SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 14, 1997
COMMISSION FILE NO. 0-9061
ELECTRO RENT CORPORATION
Exact name of registrant as specified in its charter
California 95-2412961 0-90611
(State of California) (I.R.S. Employer (Commission
Identification No.) File No.)
6060 Sepulveda Boulevard
Van Nuys, California 91411-2501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 786-2525
Item 2. Acquisition or Disposition of Assets
On November 14, 1997, Electro Rent Corporation (the "Company")
acquired the computer and test and measurement rental business of GE
Capital Technology Management Services (TMS). The Company acquired
substantially all of the business, assets and liabilities of TMS for
consideration of $241 million. The purchase price reflects certain
receivables and finance leases retained by TMS, and is subject to
adjustment based on an audited closing date balance sheet.
TMS provides short-term rental and leasing of personal computers,
workstations and general purpose electronic test equipment,
essentially the same services provided by the Company. The TMS
assets acquired are now being integrated into the Company's rental
and lease business.
The purchase price was paid in cash. The source of funds for the
purchase price was borrowings under a new $330 million reducing
revolving credit facility dated as of November 14, 1997.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Pursuant to Item 7(a)(4), the Company has not included the requisite
financial statements of the business acquired due to the
impracticability of filing such information at the time this Current
Report on Form 8-K is filed. The Company anticipates that it will
file such financial statements within sixty (60) days of the date on
which this Current Report on Form 8-K is filed.
(b) Pro Forma Financial Information.
Pursuant to Item 7(b)(2), the Company has not included the requisite
pro forma financial information due to the impracticability of filing
such information at the time this Current Report on Form 8-K is
filed. The Company anticipates that it will file such pro forma
financial information within sixty (60) days of the date on which this
Current Report on Form 8-K is filed.
(c) Exhibits.
2.1 Acquisition Agreement, dated September 21, 1997, by and among
General Electric Capital Technology Management Services Corporation,
General Electric Capital Corporation and Electro Rent Corporation
2.2 Amendment dated as of November 14, 1997 to Acquisition Agreement,
dated September 21, 1997, by and among General Electric Capital
Technology Management Services Corporation, General Electric Capital
Corporation and Electro Rent Corporation
99.1 News Release issued by the Company on November 17, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
ELECTRO RENT CORPORATION
Dated: November 26, 1997
/s/ Craig R. Jones
Craig R. Jones
Vice President and
Chief Financial Officer
ACQUISITION AGREEMENT
BY AND AMONG
GENERAL ELECTRIC CAPITAL TECHNOLOGY
MANAGEMENT SERVICES CORPORATION,
GENERAL ELECTRIC CAPITAL CORPORATION
AND
ELECTRO RENT CORPORATION
September 21, 1997
TABLE OF CONTENTS
Page
ARTICLE 1 PURCHASE AND SALE OF THE BUSINESS 1
1.1 Purchase and Sale 1
1.2 Amount of Purchase Price; Time and Manner of Payment 3
ARTICLE 2 THE CLOSING 4
2.1 Time, Date and Place of Closing 4
2.2 Conditions to Obligations of the Purchaser 4
2.3 Conditions to Obligations of the Seller 7
2.4 Deliveries by the Seller at the Closing 8
2.5 Deliveries by the Purchaser at the Closing 9
2.6 Post-Closing Calculations and Adjustments 10
2.7 Amendment of Schedules 14
ARTICLE 3 BEST EFFORTS; FURTHER ASSURANCES 15
3.1 General 15
3.2 Access to Books and Records 16
ARTICLE 4 THE SELLER'S REPRESENTATIONS AND WARRANTIES 16
4.1 Status of the Seller 17
4.2 Finance 19
4.3 Real and Personal Property 21
4.4 Patents; Trademarks; Trade Names, Etc. 24
4.5 Contracts 25
4.6 Employees; Employment Relationships 27
4.7 Employee and Fringe Benefit Plans 27
4.8 Labor Relations 28
4.9 Litigation; Compliance with Law 29
4.10 Environmental Matters 30
4.11 Major Customers and Suppliers 32
4.12 Taxes 32
4.13 Commissions 33
4.14 Government Contracts 33
4.15 Brokers and Finders Fees 33
ARTICLE 5 THE PURCHASER'S REPRESENTATIONS AND WARRANTIES 33
5.1 Organization 33
5.2 Power; Authorization; Binding Nature 33
5.3 Absence of Violations or Conflicts 34
5.4 No Pending Litigation or Proceedings 35
5.5 Brokers and Finders Fees 35
<PAGE>
ARTICLE 6 OTHER AGREEMENTS 35
6.1 Continuing Operation of Business 35
6.2 Satisfaction of Liens and Indebtedness 37
6.3 Inspection 37
6.4 Expenses 38
6.5 Certain Employee Matters 39
6.6 Confidentiality 43
6.7 No Solicitations; Discussions By Seller 43
6.8 Filing under the HSR Act 44
6.9 Additional Financial Statements 44
6.10 Transition Services 45
6.11 Fees for Credit Commitment 45
6.12 Repurchase of Certain Uncollectible Accounts Receivable 45
6.13 Equipment Not in the Possession of Seller Closing 51
ARTICLE 7 NONCOMPETITION AND NONDISCLOSURE 55
7.1 Scope and Reasonableness of Restrictions 55
7.2 Noncompetition 56
7.3 No Interference With Customers 56
7.4 Employee Utilization 56
7.5 No Interference with Employees 57
7.6 Exceptions 57
7.7 Remedies 58
7.8 Modification 58
7.9 Covenants Independent 58
ARTICLE 8 SURVIVAL; INDEMNIFICATION 59
8.1 Indemnification by the Seller 59
8.2 Indemnification by the Purchaser 59
8.3 General Indemnification Procedures 60
8.4 Arbitration 61
8.5 Certain Limitations 62
8.6 Satisfaction of Indemnification Obligations 62
8.7 Escrow 63
8.8 Mitigation and Recoveries 64
8.9 Sole Remedy 64
ARTICLE 9 TERMINATION AND ABANDONMENT 65
9.1 Termination and Abandonment 65
9.2 Rights and Obligations on Termination 66
<PAGE>
ARTICLE 10 MISCELLANEOUS PROVISIONS 66
10.1 Notices 66
10.2 Time of the Essence; Computation of Time 68
10.3 Assignment; Successors in Interest 68
10.4 Number; Gender 69
10.5 Captions; Certain Definitions 69
10.6 Controlling Law; Integration; Amendment; Waiver 69
10.7 Severability 70
10.8 No Third-Party Beneficiaries 70
10.9 Bulk Sales 70
10.10 Counterparts 71
10.11 Obligations of General Electric Capital Corporation 72
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedules Page
2.2(c) Certain Consents
2.6(b) Accounting Principles
4.1(c) Consents
4.1(d) Violations or Conflicts
4.2(a) Financial Statements
4.2(b) Absence of Changes
4.3(a) Property
4.3(a)(i) Leased Property
4.3(c) Liens
4.3(d)(x) Inventory
4.3(d)(y) Depreciation Life of Inventory
4.4(a)(x) Non-owned or Licensed Intellectual Property
4.4(a)(y) List of Intellectual Property
4.4(a)(z) Intellectual Property Encumbrances
4.4(b) Intellectual Property Violations
4.5 Contracts
4.6 Employees
4.7 Employee and Fringe Benefit Plans
4.8 Labor Relations
4.9 Litigation
4.10 Environmental Matters
4.11 Customers and Suppliers
4.13 Commissions
4.14 Government Contracts
4.15 Brokers and Finders Fees
5.5 Brokers and Finders Fees
6.5(b) Retained Employees
6.5(d) Severance Plan
Exhibits
A - Excluded Assets
B - Assumed Liabilities
C - Transition Services
<PAGE>
ACQUISITION AGREEMENT
BY AND AMONG
GENERAL ELECTRIC CAPITAL TECHNOLOGY
MANAGEMENT SERVICES CORPORATION
GENERAL ELECTRIC CAPITAL CORPORATION
AND ELECTRO RENT CORPORATION
THIS IS AN ACQUISITION AGREEMENT (this "Agreement") by and
among GENERAL ELECTRIC CAPITAL TECHNOLOGY MANAGEMENT SERVICES
CORPORATION, a California corporation (the "Seller"), GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("GECC"),
only for purposes of Section 10.11, and ELECTRO RENT CORPORATION,
a California corporation (the "Purchaser"), with respect to the
Computer Rental and Test and Measurement Rental businesses of the
Seller (collectively, the "Business") and in which the parties
hereto, in consideration of the mutual promises set forth below,
the mutuality and sufficiency of which are hereby acknowledged,
hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE BUSINESS
1.1 Purchase and Sale.
(a) General. At the Closing (defined below), which
shall occur on the Closing Date (defined below), and subject to
the terms and conditions of this Agreement, (i) the Seller shall
sell, convey, assign and transfer the Purchased Assets (defined
below) and assign the Assumed Liabilities (defined below) to the
Purchaser, (ii) the Purchaser shall purchase the Purchased Assets
and assume the Assumed Liabilities from the Seller, and (iii)
each of the Seller and the Purchaser shall also take the other
<PAGE>
actions that Sections 2.1 through 2.7 contemplate that each such
party will take.
(b) The Purchased Assets. The term "Purchased Assets"
shall mean all properties (real, personal and mixed, and tangible
and intangible) of the Seller which are used in the conduct of
the Business as of the Closing Date other than the property noted
as "Excluded Assets" in Exhibit A, which shall not be sold to the
Purchaser.
(c) The Assumed Liabilities. The term "Assumed
Liabilities" shall mean those contracts, agreements, liabilities
and obligations listed or described specifically under the
heading "Assumed Liabilities" in Exhibit B.
(d) Certain Obligations. Purchaser and Seller agree
that all obligations of Seller arising from or pertaining to the
Business or the Purchased Assets prior to the Closing shall
remain the obligations of the Seller and shall not be assumed by
Purchaser unless, and to the extent, that they constitute Assumed
Liabilities hereunder, whether or not the obligation or liability
is first claimed or asserted prior to or after the Closing. In
the case of actual or asserted liabilities based upon actions or
occurrences occurring both before and after the Closing, such as
claims for repetitive stress injury or claims based upon repeated
exposure to hazardous substances, to the extent that they are not
Assumed Liabilities, such liabilities shall be equitably
apportioned between Purchaser and Seller based upon the extent
and nature of the underlying actions and occurrences before the
Closing and after the Closing, respectively.
<PAGE>
1.2 Amount of Purchase Price; Time and Manner of Payment.
(a) Amount. The purchase price (the "Purchase Price")
for all the Purchased Assets shall be the sum of: (i) Three
Hundred Twenty Million Dollars ($320,000,000), adjusted by
prorations and other deductions, payments and withholdings to be
paid or otherwise borne by the Seller or the Purchaser pursuant
to this Agreement, payable as specified in Section 2.5(a) and
subject to Section 2.6; and (ii) the assumption of the Assumed
Liabilities.
