ------ ------ ------ ------- ------ ------- ------- ------
Income before provision for income
taxes............................ (162) 1,257 440 538 2,314 419 3,434 328 344
Provision for income taxes....... -- 503 168 215 929 167 1,374 131 138
------ ------ ------ ------ ------- ------ ------- ------- ------
Net income (loss).......... $ (162) $ 754 $ 272 $ 323 $ 1,385 $ 252 $ 2,060 $ 197 $ 206
====== ====== ====== ====== ======= ====== ======= ======= ======
<CAPTION>
ACQUIRED
ASSOCIATED OTHER BUSINESSES
---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
Equipment rentals................ $24,261 $15,152 $ 93,713
Sales of equipment, merchandise,
parts and supplies............. 16,527 15,104 97,146
------- ------- --------
Total revenue.............. 40,788 30,256 190,859
Cost of revenue:
Cost of equipment rentals,
excluding depreciation......... 4,973 8,177 32,290
Rental equipment depreciation.... 8,626 3,292 27,659
Sales of equipment, merchandise,
parts and supplies sold........ 13,464 11,630 71,336
------- ------- --------
Total cost of revenue...... 27,063 23,099 131,285
------- ------- --------
Gross profit....................... 13,725 7,157 59,574
Operating expenses:
Selling, general and
administrative expenses........ 6,143 4,710 35,313
Depreciation and amortization of
non-rental property and
equipment...................... 466 376 2,060
------- ------- --------
Total operating expenses... 6,609 5,086 37,373
------- ------- --------
Operating income................... 7,116 2,071 22,201
Other (income)/expense
Interest expense................. 3,748 1,183 9,535
Other (income)/expense, net...... (358) (94) (954)
------- ------- --------
Total other
(income)/expense......... 3,390 1,089 8,581
------- ------- --------
Income before provision for income
taxes............................ 3,726 982 13,620
Provision for income taxes....... 1,490 393 5,508
------- ------- --------
Net income (loss).......... $ 2,236 $ 589 8,112
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-6
<PAGE> 62
NATIONSRENT, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL BODE
COMPANY RFL FINN NAPLES JOBS REVCO GENERAL ASSOCIATED OTHER
---------- ---- --------- ------ ------ --------- ------- ---------- ------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals............... $5,911 $202 $ 4,687 $ 513 $1,377 $ 492 $2,209 7,153 $1,504
Sales of equipment, merchandise,
parts and supplies............ 3,128 507 10,024 893 2,635 40 311 4,290 2,522
------ ---- ------- ------ ------ ------ ------ ------- ------
Total revenue............. 9,039 709 14,711 1,406 4,012 532 2,520 11,443 4,026
Cost of revenue:
Cost of equipment rentals,
excluding depreciation........ 2,661 103 1,399 395 1,674 189 1,378 1,282 1,031
Rental equipment depreciation... 1,076 77 1,833 94 1,161 139 291 2,643 439
Sales of equipment, merchandise,
parts and supplies sold....... 2,252 327 6,754 687 1,142 27 204 3,665 1,756
------ ---- ------- ------ ------ ------ ------ ------- ------
Total cost of revenue..... 5,989 507 9,986 1,176 3,977 355 1,873 7,590 3,226
------ ---- ------- ------ ------ ------ ------ ------- ------
Gross profit...................... 3,050 202 4,725 230 35 177 647 3,853 800
Operating expenses:
Selling, general and
administrative expenses....... 1,758 46 3,965 120 343 79 298 1,474 582
Depreciation and amortization of
non-rental property and
equipment..................... 447 2 62 9 57 1 115 123 62
------ ---- ------- ------ ------ ------ ------ ------- ------
Total operating
expenses................ 2,205 48 4,027 129 400 80 413 1,597 644
------ ---- ------- ------ ------ ------ ------ ------- ------
Operating income.................. 845 154 698 101 (365) 97 234 2,256 156
Other (income)/expense
Interest expense................ 808 16 380 4 419 31 295 1,226 193
Other (income)/expense, net..... (123) -- (86) (13) -- -- -- (95) 38
------ ---- ------- ------ ------ ------ ------ ------- ------
Total other
(income)/expense........ 685 16 294 (9) 419 31 295 1,131 231
------ ---- ------- ------ ------ ------ ------ ------- ------
Income before provision for income
taxes........................... 160 138 404 110 (784) 66 (61) 1,125 (75)
Provision for income taxes...... 67 55 161 44 (314) 26 -- 450 (29)
------ ---- ------- ------ ------ ------ ------ ------- ------
Net income (loss)................. $ 93 $ 83 $ 243 $ 66 $ (470) $ 40 $ (61) $ 675 $ (46)
====== ==== ======= ====== ====== ====== ====== ======= ======
Basic and diluted net income per
share........................... $ 0.00
======
<CAPTION>
ACQUISITION PRO FORMA OFFERING PRO FORMA
ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
----------- --------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue:
Equipment rentals............... -- $24,048 -- $24,048
Sales of equipment, merchandise,
parts and supplies............ -- 24,350 -- 24,350
------- ------- ------- -------
Total revenue............. -- 48,398 -- 48,398
Cost of revenue:
Cost of equipment rentals,
excluding depreciation........ 60(a) 10,172 -- 10,172
Rental equipment depreciation... (1,479)(b) 6,274 -- 6,274
Sales of equipment, merchandise,
parts and supplies sold....... -- 16,814 -- 16,814
------- ------- ------- -------
Total cost of revenue..... (1,419) 33,260 -- 33,260
------- ------- ------- -------
Gross profit...................... 1,419 15,138 -- 15,138
Operating expenses:
Selling, general and
administrative expenses....... (539)(d) 8,271 -- 8,271
145(e)
Depreciation and amortization of
non-rental property and
equipment..................... (124)(f) 1,284 -- 1,284
530(g)
------- ------- ------- -------
Total operating
expenses................ 12 9,555 -- 9,555
------- ------- ------- -------
Operating income.................. 1,407 5,583 -- 5,583
Other (income)/expense
Interest expense................ 1,740(h) 5,112 $(2,884)(k) 2,228
Other (income)/expense, net..... 33(i) (246) -- (246)
------- ------- ------- -------
Total other
(income)/expense........ 1,773 4,866 (2,884) 1,982
------- ------- ------- -------
Income before provision for income
taxes........................... (366) 717 2,884 3,601
Provision for income taxes...... (159)(j) 301 1,211(j) 1,512
------- ------- ------- -------
Net income (loss)................. $ (207) $ 416 $ 1,673 $ 2,089
======= ======= ======= =======
Basic and diluted net income per
share........................... $ 0.01 $ 0.05
======= =======
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-7
<PAGE> 63
NATIONSRENT, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL BODE-
PREDECESSOR R&R C&E TITAN RFL FINN NAPLES JOBS REVCO
----------- ----- ------ ------ ---- ------ ------ ------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals................... $2,442 $ 300 $ 794 $ 400 $242 $4,743 $ 510 $ 999 $ 566
Sales of equipment, merchandise,
parts & supplies.................. 1,522 338 640 719 549 9,077 827 1,712 154
------ ----- ------ ------ ---- ------ ------ ------- ------
Total revenue................. 3,964 638 1,434 1,119 791 13,820 1,337 2,711 720
Cost of revenue:
Cost of equipment rentals, excluding
equipment rental depreciation..... 1,280 300 365 246 105 1,323 361 473 241
Rental equipment depreciation....... 794 148 168 101 58 1,745 93 986 134
Sales of equipment, merchandise,
parts and supplies sold........... 863 268 435 391 335 6,342 628 1,277 65
------ ----- ------ ------ ---- ------ ------ ------- ------
Total cost of revenue......... 2,937 716 968 738 498 9,410 1,082 2,736 440
------ ----- ------ ------ ---- ------ ------ ------- ------
Gross profit.......................... 1,027 (78) 466 381 293 4,410 255 (25) 280
Operating expenses:
Selling, general and administrative
expenses.......................... 970 128 302 108 47 3,755 110 377 79
Depreciation and amortization of
non-rental property and
equipment......................... 25 18 23 5 2 73 7 51 5
------ ----- ------ ------ ---- ------ ------ ------- ------
Total operating expenses...... 995 146 325 113 49 3,828 117 428 84
------ ----- ------ ------ ---- ------ ------ ------- ------
Operating income...................... 32 (224) 141 268 244 582 138 (453) 196
Other (income)/expense
Interest expense.................... 229 4 14 11 21 350 5 370 33
Other (income)/expense, net......... (50) (46) (11) (3) (2) (39) (15) -- --
------ ----- ------ ------ ---- ------ ------ ------- ------
Total other
(income)/expense............ 179 (42) 3 8 19 311 (10) 370 33
------ ----- ------ ------ ---- ------ ------ ------- ------
Income before provision for income
taxes............................... (147) (182) 138 260 225 271 148 (823) 163
Provision for income taxes.......... (59) (73) 55 104 90 137 59 (329) 65
------ ----- ------ ------ ---- ------ ------ ------- ------
Net income (loss)..................... $ (88) $(109) $ 83 $ 156 $135 $ 134 $ 89 $ (494) $ 98
====== ===== ====== ====== ==== ====== ====== ======= ======
Basic and diluted net income per
share...............................
<CAPTION>
ACQUISITION PRO FORMA OFFERING PRO FORMA
GENERAL ASSOCIATED OTHER ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
------- ---------- ------ ----------- --------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals................... $646 $ 4,288 $3,549 -- $19,479 -- $19,479
Sales of equipment, merchandise,
parts & supplies.................. 234 5,905 3,311 -- 24,988 -- 24,988
---- ------- ------ ------- ------- ------- -------
Total revenue................. 880 10,193 6,860 -- 44,467 -- 44,467
Cost of revenue:
Cost of equipment rentals, excluding
equipment rental depreciation..... 386 592 2,420 51(a) 8,143 -- 8,143
Rental equipment depreciation....... 117 1,626 978 (1,564)(b) 5,384 -- 5,384
Sales of equipment, merchandise,
parts and supplies sold........... 157 4,754 2,219 -- 17,734 -- 17,734
---- ------- ------ ------- ------- ------- -------
Total cost of revenue......... 660 6,972 5,617 (1,513) 31,261 -- 31,261
---- ------- ------ ------- ------- ------- -------
Gross profit.......................... 220 3,221 1,243 1,513 13,206 -- 13,206
Operating expenses:
Selling, general and administrative
expenses.......................... 120 951 1,423 (1,138)(d) 7,422 -- 7,422
190(e)
Depreciation and amortization of
non-rental property and
equipment......................... 27 97 135 (136)(f) 1,213 -- 1,213
881(g)
---- ------- ------ ------- ------- ------- -------
Total operating expenses...... 147 1,048 1,558 (203) 8,635 -- 8,635
---- ------- ------ ------- ------- ------- -------
Operating income...................... 73 2,173 (315) 1,716 4,571 -- 4,571
Other (income)/expense
Interest expense.................... 42 734 328 2,625(h) 4,766 (2,884)(k) 1,882
Other (income)/expense, net......... -- (12) (79) 5(i) (252) -- (252)
---- ------- ------ ------- ------- ------- -------
Total other
(income)/expense............ 42 722 249 2,630 4,514 (2,884) 1,630
---- ------- ------ ------- ------- ------- -------
Income before provision for income
taxes............................... 31 1,451 (564) (914) 57 2,884 2,941
Provision for income taxes.......... 12 580 (164) (455)(j) 22 1,211(j) 1,233
---- ------- ------ ------- ------- ------- -------
Net income (loss)..................... $ 19 $ 871 $ (400) $ (459) $ 35 $ 1,673 $ 1,708
==== ======= ====== ======= ======= ======= =======
Basic and diluted net income per
share............................... $ 0.00 $ 0.04
======= =======
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-8
<PAGE> 64
NATIONSRENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. HISTORICAL FINANCIAL STATEMENTS
The historical financial data presented in these pro forma consolidated
financial statements represents the financial position of the Company and the
Acquired Businesses at March 31, 1998 and their results of operations for the
year ended December 31, 1997 and three months ended March 31, 1997 and March 31,
1998 (except that the financial data for Raymond Equipment Company ("Jobs")
included in the pro forma consolidated statements of operations for the year
ended December 31, 1997 consists of the combined six months ended June 30, 1997
and December 31, 1997 and the financial data for J. Kelly Co. ("J. Kelly")
included in the pro forma consolidated statements of operations for the year
ended December 31, 1997 is for the year ended March 31, 1998 and includes $1,546
in revenue also included in the pro forma consolidated statements of operations
for the three months ended March 31, 1998).
2. ACQUISITIONS
During the year ended December 31, 1997 the Company completed five
acquisitions. Following year-end but prior to March 31, 1998, the Company
completed one acquisition and subsequent to March 31, 1998, the Company
completed ten additional acquisitions. Each of these was accounted for in the
unaudited pro forma consolidated financial statements using the purchase method
of accounting. Preliminary purchase accounting values for the Acquired
Businesses prior to March 31, 1998 have been recorded based on estimated fair
values of the assets and liabilities acquired. Final adjustments will be
recorded when final information as to fair values of the net assets acquired is
available. The purchase accounting adjustments for the acquisitions completed
subsequent to March 31, 1998 were based on the respective companies' March 31,
1998 balance sheets using estimates as to the fair values of assets and
liabilities acquired. As a result, final allocation could be different.
The following table summarizes the acquisitions completed by the Company:
<TABLE>
<CAPTION>
ACQUISITION
ACQUISITION DATE PURCHASE OF CONSIDERATION ASSETS LIABILITIES INTANGIBLES
----------- ----------- ----------- ------------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sam's.................................. 9/1/97 Stock $ 23,431 $ 28,553 $ 23,956 $ 18,834
R&R.................................... 12/10/97 Assets 8,000 5,374 212 2,838
C&E.................................... 12/23/97 Assets 12,250 4,401 979 8,828
Titan.................................. 12/31/97 Stock 5,900 2,409 1,067 4,558
Revco Equipment Rentals, Inc. ......... 4/3/98 Assets 5,000 2,407 44 2,637
R.F.L. Enterprises, Inc. .............. 4/15/98 Assets 2,350 2,152 83 281
Naples Rent-All & Sales Co. Inc........ 4/30/98 Assets 4,150 2,583 754 2,321
The Bode-Finn Company.................. 5/4/98 Stock 43,000 37,849 25,283 30,434
Jobs................................... 6/5/98 Stock 36,499 40,557 25,338 21,280
Associated Rental Equipment Management
Company, Inc. ....................... 7/9/98 Assets 39,250 77,611 72,620 34,259
The Florida Panhandle and Southeast
Texas Divisions of General Rental,
Inc. ................................ 7/10/98 Assets 20,151 14,491 226 5,886
Other Acquisitions..................... Various Various 22,696 17,790 12,887 17,793
-------- -------- -------- --------
Combined Total..................... $222,677 $236,177 $163,449 $149,949
======== ======== ======== ========
</TABLE>
PF-9
<PAGE> 65
NATIONSRENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
3. PRO FORMA ADJUSTMENTS
<TABLE>
<S> <C>
BALANCE SHEET:
a. To eliminate the assets not acquired and the liabilities not
assumed in the Acquisitions.
b. Represents the preliminary estimate of the adjustment to
fair market value for rental equipment acquired.
c. Represents the excess purchase price over the estimated fair
value of the net assets acquired of $107,961, net of
historical goodwill and other intangibles of $3,361.
d. Represents borrowings for the Acquisitions of $126,341 and
$39,309 funded by the Credit Facility and through the
issuance of convertible notes to the sellers, respectively.
Also reflected are reductions for pre-acquisition debt not
assumed in the Acquisitions of $15,128 and repayment on the
Credit Facility from the proceeds of the Founders'
Additional Contribution of $17,400 and the Private Placement
of $27,600.
e. Represents the estimated deferred income tax liability
related to the purchase accounting adjustments recorded for
the Acquisitions.
f. To eliminate the equity accounts reflected in the historical
financial statements of the Acquired Businesses.
g. Represents the elimination of the equity accounts of
Acquired Businesses of $900 and the issuance of Common Stock
in the Private Placement of $51.
h. Represents the elimination of the equity accounts of
Acquired Businesses of $479 and additional paid-in capital
related to the Founders' Additional Contribution of $17,400
and the Private Placement of $27,549.
i. Represents the application of net proceeds from the Offering
for repayment of the Credit Facility (assuming an initial
public offering price of $11.00 per share, which is the
midpoint of the estimated range set forth on the cover page
of this Prospectus).
STATEMENTS OF OPERATIONS:
a. Adjustment to eliminate historical lease expense on rental
equipment resulting from the termination of certain leases
which occurred in connection with the purchase of one of the
Acquired Businesses.
b. Adjustment to the historical rental equipment depreciation
recorded to conform to the Company's accounting policies.
Adjustment is based on the estimated fair value of rental
equipment acquired using estimated useful lives ranging from
2 to 10 years on the straight-line method with salvage
values ranging from zero to ten percent of cost. For the
year ended December 31, 1997, the following are the major
components of the adjustment to historical depreciation
expense: (i) approximately $4,600 reduction resulted from a
change from accelerated depreciation methods of the acquired
businesses to the straight-line methods used by the Company,
(ii) approximately $2,500 reduction resulted from the change
in the salvage value used by the Company over amounts
previously recorded by the acquired businesses, and (iii)
approximately $900 increase in depreciation expense resulted
from the adjustment to fair value of equipment acquired.
c. Adjustment to conform the historical accounting for
inventory of the Acquired Businesses from the LIFO method to
FIFO method, where applicable.
d. Adjustment to reduce historical compensation and benefits of
certain former owners and executives of the Acquired
Businesses to amounts consistent with employment
arrangements entered into between the certain owners and
executives and the Company, as well as the elimination of
certain private company business expenses that will not be
incurred by the Company.
e. Adjustment to historical facility lease expense to reflect
the increase in current lease payments in excess of
historical amounts.
f. Adjustment to historical property and equipment depreciation
recorded to conform to the Company's accounting policies.
Adjustment is based on the estimated fair value of property
and equipment acquired using estimated useful lives ranging
from 3 to 39 years on the straight-line method.
</TABLE>
PF-10
<PAGE> 66
NATIONSRENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
g. Adjustment to recognize the amortization of goodwill and
non-compete agreements using an estimated useful life of 40
and five years, respectively. Management believes that 40
years is a reasonable life for goodwill in light of the
characteristics of the equipment rental industry such as the
lack of dependence on technological change, the many years
that the industry has been in existence, the current trend
towards the outsourcing of equipment, the recent double
digit annual growth rate and the stable nature of the
customer base. In addition, the Company has focused on
acquiring well established companies that have been in
existence for many years.
h. Adjustment to record interest on borrowings under the Credit
Facility and notes issued to former owners of Acquired
Businesses, net of interest related to debt not assumed or
paid off at acquisition. The interest rate on the Credit
Facility is determined using a base rate plus a spread based
on certain financial performance ratios. Based on current
market rates, an incremental borrowing rate of 8.69% was
used to determine interest expense. A change of one-eighth
of a percent would result in a $107 reduction or increase in
the pro forma adjustment to annual interest expense.
i. To eliminate historical gains related to assets not
acquired.
j. To record a provision (benefit) for income taxes at an
expected effective rate of 42%.
k. Adjustment to record the reduction in interest giving effect
to the use of the proceeds of the Offering to repay a
portion of the Credit Facility (assuming an initial public
offering price of $11.00 per share, which is the midpoint of
the estimated range set forth on the cover page of this
Prospectus).
</TABLE>
4. PRO FORMA DILUTED EARNINGS PER SHARE
Pro forma diluted earnings per share is calculated based on the shares
outstanding at December 31, 1997, March 31, 1997 and March 31, 1998, as well as
giving effect to the Private Placement and the Offering as if these shares were
outstanding at the beginning of the respective periods. The shares used to
calculate pro forma diluted earnings per share are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1997 MARCH 31, 1998
----------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Shares outstanding........................ 25,000 25,000 25,000
Shares issued in Private Placement........ 5,119 5,119 5,119
Shares issued in Offering................. 13,000 13,000 13,000
Common Stock equivalents.................. 7 -- 69
------ ------ ------
43,126 43,119 43,188
====== ====== ======
</TABLE>
PF-11
<PAGE> 67
NATIONSRENT, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE REGISTRANT
NATIONSRENT, INC.
Report of Independent Certified Public Accountants........ F-4
Consolidated Balance Sheets as of December 31, 1997 and
March 31, 1998 (unaudited)............................. F-5
Consolidated Statements of Income for the period from
inception (August 14, 1997) to December 31, 1997 and
for the three months ended March 31, 1998
(unaudited)............................................ F-6
Consolidated Statements of Stockholders' Equity for the
period from inception (August 14, 1997) to December 31,
1997 and for the three months ended March 31, 1998
(unaudited)............................................ F-7
Consolidated Statements of Cash Flows for the period from
inception (August 14, 1997) to December 31, 1997 and
for the three months ended March 31, 1998
(unaudited)............................................ F-8
Notes to Consolidated Financial Statements................ F-9
THE PREDECESSOR COMPANY
GABRIEL TRAILER MANUFACTURING COMPANY, INC. ("SAM'S")
Report of Independent Certified Public Accountants........ F-19
Consolidated Balance Sheets as of March 31, 1997 and
August 31, 1997........................................ F-20
Consolidated Statements of Income for the years ended
March 31, 1996 and 1997 and the period from April 1,
1997 to August 31, 1997................................ F-21
Consolidated Statements of Stockholders' Equity for the
years ended March 31, 1996 and 1997 and the period from
April 1, 1997 to August 31, 1997....................... F-22
Consolidated Statements of Cash Flows for the years ended
March 31, 1996 and 1997 and the period from April 1,
1997 to August 31, 1997................................ F-23
Notes to Consolidated Financial Statements................ F-24
BUSINESSES ACQUIRED
R. AND R. RENTAL, INC.
Report of Independent Certified Public Accountants........ F-29
Balance Sheet as of December 10, 1997..................... F-30
Statement of Operations for the period from January 1,
1997 to December 10, 1997.............................. F-31
Statement of Stockholder's Equity for the period from
January 1, 1997 to December 10, 1997................... F-32
Statement of Cash Flows for the period from January 1,
1997 to December 10, 1997.............................. F-33
Notes to Financial Statements............................. F-34
C&E RENTAL AND SERVICE, INC.
Report of Independent Certified Public Accountants........ F-37
Balance Sheets as of December 31, 1996 and December 22,
1997................................................... F-38
Statements of Income for the year ended December 31, 1996
and the period from January 1, 1997 to December 22,
1997................................................... F-39
Statements of Stockholder's Equity for the year ended
December 31, 1996 and the period from January 1, 1997
to December 22, 1997................................... F-40
Statements of Cash Flows for the year ended December 31,
1996 and the period from January 1, 1997 to December
22, 1997............................................... F-41
Notes to Financial Statements............................. F-42
TITAN RENTALS, INC.
Report of Independent Certified Public Accountants........ F-46
Balance Sheet as of December 30, 1997..................... F-47
</TABLE>
F-1
<PAGE> 68
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Statement of Income for the period from January 1, 1997 to
December 30, 1997...................................... F-48
Statement of Stockholders' Equity for the period from
January 1, 1997 to December 30, 1997................... F-49
Statement of Cash Flows for the period from January 1,
1997 to December 30, 1997.............................. F-50
Notes to Financial Statements............................. F-51
THE BODE-FINN COMPANY
Report of Independent Certified Public Accountants........ F-55
Balance Sheets as of December 31, 1996 and 1997 and March
31, 1998 (unaudited)................................... F-56
Statements of Income for the years ended December 31,
1995, 1996 and 1997 and for the three month periods
ended March 31, 1997 and 1998 (unaudited).............. F-57
Statements of Stockholders' Equity for the years ended
December 31, 1995, 1996 and 1997 and for the three
month period ended March 31, 1998 (unaudited).......... F-58
Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997 and for the three month periods
ended March 31, 1997 and 1998 (unaudited).............. F-59
Notes to Financial Statements............................. F-60
RFL ENTERPRISES, INC.
Report of Independent Certified Public Accountants........ F-67
Balance Sheets as of December 31, 1997 and March 31, 1998
(unaudited)............................................ F-68
Statements of Income for the year ended December 31, 1997
and for the three month periods ended March 31, 1997
and 1998 (unaudited)................................... F-69
Statements of Stockholder's Equity for the year ended
December 31, 1997 and for the three month period ended
March 31, 1998 (unaudited)............................. F-70
Statements of Cash Flows for the year ended December 31,
1997 and for the three month periods ended March 31,
1997 and 1998 (unaudited).............................. F-71
Notes to Financial Statements............................. F-72
NAPLES RENT-ALL & SALES COMPANY, INC.
Report of Independent Certified Public Accountants........ F-76
Balance Sheets as of December 31, 1997 and March 31, 1998
(unaudited)............................................ F-77
Statements of Income for the year ended December 31, 1997
and for the three month periods ended March 31, 1997
and 1998 (unaudited)................................... F-78
Statements of Stockholder's Equity for the year ended
December 31, 1997 and for the three month period ended
March 31, 1998 (unaudited)............................. F-79
Statements of Cash Flows for the year ended December 31,
1997 and for the three month periods ended March 31,
1997 and 1998 (unaudited).............................. F-80
Notes to Financial Statements............................. F-81
RAYMOND EQUIPMENT COMPANY, INC. ("JOBS")
Report of Independent Certified Public Accountants........ F-86
Balance Sheets as of June 30, 1996 and 1997 and March 31,
1998 (unaudited)....................................... F-87
Statements of Income for the years ended June 30, 1996 and
1997 and for the nine month periods ended March 31,
1997 and 1998 (unaudited).............................. F-88
Statements of Stockholders' Equity for the years ended
June 30, 1996 and 1997 and for the nine month period
ended March 31, 1998 (unaudited)....................... F-89
Statements of Cash Flows for the years ended June 30, 1996
and 1997 and for the nine month periods ended March 31,
1997 and 1998 (unaudited).............................. F-90
Notes to Financial Statements............................. F-91
</TABLE>
F-2
<PAGE> 69
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS OF
GENERAL RENTAL, INC.
Report of Independent Certified Public Accountants........ F-95
Division Balance Sheets as of December 31, 1997 and March
31, 1998 (unaudited)................................... F-96
Statements of Division Operations for the year ended
December 31, 1997 and for the three month periods ended
March 31, 1997 and 1998 (unaudited).................... F-97
Statements of Division Equity for the year ended December
31, 1997 and for the three month period ended March 31,
1998 (unaudited)....................................... F-98
Statements of Division Cash Flows for the year ended
December 31, 1997 and for the three month periods ended
March 31, 1997 and 1998 (unaudited).................... F-99
Notes to Financial Statements............................. F-100
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
Report of Independent Certified Public Accountants........ F-106
Balance Sheets as of December 31, 1996 and 1997 and March
31, 1998 (unaudited)................................... F-107
Statements of Income for the years ended December 31,
1995, 1996 and 1997 and for the three month periods
ended March 31, 1997 and 1998 (unaudited).............. F-108
Statements of Stockholder's Equity for the years ended
December 31, 1995, 1996 and 1997 and for the three
month period ended March 31, 1998 (unaudited).......... F-109
Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997 and for the three month periods
ended March 31, 1997 and 1998 (unaudited).............. F-110
Notes to Financial Statements............................. F-111
REVCO EQUIPMENT RENTALS, INC.
Report of Independent Certified Public Accountants........ F-119
Balance Sheets as of December 31, 1997 and March 31, 1998
(unaudited)............................................ F-120
Statements of Income for the year ended December 31, 1997
and for the three month periods ended March 31, 1997
and 1998 (unaudited)................................... F-121
Statements of Stockholders' Equity for the year ended
December 31, 1997 and for the three month period ended
March 31, 1998 (unaudited)............................. F-122
Statements of Cash Flows for the year ended December 31,
1997 and for the three month periods ended March 31,
1997 and 1998 (unaudited).............................. F-123
Notes to Financial Statements............................. F-124
</TABLE>
F-3
<PAGE> 70
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To NationsRent, Inc.:
We have audited the accompanying consolidated balance sheet of NationsRent,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for the period from August 14, 1997 (inception) to December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NationsRent,
Inc. and subsidiaries as of December 31, 1997, and the results of their
operations and their cash flows for the period from August 14, 1997 (inception)
to December 31, 1997 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 3, 1998 (except with respect to
the matters referred to in the
third and fifth paragraphs of Note 10,
as to which the date is July 15, 1998).
F-4
<PAGE> 71
NATIONSRENT, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, MARCH 31, 1998
1997 1998 PRO FORMA
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................. $ 1,493 $ 650
Accounts receivable, net of allowance for doubtful
accounts of $587 and $492 (unaudited) at December 31,
1997 and March 31, 1998, respectively................... 5,008 4,214
Inventories............................................... 1,840 1,864
Prepaid expenses and other assets......................... 755 2,150
Rental equipment, net..................................... 30,619 49,063
Property and equipment, net............................... 2,334 3,315
Intangible assets related to acquired businesses, net..... 37,108 41,522
------- --------
Total Assets.................................... $79,157 $102,778
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable........................................ $ 2,303 $ 10,192
Accrued repair and maintenance expenses................. 950 905
Accrued compensation and related taxes.................. 328 436
Accrued expenses and other liabilities.................. 2,579 3,602
Debt.................................................... 42,928 52,230
Income taxes payable.................................... 1,523 675
Deferred income taxes................................... 2,545 2,644
------- --------
Total liabilities............................... 53,156 70,684
------- --------
Commitments and Contingencies (Notes 9 and 10)
Stockholders' Equity:
Preferred stock -- $0.01 par value, 5,000,000 shares
authorized, no shares issued and outstanding......... -- -- $ --
Common stock -- $0.01 par value, 100,000,000 shares
authorized, 25,000,000 shares and 30,118,694 shares
(pro forma) issued and outstanding................... 250 250 301
Additional paid-in capital.............................. 24,750 30,750 75,699
Retained earnings....................................... 1,001 1,094 1,094
------- -------- --------
Total stockholders' equity...................... 26,001 32,094 $ 77,094
------- -------- ========
Total Liabilities and Stockholders' Equity...... $79,157 $102,778
======= ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F-5
<PAGE> 72
NATIONSRENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE
AUGUST 14 MONTHS
(INCEPTION) TO ENDED
DECEMBER 31, MARCH 31,
1997 1998
-------------- -------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Equipment rentals......................................... $ 7,410 $ 5,911
Sales of equipment, parts and supplies.................... 1,895 3,128
------- -------
Total revenue..................................... 9,305 9,039
------- -------
Cost of revenue:
Cost of equipment rentals, excluding depreciation......... 2,196 2,661
Rental equipment depreciation............................. 1,526 1,076
Cost of sales of equipment, parts and supplies............ 1,691 2,252
------- -------
Total cost of revenue............................. 5,413 5,989
------- -------
Gross profit................................................ 3,892 3,050
Operating expenses:
Selling, general and administrative expenses.............. 1,081 1,758
Non-rental equipment depreciation and amortization........ 284 447
------- -------
Operating income............................................ 2,527 845
------- -------
Other (income)/expense:
Interest expense.......................................... 760 808
Interest income........................................... (29) (21)
Other, net................................................ 29 (102)
------- -------
760 685
------- -------
Income before provision for income taxes.................... 1,767 160
Provision for income taxes................................ 766 67
------- -------
Net income.................................................. $ 1,001 $ 93
======= =======
Net income per share -- basic and diluted................... $ 0.04 $ 0.00
======= =======
Weighted average common shares outstanding:
Basic..................................................... 25,000 25,000
======= =======
Diluted................................................... 25,007 25,069
======= =======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F-6
<PAGE> 73
NATIONSRENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM AUGUST 14, 1997 (INCEPTION) TO DECEMBER 31, 1997
AND THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL
NUMBER OF PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, August 14, 1997 (Inception)............ -- $ -- $ -- $ -- $ --
Issuance of common stock (after giving effect
to the stock split discussed in Note 1).... 25,000,000 250 24,750 -- 25,000
Net income.................................... -- -- -- 1,001 1,001
---------- ---- ------- ------ -------
BALANCE, December 31, 1997...................... 25,000,000 250 24,750 1,001 26,001
Capital contribution (unaudited).............. -- -- 6,000 -- 6,000
Net income (unaudited)........................ -- -- -- 93 93
---------- ---- ------- ------ -------
BALANCE, March 31, 1998 (unaudited)............. 25,000,000 $250 $30,750 $1,094 $32,094
========== ==== ======= ====== =======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F-7
<PAGE> 74
NATIONSRENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 14 FOR THE THREE
(INCEPTION) TO MONTHS ENDED
DECEMBER 31, MARCH 31,
1997 1998
-------------- -------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 1,001 $ 93
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................... 1,810 1,523
Gain on sale of rental equipment....................... (59) (200)
Deferred income tax provision.......................... 357 420
Changes in operating assets and liabilities:
Accounts receivable............................... 334 904
Inventories....................................... 83 262
Prepaid expenses and other assets................. (296) (1,411)
Accounts payable.................................. 776 7,547
Accrued expenses and other liabilities............ (428) 349
Income taxes payable.............................. 117 (848)
-------- --------
Net cash provided by operating activities......... 3,695 8,639
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES, NET OF ACQUISITIONS:
Acquisitions of businesses, net of cash acquired....... (34,137) (5,221)
Purchases of rental equipment.......................... (2,461) (19,584)
Purchases of property and equipment.................... (963) (1,113)
Proceeds from sale of rental equipment................. 1,159 1,255
Decrease in notes receivable affiliates................ 1,358 --
-------- --------
Net cash used in investing activities............. (35,044) (24,663)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock................. 25,000 --
Capital contribution................................... -- 6,000
Proceeds from debt..................................... 21,917 31,638
Repayments of debt..................................... (14,075) (22,457)
-------- --------
Net cash provided by financing activities......... 32,842 15,181
-------- --------
Net increase (decrease) in cash and cash equivalents........ 1,493 (843)
Cash and cash equivalents, beginning of period.............. -- 1,493
-------- --------
Cash and cash equivalents, end of period.................... $ 1,493 $ 650
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest................................. $ 621 $ 551
======== ========
Cash paid for income taxes............................. $ 390 $ 604
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
The Company acquired the net assets and assumed
certain liabilities of certain businesses as
follows:
Total assets, net of cash acquired................ $ 78,629 $ 6,099
Total liabilities assumed......................... (27,311) (878)
Amounts paid through the issuance of debt......... (17,181) --
-------- --------
Net cash paid..................................... $ 34,137 $ 5,221
======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F-8
<PAGE> 75
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ACCOUNTING POLICIES
Basis of presentation
NationsRent, Inc. (the "Company") was incorporated in the state of Delaware
on August 14, 1997 for the purpose of creating a nationally branded network of
equipment rental locations offering a broad selection of equipment primarily to
the construction and industrial segments of the equipment rental industry in the
United States. The Company also sells used and new equipment, spare parts,
merchandise and supplies, and provides maintenance and repair services.
The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying consolidated balance sheets
are presented on an unclassified basis.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. The Company had no
cash equivalents at December 31, 1997 and March 31, 1998 (unaudited).
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventories
Inventories, which consist of equipment, tools, parts and related
merchandise supply items, are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method. Provision is made to
reduce excess or obsolete inventories to their estimated net realizable value.
Rental equipment
Rental equipment purchased new by the Company is recorded at cost and
depreciated over the estimated useful life of the equipment using the
straight-line method. Rental equipment that is obtained through the acquisition
of a business is valued at its estimated fair market value at the time of
acquisition. The range of useful lives estimated by management for rental
equipment is two to ten years. Rental equipment is depreciated to a salvage
value of zero to ten percent of cost. Rental equipment having a cost of $500 or
less is charged to expense at the time of purchase. Accumulated depreciation on
rental equipment was $1,526,000 and $2,592,000 (unaudited) at December 31, 1997
and March 31, 1998, respectively. Ordinary maintenance and repair costs are
charged to operations as incurred.
F-9
<PAGE> 76
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and equipment
Property and equipment purchased new by the Company is recorded at cost.
Property and equipment obtained through the acquisition of a business is
recorded at the estimated fair market value at the time of acquisition.
Depreciation and amortization are recorded on a straight-line basis over the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements........................ 10-39 years, not to exceed lease term
Furniture, fixtures and office equipment.......... 3-7 years
Vehicles, delivery and shop equipment............. 5-10 years
</TABLE>
Ordinary maintenance and repair costs are charged to expense as incurred.
Intangible assets
Intangible assets are recorded at cost and are amortized using the
straight-line method over their estimated useful lives of five years for
covenants not to compete and 40 years for goodwill. The accumulated amortization
of intangible assets, including goodwill, relating to acquired businesses, was
approximately $180,000 at December 31, 1997.
Long-lived assets
The carrying value of long-lived assets, including goodwill, is reviewed if
the facts and circumstances suggest that it may be impaired. If this review
indicates that long-lived assets will not be recoverable, as determined based on
the undiscounted cash flows of the entity acquired over the remaining
amortization period, the Company's carrying value of the long-lived assets will
be reduced by the amount by which carrying value exceeds fair value.
Fair value of financial instruments
The carrying amounts reported in the accompanying consolidated balance
sheets for accounts receivable, accounts payable and accrued expenses and other
liabilities approximate fair value due to the short-term nature of these
accounts. The fair value of debt is determined using current interest rates for
similar instruments at December 31, 1997 and approximates the carrying value of
these notes due to the fact that the underlying instruments include provisions
to adjust note balances and interest rates to approximate fair market value.
Revenue recognition
Rental revenue is recognized as earned during the rental agreement period.
Equipment rentals in the consolidated statements of operations includes revenue
earned on equipment rentals, rental equipment delivery and pick-up fees and fuel
sales. Revenue from the sale of used equipment, parts and supplies and retail
merchandise is recognized at the time of delivery to, or pick-up by, the
customer. When rental equipment is sold, the related cost and accumulated
depreciation are removed from the respective accounts. Proceeds from the sale
and the related book value of the equipment sold are reported as revenue from
rental equipment sales and cost of rental equipment sales, respectively, in the
statements of operations.
Advertising
Advertising costs are charged to expense as incurred. For the period from
August 14, 1997 (inception) to December 31, 1997, the Company incurred $171,000
of advertising costs.
F-10
<PAGE> 77
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes
The Company accounts for income taxes under the liability method pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes. Under the liability method, deferred tax assets and liabilities
are determined based on differences between the financial reporting and tax
bases of assets and liabilities using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. The Company and its
wholly owned subsidiaries file a consolidated federal income tax return.
Computation of earnings per share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, Earnings Per Share. SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Under SFAS No. 128, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Earnings per share
amounts for all periods have been presented to conform with SFAS No. 128 and
Staff Accounting Bulletin No. 98 (issued by the Securities and Exchange
Commission in February 1998), which amends the determination of and accounting
for "cheap stock" in periods prior to an initial public offering. The effect of
dilutive securities is computed using the treasury stock method.
Stock split
During June 1998, the Company effected a 2,500-for-one split of its common
stock. The accompanying consolidated financial statements reflect the stock
split on a retroactive basis from the beginning of the periods presented.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits, and monitoring procedures.
Stock based compensation
The Company accounts for stock compensation arrangements in accordance with
APB Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB No. 25")
and accordingly, recognizes no compensation expense for the stock compensation
arrangements since the stock options are granted at exercise prices at or
greater than the fair value of the shares at the date of grant.
Unaudited interim consolidated financial statements
The accompanying consolidated balance sheet at March 31, 1998 and the
consolidated statements of income, stockholders' equity and cash flows for the
three months ended March 31, 1998 are unaudited and have been prepared on the
same basis as the audited consolidated financial statements included herein.
Such unaudited consolidated financial statements reflect all adjustments of a
normal recurring nature which are, in the opinion of management, necessary for a
fair presentation of financial results for the three months ended March 31,
1998, in accordance with generally accepted accounting principles for interim
financial reporting.
F-11
<PAGE> 78
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Seasonality
The Company's initial acquisitions have been in the Midwest region of the
United States. The Company's revenue and income are dependent upon the activity
in the construction industry in the markets served by the Company. Construction
activity is dependent upon weather and the traditional seasons for construction
work. Because of this variability in demand, the Company's quarterly revenue may
fluctuate, and revenue for the first quarter of each year can be expected to be
lower than the remaining quarters. Although the Company believes that the
historical trend in quarterly revenue for the second, third and fourth quarters
of each year is generally higher than the first quarter, there can be no
assurance that this will occur in future periods. Accordingly, quarterly or
other interim results should not be considered indicative of results to be
expected for any quarter or for the full year.
Impact of recently issued accounting standards
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The Company is required to adopt the provisions of these
Statements in fiscal year 1998. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components in a primary financial
statement. The Company is currently evaluating the reporting formats recommended
under this Statement. SFAS No. 131 establishes a new method by which companies
will report operating segment information. This method requires disclosure of
information which is based on the manner in which management organizes the
segments within a company for making operating decisions and assessing
performance. The Company continues to evaluate the provisions of SFAS No. 131
and, upon adoption, the Company may report operating segments. In April 1998,
the American Institute of Certified Public Accountants issued Statement of
Position No. 98-5 ("SOP 98-5"). SOP 98-5 requires that all non-governmental
entities expense costs of start-up activities, including pre-operating,
pre-opening and organization activities, as those costs are incurred. In the
opinion of management, the adoption of this statement will have no impact on its
statement of operations.
2. ACQUISITIONS
The Company is building a nationally branded network of equipment rental
locations. Pursuant to this strategy, the Company has made five acquisitions
during 1997. Consideration for these acquisitions has consisted of cash and debt
payable to former owners. The acquisitions have been accounted for using the
purchase method and, accordingly, the acquired assets and assumed liabilities,
including goodwill, have been recorded at their estimated fair values as of the
date of acquisition. Purchase accounting values for all acquisitions have been
assigned on a preliminary basis, and are subject to adjustment when final
information as to the fair values of the nets assets acquired is available. The
operations of the acquired businesses have been included in the Company's
consolidated statement of income since the date of each respective acquisition.
The following table sets forth businesses acquired during 1997 and the
consideration paid:
<TABLE>
<CAPTION>
TOTAL
NAME OF BUSINESS DATE OF ACQUISITION CONSIDERATION
- ---------------- ------------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Sam's Equipment Rental, Inc......................... August 31, 1997 $23,431
Ashland Rental and Sales, Inc. ..................... November 18, 1997 2,221
R. and R. Rental, Inc. ............................. December 10, 1997 8,000
C & E Rental and Service, Inc. ..................... December 23, 1997 12,250
Titan Rentals, Inc. ................................ December 31, 1997 5,900
-------
Total..................................... $51,802
=======
</TABLE>
F-12
<PAGE> 79
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the estimated fair value of the assets
acquired and liabilities assumed for the above acquisitions (in thousands):
<TABLE>
<S> <C>
Assets, including cash...................................... $41,828
Goodwill.................................................... 36,686
Other intangibles........................................... 599
Liabilities................................................. 27,311
</TABLE>
The following table sets forth the unaudited pro forma consolidated results
of operations for the year ended December 31, 1997 giving effect to the above
acquisitions as if such acquisitions had occurred on January 1, 1997 (in
thousands, except per share data):
<TABLE>
<S> <C>
Revenue..................................................... $42,085
Net income.................................................. 2,816
Basic and diluted earnings per share........................ $ 0.11
</TABLE>
The above unaudited pro forma consolidated results are based upon certain
assumptions and estimates which the Company believes are reasonable. The
unaudited pro forma consolidated results of operations may not be indicative of
the operating results that actually would have been reported had the Company
been in existence and had the acquisitions been consummated on January 1, 1997,
nor are they necessarily indicative of results which will be reported in the
future.
3. PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Buildings and improvements.................................. $ 96 $ 60
Furniture, fixtures and office equipment.................... 514 849
Vehicles, delivery and shop equipment....................... 906 1,207
Construction in process..................................... 923 1,435
------ ------
2,439 3,551
Less -- accumulated depreciation and amortization........... (105) (236)
------ ------
Property and equipment, net............................... $2,334 $3,315
====== ======
</TABLE>
F-13
<PAGE> 80
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Subordinated promissory notes, bearing interest at 8.5%,
interest payable quarterly and maturities through December
2000...................................................... $ 6,091 $ 5,943
Subordinated convertible notes, bearing interest at 6.5%,
interest payable quarterly and maturities through December
2002...................................................... 11,090 11,090
Mortgage payable, bearing interest at 9.5%, payable in
monthly installments through July 2007.................... 112 110
Note payable, with interest at 8.25%, payable in monthly
installments through August 1998.......................... 33 16
Equipment notes, bearing interest at 6.0% to 9.25%, payable
in various monthly installments through June 2000, secured
by equipment.............................................. 5,144 8,971
Notes payable to financial institutions..................... 20,458 26,100
------- -------
Total debt........................................ $42,928 $52,230
======= =======
</TABLE>
The subordinated promissory notes and the subordinated convertible notes
were issued in connection with the acquisitions of certain businesses. The
convertible notes have features that allow the holder to convert the principal,
or portion thereof, of the note into common stock in the event the Company
completes an initial public offering ("IPO") of its common stock. Such principal
would be converted into common stock at the IPO price. Certain convertible notes
have provisions that prospectively increase the interest rates to 8.5% if the
Company does not complete an IPO of its common stock before March 1999.
Notes payable to financial institutions at December 31, 1997 consist of
amounts due under: (i) a $12,500,000 interest bearing term loan, with interest
equal to the prime rate less 0.25%, payable in equal monthly installments of
$20,833 and a final payment of $12,000,000 on September 22, 1999, (ii) a
$6,000,000 interest bearing term loan, with interest equal to the prime rate
less 0.25%, payable in equal monthly installments of $83,333 and a final payment
of $5,500,000 on June 18, 1998 and (iii) a $2,000,000 revolving credit
agreement, bearing interest equal to the prime rate less 0.25%, with the
principal due on September 22, 1999. Each of the above notes imposes, among
other covenants, an earnings to fixed charges covenant, a minimum net worth
covenant and a liabilities to worth covenant, as defined. The notes also provide
the financial institution with a security interest in all of the assets of the
Company.
In March 1998, the Company entered into a $165,000,000 credit facility, as
amended, with a syndicate of lenders to provide for cash borrowings and letters
of credit. The credit facility has a three year term scheduled to expire on May
15, 2001. The credit facility can be used to complete permitted acquisitions,
make capital expenditures, enter into standby letters of credit, or for working
capital and other general corporate purposes. Cash borrowings bear interest at
either the BankBoston base rate plus a percentage ranging from 0.00% to 0.50%
or, at the Company's option, the Eurodollar market rate plus a percentage
ranging from 1.50% to 2.75%. The percentage over the BankBoston base rate or the
Eurodollar market rate is based on the Company's financial performance as
measured by a total funded debt ratio (as defined in the credit facility). The
credit facility provides the banks with a security interest in substantially all
of the assets of the Company. The credit facility also imposes, among other
covenants, a tangible assets to senior debt covenant, a restriction on all of
the Company's retained earnings including the declaration and payment of cash
dividends, consent requirements on certain acquisitions and a restriction on the
ratio of total funded debt to earnings before interest, income taxes,
deprecation and amortization. The proceeds from the credit facility
F-14
<PAGE> 81
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
were used to repay substantially all of the notes payable to financial
institutions that were outstanding at December 31, 1997.
The aggregate maturity of debt at December 31, 1997 for the five years
ending December 31 is: 1998, $13,892,000; 1999, $17,039,000; 2000, $9,521,000;
2001, $184,000; 2002, $2,197,000; 2003 and thereafter, $95,000.
5. STOCKHOLDERS' EQUITY
Preferred stock
The Company has authorized 5,000,000 shares of $0.01 par value preferred
stock. No shares of preferred stock have been issued at December 31, 1997 or
March 31, 1998 (unaudited). The rights and preferences of the preferred stock
will be fixed by the Board of Directors at the time such shares are issued. The
preferred stock, when issued, will have dividend and liquidation preferences
over those of the common stockholders.
Stock options
During 1997, the Company granted to certain employees options to purchase
an aggregate of 282,527 shares of common stock, at exercise prices ranging from
$2.96 to $4.40 per share. At December 31, 1997 all options granted during the
year were outstanding and had a weighted average remaining contractual life of
9.93 years. The weighted average exercise price per share for these stock
options was $3.54. The exercise price per share was based on the estimated fair
value of the Company's common stock at the time of the grant. As such, no
compensation cost will be recognized for these stock options. The above options
become exercisable in equal 25% increments commencing on the first anniversary
of date of the grant, and expire 10 years from the date of grant. Accordingly,
no options were exercisable at December 31, 1997.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, which also requires that the information be determined
as if the Company had accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model. The following assumptions were used in the
valuation: average expected life 7 years, expected volatility 0.75, risk free
interest rate 6% and no dividends. The weighted average fair value of options
granted during the year was $2.86.
For purposes of pro forma disclosures of net income and earnings per share,
the estimated fair value of the options is amortized to expense over the
options' vesting period, resulting in pro forma compensation expense of
approximately $23,000 for the period from August 14, 1997 (inception) to
December 31, 1997. The Company's pro forma net income for the period from August
14, 1997 (inception) to December 31, 1997 was $978,000 with pro forma diluted
and basic net income per share of $0.04.
6. INCOME TAXES
The components of the provision for federal and state income taxes for the
period from August 14, 1997 (inception) to December 31, 1997 are as follows (in
thousands):
<TABLE>
<S> <C>
Current..................................................... $409
Deferred.................................................... 357
----
$766
====
Federal..................................................... $602
State....................................................... 164
----
$766
====
</TABLE>
F-15
<PAGE> 82
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the difference between the expected provision for
income taxes using the statutory federal income tax rate of 34% and the
Company's actual provision for the period from August 14, 1997 (inception) to
December 31, 1997 is as follows:
<TABLE>
<S> <C>
Federal statutory income tax rate........................... 34.0%
Add:
Non-deductible goodwill amortization...................... 3.0
State income taxes, net of federal tax benefit............ 6.1
Other, net................................................ 0.3
----
43.4%
====
</TABLE>
The components of deferred income tax liabilities (assets) at December 31,
1997 are as follows (in thousands):
<TABLE>
<S> <C>
Depreciation and amortization differences................... $2,766
Accrued liabilities not deductible until paid............... (761)
Bad debt provision not currently deductible................. (233)
Change from cash to accrual basis for income tax reporting
purposes.................................................. 773
------
Net deferred income tax liabilities....................... $2,545
======
</TABLE>
The provision for income taxes for the three months ended March 31, 1998 is
calculated based on the Company's expected effective tax rate for the year
ending December 31, 1998.
7. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1997
(INCEPTION) TO THREE MONTHS
DECEMBER 31, ENDED
1997 MARCH 31, 1998
--------------- --------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Numerator:
Net income............................................ $ 1,001 $ 93
======= =======
Denominator:
Denominator for basic earnings per
share -- weighted-average shares................... 25,000 25,000
Effect of dilutive securities:
Employee stock options............................. 7 69
------- -------
Denominator for diluted earnings per share -- adjusted
weighted-average shares............................ 25,007 25,069
======= =======
Basic earnings per share................................ $ 0.04 $ 0.00
======= =======
Diluted earnings per share.............................. $ 0.04 $ 0.00
======= =======
</TABLE>
Options to purchase 113,752 shares of common stock at $4.40 per share were
outstanding at December 31, 1997 but were not included in the computation of
diluted earnings per share because the options' exercise price was greater than
the average fair value of the common shares and, therefore, the effect would be
antidilutive.
F-16
<PAGE> 83
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
See Note 10 for a description of certain transactions occurring in 1998
that would have significantly changed the number of common shares outstanding at
December 31, 1997 if these transactions had occurred before December 31, 1997.
8. RELATED PARTY TRANSACTIONS
The Company rents certain buildings from a related party. Such rental
expense totaled $160,000 for the period from August 14, 1997 (inception) to
December 31, 1997. One of the principal owners of the related party is an
officer and director of the Company.
9. COMMITMENTS AND CONTINGENCIES
Operating leases
The Company leases rental equipment, real estate and certain office
equipment under operating leases. Certain real estate leases require the Company
to pay maintenance, insurance, taxes and certain other expenses in addition to
the stated rentals. Future minimum lease payments under noncancelable operating
leases, including the related party lease discussed above, at December 31, 1997
total $1,108,000, $867,000, $555,000, $518,000 and $398,000 for the years ending
December 31, 1998, 1999, 2000, 2001 and 2002, respectively. There are no
payments under noncancelable operating leases subsequent to the year ending
December 31, 2002. Rent expense under noncancellable operating leases for the
period from August 14, 1997 (inception) to December 31, 1997 was $410,000,
including the related party lease discussed above.
Legal matters
The Company is subject to claims and lawsuits in the ordinary course of its
business. In the opinion of management, the Company has either adequate legal
defense, indemnification for such matters from previous owners or is adequately
covered by insurance. If not insured, such matters will not, in the aggregate,
have a material adverse impact upon the Company's consolidated financial
position, results of future operations or cash flows.
Environmental matters
The Company and its operations are subject to various laws and related
regulations governing environmental matters. Under such laws, an owner or lessee
of real estate may be liable for the costs of removal or remediation of certain
hazardous or toxic substances located on or in, or emanating from, such
property, as well as investigation of property damage. As part of the Company's
acquisition due diligence, the Company performs extensive environmental
analysis. The remediation has typically been the responsibility of the prior
owner and is addressed prior to closing. The Company does not believe there are
currently any environmental liabilities which should be recorded or disclosed in
its financial statements. The Company believes the possibility is remote that
its compliance with various laws and regulations relating to the protection of
the environment will have a material effect on its capital expenditures, future
earnings or financial position.
10. SUBSEQUENT EVENTS
In June 1998, the founding stockholders of the Company made an additional
capital contribution of $17,400,000. Also, in June 1998, the Company sold an
aggregate of 5,118,694 shares of common stock in a private placement for
aggregate proceeds of $27,600,000. Investors in the private placement include
Company employees and associates of the founding stockholders of the Company.
The March 31, 1998 pro forma column included in the accompanying consolidated
balance sheets gives effect to the above transactions as if they occurred on
March 31, 1998.
F-17
<PAGE> 84
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1998, the Company received an unsecured subordinated loan in the
amount of $17,400,000 (the "Huizenga Note") from Huizenga Investments Limited
Partnership, an entity controlled by a current director and stockholder of the
Company. The loan accrued interest at the prevailing prime rate which was
payable quarterly. The loan had a maturity date of January 19, 2001. The loan
was repaid, without any prepayment penalty, in its entirety on June 3, 1998
using the proceeds from the aforementioned additional capital contribution.
The Company has completed eleven acquisitions of rental equipment
businesses since December 31, 1997 for aggregate consideration of $170,875,000.
Such consideration consisted of $131,566,000 of cash, $39,309,000 of
subordinated convertible debt and warrants to purchase approximately $800,000 of
the Company's common stock at the IPO price. The cash portion of the
consideration was funded through borrowings under the credit facility and the
Huizenga Note. Each of the acquisitions has been accounted for using the
purchase method. As only one of the 1998 acquisitions was completed prior to
March 31, 1998, unaudited pro forma consolidated results of operations for the
three months ended March 31, 1998, giving effect to that acquisition as if such
acquisition occurred on January 1, 1998, would not be materially different than
the unaudited historical results reported herein.
Subsequent to December 31, 1997, through April 20, 1998, the Company
granted to certain employees options to purchase an aggregate of 805,044 shares
of common stock, at exercise prices ranging from $4.40 to $6.69 per share. The
weighted average exercise price per share for these stock options was $5.95. The
exercise prices per share were based on the estimated fair value of the
Company's common stock at the time of the grants. As such, no compensation cost
will be recognized for these stock options.
In July 1998, the Company amended its credit facility to increase the limit
for cash borrowings and letters of credit from $165,000,000 to $265,000,000.
F-18
<PAGE> 85
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Gabriel Trailer Manufacturing Company, Inc.:
We have audited the accompanying consolidated balance sheets of Gabriel Trailer
Manufacturing Company, Inc. and subsidiary (an Ohio corporation) as of March 31,
1997 and August 31, 1997, and the related consolidated statements of income,
stockholders' equity and cash flows for the years ended March 31, 1996 and 1997
and for the period from April 1, 1997 through August 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gabriel Trailer Manufacturing
Company, Inc. and subsidiary as of March 31, 1997 and August 31, 1997, and the
results of their operations and their cash flows for the years ended March 31,
1996 and 1997 and for the period from April 1, 1997 through August 31, 1997 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 8, 1998.
F-19
<PAGE> 86
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 17,186 $ 149,742
Accounts receivable, net of allowances for doubtful accounts
of $265,000 and $330,000 as of March 31, and August 31,
1997, respectively........................................ 2,044,590 3,335,663
Inventories................................................. 947,322 991,902
Due from affiliates......................................... 1,421,199 1,357,990
Rental equipment, net....................................... 21,788,980 21,885,967
Property, plant and equipment, net.......................... 1,208,147 1,145,612
Other assets................................................ 186,704 221,186
----------- -----------
Total assets...................................... $27,614,128 $29,088,062
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable.......................................... $ 1,739,231 $ 422,591
Accrued expenses and other liabilities.................... 1,667,030 1,759,464
Debt...................................................... 16,100,269 16,558,863
Income taxes payable...................................... 1,491,129 1,423,026
Deferred income taxes..................................... 2,149,565 3,156,458
----------- -----------
Total liabilities................................. 23,147,224 23,320,402
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 7, 8 and 10)
STOCKHOLDERS' EQUITY:
Common stock -- no par value, 10,000 shares authorized,
issued and outstanding................................. 500 500
Retained earnings......................................... 4,466,404 5,767,160
----------- -----------
Total stockholders' equity........................ 4,466,904 5,767,660
----------- -----------
Total liabilities and stockholders' equity........ $27,614,128 $29,088,062
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-20
<PAGE> 87
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEAR ENDED MARCH 31, APRIL 1, 1997
---------------------------- TO
1996 1997 AUGUST 31, 1997
------------ ------------ ---------------
<S> <C> <C> <C>
REVENUE:
Equipment rentals................................ $11,871,114 $15,327,802 $8,514,810
Sales of equipment, parts and supplies........... 4,301,865 4,177,194 1,204,708
----------- ----------- ----------
16,172,979 19,504,996 9,719,518
COST OF REVENUE:
Cost of equipment rentals, excluding
depreciation.................................. 4,379,534 6,029,585 2,192,790
Rental equipment depreciation.................... 2,052,534 3,465,293 1,847,567
Cost of sales of equipment, parts and supplies... 4,490,975 2,790,666 984,147
----------- ----------- ----------
10,923,043 12,285,544 5,024,504
----------- ----------- ----------
Gross profit............................. 5,249,936 7,219,452 4,695,014
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES....... 2,972,337 3,563,930 1,683,311
NONRENTAL DEPRECIATION............................. 180,101 237,905 114,993
----------- ----------- ----------
Operating income......................... 2,097,498 3,417,617 2,896,710
OTHER INCOME (EXPENSE):
Interest expense................................. (582,807) (866,284) (580,107)
Interest income.................................. 71,103 15,941 15,710
Other, net....................................... 125,468 187,044 (77,597)
----------- ----------- ----------
Total other income (expense), net........ (386,236) (663,299) (641,994)
----------- ----------- ----------
Income before provision for income
taxes.................................. 1,711,262 2,754,318 2,254,716
PROVISION FOR INCOME TAXES......................... 732,793 1,127,416 938,790
----------- ----------- ----------
NET INCOME......................................... $ 978,469 $ 1,626,902 $1,315,926
=========== =========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-21
<PAGE> 88
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------
NUMBER OF TREASURY RETAINED
SHARES AMOUNT STOCK EARNINGS TOTAL
--------- ------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, April 1, 1995.................... 10,000 $500 $(190,000) $2,051,033 $1,861,533
Retirement of treasury stock............ -- -- 190,000 (190,000) --
Net income.............................. -- -- -- 978,469 978,469
------ ---- --------- ---------- ----------
BALANCE, March 31, 1996................... 10,000 500 -- 2,839,502 2,840,002
Net income.............................. -- -- -- 1,626,902 1,626,902
------ ---- --------- ---------- ----------
BALANCE, March 31, 1997................... 10,000 500 -- 4,466,404 4,466,904
Distribution............................ -- -- -- (15,170) (15,170)
Net income.............................. -- -- -- 1,315,926 1,315,926
------ ---- --------- ---------- ----------
BALANCE, August 31, 1997.................. 10,000 $500 $ -- $5,767,160 $5,767,660
====== ==== ========= ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated statements.
F-22
<PAGE> 89
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEAR ENDED MARCH 31, APRIL 1, 1997
---------------------------- TO AUGUST 31,
1996 1997 1997
------------ ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ 978,469 $ 1,626,902 $ 1,315,926
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation................................... 2,232,635 3,703,200 1,962,560
(Gain) loss on sale of assets.................. 16,202 (68,548) 84,020
Deferred income taxes.......................... 486,450 809,283 1,006,893
Changes in operating assets and liabilities:
Accounts receivable.......................... (309,761) (688,006) (1,291,073)
Inventories.................................. (122,582) (187,075) (44,580)
Other assets................................. (41,962) 8,601 (93,296)
Accounts payable............................. 244,241 777,122 (1,316,640)
Accrued expenses and other liabilities....... 446,252 503,630 92,434
Income taxes payable......................... 246,343 318,133 (68,103)
----------- ----------- -----------
Net cash provided by operating
activities.............................. 4,176,287 6,803,242 1,648,141
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............... (494,684) (516,029) (63,792)
Proceeds from sale of property and equipment...... 314,097 17,560 8,733
Purchases of rental equipment..................... (8,799,248) (8,101,137) (1,775,155)
Proceeds from sale of rental equipment............ 916,403 1,326,510 136,685
----------- ----------- -----------
Net cash used in investing activities..... (8,063,432) (7,273,096) (1,693,529)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt................................ 12,823,899 17,922,405 4,843,858
Repayments of debt................................ (8,658,333) (14,417,413) (3,651,766)
Payments of equipment financings.................. -- (1,928,097) (1,045,871)
(Advances to) repayments from affiliates, net..... (316,721) (1,094,105) 31,723
----------- ----------- -----------
Net cash provided by financing
activities.............................. 3,848,845 482,790 177,944
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... (38,300) 12,936 132,556
CASH AND CASH EQUIVALENTS, beginning of period...... 42,550 4,250 17,186
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period............ $ 4,250 $ 17,186 $ 149,742
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................ $ 553,206 $ 821,349 $ 546,085
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Equipment financing............................... $ -- $ 4,637,084 $ 387,503
=========== =========== ===========
Property dividends................................ $ -- $ -- $ 15,170
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated statements.
F-23
<PAGE> 90
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND AUGUST 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION:
Gabriel Trailer Manufacturing Company, Inc. ("Gabriel") (together with its
subsidiary, the "Company") was incorporated in March 1970 to manufacture, buy,
sell and deal in trailer equipment, other related equipment and parts and
accessories. Gabriel's wholly-owned subsidiary, Sam's Equipment Rental, Inc. was
formed for the purpose of renting and leasing construction related equipment.
The Company currently rents a broad array of equipment to a diverse customer
base including construction industry participants, industrial companies,
homeowners and others. The Company also engages in related activities such as
selling used equipment, acting as a distributor for certain new and used
equipment, and selling related merchandise and parts. The nature of the
Company's business is such that short-term obligations are typically met by cash
flow generated from long-term assets. Consequently, consistent with industry
practice, the accompanying balance sheets are presented on an unclassified
basis.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash equivalents
The Company considers all highly liquid instruments with an original
maturity of three months or less when purchased to be cash equivalents. At March
31, 1997 and August 31, 1997, the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related rental
equipment supplies and accessories. Inventories are stated at the lower of cost
or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The range of
useful lives estimated by management for rental equipment is five to seven
years. Ordinary maintenance and repair costs are charged to operations as
incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to the rental of equipment is recognized
over the contract term.
Property, plant and equipment
Property, plant and equipment is recorded at cost and depreciated over the
estimated useful life using the straight-line method. The range of useful lives
estimated by management for property, plant and equipment is three to forty
years. Ordinary maintenance and repair costs are charged to operations as
incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-24
<PAGE> 91
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The carrying amounts reported in the accompanying consolidated balance
sheets for cash and cash equivalents, accounts receivable, accounts payable,
accrued expenses and other liabilities approximate fair value as of March 31,
1997 and August 31, 1997.
Income taxes
The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which requires, among other things, recognition
of future tax effects measured at enacted rates attributable to deductible
temporary differences between financial statement and income tax bases of assets
and liabilities to the extent that realization of said effects is more likely
than not.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits and monitoring procedures.
3. RENTAL EQUIPMENT:
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
----------- -----------
<S> <C> <C>
Rental equipment.......................................... $28,790,435 $30,641,146
Less -- accumulated depreciation.......................... 7,001,455 8,755,179
----------- -----------
Rental equipment, net................................ $21,788,980 $21,885,967
=========== ===========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
----------- -----------
<S> <C> <C>
Land...................................................... $ 49,863 $ 49,863
Building.................................................. 757,816 757,816
Furniture and fixtures.................................... 355,131 339,593
Vehicles.................................................. 1,134,204 1,113,193
----------- -----------
2,297,014 2,260,465
Less -- accumulated depreciation.......................... (1,088,867) (1,114,853)
----------- -----------
Property, plant and equipment, net.............. $ 1,208,147 $ 1,145,612
=========== ===========
</TABLE>
F-25
<PAGE> 92
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCRUED EXPENSES AND OTHER LIABILITIES:
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
---------- ----------
<S> <C> <C>
Personal property taxes..................................... $1,044,423 $1,172,905
Payroll-related............................................. 231,274 188,246
Tax penalties and interest.................................. 248,000 248,000
Other....................................................... 143,333 150,313
---------- ----------
Accrued expenses and other liabilities............ $1,667,030 $1,759,464
========== ==========
</TABLE>
6. DEBT:
Debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
----------- -----------
<S> <C> <C>
Lines of credit, with borrowings up to $6.3 million,
secured by substantially all of the Company's assets,
interest ranging from 8.25% to 8.50%, payable in
monthly installments through September 1997.......... $ 4,091,315 $ 5,497,095
Revolving term loans, secured by substantially all of
the Company's assets, interest ranging from 8.25% to
8.90%, payable in monthly installments through
January 2000......................................... 6,444,444 6,233,334
Equipment notes, secured by rental equipment, interest
ranging from 6.90% to 9.00%, payable in monthly
installments through June 2000....................... 5,312,900 4,656,172
Mortgages payable, secured by real estate, interest
ranging from 6.75% to 9.50%, payable in monthly
installments through August 2005..................... 161,798 113,936
Note payable to related party, secured by life insurance
policy on officer, interest at 8.25%, payable in
monthly installments through August 1998............. 89,812 58,326
----------- -----------
Total debt...................................... $16,100,269 $16,558,863
=========== ===========
</TABLE>
Maturities of the Company's debt at August 31, 1997, for the years ended
August 31, are as follows:
<TABLE>
<S> <C>
1998........................................................ $14,155,433
1999........................................................ 1,677,753
2000........................................................ 636,277
2001........................................................ 9,853
2002........................................................ 10,831
Thereafter.................................................. 68,716
-----------
$16,558,863
===========
</TABLE>
F-26
<PAGE> 93
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES:
The provision for Federal and state income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED PERIOD FROM
MARCH 31, APRIL 1, 1997
---------------------- TO AUGUST 31,
1996 1997 1997
-------- ---------- -------------
<S> <C> <C> <C>
Current......................................... $246,343 $ 318,133 $ (68,103)
Deferred........................................ 486,450 809,283 1,006,893
-------- ---------- ----------
$732,793 $1,127,416 $ 938,790
======== ========== ==========
Federal......................................... $575,542 $ 885,481 $ 737,333
State........................................... 157,251 241,935 201,457
-------- ---------- ----------
$732,793 $1,127,416 $ 938,790
======== ========== ==========
</TABLE>
A reconciliation of the difference between the expected provision for
income taxes using the statutory Federal income tax rate of 34% and the
Company's actual provision is as follows:
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED PERIOD FROM
MARCH 31, APRIL 1, 1997
---------------------- TO AUGUST 31,
1996 1997 1997
-------- ---------- -------------
<S> <C> <C> <C>
Provision at the statutory tax rate............. $581,829 $ 936,468 $766,603
State income taxes.............................. 103,786 159,677 132,962
Nondeductible expenses.......................... 47,178 31,271 39,225
-------- ---------- --------
$732,793 $1,127,416 $938,790
======== ========== ========
</TABLE>
Deferred income taxes arise primarily due to temporary differences in
recognizing certain revenues and expenses for tax purposes and the use of
accelerated depreciation for tax purposes. The components of the deferred income
tax liabilities are as follows:
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
---------- ----------
<S> <C> <C>
Depreciation of property and equipment and rental
equipment................................................. $2,211,443 $2,708,783
Accrued liabilities......................................... (871,739) (349,825)
Accounts receivable......................................... 809,861 (118,830)
Section 481 cash to accrual election change................. -- 916,330
---------- ----------
Deferred income tax liability............................. $2,149,565 $3,156,458
========== ==========
</TABLE>
The Company's income tax returns and related payments for the years ended
March 31, 1995, 1996 and 1997 were not filed on a timely basis. It is not
possible to predict the ultimate outcome of the Company's penalties for failure
to file, and pay on a timely basis and underpayment. The Company has estimated
an approximate liability of $175,000, which is included in accrued expenses and
other liabilities.
8. COMMITMENTS AND CONTINGENCIES:
Operating Leases
The Company leases rental equipment, real estate and certain office
equipment under operating leases. Certain real estate leases require the Company
to pay maintenance, insurance, taxes and certain other expenses in addition to
the stated rentals. The leases cover several operating locations and expire at
various dates through September 2002. Future minimum lease payments to related
and unrelated third parties, by
F-27
<PAGE> 94
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
year and in the aggregate, at August 31, 1997 for noncancelable operating leases
with initial or remaining terms of one year or more are as follows:
<TABLE>
<CAPTION>
RELATED PARTY OTHER TOTAL
------------- -------- ----------
<S> <C> <C> <C>
1998............................................ $ 480,000 $328,322 $ 808,322
1999............................................ 368,000 228,866 596,866
2000............................................ 256,000 67,821 323,821
2001............................................ 192,000 -- 192,000
2002............................................ 8,000 -- 8,000
---------- -------- ----------
Total $1,304,000 $625,009 $1,929,009
========== ======== ==========
</TABLE>
Rent expense under noncancelable operating leases for the years ended March
31, 1996 and 1997 and the period from April 1, 1997 through August 31, 1997 is
$784,354, $1,098,234 and $423,798, respectively. Included in total rent expense
is rent to a related party of approximately $280,000, $357,000 and $200,000 for
the years ended March 31, 1996 and 1997 and the period from April 1, 1997
through August 31, 1997, respectively.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
9. EMPLOYEE BENEFIT PLAN:
The Company has a 401(k) defined contribution profit-sharing plan under
which employees having worked a minimum of twelve months are eligible to
participate. Employer contributions, which are discretionary and depend on the
Company's profitability, were approximately $54,600, $70,100 and $47,700 for the
years ended March 31, 1996 and 1997 and for the period from April 1, 1997
through August 31, 1997, respectively.
10. SUBSEQUENT EVENT:
Effective September 1, 1997, all of the outstanding stock of the Company
was purchased by NationsRent, Inc., an unrelated third party, in exchange for
cash and debt.
F-28
<PAGE> 95
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To R. and R. Rental, Inc.:
We have audited the accompanying balance sheet of R. and R. Rental, Inc. (an
Ohio S corporation) at December 10, 1997, and the related statements of
operations, stockholder's equity and cash flows for the period from January 1,
1997 through December 10, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R. and R. Rental, Inc. at
December 10, 1997, and the results of its operations and its cash flows for the
period from January 1, 1997 through December 10, 1997 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 8, 1998.
F-29
<PAGE> 96
R. AND R. RENTAL, INC.
BALANCE SHEET
AS OF DECEMBER 10, 1997
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 193,714
Accounts receivable, net of allowance for doubtful accounts
of $150,000............................................... 649,193
Inventories................................................. 928,962
Rental equipment, net....................................... 4,002,825
Property and equipment, net................................. 267,903
Other assets................................................ 3,400
----------
Total assets...................................... $6,045,997
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable.......................................... $ 15,354
Accrued expenses and other liabilities.................... 108,996
Note payable.............................................. 1,523,139
----------
Total liabilities................................. 1,647,489
----------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9)
STOCKHOLDER'S EQUITY:
Common stock -- no par value, 250 shares authorized,
issued and outstanding................................. 500
Additional paid-in capital................................ 5,327,477
Accumulated deficit....................................... (929,469)
----------
Total stockholder's equity........................ 4,398,508
----------
Total liabilities and stockholder's equity........ $6,045,997
==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
balance sheet.
F-30
<PAGE> 97
R. AND R. RENTAL, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 10, 1997
<TABLE>
<S> <C>
REVENUE:
Equipment rentals......................................... $2,409,518
Sales of equipment, parts and supplies.................... 2,106,695
----------
4,516,213
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation......... 1,398,174
Rental equipment depreciation............................. 630,548
Cost of sales of equipment, parts and supplies............ 1,808,076
----------
3,836,798
----------
Gross profit...................................... 679,415
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 715,140
NONRENTAL DEPRECIATION...................................... 76,630
----------
Operating loss.................................... (112,355)
OTHER INCOME (EXPENSE):
Interest expense.......................................... (79,579)
Other income.............................................. 29,829
----------
Total other income (expense), net................. (49,750)
----------
NET LOSS.......................................... $ (162,105)
==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-31
<PAGE> 98
R. AND R. RENTAL, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 10, 1997
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL
NUMBER PAID-IN ACCUMULATED
OF SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997.................. 250 $500 $3,761,380 $(767,364) $2,994,516
Capital contributions................... -- -- 1,566,097 -- 1,566,097
Net loss................................ -- -- -- (162,105) (162,105)
--- ---- ---------- --------- ----------
BALANCE, December 10, 1997................ 250 $500 $5,327,477 $(929,469) $4,398,508
=== ==== ========== ========= ==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-32
<PAGE> 99
R. AND R. RENTAL, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 10, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (162,105)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 707,178
Loss on sale of rental equipment....................... 65,326
Changes in operating assets and liabilities:
Accounts receivable.................................. (40,271)
Inventories.......................................... (298,639)
Other assets......................................... 4,523
Accounts payable..................................... (382,070)
Accrued expenses and other liabilities............... 28,016
-----------
Net cash used in operating activities............. (78,042)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment............................. (2,208,233)
Purchases of property and equipment....................... (96,568)
Proceeds from sale of rental equipment.................... 307,793
-----------
Net cash used in investing activities............. (1,997,008)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable................................ 1,523,139
Repayments of note payable................................ (935,609)
Capital contributions..................................... 1,566,097
-----------
Net cash provided by financing activities......... 2,153,627
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 78,577
CASH AND CASH EQUIVALENTS, beginning of period.............. 115,137
-----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 193,714
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 79,579
===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-33
<PAGE> 100
R. AND R. RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 10, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
R. and R. Rentals, Inc. (the "Company") was incorporated in July 1988 in
the State of Ohio. The Company rents a broad array of equipment to a diverse
customer base that includes construction industry participants, industrial
companies, homeowners and others. The Company also engages in related activities
such as selling used equipment, acting as a distributor for certain new
equipment and selling related merchandise and parts. The nature of the Company's
business is such that short-term obligations are typically met by cash flow
generated from long-term assets. Consequently, consistent with industry
practice, the accompanying balance sheet is presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At December 10,
1997, the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related equipment
supplies and accessories inventories are stated at the lower of weighted average
cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The useful life
estimated by management for rental equipment is seven years. Ordinary
maintenance and repair costs are charged to operations as incurred.
Revenue recognition
Revenue related to the sale of equipment is recognized at the point of
sale. Revenue related to equipment rental is recognized over the contract term.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. The range of useful lives
estimated by management for property and equipment is three to fifteen years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
Fair value of financial instruments
The carrying amounts reported in the balance sheet for cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses and other
liabilities and note payable approximate fair value as of December 10, 1997.
F-34
<PAGE> 101
R. AND R. RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes
The Company is an S corporation for income tax purposes. Accordingly,
income, losses and related temporary differences which arise in the recording of
income and expense items for financial reporting and tax reporting purposes are
included in the individual tax return of the stockholder. Therefore, no
provision or liability for Federal and state income taxes has been included in
the accompanying financial statements.
On a pro forma basis, the Company would have had a tax benefit, however it
would have been fully offset by a valuation allowance as the benefit would not
have achieved the realization requirements of Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits, and monitoring procedures.
3. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation as of December 10,
1997, consist of the following:
<TABLE>
<S> <C>
Rental equipment............................................ $ 5,349,321
Less -- accumulated depreciation............................ (1,346,496)
-----------
Rental equipment, net............................. $ 4,002,825
===========
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment as of December 10, 1997, is as follows:
<TABLE>
<S> <C>
Trucks and autos............................................ $ 255,842
Furniture and fixtures...................................... 147,333
Computer equipment.......................................... 81,986
Leasehold improvements...................................... 38,466
---------
523,627
Less -- accumulated depreciation............................ (255,724)
---------
Property and equipment, net....................... $ 267,903
=========
</TABLE>
F-35
<PAGE> 102
R. AND R. RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities as of December 10, 1997, consists of
the following:
<TABLE>
<S> <C>
Accrued property taxes...................................... $100,000
Payroll-related............................................. 8,996
--------
Accrued expenses and other liabilities............ $108,996
========
</TABLE>
6. DEBT
The Company entered into a demand promissory note bearing interest at prime
(8.5% at December 10, 1997), with interest payable quarterly. This note is
secured by substantially all of the Company's rental equipment. The note had an
outstanding balance of $1,523,139 at December 10, 1997.
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases various automobiles under operating leases. Future
minimum lease payments, by year and in the aggregate, for noncancelable
operating leases with initial or remaining terms of one year or more are as
follows at December 10, 1997 for the following years ended December 10:
<TABLE>
<S> <C>
1998........................................................ $30,044
1999........................................................ 17,875
2000........................................................ 6,186
-------
Total............................................. $54,105
=======
</TABLE>
Expense under these operating leases for the period ended December 10, 1997
was $44,493 and is included under selling, general and administrative expenses
in the accompanying statement of operations.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
8. RELATED PARTY TRANSACTIONS
The Company leases two buildings from the stockholder under monthly
operating leases. For the period ended December 10, 1997, rent expense totaled
approximately $56,500 and is included under selling, general and administrative
expenses in the accompanying statement of operations.
9. SUBSEQUENT EVENT
Effective December 11, 1997, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc., an unrelated third
party, in exchange for cash and debt.
The demand promissory note of $1,523,139 at December 10, 1997 was paid off
by the stockholder of the Company with proceeds from the purchase of the
Company's assets and liabilities.
F-36
<PAGE> 103
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To C & E Rental and Service, Inc.:
We have audited the accompanying balance sheets of C & E Rental and Service,
Inc. (an Indiana S corporation) as of December 31, 1996 and December 22, 1997,
and the related statements of income, stockholder's equity and cash flows for
the year ended December 31, 1996 and the period from January 1, 1997 through
December 22, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of C & E Rental and Service, Inc.
as of December 31, 1996 and December 22, 1997, and the results of its operations
and its cash flows for the year ended December 31, 1996 and the period from
January 1, 1997 through December 22, 1997 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 8, 1998.
F-37
<PAGE> 104
C & E RENTAL AND SERVICE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 43,390 $ 184,318
Accounts receivable, net of allowances for doubtful accounts
of $81,011 and $109,973 as of December 31, 1996, and
December 22, 1997, respectively........................... 705,695 701,156
Inventories................................................. 134,491 213,934
Due from affiliate.......................................... 372,115 --
Rental equipment, net....................................... 2,202,833 3,022,154
Property and equipment, net................................. 394,665 621,734
Other assets................................................ 30,357 32,543
---------- ----------
Total assets...................................... $3,883,546 $4,775,839
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable.......................................... $ 194,278 $ 205,403
Accrued expenses and other liabilities.................... 198,443 185,087
Debt...................................................... 1,284,908 922,856
---------- ----------
Total liabilities................................. 1,677,629 1,313,346
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 8 and 10)
STOCKHOLDER'S EQUITY:
Common stock -- no par value, 1,000 shares authorized,
issued and outstanding................................. 200,000 200,000
Retained earnings......................................... 2,588,781 3,845,357
Less: Treasury stock -- 500 shares at cost................ (582,864) (582,864)
---------- ----------
Total stockholder's equity........................ 2,205,917 3,462,493
---------- ----------
Total liabilities and stockholder's equity........ $3,883,546 $4,775,839
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-38
<PAGE> 105
C & E RENTAL AND SERVICE, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FROM JANUARY 1,
ENDED 1997 TO
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ---------------
<S> <C> <C>
REVENUE:
Equipment rentals......................................... $4,395,313 $4,506,274
Sales of equipment, parts and supplies.................... 1,961,510 2,638,935
Other..................................................... 115,115 128,586
---------- ----------
6,471,938 7,273,795
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation......... 1,752,011 1,846,084
Rental equipment depreciation............................. 637,210 765,518
Cost of sales of equipment, parts and supplies............ 1,352,831 1,791,275
---------- ----------
3,742,052 4,402,877
---------- ----------
Gross profit...................................... 2,729,886 2,870,918
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 1,760,595 1,417,097
NONRENTAL DEPRECIATION AND AMORTIZATION..................... 136,897 157,252
---------- ----------
Operating income.................................. 832,394 1,296,569
OTHER INCOME (EXPENSE):
Interest expense.......................................... (115,243) (101,218)
Other, net................................................ 51,580 61,225
---------- ----------
Total other income (expense), net................. (63,663) (39,993)
---------- ----------
Net income........................................ 768,731 1,256,576
PRO FORMA PROVISION FOR INCOME TAX.......................... 307,492 502,630
---------- ----------
PRO FORMA NET INCOME........................................ $ 461,239 $ 753,946
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-39
<PAGE> 106
C & E RENTAL AND SERVICE, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE PERIOD FROM JANUARY 1, 1997 TO DECEMBER 22, 1997
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
NUMBER RETAINED TREASURY
OF SHARES AMOUNT EARNINGS STOCK TOTAL
--------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996................. 1,000 $200,000 $1,820,050 $(582,864) $1,437,186
Net income............................. -- -- 768,731 -- 768,731
----- -------- ---------- --------- ----------
BALANCE, December 31, 1996............... 1,000 200,000 2,588,781 (582,864) 2,205,917
Net income............................. -- -- 1,256,576 -- 1,256,576
----- -------- ---------- --------- ----------
BALANCE, December 22, 1997............... 1,000 $200,000 $3,845,357 $(582,864) $3,462,493
===== ======== ========== ========= ==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-40
<PAGE> 107
C & E RENTAL AND SERVICE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEAR JANUARY 1, 1997
ENDED TO
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 768,731 $ 1,256,576
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 774,107 922,770
Gain on sale of assets................................. (473,908) (705,063)
Changes in operating assets and liabilities:
Accounts receivable, net............................. (199,095) 4,539
Inventories.......................................... 15,644 (79,443)
Other assets......................................... 7,146 (2,186)
Accounts payable..................................... 65,384 11,125
Accrued expenses and other liabilities............... (21,052) (13,356)
----------- -----------
Net cash provided by operating activities......... 936,957 1,394,962
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment............................. (1,609,651) (2,848,230)
Proceeds from sale of rental equipment.................... 1,271,362 1,968,454
Purchases of property and equipment....................... (102,209) (384,321)
----------- -----------
Net cash used in investing activities............. (440,498) (1,264,097)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt........................................ 612,000 1,488,000
Repayments of debt........................................ (734,711) (1,850,052)
Payments from (advances to) affiliate..................... (372,115) 372,115
----------- -----------
Net cash provided by (used in) financing
activities...................................... (494,826) 10,063
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 1,633 140,928
CASH AND CASH EQUIVALENTS, beginning of period.............. 41,757 43,390
----------- -----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 43,390 $ 184,318
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 115,243 $ 101,218
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-41
<PAGE> 108
C & E RENTAL AND SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND DECEMBER 22, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
C & E Rental and Service, Inc. ("C & E Rental" or the "Company", formerly
Bob's Rental & Supply, Inc.), was incorporated in the State of Indiana in August
1959 and is engaged in the rental of a broad array of equipment to a diverse
customer base that includes construction industry participants, industrial
companies, homeowners and others. The Company also engages in related activities
such as selling new and used equipment, related merchandise and parts. The
nature of the Company's business is such that short-term obligations are
typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying balance sheets are presented
on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At December 31, 1996
and December 22, 1997, the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items. Inventories are stated at the lower of cost (first-in, first-out) or
market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using an accelerated method. The useful life
estimated by management for rental equipment is seven years. Ordinary
maintenance and repair costs are charged to operations as incurred.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using straight-line and accelerated methods. Ordinary
maintenance and repair costs are charged to operations as incurred. The range of
useful lives estimated by management for property and equipment is as follows:
<TABLE>
<CAPTION>
YEARS
-------------
<S> <C>
Machinery and equipment..................................... 5
Furniture and fixtures...................................... 5
Autos and trucks............................................ 5
Buildings................................................... 20 - 30
Leasehold improvements...................................... Life of lease
</TABLE>
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-42
<PAGE> 109
C & E RENTAL AND SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable and accrued expenses
and other liabilities approximate fair value as of December 31, 1996 and
December 22, 1997 and approximates the carrying value of such debt.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Income taxes
The Company is an S corporation for income tax purposes. Accordingly,
income, losses and related temporary differences which arise in the recording of
income and expense items for financial reporting and tax reporting purposes are
included in the individual tax return of the stockholder. Therefore, no
provision or liability for Federal and state income taxes has been included in
the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for informational purposes only. The pro forma provision
for income tax has been provided at the estimated effective rate of 40%.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits and monitoring procedures.
3. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ------------
<S> <C> <C>
Rental equipment............................................ $ 4,245,254 $ 5,275,468
Less -- accumulated depreciation............................ (2,042,421) (2,253,314)
----------- -----------
Rental equipment, net............................. $ 2,202,833 $ 3,022,154
=========== ===========
</TABLE>
F-43
<PAGE> 110
C & E RENTAL AND SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
A summary of property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ------------
<S> <C> <C>
Machinery and equipment..................................... $ 26,190 $ 47,614
Furniture and fixtures...................................... 153,241 245,779
Autos and trucks............................................ 406,528 479,348
Buildings................................................... 349,743 349,743
Leasehold improvements...................................... -- 195,351
Land........................................................ 88,566 89,430
---------- ----------
1,024,268 1,407,265
Less -- accumulated depreciation............................ (629,603) (785,531)
---------- ----------
Property and equipment, net....................... $ 394,665 $ 621,734
========== ==========
</TABLE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ------------
<S> <C> <C>
Payroll-related............................................. $100,640 $ 70,069
Sales, property and other taxes............................. 97,803 115,018
-------- --------
Accrued expenses and other liabilities............ $198,443 $185,087
======== ========
</TABLE>
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ------------
<S> <C> <C>
Line of credit, with borrowings up to $950,000, secured by
substantially all of the Company's business assets,
interest at 9.00% and 8.75%, as of 1996 and 1997,
respectively, payable in monthly installments through
November 1998............................................. $ 227,000 $150,000
Promissory note, secured by substantially all of the
Company's business assets, interest at 8.00%, payable in
monthly installments of $15,775 through July 2001......... 712,908 587,539
Note payable to officer, unsecured, interest at 9.50% and
9.00%, as of 1996 and 1997, respectively, payable in
December 1997............................................. 345,000 65,000
Note payable to bank, secured by certain real property,
interest at 8.75%, payable in monthly installments of
$1,583 through May 2000................................... -- 120,317
---------- --------
Total debt........................................ $1,284,908 $922,856
========== ========
</TABLE>
F-44
<PAGE> 111
C & E RENTAL AND SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of the Company's debt at December 22, 1997, for the years ended
December 22, are as follows:
<TABLE>
<S> <C>
1998........................................................ $371,459
1999........................................................ 169,516
2000........................................................ 275,014
2001........................................................ 106,867
--------
Total............................................. $922,856
========
</TABLE>
7. RELATED-PARTY TRANSACTIONS
In addition to the note payable to officer, described in Note 6, the
Company made a $372,115 advance to an affiliated company during 1996 which is
reflected as due from affiliate in the accompanying balance sheet as of December
31, 1996. The advance was repaid in 1997. During 1997, the Company entered into
a monthly operating lease with the same affiliated company for one of its
buildings. For the period ended December 22, 1997, such rental expense totaled
approximately $40,000.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases real estate under operating leases. Certain leases
require the Company to pay maintenance, insurance, taxes and certain other
expenses in addition to the stated rentals. Future minimum lease payments, by
year and in the aggregate, for noncancelable operating leases with initial or
remaining terms of one year or more are as follows at December 22, 1997:
<TABLE>
<S> <C>
1998........................................................ $54,600
1999........................................................ 28,935
-------
Total............................................. $83,535
=======
</TABLE>
Rent expense under operating leases for the year ended December 31, 1996
and the period ended December 22, 1997 were approximately $46,800 and $94,600,
respectively.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
9. EMPLOYEE BENEFIT PLAN
The Company has a contributory 401(k) profit-sharing plan under which
substantially all full-time employees are eligible to participate. Employer
contributions were approximately $51,000 and $61,000 for 1996 and 1997,
respectively.
10. SUBSEQUENT EVENT
Effective December 23, 1997, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc., an unaffiliated
third party, in exchange for cash and debt.
F-45
<PAGE> 112
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Titan Rentals, Inc.:
We have audited the accompanying balance sheet of Titan Rentals, Inc. (a West
Virginia corporation) as of December 30, 1997, and the related statements of
income, stockholders' equity and cash flows for the period from January 1, 1997
through December 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Titan Rentals, Inc. as of
December 30, 1997, and the results of its operations and its cash flows for the
period from January 1, 1997 through December 30, 1997 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 6, 1998.
F-46
<PAGE> 113
TITAN RENTALS, INC.
BALANCE SHEET
AS OF DECEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 249,470
Accounts receivable, net of allowance for doubtful accounts
of $37,360................................................ 637,253
Inventories................................................. 93,120
Prepaid expenses and other assets........................... 117,205
Rental equipment, net....................................... 1,132,746
Property and equipment, net................................. 73,305
Income taxes receivable..................................... 70,352
----------
Total assets...................................... $2,373,451
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable.......................................... $ 105,384
Accrued expenses and other liabilities.................... 97,354
Debt...................................................... 501,612
Deferred income taxes..................................... 194,307
----------
Total liabilities................................. 898,657
----------
COMMITMENTS AND CONTINGENCIES (Notes 9 and 11)
STOCKHOLDERS' EQUITY:
Common stock -- $1,000 par value, 1,000 shares authorized,
155 shares issued and outstanding...................... 155,000
Retained earnings......................................... 1,319,794
----------
Total stockholders' equity........................ 1,474,794
----------
Total liabilities and stockholders' equity........ $2,373,451
==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
balance sheet.
F-47
<PAGE> 114
TITAN RENTALS, INC.
STATEMENT OF INCOME
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 30, 1997
<TABLE>
<S> <C>
REVENUE:
Equipment rentals......................................... $1,926,760
Sales of equipment, parts and supplies.................... 2,991,843
Other..................................................... 50,611
----------
4,969,214
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation......... 1,302,454
Rental equipment depreciation............................. 302,271
Cost of sales of equipment, parts and supplies............ 2,043,201
----------
3,647,926
----------
Gross profit...................................... 1,321,288
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 823,906
NONRENTAL DEPRECIATION AND AMORTIZATION..................... 16,048
----------
Operating income.................................. 481,334
OTHER INCOME (EXPENSE):
Interest expense.......................................... (33,579)
Other expense............................................. (7,438)
----------
Total other income (expense), net................. (41,017)
----------
Income before provision for income tax............ 440,317
PROVISION FOR INCOME TAX.................................... 168,085
----------
NET INCOME.................................................. $ 272,232
==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-48
<PAGE> 115
TITAN RENTALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 30, 1997
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
NUMBER RETAINED
OF SHARES AMOUNT EARNINGS TOTAL
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1997........................... 155 $155,000 $1,047,562 $1,202,562
Net income....................................... -- -- 272,232 272,232
--- -------- ---------- ----------
BALANCE, December 30, 1997......................... 155 $155,000 $1,319,794 $1,474,794
=== ======== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-49
<PAGE> 116
TITAN RENTALS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 30, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 272,232
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 318,319
Gain on sale of rental equipment....................... (666,617)
Deferred income taxes.................................. 56,199
Changes in operating assets and liabilities:
Accounts receivable.................................. (72,740)
Inventories.......................................... (5,430)
Prepaid expenses and other assets.................... 49,703
Income taxes receivable.............................. (41,127)
Accounts payable..................................... (184,448)
Accrued expenses and other liabilities............... 49,522
-----------
Net cash used in operating activities............. (224,387)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment............................. (1,063,670)
Purchases of property and equipment....................... (61,822)
Proceeds from sale of rental equipment.................... 1,510,660
-----------
Net cash provided by investing activities......... 385,168
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt........................................ 417,271
Repayments of debt........................................ (578,759)
-----------
Net cash used in financing activities............. (161,488)
-----------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (707)
CASH AND CASH EQUIVALENTS, beginning of period.............. 250,177
-----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 249,470
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 33,579
===========
Cash paid for income taxes................................ $ 154,467
===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-50
<PAGE> 117
TITAN RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Titan Rentals, Inc. (the "Company") was incorporated in the state of West
Virginia in January 1990 for the purpose of creating an equipment rental
company. The Company rents a broad array of equipment to a diverse customer base
that includes construction industry participants, industrial companies,
homeowners and others. The Company also engages in related activities such as
selling used equipment, acting as a distributor for certain new equipment and
selling related merchandise and parts. The nature of the Company's business is
such that short-term obligations are typically met by cash flow generated from
long-term assets. Consequently, consistent with industry practice, the
accompanying balance sheet is presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At December 30,
1997, the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items. Inventories are stated at the lower of average cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using accelerated and straight-line methods. The
range of useful lives estimated by management for rental equipment is three to
seven years. Rental equipment having a cost of $500 or less is expensed at the
time of purchase. Ordinary maintenance and repair costs are charged to
operations as incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using accelerated and straight-line methods. The range of
useful lives estimated by management for property and equipment is five to seven
years. Ordinary maintenance and repair costs are charged to operations as
incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-51
<PAGE> 118
TITAN RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The carrying amounts reported in the accompanying balance sheet for cash
and cash equivalents, accounts receivable, income taxes receivable, accounts
payable, accrued expenses and other liabilities and debt approximate fair value
as of December 30, 1997 and approximates the carrying value of such debt.
Income taxes
The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires, among other things,
recognition of future tax effects measured at enacted rates attributable to
deductible temporary differences between financial statement and income tax
bases of assets and liabilities to the extent that realization of said effects
is more likely than not.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits and monitoring procedures.
3. RENTAL EQUIPMENT
As of December 30, 1997, rental equipment and related accumulated
depreciation consist of the following:
<TABLE>
<S> <C>
Rental equipment............................................ $1,491,084
Less -- accumulated depreciation............................ (358,338)
----------
Rental equipment, net............................. $1,132,746
==========
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment as of December 30, 1997, is as follows:
<TABLE>
<S> <C>
Furniture, fixtures and office equipment.................... $121,175
Less -- accumulated depreciation............................ (47,870)
--------
Property and equipment, net....................... $ 73,305
========
</TABLE>
F-52
<PAGE> 119
TITAN RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities as of December 30, 1997, consists of
the following:
<TABLE>
<S> <C>
Payroll-related............................................. $12,746
Property and sales tax...................................... 30,469
Other....................................................... 54,139
-------
Accrued expenses and other liabilities............ $97,354
=======
</TABLE>
6. DEBT
As of December 30, 1997, debt consists of the following:
<TABLE>
<S> <C>
Line of credit, secured by accounts receivable and
inventory, interest at prime plus .50% (9.5% at December
30, 1997), payable in monthly installments through
December 2002............................................. $ 33,303
Equipment notes, secured by equipment, interest from 7.90%
to 9.25%, payable in various monthly installments through
January 2000.............................................. 468,309
--------
Total debt........................................ $501,612
========
</TABLE>
Maturities of the Company's debt at December 30, 1997, for the years ended
December 30, are as follows:
<TABLE>
<S> <C>
1998........................................................ $247,731
1999........................................................ 158,804
2000........................................................ 95,077
--------
Total............................................. $501,612
========
</TABLE>
7. INCOME TAXES
The provision for Federal and state income taxes for the period from
January 1, 1997 through December 30, 1997, is as follows:
<TABLE>
<S> <C>
Current..................................................... $111,886
Deferred.................................................... 56,199
--------
$168,085
========
Federal..................................................... $112,552
State....................................................... 55,533
--------
$168,085
========
</TABLE>
A reconciliation of the difference between the expected provision for
income taxes for the period from January 1, 1997 through December 30, 1997,
using the statutory federal income tax rate of 34% and the Company's effective
tax rate is as follows:
<TABLE>
<S> <C>
Provision at statutory tax rate............................. $149,700
State income taxes, net of federal benefit.................. 36,652
Other....................................................... (18,267)
--------
$168,085
========
</TABLE>
F-53
<PAGE> 120
TITAN RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of deferred income tax assets and (liabilities) as of
December 30, 1997, are as follows:
<TABLE>
<S> <C>
Accrued liabilities......................................... $ 22,000
Accounts receivable......................................... (36,504)
Prepaid expenses............................................ (13,429)
Property and equipment...................................... (166,374)
---------
Deferred tax liability............................ $(194,307)
=========
</TABLE>
8. RELATED-PARTY TRANSACTIONS
Effective January 1, 1994, the Company entered into a lease with a related
party to lease its office and operating facilities. The minimum annual rental
payments amount to $84,000 per year and are paid on a month-to-month basis.
The accompanying financial statements include revenue of $173,499 for the
period from January 1, 1997 through December 30, 1997 and outstanding accounts
receivable as of December 30, 1997 of $24,117 related to sales to a related
party.
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases rental equipment under operating leases. Future minimum
lease payments, by year and in the aggregate, for noncancelable operating leases
with initial or remaining terms of one year or more are as follows at December
30, 1997:
<TABLE>
<S> <C>
1998........................................................ $74,292
1999........................................................ 39,893
</TABLE>
Rental equipment expense under noncancelable operating leases was $74,292
for the period from January 1, 1997 through December 30, 1997.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
10. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution profit-sharing plan under which
employees having worked a minimum of twelve months are eligible to participate.
Employer contributions, which are discretionary and depend on the Company's
profitability, were approximately $49,000 for 1997.
11. SUBSEQUENT EVENT
Effective December 31, 1997, all of the outstanding stock of the Company
was purchased by NationsRent, Inc., an unrelated third party, in exchange for
cash and debt.
F-54
<PAGE> 121
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Bode-Finn Company:
We have audited the accompanying balance sheets of The Bode-Finn Company (an
Ohio corporation) as of December 31, 1996 and 1997, and the related statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Bode-Finn Company as of
December 31, 1996 and 1997, and the results of its operations and cash flows for
each of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 12, 1998.
F-55
<PAGE> 122
THE BODE-FINN COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents........................... $ 244,625 $ 398,042 $ 887,170
Accounts receivable, net of allowance for doubtful
accounts of $770,000, $760,000 and $798,180
(unaudited) for 1996, 1997 and 1998,
respectively...................................... 8,013,745 7,840,930 7,250,208
Inventories, net.................................... 4,635,371 3,823,388 4,855,835
Rental equipment, net............................... 20,438,368 21,560,523 21,920,589
Property and equipment, net......................... 1,041,681 956,768 989,588
Other assets........................................ 879,378 886,487 849,219
----------- ----------- -----------
Total assets.............................. $35,253,168 $35,466,138 $36,752,609
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable.................................. $ 3,951,392 $ 2,350,332 $ 3,921,807
Accrued expenses and other liabilities............ 4,623,823 5,374,820 5,094,374
Debt.............................................. 16,407,989 16,086,500 15,839,363
----------- ----------- -----------
Total liabilities......................... 24,983,204 23,811,652 24,855,544
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 9 and 12)
STOCKHOLDERS' EQUITY:
Common stock, no par value, 2,500 shares
authorized, 1,250 shares issued and
outstanding.................................... 125,000 125,000 125,000
Retained earnings................................. 10,144,964 11,529,486 11,772,065
----------- ----------- -----------
Total stockholders' equity................ 10,269,964 11,654,486 11,897,065
----------- ----------- -----------
Total liabilities and stockholders'
equity.................................. $35,253,168 $35,466,138 $36,752,609
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-56
<PAGE> 123
THE BODE-FINN COMPANY
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTH
PERIOD ENDED
FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Equipment rentals.............. $18,231,447 $19,772,670 $20,211,679 $ 4,742,679 $ 4,687,176
Sales of equipment, parts and
supplies.................... 26,599,122 32,722,336 33,821,681 7,324,630 8,254,837
Service and other.............. 5,468,525 6,251,936 7,216,815 1,753,068 1,768,973
----------- ----------- ----------- ----------- -----------
50,299,094 58,746,942 61,250,175 13,820,377 14,710,986
COST OF REVENUE:
Cost of equipment rentals,
excluding depreciation...... 4,771,698 5,229,390 4,978,411 1,323,300 1,399,440
Rental equipment
depreciation................ 5,436,903 6,515,970 7,265,763 1,745,328 1,832,972
Cost of sales of equipment,
parts and supplies.......... 20,161,831 25,937,735 26,425,012 5,752,417 6,177,680
Other.......................... 2,052,764 1,895,993 2,159,402 589,033 576,602
----------- ----------- ----------- ----------- -----------
32,423,196 39,579,088 40,828,588 9,410,078 9,986,694
----------- ----------- ----------- ----------- -----------
Gross profit........... 17,875,898 19,167,854 20,421,587 4,410,299 4,724,292
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES........ 14,093,787 15,443,249 16,596,595 3,755,319 3,964,404
NONRENTAL DEPRECIATION AND
AMORTIZATION................... 205,564 260,652 256,808 72,853 61,814
----------- ----------- ----------- ----------- -----------
Operating income....... 3,576,547 3,463,953 3,568,184 582,127 698,074
OTHER INCOME (EXPENSE):
Interest expense............... (1,329,494) (1,494,310) (1,601,831) (349,526) (379,571)
Other income................... 227,106 212,218 347,947 39,326 85,795
----------- ----------- ----------- ----------- -----------
Other income (expense),
net.................. (1,102,388) (1,282,092) (1,253,884) (310,200) (293,776)
----------- ----------- ----------- ----------- -----------
Income before provision
for income taxes..... 2,474,159 2,181,861 2,314,300 271,927 404,298
PROVISION FOR INCOME TAXES....... 1,036,771 936,241 929,778 137,461 161,719
----------- ----------- ----------- ----------- -----------
NET INCOME....................... $ 1,437,388 $ 1,245,620 $ 1,384,522 $ 134,466 $ 242,579
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-57
<PAGE> 124
THE BODE-FINN COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 1997
AND THE THREE MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
NUMBER TOTAL
OF RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
--------- -------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1995.................... 1,250 $125,000 $ 7,461,956 $ 7,586,956
Net income................................ -- -- 1,437,388 1,437,388
----- -------- ----------- -----------
BALANCE, December 31, 1995.................. 1,250 125,000 8,899,344 9,024,344
Net income................................ -- -- 1,245,620 1,245,620
----- -------- ----------- -----------
BALANCE, December 31, 1996.................. 1,250 125,000 10,144,964 10,269,964
Net income................................ -- -- 1,384,522 1,384,522
----- -------- ----------- -----------
BALANCE, December 31, 1997.................. 1,250 125,000 11,529,486 11,654,486
Net income (unaudited).................... -- -- 242,579 242,579
----- -------- ----------- -----------
BALANCE, March 31, 1998 (unaudited)......... 1,250 $125,000 $11,772,065 $11,897,065
===== ======== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-58
<PAGE> 125
THE BODE-FINN COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTH
FOR THE YEAR ENDED DECEMBER 31, PERIOD ENDED MARCH 31,
------------------------------------------ --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................... $ 1,437,388 $ 1,245,620 $ 1,384,522 $ 134,466 $ 242,579
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization..... 5,642,467 6,776,622 7,522,571 1,818,181 1,899,786
Provision for bad debts........... 291,256 413,151 244,184 54,550 57,169
Provision for inventory
obsolescence.................... -- -- 50,000 -- --
Gain on sale of rental
equipment....................... (618,322) (712,961) (800,940) (121,132) (131,185)
(Gain) loss on sale of property
and equipment................... 740 (22,522) (230,537) 1,231 (29,649)
Changes in operating assets and
liabilities:
Accounts receivable............. (220,880) (810,847) (71,369) 390,384 533,553
Inventories..................... (1,359,110) 1,198,655 1,614,587 553,534 (795,309)
Other assets.................... 275,012 140,938 (7,109) (16,922) 37,268
Accounts payable................ 604,748 1,179,194 (1,601,060) (1,008,860) 1,571,475
Accrued expenses and other
liabilities.................. 383,309 (274,895) 750,997 141,046 (280,446)
------------ ------------ ------------ ------------ -----------
Total adjustments............ 4,999,220 7,887,335 7,471,324 1,812,012 2,862,662
------------ ------------ ------------ ------------ -----------
Net cash provided by
operating activities....... 6,436,608 9,132,955 8,855,846 1,946,478 3,105,241
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment... (10,733,785) (10,254,290) (10,364,431) (2,720,488) (2,588,134)
Purchases of property and
equipment.................... (419,435) (702,564) (211,398) (43,803) (101,984)
Proceeds from sale of rental
equipment.................... 1,690,437 1,850,831 1,736,844 283,554 289,142
Proceeds from sale of property
and equipment................ 16,422 42,378 458,045 1,200 32,000
------------ ------------ ------------ ------------ -----------
Net cash used in investing
activities................. (9,446,361) (9,063,645) (8,380,940) (2,479,537) (2,368,976)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt................ 8,236,990 10,797,136 17,437,380 18,054,160 758,150
Repayments of debt................ (5,331,819) (10,831,673) (17,758,869) (17,066,355) (1,005,287)
------------ ------------ ------------ ------------ -----------
Net cash provided by (used in)
financing activities............ 2,905,171 (34,537) (321,489) 987,805 (247,137)
------------ ------------ ------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................... (104,582) 34,773 153,417 454,746 489,128
CASH AND CASH EQUIVALENTS, beginning
of period........................... 314,434 209,852 244,625 244,625 398,042
------------ ------------ ------------ ------------ -----------
CASH AND CASH EQUIVALENTS, end of
period.............................. $ 209,852 $ 244,625 $ 398,042 $ 699,371 $ 887,170
============ ============ ============ ============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.............. $ 1,441,462 $ $1,476,730 $ 1,582,877 $ 349,380 $ 373,420
============ ============ ============ ============ ===========
Cash paid for income taxes.......... $ 832,954 $ 915,026 $ 812,481 $ 98,200 $ 88,000
============ ============ ============ ============ ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-59
<PAGE> 126
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION:
The Bode-Finn Company (the "Company") was incorporated in Ohio in January
1938. The Company rents a broad array of equipment to a diverse customer base
that includes construction industry participants, industrial companies and
others in the states of Ohio, Kentucky, West Virginia and Indiana. The Company
also engages in related activities such as selling used equipment, acting as a
distributor for certain new equipment and selling related merchandise and parts.
The nature of the Company's business is such that short-term obligations are
typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying audited and unaudited
balance sheets are presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents.
Inventories
Inventories consist of equipment, parts and related supply items. New and
used equipment inventories are stated at the lower of cost (determined using a
first-in, first-out "FIFO" basis) or market. Parts inventories are determined
using a combination of the last-in, first-out "LIFO" and FIFO methods and are
stated at replacement cost which approximates market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using an accelerated method. The range of useful
lives estimated by management for rental equipment is five to seven years.
Rental equipment is depreciated to a salvage value of ten to twenty percent of
cost. Rental equipment having a cost of $2,000 or less is expensed at the time
of purchase. Ordinary maintenance and repair costs are charged to operations as
incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using an accelerated method. The range of useful lives
estimated by management for property and equipment is two to thirty-nine years.
Property and equipment is depreciated to a salvage value of zero to twenty
percent of cost. Ordinary maintenance and repair costs are charged to operations
as incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-60
<PAGE> 127
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The carrying amounts for accounts receivable, accounts payable and accrued
expenses and other liabilities approximate fair value due to the short-term
nature of these accounts. The fair value of debt is determined using current
interest rates for similar instruments as of December 31, 1996 and 1997 and
approximates the carrying value of these notes due to the fact that the
underlying instruments include provisions to adjust note balances and interest
rates to approximate fair market value.
Income taxes
The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires, among other things,
recognition of future tax benefits measured at enacted rates attributable to
deductible temporary differences between financial statement and income tax
bases of assets and liabilities and to tax net operating loss carryforwards to
the extent that realization of said benefits is more likely than not.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of geographically diverse
customers make up the Company's customer base. No single customer represents
greater than 10% of total accounts receivable. The Company controls credit risk
through credit approvals, credit limits, and monitoring procedures.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Interim financial information
In the opinion of management, the unaudited interim financial information
as of March 31, 1998 and for the three month periods ended March 31, 1997 and
1998 furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim period. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the entire year.
3. INVENTORIES:
Inventories are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
New and used equipment, FIFO............. $ 2,581,561 $ 1,590,860 $ 2,319,053
Parts, LIFO.............................. 645,076 801,055 747,327
Parts, FIFO.............................. 900,780 901,854 921,799
Work in progress, at cost................ 682,954 754,619 1,092,656
Allowance for obsolete inventory......... (175,000) (225,000) (225,000)
------------ ------------ ------------
Total inventories, net......... $ 4,635,371 $ 3,823,388 $ 4,855,835
============ ============ ============
</TABLE>
F-61
<PAGE> 128
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The current costs, determined by using the FIFO basis, of LIFO inventories
was $1,122,383, $1,301,380 and $1,247,652 (unaudited) at December 31, 1996 and
1997 and March 31, 1998.
4. RENTAL EQUIPMENT:
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Rental equipment......................... $ 46,719,676 $ 50,299,100 $ 51,198,041
Less -- accumulated depreciation......... (26,281,308) (28,738,577) (29,277,452)
------------ ------------ ------------
Rental equipment, net.......... $ 20,438,368 $ 21,560,523 $ 21,920,589
============ ============ ============
</TABLE>
5. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture, fixtures and office
equipment.............................. $ 3,728,682 $ 3,588,314 $ 3,621,218
Less -- accumulated depreciation......... (2,687,001) (2,631,546) (2,631,630)
------------ ------------ ------------
Property and equipment, net.... $ 1,041,681 $ 956,768 $ 989,588
============ ============ ============
</TABLE>
6. ACCRUED EXPENSES AND OTHER LIABILITIES:
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Compensation and payroll-related............... $2,083,332 $2,422,240 $1,723,623
Deferred income-rental and maintenance......... 777,237 955,808 999,391
Taxes.......................................... 532,373 698,314 737,698
Medical insurance reserve...................... 232,256 302,381 302,381
Other.......................................... 998,625 996,077 1,331,281
---------- ---------- ----------
Accrued expenses and other liabilities......... $4,623,823 $5,374,820 $5,094,374
========== ========== ==========
</TABLE>
F-62
<PAGE> 129
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. DEBT:
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable, unsecured, interest at 6%,
payable on demand......................... $ 28,095 $ 35,525 $ 43,675
Revolving $7,000,000 credit agreement,
secured by rental equipment and inventory,
interest at prime, 8.5% at December 31,
1997 and March 31, 1998 (unaudited), due
1999...................................... -- 2,950,000 3,350,000
Revolving $15,000,000 credit agreement,
secured by rental equipment and inventory,
interest at 9.25%, payable in monthly
installments through February 2003........ -- 12,916,670 12,291,674
Revolving $8,000,000 credit agreement,
secured by rental equipment and inventory,
interest at prime 8.5% at December 31,
1997 and March 31, 1998 (unaudited),
repaid during 1997........................ 6,650,000 -- --
Notes payable, secured by rental equipment
and inventory, interest at prime plus
1/2% (9.0% at December 31, 1997 and March
31, 1998 (unaudited)), payable in monthly
installments, repaid during 1997.......... 9,123,939 -- --
Note payable, secured by property and
equipment, interest at 9.1%, payable in
monthly installments, repaid during
1997...................................... 317,337 -- --
Rental equipment notes, secured by rental
equipment and inventory, interest from
8.5% to 10.5%, payable in various monthly
installments through 2001................. 288,618 184,305 154,014
----------- ----------- -----------
Total debt........................ $16,407,989 $16,086,500 $15,839,363
=========== =========== ===========
</TABLE>
Maturities of the Company's debt at December 31, 1997 for the years ended
December 31, are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 2,610,563
1999........................................................ 5,497,943
2000........................................................ 2,536,997
2001........................................................ 2,524,034
2002........................................................ 2,500,297
2003 and thereafter......................................... 416,666
-----------
$16,086,500
===========
</TABLE>
F-63
<PAGE> 130
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES:
The provision (benefit) for Federal and state income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTH
PERIOD ENDED
FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- -------------------
1995 1996 1997 1997 1998
---------- ---------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current................................... $ 800,518 $1,157,016 $828,793 $128,263 $150,404
Deferred.................................. 236,253 (220,775) 100,985 9,198 11,315
---------- ---------- -------- -------- --------
$1,036,771 $ 936,241 $929,778 $137,461 $161,719
========== ========== ======== ======== ========
Federal................................... $ 888,321 $ 805,329 $789,496 $116,774 $137,462
State and local........................... 148,450 130,912 140,282 20,687 24,257
---------- ---------- -------- -------- --------
$1,036,771 $ 936,241 $929,778 $137,461 $161,719
========== ========== ======== ======== ========
</TABLE>
The deferred income tax results from temporary differences in the
recognition of certain items for tax and financial statement purposes,
principally from differences in depreciation methods, allowance for doubtful
accounts and other expenses not currently deductible for tax purposes. For
financial statement purposes, the credit has been recognized in 1997 as a
deferred tax asset.
A reconciliation of the difference between the expected provision for
income taxes using the statutory federal income tax rate of 34% and the
Company's actual provision is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTH
PERIOD ENDED
FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1995 1996 1997 1997 1998
---------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Provision at statutory tax rate............. $ 841,214 $741,832 $786,862 $117,225 $137,462
State and local income taxes, net of federal
benefit................................... 97,977 86,402 92,586 13,653 16,010
Other....................................... 97,580 108,007 50,330 6,583 8,247
---------- -------- -------- -------- --------
$1,036,771 $936,241 $929,778 $137,461 $161,719
========== ======== ======== ======== ========
</TABLE>
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Reserves and accruals not deductible until paid..... $ 945,915 $ 1,103,736 $ 1,116,255
Depreciation........................................ (1,274,973) (1,394,170) (1,320,000)
Alternative minimum tax credit carryforward......... 392,356 252,747 252,747
----------- ----------- -----------
Net deferred tax asset (liability)........ $ 63,298 $ (37,687) $ 49,002
=========== =========== ===========
</TABLE>
Net deferred tax assets and net deferred tax liability are reported in the
accompanying balance sheets as components of other assets and accrued expenses
and other liabilities, respectively.
F-64
<PAGE> 131
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES:
Operating Leases
The Company leases rental equipment, real estate and certain office
equipment under noncancelable operating leases. These leases expire at various
dates through September 30, 2010. Certain real estate leases require the Company
to pay maintenance, insurance, taxes and certain other expenses in addition to
the stated rentals. Future minimum lease payments for noncancelable operating
leases with initial or remaining terms of one year or more are as follows at
December 31, 1997:
<TABLE>
<S> <C>
1998..................................................... $1,644,419
1999..................................................... 1,055,192
2000..................................................... 568,309
2001..................................................... 356,649
2002..................................................... 166,289
Thereafter............................................... 1,196,538
----------
$4,987,396
==========
</TABLE>
Rent expense under noncancelable operating leases for the years ended
December 31, 1995, 1996 and 1997 were $1,537,082, $1,598,979 and $1,824,938,
respectively.
Litigation
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying consolidated financial statements.
10. RELATED PARTY TRANSACTIONS:
The Company leases land and buildings used in its operations from its
stockholders and officers. The leases cover several operating locations and
expire at various dates through September 30, 2010. The leases require minimum
monthly payments plus override amounts when certain conditions are met or
exceeded. The total rent expense related to these leases for the years ended
December 31, 1995, 1996 and 1997 was $661,481, $739,781 and $768,716,
respectively.
11. EMPLOYEE BENEFIT PLANS:
401(k) Plan
The Company participates in a 401(k) plan (the "Plan") which covers certain
full-time employees over 21 years old who have worked a minimum of one year for
the Company. The Plan is funded by employee deferrals of income and
discretionary contributions by the Company. The Company's matching contributions
totaled $207,982, $262,267 and $302,769 for the years ended December 31, 1995,
1996 and 1997. No amount was due to the Plan as of December 31, 1997.
Profit Sharing Plan
All full-time employees over 21 years old who have worked a minimum of one
year for the Company may participate in the Company's Profit Sharing Retirement
Plan (the "Profit Sharing Plan"). The Profit Sharing Plan is funded by
contributions made by the Company. The Company's Board of Directors determines
the annual amount of contributions. The Company's Profit Sharing retirement
contributions totaled $550,000, $400,000 and $508,000 for the years ended
December 31, 1995, 1996 and 1997, respectively.
F-65
<PAGE> 132
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred Compensation Plan
The Company has deferred compensation agreements with various employees.
Under the terms of the agreements, the Company will pay these employees a
defined amount for ten years subsequent to their retirement from the Company, if
retirement from the Company is after the agreed retirement date. A deferred
compensation accrual of approximately $534,226, $539,585 and $539,585
(unaudited) is included in the accompanying balance sheets in accrued expenses
and other liabilities at December 31, 1996 and 1997 and March 31, 1998.
12. SUBSEQUENT EVENT:
Effective May 5, 1998, substantially all of the outstanding stock of the
Company was purchased by NationsRent, Inc., an unrelated third party, in
exchange for cash and stock.
F-66
<PAGE> 133
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To RFL Enterprises, Inc.:
We have audited the accompanying balance sheet of RFL Enterprises, Inc. (an
Indiana S corporation) as of December 31, 1997, and the related statements of
income, stockholder's equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RFL Enterprises, Inc. as of
December 31, 1997, and the results of its operations and cash flows for the year
then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 8, 1998.
F-67
<PAGE> 134
RFL ENTERPRISES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 50,158 $ 390,055
Accounts receivable, net of allowances for doubtful accounts
of $10,000 and $10,000 (unaudited) as of December 31, 1997
and March 31, 1998, respectively.......................... 215,240 170,300
Inventories................................................. 185,366 180,962
Rental equipment, net....................................... 1,622,404 1,333,136
Property, plant and equipment, net.......................... 199,192 197,592
---------- ----------
Total assets...................................... $2,272,360 $2,272,045
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable.......................................... $ 1,791 $ 1,362
Accrued expenses and other liabilities.................... 58,041 54,940
Debt...................................................... 844,871 742,877
---------- ----------
Total liabilities................................. 904,703 799,179
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)
STOCKHOLDER'S EQUITY:
Common stock -- no par value, 1,000 shares authorized, 100
issued and outstanding................................. 10,000 10,000
Retained earnings......................................... 1,357,657 1,462,866
---------- ----------
Total stockholder's equity........................ 1,367,657 1,472,866
---------- ----------
Total liabilities and stockholder's equity........ $2,272,360 $2,272,045
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-68
<PAGE> 135
RFL ENTERPRISES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH
YEAR ENDED PERIOD ENDED MARCH 31,
DECEMBER 31, -------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Equipment rentals........................................ $ 966,277 $241,591 $201,806
Sales of equipment, parts and supplies................... 1,950,382 522,518 473,635
Other.................................................... 126,511 27,454 33,913
---------- -------- --------
3,043,170 791,563 709,354
COST OF REVENUE:
Cost of equipment rentals................................ 463,165 105,353 102,899
Rental equipment depreciation............................ 261,405 58,259 77,144
Cost of sales of equipment, parts and supplies........... 1,471,807 334,783 326,984
---------- -------- --------
2,196,377 498,395 507,027
---------- -------- --------
Gross profit..................................... 846,793 293,168 202,327
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............... 208,694 47,470 46,365
NONRENTAL DEPRECIATION..................................... 23,307 1,600 1,600
---------- -------- --------
Operating income................................. 614,792 244,098 154,362
OTHER INCOME (EXPENSE):
Interest expense......................................... (92,293) (20,654) (16,891)
Interest income.......................................... 14,925 2,356 348
---------- -------- --------
Total other income (expense), net................ (77,368) (18,298) (16,543)
---------- -------- --------
Net income....................................... 537,424 225,800 137,819
PRO FORMA PROVISION FOR INCOME TAXES....................... 214,970 90,320 55,128
---------- -------- --------
PRO FORMA NET INCOME....................................... $ 322,454 $135,480 $ 82,691
========== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-69
<PAGE> 136
RFL ENTERPRISES, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE
THREE MONTH PERIOD ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK
NO PAR VALUE
-------------------
NUMBER RETAINED
OF SHARES AMOUNT EARNINGS TOTAL
--------- ------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1997............................ 100 $10,000 $ 940,484 $ 950,484
Distribution...................................... -- -- (120,251) (120,251)
Net income........................................ -- -- 537,424 537,424
--- ------- ---------- ----------
BALANCE, December 31, 1997.......................... 100 10,000 1,357,657 1,367,657
Distribution (unaudited).......................... -- -- (32,610) (32,610)
Net income (unaudited)............................ -- -- 137,819 137,819
--- ------- ---------- ----------
BALANCE, March 31, 1998 (unaudited)................. 100 $10,000 $1,462,866 $1,472,866
=== ======= ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-70
<PAGE> 137
RFL ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH
YEAR ENDED PERIOD ENDED MARCH 31,
DECEMBER 31, -------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 537,424 $ 225,800 $ 137,819
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation......................................... 284,712 59,859 78,744
Gain on sale of rental equipment..................... (471,986) (177,803) (150,519)
Changes in operating assets and liabilities:
Accounts receivable, net........................... 56,067 97,997 44,940
Inventories........................................ (29,941) (3,529) 4,404
Accounts payable................................... 968 174,349 (429)
Accrued expenses and other liabilities............. 31,674 (11,446) (3,101)
----------- --------- ---------
Net cash provided by operating activities....... 408,918 365,227 111,858
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment........................... (2,077,859) (616,880) (110,992)
Proceeds from sale of rental equipment.................. 1,914,038 522,518 473,635
----------- --------- ---------
Net cash provided by (used in) investing
activities.................................... (163,821) (94,362) 362,643
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of distributions................................ (120,251) (120,000) (32,610)
Repayments of debt...................................... (133,202) (101,752) (101,994)
----------- --------- ---------
Net cash used in financing activities........... (253,453) (221,752) (134,604)
----------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... (8,356) 49,113 339,897
CASH AND CASH EQUIVALENTS, beginning of period............ 58,514 58,514 50,158
----------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period.................. $ 50,158 $ 107,627 $ 390,055
=========== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................. $ 87,293 $ 20,654 $ 16,891
=========== ========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-71
<PAGE> 138
RFL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
RFL Enterprises, Inc. (the "Company") was incorporated in 1983 as an
Indiana S corporation. The Company rents a broad array of equipment to a
customer base that includes principally construction industry participants and
industrial companies. The Company also engages in related activities such as
selling used equipment, acting as a distributor for certain new equipment and
selling related merchandise and parts. The nature of the Company's business is
such that short-term obligations are typically met by cash flow generated from
long-term assets. Consequently, consistent with industry practice, the
accompanying audited and unaudited balance sheets are presented on an
unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. The Company had no
cash equivalents at December 31, 1997 and March 31, 1998 (unaudited).
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items and are stated at the lower of average weighted cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The range of
useful lives estimated by management for rental equipment is five to ten years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Property, plant and equipment
Property, plant and equipment are recorded at cost and depreciated over
their estimated useful lives using the straight-line method. The range of useful
lives estimated by management for property and equipment is five to thirty-nine
years. Ordinary maintenance and repair costs are charged to operations as
incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
Fair value of financial instruments
The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable and accrued expenses
and other liabilities approximate fair value as of December 31, 1997 and March
31, 1998 (unaudited).
F-72
<PAGE> 139
RFL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes
The Company is an S corporation for income tax purposes. Accordingly,
income, losses and related temporary differences which arise in the recording of
income and expense items for financial reporting and tax reporting purposes are
included in the individual tax return of the shareholder. Therefore, no
provision or liability for Federal and state income taxes has been included in
the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for information purposes only. The pro forma provision
for income tax has been provided at the estimated rate of 40%.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Three customers each represent greater than 10%
of total accounts receivable. As of December 31, 1997, these accounts
represented 40% of total accounts receivable. The Company controls credit risk
through credit approvals, credit limits, and monitoring procedures.
Interim financial information
In the opinion of management, the unaudited interim financial information
as of March 31, 1998 and for the three month periods ended March 31, 1997 and
1998 furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim period. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the entire year primarily due to seasonal variations.
3. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Rental equipment............................................ $2,161,788 $1,880,998
Less -- accumulated depreciation............................ (539,384) (547,862)
---------- ----------
Rental equipment, net............................. $1,622,404 $1,333,136
========== ==========
</TABLE>
F-73
<PAGE> 140
RFL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture, fixtures and office equipment.................... $ 20,603 $ 20,603
Building.................................................... 140,820 140,820
Land........................................................ 80,000 80,000
-------- --------
241,423 241,423
Less -- accumulated depreciation............................ (42,231) (43,831)
-------- --------
Property and equipment, net....................... $199,192 $197,592
======== ========
</TABLE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Deferred revenues........................................... $36,000 $36,000
Sales and property tax...................................... 12,197 13,183
Other....................................................... 9,844 5,757
------- -------
Accrued expenses and other liabilities............ $58,041 $54,940
======= =======
</TABLE>
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Line of credit, interest at 8.75%, payable on demand........ $550,000 $ 64,000
Term loan, secured by accounts receivable, inventories and
equipment, interest at 9.9%, payable in semi annual
installments through December 1999........................ 114,000 500,000
Mortgage, secured by building and land, interest at 9.18%,
payable in monthly installments through June 2009......... 157,871 155,877
Unsecured note payable to stockholder, interest at 10%,
payable on demand......................................... 23,000 23,000
-------- --------
Total debt........................................ $844,871 $742,877
======== ========
</TABLE>
F-74
<PAGE> 141
RFL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Subsequent to December 31, 1997, the Company retired the line of credit,
term loan and note payable to stockholder in connection with its purchase by
NationsRent, Inc., an unrelated third party. Maturities of the mortgage at
December 31, 1997, for the years ended December 31, are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 12,000
1999........................................................ 12,000
2000........................................................ 12,000
2001........................................................ 12,000
2002........................................................ 12,000
Thereafter.................................................. 97,871
--------
Total............................................. $157,871
========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
8. SUBSEQUENT EVENT
Effective April 15, 1998, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc. in exchange for cash
and debt.
F-75
<PAGE> 142
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Naples Rent-All & Sales Company, Inc.:
We have audited the accompanying balance sheet of Naples Rent-All & Sales
Company, Inc. (a Florida S corporation) as of December 31, 1997, and the related
statements of income, stockholder's equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Naples Rent-All & Sales
Company, Inc. as of December 31, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 1, 1998.
F-76
<PAGE> 143
NAPLES RENT-ALL & SALES COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 98,660 $ 87,208
Accounts receivable, net of allowances for doubtful accounts
of $34,035 and $24,072 (unaudited) as of December 31, 1997
and March 31, 1998, respectively.......................... 408,579 447,831
Inventories................................................. 816,397 957,373
Rental equipment, net....................................... 913,137 866,056
Property and equipment, net................................. 119,647 144,475
Other assets................................................ 27,259 55,240
---------- ----------
Total assets...................................... $2,383,679 $2,558,183
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable.......................................... $ 428,714 $ 564,619
Accrued expenses and other liabilities.................... 148,452 172,948
Debt...................................................... 176,128 171,420
---------- ----------
Total liabilities................................. 753,294 908,987
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9)
STOCKHOLDER'S EQUITY:
Common stock -- $10 par value, 5,500 shares authorized,
5,129 shares issued.................................... 51,290 51,290
Additional paid-in capital................................ 6,826 6,826
Retained earnings......................................... 1,901,639 1,920,450
Treasury stock -- 1,709 shares at cost.................... (329,370) (329,370)
---------- ----------
Total stockholder's equity........................ 1,630,385 1,649,196
---------- ----------
Total liabilities and stockholder's equity........ $2,383,679 $2,558,183
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-77
<PAGE> 144
NAPLES RENT-ALL & SALES COMPANY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH
YEAR ENDED PERIOD ENDED MARCH 31,
DECEMBER 31, -------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Equipment rentals....................................... $2,262,014 $ 509,684 $ 512,784
Sales of equipment, parts and supplies.................. 3,747,704 807,151 867,976
Other................................................... 57,121 19,900 24,782
---------- ---------- ----------
6,066,839 1,336,735 1,405,542
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation....... 1,706,311 360,942 394,948
Rental equipment depreciation........................... 440,152 93,437 94,377
Cost of sales of equipment, parts and supplies.......... 2,967,261 627,675 686,811
---------- ---------- ----------
5,113,724 1,082,054 1,176,136
---------- ---------- ----------
Gross profit.................................... 953,115 254,681 229,406
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.............. 517,662 109,503 119,820
NONRENTAL DEPRECIATION AND AMORTIZATION................... 44,970 6,981 9,333
---------- ---------- ----------
Operating income................................ 390,483 138,197 100,253
OTHER INCOME (EXPENSE):
Interest expense........................................ (23,535) (4,976) (3,976)
Other income, net....................................... 52,433 14,907 13,054
---------- ---------- ----------
Total other income (expense), net............... 28,898 9,931 9,078
---------- ---------- ----------
Net income...................................... 419,381 148,128 109,331
PRO FORMA PROVISION FOR INCOME TAX........................ 167,752 59,251 43,732
---------- ---------- ----------
PRO FORMA NET INCOME...................................... $ 251,629 $ 88,877 $ 65,599
========== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-78
<PAGE> 145
NAPLES RENT-ALL & SALES COMPANY, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL
NUMBER PAID-IN RETAINED TREASURY
OF SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
--------- ------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997......... 5,129 $51,290 $6,826 $1,810,258 $(329,370) $1,539,004
Stockholder distributions...... -- -- -- (328,000) -- (328,000)
Net income..................... -- -- -- 419,381 -- 419,381
----- ------- ------ ---------- --------- ----------
BALANCE, December 31, 1997....... 5,129 51,290 6,826 1,901,639 (329,370) 1,630,385
Stockholder distributions
(unaudited)................. -- -- -- (90,520) -- (90,520)
Net income (unaudited)......... -- -- -- 109,331 -- 109,331
----- ------- ------ ---------- --------- ----------
BALANCE, March 31, 1998
(unaudited).................... 5,129 $51,290 $6,826 $1,920,450 $(329,370) $1,649,196
===== ======= ====== ========== ========= ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-79
<PAGE> 146
NAPLES RENT-ALL & SALES COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH
YEAR ENDED PERIOD ENDED MARCH 31,
DECEMBER 31, -------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 419,381 $148,128 $109,331
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 485,122 100,418 103,710
Gain on sale of rental equipment...................... (212,328) (35,288) (69,563)
Gain on sale of property and equipment................ (4,637) -- --
Changes in operating assets and liabilities:
Accounts receivable, net............................ (64,496) (13,733) (39,252)
Inventories......................................... 64,926 (17,837) (140,976)
Other assets........................................ 1,533 (53,435) (27,981)
Accounts payable.................................... (18,273) 29,397 135,905
Accrued expenses and other liabilities.............. 31,964 (12,133) 24,496
--------- -------- --------
Net cash provided by operating activities........ 703,192 145,517 95,670
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment............................ (560,004) (112,088) (85,472)
Purchases of property and equipment...................... (71,997) (2,869) (34,161)
Proceeds from sale of rental equipment................... 393,040 65,646 107,739
Proceeds from sale of property and equipment............. 16,320 -- --
--------- -------- --------
Net cash used in investing activities............ (222,641) (49,311) (11,894)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stockholder distributions................................ (328,000) (72,132) (90,520)
Proceeds from debt....................................... 65,000 10,632 --
Repayments of debt....................................... (188,261) (35,000) (4,708)
--------- -------- --------
Net cash used in financing activities............ (451,261) (96,500) (95,228)
--------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....... 29,290 (294) (11,452)
CASH AND CASH EQUIVALENTS, beginning of period............. 69,370 69,370 98,660
--------- -------- --------
CASH AND CASH EQUIVALENTS, end of period................... $ 98,660 $ 69,076 $ 87,208
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest................................... $ 23,535 $ 4,976 $ 3,976
========= ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-80
<PAGE> 147
NAPLES RENT-ALL & SALES COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Naples Rent-All & Sales Company, Inc. (the "Company") was incorporated in
January 1968 to serve as a rental center for homeowners and contractors
equipment, lawn and garden equipment, and golf course and turf maintenance
equipment. The Company also engages in related activities such as selling used
equipment, acting as a distributor for certain new equipment and selling related
merchandise and parts. The nature of the Company's business is such that
short-term obligations are typically met by cash flow generated from long-term
assets. Consequently, consistent with industry practice, the accompanying
audited and unaudited balance sheets are presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. As of December 31,
1997 and March 31, 1998 (unaudited), the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items. Inventories are stated at the lower of weighted average cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over a five-year life
using accelerated methods. Rental equipment is depreciated to a salvage value of
five percent of cost. Rental equipment having a cost of $500 or less is expensed
at the time of purchase. Ordinary maintenance and repair costs are charged to
operations as incurred.
Property and equipment
Property and equipment are recorded at cost and depreciated over an
estimated useful life of five years using the straight-line method. Ordinary
maintenance and repair costs are charged to operations as incurred. The range of
useful lives estimated by management for property and equipment is as follows:
<TABLE>
<CAPTION>
YEARS
-------------
<S> <C>
Furniture and fixtures...................................... 5
Equipment................................................... 5
Leasehold improvements...................................... Life of lease
</TABLE>
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-81
<PAGE> 148
NAPLES RENT-ALL & SALES COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses
and other liabilities and debt approximate fair value as of December 31, 1997
and March 31, 1998 (unaudited).
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Income taxes
The Company is an S corporation for tax purposes. Accordingly, income,
losses and related temporary differences which arise in the recording of income
and expense items for financial reporting and tax reporting purposes are
included in the individual tax return of the stockholder. Therefore, no
provision or liability for Federal and state income taxes has been included in
the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for informational purposes only. The pro forma provision
for income tax has been provided at the estimated effective tax rate of 40%.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of customers make up the
Company's customer base. No single customer represents greater than 10% of total
accounts receivable. The Company controls credit risk through credit approvals,
credit limits, and monitoring procedures.
Interim financial information
In the opinion of management, the unaudited interim financial information
as of March 31, 1998 and for the three month periods ended March 31, 1997 and
1998 furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim period. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the entire year primarily due to seasonal variations.
F-82
<PAGE> 149
NAPLES RENT-ALL & SALES COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Rental equipment............................................ $ 2,033,651 $ 2,051,524
Less -- accumulated depreciation............................ (1,120,514) (1,185,468)
----------- -----------
Rental equipment, net............................. $ 913,137 $ 866,056
=========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures...................................... $ 32,697 $ 32,032
Equipment................................................... 278,072 291,313
Leasehold improvements...................................... 36,847 38,362
--------- ---------
347,616 361,707
Less -- accumulated depreciation............................ (227,969) (217,232)
--------- ---------
Property and equipment, net....................... $ 119,647 $ 144,475
========= =========
</TABLE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Payroll-related............................................. $ 55,247 $ 56,988
Accrued dividends payable................................... 45,000 50,429
Accrued property taxes...................................... 15,187 4,978
Other....................................................... 33,018 60,553
-------- --------
Accrued expenses and other liabilities............ $148,452 $172,948
======== ========
</TABLE>
F-83
<PAGE> 150
NAPLES RENT-ALL & SALES COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Revolving line of credit, with borrowings up to $350,000,
secured by substantially all of the Company's receivables,
interest at prime plus .25% (8.75% at December 31, 1997
and March 31, 1998), payable in monthly installments
through November 1998..................................... $ 50,000 $ 50,000
Equipment notes, secured by equipment, interest at rates
averaging approximately 7%, payable in monthly
installments through December 2000........................ 126,128 121,420
-------- --------
Total debt........................................ $176,128 $171,420
======== ========
</TABLE>
Maturities of the Company's debt at December 31, 1997 for the years ended
December 31, are as follows:
<TABLE>
<S> <C>
1998........................................................ $122,090
1999........................................................ 36,168
2000........................................................ 17,870
--------
Total............................................. $176,128
========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases real estate under operating leases. Certain real estate
leases require the Company to pay maintenance, insurance, taxes and certain
other expenses in addition to the stated rentals. Future minimum lease payments,
by year and in the aggregate, for noncancelable operating leases with initial or
remaining terms of one year or more are as follows at December 31, 1997:
<TABLE>
<S> <C>
1998........................................................ $221,710
1999........................................................ 203,234
--------
Total............................................. $424,944
========
</TABLE>
Rent expense under operating leases for the year ended December 31, 1997
and three month periods ended March 31, 1997 and 1998 was approximately
$222,000, $58,000 (unaudited) and $55,000 (unaudited), respectively.
Consulting Agreement
The Company has a consulting agreement with a former stockholder in which
the Company is required to pay the former stockholder $30,000 per year through
November 1, 1999. Consulting fees for the year ended December 31, 1997 under the
terms of this agreement were $30,000. Subsequent to year-end, all future amounts
owed under this agreement were settled in exchange for approximately $40,000.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
F-84
<PAGE> 151
NAPLES RENT-ALL & SALES COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. EMPLOYEE BENEFIT PLAN
The Company has a contributory 401(k) profit-sharing plan under which
substantially all full-time employees are eligible to participate. The plan
allows for discretionary employer contributions as determined by the Company.
Employees vest in contributions made by the employer over a seven-year period.
Employer contributions for the year ended December 31, 1997 and three month
periods ended March 31, 1997 and 1998 were approximately $17,000, $0 (unaudited)
and $3,000 (unaudited), respectively.
9. SUBSEQUENT EVENT
Effective April 30, 1998, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc., an unrelated third
party, in exchange for cash and debt.
F-85
<PAGE> 152
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Raymond Equipment Company, Inc.:
We have audited the accompanying balance sheets of Raymond Equipment Company,
Inc. (a Kentucky S corporation) as of June 30, 1996 and 1997, and the related
statements of income, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Raymond Equipment Company, Inc.
as of June 30, 1996 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 13, 1998.
F-86
<PAGE> 153
RAYMOND EQUIPMENT COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................... $ 749,276 $ 224,684 $ 427,366
Marketable securities at market value................... 1,227,355 777,860 914,335
Accounts receivable..................................... 3,390,079 3,608,443 2,198,061
Inventories............................................. 644,061 586,321 752,124
Rental equipment, net................................... 28,865,568 32,685,787 33,704,468
Property and equipment, net............................. 2,709,715 2,719,656 2,868,278
Other assets............................................ 195,664 399,687 397,243
----------- ----------- -----------
Total assets.................................. $37,781,718 $41,002,438 $41,261,875
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable...................................... $ 974,322 $ 793,087 $ 883,350
Accrued expenses and other liabilities................ 1,059,130 539,020 328,848
Debt.................................................. 24,498,329 25,883,180 23,468,571
----------- ----------- -----------
Total liabilities............................. 26,531,781 27,215,287 24,680,769
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)
STOCKHOLDERS' EQUITY:
Common stock, no par value, 500,000 shares authorized,
207,650, 209,651 and 210,975 (unaudited) shares
issued and outstanding at June 30, 1996, 1997 and
March 31, 1998, respectively....................... 439,116 544,168 629,513
Retained earnings..................................... 10,461,809 12,969,978 15,442,113
Net unrealized gain on marketable
securities.................................. 349,012 273,005 509,480
----------- ----------- -----------
Total stockholders' equity.................... 11,249,937 13,787,151 16,581,106
----------- ----------- -----------
Total liabilities and stockholders' equity.... $37,781,718 $41,002,438 $41,261,875
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-87
<PAGE> 154
RAYMOND EQUIPMENT COMPANY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
FOR THE YEAR ENDED JUNE 30, ENDED MARCH 31,
--------------------------- -------------------------
1996 1997 1997 1998
------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Equipment rentals......................... $10,427,708 $11,997,902 $ 8,082,542 $ 9,113,745
Sales of equipment, parts and supplies.... 8,700,165 9,323,810 7,318,745 6,923,388
----------- ----------- ----------- -----------
19,127,873 21,321,712 15,401,287 16,037,133
COST OF REVENUE:
Cost of equipment rentals, excluding
depreciation........................... 3,172,008 3,329,502 2,506,446 2,291,828
Rental equipment depreciation............. 3,652,589 4,198,076 3,049,772 3,565,429
Cost of sales of equipment, parts and
supplies............................... 5,287,538 5,991,061 4,178,088 4,123,883
----------- ----------- ----------- -----------
12,112,135 13,518,639 9,734,306 9,981,140
----------- ----------- ----------- -----------
Gross profit...................... 7,015,738 7,803,073 5,666,981 6,055,993
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................. 2,361,132 2,837,207 1,865,711 1,952,962
NONRENTAL DEPRECIATION AND AMORTIZATION..... 147,637 182,783 150,571 167,226
----------- ----------- ----------- -----------
Operating income.................. 4,506,969 4,783,083 3,650,699 3,935,805
OTHER INCOME (EXPENSE):
Interest expense.......................... (1,670,707) (1,801,706) (1,303,290) (1,429,917)
Interest income........................... 28,544 23,812 11,619 20,190
Other, net................................ 93,829 121,010 112,418 258,086
----------- ----------- ----------- -----------
Total other expense, net.......... (1,548,334) (1,656,884) (1,179,253) (1,151,641)
----------- ----------- ----------- -----------
Net income........................ 2,958,635 3,126,199 2,471,446 2,784,164
PRO FORMA PROVISION FOR INCOME TAXES........ 1,239,454 1,306,480 1,044,578 1,169,665
----------- ----------- ----------- -----------
PRO FORMA NET INCOME........................ $ 1,719,181 $ 1,819,719 $ 1,426,868 $ 1,614,499
=========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-88
<PAGE> 155
RAYMOND EQUIPMENT COMPANY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
COMMON STOCK UNREALIZED
-------------------- GAIN ON TOTAL
NUMBER OF RETAINED MARKETABLE STOCKHOLDERS'
SHARES AMOUNT EARNINGS SECURITIES EQUITY
--------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, July 1, 1995................. 202,880 $256,651 $ 8,595,607 $174,455 $ 9,026,713
Issuance of common stock............ 4,770 182,465 -- -- 182,465
Distributions to stockholders....... -- -- (1,092,433) -- (1,092,433)
Net income.......................... -- -- 2,958,635 -- 2,958,635
Net increase in unrealized gain on
marketable securities............ -- -- -- 174,557 174,557
------- -------- ----------- -------- -----------
BALANCE, June 30, 1996................ 207,650 439,116 10,461,809 349,012 11,249,937
Issuance of common stock............ 2,001 105,052 -- -- 105,052
Distributions to stockholders....... -- -- (618,030) -- (618,030)
Net income.......................... -- -- 3,126,199 -- 3,126,199
Net decrease in unrealized gain on
marketable securities............ -- -- -- (76,007) (76,007)
------- -------- ----------- -------- -----------
BALANCE, June 30, 1997................ 209,651 544,168 12,969,978 273,005 13,787,151
Issuance of common stock
(unaudited)...................... 1,324 85,345 -- -- 85,345
Distributions to stockholders
(unaudited)...................... -- -- (312,029) -- (312,029)
Net income (unaudited).............. -- -- 2,784,164 -- 2,784,164
Net increase in unrealized gain on
marketable securities
(unaudited)...................... -- -- -- 236,475 236,475
------- -------- ----------- -------- -----------
BALANCE, March 31, 1998 (unaudited)... 210,975 $629,513 $15,442,113 $509,480 $16,581,106
======= ======== =========== ======== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-89
<PAGE> 156
RAYMOND EQUIPMENT COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
FOR THE YEAR ENDED JUNE 30, ENDED MARCH 31,
--------------------------- --------------------------
1996 1997 1997 1998
------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 2,958,635 $ 3,126,199 $ 2,471,446 $ 2,784,164
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 3,800,226 4,380,859 3,200,343 3,732,655
Gain on sale of rental equipment............... (1,540,076) (1,385,381) (1,195,800) (867,733)
Realized gain on sale of marketable
securities................................... (27,458) (73,615) (73,615) (50,000)
Charitable contribution marketable
securities................................... -- 297,103 -- --
Changes in operating assets and liabilities:
Accounts receivable.......................... (83,880) (218,364) 1,900,804 1,410,382
Inventories.................................. (239,521) 57,740 103,038 (165,803)
Other assets................................. (3,724) (204,023) 29,620 2,444
Accounts payable............................. 497,168 (181,235) 1,210,542 90,263
Accrued expenses and other liabilities....... 48,138 (520,110) (784,978) (210,172)
------------ ------------ ----------- ------------
Net cash provided by operating
activities.............................. 5,409,508 5,279,173 6,861,400 6,726,200
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities............... (490,000) -- -- --
Proceeds from the sale of marketable
securities..................................... 99,997 150,000 150,000 150,000
Purchases of rental equipment.................... (10,790,192) (11,300,675) (7,291,951) (7,650,313)
Purchases of property and equipment.............. (1,223,457) (217,559) (138,068) (363,494)
Proceeds from sale of rental equipment........... 4,258,338 4,678,959 4,295,084 3,947,732
Proceeds from sale of property and equipment..... 173,075 13,637 13,637 33,850
------------ ------------ ----------- ------------
Net cash used in investing activities..... (7,972,239) (6,675,638) (2,971,298) (3,882,225)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of
issuance costs................................. 182,465 105,052 105,052 85,345
Proceeds from debt............................... 15,404,343 15,329,825 4,907,186 9,839,377
Principal payments on debt....................... (11,416,600) (13,944,974) (9,183,049) (12,253,986)
Distributions to stockholders.................... (1,092,433) (618,030) (246,761) (312,029)
------------ ------------ ----------- ------------
Net cash provided by (used in) financing
activities.............................. 3,077,775 871,873 (4,417,572) (2,641,293)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 515,044 (524,592) (527,470) 202,682
CASH AND CASH EQUIVALENTS, beginning of period..... 234,232 749,276 749,276 224,684
------------ ------------ ----------- ------------
CASH AND CASH EQUIVALENTS, end of period........... $ 749,276 $ 224,684 $ 221,806 $ 427,366
============ ============ =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest........................... $ 1,653,083 $ 1,832,804 $ 1,364,318 $ 1,407,413
============ ============ =========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-90
<PAGE> 157
RAYMOND EQUIPMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND JUNE 30, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Raymond Equipment Company, Inc. (the "Company") was incorporated in the
state of Kentucky in 1955. The Company rents a broad array of equipment to a
diverse customer base that includes construction industry participants,
industrial companies, homeowners and others. The Company also engages in related
activities such as selling used equipment, acting as a distributor for certain
new equipment and selling related merchandise parts and supplies. The nature of
the Company's business is such that short-term obligations are typically met by
cash flow generated from long-term assets. Consequently, consistent with
industry practice, the accompanying audited and unaudited balance sheets are
presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At June 30, 1996 and
1997 and March 31, 1998 (unaudited), the Company had no cash equivalents.
Marketable securities
In accordance with the provisions of Statement of Financial Accounting
Standards No. 115, unrealized gains and losses on investments available-for-sale
(which are stated at quoted fair value) are included as a separate component of
stockholders' equity. All of the Company's marketable securities are held as
available-for-sale.
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items. Inventories are stated at the lower of weighted average cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The range of
useful lives estimated by management for rental equipment is two to ten years.
Rental equipment is depreciated to a salvage value of zero to ten percent of
cost. All rental equipment is capitalized at the time of purchase. Ordinary
maintenance and repair costs are charged to operations as incurred.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. The range of useful lives
estimated by management are as follows:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Buildings and improvements.................................. 20 - 25
Automobiles and trucks...................................... 3 - 7
Office furniture and fixtures............................... 5 - 10
</TABLE>
Ordinary maintenance and repair costs are charged to operations as
incurred.
F-91
<PAGE> 158
RAYMOND EQUIPMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
Fair value of financial instruments
The carrying amount reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses
and other liabilities and debt approximates fair value as of June 30, 1996 and
1997 and March 31, 1998 (unaudited).
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Income taxes
The Company is an S corporation for income tax purposes. Accordingly,
income, losses and related temporary differences which arise in the recording of
income and expense items for financial reporting and tax reporting purposes are
proportionally included in the individual tax returns of the stockholders.
Therefore, no provision or liability for Federal and state income taxes has been
included in the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for informational purposes only. The pro forma provision
for income tax has been provided at the estimated effective rate of 40% of
taxable net income.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments,
marketable securities and accounts receivable. The Company maintains cash and
cash equivalents with high quality financial institutions. Concentrations of
credit risk with respect to accounts receivable are limited because a large
number of diverse customers make up the Company's customer base. No single
customer represents greater than 10% of total accounts receivable. The Company
controls credit risk through credit approvals, credit limits and monitoring
procedures.
Interim financial information
In the opinion of management, the unaudited financial information as of
March 31, 1998 and for the nine month periods ended March 31, 1997 and 1998
furnished herein reflects all adjustments consisting of normal recurring
accruals that are necessary for a fair presentation of the results for the
interim periods. The results of operations for the nine months ended March 31,
1998 are not necessarily indicative of the results to be expected for the entire
year.
F-92
<PAGE> 159
RAYMOND EQUIPMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. MARKETABLE SECURITIES
The cost and estimated market value of marketable securities are as
follows:
<TABLE>
<CAPTION>
JUNE 30,
--------------------- MARCH 31,
1996 1997 1998
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cost................................................ $ 878,343 $504,855 $404,855
Unrealized gains.................................... 349,012 273,005 509,480
---------- -------- --------
Estimated market value.............................. $1,227,355 $777,860 $914,335
========== ======== ========
</TABLE>
4. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Rental equipment............................... $35,794,948 $41,753,287 $ 44,188,277
Less -- accumulated depreciation............... (6,929,380) (9,067,500) (10,483,809)
----------- ----------- ------------
Rental equipment, net................ $28,865,568 $32,685,787 $ 33,704,468
=========== =========== ============
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------ MARCH 31,
1996 1997 1998
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture, fixtures and office equipment......... $3,615,247 $ 3,740,810 $ 3,994,517
Less -- accumulated depreciation................. (905,532) (1,021,154) (1,126,239)
---------- ----------- -----------
Property and equipment, net............ $2,709,715 $ 2,719,656 $ 2,868,278
========== =========== ===========
</TABLE>
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------------------- MARCH 31,
1996 1997 1998
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Payroll-related..................................... $ 769,254 $279,162 $ 39,308
Accrued interest.................................... 129,231 64,308 86,812
Accrued property taxes.............................. 123,830 161,723 200,066
Other............................................... 36,815 33,827 2,662
---------- -------- --------
Accrued expenses and other liabilities.............. $1,059,130 $539,020 $328,848
========== ======== ========
</TABLE>
F-93
<PAGE> 160
RAYMOND EQUIPMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Equipment notes, secured by equipment, interest
at an average of approximately 8.00% payable
in various monthly installments through March
2002.......................................... $18,977,807 $21,303,549 $19,614,353
Two installment notes with a local bank, secured
by property, interest at 8.00% and 9.00%,
payable in various monthly installments
through December 1998 and June 2006,
respectively.................................. 5,520,522 4,579,631 3,854,218
----------- ----------- -----------
$24,498,329 $25,883,180 $23,468,571
=========== =========== ===========
</TABLE>
Maturities of the Company's debt at June 30, 1997 for the year ended June
30, are as follows:
<TABLE>
<S> <C>
1998........................................................ $10,670,581
1999........................................................ 6,404,076
2000........................................................ 6,489,429
2001........................................................ 1,743,065
2002........................................................ 95,915
Thereafter.................................................. 480,114
-----------
Total............................................. $25,883,180
===========
</TABLE>
8. PROFIT SHARING PLAN
The Company has a profit sharing plan the ("Plan") that covers
substantially all employees. The Plan allows for discretionary employer
contributions as determined by the Company's Board of Directors. Employer
contributions for the years ended June 30, 1996 and 1997 and the nine months
ended March 31, 1997 and 1998 were $150,000, $150,000, $150,000 (unaudited) and
$112,000 (unaudited), respectively.
9. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
10. SUBSEQUENT EVENT
Effective May 7, 1998, the Company entered into a definitive agreement for
the sale of all of the outstanding stock of the Company to NationsRent, Inc., an
unrelated third party, in exchange for cash and debt.
F-94
<PAGE> 161
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To General Rental, Inc.:
We have audited the accompanying division balance sheet for the Florida
Panhandle and Southeast Texas Divisions of General Rental, Inc. (a Delaware
corporation) as of December 31, 1997, and the related statements of division
operations, division equity and division cash flows for the year then ended.
These division financial statements are the responsibility of the Divisions'
management. Our responsibility is to express an opinion on these division
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the division financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the division financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall division financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the division financial statements referred to above present
fairly, in all material respects, the financial position of the Florida
Panhandle and Southeast Texas Divisions of General Rental, Inc. as of December
31, 1997, and the results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 29, 1998 (except with respect
to the matter referred to in Note 11 as
to which the date is July 10, 1998).
F-95
<PAGE> 162
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
DIVISION BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash........................................................ $ 7,550 $ 6,244
Accounts receivable, net of allowance for doubtful accounts
of $214,626 and $185,355 (unaudited) for December 31, 1997
and March 31, 1998, respectively.......................... 1,912,175 1,655,344
Inventories................................................. 381,576 246,871
Rental equipment, net....................................... 11,970,725 11,610,015
Property and equipment, net................................. 392,292 373,888
Goodwill, net............................................... 2,067,955 2,050,136
Non-compete agreements, net................................. 1,390,000 1,311,000
Prepaid expenses and other assets........................... 19,402 18,744
----------- -----------
Total assets...................................... $18,141,675 $17,272,242
=========== ===========
LIABILITIES AND DIVISION EQUITY
LIABILITIES:
Accounts payable.......................................... $ 1,462,325 $ 1,315,244
Accrued expenses and other liabilities.................... 1,837,982 1,893,161
Revolver debt............................................. 4,125,533 4,125,533
Notes payable............................................. 8,648,739 8,212,220
----------- -----------
Total liabilities................................. 16,074,579 15,546,158
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 8, 9 and 11)
DIVISION EQUITY............................................. 2,067,096 1,726,084
----------- -----------
Total liabilities and division equity............. $18,141,675 $17,272,242
=========== ===========
</TABLE>
The accompanying notes to division financial statements are an integral part of
these division balance sheets.
F-96
<PAGE> 163
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
STATEMENTS OF DIVISION OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTH
FOR THE YEAR PERIOD ENDED MARCH 31,
ENDED -------------------------
DECEMBER 31, 1997 1997 1998
----------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Equipment rentals.................................... $7,238,033 $646,230 $2,209,487
Sales of equipment, parts and supplies............... 1,875,624 234,000 311,184
---------- -------- ----------
Total revenue................................ 9,113,657 880,230 2,520,671
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation.... 4,017,826 386,493 1,377,633
Rental equipment depreciation........................ 941,665 117,406 291,246
Cost of sales of equipment, parts and supplies....... 1,203,840 156,721 204,305
---------- -------- ----------
Total cost of revenue........................ 6,163,331 660,620 1,873,184
---------- -------- ----------
Gross profit................................. 2,950,326 219,610 647,487
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........... 1,494,933 119,442 298,139
NONRENTAL DEPRECIATION AND AMORTIZATION................ 407,605 27,279 115,420
---------- -------- ----------
Operating income............................. 1,047,788 72,889 233,928
INTEREST EXPENSE....................................... 703,775 41,660 294,860
---------- -------- ----------
Income (loss) before provision for income
taxes...................................... 344,013 31,229 (60,932)
PROVISION FOR INCOME TAXES............................. 137,605 12,492 --
---------- -------- ----------
NET INCOME (LOSS)...................................... $ 206,408 $ 18,737 $ (60,932)
========== ======== ==========
</TABLE>
The accompanying notes to division financial statements are an integral part of
these division statements.
F-97
<PAGE> 164
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
STATEMENTS OF DIVISION EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE
THREE MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<S> <C>
BALANCE, December 31, 1996.................................. $1,326,099
Net income................................................ 206,408
Net transfers from corporate.............................. 534,589
----------
BALANCE, December 31, 1997.................................. 2,067,096
Net loss (unaudited)...................................... (60,932)
Net distributions to corporate (unaudited)................ (280,080)
----------
BALANCE, March 31, 1998 (unaudited)......................... $1,726,084
==========
</TABLE>
The accompanying notes to division financial statements are an integral part of
these division statements.
F-98
<PAGE> 165
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
STATEMENTS OF DIVISION CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTH
FOR THE YEAR PERIOD ENDED MARCH 31,
ENDED --------------------------
DECEMBER 31, 1997 1997 1998
----------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................ $ 206,408 $ 18,737 $ (60,932)
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization................. 1,349,270 144,685 406,666
(Gain) loss on sale of rental equipment....... (221,170) 17,050 (8,868)
Changes in operating assets and liabilities:
Accounts receivable......................... (705,914) (183,219) 256,831
Inventories................................. (91,421) 43,516 134,705
Prepaid expenses and other assets........... (19,402) (27,761) 658
Accounts payable............................ 368,097 91,252 (147,081)
Accrued expenses and other liabilities...... 243,240 43,465 55,179
----------- --------- ---------
Total adjustments........................ 922,700 128,988 698,090
----------- --------- ---------
Net cash provided by operating
activities............................. 1,129,108 147,725 637,158
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in acquisitions........................ (4,125,533) -- --
Purchases of rental equipment.................... (4,191,992) (855,787) (2,141)
Purchases of property and equipment.............. (167,407) (19,577) (3,357)
Proceeds from sale of rental equipment........... 695,353 35,473 83,633
----------- --------- ---------
Net cash provided by (used in) investing
activities.................................. (7,789,579) (839,891) 78,135
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolver debt...................... 4,125,533 -- --
Proceeds from notes payable...................... 3,735,697 519,938 --
Repayments of notes payable...................... (1,729,748) (109,249) (436,519)
Net transfers from (distributions to)
corporate..................................... 534,589 281,477 (280,080)
----------- --------- ---------
Net cash provided by (used in) financing
activities............................. 6,666,071 692,166 (716,599)
NET INCREASE (DECREASE) IN CASH.................... 5,600 -- (1,306)
CASH, beginning of period.......................... 1,950 1,950 7,550
CASH, end of period................................ $ 7,550 $ 1,950 $ 6,244
=========== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest........................ $ 703,775 $ 41,660 $ 294,860
=========== ========= =========
</TABLE>
The accompanying notes to division financial statements are an integral part of
these division statements.
F-99
<PAGE> 166
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
General Rental, Inc. ("General"), a Delaware corporation, was incorporated
in 1996. General operates through various geographical divisions including the
Florida Panhandle and Southeast Texas Divisions (the "Divisions"). The Divisions
consist of six stores in the Florida Panhandle and seven stores in Texas. The
principal business of the Divisions is rental of a broad array of equipment to a
diverse customer base that includes construction industry participants,
industrial companies and others in Florida and Texas. The Divisions also engage
in related activities such as selling used equipment, acting as a distributor
for certain new equipment and selling related merchandise and parts. The nature
of the Divisions' business is such that short-term obligations are typically met
by cash flow generated from long-term assets. Consequently, consistent with
industry practice, the accompanying audited and unaudited division balance
sheets are presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying division financial statements include only the Florida
Panhandle and Southeast Texas Divisions of General. These division financial
statements were carved out of the financial statements of General on a specific
identification basis or by using the following allocations, as required.
Allocations
The accompanying division balance sheets and statements of division
operations include allocations of certain liabilities and expenses where
specific identification is not practicable. Management of the Divisions believes
that the following allocation methods used are reasonable:
<TABLE>
<CAPTION>
FINANCIAL STATEMENT CAPTION ALLOCATION METHOD
- --------------------------- -----------------
<S> <C>
- - Accounts payable - Portion based on the percentage of revenues related to
the Divisions
- - Accrued expenses and - Portion based on the percentage of revenues or debt
other liabilities related to the Divisions
- - Revolver debt - Based on the cash required for acquisitions (see Note 3)
- - Notes payable - Based on the percentage of rental equipment financed
related to the Divisions
- - Selling, general and - Portion based on the percentage of revenues related to
administrative expenses the Divisions
- - Interest expense - Based on the average debt balance allocated to the
Divisions using an average interest rate of 9.5%
- - Provision for income - Provided at an assumed income tax rate of 40%, no
taxes benefit is recorded for losses
</TABLE>
Inventories
Inventories consist of equipment and parts. New equipment and parts
inventories are stated at the lower of average cost or market.
F-100
<PAGE> 167
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS -- (CONTINUED)
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment on a straight-line basis. The range of useful
lives estimated by management for rental equipment is three to ten years. Rental
equipment is depreciated to a salvage value of 20% of cost. Ordinary maintenance
and repair costs are charged to operations as incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term. Earned but not billed revenue included in accounts receivable was
$221,206 at December 31, 1997 and $229,420 (unaudited) at March 31, 1998,
respectively.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using a straight-line basis. The range of useful lives
estimated by management for property and equipment is three to ten years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Long-lived assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of "
requires that long-lived assets, including certain identifiable intangibles and
the goodwill related to those assets, be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. Management has reviewed the long-lived assets
of the Divisions and has determined that there are no events requiring
impairment loss recognition.
Fair value of financial instruments
The carrying amounts for accounts receivable, accounts payable and accrued
expenses and other liabilities as of December 31, 1997 is not significantly
different than fair value due to the short-term nature of these accounts. The
fair value of revolver debt and notes payable is determined using current
applicable interest rates for similar instruments as of December 31, 1997 and is
not significantly different than the carrying value of such debt.
Division equity
Division equity represents the difference between division assets and
division liabilities. Changes in division equity result from operating results
of the Divisions and any net transfers from or net distributions to corporate.
These transfers and distributions to and from corporate consist mainly of
funding for operating losses, funding of purchases of rental equipment and fixed
assets, funding of debt service costs and distributions of excess cash.
Concentrations of credit risk
Financial instruments that potentially subject the Divisions to significant
concentrations of credit risk consist principally of accounts receivable.
Concentrations of credit risk with respect to accounts receivable are limited
because a large number of geographically diverse customers make up the
Divisions' customer base. No
F-101
<PAGE> 168
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS -- (CONTINUED)
single customer represents greater than 10% of total accounts receivable. The
Divisions control credit risk through credit approvals, credit limits, and
monitoring, generally without requiring collateral.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the division financial
statements and accompanying notes. Actual results could differ from those
estimates.
Interim financial information
In the opinion of management, the unaudited interim financial information
as of March 31, 1998 and for the three month periods ended March 31, 1997 and
1998 furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim period. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the entire year.
3. ACQUISITIONS
During 1997, General purchased the assets and assumed certain liabilities
of stores (the "Acquired Stores") which are included in the division financial
statements beginning on their dates of acquisition. The acquisitions of the
Acquired Stores were accounted for under the purchase method. As a result, the
Divisions recorded approximately $1.0 million of goodwill and $1.4 million of
non-compete agreement costs. The assets and liabilities of the Acquired Stores
at their dates of acquisition are as follows:
<TABLE>
<S> <C>
Accounts receivable, net of allowance for doubtful accounts
of $27,361................................................ $ 932,877
Inventories................................................. 45,000
Prepaid expenses and other assets........................... 100,000
Rental equipment............................................ 6,780,603
Property and equipment...................................... 51,760
Goodwill.................................................... 977,833
Non-compete agreements...................................... 1,430,000
Accounts payable............................................ (348,726)
Accrued expenses and other liabilities...................... (1,386,018)
Notes payable............................................... (4,457,796)
-----------
Cash paid for acquisitions........................ $ 4,125,533
===========
</TABLE>
4. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Rental equipment.......................................... $12,959,442 $12,862,897
Less -- accumulated depreciation.......................... (988,717) (1,252,882)
----------- -----------
Rental equipment, net........................... $11,970,725 $11,610,015
=========== ===========
</TABLE>
F-102
<PAGE> 169
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Property and equipment...................................... $ 507,909 $ 511,266
Less -- accumulated depreciation............................ (115,617) (137,378)
--------- ---------
Property and equipment, net....................... $ 392,292 $ 373,888
========= =========
</TABLE>
6. INTANGIBLE ASSETS
Goodwill and related accumulated amortization consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Goodwill................................................... $2,138,270 $2,138,270
Less -- accumulated amortization........................... (70,315) (88,134)
---------- ----------
Goodwill, net.................................... $2,067,955 $2,050,136
========== ==========
</TABLE>
Goodwill amortization expense was $47,930 for the year ended December 31,
1997 and $9,693 (unaudited) and $17,819 (unaudited) for the three months ended
March 31, 1997 and 1998, respectively.
Non-compete agreements and related accumulated amortization consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Non-compete agreements..................................... $1,580,000 $1,580,000
Less -- accumulated amortization........................... (190,000) (269,000)
---------- ----------
Non-compete agreements, net...................... $1,390,000 $1,311,000
========== ==========
</TABLE>
Non-compete agreements amortization expense was $187,500 for the year ended
December 31, 1997 and $7,500 (unaudited) and $79,000 (unaudited) for the three
months ended March 31, 1997 and 1998, respectively.
Goodwill and non-compete agreements are amortized over their estimated
useful lives of 30 years and 5 years, respectively.
F-103
<PAGE> 170
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS -- (CONTINUED)
7. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Payroll-related accrued expenses........................... $ 181,893 $ 187,354
Non-payroll tax-related accrued expenses................... 144,484 148,822
Non-compete agreement liabilities.......................... 1,353,412 1,394,043
Other...................................................... 158,193 162,942
---------- ----------
Accrued expenses and other liabilities........... $1,837,982 $1,893,161
========== ==========
</TABLE>
8. REVOLVER DEBT AND NOTES PAYABLE
The revolver debt and notes payable have been allocated from General as
discussed in Note 2. All assets of the Divisions are pledged as collateral for
General's debt. As a result of cash flow difficulties at General, all such debt
is currently in default and is due on demand. The interest rate on such debt was
at a variable rate for the revolver debt and a fixed rate for the notes payable,
and approximated 9.5% for all periods presented in the accompanying division
financial statements.
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Divisions lease rental equipment, real estate, vehicles and certain
office equipment under noncancelable operating leases. These leases expire at
various dates through January 31, 2011. Certain real estate leases require the
Divisions to pay maintenance, insurance, taxes and certain other expenses in
addition to the stated rentals. Future minimum lease payments, by year and in
the aggregate, for noncancelable operating leases with initial or remaining
terms of one year or more are as follows at December 31, 1997:
<TABLE>
<S> <C>
1998........................................................ $ 764,393
1999........................................................ 732,495
2000........................................................ 782,424
2001........................................................ 449,930
2002........................................................ 157,550
Thereafter.................................................. 339,099
----------
$3,225,891
==========
</TABLE>
Rent expense under noncancelable operating leases was $567,163 for the year
ended December 31, 1997 and $74,020 (unaudited) and $141,791 (unaudited) for the
three months ended March 31, 1997 and 1998.
10. EMPLOYEE BENEFIT PLAN
The Divisions participate in a 401(k) plan (the "Plan") which covers
certain full-time employees over 21 years old who have worked a minimum of one
year for the Divisions. The Plan is funded by employee deferrals of income and
matching contributions by the Divisions of $.50 per $1.00 up to a matching
contribution of 3% of a participant's compensation. The Divisions' matching
contributions totaled $8,000 for the year ended December 31, 1997, and $1,000
(unaudited) and $2,000 (unaudited) for the three months ended March 31, 1997 and
1998, respectively.
F-104
<PAGE> 171
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS -- (CONTINUED)
11. SUBSEQUENT EVENT
In May 1998, General entered into a definitive agreement to sell the assets
of the Divisions to NationsRent, Inc., an unrelated third party, in exchange for
cash and the assumption of certain accrued liabilities. General's management
intends to utilize the proceeds of the sale to reduce its debt obligations. Such
transaction was completed on July 10, 1998.
F-105
<PAGE> 172
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Associated Rental Equipment Management Company, Inc.:
We have audited the accompanying balance sheets of Associated Rental
Equipment Management Company, Inc. (a Texas Corporation) as of December 31, 1996
and 1997, and the related statements of income, stockholder's equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Associated Rental Equipment
Management Company, Inc. as of December 31, 1996 and 1997, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 11, 1998.
F-106
<PAGE> 173
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.............................. $ 337,694 $ 828,345 $ 1,050,550
Accounts receivable, net of allowances for doubtful
accounts of $553,000, $461,000 and $400,000
(unaudited) for 1996, 1997 and 1998, respectively.... 2,904,093 4,436,887 4,813,464
Due from stockholder................................... 315,000 75,000 75,000
Marketable securities.................................. 2,235,030 2,612,642 2,861,312
Inventories............................................ 1,111,530 1,914,717 749,384
Prepaid expenses and other assets...................... 251,809 573,934 462,032
Rental equipment, net.................................. 35,287,240 59,982,594 66,134,633
Property and equipment, net............................ 2,561,625 4,975,581 5,391,791
----------- ----------- -----------
Total assets................................. $45,004,021 $75,399,700 $81,538,166
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable..................................... $ 1,156,178 $ 2,027,383 $ 1,273,626
Accrued expenses and other liabilities............... 2,362,396 2,915,667 2,275,330
Debt................................................. 36,017,937 61,598,630 67,781,414
----------- ----------- -----------
Total liabilities................................. 39,536,511 66,541,680 71,330,370
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 7, 8 and 11)
STOCKHOLDER'S EQUITY:
Common stock -- no par value; 1,000 shares
authorized, issued and outstanding................ 1,000 1,000 1,000
Paid-in capital...................................... 25,134 25,134 25,134
Unrealized gains on marketable securities............ 27,934 96,677 320,748
Retained earnings.................................... 5,413,442 8,735,209 9,860,914
----------- ----------- -----------
Total stockholder's equity................... 5,467,510 8,858,020 10,207,796
----------- ----------- -----------
Total liabilities and stockholder's equity... $45,004,021 $75,399,700 $81,538,166
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-107
<PAGE> 174
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE-MONTH PERIOD
FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------- ---------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Equipment rentals........... $20,726,189 $18,930,099 $24,261,338 $ 4,288,418 $ 7,153,512
Sales of equipment.......... 4,167,919 4,827,389 16,527,647 5,904,630 4,290,175
----------- ----------- ----------- ----------- -----------
24,894,108 23,757,488 40,788,985 10,193,048 11,443,687
----------- ----------- ----------- ----------- -----------
COST OF REVENUE:
Cost of equipment rentals,
excluding depreciation... 2,390,006 2,341,976 4,972,991 592,083 1,281,994
Rental equipment
depreciation............. 5,867,435 6,369,939 8,625,665 1,626,480 2,643,037
Cost of sales of
equipment................ 3,041,939 4,233,657 13,463,673 4,754,430 3,665,302
----------- ----------- ----------- ----------- -----------
11,299,380 12,945,572 27,062,329 6,972,993 7,590,333
----------- ----------- ----------- ----------- -----------
Gross profit........ 13,594,728 10,811,916 13,726,656 3,220,055 3,853,354
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES..... 8,114,872 6,751,686 6,144,202 951,277 1,473,824
NON-RENTAL DEPRECIATION AND
AMORTIZATION................ 300,697 385,806 466,240 96,942 123,302
----------- ----------- ----------- ----------- -----------
Operating income.... 5,179,159 3,674,424 7,116,214 2,171,836 2,256,228
----------- ----------- ----------- ----------- -----------
OTHER (EXPENSE) INCOME:
Investment earnings......... 62,767 227,717 344,301 5,131 36,566
Interest expense............ (2,290,370) (2,803,824) (3,748,335) (734,705) (1,225,593)
Other, net.................. (66,316) (14,093) 13,358 7,310 58,504
----------- ----------- ----------- ----------- -----------
Other (expense)
income, net....... (2,293,919) (2,590,200) (3,390,676) (722,264) (1,130,523)
----------- ----------- ----------- ----------- -----------
Income before
benefit for income
taxes............. 2,885,240 1,084,224 3,725,538 1,449,572 1,125,705
BENEFIT FOR INCOME TAXES...... (836,000) -- -- -- --
----------- ----------- ----------- ----------- -----------
NET INCOME.................... 3,721,240 1,084,224 3,725,538 1,449,572 1,125,705
PRO FORMA PROVISION FOR INCOME
TAXES....................... 1,990,096 433,690 1,490,215 579,829 450,282
----------- ----------- ----------- ----------- -----------
PRO FORMA NET INCOME.......... $ 1,731,144 $ 650,534 $ 2,235,323 $ 869,743 $ 675,423
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-108
<PAGE> 175
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
NO PAR VALUE
------------------ UNREALIZED
NUMBER PAID-IN GAINS ON RETAINED
OF SHARES AMOUNT CAPITAL SECURITIES EARNINGS TOTAL
--------- ------ ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1995............................. 1,000 $1,000 $25,134 $ -- $1,144,683 $ 1,170,817
Net income......................................... -- -- -- -- 3,721,240 3,721,240
----- ------ ------- -------- ---------- -----------
BALANCE, December 31, 1995........................... 1,000 1,000 25,134 -- 4,865,923 4,892,057
Unrealized gains on marketable securities.......... -- -- -- 27,934 -- 27,934
Dividends to stockholder........................... -- -- -- -- (536,705) (536,705)
Net income......................................... -- -- -- -- 1,084,224 1,084,224
----- ------ ------- -------- ---------- -----------
BALANCE, December 31, 1996........................... 1,000 1,000 25,134 27,934 5,413,442 5,467,510
Unrealized gains on marketable securities.......... -- -- -- 68,743 -- 68,743
Dividends to stockholder........................... -- -- -- -- (403,771) (403,771)
Net income......................................... -- -- -- -- 3,725,538 3,725,538
----- ------ ------- -------- ---------- -----------
BALANCE, December 31, 1997........................... 1,000 1,000 25,134 96,677 8,735,209 8,858,020
Unrealized gains on marketable securities
(unaudited)...................................... -- -- -- 224,071 -- 224,071
Net income (unaudited)............................. -- -- -- -- 1,125,705 1,125,705
----- ------ ------- -------- ---------- -----------
BALANCE, March 31, 1998 (unaudited).................. 1,000 $1,000 $25,134 $320,748 $9,860,914 $10,207,796
===== ====== ======= ======== ========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-109
<PAGE> 176
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE-MONTH
PERIOD
FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------ ---------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 3,721,240 $ 1,084,224 $ 3,725,538 $ 1,449,572 $ 1,125,705
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization................ 6,168,132 6,755,745 9,091,905 1,723,422 2,766,339
Gain on sale of rental equipment............. (1,125,980) (593,732) (3,063,974) (1,150,020) (624,873)
Changes in operating assets and liabilities:
Accounts receivable........................ (259,253) 182,134 (1,532,794) (947,876) (376,577)
Prepaid expenses and other assets.......... (117,912) (45,002) (322,125) (707,848) 111,902
Accounts payable........................... (679,218) 351,343 871,205 327,808 241,441
Accrued expenses and other liabilities..... 199,573 (73,953) 553,271 (454,545) (1,635,535)
------------ ------------ ------------ ------------ ------------
Net cash provided by operating
activities............................. 7,906,582 7,660,759 9,323,026 240,513 1,608,402
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............ (641,045) (1,548,066) (2,880,196) (786,076) (539,512)
Proceeds from sale of rental equipment......... 4,167,919 4,827,389 16,527,647 5,904,630 4,290,175
Marketable securities.......................... 16,954 (2,207,096) (308,869) 90,687 (24,599)
------------ ------------ ------------ ------------ ------------
Net cash provided by investing activities.... 3,543,828 1,072,227 13,338,582 5,209,241 3,726,064
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt............................. 469,999 1,718,414 12,326,137 -- 2,344,168
Repayments of debt............................. (10,671,000) (11,758,122) (34,333,323) (5,616,132) (7,456,429)
Dividends to stockholder....................... -- (536,705) (403,771) -- --
Due from stockholder........................... (191,450) 18,133 240,000 315,000 --
------------ ------------ ------------ ------------ ------------
Net cash used in financing activities.... (10,392,451) (10,558,280) (22,170,957) (5,301,132) (5,112,261)
------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................... 1,057,959 (1,825,294) 490,651 148,622 222,205
CASH AND CASH EQUIVALENTS, beginning of period... 1,105,029 2,162,988 337,694 337,694 828,345
------------ ------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period......... $ 2,162,988 $ 337,694 $ 828,345 $ 486,316 $ 1,050,550
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of capitalization
of $150,000 in 1997........................ $ 2,290,405 $ 2,798,349 $ 3,419,630 $ 751,847 $ 1,332,907
============ ============ ============ ============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Rental equipment financing with debt......... $ 7,846,334 $ 17,830,405 $ 47,587,879 $ 8,815,983 $ 11,295,045
============ ============ ============ ============ ============
Transfers of rental equipment to inventory,
net........................................ $ -- $ 1,111,530 $ 803,187 $ -- $ --
============ ============ ============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-110
<PAGE> 177
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Associated Rental Equipment Management Company, Inc. (the "Company") was
incorporated on July 28, 1989 in the state of Texas. The Company rents a broad
array of equipment to a diverse customer base that includes construction
industry participants, industrial companies and others in the states of Texas
and Louisiana. The Company also engages in related activities such as selling
used rental equipment. The nature of the Company's business is such that
short-term obligations are typically met by cash flows generated from long-term
assets. Consequently, consistent with industry practice, the accompanying
balance sheets are presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At December 31, 1996
and 1997 and March 31, 1998 (unaudited), the Company had no cash equivalents.
Marketable Securities
In accordance with the provisions of Statement of Financial Accounting
Standards No. 115, unrealized gains and losses on investments available-for-sale
(which are stated at quoted fair value) are included as a separate component of
stockholder's equity. All of the Company's marketable securities are held as
available-for-sale.
Inventories
Inventories consist of used rental equipment held for resale and are stated
at the lower of cost or market.
Rental Equipment
Rental equipment is recorded at cost and depreciated to zero salvage value
over the estimated useful lives of the equipment on a straight-line basis. The
average useful life estimated by management for rental equipment is seven years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Significant improvements that extend the useful life of rental equipment are
capitalized.
Revenue Recognition
Revenue related to the sale of rental equipment is recognized at the point
of sale. Revenue related to rental equipment is recognized over the contract
term.
Property and Equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using accelerated methods. The range of useful lives
estimated by management for property and equipment is five to forty years.
Property and equipment is depreciated to a salvage value of zero to twenty
percent. Ordinary maintenance and repair costs are charged to operations as
incurred. Interest costs incurred during the construction period are capitalized
in accordance with generally accepted accounting principles.
Impairment of Long-Lived Assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-111
<PAGE> 178
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
The carrying amounts reported in the accompanying balance sheets for
accounts receivable, due from stockholder, accounts payable, accrued expenses
and other liabilities approximate fair value due to the short-term nature of
these accounts. The fair value of debt is determined using current interest
rates for similar instruments as of December 31, 1996 and 1997 and March 31,
1998 (unaudited) and approximates the carrying value of these obligations due to
the fact that the underlying instruments bear interest at market rates or
include provisions to adjust note balances and interest rates to approximate
fair market value.
Income Taxes
The Company has been an S corporation for income tax purposes since January
1, 1995. Accordingly, income, losses and related temporary differences which
arise in the recording of income and expense items for financial reporting and
tax reporting purposes are included in the individual tax return of the
stockholder. Therefore, no historical provision or liability for Federal and
state income taxes has been included in the accompanying financial statements
for the years ended December 31, 1996 and 1997.
Included in the accompanying statement of income for the year ended
December 31, 1995 is a benefit for income taxes of $836,000, which represents
the reversal of the deferred income tax liability balance as of December 31,
1994 due to the change in the Company's tax status to an S corporation. The
deferred income tax liability as of December 31, 1994 arose due to the use of
accelerated depreciation methods for income tax reporting purposes.
An enterprise that changes from taxable C corporation status to nontaxable
S corporation status should continue to recognize a deferred tax liability to
the extent that the enterprise would be subject to a corporate-level tax on net
unrecognized built-in gains, as defined by Federal tax rules. At the time of the
change in tax status, the Company determined that it had no net unrecognized
built-in gains.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for informational purposes only. The pro forma provision
for income taxes has been provided so that the estimated effective Federal and
state income rate will be 40% for all periods presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of geographically diverse
customers make up the Company's customer base. No single customer represents
greater than 10% of total accounts receivable. The Company controls credit risk
through credit approvals, credit limits, and monitoring procedures.
Interim Financial Information
In the opinion of management, the unaudited financial information as of
March 31, 1998 and for the three-month periods ended March 31, 1997 and 1998
furnished herein reflects all adjustments, consisting of normal recurring
accruals that are necessary for a fair presentation of the results for the
interim periods. The
F-112
<PAGE> 179
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the entire year.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). This statement establishes standards for reporting and display of
comprehensive income. Comprehensive income is defined as the change in equity
during the financial reporting period of a business enterprise resulting from
non-owner sources. Comprehensive income was $3,721,240, $1,112,158, $3,794,281,
$1,449,572 (unaudited) and $1,349,776 (unaudited) for the years ended December
31, 1995, 1996 and 1997 and the three months ended March 31, 1997 and 1998,
respectively.
3. MARKETABLE SECURITIES
The cost and estimated fair market value of marketable securities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cost............................................. $2,207,096 $2,515,965 $2,540,564
Unrealized gains................................. 27,934 96,677 320,748
---------- ---------- ----------
Estimated market value........................... $2,235,030 $2,612,642 $2,861,312
========== ========== ==========
</TABLE>
The Company uses the specific identification method to determine cost of
securities upon sale. The net change in unrealized appreciation on the
securities available for sale of $27,934, $68,743 and $224,071 (unaudited) for
the years ended December 31, 1996 and 1997 and the three-month period ended
March 31, 1998, respectively, has been reflected in the accompanying statements
of stockholder's equity.
4. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Rental equipment............................. $ 46,551,847 $ 69,017,032 $ 76,969,007
Less -- accumulated depreciation............. (11,264,607) (9,034,438) (10,834,374)
------------ ------------ ------------
Rental equipment, net.............. $ 35,287,240 $ 59,982,594 $ 66,134,633
============ ============ ============
</TABLE>
Net rental equipment under rental equipment financing obligations was
$27,801,496, $43,501,198 and $50,486,876 (unaudited) as of December 31, 1996 and
1997 and March 31, 1998, respectively.
F-113
<PAGE> 180
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land..................................................... $ -- $ 144,013 $ 144,013
Buildings................................................ 39,244 2,703,212 2,696,472
Leaseholds............................................... 553,616 980,102 963,847
Furniture and fixtures................................... 206,051 383,720 383,720
Machinery and equipment.................................. 120,912 171,876 194,876
Vehicles................................................. 1,915,599 2,175,748 2,184,471
Construction in process.................................. 849,507 -- 495,587
---------- ---------- ----------
3,684,929 6,558,671 7,062,986
Less -- accumulated depreciation and amortization........ (1,123,304) (1,583,090) (1,671,195)
---------- ---------- ----------
Property and equipment, net............................ $2,561,625 $4,975,581 $5,391,791
========== ========== ==========
</TABLE>
Buildings include structures and improvements constructed on land that is
leased from the stockholder (see note 9). Interest costs of $150,000 were
capitalized in 1997.
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll and related expenses..................... $ 125,334 $ 161,089 $ 120,555
Interest accrual......................................... 25,440 354,145 333,970
Accrued taxes............................................ 1,621,679 1,293,892 793,288
Bank overdrafts.......................................... 584,740 1,096,046 995,198
Other.................................................... 5,203 10,495 32,319
---------- ---------- ----------
Total accrued expenses and other liabilities... $2,362,396 $2,915,667 $2,275,330
========== ========== ==========
</TABLE>
F-114
<PAGE> 181
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
LINES OF CREDIT:
Rental equipment financing line of credit from a
financing company with borrowings up to $4,000,000
(increased to $5,484,000 on March 26, 1998); interest
at 1.25% over the greater of prime or commercial
paper rates (changed to 3.25% over the commercial
paper rate effective March 26, 1998) and payable
monthly; collateralized by equipment held for sale
and personally guaranteed by the stockholder; repaid
in the first quarter of 1998......................... $ -- $ 2,258,900 $ --
Working capital line of credit from a bank with
borrowings up to $2,000,000; interest at prime plus
1/2% with interest payable monthly; collateralized by
accounts receivable, inventory and property and
equipment and personally guaranteed by the
stockholder; the underlying credit agreement expires
September 1, 1998.................................... 768,207 1,231,407 1,571,407
Working capital line of credit from a financial
services institution with borrowings up to
$2,000,000; interest at 2.40% over the 30-day
commercial paper rate; collateralized by marketable
securities; the underlying credit agreement expires
October 31, 1999..................................... -- -- 730,435
----------- ----------- -----------
Subtotal..................................... 768,207 3,490,307 2,301,842
NOTES PAYABLE:
Various notes payable, secured by equipment, payable in
monthly principal and interest installments; interest
ranging from 3.99% to 7.9%; due between April 1997
and January 2002..................................... 8,055,522 15,364,724 15,750,295
</TABLE>
(CONTINUED)
F-115
<PAGE> 182
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
RENTAL EQUIPMENT FINANCING OBLIGATIONS:
Rental equipment financing obligations, secured by
equipment, payable in monthly installments,
capitalized at the Company's incremental borrowing
rate of approximately 8%, due between January 1998
and October 2002..................................... 27,194,208 42,743,599 49,729,277
----------- ----------- -----------
Total debt................................... $36,017,937 $61,598,630 $67,781,414
=========== =========== ===========
</TABLE>
Maturities of the Company's debt at December 31, 1997 for the years ended
December 31, are as follows:
<TABLE>
<CAPTION>
RENTAL EQUIPMENT
FINANCING
LINES OF CREDIT NOTES PAYABLE OBLIGATIONS TOTAL
--------------- ------------- ---------------- -----------
<S> <C> <C> <C> <C>
1998.................... $ 3,490,307 $ 4,069,770 $30,934,508 $38,494,585
1999.................... -- 5,271,727 6,446,122 11,717,849
2000.................... -- 4,058,990 5,393,486 9,452,476
2001.................... -- 1,951,908 4,114,374 6,066,282
2002.................... -- 12,329 1,863,571 1,875,900
----------- ----------- ----------- -----------
$ 3,490,307 $15,364,724 48,752,061 67,607,092
=========== ===========
Less amount representing interest (6,008,462) (6,008,462)
----------- -----------
$42,743,599 $61,598,630
=========== ===========
</TABLE>
Each of the above lines of credit agreements subject the Company to certain
restrictive covenants including financial ratios, minimum net worth requirements
and payment of dividend restrictions. As of December 31, 1997, the Company was
not in compliance with certain of these restrictive covenants. The existence of
these events of default permits the lenders to take certain actions, including
increasing interest rates and accelerating repayment of the debt obligations.
Although the lenders have not exercised any of these rights, there is no
assurance that they will not do so in the future.
Rental equipment financing obligations include leases and rental purchase
option agreements, both of which meet the criteria for treatment as capital
leases under generally accepted accounting principles. The rental purchase
option agreements are noncancellable and have terms up to one year.
Substantially all rental equipment is purchased during or at the conclusion of
the option period and subsequently refinanced through third party leasing
arrangements with terms up to 60 months.
Interest expense related to rental equipment under rental equipment
financing leases for the years ended December 31, 1995, 1996 and 1997 and for
the three month period ended March 31, 1998 was $1,884,180, $2,142,810,
$2,746,663 and $923,110 (unaudited), respectively.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases real estate, certain office equipment and vehicles under
noncancelable operating leases. These leases expire at various dates through
September 30, 2002. Certain real estate leases require the Company to pay
maintenance, insurance, taxes and certain other expenses in addition to the
stated rentals.
F-116
<PAGE> 183
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments, by year and in the aggregate, for noncancelable
operating leases with initial or remaining terms of one year or more are as
follows at December 31, 1997:
<TABLE>
<S> <C>
1998............................................. $ 396,813
1999............................................. 414,886
2000............................................. 329,701
2001............................................. 378,199
2002............................................. 295,796
2003 and thereafter.............................. 94,046
----------
$1,909,441
==========
</TABLE>
Rent expense under noncancelable operating leases for the years ended
December 31, 1995, 1996 and 1997 was $312,083, $329,776 and $403,226,
respectively.
Sales and Use Tax Audit
During the three years ended December 31, 1997, various taxing authorities
conducted and completed audits of sales and use tax with respect to the
Company's equipment rental activities. The additional sales and use tax payable
by the Company resulting from the ultimate audit settlements was less than the
amounts accrued during the periods covered by the audits. The Company recorded
these differences in the period in which the settlements were reached. Included
in selling, general and administrative expenses for the year ended December 31,
1997 is a $655,000 credit that arose from the reversal of sales and use tax
provided for in 1995. The Company believes that its remaining sales and use tax
accruals are adequate.
Litigation, Claims and Disputes
The Company is involved in routine litigation, claims and disputes arising
in the normal course of business. Management has reviewed these matters with
legal counsel and believes that the ultimate liability, if any, resulting from
these matters will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
9. RELATED PARTY TRANSACTIONS
The Company leases land and buildings used in its operations from its
stockholder. The leases cover several operating locations and expire annually on
December 31. The total rent paid related to these leases for the years ended
December 31, 1995, 1996 and 1997 was $252,000, $262,500 and $240,000,
respectively.
The Company leases rental equipment from an affiliated company. The total
rent paid for the years ended December 31, 1995, 1996 and 1997 was $322,648,
$361,742 and $288,687, respectively. The Company also guarantees certain debt of
the affiliate. Such debt had a balance of $226,295 at December 31, 1997.
The Company had the following balances due from/payable to affiliated
companies at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- -------
<S> <C> <C>
Due from........................................ $108,861 $62,028
======== =======
Payable to...................................... $ 58,624 $61,684
======== =======
</TABLE>
F-117
<PAGE> 184
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) plan (the "Plan") which covers full-time
employees over 21 years old who have worked a minimum of one year for the
Company. The Plan is funded by employee deferrals of income and discretionary
contributions by the Company. The Company's matching contributions totaled
$20,998, $25,741 and $27,675 for the years ended December 31, 1995, 1996 and
1997, respectively. Amounts due to the Plan at December 31, 1996 and 1997 were
$25,127 and $29,020, respectively.
11. SUBSEQUENT EVENT
In June 1998, the stockholder entered into an asset purchase agreement
whereby substantially all of the Company's operating assets and liabilities,
except for real property and certain equipment, will be purchased by
NationsRent, Inc., an unrelated third party, in exchange for cash and a
convertible promissory note. Completion of this transaction is subject to
customary closing conditions.
F-118
<PAGE> 185
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Revco Equipment Rentals, Inc.:
We have audited the accompanying balance sheet of Revco Equipment Rentals,
Inc. (a Florida corporation) as of December 31, 1997, and the related statements
of income, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Revco Equipment Rentals,
Inc. as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
July 11, 1998.
F-119
<PAGE> 186
REVCO EQUIPMENT RENTALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 104,038 $ 70,576
Accounts receivable......................................... 283,747 269,246
Inventories................................................. 42,600 51,527
Other assets................................................ 51,797 50,629
Rental equipment, net....................................... 1,831,082 1,693,161
Property and equipment, net................................. 303,335 302,575
---------- ----------
Total assets...................................... $2,616,599 $2,437,714
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accrued expenses and other liabilities.................... 11,680 11,243
Debt...................................................... 1,525,991 1,336,347
---------- ----------
Total liabilities................................. 1,537,671 1,347,590
COMMITMENTS AND CONTINGENCIES (Notes 6 and 7)
STOCKHOLDERS' EQUITY:
Common stock -- $10 par value, 1,000 shares authorized,
100 issued and outstanding............................. 1,000 1,000
Treasury stock, at cost................................... (150,000) (150,000)
Additional paid-in capital................................ 131,243 131,243
Retained earnings......................................... 1,096,685 1,107,881
---------- ----------
Total stockholders' equity........................ 1,078,928 1,090,124
---------- ----------
Total liabilities and stockholders' equity........ $2,616,599 $2,437,714
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-120
<PAGE> 187
REVCO EQUIPMENT RENTALS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH PERIOD
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, --------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Equipment rentals...................................... $2,128,701 $566,346 $492,627
Sales of rental equipment, parts and supplies.......... 495,146 154,380 40,314
---------- -------- --------
2,623,847 720,726 532,941
COST OF REVENUE:
Cost of equipment rentals.............................. 1,004,217 240,983 189,115
Rental equipment depreciation.......................... 612,634 133,993 139,390
Cost of sales of rental equipment, parts and
supplies............................................ 222,818 65,172 27,216
---------- -------- --------
1,839,669 440,148 355,721
---------- -------- --------
Gross profit................................... 784,178 280,578 177,220
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................................... 312,470 79,465 79,246
NONRENTAL EQUIPMENT DEPRECIATION......................... 24,743 5,438 760
---------- -------- --------
Operating income............................... 446,965 195,675 97,214
OTHER INCOME (EXPENSE), net:
Interest expense....................................... (122,252) (32,885) (31,010)
Interest income........................................ 3,304 -- --
---------- -------- --------
Total other income (expense), net.............. (118,948) (32,885) (31,010)
---------- -------- --------
Net income..................................... 328,017 162,790 66,204
PRO FORMA PROVISION FOR INCOME TAX....................... 131,207 65,116 26,482
---------- -------- --------
PRO FORMA NET INCOME..................................... $ 196,810 $ 97,674 $ 39,722
========== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-121
<PAGE> 188
REVCO EQUIPMENT RENTALS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------
NUMBER TREASURY ADDITIONAL RETAINED
OF SHARES AMOUNT STOCK, AT COST PAID-IN CAPITAL EARNINGS TOTAL
--------- ------ -------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997..... 100 $1,000 $(150,000) $131,243 $ 932,030 $ 914,273
Distributions.............. -- -- -- -- (163,362) (163,362)
Net income................. -- -- -- -- 328,017 328,017
--- ------ --------- -------- ---------- ----------
BALANCE, December 31, 1997... 100 1,000 (150,000) 131,243 1,096,685 1,078,928
Distributions
(unaudited)............. -- -- -- -- (55,008) (55,008)
Net income (unaudited)..... -- -- -- -- 66,204 66,204
--- ------ --------- -------- ---------- ----------
BALANCE, March 31, 1998
(unaudited)................ 100 $1,000 $(150,000) $131,243 $1,107,881 $1,090,124
=== ====== ========= ======== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-122
<PAGE> 189
REVCO EQUIPMENT RENTALS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH PERIOD
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, ---------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 328,017 $ 162,790 $ 66,204
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation..................................... 637,377 139,431 140,150
Gain on sale of rental equipment................. (229,374) (93,176) (10,584)
Changes in operating assets and liabilities:
Accounts receivable............................ (49,063) (47,463) 14,501
Inventories.................................... (17,942) (21,300) (8,927)
Other assets................................... (714) 26 1,168
Accrued expenses and other liabilities......... 1,372 85 (437)
--------- --------- ---------
Net cash provided by operating activities... 669,673 140,393 202,075
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment....................... (948,004) (140,698) (9,198)
Purchases of property and equipment................. (13,716) -- --
Proceeds from sales of rental equipment............. 458,514 150,034 18,313
--------- --------- ---------
Net cash provided by (used in) investing
activities................................ (503,206) 9,336 9,115
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of distributions............................ (126,792) (60,212) (55,008)
Additional borrowings of debt....................... 716,630 179,158 --
Repayments of debt.................................. (702,694) (256,730) (189,644)
--------- --------- ---------
Net cash used in financing activities....... (112,856) (137,784) (244,652)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................................... 53,611 11,945 (33,462)
CASH AND CASH EQUIVALENTS, beginning of period........ 50,427 50,427 104,038
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period.............. $ 104,038 $ 62,372 $ 70,576
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF
NON-CASH TRANSACTIONS:
Distributions of property and equipment............. $ 36,570 $ 36,570 $ --
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.............................. $ 122,252 $ 32,885 $ 31,010
========= ========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-123
<PAGE> 190
REVCO EQUIPMENT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Revco Equipment Rentals, Inc. (the "Company") was incorporated on April 15,
1980, as a Florida S Corporation. The Company rents a broad array of equipment
to a customer base that includes principally construction industry participants
and industrial companies. The Company also engages in related activities such as
selling used rental equipment and selling related merchandise and parts. The
nature of the Company's business is such that short-term obligations are
typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying audited and unaudited
balance sheets are presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. The Company had no
cash equivalents at December 31, 1997 and March 31, 1998 (unaudited).
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items and are stated at the lower of weighted average cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using an accelerated method. The range of useful
lives estimated by management for rental equipment is five to ten years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using an accelerated method. The range of useful lives
estimated by management for property and equipment is five to thirty-nine years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Fair value of financial instruments
The carrying amounts reported in the balance sheets for accounts
receivable, accounts payable and accrued expenses and other liabilities
approximate fair value due to the short-term nature of these accounts. The fair
value of debt is determined using current applicable interest rates as of
December 31, 1997 and March 31, 1998 (unaudited) and approximates the carrying
value of such debt.
Income taxes
The Company is an S Corporation for income tax purposes. Accordingly,
income, losses, and related temporary differences which arise in the recording
of income and expense items for financial reporting and tax
F-124
<PAGE> 191
REVCO EQUIPMENT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reporting purposes are included in the individual tax returns of the
stockholders. Therefore, no provision or liability for Federal and state income
taxes has been included in the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for information purposes only. The pro forma provision
for income tax has been provided at the estimated rate of 40%.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base.
3. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Rental equipment............................................ $ 3,582,745 $ 3,567,215
Less -- accumulated depreciation............................ (1,751,663) (1,874,054)
----------- -----------
Rental equipment, net............................. $ 1,831,082 $ 1,693,161
=========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture, fixtures and office equipment.................... $ 33,396 $ 33,396
Vehicles.................................................... 241,528 241,528
Buildings................................................... 176,810 176,810
Leasehold improvements...................................... 27,750 27,750
Land........................................................ 101,600 101,600
--------- ---------
581,084 581,084
Less -- accumulated depreciation............................ (277,749) (278,509)
--------- ---------
Property and equipment, net....................... $ 303,335 $ 302,575
========= =========
</TABLE>
F-125
<PAGE> 192
REVCO EQUIPMENT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Term loans, secured by accounts receivable, inventories and
rental equipment, interest at rates ranging from 6.32% to
10.9%, payable in monthly installments.................... $1,322,456 $1,137,672
Mortgage, secured by building and land, interest at 8.25%,
Payable in monthly installments through December 1,
2007...................................................... 120,130 118,167
Unsecured note payable to a former stockholder, interest at
8.5%, payable in monthly installments through August 25,
2003...................................................... 83,405 80,508
---------- ----------
Total debt........................................ $1,525,991 $1,336,347
========== ==========
</TABLE>
Debt maturities at December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 607,270
1999........................................................ 435,368
2000........................................................ 235,259
2001........................................................ 135,976
2002........................................................ 28,051
Thereafter.................................................. 84,067
----------
Total............................................. $1,525,991
==========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment used for rental purposes under a
noncancellable operating lease. Future minimum lease payments, by year and in
the aggregate, for this lease are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 37,740
1999........................................................ 37,740
2000........................................................ 37,740
2001........................................................ 37,740
2002........................................................ 31,422
--------
Total............................................. $182,382
========
</TABLE>
7. SUBSEQUENT EVENT
Effective April 3, 1998, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc. in exchange for cash
and debt.
F-126
<PAGE> 193
[Photo of exterior of location]
<PAGE> 194
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. UNDER NO CIRCUMSTANCES SHALL THE DELIVERY OF
THIS PROSPECTUS OR ANY SALE MADE PURSUANT TO THIS PROSPECTUS CREATE ANY
IMPLICATION THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 10
Use of Proceeds...................... 15
Dividend Policy...................... 16
Capitalization....................... 17
Dilution............................. 18
Selected Consolidated Historical and
Pro Forma Financial Information and
Operating Data..................... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 21
Business............................. 27
Management........................... 38
Principal Stockholders............... 43
Certain Relationships and
Transactions....................... 44
Description of Certain
Indebtedness....................... 45
Description of Capital Stock......... 46
Shares Eligible for Future Sale...... 49
Underwriting......................... 51
Legal Matters........................ 52
Experts.............................. 53
Additional Information............... 53
Index to Pro Forma Consolidated
Financial Statements............... PF-1
Index to Financial Statements........ F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
13,000,000 SHARES
(LOGO) NATIONSRENT(TM)
COMMON STOCK
----------------------------
PROSPECTUS
----------------------------
BEAR, STEARNS & CO. INC.
BT ALEX- BROWN
DONALDSON, LUFKIN & JENRETTE
NATIONSBANC MONTGOMERY
SECURITIES LLC
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 195
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth expenses and costs payable by the Company
(other than underwriting discounts and commissions) expected to be incurred in
connection with the issuance and distribution of the securities described in
this Registration Statement. All amounts are estimated except for the SEC
registration fee and the National Association of Securities Dealers, Inc.
("NASD") filing fee.
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Registration fee under Securities Act....................... $ 52,923
NASD filing fee............................................. 25,000
New York Stock Exchange original listing fees............... 100,000*
Legal fees and expenses..................................... 300,000*
Accounting fees and expenses................................ 1,000,000*
Printing and engraving expenses............................. 400,000*
Miscellaneous expenses...................................... 122,077*
----------
Total............................................. $2,000,000*
==========
</TABLE>
--------------------
* estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate provides that the Company shall indemnify to the fullest
extent permitted by Section 145 of the DGCL, each person who is involved in any
litigation or other proceeding because such person is or was a director or
officer of the Company, against all expense, loss or liability reasonably
incurred or suffered in connection therewith. The Bylaws provides that a
director or officer may be paid expenses incurred in defending any proceeding in
advance of its final disposition upon receipt by the Company of an undertaking,
by or on behalf of the director or officer, to repay all amounts so advanced if
it is ultimately determined that such director or officer is not entitled to
indemnification.
Section 145 of the DGCL permits a corporation to indemnify any director or
officer of the corporation against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit or proceeding brought by reason of the fact
that such person is or was a director or officer of the corporation, if such
person acted in good faith and in a manner that he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, if he had no reason to believe his conduct
was unlawful. In a derivative action, (i.e., one brought by or on behalf of the
corporation), indemnification may be made only for expenses, actually and
reasonably incurred by any director or officer in connection with the defense or
settlement of such an action or suit, if such person acted in good faith and in
a manner that he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made if
such person shall have been adjudged to be liable to the corporation, unless and
only to the extent that the court in which the action or suit was brought shall
determine that the defendant is fairly and reasonably entitled to indemnity for
such expenses despite such adjudication of liability.
Pursuant to Section 102(b)(7) of the DGCL, the Certificate eliminates the
liability of a director to the corporation or its stockholders for monetary
damages for such breach of fiduciary duty as a director, except for liabilities
arising (i) from any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) from acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) from any transaction from which the director
derived an improper personal benefit.
II-1
<PAGE> 196
The Company intends to obtain primary and excess insurance policies
insuring the directors and officers of the Company and its subsidiaries against
certain liabilities they may incur in their capacity as directors and officers.
Under such policies, the insurer, on behalf of the Company, may also pay amounts
for which the Company has granted indemnification to the directors or officers.
Additionally, reference is made to the Underwriting Agreement filed as
Exhibit 1.1 hereto, which provides for indemnification by the Underwriters of
the Company, its directors and officers who sign the Registration Statement and
persons who control the Company, under certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its formation in August 1997, the Company has issued securities in
the following transactions. Each of these transactions was intended to be exempt
from the registration requirements of the Securities Act by virtue of either
Section 4(2) thereunder based on being issued in a transaction not involving a
public offering to a limited number of accredited investors or Section 3(b)
thereunder based on being issued to a limited number of non-executive employees
pursuant to written contracts relating to compensation of such persons.
In September 1997, the Company issued 12,500,000 shares of Common Stock to
H. Family Investments, Inc. and 12,500,000 shares to James L. Kirk in exchange
for an aggregate of approximately $47.1 million of equity capital which was
funded at various times from September 1997 through June 2, 1998 as required to
complete acquisitions.
In September 1997, in connection with the acquisition of Sam's, the Company
issued promissory notes in an aggregate principal amount of $7,690,000, which
are convertible into shares of Common Stock at the option of the holder at the
initial public offering price.
From November 1997 to April 1998, the Company granted options to certain of
its employees to purchase an aggregate of 1,087,571 shares of Common Stock at
exercise prices ranging from $2.96 to $6.69 per share and a weighted average
exercise price of $5.33 per share. These options vest over a four year period at
the rate of 25% per year beginning on the first anniversary of the date of
grant.
In December 1997, in connection with the acquisition of certain assets of
C&E, the Company issued a promissory note in the principal amount of $2,000,000,
which is convertible into shares of Common Stock at the option of the holder at
the initial public offering price.
In December 1997, in connection with the acquisition of certain assets of
Titan, the Company issued promissory notes in an aggregate principal amount of
$1,399,998, which are convertible into shares of Common Stock at the option of
the holders at the initial public offering price.
In April 1998, in connection with the acquisition of certain assets of
Revco, the Company issued a promissory note in the principal amount of $900,000,
which is convertible into shares of Common Stock at the option of the holder at
the initial public offering price.
In April 1998, in connection with the acquisition of certain assets of
Naples, the Company issued a promissory note in the principal amount of
$1,000,000, which is convertible into shares of Common Stock at the option of
the holder at the initial public offering price.
In May 1998, in connection with the acquisition of Bode-Finn, the Company
issued promissory notes in an aggregate principal amount of $10,000,000, which
are convertible into shares of Common Stock at the option of the holder at the
initial public offering price. The Company also issued warrants to purchase a
number of shares of Common Stock equal to $800,000 divided by the initial public
offering price at an exercise price equal to the initial public offering price
and with a term of five years commencing 18 months following the consummation of
the Offering.
In May 1998, in connection with the acquisition of certain assets of
U-Rent-It, the Company issued a promissory note in the principal amount of
$500,000, which is convertible into shares of Common Stock at the option of the
holder at the initial public offering price.
II-2
<PAGE> 197
In June 1998, the Company issued an aggregate of 5,118,694 shares of Common
Stock to accredited investors in a private placement transaction for aggregate
proceeds of $27.6 million.
In June 1998, in connection with the acquisition of A-Action, the Company
issued a promissory note in the principal amount of $1,000,000, which is
convertible into shares of Common Stock at the option of the holder at the
initial public offering price.
In June 1998, in connection with the acquisition of Jobs, the Company
issued promissory notes with an aggregate principal amount of $12,000,000, which
are convertible into shares of Common Stock at the option of the holder at the
initial public offering price.
In July 1998, in connection with the acquisition of J. Kelly, the Company
issued a promissory note in the principal amount of $2,500,000, which is
convertible into shares of Common Stock at the option of the holder at the
initial public offering price.
In July 1998, in connection with the acquisition of certain assets of
Associated, the Company issued a promissory note in the principal amount of
$10,000,000, which is convertible into shares of Common Stock at the option of
the holder at the initial public offering price.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as exhibits to this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Form of Amended and Restated Certificate of Incorporation of
the Company.
3.2* Amended and Restated By-Laws of the Company.
4.1* Form of Certificate of Common Stock.
4.2* Amended and Restated Revolving Credit Agreement, dated as of
June 29, 1998, by and among the Company, BankBoston, N.A.,
LaSalle National Bank, Fleet Bank N.A., NationsBank, N.A.,
BancBoston Securities, Inc. and other lending institutions
named therein.
4.3* Security Agreement, dated as of March 18, 1998, between the
Company and Bank Boston, N.A.
4.4* Omnibus Amendment to Security Documents, dated as of June
29, 1998, among the Company, its subsidiaries and Bank
Boston, N.A.
4.5* Joinder and Commitment Increase Agreement, dated as of July
15, 1998, among the Company, its subsidiaries, Bank Boston
N.A., US Trust and Bankers Trust Company.
4.6* Notice of Increase in Total Commitment, dated July 15, 1998,
by Bank Boston N.A.
5.1* Opinion of Akerman, Senterfitt & Eidson, P.A.
10.1* Stock Purchase Agreement dated August 15, 1997, among the
Company, Sam's and the shareholders of Sam's, together with
Amendment No.s 1 - 6.
10.2* Form of Unsecured Subordinated Promissory Notes -- Sam's
10.3* Form of Unsecured Convertible Subordinated Promissory
Note -- Sam's
10.4* Form of Unsecured Contingent Convertible Subordinated
Promissory Notes -- Sam's
10.5* Agreement, dated September 22, 1997, between the Company and
Gary L. Gabriel
10.6* Asset Purchase Agreement dated December 8, 1997 among
NationsRent of Ohio, Inc., R&R and the shareholder of R&R,
together with an Amendment dated December 10, 1997.
10.7* Form of Unsecured Subordinated Promissory Note -- R&R
10.8* Asset Purchase Agreement dated December 8, 1997, as amended,
among NationsRent of Indiana, Inc. and C&E, together with an
Amendment dated December 23, 1997.
10.9* Form of Unsecured Convertible Subordinated Promissory
Note -- C&E
10.10* Stock Purchase Agreement dated December 20, 1997, as
amended, among NationsRent of West Virginia, Inc., Titan and
the shareholders of Titan, together with an Amendment dated
December 31, 1997.
10.11* Form of Unsecured Convertible Subordinated Promissory
Notes -- Titan
</TABLE>
II-3
<PAGE> 198
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.12* Stock Purchase Agreement dated March 24, 1998 among the
Company, Bode-Finn and the shareholders of Bode-Finn,
together with Amendment No. 1 dated April 6, 1998 and
Amendment No. 2 dated April 17, 1998.
10.13* Form of Unsecured Convertible Subordinated Promissory
Notes -- Bode-Finn
10.14* Form of Warrant -- Bode-Finn
10.15* Registration Rights Agreement dated May 5, 1998 among the
Company, Bode-Finn, L.P. and Raymond E. Mason Foundation
10.16* Asset Purchase Agreement dated March 25, 1998 among
NationsRent of Indiana, Inc., RFL and the shareholder of RFL
10.17* Asset Purchase Agreement dated April 21, 1998 among
NationsRent of Florida, Inc. and Naples
10.18* Form of Unsecured Convertible Subordinated Promissory
Note -- Naples
10.19* Stock Purchase Agreement dated May 7, 1998 among the
Company, Jobs and the shareholders of Jobs
10.20* Form of Unsecured Subordinated Promissory Notes -- Jobs
10.21* Form of Unsecured Convertible Subordinated Promissory
Note -- Jobs
10.22* Asset Purchase Agreement dated May 14, 1998 among the
Company and General Rental
10.23* Stock Purchase Agreement dated May 30, 1998 among the
Company, J. Kelly and the shareholders of J. Kelly
10.24* Form of Unsecured Convertible Subordinated Promissory
Note -- J. Kelly
10.25* Form of Registration Rights Agreement among the Company and
the shareholders of J. Kelly
10.26* Asset Purchase Agreement dated June 7, 1998 among the
Company, Associated and the sole shareholder of Associated
10.27* Form of Unsecured Convertible Subordinated Promissory
Note -- Associated
10.28* Form of Registration Rights Agreement -- Associated
10.29* Form of Subscription Agreement, dated May 1998, between the
Company and certain subscribers
10.30* Form of NationsRent 1998 Stock Option Plan
21.1* Subsidiaries of the Company
23.1* Consent of Arthur Andersen LLP
23.3* Consent of Akerman, Senterfitt & Eidson, P.A. (included in
Exhibit 5.1 above)
24.1 Power of Attorney (previously filed)
27.1 Financial data schedule (previously filed)
</TABLE>
- ---------------
* Filed herewith.
(b) Financial Statement Schedule. The following financial statement
schedule together with report of independent certified public accountants is
filed on pages S-1 and S-2 herewith:
Financial Statement Schedule II, Valuation and Qualifying Accounts and
Reserves, for the Period Ended December 31, 1997.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will,
II-4
<PAGE> 199
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) To provide to the Underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) For purposes of determining any liability under the Securities
Act, each filing of the registrant's annual reports pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 200
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Fort
Lauderdale, State of Florida, on August 3, 1998.
NATIONSRENT, INC.
By: /s/ JAMES L. KIRK
------------------------------------
James L. Kirk
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES L. KIRK Chairman of the Board, President August 3, 1998
- --------------------------------------------------- and Chief Executive Officer
James L. Kirk (principal executive officer)
/s/ GENE J. OSTROW Executive Vice President and August 3, 1998
- --------------------------------------------------- Chief Financial Officer
Gene J. Ostrow (principal financial officer)
* Vice President and Controller August 3, 1998
- --------------------------------------------------- (principal accounting officer)
Kris E. Hansel
* Director August 3, 1998
- ---------------------------------------------------
Thomas H. Bruinooge
* Director August 3, 1998
- ---------------------------------------------------
Gary L. Gabriel
* Director August 3, 1998
- ---------------------------------------------------
H. Wayne Huizenga
* Director August 3, 1998
- ---------------------------------------------------
Harris W. Hudson
*By: /s/ GENE J. OSTROW
---------------------------------------------
Gene J. Ostrow, as
attorney-in-fact
</TABLE>
II-6
<PAGE> 201
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
To the Stockholders of NationsRent, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of NationsRent, Inc., and subsidiaries
included in this registration statement and have issued our report thereon dated
June 3, 1998, except with respect to the matters referred to in the third and
fifth paragraphs of Note 10 as to which the date is July 15, 1998. Our audit was
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The schedule included under Item 16(b) is the responsibility
of the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 3, 1998.
S-1
<PAGE> 202
NATIONSRENT, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO ACCOUNTS BALANCE AT
BEGINNING COSTS AND WRITTEN END
DESCRIPTIONS OF PERIOD(1) EXPENSES OFF OTHER(2) OF YEAR
------------ ------------ ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Period ended December 31, 1997
Allowance for Doubtful Accounts....... $ -- -- (40) 627 $587
</TABLE>
- ---------------
(1) August 14, 1997 (inception).
(2) Represents the historical allowances of the acquired companies.
S-2
<PAGE> 203
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Form of Amended and Restated Certificate of Incorporation of
the Company.
3.2* Amended and Restated By-Laws of the Company.
4.1* Form of Certificate of Common Stock.
4.2* Amended and Restated Revolving Credit Agreement, dated as of
June 29, 1998, by and among the Company, BankBoston, N.A.,
LaSalle National Bank, Fleet Bank N.A., NationsBank, N.A.,
BancBoston Securities, Inc. and other lending institutions
named therein.
4.3* Security Agreement, dated as of March 18, 1998, between the
Company and Bank Boston, N.A.
4.4* Omnibus Amendment to Security Documents, dated as of June
29, 1998, among the Company, its subsidiaries and Bank
Boston, N.A.
4.5* Joinder and Commitment Increase Agreement, dated as of July
15, 1998, among the Company, its subsidiaries, Bank Boston
N.A., US Trust and Bankers Trust Company.
4.6* Notice of Increase in Total Commitment, dated July 15, 1998,
by Bank Boston N.A.
5.1* Opinion of Akerman, Senterfitt & Eidson, P.A.
10.1* Stock Purchase Agreement dated August 15, 1997, among the
Company, Sam's and the shareholders of Sam's, together with
Amendment No.s 1 - 6.
10.2* Form of Unsecured Subordinated Promissory Notes -- Sam's
10.3* Form of Unsecured Convertible Subordinated Promissory
Note -- Sam's
10.4* Form of Unsecured Contingent Convertible Subordinated
Promissory Notes -- Sam's
10.5* Agreement, dated September 22, 1997, between the Company and
Gary L. Gabriel
10.6* Asset Purchase Agreement dated December 8, 1997 among
NationsRent of Ohio, Inc., R&R and the shareholder of R&R,
together with an Amendment dated December 10, 1997.
10.7* Form of Unsecured Subordinated Promissory Note -- R&R
10.8* Asset Purchase Agreement dated December 8, 1997, as amended,
among NationsRent of Indiana, Inc. and C&E, together with an
Amendment dated December 23, 1997.
10.9* Form of Unsecured Convertible Subordinated Promissory
Note -- C&E
10.10* Stock Purchase Agreement dated December 20, 1997, as
amended, among NationsRent of West Virginia, Inc., Titan and
the shareholders of Titan, together with an Amendment dated
December 31, 1997.
10.11* Form of Unsecured Convertible Subordinated Promissory
Notes -- Titan
10.12* Stock Purchase Agreement dated March 24, 1998 among the
Company, Bode-Finn and the shareholders of Bode-Finn,
together with Amendment No. 1 dated April 6, 1998 and
Amendment No. 2 dated April 17, 1998.
10.13* Form of Unsecured Convertible Subordinated Promissory
Notes -- Bode-Finn
10.14* Form of Warrant -- Bode-Finn
10.15* Registration Rights Agreement dated May 5, 1998 among the
Company, Bode-Finn, L.P. and Raymond E. Mason Foundation
10.16* Asset Purchase Agreement dated March 25, 1998 among
NationsRent of Indiana, Inc., RFL and the shareholder of RFL
10.17* Asset Purchase Agreement dated April 21, 1998 among
NationsRent of Florida, Inc. and Naples
10.18* Form of Unsecured Convertible Subordinated Promissory
Note -- Naples
10.19* Stock Purchase Agreement dated May 7, 1998 among the
Company, Jobs and the shareholders of Jobs
10.20* Form of Unsecured Subordinated Promissory Notes -- Jobs
10.21* Form of Unsecured Convertible Subordinated Promissory
Note -- Jobs
10.22* Asset Purchase Agreement dated May 14, 1998 among the
Company and General Rental
10.23* Stock Purchase Agreement dated May 30, 1998 among the
Company, J. Kelly and the shareholders of J. Kelly
</TABLE>
<PAGE> 204
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.24* Form of Unsecured Convertible Subordinated Promissory
Note -- J. Kelly
10.25* Form of Registration Rights Agreement among the Company and
the shareholders of J. Kelly
10.26* Asset Purchase Agreement dated June 7, 1998 among the
Company, Associated and the sole shareholder of Associated
10.27* Form of Unsecured Convertible Subordinated Promissory
Note -- Associated
10.28* Form of Registration Rights Agreement -- Associated
10.29* Form of Subscription Agreement, dated May 1998, between the
Company and certain subscribers
10.30* Form of NationsRent 1998 Stock Option Plan
21.1* Subsidiaries of the Company
23.1* Consent of Arthur Andersen LLP
23.3* Consent of Akerman, Senterfitt & Eidson, P.A. (included in
Exhibit 5.1 above)
24.1 Power of Attorney (previously filed)
27.1 Financial data schedule (previously filed)
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 1.1
Form of Underwriting Agreement
______ Shares of Common Stock
NATIONSRENT, INC.
FORM OF UNDERWRITING AGREEMENT
August __, 1998
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
NATIONSBANC MONTGOMERY SECURITIES LLC
As Representatives (the "Representatives") of the
several Underwriters named in
Schedule I attached hereto
c/o BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, N.Y. 10167
Ladies and Gentlemen:
NationsRent, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Company"), proposes, subject to the
terms and conditions stated herein, to issue and sell to the several
underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
________ shares (the "Firm Shares") of its common stock, par value $0.01 per
share (the "Common Stock") and, for the sole purpose of covering over-allotments
in connection with the sale of the Firm Shares, at the option of the
Underwriters, up to an additional _______ shares (the "Additional Shares") of
Common Stock. The Firm Shares and any Additional Shares purchased by the
Underwriters are referred to herein as the "Shares." The Shares are more fully
described in the Registration Statement referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
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(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and __________
amendments thereto, on Form S-1 (No. 333-56233), for the registration of the
Shares under the Securities Act of 1933, as amended (the "Act"). Such
registration statement, including the prospectus, financial statements and
schedules, exhibits and all other documents filed as a part thereof, as amended
at the time of effectiveness of the registration statement, including any
information deemed to be a part thereof as of the time of effectiveness pursuant
to paragraph (b) of Rule 430A of the Rules and Regulations of the Commission
under the Act (the "Regulations"), is herein called the "Registration Statement"
and the prospectus, in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations or filed as part of the Registration Statement at the
time of effectiveness if no Rule 424(b) filing is required, is herein called the
"Prospectus." The term "preliminary prospectus" as used herein means a
preliminary prospectus as described in Rule 430 of the Regulations.