(b) Allocation of Purchase Price. The Seller and the
Purchaser shall negotiate in good faith with respect to the
allocation of the Purchase Price among the Purchased Assets with
such allocation to include (i) allocation to receivables at face
value less applicable reserves, (ii) allocation to all other
Purchased Assets at fair market value, and (iii) allocation of
the remaining Purchase Price to good will. If the Seller and the
Purchaser are able to reach an agreement, either before or after
the Closing with respect to such allocation, then the Purchaser
and the Seller shall use such allocation for the purposes of
complying with Section 1060 of the United States Internal Revenue
Code (the "Code") and for filing Form 8594 with the Internal
Revenue Service, and the Purchaser and the Seller agree that they
will not take or cause to be taken any action that would be
inconsistent with such allocation. Each of the parties to this
Agreement agrees that all tax returns made by such party, or by
any person controlled by such party, will accurately reflect such
allocation. If no agreement as to allocation can be reached,
<PAGE>
then the Purchaser and the Seller may each adopt a different
position with respect to the allocation of Purchase Price among
the Purchased Assets.
ARTICLE 2
THE CLOSING
2.1 Time, Date and Place of Closing. Subject to
termination of the Agreement pursuant to the terms hereof, the
payment and deliveries contemplated by this Agreement to be made
at the Closing shall be made at the offices of Gibson, Dunn &
Crutcher, LLP, 333 South Grand Avenue, Los Angeles, California
90071-3197 at 10 o'clock a.m., local time, October 31, 1997 or
such later date which is two days after the conditions specified
in Sections 2.2 (c) and (e) and 2.3 (c) and (e) have been
satisfied, or on such other date as is mutually agreeable to the
Seller and the Purchaser. The date on which the last of such
payment and deliveries occurs is the "Closing Date," and the
events comprising such payment and deliveries are the "Closing."
2.2 Conditions to Obligations of the Purchaser. All of the
obligations of the Purchaser under this Agreement are subject to
the fulfillment prior to or at the Closing Date of each of the
following conditions, any one or more of which may be waived by
the Purchaser:
(a) Accuracy of Representations. The representations
and warranties of the Seller contained in this Agreement shall be
true in all material respects at and as of the Closing Date
(except to the extent that they expressly relate to an earlier
date).
<PAGE>
(b) Covenants and Agreements. The Seller shall have
performed and complied in all material respects with all
covenants, agreements and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing
Date.
(c) Consents and Approvals. All authorizations,
consents, and approvals of any state, federal, local, provincial
or foreign government agency, regulatory body or official
("Governmental Authority") necessary for the valid consummation
by the Seller of the transactions contemplated by this Agreement
shall have been obtained and shall be in full force and effect,
and any consents or approvals of any nongovernmental person or
entity, contractual or otherwise, listed on Schedule 2.2(c) shall
have been obtained and shall be in full force and effect.
(d) No Restraint. There shall not be in effect any
injunction or restraining order issued by a court of competent
jurisdiction in any action or proceeding against the transactions
contemplated herein.
(e) HSR Act. The waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall
have expired or been terminated.
(f) Underwritten Credit Commitment. Purchaser shall
have obtained the Credit Commitment (as defined in Section 6.11)
acceptable to Seller and Purchaser by October 1, 1997 or it shall
have failed to notify Seller in writing of its failure to obtain
the Credit Commitment despite its good faith efforts pursuant to
Section 6.11 on or prior to such date.
<PAGE>
(g) Funding. There shall be available to Purchaser
not more than $375,000,000 pursuant to the Credit Commitment or
pursuant to other financing sources on commercially reasonable
terms.
Notwithstanding the failure of any one or more of the
foregoing conditions, the Purchaser may proceed with the Closing
without satisfaction, in whole or in part, of any one or more of
such conditions and without written waiver. To the extent that
at the Closing the Seller delivers to the Purchaser a written
notice specifying in reasonable detail the failure of any such
conditions or the breach by the Seller of any of the
representations or warranties of the Seller herein, and
nevertheless the Purchaser proceeds with the Closing, the
Purchaser shall be deemed to have waived for all purposes any
rights or remedies it may have against the Seller by reason of
the failure of any such conditions or the breach of any such
representations or warranties to the extent described in such
notice.
2.3 Conditions to Obligations of the Seller. All of the
obligations of the Seller under this Agreement are subject to the
fulfillment prior to or at the Closing Date of each of the
following conditions, any one or more of which may be waived by
the Seller:
(a) Accuracy of Representations. The representations
and warranties of the Purchaser contained in this Agreement shall
be true in all material respects at and as of the Closing Date.
<PAGE>
(b) Covenants and Agreements. The Purchaser shall
have performed and complied in all material respects with all
covenants, agreements and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing
Date.
(c) Consents and Approvals. All authorizations,
consents and approvals of any Governmental Authority, or any
nongovernmental person or entity, contractual or otherwise,
necessary for the valid consummation by the Purchaser of the
transactions contemplated by this Agreement shall have been
obtained and shall be in full force and effect.
(d) No Restraint. There shall not be in effect any
injunction or restraining order issued by a court of competent
jurisdiction in any action or proceeding against the transactions
contemplated herein.
(e) HSR Act. The waiting period under the HSR Act
shall have expired or been terminated.
2.4 Deliveries by the Seller at the Closing. The Seller
shall deliver the following to the Purchaser at the Closing, all
in form and substance reasonably satisfactory to the Purchaser:
(a) An instrument of assignment and assumption with
respect to the Assumed Liabilities in a form mutually agreed upon
by the parties (the "Assumption Instrument"), duly executed by
the Seller and the Purchaser.
(b) A general bill of sale in a form mutually agreed
upon by the parties (the "Bill of Sale"), duly executed by the
Purchaser and the Seller, together with such other bills of sale,
<PAGE>
deeds, endorsements, title certificates, assignments and other
good and sufficient instruments of conveyance as appropriate to
convey to the Purchaser all of the Seller's title to and interest
in the Purchased Assets duly executed by the Seller, together
with releases or termination statements of all mortgages, deeds
to secure debt, deeds of trust, security interests, pledges,
liens and other charges, encumbrances or adverse claims
(collectively "Liens") on such property (other than Liens
relating to any Assumed Liability).
(c) All necessary consents to the transactions
contemplated by this Agreement from all appropriate third
parties.
(d) An affidavit from the Seller and any other parties
required pursuant to Section 1445 of the Code stating that
neither the Seller nor any other party so swearing is a "foreign
person" and including such other information as may be required
under Section 1445 of the Code.
(e) A certificate dated the Closing Date and executed
by an authorized officer of the Seller stating that the
representations and warranties of the Seller in this Agreement
are true and correct in all material respects on and as of the
Closing Date with the same effect as though such representations
and warranties had been made on and as of such date and that the
covenants, agreements and conditions to be performed or complied
with by the Seller prior to the Closing have been performed and
complied with in all material respects.
<PAGE>
2.5 Deliveries by the Purchaser at the Closing. The
Purchaser shall deliver the following at the Closing to the
Seller, all in form and substance reasonably satisfactory to the
Seller:
(a) Payment to the Seller of the Purchase Price
specified in Section 1.2(a)(i) by wire transfer to an account,
with such account to be specified by the Seller at least two
business days prior to the Closing Date, less Fifteen Million
Dollars ($15,000,000) which shall be deposited with the Escrow
Agent as provided in Section 8.7.
(b) The Assumption Instrument, duly executed by the
Seller and the Purchaser.
(c) The Bill of Sale, duly executed by the Purchaser
and the Seller.
(d) A certificate dated the Closing Date and executed
by an authorized representative of the Purchaser (i) stating that
the representations and warranties of the Purchaser contained in
this Agreement are true and correct in all material respects on
and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such
date and that the covenants, agreements and conditions to be
performed or complied with by the Purchaser prior to the Closing
have been performed and complied with in all material respects
and (ii) certifying the Purchaser's corporate actions represented
and warranted pursuant to Section 5.2 and certifying that all
such actions are still in full force and effect.
<PAGE>
(e) Sales tax exemption certificates for resale of
inventory, duly executed by the Purchaser.
2.6 Post-Closing Calculations and Adjustments.
(a) Missing Assets. The parties shall jointly take a
physical inventory of the spare parts inventory, rental and lease
inventory, inventory held for resale and fixed assets (other than
uncatalogued items which shall be tested as contemplated by
subparagraph (b) below) included in the Purchased Assets as of
the Closing Date, which are located at the Seller's facilities on
the Closing Date, and based thereon, the parties shall within
forty-five (45) days following the Closing Date prepare a list of
any items that cannot be located (collectively the "Missing
Assets") and their book values. The terms "inventory," "rental
inventory," "rental and lease inventory," "rental equipment" and
"rental and lease equipment" as used herein shall have the same
meaning.
(b) Closing Date Balance Sheet. As soon as practical
after the Closing, but in no event later than ninety (90) days
following the Closing Date, the Seller shall cause its auditors
to prepare an audited Statement of Net Tangible Assets of the
Business as of the Closing Date appropriately adjusted for any
Missing Assets (the "Closing Date Balance Sheet") in accordance
with the books and records of the Business and the significant
accounting policies summarized on Schedule 2.6(b) hereto and
other generally accepted accounting principles not inconsistent
with Schedule 2.6(b). The Seller shall calculate the amount, if
any, by which the net tangible asset value as of the Closing Date
<PAGE>
as reflected on the Closing Date Balance Sheet (excluding the
Excluded Assets and Excluded Liabilities) is less than
$279,250,000 (the "Balance Sheet Shortfall") or the amount, if
any, by which such net tangible asset value as of the Closing
Date is greater than $279,250,000 (the "Balance Sheet Excess").
(c) Review of Closing Date Balance Sheet and Missing
Assets. The Purchaser shall have forty-five (45) days after the
delivery by the Seller of the Closing Date Balance Sheet to
review said document. The Seller and the Purchaser shall
cooperate with each other to the extent reasonably practicable to
facilitate such review. In conducting their review of the
Closing Date Balance Sheet, the Purchaser and its accountants
shall be permitted to have reasonable access to and to examine
all books and records (including, but not limited to,
correspondence, memoranda, books of accounts and the like) in the
possession of the Seller and relating to the Purchased Assets and
be permitted to review the working papers of the Seller's
accountants relating to the Closing Date Balance Sheet, and shall
have access to the Seller's accountants as may be reasonably
necessary to permit the Purchaser's accountants to review in
detail the manner in which the Closing Date Balance Sheet was
prepared. In the event the Purchaser does not have objections to
the Closing Date Balance Sheet within such 45-day period, then it
shall become final and binding on the parties hereto. If the
Purchaser objects to any aspect of the Closing Date Balance
Sheet, it shall notify the Seller within such 45-day period
specifying in reasonable detail the nature and extent of such
<PAGE>
objection, and the Seller and the Purchaser will attempt to
resolve such dispute, but if they are unable to do so within
forty-five (45) days after delivery of any such objection and any
unresolved aspects represent in the aggregate an amount in excess
of $100,000.00, the parties will submit the unresolved aspects to
Price Waterhouse LLP or another mutually satisfactory "Big Six"
accounting firm to resolve the dispute and make a determination
binding on the parties hereto. In making such determination,
said accounting firm shall follow such procedures as it
reasonably deems appropriate, it being the desire of the parties
that any disagreement be resolved expeditiously and as
economically as practicable. If any such unresolved aspects
represent in the aggregate an amount equal to or less than
$100,000.00, the Seller's calculations shall be binding on the
parties hereto. The fees and expenses charged by the accounting
firm used to resolve such dispute shall be shared one-half by the
Seller and one-half by the Purchaser. For purposes of the
following subparagraph (d), the final determination of the
Balance Sheet Excess or the Balance Sheet Shortfall shall be
deemed to have been made when the parties shall have resolved all
disputes or Price Waterhouse or the other accounting firm shall
have rendered a final determination on all unresolved aspects.
(d) Post-Closing Adjustments.
(i) The Purchaser shall pay to the Seller, by
wire transfer, within five (5) business days following the final
determination of the Balance Sheet Excess, the amount of the
Balance Sheet Excess, plus interest thereon accrued from the
<PAGE>
Closing Date at the 90-day Treasury Rate in effect on the Closing
Date plus 1% (the "Additional Purchase Price") and the applicable
portion of the Escrow Fund shall be released to Seller as
provided in the Escrow Agreement. The Purchaser shall be
entitled to withdraw from the Escrow Fund the amount of the
Balance Sheet Shortfall up to $11,000,000, plus interest thereon
accrued from the Closing Date at the 90-day Treasury Rate in
effect on the Closing Date plus 1% and the remainder, if any, of
the Balance Sheet Shortfall shall be paid to Purchaser by Seller,
by wire transfer, within five (5) business days with interest at
the same rate. If the Balance Sheet Shortfall including interest
shall be less than Eleven Million Dollars ($11,000,000), the
remainder of the applicable portion of the Escrow Fund shall be
released to Seller as provided in the Escrow Agreement.
(ii) If within 150 days of the Closing Date the
Seller provides to the Purchaser evidence reasonably satisfactory
to the Purchaser that a Purchased Asset which was treated as a
Missing Asset (because it could not be located during the post
closing inventory) was actually held on the Closing Date by the
Seller or its customers, the Purchaser shall pay to the Seller
the amount of the book value as of the Closing Date of such
Purchased Asset adjusted for its designated status.
2.7 Amendment of Schedules. The Seller may, from time to
time on or prior to the Closing, by notice in accordance with the
terms of this Agreement, supplement, amend or create any Schedule
to reflect the status of the Business and the Purchased Assets as
of such time. No such supplemental, amended or additional
<PAGE>
Schedule shall be evidence, in and of itself, that the
representations and warranties in the corresponding section of
this Agreement are no longer true and correct in all material
respects. It is specifically agreed that such Schedules may be
amended to add a material, as well as immaterial, item thereto.
No such supplemental, amended or additional schedule shall be
deemed to cure any inaccuracy or breach of any representation or
warranty for purposes of Section 8.1, provided, however, that any
supplemental, amended or additional schedule related solely to
Sections 4.5, 4.6 or 4.11 which is made for the purpose of
updating such schedules for changes in the ordinary course of
business and updating shall not be deemed to create any
inaccuracy or breach of such representation or warranty for
purposes of Section 8.1. If, however, the Purchaser would be
permitted to refuse to consummate the transactions contemplated
by this Agreement pursuant to Section 2.2(a) by reason of matters
reflected in such supplemental, amended or additional Schedules
and the Closing occurs, any such supplement, amendment or
addition will be effective to cure and correct for all other
purposes any breach of any representation, warranty or covenant
which would have existed if the Seller had not made such
supplement, amendment or addition, and all references to any
Schedule hereto which is supplemented or amended as provided in
this Section 2.7 shall for all purposes after the Closing be
deemed to be a reference to such Schedule as so supplemented or
amended. In the event the Seller delivers to the Purchaser any
supplemental, amended or additional Schedule, the Purchaser shall
<PAGE>
have the right to delay the Closing until a date that is not more
than 5 business days after the date the Purchaser receives such
supplemental, amended or additional Schedules; provided, that if
such 5 business day period would extend the Closing Date beyond
the date after which this Agreement may be terminated by the
Purchaser or the Seller pursuant to Section 9.1(b) or (c), the
date in Sections 9.1(b) and (c) shall be deemed to be the
business day following the expiration of such 5 business day
period provided in this Section 2.7.
ARTICLE 3
BEST EFFORTS; FURTHER ASSURANCES
3.1 General. The parties to this Agreement shall in good
faith perform their obligations under this Agreement and use
their best efforts to cause the transactions contemplated by this
Agreement to be carried out promptly in accordance with the terms
of this Agreement. Upon the execution of this Agreement and
thereafter, each party shall take such actions and execute and
deliver such documents as may be reasonably requested by the
other party hereto in order more effectively to consummate the
transactions contemplated by this Agreement.
3.2 Access to Books and Records. After the Closing Date
the Purchaser and the Seller will grant to each other, and their
agents, access during normal business hours to any books and
records then in their possession, to the extent that information
contained in such books and records relates to the Seller's
operation of the Business or its ownership of the Purchased
Assets or its obligations under the Assumed Liabilities prior to
<PAGE>
the Closing Date and there is reason to believe that such
information is necessary and appropriate for tax, accounting or
other related purposes, and the parties hereto shall retain such
books and records for at least five years from the Closing Date.
ARTICLE 4
THE SELLER'S REPRESENTATIONS AND WARRANTIES
The Seller hereby represents and warrants to and covenants
and agrees with the Purchaser on the date of this Agreement and
at the Closing Date, as follows:
4.1 Status of the Seller.
(a) Organization, Etc. The Seller is a corporation
duly organized and validly existing in good standing under the
laws of the State of California and has the corporate power to
own or lease its properties and conduct its businesses as now
being conducted. The Seller is qualified to do business in all
of the jurisdictions in which the failure so to qualify would,
individually or in the aggregate, have a material adverse effect
on its business or financial condition.
(b) Powers; Authorization; Binding Nature. With
respect to this Agreement and any other agreements, instruments
and documents executed and delivered by the Seller pursuant to
this Agreement (collectively with this Agreement, the "Seller
Delivered Agreements"): (i) the Seller has the power and
authority to enter into the Seller Delivered Agreements and to
consummate the transactions contemplated by them; (ii) the
execution and delivery by the Seller of the Seller Delivered
Agreements and the consummation by the Seller of the transactions
<PAGE>
contemplated by them have been duly authorized by all necessary
action on the part of the Seller in compliance with its
certificate of incorporation, its bylaws and applicable law;
(iii) the Seller Delivered Agreements constitute valid and
binding agreements of the Seller that are enforceable against it
in accordance with their terms; and (iv) the Seller Delivered
Agreements effectively convey to, and vest in, the Purchaser all
right, title and interest of the Seller to and in the Purchased
Assets.
(c) No Consents Required. Except for compliance with
any applicable requirements of the HSR Act and as set forth on
Schedule 4.1(c), (i) no consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Authority on the part of the Seller is required in connection
with the execution or delivery of, or the performance of its
obligations under the Seller Delivered Agreements or the
consummation of the transactions contemplated by them; and
(ii) no consent or approval of any other person is required to
avoid a breach or default, or the acceleration or loss of rights,
under any contract or agreement to which the Seller is a party
and which relates to the Business or to which the Purchased
Assets are subject.
(d) Absence of Violations or Conflicts. Except as
disclosed on Schedule 4.1(d), the execution and delivery of the
Seller Delivered Agreements and the consummation of the
transactions contemplated by them do not and will not with the
passing of time or the giving of notice or both, constitute a
<PAGE>
violation of, conflict with, constitute a breach of or default
under or result in the creation or imposition of any Lien upon
any of the Purchased Assets under (i) any term or provision of
the certificate of incorporation or bylaws of the Seller, (ii)
any material agreement, commitment or understanding to which the
Seller is a party or to which it or any of its properties is
subject, (iii) any judgment, award, decree or order (collectively
"Orders") of any court or Governmental Authority or (iv) any
statute, law, regulation or rule (collectively "Laws").
4.2 Finance.
(a) Financial Statements. Attached hereto as Schedule
4.2(a) are copies of the unaudited Statement of Net Tangible
Assets of the Business as of December 31, 1996, and the related
unaudited statements of income for each of the years ended
December 31, 1995 and 1996. Seller shall provide the unaudited
Statement of Net Tangible Assets of the Business as of December
31, 1995 prior to the Closing. Also included on Schedule 4.2(a)
are true and complete copies of the unaudited Statements of Net
Tangible Assets of the Business as of March 31, 1997 and June 30,
1997 and related unaudited statements of income for the 3 and 6-
month periods then ended (all of which, together with the
financial statements hereafter delivered pursuant to Section 6.9,
are collectively referred to herein as the "Financial Statements"
and individually as "_________ Financial Statements" with the
year of the appropriate fiscal year end or in the case of interim
financials, the appropriate month being inserted in the blank).
The Financial Statements were prepared in accordance with the
<PAGE>
respective books and records of the Business and, except as noted
on Schedule 4.2(a), have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis throughout the periods covered by such statements, except
that the unaudited Financial Statements do not contain a
statement of cash flow or notes and are subject to normal
recurring adjustments which, except as set forth on Schedule
4.2(a), shall not be material in the aggregate, and fairly
present in all material respects the financial condition of the
Business as of their respective dates and the results of
operations and changes in financial position of the Business for
the periods indicated.
(b) Absence of Certain Changes. Except as set forth
in Schedule 4.2(b), since March 31, 1997, with respect to the
Business:
(i) there has not been any material adverse
change in the Purchased Assets or the financial condition,
results of operations or business of the Business taken as a
whole;
(ii) the Seller has not entered into any
transaction, other than in the ordinary course;
(iii) the Seller has not executed, created,
amended or terminated any material contract, except in the
ordinary course of business; and has not received written notice
from any other person of its intention to terminate any such
contract with the Seller;
<PAGE>
(iv) there has been no resignation or termination
of employment of, or notice of intention to do so by, any
executive officer or employee of the Seller earning annual base
compensation in excess of $75,000;
(v) there have been no loans made by the Seller
to any of its employees, officers or directors, other than travel
advances and other similar expenses advances;
(vi) there has been no waiver or compromise by the
Seller of a material right or of a material debt owed to it;
(vii) there has been no change in accounting
methods or practices (including, without limitation, any change
in depreciation or amortization policies or rates) by the Seller;
(viii) there has been no sale or transfer of
any of the assets of the Seller except in the ordinary course of
business;
(ix) there has been no mortgage, pledge or
subjection to any encumbrance of any kind, except liens for taxes
not due and liens of record, of any of the Purchased Assets;
(x) there have been no capital expenditures by
the Seller (other than for rental inventory) exceeding $25,000
for a single item or group of related items;
(xi) there has been no change in the nature,
composition or amount of the inventory of the Seller, other than
in the ordinary course of business consistent with past practice;
(xii) there has been no agreement or
commitment by the Seller to do or perform any of the acts
described in this Section 4.2(b).
<PAGE>
4.3 Real and Personal Property.
(a) Title. All of the real and personal properties
included in the Purchased Assets (excluding items which are
expensed for federal income tax purposes) with a book value in
excess of $1,000 are listed on Schedule 4.3(a) (except for the
patents and other intellectual properties disclosed pursuant to
Section 4.4, the contractual rights disclosed pursuant to Section
4.5, the rental and lease inventory disclosed on Schedule
4.3(d)(x) and the leased property used in the Business (the
"Leased Property") which is disclosed on Schedule 4.3(a)(i)).
Except as set forth in Schedule 4.3(a), the Seller has good and
marketable title to the Purchased Assets free and clear of all
title defects, claims and liens and encumbrances (other than
liens and encumbrances of record and liens and encumbrances which
will be Retained Liabilities), and none of the Purchased Assets
is subject to any Lien except (i) Liens for taxes not yet due and
payable; and (ii) Liens imposed by Law and incurred in the
ordinary course of business for obligations not yet due and
payable to landlords, materialmen and the like. Except for Liens
for taxes not yet due and payable and Liens relating to Assumed
Liabilities, all of the Liens on, in or with respect to the
Purchased Assets will be paid and discharged in full on or before
the Closing Date.