(b) At the time the Registration Statement was first filed
with the Commission, at the time any amendment to the Registration Statement was
filed with the Commission, at the time of the effectiveness of the Registration
Statement or the effectiveness of any post-effective amendment to the
Registration Statement, at the time the Prospectus is first filed with the
Commission pursuant to Rule 424(b) of the Regulations, at the time any
supplement to or amendment of the Prospectus is filed with the Commission and at
the Closing Date and the Additional Closing Date, if any, (as hereinafter
defined), the Registration Statement and the Prospectus and any amendments
thereof and supplements thereto complied or will comply in all material respects
with the applicable provisions of the Act and the Regulations and did not or
will not contain an untrue statement of a material fact and did not or will not
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein (i) in the case of the Registration
Statement, not misleading and (ii) in the case of the Prospectus, in light of
the circumstances under which they were made, not misleading. When any related
preliminary prospectus was first filed with the Commission (whether filed as
part of the registration statement for the registration of the Shares or any
amendments thereto or pursuant to Rule 424(a) of the Regulations) and when any
amendment thereof or supplement thereto was first filed with the Commission,
such preliminary prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the Act and
the Regulations and did not contain an untrue statement of a material fact and
did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. No representation and warranty is
made in this subsection (b), however, with respect to any information contained
in or omitted from the Registration Statement or the Prospectus or any related
preliminary prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through the Representatives expressly
for use in connection with the preparation thereof. The Company acknowledges
that the statements set forth in the last paragraph of the cover page of the
Prospectus, in the paragraph on the
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inside front cover page of the Prospectus relating to possible stabilization
transactions, in the table listing Underwriters under the caption "Underwriting"
in the Prospectus and in the third and eighth paragraphs under the caption
"Underwriting" in the Prospectus constitute the only information furnished in
writing by or on behalf of any Underwriter expressly for use in any registration
statement relating to the Shares as originally filed, in the Registration
Statement or in any amendment thereof, any related preliminary prospectus or the
Prospectus or in any amendment thereof or supplement thereto, as the case may
be.
(c) Neither the Commission nor the "Blue Sky" or securities
authority of any jurisdiction has issued an order (a "Stop Order") suspending
the effectiveness of the Registration Statement, preventing or suspending the
use of any preliminary prospectus, the Prospectus, the Registration Statement or
any amendment or supplement thereto, refusing to permit the effectiveness of the
Registration Statement, or suspending the registration or qualification of the
Firm Shares or the Additional Shares, nor, to the knowledge of the Company, has
any of such authorities instituted or threatened to institute any proceedings
with respect to a Stop Order. As used in this Agreement, "knowledge" of the
Company means the knowledge of the officers of the Company after due inquiry
under the circumstances.
(d) Arthur Andersen LLP, who have certified the financial
statements and supporting schedules included in the Registration Statement and
whose reports are filed with the Commission as part of the Registration
Statement, are independent public accountants with regard to the Company and its
subsidiaries as required by the Act and the Regulations.
(e) Subsequent to the respective dates as of which information
is given in the Registration Statement (and the Prospectus), except as set forth
in the Registration Statement (and as to the representation made at the Closing
Date and the Additional Closing Date, the Prospectus), there has been no
material adverse change, or any development involving a prospective material
adverse change, in the business, prospects, properties (whether or not insured),
assets, earnings, operations, condition (financial or other) or results of
operations of the Company and its subsidiaries taken as a whole, whether or not
arising from transactions in the ordinary course of business, (any such event, a
"Material Adverse Effect"). Since the date of the latest balance sheet presented
in the Registration Statement (and, as to the representation made at the Closing
Date and the Additional Closing Date, the Prospectus), except as expressly
disclosed in the Registration Statement (and, as to the representation made at
the Closing Date and the Additional Closing Date, the Prospectus), neither the
Company nor any of its subsidiaries has (i) incurred or undertaken any
liabilities or obligations, direct or contingent, not in the ordinary course of
business that are material to the Company and its subsidiaries taken as a whole,
(ii) entered into any material transaction not in the ordinary course of
business and consistent with past practice (iii) entered into any agreement or
made any commitment to acquire any company or business that is material to the
Company and its subsidiaries taken as a whole or (iv) declared or paid any
dividend or made any distribution on any shares of its capital stock or
redeemed,
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purchased or otherwise acquired or agreed to redeem, purchase or otherwise
acquire any shares of its capital stock.
(f) The Company has the requisite corporate power and the
authority to enter into this Agreement, perform each of its obligations
hereunder and issue, sell and deliver the Shares to be sold by it hereunder.
This Agreement and the transactions contemplated herein have been duly and
validly authorized by the Company, and this Agreement has been duly and validly
executed and delivered by the Company and is a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except (i) as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting the enforcement of creditors rights generally and by general
equitable principles and (ii) to the extent that rights to indemnity and
contribution hereunder may be limited by federal or state securities laws or the
public policy underlying such laws.
(g) The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby (including the issuance, sale and delivery of the Shares by
the Company) do not and will not (i) conflict with or result in a breach of any
of the terms and provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) under, give rise
to any right to accelerate the maturity or require the prepayment of any
material obligation of the Company or any of its subsidiaries or require any
consent, or result in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries, pursuant to the terms of any agreement, instrument, franchise,
license or permit to which the Company or any of its subsidiaries is a party or
by which any of such corporations or their respective properties or assets may
be bound, or (ii) violate or conflict with any provision of the certificate of
incorporation or by-laws of the Company or any of its subsidiaries or any
judgment, decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their respective properties or assets.
(h) No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their respective properties or assets is
required for the valid execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby, including the
issuance, sale and delivery of the Shares to be issued, sold and delivered by
the Company hereunder, except the registration under the Act of the Shares and
such consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the Shares
by the Underwriters.
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(i) All of the outstanding shares of capital stock of the
Company are duly and validly authorized and issued, fully paid and
non-assessable, were issued in compliance with all applicable United States
federal and state securities laws and were not issued and are not now in
violation of or subject to any preemptive rights or, except as disclosed in the
Registration Statement, co-sale rights, registration rights, repurchase rights,
rights of first refusal or any other similar right. The Shares have been duly
and validly authorized and, when issued, delivered and sold in accordance with
this Agreement, will be duly and validly authorized issued and outstanding,
fully paid and non-assessable, and will not have been issued in violation of or
be subject to any preemptive rights, co-sale rights, transfer restrictions,
registration rights, repurchase rights, rights of first refusal or any similar
rights and will be free and clear of any pledges, liens, security interests,
charges, claims or encumbrances of any kind (other than those created by the
Underwriters). The Company had, at March 31, 1998, a duly authorized and
outstanding capitalization as set forth under the caption "Capitalization" in
the Registration Statement and as shall be set forth in the Prospectus. The
Common Stock, the Firm Shares and the Additional Shares conform to the
descriptions thereof contained in the Registration Statement and shall be as set
forth in the Prospectus. There is no commitment, plan or arrangement to issue,
and no outstanding option, warrant, security or other right or instrument which
requires, permits or provides for the issuance, subscription or purchase of, any
share of capital stock of the Company or any security or other instrument which
by its terms is convertible into, exercisable for, or exchangeable for capital
stock of the Company, except as accurately described in all material respects in
the Registration Statement. Except as described in the Registration Statement or
as may be required by applicable securities laws, there are no restrictions on
the voting or transfer of any shares of capital stock of the Company.
(j) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation. Each of the Company and its
subsidiaries is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business makes such
qualification necessary, except for those failures to be so qualified or in good
standing which could not, individually or in the aggregate, have a Material
Adverse Effect, and neither the Company nor any of its subsidiaries has received
any claim or notice from any official in any jurisdiction that it is required to
be qualified or licensed to do business in any jurisdiction in which it is not
so qualified or licensed. Each of the Company and its subsidiaries has all
requisite power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits of
and from all public, regulatory or governmental agencies and bodies, to own,
lease and operate its properties and conduct its business as now being conducted
and as described in the Registration Statement and as shall be described in the
Prospectus, and the Company has not received any notice of any proceedings
relating to the revocation or modification of any thereof, and no such consent,
approval, authorization, order, registration, qualification, franchise license
or permit contains
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a materially burdensome restriction that is not accurately disclosed in all
material respects in the Registration Statement and the Prospectus.
(k) All of the outstanding shares of capital stock of each
subsidiary have been duly and validly authorized and issued, are fully paid and
non-assessable and were not issued and are not now in violation of or subject to
any preemptive rights, repurchase rights or rights of first refusal and are
owned directly by the Company, free and clear of any lien, pledge, encumbrance,
claim, security interest, restriction on transfer, stockholders' agreement,
voting trust or other defect of title whatsoever. Except for the wholly-owned
subsidiaries of the Company listed on Exhibit 21 to the Registration Statement,
the Company owns no controlling interest in any other corporation, partnership
or other entity and does not directly or indirectly own any shares of stock or
any other securities of any corporation or have any equity interest in any firm,
partnership, association or other entity, other than minority investments in
marketable securities that may be made in the ordinary course of business as a
part of its investment of excess cash assets.
(l) Except as described in the Registration Statement and as
shall be described in the Prospectus, there is no action, suit, investigation or
proceeding, governmental or otherwise, to which the Company or any of its
subsidiaries is a party or to which any property of the Company or any of its
subsidiaries is subject or which is pending or, to the knowledge of the Company,
contemplated against the Company or any of its subsidiaries which (i) if
adversely decided or concluded, could reasonably be expected to have a Material
Adverse Effect, (ii) is required to be disclosed in the Registration Statement
or (iii) seeks to restrain, enjoin, prevent the consummation of, or otherwise
challenge the issuance of, the Shares or the execution and delivery of this
Agreement or any of the other transactions contemplated hereby, or questions the
legality or validity of any such transactions or that seeks to recover damages
or obtain other relief in connection with any of such transactions.
(m) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares or otherwise.
(n) The financial statements, including the notes thereto, and
supporting schedules included in the Registration Statement and as will be set
forth in the Prospectus present fairly the financial condition, results of
operations, stockholders' equity and cash flows and other information purported
to be shown therein of the Company, its subsidiaries and its predecessor and the
businesses acquired by the Company at the dates and for the periods indicated
present fairly the information required to be stated therein. Such financial
statements and supporting schedules have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, and are in accordance in all material respects with the books
and records of the Company, its
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subsidiaries and its predecessor and the businesses acquired by the Company,
respectively. No other financial statements or supporting schedules are required
by Form S-1 to be included in the Registration Statement or the Prospectus. The
financial data set forth in the Registration Statement and as will be set forth
in the Prospectus under the captions "Prospectus Summary -- Summary Consolidated
Historical and Pro Forma Financial Data", "Capitalization", "Selected
Consolidated Historical and Financial Information and Operations Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" fairly present, on the basis stated in the Registration Statement
and as will be stated in the Prospectus, the information set forth therein and
have been compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement and as will be set forth in
the Prospectus. The pro forma and "as adjusted" financial information included
under the captions "Prospectus Summary - Summary Consolidated Historical and Pro
Forma Financial Data", "Capitalization", "Selected Consolidated Historical and
Pro Forma Financial Information and Operations Data" and "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" and
elsewhere in the Registration Statement and as will be included in the
Prospectus that gives effect to the issuance of the Shares, the application of
the net proceeds therefrom and the other transactions and events specified
therein presents fairly the information contained therein, has been properly
compiled on the basis of the assumptions set forth with respect thereto, and the
assumptions used in the preparation thereof are reasonable, the pro forma
adjustments to the historical figures have been properly applied to such figures
and such pro forma financial information complies in all material respects with
the applicable accounting requirements of the Commission. All other financial
information and statistical data set forth in the Registration Statement and as
will be set forth in the Prospectus are, in all material respects, accurately
presented and, in the case of such financial information, has been prepared on
an accounting basis consistent with the financial statements included in the
Registration Statement and as will be included in the Prospectus.
(o) Each of the Company and its subsidiaries has good and
marketable title to all the properties and assets reflected as owned in the
financial statements (or elsewhere) in the Registration Statement and as will be
set forth in the Prospectus, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except (i) those, if any, reflected in the financial
statements, or (ii) those which are not material in amount and do not adversely
affect the use made and proposed to be made of such property by the Company and
its subsidiaries. Each of the Company and its subsidiaries holds its leased
properties under valid, subsisting and enforceable leases, with such exceptions
as are not, individually or in the aggregate, material and do not, individually
or in the aggregate, interfere with the use made or proposed to be made of such
properties by the Company or any of its subsidiaries. Except as disclosed in the
Registration Statement and as will be disclosed in the Prospectus, each of the
Company and its subsidiaries owns or leases all such properties as are necessary
to its operations as now conducted or as proposed to be conducted.
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(p) The Company is not, and upon consummation of the
transactions contemplated hereby will not be, subject to registration as an
"investment company" or an entity "controlled by" an "investment company" within
the meaning of Investment Company Act of 1940 and the rules and regulations
promulgated thereunder.
(q) The Company and each of its subsidiaries own or possess
adequate licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights, technology and know-how necessary to conduct the
business now or proposed to be conducted by the Company and each of its
subsidiaries as described in the Registration Statement and as will be described
in the Prospectus, except for those patents, trademarks, service marks, trade
names, copyrights, technology and know-how the failure to own or have the right
to use would not have a Material Adverse Effect, and, except as disclosed in the
Registration Statement and as will be disclosed in the Prospectus, neither the
Company nor any of its subsidiaries has received any notice of infringement of
or conflict with (or knows of such infringement of or conflict with) rights of
others with respect to any patents, trademarks, service marks, trade names,
copyrights or know-how; and to the knowledge of the Company, the Company and
each of its subsidiaries do not in the conduct of their business as now
conducted or proposed to be conducted, infringe or conflict with any such rights
of any third party.
(r) There are no contracts, indentures, mortgages, loan
agreements, notes, leases or other agreements or instruments or other documents
(collectively, the "Documents") required to be described or referred to in, or
filed with, the Registration Statement and, in respect of the representation
made at the Closing Date and the Additional Closing Date, the Prospectus, other
than those described or referred to therein or filed as exhibits thereto; all
such descriptions are accurate in all material respects and present fairly the
information required to be described therein. All such Documents to which the
Company is a party have been duly authorized, executed and delivered by the
Company, constitute valid and binding agreements of the Company and are
enforceable against the Company in accordance with the terms thereof, except as
the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
(s) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business), or
guarantees of indebtedness by the Company or any of its subsidiaries to or for
the benefit of any of the officers or directors of the Company or any of its
subsidiaries or any of the members of the families of any of them, and there are
no business relationships or related-party transactions involving the Company or
any subsidiary or any other person required to be described in the Registration
Statement and the Prospectus, except as disclosed in the Registration Statement
and as will be disclosed in the Prospectus; all such descriptions are accurate
in all material respects and present fairly the information required to be
described.
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(t) Each of the Company and its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(u) Neither the Company nor any of its subsidiaries is in
violation or breach of, or in default (nor has any event occurred which with
notice, or lapse of time, or both, would constitute a default) under, any
contract, agreement, indenture, loan or other agreement, instrument, mortgage,
note, permit, lease, license, arrangement or understanding to which the Company
or any of its subsidiaries is a party or by which the Company, any of its
subsidiaries or any of their respective properties may be bound where such
default, either individually or together with all such other defaults, could
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the ability of the Company to perform its obligations hereunder. Each
such contract, agreement, indenture, loan or other agreement, instrument,
mortgage, note, permit, lease, license, arrangement and understanding is in full
force and effect and is the legal, valid, and binding obligation of the Company
or one of its subsidiaries, as the case may be, and, to the knowledge of the
Company, the other parties thereto and is enforceable against the Company or one
of its subsidiaries, as the case may be, and, to the knowledge of the Company,
against the other parties thereto in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting the
enforcement of creditors generally and by general equity principles. Each of the
Company and each of its subsidiaries enjoys peaceful and undisturbed possession
under all material leases and material licenses under which the Company and its
subsidiaries are operating. Except as disclosed in the Registration Statement,
neither the Company nor any of its subsidiaries is a party to or bound by any
contract, agreement, indenture, loan or other agreement, instrument, mortgage,
note, permit, lease, license, arrangement or understanding, or subject to any
charter or other restriction, which has had or is reasonably expected in the
future to have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries is in violation or breach of, or in default with respect to, any
term of its respective certificate of incorporation or bylaws. Neither the
Company nor any of its subsidiaries is in violation of, or in default with
respect to, any law, rule, regulation, order, judgment or decree, except such as
are described in the Registration Statement and as will be described in the
Prospectus or such as, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(v) The Company has obtained from each of the Company's
executive officers, directors and security holders set forth in Schedule II a
written agreement, in a form
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or forms approved by the Representatives and their counsel (a "Lock-Up
Agreement"), that for a period of 180 days from the date of the Prospectus each
such holder will not, without the prior written consent of Bear, Stearns & Co.
Inc., offer, sell, agree to sell, grant any option for the sale of or otherwise
dispose of (other than (i) by gift provided that the donee agrees in writing
with the Company to be bound by the terms of such written agreement and (ii)
with respect to the persons whose names are marked with an asterisk on Schedule
II, by pledge in a bona fide loan transaction with an unaffiliated third party
lender or an affiliated lender provided that the lender agrees in writing with
the Company to be bound by the terms of such written agreement) directly or
indirectly any shares of capital stock (or any security convertible into,
exercisable for or exchangeable for capital stock) of the Company now owned by
such holder.
(w) The Common Stock has been approved for listing on the New
York Exchange, subject to official notice of issuance.
(x) Except as described in the Registration Statement and as
will be described in the Prospectus, (i) no labor dispute with the employees of
the Company or any of its subsidiaries exists or, to the knowledge of the
Company, is threatened and (ii) the Company is not aware of any labor
disturbance by the employees of any of its significant manufacturers, suppliers,
customers or contractors, that could reasonably be expected in the case of both
(i) and (ii) to have a Material Adverse Effect.
(y) Except as described in the Registration Statement and as
will be described in the Prospectus, (i) the Company is not a party to or bound
by any stockholders agreements or voting trusts with respect to any securities
of the Company and (ii) there are no contracts, agreements or understandings
between the Company or any of its subsidiaries and any person or entity granting
such person or entity the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company owned or
to be owned by such person or entity or to require the Company to include such
securities in the securities registered pursuant to the Registration Statement.
(z) Except as disclosed in the Registration Statement and as
will be disclosed in the Prospectus, neither the Company nor any of its
subsidiaries is in material violation of any federal, state or local law or
regulation relating to occupational safety and health or to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including without limitation, laws, codes and regulations relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous materials or substances, solid
or hazardous wastes, petroleum and petroleum products (collectively, "Materials
of Environmental Concern"), or otherwise relating to the manufacture,
processing, distribution, use, generation, treatment, storage, disposal,
transport or handling of Materials of Environment Concern, underground or above
ground storage tanks and related piping, and emissions, discharges, releases or
threatened
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releases therefrom and damages to natural resources (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations required for
the operation of the business of the Company or its subsidiaries under
applicable Environmental Laws, or noncompliance with the terms and conditions
thereof, nor has the Company or any of its subsidiaries received any written
communication, whether from a governmental authority, citizens group, employee
or otherwise, that alleges that the Company or any of its subsidiaries is in
violation of any Environmental Law; (ii) there is no claim, action or cause of
action filed with a court or governmental authority, no investigation with
respect to which the Company has received written notice, and no written notice
by any person or entity alleging potential liability for investigatory costs,
clean-up costs, governmental responses costs, natural resources damages,
property damages, personal injuries, attorneys' fees or penalties arising out
of, based on or resulting from the presence, or release into the environment, of
any Material of Environmental Concern at any location owned, leased, controlled
or operated by the Company or any of its subsidiaries, now or in the past
(collectively, "Environmental Claims"), pending or, to the best knowledge of the
Company, threatened against the Company or any of its subsidiaries or any person
or entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed either contractually or by operation of
law; (iii) to the knowledge of the Company, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of its subsidiaries or against
any person or entity whose liability for any Environmental Claim the Company or
any of its subsidiaries has retained or assumed either contractually or by
operation of law; (iv) the Company and each of its subsidiaries have received
all permits, licenses or other approvals required under applicable federal,
state and local occupational safety and health and Environmental Laws and
regulations to conduct their respective businesses; and (v) the Company and each
of its subsidiaries is in compliance with all terms and conditions of any such
permits, licenses or approvals, except any such violation of law or regulation,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
which could not, individually or together with all such other violations or
failures, have a Material Adverse Effect.
(aa) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the course of
which it identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such review and the
amount of its established reserves, the Company has reasonably concluded that
such
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associated costs and liabilities would not, individually or in the aggregate,
have a Material Adverse Effect.
(bb) The Company, either directly or through one or more of
its subsidiaries, maintains reasonably adequate insurance with respect to its
business and properties and the business and properties of its subsidiaries.
(cc) The Company has complied and will comply with all
provisions of Florida Statutes Section 517.075 (Chapter 92-198, Laws of
Florida). Neither the Company, nor any affiliate thereof, does business with the
government of Cuba or with any person or affiliate located in Cuba.
(dd) Each of the Company and its subsidiaries has (i) filed
all federal, state and foreign tax returns which are required to be filed
through the date hereof, and all such tax returns are true, complete and
accurate in all material respects, or (ii) received valid extensions thereof and
have paid all taxes shown on such returns and all assessments received by them
except (a) for such taxes, if any, as are being contested in good faith and as
to which adequate reserves have been provided, or (b) where, in the case of
state and local and foreign tax returns, the failure to file in clause (i), or
extend the due date of or pay the same in clause (ii), in the aggregate, could
not reasonably be expected to have a Material Adverse Effect; the Company has no
knowledge of any tax deficiency which has been or might be asserted against the
Company or any of its subsidiaries which could have a Material Adverse Effect;
to the Company's knowledge, all tax liabilities are adequately provided for on
the consolidated books of the Company.
(ee) The Company and its subsidiaries and any "employee
benefit plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
all material respects with ERISA. "ERISA Affiliate" means, with respect to the
Company or a subsidiary, any member of any group of organizations described in
Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended,
and the regulations and published interpretations thereunder (the "Code") of
which the Company or such subsidiary is a member. No "reportable event" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the Company,
its subsidiaries or any of their ERISA Affiliates. No "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates, if such "employee benefit plan" were terminated, would have any
"amount of unfunded benefit liabilities" (as defined under ERISA). Neither the
Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained
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by the Company, its subsidiaries or any of their ERISA Affiliates that is
intended to be qualified under Section 401(a) of the Code is so qualified and
nothing has occurred, whether by action or failure to act, which would cause the
loss of such qualification.
(ff) Year 2000 Disclosure. The Company has made all
disclosures in the Registration Statement and the Prospectus required by the
Commission's Staff Legal Bulletin No. 5 related to Year 2000 compliance.
2. Purchase, Sale and Delivery of the Shares.
(a) The Company agrees to sell to the Underwriters and, on the
basis of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set forth, each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a price per share of $_______, the number of Firm Shares set forth opposite its
name in Schedule I hereto plus any additional number of Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 9 hereof.
(b) Delivery of certificates for the Firm Shares and payment
of the purchase price shall be made at the office of Bear, Stearns & Co. Inc.,
245 Park Avenue, New York, New York 10167, or at such other place as shall be
agreed upon by the Representatives and the Company, at 10:00 A.M. New York City
time, on the third or fourth business day (as permitted under Rule 15c6-1 under
the Exchange Act) (unless postponed in accordance with the provisions of Section
9 hereof) following the date of the effectiveness of the Registration Statement
(or, if the Company elects to rely on Rule 430A of the Regulations, the third or
fourth day (as permitted under Rule 15c6-1 under the Exchange Act) after the
determination of the initial public offering price of the Shares), or such other
time not later than ten business days after such date as shall be agreed upon by
the Representatives and the Company (such time and date of payment and delivery
being herein called the "Closing Date"). Payment shall be made to the Company in
immediately available funds by wire transfer, against delivery to the
Representatives for the respective accounts of the Underwriters of certificates
for the Firm Shares to be purchased by them. Certificates for the Firm Shares
shall be registered in such name or names and in such authorized denominations
as the Representatives may request in writing at least two full business days
prior to the Closing Date. The Company will permit the Representatives to
examine and package such certificates for delivery at least one full business
day prior to the Closing Date at the office of Bear, Stearns & Co. Inc., 245
Park Avenue, New York, New York 10167.
(c) In addition, the Company hereby grants to the several
Underwriters the option (the "Option") to purchase all or any portion of the
Additional Shares at the same purchase price per share to be paid by the several
Underwriters to the Company for the Firm Shares as set forth in Section 2(a),
for the sole purpose of covering over-allotments in the sale of Firm Shares by
the several Underwriters. The number of Additional Shares to be
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<PAGE> 14
purchased from the Company by each Underwriter (as adjusted by the
Representatives to eliminate fractions) shall be determined by multiplying the
number of Additional Shares to be sold by the Company by a fraction, the
numerator of which is the number of Firm Shares purchased by such Underwriter
and the denominator of which is the aggregate number of Firm Shares purchased by
all the Underwriters from the Company hereunder, plus any additional number of
Shares which the Underwriters may become obligated to purchase pursuant to the
provisions of Section 9 hereof. The Option may be exercised at any time, in
whole or in part, on or before the thirtieth day following the date of this
Agreement, by written notice by the Representatives to the Company in the manner
specified in Section 12 hereof. Such notice shall set forth the aggregate number
of Additional Shares as to which the Option is being exercised and the date and
time, as reasonably determined by the Representatives, when the Additional
Shares are to be delivered (such date and time being herein sometimes referred
to as the "Additional Closing Date"); provided, however, that the Additional
Closing Date shall not be earlier than the Closing Date or earlier than the
second full business day after the date on which the Option shall have been
exercised nor later than the eighth full business day after the date on which
the Option shall have been exercised (unless such time and date are postponed in
accordance with the provisions of Section 9 hereof). Certificates for the
Additional Shares shall be registered in such name or names and in such
authorized denominations as the Representatives may request in writing at least
two full business days prior to the Additional Closing Date. The Company will
permit the Representatives to examine and package such certificates for delivery
at least one full business day prior to the Additional Closing Date at the
office of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167.
Delivery of the certificates for the Additional Shares shall
be made to the Representatives, for the respective accounts of the Underwriters,
against payment by the Representatives, on behalf of the respective
Underwriters, for the Additional Shares in immediately available funds by wire
transfer at the office of Bear, Stearns & Co. Inc., 245 Park Avenue, New York,
New York 10167, or such other location as may be mutually acceptable.
(d) The Underwriters shall not be obligated to purchase any
Firm Shares from the Company except upon tender to the Underwriters by the
Company of all of the Firm Shares. The Company shall not be obligated to sell or
deliver Firm Shares except upon tender of payment by the Underwriters for all
the Firm Shares agreed to be purchased by them hereunder.
3. Offering. As soon after the Registration Statement becomes effective
as the Representatives deem it advisable to do so, the Underwriters propose to
offer the Shares for sale to the public upon the terms set forth in the
Prospectus.
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<PAGE> 15
4. Covenants of the Company. The Company covenants and agrees with the
Underwriters that:
(a) If the Registration Statement has not yet been declared
effective the Company will use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
possible. If the Registration Statement has become or becomes effective pursuant
to Rule 430A or the filing of the Prospectus is otherwise required under Rule
424(b), the Company will file the Prospectus (properly completed) pursuant to
Rule 424(b) within the prescribed time period and will provide evidence
satisfactory to the Representatives of such timely filing.
The Company will notify you immediately (and, if requested by
you, will confirm such notice in writing) (i) when the Registration Statement
and any amendments thereto become effective, (ii) of any request by the
Commission for any amendment of or supplement to the Registration Statement or
the Prospectus or for any additional information, (iii) of the mailing or the
delivery to the Commission for filing of any amendment of or supplement to the
Registration Statement or the Prospectus, (iv) of the issuance by the Commission
of any Stop Order suspending the effectiveness of the Registration Statement or
any post-effective amendment thereto or of the initiation, or the threatening,
of any proceedings therefor, (v) of the receipt of any comments or other
communication from the Commission and (vi) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for that purpose. If the Commission shall propose or enter a Stop Order at any
time, the Company will make every reasonable effort to prevent the issuance of
any such Stop Order and, if issued, to obtain the lifting of such order as soon
as possible. The Company will not file any amendment to the Registration
Statement or any amendment of or supplement to the Prospectus (including the
prospectus required to be filed pursuant to Rule 424(b)) that differs from the
prospectus on file at the time of the effectiveness of the Registration
Statement before or after the effective date of the Registration Statement to
which the Representatives shall reasonably object in writing after being timely
furnished in advance a copy thereof.
(b) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Act, any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would, in the
judgment of the Representatives or the Company include an 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 the light of the circumstances
under which they were made, not misleading, or if it shall be necessary at any
time to amend the Registration Statement or supplement the Prospectus to comply
with the Act or the Regulations, the Company will notify the Representatives
promptly and prepare and file with the Commission an appropriate amendment or
supplement (in form and substance satisfactory to the Representatives) that will
correct such statement or omission
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<PAGE> 16
and will use its best efforts to have any such amendment to the Registration
Statement declared effective as soon as possible.
(c) The Company will promptly deliver to the Representatives
two signed copies of the Registration Statement, including exhibits and all
amendments thereto, and the Company will promptly deliver to those persons,
including the Representatives, whom the Representatives identify to the Company
such number of copies of any preliminary prospectus, the Prospectus, the
Registration Statement, and all amendments of and supplements to such documents,
if any, as the Representatives may reasonably request. The Company consents to
the respective use of any preliminary prospectus or the Prospectus or any
amendment or supplement thereto by the Representatives and by all dealers to
whom the Shares may be sold, in connection with the offering or sale of the
Shares, as appropriate, and as to the Prospectus or any amendment or supplement
thereto during such period of time thereafter as the Prospectus is required by
law to be delivered in connection therewith.
(d) The Company will take such action as the Representatives
may reasonably request, at or prior to the time of effectiveness of the
Registration Statement, to qualify or register the Shares for offering and sale
under the securities or "Blue Sky" laws relating to the offering or sale of the
Shares of such jurisdictions as the Representatives may designate and to
maintain such qualifications and registrations in effect for so long as required
for the distribution thereof; except that in no event shall the Company be
obligated in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process.
(e) The Company will make generally available (within the
meaning of Section 11 (a) of the Act) to its security holders and to the
Representatives as soon as practicable, but not later than 45 days after the end
of its fiscal quarter in which the first anniversary date of the effective date
of the Registration Statement occurs, an earnings statement of the Company (in
form complying with the provisions of Rule 158 of the Regulations and in such
numbers as the Representatives shall reasonably request) covering a period of at
least twelve consecutive months beginning on the first day of the first full
calendar month after the effective date of the Registration Statement.
(f) During the period of 180 days from the date of the
Prospectus, the Company will not, without the prior written consent of Bear,
Stearns & Co. Inc., issue, sell, offer or agree to sell, grant any option for
the sale of, or otherwise dispose of, directly or indirectly, any Common Stock
(or any securities convertible into, exercisable for or exchangeable for Common
Stock) other than the sale of the Shares hereunder, the issuance of shares of
Common Stock to third parties not affiliated with the Company (or, in the case
of a third party affiliated with the Company, provided that the third party
agrees in writing with the Company to be bound by the terms of a Lock-Up
Agreement) as consideration for the Company's acquisition from such third
parties of equipment rental companies, the issuance of options pursuant to the
Company's 1998 Stock Option Plan and the issuance of
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<PAGE> 17
shares of Common Stock upon the exercise of the options (i) granted prior to the
date hereof to the persons specified on Schedule II and (ii) granted to
non-employee directors, and the Company will obtain and deliver to the
Representatives concurrently with the execution of this Agreement the Lock-Up
Agreements specified in Section 1(w).
(g) The Company will furnish to its stockholders as soon as
practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders' equity and cash flow of
the Company certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), summary financial information of the Company for such
quarter in reasonable detail.
(h) During a period of three years from the effective date of
the Registration Statement, the Company will furnish to the Representatives
copies of all reports or other communications (financial or other) furnished to
stockholders, and deliver to the Representatives as soon as they are available,
copies of any reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of securities
of the Company is listed.
(i) The Company will apply the proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.
(j) The Company will comply with all registration, filing and
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which may from time to time be applicable to the Company.
(k) The Company will comply with all provisions of all
undertakings contained in the Registration Statement.
(l) Prior to the Closing Date or the Additional Closing Date,
as the case may be, the Company will not issue any press release or other
communication directly or indirectly and will not hold any press conference with
respect to the Company, or its business, prospects, properties, assets,
earnings, condition (financial or other), results of operations or this offering
without the prior consent of Bear, Stearns & Co. Inc., which consent will not be
unreasonably withheld or delayed.
5. Payment of Expenses. Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Registration
Statement, as originally filed and all amendments thereof (including all
exhibits thereto), any preliminary prospectus, the Prospectus and any
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<PAGE> 18
amendments thereof or supplements thereto (including, without limitation, fees
and expenses of the Company's accountants and counsel), the underwriting
documents (including this Agreement, the Agreement Among Underwriters and the
Selling Agreement) and all other documents related to the public offering of the
Shares (including those supplied to the Underwriters in quantities as
hereinabove stated), (ii) the issuance, transfer and delivery of the Shares to
the Underwriters, including any transfer or other taxes payable thereon, (iii)
the qualification of the Shares under state or foreign securities or Blue Sky
laws, including the costs of printing and mailing a preliminary and final "Blue
Sky Survey" and the fees of counsel for the Underwriters and such counsel's
disbursements in relation thereto, (iv) listing the Shares on the New York Stock
Exchange, (v) filing fees of the Commission and the National Association of
Securities Dealers, Inc.; (vi) printing certificates representing the Shares and
(vii) the cost and charges of any transfer agent or registrar.
6. Conditions of Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject, in the Representatives' discretion, to the
condition that all the representations and warranties of the Company herein
contained are true and correct, as of the date hereof and as of the Closing Date
(for purposes of this Section 6 "Closing Date" shall refer to the Closing Date
for the Firm Shares and any Additional Closing Date, if any, for the Additional
Shares), to the absence from any certificates, opinions, written statements or
letters furnished to the Representatives or to Paul, Hastings Janofsky & Walker
LLP ("Underwriters' Counsel") pursuant to this Section 6 of any qualification or
limitation not previously approved in writing by the Representatives, to the
performance by the Company of its obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 p.m., New York City time on the date of this Agreement, or at
such later time and date as shall have been consented to in writing by the
Representatives; if the Company shall have elected to rely upon Rule 430A of the
Regulations, the Prospectus shall have been filed with the Commission in a
timely fashion pursuant to Rule 424(b) under the Act within the applicable time
period prescribed in the Regulations for such filing in accordance with Section
4(a) hereof, and, at or prior to the Closing Date no Stop Order shall have been
issued and no proceedings therefor shall have been initiated or threatened by
the Commission or the authorities of any such jurisdiction; (ii) all requests
for additional information on the part of the Commission shall have been
complied with to the Commission's reasonable satisfaction and (iii) after the
date hereof, no amendment or supplement to the Registration Statement or the
Prospectus shall have been filed unless a copy thereof was first submitted to
the Underwriters and the Underwriters did not reasonably object thereto.
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<PAGE> 19
(b) At the Closing Date, the Representatives shall have
received the opinion of Akerman, Senterfitt & Eidson, counsel for the Company,
dated the Closing Date addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel to the effect that:
(i) Each of the Company and its subsidiaries has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation. Each of
the Company and its subsidiaries is duly qualified and in good standing
as a foreign corporation in each jurisdiction in which the character or
location of its properties (owned, leased or licensed) or the nature or
conduct of its business makes such qualification necessary, except for
those failures to be so qualified or in good standing which would not,
individually or in the aggregate, have a Material Adverse Effect. Each
of the Company and its subsidiaries has all requisite power and
authority to own, lease and operate its properties and conduct its
business as now being conducted and as described in the Registration
Statement and the Prospectus.
(ii) All of the outstanding shares of capital stock
of each subsidiary of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable, and to the knowledge of
such counsel were not issued and to the knowledge of such counsel are
not now in violation of or subject to any preemptive rights, repurchase
rights or rights of first refusal and are owned directly by the
Company, free and clear of any lien, pledge, encumbrance, claim,
security interest, restriction on transfer, stockholders' agreement,
voting trust or other defect of title whatsoever.
(iii) The Company has authorized capital stock as set
forth in the Registration Statement and the Prospectus under the
caption "Capitalization." All the outstanding shares of capital stock
of the Company are duly authorized and validly issued, are fully paid
and non-assessable, were issued in accordance with all applicable
United States federal and state securities laws and to the knowledge of
such counsel were not issued and are not now in violation of or subject
to any preemptive rights or, except as disclosed in the Prospectus,
co-sale rights, registration rights, repurchase rights, rights of first
refusal or any other similar right. The Shares have been duly
authorized and when issued, delivered and sold by the Company against
payment therefor in accordance with this Agreement will be duly
authorized, validly issued and outstanding, fully paid and
non-assessable and to the knowledge of such counsel will not be subject
to any preemptive rights, co-sale rights, transfer restrictions,
registration rights, rights of first refusal or any similar rights and
will be free and clear of any pledges, liens, security interests,
charges, claims or encumbrances of any kind (other than those created
by the Underwriters). Upon delivery of certificates evidencing the
Shares and payment therefor as contemplated
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<PAGE> 20
hereby, the Underwriters will acquire the Firm Shares (and the
Additional Shares, if any) free of any adverse claim (as such term is
defined in Section 8-302 of the New York Uniform Commercial Code),
assuming the Underwriters are acting in good faith and without notice
of any adverse claim. The Common Stock, the Firm Shares and the
Additional Shares conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus
under the caption "Description of Capital Stock." The form of
certificate evidencing the Shares to be delivered hereunder is in due
and proper form under Delaware law.
(iv) Except as disclosed in or described in the
Prospectus, to the knowledge of such counsel there is no commitment,
plan, or arrangement to issue and no outstanding options, warrants or
other rights requiring, permitting or providing for the issuance of,
and no written commitments entered into by the Company to issue,
subscribe or purchase any shares of capital stock of the Company or any
security or other instrument convertible into exercisable for or
exchangeable for capital stock of the Company. Except as disclosed in
the Prospectus, to the knowledge of such counsel there is outstanding
no security or other instrument which by its terms is convertible into
or exchangeable for capital stock of the Company. Except as described
in the Prospectus, to the knowledge of such counsel there are no
restrictions on the voting or transfer of shares of capital stock of
the Company.
(v) Except as described in the Registration
Statement, (a) the Company is not a party to or bound by any
stockholders' agreements or voting trusts with respect to any
securities of the Company and (b) there are no contracts, written
agreements or written understandings between the Company or any of its
subsidiaries and any person or entity granting such person or entity
the right to require the Company to file a registration statement under
the Act with respect to any securities of the Company owned or to be
owned by such person or entity or to require the Company to include
such securities in the securities registered pursuant to the
Registration Statement in the Registration Statement.
(vi) The Common Stock and the Shares to be sold
under this Agreement have been duly authorized for listing on the New
York Stock Exchange, subject to official notice of issuance.
(vii) The Company has the requisite corporate power
and authority to enter into this Agreement, perform each of its
obligations hereunder, and to issue, sell and deliver the Shares to the
Underwriters. This Agreement and the transactions contemplated herein
have been duly and validly authorized, executed and delivered by the
Company.
(viii) To the knowledge of such counsel based upon a
certificate of an appropriate executive officer of the Company, there
is no action, suit,
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<PAGE> 21
investigation or proceeding, governmental or otherwise, before any
court or before or by any public, regulatory or governmental agency or
body pending or threatened against or involving any of the properties
or business of, the Company or any of its subsidiaries which is of a
character required to be disclosed in the Registration Statement and
the Prospectus which has not been properly disclosed therein.
(ix) The execution, delivery, and performance by the
Company of this Agreement and the consummation of the transactions
contemplated hereby (including the issuance, sale and delivery of the
Shares by the Company) do not and will not (A) conflict with or result
in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, give rise to any right to accelerate the
maturity, or require the prepayment of any material obligation, known
to such counsel, of the Company or any of its subsidiaries or require
any consent, or result in the creation or imposition of any material
lien, charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to, any agreement, instrument,
franchise, license or permit known to such counsel to which the Company
or any of its subsidiaries is a party or by which any of such
corporations or their respective properties or assets may be bound or
(B) violate or conflict with any provision of the certificate of
incorporation or by-laws of the Company or any of its subsidiaries, or
(c) to the knowledge of such counsel, violate or conflict with any
judgment, decree, order, statute, rule or regulation of any court or
any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their respective properties or assets, except for such violations or
conflicts as would not have a Material Adverse Effect.
(x) No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
court or any public, governmental, or regulatory agency or body of the
United States or the State of Florida or under the Delaware General
Corporation Law having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or assets is
required for the valid execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby,
except for (1) such as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the Shares
by the Underwriters (as to which such counsel need express no opinion)
and (2) such as have been made or obtained under the Act.
(xi) The Registration Statement and the Prospectus
and any amendments thereof or supplements thereto (other than the
financial statements and schedules and other financial data included or
incorporated by reference therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Act and the Regulations, except that such counsel
expresses no opinion, view or belief as to (a) the financial statements
or
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<PAGE> 22
related notes or schedules or other financial information included in
or excluded from the Registration Statement, the Prospectus or any
amendment or supplement to the Registration Statement or the
Prospectus, or (b) the accuracy, completeness or fairness of the
statements contained in the Registration Statement, the Prospectus and
each amendment or supplement to the Registration Statement and the
Prospectus except as and to the extent expressly set forth in the
paragraph following paragraph (xvi) below.
(xii) The Registration Statement is effective under
the Act, and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement or any
post-effective amendment thereof has been issued, no proceedings
therefor have been initiated or threatened by the Commission and all
filings required by Rule 424(b) under the Act have been made.
(xiii) To the knowledge of such counsel, the Company
is not in violation or breach of, or in default (nor has any event
occurred which with notice, or lapse of time, or both, would constitute
a default) under any contract, agreement, indenture, loan or other
agreement, instrument, mortgage, note, permit, lease, license,
arrangement or understanding to which the Company or any of its
subsidiaries is a party or by which the Company, any of its
subsidiaries or any of their respective properties may be bound where
such default could reasonably be expected to have a Material Adverse
Effect or a material adverse effect on the ability of the Company to
perform its obligations hereunder. The Company is not in violation or
breach of, or in default with respect to, any term of its certificate
of incorporation or bylaws.
(xiv) The statements under the caption "Description
of Capital Stock" in the Prospectus, insofar as such statements
constitute summaries of the legal matters and documents referred to
therein, fairly present the information called for with respect to such
legal matters and documents and fairly summarize such legal matters and
documents.
(xv) To the knowledge of such counsel, the Company
and each of its subsidiaries has all consents, approvals,
authorizations, orders, registrations, qualifications, licenses and
permits as may be required of it under any applicable federal, state or
local laws or regulations to own, lease and operate its properties and
to conduct its business as described in the Prospectus. To the
knowledge of such counsel, the Company is in compliance with all terms
and conditions of any such consent, approval, order, registration,
qualification, license or permit, except for such violations of law or
regulation, such failure to receive required consent, approval, order,
registration, qualification, permit or such failure to comply with the
terms and conditions of such consent, approval, order, registration,
qualification, license or permit, as would not, individually or in the
aggregate, have a Material Adverse Effect.
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(xvi) The Company is not, and upon consummation of
the transactions contemplated hereby will not be, subject to
registration as an "investment company" or an entity "controlled by an
investment company" within the meaning of the Investment Company Act of
1940 and the rules and regulations promulgated thereunder.
In addition, such opinion shall also contain a statement that such
counsel has participated in conferences with officers and
representatives of the Company, representatives of the independent
certified public accountants of the Company and representations of the
Underwriters at which the contents of the Registration Statement, the
Prospectus, any amendment thereof or supplement thereto and related
matters were discussed. On the basis of the foregoing, no facts have
come to the attention of such counsel which has led such counsel to
believe that either the Registration Statement at the time it became
effective, or any amendment thereof made prior to the Closing Date as
of the date of such amendment, contained an untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus as of its date and as of the date of
such opinion contained or contains an untrue statement of a material
fact or omitted or omits 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 were made, not misleading (it being
understood that such counsel need express no belief, view or opinion
with respect to the financial statements and schedules and other
financial data included or incorporated by reference in the
Registration Statement or the Prospectus) and such counsel does not
know if any contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus that are not
filed or described as required.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters'
Counsel, familiar with the applicable laws; and (B) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company and certificates or other written statements of officers of departments
of various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and each of its subsidiaries. The
opinion of such counsel for the Company shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and, in their opinion, the
Representatives and they are justified in relying thereon.
(c) All proceedings taken in connection with the sale of the
Firm Shares and the Additional Shares as herein contemplated shall be reasonably
satisfactory in form
23
<PAGE> 24
and substance to the Representatives and to Underwriters' Counsel, and the
Underwriters shall have received from said Underwriters' Counsel a favorable
opinion, dated as of the Closing Date with respect to the issuance and sale of
the Shares, the Registration Statement and the Prospectus and such other related
matters as the Representatives may reasonably require, and the Company shall
have furnished to Underwriters' Counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
(d) At the Closing Date, the Representatives shall have
received a certificate of the Company, executed on behalf of the Company by the
Chief Executive Officer and President and the Chief Financial Officer of the
Company, dated the Closing Date to the effect that (i) the conditions set forth
in subsection (a) of this Section 6 have been satisfied, (ii) as of the date
hereof and as of the Closing Date, the representations and warranties of the
Company set forth in Section 1 hereof are true and accurate, (iii) at the time
of the Closing on the Closing Date, the obligations of the Company to be
performed hereunder on or prior thereto have been duly performed and (iv)
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any Material
Adverse Effect, or any development involving a prospective material adverse
change, on the Company, except in each case as described in the Prospectus.
(e) At the time this Agreement is executed and at the Closing
Date, the Representatives shall have received a letter, from Arthur Andersen
LLP, independent public accountants for the Company, dated as of the date of
this Agreement and as of the Closing Date, as appropriate, addressed to the
Underwriters and in form and substance satisfactory to the Representatives, to
the effect that: (i) they are independent certified public accountants with
respect to the Company within the meaning of the Act and the Regulations and
stating that the answer to Item 10 of the Registration Statement is correct
insofar as it relates to them; (ii) in their opinion, the financial statements
and schedules of the Company included in the Registration Statement and the
Prospectus and covered by their opinion therein comply as to form in all
material respects with the applicable accounting requirements of the Act and the
applicable published rules and regulations of the Commission thereunder; (iii)
on the basis of procedures consisting of a reading of the latest available
unaudited interim consolidated financial statements of the Company and its
subsidiaries, a reading of the minutes of meetings and consents of the
stockholders and boards of directors of the Company and its subsidiaries and the
committees of such boards subsequent to [December 31, 1997], inquiries of
officers and other employees of the Company and its subsidiaries who have
responsibility for financial and accounting matters of the Company and its
subsidiaries with respect to transactions and events subsequent to [December 31,
1997] and other specified procedures and inquiries to a date not more than five
days prior to the date of such letter, nothing has come to their attention that
would cause them to believe that: (A) the unaudited consolidated financial
statements and schedules of the Company presented in the Registration Statement
and the Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and, if applicable, the Exchange
Act and the applicable published rules and regulations of the Commission
24
<PAGE> 25
thereunder or that such unaudited consolidated financial statements are not
fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
consolidated financial statements included in the Registration Statement and the
Prospectus; (B) the unaudited pro forma financial statements and other
information contained in the Registration Statement and the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations or the pro forma adjustments have
not been properly applied to the historical amounts in the compilation of these
statements; (C) with respect to the period subsequent to [December 31, 1997]
there were, as of the date of the most recent available monthly consolidated
financial statements of the Company and its subsidiaries, if any, and as of a
specified date not more than five days prior to the date of such letter, any
changes in the capital stock or long-term indebtedness of the Company or any
decrease in the net current assets or stockholders' equity of the Company, in
each case as compared with the amounts shown in the most recent balance sheet
presented in the Registration Statement and the Prospectus, except for changes
or decreases which the Registration Statement and the Prospectus disclose have
occurred or may occur or which are set forth in such letter or (D) that during
the period from [December 31, 1997] to the date of the most recent available
monthly consolidated financial statements of the Company and its subsidiaries,
if any, and to a specified date not more than five days prior to the date of
such letter, there was any decrease, as compared with the corresponding period
in the prior fiscal year, in total revenues, or total or per share net income,
except for decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur or which are set forth in such letter; and
(iv) stating that they have compared specific dollar amounts, numbers of shares,
percentages of revenues and earnings, and other financial information pertaining
to the Company and its subsidiaries set forth in the Registration Statement and
the Prospectus, which have been specified by the Representatives prior to the
date of this Agreement, to the extent that such amounts, numbers, percentages,
and information may be derived from the general accounting and financial records
of the Company and its subsidiaries or from schedules furnished by the Company,
with the results obtained from the application of specified readings, inquiries,
and other appropriate procedures specified by the Representatives set forth in
such letter, and found them to be in agreement.
(f) Prior to the Closing Date the Company shall have furnished
to you such further information, certificates and documents as the
Representatives may reasonably request.
(g) The Representatives shall have received from each person
who is a director or officer of the Company or such security holder as has been
heretofore designated by you and listed on Schedule II hereto the agreements
required by Section 4(f).
(h) At the Closing Date, the Shares shall have been approved
for listing on the New York Stock Exchange upon notice of issuance.
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<PAGE> 26
(i) The Company and its subsidiaries shall not have sustained,
(i) since the date of the latest audited financial statements included in the
Prospectus, any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree otherwise than as set
forth or expressly contemplated in the Prospectus which loss or interference is
not immaterial to the Company and its subsidiaries taken as a whole, and (ii)
since the respective dates as of which information is given in the Prospectus,
there shall not have been any change in the capital stock (other than as
disclosed in the Prospectus) or in the long-term or short-term debt of the
Company or any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position, stockholders'
equity or results of operations of the Company, otherwise than as set forth or
expressly contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii) of this Section 6(i), in the Representatives'
reasonable judgment, makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered on the Closing
Date on the terms and in the manner contemplated in the Prospectus.
(j) Certain trusts for the benefit of family members of H.
Wayne Huizenga and certain associates of Mr. Huizenga shall purchase and pay for
on the Closing Date, concurrently with the purchase of the Firm Shares by the
Underwriters, for investment purposes and at the Price to Public set forth in
the Prospectus, such number of shares as shall have an aggregate Price to Public
of $25,000,000.
If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to the
Representatives or to Underwriters' Counsel pursuant to this Section 6 shall not
be in all material respects reasonably satisfactory in form and substance to the
Representatives and to Underwriters' Counsel, all obligations of the
Underwriters hereunder may be cancelled by the Representatives at, or at any
time prior to, the Closing Date and the obligations of the Underwriters to
purchase the Additional Shares may be cancelled by the Representatives at, or at
any time prior to, the Additional Closing Date. Notice of such cancellation
shall be given to the Company in writing, or by telephone, telex or telegraph,
confirmed in writing.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in
26
<PAGE> 27
settlement of any claim or litigation), joint or several, to which they or any
of them may become subject under the Act, the Exchange Act, any state securities
or Blue Sky law or otherwise, such losses, liabilities, claims, damages,
obligations, penalties, judgments, awards, costs, disbursements or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the registration
statement for the registration of the Shares, as originally filed or any
amendment thereof, or any related preliminary prospectus or the Prospectus, or
in any supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission to state in any preliminary prospectus,
the Registration Statement for the registration of the Shares or the Prospectus,
or in any amendment thereof or supplement thereto, any material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that, (A) the Company will not be liable in any such case to
the extent but only to the extent that any such loss, liability, claim, damage,
obligation, penalty, judgment, award, cost, disbursement or expense arises out
of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any
Underwriter through the Representatives expressly for use therein and (B) the
indemnity agreement contained in this Section 7(a) with respect to any
preliminary prospectus (or the Prospectus) shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) from
whom the person asserting any such losses, liabilities, claims, damages or
expenses purchased the Shares which is the subject thereof (or to the benefit of
any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
preliminary prospectus (or the Prospectus) was corrected in the Prospectus (or
the Prospectus as amended or supplemented) and delivery of such Prospectus (or
the Prospectus as amended or supplemented) would have eliminated any such loss,
liability, claim, damage or expense unless the failure is the result of
non-compliance by the Company with Section 4(c) hereof. This indemnity agreement
will be in addition to any liability which the Company may otherwise have
including under this Agreement.
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the Company,
each of the officers of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) are based upon any untrue statement or alleged
untrue
27
<PAGE> 28
statement of a material fact contained in the registration statement for the
registration of the Shares, as originally filed or any amendment thereof, or any
related preliminary prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter through the Representatives expressly for use therein,
provided, however, that in no case shall any Underwriter be liable or
responsible for any amount in excess of the underwriting discount applicable to
the Shares purchased by such Underwriter hereunder. This indemnity will be in
addition to any liability which any Underwriter may otherwise have including
under this Agreement. The Company acknowledges that the statements set forth in
the last paragraph of the cover page, in the paragraph on the inside front cover
page of the Prospectus relating to possible stabilization transactions, in the
table listing Underwriters under the caption "Underwriting" in the Prospectus
and in the third and eighth paragraphs under the caption "Underwriting" in the
Prospectus constitute the only information furnished in writing by or on behalf
of any Underwriter expressly for use in the registration statement relating to
the Shares as originally filed or in any amendment thereof, any related
preliminary prospectus or the Prospectus or in any amendment thereof or
supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party
28
<PAGE> 29
or parties), in any of which events such fees and expenses shall be borne by the
indemnifying parties. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such consent was not unreasonably withheld.
8. Contribution. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 7 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, then each indemnifying party shall
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company, any contribution received by
the Company from persons, other than the Underwriters, who may also be liable
for contribution, including persons who control the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, officers of the
Company who signed the Registration Statement and directors of the Company) as
incurred to which the Company and one or more of the Underwriters may be
subject, in such proportions as is appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Underwriters, on the other
hand, from the offering of the Shares or, if such allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to above but also the relative fault of the Company,
on the one hand, and the Underwriters, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and the
Underwriters, on the other hand, shall be deemed to be in the same proportion as
(x) the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company, and (y) the
underwriting discounts and commissions received by the Underwriters,
respectively, in each case as set forth in the table on the cover page of the
Prospectus, bear to the aggregate public offering price of the Shares. The
relative fault of the Company, on the one hand, and of the Underwriters, on the
other hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) in no case shall any Underwriter be liable or responsible
for any portion of the contribution obligation imposed on all Underwriters in
excess of its pro rata share of the total underwriting discount set forth in the
29
<PAGE> 30
table on the cover page of the Prospectus based on the number of shares
underwritten by it as compared to the number of shares underwritten by all
Underwriters who do not default on their obligations under this Section 8 less
all amounts paid or payable by such Underwriter pursuant to Section 7, and (ii)
no person guilty of fraudulent misrepresentation (within the meaning of Section
11 (f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person, if any, who controls an Underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as such Underwriter, and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of the
immediately preceding sentence. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties, notify each party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 8 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its consent; provided, however, that such consent was not unreasonably
withheld.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default relates
do not (after giving effect to arrangements, if any, made by the Representatives
pursuant to subsection (b) below) exceed in the aggregate 10% of the number of
Firm Shares or Additional Shares, as the case may be, which all Underwriters
have agreed to purchase hereunder, then such Firm Shares or Additional Shares to
which the default relates shall be purchased by the non-defaulting Underwriters
in proportion to the respective proportions which the numbers of Firm Shares set
forth opposite their respective names in Schedule I hereto bear to the aggregate
number of Firm Shares set forth opposite the names of the non-defaulting
Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Additional Shares, as the case may be, the Representatives
may in their discretion arrange for themselves or for another party or parties
(including any non-defaulting Underwriter or Underwriters who so agree) to
purchase such Firm Shares or Additional Shares, as the case may be, to which
such default relates on the terms contained herein. If within five calendar days
after such a default the Representatives do not arrange for the purchase of the
Firm Shares or Additional Shares, as the case may be, to which such default
relates as provided in this Section 9, this Agreement or, in the case of a
default with respect to the Additional Shares, the obligations of the
Underwriters to purchase and of the Company
30
<PAGE> 31
to sell the Additional Shares shall thereupon terminate, without liability on
the part of the Company with respect thereto (except in each case as provided in
Sections 5, 7 and 8 hereof) or the several non-defaulting Underwriters, but
nothing in this Agreement shall relieve a defaulting Underwriter or Underwriters
(except as provided in Sections 5, 7 and 8 hereof) of its or their liability, if
any, to the other Underwriters and the Company for damages occasioned by its or
their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
the Representatives or the Company shall have the right to postpone the Closing
Date or Additional Closing Date, as the case may be, for a period, not exceeding
five business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment or supplement to the Registration Statement or the Prospectus which,
in the opinion of Underwriters' Counsel, may thereby be made necessary or
advisable. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 9 with like effect as if it had originally
been a party to this Agreement with respect to such Firm Shares and Additional
Shares.
10. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the Underwriters and
the Company contained in this Agreement, including the agreements contained in
Section 5, the indemnity agreements contained in Section 7 and the contribution
agreements contained in Section 8, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof, and shall survive
delivery of and payment for the Shares to and by the Underwriters. The
representations contained in Section 1 and the agreements contained in Sections
5, 7, 8 and 11(d) hereof shall survive the termination of this Agreement,
including termination pursuant to Section 9 or 11 hereof.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective (i) if Rule 430A
under the Act is not used, when the Representatives shall have received
notification of the effectiveness of the Registration Statement or (ii) if Rule
430A under the Act is used, when the parties hereto have executed and delivered
this Agreement. If either the initial public offering price or the purchase
price per Share has not been agreed upon prior to 5:00 P.M., New York City time,
on the fifth full business day after the Registration Statement shall have
become effective, this Agreement shall thereupon terminate without liability to
the Company or the Underwriters except as herein expressly provided. Until this
Agreement becomes effective as aforesaid, it may be terminated by the Company by
notifying the Representatives or by the Representatives notifying the Company.
Notwithstanding the foregoing, the provisions
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<PAGE> 32
of this Section 11 and of Sections 1, 5, 7 and 8 hereof shall at all times be in
full force and effect.
(b) The Representatives shall have the right to terminate this
Agreement at any time prior to the Closing Date (and, with respect to the
Additional Shares, the Additional Closing Date) by notice to the Company from
the Representatives, without liability (other than with respect to Sections 7
and 8 hereof) on the part of any Underwriter to the Company, if, on or prior to
such date, (i) the Company shall have failed, refused or been unable to perform
in any material respect any agreement on its, his or her part to be performed
hereunder, (ii) any other condition to the Underwriters' obligations hereunder
set forth in Section 6 is not fulfilled when and as required in any material
respect, (iii) trading in securities on the New York or American Stock Exchanges
or in the over-the-counter market shall have been suspended or materially
limited, or minimum or maximum prices shall have been established or maximum
price ranges for prices for securities shall have been required, on the New York
or American Stock Exchanges or in the over-the-counter market by the Commission,
or by such exchange or other regulatory body or governmental authority having
jurisdiction, (iv) a general banking moratorium shall have been declared by a
federal or state authority or any new restriction materially and adversely
affecting the Firm Shares or the Additional Shares, as the case may be, (v)
there shall have occurred an outbreak or escalation of armed hostilities
involving the United States on or after the date hereof, or if there has been a
declaration by the United States of a national emergency or war, the effect of
which shall be, in the Representatives' judgment, to make it inadvisable or
impracticable to proceed with the sale and delivery of the Shares on the terms
and in the manner contemplated in the Prospectus, (vi) there shall have occurred
such a material adverse change since the respective dates as of which
information is given in the Registration Statement or the Prospectus in the
condition (financial or other) of the Company and its subsidiaries taken as a
whole, whether or not arising in the ordinary course of business other than as
set forth in the Prospectus, such as, in the judgment of Bear, Stearns & Co.
Inc., makes it inadvisable or impracticable to proceed with the sale and
delivery of the Firm Shares or the Additional Shares, as the case may be, on the
terms contemplated hereby and by the Prospectus, or (vii) there shall have
occurred such a material adverse change in general economic, political or
financial conditions or if the effect of international conditions on the
financial markets in the United States shall be such as, in the judgment of
Bear, Stearns & Co. Inc., makes it inadvisable or impracticable to proceed with
the sale and delivery of the Firm Shares or the Additional Shares, as the case
may be, on the terms contemplated hereby and by the Prospectus. The right of the
Representatives to terminate this Agreement will not be waived or otherwise
relinquished by their failure to give notice of termination prior to the time
that the event giving rise to the right to terminate shall have ceased to exist,
provided that notice is given prior to the Closing Date (and, with respect to
the Additional Shares, the Additional Closing Date).
(c) Any notice of termination pursuant to this Section 11
shall be by telephone, telex, or telegraph, confirmed in writing by letter.
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<PAGE> 33
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to (i) notification by the
Representatives as provided in Section 11(a) hereof or (ii) Section 9(b) or
11(b) hereof (except clauses (i) and (ii) thereof), or if the sale of the Shares
provided for herein is not consummated because any condition to the obligations
of the Underwriters set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof, the Company will, subject to demand by the
Representatives, reimburse the Underwriters for all out-of-pocket expenses
(including the fees and expenses of their counsel), incurred by the Underwriters
in connection herewith.
12. Notices. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, New York 10167, Attention: Corporate Finance Department; if sent to
the Company, shall be mailed, delivered, or telegraphed and confirmed in writing
to NationsRent, Inc., 450 East Las Olas Boulevard, Fort Lauderdale, Florida
33301, Attention: James L. Kirk.
13. Parties. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Underwriters and the Company and the controlling
persons, directors, officers, employees and agents referred to in Sections 7 and
8 hereof, and their respective successors and assigns, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained. The term "successors and assigns" shall not include a purchaser, in
its capacity as such, of Shares from any of the Underwriters.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
15. Counterparts. This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same agreement.
16. Partial Invalidity. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
33
<PAGE> 34
If the foregoing correctly sets forth your understanding, please so
indicate in the space provided below for that purpose, and return to us five
counterparts hereof, and upon acceptance hereof by the Representatives, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters and the Company.
It is understood that the acceptance by the Representatives of this letter on
behalf of each of the Underwriters is pursuant to the authority set forth in a
form of Agreement Among Underwriters, the form of which shall be submitted to
the Company for examination, upon request, but without warranty on the part of
the Representatives as to the authority of the signers thereof.
Very truly yours,
NATIONSRENT, INC.
By:
--------------------------------
Name:
Title:
Accepted as of the date first above written at New York, New York, on behalf of
themselves severally and the other several Underwriters named in Schedule I
hereto.
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
----------------------------------
Name:
Title:
34
<PAGE> 35
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm
Name of Shares to be
Underwriter Purchased
- -------------------------- ------------------------------
<S> <C>
Bear, Stearns & Co. Inc.
BT Alex. Brown
Donaldson, Lufkin & Jenrette Securities Corporation
NationsBanc Montgomery Securities LLC
Total................................................
-------------
=============
</TABLE>
35
<PAGE> 36
SCHEDULE II
Names of officers, directors and security holders subject to the
lock-up provision
36
<PAGE> 1
EXHIBIT 3.1
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NATIONSRENT, INC.
The present name of the corporation is NationsRent, Inc. The
corporation was incorporated under the name NationsRent, Inc. by the filing of
its original Certificate of Incorporation with the Secretary of the State of
Delaware on August 14, 1997. This Amended and Restated Certificate of
Incorporation of the corporation amends and restates the provisions of the
corporation's Certificate of Incorporation as heretofore amended and
supplemented. This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 242, 245 and 228 of the
General Corporation Law of the State of Delaware. The Certificate of
Incorporation of the corporation is hereby restated to read in its entirety as
follows:
FIRST: The name of the Corporation is:
NationsRent, Inc.
SECOND: (a) The address of the registered office of the Corporation in
Delaware is:
Lexis Document Services Inc.
30 Old Rudnick Lane
Suite 100
County of Kent
Dover, Delaware 19901
(b) The name of the Corporation's registered agent at the
address of its registered office is:
Lexis Document Services Inc.
THIRD: The purpose of the Corporation is to engage in, promote, and carry
on any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of
Delaware.
FOURTH: (a) The total number of shares of stock that the Corporation
shall have authority to issue is Two Hundred Fifty-Five
Million (255,000,000), consisting of Two Hundred Fifty Million
(250,000,000) shares of Common Stock with a par value of One
Cent ($0.01) per share and Five Million (5,000,000) shares of
Preferred Stock with a par value of One Cent ($0.01) per
share.
<PAGE> 2
(b) Each share of Common Stock shall be equal to every other share
of Common Stock. The holders of shares of Common Stock shall
be entitled to one vote for each share of Common Stock upon
all matters presented to the stockholders.
(c) Shares of Preferred Stock may be issued from time to time in
one or more series. Subject to any limitations prescribed by
the laws of the State of Delaware, the Board of Directors is
expressly authorized, prior to the issuance of any series of
Preferred Stock, to fix by resolution or resolutions providing
for the issue of any series the number of shares included in
such series and the designation, relative powers, preferences
and rights, and the qualifications, limitations or
restrictions of such series. Pursuant to the foregoing general
authority vested in the Board of Directors, but not in
limitation of the powers conferred on the Board of Directors
thereby and by the law of the State of Delaware, the Board of
Directors is expressly authorized to determine with respect to
each series of Preferred Stock:
(i) the distinctive designation of such series and the
number of shares (which number from time to time may
be decreased by the Board of Directors, but not below
the number of such shares then outstanding, or may be
increased by the Board of Directors unless otherwise
provided in creating such series) constituting such
series;
(ii) the rate and time at which, and the preferences and
conditions under which, dividends shall be payable on
shares of such series, the status of such dividends
as cumulative, or noncumulative, the date or dates
from which dividends, if cumulative, shall
accumulate, and the status of such shares as
participating or nonparticipating after the payment
of dividends as to which such shares are entitled to
any preference;
(iii) the right, if any, of holders of shares of such
series to convert such shares into, or to exchange
such shares for, shares of any other class or classes
or of any other series of the same class, the prices
or rates of conversion or exchange, and adjustments
thereto, and any other terms and conditions
applicable to such conversion or exchange;
(iv) the rights and preferences, if any, of the holders of
shares of such series upon the liquidation,
dissolution or winding up of
2
<PAGE> 3
the affairs of, or upon any distribution of the
assets of, the Corporation, which amount may vary
depending upon whether such liquidation, dissolution,
or winding up is voluntary or involuntary, and, if
voluntary, may vary at different dates, and the
status of the shares of such series as participating
or nonparticipating after the satisfaction of any
such rights and preferences;
(v) the voting powers, if any, of the holders of shares
of such series which may, without limiting the
generality of the foregoing, include (A) the general
right to vote (or more or less than one vote) per
share on every matter (including, without limitation,
the election of directors) voted on by the
stockholders without regard to class and (B) the
limited right to vote, as a series by itself or
together with other series of Preferred Stock or
together with all series of Preferred Stock as a
class, upon such matters, under such circumstances
and upon such conditions as the Board of Directors
may fix, including, without limitation, the right,
voting as a series by itself or together with other
series of Preferred Stock or together with other
series of Preferred Stock as a class, to elect one or
more directors of the Corporation in the event one or
more directors of the Corporation in the event there
shall have been a default in the payment of dividends
on any one or more series of Preferred Stock;
(vi) the times, terms and conditions, if any, upon which
shares of such series shall be subject to redemption,
including the amount which the holders of shares of
such series shall be entitled to receive upon
redemption (which amount may vary under different
conditions or at different redemption dates) and the
amount, terms, conditions and manner of operation of
any purchase, retirement or sinking fund to be
provided for the shares of such series;
(vii) the limitations, if any, applicable while such series
is outstanding on the payment of dividends or making
of distributions on, or the acquisition or redemption
of, Common Stock or any other class of shares ranking
junior, either as to dividends or upon liquidation,
to the shares of such series;
(viii) the conditions or restrictions, if any, upon the
issue of any additional shares (including additional
shares of such series
3
<PAGE> 4
or any other class) ranking on a parity with or prior
to the shares of such series either as to dividends
or upon liquidation; and
(ix) any other relative powers, preferences and
participating, option or other special rights, and
the qualifications, limitations or restrictions
thereof, of shares of such series; in each case, so
far as not inconsistent with the provisions of the
Certificate of Incorporation or the law of the State
of Delaware. All shares of Preferred Stock shall be
identical and of equal rank except as to the
particulars that may be fixed by the Board of
Directors as provided above, and all shares of each
series of Preferred Stock shall be identical and of
equal rank except as to the dates from which
cumulative dividends, if any, thereon shall be
cumulative.
FIFTH: Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provisions contained
in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the Board
of Directors or in the Bylaws of the Corporation.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Elections of Directors need not be by written ballot unless
the Bylaws of the Corporation shall so provide.
EIGHTH: The Board of Directors shall consist of one or more members,
the number thereof to be fixed in the manner provided in the
Bylaws.
NINTH: Except as otherwise provided in the Certificate of
Incorporation of the Corporation, the Board of Directors
shall be authorized to adopt, amend or repeal the Bylaws of
the Corporation.
TENTH: The Corporation shall indemnify its officers and directors to
the fullest extent permitted by Section 145 of the General
Corporation Law of the State of Delaware, as it may be amended
from time to time ("Section 145"), (i) in each and every
situation where the Corporation is obligated to make such
indemnification pursuant to Section 145, and (ii) in each and
every situation where, under Section 145, the Corporation is
not obligated, but is permitted or empowered, to make such
indemnification. The Corporation shall promptly make or cause
to be made any determination which Section 145 requires.
4
<PAGE> 5
ELEVENTH: A Director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a Director. This provision
shall not eliminate or limit the liability of a Director (i)
for any breach of the Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the
General Corporation Law of the State of Delaware, or (iv) for
any transaction from which the Director derived any improper
personal benefit. If the General Corporation Law of the State
of Delaware is subsequently amended to further eliminate or
limit the liability of a Director, then a Director of the
Corporation, in addition to the circumstances in which a
Director is not personally liable as set forth herein, shall
not be liable to the fullest extent permitted by the amended
General Corporation Law of the State of Delaware.
TWELFTH: The Corporation reserves the right at any time, and from time
to time, to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation, and other
provisions authorized by the laws of the State of Delaware at
the time in force may be added or inserted, in the manner now
or hereafter prescribed by law; and all rights, preferences
and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomever by and
pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the rights
reserved in this Article TWELFTH.
THIRTEENTH: The Corporation shall not be governed by Section 203 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, NationsRent., Inc. has caused this Amended and
Restated Certificate of Incorporation to be executed by its authorized officer
on this _____ day of July 1998.
NATIONSRENT, INC.
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
5
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
NATIONSRENT, INC.
ARTICLE I
OFFICES
SECTION 1.1 REGISTERED OFFICE. The registered office of NationsRent,
Inc., a Delaware corporation (the "Corporation"), shall be located at Lexis
Document Services, Inc., 30 Old Rudnick Lane, Suite 100, County of Kent, Dover,
Delaware 19901.
SECTION 1.2 OFFICES. The Corporation may establish or discontinue, from
time to time, such other offices and places of business within or without the
State of Delaware as the Board of Directors deems proper for the conduct of the
Corporation's business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1 ANNUAL MEETING. An annual meeting of stockholders for the
purpose of electing directors and transacting such other business as may come
before it shall be held at such place, within or without the State of Delaware,
on such date and at such time as shall be designated by the Board of Directors
or the President.
SECTION 2.2 SPECIAL MEETINGS. Special meetings of stockholders, unless
otherwise prescribed by statute, may be called by the Board of Directors or by
the President. Business transacted at any special meeting of the stockholders
shall be limited to the purposes stated in the notice.
SECTION 2.3 NOTICE OF MEETINGS. Written notice of each meeting of
stockholders shall be given to each stockholder of record entitled to vote at
the meeting at the stockholder's address as it appears on the stock books of the
Corporation. The notice shall state the time and the place of the meeting and
shall be given not less than ten (10) nor more than sixty (60) days before the
day of the meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. In
the case of a special meeting, the notice shall state the purpose or purposes
for
<PAGE> 2
which the meeting is being called. Whenever notice is required to be given
hereunder, a written waiver of notice signed by the stockholder entitled to
notice, whether before or after the time stated in the notice, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting except when a person attends for the express
purpose of objecting, at the beginning of the meeting, to the transaction or any
business because the meeting is not lawfully called or convened.
SECTION 2.4 QUORUM AND ADJOURNMENT. The presence, in person or by
proxy, of the holders of a majority of the voting power of the outstanding
shares of stock entitled to vote on every matter that is to be voted on, without
regard to class or series, shall constitute a quorum at all meetings of the
stockholders. In the absence of a quorum, the holders of a majority of the
voting power of such shares of stock present in person or by proxy may adjourn
such meeting, from time to time, without notice other than announcement at the
meeting (unless otherwise required by law), until a quorum shall attend. At any
meeting reconvened after such adjournment at which a quorum may be present, any
business may be transacted which might have been transacted at the meeting as
originally called, but only those stockholders entitled to vote at the meeting
as originally called shall be entitled to vote at any reconvened meeting, unless
a new record date for such meeting is fixed.
SECTION 2.5 OFFICERS AT STOCKHOLDERS' MEETINGS. The Chairman of the
Board of Directors shall preside at all meetings of stockholders. In his
absence, the chairman shall be elected as the first order of business by the
holders of a majority of the shares of stock in attendance and entitled to vote
at the meeting.
SECTION 2.6 LIST OF STOCKHOLDERS ENTITLED TO VOTE. At least ten (10)
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder, shall be prepared by or for the Secretary and shall be open to
the examination of any stockholder for any purpose germane to the meeting,
during ordinary business hours, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
Such list shall be available for inspection at the meeting.
SECTION 2.7 FIXING DATE FOR STOCKHOLDERS OF RECORD. In order that the
Corporation may identify the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be less than ten (10) days nor more than
sixty (60) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. If no record date is fixed, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice of the meeting is given, or if
- 2 -
<PAGE> 3
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
any officer or agent of the Corporation having custody of the minute books of
the Corporation. The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 2.8 VOTING AND PROXIES. Subject to the provisions for fixing
the date for stockholders of record:
(a) Except as otherwise specified in the Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation"), each
stockholder shall at every meeting of the stockholders be entitled to one vote
for each share of stock held by that stockholder having voting rights as to the
matter being voted upon.
(b) Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for that
stockholder by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy expressly provides for a longer period.
(c) Each matter properly presented to any meeting of
stockholders shall be decided by the affirmative vote of the holders of a
majority of the voting power of the shares of stock present in person or by
proxy and entitled to vote on the matter.
SECTION 2.9 INSPECTORS OF ELECTION. The Corporation shall, in advance
of any meeting of stockholders, appoint one or more inspectors of election, who
may be employees of the Corporation, to act at the meeting or any adjournment
thereof and to make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. In the event that no inspector so appointed or designated is able to act at
a meeting of stockholders, the person presiding at the meeting shall appoint one
or more inspectors to act at the meeting. Each inspector, before entering upon
the discharge of his or her duties, shall take and sign an oath to execute
faithfully the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspector or inspectors so appointed or
designated shall (i) ascertain the number of shares of capital stock of the
Corporation outstanding and the voting power of each such share, (ii) determine
the shares of capital stock of the Corporation represented at the meeting and
the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares of capital stock of the Corporation
represented at the meeting and such inspectors' count of all votes and ballots.
Such
- 3 -
<PAGE> 4
certification and report shall specify such other information as may be required
by law. In determining the validity and counting of proxies and ballots cast at
any meeting of stockholders of the Corporation, the inspectors may consider such
information as is permitted by applicable law. No person who is a candidate for
an office at an election may serve as an inspector at such election.
SECTION 2.10 CONDUCT OF MEETINGS. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting by the person presiding over the
meeting. The Board of Directors of the Corporation may adopt by resolution such
rules and regulations for the conduct of the meeting of stockholders as it shall
deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the Corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the meeting
shall determine; (iv) restrictions on entry to the meeting after the time fixed
for commencement thereof; and (v) limitations on the time allotted to questions
or comments by participants. Unless and to the extent determined by the Board of
Directors or the chairman of the meeting, meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
SECTION 2.11 CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any action
that may be taken at any annual or special meeting of stockholders may be taken
without a meeting, without a prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the stockholders having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of such action without a
meeting by less than unanimous written consent shall be given to each
stockholder who did not consent thereto in writing.
ARTICLE III
DIRECTORS
SECTION 3.1 NUMBER AND TERM OF OFFICE. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. The number of directors that shall constitute the whole Board shall
be fixed from time to time by resolution of the stockholders or the Board of
Directors and shall consist of not more than twelve (12) members. At the first
annual meeting of stockholders and at each annual meeting of stockholders
thereafter, the respective terms of all of the directors then serving in office
shall expire at the meeting, and successors to the
- 4 -
<PAGE> 5
directors shall be elected to hold office until the next succeeding annual
meeting. Existing directors may be nominated for election each year for a
successive term, in the manner provided in these Amended and Restated Bylaws
(the "Bylaws"). Each director shall hold office for the term for which he is
elected and qualified or until his successor shall have been elected and
qualified or until his earlier resignation, removal from office or death. The
Board of Directors may from time to time establish minimum qualifications for
eligibility to become a director. Those qualifications may include, but shall
not be limited to, a prerequisite stock ownership in the Corporation.
SECTION 3.2 PLACE OF MEETINGS. Meetings of the Board of Directors may
be held at any place, within or without the State of Delaware, from time to time
as designated by the Chairman of the Board or by the body or person calling such
meeting.
SECTION 3.3 ANNUAL MEETINGS. As soon as practicable after each annual
meeting of stockholders and without further notice, the directors elected at
such meeting shall hold the annual meeting of the Board of Directors at the
place at which such meeting of stockholders took place, provided a majority of
the whole Board of Directors is present. If such a majority is not present, such
meeting may be held at any other time or place which may be specified in a
notice given in the manner provided for special meetings of the Board of
Directors or in a waiver of notice thereof.
SECTION 3.4 REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such times as may be determined by the Board of
Directors. No notice shall be required for any regular meeting.
SECTION 3.5 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the Chief Executive
Officer or the President. Notice of any special meeting shall be mailed to each
director at that director's residence or usual place of business not later than
three (3) days before the day on which the meeting is to be held, or shall be
given to that director by telegraph, telecopier or other method of electronic
transmission, by overnight express mail service, personally, or by telephone,
not later than twenty-four (24) hours before the time of such meeting. Notice of
any meeting of the Board of Directors need not be given to any director if that
director signs a written waiver thereof either before or after the time stated
therein. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except when the director attends the meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 3.6 ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board of Directors or of
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of the Board of Directors or of such
committee.
SECTION 3.7 PRESIDING OFFICER AND SECRETARY AT MEETINGS. Each meeting
of the Board of Directors shall be presided over by the Chairman of the Board of
Directors, or in his or her
- 5 -
<PAGE> 6
absence, by the Vice Chairman of the Board, the Chief Executive Officer or the
President, in that order, and if none is present, then by such member of the
Board of Directors as shall be chosen at the meeting.
SECTION 3.8 QUORUM. A majority of the total authorized number of
directors shall constitute a quorum for the transaction of business. In the
absence of a quorum, a majority of those present (or if only one be present,
then that one) may adjourn the meeting, without notice other than announcement
at the meeting, until such time as a quorum is present. The vote of a majority
of the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors.
SECTION 3.9 MEETING BY TELEPHONE. Members of the Board of Directors or
of any committee thereof may participate in a meeting of the Board of Directors
or of such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Such participation shall constitute presence in person at such
meeting.
SECTION 3.10 COMPENSATION. Directors shall receive such compensation
and expense reimbursements for their services as directors or as members of
committees as set by the Board of Directors. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent or otherwise, and receiving compensation therefor.
SECTION 3.11 RESIGNATIONS. Any director, member of a committee or
officer of the Corporation may resign at any time by giving written notice
thereof to the Chairman of the Board or the President. Such resignation shall be
effective at the time of its receipt, unless a date certain is specified for it
to take effect. Acceptance of any resignation shall not be necessary to make it
effective.
SECTION 3.12 REMOVAL OF DIRECTORS. No director may be removed without
cause before the expiration of his or her term of office except by vote of the
stockholders at a meeting called for such a purpose.
SECTION 3.13 FILLING OF VACANCIES. In case of a vacancy created by an
increase in the number of directors or any vacancy created by death, removal, or
resignation, the vacancy or vacancies may be filled either (a) by the Board of
Directors, or (b) by the stockholders. In the case of a director appointed to
fill a vacancy created by an increase in the number of directors, the director
so appointed shall hold office for the term to which his predecessor was elected
or until his successor is elected. In the case of a director appointed to fill a
vacancy created by the death, removal or resignation of a director, the newly
appointed director shall hold office for the term to which his predecessor was
elected or until his successor is elected.
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<PAGE> 7
ARTICLE IV
COMMITTEES
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, each such committee
to consist of one or more directors of the Corporation. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in such resolution or
resolutions and to the extent permitted by law, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to the following
matter: (i) approving or adopting, or recommending to the stockholders, any
action or matter expressly required by the General Corporation Law of the state
of Delaware to be submitted to stockholders for approval or (ii) adopting,
amending or repealing the Bylaws of the Corporation.
ARTICLE V
THE OFFICERS
SECTION 5.1 DESIGNATION. The Corporation shall have such officers with
such titles and duties as set forth in these Bylaws or in a resolution of the
Board of Directors adopted on or after the effective date of these Bylaws.
SECTION 5.2 ELECTION AND QUALIFICATION. The officers of the Corporation
shall be elected by the Board of Directors and, if specifically determined by
the Board of Directors, may consist of a Chairman of the Board, Vice Chairman of
the Board, Chief Executive Officer, President, Chief Operating Officer, Chief
Financial Officer, one or more Vice Presidents, a Secretary, a Treasurer, one or
more Assistant Secretaries and Assistant Treasurers, and such other officers and
agents as the Board of Directors may deem advisable. None of the officers of the
Corporation need be directors.
SECTION 5.3 TERM OF OFFICE. Officers shall be chosen in such manner and
shall hold their office for such term as determined by the Board of Directors.
Each officer shall hold office from the time of his or her election and
qualification to the time at which his or her successor is elected and
qualified, or until his or her earlier resignation, removal or death.
SECTION 5.4 RESIGNATION. Any officer of the Corporation may resign at
any time by giving written notice of such resignation to the Chairman of the
Board of Directors or to the President. Any such resignation shall take effect
at the time specified therein or, if no time be specified, upon receipt
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<PAGE> 8
thereof by the Chairman of the Board of Directors or the President. The
acceptance of such resignation shall not be necessary to make it effective.
SECTION 5.5 REMOVAL. Any officer may be removed at any time, with or
without cause, by the Board of Directors or by the Chairman of the Board of
Directors.
SECTION 5.6 COMPENSATION. The compensation of each officer shall be
determined by the Board of Directors.
SECTION 5.7 THE CHAIRMAN AND THE VICE CHAIRMAN OF THE BOARD OF
DIRECTORS. Unless otherwise specifically determined by resolution by the Board
of Directors, the Chairman of the Board and the Vice Chairman of the Board shall
be officers of the Corporation. The Chairman of the Board shall, subject to the
direction and oversight of the Board, oversee the business plans and policies of
the Corporation, and shall oversee the implementation of those business plans
and policies. The Chairman shall report to the Board, shall preside at meetings
of the Board of Directors and of its Executive Committee, and shall have general
authority to execute bonds, deeds and contracts in the name of and on behalf of
the Corporation. In the absence or disability of the Chairman, the Vice Chairman
shall be vested with and shall perform all powers and duties of the Chairman.
SECTION 5.8 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall,
subject to the direction of the Board, establish and implement the business
plans, policies and procedures of the Corporation. The Chief Executive Officer
shall report to the Chairman of the Board, shall preside over meetings of the
Board in the absence of the Chairman or Vice Chairman of the Board, and shall
have general authority to execute bonds, deeds and contracts in the name of and
on behalf of the Corporation and in general to exercise all the powers generally
appertaining to the Chief Executive Officer of a corporation.
SECTION 5.9 PRESIDENT, CHIEF OPERATING OFFICER AND CHIEF FINANCIAL
OFFICER. The President, the Chief Operating Officer and the Chief Financial
Officer shall have such duties as shall be assigned to each from time to time by
the Chairman of the Board, the Chief Executive Officer and by the Board. During
the absence of the Chairman of the Board of the Vice Chairman of the Board or
during their inability to act, the President shall exercise the powers and shall
perform the duties of the Chairman of the Board, subject to the direction of the
Board of Directors.
SECTION 5.10 VICE PRESIDENT. Each Vice President shall have such powers
and shall perform such duties as shall be assigned to him or her by the Board of
Directors.
SECTION 5.11 SECRETARY. The Secretary shall attend meetings of the
Board of Directors and stockholders and record votes and minutes of such
proceedings, subject to the direction of the Chairman; assist in issuing calls
for meetings of stockholders and directors; keep the seal of the Corporation and
affix it to such instruments as may be required from time to time; keep the
stock transfer books and other books and records of the Corporation; act as
stock transfer agent for the
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<PAGE> 9
Corporation; attest the Corporation's execution of instruments when requested
and appropriate; make such reports to the Board of Directors as are properly
requested; and perform such other duties incident to the office of Secretary and
those that may be otherwise assigned to the Secretary from time to time by the
President or the Chairman of the Board of Directors.
SECTION 5.12 TREASURER. The Treasurer shall have custody of all
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation. The Treasurer
shall deposit or disburse all moneys and other property in the name and to the
credit of the Corporation as may be designated by the President or the Board of
Directors. The Treasurer shall render to the President and the Board of
Directors at the regular meetings of the Board of Directors, or whenever they
may request it, an account of all his or her transactions as Treasurer and of
the financial condition of the Corporation. The Treasurer shall perform other
duties incident to the office of Treasurer as the President or the Board of
Directors shall from time to time designate.
SECTION 5.13 OTHER OFFICERS. Each other officer of the Corporation
shall have such powers and shall perform such duties as shall be assigned to him
or her by the Board of Directors.
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER OF STOCK
AND REGISTERED STOCKHOLDERS
SECTION 6.1 STOCK CERTIFICATES. The interest of each holder of stock of
the Corporation shall be evidenced by a certificate or certificates signed by or
in the name of the Corporation by the Chairman of the Board of Directors, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the secretary or an Assistant Secretary of the Corporation certifying the
number of shares owned by the holder thereof in the Corporation. Any of or all
of the signatures on the certificate may be a facsimile. If any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, the certificate may be issued by
the Corporation with the same effect as if he/she were such officer, transfer
agent or registrar at the date of issuance.
SECTION 6.2 CLASSES/SERIES OF STOCK. The Corporation may issue one or
more classes of stock or one or more series of stock within any class thereof,
as stated and expressed in the Certificate of Incorporation or of any amendment
thereto, any or all of which classes may be stock with par value or stock
without par value. The powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, in accordance with the General Corporation Law
of the State of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back
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<PAGE> 10
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
SECTION 6.3 TRANSFER OF STOCK. Subject to the transfer restrictions
permitted by Section 202 of the General Corporation Law of the State of Delaware
and to stop transfer orders directed in good faith by the Corporation to any
transfer agent to prevent possible violations of federal or state securities
laws, rules or regulations, the shares of stock of the Corporation shall be
transferable upon its books by the holders thereof in person or by their duly
authorized attorneys or legal representatives, and upon such transfer the old
certificates shall be surrendered to the Corporation by the delivery thereof to
the person in charge of the stock and transfer books and ledgers, or to such
other persons as the directors may designate, by whom they shall be cancelled,
and new certificates shall be issued. A record shall be made of each transfer
and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
SECTION 6.4 HOLDERS OF RECORD. Prior to due presentment for
registration of transfer, the Corporation may treat the holder of record of a
share of its stock as the complete owner thereof exclusively entitled to vote,
to receive notifications and otherwise entitled to all the rights and powers of
a complete owner thereof, notwithstanding notice of the contrary.
SECTION 6.5 LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES. A new
certificate of stock may be issued to replace a certificate theretofore issued
by the Corporation, alleged to have been lost, stolen, destroyed or mutilated,
and the Board of Directors or the President may require the owner of the lost or
destroyed certificate or his or her legal representatives, to give such sum or
post such bond as they may direct to indemnify the Corporation against any
expense or loss it may incur on account of the alleged loss of any such
certificate.
SECTION 6.6 DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation and applicable law, the directors may, out of funds legally
available therefor at any annual, regular, or special meeting, declare dividends
upon the capital stock of the Corporation as and when they deem expedient.
Dividends may be paid in cash, in property, or in shares of stock of the
Corporation. Before declaring any dividends there may be set apart out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time in their discretion deem proper working capital to
serve as a reserve fund to meet contingencies or as equalizing dividends or for
such other purposes as the directors shall deem in the best interest of the
Corporation.
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<PAGE> 11
ARTICLE VII
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 7.1 INDEMNIFICATION. The Corporation shall indemnify each of
the individuals who may be indemnified to the fullest extent permitted by
Section 145 of the General Corporation Law of Delaware, as it may be amended
from time to time (Section 145): (i) in each and every situation where the
Corporation is obligated to make such indemnification pursuant to Section 145;
and (ii) in each and every situation where, under Section 145, the Corporation
is not obligated, but is permitted or empowered, to make such indemnification.
The Corporation shall promptly make or cause to be made any determination which
Section 145 requires.
SECTION 7.2 INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
and incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the Corporation would have the power to indemnify
him or her against such liability under these provisions.
SECTION 7.3 OTHER ENTITIES. For the purposes of this section,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had the power and authority to indemnify its
directors, officers, and employees or agents so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provision
of this section with respect to the resulting or surviving corporation as he/she
would have with respect to such constituent corporation if its separate
existence had continued.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 FISCAL YEAR. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
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<PAGE> 12
SECTION 8.2 CORPORATE SEAL. The corporate seal shall be in such form as
the Board of Directors may from time to time prescribe and the same may be used
by causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
SECTION 8.3 SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall not affect the validity or enforceability of the
remaining provisions hereof.
ARTICLE IX
AMENDMENT OF BYLAWS
These Bylaws may be made, altered, or repealed, or new bylaws may be
adopted by the stockholders or the Board of Directors, but the Board of
Directors may not amend or repeal any bylaw adopted by the stockholders if the
stockholders specifically provide such bylaw shall not be subject to amendment
or repeal by directors.
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<PAGE> 1
EXHIBIT 4.1
<TABLE>
<S> <C> <C>
NR
[LOGO] NATIONSRENT(TM) [SHARES]
COMMON STOCK INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
NationsRent, Inc.
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR
IN BOSTON, MA OR NEW YORK, NY CERTAIN DEFINITIONS
CUSIP 638588 10 3
THIS CERTIFIES THAT
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE OF
NationsRent, Inc. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon
the surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be
held subject to all of the provisions of the Certificate of Incorporation, as amended, of the Corporation, to all of which the
holder of this Certificate by acceptance hereof assents. This Certificate is not valid until countersigned by the Transfer Agent
and registered by the Registrar.
In Witness Whereof the said Corporation has caused this Certificate to be signed by its duly authorized officers and the
Corporate Seal to be hereunto affixed.
Dated:
Countersigned and Registered:
BANKBOSTON, N.A. /s/ Pamela K.M. Beall /s/ James L. Kirk
By Transfer Agent
and Registrar
Vice President, Secretary Chairman of the Board, Chief Executive
Authorized Signature and Treasurer Officer and President
</TABLE>
<PAGE> 2
NationsRent, Inc.
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND
WITHOUT CHARGE A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS
AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS AUTHORIZED TO BE ISSUED. SUCH
REQUEST MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL
OFFICE OR TO ITS TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _____________ Custodian ___________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act __________________
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
__________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
__________________________________________________________________________________
__________________________________________________________________________________
___________________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________________________
Attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
</TABLE>
Dated_______________________
X ___________________________________________
X ___________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THIS CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By ________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.2
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of June
29, 1998 (the "Credit Agreement"), by and among (a) NATIONSRENT, INC., a
Delaware corporation (the "Parent"), and its Subsidiaries (collectively with the
Parent, the "Borrowers"), (b) BANKBOSTON, N.A., a national banking association
having its principal place of business at 100 Federal Street, Boston,
Massachusetts 02110 (acting in its individual capacity, "BKB"), LASALLE NATIONAL
BANK, a national banking association having its principal place of business at
135 South LaSalle Street, Chicago, Illinois 60603 (acting in its individual
capacity "LaSalle"), the other lending institutions which become parties hereto
(collectively, the "Banks") (c) BANKBOSTON, N.A., as administrative agent for
the Banks (the "Agent") (d) LASALLE NATIONAL BANK, as documentation agent for
the Banks (the "Documentation Agent") and (e) FLEET BANK, N.A. and NATIONSBANK,
N.A., as co-agents (the "Co-Agents").
WHEREAS, pursuant to that certain Revolving Credit Agreement dated as
of March 18, 1998 (as heretofore amended, the "Prior Credit Agreement"), certain
of the Banks have made loans and otherwise extended credit to the Borrowers for
the purpose described therein; and
WHEREAS, the Borrowers, the Banks and the Agent wish to amend and
restate the Prior Credit Agreement in order to increase the Banks' commitments
under the revolving credit facility, to add Banks and to make certain other
changes to the terms and provisions of the Prior Credit Agreement.
NOW THEREFORE, the Borrowers, the Banks and the Agent hereby agree that
the Prior Credit Agreement is hereby amended and restated in its entirety and
remains in force and effect only as set forth herein and the Loans (as defined
in the Prior Credit Agreement) shall constitute Loans hereunder.
ss.1. DEFINITIONS AND RULES OF INTERPRETATION.
SS.1.1. DEFINITIONS.
The following terms shall have the meanings set forth in this ss.1 or
elsewhere in the provisions of this Credit Agreement referred to below:
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<PAGE> 2
Accountants. Any independent accounting firm of national standing, or
in connection with acquisitions permitted by ss.7.4 hereof, regional accounting
firms, reasonably acceptable to the Agent.
Affected Bank. See ss.4.11.
Affiliate. Any Person that would be considered to be an affiliate of
any of the Borrowers under Rule 144 (a) of the Rules and Regulations of the
Securities and Exchange Commission, as in effect on the date hereof if such
Borrower were issuing securities.
Agent. See Preamble.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or such other location as the Agent may
designate from time to time.
Applicable Base Rate Margin. The applicable margin with respect to Base
Rate Loans as set forth in the Pricing Table.
Applicable Commitment Rate. The applicable rate with respect to the
Commitment Fee as set forth in the Pricing Table.
Applicable Eurodollar Margin. The applicable margin with respect to
Eurodollar Loans as set forth in the Pricing Table.
Applicable Laws. See ss.6.10.
Applicable L/C Margin. The applicable margin with respect to the Letter
of Credit Fee as set forth in the Pricing Table.
Associated Rentals Acquisition. The acquisition by the Parent of
certain assets of Associated Rental Equipment Management Company, Inc. pursuant
to the Associated Rental Acquisition Documents.
Associated Rentals Acquisition Documents. The asset purchase agreement
dated as of June 7, 1998, among the Parent, Thomas J. Watts, Sr. and Associated
Rental Equipment Management Company, Inc., including all exhibits and schedules
thereto, and all other agreements and documents required to be entered into or
delivered pursuant thereto or in connection with the Associated Rentals
Acquisition, each in form and substance satisfactory to the Agent.
Arranger. BancBoston Securities Inc.
Assignment and Acceptance. See ss.17.
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<PAGE> 3
Balance Sheet Date. December 31, 1997.
Bank Agents. Collectively, the Agent and the Documentation Agent.
Banks. See Preamble.
Base Rate. The higher of (a) the annual rate of interest announced from
time to time by the Agent at the Agent's Head Office as its "base rate" (it
being understood that such rate is a reference rate and not necessarily the
lowest rate of interest charged by the Agent) or (b) one percent (1%) above the
overnight federal funds effective rate, as published by the Board of Governors
of the Federal Reserve System, as in effect from time to time.
Base Rate Loans. Loans bearing interest calculated by reference to the
Base Rate.
BKB. See Preamble.
Borrowers. See Preamble.
Business Day. Any day on which banking institutions in Boston,
Massachusetts, New York, New York and Ft. Lauderdale, Florida are open for the
transaction of banking business.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and goodwill); provided that Capital Assets shall not
include (a) any item customarily charged directly to expense or depreciated over
a useful life of twelve (12) months or less in accordance with GAAP, or (b) any
item obtained through an acquisition permitted by ss.7.4 hereof.
Capital Expenditures. Amounts paid or Indebtedness incurred by the
Borrowers in connection with (i) the purchase or lease of Capital Assets that
would be required to be capitalized and shown on the balance sheet of such
Person in accordance with GAAP or (ii) the lease of any assets by any Borrower
as lessee under any Synthetic Lease to the extent that such assets would have
been Capital Assets had the Synthetic Lease been treated for accounting purposes
as a Capitalized Lease.
Capitalized Leases. Leases under which any Borrower is the lessee or
obligor, the discounted future rental payment obligations under which are
required to be capitalized on the balance sheet of the lessee or obligor in
accordance with GAAP.
CERCLA. See definition of Release.
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<PAGE> 4
Certified. With respect to the financial statements of any Person, such
statements as audited by a firm of independent auditors, whose report expresses
the opinion, without qualification, that such financial statements present
fairly the financial position of such Person.
CFO. See ss.6.4(b).
Closing Date. The date on which the conditions precedent set forth in
ss.9 are satisfied.
Co-Agents. See Preamble.
Code. The Internal Revenue Code of 1986, as amended and in effect from
time to time.
Collateral. All of the property, rights and interests of the Borrowers
that are or are intended to be subject to the security interests created by the
Security Documents.
Commitment. With respect to each Bank, the amount determined by
multiplying such Bank's Commitment Percentage by the Total Commitment specified
in ss.2.1 hereof as the amount of such Bank's commitment to make Loans to, and
to participate in the issuance, extension and renewal of, Letters of Credit for
the account of the Borrowers, as the same may be reduced or increased in
accordance with the terms hereof from time to time; or if such commitment is
terminated pursuant to the provisions hereby, zero.
Commitment Fee. See ss.4.1.
Commitment Percentage. With respect to each Bank, the percentage
initially set forth beside its name on Schedule 1 (subject to adjustment in
accordance with ss.ss.2.2.2 and 17) as such Bank's percentage of the aggregate
Commitments of all of the Banks.
Compliance Certificate. See ss.6.4(c).
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrowers,
consolidated in accordance with GAAP.
Consolidated Earnings Before Interest and Taxes or EBIT. For any
period, the actual reported Consolidated Net Income (or Deficit) of the
Borrowers, plus (a) interest expense for such period and (b) income taxes for
such period, to the extent that each was deducted in determining Consolidated
Net Income (or Deficit), determined in accordance with GAAP, provided that, EBIT
(plus nonrecurring private company expenses that are (A) discontinued or
adjusted upon acquisition by the Parent or its Subsidiaries, such as owner
compensation and adjustments to depreciation to conform to the Parent's
accounting treatment, and (B)
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<PAGE> 5
approved by the Agent) of the Subsidiaries of the Parent acquired during the
period reported in the most recent financial statements delivered to the Banks
pursuant to ss.6.4 shall be included in the calculation of EBIT if (i) the
financial statements of such acquired Subsidiaries have been audited, or with
the consent of the Agent, reviewed, by Accountants for the most recent fiscal
year ended of such acquired Subsidiaries, a portion of which fiscal year is
sought to be included in the calculation of EBIT, or (ii) the Agent consents to
such inclusion after being furnished with other acceptable financial statements,
(such statements accepted under (i) and (ii) hereof are referred to as
"Acceptable Financials") and (iii) a Compliance Certificate and other
appropriate documentation, in form and substance satisfactory to the Agent,
certifying the historical operating results and balance sheet of the acquired
companies are provided to the Agent.
Consolidated Earnings Before Interest, Taxes, Depreciation and
Amortization or EBITDA. For any period, EBIT plus (a) depreciation expense for
such period and (b) amortization expense relating to intangible assets for such
period, to the extent that each was deducted in determining Consolidated Net
Income (or Deficit), determined in accordance with GAAP, provided that, EBITDA
of the Subsidiaries of the Parent acquired during the period reported in the
most recent financial statements delivered to the Banks pursuant to ss.6.4 (plus
adjustments approved by the Agent as set forth in the definition of EBIT) shall
be included in the calculation of EBITDA (without duplication).
Consolidated Net Income (or Deficit). The consolidated net income (or
deficit) of the Borrowers after deduction of all expenses, taxes, and other
proper charges, determined in accordance with GAAP.
Consolidated Net Worth. The excess of Consolidated Total Assets over
Consolidated Total Liabilities, less, to the extent otherwise includable in the
computation of Consolidated Net Worth, any subscriptions receivable.
Consolidated Tangible Assets. All accounts receivable, inventory
(including rental inventory), property, plants and equipment, (including titled
equipment) of the Borrowers on which the Agent for the benefit of the Banks and
the Agent has a first priority perfected security interest (other than
perfection of titled equipment unless required by ss.6.19), and which in any
case are subject to no other liens, encumbrances, restrictions or other security
interests of any kind, determined on a consolidated basis in accordance with
GAAP.
Consolidated Total Assets. The sum of (i) all assets ("consolidated
balance sheet assets") of the Borrowers determined on a consolidated basis in
accordance with GAAP, plus (ii) without duplication, all assets leased by
Borrowers as lessee under any Synthetic Lease to the extent that such assets
would have been consolidated balance sheet assets had the Synthetic Lease been
treated for accounting purposes as a Capitalized Lease, plus (iii) without
duplication, all sold receivables referred to in clause (vii) of the definition
of the term "Indebtedness" to the extent that such receivables would have been
consolidated balance sheet assets had they not been sold.
-5-
<PAGE> 6
Consolidated Total Interest Expense. For any period, the aggregate
amount of interest required to be paid or accrued by the Borrowers during such
period on all Indebtedness of the Borrowers outstanding during all or any part
of such period, whether such interest was or is required to be reflected as an
item of expense or capitalized, including payments consisting of interest in
respect of any Capitalized Lease or any Synthetic Lease and including commitment
fees, agency fees, facility fees, balance deficiency fees and similar fees or
expenses in connection with the borrowing of money.
Consolidated Total Liabilities. All liabilities of the Borrowers
determined on a consolidated basis in accordance with GAAP and classified as
such on the consolidated balance sheet of the Borrowers and all other
Indebtedness of the Borrowers, whether or not so classified.
Credit Agreement. This Amended and Restated Revolving Credit Agreement,
including the Schedules and Exhibits hereto, as amended and in effect from time
to time.
Default. See ss.12.
Delinquent Bank. See ss.14.5.3.
Disposal (or Disposed). See definition of Release.
Distribution. The declaration or payment of any dividend or
distribution on or in respect of any shares of any class of capital stock, any
partnership interests or any membership interests of any Person (other than
dividends or other distributions payable solely in shares of common stock,
partnership interests or membership units of such Person, as the case may be);
the purchase, redemption, or other retirement of any shares of any class of
capital stock, partnership interests or membership units of such Person,
directly or indirectly through a Subsidiary or otherwise; the return of equity
capital by any Person to its shareholders, partners or members as such; or any
other distribution on or in respect of any shares of any class of capital stock,
partnership interest or membership unit of such Person.
Documentation Agent. See Preamble.
Dollars or $. Dollars in lawful currency of the United States of
America.
Drawdown Date. The date on which any Loan is made or is to be made, and
the date on which any Loan is converted or continued in accordance with ss.2.5.
EBIT. See definition of Consolidated Earnings Before Interest and
Taxes.
EBITDA. See definition of Consolidated Earnings Before Interest, Taxes,
Depreciation and Amortization.
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<PAGE> 7
Eligible Assignee. Any of (i) a commercial bank organized under the
laws of the United States, or any State thereof or the District of Columbia, and
having total assets in excess of $1,000,000,000; (ii) a savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof or the District of Columbia, and having a net worth of at
least $100,000,000, calculated in accordance with generally accepted accounting
principles; (iii) an Eligible Foreign Bank; and (iv) if, but only if, any Event
of Default has occurred and is continuing, any other bank, insurance company,
commercial finance company or other financial institution approved by the Agent,
such approval not to be unreasonably withheld.
Eligible Foreign Bank. (a) Any commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, provided that such bank is acting through a branch or agency located in
the Cayman Islands, in the country in which it is organized or another country
which is also a member of the OECD; or (b) the central bank of any country which
is a member of the OECD.
Employee Benefit Plan. Any employee benefit plan within the meaning of
ss.3(3) of ERISA maintained or contributed to by any Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See ss.5.16(a).
EPA. See ss.5.16(b).
Equity Issuance. The sale or issuance by the Parent of any of its
capital stock or equity interests or any warrants, rights or options to acquire
its capital stock or equity interests.
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA Affiliate. Any Person which is treated as a single employer with
any Borrower under ss.414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of ss.4043 of ERISA and the regulations
promulgated thereunder.
Eurodollar Business Day. Any Business Day on which dealings in foreign
currency and exchange are carried on among banks in London, England or such
other eurodollar interbank market as may be selected by the Agent and approved
by the Majority Banks.
Eurodollar Interest Determination Date. For any Interest Period, the
date two Eurodollar Business Days prior to the first day of such Interest
Period.
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<PAGE> 8
Eurodollar Loans. Loans bearing interest calculated by reference to the
Eurodollar Rate.
Eurodollar Offered Rate. The rate per annum at which deposits of
dollars are offered to the Agent by prime banks in the London interbank market
or other eurodollar market as may be selected by the Agent and approved by the
Majority Banks, at or about 11:00 a.m. local time in such interbank market, on
the Eurodollar Interest Determination Date, for a period equal to the requested
Interest Period in an amount substantially equal to the principal amount
requested to be loaned at or converted to a rate based on the Eurodollar Rate.
Eurodollar Rate. The rate per annum, rounded upwards to the nearest
1/16 of 1%, determined by the Agent with respect to an Interest Period in
accordance with the following formula:
Eurodollar Rate = Eurodollar Offered Rate
-----------------------
1-Reserve Rate
Event of Default. See ss.12.
Form S-1. A Registration Statement on Form S-1 suitable for filing with
the SEC pursuant to the Securities Act.
Funded Debt. Consolidated Indebtedness of the Borrowers for borrowed
money, every obligation of such Person issued or assumed as the deferred
purchase price of assets or services (including securities repurchase agreements
but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business which are not overdue in accordance with their terms
or the Borrowers' normal trade practices as applicable, or which are being
contested in good faith), and guarantees of such Indebtedness, recorded on the
consolidated balance sheet of the Borrowers, including reimbursement obligations
of the Borrowers with respect to letters of credit which are due and owing and
the amount of any Indebtedness of such Persons for Capitalized Leases which
corresponds to principal.
generally accepted accounting principles or GAAP. (i) When used in
ss.8, whether directly or indirectly through reference to a capitalized term
used therein, means (A) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(B) to the extent consistent with such principles, the accounting practice of
the Borrowers reflected in their financial statements for the year ended on the
Balance Sheet Date, and (ii) when used in general, other than as provided above,
means principles that are (A) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time, and (B) consistently applied with past financial
statements of the Borrowers adopting the same principles, provided that in each
case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
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<PAGE> 9
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of ss.3(2) of ERISA maintained or contributed to by any Borrower or any
ERISA Affiliate, the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Hazardous Substances. See ss.5.16(b).
Indebtedness. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(i) every obligation of such Person for money borrowed,
(ii) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or
businesses,
(iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person,
(iv) every obligation of such Person issued or assumed as
the deferred purchase price of property or services (including
securities repurchase agreements but excluding trade accounts payable
or accrued liabilities arising in the ordinary course of business which
are not overdue or which are being contested in good faith),
(v) every obligation of such Person under any Capitalized
Lease,
(vi) every obligation of such Person under any Synthetic
Lease,
(vii) all sales by such Person of (A) accounts or general
intangibles for money due or to become due, (B) chattel paper,
instruments or documents creating or evidencing a right to payment of
money or (C) other receivables (collectively, "receivables"), whether
pursuant to a purchase facility or otherwise, other than in connection
with the disposition of the business operations of such Person relating
thereto or a disposition of defaulted receivables for collection and
not as a financing arrangement, and together with any obligation of
such Person to pay any discount, interest, fees, indemnities,
penalties, recourse, expenses or other amounts in connection therewith,
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<PAGE> 10
(viii) every obligation of such Person (an "equity related
purchase obligation") to purchase, redeem, retire or otherwise acquire
for value any shares of capital stock of any class issued by such
Person, any warrants, options or other rights to acquire any such
shares, or any rights measured by the value of such shares, warrants,
options or other rights which obligations may be required to be
exercised prior to the Maturity Date,
(ix) every obligation of such Person under any forward
contract, futures contract, swap, option or other financing agreement
or arrangement (including, without limitation, caps, floors, collars
and similar agreements), the value of which is dependent upon interest
rates, currency exchange rates, commodities or other indices,
(x) every obligation in respect of Indebtedness of any
other entity (including any partnership in which such Person is a
general partner) to the extent that such Person is liable therefor as a
result of such Person's ownership interest in or other relationship
with such entity, except to the extent that the terms of such
Indebtedness provide that such Person is not liable therefor and such
terms are enforceable under applicable law,
(xi) every obligation, contingent or otherwise, of such
Person guaranteeing, or having the economic effect of guarantying or
otherwise acting as surety for, any obligation of a type described in
any of clauses (i) through (x) (the "primary obligation") of another
Person (the "primary obligor"), in any manner, whether directly or
indirectly, and including, without limitation, any obligation of such
Person (A) to purchase or pay (or advance or supply funds for the
purchase of) any security for the payment of such primary obligation,
(B) to purchase property, securities or services for the purpose of
assuring the payment of such primary obligation, or (C) to maintain
working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary obligor
to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (v) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with GAAP, (w) any
Capitalized Lease shall be the principal component of the aggregate of the
rentals obligation under such Capitalized Lease payable over the term thereof
that is not subject to termination by the lessee, (x) any sale of receivables
shall be the amount of unrecovered capital or principal investment of the
purchaser (other than the Borrowers) thereof, excluding amounts representative
of yield or interest earned on such investment, (y) any Synthetic Lease shall be
the stipulated loss value, termination value or other equivalent amount and (z)
any equity related purchase obligation shall be the maximum fixed redemption or
purchase price thereof inclusive of any accrued and unpaid dividends to be
comprised in such redemption or purchase price.
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<PAGE> 11
Ineligible Securities. Securities which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of the
Banking Act of 1993 (12 U.S.C. ss.24, Seventh), as amended.
Interest Period. With respect to each Eurodollar Loan:
(a) initially, the period commencing on the date of the making
of a Eurodollar Loan or the conversion from a Base Rate Loan into a Eurodollar
Loan and ending one (1), two (2), three (3), or six (6) months thereafter, as
selected by the Borrowers in a Loan and Letter of Credit Request; and
(b) thereafter, each subsequent Interest Period shall begin on
the last day of the preceding Interest Period and shall end one (1), two (2),
three (3), or six (6) months thereafter, as selected by the Borrowers in a Loan
and Letter of Credit Request;
provided, however, that whenever the first day of any Interest
Period occurs on a day of an initial calendar month for which there is no
numerically corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months in such
Interest Period, such Interest Period shall end on the last Business Day of such
succeeding calendar month.
Issuance Fee. See ss.4.1(b).
Joinder Agreement. See ss.6.16(a).
LaSalle. See Preamble.
Lease. Any lease, master lease, sublease, chattel paper, installment
sales agreement or rental agreement (including progress payment authorizations),
including any and all schedules, supplements and amendments thereto and
modifications thereof.
Lessee. The lessee under a Lease.
Letter of Credit Applications. Letter of Credit Applications in such
form as may be agreed upon by the Borrowers and the Agent from time to time
which are entered into pursuant to ss.3 hereof, as such Letter of Credit
Applications are amended, varied or supplemented from time to time.
Letter of Credit Fee. See ss.4.1(b).
Letter of Credit Participation. See ss.3.1(b).
Letters of Credit. Standby Letters of Credit issued or to be issued by
the Agent under ss.3 hereof for the account of the Borrowers.
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<PAGE> 12
Loan and Letter of Credit Request. See ss.2.6.
Loan Documents. This Credit Agreement, the Joinder Agreement(s), the
Revolving Credit Notes, the Letter of Credit Applications, the Letters of Credit
and the Security Documents, each as amended and in effect from time to time.
Loans. Revolving Credit Loans and Swing Line Loans made or to be made
by the Banks to the Borrowers pursuant to ss.2.
Majority Banks. As of any date, the Banks holding fifty-one percent
(51%) of the outstanding principal amount of the Revolving Credit Loans and
participating interests in outstanding Letters of Credit and Swing Line Loan
(other than Loans or participating interests in Letters of Credit held by
Delinquent Banks) on such date; and if no such principal is outstanding, the
Banks whose aggregate Commitments constitute fifty-one percent (51%) of the
Total Commitment; provided that for purposes of this definition "Banks" shall
not include any Delinquent Bank until such Delinquent Bank is no longer deemed a
Delinquent Bank under ss.14.5.3.
Maturity Date. June 29, 2001, or such earlier date on which the
Obligations become due and owing.
Maximum Drawing Amount. The maximum aggregate amount from time to time
that the beneficiaries may draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to terms of the
Letters of Credit.
Maximum Rate. With respect to each Bank, the maximum lawful nonusurious
rate of interest (if any) which under Applicable Law such Bank may charge the
Borrowers on the Loans and other Obligations from time to time.
Multiemployer Plan. Any multiemployer plan within the meaning of
ss.3(37) of ERISA maintained or contributed to by any Borrower or any ERISA
Affiliate.
Net Cash Proceeds. With respect to any Equity Issuance, the excess of
the gross cash proceeds received by such person from such Equity Issuance after
deduction of reasonable and customary transaction expenses (including without
limitation, underwriting discounts and commissions) actually incurred in
connection with the Equity Issuance.
Notes. The Revolving Credit Notes and Swing Line Note.
Obligations. All indebtedness, obligations and liabilities of the
Borrowers to any of the Banks or the Agent, individually or collectively,
existing on the date of this Credit Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise, arising or incurred under this Credit Agreement or any of
the
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<PAGE> 13
other Loan Documents, or under any Swap Contract between the Borrowers and any
Bank, or in respect of any of the Loans made or Reimbursement Obligations
incurred or any of the Letter of Credit Applications, the Letters of Credit, the
Revolving Credit Notes or any other instrument at any time evidencing any
thereof.
Omnibus Security Amendment. The Omnibus Amendment to Security Documents
dated as of the date hereof, among the Borrowers and the Agent.
outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by ss.4002 of
ERISA and any successor entity or entities having similar responsibilities.
Perfection Certificates. The Perfection Certificates as defined in the
Security Agreement.
Permitted Liens. See ss.7.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Pricing Ratio. As of the end of any fiscal quarter of the Borrowers
commencing with the fiscal quarter ending December 31, 1998, the ratio of (a)
Funded Debt as at the end of such quarter to (b) EBITDA for the period of four
(4) consecutive fiscal quarters ending on such date.
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<PAGE> 14
Pricing Table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Applicable Applicable Base Applicable
PRICING RATIO Eurodollar Margin Rate Margin Applicable L/C Commitment Rate
(per annum) (per annum) Margin (per annum) (per annum)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than 1.75:1 1.50% 0.00% 1.50% 0.300%
- ---------------------------------------------------------------------------------------------------------------
Greater than or 1.75% 0.00% 1.75% 0.375%
equal to 1.75:1 but
less than 2.25:1
- ---------------------------------------------------------------------------------------------------------------
Greater than or 2.00% 0.00% 2.00% 0.375%
equal to 2.25:1 but
less than 2.75:1
- ---------------------------------------------------------------------------------------------------------------
Greater than or 2.25% 0.00% 2.25% 0.375%
equal to 2.75:1 but
less than 3.25:1
- ---------------------------------------------------------------------------------------------------------------
Greater than or 2.50% 0.25% 2.50% 0.375%
equal to 3.25:1 but
less than 4.25:1
- ---------------------------------------------------------------------------------------------------------------
Greater than or 2.75% 0.50% 2.75% 0.50%
equal to 4.25:1
- ---------------------------------------------------------------------------------------------------------------
Initial Pricing 3.00% 0.75% 3.00% 0.50%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Any change in the applicable margin shall become effective on the first day
after receipt by the Banks of financial statements delivered pursuant to
ss.6.4(a) or (b) which indicate a change in the Pricing Ratio or, with respect
to the Eurodollar Applicable Margin, on the first day of each Interest Period
which begins three (3) or more days after receipt of such financial statements.
If at any time such financial statements are not delivered within the time
periods specified in ss.6.4(a) or (b), the applicable margin shall be the
highest rate set forth in the respective column of the Pricing Table, subject to
adjustment prospectively upon actual receipt of such financial statements.
Notwithstanding the above, the initial pricing set forth in the Pricing Table
above shall be effective from the Closing Date until the earlier to occur of (i)
the delivery to the Agent of a Compliance Certificate for the fiscal quarter
ending December 31, 1998 and (ii) the successful completion of a Qualified
Public Offering.
Prior Credit Agreement. See Preamble.
Qualified Public Offering. The first underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of shares of common stock of the Parent which raises
Net Cash Proceeds of at least $75,000,000.
Replacement Bank. See ss.4.11.
RCRA. See definition of Release.
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<PAGE> 15
Real Property. All real property heretofore, now, or hereafter owned or
leased (as lessee or sublessee) by any Borrowers.
Register. See ss.17.3.
Reimbursement Obligation. The Borrowers' joint and several obligations
to reimburse the Agent and the Banks on account of any drawing under any Letter
of Credit as provided in ss.3.2.
Release. Shall have the meaning specified in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss.ss.9601 et seq. ("CERCLA") and the term "Disposal" (or "Disposed")
shall have the meaning specified in the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. ss.ss.6901 et seq. ("RCRA") and regulations promulgated
thereunder; provided that in the event either CERCLA or RCRA is amended so as to
amend the meaning of any term defined thereby, such amended meaning shall apply
as of the effective date of such amendment and provided further, to the extent
that the laws of a state wherein the property lies establishes a meaning for
"Release" or "Disposal" which is broader than specified in either CERCLA or
RCRA, such broader meaning shall apply.
Replacement Bank. See ss.4.11.
Replacement Notice. See ss.4.11.
Reserve Rate. The rate, expressed as a decimal, at which the Banks
would be required to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System (or any subsequent or similar regulation
relating to such reserve requirements) against "Eurocurrency Liabilities" (as
such term is defined in Regulation D), or against any other category of
liabilities which might be incurred by the Banks to fund Eurodollar Loans, if
such liabilities were outstanding. The Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve Rate.
Revolving Credit Notes. The amended and restated promissory notes of
the Borrowers evidencing the Revolving Credit Loans hereunder, dated as of the
date hereof and in substantially the form of Exhibit A hereto.
SEC. The Securities and Exchange Commission or any successor thereto.
Section 20 Subsidiary. A Subsidiary of the bank holding company
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.
Securities Act. The Securities Act of 1933, as amended.
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<PAGE> 16
Security Agreement. The Security Agreement, dated as of March 18, 1998,
among the Borrowers and the Agent, as supplemented, amended and effective from
time to time.
Security Documents. The Security Agreement, the Stock Pledge
Agreements, the Omnibus Security Amendment, the notices to banks of the Agent's
security interest for the benefit of the Banks and the Agent in the Borrowers'
bank accounts and any other instruments and documents, including, without
limitation, Uniform Commercial Code financing statements, required to be
executed or delivered pursuant to any Security Document or evidencing or
perfecting the Agent's lien on the assets of the Borrowers for the benefit of
the Banks.
Senior Funded Debt. At any time of determination, the result of Funded
Debt minus the aggregate principal amount of Subordinated Debt outstanding as of
such date.
Settlement. The making or receiving of payments, in immediately
available funds, by the Banks to or from the Agent in accordance with ss.2.8
hereof to the extent necessary to cause each Bank's actual share of the
outstanding amount of the Revolving Credit Loans to be equal to such Bank's
Commitment Percentage of the outstanding amount of such Revolving Credit Loans,
in any case when, prior to such action, the actual share is not so equal.
Settlement Amount. See ss.2.8(b).
Settlement Date. See ss.2.8(b).
Settling Bank. See ss.2.8(b).
Stock Pledge Agreements. The several Stock Pledge Agreements between
the Parent and/or certain of its Subsidiaries and the Agent in form and
substance satisfactory to the Agent, as amended and in effect from time to time,
pursuant to which 100% of the capital stock of each such Subsidiary of the
Parent is pledged to the Agent for the benefit of the Banks.
Subordinated Debt. Unsecured Indebtedness of the Parent that is
expressly subordinated and made junior to the payment and performance in full of
the Obligations, and evidenced as such by Subordinated Debt Documents.
Subordinated Debt Documents. The Unsecured Convertible Subordinated
Promissory Notes issued by the Parent to Bode-Finn Limited Partnership and
Raymond E. Mason Foundation in connection with the Parent's acquisition of The
Bode-Finn Company, dated April 30, 1998 in the aggregate principal amount of
$8,080,000 and $1,920,000 respectively (the "Bode-Finn Notes"), and other
written agreements containing subordination provisions substantially similar to
those attached hereto as Exhibit F and with all principal payments amortizing
after the Maturity Date.
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<PAGE> 17
Subsidiary. Any corporation, association, trust, partnership, limited
liability company or other business entity of which the designated parent shall
at any time own directly, or indirectly through a Subsidiary or Subsidiaries, at
least a majority (by number of votes) of the outstanding capital stock or other
interest entitled to vote generally.
Swap Contracts. Any agreement (including any master agreement and any
agreement, whether or not in writing, relating to any single transaction) that
is an interest rate swap agreement, basis swap, forward rate agreement,
commodity swap, commodity option, equity or equity index swap or option, bond
option, interest rate option, forward foreign exchange agreement, rate cap,
collar or floor agreement, currency swap agreement, cross-currency rate swap
agreement, swaption, currency option or other similar agreement (including any
option to enter into any of the foregoing).
Swing Line Loans. Loans made by BKB to the Borrowers pursuant to
ss.2.8.
Swing Line Note. The promissory note of the Borrowers evidencing the
Swing Line Loans hereunder, dated as of the date of this Credit Agreement in
substantially the form of Exhibit A-2.
Synthetic Lease. Any lease treated as an operating lease under
generally accepted accounting principles and as a loan or financing for U.S.
income tax purposes.
Total Commitment. See ss.2.1.
Uniform Customs. With respect to any Letter of Credit, the Uniform
Customs and Practices for Documentary Credits (1993 Revisions), International
Chamber of Commerce Publication No. 500 or any successor version thereto adopted
by the Agent in the ordinary course of its business as a letter of credit issuer
and in effect at the time of issuance of such Letter of Credit.
Year 2000 Compliance. The risk that computer applications used by the
Borrowers may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to, and any date after, December 31,
1999.
SS.1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
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<PAGE> 18
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms capitalized but not otherwise defined
herein have the meanings assigned to them by generally accepted accounting
principles applied on a consistent basis by the accounting entity to which they
refer.
(f) The words "include," "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have the
meanings assigned to them therein.
(h) Reference to a particular "ss." refers to that section of
this Credit Agreement unless otherwise indicated.
(i) The words "herein," "hereof," "hereunder" and words of
like import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including," the words "to" and "until" each mean "to but
excluding," and the word "through" means "to and including."
(k) This Credit Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are, however,
cumulative and are to be performed in accordance with the terms thereof.
(l) This Credit Agreement and the other Loan Documents are the
result of negotiation among, and have been reviewed by counsel to, among others,
the Agent and the Borrowers and are the product of discussions and negotiations
among all parties. Accordingly, this Credit Agreement and the other Loan
Documents are not intended to be considered against the Agent or any of the
Banks merely on account of the Agent's or any Bank's involvement in the
preparation of such documents.
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<PAGE> 19
SS.2. THE REVOLVING CREDIT FACILITY.
SS.2.1. COMMITMENT TO LEND.
Subject to the terms and conditions set forth in this Credit Agreement,
each of the Banks severally agrees (i) on the Closing Date, to convert the loans
outstanding and owed under the Prior Credit Agreement into Revolving Credit
Loans under this Credit Agreement and (ii) to lend to the Borrowers and the
Borrowers may borrow, repay, and reborrow from time to time from the Closing
Date to the Maturity Date, upon notice by the Borrowers to the Agent given in
accordance with ss.2.6, its Commitment Percentage of the Revolving Credit Loans
as are requested by the Parent on behalf of the Borrowers, provided that the
outstanding amount of Revolving Credit Loans (after giving effect to all amounts
requested), Swing Line Loans, unpaid Reimbursement Obligations, and the Maximum
Drawing Amount shall not exceed a maximum aggregate amount outstanding of
$225,000,000 at any time, as such amount may be reduced or increased, as the
case may be, pursuant to ss.2.2 hereof (the "Total Commitment"). The Revolving
Credit Loans shall be made pro rata in accordance with each Bank's Commitment
Percentage. Each request for a Revolving Credit Loan hereunder shall constitute
a representation and warranty by the Borrowers that the conditions set forth in
ss.9 and ss.10, as the case may be, have been satisfied on the date of such
request.
SS.2.2. REDUCTION AND INCREASE OF TOTAL COMMITMENT.
SS.2.2.1. REDUCTION OF TOTAL COMMITMENT.
(a) The Borrowers shall have the right at any time
and from time to time upon five (5) Business Days' prior written notice to the
Agent to reduce by $1,000,000 or an integral multiple of $100,000 in excess
thereof, or terminate entirely, the Total Commitment, whereupon the Commitments
of the Banks shall be reduced pro rata in accordance with their respective
Commitment Percentages of the amount specified in such notice or, as the case
may be, terminated. The Agent will notify the Banks promptly after receiving any
notice of the Borrowers delivered pursuant to this ss.2.2.1.
(b) No reduction or termination of the Commitments
once made may be revoked; the portion of the Commitments reduced or terminated
may not be reinstated; and amounts in respect of such reduced or terminated
portion may not be reborrowed.
SS.2.2.2. INCREASE OF TOTAL COMMITMENT.
Unless a Default or Event of Default has occurred and
is continuing, the Borrowers may request, on more than one occasion, that the
Total Commitment be increased by an aggregate amount of up to $40,000,000
provided that the Total Commitment shall not in any event exceed $265,000,000
hereunder, subject to the approval of the Agent, provided, however, that (i) any
Bank which is a party to this Credit Agreement prior to such increase shall have
the first option, and may elect, to fund its pro rata share of the increase,
thereby increasing its Commitment hereunder, but no Bank shall be required to do
so, (ii) in the event that it becomes necessary to include a new Bank to provide
additional funding under this ss.2.2.2, such new Bank must be reasonably
acceptable to the Agent and the Borrowers, and (iii) the Banks' Commitment
Percentages shall be correspondingly adjusted, as
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necessary, to reflect any increase in the Total Commitment and Schedule 1 shall
be amended to reflect such adjustments. Notwithstanding the above, an increase
will not be made in the Total Commitment if such increase is prohibited pursuant
to the terms of the Subordinated Debt.
SS.2.3. THE REVOLVING CREDIT NOTES.
The Revolving Credit Loans shall be evidenced by separate amended and
restated promissory notes of the Borrowers in substantially the form of Exhibit
A-1 hereto (each a "Revolving Credit Note"), dated as of the Closing Date (or
such other date on which a Bank may become a party hereto in accordance with
ss.17 hereof) and completed with appropriate insertions. One Revolving Credit
Note shall be payable to the order of each Bank in a principal amount equal to
such Bank's Commitment or, if less, the outstanding amount of all Revolving
Credit Loans made by such Bank, plus interest accrued thereon, as set forth
below. The Borrowers irrevocably authorize each Bank to make or cause to be
made, in connection with a Drawdown Date of any Revolving Credit Loan or at the
time of receipt of any payment of principal on such Bank's Revolving Credit
Note, an appropriate notation on such Bank's records reflecting the making of
such Revolving Credit Loan or the receipt of such payment (as the case may be).
The outstanding amount of the Revolving Credit Loans set forth on such Bank's
record shall be prima facie evidence of the principal amount thereof owing and
unpaid to such Bank, but the failure to record, or any error in so recording,
any such amount shall not limit or otherwise affect the obligation of the
Borrowers hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
SS.2.4. INTEREST ON LOANS.
Except as otherwise provided in ss.4.6, the outstanding principal
amount of the Loans shall bear interest at the rate per annum equal to (a) the
Base Rate plus the Applicable Base Rate Margin on Base Rate Loans or (b) the
Eurodollar Rate plus the Applicable Eurodollar Margin on Eurodollar Loans. The
Borrowers jointly and severally promise to pay interest on each Loan (i)
quarterly in arrears on the first Business Day of each calendar quarter for the
immediately preceding calendar quarter, commencing July 1, 1998, on Base Rate
Loans, (ii) on the last day of the applicable Interest Period, and if such
Interest Period is longer than three (3) months, also on the day which is three
(3) months after the commencement of such Interest Period, on Eurodollar Loans,
and (iii) on the Maturity Date for all Loans.
SS.2.5. ELECTION OF EURODOLLAR RATE; NOTICE OF ELECTION; INTEREST
PERIODS; MINIMUM AMOUNTS.
(a) At the Borrowers' option, so long as no Default or Event
of Default has occurred and is then continuing, the Borrowers may (i) elect to
convert any Revolving Credit Loan which is a Base Rate Loan or a portion thereof
to a Eurodollar Loan, (ii) at the time of any Loan and Letter of Credit Request,
specify that a requested Revolving Credit
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Loan shall be a Eurodollar Loan, or (iii) upon expiration of the applicable
Interest Period, elect to maintain an existing Eurodollar Loan as such, provided
that the Borrowers give notice to the Agent pursuant to ss.2.5(b) hereof. Upon
determining any Eurodollar Rate, the Agent shall forthwith provide notice
thereof to the Borrowers and the Banks, and each such notice to the Borrowers
and the Banks shall be considered prima facie correct and binding, absent
manifest error.
(b) Three (3) Eurodollar Business Days prior to the making of
any Eurodollar Loan or the conversion of any Base Rate Loan to a Eurodollar
Loan, or, in the case of an outstanding Eurodollar Loan, the expiration date of
the applicable Interest Period, the Borrowers shall give telephonic notice
(confirmed by telecopy on the same Eurodollar Business Day) to the Agent not
later than 1:00 p.m. (Boston time) of their election pursuant to ss.2.5(a). Each
such notice delivered to the Agent shall specify the aggregate principal amount
of the Revolving Credit Loans to be borrowed or maintained as or converted to
Eurodollar Loans and the requested duration of the Interest Period that will be
applicable to such Eurodollar Loan, and shall be irrevocable and binding upon
the Borrowers. If the Borrowers shall fail to give the Agent notice of their
election hereunder together with all of the other information required by this
ss.2.5(b) with respect to any Revolving Credit Loan, such Revolving Credit Loan
shall be deemed a Base Rate Loan. In the event that the Borrowers fail to
provide any such notice with respect to the continuation of any Eurodollar Loan
as such, then such Eurodollar Loan shall be automatically converted to a Base
Rate Loan at the end of the then expiring Interest Period relating thereto.
(c) Notwithstanding anything herein to the contrary, the
Borrowers may not specify an Interest Period that would extend beyond the
Maturity Date.
(d) All Revolving Credit Loans shall be in a minimum amount of
$500,000 or an integral multiple of $100,000 in excess thereof. In no event
shall the Borrowers have more than five (5) different maturities of Eurodollar
Loans outstanding at any time.
SS.2.6. REQUESTS FOR LOANS.
The Borrowers shall give to the Agent written notice in the form of
Exhibit B hereto (or telephonic notice confirmed by telecopy on the same
Business Day in the form of Exhibit B hereto) of each Loan requested hereunder
(a "Loan and Letter of Credit Request") not later than (a) 11:00 a.m. (Boston
time) on the day of the proposed Drawdown Date of any Loan which is a Base Rate
Loan, or (b) 1:00 p.m. (Boston time) three (3) Eurodollar Business Days prior to
the proposed Drawdown Date of any Eurodollar Loan, or (c) 1:00 p.m. (Boston
time) on the proposed Drawdown Date of funding of any Swing Line Loan, provided,
however, that the Borrowers shall not request any Eurodollar Rate Loan having an
Interest Period longer than one (1) month until the date which is ninety (90)
days following the Closing Date. Each such notice shall be given by the
Borrowers and shall specify the principal amount of the Loan requested, if a
Revolving Credit Loan, whether such Revolving
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Credit Loan is a Base Rate Loan or a Eurodollar Loan, the Drawdown Date of such
Loan and shall include a current Loan and Letter of Credit Request reflecting
the Maximum Drawing Amount and the outstanding Loans. Each Loan and Letter of
Credit Request shall be irrevocable and binding on the Borrowers and shall
obligate the Borrowers to accept the Loan requested from the Banks on the
proposed Drawdown Date. Each of the representations and warranties made by or on
behalf of the Borrowers to the Banks or the Agent in this Credit Agreement or
any other Loan Document shall be true and correct in all material respects when
made and shall, for all purposes of this Credit Agreement, be deemed to be
repeated on and as of the date of the submission of any Loan and Letter of
Credit Request and on and as of the Drawdown Date of such Loan, or the date of
issuance of such Letter of Credit (except to the extent of changes resulting
from transactions contemplated or permitted by this Credit Agreement and the
other Loan Documents and changes occurring in the ordinary course of business
that singly or in the aggregate are not materially adverse, or to the extent
that such representations and warranties expressly relate solely to an earlier
date). The Agent shall promptly notify each Bank of each Loan and Letter of
Credit Request (other than requests for Swing Line Loans only) received by the
Agent.
SS.2.7. FUNDS FOR REVOLVING CREDIT LOANS
(a) Not later than 1:00 p.m. (Boston time) on the proposed
Drawdown Date of any Revolving Credit Loan, each of the Banks will make
available to the Agent, at the Agent's Head Office, in immediately available
funds, the amount of such Bank's Commitment Percentage of the amount of the
requested Revolving Credit Loans. Upon receipt from each Bank of such amount,
and upon receipt of the documents required by ss.ss.9 and 10 and the
satisfaction of the other conditions set forth therein, to the extent
applicable, the Agent will make available to the Borrowers in immediately
available funds the aggregate amount of such Revolving Credit Loans made
available to the Agent by the Banks. The failure or refusal of any Bank to make
available to the Agent at the aforesaid time and place on any Drawdown Date the
amount of its Commitment Percentage of the requested Revolving Credit Loans
shall not relieve any other Bank from its several obligation hereunder to make
available to the Agent the amount of such other Bank's Commitment Percentage of
any requested Revolving Credit Loans.
(b) The Agent may, unless notified to the contrary by any Bank
prior to a Drawdown Date, assume that such Bank has made available to the Agent
on such Drawdown Date the amount of such Bank's Commitment Percentage of the
Revolving Credit Loans to be made on such Drawdown Date, and the Agent may (but
shall not be required to), in reliance upon such assumption, make available to
the Borrowers a corresponding amount. If any Bank makes available to the Agent
such amount on a date after such Drawdown Date, such Bank shall pay to the Agent
on demand an amount equal to the product of (i) the average computed for the
period referred to in clause (iii) below, of the weighted average interest rate
paid by the Agent for federal funds acquired by the Agent during each day
included in such period, times (ii) the amount of such Bank's Commitment
Percentage of
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such Revolving Credit Loans, times (iii) a fraction, the numerator of which is
the number of days that elapse from and including such Drawdown Date to the date
on which the amount of such Bank's Commitment Percentage of such Revolving
Credit Loans shall become immediately available to the Agent, and the
denominator of which is 365. A statement of the Agent submitted to such Bank
with respect to any amounts owing under this paragraph shall be prima facie
evidence, absent manifest error, of the amount due and owing to the Agent by
such Bank. If the amount of such Bank's Commitment Percentage of such Revolving
Credit Loans is not made available to the Agent by such Bank within three (3)
Business Days following such Drawdown Date, the Agent shall be entitled to
recover such amount from the Borrowers on demand, with interest thereon at the
rate per annum applicable to the Revolving Credit Loans made on such Drawdown
Date.
SS.2.8. SWING LINE LOANS; SETTLEMENTS.
(a) Solely for ease of administration of the Revolving Credit
Loans, BKB may, upon receipt of a Loan and Letter of Credit Request no later
than 1:00 p.m. (Boston time) on the proposed date of funding, but shall not be
required to, fund Base Rate Loans made in accordance with the provisions of this
Credit Agreement ("Swing Line Loans") for periods not to exceed seven (7) days
in any one case, bearing interest as set forth in ss.2.4. The Swing Line Loans
shall be evidenced by a promissory note of the Borrowers in substantially the
form of Exhibit A-2 (the "Swing Line Note") and shall each be in a minimum
amount of $100,000 or greater, provided that the outstanding amount of Swing
Line Loans advanced by BKB hereunder shall not exceed $15,000,000 at any time.
Each Bank shall remain severally and unconditionally liable to fund its pro rata
share (based upon each Bank's Commitment Percentage) of such Swing Line Loans on
each Settlement Date and, in the event BKB chooses not to fund all Base Rate
Loans requested on any date, to fund its Commitment Percentage of the Base Rate
Loans requested, subject to satisfaction of the provisions hereof relating to
the making of Base Rate Loans. Prior to each Settlement, all payments or
repayments of the principal of, and interest on, Swing Line Loans shall be
credited to the account of BKB.
(b) The Banks shall effect Settlements on (i) the Business Day
immediately following any day which BKB gives written notice to the Agent to
effect a Settlement, (ii) the Business Day immediately following the Agent's
becoming aware of the existence of any Default or Event of Default, (iii) the
Maturity Date, (iii) any date on which the Borrowers wish to convert a Swing
Line Loan into a Eurodollar Rate Loan, and (iv) in any event, the seventh day on
which any Swing Line Loan remains outstanding (each such date, a "Settlement
Date"). One (1) Business Day prior to each such Settlement Date, the Agent shall
give telephonic notice to the Banks of (A) the respective outstanding amount of
Revolving Credit Loans made by each Bank as at the close of business on the
prior day, (B) the amount that any Bank, as applicable (a "Settling Bank"),
shall pay to effect a Settlement (a "Settlement Amount"). A statement of the
Agent submitted to the Banks with respect to any amounts owing hereunder shall
be prima facie evidence of the amount due and owing.
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Each Settling Bank shall, not later than 1:00 p.m. (Boston time) on each
Settlement Date, effect a wire transfer of immediately available funds to the
Agent at the Agent's Head Office in the amount of such Bank's Settlement Amount.
All funds advanced by any Bank as a Settling Bank pursuant to this ss.2.8 shall
for all purposes be treated as a Base Rate Loan to the Borrowers.
(c) The Agent may (unless notified to the contrary by any
Settling Bank by 12:00 noon (Boston time) one (1) Business Day prior to the
Settlement Date) assume that each Settling Bank has made available (or will make
available by the time specified in ss.2.8(b)) to the Agent its Settlement
Amount, and the Agent may (but shall not be required to), in reliance upon such
assumption, effect Settlements. If the Settlement Amount of such Settling Bank
is made available to the Agent on a date after such Settlement Date, such
Settling Bank shall pay the Agent on demand an amount equal to the product of
(i) the average, computed for the period referred to in clause (iii) below, of
the weighted average annual interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period times (ii) such
Settlement Amount times (iii) a fraction, the numerator of which is the number
of days that elapse from and including such Settlement Date to but not including
the date on which such Settlement Amount shall become immediately available to
the Agent, and the denominator of which is 365. Upon payment of such amount such
Settling Bank shall be deemed to have delivered its Settlement Amount on the
Settlement Date and shall become entitled to interest payable by the Borrowers
with respect to such Settling Bank's Settlement Amount as if such share were
delivered on the Settlement Date. If such Settlement Amount is not in fact made
available to the Agent by such Settling Bank within three (3) Business Days of
such Settlement Date, the Agent shall be entitled to recover such amount from
the Borrowers, with interest thereon at the Base Rate.
(d) After any Settlement Date, any payment by the Borrowers of
Swing Line Loans hereunder shall be allocated pro rata among the Banks, in
accordance with such Bank's Commitment Percentage.
SS.2.9. MATURITY OF THE LOANS.
The Loans shall be due and payable on the Maturity Date. The Borrowers
jointly and severally promise to pay on the Maturity Date all Loans outstanding
on such date, together with any and all accrued and unpaid interest thereon.
SS.2.10. MANDATORY REPAYMENTS OF THE LOANS AND REIMBURSEMENT
OBLIGATIONS.
If at any time the sum of the outstanding amount of the Loans plus the
Maximum Drawing Amount plus unpaid Reimbursement Obligations exceeds the Total
Commitment, whether by reduction of the Total Commitment or otherwise, then the
Borrowers shall immediately pay the amount of such excess to the Agent for
application first, to any Swing Line Loans, second, to unpaid Reimbursement
Obligations, third, to the Revolving Credit
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Loans, or if no Revolving Credit Loans shall be outstanding, to be held by the
Agent as collateral security for the Reimbursement Obligations, provided,
however, that if the amount of cash collateral held by the Agent pursuant to
this ss.2.9 exceeds the amount of the Obligations, the Agent shall return such
excess to the Borrowers. Each payment of any unpaid Reimbursement Obligations or
prepayment of Revolving Credit Loans shall be allocated among the Banks, in
proportion, as nearly as practicable, to each Reimbursement Obligation or (as
the case may be) the respective unpaid principal amount of each Bank's Revolving
Credit Note, with adjustments to the extent practicable to equalize any prior
payments or repayments not exactly in proportion.
SS.2.11. OPTIONAL PREPAYMENTS OF LOANS.
The Borrowers shall have the right, at their election, to prepay the
outstanding amount of the Loans, as a whole or in part, at any time without
penalty or premium (other than the obligation to reimburse the Banks and the
Agent pursuant to ss.4.8 hereof). The Borrowers shall give written notice to the
Agent (or telephonic notice confirmed in writing) no later than (a) 1:00 p.m.
(Boston time) on the Business Day of the proposed prepayment of any Base Rate
Loan, (b) 1:00 p.m. (Boston time) three (3) Eurodollar Business Days prior to
the proposed prepayment of any Eurodollar Loan or (c) 1:00 p.m. (Boston time) on
the Business Day of the proposed prepayment of any Swing Line Loan, in each case
specifying the proposed date of prepayment of Loans and the principal amount to
be paid. Each such partial repayment of (i) the Revolving Credit Loans shall be
in the amount of $1,000,000 or an integral multiple of $500,000 in excess
thereof, and (ii) the Swing Line Loans shall be in the amount of $100,000 or a
greater integral multiple of $10,000 in excess thereof, and shall be accompanied
by the payment of accrued interest on the principal prepaid to the date of
prepayment and shall be applied, in the absence of instruction by the Borrowers,
first to the principal of Base Rate Loans and then to the principal of
Eurodollar Loans. Each partial prepayment of Revolving Credit Loans shall be
allocated among the Banks, in proportion, as nearly as practicable, to the
respective unpaid principal amount of each Bank's Revolving Credit Loans, with
adjustments to the extent practicable to equalize any prior repayments not
exactly in proportion.
SS.3. LETTERS OF CREDIT.
SS.3.1. LETTER OF CREDIT COMMITMENTS.
(a) Subject to the terms and conditions hereof and the execution and
receipt of a Loan and Letter of Credit Request reflecting the Maximum Drawing
Amount of all Letters of Credit (including the requested Letter of Credit) and
the outstanding Loans and a Letter of Credit Application, the Agent, on behalf
of the Banks and in reliance upon the agreement of the Banks set forth in
ss.3.1(b) and upon the representations and warranties of the Borrowers contained
herein, agrees to issue, extend, and renew for the account of the Borrowers one
or more standby letters of credit, in such form as may be requested from time to
time by the Borrowers and agreed to by the Agent; provided, however, that, after
giving effect to such
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request, the Maximum Drawing Amount plus all unpaid Reimbursement Obligations
shall not exceed the lesser of (i) $25,000,000 or (ii) the Total Commitment
minus the aggregate outstanding amount of the Loans. No Letter of Credit shall
have an expiration date later than the earlier of (i) one (1) year after the
date of issuance of the Letter of Credit (which may incorporate automatic
renewals for periods of up to one (1) year, provided that no later than thirty
(30) days prior to the date of any automatic renewal the Agent may terminate
such Letter of Credit), or (ii) fourteen (14) days prior to the Maturity Date.
Each Letter of Credit so issued, extended or renewed shall be subject to the
Uniform Customs.
(b) Each Bank severally agrees that it shall be absolutely liable,
without regard to the occurrence of any Default or Event of Default or any other
condition precedent whatsoever, to the extent of such Bank's Commitment
Percentage thereof, to reimburse the Agent on demand for the amount of each
draft paid by the Agent under each Letter of Credit issued. extended or renewed
in accordance with the terms hereof to the extent that such amount is not
reimbursed by the Borrowers pursuant to ss.3.2 (such agreement for a Bank being
called herein the "Letter of Credit Participation" of such Bank).
(c) Each such payment made by a Bank shall be treated as the purchase
by such Bank of a participating interest in the Borrowers' Reimbursement
Obligation under ss.3.2 in an amount equal to such payment. Each Bank shall
share in accordance with its participating interest in any interest which
accrues pursuant to ss.3.2.
(d) All Letters of Credit issued under the Prior Credit Agreement shall
constitute Letters of Credit hereunder.
SS.3.2. REIMBURSEMENT OBLIGATION OF THE BORROWERS.
In order to induce the Agent to issue, extend and renew each Letter of
Credit and the Banks to participate therein, the Borrowers hereby agree to
reimburse or pay to the Agent with respect to each Letter of Credit issued,
extended or renewed by the Agent hereunder as follows:
(a) on each date that any draft presented under any Letter of Credit is
honored by the Agent or the Agent otherwise makes payment with respect thereto,
(i) the amount paid by the Agent under or with respect to such Letter of Credit,
and (ii) the amount of any taxes, fees, charges or other costs and expenses
whatsoever incurred by the Agent or any Bank in connection with any payment made
by the Agent or any Bank under, or with respect to, such Letter of Credit;
provided however, if the Borrowers do not reimburse the Agent on the Drawdown
Date, such amount shall, provided that no Event of Default under ss.ss.12(g) or
12(h) has occurred, become automatically a Revolving Credit Loan which is a Base
Rate Loan advanced hereunder in an amount equal to such sum; and
(b) upon the Maturity Date or the termination of the Total Commitment,
or the acceleration of the Reimbursement Obligations in accordance with ss.12,
an amount equal to
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the Maximum Drawing Amount, which amount shall be held by the Agent for the
benefit of the Banks and the Agent as cash collateral for all Reimbursement
Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office
in immediately available funds. Interest on any and all amounts remaining unpaid
by the Borrowers under this ss.3.2 at any time from the date such amounts become
due and payable (whether as stated in this ss.3.2, by acceleration or otherwise)
until payment in full (whether before or after judgment) shall be payable to the
Agent on demand at the rate specified in ss.4.6 for overdue principal on the
Loans.
SS.3.3. LETTER OF CREDIT PAYMENTS.
If any draft shall be presented or other demand for payment shall be
made under any Letter of Credit, the Agent shall notify the Borrowers of the
date and amount of the draft presented or demand for payment and of the date and
time when it expects to pay such draft or honor such demand for payment. On the
date that such draft is paid or other payment is made by the Agent, the Agent
shall promptly notify the Banks of the amount of any unpaid Reimbursement
Obligation. No later than 3:00 p.m. (Boston time) on the Business Day next
following the receipt of such notice, each Bank shall make available to the
Agent, at the Agent's Head Office, in immediately available funds, such Bank's
Commitment Percentage of such unpaid Reimbursement Obligation, together with an
amount equal to the product of (a) the weighted average, computed for the period
referred to in clause (c) below, of the interest rate paid by the Agent for
federal funds acquired by the Agent during each day included in such period,
times (b) the amount equal to such Bank's Commitment Percentage of such unpaid
Reimbursement Obligation, times (c) a fraction, the numerator of which is the
number of days that have elapsed from and including the date the Agent paid the
draft presented for honor or otherwise made payment until the date on which such
Bank's Commitment Percentage of such unpaid Reimbursement Obligation shall
become immediately available to the Agent, and the denominator of which is 365.
The responsibility of the Agent to the Borrowers and the Banks shall be only to
determine that the documents (including each draft) delivered under each Letter
of Credit in connection with such presentment shall be in conformity in all
material respects with such Letter of Credit in accordance with the Uniform
Customs.
SS.3.4. OBLIGATIONS ABSOLUTE.
The Borrowers' obligations under this ss.3 shall be absolute and
unconditional under any and all circumstances and irrespective of the occurrence
of any Default or Event of Default or any condition precedent whatsoever or any
setoff, counterclaim or defense to payment which any Borrower may have or have
had against the Agent, any Bank or any beneficiary of a Letter of Credit.
Subject to the obligations of the Banks pursuant to Article V of the Uniform
Commercial Code and the obligations of the Agent pursuant to the last sentence
of ss.3.3, the Borrowers further agree with the Agent and the Banks that the
Agent and the Banks shall not be responsible for, and the Borrowers'
Reimbursement Obligations under ss.3.2 shall
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not be affected by, among other things, the validity or genuineness of documents
or of any endorsements thereon, even if such documents should in fact prove to
be in any or all respects invalid, fraudulent or forged, or any dispute between
or among any Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of any Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Agent and the Banks shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Borrowers agree that any action taken or omitted by
the Agent or any Bank under or in connection with each Letter of Credit and the
related drafts and documents, if done in good faith, shall be binding upon the
Borrowers and shall not result in any liability on the part of the Agent or any
Bank to the Borrowers.
SS.3.5. RELIANCE BY AGENT.
To the extent not inconsistent with ss.3.4, the Agent shall be entitled
to rely, and shall be fully protected in relying upon, any Letter of Credit,
draft, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel, independent accountants or other experts selected by the Agent.
The Agent shall be fully justified in failing or refusing to take any action
under this Credit Agreement unless it shall first have received such advice or
concurrence of the Majority Banks as it reasonably deems appropriate or it shall
first be indemnified to its reasonable satisfaction by the Banks against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Credit Agreement
in accordance with a request of the Majority Banks, and such request and any
action taken or failure to act pursuant thereto shall be binding upon the Banks
and all future holders of the Revolving Credit Notes or of a Letter of Credit
Participation.
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SS.4. CERTAIN GENERAL PROVISIONS.
SS.4.1. FEES.
(a) COMMITMENT FEE. The Borrowers jointly and severally agree
to pay to the Agent, for the respective account of each Bank, a fee (the
"Commitment Fee") equal to the Applicable Commitment Rate multiplied by the
average daily amount of the unused portion of such Bank's Commitment during each
calendar quarter or portion thereof from the Closing Date to the Maturity Date
(or to the date of termination in full of the Total Commitment, if earlier). The
Commitment Fee shall be payable quarterly in arrears on the first day of each
calendar quarter for the immediately preceding calendar quarter commencing on
July 1, 1998, with a final payment on the Maturity Date or any earlier date on
which the Commitments shall terminate. Prior to any Settlement, the Swing Line
Loan shall not constitute usage of any Bank's Commitment other than BKB.
(b) LETTER OF CREDIT FEES. The Borrowers shall pay a fee (the
"Letter of Credit Fee") equal to the Applicable L/C Margin multiplied by the
Maximum Drawing Amount of each Letter of Credit. Such Letter of Credit Fee shall
be payable to the Agent for the account of the Banks, to be shared pro rata by
the Banks in accordance with their respective Commitment Percentages. The
Borrowers shall also pay a fee (the "Issuance Fee") to the Agent, for its own
account, equal to 0.125% per annum on the Maximum Drawing Amount of all Letters
of Credit issued by the Agent, plus its customary administrative charges. The
Letter of Credit Fee and the Issuance Fee shall be payable for the number of
days each Letter of Credit is outstanding, and shall be payable quarterly in
arrears on the first day of each calendar quarter for the immediately preceding
calendar quarter, and on the Maturity Date.
(c) CLOSING FEES. The Borrowers shall pay on the Closing Date
any fees owing to any of the Banks or either Bank Agent, as previously agreed
upon among the Borrowers and the Bank Agents.
(d) AGENT'S FEES. The Borrowers shall pay to the Agent an
Agent's fee, as previously agreed upon among the Borrowers and the Agent.
SS.4.2. PAYMENTS.
(a) All payments of principal, interest, Reimbursement
Obligations, fees and any other amounts due hereunder or under any of the other
Loan Documents shall be made to the Agent, for the respective accounts of the
Banks and the Agent, to be received at the Agent's Head Office in immediately
available funds by 1:00 p.m. (Boston time) on any due date.
(b) All payments by the Borrowers hereunder and under any of
the other Loan Documents shall be made without setoff or counterclaim and free
and clear of and
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without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless the Borrowers
are compelled by law to make such deduction or withholding. If any such
obligation is imposed upon the Borrowers with respect to any amount payable by
them hereunder or under any of the other Loan Documents, the Borrowers will pay
to the Agent, for the account of the Banks or (as the case may be) the Agent, on
the date on which such amount is due and payable hereunder or under such other
Loan Document, such additional amount in Dollars as shall be necessary to enable
the Banks or the Agent to receive the same net amount which the Banks or the
Agent would have received on such due date had no such obligation been imposed
upon the Borrowers. In the event that the Borrowers are required to make such
deduction or withholding as a result of the fact that a Bank is organized
outside of the United States, such Bank shall use its reasonable best efforts to
transfer its Loans to an affiliate organized within the United States if such
transfer would have no adverse effect on such Bank or the Loans. The Borrowers
will deliver promptly to the Bank certificates or other valid vouchers for all
taxes or other charges deducted from or paid with respect to payments made by
the Borrowers hereunder or under such other Loan Document.
(c) Whenever a payment hereunder or under any of the other
Loan Documents becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension; provided that any Interest Period for any
Eurodollar Loan which ends on a day that is not a Eurodollar Business Day shall
end on the next succeeding Eurodollar Business Day unless the result of such
extension would be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately preceding
Eurodollar Business Day.
SS.4.3. COMPUTATIONS.
All computations of interest on Base Rate Loans and of Commitment Fees,
Letter of Credit Fees or other fees shall, unless otherwise expressly provided
herein, be based on a 365-day year (or 366-day year, as applicable) and paid for
the actual number of days elapsed. All computations of interest on Eurodollar
Loans shall, unless otherwise expressly provided herein, be based on a 360-day
year and paid for the actual number of days elapsed.
SS.4.4. CAPITAL ADEQUACY.
If any present or future law, governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law) or the
interpretation thereof by a court or governmental authority with appropriate
jurisdiction affects the amount of capital required or expected to be maintained
by any Bank or the Agent or any corporation controlling such Bank or the Agent,
and such Bank or the Agent determines that the amount of capital required to be
maintained by it is increased by or based upon the existence of such Bank's
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or the Agent's Loans, Letter of Credit Participations or Letters of Credit, or
commitment with respect thereto, then such Bank or the Agent may notify the
Borrowers of such fact. To the extent that the costs of such increased capital
requirements are not reflected in the Base Rate (if relating to Base Rate
Loans), the Borrowers and such Bank or (as the case may be) the Agent shall
thereafter attempt to negotiate in good faith, within thirty (30) days of the
day on which the Borrowers receive such notice, an adjustment payable hereunder
that will adequately compensate such Bank or the Agent in light of these
circumstances. If the Borrowers and such Bank or the Agent are unable to agree
to such adjustment within thirty (30) days of the date on which the Borrowers
receive such notice, then commencing on the date of such notice (but not earlier
than the effective date of any such increased capital requirement), the fees
payable hereunder shall increase by an amount that will, in such Bank's or the
Agent's reasonable determination, provide adequate compensation. Each Bank and
the Agent shall allocate such cost increases among its customers in good faith
and on an equitable basis.
SS.4.5. CERTIFICATE.
A certificate setting forth any additional amounts payable pursuant to
ss.4.4 and a brief explanation of such amounts which are due, submitted by any
Bank or the Agent to the Borrowers, shall be prima facie evidence that such
amounts are due and owing.
SS.4.6. INTEREST AFTER DEFAULT.
After and during the continuance of an Event of Default, interest on
the Loans (and any overdue amounts payable hereunder or under any of the other
Loan Documents) shall bear interest compounded monthly and payable on demand at
a rate per annum equal to the Base Rate plus the Applicable Base Rate Margin
plus two (2) percentage points (2.00%) until such amount shall be paid in full
(after, as well as before, judgment).
SS.4.7. INTEREST LIMITATION.
Notwithstanding any other term of this Credit Agreement or any
Revolving Credit Note, Swing Line Note or any other document referred to herein
or therein, the maximum amount of interest which may be charged to or collected
from any person liable hereunder or under any Revolving Credit Note or any Swing
Line Note by any Bank shall be absolutely limited to, and shall in no event
exceed, the maximum amount of interest which could lawfully be charged or
collected under applicable law (including, to the extent applicable, the
provisions of Section 5197 of the Revised Statutes of the United States of
America, as amended, 12 U.S.C. Section 85, as amended), so that the maximum of
all amounts constituting interest under applicable law, howsoever computed,
shall never exceed as to any Person liable therefor such lawful maximum, and any
term of this Credit Agreement, the Revolving Credit Notes, the Swing Line Note,
the Letter of Credit Applications, or any other document referred to herein or
therein which could be construed as providing for interest in excess of
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such lawful maximum shall be and hereby is made expressly subject to and
modified by the provisions of this paragraph.
SS.4.8. EURODOLLAR INDEMNITY.
The Borrowers agree to indemnify the Banks and the Agent and to hold
them harmless from and against any loss, cost or expenses that the Banks and the
Agent may sustain or incur as a consequence of (a) default by the Borrowers in
payment of the principal amount of or any interest on any Eurodollar Loans as
and when due and payable, including any such loss or expense arising from
interest or fees payable by any Bank or the Agent to lenders of funds obtained
by it in order to maintain its Eurodollar Loans, (b) a prepayment of principal
on any Eurodollar Loan, including prepayments which are the result of
acceleration by the Banks, or (c) failure by the Borrowers to make a borrowing
or conversion after the Borrowers have given (or are deemed to have given)
notice pursuant to ss.2.5 or ss.2.6, or (d) the making of any payment of a
Eurodollar Loan or the making of any conversion of any such Eurodollar Loan to a
Base Rate Loan on a day that is not the last day of the applicable Interest
Period with respect thereto, including interest or fees payable by any Bank to
lenders of funds obtained by it in order to maintain any such Loans. Such loss
or reasonable expense shall include an amount equal to (i) the excess, if any,
as reasonably determined by each Bank of its cost of obtaining the funds for the
Eurodollar Loan being paid, prepaid, converted, not converted, or not borrowed,
as the case may be (based on the Eurodollar Rate) for the period from the date
of such payment, prepayment, conversion, or failure to borrow or convert, as the
case may be, to the last day of the Interest Period for such Loan (or, in the
case of a failure to borrow, the Interest Period for the Loan which would have
commenced on the date of such failure to borrow) over (ii) the amount of
interest (as reasonably determined by such Bank) that would be realized by such
Bank in reemploying the funds so paid, prepaid, converted, or not borrowed,
converted, or prepaid for such period or Interest Period, as the case may be,
which determinations shall be conclusive absent manifest error.
SS.4.9. ILLEGALITY; INABILITY TO DETERMINE EURODOLLAR RATE.
Notwithstanding any other provision of this Credit Agreement, if (a)
the introduction of, any change in, or any change in the interpretation of, any
law or regulation applicable to the Agent or any Bank shall make it unlawful, or
any central bank or other governmental authority having jurisdiction thereof
shall assert that it is unlawful, for any Bank or the Agent to perform its
obligations in respect of any Eurodollar Loans, or (b) if any Bank or the Agent
shall determine with respect to Eurodollar Loans that (i) by reason of
circumstances affecting the Eurodollar interbank market generally, adequate and
reasonable methods do not exist for ascertaining the Eurodollar Rate which would
otherwise be applicable during any Interest Period, or (ii) deposits of Dollars
in the relevant amount for the relevant Interest Period are not available to
such Bank or the Agent in any Eurodollar interbank market, or (iii) the
Eurodollar Rate does not or will not accurately reflect the cost to such Bank or
the Agent of obtaining or maintaining the applicable Eurodollar Loans during any
Interest Period, then such Bank or the Agent shall promptly give telephonic,
telex or cable notice of such
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determination to the Parent (which notice shall be conclusive and binding upon
the Borrowers). Upon such notification by such Bank or the Agent, the obligation
of such Bank or the Agent to make Eurodollar Loans shall be suspended until such
Bank or the Agent determines that such circumstances no longer exist, and the
outstanding Eurodollar Loans shall continue to bear interest at the applicable
rate based on the Eurodollar Rate until the end of the applicable Interest
Period or such earlier periods as may be required by law, and thereafter shall
be deemed converted to Base Rate Loans in equal principal amounts.
SS.4.10. ADDITIONAL COSTS, ETC.
If any present or future applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other regulatory body
or official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Bank by any central bank or other
fiscal, monetary or other authority (whether or not having the force of law),
shall:
(a) subject any Bank or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any Letters of Credit or
participations therein, such Bank's Commitment or the Loans or participations
therein (other than taxes based upon or measured by the income or profits of
such Bank or the Agent), or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Bank of the principal
of or the interest on any Loans or any other amounts payable to any Bank or the
Agent under this Credit Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by, or letters of credit issued by
or participated in, or commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan Documents,
any Letters of Credit, the Loans, such Bank's Commitment, or any class of loans,
letters of credit or commitments of which any of the Loans or such Bank's
Commitment forms a part, and the result of any of the foregoing is:
(i) to increase the cost to any Bank of making, funding, issuing,
renewing, extending or maintaining any of the Loans or such Bank's Commitment or
any Letter of Credit or participations therein, or
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(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Bank or the Agent hereunder on
account of such Bank's Commitment, any Letter of Credit or any of the Loans or
any participations therein, or
(iii) to require such Bank or the Agent to make any payment or to
forego any interest or Reimbursement Obligation or other sum payable hereunder,
the amount of which payment or foregone interest or Reimbursement Obligation or
other sum is calculated by reference to the gross amount of any sum receivable
or deemed received by such Bank or the Agent from the Borrowers hereunder;
then, and in each such case, the Borrowers will, upon demand made by such Bank
at any time and from time to time and as often as the occasion therefor may
arise, pay to such Bank such additional amounts as will be sufficient to
compensate such Bank for such additional cost, reduction, payment or foregone
interest or other sum (after such Bank shall have allocated the same fairly and
equitably among all customers of any class generally affected thereby).
SS.4.11. REPLACEMENT OF BANKS.
If any Bank (an "Affected Bank") (i) makes demand upon the Borrowers for (or if
the Borrowers are otherwise required to pay) amounts pursuant to ss.ss.4.4 or
4.10 or (ii) is unable to make or maintain Eurodollar Loans as a result of a
condition described in ss.4.9, the Borrowers may, within 90 days of receipt of
such demand or notice (or the occurrence of such other event causing the
Borrowers to be required to pay such compensation or causing ss.4.9 to be
applicable), by notice in writing to the Agent and such Affected Bank (a
"Replacement Notice") obtain a replacement bank satisfactory to the Agent (the
"Replacement Bank") to assume the Affected Bank's Commitment by (A) requesting
the non-Affected Banks to acquire and assume all of the Affected Bank's Loans
and Commitment, as provided herein, but none of such Banks shall be under an
obligation to do so; or (B) designating a Replacement Bank reasonably
satisfactory to the Agent. If any satisfactory Replacement Bank shall be
obtained, and/or any of the non-Affected Banks shall agree to acquire and assume
all of the Affected Bank's Loans and Commitment, then such Affected Bank shall,
so long as no Event of Default shall have occurred and be continuing, assign, in
accordance with ss.17, all of its Commitment, Loans, Revolving Credit Notes and
other rights and obligations under this Credit Agreement and all other Loan
Documents to such Replacement Bank or non-Affected Banks, as the case may be, in
exchange for payment of the principal amount so assigned and all interest and
fees accrued on the amount so assigned, plus all other Obligations then due and
payable to the Affected Bank; provided, however, that (i) such assignment shall
be without recourse, representation or warranty and shall be on terms and
conditions reasonably satisfactory to such Affected Bank and such Replacement
Bank and/or non-Affected Banks, as the case may be, and (ii) prior to any such
assignment, the Borrowers shall have paid to such Affected Bank all amounts
properly demanded and unreimbursed under ss.ss.4.4, 4.8, 4.9 and 4.10. Upon the
effective date of such
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assignment, the Borrowers shall issue replacement Revolving Credit Notes to such
Replacement Bank and/or non-Affected Banks, as the case may be, and such
institution shall become a "Bank" for all purposes under this Credit Agreement
and the other Loan Documents.
SS.4.12. CONCERNING JOINT AND SEVERAL LIABILITY OF THE BORROWERS.
(a) Each of the Borrowers is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Banks under this Credit Agreement, for the
mutual benefit, directly and indirectly, of each of the Borrowers and in
consideration of the undertakings of each other Borrower to accept joint and
several liability for the Obligations.
(b) Each of the Borrowers, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Borrowers with respect to the payment
and performance of all of the Obligations (including, without limitation, any
Obligations arising under this ss.4.12), it being the intention of the parties
hereto that all of the Obligations shall be the joint and several Obligations of
each of the Borrowers without preferences or distinction among them.
(c) If and to the extent that any of the Borrowers shall fail to make
any payment with respect to any of the Obligations as and when due or to perform
any of the Obligations in accordance with the terms thereof, then in each such
event the other Borrowers will make such payment with respect to, or perform,
such Obligation.
(d) The Obligations of each of the Borrowers under the provisions of
this ss.4.12 constitute full recourse Obligations of each of the Borrowers
enforceable against each such Person to the full extent of its properties and
assets, irrespective of the validity, regularity or enforceability of this
Credit Agreement or any other circumstance whatsoever.
(e) Except as otherwise expressly provided in this Credit Agreement,
each of the Borrowers hereby waives notice of acceptance of its joint and
several liability, notice of any Loans made under this Credit Agreement, notice
of any action at any time taken or omitted by the Banks under or in respect of
any of the Obligations, and, generally, to the extent permitted by applicable
law, all demands, notices and other formalities of every kind in connection with
this Credit Agreement. Each Borrower hereby waives all defenses which may be
available by virtue of any valuation, stay, moratorium law or other similar law
now or hereafter in effect, any right to require the marshaling of assets of the
Borrowers and any other entity or Person primarily or secondarily liable with
respect to any of the Obligations, and all suretyship defenses generally. Each
of the Borrowers hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
the Banks at any time or times in respect of any default by any of the Borrowers
in the performance or
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satisfaction of any term, covenant, condition or provision of this Credit
Agreement, any and all other indulgences whatsoever by the Banks in respect of
any of the Obligations, and the taking, addition, substitution or release, in
whole or in part, at any time or times, of any security for any of the
Obligations or the addition, substitution or release, in whole or in part, of
any of the Borrowers. Without limiting the generality of the foregoing, each of
the Borrowers assents to any other action or delay in acting or failure to act
on the part of the Banks with respect to the failure by any of the Borrowers to
comply with any of its respective Obligations, including, without limitation,
any failure strictly or diligently to assert any right or to pursue any remedy
or to comply fully with applicable laws or regulations thereunder, which might,
but for the provisions of this ss.4.12, afford grounds for terminating,
discharging or relieving any of the Borrowers, in whole or in part, from any of
its Obligations under this ss.4.12, it being the intention of each of the
Borrowers that, so long as any of the Obligations hereunder remain unsatisfied,
the Obligations of such Borrowers under this ss.4.12 shall not be discharged
except by performance and then only to the extent of such performance. The
Obligations of each of the Borrowers under this ss.4.12 shall not be diminished
or rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, re-construction or similar proceeding with respect to any of the
Borrowers or the Banks. The joint and several liability of the Borrowers
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
membership, constitution or place of formation of any of the Borrowers or the
Banks.
(f) Each of the Borrowers hereby agrees that it will not enforce any of
its rights of contribution or subrogation against the other Borrowers with
respect to any liability incurred by it hereunder or under any of the other Loan
Documents, any payments made by it to any of the Banks or the Agent with respect
to any of the Obligations or any collateral security therefor until such time as
all of the Obligations have been irrevocably paid in full in cash. Any claim
which any Borrower may have against any other Borrower with respect to any
payments to the Banks or the Agent hereunder or under any other Loan Document
are hereby expressly made subordinate and junior in right of payment, without
limitation as to any increases in the Obligations arising hereunder or
thereunder, to the prior payment in full of the Obligations and, in the event of
any insolvency, bankruptcy, receivership, liquidation, reorganization or other
similar proceeding under the laws of any jurisdiction relating to any Borrower,
its debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full before any payment or distribution of any character,
whether in cash, securities or other property, shall be made to any other
Borrower therefor.
(g) Each of Borrowers hereby agrees that the payment of any amounts due
with respect to the indebtedness owing by any Borrower to any other Borrower is
hereby subordinated to the prior payment in full in cash of the Obligations.
Each Borrower hereby agrees that after the occurrences and during the
continuance of any Default or Event of Default, such Borrower will not demand,
sue for or otherwise attempt to collect any indebtedness of any other Borrower
owing to such Borrower until the Obligations shall have been paid in full in
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cash. If, notwithstanding the foregoing sentence, such Borrower shall collect,
enforce or receive any amounts in respect of such indebtedness, such amounts
shall be collected, enforced, received by such Borrower as trustee for the Agent
and be paid over to the Agent for the pro rata accounts of the Banks to be
applied to repay the Obligations.
(h) The provisions of this ss.4.12 are made for the benefit of the
Banks and their successors and assigns, and may be enforced in good faith by
them from time to time against any or all of the Borrowers as often as the
occasion therefor may arise and without requirement on the part of the Banks
first to marshal any of their claims or to exercise any of their rights against
any other Borrower or to exhaust any remedies available to them against any
other Borrower or to resort to any other source or means of obtaining payment of
any of the Obligations hereunder or to elect any other remedy. The provisions of
this ss.4.12 shall remain in effect until all of the Obligations shall have been
paid in full or otherwise fully satisfied. If at any time, any payment, or any
part thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by the Banks upon the insolvency, bankruptcy
or reorganization of any of the Borrowers or is repaid in good faith settlement
of a pending or threatened avoidance claim, or otherwise, the provisions of this
ss.4.12 will forthwith be reinstated in effect, as though such payment had not
been made.
(i) Each of the Borrowers hereby appoints the Parent, the Parent hereby
agrees, to act as its representative and authorized signor with respect to any
notices, demands, communications or requests under this Credit Agreement or the
other Loan Documents, including, without limitation, with respect to Loan and
Letter of Credit Requests and Compliance Certificates and pursuant to ss.19 of
this Credit Agreement.
SS.5. REPRESENTATIONS AND WARRANTIES.
Each of the Borrowers jointly and severally represents and warrants to
the Banks that on and as of the date of this Credit Agreement, each Drawdown
Date, and the date of issuance of any Letter of Credit (with any disclosure on a
schedule pursuant to this ss.5 applying to all relevant representations and
warranties, regardless of whether such schedule is referenced in each relevant
representation):
SS.5.1. CORPORATE AUTHORITY.
(a) INCORPORATION; GOOD STANDING. Each Borrower (i) is a corporation
duly organized, validly existing and in good standing or in current status under
the laws of its respective state of incorporation, (ii) has all requisite
corporate power to own its property and conduct its business as now conducted
and as presently contemplated, and (iii) is in good standing as a foreign
corporation and is duly authorized to do business in each jurisdiction in which
its property or business as presently conducted or contemplated makes such
qualification necessary except where a failure to be so qualified would not have
a materially adverse effect on the business, assets or financial condition of
such Borrower.
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(b) AUTHORIZATION. The execution, delivery and performance of the Loan
Documents and the transactions contemplated hereby and thereby (i) are within
the corporate authority of each Borrower, (ii) have been duly authorized by all
necessary corporate proceedings, (iii) do not conflict with or result in any
breach or contravention of any provision of law, statute, rule or regulation to
which any Borrower is subject or any judgment, order, writ, injunction, license
or permit applicable to any Borrower, (iv) do not conflict with any provision of
the corporate charter or bylaws of any Borrower, and (v) do not conflict with
any provision of any agreement or other instrument binding upon any Borrower in
a manner which is reasonably likely to have a materially adverse effect on the
Borrowers taken as a whole.
(c) ENFORCEABILITY. The execution, delivery and performance of the Loan
Documents will result in valid and legally binding obligations of the Borrowers
enforceable against each in accordance with the respective terms and provisions
hereof and thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
SS.5.2. GOVERNMENTAL APPROVALS.
The execution, delivery and performance by the Borrowers of the Loan
Documents and the transactions contemplated hereby and thereby do not require
any approval or consent of, or filing with, any governmental agency or authority
other than those already obtained except filings required by the Security
Documents which may not have been completed on the Closing Date but executed
copies of which, if applicable, have been delivered to the Agent in form and
substance satisfactory to the Agent.
SS.5.3. TITLE TO PROPERTIES; LEASES.
The Borrowers own all of the assets reflected in the consolidated
balance sheets as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date), subject to no mortgages, capitalized leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
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SS.5.4. FINANCIAL STATEMENTS; SOLVENCY.
(a) There has been furnished to each of the Banks audited
consolidated financial statements of the Borrowers dated the Balance Sheet Date.
Said financial statements have been prepared in accordance with GAAP and fairly
present in all material respects the financial condition of the Borrowers on a
consolidated basis, as at the close of business on the date thereof and the
results of operations for the period then ended. There are no contingent
liabilities of the Borrowers involving material amounts, known to the officers
of the Borrowers, which have not been disclosed in said balance sheets and the
related notes thereto or otherwise in writing to the Banks.
(b) The Borrowers on a consolidated basis (both before and
after giving effect to the transactions contemplated by this Credit Agreement)
are and will be solvent (i.e., they have assets having a fair value in excess of
the amount required to pay their probable liabilities on their existing debts as
they become absolute and matured) and have, and expect to have, the ability to
pay their debts from time to time incurred in connection therewith as such debts
mature.
(c) Each Borrower has a fiscal year which is the twelve months
ending on December 31 of each calendar year.
SS.5.5. NO MATERIAL CHANGES, ETC.
Since the Balance Sheet Date, there have occurred no material adverse
changes in the financial condition or businesses of the Borrowers, taken as a
whole, as shown on or reflected in the consolidated balance sheet of the
Borrowers as of the Balance Sheet Date, or the consolidated statement of income
for the fiscal period then ended. Since the Balance Sheet Date, there have not
been any Distributions other than as permitted by ss.7.6 hereof.
SS.5.6. PERMITS, FRANCHISES, PATENTS, COPYRIGHTS, ETC.
Each Borrower possess all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the foregoing,
adequate for the conduct of their businesses substantially as now conducted
without known conflict with any rights of others.
SS.5.7. LITIGATION.
Except as shown on Schedules 5.7 and 5.16 hereto, there are no actions,
suits, proceedings or investigations of any kind pending or, to the knowledge of
any Borrower, threatened against any Borrower before any court, tribunal or
administrative agency or board which, if adversely determined, might, either in
any individual case or in the aggregate, materially adversely affect the
properties, assets, financial condition or business of the Borrowers, taken as a
whole, or materially impair the right of the Borrowers, taken as a whole, to
carry on business substantially as now conducted, or result in any material
liability not adequately
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covered by insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet or which question the validity of any of the Loan
Documents or any action taken or to be taken pursuant hereto or thereto.
SS.5.8. NO MATERIALLY ADVERSE CONTRACTS, ETC.
No Borrower is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Borrowers' officers has or is expected in the future to have a
materially adverse effect on the business, assets or financial condition of the
Borrowers, taken as a whole. No Borrower is a party to any contract or agreement
which in the judgment of the Borrowers' officers has or is expected to have any
materially adverse effect on the business of the Borrowers, taken as a whole.
SS.5.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.
No Borrower is violating any material provision of (a) its charter
documents or by-laws or (b) any agreement or instrument by which it may be
subject or by which it or any of its properties may be bound or any decree,
order, judgment, or any statute, license, rule or regulation in a manner which
could have a materially adverse effect on the financial condition, properties or
business of the Borrowers, taken as a whole.
SS.5.10. TAX STATUS.
Each Borrower has made or filed all federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which any of them is subject (unless and only to the extent that such Borrower
has set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes); and have paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and by appropriate proceedings; and have set aside on their books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Borrowers know of no
basis for any such claim.
SS.5.11. NO EVENT OF DEFAULT.
No Default or Event of Default has occurred and is continuing.
SS.5.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS.
No Borrower is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company," as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is any Borrower a
"registered investment company," or
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an "affiliated company" or a "principal underwriter" of a "registered investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
SS.5.13. ABSENCE OF FINANCING STATEMENTS, ETC.
Except with respect to Permitted Liens, there is no financing
statement, security agreement, chattel mortgage, real estate mortgage or other
document filed or recorded with any filing records, registry, or other public
office, which purports to cover, affect or give notice of any present or
possible future lien on, or security interest in, any assets or property of any
Borrower, or any rights relating thereto, other than financing statements
covering assets acquired in acquisitions permitted under ss.7.4.1 for which the
Borrowers are in the process of obtaining termination statements or amendments
releasing the acquired assets covered thereunder, provided that the Borrowers
have evidence in each case that the obligations secured by such liens have been
discharged.
SS.5.14. EMPLOYEE BENEFIT PLANS.
(a) Each Employee Benefit Plan and each Guaranteed Pension Plan has
been maintained and operated in compliance in all material respects with the
provisions of ERISA and, to the extent applicable, the Code, including but not
limited to the provisions thereunder respecting prohibited transactions and the
bonding of fiduciaries and other persons handling plan funds as required by
ss.412 of ERISA. Each Borrower has heretofore delivered to the Agent the most
recently completed annual report, Form 5500, with all required attachments, and
actuarial statement required to be submitted under ss.103(d) of ERISA, with
respect to each Guaranteed Pension Plan.
(b) No Employee Benefit Plan, which is an employee welfare benefit plan
within the meaning of ss.3(1) or ss.3(2)(B) of ERISA, provides benefit coverage
subsequent to termination of employment, except as required by Title I, Part 6
of ERISA or the applicable state insurance laws. A Borrower may terminate each
such Plan at any time (or at any time subsequent to the expiration of any
applicable bargaining agreement) in the discretion of such Borrower without
liability to any Person other than for claims arising prior to termination.
(c) Each contribution required to be made to a Guaranteed Pension Plan,
whether required to be made to avoid the incurrence of an accumulated funding
deficiency, the notice or lien provisions of ss.302(f) of ERISA, or otherwise,
has been timely made. No waiver of an accumulated funding deficiency or
extension of amortization periods has been received with respect to any
Guaranteed Pension Plan, and no Borrower nor any ERISA Affiliate is obligated to
or has posted security in connection with an amendment to a Guaranteed Pension
Plan pursuant to ss.307 of ERISA or ss.401(a)(29) of the Code. No liability to
the PBGC (other than required insurance premiums, all of which have been paid)
has been incurred by any Borrower or any ERISA Affiliate with respect to any
Guaranteed Pension Plan and there has not been any ERISA Reportable Event (other
than an ERISA Reportable
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Event as to which the requirement of 30 days notice has been waived), or any
other event or condition which presents a material risk of termination of any
Guaranteed Pension Plan by the PBGC. Based on the latest valuation of each
Guaranteed Pension Plan (which in each case occurred within twelve months of the
date of this representation), and on the actuarial methods and assumptions
employed for that valuation, the aggregate benefit liabilities of all such
Guaranteed Pension Plans within the meaning of ss.4001 of ERISA did not exceed
the aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
(d) No Borrower nor any ERISA Affiliate has incurred any material
liability (including secondary liability) to any Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan under ss.4201
of ERISA or as a result of a sale of assets described in ss.4204 of ERISA. No
Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan
is in reorganization or insolvent under and within the meaning of ss.4241 or
ss.4245 of ERISA or is at risk of entering reorganization or becoming insolvent,
or that any Multiemployer Plan intends to terminate or has been terminated under
ss.4041A of ERISA.
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SS.5.15. USE OF PROCEEDS.
SS.5.15.1. GENERAL.
The proceeds of the Loans shall be used solely as follows:
(a) to finance acquisitions permitted pursuant to ss.7.4; and (b) for capital
expenditures, working capital, and general corporate purposes. The Borrowers
will use Letters of Credit solely for working capital and general corporate
purposes.
SS.5.15.2. REGULATIONS U AND X.
No portion of any Loan is to be used, and no portion of any
Letter of Credit is to be obtained, for the purpose of purchasing or carrying
any "margin security" or "margin stock" as such terms are used in Regulations U
and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts
221 and 224.
SS.5.15.3. INELIGIBLE SECURITIES.
No portion of the proceeds of any Loans is to be used, and no
portion of any Letter of Credit is to be obtained, for the purpose of (a)
knowingly purchasing, or providing credit support for the purchase of,
Ineligible Securities from a Section 20 Subsidiary during any period in which
such Section 20 Subsidiary makes a market in such Ineligible Securities, (b)
knowingly purchasing, or providing credit support for the purchase of, during
the underwriting or placement period, any Ineligible Securities being
underwritten or privately placed by a Section 20 Subsidiary, or (c) making, or
providing credit support for the making of, payments of principal or interest on
Ineligible Securities underwritten or privately placed by a Section 20
Subsidiary and issued by or for the benefit of the Borrowers or other Affiliate
of the Borrowers.
SS.5.16. ENVIRONMENTAL COMPLIANCE.
Each Borrower has investigated the past and present condition
and usage of the Real Property and the operations conducted thereon and, based
upon such diligent investigation, has determined that, except as shown on
Schedule 5.16:
(a) No Borrower, nor any operator of the Borrowers'
properties, is in violation, or alleged violation, of any judgment, decree,
order, law, permit, license, rule or regulation pertaining to environmental
matters, including without limitation, those arising under RCRA, CERCLA, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state
or local statute, regulation, ordinance, order or decree relating to health,
safety or the environment (the "Environmental Laws"), which violation would have
a material adverse effect on the business, assets or financial condition of the
Borrowers on a consolidated basis.
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(b) No Borrower has received notice from any third
party, including, without limitation: any federal, state or local governmental
authority, (i) that any of the Borrowers has been identified by the United
States Environmental Protection Agency ("EPA") as a potentially responsible
party under CERCLA with respect to a site listed on the National Priorities
List, 40 C.F.R. Part 300 Appendix B; (ii) that any hazardous waste, as defined
by 42 U.S.C. ss.6903(5), any hazardous substances as defined by 42 U.S.C.
ss.9601(14), any pollutant or contaminant as defined by 42 U.S.C. ss.9601(33) or
any toxic substance, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous Substances") which any of the
Borrowers has generated, transported or disposed of has been found at any site
at which a federal, state or local agency or other third party has conducted or
has ordered that any Borrower conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that it is or shall
be a named party to any claim, action, cause of action, complaint, legal or
administrative proceeding arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances.
(c) Except where it would not have a material adverse
effect on the Borrowers taken as a whole, (i) no portion of the Real Property
has been used for the handling, processing, storage or disposal of Hazardous
Substances; and no underground tank or other underground storage receptacle for
Hazardous Substances is located on such properties; (ii) in the course of any
activities conducted by the Borrowers, or operators of the Real Property, no
Hazardous Substances have been generated or are being used on such properties in
violation of any Environmental Law; (iii) there have been no unpermitted
Releases or threatened Releases of Hazardous Substances on, upon, into or from
the Real Property; (iv) to the best of the Borrowers' knowledge, there have been
no Releases on, upon, from or into any real property in the vicinity of the Real
Property which, through soil or groundwater contamination, may have come to be
located on such properties; and (v) in addition, when required under applicable
Environmental Laws, any Hazardous Substances that have been generated on the
Real Property have been transported offsite only by carriers having an
identification number issued by the EPA, treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required under
applicable Environmental Laws, which transporters and facilities, to the best of
the Borrowers' knowledge, have been and are operating in material compliance
with such permits and applicable Environmental Laws.
(d) None of the Real Property is or shall be subject
to any applicable environmental clean-up responsibility law or environmental
restrictive transfer law or regulation, by virtue of the transactions set forth
herein and contemplated hereby.
SS.5.17. PERFECTION OF SECURITY INTERESTS.
Except as contemplated by ss.6.19, all filings, assignments, pledges
and deposits of documents or instruments have been made and all other actions
have been taken that are necessary or advisable under applicable law to
establish and perfect the Agent's security interest in the Collateral. The
Collateral and the Agent's rights with respect to the Collateral
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are not subject to any setoff, claims, withholdings or other defenses. The
Borrowers' rights in the Collateral are free from any lien, security interest,
encumbrance and any other claim or demand, except for Permitted Liens.
SS.5.18. TRANSACTIONS WITH AFFILIATES.
Except as set forth on Schedule 5.18 and arm's length transactions
pursuant to which a Borrower makes payments in the ordinary course of business
upon terms no less favorable than such Borrower could obtain from third parties,
none of the officers, directors, or employees of any Borrower is presently a
party to any transaction with any Borrower (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of any
Borrower, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
SS.5.19. SUBSIDIARIES.
Schedule 2 sets forth a complete and accurate list of the Subsidiaries
of the Parent, including the name of each Subsidiary, the location of its chief
executive office, its tax identification number, and its jurisdiction of
incorporation, together with the number of authorized and outstanding shares of
each Subsidiary. Each Subsidiary listed on Schedule 2 is wholly owned by the
Parent or a Subsidiary of the Parent and is a Borrower hereunder, 100% of the
assets and stock or other equity interests of which have been pledged to the
Agent on behalf of the Banks pursuant to the Security Documents. The Parent has
good and marketable title to all of the shares or other equity interests it
purports to own of each such Subsidiary, free and clear in each case of any lien
or encumbrance. All such shares have been duly issued and are fully paid and
non-assessable. None of the Borrowers is engaged in any joint venture or
partnership with any other Person.
SS.5.20. TRUE COPIES OF CHARTER AND OTHER DOCUMENTS.
Each Borrower has furnished the Agent copies, in each case true and
complete as of the Closing Date, of its (a) charter and other incorporation
documents and (b) by-laws, each including any amendments thereto.
SS.5.21. DISCLOSURE.
None of this Credit Agreement, nor any of the other Loan Documents, nor
any document or information furnished by the Borrowers in connection therewith
contains any untrue statement of a material fact or omits to state a material
fact (known to any Borrower in the case of any document or information not
furnished by the Borrowers) necessary in order to make the statements herein or
therein not misleading. There is no fact known to any
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Borrower which materially adversely affects, or which is reasonably likely in
the future to materially adversely affect, the business, assets, or financial
condition of any Borrower, exclusive of effects resulting from changes in
general economic conditions, legal standards or regulatory conditions.
SS.5.22. BANK ACCOUNTS.
The Perfection Certificates set forth the account numbers and location of all
bank accounts of each Borrower.
SS.5.23. CAPITALIZATION.
(a) As of the Closing Date, the authorized capital stock of
the Parent consists of 250,000,000 shares of common stock (par value $0.01 per
share) of which 30,118,694 shares are outstanding as of the Closing Date, and
5,000,000 shares of preferred stock (par value $0.01 per share) of which no
shares are outstanding as of the Closing Date. All of such outstanding shares
are fully paid and non-assessable.
(b) The shares of the capital stock of the Borrowers (other
than the Parent) pledged to the Agent pursuant to the Stock Pledge Agreements
are held of record as set forth on Annex A to the Stock Pledge Agreements. Such
capital stock constitutes, of record, 100% of the outstanding capital stock of
each such Subsidiary, and, to the Borrowers' knowledge, on a fully-diluted
basis, 100% of such outstanding capital stock.
SS.5.24. YEAR 2000 COMPLIANCE.
The Borrowers have reviewed the areas within their business and operations which
could be adversely affected by, and have developed or are developing a program
to address on a timely basis, the Year 2000 Compliance. Based on such review and
program, the Year 2000 Compliance will not have a material adverse effect on
their business and operations.
SS.5.25. SUBORDINATED DEBT.
The incurrence of Senior Funded Debt will not be prohibited pursuant to
the terms of the Subordinated Debt.
SS.6. AFFIRMATIVE COVENANTS OF THE BORROWERS.
Each of the Borrowers jointly and severally covenants and agrees that,
so long as any Loan, Revolving Credit Note, Swing Line Note or other Obligation
is outstanding or the Banks have any obligation to make Loans or participate in
Loans or Letters of Credit, or the Agent has any obligation to issue, extend, or
renew any Letters of Credit:
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SS.6.1. PUNCTUAL PAYMENT.
The Borrowers will duly and punctually pay or cause to be paid the
principal and interest on the Loans, all Reimbursement Obligations, fees and
other amounts provided for in this Credit Agreement and the other Loan
Documents, all in accordance with the terms of this Credit Agreement and such
other Loan Documents.
SS.6.2. MAINTENANCE OF OFFICES.
The Parent will maintain its chief executive office at 450 E. Las Olas
Blvd., Suite 1400, Ft. Lauderdale, Florida 33301, and each Borrower will
maintain its chief executive offices at the location set forth on Schedule 2, or
at such other place in the United States as any Borrower shall designate upon 30
days' prior written notice to the Agent.
SS.6.3. RECORDS AND ACCOUNTS.
Each Borrower will (i) keep true and accurate records and books of account
in which full, true and correct entries will be made in accordance with GAAP,
(ii) maintain adequate accounts and reserves for all taxes (including income
taxes), depreciation, depletion, obsolescence and amortization of its
properties, contingencies, and other reserves, and (iii) at all times engage
Accountants as the independent certified public accountants of the Borrowers.
SS.6.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION.
The Borrowers will deliver to the Banks:
(a) as soon as practicable, but, in any event not later 90 days after
the end of each fiscal year of the Parent, the consolidated and consolidating
balance sheets of the Parent as at the end of such year, statements of cash
flows, and the related consolidated and consolidating statements of operations,
each setting forth in comparative form the figures for the previous fiscal year,
all such consolidated and consolidating financial statements to be in reasonable
detail, prepared in accordance with GAAP and, with respect to the consolidated
financial statements, certified by the Accountants;
(b) as soon as practicable, but in any event not later than 45 days
after the end of each fiscal quarter of the Borrowers, copies of the
consolidated and consolidating balance sheets and statement of operations of the
Parent as at the end of such quarter, subject to year end adjustments, the
related statement of cash flows, all in reasonable detail and prepared in
accordance with GAAP, with a certification by the principal financial or
accounting officer of each Borrower (the "CFO") that the consolidated financial
statements are prepared in accordance with GAAP and fairly present the
consolidated financial condition of the Borrowers as at the close of business on
the date thereof (subject to year-end adjustments) and the results of operations
for the period then ended;
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(c) as soon as practicable, but in any event within forty-five (45)
days after the end of each month in each fiscal year of the Borrowers ending
prior to the successful completion of a Qualified Public Offering, unaudited
monthly consolidated and consolidating financial statements of the Parent for
such month, prepared in accordance with GAAP, with a certification by the CFO
that the information contained in such financial statements fairly presents the
financial condition of the Borrowers on the date thereof (subject to year-end
adjustments);
(d) simultaneously with the delivery of the financial statements
referred to in (a) and (b) above, a statement in the form of Exhibit C hereto
(the "Compliance Certificate") certified by the CFO that the Borrowers are in
compliance with the covenants contained in ss.ss.6, 7 and 8 hereof, as of the
end of the applicable period and setting forth in reasonable detail computations
evidencing such compliance, provided that if the Borrowers shall at the time of
issuance of such certificate or at any other time obtain knowledge of any
Default or Event of Default, the Borrowers shall include in such certificate or
otherwise deliver forthwith to the Banks a certificate specifying the nature and
period of existence thereof and what action the Borrowers propose to take with
respect thereto;
(e) annually or at such other time as may be requested by the Agent,
copies of the financial statements, financial projections, annual budget,
variance reports and business plan concerning the Borrowers in substantially the
same form in which such information is supplied to the boards of directors of
the Borrowers;
(f) contemporaneously with, or promptly following, the filing or
mailing thereof, copies of all material of a financial nature filed with the SEC
or sent to the stockholders of the Borrowers; and
(g) from time to time, such other financial data and other information
(including accountants' management letters) as the Banks may reasonably request.
Subject to ss.20 hereof, the Borrowers hereby authorize the Banks to
disclose any information obtained pursuant to this Credit Agreement to all
appropriate governmental regulatory authorities where required by law; provided,
however, that this authorization shall not be deemed to be a waiver of any
rights to object to the disclosure by the Banks of any such information which
the Borrowers have or may have under the federal Right to Financial Privacy Act
of 1978, as in effect from time to time.
SS.6.5. CORPORATE EXISTENCE AND CONDUCT OF BUSINESS.
Each Borrower will do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, corporate rights and
franchises and will not convert to a limited liability company except as
determined by such Borrower's Board of Directors in its reasonable discretion
and only after taking all actions that the Agent deems necessary or desirable
under applicable law to continue the perfection and preservation of
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the Agent's security interest in the Collateral and the effectiveness of this
Credit Agreement and the other Loan Documents with respect to such Borrower;
effect and maintain its foreign qualifications, licensing, domestication or
authorization except as terminated by such Borrower's Board of Directors in the
exercise of its reasonable judgment and except where the failure of a Borrower
to remain so qualified would not materially adversely impair the financial
condition of the Borrowers on a consolidated basis; use its reasonable best
efforts to comply with all applicable laws; and shall not become obligated under
any contract or binding arrangement which, at the time it was entered into would
materially adversely impair the financial condition of the Borrowers on a
consolidated basis. Each Borrower will continue to engage primarily in the
businesses now conducted by it and in related businesses.
SS.6.6. MAINTENANCE OF PROPERTIES.
The Borrowers will cause all material properties used or useful in the
conduct of their businesses to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Borrowers may be necessary so that the
businesses carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this section shall
prevent the Borrowers from discontinuing the operation and maintenance of any of
their properties if such discontinuance is, in the judgment of the Borrowers,
desirable in the conduct of their business and which does not in the aggregate
materially adversely affect the businesses of the Borrowers on a consolidated
basis.
SS.6.7. INSURANCE.
The Borrowers will maintain with financially sound and reputable insurance
companies, funds or underwriters' insurance of the kinds, covering the risks
(other than risks arising out of or in any way connected with personal liability
of any officers and directors thereof) and in the relative proportionate amounts
usually carried by reasonable and prudent companies conducting businesses
similar to that of the Borrowers, but in no event less than that required under
ss.8 of the Security Agreement. In addition, the Borrowers will furnish from
time to time, upon the Agent's request, a summary of the insurance coverage of
each of the Borrowers, which summary shall be in form and substance satisfactory
to the Agent and, if requested by the Agent, will furnish to the Agent copies of
the applicable policies.
SS.6.8. TAXES.
The Borrowers will duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all taxes, assessments and
other governmental charges imposed upon it and its real properties, sales and
activities, or any material part thereof, or upon the income or profits
therefrom, as well as all claims for labor, materials, or supplies, which if
unpaid might by law become a lien or charge upon any material portion of its
property; provided, however, that any such tax, assessment, charge, levy or
claim need not
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be paid if the validity or amount thereof shall currently be contested in good
faith by appropriate proceedings and if such Borrower shall have set aside on
its books adequate reserves with respect thereto; and provided, further, that
the Borrowers will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien which may
have attached as security therefor.
SS.6.9. INSPECTION OF PROPERTIES, BOOKS, AND CONTRACTS.
(a) Each Borrower will permit the Banks, the Agent or any of their
designated representatives, upon reasonable notice during normal business hours,
to visit and inspect any of its properties, to examine its books of account
(including the making of periodic accounts receivable reviews), or contracts
(and to make copies thereof and extracts therefrom), and to discuss its affairs,
finances and accounts with, and to be advised as to the same by, their officers,
all at such times and intervals as the Agent or any Bank may reasonably request.
(b) No more frequently than once during each calendar year, or more
frequently as determined by the Agent if an Event of Default shall have occurred
and be continuing, upon the request of the Agent, in each case upon reasonable
notice and during normal business hours, the Borrowers will obtain and deliver
to the Agent, or, if the Agent so elects, will cooperate with the Agent in the
Agent's obtaining, a report of an independent collateral auditor satisfactory to
the Agent (which may be affiliated with one of the Banks) based on a review and
audit of the rental equipment and inventory of the Borrowers, including
verification of the existence and condition of the same, and such report shall
be in form and substance satisfactory to the Agent. All such collateral reports
shall be conducted and made at the expense of the Borrowers.
(c) Each Borrower authorizes the Agent and, if accompanied by the
Agent, the Banks to communicate directly with the Accountants and authorizes the
Accountants to disclose to the Agent and the Banks any and all financial
statements and other supporting financial documents and schedules including
copies of any management letter with respect to the business, financial
condition and other affairs of the Borrowers. At the request of the Agent, each
Borrower shall deliver a letter addressed to such Accountants instructing them
to comply with the provisions of this ss.6.9(c).
SS.6.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES AND PERMITS; MAINTENANCE
OF MATERIAL LICENSES AND PERMITS.
Each Borrower will (i) comply with the provisions of its charter documents
and by-laws, (ii) comply with the provisions of all agreements and instruments
by which it or any of its properties may be bound except where noncompliance
with such provisions would not have a materially adverse effect in the aggregate
on the consolidated financial condition, properties or business of the Borrowers
taken as a whole; and (ii) comply with all applicable laws and regulations
(including Environmental Laws), decrees, orders, judgments, licenses
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and permits, including, without limitation, all environmental permits hereto
("Applicable Laws"), except where noncompliance with such Applicable Laws would
not have a materially adverse effect in the aggregate on the consolidated
financial condition, properties or businesses of the Borrowers taken as a whole.
If at any time while the Notes, or any Loan or Letter of Credit is outstanding
or any Bank or the Agent has any obligation to make Loans or issue Letters of
Credit hereunder, any authorization, consent, approval, permit or license from
any officer, agency or instrumentality of any government shall become necessary
or required in order that the Borrowers may fulfill any of their obligations
hereunder, the Borrowers will immediately take or cause to be taken all
reasonable steps within the power of the Borrowers to obtain such authorization,
consent, approval, permit or license and furnish the Banks with evidence
thereof.
SS.6.11. ENVIRONMENTAL INDEMNIFICATION.
Each Borrower covenants and agrees that it will indemnify and hold the
Agent and the Banks harmless from and against any and all claims, expense,
damage, loss or liability incurred by the Agent or any Bank (including all costs
of legal representation incurred by the Agent and the Banks) relating to (a) any
release or threatened release of hazardous substances on the Real Property; (b)
any violation of any Environmental Laws with respect to conditions at the Real
Property or the operations conducted thereon; or (c) the investigation or
remediation of offsite locations at which any Borrower or its predecessors are
alleged to have directly or indirectly disposed of hazardous substances. It is
expressly acknowledged by each Borrower that this covenant of indemnification
shall not include claims, expense, damage, loss or liability incurred by the
Agent or any Bank based upon the Agent's or such Banks' gross negligence or
willful misconduct (other than gross or willful misconduct which is attributed
to the Agent or any Bank solely by nature of any interest it may have in the
Real Property), and this covenant shall survive any foreclosure or any
modification, release or discharge of the Loan Documents or the payment of the
Loans and shall inure to the benefit of the Banks, their successors and assigns.
SS.6.12. FURTHER ASSURANCES.
The Borrowers will cooperate with the Banks and execute such further
instruments and documents as the Banks shall reasonably request to carry out to
the Banks' satisfaction the transactions contemplated by this Credit Agreement
and the Loan Documents.
SS.6.13. NOTICE OF POTENTIAL CLAIMS OR LITIGATION.
The Borrowers will give notice to the Agent and each of the Banks in
writing within thirty (30) days of becoming aware of any pending litigation or
proceedings affecting any Borrower or to which any Borrower is or becomes a
party (including without limitation any alleged violation of any Environmental
Law) involving an uninsured claim against any Borrower, wherein the potential
liability is in excess of $1,000,000, and stating the nature and status of such
litigation or proceedings. The Borrowers will give notice to the Agent and
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each of the Banks, in writing, in form and detail satisfactory to the Agent,
within ten (10) days of any judgment not covered by insurance, final or
otherwise, against any Borrower in an amount in excess of $1,000,000.
SS.6.14. NOTICE OF CERTAIN EVENTS CONCERNING INSURANCE AND ENVIRONMENTAL
CLAIMS.
(a) The Borrowers will provide the Banks with written notice as to any
material cancellation or material change in any insurance of the Borrowers
within ten (10) Business Days after the Borrowers' receipt of any notice
(whether formal or informal) of such cancellation or change by any of their
insurers.
(b) The Borrowers will promptly notify the Banks in writing of any of
the following events:
(i) upon any Borrower obtaining knowledge of any violation of any
Environmental Law regarding the Real Property or any Borrower's operations,
which violation could have a materially adverse effect on the Borrowers'
operations taken as a whole; (ii) upon any Borrower obtaining knowledge of any
potential or known Release or threat of Release of any Hazardous Substance at,
from, or into the Real Property which any Borrower reports in writing or is
reportable by it in writing to any governmental authority and which is material
in amount or nature or which could materially affect the value of the Real
Property; (iii) upon any Borrower's receipt of any notice of violation of any
Environmental Laws or of any Release or threatened Release of Hazardous
Substances, including a notice or claim of liability or potential responsibility
from any third party (including without limitation any federal, state or local
governmental officials) and including notice of any formal inquiry, proceeding,
demand, investigation or other action with regard to (A) any Borrower's or any
Person's operation of the Real Property, (B) contamination on, from or into the
Real Property, or (C) investigation or remediation of offsite locations at which
any Borrower or any of its predecessors is alleged to have directly or
indirectly Disposed of Hazardous Substances, which violation or Release in any
such case could have a material adverse effect on the Real Property or on any
Borrower's operations; or (iv) upon any Borrower obtaining knowledge that any
material expense or loss has been incurred by such governmental authority in
connection with the assessment, containment, removal or remediation of any
Hazardous Substances with respect to which any Borrower may be liable or for
which a lien may be imposed on the Real Property.
SS.6.15. NOTICE OF DEFAULT.
The Borrowers will promptly notify the Banks in writing of the occurrence
of any Default or Event of Default. If any Person shall give any notice or take
any other action in respect of a claimed default (whether or not constituting an
Event of Default) under this Credit Agreement or any other note, evidence of
Indebtedness, indenture or other obligation evidencing Indebtedness in excess of
$1,000,000 as to which any Borrower is a party or
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<PAGE> 53
obligor, whether as principal or surety, the Borrowers shall forthwith give
written notice thereof to the Banks, describing the notice of action and the
nature of the claimed default.
SS.6.16. NEW SUBSIDIARIES.
(a) Any newly-created or acquired Subsidiary of the Parent permitted
under ss.7.4 shall become a Borrower hereunder and become a party to the
Security Documents by (i) signing a joinder agreement in substantially the form
attached hereto as Exhibit E (the "Joinder Agreement"), (ii) signing allonges to
the Revolving Credit Notes and Swing Line Note and (iii) providing such other
documentation as the Banks or the Agent may reasonably request, including,
without limitation, documentation with respect to the conditions specified in
ss.9 hereof, and 100% of the stock or other equity interests and assets of such
new Subsidiaries shall be pledged to the Agent for the benefit of the Banks. In
such event, the Agent is hereby authorized by the parties to amend Schedule 2 to
include such new Subsidiary.
(b) The Parent shall at all times directly or indirectly through a
Subsidiary own all of the shares of capital stock of each of the Borrowers
(other than the Parent), and such shares shall at all times be pledged to the
Agent pursuant to the Stock Pledge Agreements.
SS.6.17. EMPLOYEE BENEFIT PLANS.
The Borrowers will (i) promptly upon filing the same with the Department of
Labor or Internal Revenue Service, upon request of the Agent, furnish to the
Agent a copy of the most recent actuarial statement required to be submitted
under ss.103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon
receipt or dispatch, furnish to the Agent any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under ss.ss.302, 4041, 4042,
4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan,
under ss.ss.4041A, 4202, 4219, 4242, or 4245 of ERISA.
SS.6.18. USE OF PROCEEDS.
The Borrowers will use the proceeds of the Loans and obtain Letters of
Credit solely for the purposes set forth in ss.5.15.1 hereof.
SS.6.19. TITLE AND REGISTRATION.
If requested by the Majority Banks and if the value of titled or registered
equipment exceeds five percent (5%) of Total Net Property Plant and Equipment,
as shown on the Borrowers' consolidated financial statements in accordance with
GAAP, within 30 days of such request, the Borrowers will cause such inventory
and equipment, now owned or hereafter acquired by any of the Borrowers, which,
under applicable law, is required to be registered, to be properly registered in
the name of such Person and cause all inventory and equipment, now owned or
hereafter acquired by any of the Borrowers, the ownership of
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<PAGE> 54
which, under applicable law, is evidenced by a certificate of title, to be
properly titled in the name of such Person and will cause the lien of the Agent
to be properly noted on the certificates of title issued with respect to the
equipment and inventory and deliver such certificates of title to the Agent in
accordance with the terms of the Security Agreement.
SS.7. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS.
Each Borrower agrees that, so long as any Loan or any Revolving Credit
Note, Swing Line Note or other Obligation is outstanding or the Banks have any
obligation to make Loans or participate in Loans or Letters of Credit or the
Agent has any obligation to issue, extend or renew any Letters of Credit
hereunder:
SS.7.1. RESTRICTIONS ON INDEBTEDNESS.
The Borrowers shall not become or be a guarantor or surety of, or otherwise
create, incur, assume, or be or remain liable, contingently or otherwise, with
respect to any Indebtedness, or become or be responsible in any manner (whether
by agreement to purchase any obligations, stock, assets, goods or services, or
to supply or advance any funds, assets, goods or services or otherwise) with
respect to any undertaking or Indebtedness of any other Person, or incur any
Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under this Credit
Agreement or the Loan Documents;
(b) incurrence of guaranty, suretyship or indemnification obligations
in connection with the Borrowers' performance of services for their respective
customers in the ordinary course of their businesses;
(c) Indebtedness of one Borrower to another then existing Borrower;
(d) (i) purchase money Indebtedness incurred in connection with the
acquisition after the Closing Date of any real or personal property or under
equipment leases or equipment chattel, (ii) existing Indebtedness of any
Subsidiary acquired after the Closing Date (the "Acquired Subsidiary")
originally incurred by the Acquired Subsidiary in connection with the lease or
acquisition of property or fixed assets used in the business of the Acquired
Subsidiary; or with respect to industrial finance bonds issued to finance the
purchase of such property or assets; (iii) other unsecured existing Indebtedness
of any Acquired Subsidiary; (iv) Indebtedness with respect to obligations under
Capitalized Leases or sale and leaseback transactions and (v) Indebtedness
(other than Subordinated Debt) incurred in connection with acquisitions after
the date hereof of any equity interest in, or assets of any Person owing to the
seller(s) of such equity interests or assets; provided that (A) such
acquisitions are otherwise permitted pursuant to ss.7.4; (B) the aggregate
amount of such Indebtedness under this subsection (d) (including Indebtedness
assumed in connection
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with the Associated Rentals Acquisition) shall not exceed $65,000,000 and (C)
the incurrence of such Indebtedness would not otherwise create an Event of
Default under ss.8;
(e) Subordinated Debt, provided such Indebtedness is not amended or
prepaid without the consent of the Majority Banks;
(f) Indebtedness existing on the date hereof and listed and described
on Schedule 7.1 hereto; and
(g) additional unsecured Indebtedness of the Borrowers in an aggregate
amount not to exceed $5,000,000;
provided that if the creation, incurrence, assumption or existence of any
Indebtedness would constitute an Event of Default under, or be prohibited
pursuant to the terms of, the Subordinated Debt, then the creation, incurrence,
assumption or existence of such Indebtedness shall not be permitted hereunder.
SS.7.2. RESTRICTIONS ON LIENS.
The Borrowers shall not create or incur or suffer to be created or incurred
or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or
other security interest of any kind upon any property or assets of any
character, whether now owned or hereafter acquired, or upon the income or
profits therefrom; or transfer any of such property or assets or the income or
profits therefrom for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors; or acquire, or agree or have an option to acquire, any
property or assets upon conditional sale or other title retention or purchase
money security agreement, device or arrangement; or suffer to exist for a period
of more than 30 days after the same shall have been incurred any Indebtedness or
claim or demand against it which if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors; or sell, assign, pledge or otherwise transfer any accounts, contract
rights, general intangibles or chattel paper, with or without recourse, except
as follows (the "Permitted Liens"):
(a) Liens to secure taxes, assessments and other government charges in
respect of obligations not overdue or liens on properties to secure claims for
labor, material or supplies in respect of obligations not overdue;
(b) Deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or other
social security obligations;
(c) Liens in respect of judgments or awards which have been in force
for less than the applicable period for taking an appeal so long as execution is
not levied thereunder or in respect of which the applicable Borrower shall at
the time in good faith be prosecuting an
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<PAGE> 56
appeal or proceedings for review and in respect of which a stay of execution
shall have been obtained pending such appeal or review and in respect of which
such Borrower maintains adequate reserves;
(d) Liens of carriers, warehousemen, mechanics and materialmen, and
other like liens, in existence less than 120 days from the date of creation
thereof in respect of obligations not overdue, provided that such liens may
continue to exist for a period of more than 120 days if the validity or amount
thereof shall currently be contested by the applicable Borrower in good faith by
appropriate proceedings and if such Borrower shall have set aside on its books
adequate reserves with respect thereto as required by GAAP and provided further
that such Borrower will pay any such claim forthwith upon commencement of
proceedings to foreclose any such lien;
(e) Encumbrances on Real Property consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real property and defects
and irregularities in the title thereto, landlord's or lessor's liens under
leases to which any Borrower is a party, and other minor liens or encumbrances
none of which in the opinion of such Borrower interferes materially with the use
of the property affected in the ordinary conduct of the business of such
Borrower, which defects do not individually or in the aggregate have a material
adverse effect on the business of such Borrower individually or of the Borrowers
on a consolidated basis;
(f) Liens existing as of the date hereof and listed on Schedule 7.2 on
the terms and conditions in effect as of the date hereof (subject to the
termination or amendment of certain liens as noted on such Schedule);
(g) (i) previously existing Liens granted by Acquired Subsidiaries
with respect to asset financings (mortgages, Capitalized Leases, etc.) or
industrial revenue bonds permitted under ss.7.1(d) on the terms and conditions
in effect as of the date of the acquisition, and the replacement, extension or
renewal of any such Lien provided that in each such case such Liens shall
encumber only the property or assets so financed and shall not exceed the fair
market value thereof and shall not have been incurred in contemplation of such
acquisition; (ii) Liens in respect of Indebtedness to Sellers and Capitalized
Leases permitted by ss.7.1(d); and (iii) purchase money security interests in or
purchase money mortgages on real or personal property to secure purchase money
Indebtedness of the type and amount permitted by ss.7.1(d), incurred in
connection with the acquisition of such property, which security interests or
mortgages cover only the real or personal property so acquired, and the
replacement, extension or renewal of any such Lien encumbering no more than the
property or assets encumbered by such Lien; and
(h) Liens in favor of the Agent for the benefit of the Banks and the
Agent under the Loan Documents.
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SS.7.3. RESTRICTIONS ON INVESTMENTS.
The Borrowers shall not purchase or acquire, or make any commitment
therefor, any capital stock, equity interest, or other obligations or securities
of, or any interest in, any other Person, or make or commit to make any
acquisition under ss.7.4, or make or commit to make any advance, loan, extension
of credit or capital contribution to or any other investment in, any other
Person, other than:
(a) marketable direct or guaranteed obligations of the United States
of America that mature within one (1) year from the date of purchase;
(b) demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States banks or Eligible Foreign Banks having unimpaired
capital and surplus in excess of $250,000,000;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated and
the ratings for which are not less than "P 1" if rated by Moody's Investors
Service, Inc., and not less than "A 1" if rated by Standard and Poor's Rating
Group;
(d) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;
(e) investments existing on the date hereof and listed on Schedule
7.3;
(f) loans, investments and advances by any Borrower in or to another
Borrower;
(g) investments with respect to Indebtedness permitted by ss.7.1(e);
and
(h) investments permitted under ss.7.4.
SS.7.4. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
SS.7.4.1. MERGERS AND ACQUISITIONS.
The Borrowers will not become a party to any merger or consolidation, or
agree to or effect any asset acquisition or stock acquisition (other than the
acquisition of assets in the ordinary course of business consistent with past
practices) except the merger or consolidation of, or asset or stock acquisitions
between existing Borrowers (provided that the Parent will be the survivor of any
such transaction between the Parent and another Borrower) and except as
otherwise provided in this ss.7.4. Any Borrower may purchase or otherwise
acquire all or substantially all of the assets or stock or other equity
interests of any other Person provided that:
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(a) the Borrowers are in current compliance with and, giving effect to
the proposed acquisition (including any borrowings made or to be made in
connection therewith), will continue to be in compliance with all of the
covenants in ss.8 hereof on a pro forma historical combined basis as if the
transaction occurred on the first day of the period of measurement, and a
Compliance Certificate demonstrating such compliance shall have been provided to
the Banks;
(b) at the time of such acquisition, no Default or Event of Default
has occurred and is continuing, and such acquisition will not otherwise create a
Default or an Event of Default hereunder;
(c) the business to be acquired is predominantly in the same lines of
business as the Borrowers, or businesses reasonably related or incidental
thereto;
(d) the business to be acquired operates predominantly in the United
States;
(e) all of the assets to be acquired shall be owned by an existing or
newly created Subsidiary of the Parent which Subsidiary shall be a Borrower,
100% of the assets and stock or other equity interests of which have been or,
simultaneously with such acquisition, will be pledged to the Agent on behalf of
the Banks or, in the case of a stock or other equity interest acquisition, the
acquired company, within seven (7) days after such acquisition, shall become a
Borrower or shall be merged with and into a wholly owned Subsidiary that is a
Borrower and such newly acquired or created Subsidiary shall otherwise comply
with the provisions of ss.6.16(a) hereof;
(f) not later than seven (7) days prior to the proposed acquisition
date of an acquisition requiring the consent of the Majority Banks, and not
later than two (2) days prior to the proposed acquisition date of an acquisition
not requiring the consent of the Majority Banks, a copy of the purchase
agreement, together with audited (if available, or otherwise unaudited)
financial statements for any Subsidiary to be acquired or created for the
preceding two (2) fiscal years or such shorter period of time as such Subsidiary
has been in existence shall have been furnished to the Agent; the Agent will, at
the request of any Bank, deliver a copy of such agreement and projections to
such Bank after the Agent's receipt thereof;
(g) not later than seven (7) days prior to the proposed acquisition
date of an acquisition requiring the consent of the Majority Banks, and not
later than two (2) days prior to the proposed acquisition date of an acquisition
not requiring the consent of the Majority Banks, each acquisition is preceded by
the Borrowers' standard due diligence practices, summaries of which shall have
been provided to the Agent; the Agent will, at the request of any Bank, deliver
a copy of such summaries to such Bank after the Agent's receipt thereof;
(h) the board of directors and (if required by applicable law) the
shareholders, or the equivalent thereof, of the business to be acquired has
approved such acquisition;
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(i) if such acquisition is made by a merger, a Borrower shall be the
surviving entity; and
(j) after giving effect to such acquisition, the cash consideration to
be paid by the Borrowers in connection with such acquisition or series of
related acquisitions (including deferred payments and the aggregate amount of
all Funded Debt assumed) (i) shall not exceed $20,000,000 prior to the
completion of a Qualified Public Offering without the consent of the Agent and
the Majority Banks and (ii) from and after the successful completion of a
Qualified Public Offering, shall not exceed the greater of $20,000,000 or 5% of
Consolidated Total Assets as of such date without the consent of Agent and the
Majority Banks.
(k) The Parent shall provide a certificate certifying that such
acquisition has been completed substantially in accordance with the terms of its
acquisition documents.
Notwithstanding the restrictions contained in ss.7.4.1(j), the
Associated Rentals Acquisition shall be permitted under this Credit Agreement
substantially on the terms and subject to the conditions set forth in the
Associated Rentals Acquisition Documents, provided that the Borrowers shall have
otherwise complied with the provisions of ss.7.4.1. Upon completion of the
Associated Rentals Acquisition, the EBIT of Associated Rentals, Inc. shall be
included in the calculation of EBIT under the Credit Agreement.
Notwithstanding anything herein to the contrary, the ability of
the Borrowers to incur any Indebtedness in connection with any transaction
permitted pursuant to this ss.7.4 shall be governed by ss.7.1.
SS.7.4.2. DISPOSITION OF ASSETS.
The Borrowers will not become a party to or agree to or effect any sale or
disposition of assets, other than (a) among existing Borrowers, (b) the
licensing of intellectual property and the disposition of obsolete assets, in
each case in the ordinary course of business consistent with past practices and
(c) so long as no Default or Event of Default shall have occurred and be
continuing at the time of such disposition, the sale of rental equipment
provided the net proceeds of such disposition are invested by the Borrowers
within ninety (90) days of such disposition in the purchase of new rental
equipment. The Agent will release its lien on the assets disposed of in
accordance with this ss.7.4.2(b) and (c) and will deliver to the Borrowers' such
evidence of such release as the Borrowers may reasonably request.
SS.7.5. SALE AND LEASEBACK.
None of the Borrowers shall enter into any arrangement, directly or
indirectly, whereby any Borrower shall sell or transfer any property owned by it
in order then or thereafter to lease such property or lease other property which
such Borrower intends to use for
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substantially the same purpose as the property being sold or transferred,
without the prior written consent of the Majority Banks.
SS.7.6. RESTRICTED DISTRIBUTIONS AND REDEMPTIONS.
None of the Borrowers shall make Distributions except any Borrower may make
Distributions to another Borrower provided no Default or Event of Default exists
or would be created by the making of such Distribution. None of the Borrowers
shall effect or permit any change in or amendment to any document or instrument
pertaining to the terms of any Borrower's (other than the Parent's) capital
stock.
SS.7.7. EMPLOYEE BENEFIT PLANS.
None of the Borrowers nor any ERISA Affiliate will:
(a) engage in any "prohibited transaction" within the meaning of
ss.406 of ERISA or ss.4975 of the Code which could result in a material
liability for any Borrower; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in ss.302 of ERISA, whether or not
such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could result
in the imposition of a lien or encumbrance on the assets of any Borrower
pursuant to ss.302(f) or ss.4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances requiring the
posting of security pursuant to ss.307 of ERISA or ss.401(a)(29) of the Code; or
(e) permit or take any action which would result in the aggregate
benefit liabilities (within the meaning of ss.4001 of ERISA) of all Guaranteed
Pension Plans exceeding the value of the aggregate assets of such Plans,
disregarding for this purpose the benefit liabilities and assets of any such
Plan with assets in excess of benefit liabilities.
SS.7.8. NEGATIVE PLEDGES.
The Borrowers shall not enter into or permit to exist any arrangement or
agreement, enforceable under applicable law, which directly or indirectly
prohibits any Borrower from creating or incurring any lien, encumbrance,
mortgage, pledge, charge, restriction or other security interest in favor of the
Agent for the benefit of the Banks and the Agent under the Loan Documents.
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SS.7.9. BUSINESS ACTIVITIES.
The Borrowers will not engage directly or indirectly (whether through
Subsidiaries or otherwise) in any type of business other than the businesses
conducted by any Borrower on the Closing Date and in related businesses.
SS.7.10. TRANSACTIONS WITH AFFILIATES.
The Borrowers will not engage in any transaction with any Affiliate (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such Affiliate or, to the knowledge of any
Borrower, any corporation, partnership, trust or other entity in which any such
Affiliate has a substantial interest or is an officer, director, trustee or
partner, on terms more favorable to such Person than would have been obtainable
on an arm's-length basis in the ordinary course of business.
SS.7.11. SUBORDINATED DEBT.
None of the Borrowers will amend, supplement or otherwise modify the terms
of any of the Subordinated Debt without thirty (30) days prior written notice to
the Agent and the Banks of such change, and will not make any change which, in
the opinion of the Agent, would be in any way materially adverse to the Banks
without the prior written consent of the Majority Banks or prepay, redeem or
repurchase any of the Subordinated Debt. Notwithstanding anything herein to the
contrary, in no case may the Borrowers make any payment of principal, interest,
or other amounts owing with respect to the Subordinated Debt if an Event of
Default under ss.12.1(a) or (b) exists or would be created by the making of such
payment.
SS.7.12. FISCAL YEAR.
None of the Borrowers will change the date of its fiscal year from that set
forth in ss.5.4(c) hereof.
SS.8. FINANCIAL COVENANTS.
Each of the Borrowers covenants and agrees that, so long as any Loan, any
Revolving Credit Note, Swing Line Note, any Reimbursement Obligation or other
Obligation is outstanding or the Banks have any obligation to make Loans or
participate in Loans or Letters of Credit or the Agent has any obligation to
issue, extend or renew any Letters of Credit hereunder:
SS.8.1. LEVERAGE RATIO.