(b) Condition. Each of the Purchased Assets is sound
and in good repair and operating condition (taking into account
its designated status), normal wear and tear for the Business
excepted. No person other than the Seller is entitled to possess
<PAGE>
or use any of the Purchased Assets. The Purchased Assets conform
to all Laws except for violations that, individually or in the
aggregate, would not have a material adverse effect on the
Business.
(c) All Properties Used. The Purchased Assets and the
Leased Property constitute all of the properties used in
connection with the Business as presently conducted, and the
consummation of the transactions contemplated by this Agreement
will validly transfer all such properties to the Purchaser free
and clear of Liens except as set forth in Schedule 4.3(c) and
will not alter the rights or impair the ability of the Purchaser
to use such properties.
(d) Inventory and Products. The rental and lease
inventory listed on Schedule 4.3(d)(x) and reflected in the
Closing Date Balance Sheet and financial statements set forth in
Section 6.9 comprises all of the rental and lease inventory of
the Seller as of March 31, 1997 (with a statement through August
31, 1997 to be provided prior to the Closing). With respect to
each such item of inventory, Schedule 4.3(d)(x) sets forth the
following information: (i) GE Class Code (ii) asset number;
(iii) acquisition cost; (iv) date of purchase (or age in months);
(v) location of asset; (vi) status of asset, and (vii) book
value. Except as set forth on Schedule 4.3(d)(x), all rental and
lease inventory listed on said schedule will consist of items
that are good and merchantable and of a quality presently usable
and salable in the ordinary course of business for the industry
in which the Business participates taking into account its
<PAGE>
designated status except to the extent of any allowances
reflected in the Closing Date Balance Sheet and financial
statements set forth in Section 6.9. Set forth on Schedule
4.3(d)(y) is the depreciation life of the rental and lease
inventory of the Seller.
4.4 Patents; Trademarks; Trade Names, Etc.
(a) Ownership. Except as provided in Schedule
4.4(a)(x), the Seller owns or licenses all patents, trademarks,
service marks, trade names, service names and copy rights and
applications therefor and registrations thereof, and all computer
programs, software, firmware and documentation, and all trade
secrets and other intellectual properties which are used in the
conduct of the Business (collectively the "Intellectual
Properties"). Set forth on Schedule 4.4(a)(y) is a list and
description of all patents, trademarks, service marks, trade
names and service names included in the Purchased Assets, and all
applications therefor and registrations thereof and all licenses
and other agreements (other than licenses of generally available
computer programs) pursuant to which the Seller has any right to
use or enjoy any intellectual property used in the Business that
is owned by others or pursuant to which the Seller is under a
duty of confidentiality with respect to any intellectual property
used in the Business that is owned by others (collectively the
"Intellectual Property Agreements"). Except as set forth in
Schedule 4.4(a)(z), all of the Intellectual Properties are free
and clear of all assignments, licenses, encumbrances or charges,
and the Seller has not received any claims asserted during the
<PAGE>
past three years by any person against the use by the Seller, or
challenging or questioning the validity or effectiveness, of any
of the Intellectual Properties or the Intellectual Property
Agreements or the production, marketing, licensing, rental or
sale of any of the Business's products or services, or any of the
technology, know-how or processes used in the ordinary conduct of
the Business.
(b) No Violations. Except as set forth in Schedule
4.4(b), to the knowledge of the Seller, the use, production,
marketing, licensing, rental or sale of the products of the
Business, or the use of the technology, know-how and processes
used in the Business does not violate or infringe any patent,
trademark, service mark, trade name, copyright, technology, know-
how, process, trade secret or other rights or other intellectual
properties of any third party, and Seller has received no such
claims. Except as set forth on Schedule 4.4(b), to the knowledge
of the Seller, no person, firm, corporation or entity is
infringing upon or violating any of the intellectual property
rights used in the Business, including the Seller's rights under
any of the Intellectual Property Agreements.
4.5 Contracts. Except for the Intellectual Property
Agreements, insurance agreements and employee related agreements
disclosed pursuant to Sections 4.7 and 4.8, each written
contract, agreement, commitment or understanding of the Business
to which the Seller is a party or which is otherwise an Assumed
Liability, is listed on Schedule 4.5, provided, however, in the
case of standard agreements or leases with customers and other
<PAGE>
standard commercial contracts which (i) may be terminated by
Seller on 90 or fewer days notice without penalty or (ii) do not
call for revenues or expenditures of more than $150,000 in any
twelve month period, are described on Schedule 4.5, all of which,
together with the Intellectual Property Agreements, are referred
to herein as "Contracts." Except as set forth on Schedule 4.5:
(i) the Seller is not in default in connection with any Contract,
and so far as the Seller knows, no other party is in default
under any of the Contracts; (ii) there is no outstanding notice
of cancellation or termination in connection therewith; and (iii)
each of the Contracts is a valid and binding obligation of the
Seller which is in full force and effect in accordance with its
terms. All Contracts and agreements for the rental and lease of
equipment are for actual transactions, regularly entered into and
are enforceable according to their terms (subject to the effect
of bankruptcy and similar laws of general application). The
Seller has shipping information reflecting that the equipment
covered by each contract and agreement has been delivered to the
customer in accordance with the particular contract or agreement
and has received no notice that the equipment is not in the
possession of such customer. Attached as part of Schedule 4.5
are true and correct copies of all agreements with employees of
the Business concerning terms of employment, secrecy,
confidentiality and competition. Except as disclosed on Schedule
4.5 and with respect to the Business, the Seller is not a party
or subject to:
<PAGE>
(a) any employment contract to be assigned to the
Purchaser, written or oral, with any officer, consultant,
director or employee that is not terminable on [30] days' notice
or less without penalty or legal obligation to make payments
after the expiration of such notice period;
(b) any contract for the purchase of equipment or
construction providing for payments by the Company in excess of
$25,000 (other than for rental or lease inventory);
(c) any joint venture contract or arrangement or any
other arrangement involving a sharing of profits;
(d) any agreement or instrument evidencing or
pertaining to indebtedness for borrowed money or the deferred
purchase price of property, by way of direct loan, purchase money
obligation, conditional sale, guarantee or otherwise, in the
amount of $10,000 or more;
(e) any advertising agreement or understanding not
terminable by the Seller within 90 days of the Closing Date
without liability in excess of $50,000; and
(f) any agreement which restricts the right of the
Seller to compete or engage in any business in any geographic
area.
4.6 Employees; Employment Relationships. Attached as
Schedule 4.6 is a list of each employee of the Business setting
forth each such employee's compensation, date of hire and years
of service.
4.7 Employee and Fringe Benefit Plans. (a) Each welfare
plan, as defined in Section 3(1) of the Employee Retirement
<PAGE>
Income Security Act of 1974 as amended ("ERISA"), without regard
to Sections 4(b)(4) or 4(b)(5) thereof, including, but not
limited to, any plan, fund or program which was established or is
maintained for the purpose of providing for its participants or
their beneficiaries, through the purchase of insurance or
otherwise, medical, surgical, or hospital care or benefits in the
events of sickness, accident, disability, death or unemployment
or vacation ("Welfare Plan"), (b) each pension plan, as defined
in Section 3(2) of ERISA, without regard to Sections 4(b)(4) or
4(b)(5) thereof, including, without limitation, any plan, fund or
program that provides retirement income to employees or results
in deferral of income by employees for periods extending to the
termination of covered employment or beyond ("Pension Plan"), and
(c) each other plan, program or arrangement which is a material
fringe benefit or provides any material supplemental
compensation, in which any employee of the Business participates
or is entitled to benefits by reason of employment in the
Business is listed in Schedule 4.7. The Seller has no liability
and no event has occurred relating to any Welfare Plan or Pension
Plan that would affect in any manner the Purchaser's right, title
and interest in, or the Purchaser's right to use or enjoy (free
and clear of any Lien), any Purchased Assets, any Assumed
Liability or any aspect of the Business, or that otherwise may
subject the Purchaser or any asset of the Purchaser to any
liability.
4.8 Labor Relations. Except as set forth in Schedule 4.8
and with respect to the Business: (a) the Seller is in material
<PAGE>
compliance with all Laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and to the knowledge of the Seller is not or was not
engaged in any unfair labor practice; (b) there is no unfair
labor practice complaint against the Seller pending or to the
knowledge of the Seller threatened before the National Labor
Relations Board; (c) there is no labor strike, dispute,
organizing effort, slow down or stoppage pending or to the
knowledge of the Seller threatened against the Business; (d) no
grievance which might have an adverse effect on the Business nor
any arbitration proceeding arising out of or under any collective
bargaining agreement is pending or to the knowledge of the Seller
is threatened; (e) there is no collective bargaining agreement
for employees of the Business which is binding on the Seller;
(f) none of the employees of the Business is represented by a
labor union and (g) the Business has not experienced any labor
stoppage, concerted activity or other labor difficulty during the
last three years.
4.9 Litigation; Compliance with Law. Except as disclosed
on Schedule 4.9 and with respect to the Business: (a) the Seller
is not engaged in or a party to or, to the knowledge of the
Seller, threatened with any legal action, investigation, charge
or other proceeding, at law or in equity or otherwise, whether or
not before any court or Governmental Authority and whether by a
private or public party, any adverse determination of which would
adversely affect the Seller or the Purchaser, the Purchaser's
ownership or possession of any of the Purchased Assets or its
<PAGE>
rights under any of the Assumed Liabilities, or the operation of
the Business; (b) neither the Seller nor any of the officers of
the Business has been charged or, to the knowledge of the Seller,
threatened at any time during the last three years with any
violation of, has received any written notice or warning from any
Governmental Authority with respect to any failure or alleged
failure to comply with, or is under investigation with respect
to, any provision of Law, any adverse determination of which
would adversely affect the ownership or possession by the Seller
or the Purchaser of any of the Purchased Assets or the
Purchaser's rights under any of the Assumed Liabilities, or the
operation of the Business; (c) to the knowledge of the Seller,
the Seller is not currently or has been during the last two years
in material violation of any Law or Order applicable to it;
(d) neither the Seller nor any of the officers of the Business is
a party to or subject to any Order entered in any lawsuit or
proceeding brought by any Governmental Authority or by any
person, firm, corporation or other entity against the Seller
relating to the operation of the Business; (e) the Seller has
obtained all material permits, licenses, authorizations and other
approvals of all Governmental Authorities required for the
Business, and all are valid and in full force and effect; and
(f) the Seller is not in breach of any agreement with a federally
chartered or insured bank or other lending institution relating
to the Business.
<PAGE>
4.10 Environmental Matters.
(a) For purposes of this Agreement, the term
"Environmental Laws" shall mean the Comprehensive Environmental
Responses, Compensation and Liability Act of 1980 ("CERCLA"), the
Resource Conservation and Recovery Act ("RCRA"), the Hazardous
Materials Transportation Act, any federal, state or local
environmental statute (including any amendments to each of the
foregoing) and all other federal, state or local laws or
regulations relating to pollution or protection of the
environment and any Order related thereto. For purposes of this
Agreement, the term "Hazardous Materials" shall mean any friable
asbestos, petroleum products, underground tanks of any type and
all materials defined as "hazardous substances," "hazardous
wastes," "toxic substances," "solid wastes" or bearing similar or
analogous definitions in any Environmental Law.
(b) Except as set forth on Schedule 4.10, the Seller
has conducted the Business and will consummate the transactions
contemplated by this Agreement in material compliance with all
Environmental Laws and all Authorizations obtained pursuant
thereto.
(c) The Seller has not received any notice from the
United States Environmental Protection Agency that it is a
potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act (a
"Superfund Notice") with respect to any properties of the
Business, any citations from any Governmental Authority for
noncompliance with its requirements with respect to air, water or
<PAGE>
environmental pollution, or the improper storage, use or
discharge of any hazardous waste, other waste or other substance
or material pertaining to the Business ("Citations") or any
written notice from any private party alleging any such
noncompliance or impropriety; and there are no pending or
unresolved Superfund Notices, Citations or written notices from
private parties alleging any such noncompliance or impropriety
with respect to the Business.
4.11 Major Customers and Suppliers. Schedule 4.11 sets
forth (a) the name of, and a brief description of the goods
supplied to, each customer of the Business whose purchase, lease
or rental of goods or services from the Seller during the 12
month period ending May 31, 1997 (with a statement through
July 31, 1997 to be provided prior to the Closing) equaled or
exceeded $150,000 during such period and the amounts of the
rentals, leases, or purchases by each such customer during such
period, and (b) the name of, and a brief description of the goods
or services supplied by, each supplier of goods or services to
the Business to whom the Seller paid in the aggregate $150,000 or
more during the 12 month period ending June 30, 1997. For
purposes of this Agreement, the term "lease" shall mean any lease
or rental agreement whose term is twelve months or longer, and
the term "rental" shall mean any lease or rental agreement whose
term is less than twelve months
4.12 Taxes. The Seller has no liability, proposed or actual
or to Seller's knowledge threatened, with respect to taxes that
would adversely affect Purchaser's right, title and interest in,
<PAGE>
or the Purchaser's right to use or enjoy (free and clear of any
Lien), any Purchased Assets, any Assumed Liability or any aspect
of the Business.
4.13 Commissions. Except as set forth in Schedule 4.13 and
with respect to the Business, the Seller has not paid commissions
or other similar remuneration to any person who was not an
employee of the Seller or any entity since January 1, 1996.
4.14 Government Contracts. Except as set forth in Schedule
4.14 and with respect to the Business, the Seller is not, and has
not been since January 1, 1996, a party to any agreement,
arrangement or understanding with any instrumentality of the
United States federal government.
4.15 Brokers and Finders Fees. Except as set forth on
Schedule 4.15, the Seller did not employ any broker or finder or
incur any liability for any broker's or finder's fee in
connection with the transactions contemplated hereby.
ARTICLE 5
THE PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser hereby represents and warrants to the Seller
as follows:
5.1 Organization. The Purchaser is a corporation duly
organized and existing in good standing under the laws of the
State of California.
5.2 Power; Authorization; Binding Nature. With respect to
this Agreement and any other agreements, instruments and
documents executed and delivered by the Purchaser pursuant to
this Agreement (collectively with this Agreement the "Purchaser
<PAGE>
Delivered Agreements"): (a) the Purchaser has the power and
authority to enter into the Purchaser Delivered Agreements and to
consummate the transactions contemplated by them; (b) the
execution and delivery by the Purchaser of the Purchaser
Delivered Agreements and the consummation by the Purchaser of the
transactions contemplated by them have been duly authorized by
all necessary action on the part of the Purchaser in compliance
with its articles of incorporation, its bylaws and applicable
Law; and (c) the Purchaser Delivered Agreements constitute valid
and binding agreements of the Purchaser that are enforceable
against it in accordance with their terms.
5.3 Absence of Violations or Conflicts. The execution and
delivery by the Purchaser of the Purchaser Delivered Agreements
and the consummation by the Purchaser of the transactions
contemplated by them do not and will not with the passing of time
and the giving of notice or both constitute a violation of,
conflict with, or constitute a breach of or default under (a) any
term or provision of the articles of incorporation or bylaws of
the Purchaser, (b) any agreement, commitment or understanding to
which the Purchaser is a party or to which any of its properties
is subject, (c) any Order of any court or Governmental Authority
or (d) any Laws. Except for compliance with the HSR Act, no
consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Authority is required
in connection with the Purchaser's execution or delivery of, or
the Purchaser's performance under, the Purchaser Delivered
<PAGE>
Agreements or the consummation of the transactions contemplated
by them.
5.4 No Pending Litigation or Proceedings. No litigation is
pending or, to the knowledge of the Purchaser, threatened against
or affecting the Purchaser in connection with any of the
transactions contemplated by this Agreement. There is presently
no outstanding judgment, decree or order of any Governmental
Authority against or affecting the Purchaser in connection with
the transactions contemplated by this Agreement.
5.5 Brokers and Finders Fees. Except as set forth in
Schedule 5.5, the Purchaser did not employ any broker or finder
or incur any liability for any broker's or finder's fee in
connection with the transactions contemplated hereby.
ARTICLE 6
OTHER AGREEMENTS
6.1 Continuing Operation of Business. The Seller covenants
and agrees that the Seller shall do the following with respect to
the Business, on and after the date of this Agreement and until
the Closing Date (except as otherwise agreed to in writing by the
Purchaser):
(a) Carry on the Business in the ordinary and regular
course consistent with past practice and not engage in any trans-
action or activity or enter into any agreement or make any
commitment except those in the ordinary and regular course of
business and not otherwise prohibited under this Section 6.1;
(b) Not grant any increase in the compensation of
employees of the Business, whether now or hereafter payable
<PAGE>
(including any such increase pursuant to any Welfare Plan or
Pension Plan) and not employ any additional personnel, except in
the ordinary course of business consistent with past practices;
(c) Not sell or grant any license, franchise, option
or other right of any nature whatsoever to sell, distribute, or
otherwise deal in or with the merchandise of the Business or use
any patent, trade name, trademark, service mark, copyright,
pending applications therefor, trade secrets or other rights of
the Business, except in the ordinary course of business; and
(d) maintain intact, in accordance with Seller's
reasonable business judgment, its operations;
(e) continue to meet its material contractual
obligations incurred in the ordinary course of business;
(f) pay all of its material obligations incurred in
the ordinary course of business and not waive any of its material
rights;
(g) not make any capital expenditures (other than for
inventory) in excess of $25,000;
(h) not make rental and lease inventory purchases
resulting in a percentage growth in inventory from the date of
this Agreement that is more than 5% greater than the percentage
growth in revenues of the Business from the date of this
Agreement nor any single purchase of rental and lease inventory
in excess of $50,000;
(i) use commercially reasonable efforts to preserve
the current relations with its suppliers, customers and
distributors; and
<PAGE>
(j) not take any action, or omit to take any action,
which would result in a material breach of the representation and
warranty set forth in Section 4.2(b) without the prior consent of
the Purchaser which shall not be unreasonably delayed or
withheld.
6.2 Satisfaction of Liens and Indebtedness. The Seller
shall remove or discharge all Liens on any of the Purchased
Assets and repay any indebtedness or other monetary obligation
secured by any of such items, other than any that constitute an
Assumed Liability with respect to the Business.
6.3 Inspection. The Seller shall allow the Purchaser and
its representatives full access during normal business hours
after the date hereof and until the Closing to the personnel and
representatives and to all of the books, contracts, commitments,
records and properties (including facilities) of the Seller
related to the Purchased Assets, the Assumed Liabilities and the
Business, and reasonable access to the accountants and counsel of
the Seller, provided that any extra-ordinary access to the
Seller's accountants and counsel will be at the Purchaser's
expense, and shall furnish promptly to the Purchaser all
information concerning its business, properties and personnel as
the Purchaser may reasonably request.
6.4 Expenses.
(a) General. Except as otherwise provided in this
Agreement, each party hereto shall pay its own expenses and costs
incurred in connection with the negotiation and consummation of
this Agreement and the transactions contemplated hereby.
<PAGE>
(b) Certain Taxes. Notwithstanding the foregoing:
(i) Except as otherwise specifically provided in
this Agreement, all transfer and sales taxes relating to the
transactions contemplated herein shall be paid by the Purchaser,
and all other taxes, fees and expenses relating to the
transactions contemplated by this Agreement and all recording,
indexing and filing relating to recording all documents effecting
or evidencing transfer of title to the Purchased Assets shall be
paid by the party against which they are imposed under applicable
Laws.
(ii) All property, ad valorem and similar taxes
imposed on the Purchased Assets that are accrued in the Closing
Date Balance Sheet shall be paid by the Purchaser, and any other
such taxes imposed on the Purchased Assets shall be prorated as
of the Closing Date, with the Seller paying the portion thereof
attributable to the period prior to the Closing Date and the
Purchaser paying the portion thereof attributable to the period
beginning on the Closing Date.
6.5 Certain Employee Matters.
(a) Obligation to Hire. Except for the Retained
Employees identified by Purchaser at or prior to the Closing, the
Purchaser shall offer employment commencing on the Closing Date,
to any individual who is actively employed by the Business as of
the Closing Date. An employee of the Business who is absent on
the Closing Date due to vacation or holiday or who has been
absent for less than five consecutive working days immediately
prior to the Closing Date due to illness shall be considered
<PAGE>
actively at work on the Closing Date (collectively, the
"Transferred Employees"). On and after the Closing Date
Purchaser shall comply, at its expense, with all employment laws
with respect to the Transferred Employees employed as of the
Closing Date, including, but not limited to, the Family and
Medical Leave Act, the Americans with Disability Act, and all
federal or state laws on military leave. Any employee of the
Business who is entitled to return to work under such federal or
state laws (including any employee who is receiving benefits
under the Seller's short-term disability plan) shall be offered
the opportunity to become an employee of the Purchaser when such
individual returns to work (hereafter such employee who returns
to work shall be referred to as a "Subsequently Transferred
Employee"). Transferred Employees and individuals who are
eligible to become Subsequently Transferred Employees shall be
enumerated in Schedule 4.6. Purchaser shall provide all
Transferred Employees and Subsequently Transferred Employees with
wages that are at least equal to those provided by Seller as of
the Closing Date during their first year of employment with the
Purchaser, but nothing in this Agreement shall preclude changes
in any Transferred Employee's and Subsequently Transferred
Employee's wages or benefits as the result of any change in such
person's status or responsibilities, or after said one-year
period, and nothing in this Section 6.5(a) shall prevent
Purchaser from terminating any Transferred Employee or
Subsequently Transferred Employee for cause during such one-year
period. For purposes of the foregoing sentence, with respect to
<PAGE>
that portion of compensation arising under any incentive bonus or
similar plan or arrangement, the Purchaser shall be obligated
only to provide an alternative plan or arrangement by which
employees shall have the possibility of earning amounts
reasonably equivalent to those under the plans and arrangements
of the Seller. In addition, for a period of two (2) years
following the Closing Purchaser shall provide Transferred
Employees and Subsequently Transferred Employees with benefits
which are comparable in the aggregate to those provided by the
Seller as of the Closing Date.
(b) Retained Employees. Notwithstanding any provision
in subparagraph (a) above to the contrary, Purchaser shall be
entitled to designate up to 38 employees of Seller as "Retained
Employees" prior to the Closing Date or at any time within one
(1) year after the Closing Date and provide such a list on
Schedule 6.5(b). If such a notice is provided after the Closing
Date, Seller shall have the option to (i) re-employ such Retained
Employee on the date of such notification and shall be
responsible for all benefits specified in this Section 6.5 from
and after the date of such re-employment or (ii) pay for all
severance payments arising in connection with the termination of
such Retained Employee.