Commencing with the fiscal quarter ending March 31, 1998, the ratio of (a)
Funded Debt as at the end of any fiscal quarter ending during a period described
in the table below to
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(b) EBITDA for the period of four (4) consecutive fiscal quarters ending on such
date shall not exceed the ratio set forth in the following table:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date - June 30, 1998 5.00:1.00
July 1, 1998 and thereafter 4.50:1.00
</TABLE>
SS.8.2. SENIOR FUNDED DEBT TO EBITDA.
Commencing with the fiscal quarter ending March 31, 1998, the ratio of (a)
Senior Funded Debt as at the end of any fiscal quarter ending during a period
described in the table below to (b) EBITDA for the period of four (4)
consecutive fiscal quarters ending on such date shall not exceed the ratio set
forth in the following table:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date - June 30, 1998 4.50:1.00
July 1, 1998 and thereafter 3.50:1.00
</TABLE>
SS.8.3. SENIOR FUNDED DEBT TO CAPITALIZATION RATIO.
Commencing with the fiscal quarter ending March 31, 1998, the Borrowers
will not at any time permit the ratio of (a) Senior Funded Debt as at the end of
any fiscal quarter ending during a period described in the table below to (b)
the sum of Funded Debt plus Consolidated Net Worth to exceed during any period
described in the table set forth below the percentage set forth opposite such
period in such table:
<TABLE>
<CAPTION>
Period Percentage
------ ----------
<S> <C>
Closing Date - March 31, 1998 75%
April 1, 1998 - June 30, 1998 72.5%
July 1, 1998 - September 30, 1998 60%
October 1, 1998 - December 31, 1998 60%
January 1, 1999 and thereafter 55%
</TABLE>
SS.8.4. INTEREST COVERAGE RATIO.
As of the end of any fiscal quarter of the Borrowers commencing with the
fiscal quarter ending June 30, 1998, the Borrowers will not permit the ratio of
(a) the sum of (i) actual reported EBIT (without adjustment) plus (ii)
amortization expense relating to intangible
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assets to (b) Consolidated Total Interest Expense to be less than the ratio
appearing opposite the relevant period in the table set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
June 30, 1998 - December 31, 1998 1.75:1
January 1, 1999 - December 31, 1999 2.00:1
January 1, 2000 and thereafter 2.25:1
</TABLE>
The Interest Coverage Ratio shall be calculated on a cumulative quarterly
basis for the fiscal quarters ending June 30, 1998, through December 31, 1998,
and thereafter for the four fiscal quarters then ending.
SS.8.5. TANGIBLE ASSETS TO SENIOR DEBT.
The Borrowers will not permit at any time the ratio of (a) Consolidated
Tangible Assets to (b) the sum of the Loans, unpaid Reimbursement Obligations
and the Maximum Drawing Amount to be less than 1.05:1; provided that from and
after the successful completion of a Qualified Public Offering, the Borrowers
will not permit such ratio to be less than 1.00:1.
SS.8.6. CONSOLIDATED NET WORTH.
The Borrowers will not permit Consolidated Net Worth at any time to be less
than (a) $75,000,000 from the Closing Date to June 30, 1998 or (b) thereafter,
$75,000,000 plus the sum of (i) 50% of positive Consolidated Net Income for each
fiscal quarter, beginning with the fiscal quarter ended June 30, 1998, and (ii)
100% of the net proceeds of any sale by the Borrowers of (A) equity securities
issued by the Borrowers or (B) warrants or subscription rights for equity
securities issued by the Borrowers.
SS.8.7. CAPITAL EXPENDITURES.
Capital Expenditures (other than for rental equipment inventory used in the
ordinary course of business) for the fiscal years set forth below shall not
exceed the amounts set forth opposite such fiscal year in the following table:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1998 $10,000,000
1999 $20,000,000
2000 $25,000,000
</TABLE>
provided, however, that, if during any fiscal year the amount of Capital
Expenditures permitted for that fiscal year is not utilized, such unutilized
amount may be utilized in the next succeeding fiscal year after application of
the amount set forth in the table above, but not in any subsequent fiscal year.
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SS.9. CLOSING CONDITIONS.
The obligations of the Banks to convert the Loans under the Prior Credit
Agreement into Revolving Credit Loans and to make the initial Loans, the Agent
to issue any initial Letters of Credit, and the Banks and the Agent otherwise be
bound by the terms of this Credit Agreement shall be subject to the satisfaction
of each of the following conditions precedent:
SS.9.1. LOAN DOCUMENTS, ETC.
Each of the Loan Documents shall have been duly and properly authorized,
executed and delivered by the respective parties thereto and shall be in full
force and effect in a form satisfactory to the Banks.
SS.9.2. CORPORATE ACTION.
All corporate action necessary for the valid execution, delivery and
performance by each Borrower of the Loan Documents shall have been duly and
effectively taken, and satisfactory evidence thereof shall have been provided to
the Agent.
SS.9.3. CERTIFICATE OF SECRETARY; GOOD STANDING CERTIFICATES.
The Agent shall have received from each Borrower a certificate as to the
good standing of such Borrower from the Secretary of State or other appropriate
official of the state of its organization and from each state in which it is
authorized to conduct business, in each case dated as of a recent date. The
Agent shall also have received from each Borrower a certificate of its Secretary
certifying the following attachments thereto: (a) a copy of its certificate or
articles of incorporation or constitutive documents, in each case as amended to
date, certified as of a recent date by the Secretary of State or other
appropriate official of the state of its organization, (b) a true, correct and
complete copy of its by-laws, including all amendments thereto, and (c) a true,
correct and complete copy of the resolutions of its board of directors
authorizing the transactions contemplated hereunder and under the other Loan
Documents. Such Secretary's Certificate shall also give the name and bear a
specimen signature of each individual who shall be authorized (i) to sign the
Loan Documents on behalf of each Borrower; (ii) to make Loan and Letter of
Credit Requests; and (iii) to give notices and to take other action on each
Borrower's behalf under the Loan Documents.
SS.9.4. VALIDITY OF LIENS.
The Security Documents shall be effective to create in favor of the Agent a
legal, valid and enforceable first (except for Permitted Liens entitled to
priority under applicable law) security interest in and lien upon the
Collateral. All filings, recordings, deliveries of instruments and other actions
necessary or desirable in the opinion of the Agent to protect and preserve such
security interests including, without limitation, notation of the Agent's lien
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on certificates of title as described in ss.6.19, shall have been duly effected.
The Agent shall have received evidence thereof in form and substance
satisfactory to the Agent.
SS.9.5. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS.
The Agent shall have received from each Borrower either (i) a completed and
fully executed Perfection Certificate or (ii) a certificate stating that the
Perfection Certificate previously delivered by such Borrower is true, accurate
and complete as of the Closing Date and the results of UCC searches with respect
to the Collateral, indicating no liens other than Permitted Liens and otherwise
in form and substance satisfactory to the Agent.
SS.9.6. CERTIFICATES OF INSURANCE.
The Agent shall have received a certificate of insurance signed by the
insurer or an agent authorized to bind the insurer dated as of the Closing Date,
identifying insurers, types of insurance, insurance limits, and policy terms,
and otherwise describing the Borrowers' insurance coverage and naming the Agent
as loss payee and additional insured as further provided in the Security
Agreement.
SS.9.7. LEGAL OPINIONS.
The Agent shall have received a favorable legal opinion from counsel to the
Borrowers, addressed to the Agent and each Bank, dated as of the Closing Date,
in form and substance satisfactory to the Agent, including but not limited to an
opinion regarding noncontravention of the Loan Documents and the transactions
contemplated herein and therein with the Subordinated Debt Documents.
SS.9.8. PAYMENT OF FEES.
The Borrowers shall have paid all fees owing to any of the Banks or either
Bank Agent, as appropriate, including, without limitation, the fees and expenses
of each Bank Agent's counsel.
SS.9.9. CLOSING CERTIFICATE.
The Borrowers shall have delivered to the Agent a certificate, dated as of
the Closing Date, stating that, as of such date (a) the representations and
warranties set forth herein or in any other Loan Document are true and correct
and (b) no Default or Event of Default has occurred and is continuing.
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SS.9.10. CONSENTS.
The Borrowers shall have delivered to the Agent evidence that all requisite
third-party consents to the transactions contemplated hereunder and under the
other Loan Documents have been received.
SS.9.11. SUBORDINATED DEBT DOCUMENTS.
The Borrowers shall have delivered to the Agent true, correct and complete
copies of the Subordinated Debt Documents in existence as of the Closing Date
and such documents shall be in form and substance satisfactory to the Agent.
SS.9.12. COMPLIANCE CERTIFICATE.
The Borrowers shall have delivered to the Agent a duly executed and
completed Compliance Certificate.
SS.9.13. CAPITAL STRUCTURE.
The Agent shall have received from the Borrowers evidence reasonably
satisfactory to the Agent and the Banks that (i) the Parent has received Net
Cash Proceeds from an Equity Issuance in an aggregate amount not less than
$45,000,000 and (ii) that the Unsecured Promissory Note issued by the Parent to
Huizenga Investments Limited Partnership dated as of May 1, 1998 in the amount
of $17,400,000 has been repaid in full with the proceeds of such Equity Issuance
and that no further amounts exist or are owed with respect thereto.
SS.9.14. FORM S-1.
The Borrowers shall have delivered to the Agent a draft of its Form S-1
relating to its initial public offering.
SS.10. CONDITIONS OF ALL LOANS.
The obligations of the Banks to convert the Loans under the Prior Credit
Agreement into Revolving Credit Loans hereunder and to make or extend any Loan
and of the Agent to issue, extend or renew any Letter of Credit on or after the
Closing Date, shall also be subject to the following conditions precedent:
SS.10.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT.
Each of the representations and warranties of the Borrowers contained in
this Credit Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with this Credit Agreement shall be true
as of the date as of which they were made and shall also be true at and as of
the time of any Drawdown Date or the issuance, extension or renewal of any
Letter of Credit with the same effect as if made at and as of that time (except
to the extent of changes resulting from transactions contemplated or permitted
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by this Credit Agreement and the other Loan Documents and changes occurring in
the ordinary course of business which singly or in the aggregate are not
materially adverse, or to the extent that such representations and warranties
relate solely and expressly to an earlier date) and no Default or Event of
Default shall have occurred and be continuing.
SS.10.2. PERFORMANCE; NO EVENT OF DEFAULT.
The Borrowers shall have performed and complied with all terms and
conditions herein required to be performed or complied with by the Borrowers
prior to or at the time of any Loan, and at the time of any Loan, there shall
exist no Event of Default or condition which would result in an Event of Default
upon consummation of such Loan (including without limitation any amounts to be
drawn under a Letter of Credit). Each request by the Borrowers for a Loan and
each request for issuance, extension or renewal of a Letter of Credit subsequent
to the Closing Date shall constitute certification by the Borrowers that the
conditions specified in ss.ss.10.1 and 10.2 will be duly satisfied on the date
of such Loan or Letter of Credit issuance.
SS.10.3. NO LEGAL IMPEDIMENT.
No change shall have occurred in any law or regulations thereunder or
interpretations thereof which in the reasonable opinion of any Bank would make
it illegal for such Bank to make Loans hereunder or to participate in the
issuance, extension or renewal of letters of credit or in the reasonable opinion
of the Agent would make it illegal for the Agent to issue, extend or renew such
Letter of Credit.
SS.10.4. GOVERNMENTAL REGULATION.
Each Bank shall have received such statements in form and substance
reasonably satisfactory to such Bank as such Bank shall require for the purpose
of compliance with any applicable regulations of the Comptroller of the Currency
or the Board of Governors of the Federal Reserve System.
SS.10.5. PROCEEDINGS AND DOCUMENTS.
All proceedings in connection with the transactions contemplated by this
Credit Agreement, the other Loan Documents and all documents incident thereto
shall have been delivered to the Banks in form and substance satisfactory to the
Banks, the Agent and its counsel, including without limitation a Loan and Letter
of Credit Request in the form attached hereto as Exhibit B, and the Banks, the
Agent and such counsel shall have received all information and such counterpart
originals or certified or other copies of such documents as the Agent or any
Bank may reasonably request.
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SS.11. COLLATERAL SECURITY.
The Obligations shall be secured by (a) a perfected first priority security
interest (subject only to Permitted Liens entitled to priority under applicable
law) in all assets of each Borrower (other than perfection of titled or
registered equipment unless perfection is required pursuant to ss.6.19), whether
now owned or hereafter acquired, pursuant to the terms of the Security Documents
to which such Borrower is a party and (b) a pledge of one hundred percent (100%)
of the stock or other equity interests of each Subsidiary of the Parent pursuant
to the terms of the Stock Pledge Agreements.
SS.12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION OF COMMITMENT.
SS.12.1. EVENTS OF DEFAULT AND ACCELERATION.
If any of the following events ("Events of Default" or, if the giving of
notice or the lapse of time or both is required, then, prior to such notice
and/or lapse of time, "Defaults") shall occur:
(a) the Borrowers shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable, whether at
the Maturity Date or any accelerated date of maturity or at any other date fixed
for payment;
(b) the Borrowers shall fail to pay any interest or fees or other
amounts owing hereunder within five (5) Business Days after the same shall
become due and payable whether at the Maturity Date or any accelerated date of
maturity or at any other date fixed for payment;
(c) any Borrower shall fail to comply with any of the covenants
contained in ss.ss.6.1, the first clause of 6.5, 6.15, 6.16, 6.19, 7 or 8;
(d) any Borrower shall fail to perform any term, covenant or agreement
contained herein or in any of the other Loan Documents (other than those
specified in subsections (a), (b), and (c) above) within thirty (30) days after
the earlier to occur of (i) written notice of such failure has been given to the
Borrowers by the Agent or any Bank or (ii) the date on which any Borrower knew
or should have known about such event;
(e) any representation or warranty contained in this Credit Agreement,
any of the Loan Documents or in any document or instrument delivered pursuant to
or in connection with this Credit Agreement shall prove to have been false in
any material respect upon the date when made or repeated;
(f) any Borrower shall fail to pay at maturity, or within any
applicable period of grace, any obligation for borrowed money (other than the
Obligations) or any guaranty with respect thereto in an aggregate amount greater
than $1,000,000 or fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound,
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evidencing or securing borrowed money in an aggregate amount greater than
$1,000,000 for such period of time as would, or would have permitted (assuming
the giving of appropriate notice if required) the holder or holders thereof or
of any obligations issued thereunder to accelerate the maturity thereof;
(g) any Borrower makes an assignment for the benefit of creditors, or
admits in writing its inability to pay or generally fails to pay its debts as
they mature or become due, or petitions or applies for the appointment of a
trustee or other custodian, liquidator or receiver of any Borrower or of any
substantial part of the assets of any Borrower or commences any case or other
proceeding relating to any Borrower under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect, or takes any action
to authorize or in furtherance of any of the foregoing, or if any such petition
or application is filed or any such case or other proceeding is commenced
against any Borrower and such Borrower indicates its approval thereof, consent
thereto or acquiescence therein or such petition or application shall not have
been dismissed within ninety (90) days following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating any Borrower bankrupt or
insolvent, or approving a petition in any such case or other proceeding, or a
decree or order for relief is entered in respect of any Borrower in an
involuntary case under federal bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive, any final
judgment against any Borrower which, with other outstanding final judgments,
undischarged, unsatisfied and unstayed against the Borrowers, exceeds in the
aggregate $1,000,000 after taking into account any undisputed insurance
coverage;
(j) the holders of all or any part of the Subordinated Debt shall
accelerate the maturity of all or any part of the Subordinated Debt or the
Subordinated Debt shall be prepaid, redeemed or repurchased in whole or in part;
(k) any Borrower or any ERISA Affiliate incurs any liability to the
PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate
amount exceeding $1,000,000, or any Borrower or any ERISA Affiliate is assessed
withdrawal liability pursuant to Title IV of ERISA by a Multiemployer Plan
requiring aggregate annual payments exceeding $1,000,000, or any of the
following occurs with respect to a Guaranteed Pension Plan: (i) an ERISA
Reportable Event, or a failure to make a required installment or other payment
(within the meaning of ss.302(f)(1) of ERISA), provided that the Agent
determines in its reasonable discretion that such event (A) could be expected to
result in liability of any Borrower to the PBGC or such Guaranteed Pension Plan
in an aggregate amount exceeding $1,000,000 and (B) could constitute grounds for
the termination of such Guaranteed Pension
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Plan by the PBGC, for the appointment by the appropriate United States District
Court of a trustee to administer such Guaranteed Pension Plan or for the
imposition of a lien in favor of such Guaranteed Pension Plan; or (ii) the
appointment by a United States District Court of a trustee to administer such
Guaranteed Pension Plan; or (iii) the institution by the PBGC of proceedings to
terminate such Guaranteed Pension Plan;
(l) any of the Loan Documents shall be cancelled, terminated, revoked
or rescinded or the Agent's security interests or liens in a substantial portion
of the Collateral shall cease to be perfected, or shall cease to have the
priority contemplated by the Security Documents, in each case otherwise than in
accordance with the terms thereof or with the express prior written agreement,
consent or approval of the Banks, or any action at law, suit or in equity or
other legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of any Borrower or any of their respective
stockholders, or any court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of the
Loan Documents is illegal, invalid or unenforceable in accordance with the terms
thereof;
(m) (i) the Parent shall at any time, legally or beneficially own less
than one hundred percent (100%) of the shares of the capital stock of each other
Borrower, as adjusted pursuant to any stock split, stock dividend or
recapitalization or reclassification of the capital of such Borrower; or (ii)
except as set forth on Schedule 12.1(m) any person or group of persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said Act) of
20% or more of the outstanding shares of common stock of the Parent; or, during
any period of twelve consecutive calendar months, individuals who were directors
of the Parent on the first day of such period shall cease to constitute a
majority of the board of directors; or
(n) prior to the successful completion of a Qualified Public Offering,
(i) both James Kirk and Gene Ostrow shall cease, for any reason, to be employed
in a senior management position with the Parent or there shall occur any
substantial diminution in the senior management positions, duties and
responsibilities of James Kirk and Gene Ostrow and (ii) there shall not be at
least one replacement person for James Kirk and Gene Ostrow employed in such
senior management positions, duties and responsibilities reasonably acceptable
to the Majority Banks;
then, and in any such event, so long as the same may be continuing, the Agent
may, and at the request of the Majority Banks shall, by notice in writing to the
Borrowers, declare all amounts owing with respect to this Credit Agreement, the
Notes and the other Loan Documents and all Reimbursement Obligations to be, and
they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrowers; provided that in the event of any
Event of Default specified in ss.ss.12(g), 12(h) or 12(j) all such amounts shall
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become immediately due and payable automatically and without any requirement of
notice from the Agent or any Bank. Upon demand by the Banks after the occurrence
of any Event of Default, the Borrowers shall immediately provide to the Agent
cash in an amount equal to the Maximum Drawing Amount, to be held by the Agent
as collateral security for the Obligations, provided that in the event of any
Event of Default specified in ss.ss.12(g), 12(h) or 12(j), all such amounts
shall become immediately due and payable automatically and without any
requirement of notice from the Agent or any Bank.
SS.12.2. TERMINATION OF COMMITMENTS.
If any Event of Default shall occur, the Agent may, and at the request of
the Majority Banks shall, by notice to the Borrowers, terminate the unused
portion of the Total Commitment hereunder, and upon such notice being given,
such unused portion of the Total Commitment hereunder shall terminate
immediately and the Banks shall be relieved of all further obligations to make
Loans to the Borrowers and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit for the account of the
Borrowers hereunder, provided that in the event of any Event of Default
specified in ss.ss.12(g), 12(h) or 12(j), the Total Commitment shall forthwith
terminate and each of the Banks shall be relieved of all further obligations to
make Loans to the Borrowers and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit automatically and
without any requirement of notice from the Agent or any Bank. No termination of
any portion of the Total Commitment hereunder shall relieve the Borrowers of any
of their existing Obligations to the Banks hereunder or elsewhere.
SS.12.3. REMEDIES.
Subject to ss.13, in case any one or more Events of Default shall have
occurred and be continuing, and whether or not the Banks shall have accelerated
the maturity of the Loans pursuant to ss.12.1, each Bank may proceed to protect
and enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Bank are evidenced,
including, without limitation, as permitted by applicable law the obtaining of
the ex parte appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or any
legal or equitable right of such Bank, provided that, if any of the Collateral
is Real Property located in California, Louisiana or any other state having a
one form of action rule or any rule which might impair the Collateral, then
prior to initiating any such proceeding, such Bank shall have supplied the Agent
with opinions of nationally recognized law firms specializing in California law,
Louisiana law, and the law of any other state, as applicable, having a one form
of action rule to the effect that actions by such Bank under such circumstances
shall not constitute an action for purposes of such state's one form of action
rule or in any other way impair the Collateral. No remedy herein conferred upon
any Bank or the Agent or the holder of any Note or purchaser of any Letter of
Credit Participation is intended to be exclusive of any other
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remedy and each and every remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or any other provision of law.
SS.13. SETOFF.
Regardless of the adequacy of any Collateral, during the continuance of an
Event of Default, any deposits or other sums credited by or due from any Bank to
any Borrower and any securities or other property of any Borrower in the
possession of such Bank may be applied to or set off against the payment of the
Obligations and any and all other liabilities, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, of any
Borrower to the Banks. The Banks agree among themselves that, if a Bank shall
obtain payment on any Obligation outstanding under this Credit Agreement through
the exercise of a right of offset, banker's lien or counterclaim, or from any
other source including under ss.12.3 (other than by way of a pro rata payment
under this Credit Agreement), it shall promptly make such adjustments with the
other Banks as shall be equitable to the end that all the Banks shall share the
benefits of such payments pro rata in accordance with the aggregate unpaid
amount of the Revolving Credit Notes held by each Bank immediately prior to the
payment obtained by such Bank as aforesaid. The Banks further agree among
themselves that if any payment to a Bank obtained by such Bank through the
exercise of a right of offset, banker's lien or counterclaim, or from any other
source (other than by way of a pro rata payment) as aforesaid shall be rescinded
or must otherwise be restored, the Banks who shall have shared the benefit of
such payment shall return their share of that benefit to the Bank whose payment
shall have been rescinded or otherwise restored.
SS.14. THE AGENT.
SS.14.1. AUTHORIZATION.
(a) The Agent is authorized to take such action on behalf of each of the
Banks and to exercise all such powers as are hereunder and under any of the
other Loan Documents and any related documents delegated to the Agent, together
with such powers as are reasonably incident thereto, provided that no duties or
responsibilities not expressly assumed herein or therein shall be implied to
have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that of an
independent contractor. The use of the term "Agent" is for convenience only and
is used to describe, as a form of convention, the independent contractual
relationship between the Agent and each of the Banks. Nothing contained in this
Credit Agreement nor the other Loan Documents shall be construed to create an
agency, trust or other fiduciary relationship between the Agent and any of the
Banks.
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(c) As an independent contractor empowered by the Banks to exercise certain
rights and perform certain duties and responsibilities hereunder and under the
other Loan Documents, the Agent is nevertheless a "representative" of the Banks,
as that term is defined in Article 1 of the Uniform Commercial Code, for
purposes of actions for the benefit of the Banks and the Agent with respect to
all collateral security and guaranties contemplated by the Loan Documents. Such
actions include the designation of the Agent as "secured party", "mortgagee" or
the like on all financing statements and other documents and instruments,
whether recorded or otherwise, relating to the attachment, perfection, priority
or enforcement of any security interests, mortgages or deeds of trust in
collateral security intended to secure the payment or performance of any of the
Obligations, all for the benefit of the Banks and the Agent.
SS.14.2. EMPLOYEES AND AGENTS.
The Agent may exercise its powers and execute its duties by or through
employees or agents and shall be entitled to take, and to rely on, advice of
counsel concerning all matters pertaining to its rights and duties under this
Credit Agreement and the other Loan Documents. The Agent may utilize the
services of such Persons as the Agent in its sole discretion may reasonably
determine, and all reasonable fees and expenses of any such Persons shall be
paid by the Borrowers.
SS.14.3. NO LIABILITY.
Neither the Agent nor any of its shareholders, directors, officers or
employees nor any other Person assisting them in their duties nor any agent or
employee thereof, shall be liable for any waiver, consent or approval given or
any action taken, or omitted to be taken, in good faith by it or them hereunder
or under any of the other Loan Documents, or in connection herewith or
therewith, or be responsible for the consequences of any oversight or error of
judgment whatsoever, except that the Agent or such other Person, as the case may
be, may be liable for losses due to its willful misconduct or gross negligence.
SS.14.4. NO REPRESENTATIONS.
SS.14.4.1. GENERAL.
The Agent shall not be responsible for the execution or validity
or enforceability of this Credit Agreement, the Notes, the Letters of
Credit, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the
Notes, or for the value of any such collateral security or for the
validity, enforceability or collectability of any such amounts owing
with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan
Documents or in any certificate or instrument hereafter furnished to
it by or on behalf of any Borrower, or be bound to ascertain or
inquire as to the performance or observance of any of the terms,
conditions,
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covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for the
Notes or to inspect any of the properties, books or records of any
Borrower. The Agent shall not be bound to ascertain whether any
notice, consent, waiver or request delivered to it by the Borrowers or
any holder of any of the Notes shall have been duly authorized or is
true, accurate and complete. The Agent has not made nor does it now
make any representations or warranties, express or implied, nor does
it assume any liability to the Banks, with respect to the credit
worthiness or financial conditions of any Borrower. Each Bank
acknowledges that it has, independently and without reliance upon the
Agent or any other Bank, and based upon such information and documents
as it has deemed appropriate, made its own credit analysis and
decision to enter into this Credit Agreement.
SS.14.4.2. CLOSING DOCUMENTATION, ETC.
For purposes of determining compliance with the conditions set
forth in ss.9, each Bank that has executed this Credit Agreement shall
be deemed to have consented to, approved or accepted, or to be
satisfied with, each document and matter either sent, or made
available, by the Agent or the Arranger to such Bank for consent,
approval, acceptance or satisfaction, unless an officer of the Agent
or the Arranger active upon the Borrowers' account shall have received
notice from such Bank prior to the Closing Date specifying such Bank's
objection thereto and such objection shall not have been withdrawn by
notice to the Agent or the Arranger to such effect on or prior to the
Closing Date.
SS.14.5. PAYMENTS.
SS.14.5.1. PAYMENTS TO AGENT.
A payment by the Borrower to the Agent hereunder or any of the
other Loan Documents for the account of any Bank shall constitute a
payment to such Bank. The Agent agrees promptly to distribute to each
Bank such Bank's pro rata share of payments received by the Agent for
the account of the Banks except as otherwise expressly provided herein
or in any of the other Loan Documents.
SS.14.5.2. DISTRIBUTION BY AGENT.
If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under
any of the other Loan Documents might involve it in liability, it may
refrain from making distribution until its right to make distribution
shall have been adjudicated by a court of competent jurisdiction. If a
court of competent jurisdiction shall adjudge that any amount received
and distributed by the Agent is to be repaid, each Person to whom any
such distribution shall have been made shall either repay to the Agent
its proportionate share of the
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amount so adjudged to be repaid or shall pay over the same in such
manner and to such Persons as shall be determined by such court.
SS.14.5.3. DELINQUENT BANKS.
Notwithstanding anything to the contrary contained in this Credit
Agreement or any of the other Loan Documents, any Bank that fails (i)
when required hereunder to make available to the Agent its pro rata
share of any Loan or to purchase any Letter of Credit Participation or
(ii) to comply with the provisions of ss.13 with respect to making
dispositions and arrangements with the other Banks, where such Bank's
share of any payment received, whether by setoff or otherwise, is in
excess of its pro rata share of such payments due and payable to all
of the Banks, in each case as, when and to the full extent required by
the provisions of this Credit Agreement, shall be deemed delinquent (a
"Delinquent Bank") and shall be deemed a Delinquent Bank until such
time as such delinquency is satisfied. A Delinquent Bank shall be
deemed to have assigned any and all payments due to it from the
Borrowers, whether on account of outstanding Loans, unpaid
Reimbursement Obligations, interest, fees or otherwise, to the
remaining nondelinquent Banks for application to, and reduction of,
their respective pro rata shares of all outstanding Loans and unpaid
Reimbursement Obligations. The Delinquent Bank hereby authorizes the
Agent to distribute such payments to the nondelinquent Banks in
proportion to their respective pro rata shares of all outstanding
Loans and unpaid Reimbursement Obligations. A Delinquent Bank shall be
deemed to have satisfied in full a delinquency when and if, as a
result of application of the assigned payments to all outstanding
Loans and unpaid Reimbursement Obligations of the nondelinquent Banks,
the Banks' respective pro rata shares of all outstanding Loans and
unpaid Reimbursement Obligations have returned to those in effect
immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency. A Delinquent Bank shall not be
entitled to vote on any matters under this Credit Agreement or the
other Loan Documents until such delinquency is satisfied in accordance
with this ss.14.5.3, other than matters specified in ss.26 that
require the consent of each Bank affected thereby (and such Delinquent
Bank is affected thereby) or the consent of all Banks.
SS.14.6. HOLDERS OF NOTES.
The Agent may deem and treat the payee of any Note or the purchaser of any
Letter of Credit Participation as the absolute owner or purchaser thereof for
all purposes hereof until it shall have been furnished in writing with a
different name by such payee or by a subsequent holder, assignee or transferee.
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SS.14.7. INDEMNITY.
The Banks ratably agree hereby to indemnify and hold harmless the Agent,
its affiliates and the Documentation Agent from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent, such affiliate or the
Documentation Agent has not been reimbursed by the Borrowers as required by
ss.15), and liabilities of every nature and character arising out of or related
to this Credit Agreement, the Notes, or any of the other Loan Documents or the
transactions contemplated or evidenced hereby or thereby, or the Agent's, such
affiliates or the Documentation Agent's actions taken hereunder or thereunder,
except to the extent that any of the same shall be directly caused by the
Agent's, such affiliates or the Documentation Agent's willful misconduct or
gross negligence.
SS.14.8. AGENT AS BANK.
In its individual capacity, BKB shall have the same obligations and the
same rights, powers and privileges in respect to its Commitment and the Loans
made by it, and as the holder of any of the Notes and as the purchaser of any
Letter of Credit Participations, as it would have were it not also the Agent. In
its individual capacity, LaSalle shall have the same obligations and the same
rights, powers and privileges in respect to its Commitment and the Loans made by
it, and as the holder of any of the Notes and as the purchaser of any Letter of
Credit Participations, as it would have were it not also the Documentation
Agent.
SS.14.9. RESIGNATION.
The Agent may resign at any time by giving sixty (60) days prior written
notice thereof to the Banks and the Borrowers. Upon any such resignation, the
Majority Banks shall have the right to appoint a successor Agent. Unless a
Default or Event of Default shall have occurred and be continuing, such
successor Agent shall be reasonably acceptable to the Borrowers. If no successor
Agent shall have been so appointed by the Majority Banks and shall have accepted
such appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a financial institution having a
rating of not less than A or its equivalent by Standard & Poor's Ratings Group.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation, the provisions of this Credit Agreement and the
other Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
SS.14.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT.
Each Bank hereby agrees that, upon learning of the existence of a Default
or an Event of Default, it shall promptly notify the Agent thereof. The Agent
hereby agrees that upon receipt of any notice under this ss.14.10 it shall
promptly notify the other Banks of the existence of such Default or Event of
Default.
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SS.14.11. DUTIES IN THE CASE OF ENFORCEMENT.
In case one of more Events of Default have occurred and shall be
continuing, and whether or not acceleration of the Obligations shall have
occurred, the Agent shall, if (i) so requested by the Majority Banks and (ii)
the Banks have provided to the Agent such additional indemnities and assurances
against expenses and liabilities as the Agent may reasonably request, proceed to
enforce the provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any such
other legal and equitable and other rights or remedies as it may have in respect
of such Collateral. The Majority Banks may direct the Agent in writing as to the
method and the extent of any such sale or other disposition, the Banks hereby
agreeing to indemnify and hold the Agent, harmless from all liabilities incurred
in respect of all actions taken or omitted in accordance with such directions,
provided that the Agent need not comply with any such direction to the extent
that the Agent reasonably believes the Agent's compliance with such direction to
be unlawful in any applicable jurisdiction.
SS.14.12. DUTIES OF DOCUMENTATION AGENT AND CO-AGENTS.
The Documentation Agent and Co-Agents as such shall have no duties or
responsibilities to the Borrowers, the Banks or the Agent hereunder.
SS.15. EXPENSES AND INDEMNIFICATION.
SS.15.1. EXPENSES.
Whether or not the transactions contemplated herein shall be consummated,
the Borrowers jointly and severally agree to pay (i) the reasonable costs of
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (ii) any taxes (including
any interest and penalties in respect thereto) payable by either Bank Agent or
any of the Banks (other than taxes based upon such Bank Agent's or any Bank's
net income) on or with respect to the transactions contemplated by this Credit
Agreement (the Borrowers hereby agreeing to indemnify the Agent and each Bank
with respect thereto), (iii) the reasonable fees, expenses and disbursements of
counsel to each Bank Agent incurred in connection with the preparation,
syndication, administration or interpretation of the Loan Documents and other
instruments mentioned herein, each closing hereunder, any amendments,
modifications, approvals, consents or waivers hereto or hereunder, or the
cancellation of any Loan Document upon payment in full in cash of all of the
Obligations or pursuant to any terms of such Loan Document providing for such
cancellation, (iv) the fees, expenses and disbursements of each Bank Agent, the
Arranger, or any of their affiliates incurred by each Bank Agent, the Arranger,
or such affiliate in connection with the preparation, syndication,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, including all appraisal charges, (v) all reasonable
out-of-pocket expenses (including without limitation reasonable attorneys' fees
and costs, other than attorneys which are employees of any Bank or either Bank
Agent, and
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reasonable consulting, accounting, appraisal, investment banking and similar
professional fees and charges) incurred by any Bank or either Bank Agent in
connection with (A) the enforcement of or preservation of rights under any of
the Loan Documents against any Borrower or the administration thereof after the
occurrence of a Default or Event of Default and (B) any litigation, proceeding
or dispute whether arising hereunder or otherwise, in any way related to any
Bank's or either Bank Agent's relationship with any Borrower and (vi) all
reasonable fees, expenses and disbursements of the Agent incurred in connection
with UCC searches and UCC filings.
SS.15.2. INDEMNIFICATION.
The Borrowers agree to indemnify and hold harmless the Bank Agents, their
affiliates, the Arranger and the Banks from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and expenses of every nature and character
arising out of this Credit Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (i) any actual
or proposed use by the Borrowers of the proceeds of any of the Loans or Letters
of Credit, (ii) the Borrowers entering into or performing this Credit Agreement
or any of the other Loan Documents or (iii) with respect to the Borrowers and
their respective properties and assets, the violation of any Environmental Law,
the presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threatened release of any Hazardous Substances or any action, suit,
proceeding or investigation brought or threatened with respect to any Hazardous
Substances (including, but not limited to, claims with respect to wrongful
death, personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel (excluding the
allocated costs of internal counsel) incurred in connection with any such
investigation, litigation or other proceeding except for claims, actions, suits,
liabilities, losses, damages and expenses arising from the gross negligence or
willful misconduct of such Bank Agent, such affiliate or such Bank. In
litigation, or the preparation therefor, the Banks, the Bank Agents, the
Arranger and their affiliates shall be entitled to select their own counsel and,
in addition to the foregoing indemnity, the Borrowers agree to pay promptly the
reasonable fees and expenses of such counsel for each Bank and Bank Agent. If,
and to the extent that the obligations of the Borrowers under this ss.15.2 are
unenforceable for any reason, the Borrowers hereby agree to make the maximum
contribution to the payment in satisfaction of such obligations which is
permissible under applicable law.
SS.15.3. SURVIVAL.
The covenants contained in this ss.15 shall survive payment or satisfaction
in full of all other Obligations.
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SS.16. SURVIVAL OF COVENANTS, ETC.
Unless otherwise stated herein, all covenants, agreements, representations
and warranties made herein, in the Notes, in the other Loan Documents or in any
documents or other papers delivered by or on behalf of the Borrowers pursuant
hereto shall be deemed to have been relied upon by the Banks and the Agent,
notwithstanding any investigation heretofore or hereafter made by any of them,
and shall survive the making by the Banks of the Loans and the issuance,
extension or renewal of any Letters of Credit, as herein contemplated, and shall
continue in full force and effect so long as any amount due under this Credit
Agreement, any Letter of Credit or the Notes remains outstanding and unpaid or
any Bank has any obligation to make any Loans or the Agent has any obligation to
issue any Letters of Credit hereunder. All statements contained in any
certificate or other paper delivered by or on behalf of the Borrowers pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrowers hereunder.
SS.17. ASSIGNMENT AND PARTICIPATION.
SS.17.1. CONDITIONS TO ASSIGNMENT BY BANKS.
Except as provided herein, each Bank may assign to one or more Eligible
Assignees all or a portion of its interests, rights and obligations under this
Credit Agreement (including all or a portion of its Commitment Percentage and
Commitment and the same portion of the Loans at the time owing to it, the Notes
held by it and its participating interest in the risk relating to any Letters of
Credit or Swing Line Loans); provided that (i) each of the Agent and, unless a
Default or Event of Default shall have occurred and be continuing, the Parent
(as the representative of the Borrowers) shall have given its prior written
consent to such assignment, which consent, in the case of the Parent, will not
be unreasonably withheld, (ii) each such assignment shall be of a constant, and
not a varying, percentage of all the assigning Bank's rights and obligations
under this Credit Agreement, (iii) each assignment shall be in a minimum amount
that is $5,000,000 or greater, or the entire Commitment of such Bank and (iv)
the parties to such assignment shall execute and deliver to the Agent, for
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of Exhibit D hereto (an "Assignment and
Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder,
and (ii) the assigning Bank shall, to the extent provided in such assignment and
upon payment to the Agent of the registration fee referred to in ss.17.3, be
released from its obligations under this Credit Agreement.
SS.17.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS.
By executing and delivering an Assignment and Acceptance, the parties to
the assignment thereunder confirm to and agree with each other and the other
parties hereto as follows:
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(a) other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of any
adverse claim, the assigning Bank makes no representation or warranty, express
or implied, and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Credit
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the other Loan Documents or any
other instrument or document furnished pursuant hereto or the attachment,
perfection or priority of any security interest or mortgage,
(b) the assigning Bank makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrowers or any
other Person primarily or secondarily liable in respect of any of the
Obligations, or the performance or observance by the Borrowers or any other
Person primarily or secondarily liable in respect of any of the Obligations of
any of their obligations under this Credit Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements referred
to in ss.6.4 and ss.7.4 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Credit Agreement;
(e) such assignee represents and warrants that it is an Eligible Assignee;
(f) such assignee appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Credit Agreement and
the other Loan Documents as are delegated to the Agent by the terms hereof or
thereof, together with such powers as are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Credit Agreement are
required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally authorized to
enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements with the
assigning Bank satisfactory to such assignee with respect to its pro rata share
of Letter of Credit Fees in respect of outstanding Letters of Credit.
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SS.17.3. REGISTER.
The Agent shall maintain a copy of each Assignment and Acceptance delivered
to it and a register or similar list (the "Register") for the recordation of the
names and addresses of the Banks and the Commitment Percentage of, and principal
amount of the Loans owing to and Letter of Credit Participations purchased by,
the Banks from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrowers, the Agent and the Banks may
treat each Person whose name is recorded in the Register as a Bank hereunder for
all purposes of this Credit Agreement. The Register shall be available for
inspection by the Borrowers and the Banks at any reasonable time and from time
to time upon reasonable prior notice. Upon each such recordation, the assigning
Bank (or, in the case that the assignee bank is a Replacement Bank, the
Replacement Bank) agrees to pay to the Agent a registration fee in the sum of
$3,500.
SS.17.4. NEW NOTES.
Upon its receipt of an Assignment and Acceptance executed by the parties to
such assignment, together with each Note subject to such assignment, the Agent
shall (i) record the information contained therein in the Register, and (ii)
give prompt notice thereof to the Borrower and the Banks (other than the
assigning Bank). Within five (5) Business Days after receipt of such notice, the
Borrowers, at their own expense, shall execute and deliver to the Agent, in
exchange for each surrendered Note, a new Note or Notes to the order of such
Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note or Notes to
the order of the assigning Bank in an amount equal to the amount retained by it
hereunder. Such new Note or Notes shall provide that they are replacements for
the surrendered Notes, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Notes, shall be dated the
effective date of such in Assignment and Acceptance and shall otherwise be
substantially the form of the assigned Note or Notes. Within five (5) days of
issuance of any new Notes pursuant to this ss.17.4, if requested by the assignor
or assignee Bank, the Borrowers shall deliver an opinion of counsel, addressed
to the Banks and the Agent, relating to the due authorization, execution and
delivery of such new Note or Notes and the legality, validity and binding effect
thereof, in form and substance satisfactory to the Banks. The surrendered Notes
shall be cancelled and returned to the Borrowers.
SS.17.5. PARTICIPATIONS.
Each Bank may sell participations to one or more banks or other entities in
all or a portion of such Bank's rights and obligations under this Credit
Agreement and the other Loan Documents; provided that (i) each such
participation shall be in an amount of not less than $5,000,000, (ii) any such
sale or participation shall not affect the rights and duties of the selling Bank
hereunder to the Borrowers and (iii) the only rights granted to the participant
pursuant to such participation arrangements with respect to waivers, amendments
or
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modifications of the Loan Documents shall be the rights to approve waivers,
amendments or modifications that would reduce the principal of or the interest
rate on any Loans, extend the term or increase the amount of the Commitment of
such Bank as it relates to such participant, reduce the amount of any fees to
which such participant is entitled or extend any regularly scheduled payment
date for principal or interest.
SS.17.6. DISCLOSURE.
Each Borrower agrees that in addition to disclosures made in accordance
with standard and customary banking practices any Bank may disclose information
obtained by such Bank pursuant to this Credit Agreement to assignees or
participants and potential assignees or participants hereunder; provided that
such assignees or participants or potential assignees or participants shall
agree (i) to treat in confidence such information unless such information
otherwise becomes public knowledge, (ii) not to disclose such information to a
third party, except as required by law or legal process and (iii) not to make
use of such information for purposes of transactions unrelated to such
contemplated assignment or participation.
SS.17.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH A BORROWER.
If any assignee Bank is an Affiliate of any Borrower, then any such
assignee Bank shall have no right to vote as a Bank hereunder or under any of
the other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or other modifications to any of the Loan
Documents or for purposes of making requests to the Agent pursuant to ss.12.1 or
ss.12.2, and the determination of the Majority Banks shall for all purposes of
this Credit Agreement and the other Loan Documents be made without regard to
such assignee Bank's interest in any of the Loans or Reimbursement Obligations.
If any Bank sells a participating interest in any of the Loans or Reimbursement
Obligations to a participant, and such participant is a Borrower or an Affiliate
of a Borrower, then such transferor Bank shall promptly notify the Agent of the
sale of such participation. A transferor Bank shall have no right to vote as a
Bank hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the Agent
pursuant to ss.12.1 or ss.12.2 to the extent that such participation is
beneficially owned by a Borrower or any Affiliate of a Borrower, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to the interest of
such transferor Bank in the Loans or Reimbursement Obligations to the extent of
such participation.
SS.17.8. MISCELLANEOUS ASSIGNMENT PROVISIONS.
Any assigning Bank shall retain its rights to be indemnified pursuant to
ss.17 with respect to any claims or actions arising prior to the date of such
assignment. If any assignee Bank is not incorporated under the laws of the
United States of America or any state thereof, it shall, prior to the date on
which any interest or fees are payable hereunder or under any of
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the other Loan Documents for its account, deliver to the Borrower and the Agent
certification as to its exemption from deduction or withholding of any United
States federal income taxes. Anything contained in this ss.17 to the contrary
notwithstanding, any Bank may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Notes) to (a) any of the twelve Federal Reserve Banks organized under ss.4
of the Federal Reserve Act, 12 U.S.C. ss.341 or (b) to a lender or such bank (or
trustee therefor) in connection with a bona fide financing. No such pledge or
the enforcement thereof shall release the pledgor Bank from its obligations
hereunder or under any of the other Loan Documents, provide any voting rights
hereunder to the pledgee thereof, or affect any rights or obligations of the
Borrowers or the Agent hereunder. Notwithstanding any contained herein to the
contrary, no assignment or participation shall operate to increase the Total
Commitment hereunder or otherwise alter the substantive terms of this Credit
Agreement, except as contemplated under ss.2.2.2.
SS.17.9. ASSIGNMENT BY BORROWERS.
None of the Borrowers shall assign or transfer any of its rights or
obligations under any of the Loan Documents without the prior written consent of
each of the Banks.
SS.18. PARTIES IN INTEREST.
All the terms of this Credit Agreement and the other Loan Documents shall
be binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto and thereto.
SS.19. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the other Loan Documents shall be in writing and shall be
delivered in hand, mailed by United States first-class mail, postage prepaid, or
sent by telegraph, telecopy, telex or facsimile and confirmed by delivery via
courier or postal service, addressed as follows:
(a) if to the Borrowers, at NationsRent Inc., 450 E. Los Olas Blvd.,
Suite 1400, Ft. Lauderdale, Florida 33301, Attention: Gene J. Ostrow, Executive
Vice President, telephone number (954)- 760-6550, fax number (954)-760-6565;
(b) if to the Agent or BKB, at 100 Federal Street, Boston,
Massachusetts 02110, Attention: Timothy M. Laurion, Director, telephone number
617-434-9689, telecopy number 617-434-2160; and
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(c) if to any Bank, at such Bank's address set forth on Schedule 1
hereto;
or, in each case, such other address for notice as shall have last been
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (a) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile,
(b) if sent by registered or certified first-class mail, postage prepaid, five
Business Days after the posting thereof, and (c) if sent by telex or cable, at
the time of the dispatch thereof, if in normal business hours in the country of
receipt, or otherwise at the opening of business on the following Business Day.
SS.20. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
SS.20.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY.
Each Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to the
Borrowers, in connection with this Credit Agreement or otherwise, by a Section
20 Subsidiary. Each Borrower hereby authorizes (a) such Section 20 Subsidiary to
share with the Agent and each Bank any information delivered to such Section 20
Subsidiary by such Borrower, and (b) the Agent and each Bank to share with such
Section 20 Subsidiary any information delivered to the Agent or such Bank by the
Borrowers pursuant to this Credit Agreement, or in connection with the decision
of such Bank to enter into this Credit Agreement; it being understood, in each
case, that any such Section 20 Subsidiary receiving such information shall be
bound by the confidentiality provisions of this Credit Agreement. Such
authorization shall survive the payment and satisfaction in full of all of the
Obligations.
SS.20.2. CONFIDENTIALITY.
Each of the Banks and the Agent agrees, on behalf of itself and each of
their affiliates, directors, officers, employees and representatives, to use
reasonable precautions to keep confidential, in accordance with their customary
procedures for handling confidential information of the same nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by the Borrowers pursuant to this Credit Agreement unless such
information is identified by such Person as not being confidential at the time
the same is delivered to the Banks or the Agent, provided that nothing herein
shall limit the disclosure of any such information (a) after such information
shall have become public other than through a violation of this ss.20, (b) to
the extent required by statute, rule, regulation or judicial process, (c) to
counsel for any of the Banks or the Agent, (d) to bank examiners or any other
regulatory authority having jurisdiction over any Bank or the Agent, or to
auditors or accountants, (e) to the Agent, any Bank or any Section 20
Subsidiary, (f) in connection with any litigation to which any one or more of
the Banks, the Agent or any Section 20 Subsidiary is a party, or in connection
with the enforcement of rights or remedies hereunder or under any other Loan
Document, (g) to a subsidiary or affiliate of such Bank or (h) to any
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assignee or participant (or prospective assignee or participant) so long as such
assignee or participant agrees to be bound by the provisions of this ss.20.
SS.20.3. PRIOR NOTIFICATION.
Unless specifically prohibited by applicable law or court order, each of
the Banks and the Agent shall, prior to disclosure thereof, notify the Borrowers
of any request for disclosure of any such non-public information by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Bank by such
governmental agency) or pursuant to legal process.
SS.20.4. OTHER.
In no event shall any Bank or the Agent be obligated or required to return
any materials furnished to it or any Section 20 Subsidiary by the Borrowers. The
obligations of each Bank under this ss.20 shall supersede and replace the
obligations of such Bank under any confidentiality letter in respect of this
financing signed and delivered by such Bank to the Borrowers prior to the date
hereof and shall be binding upon any assignee of, or purchaser of any
participation in, any interest in any of the Loans or Reimbursement Obligations
from any Bank.
SS.21. MISCELLANEOUS.
The rights and remedies herein expressed are cumulative and not exclusive
of any other rights which the Banks or Agent would otherwise have. The captions
in this Credit Agreement are for convenience of reference only and shall not
define or limit the provisions hereof. This Credit Agreement and any amendment
hereof may be executed in several counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one instrument. In proving this
Credit Agreement it shall not be necessary to produce or account for more than
one such counterpart signed by the party against whom enforcement is sought.
SS.22. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
ss.26. No waiver shall extend to or affect any obligation not expressly waived
or impair any right consequent thereon. No course of dealing or omission on the
part of the Agent or any Bank in exercising any right shall operate as a waiver
thereof or otherwise be prejudicial thereto. No notice to or demand upon the
Borrowers shall entitle the Borrowers to other or further notice or demand in
similar or other circumstances.
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SS.23. WAIVER OF JURY TRIAL.
EACH BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS CREDIT
AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH BORROWER HEREBY WAIVES ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING
SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWERS (A) CERTIFY
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGE THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS
CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE A PARTY BECAUSE
OF, AMONG OTHER THINGS, THE BORROWERS' WAIVERS AND CERTIFICATIONS CONTAINED
HEREIN.
SS.24. GOVERNING LAW.
This Credit Agreement and each of the other Loan Documents are contracts
under the laws of the Commonwealth of Massachusetts and shall for all purposes
be construed in accordance with and governed by the laws of said commonwealth
(excluding the laws applicable to conflicts or choice of law). The Borrowers
consent to the jurisdiction of any of the federal or state courts located in the
Commonwealth of Massachusetts in connection with any suit to enforce the rights
of any Bank or the Agent under this Credit Agreement or any of the other Loan
Documents.
SS.25. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.
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SS.26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any consent or approval required or permitted by this Credit Agreement to
be given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrowers of any terms
of this Credit Agreement, the other Loan Documents or such other instrument or
the continuance of any Default or Event of Default may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Borrowers and the written
consent of the Majority Banks, provided however, that the Agent may, in its
reasonable discretion, release Collateral with an aggregate value of $500,000 or
less in any calendar year (in addition to Collateral released pursuant to
ss.7.4.2) provided that the Agent shall promptly thereafter notify the Banks
regarding the reasons for such release. Notwithstanding the foregoing, no
amendment, waiver or consent shall do any of the following unless in writing and
signed by the Borrowers and each of the Banks affected thereby: (a) increase the
Commitments of the Banks or subject any Bank to any additional obligations
(other than in accordance with ss.2.2.2 hereof), or (b) reduce the principal of
or the rate of interest on the Notes (including, without limitation, the default
interest rate) or any fees payable hereunder; and FURTHER, no amendment, waiver
or consent shall do any of the following unless in writing and signed by ALL of
the Banks: (c) postpone the Maturity Date or any date fixed for any payment in
respect of principal or interest (including, without limitation, the default
interest rate) on the Notes, (d) change the definition of "Majority Banks" or
the number of Banks which shall be required for the Banks or any of them to take
any action under the Loan Documents; (e) amend ss.2.2.2 or this ss.26; (f)
release any Collateral with an aggregate value exceeding $500,000 (in addition
to Collateral released pursuant to ss.7.4.2) in any calendar year or (g) release
any Borrower from its obligations hereunder; and FURTHER, no amendment, waiver
or consent shall do any of the following unless in writing and signed by the
Agent: (h) amend the amount of the Agent's fee or Issuance Fees payable for the
Agent's account or (i) amend ss.14; and further, no amendment, waiver or consent
shall amend ss.2.8 or any other provisions relating to the Swing Line Loans
unless in writing and signed by BKB.
No waiver shall extend to or affect any obligation not expressly waived or
impair any right consequent thereon. No course of dealing or delay or omission
on the part of the Agent or any Bank in exercising any right shall operate as a
waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon
the Borrowers shall entitle the Borrowers to other or further notice or demand
in similar or other circumstances.
SS.27. TRANSITIONAL ARRANGEMENTS.
SS.27.1. PRIOR LOAN AGREEMENT SUPERSEDED.
This Credit Agreement shall supersede the Prior Credit Agreement in
its entirety, except as provided in this ss.27. On the Closing Date, the rights
and obligations of the parties under the Prior Credit Agreement and the
"Revolving Credit Notes" as defined therein shall be subsumed within and be
governed by this Credit Agreement and the Revolving Credit
-87-
<PAGE> 88
Notes; provided, however, that each of the "Loans" (as defined in the Prior
Credit Agreement) outstanding under the Prior Credit Agreement on the Closing
Date shall, for purposes of this Credit Agreement, be included as Revolving
Credit Loans (as defined herein).
SS.27.2. RETURN AND CANCELLATION OF NOTES.
Upon its receipt of the Notes to be delivered hereunder on the Closing
Date, each Bank will promptly return to the Borrowers, marked "Canceled", the
Revolving Credit Notes of the Borrowers held by such Bank pursuant to the Prior
Credit Agreement, if any.
SS.27.3. INTEREST AND FEES UNDER SUPERSEDED AGREEMENT.
All interest and all commitment, facility and other fees and expenses
owing or accruing under or in respect of the Prior Credit Agreement shall be
calculated as of the Closing Date (prorated in the case of any fractional
periods), and shall be paid on the dates and in accordance with the method
specified in the Prior Credit Agreement, as if the Prior Credit Agreement were
still in effect.
SS.27.4. INTERBANK SETTLEMENTS.
On the Closing Date, each of the Banks shall pay to each of the other
Banks such amounts as may be necessary so as to result in the outstanding amount
of Loans made by each Bank being equal to such Bank's Commitment Percentage of
the aggregate amount of Loans outstanding as of the Closing Date. The Borrowers
and the Banks hereby agree that all amounts paid to any Bank by any other Bank
in connection with interbank settlements with respect to Loans outstanding
immediately prior to the date hereof shall be deemed to constitute Loans under
the Credit Agreement.
[Signature Pages Follow]
-88-
<PAGE> 89
IN WITNESS WHEREOF, each of the undersigned have duly executed this Credit
Agreement under seal as of the date first set forth above.
THE BORROWERS:
NATIONSRENT, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Vice President, Secretary and Treasurer
SAM'S EQUIPMENT RENTAL, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
GABRIEL TRAILER MANUFACTURING
COMPANY, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
NATIONSRENT OF KENTUCKY, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
-1-
<PAGE> 90
NATIONSRENT OF OHIO, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
NATIONSRENT OF INDIANA, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
NATIONSRENT OF WEST VIRGINIA, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
TITAN RENTALS, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
<PAGE> 91
NATIONSRENT OF FLORIDA, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
THE BODE-FINN COMPANY
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Assistant Treasurer
A-ACTION RENTAL, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Vice President, Secretary and Treasurer
RAYMOND EQUIPMENT CO.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Vice President, Secretary and Treasurer
NATIONSRENT OF TEXAS, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
<PAGE> 92
THE BANKS:
BANKBOSTON, N.A.,
individually and as Agent
By: /s/ Timothy M. Laurion
-----------------------------------------------
Timothy M. Laurion, Director
LASALLE NATIONAL BANK,
individually and as Documentation Agent
By: /s/ David Knapp
-----------------------------------------------
Name: David Knapp
Title: Vice President
THE FIFTH THIRD BANK OF COLUMBUS
By: /s/ Stephen S. Brooks
-----------------------------------------------
Name: Stephen S. Brooks
Title: Vice President
THE PROVIDENT BANK
By: /s/ Donald U. Luthman
-----------------------------------------------
Name: Donald U. Luthman
Title: Senior Vice President
NATIONSBANK, N.A.
By: /s/ Michael Cooney
-----------------------------------------------
Name: Michael Cooney
Title: Vice President
<PAGE> 93
FLEET BANK, N.A.
By: /s/ Christopher Mayrose
-----------------------------------------------
Name: Christopher Mayrose
Title: Vice President
HUNTINGTON NATIONAL BANK
By: /s/ Nancy Cracolice
-----------------------------------------------
Name: Nancy Cracolice
Title: Vice President
COMERICA BANK
By: /s/ Dan M. Roman
-----------------------------------------------
Name: Dan M. Roman
Title: Vice President
NATIONAL CITY BANK
By: /s/ Andrew J. Walshaw
-----------------------------------------------
Name: Andrew J. Walshaw
Title: Vice President
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLAND BRANCHES
By: /s/ Jean M. Hannigan
-----------------------------------------------
Name: Jean M. Hannigan
Title: Vice President
By: /s/ Susan L. Pearson
-----------------------------------------------
Name: Susan L. Pearson
Title: Director
<PAGE> 94
FIRST UNION NATIONAL BANK
By: /s/ Jorge Gonzales
-----------------------------------------------
Name: Jorge Gonzales
Title: Senior Vice President
<PAGE> 1
EXHIBIT 4.3
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of March 18, 1998, between NATIONSRENT,
INC., a Delaware corporation (the "Parent") and its Subsidiaries (each a
"Borrower" and collectively, the "Borrowers"), and BANKBOSTON, N.A., a national
banking association, as administrative agent (hereinafter, in such capacity, the
"Agent") for itself and other banking institutions (hereinafter, collectively,
the "Banks"), which are or may become parties to a Revolving Credit Agreement
dated as of March 18, 1998 (as amended and in effect from time to time, the
"Credit Agreement"), among the Borrowers, the Banks, the Agent and LaSalle
National Bank, as documentation agent (the "Documentation Agent").
WHEREAS, it is a condition precedent to the Banks' making any Loans,
and the Agent's issuing Letters of Credit for the account of, to the Borrowers
under the Credit Agreement that each of the Borrowers execute and deliver to the
Agent, for the benefit of the Banks and the Agent, a security agreement in
substantially the form hereof; and
WHEREAS, each of the Borrowers wishes to grant security interests in
favor of the Agent, for the benefit of the Banks and the Agent, as herein
provided;
NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
All capitalized terms used herein without definitions shall have the
respective meanings provided therefor in the Credit Agreement. All terms defined
in the Uniform Commercial Code of the Commonwealth of Massachusetts and used
herein shall have the same definitions herein as specified therein. "Motor
Vehicle Equipment" shall mean all trucks, trailers, automobiles, tires and all
related equipment and accessions with respect to which any Borrower now or
hereafter has full and unencumbered title, except for Permitted Liens.
2. GRANT OF SECURITY INTEREST.
2.1. COLLATERAL GRANTED.
Each of the Borrowers hereby grants to the Agent, for the
benefit of the Banks and the Agent, to secure the payment and
performance in full of all of the Obligations, a security interest in
and so pledges and collaterally assigns to the Agent, for the benefit
of the Banks and the Agent, the following properties, assets and rights
of such Borrower, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof (all of the
same being hereinafter called the "Collateral"):
All personal and fixture property of every kind and
nature including without limitation all furniture, fixtures,
equipment (including all titled or
<PAGE> 2
registered equipment and rental equipment), raw materials,
motor vehicles, trucks, trailers, tractors, cranes, and all
related equipment, parts and accessions and additions with
respect thereto, inventory, other goods, accounts, contract
rights, rights to the payment of money, insurance refund
claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents, instruments, securities and
other investment property, deposit accounts and all general
intangibles including, without limitation, all tax refund
claims, license fees, patents, patent applications,
trademarks, trademark applications, trade names, copyrights,
copyright applications, rights to sue and recover for past
infringement of patents, trademarks and copyrights, computer
programs, computer software, engineering drawings, service
marks, customer lists, goodwill, and all licenses, permits,
agreements of any kind or nature pursuant to which such
Borrower possesses, uses or has authority to possess or use
property (whether tangible or intangible) of others or others
possess, use or have authority to possess or use property
(whether tangible or intangible) of such Borrower, and all
recorded data of any kind or nature, regardless of the medium
of recording including, without limitation, all software,
writings, plans, specifications and schematics.
2.2. DELIVERY OF INSTRUMENTS, ETC.
(a) Pursuant to the terms hereof, each of the
Borrowers has endorsed, assigned and delivered to the Agent
all negotiable or non-negotiable instruments (including
certificated securities) and chattel paper pledged by it
hereunder, together with instruments of transfer or assignment
duly executed in blank as the Agent may have specified. In the
event that any of the Borrowers shall, after the date of this
Security Agreement, acquire any other negotiable or
non-negotiable instruments (including certificated securities)
or chattel paper to be pledged by it hereunder, such Borrower
shall forthwith endorse, assign and deliver the same to the
Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as the Agent may from time
to time specify. The Agent agrees with each of the Borrowers
that the Agent shall not take any actions with respect to such
instruments and chattel paper unless a Default or an Event of
Default has occurred and is continuing and the Agent has
elected to exercise its rights and remedies as contemplated by
ss.15.
(b) To the extent that any securities now or
hereafter acquired by any of the Borrowers are uncertificated
and are issued to such Borrower or its nominee directly by the
issuer thereof, such Borrower shall cause the issuer to note
on its books the security interest of the Agent in such
securities and shall cause the issuer, pursuant to an
agreement in form and substance satisfactory to the Agent, to
agree to comply with instructions from the Agent as to such
securities, without further consent of such Borrower or such
nominee. To the extent that any securities, whether
certificated or uncertificated, or other financial assets
<PAGE> 3
now or hereafter acquired by any of the Borrower are held by
such Borrower or its nominee through a securities
intermediary, such Company shall (i) cause such securities
intermediary to note on its books the security interest of the
Agent in such securities or other financial assets and to
confirm such notation promptly to the Agent and (ii), at the
request of the Agent, cause such securities intermediary,
pursuant to an agreement in form and substance satisfactory to
the Agent, to agree to comply with entitlement orders or other
instructions from the Agent as to such securities or other
financial assets, without further consent of such Borrower or
such nominee. The Agent agrees with each of the Borrowers that
the Agent shall not give any such entitlement orders or
instructions to any such issuer or securities intermediary
unless a Default or an Event of Default has occurred and is
continuing and the Agent has elected to exercise its rights
and remedies as contemplated by ss.15.
2.3. EXCLUDED COLLATERAL.
Notwithstanding the foregoing provisions of this ss.2, such
grant of security interest shall not extend to, and the term
"Collateral" shall not include, any chattel paper and general
intangibles which are now or hereafter held by any of the Borrowers as
licensee, lessee or otherwise, to the extent that (i) such chattel
paper and general intangibles are not assignable or capable of being
encumbered as a matter of law or under the terms of the license, lease
or other agreement applicable thereto (but solely to the extent that
any such restriction shall be enforceable under applicable law),
without the consent of the licensor or lessor thereof or other
applicable party thereto and (ii) such consent has not been obtained;
provided, however, that the foregoing grant of security interest shall
extend to, and the term "Collateral" shall include, (A) any and all
proceeds of such chattel paper and general intangibles to the extent
that the assignment or encumbering of such proceeds is not so
restricted and (B) upon any such licensor, lessor or other applicable
party consent with respect to any such otherwise excluded chattel paper
or general intangibles being obtained, thereafter such chattel paper or
general intangibles as well as any and all proceeds thereof that might
have theretofore have been excluded from such grant of a security
interest and the term "Collateral".
2.4. STOCK PLEDGE AGREEMENT.
Concurrently herewith the Parent is executing and delivering
to the Agent, for the benefit of the Banks and the Agent, a stock
pledge agreement pursuant to which the Parent is pledging to the Agent,
for the benefit of the Banks and the Agent, all the shares of the
capital stock of each of its Subsidiaries. Such pledge shall be
governed by the terms of such stock pledge agreement and not by the
terms of this Security Agreement.
<PAGE> 4
3. TITLE TO COLLATERAL, ETC.
Each of the Borrowers is the owner of the Collateral free from any
adverse lien, security interest or other encumbrance, except for the security
interest created by this Security Agreement and other liens permitted by the
Credit Agreement. None of the Collateral constitutes, or is the proceeds of,
"farm products" as defined in ss.9-109(3) of the Uniform Commercial Code of the
Commonwealth of Massachusetts. None of the account debtors in respect of any
accounts, chattel paper or general intangibles and none of the obligors in
respect of any instruments included in the Collateral is a governmental
authority subject to the Federal Assignment of Claims Act.
4. CONTINUOUS PERFECTION - IN GENERAL.
Each Borrower's place of business or, if more than one, chief executive
office is indicated on the Perfection Certificate delivered by each Borrower to
the Agent herewith (the "Perfection Certificates"). None of the Borrowers will
change the same, or the name, identity or corporate structure of such Borrower
in any manner, without providing at least thirty (30) days prior written notice
to the Agent. The Collateral, other than Motor Vehicle Equipment, to the extent
not delivered to the Agent pursuant to ss.2.2, except under rental arrangements
in the ordinary course of business, will be kept at those locations listed on
the Perfection Certificates and none of the Borrowers will remove the Collateral
from such locations, without providing at least thirty (30) days prior written
notice to the Agent.
5. PERFECTION - MOTOR VEHICLE EQUIPMENT.
(a) On The Closing Date. If required under ss.6.19 of the Credit
Agreement, each item of Collateral the ownership of, or title to, which is
evidenced by a motor vehicle or other certificate of title statute (the "Titled
Equipment"), the jurisdiction in which each such item of Titled Equipment is
registered or titled, and the vehicle identification number, or other
appropriate serial number relating thereto, is listed on the Schedule of Titled
Equipment (the "Titled Equipment Schedule") attached to the Perfection
Certificate delivered by each Borrower to the Agent. On the Closing Date, the
Borrowers shall either (i) deliver to the Agent properly completed applications
to note the lien of the Agent on the certificates of title with respect to each
item of Titled Equipment owned by any Borrower which will evidence the lien of
the Agent in such Titled Equipment together with the originals of each such
certificate of title and provide for payment of all filing fees with respect
thereto or (ii) make appropriate electronic application(s) to note the lien of
the Agent on certificates of title (which will evidence the lien of the Agent in
such Titled Equipment) with the appropriate state registries of motor vehicles
on behalf of the Agent and provide evidence satisfactory to the Agent that
originals of such certificates of title have been delivered to such registries
of motor vehicles and that the Borrowers have paid all filing fees relating to
such applications.
(b) Covenants of the Borrowers. Each Borrower will, at all times,
except for transfers permitted pursuant to ss.6 hereof, if required under
ss.6.19 of the Credit Agreement, (i) maintain the registration and titling of
each item of Titled Equipment in the jurisdiction
<PAGE> 5
set forth with respect thereto on the applicable Perfection Certificate and (ii)
cause the lien of the on each item of Titled Equipment to be noted on the
certificate of title relating thereto. Upon the acquisition of any additional
Titled Equipment, such Borrower or such Company shall promptly, and in any event
within ten (10) days after such acquisition, (i) cause the lien of the Agent on
such Titled Equipment to be noted on the certificate of title relating thereto
and (ii) deliver to the Agent such certificate of title (which shall evidence
the lien of the Agent thereon). The Borrowers shall cause all additional Titled
Equipment to be listed on the Titled Equipment Schedule Update delivered to the
Agent pursuant to ss.6(c) hereof. Each certificate of title relating to Titled
Equipment shall be delivered by the Borrowers to the Agent at the Agent's Head
Office, Attention: Timothy M. Laurion, Environmental Division.
6. TRANSFERS OF COLLATERAL.
(a) In General. Except (i) as otherwise permitted under the Credit
Agreement and (ii) in compliance with the terms of this ss.6, if applicable,
none of the Borrowers will sell or offer to sell or otherwise transfer the
Collateral or any interest therein.
(b) Transfers of Titled Equipment. If the Banks' liens have been
noted on titled equipment pursuant to ss.6.19 of the Credit Agreement, in
connection with any sale or other transfer of Titled Equipment permitted
pursuant to ss.7.4.2 of the Credit Agreement, the applicable Borrower shall
request the Agent to release the lien of the Agent in such Titled Equipment;
provided that the Borrowers shall not take or request or cause the Agent to
take, any action to release such lien if (i) such release of lien or transfer of
Titled Equipment would not be in compliance with the terms of this Agreement or
the other Loan Documents, or (ii) after giving effect to such sale or transfer,
a Default or Event of Default shall exist under the Credit Agreement. The
proceeds from the sale of Titled Equipment shall be applied in accordance with
ss.7.4.2 of the Credit Agreement.
(c) Revised Titled Equipment Schedule. If required pursuant to
ss.6.19 of the Credit Agreement and requested by the Majority Banks, not later
than the 15th day of each calendar month, each Borrower shall deliver to the
Agent an updated Titled Equipment Schedule, listing, as of the last day of the
immediately preceding calendar month, (i) each item of Titled Equipment owned by
such Borrower, (ii) the jurisdiction in which each such item of Titled Equipment
is registered or titled, (iii) the vehicle identification number, or other
appropriate serial number relating thereto, and (iv) each item of Titled
Equipment acquired and each item of Titled Equipment sold or otherwise
transferred during such calendar month or, in the case of the updated Titled
Equipment Schedule delivered not later than March 15, 1998, since the Closing
Date.
7. NO LIENS.
Except for the security interest herein granted and liens permitted by
the Credit Agreement, the Borrowers shall be the owner of the Collateral free
from any lien, security interest or other encumbrance, and each of the Borrowers
shall defend the same against all
<PAGE> 6
material claims and demands of all persons at any time claiming the same or any
interests therein adverse to the Agent or any of the Banks. None of the
Borrowers shall pledge, mortgage or create, or suffer to exist a security
interest in the Collateral in favor of any person other than the Agent, for the
benefit of the Banks and the Agent, except for liens permitted by the Credit
Agreement.
8. INSURANCE.
8.1. MAINTENANCE OF INSURANCE.
Each of the Borrowers will maintain with financially sound and
reputable insurers insurance with respect to its properties and
business against such casualties and contingencies as shall be in
accordance with general practices of businesses engaged in similar
activities in similar geographic areas. Such insurance shall be in such
minimum amounts that such Borrower will not be deemed a co-insurer
under applicable insurance laws, regulations and policies and otherwise
shall be in such amounts, contain such terms, be in such forms and be
for such periods as may be reasonably satisfactory to the Agent. In
addition, all such insurance covering losses over $1,000,000 shall be
payable to the Agent as loss payee under a "standard" or "New York"
loss payee clause for the benefit of the Banks and the Agent and the
Agent shall be named as additional insured on all liability insurance
policies. Without limiting the foregoing, each of the Borrowers will
(i) keep all of its physical property insured with casualty or physical
hazard insurance on an "all risks" basis, with broad form flood and
earthquake coverage and electronic data processing coverage, with a
full replacement cost endorsement and an "agreed amount" clause in an
amount equal to 100% of the full replacement cost of such property,
(ii) maintain all such workers' compensation or similar insurance as
may be required by law and (iii) maintain, in amounts and with
deductibles equal to those generally maintained by businesses engaged
in similar activities in similar geographic areas, general public
liability insurance against claims of bodily injury, death or property
damage occurring, on, in or about the properties of such Borrower;
business interruption insurance; and product liability insurance.
8.2. INSURANCE PROCEEDS.
The proceeds of any casualty insurance in respect of any
casualty loss of any of the Collateral shall, subject to the rights, if
any, of other parties with a prior interest in the property covered
thereby, (i) so long as no Default or Event of Default has occurred and
is continuing and to the extent that the amount of such proceeds is
less than $1,000,000 be disbursed to the Borrower which has suffered
such loss for direct application by such Borrower solely to the repair
or replacement of such Borrower's property so damaged or destroyed and
(ii) in all other circumstances, be held by the Agent as cash
collateral for the Obligations. Upon the occurrence of an Event of
Default, the Agent may, at its sole option, disburse from time to time
all or
<PAGE> 7
any part of such proceeds so held as cash collateral, upon such terms
and conditions as the Agent may reasonably prescribe, for direct
application by the Borrowers solely to the repair or replacement of the
Borrowers property so damaged or destroyed, or the Agent may apply all
or any part of such proceeds to the Obligations with the Total
Commitment (if not then terminated) being reduced by the amount so
applied to the Obligations.
8.3. NOTICE OF CANCELLATION, ETC.
All policies of insurance shall provide for at least thirty
(30) days prior written cancellation notice to the Agent. In the event
of failure by any of the Borrowers to provide and maintain insurance as
herein provided, the Agent may, at its option, provide such insurance
and charge the amount thereof to the Borrowers. Each of the Borrowers
shall furnish the Agent with certificates of insurance and policies
evidencing compliance with the foregoing insurance provision.
9. MAINTENANCE OF COLLATERAL; COMPLIANCE WITH LAW.
Each of the Borrowers will keep the Collateral in good order and repair
in their reasonable business judgment and will not use the same in violation of
law or any policy of insurance thereon. The Agent, or its designee, may inspect
the Collateral at any reasonable time, wherever located. Each of the Borrowers
will pay promptly when due all taxes, assessments, governmental charges and
levies upon the Collateral or incurred in connection with the use or operation
of such Collateral or incurred in connection with this Security Agreement. Each
of the Borrowers has at all times operated, and such Borrower will continue to
operate, its business in compliance with all applicable provisions of the
federal Fair Labor Standards Act, as amended, and with all applicable provisions
of federal, state and local statutes and ordinances dealing with the control,
shipment, storage or disposal of hazardous materials or substances.
<PAGE> 8
10. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
10.1. EXPENSES INCURRED BY AGENT.
In its discretion, the Agent may discharge taxes and other
encumbrances at any time levied or placed on any of the Collateral,
make repairs thereto and pay any necessary filing fees. Each of the
Borrowers agrees to reimburse the Agent on demand for any and all
expenditures so made. The Agent shall have no obligation to any of the
Borrowers to make any such expenditures, nor shall the making thereof
relieve the Borrowers of any default.
10.2. AGENT'S OBLIGATIONS AND DUTIES.
Anything herein to the contrary notwithstanding, each of the
Borrowers shall remain liable under each contract or agreement
comprised in the Collateral to be observed or performed by such
Borrower thereunder. Neither the Agent nor any Bank shall have any
obligation or liability under any such contract or agreement by reason
of or arising out of this Security Agreement or the receipt by the
Agent or any Bank of any payment relating to any of the Collateral, nor
shall the Agent or any Bank be obligated in any manner to perform any
of the obligations of such Borrower under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency
of any payment received by the Agent or any Bank in respect of the
Collateral or as to the sufficiency of any performance by any party
under any such contract or agreement, to present or file any claim, to
take any action to enforce any performance or to collect the payment of
any amounts which may have been assigned to the Agent or to which the
Agent or any Bank may be entitled at any time or times. The Agent's
sole duty with respect to the custody, safe keeping and physical
preservation of the Collateral in its possession, under ss.9-207 of the
Uniform Commercial Code of the Commonwealth of Massachusetts or
otherwise, shall be to deal with such Collateral in the same manner as
the Agent deals with similar property for its own account and as
otherwise required by law.
11. SECURITIES AND DEPOSITS.
The Agent may at any time, at its option, transfer to itself or any
nominee any securities constituting Collateral, receive any income thereon and
hold such income as additional Collateral or apply it to the Obligations.
Whether or not any Obligations are due, the Agent may at any time sue for,
collect, or make any settlement or compromise which it deems desirable with
respect to the Collateral. Regardless of the adequacy of Collateral or any other
security for the Obligations, any deposits or other sums at any time credited by
or due from the Agent or any Bank to any of the Borrowers may at any time be
applied to or set off against any of the Obligations.
<PAGE> 9
12. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER OBLIGORS.
If an Event of Default shall have occurred and be continuing, each of
the Borrowers shall, at the request of the Agent, notify account debtors on
accounts, chattel paper and general intangibles of such Borrower and obligors on
instruments for which such Borrower is an obligee of the security interest of
the Agent in any account, chattel paper, general intangible or instrument and
that payment thereof is to be made directly to the Agent or to any financial
institution designated by the Agent as the Agent's agent therefor, and the Agent
may itself, if a Default or an Event of Default shall have occurred and be
continuing, without notice to or demand upon such Borrower, so notify account
debtors and obligors. After the making of such a request or the giving of any
such notification, each of the Borrowers shall hold any proceeds of collection
of accounts, chattel paper, general intangibles and instruments received by such
Borrower as trustee for the Agent, for the benefit of the Banks and the Agent,
without commingling the same with other funds of such Borrower and shall turn
the same over to the Agent in the identical form received, together with any
necessary endorsements or assignments. The Agent shall apply the proceeds of
collection of accounts, chattel paper, general intangibles and instruments
received by the Agent to the Obligations, such proceeds to be immediately
entered after final payment in cash or solvent credits of the items giving rise
to them.
13. FURTHER ASSURANCES.
Each of the Borrowers, at its own expense, shall do, make, execute and
deliver all such additional and further acts, things, deeds, assurances and
instruments as the Agent may reasonably require more completely to vest in and
assure to the Agent and the Banks their respective rights hereunder or in any of
the Collateral, including, without limitation, (i) executing, delivering and,
where appropriate, filing financing statements and continuation statements under
the Uniform Commercial Code, (ii) obtaining governmental and other third party
consents and approvals, including without limitation any consent of any
licensor, lessor or other applicable party referred to in ss.2.3, (iii)
obtaining waivers from mortgagees and landlords, and (iv) taking all actions
required by Sections 8-313 and 8-321 of the Uniform Commercial Code (1990) or
Sections 8-106 and 9-115 of the Uniform Commercial Code (1994), as applicable in
each relevant jurisdiction, with respect to certificated and uncertificated
securities.
14. POWER OF ATTORNEY.
14.1. APPOINTMENT AND POWERS OF AGENT.
Each of the Borrowers hereby irrevocably constitutes and
appoints the Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorneys-in-fact with full
irrevocable power and authority in the place and stead of such Borrower
or in the Agent's own name, for the purpose of carrying out the terms
of this Security Agreement, to take any and all appropriate action and
to execute any and all documents and instruments that may be necessary
or desirable to accomplish the purposes of this Security Agreement and
hereby gives said attorneys the power
<PAGE> 10
and right, on behalf of such Borrower, without notice to or assent by
such Borrower, to do the following:
(a) upon the occurrence and during the continuance of
a Default or an Event of Default, generally to sell, transfer,
pledge, make any agreement with respect to or otherwise deal
with any of the Collateral in such manner as is consistent
with the Uniform Commercial Code of the Commonwealth of
Massachusetts and as fully and completely as though the Agent
were the absolute owner thereof for all purposes, and to do at
such Borrower's expense, at any time, or from time to time,
all acts and things which the Agent deems necessary to
protect, preserve or realize upon the Collateral and the
Agent's security interest therein, in order to effect the
intent of this Security Agreement, all as fully and
effectively as such Borrower might do, including, without
limitation, (i) the filing and prosecuting of registration and
transfer applications with the appropriate federal or local
agencies or authorities with respect to trademarks, copyrights
and patentable inventions and processes, (ii) upon written
notice to such Borrower, the exercise of voting rights with
respect to voting securities, which rights may be exercised,
if the Agent so elects, with a view to causing the liquidation
in a commercially reasonable manner of assets of the issuer of
any such securities and (iii) the execution, delivery and
recording, in connection with any sale or other disposition of
any Collateral, of the endorsements, assignments or other
instruments of conveyance or transfer with respect to such
Collateral; and
(b) to file such financing statements with respect
hereto, with or without such Borrower's signature, or a
photocopy of this Security Agreement in substitution for a
financing statement, as the Agent may deem appropriate and to
execute in such Borrower's name such financing statements and
amendments thereto and continuation statements which may
require such Borrower's signature.
14.2. RATIFICATION BY BORROWERS.
To the extent permitted by law, each of the Borrowers hereby
ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
14.3. NO DUTY ON AGENT.
The powers conferred on the Agent hereunder are solely to
protect the interests of the Agent and the Banks in the Collateral and
shall not impose any duty upon the Agent to exercise any such powers.
The Agent shall be accountable only for the amounts that it actually
receives as a result of the exercise of such powers and neither it nor
any of its officers, directors, employees or agents shall be
responsible
<PAGE> 11
to any of the Borrowers for any act or failure to act, except for the
Agent's own gross negligence or willful misconduct.
15. REMEDIES.
If an Event of Default shall have occurred and be continuing, the Agent
may, without notice (except as otherwise provided for in the Credit Agreement)
to or demand upon any of the Borrowers, declare this Security Agreement to be in
default, and the Agent shall thereafter have in any jurisdiction in which
enforcement hereof is sought, in addition to all other rights and remedies, the
rights and remedies of a secured party under the Uniform Commercial Code,
including, without limitation, the right to take possession of the Collateral,
and for that purpose the Agent may, so far as the Borrowers can give authority
therefor, enter upon any premises on which the Collateral may be situated and
remove the same therefrom. The Agent may in its discretion require any of the
Borrowers to assemble all or any part of the Collateral at such location or
locations within the state(s) of such Borrower's principal office(s) or at such
other locations as the Agent may designate. Unless the Collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Agent shall give to the Borrowers at least ten (10)
Business Days prior written notice of the time and place of any public sale of
Collateral or of the time after which any private sale or any other intended
disposition is to be made. Each of the Borrowers hereby acknowledges that ten
(10) Business Days prior written notice of such sale or sales shall be
reasonable notice. In addition, each of the Borrowers waives any and all rights
that it may have to a judicial hearing in advance of the enforcement of any of
the Agent's rights hereunder, including, without limitation, its right following
an Event of Default to take immediate possession of the Collateral and to
exercise its rights with respect thereto.
16. NO WAIVER, ETC.
Each of the Borrowers waives demand, notice (except as otherwise
provided for in the Credit Agreement), protest, notice of acceptance of this
Security Agreement, notice of loans made, credit extended, Collateral received
or delivered or other action taken in reliance hereon and all other demands and
notices of any description. With respect to both the Obligations and the
Collateral, each of the Borrowers assents to any extension or postponement of
the time of payment or any other indulgence, to any substitution, exchange or
release of or failure to perfect any security interest in any Collateral, to the
addition or release of any party or person primarily or secondarily liable, to
the acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Agent may deem advisable. The Agent shall have no duty as to the collection or
protection of the Collateral or any income thereon, nor as to the preservation
of rights against prior parties, nor as to the preservation of any rights
pertaining thereto beyond the safe custody thereof as set forth in ss.10.2. The
Agent shall not be deemed to have waived any of its rights upon or under the
Obligations or the Collateral unless such waiver shall be in writing and signed
by the Agent with the consent of the
<PAGE> 12
Majority Banks. No delay or omission on the part of the Agent in exercising any
right shall operate as a waiver of such right or any other right. A waiver on
any one occasion shall not be construed as a bar to or waiver of any right on
any future occasion. All rights and remedies of the Agent with respect to the
Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as the
Agent deems expedient.
17. MARSHALLING.
Neither the Agent nor any Bank shall be required to marshal any present
or future collateral security (including but not limited to this Security
Agreement and the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of the rights of the
Agent hereunder and of the Agent or any Bank in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights, however existing or arising. To the extent that it lawfully
may, each of the Borrowers hereby agrees that it will not invoke any law
relating to the marshalling of collateral which might cause delay in or impede
the enforcement of the Agent's rights under this Security Agreement or under any
other instrument creating or evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, each of the Borrowers hereby irrevocably waives the benefits of
all such laws.
18. PROCEEDS OF DISPOSITIONS; EXPENSES.
The Borrowers shall pay to the Agent on demand any and all expenses,
including reasonable attorneys' fees and disbursements, incurred or paid by the
Agent in protecting, preserving or enforcing the Agent's rights under or in
respect of any of the Obligations or any of the Collateral. After deducting all
of said expenses, the residue of any proceeds of collection or sale of the
Obligations or Collateral shall, to the extent actually received in cash, be
applied to the payment of the Obligations in such order or preference as is
provided in the Credit Agreement, proper allowance and provision being made for
any Obligations not then due. Upon the final payment and satisfaction in full of
all of the Obligations and after making any payments required by Section
9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of Massachusetts,
any excess shall be returned to the Borrowers, and each of the Borrowers shall
remain liable for any deficiency in the payment of the Obligations.
19. OVERDUE AMOUNTS.
Until paid, all amounts remaining unpaid past the date on which such
amounts shall have first become due and payable by any of the Borrowers
hereunder shall be a debt secured by the Collateral and shall bear, whether
before or after judgment, interest at the rate of
<PAGE> 13
interest for overdue principal set forth in the Credit Agreement.
20. GOVERNING LAW; CONSENT TO JURISDICTION.
THIS SECURITY AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED
INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE COMMONWEALTH OF MASSACHUSETTS. Each of the Borrowers agrees that any suit
for the enforcement of this Security Agreement may be brought in the courts of
the Commonwealth of Massachusetts or any federal court sitting therein and
consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon such Borrower by mail at the address
set forth in ss.19 of the Credit Agreement. Each of the Borrowers hereby waives
any objection that it may now or hereafter have to the venue of any such suit or
any such court or that such suit is brought in an inconvenient court.
21. WAIVER OF JURY TRIAL.
EACH OF THE BORROWERS WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO
ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS SECURITY
AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH
RIGHTS OR OBLIGATIONS. Except as prohibited by law and absent gross negligence
and willful misconduct of the Agent or the Banks, each of the Borrowers waives
any right which it may have to claim or recover in any litigation referred to in
the preceding sentence any special, exemplary, punitive or consequential damages
or any damages other than, or in addition to, actual damages. Each of the
Borrowers (i) certifies that neither the Agent nor any Bank nor any
representative, agent or attorney of the Agent or any Bank has represented,
expressly or otherwise, that the Agent or any Bank would not, in the event of
litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in
entering into the Credit Agreement and the other Loan Documents to which the
Agent or any Bank is a party, the Agent and the Banks are relying upon, among
other things, the waivers and certifications contained in this ss.21.
22. MISCELLANEOUS.
The headings of each section of this Security Agreement are for
convenience only and shall not define or limit the provisions thereof. This
Security Agreement and all rights and obligations hereunder shall be binding
upon each of the Borrowers and its respective successors and assigns, and shall
inure to the benefit of the Agent, the Banks and their respective successors and
assigns. If any term of this Security Agreement shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby, and this Security Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein. Each of the Borrowers acknowledges receipt of a copy of this
Security Agreement.
<PAGE> 14
IN WITNESS WHEREOF, intending to be legally bound, each of the
Borrowers has caused this Security Agreement to be duly executed as of the date
first above written.
NATIONSRENT, INC.
SAM'S EQUIPMENT RENTAL, INC.
GABRIEL TRAILER
MANUFACTURING CO., INC.
By: /s/ Gene J. Ostrow
---------------------------------
Gene J. Ostrow, Vice President,
NATIONSRENT OF KENTUCKY, INC.
NATIONSRENT OF OHIO, INC.
NATIONSRENT OF INDIANA, INC.
NATIONSRENT OF WEST VIRGINIA,
INC.
TITAN RENTALS, INC.
By: /s/ Gene J. Ostrow
---------------------------------
Gene J. Ostrow, President
<PAGE> 15
Accepted:
BANKBOSTON, N.A.,
as Agent
By: /s/ Timothy M. Laurion
-----------------------------------
Timothy M. Laurion, Director
<PAGE> 1
EXHIBIT 4.4
OMNIBUS AMENDMENT
TO
SECURITY DOCUMENTS
OMNIBUS AMENDMENT TO SECURITY DOCUMENTS (this "Amendment") dated as of
June 29, 1998, by and among NATIONSRENT, INC. (the "Parent"), a Delaware
corporation and its Subsidiaries (collectively with the Parent, the "Borrowers"
and each a "Borrower"), and BANKBOSTON, N.A., as agent (the "Agent").
Capitalized terms used herein without definition shall have the meanings set
forth in the Amended and Restated Credit Agreement (as defined below).
WHEREAS, the Parent, the Borrowers and the Agent are parties to that
certain Security Agreement dated as of March 18, 1998 (as supplemented prior to
the date hereof and as otherwise amended, modified or supplemented and in effect
from time to time, the "Security Agreement");
WHEREAS, the Parent and the Agent are parties to that certain Stock
Pledge Agreement dated as of March 18, 1998 (as supplemented prior to the date
hereof and as otherwise amended, modified or supplemented and in effect from
time to time, the "Parent Stock Pledge Agreement");
WHEREAS, NationsRent of West Virginia, Inc. ("NR-WV") and the Agent are
parties to that certain Stock Pledge Agreement dated as of March 18, 1998 (as
amended, modified or supplemented and in effect from time to time, the "NR-WV
Stock Pledge Agreement");
WHEREAS, Gabriel Trailer Manufacturing Company ("Gabriel") and the
Agent are parties to that certain Stock Pledge Agreement dated as of March 18,
1998 (as amended, modified or supplemented and in effect from time to time, the
"Gabriel Stock Pledge Agreement");
WHEREAS, the Borrowers, BankBoston, N.A., LaSalle National Bank, The
Fifth Third Bank of Columbus, Provident Bank, NationsBank, N.A., Fleet Bank,
N.A., Huntington National Bank, Comerica Bank and National City Bank
(collectively, the "Existing Banks"), and BankBoston, N.A. as Agent for the
Banks and LaSalle National Bank as documentation agent for the Banks entered
into a Revolving Credit Agreement dated as of March 18, 1998 (the "Original
Credit Agreement");
WHEREAS, the Borrowers, the Existing Banks, certain other Banks (the
"New Banks" and together with the Existing Banks, the "Banks") and the Agent
have agreed to enter into an amendment and restatement of the Original Credit
Agreement (the "Amended and Restated Credit Agreement") dated as of the date
hereof pursuant to which, among other things, the Banks have agreed to extend
loans to the Borrowers;
WHEREAS, the effectiveness of the Amended and Restated Credit Agreement
is conditioned upon, among other things, the Borrowers and the Agent amending
certain provisions of the Security Agreement and reaffirming the continued
effectiveness of the Security Agreement;
WHEREAS, the effectiveness of the Amended and Restated Credit Agreement
is further conditioned upon, among other things, the Borrowers and the Agent
amending certain provisions of the Parent Stock Pledge Agreement and reaffirming
the continued effectiveness of the Parent Stock Pledge Agreement;
<PAGE> 2
WHEREAS, the effectiveness of the Amended and Restated Credit Agreement
is further conditioned upon, among other things, NR-WV and the Agent amending
certain provisions of the NR-WV Stock Pledge Agreement and reaffirming the
continued effectiveness of the NR-WV Stock Pledge Agreement;
WHEREAS, the effectiveness of the Amended and Restated Credit Agreement
is further conditioned upon, among other things, Gabriel and the Agent amending
certain provisions of the Gabriel Stock Pledge Agreement and reaffirming the
continued effectiveness of the Gabriel Stock Pledge Agreement;
NOW, THEREFORE, in consideration of the premises contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. AMENDMENT TO THE SECURITY DOCUMENTS. The Security Documents (as
defined in the Amended and Restated Credit Agreement) are amended to provide
that for each of the Security Documents, any and all references to the "Credit
Agreement" shall be deemed to be references to the Amended and Restated Credit
Agreement. Each of the Security Documents are hereby further amended mutatis
mutandis as appropriate to reflect the fact that the Original Credit Agreement
has been amended and restated as the Amended and Restated Credit Agreement.
2. CONFIRMATION OF SECURITY DOCUMENTS. Each of the Borrowers hereby
ratifies and confirms the Security Documents (as amended hereby) to which it is
a party and the pledges and security interests created thereby. Each of the
Borrowers hereby further ratifies and confirms that the Security Documents (as
amended hereby) to which it is a party and the pledges and security interest
created thereby secure the Obligations of the Borrowers under the Amended and
Restated Credit Agreement, the Security Documents (as amended hereby) and the
Notes.
4. CONDITIONS TO EFFECTIVENESS. This Amendment shall not become
effective unless and until the Agent receives counterparts of this Amendment and
each of the conditions set forth in ss.9 of the AmendeD and Restated Credit
Agreement have been met.
5. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. Each of the
Borrowers represents and warrants to the Agent and the Banks that (a) each and
every one of the representations and warranties made by each Borrower to the
Agent and the Banks in ss.5 or elsewhere in the Amended and Restated Credit
Agreement or in the other Loan Documents are true and correct in all material
respects; (b) each of the Borrowers has duly and properly performed, complied
with and observed each of its covenants, agreements and obligations contained in
ss.ss.6, 7 and 8 or elsewhere in the Original Credit Agreement or the other LoaN
Documents (as defined in the Original Credit Agreement); and (c) no event has
occurred or is continuing and no condition exists which constitutes a Default or
Event of Default.
6. RATIFICATION, ETC. Except as expressly amended by this
Amendment, the Security Documents and all documents, instruments and agreements
related thereto are hereby ratified and confirmed in all respects and shall
continue in full force and effect. The Security Documents (as amended hereby)
and the perfected first priority security interests of the Agent on behalf of
the Banks thereunder shall continue in full force and effect, and the collateral
security and guaranties provided for in the Security Documents shall not be
impaired by this Amendment.
<PAGE> 3
7. MISCELLANEOUS. Nothing contained herein shall constitute a
waiver of, impair or otherwise affect any Obligations, any other obligation of
any Borrower or any rights of the Agent or any of the Banks consequent thereon.
This Amendment may be executed in one or more counterparts, each of which shall
be deemed an original but which together shall constitute one and the same
instrument. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute part of this Amendment
for any other purpose. This Amendment shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts (without
reference to conflict of laws).
IN WITNESS WHEREOF, the Borrowers and the Agent have duly
executed this Amendment as a sealed instrument as of the date first above
written.
BANKBOSTON, N.A., as Agent
By: /s/ Timothy M. Laurion
-----------------------------------------------
Timothy M. Laurion, Director
NATIONSRENT, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Vice President, Secretary and Treasurer
SAM'S EQUIPMENT RENTAL, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
GABRIEL TRAILER MANUFACTURING COMPANY,
INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
NATIONSRENT OF KENTUCKY, INC.
By: /s/ Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
<PAGE> 4
NATIONSRENT OF OHIO, INC.
By: Pamela K. M. Beall
-------------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
NATIONSRENT OF INDIANA, INC.
By: Pamela K. M. Beall
-------------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
NATIONSRENT OF WEST VIRGINIA, INC.
By: Pamela K. M. Beall
-------------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
TITAN RENTALS, INC.
By: Pamela K. M. Beall
-------------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
NATIONSRENT OF FLORIDA, INC.
By: Pamela K. M. Beall
-------------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
THE BODE-FINN COMPANY
By: Pamela K. M. Beall
-------------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
<PAGE> 5
A-ACTION RENTAL, INC.
By: Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
RAYMOND EQUIPMENT CO.
By: Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
NATIONSRENT OF TEXAS, INC.
By: Pamela K. M. Beall
-----------------------------------------------
Name: Pamela K. M. Beall
Title: Secretary and Treasurer
<PAGE> 1
EXHIBIT 4.5
JOINDER AND COMMITMENT INCREASE AGREEMENT
This Joinder and Commitment Increase Agreement (this "Joinder"), dated
as of July 15, 1998, is among BankBoston, N.A. ("BKB"), USTrust ("UST") and
Bankers Trust Company ("BT" and together with UST, "the New Banks"), the
Borrowers referred to below and BankBoston, N.A. in its capacity as
administrative agent (the "Agent") for the Banks referred to below. All
capitalized terms used herein without definitions shall have the meanings given
such terms in the Credit Agreement (as hereinafter defined).
WHEREAS, NationsRent, Inc. (the "Parent"), its Subsidiaries
(collectively with the Parent, the "Borrowers"), BKB and the other lending
institutions listed on Schedule I thereto (collectively, the "Banks"), the
Agent, LaSalle National Bank as documentation agent for the Banks and Fleet
Bank, N.A. and NationsBank, N.A. as co-agents for the Banks are parties to that
certain Amended and Restated Revolving Credit Agreement dated as of June 29,
1998 (as amended, restated, modified or supplemented and in effect from time to
time. the "Credit Agreement").
WHEREAS, Section 2.2.2 of the Credit Agreement provides for the
increase in the Total Commitment under the Credit Agreement up to $265,000,000
upon the request of the Borrowers with the consent of the Agent;
WHEREAS, the Borrowers have requested that BKB increase its Commitment
under the Credit Agreement to $50,000,000, UST become a Bank under the Credit
Agreement with a Commitment of $15,000,000 and BT becomes a Bank under the
Credit Agreement with a Commitment of $10,000,000;
WHEREAS, the Agent is willing to consent to such increase in the Total
Commitment and the addition of the New Banks provided that the New Banks, BKB,
the Borrowers and the Agent enter into this Joinder;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. CONSENT TO JOINDER TO CREDIT AGREEMENT. Pursuant to ss.2.2.2 of the
Credit Agreement, the Agent and each of the Borrowers hereby consent to (a) the
addition of the New Banks as a Bank hereunder such that, after giving effect
hereto and as of the Effective Date, each New Bank shall be a party to the
Credit Agreement and shall have the rights and obligations of a Bank thereunder,
(b) the increase of BKB's Commitment to $50,000,000 and (c) the increase of the
Total Commitment to $265,000,000 The Borrowers hereby confirm that the increase
of the Total Commitment to $265,000,000 is not prohibited pursuant to the terms
of the Subordinated Debt.
2. JOINDER TO CREDIT AGREEMENT. Each New Bank (i) represents and
warrants that (A) it is duly and legally authorized to enter into this Joinder
Agreement (the "Joinder"), (B) the
<PAGE> 2
execution, delivery and performance of this Joinder does not conflict with any
provision of law or of the charter or by-laws of such New Bank, or of any
agreement binding on such New Bank, and (C) all acts, conditions and things
required to be done and performed and to have occurred prior to the execution,
delivery and performance of this Joinder, and to render the same the legal,
valid and binding obligation of such New Bank, enforceable against it in
accordance with its terms, have been done and performed and have occurred in due
and strict compliance with all applicable laws; (ii) confirms that it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to ss.ss.6.4 and 7.4 thereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Joinder; (iii) agrees that it
will, independently and without reliance upon either Bank Agent, either Co-Agent
or any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iv) appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement and the other Loan Documents as are delegated to the
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (v) agrees that it will perform in accordance with their
terms all the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Bank; and (vi) acknowledges and agrees that
it has made arrangements with the Agent satisfactory to such New Bank with
respect to its pro rata share of Letter of Credit Fees in respect of outstanding
Letters of Credit.
3. ISSUANCE OF REVOLVING CREDIT NOTES; REQUEST FOR LEGAL OPINION. UST
requests that the Borrowers issue a new Revolving Credit Note payable to UST in
the principal amount of $15,000,000. BT requests that the Borrowers issue a new
Revolving Credit Note payable to BT in the principal amount of $10,000,000. BKB
requests that the Borrowers issue an Amended and Restated Revolving Credit Note
payable to BKB in the principal amount of $50,000,000. BKB agrees to return its
Amended and Restated Revolving Credit Note dated as of June 29, 1998 to the
Borrowers upon its receipt of the new Amended and Restated Revolving Credit
Note. The New Banks and BKB further request that, no later than July 27, 1998,
Jones, Day, Reavis & Pogue, as counsel for the Borrowers,, deliver an opinion as
to the execution, delivery, authorization and enforceability of the new
Revolving Credit Notes and a statement that the New Banks are entitled to rely
on the prior opinions as of the respective dates thereof delivered by Jones,
Day, Reavis & Pogue in connection with the Credit Agreement.
4. EFFECTIVE DATE. The effective date for this Joinder shall be July
15, 1998 (the "Effective Date"). Following the execution of this Joinder, the
addition of the New Banks shall be recorded in the Register by the Agent.
Schedule 1 to the Credit Agreement shall thereupon be replaced as of the
Effective Date by the new Schedule 1 annexed hereto. The Agent shall make such
arrangements with the Banks as shall be necessary to provide that each Bank
shall hold its Commitment Percentage of outstanding Loans after giving effect to
this Joinder.
2
<PAGE> 3
5. RIGHTS UNDER CREDIT AGREEMENT. Upon the Effective Date, each
New Bank shall be a party to the Credit Agreement and, to the extent provided in
this Joinder, have the rights and obligations of a Bank thereunder.
6. GOVERNING LAW. THIS JOINDER IS INTENDED TO TAKE EFFECT AS A
SEALED INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO
CONFLICT OF LAWS).
7. COUNTERPARTS. This Joinder may be executed in any number of
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, but all of which together shall
constitute one instrument. In proving this Joinder, it shall not be necessary to
produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
[Remainder of page intentionally left blank]
3
<PAGE> 4
IN WITNESS WHEREOF, BKB, the New Banks, the Borrowers and the Agent
have duly executed this Joinder as of the date first above written.
BANKBOSTON, N.A., individually and as Agent
By: /s/ Timothy M. Laurion
----------------------------------------
Timothy M. Laurion, Director
USTRUST
By: /s/ Erinn Siagel
----------------------------------------
Name: Erinn Siagel
Title: Vice President
BANKERS TRUST COMPANY
By: /s/ Patricia Hogan
----------------------------------------
Name: Patricia Hogan
Title: Principal
NATIONSRENT, INC.
By: /s/ Thomas C. Richardson
----------------------------------------
Name: Thomas C. Richardson
Title: Vice President
4
<PAGE> 5
SAM'S EQUIPMENT RENTAL, INC.
By: /s/ Thomas C. Richardson
----------------------------------------
Name: Thomas C. Richardson
Title: Vice President
GABRIEL TRAILER MANUFACTURING
COMPANY, INC.
By: /s/ Thomas C. Richardson
----------------------------------------
Name: Thomas C. Richardson
Title: Vice President
NATIONSRENT OF KENTUCKY, INC.
By: /s/ Thomas C. Richardson
----------------------------------------
Name: Thomas C. Richardson
Title: Vice President
NATIONSRENT OF OHIO, INC.
By: /s/ Thomas C. Richardson
----------------------------------------
Name: Thomas C. Richardson
Title: Vice President
NATIONSRENT OF INDIANA, INC.
By: /s/ Thomas C. Richardson
----------------------------------------
Name: Thomas C. Richardson
Title: Vice President
5
<PAGE> 6
NATIONSRENT OF WEST VIRGINIA, INC.
By: /s/ Thomas C. Richardson
------------------------------------
Name: Thomas C. Richardson
Title: Vice President
TITAN RENTALS, INC.
By: /s/ Thomas C. Richardson
------------------------------------
Name: Thomas C. Richardson
Title: Vice President
NATIONSRENT OF FLORIDA, INC.
By: /s/ Thomas C. Richardson
------------------------------------
Name: Thomas C. Richardson
Title: Vice President
THE BODE-FINN COMPANY
By: /s/ Thomas C. Richardson
------------------------------------
Name: Thomas C. Richardson
Title: Vice President
6
<PAGE> 7
A-ACTION RENTAL, INC.
By: /s/ Thomas C. Richardson
------------------------------------
Name: Thomas C. Richardson
Title: Vice President
RAYMOND EQUIPMENT CO.
By: /s/ Thomas C. Richardson
------------------------------------
Name: Thomas C. Richardson
Title: Vice President
NATIONSRENT OF TEXAS, INC.
By: /s/ Thomas C. Richardson
------------------------------------
Name: Thomas C. Richardson
Title: Vice President
THE J. KELLY CO. INC.
By: /s/ Thomas C. Richardson
------------------------------------
Name: Thomas C. Richardson
Title: Vice President
7
<PAGE> 1
EXHIBIT 4.6
BANKBOSTON, N.A., as Agent
100 Federal Street
Boston, Massachusetts 02110
Dated as of July 15, 1998
To the Parties Named on the
Attached Distribution List
Re: NationsRent, Inc. - Notice of Increase in Total Commitment
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Revolving Credit
Agreement dated as of June 29, 1998 (as amended and in effect from time to time,
the "Credit Agreement"), among NationsRent, Inc. (the "Parent"), its
Subsidiaries (collectively with the Parent, the "Borrowers"), BankBoston, N.A.
and the other lending institutions listed on Schedule 1 thereto
(collectively,the "Banks"), BankBoston, N.A. as administrative agent for the
Banks (the "Agent"), LaSalle National Bank as documentation agent for the Banks
and Fleet Bank, N.A. and NationsBank, N.A., as co-agents for the Banks. All
capitalized terms used herein without definitions shall have the meanings given
such terms in the Credit Agreement.
In accordance with Section 2.2.2 of the Credit Agreement and effective
as of July 15, 1998, the Total Commitment has been increased to $265,000,000.
USTrust and Bankers Trust Company have become Banks under the Credit Agreement
and have committed $15,000,000 and $10,000,000, respectively. BankBoston, N.A.
has committed an additional $15,000,000, thus increasing its Commitment to
$50,000,000. Attached hereto as Exhibit A is a new Schedule 1 to the Credit
Agreement reflecting the increase in the Total Commitment, the addition of
USTrust and Bankers Trust Company as Banks and the adjustments to the Commitment
Percentages resulting from the increase in the Total Commitment.
Very truly yours,
BANKBOSTON, N.A., as Agent
By: /s/ Timothy M. Laurion
-----------------------------------
Timothy M. Laurion, Director
<PAGE> 1
EXHIBIT 5.1
AKERMAN, SENTERFITT & EIDSON, P.A.
ONE SOUTHEAST THIRD AVENUE
MIAMI, FLORIDA 33131
(305) 374-5600
July 22, 1998
NationsRent, Inc.
450 East Las Olas Boulevard
Ft. Lauderdale, FL 33301
Gentlemen:
NationsRent, Inc., a Delaware corporation (the "Company"), has filed with
the Securities and Exchange Commission a Registration Statement on Form S-1, as
amended (Registration No. 333-56233) (the "Registration Statement"), under the
Securities Act of 1933, as amended (the "Act"). Such Registration Statement
relates to the sale by the Company of up to 14,950,000 shares (the "Shares") of
the Company's Common Stock, $0.01 par value per share. We have acted as counsel
to the Company in connection with the preparation and filing of the Registration
Statement.
In connection with the Registration Statement, we have examined, considered
and relied upon copies of the following documents: (i) the Company's Certificate
of Incorporation, as amended to date, and the Company's Amended and Restated
Bylaws; (ii) resolutions of the Company's Board of Directors authorizing the
offering and the issuance of the Shares to be sold by the Company and related
matters; (iii) the Registration Statement and schedules and exhibits thereto;
and (iv) such other documents and instruments that we have deemed necessary for
the expression of the opinions herein contained. In making the foregoing
examinations we have assumed, without investigation, the genuineness of all
signatures and the authenticity of all documents submitted to us as originals,
the conformity to authentic original documents of all documents submitted to us
as copies, and the veracity of the documents. As to various questions of fact
material to the opinion expressed below, we have relied solely upon the
representations or certificates of officers and/or directors of the Company and
upon documents, records and instruments furnished to us by the Company, without
independently verifying the accuracy of such certificates, documents, records or
instruments.
Based upon the foregoing examination, and subject to the qualifications set
forth below, we are of the opinion that the Shares have been duly and validly
authorized and, when issued, delivered and paid for in accordance with the terms
of the Underwriting Agreement filed as Exhibit 1.1 to the Registration
Statement, will be validly issued, fully paid and non-assessable.
<PAGE> 2
Although we have acted as counsel to the Company in connection with the
preparation and filing of the Registration Statement, our engagement has been
limited to certain matters about which we have been consulted. Consequently,
there may exist matters of a legal nature involving the Company in which we have
not been consulted and have not represented the Company. We express no opinion
as to the laws of any jurisdiction other than the General Corporation Law of the
State of Delaware and the laws of the States of Florida. The opinions expressed
herein concern only the effect of the General Corporation Law of the State of
Delaware and of the laws (excluding the principles of conflict of laws) of the
State of Florida and as currently in effect. This opinion letter is limited to
the matters stated herein and no opinions may be implied or inferred beyond the
matters expressly stated herein. The opinions expressed herein are given as of
this date, and we assume no obligation to update or supplement our opinions to
reflect any facts or circumstances that may come to our attention or any change
in law that may occur or become effective at a later date.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus comprising a part of the Registration Statement. In
giving such consent, we do not thereby admit that we are included within the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations promulgated thereunder.
Sincerely,
AKERMAN, SENTERFITT & EIDSON, P.A.
/s/ Akerman, Senterfitt & Eidson, P.A.
<PAGE> 1
EXHIBIT 10.1
AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of August 15, 1997,
by NationsRent, Inc., a Delaware corporation ("Buyer"), Gary L. Gabriel,
individually ("Gary"), Gary L. Gabriel as Trustee of the Gary L. Gabriel Grantor
Retained Annuity Trust Theta ("Trust Theta"), Troy L. Gabriel as Trustee of the
Gary L. Gabriel Grantor Retained Annuity Trust Alpha ("Trust Alpha"), Thomas
Richardson as Trustee of the Gary L. Gabriel Grantor Retained Annuity Trust Beta
("Trust Beta" and, collectively with Trust Theta and Trust Alpha, the "Trusts";
Gary and the Trusts are sometimes referred to collectively herein as "Sellers"),
Troy L. Gabriel, individually ("Troy"), Thomas Richardson, individually ("Tom"),
TTG Properties, an Ohio general partnership (the "Partnership"), Gabriel Trailer
Manufacturing Company, Inc., an Ohio corporation (the "Holding Corporation"),
and Sam's Equipment Rental, Inc., an Ohio corporation (the "Company").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the issued
and outstanding shares (the "Shares") of capital stock of the Holding
Corporation, for the consideration and on the terms set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"APPLICABLE CONTRACT" -any Contract (a) under which the Company has or may
acquire any rights, (b) under which the Company has or may become subject to any
obligation or liability, or (c) by which the Company or any of the assets owned
or used by it is or may become bound.
"BALANCE SHEET" -as defined in Section 3.4.
"BEST EFFORTS" -the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible; provided however that an obligation to use Best
Efforts under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to such Person of this Agreement and the Contemplated Transactions.
"BREACH" -a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be
<PAGE> 2
deemed to have occurred if there is or has been (a) any inaccuracy in or breach
of, or any failure to perform or comply with, such representation, warranty,
covenant, obligation, or other provision, or (b) any claim (by any Person) or
other occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision, and the term
"Breach" means any such inaccuracy, breach, failure, claim, occurrence, or
circumstance.
"BUYER" -as defined in the first paragraph of this Agreement.
"CLOSING" -as defined in Section 2.3.
"CLOSING DATE" -the date and time as of which the Closing actually takes
place.
"COMPANY" -as defined in the first paragraph of this Agreement.
"CONSENT" -any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Promissory Notes,
the Employment Agreements, the Leases, and the Sellers' Releases;
(c) the performance by Buyer and Sellers of their respective covenants
and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and exercise of
control over the Holding Corporation and the Company.
"CONTRACT" -any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DAMAGES" - as defined in Section 10.2.
"DISCLOSURE SCHEDULE" -the disclosure schedule delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"EMPLOYMENT AGREEMENTS" -as defined in Section 2.4(a)(iii).
"ENCUMBRANCE" -any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind,
<PAGE> 3
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENVIRONMENT" -soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or
response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for
any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW" -any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
<PAGE> 4
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
"ERISA" -the Employee Retirement Income Security Act of 1974, as amended,
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES" -any real property, leaseholds, or other interests currently
or formerly owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles) currently or formerly owned
or operated by the Company.
"GAAP" -generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"GARY" -as defined in the first paragraph of this Agreement.
"GOVERNMENTAL AUTHORIZATION" -any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
<PAGE> 5
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"HAZARDOUS ACTIVITY" -the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Company.
"HAZARDOUS MATERIALS" -any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos containing materials.
"HOLDING CORPORATION" -as defined in the first paragraph of this Agreement.
"INDEBTEDNESS" -as applied to any Person, means: (i) all obligations of
that Person to repay or pay money borrowed from another Person or the deferred
portion of the purchase price of services or property; (ii) all obligations of
that Person under bankers acceptances; (iii) all obligations of that Person
under letters of credit; (iv) obligations of others which that Person has
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), discounted or sold with recourse or
agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire, or in respect of which that Person has agreed to supply or advance
funds (whether by way of loan, stock purchase, capital contribution or
otherwise) or otherwise to become directly or indirectly liable; (v) all
obligations evidenced or secured by any mortgage, pledge, lien or conditional
sale or other title retention agreement to which any property or asset owned or
held by that Person is subject, whether or not the obligation evidenced or
secured thereby shall have been assumed; and (vi) all other items (except items
of capital stock, capital surplus, general contingency reserves, deferred income
taxes, retained earnings and amounts attributable to minority interest, if any)
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet
<PAGE> 6
of that Person as of the date Indebtedness is to be determined, including
obligations of that Person properly treated as capital lease obligations or
their equivalent under GAAP.
"INDEMNIFIED PERSONS" -as defined in Section 10.2.
"INTELLECTUAL PROPERTY ASSETS" -as defined in Section 3.24.
"INTERIM BALANCE SHEET" -as defined in Section 3.4.
"IRC" -the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" -the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE" -an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonable inquiry concerning the existence of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity), or as an employee having responsibility for
such facts or matters, has, or at any time had, Knowledge of such fact or other
matter.
"LEASES" -as defined in Section 2.4(a)(iv)(A).
"LEGAL REQUIREMENT" -any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
<PAGE> 7
"ORDER" -any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or
by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that
are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" -(a) the articles or certificate of
incorporation and the bylaws or regulations of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
"PARTNERSHIP" -as defined in the first paragraph of this Agreement.
"PERSON" -any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" -as defined in Section 3.15.
"PROCEEDING" -any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PROMISSORY NOTES" -the four promissory notes described in Sections
2.4(b)(ii), 2.4(b)(iii), 2.4(b)(iv) and 2.4(b)(v).
"RELATED PERSON" -with respect to a particular individual:
<PAGE> 8
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 5% of the outstanding
voting power of a Person or equity securities or other equity interests
representing at least 10% of the outstanding equity securities or equity
interests in a Person.
"RELEASE" -any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
<PAGE> 9
"RENTAL EQUIPMENT" -means all machinery, equipment, tools, supplies, and
other similar tangible personal property used or held for use by the Company or
its customers.
"REPRESENTATIVE" -with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" -the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS" -as defined in the first paragraph of this Agreement.
"SELLERS' RELEASES" -as defined in Section 2.4.
"SENIOR INDEBTEDNESS" -the principal of (and premium, if any) and interest
on (a) all bank financing and other similar indebtedness of Buyer, the Holding
Corporation and the Company, other than the Promissory Notes, whether
outstanding on the date of this Agreement or thereafter created, incurred or
assumed, which is (i) reasonably determined by Buyer to be necessary or
appropriate (A) in connection with the acquisition of any businesses,
properties, or assets, or (B) to finance the working capital needs of Buyer, the
Holding Corporation, and the Company, and (ii)(A) for money borrowed or (B)
evidenced by a note or similar instrument given in connection with the
acquisition of any businesses, properties or assets, (b) obligations of the
Holding Corporation and the Company, whether outstanding on the date of this
Agreement or thereafter created, incurred or assumed, as lessee under (i) leases
of properties or assets, which leases are required to be capitalized on the
balance sheet of the lessee under GAAP, and (ii) leases of properties or assets
made as part of any sale and lease-back transaction to which the Holding
Corporation or the Company is a party, and (c) amendments, renewals, extensions,
modifications and refundings of any such indebtedness or obligation, unless in
any case in the instrument creating or evidencing any such indebtedness or
obligation or pursuant to which the same is outstanding it is provided that such
indebtedness or obligation is not superior in right of payment to the Promissory
Notes.
"SHARES" -as defined in the Recitals of this Agreement.
"SUBSIDIARY" -with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred), are held by the Owner or one or more of its Subsidiaries.
"TAX" -any tax (including, but not limited to, any income tax, capital
gains tax, value-added tax, sales or use tax, employment tax, excise tax, gross
receipts tax, property tax, gift tax, or
<PAGE> 10
estate tax), levy, assessment, tariff, duty (including any customs duty),
deficiency, or other fee, and any related charge or amount (including any fine,
penalty, interest, or addition to tax), imposed, assessed, or collected by or
under the authority of any Governmental Body or payable pursuant to any
tax-sharing agreement or any other Contract relating to the sharing or payment
of any such tax, levy, assessment, tariff, duty, deficiency, or fee.
"TAX RETURN" -any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" -a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"THREATENED" -a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"TOM" -as defined in the first paragraph of this Agreement.
"TROY" -as defined in the first paragraph of this Agreement.
"TRUST ALPHA" -as defined in the first paragraph of this Agreement.
"TRUST BETA" -as defined in the first paragraph of this Agreement.
"TRUST THETA" -as defined in the first paragraph of this Agreement.
"TRUSTS" -as defined in the first paragraph of this Agreement.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing,
Sellers will sell and transfer the Shares to Buyer, and Buyer will purchase the
Shares from Sellers.
<PAGE> 11
2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Shares will be Twenty Six
Million Dollars ($26,000,000.00), representing the sum of the Cash Payments at
Closing as specified in Section 2.4(b)(i) plus the principal amounts of the
Promissory Notes to be delivered by Buyer to Sellers at the Closing as specified
in Section 2.4(b)(ii), (iii), (iv), and (v). The Purchase Price will be subject
to pre-Closing adjustment as set forth below in Section 2.5.
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will
take place at the Columbus offices of Buyer's counsel, Squire, Sanders & Dempsey
L.L.P., at 10:00 a.m. (local time) on the later of (i) September 2, 1997 or (ii)
the date that is five business days following the satisfaction or waiver of all
conditions to the obligations of the parties to consummate the Contemplated
Transactions (other than conditions with respect to actions the respective
parties will take at the Closing itself), or at such other time and place as the
parties may agree. Subject to the provisions of Section 9, failure to consummate
the purchase and sale provided for in this Agreement on the date and time and at
the place determined pursuant to this Section 2.3 will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers, Troy, Tom, the Partnership, the Holding Corporation and the
Company will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures guaranteed by a
commercial bank or by a member firm of the New York Stock Exchange, for
transfer to Buyer;
(ii) releases in the form of Exhibit 2.4(a)(ii) executed by Sellers
(collectively, "Sellers' Releases");
(iii) an employment agreement in the form of Exhibit 2.4(a)(iii)(A),
executed by Gary, and employment agreements in the form of Exhibit
2.4(a)(iii)(B), executed by Troy and Tom (collectively, the "Employment
Agreements");
(iv) (A) a lease agreement in the form of Exhibit 2.4(a)(iv)(A),
executed by the Partnership with respect to each of the properties, and on
the terms, described in Schedule 2.4(a)(iv)(A) (collectively, the "Leases")
and (B) an assignment of sublease, estoppel certificates from predecessor
parties, and such other documentation as Buyer may
<PAGE> 12
reasonably request with respect to the premises located at 5274 Cemetery
Road, Hilliard, Ohio; and
(v) a certificate executed by Sellers, the Holding Corporation and
the Company representing and warranting to Buyer that each of the
representations and warranties of Sellers, the Holding Corporation and the
Company in this Agreement was accurate in all respects as of the date of
this Agreement and is accurate in all respects as of the Closing Date as if
made on the Closing Date (giving full effect to any supplements to the
Disclosure Schedule that were delivered by Sellers to Buyer prior to the
Closing Date in accordance with Section 5.5).
(b) Buyer will deliver to Sellers, Troy, Tom, and the Partnership:
(i) the following amounts by wire transfer to accounts specified by
Gary and the Trusts, respectively: $12,599,400.00 to Gary, $61,000.00 to
Trust Theta, $169,800.00 to Trust Alpha, and $169,800.00 to Trust Beta (for
a total amount of $13,000,000.00) (the "Cash Payments at Closing"); the
Cash Payments at Closing will be subject to pre-Closing adjustment as set
forth below in Section 2.5;
(ii) a promissory note subordinated to the Senior Indebtedness
payable to Gary, Trust Theta, Trust Alpha, and Trust Beta in the respective
principal amounts of $3,250,000.00, $250,000.00, $750,000.00, and
$750,000.00 in the form of Exhibit 2.4(b)(ii) (for an aggregate principal
amount of $5,000,000.00);
(iii) a convertible promissory note subordinated to the Senior
Indebtedness payable to Gary, Trust Theta, Trust Alpha, and Trust Beta in
the respective principal amounts of $310,000.00, $690,000.00,
$2,000,000.00, and $2,000,000.00 in the form of Exhibit 2.4(b)(iii) (for an
aggregate principal amount of $5,000,000.00);
(iv) a contingent convertible promissory note subordinated to the
Senior Indebtedness payable to Gary in the aggregate principal amount of
$1,500,000.00 in the form of Exhibit 2.4(b)(iv);
(v) a contingent convertible promissory note subordinated to the
Senior Indebtedness payable to Gary in the aggregate principal amount of
$1,500,000.00 in the form of Exhibit 2.4(b)(v);
(vi) the Employment Agreements, executed by Buyer;
(vii) the Leases, executed by Buyer; and
(viii) a certificate executed by Buyer to the effect that, except as
otherwise stated in such certificate, each of Buyer's representations and
warranties in this Agreement was
<PAGE> 13
accurate in all respects as of the date of this Agreement and is accurate
in all respects as of the Closing Date as if made on the Closing Date.
2.5 PRE-CLOSING ADJUSTMENT
(a) The Holding Corporation and the Company (i) did not timely file Tax
Returns for and did not timely pay Ohio personal property Tax for 1994, 1995,
1996, and 1997, (ii) have not yet filed Tax Returns for federal corporate income
Tax for their fiscal years ending March 31 in 1995 and 1996, (iii) have not yet
filed Tax Returns for Ohio franchise (corporate income) Tax for their fiscal
years ending March 31 in 1993, 1994, 1995, and 1996, and (iv) filed federal
corporate income Tax Returns and Ohio franchise (corporate income) Tax Returns
and paid the associated Taxes using the cash basis of accounting (rather than
the accrual basis of accounting) (the "Identified Adjustment Items").
(b) The difference between the amount of personal property, franchise, and
income taxes payable (current and deferred) on the Audited Financials (as
defined in Section 7.5) and $1,270,599.00 (the amount of such Taxes accrued in
the Balance Sheet) shall be the "Unaccrued Taxes Amount."
(c) Prior to the close of business on the later of September 2, 1997, or
three days after substantial completion by Ernst & Young, LLP of its field work
for its audit as contemplated by Section 7.5, (1) Sellers may notify Buyer of
those items reflected in the Audited Financials that relate to increases in
noncurrent assets and decreases in noncurrent liabilities resulting in a
positive cash impact to the Holding Corporation and the Company and propose an
amount to offset the Unaccrued Taxes, and (2) Buyer and Sellers agree to
negotiate in good faith and agree upon an amount, if any, that shall be the
"Offsetting Amount".
(d) The Purchase Price will be reduced by an amount (the "Adjustment
Amount") equal to the Unaccrued Taxes Amount less the sum of (i) interest and
penalties to be defended by Sellers (as specified by Sellers prior to Closing)
pursuant to paragraph (e) of this Section 2.5 ("Defended Interest and
Penalties") and (ii) the Offsetting Amount; provided, however, that if the
Adjustment Amount exceeds Two Million Dollars ($2,000,000.00) ("Seller's Maximum
Adjustment Amount") and Buyer does not elect to waive any such reduction to the
extent it exceeds Seller's Maximum Adjustment Amount, Sellers may terminate this
Agreement as provided in Section 9.1(c). The portion of the Adjustment Amount
relating to noncurrent deferred Taxes will be applied to reduce the principal
amount of the Promissory Note specified in Section 2.4 (b)(iii) that is payable
to Gary. The balance of the Adjustment Amount will be applied to reduce the Cash
Payments at Closing to Gary.
(e) Any assessment relating to the Defended Interest and Penalties shall be
considered to be a Proceeding referenced in Section 10.6(a) with respect to
which Sellers as the indemnifying party have elected to participate in and
assumed the defense therefor notwithstanding that the claim involves Taxes. If
it is ultimately determined that the Defended Interest and Penalties or any
<PAGE> 14
portion thereof must be paid by the Holding Corporation or the Company, Buyer
shall be entitled to indemnification therefor pursuant to Section 10.2.
(f) The reduction of the Cash Payments at Closing pursuant to (b), (c), and
(d) of this Section 2.5, above, will be applied to Gary's portion thereof, and
the indemnification for Defended Interest and Penalties pursuant to paragraph
(d) of this Section 2.5, will be obtained through set-off in accordance with
Section 10.5 against amounts otherwise payable to Gary under the Promissory
Notes.
(g) Upon Closing, the Identified Adjustment Items and the Unaccrued Taxes
Amount less Defended Interest and Penalties will be deemed to have been included
in the Disclosure Schedule as of the date of this Agreement with respect to
Sections 3.4, 3.13, and 3.14 and will not be regarded as a supplement to the
Disclosure Schedule for purposes of Section 10.2.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
Sellers, the Holding Corporation, and the Company represent and warrant to
Buyer that the statements contained in this Section 3 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3). Such
representations and warranties are made and given subject to the disclosures in
the Disclosure Schedule accompanying this Agreement and initialed by Sellers,
the Holding Corporation, the Company, and Buyer.
SELLERS, THE HOLDING CORPORATION, AND THE COMPANY WERE NOT ABLE TO DELIVER
TO BUYER THE DISCLOSURE SCHEDULE AND DOCUMENTATION CONTEMPLATED BY THIS SECTION
3. ALSO, SELLERS ANTICIPATE DISCLOSURES IN THE DISCLOSURE SCHEDULE NECESSARY TO
COMPORT SECTION 3.4 WITH THE AUDITED FINANCIALS (AS DEFINED IN SECTION 7.5).
NEVERTHELESS, THE PARTIES WANT TO EXECUTE THIS AGREEMENT. PRIOR TO THE CLOSE OF
BUSINESS ON AUGUST 25, 1997 (PROVIDED, HOWEVER, THAT WITH RESPECT TO THOSE
DISCLOSURES NECESSARY TO COMPORT SECTION 3.4 WITH THE AUDITED FINANCIALS, SUCH
DATE SHALL INSTEAD BE THE LATER OF SEPTEMBER 2, 1997, OR THREE DAYS AFTER
SUBSTANTIAL COMPLETION BY ERNST & YOUNG, LLP OF ITS FIELD WORK FOR ITS AUDIT AS
CONTEMPLATED BY SECTION 7.5), (1) SELLERS, THE HOLDING CORPORATION, AND THE
COMPANY WILL DELIVER SUCH PART OF THE DISCLOSURE SCHEDULE AND SUCH PORTIONS OF
SUCH DOCUMENTATION AS SOON AS THEY ARE AVAILABLE, (2) AS PART OF ITS DUE
DILIGENCE AS CONTEMPLATED BY SECTION 7.7, BUYER WILL REVIEW SUCH DISCLOSURE
SCHEDULE AND DOCUMENTATION AND NOTIFY SELLERS, TROY, TOM, AND THE PARTNERSHIP,
OF THOSE MATTERS DISCLOSED IN THE DISCLOSURE SCHEDULE WITH RESPECT TO WHICH
BUYER PROPOSES BUYER SHOULD BE ENTITLED TO INDEMNIFICATION PURSUANT TO SECTION
10.2(E), AND (3) IF SELLERS, TROY, TOM, AND THE PARTNERSHIP FULLY AGREE WITH
BUYER'S PROPOSALS OR BUYER ELECTS TO WAIVE THE PROPOSALS CAUSING DISAGREEMENT,
THE CONDITION SPECIFIED IN SECTION 7.7 WILL BE DEEMED TO HAVE BEEN SATISFIED
WITH RESPECT TO THE DISCLOSURE SCHEDULE AND DOCUMENTATION AND THE DISCLOSURE
SCHEDULE SHALL BE INITIALED BY THE PARTIES AND ATTACHED TO THIS AGREEMENT AS IF
<PAGE> 15
ATTACHED AS OF THE DATE HEREOF; AND IF THE PARTIES ARE UNABLE TO AGREE WITH
RESPECT TO BUYER'S PROPOSALS, AND BUYER HAS NOT ELECTED TO WAIVE THE PROPOSALS
CAUSING DISAGREEMENT, THIS AGREEMENT SHALL TERMINATE AS PROVIDED IN SECTION
9.1(D).
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Schedule contains a complete and accurate
list for each of the Holding Corporation and the Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each shareholder
and the number of shares held by each). Each of the Holding Corporation and the
Company is a corporation duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation, with full corporate power
and authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use, and to perform all
its obligations under Applicable Contracts. Each of the Holding Corporation and
the Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) Sellers, the Holding Corporation, and the Company have delivered to
Buyer copies of the Organizational Documents of the Holding Corporation and the
Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Sellers, Troy, Tom, the Partnership, the Holding Corporation and the Company
enforceable against them in accordance with its terms. Upon the execution and
delivery by Sellers, Troy, Tom, and the Partnership of the Sellers' Releases,
the Employment Agreements, and the Leases (collectively, the "Sellers' Closing
Documents"), the Sellers' Closing Documents will constitute the legal, valid,
and binding obligations of Sellers, Troy, Tom, and the Partnership enforceable
against them in accordance with their respective terms. Sellers, Troy, Tom, and
the Partnership have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the Sellers' Closing
Documents and to perform their obligations under this Agreement and the Sellers'
Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Holding Corporation or the
Company, or (B) any
<PAGE> 16
resolution adopted by the board of directors or the shareholders of the
Holding Corporation or Company;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which Sellers, Troy, Tom, the
Partnership, the Holding Corporation, or the Company, or any of the assets
owned or used by the Holding Corporation or the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Holding Corporation or the Company or
that otherwise relates to the business of, or any of the assets owned or
used by, the Holding Corporation or the Company;
(iv) to the Knowledge of Sellers, the Holding Corporation, and the
Company, cause any of the assets owned by the Holding Corporation or the
Company to be reassessed or revalued by any taxing authority or other
Governmental Body;
(v) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract; or
(vi) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by the Holding Corporation
or the Company.
Except as set forth in Part 3.2 of the Disclosure Schedule, none of Sellers,
Troy, Tom, the Partnership, the Holding Corporation, or the Company is or will
be required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
(c) Sellers are acquiring the Promissory Notes for their own account and
not with a view to their distribution within the meaning of Section 2(11) of the
Securities Act. Gary is an "accredited investor" as such term is defined in Rule
501(a) under the Securities Act.
3.3 CAPITALIZATION
The authorized equity securities of the Holding Corporation consist of
10,000 shares of common stock, no par value, all of which are issued and
outstanding and constitute the Shares. Sellers are and will be on the Closing
Date the record and beneficial owners and holders of the Shares, free and clear
of all Encumbrances. Gary owns 7,369 of the Shares; Trust Theta owns
<PAGE> 17
385 of the Shares; Trust Alpha owns 1,123 of the Shares; and Trust Beta owns
1,123 of the Shares. With the exception of the Shares (which are owned by
Sellers), all of the outstanding equity securities and other securities of the
Holding Corporation are owned of record and beneficially by the Holding
Corporation free and clear of all Encumbrances. The Purchase Price, the Cash
Payments at Closing, and the principal of the Promissory Notes is allocated
among Sellers in proportion to the Shares owned by them.
The authorized equity securities of the Company consist of 750 shares of
common stock, no par value, of which 750 shares are issued and outstanding. The
Holding Corporation is and will be on the Closing Date the record and beneficial
owner and holder of all such shares of the Company, free and clear of all
Encumbrances. With the exception of such shares of the Company which are owned
by the Holding Corporation, all of the outstanding equity securities and other
securities of the Company are owned of record and beneficially by the Company,
free and clear of all Encumbrances.
No legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of the Holding Corporation or the
Company. All of the outstanding equity securities of the Holding Corporation or
the Company have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in Part 3.3 of the Disclosure Schedule, there
are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of the Holding Corporation or the Company. None
of the outstanding equity securities or other securities of the Holding
Corporation or the Company were issued in violation of the Securities Act or any
other Legal Requirement. Neither the Holding Corporation nor the Company owns or
has any Contract to acquire any equity securities or other securities of any
Person or any direct or indirect equity or ownership interest in any other
business.
3.4 FINANCIAL STATEMENTS
Sellers, the Holding Corporation, and the Company have delivered to Buyer:
(a) unaudited consolidated balance sheets of the Holding Corporation and the
Company as at March 31 in each of the years 1994 through 1996 (including the
notes thereto), and the related unaudited consolidated statements of income and
cash flow for each of the fiscal years then ended, together with the review
report thereon, (b) an unaudited consolidated balance sheet of the Holding
Corporation and the Company as at March 31, 1997 (the "Balance Sheet"), and the
related unaudited consolidated statements of income for the fiscal year then
ended, and (c) an unaudited consolidated balance sheet of the Holding
Corporation and the Company as at June 30, 1997 (the "Interim Balance Sheet"),
and the related unaudited consolidated statements of income for the three months
then ended. Sellers will deliver to Buyer an audited consolidated balance sheet
of the Holding Corporation and the Company as at March 31, 1997 (including the
notes thereto), and the related consolidated statements of income, changes in
stockholders' equity, and cash flow for the fiscal year then ended, together
with the report thereon of Ernst & Young LLP, independent certified public
accountants. All of the aforementioned financial statements and notes are (i)
complete and correct and consistent with the books and records of the Holding
Corporation and
<PAGE> 18
the Company (which books and records are complete and correct); (ii) are
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby; and (iii) present fairly the financial condition and
the results of operations, changes in shareholders' equity, and cash flow of the
Holding Corporation and the Company as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP,
subject, in the case of the Balance Sheet and the Interim Balance Sheet, to the
absence of notes (that, if presented, would not differ materially from those
included in the March 31, 1996 financial statements with the review report
thereon). No financial statements of any other Person are required by GAAP to be
included in consolidated financial statements with the Holding Corporation and
the Company.
3.5 BOOKS AND RECORDS
The books of account, stock record books, and other records of the Holding
Corporation and the Company (specifically excluding the minute books), all of
which have been made available to Buyer, are complete and correct and have been
maintained in accordance with sound business practices and the requirements of
Section 13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless
of whether or not the Holding Corporation and/or the Company are subject to that
Section), including the maintenance of an adequate system of internal controls.
The minute books of the Holding Corporation and the Company are not materially
incomplete or incorrect and neither the Holding Corporation nor the Company will
be adversely affected by the manner in which such minute books have been
maintained or by the actions taken by the shareholders, the boards of directors,
and the committees of the boards of directors of the Holding Corporation and the
Company which are not fully reflected in such minute books. At the Closing, all
of the foregoing books and records will be in the possession of the Holding
Corporation and the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Schedule contains a complete and accurate list
of all real property, leaseholds, or other interests therein owned by the
Company. Sellers and the Company have delivered or made available to Buyer
copies of the deeds and other instruments (as recorded) by which the Company
acquired such real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of Sellers or the
Company and relating to such property or interests. The Company owns (with good
and marketable title in the case of real property, subject only to the matters
permitted by the following sentence) all the properties and assets (whether
real, personal, or mixed and whether tangible or intangible) that they purport
to own located in the facilities owned or operated by the Company or reflected
as owned in the books and records of the Company, including all of the
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet (except for inventory and Rental Equipment sold since the date of the
Balance Sheet and the Interim Balance Sheet, as the case may be, in the Ordinary
Course of Business), and all of the properties and assets purchased or otherwise
acquired by the Company since the date of the Balance Sheet (except for
inventory and Rental Equipment
<PAGE> 19
subsequently sold in the Ordinary Course of Business), which subsequently
purchased or acquired properties and assets (other than inventory, Rental
Equipment, and short-term investments) are listed in Part 3.6 of the Disclosure
Schedule. All material properties and assets reflected in the Balance Sheet and
the Interim Balance Sheet are free and clear of all Encumbrances and are not, in
the case of real property, subject to any rights of way, building use
restrictions, exceptions, variances, reservations, or limitations of any nature
except, with respect to all such properties and assets, (a) mortgages or
security interests shown on the Balance Sheet or the Interim Balance Sheet as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in the Ordinary
Course of Business in connection with the purchase of property or assets after
the date of the Interim Balance Sheet (such mortgages and security interests
being limited to the property or assets so acquired), with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (c) liens for current taxes not yet due, and (d) with respect
to real property, (i) minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of the Company, and (ii)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto. All buildings, plants, and
structures owned by the Company lie wholly within the boundaries of the real
property owned by the Company and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person.
3.7 ASSETS OF THE HOLDING CORPORATION
Except as set forth in Part 3.7 of the Disclosure Schedule: (a) the assets
of the Holding Corporation consist entirely of the Shares, (b) the Holding
Corporation has no liabilities or holdings of any kind, (c) the Holding
Corporation has never conducted any business other than the business currently
conducted by the Company, (d) the Holding Corporation does not currently conduct
any business activities other than holding the Shares, and (e) the Holding
Corporation currently exists solely as a vehicle to hold the Shares.
Additionally, the Holding Corporation has no employees or agents.
3.8 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the Company are
structurally sound, are in good operating condition and repair (subject to
normal wear and tear), and are adequate for the uses to which they are being
put, and none of such buildings, plants, structures, or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The building, plants, structures, and
equipment of the Company are sufficient for the continued conduct of the
Company's business after the Closing in substantially the same manner as
conducted prior to the Closing.
<PAGE> 20
3.9 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the Company
as of the Closing Date (collectively, the "Accounts Receivable") represent or
will represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the Accounts Receivable are or will be as of the Closing Date
current and collectible net of a reserve of $50,000.00 to be accrued by the
Company at the direction of Sellers and with the concurrence of Buyer prior to
the Closing Date (which reserve will be adequate). Part 3.9 of the Disclosure
Schedule contains a complete and accurate list and description of Proceedings
pending as of the date hereof to pursue collection of the Accounts Receivable
(which do not exceed $286,000.00 in the aggregate) (the "Collection Actions
A/R"), it being acknowledged by Buyer that the Company will continue to utilize
and pay for reasonable collection efforts with respect thereto after the
Closing. Subject to the foregoing $50,000 reserve, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within one hundred and twenty days after the day on which it first becomes due
and payable; provided, however, that Collection Actions A/R have been or will be
collected in full, without any set-off, within one year after the date hereof.
There is no contest, claim, or right of set-off, other than adjustments in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable. Part
3.9 of the Disclosure Schedule contains a complete and accurate list of all
Accounts Receivable as of the date of the Interim Balance Sheet, which list sets
forth the aging of such Accounts Receivable. Buyer agrees to assign to Sellers
any particular Accounts Receivable for which Sellers are required to indemnify
Buyer as a result of a Breach of this Section 3.9, but only if such assignment
does not result in a Breach of obligations under the Senior Indebtedness.
3.10 INVENTORY
All inventory of the Company, whether or not reflected in the Balance
Sheet or the Interim Balance Sheet, consists of a quality and quantity usable
and salable in the Ordinary Course of Business, except for obsolete items and
items of below-standard quality, all of which have been written off or written
down to net realizable value in the Balance Sheet or the Interim Balance Sheet.
All such inventories not written off have been priced at the lower of cost or
net realizable value on a first in, first out basis. To the Knowledge of
Sellers, the Holding Corporation and the Company, the quantities of each item of
inventory are not excessive, but are reasonable in the present circumstances of
the Company.
3.11 RENTAL EQUIPMENT
All Rental Equipment of the Company, whether or not reflected in the
Balance Sheet or the Interim Balance Sheet, consists of a quality and quantity
usable, rentable, or salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Balance Sheet or the
<PAGE> 21
Interim Balance Sheet. All such Rental Equipment not written off has been
recorded at net realizable value and has been depreciated consistent with the
economic life of such Rental Equipment. To the Knowledge of Sellers, the Holding
Corporation and the Company, the quantities of each item of such Rental
Equipment are not excessive, but are reasonable in the present circumstances of
the Company. All such Rental Equipment is in good operating condition and
repair, subject to normal wear and tear, and has been maintained in accordance
with normal industry practice.
3.12 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.12 of the Disclosure Schedule, neither the
Holding Corporation nor the Company has any liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Balance Sheet and trade payables and accrued expenses incurred in the
Ordinary Course of Business since the date thereof.
3.13 TAXES
(a) The Holding Corporation and the Company have filed or caused to be
filed on a timely basis all Tax Returns that are or were required to be filed by
or with respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. Sellers, the Holding
Corporation, and the Company have delivered or made available to Buyer copies
of, and Part 3.13 of the Disclosure Schedule contains a complete and accurate
list of, all such Tax Returns (except sales Tax Returns) filed on or since
January 1, 1993. The Holding Corporation and the Company have paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by Sellers, the Holding Corporation, or the Company, except such Taxes,
if any, as are listed in Part 3.13 of the Disclosure Schedule and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Balance Sheet and the Interim
Balance Sheet.
(b) The United States federal and state income Tax Returns of the Holding
Corporation and the Company have been audited by the IRS or relevant state tax
authorities or are closed by the applicable statute of limitations for all
taxable years through March 31, 1993. Part 3.13 of the Disclosure Schedule
contains a complete and accurate list of all audits of all such Tax Returns,
including a reasonably detailed description of the nature and outcome of each
audit. All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Part 3.13 of the Disclosure
Schedule, are being contested in good faith by appropriate proceedings. Part
3.13 of the Disclosure Schedule describes all adjustments to the United States
federal income Tax Returns filed by the Holding Corporation or the Company or
any group of corporations including the Holding Corporation or the Company for
all taxable years since March 31, 1990, and the resulting deficiencies proposed
by the IRS. Except as described in Part 3.13 of the Disclosure Schedule, no
Seller, the Holding Corporation or the Company have given or been
<PAGE> 22
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of the Holding Corporation or the Company or for which
the Holding Corporation or the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of each of the Holding Corporation and the Company are adequate
(determined in accordance with GAAP) and are at least equal to the liability for
Taxes of the Holding Corporation and the Company. There exists no proposed tax
assessment against the Holding Corporation or the Company except as disclosed in
the Balance Sheet or in Part 3.13 of the Disclosure Schedule. No consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Holding Corporation
or the Company. All Taxes that the Holding Corporation and the Company are or
were required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person. There is no action, suit, proceeding,
investigation, audit, or claim now pending or Threatened by any taxing authority
related to the Holding Corporation or the Company. No claim has ever been made
by any taxing authority in a jurisdiction where the Holding Corporation or the
Company does not file Tax Returns that the Holding Corporation or the Company is
subject to taxation in such jurisdiction. The Company has properly completed and
filed all sales tax exemption certificates for sales where tax was not charged.
(d) All Tax Returns filed by (or that include on a consolidated basis) the
Holding Corporation and the Company are true, correct, and complete. There is no
tax sharing agreement (or equivalent agreement) that will require any payment by
the Holding Corporation or the Company after the date of this Agreement. Neither
the Holding Corporation nor the Company is, or within the five-year period
preceding the Closing Date has been, an "S" corporation. During the consistency
period (as defined in Section 338(h)(4) of the IRC with respect to the sale of
the Shares to Buyer), neither the Holding Corporation nor the Company nor any
target affiliate (as defined in Section 338(h)(6) of the IRC with respect to the
sale of the Shares to Buyer) has sold or will sell any property or assets to
Buyer or to any member of the affiliated group (as defined in Section 338(h)(5)
of the IRC) that includes Buyer. Part 3.13 of the Disclosure Schedule lists all
such target affiliates.
(e) Neither the Holding Corporation nor the Company is a party to any safe
harbor lease within the meaning of Section 168(f)(8) of the IRC, as in effect
prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982.
Neither the Holding Corporation nor the Company is, and never has been, a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the IRC and Buyer is not required to withhold tax on the purchase of the
stock of the Holding Corporation by reason of Section 1445 of the IRC. No Seller
is a "foreign person" as such term is defined in Section 1445 of the IRC.
Neither the Holding Corporation nor the Company is a "consenting corporation"
under Section 341(f) of the IRC. Neither the Holding Corporation nor the Company
has entered into any compensatory agreements with respect to the performance of
services which payment thereunder would result in a
<PAGE> 23
nondeductible expense to the Holding Corporation or the Company pursuant to
Section 280G of the IRC. Neither the Holding Corporation nor the Company has
participated in an international boycott as defined in Section 999 of the IRC.
Neither the Holding Corporation nor the Company has agreed to make or is
required to make any adjustment under Section 481(a) of the IRC by reason of a
change in accounting method or otherwise.
3.14 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of the Holding Corporation or the Company, and no event has occurred
or circumstance exists that may result in such a material adverse change.
3.15 EMPLOYEE BENEFITS
(a) As used in this Section 3.15, the following terms have the meanings
set forth below.
"COMPANY" means the Holding Corporation and the Company.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit Obligation
owed, adopted, or followed by the Company or an ERISA Affiliate of the
Company.
"COMPANY PLAN" means all Plans and Multiemployer Plans of which the
Company or an ERISA Affiliate of the Company is or was a Plan Sponsor, or
to which the Company or an ERISA Affiliate of the Company otherwise
contributes or has contributed to, or in which the Company or an ERISA
Affiliate of the Company otherwise participates or has participated. All
references to Plans and Multiemployer Plans are to Company Plans unless
the context requires otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of the
Company or any ERISA Affiliate of the Company.
"ERISA AFFILIATE" means, with respect to the Company, any trade or
business (whether or not incorporated) that is part of the same controlled
group, or under common control with, or part of an affiliated service
group that includes the Company, within the meaning of IRC ss. 414 and/or
ORC ss.4001(a)(14).
"MULTIEMPLOYER PLAN" has the meaning given in ERISA ss.3(37)(A) and
4001.
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide
benefits, other than salary, as compensation for services rendered, to
present or former directors, officers, employees, or agents, other than
obligations, arrangements, and practices that are Plans. Other Benefit
<PAGE> 24
Obligations include consulting agreements under which the compensation
paid does not depend upon the amount of service rendered, sabbatical
policies, severance payment policies, and fringe benefits within the
meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" has the meaning given In ERISA ss. 3(2)(A).
"PLAN" has the meaning given in ERISA ss. 3(3).
"PLAN SPONSOR" has the meaning given in ERISA ss. 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet the
requirements of IRC ss. 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to Title IV
of ERISA, 29 U.S.C. ss. 1301 et seq., other than Multiemployer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC
ss. 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA ss. 3(1).
(b) (i) Part 3.15(i) of the Disclosure Schedule contains a complete and
accurate list of all Company Plans, Company Other Benefit Obligations, and
Company VEBAs, and identifies as such all Company Plans that are (A)
defined benefit Pension Plans, (B) Qualified Plans, (C) Title IV Plans, or
(D) Multiemployer Plans.
(ii) Part 3.15(ii) of the Disclosure Schedule contains a complete and
accurate list of (A) all ERISA Affiliates of the Company, and (B) all
Plans of which any such ERISA Affiliate is or was a Plan Sponsor, in which
any such ERISA Affiliate participates or has participated, or to which any
such ERISA Affiliate contributes or has contributed.
(iii) Part 3.15(iii) of the Disclosure Schedule sets forth, for each
Multiemployer Plan, as of its last valuation date, the amount of potential
withdrawal liability of the Company and the Company's other ERISA
Affiliates, calculated according to information made available pursuant to
ERISA ss. 4221(e).
(iv) Part 3.15(iv) of the Disclosure Schedule sets forth a
calculation of the liability of the Company for post-retirement benefits
other than pensions, made in accordance with Financial Accounting
Statement 106 of the Financial Accounting
<PAGE> 25
Standards Board, regardless of whether the Company is required by this
Statement to disclose such information.
(v) Part 3.15(v) of the Disclosure Schedule sets forth the financial
cost of all obligations owed under any Company Plan or Company Other
Benefit Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
(c) Sellers and the Company have delivered to Buyer:
(i) all documents that set forth the terms of each Company Plan,
Company Other Benefit Obligation, or Company VEBA and of any related
trust, including (A) all plan descriptions and summary plan descriptions
of Company Plans for which Sellers or the Company or any ERISA Affiliate
of the Company are required to prepare, file, and distribute, and (B) all
summaries and descriptions furnished to participants and beneficiaries
regarding Company Plans, Company Other Benefit Obligations, and Company
VEBAs for which a plan description or summary plan description is not
required;
(ii) all personnel, payroll, and employment manuals and policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including both
pension and welfare benefits) by the Company and the ERISA Affiliates of
the Company, and all collective bargaining agreements pursuant to which
contributions are being made or obligations are owed by such entities;
(iv) a written description of any Company Plan or Company Other
Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any Company
Plan and Company Other Benefit Obligation;
(vi) all insurance policies purchased by or to provide benefits
under any Company Plan and Company Other Benefit Obligation;
(vii) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that
relate to any Company Plan, Company Other Benefit Obligation, or Company
VEBA;
(viii) all reports submitted within the four years preceding the date
of this Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with respect to
any Company Plan, Company Other Benefit Obligation, or Company VEBA;
<PAGE> 26
(ix) all notifications to employees of their rights under ERISA ss.
601 et seq. and IRC ss. 4980B;
(x) the Form 5500 filed in each of the most recent three plan years
with respect to each Company Plan and Company Other Benefit Obligation,
including all schedules thereto and the opinions of independent
accountants;
(xi) all notices that were given by the Company or any ERISA
Affiliate of the Company or any Company Plan to the IRS, the U.S.
Department of Labor, the PBGC, or any participant or beneficiary, pursuant
to statute, regulation, or otherwise, within the four years preceding the
date of this Agreement, including notices that are expressly mentioned
elsewhere in this Section 3.15;
(xii) all notices that were given by the IRS, the PBGC, or the
Department of Labor to the Company, any ERISA Affiliate of the Company, or
any Company Plan within the four years preceding the date of this
Agreement;
(xiii) with respect to Qualified Plan and VEBAs, the most recent
determination letter for each Company Plan that is a Qualified Plan, and
exemption in response to the filing of IRS Form 1024 for each Company
VEBA; and
(xiv) with respect to Title IV Plans, the Form PBGC-I filed for each
of the three most recent plan years.
(d) Except as set forth in Part 3.15(vi) of the Disclosure Schedule:
(i) The Company and the Company's ERISA Affiliates have performed
all of respective obligations under all Company Plan, Company Other
Benefit Obligations, and Company VEBAs. The Company has made appropriate
entries in its financial records and statements for all obligations and
liabilities under such Company Plan, Company VEBAs, and Company Other
Benefit Obligation that have accrued but are not due.
(ii) No statement, either written or oral, has been made by the
Company to any Person with regard to any Plan or Other Benefit Obligation
that was not in accordance with the Plan or Other Benefit Obligation and
that could have an adverse economic consequence to the Company or to
Buyer;
(iii) The Company, with respect to all Company Plan, Company Other
Benefits Obligations, and Company VEBAs, are, and each Company Plan,
Company Other Benefit Obligation, and Company VEBA is, in full compliance
with ERISA, the IRC, and other applicable Laws including the provisions of
such Laws expressly mentioned in this Section 3.15, and with any
applicable collective bargaining agreement.
<PAGE> 27
(A) No transactions prohibited by ERISA ss. 406 and no
"prohibited transaction" under IRC ss. 4975(c) have occurred with
respect to any Company Plan.
(B) No Seller or the Company or any ERISA Affiliate of the
Company has any liability to the IRS with respect to any Plan,
including any liability imposed by Chapter 43 of the IRC.
(C) No Seller or the Company or any ERISA Affiliate of the
Company has any liability to the PBGC with respect to any Plan or has
any liability under ERISA ss. 502 or ss. 4071.
(D) All filings required by ERISA and the IRC as to each
Company Plan, Company VEBA, and Company Other Benefit Obligation, have
been timely filed, and all notices and disclosures to participants
required by either ERISA or the IRC have been timely provided.
(E) All contributions and payments made or accrued with respect
to all Company Plans, Company Other Benefit Obligations, and Company
VEBAs are deductible under IRC ss. 162 or ss. 404. No amount, or any
asset of any Company Plan or Company VEBA, is subject to tax as
unrelated business taxable income.
(iv) Each Company Plan and Company Other Benefit Obligation can be
terminated within thirty days, without payment of any additional
contribution or amount and without the vesting or acceleration of any
benefits promised by such Plan.
(v) Since March 31, 1993, there has been no establishment or
amendment of any Company Plan, Company VEBA, or Company Other Benefit
Obligation.
(vi) No event has occurred or circumstance exists that could result
in a material increase in premium costs of Company Plans and Company Other
Benefit Obligations that are insured, or a material increase in benefit
costs of such Company Plan and Company Other Benefit Obligation that are
self-insured.
(vii) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any
Company Plan, Company Other Benefit Obligation, or Company VEBA is pending
or, to Sellers' Knowledge, is pending or Threatened.
(viii) Each Company Plan that is a Qualified Plan is qualified in form
and operation under IRC ss. 401(a); each trust for each such Plan is
exempt from federal income tax under IRC ss. 501(a). Each Company VEBA is
exempt from federal income tax and qualifies under IRC ss. 501(c)(9). No
event has occurred or circumstance exists that will or
<PAGE> 28
could give rise to disqualification or loss of tax-exempt status of any
such Qualified Plan or trust or Company VEBA.
(ix) With respect to each Company Plan, the Company and each ERISA
Affiliate of the Company has met the minimum funding standard, and has
made all contributions required, under ERISA ss. 302 and IRC ss. 412.
(x) No Company Plan is subject to Title IV of ERISA.
(xi) The Company has paid all amounts due to the PBGC pursuant to
ERISA ss. 4007.
(xii) Neither the Company nor any ERISA Affiliate of the Company has
ceased operations at any facility or has withdrawn from any Title IV Plan
or has engaged in a transaction in a manner that would subject the Company
or any ERISA Affiliate of the Company, or any other entity or Sellers to
liability under ERISA ss. 4062(e), ss. 4063, ss. 4064 or ss. 4069.
(xiii) Neither the Company nor any ERISA Affiliate of the Company has
filed a notice of intent to terminate any Plan or has adopted any
amendment to treat a Plan as terminated. The PBGC has not instituted
proceedings to terminate any Company Plan. No event has occurred or
circumstance exists that may constitute grounds under ERISA ss. 4042 for
the termination of, or the appointment of a trustee to administer, any
Company Plan.
(xiv) No amendment has been made, or is reasonably expected to be
made, to any Plan that has required or could require the provision of
security under ERISA ss. 307 or IRC ss. 401 (a)(29).
(xv) No accumulated funding deficiency, whether or not waived,
exists with respect to any Company Plan; no event has occurred or
circumstance exists that may result in an accumulated funding deficiency
as of the last day of the current plan year of any such Company Plan.
(xvi) The actuarial report for each Company Plan that is a Title IV
Plan fairly presents the financial condition and the results of operations
of each such Title IV Plan in accordance with GAAP.
(xvii) Since the last valuation date for each Company Plan that is a
Title IV Plan, (i) no event has occurred or circumstance exists that would
increase the amount of benefits under any such Title IV Plan or that would
cause the excess of such Title IV Plan assets over benefit liabilities (as
defined in ERISA ss. 4001) to decrease, or the amount by which benefit
liabilities exceed assets to increase; and
<PAGE> 29
(xviii) The market value of assets equal or exceeded (and will, as of
the Closing Date, equal or exceed) the present value of "benefit
liabilities" (within the meaning of ERISA ss. 4001(a)(16)) thereunder
determined in accordance with both (1) such Title IVB Plan's actuarial
valuation assumptions in effect for the most recent prior plan year, and
(2) the provisions of Title IV of ERISA on a Title IV Plan termination
basis (assuming such Title IV Plan termination on each of such dates).
(xix) No reportable event (as defined in ERISA ss. 4043 and in
regulations issued thereunder) has occurred.
(xx) No Seller or the Company has Knowledge of any facts or
circumstances that may give rise to any liability of any Seller, the
Company, any ERISA Affiliate of the Company, or Buyer to the PBGC under
Title IV of ERISA.
(xxi) Neither the Company nor any ERISA Affiliate of the Company has
ever established, maintained, or contributed to or otherwise participated
in, or had an obligation to maintain, contribute to, or otherwise
participate in any Multiemployer Plan.
(xxii) Neither the Company nor any ERISA Affiliate of the Company has
withdrawn from any Multiemployer Plan with respect to which there is any
outstanding liability as of the date of this Agreement. No event has
occurred or circumstance exists that presents a risk of the occurrence of
any withdrawal from, or the participation, termination, reorganization, or
insolvency of, any Multiemployer Plan that could result in any liability
of either the Company or Buyer to a Multiemployer Plan.
(xxiii) Neither the Company nor any ERISA Affiliate of the Company has
received notice from any Multiemployer Plan that it is in reorganization
or is insolvent, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of any excise tax, or that
such Multiemployer Plan intends to terminate or has terminated.
(xxiv) No Multiemployer Plan to which the Company or any ERISA
Affiliate of the Company contributes or has contributed is a party to any
pending merger or asset or liability transfer or is subject to any
proceeding brought by the PBGC.
(xxv) Except to the extent required under ERISA ss. 601 et seq. and
IRC ss. 4980B, the Company does not provide health or welfare benefits for
any retired or former employee, officer, or director, or any other person,
and is not obligated to provide health or welfare benefits to any active
employee, officer, director, or any other person following retirement or
other termination of service.
(xxvi) The Company has the right to modify and terminate benefits to
retirees (other than pensions) with respect to both retired and active
employees.
<PAGE> 30
(xxvii) Sellers and the Company have complied with the provisions of
ERISA ss. 601 et seq. and IRC ss. 4980B.
(xxviii) No payment that is owed or may become due to any director,
officer, employee, or agent of the Company will be non-deductible to the
Company or subject to tax under IRC ss. 280G or ss. 4999; nor will the
Company be required to "gross up" or otherwise compensate any such person
because of the imposition of any excise tax on a payment to such person.
(xxiv) The consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit under any
Company Plan or Company Other Benefit Obligation.
3.16 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.16 of the Disclosure Schedule:
(i) the Holding Corporation and the Company are, and at all times
since March 31, 1993 have been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
violation by the Holding Corporation or the Company of, or a failure on
the part of the Holding Corporation or the Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of
the Holding Corporation or the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(iii) neither the Holding Corporation nor the Company have received,
at any time, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply with,
any Legal Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of the Holding Corporation or the Company to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) Part 3.16 of the Disclosure Schedule contains a complete and accurate
list of each Governmental Authorization (excluding ODOT overwidth and overweight
permits and excluding vehicle licenses, a complete and accurate list of which
will be provided by Sellers, the Holding Corporation, and the Company at least
five business days prior to the Closing) that is held by the Holding Corporation
and the Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Holding Corporation and the Company. Each
Governmental
<PAGE> 31
Authorization listed or required to be listed in Part 3.16 of the Disclosure
Schedule is valid and in full force and effect. Except as set forth in Part 3.16
of the Disclosure Schedule:
(i) both the Holding Corporation and the Company are, and at all
times since March 31, 1993 have been, in full compliance with all of the
terms and requirements of each Governmental Authorization identified or
required to be identified in Part 3.16 of the Disclosure Schedule;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be
listed in Part 3.16 of the Disclosure Schedule, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental Authorization
listed or required to be listed in Part 3.16 of the Disclosure Schedule;
(iii) neither the Holding Corporation nor the Company have received
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental
Authorization; and
(iv) all applications required to have been filed for the renewal of
the Governmental Authorizations listed or required to be listed in Part
3.16 of the Disclosure Schedule have been duly filed on a timely basis
with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.16 of the Disclosure
Schedule collectively constitute all of the Governmental Authorizations
necessary to permit the Holding Corporation and the Company to lawfully conduct
and operate their businesses in the manner they currently conduct and operate
such businesses and to permit the Holding Corporation and the Company to own and
use their assets in the manner in which they currently own and use such assets.
3.17 LEGAL PROCEEDINGS; ORDERS
(a) Part 3.17 of the Disclosure Schedule contains a complete and correct
list of each Proceeding by or against the Holding Corporation and the Company
that is currently pending, has been pending at any time since March 31, 1990
(with the stated amount in
<PAGE> 32
controversy in excess of $5,000.00 (the portion of such listing relating to
Proceedings with a stated amount in controversy of less than $25,000 is provided
only to the Knowledge of Sellers, the Holding Corporation, and the Company) and
all Proceedings where no dollar amount has been stipulated), or is Threatened,
and that:
(i) relates to or may affect the business of, or any of the assets
owned or used by, the Holding Corporation and the Company; or
(ii) challenges, or may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
In addition, (1) no event has occurred or circumstance exists that may give rise
to or serve as a basis for the commencement of any such Proceeding, (2) no
Proceeding has been settled since March 31, 1990, for an amount greater than
$25,000.00, and (3) to the Knowledge of Sellers, the Holding Corporation, and
the Company, no Proceeding has been settled since March 31, 1990, for an amount
greater than $5,000.00. Sellers have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding (if any) listed
in Part 3.17 of the Disclosure Schedule. The Proceedings listed in Part 3.17 of
the Disclosure Schedule will not have a material adverse effect on the business,
operations, assets, condition, or prospects of the Holding Corporation or the
Company.
(b) Except as set forth in Part 3.17 of the Disclosure Schedule:
(i) there is no Order to which the Holding Corporation or the
Company or any of the assets owned or used by either the Holding
Corporation or the Company, is subject;
(ii) no Seller is subject to any Order that relates to the business
of, or any of the assets owned or used by, the Holding Corporation or the
Company;
(iii) no officer or director of the Holding Corporation or the Company
is subject to any Order that prohibits such officer or director from
engaging in or continuing any conduct, activity, or practice relating to
the business of the Holding Corporation or the Company; and
(iv) to the Knowledge of Sellers, the Holding Corporation, and the
Company, no agent or employee of the Holding Corporation or the Company is
subject to any Order that prohibits such agent or employee from engaging
in or continuing any conduct, activity, or practice relating to the
business of the Holding Corporation or the Company.
(c) Except as set forth in Part 3.17 of the Disclosure Schedule:
(i) the Holding Corporation and the Company are, and at all times
since March 31, 1993 have been, in full compliance with all of the terms
and requirements of each Order to which it, or any of the assets owned or
used by it, is or has been subject;
<PAGE> 33
(ii) no event has occurred or circumstance exists that may constitute
or result in (with or without notice or lapse of time) a violation of or
failure to comply with any term or requirement of any Order to which the
Holding Corporation or the Company, or any of the assets owned or used by
the Holding Corporation or the Company, is subject; and
(iii) neither the Holding Corporation nor the Company have received,
at any time, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to comply with,
any term or requirement of any Order to which the Holding Corporation or
the Company, or any of the assets owned or used by the Holding Corporation
or the Company, is or has been subject.
3.18 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.18 of the Disclosure Schedule, since the
date of the Balance Sheet, the Holding Corporation and the Company have
conducted their business only in the Ordinary Course of Business and there has
not been any:
(a) change in the Holding Corporation's or Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of the Holding Corporation or the Company; issuance of any security
convertible into such capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by the Holding Corporation or the
Company of any shares of any such capital stock; or declaration or payment of
any dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational Documents of the Holding Corporation
or Company;
(c) payment or increase by the Holding Corporation or the Company of any
bonuses, salaries, or other compensation to any stockholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee, or debt issued or advances made to any shareholder, director, officer,
or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, which damage, destruction or loss
has materially and adversely affected the properties, assets, business,
financial condition, or prospects of the Company, taken as a whole;
<PAGE> 34
(f) entry into, amendment or termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least
$25,000.00;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the Company, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
(h) purchase of any asset or property for more than $5,000.00 (the portion
of the listing in Part 3.18 of the Disclosure Schedule relating to purchases of
any asset or property in the Ordinary Course of Business for less than
$25,000.00 is provided only to the Knowledge of Sellers, the Holding
Corporation, and the Company);
(i) cancellation or waiver of any claims or rights with a value to the
Company in excess of $10,000.00;
(j) repayment of any debt other than debt disclosed in the Balance Sheet
or incurred in the Ordinary Course of Business since the date of the Balance
Sheet;
(k) material change in the accounting methods used by the Holding
Corporation or the Company; or
(l) agreement, whether oral or written, by the Holding Corporation or the
Company to do any of the foregoing.
3.19 CONTRACTS; NO DEFAULTS
(a) Part 3.19(a) of the Disclosure Schedule contains a complete and
accurate list, if any, and Sellers have delivered to Buyer true and complete
copies, if any, of:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by the Company of an amount or value in
excess of $10,000.00 (excluding the rental of Rental Equipment in the
Ordinary Course of Business);
(ii) each Applicable Contract that involves performance of services
or delivery of goods or materials to the Company of an amount or value in
excess of $5,000.00;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of
the Company in excess of $5,000.00;
<PAGE> 35
(iv) each lease, rental or occupancy agreement, license, installment
and conditional sale agreement, and other Applicable Contract affecting
the ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per
item or aggregate payments of less than $5,000.00 and with terms of less
than one year);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the
nondisclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a
group of employees;
(vii) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of the Company or any Affiliate
of the Company or limit the freedom of the Company or any Affiliate of the
Company to engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments
for goods;
(x) each power of attorney, if any, that is currently effective and
outstanding;
(xi) each Applicable Contract, if any, entered into other than in
the Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in excess of
$5,000.00;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the
Company other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
<PAGE> 36
Part 3.19(a) of the Disclosure Schedule sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of the Company under the Contracts, and the Company's
office where details relating to the Contracts are located.
(b) Except as set forth in Part 3.19(b) of the Disclosure Schedule:
(i) no Seller (and no Related Person of any Seller) has or may
acquire any rights under, and no Seller has or may become subject to any
obligation or liability under, any Contract that relates to the business
of; or any of the assets owned or used by, the Company; and
(ii) to the Knowledge of Sellers and the Company, no officer,
director, agent, employee, consultant, or contractor of the Company is
bound by any Contract that purports to limit the ability of such officer,
director, agent, employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the business of
the Company, or (B) assign to the Company or to any other Person any
rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.19(c) of the Disclosure Schedule, each
Contract identified or required to be identified in Part 3.19(a) of the
Disclosure Schedule is in full force and effect and is valid and enforceable in
accordance with its terms.
(d) Except as set forth in Part 3.19(d) of the Disclosure Schedule:
(i) the Company is, and at all times since March 31, 1993 has been,
in substantial compliance with all applicable terms and requirements of
each Contract under which the Company has or had any obligation or
liability or by which the Company or any of the assets owned or used by
the Company is or was bound;
(ii) each other Person that has or had any obligation or liability
under any Contract under which the Company has or had any rights is, and
at all times has been, in full compliance with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result
in a violation or breach of, or give the Company or other Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, the
Applicable Contract; and
(iv) the Company has not given to or received from any other Person,
at any time any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach
of, or default under, any Contract.
<PAGE> 37
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and, to the
Knowledge of Sellers and the Company, no such Person has made written demand for
such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or provision
of products or services by the Company have been entered into in the Ordinary
Course of Business and have been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been paid
or promised, that is or would be in violation of any Legal Requirement.
3.20 INSURANCE
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance to which
the Company is a party or under which the Company, or any director of the
Company, is or has been covered at any time within the five years
preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of the Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Part 3.20(b) of the Disclosure Schedule describes:
(i) any self-insurance arrangement by or affecting the Company,
including any reserves established thereunder (excluding normal and usual
deductibles specified in policies of insurance delivered to Buyer pursuant
to Section 3.20(a)(i));
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with respect to
insurance (including such obligations under leases and service agreements)
and identifies the policy under which such coverage is provided.
(c) Part 3.20(c) of the Disclosure Schedule sets forth, by year, for the
current policy year and each of the preceding policy years:
(i) a summary of the loss experience under each policy;
<PAGE> 38
(ii) a statement describing each claim under an insurance policy for
an amount in excess of $2,500.00, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of insurance,
and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate cost of such claims.
(d) Except as set forth on Part 3.20(d) of the Disclosure Schedule:
(i) All policies to which the Company is or was a party or that
provide coverage to either Seller, the Company, or any director or officer
of the Company:
(A) are or were valid, outstanding, and enforceable;
(B) to the Knowledge of Sellers, the Holding Corporation, and
the Company, are or were issued by an insurer that is financially
sound and reputable;
(C) to the Knowledge of Sellers, the Holding Corporation, and
the Company, taken together, provide or provided adequate insurance
coverage for the assets and the operations of the Company for all
risks normally insured against by a Person carrying on the same
business or businesses as the Company;
(D) to the Knowledge of Sellers, the Holding Corporation, and
the Company, are or were sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or by which
any of them is bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of the Company.
(ii) No Seller or the Company has received (A) any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights, or (B) any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform
its obligations thereunder.
<PAGE> 39
(iii) The Company has paid all premiums due, and has otherwise
performed all of its obligations, under each policy to which the Company
is a party or that provides coverage to the Company or director thereof.
(iv) The Company have given notice to the insurer of all claims that
may be insured thereby.
3.21 ENVIRONMENTAL MATTERS
Except as set forth in Part 3.21 of the Disclosure Schedule:
(a) The Company is, and at all times has been, in full compliance with,
and has not been and is not in violation of or liable under, any Environmental
Law. No Seller or the Company has any basis to expect, nor has any of them or
any other Person for whose conduct they are or may be held to be responsible
received, any actual or Threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Sellers or the Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Sellers, the
Company, or any other Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which Sellers or the Company has or had an
interest.
(c) No Seller or the Company has Knowledge of any basis to expect, nor has
any of them or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning, or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which Sellers or the Company had an
interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by Sellers, the Company, or any other Person for whose conduct they
are or may be held
<PAGE> 40
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(d) No Seller or the Company, or any other Person for whose conduct they
are or may be held responsible, has any Environmental, Health, and Safety
Liabilities with respect to the Facilities. To the Knowledge of Sellers and the
Company, no Seller or the Company, or any other Person for whose conduct they
are or may be held responsible, has any Environmental, Health, and Safety
Liabilities with respect to any other properties and assets (whether real,
personal, or mixed) in which Sellers or the Company (or any predecessor), has or
had an interest, or at any property geologically or hydrologically adjoining the
Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on or in the Environment at
the Facilities or, to the Knowledge of the Sellers and the Company, at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. No Seller, the Company, any other Person
for whose conduct they are or may be held responsible, or any other Person, has
permitted or conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest.
(f) There has been no Release or, to the Knowledge of Sellers and the
Company, Threat of Release, of any Hazardous Materials at or from the Facilities
or at any other locations where any Hazardous Materials were generated,
manufactured, refined, transferred, produced, imported, used, or processed from
or by the Facilities, or from or by any other properties and assets (whether
real, personal, or mixed) in which Sellers or the Company has or had an
interest, or any geologically or hydrologically adjoining property, whether by
Sellers, the Company, or any other Person.
(g) Sellers have delivered to Buyer true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or initiated
by Sellers or the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by Sellers,
the Company, or any other Person for whose conduct they are or may be held
responsible, with Environmental Laws.
3.22 EMPLOYEES
(a) Part 3.22 of the Disclosure Schedule contains a complete and accurate
list of the following information for each employee, officer, or director of the
Company, including each employee on leave of absence or layoff status: employer;
name; job title; current compensation
<PAGE> 41
paid or payable; vacation accrued; and service credited for purposes of vesting
and eligibility to participate in the Company Plans, Company VEBA, and Company
Other Benefit Obligation.
(b) No officer or director or, to the Knowledge of Sellers, the Holding
Corporation, or the Company, employee, of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such officer or
director or employee and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an officer or director or employee of the Company, or (ii) the ability of the
Company to conduct its business, including any Proprietary Rights Agreement with
Sellers or the Company by any such officer or director or employee. To the
Knowledge of Sellers, the Holding Corporation, and the Company, no director,
officer, or other key employee of the Company intends to terminate his
employment with the Company and no such director, officer, or other key employee
of the Company has Threatened to terminate his employment with the Company.
(c) Part 3.22 of the Disclosure Schedule also contains a complete and
accurate list of the following information for each retired employee, officer,
or director of the Company, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
and other benefits.
3.23 LABOR RELATIONS; COMPLIANCE
The Company has not been and is not currently a party to any collective
bargaining or other labor Contract. There has not been, there is not presently
pending, existing or Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or affecting
the Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting the Company or its premises, or (c) any application for certification
of a collective bargaining agent. To Sellers' Knowledge no event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by the Company, and no such
action is contemplated by the Company. The Company has complied in all respects
with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. The Company is not liable for the payment
of any compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
Part 3.23 of the Disclosure Schedule contains a complete and correct list of all
employees of the Company whose employment by the Company was terminated within
the past three years for any reason (whether voluntarily or involuntarily and
whether initiated by the Company or the employee).
<PAGE> 42
3.24 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets-The term "Intellectual Property Assets"
includes:
(i) the name Sam's Equipment Rental, Inc., all fictional business
names, trading names, registered and unregistered trademarks, service
marks, and applications (collectively, "Marks");
(ii) all copyrights in both published works and unpublished works
(collectively, "Copyrights"); and
(iii) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, patents,
plans, drawings, rights in mask works and blue prints (collectively,
"Trade Secrets"); owned, used, or licensed by the Company as licensee or
licenser.
(b) Agreements-Part 3.24(b) of the Disclosure Schedule contains a complete
and accurate list and summary description, including any royalties paid or
received by the Company, of all Contracts relating to the Intellectual Property
Assets to which the Company is a party or by which the Company is bound, except
for any license implied by the sale of a product and perpetual, paid-up licenses
for commonly available software programs with a value of less than $5,000 under
which the Company is the licensee. There are no outstanding and, to Sellers'
Knowledge, no Threatened disputes or disagreements with respect to any such
agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those necessary for the
operation of the Company's business as its is currently conducted. The
Company is the owner of all right, title, and interest in and to each of
the Intellectual Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims, and
has the right to use without payment to a third party all of the
Intellectual Property Assets.
(ii) Except as set forth in Part 3.24(c) of the Disclosure Schedule,
all former and current employees of the Company have executed written
Contracts with the Company that assign the Company all rights to any
inventions, improvements, discoveries, or information relating to the
business of the Company. No employee of the Company has entered into any
Contract that restricts or limits in any way the scope or type of work in
which the employee may be engaged or requires the employee to transfer,
assign, or disclose information concerning his work to anyone other than
the Company.
<PAGE> 43
(d) Trademarks
(i) Part 3.24(d) of Disclosure Schedule contains a complete and
accurate list and summary description of all Marks. The Company is the
owner of all right, title, and interest in and to each of the Marks, free
and clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal
legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are
valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety days after the Closing Date.
(iii) No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, to Sellers' Knowledge, no such action
is Threatened with the respect to any of the Marks.
(iv) To Sellers' Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
(v) No Mark is infringed or, to Sellers' Knowledge, has been
challenged or threatened in any way. None of the Marks used by the Company
infringes or is alleged to infringe any trade name, trademark, or service
mark of any third party.
(vi) All products and materials containing a Mark bear the proper
federal registration notice where permitted by law.
(e) Copyrights
(i) Part 3.24(e) of the Disclosure Schedule contains a complete and
accurate list and summary description of all Copyrights. The Company is
the owner of all right, title, and interest in and to each of the
Copyrights, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) All the Copyrights have been registered and are currently in
compliance with formal legal requirements, are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due
within ninety days after the date of Closing.
(iii) No Copyright is infringed or, to Sellers' Knowledge, has been
challenged or threatened in any way. None of the subject matter of any of
the Copyrights infringes or is alleged to infringe any copyright of any
third party or is a derivative work based on the work of a third party.
<PAGE> 44
(iv) All works encompassed by the Copyrights have been marked with
the proper copyright notice.
(f) Trade Secrets
(i) With respect to each Trade Secret, the documentation relating to
such Trade Secret is current, accurate, and sufficient in detail and
content to identify and explain it and to allow its full and proper use
without reliance on the knowledge or memory of any individual.
(ii) To the best of the Knowledge of Sellers, the Holding Corporation
and the Company, Sellers and the Company have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of its
Trade Secrets.
(iii) The Company has good title and an absolute (but not necessarily
exclusive) right to use the Trade Secrets. The Trade Secrets are not part
of the public knowledge or literature, and, to Sellers' Knowledge, have
not been used, divulged, or appropriated either for the benefit of any
Person (other than the Company) or to the detriment of the Company. No
Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way.
3.25 CERTAIN PAYMENTS
Neither the Holding Corporation nor the Company, nor any director,
officer, agent, or employee of the Holding Corporation or the Company, nor to
Sellers' Knowledge any other Person associated with or acting for or on behalf
of the Holding Corporation or the Company, has directly or indirectly (a) made
any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or
other payment in violation of any Legal Requirement, applicable tort law, or any
Applicable Contract, 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, or
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of the Holding Corporation or the Company or any Affiliate of
the Holding Corporation or the Company, (b) established or maintained any fund
or asset that has not been recorded in the books and records of the Holding
Corporation or the Company.
3.26 DISCLOSURE
(a) To the best of the Knowledge of Sellers, the Holding Corporation, and
the Company, no representation or warranty of Sellers, the Holding Corporation,
or the Company in this Agreement and no statement in the Disclosure Schedule
omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
<PAGE> 45
(b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
(c) To the best of the Knowledge of Sellers, the Holding Corporation, and
the Company, there is no fact known to any Seller that has specific application
to any Seller, the Holding Corporation, or the Company (other than general
economic or industry conditions) and that materially adversely affects or, as
far as any Seller, the Holding Corporation, or the Company can reasonably
foresee, materially Threatens, the assets, business, prospects, financial
condition, or results of operations of the Holding Corporation or the Company
(separately or on a consolidated basis) that has not been set forth in this
Agreement or the Disclosure Schedule.
3.27 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.27 of the Disclosure Schedule, no Seller or
any Related Person of Sellers or of the Holding Corporation or the Company has,
or since March 31, 1990, has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the business of the Holding Corporation or the Company. No Seller or any Related
Person of Sellers or of the Holding Corporation or the Company is, or since
March 31, 1990, has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with the
Holding Corporation or the Company, or (ii) engaged in competition with the
Holding Corporation or the Company with respect to any line of the products or
services of the Holding Corporation or the Company (a "Competing Business") in
any market presently served by the Holding Corporation or the Company. Except as
set forth in Part 3.27 of the Disclosure Schedule, no Seller or any Related
Person of Sellers or of the Holding Corporation or the Company is, or since
March 31, 1990, was, a party to any Contract with, or has or had any claim or
right against, the Holding Corporation or the Company.
3.28 CUSTOMERS AND SUPPLIERS
In Part 3.28 of the Disclosure Schedule, Sellers have set forth the
Company's top twenty customers based on the revenue generated by such customers
during the fiscal year ended March 31, 1997, and sale projections for the
current fiscal year of the top twenty customers. Also set forth therein are the
Company's top ten vendors based on the expenditures of the Company with such
vendor during such fiscal year. To the best of the Knowledge of Sellers, the
Holding Corporation, and the Company, nothing has occurred since March 31, 1997,
that would in any way have an adverse effect on the relationship that the
Company has with any party listed on such Schedule.
<PAGE> 46
3.29 BROKERS OR FINDERS
Sellers and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
3.30 INDEBTEDNESS
The Indebtedness of the Company does not exceed Seventeen Million Dollars
($17,000,000.00) as of the date of this Agreement and will not exceed Sixteen
Million Dollars ($16,000,000.00) as of the Closing, it being contemplated that
the Closing amount will require the Partnership to pay off its Indebtedness to
the Company contemporaneously with the Closing and the Company will apply such
payoff to reduction of the Company's Indebtedness.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers that the statements contained in
this Section 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4).
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the Promissory Notes, the Employment
Agreements, and the Leases (collectively, the "Buyer's Closing Documents"), the
Buyer's Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer's Organizational Documents;
<PAGE> 47
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may be
bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
4.3 INITIAL CAPITAL
The cash payment specified in Section 2.4(b)(i) will be obtained by Buyer
exclusively through subscriptions for equity interests in Buyer.
4.4 CERTAIN PROCEEDINGS
No Proceeding has been commenced or Threatened against Buyer that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions.
4.5 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold Sellers harmless from any such payment alleged to be due by
or through Buyer as a result of the action of Buyer or its officers or agents.
5. COVENANTS OF SELLERS AND THE COMPANY PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers, the
Holding Corporation, the Company, and their Representatives will (a) afford
Buyer and its Representatives and prospective investors and their
Representatives (collectively, "Buyer's Advisors") full, free, and unrestricted
access to the Company's personnel, Representatives, properties (including
subsurface testing), contracts, books and records, and other documents and data,
(b) furnish Buyer and Buyer's Advisors with copies of all such contracts, books
and records, and other existing documents and data as Buyer may reasonably
request, and (c) furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information as Buyer may reasonably
request. Buyer, Sellers, the Holding Corporation, and the Company will
coordinate such activities
<PAGE> 48
in a manner so as to eliminate or reduce the disruption to the Company's
business resulting therefrom.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date, Sellers, the
Holding Corporation, and the Company will:
(a) conduct the business of the Holding Corporation and the Company only
in the Ordinary Course of Business and otherwise refrain from any extraordinary
transactions, except that (i) the Company may take such action as the Company
reasonably determines to be necessary or advisable to open new store locations
in Mansfield and Findlay; (ii) any OSU seat arena licenses will be distributed
to Sellers; and (iii) the real estate located at 2468 Hooverside, Grove City,
Ohio and related debts will be distributed to Sellers;
(b) use their Best Efforts to preserve intact the current business
organization of the Holding Corporation and the Company, keep available the
services of the current officers, employees, and agents of the Holding
Corporation and the Company, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and others having
business relationships with the Holding Corporation and the Company; and
(c) report periodically to Buyer concerning the status of the business,
operations, and finances of the Holding Corporation and the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Sellers and the Company will not
without the prior consent of Buyer, take any affirmative action, or fail to take
any reasonable action as a result of which any of the changes or events listed
in Section 3.18 will occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers, the
Holding Corporation and the Company will make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers,
the Holding Corporation and the Company will (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all consents identified in Schedule 4.2.
<PAGE> 49
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each of Sellers
and the Company will promptly notify Buyer in writing if such Seller or the
Company becomes aware of any fact or condition or the occurrence thereof that
causes or constitutes a Breach of any of the representations and warranties of
Sellers and the Company in this Agreement. Should any such fact or condition
require any change in the Disclosure Schedule if the Disclosure Schedule were
dated the date of the discovery or occurrence of any such fact or condition,
Sellers and the Company will promptly deliver to Buyer a supplement to the
Disclosure Schedule specifying such change. During the same period, each of
Sellers and the Company will promptly notify Buyer of the occurrence of any
Breach of any of the covenants of Sellers, the Holding Corporation and the
Company in this Section 5 or of the occurrence of any event, or the likely
failure of the occurrence of any event, that may make the satisfaction of the
conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Sellers, the Holding
Corporation, and the Company will cause all Indebtedness owed to the Company by
any Seller or any Related Person of any Seller to be paid in full prior to
Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Sellers, the Holding Corporation, the Company, and their respective
Representatives will not directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of the Holding Corporation or the Company, or any of the capital
stock of the Holding Corporation or the Company, or any merger, consolidation,
business combination, or similar transaction involving the Holding Corporation
or the Company. Sellers, the Holding Corporation, the Company, and their
Representatives will immediately notify Buyer regarding any contact between
Sellers, the Holding Corporation, the Company, or their Representatives and any
other Person regarding any such offer or proposal or any related inquiry.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers will use
their Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
<PAGE> 50
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will
make all filings required by Legal Requirements to be made by it to consummate
the Contemplated Transactions. Between the date of this Agreement and the
Closing Date, Buyer will cooperate with Sellers, the Holding Corporation, and
the Company with respect to all filings that Sellers, the Holding Corporation,
and the Company are required by Legal Requirements to make in connection with
the Contemplated Transactions, and (ii) cooperate with Sellers, the Holding
Corporation, and the Company in obtaining all consents identified in Part 3.2 of
the Disclosure Schedule; provided that this Agreement will not require Buyer to
dispose of or make any change in any portion of its business or to incur any
other burden to obtain a Governmental Authorization.
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of
this Agreement and the Closing Date, Buyer will use its Best Efforts to cause
the conditions in Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of the representations and warranties of Sellers, the Holding
Corporation, and the Company in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement,
and must be accurate in all material respects as of the Closing Date as if made
on the Closing Date, without giving effect to any supplement to the Disclosure
Schedule made pursuant to Section 5.5.
(b) Each of the representations and warranties of Sellers, the Holding
Corporation, and the Company in Sections 3.3, 3.4, 3.13, 3.14, and 3.26 must
have been accurate in all respects as of the date of this Agreement, and must be
accurate in all respects as of the Closing Date as if made on the Closing Date,
without giving effect to any supplement to the Disclosure Schedule.
<PAGE> 51
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers, the Holding
Corporation, and the Company are required to perform or to comply with pursuant
to this Agreement at or prior to the Closing (considered collectively), and each
of these covenants and obligations (considered individually), must have been
duly performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.4 must
have been delivered, and each of the other covenants and obligations in Section
5.4 must have been performed and complied with in all respects.
7.3 CONSENTS
All Consents required in Part 3.2 of the Disclosure Schedule, each Consent
identified in Schedule 4.2, and any and all other Consents must have been
obtained and must be in full force and effect.
7.4 BANK INDEBTEDNESS
Amendments to loan agreements, new loan agreements, estoppel certificates,
and/or other documentation fully assuring Buyer of continuation and/or
replacement of the Company's Senior Indebtedness, to such extent as Buyer
reasonably determines to be necessary or advisable (and otherwise in a form
reasonably satisfactory to Buyer and its counsel), must have been delivered to
or obtained by Buyer.
7.5 AUDITED FINANCIALS
Sellers, the Holding Corporation, and the Company shall have delivered to
Buyer the unqualified opinion of Ernst & Young, LLP as to its audit of the
consolidated financial statements of the Holding Corporation and the Company as
of and for the fiscal year ending March 31, 1997, together with such
consolidated financial statements (the "Audited Financials") and such letter or
report to management as Ernst & Young, LLP would normally prepare with respect
thereto, and Buyer shall be satisfied in its sole discretion with such audited
statements.
7.6 ADDITIONAL DOCUMENTS
Sellers, Troy, Tom, the Partnership, the Holding Corporation and the
Company must have caused the following documents to be delivered to Buyer:
(a) an opinion of Kemp, Schaeffer, Rowe & Lardiere Co., L.P.A., dated the
Closing Date, in the form of Exhibit 7.6(a);
<PAGE> 52
(b) such other documents as Buyer may reasonably request for the purpose
of (i) enabling its counsel to provide the opinion referred to in Section
8.4(a), (ii) evidencing the accuracy of any of the representations and
warranties of Sellers, the Holding Corporation, and the Company, (iii)
evidencing the performance by Sellers, the Holding Corporation, and the Company
of, or the compliance by Sellers, the Holding Corporation, and the Company with,
any covenant or obligation required to be performed or complied with by Sellers,
the Holding Corporation, and the Company, (iv) evidencing the satisfaction of
any condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
7.7 DUE DILIGENCE
The Buyer must be satisfied, in its sole discretion, with the results of
its due diligence of the Holding Corporation and the Company including taxes,
ERISA, health and welfare policies, OSHA, insurance, environmental.
7.8 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.9 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, the Holding Corporation or the
Company, or (b) is entitled to all or any portion of the Purchase Price payable
for the Shares.
7.10 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
<PAGE> 53
8. CONDITIONS PRECEDENT TO THE OBLIGATION TO CLOSE
OF SELLERS, TROY, TOM, AND THE PARTNERSHIP
The obligation of Sellers, Troy, Tom, and the Partnership to sell the
Shares and to take the other actions required to be taken by them at the Closing
is subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by them, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4 and must have made the cash payments
required to be made by Buyer pursuant to Section 2.4(b)(i).
8.3 PERSONAL GUARANTEES
The personal guarantees by Gary of the Senior Indebtedness must have been
removed or eliminated to the reasonable satisfaction of Sellers.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to Sellers:
(a) an opinion of Squire, Sanders & Dempsey L.L.P., dated the Closing
Date, in the form of Exhibit 8.4(a); and
(b) such other documents as Sellers may reasonably request for the purpose
of (i) enabling their counsel to provide the opinion referred to in Section
7.6(a), (ii) evidencing the accuracy of any representation or warranty of Buyer,
(iii) evidencing the performance by Buyer of, or the compliance by Buyer with,
any covenant or obligation required to be performed or
<PAGE> 54
complied with by Buyer, (ii) evidencing the satisfaction of any condition
referred to in this Section 8, or (v) otherwise facilitating the consummation of
any of the Contemplated Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and
(b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Sellers if a material Breach of any provision of
this Agreement has been committed by the other party and such Breach has not
been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of October 31, 1997, or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before October 31, 1997 (provided, however, that in the case of the condition in
Section 7.7, Buyer must terminate this Agreement or waive such condition on or
before September 30, 1997); or (ii) by Sellers, if any of the conditions in
Section 8 has not been satisfied as of October 31, 1997, or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Sellers to comply with their obligations under this Agreement) and Sellers have
not waived such condition on or before October 31, 1997;
(c) by Sellers under the circumstances described in Section 2.5(d);
(d) by (i) mutual consent of Buyer and Sellers, (ii) failure to agree on
Buyer's proposals as contemplated by the lead-in paragraphs of Section 3 and
Buyer has not elected to waive the proposals causing disagreement, or (iii)
failure by the parties to finalize the Exhibits and Option Prices as
contemplated by the footnote at the end of the Table of Contents to this
Agreement; or
(e) by either Buyer or Sellers if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before October 31, 1997,
or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an
<PAGE> 55
election of remedies. If this Agreement is terminated pursuant to Section 9.1,
all further obligations of the parties under this Agreement will terminate,
except that the obligations in Sections 11.1 and 11.3 will survive; provided,
however, that if this Agreement is terminated by a party because of the Breach
of this Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedule, the supplements to the Disclosure Schedule,
the certificate delivered pursuant to Section 2.4(a)(v), and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing. The right to indemnification, payment of Damages or other remedy based
on such representations, warranties, covenants, and obligations will not be
affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS,
TROY, TOM, AND THE PARTNERSHIP
Sellers, Troy, Tom, and the Partnership, jointly and severally, will
indemnify and hold harmless Buyer, the Holding Corporation, the Company, and
their respective Representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Sellers, the
Holding Corporation, and the Company in this Agreement (without giving effect to
any supplement to the Disclosure Schedule), the Disclosure Schedule, the
supplements to the Disclosure Schedule made pursuant to Section 5.5, or any
other certificate or document delivered by Sellers, the Holding Corporation, and
the Company pursuant to this Agreement;
<PAGE> 56
(b) any Breach by any of Sellers, Troy, Tom, and the Partnership of any of
their respective covenants or obligations in this Agreement;
(c) any product sold, leased, or rented by, or any services provided by,
the Holding Corporation or the Company prior to the Closing Date;
(d) any Tax in excess of amounts accrued on the Balance Sheet or disclosed
in Part 3.13 of the Disclosure Schedule (without giving effect to any supplement
to the Disclosure Schedule);
(e) any matters disclosed in the Disclosure Schedule to which Buyer,
Sellers, Troy, Tom, and the Partnership agree as provided in Section 3 (which
agreement shall be reflected as an amendment to this Agreement); or
(f) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with any of Sellers, Troy, Tom, the Partnership,
the Holding Corporation, and the Company (or any Person acting on their behalf)
in connection with any of the Contemplated Transactions.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers
the amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement, or (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
10.4 TIME AND AMOUNT LIMITATIONS
(a) If the Closing occurs, in order for Sellers, Troy, Tom, and the
Partnership to have any liability (for indemnification or otherwise) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date (excepting those in
Sections 3.3, 3.4, 3.7, 3.13, 3.15, 3.21, and 3.27), Buyer must notify Sellers,
Troy, Tom, and the Partnership of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer on or before the
third anniversary of the Closing Date. There shall be no such notification
requirement as to any claim with respect to Sections 3.3, 3.4, 3.7, 3.13, 3.15,
3.21, or 3.27, or any claim for indemnification or reimbursement not based upon
any
<PAGE> 57
representation or warranty or any covenant or obligation to be performed and
complied with prior to the Closing Date. If the Closing occurs, in order for
Buyer to have any liability (for indemnification or otherwise) with respect to
any representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, Sellers must notify Buyer of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Sellers on or before the third anniversary of the Closing Date.
(b) Each of Troy and Tom will be liable (for indemnification or otherwise)
with respect to the matters described in Section 10.2 only up to an aggregate
amount that is the greater of (i) One Million Three Hundred Thousand Dollars
($1,300,000.00) and (ii) the amount that he directly or indirectly receives from
Sellers from the date hereof through the date such determination is to be made.
10.5 RIGHT OF SET-OFF
Upon notice to Sellers, Troy, Tom, and the Partnership specifying in
reasonable detail the basis for such set-off, Buyer may set off any amount to
which it may be entitled under this Section 10 against amounts otherwise payable
under the Promissory Notes, and the Leases, but Buyer shall have no right of
set-off against the Employment Agreements. The exercise of such right of set-off
by Buyer in good faith, whether or not ultimately determined to be justified,
will not constitute an event of default under the Promissory Notes, or the
Leases. Neither the exercise of nor the failure to exercise such right of
set-off will constitute an election of remedies or limit Buyer in any manner in
the enforcement of any other remedies that may be available to it.
10.6 PROCEDURE FOR INDEMNIFICATION-THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Sections 10.2 or
10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice; provided, however, that if the indemnified party intentionally
failed to give such notice, the indemnifying party will be deemed to have been
prejudiced by the amount of attorneys' fees incurred with respect thereto
through the date notice is received by the indemnifying party and the
indemnifying party will not be required to indemnify the indemnified party for
such attorneys' fees.
(b) If any Proceeding referred to in Section 10.6(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes (as to any such claims involving Taxes, Buyer must select counsel
satisfactory to Sellers, it being acknowledged and agreed that Ernst & Young,
LLP and Squire, Sanders & Dempsey, LLP are satisfactory to Sellers), be entitled
to
<PAGE> 58
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel satisfactory to the indemnified party and, after
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will not, as long
as it diligently conducts such defense, be liable to the indemnified party under
this Section 10 for any fees of other counsel or any other expenses with respect
to the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation and monitoring of defense of such Proceeding.
If the indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) Sellers, Troy, Tom, and the Partnership hereby consent to the
non-exclusive jurisdiction of any court in which a Proceeding is brought against
any Indemnified Person for purposes of any claim that an Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on them with respect to such a
claim anywhere in the world.
<PAGE> 59
10.7 PROCEDURE FOR INDEMNIFICATION-OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
10.8 BUYER PAYMENTS RELATED TO GARY'S GIFTS TO THE TRUSTS
Prior to the execution of this Agreement, Gary made gifts (the "Gifts") of
certain shares of the capital stock of the Holding Corporation to the Trusts.
Buyer agrees that if (a) the Internal Revenue Service proposes any adjustment to
the amount or amounts reported as taxable gifts to the Trusts or the Trust
beneficiaries with respect to the Gifts on the gift tax return filed by Gary in
connection with the Gifts (a "Proposed Adjustment"), and/or (b) the Internal
Revenue Service issues a gift tax deficiency to Gary or any beneficiary of the
Trusts as a result of any such Proposed Adjustment (but not as a result of
Gary's receipt of or failure to receive any payment from the Trusts), Buyer will
pay to Gary or to the Trust beneficiary issued such gift tax deficiency, as the
case may be, the sum of the following: (i) the amount of any such gift tax
deficiency including penalties and interest, if any, plus (ii) an amount equal
to any reduction in or loss of Gary's unified credit against gift and estate
taxes as a result of any such Proposed Adjustment (to the extent not already
reflected in such gift tax deficiency), plus (iii) any income taxes payable by
Gary (or by any beneficiary of the Trusts) in connection with any payments made
to Gary by Buyer pursuant hereto. However, Buyer will be obligated to make any
such payment only upon presentation to Buyer of satisfactory written evidence
that Gary or the Trust beneficiary requesting such payment has made a
corresponding payment to the Internal Revenue Service on account of any such
Proposed Adjustment or gift tax deficiency and/or that Gary has entered into an
agreement with the Internal Revenue Service with respect to a reduction or loss
in unified credit. Further, in no event will Buyer's payment obligations
pursuant hereto exceed the sum of Three Hundred and Fifty Thousand Dollars
($350,000.00) in the aggregate.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Sellers, Troy, Tom, and the Partnership will cause the
Holding Corporation and the Company not to incur any out-of-pocket expenses in
connection with this Agreement, or, to the extent so incurred, will cause the
Holding Corporation and the Company to be reimbursed therefor by Sellers, Troy,
Tom, or the Partnership. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.
<PAGE> 60
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer and Sellers shall agree. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing
Sellers, the Holding Corporation, and the Company shall keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person. Buyer and Sellers will consult with each other concerning the means by
which the employees, customers, and suppliers of the Holding Corporation and the
Company and others having dealings with the Holding Corporation and the Company
will be informed of the Contemplated Transactions, and Buyer will have the right
to be present for any such communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, except as and to
the extent required by law, absent express, written consent of Sellers, Buyer
shall not, directly or indirectly, disclose to third parties or use for its own
purposes any confidential or secret information of Sellers, except to the extent
permitted under this Agreement. Buyer also agrees that it will, upon the
completion of its investigation, return to Sellers, all documents and other
records or confidential information previously authorized to be reviewed by
Buyer. It is understood that both Federal and State laws apply to some
incidences of release of information, and that violation of this provision may
also be a violation of these laws. The term "confidential information," as used
in this paragraph, means any information received from Sellers, including but
not limited to, the names or addresses of customers, research, inventions,
discoveries, improvements, equipment, methods of production, costs or prices or
uses of either party's products or services, business plans of either party,
suppliers and costs thereof, development work, any other information containing
business information which is required to be maintained as such for the business
success of either party, and any other trade secrets, whether or not contained
in any written documents or financial information other than information which
(a) is already in the possession of Buyer, its employees, representatives or
agents (b) from customers of Sellers known to Buyer prior to the date of this
Agreement; (c) is or becomes generally available to the public through no fault
or actions by Buyer or its employees, representatives or agents; or (d) becomes
available to Buyer from a source which is not prohibited from disclosing such
information to Buyer by a contractual obligation to the Company. The parties
hereto agree that Sellers would suffer irreparable harm in the event Buyer
violates this paragraph and either discloses or uses for its own purposes
information received from Sellers.
During the course of discussions between Buyer and Sellers, Sellers and
its employees, representatives and agents may receive confidential, proprietary,
non-public business and other information concerning Buyer. With respect to such
information, and the fact that Buyer has furnished such information and the fact
that there are ongoing discussions regarding the Contemplated Transaction,
Sellers agree to be bound with respect thereto to the same extent that Buyer is
bound hereunder with respect to information concerning Sellers.
<PAGE> 61
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Gary Gary L. Gabriel
3327 Vacation Lane
St. James City, FL 33956
Troy Troy L. Gabriel
1261 White Road
Grove City, OH 43123
Tom Tom R. Richardson
6219 Brookmeade Circle
Grove City, OH 43123
with a copy to: Kemp, Schaeffer, Rowe & Lardiere Co., L.P.A.
88 West Mound Street
Columbus, Ohio 43215
Attention: Michael N. Schaeffer
Facsimile No.: (614) 469-7170
Buyer: NationsRent, Inc.
James L. Kirk
7130 County Road 254
Findlay, OH 45840
with a copy to: Squire, Sanders & Dempsey L.L.P.
1300 Huntington Center
41 South High Street
Columbus, Ohio 43215
Attention: Patrick J. Dugan
Facsimile No.: (614) 365-2499
<PAGE> 62
11.5 RESOLUTION OF DISPUTES
(a) The parties desire to avoid and settle without litigation future
disputes which may arise between them concerning the rights, duties and
obligations of the parties under this Agreement. Accordingly, any such dispute
shall be settled by arbitration administered by the American Arbitration
Association under its Arbitration Rules and the Supplemental Procedures for
Large, Complex Disputes (hereinafter "Rules") then in effect; provided, however,
that any party may seek injunctive or other similar equitable relief from any
court of competent jurisdiction pending settlement of the underlying dispute by
such arbitration.
(b) Three arbitrators shall be appointed in accordance with the Rules. The
place of arbitration shall be Columbus, Ohio and a stenographic record shall be
made of any arbitration hearing. The award rendered by the arbitrators shall be
in writing and shall be based on applicable law and judicial precedent. Unless
the parties otherwise agree, the award shall include the findings of fact and
conclusions of law on which the award is based. Judgment on such award may be
entered in any court having jurisdiction thereof.
(c) Upon the application by any party to a court for an order confirming,
modifying or vacating the award, the court shall have the power to review
whether, as a matter of law based on the findings of fact determined by the
arbitrator, the award should be confirmed, modified or vacated in order to
correct any errors of law made by the arbitrator. In order to effectuate such
judicial review limited to issues of law, the parties agree (and shall so
stipulate to the court) that the findings of fact made by the arbitrator shall
be final and binding on the parties and shall serve as the facts to be submitted
to and relied on by the court in determining the extent to which the award
should be confirmed, modified or vacated.
(d) A request by one party for arbitration of any dispute subject to
arbitration shall be made in writing to the American Arbitration Association and
a copy thereof shall be sent to the other party. The party requesting
arbitration shall pay any deposit required by the American Arbitration
Association subject to reimbursement, if required, from the other party in
accordance with any award by the arbitrators.
11.6 FURTHER ASSURANCES
(a) The parties agree (i) to furnish upon request to each other such
further information, (ii) to execute and deliver to each other such other
documents, and (iii) to do such other acts and things, all as the other party
may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
(b) In the event and for so long as any party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand in connection with (i) the Contemplated
Transactions, or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction
<PAGE> 63
on or prior to the Closing Date involving any of the Holding Corporation and the
Company, each of the other parties will cooperate with him or it and his or its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending party (unless the contesting or defending party is
entitled to indemnification therefor under Section 10 above).
(c) In order to establish a factual basis for the resolution of disputes
with respect to environmental and related matters, subsequent to the Closing
Buyer and Sellers will establish a benchmark as to the physical integrity of the
Premises. For such purpose, Buyer and Sellers will determine the scope of and
will perform such soil tests, topographical, environmental, or wetland studies
and any other physical and engineering examinations. Buyer and Seller will each
pay one-half of the costs and expenses of such studies and examinations.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the No-Shop Letter and the extensions
dated June 13, 1997, and July 23, 1997, respectively, and the Letter of Intent
dated July 25, 1997) and constitutes (along with the documents referred to in
this Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
<PAGE> 64
11.9 DISCLOSURE SCHEDULE
(a) The disclosures in the Disclosure Schedule, and those in any
Supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the body
of this Agreement and those in the Disclosure Schedule (other than an exception
expressly set forth as such in the Disclosure Schedule with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties, which will not be unreasonably withheld,
except that Buyer may assign any of its rights under this Agreement to any
Related Person of Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
<PAGE> 65
11.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Ohio without
regard to conflicts of laws principles.
11.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
Buyer: NationsRent, Inc. Troy:
By:/s/ Gene J. Ostrow /s/ Troy L. Gabriel
----------------------------------- -------------------------------------
Gene J. Ostrow, Vice President Troy L. Gabriel, individually
Sellers: Tom:
/s/ Gary L. Gabriel /s/ Thomas Richardson
- -------------------------------------- -------------------------------------
Gary L. Gabriel, individually Thomas Richardson, individually
Trust Theta: Gary L. Gabriel Grantor Partnership: TTG Properties
Retained Annuity Trust Theta
By:/s/ Gary L. Gabriel By:/s/ Gary L. Gabriel
----------------------------------- -------------------------------------
Gary L. Gabriel, Trustee Gary L. Gabriel, Partner
<PAGE> 66
Trust Alpha: Gary L. Gabriel Grantor By:/s/ Troy L. Gabriel
Retained Annuity Trust Alpha -------------------------------------
Troy L. Gabriel, Partner
By:/s/ Troy L. Gabriel By:/s/ Thomas Richardson
----------------------------------- -------------------------------------
Troy L. Gabriel, Trustee Thomas Richardson, Partner
Trust Beta: Gary L. Gabriel Grantor By:/s/ Kimberly K. Richardson
Retained Annuity Trust Beta -------------------------------------
Kimberly K. Richardson, Partner
By:/s/ Thomas Richardson
-----------------------------------
Thomas Richardson, Trustee
Holding Corporation: Gabriel Trailer
Manufacturing Company, Inc.
By:/s/ Gary L. Gabriel
----------------------------------
Gary L. Gabriel, President
Company: Sam's Equipment Rental, Inc.
By:/s/ Gary L. Gabriel
----------------------------------
Gary L. Gabriel, President
<PAGE> 67
AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This is an amendment ("Amendment") to the Stock Purchase Agreement
("Agreement") dated August 15, 1997, by NationsRent, Inc., a Delaware
corporation ("Buyer"), Gary L. Gabriel, individually ("Gary"), Gary L. Gabriel
as Trustee of the Gary L. Gabriel Grantor Retained Annuity Trust Theta ("Trust
Theta"), Troy L. Gabriel as Trustee of the Gary L. Gabriel Grantor Retained
Annuity Trust Alpha ("Trust Alpha"), Thomas Richardson as Trustee of the Gary L.
Gabriel Grantor Retained Annuity Trust Beta ("Trust Beta" and, collectively with
Trust Theta and Trust Alpha, the "Trusts"; Gary and the Trusts are sometimes
referred to collectively herein as "Sellers"), Troy L. Gabriel, individually
("Troy"), Thomas Richardson, individually ("Tom"), TTG Properties, an Ohio
general partnership (the "Partnership"), Gabriel Trailer Manufacturing Company,
Inc., an Ohio corporation (the "Holding Corporation"), and Sam's Equipment
Rental, Inc., an Ohio corporation (the "Company").
WHEREAS, the Buyer, the Sellers, Troy, Tom, the Partnership, the Holding
Corporation and the Company wish to amend the Agreement as shown by the
following marked changes.
1. The third sentence in the footnote at the end of the Table of Contents
shall be amended as follows:
Prior to the close of business on _______________ August 27, 1997, the
parties agree to negotiate in good faith and finalize agreement on such
Exhibits and Option Prices.
2. The the fourth sentence to the lead-in paragraph of Section 3 shall be
amended as follows:
Prior to the close of business on August 25, 1997 (provided, however,
that with respect to those disclosures necessary to comport Section 3.4
with the Audited Financials, such date shall instead be the later of
September 2, 1997, or three days after substantial completion by Ernst
& Young, LLP of its field work for its audit as contemplated by Section
7.5), (1) Sellers, the Holding Corporation, and the Company will
deliver such part of the Disclosure Schedule and such portions of such
documentation as soon as they are available. Prior to the close of
business on August 29, 1997, (1) as part of its due diligence as
contemplated by Section 7.7, Buyer will review such Disclosure Schedule
and documentation and notify Sellers, Troy, Tom, and the Partnership,
of those matters disclosed in the Disclosure Schedule with respect to
which Buyer proposes Buyer should be entitled to indemnification
pursuant to Section 10.2(e), and (2) if Sellers, Troy, Tom, and the
<PAGE> 68
Partnership fully agree with Buyer's proposals or Buyer elects to waive
the proposals causing disagreement, the condition specified in Section
7.7 will be deemed to have been satisfied with respect to the
Disclosure Schedule and documentation and the Disclosure Schedule shall
be initialed by the parties and attached to this Agreement as if
attached as of the date hereof; and if the parties are unable to agree
with respect to Buyer's proposals, and Buyer has not elected to waive
the proposals causing disagreement, this Agreement shall terminate as
provided in Section 9.1(d).
3. Section 9.1(d) shall be amended as follows:
This Amendment may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Amendment and all of which, when
taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of August 22, 1997.
Buyer: NationsRent, Inc. Troy:
By:/s/ Gene J. Ostrow /s/ Troy L. Gabriel
----------------------------------- --------------------------------------
Gene J. Ostrow, Vice President Troy L. Gabriel, individually
Sellers: Tom:
/s/ Gary L. Gabriel /s/ Thomas Richardson
- -------------------------------------- --------------------------------------
Gary L. Gabriel, individually Thomas Richardson, individually
Trust Theta: Gary L. Gabriel Grantor Partnership: TTG Properties
Retained Annuity Trust Theta
By:/s/ Gary L. Gabriel By:/s/ Gary L. Gabriel
----------------------------------- -----------------------------------
Gary L. Gabriel, Trustee Gary L. Gabriel, Partner
- 2 -
<PAGE> 69
Trust Alpha: Gary L. Gabriel Grantor By:/s/ Troy L. Gabriel
Retained Annuity Trust Alpha -----------------------------------
Troy L. Gabriel, Partner
By:/s/ Troy L. Gabriel By:/s/ Kimberly K. Richardson
----------------------------------- -----------------------------------
Troy L. Gabriel, Trustee Kimberly K. Richardson, Partner
Trust Beta: Gary L. Gabriel Grantor Holding Corporation: Gabriel Trailer
Retained Annuity Trust Beta Manufacturing Company, Inc.
By:/s/ Thomas Richardson By:/s/ Gary L. Gabriel
- -------------------------------------- -----------------------------------
Thomas Richardson, Trustee Gary L. Gabriel, President
Company: Sam's Equipment Rental, Inc.
By:/s/ Gary L. Gabriel
-----------------------------------
Gary L. Gabriel, President
- 3 -
<PAGE> 70
AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This is a second amendment ("Amendment") to the Stock Purchase Agreement
("Agreement") dated August 15, 1997, by NationsRent, Inc., a Delaware
corporation ("Buyer"), Gary L. Gabriel, individually ("Gary"), Gary L. Gabriel
as Trustee of the Gary L. Gabriel Grantor Retained Annuity Trust Theta ("Trust
Theta"), Troy L. Gabriel as Trustee of the Gary L. Gabriel Grantor Retained
Annuity Trust Alpha ("Trust Alpha"), Thomas Richardson as Trustee of the Gary L.
Gabriel Grantor Retained Annuity Trust Beta ("Trust Beta" and, collectively with
Trust Theta and Trust Alpha, the "Trusts"; Gary and the Trusts are sometimes
referred to collectively herein as "Sellers"), Troy L. Gabriel, individually
("Troy"), Thomas Richardson, individually ("Tom"), TTG Properties, an Ohio
general partnership (the "Partnership"), Gabriel Trailer Manufacturing Company,
Inc., an Ohio corporation (the "Holding Corporation"), and Sam's Equipment
Rental, Inc., an Ohio corporation (the "Company").
WHEREAS, Buyer, Sellers, Troy, Tom, the Partnership, the Holding
Corporation, and the Company wish to amend the Agreement as shown by the
following marked changes.
1. The third sentence in the footnote at the end of the Table of Contents
shall be amended as follows:
Prior to the close of business on August 29, 1997, the parties agree to
negotiate in good faith and finalize agreement on such Exhibits and prior
to the close of business on the Closing Date, the parties agree to
negotiate in good faith and finalize agreement on the Option Prices.
2. The date _________________ in the fourth sentence to the lead-in
paragraph of Section 3 shall be amended to instead be "September 5, 1997".
3. The date ___________________ in Section 2.3(i) shall be amended to
instead be "September 12, 1997".
4. Section 9.1(d) shall be amended as follows:
"(d) by (i) mutual consent of Buyer and Sellers, (ii) either Buyer or
Sellers if the parties are unable failure to agree on with respect to Buyer's
proposals as contemplated by the lead-in paragraphs of Section 3 and Buyer has
not elected to waive the proposals causing disagreement, or (iii) either Buyer
or Sellers if the parties are unable to finalize agreement on the Exhibits and
Option Prices as contemplated by the footnote at the end of the Table of
Contents to this Agreement;"
Any references in the Agreement to any sections amended by this Amendment
are hereby deemed to refer to those sections as amended hereby. The Agreement
shall, except as provided
<PAGE> 71
above, remain unchanged and continue in full force and effect. All capitalized
terms used in this Amendment without definition shall have the respective
meanings set forth in the Agreement.
This Amendment may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Amendment and all of which, when
taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of ___________ __, 1997.
Buyer: NationsRent, Inc. Troy:
By: /s/ Gene J. Ostrow /s/ Troy L. Gabriel
----------------------------------- --------------------------------------
Gene J. Ostrow, Vice President Troy L. Gabriel, individually
Sellers: Tom:
/s/ Gary L. Gabriel /s/ Thomas Richardson
- -------------------------------------- --------------------------------------
Gary L. Gabriel, individually Thomas Richardson, individually
Trust Theta: Gary L. Gabriel Grantor Partnership: TTG Properties
Retained Annuity Trust Theta
By: /s/ Gary L. Gabriel By: /s/ Gary L. Gabriel
----------------------------------- -----------------------------------
Gary L. Gabriel, Trustee Gary L. Gabriel, Partner
Trust Alpha: Gary L. Gabriel Grantor By: /s/ Troy L. Gabriel
Retained Annuity Trust Alpha -----------------------------------
Troy L. Gabriel, Partner
By: /s/ Troy L. Gabriel By: /s/ Kimberly K. Richardson
----------------------------------- -----------------------------------
Troy L. Gabriel, Trustee Kimberly K. Richardson, Partner
- 2 -
<PAGE> 72
Trust Beta: Gary L. Gabriel Grantor Holding Corporation: Gabriel Trailer
Retained Annuity Trust Beta Manufacturing Company, Inc.
By: /s/ Thomas Richardson By: /s/ Gary L. Gabriel
- -------------------------------------- -----------------------------------
Thomas Richardson, Trustee Gary L. Gabriel, President
Company: Sam's Equipment Rental, Inc.
By: /s/ Gary L. Gabriel
-----------------------------------
Gary L. Gabriel, President
- 3 -
<PAGE> 73
THIRD AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This is a third amendment ("Amendment") to the Stock Purchase Agreement
("Agreement") dated August 15, 1997, by NationsRent, Inc., a Delaware
corporation ("Buyer"), Gary L. Gabriel, individually ("Gary"), Gary L. Gabriel
as Trustee of the Gary L. Gabriel Grantor Retained Annuity Trust Theta ("Trust
Theta"), Troy L. Gabriel as Trustee of the Gary L. Gabriel Grantor Retained
Annuity Trust Alpha ("Trust Alpha"), Thomas Richardson as Trustee of the Gary L.
Gabriel Grantor Retained Annuity Trust Beta ("Trust Beta" and, collectively with
Trust Theta and Trust Alpha, the "Trusts"; Gary and the Trusts are sometimes
referred to collectively herein as "Sellers"), Troy L. Gabriel, individually
("Troy"), Thomas Richardson, individually ("Tom"), TTG Properties, an Ohio
general partnership (the "Partnership"), Gabriel Trailer Manufacturing Company,
Inc., an Ohio corporation (the "Holding Corporation"), and Sam's Equipment
Rental, Inc., an Ohio corporation (the "Company").
WHEREAS, Buyer, Sellers, Troy, Tom, the Partnership, the Holding
Corporation, and the Company wish to amend the Agreement as follows marked
changes:
The date ___________________ in the fourth sentence to the lead-in
paragraph of Section 3 shall be amended to instead be "the Closing Date".
This Amendment may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Amendment and all of which, when
taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of September 5, 1997.
Buyer: NationsRent, Inc. Troy L. Gabriel
By: /s/ Gene J. Ostrow /s/ Troy L. Gabriel
--------------------------------- --------------------------------------
Gene J. Ostrow, Vice President Troy L. Gabriel, individually
Sellers:
Gary L. Gabriel Thomas Richardson
/s/ Gary L. Gabriel /s/ Thomas Richardson
--------------------------------- --------------------------------------
Gary L. Gabriel, individually Thomas Richardson, individually
<PAGE> 74
Gary L. Gabriel Grantor Retained TTG Properties
Annuity Trust Theta
By: /s/ Gary L. Gabriel By: /s/ Gary L. Gabriel
--------------------------------- ----------------------------------
Gary L. Gabriel, Trustee Gary L. Gabriel, Partner
Gary L. Gabriel Grantor Retained By: /s/ Troy L. Gabriel
Annuity Trust Alpha ----------------------------------
Troy L. Gabriel, Partner
By: /s/ Thomas Richardson
----------------------------------
Thomas Richardson, Partner
By: /s/ Troy L. Gabriel By: /s/ Kimberly K. Richardson
--------------------------------- ----------------------------------
Troy L. Gabriel, Trustee Kimberly K. Richardson, Partner
Gary L. Gabriel Grantor Retained Gabriel Trailer Manufacturing
Annuity Trust Beta Company, Inc.
By: /s/ Thomas Richardson By: /s/ Gary L. Gabriel
--------------------------------- ----------------------------------
Thomas Richardson, Trustee Gary L. Gabriel, President
Sam's Equipment Rental, Inc.
By: /s/ Gary L. Gabriel
----------------------------------
Gary L. Gabriel, President
- 2 -
<PAGE> 75
FOURTH AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This is a fourth amendment ("Amendment") to the Stock Purchase Agreement
("Agreement") dated August 15, 1997, by NationsRent, Inc., a Delaware
corporation ("Buyer"), Gary L. Gabriel, individually ("Gary"), Gary L. Gabriel
as Trustee of the Gary L. Gabriel Grantor Retained Annuity Trust Theta ("Trust
Theta"), Troy L. Gabriel as Trustee of the Gary L. Gabriel Grantor Retained
Annuity Trust Alpha ("Trust Alpha"), Thomas Richardson as Trustee of the Gary L.
Gabriel Grantor Retained Annuity Trust Beta ("Trust Beta" and, collectively with
Trust Theta and Trust Alpha, the "Trusts"; Gary and the Trusts are sometimes
referred to collectively herein as "Sellers"), Troy L. Gabriel, individually
("Troy"), Thomas Richardson, individually ("Tom"), TTG Properties, an Ohio
general partnership (the "Partnership"), Gabriel Trailer Manufacturing Company,
Inc., an Ohio corporation (the "Holding Corporation"), and Sam's Equipment
Rental, Inc., an Ohio corporation (the "Company").
WHEREAS, Buyer, Sellers, Troy, Tom, the Partnership, the Holding
Corporation, and the Company wish to amend the Agreement as follows marked
changes:
The date ____________________ in Section 2.3(i) shall be amended to
instead be "September 19, 1997".
This Amendment may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Amendment and all of which, when
taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of September 12, 1997.
Buyer: NationsRent, Inc. Troy L. Gabriel
By: /s/ Gene J. Ostrow /s/ Troy L. Gabriel
--------------------------------- --------------------------------------
Gene J. Ostrow, Vice President Troy L. Gabriel, individually
Sellers:
Gary L. Gabriel Thomas Richardson
/s/ Gary L. Gabriel /s/ Thomas Richardson
--------------------------------- --------------------------------------
Gary L. Gabriel, individually Thomas Richardson, individually
<PAGE> 76
Gary L. Gabriel Grantor Retained TTG Properties
Annuity Trust Theta
By: /s/ Gary L. Gabriel By: /s/ Gary L. Gabriel
--------------------------------- ----------------------------------
Gary L. Gabriel, Trustee Gary L. Gabriel, Partner
Gary L. Gabriel Grantor Retained By: /s/ Troy L. Gabriel
Annuity Trust Alpha ----------------------------------
Troy L. Gabriel, Partner
By: /s/ Thomas Richardson
----------------------------------
Thomas Richardson, Partner
By: /s/ Troy L. Gabriel By: /s/ Kimberly K. Richardson
--------------------------------- ----------------------------------
Troy L. Gabriel, Trustee Kimberly K. Richardson, Partner
Gary L. Gabriel Grantor Retained Gabriel Trailer Manufacturing
Annuity Trust Beta Company, Inc.
By: /s/ Thomas Richardson By: /s/ Gary L. Gabriel
--------------------------------- ----------------------------------
Thomas Richardson, Trustee Gary L. Gabriel, President
Sam's Equipment Rental, Inc.
By: /s/ Gary L. Gabriel
----------------------------------
Gary L. Gabriel, President
- 2 -
<PAGE> 77
FIFTH AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This is a fifth amendment ("Amendment") to the Stock Purchase Agreement
("Agreement") dated August 15, 1997, by NationsRent, Inc., a Delaware
corporation ("Buyer"), Gary L. Gabriel, individually ("Gary"), Gary L. Gabriel
as Trustee of the Gary L. Gabriel Grantor Retained Annuity Trust Theta ("Trust
Theta"), Troy L. Gabriel as Trustee of the Gary L. Gabriel Grantor Retained
Annuity Trust Alpha ("Trust Alpha"), Thomas Richardson as Trustee of the Gary L.
Gabriel Grantor Retained Annuity Trust Beta ("Trust Beta" and, collectively with
Trust Theta and Trust Alpha, the "Trusts"; Gary and the Trusts are sometimes
referred to collectively herein as "Sellers"), Troy L. Gabriel, individually
("Troy"), Thomas Richardson, individually ("Tom"), TTG Properties, an Ohio
general partnership (the "Partnership"), Gabriel Trailer Manufacturing Company,
Inc., an Ohio corporation (the "Holding Corporation"), and Sam's Equipment
Rental, Inc., an Ohio corporation (the "Company").