(c) Employees and Benefit Plans. The Purchaser shall
take all actions necessary or appropriate to permit Transferred
Employees and Subsequently Transferred Employees to participate
as soon as practicable after the Closing Date in the employee
benefit programs of the Purchaser for which they are otherwise
<PAGE>
eligible. Purchaser shall amend its tax-qualified defined
contribution plan(s) to the extent necessary to receive eligible
rollover distributions (as defined in Code Section 402(c)(4))
from the Seller's defined contribution plan(s) in which
Transferred Employees or Subsequently Transferred Employees
participated in prior to the Closing Date. In addition, the
Transferred Employees' and Subsequently Transferred Employees'
length of service with the Seller shall be recognized as length
of service with the Purchaser for earning the following benefits
from the day that they begin service with the Purchaser:
(i) vacation and holiday benefits;
(ii) eligibility for absence payments, such as
death in family and military service allowances; and
(iii) vesting and eligibility to participate
in and receive benefits from any pension plan (as defined in
section (3)(2) of ERISA) maintained by Purchaser;
provided, however, that Purchaser shall have no
liability for any benefits relating to periods prior to the
Closing Date unless an appropriate accrual therefor is made in
the Closing Date Balance Sheet except as otherwise provided in
Section 6.5(d) of this Agreement.
(d) Severance. The Purchaser shall maintain, for
twelve months following the Closing Date, a severance plan, the
terms and conditions of which shall be as set forth in
Schedule 6.5(d) which is identical to the severance plan
maintained by the Seller as of the Closing Date. In determining
the benefits payable to any Transferred Employee or Subsequently
<PAGE>
Transferred Employee under such severance plan for terminations
occurring on or after the Closing Date, Purchaser shall treat all
service earned by a terminated employee with the Seller as
service with the Purchaser.
(e) Health Coverage. Effective as of the Closing
Date, Purchaser shall provide medical coverage to all Transferred
Employees and Subsequently Transferred Employees (and their
respective dependents, as applicable) under Purchaser's medical
plan without regard to any preexisting condition exclusion.
Purchaser shall be solely responsible and shall hold Seller
harmless for any and all damages, losses, liabilities and
expenses (including, without limitation, expenses of
investigation and reasonable attorneys' fees and expenses in
connection with any action, suit, or proceeding) arising under
Code section 4980B and the regulations promulgated thereunder for
all qualifying events (as defined in Code section 4980B9(f)(3))
occurring on or after the Closing Date with respect to any
Transferred Employee or any individual who becomes a Subsequently
Transferred Employee.
6.6 Confidentiality. The covenants, terms and conditions
of the Confidentiality Agreement between the Purchaser and the
Seller dated April 30, 1997, are hereby incorporated herein in
full. Neither the Purchaser nor the Seller will make any public
disclosure or publicity release pertaining to the existence of
this Agreement or the subject matter hereof without the prior
written consent of the other party; provided however, that each
party shall be permitted to make such disclosure to the public or
<PAGE>
any Governmental Authority as its counsel shall reasonably deem
necessary to comply with any Laws, but any such disclosure shall
be submitted to the other party hereto for review prior to
dissemination, except as otherwise required by Law.
6.7 No Solicitations; Discussions By Seller. Between the
date of this Agreement and the Closing Date or the earlier
termination of this Agreement, the Seller will not, nor will the
Seller permit any of its representatives to solicit or encourage
any proposal for the acquisition of all or any significant part
of the business, properties or assets of the Business with any
other party.
6.8 Filing under the HSR Act.
(a) General. The Purchaser and the Seller acknowledge
that the transactions contemplated by this Agreement require
filings with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the United States Department of Justice
(the "Antitrust Division") under the HSR Act.
(b) Filings. The Purchaser and the Seller shall each
promptly file with the FTC and the Antitrust Division the
notifications and reports required to be filed pursuant to the
HSR Act and shall undertake in good faith to file promptly any
supplemental information which may be requested in connection
therewith, which notifications and reports will comply in all
material respects with the requirements of the HSR Act. The
Purchaser and the Seller shall each furnish to the other such
information as either may reasonably request to make such
<PAGE>
filings. The Seller shall reimburse the Purchaser for 50% of the
HSR filing fee to be paid by the Purchaser.
6.9 Additional Financial Statements. The Seller shall
cause its auditors to prepare audited financial statements of the
Business as of December 31, 1995, December 31, 1996 and October
31, 1997, and deliver them to Purchaser not later than December
31, 1997, the costs of which shall be equally split between the
Seller and the Purchaser but Purchaser's obligation shall not
exceed $62,500.
6.10 Transition Services. The Seller shall provide certain
specified transition services to the Purchaser as provided in the
Continuing Services Agreement attached hereto as Exhibit C.
6.11 Fees for Credit Commitment. Purchaser shall use its
best efforts to obtain a credit commitment from a bank reasonably
acceptable to Purchaser which will state that funds will be
available (without a condition for syndication of the credit
facility) (the "Credit Commitment") for a loan of up to
$375,000,000 on commercially standard terms and conditions with a
funding date of October 31, 1997. In the event that the Closing
occurs, Purchaser and Seller shall share (one-half each) the
costs of the Credit Commitment that are (i) in excess of the fees
that would have been paid by Purchaser for a "best efforts"
financing, and (ii) in excess of $768,000; provided, however,
that the costs to be paid by Seller shall not exceed $950,000.
Purchaser shall also use its best efforts to obtain the funding
for the transactions contemplated herein pursuant to the Credit
<PAGE>
Commitment or otherwise from other sources on commercially
reasonable terms.
6.12 Repurchase of Certain Uncollectible Accounts
Receivable.
(a) For a period of one hundred eighty (180) days after
the Closing, the Purchaser shall use commercially reasonable
efforts, consistent with the level of effort, procedures and
expenditures made by Purchaser with respect to its own
receivables, to collect the accounts receivable included in the
Purchased Assets as of the Closing Date. Seller shall also be
permitted to participate in the collection efforts in a
reasonable manner, but shall not contact customers without
permission from Purchaser which permission shall not be
unreasonably withheld. For a period of thirty (30) days
following the expiration of such 180-day period, Purchaser shall
have the option with respect to Subject Receivables (as defined
below), of either: (A) retaining any Subject Receivables and
forgoing any claim against the Seller under this Agreement or
(B) delivering to the Seller a list of such uncollected Subject
Receivables (the "Unrecovered Receivables"), transferring title
to such Unrecovered Receivables to the Seller and obtaining from
the Seller a refund for (x) the related equipment when applicable
pursuant to (d) below and (y) the receivables (only after any
otherwise refundable amounts with respect to receivables exceed
<PAGE>
the applicable reserves for uncollectible accounts receivable in
the Closing Date Balance Sheet) equal to:
(1) the amount of such Unrecovered Receivable (as
determined in (e) below) accrued as of the Closing Date (which
shall include the book value at the Closing Date of related
equipment when applicable pursuant to (d) below), plus
(2) interest on such amount from the Closing Date at the 90-day
Treasury rate in effect on the Closing Date plus 1%, less (3) any
amounts received by the Purchaser with respect to such
Unrecovered Receivable after the Closing Date and less
(4) interest on such amounts received, computed from the date or
dates of receipt at the foregoing annual rate.
(b) Purchaser shall obtain Seller's approval prior to
settling any Subject Receivable for less than the gross amount
thereof, with Seller's approval not to be unreasonably withheld,
and if Seller does not notify Purchaser of the withholding of
such approval and the reasons therefor within five (5) business
days of receipt of notice from Purchaser, Seller shall be deemed
to have approved the proposed settlement; provided that if
Purchaser unilaterally elects to settle any such Subject
Receivable for an amount less than the gross amount or such
lesser amount as Seller may approve, Purchaser shall be deemed to
have collected such Subject Receivable in the gross amount or
such lesser amount as Seller shall have approved. Upon Seller's
<PAGE>
reimbursement of Purchaser for any Unrecovered Receivable,
Purchaser shall do, execute, acknowledge and deliver all such
further acts, assurances, deeds, assignments, transfers,
conveyances and other instruments and papers as may reasonably be
required to sell, assign and transfer to Seller all the right,
title and interest of Purchaser in such Unrecovered Receivable.
(c) If Purchaser elects to sell any of the Subject
Receivables to the Seller, Purchaser shall notify Seller and
shall provide Seller with reasonable supporting detail showing
the proposed calculation of the reimbursement due with respect
thereto. Within thirty (30) business days of each such
notification (the "Review Period"), Seller may object in writing
to such proposed calculations, provided that Seller shall make
payment to Purchaser, by wire transfer of immediately available
funds to such account as Purchaser may specify, of any amounts
owing to Purchaser which are not subject to Seller's objection.
During the Review Period, the Seller shall have reasonable access
to all books and records in the possession of the Purchaser
(which Purchaser shall maintain consistent with its maintenance
of its current books and records) to enable the Seller to review
and verify the calculation and supporting information provided by
Purchaser. If the Seller objects to such calculation and
supporting information, it shall notify the Purchaser and the
parties shall attempt to resolve any dispute. If they are unable
to do so within 30 days after delivery of such objection, the
<PAGE>
parties will submit the unresolved calculation to Price
Waterhouse LLP, or such other Big Six accounting firm acceptable
to the parties, to resolve the dispute and make a determination
binding on the parties. In making such determination, said
accounting firm shall follow such procedures as it reasonably
deems appropriate, it being the desire of the parties that any
disagreement with respect to the calculation be resolved
expeditiously and as economically as practicable. The fees and
expenses charged by Price Waterhouse LLP, or such other Big Six
accounting firm acceptable to the parties, shall be shared one-
half by the Seller and one-half by the Purchaser. Promptly
following any determination by Price Waterhouse LLP, or such
other Big Six accounting firm acceptable to the parties, Seller
shall make payments to Purchaser as aforesaid of any additional
amount owing to it hereunder based upon such determination. Any
amounts received by Purchaser in collection of any Unrecovered
Receivables following reimbursement by Seller shall be promptly
transferred to the Seller. In the event that Purchaser is
required by law to refund to the customer or its legal
representative amounts previously paid to Seller pursuant to the
previous sentence, Seller shall reimburse Purchaser for such
amounts. In the event that Purchaser incorrectly paid Seller any
amounts pursuant to the second preceding sentence due to
computational error, Seller shall reimburse Purchaser such
amounts. Purchaser shall certify within ninety (90) days of each
<PAGE>
anniversary date of this Agreement for a period of 3 years that
all such amounts paid pursuant to the third preceding sentence
have been remitted to Seller.
(d) Subject Receivables shall be all receivables that
as of the Closing Date were unpaid thirty-one (31) days or more
from the invoice date, or with respect to all receivables billed
on other than a monthly basis, those that were more than sixty
(60) days past the beginning of the rental or lease period of
performance or sale (the beginning of the billing period).
Subject Receivables shall include all related Equipment on a
rental or lease contract still in possession of the customer only
(i) in the case of a customer's inability to pay its obligations
as they become due as agreed to by Seller and Purchaser at the
time, or in the absence of such agreement as determined by
Purchaser, together with the customer's documented unwillingness
to return the equipment, or (ii) in cases where the customer and
equipment cannot be located.