WHEREAS, Buyer, Sellers, Troy, Tom, the Partnership, the Holding
Corporation, and the Company wish to amend the Agreement as follows:
Section 2.5 of the Agreement is amended to add a new subsection (h) at the
end thereof as follows:
"(h) If it is ultimately determined that the Unaccrued Taxes Amount should
have been more or less than $2,868,000 (as specified in the
Acknowledgement and Agreement as to Pre-Closing Adjustment), Buyer will
pay or credit or debit (as the case may be) Sellers for the resulting
increase or decrease in the Adjustment Amount (in a manner consistent with
the Closing adjustments to reflect the originally determined Adjustment
Amount)."
A subsection (d) shall be added to the end of the first sentence of
Section 3.4 as follows:
",and (d) an unaudited consolidated balance sheet of the Holding
Corporation and the Company as at August 31, 1997, and the related
unaudited consolidated statements of income for the five months then
ended."
As of the date of this Amendment, the audited consolidated financial
statements of the Holding Corporation and the Company as at March 31, 1997
(including the notes thereto), and the related consolidated statements of
income, changes in stockholders' equity, and cash flow for the fiscal year then
ended, together with the report thereon of Ernst & Young, LLP, independent
certified public accountants, have not been delivered as contemplated by the
second sentence of Section 3.4, but preliminary preaudit financial statements
have been provided to Buyer. Notwithstanding nondelivery of such audited
financial statements, the parties have nevertheless decided to proceed with the
Closing of the Contemplated Transactions. Therefore, the second sentence of
Section 3.4 shall be amended as follows:
<PAGE> 78
"Sellers will deliver to Buyer a preliminary preaudit consolidated balance
sheet of the Holding Corporation and the Company as at March 31, 1997, and
the related consolidated statements of income, changes in stockholders'
equity, and cash flow for the fiscal year then ended";
and the following new Section 11.16 will be added to the Agreement as follows:
11.16 AUDITED FINANCIALS
"Promptly after the Closing, Sellers will use their Best Efforts
(including execution of required audit representation letters) to effect
the delivery to Buyer of an audited consolidated balance sheet of the
Holding Corporation and the Company as at March 31, 1997 (including the
notes thereto), and the related consolidated statements of income, changes
in stockholders' equity, and cash flow for the fiscal year then ended,
together with the report thereon of Ernst & Young LLP, independent
certified public accountants. The aforementioned financial statements and
notes will (i) be complete and correct and consistent with the books and
records of the Holding Corporation and the Company (which books and
records are complete and correct); (ii) be prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby;
and (iii) present fairly the financial condition and the results of
operations, changes in shareholders' equity, and cash flow of the Holding
Corporation and the Company as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with
GAAP."
Section 10.2(e) is hereby deleted in its entirety and substituted with the
following:
"(e) The items set forth in the Disclosure Schedule as follows:
Section 3.1: Listing* of Organization and Good Standing
information
Section 3.3: Listing of Contracts
Section 3.6 Listing of leaseholds
Section 3.7 Listing of Holding Corporation assets
Section 3.8 Listing of sufficiency and condition of
certain assets
Section 3.9 Listing of Accounts Receivable
- -------------------------
* All items designated as a "Listing" herein refer to items required to
be listed by the Agreement and such listed items are not intended to
be exceptions to the representations and warranties contained in
Section 3 of the Agreement for indemnification purposes or otherwise.
- 2 -
<PAGE> 79
Section 3.12 (1)&(3) (disclosure for purposes of avoiding
Sellers', Troy's, Tom's, and the
Partnership's indemnification obligations
therefor not accepted, except to extent
otherwise specifically contemplated by
Section 2.5(g) of the Agreement)
Section 3.13 (disclosure for purposes of avoiding
Sellers', Troy's, Tom's, and the
Partnership's indemnification obligations
therefor not accepted, except to extent
otherwise specifically contemplated by
Section 2.5(g) of the Agreement)
Section 3.15 Listing of Employee Benefits
Section 3.16 (a)(i) (disclosure for purposes of avoiding
Sellers', Troy's, Tom's, and the
Partnership's indemnification obligations
therefor not accepted, except to extent
otherwise specifically contemplated by
Section 2.5(g) of the Agreement)
(a)(ii) (disclosure for purposes of avoiding
Sellers', Troy's, Tom's, and the
Partnership's indemnification obligations
therefor not accepted, except to extent
otherwise specifically contemplated by
Section 2.5(g) of the Agreement)
(a)(iii) (disclosure for purposes of avoiding
Sellers', Troy's, Tom's, and the
Partnership's indemnification obligations
therefor not accepted, except to extent
otherwise specifically contemplated by
Section 2.5(g) of the Agreement)
(b) Listing of Government Authorizations
(b)(i) (disclosure not accepted for purposes
of avoiding Sellers', Troy's, Tom's, and the
Partnership's indemnification obligations
therefor
Section 3.17 (a)(ii) Listing of Collection Accounts
Receivable
(a)(ii) Insurance Proceedings--(disclosure
for purposes of avoiding Sellers', Troy's,
Tom's, and the Partnership's indemnification
obligations therefor not accepted.
- 3 -
<PAGE> 80
Section 3.18 (a)&(b) Listing of certain changes and events
(f),(g)&(h) (disclosure accepted only to
extent the obligations and liabilities of the
Holding Corporation and/or the Company are
specifically expressed in the Disclosure
Schedule)
(k) (disclosure for purposes of avoiding
Sellers', Troy's, Tom's, and the
Partnership's indemnification obligations
therefor not accepted)
(l) (disclosure for purposes of avoiding
Sellers', Troy's, Tom's, and the
Partnership's indemnification obligations
therefor not accepted)
Section 3.19 (a) (disclosure accepted only to extent the
obligations and liabilities of the Holding
Corporation and/or the Company are
specifically expressed in the Disclosure
Schedule)
(d) Listing of Collection Accounts Receivable
Section 3.20 (c) Listing of Loss Experience
Section 3.21 (e) Listing of Environmental matters
Section 3.22 (a) Listing of Employee information
(b) Listing of Chet Gibson contract
Section 3.23 Listing of terminated employees
Section 3.27 Listing of Relationships with Related Persons
Section 3.28 Listing of Customers and Suppliers."
A new Section 3.31 shall be added to the Agreement as follows:
"3.31 ADDITIONAL REPRESENTATIONS AND WARRANTIES
(a) The final payment due on the Cognovit Promissory Note to Samuel E.
Gabriel, Sr. by the Holding Corporation dated March 20, 1990 is July
20, 1998 and no amounts are due or payable or will be required to be
made after that final payment date.
(b) The final payment due on the obligation of the Holding Corporation
to Samuel E. Gabriel, Sr. under the Property Settlement Agreement
dated March 20, 1990 is July 20, 1998, and no amounts are due or
payable or will be required to be made after that final payment
date.
- 4 -
<PAGE> 81
(c) the Agreement among the Company, Big Bird Racing Team (the "Team")
and Jerry Dennis which provides that the Company pay the expenses of
the Team in exchange for sponsorship rights of the Team to the
Company is not an agreement that is binding on the Company and the
Company has no commitment or obligations to fund the Team at any
level.
(d) The Amendment to the Kubota Dealer Sales and Service Agreement with
Kubota Tractor Corporation effective July 15, 1997 will not
adversely affect the ongoing operations of the business as currently
conducted by the Company."
A new Section 11.17 shall be added to the Agreement as follows:
"11.17 UNFILED TAX RETURNS
Sellers, Troy, Tom, and the Partnership acknowledge and agree that all Tax
Returns for the Holding Corporation and/or the Company which are due
during 1997 or before and have not yet been filed will be finalized,
filed, and executed by Gary, Troy, and/or Tom on or prior to September 27,
1997, based mostly upon information developed and work performed prior to
the Closing and that Buyer will not be available to provide any assistance
or oversight with respect thereto. Sellers, Troy, Tom and the Partnership
covenant, represent, and warrant that all such Tax Returns will be true,
correct, and complete and that adequate provision has been made in the
preliminary preaudit financial statements for all Taxes due pursuant to
those Tax Returns."
This Amendment may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Amendment and all of which, when
taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of September ____, 1997.
Buyer: NationsRent, Inc. Troy:
By:/s/ Gene J. Ostrow /s/ Troy L. Gabriel
----------------------------------- --------------------------------------
Gene J. Ostrow, Vice President Troy L. Gabriel, individually
Sellers: Tom:
/s/ Gary L. Gabriel /s/ Thomas Richardson
- -------------------------------------- --------------------------------------
Gary L. Gabriel, individually Thomas Richardson, individually
- 5 -
<PAGE> 82
Trust Theta: Gary L. Gabriel Grantor Partnership: TTG Properties
Retained Annuity Trust Theta
By:/s/ Gary L. Gabriel By:/s/ Gary L. Gabriel
----------------------------------- -----------------------------------
Gary L. Gabriel, Trustee Gary L. Gabriel, Partner
Trust Alpha: Gary L. Gabriel Grantor By:/s/ Troy L. Gabriel
Retained Annuity Trust Alpha -----------------------------------
Troy L. Gabriel, Partner
By:/s/ Troy L. Gabriel By:/s/ Kimberly K. Richardson
----------------------------------- -----------------------------------
Troy L. Gabriel, Trustee Kimberly K. Richardson, Partner
Trust Beta: Gary L. Gabriel Grantor Holding Corporation: Gabriel Trailer
Retained Annuity Trust Beta Manufacturing Company, Inc.
By:/s/ Thomas Richardson By:/s/ Gary L. Gabriel
- -------------------------------------- -----------------------------------
Thomas Richardson, Trustee Gary L. Gabriel, President
Company: Sam's Equipment Rental, Inc.
By:/s/ Gary L. Gabriel
-----------------------------------
Gary L. Gabriel, President
- 6 -
<PAGE> 83
SIXTH AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS SIXTH AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment") is
made and entered into as of September 22,1998 by and among NationsRent, Inc., a
Delaware corporation ("Buyer"), Gary L. Gabriel, individually ("Gary"), Gary L.
Gabriel as Trustee of the Gary L. Gabriel Grantor Retained Annuity Trust Theta
("Trust Theta"), Troy L. Gabriel Grantor Retained Annuity Trust Alpha ("Trust
Alpha"), Thomas Richardson as Trustee of the Gary L. Gabriel Grantor Retained
Annuity Trust Beta ("Trust Beta" and, collectively with Trust Theta and Trust
Alpha, the "Trusts"; Gary and the Trusts are sometimes referred to collectively
herein as "Sellers), Troy I. Gabriel, individually ("Troy"), Thomas Richardson,
individually ("Tom"), TTG Properties, an Ohio general partnership (the
"Partnership"), Gabriel Trailer Manufacturing Company, Inc., an Ohio corporation
(the "Holding Corporation"), and Sam's Equipment Rental, Inc., an Ohio
corporation (the "Company").
RECITALS
The following recitals are representations wit respect to certain
factual matters that form the basis of this Amendment and are an integral part
of this Amendment.
A. Buyers, Sellers, Troy, Tom, the Partnership, the Holding Corporation
and the Company (collectively, the "Parties") are parties to a certain Stock
Purchase Agreement dated as of August 15, 1997, as amended by five amendments
dated as of August 25, 1987, August 29, 1997, September 5, 1997, September 12,
1997 and September 22, 1997, respectively, relating to the purchase and sale of
all of the issued and outstanding shares of capital stock of Gabriel Trailer
Manufacturing Company, Inc., an Ohio corporation (as amended, the "Agreement").
Capitalized terms which are not otherwise defined herein shall have the meanings
assigned to such terms in the Agreement.
C. The Parties desire to further amend the Agreement to evidence the
Parties agreement on the Closing Date to treat the Closing as if it occurred on
August 31, 1997 for financial accounting purposes, notwithstanding the fact that
the actual closing did not occur until September 22, 1997.
AGREEMENT
NOW, THEREFORE, in consideration of the agreement and undertakings of
the Parties to amend the Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
1. All terms and conditions of the Agreement shall remain in full force
and effect without change, except that the following language is hereby added to
the end of Section 2.3 (Closing) of the Agreement:
<PAGE> 84
"The Parties agree that for financial accounting purposes the Closing
shall be deemed to have occurred on August 31, 1997, the effective date
on which Sellers transferred control of the Holding Corporation to
Buyer, notwithstanding that the Closing Date is a later date."
2. This Amendment may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument. The parties hereto may execute this
Amendment by facsimile signature.
[Remainder of this page intentionally left blank]
2
<PAGE> 1
EXHIBIT 10.2
FORM OF PROMISSORY NOTE
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL IT IS SO REGISTERED OR UPON
RECEIPT OF AN OPINION OF COUNSEL, SATISFACTORY TO THE MAKER, THAT SUCH
REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR
TRANSFER.
UNSECURED SUBORDINATED PROMISSORY NOTE
8.5% Subordinated Note $[_________], September [___], 1997
Due 1998
FOR VALUE RECEIVED, NationsRent, Inc., a Delaware corporation
("Maker"), promises to pay to [_______________________] ("Payee"), or registered
assigns, in lawful money of the United States of America, the principal sum of
[_______________] ($[________]), together with interest in arrears on the unpaid
principal balance at an annual rate equal to 8.5%, in the manner provided below.
Interest shall be calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days elapsed.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Stock Purchase Agreement, dated August 15,
1997, among Maker Gary L. Gabriel, individually and as Trustee of the Gary L.
Gabriel Grantor Retained Annuity Trust Theta, Troy L. Gabriel as Trustee of the
Gary L. Gabriel Grantor Retained Annuity Trust Alpha, Thomas Richardson as
Trustee of the Gary L. Gabriel Grantor Retained Annuity Trust Beta, Gabriel
Trailer Manufacturing Company, Inc., an Ohio corporation, and Sam's Equipment
Rental, Inc., an Ohio corporation, and certain other parties (the "Agreement"),
and is subject to the terms and conditions of the Agreement, which are, by this
reference, incorporated herein and made a part hereof. Capitalized terms used in
this Note without definition shall have the respective meanings set forth in the
Agreement.
1. PAYMENTS
1.1 PRINCIPAL AND INTEREST
The principal amount of this Note shall be due and payable on September
22, 1998. Interest on the unpaid principal balance of this Note shall be due and
payable quarterly on December 22, March 22, June 22, and September 22.
<PAGE> 2
1.2 MANNER OF PAYMENT
All payments of principal and interest on this Note shall be made by
check at such other place in the United States of America as Payee shall
designate to Maker in writing or by wire transfer of immediately available funds
to an account designated by Payee in writing. If any payment of principal or
interest on this Note is due on a day which is not a Business Day, such payment
shall be due on the next succeeding Business Day, and such extension of time
shall be taken into account in calculating the amount of interest payable under
this Note. "Business Day" means any day other than a Saturday, Sunday or legal
holiday in the State of Ohio.
1.3 PREPAYMENT
Maker may, without premium or penalty, at any time and from time to
time, prepay all or any portion of the outstanding principal balance due under
this Note, provided that each such prepayment is accompanied by accrued interest
on the amount of principal prepaid calculated to the date of such prepayment.
Any partial prepayments shall be applied to installments of principal in inverse
order of their maturity.
1.4 RIGHT OF SET-OFF
Maker shall have the right to withhold and set-off against any amount
due hereunder the amount of any claim for indemnification or payment of damages
to which Maker may be entitled under the Agreement, as provided in Section 10.5
thereof.
1.5 LATE PAYMENT PENALTY
If any payment of principal and/or interest on this Note is not paid in
full within fifteen (15) Business Days of when it is due, then in addition to
the amount of such payment, there shall be due, and Maker promises to pay, a
late charge in respect of such payment in the amount of five percent (5%) of
such payment.
2. DEFAULTS
2.1 EVENTS OF DEFAULT
The occurrence and continuance of any one or more of the following
events with respect to Maker shall constitute an event of default hereunder
("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal
or interest on this Note and such failure continues for twenty-five (25)
Business Days after Payee notifies Maker thereof in writing; provided, however,
that the exercise by Maker in good faith of its right of set-off pursuant to
Section 1.4 above, whether or not ultimately determined to be justified, shall
not constitute an Event of Default.
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<PAGE> 3
(b) The occurrence and continuance of an Event of Default under
any of the other Promissory Notes beyond any grace, notice or cure period
thereunder.
(c) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
as they become due.
(d) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case, (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties, or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
(e) The failure of Maker to maintain its Net Worth as set forth
under Section 3.2 of this Note.
2.2 NOTICE BY MAKER
Maker shall notify Payee in writing within five days after the
occurrence of any Event of Default of which Maker acquires knowledge.
2.3 REMEDIES
Upon the occurrence of an Event of Default hereunder (unless all Events
of Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
If an Event of Default has occurred under Section 2.1(a) of this Note
and the Payee has elected to exercise its remedy under Section 2.3(i) of this
Note, the entire outstanding principal balance due on this Note together with
all accrued interest thereon remaining unpaid, shall bear interest at the sum of
the then current interest rate payable under this Note plus four percentage
points (4%) per annum from the date of such default until paid.
-3-
<PAGE> 4
3. MISCELLANEOUS
3.1 SENIOR INDEBTEDNESS
The indebtedness evidenced by this Note is, to the extent provided in
the Agreement, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, and this Note is issued subject to the
provisions of the Agreement with respect thereto.
If an Event of Default has occurred under this Note, for so long as any
Senior Indebtedness remains unpaid, and so long as no legal proceedings to
collect on such Senior Indebtedness has been commenced, the Payee shall not
commence or join with any creditor of the Maker other than the holder of the
Senior Indebtedness in commencing any proceedings to collect or enforce its
rights hereunder for a period of 120 days from the occurrence of such Event of
Default; provided, however, that notwithstanding such forbearance of the
commencement of proceedings with respect to an Event of Default, such Event of
Default shall nevertheless be an Event of Default for all other purposes of this
Note and the Payee shall be entitled to pursue all other remedies other than the
commencement of proceedings under the circumstances set forth in this Section.
Furthermore, the Payee agrees to furnish any holder of Senior Indebtedness upon
request a subordination agreement that sets forth the priority rights of the
Payee and the holder of the Senior Indebtedness and prohibits payments to the
Payee that would cause a default under the Senior Indebtedness.
3.2 NET WORTH
The Maker shall not permit its Net Worth to be less than Thirteen
Million Dollars ($13,000,000.00) at any time that this Note is outstanding. For
purposes of this Note, "Net Worth" of the Maker shall mean the total assets of
the Maker less the total liabilities of the Maker as determined in accordance
with GAAP for purposes of balance sheet presentation. Upon Payee's written
request from time to time, Maker shall promptly deliver to Payee a copy of
Maker's most recent financial statements for purposes of verifying Maker's
compliance with the provisions of this paragraph.
3.3 WAIVER
The rights and remedies of Payee under this Note shall be cumulative
and not alternative. No waiver by Payee of any right or remedy under this Note
shall be effective unless in a writing signed by Payee. Neither the failure nor
any delay in exercising any right, power or privilege under this Note will
operate as a waiver of such right, power or privilege and no single or partial
exercise of any such right, power or privilege by Payee will preclude any other
or further exercise of such right, power or privilege or the exercise of any
other right, power or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right of Payee arising out of this Note can be discharged
by Payee, in whole or in part, by a waiver or renunciation of the claim or right
unless in a writing, signed by Payee; (b) no waiver that may be given by Payee
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on Maker will be deemed to be a waiver of any
obligation of Maker or of the right of Payee to take further action without
notice or
-4-
<PAGE> 5
demand as provided in this Note. Maker hereby waives presentment, demand,
protest and notice of dishonor and protest.
3.4 NOTICES
Any notice required or permitted to be given hereunder shall be given
in accordance with Section 11.4 of the Agreement.
3.5 SEVERABILITY
If any provision in this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
3.6 GOVERNING LAW; WAIVER OF JURY
This Note will be governed by the laws of the State of Ohio without
regard to conflicts of laws principles.
THE PAYEE AND MAKER HEREBY VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE PAYEE AND MAKER ARISING OUT
OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN MAKER AND THE PAYEE IN CONNECTION WITH THIS PROMISSORY NOTE.
THIS PROVISION IS A MATERIAL INDUCEMENT TO THE PAYEE TO ENTER INTO THE
TRANSACTION IN WHICH THIS NOTE IS ISSUED. IT SHALL NOT IN ANY WAY AFFECT, WAIVE,
LIMIT, AMEND OR MODIFY THE PAYEE'S ABILITY TO PURSUE ITS REMEDIES CONTAINED
HEREIN.
3.7 PARTIES IN INTEREST
This Note shall bind Maker and its successors and assigns. This Note
shall not be assigned or transferred by Payee without the express prior written
consent of Maker, except by Will or, in default thereof, by operation of law.
3.8 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Note unless otherwise specified.
-5-
<PAGE> 6
All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
MAKER
By:
-----------------------------------------
Title: Gene J. Ostrow, Vice President
-6-
<PAGE> 1
EXHIBIT 10.3
FORM OF PROMISSORY NOTE
NEITHER THIS PROMISSORY NOTE NOR THE SHARES ISSUABLE UPON CONVERSION OF THIS
PROMISSORY NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
PROMISSORY NOTE CANNOT BE SOLD OR TRANSFERRED, AND THE SHARES ISSUABLE UPON
CONVERSION OF THIS PROMISSORY NOTE CANNOT BE SOLD OR TRANSFERRED, UNLESS AND
UNTIL THEY ARE SO REGISTERED OR UPON RECEIPT OF AN OPINION OF COUNSEL,
SATISFACTORY TO THE MAKER, THAT SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE
CIRCUMSTANCES OF SUCH SALE OR TRANSFER.
UNSECURED CONVERTIBLE SUBORDINATED PROMISSORY NOTE
6.5/8.5% Convertible $[__________], September [___], 1997
Subordinated Note
Due 2000
FOR VALUE RECEIVED, NationsRent, Inc., a Delaware corporation
("Company" or "Maker"), promises to pay to [__________________] ("Payee"), in
lawful money of the United States of America, the principal sum of [_________]
($[________]), together with interest in arrears on the unpaid principal balance
in the manner provided below at an annual rate equal to 6.5%, except any period
between the Conversion Date and the Reversion Date (as defined in Section 1.5
herein), during which time interest shall be payable at an annual rate equal to
8.5%. Interest shall be calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days elapsed.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Stock Purchase Agreement, dated August 15,
1997, among Maker Gary L. Gabriel, individually and as Trustee of the Gary L.
Gabriel Grantor Retained Annuity Trust Theta, Troy L. Gabriel as Trustee of the
Gary L. Gabriel Grantor Retained Annuity Trust Alpha, Thomas Richardson as
Trustee of the Gary L. Gabriel Grantor Retained Annuity Trust Beta, Gabriel
Trailer Manufacturing Company, Inc., an Ohio corporation, and Sam's Equipment
Rental, Inc., an Ohio corporation, and certain other parties (the "Agreement"),
and is subject to the terms and conditions of the Agreement, which are, by this
reference, incorporated herein and made a part hereof. Capitalized terms used in
this Note without definition shall have the respective meanings set forth in the
Agreement.
-1-
<PAGE> 2
1. PAYMENTS
1.1 PRINCIPAL AND INTEREST
The principal amount of this Note shall be due and payable on September
22, 2000, and interest will be payable thereon from September 22, 1997,
quarterly on December 22, March 22, June 22, and September 22.
1.2 MANNER OF PAYMENT
All payments of principal and interest on this Note shall be made by
check at such place in the United States of America as Payee shall designate to
Maker in writing or by wire transfer of immediately available funds to an
account designated by Payee in writing. If any payment of principal or interest
on this Note is due on a day which is not a Business Day, such payment shall be
due on the next succeeding Business Day, and such extension of time shall be
taken into account in calculating the amount of interest payable under this
Note. "Business Day" means any day other than a Saturday, Sunday or legal
holiday in the State of Ohio.
1.3 PREPAYMENT
After the later of (a) the expiration of one hundred and eighty days
following the date on which the Company becomes a public company, or (b) the
date on which the closing price of the shares of the Company into which the Note
is convertible has averaged more than 120% of the Conversion Price for a period
of twenty consecutive trading days (the "Prepayment Date"), Maker may, without
premium or penalty, at any time and from time to time, prepay all or any portion
of the outstanding principal balance due under this Note, provided that each
such prepayment is accompanied by accrued interest on the amount of principal
prepaid calculated to the date of such prepayment. Any partial prepayments shall
be applied to installments of principal in inverse order of their maturity.
Prior to the Prepayment Date, Maker shall not be entitled to prepay any portion
of the outstanding principal balance due under this Note.
1.4 RIGHT OF SET-OFF
Maker shall have the right to withhold and set-off against any amount
due hereunder the amount of any claim for indemnification or payment of damages
to which Maker may be entitled under the Agreement, as provided in Section 10.5
thereof.
1.5 CONVERSION
Subject to and upon compliance with the provisions of the Agreement, if
the Company becomes a public company, the holder of this Note is entitled, at
his or its option, at any time on or before the close of business on September
22, 2000, to convert the principal amount of this Note (or any portion of the
principal amount hereof which is $1,000.00 or any integral multiple thereof), at
the principal amount hereof, or of such portion, into fully paid and
nonassessable
-2-
<PAGE> 3
shares (calculated as to each conversion to the nearest 1/1000 of a share) of
common stock of the Company at a conversion price equal to the Company's initial
public offering price (or, if the Company is merged into or otherwise acquired
by or converted into an already existing, publicly held entity ("New Entity"),
at a conversion price equal to the average closing price of the shares of the
New Entity for twenty trading days following the merger) (the "Conversion
Price"). The holder shall surrender this Note, duly endorsed or assigned to the
Company or in blank, to the Company at its office or agency at the address
provided in writing by Company accompanied by written notice to the Company that
the holder hereof elects to convert this Note, or if less than the entire
principal amount hereof is to be converted, the portion hereof to be converted.
No payment or adjustment is to be made on conversion for interest accrued hereon
or for dividends on the common stock issued on conversion. No fractions of
shares or scrip representing fractions of shares will be issued on conversion,
but instead of any fractional interest the Company shall pay a cash adjustment.
In addition, in case of certain consolidations or mergers to which the Company
is a party or the transfer of substantially all of the assets of the Company,
this Note, if then outstanding, will be convertible thereafter, during the
period this Note shall be convertible as specified above, only into the kind and
amount of securities, cash and other property receivable upon the consolidation,
merger or transfer by a holder of the number of shares of common stock into
which this Note might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of common stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares).
If the Company has not become a public company, has not merged, or has
not been otherwise acquired by or converted into a New Entity by March 22, 1999
(the "Conversion Date"), this Note would then pay interest at an annual rate of
8.5% commencing on the next Interest Payment Date following the Conversion Date.
After the Conversion Date but before the close of business on September 22,
2000, the interest rate shall revert to 6.5% per annum as of the date the
Company becomes a public company (the "Reversion Date").
1.6 LATE PAYMENT PENALTY
If any payment of principal and/or interest on this Note is not paid in
full within fifteen (15) Business Days of when it is due, then in addition to
the amount of such payment, there shall be due, and Maker promises to pay, a
late charge in respect of such payment in the amount of five percent (5%) of
such payment.
2. DEFAULTS
2.1 EVENTS OF DEFAULT
The occurrence and continuance of any one or more of the following
events with respect to Maker shall constitute an event of default hereunder
("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal
or interest on this Note and such failure continues for twenty-five (25) days
after Payee notifies Maker thereof in
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writing; provided, however, that the exercise by Maker in good faith of its
right of set-off pursuant to Section 1.4 above, whether or not ultimately
determined to be justified, shall not constitute an Event of Default.
(b) The occurrence and continuance of an Event of Default under
any of the other Promissory Notes beyond any grace, notice or cure period
thereunder.
(c) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
as they become due.
(d) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case, (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties, or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
(e) The failure of Maker to maintain its Net Worth as set forth
under Section 3.2 of this Note.
2.2 NOTICE BY MAKER
Maker shall notify Payee in writing within five days after the
occurrence of any Event of Default of which Maker acquires knowledge.
2.3 REMEDIES
Upon the occurrence of an Event of Default hereunder (unless all Events
of Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
If an Event of Default has occurred under Section 2.1(a) of this Note
and the Payee has elected to exercise its remedy under Section 2.3(i) of this
Note, the entire outstanding principal balance due on this Note together with
all accrued interest thereon remaining unpaid, shall bear interest at the sum of
the then current interest rate payable under this Note plus four percentage
points (4%) per annum from the date of such default until paid.
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3. MISCELLANEOUS
3.1 SENIOR INDEBTEDNESS
The indebtedness evidenced by this Note is, to the extent provided in
the Agreement, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, and this Note is issued subject to the
provisions of the Agreement with respect thereto.
If an Event of Default has occurred under this Note, for so long as any
Senior Indebtedness remains unpaid, and so long as no legal proceedings to
collect on such Senior Indebtedness has been commenced, the Payee shall not
commence or join with any creditor of the Maker other than the holder of the
Senior Indebtedness in commencing any proceedings to collect or enforce its
rights hereunder for a period of 120 days from the occurrence of such Event of
Default; provided, however, that notwithstanding such forbearance of the
commencement of proceedings with respect to an Event of Default, such Event of
Default shall nevertheless be an Event of Default for all other purposes of this
Note and the Payee shall be entitled to pursue all other remedies other than the
commencement of proceedings under the circumstances set forth in this Section.
Furthermore, the Payee agrees to furnish any holder of Senior Indebtedness upon
request a subordination agreement that sets forth the priority rights of the
Payee and the holder of the Senior Indebtedness and prohibits payments to the
Payee that would cause a default under the Senior Indebtedness.
3.2 NET WORTH
The Maker shall not permit its Net Worth to be less than Thirteen
Million Dollars ($13,000,000.00) at any time that this Note is outstanding. For
purposes of this Note, "Net Worth" of the Maker shall mean the total assets of
the Maker less the total liabilities of the Maker as determined in accordance
with GAAP for purposes of balance sheet presentation. Upon Payee's written
request from time to time, Maker shall promptly deliver to Payee a copy of
Maker's most recent financial statements for purposes of verifying Maker's
compliance with the provisions of this paragraph.
3.3 WAIVER
The rights and remedies of Payee under this Note shall be cumulative
and not alternative. No waiver by Payee of any right or remedy under this Note
shall be effective unless in a writing signed by Payee. Neither the failure nor
any delay in exercising any right, power or privilege under this Note will
operate as a waiver of such right, power or privilege and no single or partial
exercise of any such right, power or privilege by Payee will preclude any other
or further exercise of such right, power or privilege or the exercise of any
other right, power or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right of Payee arising out of this Note can be discharged
by Payee, in whole or in part, by a waiver or renunciation of the claim or right
unless in a writing, signed by Payee; (b) no waiver that may be given by Payee
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on Maker will be deemed to be a waiver of any
obligation of Maker or of the right of Payee to take
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<PAGE> 6
further action without notice or demand as provided in this Note. Maker hereby
waives presentment, demand, protest and notice of dishonor and protest.
3.4 NOTICES
Any notice required or permitted to be given hereunder shall be given
in accordance with Section 11.4 of the Agreement.
3.5 SEVERABILITY
If any provision in this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
3.6 GOVERNING LAW; WAIVER OF JURY
This Note will be governed by the laws of the State of Ohio without
regard to conflicts of laws principles.
THE PAYEE AND MAKER HEREBY VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE PAYEE AND MAKER ARISING OUT
OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN MAKER AND THE PAYEE IN CONNECTION WITH THIS PROMISSORY NOTE.
THIS PROVISION IS A MATERIAL INDUCEMENT TO THE PAYEE TO ENTER INTO THE
TRANSACTION IN WHICH THIS NOTE IS ISSUED. IT SHALL NOT IN ANY WAY AFFECT, WAIVE,
LIMIT, AMEND OR MODIFY THE PAYEE'S ABILITY TO PURSUE ITS REMEDIES CONTAINED
HEREIN.
3.7 PARTIES IN INTEREST
This Note shall bind Maker and its successors and assigns. This Note
shall not be assigned or transferred by Payee without the express prior written
consent of Maker, except by Will or, in default thereof, by operation of law.
3.8 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Note unless otherwise specified.
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<PAGE> 7
All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
MAKER
By:
-----------------------------------------
Title: Gene J. Ostrow, Vice President
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<PAGE> 1
EXHIBIT 10.4
FORM OF PROMISSORY NOTE
NEITHER THIS PROMISSORY NOTE NOR THE SHARES ISSUABLE UPON CONVERSION OF THIS
PROMISSORY NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
PROMISSORY NOTE CANNOT BE SOLD OR TRANSFERRED, AND THE SHARES ISSUABLE UPON
CONVERSION OF THIS PROMISSORY NOTE CANNOT BE SOLD OR TRANSFERRED, UNLESS AND
UNTIL THEY ARE SO REGISTERED OR UPON RECEIPT OF AN OPINION OF COUNSEL,
SATISFACTORY TO THE MAKER, THAT SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE
CIRCUMSTANCES OF SUCH SALE OR TRANSFER.
UNSECURED CONTINGENT CONVERTIBLE SUBORDINATED
PROMISSORY NOTE
6.5% Contingent Convertible $[__________], September [__], 1997
Subordinated Note
Due 2000
FOR VALUE RECEIVED, NationsRent, Inc., a Delaware corporation
("Company" or "Maker"), promises to pay to [_______] ("Payee"), in lawful money
of the United States of America, the principal sum of [____________]
($[_______]), together with interest in arrears on the unpaid principal balance
at an annual rate equal to 6.5%, in the manner provided below. Interest shall be
calculated on the basis of a year of 365 or 366 days, as applicable, and charged
for the actual number of days elapsed.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Stock Purchase Agreement, dated August 15,
1997, among Maker Gary L. Gabriel, individually and as Trustee of the Gary L.
Gabriel Grantor Retained Annuity Trust Theta, Troy L. Gabriel as Trustee of the
Gary L. Gabriel Grantor Retained Annuity Trust Alpha, Thomas Richardson as
Trustee of the Gary L. Gabriel Grantor Retained Annuity Trust Beta, Gabriel
Trailer Manufacturing Company, Inc., an Ohio corporation, and Sam's Equipment
Rental, Inc., an Ohio corporation, and certain other parties (the "Agreement"),
and is subject to the terms and conditions of the Agreement, which are, by this
reference, incorporated herein and made a part hereof. Capitalized terms used in
this Note without definition shall have the respective meanings set forth in the
Agreement.
<PAGE> 2
1. PAYMENTS
1.1 PRINCIPAL AND INTEREST
The principal amount of this Note shall be due and payable as follows:
(a) Two Hundred Thousand Dollars ($200,000.00) payable on
September 22, 1998, on the condition that Troy L. Gabriel ("Troy") is
currently employed by the Company on such date. This amount shall be
paid to the Payee outright or, at Payee's election, held by the Company
in escrow (in order to allow such amount to be held for conversion in
accordance with Section 1.5 herein).
(b) Two Hundred Thousand Dollars ($200,000.00) payable on
September 22, 1999 on the condition that Troy is currently employed by
the Company on such date. This amount shall be paid to the Payee
outright or, at Payee's election, held by the Company in escrow (in
order to allow such amount to be held for conversion in accordance with
Section 1.5 herein).
(c) One Million One Hundred Thousand Dollars
($1,100,000.00) payable on September 22, 2000, on the condition that
Troy is currently employed by the Company on such date. This amount
shall be paid to the Payee outright or, at Payee's election, held by
the Company in escrow (in order to allow such amount to be held for
conversion in accordance with Section 1.5 herein).
Interest will be payable thereon from September 22, 1997, quarterly on December
22, March 22, June 22, and September 22.
The payments under the Note would remain due and payable if Troy is not
in the employment of the Company on the above stated anniversary dates for the
reason that his employment was terminated (i) without cause (as defined in the
Employment Agreement among the parties) by the Company, (ii) due to his death or
disability, or (iii) due to a breach under the Employment Agreement by the
Company (an "Acceptable Reason").
1.2 MANNER OF PAYMENT
All payments of principal and interest on this Note shall be made by
check at such place in the United States of America as Payee shall designate to
Maker in writing or by wire transfer of immediately available funds to an
account designated by Payee in writing. If any payment of principal or interest
on this Note is due on a day which is not a Business Day, such payment shall be
due on the next succeeding Business Day, and such extension of time shall be
taken into account in calculating the amount of interest payable under this
Note. "Business Day" means any day other than a Saturday, Sunday or legal
holiday in the State of Ohio.
1.3 PREPAYMENT
After the later of (a) the expiration of one hundred and eighty days
following the date on which the Company becomes a public company, or (b) the
date on which the closing price of the
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<PAGE> 3
shares of the Company into which the Note is convertible has averaged more than
120% of the Conversion Price for a period of twenty consecutive trading days
(the "Prepayment Date"), Maker may, without premium or penalty, at any time and
from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by accrued interest on the amount of principal prepaid calculated to the date of
such prepayment. Any partial prepayments shall be applied to installments of
principal in inverse order of their maturity. Prior to the Prepayment Date,
Maker shall not be entitled to prepay any portion of the outstanding principal
balance due under this Note.
1.4 RIGHT OF SET-OFF
Maker shall have the right to withhold and set-off against any amount
due hereunder the amount of any claim for indemnification or payment of damages
to which Maker may be entitled under the Agreement, as provided in Section 10.5
thereof.
1.5 CONVERSION
Subject to and upon compliance with the provisions of the Agreement, if
the Company becomes a public company, the holder of this Note is entitled, at
his or its option, at any time on or before the close of business on September
22, 2000, to convert up to, but not exceeding an amount equal to the principal
amount of this Note that has become due and payable (or any portion of the
principal amount hereof that has become due and payable which is $1,000.00 or
any integral multiple thereof), at the principal amount hereof, or of such
portion, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/1000 of a share) of common stock of the Company at a
conversion price equal to the Company's initial public offering price or, if the
Company is merged into or otherwise acquired by or converted into an already
existing, publicly held entity ("New Entity"), at a conversion price equal to
the average closing price of the shares of the New Entity for twenty trading
days following the merger. The holder shall surrender this Note, duly endorsed
or assigned to the Company or in blank, to the Company at its office or agency
at the address provided in writing by the Company, accompanied by written notice
to the Company that the holder hereof elects to convert this Note, or if less
than the entire principal amount hereof is to be converted, the portion hereof
to be converted. No payment or adjustment is to be made on conversion for
interest accrued hereon or for dividends on the common stock issued on
conversion. No fractions of shares or scrip representing fractions of shares
will be issued on conversion, but instead of any fractional interest the Company
shall pay a cash adjustment. In addition, in case of certain consolidations or
mergers to which the Company is a party or the transfer of substantially all of
the assets of the Company, this Note, if then outstanding, will be convertible
thereafter, during the period this Note shall be convertible as specified above,
only into the kind and amount of securities, cash and other property receivable
upon the consolidation, merger or transfer by a holder of the number of shares
of common stock into which this Note might have been converted immediately prior
to such consolidation, merger or transfer (assuming such holder of common stock
failed to exercise any rights of election and received per share the kind and
amount received per share by a plurality of non-electing shares).
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<PAGE> 4
1.6 LATE PAYMENT PENALTY
If any payment of principal and/or interest on this Note is not paid in
full within fifteen (15) Business Days of when it is due, then in addition to
the amount of such payment, there shall be due, and Maker promises to pay, a
late charge in respect of such payment in the amount of five percent (5%) of
such payment.
2. DEFAULTS
2.1 EVENTS OF DEFAULT
The occurrence and continuance of any one or more of the following
events with respect to Maker shall constitute an event of default hereunder
("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal
or interest on this Note and such failure continues for twenty-five (25) days
after Payee notifies Maker thereof in writing; provided, however, that the
exercise by Maker in good faith of its right of set-off pursuant to Section 1.4
above, whether or not ultimately determined to be justified, shall not
constitute an Event of Default.
(b) The occurrence and continuance of an Event of Default under
any of the other Promissory Notes beyond any grace, notice or cure period
thereunder.
(c) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
as they become due.
(d) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case, (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties, or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
(e) The failure of Maker to maintain its Net Worth as set forth
under Section 3.2 of this Note.
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<PAGE> 5
2.2 NOTICE BY MAKER
Maker shall notify Payee in writing within five days after the
occurrence of any Event of Default of which Maker acquires knowledge.
2.3 REMEDIES
Upon the occurrence of an Event of Default hereunder (unless all Events
of Default have been cured or waived by Payee), Payee may, so long as Troy is
then employed by the Company or Troy is not in the employment of the Company for
an Acceptable Reason, elect at its option to, (i) by written notice to Maker at
any time after the earlier of (A) expiration of one year from the date of such
Event of Default (assuming such Event of Default has not been cured or waived),
(B) termination of Troy's employment for an Acceptable Reason, or (C) September
22, 2000, declare the entire unpaid principal balance of this Note, together
with all accrued interest thereon, immediately due and payable regardless of any
prior forbearance, and (ii) exercise any and all rights and remedies available
to it under applicable law, including, without limitation, the right to collect
from Maker all sums due under this Note. Maker shall pay all reasonable costs
and expenses incurred by or on behalf of Payee in connection with Payee's
exercise of any or all of its rights and remedies under this Note, including,
without limitation, reasonable attorneys' fees.
If an Event of Default has occurred under Section 2.1(a) and either (a)
the Payee has elected to exercise its remedy under ss.2.3(i), or (b) the Payee
otherwise elects to give Maker notice of the Payee's exercise of its right to
increase the interest rate under this provision, then the entire outstanding
principal balance due on this Note together with all accrued interest thereon
remaining unpaid, shall bear interest at the sum of the then current interest
rate payable under this Note plus four percentage points (4%) per annum from the
date of such Event of Default until paid.
3. MISCELLANEOUS
3.1 SENIOR INDEBTEDNESS
The indebtedness evidenced by this Note is, to the extent provided in
the Agreement, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, and this Note is issued subject to the
provisions of the Agreement with respect thereto.
If an Event of Default has occurred under this Note, for so long as any
Senior Indebtedness remains unpaid, and so long as no legal proceedings to
collect on such Senior Indebtedness has been commenced, the Payee shall not
commence or join with any creditor of the Maker other than the holder of the
Senior Indebtedness in commencing any proceedings to collect or enforce its
rights hereunder for a period of 120 days from the occurrence of such Event of
Default; provided, however, that notwithstanding such forbearance of the
commencement of proceedings with respect to an Event of Default, such Event of
Default shall nevertheless be an Event of Default for all other purposes of this
Note and the Payee shall be entitled to pursue all other remedies other than
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<PAGE> 6
the commencement of proceedings under the circumstances set forth in this
Section. Furthermore, the Payee agrees to furnish any holder of Senior
Indebtedness upon request a subordination agreement that sets forth the priority
rights of the Payee and the holder of the Senior Indebtedness and prohibits
payments to the Payee that would cause a default under the Senior Indebtedness.
3.2 NET WORTH
The Maker shall not permit its Net Worth to be less than Thirteen
Million Dollars ($13,000,000.00) at any time that this Note is outstanding. For
purposes of this Note, "Net Worth" of the Maker shall mean the total assets of
the Maker less the total liabilities of the Maker as determined in accordance
with GAAP for purposes of balance sheet presentation. Upon Payee's written
request from time to time, Maker shall promptly deliver to Payee a copy of
Maker's most recent financial statements for purposes of verifying Maker's
compliance with the provisions of this paragraph.
3.3 WAIVER
The rights and remedies of Payee under this Note shall be cumulative
and not alternative. No waiver by Payee of any right or remedy under this Note
shall be effective unless in a writing signed by Payee. Neither the failure nor
any delay in exercising any right, power or privilege under this Note will
operate as a waiver of such right, power or privilege and no single or partial
exercise of any such right, power or privilege by Payee will preclude any other
or further exercise of such right, power or privilege or the exercise of any
other right, power or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right of Payee arising out of this Note can be discharged
by Payee, in whole or in part, by a waiver or renunciation of the claim or right
unless in a writing, signed by Payee; (b) no waiver that may be given by Payee
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on Maker will be deemed to be a waiver of any
obligation of Maker or of the right of Payee to take further action without
notice or demand as provided in this Note. Maker hereby waives presentment,
demand, protest and notice of dishonor and protest.
3.4 NOTICES
Any notice required or permitted to be given hereunder shall be given
in accordance with Section 11.4 of the Agreement.
3.5 SEVERABILITY
If any provision in this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
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3.6 GOVERNING LAW; WAIVER OF JURY
This Note will be governed by the laws of the State of Ohio without
regard to conflicts of laws principles.
THE PAYEE AND MAKER HEREBY VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE PAYEE AND MAKER ARISING OUT
OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN MAKER AND THE PAYEE IN CONNECTION WITH THIS PROMISSORY NOTE.
THIS PROVISION IS A MATERIAL INDUCEMENT TO THE PAYEE TO ENTER INTO THE
TRANSACTION IN WHICH THIS NOTE IS ISSUED. IT SHALL NOT IN ANY WAY AFFECT, WAIVE,
LIMIT, AMEND OR MODIFY THE PAYEE'S ABILITY TO PURSUE ITS REMEDIES CONTAINED
HEREIN.
3.7 PARTIES IN INTEREST
This Note shall bind Maker and its successors and assigns. This Note
shall not be assigned or transferred by Payee without the express prior written
consent of Maker, except by Will or, in default thereof, by operation of law.
3.8 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Note unless otherwise specified.
All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
MAKER
By:
-----------------------------------------
Title: Gene J. Ostrow, Vice President
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<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of September
22, 1997 by Sam's Equipment Rental, Inc., an Ohio corporation (the "Employer"),
and Gary L. Gabriel, an individual resident of St. James, Florida (the
"Executive").
RECITALS
Concurrently with the execution and delivery of this Agreement,
NationsRent, Inc., a Delaware corporation (the "Buyer") is purchasing from the
Executive (individually and as Trustee of the Gary L. Gabriel Grantor Retained
Annuity Trust Theta) and certain other parties ("Sellers"), all of the issued
and outstanding shares of Gabriel Trailer Manufacturing Company, Inc., an Ohio
corporation ("Holding Corporation"), whose only asset is all of the outstanding
capital stock of the Employer, pursuant to a Stock Purchase Agreement dated
August 15, 1997 among the Buyer, Sellers, Troy L. Gabriel, Thomas Richardson,
TTG Properties, Holding Corporation, and the Employer (the "Stock Purchase
Agreement"). The Buyer and the Employer desire the Executive's continued
employment with the Employer, and the Executive wishes to accept such
employment, upon the terms and conditions set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.
"AGREEMENT"-this Employment Agreement, as amended from time to time.
"BASIC COMPENSATION"-Salary and Benefits.
"BENEFITS"-as defined in Section 3.1(B).
"BOARD OF DIRECTORS"-the board of directors of the Employer.
"CONFIDENTIAL INFORMATION"-any and all:
(a) trade secrets concerning the business and affairs of the
Employer, product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples, inventions
and ideas, past, current, and planned research and development, current and
planned manufacturing or distribution methods and processes,
<PAGE> 2
customer lists, current and anticipated customer requirements, price lists,
market studies, business plans, computer software and programs (including object
code and source code), computer software and database technologies, systems,
structures, and architectures (and related formulae, compositions, processes,
improvements, devices, know-how, inventions, discoveries, concepts, ideas,
designs, methods and information), and any other information, however
documented, that is a trade secret within the meaning of the Uniform Trade
Secrets Act as adopted by Ohio and codified at Ohio Revised Code ss.ss. 1333.61
to 1333.69 and as otherwise defined under Ohio law; and
(b) information concerning the business and affairs of the
Employer (which includes historical financial statements, financial projections
and budgets, historical and projected sales, capital spending budgets and plans,
the names and backgrounds of key personnel, personnel training and techniques
and materials), however documented; and
(c) notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Employer containing or based. in whole or in
part, on any information included in the foregoing.
"DISABILITY"-as defined in Section 6.2.
"EFFECTIVE DATE"-the date stated in the first paragraph of the
Agreement.
"EMPLOYEE INVENTION"-any idea, invention, technique, modification,
process, or improvement (whether patentable or not), any industrial design
(whether registerable or not), any mask work, however fixed or encoded, that is
suitable to be fixed, embedded or programmed in a semiconductor product (whether
recordable or not), and any work of authorship (whether or not copyright
protection may be obtained for it) created, conceived, or developed by the
Executive, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Employer, and any such item created
by the Executive, either solely or in conjunction with others, following
termination of the Executive's employment with the Employer, that is based upon
or uses Confidential Information. "EMPLOYMENT PERIOD"-the term of the
Executive's employment under this Agreement.
"FISCAL YEAR"-the Employer's fiscal year, as it exists on the Effective
Date or as changed from time to time.
"FOR CAUSE"-as defined in Section 6.3.
"PERSON"-any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.
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"POST-EMPLOYMENT PERIOD"-as defined in Section 8.2.
"PROPRIETARY ITEMS"-as defined in Section 7.2(A)(iv).
"SALARY"-as defined in Section 3.1(A).
"WITHOUT CAUSE"-as defined in Section 6.4.
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
The Employer hereby employs the Executive, and the Executive hereby
accepts employment by the Employer, upon the terms and conditions set forth in
this Agreement.
2.2 TERM
Subject to the provisions of Section 6, the term of the Executive's
employment under this Agreement will be three years, beginning on the Effective
Date and ending on the third anniversary of the Effective Date. In addition,
following the initial three year term, this Agreement will automatically be
renewed for a term of one year unless the party who wishes to terminate the
Agreement has given the other party 60 days' written notice of termination.
2.3 DUTIES
The Executive will have such duties as are assigned or delegated to the
Executive by the Board of Directors or Chief Executive Officer, and will
initially serve as an officer of the Employer. The Executive will be committed
to devote at least 50% of what would be considered normal full-time employment
for an executive in a similar position and will use his good faith efforts to
promote the success of the Employer's business, and will cooperate fully with
the Board of Directors in the advancement of the best interests of the Employer.
Notwithstanding the foregoing, the Executive may perform his duties hereunder in
Ohio or from his Florida residence or at other locations in the continental
United States in pursuit of new opportunities for expansion or enhancement of
the Employer's business. Nothing in this Section 2.3 will prevent the Executive
from engaging in additional activities in connection with personal investments
and community affairs that are not inconsistent with the Executive's duties
under this Agreement. If the Executive is elected as an officer of any of its
affiliates, the Executive will fulfill his duties as such officer without
additional compensation.
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3. COMPENSATION
3.1 BASIC COMPENSATION
(A) Salary. The Executive will be paid an annual salary of
$100,000.00, subject to adjustment as provided below (the "Salary"), which will
be payable in equal periodic installments according to the Employer's customary
payroll practices, but no less frequently than monthly.
(B) Benefits. The Executive will, during the Employment Period, be
permitted to participate in such pension, profit sharing, bonus, life insurance,
hospitalization, major medical, disability, and other employee benefit plans of
the Employer that may be in effect from time to time, to the extent the
Executive is eligible under the terms of those plans (collectively, the
"Benefits")
4. FACILITIES AND EXPENSES
4.1 GENERAL
The Employer will furnish the Executive office space, equipment,
supplies, and such other facilities and personnel as the Employer deems
necessary or appropriate for the performance of the Executive's duties under
this Agreement. Office space for the Executive in Florida will be provided by
the Executive at his Florida residence.
4.2 AUTOMOBILE
The Employer will continue to provide the leased vehicle to the Executive that
is currently in the Executive's possession until the Executive turns in the
vehicle at the end of the lease or at a mutually agreed upon time. Thereafter,
the Employer will provide the Executive with a replacement automobile or an
allowance, for a replacement automobile which will be the same as or equivalent
to the Executive's existing automobile. The Employer will pay or reimburse the
Executive for all reasonable operating costs of such vehicle, including but not
limited to insurance, fuel and maintenance. The Executive is required to assure
that liability insurance is maintained on any automobile used in connection with
the Employer's business, including excess liability (umbrella) insurance
coverage in an amount not less than two million dollars per occurrence, with
underlying insurance coverage as required by such excess liability insurance
policy, whether through the Employer or otherwise. The Executive must file
expense reports with respect to such automobile in accordance with the
Employer's policies.
4.3 PERSONAL USE OF RENTAL EQUIPMENT
During the Employment Period, the Executive shall be entitled to
rent-free personal use of Rental Equipment for up to $30,000 per year (based on
the Employer's published rate list); provided, however, that any such Rental
Equipment so used by the Executive shall be used at the reasonable convenience
of the Employer and not at such time as it would otherwise be utilized by
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the Employer for its business purposes. The Executive shall have such
obligations and responsibilities with respect to such Rental Equipment to the
same extent and on the same terms and conditions as a customer of the Employer
would have with respect to such Rental Equipment.
5. VACATIONS AND HOLIDAYS
The Executive's vacation time is included in the 50% of the time that
the Executive is not expected to be working.
6. TERMINATION
6.1 EVENTS OF TERMINATION
The Employment Period and the Executive's Basic Compensation, and any
and all other rights of the Executive under this Agreement or otherwise as an
employee of the Employer will terminate (except as otherwise provided in this
Section 6):
(a) upon the death of the Executive;
(b) upon the disability of the Executive (as defined in Section
6.2) immediately upon notice from either party to the other;
(c) for cause (as defined in Section 6.3), immediately upon notice
from the Employer to the Executive, or at such later time as such notice may
specify; or
(d) without cause (as defined in Section 6.4), immediately upon
notice from the Employer to the Executive, or at such later time as such notice
may specify.
6.2 DEFINITION OF DISABILITY
For purposes of Section 6.1, the Executive will be deemed to have a
"disability" if, for physical or mental reasons, the Executive is unable to
perform the essential functions of the Executive's duties under this Agreement
for 120 consecutive days, or 180 days during any twelve month period, as
determined in accordance with this Section 6.2. The disability of the Executive
will be determined by a medical doctor selected by written agreement of the
Employer and the Executive upon the request of either party by notice to the
other. If the Employer and the Executive cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Executive has a disability. The determination of the medical doctor selected
under this Section 6.2 will be binding on both parties. The Executive must
submit to a reasonable number of examinations by the medical doctor making the
determination of disability under this Section 6.2, and the Executive hereby
authorizes the disclosure and release to the Employer of such determination and
all supporting medical records. If the Executive is not legally competent, the
Executive's legal guardian or duly authorized attorney-in-fact will act in the
Executive's stead,
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under this Section 6.2, for the purposes of submitting the Executive to the
examinations, and providing the authorization of disclosure, required under this
Section 6.2.
6.3 DEFINITION OF "FOR CAUSE"
For purposes of Section 6.1, the phrase "for cause" means: (a) the
Executive's material breach of this Agreement (so long as the Employer shall
have delivered to the Executive within a reasonable time (not less than 30 days)
prior to notice of termination a notice of proposed termination specifying in
reasonable detail the basis therefor and the Executive shall have failed prior
to the expiration of such reasonable period of time to have effected a cure
thereof in all material respects); (b) the appropriation (or attempted
appropriation) of a material business opportunity of the Employer, including
attempting to secure or securing any personal profit in connection with any
transaction entered into on behalf of the Employer; (c) the misappropriation (or
attempted misappropriation) of any of the Employer's funds or property; or (d)
the conviction of, the indictment for (or its procedural equivalent), or the
entering of a guilty plea or plea of no contest with respect to, any non-traffic
related offense that is a felony, the equivalent thereof, or any other crime
with respect to which imprisonment is a possible punishment.
6.4 DEFINITION OF "WITHOUT CAUSE"
For purposes of Section 6.1, the phrase "without cause" means that the
Employer terminates this Agreement for any reason other than for cause.
6.5 TERMINATION PAY
Effective upon the termination of this Agreement, the Employer will be
obligated to pay the Executive (or, in the event of his death, his designated
beneficiary as defined below) only such compensation as is provided in this
Section 6.5, and in lieu of all other amounts and in settlement and complete
release of all claims the Executive may have against the Employer. For purposes
of this Section 6.5, the Executive's designated beneficiary will be such
individual beneficiary or trust, located at such address, as the Executive may
designate by notice to the Employer from time to time or, if the Executive fails
to give notice to the Employer of such a beneficiary, the Executive's estate.
Notwithstanding the preceding sentence, the Employer will have no duty, in any
circumstances, to attempt to open an estate on behalf of the Executive, to
determine whether any beneficiary designated by the Executive is alive or to
ascertain the address of any such beneficiary, to determine the existence of any
trust, to determine whether any person or entity purporting to act as the
Executive's personal representative (or the trustee of a trust established by
the Executive) is duly authorized to act in that capacity, or to locate or
attempt to locate any beneficiary, personal representative, or trustee.
(A) Termination by the Employer Without Cause. If the Employer
terminates this Agreement without cause, the Employer will pay the Executive the
Executive's Salary for the remainder, if any, of the calendar month in which
such termination is effective and for twelve consecutive calendar months
thereafter.
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(B) Termination by the Employer for Cause. If the Employer
terminates this Agreement for cause, the Executive will be entitled to receive
his Salary only through the date such termination is effective.
(C) Termination upon Disability. If this Agreement is terminated
by either party as a result of the Executive's disability, as determined under
Section 6.2, the Employer will pay the Executive his Salary through the
remainder of the calendar month during which such termination is effective and
for the lesser of (i) six consecutive months thereafter, or (ii) the period
until disability insurance benefits commence under the disability insurance
coverage furnished by the Employer to the Executive.
(D) Termination upon Death. If this Agreement is terminated
because of the Executive's death, the Executive will be entitled to receive his
Salary through the end of the calendar month in which his death occurs.
(E) Benefits. The Executive's accrual of, or participation in
plans providing for, the Benefits will cease at the effective date of the
termination of this Agreement, and the Executive will be entitled to accrued
Benefits pursuant to such plans only as provided in such plans. The Executive
will not receive, as part of his termination pay pursuant to this Section 6, any
payment or other compensation for any vacation, holiday, sick leave, or other
leave unused on the date the notice of termination is given under this
Agreement.
7. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that (a) during the Employment Period and as
a part of his employment, the Executive will be afforded access to Confidential
Information; (b) public disclosure of such Confidential Information could have
an adverse effect on the Employer and its business; (c) because the Executive
possesses substantial technical expertise and skill with respect to the
Employer's business, the Employer desires to obtain exclusive ownership of each
Employee Invention, and the Employer will be at a substantial competitive
disadvantage if it fails to acquire exclusive ownership of each Employee
Invention; (d) the Buyer has required that the Executive make the covenants in
this Section 7 as a condition to its purchase of the Employer's stock; and (e)
the provisions of this Section 7 are reasonable and necessary to prevent the
improper use or disclosure of Confidential Information and to provide the
Employer with exclusive ownership of all Employee Inventions.
7.2 AGREEMENTS OF THE EXECUTIVE
In consideration of the compensation and benefits to be paid or
provided to the Executive by the Employer under this Agreement, the Executive
covenants as follows:
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(A) Confidentiality.
(i) During and following the Employment Period, the
Executive will hold in confidence the Confidential Information and will
not disclose it to any person except with the specific prior written
consent of the Employer or except as otherwise expressly permitted by
the terms of this Agreement.
(ii) Any trade secrets of the Employer will be entitled to
all of the protections and benefits under the Uniform Trade Secrets Act
as adopted by Ohio and codified at Ohio Revised Code ss.ss.1333.61 to
1333.69 and as otherwise defined under Ohio law and any other
applicable law. If any information that the Employer deems to be a
trade secret is found by a court of competent jurisdiction not to be a
trade secret for purposes of this Agreement, such information will,
nevertheless, be considered Confidential Information for purposes of
this Agreement. The Executive hereby waives any requirement that the
Employer submit proof of the economic value of any trade secret or post
a bond or other security.
(iii) None of the foregoing obligations and restrictions
applies to any part of the Confidential Information that the Executive
demonstrates was or became generally available to the public other than
as a result of a disclosure by the Executive.
(iv) The Executive will not remove from the Employer's
premises (except to the extent such removal is for purposes of the
performance of the Executive's duties at home or while traveling, or
except as otherwise specifically authorized by the Employer) any
document, record, notebook, plan, model, component, device, or computer
software or code, whether embodied in a disk or in any other form
(collectively, the "Proprietary Items"). The Executive recognizes that,
as between the Employer and the Executive, all of the Proprietary
Items, whether or not developed by the Executive, are the exclusive
property of the Employer. Upon termination of this Agreement by either
party, or upon the request of the Employer during the Employment
Period, the Executive will return to the Employer all of the
Proprietary Items in the Executive's possession or subject to the
Executive's control, and the Executive shall not retain any copies,
abstracts, sketches, or other physical embodiment of any of the
Proprietary Items.
(B) Employee Inventions. Each Employee Invention will belong
exclusively to the Employer. The Executive acknowledges that all of the
Executive's writing, works of authorship, and other Employee Inventions are
works made for hire and the property of the Employer, including any copyrights,
patents, or other intellectual property rights pertaining thereto. If it is
determined that any such works are not works made for hire, the Executive hereby
assigns to the Employer all of the Executive's right, title, and interest,
including all rights of copyright, patent, and other intellectual property
rights, to or in such Employee Inventions. The Executive covenants that he will
promptly:
(i) disclose to the Employer in writing any Employee
Invention;
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(ii) assign to the Employer or to a party designated by
the Employer, at the Employer's request and without additional
compensation, all of the Executive's right to the Employee Invention
for the United States and all foreign jurisdictions;
(iii) execute and deliver to the Employer such
applications, assignments, and other documents as the Employer may
request in order to apply for and obtain patents or other registrations
with respect to any Employee Invention in the United States and any
foreign jurisdictions;
(iv) sign all other papers necessary to carry out the
above obligations; and
(v) give testimony and render any other assistance but
without expense to the Executive in support of the Employer's rights to
any Employee Invention.
7.3 DISPUTES OR CONTROVERSIES
The Executive recognizes that should a dispute or controversy arising
from or relating to this Agreement be submitted for adjudication to any court,
arbitration panel, or other third party, the preservation of the secrecy of
Confidential Information may be jeopardized. All pleadings, documents,
testimony, and records relating to any such adjudication will be maintained in
secrecy and will be available for inspection by the Employer, the Executive, and
their respective attorneys and experts, who will agree, in advance and in
writing, to receive and maintain all such information in secrecy, except as may
be limited by them in writing.
8. NON-COMPETITION AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that: (a) the services to be performed by
him under this Agreement are of a special, unique, unusual, extraordinary, and
intellectual character; (b) the Employer competes with other businesses that are
or could be located in any part of the United States; (c) the Buyer has required
that the Executive make the covenants set forth in this Section 8 as a condition
to the Buyer's purchase of the Executive's stock in the Employer; and (d) the
provisions of this Section 8 are reasonable and necessary to protect the
Employer's business.
8.2 COVENANTS OF THE EXECUTIVE
In consideration of the acknowledgments by the Executive, and in
consideration of the compensation and benefits to be paid or provided to the
Executive by the Employer, the Executive covenants that he will not, directly or
indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period, engage or invest
in, own, manage, operate, finance, control, or participate in the ownership,
management, operation, financing, or control of, be
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employed by, associated with, or in any manner connected with, lend the
Executive's name or any similar name to, lend Executive's credit to or render
services or advice to, any business whose products or activities compete in
whole or in part with the products or activities of the Employer anywhere within
the United States; provided, however, that the Executive may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934;
(b) whether for the Executive's own account or for the account of
any other person, at any time during the Employment Period and the
Post-Employment Period, solicit business of the same or similar type being
carried on by the Employer, from any person known by the Executive to be a
customer of the Employer, whether or not the Executive had personal contact with
such person during and by reason of the Executive's employment with the
Employer;
(c) whether for the Executive's own account or the account of any
other person (i) at any time during the Employment Period and the
Post-Employment Period, solicit, employ, or otherwise engage as an employee,
independent contractor, or otherwise, any person who is or was an employee of
the Employer at any time during the Employment Period or in any manner induce or
attempt to induce any employee of the Employer to terminate his employment with
the Employer; or (ii) at any time during the Employment Period and for five
years thereafter, interfere with the Employer's relationship with any person,
including any person who at any time during the Employment Period was an
employee, contractor, supplier, or customer of the Employer; or
(d) at any time during or after the Employment Period, disparage
the Employer or any of its shareholders, directors, officers, employees, or
agents.
For purposes of this Section 8.2, the term "Post-Employment Period"
means such period of time after the Employment Period, if any, as shall extend
to the fifth anniversary of the Closing Date.
If any covenant in this Section 8.2 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Executive.
The period of time applicable to any covenant in this Section 8.2 will
be extended by the duration of any violation by the Executive of such covenant.
The Executive will, while the covenant under this Section 8.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's employer. The Buyer or the
Employer may notify such employer that the Executive
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is bound by this Agreement and, at the Employer's election, furnish such
employer with a copy of this Agreement or relevant portions thereof.
9. GENERAL PROVISIONS
9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
The Executive acknowledges that the injury that would be suffered by
the Employer as a result of a breach of the provisions of this Agreement
(including any provision of Sections 7 and 8) would be irreparable and that an
award of monetary damages to the Employer for such a breach would be an
inadequate remedy. Consequently, the Employer will have the right, in addition
to any other rights it may have, to obtain injunctive relief to restrain any
breach or threatened breach or otherwise to specifically enforce any provision
of this Agreement, and the Employer will not be obligated to post bond or other
security in seeking such relief. Without limiting the Employer's rights under
this Section 9 or any other remedies of the Employer, if the Executive breaches
any of the provisions of Section 7 or 8, the Employer will have the right to
cease making any payments otherwise due to the Executive under this Agreement.
9.2 COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT COVENANTS
The covenants by the Executive in Sections 7 and 8 are essential
elements of this Agreement, and without the Executive's agreement to comply with
such covenants, the Buyer would not have purchased the Executive's stock under
the Stock Purchase Agreement and the Employer would not have entered into this
Agreement or employed or continued the employment of the Executive. The Employer
and the Executive have independently consulted their respective counsel and have
been advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the
Employer.
The Executive's covenants in Sections 7 and 8 are independent covenants
and the existence of any claim by the Executive against the Employer under this
Agreement or otherwise, or against the Buyer, will not excuse the Executive's
breach of any covenant in Section 7 or 8.
If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Sections 7 and 8.
9.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE
The Executive represents and warrants to the Employer that the
execution and delivery by the Executive of this Agreement do not, and the
performance by the Executive of the Executive's obligations hereunder will not,
with or without the giving of notice or the passage of time, or both: (a)
violate any judgment, writ, injunction, or order of any court, arbitrator, or
governmental agency applicable to the Executive; or (b) conflict with, result in
the breach of any provisions of
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or the termination of, or constitute a default under, any agreement to which the
Executive is a party or by which the Executive is or may be bound.
9.4 OBLIGATIONS CONTINGENT ON PERFORMANCE
The obligations of the Employer hereunder, including its obligation to
pay the compensation provided for herein, are contingent upon the Executive's
performance of the Executive's obligations hereunder.
9.5 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by either party in
exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
9.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be binding
upon, the parties hereto and their respective successors, assigns, heirs, and
legal representatives, including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.
9.7 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
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If to Employer: Sam's Equipment Rental, Inc.
c/o NationsRent, Inc.
James L. Kirk
7130 County Road 254
Findlay, OH 45840
With a copy to: Squire, Sanders & Dempsey L.L.P.
1300 Huntington Center
41 South High Street
Columbus, Ohio 43215
Attention: Patrick J. Dugan
Facsimile No.: (614) 365-2499
If to the Executive: Gary L. Gabriel
3327 Vacation Lane
St. James, FL 33956
With a copy to: Kemp, Schaeffer, Rowe & Lardiere Co., L.P.A.
88 West Mound Street
Columbus, Ohio 43215
Attention: Michael N. Schaeffer
Facsimile No.: (614) 469-7170
9.8 ENTIRE AGREEMENT; AMENDMENTS
This Agreement, the Stock Purchase Agreement, and the documents
executed in connection with the Stock Purchase Agreement, contain the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof. This Agreement may not
be amended orally, but only by an agreement in writing signed by the parties
hereto.
9.9 GOVERNING LAW
This Agreement will be governed by the laws of the State of Ohio
without regard to conflicts of laws principles.
9.10 RESOLUTION OF DISPUTES
(a) The parties desire to avoid and settle without litigation
future disputes which may arise between them concerning the rights, duties and
obligations of the parties under this Agreement. Accordingly, any such dispute
shall be settled by arbitration administered by the American Arbitration
Association under its Arbitration Rules and the Supplemental Procedures for
Large, Complex Disputes (hereinafter "Rules") then in effect; provided, however,
that any
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party may seek injunctive or other similar equitable relief from any court of
competent jurisdiction pending settlement of the underlying dispute by such
arbitration.
(b) Three arbitrators shall be appointed in accordance with the
Rules. The place of arbitration shall be Columbus, Ohio and a stenographic
record shall be made of any arbitration hearing. The award rendered by the
arbitrators shall be in writing and shall be based on applicable law and
judicial precedent. Unless the parties otherwise agree, the award shall include
the findings of fact and conclusions of law on which the award is based.
Judgment on such award may be entered in any court having jurisdiction thereof.
(c) Upon the application by any party to a court for an order
confirming, modifying or vacating the award, the court shall have the power to
review whether, as a matter of law based on the findings of fact determined by
the arbitrator, the award should be confirmed, modified or vacated in order to
correct any errors of law made by the arbitrator. In order to effectuate such
judicial review limited to issues of law, the parties agree (and shall so
stipulate to the court) that the findings of fact made by the arbitrator shall
be final and binding on the parties and shall serve as the facts to be submitted
to and relied on by the court in determining the extent to which the award
should be confirmed, modified or vacated.
(d) A request by one party for arbitration of any dispute subject
to arbitration shall be made in writing to the American Arbitration Association
and a copy thereof shall be sent to the other party. The party requesting
arbitration shall pay any deposit required by the American Arbitration
Association subject to reimbursement, if required, from the other party in
accordance with any award by the arbitrators.
9.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
9.12 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
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9.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.
EMPLOYER: EXECUTIVE:
SAM'S EQUIPMENT RENTAL, INC.
By: /s/ Gene J. Ostrow /s/ Gary L. Gabriel
------------------------------- ----------------------------------
Gene J. Ostrow, President Gary L. Gabriel
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EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
Agreement entered into on December 8, 1997, between NationsRent of
Ohio, Inc., a Delaware corporation (the "Buyer"), and R. and R. Rental, Inc., an
Ohio corporation (the "Seller"). The Buyer and the Seller are referred to
collectively herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer will
purchase substantially all of the assets and assume certain of the liabilities
of the Seller in return for cash and a promissory note.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
SS.1. DEFINITIONS.
"Acquired Assets" means all right, title, and interest in and to those
assets of the Seller relating to the Business including without limitation those
items of tangible and intangible personal property including Rental Equipment
and Inventory, and all those other assets of the Seller used in the Business
(such as machinery, equipment, materials, supplies, furniture, automobiles,
trucks, tractors, trailers, leases, subleases and rights thereunder, agreements,
contracts, accounts, notes, and other receivables, the right to use the name "R.
and R. Rental" or any variation thereof, claims, prepayments, refunds, causes of
action, rights of recovery, rights of set off and rights of recoupment,
franchises, assignable approvals, assignable permits, assignable licenses,
orders, assignable registrations, assignable certificates, and other similar
rights obtained from governments and governmental agencies that are assignable,
books, records, ledgers, files, documents, correspondence, and lists), all as
set forth in Schedule A attached hereto; provided, however, that the Acquired
Assets shall not include any Excluded Assets.
"Adjustment" has the meaning set forth in ss.2(c) below.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Person specified.
"Approved Operations" has the meaning set forth in ss.5(h) below.
"Assumed Liabilities" means the Liabilities of the Seller and any of
the Seller's obligations assumed by the Buyer under any leases, contracts,
agreements or commitments relating to the conduct of the Business, all as set
forth in Schedule B attached hereto.
"Business" means the sales and rental business of the Seller.
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"Buyer" has the meaning set forth in the preface above.
"Buyer's Disclosure Schedule" has the meaning set forth in ss.4 below.
"Buyer Note" has the meaning set forth in ss.2(c) below.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments).
"Closing" has the meaning set forth in ss.2(f) below.
"Closing Date" has the meaning set forth in ss.2(f) below.
"Confidential Information" means any information concerning the
Business that is not already generally available to the public.
"Enforceability Exceptions" means the exceptions that enforceability
may be limited by applicable bankruptcy, insolvency or other similar laws from
time to time in effect which affect the enforcement of creditors' rights and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
"Excluded Assets" means (i) all Cash, (ii) the corporate charter,
taxpayer and other identification numbers, seals, minute books, stock transfer
books, blank stock certificates, and other documents relating to the
organization, maintenance, and existence of the Seller as a corporation, (iii)
any of the rights of the Seller under this Agreement (or under any side
agreement between the Seller on the one hand and the Buyer on the other hand
entered into on or after the date of this Agreement), (iv) the Facilities Real
Estate, (v) the Seller's Tax returns, financial statements and supporting
schedules and work papers, and (vi) any rights of indemnity with respect to
Liabilities which are not Assumed Liabilities.
"Facilities Real Estate" means, collectively, the Seller's real
property leasehold interests relating to its two facilities located at (A) 3663
Pearl Road, Medina, Ohio and (B) 5162 Akron-Cleveland Road, Peninsula, Ohio.
"Financial Statements" has the meaning set forth in ss.3(g) below.
"Indemnified Party" has the meaning set forth in ss.7(d) below.
"Indemnifying Party" has the meaning set forth in ss.7(d) below.
"Interim Balance Sheet" means the balance sheet contained within the
Interim Financial Statements.
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"Interim Financial Statements" has the meaning set forth in ss.3(g)
below.
"Interim Fiscal Month End" has the meaning set forth in ss.3(g) below.
"Inventory" means all equipment and other items of the Seller held for
retail sale by the Seller to its customers.
"Leases" has the meaning set forth in ss.2(d) below.
"Lessor" means Ries, the owner of the Facilities Real Estate and the
lessor under the Leases.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"NationsRent" means NationsRent, Inc., the parent company of the Buyer.
"NationsRent Statements" has the meaning set forth in ss.4(d).
"Ordinary Course of Business" means the ordinary course of the Business
consistent with past custom and practice.
"Parties" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Purchase Price" has the meaning set forth in ss.2(c) below.
"Rental Equipment" means all machinery, equipment, tools, supplies, and
other similar tangible personal property of the Seller held for rental by the
Seller to its customers.
"Ries" means Donald P. Ries, an individual residing in the State of
Ohio.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other secured interest.
"Seller" has the meaning set forth in the preface above.
"Seller's Disclosure Schedule" has the meaning set forth in ss.3 below.
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"Seller's Knowledge" means actual knowledge of the Stockholder after
reasonable investigation including without limitation discussions with all
officers and all persons functioning in a supervisory and/or managerial capacity
with respect to the Business.
"Stockholder" means Ries, the sole legal and beneficial shareholder of
all of the outstanding shares of the Seller.
"Subsidiary" means any corporation with respect to which the Seller (or
a Subsidiary thereof) owns a majority of the common stock or has the power to
vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Internal Revenue
Code ss.59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Third Party Claim" has the meaning set forth in ss.7(d) below.
SS.2. BASIC TRANSACTION.
(A) PURCHASE AND SALE OF ACQUIRED ASSETS. On and subject to the
terms and conditions of this Agreement, at the Closing the Buyer will purchase
from the Seller, and the Seller will sell, assign, transfer, convey, and agree
to deliver to the Buyer, all of the Acquired Assets for the consideration
specified below in this ss.2.
(B) ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, at the Closing the Buyer agrees to assume and
become responsible for all of the Assumed Liabilities. The Buyer will not assume
or have any responsibility, however, with respect to any other obligation or
Liability of the Seller not included within the definition of Assumed
Liabilities.
(C) PURCHASE PRICE. The Buyer hereby agrees to pay to the Seller a
purchase price of Eight Million Dollars ($8,000,000.00) (the "Purchase Price")
by delivering on the Closing Date: (i) cash in the amount of Six Million Dollars
($6,000,000.00), subject to the Adjustment (defined below), if any, by wire
transfer or delivery of other immediately available funds acceptable to the
Seller; and (ii) a duly executed promissory note issued by NationsRent (the
"Buyer Note") in the form of Exhibit A attached hereto in the original principal
amount of Two Million Dollars ($2,000,000.00); provided, however, that the cash
portion of the Purchase Price shall be, if applicable, adjusted (A) down dollar
for dollar in the amount, if any, by which the book value of the Acquired Assets
as of the date hereof, disregarding depreciation applicable in the Ordinary
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Course of Business with respect to the Acquired Assets from October 1, 1997
through the date hereof, is less than Six Million One Hundred Twenty-Two
Thousand Dollars ($6,122,000.00) or (B) up dollar for dollar in the amount, if
any, by which the book value of the Acquired Assets as of the date hereof,
disregarding depreciation applicable in the Ordinary Course of Business with
respect to the Acquired Assets from October 1, 1997 through the date hereof, is
greater than Six Million Five Hundred Twenty-Two Thousand Dollars
($6,522,000.00) (the "Adjustment"). Immediately prior to the Closing, the Seller
and the Buyer shall agree upon the book value of the Acquired Assets as of the
Closing Date, disregarding depreciation applicable in the Ordinary Course of
Business with respect to the Acquired Assets from October 1, 1997 through the
date of the Closing, and such agreed upon book value shall be set forth on
Schedule G attached hereto and initialed by the Parties.
(D) LEASE OF FACILITIES REAL ESTATE. At the Closing, the Buyer and
the Lessor shall enter into one or more lease agreements in the form of Exhibit
B attached hereto with respect to the Facilities Real Estate (the "Leases").
(E) ALLOCATION. The Seller and the Buyer agree to allocate the
Purchase Price among the Acquired Assets for all purposes (including financial
accounting and tax purposes) in accordance with the allocation schedule attached
hereto as Schedule C and further agree to sign and file a Form 8594 "Asset
Acquisition Statement" under Section 1060 of the Internal Revenue Code with
respect to the transaction contemplated by this Agreement that reflects the
amounts set forth in said Schedule C.
(F) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Squire,
Sanders & Dempsey L.L.P. in Columbus, Ohio commencing at 10:00 a.m. local time
on December 10, 1997 or such other date and time as the Parties may mutually
determine (the "Closing Date").
(G) DELIVERIES. At the Closing (i) the Seller shall deliver to the
Buyer the various certificates, instruments, and documents as required herein
and as otherwise reasonably requested by the Buyer and its counsel; (ii) the
Buyer shall deliver to the Seller the various certificates, instruments, and
documents as required herein and as otherwise reasonably requested by the Seller
and its counsel; (iii) the Seller shall execute, acknowledge (if appropriate),
and deliver to the Buyer such instruments of sale, transfer, conveyance, and
assignment as the Buyer and its counsel reasonably may request; (iv) the Buyer
shall execute, acknowledge (if appropriate), and deliver to the Seller such
instruments of assumption as the Seller and its counsel reasonably may request;
(v) the Seller shall deliver to the Buyer an Agreement with the Stockholder
relating to non-compete and confidentiality in the the form of Exhibit C
attached hereto; and (vi) the Buyer shall deliver to the Seller the Purchase
Price as specified in ss.2(c) above.
SS.3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants to the Buyer that, except as set forth in the disclosure
schedule of the Seller to be attached to this Agreement and initialed by the
Parties at the Closing (the "Seller's Disclosure Schedule"), the statements
contained in this ss.3 shall be correct and complete as of the Closing Date. The
Seller's
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Disclosure Schedule shall be arranged in paragraphs corresponding to the
lettered paragraphs contained in this ss.3.
(A) ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(B) AUTHORIZATION OF TRANSACTION. The Seller has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the foregoing, the
board of directors of the Seller and the Seller's Stockholder has duly
authorized the execution, delivery and performance of this Agreement by the
Seller. This Agreement constitutes the valid and legally binding obligation of
the Seller, enforceable in accordance with its terms and conditions, except for
the Enforceability Exceptions.
(C) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject, (ii) violate any
provision of the articles of incorporation or regulations of the Seller, or
(iii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Seller is a party or by
which it is bound or to which any of the Acquired Assets are subject (or result
in the imposition of any Security Interest upon any of the Acquired Assets). The
Seller does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in ss.2 above).
(D) BROKERS' FEES. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(E) TITLE TO ACQUIRED ASSETS. The Seller has and hereby transfers
to the Buyer good and marketable title to, or a valid leasehold interest in, the
items of tangible personal property included in the Acquired Assets free and
clear of all Security Interests.
(F) SUBSIDIARIES. The Seller has no Subsidiaries.
(G) FINANCIAL MATTERS. Attached hereto as Schedule D are the
following financial statements for the Seller (collectively, the "Financial
Statements"): (i) compiled balance sheets and statements of income, as of and
for the fiscal year ended December 31, 1996, and (ii) compiled balance sheets
and statements of income (the "Interim Financial Statements") as of and for the
nine months ended September 30, 1997 (the "Interim Fiscal Month End"). The
Financial Statements (including the notes, if any, thereto) present fairly the
financial condition of the Seller as of such dates and the results of operations
of the Seller for such periods and in all material
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respects are consistent with the books and records of the Seller (which books
and records in all material respects are correct and complete).
(H) UNDISCLOSED LIABILITIES. To Seller's Knowledge, the Seller has
no Liability relating to the Business (and there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Seller giving rise to any such Liability), except
for Liabilities which have arisen after the Interim Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
(I) LEGAL COMPLIANCE. To Seller's Knowledge, the Seller has
complied with and is not in violation of any applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state and local governments (and any relevant
agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
it alleging any failure so to comply.
(J) CONDUCT OF BUSINESS; NO ADVERSE CHANGE. Since the Interim
Fiscal Month End, the Seller has (i) operated the Business in the Ordinary
Course of Business and not made or obligated itself to make any acquisition or
disposition other than in the Ordinary Course of Business, (ii) caused the
Business to function in a good and efficient manner in keeping with past
practices and (iii) operated the Business in such a way as to avoid any material
adverse effect upon the Business or the operations of the Business or the good
name, good will and reputation of the Business. To Seller's Knowledge, since the
Interim Fiscal Month End, there has not been any material adverse change in the
Business or the financial condition, operations, results of operations, or
future prospects of the Business. Without limiting the generality of the
foregoing, since the Interim Fiscal Month End:
(A) the Seller has not imposed any Security Interest upon
any of the Acquired Assets; and
(B) the Seller has not made any material change in the
manner of business or operations of the Business (including without
limitation any sale or liquidation of any assets of the Business other
than in the Ordinary Course of Business).
(K) INVENTORY. Paragraph (k) of the Seller's Disclosure Schedule
lists all Inventory, which Inventory is being purchased "AS IS" and carries with
it any and all implied and/or express warranties of the manufacturer thereof. To
Seller's Knowledge, the quantities of each item of Inventory are not excessive,
but are reasonable in the present circumstances of the Business.
(L) CONTRACTS. Paragraph (l) of the Seller's Disclosure Schedule
lists all contracts, including the following contracts and other agreements, to
which the Seller is a party:
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(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for
lease payments in excess of $3,000.00 per annum;
(ii) any agreement (or group of related agreements) for
the purchase or sale of machinery, equipment or supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year or involve consideration in excess of $5,000.00;
(iii) any agreement where Seller is involved in a
partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which the Seller has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation,
in excess of $5,000.00 or under which the Seller has imposed a Security
Interest on any of the Acquired Assets;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $5,000.00 or providing severance benefits;
and
(vii) any other agreement (or group of related agreements)
the performance of which involves consideration over the term thereof
in excess of $5,000.00.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in Paragraph (l) of the Seller's Disclosure Schedule
and a written summary setting forth the terms and conditions of each oral
agreement, if any, referred to in Paragraph (l) of the Seller's Disclosure
Schedule. With respect to each such agreement, to Seller's Knowledge: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(B) the consummation of the transactions contemplated hereby (including the
assignments and assumptions referred to in ss.2 above) will not prevent the
agreement from continuing to be legal, valid, binding, enforceable, and in full
force and effect on identical terms; (C) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement; and (D) no party has repudiated any provision of the agreement.
(M) LITIGATION. Paragraph (m) of the Seller's Disclosure Schedule
sets forth each instance in which the Seller or any of its Affiliates (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge which materially affects or could materially affect the Business or (ii)
is a party or is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasijudicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator which materially affects
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or could materially affect the Business. To Seller's Knowledge, none of the
actions, suits, proceedings, hearings, and investigations set forth in Paragraph
(m) of the Seller's Disclosure Schedule could result in any material adverse
change in the Business or the financial condition, operations, results of
operations, or future prospects of the Business. To Seller's Knowledge, neither
the directors nor the officers (and employees with responsibility for litigation
matters) of the Seller has any reason to believe that any such action, suit,
proceeding, hearing, or investigation may be brought or threatened against the
Seller or any of its Affiliates.
(N) WARRANTIES. The Inventory being sold to Buyer hereunder or
that has been sold or delivered by the Seller prior to the Closing includes any
and all warranties of the manufacturers of such items and any applicable implied
warranties of merchantability, and the Rental Equipment being sold to Buyer
hereunder or that has been rented and delivered by the Seller prior to the
Closing includes no warranties, express or implied, other than an offer to
replace or substitute for such item of Rental Equipment if it fails to perform
while being leased/rented by customers of the Seller. Paragraph (n) of the
Seller's Disclosure Schedule includes copies of the standard terms and
conditions of sale or lease for the Seller (containing any applicable guaranty,
warranty, and indemnity provisions).
(O) PRODUCT LIABILITY. To Seller's Knowledge, the Seller has no
Liability (and, to Seller's Knowledge, there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Seller giving rise to any Liability) arising out of
any injury to individuals or property as a result of the ownership, possession,
or use of any Inventory or Rental Equipment sold, leased, or delivered by the
Seller.
(P) RENTAL EQUIPMENT. All Rental Equipment is in working condition
and adequate for its intended use, subject to normal wear and tear, and has been
maintained in accordance with normal industry practice. All such Rental
Equipment has been depreciated for book purposes on a straight line basis. To
Seller's Knowledge, the quantities of each item of Rental Equipment are not
excessive, but are reasonable in the present circumstances of the Business.
(Q) DISCLOSURE. The representations and warranties contained in
this ss.3 do not contain any material untrue statement of fact or omit to state
any material fact necessary in order to make the statements and information
contained in this ss.3 not materially misleading.
SS.4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Seller that, except as set forth in the
disclosure schedule of the Buyer to be attached to this Agreement and initialed
by the Parties at the Closing (the "Buyer's Disclosure Schedule"), the
statements contained in this ss.4 shall be correct and complete as of the
Closing Date. The Buyer's Disclosure Schedule shall be arranged in paragraphs
corresponding to the lettered paragraphs contained in this ss.4.
(A) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
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(B) AUTHORIZATION OF TRANSACTION. The Buyer has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the foregoing, the
board of directors of the Buyer has duly authorized the execution, delivery and
performance of this Agreement by the Buyer. This Agreement constitutes the valid
and legally binding obligation of the Buyer, enforceable in accordance with its
terms and conditions, except for the Enforceability Exceptions.
(C) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject, (ii) violate any
provision of the certificate of incorporation or the by-laws of the Buyer, or
(iii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Buyer is a party or by
which it is bound or to which any of its assets is subject. The Buyer does not
need to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement (including
the assignments and assumptions referred to in ss.2 above).
(D) NATIONSRENT STATEMENTS. Attached hereto as Schedule E are
certain financial statements of NationsRent (collectively, the "NationsRent
Statements"). The NationsRent Statements (including the notes, if any, thereto)
present fairly the financial condition of NationsRent as of such dates and the
results of the operations of NationsRent for such periods and in all material
respects are consistent with the books and records of NationsRent (which books
and records in all material respects are correct and complete).
(E) BROKERS' FEES. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
SS.5. POST-CLOSING COVENANTS. The Parties agree as follows with
respect to the period following the Closing.
(A) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties shall take such further action (including the execution and
delivery of such further instruments and documents) as the other Party
reasonably may request, at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under ss.7
below). The Seller acknowledges and agrees that from and after the Closing the
Buyer shall be entitled upon reasonable advance notice to review all documents,
books, records (including Tax records), agreements, and other relevant
information of the Seller relating to the Business. The Buyer
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acknowledges and agrees that from and after the Closing the Seller shall be
entitled upon reasonable advance notice to have access to the relevant computers
and computer systems and relevant books and records of the Buyer relating to the
Business, and such assistance from the Buyer's employees as may be required, for
the purpose of permitting the Seller to satisfy any financial or Tax reporting
requirements and to obtain customer collection information for payment of
pre-Closing commissions.
(B) LITIGATION SUPPORT. Excepting disputes between the Parties, in
the event and for so long as any Party actively is contesting or defending
against any action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving the Seller and its
Affiliates, the other Party shall cooperate with the contesting or defending
Party and its counsel in the contest or defense, make available its personnel,
and provide such testimony and access to its books and records as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under ss.7 below).
(C) TRANSITION. The Seller shall change its name to remove "R. and
R. Rental" from its name within thirty (30) days after the Closing. Also, the
Seller shall refer all customer inquiries relating to the Business to the Buyer
from and after the Closing.
(D) CONFIDENTIALITY. The Seller shall treat and hold as
confidential all of the Confidential Information and refrain from using any of
the Confidential Information except in connection with this Agreement. In the
event that the Seller is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, the Seller shall notify the Buyer promptly of the request or
requirement so that the Buyer, at its expense, may seek an appropriate
protective order or waive compliance with the provisions of this ss.5(d). If, in
the absence of a protective order or the receipt of a waiver hereunder, the
Seller is, on the advice of its counsel, compelled to disclose any Confidential
Information, the Seller may disclose the Confidential Information; provided,
however, that the Seller shall use its best efforts to obtain, at the reasonable
request of the Buyer and at the Buyer's expense, an order or other assurance
that confidential treatment shall be accorded to such portion of the
Confidential Information required to be disclosed as the Buyer shall reasonably
designate.
(E) COVENANT NOT TO COMPETE. For a period of five years from and
after the Closing Date, neither the Seller nor any of its Affiliates (which for
the purposes of this ss.5(e) only shall not include Stein, Inc. or any
Affiliates of Stein, Inc.) shall engage directly or indirectly in any business
similar to the Business of the Seller as of the Closing Date in any area within
a 250-mile radius of the Facilities Real Estate; provided, however, that
ownership of less than 1% of the outstanding stock of any publicly traded
corporation shall not be deemed to be engaging solely by
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<PAGE> 12
reason thereof in any of its businesses. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this ss.5(e) 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.
(F) SALES TAXES. The Buyer shall be responsible for any and all
sales Taxes incurred as a result of the transactions contemplated by this
Agreement.
(G) EMPLOYEE OBLIGATIONS; CONTINUATION OF EMPLOYEE HEALTH
INSURANCE.
(i) Each employee of the Seller as of the Closing Date
and all of the obligations of the Seller to each such employee for
accrued vacation and other such benefits which shall be assumed by the
Buyer and shall survive the Closing are set forth in Schedule F hereto.
(ii) The Buyer shall hire, at will or otherwise and on
such terms as are determined by the Buyer in its sole discretion, (A)
as of the Closing Date, all salaried and hourly employees of the Seller
who are actively employed by the Seller immediately prior to the
Closing Date, and (B) at the expiration of their leaves of absence, all
salaried and hourly employees of the Seller on disability, pregnancy,
military or other approved leaves of absence from the Seller
immediately prior to the Closing Date; provided, however, that the
Buyer shall have no obligation to continue for any period of time the
employment of any such person so hired by the Buyer.
(iii) The Buyer shall provide health benefits on an
uninterrupted basis to the Seller's employees identified on Schedule F
hereto.
SS.6. CONDITIONS TO OBLIGATION TO CLOSE. The Closing of this
Agreement and of the transactions contemplated herein shall be subject to the
preparation and delivery of the Buyer's Disclosure Schedule, the Seller's
Disclosure Schedule, the Schedules and the Exhibits required hereunder, all of
which shall be in form and substance mutually agreeable to the Parties.
SS.7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(A) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Subject to the limitations contained herein, the representations,
warranties and covenants of the Buyer and the Seller contained in this Agreement
shall survive the Closing and continue in full force and effect until expiration
of the second (2nd) anniversary of the Closing. After
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<PAGE> 13
such expiration, any claim by a Party hereto based upon a breach of any such
representation, warranty or covenant shall be of no further force and effect,
except to the extent a Party has asserted a reasonable claim for any such breach
prior to such expiration, in which event any representation, warranty or
covenant to which such claim relates shall survive with respect to such claim
until such claim is resolved.
(B) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) In the event that the Seller breaches any of its
representations, warranties, and covenants contained in this Agreement,
the Seller agrees to indemnify the Buyer from and against any losses
the Buyer may suffer through and after the date of the claim for
indemnification resulting from, arising out of, relating to, in the
nature of, or caused by the breach.
(ii) The Seller agrees to indemnify the Buyer from and
against any losses the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by:
(A) any Liability of the Seller for unpaid
Taxes, with respect to any Tax year or portion thereof ending
on or before the Closing Date (or for any Tax year beginning
before and ending after the Closing Date to the extent
allocable to the portion of such period beginning before and
ending on the Closing Date) including without limitation any
Taxes assessed as a result of any audit of the Seller; and
(B) any other Liability of the Seller which is
not an Assumed Liability (including any Liability of the
Seller that becomes a Liability of the Buyer under any common
law doctrine of de facto merger or successor liability, or
otherwise by operation of law).
(C) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER.
(i) In the event that the Buyer breaches any of its
representations, warranties, and covenants contained in this Agreement,
the Buyer agrees to indemnify the Seller from and against any losses
the Seller may suffer through and after the date of the claim for
indemnification resulting from, arising out of, relating to, in the
nature of, or caused by the breach.
(ii) The Buyer agrees to indemnify the Seller from and
against any losses the Seller may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Buyer's operation
of the Seller's Business at any time after Closing and for any Assumed
Liability.
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<PAGE> 14
(D) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter which may give rise to
a claim for indemnification (a "Third Party Claim") against the other
Party (the "Indemnifying Party") under this ss.7, then the Indemnified
Party shall promptly notify the Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
in notifying the Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) The Indemnifying Party shall have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party shall indemnify the Indemnified Party
from and against any losses the Indemnified Party may suffer resulting
from, arising out of, relating to, or caused by the Third Party Claim,
(B) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Party shall have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, and
(C) the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently. Each Party agrees that the counsel
representing the other Party with respect to this Agreement is
reasonably satisfactory for purposes of defending a Third Party Claim
hereunder.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with ss.7(d)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party
Claim, (B) the Indemnified Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably), and (C) the Indemnified Party shall
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim seeking only money damages negotiated
by the Indemnifying Party.
(iv) In the event any of the conditions in ss.7(d)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, the Indemnifying Party in
connection therewith), (B) the Indemnifying Party shall reimburse the
Indemnified Party promptly and periodically for the reasonable costs of
defending against the Third Party Claim (including reasonable
attorneys' fees and expenses), and (C) the Indemnifying Party shall
remain responsible for any losses the Indemnified Party may suffer
resulting from, arising out of,
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<PAGE> 15
relating to, in the nature of, or caused by the Third Party Claim to
the fullest extent provided in this ss.7.
(E) OTHER INDEMNIFICATION PROVISIONS.
(i) The rights of the Parties hereto for indemnification
shall be their sole and exclusive rights with respect to any and all
claims arising out of a breach of the representations, warranties and
covenants contained in this Agreement.
(ii) No right of indemnification may be asserted hereunder
until an Indemnified Party's aggregate claims exceed $40,000 and then
only to the extent such Indemnified Party's aggregate claims exceed
$40,000.
SS.8. MISCELLANEOUS.
(A) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(B) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they have related in any way
to the subject matter hereof.
(C) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer may (i) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(D) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(E) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(F) NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered
15
<PAGE> 16
or certified mail, return receipt requested, postage prepaid, and addressed to
the intended recipient as set forth below:
If to the Seller: Copy to:
R. and R. Rental, Inc. Buckingham, Doolittle & Burroughs
1929 East Royalton Road A Legal Professional Association
Broadview Heights, Ohio 44147 50 S. Main Street
Attn: James Conlon P.O. Box 1500
Akron, Ohio 44309
Attn: Robert W. Malone, Esq.
If to the Buyer: Copy to:
NationsRent, Inc. Squire, Sanders & Dempsey L.L.P.
50 West Broad Street 1300 Huntington Center
Suite 3100 41 South High Street
Columbus, Ohio 43215 Columbus, Ohio 43215
Attn: Jeffrey E. Levine Attn: Patrick J. Dugan, Esq.
Vice President
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(G) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Ohio without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
Ohio.
(H) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(I) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of
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<PAGE> 17
the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction.
(J) EXPENSES. Each of the Parties shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(K) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(L) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(M) SPECIFIC PERFORMANCE. The Seller acknowledges and agrees that
the Buyer would be damaged irreparably in the event any of the provisions of
ss.5(c), (d) or (e) of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, the Seller agrees that
the Buyer shall be entitled to, notwithstanding the provisions of ss.8(n) below,
an injunction or injunctions to prevent breaches of ss.ss.5(c), (d) or (e) of
this Agreement and to enforce specifically the terms and provisions thereof in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the Seller and the matter, in addition to any other
remedy to which it may be entitled, at law or in equity.
(N) SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the State of Ohio in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each of the Parties also agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto.
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<PAGE> 18
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
NATIONSRENT OF OHIO, INC.
By: /s/ Jeffrey E. Levine
-------------------------------
Name: Jeffrey E. Levine
------------------------------
Title: Vice President
-----------------------------
R. AND R. RENTAL, INC.
By: /s/ Donald P. Ries
-------------------------------
Name: Donald P. Ries
------------------------------
Title: President
------------------------------
<PAGE> 19
AMENDMENT TO ASSET PURCHASE AGREEMENT
This is an amendment ("Amendment") to the Asset Purchase Agreement
("Agreement") dated December 8, 1997, by NationsRent of Ohio, Inc., a Delaware
corporation ("Buyer") and R. and R. Rental, Inc., an Ohio corporation
("Seller").
WHEREAS, the Buyer and the Seller wish to amend the Agreement as
follows:
1. Section 1 of the Agreement shall be amended to include in the
appropriate alphabetical placement the following term and
definition:
"'Indemnification Ending Date' has the meaning set
forth in ss.7(a) below."
2. The definition of Excluded Assets in ss.1 of the Agreement
shall be amended to include the marked changes as follows:
"means (i) all Cash, (ii) the corporate charter,
taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock
certificates, and other documents relating to the
organization, maintenance, and existence of the
Seller as a corporation, (iii) any of the rights of
the Seller under this Agreement (or under any side
agreement between the Seller on the one hand and the
Buyer on the other hand entered into on or after the
date of this Agreement), (iv) the Facilities Real
Estate, (v) the Seller's Tax returns, financial
statements and supporting schedules and work papers,
(vi) any rights of indemnity with respect to
Liabilities which are not Assumed Liabilities, and
(vii) any stock held by the Seller."
3. Section 2(e) of the Agreement is amended to read in its
entirety as follows:
"(E) ALLOCATION. For purposes of this Agreement, the
Seller is allocating the Purchase Price among the
Acquired Assets in accordance with the allocation
schedule attached hereto as Schedule C. To the extent
the Buyer uses a different allocation for any purpose
which results in any losses to the Seller, the Buyer
shall indemnify the Seller therefore pursuant to ss.7
as if the Buyer had agreed herein to follow such
allocation."
<PAGE> 20
4. Section 3 of the Agreement shall be amended to add a new
subsection (r) at the end thereof as follows:
"(R) RETURNS; TAXES PAID. The Seller has filed all
Tax returns and reports required to be filed by it,
including without limitation returns for all
applicable federal, state and local income,
franchise, sales, use, property, employment excise
and other Taxes. The Seller has paid all Taxes,
interest and penalties required to be paid pursuant
to said returns or otherwise required to be paid by
it. There is no Tax audit or examination now pending
(or, to Seller's Knowledge, threatened) with respect
to the Seller. All Taxes and assessments which the
Seller was or is required by law to withhold or
collect have been and are being withheld or collected
by it and have been and are being paid over to the
proper governmental authorities or are being held by
the Seller for such payment. The Seller has not
waived or extended any applicable statute of
limitations relating to the assessment of any Tax."
5. Section 4(d) of the Agreement shall be amended as follows:
"(D) NATIONSRENT NET WORTH. The net worth of
NationsRent is not less than $15,000,000.00."
6. Section 5 of the Agreement shall be amended to add a new
subsection (h) at the end thereof as follows:
"(H) NATIONSRENT NET WORTH. The net worth of
NationsRent shall at all times hereafter be not less
than $15,000,000.00. The Buyer shall cause
NationsRent to furnish to the Seller, not less
frequently than semi-annually, a then-current balance
sheet of NationsRent."
7. Section 7(a) of the Agreement shall be amended to read in its
entirety as follows:
"(A) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS.
Subject to the limitations contained herein,
the representations, warranties and covenants of the
Buyer and the Seller contained in this Agreement
shall survive the Closing and continue in full force
and effect until expiration of the Indemnification
Ending Date (as defined below). After such
expiration, any claim by a Party hereto based upon a
breach of any such representation, warranty or
covenant shall be of no further force and effect,
except to the extent a Party has asserted a
reasonable claim for any such breach prior to such
expiration, in which event any representation,
<PAGE> 21
warranty or covenant to which such claim relates
shall survive with respect to such claim until such
claim is resolved. For purposes of this Agreement,
"Indemnification Ending Date" means the expiration of
the tenth (10th) anniversary of the Closing with
respect to the covenant in ss.2(e), the expiration of
the third (3rd) anniversary of the Closing with
respect to the representations, warranties and
covenants in ss.4(d) and ss.5(h), and the expiration
of the second (2d) anniversary of the Closing with
respect to all other representations, warranties and
covenants."
8. Section 7(e)(ii) shall be amended to include the marked
changes as follows:
"Except with respect to any right of indemnification
asserted under ss.2(e) and/or ss.7(b)(ii)(A), no
right of indemnification may be asserted hereunder
until an Indemnified Party's aggregate claims exceed
$40,000 and then only to the extent such Indemnified
Party's aggregate claims exceed $40,000."
9. The parties hereto agree that Schedule E to the Agreement has
been intentionally omitted.
Any references in the Agreement to any sections amended by this
Amendment are hereby deemed to refer to those sections as amended hereby. The
Agreement shall, except as provided above, remain unchanged and continue in full
force and effect. All capitalized terms used in this Amendment without
definition shall have the respective meanings set forth in the Agreement.
This Amendment may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Amendment and all of which,
when taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of December 10, 1997.
BUYER: NationsRent of Ohio, Inc. SELLER: R. and R. Rental, Inc.:
By: /s/ Jeffrey E. Levine By: /s/ Donald P. Ries
--------------------------------- ------------------------------
Name: Jeffrey E. Levine Name: Donald P. Ries
-------------------------------- -----------------------------
Its: Vice President Its: President
-------------------------------- -----------------------------
<PAGE> 1
EXHIBIT 10.7
FORM OF PROMISSORY NOTE
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL IT IS SO REGISTERED OR UPON
RECEIPT OF AN OPINION OF COUNSEL, SATISFACTORY TO MAKER, THAT SUCH REGISTRATION
IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR TRANSFER.
UNSECURED SUBORDINATED PROMISSORY NOTE
8.5% Subordinated Note $[__________]
Due December [___], 2000 December [__], 1997
FOR VALUE RECEIVED, NationsRent, Inc., a Delaware corporation
("Maker"), promises to pay to [___________] ("Payee"), in lawful money of the
United States of America, the principal sum of [___________] ($[__________]),
together with interest in arrears on the unpaid principal balance at an annual
rate equal to 8.5%, in the manner provided below. Interest shall be calculated
on the basis of a year of 365 or 366 days, as applicable, and charged for actual
number of days elapsed.
This promissory note (this "Note") has been executed and delivered
pursuant to and in accordance with the terms and conditions of the Asset
Purchase Agreement, dated December 10, 1997, between NationsRent of Ohio, Inc.,
a Delaware corporation and a wholly-owned subsidiary of Maker, and Payee (the
"Purchase Agreement"), and is subject to the terms and conditions of the
Purchase Agreement, which are, by this reference, incorporated herein and made a
part hereof. Capitalized terms used in this Note without definition shall have
their respective meanings set forth in the Purchase Agreement.
SECTION 1. PAYMENTS
1.1 PRINCIPAL AND INTEREST
The principal sum of this Note together with accrued interest thereon
shall be due and payable in thirty-six (36) equal monthly installments of
$[________], commencing on January 10, 1998 and on the same day of each and
every consecutive month thereafter through and including the final payment on
such day in December of 2000.
1.2 MANNER OF PAYMENT
All payments on this Note shall be made by certified or bank check at
such place in the United States of America as Payee shall designate to Maker in
writing or by wire transfer of immediately available funds to an account
designated by Payee in writing. If any payment on this Note is due on a day
which is not a Business Day, such payment shall be due on the next
<PAGE> 2
succeeding Business Day. "Business Day" means any day other than a Saturday,
Sunday or legal holiday in the State of Ohio.
1.3 PREPAYMENT
Maker may, without premium or penalty, at any time and from time to
time, prepay all or any portion of the outstanding principal balance due under
this Note, provided that each such prepayment is accompanied by accrued interest
on the amount of principal prepaid calculated to the date of such prepayment.
Any partial prepayments shall be applied to installments of principal in inverse
order of their maturity.
1.4 RIGHT OF SET-OFF
Maker shall have the right to withhold and set-off against any amount
due hereunder the amount of any claim for indemnification or payment of damages
to which Maker may be entitled under the Purchase Agreement as provided in ss.6
of the Purchase Agreement.
1.5 LATE PAYMENT PENALTY
If any payment of principal and accrued interest due on this Note is
not paid in full within ten (10) Business Days of when it is due, then in
addition to the amount of such overdue payment, there shall also be due, and
Maker promises to pay, a late charge in respect of such overdue payment in the
amount of five percent (5%) of such overdue payment.
1.6 DEFAULT RATE OF INTEREST
Upon the occurrence of an Event of Default (defined hereunder), the
interest payable on the unpaid principal balance due on this Note shall
thereupon accrue at the default rate of interest of 10.5% per annum until such
Event of Default has been waived by Payee in writing or cured by Maker to the
satisfaction of Payee.
SECTION 2. EVENTS OF DEFAULT
2.1 EVENTS OF DEFAULT
The occurrence and continuance of any one or more of the following
events with respect to Maker shall constitute an event of default hereunder
("Event of Default"):
(a) If Maker shall fail to pay when due any payment on this Note
and such failure continues for ten (10) Business Days after Payee notifies Maker
thereof in writing; provided, however, that the exercise by Maker in good faith
of its right of set-off pursuant to Section 1.4 above, whether or not ultimately
determined to be justified, shall not constitute an Event of Default.
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<PAGE> 3
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding, (ii) consent to the entry of an order for relief against it
in an involuntary case, (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official for Maker or substantially all of
Maker's properties, (iv) make an assignment for the benefit of its creditors, or
(v) admit in writing its inability to pay its debts as they become due.
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case, (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties, or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
(d) If Maker's net worth at any time hereafter is less than
$15,000,000.00.
2.2 NOTICE BY MAKER
Maker shall notify Payee in writing within five (5) days after the
occurrence of any Event of Default of which Maker acquires knowledge.
2.3 REMEDIES
Upon the occurrence of an Event of Default hereunder (unless all Events
of Default have been cured to the satisfaction of Payee or waived in writing by
Payee), Payee may, at its option, (i) by written notice to Maker declare the
entire unpaid principal balance of this Note, together with all accrued interest
thereon, immediately due and payable regardless of any prior forbearance, and
(ii) exercise any and all rights and remedies available to it under applicable
law, including, without limitation, the right to collect from Maker all sums due
under this Note. Maker shall pay all reasonable costs and expenses incurred by
or on behalf of Payee in connection with Payee's exercise of any or all of its
rights and remedies under this Note, including, without limitation, reasonable
attorneys' fees.
SECTION 3. MISCELLANEOUS
3.1 SENIOR INDEBTEDNESS
The indebtedness evidenced by this Note is subordinate and subject in
right of payment to the prior payment in full of all Senior Indebtedness
(defined below); provided, however, that Maker may make, and Payee may receive,
the scheduled payments due on this Note so long as no event of default has
occurred with respect to the Senior Indebtedness. "Senior Indebtedness" means
the principal of (and premium, if any) and interest on (a) all bank financing
and other similar indebtedness of Maker, other than Seller Notes (defined
below), whether outstanding on
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<PAGE> 4
the date of the Purchase Agreement or thereafter created, incurred or assumed,
which is (i) determined by Maker to be necessary or appropriate (A) in
connection with the acquisition of any businesses, properties, stock or assets,
or (B) to finance the working capital needs of Maker and (ii) for money
borrowed, (b) obligations of Maker, whether outstanding on the date of the
Purchase Agreement or thereafter created, incurred or assumed, as lessee under
(i) leases of properties or assets, which leases are required to be capitalized
on the balance sheet of Maker as lessee under GAAP, or (ii) leases of properties
or assets made as part of any sale and lease-back transaction to which Maker is
a party, and (c) amendments, renewals, extensions, modifications and refundings
of any such indebtedness or obligation, unless in any case in the instrument
creating or evidencing any such indebtedness or obligation or pursuant to which
the same is outstanding it is provided that such indebtedness or obligation is
not superior in right of payment to this Note. "Seller Notes" means this Note
and notes given to other sellers by Maker or any Maker Subsidiary (defined
below) in connection with the acquisition by Maker or any Maker Subsidiary of
any business, properties, stock or assets of such sellers, whether outstanding
on the date of the Purchase Agreement or thereafter created, incurred or
assumed. "Maker Subsidiary" means any corporation with respect to which Maker
owns a majority of the common stock or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors.
If an Event of Default has occurred under this Note, for so long as any
Senior Indebtedness remains unpaid, and so long as no legal proceedings to
collect on such Senior Indebtedness has been commenced, Payee shall not commence
or join with any creditor of Maker other than the holder of the Senior
Indebtedness in commencing any proceedings to collect or enforce its rights
hereunder for a period of 120 days from the occurrence of such Event of Default;
provided, however, that, notwithstanding such forbearance of the commencement of
proceedings with respect to an Event of Default, such Event of Default shall
nevertheless be an Event of Default for all other purposes of this Note and
Payee shall be entitled to pursue all other remedies other than the commencement
of proceedings under the circumstances set forth in this Section. Furthermore,
Payee agrees to furnish any holder of Senior Indebtedness upon request a
subordination agreement that sets forth the priority rights of Payee and the
holder of the Senior Indebtedness and prohibits payments to Payee that would
cause a default under the Senior Indebtedness. The Senior Indebtedness does not
and will not prohibit regularly scheduled payments under this Note so long as
there is not a default under the Senior Indebtedness, and the making of such
payments hereunder will not in and of itself constitute an event of default
under the Senior Indebtedness.
Maker hereby represents and warrants to Payee that as of the Closing
Date no Seller Notes hold a position senior in right of payment to that of Payee
under this Note.
Maker hereby represents and warrants to Payee that it is not currently
in default under any of its Senior Indebtedness.
Maker hereby represents and warrants that its net worth is not less
than $15,000,000.00.
- 4 -
<PAGE> 5
3.2 WAIVER
The rights and remedies of Payee under this Note shall be cumulative
and not alternative. No waiver by Payee of any right or remedy under this Note
shall be effective unless in a writing signed by Payee. Neither the failure nor
any delay in exercising any right, power or privilege under this Note will
operate as a waiver of such right, power or privilege and no single or partial
exercise of any such right, power or privilege by Payee will preclude any other
or further exercise of such right, power or privilege or the exercise of any
other right, power or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right of Payee arising out of this Note can be discharged
by Payee, in whole or in part, by a waiver or renunciation of the claim or right
unless in a writing signed by Payee; (b) no waiver that may be given by Payee
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on Maker will be deemed to be a waiver of any
obligation of Maker or of the right of Payee to take further action without
notice or demand as provided in this Note. Maker hereby waives presentment,
demand, protest and notice of dishonor and protest.
3.3 NOTICES
Any notice required or permitted to be given hereunder shall be given
in accordance with ss.8(f) of the Purchase Agreement.
3.4 SEVERABILITY
If any provision of this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
3.5 GOVERNING LAW
This Note will be governed by the laws of the State of Ohio without
regard to conflicts of laws principles.
3.6 PARTIES IN INTEREST
This Note shall bind Maker and its successors and assigns. This Note
shall not be assigned or transferred by Payee without the express prior written
consent of Maker, except by operation of law.
- 5 -
<PAGE> 6
3.7 SECTION HEADINGS, CONSTRUCTION
The headings of the Sections of this Note are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Note unless otherwise specified.
All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific Section or provision hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
MAKER:
NATIONSRENT, INC.
By:
-----------------------------------
Name:
----------------------------------
Title:
---------------------------------
- 6 -
<PAGE> 1
EXHIBIT 10.8
ASSET PURCHASE AGREEMENT
Agreement entered into on December 8, 1997, by and between NationsRent
of Indiana, Inc., a Delaware corporation (the "Buyer"), and C&E Rental and
Service, Inc., an Indiana corporation (the "Seller"). The Buyer and the Seller
are referred to collectively herein as the "Parties."
RECITALS
This Agreement contemplates a transaction in which the Buyer will
purchase all of the assets (and assume certain of the liabilities) of the Seller
in return for cash and other consideration.
STATEMENT OF AGREEMENT
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
SS.1. DEFINITIONS.
"Acquired Assets" means all right, title, and interest in and to all of
the assets and business of Seller, including all Cash, tangible and intangible
personal property and real property interests, machinery, equipment (including
Rental Equipment), inventories of materials and supplies, furniture and
fixtures, automobiles, trucks, tractors, trailers, leases, subleases and rights
thereunder, agreements, contracts, accounts, notes, and other receivables,
claims, deposits, prepayments, refunds, causes of action, rights of recovery,
rights of set off and rights of recoupment, franchises, approvals, permits,
licenses, orders, registrations, certificates, variances, and similar rights
obtained from governments and governmental agencies, books, records, ledgers,
files, documents, correspondence, lists, including, without limitation, all
assets set forth in Schedule A attached hereto; provided, however, that the
Acquired Assets shall not include (i) the corporate charter, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance, and
existence of the Seller as a corporation, (ii) any of the rights of the Seller
under this Agreement (or any other agreement between the Seller on the one hand
and the Buyer on the other hand entered into on or after the date of this
Agreement, (iii) Cash in the Seller's bank accounts as of the Closing up to
$100,000 (the "Excluded Cash"), and (iv) the Seller's real property interests
relating to its four parcels of real estate (equipment rental locations) with
improvements located at Noblesville, Michigan Road, Franklin, and Columbus,
respectively (as more specifically described in the Lease Agreements)
(separately referred to herein as a "Facility" and together as the "Facilities
Real Estate").
<PAGE> 2
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement With Stockholder" means the Agreement with the Stockholder
entered into concurrently herewith and attached hereto as Exhibit E.
"Applicable Rate" means the interest rate announced from time to time
by Fifth Third Bank, as its prime lending rate, expressed as a percent per
annum, determined on a daily basis.
"Assumed Liabilities" means the Liabilities of the Seller to be assumed
by the Buyer hereunder as set forth in Schedule B attached hereto.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Seller's financial statements.
"Closing" has the meaning set forth in ss.2(f) below.
"Closing Date" has the meaning set forth in ss.2(f) below.
"Confidential Information" means any information concerning the
businesses and affairs of the Seller that is not already generally available to
the public.
"Consulting Agreement" has the meaning set forth in ss.2(e)(ii) below.
"Disclosure Schedule" has the meaning set forth in ss.3 below.
"Employment Agreement" has the meaning set forth in ss.2(e)(i) below.
"Excluded Cash" has the meaning set forth in this ss.1 under the
definition of Acquired Assets.
<PAGE> 3
"Facility" has the meaning set forth in this ss.1 under the definition
of Acquired Assets.
"Facilities Real Estate" has the meaning set forth in this ss.1 under
the definition of Acquired Assets.
"Financial Statements" has the meaning set forth in ss.3(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Indemnified Party" has the meaning set forth in ss.7(d) below.
"Indemnifying Party" has the meaning set forth in ss.7(d) below.
"Knowledge" means actual knowledge after reasonable investigation.
"Lease Agreement" has the meaning set forth in ss.2(d) below.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Month End" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.3(g)
below.
"Note" has the meaning set forth in ss.3(r) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parties" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
<PAGE> 4
"Pre-Billed Accounts Amount" means the aggregate amount of all sums
billed by Seller on customer accounts for any services to be rendered or
provided after the Closing Date, as identified, described and calculated in
Schedule C attached hereto.
"Purchase Price" has the meaning set forth in ss.2(c) below.
"Rental Equipment" means all machinery, equipment, tools, supplies, and
other similar tangible personal property used or held for use by the Company or
its customers.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
"Seller" has the meaning set forth in the preface above.
"Stockholder" means Edgar Lynn Coverdale, the sole shareholder of the
Seller.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Internal Revenue
Code ss.59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Third Party Claim" has the meaning set forth in ss.7(d) below.
SS.2. BASIC TRANSACTION.
(A) PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, at the Closing the Buyer will purchase from the
Seller, and the Seller will sell, assign, transfer, convey, and agree to deliver
to the Buyer, all of the Acquired Assets for the consideration specified below
in this ss.2.
(B) ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, at the Closing the Buyer agrees to assume and
become responsible for all of the Assumed Liabilities. The Buyer will not assume
or have any responsibility, however, with respect to any other obligation or
Liability of the Seller not included within the definition of Assumed
Liabilities.
<PAGE> 5
(C) PURCHASE PRICE.
(i) At Closing, the Buyer agrees to pay to the Seller
Twelve Million Two Hundred Fifty Thousand Dollars ($12,250,000) less
the Pre-Billed Accounts Amount as
of the Closing (the "Purchase Price").
(ii) The Purchase Price will be payable as follows: (A) a
$2,000,000, five-year, convertible, subordinated 6.5% unsecured
promissory note in the form of Exhibit A attached hereto (the "Note"),
such Note to be executed by the Buyer and delivered to the Seller at
the Closing; and (B) a cash payment to the Seller in an amount equal to
the balance of the Purchase Price payable at the Closing by wire
transfer.
(D) LEASE OF FACILITIES REAL ESTATE. At the Closing, the Buyer and
the Seller will enter into a separate lease agreement for each Facility as of
the Closing Date each in the form of Exhibit B attached hereto (each, a "Lease
Agreement"), on the terms as specified in Schedule D attached hereto.
(E) EMPLOYMENT AND CONSULTING AGREEMENTS.
(i) Employment Agreements. At the Closing the Buyer will
enter into employment agreements with Randy Elliott and Brad Coverdale
as of the Closing Date in the form of Exhibit C-1 and Exhibit C-2
attached hereto (each an "Employment Agreement").
(ii) Consulting Agreement. The Buyer will also enter into
a consulting agreement as of the Closing Date with Edgar Coverdale in
the form of Exhibit C-3 attached hereto (the "Consulting Agreement").
(F) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Squire,
Sanders & Dempsey L.L.P. in Columbus, Ohio commencing at 11:00 a.m. local time
on December 19, 1997 or such other date as the Parties may mutually determine
(the "Closing Date"). Subject to the provisions of ss.8, failure to consummate
the transactions contemplated by this Agreement on the date and time specified
in this ss.2(f) will not result in the termination of this Agreement and will
not relieve any party of its obligations under this Agreement.
(G) DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents as
required herein; (ii) the Buyer will deliver to the Seller the various
certificates, instruments, and documents as required herein; (iii) the Seller
will execute, acknowledge (if appropriate), and deliver to the Buyer such
instruments of sale, transfer, conveyance, and assignment as the Buyer and its
counsel reasonably may request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Seller such instruments of assumption as the
Seller and its counsel reasonably may request; and (v) the Buyer will deliver to
the Seller the consideration specified in ss.2(c) above.
SS.3. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
<PAGE> 6
The Seller represents and warrants to the Buyer that the statements
contained in this ss.3 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this ss.3), except as set forth in the disclosure schedule
accompanying this Agreement executed and delivered by the Seller to Buyer on the
date hereof (the "Disclosure Schedule"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this ss.3.
(A) ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(B) AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Seller, enforceable
in accordance with its terms and conditions.
(C) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or to the Knowledge of the Seller, other
restriction of any government, governmental agency, or court to which the Seller
is subject; (ii) any provision of the charter or bylaws of the Seller; or (iii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a party or by which it
is bound or to which any of its assets is subject (or result in the imposition
of any Security Interest upon any of its assets). The Seller does not need to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in ss.2 above).
(D) BROKERS' FEES. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(E) TITLE TO ASSETS. The Seller has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by them,
located on their premises, or shown on the Most Recent Balance Sheet or acquired
after the date thereof, and, other than as set forth in ss.3(e) of the
Disclosure Schedule, are free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet. Without limiting the generality of the
foregoing, the Seller has and hereby transfers good and marketable title to all
of the Acquired Assets, free and clear of any Security Interest or restriction
on transfer.
<PAGE> 7
(F) SUBSIDIARIES; AFFILIATES. The Seller has no Subsidiaries. None
of the Seller's Affiliates is engaged in any business except as a stockholder,
director, officer and/or employee of the Seller.
(G) FINANCIAL STATEMENTS. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"): (i)
unaudited balance sheets and statements of income, changes in control account,
and cash flow as of and for the fiscal year ended December 31, 1996 (the "Most
Recent Fiscal Year End") for the Seller, and (ii) unaudited balance sheets and
statements of income, changes in control account, and cash flow (the "Most
Recent Financial Statements") as of and for the ten months ended October 31,
1997 (the "Most Recent Fiscal Month End") for Seller. The Financial Statements
(including the notes thereto) present fairly the financial condition of the
Seller as of such dates and the results of operations of the Seller for such
periods, are correct and complete, and are consistent with the books and records
of the Seller (which books and records are correct and complete); provided,
however, that the Most Recent Financial Statements are subject to normal year
end adjustments (which will not be material individually or in the aggregate)
and lack footnotes and other presentation items. Further, the earnings of the
Seller before interest, taxes, depreciation and amortization for the fiscal year
ending December 31, 1997, will exceed $2,500,000.
(H) UNDISCLOSED LIABILITIES. The Seller has no Liability (other
than as set forth in Schedule B) relating to its business (and to the Knowledge
of the Seller, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
the Seller giving rise to any such Liability), except for Liabilities which have
arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
(I) LEGAL COMPLIANCE. The Seller and its Affiliates has complied
with and is not in violation of any applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing to Seller's charge,
complaint, claim, demand, notice or, to Seller's Knowledge, no investigation has
been filed or commenced against it alleging any failure so to comply except as
set forth in ss.3(i) of the Disclosure Schedule.
(J) NO ADVERSE CHANGE. Since September 30, 1997, the Seller has
operated its business and otherwise conducted its affairs only in the Ordinary
Course of Business and there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Seller. Without limiting the generality of the foregoing, since
that date:
(i) the Seller has not imposed any Security Interest upon
any of its assets, tangible or intangible;
(ii) the Seller has not paid any amount to any third party
with respect to any Liability or obligation (including any costs and
expenses the Seller has incurred or may
<PAGE> 8
incur in connection with this Agreement and the transactions
contemplated hereby) which would not constitute an Assumed Liability if
in existence as of the Closing;
(K) INVENTORY. All inventory of the Company, whether or not
reflected in the Most Recent Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, all of which have been written off or
written down to net realizable value in the Most Recent Balance Sheet. All such
inventories not written off have been priced at the lower of cost or net
realizable value on a first in, first out basis. To the Knowledge of Sellers,
the quantities of each item of inventory are not excessive, but are reasonable
in the present circumstances of the Company.
(L) CONTRACTS. ss.3(l) of the Disclosure Schedule lists all
material contracts, including the following contracts and other agreements to
which the Seller is a party:
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for
lease payments in excess of $3,000.00 per annum;
(ii) any agreement (or group of related agreements) for
the purchase or sale of machinery, equipment or supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a material loss to the Seller, or involve consideration
in excess of $5,000.00;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$5,000.00 or under which it has imposed a Security Interest on any of
its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement involving the Stockholder and his
Affiliates;
(vii) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $5,000.00 or providing severance benefits;
(viii) any agreement under which it has advanced or loaned
any amount to any of the directors, officers, and employees of the
Seller outside the Ordinary Course of Business;
<PAGE> 9
(ix) any agreement under which the consequences of a
default or termination could have a material adverse effect on the
business, financial condition, operations, results of operations, or
future prospects of the Seller; or
(x) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $5,000.00.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in ss.3(l) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in ss.3(l) of the Disclosure Schedule. With respect to
each such agreement: (A) the agreement is valid, binding, enforceable, and in
full force and effect; (B) the agreement will continue to be valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby (including the assignments
and assumptions referred to in ss.2 above); (C) no party is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
(M) LITIGATION. ss.3(m) of the Disclosure Schedule sets forth each
instance in which the Seller (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or to the
Knowledge of the Seller is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasijudicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in ss.3(m) of the Disclosure Schedule
could result in any adverse change in the business, financial condition,
operations, results of operations, or to the Knowledge of the Seller, future
prospects of the Seller. Neither the Stockholder nor the directors and officers
(and employees with responsibility for litigation matters) of the Seller has any
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Seller and its
Affiliates.
(N) CONDITION AND SUFFICIENCY OF THE ACQUIRED ASSETS. The Acquired
Assets, where applicable, are structurally sound, are in good operating
condition and repair (subject to normal wear and tear), and are adequate for the
uses to which they are being put, and none of the Acquired Assets, where
applicable, is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The Acquired
Assets are sufficient for the continued conduct of the Seller's business after
the Closing in substantially the same manner as conducted prior to the Closing.
(O) PRODUCT LIABILITY. None of the Seller and its Affiliates has
any Liability (and to the Knowledge of the Seller there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against it giving rise to any Liability) arising out
of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered by
the Seller.
<PAGE> 10
(P) RENTAL EQUIPMENT. All Rental Equipment of the Company, whether
or not reflected in the Most Recent Balance Sheet, consists of a quality and
quantity usable, rentable, or salable in the Ordinary Course of Business, except
for obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Most Recent Balance
Sheet. All such Rental Equipment not written off has been recorded at net
realizable value and has been depreciated consistent with the economic life of
such Rental Equipment. To the Knowledge of Sellers, the quantities of each item
of such Rental Equipment are not excessive, but are reasonable in the present
circumstances of the Company. All such Rental Equipment is in good operating
condition and repair, subject to normal wear and tear, and has been maintained
in the ordinary course in a manner consistent with normal industry practice.
(Q) DISCLOSURE. The representations and warranties contained in
this ss.3 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
ss.3 not misleading.
(R) INVESTMENT. The Seller (i) understands that the Note has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and is being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (ii) is
acquiring the Note solely for its own account for investment purposes, and not
with a view to the distribution thereof, (iii) is a sophisticated investor with
knowledge and experience in business and financial matters, (iv) has received
certain information concerning the Buyer and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in holding the Note, (v) is able to bear the economic risk and lack of
liquidity inherent in holding the Note, and (vi) is an accredited investor.
(S) ACCOUNTS RECEIVABLE. All accounts receivable of the Seller
that are reflected on the Most Recent Balance Sheet or on the accounting records
of the Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. On the
Closing, the Seller shall execute and deliver to the Buyer an assignment of the
Seller's Accounts Receivable. Such assignment shall identify the account debtors
and the amounts of the respective accounts being thereby assigned. The Buyer may
collect all Accounts Receivable existing on the Closing, and the Seller shall
not be required to take any actions with respect to such Accounts Receivable.
The Seller shall not be obligated to sue or otherwise enforce collections of
such Accounts Receivable nor be obligated to the Buyer with respect to such
Accounts Receivable or any uncollectible portion thereof, except to the extent
Seller receives payment therefor after the date of the Closing. ss.3(s) of the
Disclosure Schedule contains a complete and accurate list of all Accounts
Receivable as of the date of the Most Recent Balance Sheet, which list sets
forth the aging of such Accounts Receivable. Notwithstanding the foregoing, on
the Closing, the Buyer shall hold back from the Purchase Price ("Accounts
Receivable Holdback") an amount equal to the sum of (i) 10% of any Accounts
Receivable outstanding for 45 days or less as of the Closing Date, plus (ii)
100% of any Accounts Receivable outstanding for more than 45 days as of the
Closing Date. Both after 90 days following the Closing Date and after 180 days
following the Closing
<PAGE> 11
Date, the Buyer shall reconcile the Accounts Receivable Holdback with the
Accounts Receivable actually collected and shall pay the Seller the sum of (i)
the excess of 90% of any Accounts Receivable collected that were outstanding for
45 days or less as of the Closing Date, plus (ii) 100% of any Accounts
Receivable collected that were outstanding for more than 45 days as of the
Closing Date. As an accommodation to Seller, Buyer is assuming the charged off
collectibles portion of the Accounts Receivable and will forward to Seller any
amounts collected on such accounts, less any costs of such collection.
SS.4. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Seller that the statements
contained in this ss.4 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this ss.4).
(A) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(B) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions.
(C) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or to the Knowledge of the Buyer other
restriction of any government, governmental agency, or court to which the Buyer
is subject; (ii) any provision of its charter or bylaws; or (iii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject. The Buyer does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in ss.2 above).
(D) BROKERS' FEES. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
SS.5. POST-CLOSING COVENANTS.
<PAGE> 12
The Parties agree as follows with respect to the period following the
Closing.
(A) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as the other Party
reasonably may request, at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under ss.7
below). The Seller acknowledges and agrees that from and after the Closing the
Buyer will be entitled to possession of all documents, books, records (including
Tax records), agreements, and data of any sort relating to the Seller other than
as excluded in the definition of Acquired Assets. From and after the Closing
Date Buyer agrees to provide Seller with access, upon notice and at reasonable
times, to records of Buyer relating to the Acquired Assets, including the
business information of Seller transferred to Buyer to the extent necessary to
permit Seller and the Stockholder to prepare their respective tax returns and to
respond to any governmental inquiry, litigation, prospective litigation,
threatened litigation, claims or other events.
(B) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Seller and its Affiliates, the other Party
will cooperate with the contesting or defending Party and its counsel in the
contest or defense, make available its personnel, and provide such testimony and
access to its books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under ss.7 below).
(C) TRANSITION. The Seller will not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Seller from maintaining
the same business relationships with the Buyer after the Closing as it
maintained with the Seller prior to the Closing. The Seller will refer all
customer inquiries relating to the business of the Seller to the Buyer from and
after the Closing.
(D) CONFIDENTIALITY. The Seller will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement. In the event that the
Seller is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, the Seller
will notify the Buyer promptly of the request or requirement so that the Buyer
may seek an appropriate protective order or waive compliance with the provisions
of this ss.5(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, the Seller is, on the advice of counsel, compelled to disclose
any Confidential Information to any tribunal or else stand liable for contempt,
the Seller may disclose the Confidential Information to the tribunal; provided,
however, that the Seller shall
<PAGE> 13
use its reasonable best efforts to obtain, at the reasonable request of the
Buyer, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as the
Buyer shall designate.
(E) COVENANT NOT TO COMPETE. In consideration for the Purchase
Price and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, for a period of five years from and after the
Closing Date, neither the Seller nor any Affiliate of the Seller (including
Edgar Lynn Coverdale, Brad Coverdale, and Randy Elliott) will engage directly or
indirectly in any business that the Seller conducts as of the Closing Date
(except for lease of the Facilities Real Estate as set forth herein) in any area
within a 250-mile radius of the Facilities Real Estate; provided however, that
the purchase and sale of real property by the Seller and/or any Affiliate of the
Seller shall not be deemed to be engaging solely by reason thereof in any such
businesses; and provided, further, that ownership of less than 1% of the
outstanding stock of any publicly traded corporation shall not be deemed to be
engaging solely by reason thereof in any of such businesses. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this ss.5(e) 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.
(F) SALES TAXES, ETC. The Seller will be responsible for sales,
use or other transfer taxes, fees or expenses incurred as a result of the
transactions contemplated by this Agreement.
(G) NOTICE OF DEVELOPMENTS; CURE. The Seller will notify the Buyer
promptly in writing of, and contemporaneously will provide the Buyer with true
and complete copies of any and all information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing, any
event, transaction, or circumstance occurring after the date of this Agreement
that causes or will cause any covenant or agreement of the Seller under this
Agreement to be breached, or that renders or will render untrue any
representation or warranty of the Seller contained in this Agreement as if the
same were made on or as of the date of such event, transaction, or circumstance.
The Seller also will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach of any representation, warranty, covenant, or
agreement made by it in this Agreement, whether occurring or arising before or
after the date of this Agreement. No disclosure by the Seller pursuant to this
ss.5(g), however, shall be deemed to amend or supplement the Disclosure
Schedule, or to prevent or cure any misrepresentation or breach of warranty,
unless consented to in writing by the Buyer.
<PAGE> 14
SS.6. CONDITIONS TO OBLIGATION TO CLOSE.
(A) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Seller shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) Buyer and Seller in the case of the Facilities
located at Noblesville, Michigan Road and Franklin, and in the case of
the Facility located at Columbus, the Buyer and Barco, LLC shall have
entered into a Lease Agreement with respect to each such Facility;
(iv) Buyer shall have entered into separate Employment
Agreements with Randy Elliott and Brad Coverdale and one Consulting
Agreement with Edgar Lynn Coverdale;
(v) the Seller shall have executed and delivered to the
Buyer a bill of sale acceptable to the Buyer transferring all of the
Acquired Assets to the Buyer.
(vi) the Buyer and the Seller shall have executed a
mutually agreeable instrument for assignment and assumption of the
Assumed Liabilities;
(vii) the Seller shall have delivered, or caused to be
delivered, to the Buyer a certificate of the Secretary of the Seller
stating that the resolutions adopted by its board of directors and
Stockholder authorizing the actions taken in connection with the
transactions contemplated by this Agreement, including without
limitation the execution and delivery of this Agreement, were duly
adopted and continue in full force and effect (with a copy of such
resolution to be annexed to such certificate).
(viii) no action, suit, or proceeding shall be pending or
threatened before any court or quasijudicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Buyer to own the
Acquired Assets or to operate the former business of the Seller (and no
such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
<PAGE> 15
(ix) the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above
in ss.6(a)(i)-(viii) is satisfied in all respects;
(x) the Buyer shall have obtained on terms and conditions
reasonably satisfactory to it all of the financing it needs in order to
consummate the transactions contemplated hereby and fund the working
capital requirements of the acquired businesses after the Closing;
(xi) the Buyer must be satisfied, in its sole discretion,
with the results of its financial, legal, and other due diligence of
the Seller and its business and assets;
(xii) the Stockholder and the Buyer shall have entered into
the Agreement with Stockholder;
(xiii) all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this ss.6(a) if it
executes a writing so stating at or prior to the Closing.
(B) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasijudicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(iv) the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above
in ss.6(b)(i)-(iii) is satisfied in all respects;
<PAGE> 16
(v) all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this ss.6(b) if it
executes a writing so stating at or prior to the Closing.
(C) SCHEDULES AND EXHIBITS. The Buyer's Disclosure
Schedule, the Seller's Disclosure Schedule, the Schedules and the
Exhibits, none of which have been prepared as of the date hereof, shall
be prepared prior to the Closing and be in form and substance
acceptable to each of the Seller and the Buyer; provided, however, that
the Seller shall deliver the form of such Seller's Disclosure Schedule,
Schedules and Exhibits to the Buyer at least two (2) days prior to the
Closing.
SS.7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(A) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Buyer and the Seller contained in this
Agreement shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect forever thereafter (subject to
any applicable statutes of limitations).
(B) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean the Seller has
breached) any of its representations, warranties, and covenants
contained in this Agreement, then the Seller agrees to indemnify the
Buyer from and against the entirety of any Adverse Consequences the
Buyer may suffer through and after the date of the claim for
indemnification resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach).
(ii) The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by:
(A) any Liability of the Seller not listed on
Schedule B (including any Liability of the Seller that becomes
a Liability of the Buyer under any bulk transfer law of any
jurisdiction, under any common law doctrine of de facto merger
or successor liability, or otherwise by operation of law);
(B) any Liability of the Seller for unpaid
Taxes, with respect to any Tax year or portion thereof ending
on or before the Closing Date (or for any Tax year
<PAGE> 17
beginning before and ending after the Closing Date to the
extent allocable to the portion of such period beginning
before and ending on the Closing Date) including, but not
limited to, any Taxes assessed as a result of the current
sales tax audit or as a result of any other audit of the
Company;
(iii) The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by the Seller's operation of the business prior to the Closing,
provided, however, that the Buyer will hold the Seller harmless for any
Adverse Consequences arising after one year following the Closing Date
resulting from the sale, rental or service of the Acquired Assets.
(C) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER.
(i) In the event the Buyer breaches (or in the event any
third party alleges facts that, if true, would mean the Buyer has
breached) any of its representations, warranties, and covenants
contained in this Agreement, then the Buyer agrees to indemnify the
Seller from and against the entirety of any Adverse Consequences the
Seller may suffer through and after the date of the claim for
indemnification resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach).
(ii) The Buyer agrees to indemnify the Seller from and
against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by any Assumed Liability.
(D) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against the other
Party (the "Indemnifying Party") under this ss.7, then the Indemnified
Party shall promptly notify the Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
in notifying the Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) The Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable
<PAGE> 18
to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other
equitable relief, (D) settlement of, or an adverse judgment with
respect to, the Third Party Claim is not, in the good faith judgment of
the Indemnified Party, likely to establish a precedential custom or
practice materially adverse to the continuing business interests of the
Indemnified Party, and (E) the Indemnifying Party conducts the defense
of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with ss.7(d)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party
Claim, (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in ss.7(d)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, the Indemnifying Party in
connection therewith), (B) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (C) the Indemnifying Party will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this ss.7.
(E) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall take
into account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this ss.7. All
indemnification payments under this ss.7 shall be deemed to be adjustments to
the Purchase Price.
(F) OTHER INDEMNIFICATION PROVISIONS. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant any Party may have with respect to the
Seller, or the transactions contemplated by this Agreement.
<PAGE> 19
SS.8. TERMINATION OF AGREEMENT.
(A) TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time prior to Closing:
(i) by the Buyer and the Seller by mutual written consent
at any time prior to the Closing;
(ii) by either Buyer or Seller if the Closing shall not
have been consummated on or before December 31, 1997, or such later
date as the parties may agree upon;
(iii) by either Seller or Buyer if there shall be any law
or regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction;
(iv) by the Buyer by giving written notice to the Seller
at any time prior to the Closing (A) in the event the Seller has
breached any representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the Seller of
the breach, and the breach has continued without cure for a period of
thirty (30) days after the notice of breach or (B) if events occur
which render impossible compliance with one or more conditions set
forth in ss.6(a) hereof and such conditions are not waived by Buyer;
provided that such events did not result from any action or omission by
Buyer which were within its control and which it was not expressly
permitted to take or omit by the terms of this Agreement; and
(v) by the Seller by giving written notice to the Buyer
at any time prior to the Closing (i) in the event the Buyer has
breached any representation, warranty, or covenant contained in this
Agreement in any material respect, the Seller has notified the Buyer of
the breach, and the breach has continued without cure for a period of
thirty (30) days after the notice of breach or (ii) if events occur
which render impossible compliance with one or more conditions set
forth in ss.6(b) hereof, and such conditions are not waived by Seller;
provided that such events did not result from any action or omission by
Seller which were within the control of such entity and which such
entity was not expressly permitted to take or omit by the terms of this
Agreement.
(B) EFFECT OF TERMINATION. If any Party terminates this Agreement
as permitted by ss.8(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
provided that if such termination shall result from the willful failure of one
Party to fulfill a condition to the performance of the obligations of the other
Party or to perform a covenant of this Agreement or from a willful breach by
such Party to this Agreement, such Party shall be fully liable for any and all
damages incurred or suffered by the other Party as
<PAGE> 20
a result of such failure or breach. The provisions of ss.5(d) shall survive any
termination hereof pursuant to ss.8(b).
SS.9. MISCELLANEOUS.
(A) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Party prior to
making the disclosure).
(B) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(C) ENTIRE AGREEMENT. This Agreement, and that certain Agreement
with Seller's Stockholder, dated of even date herewith (including the documents
referred to herein) constitute the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they have related in any way
to the subject matter hereof.
(D) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided however, that the Buyer may (i) assign any
or all of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
(E) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(F) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(G) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
<PAGE> 21
If to the Seller: Copy to:
Edgar Lynn Coverdale Holt, Fleck & Free
20288 Cumberland Road 83 South 9th Street
Noblesville, Indiana 46060 Noblesville, Indiana 46060
Attn: Steven A. Holt, Esq.
If to the Buyer: Copy to:
NationsRent, Inc. Squire, Sanders & Dempsey L.L.P.
50 West Broad Street 1300 Huntington Center
Suite 3100 41 South High Street
Columbus, Ohio 43215 Columbus, Ohio 43215
Attn: Jeffrey E. Levine, Esq. Attn: Patrick J. Dugan, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(H) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Indiana without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
Indiana.
(I) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(J) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(K) EXPENSES. Each of the Buyer, the Seller, and the Stockholder
will bear his, her or its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
<PAGE> 22
(L) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(M) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(N) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to, notwithstanding the provisions of ss.9(o)
below, an injunction or injunctions to prevent breaches of the provisions of
this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter, in
addition to any other remedy to which it may be entitled, at law or in equity.
(O) SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Hamilton County, Indiana
in any action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto.
(P) BULK TRANSFER LAWS. The Buyer acknowledges that the Seller
will not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
<PAGE> 23
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
BUYER:
NATIONSRENT OF INDIANA, INC.
By: /s/ Jeffrey E. Levine
-------------------------------------
Name: Jeffrey E. Levine
------------------------------------
Its: Vice President
------------------------------------
SELLER:
C&E RENTAL AND SERVICE, INC.
By: /s/ Edgar Lynn Coverdale
------------------------------------
Edgar Lynn Coverdale, President
<PAGE> 24
AMENDMENT TO ASSET PURCHASE AGREEMENT
BY AND BETWEEN
C&E RENTAL AND SERVICE, INC. AND
NATIONSRENT OF INDIANA, INC.
DECEMBER 23, 1997
Amendment (the "Amendment"), entered into on the date first set forth
above, to the Asset Purchase Agreement (the "Purchase Agreement") dated October
8, 1997 by and between C&E Rental and Service, Inc., an Indiana corporation (the
"Buyer"), and NationsRent of Indiana, Inc., a Delaware corporation (the
"Seller," and collectively with the Buyer, the "Parties").
SECTION 1. DEFINITIONS. The definition of "Acquired Assets" in the
Purchase Agreement as executed will be deleted and replaced with the following
language:
"Acquired Assets" means all right, title and interest in and to all of
the assets and business of Seller, including all Cash, tangible and intangible
personal property and real property interest, machinery, equipment (including
Rental Equipment), inventories of materials and supplies, furniture and
fixtures, automobiles, trucks, tractors, trailers, leases, subleases and rights
thereunder, agreements, contracts, accounts, notes, and other receivables,
claims, deposits, prepayments, refunds, causes of action, rights of recovery,
rights of set off and rights of recoupment, franchises, approvals, permits,
licenses, orders, registrations, certificates, variances, and similar rights
obtained from governments and governmental agencies, trademarks, service marks,
trade names and other intellectual property, books, records, ledgers, files,
documents, correspondence, lists, including, without limitation, all assets set
forth in Schedule A attached hereto, including the Seller's real property
interest relating to its equipment rental locations located at West Washington
Street and Elmwood Avenue; provided, however, that the Acquired Assets shall not
include (i) the corporate charter, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of Seller as
a corporation, (ii) any of the rights of the Seller under this Agreement (or any
other Agreement between Seller on the one hand and Buyer on the other hand
entered into on or about the date of this Agreement), (iii) Cash in Seller's
bank accounts as of the Closing up to the sum of $100,000 less the book value of
the 1997 Chevrolet Tahoe 1500L (VIN # 1GNEK13RZVJ323779) pursuant to the terms
of the Consulting Agreement (the "Excluded Cash"), and (iv) the Seller's real
property interest relating to its four parcels of real estate (equipment rental
locations) with improvements located at Noblesville, Michigan Road, Franklin,
and Columbus, respectively (as more specifically described in the Lease
Agreements) (separately referred to herein, along with the rental equipment
locations at West Washington Street and Elmwood Avenue, as a "Facility" and
together as the "Facilities Real Estate").
<PAGE> 25
SECTION 2. LEASE OF FACILITIES REAL ESTATE. The text in the Purchase
Agreement as executed shall be deleted and replaced with the following language:
At the Closing, the Buyer and the Seller will enter into a separate
lease agreement for each Facility (other than the West Washington Street and
Elmwood Avenue Facilities) each in the form of Exhibit B attached hereto (each,
a "Lease Agreement"), and the Seller will assign and the Buyer will accept
assignment of the current leasehold interest of the Seller in the West
Washington Street Facility.
SECTION 3(C). NONCONTRAVENTION. The text in the Purchase Agreement as
currently executed will be amended by inserting the text "except as provided in
ss.3(c) of the Disclosure Schedule," immediately after "(iii)" in the sixth line
of said subsection.
SECTION 3(F). SUBSIDIARIES; AFFILIATES. The text in the Purchase
Agreement as executed will be amended by inserting the text "Except as provided
in ss.3(f) of the Disclosure Schedule," at the beginning of the second sentence
of said subsection, and changing the capitalization of "None" in that sentence.
SECTION 5. POST-CLOSING COVENANTS. The following subsection (h) will be
added to the Purchase Agreement as currently executed:
(H) TRANSITION. The Seller shall change its name to remove "C&E
Rental and Service" from its name within thirty (30) days after the Closing.
Also, the Seller shall refer all customer inquiries relating to the Business to
the Buyer from and after the Closing.
SECTION 6(A). CONDITIONS TO OBLIGATION OF THE BUYER. The text in the
executed version of the Purchase Agreement shall be amended by replacing the
period (.) with a semi-colon (;) at the end of subsection (xiii) and adding the
following two subsections:
(xiv) the Buyer and the Seller shall have executed a mutually
acceptable instrument for assignment of the trademarks, service marks, trade
names, and other intellectual property of the Seller;
(xv) the Seller will obtain all necessary consents for the
assignment of the Lease at the West Washington Street Facility and the Buyer and
the Seller shall have executed an Assignment of Lease for the West Washington
Street Facility.
SECTION 7(B). INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE BUYER.
The following subpargraph (ii)(C) is hereby added to the Purchase Agreement as
currently executed:
(ii)(C) any litigation matter set forth in ss.3(m) of the Disclosure
Schedule.
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<PAGE> 26
SECTION 7(F). RIGHT OF SET-OFF. The following Section 7(f) is hereby
added to the Purchase Agreement as currently executed:
SS.7(F) RIGHT OF SET-OFF. Upon notice to the Seller specifying in
reasonable detail the basis for such set-off, the Buyer may set-off any amount
to which it may be entitled under ss.7(b)(ii)(C) against any amounts otherwise
payable under the Promissory Note. The exercise of the such right of set-off by
the Buyer in good faith, whether or not ultimately determined to be justified,
will not constitute an event of default under the Promissory Note. Neither the
exercise of, nor the failure to exercise, such right of set-off will constitute
an electon of remedies or limit the Buyer in any manner in the enforcement of
any other remedies that may be available to it.
[Remainder of this Page Intentionally Left Blank.]
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<PAGE> 27
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment on
the date first set forth above.
BUYER:
NATIONSRENT OF INDIANA, INC.
By: /s/Jeffrey E. Levine
-----------------------------------
Jeffrey E. Levine, Vice President
SELLER
C&E RENTAL AND SERVICE, INC.
By: /s/ Edgar Lynn Coverdale
-----------------------------------
Edgar Lynn Coverdale, President
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<PAGE> 1
EXHIBIT 10.9
FORM OF PROMISSORY NOTE
NEITHER THIS PROMISSORY NOTE NOR THE SHARES ISSUABLE UPON CONVERSION OF THIS
PROMISSORY NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
PROMISSORY NOTE CANNOT BE SOLD OR TRANSFERRED, AND THE SHARES ISSUABLE UPON
CONVERSION OF THIS PROMISSORY NOTE CANNOT BE SOLD OR TRANSFERRED, UNLESS AND
UNTIL THEY ARE SO REGISTERED OR UPON RECEIPT OF AN OPINION OF COUNSEL,
SATISFACTORY TO THE MAKER, THAT SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE
CIRCUMSTANCES OF SUCH SALE OR TRANSFER.
UNSECURED CONVERTIBLE SUBORDINATED PROMISSORY NOTE
6.5% CONVERTIBLE $[ ]
----------
SUBORDINATED NOTE DECEMBER [ ], 1997
---
DUE DECEMBER [ ], 2002
---
FOR VALUE RECEIVED, NATIONSRENT, INC., a Delaware corporation
("Maker"), promises to pay to [________________] ("Payee"), in lawful money of
the United States of America, the principal sum of [____________]
($[_________]), together with interest in arrears on the unpaid principal
balance in the manner provided below at an annual rate equal to 6.5%. Interest
shall be calculated on the basis of a year of 365 or 366 days, as applicable,
and charged for the actual number of days elapsed.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Asset Purchase Agreement, dated December 8,
1997, between NationsRent of Indiana, Inc., a Delaware corporation and
subsidiary of Maker ("Company") and Payee (the "Agreement"), and is subject to
the terms and conditions of the Agreement, which are, by this reference,
incorporated herein and made a part hereof. Capitalized terms used in this Note
without definition shall have the respective meanings set forth in the
Agreement.
1. PAYMENTS
1.1 PRINCIPAL AND INTEREST
The principal amount of this Note shall be due and payable on December
8, 2002 and interest will be payable thereon from the date of this Note first
set forth above, on a quarterly basis on March 31, June 30, September 30, and
December 31 of each year during the term of this Note commencing on March 31,
1998.
1.2 MANNER OF PAYMENT
All payments of principal and interest on this Note shall be made by
certified or bank check at such place in the United States of America as Payee
shall designate to Maker in writing
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<PAGE> 2
or by wire transfer of immediately available funds to an account designated by
Payee in writing. If any payment of principal or interest on this Note is due on
a day which is not a Business Day such payment shall be due on the next
succeeding Business Day. "Business Day" means any day other than a Saturday,
Sunday or legal holiday in the State of Ohio.
1.3 PREPAYMENT
Upon ten (10) days written notice, after the later of (a) the
expiration of one hundred and eighty days following the date on which Maker
becomes a public company, or (b) the date on which the closing price of the
shares of the Maker into which the Note is convertible has averaged more than
120% of the Conversion Price for a period of twenty (20) consecutive trading
days (the "Prepayment Date"), Maker may, without premium or penalty, at any time
and from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by accrued interest on the amount of principal prepaid calculated to the date of
such prepayment. Any partial prepayments shall be applied to installments of
principal in inverse order of their maturity. Prior to the Prepayment Date,
Maker shall not be entitled to prepay any portion of the outstanding principal
balance due under this Note.
1.4 RIGHT OF SET-OFF
Maker hereby waives the right to withhold and set-off against any
amount due hereunder the amount of any claim for indemnification or payment of
damages to which Maker may be entitled under the Agreement.
1.5 CONVERSION
Subject to and upon compliance with the provisions of the Agreement, if
the Maker becomes a public company, the holder of this Note is entitled, at his
or its option, at any time on or before the close of business on December 22,
2002 to convert the principal amount of this Note (or any portion of the
principal amount hereof which is $1,000.00 or any integral multiple thereof), at
the principal amount hereof, or of such portion, into fully paid and
nonassessable shares (calculated as to each conversion to the nearest 1/1000 of
a share) of common stock of the Maker at a conversion price equal to the initial
public offering price of the Maker (or, if the Maker is merged into or otherwise
acquired by or converted into an already existing, publicly held entity ("New
Entity"), at a conversion price equal to the average closing price of the shares
of the New Entity for twenty (20) trading days following the merger) (the
"Conversion Price"). The holder shall surrender this Note, duly endorsed or
assigned to the Maker or in blank, to the Maker at its office or agency at the
address provided in writing by the Maker accompanied by written notice to the
Maker that the holder hereof elects to convert this Note, or if less than the
entire principal amount hereof is to be converted, the portion hereof to be
converted. No payment or adjustment is to be made on conversion for interest
accrued hereon or for dividends on the common stock issued on conversion. No
fractions of shares or scrip representing fractions of shares will be issued on
conversion, but instead of any fractional interest the Maker shall pay a cash
adjustment. In addition, in case of certain consolidations or mergers to which
the Maker is
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<PAGE> 3
a party or the transfer of substantially all of the assets of the Maker, this
Note, if then outstanding, will be convertible thereafter, during the period
this Note shall be convertible as specified above, only into the kind and amount
of securities, cash and other property receivable upon the consolidation, merger
or transfer by a holder of the number of shares of common stock into which this
Note might have been converted immediately prior to such consolidation, merger
or transfer (assuming such holder of common stock failed to exercise any rights
of election and received per share the kind and amount received per share by a
plurality of non-electing shares).
2. DEFAULTS
2.1 EVENTS OF DEFAULT
The occurrence and continuance of any one or more of the following
events with respect to Maker shall constitute an event of default hereunder
("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for twenty-five (25) days after
Payee notifies Maker thereof in writing.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
as they become due.
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case, (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties, or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
2.2 NOTICE BY MAKER
Maker shall notify Payee in writing within five (5) days after the
occurrence of any Event of Default of which Maker acquires knowledge.
2.3 REMEDIES
Upon the occurrence of an Event of Default hereunder (unless all Events
of Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right
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<PAGE> 4
to collect from Maker all sums due under this Note. Maker shall pay all
reasonable costs and expenses incurred by or on behalf of Payee in connection
with Payee's exercise of any or all of its rights and remedies under this Note,
including, without limitation, reasonable attorneys' fees.
3. MISCELLANEOUS
3.1 SENIOR INDEBTEDNESS
The indebtedness evidenced by this Note is subordinate and subject in
right of payment to the prior payment in full of all Senior Indebtedness
(defined below);
For purposes of this Note, the following terms have the meanings
specified below:
"Senior Indebtedness" means the principal of (and premium, if
any) and interest on (a) all bank financing and other similar
indebtedness of the Maker, other than the Seller Notes (defined below),
whether outstanding on the date of this Note or thereafter created,
incurred or assumed, which is (i) reasonably determined by Maker to be
necessary or appropriate (A) in connection with the acquisition by
Maker or any Maker Subsidiary (as defined below) of any businesses,
properties, stock or assets, or (B) to finance the working capital
needs of the Maker or any Maker Subsidiary and (ii) for money borrowed;
(b) obligations of the Maker or any Maker Subsidiary, whether
outstanding on the date of this Note or thereafter created, incurred or
assumed, as lessee under (i) leases of properties or assets, which
leases are required to be capitalized on the balance sheet of the Maker
or any Maker Subsidiary under GAAP, and (ii) leases of properties or
assets made as part of any sale and lease-back transaction to which the
Maker or any Maker Subsidiary is a party, and (c) amendments, renewals,
extensions, modifications and refundings of any such indebtedness or
obligation, unless in any case in the instrument creating or evidencing
any such indebtedness or obligation or pursuant to which the same is
outstanding it is provided that such indebtedness or obligation is not
superior in right of payment to this Note.
"Seller Notes" means (a) this Note and (b) any other notes
whether outstanding on the date of this Note or thereafter created,
incurred or assumed, given by Maker or any Maker Subsidiary in
connection with the acquisition by the Maker or any Maker Subsidiary of
any business, properties, stock or assets to the sellers of such
businesses, properties, stock or assets.
"Maker Subsidiary" means any corporation with respect to which
the Maker owns a majority of the common stock or has the power to vote
or direct the voting of sufficient securities to elect a majority of
the directors.
If an Event of Default has occurred under this Note, for so long as any
Senior Indebtedness remains unpaid, and so long as no legal proceedings to
collect on such Senior Indebtedness has been commenced, the Payee shall not
commence or join with any creditor of the Maker other than the holder of the
Senior Indebtedness in commencing any proceedings to collect or enforce its
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<PAGE> 5
rights hereunder for a period of 120 days from the occurrence of such Event of
Default; provided, however, that notwithstanding such forbearance of the
commencement of proceedings with respect to an Event of Default, such Event of
Default shall nevertheless be an Event of Default for all other purposes of this
Note and the Payee shall be entitled to pursue all other remedies other than the
commencement of proceedings under the circumstances set forth in this Section.
Furthermore, the Payee agrees to furnish any holder of Senior Indebtedness upon
request a subordination agreement that sets forth the priority rights of the
Payee and the holder of the Senior Indebtedness and prohibits payments to the
Payee that would cause a default under the Senior Indebtedness. The Senior
Indebtedness does not and will not prohibit regularly scheduled payments under
this Note so long as there is not a default under the Senior Indebtedness, and
the making of such payments hereunder will not in and of itself constitute an
event of default under the Senior Indebtedness.
The Maker hereby represents and warrants to the Payee that as of the
Closing Date (i) no Seller Notes hold a position senior in right of payment to
that of Payee under this Note and (ii) that it is not currently in default under
any of its Senior Indebtedness.
3.2 WAIVER
The rights and remedies of Payee under this Note shall be cumulative
and not alternative. No waiver by Payee of any right or remedy under this Note
shall be effective unless in a writing signed by Payee. Neither the failure nor
any delay in exercising any right, power or privilege under this Note will
operate as a waiver of such right, power or privilege and no single or partial
exercise of any such right, power or privilege by Payee will preclude any other
or further exercise of such right, power or privilege or the exercise of any
other right, power or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right of Payee arising out of this Note can be discharged
by Payee, in whole or in part, by a waiver or renunciation of the claim or right
unless in a writing, signed by Payee; (b) no waiver that may be given by Payee
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on Maker will be deemed to be a waiver of any
obligation of Maker or of the right of Payee to take further action without
notice or demand as provided in this Note. Maker hereby waives presentment,
demand, protest and notice of dishonor and protest.
3.3 NOTICES
Any notice required or permitted to be given hereunder shall be given
in accordance with Section 9(g) of the Agreement.
3.4 SEVERABILITY
If any provision in this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
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<PAGE> 6
3.5 GOVERNING LAW
This Note will be governed by the laws of the State of Indiana without
regard to conflicts of laws principles. Any party to this Note submits to the
jurisdiction of any state or federal court sitting in Hamilton County, Indiana
in any action or proceeding arising out of or relating to this Note, and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court.
3.6 PARTIES IN INTEREST
This Note shall bind Maker and its successors and assigns. This Note
shall not be assigned or transferred by Payee without the express prior written
consent of Maker, except by Will or, in default thereof, by operation of law.
3.7 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Note unless otherwise specified.
All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
NATIONSRENT, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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<PAGE> 1
EXHIBIT 10.10
AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into as of the
20th day of December, 1997, by and among NationsRent of West Virginia, Inc., a
Delaware corporation ("Buyer"), William O. Tracy, III and Fred W. Truman (the
"Principal Sellers") and Byron H. Black, Kent E. Jackfert, Robert V. Berthold,
Jr., Samuel Yerrid, Robert Orders, and Andrew Teeter (the "Other Sellers", and
together with the Principal Sellers, the "Sellers") and Titan Rentals, Inc., a
West Virginia corporation ("Company"). The Buyer and the Sellers are referred to
collectively herein as the "Parties."
RECITALS
The Sellers in the aggregate own all of the outstanding capital stock
of the Company. The Sellers desire to sell, and the Buyer desires to purchase,
all of the issued and outstanding shares (the "Shares") of capital stock of the
Company, for the consideration and on the terms set forth in this Agreement.
STATEMENT OF AGREEMENT
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties agree as follows.
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I:
"Accounts Receivable" has the meaning set forth in ss.3.8(a) below.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Affiliate" shall mean a person that directly, or indirectly through
one or more intermediaries, or is controlled by, or is under common control with
the Person specified.
"Applicable Contract" shall mean any Contract (a) under which the
Company has or may acquire any rights, (b) under which the Company has or may
become subject to any obligation or liability, or (c) by which the Company or
any of the assets owned or used by it is or may become bound.
<PAGE> 2
"Company VEBA" means a VEBA whose members include employees of the
Company or any ERISA Affiliate of the Company.
"Consent" shall mean any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Contemplated Transactions" shall mean all of the transactions
contemplated by this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Promissory
Notes, the Employment Agreements, the Lease Agreements, and the
Sellers' Releases;
(c) the performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and
exercise of control over the Company.
"Contract" shall mean any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Contract Terminations" has the meaning set forth in ss.3.2(b)(vii)
below.
"Damages" has the meaning set forth in ss.10.2 below.
"Employment Agreements" has the meaning set forth in ss.2.4(a)(iii)
below.
"Encumbrance" shall mean any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"Environment" shall mean soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"Environmental, Health, and Safety Liabilities" shall mean any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and consisting of
or relating to:
<PAGE> 3
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment, or
other remediation or response actions ("Cleanup") required by
applicable Environmental Law or Occupational Safety and Health Law
(whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational
Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"Environmental Law" shall mean any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to human health
or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
<PAGE> 4
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) the Cleanup of pollutants that have been released,
preventing the threat of release, or paying the costs of such Cleanup
or prevention; or
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
"ERISA Affiliate" means, with respect to the Company, any trade or
business (whether or not incorporated) that is part of the same controlled
group, or under common control with, or part of an affiliated service group that
includes the Company, within the meaning of IRC ss.414 and/or ORC
ss.4001(a)(14).
"Facilities" shall mean any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures, or equipment (including motor vehicles) currently
or formerly owned or operated by the Company.
"Financial Statements" has the meaning set forth in ss.3.4 below.
"GAAP" shall mean generally accepted United States generally accepted
accounting principles, as in effect from time to time, applied on a consistent
basis.
"Governmental Authorization" shall mean any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" shall mean any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
<PAGE> 5
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"Hazardous Activity" shall mean the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Company.
"Hazardous Materials" shall mean any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos containing materials.
"Indebtedness" shall mean as applied to any Person, means: (i) all
obligations of that Person to repay or pay money borrowed from another Person or
the deferred portion of the purchase price of services or property; (ii) all
obligations of that Person under bankers acceptances; (iii) all obligations of
that Person under letters of credit; (iv) obligations of others which that
Person has directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the Ordinary Course of Business), discounted or sold
with recourse or agreed (contingently or otherwise) to purchase or repurchase or
otherwise acquire, or in respect of which that Person has agreed to supply or
advance funds (whether by way of loan, stock purchase, capital contribution or
otherwise) or otherwise to become directly or indirectly liable; (v) all
obligations evidenced or secured by any mortgage, pledge, lien or conditional
sale or other title retention agreement to which any property or asset owned or
held by that Person is subject, whether or not the obligation evidenced or
secured thereby shall have been assumed; and (vi) all other items (except items
of capital stock, capital surplus, general contingency reserves, deferred income
taxes, retained earnings and amounts attributable to minority interest, if any)
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet of that Person as of the date
Indebtedness is to be determined, including obligations of that Person properly
treated as capital lease obligations or their equivalent under GAAP.
"Indemnified Persons" has the meaning set forth in ss.10.2 below.
"Intellectual Property Assets" has the meaning set forth in ss.3.23
below.
"IRC" shall mean the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
<PAGE> 6
"IRS" shall mean the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"Knowledge" shall mean with respect to a particular fact or matter:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonable inquiry concerning the existence of such fact
or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, partner, executor, or trustee of
such Person (or in any similar capacity), or as an employee having
responsibility for such facts or matters, has, or at any time had, Knowledge of
such fact or other matter.
"Lease Agreements" has the meaning set forth in ss.2.4(a)(iv) below.
"Lease Property" means each of the properties to be leased by Buyer
located near St. Albans and Fairmont, West Virginia, respectively.
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"Maximum Indebtedness" has the meaning set forth in ss.3.30 below.
"Most Recent Balance Sheet" has the meaning set forth in ss.3.4(a)
below.
"Most Recent Financial Statements" has the meaning set forth in
ss.3.4(a) below.
"Most Recent Fiscal Month End" has the meaning set forth in ss.3.4(a)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.3.4(a)
below.
"Multiemployer Plan" has the meaning given in ERISA ss.3(37)(A) and
4001.
"Occupational Safety and Health Law" shall mean any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
<PAGE> 7
"Order" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" shall mean an action taken by a Person
that is:
(a) consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) not required to be authorized by the board of directors of
such Person (or by any Person or group of Persons exercising similar
authority) and is not required to be specifically authorized by the
parent company (if any) of such Person; and
(c) similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any
Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons
that are in the same line of business as such Person.
"Organizational Documents" shall mean (a) the articles or certificate
of incorporation and the bylaws or regulations of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
"Other Benefit Obligations" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, officers, employees, or agents, other than obligations, arrangements,
and practices that are Plans. Other Benefit Obligations include consulting
agreements under which the compensation paid does not depend upon the amount of
service rendered, sabbatical policies, severance payment policies, and fringe
benefits within the meaning of IRC ss.132.
"Other Sellers" has the meaning set forth in the first paragraph of
this Agreement.
"Parent Subsidiary" means any corporation with respect to which the
Parent owns a majority of the common stock or has the power to vote or direct
the voting of sufficient securities to elect a majority of the directors.
"Parties" has the meaning set forth in the first paragraph of this
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
<PAGE> 8
"Pension Plan" has the meaning given in ERISA ss.3(2)(A).
"Person" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"Plan" has the meaning given in ERISA ss.3(3).
"Plan Sponsor" has the meaning given in ERISA ss.3(16)(B).
"Principal Sellers" has the meaning set forth in the first paragraph of
this Agreement.
"Proceeding" shall mean any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Promissory Notes" shall mean the promissory notes described in
ss.2.4(b)(ii) below.
"Qualified Plan" means any Plan that meets or purports to meet the
requirements of IRC ss.401(a).
"Related Person" shall mean with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
<PAGE> 9
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity);
and
(f) any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"Release" shall mean any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"Rental Equipment" shall mean all machinery, equipment, tools,
supplies, and other similar tangible personal property used or held for use by
the Company or its customers.
"Representative" shall mean with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Restrictions" shall mean any restriction of transfer (other than
Restrictions under the Securities Act and state securities laws), Taxes,
security interests, options, warrants, pre-emptive rights, purchase rights,
contracts, commitments, equities, claims, demands or other restrictions in the
right to vote, sell, pledge, transfer or otherwise dispose of the Shares.
"Securities Act" shall mean the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Seller Notes" mean (a) the Promissory Notes and (b) any other notes
whether outstanding on the date of the Promissory Notes or thereafter created,
incurred or assumed, issued by the Parent or any Parent Subsidiary in connection
with the acquisition by Parent or any Parent Subsidiary of any other business,
properties, stock or assets of the sellers of such businesses, properties, stock
or assets.
<PAGE> 10
"Sellers" has the meaning set forth in the first paragraph of this
Agreement.
"Sellers' Disclosure Schedule" shall mean the disclosure schedule to be
delivered by Sellers to Buyer prior to Buyer's execution of this Agreement.
"Sellers' Releases" has the meaning set forth in ss.2.4(a)(ii) below.
"Senior Indebtedness" shall mean the principal of (and premium, if any)
and interest on (a) all bank financing and other similar indebtedness of the
ultimate parent of Buyer, NationsRent, Inc., a Delaware corporation ("Parent"),
other than the Seller Notes, whether outstanding on the date of the Promissory
Notes or thereafter created, incurred or assumed, which is (i) reasonably
determined by Parent to be necessary or appropriate (A) in connection with the
acquisition by Parent or any Parent Subsidiary of any businesses, properties, or
assets, or (B) to finance the working capital needs of Parent or any Parent
Subsidiary, and (ii) for money borrowed; (b) obligations of Parent or any Parent
Subsidiary, whether outstanding on the date of the Promissory Notes or
thereafter created, incurred or assumed, as lessee under (I) leases of
properties or assets, which leases are required to be capitalized on the balance
sheet of Parent or any Parent Subsidiary under GAAP, and (II) leases of
properties or assets made as part of any sale and lease-back transaction to
which Parent or any Parent Subsidiary is a party; and (c) amendments, renewals,
extensions, modifications and refundings of any such indebtedness or obligation,
unless in any case in the instrument creating or evidencing any such
indebtedness or obligation or pursuant to which the same is outstanding it is
provided that such indebtedness or obligation is not superior in right of
payment to the Promissory Notes.
"Shares" has the meaning set forth in the Recitals of this Agreement.
"Subsidiary" shall mean with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred), are held by the Owner or one or more of its
Subsidiaries.
"Tax" shall mean any tax (including, but not limited to, any income
tax, capital gains tax, value-added tax, sales or use tax, employment tax,
excise tax, gross receipts tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Governmental Body or payable pursuant to any tax-sharing agreement or any
other Contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"Tax Return" shall mean any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required
<PAGE> 11
to be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection, or payment of any Tax or in connection
with the administration, implementation, or enforcement of or compliance with
any Legal Requirement relating to any Tax.
"Threat of Release" shall mean a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"Threatened" shall mean a claim, Proceeding, dispute, action, or other
matter pursuant to which if any demand or statement has been made (orally or in
writing) or any notice has been given (orally or in writing), or if any other
event has occurred or any other circumstances exist, that would lead a prudent
Person to conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.
"Title IV Plans" means all Pension Plans that are subject to Title IV
of ERISA 29 U.S.C. ss.1301 et seq., other than Multiemployer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC
ss.501(c)(9).
"Welfare Plan" has the meaning given in ERISA ss.3(1).
ARTICLE II
SALE AND TRANSFER OF SHARES; CLOSING
SS.2.1 BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, at the Closing, the Buyer agrees to purchase from the Sellers
and the Sellers agree to sell to the Buyer, all of the Shares free and clear of
all Restrictions.
SS.2.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for
the Shares will be Six Million Dollars ($6,000,000), representing the sum of the
Cash Payment as specified in ss.2.4(b)(i) plus the principal amounts of the
Promissory Notes to be delivered by Buyer to Sellers pursuant to ss.2.4(b)(ii)
at the Closing.
SS.2.3 CLOSING. The closing of the Contemplated Transactions (the
"Closing") shall take place at the Columbus offices of Buyer's counsel, Squire,
Sanders & Dempsey L.L.P., at 10:00 a.m. (local time) on the later of (i)
December 23, 1997 or (ii) the date that is five business days following the
satisfaction or waiver of all conditions to the obligations of the parties to
consummate the Contemplated Transactions (other than conditions with respect to
actions the respective Parties will take at the Closing itself), or at such
other time and place as the parties may agree. Subject to the provisions of
Article IX, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
ss.2.3 will not result in the termination of this Agreement and will not relieve
any party of any obligation under this Agreement.
<PAGE> 12
SS.2.4 CLOSING OBLIGATIONS. At the Closing,
(a) The Sellers and the Company will deliver to the
Buyer:
(i) certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers), and
notarized, for transfer to Buyer;
(ii) releases in the form of Exhibit 2.4(a)(ii)
executed by Sellers (collectively, "Sellers' Releases");
(iii) an employment agreement in the form of Exhibit
2.4(a)(iii)(A), executed by William O. Tracy, III, and an
employment agreement in the form of Exhibit 2.4(a)(iii)(B),
executed by Fred W. Truman (collectively, the "Employment
Agreements");
(iv) separate lease agreements, each in the form of
Exhibit 2.4(a)(iv), executed by Titan Partners with respect to
each Lease Property (collectively, the "Lease Agreements") and
(v) the various opinions, certificates,
instruments and other documents referred to in Article VII of
this Agreement;
(vi) certified copies of the articles of
incorporation and by-laws of the Company;
(vii) complete stock books, stock ledgers, minute
books and corporate seals of the Company; and
(viii) resignations of such officers and directors
(form their offices as such) of the Company as the Buyer may
request.
(b) Buyer will deliver to Sellers:
(i) $4,500,000 (the "Cash Payment"), in
immediately available funds by wire transfer to account of the
Sellers, with a bank in Charleston, West Virginia designated
by the Sellers, by notice to the Buyer, not later than two (2)
business days prior to the Closing Date;
(ii) the following convertible promissory notes (in
the form of Exhibit 2.4(b)(ii)) (each a "Promissory Note" and
together, the "Promissory Notes") of NationsRent, Inc., a
Delaware corporation and the parent corporation of the Buyer,
which Promissory Notes will bear interest at the rate of 6.5%
per annum (subject
<PAGE> 13
to a certain conversion period adjustment) and be subordinate
to the Senior Indebtedness:
(A) $387,096 Promissory Note payable to
William O. Tracy, III,
(B) $241,935 Promissory Note payable to
Byron H. Black,
(C) $193,549 Promissory Note payable to Kent
E. Jackfert,
(D) $193,549 Promissory Note payable to
Robert V. Berthold, Jr.,
(E) $193,549 Promissory Note payable to Fred
W. Truman,
(F) $96,774 Promissory Note payable to
Samuel Yerrid,
(G) $96,774 Promissory Note payable to
Robert Orders, and
(H) $96,774 Promissory Note payable to
Andrew Teeter;
(iii) the Employment Agreements, executed by Buyer;
(iv) the Lease Agreements, executed by Buyer; and
(v) the various opinions, certificates, instruments
and other documents referred to in Article VIII of this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
The Sellers and the Company represent and warrant to Buyer that the
statements contained in this Article III are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article III). Such representations and warranties
are made and given subject to the disclosures in the Sellers' Disclosure
Schedule accompanying this Agreement executed, delivered and satisfied by the
Sellers and the Company.
SS.3.1 ORGANIZATION AND GOOD STANDING.
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its
business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. The Company is duly qualified
to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
<PAGE> 14
(b) The Sellers and the Company have delivered to Buyer copies
of the Organizational Documents of the Company, as currently in effect.
(c) Attachment ss.3.1(c) contains a complete and accurate list
for the Company of its name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each shareholder and the
number of shares held by each).
SS.3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and the Company enforceable against them in
accordance with its terms. Upon the execution and delivery by Sellers
of the Sellers' Releases, the Employment Agreements and the Lease
Agreements (collectively, the "Sellers' Closing Documents"), the
Sellers' Closing Documents will constitute the legal, valid, and
binding obligations of Sellers, enforceable against them in accordance
with their respective terms. Sellers have the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this
Agreement and the Sellers' Closing Documents and to perform their
obligations under this Agreement and the Sellers' Closing Documents.
(b) Except as set forth in ss.3.2(b) of the Sellers'
Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents
of the Company, or (B) any resolution adopted by the board of
directors or the shareholders of the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person
the right to challenge any of the Contemplated Transactions or
to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Sellers, or the Company, or
any of the assets owned or used by the Company, may be
subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by the
Company;
<PAGE> 15
(iv) to the Knowledge of Sellers, cause any of the
assets owned by the Company to be reassessed or revalued by
any taxing authority or other Governmental Body;
(v) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract;
(vi) violate any applicable law, rule, regulation,
judgment, injunction, order or decree or alter or violate or
impair any license, franchise, permit or other similar
authorization held by the Company;
(vii) require any consent or other action by any
Person under, conflict with, result in a breach of, constitute
a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of the
Sellers or the Company to a loss of any benefit to which the
Company is entitled under, any agreement, contract, lease,
license, instrument or other arrangement binding upon the
Company or its properties or assets (any such event being a
"Contract Termination"); or
(viii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by the Company.
(c) Except as set forth in ss.3.2(c) of the Sellers'
Disclosure Schedule, neither the Sellers nor the Company is or will be
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
(d) The Sellers are acquiring the Promissory Notes for their
own account and not with a view to distribution within the meaning of
Section 2(11) of the Securities Act.
SS.3.3 CAPITALIZATION.
(a) The authorized equity securities of the Company consist of
155 shares of common stock, no par value, all of which are issued and
outstanding and constitute the Shares. Sellers are and will be on the
Closing Date the record and beneficial owners and holders of the
Shares, free and clear of all Encumbrances.
(b) No legend or other reference to any purported Encumbrance
appears upon any certificate representing equity securities of the
Company. All of the issued and outstanding equity securities of the
Company have been duly authorized and validly issued, fully paid and
nonassessable and are held of record by the Sellers, free and clear of
all
<PAGE> 16
Encumbrances. Except as set forth in ss.3.3(b) of the Sellers'
Disclosure Schedule, there are no outstanding (i) shares of capital
stock or voting securities of the Company other than the Shares, (ii)
securities of the Company convertible into or exchangeable for shares
of capital stock or voting securities or ownership interests in the
Company or (iii) options or other rights to securities or ownership
interests in or securities convertible into or exchangeable for capital
stock or voting securities or ownership interests in the Company (the
items in clauses (i), (ii), and (iii) being referred to collectively as
"Company Securities"). There are no outstanding obligations of the
Company to repurchase, redeem or otherwise acquire any Company
Securities. The Company has no outstanding any bonds, debentures, notes
or other obligations the holders of which have the right to vote (or
are convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter.
(c) None of the outstanding equity securities or other
securities of the Company were issued in violation of the Securities
Act or any other Legal Requirement.
(d) Except as set forth in ss.3.3(d) of the Sellers'
Disclosure Schedule, the Company does not own or have any Contract to
acquire any equity securities or other securities of any Person or any
direct or indirect equity or ownership interest in any other business.
SS.3.4 FINANCIAL STATEMENTS.
(a) The Sellers and the Company have delivered to the Buyer
the following financial statements (collectively, the "Financial
Statements") that have been compiled by Virginia C. Slack, certified
public accountant: (i) unaudited balance sheet ("Balance Sheet") and
statements of income, changes in shareholders' equity, and cash flow as
of and for the fiscal year ended December 31, 1996 (the "Most Recent
Fiscal Year End"), and (ii) unaudited balance sheet (the "Most Recent
Balance Sheet") and statements of income, changes in shareholders'
equity, and cash flow (the "Most Recent Financial Statements") as of
and for the nine months ended September 30, 1997 (the "Most Recent
Fiscal Month End").
(b) The Financial Statements are (i) complete and correct and
consistent with the books and records of the Company (which books and
records are complete and correct); (ii) are prepared in accordance with
the income tax basis of accounting and standards established by the
American Institute of Certified Public Accountants applied on a
consistent basis throughout the periods covered thereby; and (iii)
present fairly the financial condition and the results of operations,
changes in shareholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such financial
statements, subject to the absence of notes (that, if presented, would
not materially alter the information presented in said Financial
Statements. No financial
<PAGE> 17
statements of any other Person are required by GAAP to be included in
consolidated financial statements with the Company.
SS.3.5 BOOKS AND RECORDS. The books of account, stock record books,
and other records of the Company (specifically excluding the minute books), all
of which have been made available to the Buyer, are complete and correct and
have been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls, and accurately reflect
all material transactions. The minute books of the Company are not materially
incomplete or incorrect and the Company will not be adversely affected by the
manner in which such minute books have been maintained or by the actions taken
by the shareholders, the boards of directors, and the committees of the boards
of directors of the Company which are not fully reflected in such minute books.
At the Closing, all of the foregoing books and records will be in the possession
of the Company.
SS.3.6 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) ss.3.6(a) of the Sellers' Disclosure Schedule contains a
complete and accurate list of all real property, leaseholds, or other
interests therein owned by the Company. Sellers and the Company have
delivered or made available to Buyer copies of the deeds and other
instruments (as recorded) by which the Company acquired such real
property and interests, and copies of all title insurance policies,
opinions, abstracts, and surveys in the possession of Sellers or the
Company and relating to such property or interests.
(b) The Company owns (with good and marketable title in the
case of real property, subject only to the matters permitted by the
following sentence) all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that they
purport to own located in the facilities owned or operated by the
Company or reflected as owned in the books and records of the Company,
including all of the properties and assets reflected in the Financial
Statements (except for inventory and Rental Equipment sold since the
Most Recent Fiscal Month End, in the Ordinary Course of Business), and
all of the properties and assets purchased or otherwise acquired by the
Company since the Most Recent Fiscal Month End (except for inventory
and Rental Equipment subsequently sold in the Ordinary Course of
Business), which subsequently purchased or acquired properties and
assets (other than inventory, Rental Equipment, and short-term
investments) are listed in ss.3.6(b) of the Sellers' Disclosure
Schedule.
(c) All material properties and assets reflected in the Most
Recent Balance Sheet are free and clear of all Encumbrances and are
not, in the case of real property, subject to any rights of way,
building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such properties
and assets, (i) mortgages or security interests shown on the Most
Recent Balance Sheet as securing specified liabilities or obligations,
with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (ii) mortgages or
security
<PAGE> 18
interests incurred in the Ordinary Course of Business in connection
with the purchase of property or assets after the Most Recent Fiscal
Month End (such mortgages and security interests being limited to the
property or assets so acquired), with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a
default) exists, (iii) liens for current taxes not yet due, and (iv)
with respect to real property, (A) minor imperfections of title, if
any, none of which is substantial in amount, materially detracts from
the value or impairs the use of the property subject thereto, or
impairs the operations of the Company and (B) zoning laws and other
land use restrictions that do not impair the present or anticipated use
of the property subject thereto. All buildings, plants, and structures
owned by the Company lie wholly within the boundaries of the real
property owned by the Company and do not encroach upon the property of,
or otherwise conflict with the property rights of, any other Person.
SS.3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings, plants,
structures, and equipment of the Company are structurally sound, are in good
operating condition and repair (subject to normal wear and tear), and are
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost. The building, plants, structures, and equipment of the Company are
sufficient for the continued conduct of the Company's business after the Closing
in substantially the same manner as conducted prior to the Closing.
SS.3.8 ACCOUNTS RECEIVABLE.
(a) All accounts receivable of the Company that are reflected
on the Most Recent Balance Sheet or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from
sales actually made or services actually performed in the Ordinary
Course of Business. Unless paid prior to the Closing Date, the Accounts
Receivable are, or will be as of the Closing Date, current and
collectible.
(b) ss.3.8(b) of the Sellers' Disclosure Schedule contains a
complete and accurate list and description of Proceedings pending as of
the date hereof to pursue collection of the Accounts Receivable (the
"Collection Actions A/R"). There is no contest, claim, or right of
set-off, other than adjustments in the Ordinary Course of Business,
under any Contract with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable.
(c) ss.3.8(c) of the Sellers' Disclosure Schedule contains a
complete and accurate list of all Accounts Receivable as of the Most
Recent Fiscal Month End, which list sets forth the aging of such
Accounts Receivable.
<PAGE> 19
SS.3.9 INVENTORY. All inventory of the Company, whether or not
reflected in the Most Recent Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, all of which have been written off or
written down to net realizable value in the Most Recent Balance Sheet. All such
inventories not written off have been priced at the lower of cost or net
realizable value on a first in, first out basis. To the Knowledge of Sellers,
the quantities of each item of inventory of the Company are not excessive, but
are reasonable and consistent with normal industry practices.
SS.3.10 RENTAL EQUIPMENT. All Rental Equipment of the Company,
whether or not reflected in the Most Recent Balance Sheet, consists of a quality
and quantity usable, rentable, or salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Most Recent
Balance Sheet. All such Rental Equipment not written off has been recorded at
net realizable value and has been depreciated consistent with the economic life
of such Rental Equipment. To the Knowledge of Sellers, the quantities of each
item of such Rental Equipment are not excessive, but are reasonable and
consistent with normal industry practices. All such Rental Equipment is in good
operating condition and repair, subject to normal wear and tear, and has been
maintained in accordance with normal industry practice.
SS.3.11 NO UNDISCLOSED LIABILITIES. Except as set forth in ss.3.11 of
the Sellers' Disclosure Schedule, the Company does not have any liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Most Recent Balance Sheet and trade
payables and accrued expenses incurred in the Ordinary Course of Business since
the date thereof.
SS.3.12 TAXES.
(a) The Company has filed or caused to be filed on a timely
basis all Tax Returns that are or were required to be filed by it,
either separately or as a member of a group of corporations, pursuant
to applicable Legal Requirements. The Sellers and the Company have
delivered or made available to Buyer copies of, and ss.3.12(a) of the
Sellers' Disclosure Schedule contains a complete and accurate list of,
all such Tax Returns (except sales Tax Returns) filed on or since
January 1, 1993. The Company has paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant to
those Tax Returns or otherwise, or pursuant to any assessment received
by the Sellers or the Company, except such Taxes, if any, as are listed
in ss.3.12(a) of the Sellers' Disclosure Schedule and are being
contested in good faith and as to which adequate reserves (determined
in accordance with the basis of accounting used in the Financial
Statements) have been provided in the Most Recent Balance Sheet.
(b) The United States federal and state income Tax Returns of
the Company have been audited by the IRS or relevant state tax
authorities or are closed by the applicable statute of limitations for
all taxable years through December 31, 1993. ss.3.12(b)
<PAGE> 20
of the Sellers' Disclosure Schedule contains a complete and accurate
list of all audits of all such Tax Returns, including a reasonably
detailed description of the nature and outcome of each audit. All
deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in ss.3.12(a) of the
Sellers' Disclosure Schedule, are being contested in good faith by
appropriate proceedings. ss.3.12(a) of the Sellers' Disclosure Schedule
describes all adjustments to the United States federal income Tax
Returns filed by the Company or any group of corporations including the
Company for all taxable years since December 31, 1990, and the
resulting deficiencies proposed by the IRS.
(c) Except as described in ss.3.12(c) of the Sellers'
Disclosure Schedule, neither the Seller nor the Company has given or
been requested to give waivers or extensions (or is or would be subject
to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or for
which the Company may be liable.
(d) The charges, accruals, and reserves with respect to Taxes
on the books of the Company are adequate (determined in accordance with
the basis of accounting used in the Financial Statements) and are at
least equal to the liability for Taxes of the Company. There exists no
proposed tax assessment against the Company except as disclosed in the
Most Recent Balance Sheet or in ss.3.12(d) of the Sellers' Disclosure
Schedule. No consent to the application of Section 341(f)(2) of the IRC
has been filed with respect to any property or assets held, acquired,
or to be acquired by the Company. All Taxes that the Company is or was
required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to
the proper Governmental Body or other Person. There is no action, suit,
proceeding, investigation, audit, or claim now pending or Threatened by
any taxing authority related to the Company. No claim has ever been
made by any taxing authority in a jurisdiction where the Company does
not file Tax Returns that the Company is subject to taxation in such
jurisdiction. The Company has properly completed and filed all sales
tax exemption certificates for sales where tax was not charged.
(e) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There
is no tax sharing agreement (or equivalent agreement) that will require
any payment by the Company after the date of this Agreement. The
Company is not, or within the five-year period preceding the Closing
Date has not been, an "S" corporation. During the consistency period
(as defined in Section 338(h)(4) of the IRC with respect to the sale of
the Shares to Buyer), neither the Company nor any target affiliate (as
defined in Section 338(h)(6) of the IRC with respect to the sale of the
Shares to Buyer) has sold or will sell any property or assets to Buyer
or to any member of the affiliated group (as defined in Section
338(h)(5) of the IRC) that includes Buyer. ss.3.12(e) of the Sellers'
Disclosure Schedule lists all such target affiliates.
<PAGE> 21
(f) The Company is not a party to any safe harbor lease within
the meaning of Section 168(f)(8) of the IRC, as in effect prior to
amendment by the Tax Equity and Fiscal Responsibility Act of 1982. The
Company is not, and never has been, a United States real property
holding corporation within the meaning of Section 897(c)(2) of the IRC.
No Seller is a "foreign person" as such term is defined in Section 1445
of the IRC. The Company is not a "consenting corporation" under Section
341(f) of the IRC. The Company has not entered into any compensatory
agreements with respect to the performance of services which payment
thereunder would result in a nondeductible expense to the Company
pursuant to Section 280G of the IRC. The Company has not participated
in an international boycott as defined in Section 999 of the IRC. The
Company has not agreed to make or is required to make any adjustment
under Section 481(a) of the IRC by reason of a change in accounting
method or otherwise.
SS.3.13 NO MATERIAL ADVERSE CHANGE. Except as set forth in ss.3.13
of the Sellers' Disclosure Schedule, since the Most Recent Fiscal Month End,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and no event has
occurred or circumstance exists that may result in such a material adverse
change.
SS.3.14 EMPLOYEE BENEFITS.
(a) ss.3.14(a) of the Sellers' Disclosure Schedule
contains or sets forth the following:
(i) a complete and accurate list of all Company
Plans, Company Other Benefit Obligations, and Company VEBAs,
and identifies as such all Company Plans that are (A) defined
benefit Pension Plans, (B) Qualified Plans, (C) Title IV
Plans, or (D) Multiemployer Plans.
(ii) a complete and accurate list of (A) all ERISA
Affiliates of the Company, and (B) all Plans of which any such
ERISA Affiliate is or was a Plan Sponsor, in which any such
ERISA Affiliate participates or has participated, or to which
any such ERISA Affiliate contributes or has contributed.
(iii) for each Multiemployer Plan, as of its last
valuation date, the amount of potential withdrawal liability
of the Company and the Company's other ERISA Affiliates,
calculated according to information made available pursuant to
ERISA ss. 4221(e).
(iv) a calculation of the liability of the Company
for post-retirement benefits other than pensions, made in
accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether
the Company is required by this Statement to disclose such
information.
<PAGE> 22
(v) the financial cost of all obligations owed under
any Company Plan or Company Other Benefit Obligation that is
not subject to the disclosure and reporting requirements of
ERISA.
(b) The Sellers and the Company have delivered to Buyer:
(i) all documents that set forth the terms of each
Company Plan, Company Other Benefit Obligation, or Company
VEBA and of any related trust, including (A) all plan
descriptions and summary plan descriptions of Company Plans
for which Sellers or the Company or any ERISA Affiliate of the
Company are required to prepare, file, and distribute, and (B)
all summaries and descriptions furnished to participants and
beneficiaries regarding Company Plans, Company Other Benefit
Obligations, and Company VEBAs for which a plan description or
summary plan description is not required;
(ii) all personnel, payroll, and employment manuals
and policies;
(iii) all collective bargaining agreements pursuant
to which contributions have been made or obligations incurred
(including both pension and welfare benefits) by the Company
and the ERISA Affiliates of the Company, and all collective
bargaining agreements pursuant to which contributions are
being made or obligations are owed by such entities;
(iv) a written description of any Company Plan or
Company Other Benefit Obligation that is not otherwise in
writing;
(v) all registration statements filed with respect
to any Company Plan and Company Other Benefit Obligation;
(vi) all insurance policies purchased by or to
provide benefits under any Company Plan and Company Other
Benefit Obligation;
(vii) all contracts with third party administrators,
actuaries, investment managers, consultants, and other
independent contractors that relate to any Company Plan,
Company Other Benefit Obligation, or Company VEBA;
(viii) all reports submitted within the four years
preceding the date of this Agreement by third party
administrators, actuaries, investment managers, consultants,
or other independent contractors with respect to any Company
Plan, Company Other Benefit Obligation, or Company VEBA;
(ix) all notifications to employees of their rights
under ERISA ss.601 et seq. and IRC ss. 4980B;
<PAGE> 23
(x) the Form 5500 filed in each of the most recent
three plan years with respect to each Company Plan and Company
Other Benefit Obligation, including all schedules thereto and
the opinions of independent accountants;
(xi) all notices that were given by the Company or
any ERISA Affiliate of the Company or any Company Plan to the
IRS, the U.S. Department of Labor, the PBGC, or any
participant or beneficiary, pursuant to statute, regulation,
or otherwise, within the four years preceding the date of this
Agreement, including notices that are expressly mentioned
elsewhere in this ss.3.14;
(xii) all notices that were given by the IRS, the
PBGC, or the Department of Labor to the Company, any ERISA
Affiliate of the Company, or any Company Plan within the four
years preceding the date of this Agreement;
(xiii) with respect to Qualified Plan and VEBAs, the
most recent determination letter for each Company Plan that is
a Qualified Plan, and exemption in response to the filing of
IRS Form 1024 for each Company VEBA; and
(xiv) with respect to Title IV Plans, the Form
PBGC-I filed for each of the three most recent plan years.
(c) Except as set forth in ss.3.14(c) of the Sellers'
Disclosure Schedule:
(i) The Company and the Company's ERISA Affiliates
have performed all of respective obligations under all Company
Plan, Company Other Benefit Obligations, and Company VEBAs.
The Company has made appropriate entries in its financial
records and statements for all obligations and liabilities
under such Company Plan, Company VEBAs, and Company Other
Benefit Obligation that have accrued but are not due.
(ii) No statement, either written or oral, has been
made by the Company to any Person with regard to any Plan or
Other Benefit Obligation that was not in accordance with the
Plan or Other Benefit Obligation and that could have an
adverse economic consequence to the Company or to Buyer.
(iii) The Company, with respect to all Company Plan,
Company Other Benefits Obligations, and Company VEBAs, are,
and each Company Plan, Company Other Benefit Obligation, and
Company VEBA is, in full compliance with ERISA, the IRC, and
other applicable Laws including the provisions of such Laws
expressly mentioned in this ss.3.14, and with any applicable
collective bargaining agreement.
<PAGE> 24
(A) No transactions prohibited by ERISA
ss.406 and no "prohibited transaction" under IRC
ss.4975(c) have occurred with respect to any Company
Plan.
(B) No Seller or the Company or any ERISA
Affiliate of the Company has any liability to the IRS
with respect to any Plan, including any liability
imposed by Chapter 43 of the IRC.
(C) No Seller or the Company or any ERISA
Affiliate of the Company has any liability to the
PBGC with respect to any Plan or has any liability
under ERISA ss.502 or ss.4071.
(D) All filings required by ERISA and the
IRC as to each Company Plan, Company VEBA, and
Company Other Benefit Obligation, have been timely
filed, and all notices and disclosures to
participants required by either ERISA or the IRC have
been timely provided.
(E) All contributions and payments made or
accrued with respect to all Company Plans, Company
Other Benefit Obligations, and Company VEBAs are
deductible under IRC ss.162 or ss.404. No amount, or
any asset of any Company Plan or Company VEBA, is
subject to tax as unrelated business taxable income.
(iv) Each Company Plan and Company Other Benefit
Obligation can be terminated within thirty days, without
payment of any additional contribution or amount and without
the vesting or acceleration of any benefits promised by such
Plan.
(v) Since December 31, 1993, there has been no
establishment or amendment of any Company Plan, Company VEBA,
or Company Other Benefit Obligation.
(vi) No event has occurred or circumstance exists
that could result in a material increase in premium costs of
Company Plans and Company Other Benefit Obligations that are
insured, or a material increase in benefit costs of such
Company Plan and Company Other Benefit Obligation that are
self-insured.
(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal
proceeding involving, any Company Plan, Company Other Benefit
Obligation, or Company VEBA is pending or, to the Knowledge of
Sellers', is pending or Threatened.
<PAGE> 25
(viii) Each Company Plan that is a Qualified Plan is
qualified in form and operation under IRC ss.401(a); each
trust for each such Plan is exempt from federal income tax
under IRC ss.501(a). Each Company VEBA is exempt from federal
income tax and qualifies under IRC ss.501(c)(9). No event has
occurred or circumstance exists that will or could give rise
to disqualification or loss of tax-exempt status of any such
Qualified Plan or trust or Company VEBA.
(ix) With respect to each Company Plan, the Company
and each ERISA Affiliate of the Company has met the minimum
funding standard, and has made all contributions required,
under ERISA ss.302 and IRC ss.412.
(x) No Company Plan is subject to Title IV of
ERISA.
(xi) The Company has paid all amounts due to the
PBGC pursuant to ERISA ss.4007.
(xii) Neither the Company nor any ERISA Affiliate of
the Company has ceased operations at any facility or has
withdrawn from any Title IV Plan or has engaged in a
transaction in a manner that would subject the Company or any
ERISA Affiliate of the Company, or any other entity or Sellers
to liability under ERISA ss.4062(e), ss.4063, ss.4064 or
ss.4069.
(xiii) Neither the Company nor any ERISA Affiliate of
the Company has filed a notice of intent to terminate any Plan
or has adopted any amendment to treat a Plan as terminated.
The PBGC has not instituted proceedings to terminate any
Company Plan. No event has occurred or circumstance exists
that may constitute grounds under ERISA ss.4042 for the
termination of, or the appointment of a trustee to administer,
any Company Plan.
(xiv) No amendment has been made, or is reasonably
expected to be made, to any Plan that has required or could
require the provision of security under ERISA ss.307 or IRC
ss.401(a)(29).
(xv) No accumulated funding deficiency, whether or
not waived, exists with respect to any Company Plan; no event
has occurred or circumstance exists that may result in an
accumulated funding deficiency as of the last day of the
current plan year of any such Company Plan.
(xvi) The actuarial report for each Company Plan
that is a Title IV Plan fairly presents the financial
condition and the results of operations of each such Title IV
Plan in accordance with GAAP.
<PAGE> 26
(xvii) Since the last valuation date for each
Company Plan that is a Title IV Plan, no event has occurred or
circumstance exists that would increase the amount of benefits
under any such Title IV Plan or that would cause the excess of
such Title IV Plan assets over benefit liabilities (as defined
in ERISA ss.4001) to decrease, or the amount by which benefit
liabilities exceed assets to increase; and
(xviii) The market value of assets equal or exceeded
(and will, as of the Closing Date, equal or exceed) the
present value of "benefit liabilities" (within the meaning of
ERISA ss.4001(a)(16)) thereunder determined in accordance with
both (A) such Title IVB Plan's actuarial valuation assumptions
in effect for the most recent prior plan year, and (B) the
provisions of Title IV of ERISA on a Title IV Plan termination
basis (assuming such Title IV Plan termination on each of such
dates).
(xix) No reportable event (as defined in ERISA
ss.4043 and in regulations issued thereunder) has occurred.
(xx) No Seller has Knowledge of any facts or
circumstances that may give rise to any liability of any
Seller, the Company, any ERISA Affiliate of the Company, or
Buyer to the PBGC under Title IV of ERISA.
(xxi) Neither the Company nor any ERISA Affiliate
of the Company has ever established, maintained, or
contributed to or otherwise participated in, or had an
obligation to maintain, contribute to, or otherwise
participate in any Multiemployer Plan.
(xxii) Neither the Company nor any ERISA Affiliate
of the Company has withdrawn from any Multiemployer Plan with
respect to which there is any outstanding liability as of the
date of this Agreement. No event has occurred or circumstance
exists that presents a risk of the occurrence of any
withdrawal from, or the participation, termination,
reorganization, or insolvency of, any Multiemployer Plan that
could result in any liability of either the Company or Buyer
to a Multiemployer Plan.
(xxiii) Neither the Company nor any ERISA Affiliate
of the Company has received notice from any Multiemployer Plan
that it is in reorganization or is insolvent, that increased
contributions may be required to avoid a reduction in plan
benefits or the imposition of any excise tax, or that such
Multiemployer Plan intends to terminate or has terminated.
(xxiv) No Multiemployer Plan to which the Company or
any ERISA Affiliate of the Company contributes or has
contributed is a party to any pending
<PAGE> 27
merger or asset or liability transfer or is subject to any
proceeding brought by the PBGC.
(xxv) Except to the extent required under ERISA
ss.601 et seq. and IRC ss.4980B, the Company does not provide
health or welfare benefits for any retired or former employee,
officer, or director, or any other person, and is not
obligated to provide health or welfare benefits to any active
employee, officer, director, or any other person following
retirement or other termination of service.
(xxvi) The Company has the right to modify and
terminate benefits to retirees (other than pensions) with
respect to both retired and active employees.
(xxvii) Sellers and the Company have complied with
the provisions of ERISA ss.601 et seq. and IRC ss.4980B.
(xxviii) No payment that is owed or may become due to
any director, officer, employee, or agent of the Company will
be non-deductible to the Company or subject to tax under IRC
ss.280G or ss.4999; nor will the Company be required to "gross
up" or otherwise compensate any such person because of the
imposition of any excise tax on a payment to such person.
(xxiv) The consummation of the Contemplated
Transactions will not result in the payment, vesting, or
acceleration of any benefit under any Company Plan or Company
Other Benefit Obligation.
SS.3.15 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in ss.3.15(a) of the Sellers'
Disclosure Schedule,
(i) the Company is, and at all times since
December 31, 1994 has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct
or operation of its business or the ownership or use of any of
its assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) may
constitute or result in a violation by the Company of, or a
failure on the part of the Company to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the
part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time,
any notice or other communication (whether oral or written)
from any Governmental Body or any
<PAGE> 28
other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or
potential obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) ss.3.15(b) of the Sellers' Disclosure Schedule
contains a complete and accurate list of each Governmental
Authorization (excluding vehicle licenses, a complete and accurate list
of which will be provided by Sellers and the Company at least five
business days prior to the Closing) that is held by the Company or that
otherwise relates to the business of, or to any of the assets owned or
used by the Company. Each Governmental Authorization listed in
ss.3.15(b) of the Sellers' Disclosure Schedule is valid and in full
force and effect. The Governmental Authorizations listed in ss.3.15(b)
of the Sellers' Disclosure Schedule collectively constitute all of the
Governmental Authorizations necessary to permit the Company to lawfully
conduct and operate their businesses in the manner they currently
conduct and operate such businesses and to permit the Company to own
and use its assets in the manner in which it currently owns and uses
such assets.
(c) Except as set forth in ss.3.15(c) of the Sellers'
Disclosure Schedule:
(i) the Company is, and at all times since December
31, 1993 has been, in full compliance with all of the terms
and requirements of each Governmental Authorization identified
or required to be identified in ss.3.15(b) of the Sellers'
Disclosure Schedule;
(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of
or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in
ss.3.15(b) of the Sellers' Disclosure Schedule, or (B) result
directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or
required to be listed in ss.3.15(b) of the Sellers' Disclosure
Schedule;
(iii) the Company has not received any notice or
other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or
required to be listed in ss.3.15(b) of the
<PAGE> 29
Sellers' Disclosure Schedule have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely
basis with the appropriate Governmental Bodies.
SS.3.16 LEGAL PROCEEDINGS; ORDERS.
(a) ss.3.16(a) of the Sellers' Disclosure Schedule
contains a complete and correct list of each Proceeding by or against
the Company that is currently pending, has been pending at any time
since December 31, 1992, or is Threatened, and that:
(i) relates to or may affect the business of, or any
of the assets owned or used by the Company; or
(ii) challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions.
In addition, (1) no event has occurred or circumstance exists that may
give rise to or serve as a basis for the commencement of any such
Proceeding and (2) no Proceeding has been settled since December 31,
1992, for an amount greater than $5,000.00. Sellers have delivered to
Buyer copies of all pleadings, correspondence, and other documents
relating to each Proceeding (if any) listed in ss.3.16(a) of the
Sellers' Disclosure Schedule. The Proceedings listed in ss.3.16(a) of
the Sellers' Disclosure Schedule will not have a material adverse
effect on the business, operations, assets, condition, or prospects of
the Company.
(b) Except as set forth in ss.3.16(b) of the Sellers'
Disclosure Schedule,
(i) there is no Order to which the Company or any
of the assets owned or used by either the Company, is subject;
(ii) no Seller is subject to any Order that relates
to the business of, or any of the assets owned or used by, the
Company;
(iii) no officer or director of the Company is
subject to any Order that prohibits such officer or director
from engaging in or continuing any conduct, activity, or
practice relating to the business of the Company; and
(iv) to the Knowledge of Sellers, no agent or
employee of the Company is subject to any Order that prohibits
such agent or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in ss.3.16(c) of the Sellers'
Disclosure Schedule,
<PAGE> 30
(i) the Company is, and at all times since December
31, 1993 has been, in full compliance with all of the terms
and requirements of each Order to which it, or any of the
assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists
that may constitute or result in (with or without notice or
lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which the Company, or any
of the assets owned or used by the Company, is subject; and
(iii) the Company has not received, at any time, any
notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order
to which the Company, or any of the assets owned or used by
the Company, is or has been subject.
SS.3.17 ABSENCE OF CERTAIN CHANGES AND EVENTS.
(a) Except as set forth in ss.3.17(a) of the Sellers'
Disclosure Schedule, since the Most Recent Fiscal Month End, the
Company has conducted its business only in the Ordinary Course of
Business and there has not been any:
(i) any event, occurrence, development or state of
circumstances or facts which has had or is reasonably expected
to have a material adverse effect, other than those resulting
from changes in general conditions (including laws and
regulations) applicable to the industry, or general economic
conditions;
(ii) any change in the authorized or issued capital
stock of the Company, any merger or consolidation with any
other Person, any declaration, setting aside or payment of any
dividend (whether in cash, securities or other property) or
other distribution with respect to any shares of capital stock
of the Company, or any repurchase, redemption or other
acquisition by the Company of any outstanding shares of
capital stock or other securities of, or other material
ownership interests in, the Company, or the issuance or sale
by the Company of any capital stock or the issuance or sale by
the Company of any capital stock or the issuance or grant by
the Company of any option, warrant, call, commitment,
subscription, right to purchase or contract of any character
relating to its authorized or issued capital stock or any
securities convertible into, relating to or based on its
capital stock or any arrangement or contract with respect to
the purchase or voting of any shares of its or their
respective shares of capital stock, or to adjust, split,
combine or reclassify any of their respective securities or
make any other changes in their respective capital structure;
<PAGE> 31
(iii) amendment to the Organizational Documents of
the Company;
(iv) payment or increase by the Company of any
bonuses, salaries, or other compensation to any stockholder,
director, officer, or (except in the Ordinary Course of
Business) employee or entry into any employment, severance, or
similar Contract with any director, officer, or employee, or
debt issued or advances made to any shareholder, director,
officer, or employee;
(v) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or
other employee benefit plan for or with any employees of the
Company;
(vi) damage to or destruction or loss of any asset
or property of the Company, whether or not covered by
insurance, which damage, destruction or loss has materially
and adversely affected the properties, assets, business,
financial condition, or prospects of the Company, taken as a
whole;
(vii) entry into, amendment or termination of, or
receipt of notice of termination of (A) any license,
distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (B) any Contract or
transaction involving a total remaining commitment by or to
the Company of at least $10,000.00;
(viii) sale (other than sales of inventory in the
Ordinary Course of Business), lease, or other disposition of
any asset or property of the Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any material
asset or property of the Company, including the sale, lease,
or other disposition of any of the Intellectual Property
Assets;
(ix) purchase of any asset or property other than
in the Ordinary Course of Business;
(x) cancellation or waiver of any claims or rights
other than in the Ordinary Course of Business;
(xi) repayment of any debt other than debt
disclosed in the Most Recent Balance Sheet or incurred in the
Ordinary Course of Business since the Most Recent Fiscal Month
End;
(xii) material change in the accounting methods used
by the Company; or
<PAGE> 32
(xiii) any occurrence, assumption or guarantee by the
Company or of any Indebtedness in excess of $10,000;
(xiv) any transaction or commitment made to acquire
or dispose of any real property;
(xv) any labor dispute, other than routine
individual grievances, or, to the Knowledge of Sellers, any
activity or proceeding by a labor union or representative
thereof to organize any employees of the Company, or any
lockouts, strikes, slowdowns, work stoppages or, to the
Knowledge of Sellers any threats thereof by or with respect to
any employees of the Company;
(xvi) agreement, whether oral or written, by the
Company to do any of the foregoing.
(b) Prior to the Closing, the Sellers will not (i) sell
or otherwise transfer or dispose of the Shares, (ii) pledge or
otherwise encumber the Shares, (iii) enter into any shareholders
agreement or voting trust agreement, or (iv) grant any proxy with
respect to the Shares.
SS.3.18 CONTRACTS; NO DEFAULTS.
(a) ss.3.18(a) of the Sellers' Disclosure Schedule
contains a complete and accurate list, if any, and the Sellers have
delivered to the Buyer true and complete copies, if any, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by
the Company of an amount or value in excess of $10,000.00
(excluding the rental of Rental Equipment in the Ordinary
Course of Business);
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to
the Company of an amount or value in excess of $5,000.00;
(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves
expenditures or receipts of the Company in excess of
$5,000.00;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property (except personal property leases and
installment and conditional
<PAGE> 33
sales agreements having a value per item or aggregate payments
of less than $5,000.00 and with terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current
or former employees, consultants, or contractors regarding the
appropriation or the nondisclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any
other Person;
(viii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity of
the Company or any Affiliate of the Company or limit the
freedom of the Company or any Affiliate of the Company to
engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(x) each power of attorney, if any, that is
currently effective and outstanding;
(xi) each Applicable Contract, if any, entered into
other than in the Ordinary Course of Business that contains or
provides for an express undertaking by the Company to be
responsible for consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $5,000.00;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
ss.3.18(a) of the Sellers' Disclosure Schedule sets forth reasonably
complete details concerning such Contracts, including the parties to
the Contracts, the amount of the
<PAGE> 34
remaining commitment of the Company under the Contracts, and the
Company's office where details relating to the Contracts are located.
(b) Except as set forth in ss.3.18(b) of the Sellers'
Disclosure Schedules,
(i) no Seller (and no Related Person of any Seller)
has or may acquire any rights under, and no Seller has or may
become subject to any obligation or liability under, any
Contract that relates to the business of, or any of the assets
owned or used by, the Company; and
(ii) to the Knowledge of Sellers, no officer,
director, agent, employee, consultant, or contractor of the
Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any
conduct, activity, or practice relating to the business of the
Company, or (B) assign to the Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in ss.3.18(c) of the Sellers'
Disclosure Schedule, each Contract identified or required to be
identified in ss.3.18(a) of the Sellers' Disclosure Schedule is in full
force and effect and is valid and enforceable in accordance with its
terms.
(d) Except as set forth in ss.3.19(d) of the Sellers'
Disclosure Schedules,
(i) the Company is, and at all times since December
31, 1994 has been, in substantial compliance with all
applicable terms and requirements of each Contract under which
the Company has or had any obligation or liability or by which
the Company or any of the assets owned or used by the Company
is or was bound;
(ii) each other Person that has or had any
obligation or liability under any Contract under which the
Company has or had any rights is, and at all times has been,
in full compliance with all applicable terms and requirements
of such Contract;
(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene,
conflict with, or result in a violation or breach of, or give
the Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, the
Applicable Contract; and
(iv) the Company has not given to or received from
any other Person, at any time any notice or other
communication (whether oral or written) regarding
<PAGE> 35
any actual, alleged, possible, or potential violation or
breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or
payable to the Company under current or completed Contracts with any
Person and, to the Knowledge of the Sellers, no such Person has made
written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture,
or provision of products or services by the Company have been entered
into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other
Person, or any consideration having been paid or promised, that is or
would be in violation of any Legal Requirement.
SS.3.19 INSURANCE.
(a) The Sellers have delivered to the Buyer:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the
Company, or any director of the Company, is or has been
covered at any time within the five years preceding the date
of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) ss.3.19(b) of the Sellers' Disclosure Schedule describes:
(i) any self-insurance arrangement by or affecting
the Company, including any reserves established thereunder
(excluding normal and usual deductibles specified in policies
of insurance delivered to Buyer pursuant to ss.3.19(a));
(ii) any contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk
by the Company; and
(iii) all obligations of the Company to third parties
with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy under
which such coverage is provided.
<PAGE> 36
(c) ss.3.19(c) of the Sellers' Disclosure Schedule sets
forth, by year, for the current policy year and each of the preceding
policy years:
(i) a summary of the loss experience under each
policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $2,500.00, which
sets forth (A) the name of the claimant; (B) a description of
the policy by insurer, type of insurance, and period of
coverage; and (C) the amount and a brief description of the
claim; and
(iii) a statement describing the loss experience for
all claims that were self-insured, including the number and
aggregate cost of such claims.
(d) Except as set forth on ss.3.19(d) of the Sellers'
Disclosure Schedule,
(i) All policies to which the Company is or was a
party or that provide coverage to either the Sellers, the
Company, or any director or officer of the Company:
(A) are or were valid, outstanding, and
enforceable;
(B) to the Knowledge of Sellers, are or were
issued by an insurer that is financially sound and
reputable;
(C) to the Knowledge of Sellers, taken
together, provide or provided adequate insurance
coverage for the assets and the operations of the
Company for all risks normally insured against by a
Person carrying on the same business or businesses as
the Company;
(D) to the Knowledge of Sellers, are or were
sufficient for compliance with all Legal Requirements
and Contracts to which the Company is a party or by
which any of them is bound;
(E) will continue in full force and effect
following the consummation of the Contemplated
Transactions; and
(F) do not provide for any retrospective
premium adjustment or other experienced-based
liability on the part of the Company.
(ii) No Seller or the Company has received (A) any
refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy
is no longer
<PAGE> 37
in full force or effect or will not be renewed or that the
issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) The Company has paid all premiums due, and has
otherwise performed all of its obligations, under each policy
to which the Company is a party or that provides coverage to
the Company or director thereof.
(iv) The Company have given notice to the insurer of
all claims that may be insured thereby.
SS.3.20 ENVIRONMENTAL MATTERS.
(a) Except as set forth in ss.3.20(a) of the Sellers'
Disclosure Schedule,
(i) The Company is, and at all times has been, in
full compliance with, and has not been and is not in violation
of or liable under, any Environmental Law. No Seller or the
Company has any basis to expect, nor has any of them or any
other Person for whose conduct they are or may be held to be
responsible received, any actual or Threatened order, notice,
or other communication from (A) any Governmental Body or
private citizen acting in the public interest, or (B) the
current or prior owner or operator of any Facilities, of any
actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation
to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities
or any other properties or assets (whether real, personal, or
mixed) in which the Sellers or the Company has had an
interest, or with respect to any property or Facility at or to
which Hazardous Materials were generated, manufactured,
refined, transferred, imported, used, or processed by the
Sellers, the Company, or any other Person for whose conduct
they are or may be held responsible, or from which Hazardous
Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(ii) There are no pending or Threatened claims,
Encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with
respect to or affecting any of the Facilities or any other
properties and assets (whether real, personal, or mixed) in
which the Sellers or the Company has or had an interest.
(iii) The Sellers have no Knowledge of any basis to
expect, nor has any of them or any other Person for whose
conduct they are or may be held responsible, received, any
citation, directive, inquiry, notice, Order, summons, warning,
or other communication that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with
<PAGE> 38
any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Sellers or the Company had an
interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Sellers, the
Company, or any other Person for whose conduct they are or may
be held responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(iv) Neither the Sellers nor the Company nor any
other Person for whose conduct they are or may be held
responsible, has any Environmental, Health, and Safety
Liabilities with respect to the Facilities. To the Knowledge
of the Sellers, neither the Sellers nor the Company nor any
other Person for whose conduct they are or may be held
responsible, has any Environmental, Health, and Safety
Liabilities with respect to any other properties and assets
(whether real, personal, or mixed) in which the Sellers or the
Company (or any predecessor), has or had an interest, or at
any property geologically or hydrologically adjoining the
Facilities or any such other property or assets.
(v) There are no Hazardous Materials present on or
in the Environment at the Facilities or, to the Knowledge of
the Sellers, at any geologically or hydrologically adjoining
property, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land
deposits, dumps, equipment (whether moveable or fixed) or
other containers, either temporary or permanent, and deposited
or located in land, water, sumps, or any other part of the
Facilities or such adjoining property, or incorporated into
any structure therein or thereon. Neither Sellers, the Company
nor any other Person for whose conduct they are or may be held
responsible, nor any other Person, has permitted or conducted,
or is aware of, any Hazardous Activity conducted with respect
to the Facilities or any other properties or assets (whether
real, personal, or mixed) in which the Sellers or the Company
has or had an interest.
(vi) There has been no Release or, to the Knowledge
of the Sellers, Threat of Release, of any Hazardous Materials
at or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by
the Facilities, or from or by any other properties and assets
(whether real, personal, or mixed) in which the Sellers or the
Company has or had an interest, or any geologically or
hydrologically adjoining property, whether by the Sellers, the
Company, or any other Person.
<PAGE> 39
(b) The Sellers have delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Sellers or the Company pertaining
to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by Sellers, the Company, or any
other Person for whose conduct they are or may be held responsible,
with Environmental Laws.
SS.3.21 EMPLOYEES.
(a) ss.3.21(a) of the Sellers' Disclosure Schedule contains a
complete and accurate list of the following information for each
employee, officer, or director of the Company, including each employee
on leave of absence or layoff status: employer, name, job title,
current compensation paid or payable, vacation accrued, and service
credited for purposes of vesting and eligibility to participate in the
Company Plans, Company VEBA, and Company Other Benefit Obligation.
(b) Except as set forth in ss.3.21(b) of the Sellers'
Disclosure Schedule, there are no employment or consulting contracts
with any employee of the Company and the employment of each employee is
terminable at will by the Company without restriction, penalty or
payment of any kind, other than payments with respect to liabilities
reflected on the Financial Statements, payments for services actually
performed, non-material payments for accrued benefits and any severance
payments payable under the employment agreements listed in ss.3.21(b)
of the Sellers' Disclosure Schedule or as may be provided for under
federal, state or local laws, rules or regulations.
(c) No officer or director or, to the Knowledge of Sellers,
the Company, employee, of the Company is a party to, or is otherwise
bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such officer
or director or employee and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will affect (i) the
performance of his duties as an officer or director or employee of the
Company, or (ii) the ability of the Company to conduct its business,
including any Proprietary Rights Agreement with Sellers or the Company
by any such officer or director or employee. To the Knowledge of
Sellers, no director, officer, or other key employee of the Company
intends to terminate his employment with the Company and no such
director, officer, or other key employee of the Company has Threatened
to terminate his employment with the Company.
(d) ss.3.21(d) of the Sellers' Disclosure Schedule also
contains a complete and accurate list of the following information for
each retired employee, officer, or director of the Company, or their
dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other
benefits.
<PAGE> 40
(e) The employees of the Company are not represented by a
labor organization, no union claims to represent any such employees
and, to the Knowledge of the Sellers, no union organizing effort is or
within the last two (2) years has been underway involving employees of
the Company.
SS.3.22 LABOR RELATIONS; COMPLIANCE.
(a) The Company has not been and is not currently a party to any
collective bargaining or other labor Contract. There has not been, there is not
presently pending, existing or Threatened, (i) any strike, slowdown, picketing,
work stoppage, or employee grievance process, (ii) any Proceeding against or
affecting the Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee with the National Labor Relations Board, the
Equal Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting the Company or its premises, or (iii) any application for
certification of a collective bargaining agent. To the Knowledge of Sellers no
event has occurred or circumstance exists that could provide the basis for any
work stoppage or other labor dispute. There is no lockout of any employees by
the Company, and no such action is contemplated by the Company. The Company has
complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. The Company is not
liable for the payment of any compensation, damages, taxes, fines, penalties, or
other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
(b) ss.3.22(b) of the Sellers' Disclosure Schedule contains a
complete and correct list of all employees of the Company whose employment by
the Company was terminated within the past three years for any reason (whether
voluntarily or involuntarily and whether initiated by the Company or the
employee).
SS.3.23 INTELLECTUAL PROPERTY.
(a) Intellectual Property Assets. The term "Intellectual Property
Assets" includes:
(i) the name Titan Rentals, Inc., all fictional business
names, trading names, registered and unregistered trademarks, service
marks, and applications (collectively, "Marks");
(ii) all copyrights in both published works and unpublished
works (collectively, "Copyrights"); and
(iii) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, patents, plans, drawings, rights
<PAGE> 41
in mask works and blue prints (collectively, "Trade Secrets"); owned,
used, or licensed by the Company as licensee or licenser.
(b) Agreements. ss.3.23(b) of the Sellers' Disclosure Schedule
contains a complete and accurate list and summary description, including any
royalties paid or received by the Company, of all Contracts relating to the
Intellectual Property Assets to which the Company is a party or by which the
Company is bound, except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software programs with a
value of less than $5,000 under which the Company is the licensee. There are no
outstanding and, to the Knowledge of the Sellers, no Threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business.
(i) The Intellectual Property Assets are all those necessary
for the operation of the Company's business as its is currently
conducted. The Company is the owner of all right, title, and interest
in and to each of the Intellectual Property Assets, free and clear of
all liens, security interests, charges, encumbrances, equities, and
other adverse claims, and has the right to use without payment to a
third party all of the Intellectual Property Assets.
(ii) Except as set forth in ss.3.23(c)(ii) of the Sellers'
Disclosure Schedule, all former and current employees of the Company
have executed written Contracts with the Company that assign the
Company all rights to any inventions, improvements, discoveries, or
information relating to the business of the Company. No employee of the
Company has entered into any Contract that restricts or limits in any
way the scope or type of work in which the employee may be engaged or
requires the employee to transfer, assign, or disclose information
concerning his work to anyone other than the Company.
(d) Trademarks.
(i) ss.3.23(d)(i) of the Sellers' Disclosure Schedule
contains a complete and accurate list and summary description of all
Marks. The Company is the owner of all right, title, and interest in
and to each of the Marks, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims.
(ii) All Marks that have been registered with the United
States Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days
after the Closing Date.
<PAGE> 42
(iii) No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, to the Knowledge of the Sellers, no
such action is Threatened with the respect to any of the Marks.
(iv) To the Knowledge of the Sellers, there is no potentially
interfering trademark or trademark application of any third party.
(v) No Mark is infringed or, to the Knowledge of the
Sellers, has been challenged or threatened in any way. None of the
Marks used by the Company infringes or is alleged to infringe any trade
name, trademark, or service mark of any third party.
(vi) All products and materials containing a Mark bear the
proper federal registration notice where permitted by law.
(e) Copyrights.
(i) ss.3.23(e)(i) of the Sellers' Disclosure Schedule
contains a complete and accurate list and summary description of all
Copyrights. The Company is the owner of all right, title, and interest
in and to each of the Copyrights, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims.
(ii) All the Copyrights have been registered and are
currently in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the date of Closing.
(iii) No Copyright is infringed or, to the Knowledge of the
Sellers, has been challenged or threatened in any way. None of the
subject matter of any of the Copyrights infringes or is alleged to
infringe any copyright of any third party or is a derivative work based
on the work of a third party.
(iv) All works encompassed by the Copyrights have been marked
with the proper copyright notice.
(f) Trade Secrets.
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient in
detail and content to identify and explain it and to allow its full and
proper use without reliance on the Knowledge or memory of any
individual.
<PAGE> 43
(ii) To the Knowledge of the Sellers, the Sellers and the
Company have taken all reasonable precautions to protect the secrecy,
confidentiality, and value of its Trade Secrets.
(iii) The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade
Secrets are not part of the public Knowledge or literature, and, to the
Knowledge of the Sellers, have not been used, divulged, or appropriated
either for the benefit of any Person (other than the Company) or to the
detriment of the Company. No Trade Secret is subject to any adverse
claim or has been challenged or threatened in any way.
SS.3.24 CERTAIN PAYMENTS. Neither the Company, nor any director,
officer, agent, or employee of the Company, nor to the Knowledge of the Sellers
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, kickback, or other payment in violation of any Legal
Requirement, applicable tort law, or any Applicable Contract, 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, or (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Company or
any Affiliate of the Company, or (b) established or maintained any fund or asset
that has not been recorded in the books and records of the Company.
SS.3.25 RELATIONSHIPS WITH RELATED PERSONS.
(a) Except as set forth in ss.3.25(a) of the Sellers'
Disclosure Schedule, no Seller or any Related Person of Sellers or of
the Company has, or since December 31, 1992, has had, any interest in
any property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to the business of the Company. No
Seller or any Related Person of Sellers or of the Company is, or since
December 31, 1992, has owned (of record or as a beneficial owner) an
equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in
any transaction with the Company, or (ii) engaged in competition with
the Company with respect to any line of the products or services of the
Company (a "Competing Business") in any market presently served by the
Company.
(b) Except as set forth in ss.3.25(b) of the Sellers'
Disclosure Schedule, no Seller or any Related Person of Sellers or of
the Company is, or since December 31, 1992, was, a party to any
Contract with, or has or had any claim or right against, the Company.
SS.3.26 CUSTOMERS AND SUPPLIERS. ss.3.26 of the Sellers' Disclosure
Schedule sets forth the Company's top twenty customers based on the revenue
generated by such customers during the fiscal year ended December 31, 1997, and
sale projections for the current fiscal year of the top twenty customers. Also
set forth therein are the Company's top ten vendors based on the
<PAGE> 44
expenditures of the Company with such vendor during such fiscal year. To the
best of the Knowledge of Sellers, nothing has occurred since the Most Recent
Fiscal Month End that would in any way have an adverse effect on the
relationship that the Company has with any party listed in ss.3.26 of the
Sellers' Disclosure Schedule.
SS.3.27 BROKERS OR FINDERS. The Sellers and their agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
SS.3.28 BANK ACCOUNT. ss.3.28 of the Sellers' Disclosure Schedule
contains (a) a true and complete list of the names and locations of all banks,
trust companies, securities brokers, and other financial institutions at which
the Company has an account or safe deposit box or maintains a banking,
custodial, trading, trust, or other similar relationship, (b) a true and
complete list and description of each such account, box, and relationship, and
(c) a list of all signatories for each such account and box.
SS.3.29 DISCLOSURE.
(a) No representation or warranty of Sellers or the Company in
this Agreement and no statement in the Sellers' Disclosure Schedule
omits to state a material fact necessary to make the statements herein
or therein, in light of the circumstances in which they were made, not
misleading.
(b) No notice given pursuant to ss.5.5 will contain any untrue
statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances
in which they were made, not misleading.
(c) There is no fact known to any Seller that has specific
application to any Seller or the Company (other than general economic
or industry conditions) and that materially adversely affects or, as
far as any Seller or the Company can reasonably foresee, materially
Threatens, the assets, business, prospects, financial condition, or
results of operations of the Company (separately or on a consolidated
basis) that has not been set forth in this Agreement or the Sellers'
Disclosure Schedule.
SS.3.30 INDEBTEDNESS. The Indebtedness of the Company as of the date
of this Agreement does not exceed $600,000 and will not exceed $600,000 as of
the Closing Date (the "Maximum Indebtedness").
<PAGE> 45
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to Sellers that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article IV). Such representatives and warranties are
made and given subject to the disclosures in the Buyer's schedules accompanying
this Agreement executed, delivered and certified by the Buyer.
SS.4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
SS.4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms. Upon the execution and delivery by Buyer of the Promissory
Notes, the Employment Agreements, and the Lease Agreements
(collectively, the "Buyer's Closing Documents"), the Buyer's Closing
Documents will constitute the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective
terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the
Buyer's Closing Documents.
(b) Except as set forth in ss.4.2 of the Buyer's Disclosure
Schedule, neither the execution and delivery of this Agreement by Buyer
nor the consummation or performance of any of the Contemplated
Transactions by Buyer will give any Person the right to prevent, delay,
or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer's Organizational
Documents;
(ii) any resolution adopted by the board of
directors or the stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer
may be subject; or
(iv) any Contract to which Buyer is a party or by
which Buyer may be bound.
(c) Except as set forth in ss.4.2(c) of the Buyer's
Disclosure Schedule, Buyer is not and will not be required to obtain
any Consent from any Person in connection with the
<PAGE> 46
execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
SS.4.3 CERTAIN PROCEEDINGS. No Proceeding has been commenced or to
the Knowledge of the Buyer Threatened against the Buyer that challenges, or may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
SS.4.4 BROKERS OR FINDERS. The Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold the Sellers harmless from any such
payment alleged to be due by or through the Buyer as a result of the action of
the Buyer or its officers or agents.
ARTICLE V
COVENANTS OF SELLERS AND THE COMPANY
The Sellers and the Company covenant and agree with Buyer that, at all
times before the earlier of the Closing Date or the termination of this
Agreement in accordance with Article IX hereof, the Sellers and the Company will
comply with all covenants and provisions of this Article V applicable to it,
except to the extent (i) the Buyer may otherwise consent in writing, (ii)
otherwise required by applicable law, or (iii) otherwise expressly required or
permitted by this Agreement.
SS.5.1 ACCESS AND INVESTIGATION.
(a) Between the date of this Agreement and the Closing Date,
Sellers, the Company, and their Representatives will (i) afford Buyer
and its Representatives and prospective investors and their
Representatives (collectively, "Buyer's Advisors") full, free, and
unrestricted access to the Company's personnel, Representatives,
properties (including subsurface testing), contracts, books and
records, and other documents and data, (ii) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and
other existing documents and data as Buyer may reasonably request,
(iii) furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information as Buyer may
reasonably request, (iv) instruct the employees, counsel and financial
advisors of Sellers, Sellers' Affiliates, and the Company to cooperate
with the Buyer in its investigation of the Company, and (v) otherwise
cooperate with the investigation by Buyer and Buyer's Advisors, and
shall authorize independent certified public accountants of the Company
to permit Buyer and Buyer's Advisors to examine all accounting records
and working papers pertaining to the Financial Statements. Buyer,
Sellers, and the Company will coordinate such activities in a manner so
as to eliminate or reduce the disruption to the Company's business
resulting therefrom.
<PAGE> 47
(b) No investigation pursuant to this ss.5.1 shall affect or
be deemed to modify any representation or warranty made by the Sellers
or the Company.
SS.5.2 OPERATION OF THE BUSINESS OF THE COMPANY. Between the date of
this Agreement and the Closing Date, Sellers and the Company will:
(a) conduct the business of the Company only in the Ordinary
Course of Business and otherwise refrain from any extraordinary
transactions;
(b) use their Best Efforts to preserve intact the current
business organization of the Company, keep available the services of
the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company; and
(c) report periodically to the Buyer concerning the status of
the business, operations, and finances of the Company.
SS.5.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, Sellers
and the Company will not without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action as a result of which
any of the changes or events listed in ss.3.17 will occur.
SS.5.4 REQUIRED APPROVALS; COOPERATION.
(a) As promptly as practicable after the date of this
Agreement, Sellers and the Company will (i) make all filings and obtain
all approvals, authorizations, consents and clearances required by
Legal Requirements to be made by them in order to consummate the
Contemplated Transactions and (ii) obtain all approvals and consents
required of any Person to consummate the Contemplated Transactions.
(b) Between the date of this Agreement and the Closing Date,
Sellers and the Company will (i) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions,
and (ii) cooperate with Buyer in obtaining all consents identified in
Schedule 4.2.
SS.5.5 NOTIFICATION. The Sellers and the Company will notify the
Buyer promptly in writing of, and contemporaneously will provide the Buyer with
true and complete copies of any and all information or documents relating to,
and will use all commercially reasonable efforts to cure before the Closing, any
event, transaction, or circumstance occurring after the date of this Agreement
that causes or will cause any covenant or agreement of the Seller under this
Agreement to be breached, or that renders or will render untrue any
representation or warranty of the Sellers
<PAGE> 48
and the Company contained in this Agreement as if the same were made on or as of
the date of such event, transaction, or circumstance. The Sellers and the
Company also will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach of any representation, warranty, covenant, or
agreement made by it in this Agreement, whether occurring or arising before or
after the date of this Agreement. No disclosure by the Sellers and the Company
pursuant to this ss.5.5, however, shall be deemed to amend or supplement the
Sellers' Disclosure Schedule, or to prevent or cure any misrepresentation or
breach of warranty, unless consented to in writing by the Buyer.
SS.5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers and the Company will cause all Indebtedness
owed to the Company by any Seller or any Related Person of any Seller to be paid
in full prior to Closing.
SS.5.7 MAXIMUM INDEBTEDNESS. In the event the Indebtedness of the
Company exceeds the Maximum Indebtedness as of the Closing Date, Sellers agree
to (a) pay, or assume the obligation to pay, such portion of the Company's
Indebtedness to cause the amount of such Indebtedness to be less than or equal
to the Maximum Indebtedness and (b) execute and deliver such agreements,
instruments, certificates or other documents as necessary to evidence the
payment or assumption of such amount of the Company's Indebtedness in excess of
the Maximum Indebtedness.
SS.5.8 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Article IX, the Sellers and the Company, and their
respective Representatives will not directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of the Company, or any of the capital stock of the
Company, or any merger, consolidation, business combination, or similar
transaction involving the Company. The Sellers, the Company, and their
Representatives will immediately notify Buyer regarding any contact between the
Sellers, the Company, or their Representatives and any other Person regarding
any such offer or proposal or any related inquiry.
SS.5.9 NO CHARTER AMENDMENTS. The Sellers will cause the Company to
refrain from amending its Organizational Documents and from taking any action
with respect to any such amendment.
SS.5.10 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Sellers will cause
such directors and officers of the Company as are designated by the Buyer at
least two (2) days prior to the Closing Date to tender their resignations
effective at, and subject to, the Closing.
<PAGE> 49
SS.5.11 RESTRICTIONS ON COMPETITION.
(a) For period ending in the later (i) three (3) years from
the Closing Date and (ii) one (1) year after the termination of
employment with the Buyer or an Affiliate of the Buyer, neither of the
Principal Sellers nor any Affiliate of the Principal Sellers shall
engage in directly or indirectly in any business that the Company
conducts as of the Closing Date (except for the lease of the Properties
as set forth herein) in any area within a 250-mile radius of any of the
Properties; provided, however that ownership of less than 1% 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.
(b) For a period of five (5) years from and after the Closing
Date, neither the Other Sellers nor any Affiliate of the Other Sellers
shall engage directly or indirectly in any business that the Company
conducts as of the Closing Date (except for lease of the Properties as
set forth herein) in any area within a 250-mile radius of any of the
Properties; provided, however, that ownership of less than 1% 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.
(c) For a period ending one (1) year after the Closing Date,
neither Sellers nor any Affiliate of the Sellers shall, directly or
indirectly, (i) solicit or induce, or attempt to solicit or induce, any
employee of the Company, the Buyer or any Affiliate of the Buyer to
leave such employ of such entity for any reason whatsoever, or (ii)
hire any of the employees of the Company, the Buyer or any Affiliate of
the Buyer; provided, however, that the prohibition imposed by this
subsection (ii) shall not apply to any employee whose employment by the
Company, the Buyer or any Affiliate of the Buyer is terminated by such
entity without cause.
(d) In the event of a breach by any Seller or any Affiliate of
any Seller of the terms of this ss.5.11, Buyer shall (notwithstanding
the provisions of Article X) be entitled, if it shall so elect, to
institute legal proceedings to obtain damages for any such breach, or
to enforce the specific performance of such terms by such Seller or
Affiliate of such Seller and to enjoin such Seller or Affiliate of such
Seller from any further violation and to exercise such remedies
cumulatively or in conjunction with all other rights and remedies
provided by law. The Sellers acknowledge, however, that the remedies at
law for any breach by any of the Sellers or its Affiliates of the
provisions of this ss.5.11 may be inadequate and that Buyer shall be
entitled to injunctive relief against such Parties in the event of any
breach.
(e) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this ss.5.11 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,
<PAGE> 50
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.
SS.5.12 BEST EFFORTS. The Sellers will use their Best Efforts to take
all action and to do all things reasonably necessary, proper or advisable in
order to consummate and make effective the Contemplated Transactions (including
satisfaction, but not waiver, of the closing conditions set forth in Article VII
and VIII below.
ARTICLE VI
COVENANTS OF BUYER
Buyer covenants and agrees with Sellers that, at all times before the
earlier of the Closing Date, or the termination of this Agreement in accordance
with Article IX hereof, the Buyer will comply with all covenants and provisions
of this Article VI applicable to it, except to the extent (i) the Sellers may
otherwise consent in writing, (ii) otherwise required by applicable law, or
(iii) otherwise expressly required or permitted by this Agreement.
SS.6.1 APPROVALS OF GOVERNMENTAL BODIES.
(a) As promptly as practicable after the date of this
Agreement, Buyer will make all filings and obtain all approvals,
authorizations, consents and clearances required by Legal Requirements
to be made by it to consummate the Contemplated Transactions.
(b) Between the date of this Agreement and the Closing Date,
Buyer will cooperate with Sellers and the Company with respect to all
filings that Sellers and the Company are required by Legal Requirements
to make in connection with the Contemplated Transactions and cooperate
with Sellers and the Company in obtaining all consents identified in
ss.3.2 of the Sellers' Disclosure Schedule; provided that this
Agreement will not require Buyer to dispose of or make any change in
any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
SS.6.2 NOTIFICATION. The Buyer will notify the Sellers and the
Company promptly in writing of, and contemporaneously will provide the Sellers
and the Company with true and complete copies of any and all information or
documents relating to, and will use all commercially reasonable efforts to cure
before the Closing, any event, transaction, or circumstance occurring after the
date of this Agreement that causes or will cause any covenant or agreement of
the Buyer under this Agreement to be breached, or that renders or will render
untrue any representation or warranty of the Buyer contained in this Agreement
as if the same were made on or as of the date of such event, transaction, or
circumstance. The Buyer also will use all commercially reasonable efforts to
cure, before the Closing, any violation or breach of any representation,
warranty, covenant, or agreement made by it in this Agreement, whether occurring
or arising before or after
<PAGE> 51
the date of this Agreement. No disclosure by the Buyer pursuant to this ss.6.2,
however, shall be deemed to amend or supplement the Buyer's Disclosure Schedule,
or to prevent or cure any misrepresentation or breach of warranty, unless
consented to in writing by the Sellers and the Company.
SS.6.3 BEST EFFORTS. The Buyer will use its Best Efforts to take all
action and to do all things reasonably necessary, proper or advisable in order
to consummate and make effective the Contemplated Transactions (including
satisfaction but not waiver, of the closing conditions set forth in Articles VII
and VIII below.
SS.6.4 ACCOUNTS RECEIVABLE COLLECTION. The Buyer shall use its usual
efforts in the Ordinary Cause of Business (short of litigation, employment of
counsel or engagement or assignment to a collection agency) to collect the
Accounts Receivable. All amounts collected by the Buyer from customers whose
accounts receivable are included in the Accounts Receivable shall be deemed to
be in payment of the accounts receivable of such customer, unless such customer
indicates in writing that such amounts so collected relate to the accounts
receivable of the Buyer. Any unpaid Accounts Receivable to which the Buyer has
exercised its right of set-off shall be assigned by the Buyer to the Seller.
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
The obligation of the Buyer to purchase the Shares and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part) if it executes a
writing so stating at or prior to Closing:
SS.7.1 ACCURACY OF REPRESENTATIONS.
(a) All of the representations and warranties of Sellers and
the Company in this Agreement (considered collectively), and each of
these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this
Agreement, and must be accurate in all material respects at and as of
the Closing Date, as if made at and as of the Closing Date.
(b) Each of the representations and warranties of Sellers and
the Company in ss.ss.3.3, 3.4, 3.12, 3.13, and 3.29 must have been
accurate in all respects as of the date of this Agreement, and must be
accurate in all respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Sellers'
Disclosure Schedule.
<PAGE> 52
SS.7.2 SELLERS' PERFORMANCE.
(a) Except as set forth in ss.7.2(b) below, all of the
covenants and obligations that Sellers and the Company are required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed
and complied with in all material respects.
(b) Each document required to be delivered pursuant to
ss.2.4(a) must have been delivered, and each of the other covenants and
obligations in ss.5.4 must have been performed and complied with in all
respects.
SS.7.3 CONSENTS. All Consents required in ss.3.2 of the Sellers'
Disclosure Schedule, each Consent identified in ss.4.2 of the Buyer's Disclosure
Schedule, and any and all other Consents must have been obtained and must be in
full force and effect.
SS.7.4 INDEBTEDNESS.
(a) Amendments to loan agreements, new loan agreements,
estoppel certificates, and/or other documentation fully assuring Buyer
of continuation and/or replacement of the Company's Senior
Indebtedness, to such extent as Buyer reasonably determines to be
necessary or advisable (and otherwise in a form reasonably satisfactory
to Buyer and its counsel), must have been delivered to or obtained by
Buyer.
(b) Sellers and the Company shall have delivered to the Buyer
(i) a schedule of Indebtedness of the Company as of the Closing Date
showing that the Indebtedness of the Company does not exceed the
Maximum Indebtedness and (ii) such agreements, instruments,
certificates or other documentation as may be necessary to evidence the
Sellers' payment or assumption of any Indebtedness of the Company in
excess of the Maximum Indebtedness as of the Closing Date.
SS.7.5 FINANCIAL STATEMENTS. Sellers and the Company shall have
delivered to Buyer the Financial Statements and Buyer shall be satisfied in its
sole discretion with such Financial Statements.
SS.7.6 ADDITIONAL DOCUMENTS. Sellers and the Company must have
caused the following documents to be delivered to Buyer:
(a) an opinion of Berthold & Tiano, dated the Closing Date, in
the form of Exhibit 7.6(a);
(b) such other documents as Buyer may reasonably request for
the purpose of enabling its counsel to provide the opinion referred to
in ss.8.3(a) below;
<PAGE> 53
(c) a certificate of Sellers and the Company certifying as to
(i) the accuracy of any of the representations and warranties of
Sellers and the Company, (ii) the performance by Sellers and the
Company of, or the compliance by Sellers and the Company with, any
covenant or obligation required to be performed or complied with by
Sellers and the Company, and (iii) the satisfaction of any condition
referred to in this Article VII; and
(d) such other documents as Buyer may reasonably request for
the purpose of facilitating the consummation or performance of any of
the Contemplated Transactions.
SS.7.7 DUE DILIGENCE. The Buyer must be satisfied, in its sole
discretion, with the results of its due diligence of the Company including
taxes, ERISA, health and welfare policies, OSHA, insurance, environmental.
SS.7.8 NO PROCEEDINGS. Since the date of this Agreement, there must
not have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
SS.7.9 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There
must not have been made or Threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other voting,
equity, or ownership interest in, the Company, or (b) is entitled to all or any
portion of the Purchase Price payable for the Shares.
SS.7.10 NO PROHIBITION. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
SS.7.11 BUYER'S BOARD APPROVAL. This Agreement and the Contemplated
Transactions shall have been approved by the Board of Directors of the Buyer.
SS.7.12 SATISFACTION OF BUYER. All actions to be taken by the Sellers
and the Company in connection with consummation of the Contemplated Transactions
and all certificates, opinions, instruments, and other documents required to
effect the Contemplated Transactions hereby will be reasonably satisfactory in
form and substance to the Buyer.
SS.7.13 SCHEDULES AND EXHIBITS. The Sellers' Disclosure Schedule,
and the Exhibits, shall be in form and substance acceptable to the Buyer;
provided, however, that the Sellers shall deliver
<PAGE> 54
the form of such Sellers' Disclosure Schedule, and the form of any Exhibits
required to be delivered by the Seller to the Buyer at least two (2) days prior
to the Closing.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATION TO CLOSE
The obligation of Sellers to sell the Shares and to take the other
actions required to be taken by them at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by them, in whole or in part if they execute a
writing so stating at or prior to Closing):
SS.8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations
and warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date, except for those representations and warranties made of a
specified date.
SS.8.2 BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Buyer must have delivered each of the documents required
to be delivered by Buyer pursuant to ss.2.4(b) and must have made the
Cash Payment required to be made by Buyer pursuant to ss.2.4(b)(i).
SS.8.3 ADDITIONAL DOCUMENTS. The Buyer must have caused the
following documents to be delivered to Sellers:
(a) an opinion of Squire, Sanders & Dempsey L.L.P., dated the
Closing Date, in the form of Exhibit 8.3(a); and
(b) such other documents as Sellers may reasonably request for
the purpose of enabling their counsel to provide the opinion referred
to in ss.7.6(a) above;
(c) a certificate of the Buyer certifying as to (i) the
accuracy of any of the representations and warranties of Buyer, (ii)
the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by
Buyer, and (iii) the satisfaction of any condition referred to in this
Article VIII; and
<PAGE> 55
(d) such other documents as the Sellers may reasonably request
for the purposes of otherwise facilitating the consummation of any of
the Contemplated Transactions.
SS.8.4 NO INJUNCTION. There must not be in effect any Legal
Requirement or any injunction or other Order that (a) prohibits the sale of the
Shares by Sellers to Buyer, and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.
SS.8.5 SATISFACTION OF SELLERS. All actions to be taken by the Buyers
in connection with consummation of the Contemplated Transactions and all
certificates, opinions, instruments, and other documents required to effect the
Contemplated Transactions hereby will be reasonably satisfactory in form and
substance to the Sellers.
SS.8.6 SCHEDULES AND EXHIBITS. The Buyers's Disclosure Schedule, and
the Exhibits, shall be in form and substance acceptable to the Seller; provided,
however, that the Seller shall deliver the form of such Sellers' Disclosure
Schedule and the form of any Exhibits required to be delivered by the Buyer to
the Seller at least two (2) days prior to the Closing.
ARTICLE IX
TERMINATION
SS.9.1 TERMINATION EVENTS. This Agreement may be terminated at any
time prior to Closing:
(a) by the Buyer and the Sellers by mutual written consent at
any time prior to the Closing;
(b) by either the Buyer or the Sellers if the Closing shall
not have been consummated on or before January 15, 1998;
(c) by either the Sellers or the Buyer if there shall be any
law or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if consummation
of the transactions contemplated hereby would violate any nonappealable
final order, decree or judgment of any court or governmental body
having competent jurisdiction;
(d) by the Buyer by giving written notice to the Sellers at
any time prior to the Closing in the event (i) the Sellers have given
the Buyer any notice pursuant to ss.5.5 above and (ii) the development
that is the subject of the notice (together with the development(s)
that are the subject of any prior notice pursuant to such section) in
the aggregate have had a material adverse effect.
(e) by the Sellers by giving written notice to the Buyer at
any time prior to the Closing in the event (i) the Buyer has given the
Sellers any notice pursuant to ss.6.2 above
<PAGE> 56
and (ii) the development that is the subject of the notice (together
with the development(s) that are the subject of any prior notice
pursuant to such section) in the aggregate have had a material adverse
effect.
(f) by the Buyer by giving written notice to the Sellers at
any time prior to the Closing (i) in the event the Sellers have
breached any representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the Sellers
of the breach, and the breach has continued without cure for a period
of thirty (30) days after the notice of breach or (ii) if events occur
which render impossible compliance with one or more conditions set
forth in Article VII hereof and such conditions are not waived by
Buyer; provided that such events did not result from any action or
omission by Buyer which were within its control and which it was not
expressly permitted to take or omit by the terms of this Agreement; and
(g) by the Sellers by giving written notice to the Buyer at
any time prior to the Closing (i) in the event the Buyer has breached
any representation, warranty, or covenant contained in this Agreement
in any material respect, the Sellers have notified the Buyer of the
breach, and the breach has continued without cure for a period of 30
days after the notice of breach or (ii) if events occur which render
impossible compliance with one or more conditions set forth in Article
VII hereof, and such conditions are not waived by Sellers; provided
that such events did not result from any action or omission by Sellers
or the Company which were within the control of such entity and which
such entity was not expressly permitted to take or omit by the terms of
this Agreement.
SS.9.2 EFFECT OF TERMINATION. Each Party's right of termination under
ss.9.1 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to ss.9.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in ss.ss.11.1 and 11.3 will survive; provided, however, that if this
Agreement is terminated by a party because of the Breach of this Agreement by
the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
ARTICLE X
INDEMNIFICATION; REMEDIES
SS.10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE.
All representations, warranties, covenants, and obligations in this Agreement,
the Sellers' Disclosure Schedule, the supplements to the Sellers' Disclosure
Schedule, the Buyer's Disclosure Schedule, the supplements to the Buyer's
Disclosure Schedule and any other certificate or document delivered pursuant to
this Agreement will survive the Closing. The right to indemnification,
<PAGE> 57
payment of Damages or other remedy based on such representations, warranties,
covenants, and obligations will not be affected by any investigation conducted
with respect to, or any Knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant, or obligation. The waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
SS.10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Sellers,
jointly and severally, will indemnify and hold harmless the Buyer and the
Company, and their respective Representatives, stockholders, controlling
persons, and affiliates (collectively, the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Sellers and the Company in this Agreement (without giving effect to any
supplement to the Sellers' Disclosure Schedule), the Sellers'
Disclosure Schedule, the supplements to the Sellers' Disclosure
Schedule made pursuant to ss.5.5, or any other certificate or document
delivered by Sellers and the Company pursuant to this Agreement;
(b) any Breach by any of Sellers of any of their respective
covenants or obligations in this Agreement;
(c) any product sold, leased, or rented by, or any services
provided by the Company prior to the Closing Date;
(d) any Tax in excess of amounts accrued on the Balance Sheet
or disclosed in ss.3.12(a) of the Sellers' Disclosure Schedule (without
giving effect to any supplement to the Sellers' Disclosure Schedule);
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with any of
Sellers and the Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions.
The remedies provided in this ss.10.2 will not be exclusive of or limit
any other remedies that may be available to Buyer or the other Indemnified
Persons.
<PAGE> 58
SS.10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions.
The remedies provided in this ss.10.3 will not be exclusive of or limit
any other remedies that may be available to Sellers.
SS.10.4 TIME LIMITATIONS. If the Closing occurs, in order for the
Sellers to have any liability (for indemnification or otherwise) with respect to
any representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date (excepting those in ss.ss.3.3, 3.4,
3.12, 3.14 and 3.20), the Buyer must notify Sellers of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by the
Buyer on or before the third anniversary of the Closing Date. There shall be no
such notification requirement as to any claim with respect to ss.ss.3.3, 3.4,
3.12, 3.14 or 3.20, or any claim for indemnification or reimbursement not based
upon any representation or warranty or any covenant or obligation to be
performed and complied with prior to the Closing Date. If the Closing occurs, in
order for the Buyer to have any liability (for indemnification or otherwise)
with respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, the Sellers must notify
the Buyer of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by the Sellers on or before the third
anniversary of the Closing Date.
SS.10.5 RIGHT OF SET-OFF.
(a) Upon notice to Sellers specifying in reasonable detail the
basis for such set-off, Buyer may set-off any amount to which it may be
entitled under this Article X (other than as a result of a breach of
the representation and warranty set forth in ss.3.8) against amounts
otherwise payable under the Promissory Notes and the Lease Agreements.
The Buyer shall have no right of set-off against the Employment
Agreements.
(b) With respect to a breach of ss.3.8 above, if any Accounts
Receivable remain unpaid as of the 180th day following the Closing
Date, the Buyer may set-off the amount of such unpaid Accounts
Receivable against amounts otherwise payable under the Promissory Notes
by notifying the Sellers that it is reducing the principal amount
outstanding under such Promissory Notes. Any unpaid Accounts Receivable
to which the Buyer has exercised its right of set-off shall be assigned
by the Buyer to the Sellers, provided that such assignment does not
result in a Breach of any obligation under the Senior Indebtedness.
<PAGE> 59
(c) Any amounts set-off against the Promissory Notes shall be
set-off on a pro-rata basis among all the Promissory Notes.
(d) The exercise of such right of set-off by the Buyer in good
faith, whether or not ultimately determined to be justified, will not
constitute an event of default under either the Promissory Notes or the
Lease Agreements. Neither the exercise of nor the failure to exercise
such right of set-off will constitute an election of remedies or limit
the Buyer in any manner in the enforcement of any other remedies that
may be available to it.
SS.10.6 PROCEDURE FOR INDEMNIFICATION-THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under
ss.ss.10.2 or 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure
to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's
failure to give such notice; provided, however, that if the indemnified
party intentionally failed to give such notice, the indemnifying party
will be deemed to have been prejudiced by the amount of attorneys' fees
incurred with respect thereto through the date notice is received by
the indemnifying party and the indemnifying party will not be required
to indemnify the indemnified party for such attorneys' fees.
(b) If any Proceeding referred to in ss.10.6(a) is brought
against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party
will, unless the claim involves Taxes (as to any such claims involving
Taxes, the Buyer must select counsel satisfactory to the Sellers, it
being acknowledged and agreed that Squire, Sanders & Dempsey L.L.P. is
satisfactory to the Sellers), be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation
would be inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as
long as it diligently conducts such defense, be liable to the
indemnified party under this Article X for any fees of other counsel or
any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection
with the defense of such Proceeding, other than reasonable costs of
investigation and monitoring of defense of such Proceeding. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes
<PAGE> 60
of this Agreement that the claims made in that Proceeding are within
the scope of and subject to indemnification; (ii) no compromise or
settlement of such claims may be effected by the indemnifying party
without the indemnified party's consent unless (A) there is no finding
or admission of any violation of Legal Requirements or any violation of
the rights of any Person and no effect on any other claims that may be
made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and
(iii) the indemnified party will have no liability with respect to any
compromise or settlement of such claims effected without its consent.
If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within ten (10) days
after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any determination
made in such Proceeding or any compromise or settlement effected by the
indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) The Sellers hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person
may have under this Agreement with respect to such Proceeding or the
matters alleged therein, and agree that process may be served on them
with respect to such a claim anywhere in the world.
SS.10.7 PROCEDURE FOR INDEMNIFICATION-OTHER CLAIMS. Subject to the
provisions of ss.10.4, a claim for indemnification for any matter not involving
a third-party claim may be asserted by notice to the Party from whom
indemnification is sought.
SS.10.8 DETERMINATION OF DAMAGES. The Parties shall make appropriate
adjustments for the time cost of money (using the Applicable Rate as the
discount rate) in determining Damages for purposes of Article X. All
indemnification payments under this Article X shall be deemed to be adjustments
to the Purchase Price.
<PAGE> 61
ARTICLE XI
GENERAL PROVISIONS
SS.11.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Sellers will cause the
Company not to incur any out-of-pocket expenses in connection with this
Agreement, or, to the extent so incurred, will cause the Company to be
reimbursed therefor by Sellers. In the event of termination of this Agreement,
the obligation of each party to pay its own expenses will be subject to any
rights of such party arising from a breach of this Agreement by another party.
SS.11.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as the Buyer and the
Sellers shall agree. Unless consented to by Buyer in advance or required by
Legal Requirements, prior to the Closing the Sellers and the Company shall keep
this Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person. The Buyer and the Sellers will consult with each other
concerning the means by which the employees, customers, and suppliers of the
Company and others having dealings with the Company will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for any
such communication.
SS.11.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, except as and to the extent required by law, absent express,
written consent of the Sellers, the Buyer shall not, directly or indirectly,
disclose to third parties or use for its own purposes any confidential or secret
information of the Sellers, except to the extent permitted under this Agreement.
The Buyer also agrees that it will, upon the completion of its investigation,
return to the Sellers, all documents and other records or confidential
information previously authorized to be reviewed by the Buyer. It is understood
that both Federal and State laws apply to some incidences of release of
information, and that violation of this provision may also be a violation of
these laws. The term "confidential information," as used in this paragraph,
means any information received from the Sellers, including but not limited to,
the names or addresses of customers, research, inventions, discoveries,
improvements, equipment, methods of production, costs or prices or uses of
either party's products or services, business plans of either party, suppliers
and costs thereof, development work, any other information containing business
information which is required to be maintained as such for the business success
of either party, and any other trade secrets, whether or not contained in any
written documents or financial information other than information which (a) is
already in the possession of the Buyer, its employees, representatives or agents
(b) from customers of the Sellers known to the Buyer prior to the date of this
Agreement; (c) is or becomes generally available to the public through no fault
or actions by the Buyer or its employees, representatives or agents; or (d)
becomes available to the Buyer from a source which is not prohibited from
disclosing such information to the Buyer by a contractual obligation to the
Company. The parties hereto agree that the Sellers would suffer irreparable harm
in the event the
<PAGE> 62
Buyer violates this paragraph and either discloses or uses for its own purposes
information received from the Sellers.
During the course of discussions between the Buyer and the Sellers, the
Sellers and its employees, representatives and agents may receive confidential,
proprietary, non-public business and other information concerning the Buyer.
With respect to such information, and the fact that the Buyer has furnished such
information and the fact that there are ongoing discussions regarding the
Contemplated Transaction, the Sellers agree to be bound with respect thereto to
the same extent that the Buyer is bound hereunder with respect to information
concerning the Sellers.
SS.11.4 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Sellers: William O. Tracy, III
6580 MacCorkle Ave. S.W.
St. Albans, West Virginia 25177
Fred W. Truman
6580 MacCorkle Ave. S.W.
St. Albans, West Virginia 25177
with a copy to Berthold & Tiano
208 Capitol Street
P.O. Box 3508
Charleston, WV 25335
Robert V. Berthold, Jr.
Facsimile No.: (304) 345-5703
Buyer: NationsRent of West Virginia, Inc.
50 West Broad Street
Suite 3100
Columbus, OH 43215
Attention: Jeffrey E. Levine, Esq.
Facsimile No.: (614) 461-7943
<PAGE> 63
with a copy to: Squire, Sanders & Dempsey L.L.P.
1300 Huntington Center
41 South High Street
Columbus, Ohio 43215
Attention: Patrick J. Dugan, Esq.
Facsimile No.: (614) 365-2499
SS.11.5 RESOLUTION OF DISPUTES.
(a) The parties desire to avoid and settle without litigation
future disputes which may arise between them concerning the rights,
duties and obligations of the parties under this Agreement.
Accordingly, any such dispute shall be settled by arbitration
administered by the American Arbitration Association under its
Arbitration Rules and the Supplemental Procedures for Large, Complex
Disputes (hereinafter "Rules") then in effect; provided, however, that
any party may seek injunctive or other similar equitable relief from
any court of competent jurisdiction pending settlement of the
underlying dispute by such arbitration.
(b) Three arbitrators shall be appointed in accordance with
the Rules. The place of arbitration shall be Columbus, Ohio and a
stenographic record shall be made of any arbitration hearing. The award
rendered by the arbitrators shall be in writing and shall be based on
applicable law and judicial precedent. Unless the parties otherwise
agree, the award shall include the findings of fact and conclusions of
law on which the award is based. Judgment on such award may be entered
in any court having jurisdiction thereof.
(c) Upon the application by any party to a court for an order
confirming, modifying or vacating the award, the court shall have the
power to review whether, as a matter of law based on the findings of
fact determined by the arbitrator, the award should be confirmed,
modified or vacated in order to correct any errors of law made by the
arbitrator. In order to effectuate such judicial review limited to
issues of law, the parties agree (and shall so stipulate to the court)
that the findings of fact made by the arbitrator shall be final and
binding on the parties and shall serve as the facts to be submitted to
and relied on by the court in determining the extent to which the award
should be confirmed, modified or vacated.
(d) A request by one party for arbitration of any dispute
subject to arbitration shall be made in writing to the American
Arbitration Association and a copy thereof shall be sent to the other
party. The party requesting arbitration shall pay any deposit required
by the American Arbitration Association subject to reimbursement, if
required, from the other party in accordance with any award by the
arbitrators.
<PAGE> 64
SS.11.6 FURTHER ASSURANCES.
(a) The parties agree (i) to furnish upon request to each
other such further information, (ii) to execute and deliver to each
other such other documents, and (iii) to do such other acts and things,
all as the other party may reasonably request for the purpose of
carrying out the intent of this Agreement and the documents referred to
in this Agreement.
(b) In the event and for so long as any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with
(i) the Contemplated Transactions, or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence,
event, incident, action, failure to act, or transaction on or prior to
the Closing Date involving the Company, each of the other parties will
cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and
access to their books and records as shall be necessary in connection
with the contest or defense, all at the sole cost and expense of the
contesting or defending party (unless the contesting or defending party
is entitled to indemnification therefor under Article X above).
(c) In order to establish a factual basis for the resolution
of disputes with respect to environmental and related matters,
subsequent to the Closing the Buyer and the Sellers will establish a
benchmark as to the physical integrity of the Premises. For such
purpose, the Buyer and the Sellers will determine the scope of and will
perform such soil tests, topographical, environmental, or wetland
studies and any other physical and engineering examinations. The Buyer
and the Sellers will each pay one-half of the costs and expenses of
such studies and examinations.
SS.11.7 WAIVER. The rights and remedies of the Parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any Party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
<PAGE> 65
SS.11.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
(including the Letter of Intent dated November 13, 1997) and constitutes (along
with the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
SS.11.9 DISCLOSURE SCHEDULES.
(a) The disclosures in the Disclosure Schedules, and those in
any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly
relate and not to any other representation or warranty in this
Agreement.
(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Disclosure Schedules
(other than an exception expressly set forth as such in the Disclosure
Schedules with respect to a specifically identified representation or
warranty), the statements in the body of this Agreement will control.
SS.11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither
Party may assign any of its rights under this Agreement without the prior
consent of the other Parties, which will not be unreasonably withheld, except
that the Buyer may assign any of its rights under this Agreement to any Related
Person of the Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the Parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the Parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
SS.11.11 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
SS.11.12 SECTION HEADINGS, CONSTRUCTION. The headings of sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to a section ("ss.") or sections
("ss.ss.") refer to the corresponding section or sections of this Agreement. All
words used in this Agreement will be construed to be of such gender or number as
the circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
<PAGE> 66
SS.11.13 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
SS.11.14 GOVERNING LAW. This Agreement will be governed by the laws of
the State of Ohio without regard to conflicts of laws principles.
SS.11.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
<PAGE> 67
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
NATIONSRENT OF WEST VIRGINIA, INC.
By: /s/ Jeffrey E. Levine
--------------------------------------
Name: Jeffrey E. Levine
------------------------------------
Its: Vice President
-------------------------------------
SELLERS:
/s/ William O. Tracy, III
-----------------------------------------
William O. Tracy, III
/s/ Byron H. Black
-----------------------------------------
Byron H. Black
/s/ Kent E. Jackfert
-----------------------------------------
Kent E. Jackfert
/s/ Robert W. Berthold, Jr.
-----------------------------------------
Robert W. Berthold, Jr.
/s/ Fred W. Truman
-----------------------------------------
Fred W. Truman
/s/ Samuel Yerrid
-----------------------------------------
Samuel Yerrid
/s/ Robert Orders
-----------------------------------------
Robert Orders
/s/ Andrew Teeter
-----------------------------------------
Andrew Teeter
COMPANY:
TITAN RENTALS, INC.
By: /s/ William O. Tracy, III
--------------------------------------
William O. Tracy, III, President
<PAGE> 68
AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This is an amendment ("Amendment") to the Stock Purchase Agreement
("Agreement") dated December 20, 1997, among NationsRent of West Virginia, Inc.,
a Delaware corporation ("Buyer"), William O. Tracy, III, Fred W. Truman, Byron
H. Black, Kent E. Jackfert, Robert V. Berthold, Jr., Samuel Yerrid, Robert
Orders, and Andrew Teeter ("Sellers"), and Titan Rentals Inc., a West Virginia
corporation (the "Company").
The Buyer, the Sellers, and the Company do hereby amend the Agreement
as follows:
1. Section 2.4(b)(ii)(A) through (H) shall be amended to read as
follows:
(A) $361,291 Promissory Note payable to William O. Tracy,
III,
(B) $225,806 Promissory Note payable to Byron H. Black,
(C) $180,645 Promissory Note payable to Kent E. Jackfert,
(D) $180,645 Promissory Note payable to Robert V.
Berthold, Jr.,
(E) $180,645 Promissory Note payable to Fred W. Truman,
(F) $90,322 Promissory Note payable to Samuel Yerrid,
(G) $90,322 Promissory Note payable to Robert Orders, and
(H) $90,322 Promissory Note payable to Andrew Teeter;
2. A new subsection (c) shall be added to Section 3.17 as
follows:
(c) Notwithstanding the provisions of the last sentence of
paragraph seven of the Letter of Intent dated November 13, 1997, no
$250,000 distributions to managers or any other distributions to any of
the Sellers (other than salaries in the Ordinary Course of Business)
have been made since the Most Recent Fiscal Month End, and no such
distributions shall be made to any of the Sellers prior to the Closing.
3. Section 3.30 shall be amended to read as follows:
SS.3.30 INDEBTEDNESS. The Indebtedness of the Company as of the date
of this Agreement does not exceed $478,227.73 and will not exceed
$478,227.73 as of the Closing Date (the "Maximum Indebtedness").
4. A semicolon shall replace the period at the end of
subsection (e) of Section 10.2 and a new subsection (f) shall be added to
Section 10.2 immediately after subsection (e) thereof as follows:
<PAGE> 69
AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This is an amendment ("Amendment") to the Stock Purchase Agreement
("Agreement") dated December 20, 1997, among NationsRent of West Virginia, Inc.,
a Delaware corporation ("Buyer"), William O. Tracy, III, Fred W. Truman, Byron
H. Black, Kent E. Jackfert, Robert V. Berthold, Jr., Samuel Yerrid, Robert
Orders, and Andrew Teeter ("Sellers"), and Titan Rentals Inc., a West Virginia
corporation (the "Company").
The Buyer, the Sellers, and the Company do hereby amend the Agreement
as follows:
1. Section 2.4(b)(ii)(A) through (H) shall be amended to read as
follows:
(A) $361,291 Promissory Note payable to William O. Tracy,
III,
(B) $225,806 Promissory Note payable to Byron H. Black,
(C) $180,645 Promissory Note payable to Kent E. Jackfert,
(D) $180,645 Promissory Note payable to Robert V.
Berthold, Jr.,
(E) $180,645 Promissory Note payable to Fred W. Truman,
(F) $90,322 Promissory Note payable to Samuel Yerrid,
(G) $90,322 Promissory Note payable to Robert Orders, and
(H) $90,322 Promissory Note payable to Andrew Teeter;
2. A new subsection (c) shall be added to Section 3.17 as
follows:
(c) Notwithstanding the provisions of the last sentence of
paragraph seven of the Letter of Intent dated November 13, 1997, no
$250,000 distributions to managers or any other distributions to any of
the Sellers (other than salaries in the Ordinary Course of Business)
have been made since the Most Recent Fiscal Month End, and no such
distributions shall be made to any of the Sellers prior to the Closing.
3. Section 3.30 shall be amended to read as follows:
SS.3.30 INDEBTEDNESS. The Indebtedness of the Company as of the date
of this Agreement does not exceed $478,227.73 and will not exceed
$478,227.73 as of the Closing Date (the "Maximum Indebtedness").
4. A semicolon shall replace the period at the end of
subsection (e) of Section 10.2 and a new subsection (f) shall be added to
Section 10.2 immediately after subsection (e) thereof as follows:
<PAGE> 70
(f) The transfer of the capital stock, business and/or
assets of Subsurface, Inc. to Sellers, including any Tax resulting from
such transfer (whether as a result of recognition of gain on such
transfer or otherwise).
5. The following subsection (c) shall be added to the end of
Section 3.4:
The Financial Statements (including the Balance Sheet and the
most Recent Balance Sheet) fully and properly reflect all Indebtedness,
liabilities and obligations of the Company required to be so reflected
(whether as an accrual or in footnotes thereto).
Any references in the Agreement to any sections amended by this
Amendment are hereby deemed to refer to those sections as amended hereby. The
Agreement shall, except as provided above, remain unchanged and continue in full
force and effect. All capitalized terms used in this Amendment without
definition shall have the respective meanings set forth in the Agreement.
This Amendment may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Amendment and all of which,
when taken together, will be deemed to constitute one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 71
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of
December 31, 1997.
BUYER:
NATIONSRENT OF WEST VIRGINIA, INC.
By: /s/ Jeffrey E. Levine
-----------------------------------------
Jeffrey E. Levine, Secretary
SELLERS:
/s/ William O . Tracy, III
-----------------------------------------
William O . Tracy, III
/s/ Byron H. Black
-----------------------------------------
Byron H. Black
/s/ Kent E. Jackfert
-----------------------------------------
Kent E. Jackfert
/s/ Robert W. Berthold, Jr.
-----------------------------------------
Robert W. Berthold, Jr.
/s/ Fred W. Truman
-----------------------------------------
Fred W. Truman
/s/ Samuel Yerrid
-----------------------------------------
Samuel Yerrid
/s/ Robert Orders
-----------------------------------------
Robert Orders
/s/ Andrew Teeter
-----------------------------------------
Andrew Teeter
COMPANY:
TITAN RENTALS, INC.
By: /s/ William O. Tracy, III
-----------------------------------------
William O. Tracy, III, President
- 3 -
<PAGE> 1
EXHIBIT 10.11
FORM OF PROMISSORY NOTE
NEITHER THIS PROMISSORY NOTE NOR THE SHARES ISSUABLE UPON CONVERSION OF THIS
PROMISSORY NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
PROMISSORY NOTE CANNOT BE SOLD OR TRANSFERRED, AND THE SHARES ISSUABLE UPON
CONVERSION OF THIS PROMISSORY NOTE CANNOT BE SOLD OR TRANSFERRED, UNLESS AND
UNTIL THEY ARE SO REGISTERED OR UPON RECEIPT OF AN OPINION OF COUNSEL,
SATISFACTORY TO THE MAKER, THAT SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE
CIRCUMSTANCES OF SUCH SALE OR TRANSFER.
UNSECURED CONVERTIBLE SUBORDINATED PROMISSORY NOTE
6.5/8.5% Convertible $ [__________]
Subordinated Note December [___], 1997
Due December [___], 2000
FOR VALUE RECEIVED, NATIONSRENT INC., a Delaware corporation ("Maker"),
promises to pay to [___________], ("Payee"), in lawful money of the United
States of America, the principal sum of [___________________] ($[__________])
together with interest in arrears on the unpaid principal balance in the manner
provided below at an annual rate equal to 6.5%, except any period between the
Conversion Date and the Reversion Date (as defined in Section 1.5 herein),
during which time interest shall be payable at an annual rate equal to 8.5%.
Interest shall be calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days elapsed.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Stock Purchase Agreement (the "Agreement"),
dated December 20, 1997, among NationsRent of West Virginia, Inc., a Delaware
corporation and subsidiary of the Maker (the "Company"), the Payee and certain
other selling shareholders (the "Shareholders"), and Titan Rentals, Inc., a West
Virginia corporation, and is subject to the terms and conditions of the
Agreement, which are, by this reference, incorporated herein and made a part
hereof. Capitalized terms used in this Note without definition shall have the
respective meanings set forth in the Agreement.
SECTION 1. PAYMENTS.
SECTION 1.1 PRINCIPAL AND INTEREST
The principal amount of this Note shall be due and payable on December
31, 2000, and interest will be payable thereon from the date of this Note first
set forth above, on a quarterly
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<PAGE> 2
basis on March 31, June 30, September 30 and December 31 of each year during the
term of this Note commencing on March 31, 1998.
SECTION 1.2 MANNER OF PAYMENT
All payments of principal and interest on this Note shall be made by
certified or bank check at such place in the United States of America as Payee
shall designate to Maker in writing or by wire transfer of immediately available
funds to an account designated by Payee in writing. If any payment of principal
or interest on this Note is due on a day which is not a Business Day, such
payment shall be due on the next succeeding Business Day. "Business Day" means
any day other than a Saturday, Sunday or legal holiday in the State of Ohio.
SECTION 1.3 PREPAYMENT
Upon twenty (20) days written notice (during which period the Payee may
exercise his option to convert under ss.1.5 of this Note), after the later of
(a) the expiration of one hundred and eighty days following the date on which
the Maker becomes a public company, or (b) the date on which the closing price
of the shares of the Maker into which the Note is convertible has averaged more
than 120% of the Conversion Price for a period of twenty (20) consecutive
trading days (the "Prepayment Date"), Maker may, without premium or penalty, at
any time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note, provided that each such prepayment is
accompanied by accrued interest on the amount of principal prepaid calculated to
the date of such prepayment. Any partial prepayments shall be applied to
installments of principal in inverse order of their maturity. Prior to the
Prepayment Date, Maker shall not be entitled to prepay any portion of the
outstanding principal balance due under this Note.
SECTION 1.4 RIGHT OF SET-OFF
Maker shall have the right to withhold and set-off against any amount
due hereunder the amount of any claim for indemnification or payment of damages
to which Maker may be entitled under the Agreement, as provided in Section 10.5
thereof. Any amounts set-off against any amount due hereunder shall be treated
as if the Maker had made a permitted prepayment (without penalty or premium)
hereunder.
SECTION 1.5 CONVERSION
Subject to and upon compliance with the provisions of the Agreement, if
the Maker becomes a public company, the holder of this Note is entitled, at his
or its option, at any time on or before the close of business on December 31,
2000, to convert the principal amount of this Note (or any portion of the
principal amount hereof which is $1,000.00 or any integral multiple thereof), at
the principal amount hereof, or of such portion, into fully paid and
nonassessable shares (calculated as to each conversion to the nearest 1/1000 of
a share) of common stock of the Maker at a conversion price equal to the Maker's
initial public offering price (or, if the Maker is merged into or otherwise
acquired by or converted into an already existing, publicly held entity
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<PAGE> 3
("New Entity"), at a conversion price equal to the average closing price of the
shares of the New Entity for twenty (20) trading days following the merger) (the
"Conversion Price"). The holder shall surrender this Note, duly endorsed or
assigned to the Maker or in blank, to the Maker at its office or agency at the
address provided in writing by Maker accompanied by written notice to the Maker
that the holder hereof elects to convert this Note, or if less than the entire
principal amount hereof is to be converted, the portion hereof to be converted.
No payment or adjustment is to be made on conversion for interest accrued hereon
or for dividends on the common stock issued on conversion. No fractions of
shares or scrip representing fractions of shares will be issued on conversion,
but instead of any fractional interest the Maker shall pay a cash adjustment. In
addition, in case of certain consolidations or mergers to which the Maker is a
party or the transfer of substantially all of the assets of the Maker, this
Note, if then outstanding, will be convertible thereafter, during the period
this Note shall be convertible as specified above, only into the kind and amount
of securities, cash and other property receivable upon the consolidation, merger
or transfer by a holder of the number of shares of common stock into which this
Note might have been converted immediately prior to such consolidation, merger
or transfer (assuming such holder of common stock failed to exercise any rights
of election and received per share the kind and amount received per share by a
plurality of non-electing shares).
If the Maker has not become a public company, has not merged, or has
not been otherwise acquired by or converted into a New Entity by December 31,
1998 (the "Conversion Date"), this Note would then pay interest at an annual
rate of 8.5% commencing on the next Interest Payment Date following the
Conversion Date. After the Conversion Date but before the close of business on
December 31, 2000, the interest rate shall revert to 6.5% per annum as of the
date the Maker becomes a public company (the "Reversion Date").
SECTION 2. DEFAULTS.
SECTION 2.1 EVENTS OF DEFAULT
The occurrence and continuance of any one or more of the following
events with respect to Maker shall constitute an event of default hereunder
("Event of Default"):
(a) If Maker shall fail to pay when due any payment of
principal or interest on this Note and such failure continues for
twenty-five (25) days after Payee notifies Maker thereof in writing;
provided, however, that the exercise by Maker in good faith of its
right of set-off pursuant to Section 1.4 above, whether or not
ultimately determined to be justified, shall not constitute an Event of
Default.
(b) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to
insolvency or relief of debtors (a "Bankruptcy Law"), Maker shall (i)
commence a voluntary case or proceeding; (ii) consent to the entry of
an order for relief against it in an involuntary case; (iii) consent to
the appointment of a trustee, receiver, assignee, liquidator or similar
official; (iv) make an assignment for the
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<PAGE> 4
benefit of its creditors; or (v) admit in writing its inability to pay
its debts as they become due.
(c) If a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that (i) is for relief against Maker
in an involuntary case, (ii) appoints a trustee, receiver, assignee,
liquidator or similar official for Maker or substantially all of
Maker's properties, or (iii) orders the liquidation of Maker, and in
each case the order or decree is not dismissed within 120 days.
SECTION 2.2 NOTICE BY MAKER
Maker shall notify Payee in writing within five (5) days after the
occurrence of any Event of Default of which Maker acquires knowledge.
SECTION 2.3 REMEDIES
Upon the occurrence of an Event of Default hereunder (unless all Events
of Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
SECTION 3. MISCELLANEOUS.
SECTION 3.1 SENIOR INDEBTEDNESS
The indebtedness evidenced by this Note is subordinate and subject in
right of payment to the prior payment in full of all Senior Indebtedness
(defined below).
For purposes of this Note, the following terms have the meanings
specified below:
"Senior Indebtedness" means the principal of (and premium, if
any) and interest on (a) all bank financing and other similar
indebtedness of the Maker, other than the Seller Notes (defined below),
whether outstanding on the date of this Note or thereafter created,
incurred or assumed, which is (i) reasonably determined by Maker to be
necessary or appropriate (A) in connection with the acquisition by
Maker or any Maker Subsidiary (as defined below) of any businesses,
properties, or assets, or (B) to finance the working capital needs of
the Maker or any Maker Subsidiary, and (ii) for money borrowed; (b)
obligations of the Maker or any Maker Subsidiary, whether outstanding
on the date of this Note or thereafter created, incurred or assumed, as
lessee under (I) leases of properties or assets, which leases are
required to be capitalized on the balance sheet of the Maker or any
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<PAGE> 5
Maker Subsidiary under GAAP, and (II) leases of properties or assets
made as part of any sale and lease-back transaction to which the Maker
or any Maker Subsidiary is a party; and (c) amendments, renewals,
extensions, modifications and refundings of any such indebtedness or
obligation, unless in any case in the instrument creating or evidencing
any such indebtedness or obligation or pursuant to which the same is
outstanding it is provided that such indebtedness or obligation is not
superior in right of payment to this Note.
"Seller Notes" means (a) this Note and notes given to other
Shareholders by Maker and (b) any other notes whether outstanding on
the date of this Note or thereafter created, incurred or assumed,
issued by the Maker or any Maker Subsidiary in connection with the
acquisition by Maker or any Maker Subsidiary of any other business,
properties, stock or assets of the sellers of such businesses,
properties, stock or assets.
"Maker Subsidiary" means any corporation with respect to which
Maker owns a majority of the common stock or has the power to vote or
direct the voting of sufficient securities to elect a majority of the
directors.
If an Event of Default has occurred under this Note, for so long as any
Senior Indebtedness remains unpaid, and so long as no legal proceedings to
collect on such Senior Indebtedness has been commenced, the Payee shall not
commence or join with any creditor of the Maker other than the holder of the
Senior Indebtedness in commencing any proceedings to collect or enforce its
rights hereunder for a period of 120 days from the occurrence of such Event of
Default; provided, however, that notwithstanding such forbearance of the
commencement of proceedings with respect to an Event of Default, such Event of
Default shall nevertheless be an Event of Default for all other purposes of this
Note and the Payee shall be entitled to pursue all other remedies other than the
commencement of proceedings under the circumstances set forth in this Section.
Furthermore, the Payee agrees to furnish any holder of Senior Indebtedness upon
request a subordination agreement that sets forth the priority rights of the
Payee and the holder of the Senior Indebtedness and prohibits payments to the
Payee that would cause a default under the Senior Indebtedness. The Senior
Indebtedness does not and will not prohibit regularly scheduled payments under
this Note so long as there is not a default under the Senior Indebtedness, and
the making of such payments hereunder will not in and of itself constitute an
event of default under the Senior Indebtedness.
The Maker hereby represents and warrants to Payee that as of the
Closing Date (i) no Seller Notes hold a position senior in right of payment to
that of Payee under this Note and (ii) that it is not currently in default under
any of its Senior Indebtedness.
SECTION 3.2 WAIVER
The rights and remedies of Payee under this Note shall be cumulative
and not alternative. No waiver by Payee of any right or remedy under this Note
shall be effective unless in a writing signed by Payee. Neither the failure nor
any delay in exercising any right, power or privilege under this Note will
operate as a waiver of such right, power or privilege and no single or partial
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<PAGE> 6
exercise of any such right, power or privilege by Payee will preclude any other
or further exercise of such right, power or privilege or the exercise of any
other right, power or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right of Payee arising out of this Note can be discharged
by Payee, in whole or in part, by a waiver or renunciation of the claim or right
unless in a writing, signed by Payee; (b) no waiver that may be given by Payee
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on Maker will be deemed to be a waiver of any
obligation of Maker or of the right of Payee to take further action without
notice or demand as provided in this Note. Maker hereby waives presentment,
demand, protest and notice of dishonor and protest.
SECTION 3.3 NOTICES
Any notice required or permitted to be given hereunder shall be given
in accordance with Section 11.4 of the Agreement.
SECTION 3.4 SEVERABILITY
If any provision in this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
SECTION 3.5 GOVERNING LAW
This Note will be governed by the laws of the State of Ohio without
regard to conflicts of laws principles.
SECTION 3.6 PARTIES IN INTEREST
This Note shall bind Maker and its successors and assigns. This Note
shall not be assigned or transferred by Payee without the express prior written
consent of Maker, except by Will or, in default thereof, by operation of law.
SECTION 3.7 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Note unless otherwise specified.
All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
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<PAGE> 7
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
NATIONSRENT, INC.
By:
-----------------------------------------
Jeffrey E. Levine,
Vice President and Secretary
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<PAGE> 1
EXHIBIT 10.12
AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of March 24,
1998, by NationsRent, Inc., a Delaware corporation ("Buyer"), Bode-Finn Limited
Partnership, an Ohio limited partnership (the "Partnership"), Raymond E. Mason
Foundation, an Ohio nonprofit corporation (the "Foundation" and, collectively
with the Partnership, "Sellers"), Raymond E. Mason, Jr., individually ("Ray"),
Raymond E. Mason, III, individually ("Ray III"), Michael D. Mason, individually
("Michael"), and Bruce R. Mason, individually ("Bruce").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the
issued and outstanding shares (the "Shares") of capital stock of The Bode-Finn
Company, an Ohio corporation (the "Company"), for the consideration and on the
terms set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"APPLICABLE CONTRACT"-any Contract (a) under which the Company has or
may acquire any rights, (b) under which the Company has or may become subject to
any obligation or liability, or (c) by which the Company or any of the assets
owned or used by it is or may become bound.
"BALANCE SHEET"-as defined in Section 3.4.
"BEST EFFORTS"-the efforts that a prudent Person desirous of achieving
a result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible; provided however that an obligation to
use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
"BREACH"-a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision; and the
term "Breach" means any such inaccuracy, breach, or failure.
"BUYER"-as defined in the first paragraph of this Agreement.
<PAGE> 2
"CLOSING"-as defined in Section 2.3.
"CLOSING DATE"-the date and time as of which the Closing actually takes
place.
"COMPANY"-as defined in the Recitals of this Agreement.
"CONSENT"-any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONSULTING AGREEMENT"-as defined in Section 2.4(a)(iii)(A).
"CONTEMPLATED TRANSACTIONS"-all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the
Promissory Note, the Consulting Agreement, the Employment Agreements,
the Leases, and the Sellers Releases;
(c) the performance by Buyer and Sellers of their
respective covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares.
"CONTRACT"-any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding, other than a Company Plan or Company Other Benefit Obligation (as
defined in Section 3.13).
"DAMAGES"- as defined in Section 10.2.
"DISCLOSURE SCHEDULE"-the disclosure schedule delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"EMPLOYMENT AGREEMENTS"-as defined in Section 2.4(b)(v).
"ENCUMBRANCE"-any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ENVIRONMENT"-soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any
<PAGE> 3
other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"-any material cost,
damages, expense, liability, obligation, or other responsibility arising prior
to the Closing Date from or under Environmental Law or Occupational Safety and
Health Law and consisting of or relating to:
(a) fines, penalties, judgments, awards, settlements,
legal or administrative proceedings, damages, losses, claims, demands
and response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(b) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment, or
other remediation or response actions ("Cleanup") required by
applicable Environmental Law or Occupational Safety and Health Law and
for any natural resource damages; or
(c) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational
Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW"-any Legal Requirement as of the Closing Date that
requires or relates to:
(a) advising a Governmental Body of intended or actual
Releases of Hazardous Materials or violations of discharge limits;
(b) preventing or reducing to legally required levels the
release of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological
amenities;
(f) reducing to legally required levels the risks
inherent in the transportation
<PAGE> 4
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up
or prevention; or
(h) making responsible parties pay private parties, or
groups of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"ERISA"-the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"FACILITIES"-any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles) currently or
formerly owned or operated by the Company.
"GAAP"-generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"GOVERNMENTAL AUTHORIZATION"-any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"-any:
(a) nation, state, county, city, town, village, district,
or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"HAZARDOUS ACTIVITY"-the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials
<PAGE> 5
in, on, under, about, or from the Facilities or any part thereof into the
Environment.
"HAZARDOUS MATERIALS"-any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos containing materials.
"INDEBTEDNESS"-as applied to any Person, means: (i) all obligations of
that Person to repay or pay money borrowed from another Person or the deferred
portion of the purchase price of services or property; (ii) all obligations of
that Person under bankers acceptances; (iii) all obligations of that Person
under letters of credit; (iv) obligations of others which that Person has
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), discounted or sold with recourse or
agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire, or in respect of which that Person has agreed to supply or advance
funds (whether by way of loan, stock purchase, capital contribution or
otherwise) or otherwise to become directly or indirectly liable; (v) all
obligations evidenced or secured by any mortgage, pledge, lien or conditional
sale or other title retention agreement to which any property or asset owned or
held by that Person is subject, whether or not the obligation evidenced or
secured thereby shall have been assumed; and (vi) all other items (except items
of capital stock, capital surplus, general contingency reserves, deferred income
taxes, retained earnings and amounts attributable to minority interest, if any)
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet of that Person as of the date
Indebtedness is to be determined, including obligations of that Person properly
treated as capital lease obligations or their equivalent under GAAP.
"INDEMNIFIED PERSONS"-as defined in Section 10.2.
"INTELLECTUAL PROPERTY ASSETS"-as defined in Section 3.24.
"INTERIM BALANCE SHEET"-as defined in Section 3.4.
"IRC"-the Internal Revenue Code of 1986, as amended, or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS"-the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE"-an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or
other matter; or
<PAGE> 6
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
A Person (other than an individual), including the Company, will be
deemed to have "Knowledge" of a particular fact or other matter only if any
individual who is currently serving as a senior management employee of such
Person has, or at any time had, Knowledge of such fact or other matter.
"LEASES"-as defined in Section 2.4(a)(iv).
"LEGAL REQUIREMENT"-any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"OCCUPATIONAL SAFETY AND HEALTH LAW"-any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards.
"ORDER"-any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"-an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal
operations of such Person;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority) and is not required to be specifically
authorized by the parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal operations of other
Persons that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS"-(a) the articles or certificate of
incorporation and the regulations or bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
<PAGE> 7
"PERSON"-any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN"-as defined in Section 3.15.
"PROCEEDING"-any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PROMISSORY NOTE"-the promissory note described in Section 2.4(b)(ii).
"RELATED PERSON"-with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled
by such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or
one or more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar
capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
<PAGE> 8
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 5% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person.
"RELEASE"-any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"RENTAL EQUIPMENT"-means all machinery, equipment, tools, supplies, and
other similar tangible personal property used or held for use by the Company or
its customers.
"REPRESENTATIVE"-with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"-the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"-as defined in the first paragraph of this Agreement.
"SELLERS NOTES" means (a) the Promissory Note and (b) any other notes
whether outstanding on the date of this Agreement or thereafter created,
incurred or assumed, given by Buyer or any Buyer Subsidiary in connection with
the acquisition by Buyer or any Buyer Subsidiary of any business, properties,
stock or assets to the sellers of such businesses, properties, stock or assets.
"SELLERS RELEASES"-as defined in Section 2.4.
"SENIOR INDEBTEDNESS"-the principal of (and premium, if any) and
interest on (a) all bank financing and other indebtedness, public or private, of
Buyer and any Buyer Subsidiary, other than the Sellers Notes, whether
outstanding on the date of this Agreement or thereafter created, incurred or
assumed, which is (i) reasonably determined by Buyer or any Buyer Subsidiary to
be necessary or appropriate (A) in connection with the acquisition of any
businesses, properties, stock, or assets, or (B) to finance the working capital
needs of Buyer and any Buyer Subsidiary, and (ii) for money borrowed; (b)
obligations of Buyer and any Buyer Subsidiary, whether outstanding on the date
of this Agreement or thereafter created, incurred or assumed, as lessee under
(i) leases of properties or assets, which leases are required to be capitalized
on the balance sheet of the lessee under GAAP, and (ii) leases of properties or
assets made as part of any sale and lease-back transaction to which Buyer or any
Buyer Subsidiary is a party, and (c) amendments, renewals, extensions,
modifications and refundings of any such indebtedness or obligation, unless
<PAGE> 9
in any case in the instrument creating or evidencing any such indebtedness or
obligation or pursuant to which the same is outstanding it is provided that such
indebtedness or obligation is not superior in right of payment to the Promissory
Note.
"SHARES"-as defined in the Recitals of this Agreement.
"SUBSIDIARY"-with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred), are held by the Owner or one or more of its Subsidiaries.
"TAX"-any tax (including any income tax, capital gains tax, value-added
tax, sales or use tax, employment tax, excise tax, gross receipts tax, property
tax, gift tax, or estate tax), levy, assessment, tariff, duty (including any
customs duty), deficiency, or other fee, and any related charge or amount
(including any fine, penalty, interest, or addition to tax), imposed, assessed,
or collected by or under the authority of any Governmental Body or payable
pursuant to any tax-sharing agreement or any other Contract relating to the
sharing or payment of any such tax, levy, assessment, tariff, duty, deficiency,
or fee.
"TAX RETURN"-any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"-a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED"-a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made (in
writing) or any notice has been given (in writing).
"RAY"-as defined in the first paragraph of this Agreement.
"RAY III"-as defined in the first paragraph of this Agreement.
"MICHAEL"-as defined in the first paragraph of this Agreement.
"BRUCE"-as defined in the first paragraph of this Agreement.
<PAGE> 10
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing,
Sellers will sell and transfer the Shares to Buyer, and Buyer will purchase the
Shares from Sellers.
2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Shares will be
Forty-One Million Five Hundred Thousand Dollars ($41,500,000.00), representing
the sum of the cash to be paid by Buyer to Sellers at the Closing as specified
in Section 2.4(b)(i) plus the principal amount of the Promissory Note to be
delivered by Buyer to Sellers at the Closing as specified in Section 2.4(b)(ii).
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement
will take place at the Columbus offices of Buyer's counsel, Squire, Sanders &
Dempsey L.L.P., at 10:00 a.m. (local time) on the later of (i) April 1, 1998 or
(ii) the date that is five business days following the satisfaction or waiver of
all conditions to the obligations of the parties to consummate the Contemplated
Transactions (other than conditions with respect to actions the respective
parties will take at the Closing itself), it being understood and acknowledged
that Section 9.1(b) and (d) provide for termination of this Agreement by Buyer
or Sellers if the Closing has not occurred on or before April 8, 1998, or (iii)
such other time and place as the parties may agree. Subject to the provisions of
Section 9, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.3 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers, Ray, Ray III, Michael, and Bruce will deliver to
Buyer:
(i) certificates representing the Shares, duly endorsed
(or accompanied by duly executed stock powers) for transfer to Buyer;
(ii) releases in the form of Exhibit 2.4(a)(ii) executed
by Sellers, Ray, Ray III, Michael, and Bruce (collectively, "Sellers
Releases");
(iii) a consulting agreement in the form of Exhibit
2.4(a)(iii) (the "Consulting
<PAGE> 11
Agreement"), executed by Ray;
(iv) a lease agreement in the form of Exhibit 2.4(a)(iv),
executed by the owner(s) thereof with respect to each of the
properties, and on the terms, described in Schedule 2.4(a)(iv)
(collectively, the "Leases");
(v) a certificate executed by Sellers, Ray, Ray III,
Michael, and Bruce representing and warranting to Buyer that each of
the representations and warranties of Sellers, Ray, Ray III, Michael,
and Bruce in this Agreement (as supplemented pursuant to Section 5.5)
was accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the
Closing Date (giving full effect to any supplements to the Disclosure
Schedule that were delivered by Sellers to Buyer prior to the Closing
Date in accordance with Section 5.5 and the transactions contemplated
by Section 5.2 hereof).
(b) Buyer will deliver to Sellers, Ray, Ray III, Michael, and
Bruce:
(i) $31,500,000 by wire transfer to an account specified
by Sellers;
(ii) a convertible promissory note subordinated to the
Senior Indebtedness payable to Sellers in the principal amount of
$10,000,000.00 in the form of Exhibit 2.4(b)(ii), executed by Buyer;
(iii) a registration rights agreement in the form of
Exhibit 2.4(b)(iv), executed by Buyer;
(iv) a warrant agreement in the form of Exhibit 2.4(b)(v),
executed by Buyer;
(v) an Employment Agreement with Lloyd Glick in the form
of Exhibit 2.4(c), executed by Buyer (subject to Mr. Glick's consent to
the terms and conditions thereof) (such Employment Agreement and the
Raterman Employment Agreement (if applicable pursuant to Section
2.4(b)(vi) below) are referred to herein together as the "Employment
Agreement)";
(vi) an Employment Agreement with Charlie J. Raterman in
the form of Exhibit 2.4(b)(vi) hereto, executed by Buyer; provided,
however, that in the event that Mr. Raterman refuses to execute and
deliver to Buyer such an agreement on or before the Closing, Buyer, in
lieu of executing and delivering said agreement, shall after the
Closing pay Mr. Raterman $1,500,000 in accordance with and pursuant to
the terms of Section 3.3 of said form of agreement in full satisfaction
of Buyer's obligations under this Section 2.4(b)(vi);
(vii) the Leases, executed by Buyer; and
<PAGE> 12
(viii) a certificate executed by Buyer to the effect that
each of Buyer's representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the
Closing Date.
(c) The parties mutally agree to encourage Lloyd Glick to execute
and deliver an employment agreement in the form of Exhibit 2.4(c).
3. REPRESENTATIONS AND WARRANTIES OF SELLERS, RAY, RAY III, MICHAEL, AND
BRUCE
Sellers, Ray, Ray III, Michael, and Bruce represent and warrant to
Buyer that the statements contained in this Section 3 (as supplemented pursuant
to Section 5.5) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3). Such representations and warranties are made and
given subject to the disclosures in the Disclosure Schedule accompanying this
Agreement and initialed by Sellers, Ray, Ray III, Michael, Bruce, and Buyer, and
shall be further qualified by supplements to the Disclosure Schedule to the
extent provided in Section 5.5.
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Schedule contains a complete and
accurate list for the Company as of the date of this Agreement of its name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each shareholder
and the number of shares held by each). The Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification, except where the lack of such qualification would not have a
material adverse effect on the business, operations, properties, assets, or
condition (financial or otherwise) of the Company.
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
<PAGE> 13
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Partnership, Ray, Ray III, Michael, and Bruce enforceable
against them in accordance with its terms and at the Closing will constitute the
legal, valid and binding obligation of the Foundation. Upon the execution and
delivery of the Sellers Releases, the Consulting Agreement, the Employment
Agreements, and the Leases (collectively, the "Sellers' Closing Documents") by
Sellers, Ray, Ray III, Michael, Bruce, and such other Persons as may be required
for the Sellers' Closing Documents to be effectuated, the Sellers' Closing
Documents will constitute the legal, valid, and binding obligations of Sellers,
Ray, Ray III, Michael, Bruce, and such other persons as may be required for the
Sellers' Closing Documents to be effectuated, enforceable against them in
accordance with their respective terms. Sellers, Ray, Ray III, Michael, Bruce,
and such other persons as may be required for the Sellers' Closing Documents to
be effectuated have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the Sellers' Closing
Documents and to perform their obligations under this Agreement and the Sellers'
Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents of the Company, or
(B) any resolution adopted by the board of directors or the
shareholders of Company;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order
to which Sellers or the Company, or any of the assets owned or used by
the Company, may be subject, except where the contravention, conflict,
violation, or right could not reasonably be expected to have a material
adverse effect in the business, operations, properties, prospects,
assets, or condition (financial or otherwise) of the Company, or, to
the Knowledge of Sellers, Ray, and the Company, the prospects of the
Company;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify,
any material Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or any of the assets owned
or used by, the Company;
(iv) cause the Company to become subject to, or to become
liable for the payment of, any tax;
<PAGE> 14
(v) to the Knowledge of Sellers, Ray, and the Company,
cause any of the assets owned by the Company to be reassessed or
revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable
Contract involving monetary amounts in excess of $25,000; or
(vii) result in the imposition or creation of any
Encumbrance in excess of $25,000 in the aggregate upon or with respect
to any of the assets owned or used by the Company, except as it may
relate to Indebtedness of Buyer.
Except as set forth in Part 3.2 of the Disclosure Schedule, none of Sellers,
Ray, Ray III, Michael, Bruce, or the Company is or will be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions, except to the extent any Consent under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations issued pursuant thereto may be required.
(c) Sellers are acquiring the Promissory Note for their own
account and not with a view to distribution thereof within the meaning of
Section 2(11) of the Securities Act. Sellers are an "accredited investor" as
such term is defined in Rule 501(a) under the Securities Act.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 2500 shares
of common stock, no par value, of which 1250 shares are issued and outstanding
and constitute the Shares. Sellers are and will be on the Closing Date the
record and beneficial owner and holder of all of the Shares, free and clear of
all Encumbrances.
Except as set forth in Part 3.3 of the Disclosure Schedule, no legend
or other reference to any purported Encumbrance appears upon any certificate
representing equity securities of the Company. All of the outstanding equity
securities of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. There are no Contracts relating to the issuance,
sale, or transfer of any equity securities or other securities of the Company
other than this Agreement. None of the outstanding equity securities or other
securities of the Company were issued in violation of the Securities Act or any
other material Legal Requirement. The Company neither owns nor has any Contract
to acquire any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business.
<PAGE> 15
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) audited balance sheets of the
Company as at December 31 in each of the years 1993 through 1995 (including the
notes thereto), and the related audited statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended
(including in each case the notes thereto), together with the report thereon of
John Gerlach and Company, independent certified public accountants, (b) an
audited balance sheet of the Company as at December 31, 1996 (including the
notes thereto) (the "Balance Sheet"), and the related audited statements of
income, changes in stockholders' equity and cash flow for the fiscal year then
ended (including in each case the notes thereto) together with the report
thereon, and (c) an unaudited balance sheet of the Company as at December 31,
1997 (the "Interim Balance Sheet"), and the related unaudited statements of
income, changes in stockholders' equity, and cash flow for the twelve months
then ended (including in each case the notes thereto). Such financial statements
and notes (i) except as disclosed in Part 3.4 of the Disclosure Schedule, fairly
present in all material respects the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Company as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP; (ii) reflect the consistent application
of such accounting principles throughout the periods involved; and (iii) are
consistent with the books and records of the Company as of those dates (which
books and records are complete and correct in all material respects as of those
dates). No financial statements of any other Person are required by GAAP to be
included in consolidated financial statements with the Company.
3.5 BOOKS AND RECORDS
Except for the stock record book, which Sellers, Ray, and the Company
are unable to locate, the books of account and other records of the Company, all
of which have been made available to Buyer, are complete and correct and have
been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls. The minute books of the
Company are not materially incomplete or incorrect and the Company will not be
adversely affected by the manner in which such minute books have been maintained
or by the actions taken which are not fully reflected in such minute books. At
the Closing, all of the foregoing books and records will be in the possession of
the Company.
<PAGE> 16
3.6 TITLE TO PROPERTIES
Part 3.6 of the Disclosure Schedule contains a complete and accurate
list of all real property used or held for use by the Company as of the date of
this Agreement. The Company has no fee simple or other similar ownership
interest in real property. Except as set forth in Part 3.6 of the Disclosure
Schedule, Sellers have delivered or made available to Buyer copies of all leases
or other Contracts with respect to leasehold or other contractual interests of
the Company in real property. The Company owns all the properties and assets
(whether real, personal, or mixed and whether tangible or intangible) that they
purport to own located in the facilities operated by the Company or reflected as
owned in the books and records of the Company, including all of the properties
and assets reflected in the Interim Balance Sheet (except for inventory and
Rental Equipment sold since the date of the Interim Balance Sheet, as the case
may be, in the Ordinary Course of Business), and all of the properties and
assets purchased or otherwise acquired by the Company since the date of the
Interim Balance Sheet (except for inventory and Rental Equipment subsequently
sold in the Ordinary Course of Business).
3.7 ENCUMBRANCES
Except as set forth in Part 3.7 of the Disclosure Schedule, all
material properties and assets reflected in the Interim Balance Sheet are free
and clear of all Encumbrances and, in the case of real property, are not subject
to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature; except, with respect to all such
properties and assets, (a) mortgages or security interests shown on the Interim
Balance Sheet as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
the Ordinary Course of Business in connection with the purchase of property or
assets after the date of the Interim Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, and (c) liens for current taxes not yet due. To
the Knowledge of Sellers, Ray, and the Company, all buildings, plants, and
structures used or held for use by the Company lie wholly within the boundaries
of the real property leased by the Company and do not encroach upon the property
of, or otherwise conflict with the property rights of, any other Person.
<PAGE> 17
3.8 CONDITION AND SUFFICIENCY OF ASSETS
Except as set forth in Part 3.8 of the Disclosure Schedule, the
buildings, plants, structures, and equipment of the Company are structurally
sound, are in good operating condition and repair (subject to normal wear and
tear), and are adequate for the uses to which they are being put, and none of
such buildings, plants, structures, or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The building, plants, structures, and equipment of
the Company are sufficient for the continued conduct of the Company's business
after the Closing in substantially the same manner as conducted prior to the
Closing.
3.9 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the
Interim Balance Sheet or on the accounting records of the Company as of the
Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from transactions in the Ordinary Course of
Business to which the Company was a party or from services actually performed in
the Ordinary Course of Business. Except for (a) Accounts Receivable of customers
disclosed in Part 3.9 of the Disclosure Schedule (which will be collected within
360 days) and (b) the respective reserves shown on the Interim Balance Sheet or
on the accounting records of the Company as of the Closing Date (which reserves
have been effected in a method and manner in accordance with GAAP consistently
applied and consistent with past practice and, in the case of the reserve as of
the Closing Date, will not represent a percentage of the Accounts Receivable as
of the Closing Date greater than 11%), the Accounts Receivable either have been
or will be collected in full, without any set-off, within 270 days. Part 3.9 of
the Disclosure Schedule contains a complete and accurate list of all Accounts
Receivable in excess of $25,000 as of February 9, 1998. Buyer agrees to assign
to Sellers any particular Accounts Receivable for which Sellers are required to
indemnify Buyer as a result of a Breach of this Section 3.9, but only if such
assignment does not result in a Breach of obligations under the Senior
Indebtedness.
3.10 INVENTORY
All inventory of the Company, whether or not reflected in the Interim
Balance Sheet, consists of a quality and quantity usable and salable in the
Ordinary Course of Business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Interim Balance Sheet or on the accounting records
of the Company as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or net realizable value on the
basis reflected in the Interim Financial Statements. The quantities of each item
of inventory are reasonable in the present circumstances of the Company.
<PAGE> 18
3.11 RENTAL EQUIPMENT
All Rental Equipment of the Company, whether or not reflected in the
Interim Balance Sheet or on the accounting records of the Company as of the
Closing Date, consists of a quality and quantity usable, rentable, or salable in
the Ordinary Course of Business, except for obsolete items and items of
below-standard quality, all of which have been written off, written down or
adequately reserved against to their net realizable value in the Interim Balance
Sheet. All such Rental Equipment not written off has been recorded at the lower
of cost or net realizable value, and depreciated consistent with the economic
life of such Rental Equipment. The quantities of each item of such Rental
Equipment are reasonable in the present circumstances of the Company. All such
Rental Equipment is in good operating condition and repair, subject to normal
wear and tear, and has been maintained in accordance with normal industry
practice.
3.12 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.12 of the Disclosure Schedule, the
Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for (a)
liabilities or obligations reflected or reserved against in the Interim Balance
Sheet and (b) trade payables and accrued expenses which would be properly
categorized as current liabilities incurred in the Ordinary Course of Business
since the respective dates thereof.
3.13 TAXES
Except as set forth in Schedule 3.13 or disclosed in the Interim
Balance Sheet:
(a) The Company has filed or caused to be filed on a timely basis
all material Tax Returns that are or were required to be filed by or with
respect to it, either separately or as a member of a group of corporations,
pursuant to applicable Legal Requirements. The Company has paid, or accrued for
the payment of, all material Taxes that have or may have become due pursuant to
those Tax Returns, or pursuant to any assessment received by Sellers or the
Company, except to the extent such Taxes, if any, as are listed in Part 3.13 of
the Disclosure Schedule and are being contested in good faith or as to which
adequate reserves (determined in accordance with GAAP for both current and
deferred Taxes) have been accrued in the Interim Balance Sheet. The Company has
not taken any material position on its Tax Returns which is not supported by
"substantial authority" as that term is defined in Section 6662 of the IRC.
Sellers and the Company have delivered to Buyer copies of, and Part 3.13 of the
Disclosure Schedule contains a complete and accurate list of, all federal and
state income Tax Returns filed on or since January 1, 1994.
(b) Except as set forth in Part 3.13 of the Disclosure Schedule,
the United States federal and state income Tax Returns of the Company have not
been audited by the IRS or relevant state tax authorities for any year not
closed by the applicable statute of limitations, except that the IRS
<PAGE> 19
had a "no change" audit of the Company for the year 1994. Except as described in
Part 3.13 of the Disclosure Schedule, the Company has not given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on
the respective books of the Company are adequate (determined in accordance with
GAAP for both current and deferred Taxes) and are at least equal to the
liability for Taxes of the Company. There exists no proposed federal or state
income tax assessment or any other tax assessment against the Company except as
disclosed in the Balance Sheet or in Part 3.13 of the Disclosure Schedule or for
Taxes not yet due and payable. No consent to the application of Section
341(f)(2) of the IRC has been filed with respect to any property or assets held,
acquired, or to be acquired by the Company. All Taxes that the Company is or was
required by Legal Requirements to withhold or collect have been, in all material
respects, duly withheld or collected and paid to the proper Governmental Body or
other Person. To the Knowledge of Seller, there is no action, suit, proceeding,
investigation, audit, or claim now pending or Threatened by any taxing authority
related to the Company. No claim has ever been made by any taxing authority
since January 1, 1994 in a jurisdiction where the Company does not file Tax
Returns that the Company is subject to taxation in such jurisdiction. Except for
the Kentucky sales tax assessment discussed in Part 3.13 of the Disclosure
Schedule, the Company has complied in all material respects with sales and use
tax laws.
(d) There is no tax sharing agreement (or equivalent agreement)
that will require any payment by the Company after the date of this Agreement.
The Company is not, or within the five-year period preceding the Closing Date
has not been, an "S" corporation. To the Knowledge of Sellers, Ray, and the
Company, during the one year period prior to the date hereof, neither the
Company nor any target affiliate (as defined in Section 338(h)(6) of the IRC
with respect to the sale of the Shares to Buyer) has sold any property or assets
to Buyer or to any Subsidiary of Buyer.
(e) The Company is not a party to any safe harbor lease within the
meaning of Section 168(f)(8) of the IRC, as in effect prior to amendment by the
Tax Equity and Fiscal Responsibility Act of 1982. The Company is not, and never
has been, a United States real property holding corporation within the meaning
of Section 897(c)(2) of the IRC and Buyer is not required to withhold tax on the
purchase of the stock of the Company by reason of Section 1445 of the IRC. No
Sellers are a "foreign person" as such term is defined in Section 1445 of the
IRC. The Company is not a "consenting corporation" under Section 341(f) of the
IRC. The Company has not entered into any compensatory agreements with respect
to the performance of services which payment thereunder will result in a
nondeductible expense to the Company pursuant to Section 280G of the IRC. The
Company has not participated in an international boycott as defined in Section
999 of the IRC. The Company has not agreed to make and is not required to make
any adjustment under Section 481(a) of the IRC by reason of a change in
accounting method or otherwise.
<PAGE> 20
3.14 NO MATERIAL ADVERSE CHANGE
Since the date of the Interim Balance Sheet, (a) there has not been any
material adverse change in (i) the business, operations, properties, assets, or
condition of the Company, or (ii) to the Knowledge of Sellers and Ray, the
prospects of the Company, and (b) no event has occurred or circumstance exists
that will likely result in such a material adverse change.
3.15 EMPLOYEE BENEFITS
(a) As used in this Section 3.15, the following terms have the
meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit
Obligation owed, adopted, or followed by the Company or an ERISA
Affiliate of the Company.
"COMPANY PLAN" means all Plans of which the Company or an
ERISA Affiliate of the Company is or, during the prior six years, was a
Plan Sponsor, or to which the Company or an ERISA Affiliate of the
Company otherwise contributes or, during the prior six years, has
contributed to, or in which the Company or an ERISA Affiliate of the
Company otherwise participates or, during the prior six years, has
participated.
"ERISA AFFILIATE" means, with respect to the Company, any
trade or business (whether or not incorporated) that is part of the
same controlled group, or under common control with, or part of an
affiliated service group that includes the Company, within the meaning
of IRC Section 414 and/or ERISA Section 4001(a)(14).
"MULTIEMPLOYER PLAN" has the meaning given in ERISA
Sections 3(37)(A) and 4001(a)(3).
"OTHER BENEFIT OBLIGATIONS" means all material obligations,
arrangements, or customary practices to provide benefits to present or
former directors, officers, employees, or agents, other than
obligations, arrangements, and practices that are Plans. Other Benefit
Obligations include, without limitation, sabbatical policies, severance
payment policies, and fringe benefits within the meaning of IRC Section
132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" has the meaning given In ERISA Section 3(2)(A).
"PLAN" has the meaning given in ERISA Section 3(3).
"PLAN SPONSOR" has the meaning given in ERISA Section
3(16)(B).
<PAGE> 21
"QUALIFIED PLAN" means any Plan that meets or purports to meet
the requirements of IRC Section 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than
Multiemployer Plans.
"VEBA" means a voluntary employees' beneficiary association
under IRC Section 501(c)(9).
(b) (i) Part 3.15(i) of the Disclosure Schedule contains a
complete and accurate list of all Company Plans and Company Other
Benefit Obligations as of the date of this Agreement.
(ii) Part 3.15(ii) of the Disclosure Schedule contains a
complete and accurate list as of the date of this Agreement of (A) all
ERISA Affiliates of the Company, and (B) all Plans of which any such
ERISA Affiliate is or, during the prior six years, was a Plan Sponsor,
in which any such ERISA Affiliate participates or, during the prior six
years, has participated, or to which any such ERISA Affiliate
contributes or, during the prior six years, has contributed.
(c) Except as set forth in Paragraph 3.15(c) of the Disclosure
Schedule, Sellers have delivered or made available to Buyer:
(i) all documents that set forth the terms of each
Company Plan and Company Other Benefit Obligation and of any related
trust, including (A) all plan descriptions and summary plan
descriptions of Company Plans for which Sellers or the Company or any
ERISA Affiliate of the Company are required to prepare, file, and
distribute, and (B) all summaries and descriptions furnished to
participants and beneficiaries regarding Company Plans and Company
Other Benefit Obligations for which a plan description or summary plan
description is not required;
(ii) all personnel, payroll, and employment manuals and
policies;
(iii) all collective bargaining agreements pursuant to
which contributions have been made or obligations incurred (including
both pension and welfare benefits) by the Company and the ERISA
Affiliates of the Company, and all collective bargaining agreements
pursuant to which contributions are being made or obligations are owed
by such entities;
(iv) a written description of any Company Plan or Company
Other Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any
Company Plan and
<PAGE> 22
Company Other Benefit Obligation;
(vi) all insurance policies purchased by or to provide
benefits under any Company Plan and Company Other Benefit Obligation;
(vii) all contracts with third party administrators,
actuaries, investment managers, consultants, and other independent
contractors that relate to any Company Plan or Company Other Benefit
Obligation;
(viii) all material reports submitted within the four years
preceding the date of this Agreement by third party administrators,
actuaries, investment managers, consultants, or other independent
contractors with respect to any Company Plan or Company Other Benefit
Obligation;
(ix) a sample of the notifications sent to employees of
their rights under ERISA Section 601 et seq. and IRC Section 4980B;
(x) the Form 5500 filed in each of the most recent three
plan years with respect to each Company Plan and Company Other Benefit
Obligation, including all schedules thereto and the opinions of
independent accountants;
(xi) all notices that were given by the Company or any
ERISA Affiliate of the Company or any Company Plan to the IRS, the U.S.
Department of Labor, the PBGC, or any participant or beneficiary,
pursuant to statute, regulation, or otherwise, within the four years
preceding the date of this Agreement, including notices that are
expressly mentioned elsewhere in this Section 3.15;
(xii) all notices that were given by the IRS, the PBGC, or
the Department of Labor to the Company, any ERISA Affiliate of the
Company, or any Company Plan within the four years preceding the date
of this Agreement;
(xiii) with respect to any Qualified Plan, the most recent
determination letter for each Company Plan that is a Qualified Plan;
and
(d) Except as set forth in Part 3.15(d) of the Disclosure
Schedule:
(i) The Company and the Company's ERISA Affiliates have
performed all of their respective material obligations under all
Company Plans and Company Other Benefit Obligations.
(ii) Except for any such statements made prior to the date
which is three years prior to the date hereof which have not had and
will not have any continuing adverse effect on the Company after such
date, no statement, either written or oral, has been made by the
<PAGE> 23
Company to any Person with regard to any Plan or Other Benefit
Obligation that was not in accordance with the Plan or Other Benefit
Obligation and that will likely have an adverse economic consequence to
the Company or to Buyer;
(iii) The Company, with respect to all Company Plans and
Company Other Benefits Obligations are, and each Company Plan and
Company Other Benefit Obligation is, in material compliance with ERISA,
the IRC, and other applicable Laws including the provisions of such
Laws expressly mentioned in this Section 3.15, and with any applicable
collective bargaining agreement.
(A) No non-exempt transactions prohibited by
ERISA Section 406 and no non-exempt "prohibited transaction"
under IRC Section 4975(c) have occurred with respect to any
Company Plan.
(B) No Company Plan is a Title IV Plan, a
Multiemployer Plan, or a VEBA.
(C) Neither Sellers nor the Company nor any
ERISA Affiliate of the Company has any material liability to
the IRS with respect to any Plan, including any liability
imposed by Chapter 43 of the IRC.
(D) Neither Sellers nor the Company nor any
ERISA Affiliate of the Company has any material liability to
the PBGC with respect to any Plan or has any liability under
ERISA Section 502 or Section 4071.
(E) Except as disclosed in Part 3.15(d)(iii)(E)
of the Disclosure Schedule, all filings required by ERISA and
the IRC as to each Company Plan and Company Other Benefit
Obligation, have been timely filed, and all notices and
disclosures to participants required by either ERISA or the
IRC have been timely provided.
(F) Except as described in Part 3.15(d)(iii)(F)
of the Disclosure Schedule, all contributions and payments
made or accrued with respect to all Company Plans and Company
Other Benefit Obligations are deductible under IRC Section 162
or Section 404. No amount, or any asset of any Company Plan is
subject to tax as unrelated business taxable income.
(iv) Except as set forth in Paragraph 3.15(d)(iv) of the
Disclosure Schedule, each Company Plan and Company Other Benefit
Obligation can be terminated within thirty days, without payment of any
additional contribution or amount and without the vesting or
acceleration of any benefits promised by such Plan.
(v) To Sellers' Knowledge, no event has occurred or
circumstance exists that
<PAGE> 24
is likely to result in a material increase in premium costs of Company
Plans and Company Other Benefit Obligations that are insured, or a
material increase in benefit costs of such Company Plan and Company
Other Benefit Obligation that are self-insured.
(vi) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding
involving, any Company Plan or Company Other Benefit Obligation is
pending or, to Sellers' Knowledge, is Threatened.
(vii) Except as set forth in Paragraph 3.15(d)(vii) of the
Disclosure Schedule, each Company Plan that is a Qualified Plan is
qualified in form and operation under IRC Section 401(a); each trust
for each such Plan is exempt from federal income tax under IRC Section
501(a). No event has occurred or circumstance exists that will or could
give rise to disqualification or loss of tax-exempt status of any such
Qualified Plan or trust.
(viii) With respect to each Company Plan, the Company and
each ERISA Affiliate of the Company has met the minimum funding
standard, and has made all contributions required, under ERISA Section
302 and IRC Section 412.
(ix) Neither Sellers nor the Company has Knowledge of any
facts or circumstances that may give rise to any liability of any
Sellers, the Company, any ERISA Affiliate of the Company, or Buyer to
the PBGC under Title IV of ERISA.
(x) Neither the Company nor any ERISA Affiliate of the
Company has ever established, maintained, or contributed to or
otherwise participated in, or had an obligation to maintain, contribute
to, or otherwise participate in any Multiemployer Plan.
(xi) Except to the extent required under ERISA Section 601
et seq. and IRC Section 4980B or other applicable law, the Company is
not required to provide health or welfare benefits for any retired or
former employee, officer, or director, or any other person, and is not
obligated to provide health or welfare benefits to any active employee,
officer, director, or any other Person following retirement or other
termination of service.
(xii) Sellers and the Company have complied with the
provisions of ERISA Section 601 et seq. and IRC Section 4980B in all
material respects.
(xiii) No payment that is owed or may become due to any
director, officer, employee, or agent of the Company will be
non-deductible to the Company or subject to tax under IRC Section 280G
or Section 4999; nor will the Company be required to "gross up" or
otherwise compensate any such person because of the imposition of any
excise tax on a payment to such person.
(xiv) The consummation of the Contemplated Transactions
will not result in the
<PAGE> 25
payment, vesting, or acceleration of any benefit under any Company Plan
or Company Other Benefit Obligation.
3.16 COMPLIANCE WITH MATERIAL LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.16 of the Disclosure Schedule:
(i) the Company is, and at all times has been, in
compliance with each material Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute or result
in a material violation by the Company of, or a failure on the part of
the Company to comply with, any material Legal Requirement, or (B) may
give rise to any material obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) the Company has not received, at any time, any notice
or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible,
or potential violation of, or failure to comply with, any material
Legal Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of the Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature.
(b) Part 3.16 of the Disclosure Schedule contains a complete and
accurate list as of the date of this Agreement of each material Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or to any of the assets owned or used by, the Company. Each
Governmental Authorization listed or required to be listed in Part 3.16 of the
Disclosure Schedule is valid and in force and effect.
The Governmental Authorizations listed in Part 3.16 of the Disclosure
Schedule collectively constitute all of the material Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Company to own and use its assets in the manner in which it currently owns
and uses such assets.
3.17 LEGAL PROCEEDINGS; ORDERS
(a) Part 3.17 of the Disclosure Schedule contains a complete and
correct list of each Proceeding by or against the Company that is currently
pending, has been pending at any time since December 31, 1992 (with the stated
amount in controversy in excess of $25,000.00 and all Proceedings where no
dollar amount has been stipulated), and that:
<PAGE> 26
(i) relates to or may affect the business of, or any of
the assets owned or used by, the Company; or
(ii) challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
Except as disclosed in Part 3.17 of the Disclosure Schedule, to the Knowledge of
Sellers, Ray, and the Company, (1) no such Proceeding has been Threatened, (2)
no event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding, and (3) no Proceeding has
been settled since December 31, 1992, for an amount greater than $25,000.00.
Sellers have made available to Buyer copies of all pleadings, correspondence,
and other documents relating to each Proceeding listed in Part 3.17 of the
Disclosure Schedule. The Proceedings listed in Part 3.17 of the Disclosure
Schedule will not have a material adverse effect on the business, operations,
assets, condition, or prospects of the Company.
(b) Except as set forth in Part 3.17 of the Disclosure Schedule:
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject, which Order could
reasonably be expected to have a material adverse effect in the
business, operations, properties, prospects, assets, or condition
(financial or otherwise) of the Company;
(ii) Sellers are not subject to any Order that relates to
the business of, or any of the assets owned or used by, the Company,
which Order could reasonably be expected to have a material adverse
effect in the business, operations, properties, prospects, assets, or
conditions (financial or otherwise) of the Company; and
(iii) no officer, director, agent, or employee of the
Company is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company.
(c) Except as set forth in Part 3.17 of the Disclosure Schedule:
(i) the Company is, and at all times since December 31,
1992 has been, in full compliance with all of the material terms and
requirements of each Order to which it, or any of the assets owned or
used by it, is or has been subject;
(ii) to the Knowledge of Sellers, Ray, and the Company, no
event has occurred or circumstance exists that may constitute or result
in (with or without notice or lapse of time) a violation of or failure
to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject;
and
<PAGE> 27
(iii) to the Knowledge of Sellers, Ray, and the Company,
the Company has not received any notice or other communication (whether
oral or written) from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which
the Company, or any of the assets owned or used by the Company, is or
has been subject.
3.18 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.18 of the Disclosure Schedule, since the
date of the Interim Balance Sheet, the Company has conducted its business only
in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock; grant of
any registration rights; purchase, redemption, retirement, or other acquisition
by the Company of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of shares of
capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries,
or other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee, or debt issued or
advances made to any shareholder, director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of
the Company, whether or not covered by insurance, which damage, destruction or
loss has materially and adversely affected the properties, assets, business, or
financial condition of the Company, taken as a whole, or, to the Knowledge of
Sellers, Ray, and the Company, the prospects of the Company, taken as a whole;
(f) entry into, amendment or termination of, or receipt of notice
of termination of (i) any license, distributorship, dealer, nonemployee sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company of at least $25,000.00 outside of the Ordinary Course of Business;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or
<PAGE> 28
other disposition of any asset or property of the Company with a value of
$25,000 or greater, or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company, including the
sale, lease, or other disposition of any of the Intellectual Property Assets;
(h) purchase outside the Ordinary Course of Business of any asset
or property for more than $25,000.00;
(i) cancellation or waiver of any claims or rights with a value to
the Company in excess of $25,000.00;
(j) repayment of any debt other than debt disclosed in the Balance
Sheet or the Interim Balance Sheet or incurred in the Ordinary Course of
Business since the respective dates thereof;
(k) material change in the accounting methods used by the Company;
or
(l) agreement, whether oral or written, by the Company to do any
of the foregoing.
3.19 CONTRACTS; NO DEFAULTS
(a) Part 3.19(a) of the Disclosure Schedule contains a complete
and accurate list as of the date of this Agreement, and Sellers have made
available to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an amount
or value in excess of $25,000.00 (excluding the sale or rental of
Rental Equipment in the Ordinary Course of Business);
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount
or value in excess of $25,000.00;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or
receipts of the Company in excess of $25,000.00;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property
(except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than
$25,000.00);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with
<PAGE> 29
current or former employees, consultants, or contractors regarding the
appropriation or the nondisclosure of any of the Intellectual Property
Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs,
or liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of the Company or any
Affiliate of the Company or limit the freedom of the Company or any
Affiliate of the Company to engage in any line of business or to
compete with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than direct
payments for goods;
(x) each power of attorney that is currently effective
and outstanding;
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for an
express undertaking by the Company to be responsible for consequential
damages;
(xii) each Applicable Contract for capital expenditures in
excess of $25,000.00;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the
Company other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
Part 3.19(a) of the Disclosure Schedule sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of the Company under the Contracts, and the Company's
office where details relating to the Contracts are located.
(b) Except as set forth in Part 3.19(b) of the Disclosure Schedule
or as contemplated by this Agreement:
(i) neither Sellers nor any Related Person of Sellers has
or may acquire any
<PAGE> 30
rights under, and neither Sellers nor any Related Person of Sellers has
or may become subject to any obligation or liability under, any
Contract that relates to the business of, or any of the assets owned or
used by, the Company; and
(ii) to the Knowledge of Sellers, Ray, and the Company, no
officer, director, agent, employee, consultant, or contractor of the
Company is bound by any Contract that purports to limit the ability of
such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating
to the business of the Company, or (B) assign to the Company or to any
other Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.19(c) of the Disclosure
Schedule, each Contract identified or required to be identified in Part 3.19(a)
of the Disclosure Schedule is in full force and effect with respect to the
Company in all material respects; each material Contract of the Company is valid
and enforceable in accordance with its material terms; and to the Knowledge of
Sellers, Ray, and the Company, each Contract identified or required to be
identified in Part 3.19(a) of the Disclosure Schedule is valid and enforceable
in accordance with its material terms.
(d) Except as set forth in Part 3.19(d) of the Disclosure
Schedule:
(i) the Company is in full compliance with all applicable
material terms and requirements of each Contract under which the
Company has or had any obligation or liability or by which the Company
or any of the assets owned or used by the Company is or was bound;
(ii) to the Knowledge of Sellers, Ray and the Company,
each other Person that has or had any obligation or liability under any
Contract required to be disclosed in Part 3.19 of the Disclosure
Schedule under which the Company has or had any rights is, and at all
times has been, in full compliance with all applicable material terms
and requirements of such Contract;
(iii) no material event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene, conflict
with, or result in a violation or breach of, or give the Company, or to
the Knowledge of Sellers, Ray and the Company, any other Person, the
right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or
modify, any Contract required to be disclosed in Part 3.19 of the
Disclosure Schedule; and
(iv) the Company has not given to or received from any
other Person, at any time any notice or other written communication
regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Contract required to be disclosed in
Part 3.19 of the Disclosure Schedule.
<PAGE> 31
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts required to be disclosed in Part
3.19 of the Disclosure Schedule with any Person and, to the Knowledge of Sellers
and the Company, no such Person has made written demand for such renegotiation.
(f) The Contracts required to be disclosed in Part 3.19 of the
Disclosure Schedule relating to the sale, design, manufacture, or provision of
products or services by the Company have been entered into in the Ordinary
Course of Business and have been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been paid
or promised, that is or would be in violation of any Legal Requirement.
3.20 INSURANCE
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance
(excluding the endorsements to such policies, which have been made
available to Buyer by Sellers) to which the Company is a party or under
which the Company, or any director of the Company, is or has been
covered at any time within the five years preceding the date of this
Agreement;
(ii) true and complete copies of all pending applications
for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Part 3.20(b) of the Disclosure Schedule describes (as of the
date of this Agreement):
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company
outside the Ordinary Course of Business; and
(iii) all obligations of the Company to third parties in
excess of $25,000 with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy under
which such coverage is provided.
(c) Except for health insurance claims of the Company's employees
which are covered by a Company health insurance policy or the obligation of an
employee of the Company, Part
<PAGE> 32
3.20(c) of the Disclosure Schedule sets forth (as of the date of this
Agreement), by year, for the current policy year and each of the two preceding
policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $25,000 (together with such
additional information as is readily available from the Company's
insurance company), which sets forth:
(A) a description of the policy by insurer, type
of insurance, and period of coverage; and
(B) the amount and a brief description of the
claim; and
(iii) a statement describing the loss experience for all
claims since December 31, 1994 that were self-insured, including the
number and aggregate cost of such claims.
(d) Except as set forth on Part 3.20(d) of the Disclosure
Schedule:
(i) All policies to which the Company is or was a party
since December 31, 1994 or that currently provide coverage to either
Sellers, the Company, or any director or officer of the Company:
(A) are or were valid, outstanding, and
enforceable;
(B) are or, to the Knowledge of Sellers, Ray,
and the Company, were issued by an insurer that is financially
sound and reputable;
(C) taken together, provide or provided adequate
insurance coverage for the assets and the operations of the
Company for all risks normally insured against by a Person
carrying on the same business or businesses as the Company;
(D) are or were sufficient for compliance with
all Legal Requirements and Contracts required to be disclosed
in Part 3.19 of the Disclosure Schedule to which the Company
is a party or by which any of them is bound;
(E) will continue in full force and effect in
accordance with their terms following the consummation of the
Contemplated Transactions (except to the extent affected by
Buyer's purchase of the Shares); and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of
the Company.
<PAGE> 33
(ii) Neither Sellers nor the Company has received (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any policy is not
willing or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and has
otherwise performed all of its obligations, under each policy to which
the Company is a party or that provides coverage to the Company or
director thereof.
(iv) The Company have given notice to the insurer of all
material claims that may be insured thereby.
3.21 ENVIRONMENTAL MATTERS
Except as set forth in Part 3.21 of the Disclosure Schedule:
(a) To the Knowledge of Sellers, Ray, and the Company, the Company
is, and at all material times has been, in material compliance with, and has not
been and is not in material violation of or liable under, any Environmental Law.
Neither Sellers, Ray, nor the Company has any reasonable basis to expect, nor
has any of them or any other Person for whose conduct they are responsible
received, any actual or Threatened order, notice, or other material written
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any material actual or potential violation or failure to comply
with any Environmental Law, or of any material actual or Threatened obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which the Company has had an
interest, or with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used, or
processed by the Company, or any other Person for whose conduct it is or will
likely be held legally responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) To the Knowledge of Sellers, Ray, and the Company, there are
no pending or Threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which Sellers, Ray, or the Company has or had an
interest.
(c) Neither the Company nor, to the Knowledge of Sellers, Ray, and
the Company, any other Person for whose conduct it is responsible, has any
Environmental, Health, and Safety Liabilities with respect to the Facilities or,
to the Knowledge of Sellers, Ray, and the Company, with respect to any other
properties and assets (whether real, personal, or mixed) in which the
<PAGE> 34
Company (or any predecessor), has or had an interest, or, to the Knowledge of
Sellers, Ray, and the Company, at any property geologically or hydrologically
adjoining the Facilities or any such other property or assets.
(d) Except for Hazardous Materials used by the Company in the
Ordinary Course of Business, there are no Hazardous Materials present on or in
the Environment at the Facilities or, to the Knowledge of Sellers, Ray, and the
Company, at any geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground storage tanks,
landfills, land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in land,
water, sumps, or any other part of the Facilities or such adjoining property, or
incorporated into any structure therein or thereon. To the Knowledge of Sellers,
Ray, and the Company, neither the Company nor any other Person for whose conduct
it is responsible, has permitted or conducted, or is aware of, any Hazardous
Activity conducted with respect to the Facilities or any other properties or
assets (whether real, personal, or mixed) in which the Company has or had an
interest.
(e) To the Knowledge of Sellers, Ray, and the Company, there has
been no Release or Threat of Release of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities.
(f) Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring currently in the
Company's possession or initiated in the five years prior to the Closing Date by
Sellers, Ray, or the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by Sellers,
Ray, the Company, or any other Person for whose conduct they are held legally
responsible, with Environmental Laws in connection with the Facilities.
3.22 EMPLOYEES
(a) Part 3.22 of the Disclosure Schedule contains a complete and
accurate list as of the date of this Agreement of the following information for
each employee, officer, or director of the Company who had compensation in
excess of $75,000 during the year ended December 31, 1996, including each
employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since
December 31, 1996; vacation accrued; and service credited for purposes of
vesting and eligibility to participate in the Company Plans or any Company Other
Benefit Obligation.
(b) Except as specified in the Consulting Agreement as to Ray or
as set forth in Part 3.22 of the Disclosure Schedule, no officer, director or,
to the Knowledge of Sellers, Ray, and the Company, employee, of the Company is a
party to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee, officer, or director and any other Person ("Proprietary Rights
<PAGE> 35
Agreement") that in any way adversely affects or will affect (i) the performance
of his duties as an officer, director or, to the Knowledge of Sellers, Ray, and
the Company, employee, of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers or
the Company by any such employee, officer, or director. To the Knowledge of
Sellers, Ray, and the Company, no director, officer, or other key employee of
the Company (other than Ray) intends to terminate his employment with the
Company and no such director, officer, or other key employee of the Company has
Threatened to terminate his employment with the Company.
(c) Excluding information relating to Company Plans, Part 3.22 of
the Disclosure Schedule also contains a complete and accurate list as of the
date of this Agreement of the following information for each retired employee,
officer, or director of the Company, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
3.23 LABOR RELATIONS; COMPLIANCE
Except as disclosed in Part 3.23 of the Disclosure Schedule, the
Company has not been and is not currently a party to any collective bargaining
or other labor Contract. Except as disclosed in Part 3.23 of the Disclosure
Schedule, (i) there has not been since December 31, 1994, (ii) there is not
presently pending or existing, and (iii) to the Knowledge of Sellers, Ray, and
the Company, there is not presently Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any Proceeding
against or affecting the Company relating to the alleged violation of any
material Legal Requirement pertaining to labor relations or employment matters
with a stated amount in controversy in excess of $25,000, including any charge
or complaint filed by an employee or union with the National Labor Relations
Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Body, organizational activity, or other labor or employment dispute
against or affecting the Company or its premises, or (c) any application for
certification of a collective bargaining agent. To the Knowledge of Sellers,
Ray, and the Company, no event has occurred or circumstance exists that could
provide the basis for any work stoppage or other labor dispute. There is no
lockout of any employees by the Company, and no such action is contemplated by
the Company. The Company has complied in all respects with all material Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing material Legal
Requirements. Sellers have provided Buyer with an opportunity to review the
employment files of all employees of the Company whose employment by the Company
was terminated since December 31, 1993, for any reason (whether voluntarily or
involuntarily and whether initiated by the Company or the employee), which
employment files are, to the Knowledge of Sellers, Ray, and the Company,
complete and correct in all materal respects.
<PAGE> 36
3.24 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets-The term "Intellectual Property
Assets" includes:
(i) the name "Bode-Finn", all fictional business names,
trading names, registered and unregistered trademarks, service marks,
and applications (collectively, "Marks");
(ii) all copyrights in both published works and
unpublished works (collectively, "Copyrights"); and
(iii) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data,
process technology, patents, plans, drawings, rights in mask works and
blue prints (collectively, "Trade Secrets"); owned, used, or licensed
by the Company as licensee or licenser.
(b) Agreements-Part 3.24(b) of the Disclosure Schedule contains a
complete and accurate list and summary description as of the date of this
Agreement, including any royalties paid or received by the Company, of all
Contracts relating to the Intellectual Property Assets to which the Company is a
party or by which the Company is bound, except for any license implied by the
sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $25,000 under which the Company is
the licensee. There are no outstanding and, to the Knowledge of Sellers, Ray,
and the Company, no Threatened disputes or disagreements with respect to any
such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those
necessary for the operation of the Company's business as it is
currently conducted, except for the Company's computer software
systems, of which the Company is a licensee. The Company is the owner
of all right, title, and interest in and to each of the Intellectual
Property Assets, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims, and has the
right to use without payment to a third party all of the Intellectual
Property Assets.
(ii) To the Knowledge of Sellers, Ray, and the Company,
none of the Marks or Copyrights are material to the Company (with the
exception of the name "The Bode-Finn Company" and the trademark "Onward
and Upward", which to the Knowledge of Sellers, Ray, and the Company,
the Company is the owner of all right, title, and interest in and to
such name free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims) and the only Trade
Secrets material to the Company are its customer lists and pricing
information. To the Knowledge of Sellers, Ray, and the Company, there
have been no claims of infringement or challenges to the Company's use
<PAGE> 37
of any Intellectual Property Assets.
3.25 CERTAIN PAYMENTS
To the Knowledge of Sellers, Ray, and the Company, neither the Company
nor any director, officer, agent, or employee of the Company, nor 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, kickback, or other payment in violation of any Legal Requirement,
applicable tort law, or any Applicable Contract, 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, or (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of the Company or any
Affiliate of the Company, or (b) established or maintained any fund or asset
that has not been recorded in the books and records of the Company.
3.26 DISCLOSURE
(a) No representation or warranty of Sellers, Ray, Ray III,
Michael, or Bruce in this Agreement and no statement in the Disclosure Schedule
as amended pursuant to Section 5.5 omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
3.27 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.27 of the Disclosure Schedule, neither
Sellers nor any Related Person of Sellers or the Company has, or since December
31, 1990, has had, any interest in any property (whether real, personal, or
mixed and whether tangible or intangible), used in or pertaining to the business
of the Company. Neither Sellers nor any Related Person of Sellers or the Company
is, or since December 31, 1990, has owned (of record or as a beneficial owner)
an equity interest or any other financial or profit interest in, a Person that
has (i) had business dealings or a material financial interest in any
transaction with the Company, or (ii) engaged in competition with the Company
with respect to any line of the products or services of the Company (a
"Competing Business") in any market presently served by the Company. Except as
set forth in Part 3.27 of the Disclosure Schedule, no Sellers or any Related
Person of Sellers or the Company is, or since March 31, 1990, was, a party to
any Contract with, or has or had any claim or right against, the Company.
<PAGE> 38
3.28 CUSTOMERS AND SUPPLIERS
In Part 3.28 of the Disclosure Schedule, Sellers have set forth the
Company's top twenty customers based on the revenue generated by such customers
during the fiscal year ended December 31, 1997. Also set forth therein are the
Company's top ten vendors based on the expenditures of the Company with such
vendor during such fiscal year. To the Knowledge of Sellers, Ray, and the
Company, nothing has occurred since December 31, 1997, that would in any way
have a material adverse effect on the relationship that the Company has with any
party listed on such Schedule.
3.29 BROKERS OR FINDERS
Except as set forth in Part 3.29 of the Disclosure Schedule, Sellers
and their agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
3.30 INDEBTEDNESS
Except for any interest-bearing Indebtedness incurred in the Ordinary
Course of Business from the date hereof through the Closing Date, the
interest-bearing Indebtedness of the Company does not, and at the Closing will
not, exceed Eighteen Million Five Hundred Thousand Dollars ($18,500,000.00).
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers that the statements contained
in this Section 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4).
4.1 ORGANIZATION AND GOOD STANDING
Buyer 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 conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under this Agreement and the documents contemplated by this
Agreement. Buyer is duly qualified to do business as a foreign corporation and
is in good standing under the laws of the State of Ohio and each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification, except where the lack of such qualification would not have a
material adverse effect on the business, operations, properties, prospects,
assets, or condition (financial or otherwise) of Buyer.
<PAGE> 39
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Promissory Note, the Consulting
Agreement, the Employment Agreements, and the Leases (collectively, the "Buyer's
Closing Documents"), the Buyer's Closing Documents will constitute the legal,
valid, and binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms. Buyer has the absolute and unrestricted right,
power, and authority to execute and deliver this Agreement and the Buyer's
Closing Documents and to perform its obligations under this Agreement and the
Buyer's Closing Documents.
(b) Neither the execution and delivery of this Agreement by Buyer
nor the consummation or performance of any of the Contemplated Transactions by
Buyer will give any Person the right to prevent, delay, or otherwise interfere
with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents or
the Organizational Documents of any Buyer Subsidiary;
(ii) any resolution adopted by the board of directors or
the stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer or any
Buyer Subsidiary may be subject; or
(iv) any Contract to which Buyer or any Buyer Subsidiary
is a party or by which Buyer or any Buyer Subsidiary may be bound.
Buyer is not and will not be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
4.3 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view
to their distribution within the meaning of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS
No Proceeding has been commenced or Threatened against Buyer that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions.
<PAGE> 40
4.5 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold Sellers harmless from any such payment alleged to be due by
or through Buyer as a result of the action of Buyer or its officers or agents.
4.6 CAPITALIZATION
The authorized equity securities of Buyer consist of 100,000 shares of
common stock, $0.01 par value per share, of which 10,000 shares are issued and
outstanding on the date hereof. All of the issued and outstanding equity
securities of Buyer have been duly authorized and validly issued and are fully
paid and non-assessable. None of the outstanding equity securities or other
securities of Buyer were issued in violation of the Securities Act (or any other
material Legal Requirement). Set forth below is a listing of all of the
Subsidiaries of Buyer:
(i) NationsRent of West Virginia, Inc., a Delaware corporation
qualified to do business in West Virginia,
(ii) Titan Rentals, Inc., a West Virginia corporation,
(iii) NationsRent of Kentucky, Inc., a Delaware corporation
qualified to do business in Kentucky,
(iv) NationsRent of Indiana, Inc., a Delaware corporation qualified
to do business in Indiana,
(v) NationsRent of Ohio, Inc., a Delaware corporation qualified to
do business in Ohio,
(vi) Gabriel Trailer Manufacturing Company, Inc., an Ohio
corporation, and
(vii) Sam's Equipment Rental, Inc., an Ohio corporation.
4.7 DISCLOSURE
No representation or warranty of Buyer in this Agreement or any other
document delivered by Buyer to Sellers pursuant to the terms of this Agreement
omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances which they were made, not misleading.
4.8 FINANCIAL STATEMENTS
Buyer has delivered to Sellers an unaudited consolidated balance sheet
of Buyer as of December 31, 1997, and the related unaudited statements of income
for the period then ended. Such financial statements are materially complete and
correct, materially consistent with the books and records of Buyer, are prepared
in accordance with GAAP, and fairly present in all material respects the
financial condition of Buyer; subject to (a) adjustments to reflect application
of
<PAGE> 41
purchase accounting for the acquisitions made by Buyer during such period, (b)
adjustments to reflect adoption of a methodology of accounting for depreciation
and amortization, (c) year-end adjustments, (d) the absence of notes, and (e)
possible adjustment for the closing of the Central Rent-All acquisition on
January 8, 1998. Since the date of such financial statements, there has not been
any material adverse change in the business, operations, properties, assets, or
condition of Buyer or, to the Knowledge of Buyer, the prospects of Buyer.
4.9 NET WORTH
Buyer's Net Worth will be no less than (a) Thirty Million Dollars
($30,000,000) from the date hereof through June 30, 1998, or (b) Thirty-Five
Million Dollars ($35,000,000) thereafter for the term of the Promissory Note.
For the purposes of this Agreement, "Net Worth" of Buyer shall mean the total
assets of Buyer less the total liabilities of Buyer as determined in accordance
with GAAP for purposes of balance sheet presentation.
4.10 REVOLVING CREDIT AGREEMENT
Buyer has heretofore deliverd to Sellers a true, correct and complete
copy of the Revolving Credit Agreement dated as of March 18, 1998 among Buyer
and its subsidiaries, BankBoston, N.A. as Agent, LaSalle National Bank, as
Documentation Agent, and the lending institutions party thereto, with BankBoston
Securities Inc., as Arranger.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers will,
and will cause the Company and its Representatives to, (a) afford Buyer and its
Representatives and prospective lenders and their Representatives (collectively,
"Buyer's Advisors") full, free, and unrestricted access to the Company's
personnel, Representatives, properties, contracts, books and records, and other
documents and data, (b) furnish Buyer and Buyer's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request. Buyer and Sellers will coordinate such activities in a
manner so as to eliminate or reduce the disruption to the Company's business
resulting therefrom.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date, Sellers will,
and will cause the Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business and
<PAGE> 42
otherwise refrain from any extraordinary transactions;
(b) use their Best Efforts to preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees, and agents of the Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company; and
(c) report periodically to Buyer concerning the status of the
business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Sellers will not, and will cause
the Company not to, without the prior consent of Buyer, take any affirmative
action, or fail to take any reasonable action as a result of which any of the
changes or events listed in Section 3.18 will occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers
will, and will cause the Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining all consents identified in Schedule 4.2.
5.5 SUPPLEMENTS TO DISCLOSURE SCHEDULE
The parties hereto hereby acknowledge and agree that the Disclosure
Schedule has not been fully completed by Sellers as of the date of this
Agreement and that, accordingly, Sellers shall complete the same by delivering
to Buyer on or before the Closing Date one or more supplements thereto.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Sellers will, and will cause the Company to, cause all Indebtedness
owed to the Company by Sellers, Ray, or any Related Person of Sellers or Ray to
be paid in full prior to Closing.
<PAGE> 43
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Sellers, Ray, Ray III, Michael, and Bruce will not, and will cause
the Company and their respective Representatives not to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets (other
than in the Ordinary Course of Business) of the Company, or any of the capital
stock of the Company, or any merger, consolidation, business combination, or
similar transaction involving the Company, provided, however, that Ray may
contact United Rentals, Inc. to inform it of the execution of this Agreement.
Sellers, Ray, Ray III, Michael, and Bruce will, and will cause the Company and
their respective Representatives to, immediately notify Buyer regarding any
contact between Sellers, Ray, Ray III, Michael, Bruce, the Company, or their
Representatives and any other Person regarding any such offer or proposal or any
related inquiry.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers, Ray,
Ray III, Michael, and Bruce will use their Best Efforts to cause the conditions
in Sections 7 and 8 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will
make all filings required by Legal Requirements to be made by it to consummate
the Contemplated Transactions. Between the date of this Agreement and the
Closing Date, Buyer will (i) cooperate with Sellers with respect to all filings
that Sellers are required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with Sellers in obtaining all
consents identified in Part 3.2 of the Disclosure Schedule; provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of
this Agreement and the Closing Date, Buyer will use its Best Efforts to cause
the conditions in Sections 7 and 8 to be satisfied.
6.3 NOTIFICATION OF CERTAIN MATTERS
Between the date of this Agreement and the Closing Date, Buyer will
promptly notify
<PAGE> 44
Sellers of the occurrence or nonoccurrence of any material event affecting
Buyer's financial condition.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of the representations and warranties of Sellers, Ray, Ray
III, Michael, and Bruce in this Agreement (considered collectively), and each of
these representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement (after giving
effect to any supplement to the Disclosure Schedule made pursuant to Section
5.5), and must be accurate in all material respects as of the Closing Date as if
made on the Closing Date (after giving effect to any supplement to the
Disclosure Schedule made pursuant to Section 5.5).
(b) Each of the representations and warranties of Sellers, Ray,
Ray III, Michael, and Bruce in Sections 3.3, 3.4, 3.14, and 3.26 must have been
accurate in all respects as of the date of this Agreement, and must be accurate
in all respects as of the Closing Date as if made on the Closing Date, without
giving effect to any supplement to the Disclosure Schedule.
(c) The supplements to the Disclosure Schedule made pursuant to
Section 5.5 must not have revealed a change in the representation and warranties
of Sellers, Ray, Ray III, Michael and Bruce which would have a material adverse
effect on the business of the Company.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers, Ray, Ray
III, Michael, and Bruce are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.4
must have been delivered and each of the other covenants and obligations in
Sections 5.4 and 5.8 must have been performed and complied with in all respects.
7.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Schedule
and any and all other Consents must have been obtained and must be in full force
and effect.
<PAGE> 45
7.4 BANK INDEBTEDNESS
Amendments to loan agreements, new loan agreements, estoppel
certificates, and/or other documentation fully assuring Buyer of continuation
and/or replacement of the Company's material Indebtedness, to such extent as
Buyer reasonably determines to be necessary or advisable (and otherwise in a
form reasonably satisfactory to Buyer and its counsel), must have been delivered
to or obtained by Buyer.
7.5 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Benesch, Friedlander, Coplan & Aronoff LLP,
dated the Closing Date, in the form of Exhibit 7.5(a);
(b) such other documents as Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.3(a), (ii) evidencing the accuracy of any of the representations and
warranties of Sellers, Ray, Ray III, Michael, and Bruce (as supplemented
pursuant to Section 5.5), (iii) evidencing the performance by Sellers, Ray, Ray
III, Michael, and Bruce of, or the compliance by Sellers, Ray, Ray III, Michael,
and Bruce with, any covenant or obligation required to be performed or complied
with by Sellers, Ray, Ray III, Michael, and Bruce, (iv) evidencing the
satisfaction of any condition referred to in this Section 7, or (v) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
7.6 DUE DILIGENCE
Buyer must be satisfied, in its reasonable discretion, with the results
of its due diligence with respect to the Company's distributor/dealer
relationships with Hyster Company and Genie Financial Services, Inc.
7.7 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
<PAGE> 46
7.8 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or, to the Knowledge of Sellers, Ray, Ray
III, Michael, Bruce, the Company, or Buyer, Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, the Company, or (b) is entitled
to all or any portion of the Purchase Price payable for the Shares.
7.9 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
8. CONDITIONS PRECEDENT TO THE OBLIGATION TO CLOSE OF SELLERS, RAY,
RAY III, MICHAEL AND BRUCE
The obligation of Sellers, Ray, Ray III, Michael and Bruce to sell the
Shares and to take the other actions required to be taken by them at the Closing
is subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by them, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4 and must have made the cash payments
required to be made by Buyer pursuant to Section 2.4(b)(i).
<PAGE> 47
8.3 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to
Sellers:
(a) an opinion of Squire, Sanders & Dempsey L.L.P., dated the
Closing Date, in the form of Exhibit 8.3(a); and
(b) such other documents as Sellers may reasonably request for the
purpose of (i) enabling their counsel to provide the opinion referred to in
Section 7.6(a), (ii) evidencing the accuracy of any representation or warranty
of Buyer, (iii) evidencing the performance by Buyer of, or the compliance by
Buyer with, any covenant or obligation required to be performed or complied with
by Buyer, (ii) evidencing the satisfaction of any condition referred to in this
Section 8, or (v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.4 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and
(b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
8.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Sellers, or against any Person affiliated with Sellers, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
8.6 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict, or result in a material violation of,
or cause Seller or any Person affiliated with Seller to suffer any material
adverse consequence under, (a) any applicable Legal Requirement or Order, or (b)
any Legal Requirement or Order that has been published, introduced or otherwise
proposed by or before any Governmental Body.
<PAGE> 48
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Sellers if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has
not been satisfied as of April 8, 1998, or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before April 8, 1998; or (ii) by Sellers, if any of the conditions in Section
8 has not been satisfied as of April 8, 1998, or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before April 8, 1998;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations in all material respects under this
Agreement) on or before April 8, 1998, or such later date as the parties may
agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 9.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
11.1 and 11.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of this Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
<PAGE> 49
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedule, the supplements to the Disclosure Schedule,
the certificate delivered pursuant to Section 2.4(a)(v), and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing, subject to the time limitations set forth in Section 10.5(a). The right
to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS, RAY, RAY III,
MICHAEL, AND BRUCE
Sellers, Ray, Ray III, Michael, and Bruce, jointly and severally,
(subject to Section 10.4(b)) will indemnify and hold harmless Buyer, the
Company, and their respective stockholders, controlling persons, agents, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
consequential damages), expense (including reasonable costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach (in determining (i) whether any such Breach has
occurred for purposes of (A) this subsection (a), and (B) the entitlement to
indemnification therefor under this Section 10.2, and (ii) the Damages for any
such Breach, the word "material" or derivations thereof as used in Section 1 and
Sections 3.1 through 3.30 shall be ignored) of any representation or warranty
made by Sellers, Ray, Ray III, Michael, and Bruce in this Agreement (after
giving effect to any supplements to the Disclosure Schedule made pursuant to
Section 5.5), the Disclosure Schedule, the supplements to the Disclosure
Schedule made pursuant to Section 5.5, or any other certificate or document
delivered by Sellers, Ray, Ray III, Michael, and Bruce at the Closing pursuant
to this Agreement;
(b) any Breach by any of Sellers, Ray, Ray III, Michael, and Bruce
of any of their respective covenants or obligations in this Agreement;
(c) any Tax in excess of amounts accrued on the Interim Balance
Sheet or disclosed in
<PAGE> 50
Part 3.13 of the Disclosure Schedule (after giving effect to any supplements to
the Disclosure Schedule made pursuant to Section 5.5); or
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any of Sellers, Ray, Ray III,
Michael, Bruce, and the Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions.
The remedies provided in this Section 10.2 will be the exclusive remedy
of Buyer with respect to Sellers, Ray, Ray III, Michael and Bruce and this
Agreement.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS AND RAY--
ENVIRONMENTAL MATTERS
In addition to the provisions of Section 10.2, Sellers and Ray, jointly
and severally, will indemnify and hold harmless Buyer, the Company, and the
other Indemnified Persons for, and will pay to Buyer, the Company, and the other
Indemnified Persons the amount of, any Damages (including costs of cleanup,
containment, or other remediation) arising, directly or indirectly, from or in
connection with:
(a) any Environmental, Health, and Safety Liabilities arising out
of or relating to: (i) (A) the ownership, operation, or condition at any time on
or prior to the Closing Date of the Facilities or any other properties and
assets (whether real, personal, or mixed and whether tangible or intangible) in
which Sellers, Ray, or the Company has or had an interest, or (B) any Hazardous
Materials or other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the Closing Date; or (ii)
(A) any Hazardous Materials or other contaminants, wherever located, that were
generated, transported, stored, treated, Released, or otherwise handled by
Sellers, Ray or the Company or by any other Person for whose conduct they are or
may be held legally responsible at any time on or prior to the Closing Date, or
(B) any Hazardous Activities that were conducted by Sellers, Ray, or the Company
or by any other Person for whose conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death,
and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
Sellers, Ray, or the Company or any other Person for whose conduct they are or
may be held responsible, in any way arising from any Hazardous Activity
conducted or allegedly conducted with respect to the Facilities or the operation
of the Company prior to the Closing Date, or from Hazardous Material that was
(i) present on or before the Closing Date on or at the Facilities (or present on
any other property, if such Hazardous Material emanated from any of the
Facilities and was present on any of the Facilities on or prior to the Closing
Date) or (ii) Released by Sellers, Ray, or the Company or any other Person for
whose conduct they are or may be held responsible,
<PAGE> 51
at any time on or prior to the Closing Date.
Sellers will be entitled to control any Cleanup or related Proceeding
with respect to real property and any other Proceeding with respect to which
indemnity may be sought under this Section 10.3; provided, however, that (x)
Buyer may participate therein if it will likely adversely affect Buyer or the
Company, (y) no compromise, settlement or other significant action with respect
to any such Cleanup or related Proceeding may be effected by Sellers without
Buyer's consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no effect on
any other claims that may be made against Buyer or the Company, and (B) (i) no
action to be taken pursuant thereto will likely materially adversely affect
Buyer's or the Company's business or operations, or (ii) the sole relief
provided is monetary damages that are paid in full by Sellers, and (z) neither
Buyer nor the Company will have any liability with respect to any compromise,
settlement or other such action effected without its consent, which consent will
not be unreasonably withheld.
Notwithstanding any provision of this Agreement to the contrary items disclosed
in the Disclosure Schedule shall have no effect whatsoever on the
indemnification obligations of Sellers and Ray under this Section 10.3
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, Ray, Ray III, Michael,
Bruce, and the officers, and directors or trustees of the Foundation and will
pay to such parties the amount of any Damages arising, directly or indirectly,
from or in connection with (a) any Breach of any representation or warranty made
by Buyer in this Agreement or in any certificate delivered by Buyer pursuant to
this Agreement, (b) any Breach by Buyer of any covenant or obligation of Buyer
in this Agreement, or (c) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
10.5 TIME AND AMOUNT LIMITATIONS
(a) In order for Sellers, Ray, Ray III, Michael, and Bruce to have
any liability for indemnification under Section 10.2 (excepting those
representations and warranties in Sections 3.3, 3.13, 3.15, and 3.21 of this
Agreement), Buyer must notify Sellers, Ray, Ray III, Michael, or Bruce of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Buyer on or before May 31, 2000.
(b) (i) Sellers, Ray, Ray III, Michael, and Bruce will have no
liability (for indemnification or otherwise) with respect to the matters
described in clauses (a) through (d) of Section 10.2 or Section 10.3 until the
total of all Damages with respect to such matters exceeds $250,000.00, and then
only for the amount by which such Damages exceed $250,000.00; and (ii)
<PAGE> 52
Sellers, Ray, Ray III, Michael, and Bruce will have no liability (for
indemnification or otherwise) with respect to the matters described in clauses
(a) through (d) of Section 10.2 or in Section 10.3 to the extent the total of
all Damages with respect to such matters exceeds $14,000,000.00.
(c) The Foundation will be liable (for indemnification or
otherwise) with respect to the matters described in Sections 10.2 and 10.3 only
up to the aggregate amount it receives from Buyer pursuant to this Agreement.
(d) Each of Ray III, Michael, and Bruce will be liable (for
indemnification or otherwise) with respect to the matters described in Section
10.2 and 10.3 only up to an aggregate amount that is equal to the amount that he
directly or indirectly receives from Sellers from the date hereof through the
date such determination is to be made.
(e) However, this Section 10.5 will not apply to any Breach of any
of the representations and warranties of Sellers, Ray, Ray III, Michael, and
Bruce of which such party was actually aware as of the Closing Date or any
intentional Breach by any such party of any covenant or obligation, and such
party will be personally liable for all Damages with respect to any such Breach.
<PAGE> 53
10.6 RIGHT OF SET-OFF
Upon 20 days prior written notice to Sellers specifying in reasonable
detail the basis for such set-off (during which 20 days Buyer will be available
to meet with Sellers to discuss in good faith a resolution of the underlying
issues), Buyer may set off any amount to which it may be entitled under this
Section 10 against amounts otherwise payable under the Promissory Note, but only
in accordance with (i) a mutual agreement with Sellers or (ii) a decision of an
arbitrator pursuant to an arbitration satisfying the conditions set forth below.
The pursuit of exercise of such right of set-off by Buyer in good faith, whether
or not ultimately determined to be justified, will not constitute an event of
default under the Promissory Note. Neither the exercise of nor the failure to
pursue exercise of such right of set-off will constitute an election of remedies
or limit Buyer in any manner in the enforcement of any other remedies that may
be available to it. Before pursuing any other remedies it may have, Buyer agrees
to first pursue its rights of set-off hereunder against the principal amount
then outstanding under the Promissory Note (after taking into account any
conversion hereunder); provided, however, that Buyer may immediately pursue
other remedies to the extent of claims in excess of such principal amount (after
taking into account any conversion hereunder). Any arbitration pursuant to this
Section 10.6 shall be settled by arbitration in accordance with the Rules of the
American Arbitration Association then pertaining in Columbus, Ohio relating to
commercial arbitrations, and judgment upon the award rendered by the arbitrator
or arbitrators may be entered in any court having jurisdiction thereof. During
any such arbitration, the right of Sellers to convert under the Promissory Note
shall be suspended to the extent of the set-off claimed by Buyer in good faith
prior to receipt of a Written Conversion Notice (as defined on the Promissory
Note); provided, however, that Sellers shall be entitled to place in escrow the
amount so claimed by Buyer and thereby eliminate such suspension of its
conversion rights.
10.7 PROCEDURE FOR INDEMNIFICATION-THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Sections
10.2, 10.4, or Section 10.3 of the assertion of any claim or notice of the
commencement of any Proceeding against it in respect of which indemnification
may be sought, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give written notice to the indemnifying
party of the assertion of such claim or commencement of such Proceeding, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party is prejudiced by the indemnified party's failure to
give such notice.
(b) Except as provided in Section 10.3, if any asserted claim or
Proceeding referred to in Section 10.7(a) is brought against an indemnified
party and it gives notice to the indemnifying party of the commencement of a
Proceeding, the indemnifying party will, except for Sellers, Ray, Ray III,
Michael, and Bruce as to any claim which involves Taxes for a time period
subsequent to the Closing Date, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified
<PAGE> 54
party determines in good faith that joint representation would be inappropriate,
or (ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel reasonably satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such Proceeding. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification, except to the extent the indemnifying party reserves its rights
to challenge such conclusion in writing to the indemnified party before the
assumption of defense; (ii) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or anyviolation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent, which
consent will not be unreasonably withheld. In the case of a Proceeding involving
Taxes solely for a time period prior to the Closing Date for which Sellers, Ray,
Ray III, Michael, or Bruce has, pursuant to this Section 10.7(b), assumed the
defense thereof, (x) Buyer may participate in the defense thereof if such
Proceeding may adversely affect Buyer's or the Company's Tax obligations for a
time period subsequent to the Closing Date, and (y) the indemnifying parties
shall not enter into a settlement agreement, file an amended tax return, or seek
a refund, with respect to Taxes relating to the operations of the Company or
take any other action adverse to Buyer without the prior written consent of
Buyer, which consent shall not be unreasonably withheld. If notice is given to
an indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within 28 days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnified party will not enter into any compromise or
settlement of such Proceeding without the prior written consent of the
indemnifying party, which consent shall not be unreasonably withheld, and the
indemnifying party will be bound by any determination made in such Proceeding.
(c) Notwithstanding the foregoing, except claims of damages
pursuant to Section 10.3, if an indemnified party determines in good faith that
there is a reasonable probability that a Proceeding will likely materially
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
<PAGE> 55
(d) Buyer will not enter into a settlement agreement, file an
amended return, or seek a refund, with respect to Taxes relating to the
operations of the Company in a manner that would adversely affect the
obligations of Sellers, Ray, Ray III, Michael, and Bruce to indemnify Buyer for
such Taxes under this Agreement, except with the prior written consent of
Sellers, Ray, Ray III, Michael, and Bruce, which consent shall not be
unreasonably withheld.
(e) Notwithstanding the provisions of Section 11.5, Sellers, Ray,
Ray III, Michael, and Bruce hereby consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on them with respect to such a claim anywhere in the
world.
10.8 PROCEDURE FOR INDEMNIFICATION-OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
10.9 DETERMINATION OF DAMAGES
In determining Damages for purposes of this Agreement, the parties
shall make appropriate adjustments for (a) Tax benefits (including, for example,
the deductions the Company obtains from the cost of the matters for which the
Company was indemnified, the Tax cost of receipt of any indemnification payment,
any reduction in Tax basis, and any reduction in depreciation and amortization
resulting if the indemnification payment is treated as an adjustment of the
Purchase Price), (b) insurance coverage (after reduction for costs incurred
therefor, including retrospective premium adjustments, experienced-based premium
adjustments, and indemnification obligations), and (c) reserves or allowances
reflected in the Interim Balance Sheet.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Sellers, Ray, Ray III, Michael, and Bruce will cause
the Company not to incur any out-of-pocket expenses in connection with this
Agreement, or, to the extent so incurred, will cause the Company to be
reimbursed therefor by Sellers. In the event of termination of this Agreement,
the obligation of each party to pay its own expenses will be subject to any
rights of such party arising from a breach of this Agreement by another party.
Notwithstanding the foregoing, Buyer shall pay or reimurse Sellers at Closing an
amount up to $257,800 relating to the investment advisory fees payable by
Sellers to Falls River Group.
<PAGE> 56
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer determines; provided, however, that Buyer must
first obtain Sellers' approval of any such announcement or similar publicity,
which approval will not be unreasonably withheld. Unless consented to by Buyer
in advance (which consent shall not be unreasonably withheld) or required by
Legal Requirements, prior to the Closing Sellers, Ray, Ray III, Michael, Bruce,
and the Company shall keep this Agreement strictly confidential and may not make
any disclosure of this Agreement to any Person. Buyer and Sellers will consult
with each other concerning the means by which the employees, customers, and
suppliers of the Company and others having dealings with the Company will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, except as and
to the extent required by law, absent express, written consent of Sellers, Buyer
shall not, directly or indirectly, disclose to third parties or use for its own
purposes any confidential or secret information of the Company or Sellers,
except to the extent permitted under this Agreement. Buyer also agrees that it
will, upon the completion of its investigation, return to the Company or
Sellers, all documents and other records or confidential information previously
authorized to be reviewed by Buyer. It is understood that both Federal and State
laws apply to some incidences of release of information, and that violation of
this provision may also be a violation of these laws. The term "confidential
information," as used in this paragraph, means any information received from the
Company or Sellers, including but not limited to, the names or addresses of
customers, research, inventions, discoveries, improvements, equipment, methods
of production, costs or prices or uses of either party's products or services,
business plans of either party, suppliers and costs thereof, development work,
any other information containing business information which is required to be
maintained as such for the business success of either party, and any other trade
secrets, whether or not contained in any written documents or financial
information other than information which (a) is already in the possession of
Buyer, its employees, representatives or agents (b) from customers of the
Company or Sellers known to Buyer prior to the date of this Agreement; (c) is or
becomes generally available to the public through no fault or actions by Buyer
or its employees, representatives or agents; or (d) becomes available to Buyer
from a source which is not prohibited from disclosing such information to Buyer
by a contractual obligation to the Company. The parties hereto agree that
Sellers would suffer irreparable harm in the event Buyer violates this paragraph
and either discloses or uses for its own purposes information received from the
Company or Sellers.
During the course of discussions between Buyer and Sellers, Sellers,
Ray, Ray III, Michael, Bruce, the Company, and the Company's employees,
representatives and agents may receive confidential, proprietary, non-public
business and other information concerning Buyer.
<PAGE> 57
With respect to such information, the fact that Buyer has furnished such
information and the fact that there are ongoing discussions regarding the
Contemplated Transaction, Sellers, Ray, Ray III, Michael, Bruce, and the Company
agree to be bound with respect thereto to the same extent that Buyer is bound
hereunder with respect to information concerning Sellers.
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers, Ray, Ray III, Raymond E. Mason, Jr.
Michael, and Bruce: c/o Columbus Truck and Equipment
Company, Inc.
1688 East Fifth Avenue
P.O. Box 03250
Columbus, Ohio 43203-0250
Facsimile No.: (614) 252-7327
with copies to: Stuart Susskind, Esq.
Benesch, Friedlander, Coplan & Aronoff LLP
2800 Cincinnati Commerce Center
600 Vine Street
Cincinnati, Ohio 45202
Facsimile No.: (513) 762-6245
Buyer: NationsRent, Inc.
50 West Broad Street
Suite 3100
Columbus, Ohio 43215
Attention: Gene J. Ostrow
Facsimile No.: (614) 461-7943
with a copy to: Squire, Sanders & Dempsey L.L.P.
1300 Huntington Center
41 South High Street
Columbus, Ohio 43215
Attention: Patrick J. Dugan
Facsimile No.: (614) 365-2499
<PAGE> 58
11.5 JURISDICTION; SERVICES OF PROCESS
Except for arbitration prior to set off as contemplated in Section
10.6, any action or proceeding seeking to enforce any provision of, or based on
any right arising out of this Agreement shall be brought against any of the
parties in the courts of the State of Ohio, County of Franklin, or, if it has or
can acquire jurisdiction, in the United States District Court for the Southern
District of Ohio, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
11.6 FURTHER ASSURANCES
(a) The parties agree (i) to furnish upon request to each other
such further information, (ii) to execute and deliver to each other such other
documents, and (iii) to do such other acts and things, all as the other party
may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
(b) In order to establish a factual basis for the resolution of
disputes with respect to environmental and related matters, subsequent to the
Closing Buyer and Sellers will establish a baseline or benchmark as to the
physical integrity or condition of the Environment at the Facilities. For such
purpose, Buyer and Sellers will determine the scope of and will perform such
additional soil tests, topographical, environmental, or wetland studies and any
other physical and engineering examinations as they mutually agree shall be
appropriate after review of the Phase I Environmental assessments currently
being performed by Industrial Safety and Health. Buyer and Sellers will each pay
one-half of the costs and expenses of all such additional tests, studies and
examinations, provided, however, that Buyer will pay all of the costs and
expenses of the Phase I Environmental assessments currently being performed.
<PAGE> 59
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent dated December 19,
1997) and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
11.9 DISCLOSURE SCHEDULE
(a) The disclosures in the Disclosure Schedule, and those in any
Supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement; provided, however, that cross
references incorporating other disclosures by such reference may be made.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Disclosure Schedule (other than an
exception expressly set forth as such in the Disclosure Schedule with respect to
a specifically identified representation or warranty), the statements in the
body of this Agreement will control.
<PAGE> 60
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties, which will not be unreasonably withheld,
except that Buyer may assign any of its rights under this Agreement to any Buyer
Subsidiary. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
11.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Ohio
without regard to conflicts of laws principles.
11.14A FACSIMILE SIGNATURES
The parties hereto may execute this Agreement by facsimile signature.
<PAGE> 61
11.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
<PAGE> 62
IN WITNESS WHEREOF, the parties have executed and delivered this Stock
Purchase Agreement as of the date first written above.
NATIONSRENT, INC. BODE-FINN LIMITED PARTNERSHIP
By: /s/ Gene J. Ostrow By: /s/ Raymond E. Mason, Jr.
-------------------------------- -------------------------------
Name: Gene J. Ostrow Raymond E. Mason, Jr., Managing
------------------------------ General Partner
Title: Executive Vice President
-----------------------------
/s/ Raymond E. Mason, Jr. RAYMOND E. MASON FOUNDATION
- -----------------------------------
Raymond E. Mason, Jr., individually
By: /s/ Raymond E. Mason
--------------------------------
/s/ Raymond E. Mason, III Name: Raymond E. Mason
- ----------------------------------- ------------------------------
Raymond E. Mason, III, individually Title: Chairman
-----------------------------
/s/ Michael D. Mason
- -----------------------------------
Michael D. Mason, individually
/s/ Bruce R. Mason
- -----------------------------------
Bruce R. Mason, individually
<PAGE> 63
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment") is
made and entered into as of April 6, 1998 by and between NATIONSRENT, INC., a
Delaware corporation ("Buyer"), BODE-FINN LIMITED PARTNERSHIP, an Ohio limited
partnership (the "Partnership"), RAYMOND E. MASON FOUNDATION, an Ohio nonprofit
corporation (the "Foundation" and, together with the Partnership, "Sellers"),
RAYMOND E. MASON, JR., individually ("Ray"), RAYMOND E. MASON, III, individually
("Ray III"), MICHAEL D. MASON, individually ("Michael"), and BRUCE R. MASON,
individually ("Bruce").
RECITALS
The following recitals are representations with respect to certain
factual matters that form the basis of this Amendment and are an integral part
of this Amendment.
A. Buyer, Sellers, Ray, Ray III, Michael and Bruce (collectively,
the "Parties") are parties to a certain Stock Purchase Agreement dated as of
March 24, 1998, relating to the purchase and sale of all of the issued and
outstanding shares of capital stock of The Bode-Finn Company, an Ohio
corporation (the "Agreement"). Capitalized terms which are not otherwise defined
herein shall have the meanings assigned to such terms in the Agreement.
B. Sections 2.3, 9.1(b) and 9.1(d) of the Agreement provide that
Buyer or Sellers may terminate the Agreement if the Closing has not occurred on
or before April 8, 1998.
C. The parties desire to amend the Agreement to extend the date
after which Buyer or Sellers may terminate the Agreement pursuant to Sections
9.1(b) and 9.1(d) from April 8, 1998 to April 30, 1998.
AGREEMENT
NOW, THEREFORE, in consideration of the agreement and undertakings of
the parties to amend the Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. All terms and conditions of the Agreement shall remain in full
force and effect without change, except that Sections 2.3, 9.1(b) and 9.1(d) of
the Agreement are hereby amended by deleting all references to "April 8, 1998"
and replacing such date with "April 30, 1998."
2. This Amendment may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument. The parties hereto may execute this
Amendment by facsimile signature.
<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Stock Purchase Agreement as of the date first set forth above.
NATIONSRENT, INC. BODE-FINN LIMITED PARTNERSHIP
By: /s/ Gene J. Ostrow By: /s/ Raymond E. Mason, Jr.
-------------------------------- --------------------------------
Name: Gene J. Ostrow Raymond E. Mason, Jr., Managing
------------------------------ General Partner
Title: Executive Vice President
-----------------------------
/s/ Raymond E. Mason, Jr. RAYMOND E. MASON FOUNDATION
- -----------------------------------
RAYMOND E. MASON, JR., individually
By: /s/ Raymond E. Mason, Jr.
--------------------------------
/s/ Raymond E. Mason, III Name: Raymond E. Mason, Jr.
- ----------------------------------- ------------------------------
RAYMOND E. MASON, III, individually Title: Chairman
-----------------------------
/s/ Michael D. Mason
- -----------------------------------
MICHAEL D. MASON, individually
/s/ Bruce R. Mason
- -----------------------------------
BRUCE R. MASON, individually
-2-
<PAGE> 65
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment") is
made and entered into as of April 17, 1998 by and between NATIONSRENT, INC., a
Delaware corporation ("Buyer"), BODE-FINN LIMITED PARTNERSHIP, an Ohio limited
partnership (the "Partnership"), RAYMOND E. MASON FOUNDATION, an Ohio nonprofit
corporation (the "Foundation" and, together with the Partnership, "Sellers"),
RAYMOND E. MASON, JR., individually ("Ray"), RAYMOND E. MASON, III, individually
("Ray III"), MICHAEL D. MASON, individually ("Michael"), and BRUCE R. MASON,
individually ("Bruce").
RECITALS
The following recitals are representations with respect to certain
factual matters that form the basis of this Amendment and are an integral part
of this Amendment.
A. Buyer, Sellers, Ray, Ray III, Michael and Bruce (collectively,
the "Parties") are parties to a certain Stock Purchase Agreement dated as of
March 24, 1998, as amended by a certain First Amendment to Stock Purchase
Agreement dated as of April 6, 1998, relating to the purchase and sale of all of
the issued and outstanding shares of capital stock of The Bode-Finn Company, an
Ohio corporation (as amended, the "Agreement"). Capitalized terms which are not
otherwise defined herein shall have the meanings assigned to such terms in the
Agreement.
B. Buyer has determined that a filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), is required in
connection with the transaction contemplated by the Agreement.
C. The Parties desire to further amend the Agreement to (i) add
the expiration or termination of the applicable waiting periods under the HSR
Act as a condition precedent to the closing of the transactions contemplated by
the Agreement and (ii) to make certain other changes to the Agreement in
connection therewith.
AGREEMENT
NOW, THEREFORE, in consideration of the agreement and undertakings of
the Parties to amend the Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
1. All terms and conditions of the Agreement shall remain in full
force and effect without change, except that:
<PAGE> 66
(a) Section 1 (Definitions) of the Agreement is hereby amended by
adding the following between the definition of "Hazardous Materials" and the
definition of "Indebtedness":
"HSR ACT-the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, or any successor law, and regulations and
rules issued pursuant to that Act or any successor law."
(b) The following is hereby added at the end of Section 2.2
(Purchase Price):
"In the event that the Closing does not take place on or prior
to April 30, 1998, the Purchase Price shall be increased by an
amount (the "Purchase Price Adjustment Amount") equal to the
product of (i) $41,500,000 multiplied by (ii) the quotient of
(A) the number of days which elapse from and after May 1, 1998
through the Closing Date (e.g., if the Closing Date occurs on
May 3, 1998, then 3 days shall be deemed to have elapsed for
purposes hereof) divided by (B) 365 days multiplied by (iii)
the prime rate of interest on April 30, 1998, as published in
The Wall Street Journal. The Purchase Price Adjustment Amount,
if any, shall be payable by Buyer to Sellers in cash at the
Closing as specified in Section 2.4(b)(i)."
(c) Section 2.4(b)(i) is hereby deleted in its entirety and placed
with the following:
"(i) $31,500,000, plus the Purchase Price Adjustment
Amount (if any), by wire transfer to an account specified by
Sellers;"
(d) Section 5.4 (Required Approvals) of the Agreement is hereby
deleted in its entirety and replaced with the following:
"As promptly as practicable after the date of this Agreement,
Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to
consummate the Contemplated Transactions (including all
filings under the HSR Act); provided, however, that the
expense of any filings with respect to the HSR Act will be
borne by Buyer. Between the date of this Agreement and the
Closing Date, Sellers will, and will cause the Company to, (a)
cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all consents identified in
Part 3.2 of the Disclosure Schedule (including taking all
reasonable actions
-2-
<PAGE> 67
requested by Buyer to cause early termination of any
applicable waiting period under the HSR Act)."
(e) The following is hereby added at the end of Section 6.1
(Approvals of Governmental Bodies) of the Agreement"
"Without limiting the foregoing in any respect, Buyer hereby
agrees to make all filings under the HSR Act required to be
made by Buyer on or before April 17, 1998."
(f) The following is hereby added at the end of both Section 7.9
(No Prohibition) and Section 8.6 (No Prohibition) of the Agreement:
"All applicable waiting periods (and any extensions thereof)
under the HSR Act must have expired or otherwise been
terminated."
(g) Sections 2.3, 9.1(b) and 9.1(d) of the Agreement are hereby
amended by deleting all references to "April 30, 1998" and replacing such date
with "May 26, 1998."
2. This Amendment may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument. The parties hereto may execute this
Amendment by facsimile signature.
[Remainder of this page intentionally left blank]
-3-
<PAGE> 68
IN WITNESS WHEREOF, the Parties have executed this Second Amendment to
Stock Purchase Agreement as of the date first set forth above.
NATIONSRENT, INC. BODE-FINN LIMITED PARTNERSHIP
By: /s/ Gene J. Ostrow By: /s/ Raymond E. Mason, Jr.
-------------------------------- --------------------------------
Name: Gene J. Ostrow Raymond E. Mason, Jr., Managing
------------------------------ General Partner
Title: Executive Vice President
-----------------------------
/s/ Raymond E. Mason, Jr. RAYMOND E. MASON FOUNDATION
- -----------------------------------
RAYMOND E. MASON, JR., individually
By: /s/ Raymond E. Mason, Jr.
--------------------------------
/s/ Raymond E. Mason, III Name: Raymond E. Mason, Jr.
- ----------------------------------- ------------------------------
RAYMOND E. MASON, III, individually Title: Chairman
-----------------------------
/s/ Michael D. Mason
- -----------------------------------
MICHAEL D. MASON, individually
/s/ Bruce R. Mason
- -----------------------------------
BRUCE R. MASON, individually
-4-
<PAGE> 1
EXHIBIT 10.13
FORM OF PROMISSORY NOTE
NEITHER THIS UNSECURED CONVERTIBLE SUBORDINATED PROMISSORY NOTE NOR THE
SHARES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"), AND NEITHER THIS UNSECURED
CONVERTIBLE SUBORDINATED PROMISSORY NOTE NOR THE SHARES ISSUABLE UPON
CONVERSION HEREOF MAY BE SOLD OR OTHERWISE TRANSFERRED UNLESS AND UNTIL
THEY ARE SO REGISTERED OR UPON RECEIPT OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO MAKER, THAT SUCH REGISTRATION IS NOT THEN
REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR TRANSFER.
UNSECURED CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$[_________] May [__], 1998
FOR VALUE RECEIVED, NationsRent, Inc., a Delaware corporation ("Maker"), hereby
promises to pay [______________] ("Payee"), in lawful money of the United States
of America, the principal sum of [______________] ($[_______]) on May[__], 2003
(the "Maturity Date") with interest (computed on the basis of a year of 365 or
366 days, as applicable, and charged for the actual number of days elapsed) on
the principal sum hereof, as set forth in Paragraph 1.
This Unsecured Convertible Subordinated Promissory Note (this "Note") is issued
by Maker to Payee in accordance with, and is subject to the terms of, the Stock
Purchase Agreement dated March 24, 1998 between Maker, Payee, Raymond E. Mason
Foundation, Raymond E. Mason, Jr., Raymond E. Mason, III, Michael D. Mason and
Bruce R. Mason (the "Agreement"). All initial capitalized defined terms used
herein and not defined herein shall have the meaning as defined in the
Agreement.
1. Payment of Interest.
(a) This Note will bear interest at the rate of eight and one-half
percent (8-1/2%) per annum, commencing on the date hereof, or as
otherwise provided herein (the "Interest Rate"). Accrued and unpaid
interest will be payable quarterly, on each August 5, November 5,
February 5, and May 5, until all principal and accrued and unpaid
interest shall have been paid in full.
(b) In the event that on the first anniversary date of this Note, Maker
has not completed an IPO (as defined herein), then from and after such
first anniversary until the date on which
<PAGE> 2
Maker has completed an IPO, the Interest Rate shall be at the rate of
ten percent (10%) per annum, except as provided in subparagraph 1(d)
below. As used herein, "IPO" shall mean an underwritten public offering
covering the sale of shares of Maker's common stock, par value $0.01
per share ("Common Stock"), registered under the Act, in which net
proceeds to Maker are at least $10,000,000.
(c) From and after the date on which Maker has completed an IPO, the
Interest Rate shall be at the rate of five and one-half percent
(5-1/2%) per annum, except as provided in subparagraph 1(d) below.
(d) To the extent permitted by law, upon the occurrence of an Event of
Default (as defined herein) and until such time as such Event of
Default has been cured or waived, the Interest Rate shall be at the
rate of twelve percent (12%) per annum. Maker acknowledges that the
increased interest rate referred to in this subparagraph 1(d) reflects,
among other things, the fact that this Note would have become a
substantially greater risk given its default status and that Payee
would be entitled to additional compensation for such risk.
2. Repayment of Principal. Except as otherwise provided herein, the
principal of this Note will be payable on the Maturity Date. Except as provided
in and subject to the provisions of Paragraph 10 hereof, the principal of this
Note may not be voluntarily prepaid prior to the Maturity Date.
3. Note Subordinate to Senior Indebtedness. Anything in this Note to
the contrary notwithstanding, Maker covenants and agrees, and Payee likewise
covenants and agrees, that, to the extent and in the manner hereinafter set
forth in this Paragraph 3, the indebtedness represented by this Note and the
payment of principal of and interest on this Note and other amounts owed by
Maker under this Note are hereby expressly made subordinate and subject in right
of payment to the prior payment in full of all Senior Indebtedness (as defined
in the Agreement), including any interest accruing after the occurrence of an
Event of Default under subparagraphs 6(e) or (f), whether or not such interest
is an allowed claim enforceable against the debtor in a case brought under the
Bankruptcy Code, and any fees, costs, expenses and other indemnity and
reimbursement obligations relating to such Senior Indebtedness (hereinafter the
"Senior Indebtedness").
(a) Payment Over of Proceeds upon Dissolution, etc. In the event of
(i) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to Maker or to its
creditors, as such, or to its assets, or
(ii) any liquidation, dissolution or other winding up of
Maker, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or
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<PAGE> 3
(iii) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of Maker, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, then
and in any such event:
(1) the holders of Senior Indebtedness shall be entitled to
receive payment in full of all amounts due or to become due on or in
respect of all Senior Indebtedness, or provision shall be made for such
payment in accordance with the instruments governing such Senior
Indebtedness, before Payee is entitled to receive any payment on
account of principal of (or premium, if any) or interest on this Note
or other amounts owed by Maker under this Note;
(2) any payment or distribution of assets or securities of
Maker of any kind or character, whether in cash, property or
securities, to which Payee would be entitled but for the provisions of
this Paragraph 3, including any such payment or distribution which may
be payable or deliverable by reason of the payment of any other
indebtedness of Maker being subordinated to the payment of this Note
(except for any such payment or distribution (x) authorized by an order
or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of this Note to the Senior
Indebtedness, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law, or (y)
of securities that are subordinated, to at least the same extent as
this Note, to the payment in cash of all Senior Indebtedness then
outstanding), shall be paid by the liquidating trustee or agent or
other Person making such payment or distribution, whether a trustee in
bankruptcy, a receiver of liquidating trustee or otherwise, directly to
the holders of the Senior Indebtedness or their representative or
representatives, ratably according to the aggregate amounts remaining
unpaid on the Senior Indebtedness, for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to
pay all Senior Indebtedness in full, after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this paragraph, Payee shall have received any such
payment or distribution of assets or securities of Maker of any kind or
character, whether in cash, property or securities (other than payments
or distributions (x) authorized by an order or decree giving effect to
the subordination of this Note to the Senior Indebtedness, or (y) of
securities that are subordinated to the payment in cash of all Senior
Indebtedness, all as described in subparagraph 3(a)(2) above),
including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of Maker
being subordinated to the payment of this Note, before all Senior
Indebtedness is paid in full in cash or payment thereof provided for,
then and in such event such payment or distribution shall be received
and held in trust for the benefit of, and shall be paid over or
delivered to, the holders of the Senior
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<PAGE> 4
Indebtedness or their representative or representatives, ratably
according to the aggregate amount remaining unpaid on the Senior
Indebtedness, for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full in cash, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior
Indebtedness.
(4) in the event that Payee fails to, in a timely manner and
to the fullest extent possible, (i) file or cause to be filed such
proofs of claim and other papers or documents as may be necessary or
advisable to have the claims under this Note allowed at any meeting of
creditors or in any proceeding referred to in this Paragraph 3(a) or
(ii) enforce claims under this Note, by proof of debt, proof of claim,
or otherwise, the holders of the Senior Indebtedness shall be entitled
and are authorized to so file and/or enforce either in Payee's name or
in the name or names of any holders of the Senior Indebtedness.
(5) Payee shall retain the right to vote and otherwise act
with respect to the claims under this Note (including, without
limitation, the right to vote to accept or reject any plan of partial
or complete liquidation, reorganization, arrangement, composition or
extension), provided that Payee shall not vote with respect to any such
plan or take any other action in any way so as to (i) contest the
validity of any Senior Indebtedness or any collateral therefor or
guaranties thereof, (ii) contest the relative rights and duties of any
holders of any Senior Indebtedness established in any instruments or
agreements creating or evidencing any of the Senior Indebtedness with
respect to any of such collateral or guaranties, or (iii) contest
Payee's obligations and agreements set forth in this Paragraph 3.
The consolidation of Maker with, or the merger of Maker into, another
corporation or the liquidation or dissolution of Maker following the conveyance,
transfer or lease of its properties and assets substantially as an entirety to
another corporation shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshaling of assets
and liabilities of Maker for the purposes of this Paragraph 3 if the corporation
formed by such consolidation or into which Maker is merged or the corporation
which acquires Maker's properties and assets substantially as an entirety, as
the case may be, shall, as a part of such consolidation, merger, conveyance,
transfer or lease, comply with the conditions set forth in Subparagraph 5(i).
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<PAGE> 5
(b) No Payment When Senior Indebtedness in Default.
(i) In the event of and during the continuation of any default
in the payment of any Senior Indebtedness beyond any applicable grace
period with respect thereto ("payment default"), then no payment shall
be made by or on behalf of Maker on this Note until the date, if any,
on which such default or event of default is waived by the holders of
such Senior Indebtedness or otherwise cured or has ceased to exist or
the Senior Indebtedness to which such default or event of default
relates is discharged by payment in full in cash.
(ii) In the event that any other event of default with respect
to any Senior Indebtedness shall have occurred and be continuing that
permits the holders of such Senior Indebtedness (or a trustee on behalf
of such holders) to declare such Senior Indebtedness due and payable
prior to the date on which it would otherwise have become due and
payable, and upon receipt by Maker of written notice (the "Payment
Notice") from Payee or a representative for,or the holder of any Senior
Indebtedness, then no payment shall be made by or on behalf of Maker on
this Note until the earlier of (x) 179 days after the date on which
such Payment Notice shall have been received and (y) the date, if any,
on which such default or event of default is waived by the holders of
the Senior Indebtedness to which such default or event of default
relates is discharged by payment in full in cash (a "Blockage Period").
Not more than two Blockage Periods may be commenced during any period
of 360 consecutive days. No event of default that existed or was
continuing (it being acknowledged that any subsequent action that would
give rise to an event of default pursuant to any provision under which
an event of default previously existed or was continuing shall
constitute a new event of default for this purpose) on the date of the
commencement of any Blockage Period with respect to the Senior
Indebtedness initiating such Blockage Period shall be, or shall be
made, the basis for the commencement of a second Blockage Period by the
representative for, or the holders of, such Senior Indebtedness whether
or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than
90 consecutive days. Further, Blockage Periods may not exist for more
than 180 days during any period of 360 consecutive days and shall be
suspended to the extent necessary to comply with the foregoing. Any
such failure to make a payment on this Note shall not be construed as
preventing the occurrence of an Event of Default under this Note. Any
payment permitted hereunder after a Blockage Period of amounts owed to
the holders of this Note during a Blockage Period shall be deemed a
cure of any Event of Default caused by any such delayed payment.
Notwithstanding any other provision contained herein, during all times
in which Maker's most senior credit facility (the "Senior Credit
Facility") is in effect or the lenders thereunder have any obligations
to make loans or extend credit to Maker or its subsidiaries, the only
holder of Senior Indebtedness entitled to exercise its rights under
Paragraph 3(a)(iii)(4) and this Paragraph 3(b)(ii) shall be the agent
under the Senior Credit Facility.
In the event that, notwithstanding the foregoing, any payment
or distribution shall be received by Payee in contravention of the
provisions of this Paragraph 3, then and in such
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<PAGE> 6
event such payment or distribution shall be received and held in trust
for the benefit of, and shall be paid over or delivered to, the holders
of the Senior Indebtedness or their representative or representatives,
ratably according to the aggregate amounts remaining unpaid on account
of the Senior Indebtedness, for application to the payment of all
Senior Indebtedness remaining unpaid, to the extent necessary to pay
all Senior Indebtedness in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
The provisions of this subparagraph 3(b) shall not apply to
any payment with respect to which subparagraph 3(a) would be
applicable.
(c) Payment Permitted If No Default. Nothing contained in this
Paragraph or elsewhere in this Note shall prevent Maker, at any time except
under the circumstances described in subparagraph 3(a) or under the conditions
described in subparagraph 3(b), from making payments at any time of principal of
(and premium, if any) or interest on this Note or other amounts owed by Maker
under this Note.
(d) Subrogation to Rights of Holders of Senior Indebtedness. No payment
or distributions to the holders of Senior Indebtedness or their representatives
pursuant to the provisions of this Paragraph 3 shall entitle Payee to exercise
any right of subrogation in respect thereof until the Senior Indebtedness shall
have been paid in full.
(e) Provisions Solely to Define Relative Rights. The provisions of this
Paragraph 3 are intended solely for the purpose of defining the relative rights
of Payee on the one hand the holders of Senior Indebtedness on the other hand.
Nothing contained in this Note is intended to or shall (a) impair, as among
Maker, its creditors other than holders of Senior Indebtedness and Payee, the
obligation of Maker, which is absolute and unconditional, to pay to Payee the
principal of (and premium, if any) and interest on this Note as and when the
same shall become due and payable in accordance with its terms; or (b) affect
the relative rights against Maker of Payee and creditors of Maker other than the
holders of Senior Indebtedness; or (c) prevent Payee from exercising all
remedies otherwise permitted by applicable law or this Note upon default under
this Note, subject to the rights, if any, under this Paragraph 3 and Paragraph 6
of the holders of the Senior Indebtedness.
(f) No Waiver of Subordination Provisions. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of Maker or by any act or failure to act, in good
faith, by any such holder, or by noncompliance by Maker with the terms,
provisions of and covenants of this Note, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
(g) Notice to Payee. Maker shall give prompt written notice to Payee of
any fact known to Maker which would prohibit the making of any payment to or by
Payee in respect of this Note.
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<PAGE> 7
Notwithstanding the provisions of this Paragraph 3 or any other provision of
this Note, Payee shall not be charged with knowledge of the existence of any
facts which would prohibit the making of any payment to or by Payee in respect
of this Note, unless and until Payee shall have received written notice thereof
from Maker or a holder of Senior Indebtedness.
(h) Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities of Maker referred to in
subparagraph 3(a), Payee shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of
Maker, the amount thereof or payment thereon, the amount of amounts paid or
distributed thereon and all other facts pertinent thereto or to this Paragraph
3.
(i) Payee Not a Fiduciary. Payee shall not be deemed to be a fiduciary
as to any holder of the Senior Indebtedness.
(j) Freedom of Dealing. Payee agrees, with respect to the Senior
Indebtedness and any and all collateral therefor or guaranties thereof, that
Maker and the holders of the Senior Indebtedness may agree to increase the
amount of the Senior Indebtedness (subject to the limitation on the principal
amount of additional indebtedness set forth in Paragraph 5(c) hereof) or
otherwise modify the terms of any of the Senior Indebtedness, and the holders of
the Senior Indebtedness may grant extensions of the time of payment or
performance to and make compromises, including releases of collateral or
guaranties, and settlements with Maker and all other persons, in each case
without the consent of Payee or Maker and without affecting the agreements of
Payee or Maker contained in this Note; provided, however, that nothing contained
in this Paragraph 3(i) shall constitute a waiver of the right of Maker itself to
agree or consent to a settlement or compromise of a claim which any holder of
the Senior Indebtedness may have against Maker.
(k) Defense to Enforcement. If Payee, in contravention of the terms of
this Agreement, shall commence, prosecute or participate in any suit, action or
proceeding against Maker, then Maker may interpose as a defense or plea the
provisions of this Paragraph 3, and any holder of the Senior Indebtedness may
intervene and interpose such defense or plea in its name or in the name of
Maker. If Payee, in contravention of the terms of this Paragraph 3 or the last
paragraph of Paragraph 6, shall attempt to collect under this Note or enforce
any provisions of this Note, then any holder of the Senior Indebtedness or Maker
may restrain the enforcement thereof in the name of such holder of the Senior
Indebtedness or in the name of Maker.
(l) Reinstatement of Subordination. To the extent that Maker or any
guarantor of or provider of collateral for the Senior Indebtedness makes any
payment on the Senior Indebtedness that is subsequently invalidated, declared to
be fraudulent or preferential or set aside or is required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or
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<PAGE> 8
reorganization act, state or federal law, common law or equitable cause (such
payment being hereinafter referred to as a "Voided Payment"), then to the extent
of such Voided Payment, that portion of the Senior Indebtedness that had been
previously satisfied by such Voided Payment shall be revived and continue in
full force and effect as if such Voided Payment had never been made. In the
event that a Voided Payment is recovered from any holder of the Senior
Indebtedness, a default in the payment of the relevant Senior Indebtedness shall
be deemed to have existed and to be continuing from the date of such holder of
the Senior Indebtedness' initial receipt of such Voided Payment until the full
amount of such Voided Payment is restored to such holder of the Senior
Indebtedness. During any continuance of any such payment default, this Paragraph
3 and the last paragraph of Paragraph 6 shall be in full force and effect with
respect to the obligations hereunder.
(m) Amendments; Liens. The provisions of this Paragraph 3 and the last
paragraph of Paragraph 6 may not be amended or waived without the written
agreement of Maker, all holders of the Senior Indebtedness entitled to rely
thereon and Payee. Payee will not, without the prior written consent of all the
holders of the Senior Indebtedness, take or receive any security interest, lien,
mortgage or other encumbrance on any assets of Maker or its Subsidiaries.
4. Conversion. This Note will be convertible into whole shares of Common
Stock as hereinafter set forth:
(a) Conversion Price; Method of Conversion
(i) The unpaid principal of this Note is convertible at the
option of Payee, in whole or in part (as described below), into shares
of Common Stock on and after the date of Maker's IPO, upon written
notice to Maker and subject to the procedures described more fully
below.
(ii) The conversion price (the "Conversion Price") will be
equal to the price at which the Common Stock is initially offered to
the public by the Company on the date of the IPO, and will be subject
to adjustment as provided in subparagraph 4(d) below.
(iii) To convert, Payee must surrender this Note to Maker at
any time during usual business hours at Maker's principal office at 450
East Las Olas Boulevard, Suite 1400, Ft. Lauderdale, Florida 33301 (or
at such other location designated in a written notice given by Maker to
Payee), accompanied by a written conversion notice substantially in the
form attached hereto as Annex I (the "Written Conversion Notice") duly
executed by Payee or his attorney(s) duly authorized in writing. Any
such conversion will be deemed to have been made as of the day that
this Note is surrendered, accompanied by the Written Conversion Notice,
or if such date is not a business day, the next succeeding business day
(the "Conversion Date"). The rights of Payee in and to such amount of
the principal of this Note so converted, when this Note is surrendered
for conversion, will cease as of the Conversion Date and Payee will
thereafter be deemed to be the record holder of shares of Common
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<PAGE> 9
Stock. Any partial conversion of this Note must be in an amount equal
to or greater than One Thousand Dollars ($1,000) principal amount
unless otherwise agreed by Maker.
(b) Delivery of Certificates. As promptly as practicable but in all
events not later than five days after the Conversion Date, Maker will cause to
be delivered to Payee certificates representing the number of fully paid and
nonassessable shares of Common Stock into which this Note has been converted. In
connection with the issuance of this Note, Maker, Payee and Raymond E. Mason
Foundation have executed and delivered a Registration Rights Agreement of even
date herewith.
(c) No Dividend Adjustment. No adjustments in respect of interest
accrued hereon or any cash dividends paid on shares of Common Stock prior to the
Conversion Date will be made.
(d) Adjustment of Conversion Price. The Conversion Price or property
received upon conversion will be subject to adjustment from time to time and
after the IPO as hereafter set forth:
(i) Stock Dividends; Stock Splits Etc. If the number of shares
of Common Stock outstanding is increased by a stock dividend payable in
Common Stock or by a subdivision or stock split of the outstanding
shares of Common Stock, then immediately after the record date fixed
for the determination of holders of Common Stock entitled to receive
such stock dividend or the effective date of such subdivision or stock
split, as the case may be, the Conversion Price then in effect will be
appropriately adjusted so that Payee, upon conversion of this Note,
will be entitled to receive the number of shares of Common Stock which
Payee would have owned immediately following such action had this Note
been converted immediately prior thereto.
(ii) Combination of Shares. If the number of shares of Common
Stock outstanding is decreased by a combination or a reverse stock
split of the outstanding shares of Common Stock, immediately after the
effective date of such combination or reverse stock split, the
Conversion Price will be appropriately increased so that Payee, upon
conversion of this Note, will be entitled to receive the number of
shares of Common Stock which Payee would have owned immediately
following such action had this Note been converted immediately prior
thereto.
(iii) Reorganization Etc. In the case of any capital
reorganization of Maker, any reclassification of Common Stock, the
consolidation of Maker with or the merger of Maker with or into any
other entity (other than a reorganization or merger solely for the
purpose of a change in the state of incorporation of Maker) or the
sale, lease or other transfer of all or substantially all of the assets
of Maker to any other person or entity, this Note shall after such
capital reorganization, reclassification, consolidation, merger, sale,
lease or other transfer be convertible into the number of shares of
capital stock or other securities or property to which the shares of
common Stock issuable (at the time of such capital reorganization,
reclassification, consolidation, merger, sale, lease or other transfer)
upon conversion of this
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<PAGE> 10
Note would have been entitled upon such capital reorganization,
reclassification, consolidation, merger, sale, lease or other transfer;
and in any such case, if necessary, the provisions set forth herein
with respect to the rights and interests thereafter of Payee shall be
appropriately adjusted so as to be applicable, as nearly as may
reasonably be possible, to any shares of capital stock or other
securities or property thereafter deliverable on the conversion of this
Note. The subdivision or combination of shares of Common Stock issuable
upon conversion of this Note at any time outstanding into a greater or
less number of shares of Common Stock (whether with or without par
value) shall not be deemed to be a reclassification of the Common Stock
for the purposes of this subparagraph 4(d)(iii).
(iv) Rounding of Calculations; Minimum Adjustment. All
calculations under this subparagraph 4(d) will be made to the nearest
cent or to the nearest one-hundredth (1/100th) of a share, as the case
may be. Any provision of this Paragraph 4 to the contrary
notwithstanding, no adjustment in the Conversion Price will be made if
the amount of such adjustment would be less than One One-Hundredth of
one United States dollars ($0.01), but any such amount will be carried
forward and an adjustment with respect thereto will be made at the time
of, and together with, any subsequent adjustment which, together with
such amount and any other amount or amounts so carried forward, will
aggregate One One-Hundredth of one United States Dollars ($0.01) or
more.
(v) Applicable Adjustment. In any case in which two or more
separate provisions of this paragraph 4(d) shall require an adjustment
to the Conversion Price for this Note, the applicable adjustment shall
be the largest adjustment lowering the Conversion Price resulting from
the application of any and all appropriate subparagraphs of this
subparagraph 4(d) to such event.
(vi) Fractional Interests. Maker shall not be required to
issue fractions of shares of Common Stock upon conversion of this Note.
If any fraction of a share of Common Stock would, except for the
provisions of this subparagraph, be issuable upon conversion of this
Note, Maker shall, upon such issuance, purchase such fraction for an
amount in cash equal to the current value of such fraction, computed on
the basis of the last reported close price of the Common Stock on the
Nasdaq National Market System or the principal market on which the
Common Stock is then traded on the last business day prior to the date
of exercise upon which such a sale shall have been effected.
(vii) Effect of Alternate Securities. If at any time, as a
result of an adjustment made pursuant to this subparagraph 4(d), Payee
shall thereafter become entitled to receive any securities of Maker
other than shares of Common Stock, then the number of such other
securities receivable upon conversion of this Note shall be subject to
adjustment from time to time on terms as nearly equivalent as
practicable to the provisions with respect to shares of Common Stock
contained in this subparagraph 4(d).
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<PAGE> 11
(viii) Successive Application. The provisions of this
subparagraph 4(d) shall similarly apply to successive events covered by
this subparagraph 4(d).
(e) Certificate of Adjustment. In each case of an adjustment of the
Conversion Price or the number of shares of Common Stock or other securities
issuable upon conversion of the Note, Maker, at its expense, shall compute such
adjustment in accordance with the terms hereof and prepare a certificate, signed
by the President or Chief Financial Officer of Maker, showing such adjustment
and shall send such certificate to the holder hereof by notice hereunder. The
certificate shall set forth such adjustment showing in reasonable detail the
facts upon which such adjustment is based, including a statement of (i) the
Conversion Price at the time in effect and (ii) the type and amount of any other
property which at the time would be received upon conversion of the Note.
(f) Return/Cancellation. This Note, when surrendered for conversion as
herein provided in this Paragraph 4, (i) if the entire outstanding principal
balance of this Note is converted, will be canceled and no longer deemed to be
outstanding and all rights with respect to this Note will forthwith cease and
terminate, except the right of Payee to receive Common Stock in exchange
therefor and to receive any accrued and unpaid interest hereunder, or (ii) if
less than the entire outstanding principal balance of this Note is converted,
will be returned to Payee with appropriate notations evidencing the pay-down of
the principal balance by virtue of such conversion.
(g) Reclassification of Common Stock. For the purposes of this
Paragraph 4, the term "Common Stock" shall mean (i) the class of stock
designated as the Common Stock, par value $0.01 per share, of Maker in Maker's
Certificate of Incorporation, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value or from no par value to par value, or from par value to
no par value. If at any time as a result of an adjustment made pursuant to the
provisions of subparagraph 4(d)(iii) hereof, Payee, if this Note is surrendered
for conversion, shall become entitled to receive any shares of Maker other than
Common Stock, then the number of such other shares so receivable upon conversion
of this Note shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in subparagraph 4(d)(iii) hereof, and the other
provisions of this Paragraph 4, with respect to the Common Stock shall apply on
like terms to any such other shares.
(h) Approvals. If any Common Stock to be reserved for the purpose of
conversion of this Note require registration with or approval of any
governmental authority under any federal or state law (other than the Securities
Act of 1933, as amended) or of the NASDAQ System or any national securities
exchange before such shares may be validly issued or delivered upon conversion,
Maker shall in good faith and as expeditiously as possible endeavor to secure
such registration or approval, as the case may be. If, and so long as, any
Common Stock into which this Note is then convertible are listed on any national
securities exchange, Maker shall, if permitted by the rules of such exchange,
list and keep listed on such exchange, upon official notice of issuance, all of
such Common Stock issuable upon conversion.
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(i) Valid Issuance. All Common Stock that may be issued upon conversion
of this Note shall upon issuance by Maker be duly and validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
(j) Reservation of Shares. Maker will at all times reserve and keep
available, free from preemptive rights, out of its treasury shares or its
authorized but unissued Common Stock (or other securities), for the purpose of
effecting the conversion of this Note, the full number of shares of Common Stock
then deliverable upon the conversion of this Note. If at any time the number of
authorized but unissued shares of Common Stock (or other securities) shall not
be sufficient to effect the conversion of all then outstanding principal under
the Note, Maker shall promptly seek such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common Stock (or other securities) to such number of shares as shall be
sufficient for such purpose. In the event of the consolidation or merger of
Maker with another corporation where Maker is not the surviving corporation,
effective provisions shall be made in the certificate or articles of
incorporation, merger or consolidation, or otherwise of the surviving
corporation so that such corporation will at all times reserve and keep
available a sufficient number of shares of its common stock (or other
securities) or property to provide for the conversion of the outstanding
principal amount of this Note in accordance with the provisions hereof.
(k) Payment of Taxes. Maker shall pay all taxes and other governmental
charges (other than any income or other taxes imposed upon the profits realized
by the recipient) that may be imposed in respect of the issue or delivery of
shares of Common Stock or other securities or property upon conversion of this
Note, other than any tax or other charge imposed in connection with any transfer
involved in the issue and delivery of shares of Common Stock or other securities
in a name other than that in which the Note so converted was registered.
5. Covenants. Maker hereby covenants and agrees with Payee, so long as any
amount due under this Note is outstanding, as follows:
(a) Reports and Financial Statements. Maker shall deliver to Payee,
without cost, within 10 days after it files the same with the SEC, copies of its
annual reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which Maker is required to file with the SEC pursuant to Sections 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); or, if not otherwise required pursuant to this subparagraph 5(a), deliver
to Payee, within 10 days after it would have been required to file with the SEC
had it been subject to the requirements of Sections 13 or 15(d) of the Exchange
Act, a consolidated balance sheet, statement of operations, statement of
stockholders' equity, and cash flow statement, including any notes thereto
prepared in accordance with GAAP.
(b) Further Instruments and Acts. Upon request of Payee, Maker will
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purposes of
this Note.
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<PAGE> 13
(c) Incurrence of Additional Indebtedness. Maker may, and may permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee or otherwise become directly or indirectly liable for the payment of
Indebtedness if, after giving pro forma effect to the incurrence of such
Indebtedness and related transactions, the Consolidated Fixed Charge Coverage
Ratio for the four full fiscal quarters immediately preceding the incurrence of
such Indebtedness, taken as one period, calculated on the assumption that such
Indebtedness had been incurred (and the proceeds thereof were used to repay
Indebtedness, if applicable) on the last day of such four full fiscal quarter
period would have been greater than or equal to 1.0:1.0. For purposes of this
Note, "Consolidated Fixed Charge Coverage Ratio" means, for any period, the
ratio of (i) earnings before interest, depreciation expense, amortization
expense and taxes of Maker and its Subsidiaries for such period to (ii) net
interest expense (including the interest component of any obligation under any
capital lease which, in accordance with GAAP, has been recorded as a capitalized
lease obligation) of Maker and its Subsidiaries for such period, determined in
accordance with GAAP.
(d) Certain Actions. Maker (i) will not increase the par value of any
shares of stock receivable on the conversion of this Note above the amount
payable therefor on such conversion, or (ii) will take all such action as may be
necessary or appropriate in order that Maker may validly and legally issue fully
paid and nonassessable shares of Common Stock on the conversion of this Note.
(e) Notices of Record Date, Etc. In the event of:
(i) any taking by Maker of a record of the holders of
any class or securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or
other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right;
or
(ii) (1) any capital reorganization of Maker, any
reclassification or recapitalization of the capital stock of
Maker or any transfer of all or substantially all of the
assets of Maker to, or the consolidation or merger of Maker
with or into, any other Person, (2) which requires the
approval of the stockholders of Maker; or
(iii) any voluntary or involuntary dissolution,
liquidation or winding-up of Maker;
then and in each such event, Maker will mail or cause to be mailed to Payee a
notice specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount the
character of such dividend, distribution or right; and (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution,
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<PAGE> 14
liquidation or winding-up. Such notice shall be mailed at least fifteen (15)
days prior to the date on which such record is to be taken as specified in such
notice.
(f) Senior Indebtedness to Net Worth Ratio. Maker shall not permit at
any time the ratio of (1) Senior Indebtedness to (2) Net Worth, to be greater
than 5.5:1. For purposes of this Note, "Net Worth" of Maker shall mean the total
assets of Maker less the total liabilities of Maker as determined in accordance
with GAAP for purposes of balance sheet presentation.
(g) Total Indebtedness to Net Worth Ratio. Maker shall not permit at
any time the ratio of (1) its outstanding Indebtedness, to (2) Net Worth, to be
greater than 5.5:1.
(h) Minimum Net Worth. Maker shall not permit at any time its
consolidated Net Worth to be less than (1) $30,000,000 from and after the date
hereof, and (2) $35,000,000 from and after June 30, 1998.
(i) Maker May Consolidate, etc. on Certain Terms. Maker will not merge
or consolidate with any other corporation or sell or convey all or substantially
all of its assets to any person, firm or corporation, unless (i) either Maker
shall be the continuing corporation, or the successor corporation (if other than
Maker) shall expressly assume the payment of interest on or the principal of
this Note and the performance of and compliance with all of the covenants of
this Note to be performed by Maker, (ii) Maker or such successor corporation, as
the case may be, shall not, immediately after such merger or consolidation, or
such sale or conveyance, be in default in the performance of or compliance with
any such covenants, including those covenants specified in Subparagraphs 5(c),
5(f), 5(g), and 5(h), and (iii) the Net Worth of Maker or such successor
corporation, as the case may be, shall not, immediately after such merger or
consolidation, or such sale or conveyance, be less than the Net Worth of Maker
as reflected in its most recent audited financial statements, or, if more
recent, its most recent financial statements, if any, filed with the Securities
and Exchange Commission.
(j) No Prohibitions on Dividends from Maker's Subsidiaries. Maker shall
not enter into, or permit any of Maker's Subsidiaries to enter into, any
agreement which prohibits or restricts in any way the right of any of Maker's
Subsidiaries to pay dividends to Maker.
6. Events of Default. If one or more of the following events occurs, namely:
(a) If there is a failure in the payment, when due and payable, of
interest on or the principal of this Note when the same becomes due and payable
at maturity, acceleration or otherwise, and such failure continues for five (5)
days after Payee notifies Maker thereof in writing, provided, however, that the
exercise by Maker in good faith of its right of set-off pursuant to Paragraph
10, below, whether or not ultimately determined to be justified, shall not
constitute an event of default; or
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<PAGE> 15
(b) Maker fails to comply with any of its covenants or agreements
contained in Paragraph 4 and Subparagraphs 5(c), 5(f), 5(g), 5(h), and 5(i) of
this Note; or
(c) Maker fails to comply with any of its covenants or agreements in
this Note (other than those referred to in Subparagraphs 6(a) and 6(b)) and such
failure continues for 10 days after receipt by Maker of a notice of such default
or such longer period as may be reasonably necessary to cure such default (it
being acknowledged by Maker that cure with respect to violation of (i) the
covenant in Subparagraph 5(d) will require Maker to issue such shares of Common
Stock upon conversion of the Note as if Maker had fully complied with such
covenant and (ii) the covenant in Subparagraph 5(e) will require Maker to allow
Payee to exercise whatever conversion or other rights under this Note Payee
would reasonably have exercised had Payee received such notice on a timely
basis); or
(d) A declaration of default by Maker in the payment of any principal
of or interest on Maker's Senior Credit Facility, or if no such facility exists
or it has been terminated, Maker's most senior Indebtedness, issued by the
holder thereof, which default shall be continuing; or
(e) (i) Maker defaults in the payment of any Indebtedness beyond any
period of grace provided with respect thereto, or (ii) Maker defaults in the
performance of any agreement under which such Indebtedness payment obligation is
created if the effect of such default is to cause or permit the holder of such
obligation to cause such payment obligation to become due prior to its date of
maturity, and the result of any such default described in (i) or (ii) is to in
fact cause in excess of $10,000,000 of such Indebtedness to become due prior to
its date of maturity; or
(f) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
as they become due; or
(g) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case, (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties, or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 60 days; or
(h) If a petition under any Bankruptcy Law for relief against Maker in
an involuntary case is filed, and such petition is not dismissed within 60 days;
(each, an "Event of Default") then upon the written notice of Payee in case of
an Event of Default under Subparagraphs 6(a), (b), (c), (d), and (e) above, and
without any action taken by Payee in the case of an Event of Default under
Subparagraphs 6(f), (g) or (h) above, the entire aggregate principal amount of
this Note will become immediately due and payable, together with all accrued and
unpaid interest thereon. Maker will pay on demand all costs and expenses,
including reasonable attorneys' fees, incurred or paid by Payee
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<PAGE> 16
in enforcing or collecting any of the obligations of Maker hereunder. At the
option of Payee, upon an Event of Default, any interest payable hereunder which
is not paid when due may be added to the principal amount outstanding hereunder.
As used herein, "Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
Notwithstanding the above, if an Event of Default has occurred under this Note
and such Event of Default results in a default under the Senior Indebtedness or
a default under the Senior Indebtedness otherwise exists, then for so long as
any Senior Indebtedness remains unpaid, the Payee shall not commence or join
with any creditor of Maker in commencing any proceedings to collect or enforce
its rights hereunder until the earlier of (x) 180 days from the occurrence of
such Event of Default, and (y) the date, if any, on which such default is waived
by the holder or holders of the Senior Indebtedness to which such default
relates; provided, however, that notwithstanding such forbearance of the
commencement of proceedings with respect to an Event of Default, such Event of
Default shall nevertheless be an Event of Default for all other purposes of this
Note and Payee shall be entitled to pursue all other remedies other than the
commencement of proceedings under the circumstances set forth in this Paragraph
6.
7. Other Remedies. Subject to the provisions of Paragraph 3 and Paragraph 6, if
an Event of Default occurs and is continuing, Payee may pursue any available
remedy by proceeding at law or in equity to collect the payment of principal of,
premium, if any, or interest on this Note or to enforce the performance of any
provision of this Note. A delay or omission by Payee in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of, or acquiescence in, the Event of Default. No remedy is
exclusive of any other remedy.
All available remedies are cumulative.
8. Notice: Registered Form. Any notice or communication given under this Note
will be in writing and be hand delivered, mailed by registered or certified
mail, postage prepaid, delivered by facsimile (with a telephonic confirmation or
answer-back) or by overnight courier as follows:
(a) If to Payee: With copies to:
Raymond E. Mason Foundation Benesch, Friedlander, Coplan &
c/o Columbus Truck and Aronoff LLP
Equipment Company, Inc. 2800 Cincinnati Commerce Center
1688 East Fifth Avenue 600 Vine Street
Post Office Box 03250 Cincinnati, OH 45202
Columbus, OH 43202-0250 Facsimile No.: 513-752-6245
Facsimile No.: 614-252-7327
(b) If to Maker: With a copy to:
NationsRent, Inc. Squire, Sanders & Dempsey L.L.P.
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<PAGE> 17
Suite 3100 1300 Huntington Center
50 West Broad Street 41 South High Street
Columbus, OH 43215 Columbus, OH 43215
Facsimile No.: 614-461-7943 Facsimile No.: 614-365-2499
Attn: Gene J. Ostrow Attn: Patrick J. Dugan, Esq.
or at such other address as hereafter will be furnished in writing by the
addressed party to the other party. Delivery by hand will be deemed given when
personally delivered; delivery by registered or certified mail will be deemed
given three (3) business days after the same is posted; delivery by facsimile
will be deemed given when received; and delivery by overnight courier will be
deemed given the first business day following the date of timely deposit with
such courier.
9. Replacement of Note. On receipt of evidence reasonably satisfactory to Maker
of the loss, theft, destruction or mutilation of this Note, on delivery of an
indemnity agreement and/or security satisfactory in form and amount to Maker,
Maker will execute and deliver, in lieu thereof, a new Note of like tenor.
10. Rights of Set-Off. Upon 20 days prior written notice to Payee specifying in
reasonable detail the basis for such set-off (during which 20 days Maker will be
available to meet with Payee and will discuss in good faith a resolution of the
underlying issues), Maker shall have the right to withhold and set-off against
any amount due hereunder the amount of any claim for indemnification or payment
of damages to which Maker is entitled under the Agreement, solely as provided in
Section 10.6 thereof. Any amounts set-off against any amount due hereunder shall
be treated as if Maker had made a permitted prepayment (without penalty or
premium) hereunder. Maker's right of set-off hereunder shall be subject to
arbitration as provided in Section 10.6 of the Agreement, and, notwithstanding
the foregoing, during any arbitration pursuant to Section 10.6 of the Agreement,
the right to Payee to convert under this Note shall be suspended to the extent
of set-off claimed by Buyer in good faith prior to receipt of a Written
Conversion Notice; provided, however, that Sellers shall be entitled to place in
escrow the amount so claimed by Buyer and thereby eliminate such suspension of
the conversion rights.
11. Manner of Payment. All payments of principal and interest on this Note shall
be made by official bank or certified check at Raymond E. Mason Foundation, c/o
The Columbus Foundation, 1234 East Broad Street, Columbus, Ohio 43205-1453 or at
such other place in the United States of America as Payee shall designate to
Maker in writing or by wire transfer of immediately available funds to an
account designated by Payee in writing.
12. Waiver, Modification in Writing. No failure or delay on the part of Payee in
exercising any right, power or remedy hereunder will operate as a waiver
thereof, nor will 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 Payee at law or
in equity.
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<PAGE> 18
13. Severability. If any provision in this Note is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Note will
remain in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
14. Governing Law: Waiver of Jury. This Note will be governed by the laws of the
State of Ohio without regard to conflicts of laws principles.
15. Parties in Interest. This Note shall bind Maker and its successors and
assigns. This Note shall not be assigned or transferred by Payee without the
express prior written consent of Maker, except to the partners of Payee or
immediate family members of the partners of Payee, or by will or, in default
thereof, by operation of law.
16. Paragraph Headings. Construction. The headings of Paragraphs in this Note
are provided for convenience only and will not affect its construction or
interpretation. All references to "Paragraph" or "Paragraphs" refer to the
corresponding Paragraph or Paragraphs of this Note unless otherwise specified
"hereunder" and similar references refer to this Note in its entirety and not to
any specific Paragraph or Subparagraph hereof.
All words used in this Note will be construed to be of such gender or number as
the circumstances require. Unless otherwise expressly provided, the words
"hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific Paragraph or Subparagraph hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
MAKER: NATIONSRENT, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
STATE OF )
------------ ) ss:
COUNTY OF )
-----------
The foregoing instrument was acknowledged before me this _____ day of
__________________, 1998, by Gene J. Ostrow, Vice President of
NationsRent, Inc. a Delaware corporation who is personally known to me, on
behalf of said corporation.
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<PAGE> 19
ANNEX I
(SUBPARAGRAPH 4(A)(III))
CONVERSION NOTICE
To: NationsRent, Inc.
[Address]
Re: Conversion of Unsecured Convertible Subordinated Promissory Note
The undersigned owner of the within Unsecured Convertible Subordinated
Promissory Note (the "Note") hereby irrevocably exercises the option to convert
the within Note, or portion thereof (in a principal amount of at least $1,000)
below designated, into Common Stock of NationsRent, Inc., a Delaware
corporation, in accordance with the terms of the within Note, and directs that
the shares issuable and deliverable upon the conversion, together with any check
in payment for fractional shares and any Note representing any unconverted
principal amount of the within Note, be issued and delivered to the undersigned
holder of the within Note, unless a different name has been indicated below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.
Dated:
---------------------- ------------------------------------------------
Signature of Holder of Note
------------------------------------------------
Such Person's Social Security or Other
Taxpayer Identification No.
------------------------------------------------
Principal Amount to be Converted (in an
amount of at least $1,000, if less
than all)
Fill in for registration of Common Stock if to be issued otherwise than
to the above holder of the Note:
- -----------------------------------------------
Name
- -----------------------------------------------
Address Including Zip Code Number
- -----------------------------------------------
Such Person's Social Security or
Other Taxpayer Identification Number
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<PAGE> 1
EXHIBIT 10.14
FORM OF WARRANT
NEITHER THIS WARRANT NOR THE SHARES ISSUED UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND NEITHER THIS WARRANT
NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD OR OTHERWISE
TRANSFERRED UNLESS AND UNTIL THEY ARE SO REGISTERED OR UPON RECEIPT OF AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR
TRANSFER.
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Warrant") is being entered into as of May
[__], 1998, by and between NationsRent, Inc., a Delaware corporation (together
with its successors and permitted assigns, the "Company"), and Bode-Finn Limited
Partnership, an Ohio limited partnership (the "Partnership," and, together with
its respective successors and permitted assigns, the "Holder").
RECITALS
WHEREAS, the Company and the Holder are parties to that certain Stock
Purchase Agreement, dated as of March 24, 1998, by and between the Company, the
Holder, Raymond E. Mason Foundation, Raymond E. Mason, Jr., Raymond E. Mason,
III, Michael D. Mason, and Bruce R. Mason (the "Purchase Agreement"), pursuant
to which the Company has agreed to purchase all of the outstanding shares of
capital stock of The Bode-Finn Company, an Ohio corporation (the "Bode-Finn
Stock");
WHEREAS, pursuant to the Purchase Agreement, and as partial
consideration for the purchase of the Bode-Finn Stock, the Company will issue to
the Holder this Warrant and a Convertible Subordinated Note, dated as of the
date hereof, in the principal amount of $8,080,000 (the "Note");
WHEREAS, in connection with the Purchase Agreement, the Company, the
Holder and the Raymond E. Mason Foundation will also enter into a Registration
Rights Agreement, dated as of the date hereof, pursuant to which the Company
will provide registration rights with respect to the shares of common stock, par
value $0.01 per share, of the Company (the "Common Stock") that the Holder will
obtain upon conversion of the Note and upon exercise of this Warrant.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
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<PAGE> 2
ARTICLE 1. GRANT OF WARRANT
1.1 GRANT. The Company hereby grants to Holder this Warrant, which is
exercisable as provided herein, in whole or in part, at any time and from time
to time during the period commencing eighteen (18) months following the date
(the "IPO Date") upon which the Company consummates an underwritten initial
public offering (the "IPO") covering the sale of its Common Stock registered
under the Securities Act of 1933, as amended, and ending on the fifth
anniversary of the IPO Date at 5:00 p.m., local time in Columbus, Ohio (the
"Exercise Period"), to purchase the number of shares of Common Stock determined
according to Section 1.2 hereof (the "Warrant Shares"), at an exercise price per
share equal to the price at which the Common Stock is offered to the public on
the IPO Date (the "IPO Price") (as it may be hereinafter adjusted, the "Exercise
Price").
1.2 SHARES TO BE ISSUED; RESERVATION OF SHARES. The aggregate number of
Warrant Shares into which this Warrant is exercisable is equal to eight percent
(8%) of the total number of shares of Common Stock into which the Note is
convertible on the IPO Date at the IPO Price. The number of Warrant Shares that
may be purchased hereunder shall be determined, and this Warrant shall be
exercisable during the Exercise Period, regardless of whether all or any part of
the Note is converted into shares of Common Stock. The Company covenants and
agrees that all Warrant Shares will, upon issuance, be duly authorized, validly
issued and outstanding, fully paid and non-assessable, and free from all taxes,
liens and charges with respect to the issuance thereof. The Company further
covenants and agrees that it will from time to time take all actions required to
assure that the par value per share of the Common Stock is at all times equal to
or less than the effective Exercise Price. The Company further covenants and
agrees that, during the Exercise Period, the Company will at all times have
authorized and reserved sufficient shares of Common Stock to provide for the
exercise of this Warrant in full.
ARTICLE 2. ADJUSTMENTS TO WARRANT RIGHTS
2.1 STOCK COMBINATIONS, REVERSE STOCK SPLIT, ETC. If after the IPO Date
the number of shares of Common Stock outstanding is decreased by a combination
or a reverse stock split of the outstanding shares of Common Stock, immediately
after the effective date of such combination or reverse stock split, the
Exercise Price and the number of Warrant Shares into which this warrant is
exercisable will be appropriately adjusted so that the Holder, upon exercise of
this Warrant, will be entitled to receive the number of shares of Common Stock
which the Holder would have owned immediately following such action had this
Warrant been exercised immediately prior thereto.
2.2 STOCK DIVIDENDS; STOCK SPLITS, ETC. If after the IPO Date the
number of shares of Common Stock outstanding is increased by a stock dividend
payable in Common Stock or by a subdivision or stock split of the outstanding
shares of Common Stock, then immediately after the record date fixed for the
determination of holders of Common Stock entitled to receive such stock dividend
or the effective date of such subdivision or stock split, as the case may be,
the Exercise Price then in effect and the number of Warrant Shares into which
this warrant is exercisable will be appropriately adjusted so that the Holder,
upon exercise of this Warrant, will be entitled to receive
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<PAGE> 3
the number of shares of Common Stock which the Holder would have owned
immediately following such action had this Warrant been converted immediately
prior thereto.
2.3 REORGANIZATIONS, RECLASSIFICATIONS, ETC. In the case of any capital
reorganization of the Company, any reclassification of Common Stock, the
consolidation of the Company with or the merger of the Company with or into any
other entity (other than a reorganization or merger solely for the purpose of a
change in the state of incorporation of the Company) or the sale, lease or other
transfer of all or substantially all of the assets of the Company to any other
person or entity, this Warrant shall after such capital reorganization,
reclassification, consolidation, merger, sale, lease or other transfer be
convertible into the number of shares of capital stock or other securities or
property to which the shares of Common Stock issuable (at the time of such
capital reorganization, reclassification, consolidation, merger, sale, lease or
other transfer) upon conversion of this Warrant would have been entitled upon
such capital reorganization, reclassification, consolidation, merger, sale,
lease or other transfer; and in any such case, if necessary, the provisions set
forth herein with respect to the rights and interests thereafter of the Holder
shall be appropriately adjusted so as to be applicable, as nearly as may
reasonably be possible, to any shares of capital stock or other securities or
property thereafter deliverable on the conversion of this Warrant. The
subdivision or combination of shares of Common Stock issuable upon exercise of
this Warrant at any time outstanding into a greater or lesser number of shares
of Common Stock (whether with or without par value) shall not be deemed to be a
reclassification of the Common Stock for the purposes of this Section 2.3.
2.4 ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. All calculations
under Sections 2.1, 2.2 or 2.3 hereof will be made to the nearest cent or to the
nearest one-hundredth (1/l00th) of a share, as the case may be. Any provisions
of this Article 2 to the contrary notwithstanding, no adjustment in the Exercise
Price will be made if the amount of such adjustment would be less than One
One-Hundredth of one United States Dollar ($0.01), but any such amount will be
carried forward and an adjustment with respect thereto will be made at the time
of, and together with, any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, will aggregate One
One-Hundredth of one United States Dollar ($0.01) or more.
2.5 APPLICABLE ADJUSTMENT. In any case in which two or more of Sections
2.1, 2.2 or 2.3 shall require an adjustment to the Exercise Price for this
Warrant, the applicable adjustment shall be the largest adjustment lowering the
Exercise Price resulting from the application of any and all of such Sections,
as appropriate.
2.6 CERTIFICATE OF ADJUSTMENT. In each case of an adjustment of the
Exercise Price and the number of Warrant Shares into which this warrant is
exercisable or the number of shares of Common Stock or other securities issuable
upon conversion of this Warrant, the Company, at its expense, shall compute such
adjustment in accordance with the terms hereof and prepare a certificate, signed
by the President or Chief Financial Officer of the Company, showing such
adjustment and shall send such certificate to the Holder by notice hereunder.
This certificate shall set forth such adjustment showing in reasonable detail
the facts upon which such adjustment is
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<PAGE> 4
based, including a statement of (i) the Exercise Price at the time in effect and
(ii) the type and amount of any other property which at the time would be
received upon exercise of this Warrant.
2.7 FRACTIONAL INTERESTS. The Company shall not be required to issue
fractions of shares of Common Stock upon exercise of this Warrant. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 2.7, be issuable upon the exercise of this Warrant, the Company shall,
upon such issuance, purchase such fraction for an amount in cash equal to the
current value of such fraction, computed on the basis of the last reported close
price of the Common Stock on the Nasdaq National Market System or the principal
market on which the Common Stock is then traded on the last business day prior
to the date of exercise upon which such a sale shall have been effected.
2.8 EFFECT OF ALTERNATE SECURITIES. If at any time, as a result of an
adjustment made pursuant to this Article 2, the Holder of the Warrant shall
thereafter become entitled to receive any securities of the Company other than
shares of Common Stock, then the number of such other securities receivable upon
exercise of this Warrant shall be subject to adjustment from time to time on
terms as nearly equivalent as practicable to the provisions with respect to
shares of Common Stock contained in this Article 2.
2.9 SUCCESSIVE APPLICATION. The provisions of this Article 2 shall
similarly apply to successive events covered by this Article.
2.10 NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right; or
(b) (i) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to, or the consolidation or
merger of the Company with or into, any other Person, (ii) which requires the
approval of the stockholders of the Company; or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company; then and in each such event, the Company will mail or cause to
be mailed to the Holder a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount the character of such dividend, distribution or right;
and (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other
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<PAGE> 5
property deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least fifteen (15) days prior to the date on which
such record is to be taken as specified in such notice.
ARTICLE 3. EXERCISE
3.1 EXERCISE OF WARRANT.
(a) The Holder may exercise this Warrant by (i) surrendering this
Warrant, with the form of exercise notice attached hereto as Exhibit "A" duly
executed by Holder, and (ii) making payment to the Company of the aggregate
Exercise Price for the applicable Warrant Shares in cash, by certified check or
bank check or by wire transfer to an account designated by the Company. Upon any
partial exercise of this Warrant, the Company, at its expense, shall forthwith
issue to the Holder for its surrendered warrant a replacement Warrant identical
in all respects to this Warrant, except that the number of Warrant Shares shall
be reduced accordingly.
(b) RECORD DATE FOR OWNERSHIP OF WARRANT SHARES. Each person in whose
name any Warrant Share certificate is issued upon exercise of the Warrant shall
for all purposes been deemed to have become the holder of record of the Warrant
Shares for which such Warrant was exercised, and such Warrant Share certificate
shall be dated the date upon which the Warrant exercise notice was duly
surrendered and payment of the Exercise Price was tendered to the Company.
3.2 ISSUANCE OF WARRANT SHARES. The Warrant Shares purchased shall be
issued to the Holder exercising this Warrant as of the close of business on the
date on which all actions and payments required to be taken or made by Holder,
pursuant to Section 3.1, shall have been so taken or made. Certificates for the
Warrant Shares so purchased shall be delivered to the Holder within a reasonable
time, not exceeding ten (10) days after this Warrant is surrendered.
ARTICLE 4. RIGHTS OF HOLDER
Holder shall not, solely by virtue of this Warrant and prior to the
issuance of the Warrant Shares upon due exercise thereof, be entitled to any
rights of a stockholder in the Company.
This Warrant shall not be assigned or transferred by Holder without the
express prior written consent of the Company, except to the partners of the
Partnership or immediate family members of the partners of the Partnership, or
by will or, in default thereof by operation of law.
ARTICLE 5. MISCELLANEOUS
5.1 AMENDMENTS; WAIVERS. This Agreement may not be amended, modified or
supplemented and no waivers of or consents to departures from the provisions
hereof may be given unless consented to in writing by the Company and the
Holder.
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<PAGE> 6
5.2 NOTICES. Any and all notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage prepaid), guaranteed overnight delivery,
or confirmed facsimile transmission:
(a) if to the Company to:
NationsRent, Inc.
LeVeque Tower
50 West Broad Street
Columbus, Ohio 43215
Attention: Gene J. Ostrow
Telephone: (614) 461-7940
Facsimile: (614) 461-7943
with a copy to:
Squire, Sanders & Dempsey L.L.P.
41 South High Street
Columbus, Ohio 43215
Attention: Patrick J. Dugan, Esq.
Telephone: (614) 365-2700
Facsimile: (614) 365-2499
(b) If to the Holder, to the address appearing on the books of the
Company or of the transfer agent and registrar for its Common Stock.
All such notices and communications shall be deemed to have been duly
given and effective: when delivered by hand, if personally delivered; two
business days after being deposited in the mail, postage prepaid, if mailed; and
when receipt confirmed, if sent by facsimile.
5.3 NO IMPLIED WAIVER; RIGHTS ARE CUMULATIVE. The failure to exercise
or the delay in exercising by either party of any right, remedy, power or
privilege under this Warrant, shall not operate as a waiver thereof. The single
or partial exercise of any right, remedy, power or privilege under this Warrant
shall not preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
5.4 GOVERNING LAW. This Warrant is made pursuant to and this Warrant
and rights and obligations of the parties hereunder shall be governed by,
construed and interpreted in accordance with the laws of the State of Ohio
without regard to that State's conflict of law provisions.
5.5 SEVERABILITY. If any provision of this Warrant or any portion
thereof is finally determined to be unlawful or unenforceable, such provision or
portion thereof shall be deemed not
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<PAGE> 7
to be a part of this Warrant and any portion of such invalidated provision that
is not invalidated by such a determination, shall remain in full force and
effect.
5.6 CAPTIONS. The captions contained in this Warrant are for reference
purposes only and are not be used to construe the provisions of this Warrant.
5.7 ENTIRE AGREEMENT. This Warrant constitutes the entire understanding
of the parties hereto with respect to the subject matter of the Warrant and
supersedes all prior discussions, agreements, understandings and
representations, whether oral or written, concerning the subject matter hereof.
5.8 COUNTERPARTS. This Warrant may be executed in one or more
counterparts, each of which shall be deemed an original and all of which,
together, shall constitute one and the same instrument.
5.9 DEFAULTS. A default by any party to this Warrant in such party's
compliance with any of the conditions or covenants hereof or performance of any
of the obligations of such party hereunder shall not constitute a default by any
other party.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
duly executed and delivered by the proper and duly authorized officers as of the
day and year first above written.
NATIONSRENT, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BODE-FINN LIMITED PARTNERSHIP
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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<PAGE> 8
EXHIBIT "A"
[To be signed only upon exercise of Warrant]
To NationsRent, Inc.:
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder,
shares of the common stock par value $0.01 per share, of NationsRent,
Inc. and herewith makes payment of $ therefor, and requests that the
certificates for such shares be issued in the name of, and be delivered to,
whose address is
Dated:
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant)
Address
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<PAGE> 1
EXHIBIT 10.15
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of May 5, 1998, between NationsRent, Inc., a Delaware corporation (together
with its successors and permitted assigns, the "Company"), and Bode-Finn Limited
Partnership, an Ohio limited partnership (the "Partnership"), and Raymond E.
Mason Foundation, an Ohio nonprofit corporation (the "Foundation" and together
with the Partnership, and their successors and permitted assigns, the "Holder").
WHEREAS, the Company and the Holder are parties to that certain Stock
Purchase Agreement, dated March 24, 1998, by and between the Company, the
Holder, Raymond E. Mason, Jr., Raymond E. Mason, III, Michael D. Mason, and
Bruce R. Mason (the "Purchase Agreement");
WHEREAS, pursuant to the Purchase Agreement and as partial
consideration for its purchase of all of the outstanding capital stock of The
Bode-Finn Company, an Ohio corporation (the "Bode- Finn Stock"), the Company has
issued (i) a Convertible Subordinated Promissory Note, dated as of the date
hereof, in the principal amount of $8,080,000 in favor of the Partnership (the
"Partnership Note"), and (ii) a Convertible Subordinated Promissory Note, dated
as of the date hereof, in the principal amount of $1,920,000 in favor of the
Foundation (the "Foundation Note", and together with the Partnership Note, the
"Notes"), and has entered into a (i) Warrant Agreement, dated as of the date
hereof, by and between the Company and the Partnership (the "Partnership
Warrant"), and (ii) a Warrant Agreement, dated as of the date hereof, by and
between the Company and the Foundation (the "Foundation Warrant," and together
with the Partnership Warrant, the "Warrants").
WHEREAS, pursuant to the Purchase Agreement, and as additional
consideration for the Bode-Finn Stock, the Company has agreed to provide to the
Holder registration rights as set forth in this Agreement with respect to the
shares of common stock, par value $0.01 per share, of the Company (the "Common
Stock"), that the Holder would obtain upon conversion of the Notes and upon
exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. DEFINITIONS. In addition to the terms that are defined above,
capitalized terms not defined herein shall have the meanings ascribed thereto in
the Purchase Agreement and the following terms shall have the following meanings
as used in this Agreement:
"Affiliate" shall mean any Person that directly or indirectly controls,
is controlled by, or is under common control with, such Person. A Person shall
be deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the
<PAGE> 2
management or policies of the "controlled" Person, whether through ownership of
stock or partnership interests, by contract, agreement or understanding (whether
oral or written), or otherwise.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Holders" shall mean Holder, any Affiliate of Holder (other than the
Company) and any transferees of Holder who are holders of record of any
Registrable Shares, and any combination of them.
"IPO Date" shall mean the date on which the Company consummates an
underwritten initial public offering covering the sale of its Common Stock
registered under the Securities Act.
"NASD" shall mean National Association of Securities Dealers, Inc.
"Other Holders" shall mean Persons who are holders of record of equity
securities of the Company who acquire outstanding shares of Common Stock
pursuant to a transaction with the Company and to whom the Company grants
registration rights pursuant to a written agreement.
"Person" shall mean any individual, corporation, association,
partnership, group (as defined in Section 13(d)(3) of the Exchange Act), limited
liability company, joint venture, business trust or unincorporated organization,
or a government or any agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Shares covered by
such Registration Statement and all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.
"Registrable Shares" shall mean: (i) any Common Stock issued to Holder
upon exercise of the Warrant or upon conversion of the Note; and (ii) any equity
securities of the Company issued or distributed after the date hereof in respect
of the Common Stock referred to in clause (i) above by way of any stock
dividend, stock split or other distribution, recapitalization or
reclassification, and any equity securities of the Company acquired by a Holder
upon exercise or conversion of any such securities. As to any particular
Registrable Shares, such Registrable Shares shall cease to be Registrable Shares
when (A) they shall have been sold, transferred or otherwise disposed of or
exchanged pursuant to a Registration Statement under the Securities Act, (B)
they shall have been distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act, (C) they shall have been
otherwise transferred and the Company shall have delivered new certificates or
other evidences of ownership for them not subject to any stop transfer order or
other restriction on transfer and not bearing any legend restricting transfer in
the absence of an effective registration or an exemption from the registration
requirements of the Securities Act, (D) they have been sold, assigned, pledged,
hypothecated or otherwise disposed of by the Holder in a transaction in which
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<PAGE> 3
the Holder's rights under this Agreement are not assigned or assignable, or (E)
the rights of the Holder under Section 2 or 4 shall have terminated pursuant to
Section 11.
"Registration Expenses" shall have the meaning set forth in Section
7(b) hereof.
"Registration Period" shall mean the period (i) beginning on the IPO
Date and (ii) ending on the earlier of (A) the third anniversary of the IPO
Date, and (B) the date that the Company is no longer a reporting company under
the Exchange Act.
"Registration Statement" shall mean any appropriate Registration
Statement, including, without limitation, and subject to the terms and
provisions contained herein, a Registration Statement on Form S-1, Form S-2 or
Form S-3 or any successor form thereto, of the Company in a registration that
covers the sale of any of the Registrable Shares pursuant to the provisions of
Sections 2 or 4 of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, post-effective amendments, all
exhibits and all material incorporated by reference in such Registration
Statement.
"SEC" shall mean the Securities and Exchange Commission or any
successor agency thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2. INCIDENTAL REGISTRATIONS
(a) RIGHT TO INCLUDE REGISTRABLE SHARES. Each time following the IPO
Date that the Company shall determine to file a registration statement under the
Securities Act in connection with the proposed offer and sale for cash of any
Common Stock (other than registration statements relating to (i) the sale of
securities pursuant to an employee benefit plan on Form S-8 or any other
available form, (ii) the offering of securities in connection with a merger,
consolidation or otherwise on Form S-4 or any other available form, (iii) Common
Stock in which the only Common Stock being registered is Common Stock issuable
upon conversion of debt securities which are also being registered, (iv) the
offering of Common Stock registered on Form S-3 relating to a dividend
reinvestment plan, or (v) an offering of Common Stock on any form which does not
include substantially the same information as would be included in a
registration statement covering the sale of the Registrable Securities) either
by it or by any holders of its outstanding Common Stock, the Company will give
prompt written notice of its determination to each Holder and of such Holder's
rights under this Section 2, at least 45 days prior to the anticipated filing
date of such Registration Statement. Upon the written request of each Holder
made within 21 days after the receipt of any such notice from the Company,
(which request shall specify the Registrable Shares intended to be disposed of
by such Holder), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Shares which the
Company has been so requested to register by the Holders thereof; provided,
however, that (i) if, at any time after giving written notice of its intention
to register any securities and prior to the effective date of the Registration
Statement filed in connection with such registration, the Company shall
determine for any reason not to proceed with
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<PAGE> 4
the proposed registration of the securities to be sold by it, the Company may,
at its election, give written notice of such determination to each Holder of
Registrable Shares and thereupon shall be relieved of its obligation to register
any Registrable Shares in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith); and (ii)
if such registration involves an underwritten offering, all Holders of
Registrable Shares requesting to be included in the Company's registration must
sell their Registrable Shares to the underwriters on the same terms and
conditions as apply to the Company, with such differences, including any with
respect to indemnification and liability insurance, as may be customary or
appropriate in combined primary and secondary offerings. If a registration
requested pursuant to this Section 2(a) involves an underwritten offering, any
Holder of Registrable Shares requesting to be included in such registration may
elect, in writing prior to the effective date of the Registration Statement
filed in connection with such registration, not to register such securities in
connection with such registration.
(b) PRIORITY IN INCIDENTAL REGISTRATION. If a registration pursuant to
this Section 2 involves an underwritten offering and the managing underwriter or
underwriters in good faith advises the Company in writing that, in its opinion,
the number of securities requested and otherwise proposed to be included in such
registration exceeds the largest number which can be sold in such offering
without having an adverse effect on such offering (including the price at which
such securities can be sold), the Company will include in such registration, to
the extent of the number which the Company is so advised can be sold in such
offering (i) if the registration is a primary registration on behalf of the
Company, (A) first, the securities proposed to be registered by the Company, and
(B) second, the Registrable Shares and the securities held by Other Holders
requested to be included in such registration pro rata in accordance with the
numbers of securities requested to be included by all Holders of Registrable
Shares and Other Holders requesting to be included; and (ii) if the registration
is a secondary registration on behalf of Other Holders, the Registrable Shares
and securities of the Other Holders included in such registration pro rata in
accordance with the numbers of securities requested to be included by the
Holders of Registrable Shares and the numbers of other securities proposed to be
registered by the Other Holders. The Company will not grant any registration
rights having priorities that conflict or are otherwise inconsistent with this
Section 2(b).
3. HOLDBACK AGREEMENTS. If any registration of Registrable Shares shall
be in connection with an underwritten public offering, the Holders agree not to
effect any public sale or distribution (except in connection with such public
offering), of any equity securities of the Company, or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (in each case, other than as part of such underwritten public offering),
during the 180-day period (or such lesser period as the managing underwriter or
underwriters may permit) beginning on the effective date of such registration,
if, and to the extent, the managing underwriter or underwriters of any such
offering determines such action is necessary or desirable to effect such
offering; provided, however, that each Holder has received the written notice
required by Section 2(a) hereof.
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<PAGE> 5
4. REGISTRATION ON REQUEST.
(a) REQUEST BY HOLDERS. At any time subsequent to six months following
the IPO Date, subject to Section 11 hereof, upon the written request of the
Holders of at least 25% of the Registrable Shares that the Company effect the
registration under the Securities Act of all or part of such Holders'
Registrable Shares (the date on which such request is received is hereinafter
referred to as the "Demand Registration Date"), and specifying the amount (which
shall not be less than 50% of the outstanding Registrable Shares held by each
Holder that requests registration) and intended method of disposition thereof,
the Company will promptly give notice of such requested registration to all
Other Holders of Registrable Shares and, as expeditiously as possible, use its
best efforts to effect the registration under the Securities Act of: (i) the
Registrable Shares which the Company has been so requested to register by
Holders of at least 25% of the Registrable Shares; and (ii) all other
Registrable Shares which the Company has been requested to register by any Other
Holder thereof by written request received by the Company within 21 days after
the giving of such written notice by the Company (which request shall specify
the intended method of disposition of such Registrable Shares); provided,
however, that in no event shall the Company be required to effect more than two
registrations pursuant to this Section 4. Promptly after the expiration of the
21-day period referred to in clause (ii) above, the Company will notify all the
Holders to be included in the registration of the Other Holders and the number
of shares of Registrable Shares requested to be included therein. The Holders
initially requesting a registration pursuant to this Section 4 may, at any time
prior to the effective date of the Registration Statement relating to such
registration, revoke such request by providing a written notice to the Company
revoking such request; provided, however, that, in the event the Holders shall
have made a written request for a demand registration (i) which is subsequently
withdrawn by the Company at the request of the Holders after the Company has
filed a Registration Statement with the SEC in connection therewith which has
been declared effective by the SEC or (ii) which is not declared effective
solely as a result of the failure of Holders to take all actions reasonably
required in order to have the registration and the related Registration
Statement declared effective by the SEC, then, in any such event, such demand
registration shall be counted as a demand registration for purposes of this
Section 4(a).