(e) Unrecovered Receivables shall be computed by
deducting credit memoranda outstanding for the applicable
Unrecovered Receivables existing at the Closing Date to the
extent reflected in the Closing Date Balance Sheet. Any amounts
received by Purchaser that are not designated for a specific
invoice, and which cannot be designated to a specific rental,
lease or sale agreement shall be applied on a proportional basis
<PAGE>
over all of the obligations of such customer (with such amounts
applied first to the earliest claim under each agreement);
provided that if a payment can be designated to a specific
rental, lease or sale agreement but not to a specific invoice,
such payment shall be applied to the earliest claim against such
customer pursuant to such identified agreement.
6.13 Equipment Not in the Possession of Seller at Closing.
(a) Following the Closing, Seller shall reimburse the
Purchaser, as set forth below, for the book value as reflected on
the Closing Date Balance Sheet (plus interest, and less certain
amounts as provided below) of all rental and lease equipment
shown by the records of the Seller to be in the possession of the
Seller's customers ("On-Rent Equipment), equipment shown by the
records of the Seller to be off site for repairs ("Repair
Equipment"), equipment shown by the records of the Seller to be
in transit ("In-Transit Equipment"), or equipment shown by the
records of Seller to be in the possession of employees ("Employee
Equipment"), all as of the Closing Date, as to which:
(i) the customer denies possession of On-Rent
Equipment and proof of delivery satisfactory to the customer or
proof of return cannot be documented;
(ii) Seller or Purchaser is notified by the
customer that the On-Rent Equipment was received by it in damaged
condition (in which case the amount owed shall be the lower of
the cost of repairs or the cost of replacement);
<PAGE>
(iii) the Repair Equipment cannot be located
and proof of delivery satisfactory to the vendor or proof of
return cannot be documented, the Repair Equipment is returned to
the Purchaser in damaged condition(in which case the amount owed
shall be the lower of the cost of repairs or the cost of
replacement), or the vendor does not take responsibility for the
Repair Equipment;
(iv) the In-Transit Equipment cannot be located
and satisfactory proof of return cannot be documented, or the In-
Transit Equipment is delivered to the Purchaser in damaged
condition (in which case the amount owed shall be the lower of
the cost of repairs or the cost of replacement), or
(v) the Employee Equipment cannot be
located and satisfactory proof of return cannot be documented,
or the Employee Equipment is returned to the Purchaser
in damaged condition (in which case the amount owed
shall be the lower of the cost of repairs or the
cost or replacement). Equipment described in clauses (i), (ii),
(iii), (iv) or (v) is referred to herein as "Subject Equipment."
Following the Closing, Purchaser shall use commercially
reasonable efforts to identify Subject Equipment and to collect
amounts due and payable to it with respect thereto. Seller
agrees, without implying any limitation on changes that Purchaser
may make following the Closing, that the level of effort,
procedures and expenditures made by Seller for such purpose prior
to the Closing shall be deemed to constitute commercially
reasonable efforts.
<PAGE>
(b) Purchaser shall notify Seller, from time to time,
as Subject Equipment is identified and shall provide Seller with
reasonable supporting detail showing the proposed calculation of
the reimbursement due with respect thereto. Within 30 business
days of each such notification (the "Review Period"), Seller may
object in writing to such reimbursement or, if it has no
objection, make payment to Purchaser, by wire transfer of
immediately available funds to such account as Purchaser may
specify, of an amount with respect to such equipment equal to the
book value thereof, as reflected on the Closing Date Balance
Sheet, plus interest on such amount from the Closing Date at the
90-day Treasury Rate in effect on the Closing Date plus 1%, less
the sum of (x) all amounts received by Purchaser subsequent to
the Closing Date with respect to such equipment, as rent or
pursuant to the risk of loss provision of the applicable rental
agreement, (y) the salvage value of any such equipment (as
determined by Purchaser) returned to or recovered by Purchaser
and (z) interest on such amounts received, computed from the date
or dates of receipt at the foregoing annual rate. Upon payment
to Purchaser of the amount specified in the preceding sentence
with respect to any On-Rent Equipment, Seller may (at its
election) receive from Purchaser an assignment of the rental or
lease agreement covering such On-Rent Equipment and retain for
its own account any amounts recovered thereunder and any rights
to the On-Rent Equipment. During the Review Period, the Seller
shall have reasonable access to all books and records in the
Possession of the Purchaser to enable the Seller to review and
<PAGE>
verify the information provided by Purchaser. If the Seller
objects to such information, it shall notify the Purchaser and
the parties shall attempt to resolve any dispute. If they are
unable to do so within 30 days after delivery of any such
objection, the parties will submit the unresolved aspects to
Price Waterhouse to resolve the dispute and make a determination
binding on the parties. In making such determination, said
accounting firm shall follow such procedures as it reasonably
deems appropriate, it being the desire of the parties that any
disagreement be resolved expeditiously and as economically as
practicable. The fees and expenses charged by Price Waterhouse
shall be shared one-half by the Seller and one-half by the
Purchaser. Promptly following any determination by Price
Waterhouse Seller shall make payment to Purchaser as aforesaid of
any additional amount owing to it hereunder based upon such
determination.
(c) No reimbursement shall be payable from Seller to
Purchaser in respect of Equipment which has not been designated
as Subject Equipment within the period of 180 days following the
Closing, unless Purchaser has notified Seller in writing within
such period: (x) identifying the particular equipment;
(y) setting forth the reason why Purchaser believes such
equipment may be Subject Equipment, and (z) identifying the
applicable rental or lease agreement from the records of the
Business.
(d) If any Subject Equipment is recovered by Purchaser
following its designation as Subject Equipment, Purchaser shall
<PAGE>
promptly notify Seller and Seller shall be entitled to a refund
of any amounts theretofore paid with respect thereto (or a credit
against amounts owing with respect thereto) pursuant to this
Section 6.13, less costs of recovery and repair or
reconditioning, if any, plus interest at the 90-day Treasury Rate
in effect on the Closing Date plus 1%. In addition, in the event
the Seller believes that the salvage value determined by
Purchaser is unduly low, Seller shall have the right, upon
payment to Purchaser of the amounts owing in respect of such
equipment, to purchase such equipment for the amount determined
by Purchaser to be its salvage value.
(e) Purchaser shall maintain all records related to
the Subject Equipment which are transferred to Purchaser as part
of the transaction contemplated herein for the one-year period
following the Closing.
ARTICLE 7
NONCOMPETITION AND NONDISCLOSURE
7.1 Scope and Reasonableness of Restrictions. The Seller
acknowledges that the Seller presently sells products and
services throughout the United States (collectively the
"Territory") and that the Purchaser intends to increase its sales
and operations throughout the Territory. The Seller further
acknowledges that the Purchaser would not enter into any of the
transactions contemplated by this Agreement without the assurance
that the Seller will not engage in the activities prohibited by
this Article 7 as and for the periods set forth, and, in order to
induce the Purchaser to consummate the transactions contemplated
<PAGE>
by this Agreement, the Seller agrees to restrict its actions
throughout the Territory as provided in this Article 7. The
Seller acknowledges that such restrictions are reasonable in
light of the businesses of the Seller and the benefits of the
transactions contemplated by this Agreement to the Seller.
7.2 Noncompetition. The Seller agrees that for a period of
five (5) years from the Closing Date, it will not, in the
Territory have any interest in, except for ownership of no more
than five (5) percent of the equity securities of a publicly-held
corporation and except as provided in Section 7.5 below, enter
into the employment of, act as agent, broker or distributor for
or adviser or consultant to, or in any way assist (whether by
solicitation of customers or employees or otherwise) any person,
firm, corporation or entity which is engaged, or which it
reasonably knows is undertaking to become engaged, in the
Territory in the business of computer and test and measurement
equipment rental operations.
7.3 No Interference With Customers. The Seller agrees that
for a period of five (5) years from the Closing Date, it will not
induce a Customer (defined below) to patronize any business
entity operating in the Territory (other than the Purchaser) with
respect to the types of services sold to such Customer by the
Seller in connection with the operation of the Business within
the twelve month period prior to the Closing, or to withdraw,
curtail or cancel such Customer's business with the Purchaser.
As used in this Article 7, "Customer" means any customer of the
<PAGE>
Business served or solicited within the twelve-month period prior
to the Closing.
7.4 Employee Utilization. GECC and the Seller agree that
for a period of four (4) years from the Closing Date, they will
not employ any person who was an employee of the Business on the
Closing Date, whose rate of annual compensation as of such date
is $70,000 or more in any other business of GECC or the Seller
which in any way competes directly or indirectly with the
computer and test and measurement operating lease and rental
activities of the Purchaser.
7.5 No Interference with Employees. GECC and the Seller
agree that for a period of four (4) years from the Closing Date,
they will not request, induce or solicit any employee of the
Purchaser or its affiliates to terminate his or her employment
with the Purchaser or its affiliates and accept employment with
another business entity engaged in the Business in the Territory
or with GECC or the Seller. This Section 7.5 shall not prohibit
GECC or the Seller from hiring an employee of the Purchaser or
its affiliates:
(a) who initiates the contact which leads to hiring;
(b) who responds to a general employment
advertisement; or
(c) who responds to a blind solicitation from a search
firm which is not directed at Purchaser's or its affiliates'
employees.
7.6 Exceptions. The provisions of this Article 7 shall not
be deemed breached by (i) any existing activities of the Seller
<PAGE>
which do not constitute the primary business of the division of
Seller engaged in such activities, (ii) any activities of an
entity acquired by the Seller following the date of this
Agreement if the violating activities are not the primary
activity of such acquired entity, or (iii) the continued
operations of Seller's Canadian computer rental business, which
is not part of the Purchased Assets.
7.7 Remedies. The Seller acknowledges that any violation
of this Article 7 may cause irreparable harm to the Purchaser and
monetary damages may not be an adequate remedy. The Seller
therefore agree that the Purchaser shall be entitled to an
injunction by an appropriate court in the appropriate
jurisdiction, enjoining the Seller from the continuance of any
such violation, in addition to any monetary damages which might
occur by reason of the violation of the prohibitions of this
Article 7. Nothing in this Agreement shall restrict any rights
that the Purchaser may have at law or in equity with respect to
matters covered by this Article 7.
7.8 Modification. It is understood and agreed by the
parties hereto that should any portion, provision or clause of
this Article 7 be deemed too broad to permit enforcement to its
full extent, then it shall be enforced to the maximum extent
permitted by law, and the Seller and the Purchaser hereby consent
and agree that such scope may be judicially modified accordingly
in any proceeding brought to enforce such restriction.
7.9 Covenants Independent. The covenants set forth in this
Article 7 shall be deemed and shall be construed as separate and
<PAGE>
independent covenants, and should any part or provision of such
covenants be held invalid, void or unenforceable by any court of
competent jurisdiction, such invalidity, voidness, or
unenforceability shall in no way render invalid, void or
unenforceable any other part or provision thereof or any separate
covenant not declared invalid, void, or unenforceable; and this
Agreement and this Article 7 shall in that case be construed as
if the void, invalid or unenforceable provisions were omitted.