(b) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant
to this Section 4 will not be deemed to have been effected unless it has become
effective under the Securities Act and has remained effective until all shares
included in such registration may be immediately sold by the Holders included in
such registration under Rule 144 during any 90-day period. In addition, if
within 60 days after it has become effective, the offering of Registrable Shares
pursuant to such registration is interfered with by any stop order, injunction
or other order or requirement of the SEC or other governmental agency or court,
such registration will be deemed not to have been effected for purposes of this
Section 4.
(c) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
pursuant to this Section 4 involves an underwritten offering and the managing
underwriter or underwriters in good faith advises the Company in writing that,
in its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Shares)
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<PAGE> 6
exceeds the largest number of securities which can be sold in such offering
without having an adverse effect on such offering (including the price at which
such securities can be sold), then the Company will include in such registration
to the extent of the number which the Company is so advised can be sold in such
offering (i) first, Registrable Shares requested to be included in such
registration by any Holder and the securities held by Other Holders requested to
be included in such registration pro rata among such Holders and Other Holders
on the basis of the number of securities requested to be included by such
Holders and Other Holders and (ii) second, securities of the Company proposed by
the Company to be sold for its own account.
5. REGISTRATION PROCEDURES.
(a) If and whenever the Company is required by the provisions of
Sections 2 or 4 hereof to use its best efforts to effect or cause the
registration of Registrable Shares, the Company shall as expeditiously as
possible:
(i) prepare and, in any event within 45 days after the Demand
Registration Date, file with the SEC a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause such Registration
Statement to become effective; provided, however, that at least five business
days before filing such Registration Statement, the Company will furnish to one
counsel selected by the Holders of a majority of the Registrable Shares covered
by such Registration Statement copies of the Registration Statement and the
Company will not, unless the Company reasonably determines such is required by
applicable law, include any information as to the Holders in any such
Registration Statement or any amendment, prospectus or supplement thereto
(including any document incorporated by reference) to which counsel for the
Holders reasonably objects;
(ii) prepare and file with the SEC such amendments and supplements
to such Registration Statement and the Prospectus used in connection therewith
as may be necessary to keep such Registration Statement effective for a period
not in excess of 90 days (180 days in the case of the Second Request) and to
comply with the provisions of the Securities Act, the Exchange Act and the rules
and regulations promulgated thereunder with respect to the disposition of all
the securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the Holders thereof set
forth in such Registration Statement; provided, however, that (A) at least five
business days before filing any such amendments or supplements thereto
containing personal information relating to the Holders, the Company will
furnish to one counsel selected by the Holders of a majority of the Registrable
Shares covered by such Registration Statement copies of all documents proposed
to be filed and (B) the Company will notify each Holder of Registrable Shares
covered by such Registration Statement of any stop order issued or threatened by
the SEC, any other order suspending the use of any preliminary prospectus or of
the suspension of the qualification of the Registration Statement for offering
or sale in any jurisdiction, and take all reasonable actions required to prevent
the entry of such stop order, other order or suspension or to remove it if
entered;
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<PAGE> 7
(iii) furnish to each Holder and each underwriter, if applicable, of
Registrable Shares covered by such Registration Statement, without charge, such
number of confirmed copies of the Registration Statement and of each amendment
and supplement thereto (in each case including all exhibits), such number of
copies of the Prospectus and preliminary prospectuses included in such
Registration Statement, in conformity with the requirements of the Securities
Act, and such other documents as each Holder of Registrable Shares covered by
such Registration Statement may reasonably request in order to facilitate the
disposition of the Registrable Shares by such Holder (it being understood that
the Company consents to the use of the prospectus and any amendment or
supplement thereto by each of the Holders and the underwriter or underwriters,
if any, in connection with the offering and sale of the Registrable Shares
covered by the prospectus or any amendment or supplement thereto);
(iv) on or prior to the date on which the Registration Statement is
declared effective, use its best efforts to register or qualify such Registrable
Shares covered by such registration statement under the state securities or blue
sky laws of such jurisdictions as each Holder of Registrable Shares covered by
such Registration Statement and, if applicable, each underwriter, may reasonably
request, use its best efforts to keep each such registration or qualification
effective, including through new filings, or amendments or renewals, during the
period the Registration Statement is required hereunder to be kept effective and
do any and all other acts and things which may be reasonably necessary to
consummate the disposition in such jurisdictions of the Registrable Shares owned
by such Holder (provided, however, that the Company will not be required to (A)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this clause (iv), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of process
in any such jurisdiction);
(v) if, at any time when a Prospectus relating to the Registrable
Shares is required to be delivered under the Securities Act, any event shall
have occurred as the result of which any such Prospectus as then in effect would
include an 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
not misleading, immediately give written notice thereof to each Holder and the
managing underwriter or underwriters, if any, of such Registrable Shares and
prepare and furnish to each such Holder a reasonable number of copies of an
amended or supplemental Prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Shares, such Prospectus shall
not include an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading;
(vi) on or prior to the effective date of the Registration Statement,
use its best efforts to list such Registrable Shares on any securities exchange
on which similar securities of the Company are then listed, and enter into
customary agreements including a listing application and indemnification
agreement in customary form, provided that the applicable listing requirements
are satisfied, and provide a transfer agent and registrar for such Registrable
Shares covered by such Registration Statement not later than the effective date
of such Registration Statement;
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<PAGE> 8
(vii) enter into such customary agreements (including an underwriting
agreement in customary form) and take such other actions as each Holder of
Registrable Shares being sold or the underwriter or underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Shares, including customary indemnification provisions and opinions;
(viii) if a requested registration pursuant to this Section 5 involves
an underwritten offering, use its best efforts to obtain a "cold comfort" letter
or letters from the Company's independent public accountants in customary form
and covering matters of the type customarily covered by "cold comfort" letters
as the underwriters retained by such Holders shall reasonably request;
(ix) make available for inspection by representatives of any Holder of
Registrable Shares covered by such Registration Statement, by any underwriter
participating in any disposition to be effected pursuant to such Registration
Statement and by any attorney, accountant or other agent retained by such
Holders or any such underwriter, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries' as shall
be necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
and respond to all inquiries reasonably requested by such Holders or any such
representative, underwriter, attorney, accountant or agent in connection with
such Registration Statement;
(x) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as soon
as reasonably practicable after the effective date of the Registration
Statement, an earnings statement which shall satisfy the provisions of Section
11(a) of the Securities Act and the rules and regulations promulgated
thereunder;
(xi) use its best efforts to provide a CUSIP number for all Registrable
Shares not later than the effective date of the applicable Registration
Statement, and provide the applicable transfer agents with printed certificates
for the Registrable Shares which are in a form eligible for deposit with the
Depository Trust Company;
(xii) notify counsel for the Holders of Registrable Shares included in
such Registration Statement and the managing underwriter or underwriters, if
any, immediately and confirm the notice in writing, (A) when the Registration
Statement, or any post-effective amendment to the Registration Statement, shall
have become effective, or any supplement to the Prospectus or any amendment
Prospectus shall have been filed, (B) of the receipt of any comments from the
SEC and (C) of any request of the SEC to amend the Registration Statement or
amend or supplement the Prospectus or for additional information;
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<PAGE> 9
(xiii) cooperate with each seller of Registrable Shares and each
underwriter, if any, participating in the disposition of such Registrable Shares
and their respective counsel in connection with any filings required to be made
with NASD;
(xiv) during the period when the Prospectus is required to be delivered
under the 1933 Act, promptly file all documents required to be filed with the
SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act.
(xv) if requested by the managing underwriter or underwriters, if any,
or any of the Holders, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters reasonably requests, or any of the Holders reasonably requests, to
be included therein, including, without limitation, with respect to the
principal amount of Registrable Shares being sold by any of the Holders to such
underwriter or underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other terms of the
underwritten offering of the Registrable Shares to be sold in such offering, and
promptly make all required filings of such prospectus supplement or
post-effective amendment;
(xvi) as promptly as practicable after filing with the SEC of any
document which is listed as an exhibit to the Registration Statement or
incorporated by reference therein, deliver a copy of such document to each of
the Holders and the managing underwriter or underwriters, if any; and
(xvii) cooperate with each of the Holders and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities sold
under the Registration Statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or any of the Holders may request at least two business
days prior to the closing of any sale of Registrable Shares;
(b) Each Holder of Registrable Shares hereby agrees that, upon receipt
of any notice from the Company of the happening of any event of the type
described in Section 5(a)(vi) hereof, such Holder shall forthwith discontinue
disposition of such Registrable Shares covered by such Registration Statement or
related Prospectus until such Holder's receipt of the copies of the supplemental
or amended Prospectus contemplated by Section 5(a)(vi) hereof, and, if so
directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Shares at the
time of receipt of such notice. In the event the Company shall give any such
notice, the period mentioned in Section 5(a)(ii) hereof shall be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to Section 5(a)(vi) hereof and including the date when such
Holder shall have received the copies of the supplemental or amended Prospectus
contemplated by Section 5(a)(vi) hereof. If for any other reason the
effectiveness of any Registration Statement filed pursuant to Section 4 hereof
is suspended or interrupted prior to the expiration of the time period regarding
the maintenance of the effectiveness
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<PAGE> 10
of such Registration Statement required by Section 5(a)(ii) hereof so that
Registrable Shares may not be sold pursuant thereto, the applicable time period
shall be extended by the number of days equal to the number of days during the
period beginning with the date of such suspension or interruption to and ending
with the date when the sale of Registrable Shares pursuant to such Registration
Statement may be recommenced.
(c) Each Holder hereby agrees to provide the Company, upon receipt of
its request, with such information about such Holder to enable the Company to
comply with the requirements of the Securities Act and to execute such
certificates as the Company may reasonably request in connection with such
information and otherwise to satisfy any requirements of law.
6. UNDERWRITTEN REGISTRATIONS. Subject to the provisions of Sections 2,
3 and 4 hereof, any of the Registrable Shares covered by a Registration
Statement may be sold in an underwritten offering at the discretion of the
Holder thereof. In the case of an underwritten offering pursuant to Section 2
hereof, the managing underwriter or underwriters that will administer the
offering shall be selected by the Company. In the case of any underwritten
offering pursuant to Section 4 hereof, the managing underwriter or underwriters
that will administer the offering shall be selected by the Holders of a majority
of the Registrable Shares to be registered, provided, that such underwriter or
underwriters are reasonably satisfactory to the Company.
7. EXPENSES.
(a) The fees, costs and expenses of all registrations in accordance
with Section 2 and Section 4 hereof shall be borne by the Company, subject to
the provisions of Section 7(b) hereof.
(b) The fees, costs and expenses of registration to be borne as
provided in Section 7(a) hereof shall include, without limitation, all expenses
incident to the Company's performance of or compliance with this Agreement,
including without limitation all SEC and stock exchange or NASD registration and
filing fees and expenses, reasonable fees and expenses of any "qualified
independent underwriter" and its counsel as may be required by the rules of
NASD, fees and expenses of compliance with securities or blue sky laws
(including without limitation reasonable fees and disbursements of counsel for
the underwriters, if any or for the Selling Holders, in connection with blue sky
qualifications, if any of the Registrable Shares), rating agency fees, printing
expenses (including expenses of printing certificates for Registrable Shares and
Prospectuses), messenger, telephone and delivery expenses, the fees and expenses
incurred in connection with the listing of the securities to be registered upon
each secured exchange or national market system on which similar securities
issues by the Company are then listed, fees and disbursements of counsel for the
Company and all independent certified public accountants (including the expenses
of any annual audit, special audit and "cold comfort" letters required by or
incident to such performance and compliance), securities laws liability
insurance (if the Company in its sole discretion decides to obtain such
insurance), the fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (including, without limitation, expenses
relating to "road shows" and other marketing activities), the reasonable fees of
one counsel for the Holders in connection with each such registration retained
by the Holders of a majority of the Registrable Shares being registered, the
reasonable fees and expenses of any special experts retained by the Company in
connection with such registration, and fees and expenses of other persons
retained by the Company (but not including any undewriting discounts or
commissions or transfer taxes, if any, attributable to the sale of Registrable
Shares by such Holders) (collectively, "Registration Expenses").
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<PAGE> 11
8. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any registration of
any securities of the Company under the Securities Act pursuant to Sections 2 or
4 hereof, the Company will, and it hereby does, indemnify and hold harmless, to
the extent permitted by law, each of the Holders of any Registrable Shares
covered by such Registration Statement, each Affiliate of such Holder and their
respective directors and officers or general and limited partners (and the
directors, officers, general and limited partners, affiliates and controlling
Persons thereof), each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who controls
such Holder or any such underwriter within the meaning of the Securities Act
(collectively, the "Indemnified Parties"), against any and all losses, claims,
damages or liabilities, joint or several, and expenses (including any amounts
paid in any settlement effected with the Company's consent) to which any
Indemnified Party may become subject under the Securities Act, state securities
or blue sky laws, common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof, whether or
not such Indemnified Party is a party thereto) or expenses arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
Prospectus contained therein, or any amendment or supplement thereto; (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; or
(iii) any violation by the Company of any federal, state or common law rule or
regulation applicable to the Company and relating to action required of or
inaction by the Company in connection with any such registration, and the
Company will reimburse such Indemnified Party for any legal or any other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, liability, action or proceeding; provided, however, that
the Company shall not be liable to any Indemnified Party in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement or amendment or supplement thereto or in any such
preliminary, final or summary Prospectus in reliance upon and in conformity with
written information with respect to such Holder furnished to the Company by such
Holder for use in the preparation thereof; provided, further, however, that the
Company shall not be liable to any Indemnified Party in any such case to the
extent any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon the failure of an
Indemnified Party to deliver any amendment or supplement to a Registration
Statement which corrects any untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement to which such
amendment or supplement pertains. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Holder or
any Indemnified Party and shall survive the transfer of such securities by such
Holder.
(b) INDEMNIFICATION BY THE HOLDERS AND UNDERWRITERS. The Company may
require, as a condition to including any Registrable Shares in any Registration
Statement filed in accordance with Sections 2 or 4 hereof, that the Company
shall have received an undertaking reasonably
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<PAGE> 12
satisfactory to it from the Holders of such Registrable Shares or any
underwriter to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 8(a) hereof) the Company with respect to any
statement or alleged statement in or omission or alleged omission from such
Registration Statement, any preliminary, final or summary Prospectus contained
therein, or any amendment or supplement, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity with
information with respect to the Holders of the Registrable Shares being
registered or such underwriter furnished to the Company by such Holders or such
underwriter for use in the preparation of such Registration Statement,
preliminary, final or summary Prospectus or amendment or supplement, or a
document incorporated by reference into any of the foregoing. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any of the Holders, or any of their respective
Affiliates, directors, officers or controlling Persons, and shall survive the
transfer of such securities by such Holder.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 8, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, however, that the failure
of the indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 8, except to the extent
that the indemnifying party is actually materially prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, with counsel satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the indemnified party shall have the
right to employ counsel to represent the indemnified party and its respective
controlling Persons, directors, officers, general or limited partners, employees
or agents who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the indemnified party against such indemnifying
party under this Section 8 if: (i) the employment of such counsel shall have
been authorized in writing by such indemnifying party in connection with the
defense of such action; (ii) the indemnifying party shall not have within a
reasonable time employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action or counsel; or (iii) any indemnified
party shall have reasonably concluded based upon written advice of counsel that
there may be defenses available to such indemnified party or its respective
controlling Persons, directors, officers, employees or agents which are in
conflict with those available to an indemnifying party; provided, however, that
the indemnifying party shall not be obligated to pay for more than the expenses
of one firm of separate counsel for the indemnified party (in addition to the
reasonable fees and expenses of one firm serving as local counsel). No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant
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<PAGE> 13
or plaintiff to such indemnified party of a release from all liability in
respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in this Section 8
shall for any reason be unavailable to any indemnified party under Section 8(a)
or 8(b) hereof or is insufficient to hold it harmless in respect of any loss,
claim, damage or liability, or any action in respect of any loss, claim, damage
or liability, or any action in respect thereof referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the indemnified party and indemnifying
party or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) but also the relative fault of the
indemnified party and indemnifying party with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations.
Notwithstanding any other provision of this Section 8(d), no Holder of
Registrable Shares shall be required to contribute an amount greater than the
dollar amount of the net proceeds received by such Holder with respect to the
sale of any such Registrable Shares. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(e) OTHER INDEMNIFICATION. Indemnification similar to that specified in
the preceding subdivisions of this Section 8 (with appropriate modifications)
shall be given by the Company and each Holder of Registrable Shares with respect
to any required registration or other qualification of securities under any
federal or state law or regulation or governmental authority other than the
Securities Act.
9. RULE 144. The Company covenants that following the IPO Date it will
file in a timely manner the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, and it will take such further action as any Holder of Registrable
Shares may reasonably request, all to the extent required from time to time to
enable such Holder to sell Registrable Shares without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such Rule may be amended from time to time or (ii)
any similar rule or regulation hereafter adopted by the SEC. Upon the request of
any Holder of Registrable Shares, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
10. LIMITED LIABILITY. Notwithstanding any other provision of this
Agreement, neither the general partners, limited partners or managing directors,
or any directors or officers of any general or limited partners, nor any future
general partners, limited partners or managing directors, if any, of the Holders
shall have any personal liability for performance of any obligation of the
Holders under this Agreement.
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<PAGE> 14
11. TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
request registration pursuant to Section 4 shall terminate on the IPO Date if
all Registrable Shares held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 during any 90-day period, or on
such date after the IPO Date as all Registrable Shares held or entitled to be
held upon conversion by such Holder may immediately be sold under Rule 144
during any 90-day period.
12. ASSIGNABILITY. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. In addition, and whether or not any express assignment shall
have been made, the provisions of this Agreement which are for the benefit of
the parties hereto other than the Company shall also be for the benefit of and
enforceable by any subsequent Holder of any Registrable Shares. The Company may
not assign any of its rights or delegate any of its duties under this Agreement
without the prior written consent of the Holders of a majority of the
Registrable Shares; and except for assignment to the partners of the Partnership
or immediate family members of the partners of the Partnership, or by will or,
in default thereof, by operation of law, any Holder may not assign its rights
hereunder without the prior written consent of the Company. Any purported
assignment in violation of this Section 12 shall be void.
13. NOTICES. Any and all notices, requests, demands, claims or any
other communication shall be in writing and shall be delivered by certified or
registered mail (first class postage prepaid), guaranteed overnight delivery or
confirmed facsimile transmission:
(a) If to the Company, at:
NationsRent, Inc.
LeVeque Tower
50 West Broad Street
Columbus, Ohio 43215
Attention: Gene J. Ostrow
Telephone: (614) 461-7940
Facsimile: (614) 461-7943
With a copy to:
Squire, Sanders & Dempsey L.L.P.
41 South High Street
Columbus, Ohio 43215
Attention: Patrick J. Dugan, Esq.
Telephone: (614) 365-2700
Facsimile: (614) 365-2499
(b) If to any Holder, to the address appearing on the books of the
Company or of the transfer agent and registrar for its Common Stock.
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<PAGE> 15
All such notices and communications shall be deemed to have been duly
given and effective: when delivered by hand, if personally delivered; two
business days after being deposited in the mail. postage prepaid, if mailed; and
when receipt acknowledged, if telecopied.
14. NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement.
15. SEVERABILITY. If any provision of this Agreement or any portion
thereof is finally determined to be unlawful or unenforceable, such provision or
portion thereof shall be deemed not to be a part of this Agreement and any
portion of such invalidated provision that is not invalidated by such a
determination, shall remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which,
together, shall constitute one and the same instrument.
17. AMENDMENTS, WAIVERS. This Agreement may not be amended, modified or
supplemented and no waivers of or consents to departures from the provisions
hereof may be given unless consented to in writing by the Company and the
holders of a majority of the Registrable Shares; provided, however, that no such
amendment, supplement, modification or waiver shall deprive any Holder of any
rights under Sections 2 or 4 hereof without the consent of such Holder.
18. CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not to be used to construe the provisions of
this Agreement.
19. ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties hereto with respect to the subject matter of this Agreement and
supersedes all prior discussions, agreements, understandings and
representations, whether oral or written, concerning the subject matter hereof.
20. GOVERNING LAW. This Agreement is made pursuant to, and this
Agreement and the rights and obligations of the parties hereunder, shall be
governed by, construed and interpreted in accordance with the laws of the State
of Ohio, without regard to that state's conflicts of laws principles.
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
NATIONSRENT, INC.
By: /s/ Gene J. Ostrow
----------------------------------------------
Name: Gene J. Ostrow
--------------------------------------------
Title: Executive Vice President
-------------------------------------------
BODE-FINN LIMITED PARTNERSHIP
By: /s/ Raymond E. Mason
----------------------------------------------
Name: Raymond E. Mason
--------------------------------------------
Title: Managing Partner
-------------------------------------------
RAYMOND E. MASON FOUNDATION
By: /s/ Raymond E. Mason
----------------------------------------------
Name: Raymond E. Mason
--------------------------------------------
Title: Chairman
-------------------------------------------
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<PAGE> 1
EXHIBIT 10.16
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of March 25,
1998, by and among R.F.L. ENTERPRISES, INC., an Indiana corporation ("Seller"),
Randal F. Lawrence, an individual resident of the State of Indiana and sole
shareholder of Seller ("Lawrence") and NATIONSRENT OF INDIANA, INC., a Delaware
corporation (together with its permitted successors and assigns, "Nations").
W I T N E S S E T H:
WHEREAS, Seller presently owns and operates a machine and tool rental
business, excluding any real property, real property leases and fixtures (the
"Business");
WHEREAS, Lawrence currently owns one hundred percent (100%) of the
issued and outstanding capital stock of Seller;
WHEREAS, Seller and Lawrence desire to sell and transfer to Nations and
Nations desires to purchase and acquire from Seller and Lawrence substantially
all the assets, properties and rights related to the Business (the
"Acquisition") on the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, in connection with the Acquisition, Nations and Lawrence
desire to enter into an employment arrangement (the "Employment Arrangement"),
which will include provisions relating to annual compensation, an incentive
bonus package and a benefit package; and
WHEREAS, in connection with the Acquisition, Nations and Lawrence also
desire to enter into a five (5) year non-competition arrangement (the
"Non-Competition Arrangement").
NOW, THEREFORE, in consideration of the mutual promises set forth
herein and other good and valuable consideration, the parties hereto, upon the
terms and subject to the conditions contained herein, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1. Purchase and Sale of Assets. Upon the terms and subject to
the conditions contained herein, Seller shall sell, convey, set over, deliver,
assign and transfer to Nations and Nations shall purchase and acquire from
Seller, at the Closing (as defined in Section 1.4), the assets referred to or
described in this Section 1.1 and the Schedules attached hereto and made a part
hereof.
(a) Transferred Assets. Seller shall sell, transfer, assign,
grant, convey and deliver (or cause to be sold, transferred, assigned, granted,
conveyed and delivered) to Nations, and Nations
<PAGE> 2
shall purchase, acquire and accept at the Closing (as defined in Section 1.4
hereof) all of the right, title and interest of Seller in the assets, business,
properties, goodwill and rights of Seller of every nature, kind and description,
wherever located, tangible and intangible, personal and mixed, which are related
to, or used or usable in connection with, the Business, as the same exists on
the Closing Date (all of such assets, business, properties, goodwill and rights
are collectively referred to hereinafter as the "Transferred Assets") except for
the Excluded Assets identified on Schedule 1.1(a). The Transferred Assets to be
sold to Nations include, without limitation:
(i) all machinery, equipment, scaffolding, hoppers,
miscellaneous tools, computers, office equipment, replacement parts,
furniture, vehicles, transportation equipment and other tangible assets
or property, wherever located, used in the operation of the Business
and owned by Seller;
(ii) all inventories, raw materials, supplies, works in
process and samples, wherever located, used in the operation of the
Business and owned by Seller;
(iii) all of the right, title and interest of Seller in, to
and under any contracts, agreements, commitments, plans, arrangements,
leases of personal property, licenses, instruments, that are related to
the Business (the "Contracts"), including, without limitation, those
listed on Schedule 1.1(a)(iii);
(iv) all registrations, licenses, permits, approvals,
grants, franchises and consents for operation of the Business;
(v) all right, title and interest of Seller in and to any
and all patents, trademarks, trademark applications, trade names,
copyrights and copyright registrations, know-how, inventions,
processes, formulae, and proprietary technical information, logos,
designs or other intellectual rights related to the Business;
(vi) all databases in all forms, versions and media
including all customer lists and records, together with prior and
proposed updates, modifications and enhancements thereto, as well as
documentation and listing therefor used in the Business;
(vii) all computer software in source and object code, and
all prior and proposed versions, releases, modifications, updates,
upgrades and enhancements thereto, as well as all documentation and
listings related thereto used in the Business;
(viii) all cash, billed and unbilled accounts receivable,
including work in process ("Accounts Receivable"), notes, drafts,
advances and other rights to receive the payment of money, insurance
policies, rights to receive damages arising out of or for breach or
default in respect of any accounts or agreements, and rights to receive
payments from customers for goods or services rendered in connection
with the Business;
(ix) all right, title and interest of Seller in and to all
prepaid deposits and other prepaid expenses, all credit balances and
rights of Seller under any state unemployment compensation plan or fund
relating to employees of the Business hired by Nations;
<PAGE> 3
(x) the non-exclusive right to possession of all books
and records, including all sales and credit records, advertising and
sales material, literature, financial records, personnel and payroll
records and production records of Seller relating to the Business;
provided, that Seller shall be entitled to retain copies of all of the
foregoing; and
(xi) the Business as a going concern and the goodwill
thereof and all other property and assets of any member of Seller
related to the Business, real or personal, tangible or intangible, of
every kind whatsoever and wherever situated.
All of the Transferred Assets shall be conveyed to Nations free and clear of all
liabilities, obligations, liens and encumbrances, except for Assumed Liabilities
(as defined in Section 1.2).
(b) Effectuation of Purchase and Sale. The transfer of the
Transferred Assets as herein provided shall be effected by bills of sale,
endorsements, assignments, subleases, drafts, checks, and other instruments of
transfer and conveyance delivered to Nations contemporaneously herewith in form
and substance satisfactory to Nations. Seller and Lawrence covenant that they
will (i) at any time and from time to time after the Closing Date, execute and
deliver such other instruments of transfer and conveyance and do all such
further acts and things as may be reasonably requested by Nations to transfer
and deliver to Nations or to aid and assist Nations in collecting and reducing
to possession, any and all of the Transferred Assets, and (ii) transfer and
deliver to Nations or as directed by Nations any cash or other property that
Seller or Lawrence may receive after the Closing Date in respect of or arising
out of the Transferred Assets. After the Closing Date, at reasonable times and
upon reasonable notice, Seller and Lawrence shall have access to, and the right,
at its sole cost and expense, to make copies of, the books and records conveyed
to Nations hereunder, and Nations shall have access to, and the right, at its
sole cost and expense, to make copies of, any minute books, stock books and
similar corporate records relating to the Business retained by Seller or
Lawrence. Each of Nations, Seller and Lawrence covenants to the other that it
will not destroy any of the books and records referred to in the preceding
sentence without first offering possession thereof to the other.
(c) Consents. To the extent requested by Nations, Seller shall use
its best efforts to obtain the consent of any parties to any Contracts,
including but not limited to those listed on Schedule 1.1(a)(iii) attached
hereto, licenses, leases, commitments, sales orders, purchase orders or other
agreements being assigned by Seller to Nations hereunder as shall be requested
by Nations, which consent shall specifically state that such party consents to
the assignment to Nations on substantially the same terms and conditions as were
applicable to Seller. If any required consent is not obtained, this Agreement
shall not constitute an agreement to assign the instrument relating thereto, and
notwithstanding anything herein to the contrary, Nations shall not assume any
liability associated with any such contract, license, lease, commitment, sales
order, purchase order or other agreement. Seller and Lawrence shall cooperate
with Nations in any reasonable arrangement to provide for Nations the benefits
under any such contract, license, lease, commitment, sales order, purchase order
or other agreement, including enforcement, at the cost and for the benefit of
Nations, of any and all rights of Seller against the other party thereto arising
out of the breach or cancellation by such party or otherwise; provided, that
nothing in this sentence shall constitute a waiver by Nations of any conditions
contained in this Agreement.
<PAGE> 4
Section 1.2. Assumed and Retained Liabilities.
(a) Assumed Liabilities. As partial consideration for the
Transferred Assets, effective as of the Closing Date, Nations shall assume and
shall thereafter pay when due or cause to be paid when due or otherwise
discharged, subject to the limitations contained herein, the following
liabilities (the "Assumed Liabilities") of Seller as the same shall exist on and
as of the Closing Date:
(i) Balance Sheet Liabilities. Certain trade accounts
payable and other liabilities as set forth on Schedule 1.2(a)(i) that
continue to exist on the Closing Date.
(ii) Leases and Other Contracts.
(A) Leases. Certain liabilities and obligations of
Seller under each of the Leases set forth on Schedule
1.2(a)(ii)(A) attached hereto (collectively the "Assumed
Leases"); provided, that Nations shall not assume or be
responsible for any such liabilities or obligations which
arise or accrue under the Assumed Leases prior to the Closing
Date.
(B) Other Contracts. Those liabilities and
obligations of Seller under the Contracts as set forth on
Schedule 1.1(a)(iii); provided, that Nations shall not assume
or be responsible for any such liabilities or obligations
which arise or accrue under the Contracts prior to the Closing
Date.
(iii) Warranty Obligations. Those liabilities and
obligations of Seller with respect to goods sold, leased or repaired in
the ordinary course of business prior to the Closing Date.
(b) Retained Liabilities. Nations shall not assume or be liable
for any debt, liability or obligation, known or unknown, fixed, contingent or
otherwise, of Seller, its stockholders, directors, officers, employees or
agents, other than those referred to in Section 1.2(a) (the liabilities and
obligations not being assumed by Nations shall collectively be referred to
hereinafter as the "Retained Liabilities"). The Retained Liabilities shall
include, without limitation, all obligations arising under: (i) any Employee
Plan (as defined in Section 2.1(j)) of Seller, unless scheduled as an Assumed
Liability; (ii) all loans or advances from, or any other liability to, any
stockholder, director, officer, employee or other affiliate of Seller,
including, without limitation, all liabilities reflected on the Balance Sheet as
shareholder loans and any arising thereafter; (iii) Seller's unpaid note payable
balance due to Fort Wayne National Bank; and (iv) any liabilities associated
with Seller's real estate. The Retained Liabilities shall be retained by Seller
and Seller shall pay when due or cause to be paid when due or otherwise
discharged, the Retained Liabilities and in all events will indemnify pursuant
to Section 4.1(iii).
Section 1.3. Purchase Price.
(a) Consideration. In consideration for the Transferred Assets,
including the Contracts, the Non-Competition Arrangement and the Employment
Arrangement, Nations shall assume the Assumed Liabilities as provided in Section
1.2 hereof and, in addition, shall pay the following amounts:
<PAGE> 5
(i) The Purchase Price. As consideration for the
Transferred Assets, including the Contracts, Nations shall, at the
Closing, make or cause to be made, a payment equal to $2,350,000 (the
"Purchase Price") to Seller by wire transfer of immediately available
funds to an account or accounts designated by Seller.
(b) Allocation of Purchase Price. The purchase price referred to
in subparagraph 1.3(a)(i) above shall be allocated among the Transferred Assets
based upon their relative fair market values, as determined by Nations'
appraiser in accordance with the allocation requirements of Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
promulgated thereunder. Seller and Nations agree that each will report the
transactions consummated hereunder in accordance with such determination for all
federal, state and local tax purposes. Seller, on the one hand, and Nations, on
the other hand, also agree to indemnify and hold harmless the other party from
and against any and all losses, liabilities and expenses, including, without
limitation, additional income taxes and fees and disbursements of counsel,
incurred by the indemnified party as a result of the failure of the indemnifying
party to so report the transactions consummated hereunder; provided, however,
that no party hereunder shall be required to indemnify any other party hereunder
for any audit adjustments required to be made by the Internal Revenue Service.
Section 1.4. Time and Place of Closing. The "Closing" means the
time at which the parties hereto consummate the transfer of the Transferred
Assets and the assumption of the Assumed Liabilities contemplated hereby. The
Closing shall occur at a location and on a date mutually agreed upon by the
parties (the "Closing Date").
Section 1.5. Seller's Closing Deliveries. Prior to or at the
Closing, Seller shall deliver to Nations:
(a) the Transferred Assets, as well as all documents effectuating
the transfer of the Transferred Assets, as provided in Section 1.1(b);
(b) copies of the Articles of Incorporation of Seller, certified
by the Secretary of State of Indiana, and the Bylaws of Seller, certified by an
officer thereof;
(c) documentary evidence, in a form satisfactory to Nations, that
Seller has obtained all consents and waivers of third parties necessary to the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the consent of Lull Industries, Inc. ("Lull") to assign the
Lull Industries, Inc. Equipment Dealer Agreement, dated as of January 1, 1996,
to which Seller is a party (the "Lull Agreement");
(d) certified copies of resolutions of each Seller's board of
directors and shareholders approving all actions taken or to be taken by Seller
and its respective officers in connection with the consummation of the
transactions contemplated by this Agreement;
(e) an opinion of counsel for Seller, in form and substance
satisfactory to Nations;
(f) receipts executed by the appropriate parties, dated the
Closing Date, acknowledging receipt from Nations of the payments listed in
Section 1.2(a); and
<PAGE> 6
(g) an executed agreement that provides for the Employment
Agreement and the Non-Competition Arrangement provided for in the recitals to
this Agreement (the "Employment and Non-Competition Agreement").
Section 1.6. Nations' Closing Deliveries. Prior to or at the
Closing, Nations shall deliverto Seller:
(a) the Purchase Price;
(b) certified copies of resolutions of the board of directors of
Nations authorizing the execution of this Agreement and the consummation of the
transactions contemplated hereby; and
(c) the Employment and Non-Competition Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of Seller and
Lawrence. Seller and Lawrence represent and warrant to Nations as follows:
(a) Authorization; Non-Contravention. Seller has, and will have,
all requisite power, authority (including any necessary shareholder
authorizations), and capacity to execute, deliver and enter into this Agreement
and any other agreements contemplated hereby; to perform all of the obligations
to be performed by them hereunder and thereunder; and to consummate the
transactions contemplated hereby and thereby. Lawrence is competent to, and has
the authority to, execute and deliver this Agreement and any other agreements
contemplated hereby; and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly and validly authorized, executed and
delivered by and is the valid and binding obligation of Seller and is
enforceable in accordance with its terms.
(b) Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Indiana and Seller
has the requisite power and authority to own, lease and operate its properties
and assets and to carry on its business as it has been and is now being
conducted. Seller is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the properties
owned or leased by it or the nature of the business conducted by it makes such
qualification or licensure necessary, except where the failure to be so
qualified or licensed and in good standing would not have a material adverse
effect on the Business. Seller has delivered to Nations true and correct copies
of its Articles of Incorporation or other governing documents as amended to date
and Bylaws as amended to date.
(c) Ownership. The persons or entities identified on Schedule
2.1(c) own all of the issued and outstanding capital stock of Seller free and
clear of all claims, options, liens, charges, equities, security interests,
encumbrances and other restrictions or limitations of any kind whatsoever except
as set forth on Schedule 2.1(c).
<PAGE> 7
(d) Financial Statements. Schedule 2.1(d) contains a true,
complete and correct copy of the adjusted balance sheet and profit and loss
statement of Seller for the fiscal years ended December 31, 1996 and December
31, 1997 and for the two months ended February 28, 1998 (hereinafter referred to
as the "Financial Statements"). Except as disclosed in Schedule 2.1(d), the
Financial Statements are complete and correct, and presents fairly the financial
condition of Seller as of such dates, and have been prepared in accordance with
generally accepted accounting principles, consistently applied ("GAAP"), except
to the extent that such unaudited financial statements are subject to
nonrecurring audit adjustments and do not contain all required footnote
disclosures.
(e) Leased Property. Schedule 2.1(e) hereof is a list, true and
correct, of all leases and subleases (collectively, the "Personal Property
Leases") with respect to all property, other than real property, leased by
Seller as lessee (the "Leased Personal Property"). Seller has delivered to
Nations true and correct copies of each of the Personal Property Leases.
(f) Title and Related Matters. Seller has good, valid and
marketable title to all of the Transferred Assets; except for the Leased
Personal Property, in which Seller has a valid leasehold interest and has all
rights under applicable state laws to maintain leasehold status as applicable,
and to maintain the use and benefit of such property as it is being used and
enjoyed on the date hereof. Except as identified on Schedule 2.1(f), all the
Transferred Assets referred to in the preceding sentence are presently owned or
held under lease by Seller, free and clear of all mortgages, liens, pledges,
charges, security interests, leasehold interests, options to purchase or other
encumbrances of any kind or character except: liens for taxes, assessments and
governmental charges or levies imposed upon Seller or upon its income or
profits, or upon any of its property, other than real property, or upon any part
thereof if the same shall not at the time be due and payable. The Personal
Property Leases and all other documents and agreements pursuant to which Seller
has obtained the right to use any personal property are valid and enforceable in
accordance with their respective terms; all licenses, permits and authorizations
in any manner related to the operation of the Business, or through the use of
the Leased Personal Property, are in good standing, valid and enforceable in
accordance with their respective terms; and there is not, under any of the
foregoing instruments, documents or agreements, any existing default or event
which with notice or lapse of time, or both, would constitute a default caused
or affected by Seller or, to the best knowledge of Seller, caused or affected by
any other party thereto.
(g) Absence of Undisclosed Liabilities. As of the date hereof,
Seller does not have any indebtedness, liability or obligations of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, which was not shown on or provided for in full on the Financial Statements
or in the notes thereto or related to the Assumed Contracts or Assumed Leases,
other than those liabilities incurred in the ordinary course of business since
February 28, 1998, the date of the most recent Financial Statements (the
"Financial Statements Date").
(h) Absence of Certain Changes or Events. Since the Financial
Statements Date, Seller has not, without Nations' prior written consent, with
respect to the Business:
(i) issued or sold, or contracted to sell, any of the
stock, notes, bonds, or other securities or interests of Seller, or any
option to purchase the same, or entered into any agreement with respect
thereto;
<PAGE> 8
(ii) amended the Articles of Incorporation or Bylaws of
Seller;
(iii) except as disclosed in Schedule 2.1(h)(iii), made any
capital expenditures or commitments for the acquisition, lease or
construction of any property, plant or equipment;
(iv) entered into any material transaction inconsistent in
any respect with the past practices of the Business and have not
conducted the Business in any manner materially inconsistent with past
practices;
(v) incurred any damage, destruction, requisition, taking
or similar loss or casualty event (whether or not covered by
insurance);
(vi) suffered any loss, or been threatened by any
prospective loss, of any dealer or supplier or alteration of any
contractual arrangement with any dealer or supplier the loss or
alteration of which would have a material adverse effect on the
Business;
(vii) incurred or accrued any material liability or
obligation (absolute or contingent) or made any material expenditure,
other than such as may have been incurred or made in the ordinary
course of business.
(viii) incurred any indebtedness for money borrowed from any
third parties or affiliates, other than trade payables in the ordinary
course, amended any agreement relating to existing indebtedness, or
made any loans or advances to any third parties or affiliates;
(ix) permitted the occurrence or continuance of any
default under any agreement;
(x) made any acquisition of stock of, all or
substantially all of the assets of, or merged or consolidated with, any
entity;
(xi) except as required by ERISA, adopted, amended in any
material respect or terminated any Employee Plan, severance plan or
collective bargaining agreement or make awards or distributions under
any Employee Plan not consistent with past practice or custom;
(xii) created, assumed or permitted to exist any lien,
pledge, security interest, encumbrance or mortgage of any kind on any
of its properties or assets other than liens existing on the date
hereof as set forth on Schedule 2.1(f) hereof;
(xiii) initiated any legal proceedings, including suits and
administrative proceedings;
(xiv) entered into, made any amendment of or terminated any
material lease or any material contract or agreement except in the
ordinary course of business;
<PAGE> 9
In addition, since the Financial Statements Date;
(A) there has been no material adverse change in the
business, operations, earnings, assets, financial condition or
prospects of Seller, and no event or events that would materially and
adversely affect the business, earnings, assets, condition (financial
or otherwise) or prospects of Seller has occurred;
(B) there has been no declaration, setting aside or
payment of any distribution or dividend in respect of the capital stock
of Seller;
(C) there has been no sale of Seller's accounts
receivable;
(D) there has been no purchase or disposal of, or
execution of a contract to purchase or dispose of, or grant or receipt
of an option to purchase or sell, any of the properties or assets of
Seller except in the ordinary course of business;
(E) except for normal annual compensation increases,
there has not been any increase in the rate of compensation payable or
to become payable to the directors, officers or employees of Seller or
any increase in the amounts paid or payable to such directors, officers
or employees under any bonus, insurance, pension or other benefit plan,
or any arrangements therefor made for or with any of said officers or
employees;
(F) Seller has not adopted or amended any collective
bargaining, bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation or other plan, agreement, trust, fund
or arrangement for the benefit of its employees;
(G) there has been no change in any material accounting
principle, procedure or practice followed by Seller or in the method of
applying any such principle, procedure or practice;
(H) Seller has not engaged in any transaction with any
affiliate thereof nor made any loan or advance to any affiliate thereof
other than advances or reimbursements for travel and entertainment
costs consistent with past practices.
(i) Contracts. Schedule 2.1(i) contains a complete list or
description of (a) each material license, contract, agreement, commitment and
undertaking (whether written or oral) relating to Seller's business, or to which
Seller is a party, (b) each loan or credit agreement, security agreement,
guaranty, indenture, mortgage, pledge, conditional sale or title retention
agreement, equipment obligation, lease purchase agreement or other instrument
evidencing indebtedness relating to Seller, or to which Seller is a party, and
(c) each contract, agreement, commitment or undertaking whether or not fully
performed, between Seller and any officer, director, shareholder, affiliate,
consultant or other employee of Seller (d) each contract, agreement, commitment
and undertaking (whether written or oral) relating to the provision of services
by Seller. Seller has not breached or improperly terminated any contract and is
not in default under any contract by which it is bound, and there exists no
condition or event which, after notice or lapse of time or both, would
constitute any such breach, termination or default caused or affected by Seller.
Seller has delivered to, or have made available
<PAGE> 10
to, Nations true, correct and complete copies of each written contract listed in
Schedule 2.1(i), and all modifications and amendments thereto.
(j) Employee Benefit Plans. Except as disclosed in Schedule
2.1(j), Seller has no pension, retirement, profit-sharing, deferred
compensation, bonus or other incentive plan, any other employee program,
arrangement, agreement or understanding, any medical, vision, dental or other
health plan, any life insurance plan, severance plan or any other employee
benefit plan (each an "Employee Plan") subject to the Employee Retirement Income
Security Act of 1974, as amended.
(k) Non-Contravention; Consents. Except as set forth in Schedule
2.1(k) hereof, the execution and delivery of this Agreement and the consummation
of any of the transactions contemplated hereby by Seller does not and will not:
(i) violate any provision of the governing documents of
Seller;
(ii) violate, or result with the passage of time in the
violation of, any provision of, or result in the acceleration of or
entitle any party to accelerate (whether after the giving of notice or
lapse of time or both) any material obligation under, or result in the
creation or imposition of any lien, charge, pledge, security interest
or other encumbrance upon any of the properties necessary for the
conduct of the Business pursuant to any provision of, any mortgage,
lien, lease, contract, agreement, permit, indenture, license,
instrument, law, order, arbitration award, judgment or decree to which
Seller is a party or by which any of its properties or assets are
bound;
(iii) violate any law, order, judgment or decree to which
Seller is subject;
(iv) constitute an event of default or an event permitting
termination of any agreement to which Seller is a party or to which it
or any of its properties is subject.
Except as provided in Schedule 2.1(k), no consent, authorization, order or
approval of, or filing or registration with, any governmental commission, board
or other regulatory body is required for or in connection with the execution,
delivery and performance of this Agreement by Seller and the consummation by
each of them of any of the transactions contemplated hereby.
(l) Labor Relations. There are no agreements with, or pending
petitions for recognition of, any labor union or association as the bargaining
agent or representative for any or all of Seller's employees, and no such
petitions have been pending at any time within two (2) years of the date of this
Agreement, and there has been no organizing effort by any union or other group
seeking to represent any employees of Seller as their bargaining agent or
representative at any time within two (2) years of the date of this Agreement.
(m) Receivables. As of the date hereof: (A) no event has occurred
that would, under Seller's practices when the Financial Statements were
prepared, require a significant increase in the ratio of (i) the reserve for
uncollectible accounts receivable to (ii) the Accounts Receivable of Seller, and
(B) there has been no material adverse change in the composition of such
Accounts Receivable in terms of aging. There is no contest, claim or right of
set-off contained in any written agreement with any account debtor relating to
the amount or validity of any Account Receivable, all Accounts
<PAGE> 11
Receivable of Seller are and will be, unless previously collected, valid and
collectible, other than Accounts Receivable which do not exceed, in the
aggregate, the reserve for uncollected accounts reflected in the Financial
Statements. As of the date hereof and as of the Closing Date, all notes
receivable of Seller were, are and will be, respectively, unless previously
collected, valid and collectible and there is no contest, claim or right of
set-off contained in any written agreement with any note maker relating to the
amount or validity of any note. With respect to a claim for indemnity under
Section 4.1 and Section 4.3 hereof arising out of a breach of the
representations and warranty contained in this Section 2.1(m), such claim will
not be made until an Account Receivable is more than one year past due and, in
connection with payment of such claim, such Account Receivable will be assigned
to Seller.
(n) Customers and Suppliers. Since the Financial Statements Date,
there has not been any material adverse change in the business relationship of
the Business with any of its respective customers or suppliers nor has Seller
been involved in any material controversy with any of their respective customers
or suppliers.
(o) Insurance. Set forth in Schedule 2.1(o) hereof is a true,
correct and complete schedule of all insurance policies or binders of insurance
or programs of self-insurance that relate to the Business. The coverage under
each such policy and binder is in full force and effect, and no notice of
cancellation or nonrenewal with respect to, or disallowance of any claim under,
any such policy or binder has been received by Seller. Seller has no knowledge
of any fact or the occurrence of any event which reasonably might form the basis
of any claim against Seller relating to its business or operations or any of its
assets or properties covered by any of the policies or binders set forth in
Schedule 2.1(o), which claim Seller has reason to believe will materially
increase the insurance premiums payable under any such policy or binder.
(p) Patents, Trademarks, Etc.
(i) Schedule 2.1(q)(i) hereof sets forth a true and
complete list, including, where applicable, the date of registration,
serial or registration number or patent number, of Seller's United
States (including the individual states and territories of the United
States) and foreign registered trademarks, service marks and trade
names; trademark, service mark and trade name applications; product
designations and model numbers; unexpired patents; pending and filed
patent applications; and registered copyrights (collectively, the
"Intellectual Property").
(ii) Seller has not, whether directly, contributorily or
by inducement, within any time period as to which any potential
liability of Seller is not barred by statute, infringed any patent,
trademark, service mark, trade name or copyright or misappropriated any
intellectual property of another, or received from another any notice,
charge, claim or other assertion in respect thereto or committed any
acts of unfair competition.
(iii) Seller has not, within any time period as to which
any potential liability of another person is not barred by statute,
sent or otherwise communicated to such other person any notice, charge,
claim or other assertion of, or has any knowledge of, present,
impending or threatened patent, trademark, service mark, trade name or
copyright infringement by such other person, or misappropriation of any
Intellectual Property of Seller by such other person or any acts of
unfair competition by such other person.
<PAGE> 12
(q) Litigation. No litigation, action, suit, proceeding or
investigation is pending or threatened against Seller, or Seller's properties,
assets or capital stock. Seller is not subject to, or in default in respect of,
any judgment, order, writ, injunction or decree of any court or any federal,
state, local or other governmental department, commission, board, bureau, agency
or instrumentality. No action, suit, proceeding or investigation pending,
threatened, or related to the properties or businesses of Seller that might
adversely affect or restrict the ability of Seller to consummate the
transactions contemplated hereby.
(r) Unlawful Payment. Seller has not made, directly or indirectly,
with respect to the business of Seller, any illegal political or illegal
charitable contributions, payments from corporate or partnership funds not
recorded on the books and records of Seller, payments from corporate funds that
were falsely recorded on the books and records of Seller, payments from
corporate funds to governmental officials in their individual capacities for the
purpose of affecting their action or the action of the government they represent
to obtain favorable treatment in securing businesses or licenses or to obtain
special concessions or payments to any officers, employees or agents of a
customer or supplier for the purpose of influencing their action or inaction or
the action or inaction of any other officer, employee or agent of such customer
or supplier.
(s) Compliance with Laws; Environmental Compliance. Seller has
complied with and made all filings required pursuant to all federal, state,
municipal or local constitutional provisions, laws, ordinances, rules,
regulations and orders in connection with the conduct of the Business,
including, without limitation, all rules and regulations of any federal or state
environmental agency applicable thereto. Seller has all governmental licenses,
permits and authorizations necessary for the conduct of its business as
currently conducted (the "Permits") and all such Permits are in full force and
effect, and no violations exist in respect of any such Permits, and no
proceeding is pending or threatened to revoke or limit any thereof. Seller has
not violated, and has no knowledge of any alleged or potential violation of, any
such constitutional provisions, laws, ordinances, rules, regulations or orders,
cured or not, or any injunction or governmental order or decree.
(t) Restrictive Covenants. Except as identified on Schedule 2.1(t)
and except as contemplated by this Agreement, Seller and Lawrence are not bound
by any agreement, contract or covenant limiting its freedom to compete in any
line of business or with any person or other entity in any geographic area.
(u) Tax Matters. For purposes of this Agreement, "Taxes" or "Tax"
means all net income, capital gains, gross income, gross receipts, sales, use,
ad valorem, franchise, profits, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, or windfall profit
taxes, customs duties, or other taxes, fees, assessments, or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax, or
additional amounts imposed by any taxing authority ("Taxing Authority") upon
Seller.
(i) Seller has filed when due all federal, foreign,
state, and local tax returns, tax information returns, reports, and
estimates for all years and periods (and portions thereof) ending on or
before the Closing Date for which any such returns, reports or
estimates were due. All such returns, reports, and estimates were
prepared in the manner required by applicable law, and all Taxes shown
thereby to be payable have been paid when due.
<PAGE> 13
(ii) Seller has withheld or will withhold amounts from the
compensation and other payments due and payable to its employees and
have filed or will file all federal, foreign, state, and local returns
and reports with respect to employee income tax withholding and social
security and unemployment taxes for all periods (or portions thereof)
ending on or before the Closing Date, in compliance with the provisions
of the Code and other applicable federal, foreign, state, and local
laws.
(iii) Seller has paid all federal, state, local, and
foreign Taxes, which are due and owing with respect to all periods, or
portions thereof, ending on or before the Closing Date.
(iv) There are no material claims or investigations by any
Taxing Authority pending or, to the best knowledge of Seller and
Lawrence, threatened against Seller for any past due Taxes; and there
has been no waiver of any applicable statute of limitations or
extension of the time for the assessment of any Tax against Seller.
(v) Seller has never been, nor is it currently, a party
to any agreement relating to the sharing of any liability for, or
payment of, taxes with any other person or entity.
(v) Bank Accounts. Schedule 2.1(v) hereof is a true, correct and
complete list of each bank, savings and loan, or other financial institution, in
which Seller has an account, including cash contribution accounts, or safe
deposit boxes, and, to the extent practicable, the names of all persons
authorized to draw thereon or to have access thereto.
(w) Employees; Compensation. Schedule 2.1(w) hereof is a true,
correct and complete list of all employees of Seller and all salary, bonuses and
other compensation paid or payable to such employees with respect to the current
fiscal year. Except as set forth on Schedule 2.1(w), there are no outstanding
liabilities or amounts due to shareholders, directors, officers or employees
(other than unpaid base salary, accrued vacations and cash advances in the
ordinary and normal course of business and not material in the aggregate) or
other related parties of Seller.
(x) Brokers. Seller and Lawrence have not expressly or impliedly
engaged any broker, finder or agent with respect to this Agreement or any
transaction contemplated hereby, nor is there any commission, fee or other
compensation due or to become due to any broker, finder or agent with respect to
this Agreement or any transaction contemplated hereby.
(y) Necessary Assets. The Transferred Assets constitute all the
properties (real and personal, tangible and intangible), rights and interests
necessary for the conduct by Nations of the Business as now being conducted by
Seller.
(z) Accuracy of Information Furnished. No statement by Seller or
Lawrence contained in this Agreement, in any Schedule hereto, and no statement
contained in any certificate or other instrument or document furnished or to be
furnished by or on behalf of Seller or Lawrence to Nations pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact which is required to be stated herein or therein or which is
necessary to make the statements contained herein or therein in light of the
circumstances under which they were made, not misleading; provided, however,
that with respect to any projections furnished to Nations, Seller and Lawrence
represent
<PAGE> 14
and warrant only that such projections were prepared in good faith and were
based upon assumptions that Seller and Lawrence believe to be reasonable.
(aa) Inventory. The values at which the inventories of Seller are
shown on the Financial Statements have been determined in accordance with the
normal valuation policies of Seller. The inventories of Seller shown on the
Financial Statements and thereafter acquired by Seller in the ordinary course of
business consist only of items of a quality and quantity commercially usable or
salable in the ordinary course of business. Such inventories represent a
reasonable distribution of the types of inventories utilized in the conduct of
the Business in accordance with good business practices.
Section 2.2. Representations and Warranties of Nations. Nations
represents and warrants to Seller and Lawrence as follows:
(a) Authorization. The execution, delivery and performance of this
Agreement and any other agreements contemplated hereby, and the consummation of
the transactions contemplated hereby and thereby, have been or will be duly
authorized and approved by the Board of Directors of Nations. Nations has the
power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby and thereby. This Agreement has
been, and the other agreements contemplated hereby, when executed and delivered
will be, duly and validly executed and delivered by, and is and will be, as
appropriate, the valid and binding obligations of Nations in accordance with its
terms.
(b) Organization. Nations is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Nations
has the corporate power and authority to own and lease its properties and assets
and to carry on its business as now being conducted. Nations is duly qualified
or licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which the properties owned or leased by it or the nature of
the business conducted by it makes such qualification or licensure necessary,
except where the failure to be so qualified or licensed and in good standing
would not have a material adverse effect on its business. Nations has delivered
to Seller true and correct copies of its Certificate of Incorporation and
Bylaws.
(c) Non-Contravention; Consents. The execution and delivery of
this Agreement and the consummation of any of the transactions contemplated
hereby does not and will not:
(i) violate any provision of the Certificate of
Incorporation or Bylaws of Nations;
(ii) violate, or result with the passage of time in the
violation of, any provision of, or result in the acceleration of or
entitle any party to accelerate (whether after the giving of notice or
lapse of time or both) any material obligation under, or result in the
creation or imposition of any lien, charge, pledge, security interest
or other encumbrance upon any of the properties necessary for the
conduct of the business of Nations or provision of, any mortgage, lien,
lease, contract, agreement, permit, indenture, license, instrument,
law, order, arbitration award, judgment or decree to which Nations is a
party or by which any of its respective properties or assets are bound;
(iii) violate any law, order, judgment or decree to which
Nations is subject;
<PAGE> 15
(iv) constitute an event of default or an event permitting
termination of any agreement to which Nations is a party or to which
any of its respective properties is subject.
No consent, authorization, order or approval of, or filing or registration with,
any governmental commission, board or other regulatory body is required for or
in connection with the execution, delivery and performance of this Agreement by
Nations and the consummation of the transactions contemplated hereby.
(d) Brokers. Nations has not expressly or impliedly engaged any
broker, finder or agent with respect to this Agreement or any transaction
contemplated hereby, nor is there any commission, fee or other compensation due
or to become due to any broker, finder or agent with respect to this Agreement
or any transaction contemplated hereby.
(e) Litigation. There is no action, suit, proceeding or
investigation pending or threatened against Nations that might adversely affect
or restrict the ability of Nations to consummate the transactions contemplated
hereby.
ARTICLE III
COVENANTS
Section 3.1. Covenants of Seller and Lawrence.
(a) Notification. Seller and/or Lawrence shall give prompt notice
to Nations of (i) any notice of, or other communication received by them
relating to, a default or event that with notice or lapse of time or both would
become a default, or which would cause any warranty or representation of Seller
and/or Lawrence to be untrue or misleading in any material respect, under this
Agreement, (ii) any notice or other communication received by them from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated hereby and (iii) any knowledge
received by them that would cause the representations and warranties contained
in Section 2.1(s) to not be true and correct, including, without limitation, any
knowledge received from Nations.
(b) Cooperation. Following the execution of this Agreement, Seller
and/or Lawrence, at the request of Nations where appropriate, will:
(i) comply promptly with all filing requirements that
foreign, federal or state law may impose on Seller with respect to the
transactions contemplated hereby;
(ii) use their best efforts to obtain any further consent,
authorization or approval of, or exemption by, any governmental
authority or agency necessary in connection with the consummation of
the transactions contemplated hereby;
(iii) cooperate with Nations in the filing of any necessary
or advisable applications, reports or other documents with any federal
or state governmental agencies or authorities with respect to the
Acquisition and the consummation of the related transactions
<PAGE> 16
contemplated hereby (including any financing related to such
transactions), including, without limitation, the transfer of any
Permits, and in seeking and obtaining from such agencies or authorities
all necessary or advisable approvals or authorizations of said
acquisition and transactions;
(iv) use their best efforts to obtain any further consent,
authorization or approval of any third party, including without
limitation their landlords and lessors, necessary to consummate the
transactions contemplated hereby, including without limitation any and
all consents, authorizations and approvals necessary for the assignment
of rights for security to lenders of Nations, which consent,
authorization or approval shall specifically state that such party
consents to the assignment to Nations on substantially the same terms
and conditions as were applicable to the Seller.
(c) Employees. Seller and Lawrence agree that they shall use their
best efforts to assure that Seller's employees employed in connection with the
Business remain in the employ of Seller.
(d) Right to Investigate. Seller and Lawrence shall afford to the
officers, employees and authorized representatives of Nations free and full
access, during normal business hours and upon reasonable prior notice, to the
offices, properties, books and records of Seller in order that Nations may have
full opportunity to complete the consummation of the transactions contemplated
hereby, and Seller and Lawrence shall furnish Nations with such additional
financial and operating data and other information relating to the assets,
property and business of Seller as Nations shall from time to time reasonably
request. Nations shall indemnify Seller and Lawrence for any physical damage
caused to the offices, properties, books and records of Seller and Lawrence by
any officer, employee or authorized representative of Nations during the course
of its investigations pursuant to this Section 3.1(d). The representations,
warranties and agreements of each of the parties hereto shall be effective
regardless of, and shall not be affected by, any investigation that any party
has undertaken or failed to undertake.
(e) Evidence of Title. Seller and Lawrence shall provide Nations
with such title insurance policies, title reports, UCC reports or other
documentary evidence as Nations shall reasonably request in order to confirm the
accuracy of Seller and Lawrence's representations set forth in Section 2.1(f)
relating to the existence of liens or encumbrances affecting the Transferred
Assets.
(f) Employee Plans. Following the Closing Date, Seller shall
comply with the terms of the Employee Plans and with all laws, rules and
regulations relating to the Employee Plans.
(g) Short-Term Lease. At or after the Closing and if requested in
writing by Buyer within five (5) days prior to Closing, Seller or Lawrence, as
applicable, shall enter into a lease agreement with Buyer for the lease of the
real property used by Seller in connection with the Business. Such lease
agreement shall be in a form satisfactory to Buyer and Seller or Lawrence, as
applicable, and shall include the following terms:
(i) a term of not more than six (6) months;
(ii) monthly rental in the amount of $2,500; and
<PAGE> 17
(iii) standard warranties and indemnities by lessee.
Section 3.2. Covenants of Nations.
(a) Notification. Nations shall give prompt notice to Seller or
Lawrence of (i) any notice of, or other communication received by Nations
subsequent to the date of this Agreement relating to an event that would cause
any warranty or representation of Nations to be untrue or misleading, under this
Agreement, and (ii) any notice or other communication of any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
(b) Consents. As soon as practicable following the execution of
this Agreement, Nations, with the cooperation of Seller and/or Lawrence where
appropriate, will:
(i) comply promptly with all filing requirements which
foreign, federal or state law may impose on Nations with respect to the
transactions contemplated hereby;
(ii) use its best efforts to obtain any consent,
authorization or approval of, or exemption by, any governmental
authority or agency necessary in connection with the consummation of
the transactions contemplated hereby;
(iii) cooperate with Seller in the filing of any necessary
or advisable applications, reports or other documents with any federal
or state governmental agencies or authorities with respect to the sale
by Seller of the Transferred Assets and the consummation of the related
transactions contemplated hereby (including any financing related to
such transactions), and in seeking and obtaining from such agencies or
authorities all necessary or advisable approvals or authorizations of
said acquisition and transactions;
Section 3.3. Certain Joint Covenants. Subject to the terms and
conditions of this Agreement, Seller, Lawrence and Nations will use their best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement and
not to undertake any course of action inconsistent with such intended result.
ARTICLE IV: CONDITIONS TO CLOSING
Section 4.1. Conditions to Nations' Obligations. The obligation of
Nations to consummate the transactions provided for by this Agreement is subject
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Nations:
(a) Representations and Warranties. Each of the representations
and warranties of Seller and Lawrence made in Section 2.1 of this Agreement
shall be true and correct in all material respects both on the date hereof and
as of the Closing Date as though made at such time.
(b) Covenants. Seller and Lawrence shall have performed and
complied with all covenants and agreements required to be performed or complied
with by them at or prior to the Closing Date.
<PAGE> 18
(c) Material Adverse Change. Since the date hereof, there shall
have occurred no material adverse change, or discovery of a condition or
occurrence of any event that might result in any such change, in the condition
(financial or otherwise), business, assets, properties, operations or prospects
of Seller or the Business.
(d) Consents. All consents necessary to consummate the
transactions contemplated hereunder shall have been obtained and satisfied
including, without limitation, the consent of Lull to assign the Lull Agreement.
(e) No Proceeding or Litigation. No litigation, action, suit,
investigation, claim or proceeding challenging the legality of, or seeking to
restrain, prohibit or materially modify, the transactions provided for in this
Agreement shall have been instituted and not settled or otherwise terminated.
(f) Legal Matters. All legal matters in connection with this
Agreement and the transactions contemplated hereby, and the form and substance
of all legal proceedings and of all papers, instruments and documents delivered
hereunder or incidental hereto shall, in the reasonable judgment of Nations, be
satisfactory to Nations, and if requested by Nations, to Jones, Day, Reavis &
Pogue, counsel to Nations.
(g) Certificate of Sellers. At the Closing, Seller shall have
delivered to Nations a Certificate signed by Seller's President, and attested to
by their Secretary or an Assistant Secretary, and dated the Closing Date, to the
effect that to the best of the knowledge and belief of such officers the
conditions specified in Sections 4.1(a), (b), (c) and (d) have been fulfilled.
(h) Certificate; Documents. Seller shall have delivered the
certificates, opinion of counsel and other documents required by Sections 1.5.
(i) Satisfaction of Indebtedness. Seller shall deliver to Nations
evidence, satisfactory to Nations, that the Transferred Assets are transferred
to Nations free and clear of all liabilities, obligations, liens and
encumbrances, except for Assumed Liabilities.
Section 4.2. Conditions to Seller's and Lawrence's Obligations. The
obligations of Seller and Lawrence to consummate the transactions provided for
by this Agreement are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may be waived by Seller
and Lawrence:
(a) Representations and Warranties. Each of the representations
and warranties of Nations made in Section 2.2 of this Agreement shall be true
and correct in all material respects both on the date hereof and as of the
Closing Date as though made at such time.
(b) Covenants. Nations shall have performed and complied with all
covenants and agreements required to be performed or complied with by it at or
prior to the Closing Date.
(c) No Proceeding or Litigation. No litigation, action, suit,
investigation, claim or proceeding challenging the legality of, or seeking to
restrain, prohibit or materially modify, the
<PAGE> 19
transactions provided for in this Agreement shall have been instituted and not
settled or otherwise terminated.
(d) Legal Matters. All legal matters in connection with this
Agreement and the transactions contemplated hereby, and the form and substance
of all legal proceedings and of all papers, instruments and documents delivered
hereunder or incidental hereto shall, in the reasonable judgment of Seller and
Lawrence, be satisfactory to Seller and Lawrence, and if requested by Seller and
Lawrence, to Baker & Daniels, counsel to Seller and Lawrence.
(e) Certificate of Nations. At the Closing, Nations shall have
delivered to Sellers a Certificate signed by the President or a Vice President
of Nations, and attested to by the Secretary or an Assistant Secretary of
Nations, and dated the Closing Date, to the effect that to the best of the
knowledge of such officers the conditions specified in Section 4.2(a) and (b)
have been fulfilled.
(f) Certificates; Documents. Nations shall have delivered the
certificates and other documents required by Section 1.6.
ARTICLE V
INDEMNIFICATION
Section 5.1. Indemnification by The Seller and Lawrence. From and
after the Closing Date, Seller and Lawrence, jointly and severally, shall
indemnify and save and hold Nations, and any director, officer, employee, agent
or representative of Nations, harmless from and against any and all liability,
loss, cost, judgments, damage (including consequential damages), punitive
damages, civil and criminal penalties or expense (including reasonable
attorneys' fees) whatsoever resulting from or arising out of or in connection
with (i) any breach of any representation or warranty of Seller and Lawrence,
(ii) any breach of any covenant or obligation of Seller and/or Lawrence
contained herein, or (iii) any liability or obligation whatsoever in respect of
the conduct of the Business or the ownership or use of any of the Transferred
Assets prior to the Closing Date, including, without limitation, the Retained
Liabilities, but not including the Assumed Liabilities.
Section 5.2. Indemnification by Nations. From and after the
Closing Date, Nations shall indemnify and save and hold Seller and Lawrence
harmless from and against any and all liability, loss, cost, judgments, damage
(including consequential damages) or expense (including reasonable attorneys'
fees) whatsoever resulting from, arising out of or in connection with (i) the
Assumed Liabilities, (ii) any breach of any representation or warranty of
Nations contained herein, (iii) any breach of any covenant or obligation of
Nations contained herein, or (iv) any liability or obligation whatsoever in
respect of the conduct of the Business or the ownership or use of any of the
Transferred Assets after the Closing Date other than the Retained Liabilities.
Section 5.3. Claims. In the event Nations, Seller or Lawrence (the
"Claimant") desires to make a claim against the other (the "Indemnitor") under
Section 5.1 or 5.2 hereof, the Claimant shall give prompt notice to the
Indemnitor of the institution of any actions, suits or proceedings and demands
at any time instituted against or made upon Claimant, or any state of facts
known to Claimant in connection with which the Claimant would claim
indemnification under Section 5.1 or
<PAGE> 20
5.2; provided, however, that the failure of any Claimant to give notice as
provided herein shall not relieve the Indemnitor of its obligations under
Section 5.1 or 5.2, except to the extent that the Indemnitor's position has been
materially adversely affected by such failure. Indemnitor shall have the right,
but not the obligation, to assume the defense of any action, suit or proceeding
for which there is a claim for indemnification hereunder, provided that the
Indemnitor affirmatively assumes, in writing, the obligation to pay the loss,
cost, damage and expense arising from the claim of which defense is assumed. If
Indemnitor does not assume the defense of any such action, suit or proceeding
before the earlier to occur of (i) the thirtieth (30) day after receipt of
notice, or (ii) five days or any shorter period of time, if necessary, before
the date an answer or similar response to an initiation of judicial proceedings
is due, the Claimant shall, upon further notice to the Indemnitor, have the
right to undertake, at the expense of the Indemnitor, the defense, compromise,
or settlement of such claim on behalf of and for the account and risk of the
Indemnitor, subject to the right of the Indemnitor to assume the defense of such
claim at any time prior to settlement, compromise or final determination
thereof; provided, however, that the exercise of the right of Indemnitor to
assume the defense of such claim, once the Claimant has undertaken the defense,
compromise or settlement of such claim in accordance with this Section 5.3,
shall not prejudice the Claimant. Anything in this Article V to the contrary
notwithstanding, (i) if there is a reasonable probability that such an action,
suit or proceeding may materially and adversely affect the Claimant despite the
indemnity of the Indemnitor, the Claimant shall have the right to defend, at its
own cost and expense, and to compromise or settle such action, suit or
proceeding; provided, however, that the Indemnitor shall have given written
consent for such compromise or settlement, and (ii) the Indemnitor shall not,
without the written consent of the Claimant, which consent may not be
unreasonably withheld, settle or compromise any such action, suit or proceeding
or consent to the entry of any judgment. The Indemnitor shall remain fully
liable for its obligation of indemnity despite any action by the Claimant under
the preceding sentence. With respect to liquidated claims, if within thirty (30)
days the Indemnitor has not contested said claim in writing, the Indemnitor will
pay the full amount thereof in cash within ten (10) days after the expiration of
such period. Each party shall be responsible for its own expenses in any
arbitration or litigation between the parties hereto and any expenses not
attributable to either party, such as the cost of a third-party arbitrator (in
the event that the parties agree to arbitration), shall be shared equally by the
parties.
Section 5.4. Time Limitations on Claims for Indemnification. The
right of Nations to indemnification under Section 5.1 shall apply only to those
claims for indemnification that are given pursuant to this Agreement on or
before the respective dates set forth below:
(a) Any claim for indemnification relating to any breach of the
representations and warranties set forth in Section 2.1(u) shall be made on or
before forty-five days after the expiration of the applicable statute of
limitations (and any waivers or extensions thereof) applicable to any claim
arising in connection with any breach of any such representations and
warranties;
(b) No time limit shall apply to any right to indemnification
with respect to any breach of any representation or warranty contained in
Sections 2.1(a), (b), (f), or (s); and
(c) Any claim for indemnification not referred to in subsections
(a) or (b) of this Section 4.4 shall be made on or before the date which is
three (3) years following the Closing Date.
<PAGE> 21
Section 5.5. Threshold Amount. Seller and Lawrence shall not be
required to indemnify and save and hold Nations, and any director, officer,
employee, agent or representative of Nations, harmless under Section 5.1 unless
and until the amount of such indemnification equals $10,000 in the aggregate
(the "Threshold Amount") in which event Seller and Lawrence shall be obligated
to indemnify Nations, and Nations may assert its right to indemnification
hereunder to the full extent of all amounts relating to such right, including
amounts that are less than the Threshold Amount.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Survival of Representations and Warranties. The
representations and warranties contained in this Agreement, and in any Schedule
delivered pursuant hereto, shall survive the Closing Date. Each of the covenants
and other agreements contained herein shall survive the Closing Date.
Section 6.2. Entire Agreement; Assignment. This Agreement,
including the Schedules attached and delivered pursuant hereto, constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof. This
Agreement shall not be assigned by operation of law or otherwise without the
prior written consent of the other party hereto except that Nations may assign
its rights and responsibilities hereunder to an affiliate without the prior
written consent of Seller or Lawrence. No assignment pursuant to this Section
6.2, however, shall release the assignor or any other person of any obligations
or liabilities hereunder.
Section 6.3. Validity; Severability. Each Article, section,
subsection and lesser section of this Agreement constitutes a separate and
distinct undertaking, covenant and/or provision hereof. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law. In the event that any provision of
this Agreement shall be determined to be unlawful, invalid or unenforceable,
such provision shall be deemed severed from this Agreement, but every other
provision of this Agreement shall remain in full force and effect. In
substitution for any provision of this Agreement held unlawful, invalid or
unenforceable, there shall be substituted a provision of similar import
reflecting the original intent of the parties hereto to the fullest extent
permissible under law.
Section 6.4. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by cable, telegram or telex, by
registered or certified mail (postage prepaid, return receipt requested) or by
facsimile, the receipt of which is acknowledged, to the respective parties as
follows:
<PAGE> 22
If to Seller:
R.F.L. Enterprises, Inc.
4440 Secretary Drive
Fort Wayne, Indiana 46808
Attention: Randal F. Lawrence
With copies to:
Baker & Daniels
111 East Wayne Street, Suite 800
Fort Wayne, Indiana 46802-2603
Attention: Steven H. Hazelrigg, Esq.
If to Lawrence:
Randal F. Lawrence
4440 Secretary Drive
Fort Wayne, Indiana 46808
With copies to:
Baker & Daniels
111 East Wayne Street, Suite 800
Fort Wayne, Indiana 46802-2603
Attention: Steven H. Hazelrigg, Esq.
If to Nations:
NationsRent of Indiana, Inc.
Leveque Tower
50 West Broad Street, Suite 3100
Columbus, Ohio 43215
Attention: Troy Gabriel
With copies to:
Jones, Day, Reavis & Pogue
1900 Huntington Center
41 South High Street
Columbus, Ohio 43215
Attention: Robert J. Gilker, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
<PAGE> 23
Section 6.5. Amendment. This Agreement may not be amended except
by an instrument in writing signed on behalf of all the parties hereto.
Section 6.6. Waivers. At any time prior to the Closing Date, the
parties may (i) waive any inaccuracies in the representations and warranties
contained herein or in any document, certificate or writing delivered pursuant
hereto; or (ii) waive compliance with any of the agreements or conditions
contained herein; provided, however, that no failure or delay of any party
hereto in exercising any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right hereunder. Any agreement on
the part of any party to any such waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
Section 6.7. Governing Law. This Agreement shall be governed by
and construed in accordance with the internal substantive laws of the State of
Indiana, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws.
Section 6.8. Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
Section 6.9. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and their successors
and permitted assigns, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights, remedies, obligations or
liabilities of any nature whatsoever under or by reason of this Agreement.
Section 6.10. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
Section 6.11. Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
Section 6.12. Specific Performance. The parties hereto acknowledge
that damages would be an inadequate remedy for breach of this Agreement and that
the obligations of the parties shall be specifically enforceable.
Section 6.13. Passage of Title and Risk of Loss. Legal title,
equitable title and risk of loss with respect to the Transferred Assets shall
not pass to Nations until such assets are transferred at the Closing, which
transfer, once it has occurred, shall be deemed effective for tax, accounting
and other computational purposes as of midnight (Eastern Time) on the Closing
Date.
Section 6.14. Waiver of Compliance with Bulk Transfer Laws. Nations
hereby waives compliance by Seller with the provisions of Article 6 of the
Uniform Commercial Code of the State of Indiana, any similar articles or section
under the Uniform Commercial Code enacted in any other jurisdiction, or any
other bulk transfer laws enacted in any other jurisdiction in which any of the
Transferred Assets may be located that may be applicable to the transactions
contemplated by this
<PAGE> 24
Agreement. Seller and Lawrence, jointly and severally, agree to indemnify and
hold Nations harmless from any and all liabilities, costs, damages, claims,
suits and expenses, including reasonable attorneys' fees and expenses and court
costs, incurred with regard to creditors of Seller as a result of the failure to
comply with such bulk transfer laws other than with respect to Assumed
Liabilities.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, or
has caused this Agreement to be executed on its behalf by its duly authorized
officers, as the case may be, as of the day and year first above written.
NATIONSRENT OF INDIANA, INC.
By: /s/ Gene J. Ostrow
--------------------------------------
Name: Gene J. Ostrow
------------------------------------
Title: Executive Vice President
-----------------------------------
R.F.L. ENTERPRISES, INC.
By: /s/ Randal F. Lawrence
--------------------------------------
Name: Randal F. Lawrence
------------------------------------
Title:
-----------------------------------
/s/ Randal F. Lawrence
-----------------------------------------
Randal F. Lawrence, Individually
<PAGE> 1
EXHIBIT 10.17
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of April 21, 1998, by and between NATIONSRENT OF FLORIDA, INC., a
Delaware corporation (the "Buyer"), and NAPLES RENT-ALL AND SALES COMPANY, INC.,
a Florida corporation (the "Seller"). The Buyer and the Seller are referred to
herein collectively as the "Parties."
RECITALS
This Agreement contemplates a transaction in which the Buyer will
purchase substantially all of the assets (and assume certain of the liabilities)
of the Seller in return for cash and other consideration.
STATEMENT OF AGREEMENT
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties hereby agree as follows.
SS.1. DEFINITIONS.
For purposes of this Agreement, in addition to the terms defined
elsewhere in this Agreement, the following terms shall have the meanings set
forth below:
"Acquired Assets" means all right, title, and interest in and to all of
the assets and business of Seller, including all Cash, tangible and intangible
personal property and real property interests, machinery, equipment (including
Rental Equipment), inventories of materials and supplies, furniture and
fixtures, automobiles, trucks, tractors, trailers, leases, subleases and rights
thereunder, Marks, agreements, contracts, accounts, notes, and other
receivables, claims, deposits, prepayments, refunds, causes of action, rights of
recovery, rights of set off and rights of recoupment, franchises, approvals,
permits, licenses, orders, registrations, certificates, variances, and similar
rights obtained from governments and governmental agencies, books, records,
ledgers, files, documents, correspondence and lists, the Employee Benefit Plans
(and the assets corresponding thereto) that the Seller maintains and each trust,
insurance contract, annuity contract or other funding arrangement that the
Seller has established with respect thereto, including, without limitation, all
assets set forth in Schedule A attached hereto; provided, however, that the
Acquired Assets shall not include (i) the corporate charter, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance, and
existence of the Seller as a corporation, (ii) any of the rights of the Seller
under this Agreement (or any other agreement between the Seller on the one hand
and the Buyer on the other hand entered into on or after the date of this
Agreement, (iii) the key man like insurance policies insuring the life of the
Stockholder owned by the Seller; and (iv) the Seller's real property interests
relating to its three (3) Facilities.
<PAGE> 2
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Agreement with Stockholder" means the Agreement with the Stockholder
entered into concurrently herewith and attached hereto as Exhibit F.
"Applicable Rate" means the interest rate announced from time to time
by Fifth Third Bank, as its prime lending rate, expressed as a percent per
annum, determined on a daily basis.
"Assumed Liabilities" means the Liabilities, if any, of the Seller to
be assumed by the Buyer hereunder as set forth in Schedule B attached hereto.
"Assumption Agreement" has the meaning set forth in ss.6(a)(vi) below.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Benefit Arrangement" has the meaning set forth in ss.3(v) below.
"Bill of Sale" has the meaning set forth in ss.6(a)(v) below.
"Business Records" has the meaning set forth in ss.5(a) below.
"Buyer" has the meaning set forth in the preface above.
"Buyer's Parent" means NationsRent, Inc., a Delaware corporation and
the sole shareholder of the Buyer.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Seller's financial statements.
"Certificate of Title" means the certificate of title or manufacturer's
or importer's certificate, as applicable, issued by the Registrar of Title in
the jurisdiction in which the applicable item of Titled Property is registered.
"Closing" has the meaning set forth in ss.2(g) below.
"Closing Date" has the meaning set forth in ss.2(g) below.
<PAGE> 3
"Confidential Information" means any information concerning the
businesses and affairs of the Seller or the Buyer that is neither already
generally available to the public nor becomes generally available to the Public
through no fault of the Seller or its Affiliates.
"Consent to Sublease Agreement" and "Consents to Sublease Agreements"
have the respective meanings set forth in ss.2(d) below.
"2600 Davis Blvd. Facility" means the parcel of real property and the
improvements thereon located at 2600 Davis Blvd., Naples, Collier County,
Florida, which property is leased by the Seller and used by the Seller as an
equipment rental location.
"2636 Davis Blvd. Facility" means the parcel of real property and the
improvements thereon located at 2636 Davis Blvd., Naples, Collier County,
Florida, which property is leased by the Seller and used by the Seller as an
equipment rental location.
"Disclosure Schedule" has the meaning set forth in ss.3 below.
"Employment Agreement" has the meaning set forth in ss.2(f) below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in ss.3(v) below.
"Facility" means, individually, the 2600 Davis Blvd. Facility, the 2636
Davis Facility and the North Airport Road Facility.
"Facilities" means, collectively, the 2600 Davis Blvd. Facility, the
2636 Davis Facility and the North Airport Road Facility.
"Financial Statements" has the meaning set forth in ss.3(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Indemnified Party" has the meaning set forth in ss.8(d)(i) below.
<PAGE> 4
"Indemnifying Party" has the meaning set forth in ss.8(d)(i) below.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes and any liability related to, under, or
with respect to any Employee Benefit Plan that the Seller or any subsidiary or
ERISA Affiliate of Seller maintains or ever has maintained.
"Marks" has the meaning set forth in ss.3(t) below.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Month End" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.3(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37)
"North Airport Road Facility" means the parcel of real property and the
improvements thereon located at 6487 North Airport Road, Naples, Collier County,
Florida, which property is leased by the Seller and used by the Seller as an
equipment rental location.
"Note" has the meaning set forth in ss.2(c) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parties" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"401(k) Plan" has the meaning set forth in ss.7(h) below.
"Purchase Price" has the meaning set forth in ss.2(c) below.
"Registrar of Title" means the department, agency, court or official in
the jurisdiction in which an item of Titled Property is registered that is
responsible for accepting applications for, and maintaining records regarding,
Certificates of Title and liens thereon.
<PAGE> 5
"Rental Equipment" means all machinery, equipment, tools, supplies and
other similar tangible personal property used or held for use by the Seller or
its customers.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge or other security interest.
"Seller" has the meaning set forth in the preface above.
"Stockholder" means Michael C. Nordberg, the sole stockholder of the
Seller.
"Sublease Agreement" and "Sublease Agreements" have the respective
meanings set forth in ss.2(d) below
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Internal Revenue
Code ss.59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Third Party Claim" has the meaning set forth in ss.8(d)(i) below.
"Titled Property" means the automobiles, trucks, trailers,
semitrailers, equipment, machinery and other tangible personal property of the
Seller included in the Acquired Assets, the ownership of which is evidenced by a
Certificate of Title.
"Titled Property Transfer Documents" has the meaning set forth in
ss.6(a)(v) below.
SS.2. BASIC TRANSACTION.
(A) PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, at the Closing the Buyer shall purchase from the
Seller, and the Seller shall sell, assign, transfer, convey, and agree to
deliver to the Buyer, all of the Acquired Assets for the consideration specified
below in this ss.2.
(B) ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, at the Closing the Buyer agrees to assume and
become responsible for all of the Assumed Liabilities. The Buyer shall not
assume or have any responsibility, however, with respect to any other obligation
or Liability of the Seller not included within the definition of Assumed
<PAGE> 6
Liabilities. The Assumed Liabilities shall not include any liability of Seller
under that certain consulting agreement dated November 22, 1994 between Seller
and John Caskey, Jr.
(C) PURCHASE PRICE. The Buyer agrees to pay to the Seller an
amount equal to Four Million One Hundred Thousand Fifty Dollars ($4,150,000)
(the "Purchase Price"). The Purchase Price shall be paid at the Closing by (i)
wire transfer or delivery of other immediately available funds in the amount of
Three Million One Hundred Fifty Thousand Dollars ($3,150,000) and (ii) execution
and delivery by the Buyer's Parent to the Seller of an unsecured convertible
subordinated promissory note in the original principal amount of One Million
Dollars ($1,000,000) in the form of Exhibit A attached hereto (the "Note").
(D) SUBLEASE OF FACILITIES. At the Closing, the Buyer and the
Seller shall enter into a sublease agreement relating to each Facility in the
form of Exhibit B attached hereto (individually, a "Sublease Agreement" and
collectively, the "Sublease Agreements"), at the monthly rental rates specified
in Schedule C attached hereto, and (ii) an agreement with the Seller's landlord
for each facility in the form of Exhibit C attached hereto (with such changes
thereto as are reasonably acceptable to the Parties), whereby such landlords
shall consent to the Sublease Agreements (individually, a "Consent to Sublease
Agreement" and collectively, the "Consent to Sublease Agreements").
(E) EMPLOYMENT AGREEMENT. At the Closing, the Buyer shall enter
into an employment agreement with the Stockholder in the form of Exhibit C
attached hereto (the "Employment Agreement").
(F) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Squire,
Sanders & Dempsey L.L.P. in Columbus, Ohio commencing at 11:00 a.m. (local time)
on April 21, 1998 or such other date as the Parties may mutually determine (the
"Closing Date"). Subject to the provisions of ss.9 hereof, failure to consummate
the transactions contemplated by this Agreement on the date and time specified
in this ss.2(f) shall not result in the termination of this Agreement and shall
not relieve any party of its obligations under this Agreement.
(G) DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller
shall deliver to the Buyer the various agreements, certificates, instruments and
documents required herein; (ii) the Buyer shall deliver to the Seller the
various agreements, certificates, instruments and documents required herein;
(iii) the Seller shall execute, acknowledge (if appropriate) and deliver to the
Buyer such instruments of sale, transfer, conveyance and assignment as the Buyer
and its counsel reasonably may request; (iv) the Buyer will execute, acknowledge
(if appropriate) and deliver to the Seller such instruments of assumption as the
Seller and its counsel reasonably may request; and (v) the Buyer shall deliver
to the Seller the consideration specified in ss.2(c) above.
SS.3. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to the Buyer that the statements
contained in this ss.3 are true, correct and complete as of the date of this
Agreement and shall be true, correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
<PAGE> 7
date of this Agreement throughout this ss.3), except as set forth in the
disclosure schedule accompanying this Agreement executed and delivered by the
Seller to the Buyer on the date hereof (the "Disclosure Schedule"). The
Disclosure Schedule shall be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this ss.3. The Seller shall have
the right to amend and/or supplement the Disclosure Schedule by giving the Buyer
written notice thereof on or before April 23, 1998; provided, however, that in
such event the Buyer shall have the right and option to terminate this Agreement
in accordance with the provisions of ss.9(a)(iv)(B) hereof.
(A) ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Florida. The Stockholder is the owner of all of the issued and outstanding
shares of capital stock of the Seller.
(B) AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Seller, enforceable
in accordance with its terms and conditions.
(C) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling or charge, or, to the Knowledge of the Seller, any other
restriction of any government, governmental agency or court to which the Seller
is subject; (ii) any provision of the charter or bylaws of the Seller; or (iii)
except as set forth in ss.3(c)(iii) of the Disclosure Schedule, conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which the Seller is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). The Seller does not need to give any notice
to, make any filing with, or obtain any authorization, consent or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in ss.2 above).
(D) BROKERS' FEES. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(E) TITLE TO ASSETS. The Seller has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet. Without limiting the generality of the foregoing, the
Seller has (and at the Closing shall transfer to the Buyer) good and marketable
title to all of the Acquired Assets, free and clear of any Security Interest or
restriction on transfer, except for Security Interests securing Assumed
Liabilities. ss.3(e) of the Disclosure Schedule identifies in reasonable detail
(including, without limitation, the make, model, serial and registration numbers
and year) all Titled Property.
<PAGE> 8
(F) SUBSIDIARIES; AFFILIATES. The Seller has no Subsidiaries. None
of the Seller's Affiliates is engaged in any business except as a stockholder,
director, officer and/or employee of the Seller.
(G) FINANCIAL STATEMENTS. Attached hereto as Exhibit D are the
following financial statements (collectively, the "Financial Statements"): (i)
unaudited balance sheets and statements of income, changes in stockholders'
equity, and changes in cash flows as of and for the fiscal years ended December
31, 1996 and December 31, 1997 (the "Most Recent Fiscal Year End") for the
Seller, and (ii) unaudited balance sheets and statements of income, changes in
stockholders' equity, and changes in cash flows (the "Most Recent Financial
Statements") as of and for the three months ended March 31, 1998 (the "Most
Recent Fiscal Month End") for the Seller. The Financial Statements (including
the notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Seller as of such dates and the results of operations
of the Seller for such periods, are correct and complete in all material
respects, and are consistent with the books and records of the Seller (which
books and records are correct and complete); provided, however, that the Most
Recent Financial Statements are subject to normal year end adjustments (which
will not be material individually or in the aggregate) and lack footnotes and
other presentation items.
(H) UNDISCLOSED LIABILITIES. The Seller has no Liability relating
to its business (and, to the Knowledge of the Seller, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Seller giving rise to any such
Liability), except for Liabilities which have arisen after the Most Recent
Fiscal Month End in the Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law).
(I) LEGAL COMPLIANCE. Except as set forth in ss.3(i) of the
Disclosure Schedule, the Seller has complied with and is not in violation of any
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, complaint, claim, demand, notice or, to Seller's Knowledge,
investigation has been filed or commenced against it alleging any failure so to
comply.
(J) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the
Most Recent Fiscal Year End, the Seller has operated its business and otherwise
conducted its affairs only in the Ordinary Course of Business and there has not
been any material adverse change in the business, financial condition,
operations, results of operations or future prospects of the Seller. Without
limiting the generality of the foregoing, since that date (except as set forth
in ss.3(j) of the Disclosure Schedule):
(i) the Seller has not sold, leased, transferred or
assigned any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
<PAGE> 9
(ii) the Seller has not entered into any agreement,
contract, lease or license (or series of related agreements, contracts,
leases and licenses) either involving more than $5,000 (except for the
purchase of Rental Equipment and other inventory in the Ordinary Course
of Business and leases of Rental Equipment to Customers in the Ordinary
Course of Business) or outside the Ordinary Course of Business;
(iii) no party (including the Seller) has accelerated,
terminated, modified, or canceled any agreement, contract, lease or
license (or series of related agreements, contracts, leases, and
licenses) involving more than $5,000 to which the Seller is a party or
by which it is bound;
(iv) the Seller has not imposed any Security Interest upon
any of its assets, tangible or intangible;
(v) the Seller has not made any capital expenditure (or
series of related capital expenditures) either involving more than
$5,000 or outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any
other Person (or series of related capital investments, loans and
acquisitions) either involving more than $5,000 or outside the Ordinary
Course of Business;
(vii) the Seller has not issued any note, bond or other
debt security or created, incurred, assumed or guaranteed any
indebtedness for borrowed money or capitalized lease obligation either
involving more than $2,000 singly or $5,000 in the aggregate;
(viii) the Seller has not delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary Course
of Business;
(ix) the Seller has not canceled, compromised, waived or
released any right or claim (or series of related rights and claims)
either involving more than $2,000 or outside the Ordinary Course of
Business;
(x) the Seller has not granted any license or sublicense
of any rights under or with respect to any intellectual property;
(xi) there has been no change made or authorized in the
charter or bylaws of the Seller;
(xii) the Seller has not issued, sold or otherwise disposed
of any of its capital stock, or granted any options, warrants or other
rights to purchase or obtain (including upon conversion, exchange or
exercise) any of its capital stock;
<PAGE> 10
(xiii) the Seller has not declared, set aside or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased or otherwise
acquired any of its capital stock;
(xiv) the Seller has not experienced any damage,
destruction or loss (whether or not covered by insurance) to its
property;
(xv) the Seller has not made any loan to, or entered into
any other transaction with, any of its directors, officers,
stockholders or employees outside the Ordinary Course of Business;
(xvi) the Seller has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(xvii) the Seller has not granted any increase in the base
compensation of any of its directors, officers or employees exceeding
$5,000 per year or outside the Ordinary Course of Business;
(xviii) the Seller has not adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance or other
plan, contract or commitment for the benefit of any of its directors,
officers and employees (or taken any such action with respect to any
other employee benefit plan);
(xix) the Seller has not made any other change in
employment terms for any of its directors, officers and employees
outside the Ordinary Course of Business;
(xx) the Seller has not made or pledged to make any
charitable or other capital contribution in excess of an aggregate of
$1,000;
(xxi) the Seller has not paid any amount to any third party
with respect to any Liability or obligation (including any costs and
expenses which the Seller has incurred or may incur in connection with
this Agreement and the transactions contemplated hereby) which would
not constitute an Assumed Liability if in existence as of the Closing;
(xxii) there has not been any other material occurrence,
event, incident, action, failure to act or transaction outside the
Ordinary Course of Business involving the Seller; and
(xxiii) the Seller has not committed to any of the foregoing.
(K) INVENTORY. Except as set forth in ss.3(k) of the Disclosure
Schedule, all inventory of the Seller, whether or not reflected in the Most
Recent Balance Sheet, consists of a quality and quantity usable and salable in
the Ordinary Course of Business, except for obsolete items and items
<PAGE> 11
of below-standard quality, all of which have been written off or written down to
net realizable value in the Most Recent Balance Sheet. All such inventories not
written off have been priced at the lower of cost or net realizable value on a
first in, first out basis. To the Knowledge of the Seller, the quantities of
each item of inventory are not excessive, but are reasonable in the present
circumstances of the Seller.
(L) CONTRACTS. ss.3(l) of the Disclosure Schedule lists all
material contracts, including the following contracts and other agreements to
which the Seller is a party:
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for
lease payments in excess of $3,000.00 per annum;
(ii) any agreement (or group of related agreements) for
the purchase or sale of machinery, equipment or supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a material loss to the Seller, or involve consideration
in excess of $5,000.00;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$5,000.00 or under which it has imposed a Security Interest on any of
its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement involving the Stockholder and any of
his Affiliates;
(vii) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $5,000.00 or providing severance benefits;
(viii) any agreement under which it has advanced or loaned
any amount to any of the directors, officers, and employees of the
Seller outside the Ordinary Course of Business;
(ix) any agreement under which the consequences of a
default or termination could have a material adverse effect on the
business, financial condition, operations, results of operations, or
future prospects of the Seller; or
(x) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $5,000.00.
<PAGE> 12
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in ss.3(l) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in ss.3(l) of the Disclosure Schedule. With respect to
each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in ss.2 above); (C) no party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
(M) LITIGATION. ss.3(m) of the Disclosure Schedule sets forth each
instance in which the Seller (i) is subject to any outstanding injunction,
judgment, order, decree, ruling or charge or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any action, suit,
proceeding, hearing or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings and investigations set forth in ss.3(m) of the Disclosure Schedule
could result in any adverse change in the business, financial condition,
operations, results of operations, or, to the Knowledge of the Seller, future
prospects of the Seller. None of the stockholders, directors and officers (and
employees with responsibility for litigation matters) of the Seller has any
reason to believe that any such action, suit, proceeding, hearing or
investigation may be brought or threatened against the Seller and its
Affiliates.
(N) CONDITION AND SUFFICIENCY OF THE ACQUIRED ASSETS. The Acquired
Assets, where applicable, are structurally sound, are in good operating
condition and repair (subject to normal wear and tear), and are adequate for the
uses to which they are being put, and none of the Acquired Assets, where
applicable, is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The Acquired
Assets are sufficient for the continued conduct of the Seller's business after
the Closing in substantially the same manner as conducted prior to the Closing.
(O) PRODUCT LIABILITY. None of the Seller and its Affiliates has
any Liability (and, to the Knowledge of the Seller, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against it giving rise to any Liability) arising out
of any injury to individuals or property as a result of the ownership,
possession or use of any product manufactured, sold, leased or delivered by the
Seller.
(P) RENTAL EQUIPMENT. All Rental Equipment of the Seller, whether
or not reflected in the Most Recent Balance Sheet, consists of a quality and
quantity usable, rentable or salable in the Ordinary Course of Business, except
for obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Most Recent Balance
Sheet. All such Rental Equipment not written off has been recorded at net
realizable value and has been depreciated consistent with the economic life of
such Rental Equipment. To the Knowledge
<PAGE> 13
of the Seller, the quantities of each item of such Rental Equipment are not
excessive, but are reasonable in the present circumstances of the Seller. All
such Rental Equipment is in good operating condition and repair, subject to
normal wear and tear, and has been maintained in the ordinary course in a manner
consistent with normal industry practice.
(Q) DISCLOSURE. The representations and warranties contained in
this ss.3 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
ss.3 not misleading.
(R) INVESTMENT. The Seller (i) understands that the Note has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and is being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (ii) is
acquiring the Note solely for its own account for investment purposes, and not
with a view to the distribution thereof, (iii) is a sophisticated investor with
knowledge and experience in business and financial matters, (iv) has received
certain information concerning the Buyer and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in holding the Note, (v) is able to bear the economic risk and lack of
liquidity inherent in holding the Note, and (vi) is an "accredited investor," as
such term is defined in Rule 501(a) promulgated under the Securities Act.
(S) ACCOUNTS RECEIVABLE. All accounts receivable of the Seller
that are reflected on the Most Recent Balance Sheet or on the accounting records
of the Seller as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of a reserve in an amount not to exceed
$10,000 (the "A/R Reserve") to be accrued by the Seller with the concurrence of
Buyer prior to the Closing Date (which reserve shall be adequate). ss.3(s) of
the Disclosure Schedule contains a complete and accurate list and description of
actions pending as of the date hereof to pursue collection of the Accounts
Receivable (the "Collection Actions A/R"), it being acknowledged by the Buyer
that the Seller will continue to utilize and pay for reasonable collection
efforts with respect thereto after the Closing. Subject to the foregoing A/R
Reserve, each of the Accounts Receivable either has been or will be collected in
full, without any set-off, within ninety (90) days after the day on which it
first becomes due and payable; provided, however, that Collection Actions A/R
have been or will be collected in full, without any set-off, within ninety (90)
days after the date hereof. There is no contest, claim or right of set-off,
other than adjustments in the Ordinary Course of Business, under any Contract
with any obligor of an Accounts Receivable relating to the amount or validity of
such Accounts Receivable. ss.3(s) of the Disclosure Schedule contains a complete
and accurate list of all Accounts Receivable as of March 31, 1998, which list
sets forth the aging of such Accounts Receivable. Buyer agrees to assign to the
Seller any particular Accounts Receivable for which the Seller is required to
indemnify the Buyer as a result of a Breach of this ss.3(s).
<PAGE> 14
(T) MARKS. ss.3(t) of the Disclosure Schedule contains a complete
and accurate list and summary description of the name of the Seller, all
fictional business names, trading names, registered or unregistered trademarks,
servicemarks, and applications therefor (collectively, the "Marks"). The Seller
is the owner of all right, title and interest in and to each of the Marks, free
and clear of all liens, Security Interests, charges, encumbrances and equities.
(U) EMPLOYEE BENEFITS MATTERS.
(i) Paragraph (u)(i) of the Disclosure Schedule lists and
identifies: (i) each Employee Pension Benefit Plan; (ii) each Employee
Welfare Benefit Plan; and (iii) each compensation and employment
arrangement, including, but not limited to, any fringe benefit,
incentive compensation, bonus, severance, deferred compensation,
supplemental executive compensation plan, and employment arrangement (a
"Benefit Arrangement"), that is maintained by the Seller.
(ii) Each Employee Welfare Benefit Plan that provides
medical benefits has been administered in compliance in all respects
with the requirements of Code ss.4980B and ss.ss.601 through 608 of
ERISA.
(iii) Neither the Seller nor any ERISA Affiliate (as
hereinafter defined) of the Seller has participated in any
Multiemployer Plan during the most recent (5) five years. As used
herein, the term "ERISA Affiliate" shall mean any subsidiary of the
Seller and any trade or business (whether or not incorporated) that is
part of the same controlled group, or under common control with, or
part of an affiliated service group that includes the Seller within the
meaning of Code ss.ss.414(b), (c), (m) or (o).
(iv) Except as set forth in ss.7 of this Agreement, no
Employee Pension Benefit Plan, Employee Welfare Benefit Plan, or
Benefit Arrangement shall result in any liability to the Buyer or shall
have an adverse impact upon the Acquired Assets or subject the Acquired
Assets to any lien under ERISA, the Code, or the laws of any state or
country.
(v) No Employee Benefit Pension Plan is subject to Title
IV of ERISA.
(vi) Each Employee Benefit Pension Plan is qualified in
form and operation under Code ss.401(a) and any related trust is exempt
from taxation under Code ss.501(a) and has received a current favorable
determination letter from the Internal Revenue Service to such effect,
and each Pension Plan has complied in all material respects with ERISA
and the applicable provisions of the Code.
(vii) Each Employee Benefit Pension Plan has been
administered in accordance with its terms and applicable law.
<PAGE> 15
(V) INTERCOMPANY ARRANGEMENTS. Except as set forth in the
Disclosure Schedule, no Affiliate of the Seller (i) provides or causes to be
provided to the Seller any products, services, equipment, facilities or similar
items or (ii) has been involved in any material business arrangement or
relationship with the Seller within the past two (2) years.
SS.4. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Seller that the statements
contained in this ss.4 are true, correct and complete as of the date of this
Agreement and will be true, correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this ss.4).
(A) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(B) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions.
(C) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling charge, or, to the Knowledge of the Buyer, any other
restriction of any government, governmental agency or court to which the Buyer
is subject; (ii) any provision of its charter or bylaws; or (iii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument
or other arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject. The Buyer does not need to give any notice
to, make any filing with, or obtain any authorization, consent or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in ss.2 above).
(D) BROKERS' FEES. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
SS.5. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing:
<PAGE> 16
(A) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as the other Party
reasonably may request, at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under ss.8
below). The Seller acknowledges and agrees that from and after the Closing the
Buyer (unless otherwise prohibited by law) will be entitled to possession of all
documents, books, records (including Tax records and the personnel records of
any former employees of the Seller hired by the Buyer), agreements and data of
any sort relating to the Seller (the "Business Records"), other than as excluded
in the definition of Acquired Assets. From and after the Closing Date the Buyer
agrees to provide the Seller with access, upon notice and at reasonable times,
to records of the Buyer relating to the Acquired Assets, including the Business
Records of the Seller transferred to the Buyer, to the extent necessary to
permit the Seller and the Stockholder to prepare their respective tax returns
and to respond to any governmental inquiry, litigation, prospective litigation,
threatened litigation, claims or other events.
(B) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand asserted by a third
party in connection with (i) any transaction contemplated under this Agreement
or (ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the Seller and its
Affiliates, the other Party will cooperate with the contesting or defending
Party and its counsel in the contest or defense, make available its personnel,
and provide such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under ss.8 below).
(C) TRANSITION. The Seller shall not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of the Seller from maintaining
the same business relationships with the Buyer after the Closing as it
maintained with the Seller prior to the Closing. The Seller shall refer all
customer inquiries relating to the business of the Seller to the Buyer from and
after the Closing. In addition, Seller shall file an amendment to its articles
of incorporation changing its name to remove "Naples" and "Rent-All" (and all
variations thereof or words of similar import) from its name within five (5)
days after the Closing.
(D) CONFIDENTIALITY. The Seller shall treat and hold as such all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement. In the event that the
Seller is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand or similar process) to disclose any Confidential Information, the Seller
shall notify the Buyer promptly of the request or requirement so that the Buyer
may seek an appropriate protective order or waive compliance with the provisions
of this ss.5(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, the Seller is, on the advice of counsel, compelled to disclose
<PAGE> 17
any Confidential Information to any tribunal or else stand liable for contempt,
then the Seller may disclose the Confidential Information to the tribunal;
provided, however, that the Seller shall use its best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Buyer shall designate.
(E) COVENANT NOT TO COMPETE. In consideration for the Purchase
Price and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, for a period of five (5) years from and after the
Closing Date, neither the Seller, the Stockholder nor any Affiliate of the
Seller shall engage, directly or indirectly, in any business that the Seller
conducts as of the Closing Date (except as an employee of the Buyer or as the
sublessor of the Facilities, as contemplated herein) in any area within a
250-mile radius of any Facility; provided, however, that the purchase and sale
of real property by the Seller, the Stockholder and/or any Affiliate of the
Seller shall not be deemed to be engaging solely by reason thereof in any such
businesses; and provided, further, that ownership of less than 1% of the
outstanding stock of any publicly traded corporation shall not be deemed to be
engaging solely by reason thereof in any of such businesses. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this ss.5(e) is invalid or unenforceable, then 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.
(F) SALES TAXES, ETC. The Seller shall be responsible for sales,
use, documentary stamp or other transfer taxes, fees or expenses incurred as a
result of the transactions contemplated by this Agreement.
(G) NOTICE OF DEVELOPMENTS; CURE. The Seller shall notify the
Buyer promptly in writing of, and contemporaneously will provide the Buyer with
true and complete copies of any and all information or documents relating to,
and will use all commercially reasonable efforts to cure before the Closing, any
event, transaction, or circumstance occurring after the date of this Agreement
that causes or will cause any covenant or agreement of the Seller under this
Agreement to be breached, or that renders or will render untrue any
representation or warranty of the Seller contained in this Agreement as if the
same were made on or as of the date of such event, transaction or circumstance.
The Seller also shall use all commercially reasonable efforts to cure, before
the Closing, any violation or breach of any representation, warranty, covenant,
or agreement made by it in this Agreement, whether occurring or arising before
or after the date of this Agreement. No disclosure by the Seller pursuant to
this ss.5(g), however, shall be deemed to amend or supplement the Disclosure
Schedule, or to prevent or cure any misrepresentation or breach of warranty,
unless consented to in writing by the Buyer.
<PAGE> 18
SS.6. CONDITIONS TO OBLIGATION TO CLOSE.
(A) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Seller shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) the Seller shall have executed and delivered to the
Buyer the Sublease Agreements and the Consent to Sublease Agreements,
and the landlord of each Facility shall have executed and delivered to
the Buyer a Consent to Sublease Agreement;
(iv) the Stockholder shall have executed and delivered to
the Buyer the Employment Agreement and the Agreement with Stockholder;
(v) the Seller shall have executed and delivered to the
Buyer (A) a warranty bill of sale in the form attached hereto as
Exhibit G transferring all of the Acquired Assets to the Buyer (the
"Bill of Sale") and, (B) with respect to each item of Titled Property,
the original Certificate of Title and registration therefore, together
with such other agreements, documents and instruments as are necessary
to transfer title thereof to the Buyer (collectively, the "Titled
Property Transfer Documents");
(vi) the Buyer and the Seller shall have executed an
instrument for assignment and assumption of the Assumed Liabilities in
the form attached hereto as Exhibit G (the "Assumption Agreement");
(vii) the Seller shall have delivered, or caused to be
delivered, to the Buyer a certificate of the Secretary of the Seller
(A) stating that the resolutions adopted by its board of directors and
stockholders authorizing the actions taken in connection with the
transactions contemplated by this Agreement, including, without
limitation, the execution and delivery of this Agreement, were duly
adopted and continue in full force and effect (with a copy of such
resolution to be annexed to such certificate) and (B) certifying the
names and signatures of the officers of the Seller authorized to sign
this Agreement and the other documents to be delivered hereunder;
(viii) 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 injunction, judgment, order, decree,
ruling or charge would (A) prevent consummation of any of the
transactions contemplated by this
<PAGE> 19
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (C) affect adversely
the right of the Buyer to own the Acquired Assets or to operate the
former business of the Seller (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect);
(ix) the Seller shall have delivered to the Buyer an
opinion of counsel for the Seller and the Stockholder dated the Closing
Date in form and substance as attached hereto as Exhibit I, together
with such other opinions as the Buyer may reasonably request;
(x) the Seller shall have delivered to the Buyer current
Uniform Commercial Code and state, local and federal tax, sales and
unemployment compensation tax, judgment, bankruptcy, and similar lien
searches showing no liens, security interests, claims, or judgments
against the assets of the Buyer, other than those related solely to
Assumed Liabilities;
(xi) all necessary consents, approvals, certifications,
licenses and permits with respect to the transactions contemplated
hereby, the absence of which would have an adverse effect on the
Buyer's rights under this Agreement, or which would constitute a breach
pursuant to the provision of, or which would result in the termination
or loss of any right under, any contract, agreement, instrument,
document, lease, license, certification, permit, indenture or other
obligation, or without which the Buyer is precluded or impeded from
conducting the Seller's business after the Closing Date, shall have
been received by the Buyer on or before the Closing Date;
(xii) the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above
in ss.6(a)(i)-(xi) is satisfied in all respects;
(xiii) the Buyer must be satisfied, in its sole discretion,
with the results of its financial, legal and other due diligence with
respect to the Seller and its business and assets; and
(xiv) all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this ss.6(a) if it
executes a writing so stating at or prior to the Closing.
(B) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
<PAGE> 20
(i) the representations and warranties set forth in ss.4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) the Buyer shall have executed and delivered to the
Seller the Sublease Agreements and the Consent to Sublease Agreements;
(iv) the Buyer shall have executed and delivered to the
Stockholder the Employment Agreement and the Agreement with
Stockholder;
(v) 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 injunction, judgment, order, decree,
ruling or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling
or charge shall be in effect);
(vi) the Buyer shall have delivered to the Seller an
opinion of counsel for the Buyer dated the Closing Date in form and
substance as attached hereto as Exhibit J;
(vii) the Buyer shall have delivered, or caused to be
delivered, to the Seller a certificate of the Secretary of the Buyer
(A) stating that the resolutions adopted by the Buyer's board of
directors authorizing the actions taken in connection with the
transactions contemplated by this Agreement, including, without
limitation, the execution and delivery of this Agreement, were duly
adopted and continue in full force and effect (with a copy of such
resolution to be annexed to such certificate) and (B) certifying the
names and signatures of the officers of the Buyer authorized to sign
this Agreement and the other documents to be delivered hereunder;
(viii) the Buyer shall have delivered, or caused to be
delivered, to the Seller a certificate of the Secretary of the Buyer's
Parent (A) stating that the resolutions adopted by the Buyer's Parent's
board of directors authorizing the actions taken in connection with the
Buyer's Parent's execution and delivery of the Note were duly adopted
and continue in full force and effect (with a copy of such resolution
to be annexed to such certificate) and (B) certifying the names and
signatures of the officers of the Buyer's Parent authorized to sign the
Note;
(ix) the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above
in ss.6(b)(i)-(viii) is satisfied in all respects;
<PAGE> 21
(x) the Buyer shall have paid to the Seller the Purchase
Price in accordance with ss.2(c) hereof; and
(xi) all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this ss.6(b) if it
executes a writing so stating at or prior to the Closing.
SS.7. EMPLOYMENT MATTERS.
(A) TREATMENT OF EMPLOYEES.
(i) The Seller shall terminate all of its employees
effective as of the Closing Date. Any amounts owing to such employees,
including, without limitation, any severance or termination pay
obligations arising from the transactions contemplated hereby as of the
Closing Date (or any matching 401(K) Plan contribution with respect
thereto), will be paid by the Seller.
(ii) Immediately following the Closing Date, the Buyer
may, but shall not be obligated to, hire certain former employees of
the Seller terminated by the Seller pursuant to ss.7(a)(i) above who
desire to be employed by the Buyer.
(B) RETIREMENT PLAN.
(i) The Buyer shall become the successor plan sponsor to
the Seller of Seller's 401(K) Plan (the "401(K) Plan") and, at the
Buyer's election, may appoint a successor trustee with respect to the
401(K) Plan at any time after the Closing Date.
(ii) The Seller has provided the Buyer with a full and
complete copy of the 401(K) Plan, as well as the most recent
determination letter received from the Internal Revenue Service with
respect to the 401(K) Plan, all related trust agreements and all other
funding arrangements and documents that describe the features of the
401(K) Plan.
(iii) Except for the Seller's post-Closing Date
contributions (and liabilities therefor) to the 401(K) Plan for all
time periods preceding the Closing Date, the Seller shall not
thereafter be responsible for making any contributions to, or have any
other liability with respect to, the 401(K) Plan. The Buyer shall
indemnify and hold harmless the Seller from any costs, expenses,
contributions or Liabilities associated with the operation or
termination of the 401(K) Plan which relate to the time period after
the Closing Date. The Seller shall indemnify and hold harmless the
Buyer from any costs, expenses, contributions or Liabilities
<PAGE> 22
associated with the operation or termination of the 401(K) Plan which
relate to the time period prior to or on the Closing Date.
(iv) The Seller agrees to take any and all actions
necessary to cause the transfer of all books and records of the 401(K)
Plan to the Buyer or to any person designated by the Buyer as successor
trustee with respect to the 401(K) Plan. The Seller shall perform all
acts and execute all documents as may be necessary to accomplish such
transfer of the assets of the 401(K) Plan.
(C) HEALTH INSURANCE.
(i) The Seller shall use reasonable efforts to cause the
group health insurance contract of the Seller to be assigned to the
Buyer. Until the earlier of such time as such assignment is effected or
such time as the Buyer obtains a group health insurance plan pursuant
to the provisions of ss.7(c)(ii) below, the Seller shall maintain the
group health insurance plan of the Seller that the former employees of
the Seller participated in prior to the Closing Date. The Buyer agrees
to reimburse the Seller for the Seller's premium costs for maintaining
such group health insurance.
(ii) If the Seller is unable to assign to the Buyer the
Seller's group health insurance contract as contemplated under
ss.7(c)(i) above, then, within one (1) year after the Closing Date, the
Buyer shall establish or otherwise adopt a group health plan which
shall provide group health benefits to former employees of the Seller
who are at that time employed by the Buyer, on an uninterrupted basis
on substantially similar terms and at substantially similar prices as
are available to all other employees of the Buyer or its Affiliates.
(D) NO THIRD-PARTY BENEFICIARIES. Nothing contained in this
section shall be construed to confer any benefit or standing to pursue any claim
on any person other than the Parties, and nothing contained in this section
shall create any third-party beneficiaries.
SS.8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(A) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Buyer and the Seller contained in this
Agreement shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing, it being agreed that the damaged Party shall nevertheless endeavor to
give the other Party notice of any misrepresentation or breach actually known to
the damaged Party) and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations).
<PAGE> 23
(B) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) If the Seller breaches (or if any third party alleges
facts that, if true, would mean that the Seller has breached) any of
its representations, warranties or covenants contained in this
Agreement, then the Seller shall indemnify the Buyer from and against
the entirety of any Adverse Consequences which the Buyer may suffer
through and after the date of the claim for indemnification resulting
from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach); provided, however, that the Seller and
the Stockholder shall not have any obligation to indemnify the Buyer
from and against any Adverse Consequences caused by the breach of any
representation, warranty or covenant of the Seller or the Stockholder
(A) until the sum of the Adverse Consequences suffered by the Buyer by
reason of the Seller or Stockholder exceeds a $10,000 aggregate
deductible (after which point the Seller and the Stockholder will be
obligated to indemnify the Buyer from and against further such Adverse
Consequences) or (B) to the extent the Adverse Consequences the Buyer
has suffered by reason of all such breaches exceeds a $4,150,000
aggregate ceiling (after which point the Seller and the Stockholder
will have no obligation to indemnify the Buyer from and against further
such Adverse Consequences). The foregoing deductible and ceiling
provisions shall not apply to any breach by the Seller or the
Stockholder of the aforementioned representations and warranties if the
Seller or the Stockholder had knowledge of such breach at any time
prior to the date on which such representation or warranty is made or
to any breach of any covenant of the Seller or the Stockholder, and the
Seller and the Stockholder shall be liable for the entirety of such
Adverse Consequences with respect to such breaches.
(ii) In addition to, and without limiting in any way, the
Seller's liability and obligations under any other provision of this
ss.8(b), the Seller shall indemnify the Buyer from and against the
entirety of any Adverse Consequences which the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by:
(A) any Liability of the Seller which is not an
Assumed Liability (including any Liability of the Seller that
becomes a Liability of the Buyer under any bulk transfer law
of any jurisdiction, under any common law doctrine of de facto
merger or successor liability, or otherwise by operation of
law); or
(B) any Liability of the Seller (other than the
Assumed Liabilities) for unpaid Taxes, with respect to any Tax
year or portion thereof ending on or before the Closing Date
(or for any Tax year beginning before and ending after the
Closing Date to the extent allocable to the portion of such
period beginning before and ending on the Closing Date)
including, but not limited to, any Taxes assessed as a result
of the current sales tax audit or as a result of any other
audit of the Seller.
(iii) In addition to, and without limiting in any way, the
Seller's liability and obligations under any other provision of this
ss.8(b), the Seller shall indemnify the Buyer from
<PAGE> 24
and against the entirety of any Adverse Consequences which the Buyer
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Seller's operation of the business prior to the
Closing (other than the Assumed Liabilities).
(C) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER.
(i) If the Buyer breaches (or if any third party alleges facts
that, if true, would mean the Buyer has breached) any of its
representations, warranties, or covenants contained in this Agreement,
then the Buyer shall indemnify the Seller from and against the entirety
of any Adverse Consequences which the Seller may suffer through and
after the date of the claim for indemnification resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or the
alleged breach).
(ii) The Buyer shall indemnify the Seller from and against the
entirety of any Adverse Consequences which the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by any Assumed Liability or by the Buyer's operation of its
business after the Closing Date, except to the extent related to or
caused by the negligence or intentional misconduct of the Stockholder
or his Affiliates.
(D) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against the other
Party (the "Indemnifying Party") under this ss.8, then the Indemnified
Party shall promptly notify the Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
in notifying the Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) The Indemnifying Party shall have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interests of the
<PAGE> 25
Indemnified Party, and (E) the Indemnifying Party conducts the defense
of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with ss.8(d)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party
Claim, (B) the Indemnified Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be unreasonably withheld), and (C) the Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be unreasonably withheld).
(iv) In the event any of the conditions in ss.8(d)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, the Indemnifying Party in
connection therewith), (B) the Indemnifying Party shall reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (C) the Indemnifying Party shall remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this ss.8.
(E) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall take
into account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this ss.8. All
indemnification payments under this ss.8 shall be deemed to be adjustments to
the Purchase Price.
(F) OTHER INDEMNIFICATION PROVISIONS. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable or common law remedy any Party may have for breach of
representation, warranty or covenant any Party may have with respect to the
Seller, or the transactions contemplated by this Agreement.
SS.9. TERMINATION OF AGREEMENT.
(A) TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time prior to the Closing:
(i) by the Buyer and the Seller by mutual written consent
at any time prior to the Closing;
<PAGE> 26
(ii) by either the Buyer or the Seller if the Closing
shall not have been consummated on or before May 15, 1998, or such
later date as the parties may agree upon;
(iii) by either the Seller or the Buyer if there shall be
any law or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if consummation
of the transactions contemplated hereby would violate any nonappealable
final order, decree or judgment of any court or governmental body
having competent jurisdiction;
(iv) by the Buyer by giving written notice to the Seller
at any time prior to the Closing (A) in the event the Seller has
breached any representation, warranty or covenant contained in this
Agreement in any material respect, the Buyer has notified the Seller of
the breach, and the breach has continued without cure for a period of
thirty (30) days after the Buyer gave such notice of breach; (B) if the
Buyer objects to any amendment or supplement to the Disclosure Schedule
made by the Seller pursuant to ss.3 hereof within five (5) days after
the Buyer's receipt of notice of the same and the Seller fails to
modify the Disclosure Schedule so as to be acceptable to the Buyer
within five (5) days after Seller's receipt of Buyer's objection, said
notice to specify in reasonable detail the reasons for the Buyer's
objection; or (C) if events occur which render impossible compliance
with one or more conditions set forth in ss.6(a) hereof and such
conditions are not waived by Buyer; provided that such events did not
result from any action or omission by the Buyer which were within its
control and which it was not expressly permitted to take or omit by the
terms of this Agreement; and
(v) by the Seller by giving written notice to the Buyer
at any time prior to the Closing (i) in the event the Buyer has
breached any representation, warranty or covenant contained in this
Agreement in any material respect, the Seller has notified the Buyer of
the breach, and the breach has continued without cure for a period of
thirty (30) days after the Seller gave such notice of breach or (ii) if
events occur which render impossible compliance with one or more
conditions set forth in ss.6(b) hereof, and such conditions are not
waived by Seller; provided that such events did not result from any
action or omission by the Seller which were within the control of such
entity and which such entity was not expressly permitted to take or
omit by the terms of this Agreement.
(B) EFFECT OF TERMINATION. If any Party terminates this Agreement
as permitted by ss.9(a) above, then all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
provided that in the event that such termination results from the willful
failure of one Party to fulfill a condition to the performance of the
obligations of the other Party or to perform a covenant of this Agreement or
from a willful breach by such Party to this Agreement, such Party shall be fully
liable for any and all damages incurred or suffered by the other Party as a
result of such failure or breach. The provisions of ss.5(d) shall survive any
termination hereof pursuant to ss.9(b).
<PAGE> 27
SS.10. MISCELLANEOUS.
(A) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Party prior to
making the disclosure).
(B) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(C) ENTIRE AGREEMENT. This Agreement and the exhibits and
schedules attached hereto constitute the entire agreement between the Parties
and supersede all prior understandings, agreements or representations by or
between the Parties, written or oral, to the extent they have related in any way
to the subject matter hereof.
(D) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other Party; provided however, that the Buyer may (i) assign any
or all of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
(E) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(F) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(G) NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: With a copy to:
Naples Rent-All and Sales Company, Inc. Quarles & Brady
2600 Davis Blvd. 411 East Wisconsin Avenue
Naples, Florida 33942 Milwaukee, Wisconsin 53202
<PAGE> 28
Attn: Michael C. Nordberg, President Attn: Michael M. Grebe, Esq.
If to the Buyer: With a copy to:
NationsRent of Florida, Inc. Squire, Sanders & Dempsey L.L.P.
450 East Las Olas Blvd. 1300 Huntington Center
Suite 1400 41 South High Street
Ft. Lauderdale, Florida 33301 Columbus, Ohio 43215
Attn: Gene J. Ostrow and Attn: Anthony J. Sugar, Esq.
Jonathan G. Usher
and
Randall M. Walters, Esq.
1900 Huntington Center
41 South high Street
Columbus, Ohio 43215
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
(H) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
Florida.
(I) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(J) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
<PAGE> 29
(K) EXPENSES. Each of the Buyer, the Seller, and the Stockholder
will bear its or his own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
(L) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty or covenant contained herein
in any respect, then the fact that there exists another representation, warranty
or covenant relating to the same subject matter (regardless of the relative
levels of specificity) which the Party has not breached shall not detract from
or mitigate the fact that the Party is in breach of the first representation,
warranty or covenant.
(M) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(N) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to, notwithstanding the provisions of ss.9(o)
below, an injunction or injunctions to prevent breaches of the provisions of
this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter, in
addition to any other remedy to which it may be entitled, at law or in equity.
(O) SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the State of Florida in
any action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto.
(P) BULK TRANSFER LAWS. The Buyer acknowledges that the Seller
will not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
<PAGE> 30
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
NATIONSRENT OF FLORIDA, INC., a Delaware
corporation
By: /s/ Gene J. Ostrow
--------------------------------------
Gene J. Ostrow, President
SELLER:
NAPLES RENT-ALL AND SALES COMPANY,
INC., a Florida corporation
By: /s/ Michael C. Nordberg
--------------------------------------
Michael C. Nordberg, President
<PAGE> 1
EXHIBIT 10.18
FORM OF PROMISSORY NOTE
NEITHER THIS PROMISSORY NOTE NOR THE SHARES ISSUABLE UPON CONVERSION OF THIS
PROMISSORY NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND THIS PROMISSORY NOTE CANNOT BE
SOLD OR TRANSFERRED, AND THE SHARES ISSUABLE UPON CONVERSION OF THIS PROMISSORY
NOTE CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR
UPON RECEIPT OF AN OPINION OF COUNSEL, SATISFACTORY TO THE MAKER, THAT SUCH
REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR
TRANSFER.
UNSECURED CONVERTIBLE SUBORDINATED PROMISSORY NOTE
COLUMBUS, OHIO
$[_________] APRIL [___], 1998
FOR VALUE RECEIVED, NATIONSRENT, INC., a Delaware corporation
("Maker"), promises to pay to [__________________] ("Payee"), in lawful money of
the United States of America, the principal sum of [__________] ($[__________]),
together with interest (calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days elapsed) in arrears on the
unpaid principal balance in the manner provided below. This Note has been
executed and delivered pursuant to and in accordance with the terms and
conditions of the Asset Purchase Agreement, dated April 21, 1998 (the
"Agreement"), between the Payee and NationsRent of Florida, Inc., a Delaware
corporation and a wholly owned subsidiary of Maker (the "Buyer"), and is subject
to the terms and conditions of the Agreement, which are, by this reference,
incorporated herein and made a part hereof. Capitalized terms used in this Note
without definition shall have the respective meanings set forth in the
Agreement.
SS.1. PAYMENTS.
SS.1.1 PAYMENT OF INTEREST
(a) This Note shall bear interest at the rate of six and
one-half percent (6-1/2%) per annum, commencing on the date hereof, subject to
adjustment as provided in ss.1.1(b) below. Accrued and unpaid interest shall be
payable quarterly on each March 31, June 30, September 30, and December 31,
commencing on June 30, 1998, until all principal and accrued and unpaid interest
shall have been paid in full.
(b) Notwithstanding anything to the contrary contained
herein, on or after an Event of Default (defined below) resulting from the
failure to timely pay principal of or interest on this Note or on or after any
other Event of Default for which Payee has accelerated the
<PAGE> 2
maturity date (subject to any notice, grace and cure provisions provided
herein), this Note shall bear interest at a rate per annum equal to two percent
(2.0%) in excess of the rate that otherwise would be applicable hereunder, from
the date of such Event of Default until paid in full.
SS.1.2 REPAYMENT OF PRINCIPAL
The principal amount of this Note shall be due and payable on April 30,
2003.
SS.1.3 MANNER OF PAYMENT
All payments of principal and interest on this Note shall be made by
check at such place in the United States of America as Payee shall designate to
Maker in writing or by wire transfer of immediately available funds to an
account designated by Payee in writing. If any payment of principal or interest
on this Note is due on a day which is not a Business Day (defined below), such
payment shall be due on the next succeeding Business Day, and such extension of
time shall be taken into account in calculating the amount of interest payable
under this Note. "Business Day" means any day other than a Saturday, Sunday or
legal holiday in the State of Ohio.
SS.1.4 PREPAYMENT
After the date on which the closing price of the shares of Maker into
which this Note is convertible has averaged more than 150% of the Conversion
Price (defined below) for a period of thirty (30) or more consecutive trading
days (the "Prepayment Date"), Maker may, without premium or penalty, at any time
and from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by accrued interest on the amount of principal prepaid calculated to the date of
such prepayment. Any partial prepayments shall be applied to installments of
principal in inverse order of their maturity. Prior to the Prepayment Date,
Maker shall not be entitled to prepay any portion of the outstanding principal
balance due under this Note.
SS.1.5 RIGHT OF SET-OFF
Maker shall have the right to withhold and set-off against any amount
due hereunder the amount of any claim for indemnification or payment of damages
to which Buyer may be entitled under the Agreement or the Agreement with
Stockholders.
SS.1.6 CONVERSION
Subject to and upon compliance with the provisions of the Agreement, if
Maker completes an IPO (defined below), then the holder of this Note shall be
entitled, at the holder's option, at any time on or before the close of business
on December 31, 2002 to convert the principal amount of this Note (or any
portion of the principal amount hereof which is $1,000.00 or any integral
multiple thereof), at the principal amount hereof, or of such portion, into
fully paid and
2
<PAGE> 3
nonassessable shares (calculated as to each conversion to the nearest 1/1000 of
a share) of common stock of Maker at a conversion price equal to the initial
public offering price of such shares (or, if Maker is merged into or otherwise
acquired by or converted into an already existing, publicly held entity ("New
Entity"), at a conversion price equal to the average closing price of the shares
of the New Entity for twenty (20) trading days following the merger) (the
"Conversion Price"). The holder shall surrender this Note, duly endorsed or
assigned to Maker or in blank, to Maker at its office or agency at the address
provided in writing by Maker, accompanied by written notice to Maker that the
holder hereof elects to convert this Note, or if less than the entire principal
amount hereof is to be converted, the portion hereof to be converted. No payment
or adjustment is to be made on conversion for interest accrued hereon or for
dividends on the common stock issued on conversion. No fractions of shares or
scrip representing fractions of shares will be issued on conversion, but instead
of any fractional interest the Seller shall pay a cash adjustment. In addition,
in case of certain consolidations or mergers to which Maker is a party or the
transfer of substantially all of the assets of Maker, this Note, if then
outstanding, will be convertible thereafter, during the period this Note shall
be convertible as specified above, only into the kind and amount of securities,
cash and other property receivable upon the consolidation, merger or transfer by
a holder of the number of shares of common stock into which this Note might have
been converted immediately prior to such consolidation, merger or transfer
(assuming such holder of common stock failed to exercise any rights of election
and received per share the kind and amount received per share by a plurality of
non-electing shares). As used herein, "IPO" shall mean an underwritten public
offering of shares of the common stock of Maker registered under the Securities
Act.
SS.2. DEFAULTS.
SS.2.1 EVENTS OF DEFAULT
The occurrence and continuance of any one or more of the following
events with respect to Maker shall constitute an event of default hereunder
("Event of Default"):
(a) If Maker shall fail to pay when due any payment of
principal or interest on this Note and such failure continues for thirty (30)
days after Payee notifies Maker thereof in writing;
(b) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
as they become due; or
(c) If a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that (i) is for relief against Maker in an
involuntary case, (ii) appoints a trustee,
3
<PAGE> 4
receiver, assignee, liquidator or similar official for Maker or substantially
all of Maker's properties, or (iii) orders the liquidation of Maker, and in each
case the order or decree is not dismissed within 120 days.
SS.2.2 NOTICE BY MAKER
Maker shall notify Payee in writing within five (5) days after the
occurrence of any Event of Default of which Maker acquires knowledge.
SS.2.3 REMEDIES
Upon the occurrence of an Event of Default hereunder (unless all Events
of Default have been waived by Payee or cured), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
Notwithstanding the above, if an Event of Default has occurred under
this Note and such Event of Default results in a default under the Senior
Indebtedness (defined in ss.3 below) or a default under the Senior Indebtedness
otherwise exists, then for so long as any Senior Indebtedness remains unpaid,
the Payee shall not commence or join with any creditor of Maker in commencing
any proceedings to collect or enforce its rights hereunder until the earlier of
(x) 180 days from the occurrence of such Event of Default, and (y) the date, if
any, on which such default is waived by the holder or holders of the Senior
Indebtedness to which such default relates; provided, however, that
notwithstanding such forbearance of the commencement of proceedings with respect
to an Event of Default, such Event of Default shall nevertheless be an Event of
Default for all other purposes of this Note and Payee shall be entitled to
pursue all other remedies other than the commencement of proceedings under the
circumstances set forth in this paragraph.
SS.3. NOTE SUBORDINATE TO SENIOR INDEBTEDNESS.
SS.3.1 SENIOR INDEBTEDNESS.
Anything in this Note to the contrary notwithstanding, Maker covenants
and agrees, and Payee likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this ss.3, the indebtedness represented by
this Note and the payment of principal of and interest on this Note and other
amounts owed by Maker under this Note are hereby expressly made subordinate and
subject in right of payment to the prior payment in full in cash of all Senior
Indebtedness (defined below), including any interest accruing after the
occurrence of an Event of Default, whether or not such interest is an allowed
claim enforceable against the debtor in a case
4
<PAGE> 5
brought under the United States Bankruptcy Code (the "Bankruptcy Code"). "Senior
Indebtedness" means the principal of (and premium, if any) and interest on (i)
all indebtedness, public or private, of Maker for money borrowed, whether
outstanding on the date of this Note or thereafter created, assumed or incurred,
except (A) such indebtedness as is by its terms expressly stated to be not
superior in right of payment to this Note or to rank pari passu with this Note,
(B) all notes issued in connection with the acquisition of any business,
properties, stock or assets to the seller of such business, properties, stock or
assets, which shall rank pari passu with this Note unless otherwise expressly
stated to be not superior or superior in right of payment to this Note, and (C)
this Note, (ii) any deferrals, renewals or extensions of any such Senior
Indebtedness, and (iii) any fees, costs, enforcement expenses (including legal
fees and disbursements), collateral protection expenses and other reimbursement
or indemnity obligations relating to Senior Indebtedness. The term "indebtedness
of Maker for money borrowed" means any obligation of, or any obligation
guaranteed by, Maker for the repayment of money borrowed, whether or not
evidenced by bonds, debentures, notes or other written instruments, any
capitalized lease obligation and any deferred obligation for payment of the
purchase price of any property or assets. Payee agrees to furnish any holder of
Senior Indebtedness upon request a subordination agreement that contains
reasonably customary subordination provisions, including the priority rights of
Payee and the holder of the Senior Indebtedness and prohibits payments to Payee
that would cause a default under the Senior Indebtedness.
SS.3.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (i) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to Maker or to its creditors, as
such, or to its assets, (ii) any liquidation, dissolution or other winding up of
Maker, whether voluntary or involuntary and whether or not involving insolvency
or bankruptcy, or (iii) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of Maker, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, then and in any such
event:
(a) the holders of Senior Indebtedness shall be entitled
to receive payment in full in cash of all amounts due or to become due on or in
respect of all Senior Indebtedness, or provision shall be made for such payment
in accordance with the instruments governing such Senior Indebtedness, before
Payee is entitled to receive any payment on account of principal of (or premium,
if any) or interest on this Note or other amounts owed by Maker under this Note;
(b) any payment or distribution of assets or securities
of Maker of any kind or character, whether in cash, property or securities, to
which Payee would be entitled but for the provisions of this ss.3, including any
such payment or distribution which may be payable or deliverable by reason of
the payment of any other indebtedness of Maker being subordinated to the payment
of this Note (except for any such payment or distribution (x) authorized by an
order or decree giving effect, and stating in such order or decree that effect
is given, to the subordination of this Note to the Senior Indebtedness, and made
by a court of competent
5
<PAGE> 6
jurisdiction in a reorganization proceeding under any applicable bankruptcy law,
or (y) of securities that are subordinated, to at least the same extent as this
Note, to the payment in full in cash of all Senior Indebtedness then
outstanding), shall be paid by the liquidating trustee or agent or other Person
making such payment or distribution, whether a trustee in bankruptcy, a receiver
of liquidating trustee or otherwise, directly to the holders of the Senior
Indebtedness or their representative or representatives, ratably according to
the aggregate amounts remaining unpaid on the Senior Indebtedness, for
application to the payment of all Senior Indebtedness remaining unpaid, to the
extent necessary to pay all Senior Indebtedness in full, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of ss.3, Payee shalL have received any such payment or distribution
of assets or securities of Maker of any kind or character, whether in cash,
property or securities (other than payments or distributions (x) authorized by
an order or decree giving effect to the subordination of this Note to the Senior
Indebtedness, or (y) of securities that are subordinated to the payment in full
in cash of all Senior Indebtedness, all as described in ss.3.2(b) above,
including any such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of Maker being subordinated
to the payment of this Note, before all Senior Indebtedness is paid in full in
cash or payment thereof provided for, then and in such event such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered to, the holders of the Senior Indebtedness or their
representative or representatives, ratably according to the aggregate amount
remaining unpaid on the Senior Indebtedness, for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full in cash, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.
(d) in the event that Payee fails to, in a timely manner
and to the fullest extent possible, (i) file or cause to be filed such proofs of
claim and other papers or documents as may be necessary or advisable to have the
claims under this Note allowed at any meeting of creditors or in any proceeding
referred to in this ss.3.2 or (ii) enforce claims under this Note, by proof of
debt, proof of claim, or otherwise, the holders of the Senior Indebtedness shall
be entitled and are authorized to so file and/or enforce either in Payee's name
or in the name or names of any holders of the Senior Indebtedness.
(e) Payee shall retain the right to vote and otherwise
act with respect to the claims under this Note (including, without limitation,
the right to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension), provided
that Payee shall not vote with respect to any such plan or take any other action
in any way so as to (i) contest the validity of any Senior Indebtedness or any
collateral therefor or guaranties thereof, (ii) contest the relative rights and
duties of any holders of any Senior Indebtedness established in any instruments
or agreements creating or evidencing any of the Senior Indebtedness with respect
to any of such collateral or guaranties, or (iii) contest Payee's obligations
and agreements set forth in this ss.3.
6
<PAGE> 7
The consolidation of Maker with, or the merger of Maker into, another
corporation or the liquidation or dissolution of Maker following the conveyance,
transfer or lease of its properties and assets substantially as an entirety to
another corporation shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshaling of assets
and liabilities of Maker for the purposes of this ss.3 if the corporation formed
by such consolidation or into which Maker is merged or the corporation which
acquires Maker's properties and assets substantially as an entirety, as the case
may be, shall as a part of such consolidation, merger, conveyance, transfer or
lease, comply with the conditions set forth in ss.3.14.
SS.3.3 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
(a) In the event of and during the continuation of any
default in the payment of any Senior Indebtedness beyond any applicable grace
period with respect thereto ("payment default"), then no payment shall be made
by or on behalf of Maker on this Note until the date, if any, on which such
default or event of default is waived by the holders of such Senior Indebtedness
or otherwise cured or has ceased to exist or the Senior Indebtedness to which
such default or event of default relates is discharged by payment in full in
cash.
(b) In the event that any other event of default with
respect to any Senior Indebtedness shall have occurred and be continuing that
permits the holders of such Senior Indebtedness (or a trustee on behalf of such
holders) to declare such Senior Indebtedness due and payable prior to the date
on which it would otherwise have become due and payable, and upon receipt by
Maker of written notice (the "Payment Notice") from Payee or a representative
for, or the holder of, any Senior Indebtedness, then no payment shall be made by
or on behalf of Maker on this Note until the earlier of (x) 179 days after the
date on which such Payment Notice shall have been received and (y) the date, if
any, on which such default or event of default is waived by the holders of the
Senior Indebtedness to which such default or event of default relates is
discharged by payment in full in cash (a "Blockage Period"). Not more than two
Blockage Periods may be commenced during any period of 360 consecutive days. No
event of default that existed or was continuing (it being acknowledged that any
subsequent action that would give rise to an event of default pursuant to any
provision under which an event of default previously existed or was continuing
shall constitute a new event of default for this purpose) on the date of the
commencement of any Blockage Period with respect to the Senior Indebtedness
initiating such Blockage Period shall be, or shall be made, the basis for the
commencement of a second Blockage Period by the representative for, or the
holders of, such Senior Indebtedness whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days. Further, Blockage Periods may
not exist for more than 180 days during any period of 360 consecutive days and
shall be suspended to the extent necessary to comply with the foregoing. Any
such failure to make a payment on this Note shall not be construed as preventing
the occurrence of an Event of Default under this Note. Any payment permitted
hereunder after a Blockage Period of amounts owed to the holders of this Note
during a Blockage Period shall be deemed a cure of any Event of Default caused
by any such delayed payment. Notwithstanding any other provision contained
herein, during all times in
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which Maker's senior credit facility, dated March 18, 1998 with BankBoston,
N.A., as agent and LaSalle National Bank, as Documentation Agent, and the
lenders identified therein, or any restatement, amendment, supplement or
modification thereof or any replacement facility thereof (the "Senior Bank
Facility") is in effect or the lenders thereunder have any obligations to make
loans or extend credit to Maker or its subsidiaries, the only holder of Senior
Indebtedness entitled to exercise its rights under ss.3.2(d) and this ss.3.3(b)
shall be the agent under the Senior Bank Facility.
In the event that, notwithstanding the foregoing, any payment or
distribution shall be received by Payee in contravention of the provisions of
this ss.3, then and in such event such payment or distribution shall be received
and held in trust for the benefit of, and shall be paid over or delivered to,
the holders of the Senior Indebtedness or their representative or
representatives, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness, for application to the Senior Indebtedness
or to be held as collateral for, the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full
in cash, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
The provisions of this ss.3.3 shall not apply to any payment with
respect to which ss.3.2 would be applicable.
SS.3.4 PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in this ss.3
or elsewhere in this Note shall prevent Maker, at any time except under the
circumstances described in ss.3.1 or under the conditions described in ss.3.2,
from making payments at any time of principal of (and premium, if any) or
interest on this Note or other amounts owed by Maker under this Note.
SS.3.5 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS. No
payment or distributions to the holders of Senior Indebtedness or their
representatives pursuant to the provisions of this ss.3 shall entitle Payee to
exercise any right of subrogation in respect thereof until the Senior
Indebtedness shall have been paid in full. Payee further waives any and all
rights with respect to marshaling.
SS.3.6 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this ss.3 are intended solely for the purpose of defining the relative rights of
Payee on the one hand the holders of Senior Indebtedness on the other hand.
Nothing contained in this Note is intended to or shall (a) impair, as among
Maker, its creditors other than holders of Senior Indebtedness and Payee, the
obligation of Maker, which is absolute and unconditional, to pay to Payee the
principal of (and premium, if any) and interest on this Note as and when the
same shall become due and payable in accordance with its terms; or (b) affect
the relative rights against Maker of Payee and creditors of Maker other than the
holders of Senior Indebtedness; or (c) prevent Payee from exercising all
remedies otherwise permitted by applicable law or this Note upon default under
this Note, subject to the rights, if any, under this ss.3 and ss.2.1 of the
holders of the Senior Indebtedness.
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SS.3.7 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present
or future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of Maker or by any act or failure to act, in good
faith, by any such holder, or by noncompliance by Maker with the terms,
provisions of and covenants of this Note, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
SS.3.8 NOTICE TO PAYEE. Maker shall give prompt written notice to Payee
of any fact known to Maker which would prohibit the making of any payment to or
by Payee in respect of this Note. Notwithstanding the provisions of this ss.3 or
any other provision of this Note, Payee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by Payee in respect of this Note, unless and until Payee shall have received
written notice thereof from Maker or a holder of Senior Indebtedness.
SS.3.9 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets or securities of Maker referred to in
ss.3.2, Payee shall be entitled to rely upon any order or decree entered by any
court of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding up or similar
case or proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other Persons entitled to participate in such payment or distribution,
the holders of Senior Indebtedness and other indebtedness of Maker, the amount
thereof or payment thereon, the amount of amounts paid or distributed thereon
and all other facts pertinent thereto or to this ss.3.
SS.3.10 FREEDOM OF DEALING. Payee agrees, with respect to the Senior
Indebtedness and any and all collateral therefor or guaranties thereof, that
Maker and the holders of the Senior Indebtedness may agree to increase the
amount of the Senior Indebtedness or otherwise modify the terms of any of the
Senior Indebtedness, and the holders of the Senior Indebtedness may grant
extensions of the time of payment or performance to and make compromises,
including releases of collateral or guaranties, and settlements with Maker and
all other persons, in each case without the consent of Payee or Maker and
without affecting the agreements of Payee or Maker contained in this Note;
provided, however, that nothing contained in this ss.3.10 shall constitute a
waiver of the right of Maker itself to agree or consent to a settlement or
compromise of a claim which any holder of the Senior Indebtedness may have
against Maker.
SS.3.11 DEFENSE TO ENFORCEMENT. If Payee, in contravention of the terms
of this Note, shall commence, prosecute or participate in any suit, action or
proceeding against Maker, then Maker may interpose as a defense or plea the
provisions of this ss.3, and any holder of the Senior Indebtedness may intervene
and interpose such defense or plea in its name or in the name of Maker. If
Payee, in contravention of the terms of this ss.3 or the last paragraph of
ss.2.3, shall attempt to collect under this Note or enforce any provisions of
this Note, then any holder of the Senior Indebtedness or Maker may restrain the
enforcement thereof in the name of such holder of the Senior Indebtedness or in
the name of Maker.
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SS.3.12 REINSTATEMENT OF SUBORDINATION. To the extent that Maker or any
guarantor of or provider of collateral for the Senior Indebtedness makes any
payment on the Senior Indebtedness that is subsequently invalidated, declared to
be fraudulent or preferential or set aside or is required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or
reorganization act, state or federal law, common law or equitable cause (such
payment being hereinafter referred to as a "Voided Payment"), then to the extent
of such Voided Payment, that portion of the Senior Indebtedness that had been
previously satisfied by such Voided Payment shall be revived and continue in
full force and effect as if such Voided Payment had never been made. In the
event that a Voided Payment is recovered from any holder of the Senior
Indebtedness, a default in the payment of the relevant Senior Indebtedness shall
be deemed to have existed and to be continuing from the date of such holder of
the Senior Indebtedness' initial receipt of such Voided Payment until the full
amount of such Voided Payment is restored to such holder of the Senior
Indebtedness. During any continuance of any such payment default, this ss.3 and
the last paragraph of ss.2.3 shall be in full force and effect with respect to
the obligations hereunder.
SS.3.13 AMENDMENTS; LIENS. The provisions of this ss.3 and the last
paragraph of ss.2.3 may not be amended or waived without the written agreement
of Maker, the agent under the Senior Bank Facility and Payee. Payee will not,
without the prior written consent of all the holders of the Senior Indebtedness,
take or receive any security interest, lien, mortgage or other encumbrance on
any assets of Maker or its Subsidiaries.
SS.3.14 MAKER MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. Maker will not
merge or consolidate with any other corporation or sell or convey all or
substantially all of its assets to any person, firm or corporation, unless (i)
either Maker shall be the continuing corporation, or the successor corporation
(if other than Maker) shall expressly assume the payment of interest on or the
principal of this Note and the performance of and compliance with all of the
covenants of this Note to be performed by Maker, and (ii) Maker or such
successor corporation, as the case may be, shall not, immediately after such
merger or consolidation, or such sale or conveyance, be in default in the
performance of or compliance with any such covenants.
SS.4. MISCELLANEOUS.
SS.4.1 WAIVER
The rights and remedies of Payee under this Note shall be cumulative
and not alternative. No waiver by Payee of any right or remedy under this Note
shall be effective unless in a writing signed by Payee. Neither the failure nor
any delay in exercising any right, power or privilege under this Note will
operate as a waiver of such right, power or privilege and no single or partial
exercise of any such right, power or privilege by Payee will preclude any other
or further exercise of such right, power or privilege or the exercise of any
other right, power or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right of Payee arising out of this Note can be discharged
by Payee, in whole or in part, by a waiver or renunciation of the claim or right
unless in a writing, signed by Payee; (b) no waiver that may be given by Payee
will be
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applicable except in the specific instance for which it is given; and (c) no
notice to or demand on Maker will be deemed to be a waiver of any obligation of
Maker or of the right of Payee to take further action without notice or demand
as provided in this Note. Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
SS.4.2 NOTICES
Any notice required or permitted to be given hereunder shall be given
in accordance with Section 9(g) of the Agreement.
SS.4.3 SEVERABILITY
If any provision in this Note is held invalid or unenforceable by any
court of competent jurisdiction, then the other provisions of this Note shall
remain in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree shall remain in full force and effect to
the extent not held invalid or unenforceable.
SS.4.4 GOVERNING LAW
This Note shall be governed by the laws of the State of Florida without
regard to conflicts of laws principles.
SS.4.5 PARTIES IN INTEREST
This Note shall bind Maker and its successors and assigns. This Note
shall not be assigned or transferred by Payee without the express prior written
consent of Maker, except by Will or, in default thereof, by operation of law.
SS.4.6 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Note are provided for convenience only
and shall not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Note unless otherwise specified.
All words used in this Note shall be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
NATIONSRENT, INC., a Delaware
corporation
By:
----------------------------------
Gene J. Ostrow, President
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<PAGE> 1
EXHIBIT 10.19
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
May 7, 1998 by and among NATIONSRENT, INC., a Delaware corporation ("Nations");
RAYMOND EQUIPMENT CO., a Kentucky corporation ("Company");Oliver Raymond, a
resident of the state of Florida; Linda Raymond, a resident of the state of
Indiana; Michael O'Bryan; and, James Lathrop, residents of the Commonwealth of
Kentucky; and, Donald Tewell and Kenneth Acton, each a resident of the state of
Indiana who collectively constitute all of the shareholders of the Company (the
"Shareholders"). Certain other capitalized terms used herein are defined in
Article XI and throughout this Agreement.
RECITALS
The Shareholders own the capital stock of and operate a construction
equipment rental business in the states of Kentucky, Indiana and Ohio (the
"Business"). The parties have determined that it is in their respective best
interests for Nations to acquire all of the issued and outstanding shares (the
"Shares") of common stock, without par value, of the Company (the "Company
Common Stock") which are held by the Shareholders upon the terms and subject to
the conditions set forth in this Agreement.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 THE ACQUISITION. Upon the terms and subject to the conditions
of this Agreement, at the Closing (as defined below), the Shareholders will
sell, assign, transfer, convey and deliver to Nations and Nations shall
purchase, acquire and accept from the Shareholders, the Shares, free and clear
of any liens (the "Acquisition").
<PAGE> 2
1.2 CONSIDERATION. As consideration for the Shares, Nations shall,
upon the terms and subject to the conditions of this Agreement, remit to
Shareholders (the "Purchase Price") at the Closing (as hereinafter defined): (I)
Twenty Three Million Ninety One Thousand One Hundred and Eighty Dollars
(23,091,180.00) (the "Closing Payment") in immediately available funds; (ii) a
series of promissory notes from Nations in the original principal amount of
Eleven Million Three Hundred and Nine Thousand, Nine Hundred and Sixty Five
Dollars ($11,309,965) the form of which is provided as Exhibit A attached hereto
(the "Promissory Notes"); and (iii) the Management Promissory Notes (as
hereinafter defined) in the original amount of (I) One Million Four Hundred and
Eight Thousand Eight Hundred and Twenty One dollars (1,408,821) which is not
convertible to Nations Common Stock (Exhibit BI); and (ii) Six Hundred and
Ninety Thousand and Thirty Four Dollars ($690,034), which is convertible to
Nations Common Stock (Exhibit BII). Nations shall also assume the indebtedness,
(as defined in Section 3.10) of the Company. The Promissory Notes and the
Management Promissory Notes shall be subject to the set off rights, and upon
conversion, hold back rights described in Section 8.3. The parties acknowledge
that Nations has bargained for Michael O'Bryan and James Lathrop (the "Company
Management") to continue with the Company after the Closing Date for two years.
Should Company Management voluntarily terminate or be terminated for Compelling
Cause (as defined in the Employment Agreement) other than death or disability
then a portion of the Purchase Price to be received by Company Management shall
be reduced as contemplated by the promissory notes issued to Company Management
("Management Promissory Notes") the form of which is attached hereto as Exhibit
B.
1.3 THE CLOSING. Subject to the terms and conditions of this
Agreement, the consummation of the Acquisition (the "Closing") shall take place
no later than May 31, 1998, or as promptly as practicable (and in any event
within five (5) business days) after satisfaction or waiver of the conditions
set forth in Articles VI and VII, at the offices of Shareholders' counsel,
Seiller & Handmaker, LLP, Louisville, Kentucky, or such other time and place as
the parties may otherwise agree (the "Closing Date").
1.4 PROCEDURE AT THE CLOSING. At the Closing, the Shareholders
shall deliver to Nations certificates representing the Shares duly endorsed for
transfer, and Nations shall pay the Purchase Price to Shareholders in accordance
with Section 1.2. In addition, at the Closing the Company and the Shareholders
shall deliver to Nations the documents, certificates, opinions, consents and
letters required by Article VI, and Nations shall deliver to the Company and the
Shareholders the documents and certificates required by Article VII.
1.5 ACCOUNTING TREATMENT. The parties hereto acknowledge and agree
that the transactions contemplated hereby are intended to be treated as a
purchase by Nations for accounting purposes.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF NATIONS
As a material inducement to the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, Nations makes
the following representations and warranties:
2.1 CORPORATE STATUS. Nations is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
2.2 CORPORATE POWER AND AUTHORITY. Nations has the corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Nations has
taken all action necessary to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby.
2.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by Nations and constitutes a legal, valid and binding obligation of
Nations, enforceable against Nations in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
2.4 NO COMMISSIONS. Nations has not incurred any obligation for
any finder's or broker's or agent's fees or commissions or similar compensation
in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
As a material inducement to Nations to enter into this Agreement and to
consummate the transactions contemplated hereby, the Shareholders, jointly and
severally, make the following representations and warranties to Nations:
3.1 CORPORATE STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Kentucky
and has the requisite power and authority to own or lease its properties and to
carry on its business as now being conducted. The Company is legally qualified
to do business as a foreign corporation in each state where the nature of its
properties and the conduct of its business requires such qualification.
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3.2 POWER AND AUTHORITY. The Company has the power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The Company has taken all
action necessary to authorize the execution and delivery of this Agreement, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby. The Shareholders have the requisite
competence, power and authority to execute and deliver this Agreement, to
perform their obligations hereunder and to consummate the transactions
contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by each of the Company and the Shareholders, and constitutes the
legal, valid and binding obligation of each of them, enforceable against each of
them in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
3.4 CAPITALIZATION.
(a) Schedule 3.4(a) sets forth, with respect to the Company,
(I) the number of authorized shares of each class of its capital stock, and (ii)
the number of issued and outstanding shares of each class of its capital stock.
There are no outstanding or authorized rights, options, warrants, convertible
securities, subscription rights, conversion rights, exchange rights or other
agreements or commitments of any kind that could require the Company to issue or
sell any shares of its capital stock (or securities convertible into or
exchangeable for shares of its capital stock). There are no outstanding stock
appreciation, phantom stock, profit participation (except for the Company Profit
Sharing Plan) or other similar rights with respect to the Company. Except as set
forth on Schedule 3.4(a), there are no proxies, voting rights or other
agreements or understandings with respect to the voting or transfer of the
capital stock of the Company. Except as set forth on Schedule 3.4(a), the
Company is not obligated to redeem or otherwise acquire any of its outstanding
shares of capital stock.
(b) Schedule 3.4(b) sets forth, with respect to the Company,
the name, address and federal taxpayer identification number of, and the number
of outstanding shares of each class of its capital stock owned of record and/or
beneficially by, each shareholder of the Company as of the close of business on
the date of this Agreement. As of the date hereof, the Shareholders are the
holders of all issued and outstanding shares of capital stock of the Company,
and the Shareholders own such shares free and clear of all Liens, restrictions
and claims of any kind.
3.5 NO VIOLATION. Except as set forth on Schedule 3.5, the
execution and delivery of this Agreement by the Company and the Shareholders,
the performance by the Company and the Shareholders of their respective
obligations hereunder and the consummation by the Company and the Shareholders
of the transactions contemplated by this Agreement will not (I) contravene any
provision of the articles of incorporation or bylaws of the Company, (ii)
violate or conflict with any law, statute, ordinance, rule, regulation, decree,
writ, injunction, judgment or order of any
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Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against the Company or the Shareholders, (iii)
conflict with, result in any breach of, or constitute a default (or an event
which would, with the passage of time or the giving of notice or both,
constitute a default) under, or give rise to a right to terminate, amend,
modify, abandon or accelerate, any Contract which is applicable to, binding upon
or enforceable against the Company or the Shareholders, (iv) result in or
require the creation or imposition of any Lien upon or with respect to any of
the Company Assets (as defined in Section 3.14), or (v) require the consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, any court or tribunal or any other Person, except as may
be required under the HSR Act.
3.6 SUBSIDIARIES. Except as provided at Section 5.9(d) hereof, the
Company does not own, directly or indirectly, any outstanding voting securities
of or other interests in, or control, any other corporation, partnership, joint
venture or other business entity.
3.7 NO COMMISSIONS. Neither the Company nor the Shareholders have
incurred any obligation for any finder's or broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby.
3.8 FINANCIAL STATEMENTS. The Company has delivered to Nations (I)
the financial statements of the Company for the year ending June 30, 1997,
including the notes thereto, audited by Deming, Malone, Livesay and Ostroff
("Auditor"), and (ii) the financial statements of the Company for the eight
month period ended February 28, 1998, and the nine-month period ended March 31,
1998 (collectively, the "Financial Statements"), copies of which are attached to
Schedule 3.8 hereto. The balance sheet dated as of February 28, 1998, including
the notes thereto, of the Company included in the Financial Statements is
referred to herein as the "Current Balance Sheet." The Financial Statements
fairly present the financial position of the Company as of the balance sheet
dates and the results of operations for the periods covered thereby, and have
been prepared in accordance with GAAP consistently applied throughout the
periods indicated. The books and records of the Company fully and fairly reflect
all transactions, properties, assets and liabilities of the Company. There are
no extraordinary or material non-recurring items of income or expense during the
periods covered by the Financial Statements and the balance sheets included in
the Financial Statements do not reflect any writeup or revaluation increasing
the book value of any assets, except as specifically disclosed in the notes
thereto. The Financial Statements reflect all adjustments necessary for a fair
presentation of the financial information contained therein.
3.9 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as
provided on Schedule 3.9 attached hereto, since the date of the Current Balance
Sheet, the Company has operated in the ordinary course of business and has not
(I) issued any capital stock or other securities; (ii) made any distribution of
or with respect to its capital stock or other securities or purchased or
redeemed any of its securities; (iii) paid any bonus to or increased the rate of
compensation of any of its officers or salaried employees or amended any other
terms of employment of such persons; (iv) sold, leased or transferred any of its
properties or assets other than in the ordinary course of business consistent
with past practice except as disclosed in the Letter of Agreement dated as of
April 22, 1998 between
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Nations, the Company and the Stockholders; (v) made or obligated itself to make
capital expenditures out of the ordinary course of business consistent with past
practice; (vi) made any payment in respect of its liabilities other than in the
ordinary course of business consistent with past practice; (vii) incurred any
obligations or liabilities (including any indebtedness) or entered into any
transaction or series of transactions involving in excess of $10,000 in the
aggregate out of the ordinary course of business, except for this Agreement and
the transactions contemplated hereby; (viii) suffered any theft, damage,
destruction or casualty loss, not covered by insurance and for which a timely
claim was filed, in excess of $10,000 in the aggregate; (ix) suffered any
extraordinary losses (whether or not covered by insurance); (x) waived,
canceled, compromised or released any rights having a value in excess of $10,000
in the aggregate; (xi) made or adopted any change in its accounting practice or
policies; (xii) made any adjustment to its books and records other than in
respect of the conduct of its business activities in the ordinary course
consistent with past practice; (xiii) entered into any transaction with any
Affiliate; (xiv) entered into any employment agreement; (xv) terminated, amended
or modified any agreement involving an amount in excess of $10,000; (xvi)
imposed any security interest or other Lien on any of its assets other than in
the ordinary course of business consistent with past practice; (xvii) delayed
paying any accounts payable which is due and payable except to the extent being
contested in good faith; (xviii) made or pledged any charitable contribution in
excess of $1,000; (xix) entered into any other transaction or been subject to
any event which has or may have a Material Adverse Effect on the Company or
agreed to do or authorized any of the foregoing.
3.10 LIABILITIES OF THE COMPANY. The Company has no liabilities or
obligations, whether accrued, absolute, contingent or otherwise, except (a) to
the extent reflected or taken into account in the Current Balance Sheet and not
heretofore paid or discharged, (b) liabilities incurred in the ordinary course
of business consistent with past practice since the date of the Current Balance
Sheet (none of which relate to breach of contract, breach of warranty, tort,
infringement or violation of law, or which arose out of any action, suit, claim,
governmental investigation or arbitration proceeding), and (c) normal accruals,
reclassifications, and audit adjustments which would be reflected on an audited
financial statement and which could not be material in the aggregate.
Notwithstanding the generality of the foregoing, however, the costs of defense
of the action described in Schedule 3.11 at item A2 shall be deemed to be in the
ordinary course of business. Schedule 3.10 sets forth any liability or
indebtedness for borrowed money by the Company or secured by the Assets, as
defined in Section 3.14(a), (the "Indebtedness) which shall not on the closing
date exceed $23,500,000.00 plus amounts borrowed after March 31, 1998 to fund
incremental equipment purchases.
3.11 LITIGATION. Except as set forth on Schedule 3.11 attached
hereto, there is no action, suit, or other legal or administrative proceeding or
governmental investigation pending, threatened, anticipated or to the knowledge
of the Company and Shareholders contemplated against, by or affecting the
Company or the Shareholders, or which question the validity or enforceability of
this Agreement or the transactions contemplated hereby. During the three-year
period prior to the date hereof, there has been no action, suit or other legal
or administrative proceeding or governmental investigation against, by or
affecting the Company or the Shareholders in which the amount in question
exceeded $10,000. There are no outstanding orders, decrees, stipulations or
agreements
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issued by any Governmental Authority in any proceeding or agreed to by the
Company or the Shareholders to which the Company or the Shareholders are or were
a party which have not been complied with in full or which continue to impose
any obligations on the Company or the Shareholders or which may have a Material
Adverse Effect on the Company or the Shareholders.
3.12 ENVIRONMENTAL MATTERS.
(a) The Company is and has at all times been in full
compliance with all Environmental Laws (as defined in clause (g) below)
governing its business, operations, properties and assets, including, without
limitation: (I) all requirements relating to the Discharge (as defined in clause
(g) below) and Handling (as defined in clause (g below) of Hazardous Substances
(as defined in clause (g) below); (ii) all requirements relating to notice,
record keeping and reporting; (iii) all requirements relating to obtaining and
maintaining Licenses (as defined in clause (h) below) for the ownership of its
properties and assets and the operation of its business as presently conducted,
and (iv) all applicable writs, orders, judgements, injunctions, governmental
communications, decrees, informational requests or demands issued pursuant to,
or arising under, any Environmental Laws.
(b) There are no (and there is no basis for any)
non-compliance orders, warning letters, notices of violation (collectively,
"Notices"), claims, suits, actions, judgments, penalties, fines, or
administrative or judicial investigations or proceedings (collectively,
"Proceedings") pending or threatened against or involving the Company or its
business, operations, properties, or assets, issued by any Governmental
Authority or third party with respect to any Environmental Laws or Licenses
issued to the Company thereunder in connection with, related to or arising out
of the ownership by the Company of its properties or assets or the operation of
the Business, which have not been resolved or which would impose any obligation,
burden or continuing liability on Nations in the event that the transactions
contemplated by this Agreement are consummated, or which could have a Material
Adverse Effect on the Company.
(c) The Company has not Handled or Discharged, nor has it at
any time allowed or arranged for any third party to Handle or Discharge,
Hazardous Substances to, at or upon: (I) any location other than a site lawfully
permitted to receive such Hazardous Substances; (ii) any real property currently
or previously owned or operated by the Company; or (iii) any site which,
pursuant to any Environmental Laws, (x) has been placed on the National
Priorities List or its state equivalent; or (y) the United States Environmental
Protection Agency or the relevant state agency or other Governmental Authority
has notified the Company that such Governmental Authority has proposed or is
proposing to place on the National Priorities List or its state equivalent.
There has not occurred, nor is there presently occurring, a Discharge, or
threatened Discharge, of any Hazardous Substance on, into or beneath the surface
of, or adjacent to, any real property currently
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or previously owned or operated by the Company in an amount requiring a notice
or report to be made to a Governmental Authority or in violation of any
applicable Environmental Laws.
(d) Schedule 3.12 identifies the operations and activities,
and locations thereof, which have been conducted or are being conducted by the
Company on any real property currently or previously owned or operated by the
Company which have involved the Handling or Discharge of Hazardous Substances.
(e) Except as set forth on Schedule 3.12, the Company does not
use, nor has it used, any Aboveground Storage Tanks (as defined in clause (g)
below) or Underground Storage Tanks (as defined in clause (g) below), and there
are not now nor to the knowledge of the Company and the Shareholders have there
ever been any Underground Storage Tanks beneath any real property currently or
previously owned or operated by the Company that are required to be registered
under applicable Environmental Laws.
(f) Schedule 3.12 identifies (I) all environmental audits,
assessments or occupational health studies undertaken by the Company or its
agents for the period of time during which the Company owned or possessed any
real property or any Governmental Authority or third party, relating to or
affecting the Company or any real property currently or previously owned or
operated by the Company; (ii) the results of any ground, water, soil, air or
asbestos monitoring undertaken by the Company or its agents or any Governmental
Authority or third party, relating to or affecting the Company or any real
property currently or previously owned or operated by the Company which indicate
the presence of Hazardous Substances at levels requiring a notice or report to
be made to a Governmental Authority or in violation of any applicable
Environmental Laws; (iii) all material written communications between the
Company and any Governmental Authority arising under or related to Environmental
Laws; and (iv) all outstanding citations issued under OSHA, or similar state or
local statutes, laws, ordinances, codes, rules, regulations, orders, rulings, or
decrees, relating to or affecting the Company or any real property currently or
previously owned or operated by the Company.
(g) For purposes of this Section 3.12, the following terms
shall have the meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Aboveground Storage
Tanks.
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing or emitting, as any of such terms may further be
defined in any Environmental Law, into or through any medium including,
without limitation, ground water, surface water, land, soil or air.
"Environmental Laws" means all federal, state, regional or
local statutes, laws, rules, regulations, codes, orders, plans,
injunctions, decrees, rulings, and changes or ordinances or judicial or
administrative interpretations thereof, or similar laws of foreign
jurisdictions where the Company conducts business, whether currently in
existence or hereafter enacted or promulgated, any of which govern (or
purport to
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govern) or relate to pollution, protection of the environment, public
health and safety, air emissions, water discharges, hazardous or toxic
substances, solid or hazardous waste or occupational health and safety,
as any of these terms are or may be defined in such statutes, laws,
rules, regulations, codes, orders, plans, injunctions, decrees, rulings
and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation: the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendment and Reauthorization Act of
1986, 42 U.S.C. 9601, et ,. (collectively "CERCLA"); the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act
of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. 6901 et seq. (collectively "RCRA"); the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. 1801, et seq. (the "Hazardous
Materials Transportation Act"); the Clean Water Act, as amended, 33
U.S.C. 1311, et seq. (the "Clean Water Act"); the Clean Air Act, as
amended (42 U.S.C. 7401-7642) (the "Clean Air Act"); the Toxic
Substances Control Act, as amended, 15 U.S.C. 2601 et seq. (the "Toxic
Substances Control Act"); the Federal Insecticide, Fungicide, and
Rodenticide Act as amended, 7 U.S.C. 136- 136y, ("FIFRA"); the
Emergency Planning and Community Right-to-Know Act of 1986 as amended,
42 U.S.C. 11001, et seq. (Title III of SARA) ("EPCRA"); and the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. 651,
et seq. ("OSHA").
"Handle" means any manner of generating, accumulating,
storing, treating, disposing of, transporting, transferring, labeling,
handling, manufacturing or using, as any of such terms may further be
defined in any Environmental Law, of any Hazardous Substances or Waste.
"Hazardous Substances" shall be construed broadly to include
any toxic or hazardous substance, material, or waste, and any other
contaminant, pollutant or constituent thereof, whether liquid, solid,
semi-solid, sludge and/or gaseous, including without limitation,
chemicals, compounds, by-products, pesticides, asbestos containing
materials, petroleum or petroleum products, and polychlorinated
biphenyls, the presence of which requires investigation or remediation
under any Environmental Laws or which are or become regulated, listed
or controlled by, under or pursuant to any Environmental Laws,
including, without limitation, RCRA, CERCLA, the Hazardous Materials
Transportation Act, the Toxic Substances Control Act, the Clean Air
Act, the Clean Water Act, FIFRA, EPCRA and OSHA, or any similar state
statute, or any future amendments to, or regulations implementing such
statutes, laws, ordinances, codes, rules, regulations, orders, rulings,
or decrees, or which has been or shall be determined or interpreted at
any time by any Governmental Authority to be a hazardous or toxic
substance regulated under any other statute, law, regulation, order,
code, rule, order, or decree.
"Licenses" means all licenses, certificates, permits,
approvals and registrations.
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"Underground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Underground Storage
Tanks.
3.13 REAL ESTATE. The Company at Closing will not own any parcels
of real property. Schedule 3.13 sets forth (a) a list of all leases, licenses or
similar agreements ("Real Property Leases") copies of which have previously been
furnished to Nations), (b) the lessor and lessee thereof and the date and term
of each of such leases, (c) the legal description, if known, including street
address, of each property covered thereby (the "Leased Premises"), and (d) a
brief description (including size and function) of the principal improvements
and buildings thereon. The Real Property Leases are in full force and effect and
have not been amended, and no party thereto is in default or breach under any
such Lease. No event has occurred which, with the passage of time or the giving
of notice or both, would cause a breach of or default by the Company under any
of such leases and there is no breach or anticipated breach by any other party
to such leases. With respect to each of the Leased Premises: (I) the Company has
valid leasehold interests or other rights of use and occupancy in the Leased
Premises, free and clear of any Liens on such leasehold interests or other
rights of use and occupancy, or any covenants, easements or title defects known
to or created by the Company, except as do not affect the occupancy or uses of
such properties; (ii) the portions of the buildings located on the Leased
Premises that are used in the business of the Company are within the property
setback and building lines of the respective property, are in good repair and
condition, normal wear and tear excepted, and are in the aggregate sufficient to
satisfy the Company respective normal business activities as conducted thereat;
(iii) each of the Leased Premises (a) has direct access to public roads or
access to public roads by means of a perpetual access easement, such access
being sufficient to satisfy the current and reasonably anticipated normal
transportation requirements of the Company respective business as presently
conducted at such parcel; and (b) is served by all utilities in such quantity
and quality as are sufficient to satisfy the current normal business activities
as conducted at such parcel; and (iv) the Company has not received notice of (a)
any condemnation proceeding with respect to any portion of the Leased Premises
or any access thereto and no such proceeding is contemplated to the knowledge of
the Company by any Governmental Authority; or (b) any special assessment which
may affect any of the Leased Premises and to the knowledge of the Company and
the Shareholders no such special assessment is contemplated by any Governmental
Authority.
3.14 GOOD TITLE, ADEQUACY AND CONDITION OF ASSETS. Except as set
forth on Schedule 3.10, the Company has, and at the Closing will have, good and
marketable title to its Assets, as hereinafter defined, with full power to sell,
transfer and assign the same free and clear of any Lien. The Assets and the
Leased Premises constitute, in the aggregate, all of the assets and properties
necessary for the conduct of the Business in the manner in which and to the
extent to which such Business is currently being conducted. Assets means all of
the properties and assets of the Company, including the Leased Premises, whether
personal or mixed, tangible or intangible, wherever located. The Assets are in
good operating condition, normal wear and tear excepted, and have been
maintained in accordance with all applicable specifications and warranties. All
inventory of rental equipment of the Company set forth on Schedule 3.14(a)
hereto and all inventory of merchandise set
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forth in Schedule 3.14(b) hereto, consists of a quality and quantity usable,
rentable, or salable in the ordinary course of business of the Company, except
for obsolete items and items of below standard quality, all of which have been
written off, written down or adequately reserved against to their net realizable
value in the Current Balance Sheet. All such inventory not written off has been
recorded at the lower of cost or net realizable value, and depreciated
consistent with the economic life of such inventory. The quantities of each item
of such inventory are reasonable in the present circumstances of the Company.
All such inventory is in good operating condition and repair, subject to normal
wear and tear, and has been maintained in accordance with normal industry
practice.
3.15 COMPLIANCE WITH LAWS. The Company is and has been in
compliance with all laws, regulations and orders applicable to it, its business
and operations (as conducted by it now and in the past), the Assets and any
other properties and assets (in each case owned or used by it now or in the
past). The Company has not been cited, fined or otherwise notified of any
asserted past or present failure to comply with any laws, regulations or orders
and no proceeding with respect to any such violation is pending or threatened.
Neither the Company, nor any of its respective employees or to the knowledge of
the Company or the Shareholders, agents, has made any payment of funds which is
prohibited by law, and no funds have been set aside to be used for any payment
prohibited by law. The Company is not subject to any Contract, decree or
injunction which restricts the continued operation of the Business or the
expansion thereof to other geographical areas, customers or suppliers, or to
other lines of business.
3.16 LABOR AND EMPLOYMENT MATTERS. Schedule 3.16 sets forth the
name and current rate of compensation of each employee of the Company. The
Company is not a party to or bound by any collective bargaining agreement or any
other agreement with a labor union, and there has been no effort by any labor
union during the twenty-four (24) months prior to the date hereof to organize
any employees of the Company into one or more collective bargaining units. There
is no pending or threatened labor dispute, strike or work stoppage which affects
or which may affect the Business. Neither the Company, nor any agent,
representative or employee thereof has within the last ten (10) years committed
any unfair labor practice as defined in the National Labor Relations Act, as
amended, and there is no pending or threatened charge or complaint against the
Company or any of the Companies by or with the National Labor Relations Board or
any representative thereof The Company is not aware that any key employee or
group of employees have any plans to terminate his or their employment with the
Company. The Company is not a party or subject to any employment agreements,
noncompetition agreements, or consulting agreements. The Company has complied
with all applicable laws, rules and regulations relating to employment, civil
rights and equal employment opportunities, including but not limited to, the
Civil Rights Act of 1964, the Fair Labor Standards Act, and Americans with
Disabilities Act, each as amended.
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3.17 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.17 sets forth each employee Benefit Plan of the
Company. With respect to each Employee Benefit Plan (as defined in clause (d)
below) of the Company, (I) each has been administered in compliance with its
terms and with all applicable laws including, without limitation, ERISA and the
Code; (ii) no actions, suits, claims or disputes are pending or to the knowledge
of the Company and the Shareholders threatened; (iii) no audits, proceedings,
claims or demands are pending with any Governmental Authority; (iv) all reports,
returns and similar documents required to be filed with any Governmental
Authority or distributed to any plan participant have been duly or timely filed
or distributed; (v) no "prohibited transaction" has occurred within the meaning
of ERISA or the Code; (vi) no such plan provides medical or dental benefits for
any current or former employees of the Company or its predecessors after
termination of employment; (vii) no such plan obligates the Company to pay
separation, severance, termination or similar benefits as a result of any
transaction contemplated by this Agreement or solely as a result of a "change of
control" (as defined in Section 280G of the Code); (viii) all required or
discretionary (in accordance with historical practices) payments, premiums,
contributions, reimbursements or accruals for all periods ending prior to or as
of the Closing shall have been made or properly accrued on the Current Balance
Sheet or will be properly accrued on the books and records of the Company as of
the Closing; (ix) no such plan has any unfunded liabilities which are not
reflected on the Current Balance Sheet or the books and records of the Company;
(x) the Company has complied with the notice and continuation of coverage
requirements of Section 4980B of the Code and the regulations thereunder with
respect to any group health plan within the meaning of Code Section 5000(b)(1);
and (xi) the Company does not participate in, nor has it ever participated in,
or have any withdrawal liability under ERISA with respect to, a "multiemployer
plan" (as defined in Section 3(37) of ERISA). True and accurate copies of each
Employee Benefit Plan of the Company, together with the most recent annual
reports on Form 5500, all IRS favorable determination letters and summary plan
descriptions for such plans have been furnished to Nations.
(b) With respect to each Employee Benefit Plan of the Company
intended to qualify under Code Section 401(a) or 403(a), (I) the Internal
Revenue Service has issued a favorable determination letter, which has not been
revoked, that any such plan is tax-qualified and exempt from federal income tax;
(ii) no reportable event (within the meaning of Section 4043 of ERISA) has
occurred; and (iii) the present value of all liabilities under any such plan
will not exceed the current fair market value of the assets of such plan
(determined using the actuarial assumption used for the most recent actuarial
valuation for such plan).
(c) Nations will not suffer any loss, cost or liability as a
result of any claim that the Company has not complied with the provisions of
paragraphs (a) and (b) above with respect to each Employee Benefit Plan
maintained by any such entity.
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(d) For purposes hereof, "Employee Benefit Plan" means any:
(I) employee pension benefit plan as defined in Section 3(2) of ERISA; (ii)
multiemployer plan as defined in Section 3(37) of ERISA; (iii) employee welfare
benefit plan as defined in Section 3(1) of ERISA; and (iv) any stock option,
bonus, stock purchase, or insurance plan and any severance or termination pay
plan or policy in which employees, spouses or dependents participate.
3.18 TAX MATTERS. All Tax Returns required to be filed prior to the
date hereof with respect to the Company or its respective income, properties,
franchises or operations have been timely filed, each such Tax Return has been
prepared in compliance with all applicable laws and regulations, and all such
Tax Returns are true and accurate in all respects. All Taxes due and payable by
or with respect to the Company and the Business have been paid or are accrued on
the Current Balance Sheet. The Company has withheld and paid all Taxes to the
appropriate Governmental Authority 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. With respect to each taxable period
of the Company: (I) except as set forth on Schedule 3.18 attached hereto, no
deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Taxes has been asserted or assessed by any taxing
authority against the Company; (ii) the Company has not consented to extend the
time in which any Taxes may be assessed or collected by any taxing authority;
(iii) the Company has not requested or been granted an extension of the time for
filing any Tax Return to a date later than the Closing; (iv) there is no action,
suit, taxing authority proceeding, or audit or claim for refund now in progress,
pending or threatened against or with respect to the Company regarding Taxes;
(v) there are no Liens for Taxes (other than for current Taxes not yet due and
payable) upon the Assets of the Company and (vi) the Company has duly and
validly filed an election for "S" corporation status under the Code, and such
"S" election has not been revoked or terminated and neither the Company nor the
Shareholders have taken any action which would cause a termination of such "S"
election. No sales or use tax (other than sales tax on motor vehicles),
non-recurring intangible tax, documentary stamp tax or other excise tax (or
comparable tax imposed by any governmental entity) will be payable by the
Company or Nations by virtue of the transactions contemplated in this Agreement.
3.19 INSURANCE. Schedule 3.19 provides a list of all insurance
policies of the company currently in force and provides the insurer, type of
coverage, and policy period for each policy. The Company is covered by valid,
outstanding and enforceable policies of insurance issued to it covering its
properties, assets and business against risks of the nature normally insured
against by corporations in the same or similar lines of business and in coverage
amounts typically and reasonably carried by such corporations (the "Insurance
Policies"). Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid. The Company has complied with the
provisions of such Insurance Policies. During the three year period to the date
hereof, the Company has not made any claims under any of the Insurance Policies,
and has suffered no losses that would give rise to any such claims, for an
amount in excess of $ 10,000. The Company has not failed to give, in a timely
manner, any notice required under any of the Insurance Policies to preserve its
rights thereunder. Through the Closing Date, each of the Insurance Policies will
be in full force and effect.
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3.20 RECEIVABLES. All of the receivables of the Company are valid
and legally binding, represent bona fide transactions and arose in the ordinary
course of business of the Company. All of such receivables are good and
collectible receivables, and will be collected in full in accordance with the
terms of such receivables and in any event within three (3) months following the
Closing, except for those receivables set forth on Schedule 3.20 attached hereto
which shall be collected within six months of the Closing, without set off or
counterclaims. If the receivables listed on Schedule 3.20 are not collected
within six months of the Closing, Shareholders shall have ten (10) days to
purchase any one or more of such receivables at the legal balance.
3.21 LICENSES AND PERMITS. The Company possesses all licenses and
required governmental or official approvals, permits or authorizations
(collectively, the "Permits") for the Business and operations, and Schedule 3.21
sets forth a true, complete and accurate list of all such Permits. All such
Permits are valid and in full force and effect, the Company is in full
compliance with the respective requirements thereof, and no proceeding is
pending or threatened to revoke or amend any of them. None of such Permits is or
will be impaired or in any way affected by the execution and delivery of this
Agreement or the transactions contemplated hereby.
3.22 RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS; AFFILIATED
TRANSACTIONS. No current customer of the Company has threatened to terminate its
business relationship with the Company for any reason. The Company has no direct
or indirect interest in any customer, supplier or competitor of the Company, or
in any person from whom or to whom the Company leases real or personal property,
except as provided in Section 5.9 hereof. No officer, director, or shareholder
of the Company, nor any person related by blood or marriage to any such person,
nor any entity in which any such person owns any beneficial interest, is a party
to any Contract or transaction with the Company has any interest in any property
used by the Company.
3.23 CONTRACTS. Schedule 3.23 sets forth a list of each Contract to
which the Company is a party or by which it or its properties and assets are
bound and which is material to its business, assets, properties or prospects
(the "Material Contracts"), true, correct and complete copies of which have been
provided to Nations. The copy of each Material Contract furnished to Nations is
a true and complete copy of the document it purports to represent and reflects
all amendments thereto made through the date of this Agreement. The Company has
not violated any of the terms or conditions of any Material Contract or any term
or condition which would permit termination or modification of any Material
Contract, and all of the covenants to be performed by any other party thereto
have been fully performed, and there are no claims for breach or indemnification
or notice of default or termination under any Material Contract. No event has
occurred which constitutes, or after notice or the passage of time, or both,
would constitute, a default by the Company under any Material Contract, and no
such event has occurred which constitutes or would constitute a default by any
other party. The Company is not subject to any liability or payment resulting
from renegotiation of amounts paid under any Material Contract. As used in this
Section 3.23, Material Contracts shall include, without limitation, formal or
informal, written or oral, in each case which is material to the business,
assets, properties or prospects of the Company, (a) loan agreements, indentures,
mortgages, pledges, hypothecations, deeds of trust, conditional sale or title
retention agreements, security agreements,
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equipment financing obligations or guaranties, or other sources of contingent
liability in respect of any indebtedness or obligations to any other Person(s),
or letters of intent or commitment letters with respect to same; (b) contracts
obligating the Company to provide products or services for a period of one year
or more, excluding standard collection contracts entered into in the ordinary
course of its business without material modification from the preprinted forms
used by the Company in the ordinary course of business, copies of which have
been supplied to Nations; (c) leases of real property and leases of personal
property not cancelable without penalty on notice of sixty (60) days or less or
calling for payment of an annual gross rental exceeding $10,000; (d)
distribution, sales agency or franchise or similar agreements, or agreements
providing for an independent contractor's services, or letters of intent with
respect to same; (e) employment agreements, management service agreements,
consulting agreements, confidentiality agreements, non-competition agreements,
employee handbooks, policy statements and any other agreements relating to any
employee, officer or director of the Company; (f) licenses, assignments or
transfers of trademarks, trade names, service marks, patents, copyrights, trade
secrets or know how, or other agreements regarding proprietary rights or
intellectual property; (g) any Contract relating to pending capital expenditures
by the Company; (h) any non-competition agreements restricting the Company in
any manner; and (I) other material Contracts or understandings, irrespective of
subject matter and whether or not in writing, not entered into in the ordinary
course of business by the Company and not otherwise disclosed on the Schedules.
3.24 ACCURACY OF INFORMATION FURNISHED. No statement or information
made or furnished by the Company or the Shareholders to Nations or any of
Nations' representatives, including those contained in this Agreement and the
various schedules attached hereto and the other information and statements
referred to herein and previously furnished by the Company and the Shareholders,
contains or shall contain any untrue statement of a fact or omits or shall omit
any fact necessary to make the information contained therein not misleading. The
Company and the Shareholders have provided Nations with true, accurate and
complete copies of all documents listed or described in the various Schedules
attached hereto.
3.25 CUSTOMERS. All of the customers listed on the customer lists
attached hereto as Schedule 3.25 are subject to valid and enforceable customer
contracts. True, correct and complete copies of such contracts have been
furnished by the Company to Nations. The Company has not violated any of the
terms or conditions of any of the customer contracts, and all of the covenants
to be performed by any other party thereto have been fully performed and there
are no claims for breach or indemnification or notice of default or termination
thereunder. Schedule 3.25 notes the top 25 customers of the Company as measured
by annual revenue for the last twelve months.
3.26 INTELLECTUAL PROPERTY. The Company has full legal right, title
and interest to the Intellectual Property and has not granted any rights in or
to the same to any third party. The Business as presently conducted, and the
unrestricted conduct and the unrestricted use and exploitation of the
Intellectual Property, does not infringe or misappropriate any rights held or
asserted by any Person, and no Person is infringing on the Intellectual
Property. No payments are required for the continued use of the Intellectual
Property. None of the Intellectual Property has ever been declared invalid or
unenforceable, or is the subject of any pending or threatened action for
opposition, cancellation,
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declaration, infringement, or invalidity, unenforceability or misappropriation
or like claim, action or proceeding.
3.27 BANK ACCOUNTS. Schedule 3.27 lists each account of each of the
Company with any bank, broker or other depository institution, and the names of
all persons authorized to withdraw funds from each such account, and the
locations of all safe deposit boxes of the Company and the names of all persons
authorized to have access to such safe deposit boxes.
3.28 NAMES: PRIOR ACQUISITIONS. All names under which the Company
does business as of the date hereof are specified on Schedule 3.28. Except as
otherwise disclosed in Schedule 3.28, the Company has not changed its name or
used any assumed or fictitious name or been the surviving entity in a merger,
acquired any business or changed its principal place of business or chief
executive office, within the past three years.
3.29 DISTRIBUTIONS. From July 1, 1997, to the Closing Date, the
Company has not made and will not make any distributions to Shareholders beyond
those already made and listed on Schedule 3.9 other than: (I) salaries and
reimbursements of customary business expenses incurred in the ordinary course of
business consistent with past practices paid to Shareholders who are also
employees of the Company; (ii) as provided on Schedule 3.9; and (iii) as
contemplated by Section 5.9.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 CONDUCT OF BUSINESS PENDING THE CLOSING. The Company covenants
and agrees that, between the date of this Agreement and the Closing Date, the
Business shall be conducted only in, and shall not take any action except in,
the ordinary course of business consistent with past practice. The Company shall
use its reasonable best efforts to preserve intact its business organization, to
keep available the services of its current officers, employees and consultants,
and to preserve its present relationships with customers, suppliers and other
persons with which it has significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement, the
Company shall not between the date of this Agreement and the Closing Date,
directly or indirectly, do or propose or agree to do any of the following
without the prior written consent of Nations: (a) amend or otherwise change its
articles of incorporation or bylaws or equivalent organizational
documents; (b) issue or authorize the issuance of, any shares of its capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock or other ownership
interest; (c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock other than as contemplated by Section 3.29; (d) reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock; (e) acquire (including, without
limitation, for cash, or shares of stock, property or services, by merger,
consolidation or acquisition of stock or assets) any interest in any
corporation, partnership or other business
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organization or division thereof; (f) incur any additional indebtedness or
prepay any Indebtedness other than to fund additional equipment purchases; (g)
make any loans or advances to any person or entity or guarantee the indebtedness
of any person or entity, except in the ordinary course of business consistent
with past practice; (h) sell, dispose of or encumber any of its assets outside
the ordinary course of business ; (I) enter into, modify or terminate, any
Contract, other than in the ordinary course of business consistent with past
practice; (j) pay any bonus to or increase the compensation or benefits payable
or to become payable to its employees, independent contractors or consultants
except as described in Section 5.14 below; (k) pay, discharge or satisfy any
existing claims, liabilities or obligations other than in the ordinary course of
business consistent with past practice; (l) increase or decrease prices charged
to its customers, except for previously announced price changes, or take any
other action which might reasonably result in any increase in the loss of
customers; (m) make (or commit to make) any capital expenditures in excess of
$10,000 except in the ordinary course of business; or (n) agree, in writing or
otherwise, to take or authorize any of the foregoing actions or any other action
which would make any representation or warranty in Article III untrue or
incorrect.
ARTICLE V
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
5.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby and to
satisfy the conditions set forth in Article VI and Article VII. The Shareholders
shall cause the Company to comply with all of the covenants of the Company under
this Agreement.
5.2 HSR ACT AND OTHER ACTIONS. Each of the parties hereto shall
(I) make promptly (and in no event later than eight (8) business days following
the date hereof) their respective filings, if any, and thereafter make any other
required submissions, under the HSR Act, with respect to the transactions
contemplated hereby, and (ii) use their reasonable best efforts to take, or
cause to be taken, all appropriate actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated herein, including,
without limitation, using their best efforts to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of any
Governmental Authority and parties to Contracts with the Company as are
necessary for the consummation of the transactions contemplated hereby. Each of
the parties agrees to cooperate with the others in the preparation and filing of
all forms, notifications, reports and information, if any, required or
reasonably deemed advisable pursuant to any law, rule or regulation in
connection with the transactions contemplated by this Agreement, and to use
their respective best efforts to agree jointly on a method to overcome any
objections by any Governmental Authority to any such transactions. The parties
also agree to use best efforts to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby and to lift or rescind any injunction or
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restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby.
5.3 NOTIFICATION OF CERTAIN MATTERS. The Company and the
Shareholders shall give prompt notice to Nations of the occurrence or
non-occurrence of any event which would likely cause any representation or
warranty contained herein to be untrue or inaccurate, or any covenant,
condition, or agreement contained herein not to be complied with or satisfied.
5.4 CONFIDENTIALITY: PUBLICITY. Except as may be required by law
or as otherwise permitted or expressly contemplated herein, no party hereto or
their respective Affiliates, employees, agents and representatives shall
disclose to any third party this Agreement or the subject matter or terms hereof
without the prior consent of the other parties hereto. No press release or other
public announcement related to this Agreement or the transactions contemplated
hereby shall be issued by any party hereto without the prior approval of the
other parties.
5.5 NO OTHER DISCUSSIONS. The Company and the Shareholders agree
that the Company and the Shareholders and their respective Affiliates,
employees, agents and representatives will not (I) initiate, encourage the
initiation by others of discussions or negotiations with third parties or
respond to solicitations by third persons relating to any merger, sale or other
disposition of any substantial part of the assets, business or properties of the
Company (whether by merger, consolidation, sale of stock or otherwise), or (ii)
enter into any agreement or commitment (whether or not binding) with respect to
any of the foregoing transactions. The Company and the Shareholders will
immediately notify Nations if any third party attempts to initiate any
solicitation, discussion or negotiation with respect to any of the foregoing
transactions.
5.6 DUE DILIGENCE REVIEW AND ENVIRONMENTAL ASSESSMENT. Nations
shall be entitled to conduct prior to the Closing a due diligence review of the
assets, properties, books and records of the Company and an environmental
assessment of the Leased Premises (hereinafter referred to as "Environmental
Assessment"). The Company shall cause their respective directors, officers,
employees, auditors, counsel and agents to afford Nations and its officers,
employees, auditors, counsel and agents reasonable access at all reasonable
times to the properties, offices, and other facilities of the Company, to its
respective officers and employees and to all books and records, and shall
furnish such persons with all financial, operating and other data and
information as may be requested. The Environmental Assessment may include a
physical examination of the Leased Premises and any structures, facilities, or
equipment located thereon, soil samples, ground and surface water samples,
storage tank testing and review of pertinent records, documents, and licenses of
the Company. If the Environmental Assessment identifies environmental
contamination which requires remediation or further evaluation or if the results
of the Environmental Assessment or due diligence review are otherwise not
satisfactory to Nations in its sole discretion, then Nations may elect not to
close the transactions contemplated by this Agreement and to terminate this
Agreement. Nations' failure or decision not to conduct any such due diligence
review or Environmental Assessment, and any information provided to or obtained
by Nations, shall not affect any representation or warranty of the Company or
the Shareholders under this Agreement. Assuming the Company makes available
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the materials for review by Nations, its due diligence review shall be completed
by May 14, 1998, and the Environmental Assessment which shall be completed by
May 31, 1998.
5.7 RESTRICTIVE COVENANTS. In order to assure that Nations will
realize the benefits of the transactions contemplated hereby, the Company and
each of, Oliver Raymond, Michael O'Bryan and James Lathrop agree that he, will
not:
(a) for a period of three (3) years following the termination
of his employment with the Company, directly or indirectly, alone or as a
partner, joint venturer, officer, director, employee, consultant, agent,
independent contractor, or security holder, of any company or business, engage
in, or finance, or provide financial assistance with respect to, any business
activity in the business of renting, selling, leasing, distributing, servicing
or repairing new or used equipment, spare parts and related supplies to
industrial, manufacturing, or construction customers (the "Equipment Business")
in any county in any state in the United States in which NationsRent, Inc. or
any of its subsidiaries, successors, or assigns (collectively, the "Nations
Companies") conducts such business at the time such person commences to engage
in such activity; provided, however, that the beneficial ownership of less than
five percent (5%) of any class of securities of any entity having a class of
equity securities actively traded on a national securities exchange or
over-the-counter market shall not be deemed, in and of itself, to violate the
prohibitions of this Section;
(b) for a period of three (3) years following the termination
of his employment with the Company, directly or indirectly, (I) induce any
customer acquired hereunder or any other customer of the Nations Companies to
patronize any business which is directly or indirectly in competition with the
Equipment Business conducted by any of the Nations Companies; (ii) canvass,
solicit or accept from any Person which is a customer of the Equipment Business
conducted by any of the Nations Companies, any such competitive business; or
(iii) request or advise any customer of the Equipment Business conducted by any
of the Nations Companies to withdraw, curtail or cancel any such customer's
business with the Nations Companies or their successors;
(c) for a period of three (3) years following the termination
of his employment with the Company, directly or indirectly, employ any person
who was employed by the Nations Companies, within six (6) months prior to the
date being employed by such Shareholder, or in any manner seek to induce any
employee of the Nations Companies to leave his or her employment; and
(d) at any time following the Closing Date, directly or
indirectly, in any way utilize, disclose, copy, reproduce or retain in his
possession any of the Companies' proprietary rights or records acquired
hereunder, including, but not limited to, any customer lists.
(e) Notwithstanding the foregoing, the restrictions described
above in (a), (b), and (c) shall run, in the case of Oliver Raymond, for a term
of five (5) years from Closing.
The Company and the Shareholders agree and acknowledge that the
restrictions contained in this Section are reasonable in scope and duration, and
are necessary to protect the Nations
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Companies. The Company and the Shareholders agree and acknowledge that any
breach of this Section will cause irreparable injury to the Nations Companies
and upon any breach or threatened breach of any provision of this Section, the
Nations Companies shall be entitled to injunctive relief, specific performance
or other equitable relief, without the necessity of posting bond; provided,
however, that this shall in no way limit any other remedies which the Nations
Companies may have as a result of such breach, including the right to seek
monetary damages. The parties hereto agree that Nations may assign, without
limitation, the foregoing restrictive covenants to any successor to Nations'
Equipment Business.
5.8 EMPLOYMENT AGREEMENTS. (a) The Company and Shareholders shall
cause Michael O'Bryan and James Lathrop to enter into two (2) year employment
agreements, the form of which is provided at Exhibit C.
(b) The Company and the Shareholders shall cooperate with and
assist Nations to cause Donald Tewell and Kenneth Acton to enter into employment
agreements substantially similar to the form of employment agreement attached as
Exhibit C.
5.9 TRANSFER OF REAL PROPERTY, LEASES.
(a) Prior to Closing the Company shall cause to be transferred
to Shareholders or their designee the real property located at 3816 Bishop Lane,
Louisville, KY; 4114 Bishop Lane, Louisville, KY; 4949 South Harding Street,
Indianapolis, IN; and 10060 Toebben Drive, Independence, KY.
(b) On the Closing Date the Company shall enter into leases
(the form of which is attached as Exhibit D) providing for the lease of the
Leased Premises.
(c) The Company shall prior to the Closing distribute its
rights to certain life insurance policies listed on Schedule 5.9(c) prior to
Closing.
(d) Prior to the Closing Date the Company shall distribute to
Oliver Raymond or his assignee the following securities: Community Bank of
Naples; Harmony Oaks Limited Partnership; and First National Bank of PA.
5.10 CONTRACTS: CONSENTS. Prior to the Closing, (I) the Company
shall not terminate or otherwise modify or amend any of its Contracts, and (ii)
the Company shall receive consents to the transactions contemplated hereby and
waivers of rights to terminate or modify any rights or obligations of the
Company from any Person(s) from whom such consent or waiver is required under
any Contract to which the Company or the Assets are bound as of a date not more
than ten (10) days prior to the Closing Date, or who, as a result of the
transactions contemplated hereby, would have such rights to terminate or modify
such contracts, either by the terms thereof or as a matter of law.
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5.11 PAYOFF AND ESTOPPEL LETTERS. Prior to the Closing, the Company
shall request and deliver to Nations payoff and estoppel letters from all
holders of any Indebtedness of the Company which letters shall contain payoff
amounts, per diem interest, wire transfer instructions and an agreement to
deliver to Nations, upon full payment of any such Indebtedness, UCC-3
termination statements, satisfactions of mortgage or other appropriate releases
and any original promissory notes or other evidences of indebtedness marked
canceled.
5.12 SHAREHOLDERS VOTE. The Shareholders, in executing this
Agreement, consent as shareholders of the Company to the transactions
contemplated hereby, and waive notice of any meeting in connection therewith.
5.13 YEAR END BONUSES. On or before June 30, 1998, Nations shall
cause Company to pay to Employees year-end bonuses for the fiscal year ending
June 30, 1998, calculated in accordance with past practices, and as set forth on
Schedule 3.16.
5.14 COOPERATION OF SHAREHOLDERS. The Shareholders shall cooperate
with Nations in the conduct of an audit of the Company, including but not
limited to the execution of required representation letters, in connection with
the preparation of a registration for a securities offering.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF NATIONS
The obligations of Nations to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions, any or all of which may be waived in whole or in part
in writing by Nations:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Company and the
Shareholders contained in this Agreement shall be true and correct at and as of
the Closing Date with the same force and effect as though made at and as of that
time except (I) for matters specifically permitted by or disclosed on any
Schedule to this Agreement, and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and correct
as of such date. Each of the Company and Shareholders shall have performed and
complied with all of their respective obligations required by this Agreement to
be performed or complied with at or prior to the Closing Date. Each of the
Company and Shareholders shall have delivered to Nations a certificate, dated as
of the Closing Date, duly signed (in the case of the Company by its President),
certifying that such representations and warranties are true and correct and
that all such obligations have been complied with and performed.
6.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between
the date hereof and the Closing Date, (I) there shall have been no Material
Adverse Change in the Assets or the Business except as contemplated by the terms
of this Agreement, (ii) there shall have been no adverse federal, state or local
legislative or regulatory change affecting in any respect the Assets or the
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Business, and (iii) none of the Assets shall have been damaged by fire, flood,
casualty, act of God or the public enemy or other cause (regardless of insurance
coverage for such damage), and there shall have been delivered to Nations a
certificate to that effect, dated the Closing Date and signed by or on behalf of
the Company and the Shareholders.
6.3 CORPORATE CERTIFICATE. The Company shall have delivered to
Nations (I) copies of its articles of incorporation and bylaws as in effect
immediately prior to the Closing Date, (ii) copies of resolutions adopted by its
Board of Directors and Shareholders authorizing the transactions contemplated by
this Agreement, and (iii) a certificate of existence issued by the Commonwealth
of Kentucky as of a date not more than ten (10) days prior to the Closing Date,
certified in the case of subsections (I) and (ii) of this Section as of the
Closing Date by the Secretary of the Company as being true, correct and
complete.
6.4 DELIVERY OF THE SHARES. At the Closing, Shareholders shall
duly endorse for transfer and deliver to Nations (or its assignee) the Shares
and such other instruments of transfer of title as are necessary to transfer to
Nations (or its assignee) good and marketable title to the Shares free and clear
of any Liens.
6.5 OPINION OF COUNSEL. Nations shall have received an opinion
dated as of the Closing Date from counsel for the Company and the Shareholders,
in form and substance acceptable to Nations, to the effect that:
(I) the Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Kentucky and is authorized to carry on the business now conducted by it
and to own or lease the properties now owned or leased by it;
(ii) the Company has obtained all necessary authorizations
and consents of its Boards of Directors and Shareholders to consummate
the Acquisition and the other transactions contemplated hereby;
(iii) Such counsel does not know or have reason to believe
that there is any litigation, proceeding or investigation pending or
threatened which might result in any Material Adverse Effect on the
Company, or which questions the validity of this Agreement;
(iv) The execution and delivery of this Agreement by the
Company and the Shareholders, the performance by the Company and the
Shareholders of their respective obligations hereunder and the
consummation by the Company and the Shareholders of the transactions
contemplated by this Agreement will not (a) contravene any provision of
the articles of incorporation or bylaws of the Company, (b) violate or
conflict with any law, statute, ordinance, rule, regulation, decree,
writ, injunction, judgment or order of any Governmental Authority or of
any arbitration
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award which is either applicable to, binding upon or enforceable
against the Company, or the Shareholders, (c) conflict with, result in
any breach of, or constitute a default (or an event which would, with
the passage of time or the giving of notice or both, constitute a
default) under, or give rise to a right to terminate, amend, modify,
abandon or accelerate, any Contract which is applicable to, binding
upon or enforceable against the Company or the Shareholders except for
loan agreements, (d) result in or require the creation or imposition of
any Lien upon or with respect to any of the Assets, or (e) require the
consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, any court or tribunal or
any other Person, except for certain lenders and as required and as
have been made under the HSR Act; and
(v) This Agreement is a valid and binding obligation of the
Company and the Shareholders, and enforceable against each of them in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or general
equitable principles.
6.6 NO ADVERSE LITIGATION. There shall not be pending or
threatened any action or proceeding by or before any court or other governmental
body which shall seek to restrain, prohibit, invalidate or collect damages
arising out of the transactions contemplated hereby, and which, in the judgment
of Nations, makes it inadvisable to proceed with the transactions contemplated
hereby.
6.7 DUE DILIGENCE REVIEW. Nations shall have completed its due
diligence review of the Company, the Assets and the Business pursuant to Section
5.6, and shall be satisfied with the results of such review and assessment.
6.8 BOARD APPROVAL. The Board of Directors of Nations shall have
authorized and approved this Agreement and the transactions contemplated hereby.
6.9 EMPLOYMENT AGREEMENTS; LEASES; TERMINATION OF BUY SELL
AGREEMENT. The Company shall have delivered the executed employment agreements
contemplated by Section 5.8 and the leases contemplated by Section 5.9 hereof.
The Shareholders shall deliver at Closing a
termination agreement, in form and substance reasonably acceptable to Nations,
terminating the Buy Sell Agreement listed on Schedule 3.4(a).
6.10 CONSENTS. The Company shall have received the consents to the
transactions contemplated hereby in accordance with Section 5.10 hereof.
6.11 HSR ACT. Any applicable HSR Act waiting period shall have
expired or been terminated.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
AND THE SHAREHOLDERS
The obligations of the Company and the Shareholders to effect the
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, any or all of which may be
waived in whole or in part in writing by the Company and the Shareholders:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Nations contained in this
Agreement shall be true and correct at and as of the Closing Date with the same
force and effect as though made at and as of that time except (I) for changes
specifically permitted by or disclosed pursuant to this Agreement, and (ii) that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date. Nations shall
have performed and complied with all of its obligations required by this
Agreement to be performed or complied with at or prior to the Closing Date.
Nations shall have delivered to the Company, the Companies and the Shareholders
a certificate, dated as of the Closing Date, and signed by an officer thereof,
certifying that such representations and warranties are true and correct, and
that all such obligations have been performed and complied with, in all material
respects.
7.2 PURCHASE PRICE. At the Closing, Nations shall (I) pay to the
Shareholders the Closing Payment; and (ii) deliver to Shareholders the
Promissory Notes.
7.3 NO ORDER OR INJUNCTION. There shall not be pending by or
before any court or other governmental body an order or injunction restraining
or prohibiting the transactions contemplated hereby.
7.4 HSR ACT. Any applicable HSR Act waiting period shall have
expired or been terminated.
ARTICLE VIII
INDEMNIFICATION
8.1 AGREEMENT TO INDEMNIFY. Shareholders agree to protect, defend,
indemnify and hold Nations harmless from and against the aggregate of all
expenses, losses, costs, deficiencies, liabilities and damages (including,
without limitation, related counsel and paralegal fees and expenses) incurred or
suffered by Nations resulting from or arising out of (I) any breach of a
representation or warranty made by the Company or Shareholders in or pursuant to
this Agreement, (ii) any breach of the covenants or agreements made by the
Company or the Shareholders in this Agreement, or (iii) any
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inaccuracy in any certificate delivered by the Company or the Shareholders
pursuant to this Agreement or (iv) any liability for any judgment, award, or
settlement under the litigation against the Company listed on Schedule 3.11 as
item A.2. (collectively, "Indemnifiable Damages"). Without limiting the
generality of the foregoing with respect to the measurement of Indemnifiable
Damages, Nations shall have the right to be put in the same pre-tax consolidated
financial position as it would have been in had each of the representations and
warranties of the Company and the Shareholders hereunder been true and correct
and had the agreements and covenants of the Company and the Shareholders been
performed in full. Notwithstanding anything to the contrary contained herein,
Nations shall not be entitled to any Indemnifiable Damages unless the aggregate
of all such Indemnifiable Damages exceeds $200,000.00 ("Indemnification
Threshold"), in which case, Nations shall be entitled to the full amount of
Indemnifiable Damages including the amount of the Indemnification Threshold. Any
receivables of the Company charged-off or written down prior to the date hereof
that the Company receives a recovery on after the Closing Date (net of any
expenses of such recovery), shall be applied to reduce the aggregate amount of
Indemnifiable Damages.
8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Shareholders in this Agreement at
Sections 3.1, 3.12, 3.17 and 3.18 shall survive the Closing of the transactions
contemplated hereby. All other representations and warranties made by the
Shareholders shall survive for a period of three (3) years after the Closing
Date. Notwithstanding any knowledge of facts determined or determinable by any
party by investigation, each party shall have the right to fully rely on the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement or in any other documents or papers delivered in
connection herewith. Each representation, warranty, covenant and agreement of
the parties contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
8.3 SET OFF AND SECURITY FOR INDEMNIFICATION OBLIGATIONS.
Shareholders agree that Nations may set off against and recoup from the
Promissory Notes and/or the Management Promissory Notes any Indemnifiable
Damages for which the Shareholders may be responsible pursuant to this
Agreement. Should the Promissory Notes be (in accordance with their terms)
converted to common stock of Nations, $.01 par value per share (the "Nations
Common Stock"), the Shareholders hereby grant a first priority security interest
in, and pledge and instruct Nations to set aside and hold back Nations Common
Stock equal to $6,000,000.00 (at the initial price of the Nations Common Stock
of its initial underwriters public offering registered under the Securities Act
of 1933, as amended) (the "Held Back Shares"). Nations may set off against the
Held Back Shares any Indemnifiable Damages for which the Shareholders are
responsible in accordance with this Agreement. The set off and hold back rights
are subject, however, to the following terms and conditions:
(a) Nations shall give written notice to the Company of any
claim for Indemnifiable Damages or any other damages hereunder, which
notice shall set forth (I) the amount of Indemnifiable Damages or other
loss, damage, cost or expense
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which Nations claims to have sustained by reason thereof, and (ii) the
basis of the claim therefor.
(b) Such set off and recoupment shall be effected on the later
to occur of the expiration of thirty (30) days from the date of such
notice (the "Notice of Contest Period") or, if such claim is contested,
the date the dispute is resolved.
(c) If, prior to the expiration of the Notice of Contest
Period, the Shareholders shall notify Nations in writing of an
intention to dispute the claim and if such dispute is not resolved
within thirty (30) days after expiration of such period (the
"Resolution Period"), then Nations may elect that such dispute shall be
resolved by a committee of three (3) arbitrators (one appointed by the
Company, one appointed by Nations and one appointed by the two
arbitrators so appointed), which shall be appointed within sixty (60)
days after the expiration of the Resolution Period. The arbitrators
shall abide by the rules of the American Arbitration Association and
their decision shall be made within forty-five (45) days of being
appointed and shall be final and binding on all parties.
(d) The Held Back Amount shall constitute a deferred payment
obligation of Nations to the Shareholders which shall be paid to the
Shareholders eighteen months after the Closing Date subject to any
setoffs and recoupments by Nations hereunder. All setoffs, recoupments
and payments of Indemnifiable Damages pursuant to this Section shall be
treated as adjustments to the Purchase Price.
8.4 VOTING OF AND DIVIDENDS ON THE HELD BACK SHARES. Except with
respect to shares transferred pursuant to the foregoing right of set off (and in
the case of such shares, until the same are transferred), all Held Back Shares
shall be deemed to be owned by the Shareholders and the shareholders shall be
entitled to vote the same; provided, however, that, there shall also be
deposited with Nations subject to the terms of this Article, all shares of
Nations Common Stock issued to the Shareholders as a result of any stock
dividend or stock split and all cash issuable to the Shareholders as a result of
any cash dividend, with respect to the Held Back Shares. All stock and cash
issued or paid upon Held Back Shares shall be distributed to the Shareholders
together with such Held Back Shares.
8.5 SUBSTITUTION FOR HELD BACK SHARES. At any time that Nations is
holding Held Back Shares under the provision of sections 8.3 and 8.4 above, the
Shareholders or any of them shall be entitled to receive delivery of such
shares, unencumbered, upon the delivery to Nations of substitute collateral, in
such form as shall be acceptable to Nations, approval of which shall not be
unreasonably withheld, to be held for the same time, the same manner, and under
the same provisions as the Held Back Shares, with provisions for further
substitution in the same manner.
8.6 DELIVERY OF HELD BACK SHARES. Nations agrees to deliver to the
Shareholders no later than eighteen months after the Closing Date any Held Back
Shares then held by it (or proceeds from
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the Held Back Shares) unless there then remains unresolved any claim for
Indemnifiable Damages or other damages hereunder as to which notice has been
given, in which event any Held Back Shares remaining on deposit (or proceeds
from the sale of Held Back Shares) after such claim shall have been satisfied
shall be returned to the Shareholders promptly after the time of satisfaction.
8.7 NO BAR: WAIVER. If the Held Back Shares are insufficient to
set off any claim for Indemnifiable Damages made hereunder (or have been
delivered to the Shareholders prior to the making or resolution of such claim),
then Nations may take any action or exercise any remedy available to it by
appropriate legal proceedings to collect the Indemnifiable Damages. The
Shareholders hereby waive any rights to contribution or any similar rights they
may have against the Company as a result of their agreement to indemnify Nations
under this Article VIII or otherwise.
ARTICLE IX
DEFINITIONS
9.1 DEFINED TERMS. As used herein, the following terms shall have
the following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, as in effect on the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
and the treasury regulations promulgated thereunder.
"Contract" means any agreement, contract, lease, note,
mortgage, indenture, loan agreement, franchise agreement, covenant,
employment agreement, license, instrument, purchase and sales order,
undertaking, commitment, obligation whether written or oral, express or
implied.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time.
"Governmental Authority" means any nation or government, any
state, regional, local or other political subdivision thereof, and any
entity or official exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"Indebtedness" of any entity means all obligations of such
entity (I) which in accordance with GAAP should be classified upon a
balance sheet as indebtedness; (ii) for borrowed money or purchase
money financing which has been incurred in connection with the
acquisition of property, assets or services; (iii) secured by any Lien
or other charge upon property or assets owned by such entity, even
though such entity has not assumed or become liable for the payment of
such obligations; (iv) created or arising under any conditional sale or
other title retention agreement with respect to property acquired by
such entity, whether or not the rights and remedies of the lender or
lessor under such agreement in the event of default are limited to
repossession or sale of the property; and (v) for remaining payments
under any capitalized leases (as defined under GAAP), non-competition
agreements, severance agreements, or any other agreements made outside
the ordinary course of business.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, but not limited to,
any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or comparable law
or any jurisdiction in connection with such mortgage, pledge, security
interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or
effect), in the condition (financial or otherwise), properties, assets,
liabilities, rights, obligations, operations, business or prospects
which change (or effect) individually or in the aggregate, is
materially adverse to such condition, properties, assets, liabilities,
rights, obligations, operations, business or prospects.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, limited liability company, estate,
trust, unincorporated association, joint venture, Governmental
Authority or other entity, of whatever nature.
"Tax Return" means any tax return, filing or information
statement required to be filed in connection with or with respect to
any Taxes; and
"Taxes" means all taxes, fees or other assessments, including,
but not limited to, income, excise, property, sales, franchise,
intangible, withholding, social security and unemployment taxes imposed
by any federal, state, local or foreign governmental agency, and any
interest or penalties related thereto.
9.2 OTHER DEFINITIONAL PROVISIONS. All terms defined in this Agreement
shall have the defined meanings when used in any certificates, reports or other
documents made or delivered
28
<PAGE> 29
pursuant hereto or thereto, unless the context otherwise requires. Terms defined
in the singular shall have a comparable meaning when used in the plural, and
vice versa. All matters of an accounting nature in connection with this
Agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods, where
applicable. As used herein, the neuter gender shall also denote the masculine
and feminine, and the masculine gender shall also denote the neuter and
feminine, where the context so permits.
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date: (a) by mutual written consent of all of the parties
hereto at any time prior to the Closing; or (b) by Nations in the event of a
material breach by the Company or the Shareholders of any provision of this
Agreement or in accordance with Section 5.6; (c) by the Company in the event of
a material breach by Nations of any provision of this Agreement; or (d) by
Nations or the Company if the Closing shall not have occurred by July 31, 1998
provided that the party seeking to terminate this Agreement has acted in good
faith to close the transactions contemplated hereby.
10.2 EFFECT OF TERMINATION. Except for the provisions of Article
VIII hereof, which shall survive any termination of this Agreement, in the event
of termination of this Agreement pursuant to Section 1 0.1, this Agreement shall
forthwith become void and of no further force and effect, and the parties hereto
shall be released from any and all obligations hereunder; provided, however,
that nothing herein shall relieve any party from liability for the willful
breach of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
ARTICLE XI
GENERAL PROVISIONS
11.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
(a) IF TO NATIONS:
NationsRent, Inc.
450 East Las Olas Boulevard
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<PAGE> 30
Ft. Lauderdale, FL 33301
Attn: Gene Ostrow
Telecopy: (954) 760-6565
WITH A COPY TO:
Akerman, Senterfitt & Eidson, P.A.
One S.E. Third Avenue
Miami, Florida 33131
Attn: Joseph H. Izhakoff
Telecopy: (305) 374-5095
(b) IF TO THE COMPANY OR THE SHAREHOLDERS:
Raymond Equipment Co.
3816 Bishop Lane
Louisville, KY 40218
Attn.: Michael O'Bryan
Telecopy: (502) 968-1823
Oliver H. Raymond, Jr.
2319 Gulf Shore Blvd. N.
Naples, FL 34103
Linda A. Raymond
7575 Shadyside Dr.
Bloomington, IN 47401
L. Michael O'Bryan
5205 Indian Woods Drive
Louisville, KY 40207
James B. Lathrop
4012 Deer Creek Drive
Louisville, KY 40241
Donald P. Tewell
2087 Golfview Court
Greenwood, IN 46143
Kenneth D. Acton
7640 Rolling Hills
Lanesville, IN 47136
30
<PAGE> 31
WITH A COPY TO:
Seiller & Handmaker, LLP
2200 Meidinger Tower
Louisville, KY 40202
Attn: Stuart A. Handmaker
Telecopy: (502) 583-2100
Notice shall be deemed given on the date sent if sent by facsimile
transmission and on the date delivered (or the date of refusal of delivery) if
sent by overnight delivery or certified or registered mail.
11.2 ENTIRE AGREEMENT: THIRD PARTY BENEFICIARIES. This Agreement
(including the Exhibits and Schedules attached hereto) and other documents
delivered at the Closing pursuant hereto, contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings (oral or written) between or among the parties with respect
to such subject matter. The Exhibits and Schedules constitute a part hereof as
though set forth in full above. Except for the Nations Companies which are
intended to be third party beneficiaries of this Agreement, this Agreement is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
11.3 EXPENSES. Except as otherwise provided herein, the
Shareholders and Nations shall pay their own fees and expenses, except for the
filing fee and Washington counsel fee due in connection with the HSR filing
which shall be paid by Nations, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby. The
Shareholders hereby agrees to pay any and all sales, transfer and use and/or
similar taxes or fees which may become due and owing as a result of the
completion of the transactions contemplated by Section 5.9.
11.4 AMENDMENT; WAIVER. This Agreement may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising, any
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. The rights and remedies of the parties
under this Agreement are in addition to all other rights and remedies, at law or
equity, that they may have against each other.
11.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
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<PAGE> 32
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by the Companies or the Shareholders without the
prior written consent of Nations.
11.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. A telecopy signature of any party shall
be considered to have the same binding legal effect as an original signature.
11.7 INTERPRETATION. When a reference is made in this Agreement to
an article, section, paragraph, clause, schedule or exhibit, such reference
shall be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement.
11.8 CONSTRUCTION. The parties agree and acknowledge that they have
jointly participated in the negotiation and drafting of this Agreement. In the
event of an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement. The parties agree that
prior drafts of this Agreement shall not be deemed to provide any evidence as to
the meaning of any provision hereof or the intent of the parties with respect
thereto. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. If any party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty, or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant. The mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty relates solely to the existence of the
document or other items itself).
11.9 GOVERNING LAW: SEVERABILITY. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of
Florida applicable to contracts executed and to be wholly performed within such
State. If any word, phrase, sentence, clause, section, subsection or provision
of this Agreement as applied to an party or to any circumstance is adjudged by a
court to be invalid or unenforceable, the same will in no way affect any other
circumstance or the validity or enforceability of any other word, phrase,
sentence, clause, section, subsection or provision of this Agreement. If any
provision of this Agreement, or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered thereby, the
parties agree that the court making such determination shall have the power to
reduce the duration and/or area of such provision, and/or to delete specific
words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.
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<PAGE> 33
11.10 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
NATIONSRENT, INC., a Delaware corporation
By:/s/ Gene J. Ostrow
-----------------------------------------
Name: Gene J. Ostrow
Title: Vice President
RAYMOND EQUIPMENT CO., a
Kentucky corporation
By:/s/ L. Michael O'Bryan
-----------------------------------------
L. Michael O'Bryan, President
/s/ Oliver Raymond
--------------------------------------------
Oliver Raymond
/s/ Linda Raymond
--------------------------------------------
Linda Raymond
/s/ Michael O'Bryan
--------------------------------------------
Michael O'Bryan
/s/ James Lathrop
--------------------------------------------
James Lathrop
/s/ Donald Tewell
--------------------------------------------
Donald Tewell
/s/ Kenneth Acton
--------------------------------------------
Kenneth Acton
34
<PAGE> 1
EXHIBIT 10.20
FORM OF MANAGEMENT PROMISSORY NOTES
NEITHER THIS PROMISSORY NOTE NOR THE SHARES ISSUABLE UPON CONVERSION OF THIS
PROMISSORY NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND THIS PROMISSORY NOTE CANNOT BE
SOLD OR TRANSFERRED, AND THE SHARES ISSUABLE UPON CONVERSION OF THIS PROMISSORY
NOTE CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR
UPON RECEIPT OF AN OPINION OF COUNSEL, SATISFACTORY TO THE MAKER, THAT SUCH
REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR
TRANSFER.
UNSECURED SUBORDINATED PROMISSORY NOTE
, Kentucky
---------------
[$ ] May , 1998
----
FOR VALUE RECEIVED, NATIONSRENT, INC., a Delaware corporation
("Maker"), promises to pay, following the satisfaction of the conditions
precedent contained herein, to [
], an individual resident in the
State of Kentucky ("Payee"), in lawful money of the United States of America,
the principal sum of [
], together with interest (calculated on the basis of a year of 365
or 366 days, as applicable, and charged for the actual number of days elapsed)
in arrears on the unpaid principal balance in the manner provided below. This
Note has been executed and delivered pursuant to and in accordance with the
terms and conditions of that certain Stock Purchase Agreement, dated May__, 1998
(the "Agreement"), between the Payee and Maker (also referred to herein as the
"Buyer"), and is subject to the terms and conditions of the Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used in this Note without definition shall have the respective meanings
set forth in the Agreement.
ARTICLE I
PAYMENTS
1.1 PAYMENTS OF INTEREST.
(a) This Note shall bear interest at the rate of seven and
one-half percent (7-1/2%) per annum, commencing on the date hereof,
subject to adjustment as provided in Section 1.1(b) below. Accrued and
unpaid interest shall be payable quarterly on each March 31, June 30,
September 30, and December 31, commencing on June 30, 1998, until all
principal and accrued and unpaid interest shall have been paid in full.
<PAGE> 2
(b) Notwithstanding anything to the contrary contained herein,
on or after an Event of Default (defined below) resulting from the
failure to timely pay principal of or interest on this Note or on or
after another Event of Default for which Payee has accelerated the
maturity date (subject to any notice, grace and cure provisions
provided herein), this Note shall bear interest at a rate per annum
equal to two percent (2.0%) in excess of the rate that otherwise would
be applicable hereunder, from the date of such Event of Default until
paid in full.
1.2 REPAYMENT OF PRINCIPAL. Provided that the payment conditions
specified in Section 1.5 herein are satisfied, the principal amount of this Note
shall be due and payable in two (2) equal installments of principal on May ____,
1999 (the "First Installment") and May ___, 2000 (the "Second Installment").
1.3 MANNER OF PAYMENT. All payments of principal and interest on
this Note shall be made by check at such place in the United States of America
as Payee shall designate to Maker in writing or, at Maker's option, by wire
transfer of immediately available funds to an account designated by Payee in
writing. If any payment of principal or interest on this Note is due on a day
which is not a Business Day (defined below), such payment shall be due on the
next succeeding Business Day, and such extension of time shall be taken into
account in calculating the amount of interest payable under this Note. "Business
Day" means any day other than a Saturday, Sunday or legal holiday in the State
of Florida.
1.4 RIGHT OF SET-OFF. Maker shall have the right to withhold and
set-off against any amount due hereunder the amount of any claim for
Indemnifiable Damages to which Buyer may be entitled under the Agreement.
1.5 PAYEE CONDITION PRECEDENT. Notwithstanding any other provision
of this Note, the Makers obligation to pay the First Installment and the Second
Installment is contingent upon, and shall only arise if, on the due date for the
installment then due, the Payee is either (a) employed by the Maker or Raymond
Equipment Co. ("Raymond") or (b) not employed by Maker or Raymond provided that
he has not voluntarily terminated his employment or been terminated for
Compelling Cause, as defined in that certain Employment Agreement between
Raymond and Payee dated April ___, 1998, (the "Employment Agreement"), except
that for purposes of this Note, Compelling Cause shall not include the Payee's
inability to perform his duties and responsibilities as provided in the
Employment Agreement due to his death, physical or mental disability or sickness
extending for, or reasonably expected to extend for greater than 90 days.
2
<PAGE> 3
ARTICLE II
DEFAULTS
2.1 EVENTS OF DEFAULT BY MAKER. The occurrence and continuance of
any one or more of the following events with respect to Maker shall constitute
an event of default hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of
principal or interest on this Note and such failure continues for ten
(10) days after Payee notifies Maker thereof in writing;
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to
insolvency or relief of debtors (a "Bankruptcy Law"), Maker shall (i)
commence a voluntary case or proceeding; (ii) consent to the entry of
an order for relief against it in an involuntary case; (iii) consent to
the appointment of a trustee, receiver, assignee, liquidator or similar
official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due;
or
(c) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (i) is for relief against Maker in
an involuntary case, (ii) appoints a trustee, receiver, assignee,
liquidator or similar official for Maker or substantially all of
Maker's properties, or (iii) orders the liquidation of Maker, and in
each case the order or decree is not dismissed within 120 days.
2.2 NOTICE BY MAKER. Upon the occurrence of an Event of
Default hereunder (unless all Events of Default have been waived by Payee or
cured), Payee may, at its option, (i) by written notice to Maker, declare the
entire unpaid principal balance of this Note, together with all accrued interest
thereon, immediately due and payable regardless of any prior forbearance, and
(ii) exercise any and all rights and remedies available to it under applicable
law, including, without limitation, the right to collect from Maker all sums due
under this Note. Maker shall pay all reasonable costs and expenses incurred by
or on behalf of Payee in connection with Payee's exercise of any or all of its
rights and remedies under this Note, including, without limitation, reasonable
attorney's fees.
Notwithstanding the above, if an Event of Default has occurred
under this Note and such Event of Default results in a default under the Senior
Indebtedness (defined in Section 3 below) or a default under the Senior
Indebtedness otherwise exists, then for so long as any Senior Indebtedness
remains unpaid, the Payee shall not commence or join with any creditor of Maker
in commencing any proceedings to collect or enforce its rights hereunder until
the earlier of (x) 180 days from the occurrence of such Event of Default, and
(y) the date, if any, on which such default is waived by the holder or holders
of the Senior Indebtedness to which such default relates; provided,
3
<PAGE> 4
however, that notwithstanding such forbearance of the commencement of
proceedings with respect to an Event of Default, such Event of Default shall
nevertheless be an Event of Default for all other purposes of this Note and
Payee shall be entitled to pursue all other remedies other than the commencement
of proceedings under the circumstances set forth in this paragraph.
ARTICLE III
NOTE SUBORDINATE TO SENIOR INDEBTEDNESS
3.1 SENIOR INDEBTEDNESS. Anything in this Note to the contrary
notwithstanding, Maker covenants and agrees, and Payee likewise covenants and
agrees, that, to the extent and in the manner hereinafter set forth in this
Section 3, the indebtedness represented by this Note and the payment of
principal of and interest on this Note and other amounts owed by Maker under
this Note are hereby expressly made subordinate and subject in right of payment
to the prior payment in full in cash of all Senior Indebtedness (defined below),
including any interest accruing after the occurrence of an Event of Default,
whether or not such interest is an allowed claim enforceable against the debtor
in a case brought under the United States Bankruptcy Code (the "Bankruptcy
Code"). "Senior Indebtedness" means the principal of (and premium, if any) and
interest on (i) all indebtedness, public or private, of Maker for money
borrowed, whether outstanding on the date of this Note or thereafter created,
assumed or incurred, except (A) such indebtedness as is by its terms expressly
stated to be not superior in right of payment to this Note or to rank pari passu
with this Note, (B) all notes issued in connection with the acquisition of any
business, properties, stock or assets to the seller of such business,
properties, stock or assets, which shall rank pari passu with this Note unless
otherwise expressly stated to be not superior or superior in right of payment to
this Note, and (C) this Note, and (ii) any deferrals, renewals or extensions of
any such Senior Indebtedness, and (iii) any fees, costs, enforcement expenses
(including legal fees and disbursements), collateral protection expenses and
other reimbursement or indemnity obligations relating to Senior Indebtedness.
The term "indebtedness of Maker for money borrowed" means any obligation of, or
any obligation guaranteed by, Maker for the repayment of money borrowed, whether
or not evidenced by bonds, debentures, notes or other written instruments, any
capitalized lease obligation and any deferred obligation for payment of the
purchase price of any property or assets. Payee agrees to furnish any holder of
Senior Indebtedness upon request a subordination agreement that contains
reasonably customary subordination provisions, including the priority rights of
Payee and the holder of the Senior Indebtedness and prohibits payments to Payee
that would cause a default under the Senior Indebtedness.
3.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the event
of (i) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to maker or to its creditors, as such, or to its assets, or
(ii) any liquidation, dissolution or other winding up of Maker, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (iii) any assignment for the
4
<PAGE> 5
benefit of creditors or any other marshaling of assets and liabilities of Maker,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, then and in any such event:
(a) the holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all amounts due or to become due on
or in respect of all Senior Indebtedness, or provision shall be made
for such payment in accordance with the instruments governing such
Senior Indebtedness, before Payee is entitled to receive any payment on
account of principal of (or premium, if any) or interest on this Note
or other amounts owed by Maker under this Note;
(b) any payment or distribution of assets or securities of
Maker of any kind or character, whether in cash, property or
securities, to which Payee would be entitled but for the provisions of
this Section 3, including any such payment or distribution which may be
payable or deliverable by reason of the payment of any other
indebtedness of Maker being subordinated to the payment of this Note
(except for any such payment or distribution (x) authorized by an order
or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of this Note to the Senior
Indebtedness, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law, or (y)
of securities that are subordinated, to at least the same extent as
this Note, to the payment in full in cash of all Senior Indebtedness
then outstanding), shall be paid by the liquidating trustee or agent or
other person making such payment or distribution, whether a trustee in
bankruptcy, a receiver of liquidating trustee or otherwise, directly to
the holders of the Senior Indebtedness or their representative or
representatives, ratably according to the aggregate amounts remaining
unpaid on the Senior Indebtedness, for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to
pay all Senior Indebtedness in full in cash, after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of Section 3, Payee shall have received any such payment or
distribution of assets or securities of Maker of any kind or character,
whether in cash, property or securities (other than payments or
distributions (x) authorized by an order or decree giving effect to the
subordination of this Note to the Senior Indebtedness, or (y) of
securities that are subordinated to the payment in full in cash of all
Senior Indebtedness, all as described in Section 3.2(b) above),
including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of Maker
being subordinated to the payment of this Note, before all Senior
Indebtedness is paid in full in cash or payment thereof provided for,
then and in such event such payment or distribution shall be received
and held in trust for the benefit of, and shall be paid over or
delivered to, the holders of the Senior Indebtedness or their
representative or representatives, ratably according to the aggregate
amount remaining unpaid on the Senior Indebtedness, for application to
the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full in cash, after
giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness.
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<PAGE> 6
(d) in the event that Payee fails to, in a timely manner and
to the fullest extent possible, (i) file or cause to be filed such
proofs of claim and other papers or documents as may be necessary or
advisable to have the claims under this Note allowed at any meeting of
creditors or in any proceeding referred to in this Section 3.2 or (ii)
enforce claims under this Note, by proof of debt, proof of claim, or
otherwise, the holders of the Senior Indebtedness shall be entitled and
are authorized to so file and/or enforce either in Payee's name or in
the name or names of any holder of the Senior Indebtedness.
(e) Payee shall retain the right to vote and otherwise act
with respect to the claims under this Note (including, without
limitation, the right to vote to accept or reject any plan of partial
or complete liquidation, reorganization, arrangement, composition or
extension), provided that Payee shall not vote with respect to any such
plan or take any other action in any way so as to (i) contest the
validity of any Senior Indebtedness or any collateral therefor or
guaranties thereof, (ii) contest the relative rights and duties of any
holders of any Senior Indebtedness established in any instruments or
agreements creating or evidencing any of the Senior Indebtedness with
respect to any of such collateral or guaranties, or (iii) contest
Payee's obligations and agreements set forth in this Section 3.
The consolidation of Maker with, or the merger of Maker into,
another corporation or the liquidation or dissolution of Maker following the
conveyance, transfer or lease of its properties and assets substantially as an
entirety to another corporation shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of Maker for the purposes of this Section
3.
3.3 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
(a) In the event of and during the continuation of any default
in the payment of any Senior Indebtedness beyond any applicable grace
period with respect thereto ("payment default"), then no payment shall
be made by or on behalf of Maker on this Note until the date, if any,
on which such default or event of default is waived by the holders of
such Senior Indebtedness or otherwise cured or has ceased to exist or
the Senior Indebtedness to which such default or event of default
relates is discharged by payment in full in cash.
(b) In the event that any other event of default with respect
to any Senior Indebtedness shall have occurred and be continuing that
permits the holders of such Senior Indebtedness (or a trustee on behalf
of such holders) to declare such Senior Indebtedness due and payable
prior to the date on which it would otherwise have become due and
payable, and upon receipt by Maker and Payee of written notice (the
"Payment Notice") from a representative for, or the holder of, any
Senior Indebtedness, then no payment shall be made by or on behalf of
Maker on this Note until the earlier of (x) 179 days after the date on
which such Payment Notice shall have been received and (y) the date, if
any, on which such default or event of default is waived by the holders
of the Senior Indebtedness to which such default or event of default
relates is discharged by payment in full in cash (a "Blockage Period").
Not
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<PAGE> 7
more than two Blockage Periods may be commenced during any period
of 360 consecutive days. No event of default that existed or was
continuing (it being acknowledged that any subsequent action that would
give rise to an event of default pursuant to any provision under which
an event of default previously existed or was continuing shall
constitute a new event of default for this purpose) on the date of the
commencement of any Blockage Period with respect to the Senior
Indebtedness initiating such Blockage Period shall be, or shall be
made, the basis for the commencement of a second Blockage Period by the
representative for, or the holders of, such Senior Indebtedness whether
or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than
90 consecutive days. Any such failure to make a payment on this Note
shall not be construed as preventing the occurrence of an Event of
Default under this Note. Any payment permitted hereunder after a
Blockage Period of amounts owed to the holders of this Note during a
Blockage Period shall be deemed a cure of any Event of Default caused
by any such delayed payment. Notwithstanding any other provision
contained herein, during all times in which Maker's senior credit
facility, dated March 18, 1998 with BankBoston, N.A., as agent and
LaSalle National Bank, as documentation agent, and the lenders
identified therein, or any restatement, amendment, supplement or
modification thereof or any replacement facility thereof (the "Senior
Bank Facility") is in effect or the lenders thereunder have any
obligations to make loans or extend credit to Maker or its
subsidiaries, the only holder of Senior Indebtedness entitled to
exercise its rights under Section 3.2(d) and this Section 3.3(b) shall
be the agent under the Senior Bank Facility.
In the event that, notwithstanding the foregoing, any payment or
distribution shall be received by Payee in contravention of the provisions of
this Section 3, then and in such event such payment or distribution shall be
received and held in trust for the benefit of, and shall be paid over or
delivered to, the holders of the Senior Indebtedness or their representative or
representatives, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness, for application to the Senior Indebtedness
or to be held as collateral for, the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full
in cash, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
The provisions of this Section 3.3 shall not apply to any payment with
respect to which Section 3.2 would be applicable.
3.4 PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in this
Section 3 or elsewhere in this Note shall prevent Maker, at any time except
under the circumstances described in Section 3.1 or under the conditions
described in Section 3.2, from making regularly scheduled payments at any time
of principal of (and premium, if any) or interest on this Note or other amounts
owed by Maker under this Note.
3.5 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS;
MARSHALING. No payment or distributions to the holders of Senior Indebtedness or
their representatives pursuant to the provisions of this Section 3 shall entitle
Payee to exercise any right of subrogation in respect
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thereof until the Senior Indebtedness shall have been paid in full. Payee
further waives any and all rights with respect to marshaling.
3.6 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this Section 3 are intended solely for the purpose of defining the relative
rights of Payee on the one hand and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Note is intended to or shall (a) impair,
as among Maker, its creditors other than holders of Senior Indebtedness and
Payee, the obligation of Maker, which is absolute and unconditional, to pay to
Payee the principal of (and premium, if any) and interest on this Note as and
when the same shall become due and payable in accordance with its terms; or (b)
affect the relative rights against Maker of Payee and creditors of Maker other
than the holders of Senior Indebtedness; or (c) prevent Payee from exercising
all remedies otherwise permitted by applicable law or this Note upon default
under this Note, subject to the rights, if any, under this Section 3 and Section
2.1 of the holders of the Senior Indebtedness.
3.7 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present
or future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of Maker or by any act or failure to act, in good
faith, by any such holder, or by noncompliance by Maker with the terms,
provisions of and covenants of this Note, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
3.8 NOTICE TO PAYEE. Maker shall give prompt written notice to
Payee of any fact known to Maker which would prohibit the making of any payment
to or by Payee in respect of this Note. Notwithstanding the provisions of this
Section 3 or any other provision of this Note, Payee shall not be charged with
the knowledge of the existence of any facts which would prohibit the making of
any payment to or by Payee in respect of this Note, unless and until Payee shall
have received written notice thereof from Maker or holder of Senior Indebtedness
or from any trustee, fiduciary or agent therefor.
3.9 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT. Upon any payment or distribution of assets or securities of Maker
referred to in Section 3.2, Payee shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other person making such payment or distribution deliver
to Payee, for the purpose of ascertaining the persons entitled to participate in
such payment or distribution, the holders of Senior Indebtedness and other
indebtedness of Maker, the amount thereof or payment thereof, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Section 3.
3.10 FREEDOM OF DEALING. Payee agrees, with respect to the Senior
Indebtedness and any and all collateral therefor or guaranties thereof, that
Maker and the holders of the Senior Indebtedness may agree to increase the
amount of the Senior Indebtedness or otherwise modify the terms of any
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<PAGE> 9
of the Senior Indebtedness, and the holders of the Senior Indebtedness may grant
extensions of the time of payment or performance to and make compromises,
including releases of collateral or guaranties, and settlements with Maker and
all other persons, in each case without the consent of Payee or Maker and
without affecting the agreements of Payee or Maker contained in this Note;
provided, however, that nothing contained in this Section 3.10 shall constitute
a waiver of the right of Maker itself to agree or consent to a settlement or
compromise of a claim which any holder of the Senior Indebtedness may have
against Maker.
3.11 DEFENSE TO ENFORCEMENT. If Payee, in contravention of the
terms of this Note, shall commence, prosecute or participate in any suit, action
or proceeding against Maker, then Maker may interpose as a defense or plea the
provisions of this Section 3, and any holder of the Senior Indebtedness may
intervene and interpose such defense or plea in its name or in the name of
Maker. If Payee, in contravention of the terms of this Section 3, or the last
paragraph of Section 2.2, shall attempt to collect under this Note or enforce
any provisions of this Note, then any holder of the Senior Indebtedness or Maker
may restrain the enforcement thereof in the name of such holder of the Senior
Indebtedness or in the name of Maker.
3.12 REINSTATEMENT OF SUBORDINATION. To the extent that Maker or
any guarantor of or provider of collateral for the Senior Indebtedness makes any
payment on the Senior Indebtedness that is subsequently invalidated, declared to
be fraudulent or preferential or set aside or is required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or
reorganization act, state or federal law, common law or equitable cause (such
payment being hereinafter referred to as a "Voided Payment"), then to the extent
of such Voided Payment, that portion of the Senior Indebtedness that had been
previously satisfied by such Voided Payment shall be revived and continue in
full force and effect as if such Voided Payment had never been made. In the
event that a Voided Payment is recovered from any holder of the Senior
Indebtedness, a default in the payment of the relevant Senior Indebtedness shall
be deemed to have existed and to be continuing from the date of such holder of
the Senior Indebtedness' initial receipt of such Voided Payment until the full
amount of such Voided Payment is restored to such holder of the Senior
Indebtedness. During any continuance of any such payment default, this Section 3
and the last paragraph of Section 2.2 shall be in full force and effect with
respect to the obligations hereunder.
3.13 AMENDMENTS; LIENS. The provisions of this Section 3 and the
last paragraph of Section 2.2 may not be amended or waived without the written
agreement of Maker, the agent under the Senior Bank Facility and Payee. Payee
will not, without the prior written consent of all the holders of the Senior
Indebtedness, take or receive any security interest, lien, mortgage or other
encumbrance on any assets of Maker or its subsidiaries.
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ARTICLE IV
MISCELLANEOUS
4.1 WAIVER. The rights and remedies of Payee under this Note shall
be cumulative and not alternative. No waiver by Payee of any right or remedy
under this Note shall be effective unless in a writing signed by Payee. Neither
the failure nor any delay in exercising any right, power or privilege under this
Note will operate as a waiver of such right, power or privilege and no single or
partial exercise of any such right, power or privilege by Payee will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law: (a) no claim or right of Payee arising out of this Note can be
discharged by Payee, in whole or in part, by a waiver or renunciation of the
claim or right unless in a writing, signed by Payee; (b) no waiver that may be
given by Payee will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on Maker will be deemed to be a waiver
of any obligation of Maker or of the right of Payee to take further action
without notice or demand as provided in this Note. Maker hereby waives
presentment, demand, protest and notice of dishonor and protest.
4.2 NOTICES. Any notice required or permitted to be given
hereunder shall be given in accordance with Section 13.1 of the Agreement.
4.3 SEVERABILITY. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, then the other provisions
of this Note shall remain in full force and effect. Any provision of this Note
held invalid or unenforceable only in part or degree shall remain in full force
and effect to the extent not held invalid or unenforceable.
4.4 GOVERNING LAW. This Note shall be governed by the laws of the
State of Florida without regard to conflicts of laws principles.
4.5 PARTIES IN INTEREST. This Note shall bind Maker and its
successors and assigns. This Note shall not be assigned or transferred by Payee
without the express prior written consent of Maker, except by Will or, in
default thereof, by operation of law.
4.6 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Note are provided for convenience only and shall not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Note unless otherwise
specified. All words used in this Note shall be construed to be of such gender
or number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
NATIONSRENT, INC., a Delaware corporation
By:
-------------------------------------------
Gene J. Ostrow, Senior Vice President and
Chief Financial Officer
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<PAGE> 1
EXHIBIT 10.21
FORM OF PROMISSORY NOTE
NEITHER THIS PROMISSORY NOTE NOR THE SHARES ISSUABLE UPON CONVERSION OF THIS
PROMISSORY NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND THIS PROMISSORY NOTE CANNOT BE
SOLD OR TRANSFERRED, AND THE SHARES ISSUABLE UPON CONVERSION OF OR THIS
PROMISSORY NOTE CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL THEY ARE SO
REGISTERED OR UPON RECEIPT OF AN OPINION OF COUNSEL, SATISFACTORY TO THE MAKER,
THAT SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE
OR TRANSFER.
UNSECURED CONVERTIBLE SUBORDINATED PROMISSORY NOTE
, Kentucky
-------------
[$ ] May April , 1998
----
FOR VALUE RECEIVED, NATIONSRENT, INC., a Delaware corporation
("Maker"), promises to pay to [ ], an
individual resident in the State of Kentucky ("Payee"), in lawful money of the
United States of America, the principal sum of [
], together with interest (calculated on the
basis of a year of 365 or 366 days, as applicable, and charged for the actual
number of days elapsed) in arrears on the unpaid principal balance in the manner
provided below. This Note has been executed and delivered pursuant to and in
accordance with the terms and conditions of that certain Stock Purchase
Agreement, dated May April , 1998 (the "Agreement"), between the Payee and Maker
(also referred to herein as the "Buyer"), and is subject to the terms and
conditions of the Agreement, which are, by this reference, incorporated herein
and made a part hereof. Capitalized terms used in this Note without definition
shall have the respective meanings set forth in the Agreement.
ARTICLE I
PAYMENTS
1.1 PAYMENTS OF INTEREST.
(a) This Note shall bear interest at the rate of six and
one-half percent (6-1/2%) per annum, commencing on the date hereof,
subject to adjustment as provided in Section 1.1(b) below. Accrued and
unpaid interest shall be payable quarterly on each March 31, June 30,
September 30, and December 31, commencing on June 30, 1998, until all
principal and accrued and unpaid interest shall have been paid in full.
<PAGE> 2
(b) Notwithstanding anything to the contrary contained herein,
on or after an Event of Default (defined below) resulting from the
failure to timely pay principal of or interest on this Note or on or
after another Event of Default for which Payee has accelerated the
maturity date (subject to any notice, grace and cure provisions
provided herein), this Note shall bear interest at a rate per annum
equal to two percent (2.0%) in excess of the rate that otherwise would
be applicable hereunder, from the date of such Event of Default until
paid in full.
1.2 REPAYMENT OF PRINCIPAL. The principal amount of this Note
shall be due and payable on April ____, 2003.
1.3 MANNER OF PAYMENT. All payments of principal and interest on
this Note shall be made by check at such place in the United States of America
as Payee shall designate to Maker in writing or, at Maker's option, by wire
transfer of immediately available funds to an account designated by Payee in
writing. If any payment of principal or interest on this Note is due on a day
which is not a Business Day (defined below), such payment shall be due on the
next succeeding Business Day, and such extension of time shall be taken into
account in calculating the amount of interest payable under this Note. "Business
Day" means any day other than a Saturday, Sunday or legal holiday in the State
of Florida.
1.4 PREPAYMENT. After the date on which the closing price of the
shares of Maker into which this Note is convertible has averaged more than 150%
of the Conversion Price (defined below) for a period of thirty (30) or more
consecutive trading days (the "Prepayment Date"), Maker may, without premium or
penalty, at anytime and from time to time, upon thirty (30) days prior written
notice to Payee, prepay all or any portion of the outstanding principal balance
due under this Note, provided that each such prepayment is accompanied by
accrued interest on the amount of principal prepaid calculated to the date of
such prepayment. Any partial prepayments shall be applied to installments of
principal in inverse order of their maturity. Prior to the Prepayment Date,
Maker shall not be entitled to prepay any portion of the outstanding principal
balance due under this Note.
1.5 RIGHT OF SET-OFF. Maker shall have the right to withhold and
set-off against any amount due hereunder the amount of any claim for
Indemnifiable Damages to which Buyer may be entitled under the Agreement.
1.6 CONVERSION. Subject to and upon compliance with the provisions
of the Agreement, if Maker completes an IPO (as defined below), then the holder
of this Note shall be entitled, at the holder's option, at any time on or before
the close of business on December 31, 2002 to convert the principal amount of
this Note (or any portion of the principal amount hereof which is $1,000.00 or
any integral multiple thereof), at the principal amount hereof, or of such
portion, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/1000 of a share) of common stock of Maker at a
conversion price equal to the initial public offering price of such shares
("Conversion Price") (or, if, prior to completion of an IPO, Maker is merged
into or otherwise
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acquired by or converted into an already existing, publicly held entity ("New
Entity"), at a conversion price equal to the average closing price of the shares
of the New Entity for twenty (20) trading days following the merger) (the
"Conversion Price"). If such merger or acquisition shall take place after
completion of the IPO, the holder of this Note shall be entitled, similarly, to
convert such principal amount into shares of New Entity, the number of which
shares shall be that number of shares of New Entity which the holder would have
received if he had exercised his option of conversion into shares of Maker
immediately prior to such merger. The holder shall surrender this Note, duly
endorsed or assigned to Maker or in blank, to Maker at its office or agency at
the address provided in writing by maker, accompanied by written notice to Maker
that the holder hereof elects to convert this Note, or if less than the entire
principal amount hereof is to be converted, the portion hereof to be converted.
No payment or adjustment is to be made on conversion for interest accrued hereon
or for dividends on the common stock issued on conversion. No fractions of
shares or scrip representing fractions of shares will be issued on conversion,
but instead of any fractional interest the Seller shall pay a cash adjustment.
In addition, in case of certain consolidations or mergers to which Maker is a
party or the transfer of substantially all of the assets of Maker, this Note, if
then outstanding, will be convertible thereafter, during the period this Note
shall be convertible as specified above, only into the kind and amount of
securities, cash and other property receivable upon the consolidation, merger or
transfer by a holder of the number of shares of common stock into which this
Note might have been converted immediately prior to such consolidation, merger
or transfer (assuming such holder of common stock failed to exercise any rights
of election and received per share the kind and amount received per share by a
plurality of non-electing shares). As used herein, "IPO" shall mean an
underwritten public offering of shares of the common stock of Maker registered
under the Securities Act of 1933, as amended.
ARTICLE II
DEFAULTS
2.1 EVENTS OF DEFAULT. The occurrence and continuance of any one
or more of the following events with respect to Maker shall constitute an event
of default hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of
principal or interest on this Note and such failure continues for ten
(10)thirty (30) days after Payee notifies Maker thereof in writing;
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to
insolvency or relief of debtors (a "Bankruptcy Law"), Maker shall (i)
commence a voluntary case or proceeding; (ii) consent to the entry of
an order for relief against it in an involuntary case; (iii) consent to
the appointment of a trustee, receiver, assignee, liquidator or similar
official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due;
or
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(c) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (i) is for relief against Maker in
an involuntary case, (ii) appoints a trustee, receiver, assignee,
liquidator or similar official for Maker or substantially all of
Maker's properties, or (iii) orders the liquidation of Maker, and in
each case the order or decree is not dismissed within 120 days.
2.2 NOTICE BY MAKER. Upon the occurrence of an Event of
Default hereunder (unless all Events of Default have been waived by Payee or
cured), Payee may, at its option, (i) by written notice to Maker, declare the
entire unpaid principal balance of this Note, together with all accrued interest
thereon, immediately due and payable regardless of any prior forbearance, and
(ii) exercise any and all rights and remedies available to it under applicable
law, including, without limitation, the right to collect from Maker all sums due
under this Note. Maker shall pay all reasonable costs and expenses incurred by
or on behalf of Payee in connection with Payee's exercise of any or all of its
rights and remedies under this Note, including, without limitation, reasonable
attorney's fees.
Notwithstanding the above, if an Event of Default has occurred
under this Note and such Event of Default results in a default under the Senior
Indebtedness (defined in Section 3 below) or a default under the Senior
Indebtedness otherwise exists, then for so long as any Senior Indebtedness
remains unpaid, the Payee shall not commence or join with any creditor of Maker
in commencing any proceedings to collect or enforce its rights hereunder until
the earlier of (x) 180 days from the occurrence of such Event of Default, and
(y) the date, if any, on which such default is waived by the holder or holders
of the Senior Indebtedness to which such default relates; provided, however,
that notwithstanding such forbearance of the commencement of proceedings with
respect to an Event of Default, such Event of Default shall nevertheless be an
Event of Default for all other purposes of this Note and Payee shall be entitled
to pursue all other remedies other than the commencement of proceedings under
the circumstances set forth in this paragraph.
ARTICLE III
NOTE SUBORDINATE TO SENIOR INDEBTEDNESS
3.1 SENIOR INDEBTEDNESS. Anything in this Note to the contrary
notwithstanding, Maker covenants and agrees, and Payee likewise covenants and
agrees, that, to the extent and in the manner hereinafter set forth in this
Section 3, the indebtedness represented by this Note and the payment of
principal of and interest on this Note and other amounts owed by Maker under
this Note are hereby expressly made subordinate and subject in right of payment
to the prior payment in full in cash of all Senior Indebtedness (defined below),
including any interest accruing after the occurrence of an Event of Default,
whether or not such interest is an allowed claim enforceable against the debtor
in a case brought under the United States Bankruptcy Code (the "Bankruptcy
Code"). "Senior Indebtedness" means the principal of (and premium, if any) and
interest on (i) all indebtedness, public or private, of Maker for money
borrowed, whether outstanding on the date of this Note or thereafter created,
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assumed or incurred, except (A) such indebtedness as is by its terms expressly
stated to be not superior in right of payment to this Note or to rank pari passu
with this Note, (B) all notes issued in connection with the acquisition of any
business, properties, stock or assets to the seller of such business,
properties, stock or assets, which shall rank pari passu with this Note unless
otherwise expressly stated to be not superior or superior in right of payment to
this Note, and (C) this Note, and (ii) any deferrals, renewals or extensions of
any such Senior Indebtedness, and (iii) any fees, costs, enforcement expenses
(including legal fees and disbursements), collateral protection expenses and
other reimbursement or indemnity obligations relating to Senior Indebtedness.
The term "indebtedness of Maker for money borrowed" means any obligation of, or
any obligation guaranteed by, Maker for the repayment of money borrowed, whether
or not evidenced by bonds, debentures, notes or other written instruments, any
capitalized lease obligation and any deferred obligation for payment of the
purchase price of any property or assets. Payee agrees to furnish any holder of
Senior Indebtedness upon request a subordination agreement that contains
reasonably customary subordination provisions, including the priority rights of
Payee and the holder of the Senior Indebtedness and prohibits payments to Payee
that would cause a default under the Senior Indebtedness.
3.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the event
of (i) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to maker or to its creditors, as such, or to its assets, or
(ii) any liquidation, dissolution or other winding up of Maker, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (iii) any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of Maker, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, then and in any such event:
(a) the holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all amounts due or to become due on
or in respect of all Senior Indebtedness, or provision shall be made
for such payment in accordance with the instruments governing such
Senior Indebtedness, before Payee is entitled to receive any payment on
account of principal of (or premium, if any) or interest on this Note
or other amounts owed by Maker under this Note;
(b) any payment or distribution of assets or securities of
Maker of any kind or character, whether in cash, property or
securities, to which Payee would be entitled but for the provisions of
this Section 3, including any such payment or distribution which may be
payable or deliverable by reason of the payment of any other
indebtedness of Maker being subordinated to the payment of this Note
(except for any such payment or distribution (x) authorized by an order
or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of this Note to the Senior
Indebtedness, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law, or (y)
of securities that are subordinated, to at least the same extent as
this Note, to the payment in full in cash of all Senior Indebtedness
then outstanding), shall be paid by the liquidating trustee or agent or
other person making such payment or distribution, whether a
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<PAGE> 6
trustee in bankruptcy, a receiver of liquidating trustee or otherwise,
directly to the holders of the Senior Indebtedness or their
representative or representatives, ratably according to the aggregate
amounts remaining unpaid on the Senior Indebtedness, for application to
the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full in cash, after giving
effect to any concurrent payment or distribution to or for the holders
of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of Section 3, Payee shall have received any such payment or
distribution of assets or securities of Maker of any kind or character,
whether in cash, property or securities (other than payments or
distributions (x) authorized by an order or decree giving effect to the
subordination of this Note to the Senior Indebtedness, or (y) of
securities that are subordinated to the payment in full in cash of all
Senior Indebtedness, all as described in Section 3.2(b) above),
including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of Maker
being subordinated to the payment of this Note, before all Senior
Indebtedness is paid in full in cash or payment thereof provided for,
then and in such event such payment or distribution shall be received
and held in trust for the benefit of, and shall be paid over or
delivered to, the holders of the Senior Indebtedness or their
representative or representatives, ratably according to the aggregate
amount remaining unpaid on the Senior Indebtedness, for application to
the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full in cash, after giving
effect to any concurrent payment or distribution to or for the holders
of such Senior Indebtedness.
(d) in the event that Payee fails to, in a timely manner and
to the fullest extent possible, (i) file or cause to be filed such
proofs of claim and other papers or documents as may be necessary or
advisable to have the claims under this Note allowed at any meeting of
creditors or in any proceeding referred to in this Section 3.2 or (ii)
enforce claims under this Note, by proof of debt, proof of claim, or
otherwise, the holders of the Senior Indebtedness shall be entitled and
are authorized to so file and/or enforce either in Payee's name or in
the name or names of any holder of the Senior Indebtedness.
(e) Payee shall retain the right to vote and otherwise act
with respect to the claims under this Note (including, without
limitation, the right to vote to accept or reject any plan of partial
or complete liquidation, reorganization, arrangement, composition or
extension), provided that Payee shall not vote with respect to any such
plan or take any other action in any way so as to (i) contest the
validity of any Senior Indebtedness or any collateral therefor or
guaranties thereof, (ii) contest the relative rights and duties of any
holders of any Senior Indebtedness established in any instruments or
agreements creating or evidencing any of the Senior Indebtedness with
respect to any of such collateral or guaranties, or (iii) contest
Payee's obligations and agreements set forth in this Section 3.
The consolidation of Maker with, or the merger of Maker into,
another corporation or the liquidation or dissolution of Maker following the
conveyance, transfer or lease of its properties
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<PAGE> 7
and assets substantially as an entirety to another corporation shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshaling of assets and liabilities of Maker for
the purposes of this Section 3.
3.3 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
(a) In the event of and during the continuation of any default
in the payment of any Senior Indebtedness beyond any applicable grace
period with respect thereto ("payment default"), then no payment shall
be made by or on behalf of Maker on this Note until the date, if any,
on which such default or event of default is waived by the holders of
such Senior Indebtedness or otherwise cured or has ceased to exist or
the Senior Indebtedness to which such default or event of default
relates is discharged by payment in full in cash.
(b) In the event that any other event of default with respect
to any Senior Indebtedness shall have occurred and be continuing that
permits the holders of such Senior Indebtedness (or a trustee on behalf
of such holders) to declare such Senior Indebtedness due and payable
prior to the date on which it would otherwise have become due and
payable, and upon receipt by Maker and Payee of written notice (the
"Payment Notice") from a representative for, or the holder of, any
Senior Indebtedness, then no payment shall be made by or on behalf of
Maker on this Note until the earlier of (x) 179 days after the date on
which such Payment Notice shall have been received and (y) the date, if
any, on which such default or event of default is waived by the holders
of the Senior Indebtedness to which such default or event of default
relates is discharged by payment in full in cash (a "Blockage Period").
Not more than two Blockage Periods may be commenced during any period
of 360 consecutive days. No event of default that existed or was
continuing (it being acknowledged that any subsequent action that would
give rise to an event of default pursuant to any provision under which
an event of default previously existed or was continuing shall
constitute a new event of default for this purpose) on the date of the
commencement of any Blockage Period with respect to the Senior
Indebtedness initiating such Blockage Period shall be, or shall be
made, the basis for the commencement of a second Blockage Period by the
representative for, or the holders of, such Senior Indebtedness whether
or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than
90 consecutive days. Any such failure to make a payment on this Note
shall not be construed as preventing the occurrence of an Event of
Default under this Note. Any payment permitted hereunder after a
Blockage Period of amounts owed to the holders of this Note during a
Blockage Period shall be deemed a cure of any Event of Default caused
by any such delayed payment. Notwithstanding any other provision
contained herein, during all times in which Maker's senior credit
facility, dated March 18, 1998 with BankBoston, N.A., as agent and
LaSalle National Bank, as documentation agent, and the lenders
identified therein, or any restatement, amendment, supplement or
modification thereof or any replacement facility thereof (the "Senior
Bank Facility") is in effect or the lenders thereunder have any
obligations to make loans or extend credit to Maker or its
subsidiaries, the only holder of Senior
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Indebtedness entitled to exercise its rights under Section 3.2(d) and
this Section 3.3(b) shall be the agent under the Senior Bank Facility.
In the event that, notwithstanding the foregoing, any payment or
distribution shall be received by Payee in contravention of the provisions of
this Section 3, then and in such event such payment or distribution shall be
received and held in trust for the benefit of, and shall be paid over or
delivered to, the holders of the Senior Indebtedness or their representative or
representatives, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness, for application to the Senior Indebtedness
or to be held as collateral for, the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full
in cash, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
The provisions of this Section 3.3 shall not apply to any payment with
respect to which Section 3.2 would be applicable.
3.4 PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in this
Section 3 or elsewhere in this Note shall prevent Maker, at any time except
under the circumstances described in Section 3.1 or under the conditions
described in Section 3.2, from making regularly scheduled payments at any time
of principal of (and premium, if any) or interest on this Note or other amounts
owed by Maker under this Note.
3.5 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS;
MARSHALING. No payment or distributions to the holders of Senior Indebtedness or
their representatives pursuant to the provisions of this Section 3 shall entitle
Payee to exercise any right of subrogation in respect thereof until the Senior
Indebtedness shall have been paid in full. Payee further waives any and all
rights with respect to marshaling.
3.6 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this Section 3 are intended solely for the purpose of defining the relative
rights of Payee on the one hand and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Note is intended to or shall (a) impair,
as among Maker, its creditors other than holders of Senior Indebtedness and
Payee, the obligation of Maker, which is absolute and unconditional, to pay to
Payee the principal of (and premium, if any) and interest on this Note as and
when the same shall become due and payable in accordance with its terms; or (b)
affect the relative rights against Maker of Payee and creditors of Maker other
than the holders of Senior Indebtedness; or (c) prevent Payee from exercising
all remedies otherwise permitted by applicable law or this Note upon default
under this Note, subject to the rights, if any, under this Section 3 and Section
2.1 of the holders of the Senior Indebtedness.
3.7 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present
or future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of Maker or by any act or failure to act, in good
faith, by any such holder, or by noncompliance by Maker with the terms,
provisions of
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and covenants of this Note, regardless of any knowledge thereof any such holder
may have or be otherwise charged with.
3.8 NOTICE TO PAYEE. Maker shall give prompt written notice to
Payee of any fact known to Maker which would prohibit the making of any payment
to or by Payee in respect of this Note. Notwithstanding the provisions of this
Section 3 or any other provision of this Note, Payee shall not be charged with
the knowledge of the existence of any facts which would prohibit the making of
any payment to or by Payee in respect of this Note, unless and until Payee shall
have received written notice thereof from Maker or holder of Senior Indebtedness
or from any trustee, fiduciary or agent therefor.
3.9 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT. Upon any payment or distribution of assets or securities of Maker
referred to in Section 3.2, Payee shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to Payee, for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other indebtedness of Maker, the amount thereof or payment thereof, the
amount orf amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 3.
3.10 FREEDOM OF DEALING. Payee agrees, with respect to the Senior
Indebtedness and any and all collateral therefor or guaranties thereof, that
Maker and the holders of the Senior Indebtedness may agree to increase the
amount of the Senior Indebtedness or otherwise modify the terms of any of the
Senior Indebtedness, and the holders of the Senior Indebtedness may grant
extensions of the time of payment or performance to and make compromises,
including releases of collateral or guaranties, and settlements with Maker and
all other persons, in each case without the consent of Payee or Maker and
without affecting the agreements of Payee or Maker contained in this Note;
provided, however, that nothing contained in this Section 3.10 shall constitute
a waiver of the right of Maker itself to agree or consent to a settlement or
compromise of a claim which any holder of the Senior Indebtedness may have
against Maker.
3.11 DEFENSE TO ENFORCEMENT. If Payee, in contravention of the
terms of this Note, shall commence, prosecute or participate in any suit, action
or proceeding against Maker, then Maker may interpose as a defense or plea the
provisions of this Section 3, and any holder of the Senior Indebtedness may
intervene and interpose such defense or plea in its name or in the name of
Maker. If Payee, in contravention of the terms of this Section 3, or the last
paragraph of Section 2.2, shall attempt to collect under this Note or enforce
any provisions of this Note, then any holder of the Senior Indebtedness or Maker
may restrain the enforcement thereof in the name of such holder of the Senior
Indebtedness or in the name of Maker.
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<PAGE> 10
3.12 REINSTATEMENT OF SUBORDINATION. To the extent that Maker or
any guarantor of or provider of collateral for the Senior Indebtedness makes any
payment on the Senior Indebtedness that is subsequently invalidated, declared to
be fraudulent or preferential or set aside or is required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or
reorganization act, state or federal law, common law or equitable cause (such
payment being hereinafter referred to as a "Voided Payment"), then to the extent
of such Voided Payment, that portion of the Senior Indebtedness that had been
previously satisfied by such Voided Payment shall be revived and continue in
full force and effect as if such Voided Payment had never been made. In the
event that a Voided Payment is recovered from any holder of the Senior
Indebtedness, a default in the payment of the relevant Senior Indebtedness shall
be deemed to have existed and to be continuing from the date of such holder of
the Senior Indebtedness' initial receipt of such Voided Payment until the full
amount of such Voided Payment is restored to such holder of the Senior
Indebtedness. During any continuance of any such payment default, this Section 3
and the last paragraph of Section 2.2 shall be in full force and effect with
respect to the obligations hereunder.
3.13 AMENDMENTS; LIENS. The provisions of this Section 3 and the
last paragraph of Section 2.2 may not be amended or waived without the written
agreement of Maker, the agent under the Senior Bank Facility and Payee. Payee
will not, without the prior written consent of all the holders of the Senior
Indebtedness, take or receive any security interest, lien, mortgage or other
encumbrance on any assets of Maker or its subsidiaries.
ARTICLE IV
MISCELLANEOUS
4.1 WAIVER. The rights and remedies of Payee under this Note shall
be cumulative and not alternative. No waiver by Payee of any right or remedy
under this Note shall be effective unless in a writing signed by Payee. Neither
the failure nor any delay in exercising any right, power or privilege under this
Note will operate as a waiver of such right, power or privilege and no single or
partial exercise of any such right, power or privilege by Payee will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law: (a) no claim or right of Payee arising out of this Note can be
discharged by Payee, in whole or in part, by a waiver or renunciation of the
claim or right unless in a writing, signed by Payee; (b) no waiver that may be
given by Payee will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on Maker will be deemed to be a waiver
of any obligation of Maker or of the right of Payee to take further action
without notice or demand as provided in this Note. Maker hereby waives
presentment, demand, protest and notice of dishonor and protest.
4.2 NOTICES. Any notice required or permitted to be given
hereunder shall be given in accordance with Section 13.1 of the Agreement.
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4.3 SEVERABILITY. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, then the other provisions
of this Note shall remain in full force and effect. Any provision of this Note
held invalid or unenforceable only in part or degree shall remain in full force
and effect to the extent not held invalid or unenforceable.
4.4 GOVERNING LAW. This Note shall be governed by the laws of the
State of Florida without regard to conflicts of laws principles.
4.5 PARTIES IN INTEREST. This Note shall bind Maker and its
successors and assigns. This Note shall not be assigned or transferred by Payee
without the express prior written consent of Maker, except by Will or, in
default thereof, by operation of law.
4.6 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Note are provided for convenience only and shall not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Note unless otherwise
specified. All words used in this Note shall be construed to be of such gender
or number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
NATIONSRENT, INC., a Delaware corporation
By:
-------------------------------------------
Gene J. Ostrow, Senior Vice President and
Chief Financial Officer
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EXHIBIT 10.22
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated as of
May 14, 1998 among General Rental, Inc., a Delaware corporation ("Seller") and
NationsRent, Inc., a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller presently conducts the business of rental and
sale of various machinery, equipment, tools, supplies and other tangible
personal property through its Texas and Emerald Coast Districts at the locations
described on the Schedule entitled "Real Estate and Leases" (the "Business");
and
WHEREAS, Seller desires to sell substantially all of its
assets, properties, rights and interests relating to the Business to Buyer; and
WHEREAS, Buyer desires to purchase and acquire from Seller,
upon the terms and subject to the conditions hereinafter set forth,
substantially all of such assets, properties, rights and interests of Seller
relating primarily to the Business, in consideration of certain payments by
Buyer and the assumption by Buyer of certain liabilities and obligations of
Seller specifically disclosed in this Agreement;
NOW, THEREFORE, in consideration of the promises and the
mutual covenants hereinafter contained and other good and valuable consideration
had and received, Buyer and Seller, on the basis of, and in reliance upon, the
representations, warranties, covenants, obligations and agreements set forth in
this Agreement, and upon the terms and subject to the conditions contained
herein, hereby agree as follows:
ARTICLE I: PURCHASE AND SALE OF ASSETS
1.1 Sale and Transfer of Assets. At the Closing (as hereinafter
defined) and effective as of the Closing Date (as hereinafter defined), Buyer
shall purchase and acquire from Seller, and Seller shall sell, transfer, convey,
assign and deliver to Buyer all of the assets, properties, rights and interests
owned, used, occupied or held by or for the benefit of Seller primarily in the
operation of the Business (other than the Retained Assets, as hereinafter
defined) wherever situated, as the same shall exist as of the Closing Date
including, without limitation, the following:
(a) Prepaids. All prepaid expenses, advance payments,
deposits, surety accounts and other similar assets, including, without
limitation, prepaid deposits with suppliers and utilities from which
Buyer will receive the benefit following the Closing (collectively, the
"Prepaids") to the extent included in the calculation of Gross Working
Capital pursuant to Section 3.3 hereof;
<PAGE> 2
(b) Inventory. All inventories of products,
work-in-process, finished goods, raw materials, supplies and parts, new
equipment and resale merchandise held in connection with the Business
(collectively, "Inventory" or "Inventories"), including, without
limitation, all Inventories located at the facilities listed on the
Schedule entitled "Real Estate and Leases";
(c) Rental Equipment. All machinery, equipment, tools,
supplies, and other tangible personal property used or held for use by
Seller or its customers in connection with the Business (collectively,
"Rental Equipment");
(d) Accounts Receivable. All accounts receivable
(including royalties receivable and earned but unbilled revenues), any
payments received with respect thereto after the Closing Date, unpaid
interest accrued on any such accounts receivable and any security or
collateral relating thereto, all as such relate to the Business
(collectively, "Accounts Receivable");
(e) Fixed Assets. All tangible personal property, plant
and equipment, including, without limitation, buildings, structures,
fixtures, machinery and equipment, dies, jigs, molds, patterns, tools,
tooling, production fixtures, maintenance machinery and equipment,
office furniture and office equipment, other furnishings, trucks,
automobiles and other vehicles and transportation equipment, leasehold
improvements and construction-in-process, to the extent such property
is used by Seller primarily in connection with the Business and all
tangible personal property set forth on the Schedule entitled "Fixed
Assets" attached hereto (collectively, the "Fixed Assets");
(f) Fee Property. All Rights and interests identified
under the heading "Fee Property" on the Schedule entitled "Real Estate
and Leases" attached hereto, which consist of: (i) the land more
particularly described under such heading, which descriptions are
incorporated herein by reference, (ii) all buildings, structures, and
leasehold improvements located thereon and all appurtenances relating
thereto, and (iii) all fixtures, machinery, apparatus or equipment
affixed to said premises, including, without limitation, all of the
electrical, heating, plumbing, air conditioning, air compression and
all other systems located on said premises, and all other structures,
fences and improvements (collectively, the "Fee Property");
(g) Leased Property. All rights and interests under the
lease agreements (the "Lease Agreements") more particularly described
as "Assumed Leases" under the heading "Leased Property" on the Schedule
entitled "Real Estate and Leases" attached hereto, which descriptions
are incorporated herein by reference (the premises subject to the Lease
Agreements being hereinafter collectively referred to as the "Leased
Property");
(h) Intellectual Property Rights. All inventions,
discoveries, trademarks, patents, trade names, copyrights, know-how,
intellectual property, software, shop rights, licenses, developments,
research data, designs, technology, discoveries, trade secrets, test
procedures, processes, research data, formulas and other confidential
information, intellectual and similar intangible property rights,
whether or not patentable (or otherwise subject to legally enforceable
restrictions or protections against unauthorized third party usage),
and any and
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all applications for, and extensions, divisions and reissuances of, any
of the foregoing, and rights therein used primarily in the Business,
including, without limitation, a license to use (i) the name "General
Rental," and "Rental One" and all related trade names and trademarks,
and (ii) the intellectual and intangible property rights described on
the Schedule entitled "Intellectual Property" attached hereto;
(i) Business Records. All books and records relating
primarily to the Business, including, without limitation, all files,
invoices, forms, accounts, correspondence, production records,
technical, accounting, manufacturing and procedural manuals, employment
records, studies, reports or summaries relating to any Environmental
Requirements (as hereinafter defined), and other books and records
relating primarily to the operation of any of the Acquired Assets (as
hereinafter defined) or other assets or properties, and any
confidential information relating primarily to the Business which has
been reduced to writing or other tangible medium (collectively, the
"Business Records");
(j) Rights Under Confidentiality Agreements and
Warranties. All rights, claims and benefits of Seller in, to or under
any (i) (A) employee confidentiality agreements entered into by Seller,
(B) confidentiality or secrecy agreements entered into by Seller with
third parties that relate to the use or disclosure of information (the
"Confidentiality Agreement Rights") and (C) non-competition agreements
entered into by Seller with companies and persons affiliated with
companies acquired by Seller or its predecessors relating to the
Business; and (ii) express or implied warranties from the suppliers of
goods or services (including any coverage rights under product
liability or other insurance maintained by any of such suppliers for
the benefit of the Seller) all as such relate to the Business;
(k) Customer List. The list or lists maintained by
Seller, if any, or other records maintained by Seller, if any, of all
of the Persons to whom or to which Seller has rented, sold or otherwise
furnished Rental Equipment, directly or indirectly, through the
Business at the locations described on the Schedule entitled "Real
Estate and Leases" at any time during the thirty-six (36) month period
ending on the Closing Date (individually, a "Customer" and
collectively, the "Customers," such terms to include any assignee or
successor of any such Person, whether by consolidation, merger, sale of
assets or otherwise), including to the extent maintained by Seller
related information as to the unit and dollar volume of such sales, the
type of Rental Equipment so rented, sold or furnished, the method of
distribution and other relevant marketing and Rental Equipment
information for each Customer (the "Customer List");
(l) Catalogs and Advertising Materials. All promotional
and advertising materials, including, without limitation, all catalogs,
brochures, plans, supplier lists, manuals, handbooks, equipment and
parts lists, dealer and distributor lists, and labels and packaging
materials held for use in connection with the Business;
(m) Purchase Orders. All unfilled purchase and sale
orders (including releases of quantities pursuant thereto) relating to
the Business including, without limitation, those purchase orders
involving more than $25,000 for the purchase of goods and services and
listed on the Schedule attached hereto entitled "Purchase Orders";
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(n) Contracts. Subject to Section 1.2(b) and 1.3, all
rights, benefits and interests of Seller in and to all licenses,
leases, contracts, agreements, commitments and undertakings relating to
the Business, including, without limitation, all rights of Seller to
indemnities under agreements through which Seller purchased all or any
part of the assets used in the Business (the "Indemnity Assignments");
provided, however, that the Indemnity Assignments may provide that
Seller may retain rights to pursue the grantor of the indemnity
exclusively (i) for matters with respect to which Buyer has not
suffered any loss or damage and (ii) for amounts paid to Buyer by
Seller provided that Buyer has not incurred, in the aggregate, the
maximum amount of Liabilities with respect to which Buyer is entitled
to indemnification pursuant to Section 11.5(a) hereof and in all other
situations, Buyer and Seller may pursue the grantor of the indemnity in
proportion to the loss suffered by each;
(o) Permits. All licenses, permits, approvals, variances,
waivers or consents (collectively, the "Permits"), to the extent
transferable, issued by any foreign, United States, state or local
governmental entity or municipality or subdivision thereof or any
authority, department, commission, board, bureau, agency, court or
instrumentality (collectively, "Governmental Authorities") and used in
or necessary to the operation of the Business;
(p) Insurance. All claims of Seller in, to or under all
insurance policies maintained by Seller for losses incurred with
respect to the Acquired Assets after the date hereof and losses with
respect to the Business for which the liability relating thereto is an
Assumed Liability;
(q) Goodwill. The goodwill of Seller relating to the
Business; and
(r) Miscellaneous. Except for the Retained Assets (as
hereinafter defined), all other assets, properties, rights and
interests of Seller otherwise employed primarily in or related
primarily to the operation of the Business, of every kind, nature and
description, whether tangible or intangible, real, personal or mixed,
and wherever situated, including, without limitation, those assets,
properties, rights and interests set forth on the Balance Sheet (as
hereinafter defined), all of which are to be sold, transferred,
conveyed, assigned and delivered to Buyer at the Closing pursuant to
this Agreement.
All of the assets, properties, rights and interests owned, used, occupied or
held by or for the benefit of the Seller primarily for use in the operation of
the Business, which are to be sold, transferred, conveyed, assigned and
delivered by Seller to Buyer at the Closing as contemplated herein, including
without limitation, those described in clauses (a) through (r) above, but
excluding the Retained Assets, are referred to herein collectively as the
"Acquired Assets."
1.2 Retained Assets. Anything in Section 1.1 to the contrary
notwithstanding, the following assets (collectively, the "Retained Assets")
shall be retained by Seller, and Buyer shall in no way be construed to have
purchased or acquired (or to be obligated to purchase or to acquire) any
interest whatsoever in any of the following:
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<PAGE> 5
(a) Designated Assets. Any of the assets, properties,
rights and/or interests, owned, used, occupied or held by or for the
benefit of Seller listed on the Schedule entitled "Designated Assets"
attached hereto (collectively, the "Designated Assets");
(b) Non-Assigned Contracts. All of the rights and
interests, and all of the liabilities and obligations, of Seller in,
under or pursuant to any license, lease, contract, agreement,
commitment or undertaking listed on the Schedule entitled "Non-Assigned
Contracts" attached hereto (collectively, the "Non-Assigned
Contracts");
(c) Non-Assigned Leases. All of the rights and interests
under the lease agreements more particularly described as "Non Assumed
Leases" under the heading "Leased Property" on the Schedule entitled
"Real Estate and Leases."
(d) Employee Plan Assets. The rights of Seller under, and
any funds and property held in trust or any other funding vehicle
pursuant to, any "employee benefit plan" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or any other bonus, stock option, stock appreciation, stock
purchase, severance, termination, lay-off, leave of absence,
disability, workers compensation, pension, profit sharing, retirement,
vacation or holiday pay, insurance, deferred compensation or other
employee or welfare benefit plan, agreement or arrangement of Seller
applicable to Seller's past, present or future employees (collectively,
"Employee Plans");
(e) Corporate Records. Seller's minute books, stock
books, stock ledger and corporate seal; and
(f) Cash and Cash Equivalents. All cash, cash equivalents
and marketable securities of the Business, including cash on hand
maintained at the facilities of Seller described on the Schedule
entitled "Real Estate and Leases," and cash, cash-equivalents and
marketable securities in lock boxes or on deposit with or held by any
financial institution in connection with the Business other than cash
or cash equivalents which represent payment for Accounts Receivable
purchased by Buyer.
1.3 Assignability and Consents.
(a) Required Consents. The Schedule entitled "Assignments
and Consents" sets forth a list of all Acquired Assets, including
Contracts, Permits and Lease Agreements (but excluding leases of office
equipment involving future payments of less than Twenty-Five Thousand
Dollars ($25,000) in the aggregate and other agreements which have less
than one year remaining in their terms and involve future payments of
less than Twenty-Five Thousand Dollars ($25,000) in the aggregate),
which are non-assignable or non-transferable or cannot be subleased to
Buyer without the consent of some other individual, partnership,
corporation, association, joint stock company, trust, joint venture,
limited liability company or Governmental Authority (collectively,
"Person"). Seller has commenced and shall continue to take, or cause to
be taken by others, all commercially reasonable actions required to
obtain or satisfy, at the earliest practicable date, all consents,
novations, approvals, authorizations, requirements (including filing
and registration requirements), waivers and
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agreements ("Consents") from any Persons necessary to authorize,
approve or permit the full and complete sale, conveyance, assignment,
sublease or transfer of the Acquired Assets, and to consummate and make
effective the transactions contemplated by this Agreement and to
continue such commercially reasonable efforts as may be required after
the Closing Date to facilitate the full and expeditious transfer of
legal title, or the sublease, as the case may be, of the Acquired
Assets.
(b) Nonassignable Items. Anything in this agreement to
the contrary notwithstanding, this Agreement shall not constitute an
Agreement to sell, convey, assign, sublease or transfer any Acquired
Assets, including Contracts, Permits and Lease Agreements (other than
leases of office equipment involving future payments of less than
Twenty-Five Thousand Dollars ($25,000) in the aggregate and other
agreements which have less than one year remaining in their terms and
involve future payments of less than Twenty-Five Thousand Dollars
($25,000)), if an attempted sale, conveyance, assignment, sublease or
transfer thereof, without the Consent of another party thereto or a
Governmental Authority would constitute a breach of, or in any way
affect the rights of Seller or Buyer with respect to such Acquired
Asset ("Nonassignable Items"). Seller shall use its commercially
reasonable efforts and Buyer shall cooperate in all reasonable respects
with Seller to obtain and satisfy all Consents and to resolve all
impracticalities of sale, conveyance, assignment, sublease or transfer
necessary to convey to Buyer all Nonassignable Items. If any such
Consents are not obtained and satisfied or if an attempted sale,
conveyance, assignment, sublease or transfer would be ineffective,
Seller and its appropriate Affiliates shall at the Closing enter into
such arrangements (including related written agreements) as Buyer may
reasonably request in order to fairly compensate Buyer for the loss of,
or to provide to Buyer the benefit of, any such Nonassignable Items (it
being acknowledged that such arrangement may include obligations
imposed on Seller and such Affiliates promptly to pay to Buyer when
received all monies and other items of value received by Seller and
such Affiliates under any such Nonassignable Item).
1.4 Formation of Subsidiary and Assignment of Rights. Prior to the
Closing, Buyer may assign all or any part of its rights and obligations under
this Agreement to one or more, direct or indirect, wholly-owned Subsidiary or
Subsidiaries and cause such Subsidiary to perform the obligations of Buyer under
this Agreement, including, without limitation, rights and obligations of Buyer
to acquire the Acquired Assets pursuant to this Article I; provided, however,
that no such assignment shall otherwise vary or diminish any of Buyer's or
Seller's rights or obligations under this Agreement or shall cause a delay in
the Closing.
ARTICLE II: LIABILITIES
2.1 Assumption of Liabilities. On the terms and subject to the
conditions set forth in this Agreement, Buyer shall assume, at the Closing and
effective as of the Closing Date, and shall thereafter pay, perform and
discharge as and when due the following, and only the following, liabilities and
obligations of Seller incurred in or arising from the operation of the Business
(collectively, the "Assumed Liabilities"):
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(a) Contracts. All liabilities and obligations of Seller
arising under the terms of the Contracts and listed on the Schedule
attached hereto and entitled "Assumed Contracts" other than contracts
that constitute Non-Assigned Contracts (the "Assumed Contracts") but
only to the extent such liabilities and obligations arise or accrue in
the ordinary and normal course and consistent with the representations,
warranties, covenants, obligations and agreements set forth in this
Agreement; provided, however, that, other than as listed under the
heading "Extraordinary Items" on the Schedule entitled "Assumed
Contracts", Buyer shall not assume or be responsible for any such
liabilities or obligations which arise from breaches thereof or
defaults thereunder by Seller, all of which liabilities and obligations
shall constitute Retained Liabilities (as hereinafter defined);
(b) Assumed Leases. All liabilities and obligations of
Seller arising under the terms of the "Assumed Leases" listed under the
heading "Leased Property" on the Schedule entitled "Real Estate and
Leases," but only to the extent such liabilities and obligations arise
or accrue in the ordinary and normal course and consistent with the
representations, warranties, covenants, obligations and agreements set
forth in this Agreement; provided, however, that, other than as listed
under the heading "Extraordinary Items" on the Schedule entitled "Real
Estate and Leases", Buyer shall not assume or be responsible for any
such liabilities or obligations which arise from breaches thereof or
defaults thereunder by Seller all of which liabilities or obligations
shall constitute Retained Liabilities; and
(c) Miscellaneous Liabilities. All liabilities identified
on the Schedule attached hereto entitled "Miscellaneous Liabilities,"
which includes accrued expenses of the Business that would be current
liabilities under GAAP that are not due and payable until after the
Closing Date.
2.2 Retained Liabilities. Except as provided in Section 2.1,
Seller shall retain, and Buyer shall not assume, or be responsible or liable
with respect to, any liabilities or obligations of, Seller, or otherwise
relating to the Business or any present or former owner or operator thereof,
whether or not of, associated with, or arising from, any of the Acquired Assets,
and whether fixed, contingent or otherwise, known or unknown (collectively
referred to hereinafter as the "Retained Liabilities"), including, without
limitation, the following:
(a) Pre-Closing. All liabilities, obligations and accrued
expenses relating to, based in whole or in part on events or conditions
occurring or existing in connection with, or arising out of, the
Business as operated prior to the Closing Date, or the ownership,
possession, use, operation or sale or other disposition prior to the
Closing Date of the Acquired Assets (or any other assets, properties,
rights or interests associated, at any time prior to the Closing Date,
with the Business) which are not Assumed Liabilities;
(b) Liabilities Relating to the Sale of Acquired Assets.
Subject to Section 9.6 hereof, all liabilities and obligations of
Seller or any of its Affiliates, or their respective directors,
officers, stockholders or agents, arising out of, or relating to, this
Agreement or the transactions contemplated hereby, whether incurred
prior to, at, or subsequent to the Closing Date, including, without
limitation, all finder's or broker's fees and expenses, and any and all
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fees and expenses of any attorneys, accountants or other professionals
retained by or on behalf of Seller or any of its Affiliates;
(c) Employee-Related Liabilities. Except as identified on
the Schedule entitled "Miscellaneous Liabilities", all liabilities and
obligations to any person at any time employed by Seller or its
Affiliates or their respective predecessors-in-interest in the Business
or otherwise, at any time or to any such person's spouses, children,
other dependents or beneficiaries, with respect to incidents, events,
exposures or circumstances occurring at any time during the period or
periods of any such persons' employment by Seller or its Affiliates or
their respective predecessors-in-interest, whenever such claims mature
or are asserted, including, without limitation, all liabilities and
obligations arising (i) under any Employee Plans, (ii) under any
employment, wage and hour restriction, equal opportunity,
discrimination, plant closing or immigration and naturalization laws,
(iii) under any collective bargaining laws, agreements or arrangements,
or (iv) in connection with any workers' compensation or any other
employee health, accident, disability or safety claims;
(d) Litigation. All liabilities and obligations relating
to any litigation, action, suit, claim, investigation or proceeding
pending on the date hereof, or constituted hereafter, based in whole or
in part on events or conditions occurring or existing in connection
with, or arising out of, or otherwise relating to, the Business as
operated by Seller or any of its Affiliates (or any of their respective
predecessors-in-interest), or the ownership, possession, use,
operation, sale or other disposition prior to the Closing Date of any
Rental Equipment or any of the Acquired Assets (or any other assets,
properties, rights or interests associated, at any time prior to the
Closing Date, with the Business);
(e) Product, Environmental and Safety Liability. All
liabilities and obligations relating to the Business or the Acquired
Assets (or any other assets, properties, rights or interests
associated, at any time prior to the Closing Date, with the Business or
the Acquired Assets), based in whole or in part on events or conditions
occurring or existing prior to the Closing Date and connected with,
arising out of or relating to (i) any dispute for services rendered or
goods manufactured, including, without limitation, product warranty
claims and product liability claims, and claims for refunds, returns,
personal injury and property damage, but only to the extent such
disputes did not arise in the ordinary and normal course of business
and the individual dispute is greater than $5,000, (ii) Hazardous
Materials, Environmental Requirements or Environmental Damages (all as
hereinafter defined), (iii) claims relating to employee health and
safety, including claims for injury, sickness, disease or death of any
Person, or (iv) compliance with any Laws relating to any of the
foregoing;
(f) Taxes. Except as identified on the Schedule entitled
"Miscellaneous Liabilities," all liabilities and obligations of Seller
or any of its Affiliates (or any of their respective
predecessors-in-interest) for any Taxes (as hereinafter defined) due or
becoming due by reason of (i) the conduct of the Business, or (ii) the
ownership, possession, use, operation, purchase, acquisition, sale or
disposition, of any Products or any of the Acquired Assets, including,
without limitation, Taxes attributable to the sale of inventory and
employee withholding tax obligations; (ii) Taxes imposed on, or
accruing as a result of the purchase and sale of the Acquired Assets;
and (iii) Taxes attributable to, or resulting from,
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recapture of depreciation, other tax benefit items, or otherwise
arising from the transactions contemplated by this Agreement;
(g) Breach of Agreement. All liabilities and obligations,
known or unknown, fixed, contingent or otherwise, the existence of
which is a breach of, or inconsistent with, any representation,
warranty, covenant, obligation or agreement of Seller set forth in this
Agreement or in any of the other documents or agreements contemplated
hereby;
(h) Liabilities Relating to Retained Assets. All
liabilities and obligations relating to, based in whole or in part on
events or conditions occurring or existing in connection with, or
arising out of, any and all assets, properties, rights and interests
which are not being acquired by Buyer hereunder, including, without
limitation, the Retained Assets;
(i) Post-Closing Date. All liabilities and obligations
incurred by Seller or its Affiliates or their respective directors,
officers, stockholders, agents or employees after the Closing Date; and
(j) Balance Sheet and Other. All liabilities and
obligations of Seller other than such liabilities and obligations
expressly identified as Assumed Liabilities.
ARTICLE III: PURCHASE PRICE
3.1 Payment. In full consideration for the transfer of the
Acquired Assets (the "Purchase Price"), Buyer (i) pay to Seller by wire transfer
in immediately available funds to an account designated by Seller an amount
equal to $18,250,000, plus or less an amount equal to the product of .8
multiplied by the difference between (A) $1,000,000 and (B) the Estimated Gross
Working Capital (as defined in Section 3.2) (such product being the "Initial
Working Capital Amount"), and (ii) shall deliver into escrow, pursuant to the
terms and conditions of an Escrow Agreement in the form attached hereto as
Exhibit A (the "Indemnity Escrow Agreement"), an amount equal to $1,750,000.
Upon execution of this Agreement, Buyer has deposited $250,000 in escrow
pursuant to an escrow agreement, dated even date herewith, and attached hereto
as Exhibit B (the "Initial Escrow Agreement"), which amount shall be paid to
Seller as part of the Purchase Price or returned to Buyer pursuant to the
Initial Escrow Agreement.
3.2 Gross Working Capital Adjustment. The Purchase Price shall be
adjusted upon final determination of the Final Working Capital Amount as
hereinafter set forth. Gross Working Capital shall be defined as current assets
of the Business, less the current liabilities of the Business identified on the
Schedule entitled "Miscellaneous Liabilities." For purposes of this Agreement,
current assets shall consist of Accounts Receivable (net of a reserve for
uncollectible accounts equal to $150,000), Inventories (net of the reserve for
obsolete or unsaleable Inventory as reflected in the books and records of the
Seller), and Prepaids. At the Closing, Seller shall prepare a statement setting
forth, in reasonable detail, its estimate of Gross Working Capital as of the
Closing Date ("Estimated Gross Working Capital"). Within sixty (60) days of the
Closing Date, Buyer shall prepare and deliver to the Seller a statement setting
forth its calculation of Gross Working Capital as of the Closing Date. That
statement shall be prepared in a manner consistent with Generally Accepted
Accounting Principles ("GAAP") and consistent with the definitions of the
defined terms contained herein. The
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Seller shall have a period of fifteen (15) days after receipt of that statement
to object to such calculation. In the event any such objection cannot be
amicably resolved, Seller and Buyer shall agree upon an independent national
accounting firm to be hired for the purposes of resolving such dispute, which
resolution shall be the final Gross Working Capital and the difference between
$1,000,000 and the final Gross Working Capital (which, if less than $1,000,000
shall be expressed as a negative number) shall be the "Final Working Capital
Amount." The fees of such independent national accounting firm shall be shared
equally by Seller and Buyer. Upon final determination of the Final Working
Capital Amount, the difference between the Final Working Capital Amount, and the
Initial Working Capital Amount shall be paid within 15 days from such
determination (i) by Buyer to Seller, if the Final Working Capital Amount is
more than the Initial Working Capital Amount and (ii) by Seller to Buyer if the
Final Working Capital Amount is less than the Initial Working Capital Amount.
ARTICLE IV: CLOSING
4.1 General. As used in this Agreement, the "Closing" shall mean
the time at which Seller consummates the sale, assignment, transfer and delivery
of the Acquired Assets to Buyer as provided herein by the execution and delivery
by Seller of the documents and instruments referred to in Section 4.2 and
delivery by Buyer of the documents and payments provided in Sections 3.1(a) and
4.3, and Seller, Buyer and the other Persons referred to herein deliver the
additional documents referred to in Section 4.4. In the absence of a prior
termination of this Agreement by one of the parties in accordance with Article
X, the Closing shall take place at the offices of Jones, Day, Reavis & Pogue,
1900 Huntington Center, Columbus, OH 43215, at 10:00 A.M. on the later to occur
of (a) the second day following the day on which the waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "H-S-R Act") shall
have expired, if applicable, or (b) June 2, 1998, or at such other time and
place and on such other day as shall be mutually agreed upon in writing by the
parties hereto (the "Closing Date"), provided that either Seller or Buyer may
unilaterally extend the Closing Date to a date not later than June 30, 1998 in
order to satisfy any conditions to Closing that have not been satisfied by June
4, 1998 and further, provided, that if the Closing has not occurred on or before
June 4, 1998 solely because of Buyer's failure to satisfy a condition set forth
in Section 6.2 (not waived by Seller) hereof that is within Buyer's sole
control, Buyer shall deposit $250,000 into escrow pursuant to Section 1.1(b) of
that certain Escrow Agreement, dated even date herewith. Legal title, equitable
title and risk of loss with respect to the Acquired Assets shall not pass to
Buyer until the Acquired Assets are transferred at the Closing, which transfer,
once it has occurred, shall be deemed effective for tax, accounting and other
computational purposes as of 12:01 A.M. (Eastern Time) on the Closing Date.
4.2 Documents to be Delivered by Seller. At the Closing (or as
otherwise specified), Seller shall deliver to Buyer:
(a) Copies of (i) the resolutions of the Board of
Directors of Seller, authorizing and approving this Agreement and all
other transactions and agreements contemplated hereby, (ii) Seller's
Certificate of Incorporation, and (iii) Seller's Bylaws, all certified
by the corporate Secretary or Assistant Secretary of Seller to be true,
correct, complete and in full force and effect and unmodified as of the
Closing Date;
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(b) A bill of sale, bills of sale or other conveyancing
documents transferring the Acquired Assets to Buyer, free and clear of
any and all liens, equities, claims, prior assignments, mortgages,
charges, security interests, pledges, conditional sales contracts,
collateral security arrangements and other title retention
arrangements, restrictions (including, in the case of real property,
rights of way, use restrictions, and other variances, reservations or
limitations of any nature) or encumbrances whatsoever (collectively,
"Liens"), but subject to the Permitted Liens;
(c) An opinion, dated as of the Closing Date, of Pedersen
& Houpt, counsel to Seller, addressed to Buyer, in form and substance
satisfactory to Buyer;
(d) Copies of all Consents to the transfer, assignment or
sublease to Buyer of each Acquired Asset, including Contracts, Permits
and Lease Agreements, that requires such Consent.
(e) Instruments of assignment to Buyer of all trademarks,
trade names, service marks and patents (and all applications for, and
extensions and reissuances of, any of the foregoing and rights therein)
identified on the Schedule entitled "Intellectual Property";
(f) The certificate required by Section 6.1(g);
(g) Long-form good standing and tax certificates for
Seller from the Secretary of State of Delaware and from the appropriate
state and tax authorities in each jurisdiction in which Seller is
qualified to do business as a foreign corporation, with respect to the
ownership, possession, use or operation of any of the Acquired Assets,
dated not more than ten days prior to the Closing;
(h) If required by applicable law or regulation, evidence
of the due filing by Seller's ultimate parent, with the Federal Trade
Commission ("FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") pursuant to the H-S-R Act and the
expiration of the waiting period thereunder;
(i) An Incumbency Certificate of the officers of Seller;
(j) (i) A deed or deeds of general warranty (the "Deed")
in recordable form conveying the Fee Property to Buyer, free and clear
of all Liens whatsoever except for Permitted Liens (as hereinafter
defined);
(ii) Good and valid title insurance policies or,
in final form, irrevocable title insurance commitments
issuable by Lawyer's Title Insurance Corporation (the "Title
Insurance Policies"), dated as of the Closing Date, insuring
Buyer's title as fee owner in each parcel of real property
included in the Fee Property to be conveyed to Buyer pursuant
hereto, access rights to such property and specific survey
facts, if any, free and clear of all Liens and other
exceptions (including mechanics' liens) other than Permitted
Liens;
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(k) Releases, including, without limitation, termination
statements under the Uniform Commercial Code ("UCC") of any financing
statements filed against any Acquired Assets, evidencing discharge,
removal and termination of all Liens to which the Acquired Assets are
subject which releases shall be effective at or prior to the Closing;
(l) The Indemnity Escrow Agreement, duly executed on
behalf of Seller, and in substantially the form attached hereto as
Exhibit A.
(m) Such other deeds, bills of sale, endorsements,
assignments, affidavits, and other good and sufficient instruments of
sale, assignment, conveyance and transfer (including, without
limitation, such affidavits, releases and other instruments necessary
for the issuance of the Title Insurance Policies) in form and substance
satisfactory to Buyer and its counsel, as are required to effectively
vest in Buyer good and marketable title in and to all of the Acquired
Assets, free and clear of any and all Liens except Permitted Liens;
(n) The statement of Estimated Gross Working Capital
(delivered not less than 24 hours prior to Closing);
(o) A license agreement, in form and substance
satisfactory to Buyer and Seller for the use of the names "General
Rental" and "Rental One" and all related tradenames and trademarks (the
"License Agreement");
(p) An agreement, in form and substance satisfactory to
Buyer and Seller for transitional services to be rendered by Seller to
Buyer with respect to the Business (the "Transitional Services
Agreement"); and
(q) The Release (as hereinafter defined).
4.3 Documents to be Delivered by Buyer. At the Closing, Buyer
shall deliver to Seller:
(a) A copy of (i) the resolutions of the Board of
Directors of Buyer authorizing and approving this Agreement and all
other transactions and agreements contemplated hereby, (ii) Buyer's
Certificate of Incorporation, and (iii) Buyer's Bylaws, all certified
by the Secretary or an Assistant Secretary of Buyer to be true,
correct, complete and in full force and effect and unmodified as of the
Closing Date;
(b) The certificate required by Section 6.2(g);
(c) The Indemnity Escrow Agreement;
(d) If applicable, evidence of the due filing by Buyer,
with the FTC and the DOJ pursuant to the H-S-R Act and the expiration
of the waiting period thereunder;
(e) An opinion, dated the Closing Date, of Jones, Day,
Reavis & Pogue, counsel to Buyer, addressed to Seller, in form and
substance satisfactory to Seller;
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(f) Long-form good standing and tax certificates for
Buyer from the Secretary of State of Delaware, dated not more than ten
days prior to the Closing;
(g) An Incumbency Certificate of the officers of Buyer;
(h) An Instrument of Assumption of the Assumed
Liabilities, in form and substance satisfactory to Seller;
(i) The License Agreement; and
(j) The Transitional Services Agreement.
4.4 Other Documents to be Delivered. At the Closing, Buyer shall
execute and deliver Non-Competition Agreements with Seller, GRI, L.P., Robert J.
Bobb, Joseph McInerney and the DFW Capital Partners, L.P. in substantially the
form attached as Exhibit C hereto.
ARTICLE V: REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller. Subject only to
those exceptions and qualifications listed and described (including an
identification by section reference to the representations and warranties to
which such exceptions and qualifications relate) on the Disclosure Schedule
attached to this Agreement hereby represent and warrant to Buyer that:
(a) Organization and Standing; Power and Authority.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has full
corporate power and authority to operate the Business, to own or lease
the Acquired Assets, to carry on the Business as now being conducted,
and to enter into and perform this Agreement and the transactions and
other agreements and instruments contemplated by this Agreement. Except
as disclosed on the Schedule entitled "Affiliate Companies," Seller has
no Subsidiary corporations, owns no interest, direct or indirect, in
any other business enterprise, firm or corporation, and is the only
business enterprise, firm or corporation through which the Business (or
any business competing with or similar to the Business) is conducted,
or which owns, leases or uses assets related to the Business. Seller is
duly qualified or licensed to do business as a foreign corporation and
is in good standing in each jurisdiction in which the ownership or
lease of the Acquired Assets or the operation of the Business requires
such qualification. This Agreement and all other agreements and
instruments executed and delivered or to be executed and delivered by
Seller in connection herewith (collectively, the "Transaction
Documents") have been, or upon execution thereof will be, duly executed
and delivered by Seller. This Agreement and the transactions and other
agreements and instruments contemplated hereby have been duly approved
by all necessary corporate action of Seller, and constitute the valid
and binding obligations of Seller, enforceable in accordance with their
respective terms.
(b) Certificate of Incorporation and Bylaws. The copies
of the Certificate of Incorporation of Seller, certified by the
Secretary of State of Delaware, and the Bylaws of
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Seller, included in the Schedule entitled "Certificate of Incorporation
and Bylaws of Seller" attached to this Agreement are true, correct and
complete.
(c) Conflicts; Defaults.
(i) Neither the execution and delivery of this
Agreement and the other agreements and instruments executed or
to be executed in connection herewith by Seller or
Stockholders, nor the performance by Seller or Stockholders of
the transactions contemplated hereby or thereby, will (A)
violate, conflict with, or constitute a default under, any of
the terms of Seller's Certificate of Incorporation, or
Seller's Bylaws, or any provisions of, or result in the
acceleration of any obligation under, any contract, sales
commitment, license, purchase order, security agreement,
mortgage, note, deed, lien, lease, agreement or instrument,
including, without limitation, the Contracts, or any order,
judgment or decree, relating to the Business or the Acquired
Assets, or by which Seller or the Acquired Assets are bound,
(B) result in the creation or imposition of any Liens or
claims in favor of any third Person or entity upon any of the
Acquired Assets, (C) violate any law, statute, judgment,
decree, order, rule or regulation of any Governmental
Authority, (D) constitute an event which, after notice or
lapse or time or both, would result in such violation,
conflict, default, acceleration, or creation or imposition of
Liens or claims, or (E) constitute an event which, after
notice of lapse of time or otherwise would create, or cause to
be exercisable or enforceable, any option, agreement or right
of any kind to purchase any of the Acquired Assets. No
consent, novation, approval, filing or authorization will be
required to be obtained or satisfied for the continued
performance by Buyer following the Closing of any contract,
agreement, commitment or undertaking included in the Acquired
Assets.
(ii) Seller is not in violation of or in default
under its Certificate of Incorporation or Bylaws.
(iii) Seller is not in violation of or in default
of any contract, sales commitment, license, purchase order,
security agreement, mortgage, note, deed, lien, lease,
agreement or instrument, including without limitation, the
Contracts, or any of Seller's monetary obligations or debts
relating to the Business, and there exists no condition or
event which, after notice or lapse of time or both, would
result in any such violation or default.
(iv) Seller is not in violation of or in default
of any order, judgment or decree, relating to the Business or
the Acquired Assets, or by which Seller or the Acquired Assets
is bound.
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(d) Acquired Assets; Title to the Acquired Assets.
(i) The Schedule entitled "Fixed Assets"
includes a true and correct list of all fixed assets of the
Business as of December 31, 1997 (the "Balance Sheet Date"),
including a listing of the book value of each item of Rental
Equipment as reflected in the books and records of Seller as
of the Balance Sheet Date. Except for the Retained Assets, the
Acquired Assets are all of the, and the only, assets,
properties, rights and interests used by Seller solely in
connection with the Business. The Acquired Assets to be
conveyed to Buyer under this Agreement constitute all of the
assets, properties, rights and interests necessary to conduct
the Business in substantially the same manner as conducted by
Seller prior to the date of this Agreement. All of the
Acquired Assets used in connection with the operation of
Seller's business (including, without limitation, the assets
reflected on the Fixed Asset Schedule) are in good operating
condition and repair, subject to normal wear and tear
consistent with the age of the properties or assets, and are
adequate and sufficient for the uses to which they are put in
the Business. None of the Acquired Assets have any material
defects or are in need of maintenance or repair, except for
ordinary, routine maintenance and repairs which are not
material in nature or cost.
(ii) Seller has good, marketable and exclusive
title to, and the valid and enforceable power and unqualified
right to use and transfer to Buyer, each of the Acquired
Assets, including, without limitation, all dies, molds or
other tooling or equipment used primarily in the Business,
whether located at the Seller's facilities or at the
facilities of its Customers or suppliers, and the Acquired
Assets are free and clear of all Liens and claims of any kind
or nature whatsoever, except for Permitted Liens (as
hereinafter defined) and Liens set forth on the Schedule
entitled "Liens"). All of the Acquired Assets that are Rental
Equipment and were held under operating leases at the Balance
Sheet Date are included in the Schedule entitled "Fixed
Assets" and will, as of the Closing Date, be transferred free
and clear of all Liens and claims of any kind or nature
whatsoever, except for Permitted Liens, and annual payments
under such operating leases were, as of the Balance Sheet
Date, in excess of $309,000. The consummation of the
transactions contemplated by this Agreement (including,
without limitation, the transfer or assignment of the Acquired
Assets, and all rights and interests therein, to Buyer as
contemplated herein) will not adversely affect such title or
rights, or any terms of the applicable agreements (whether
written or oral) evidencing, creating or granting such title
or rights. Seller has the right under valid and existing
leases to occupy, use or control all properties and assets
leased by it and included in the Acquired Assets. The delivery
to Buyer of the instruments of transfer of ownership
contemplated by this Agreement will vest good, marketable and
exclusive title (as to all Acquired Assets owned by Seller) or
full right to possess and use (as to all Acquired Assets not
owned by Seller) to the Acquired Assets in Buyer, free and
clear of all Liens and claims of any kind or nature
whatsoever, except for (a) current real estate Taxes or
governmental charges or levies which are a Lien but not yet
due and payable, and (b) minor imperfections of title, if any,
none of which are substantial in amount, or materially detract
from the value or impair the use of the property subject
thereto or the operation of the Business and which have arisen
only
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in the ordinary and normal course of business consistent with
past practice (the Liens described in clauses (a) and (b)
being collectively referred to herein as "Permitted Liens").
(e) Real Property.
(i) The Schedule entitled "Real Estate and
Leases" attached hereto contains a true, correct and complete
list of all instruments and agreements creating any interest
or right in real property relating to the Business, or owned,
leased or occupied by Seller, including all easements,
buildings, structures, fixtures and improvements. True,
correct and complete copies of the instruments and agreements
identified in such Schedule have been delivered to Buyer. Each
such instrument and agreement is in full force and effect and
is a legal, binding, and enforceable obligation of the parties
thereto and no event has occurred which constitutes or, with
the giving of notice or passage of time, or both, would
constitute a default or breach thereunder. Seller has the
right to quiet enjoyment of all real property subject to
leaseholds under any such instruments for the full term of
each such lease and any renewal option related thereto. There
has been no disturbance of or challenge to the Seller's quiet
possession under each such lease, and no leasehold or other
interest of Seller in such real property is subject to or
subordinate to any Liens except Permitted Liens. Neither the
whole nor any portion of any real property leased or occupied
by Seller has been condemned, requisitioned or otherwise taken
by any Governmental Authority, and, to the best of Seller's
knowledge, no such condemnation, requisition or taking is
threatened or contemplated.
(ii) All buildings, structures, fixtures and
appurtenances comprising part of the real properties of Seller
are in good condition and have been maintained consistent with
industry practice, normal wear and tear excepted.
(f) Lease. The Assumed Leases have not been modified,
altered, terminated or revoked, and are in full force and effect.
Seller, as the present tenant under the Assumed Leases, is not in
default under, or in breach of, any of the terms of the Assumed Leases,
and there are no existing facts or conditions which could give rise to
any such breach or default, or any claim against Seller, under the
Assumed Leases. To Seller's knowledge, (i) the lessors under the
Assumed Leases are not in default thereunder, or in breach thereof, and
(ii) there are no existing facts or conditions which could give rise to
any such breach or default, or any claim against the lessors under the
Assumed Leases.
(g) Contracts. The Schedule entitled "Contracts" attached
hereto contains a complete list or description of (i) each license,
contract, agreement, commitment and undertaking (whether written or
oral) (A) relating to the Business (1) which involves the purchase of
inventories or the sale of products, and involves aggregate future
payments in excess of $25,000, or which extends for a period of more
than 12 months and cannot be canceled by Seller without further payment
or penalty, or (2) which does not involve the purchase of inventories
or the sale of products, and involves aggregate future payments in
excess of $25,000 or extends for a period of more than 12 months and
cannot be canceled
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by Seller without further payment or penalty, (B) between Seller and
any distributors, manufacturers' agents or selling agents used or
retained in connection with the Business, or pursuant to which Seller
sells or leases Products, in each case described in this subsection (B)
regardless of the size or term or such licenses, contracts, agreements,
commitments and undertakings, (ii) each loan or credit agreement,
security agreement, guaranty, indenture, mortgage, pledge or other
agreement or instrument to which Seller is a party, and which
constitutes, or contemplates, a Lien on the Acquired Assets, (iii) any
conditional sale or other title retention agreement, equipment
obligation, or lease purchase agreement involving (in the aggregate)
amounts in excess of $25,000 relating to the Business, or to which
Seller is a party, (iv) any power of attorney given by Seller to any
Person, firm or corporation or otherwise relating to the Business or
the Acquired Assets, (v) any non-competition, restrictive covenant or
other agreement that restricts Seller or any other entity from
conducting the Business anywhere in the world, (vi) each contract,
agreement, commitment or undertaking presently in effect, whether or
not fully performed, between Seller and any current or former officer,
director, consultant or other employee (or group thereof) retained or
employed primarily in connection with the Business, or any current or
former stockholder (or group of stockholders) of Seller, (vii) any
agreement entered into by Seller with companies or individuals in
connection with transactions pursuant to which Seller acquired all or
any part of the Acquired Assets and which provides Seller with rights
of non-competition and indemnity or similar rights, and (viii) any
other contract, agreement, commitment or undertaking which is material
to the condition (financial or otherwise), results of operations,
properties, assets, liabilities, business or prospects of the Business
(the items described in clauses (i) through (viii) being herein
collectively referred to as the "Contracts"). Seller has performed all
obligations required to be performed by it to date under the Contracts,
and neither Seller nor any other party to any Contract has breached or
improperly terminated any Contract or is in default under any Contract
by which it is bound, and there exists no condition or event which
after notice or lapse of time or both, would constitute any such
breach, termination or default. Seller is not a party to, and the
Business does not involve, any contracts, agreements, commitments or
undertakings which are subject to the Federal Acquisition Regulations,
Chapter 48 of the Code of Federal Regulations and all agency
supplements thereto, the Cost Accounting Standards set forth in Chapter
4 of the Code of Federal Regulations, or the Cost Principles set forth
in Chapter 31 of the Code of Federal Regulations. Each of the Contracts
is in full force and effect, and is a legal, binding and enforceable
obligation of or against the parties thereto. Except as set forth on
the Schedule entitled "Contracts," Seller, in connection with the
Business has no outstanding Contracts, including Contracts with
officers, employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers, that are not cancelable by it
on notice of not longer than 30 days and without liability, penalty or
premium. Seller enjoys good working relationships under all of its
Contracts, including, without limitation, its supply, distribution and
similar contractual arrangements in connection with the normal
operation of the Business, and the consummation of the transactions
contemplated hereby will not materially affect any such Contracts,
relationships or arrangements.
(h) Financial Statements. Seller has heretofore delivered
to Buyer the following financial statements (collectively, together
with the financial statements to be delivered pursuant to Section
7.2(b), the "Financial Statements"):
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(i) the unaudited Statement of Operations of the
Business for the year ended December 31, 1997 and the quarter
ended March 31, 1998, each of which are attached hereto on the
Schedule entitled "Seller's Statement of Operations";
Each of the Financial Statements is true, complete and correct in all
material respects, was prepared from the books and records kept by
Seller for the Business, and fairly presents the results of the
Business's operations for the periods then ended in accordance with
GAAP consistently applied (except for the absence of footnotes and
normally recurring year-end adjustments, which adjustments will not
differ materially from the effects of normally recurring year end
adjustments on the audited financial statements of the Seller for the
1996 fiscal year). Except as set forth in the Schedules delivered
pursuant to this Agreement or the Financial Statements, since the
Balance Sheet Date, there has been no material adverse change in the
condition (financial or otherwise), results of operations, properties,
assets, or business of the Business, nor has there been any event or
condition of any character which has materially and adversely affected,
or which is likely to materially and adversely affect, the condition
(financial or otherwise), results of operations, properties, assets, or
business of the Business. The Schedules entitled "Fixed Assets" and
"Rental Equipment" reflects all properties and assets, real, personal
or mixed, which are currently used in connection with the Business,
except for (A) Inventory or Rental Equipment purchased or sold
consistent with past practice and in the ordinary and normal course of
business since the Balance Sheet Date; provided, however, that the
aggregate reduction in the book value of Rental Equipment since the
Balance Sheet Date (without taking into account depreciation for fiscal
year 1998) shall not exceed $20,000 without the prior written consent
of Buyer, (B) other properties and assets (other than capital assets)
not in excess of $10,000 (in the aggregate) purchased or sold since the
Balance Sheet Date consistent with past practice and in the ordinary
and normal course of business, (C) capital assets purchased since the
Balance Sheet Date in an amount not in excess of $10,000 (in the
aggregate), and (D) purchase commitments disclosed on the Schedule
entitled "Liabilities."
(i) [intentionally omitted].
(j) Accounts Receivable; Collection. Except for Accounts
Receivable with respect to which applicable reserves will be set forth
on the schedule of Estimated Gross Working Capital, all Accounts
Receivable outstanding relating to the Business as of the Balance Sheet
Date and the Closing Date represent sales actually made in the ordinary
and normal course of business. As of the Closing Date all Accounts
Receivable will be current and collectible in full no later than 180
days after the Closing Date, subject to applicable reserves. To the
best of Seller's knowledge, other than as provided for in reserves as
contemplated above, there are no counterclaims or setoffs against (or
any basis therefor), or any other matter or condition likely to
interfere with full and timely collection of, any of such outstanding
Accounts Receivable. The Schedule entitled "Accounts Receivable" sets
forth an aged listing by Customer of the Accounts Receivable that are
outstanding as of a date no earlier than three business days before the
date of this Agreement (and Seller will update this Schedule as of the
Closing Date).
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<PAGE> 19
(k) Inventories. All of the Inventories are of a quality
and quantities usable or salable in the ordinary and normal course of
business, and there are no damaged or obsolete items or items of below
standard quality included therein, except with respect to which
adequate reserves shall be set forth on the Balance Sheet. The value at
which the Inventory is carried on the books and records of the Seller
reflects a moving average cost basis, and reflects writeoffs or
writedowns for damaged or obsolete items, or items of below standard
quality, in accordance with GAAP. The Inventory is not (as of the date
hereof) and will not be (as of the Closing Date) excessive in kind or
amount in light of the ordinary and normal course of conduct and
reasonably anticipated needs of the Business.
(l) Rental Equipment. The Schedule entitled "Rental
Equipment" includes a true and correct list of all equipment rentable
and salable in the ordinary course of business of the Business as of
the Balance Sheet Date, including a listing of the book value of each
item of Rental Equipment as reflected in the books and records of the
Seller. All Rental Equipment is of a quality and quantity usable,
rentable, or salable in the ordinary and normal course of business,
except for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value in
the books and records of the Seller. All such Rental Equipment not
written off has been recorded at net realizable value and has been
depreciated consistent with the economic life of such Rental Equipment.
To the knowledge of Seller, the quantities of each item of such Rental
Equipment are not excessive, but are reasonable in the present
circumstances of the Seller. All such Rental Equipment is in good
operating condition and repair, subject to normal wear and tear, and
has been maintained in accordance with normal industry practice.
(m) Litigation. Except as set forth on the Schedule
entitled "Litigation," Seller is not subject to any order of, or
written agreement or memorandum or understanding with, any Governmental
Authority relating to the Business, and there exists no litigation,
action, suit, claim or proceeding pending, or, to the best of Seller's
knowledge, any litigation, action, suit, investigation, claim or
proceeding threatened against or affecting Seller, the Business or the
Acquired Assets, or any employee associated with the Business or the
Acquired Assets, or which would affect the transactions contemplated by
this Agreement, at law or in equity or before any Governmental
Authority, including, without limitation, claims for product warranty,
product liability, anti-trust, unfair competition, price discrimination
or other liability or obligation relating to Products, whether
manufactured or sold by Seller, any of its Affiliates or any of their
respective predecessors-in-interest in respect of the Business, or
which would adversely affect the transactions contemplated by this
Agreement, and to Seller's knowledge no one has grounds to assert any
such litigation, action, suit, claim or proceeding. Set forth on the
Schedule entitled "Litigation" is a description of (i) all litigation,
actions, suits, investigations, claims and proceedings asserted,
brought or threatened against Seller or its Affiliates or
predecessors-in-interest in respect of the Business during the
three-year period preceding the date hereof (except as otherwise noted
on such Schedule), which involved a claim in excess of $5,000 or which
did not include a dollar amount as a claim together with a description
of the outcome or present status thereof, and (ii) all judgments,
orders, decrees, writs or injunctions entered into by or against Seller
which might affect the Business or the consummation of the transactions
contemplated hereby.
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<PAGE> 20
(n) Customers and Suppliers. Seller is not involved in
any material controversy with any of the material Customers of the
Business. Except for the Customers and suppliers named in the Schedule
entitled "Customers and Suppliers," (i) Seller has not had any Customer
who accounted for more than 2% of Business's sales during the period
from May 1, 1997 to December 31, 1997, or any supplier from whom it
purchased more than 2% of the goods or services purchased in connection
with the Business during the period from May 1, 1997 to December 31,
1997, and (ii) to the Seller's knowledge, the Business has not had any
Customer who accounted for more than 2% of Seller's sales during the
period from January 1, 1996 to April 30, 1997, or any supplier from
whom it purchased more than 2% of the goods or services purchased in
connection with the Business during the period from January 1, 1996 to
April 30, 1997. Seller has not been advised by any Customer or supplier
(representing purchases and sales of $50,000 or more) with respect to
the Business, that such Customer or supplier was or is intending to
terminate its relationship with Seller or would not continue to
purchase supplies or services relating to the Business for future
periods on account of any dissatisfaction with Seller's performance.
All business placed by all employees of Seller with respect to the
Business has been placed in the name of Seller, and all fees on such
Business have been paid to and are the property of Seller.
(o) Regulatory Compliance. Except as set forth on the
Schedule entitled "Litigation," the Business has been conducted, the
Acquired Assets have been maintained and Seller is currently in
substantial compliance with all applicable laws (including, without
limitation, all laws relating to zoning, building codes, civil rights,
occupational health and safety, antitrust, consumer protection,
currency exchange, equal opportunity, pensions, securities and
trading-with-the-enemy), and no material expenditures are or will be
required to comply with any such laws, regulations and orders of
Governmental Authorities. Seller is not in default under, and no event
has occurred which, with the lapse of time or action by a third party,
could result in default under, the terms of any judgment, decree,
order, writ or injunction of any Governmental Authority, whether at law
or in equity.
(p) Brokers, Finders and Agents. Seller is not directly
or indirectly obligated to anyone acting as a broker, finder or in any
other similar capacity in connection with this Agreement or the
transactions contemplated hereby.
(q) Intellectual Property. The Schedule entitled
"Intellectual Property" attached hereto sets forth a complete and
correct list (with an indication of the record owner and identifying
number) of all patents, trademarks, service marks, trade names and
copyrights for which registrations have been obtained (and all
applications for, or extensions or reissuances of, any of the
foregoing) which are or have been used primarily in the conduct of, or
which relate primarily to, the Business or which are owned by Seller.
True, correct and complete copies of such patents, trademarks, service
marks, trade names and copyrights (and all applications for, or
extensions or reissuances of, any of the foregoing) identified on such
Schedule have been delivered to Buyer. To Seller's knowledge, Seller is
the sole owner and has the exclusive right to use, free and clear of
any payment, restriction or encumbrance, all such patents, trademarks,
service marks, trade names and copyrights. To Seller's knowledge, no
patents, trademarks, service marks, trade names and copyrights (or
applications for, or extensions or reissuances of any of the foregoing)
which are or have been used in the conduct
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<PAGE> 21
of, or which relate to, the Business are owned otherwise than by
Seller. There is no claim or demand of any Person pertaining to, or any
proceedings which are pending or, to the best of Seller's knowledge,
threatened, which challenge (i) the exclusive rights of Seller in
respect of any patents, trademarks, service marks, trade names or
copyrights (or applications for, or extensions or reissuances of, any
of the foregoing) which are or have been used in the conduct of, or
which relate to, the Business or which are owned by Seller, or (ii) the
rights of Seller in respect of any processes, formulas, confidential
information, trade secrets, know-how, engineering data, technology or
other intellectual property which are owned by Seller. No patent,
trademark, service mark, trade name, copyright, process, formulas,
confidential information, trade secret, know-how, engineering data,
technology or other intellectual property which is owned by Seller is
subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any Governmental Authority or any contract,
agreement, commitment or undertaking with any Person, or infringes or,
to the best of Seller's knowledge, is being infringed by others or is
used by others (whether or not such use constitutes infringement). To
the best of Seller's knowledge, the Business does not involve
employment of any Person in a manner which violates any non-competition
or non-disclosure agreement which such Person entered into in
connection with any former employment. All patents, trademarks, service
marks, trade names or copyrights (or applications for, or extensions or
reissuances of, any of the foregoing) or processes, formulas,
confidential information, trade secrets, know-how, engineering data,
technology or other intellectual property, or rights thereto, owned or
held, directly or indirectly by any officer, director, stockholder,
employee or any Affiliate of Seller and relating primarily to the
Business have been, or prior to the Closing Date will have been, duly
and effectively transferred to Seller. Set forth on the Schedule
entitled "Intellectual Property" is a description all litigation,
actions, suits, investigations, claims and proceedings, asserted,
brought or threatened against the Seller within the five years
preceding the date hereof, together with a description of the outcome
or present status thereof, relating to any patent, trademark, service
mark, trade name, copyright, process, formula, confidential
information, trade secret, know-how, engineering data, technology or
other intellectual property. Seller is not engaged in any research or
development activities involving reverse engineering, or in other
development or production of products based upon designs or attributes
of products manufactured or sold by Persons other than Seller.
(r) Permits. The Schedule entitled "Permits" attached
hereto contains a true, correct and complete list of all material
Permits issued to Seller in connection with the Business. Seller has,
and is in full compliance with, all Permits which are necessary or
required for the operation of the Business as it is currently being
operated and its present activities on its properties and facilities,
all of which Permits are in full force and effect. There has been no
change in the facts or circumstances reported or assumed in the
application for or granting of such Permits. Seller's operation of the
Business during the pendency of its applications, if any, for Permits
does not violate any law, regulation or order of any Governmental
Authority.
(s) Employee Relations; Collective Bargaining Agreements.
There are no material controversies, including strikes, disputes,
slowdowns or work stoppages, pending, or to the best of Seller's
knowledge, threatened which involve any employees employed in
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<PAGE> 22
connection with the Business. Seller has complied and is complying with
all laws relating to the employment of labor, including, without
limitation, any provision thereof relating to wages, hours, collective
bargaining, employee health, safety and welfare, and the payment of
social security and similar taxes. Seller has not experienced any
material labor difficulties, including, without limitation, strikes,
slowdowns, or work stoppages, within the five-year period preceding the
date hereof. Seller is not a party to any collective bargaining or
union contract, and to the best of Seller's knowledge, there exists no
current union organizational effort with respect to any of Seller's
employees.
(t) Employees and Employee Plans. The Schedule entitled
"Employee Plans" attached hereto contains a true and complete list of
(a) all employees of the Business, together with a description of their
respective job titles and responsibilities and annual compensation
(including salaries, bonuses, consulting or directors' fees and
incentive or deferred compensation) and (b) all Employee Plans and
employment Contracts of the Business. Neither Seller nor any officers,
directors, stockholders, employees or agents of Seller have taken any
action directly or indirectly to obligate Seller to institute any
Employee Plan applicable to employees of the Business other than those
Employee Plans set forth in such Schedule, or to amend any such
Employee Plan. Each Employee Plan maintained or contributed to,
currently or in the past, by Seller (or by any other corporation or
trade or business the employees of which, together with the employees
of Seller, are required by any of the rules contained in ERISA or the
Internal Revenue Code of 1986, as amended (the "Code") to be treated as
if they were employed by a single employer) that is a group health plan
(as such term is defined in Section 5000(b)(1) of the Code) has been
operated in full compliance with the continuation overage requirements
of Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the
Code.
(u) Environmental and Safety Compliance.
(i) General. Except as disclosed on the Schedule
entitled "Environmental Matters," neither Seller, nor, to the
best of Seller's knowledge, any other previous owner, tenant,
occupant or user of the real property, including Leased
Property, listed on the Schedule entitled "Real Estate and
Leases" (hereinafter collectively referred to as the
"Property") nor any other Person, has engaged in or permitted
any operations or activities upon, or any use or occupancy of
the Property, or any portion thereof, resulting in the
emission, release, discharge, dumping or disposal of any
Hazardous Materials (as hereinafter defined) on, under, in or
about the Property, nor have any Hazardous Materials migrated
from the Property to, upon, about or beneath other properties,
nor have any Hazardous Materials migrated or, to Seller's
knowledge, threatened to migrate from other properties to,
upon, about or beneath the Property.
(ii) Specific Environmental Representations and
Warranties. Except as specified in the Schedule entitled
"Environmental Matters":
(A) There is not, nor has there been,
constructed, placed, deposited, stored, disposed of
or located on the Property any asbestos in any form
which has become friable.
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(B) No underground improvements,
including but not limited to treatment or storage
tanks, sumps, or water, gas or oil wells, are or have
been located on the Property.
(C) There are no polychlorinated
biphenyls (PCBs) or transformers, capacitors,
ballasts, or other equipment which contain dielectric
fluid containing PCBs at levels in excess of fifty
parts per million (50ppm) constructed, placed,
deposited, stored, disposed of or located on the
Property.
(D) The Property and its existing uses
and activities and, to the best of Seller's
knowledge, its prior uses and activities, and the
Business and its operations comply and have at all
times complied in all material respects with all
Environmental Requirements (as hereinafter defined),
and Seller has obtained all Permits necessary under
applicable Environmental Requirements.
(E) Neither Seller nor to the best of
Seller's knowledge, any prior owner or occupant of
the Property, has received any notice or other
communication concerning any alleged violation of
Environmental Requirements, whether or not corrected
to the satisfaction of the appropriate authority, nor
any notice or other communication concerning alleged
liability for Environmental Damages in connection
with the Property, and there exists no judgment,
decree, order, writ or injunction outstanding, nor
any litigation, action, suit, claim (including
citation or directive) or proceeding pending or to
the best of Seller's knowledge any litigation,
action, suit, investigation, claim or proceeding
threatened, relating to the ownership, use,
maintenance or operation of the Property by any
Person, or from the alleged violation of
Environmental Requirements, or from the suspected
presence of quantities of Hazardous Material thereon
or potential migration thereto, nor are there any
existing facts or conditions which could give rise to
any such violation or liabilities.
(iii) Definitions.
(A) For purposes of this Section
5.1(u), the term "Hazardous Material" means any
substance:
(1) the presence of which requires
investigation or remediation under any
Federal, state or local statute, regulation,
ordinance, order, action, policy or common
law; or
(2) which is or has been identified
as a potential "hazardous waste," "hazardous
substance," pollutant or contaminant under
any Federal, applicable state or local
statute, regulation, rule or ordinance or
amendments thereto including, without
limitation, the Comprehensive Environmental
Response, Compensation and
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Liability Act (42 U.S.C. ss.ss. 9601 et
seq.) and/or the Resource Conservation and
Recovery Act (42 U.S.C. ss.ss. 6901 et
seq.); or
(3) which is toxic, explosive,
corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic,
reactive, or otherwise hazardous and has
been identified as regulated by any
Governmental Authority.
(B) For purposes of this Section 5.1(u)
the term "Environmental Requirements" means all
applicable laws, regulations, ordinances, Permits and
similar items of all Governmental Authorities and all
applicable judicial, administrative, and regulatory
judgments, decrees, orders, writs or injunctions
relating to the protection of human health or the
environment, including, without limitation:
(1) All requirements pertaining to
reporting, licensing, permitting,
investigation, and remediation of emissions,
discharges, releases, or threatened releases
of Hazardous Materials;
(2) All requirements pertaining to
the protection of the health and safety of
employees or the public; and
(3) All other limitations,
restrictions, conditions, standards,
prohibitions, obligations, schedules and
timetables contained therein or in any
notice or demand letter issued, entered,
promulgated or approved thereunder.
(C) For purposes of this Section
5.1(u), the term "Environmental Damages" means any
and all Liabilities (as defined in Section 11.1)
which are incurred at any time as a result of the
existence prior to Closing of Hazardous Material
upon, about, beneath the Property or migrating or
threatening to migrate to or from the Property, or
the existence of a violation of Environmental
Requirements pertaining to the Property, regardless
of whether the existence of such Hazardous Material
or the violation of Environmental Requirements arose
prior to the present ownership or operation of the
Property, and including without limitation:
(1) Damages for personal injury, or
injury to property or natural resources
occurring upon or off of the Property,
foreseeable or unforeseeable, including,
without limitation, consequential damages,
the cost of demolition and rebuilding of any
improvements on real property, interest and
penalties; and
(2) Fees incurred for the services
of attorneys, consultants, contractors,
experts, laboratories and all other costs
incurred in connection with the
investigation or remediation of such
Hazardous
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Materials or violation of Environmental
Requirements including, but not limited to,
the preparation of any feasibility studies
or reports or the performance of any
cleanup, remediation, removal, response,
abatement, containment, closure, restoration
or monitoring work required by any
Governmental Authority, or reasonably
necessary to make full economic use of the
Property or any other property in a manner
consistent with its intended use or
otherwise expended in connection with such
conditions, and including without limitation
any attorneys' fees, costs and expenses
incurred in enforcing this Agreement or
collecting any sums due hereunder.
(v) Changes in Circumstances. Except as disclosed in the
Schedule entitled "Changes in Circumstances," since the Balance Sheet
Date Seller has not (i) sold, transferred or otherwise disposed of any
properties or assets related to the Business outside the ordinary and
normal course of business or for less than fair market value; (ii)
mortgaged, pledged or subjected to any Lien, any of the Acquired
Assets; (iii) acquired any property or assets related to the Business
outside the ordinary and normal course of business or for more than
fair market value; (iv) sustained any damage, loss or destruction of or
to the Acquired Assets (whether or not covered by insurance); (v)
entered into any transaction or otherwise conducted the Business other
than in the ordinary and normal course; (vi) granted any salary
increase or bonus or permitted any advance to any officer, director or
employee, instituted or granted any general salary increase to the
employees of Seller in connection with the Business other than normal
annual increases consistent with past practices or entered into any
new, or altered or amended any existing, Employee Plan or any
employment or consulting agreement; (vii) transferred any assets or
employees from the Business to other divisions or districts operated by
Seller; (viii) entered into any licenses or leases in connection with
the Business; (ix) made any loans or gifts in connection with the
Business; (x) modified, amended, canceled or terminated any contracts
or commitments under circumstances which would materially and adversely
affect the condition (financial or otherwise), results of operations,
business, properties, assets, liabilities or prospects of the Business
or result in the loss of any substantial rights of Seller in connection
with the Business under such contracts or commitments; (xi) made
capital expenditures or commitments in excess of an aggregate of
$10,000 for additions to property, plant or equipment, including,
without limitation, Rental Equipment in connection with the Business;
(xii) written down the value of any Inventory or written off as
uncollectible any notes or Accounts Receivable or any portion thereof;
(xiii) canceled any other debts or claims or waived any rights of
substantial value in connection with the Business; (xiv) made any
material change in any method of accounting or accounting practice in
connection with the Business; (xv) paid, accrued or incurred any
management or similar fees to any Related Party (as hereinafter
defined) or made any other payment or incurred any other liability to a
Related Party or paid any amounts to or in respect of, or sold or
transferred any assets of the Business to, any company or other entity,
a substantial portion of the equity ownership interest of which is
owned by Seller or a Related Party individually or as a group; (xvi)
taken or omitted to take any action which would cause to be breached,
or might result in a breach of, any of the representations, warranties,
covenants, obligations and agreements of Seller contained herein if the
same were made anew immediately after such act or omission; (xvii)
suffered any change in the
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<PAGE> 26
condition (financial or otherwise), results of operations, properties,
assets, or business of the Business, except for usual and normal
changes in the ordinary course of business which have not, individually
or in the aggregate, been materially adverse to the Business; or
(xviii) agreed to, or obligated itself to, do anything identified in
(i) through (xviii) above. For purposes of this Agreement, a "Related
Party" is any trust, corporation or any entity in which Seller or any
of its Affiliates has a material interest.
(w) Taxes. Seller has prepared in good faith and duly
filed or caused to be duly filed all Tax returns and reports required
to be filed by it with any Governmental Authority. All Taxes owed to
any Governmental Authority by Seller with respect to the Business or
Acquired Assets for periods covered by such returns and reports, and
all claims, demands, assessments, judgments, costs and expenses
connected therewith, have been paid in full. Seller is not a party to
any action or proceeding, nor to the best of Seller's knowledge, is any
such action of proceeding contemplated or threatened, for the
assessment or collection of any Taxes with respect to the Business or
Acquired Assets, and no deficiency notices or reports have been
received by Seller in respect of any such Tax. For the purposes of this
Agreement, "Tax" or "Taxes" means all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, personal property,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits
taxes, customs duties or other taxes, fees, assessments or charges of
any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority
(domestic or foreign) or Governmental Authority.
(x) Insurance. The Schedule entitled "Insurance" contains
a list of all insurance policies (specifying the location, insured,
insurer, amount of coverage, type of insurance and policy number)
maintained by Seller in connection with the Business. All such policies
are in full force and effect, all premiums with respect thereto
covering all periods up to and including the date of Closing have been
paid, and no notice of cancellation or termination has been received
with respect to any such policy. Such policies (i) are sufficient for
compliance with all requirements of law and of all agreements to which
the Seller is a party and which relate to coverage of the Business;
(ii) are valid, outstanding and enforceable policies; (iii) provide
adequate insurance coverage for the assets and operations of the Seller
in connection with the Business; (iv) will remain in full force and
effect through the Closing Date; and (v) will not in any way be
affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. The Schedule entitled "Insurance"
identifies all risks related to the Business which the Seller, its
Board of Directors or its officers have designated as being self
insured and provides information for the past three years regarding
claims activities under the Seller's property and casualty liability
insurance policies. The Seller has not been refused any insurance with
respect to its assets or operations, nor has its coverage been limited,
by any insurance carrier to which it has applied for any such insurance
or with which it has carried insurance during the last five years.
(y) Approvals. The Schedule entitled "Assignments and
Consents" attached hereto sets forth a list of all Consents, which must
be obtained or satisfied by Seller for the consummation of the
transactions contemplated by this Agreement, including, without
limitation, all Consents, which must be obtained pursuant to Section
1.3(a).
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<PAGE> 27
(z) Absence of Certain Commercial Practices. Neither
Seller nor any officer, director, employee or agent of Seller (or any
Person acting on behalf of any of the foregoing) in connection with the
Business has given or agreed to give (i) any gift or similar benefit of
more than nominal value to any Customer, supplier, Governmental
Authority (including any governmental employee or official) or any
other Person who is or may be in a position to help, hinder or assist
Seller, the Business or the Person giving such gift or benefit in
connection with any actual or proposed transaction relating to the
Business, which gifts or similar benefits would individually or in the
aggregate subject Seller or any officer, director, employee or agent of
Seller to any fine, penalty, cost or expense or to any criminal
sanctions, (ii) receipts from or payments to any governmental officials
or employees, (iii) commercial bribes or kick-backs, (iv) political
contributions, or (v) any receipts or disbursements in connection with
any unlawful boycott. No such gift or benefit is required in connection
with the operation of the Business to avoid any fine, penalty, cost,
expense or material adverse change in the condition (financial or
otherwise), results of operations, properties, assets, liabilities,
business or prospects of the Business.
(aa) Books and Records. The books and records of Seller
maintained in connection with the Business (including, without
limitation, (i) books and records relating to the purchase of materials
and supplies, manufacture or processing of products, sales of products,
dealings with Customers, invoices, Customer Lists, Inventories,
supplier lists, personnel records and taxes, and (ii) computer software
and data in computer readable and human readable form used to maintain
such books and records together with the media on which such software
and data are stored and all documentation relating thereto) accurately
record all transactions relating to the Business in all material
respects, and have been maintained consistent with good business
practice.
(bb) Penalties and Renegotiation of Contracts. Seller has
no liabilities under any contracts relating to the Business providing
for (i) penalties in the event of misfeasance by the Seller in the
performance of its duties thereunder, or (ii) the renegotiation or
redetermination of profits or prices, nor will any of Seller's costs
which are incurred or accruable prior to the Closing under contracts
entered into in connection with the Business between the Seller and any
Governmental Authority or any other Person, firm or corporation or
under subcontracts entered into in connection with the Business between
the Seller and any other Person, firm or corporation be subject to
disallowance.
(cc) Pricing Practices. The prices to be received or paid
by Seller under all outstanding contracts, agreements, commitments and
undertakings with its customers and suppliers and others in connection
with the Business have been determined in accordance with Seller's
established past pricing policies, and there are no outstanding
contracts, agreements, commitments or undertakings relating to the
Business that individually or in the aggregate are expected to result
in any material loss to Seller or the Business.
(dd) Copies of Documents. Seller has delivered to Buyer
true, correct and complete copies of all contracts, agreements and
other documents listed in the Schedules to, or referenced in, this
Agreement, and all modifications and amendments thereto.
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(ee) Insider Interests. Except as set forth in the
Schedule entitled "Insider Interests," no officer, director or employee
of Seller or any Subsidiary has any material interest in any property,
real or personal, tangible or intangible, including without limitation,
inventions, patents, trademarks or trade names, used in or pertaining
to the Business.
(ff) Disclosure. No representation or warranty made by
Seller contained in this Agreement or in any other writing furnished
pursuant hereto contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements and
facts contained herein or therein, in light of the circumstances in
which they were or are made, not false or misleading.
5.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller that:
(a) Organization and Standing; Corporate Power and
Authority. Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has full
corporate power and authority to own or lease its assets, to carry on
its business as now being conducted, and to make and perform this
Agreement, and to perform the transactions contemplated by this
Agreement. Except as disclosed on the Schedule entitled "Buyer's
Affiliated Companies", Buyer has no Subsidiary corporations, owns no
interest, direct or indirect, in any other business, enterprise, firm
or corporation, and is the only business enterprise, firm, or
corporation through which it conducts its business, or which owns,
leases, or uses assets related to its business. Buyer is duly qualified
or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the ownership or lease of its
assets, including the Acquired Assets, or the operation of the Business
requires such qualification. This Agreement and all other agreements
and instruments executed and delivered by Buyer in connection herewith
have been duly executed and delivered by Buyer. This Agreement and the
transactions and other agreements and instruments contemplated by this
Agreement have been duly approved by the Directors of Buyer (approval
of Buyer's stockholders not being required), and constitute the valid
and binding obligations of Buyer, enforceable in accordance with their
respective terms.
(b) Certificate of Incorporation and Bylaws. The copies
of the Certificate of Incorporation of Buyer, certified by the
Secretary of State of Delaware, and the Bylaws of the Buyer included in
the Schedule entitled "Certificate of Incorporation and Bylaws of
Buyer" attached to this Agreement are true, correct and complete.
(c) Conflicts; Defaults. Neither the execution and
delivery of this Agreement and the other agreements and instruments
executed or to be executed in connection herewith by Buyer, nor the
performance by Buyer of the transactions contemplated hereby or
thereby, will (i) violate, conflict with, or constitute a default
under, any of the terms of Buyer's Certificate of Incorporation, or
Buyer's Bylaws, or any provisions of, or result in the acceleration of
any obligation under, any material contract, sales commitment, license,
purchase order, security agreement, mortgage, note, deed, lien, lease,
agreement or instrument, (ii) violate any law, statute, judgment,
decree, order, rule or regulation of any Governmental Authority, or
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(iii) constitute an event which, after notice or lapse of time or both,
would result in such violation, conflict, default, acceleration, or
creation or imposition of liens or claims.
(d) Brokers, Finders and Agents. Buyer is not directly or
indirectly obligated to anyone as a broker, finder or in any other
similar capacity in connection with this Agreement or the transactions
contemplated hereby.
5.3 General. The representations and warranties of the parties
hereto made in this Agreement, subject to the exceptions thereto, shall not be
affected by any information furnished to, or any investigation conducted by, any
of them or their representatives in connection with the subject matter of this
Agreement. The representations and warranties made in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Closing;
provided, however, that any claim for indemnity under Article XI hereof based on
a breach of such representations and warranties shall be made by Buyer within
the time periods provided for claims for indemnification set forth in Section
11.5 hereof.
ARTICLE VI: CONDITIONS TO CLOSING
6.1 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions provided for by this Agreement is subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Buyer except for the conditions set
forth in subsection (d) (as to Consents of Governmental Authorities) of this
Section 6.1:
(a) Representations and Warranties. Each of the
representations and warranties of Seller made in Section 5.1 of this
Agreement shall be true and correct in all material respects both on
the date hereof and as of the Closing Date as though made at such time.
(b) Covenants. Seller shall have performed and complied
in all material respects with all covenants and agreements required to
be performed or complied with by it at or prior to the Closing Date.
(c) Material Adverse Change. Since the date hereof,
except as set forth in item (xix) of Schedule 5.1(v) hereto, there
shall have occurred no material adverse change, or discovery of a
condition or occurrence of any event which might result in any such
change, in the condition (financial or otherwise), business, assets,
properties or operations of the Business.
(d) Consents. All Consents of Governmental Authorities
and third parties described in Sections 1.3, 5.1(y) and 9.6 and
necessary to consummate the transactions contemplated hereunder shall
have been obtained and satisfied and the applicable waiting period, if
applicable, under the H-S-R Act shall have expired.
(e) No Proceeding or Litigation. No litigation, action,
suit, investigation, claim or proceeding challenging the legality of,
or seeking to restrain, prohibit or materially
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modify, the transactions provided for in this Agreement shall have been
instituted and not settled or otherwise terminated.
(f) Legal Matters. The form and substance of all papers,
instruments and documents delivered hereunder or incidental hereto
shall, in the reasonable judgment of Buyer, be satisfactory to Buyer,
and if requested by Buyer, in the reasonable judgment of Jones, Day,
Reavis & Pogue, counsel to Buyer.
(g) Certificate of Seller. At the Closing, Seller shall
have delivered to Buyer a Certificate signed by Seller's Chairman of
the Board, President, or Vice President and attested to by its
Secretary or an Assistant Secretary, and dated the Closing Date, to the
effect that to the best of the knowledge and belief of such officers
the conditions specified in Sections 6.1(a), (b), (c) and (d) have been
fulfilled.
(h) Certificate; Documents. Seller and the other Persons
shall have delivered the certificates, opinion of counsel and other
documents required by Sections 4.2 and 4.4.
6.2 Conditions to Seller's Obligations. The obligations of Seller
to consummate the transactions provided for by this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Seller except for the conditions set
forth in subsection (c) of this Section 6.2:
(a) Representations and Warranties. Each of the
representations and warranties of Buyer made in Section 5.2 of this
Agreement shall be true and correct in all material respects both on
the date hereof and as of the Closing Date as though made at such time.
(b) Covenants. Buyer shall have performed and complied in
all material respects with all covenants and agreements required to be
performed or complied with by it at or prior to the Closing Date.
(c) Consents. The applicable waiting period, if
applicable, under the H-S-R Act shall have expired and all consents of
Governmental Authorities shall have been obtained.
(d) No Proceeding or Litigation. No litigation, action,
suit, investigation, claim or proceeding challenging the legality of,
or seeking to restrain, prohibit or materially modify, the transactions
provided for in this Agreement shall have been instituted and not
settled or otherwise terminated.
(e) Legal Matters. The form and substance of all papers,
instruments and documents delivered hereunder or incidental hereto
shall, in the reasonable judgment of Seller, be satisfactory to Seller,
and if requested by Seller, in the reasonable judgment of Pedersen &
Houpt, counsel to Seller.
(f) Certificate of Buyer. At the Closing, Buyer shall
have delivered to Seller a Certificate signed by the President or a
Vice President of Buyer, and attested to by the Secretary or an
Assistant Secretary of Buyer, and dated the Closing Date, to the effect
that
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to the best of the knowledge of such officers the conditions specified
in Section 6.2(a), (b) and (c) have been fulfilled.
(g) Certificates; Documents. Buyer shall have delivered
the certificates and other documents required by Section 4.3.
ARTICLE VII: COVENANTS OF SELLER
7.1 Conduct of Business. During the period from the date hereof
through the Closing Date, Seller shall conduct the Business and operate the
Acquired Assets diligently and in the ordinary and normal course and consistent
with past practice (including, without limitation, using its commercially
reasonable efforts to preserve beneficial relationships between Seller and its
distributors, agents, lessors, suppliers and customers) and continue normal
maintenance, marketing, advertising, distributional and promotional expenditures
in connection with the Business. Seller shall engage in no transactions relating
to the Business, including transactions relating to the purchase or sale of
goods, raw materials, inventories or other operating or production items,
intracorporate or otherwise, with any of its Affiliates from the date hereof
until the Closing other than (i) transactions approved by Buyer in writing; or
(ii) transactions on terms no more favorable to Seller or its Affiliates than
would have been obtainable in arm's-length dealing. Without limiting the
generality of the foregoing and except as otherwise expressly provided in this
Agreement, during the period from the date hereof through the Closing Date,
Seller shall not with respect to the Business:
(a) Obligations for Borrowed Money. (i) create, incur or
assume any debt (including obligations in respect of capital leases) or
any debt for money borrowed (whether long- or short-term) other than in
the normal and ordinary course of business; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligation of any other Person; or
(iii) make any loans, advances or capital contributions to any other
Person, other than Trade Payables;
(b) Employee Matters. (i) Increase in any manner the rate
of compensation of any of its employees listed on Schedule 9.1(b); (ii)
make or agree to make any payment pursuant to any Employee Plan,
including, without limitation, any payment of any pension, retirement
allowance, severance or other employee benefit, except as required by
any existing Employee Plan disclosed on the Schedules to this
Agreement, to any such officers or employees, whether past or present;
(iii) enter into or modify any collective bargaining agreement, except
as required by law; (iv) commit itself to any additional Employee Plan,
or employment or consulting agreement with a Person, or to amend any of
such Employee Plans or agreements, except as required by law; or (v)
transfer any employee from the Business to any other district or
division of Seller;
(c) Sale of Assets. Sell, transfer, license or otherwise
dispose of or agree to sell, transfer, license or otherwise dispose of
any Acquired Assets, except Inventory and Rental Equipment in the
ordinary and normal course of business consistent with past practice or
transfer or assign any Acquired Assets from the Business to any other
division or district of Seller;
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(d) Commitments. Enter into any other agreements,
commitments, contracts or undertaking in connection with the Business,
except agreements, commitments, contracts or undertakings made in the
ordinary and normal course of business consistent with past practice
and the representations and warranties of Seller contained in this
Agreement;
(e) Leased Facilities. Terminate, modify or amend the
Assumed Leases;
(f) Encumbrances. Encumber or grant or create a Lien on
any of the Acquired Assets;
(g) Insurance. Cause any of the policies of insurance
referred to in Section 5.1(x) to terminate, lapse or be canceled,
unless equivalent replacement policies, without lapse of coverage,
shall be put in place;
(h) Representations and Warranties. Take any action the
taking of which, or omit to take any action the omission of which,
would cause any of the representations and warranties contained in
Section 5.1 to fail to be true and correct as of the Closing as though
made at and as of the Closing; or
(i) Other. Agree or commit to do any of the foregoing.
7.2 Disclosure Supplements.
(a) From time to time prior to the Closing, Seller shall
promptly supplement or amend the Schedules to this Agreement with
respect to any matter (i) which may arise hereafter and which, if
existing or occurring at or prior to the date hereof, would have been
required to be set forth or described in the Schedules to this
Agreement, or (ii) which makes it necessary to correct any information
in the Schedules to this Agreement or in any representation and
warranty of Seller which has been rendered inaccurate in any material
respect. No supplement or amendment to the Schedules to this Agreement
or any delivery of Schedules after the date hereof, unless expressly
consented in writing by Buyer, shall be deemed to cure any breach of
any representation or warranty made in this Agreement, or modify,
affect or diminish Buyer's right to terminate this Agreement pursuant
to Section 10.1(c); provided, however, that, notwithstanding the
foregoing, if Seller supplements or amends the Schedules to this
Agreement or delivers a Schedule after the date of this Agreement,
which supplement, amendment, or Schedule if not delivered would give
Buyer the right to terminate this Agreement under Section 10.1(c)
hereof (each a "Schedule Amendment"), then, if the transactions
contemplated by this Agreement are consummated, such Schedule
Amendments shall not form the basis of any right of indemnification by
Buyer.
(b) During the period from the date hereof to the
Closing, Seller shall promptly (i) furnish or make available to Buyer
copies of all major operating reports and monthly, quarterly and
year-end financial statements with respect to the Business as soon as
they become available, all certified by Seller's chief financial
officer that such financial statements fairly present the financial
position and results of operations of the Business for the periods
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covered by such statements in accordance with GAAP consistently applied
(subject to normally recurring year-end audit adjustments and without
footnote disclosures), and (ii) notify Buyer of (A) any material change
in the condition (financial or otherwise), business, assets,
properties, or operations of the Business, and (B) the institution or
settlement of any litigation, action, suit, investigation, claim or
proceeding and of any developments therein.
7.3 Closing. Seller shall use commercially reasonable efforts to
cause the conditions set forth in Section 6.1 to be satisfied by the Closing
Date.
7.4 Confidentiality. Seller shall, and shall cause its Affiliates,
officers, employees, representatives, consultants and advisors to, hold in
confidence and not use any confidential information which remains after Closing
in the possession of Seller or its Affiliates. Seller shall not release or
disclose any such information to any Person other than Buyer and its authorized
representatives. Notwithstanding the foregoing, the confidentiality obligations
of this Section shall not apply to information:
(a) which Seller is compelled to disclose by judicial or
administrative process, or, in the opinion of counsel, by other
mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to Seller by
a third party who obtained such information other than from Seller or
other than as a result of a breach of this Section.
7.5 Maintenance of Insurance. Seller will (a) maintain all
policies of insurance in effect on the date hereof through and until the
Closing; and (b) after the Closing use its best efforts to maintain any policies
of insurance which cover liabilities associated with the operation of the
Business prior to the Closing; provided, however, that after the Closing, Seller
shall not be required to pay any additional premiums in respect of such policies
or maintain in effect any insurance coverage other than coverage disclosed on
the Schedules hereto.
7.6 Inventories. Prior to the Closing, Seller will maintain levels
of all Inventories, including materials and supplies, at levels consistent with
current practice in the ordinary and normal course of business.
7.7 Maintenance of, and Access to, Records. After the Closing
Date, Seller shall provide Buyer with access (with an opportunity to make
copies), during normal business hours, and upon reasonable notice, to any
records relating to the Business which are retained by it. Seller shall preserve
and maintain any books and records relating to the Business and retained by
Seller for at least three years after the Closing Date.
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7.8 Accounts Receivable.
(a) In the event that Seller or any of its Affiliates
receives any payment relating to any Account Receivable outstanding on
or after the Closing Date, such payment shall be the property of, and
shall be immediately forwarded and remitted to, Buyer. In the event
that Buyer or any Affiliate of Buyer receives any payment relating to
any Account Receivable written off by Seller prior to the Closing Date,
such payment shall be the property of, and shall be immediately
forwarded to, Seller. Seller or Buyer or such Affiliate will promptly
endorse and deliver to Buyer or Seller any cash, checks or other
documents received by Seller or Buyer on account of any such Accounts
Receivable. Seller or such Affiliate shall advise Buyer (promptly
following Seller's becoming aware thereof) of any counterclaims or
set-offs that may arise subsequent to the Closing Date with respect to
any Account Receivable.
(b) After the Closing Date, Buyer shall use reasonable
efforts, consistent with prior ordinary course business practices of
Seller, to collect all Accounts Receivable included in the Acquired
Assets; provided, however, that Buyer shall not be obligated to
continue to do business with any Person if Buyer believes such
continuation will not be in its best interests, and shall not be
obligated to initiate litigation or to turn any of such Accounts
Receivable over to a collection agency or attorney.
(c) Buyer shall deliver a true and correct list of its
Accounts Receivable aging within fifteen (15) business days following
the expiration of the period during which such Accounts Receivable are
deemed "uncollectible" in accordance with this Section, together with
the signed original rental contract, customer collection comment,
invoice inquiry report, and pick up ticket with respect to each Account
Receivable on the list. Accounts Receivable shall be deemed
"uncollectible" if remaining unpaid 180 days after the Closing Date
(the "Uncollectible Date").
(d) In the event that any Account Receivable or any
portion thereof (less applicable reserves for any such Account
Receivable included in the calculation of Gross Working Capital set
forth in Section 3.2 hereof) is not paid by the date as of which it is
deemed uncollectible as herein provided, Buyer shall be entitled to
reimbursement from Seller within 30 days from the Uncollectible Date in
the amount of such unpaid Account Receivable. Upon such reimbursement,
the claim or cause of action against the debtor not making payment
shall be assigned by Buyer to Seller, and Seller may take such measures
to enforce collection of the unpaid items as Seller shall deem
necessary. In connection with the collection of any Accounts
Receivable, remittances by a customer shall be first credited to the
Accounts Receivable bearing the earliest date unless the customer has
specified the particular invoice to which a remittance pertains, in
which case the credit shall be made to the invoice specified. In the
event that collections on all Accounts Receivable exceed the amount of
Accounts Receivable (less applicable reserves for such Accounts
Receivable included in the calculation of Gross Working Capital set
forth in Section 3.2 hereof), such excess shall be reimbursed by Buyer
to Seller within 30 days from The Uncollectible Date.
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7.9 No Shopping. From the date hereof through and until the
earlier of termination of this Agreement pursuant to Article X or Closing,
neither Seller nor any of its Affiliates, employees, officers, agents or
advisors shall, directly or indirectly, (a) solicit, initiate or encourage any
inquiries, proposals or offers from any Person relating to any acquisition (or
sublease as the case may be) of the Acquired Assets or the Business or any
portion thereof, or any securities of, or any merger, consolidation or business
combination with, Seller, or (b) with respect to any effort or attempt by any
other Person to do or seek any of the foregoing, (i) participate in any
discussions or negotiations, (ii) furnish to any other Person any information
with respect to, or afford access to the properties, books or records of or
relating to, Seller, the Acquired Assets or the Business, or (iii) otherwise
cooperate in any way with, or assist or participate in, or facilitate or
encourage any such effort. Seller shall promptly notify Buyer if any such
proposal or offer or any inquiry or contact with any Person with respect thereto
is made.
7.10 Further Assurances; Customer and Supplier Relationships;
Assertion of Claims.
(a) Seller shall use its best efforts to implement the
provisions of this Agreement, and for such purpose Seller, at the
request of Buyer, at or after the Closing, shall, without further
consideration, promptly execute and deliver, or cause to be executed
and delivered, to Buyer such deeds, assignments, bills of sale,
Consents and other instruments in addition to those required by this
Agreement, in form and substance satisfactory to Buyer, and take all
such other actions, as Buyer may reasonably deem necessary or desirable
to implement any provision of this Agreement or to more effectively
transfer, convey and assign to Buyer good and marketable title to, and
to put Buyer in actual possession and operating control of, all of the
Acquired Assets, free and clear of all Liens other than Permitted
Liens.
(b) From and after the Closing, Seller shall use its
reasonable efforts to assist in the transfer to Buyer of the goodwill
and reputation associated with the Business, and of Seller's personnel,
suppliers, manufacturer's representatives and customer relationships.
Seller shall use its reasonable efforts to assure that Seller's current
customers and suppliers with respect to the Business shall continue to
do business with Buyer in accordance with the terms and for the periods
of time set forth in any contract, agreement, commitment or undertaking
(including the Contracts), whether oral or written, and whether
currently in effect or proposed to be entered into by Seller.
(c) Seller covenants and agrees with Buyer that after the
Closing Date, Seller shall give Buyer 30-days' prior written notice of
any intent on the part of Seller or any of its Affiliates to assert any
claim against any former Customer or supplier of Seller or such
Affiliate.
7.11 Release. At or prior to Closing Seller and Stockholders, for
and on behalf of its stockholders and successors and assigns, shall deliver a
release, which will forever discharge Buyer, and its respective successors and
assigns, from any and all claims, actions or causes of action heretofore arising
in any manner under, pursuant to or with respect to Buyer's actions under,
pursuant to or with respect to Buyer's failure to enter into or consummate a
purchase and sale of all or substantially all the assets of Seller at all of the
Seller's business locations (the "Release").
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ARTICLE VIII: COVENANTS OF BUYER
8.1 Maintenance of, and Access to, Records. From and after the
Closing, Buyer shall, whenever reasonably requested by Seller, permit Seller to
have access to such business records turned over to Buyer pursuant to this
Agreement as may be required by Seller in connection with any audit or
investigation by any Governmental Authority, or preparation of tax returns and
other tax matters or any matter relating to insurance coverage or third party
claims or for any other valid business purpose, in each such case to the extent
relating to the operation of the Business by Seller prior to the Closing. Buyer
shall preserve and maintain the records relating to the Business which are part
of the Acquired Assets for at least three years after the Closing Date. If Buyer
intends to discontinue preserving and maintaining these records, Buyer shall, at
Seller's cost and expense, offer to deliver such records to Seller.
8.2 Closing. Buyer shall use its best efforts to cause the
conditions set forth in Section 6.2 to be satisfied by the Closing Date.
ARTICLE IX: CERTAIN ADDITIONAL COVENANTS
9.1 Access to Records and Properties. Prior to the Closing, (a)
Buyer shall be entitled, and Seller shall permit Buyer, to conduct such
investigations as Buyer shall reasonably deem appropriate, and (b) Seller shall
(i) provide Buyer and its agents and representatives, including its independent
accountants, internal auditors and attorneys, full and complete access to all
the facilities, offices and personnel of Seller, and to all of the books and
records of Seller (including work papers of any independent accountant) and (ii)
cause Seller's officers, employees and advisors to furnish Buyer with such
financial and operating data (including the data described in Section 7.2(b))
and other information with respect to the condition (financial or otherwise),
business, assets, properties, operations or prospects of Seller with respect to
the Business as Buyer shall reasonably request. From and after the Closing,
Seller shall, whenever reasonably requested by Buyer, permit Buyer to have
access to such business records of Seller which are not turned over to Buyer
pursuant to this Agreement as may be requested by Buyer in connection with any
audit or investigation by any Governmental Authority, or audit by any
independent public accountant of Buyer, or preparation of tax returns and other
tax matters relating to Seller's operation of the Business prior to Closing or
any matters relating to insurance coverage or third party claims or for any
other valid business purpose and Seller shall cooperate with Buyer as reasonably
requested by Buyer, including, without limitation, the execution of reasonably
customary audit representation letters.
9.2 Expenses; Transfer Taxes. Subject to Section 9.6 hereto, each
party hereto will bear the legal, accounting and other expenses incurred by such
party in connection with the negotiation, preparation and execution of this
Agreement, the Transaction Documents, and the transactions contemplated hereby.
All sales, transfer, recordation and documentary Taxes and fees which may be
payable in connection with the transactions contemplated by this Agreement shall
be borne by the party responsible for such Taxes and fees under applicable law
and customary practice.
9.3 Bulk Transfer Laws. Buyer hereby waives compliance by Seller
with the laws of any jurisdiction relating to bulk transfers which may be
applicable in connection with the transfer of the Acquired Assets to Buyer (the
"Bulk Transfer Laws").
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9.4 Press Releases and Disclosure. The parties agree that neither
Seller, Buyer nor their respective Affiliates shall issue or cause publication
of any press release or other announcement or public communication with respect
to this Agreement or the transactions contemplated hereby or otherwise disclose
this Agreement or the transactions contemplated hereby to any third party (other
than attorneys, advisors and accountants to Seller or Buyer) without the consent
of the other party hereto, which consent shall not be unreasonably withheld;
provided, however, that nothing herein shall prohibit any party from issuing or
causing publication of any press release, announcement or public communication
to the extent that such party deems such action to be required by law or stock
exchange; provided further that such party shall, whenever practicable consult
with the other party concerning the timing and content of such press release,
announcement or communication before the same is issued or published.
9.5 Cooperation in the Defense of Claims.
(i) In the event that a claim is asserted against Buyer,
any of its direct or indirect Subsidiaries or Affiliates, with respect
to events or conditions occurring or existing in connection with, or
arising out of, the operation of the Business prior to the Closing, or
the ownership, possession, use or sale of the Acquired Assets prior to
the Closing, Seller shall reasonably cooperate with Buyer in the
defense of any such claim. If such claim does not give rise to a claim
for indemnity by Buyer against Seller pursuant to Article XI hereof,
Buyer shall hold harmless Seller for its out-of-pocket expenses arising
from Seller's cooperation.
(ii) In the event that a claim is asserted against Seller,
any of its direct or indirect Subsidiaries or Affiliates, with respect
to events or conditions occurring or existing in connection with, or
arising out of, the operation of the Business after the Closing, or the
ownership, possession, use or sale of the Acquired Assets after the
Closing, Buyer shall reasonably cooperate with Seller in the defense of
any such claim. If such claim does not give rise to a claim for
indemnity of Seller against Buyer pursuant to Article XI hereof, Seller
shall hold harmless Buyer for its out-of-pocket expenses arising from
Buyer's cooperation.
9.6 Regulatory Approvals. Seller will, and will cause its
appropriate Affiliates to, and Buyer will, use, in each case, its commercially
reasonable efforts to obtain any authorizations, consents, orders and approvals
of any Governmental Authority necessary for the performance of its respective
obligations pursuant to this Agreement and any of the other transaction
documents, and the consummation of the transactions contemplated hereby and
thereby, and will cooperate fully with each other in all reasonable respects in
promptly seeking to obtain such authorizations, consents, orders and approvals.
Neither Seller nor Buyer will take any action that will have the effect of
delaying, impairing or impeding the receipt of any required regulatory
approvals. Seller and Buyer shall file with the FTC and the DOJ pursuant to the
H-S-R Act, the notification and documentary material required in connection with
the acquisition of the Acquired Assets by Buyer pursuant to this Agreement;
provided, that, if Buyer shall not make its initial filing within two business
days of the execution and delivery of this Agreement, Seller may terminate this
Agreement by written notice to Buyer after such two business days and at any
time prior to Buyer's initial filing and if Seller shall not make its initial
filing within two business days following execution and delivery of this
Agreement, Buyer may terminate this Agreement by written notice to Seller after
such two business
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days and at any time prior to Seller's initial filing. Buyer shall pay all fees
associated with the filing of any such Notification and Report Forms or related
materials and information (other than the fees and expenses of Seller's legal,
financial or other professionals engaged to provide services in respect of such
filing). Buyer and Seller will promptly file any additional information
requested as soon as practicable after receipt of a request for additional
information. Buyer and Seller will use reasonable efforts to obtain early
termination of the applicable waiting period under the H-S-R Act. The parties
hereto will coordinate and cooperate with one another in exchanging such
information and providing such reasonable assistance as may be requested in
connection with such filing. Seller will supply Buyer with copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between Seller or its representatives, on the one hand, and
the FTC, the DOJ or any other Governmental Authority or members of their
respective staffs, on the other hand, with respect to this Agreement or the
transactions contemplated hereby.
9.7 Employee Matters.
(a) Employee Benefits. Except as identified on the
Schedule entitled "Miscellaneous Liabilities," Seller shall retain all
liabilities and obligations in respect of its past, present and future
employees under the Employee Plans and applicable laws. Without
limiting the generality of the foregoing or of Section 2.2(c), Buyer
shall have no liability or obligation whatsoever under the Employee
Plans, nor shall Buyer have any obligation to provide any employee
benefits to any Persons employed in the Business as of or at any time
prior to the Closing ("Employees"), except as identified on the
Schedule entitled "Miscellaneous Liabilities."
(b) Future Employment. Buyer shall offer employment to
all employees of Seller primarily engaged in the Business and listed on
Schedule 9.7(b) (the "Transferred Employee") as "at will" employees.
The parties acknowledge that as of the Closing Date, the Transferred
Employees shall cease to be employees of Seller and shall become
employees of Buyer. Buyer shall be responsible for all claims, causes
of actions, judgments, damages, penalties and liabilities related to
the Transferred Employees arising from circumstances and occurrences
from and after the Closing Date. Prior to the Closing Date upon
reasonable prior notice to Seller, Buyer may communicate with any of
the Employees currently employed in the Business.
(c) Employee Information.
(i) Subject to applicable legal restrictions,
Buyer and Seller shall provide each other, in a timely manner,
with any information which the other may reasonably request
with respect to any Employee of Seller or, after the Closing,
any Person employed by Buyer in the Business, his employment
with and compensation from Seller or Buyer, or rights or
benefits under any Employee Plan or any personnel policy of
Seller or Buyer relating to the Business.
(ii) Without in any way limiting the generality
of Section 9.7(c)(i), and to the extent they may legally do
so, Seller shall afford Buyer and its representatives such
access to the medical, workers' compensation and other
health-related records
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of the Employees (the "Employee Health Records") as are
maintained by or available to Seller and as Buyer shall, in
its sole discretion, deem reasonably necessary or desirable,
and Buyer shall be permitted, to the extent Seller may legally
give such permission, to make copies of such Employee Health
Records as it may deem reasonably necessary or desirable.
Promptly after the date hereof, Seller shall use its best
efforts to obtain or cause to be obtained any consent of any
Employee, health care provider, workers' compensation
authority or other Person as may be necessary in order to
permit Seller to afford Buyer and its representatives with
access to and permission to copy Employee Health Records as
provided in this Section 9.7(c).
9.8 Environmental Inspection and Assessment; Compliance Actions.
(a) Inspection. Buyer intends to conduct an inspection
and environmental assessment of the Property, which shall include
so-called "Phase I" preliminary environmental audits of the Property
(i.e., walk-through site inspection and a review of Seller's records
regarding previous environmental violations, if any, and inspection of
environmental Permits and verification of compliance with the same) and
in the event that any of the foregoing procedures reveal any actual or
potential environmental conditions existing on, in, under or about the
Property or otherwise associated with the operation of the Business or
with the ownership, possession or use of any of the Acquired Assets
(each an "Environmental Condition"), such other testing as Buyer may
determine to be appropriate, including without limitation, so-called
"Phase II" environmental audits (the "Environmental Tests"). Buyer will
coordinate with Seller on the timing of the physical inspection and, if
deemed appropriate by Buyer, other testing. The parties (or their
representatives) will also agree on the implementation (e.g. timing,
locations, etc.) of the sampling program, provided that the parties'
consent shall not be unreasonably withheld. Buyer agrees to (i)
reasonably restore the Property to pre-test condition, and (ii)
indemnify and hold Seller harmless from all claims resulting from such
inspections and testing conducted by Buyer.
(b) Right to Indemnification. Without limiting any of
Buyer's rights set forth elsewhere in this Agreement, if Buyer has a
right to, but does not terminate this Agreement pursuant to Section
10.1(i), then, in accordance with Article XI, Buyer shall be entitled
to indemnification from Seller for any and all Liabilities and
Environmental Damages related to any Environmental Conditions revealed
by the Environmental Tests.
(c) Post-Closing Testing. During the six (6) month period
following the Closing Date, Buyer shall be entitled to perform such
other testing as Buyer may determine to be appropriate and which was
not completed prior to the Closing (the "Additional Testing"). If the
Additional Testing reveals any actual or potential Environmental
Conditions existing on, in, under or about any Property which is
subleased from Seller, Buyer shall have the option to terminate such
sublease.
(d) Nothing in this Section 9.8 shall limit Buyer's right
to seek indemnity under Article XI.
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9.9 Technical Support. For a period of 120 days following the
Closing Date, upon the request of Buyer, Seller shall, at Seller's sole cost and
expense, provide to Buyer, to the extent and in the manner heretofore provided
by Seller to the Business in connection with the usual course of the Business,
data and transaction processing support pursuant to the Transitional Services
Agreement.
ARTICLE X: TERMINATION
10.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing upon the occurrence of
any of the following events:
(a) Mutual Consent. By mutual written consent of Seller
and Buyer;
(b) Closing Date. By Seller or Buyer if the Closing shall
not have occurred on or before June 30, 1998 (the "Termination Date");
(c) Seller Misrepresentation or Breach. By Buyer, if
there has been a material breach by Seller of any of its
representations, warranties, covenants, obligations or agreements set
forth in this Agreement or a materially adverse change reflected as a
result of an amendment or supplement to any schedule hereafter
delivered pursuant hereto by Seller;
(d) Buyer Misrepresentation or Breach. By Seller, if
there has been a material breach by Buyer of any of its
representations, warranties, covenants, obligations or agreements set
forth in this Agreement or in any writing delivered pursuant hereto by
Buyer;
(e) Court Order. By Seller or Buyer if consummation of
the transactions contemplated hereby shall violate any non-appealable
final order, decree or judgment of any court or Governmental Authority
having competent jurisdiction;
(f) Material Adverse Change. By Buyer, if since the
Balance Sheet Date there has been a material adverse change, or the
occurrence of a condition or event which might result in a material
adverse change, in the condition (financial or otherwise), business,
assets, properties or operations of the Business;
(g) Buyer's Conditions. By Buyer, if any condition
precedent to Buyer's obligation to effect the Closing as set forth in
Section 6.1 is not satisfied, or shall have become incapable of
fulfillment, and such condition is not waived, if waivable, by Buyer on
or prior to the Termination Date;
(h) Seller's Conditions. By Seller, if any condition
precedent to Seller's obligation to effect the Closing as set forth in
Section 6.2 is not satisfied, or shall have become incapable of
fulfillment, and such condition is not waived, if waivable, by Seller
on or prior to the Termination Date; or
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(i) Environmental Conditions. At Buyer's option exercised
within twenty-one (21) days after the date of this Agreement, if the
Environmental Tests reveal Environmental Conditions on the Properties,
the aggregate cost of remediation of which would exceed $500,000, as
determined in the reasonable and good faith discretion of the Buyer.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, written notice thereof shall forthwith be given to the
other party and this Agreement shall thereafter become void and have no further
force and effect and all further obligations of Seller and Buyer under this
Agreement shall terminate without further liability of Seller or Buyer, except
that (a) each party will return all documents, workpapers and other material of
any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same,
and all confidential information received by any party hereto with respect to
the business of any other party shall be treated in accordance with Section 7.4
and the Confidentiality Agreement (as hereinafter defined); (b) the obligations
of Seller and Buyer under Section 9.2 shall survive such termination; (c) if
this Agreement is terminated by Buyer pursuant to Section 10.1(i), Seller shall,
immediately upon receipt of documentation thereof from Buyer, pay to Buyer an
amount (not to exceed $125,000) equal to (i) the filing fees paid by Buyer in
connection with the H-S-R Act filings made pursuant to Section 4.3(d) and (ii)
the costs and expenses incurred by Buyer in connection with the Environmental
Tests; and (d) such termination shall not constitute a waiver by any party of
any claim it may have for damages caused by reason of, or relieve any party from
liability for, any breach of this Agreement prior to termination under Section
10.1.
ARTICLE XI: INDEMNIFICATION
11.1 Indemnification by Buyer. From and after the Closing, Buyer
shall indemnify, defend and hold Seller, its Affiliates, and their respective
directors, officers, representatives, employees and agents harmless from and
against any and all claims, actions, suits, demands, assessments, judgments,
losses, liabilities, damages, including, without limitation, consequential
damages, costs and expenses (including, without limitation, interest, penalties,
attorneys' fees to the extent permitted by law, and accounting fees and
investigation costs) (collectively, "Liabilities") that may be incurred by
Seller resulting or arising from or related to, or incurred in connection with:
(a) the failure of Buyer to assume, pay, perform and discharge the Assumed
Liabilities, (b) the failure of Buyer to report the purchase of the Acquired
Assets in accordance with the allocations required by Section 3.2, and (c) any
breach of any representation, warranty, covenant, obligation or agreement of
Buyer contained herein or in any other Transaction Document. "Liabilities" shall
be determined on a net after-tax basis and shall be net of and take into account
any insurance proceeds received by the indemnified party; provided, however,
that, if any such insurance proceeds are received by the indemnified party after
the date on which Liabilities are calculated, Liabilities shall be recalculated
and the indemnifying party shall receive the benefit of such recalculation.
11.2 Indemnification by Seller.
(a) General. From and after the Closing, Seller shall
indemnify, defend and hold Buyer, its Affiliates, and their respective
directors, officers, representatives, employees and agents harmless
from and against any and all Liabilities that may be incurred by Buyer
resulting or arising from, related to or incurred in connection with:
(i) the failure of Seller
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to assume, pay, perform and discharge the Retained Liabilities (except
those Retained Liabilities set forth in Section 2.2(e)(ii)), (ii) any
breach of any representation, warranty, covenant, obligation or
agreement of Seller contained herein or in any other Transaction
Document (other than the representation or warranty contained in
Section 5.1(u) hereof), and (iii) any violation of the Bulk Transfer
Laws.
(b) Environmental Indemnification. Seller agrees to
indemnify, defend, reimburse and hold harmless Buyer, its Affiliates
and their respective directors, officers, representatives, employees
and agents from and against any and all Liabilities and Environmental
Damages arising from (i) the presence, use, generation, storage,
treatment, discharge, release or disposal (including off-site disposal)
of Hazardous Materials upon, about, from or beneath the Property or
migrating to or from the Property, or arising in any manner whatsoever
out of the violation of any Environmental Requirements pertaining to
the Property and the activities thereon, in each case to the extent
that such Environmental Damages or violation of any Environmental
Requirements are attributable to, or the result of, any act or omission
by Seller prior to the Closing Date, (ii) the failure of Seller to pay
perform and discharge the Retained Liabilities set forth in Section
2.2(e)(ii), or (iii) a breach of the representation and warranty
contained in Section 5.1(u). This obligation to indemnify shall
include, but not be limited to, the expense of defending all claims,
suits and administrative proceedings (with counsel reasonably approved
by the indemnified parties), even if such claims, suits or proceedings
are groundless, false or fraudulent, and paying and discharging, when
and as the same become due, any and all judgments, penalties or other
sums due against such indemnified Persons; provided, however, that any
clean-up or remediation of any environmental condition shall only be
done pursuant to a plan (the "Plan") that (x) is prepared by a
nationally recognized environmental remediation consulting firm that is
mutually selected by, in the good faith of, Seller and Buyer, and (y)
is mutually acceptable to, in the good faith of, Buyer and Seller, and
(z) at a minimum, complies with all Environmental Requirements and
rectifies the issues identified in the Plan in a commercially
reasonable manner. The procedures described in Section 11.3 shall apply
to any claim solely for monetary damages relating to a matter covered
by this Section.
11.3 Notice of Claim; Right to Participate in and Defend Third
Party Claim.
(a) If any indemnified party receives notice of the
assertion of any claim, the commencement of any suit, action or
proceeding, or the imposition of any penalty or assessment by a third
party in respect of which indemnity may be sought hereunder (a "Third
Party Claim"), and the indemnified party intends to seek indemnity
hereunder, then the indemnified party shall promptly provide the
indemnifying party with prompt written notice of the Third Party Claim,
but in any event not later than 15 calendar days after receipt of such
notice of Third Party Claim. The failure by an indemnified party to
notify an indemnifying party of a Third Party Claim shall not relieve
the indemnifying party of any indemnification responsibility under this
Article XI, unless such failure materially prejudices the ability of
the indemnifying party to defend such Third Party Claim.
(b) The indemnifying party shall have the right to
control the defense, compromise or settlement of the Third Party Claim
with its own counsel (reasonably
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satisfactory to the indemnified party) if the indemnifying party
delivers written notice to the indemnified party within seven days
following the indemnifying party's receipt of notice of the Third Party
Claim from the indemnified party acknowledging its obligations to
indemnify the indemnified party with respect to such Third Party Claim
in accordance with this Article XI, and establishes security in form
and substance reasonably satisfactory to the indemnified party to
secure the indemnifying party's obligations under this Article XI with
respect to such Third Party Claim (it being agreed that an amount held
in escrow in an amount in excess of the Third Party Claims shall be
deemed to be sufficient security); provided, however, that the
indemnifying party shall not enter into any settlement of any Third
Party Claim which would impose or create any obligation or any
financial or other liability on the part of the indemnified party if
such liability or obligation (i) requires more than the payment of a
liquidated sum, or (ii) is not covered by the indemnification provided
to the indemnified party hereunder. In its defense, compromise or
settlement of any Third Party Claim, the indemnifying party shall
timely provide the indemnified party with such information with respect
to such defense, compromise or settlement as the indemnified party
shall request, and shall not assume any position or take any action
that would impose an obligation of any kind on, or restrict the actions
of, the indemnified party. The indemnified party shall be entitled (at
the indemnified party's expense) to participate in the defense by the
indemnifying party of any Third Party Claim with its own counsel.
(c) Any indemnifiable claim hereunder that is not a Third
Party Claim shall be asserted by the indemnified party by promptly
delivering notice thereof to the indemnifying party. If the
indemnifying party does not respond to such notice within 60 days after
its receipt, it shall have no further right to contest the validity of
such claim.
11.4 Time Limitations on Claims for Indemnification. The right of
Buyer to indemnification under Section 11.2(b) or for any breach of any
representation or warranty under Section 11.2(a)(ii) shall apply only to those
claims for indemnification which are given pursuant to this Agreement on or
before two years following the Closing Date.
11.5 Maximum and De Minimis Amounts and Other Matters.
(a) The maximum amount of indemnification which can be
required of Seller under Section 11.2(a)(ii) or 11.2(b) shall not
exceed $5,000,000 for all claims for indemnification which are given
pursuant to this Agreement on or before the first anniversary of the
Closing Date and $2,500,000 for all claims for indemnification which
are given pursuant to this Agreement thereafter.
(b) Seller shall not be required to indemnify, defend or
hold Buyer harmless from and against any Liabilities under Section
11.2(a)(ii) with respect to any breach of any representation or
warranty and Section 11.2(b), unless and until the amount of such
Liabilities equals or exceeds $250,000 (the "Seller Threshold Amount"),
in which event Seller shall be obligated to indemnify Buyer for amounts
in excess of the Seller Threshold Amount.
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(c) Buyer shall not be required to indemnify, defend or
hold Seller harmless under Section 11.1(c), unless and until the amount
of such Liabilities equals or exceeds $250,000 in the aggregate (the
"Buyer Threshold Amount"), in which event Buyer shall be obligated to
indemnify Seller for amounts in excess of the Buyer Threshold Amount.
(d) All claims by Buyer with respect to indemnification
hereunder shall first be satisfied from amounts held pursuant to the
Indemnity Escrow Agreement.
11.6 Dispute Resolution.
(a) In the event that any party to this Agreement has any
claim, right or cause of action against any other party to this
Agreement, which the parties shall be unable to settle by agreement
between themselves, such claim, right or cause of action, to the extent
that the relief sought by such party is for monetary damages or awards,
shall be determined by arbitration in accordance with the provisions of
this Section 11.6.
(b) The party or parties requesting arbitration shall
serve upon the other or others a demand therefor, in writing,
specifying the matter to be submitted to arbitration, and nominating a
competent disinterested person to act as an arbitrator. Within thirty
(30) days after receipt of such written demand and nomination, the
other party or parties shall, in writing, nominate a competent
disinterested person, and the two (2) arbitrators so designated shall,
within thirty (30) days thereafter, select a third arbitrator. The
three (3) arbitrators shall give immediate written notice of such
selection to the parties and shall fix in said notice a time and place
of the meeting of the arbitrators which shall be as soon as
conveniently possible (but in no event later than 15 days after the
appointment of the third arbitrator), at which time and place the
parties to the controversy shall appear and be heard with respect to
the right, claim or cause of action.
(c) In case the notified party or parties shall fail to
make a selection upon notice within the time period specified, the
party asserting such claim shall appoint an arbitrator on behalf of the
notified party. In the event that the first two (2) arbitrators
selected shall fail to agree upon a third arbitrator within thirty (30)
days after their selection, then such arbitrator may, upon application
made by either of the parties to the controversy, be appointed by any
judge of any United States court of record.
(d) Each party shall present such testimony, examinations
and investigations in accordance with such procedures and regulations
as may be determined by the arbitrators and shall also recommend to the
arbitrators a monetary award to be adopted by the arbitrators as the
complete disposition of such claim, right or cause of action. After
hearing the parties in regard to the matter in dispute, the arbitrators
shall adopt as their determination with respect to such claim, right or
cause of action, within sixty (60) days of the completion of the
examination, by majority decision signed in writing (together with a
brief written statement of the reasons for adopting such
recommendation), one of the recommendations submitted by the parties to
the dispute and shall grant no other relief or remedy. The decision of
said arbitrators, absent fraud, duress or manifest error, shall be
final and binding upon the parties to such controversy and may be
enforced in any court of competent jurisdiction.
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(e) The expense and cost of such arbitration shall be
borne by the party or parties whose recommendation was not adopted by
the arbitrators. Each party shall pay the fees and expenses of its own
counsel.
(f) Notwithstanding any other provisions of this Section
11.6, in the event that a party against whom any claim, right or cause
of action is asserted commences, or has commenced against it,
bankruptcy, insolvency or similar proceedings, which remain pending,
the party or parties asserting such claim, right or cause of action
shall have no obligations under this Section 11.6 and may assert such
claim, right or cause of action in the manner and forum it deems
appropriate, subject to applicable laws. No determination or decision
by the arbitrators pursuant to this Section 11.6 shall limit or
restrict the ability of any party hereto to obtain or seek in any
appropriate forum, any relief or remedy that is not a monetary award or
money damages.
ARTICLE XII: MISCELLANEOUS
12.1 Amendments. This Agreement may be amended only by a writing
executed by all of the parties hereto;
12.2 Entire Agreement. This Agreement, the Confidentiality
Agreement dated January 23, 1998, between Seller and Buyer (the "Confidentiality
Agreement"), and the other agreements expressly provided for herein, set forth
the entire understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior contracts, agreements, arrangements,
communications, discussions, representations and warranties, whether oral or
written, between the parties.
12.3 Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Ohio,
without regard to its conflicts of law doctrine.
12.4 Notices. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given (a) when received if personally delivered, (b) within 5 days after being
sent by registered or certified mail, return receipt requested, postage prepaid,
(c) within 12 hours after being sent by telecopy, with confirmed answerback, or
(d) within 1 business day of being sent by priority delivery by established
overnight courier, to the parties at their respective addresses set forth below.
To Seller: General Rental, Inc.
c/o Robert J. Bobb & Company
311 S. Wacker Drive
Suite 5500
Chicago, IL 60606
Attention: Robert J. Bobb
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With a copy to: Michael W. Black, Esq.
Pedersen & Houpt
161 North Clark Street
Suite 3100
Chicago, IL 60601-3225
To Buyer: NationsRent, Inc.
450 E. Las Olas Blvd.
Suite 1400
Ft. Lauderdale, FL 33301
Attention: Gene J. Ostrow, Executive Vice President
With a copy to: Robert J. Gilker, Esq.
Jones, Day, Reavis & Pogue
1900 Huntington Center
41 S. High Street
Columbus, OH 43215
Any party by written notice to the others given in accordance with this Section
12.4 may change the address or the Persons to whom notices or copies thereof
shall be directed.
12.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together will constitute one and the same instrument.
12.6 Assignment. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of each party hereto, but, except as
provided in Section 1.4, no rights, obligations or liabilities hereunder shall
be assignable by any party without the prior written consent of the other
parties.
12.7 Waivers. Except as otherwise provided herein, Buyer or Seller
(acting on behalf of itself and its appropriate Affiliates), may waive in
writing compliance by any of the other parties hereto (to the extent such
compliance is for the benefit of the party giving such waiver) with any of the
terms, covenants or conditions contained in this Agreement or in any of the
other Transaction Documents (except such as may be imposed by law). Any waiver
by any party of any violation of, breach of, or default under, any provision of
this Agreement or any of the other Transaction Documents, by any other party
shall not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach of or default under any other
provision of this Agreement or any of the other Transaction Documents.
12.8 Third Parties. Nothing expressed or implied in this Agreement
is intended, or shall be construed, to confer upon or give any Person or entity
other than Buyer and Seller any rights or remedies under or by reason of this
Agreement.
12.9 Schedules, Addenda and Exhibits. The Schedules, Addenda and
Exhibits attached to this Agreement are incorporated herein and shall be part of
this Agreement for all purposes.
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12.10 Headings. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
12.11 Certain Definitions. For purposes of this Agreement and any of
the Transaction Documents:
(a) the term "Affiliate" shall mean any Person that
directly, or indirectly through one or more Persons, controls, is
controlled by, or is under common control with, the Person specified
or, directly or indirectly, is related to or otherwise associated with
any such Person or entity;
(b) the term "Subsidiary" shall mean, as to any Person,
any corporation, or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board
of directors or other Persons performing similar functions are at the
time directly or indirectly owned by such Person, corporation, or other
such entity;
(c) the phrase, "to the best of the Seller's knowledge"
or "Seller's knowledge" shall be deemed to include all information that
is actually known or, in the exercise of reasonable diligence in the
normal course of their employment and/or assigned duties, should be
known, by each of the following individuals: (i) the following officers
of Seller: Robert J. Bobb, Joseph McInerney, and all management or
supervisory personnel who are (or, at any time since January 1, 1998,
were) employed or retained by the Seller or any of its Affiliates and
whose principal place of performance of their duties was at 2101 N.W.
33rd St., Suite 500, Pompano Beach, Florida, 33069, whether or not such
individuals were or are also officers, directors of employees of the
Seller or any of its Affiliates, and (ii) all other individuals
employed or retained by the Seller or any of its Affiliates who have
(or should have) exercised by reason of their position,
responsibilities or duties, the principal supervisory, monitoring or
compliance function with respect to any of the particular subject
matters addressed by the representations and warranties set forth in
Article V of this Agreement; and
(d) the term "claim" shall mean a right to payment,
whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured; or right to an
equitable remedy for breach of performance if such breach gives rise to
a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured.
12.12 Remedies Not Exclusive. No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy and each remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or hereafter existing at law or in equity or by
statute or otherwise. No remedy shall be deemed to be a limitation on the amount
or measure of damages resulting from any breach of this Agreement. The election
of any one or more remedies shall not constitute a waiver of the right to pursue
other available remedies.
12.13 Gender and Number. The masculine, feminine or neuter gender
and the singular or plural number shall each be deemed to include the others
whenever the context so indicates.
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IN WITNESS WHEREOF, the parties have caused their duly
authorized representatives to execute this Agreement as of the date first above
written.
GENERAL RENTAL, INC. NATIONSRENT, INC.
By: /s/ Joseph McInerney By: /s/ Jonathan G. Usher
--------------------------- ----------------------------
Name: Joseph McInerney Name: Jonathan G. Usher
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Title: Vice President Title: Vice President
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<PAGE> 1
EXHIBIT 10.23
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of May
30, 1998 by and among NATIONSRENT, INC., a Delaware corporation ("Nations"); THE
J. KELLY CO., INC., a Michigan corporation ("Company"); James E. Kelly and
Virginia M. Kelly who together constitute all of the shareholders of the Company
(collectively, the "Shareholder"). Certain other capitalized terms used herein
are defined in Article XI and throughout this Agreement.
RECITALS
The Shareholder owns the capital stock of and operates a construction
equipment rental business in Michigan (the "Business"). The parties have
determined that it is in their respective best interests for Nations to acquire
all of the issued and outstanding shares (the "Shares") of common stock, $1.00
par value, of the Company (the "Company Common Stock") which are held by the
Shareholder upon the terms and subject to the conditions set forth in this
Agreement.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 THE ACQUISITION. Upon the terms and subject to the conditions of this
Agreement, at the Closing (as defined below), the Shareholder will sell, assign,
transfer, convey and deliver to Nations and Nations shall purchase, acquire and
accept from the Shareholder, the Shares, free and clear of any liens (the
"Acquisition").
1.2 CONSIDERATION.
(a) As consideration for the Shares, Nations shall, upon the terms and
subject to the conditions of this Agreement, remit to Shareholder (the "Purchase
Price"): (i) at the Closing (as hereinafter defined), Four Million Five Hundred
Thousand Dollars ($4,500,000.00) (the "Closing Payment") in immediately
available funds net of: (A) Indebtedness (as defined in Section 3.10) of the
Company; (B) the cash surrender value of the Life Insurance Policy listed on
Schedule 5.9(b); (C) Officer and Shareholder loans; and (D) expenses of the
transactions contemplated hereby
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incurred by the Shareholder including but not limited to accounting and legal
expenses; (ii) at the Closing, a Promissory Note from Nations in the original
principal amount of Two Million Five Hundred Thousand Dollars ($2,500,0000.00)
the form of which is provided as Exhibit A attached hereto (the "Promissory
Note"); and (iii) during the three year period after the Closing Date (the
"Earn-Out Period"), fifteen (15%) of the net earnings before interest payments,
income taxes and corporate charges determined in accordance with GAAP,
consistently applied by NationsRent for operations located in Michigan which are
managed by Company Management or James E. Kelly (the "Earn-Out Amount"),
provided, however, in no event shall the aggregate Earn-Out Amount payable
hereunder be less than $500,000 (the "Minimum Earn-Out Amount") or more than
$1,500,000. The Promissory Note shall be subject to the set off rights, and upon
conversion, hold back rights described in Section 8.3.
(b) The Earn-Out Amount shall be calculated annually but shall be
aggregated during the Earn-Out Period. By way of illustration a loss in year one
shall be aggregated with income earned in years two and three to determine the
aggregate Earn-Out Amount. The Minimum Earn-Out Amount shall be paid to
Shareholder in three installments after each of the first three anniversaries of
the Closing Date (the "Minimum Earn-Out Payment Dates"). One third of the
Minimum Earn-Out Amount or $166,666,66 shall be paid to Shareholder on each
Minimum Earn-Out Payment Date. All remaining amounts due shall be paid as soon
as practicable after the calculation of the Earn-Out Amount and after the third
Earn-Out Payment Date. The calculation of the Earn-Out Amounts shall be provided
in writing to Shareholder. The Earn-Out Amount shall be paid after the third
Earn-Out Payment Date and ten (10) days from the date of such notice unless
Shareholder provides written notice to Nations that Shareholder is contesting
the calculation of the Earn-Out Amount setting forth in detail the amounts
contested. If no written objection is received by Shareholder during the ten-day
period, then such Earn-Out Amount shall be final and binding on the parties
hereto. In the event Shareholder gives written notice of any objection to the
calculation of the Earn-Out Amount, Nations and Shareholder shall use all
reasonable efforts to resolve the dispute within thirty (30) days following
receipt by Nations of written notice from Shareholder. If the parties are unable
to reach an agreement within such thirty (30) day period, the matter shall be
submitted to a mutually agreed upon certified public accounting firm for
determination which shall be final and binding upon the Parties hereto. Nations
and Shareholder shall contribute equally to all costs (including fees and
expenses charged by the selected firm of certified public accountants) in
connection with the resolution of any such dispute.
1.3 THE CLOSING. Subject to the terms and conditions of this Agreement,
the consummation of the Acquisition (the "Closing") shall take place as promptly
as practicable (and in any event within five (5) business days) after
satisfaction or waiver of the conditions set forth in Articles VI and VII, at
the offices of Company's counsel, Kemp, Klein, Umphrey & Endelman, Troy,
Michigan, or such other time and place as the parties may otherwise agree (the
"Closing Date").
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1.4 PROCEDURE AT THE CLOSING. At the Closing, the Shareholder shall
deliver to Nations certificates representing the Shares duly endorsed for
transfer, and Nations shall pay the Purchase Price to Shareholder in accordance
with Section 1.2. In addition, at the Closing the Company and the Shareholder
shall deliver to Nations the documents, certificates, opinions, consents and
letters required by Article VI, and Nations shall deliver to the Company and the
Shareholder the documents and certificates required by Article VII.
1.5 ACCOUNTING TREATMENT. The parties hereto acknowledge and agree that
the transactions contemplated hereby are intended to be treated as a purchase by
Nations for accounting purposes.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF NATIONS
As a material inducement to the Shareholder to enter into this Agreement
and to consummate the transactions contemplated hereby, Nations makes the
following representations and warranties:
2.1 CORPORATE STATUS. Nations is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
2.2 CORPORATE POWER AND AUTHORITY. Nations has the corporate power and
authority to execute and deliver this Agreement, Promissory Note, Shareholder
Employment Agreement, Company Management Employment Agreement, Registration
Rights Agreement and the Leases (as such terms are hereinafter defined)
(collectively, the "Transaction Documents") to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. Nations has taken all action necessary to authorize the execution and
delivery of the Transaction Documents, the performance of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby.
2.3 ENFORCEABILITY. Each of the Transaction Documents have been duly
executed and delivered by Nations and each Transaction Document constitute (or
will constitute) a legal, valid and binding obligation of Nations, enforceable
against Nations in accordance with its terms, except as the same may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
2.4 FINANCIAL STATEMENTS. Nations has delivered to the Shareholder the
financial statements for the Company for the period ending December 31, 1997,
prepared by the Company. Such financial statements fairly present the financial
position of Nations as of the dates indicated.
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2.5 NO VIOLATION. The execution and delivery of the Transaction Documents
by Nations, the performance by Nations of its obligations hereunder and the
consummation by Nations of the transactions contemplated by the Transaction
Documents will not (i) contravene any provision of the certificate of
incorporation or bylaws of Nations, (ii) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment or
order of any Governmental Authority or of any arbitration award which is either
applicable to, binding upon or enforceable against Nations, (iii) conflict with,
result in any breach of, or constitute a default (or an event which would, with
the passage of time or the giving of notice or both, constitute a default)
under, or give rise to a right to terminate, amend, modify, abandon or
accelerate, any Contract which is applicable to, binding upon or enforceable
against Nations, (iv) result in or require the creation or imposition of any
Lien upon or with respect to any of Nations assets, or (v) require the consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, any court or tribunal or any other Person.
2.6 NO COMMISSIONS. Nations has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDER
As a material inducement to Nations to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company and the
Shareholder, jointly and severally, make the following representations and
warranties to Nations:
3.1 CORPORATE STATUS. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan and has
the requisite power and authority to own or lease its properties and to carry on
its business as now being conducted. The Company is legally qualified to do
business as a foreign corporation in each state where the nature of its
properties and the conduct of its business requires such qualification.
3.2 POWER AND AUTHORITY. The Company has the power and authority to
execute and deliver the Transaction Documents, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The Company has taken all action necessary to authorize the
execution and delivery of the Transaction Documents, the performance of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby. The Shareholder has the requisite competence,
power and authority to execute and deliver the Transaction Documents, to perform
his obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
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3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
and the Transaction Documents at Closing will be duly executed and delivered by
each of the Company, the Shareholder, and the Company Management, as the case
may be, and each Transaction Document constitutes (or will constitute) the
legal, valid and binding obligation of each of them, enforceable against each of
them in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
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3.4 CAPITALIZATION.
(a) Schedule 3.4(a) sets forth, with respect to the Company, (i) the
number of authorized shares of each class of its capital stock, and (ii) the
number of issued and outstanding shares of each class of its capital stock.
There are no outstanding or authorized rights, options, warrants, convertible
securities, subscription rights, conversion rights, exchange rights or other
agreements or commitments of any kind that could require the Company to issue or
sell any shares of its capital stock (or securities convertible into or
exchangeable for shares of its capital stock). There are no outstanding stock
appreciation, phantom stock, profit participation (other than the Company's
Profit Sharing Plan) or other similar rights with respect to the Company. There
are no proxies, voting rights or other agreements or understandings with respect
to the voting or transfer of the capital stock of the Company. The Company is
not obligated to redeem or otherwise acquire any of its outstanding shares of
capital stock.
(b) Schedule 3.4(b) sets forth, with respect to the Company, the name,
address and federal taxpayer identification number of, and the number of
outstanding shares of each class of its capital stock owned of record and/or
beneficially by, each shareholder of the Company as of the close of business on
the date of this Agreement. As of the date hereof, the Shareholder is the holder
of all issued and outstanding shares of capital stock of the Company, and the
Shareholder owns such shares free and clear of all Liens, restrictions and
claims of any kind.
3.5 NO VIOLATION. Except as set forth on Schedule 3.5, the execution and
delivery of this Agreement by the Company and the Shareholder, the performance
by the Company and the Shareholder of their respective obligations hereunder and
the consummation by the Company and the Shareholder of the transactions
contemplated by this Agreement will not (i) contravene any provision of the
articles of incorporation or bylaws of the Company, (ii) violate or conflict
with any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment or order of any Governmental Authority or of any arbitration award
which is either applicable to, binding upon or enforceable against the Company
or the Shareholder, (iii) conflict with, result in any breach of, or constitute
a default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against the Company or the
Shareholder, (iv) result in or require the creation or imposition of any Lien
upon or with respect to any of the Company Assets (as defined in Section 3.14),
or (v) require the consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Authority, any court or tribunal or any
other Person.
3.6 SUBSIDIARIES. The Company does not own, directly or indirectly, any
outstanding voting securities of or other interests in, or control, any other
corporation, partnership, joint venture or other business entity.
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3.7 NO COMMISSIONS. Neither the Company nor the Shareholder have incurred
any obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
3.8 FINANCIAL STATEMENTS. The Company has delivered to Nations (i) the
financial statements of the Company for the year ending March 31, 1997,
including the notes thereto, reviewed by Gerald Slutsky, C.P.A., and (ii) the
financial statements of the Company for the nine month and eleven month periods
ended December 31,1997 and February 28, 1998, and for the year ended March 31,
1998, including the notes thereto, compiled by Howard I. Bleiwas and Associates
(the financial statements of the Company dated December 31, 1997, February 28,
1998 and March 31, 1998 are collectively referred to as the "Financial
Statements"), copies of which are attached to Schedule 3.8 hereto. The balance
sheet dated as of December 31, 1997 of the Company included in the Financial
Statements are referred to herein as the "Current Balance Sheet." The Financial
Statements fairly present the financial position of the Company each of the
balance sheet dates and the results of operations for the periods covered
thereby, and have been prepared in accordance with GAAP consistently applied
throughout the periods indicated except as indicated in Schedule 3.8. The books
and records of the Company fully and fairly reflect all transactions,
properties, assets and liabilities of the Company. There are no extraordinary or
material non-recurring items of income or expense during the periods covered by
the Financial Statements and the balance sheets included in the Financial
Statements do not reflect any writeup or revaluation increasing the book value
of any assets, except as specifically disclosed in the notes thereto. The
Financial Statements reflect all adjustments necessary for a fair presentation
of the financial information contained therein.
3.9 CHANGES SINCE THE CURRENT BALANCE SHEET. Except for Schedule 3.9,
since the date of the Current Balance Sheet, the Company has operated in the
ordinary course of business and has not (i) issued any capital stock or other
securities; (ii) made any distribution of or with respect to its capital stock
or other securities or purchased or redeemed any of its securities; (iii) paid
any bonus to or increased the rate of compensation of any of its officers or
salaried employees or amended any other terms of employment of such persons;
(iv) sold, leased or transferred any of its properties or assets other than in
the ordinary course of business consistent with past practice; (v) made or
obligated itself to make capital expenditures out of the ordinary course of
business consistent with past practice; (vi) made any payment in respect of its
liabilities other than in the ordinary course of business consistent with past
practice; (vii) incurred any obligations or liabilities (including any
indebtedness) or entered into any transaction or series of transactions
involving in excess of $10,000 in the aggregate out of the ordinary course of
business, except for this Agreement and the transactions contemplated hereby;
(viii) suffered any theft, damage, destruction or casualty loss, not covered by
insurance and for which a timely claim was filed, in excess of $10,000 in the
aggregate; (ix) suffered any extraordinary losses (whether or not covered by
insurance); (x) waived, canceled, compromised or released any rights having a
value in excess of $10,000 in the aggregate; (xi) made or adopted any change in
its accounting practice or policies; (xii) made any adjustment to its books and
records other than in respect of the conduct of its business activities in the
ordinary course
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consistent with past practice; (xiii) entered into any transaction with any
Affiliate; (xiv) entered into any employment agreement; (xv) terminated, amended
or modified any agreement involving an amount in excess of $10,000; (xvi)
imposed any security interest or other Lien on any of its assets other than in
the ordinary course of business consistent with past practice; (xvii) delayed
paying any accounts payable which is due and payable except to the extent being
contested in good faith; (xviii) made or pledged any charitable contribution in
excess of $1,000; (xix) entered into any other transaction or been subject to
any event which has or may have a Material Adverse Effect on the Company or
agreed to do or authorized any of the foregoing.
3.10 LIABILITIES OF THE COMPANY. The Company has no liabilities or
obligations, whether accrued, absolute, contingent or otherwise, except (a) to
the extent reflected or taken into account in the Current Balance Sheet and not
heretofore paid or discharged, (b) liabilities incurred in the ordinary course
of business consistent with past practice since the date of the Current Balance
Sheet (none of which relates to breach of contract, breach of warranty, tort,
infringement or violation of law, or which arose out of any action, suit, claim,
governmental investigation or arbitration proceeding), and (c) normal accruals,
reclassifications, and audit adjustments which would be reflected on an audited
financial statement and which could not be material in the aggregate. Schedule
3.10(a) sets forth any liability or indebtedness for borrowed money by the
Company or secured by the Assets, as defined in Section 3.14(a) (the
"Indebtedness"). Schedule 3.10(b) sets forth certain trade or other borrowings
of the Company which will be assumed by Nations plus amounts borrowed after
December 31, 1997 to fund incremental equipment purchases all of which shall not
be deemed Indebtedness for purposes of this Agreement.
3.11 LITIGATION. Except as set forth on Schedule 3.11, there is no action,
suit, or other legal or administrative proceeding or governmental investigation
pending, threatened, and to the knowledge of the Shareholder and the Company
anticipated or contemplated against, by or affecting the Company or the
Shareholder, or which question the validity or enforceability of this Agreement
or the transactions contemplated hereby, and to the knowledge of the Shareholder
and the Company there is no basis for any of the foregoing. During the
three-year period prior to the date hereof, there has been no action, suit or
other legal or administrative proceeding or governmental investigation against,
by or affecting the Company or the Shareholder in which the amount in question
exceeded $10,000. There are no outstanding orders, decrees, stipulations or
agreements issued by any Governmental Authority in any proceeding or agreed to
by the Company or the Shareholder to which the Company or the Shareholder are or
were a party which have not been complied with in full or which continue to
impose any obligations on the Company or the Shareholder or which may have a
Material Adverse Effect on the Company or the Shareholder.
3.12 ENVIRONMENTAL MATTERS.
(a) The Company is and has at all times been in full compliance with
all Environmental Laws (as defined in clause (g) below) governing its business,
operations, properties
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and assets, including, without limitation: (i) all requirements relating to the
Discharge (as defined in clause (g) below) and Handling (as defined in clause
(g) below) of Hazardous Substances (as defined in clause (g) below); (ii) all
requirements relating to notice, record keeping and reporting; (iii) all
requirements relating to obtaining and maintaining Licenses (as defined in
clause (g) below) for the ownership of its properties and assets and the
operation of its business as presently conducted, and (iv) all applicable writs,
orders, judgements, injunctions, governmental communications, decrees,
informational requests or demands issued pursuant to, or arising under, any
Environmental Laws.
(b) There are no (and to the knowledge of the Shareholder and the
Company there is no basis for any) non-compliance orders, warning letters,
notices of violation (collectively, "Notices"), claims, suits, actions,
judgments, penalties, fines, or administrative or judicial investigations or
proceedings (collectively, "Proceedings") pending or threatened against or
involving the Company or its business, operations, properties, or assets, issued
by any Governmental Authority or third party with respect to any Environmental
Laws or Licenses issued to the Company thereunder in connection with, related to
or arising out of the ownership by the Company of its properties or assets or
the operation of the Business, which have not been resolved or which would
impose any obligation, burden or continuing liability on Nations in the event
that the transactions contemplated by this Agreement are consummated, or which
could have a Material Adverse Effect on the Company.
(c) The Company has not Handled or Discharged, nor has it at any time
allowed or arranged for any third party to Handle or Discharge, Hazardous
Substances to, at or upon: (i) any location other than a site lawfully permitted
to receive such Hazardous Substances; (ii) any real property currently or
previously owned or operated by the Company; or (iii) any site which, pursuant
to any Environmental Laws, (x) has been placed on the National Priorities List
or its state equivalent; or (y) the United States Environmental Protection
Agency or the relevant state agency or other Governmental Authority has notified
the Company that such Governmental Authority has proposed or is proposing to
place on the National Priorities List or its state equivalent. There has not
occurred, nor is there presently occurring, a Discharge, or threatened
Discharge, of any Hazardous Substance on, into or beneath the surface of, or
adjacent to, any real property currently or previously owned or operated by the
Company in an amount requiring a notice or report to be made to a Governmental
Authority or in violation of any applicable Environmental Laws.
(d) Schedule 3.12 identifies the operations and activities, and
locations thereof, which have been conducted or are being conducted by the
Company on any real property currently or previously owned or operated by the
Company which have involved the Handling or Discharge of Hazardous Substances.
(e) Except as set forth on Schedule 3.12, the Company does not use,
nor has it used, any Aboveground Storage Tanks (as defined in clause (g) below)
or Underground Storage
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Tanks (as defined in clause (g) below), and there are not now nor have there
ever been any Underground Storage Tanks beneath any real property currently or
previously owned or operated by the Company that are required to be registered
under applicable Environmental Laws.
(f) Schedule 3.12 identifies (i) all environmental audits,
assessments or occupational health studies undertaken by the Company or its
agents or any Governmental Authority or third party, relating to or affecting
the Company or any real property currently or previously owned or operated by
the Company; (ii) the results of any ground, water, soil, air or asbestos
monitoring undertaken by the Company or its agents or any Governmental Authority
or third party, relating to or affecting the Company or any real property
currently or previously owned or operated by the Company which indicate the
presence of Hazardous Substances at levels requiring a notice or report to be
made to a Governmental Authority or in violation of any applicable Environmental
Laws; (iii) all material written communications between the Company and any
Governmental Authority arising under or related to Environmental Laws; and (iv)
all outstanding citations issued under OSHA, or similar state or local statutes,
laws, ordinances, codes, rules, regulations, orders, rulings, or decrees,
relating to or affecting the Company or any real property currently or
previously owned or operated by the Company.
(g) For purposes of this Section 3.12, the following terms shall have
the meanings
ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to such
term in Section 6901 et seq., as amended, of RCRA, or any applicable state
or local statute, law, ordinance, code, rule, regulation, order ruling, or
decree governing Aboveground Storage Tanks.
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing or emitting, as any of such terms may further be
defined in any Environmental Law, into or through any medium including,
without limitation, ground water, surface water, land, soil or air.
"Environmental Laws" means all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings, and changes or ordinances or judicial or administrative
interpretations thereof, or similar laws of foreign jurisdictions where
the Company conducts business, whether currently in existence or hereafter
enacted or promulgated, any of which govern (or purport to govern) or
relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances,
solid or hazardous waste or occupational health and safety, as any of
these terms are or may be defined in such statutes, laws, rules,
regulations, codes, orders, plans, injunctions, decrees, rulings and
changes or ordinances, or judicial or administrative interpretations
thereof, including, without limitation: the Comprehensive Environmental
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Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. ss.9601, et
seq. (collectively "CERCLA"); the Solid Waste Disposal Act, as amended by
the Resource Conservation and Recovery Act of 1976 and subsequent
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. ss.6901 et seq.
(collectively "RCRA"); the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. ss.1801, et seq. (the "Hazardous Materials
Transportation Act"); the Clean Water Act, as amended, 33 U.S.C. ss.1311,
et seq. (the "Clean Water Act"); the Clean Air Act, as amended (42 U.S.C.
ss.7401-7642) (the "Clean Air Act"); the Toxic Substances Control Act, as
amended, 15 U.S.C. ss.2601 et seq. (the "Toxic Substances Control Act");
the Federal Insecticide, Fungicide, and Rodenticide Act as amended, 7
U.S.C. ss.136-136y ("FIFRA"); the Emergency Planning and Community
Right-to-Know Act of 1986 as amended, 42 U.S.C. ss.11001, et seq. (Title
III of SARA) ("EPCRA"); and the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. ss.651, et seq. ("OSHA").
"Handle" means any manner of generating, accumulating, storing,
treating, disposing of, transporting, transferring, labeling, handling,
manufacturing or using, as any of such terms may further be defined in any
Environmental Law, of any Hazardous Substances or Waste.
"Hazardous Substances" shall be construed broadly to include any
toxic or hazardous substance, material, or waste, and any other
contaminant, pollutant or constituent thereof, whether liquid, solid,
semi-solid, sludge and/or gaseous, including without limitation,
chemicals, compounds, by-products, pesticides, asbestos containing
materials, petroleum or petroleum products, and polychlorinated biphenyls,
the presence of which requires investigation or remediation under any
Environmental Laws or which are or become regulated, listed or controlled
by, under or pursuant to any Environmental Laws, including, without
limitation, RCRA, CERCLA, the Hazardous Materials Transportation Act, the
Toxic Substances Control Act, the Clean Air Act, the Clean Water Act,
FIFRA, EPCRA and OSHA, or any similar state statute, or any future
amendments to, or regulations implementing such statutes, laws,
ordinances, codes, rules, regulations, orders, rulings, or decrees, or
which has been or shall be determined or interpreted at any time by any
Governmental Authority to be a hazardous or toxic substance regulated
under any other statute, law, regulation, order, code, rule, order, or
decree.
"Licenses" means all licenses, certificates, permits, approvals and
registrations.
"Underground Storage Tank" shall have the meaning ascribed to such
term in Section 6901 et seq., as amended, of RCRA, or any applicable state
or local statute, law, ordinance, code, rule, regulation, order ruling, or
decree governing Underground Storage Tanks.
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3.13 REAL ESTATE. The Company does not own any parcels of real property.
Schedule 3.13 sets forth (a) a list of all leases, licenses or similar
agreements ("Real Property Leases" ) copies of which have previously been
furnished to Nations), (b) the lessor and lessee thereof and the date and term
of each of such leases, (c) the legal description, if known, including street
address, of each property covered thereby (the "Leased Premises"), and (d) a
brief description (including size and function) of the principal improvements
and buildings thereon. The Real Property Leases are in full force and effect and
have not been amended, and no party thereto is in default or breach under any
such Lease. No event has occurred which, with the passage of time or the giving
of notice or both, would cause a breach of or default by the Company under any
of such leases and there is no breach or anticipated breach by any other party
to such leases. With respect to each of the Leased Premises: the Company has
valid leasehold interests or other rights of use and occupancy in the Leased
Premises, free and clear of any Liens on such leasehold interests or other
rights of use and occupancy, or any covenants, easements or title defects known
to or created by the Company, except as do not affect the occupancy or uses of
such properties; the portions of the buildings located on the Leased Premises
that are used in the business of the Company are within the property setback and
building lines of the respective property, are in good repair and condition,
normal wear and tear excepted, and are in the aggregate sufficient to satisfy
the Company' respective normal business activities as conducted thereat; each of
the Leased Premises (a) has direct access to public roads or access to public
roads by means of a perpetual access easement, such access being sufficient to
satisfy the current and reasonably anticipated normal transportation
requirements of the Company' respective business as presently conducted at such
parcel; and (b) is served by all utilities in such quantity and quality as are
sufficient to satisfy the current normal business activities as conducted at
such parcel; and the Company has not received notice of (a) any condemnation
proceeding with respect to any portion of the Leased Premises or any access
thereto and no such proceeding is contemplated by any Governmental Authority; or
(b) any special assessment which may affect any of the Leased Premises and no
such special assessment is contemplated by any Governmental Authority.
3.14 GOOD TITLE TO AND CONDITION OF ASSETS. Except as set forth on
Schedule 3.14(a), the Company has, and at the Closing will have, good and
marketable title to its Assets, as hereinafter defined, with full power to sell,
transfer and assign the same free and clear of any Lien. The Assets and the
Leased Premises constitute, in the aggregate, all of the assets and properties
necessary for the conduct of the Business in the manner in which and to the
extent to which such Business is currently being conducted. Assets means all of
the properties and assets of the Company, including the Leased Premises, whether
personal or mixed, tangible or intangible, wherever located. The Assets are in
good operating condition, normal wear and tear excepted, and have been
maintained in accordance with all applicable specifications and warranties. All
inventory of rental equipment of the Company set forth on Schedule 3.14(b)
hereto and all inventory of merchandise set forth in Schedule 3.14(c) hereto,
consists of a quality and quantity usable, rentable, or salable in the ordinary
course of business of the Company, except for obsolete items and items of
below-standard quality, all of which have been written off, written down or
adequately reserved against to their net realizable
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value in the Current Balance Sheet. All such inventory not written off has been
recorded at the lower of cost or net realizable value, and depreciated in
accordance with an accelerated cost recovery system. The quantities of each item
of such inventory are reasonable in the present circumstances of the Company.
All such inventory is in good operating condition and repair, subject to normal
wear and tear, and has been maintained in accordance with normal industry
practice.
3.15 COMPLIANCE WITH LAWS. The Company is and has been in compliance with
all laws, regulations and orders applicable to it, its business and operations
(as conducted by it now and in the past), the Assets and any other properties
and assets (in each case owned or used by it now or in the past). The Company
has not been cited, fined or otherwise notified of any asserted past or present
failure to comply with any laws, regulations or orders and no proceeding with
respect to any such violation is pending or threatened. Neither the Company, nor
any of its employees or agents, has made any payment of funds which is
prohibited by law, and no funds have been set aside to be used for any payment
prohibited by law. The Company is not subject to any Contract, decree or
injunction which restricts the continued operation of the Business or the
expansion thereof to other geographical areas, customers or suppliers, or to
other lines of business.
3.16 LABOR AND EMPLOYMENT MATTERS. Schedule 3.16 sets forth the name and
current rate of compensation of each employee of any of the Company. The Company
is not a party to or bound by any collective bargaining agreement or any other
agreement with a labor union, and there has been no effort by any labor union
during the twenty-four (24) months prior to the date hereof to organize any
employees of the Company into one or more collective bargaining units. There is
no pending or threatened labor dispute, strike or work stoppage which affects or
which may affect the Business. Neither the Company, nor any agent,
representative or employee thereof has since the date of incorporation of the
Company committed any unfair labor practice as defined in the National Labor
Relations Act, as amended, and there is no pending or threatened charge or
complaint against the Company or any of the Companies by or with the National
Labor Relations Board or any representative thereof. The Company is not aware
that any key employee or group of employees have any plans to terminate his or
their employment with the Company. The Company is not a party or subject to any
employment agreements, noncompetition agreements, or consulting agreements. The
Company has no knowledge of any violations of, received no notice of any
violations of and made a good faith effort to comply with all applicable laws,
rules and regulations relating to employment, civil rights and equal employment
opportunities, including but not limited to, the Civil Rights Act of 1964, the
Fair Labor Standards Act, and Americans with Disabilities Act, each as amended.
3.17 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.17 sets forth each Employment Benefit Plan of the
Company. With respect to each Employee Benefit Plan (as defined in clause (d)
below) of the Company, (i) each has been administered in compliance with its
terms and with all applicable laws including, without
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limitation, ERISA and the Code; (ii) no actions, suits, claims or disputes are
pending or threatened; (iii) no audits, proceedings, claims or demands are
pending with any Governmental Authority; (iv) all reports, returns and similar
documents required to be filed with any Governmental Authority or distributed to
any plan participant have been duly or timely filed or distributed; (v) no
"prohibited transaction" has occurred within the meaning of ERISA or the Code;
(vi) no such plan provides medical or dental benefits for any current or former
employees of the Company or its predecessors after termination of employment
other than rights that may be provided by law; (vii) no such plan obligates the
Company to pay separation, severance, termination or similar benefits as a
result of any transaction contemplated by this Agreement or solely as a result
of a "change of control" (as defined in Section 280G of the Code); (viii) all
required or discretionary (in accordance with historical practices) payments,
premiums, contributions, reimbursements or accruals for all periods ending prior
to or as of the Closing shall have been made or properly accrued on the Current
Balance Sheet or will be properly accrued on the books and records of the
Company as of the Closing; (ix) no such plan has any unfunded liabilities which
are not reflected on the Current Balance Sheet or the books and records of the
Company; (x) the Company has complied with the notice and continuation of
coverage requirements of Section 4980B of the Code and the regulations
thereunder with respect to any group health plan within the meaning of Code
Section 5000(b)(1); and (xi) the Company does not participate in, or have ever
participated in, or have any withdrawal liability under ERISA with respect to, a
"multiemployer plan" (as defined in Section 3(37) of ERISA). True and accurate
copies of each Employee Benefit Plan of the Company, together with the most
recent annual reports on Form 5500, all IRS favorable determination letters and
summary plan descriptions for such plans have been furnished to Nations.
(b) With respect to each Employee Benefit Plan of the Company
intended to qualify under Code Section 401(a) or 403(a), (i) the Internal
Revenue Service has issued a favorable determination letter, which has not been
revoked, that any such plan is tax-qualified and exempt from federal income tax;
(ii) no reportable event (within the meaning of Section 4043 of ERISA) has
occurred; and (iii) the present value of all liabilities under any such plan
will not exceed the current fair market value of the assets of such plan
(determined using the actuarial assumption used for the most recent actuarial
valuation for such plan).
(c) Nations will not suffer any loss, cost or liability as a result
of any claim that the Company, or any entity that would be aggregated with the
Company under Code Section 414(b), (c), (m) or (0), has not complied with the
provisions of paragraphs (a) and (b) above with respect to each Employee Benefit
Plan maintained by any such entity.
(d) For purposes hereof, "Employee Benefit Plan" means any: (i)
employee pension benefit plan as defined in Section 3(2) of ERISA; (ii)
multiemployer plan as defined in Section 3(37) of ERISA; (iii) employee welfare
benefit plan as defined in Section 3(1) of ERISA; and (iv) any stock option,
bonus, stock purchase, or insurance plan and any severance or termination pay
plan or policy in which employees, spouses or dependents participate.
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3.18 TAX MATTERS. Except as set forth on Schedule 3.18, all Tax Returns
required to be filed prior to the date hereof with respect to the Company or its
respective income, properties, franchises or operations have been timely filed,
each such Tax Return has been prepared in compliance with all applicable laws
and regulations, and all such Tax Returns are true and accurate in all respects.
All Taxes due and payable by or with respect to the Company and the Business
have been paid or are accrued on the Current Balance Sheet. The Company has
withheld and paid all Taxes to the appropriate Governmental Authority 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.
With respect to each taxable period of the Company: (i) no deficiency or
proposed adjustment which has not been settled or otherwise resolved for any
amount of Taxes has been asserted or assessed by any taxing authority against
the Company; (ii) the Company has not consented to extend the time in which any
Taxes may be assessed or collected by any taxing authority; (iii) the Company
has not requested or been granted an extension of the time for filing any Tax
Return to a date later than the Closing; (iv) there is no action, suit, taxing
authority proceeding, or audit or claim for refund now in progress, pending or
threatened against or with respect to the Company regarding Taxes; and (v) there
are no Liens for Taxes (other than for current Taxes not yet due and payable)
upon the Assets of the Company. No sales or use tax (other than sales tax on
motor vehicles), non-recurring intangible tax, documentary stamp tax or other
excise tax (or comparable tax imposed by any governmental entity) will be
payable by the Company or Nations by virtue of the transactions contemplated in
this Agreement.
3.19 INSURANCE. Schedule 3.19 provides a list of all insurance policies of
the Company currently in force and provides the insurer, type of coverage and
policy period for each policy. The Company is covered by valid, outstanding and
enforceable policies of insurance issued to it covering its properties, assets
and business against risks of the nature normally insured against by
corporations in the same or similar lines of business and in coverage amounts
typically and reasonably carried by such corporations (the "Insurance
Policies"). Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid. The Company has complied with the
provisions of such Insurance Policies. During the three year period to the date
hereof, the Company has not made any claims under any of the Insurance Policies,
and has suffered no losses that would give rise to any such claims, for an
amount in excess of $10,000. The Company has not failed to give, in a timely
manner, any notice required under any of the Insurance Policies to preserve its
rights thereunder. Through the Closing Date, each of the Insurance Policies will
be in full force and effect.
3.20 RECEIVABLES/EMPLOYEE LOANS. All of the receivables of the Company are
valid and legally binding, represent bona fide transactions and arose in the
ordinary course of business of the Company. All of such receivables are good and
collectible receivables, and eighty percent (80%) will be collected in full
within 120 days of the Closing and twenty percent (20%) will be collected in
full within 180 days of the Closing, without set off or counterclaims, subject
to the allowance for doubtful accounts, if any, set forth on the Current Balance
Sheet, as reasonably adjusted since the date of the Current Balance Sheet in the
ordinary course of business consistent with past practice.
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Schedule 3.20 sets forth all loans to Company employees except for the
Shareholder, the current balance of which does not exceed $20,000. Each such
loan is in writing and is a binding and enforceable obligation of such
employees.
3.21 LICENSES AND PERMITS. The Company possesses all licenses and required
governmental or official approvals, permits or authorizations (collectively, the
"Permits") for the Business and operations, and Schedule 3.21 sets forth a true,
complete and accurate list of all such Permits. All such Permits are valid and
in full force and effect, the Company is in full compliance with the respective
requirements thereof, and no proceeding is pending or threatened to revoke or
amend any of them. None of such Permits is or will be impaired or in any way
affected by the execution and delivery of this Agreement or the transactions
contemplated hereby.
3.22 RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS; AFFILIATED TRANSACTIONS.
No current customer or supplier of the Company has threatened to terminate its
business relationship with the Company for any reason. Schedule 3.22 sets forth
the top 25 suppliers of goods and/or services to the Company. The Company has no
direct or indirect interest in any customer, supplier or competitor of the
Company, or in any person from whom or to whom the Company leases real or
personal property, except for the Real Property Leases. No officer, director, or
shareholder of the Company, nor any person related by blood or marriage to any
such person, nor any entity in which any such person owns any beneficial
interest, is a party to any Contract or transaction with the Company has any
interest in any property used by the Company.
3.23 CONTRACTS. Schedule 3.23 sets forth a list of each Contract to which
the Company is a party or by which it or its properties and assets are bound and
which is material to its business, assets, properties or prospects (the
"Material Contracts"), true, correct and complete copies of which have been
provided to Nations. The copy of each Material Contract furnished to Nations is
a true and complete copy of the document it purports to represent and reflects
all amendments thereto made through the date of this Agreement. The Company has
not violated any of the terms or conditions of any Material Contract or any term
or condition which would permit termination or modification of any Material
Contract, and all of the covenants to be performed by any other party thereto
have been fully performed, and there are no claims for breach or indemnification
or notice of default or termination under any Material Contract. No event has
occurred which constitutes, or after notice or the passage of time, or both,
would constitute, a default by the Company under any Material Contract, and no
such event has occurred which constitutes or would constitute a default by any
other party. The Company is not subject to any liability or payment resulting
from renegotiation of amounts paid under any Material Contract. As used in this
Section 3.23, Material Contracts shall include, without limitation, formal or
informal, written or oral, in each case which is material to the business,
assets, properties or prospects of the Company, (a) loan agreements, indentures,
mortgages, pledges, hypothecations, deeds of trust, conditional sale or title
retention agreements, security agreements, equipment financing obligations or
guaranties, or other sources of contingent liability in respect of any
indebtedness or obligations to any other Person(s), or letters of intent or
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commitment letters with respect to same; (b) contracts obligating the Company to
provide products or services for a period of one year or more, excluding
standard collection contracts entered into in the ordinary course of its
business without material modification from the preprinted forms used by the
Company in the ordinary course of business, copies of which have been supplied
to Nations; (c) leases of real property and leases of personal property not
cancelable without penalty on notice of sixty (60) days or less or calling for
payment of an annual gross rental exceeding $10,000; (d) distribution, sales
agency or franchise or similar agreements, or agreements providing for an
independent contractor's services, or letters of intent with respect to same;
(e) employment agreements, management service agreements, consulting agreements,
confidentiality agreements, non-competition agreements, employee handbooks,
policy statements and any other agreements relating to any employee, officer or
director of any of the Company; (f) licenses, assignments or transfers of
trademarks, trade names, service marks, patents, copyrights, trade secrets or
know how, or other agreements regarding proprietary rights or intellectual
property; (g) any Contract relating to pending capital expenditures by any of
the Company; (h) any non-competition agreements restricting the Company in any
manner; and (i) other material Contracts or understandings, irrespective of
subject matter and whether or not in writing, not entered into in the ordinary
course of business by the Company and not otherwise disclosed on the Schedules
calling for payments by the Company exceeding $10,000.
3.24 ACCURACY OF INFORMATION FURNISHED. No statement or information made
or furnished by the Company or the Shareholder to Nations or any of Nations'
representatives, including those contained in this Agreement and the various
schedules attached hereto and the other information and statements referred to
herein and previously furnished by the Company and the Shareholder, contains or
shall contain any untrue statement of a fact or omits or shall omit any fact
necessary to make the information contained therein not misleading. The Company
and the Shareholder have provided Nations with true, accurate and complete
copies of all documents listed or described in the various Schedules attached
hereto.
3.25 CUSTOMERS. All of the customers listed on the customer lists attached
hereto as Schedule 3.25 are subject to valid and enforceable customer contracts.
True, correct and complete copies of the form of such contracts have been
furnished by the Company to Nations. The Company has not violated any of the
terms or conditions of any of the customer contracts, and all of the covenants
to be performed by any other party thereto have been fully performed and there
are no claims for breach or indemnification or notice of default or termination
thereunder. Schedule 3.25 notes the top 25 customers of the Company as measured
by annual revenue for the last twelve months.
3.26 INTELLECTUAL PROPERTY. The Company has full legal right, title and
interest to all of the proprietary rights of the Company, including without
limitation all trademarks, trade names, patents, patent applications, licenses
thereof, trade secrets, computer software, slogans, copyrights, processes,
operating rights, other licenses and permits and other similar intangible
property and rights relating
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to the Business, and all goodwill developed through the use of such property and
rights (collectively, "Intellectual Property"), as more particularly described
on Schedule 3.26 attached hereto and has not granted any rights in or to the
same to any third party. The Business as presently conducted, and the
unrestricted conduct and the unrestricted use and exploitation of the
Intellectual Property, does not infringe or misappropriate any rights held or
asserted by any Person, and no Person is infringing on the Intellectual
Property. No payments are required for the continued use of the Intellectual
Property. None of the Intellectual Property has ever been declared invalid or
unenforceable, or is the subject of any pending or threatened action for
opposition, cancellation, declaration, infringement, or invalidity,
unenforceability or misappropriation or like claim, action or proceeding.
3.27 BANK ACCOUNTS. Schedule 3.27 lists each account of each of the
Company with any bank, broker or other depository institution, and the names of
all persons authorized to withdraw funds from each such account, and the
locations of all safe deposit boxes of the Company and the names of all persons
authorized to have access to such safe deposit boxes.
3.28 NAMES; PRIOR ACQUISITIONS. All names under which the Company does
business as of the date hereof are specified on Schedule 3.28. Except as
otherwise disclosed in Schedule 3.28, the Company has not changed its name or
used any assumed or fictitious name or been the surviving entity in a merger,
acquired any business or changed its principal place of business or chief
executive office, within the past three years.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 CONDUCT OF BUSINESS PENDING THE CLOSING. The Company covenants and
agrees that, between the date of this Agreement and the Closing Date, the
Business shall be conducted only in, and shall not take any action except in,
the ordinary course of business consistent with past practice. The Company shall
use its reasonable best efforts to preserve intact its business organization, to
keep available the services of its current officers, employees and consultants,
and to preserve its present relationships with customers, suppliers and other
persons with which it has significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement, the
Company shall not between the date of this Agreement and the Closing Date,
directly or indirectly, do or propose or agree to do any of the following
without the prior written consent of Nations: amend or otherwise change its
articles of incorporation or bylaws or equivalent organizational documents;
issue or authorize the issuance of, any shares of its capital stock of any
class, or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock or other ownership interest;
declare, set aside, make or pay any dividend or other distribution, payable in
cash, stock, property or otherwise, with respect to any of its capital stock;
reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock; acquire (including, without
limitation, for cash, or shares of stock, property
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or services, by merger, consolidation or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof; (f) incur any additional indebtedness or prepay any
Indebtedness other than in the ordinary course of business consistent with past
practices; (g) make any loans or advances to any person or entity or guarantee
the indebtedness of any person or entity, except in the ordinary course of
business consistent with past practice; (h) sell, dispose of or encumber any of
its assets, other than in the ordinary course of business, consistent with past
practice; (i) enter into, modify or terminate, any Contract, other than in the
ordinary course of business consistent with past practice; (j) pay any bonus to
or increase the compensation or benefits payable or to become payable to its
employees, independent contractors or consultants; (k) pay, discharge or satisfy
any existing claims, liabilities or obligations other than in the ordinary
course of business consistent with past practice; (l) increase or decrease
prices charged to its customers, except for previously announced price changes,
or take any other action which might reasonably result in any increase in the
loss of customers; or (m) agree, in writing or otherwise, to take or authorize
any of the foregoing actions or any other action which would make any
representation or warranty in Article III untrue or incorrect.
ARTICLE V
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
5.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby and to
satisfy the conditions set forth in Article VI and Article VII. The Shareholder
shall cause the Company to comply with all of the covenants of the Company under
this Agreement.
5.2 OTHER ACTIONS. Each of the parties hereto shall use their reasonable
best efforts to take, or cause to be taken, all appropriate actions, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated herein, including, without limitation, using their best efforts to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of any Governmental Authority and parties to Contracts
with the Company as are necessary for the consummation of the transactions
contemplated hereby. The Shareholder agrees to cooperate and assist and cause
its accountants to assist Nations in its audit of the Company, including but not
limited to the execution by Shareholder of customary and reasonable audit
representation letters. Each of the parties agrees to cooperate with the others
in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation in connection with the transactions contemplated by this
Agreement, and to use their respective best efforts to agree jointly on a method
to overcome any objections by any Governmental Authority to any such
transactions. The parties also agree to use best efforts to defend all lawsuits
or other legal
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proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby and to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby.
5.3 NOTIFICATION OF CERTAIN MATTERS. The Company and the Shareholder shall
give prompt notice to Nations of the occurrence or non-occurrence of any event
which would likely cause any representation or warranty contained herein to be
untrue or inaccurate, or any covenant, condition, or agreement contained herein
not to be complied with or satisfied.
5.4 CONFIDENTIALITY; PUBLICITY. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement or the subject matter or terms hereof without the
prior consent of the other parties hereto. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto without the prior approval of the other
parties.
5.5 NO OTHER DISCUSSIONS. The Company and the Shareholder agree that the
Company and the Shareholder and their respective Affiliates, employees, agents
and representatives will not (i) initiate, encourage the initiation by others of
discussions or negotiations with third parties or respond to solicitations by
third persons relating to any merger, sale or other disposition of any
substantial part of the assets, business or properties of the Company (whether
by merger, consolidation, sale of stock or otherwise), or (ii) enter into any
agreement or commitment (whether or not binding) with respect to any of the
foregoing transactions. The Company and the Shareholder will immediately notify
Nations if any third party attempts to initiate any solicitation, discussion or
negotiation with respect to any of the foregoing transactions.
5.6 DUE DILIGENCE REVIEW AND ENVIRONMENTAL ASSESSMENT. Nations shall be
entitled to conduct prior to the Closing at its cost a due diligence review of
the assets, properties, books and records of the Company and an environmental
assessment of the Leased Premises (hereinafter referred to as "Environmental
Assessment"). The Company shall cause their respective directors, officers,
employees, auditors, counsel and agents to afford Nations and its officers,
employees, auditors, counsel and agents reasonable access at all reasonable
times to the properties, offices, and other facilities of the Company, to its
respective officers and employees and to all books and records, and shall
furnish such persons with all financial, operating and other data and
information as may be requested. The Environmental Assessment may include a
physical examination of the Leased Premises and any structures, facilities, or
equipment located thereon, soil samples, ground and surface water samples,
storage tank testing and review of pertinent records, documents, and licenses of
the Company. Nations shall provide a copy of any Environmental Assessments to
the Company. Nations shall indemnify and hold harmless the Company from any
damages to the Leased Premises caused by such Environmental Assessments. If the
Environmental Assessment identifies environmental contamination which requires
remediation or further evaluation or if the results of the
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Environmental Assessment or due diligence review are otherwise not satisfactory
to Nations in its sole discretion, then Nations may elect not to close the
transactions contemplated by this Agreement and to terminate this Agreement.
Nations' failure or decision not to conduct any such due diligence review or
Environmental Assessment, and any information provided to or obtained by
Nations, shall not affect any representation or warranty of the Company or the
Shareholder under this Agreement. Nations shall complete its due diligence
review by June 12, 1998 and its Environmental Assessments shall be completed by
June 24, 1998 provided, however, if Company does not provide the materials
reasonably requested by Nations, Nations may extend the due diligence and
Environmental Assessment periods for a reasonable period of time.
5.7 RESTRICTIVE COVENANTS. In order to assure that Nations will realize
the benefits of the transactions contemplated hereby, the Company and the
Shareholder agree that he, will not:
(a) for a period of five (5) years following the Closing, directly or
indirectly, alone or as a partner, joint venturer, officer, director, employee,
consultant, agent, independent contractor, or security holder, of any company or
business, engage in, or finance, or provide financial assistance with respect
to, any business activity in the business of renting, selling, leasing,
distributing, servicing or repairing new or used equipment, spare parts and
related supplies to industrial, manufacturing, or construction customers (the
"Equipment Business") in any county in any state in the United States in which
NationsRent, Inc. or any of its subsidiaries, successors, or assigns
(collectively, the "Nations Companies") conducts such business at the time such
person commences to engage in such activity; provided, however, that the
beneficial ownership of less than five percent (5%) of any class of securities
of any entity having a class of equity securities actively traded on a national
securities exchange or over-the-counter market shall not be deemed, in and of
itself, to violate the prohibitions of this Section;
(b) for a period of five (5) years following the Closing, directly or
indirectly, (i) induce any customer acquired hereunder or any other customer of
the Nations Companies to patronize any business which is directly or indirectly
in competition with the Equipment Business conducted by any of the Nations
Companies; (ii) canvass, solicit or accept from any Person which is a customer
of the Equipment Business conducted by any of the Nations Companies, any such
competitive business; or (iii) request or advise any customer of the Equipment
Business conducted by any of the Nations Companies to withdraw, curtail or
cancel any such customer's business with the Nations Companies or their
successors;
(c) for a period of five (5) years following the Closing, directly or
indirectly, employ any person who was employed by the Nations Companies, within
six (6) months prior to the date being employed by the Nations Companies, or in
any manner seek to induce any employee of the Nations Companies to leave his or
her employment; and
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(d) at any time following the Closing Date, directly or indirectly, in
any way utilize, disclose, copy, reproduce or retain in his possession any of
the Companies' proprietary rights or records acquired hereunder, including, but
not limited to, any customer lists.
The parties acknowledge that should Nations vacate the Company facilities listed
at Section 5.9, or either of them, the Shareholder may lease such premises to
any Person including a competitor of Nations. The Company and the Shareholder
agree and acknowledge that the restrictions contained in this Section are
reasonable in scope and duration, and are necessary to protect the Nations
Companies. The Company and the Shareholder agree and acknowledge that any breach
of this Section will cause irreparable injury to the Nations Companies and upon
any breach or threatened breach of any provision of this Section, the Nations
Companies shall be entitled to injunctive relief, specific performance or other
equitable relief, without the necessity of posting bond; provided, however, that
this shall in no way limit any other remedies which the Nations Companies may
have as a result of such breach, including the right to seek monetary damages.
The parties hereto agree that Nations may assign, without limitation, the
foregoing restrictive covenants to any successor to Nations's Equipment
Business.
5.8 EMPLOYMENT AGREEMENTS.
(a) The Shareholder shall on the Closing Date enter into an employment
agreement with the Company, the form of which is provided at Exhibit B (the
"Shareholder Employment Agreement").
(b) The Company and Shareholder shall cause Brian Hindman and Greg
Miller ("Company Management") to enter into three (3) year employment agreements
with the Company, the form of which is provided at Exhibit C (the "Company
Management Employment Agreement").
5.9 LEASES AND OTHER ASSETS.
(a) On the Closing Date the Company shall enter into leases (the form
of which is attached as Exhibit D (the "Leases") providing for the lease of the
Company facilities at 1335 E Eight Mile Road, Hazel Park Michigan at $7,887 per
month until such time that the Landlord completes its purchase and renovation
and receives a temporary or permanent certificate of occupancy of an adjacent
property at which time the rate shall be $15,800 per month; and 48595 Grand
River, Novi, Michigan at $11,000 per month. Such other terms and conditions are
provided in the form of lease.
(b) The Company shall prior to the Closing Date distribute its rights
to that certain sublease between Detroit Cellular Telephone Company and the
Company, the life insurance policies and artwork listed on Schedule 5.9(b) to
the Shareholder.
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(c) Nations acknowledges it has no interest in certain tickets to the
Detroit Red Wings hockey games.
5.10 CONTRACTS; CONSENTS. Prior to the Closing, (i) the Company shall not
terminate or otherwise modify or amend any of its Contracts, and (ii) the
Company shall receive consents to the transactions contemplated hereby and
waivers of rights to terminate or modify any rights or obligations of the
Company from any Person(s) from whom such consent or waiver is required under
any Contract to which the Company or the Assets are bound as of a date not more
than ten (10) days prior to the Closing Date, or who, as a result of the
transactions contemplated hereby, would have such rights to terminate or modify
such contracts, either by the terms thereof or as a matter of law.
5.11 RECEIVABLES. At or prior to the Closing Date, the Company shall
deliver to Nations a true, complete and correct list of all receivables of the
Company.
5.12 PAYOFF AND ESTOPPEL LETTERS. Prior to the Closing, the Company shall
request and deliver to Nations payoff and estoppel letters from all holders of
any Indebtedness of the Company which letters shall contain payoff amounts, per
diem interest, wire transfer instructions and an agreement to deliver to
Nations, upon full payment of any such Indebtedness, UCC-3 termination
statements, satisfactions of mortgage or other appropriate releases and any
original promissory notes or other evidences of indebtedness marked canceled.
5.13 SHAREHOLDERS VOTE. The Shareholder, in executing this Agreement,
consent as shareholder of the Company to the transactions contemplated hereby,
and waive notice of any meeting in connection therewith.
5.14 OFFICER LOAN. Shareholder shall at Closing pay in full all Officer
and Shareholder loans.
5.15 PROFIT SHARING PLAN. The Shareholder shall cause the Company prior to
Closing to terminate the Company Profit Sharing Plan (the "Plan"). Nations
agrees to contribute to the unfunded portion of the 1998 fiscal year
contribution to the Plan up to an amount not exceeding in total $70,000. Until
such time as the assets of the Plan are distributed, James E. Kelly shall remain
as sole trustee of the Plan. Nations will cooperate in the termination and
distribution of the Plan assets.
5.16 NOTE ISSUANCE. Nations shall issue to the Shareholder a second
promissory note (the "Second Promissory Note") in a principal amount not to
exceed Five Hundred Thousand Dollars ($500,000) promptly after that date which
is twenty-four months after Nations completes its initial public offering
("Adjustment Date"), if, and only if during such period (the "Adjustment
Period") the Shareholder could not have (i) converted the Promissory Note, in
accordance with Section 1.6 thereof, to common stock of Nations, $.01 par value
per share (the "Nations Common Stock) with
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an aggregate value (such stock to be valued at the average closing price per
share of Nations Common Stock as quoted by the Wall Street Journal during any
twenty day consecutive period during the Adjustment Period) of Three Million
Dollars (the "Converted Value") and (ii) sold, immediately following such
conversion of all of such Nations Common Stock in year one of the Adjustment
Period in accordance with an effective registration statement that includes the
Shareholder's converted shares, (the "Registration Statement") or in year two of
the Adjustment Period in accordance with Securities and Exchange Commission Rule
144 (without regard to any other shares held by Shareholder) or the Registration
Statement. A sale of the Shareholder's shares within twenty days after the
Adjustment Period shall satisfy the condition above. The amount of the Second
Promissory Note shall be determined as of the Adjustment Date, and be equal to
the lesser of (x) the difference between Three Million Dollars ($3,000,000)
minus the value of the number of shares of Nations Common Stock the Promissory
Note could have been converted into under Section 1.6 thereof on the Adjustment
Date (for purposes of this clause (x) the market value of the Nations Common
Stock shall be the average closing price per share as quoted by the Wall Street
Journal for the twenty consecutive trading days prior to the termination of the
Adjustment Period); or (y) $500,000 (the "Adjustment Amount"). The Second
Promissory Note shall not be convertible into Nations Common Stock. If the
Second Promissory Note is issued Nations shall pay interest upon issuance to the
Shareholder on the Adjustment Amount at the rate of seven percent (7%) per annum
commencing from the Closing Date. In addition, the terms of the Second
Promissory Note shall be the same as the Promissory Note except for sections 1.5
and 1.6 and further except that repayment may occur at Nations option at any
time.
5.17 SCHEDULES. The parties hereto acknowledge and agree that this
Agreement is being entered into by each such party as of the date hereof without
the benefit of completed Schedules being attached hereto. The Shareholder and
the Company agree to work diligently and in good faith to prepare the Schedules
and deliver them to Nations by June 8, 1998. Nations shall in good faith review
and comment upon such Schedules. Should Nations determine in its reasonable
judgement that certain disclosures on such Schedules make it inadvisable to
proceed with the transaction contemplated hereby they shall advise the
Shareholder and the Company in writing of its determination. The Shareholder and
the Company shall have five days to take such steps to alleviate Nations'
concerns. If the Shareholder and the Company do not take sufficient action to
alleviate Nations' concerns then this Agreement shall be deemed to be
terminated, each party shall be released from their respective obligations
hereunder, and no party shall have any obligation to any other party hereunder
on account of this Agreement or the transactions contemplated hereby.
5.18 REGISTRATION RIGHTS. On the Closing Date, Nations shall provide to
Shareholder certain registration rights pursuant to a registration rights
agreement, the form of which is attached as Exhibit E (the "Registration Rights
Agreement").
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ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF NATIONS
The obligations of Nations to effect the transactions contemplated hereby
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions, any or all of which may be waived in whole or in part in
writing by Nations:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Company and the
Shareholder contained in this Agreement shall be true and correct at and as of
the Closing Date with the same force and effect as though made at and as of that
time except (i) for matters specifically permitted by or disclosed on any
Schedule to this Agreement, and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and correct
as of such date. Each of the Company and Shareholder shall have performed and
complied with all of their respective obligations required by this Agreement to
be performed or complied with at or prior to the Closing Date. Each of the
Company and Shareholder shall have delivered to Nations a certificate, dated as
of the Closing Date, duly signed (in the case of the Company by its President),
certifying that such representations and warranties are true and correct and
that all such obligations have been complied with and performed.
6.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between the
date hereof and the Closing Date, (i) there shall have been no Material Adverse
Change in the Assets or the Business, (ii) there shall have been no adverse
federal, state or local legislative or regulatory change affecting in any
respect the Assets or the Business, and (iii) none of the Assets shall have been
damaged by fire, flood, casualty, act of God or the public enemy or other cause
(regardless of insurance coverage for such damage), and there shall have been
delivered to Nations a certificate to that effect, dated the Closing Date and
signed by or on behalf of the Company and the Shareholder.
6.3 CORPORATE CERTIFICATE. The Company shall have delivered to Nations (i)
copies of its articles of incorporation and bylaws as in effect immediately
prior to the Closing Date, (ii) copies of resolutions adopted by its Board of
Directors and shareholder authorizing the transactions contemplated by this
Agreement, and (iii) a certificate of good standing issued by the Secretary of
State of Michigan as of a date not more than ten (10) days prior to the Closing
Date, certified in the case of subsections (i) and (ii) of this Section as of
the Closing Date by the Secretary of the Company as being true, correct and
complete.
6.4 DELIVERY OF THE SHARES. At the Closing, Shareholder shall duly endorse
for transfer and deliver to Nations (or its assignee) the Shares and such other
instruments of transfer of title as are necessary to transfer to Nations (or its
assignee) good and marketable title to the Shares free and clear of any Liens.