ARTICLE 8
SURVIVAL; INDEMNIFICATION
8.1 Indemnification by the Seller. Subject to the
provisions of this Article 8, the Seller shall defend, indemnify
and hold the Purchaser harmless against any and all damages,
losses, liabilities and expenses (including, without limitation,
expenses of investigation and reasonable attorneys' fees and
expenses in connection with any action, suit or proceeding) with
respect to any such damages, losses, liabilities and expenses
(collectively "Damages") actually incurred or suffered by the
Purchaser on or after the Closing Date arising out of (a) any
misrepresentation or breach of any representation, warranty,
covenant or agreement made by the Seller in this Agreement; or
(b) the Seller's failure to pay or otherwise perform or discharge
any obligation arising from or pertaining to the Business or the
Purchased Assets prior to the Closing, other than the Assumed
Liabilities.
8.2 Indemnification by the Purchaser. Subject to the
provisions of this Article 8, the Purchaser shall defend,
<PAGE>
indemnify and hold the Seller harmless against any and all
Damages actually incurred or suffered by the Seller on or after
the Closing Date arising out of (a) any misrepresentation or
breach of any representation, warranty, covenant or agreement
made by the Purchaser in this Agreement; or (b) the Purchaser's
failure to pay or otherwise perform or discharge any of the
Assumed Liabilities.
8.3 General Indemnification Procedures. The party seeking
indemnification (the "Indemnified Party") shall give written
notice to the party or parties from whom such indemnification is
sought (the "Indemnifying Party") of any claim or the commence-
ment of any action, suit or proceeding in respect of which in-
demnity may be sought hereunder and will give the Indemnifying
Party such information with respect thereto as the Indemnifying
Party may reasonably request. Such notice shall be given within
sixty (60) days of the time at which the Indemnified Party re-
ceived notice of such claim, action, suit or proceeding; pro-
vided, however, that failure to give such notice shall not re-
lieve the Indemnifying Party of any liability hereunder except to
the extent the Indemnifying Party has suffered actual damages
thereby. The Indemnifying Party shall have the right to
undertake, by counsel of its own choosing, at its expense, the
defense of any such action, suit or proceeding involving a third
party. The Indemnified Party shall have the right to employ its
own counsel in any such action, but the fees and expenses of such
counsel shall be at the sole expense of the Indemnified Party
unless (i) the employment of counsel by the Indemnified Party has
<PAGE>
been authorized by the prior written consent of the Indemnifying
Party or (ii) the Indemnifying Party has not in fact employed
counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees and expenses of counsel
will be at the expense of the Indemnifying Party, and the
Indemnifying Party shall reimburse or pay such fees and expenses
as they are incurred. Whether or not the Indemnifying Party
chooses to defend or prosecute any claim involving a third party,
all the parties hereto shall cooperate in the defense or
prosecution thereof and shall furnish such records, information
and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals, as may be reasonably
requested in connection therewith.
8.4 Arbitration. After the Closing, any controversy or
claim arising out of or relating to this Agreement (including,
without limitation, the indemnification provisions of this
Article 8), shall be settled by arbitration in accordance with
the prevailing Commercial Arbitration Rules of the American
Arbitration Association. Such arbitration shall be held in St.
Louis, Missouri before a panel of three (3) arbitrators, one
selected by the Seller, one selected by the Purchaser and the
third selected by mutual agreement of the first two. Any
controversy or claim regarding liability of a party to this
Agreement for any action, suit or proceeding by a third party
shall not be finally resolved until the action, suit or
proceeding is finally resolved. Judgment upon any award rendered
<PAGE>
by the arbitrators may be entered in any court of competent
jurisdiction.
8.5 Certain Limitations.
(a) Dollar Limits. The Seller shall not have
liability for Damages under this Article 8 for breaches of
representations and warranties, unless (and then only to the
extent that) such Damages in the aggregate exceed $500,000, and
the aggregate liability of the Seller for Damages under this
Article 8 shall not exceed $100,000,000, except that the
foregoing limitations shall not apply to any Excluded Assets,
Article 7 or any intentional misrepresentations or breaches or
fraud or to Seller's failure to pay or otherwise perform any of
its covenants or agreements hereunder (by way of explanation,
representations and warranties in this Agreement are not deemed
to be covenants and agreements).
(b) Time Limits. The Seller shall have no liability
for damages under this Article 8 for breaches of representations
and warranties, unless the Purchaser notifies the Seller of a
claim therefor on or before the eighteen month anniversary of the
Closing, except that this time limit shall not apply to
Section 4.10, Article 7 or any intentional misrepresentations or
intentional breaches of warranty or to Seller's failure to pay or
otherwise perform any of its covenants or agreements hereunder.
8.6 Satisfaction of Indemnification Obligations. Subject
to the terms and conditions set forth in Sections 8.3, 8.4 and
8.5, claims for Damages shall be satisfied promptly by the
Indemnifying Party paying the amount of such Damages to the
<PAGE>
Indemnified Party, or, in the case of obligations of the Seller,
first from the Escrow Fund, if a balance remains, and then
payment by the Seller.
8.7 Escrow. An escrow shall be established to secure
certain specified rights of the Purchaser under this Agreement,
pursuant to the terms of an Escrow Agreement (the "Escrow
Agreement") in a form mutually acceptable to the parties hereto.
The Escrow Agreement shall contain, among other things, the
following provisions: (i) an Escrow Fund initially in the amount
of $15 million shall be delivered to an escrow agent the "Escrow
Agent") by the Purchaser and held by the Escrow Agent; (ii) $11
million minus the amount, if any, paid to the Purchaser pursuant
to Section 2.6 shall be released from the Escrow Fund to the
Seller upon the completion of the final settlements under the
Closing Date Balance Sheet; and (iii) $4 million minus the amount
paid to the Purchaser pursuant to Sections 6.12 and 6.13 shall be
released from the Escrow Fund to the Seller upon the final
settlements with respect to the Subject Equipment and the Subject
Property. If the resulting amount under clauses (ii) and (iii)
above is a negative number, then, no amount shall be released to
the Seller from the Escrow Fund, and instead, the Seller shall
immediately pay to the Purchaser by way of wire transfer the
amount due to the Purchaser. The fees payable to the Escrow
Agent for maintaining the Escrow Fund shall be shared one-half by
the Purchaser and one-half by the Seller. Subject to the
withdrawal rights of the Purchaser as set forth in Sections 6.12
and 6.13, all remaining funds including accrued interest in the
<PAGE>
Escrow Fund shall be released to the Seller following the
completion of the last of the settlements set forth above. The
Escrow Fund is to secure certain rights of Purchaser hereunder
and does not affect or in any way limit the obligations of Seller
hereunder.
8.8 Mitigation and Recoveries. The Indemnified Party shall
act in good faith and in a commercially reasonable manner to
mitigate any damages it may suffer. The amount of any Damages
suffered by a party under this Agreement shall be reduced by the
amount, if any, of the recovery or benefit (net of reasonable
expenses incurred in obtaining such recovery or benefit) that the
party seeking indemnification under this Agreement shall receive
or otherwise enjoy with respect thereto from any person
(including the present value of any tax benefit and any recovery
under any insurance policies).
8.9 Sole Remedy. The indemnification remedies provided in
this Article 8 are the sole and exclusive remedies for damages
arising out of any breach of this Agreement or the transactions
provided for herein, except for intentional breaches of covenants
and agreements resulting in a failure to close the transactions
contemplated herein and fraud; provided, however, the parties
recognize and agree that neither money damages nor the
indemnification remedies provided in this Article 8 would be
sufficient in the event of any breach or threatened breach of
Article 7 of this Agreement; therefore, the Purchaser shall be
entitled to specific performance and injunctive relief as
remedies for any such violation.
<PAGE>
ARTICLE 9
TERMINATION AND ABANDONMENT
9.1 Termination and Abandonment. This Agreement may be
terminated and the transactions contemplated by it abandoned at
any time prior to the Closing:
(a) by mutual agreement of the Seller and the
Purchaser; or
(b) by the Purchaser, if the conditions set forth in
Section 2.2 or the deliveries required by Section 2.4 shall not
have been complied with or performed in any material respect and
such noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) or if
the Closing has not occurred within 75 days of the date of this
Agreement; or
(c) by the Seller, if the conditions set forth in
Section 2.3 or the deliveries required by Section 2.5 shall not
have been complied with or performed in any material respect and
such noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) or if
the Closing has not occurred within 75 days of the date of this
Agreement.
(d) By the Seller, if the Purchaser has not obtained
the Credit Commitment referred to Section 2.2(f) on or before
October 1, 1997, provided, however, that if Seller has not
exercised its right to terminate this Agreement, pursuant to this
subparagraph (d) and in the interim Purchaser obtains the Credit
Commitment prior to the Closing Date, then Seller shall no longer
<PAGE>
be able to terminate this Agreement pursuant to this
subparagraph (d).
9.2 Rights and Obligations on Termination. If this
Agreement is terminated and abandoned as provided in this Article
9, each party will redeliver all documents, work papers and other
materials of any other party relating to the transactions
contemplated by this Agreement, whether so obtained before or
after the execution of this Agreement, to the party furnishing
the same, and all information received by any party to this
Agreement with respect to the business of any other party shall
not at any time be used for the advantage of, or disclosed to
third parties by, such party to the detriment of the party
furnishing such information; provided, however, that the
foregoing restriction shall not apply to any documents, work
papers, material or information which is a matter of public
knowledge or is otherwise in the public domain.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Notices. Each notice, communication and delivery under
this Agreement shall be made in writing signed by the party
making the same, shall specify the Section of this Agreement
pursuant to which it is given, and shall be deemed given on the
date delivered if delivered in person or on the next business day
after mailed if mailed by overnight delivery (and shall be deemed
received on the date of personal delivery or, if so mailed, on
the next business day after so mailed), as follows:
To the Purchaser:
<PAGE>
Electro Rent Corporation
6060 Sepulveda Boulevard
Van Nuys, California
Attention: William Weitzman, President
With a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Andrew E. Bogen
To the Seller:
General Electric Capital Technology
Management Services
1000 Windward Concourse
Alpharetta, Georgia 30023
Attention: D. Michael Upton
With copies to:
General Electric Capital Technology
Management Services
1000 Windward Concourse
Alpharetta, Georgia 30023
Attention: David Lidstone
and
Sutherland, Asbill & Brennan, LLP
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: Mark D. Wasserman
or to such other representative or at such other address as a
party to this Agreement may furnish to the other parties in
writing.
10.2 Time of the Essence; Computation of Time. Time is of
the essence of each and every provision of this Agreement.
Whenever the last day for the exercise of any privilege or the
discharge of any duty under this Agreement shall fall upon
Saturday, Sunday or any public or legal holiday, whether state or
federal, the party having such privilege or duty shall have until
<PAGE>
5:00 p.m., Los Angeles, California time, on the next succeeding
regular business day to exercise such privilege or to discharge
such duty.
10.3 Assignment; Successors in Interest. Except for any
transfer or assignment of rights under this Agreement by
operation of law upon the dissolution of the Seller or except
with the prior written consent of the Purchaser, no transfer or
assignment (by operation of law or otherwise) by the Seller of
its rights or obligations under this Agreement shall be made to
any person or entity. Except with the prior written consent of
the Seller, no assignment or transfer by the Purchaser of its
rights and obligations under this Agreement may be made other
than to an entity in common control with the Purchaser or to a
successor to a substantial portion or all of the Business. This
Agreement shall be binding upon the parties to this Agreement and
their respective legal representatives, heirs, successors and
assigns (whether or not permitted and including without
limitation the shareholders of the Seller upon its liquidation),
shall inure to the benefit of the parties to this