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6.5 OPINION OF COUNSEL. Nations shall have received an opinion dated as of
the Closing Date from counsel for the Company and the Shareholder, in form and
substance acceptable to Nations, but limited to Michigan law only, to the effect
that:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Michigan and is authorized
to carry on the business now conducted by it and to own or lease the properties
now owned or leased by it;
(ii) The Company has obtained all necessary authorizations and
consents of its Boards of Directors and Shareholder to consummate the
Acquisition and the other transactions contemplated hereby;
(iii) Such counsel after due investigation has no actual knowledge or
have reason to believe that there is any litigation, proceeding or investigation
pending or threatened which might result in any Material Adverse Effect on the
Company, or which questions the validity of this Agreement;
(iv) The execution and delivery of this Agreement by the Company and
the Shareholder, the performance by the Company and the Shareholder of their
respective obligations hereunder and the consummation by the Company and the
Shareholder of the transactions contemplated by this Agreement will not (a)
contravene any provision of the articles of incorporation or bylaws of the
Company, (b) violate or conflict with any law, statute, ordinance, rule,
regulation, to the best of our knowledge, decree, writ, injunction, judgment or
order of any Governmental Authority or of any arbitration award which is either
applicable to, binding upon or enforceable against the Company, or the
Shareholder, (c) to the best of our knowledge, conflict with, result in any
breach of, or constitute a default (or an event which would, with the passage of
time or the giving of notice or both, constitute a default) under, or give rise
to a right to terminate, amend, modify, abandon or accelerate, any Contract
which is applicable to, binding upon or enforceable against the Company or the
Shareholder, (d) result in or require the creation or imposition of any Lien
upon or with respect to any of the Assets, or (e) require the consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, any court or tribunal or any other Person; and
(v) This Agreement is a valid and binding obligation of the Company
and the Shareholder, and enforceable against each of them in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or general equitable principles.
(vi) The Company has the corporate power and authority to borrow
money, obtain extensions of credit and to grant security interests in its
properties.
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(vii) The authorized stock of the Company consists of 50,000 shares
of $1.00 par value common stock of which 1,000 shares are issued and outstanding
and all of which are held of record as set forth on Schedule 3.4(b) of the
Agreement. The Company's common stock is validly issued and nonassessable and is
not subject to any statutory preemptive rights. The common stock outstanding
constitutes of record all of the outstanding capital stock of the Company. To
our actual knowledge the Company has no outstanding rights or options to
subscribe for or other agreements providing for or requiring the issuance by the
Company of any capital stock or any securities convertible into or exchangeable
for its capital stock.
Nation's lenders shall also receive an opinion dated as of the Closing Date with
respect to subparagraphs (i), (iii), except for the last phrase consisting of
eight words, (vi) and (vii).
6.6 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the transactions contemplated hereby, and which, in the judgment of Nations,
makes it inadvisable to proceed with the transactions contemplated hereby.
6.7 DUE DILIGENCE REVIEW, SCHEDULES. Nations shall have completed its due
diligence review of the Company, the Assets and the Business pursuant to Section
5.6, and shall be satisfied with the results of such review and assessment.
Nations shall have accepted the Schedules in accordance with Section 5.17.
6.8 TRANSACTION DOCUMENTS. The Company shall have delivered the executed
Transaction Documents.
6.9 PAYMENT OF OFFICER LOANS. Shareholder shall have paid in full the
Shareholder and Officer loans.
6.10 CONSENTS. The Company shall have received the consents to the
transactions contemplated hereby in accordance with Section 5.10 hereof.
6.11 RESIGNATION OF MEMBERS OF BOARD OF DIRECTORS. The Board of Directors
of the Company shall have submitted their resignation from the Board of
Directors to the Company effective as of the Closing Date.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
AND THE SHAREHOLDER
The obligations of the Company and the Shareholder to effect the
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, any or all of which may be
waived in whole or in part in writing by the Company and the Shareholder:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Nations contained in this
Agreement shall be true and correct at and as of the Closing Date with the same
force and effect as though made at and as of that time except (i) for changes
specifically permitted by or disclosed pursuant to this Agreement, and (ii) that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date. Nations shall
have performed and complied with all of its obligations required by this
Agreement to be performed or complied with at or prior to the Closing Date.
Nations shall have delivered to the Company, the Companies and the Shareholders
a certificate, dated as of the Closing Date, and signed by an officer thereof,
certifying that such representations and warranties are true and correct, and
that all such obligations have been performed and complied with, in all material
respects.
7.2 PURCHASE PRICE. At the Closing, Nations shall (i) pay to the
Shareholder the Closing Payment; and (ii) deliver the Transaction Documents and
the other documents contemplated hereby.
7.3 NO ORDER OR INJUNCTION. There shall not be pending by or before any
court or other governmental body an order or injunction restraining or
prohibiting the transactions contemplated hereby.
7.4 SCHEDULES; TRANSACTION DOCUMENTS. Nations shall have accepted the
Schedules in accordance with Section 5.17 and Nations shall have delivered
the executed Transaction Documents.
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ARTICLE VIII
INDEMNIFICATION
8.1 AGREEMENT TO INDEMNIFY. Shareholder, agrees to protect, defend,
indemnify and hold Nations harmless from and against the aggregate of all
expenses, losses, costs, deficiencies, liabilities and damages (including,
without limitation, related counsel and paralegal fees and expenses) incurred or
suffered by Nations resulting from or arising out of (i) any breach of a
representation or warranty made by the Company or Shareholder in or pursuant to
this Agreement, (ii) any breach of the covenants or agreements made by the
Company or the Shareholder in this Agreement, (iii) any inaccuracy in any
certificate delivered by the Company or the Shareholder pursuant to this
Agreement, or (iv) any loss of rights of use, occupancy or ownership with
respect to any defaults by the Shareholder pursuant to that certain Land
Contract dated January 25, 1983 relating to property in the City of Hazel Park,
Oakland County, Michigan among T. Cleary, Mabel Cleary, James E. Kelly and
Virginia M. Kelly and that certain Addendum to Land Contract dated January 25,
1983 or as a result of the effect or operation of Paragraph 3 of such Addendum
to Land Contract (collectively, "Indemnifiable Damages"). Without limiting the
generality of the foregoing with respect to the measurement of Indemnifiable
Damages, Nations shall have the right to be put in the same pre-tax consolidated
financial position as it would have been in had each of the representations and
warranties of the Company and the Shareholder hereunder been true and correct
and had the agreements and covenants of the Company and the Shareholder been
performed in full. Notwithstanding anything to the contrary contained herein,
Nations shall not be entitled to any Indemnifiable Damages unless the aggregate
of all such Indemnifiable Damages exceeds $65,000.00 (the "Indemnification
Threshold"), in which case, Nations shall be entitled to the full amount of
Indemnifiable Damages above the Indemnification Threshold, except that
Indemnifiable Damages shall be limited to the amount of the Purchase Price in
the case of a breach of Sections 3.1, 3.12, 3.17 and 3.18 herein, and to Three
Million Dollars ($3,000,000.00) for all other Indemnifiable Damages.
8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, COVENANTS AND AGREEMENTS.
Each of the representations and warranties made by the Company and the
Shareholder in this Agreement at Sections 3.1, 3.12, 3.17 and 3.18 shall survive
the Closing of the transactions contemplated hereby, subject to any statutes of
limitations. All other representations and warranties made by the Shareholder
shall survive for a period of three (3) years after the Closing. Notwithstanding
any knowledge of facts determined or determinable by any party by investigation,
each party shall have the right to fully rely on the representations,
warranties, covenants and agreements of the other parties contained in this
Agreement or in any other documents or papers delivered in connection herewith.
Each representation, warranty, covenant and agreement of the parties contained
in this Agreement is independent of each other representation, warranty,
covenant and agreement. All covenants and obligations of the parties will
survive the Closing hereunder and be enforceable in accordance with their
respective terms.
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8.3 SET OFF AND SECURITY FOR INDEMNIFICATION OBLIGATIONS. Shareholder
agrees that Nations may set off against and recoup from the Promissory Note and
the Earn-Out Amount any Indemnifiable Damages for which the Shareholder may be
responsible pursuant to this Agreement. Should the Promissory Note be (in
accordance with its terms) converted to Nations Common Stock, `the Shareholder
does hereby grant a first priority security interest in, and pledge and instruct
Nations to set aside and hold back Nations Common Stock equal to One Million
Dollars (the "Held Back Shares"). Nations may set off against the Held Back
Shares any Indemnifiable Damages for which the Shareholder is responsible in
accordance with this Agreement. The set off and hold back rights are subject,
however, to the following terms and conditions:
(a) Nations shall give written notice to the Shareholder of any claim
for Indemnifiable Damages or any other damages hereunder, which notice shall set
forth (i) the amount of Indemnifiable Damages or other loss, damage, cost or
expense which Nations claims to have sustained by reason thereof, and (ii) the
basis of the claim therefor.
(b) Such set off and recoupment shall be effected on the later to
occur of the expiration of ten (10) days from the date of such notice (the
"Notice of Contest Period") or, if such claim is contested, the date the dispute
is resolved.
(c) If, prior to the expiration of the Notice of Contest Period, the
Shareholder shall notify Nations in writing of an intention to dispute the claim
and if such dispute is not resolved within thirty (30) days after expiration of
such period (the "Resolution Period"), then Nations may elect that such dispute
shall be resolved by a committee of three (3) arbitrators (one appointed by the
Shareholder, one appointed by Nations and one appointed by the two arbitrators
so appointed), which shall be appointed within sixty (60) days after the
expiration of the Resolution Period. The arbitrators shall abide by the rules of
the American Arbitration Association and their decision shall be made within
forty-five (45) days of being appointed and shall be final and binding on all
parties. The proceedings shall take place in Oakland County, Michigan.
(d) The Held Back Amount shall constitute a deferred payment
obligation of Nations to the Shareholder which shall be paid to the eighteen
months after the Closing Date subject to any setoffs and recoupments by Nations
hereunder. All setoffs, recoupments and payments of Indemnifiable Damages
pursuant to this Section shall be treated as adjustments to the Purchase Price.
8.4 SALE OF, VOTING OF, AND DIVIDENDS ON THE HELD BACK SHARES. Except with
respect to shares transferred pursuant to the foregoing right of setoff (and in
the case of such shares, until the same are transferred), all Held Back Shares
shall be deemed to be owned by the Shareholder and the Shareholder shall be
entitled to sell and vote the same; provided, however, that, there shall also be
deposited with Nations subject to the terms of this Article, all proceeds of
such sale or all shares of Nations Common Stock issued to the Shareholder as a
result of any stock dividend or stock split and
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all cash issuable to the Shareholder as a result of any cash dividend, with
respect to the Held Back Shares. All cash and stock issued or paid upon Held
Back Shares shall be distributed to the Shareholder together with such Held Back
Shares.
8.5 DELIVERY OF HELD BACK SHARES. Nations agrees to deliver to the
Shareholder no later than the eighteen months after the Closing Date any Held
Back Shares then held by it (or proceeds from the Held Back Shares) unless there
then remains unresolved any claim for Indemnifiable Damages or other damages
hereunder as to which notice has been given, in which event any Held Back Shares
remaining on deposit (or proceeds from the sale of Held Back Shares) after such
claim shall have been satisfied shall be returned to the Shareholder promptly
after the time of satisfaction.
8.6 NO BAR; WAIVER. If the Held Back Shares and the Promissory Note is
insufficient to set off any claim for Indemnifiable Damages made hereunder (or
have been delivered to the Shareholder prior to the making or resolution of such
claim), then Nations may take any action or exercise any remedy available to it
by appropriate legal proceedings to collect the Indemnifiable Damages. The
Shareholder hereby waive any rights to contribution or any similar rights they
may have against the Company as a result of their agreement to indemnify Nations
under this Article VIII or otherwise.
8.7 INDEMNIFICATION PROCEDURE. The indemnification obligations under this
Agreement shall be subject to the following procedures:
(a) Third Party Claims. Promptly after receipt by Nations or the
Company (an "Indemnitee") under Section 8.7 of notice of the commencement of any
action against it, such Indemnitee will, if a claim is to be made against the
Shareholder under such Section, give notice to the Shareholder of the
commencement of such action, but the failure to notify the Shareholder will not
relieve the Shareholder of any liability that it may have to any Indemnitee,
except to the extent that the Shareholder demonstrates that the defense of such
action is prejudiced by the Indemnitee's failure to give such notice. With
respect to any such action, the Shareholder will be entitled to participate in
such action and, to the extent that it wishes (unless (i) the Shareholder is
also a party to such action and the Indemnitee determines in good faith that
joint representation would be inappropriate, or (ii) the Shareholder fails to
provide reasonable assurance to the Indemnitee of its financial capacity to
defend such action and provide indemnification with respect to such action), to
assume the defense of such action with counsel satisfactory to the Indemnitee
and, after notice from the Shareholder to the Indemnitee of its election to
assume the defense of such action, the Shareholder will not, as long as it
diligently conducts such defense, be liable to the Indemnitee for any fees of
other counsel or any other expenses with respect to the defense of such action,
in each case subsequently incurred by the Indemnitee in connection with the
defense of such action, other than reasonable costs of investigation. If the
Shareholder assumes the defense of an action, (i) no compromise or settlement of
such claims may be effected by the Shareholder without the Indemnitee's consent
unless (A) there is no finding or admission of any violation of law or any
violation of the rights of any Person and no effect on any other claims that may
be made against the
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Shareholder, and (B) the sole relief provided is monetary damages that are paid
in full by the Shareholder; and (ii)the Indemnitee will have no liability with
respect to any compromise or settlement of such claims effected without its
consent (which may not be unreasonably withheld). If notice is given to the
Shareholder of the commencement of any action and the Shareholder does not,
within ten days after the Indemnitee's notice is given, give notice to the
Indemnitee of its election to assume the defense of such action, the Shareholder
will be bound by any determination made in such action or any reasonable
compromise or settlement effected by the Indemnitee. Notwithstanding the
foregoing, if an Indemnitee determines in good faith that there is a reasonable
probability that an action may adversely affect it or its affiliates other than
as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnitee may, by notice to the
Shareholder, assume the exclusive right to defend, compromise, or settle such
action, but the Shareholder will not be bound by any determination of an action
so defended or any compromise or settlement effected without its consent (which
may not be unreasonably withheld).
(b) Other Claims. A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the Shareholder.
ARTICLE IX
DEFINITIONS
9.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, as in effect on the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and the
treasury regulations promulgated thereunder.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment agreement,
license, instrument, purchase and sales order, undertaking, commitment,
obligation whether written or oral, express or implied.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
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"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, but not limited to, any conditional sale or other
title retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or effect), in the
condition (financial or otherwise), properties, assets, liabilities, rights,
obligations, operations, business or prospects which change (or effect)
individually or in the aggregate, is materially adverse to such condition,
properties, assets, liabilities, rights, obligations, operations, business or
prospects.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, estate, trust, unincorporated association, joint venture,
Governmental Authority or other entity, of whatever nature.
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes; and
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise, property, sales, franchise, intangible, withholding,
social security and unemployment taxes imposed by any federal, state, local or
foreign governmental agency, and any interest or penalties related thereto.
9.2 OTHER DEFINITIONAL PROVISIONS. All terms defined in this Agreement
shall have the defined meanings when used in any certificates, reports or other
documents made or delivered pursuant hereto or thereto, unless the context
otherwise requires. Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa. All matters of an accounting
nature in connection with this Agreement and the transactions contemplated
hereby shall be determined in accordance with GAAP applied on a basis consistent
with prior periods, where applicable except as otherwise provided to the
contrary herein. As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
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ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date: by mutual written consent of all of the parties hereto at any
time prior to the Closing; or by Nations in the event of a material breach by
the Company or the Shareholder of any provision of this Agreement; by the
Company in the event of a material breach by Nations of any provision of this
Agreement; (d) by Nations or the Shareholder in accordance with Section 5.17
hereof, or (e) by Nations or the Company if the Closing shall not have occurred
by July 31, 1998.
10.2 EFFECT OF TERMINATION. Except for the provisions of Section 5.4
hereof, which shall survive any termination of this Agreement, in the event of
termination of this Agreement pursuant to Section 10.1, this Agreement shall
forthwith become void and of no further force and effect, and the parties hereto
shall be released from any and all obligations hereunder; provided, however,
that nothing herein shall relieve any party from liability for the willful
breach of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
ARTICLE XI
GENERAL PROVISIONS
11.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
(a) IF TO NATIONS:
NationsRent, Inc.
450 East Las Olas Boulevard
Ft. Lauderdale, FL 33301
Attn: Gene Ostrow
Telecopy: (954) 760-6565
WITH A COPY TO:
Akerman, Senterfitt & Eidson, P.A.
One S.E. Third Avenue
Miami, Florida 33131
Attn: Stephen K. Roddenberry
Telecopy: (305) 374-5095
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(b) IF TO THE COMPANY OR SHAREHOLDER:
Mr. & Mrs. James E. Kelly
20646 Windham
Macomb Twp., MI 48044
Telecopy: (810) 226-9441
WITH A COPY TO:
Kemp, Klein, Umphrey & Endelman
P.O. Box 4300
Troy, MI 48098 - 4300
Attn.: Earle E. Endelman
Telecopy: (218) 528-5129
Notice shall be deemed given on the date sent if sent by facsimile
transmission and on the date delivered (or the date of refusal of delivery) if
sent by overnight delivery or certified or registered mail.
11.2 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement
(including the Exhibits and Schedules attached hereto) and other documents
delivered at the Closing pursuant hereto, contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings (oral or written) between or among the parties with respect
to such subject matter. The Exhibits and Schedules constitute a part hereof as
though set forth in full above. Except for the Nations Companies which are
intended to be third party beneficiaries of this Agreement, this Agreement is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
11.3 EXPENSES. Except as otherwise provided herein, the Shareholder and
Nations shall pay their own fees and expenses, including their own counsel fees,
incurred in connection with this Agreement or any transaction contemplated
hereby.
11.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of
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<PAGE> 36
time for performance of any obligations or other acts hereunder or under any
other agreement shall be deemed to be an extension of the time for performance
of any other obligations or any other acts. The rights and remedies of the
parties under this Agreement are in addition to all other rights and remedies,
at law or equity, that they may have against each other.
11.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by the Companies or the Shareholders without the
prior written consent of Nations.
11.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. A telecopy signature of any party shall
be considered to have the same binding legal effect as an original signature.
11.7 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement.
11.8 CONSTRUCTION. The parties agree and acknowledge that they have
jointly participated in the negotiation and drafting of this Agreement. In the
event of an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement. The parties agree that
prior drafts of this Agreement shall not be deemed to provide any evidence as to
the meaning of any provision hereof or the intent of the parties with respect
thereto. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. If any party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
there exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
11.9 GOVERNING LAW; SEVERABILITY. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
Florida applicable to contracts executed and to be wholly performed within such
State. If any word, phrase, sentence, clause, section, subsection
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<PAGE> 37
or provision of this Agreement as applied to an party or to any circumstance is
adjudged by a court to be invalid or unenforceable, the same will in no way
affect any other circumstance or the validity or enforceability of any other
word, phrase, sentence, clause, section, subsection or provision of this
Agreement. If any provision of this Agreement, or any part thereof, is held to
be unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination shall have
the power to reduce the duration and/or area of such provision, and/or to delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.
11.10 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
NATIONSRENT, INC., a Delaware corporation
By:/s/ Gene J. Ostrow
------------------------------------------
Name: Gene J. Ostrow
Title: Vice President
THE J. KELLY CO., a Michigan corporation
By:/s/ James E. Kelly
------------------------------------------
James E. Kelly, President
/s/ James E. Kelly
---------------------------------------------
James E. Kelly, as Shareholder
/s/ Virginia M. Kelly
---------------------------------------------
Virginia M. Kelly, as Shareholder
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<PAGE> 1
EXHIBIT 10.24
FORM OF PROMISSORY NOTE
NEITHER THIS PROMISSORY NOTE NOR THE SHARES ISSUABLE UPON CONVERSION OF THIS
PROMISSORY NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND THIS PROMISSORY NOTE CANNOT BE
SOLD OR TRANSFERRED, AND THE SHARES ISSUABLE UPON CONVERSION OF THIS PROMISSORY
NOTE CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR
UPON RECEIPT OF AN OPINION OF COUNSEL, SATISFACTORY TO THE MAKER, THAT SUCH
REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR
TRANSFER.
UNSECURED CONVERTIBLE SUBORDINATED PROMISSORY NOTE
HAZEL PARK, MICHIGAN
$[____________] JUNE __, 1998
FOR VALUE RECEIVED, NATIONSRENT, INC., a Delaware corporation ("Maker"),
promises to pay to [______________], an individual resident at [____________]
("Payee"), in lawful money of the United States of America, the principal sum of
[__________________] ($_____________), together with interest (calculated on the
basis of a year of 365 or 366 days, as applicable, and charged for the actual
number of days elapsed) in arrears on the unpaid principal balance in the manner
provided below. This Note has been executed and delivered pursuant to and in
accordance with the terms and conditions of that certain Stock Purchase
Agreement, dated May __, 1998 (the "Agreement"), between the Payee and
NationsRent, Inc., a Delaware corporation (the "Buyer"), and is subject to the
terms and conditions of the Agreement, which are, by this reference,
incorporated herein and made a part hereof. Capitalized terms used in this Note
without definition shall have the respective meanings set forth in the
Agreement.
ARTICLE I
PAYMENTS
1.1. PAYMENTS OF INTEREST.
(a) This Note shall bear interest at the rate of seven percent
(7.0%) per annum, commencing on the date hereof, subject to adjustment
as provided in Section 1.1(b) below. Accrued and unpaid interest shall
be payable quarterly on each March 31, June 30, September 30, and
December 31, commencing on June 30, 1998, until all principal and
accrued and unpaid interest shall have been paid in full.
<PAGE> 2
(b) In the event that within eighteen (18) months after the date
hereof Maker has not completed an IPO (defined below) or become subject
to the periodic reporting requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act), then from and after such date
until the date on which Maker has completed an IPO or become subject to
the registration requirements of the Exchange Act, this Note shall bear
interest at the rate of nine percent (9.0%) per annum. As used herein,
"IPO" shall mean an underwritten public offering of shares of the
common stock of Maker registered under the Securities Act of 1933, as
amended.
(c) Notwithstanding anything to the contrary contained herein, on
or after an Event of Default (defined below) resulting from the failure
to timely pay principal of or interest on this Note or on or after
another Event of Default for which Payee has accelerated the maturity
date (subject to any notice, grace and cure provisions provided
herein), this Note shall bear interest at a rate per annum equal to two
percent (2.0%) in excess of the rate that otherwise would be applicable
hereunder, from the date of such Event of Default until paid in full.
1.2. REPAYMENT OF PRINCIPAL. The principal amount of this Note shall be
due and payable on June ____, 2003.
1.3. MANNER OF PAYMENT. All payments of principal and interest on this
Note shall be made by check at such place in the United States of America as
Payee shall designate to Maker in writing or, at Maker's option, by wire
transfer of immediately available funds to an account designated by Payee in
writing. If any payment of principal or interest on this Note is due on a day
which is not a Business Day (defined below), such payment shall be due on the
next succeeding Business Day, and such extension of time shall be taken into
account in calculating the amount of interest payable under this Note. "Business
Day" means any day other than a Saturday, Sunday or legal holiday in the State
of Florida.
1.4. PREPAYMENT. After the date on which the closing price of the
shares of Maker into which this Note is convertible has averaged more than 150%
of the Conversion Price (defined below) for a period of thirty (30) or more
consecutive trading days (the "Prepayment Date"), Maker may, without premium or
penalty, at anytime and from time to time, prepay all or any portion of the
outstanding principal balance due under this Note, provided that each such
prepayment is accompanied by accrued interest on the amount of principal prepaid
calculated to the date of such prepayment and provided further that Maker
provides fifteen (15) days prior written notice of any such prepayment during
which time all conversion rights provided by Section 1.6 shall remain
exercisable by Payee. Any partial prepayments shall be applied to principal.
Prior to the Prepayment Date, Maker shall not be entitled to prepay any portion
of the outstanding principal balance due under this Note.
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<PAGE> 3
1.5. RIGHT OF SET-OFF. Maker shall have the right to withhold and
set-off against any amount due hereunder the amount of any claim for
Indemnifiable Damages to which Maker may be entitled under the Agreement.
1.6. CONVERSION. Subject to and upon compliance with the provisions of
the Agreement, if Maker completes an IPO, then the holder of this Note shall be
entitled, at the holder's option, at any time on or before the close of business
on June ___, 2003 to convert the principal amount of this Note (or any portion
of the principal amount hereof which is $1,000.00 or any integral multiple
thereof), at the principal amount hereof, or of such portion, into fully paid
and nonassessable shares (calculated as to each conversion to the nearest 1/1000
of a share) of common stock of Maker $.01 par value (the "Common Stock") at a
conversion price equal to the initial public offering price of such shares (or,
if Maker is merged into or otherwise acquired by or converted into an already
existing, publicly held entity ("New Entity"), at a conversion price equal to
the average closing price of the shares of the New Entity for twenty (20)
trading days following the merger) (the "Conversion Price"). The holder shall
surrender this Note, duly endorsed or assigned to Maker or in blank, to Maker at
its office or agency at the address provided in writing by maker, accompanied by
written notice to Maker that the holder hereof elects to convert this Note, or
if less than the entire principal amount hereof is to be converted, the portion
hereof to be converted. No payment or adjustment is to be made on conversion for
interest accrued hereon or for dividends on the common stock issued on
conversion. No fractions of shares or scrip representing fractions of shares
will be issued on conversion, but instead of any fractional interest the Seller
shall pay a cash adjustment. In addition, in case of certain consolidations or
mergers to which Maker is a party or the transfer of substantially all of the
assets of Maker, this Note, if then outstanding, will be convertible thereafter,
during the period this Note shall be convertible as specified above, only into
the kind and amount of securities, cash and other property receivable upon the
consolidation, merger or transfer by a holder of the number of shares of common
stock into which this Note might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of common stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares).
ARTICLE II
DEFAULTS
2.1. EVENTS OF DEFAULT. The occurrence and continuance of any one or
more of the following events with respect to Maker shall constitute an event of
default hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal
or interest on this Note and such failure continues for thirty (30)
days after Payee notifies Maker thereof in writing;
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<PAGE> 4
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to
insolvency or relief of debtors (a "Bankruptcy Law"), Maker shall (i)
commence a voluntary case or proceeding; (ii) consent to the entry of
an order for relief against it in an involuntary case; (iii) consent to
the appointment of a trustee, receiver, assignee, liquidator or similar
official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due;
or
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an
involuntary case, (ii) appoints a trustee, receiver, assignee,
liquidator or similar official for Maker or substantially all of
Maker's properties, or (iii) orders the liquidation of Maker, and in
each case the order or decree is not dismissed within 120 days.
2.2. NOTICE BY MAKER. Upon the occurrence of an Event of Default
hereunder (unless all Events of Default have been waived by Payee or cured),
Payee may, at its option, (i) by written notice to Maker, declare the entire
unpaid principal balance of this Note, together with all accrued interest
thereon, immediately due and payable regardless of any prior forbearance, and
(ii) exercise any and all rights and remedies available to it under applicable
law, including, without limitation, the right to collect from Maker all sums due
under this Note. Maker shall pay all reasonable costs and expenses incurred by
or on behalf of Payee in connection with Payee's exercise of any or all of its
rights and remedies under this Note, including, without limitation, reasonable
attorney's fees.
Notwithstanding the above, if an Event of Default has occurred under
this Note and such Event of Default results in a default under the Senior
Indebtedness (defined in Section 3 below) or a default under the Senior
Indebtedness otherwise exists, then for so long as any Senior Indebtedness
remains unpaid, the Payee shall not commence or join with any creditor of Maker
in commencing any proceedings to collect or enforce its rights hereunder until
the earlier of (x) 180 days from the occurrence of such Event of Default, and
(y) the date, if any, on which such default is waived by the holder or holders
of the Senior Indebtedness to which such default relates; provided, however,
that notwithstanding such forbearance of the commencement of proceedings with
respect to an Event of Default, such Event of Default shall nevertheless be an
Event of Default for all other purposes of this Note and Payee shall be entitled
to pursue all other remedies other than the commencement of proceedings under
the circumstances set forth in this paragraph.
ARTICLE III
NOTE SUBORDINATE TO SENIOR INDEBTEDNESS
3.1. SENIOR INDEBTEDNESS. Anything in this Note to the contrary
notwithstanding, Maker covenants and agrees, and Payee likewise covenants and
agrees, that, to the extent and in the manner hereinafter set forth in this
Section 3, the indebtedness represented by this Note and the payment of
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<PAGE> 5
principal of and interest on this Note and other amounts owed by Maker under
this Note are hereby expressly made subordinate and subject in right of payment
to the prior payment in full in cash of all Senior Indebtedness (defined below),
including any interest accruing after the occurrence of an Event of Default,
whether or not such interest is an allowed claim enforceable against the debtor
in a case brought under the United States Bankruptcy Code (the "Bankruptcy
Code"). "Senior Indebtedness" means the principal of (and premium, if any) and
interest on (i) all indebtedness, public or private, of Maker for money
borrowed, whether outstanding on the date of this Note or thereafter created,
assumed or incurred, except (A) such indebtedness as is by its terms expressly
stated to be not superior in right of payment to this Note or to rank pari passu
with this Note, (B) all notes issued in connection with the acquisition of any
business, properties, stock or assets to the seller of such business,
properties, stock or assets, which shall rank pari passu with this Note unless
otherwise expressly stated to be not superior or superior in right of payment to
this Note, and (C) this Note, and (ii) any deferrals, renewals, increases or
extensions of any such Senior Indebtedness, and (iii) any fees, costs,
enforcement expenses (including legal fees and disbursements), collateral
protection expenses and other reimbursement or indemnity obligations relating to
Senior Indebtedness. The term "indebtedness of Maker for money borrowed" means
any obligation of, or any obligation guaranteed by, Maker for the repayment of
money borrowed, whether or not evidenced by bonds, debentures, notes or other
written instruments, any capitalized lease obligation and any deferred
obligation for payment of the purchase price of any property or assets. Payee
agrees to furnish any holder of Senior Indebtedness upon request a subordination
agreement that contains reasonably customary subordination provisions, including
the priority rights of Payee and the holder of the Senior Indebtedness and
prohibits payments to Payee that would cause a default under the Senior
Indebtedness.
3.2. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the event of
(i) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to maker or to its creditors, as such, or to its assets, or
(ii) any liquidation, dissolution or other winding up of Maker, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (iii) any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of Maker, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, then and in any such event:
(a) the holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all amounts due or to become due on
or in respect of all Senior Indebtedness, or provision shall be made
for such payment in accordance with the instruments governing such
Senior Indebtedness, before Payee is entitled to receive any payment on
account of principal of (or premium, if any) or interest on this Note
or other amounts owed by Maker under this Note;
(b) any payment or distribution of assets or securities of Maker
of any kind or character, whether in cash, property or securities, to
which Payee would be entitled but for the provisions of this Section 3,
including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of Maker
being
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<PAGE> 6
subordinated to the payment of this Note (except for any such payment
or distribution (x) authorized by an order or decree giving effect, and
stating in such order or decree that effect is given, to the
subordination of this Note to the Senior Indebtedness, and made by a
court of competent jurisdiction in a reorganization proceeding under
any applicable bankruptcy law, or (y) of securities that are
subordinated, to at least the same extent as this Note, to the payment
in full in cash of all Senior Indebtedness then outstanding), shall be
paid by the liquidating trustee or agent or other person making such
payment or distribution, whether a trustee in bankruptcy, a receiver of
liquidating trustee or otherwise, directly to the holders of the Senior
Indebtedness or their representative or representatives, ratably
according to the aggregate amounts remaining unpaid on the Senior
Indebtedness, for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full in cash, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of
Section 3, Payee shall have received any such payment or distribution
of assets or securities of Maker of any kind or character, whether in
cash, property or securities (other than payments or distributions (x)
authorized by an order or decree giving effect to the subordination of
this Note to the Senior Indebtedness, or (y) of securities that are
subordinated to the payment in full in cash of all Senior Indebtedness,
all as described in Section 3.2(b) above), including any such payment
or distribution which may be payable or deliverable by reason of the
payment of any other indebtedness of Maker being subordinated to the
payment of this Note, before all Senior Indebtedness is paid in full in
cash or payment thereof provided for, then and in such event such
payment or distribution shall be received and held in trust for the
benefit of, and shall be paid over or delivered to, the holders of the
Senior Indebtedness or their representative or representatives, ratably
according to the aggregate amount remaining unpaid on the Senior
Indebtedness, for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full in cash, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior
Indebtedness.
(d) in the event that Payee fails to, in a timely manner and to
the fullest extent possible, (i) file or cause to be filed such proofs
of claim and other papers or documents as may be necessary or advisable
to have the claims under this Note allowed at any meeting of creditors
or in any proceeding referred to in this Section 3.2 or (ii) enforce
claims under this Note, by proof of debt, proof of claim, or otherwise,
the holders of the Senior Indebtedness shall be entitled and are
authorized to so file and/or enforce either in Payee's name or in the
name or names of any holder of the Senior Indebtedness.
(e) Payee shall retain the right to vote and otherwise act with
respect to the claims under this Note (including, without limitation,
the right to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension),
provided that Payee shall not vote with respect to any such plan or
take any other action in any way so as to (i) contest the validity of
any Senior Indebtedness or any collateral therefor
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or guaranties thereof, (ii) contest the relative rights and duties of
any holders of any Senior Indebtedness established in any instruments
or agreements creating or evidencing any of the Senior Indebtedness
with respect to any of such collateral or guaranties, or (iii) contest
Payee's obligations and agreements set forth in this Section 3.
The consolidation of Maker with, or the merger of Maker into, another
corporation or the liquidation or dissolution of Maker following the conveyance,
transfer or lease of its properties and assets substantially as an entirety to
another corporation shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshaling of assets
and liabilities of Maker for the purposes of this Section 3.
3.3. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
(a) In the event of and during the continuation of any default in
the payment of any Senior Indebtedness beyond any applicable grace
period with respect thereto ("payment default"), then no payment shall
be made by or on behalf of Maker on this Note until the date, if any,
on which such default or event of default is waived by the holders of
such Senior Indebtedness or otherwise cured or has ceased to exist or
the Senior Indebtedness to which such default or event of default
relates is discharged by payment in full in cash.
(b) In the event that any other event of default with respect to
any Senior Indebtedness shall have occurred and be continuing that
permits the holders of such Senior Indebtedness (or a trustee on behalf
of such holders) to declare such Senior Indebtedness due and payable
prior to the date on which it would otherwise have become due and
payable, and upon receipt by Maker and Payee of written notice (the
"Payment Notice") from a representative for, or the holder of, any
Senior Indebtedness, then no payment shall be made by or on behalf of
Maker on this Note until the earlier of (x) 179 days after the date on
which such Payment Notice shall have been received and (y) the date, if
any, on which such default or event of default is waived by the holders
of the Senior Indebtedness to which such default or event of default
relates is discharged by payment in full in cash (a "Blockage Period").
Not more than two Blockage Periods may be commenced during any period
of 360 consecutive days. No event of default that existed or was
continuing (it being acknowledged that any subsequent action that would
give rise to an event of default pursuant to any provision under which
an event of default previously existed or was continuing shall
constitute a new event of default for this purpose) on the date of the
commencement of any Blockage Period with respect to the Senior
Indebtedness initiating such Blockage Period shall be, or shall be
made, the basis for the commencement of a second Blockage Period by the
representative for, or the holders of, such Senior Indebtedness whether
or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than
90 consecutive days. Any such failure to make a payment on this Note
shall not be construed as preventing the occurrence of an Event of
Default under this Note. Any payment permitted hereunder after a
Blockage Period of amounts owed to the holders of this Note during a
Blockage Period shall be deemed a cure of any Event of Default caused
by any such delayed
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payment. Notwithstanding any other provision contained herein, during
all times in which Maker's senior credit facility, dated March 18, 1998
with BankBoston, N.A., as agent and LaSalle National Bank, as
documentation agent, and the lenders identified therein, or any
restatement, amendment, supplement or modification thereof or any
replacement facility thereof (the "Senior Bank Facility") is in effect
or the lenders thereunder have any obligations to make loans or extend
credit to Maker or its subsidiaries, the only holder of Senior
Indebtedness entitled to exercise its rights under Section 3.2(d) and
this Section 3.3(b) shall be the agent under the Senior Bank Facility.
In the event that, notwithstanding the foregoing, any payment or
distribution shall be received by Payee in contravention of the provisions of
this Section 3, then and in such event such payment or distribution shall be
received and held in trust for the benefit of, and shall be paid over or
delivered to, the holders of the Senior Indebtedness or their representative or
representatives, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness, for application to the Senior Indebtedness
or to be held as collateral for, the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full
in cash, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
The provisions of this Section 3.3 shall not apply to any payment with
respect to which Section 3.2 would be applicable.
3.4. PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in this Section
3 or elsewhere in this Note shall prevent Maker, at any time except under the
circumstances described in Section 3.1 or under the conditions described in
Section 3.2, from making regularly scheduled payments at any time of principal
of (and premium, if any) or interest on this Note or other amounts owed by Maker
under this Note.
3.5. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS;
MARSHALING. No payment or distributions to the holders of Senior Indebtedness or
their representatives pursuant to the provisions of this Section 3 shall entitle
Payee to exercise any right of subrogation in respect thereof until the Senior
Indebtedness shall have been paid in full. Payee further waives any and all
rights with respect to marshaling.
3.6. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this Section 3 are intended solely for the purpose of defining the relative
rights of Payee on the one hand and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Note is intended to or shall (a) impair,
as among Maker, its creditors other than holders of Senior Indebtedness and
Payee, the obligation of Maker, which is absolute and unconditional, to pay to
Payee the principal of (and premium, if any) and interest on this Note as and
when the same shall become due and payable in accordance with its terms; or (b)
affect the relative rights against Maker of Payee and creditors of Maker other
than the holders of Senior Indebtedness; or (c) prevent Payee from exercising
all remedies otherwise permitted by applicable law or this Note upon default
under this Note, subject to the rights, if any, under this Section 3 and Section
2.1 of the holders of the Senior Indebtedness.
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3.7. NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of Maker or by any act or failure to act, in good
faith, by any such holder, or by noncompliance by Maker with the terms,
provisions of and covenants of this Note, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
3.8. NOTICE TO PAYEE. Maker shall give prompt written notice to Payee
of any fact known to Maker which would prohibit the making of any payment to or
by Payee in respect of this Note. Notwithstanding the provisions of this Section
3 or any other provision of this Note, Payee shall not be charged with the
knowledge of the existence of any facts which would prohibit the making of any
payment to or by Payee in respect of this Note, unless and until Payee shall
have received written notice thereof from Maker or holder of Senior Indebtedness
or from any trustee, fiduciary or agent therefor.
3.9. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets or securities of Maker referred to in
Section 3.2, Payee shall be entitled to rely upon any order or decree entered by
any court of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding up or similar
case or proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other person making such payment or distribution, delivered to Payee
for the purpose of ascertaining the persons entitled to participate in such
payment or distribution, the holders of Senior Indebtedness and other
indebtedness of Maker, the amount thereof or payment thereof, the amount of
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Section 3.
3.10. FREEDOM OF DEALING. Payee agrees, with respect to the Senior
Indebtedness and any and all collateral therefor or guaranties thereof, that
Maker and the holders of the Senior Indebtedness may agree to increase the
amount of the Senior Indebtedness or otherwise modify the terms of any of the
Senior Indebtedness, and the holders of the Senior Indebtedness may grant
extensions of the time of payment or performance to and make compromises,
including releases of collateral or guaranties, and settlements with Maker and
all other persons, in each case without the consent of Payee or Maker and
without affecting the agreements of Payee or Maker contained in this Note;
provided, however, that nothing contained in this Section 3.10 shall constitute
a waiver of the right of Maker itself to agree or consent to a settlement or
compromise of a claim which any holder of the Senior Indebtedness may have
against Maker.
3.11. DEFENSE TO ENFORCEMENT. If Payee, in contravention of the terms
of this Note, shall commence, prosecute or participate in any suit, action or
proceeding against Maker, then Maker may interpose as a defense or plea the
provisions of this Section 3, and any holder of the Senior Indebtedness may
intervene and interpose such defense or plea in its name or in the name of
Maker. If Payee, in contravention of the terms of this Section 3, or the last
paragraph of Section 2.2, shall attempt to collect under this Note or enforce
any provisions of this Note, then any holder of the
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<PAGE> 10
Senior Indebtedness or Maker may restrain the enforcement thereof in the name of
such holder of the Senior Indebtedness or in the name of Maker.
3.12. REINSTATEMENT OF SUBORDINATION. To the extent that Maker or any
guarantor of or provider of collateral for the Senior Indebtedness makes any
payment on the Senior Indebtedness that is subsequently invalidated, declared to
be fraudulent or preferential or set aside or is required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or
reorganization act, state or federal law, common law or equitable cause (such
payment being hereinafter referred to as a "Voided Payment"), then to the extent
of such Voided Payment, that portion of the Senior Indebtedness that had been
previously satisfied by such Voided Payment shall be revived and continue in
full force and effect as if such Voided Payment had never been made. In the
event that a Voided Payment is recovered from any holder of the Senior
Indebtedness, a default in the payment of the relevant Senior Indebtedness shall
be deemed to have existed and to be continuing from the date of such holder of
the Senior Indebtedness' initial receipt of such Voided Payment until the full
amount of such Voided Payment is restored to such holder of the Senior
Indebtedness. During any continuance of any such payment default, this Section 3
and the last paragraph of Section 2.2 shall be in full force and effect with
respect to the obligations hereunder.
3.13. AMENDMENTS; LIENS. The provisions of this Section 3 and the last
paragraph of Section 2.2 may not be amended or waived without the written
agreement of Maker, the agent under the Senior Bank Facility and Payee. Payee
will not, without the prior written consent of all the holders of the Senior
Indebtedness, take or receive any security interest, lien, mortgage or other
encumbrance on any assets of Maker or its subsidiaries.
ARTICLE IV
MISCELLANEOUS
4.1. WAIVER. The rights and remedies of Payee under this Note shall be
cumulative and not alternative. No waiver by Payee of any right or remedy under
this Note shall be effective unless in a writing signed by Payee. Neither the
failure nor any delay in exercising any right, power or privilege under this
Note will operate as a waiver of such right, power or privilege and no single or
partial exercise of any such right, power or privilege by Payee will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law: (a) no claim or right of Payee arising out of this Note can be
discharged by Payee, in whole or in part, by a waiver or renunciation of the
claim or right unless in a writing, signed by Payee; (b) no waiver that may be
given by Payee will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on Maker will be deemed to be a waiver
of any obligation of Maker or of the right of Payee to take further action
without notice or demand as provided in this Note. Maker hereby waives
presentment, demand, protest and notice of dishonor and protest.
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<PAGE> 11
4.2. NOTICES. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 13.1 of the Agreement.
4.3. SEVERABILITY. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, then the other provisions
of this Note shall remain in full force and effect. Any provision of this Note
held invalid or unenforceable only in part or degree shall remain in full force
and effect to the extent not held invalid or unenforceable.
4.4. GOVERNING LAW. This Note shall be governed by the laws of the
State of Florida without regard to conflicts of laws principles.
4.5. PARTIES IN INTEREST. This Note shall bind Maker and its successors
and assigns. This Note shall not be assigned or transferred by Payee without the
express prior written consent of Maker, except by Grantor Trust, Will or, in
default thereof, by operation of law.
4.6. SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Note are provided for convenience only and shall not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified. All
words used in this Note shall be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the words "hereof"
and "hereunder" and similar references refer to this Note in its entirety and
not to any specific section or subsection hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
NATIONSRENT, INC., a Delaware corporation
By:
------------------------------------------
Title:
---------------------------------------
11
<PAGE> 1
EXHIBIT 10.25
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered into
as of ______________, 1998, by and between NATIONSRENT, INC., a Delaware
corporation ("Nations"), James E. Kelly and Virginia M. Kelly and their
permitted assigns ( collectively the "Holders"). Certain other capitalized terms
used herein are defined in Section 8 and throughout this Agreement.
WHEREAS, Nations and the Holders have entered into a Stock Purchase
Agreement dated as of May ___, 1998, (the "Stock Purchase Agreement") pursuant
to which Nations shall issue a promissory note to the Holders (the "Promissory
Note"), and the principal and accrued interest of the Promissory Note, upon the
fulfillment of certain conditions, is convertible into Nations common stock,
$.01 par value (the "Common Stock");
WHEREAS, Nations has agreed to provide to the Holders the registration
rights provided herein with respect to the shares of the Common Stock;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein, in the Stock Purchase Agreement and the Promissory
Note, the parties agree as follows:
1. PIGGY-BACK REGISTRATION.
(a) The Holders of the Registrable Shares are hereby granted the
following piggy-back registration rights with respect to the Registrable Shares
(other than an acquisition shelf Registration Statement which may be filed by
Nations pursuant to Rule 415 of the Securities Act, or a Registration Statement
covering shares of Common Stock which would become issuable pursuant to the
Nations' stock option plans). Whenever Nations proposes to file a Registration
Statement, other than the Registration Statement for its initial public offering
(the "IPO") and except for the period ending on the later of one year from the
date hereof or the six month period from the effective date of the IPO, Nations
will, prior to such filing, give written notice to the Holders of its intention
to do so and, upon the written request of the Holders given within ten (10) days
after Nations provides such notice (which request shall state the intended
method of disposition of such Registrable Shares), Nations shall use its
reasonable best efforts to cause all Registrable Shares which Nations has been
requested to register by such Holder or Holders to be registered under the
Securities Act to the extent necessary to permit their sale or other disposition
in accordance with the intended methods of distribution specified in the request
of such Holder or Holders.
(b) If, by virtue of this agreement, the Holders request and are
entitled to inclusion in such registration, Nations shall, (together with the
Holders and any other holder of Nations Common Stock provided registration
rights by Nations with respect to their shares of the Common Stock (the
"Stockholders") proposing to distribute their securities through such
underwriting) enter
<PAGE> 2
into an underwriting agreement with the representative of the underwriter or
underwriters selected for such underwriting (the "Representative").
(c) Notwithstanding any other provision of this Agreement, if the
Representative advises Nations in writing that marketing factors require a
limitation of the number of shares to be underwritten, then Nations shall so
advise the Holders and Stockholders, if any, which would otherwise be entitled
to registration, and the number of shares of Common Stock that may be included
in the registration and underwriting, if any, shall be allocated among the
Holders and Stockholders in such proportion as the respective number of shares
each Holder and Stockholder requests to be included in such registration bears
to the total number of shares such Holders and Stockholders request be included.
All Registrable Shares or any other Common Stock excluded from the underwriting
by reason of the underwriter's marketing limitation shall not be included in
such registration.
(d) If any Holders or Stockholders of Common Stock entitled (upon
request) to be included in such registration, disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
Nations and the underwriter. The Common Stock so withdrawn shall also be
withdrawn from registration.
2. EXPENSES OF REGISTRATION. Nations shall pay all expenses incurred by
Nations in connection with the registration, qualification and/or exemption of
the Common Stock, including any SEC and state securities law registration and
filing fees, printing expenses, fees and disbursements of Nations' counsel and
accountants, transfer agents' and registrars' fees, fees and disbursements of
experts used by Nations in connection with such registration, qualification
and/or exemption, and expenses incidental to any amendment or supplement to the
Registration Statement or prospectuses contained therein. Nations shall not,
however, be liable for any underwriting discounts, sales, broker's or
underwriting commissions upon sale by any Holder of any of the Common Stock.
3. FURNISHING OF DOCUMENTS. Nations shall furnish to the Holders such
reasonable number of copies of the Registration Statement, such prospectuses as
are contained in the Registration Statement and such other documents as the
Holders may reasonably request in order to facilitate the offering of the
Nations Shares.
4. AMENDMENTS AND SUPPLEMENTS. Nations shall prepare and promptly file
with the SEC and promptly notify the Holders of the filing of such amendments or
supplements to the Registration Statement or prospectuses contained therein as
may be necessary to correct any statements or omissions if, at the time when a
prospectus relating to the Nations Shares is required to be delivered under the
Securities Act, any event shall have occurred as a result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. Nations shall also advise the Holders promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of the Registration Statement or
the initiation or threatening
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of any proceeding for that purpose and promptly use its reasonable best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
5. DURATION. Nations shall maintain the effectiveness of the Registration
Statement for one (1) year from the effective date of registration of the
Registrable Shares.
6. FURTHER INFORMATION. If a Holder includes Registrable Shares in any
registration, such Holder shall furnish Nations such information regarding
itself as Nations may reasonably request and as shall be required in connection
with any registration, qualification or compliance referred to in this
Agreement.
7. INDEMNIFICATION
(a) Nations will indemnify and hold harmless the Holders from and
against any and all losses, damages, liabilities, costs and expenses to which
the Holders or any such controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that, Nations will not be liable in any such case
to the extent that any such loss, claim, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by or on behalf of any Holder or such controlling person in writing specifically
for use in the preparation thereof.
(b) The Holders, jointly and severally, hereby agree to indemnify and
hold harmless Nations and each person, if any, who controls Nations within the
meaning of the Securities Act, from and against any and all losses, damages,
liabilities, costs and expenses to which Nations or any such controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, to the extent that such untrue statement
or alleged untrue statement or omission or alleged omission was so made in
reliance upon written information furnished by or on behalf of any Holder
specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 7 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify
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<PAGE> 4
the indemnifying party will not relieve it from any liability which it may have
hereunder unless the indemnifying party has been materially prejudiced thereby
nor will such failure to so notify the indemnifying party relieve it from any
liability which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the right to
select separate counsel to participate in the defense of such action on behalf
of such indemnified party or parties. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the indemnified
party shall have employed counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall not have employed counsel
to represent the indemnified party within a reasonable time after the notice of
the commencement of the action, or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party.
(d) In the event any of the Registrable Shares are sold by any Holder
or Holders in an underwritten public offering consented to by Nations, Nations
shall provide indemnification to the underwriters of such offering and any
person controlling any such underwriter on behalf of the Holder or Holders
making the offering; provided, however, that Nations shall not be required to
consent to any such underwriting or to provide such indemnification in respect
of the matters described in the proviso to the first sentence of Section 7(a).
8. DEFINITIONS. As used in this Agreement, the following terms shall have
the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time.
"Registration Expenses" means the expenses described in Section 2.
"Registrable Shares" shall mean shares of Common Stock converted by
the Holders in accordance with the terms of the Promissory Note issued by the
Company to the Holders and any other shares of capital stock of Nations issued
to the Holders in respect of the Common Stock as a result of stock splits, stock
dividends, reclassification, recapitalization, mergers, consolidations or
similar events.
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<PAGE> 5
"Registration Statement" shall mean any registration statement of
Nations, except an initial Registration Statement, on any form (to be selected
by Nations) for which Nations then qualifies and which permits the secondary
resale thereunder of Registrable Shares. The term Registration Statement shall
also include all exhibits and financial statements and schedules and documents
incorporated by reference in such Registration Statement when it becomes
effective under the Securities Act, and in the case of the references to the
Registration Statement as of a date subsequent to the effective date, as amended
or supplemented as of such date.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations promulgated thereunder,
all as the same shall be in effect at the time.
9. MISCELLANEOUS.
(e) Notice Generally. Any notice, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Agreement shall be sufficiently given or made if in
writing and either delivered in person with receipt acknowledged, delivered by
reputable overnight courier, telecopied and confirmed separately in writing by a
copy mailed as follows or sent by registered or certified mail, return receipt
requested, postage prepaid, to the addresses set forth in the Purchase
Agreement.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto;
provided, however, that the Holder's rights hereunder may not be transferred
without the prior written consent of Nations.
(g) Governing Law. This Agreement shall be governed by the laws of
the State of Florida, without regard to the provisions thereof relating to
conflict of laws.
(h) Severability. Wherever 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 shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(i) Entire Agreement. This Agreement, together with the Purchase
Agreement, is intended by the parties as a final expression of their agreement
and intended to be a complete 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 and therein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to the subject matter hereof.
(j) Counterparts. This Agreement may be executed in separate
counterparts, each of which shall collectively and separately, constitute one
agreement.
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<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
NATIONSRENT, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
---------------------------------------------
JAMES E. KELLY, individually
---------------------------------------------
VIRGINIA M. KELLY, individually
6
<PAGE> 1
EXHIBIT 10.26
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of June
7, 1998 by and among NATIONSRENT, INC., a Delaware corporation ("Nations");
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC., a Texas corporation (the
"Company"), and Thomas J. Watts, Sr., who constitutes the sole shareholder of
the Company (the "Shareholder"). Certain other capitalized terms used herein are
defined in Article XI and throughout this Agreement.
RECITALS
The Company owns and operates construction equipment rental businesses in
the states of Texas, Louisiana and Mississippi (the "Business"). Nations desires
to purchase and the Company desires to sell, all of the assets, properties and
business of the Company (the "Acquisition") on the terms and subject to the
conditions set forth in this Agreement.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1. PURCHASED ASSETS. Upon the terms and subject to the conditions of this
Agreement, at the Closing (as defined in Section 3.1), the Company will sell,
convey, transfer, assign and deliver to Nations (or one or more of its
assignees) all of its right, title and interest in and to its assets, properties
and business of every kind and description, whether real, personal or mixed,
tangible or intangible, wherever located (except those assets of the Company
which are specifically excluded as provided in Section 1.2 hereof) as shall
exist on the Closing Date (as defined in Section 3.1), whether or not appearing
on the Current Balance Sheet (as defined in Section 5.8) (collectively, the
"Purchased Assets"), free and clear of any Lien (as defined in Section 11.1)
other than as permitted herein. Without limiting the generality of the
foregoing, the Purchased Assets shall include, but not be limited to, the
following:
<PAGE> 2
(a) Inventory of Rental Equipment. All inventory of rental equipment
owned, leased or held under rental purchase options by the Company, as more
particularly described on Schedule 1.1(a) attached hereto;
(b) Inventory of Merchandise. All inventory of merchandise held for
sale and owned by the Company, as more particularly described on Schedule
1.1(b) attached hereto.
(c) Other Tangible Personal Property. All machinery, equipment, tools,
supplies, leasehold improvements, construction in progress, furniture and
fixtures, trucks, automobiles, vehicles, computer equipment, computer
software and any other fixed assets owned or leased by the Company, as more
particularly described on Schedule 1.1(c) attached hereto not related to
the Excluded Assets;
(d) Customer Accounts. All of the customer accounts and customer
account contracts (the "Customer Contracts") of the Company, as more
particularly described on Schedule 1.1(d) attached hereto;
(e) Assumed Contracts. All of the interest, rights and benefits
accruing to the Company under any dealer, franchise, sales or service
agreements or any other Contracts (as defined in Section 11.1) to which the
Company is a party and which are set forth on Schedule 1.1(e) attached
hereto (the "Assumed Contracts");
(f) Cash and Cash Equivalents. All cash and cash equivalents and
investments, whether short-term or long-term, of the Company, including
without limitation, bank accounts, certificates of deposit, treasury bills
and securities;
(g) Prepayments. All prepaid and deferred items of the Company,
including without limitation, prepaid rentals, insurance, taxes and
unbilled charges and deposits relating to the operations of the Company;
(h) Receivables. All receivables of the Company, including without
limitation all trade accounts receivables, notes receivable, receivables
arising as a result of contracts in transit and receivables from
manufacturers, insurance companies, service contract providers and any
other vendors or suppliers of the Company not related to the Excluded
Assets;
(i) Equipment Leases. All of the interest of and the rights and
benefits accruing to the Company as lessee under leases of machinery,
vehicles, equipment, tools, furniture and fixtures and other fixed assets
("Equipment Leases"), as more particularly described on Schedule 1.1(i)
attached hereto;
(j) Intangible Property. All of the proprietary rights of the Company,
including without limitation all trademarks, trade names, patents, patent
applications, licenses thereof,
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<PAGE> 3
trade secrets, computer software, slogans, copyrights, processes, operating
rights, other licenses and permits and other similar intangible property
and rights relating to the Business, and all goodwill developed through the
use of such property and rights (collectively, "Intellectual Property"), as
more particularly described on Schedule 1.1(j) attached hereto;
(k) Licenses and Permits. To the extent assignable, all permits,
licenses, certificates of authority, franchises, accreditations,
registrations and other authorizations issued or used in connection with
the Business;
(l) Books, Records and Other Assets. All operating data and records of
the Company, including without limitation, customer lists and records,
financial, accounting and credit records, correspondence, budgets and other
similar documents and records, and all of the Company telephone and
telecopier numbers, and post office boxes; and
(m) Real Property. All of the interests, rights and benefits accruing
to the Company as lessee under the leases (the "Real Property Leases")
covering the parcels of real property leased by the Company and set forth
on Schedule 1.1(m) attached hereto (the "Leased Premises").
1.2. EXCLUDED ASSETS. Notwithstanding anything to the contrary set forth in
Section 1.1, the Purchased Assets shall exclude the following assets of the
Company: (i) the Purchase Price (as defined in Section 2.1) and other rights of
the Company under this Agreement; (ii) the corporate minute books and stock
records of the Company; (iii) all Owned Property (the "Real Property") and
fixtures; (iv) the life insurance policy insuring the life of the Shareholder or
other family members; (v) marketable securities of the Company held in an
account at Merrill Lynch, San Antonio, Texas, as of May 13, 1998, including any
reinvested dividends, interest and capital gains paid from May 13, 1998 through
the Closing Date; (vi) a receivable of the Company from Ron and Kim Wright in an
amount not to exceed $75,000; and (vii) the assets listed on Schedule 1.2
hereto, and (viii) any proceeds or receivables related to the foregoing.
1.3. ASSIGNMENT OF CONTRACTS. Notwithstanding anything in this Agreement to
the contrary, this Agreement shall not constitute an assignment of any claim,
contract, license, franchise, lease, commitment, sales order, sales contract,
supply contract, service agreement, purchase order or purchase commitment if an
attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach thereof or in any way adversely affect the rights of
Nations thereunder. If such consent is not obtained, or if any attempt at an
assignment thereof would be ineffective or would affect the rights of the
Company thereunder so that Nations would not in fact receive all such rights,
the Company shall reasonably cooperate with Nations to the extent necessary to
provide for Nations the benefits under such claim, contract, license, franchise,
lease, commitment, sales order, sales contract, supply contract, service
agreement, purchase order or purchase commitment, including subcontracting all
rights and obligations thereunder to Nations and enforcement for the benefit of
Nations of any and all rights of the Company against a third party
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thereto arising out of the breach or cancellation by such third party or
otherwise to the fullest extent permitted by law or agreement.
ARTICLE II
PURCHASE PRICE; ASSUMED LIABILITIES
2.1. PURCHASE PRICE. As consideration for the Purchased Assets, Nations
agrees, on the terms and subject to the conditions and limitations set forth
herein, to pay to the Company an aggregate amount of $39,250,000 (the "Purchase
Price"), payable at the Closing as follows: (i) $29,250,000 in immediately
available funds; and (ii) the issuance of a promissory note from Nations in the
original principal amount of $10,000,000, the form of such note is provided as
Exhibit A attached hereto (the "Promissory Note"). In addition, in the event
that the Closing shall not have occurred prior to August 31,1998, the Purchase
Price to be paid in immediately available funds shall be increased by an amount
equal to $8,064.51 multiplied by the number of days beginning with and including
August 1, 1998, until the Closing Date; provided, however, that no such
adjustment shall be required if and to the extent that the Closing is delayed
solely to the nonfulfillment of the condition set forth in Section 8.12 or the
failure of the Company and the Shareholder to use reasonable best efforts to
seek to obtain the consents required by Section 8.8.
2.2. ASSUMED LIABILITIES. As of the Closing, Nations shall assume and
agree to pay, discharge and perform when lawfully due without setoff under this
Agreement or any other agreement (provided that Nations reserves all rights to
seek indemnification pursuant to Section 10.1(b) hereof), all of the
obligations, duties and liabilities of the Companies (the "Assumed Liabilities")
with respect to the following: 2.3. all of the obligations, duties and
liabilities of the Company accruing as of the Closing Date with respect to the
Customer Contracts (including any warranty obligations), the Assumed Contracts,
the Indebtedness, as defined in Section 5.10 below; (b) increases in
indebtedness resulting from incremental purchases of new equipment subsequent to
May 11, 1998; (c) the outstanding balance at Closing under the Compass Bank
working capital line of credit not to exceed $2,000,000 (or if such line cannot
be assumed by Nations, the payment of such balance not to exceed $2,000,000 at
the Closing); (d) current liabilities of the Company as reflected on the Current
Balance Sheet (including certain Tax accruals limited to the amount of such
accrual) and as accrued since the date of the Current Balance Sheet until the
Closing Date, which have been incurred in the ordinary course of business
(excluding notes payable not constituting Indebtedness hereunder; and (e) the
tax obligations of Nations set forth in Section 13.3 hereof, notwithstanding the
foregoing, Nations will not assume any Excluded Liabilities as defined below.
2.3. EXCLUDED LIABILITIES. Except for the Assumed Liabilities, the parties
expressly agree that Nations shall not assume or otherwise become liable for any
other obligations or liabilities of any of the Company or any of the following
liabilities; (a) any liability or obligation relating to Taxes (as defined in
Section 11.1) of the Company except for the tax obligations of Nations set forth
in Section 13.3 hereof and except up to the amount of the Tax accruals set forth
in Section 2.2(d); (b)
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any liability or obligation relating to any default under any of the Assumed
Liabilities to the extent such default existed prior to the Closing (subject to
the Threshold as defined in Section 10.2); (c) any liability or obligation
(which is not an assumed liability), whether in tort, contract or for violation
of any law, statute, rule or regulation by the Company or the Shareholder or any
officer, director, employee or agent of the Company, that arises out of or
results from any act, omission, occurrence or state of facts prior to the
Closing; (d) any liability or obligation of the Company with respect to or
arising out of any employee benefit plan or any other plans or arrangements for
the benefit of any employees of the Company; (e) any liability or obligation of
the Company and the Shareholder with respect to that certain line of credit from
Merrill Lynch to the Company, loan number 59207349; (f) any liability or
obligation of the Company and the Shareholder with respect to the Excluded
Assets; (g) any liability or obligation (which is not an assumed liability) of
the Company, the Shareholder or any of their Affiliates, whether by contract,
pursuant to law, or otherwise; and (h) any liability or obligation of A-MOP,
Inc. ("A-MOP") not constituting Indebtedness hereunder. The liabilities not
assumed by Nations hereunder, including the liabilities enumerated above, as
referenced to herein as the "Excluded Liabilities".
2.4. NO EXPANSION OF THIRD PARTY RIGHTS. Except as set forth by applicable
laws or in the agreements underlying such Assumed Liabilities, the assumption by
Nations of the Assumed Liabilities, and the transfer thereof by the Company,
shall in no way expand the rights or remedies of any third party against Nations
or the Company as compared to the rights and remedies which such third party
would have had against the Company had Nations not assumed such liabilities.
Without limiting the generality of the preceding sentence, the assumption by
Nations of the Assumed Liabilities shall not create any third party beneficiary
rights.
2.5. TAX TREATMENT; ALLOCATION OF PURCHASE PRICE. The parties hereto intend
that the transactions contemplated by this Agreement shall be treated for tax
purposes as a taxable purchase under the Code. The parties agree that the fair
market value of the Company's fixed assets is the tax basis thereof, and the
allocation of the purchase price of the Company's fixed assets as reflected on
the Company balance sheet dated March 31, 1998 for tax purposes will not be
greater than the existing tax basis of the assets, but in no event less than $10
million, which allocation shall be set forth in Schedule 2.5 to be attached at
Closing. The parties agree to allocate the Purchase Price among such Purchased
Assets in a manner consistent with the requirements set forth in the Code,
including Code Section 1060, and the Treasury regulations promulgated
thereunder. In addition, it is agreed that such allocation will be binding on
both parties for federal income tax purposes in connection with this purchase
and sale of the Purchased Assets, and will be consistently reflected by each
party on their respective federal income tax returns. The parties agree to
prepare and timely file all applicable Internal Revenue Service forms, including
Form 8594 (Asset Acquisition Statement) and other governmental forms, to
cooperate with each other in the preparation of such forms, and to furnish each
other with a copy of such forms prepared in draft, within a reasonable period
prior to the filing due date thereof.
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ARTICLE III
CLOSING
3.1. TIME AND PLACE. Subject to and after fulfillment or waiver of the
conditions set forth in Article VIII and Article IX of this Agreement, the
Closing of the purchase and sale of the Purchased Assets (the "Closing") shall
take place within five (5) business days after satisfaction or waiver of the
conditions (the "Closing Date"), at the offices of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., San Antonio.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF NATIONS
As a material inducement to the Company and the Shareholder to enter into
this Agreement and to consummate the transactions contemplated hereby, Nations
makes the following representations and warranties:
4.1. CORPORATE STATUS. Nations is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Nations
shall be at the time of Closing, if required by applicable law, legally
qualified to transact its business as a foreign corporation in the States of
Texas, Louisiana and Mississippi.
4.2. CORPORATE POWER AND AUTHORITY. Nations has the corporate power and
authority to execute and deliver this Agreement, the Employment Agreement, the
Promissory Note, the Registration Rights Agreement, the Leases, and the
Assignment and Assumption Agreement (collectively the "Transaction Documents")
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Nations has taken all action
necessary to authorize the execution and delivery of the Transaction Documents,
the performance of its obligations hereunder and thereunder and the consummation
of the transactions contemplated hereby and thereby.
4.3. ENFORCEABILITY. This Agreement has been and at Closing each of the
remaining Transaction Documents will be duly executed and delivered by Nations
and each constitute legal, valid and binding obligation of Nations, enforceable
against Nations in accordance with its terms, except as the same may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
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4.4. NO COMMISSIONS. Nations has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
4.5. AUTHORIZED SHARES. The capitalization of Nations is as set forth on
Schedule 4.5.
4.6. NO VIOLATION. The execution and delivery of the Transaction Documents
by Nations, the performance by Nations of its obligations hereunder and
thereunder and the consummation by Nations of the transactions contemplated
hereby and thereby will not (i) contravene any provision of the Certificate of
Incorporation or bylaws of the Company, (ii) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment or
order of any Governmental Authority or of any arbitration award which is either
applicable to, binding upon or enforceable against Nations, (iii) except for
Nations senior indebtedness, conflict with, result in any breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to a right
to terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against Nations, or (iv) except for
Nations senior indebtedness, require the consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority, any
court or tribunal or any other Person, except as may be required under the HSR
4.7. FUNDS. On the Closing, Nations shall have the necessary funds to remit
the Purchase Price.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDER
As a material inducement to Nations to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company and the
Shareholder, jointly and severally, make the following representations and
warranties to Nations:
5.1. CORPORATE STATUS. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has the
requisite power and authority to own or lease its properties and to carry on its
business as now being conducted. The Company is legally qualified to do business
and in good standing as a foreign corporation in the states of Mississippi and
Louisiana. The nature of the Company's properties and the conduct of its
business does not require it to be legally qualified in any other state.
5.2. POWER AND AUTHORITY. The Company has the power and authority to
execute and deliver each of the Transaction Documents, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The Company has taken all action
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necessary to authorize the execution and delivery of each of the Transaction
Documents, the performance of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby. The
Shareholder has the requisite competence, power and authority to execute and
deliver each of the Transaction Documents, to perform his obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby.
5.3. ENFORCEABILITY. This Agreement has been and each of the remaining
Transaction Documents shall be at Closing duly executed and delivered by the
Company and the Shareholder, and each constitute the legal, valid and binding
obligation of each of them, enforceable against each of them in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
5.4. CAPITALIZATION.
(a) Schedule 5.4(a) sets forth, with respect to the Company, (i) the
number of authorized shares of each class of its capital stock, and (ii) the
number of issued and outstanding shares of each class of its capital stock.
There are no outstanding or authorized rights, options, warrants, convertible
securities, subscription rights, conversion rights, exchange rights or other
agreements or commitments of any kind that could require the Company to issue or
sell any shares of its capital stock (or securities convertible into or
exchangeable for shares of its capital stock). There are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights with
respect to the Company. Other than as set forth herein, there are no proxies,
voting rights or other agreements or understandings with respect to the voting
or transfer of the capital stock of the Company. The Company is not obligated to
redeem or otherwise acquire any of its outstanding shares of capital stock. The
Shareholder is the record and beneficial owner of all of such shares and the
Shareholder owns such shares free and clear of all Liens, restrictions and
claims of any kind.
5.5. NO VIOLATION. Except as set forth on Schedule 5.5, the execution and
delivery of the Transaction Documents by the Company and the Shareholder, the
performance by the Company and the Shareholder of their respective obligations
hereunder and thereunder and the consummation by the Company and the Shareholder
of the transactions contemplated hereunder and thereunder will not (i)
contravene any provision of the articles of incorporation or bylaws of the
Company, (ii) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment or order of any Governmental
Authority or of any arbitration award which is either applicable to, binding
upon or enforceable against, the Company, the Shareholder or the Purchased
Assets, (iii) conflict with, result in any breach of, or constitute a default
(or an event which would, with the passage of time or the giving of notice or
both, constitute a default) under, or give rise to a right to terminate, amend,
modify, abandon or accelerate, any Contract which is applicable to, binding upon
or enforceable against, the Company, the Shareholder or the Purchased Assets,
(iv) result in or require the creation or imposition of any Lien upon or with
respect to any of the Purchased Assets, or (v) require the consent, approval,
authorization or permit of, or filing with or
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notification to, any Governmental Authority, any court or tribunal or any other
Person, except as may be required under the HSR Act.
5.6. SUBSIDIARIES. The Company does not own, directly or indirectly, any
outstanding voting securities of or other interests in, or controls, any other
corporation, partnership, joint venture or other business entity.
5.7. NO COMMISSIONS. Neither the Company nor the Shareholder have incurred
any obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
5.8. FINANCIAL STATEMENTS. The Company has delivered to Nations (i) the
unaudited financial statements of the Company for the years ending December 31,
1996 and 1997, including the notes thereto (if applicable), reviewed by
Tschirhart, Oroian, Little & Rawi, P.C. (the "Annual Statements'), and (ii) the
unaudited compiled financial statements of the Company for the 3 month period
ended March 31, 1998, including the notes thereto, (if applicable) and unaudited
internally generated financial statements of the Company for the four month
period ended April 30, 1998, (collectively with the Annual Statements, the
"Financial Statements"), copies of which are attached to Schedule 5.8 hereto.
The balance sheet dated as of March 31, 1998 of Company included in the
Financial Statements is referred to herein as the "Current Balance Sheet."
Subject to the limitations and qualifications set forth in Schedule 5.8, the
Financial Statements fairly present the financial position of the Company at
each of the balance sheet dates and the results of operations for the periods
covered thereby, in accordance with GAAP on a basis consistent with the
Company's prior practices except that such Financial Statements may not be
accompanied by notes or other textual disclosure required by GAAP, and in the
case of the interim statements are also subject to year end adjustments. The
books and records of the Company fully and fairly in all material respects
reflect all transactions, properties, assets and liabilities of the Company.
Except as set forth in Schedule 5.8 there are no extraordinary or material
non-recurring items of income or expense during the periods covered by the
Financial Statements and the balance sheets included in the Financial Statements
do not reflect any writeup or revaluation increasing the book value of any
assets, except in the case of the Annual Statements as specifically disclosed in
the notes thereto. The Annual Financial Statements reflect all adjustments
necessary for a fair presentation of the financial information contained
therein. Nations agrees that the accounting assumptions and practices of the
Company, so long as in accordance with GAAP or set forth on Schedule 5.8, will
not be a breach of this representation.
5.9. CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Since the date of the
Current Balance Sheet, except as set forth on Schedule 5.9, the Company has
operated in the ordinary course of business and has not (i) issued any capital
stock or other securities; (ii) made any distribution of or with respect to its
capital stock or other securities or purchased or redeemed any of its
securities; (iii) paid any bonus to or increased the rate of compensation of any
of its officers or salaried employees or amended any other terms of employment
of such persons; (iv) sold, leased or transferred any of its properties or
assets other than in the ordinary course of business consistent with
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past practice; (v) made or obligated itself to make capital expenditures out of
the ordinary course of business consistent with past practice; (vi) made any
payment in respect of its liabilities other than in the ordinary course of
business consistent with past practice; (vii) incurred any obligations or
liabilities (including any indebtedness) or entered into any transaction or
series of transactions involving in excess of $10,000 in the aggregate out of
the ordinary course of business, except for this Agreement and the transactions
contemplated hereby; (viii) suffered any theft, damage, destruction or casualty
loss, not covered by insurance and for which a timely claim was filed, in excess
of $10,000 in the aggregate; (ix) suffered any extraordinary losses (whether or
not covered by insurance); (x) waived, canceled, compromised or released any
rights having a value in excess of $10,000 in the aggregate; (xi) made or
adopted any change in its accounting practice or policies; (xii) made any
adjustment to its books and records other than in respect of the conduct of its
business activities in the ordinary course consistent with past practice; (xiii)
entered into any transaction with any Affiliate other than in the ordinary
course of business consistent with past practice; (xiv) entered into any
employment agreement; (xv) terminated, amended or modified any agreement
involving an amount in excess of $10,000 other than in the ordinary course of
business consistent with past practice; (xvi) imposed any security interest or
other Lien on any of its assets other than in the ordinary course of business
consistent with past practice; (xvii) delayed paying any accounts payable which
are due and payable except to the extent being contested in good faith; (xviii)
made or pledged any charitable contribution in excess of $1,000; (xix) entered
into any other transaction or been subject to any event which has or may have a
Material Adverse Effect on the Company; or agreed to do or authorized any of the
foregoing.
5.10. LIABILITIES OF THE COMPANY. Except as set forth on Schedule 5.10, the
Company has no liabilities or obligations, whether accrued, absolute, contingent
or otherwise, except (a) to the extent reflected or taken into account in the
Current Balance Sheet and not heretofore paid or discharged, (b) liabilities
incurred in the ordinary course of business consistent with past practice since
the date of the Current Balance Sheet (none of which relates to breach of
contract, breach of warranty, tort, infringement or violation of law, or which
arose out of any action, suit, claim, governmental investigation or arbitration
proceeding), and (c) normal accruals, reclassifications, and audit adjustments
which would be reflected on an audited financial statement and which could not
be material in the aggregate. Schedule 5.10 sets forth Indebtedness which shall
not at Closing exceed $75,000,000. "Indebtedness" shall mean the aggregate
amount of all indebtedness and other obligations of the Company (including
accrued and unpaid interest) for borrowed money, guaranties, letters of credit,
and deferred purchase price of any property, whether owed to a bank or any other
person, and all payoff amounts on all equipment leases and equipment rental
purchase options (plus prepayment penalties less early payment discounts) but
shall not include debt related to Real Property, debt related to Excluded
Assets, or debt relating to obligations not to be assumed by Nations hereunder.
5.11. LITIGATION. Except as set forth on Schedule 5.11, there is no action,
suit, or other legal or administrative proceeding or governmental investigation
pending, threatened, anticipated or to the knowledge of the Company or the
Shareholder contemplated against, by or affecting, the Company, the Shareholder
or the Purchased Assets, or which question the validity or enforceability
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of this Agreement or the transactions contemplated hereby, and there is no basis
for any of the foregoing. Except as set forth on Schedule 5.11, during the
three-year period prior to the date hereof, there has been no action, suit or
other legal or administrative proceeding or governmental investigation against,
by or affecting the Company, the Shareholder or the Purchased Assets, in which
the amount in question exceeded $50,000. There are no outstanding orders,
decrees, stipulations or agreements issued by any Governmental Authority in any
proceeding or agreed to by the Company or the Shareholder to which the Company
or the Shareholder are or were a party which have not been complied with in full
which may have a Material Adverse Effect on the Purchased Assets.
5.12. ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 5.12, the Company is and has at
all times been in full compliance with all Environmental Laws (as defined in
clause (g) below) governing its business, operations, properties and assets,
including, without limitation: (i) all requirements relating to the Discharge
(as defined in clause (g) below) and Handling (as defined in clause (g) below)
of Hazardous Substances (as defined in clause (g) below); (ii) all requirements
relating to notice, record keeping and reporting; (iii) all requirements
relating to obtaining and maintaining Licenses (as defined in clause (g) below)
for the ownership of its properties and assets and the operation of its business
as presently conducted, and (iv) all applicable writs, orders, judgements,
injunctions, governmental communications, decrees, informational requests or
demands issued pursuant to, or arising under, any Environmental Laws.
(b) Except as set forth on Schedule 5.12, there are no (and to the
knowledge of the Company there is no basis for any) non-compliance orders,
warning letters, notices of violation (collectively, "Notices"), claims, suits,
actions, judgments, penalties, fines, or administrative or judicial
investigations or proceedings (collectively, "Proceedings") pending or
threatened against or involving the Company, or its business, operations,
properties, or assets, issued by any Governmental Authority or third party with
respect to any Environmental Laws or Licenses issued to the Company thereunder
in connection with, related to or arising out of the ownership by the Company of
its properties or assets or the operation of its business, which have not been
resolved or which would impose any obligation, burden or continuing liability on
Nations in the event that the transactions contemplated by this Agreement are
consummated, or which could have a Material Adverse Effect on the Company.
(c) Except as set forth on Schedule 5.12, the Company has not Handled
or Discharged, nor has it at any time allowed or arranged for any third party to
Handle or Discharge, Hazardous Substances to, at or upon: (i) any location other
than a site lawfully permitted to receive such Hazardous Substances; (ii) any
real property currently or previously owned or operated by the Company; or (iii)
any site which, pursuant to any Environmental Laws, (x) has been placed on the
National Priorities List or its state equivalent; or (y) the United States
Environmental Protection Agency or the relevant state agency or other
Governmental Authority has not notified the Company that such Governmental
Authority has proposed or is proposing to place on the National Priorities
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List or its state equivalent. There has not occurred, nor is there presently
occurring, a Discharge, or threatened Discharge, of any Hazardous Substance on,
into or beneath the surface of, or adjacent to, any real property currently or
previously owned or operated by the Company in an amount requiring a notice or
report to be made to a Governmental Authority or in violation of any applicable
Environmental Laws.
(d) Schedule 5.12 identifies the operations and activities, and
locations thereof, which have been conducted or are being conducted by the
Company on any real property currently or previously owned or operated by the
Company which have involved the Handling or Discharge of Hazardous Substances.
(e) Except as set forth on Schedule 5.12, the Company does not use,
nor has it used, any Aboveground Storage Tanks (as defined in clause (g) below)
or Underground Storage Tanks (as defined in clause (g) below), and there are not
now nor have there ever been any Underground Storage Tanks beneath any real
property currently or previously owned or operated by the Company that are
required to be registered under applicable Environmental Laws.
(f) Schedule 5.12 identifies (i) all environmental audits, assessments
or occupational health studies undertaken by the Company or their agents or any
Governmental Authority or third party, relating to or affecting the Company or
any real property currently or previously owned or operated by or any of the
Company; (ii) the results of any ground, water, soil, air or asbestos monitoring
undertaken by the Company or their agents or any Governmental Authority or third
party, relating to or affecting the Company or any real property currently or
previously owned or operated by the Company which indicate the presence of
Hazardous Substances at levels requiring a notice or report to be made to a
Governmental Authority or in violation of any applicable Environmental Laws;
(iii) all material written communications between the Company and any
Governmental Authority arising under or related to Environmental Laws; and (iv)
all outstanding citations issued under OSHA, or similar state or local statutes,
laws, ordinances, codes, rules, regulations, orders, rulings, or decrees,
relating to or affecting the Company or any real property currently or
previously owned or operated by the Company.
(g) For purposes of this Section 5.12, the following terms shall have
the meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to such
term in Section 6901 et seq., as amended, of RCRA, or any applicable state
or local statute, law, ordinance, code, rule, regulation, order ruling, or
decree governing Aboveground Storage Tanks.
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing or emitting, as any of such terms may further be
defined in any Environmental Law, into or through any medium including,
without limitation, ground water, surface water, land, soil or air.
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"Environmental Laws" means all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings, and changes or ordinances or judicial or administrative
interpretations thereof, or similar laws of foreign jurisdictions where the
Company conducts business, whether currently in existence or hereafter
enacted or promulgated, any of which govern (or purport to govern) or
relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances,
solid or hazardous waste or occupational health and safety, as any of these
terms are or may be defined in such statutes, laws, rules, regulations,
codes, orders, plans, injunctions, decrees, rulings and changes or
ordinances, or judicial or administrative interpretations thereof,
including, without limitation: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. ss.9601, et seq.
(collectively "CERCLA"); the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. ss.6901 et seq. (collectively
"RCRA"); the Hazardous Materials Transportation Act, as amended, 49 U.S.C.
ss.1801, et seq. (the "Hazardous Materials Transportation Act"); the Clean
Water Act, as amended, 33 U.S.C. ss.1311, et seq. (the "Clean Water Act");
the Clean Air Act, as amended (42 U.S.C. ss.7401-7642) (the "Clean Air
Act"); the Toxic Substances Control Act, as amended, 15 U.S.C. ss.2601 et
seq. (the "Toxic Substances Control Act"); the Federal Insecticide,
Fungicide, and Rodenticide Act as amended, 7 U.S.C. ss.136-136y ("FIFRA");
the Emergency Planning and Community Right-to-Know Act of 1986 as amended,
42 U.S.C. ss.11001, et seq. (Title III of SARA) ("EPCRA"); and the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651,
et seq. ("OSHA").
"Handle" means any manner of generating, accumulating, storing,
treating, disposing of, transporting, transferring, labeling, handling,
manufacturing or using, as any of such terms may further be defined in any
Environmental Law, of any Hazardous Substances or Waste.
"Hazardous Substances" shall be construed broadly to include any toxic
or hazardous substance, material, or waste, and any other contaminant,
pollutant or constituent thereof, whether liquid, solid, semi-solid, sludge
and/or gaseous, including without limitation, chemicals, compounds,
by-products, pesticides, asbestos containing materials, petroleum or
petroleum products, and polychlorinated biphenyls, the presence of which
requires investigation or remediation under any Environmental Laws or which
are or become regulated, listed or controlled by, under or pursuant to any
Environmental Laws, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act,
the Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA, or any
similar state statute, or any future amendments to, or regulations
implementing
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such statutes, laws, ordinances, codes, rules, regulations, orders,
rulings, or decrees, or which has been or shall be determined or
interpreted at any time by any Governmental Authority to be a hazardous or
toxic substance regulated under any other statute, law, regulation, order,
code, rule, order, or decree.
"Licenses" means all licenses, certificates, permits, approvals and
registrations.
"Underground Storage Tank" shall have the meaning ascribed to such
term in Section 6901 et seq., as amended, of RCRA, or any applicable state
or local statute, law, ordinance, code, rule, regulation, order ruling, or
decree governing Underground Storage Tanks.
5.13. REAL ESTATE.
(a) The Company and Shareholder are making the following
representations and warranties on behalf of the parties identified on Schedule
5.13 that to the knowledge of the Company own certain of the facilities as of
the date hereof and on the Closing Date shall be owned by TJW, Sr./ SKW
Properties, Ltd. at which the Company operates the Business, as set forth on
Schedule 5.13 (the "Owned Property"), which Schedule sets forth the location and
principal improvements and buildings on ("Improvements") the Owned Property,
together with a list of all title insurance policies relating to such
properties, all of which policies have previously been delivered or made
available to Nations.
(i) The owner of each parcel of property identified on Schedule
5.13 holds marketable fee simple title to the Owned Property and existing
Improvements, and valid enforceable easements over the easement areas identified
on Schedule 5.13, if any, all are free and clear of all mortgages, deeds of
trust, ground rents, leases, tenancies, easements, licenses, contracts of sale
or deed, options or rights of first refusal and security interests and any liens
or encumbrances that materially affect the operation of the Business, except the
deeds of trust identified in Schedule 5.13.
(ii) No Improvements upon the Owned Property encroaches upon any
adjacent property boundary line, or any building setback line, side yard line,
local comprehensive plan provisions, zoning laws and ordinances, building code
requirements, permits, licenses or other forms of approval by any Governmental
Authority or any recorded easement (or other easement of which they are aware or
have reason to believe may exist) in a manner that materially interferes with
the operation of the Business on such Owned Property; and the Owned Property is
not located within any flood plain (such that a mortgage would require a
mortgagor to obtain flood insurance).
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(iii) The Owned Property is taxed separately without regard to
any other property and has been subdivided from all other property in compliance
with applicable laws.
(iv) There is no pending condemnation proceedings, suits which
would affect the Owned Property or any portion thereof, nor have the Company or
the Shareholder been provided notice of any potential condemnation actions or
proceedings.
(v) The Company and the Shareholder have received no notice of
any plan, study or effort of any Governmental Authority which in any way would
materially interfere with the operation of the Business thereon or any intended
public improvements which will result in any charge or lien being levied or
assessed upon the Owned Property. The Company and the Shareholder have received
no notice of any existing, proposed or contemplated plan to widen, modify or
realign any street or highway contiguous to the Owned Property.
(vi) All facilities located on the parcels of Owned Property are
supplied with utilities and other services necessary for the operation of such
facilities, including gas, electricity, water, telephone, sanitary sewer and
storm sewer, all of which services are adequate for the Owned Property and to
the best of the shareholder's and the Company's knowledge are provided via
public roads or via permanent, irrevocable, appurtenant easements.
(vii) The Premises are free from defects that materially affect
the operation of the Business, have been maintained in accordance with normal
industry practice and are in good operating condition and repair and are
suitable for the purposes for which they are presently used.
(b) Schedule 1.1(m) sets forth with respect to each of the Real
Property Leases (copies of which have previously been furnished to Nations) (A)
the lessor and lessee thereof and the date and term of each of such leases, (B)
the legal description, if known, including street address, of each property
covered thereby, and (C) a brief description of the principal improvements and
buildings thereon. The Real Property Leases are in full force and effect and
have not been amended, and the Company is not and to the knowledge of the
Company or the Shareholder no other party thereto is in default or breach under
any such Lease. No event has occurred which, with the passage of time or the
giving of notice or both, would cause a breach of or default by the Company
under any of such leases and there is no breach or anticipated breach by any
other party to such leases. Except as set forth on Schedule 5.12, with respect
to each of the Leased Premises: (a) The Company has valid leasehold interests or
other rights of use and occupancy in the Leased Premises, free and clear of any
Liens on such leasehold interests or other rights of use and occupancy, or any
covenants, easements or title defects known to or created by the Company, except
as do not materially interfere with the operation of the Business thereon; (b)
No portions of the
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buildings located on the Leased Premises that are used in the business of the
Company encroach upon the property setback and building lines of the respective
property in a manner which materially interferes with the operation of the
Business thereon; (c) Each of the Leased Premises (i) has direct access to
public roads or access to public roads by means of a perpetual access easement,
such access being reasonably sufficient to satisfy the needs of the Business;
and (ii) is served by all utilities in such quantity and quality as are
sufficient to satisfy the current normal business activities as conducted at
such parcel; and (iii) the Company has not received notice of (x) any
condemnation proceeding with respect to any portion of the Leased Premises or
any access thereto and neither the Shareholder nor the Company have any
knowledge that such proceeding is contemplated by any Governmental Authority; or
(y) any special assessment which may affect any of the Leased Premises and (d)
the Leased Premises are free from defects that materially affect the operation
of the Business, have been maintained in accordance with normal industry
practice and are in good operating condition and repair and are suitable for the
purposes for which they are presently used.
5.14. GOOD TITLE, ADEQUACY AND CONDITION. Other than the Liens provide on
Schedule 5.14 or Permitted Liens, the Company has, and at the Closing will have,
good and marketable title to the Purchased Assets with full power to sell,
transfer and assign the same free and clear of any Lien, restrictions or claim
of any kind. The Purchased Assets constitute, in the aggregate, all of the
assets and properties necessary for the conduct of the Business in the manner in
which and to the extent to which such Business is currently being conducted. The
Purchased Assets are in good operating condition and repair, normal wear and
tear excepted, and have been maintained in accordance with all applicable
material specifications and warranties and normal industry practice. All
inventory of rental equipment set forth on Schedule 1.1(a) hereto and all
inventory of merchandise set forth on Schedule 1.1(b) hereto consist of a
quality and quantity usable, rentable, or saleable in the ordinary course of
business of the Company, except for obsolete items and items of below-standard
quality, all of which have been written off, written down or adequately reserved
against to their net realizable value in the Current Balance Sheet. All such
inventory not written off has been recorded at the lower of cost or net
realizable value, and depreciated consistent with the economic life of such
inventory. The quantities of each item of such inventory are reasonable in the
present circumstances of the Company.
5.15. COMPLIANCE WITH LAWS. The Company is and during the five (5) years
prior to the date hereof has been in compliance with all laws, regulations and
orders applicable to it, its business and operations (as conducted by it now and
in the past), the Purchased Assets and any other properties and assets (in each
case owned or used by it now or in the past). Except as set forth on Schedule
5.15 during the five (5) years prior to the date hereof, the Company has not
been cited, fined or otherwise notified of any asserted past or present failure
to comply with any laws, regulations or orders and no proceeding with respect to
any such violation is pending or to the knowledge of the Company and the
Shareholder threatened. Neither the Company nor any of its employees or agents,
has made any payment of funds which is prohibited by law, and no funds have been
set aside to be used for any payment prohibited by law. The Company is not
subject to any
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Contract, decree or injunction which restricts the continued operation of the
Business or the expansion thereof to other geographical areas, customers or
suppliers, or to other lines of business.
5.16. LABOR AND EMPLOYMENT MATTERS. Schedule 5.16 sets forth the name and
current rate of compensation of each employee of the Company. The Company is not
a party to or bound by any collective bargaining agreement or any other
agreement with a labor union, and to the knowledge of the Company and the
Shareholder, there has been no effort by any labor union during the twenty-four
(24) months prior to the date hereof to organize any employees of the Company
into one or more collective bargaining units. There is no pending or to the
knowledge of the Company and the Shareholder, threatened labor dispute, strike
or work stoppage which affects or which may reasonably affect the Business. None
of the Company nor any agent, representative or employee thereof has since the
date of incorporation of the Company committed any unfair labor practice as
defined in the National Labor Relations Act, as amended, and there is no pending
or threatened charge or complaint against the Company by or with the National
Labor Relations Board or any representative thereof. The Company is not aware
that any key employee or group of employees has any plans to terminate his or
their employment with the Company. Except as set forth on Schedule 5.16, the
Company is not a party or subject to any employment agreements, noncompetition
agreements, or consulting agreements and the Company has complied with all
applicable laws, rules and regulations relating to employment, civil rights and
equal employment opportunities, including but not limited to, the Civil Rights
Act of 1964, the Fair Labor Standards Act, and Americans with Disabilities Act,
each as amended.
5.17. EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.17 sets forth all Employee Benefit Plans of the
Company. With respect to each Employee Benefit Plan (as defined in clause (d)
below) of the Company, (i) each has been administered in compliance with its
terms and with all applicable laws including, without limitation, ERISA and the
Code; (ii) no actions, suits, claims or disputes are pending or threatened;
(iii) no audits, proceedings, claims or demands are pending with any
Governmental Authority; (iv) all reports, returns and similar documents required
to be filed with any Governmental Authority or distributed to any plan
participant have been duly or timely filed or distributed; (v) no "prohibited
transaction" has occurred within the meaning of ERISA or the Code; (vi) no such
plan provides medical or dental benefits for any current or former employees of
the Company or their predecessors after termination of employment; (vii) no such
plan obligates of the Company to pay separation, severance, termination or
similar benefits as a result of any transaction contemplated by this Agreement
or solely as a result of a "change of control" (as defined in Section 280G of
the Code); (viii) all required or discretionary (in accordance with historical
practices) payments, premiums, contributions, reimbursements or accruals for all
periods ending prior to or as of the Closing shall have been made or properly
accrued on the Current Balance Sheet or will be properly accrued on the books
and records of the Company as of the Closing; (ix) no such plan has any unfunded
liabilities which are not reflected on the Current Balance Sheet or the books
and records of the Company; (x) the Company has complied with the notice and
continuation of coverage requirements of Section 4980B of the Code and the
regulations thereunder with respect to any group health plan within the
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meaning of Code Section 5000(b)(1); and (xi) the Company participate in, or have
ever participated in, or have any withdrawal liability under ERISA with respect
to, a "multiemployer plan" (as defined in Section 3(37) of ERISA). True and
accurate copies of each Employee Benefit Plan of the Company, together with the
most recent annual reports on Form 5500, all IRS favorable determination letters
and summary plan descriptions for such plans have been furnished to Nations.
(b) With respect to each Employee Benefit Plan of the Company
intended to qualify under Code Section 401(a) or 403(a), (i) the Internal
Revenue Service has issued a favorable determination letter, which has not been
revoked, that any such plan is tax-qualified and exempt from federal income tax;
(ii) no reportable event (within the meaning of Section 4043 of ERISA) has
occurred; and (iii) the present value of all liabilities under any such plan
will not exceed the current fair market value of the assets of such plan
(determined using the actuarial assumption used for the most recent actuarial
valuation for such plan).
(c) Neither Nations nor the Company will suffer any loss, cost or
liability as a result of any claim that the Company, or any entity that would be
aggregated with the Company under Code Section 414(b), (c), (m) or (o), has not
complied with the provisions of paragraphs (a) and (b) above with respect to
each Employee Benefit Plan maintained by any such entity.
(d) For purposes hereof, "Employee Benefit Plan" means any: (i)
employee pension benefit plan as defined in Section 3(2) of ERISA; (ii)
multiemployer plan as defined in Section 3(37) of ERISA; (iii) employee welfare
benefit plan as defined in Section 3(1) of ERISA; and (iv) any stock option,
bonus, stock purchase, or insurance plan and any severance or termination pay
plan or policy in which employees, spouses or dependents participate.
5.18. TAX MATTERS. Except as set forth on Schedule 5.18 or otherwise
disclosed in writing to Nations prior to the date hereof, all Tax Returns
required to be filed prior to the date hereof with respect to the Company and
its income, properties, franchises or operations have been timely filed, each
such Tax Return has been prepared in compliance with all applicable laws and
regulations, and all such Tax Returns are true and accurate in all respects.
Except as set forth on Schedule 5.18, all Taxes due and payable, or which have
been incurred but are not yet due and payable by or with respect to the Company
and the Business have been paid or are accrued on the Current Balance Sheet. The
Company has withheld and paid all Taxes to the appropriate Governmental
Authority 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. With respect to taxable period of the Company: (i) no
deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Taxes has been asserted or assessed by any taxing
authority against the Company; (ii) the Company has not consented to extend the
time in which any Taxes may be assessed or collected by any taxing authority;
(iii) the Company has not requested or been granted an extension of the time for
filing any Tax Return to a date later than the Closing; (iv) there is no action,
suit, taxing authority proceeding, or audit or claim for refund now in progress,
pending or threatened against or with respect to the Company or regarding Taxes;
and (v) there are no Liens
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for Taxes (other than for current Taxes not yet due and payable) upon the assets
of the Company (other than Liens related to taxes to be assumed by Nations in
accordance with Section 13.3).
5.19. INSURANCE. Schedule 5.19 provides a list of all insurance policies of
the Company currently in force and provides the insurer, type of coverage and
policy period for each policy (the "Insurance Policies"). Such Insurance
Policies are in full force and effect, and all premiums due thereon have been
paid. The Company has complied with the provisions of such Insurance Policies.
During the three year period to the date hereof, the Company has not made any
claims under any of the Insurance Policies, and has suffered no losses that
would give rise to any such claims, for an amount in excess of $10,000 except as
set forth on Schedule 5.19. The Company has not failed to give, in a timely
manner, any notice required under any of the Insurance Policies to preserve its
rights thereunder. Through the Closing Date, each of the Insurance Policies will
be in full force and effect.
5.20. RECEIVABLES. All of the receivables of the Company being transferred
to Nations hereunder are valid and legally binding, represent bona fide
transactions and arose in the ordinary course of business of the Company. All of
such receivables are good and collectible receivables, and will be collected in
full in accordance with the terms of such receivables (and in any event within
one hundred and thirty five (135) days following the Closing), without set off
or counterclaims, subject to the allowance for doubtful accounts, if any, set
forth on the Current Balance Sheet, as reasonably adjusted since the date of the
Current Balance Sheet in the ordinary course of business consistent with past
practice.
5.21. LICENSES AND PERMITS. The Company possesses all licenses and required
governmental or official approvals, permits or authorizations (collectively, the
"Permits") for its business and operations, and Schedule 5.21 sets forth a true,
complete and accurate list of all such Permits. All such Permits are valid and
in full force and effect, the Company is in full compliance with the respective
requirements thereof, and no proceeding is pending or threatened to revoke or
amend any of them. None of such Permits is or will be impaired or in any way
affected by the execution and delivery of this Agreement or the transactions
contemplated hereby.
5.22. RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS; AFFILIATED TRANSACTIONS.
No current customer of the Company has given the Company written notice of its
intent to terminate its business relationship with the Company for any reason.
Except as set forth on Schedule 5.22, the Company has no direct or indirect
interest in any customer, supplier or competitor of the Company, or in any
person from whom or to whom the Company leases real or personal property. No
officer, director, or shareholder of the Company, nor any person related by
blood or marriage to any such person, nor any entity in which any such person
owns any beneficial interest, is a party to any Contract or transaction with the
Company or has any interest in any property used by the Company.
5.23. CONTRACTS. Schedule 5.23 sets forth a list of each Contract to which
the Company is a party or by which it or its properties and assets are bound and
which is material to its business, assets, properties or prospects (the
"Material Contracts"), true, correct and complete copies of which have been
provided to Nations. The copy of each Material Contract furnished to Nations is
a true
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and complete copy of the document it purports to represent and reflects all
amendments thereto made through the date of this Agreement. The Company has not
violated any of the terms or conditions of any Material Contract or any term or
condition which would permit termination or modification of any Material
Contract, and to the knowledge of the Company and the Shareholder all of the
covenants to be performed by any other party thereto have been fully performed,
and there are no claims for breach or indemnification or notice of default or
termination under any Material Contract. No event has occurred which
constitutes, or after notice or the passage of time, or both, would constitute,
a default by the Company under any Material Contract, and no such event has
occurred which constitutes or would constitute a default by any other party. The
Company is not subject to any liability or payment resulting from renegotiation
of amounts paid under any Material Contract other than such action taken in the
ordinary course of business consistent with past practice. As used in this
Section 5.24, Material Contracts shall include, without limitation, formal or
informal, written or oral, in each case which is material to the business,
assets, properties or prospects of the Company, (a) loan agreements, indentures,
mortgages, pledges, hypothecations, deeds of trust, conditional sale or title
retention agreements, security agreements, equipment financing obligations or
guaranties, or other sources of contingent liability in respect of any
indebtedness or obligations to any other Person(s), or letters of intent or
commitment letters with respect to same; (b) contracts obligating of the Company
to provide or purchase products or services for a period of one year or more,
excluding standard collection contracts entered into in the ordinary course of
its business without material modification from the preprinted forms used by the
Company in the ordinary course of business, copies of which have been supplied
to Nations; (c) leases of personal property, not a Capital Lease and not
cancelable without penalty on notice of sixty (60) days or less or calling for
payment of an annual gross rental exceeding $10,000; (d) distribution, sales
agency or franchise or similar agreements, or agreements providing for an
independent contractor's services, or letters of intent with respect to same;
(e) employment agreements, management service agreements, consulting agreements,
confidentiality agreements, non-competition agreements, employee handbooks,
policy statements and any other agreements relating to any employee, officer or
director of the Company; (f) licenses, assignments or transfers of trademarks,
trade names, service marks, patents, copyrights, trade secrets or know how, or
other agreements regarding proprietary rights or intellectual property; (g) any
Contract relating to pending capital expenditures by the Company; (h) any
non-competition agreements restricting the Company in any manner; and (i) other
material Contracts or understandings, irrespective of subject matter and whether
or not in writing, not entered into in the ordinary course of business by the
Company and not otherwise disclosed on the Schedules.
5.24. ACCURACY OF INFORMATION FURNISHED. No statement or information made
or furnished by the Company or the Shareholder to Nations or any of Nations'
representatives in this Agreement and the various schedules attached hereto,
contains or shall contain any untrue statement of a fact or omits or shall omit
any fact necessary to make the information contained therein not misleading. The
Company and the Shareholder have provided Nations with true, accurate and
complete copies of all documents listed or described in the various Schedules
attached hereto.
5.25. CUSTOMERS. All of the customers listed on the customer lists attached
hereto as Schedule 1.1(b) are to the knowledge of the Company and the
Shareholder subject to valid and
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enforceable Customer Contracts except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity. True, correct and complete copies of such contracts have been
furnished by the Company to Nations or made available to Nations. The Company
has not violated any of the terms or conditions of any of the Customer
Contracts, and to the knowledge of the Company and the Shareholder all of the
covenants to be performed by any other party thereto have been fully performed
and there are no claims for breach or indemnification or notice of default or
termination thereunder. Schedule 5.25 lists the top 25 customers of the Company
as measured by annual revenue for the last twelve months.
5.26. INTELLECTUAL PROPERTY. The Company has full legal right, title and
interest to the Intellectual Property and has not granted any rights in or to
the same or any third party. The Business as presently conducted, and the
unrestricted conduct and the unrestricted use and exploitation of the
Intellectual Property, does not infringe or misappropriate any rights held or
asserted by any Person, and no Person is infringing on the Intellectual
Property. Other than payments under the Assumed Liabilities, no payments are
required for the continued use of the Intellectual Property. None of the
Intellectual Property has ever been declared invalid or unenforceable, or is the
subject of any pending or threatened action for opposition, cancellation,
declaration, infringement, or invalidity, unenforceability or misappropriation
or like claim, action or proceeding. The Company will not acquire an interest in
any trade name or trademark similar to the trade names or trademarks transferred
hereunder. The Company has the right to use the computer software.
5.27. BANK ACCOUNTS. Schedule 5.27 lists each account of the Company with
any bank, broker or other depository institution, and the names of all persons
authorized to withdraw funds from each such account, and the locations of all
safe deposit boxes of the Company and the names of all persons authorized to
have access to such safe deposit boxes.
5.28. NAMES; PRIOR ACQUISITIONS. All names under which the Company does
business as of the date hereof are specified on Schedule 5.28. Except as
otherwise disclosed in Schedule 5.28, the Company has not changed its name or
used any assumed or fictitious name or been the surviving entity in a merger,
acquired any business or changed its principal place of business or chief
executive office, within the past three years.
5.29. A-MOP, INC. The Shareholder is the sole record and beneficial owner
of all the outstanding shares of capital stock of A-MOP, free and clear of any
Liens of any kind. A-MOP (i) has no equipment other than as included in Schedule
1.1(a), (ii) no customers other than the Company, (iii) no employees, (iv) has
good title to all of its assets, other than for Liens relating to Indebtedness.
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ARTICLE VI
CONDUCT OF BUSINESS PENDING THE CLOSING
6.1. CONDUCT OF BUSINESS PENDING THE CLOSING. The Company covenants and
agrees that, between the date of this Agreement and the Closing Date, the
Business shall be conducted only in, and the Company shall not take any action
except in, the ordinary course of business consistent with past practice. The
Company shall use its reasonable best efforts to preserve intact its business
organization, to keep available the services of its current officers, employees
and consultants, and to preserve its present relationships with customers,
suppliers and other persons with which it has significant business relations. By
way of amplification and not limitation, except as contemplated by this
Agreement, the Company shall not between the date of this Agreement and the
Closing Date, directly or indirectly, do or propose or agree to do any of the
following without the prior written consent of Nations: (i) incur any additional
Indebtedness other than amounts borrowed after May 11, 1998 to fund incremental
equipment purchases and borrowings under the Compass Bank line of Credit not to
exceed $2 million (the Company will not be restricted from borrowing under the
Merrill Lynch line of credit), (ii) create liens on any currently existing
assets, (iii) sell any assets outside the ordinary course of business, (iv)
enter into any contracts, leases or other agreements except in the ordinary
course of business consistent with past practice, (v) amend or terminate any
contracts, leases or other agreements except in the ordinary course of business,
(vi) declare, make or pay any dividend or distribution with respect to (or
redeem any of) the outstanding common stock of the Company; (vii) make (or
commit to) any capital expenditures in excess of $10,000 except in the ordinary
course of business (viii) increase (or authorize an increase) in compensation or
benefits payable to any employee, independent contractors or consultants except
in the ordinary course of business, (ix) issue, or authorize or propose the
issuance of, additional outstanding common stock of any class, or securities
convertible into or exchangeable for any outstanding common stock or other
securities of the Company or any of its subsidiaries, (x) issue, or authorize or
propose the issuance of, any other securities in respect of, in lieu of, or in
substitution for its now outstanding common stock, (xi) transfer any of the
outstanding shares of the Company's capital stock or (xii) purchase additional
marketable securities in the Merrill Lynch account that constitutes an Excluded
Asset; provided, however, that the Company may distribute cash or receivables to
the Shareholder relating to any of the Purchased Assets owned by A-MOP on the
date hereof. The Company agrees to give notice in writing to Nations promptly
following the occurrence of any event which has had (or which is likely to have)
an adverse effect upon its assets, business, operations, prospects, properties
or condition (financial or otherwise).
ARTICLE VII
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
7.1. FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby and to
satisfy the conditions set forth in Article VIII and Article
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IX. The Shareholder and the Company shall, and shall use reasonable efforts to
cause the Company's accountants (at the expense of Nations) to, cooperate (such
cooperation to include execution and delivery by the Shareholder and the Company
of customary audit representation letters) with Nations accountants from time to
time in connection with any audit of the assets, property and business of the
Company acquired hereunder, including in connection with Nations initial public
offering. The Shareholder shall cause the Company to comply with all of the
covenants of the Company under this Agreement. Each of the parties agrees to
reasonably cooperate with the others in the preparation and filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to any law, rule or regulation in connection with the
transactions contemplated by this Agreement, and to use their respective
reasonably best efforts to agree jointly on a method to overcome any objections
by any Governmental Authority to any such transactions. The parties also agree
to use best efforts to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby and to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby.
7.2. HSR ACT AND OTHER ACTIONS. Each of the parties hereto shall (i) make
promptly (and in no event later than ten (10) business days following the date
hereof) their respective filings, if any, and thereafter make any other required
submissions, under the HSR Act, with respect to the transactions contemplated
hereby, and (ii) use their reasonable best efforts to take, or cause to be
taken, all appropriate actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated herein, including,
without limitation, using their best efforts to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of any
Governmental Authority and parties to Contracts with the Company as are
necessary for the consummation of the transactions contemplated hereby. Each of
the parties agrees to cooperate with the others in the preparation and filing of
all forms, notifications, reports and information, if any, required or
reasonably deemed advisable pursuant to any law, rule or regulation in
connection with the transactions contemplated by this Agreement, and to use
their respective best efforts to agree jointly on a method to overcome any
objections by any Governmental Authority to any such transactions. The parties
also agree to use reasonable best efforts to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby and to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby.
7.3. NOTIFICATION OF CERTAIN MATTERS. The Company and the Shareholder shall
give prompt notice to Nations of the occurrence or non-occurrence of any event
which would likely cause any representation or warranty contained herein to be
untrue or inaccurate, or any covenant, condition, or agreement contained herein
not to be complied with or satisfied.
7.4. CONFIDENTIALITY; PUBLICITY. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement or the subject matter or
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terms hereof without the prior consent of the other parties hereto. No press
release or other public announcement related to this Agreement or the
transactions contemplated hereby shall be issued by any party hereto without the
prior approval of the other parties.
7.5. NO OTHER DISCUSSIONS. The Company and the Shareholder agree that until
the termination of this Agreement, the Company, the Shareholder and their
respective Affiliates, employees, agents and representatives will not (i)
initiate, encourage the initiation by others of discussions or negotiations with
third parties or respond to solicitations by third persons relating to any
merger, sale or other disposition of any substantial part of the assets,
business or properties of the Company (whether by merger, consolidation, sale of
stock or otherwise), or (ii) enter into any agreement or commitment (whether or
not binding) with respect to any of the foregoing transactions. The Company and
the Shareholder will immediately notify Nations if any third party attempts to
initiate any solicitation, discussion or negotiation with respect to any of the
foregoing transactions.
7.6. DUE DILIGENCE REVIEW AND ENVIRONMENTAL ASSESSMENT. Nations shall be
entitled to conduct prior to the Closing a due diligence review of the assets,
properties, books and records of the Company and an environmental assessment of
the Leased Premises (hereinafter referred to as "Environmental Assessment"). The
Company shall (and shall cause their respective directors, officers, employees,
auditors, counsel and agents to) afford Nations and its officers, employees,
auditors, counsel and agents reasonable access at all reasonable times to the
properties, offices, and other facilities of the Company, to their respective
officers and employees and to all books and records, subject to applicable law,
and shall furnish such persons with all financial, operating and other data and
information as may be requested. The Environmental Assessment may include a
physical examination of the Leased Premises and any structures, facilities, or
equipment located thereon, soil samples, ground and surface water samples,
storage tank testing and review of pertinent records, documents, and licenses of
the Company. If the Environmental Assessment identifies environmental
contamination which requires remediation or further evaluation or if the results
of the Environmental Assessment or due diligence review are otherwise not
satisfactory to Nations in its sole discretion, then Nations may elect not to
close the transactions contemplated by this Agreement and to terminate this
Agreement. Nations' failure or decision not to conduct any such due diligence
review or Environmental Assessment, and any information provided to or obtained
by Nations, shall not affect any representation or warranty of the Company or
the Shareholder under this Agreement.
7.7. RESTRICTIVE COVENANTS. In order to assure that Nations will realize
the benefits of the transactions contemplated hereby, the Company and the
Shareholder agrees that he, and it will not:
(a) for a period of five (5) years following the Closing Date (the
"Noncompete Period"), directly or indirectly, alone or as a partner, joint
venturer, officer, director, employee, consultant, agent, independent
contractor, or security holder, of any company or business, engage in, or
finance, or provide financial assistance with respect to, any business activity
in the business of renting, selling, leasing, distributing, servicing or
repairing new or used equipment, spare parts and related supplies to industrial,
manufacturing, or construction customers (the "Equipment
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Business") in the states of Texas, Louisiana and Mississippi (the "Territory);
provided, however, that the beneficial ownership of less than five percent (5%)
of any class of securities of any entity having a class of equity securities
actively traded on a national securities exchange or over-the-counter market
shall not be deemed, in and of itself, to violate the prohibitions of this
Section;
(b) during the Noncompetition Period, directly or indirectly, (i)
induce any customer acquired hereunder or any other customer of Nations in the
Territory, any of its subsidiaries, successors and assigns (collectively the
"Nations Companies") to patronize any business which is directly or indirectly
in competition with the Equipment Business conducted by any of the Nations
Companies in the Territory; (ii) canvass, solicit or accept from any Person
which is a customer of the Equipment Business conducted by any of the Nations
Companies in the Territory, any such competitive business; or (iii) request or
advise any customer of the Equipment Business conducted by any of the Nations
Companies in the Territory to withdraw, curtail or cancel any such customer's
business with the Nations Companies or their successors;
(c) during the Noncompetition Period, directly or indirectly, solicit
the employment of any person employed by the Nations Companies in the Territory,
or in any manner seek to induce any employee of the Nations Companies to leave
his or her employment, but may hire former employees of the Nations Companies;
and
(d) at any time following the Closing Date, directly or indirectly, in
any way utilize, disclose, copy, reproduce or retain in his possession any of
the Company's proprietary rights or records acquired hereunder, including, but
not limited to, any customer lists.
The Company and the Shareholder agree and acknowledge that the restrictions
contained in this Section are reasonable in scope and duration, and are
necessary to protect the Nations Companies. The Company and the Shareholder
agree and acknowledge that any breach of this Section will cause irreparable
injury to the Nations Companies and upon any breach or threatened breach of any
provision of this Section, the Nations Companies shall be entitled to injunctive
relief, specific performance or other equitable relief; provided, however, that
this shall in no way limit any other remedies which the Nations Companies may
have as a result of such breach, including the right to seek monetary damages.
The parties hereto agree that Nations may assign, without limitation, the
foregoing restrictive covenants to any successor to Nations's Equipment
Business.
7.8. CONTRACTS; CONSENTS. Without the consent of Nations, prior to the
Closing, (i) the Company shall not terminate or otherwise modify or amend any of
its Contracts, and (ii) the Company shall use its reasonable best efforts to
obtain and receive consents to the transactions contemplated hereby and waivers
of rights to terminate or modify any rights or obligations of the Company from
any Person(s) from whom such consent or waiver is required under any Contract to
which the Company or the Purchased Assets are bound (including the Customer
Contracts, the Assumed Contracts, the Equipment Leases and the Real Property
Leases) as of a date not more than ten (10) days prior to the Closing Date, or
who, as a result of the transactions contemplated hereby,
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would have such rights to terminate or modify such contracts, either by the
terms thereof or as a matter of law.
7.9. RECEIVABLES. At or prior to the Closing Date, the Company shall
deliver to Nations a true, complete and correct list of all receivables to be
transferred to Nations pursuant to Section 1.1(h). From and after the Closing,
the Company shall cooperate with Nations upon Nations' request to notify each
payor of any receivables of such transfer to Nations. The Company and the
Shareholder hereby agrees and acknowledges that any and all payments in respect
of such receivables that are received by the Company or the Shareholder after
the Closing shall be held in trust for the benefit of Nations and delivered to
Nations as soon as practicable.
7.10. PAYOFF AND ESTOPPEL LETTERS. Prior to the Closing, the Company shall
request and deliver to Nations payoff and estoppel letters reasonably requested
by Nations from all holders of any Indebtedness of the Company to be paid off on
or prior to the Closing, which letters shall contain payoff amounts, per diem
interest, wire transfer instructions and an agreement to deliver to Nations,
upon full payment of any such Assumed Indebtedness, UCC-3 termination
statements, satisfactions of mortgage or other appropriate releases and any
original promissory notes or other evidences of indebtedness marked canceled.
7.11. TRANSACTION DOCUMENTS. The Shareholder shall enter into a three (3)
year employment agreement, the form of which is attached as Exhibit B, the
Promissory Note, the Bill of Sale, Assignment and Assumption Agreement, the form
of which is attached as Exhibit E, and such other closing documents requested by
Nations and the Shareholder.
7.12. LEASES. (a) Nations, the Company and the Shareholder (as applicable)
shall at Closing enter into leases, the form of which is attached as Exhibit C,
for each of the facilities of the Company. Nations (or its designee) shall enter
into the leases for an initial term of ten (10) years at the Houston, Port
Arthur, Lake Charles, Slidel, Conroe and Longview facilities, and for an initial
term of five (5) years at Texas City, Baton Rouge and Lake Charles (corporate
office) facilities at the aggregate rental price of Six Hundred Thousand
($600,000) per year, with three, five year renewal options with an increase in
rent prior to the beginning of the sixth year, based on the cumulative change in
the Consumer Price Index ("CPI") from the inception date. Thereafter, rent shall
increase annually based upon the change in the CPI from the previous year. The
leases will be triple net leases and contain cross default provisions. Nations
will be responsible for repairs other than structural repairs to roof, sidewalls
and foundation. The leases will also provide for a purchase option by Nations at
the fair market value. If during the term or any renewal term of the leases the
Company or affiliate shall have received a bona fide arm's length offer to
purchase the property which is acceptable to landlord from any third party the
Company or affiliate shall send a notice to Nations. Nations shall have ten (10)
business days to accept the offer in writing on the exact terms made by such
third party and forty-five (45) days to close the transaction. Any decision not
to exercise such right shall not affect its right to purchase stated above.
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(b) On or prior to the Closing Date, the Shareholder shall either
obtain a nondisturbance agreement in favor of Nations (acceptable to Nations) or
prepay the obligation of the Company to purchase prior to the Closing Date the
Houston property and shall extinguish any existing mortgage, deed of trust,
liens or encumbrances affecting the Owned Properties or obtain a nondisturbance
agreement in favor of Nations (acceptable to Nations).
7.13. REGISTRATION RIGHTS. In connection with the issuance of the
Promissory Note and the conversion of the principal balance of such Promissory
Note to Nation's common stock, the Stockholder shall receive certain
registration rights in accordance with a registration rights agreement, the form
of which is attached as Exhibit D.
7.14. AWARD OF OPTIONS. Nations shall grant to qualified management of the
Company options to purchase an amount of Nations common stock $.01 par value
(the "Common Stock") equal to Five Hundred Thousand Dollars ($500,000) in the
aggregate at a price per share equal to the underwritten initial public offering
("IPO") price of Nations Common Stock. The options shall be issued in accordance
with the terms of the Nations Stock Option Plan in effect at the time. The
recipients of such options shall be determined by the Shareholder. The options
shall vest during a four (4) year period after issuance, at a rate of
twenty-five (25%) percent per year on each anniversary of the date of issuance.
7.15. POST-CLOSING ACTIONS OF THE COMPANY. Within ten (10) days following
the Closing, the Company shall change its names to a name that does not include
the words "associate", "rental" or "equipment" or any derivation thereof.
7.16. EXECUTION OF FURTHER DOCUMENTS. From and after the Closing, upon the
reasonable request of Nations, the Company shall execute, acknowledge and
deliver all such further deeds, bills of sale, assignments, transfers,
conveyances, powers of attorney and assurance as may be required or appropriate
to convey and transfer to and vest in Nations and protect its right, title and
interest in all of the Purchased Assets and to carry out the transactions
contemplated by this Agreement.
7.17. SHAREHOLDER VOTE. The Shareholder, in executing this Agreement,
consents as Shareholder of the Company to the transactions contemplated hereby,
and waives notice of any meeting in connection therewith.
7.18. ACCESS TO INFORMATION. Nations agrees to provide to Company and the
Shareholder access to financial and accounting records of the Company for tax
purposes. Any expense incurred by Nations including but not limited to research
and copying costs shall be paid by Company or the Shareholder.
7.19. EMPLOYEES. Nations agrees to on the Closing Date to: (a) offer
employment to all of the Company's employees at the same wages with
substantially similar benefits provided, however, that no third party
beneficiary rights are meant to be created by the parties hereby which shall
obligate Nations to employ, to pay a certain wage or to provide a specific
benefit to any
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employee of the Company; (b) not to close a facility of the Company for 60 days
after the Closing Date; and (c) employees shall receive full credit for prior
service with the Company for purposes of vesting only and not benefit accrual
for all benefit plans, medical plans and severance plans.
7.20. LEASE TERMINATION, PURCHASE OF CERTAIN ASSETS. On the Closing Date,
the Company shall terminate all existing leases (except for the facility located
at 320 South Richey Street, Pasadena, Texas) relating to the Owned Property. The
Company shall purchase prior to the Closing all of A-MOP's right, title and
interest in all of its equipment, whether owned, leased or pursuant to rental
purchase options and shall assume the Indebtedness relating thereto. The
purchase price for such assets shall be equal to the difference of the book
value of such assets, less the Indebtedness related thereto.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF NATIONS
The obligations of Nations to effect the transactions contemplated hereby
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions, any or all of which may be waived in whole or in part in
writing by Nations:
8.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Company and the
Shareholder contained in this Agreement shall be true and correct at and as of
the Closing Date in all material respects (materiality to be defined for such
purpose as $10,000 per Disclosure Schedule) with the same force and effect as
though made at and as of that time except (i) for matters specifically permitted
by or disclosed on any Schedule to this Agreement, (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date, and (iii) for the
representations and warranties made in Sections 5.8, 5.9, 5.10, 5.11, 5.12,
5.13, 5.14, 5.18 and 5.22, which may be amended by the Company and the
Shareholder as of the Closing Date to reflect changes from the date hereof, so
long as such amendment does not materially affect the prior disclosures on such
schedule, provided that in the event of (iii) above, any action permitted by
Nations pursuant to Section 6.1 shall be deemed to have supplemented any
applicable schedules for all purposes under this Agreement. The Company and
Shareholder shall have performed and complied with all of their respective
obligations required by this Agreement to be performed or complied with at or
prior to the Closing Date. The Company and Shareholder shall have delivered to
Nations a certificate, dated as of the Closing Date, duly signed (in the case of
the Company, by its President), certifying that such representations and
warranties are true and correct in all material respects and that all such
obligations have been complied with and performed.
8.2. NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between the
date hereof and the Closing Date, (i) there shall have been no Material Adverse
Change in the Purchased Assets or the Business, (ii) there shall have been no
adverse federal, state or local legislative or regulatory
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change affecting in any material respect the Purchased Assets or the Business,
and (iii) none of the Purchased Assets in excess of $100,000 shall have been
damaged by fire, flood, casualty, act of God or the public enemy or other cause
(regardless of insurance coverage for such damage), and there shall have been
delivered to Nations a certificate to that effect, dated the Closing Date and
signed by or on behalf of the Company and the Shareholder.
8.3. CORPORATE CERTIFICATE. The Company shall have delivered to Nations (i)
copies of its articles of incorporation and bylaws as in effect immediately
prior to the Closing Date, (ii) copies of resolutions adopted by its Board of
Directors and Shareholder authorizing the transactions contemplated by this
Agreement, and (iii) a certificate of good standing issued by the Secretary of
State of Texas as of a date not more than ten (10) days prior to the Closing
Date, certified in the case of subsections (i) and (ii) of this Section as of
the Closing Date by the Secretary of the Company as being true, correct and
complete.
8.4. DELIVERY OF PURCHASED ASSETS. At the Closing, and the Company shall
duly execute and deliver to Nations (or its assignee) a Bill of Sale, Assignment
and Assumption in the form attached hereto as Exhibit E, and such other
instruments of transfer of title as are necessary to transfer to Nations (or its
assignee) good and marketable title to the Purchased Assets free and clear of
any Liens other than the Assumed Liabilities and Permitted Liens, and shall
deliver to Nations (or its assignee) immediate possession of the Purchased
Assets.
8.5. OPINION OF COUNSEL. Nations shall have received an opinion dated as of
the Closing Date from counsel for the Company and the Shareholder, in form and
substance acceptable to Nations, to the effect that:
(i) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Texas and is
authorized to carry on the business now conducted by them and to own or
lease the properties now owned or leased by them;
(ii) The Company has obtained all necessary corporate
authorizations to consummate the Acquisition and the other transactions
contemplated hereby;
(iii) The execution and delivery of the Transaction Documents by,
the Company and the Shareholder, the performance by the Company and the
Shareholder of their respective obligations hereunder and thereunder and
the consummation by the Company and the Shareholder of the transactions
contemplated by this Agreement will not (a) contravene any provision of the
articles of incorporation or bylaws of the Company, or (b) violate or
conflict with any law, statute, ordinance, rule, regulation, decree, writ,
injunction, judgment or order of any Governmental Authority or of any
arbitration award which is either applicable to,
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binding upon or enforceable against the Company, the Shareholder or the
Purchased Assets; and
(iv) Each of the Transaction Documents is a valid and binding
obligation of the Company and the Shareholder, and enforceable against each
of them in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or general
equitable principles.
8.6. NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the transactions contemplated hereby, and which, in the reasonable judgment of
Nations, makes it inadvisable to proceed with the transactions contemplated
hereby.
8.7. DUE DILIGENCE REVIEW. Nations shall have completed its due diligence
review of the Company, the Purchased Assets and the Business, the audit of the
Company prepared on behalf of Nations by Arthur Andersen & Co., and its
Environmental Assessment of the Company, and in each such case shall be
satisfied with the results of such review, audit and assessment.
8.8. APPROVALS. Nations or the Company shall have received all necessary
and material permits, licenses, franchises, consents and approvals of all
governmental authorities, lenders, lessors and other third parties, including
under the HSR Act. Any applicable HSR Act waiting period shall have expired or
been terminated.
8.9. CLOSING DOCUMENTS. The Company and Shareholder and the other parties
named therein shall have executed and delivered the Transaction Documents and
such other closing documents necessary to consummate the Acquisition.
8.10 MOVEMENT OF OWNED PROPERTY. The Shareholder shall cause the Owned
Property prior to the Closing Date to be owned by TJW, Sr./ SKW Properties, Ltd.
8.11 REMOVAL OF CERTAIN STORAGE TANKS. The Company shall have removed or
commenced the removal and cleanup or remediation action of the four Underground
Storage Tanks at the Houston property at the Shareholder and landlords expense.
8.12 NONDISTURBANCE AGREEMENTS. The Company and the Shareholder shall have
obtained the nondisturbance agreements or taken the actions contemplated by
Section 7.12(b).
8.13 MOVEMENT OF ASSETS. The Company and the Shareholder shall have caused
A-MOP to have transferred all equipment constituting Purchased Assets to the
Company and the Company shall have assumed all Indebtedness related to such
assets.
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ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY AND THE SHAREHOLDER
The obligations of the Company and the Shareholder to effect the
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, any or all of which may be
waived in whole or in part in writing by the Company and the Shareholder:
9.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. Subject to Section 8.1, the representations and warranties of
Nations contained in this Agreement shall be true and correct in all material
respects (materiality to be defined as $10,000 per Disclosure Schedule) at and
as of the Closing Date with the same force and effect as though made at and as
of that time except (i) for changes specifically permitted by or disclosed
pursuant to this Agreement, and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and correct
as of such date. Nations shall have performed and complied with all of its
obligations required by this Agreement to be performed or complied with at or
prior to the Closing Date. Nations shall have delivered to the Company and the
Shareholder a certificate, dated as of the Closing Date, and signed by an
officer thereof, certifying that such representations and warranties are true
and correct in all material respects, and that all such obligations have been
performed and complied with, in all material respects.
9.2. PURCHASE PRICE. At the Closing, Nations shall pay to the Company the
Purchase Price and assume the Assumed Liabilities.
9.3. NO ORDER OR INJUNCTION. There shall not be pending by or before any
court or other governmental body an order or injunction restraining or
prohibiting the transactions contemplated hereby.
9.4. APPROVALS. Nations or the Company shall have received all necessary
and material permits, licenses, franchises, consents and approvals of all
governmental authorities, lenders, lessors and other third parties, including
under the HSR Act. Any applicable HSR Act waiting period shall have expired or
been terminated.
9.5. OPINION OF COUNSEL. The Company shall have received an opinion dated
as of the Closing Date from counsel for Nations, in form and substance
acceptable to the Company and the Shareholders, to the effect that:
(i) Nations is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and
is authorized to carry on the business now conducted by them and to own or
lease the properties now owned or leased by them;
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(ii) Nations has obtained all necessary corporate authorizations
to consummate the Acquisition and the other transactions contemplated
hereby;
(iii) The execution and delivery of the Transaction Documents by,
Nations, the performance by Nations obligations thereunder and the
consummation by Nations of the transactions contemplated by this Agreement
will not (a) contravene any provision of the certificate of incorporation
or bylaws of Nations, or (b) violate or conflict with any law, statute,
ordinance, rule, regulation, decree, writ, injunction, judgment or order of
any Governmental Authority or of any arbitration award which is either
applicable to, binding upon or enforceable against Nations; and
(iv) Each of the Transaction Documents is a valid and binding
obligation of Nations, and enforceable against Nations in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of
creditors' rights generally or general equitable principles.
9.6. CLOSING DOCUMENTS. Nations shall have executed and delivered the
Transaction Documents and such other closing documents necessary to consummate
the Acquisition.
9.7. RELEASE OF GUARANTIES. All guaranties or contingent obligations of the
Shareholder relating to the Assumed Liabilities shall have been terminated and
are of no further force and effect.
ARTICLE X
INDEMNIFICATION
10.1. AGREEMENT TO INDEMNIFY.
(a) From and after the Closing, the Company and the Shareholder,
jointly and severally, agree to protect, defend, indemnify and hold Nations
harmless from and will pay to Nations the aggregate of any loss, liability,
claim, action, damage, expense (including costs of investigation and
defense and reasonable attorneys fees), penalty, or fine, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
(i) any breach of any representation or warranty made by the
Company, and the Shareholder in this Agreement (but giving effect to
the Company's Disclosure Schedules) or any other certificate or
document delivered by or on behalf of the Company or the Shareholder
pursuant to this Agreement;
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(ii) any breach by the Company or the Shareholder of any
covenant or obligation of the Company or Shareholder in this
Agreement;
(iii) any claims (regardless of whether made before or after
Closing) that arise from any facts or circumstances, acts or
omissions occurring prior to the Closing Date or relate to the
Excluded Assets and the Excluded Liabilities; and
(iv) any claims related to any obligation, liability, operations
or the business of A-MOP.
(b) Nations, agrees to protect, defend, indemnify and hold the
Company and the Shareholder harmless from and will pay to the Company and
Shareholder the aggregate of any Damages arising, directly or indirectly,
from or in connection with:
(i) any breach of any representation or warranty made by
Nations in this Asset Purchase Agreement or any other certificate or
document delivered by or on behalf of Nations pursuant to this
Agreement;
(ii) any breach by Nations of any covenant or obligation of
Nations in this Agreement; or
(iii) the Assumed Liabilities, except for any liability or
obligation relating to any default under any of the Assumed
Liabilities to the extent such default existed prior to the Closing
(subject to the Threshold provided at Section 10.2).
10.2. LIMITATIONS ON AMOUNT. Neither the Company nor the Shareholder will
have liability for indemnification or Damages until the total of all Damages
with respect to such matters exceeds $500,000, and then only for the amount by
which such Damages exceed $500,000 (the "Threshold"). The maximum liability for
which the Company and the Shareholders shall be liable for under this Agreement
shall be $10,000,000. However, this limitation will not apply to any fraud by
the Company or the Shareholders.
10.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by any party in this Agreement shall survive the Closing for a
period of one year from the Closing Date, provided that the representations and
warranties concerning environmental matters shall survive for three years from
the Closing Date, and the representations and warranty concerning Taxes set
forth in Section 5.18 shall survive until expiration of the applicable statute
of limitations. If a party receives notice of a claim for indemnification before
the expiration of the applicable representation or warranty, the party shall
remain responsible for any damages relating thereto notwithstanding the
subsequent expiration of such representation or warranty. Notwithstanding any
knowledge of facts
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determined or determinable by any party by investigation, each party shall have
the right to fully rely on the representations, warranties, covenants and
agreements of the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each representation,
warranty, covenant and agreement of the parties contained in this Agreement is
independent of each other representation, warranty, covenant and agreement.
10.4. INDEMNIFICATION PROCEDURE. The indemnification obligations under this
Letter Agreement or the Asset Purchase Agreement shall be subject to the
following procedures:
(a) Third Party Claims. Promptly after receipt by an indemnified
party (an "Indemnitee") under Section 10.1 of notice of the commencement of
any action against it, such Indemnitee will, if a claim is to be made
against an indemnifying party (an "Indemnitor") under such Section, give
notice to the Indemnitor of the commencement of such action, but the
failure to notify the Indemnitor will not relieve the Indemnitor of any
liability that it may have to any Indemnitee, except to the extent that the
Indemnitor demonstrate that the defense of such action is prejudiced by the
Indemnitee's failure to give such notice. With respect to any such action,
the Indemnitor will be entitled to participate in such action and, to the
extent that it wishes (unless (i) the Indemnitor is also a party to such
action and the Indemnitee determines in good faith that joint
representation would be inappropriate, or (ii) the Indemnitor fails to
provide reasonable assurance to the Indemnitee of its financial capacity to
defend such action and provide indemnification with respect to such
action), to assume the defense of such action with counsel satisfactory to
the Indemnitee and, after notice from the Indemnitor to the Indemnitee of
its election to assume the defense of such action, the Indemnitor will not,
as long as it diligently conducts such defense, be liable to the Indemnitee
for any fees of other counsel or any other expenses with respect to the
defense of such action, in each case subsequently incurred by the
Indemnitee in connection with the defense of such action, other than
reasonable costs of investigation. If the Indemnitor assumes the defense of
an action, (i) no compromise or settlement of such claims may be effected
by the Indemnitor without the Indemnitee's consent unless (A) there is no
finding or admission of any violation of law or any violation of the rights
of any Person and no effect on any other claims that may be made against
the Indemnitor, and (B) the sole relief provided is monetary damages that
are paid in full by the Indemnitor; and (ii)the Indemnitee will have no
liability with respect to any compromise or settlement of such claims
effected without its consent (which may not be unreasonably withheld). If
notice is given to an Indemnitor of the commencement of any action and the
Indemnitor does not, within ten days after the Indemnitee's notice is
given, give notice to the Indemnitee of its election to assume the defense
of such action, the Indemnitor will be bound by any determination made in
such action or any reasonable compromise or settlement effected by the
Indemnitee.
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Notwithstanding the foregoing, if an Indemnitee determines in good faith
that there is a reasonable probability that an action may adversely affect
it or its affiliates other than as a result of monetary damages for which
it would be entitled to indemnification under this Agreement, the
Indemnitee may, by notice to the Indemnitor, assume the exclusive right to
defend, compromise, or settle such action, but the Indemnitor will not be
bound by any determination of an action so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld).
(b) Other Claims. A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the party from
whom indemnification is sought.
(c) Cost of Environmental Clean-up. The Company and the Shareholders
will be entitled to control any clean-up and any related proceeding
relating to indemnification claims arising from a breach by the Company and
the Shareholders of representations relating to environmental matters.
10.5. SOLE AND EXCLUSIVE REMEDY. The parties agree that except as otherwise
provided in this Agreement, to the extent permitted by applicable law, the
indemnification provided in this Article shall be the sole and exclusive relief
and remedy available to the parties hereto with respect to a breach of a
representation, warranty, covenant or agreement contained in this Agreement
after the Closing occurs, and Nations shall not be entitled to rescission of
this Agreement. In no event shall the Company or the Shareholder be liable to
Nations for Nations' consequential, incidental, exemplary or punitive damages.
Moreover, no damage, claim, loss, liability, cost or expense shall be deemed to
have been sustained by Nations to the extent covered by insurance policies with
respect thereto. Notwithstanding the foregoing, no provision in this Agreement
shall in any manner limit the right of a party to seek judicial or other relief
for fraud. Prior to one year from the Closing Date, Nations shall have the right
to set off against the Promissory Note for its Damages, with such set off
limited to $2 million prior to December 31, 1998, and such right of setoff being
reduced to $700,000 thereafter (the "Set Off Amount"). Nations may not set off
against the Promissory Note for claims for Damages after June 30, 1999.
10.6. SET OFF FOR INDEMNIFICATION OBLIGATION s. A set off against the
Promissory Note of any Damages for which the Company or the Shareholder may be
responsible pursuant to this Agreement is, subject, to the following terms and
conditions:
(a) Nations shall give written notice to Shareholder of any claim for
Damages or any other damages hereunder, which notice shall set forth (i)
the amount of Damages or other loss, damage, cost or expense which Nations
claims to have sustained by reason thereof, and (ii) the basis of the claim
therefor.
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(b) Such set off and recoupment shall be effected on the later to
occur of the expiration of ten (10) days from the date of such notice (the
"Notice of Contest Period") or, if such claim is contested, the date the
dispute is resolved.
(c) If, prior to the expiration of the Notice of Contest Period, the
Shareholder shall notify Nations in writing of an intention to dispute the
claim and if such dispute is not resolved within thirty (30) days after
expiration of such period (the "Resolution Period"), then Nations may elect
that such dispute shall be resolved by a committee of three (3) arbitrators
(one appointed by the Shareholder, one appointed by Nations and one
appointed by the two arbitrators so appointed), which shall be appointed
within sixty (60) days after the expiration of the Resolution Period. The
arbitrators shall abide by the rules of the American Arbitration
Association and their decision shall be made within forty-five (45) days of
being appointed and shall be final and binding on all parties.
10.7. NO BAR. Subject to Section 10.2, if the Set Off Amount is
insufficient to set off any claim for Damages hereunder (or has been paid by
Nations prior to the making of resolution of such claim), then Nations may take
any action or exercise any remedy available to it by appropriate legal
proceedings to collect the Damages.
ARTICLE XI
DEFINITIONS
11.1. DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, as in effect on the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and the
treasury regulations promulgated thereunder.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment
agreement, license, instrument, purchase and sales order, undertaking,
commitment, obligation whether written or oral, express or implied.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
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"GAAP" means generally accepted accounting principles in effect in
the United States of America as of April 30, 1998.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" shall have the meaning set forth in Section 5.10.
"Knowledge" or "knowledge" with respect to the Company and the
Shareholder, means the actual knowledge of Thomas J. Watts, Sr., Kevin
Caldwell, Steven Morris, and Jay Dinger.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, but not limited to, any conditional
sale or other title retention agreement, any lease in the nature thereof,
and the filing of or agreement to give any financing statement under the
Uniform Commercial Code or comparable law or any jurisdiction in connection
with such mortgage, pledge, security interest, encumbrance, lien or
charge).
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, operations, business or prospects which change (or
effect) individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations,
operations, business or prospects.
"Permitted Liens" means (i) those consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations on
the use of such property, (ii) Liens for current taxes, assessments or
governmental charges or levies on property not yet due and delinquent, and
(iii) warehousemen's, mechanics', carriers', landlords', repairmen's or
other similar Liens relating to the Purchased Assets or Assumed Liabilities
arising in the ordinary course of business and securing obligations of the
Company.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association,
joint venture, Governmental Authority or other entity, of whatever nature.
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"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes; and
"Taxes" means all taxes, fees or other assessments, including, but
not limited to, income, excise, property, sales, franchise, intangible,
withholding, social security, employment and unemployment taxes imposed by
any federal, state, local or foreign governmental agency, and any interest
or penalties related thereto.
11.2. OTHER DEFINITIONAL PROVISIONS. All terms defined in this Agreement
shall have the defined meanings when used in any certificates, reports or other
documents made or delivered pursuant hereto or thereto, unless the context
otherwise requires. Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa. All matters of an accounting
nature in connection with this Agreement and the transactions contemplated
hereby shall be determined in accordance with GAAP applied on a basis consistent
with prior periods, where applicable. As used herein, the neuter gender shall
also denote the masculine and feminine, and the masculine gender shall also
denote the neuter and feminine, where the context so permits.
ARTICLE XII
TERMINATION
12.1. TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date: 14. by mutual written consent of all of the parties hereto; or
15. by Nations in the event of a material breach by the Company or the
Shareholder of any provision of this Agreement; 16. by the Company or the
Shareholder in the event of a material breach by Nations of any provision of
this Agreement; 17. by Nations, the Company or the Shareholder if the Closing
shall not have occurred by August 31, 1998 or (e) by Nations pursuant to Section
8.7 if it is not satisfied with its investigation, audit or assessment. If
Nations does not close by August 31, 1998 for any reason other than a material
breach of this Agreement by the Company, or a material adverse change to the
Company since March 31, 1998, Nations shall reimburse the Company for all of its
documented expenses up to $200,000 (including supportable time value of the
Company's employees and the value of the Company's materials).
12.2. EFFECT OF TERMINATION. In the event of termination of this Agreement
pursuant to Section 12.1, this Agreement shall forthwith become void and of no
further force and effect, and the parties hereto shall be released from any and
all obligations hereunder; provided, however, that nothing herein shall relieve
any party from liability for the willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
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ARTICLE XIII
GENERAL PROVISIONS
13.1. NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
(a) IF TO NATIONS:
NationsRent, Inc.
450 East Las Olas Boulevard
Ft. Lauderdale, FL 33301
Attn: Gene Ostrow
Telecopy: (954) 760-6565
WITH A COPY TO:
Akerman, Senterfitt & Eidson, P.A.
One S.E. Third Avenue
Miami, Florida 33131
Attn: Stephen K. Roddenberry
Telecopy: (305) 374-5095
(b) IF TO THE COMPANY OR THE SHAREHOLDER:
Thomas J. Watts, Sr.
P.O. Box 4700
Pasadena, Texas 77502
Telecopy: 713-477-5035
WITH A COPY TO:
Akin, Gump, Strauss, Hauer & Feld, L.L.P
300 Covent, Suite 1500
San Antonio, Texas 78205
Attn.: Stephen C. Mount
Telecopy:210-224-2035
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Notice shall be deemed given on the date sent if sent by facsimile
transmission and on the date delivered (or the date of refusal of delivery) if
sent by overnight delivery or certified or registered mail.
13.2. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement
(including the Exhibits and Schedules attached hereto) and other documents
delivered at the Closing pursuant hereto, contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings (oral or written) between or among the parties with respect
to such subject matter including the Letter Agreement dated May 15, 1998, which
shall be superceded by this Agreement and the other agreements referenced
herein. The Exhibits and Schedules constitute a part hereof as though set forth
in full above. Except for the Nations Companies which are intended to be third
party beneficiaries of this Agreement, this Agreement is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
13.3. EXPENSES. Except as otherwise provided herein, the parties shall pay
their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby. Nation
hereby agrees to pay any and all sales, transfer and use taxes or fees which may
become due and owing as a result of the completion of the transactions
contemplated hereby.
13.4. AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
13.5. BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be (i) assigned by the Company or the Shareholder without the
prior written consent of Nations or (ii) assigned by Nations without the prior
written consent of the Company and the Shareholder, which consent shall not be
unreasonably withheld, provided that Nations shall have the right to assign its
rights and obligation under this Agreement to a wholly-owned subsidiary of
Nations without the prior consent of the Company or the Shareholder.
Notwithstanding the above, in the event of any assignment by any party hereto,
the assigning party shall remain obligated for all obligations of such assigning
party under this Agreement.
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13.6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. A telecopy signature of any party shall
be considered to have the same binding legal effect as an original signature.
13.7. INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement.
13.8. CONSTRUCTION. The parties agree and acknowledge that they have
jointly participated in the negotiation and drafting of this Agreement. In the
event of an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement. The parties agree that
prior drafts of this Agreement shall not be deemed to provide any evidence as to
the meaning of any provision hereof or the intent of the parties with respect
thereto. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. If any party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
there exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
13.9. DISPUTE RESOLUTION; GOVERNING LAW; SEVERABILITY. Any controversy or
claim arising out of or relating to this Agreement, or the breach thereof, shall
be settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in Houston, Texas and judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof, and shall not be appealable. Judicial proceedings may be
commenced only to enforce this arbitration agreement or to enforce the results
of arbitration; provided that such prohibition shall not apply in the event that
a court ordered injunction is an appropriate remedy for a breach of this
Agreement or if a cause of action is being asserted for fraud. This Agreement
shall be construed in accordance with and governed for all purposes by the laws
of the State of Texas applicable to contracts executed and to be wholly
performed within such State. If any word, phrase, sentence, clause, section,
subsection or provision of this Agreement as applied to an party or to any
circumstance is adjudged by a court to be invalid or unenforceable, the same
will in no way affect any other circumstance or the validity or enforceability
of any other word, phrase, sentence, clause, section, subsection or provision of
this Agreement. If any provision of this Agreement, or any part thereof, is held
to be unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision,
and/or to delete specific words or phrases, and in its reduced form, such
provision shall then be enforceable and shall be enforced.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
NATIONSRENT, INC., a Delaware corporation
By: /s/ Robert W. Levis
------------------------------------------
Name: Robert W. Levis
------------------------------------
Title: Vice President
-----------------------------------
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT
COMPANY, INC., a Texas corporation
By: /s/ Thomas J. Watts, Sr.
------------------------------------------
Thomas J. Watts, Sr., President
/s/ Thomas J. Watts, Sr.
---------------------------------------------
Thomas J. Watts, Sr., Individually
SPOUSAL JOINDER
The undersigned hereby executes this Agreement solely to transfer her community
property interest in the assets being purchased by Nations hereunder.
/s/ Susan K. Watts
---------------------------------------------
Susan K. Watts
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JOINDER OF A-MOP, INC.
The undersigned duly authorized officer of A-MOP, Inc. hereby executes this
Agreement solely to acknowledge the obligation hereunder to transfer all of the
equipment of A-MOP, Inc. and to assign all of its liabilities constituting
Assumed Liabilities hereunder to the Company prior to the Closing.
A-MOP INC.
/s/ Thomas J. Watts
---------------------------------------------
Thomas J. Watts, Sr.
43
<PAGE> 1
EXHIBIT 10.27
FORM OF PROMISSORY NOTE
NEITHER THIS PROMISSORY NOTE NOR THE SHARES ISSUABLE UPON CONVERSION OF THIS
PROMISSORY NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND THIS PROMISSORY NOTE CANNOT BE
SOLD OR TRANSFERRED, AND THE SHARES ISSUABLE UPON CONVERSION OF OR THIS
PROMISSORY NOTE CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL THEY ARE SO
REGISTERED OR UPON RECEIPT OF AN OPINION OF COUNSEL, SATISFACTORY TO THE MAKER,
THAT SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE
OR TRANSFER.
UNSECURED CONVERTIBLE SUBORDINATED PROMISSORY NOTE
_____________, Texas
$[____________] _______________, 1998
FOR VALUE RECEIVED, NATIONSRENT, INC., a Delaware corporation
("Maker"), promises to pay to [_____________], an individual resident in the
State of Texas ("Payee" or "Holder"), in lawful money of the United States of
America, the principal sum of [_________________] ($[___________]), together
with interest (calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days elapsed) in arrears on the
unpaid principal balance in the manner provided below. This Note has been
executed and delivered pursuant to and in accordance with the terms and
conditions of that certain Asset Purchase Agreement, dated June , 1998 (the
"Agreement"), between the Payee and Maker (also referred to herein as the
"Buyer"), and is subject to the terms and conditions of the Agreement until one
year from the date hereof, which are until such date, by this reference,
incorporated herein and made a part hereof. Capitalized terms used in this Note
without definition shall have the respective meanings set forth in the
Agreement.
ARTICLE I
PAYMENTS
1.1 PAYMENTS OF INTEREST.
(a) This Note shall bear interest at the rate of six and
one-half percent (6-1/2%) per annum, commencing on the date hereof,
subject to adjustment as provided in Section 1.1(b) below. Accrued and
unpaid interest shall be payable quarterly on each March 31, June 30,
September 30, and December 31, commencing on June 30, 1998, until all
principal and accrued and unpaid interest shall have been paid in full.
<PAGE> 2
(b) Notwithstanding anything to the contrary contained
herein, on or after an Event of Default (defined below) resulting from
the failure to timely pay principal of or interest on this Note or on
or after another Event of Default for which Payee has accelerated the
maturity date (subject to any notice, grace and cure provisions
provided herein), this Note shall bear interest at a rate per annum
equal to two percent (2.0%) in excess of the rate that otherwise would
be applicable hereunder, from the date of such Event of Default until
paid in full.
1.2 REPAYMENT OF PRINCIPAL. The principal amount of this Note
shall be due and payable on __________, 2003. In addition, upon the occurrence
of a Change of Control (as defined below) of the Maker or its successor, the
Holder of this Note shall have ten (10) days from receiving Notice of Change of
Control (as defined below) to require the Maker or its successor to repurchase
all or a portion of this Note from the Holder hereof. Upon notice of such
repurchase requirement, the Maker or its successor shall have ten (10) days
within which to effect the repurchase and remit to the Holder hereof the
repurchase price in immediately available funds. The repurchase price shall be
equal to the entire principal amount of this Note or such fraction thereof as
may be specified in the repurchase notice, plus accrued interest on the amount
to be repurchased up to the date that the repurchase price is remitted to the
Holder hereof. In the event Maker is not the successor, Maker shall as a
condition to such transaction constituting a Change of Control require the
successor to expressly assume all of Maker's obligations hereunder.
A "Change of Control" shall be deemed to have occurred (and the Maker
or its successor shall be required to give "Notice of Change of Control" to the
holder hereof within ten (10) days of the occurrence of a Change of Control), if
(i) any "person" (as such term is used in the Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")) is or becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Maker or its successor
representing 50% or more of the combined voting power of the outstanding
securities of the Maker or its successor, or (ii) the equity holders of the
Maker or its successor consummate (x) a merger or consolidation with any other
entity or (y) an agreement or agreements for the sale or disposition, in a
single transaction or series of related transactions, by the Maker or its
successor of all or substantially all of its property and assets, provided that
a Change of Control shall not be deemed to have occurred under clause (ii) above
in the event that (i) the common stockholders of Nations received, and the
Holder of this Note is entitled to receive upon conversion, shares of fully
tradable common stock (without restriction under applicable securities laws) in
the successor entity resulting from such merger or consolidation registered
under a Registration Statement on Form S-4 under the Securities Act of 1933, as
amended or (ii) the current beneficial owners of Maker's outstanding Common
Stock immediately prior to such transaction beneficially own more than 50% of,
respectively, the outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote for directors,
as the case may be, of the corporation or entity resulting from such
transaction.
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<PAGE> 3
1.3 MANNER OF PAYMENT. All payments of principal and interest on
this Note shall be made by check at such place in the United States of America
as Payee shall designate to Maker in writing or, at Maker's option, by wire
transfer of immediately available funds to an account designated by Payee in
writing. If any payment of principal or interest on this Note is due on a day
which is not a Business Day (defined below), such payment shall be due on the
next succeeding Business Day, and such extension of time shall be taken into
account in calculating the amount of interest payable under this Note. "Business
Day" means any day other than a Saturday, Sunday or legal holiday in the State
of Florida.
1.4 PREPAYMENT. After the date on which the closing price of the
shares of Maker into which this Note is convertible has averaged more than 150%
of the Conversion Price (defined below) for a period of thirty (30) or more
consecutive trading days (the "Prepayment Date"), Maker may, without premium or
penalty, at anytime and from time to time, upon ten (10) days prior written
notice to Payee, prepay all or any portion of the outstanding principal balance
due under this Note, provided that each such prepayment is accompanied by
accrued interest on the amount of principal prepaid calculated to the date of
such prepayment and provided further that Nations shall not call the Note unless
the holders shall have the right and ability to sell all of the Nation's Common
Stock into which the Note would be converted in one or more open market
transactions, such transactions subject to any restrictions imposed by
applicable law, or a private sale arranged by Nations at as price and on terms
satisfactory to the holders. Prior to the Prepayment Date, Maker shall not be
entitled to prepay any portion of the outstanding principal balance due under
this Note.
1.5 RIGHT OF SET-OFF. Maker shall have the right to withhold and
set-off against any amount due hereunder the amount of any claim for
Indemnifiable Damages to which Maker may be entitled under the Agreement as set
forth below. Prior to __________, 1999, Maker shall have the right to set-off
against this Note the amount of its Indemnifiable Damages with such set-off
limited to $2,000,000 prior to ___________, 1998, and $700,000 to June 30, 1999,
after which time Maker shall have no set-off rights.
1.6 CONVERSION. Subject to and upon compliance with the provisions
of the Agreement, if Maker completes an IPO (as defined below), then the holder
of this Note shall be entitled, at the holder's option, at any time on or before
the close of business on December 31, 2002 to convert the principal amount of
this Note (or any portion of the principal amount hereof which is $1,000.00 or
any integral multiple thereof), at the principal amount hereof, or of such
portion, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/1000 of a share) of common stock of Maker at a
conversion price equal to the initial public offering price of such shares
("Conversion Price") (or, if, prior to completion of an IPO, Maker is merged
into or otherwise acquired by or converted into an already existing, publicly
held entity ("New Entity"), at a conversion price equal to the average closing
price of the shares of the New Entity for twenty (20) trading days following the
merger) (the "Conversion Price"). If such merger or acquisition shall take place
after completion of the IPO, the holder of this Note shall be entitled,
similarly, to convert such
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<PAGE> 4
principal amount into shares of New Entity, the number of which shares shall be
that number of shares of New Entity which the holder would have received if he
had exercised his option of conversion into shares of Maker immediately prior to
such merger. In the event of any such merger or acquisition involving Maker,
Maker shall notify the holder hereof no less than ten (10) days prior to the
effective date of such merger or acquisition of such proposed merger or
acquisition. The holder shall surrender this Note, duly endorsed or assigned to
Maker or in blank, to Maker at its office or agency at the address provided in
writing by Maker, accompanied by written notice to Maker that the holder hereof
elects to convert this Note, or if less than the entire principal amount hereof
is to be converted, the portion hereof to be converted. No payment or adjustment
is to be made on conversion for dividends on the common stock issued on
conversion if the conversion occurs after the record date for such dividend. On
the date of conversion, Maker shall pay to holder all interest relating to the
principal amount of the Note through the date of such conversion. No fractions
of shares or scrip representing fractions of shares will be issued on
conversion, but instead of any fractional interest the Seller shall pay a cash
adjustment. In addition, in case of certain consolidations or mergers to which
Maker is a party or the transfer of substantially all of the assets of Maker,
this Note, if then outstanding, will be convertible thereafter, during the
period this Note shall be convertible as specified above, only into the kind and
amount of securities, cash and other property receivable upon the consolidation,
merger or transfer by a holder of the number of shares of common stock into
which this Note might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of common stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares). As used herein, "IPO"
shall mean an underwritten public offering of shares of the common stock of
Maker registered under the Securities Act of 1933, as amended. If the Maker or
the New Entity (i) declares a dividend or makes a distribution on its
outstanding shares in the form of additional shares, (ii) subdivides or
reclassifies its outstanding shares into a greater or lesser number of shares,
or (iii) combines or reclassifies its outstanding shares, then an adjustment
shall be made so that (i) the number of shares that may be acquired through a
conversion shall be increased or decreased proportionately, as the case may be,
and (ii) the Conversion Price shall be increased or decreased proportionately,
as the case may be, without changing the aggregate value of the shares of common
stock into which this Note is convertible, effective upon the date of such
event. Such adjustment shall be made successively whenever any event specified
above shall occur.
ARTICLE II
DEFAULTS
2.1 EVENTS OF DEFAULT. The occurrence and continuance of any one
or more of the following events with respect to Maker shall constitute an event
of default hereunder ("Event of Default"):
(a) If Maker shall fail to pay (i) when due, any payment
of principal or interest on this Note and such failure continues for
ten (10) days after Payee notifies Maker thereof
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<PAGE> 5
in writing or (ii) when due, any payment of principal and interest in
the event Holder exercises its repurchase right hereunder upon a Change
of Control;
(b) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to
insolvency or relief of debtors (a "Bankruptcy Law"), Maker shall (i)
commence a voluntary case or proceeding; (ii) consent to the entry of
an order for relief against it in an involuntary case; (iii) consent to
the appointment of a trustee, receiver, assignee, liquidator or similar
official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due;
(c) If a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that (i) is for relief against Maker
in an involuntary case, (ii) appoints a trustee, receiver, assignee,
liquidator or similar official for Maker or substantially all of
Maker's properties, or (iii) orders the liquidation of Maker, and in
each case the order or decree is not dismissed within 120 days; or
(d) Any other breach of the terms of this Note and such
breach continues for ten (10) days after Payee notifies Maker thereof
in writing.
2.2 NOTICE BY MAKER. Upon the occurrence of an Event of Default
hereunder (unless all Events of Default have been waived by Payee or cured),
Payee may, at its option, (i) by written notice to Maker, declare the entire
unpaid principal balance of this Note, together with all accrued interest
thereon, immediately due and payable regardless of any prior forbearance, and
(ii) exercise any and all rights and remedies available to it under applicable
law, including, without limitation, the right to collect from Maker all sums due
under this Note. Maker shall pay all reasonable costs and expenses incurred by
or on behalf of Payee in connection with Payee's exercise of any or all of its
rights and remedies under this Note, including, without limitation, reasonable
attorneys' fees.
Notwithstanding the above, if an Event of Default has occurred
under this Note and such Event of Default results in a default under the Senior
Indebtedness (defined in Section 3 below) or a default under the Senior
Indebtedness otherwise exists, then for so long as any Senior Indebtedness
remains unpaid, the Payee shall not commence or join with any creditor of Maker
in commencing any proceedings to collect or enforce its rights hereunder until
the earlier of (x) 180 days from the occurrence of such Event of Default, and
(y) the date, if any, on which such default is waived by the holder or holders
of the Senior Indebtedness to which such default relates; provided, however,
that notwithstanding such forbearance of the commencement of proceedings with
respect to an Event of Default, such Event of Default shall nevertheless be an
Event of Default for all other purposes of this Note and Payee shall be entitled
to pursue all other remedies other than the commencement of proceedings under
the circumstances set forth in this paragraph.
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<PAGE> 6
ARTICLE III
NOTE SUBORDINATE TO SENIOR INDEBTEDNESS
3.1 SENIOR INDEBTEDNESS. Anything in this Note to the contrary
notwithstanding, Maker covenants and agrees, and Payee likewise covenants and
agrees, that, to the extent and in the manner hereinafter set forth in this
Section 3, the indebtedness represented by this Note and the payment of
principal of and interest on this Note and other amounts owed by Maker under
this Note are hereby expressly made subordinate and subject in right of payment
to the prior payment in full in cash of all Senior Indebtedness (defined below),
including any interest accruing after the occurrence of an Event of Default,
whether or not such interest is an allowed claim enforceable against the debtor
in a case brought under the United States Bankruptcy Code (the "Bankruptcy
Code"). "Senior Indebtedness" means the principal of (and premium, if any) and
interest on (i) all indebtedness, public or private, of Maker for money
borrowed, whether outstanding on the date of this Note or thereafter created,
assumed or incurred, except (A) such indebtedness as is by its terms expressly
stated to be not superior in right of payment to this Note or to rank pari passu
with this Note, (B) all notes issued in connection with the acquisition of any
business, properties, stock or assets to the seller of such business,
properties, stock or assets, which shall rank pari passu with this Note unless
otherwise expressly stated to be not superior or superior in right of payment to
this Note, and (C) this Note, and (ii) any deferrals, renewals, increases or
extensions of any such Senior Indebtedness, and (iii) any fees, costs,
enforcement expenses (including legal fees and disbursements), collateral
protection expenses and other reimbursement or indemnity obligations relating to
Senior Indebtedness. The term "indebtedness of Maker for money borrowed" means
any obligation of, or any obligation guaranteed by, Maker for the repayment of
money borrowed, whether or not evidenced by bonds, debentures, notes or other
written instruments, any capitalized lease obligation and any deferred
obligation for payment of the purchase price of any property or assets. Payee
agrees to furnish any holder of Senior Indebtedness upon request a subordination
agreement that contains reasonably customary subordination provisions, including
the priority rights of Payee and the holder of the Senior Indebtedness and
prohibits payments to Payee that would cause a default under the Senior
Indebtedness.
3.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the event
of (i) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to maker or to its creditors, as such, or to its assets, or
(ii) any liquidation, dissolution or other winding up of Maker, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (iii) any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of Maker, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, then and in any such event:
(a) the holders of Senior Indebtedness shall be entitled
to receive payment in full in cash of all amounts due or to become due
on or in respect of all Senior Indebtedness, or provision shall be made
for such payment in accordance with the instruments governing such
Senior Indebtedness, before Payee is entitled to receive any payment on
account of principal
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of (or premium, if any) or interest on this Note or other amounts owed
by Maker under this Note;
(b) any payment or distribution of assets or securities
of Maker of any kind or character, whether in cash, property or
securities, to which Payee would be entitled but for the provisions of
this Section 3, including any such payment or distribution which may be
payable or deliverable by reason of the payment of any other
indebtedness of Maker being subordinated to the payment of this Note
(except for any such payment or distribution (x) authorized by an order
or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of this Note to the Senior
Indebtedness, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law, or (y)
of securities that are subordinated, to at least the same extent as
this Note, to the payment in full in cash of all Senior Indebtedness
then outstanding), shall be paid by the liquidating trustee or agent or
other person making such payment or distribution, whether a trustee in
bankruptcy, a receiver of liquidating trustee or otherwise, directly to
the holders of the Senior Indebtedness or their representative or
representatives, ratably according to the aggregate amounts remaining
unpaid on the Senior Indebtedness, for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to
pay all Senior Indebtedness in full in cash, after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of Section 3, Payee shall have received any such payment or
distribution of assets or securities of Maker of any kind or character,
whether in cash, property or securities (other than payments or
distributions (x) authorized by an order or decree giving effect to the
subordination of this Note to the Senior Indebtedness, or (y) of
securities that are subordinated to the payment in full in cash of all
Senior Indebtedness, all as described in Section 3.2(b) above),
including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of Maker
being subordinated to the payment of this Note, before all Senior
Indebtedness is paid in full in cash or payment thereof provided for,
then and in such event such payment or distribution shall be received
and held in trust for the benefit of, and shall be paid over or
delivered to, the holders of the Senior Indebtedness or their
representative or representatives, ratably according to the aggregate
amount remaining unpaid on the Senior Indebtedness, for application to
the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full in cash, after giving
effect to any concurrent payment or distribution to or for the holders
of such Senior Indebtedness.
(d) in the event that Payee fails to, in a timely manner
and to the fullest extent possible, (i) file or cause to be filed such
proofs of claim and other papers or documents as may be necessary or
advisable to have the claims under this Note allowed at any meeting of
creditors or in any proceeding referred to in this Section 3.2 or (ii)
enforce claims under this
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<PAGE> 8
Note, by proof of debt, proof of claim, or otherwise, the holders of
the Senior Indebtedness shall be entitled and are authorized to so file
and/or enforce either in Payee's name or in the name or names of any
holder of the Senior Indebtedness.
(e) Payee shall retain the right to vote and otherwise
act with respect to the claims under this Note (including, without
limitation, the right to vote to accept or reject any plan of partial
or complete liquidation, reorganization, arrangement, composition or
extension), provided that Payee shall not vote with respect to any such
plan or take any other action in any way so as to (i) contest the
validity of any Senior Indebtedness or any collateral therefor or
guaranties thereof, (ii) contest the relative rights and duties of any
holders of any Senior Indebtedness established in any instruments or
agreements creating or evidencing any of the Senior Indebtedness with
respect to any of such collateral or guaranties, or (iii) contest
Payee's obligations and agreements set forth in this Section 3.
The consolidation of Maker with, or the merger of Maker into,
another corporation or the liquidation or dissolution of Maker following the
conveyance, transfer or lease of its properties and assets substantially as an
entirety to another corporation shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of Maker for the purposes of this Section
3.
3.3 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
(a) In the event of and during the continuation of any
default in the payment of any Senior Indebtedness beyond any applicable
grace period with respect thereto ("payment default"), then no payment
shall be made by or on behalf of Maker on this Note until the date, if
any, on which such default or event of default is waived by the holders
of such Senior Indebtedness or otherwise cured or has ceased to exist
or the Senior Indebtedness to which such default or event of default
relates is discharged by payment in full in cash.
(b) In the event that any other event of default with
respect to any Senior Indebtedness shall have occurred and be
continuing that permits the holders of such Senior Indebtedness (or a
trustee on behalf of such holders) to declare such Senior Indebtedness
due and payable prior to the date on which it would otherwise have
become due and payable, and upon receipt by Maker and Payee of written
notice (the "Payment Notice") from a representative for, or the holder
of, any Senior Indebtedness, then no payment shall be made by or on
behalf of Maker on this Note until the earlier of (x) 179 days after
the date on which such Payment Notice shall have been received and (y)
the date, if any, on which such default or event of default is waived
by the holders of the Senior Indebtedness to which such default or
event of default relates is discharged by payment in full in cash (a
"Blockage Period"). Not more than two Blockage Periods may be commenced
during any period of 360 consecutive days. No event of default that
existed or was continuing (it being acknowledged that any subsequent
action that would give rise to an event of default pursuant to any
provision under which an event of default previously existed or was
continuing shall
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<PAGE> 9
constitute a new event of default for this purpose) on the date of the
commencement of any Blockage Period with respect to the Senior
Indebtedness initiating such Blockage Period shall be, or shall be
made, the basis for the commencement of a second Blockage Period by the
representative for, or the holders of, such Senior Indebtedness whether
or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than
90 consecutive days. Any such failure to make a payment on this Note
shall not be construed as preventing the occurrence of an Event of
Default under this Note. Any payment permitted hereunder after a
Blockage Period of amounts owed to the holders of this Note during a
Blockage Period shall be deemed a cure of any Event of Default caused
by any such delayed payment. Notwithstanding any other provision
contained herein, during all times in which Maker's senior credit
facility, dated March 18, 1998 with BankBoston, N.A., as agent and
LaSalle National Bank, as documentation agent, and the lenders
identified therein, or any restatement, amendment, supplement or
modification thereof or any replacement facility thereof (the "Senior
Bank Facility") is in effect or the lenders thereunder have any
obligations to make loans or extend credit to Maker or its
subsidiaries, the only holder of Senior Indebtedness entitled to
exercise its rights under Section 3.2(d) and this Section 3.3(b) shall
be the agent under the Senior Bank Facility.
In the event that, notwithstanding the foregoing, any payment or
distribution shall be received by Payee in contravention of the provisions of
this Section 3, then and in such event such payment or distribution shall be
received and held in trust for the benefit of, and shall be paid over or
delivered to, the holders of the Senior Indebtedness or their representative or
representatives, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness, for application to the Senior Indebtedness
or to be held as collateral for, the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full
in cash, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
The provisions of this Section 3.3 shall not apply to any payment with
respect to which Section 3.2 would be applicable.
3.4 PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in this
Section 3 or elsewhere in this Note shall prevent Maker, at any time except
under the circumstances described in Section 3.1 or under the conditions
described in Section 3.2, from making regularly scheduled payments at any time
of principal of (and premium, if any) or interest on this Note or other amounts
owed by Maker under this Note.
3.5 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS;
MARSHALING. No payment or distributions to the holders of Senior Indebtedness or
their representatives pursuant to the provisions of this Section 3 shall entitle
Payee to exercise any right of subrogation in respect thereof until the Senior
Indebtedness shall have been paid in full. Payee further waives any and all
rights with respect to marshaling.
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3.6 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this Section 3 are intended solely for the purpose of defining the relative
rights of Payee on the one hand and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Note is intended to or shall (a) impair,
as among Maker, its creditors other than holders of Senior Indebtedness and
Payee, the obligation of Maker, which is absolute and unconditional, to pay to
Payee the principal of (and premium, if any) and interest on this Note as and
when the same shall become due and payable in accordance with its terms; or (b)
affect the relative rights against Maker of Payee and creditors of Maker other
than the holders of Senior Indebtedness; or (c) prevent Payee from exercising
all remedies otherwise permitted by applicable law or this Note upon default
under this Note, subject to the rights, if any, under this Section 3 and Section
2.1 of the holders of the Senior Indebtedness.
3.7 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present
or future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of Maker or by any act or failure to act, in good
faith, by any such holder, or by noncompliance by Maker with the terms,
provisions of and covenants of this Note, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
3.8 NOTICE TO PAYEE. Maker shall give prompt written notice to
Payee of any fact known to Maker which would prohibit the making of any payment
to or by Payee in respect of this Note. Notwithstanding the provisions of this
Section 3 or any other provision of this Note, Payee shall not be charged with
the knowledge of the existence of any facts which would prohibit the making of
any payment to or by Payee in respect of this Note, unless and until Payee shall
have received written notice thereof from Maker or holder of Senior Indebtedness
or from any trustee, fiduciary or agent therefor.
3.9 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT. Upon any payment or distribution of assets or securities of Maker
referred to in Section 3.2, Payee shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to Payee, for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other indebtedness of Maker, the amount thereof or payment thereof, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 3.
3.10 FREEDOM OF DEALING. Payee agrees, with respect to the Senior
Indebtedness and any and all collateral therefor or guaranties thereof, that
Maker and the holders of the Senior Indebtedness may agree to increase the
amount of the Senior Indebtedness or otherwise modify the terms of any of the
Senior Indebtedness, and the holders of the Senior Indebtedness may grant
extensions of the time of payment or performance to and make compromises,
including releases of
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collateral or guaranties, and settlements with Maker and all other persons, in
each case without the consent of Payee or Maker and without affecting the
agreements of Payee or Maker contained in this Note; provided, however, that
nothing contained in this Section 3.10 shall constitute a waiver of the right of
Maker itself to agree or consent to a settlement or compromise of a claim which
any holder of the Senior Indebtedness may have against Maker.
3.11 DEFENSE TO ENFORCEMENT. If Payee, in contravention of the
terms of this Note, shall commence, prosecute or participate in any suit, action
or proceeding against Maker, then Maker may interpose as a defense or plea the
provisions of this Section 3, and any holder of the Senior Indebtedness may
intervene and interpose such defense or plea in its name or in the name of
Maker. If Payee, in contravention of the terms of this Section 3, or the last
paragraph of Section 2.2, shall attempt to collect under this Note or enforce
any provisions of this Note, then any holder of the Senior Indebtedness or Maker
may restrain the enforcement thereof in the name of such holder of the Senior
Indebtedness or in the name of Maker.
3.12 REINSTATEMENT OF SUBORDINATION. To the extent that Maker or
any guarantor of or provider of collateral for the Senior Indebtedness makes any
payment on the Senior Indebtedness that is subsequently invalidated, declared to
be fraudulent or preferential or set aside or is required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or
reorganization act, state or federal law, common law or equitable cause (such
payment being hereinafter referred to as a "Voided Payment"), then to the extent
of such Voided Payment, that portion of the Senior Indebtedness that had been
previously satisfied by such Voided Payment shall be revived and continue in
full force and effect as if such Voided Payment had never been made. In the
event that a Voided Payment is recovered from any holder of the Senior
Indebtedness, a default in the payment of the relevant Senior Indebtedness shall
be deemed to have existed and to be continuing from the date of such holder of
the Senior Indebtedness' initial receipt of such Voided Payment until the full
amount of such Voided Payment is restored to such holder of the Senior
Indebtedness. During any continuance of any such payment default, this Section 3
and the last paragraph of Section 2.2 shall be in full force and effect with
respect to the obligations hereunder.
3.13 AMENDMENTS; LIENS. The provisions of this Section 3 and the
last paragraph of Section 2.2 may not be amended or waived without the written
agreement of Maker, the agent under the Senior Bank Facility and Payee. Payee
will not, without the prior written consent of all the holders of the Senior
Indebtedness, take or receive any security interest, lien, mortgage or other
encumbrance on any assets of Maker or its subsidiaries.
ARTICLE IV
MISCELLANEOUS
4.1 WAIVER. The rights and remedies of Payee under this Note shall
be cumulative and not alternative. No waiver by Payee of any right or remedy
under this Note shall be effective unless in a writing signed by Payee. Neither
the failure nor any delay in exercising any right, power or
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privilege under this Note will operate as a waiver of such right, power or
privilege and no single or partial exercise of any such right, power or
privilege by Payee will preclude any other or further exercise of such right,
power or privilege or the exercise of any other right, power or privilege. To
the maximum extent permitted by applicable law: (a) no claim or right of Payee
arising out of this Note can be discharged by Payee, in whole or in part, by a
waiver or renunciation of the claim or right unless in a writing, signed by
Payee; (b) no waiver that may be given by Payee will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on Maker
will be deemed to be a waiver of any obligation of Maker or of the right of
Payee to take further action without notice or demand as provided in this Note.
Maker hereby waives presentment, demand, protest and notice of dishonor and
protest.
4.2 NOTICES. Any notice required or permitted to be given
hereunder shall be given in accordance with Section 13.1 of the Agreement.
4.3 SEVERABILITY. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, then the other provisions
of this Note shall remain in full force and effect. Any provision of this Note
held invalid or unenforceable only in part or degree shall remain in full force
and effect to the extent not held invalid or unenforceable.
4.4 GOVERNING LAW. This Note shall be governed by the laws of the
State of Florida without regard to conflicts of laws principles.
4.5 PARTIES IN INTEREST. This Note shall bind Maker and its
successors and assigns. This Note shall not be assigned or transferred by Payee
without the express prior written consent of Maker, except by will or other
transfer upon the death of Holder, in default thereof, by operation of law. This
Note may not be assigned by the Maker without the prior written consent of the
Holder, except upon a merger or acquisition to the extent permitted herein.
Notwithstanding the above, after one year from the date hereof, the holder of
this Note shall be entitled to pledge all or any portion of this Note as
collateral (and such financial institution shall be entitled to receive an
assignment of all or such portion of this Note without the consent of Maker) to
a financial institution, provided that (i) the financial institution to whom
this Note is pledged agrees to assume the obligations of the Holder hereof, and
(ii) the financial institution to whom this Note is pledged is not an affiliate
of an entity engaged in the short-term heavy equipment rental business.
4.6 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Note are provided for convenience only and shall not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Note unless otherwise
specified. All words used in this Note shall be construed to be of such gender
or number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
NATIONSRENT, INC., a Delaware corporation
By:
--------------------------------------------
Gene J. Ostrow, Senior Vice President and
Chief Financial Officer
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EXHIBIT 10.28
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered
into as of ______________, 1998, by and between NATIONSRENT, INC., a Delaware
corporation ("Nations"), Thomas J. Watts, Sr. and his permitted assigns (the
"Holder"). Certain other capitalized terms used herein are defined in Section 7
and throughout this Agreement.
WHEREAS, Nations and the Holder have entered into an Asset Purchase
Agreement dated as of June ___, 1998, (the "Asset Purchase Agreement") pursuant
to which Nations shall issue a promissory note to the Holder (the "Promissory
Note"), and the principal of the Promissory Note, upon the fulfillment of
certain conditions, is convertible into Nations common stock, $.01 par value
(the "Common Stock");
WHEREAS, Nations has agreed to provide to the Holder the registration
rights provided herein with respect to the shares of the Common Stock;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements set forth herein, in the Asset Purchase Agreement and the
Promissory Note, the parties agree as follows:
1. PIGGY-BACK REGISTRATION.
(a) The Holder of the Registrable Shares is hereby
granted the following piggyback registration rights with respects to the
Registrable Shares whenever Nations proposes to file a Registration Statement
(other than an acquisition shelf Registration Statement which may be filed by
Nations pursuant to Rule 415 of the Securities Act or a Registration Statement
covering shares of Common Stock which would become issuable pursuant to the
Nations stock option plans), provided that in the event that any Registrable
Shares are included in any such Registration Statement, the Holder agrees to not
to sell any shares of Common Stock for a period of 180 days (or such lesser
period agreed to by the underwriters for such offering). Whenever Nations
proposes to file a Registration Statement, other than the Registration Statement
for its initial public offering (the "IPO") and except for the period ending on
the later of one year from the date hereof or the six month period from the
effective date of the IPO, Nations will, fifteen (15) days prior to such filing,
give written notice to the Holder of its intention to do so and, upon the
written request of the Holder given within ten (10) days after Nations provides
such notice (which request shall state the intended method of disposition of
such Registrable Shares), Nations shall use its reasonable best efforts to cause
all Registrable Shares which Nations has been requested to register by the
Holder to be registered under the Securities Act to the extent necessary to
permit his sale or other disposition in accordance with the intended methods of
distribution specified in the request of such Holder. In addition, if Nations
files a Registration Statement pursuant to Rule 415 of the Securities Act on
behalf of the holder of any convertible debt or notes of Nations registering
<PAGE> 2
Common Stock issuable or issued upon conversion of such securities, such
Registration Statement shall also include all of the Registrable Shares
requested by the Holder to be included in such Registration Statement.
(b) If, by virtue of this Agreement, the Holder requests
and is entitled to inclusion in such registration, Nations and the Holder shall,
(together with any other holder of Nations Common Stock provided registration
rights by Nations with respect to their shares of the common Stock (the
"Stockholders") proposing to distribute their securities through such
underwriting) enter into an underwriting agreement with the representative of
the underwriter or underwriters selected for such underwriting (the
"Representative").
(c) Notwithstanding any other provision of this
Agreement, if the Representative advises Nations in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
Nations shall so advise the Holder and Stockholders, if any, which would
otherwise be entitled to registration, and the number of shares of Common Stock
that may be included in the registration and underwriting, if any, shall be
allocated among the Holder and Stockholders in such proportion as the respective
number of shares each Holder and Stockholder requests to be included in such
registration bears to the total number of shares such Holder and Stockholder
request be included. All Registrable Shares or any other Common Stock excluded
from the underwriting by reason of the underwriter's marketing limitation shall
not be included in such registration.
(d) If any Holder or Stockholder of Common Stock entitled
(upon request) to be included in such registration, disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to Nations and the underwriter. The Common Stock so withdrawn shall also be
withdrawn from registration.
2. EXPENSES OF REGISTRATION. Nations shall pay all expenses
incurred by Nations in connection with the registration, qualification and/or
exemption of the Common Stock, including any SEC and state securities law
registration and filing fees, printing expenses, fees and disbursements of
Nations' counsel and accountants, transfer agents' and registrars' fees, fees
and disbursements of experts used by Nations in connection with such
registration, qualification and/or exemption, and expenses incidental to any
amendment or supplement to the Registration Statement or prospectuses contained
therein. Nations shall not, however, be liable for any underwriting discounts,
sales, broker's or underwriting commissions upon sale by any Holder of any of
the Common Stock.
3. FURNISHING OF DOCUMENTS. Nations shall furnish to the Holder
such reasonable number of copies of the Registration Statement, such
prospectuses as are contained in the Registration Statement and such other
documents as the Holder may reasonably request in order to facilitate the
offering of the Nations Shares.
4. AMENDMENTS AND SUPPLEMENTS. Nations shall prepare and promptly
file with the SEC and promptly notify the Holder of the filing of such
amendments or supplements to the
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<PAGE> 3
Registration Statement or prospectuses contained therein as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to the Common Stock is required to be delivered under the Securities Act, any
event shall have occurred as a result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Nations shall also advise the Holder promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of the Registration Statement or the initiation or
threatening of any proceeding for that purpose and promptly use its reasonable
best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
5. FURTHER INFORMATION. If a Holder includes Registrable Shares
in any registration, such Holder shall furnish Nations such information
regarding itself as Nations may reasonably request and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
6. INDEMNIFICATION
(a) Nations will indemnify and hold harmless the Holder
from and against any and all losses, damages, liabilities, costs and expenses to
which the Holder may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that, Nations will not
be liable in any such case to the extent that any such loss, claim, damage,
liability, cost or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by or on behalf of Holder in writing specifically for
use in the preparation thereof.
(b) The Holder hereby agree to indemnify and hold
harmless Nations and each person, if any, who controls Nations within the
meaning of the Securities Act, from and against any and all losses, damages,
liabilities, costs and expenses to which Nations or any such controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, solely to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was so
made in reliance upon written information furnished by or on behalf of any
Holder specifically for use in the preparation thereof.
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<PAGE> 4
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this Section 6 of notice
of the commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have hereunder unless the indemnifying party has been
materially prejudiced thereby nor will such failure to so notify the
indemnifying party relieve it from any liability which it may have to any
indemnified party otherwise than hereunder. In case such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants in
any action include both the indemnified party and the indemnifying party and
there is a conflict of interest which would prevent counsel for the indemnifying
party from also representing the indemnified party, the indemnified party or
parties shall have the right to select separate counsel to participate in the
defense of such action on behalf of such indemnified party or parties. After
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a) or (b) for
any legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel to represent the indemnified party within
a reasonable time after the notice of the commencement of the action, or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
(d) In the event any of the Registrable Shares are sold
by Holder in an underwritten public offering consented to by Nations, Nations
shall provide indemnification to the underwriters of such offering and any
person controlling any such underwriter on behalf of the Holder making the
offering; provided, however, that Nations shall not be required to consent to
any such underwriting or to provide such indemnification in respect of the
matters described in the proviso to the first sentence of Section 6(a).
7. DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations
promulgated thereunder, all as the same shall be in effect at the time.
"Registration Expenses" means the expenses described in
Section 2.
"Registrable Shares" shall mean shares of Common Stock owned
directly or issuable upon conversion of the Promissory Note issued by the
Company to the Holder and any other shares
4
<PAGE> 5
of capital stock of Nations or any successor issued to the Holder in respect of
the Common Stock as a result of stock splits, stock dividends, reclassification,
recapitalization, mergers, consolidations or similar events.
"Registration Statement" shall mean any registration statement
of Nations, except an initial Registration Statement, on any form (to be
selected by Nations other than S-4 or S-8) for which Nations then qualifies. The
term Registration Statement shall also include all exhibits and financial
statements and schedules and documents incorporated by reference in such
Registration Statement when it becomes effective under the Securities Act, and
in the case of the references to the Registration Statement as of a date
subsequent to the effective date, as amended or supplemented as of such date.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time.
8. MISCELLANEOUS.
(a) Notice Generally. Any notice, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Agreement shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged,
delivered by reputable overnight courier, telecopied and confirmed separately in
writing by a copy mailed as follows or sent by registered or certified mail,
return receipt requested, postage prepaid, to the addresses set forth in the
Asset Purchase Agreement.
(b) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto; provided, however, that the Holder's rights hereunder may not be
transferred without the prior written consent of Nations, provided that this
Agreement may be assigned to a subsequent holder of all or a portion of the
principal amount of the Promissory Note to the extent such assignment of the
Promissory Note is permitted thereunder.
(c) Governing Law. This Agreement shall be governed by
the laws of the State of Florida, without regard to the provisions thereof
relating to conflict of laws.
(d) Severability. Wherever 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 shall be prohibited
by or invalid under applicable law, such provisions shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
(e) Entire Agreement. This Agreement, together with the
Asset Purchase Agreement, is intended by the parties as a final expression of
their agreement and intended to be a complete exclusive statement of the
agreement and understanding of the parties hereto in respect of
5
<PAGE> 6
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof.
(f) Counterparts. This Agreement may be executed in
separate counterparts, each of which shall collectively and separately,
constitute one agreement.
(g) No Superior Registration Rights. The Company has no
outstanding piggyback registration rights that rank superior to those granted to
the Holder herein. The Company agrees so long as all or any part of the
Promissory Note is outstanding that all future piggyback registration rights
will rank pari passu or subordinate to the registration rights contained herein.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NATIONSRENT, INC.
By:
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-------------------------------------
THOMAS J. WATTS, SR., individually
7
<PAGE> 1
EXHIBIT 10.29
FORM OF
NATIONSRENT, INC.
SUBSCRIPTION AGREEMENT
NationsRent, Inc.
450 East Las Olas Boulevard, Suite 1400
Fort Lauderdale, Florida 33301
1. Subscription. The undersigned hereby subscribes to purchase shares
(the "Shares") of the common stock, $0.01 par value per share (the "Common
Stock"), of NationsRent, Inc., a Delaware corporation (the "Corporation), and
agrees to contribute to the Corporation, at such time or times as the board of
directors of the Corporation (the "Board of Directors") may specify, the amount
of the commitment set forth on the signature page hereof that has been accepted
by the Company (the "Commitment"). This Subscription Agreement shall be
submitted to the Corporation by May 28, 1998.
2. Payment of Commitment. The Commitment shall be payable as follows:
100% of the Commitment shall be payable, on or before June 1, 1998, in
the form of the undersigned's check payable to NationsRent, Inc. delivered to
Pamela K.M. Beall at 450 E. Las Olas Blvd., Suite 1400, Fort Lauderdale, FL
33301 or by wire transfer to:
Wire to: NationsBank, N.A.
Fort Lauderdale, FL
ABA Number: 063100277
For Credit to: NationsRent, Inc.
Clearing Account
Account Number: 003660952537
3. Issuance of Shares and/or Notes.
(1) The Corporation shall advise the undersigned that it has
accepted this Subscription Agreement and shall advise the undersigned of the
amount of the Commitment accepted by the Corporation, on or before May 290,
1998. Upon acceptance of this Subscription Agreement by the Corporation, the
Corporation shall issue, in the name of the undersigned, certificates evidencing
Shares of the Corporation's common stock equal in number to the amount
determined by dividing the total amount of the Commitment by $10.00 per share.
All of such certificates shall be held in escrow by the Corporation, pursuant to
the terms of this Subscription Agreement.
<PAGE> 2
(2) Upon the payment in full by the undersigned of his Commitment,
the Corporation shall release from escrow and deliver to the undersigned a
certificate or certificates evidencing a number of shares equal to the dollar
amount of the Commitment actually paid to the Corporation by the undersigned
divided by $10.00 per share.
4. Default; Repurchase. In the event the undersigned fails to pay any
portion of the Commitment in accordance with the provisions of Paragraph 2
above, the undersigned shall forfeit his right hereunder to receive the Shares
issued in his name which the Corporation is then holding in escrow pursuant to
Paragraph 3(a) above, which Shares shall be cancelled and reclassified as
authorized but unissued Shares. The undersigned may retain all Shares previously
issued and delivered to him for which payment has been received and shall
thereafter be released from any further liability to the Corporation to pay the
remaining unpaid portion of his Commitment. If, at the time of the forfeiture
referred to immediately above, the dollar amount of the Commitment actually paid
to the Corporation by the undersigned exceeds the number of Shares issued and
delivered to the undersigned, the Corporation shall promptly refund such excess
to the undersigned, with interest on such excess amount at the rate of 6% per
annum.
5. Additional Requirements. For and in consideration of the right to
subscribe to purchase Shares of the Corporation under the terms of this
Subscription Agreement, the undersigned agrees to grant a proxy to be held and
exercised jointly by H. Wayne Huizenga and James L. Kirk and to grant a right of
first refusal to the Corporation which right of first refusal shall terminate
immediately following the consummation of the Qualified IPO. Accordingly, the
undersigned agrees to execute and deliver to the Corporation an Irrevocable
Proxy and Right of First Refusal, in the form attached hereto as Exhibit "A" and
deliver such agreement on or before June 1, 1998.
6. Representations and Warranties. The undersigned represents and
warrants to the Corporation as follows:
(1) The undersigned is an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act of 1933.
(2) The undersigned represents that he is a sophisticated investor,
has had prior experience with investments of a similar nature, and that the
undersigned's knowledge and experience in financial and business matters are
such that he is capable of evaluating the merits and risks of an investment in
the Corporation, that he is not disproportionately invested in illiquid
investments and will not become so by reason of this investment, that he does
not require the funds invested for his normal expenses, and that he can afford
to lose his entire investment in the Corporation. The undersigned understands
that the Corporation has recently commenced business operations, has not yet
generated substantial amounts of revenues from operations, and that an
investment in the Shares involves a high degree of risk.
(3) The undersigned understands that no Federal or state agency has
recommended or endorsed the Shares or made any finding or determination as to
the fairness for public investment of the Shares.
2
<PAGE> 3
(4) All material documents, records and books pertaining to the
Corporation and the Shares which the undersigned has requested have been made
available to the undersigned, and the undersigned also confirms that he has been
given an opportunity to make any further inquiries of the Corporation and its
representatives that the undersigned desires to make and that each such inquiry
has been answered, or requested information provided, to his satisfaction. In
evaluating the suitability of an investment in the Corporation, the undersigned
has not relied upon any representations or other information (whether oral or
written) other than as set forth in this Subscription Agreement or as contained
in any documents delivered or answers given in writing by the Corporation to
questions furnished to the Corporation.
(5) The undersigned understands that the Shares have not been
registered under the Securities Act of 1933 and, therefore, cannot be sold or
transferred unless either they are subsequently registered under such Act (as
well as under any applicable state securities laws) or an exemption from such
registration is available. The undersigned is also aware that there is no
established market for the Shares, and further, that the undersigned's right to
transfer the Shares is restricted and depends upon the consent of the Board of
Directors of the Corporation (which may be granted or withheld in its sole
discretion), and the undersigned agrees that certificates representing the
Shares may be so legended.
(6) The undersigned is the sole party in interest as to his
investment in the Corporation, and the undersigned is acquiring the Shares
solely for investment for his or its own account and not with a view to or for
sale in connection with any distribution of the Shares and has no present
agreement, understanding or arrangement to subdivide, sell, assign, transfer, or
otherwise dispose of all or any part of the Shares to any other person.
(7) The residence or principal place of business of the undersigned
is in the state shown on the signature page hereof and the undersigned has no
present intention of changing such residence or principal place of business.
(8) The social security number or taxpayer identification number of
the undersigned is as set forth on the signature page hereof.
(9) This Subscription Agreement has been duly executed and delivered
by the undersigned and constitutes the legal, valid and binding obligation of
the undersigned, enforceable against the undersigned in accordance with its
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally and general principles of equity.
3
<PAGE> 4
(10) The undersigned has been advised and hereby acknowledges
that Florida investors are entitled to rescind their purchase within three (3)
days after the first tender of consideration by the undersigned to the
Corporation in connection with this subscription.
(11) The undersigned has been advised and hereby acknowledges
that he or it has carefully considered the risk factors attached hereto as
Exhibit "B" in evaluating whether to undertake the investment in the Shares as
provided in this Subscription Agreement.
7. Registration Rights. The undersigned shall have the following rights
with respect to the Shares issued to them hereunder.
(1) Registration Rights for Shares; Filing of Registration
Statement. The Corporation will utilize reasonable efforts to cause, as soon as
practicable following the consummation of a Qualified IPO, a registration
statement to be filed under the Securities Act of 1933, as amended (the "Act"),
or a pending registration statement to be amended for the purpose of registering
the Shares for resale by the undersigned (the "Registration Statement"). The
Corporation will use reasonable efforts to have the Registration Statement
become effective and cause the Shares to be registered under the Act, and
registered, qualified or exempted under the state securities laws of such
jurisdictions as the undersigned reasonably requests, as soon as is reasonably
practicable. Notwithstanding the foregoing, the Corporation may delay filing the
Registration Statement, and may withhold efforts to cause the Registration
Statement to become effective, if the Corporation determines in good faith that
such registration might interfere with or affect the negotiation or completion
of any transaction that is being contemplated by the Corporation (whether or not
a final decision has been made to undertake such transaction) at the time the
right to delay is exercised. In addition to the Shares, the Corporation shall
also afford the undersigned the right to include any other shares of the Common
Stock owned by the undersigned on the date hereof (the "Other Owned Shares").
(2) Expenses of Registration. The Corporation shall pay all
expenses incurred by the Corporation in connection with the registration,
qualification and/or exemption of the Shares, including any Securities Exchange
Commission ("SEC") and state securities law registration and filing fees,
printing expenses, fees and disbursements of the Corporation's counsel and
accountants, transfer agents' and registrars' fees, fees and disbursements of
experts used by the Corporation in connection with such registration,
qualification and/or exemption, and expenses incidental to any amendment or
supplement to the Registration Statement or prospectuses contained therein. The
Corporation shall not, however, be liable for any sales, broker's or
underwriting commissions upon sale by undersigned of any of the Shares.
(3) Furnishing of Documents. The Corporation shall furnish to
the undersigned such reasonable number of copies of the Registration Statement,
such prospectuses as are contained in the Registration Statement and such other
documents as the undersigned may reasonably request in order to facilitate the
resale of the Shares.
4
<PAGE> 5
(4) Amendments and Supplements. The Corporation shall prepare
and promptly file with the SEC and promptly notify the undersigned of the filing
of such amendments or supplements to the Registration Statement or prospectuses
contained therein as may be necessary to correct any statements or omissions if,
at the time when a prospectus relating to the Shares is required to be delivered
under the Act, any event shall have occurred as a result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Corporation shall also advise the undersigned
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the SEC suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceeding for
that purpose and promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued. If, after a Registration Statement becomes effective, the Corporation
advises the undersigned that the Corporation considers it appropriate that the
Registration Statement be amended, the undersigned shall suspend any further
sales of the Shares until the Corporation advises the undersigned that the
Registration Statement has been amended.
(5) Duration. The Corporation shall maintain the effectiveness
of the Registration Statement until such time as the Corporation reasonably
determines, based on an opinion of counsel, that the undersigned will be
eligible to sell all of the Shares then owned by the undersigned without the
need for continued registration of the shares, in the three month period
immediately following the termination of the effectiveness of the Registration
Statement.
(6) Further Information. If Shares owned by the undersigned are
included in any registration, the undersigned shall furnish the Corporation such
information regarding himself as the Corporation may reasonably request and as
shall be required in connection with any registration, qualification or
compliance referred to in this Agreement.
(7) "Qualified IPO". For purposes of this Agreement a "Qualified
IPO" shall mean the consummation by the Corporation of a registration under the
Act of an initial public offering of its Shares, such that, thereafter, the
Shares of the Common Stock are listed on a national securities exchange or
regularly quoted in a market maintained by one or more members of a national or
affiliated securities association.
(8) The Corporation agrees to indemnify and hold harmless the
undersigned from and against any and all damages which may be incurred by the
undersigned under federal or state securities laws, insofar as such damages are
caused by any material misstatement or omission in the Registration Statement,
unless such misstatement or omission was made in conformity with information
furnished by or on behalf of the undersigned in writing specifically for use in
the preparation of such Registration Statement.
(9) The Corporation shall not be required to register any of
the Shares or the Other Owned Shares under the Act if, in the written opinion of
counsel for the Corporation (which counsel
5
<PAGE> 6
shall be reasonably acceptable to the undersigned), said Shares or the Other
Owned Shares may be publicly sold without the need for compliance with the
registration provisions of the Act and applicable Blue Sky Laws.
(10) The undersigned, upon receipt of notice from the Corporation,
upon the occurrence of an event which requires a post-effective amendment to the
registration statement or a supplement to the prospectus included therein, shall
promptly discontinue the sale of the Shares or the Other Owned Shares until they
have received copies of a supplemented or amended prospectus from the
Corporation, which the Corporation shall provide as soon as practicable after
such notice.
(11) The undersigned agrees that, at such time as the
Corporation files a registration statement for an initial public offering of the
Corporation's common stock, the undersigned will use its or his best efforts to
cause the Corporation to register for sale all Shares or Other Owned Shares then
owned by the undersigned.
8. Miscellaneous.
(1) Survival. The representations, warranties, and agreements
contained herein are continuing in nature and shall survive the acceptance of
this Subscription Agreement.
(2) Governing Law. This Subscription Agreement shall be governed by
and construed in accordance with the laws of the State of Florida.
(3) Brokers and Finders. Each party hereto represents and
warrants to the other parties hereto that it has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finder's fees or agent's
commissions or other like payment in connection with this Subscription Agreement
or the transactions contemplated hereby, and each party agrees to indemnify and
hold the other parties hereto harmless against and in respect of any such
obligation or liability based in any way on agreements, arrangements, or
understandings claimed to have been made by such party with any third party.
(4) Expenses. The undersigned agrees that he shall be responsible
for paying the fees and expenses that he incurs in connection with
this Subscription Agreement and the transactions contemplated hereby.
(5) Captions. The captions herein are inserted for convenience
of reference only and shall not affect the construction of this Subscription
Agreement.
(6) Pronouns and Plurals. Whenever the context may require,
any pronoun used in this Subscription Agreement shall include the corresponding
masculine, feminine, or neuter forms, and the singular form of nouns, pronouns
and verbs shall include the plural and vice versa.
6
<PAGE> 7
(7) Binding Effect. This Subscription Agreement shall be binding
upon the undersigned and his permitted successors and assigns, and, to the
extent this Subscription Agreement is accepted by the Corporation, upon the
Corporation and its respective successors and assigns.
(8) Assignment. The undersigned may not assign any of his rights or
interest in or under this Subscription Agreement without the prior written
consent of the Corporation.
(9) Confidentiality. The undersigned acknowledges and agrees that in
connection with this Subscription Agreement, the Corporation shall provide the
undersigned with certain information about the properties and operations of the
Corporation. All information about (i) the terms and provisions of this
Subscription Agreement or (ii) the Corporation, its business, properties, assets
or operations, furnished to the undersigned before or after the date hereof, and
regardless of the manner in which it is furnished, is referred to in this letter
agreement as "Confidential Information". Unless otherwise agreed to in writing
by the Corporation, the undersigned agrees that except as required by law, to
keep all Confidential Information confidential and not to disclose or reveal any
Confidential Information to any person, and agrees not to use Confidential
Information for any purposes. As used in this letter, the term "person" shall be
broadly interpreted to include, without limitation, any corporation, company,
partnership, individual or other business entity.
IN WITNESS WHEREOF, the undersigned has caused this Subscription
Agreement to be duly executed as of this _______ day of May, 1998.
SUBSCRIBER:
----------------------------------
print name
Signature:
-----------------------------------
Address:
-------------------------------------
-------------------------------------
AMOUNT OF
COMMITMENT:
$
-------------------------- ---------------------------------------------
Name As It Should Appear on Stock Certificate
---------------------------------------------
Telephone Number and Facsimile Number
Soc. Sec. No.
or
Taxpayer I.D. No:
----------------------------
SUBSCRIPTION AGREEMENT NO.
-----------------------
Accepted and Agreed:
NATIONSRENT, INC.
By: May ___, 1998
------------------------------------
Its:
-----------------------------------
7
<PAGE> 1
EXHIBIT 10.30
FORM OF
NATIONSRENT, INC.
1998 STOCK OPTION PLAN
1. ESTABLISHMENT, EFFECTIVE DATE AND TERM
NationsRent, Inc., a Delaware corporation (the "Company") hereby
establishes the "NationsRent, Inc. 1998 Stock Option Plan" (the "Plan"). The
effective date of the Plan shall be August ___, 1998 (the "Effective Date"),
which is the date that the Plan was approved and adopted by the Board of
Directors of the Company (the "Board") and the stockholders of the Company.
Unless earlier terminated pursuant to Section 17 hereof, the Plan shall
terminate on August ___, 2008.
2. PURPOSE
The purpose of the Plan is to advance the interests of the Company by
providing Eligible Individuals (as defined in Section 5 below) with an
opportunity to acquire or increase a proprietary interest in the Company, which
thereby will create a stronger incentive to expend maximum effort for the growth
and success of the Company and its subsidiaries, and will encourage such
individuals to remain in the employ of the Company or one or more of its
subsidiaries.
3. TYPE OF OPTIONS
Each stock option granted under the Plan (an "Option") may be
designated by the Board, in its sole discretion, either as (i) an "incentive
stock option" ("Incentive Stock Options") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended from time to time (the "Code"), or
(ii) as a non-qualified option which is not intended to meet the requirements of
Section 422 of the Code; provided that Incentive Stock Options may only be
granted to employees of the Company or any "subsidiary corporation" as defined
in Section 424 of the Code (a "Subsidiary"). In the absence of any designation,
Options granted under the Plan will be deemed to be non-qualified options. The
Plan shall be administered and interpreted so that all incentive stock options
granted under the plan will qualify as incentive stock options under Section 422
of the Code. Options designated as Incentive Stock Options that fail to continue
to meet the requirements of Section 422 of the Code shall be redesignated as
non-qualified options automatically on the date of such failure to continue to
meet such requirements without further action by the Board.
4. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board, which
shall have the full power and authority to take all actions,
and to make all determinations required or provided for under
the Plan or any Option granted or Option Agreement (as defined
in Section
<PAGE> 2
9 below) entered into under the Plan and all such other
actions and determinations not inconsistent with the specific
terms and provisions of the Plan deemed by the Board to be
necessary or appropriate to the administration of the Plan or
any Option granted or Option Agreement entered into hereunder.
The Board may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Option
Agreement in the manner and to the extent it shall deem
expedient to carry the Plan into effect and shall be the sole
and final judge of such expediency. All such actions and
determinations shall be by the affirmative vote of a majority
of the members of the Board present at a meeting at which any
issue relating to the Plan is properly raised for
consideration or without a meeting by written consent of the
Board executed in accordance with the Company's Certificate of
Incorporation and By-Laws and applicable law. The
interpretation and construction by the Board of any provision
of the Plan or of any Option granted or Option Agreement
entered into hereunder shall be final and conclusive.
(b) Committee. The Board may, in its discretion, from time to
time appoint a Stock Option Committee (the "Committee")
consisting of not less than two members of the Board, none of
whom shall be an officer or other salaried employee of the
Company or any Subsidiary, and each of whom shall qualify in
all respects as a "non-employee director" as defined in Rule
16b-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and an "outside director" for
purposes of Section 162(m) of the Code. The Board, in its sole
discretion, may provide that the role of the Committee shall
be limited to making recommendations to the Board concerning
any determinations to be made and actions to be taken by the
Board pursuant to or with respect to the Plan, or the Board
may delegate to the Committee such powers and authorities
related to the administration of the Plan, as set forth in
Section 4(a) above, as the Board shall determine, consistent
with the Certificate of Incorporation and By-Laws of the
Company and applicable law. The Board may remove members, add
members, and fill vacancies on the Committee from time to
time, all in accordance with the Company's Certificate of
Incorporation and By-Laws, and with applicable law. The
majority vote of the Committee, or acts reduced to or approved
in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.
(c) No Liability. No member of the Board or of the Committee shall
be liable for any action or determination made in good faith
with respect to the Plan or any Option granted or Option
Agreement entered into hereunder.
(d) Delegation to the Committee. In the event that the Plan or any
Option granted or Option Agreement entered into hereunder
provides for any action to be taken by or determination to be
made by the Board, such action may be taken by or such
determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the
Board as provided for in Section 4(b) above.
2
<PAGE> 3
Unless otherwise expressly determined by the Board, any such
action or determination by the Committee shall be final and
conclusive.
5. COMMON STOCK
The capital stock of the Company that may be issued pursuant to Options
granted under the Plan shall be shares of common stock, $.01 par value, of the
Company (the "Common Stock"), which shares may be treasury shares or authorized
but unissued shares. The total number of shares of Common Stock that may be
issued pursuant to Options granted under the Plan shall be 5,000,000 shares,
subject to adjustment as provided in Section 18 below. If any Option expires,
terminates, or is terminated or canceled for any reason prior to exercise in
full, the shares of Common Stock that were subject to the unexercised portion of
such Option shall be available for future Options granted under the Plan.
6. ELIGIBILITY
Options may be granted under the Plan to any employee or director
(employee and non-employee directors) of the Company or any Subsidiary, as well
as to any independent contractor or consultant performing services for the
Company or any Subsidiary as determined by the Board from time to time on the
basis of their importance to the business of the Company or any Subsidiary
(collectively, "Eligible Individuals"), provided that Incentive Stock Options
may only be granted to employees of the Company and its Subsidiaries.. An
individual may hold more than one Option, subject to such restrictions as are
provided herein.
7. GRANT OF OPTIONS
(a) General. Subject to the terms and conditions of the Plan, the
Board may, at any time and from time to time, prior to the
date of termination of the Plan, grant to such Eligible
Individuals as the Board may determine ("Optionees"), Options
to purchase such number of shares of Common Stock on such
terms and conditions as the Board may determine. The date on
which the Board approves the grant of an Option (or such later
date as is specified by the Board) shall be considered the
date on which such Option is granted. The maximum number of
shares of Common Stock subject to Options that may be granted
during any calendar year under the Plan to any executive
officer or other employee of the Company or any Subsidiary
whose compensation is or may be subject to Section 162(m) of
the Code is _______________ shares (subject to adjustment as
provided in Section 18 below).
(b) Non-Employee Directors.
(i) Each member of the Board that is not an employee of the
Company, as determined by the Board in its sole discretion,
shall automatically be granted, as of the consummation of the
Company's initial public offering of its Common Stock
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("IPO"), an Option to acquire 50,000 shares of Common Stock at
a price per share equal to the initial public offering price.
Each person who joins the Board after the closing date of the
IPO shall automatically be granted, as of the date he or she
joins the Board, an Option to acquire 50,000 shares of Common
Stock at a price per share equal to the closing price of a
share of Common Stock on the New York Stock Exchange on the
last trading date immediately prior to the grant date,
provided if the Common Stock is not listed on the NYSE, the
price per share shall be determined in accordance with Section
10.
(ii) Additionally, each member of the Board who is not an
employee of the Company as of the first day of each fiscal
year of the Company, shall automatically be granted, as of
such date, an Option to acquire 10,000 shares of Common Stock
at a price per share equal to the closing price of a share of
Common Stock on the New York Stock Exchange on the last
trading date immediately prior to the grant date, provided if
the Common Stock is not listed on the NYSE, the price per
share shall be determined in accordance with Section 10.
(iii) All Options granted under this Section 7(b) shall be
fully vested and immediately exercisable, and shall remain
exercisable for a term of ten years from the date of grant so
long as such person remains a member of the Board. At such
time as such person ceases to be a Board member, any portion
of the Option that has not been exercised shall no longer be
exercisable and shall terminate.
(iv) No Option referred to herein shall be granted, awarded,
or exercised at any time prior to the consummation of the IPO.
If the IPO is not consummated, the Options referred to herein
shall not be granted or awarded or become exercisable.
8. LIMITATION ON INCENTIVE STOCK OPTIONS
(a) Ten Percent Stockholder. Notwithstanding any other provision
of this Plan to the contrary, no individual may receive an
Incentive Stock Option under the Plan if such individual, at
the time the award is granted, owns (after application of the
rules contained in Section 424(d) of the Code) stock
possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company or its
subsidiaries, unless (i) the purchase price for each share of
Common Stock subject to such Incentive Stock Option is at
least 110 percent of the fair market value of a share of
Common Stock on the date of grant (as determined in good faith
by the Board) and (ii) such Incentive Stock Option is not
exercisable after the date which is five years from the date
of grant.
(b) Limitation on Grants. The aggregate fair market value
(determined with respect to each Incentive Stock Option at the
time such Incentive Stock Option is granted) of the shares of
Common Stock with respect to which Incentive Stock Options are
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exercisable for the first time by an individual during any
calendar year (under this Plan or any other plan of the
Company or a subsidiary) shall not exceed $100,000. If an
incentive stock option is granted pursuant to which the
aggregate fair market value of shares with respect to which it
first becomes exercisable in any calendar year by an
individual exceeds such $100,000 limitation, the portion of
such option which is in excess of the $100,000 limitation, and
any such options issued subsequently in the same calendar
year, shall be treated as a non-qualified option pursuant to
Section 422(d)(1) of the Code. In the event that an individual
is eligible to participate in any other stock option plan of
the Company or any parent or subsidiary of the Company which
is also intended to comply with the provisions of Section 422
of the Code, such $100,000 limitation shall apply to the
aggregate number of shares for which incentive stock options
may be granted under this Plan and all such other plans.
9. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements ("Option Agreements"), to be executed by the Company and by the
Optionee, in such form or forms as the Board shall from time to time determine.
Option Agreements covering Options granted from time to time or at the same time
need not contain similar provisions; provided, however, that all such Option
Agreements shall comply with all terms of the Plan.
10. OPTION PRICE
The purchase price of each share of Common Stock subject to an Option
(the "Option Price") shall be fixed by the Board and stated in each Option
Agreement, and subject to the provisions of Sections 7(b) and 8(a) above, shall
be not less than 100 percent of the fair market value of a share of Common Stock
on the date the Option is granted. If the Common Stock is then listed on any
national securities exchange, the fair market value shall be the closing price
of a share of Common Stock on such exchange on the last trading day immediately
prior to the date of grant. If the Common Stock is not listed on any such
exchange, the fair market value shall be determined in good faith by the Board.
Notwithstanding the foregoing, the Option Price of Options granted upon
consummation of the IPO shall be equal to the initial public offering price.
11. TERM AND VESTING OF OPTIONS
(a) Option Period. Subject to the provisions of Sections 8(a) and
14 hereof, each Option granted under the Plan shall terminate
and all rights to purchase shares thereunder shall cease upon
the expiration of 10 years from the date such Option is
granted, or on such date prior thereto as may be fixed by the
Board and stated in the Option Agreement relating to such
Option. Notwithstanding the foregoing, the Board may in its
discretion, at any time prior to the expiration or termination
of any Option, extend the term of any such Option for such
additional period as the Board in its discretion may
determine; provided, however, that in no event shall the
aggregate
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option period with respect to any Option, including the
initial term of such Option and any extensions thereof, exceed
10 years.
(b) Vesting. Subject to the provisions of Section 14 hereof, and
except as set forth in Section 7(b)(iii), each Option shall
become exercisable with respect to 25% of the total number of
shares subject to the Option on the date that is 12 months
after the date of its grant (the "Vesting Date") and with
respect to an additional 25% of the number of such shares on
each of the next three succeeding anniversaries of the Vesting
Date. Notwithstanding the foregoing, the Board may in its
discretion provide that any vesting requirement or other such
limitation on the exercise of an Option may be rescinded,
modified or waived by the Board, in its sole discretion, at
any time and from time to time after the date of grant of such
Option, so as to accelerate the time at which the Option may
be exercised.
(c) Change in Control. In the event of a Change in Control (as
defined below), except as the Board shall otherwise provide in
an Option Agreement with respect to an Option granted under
the Plan, all outstanding Options shall become immediately
exercisable in full, without regard to any limitation on
exercise imposed pursuant to Section 11(b) above. For purposes
of the Plan, a "Change in Control" shall be deemed to occur if
any person (excluding those persons or affiliates of those
persons who were stockholders of the Company prior to the
Company's initial public offering) shall (a) acquire direct or
indirect beneficial ownership of more than 50% of the total
combined voting power with respect to the election of
directors of the issued and outstanding capital stock of the
Company (except that no Change in Control shall be deemed to
have occurred if the stockholders of the Company immediately
before such acquisition own all or substantially all of the
voting stock or other interests of such acquiring person
immediately after such transaction), or (b) have the power
(whether as a result of stock ownership, revocable or
irrevocable proxies, contract or otherwise) or ability to
elect or cause the election of directors consisting at the
time of such election of a majority of the Board. For purposes
of the Plan, a "person" shall mean any person, corporation,
partnership, joint venture or other entity or any group (as
such term is defined for purposes of Section 13(d) of the
Exchange Act) and "beneficial ownership" shall be determined
in accordance with Rule 13d-3 under the Exchange Act.
12. MANNER OF EXERCISE AND PAYMENT
(a) Exercise. An Option that is exercisable hereunder may be
exercised by delivery to the Company on any business day, at
its principal office, addressed to the attention of the Stock
Option Administrator, of written notice of exercise, which
notice shall specify the number of shares with respect to
which the Option is being exercised, and shall be accompanied
by payment in full of the Option Price of the shares for which
the Option is being exercised, by one or more of the methods
provided below. The
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minimum number of shares of Common Stock with respect to which
an Option may be exercised, in whole or in part, at any time
shall be the lesser of 100 shares or the maximum number of
shares available for purchase under the Option at the time of
exercise.
(b) Payment. Payment of the Option Price for the shares of Common
Stock purchased pursuant to the exercise of an Option shall be
made (i) in cash or in cash equivalents; (ii) through the
tender to the Company of shares of Common Stock, which shares
shall be valued, for purposes of determining the extent to
which the Option Price has been paid thereby, at their fair
market value (determined in the manner described in Section 10
above) on the date of exercise; (iii) by delivering a written
direction to the Company that the Option be exercised pursuant
to a "cashless" exercise/sale procedure (pursuant to which
funds to pay for exercise of the Option are delivered to the
Company by a broker upon receipt of stock certificates from
the Company) or a cashless exercise/loan procedure (pursuant
to which the Optionees would obtain a margin loan from a
broker to fund the exercise) through a licensed broker
acceptable to the Company whereby the stock certificate or
certificates for the shares of Common Stock for which the
Option is exercised will be delivered to such broker as the
agent for the individual exercising the Option and the broker
will deliver to the Company cash (or cash equivalents
acceptable to the Company) equal to the Option Price for the
shares of Common Stock purchased pursuant to the exercise of
the Option plus the amount (if any) of federal and other taxes
that the Company, may, in its judgment, be required to
withhold with respect to the exercise of the Option; (iv) to
the extent permitted by applicable law and agreed to by the
Board in its sole and absolute discretion, by the delivery of
a promissory note of the Optionee to the Company on such terms
as the Board shall specify in its sole and absolute
discretion; or (v) by a combination of the methods described
in clauses (i), (ii), (iii) and (iv). Payment in full of the
Option Price need not accompany the written notice of exercise
if the Option is exercised pursuant to the cashless
exercise/sale procedure described above. An attempt to
exercise any Option granted hereunder other than as set forth
above shall be invalid and of no force and effect.
(c) Issuance of Certificates. Promptly after the exercise of an
Option, the individual exercising the Option shall be entitled
to the issuance of a certificate or certificates evidencing
his ownership of such shares of Common Stock. An individual
holding or exercising an Option shall have none of the rights
of a stockholder until the shares of Common Stock covered
thereby are fully paid and issued to him and, except as
provided in Section 18 below, no adjustment shall be made for
dividends or other rights for which the record date is prior
to the date of such issuance.
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13. TRANSFERABILITY OF OPTIONS
No Option shall be assignable or transferable by the Optionee to whom
it is granted, other than by will or the laws of descent and distribution.
14. TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY
(a) General. Upon the termination of the employment or other
service of an Optionee with the Company or any Subsidiary,
other than by reason of death or "permanent and total
disability" (within the meaning of Section 22(e)(3) of the
Code) of such Optionee, any Option granted to such Optionee
pursuant to the Plan shall terminate upon the date of such
termination of employment or service and such Optionee shall
have no further right to purchase shares of Common Stock
pursuant to such Option. Notwithstanding the foregoing
provisions of this Section 14, the Board may provide, in its
discretion, that following the termination of employment or
service of an Optionee with the Company or any Subsidiary, an
Optionee may exercise an Option, in whole or in part, at any
time subsequent to such termination of employment or service
and prior to termination of the Option pursuant to Section
11(a) above, either subject to or without regard to any
vesting or other limitation on exercise imposed pursuant to
Section 11(b) above. Unless otherwise determined by the Board,
temporary absence from employment or service because of
illness, vacation, approved leaves of absence, military
service and transfer of employment shall not constitute a
termination of employment or service with the Company or any
Subsidiary.
(b) Death. If an Optionee dies while in the employ or service of
the Company or any Subsidiary, Optionee's estate shall have
the right, at any time within three years after the date of
such Optionee's death and prior to termination of the Option
pursuant to Section 11(a) above, to exercise, in whole or in
part, any vested portion of the Option (in accordance with
Section 11(b) above) held by such Optionee at the date of such
Optionee's death. On the date of Optionee's death, the
unvested portion of the Option shall terminate.
(c) Disability. If an Optionee terminates employment or service
with the Company or any Subsidiary by reason of the "permanent
and total disability" (within the meaning of Section 22(e)(3)
of the Code) of such Optionee, then Optionee shall have the
right at any time within three years after such termination of
employment or service and prior to termination of the Option
pursuant to Section 11(a) above, to exercise, in whole or in
part, any vested portion of the Option (in accordance with
Section 11(b) above) held by such Optionee at the date of such
termination of employment or service. On the date of such
termination of employment or service, the unvested portion of
the Option shall terminate. Whether a termination of
employment or service is to be considered by reason of
"permanent and total disability" for purposes
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<PAGE> 9
of this Plan shall be determined by the Board, which
determination shall be final and conclusive.
15. USE OF PROCEEDS
The proceeds received by the Company from the sale of Common Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Company.
16. REQUIREMENTS OF LAW
(a) Violations of Law. The Company shall not be required to sell
or issue any shares of Common Stock under any Option if the
sale or issuance of such shares would constitute a violation
by the individual exercising the Option or the Company of any
provisions of any law or regulation of any governmental
authority, including without limitation any federal or state
securities laws or regulations. Any determination in this
connection by the Board shall be final, binding, and
conclusive. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of an Option
or the issuance of shares pursuant thereto to comply with any
law or regulation of any governmental authority.
(b) Registration. At the time of any exercise of any Option, the
Company may, if it shall determine it necessary or desirable
for any reason, require the Optionee (or his or her heirs,
legatees or legal representative, as the case may be), as a
condition to the exercise thereof, to deliver to the Company a
written representation of present intention to purchase the
shares for their own account as an investment and not with a
view to, or for sale in connection with, the distribution of
such shares, except in compliance with applicable federal and
state securities laws with respect thereto. In the event such
representation is required to be delivered, an appropriate
legend may be placed upon each certificate delivered to the
Optionee (or his or her heirs, legatees or legal
representative, as the case may be) upon his or her exercise
of part or all of the Option and a stop transfer order may be
placed with the transfer agent. Each Option shall also be
subject to the requirement that, if at any time the Company
determines, in its discretion, that the listing, registration
or qualification of the shares subject to the Option upon any
securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is
necessary or desirable as a condition of or in connection
with, the issuance or purchase of the shares thereunder, the
Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions
not acceptable to the Company in its sole discretion. The
Company shall not be obligated to take any affirmative action
in order to cause the exercisability or vesting of an Option
or to cause the exercise of an Option or the issuance of
shares pursuant thereto to comply with any law or regulation
of any governmental authority.
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(c) Withholding. The Board may make such provisions and take such
steps as it may deem necessary or appropriate for the
withholding of any taxes that the Company is required by any
law or regulation of any governmental authority, whether
federal, state or local, domestic or foreign, to withhold in
connection with the exercise of any Option, including, but not
limited to: (i) the withholding of delivery of shares of
Common Stock upon exercise of Options until the holder
reimburses the Company for the amount the Company is required
to withhold with respect to such taxes, (ii) the canceling of
any number of shares of Common Stock issuable upon exercise of
such Options in an amount sufficient to reimburse the Company
for the amount it is required to so withhold, or (iii)
withholding the amount due from any such person's wages or
compensation due such person.
(d) Governing Law. This Plan shall be governed by, and construed
and enforced in accordance with, the laws of the State of
Delaware.
17. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Common Stock as to which Options have not
been granted; provided, however, that the approval by a majority of the votes
present and entitled to vote at a duly held meeting of the stockholders of the
Company at which a quorum representing a majority of all outstanding voting
stock is, either in person or by proxy, present and voting on the amendment, or
by written consent in accordance with applicable state law and the Certificate
of Incorporation and By-Laws of the Company shall be required for any amendment
(i) that changes the requirements as to Eligible Individuals to receive Options
under the Plan, (ii) that increases the maximum number of shares of Common Stock
in the aggregate that may be sold pursuant to Options that are granted under the
Plan (except as permitted under Section 18 hereof), or (iii) if approval of such
amendment is necessary to comply with federal or state law (including without
limitation Rule 162(m) of the Code and Rule 16b-3 under the Exchange Act) or
with the rules of any stock exchange or automated quotation system on which the
Common Stock may be listed or traded. Except as permitted under Section 18
hereof, no amendment, suspension or termination of the Plan shall, without the
consent of the holder of the Option, alter or impair rights or obligations under
any Option theretofore granted under the Plan.
18. EFFECT OF CHANGES IN CAPITALIZATION
(a) Recapitalization. If the outstanding shares of Common Stock
are increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the
Company by reason of any recapitalization, reclassification,
stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in
capital stock of the Company, or other increase or decrease in
such shares effected without receipt of consideration by the
Company, occurring after the Effective Date, an appropriate
and proportionate adjustment shall
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be made by the Board (i) in the aggregate number and kind of
shares of Common Stock available under the Plan, (ii) in the
number and kind of shares of Common Stock issuable upon
exercise of outstanding Options granted under the Plan, and
(iii) in the Option Price per share of outstanding Options
granted under the Plan.
(b) Reorganization. In connection with a merger, consolidation,
reorganization or other business combination of the Company
with one or more other entities in which the Company is not
the surviving entity, each then outstanding Option shall upon
exercise thereafter entitle the holder thereof to such number
of shares of Common Stock or other securities or property to
which a holder of shares of Common Stock would have been
entitled to upon such merger, consolidation, reorganization or
other business combination.
(c) Dissolution or Liquidation. Upon the dissolution or
liquidation of the Company, the Plan and all Options
outstanding hereunder shall terminate. In the event of any
termination of the Plan under this Section 18(c), each
individual holding an Option shall have the right, immediately
prior to the occurrence of such termination and during such
reasonable period as the Board in its sole discretion shall
determine and designate, to exercise such Option in whole or
in part, whether or not such Option was otherwise exercisable
at the time such termination occurs and without regard to any
vesting or other limitation on exercise imposed pursuant to
Section 11(b) above.
(d) Adjustments. Adjustments under this Section 18 related to
stock or securities of the Company shall be made by the Board,
whose determination in that respect shall be final, binding,
and conclusive. No fractional shares of Common Stock or units
of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such
adjustment shall be eliminated in each case by rounding
downward to the nearest whole share or unit.
(e) No Limitations. The grant of an Option pursuant to the Plan
shall not affect or limit in any way the right or power of the
Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or
to sell or transfer all or any part of its business or assets.
19. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of the Company or any Subsidiary or
to interfere in any way with the right and authority of the Company or any
Subsidiary either to increase or decrease the compensation of any individual,
including any Option holder, at any time, or to terminate any employment or
other relationship between any individual and the Company or any Subsidiary. A
holder of an option shall not be deemed for any
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purpose to be a stockholder of the Company with respect to such option except to
the extent that such option shall have been exercised with respect thereto and,
in addition, a stock certificate shall have been issued theretofore and
delivered to the holder. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as expressly provided in Section 18 hereof.
20. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options or stock
appreciation rights otherwise than under the Plan.
21. SEVERABILITY
If any provision of the Plan or any Option Agreement shall be
determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable and
enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.
22. NOTICES
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: President, and if to the holder of an option, to the address as
appearing on the records of the Company.
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EXHIBIT 21.1
NATIONSRENT, INC. AND ITS SUBSIDIARIES
NationsRent, Inc., a Delaware corporation
Gabriel Trailer Manufacturing Company, Inc., an Ohio corporation
NationsRent of Kentucky, Inc., a Delaware corporation
NationsRent of Ohio, Inc., a Delaware corporation
NationsRent of Indiana, Inc., a Delaware corporation
NationsRent of West Virginia, Inc., a Delaware corporation
Sam's Equipment Rental, Inc., an Ohio corporation
(a subsidiary of Gabriel Trailer Manufacturing Company, Inc.)
Titan Rentals, Inc., a West Virginia corporation (a subsidiary of NationsRent
of West Virginia, Inc.)
The Bode-Finn Company, an Ohio corporation
NationsRent of Florida, Inc., a Delaware corporation
A-Action, Inc., a Pennsylvania corporation doing business as A-Action Rental &
Sales, Inc.
Raymond Equipment Company, a Kentucky corporation doing business as Jobs Rental
NationsRent of Texas, Inc., a Delaware corporation
The J. Kelly Co., a Michigan corporation
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of
our reports (and to all references to our Firm) included in or made part of
this registration statement.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
August 3, 1998.
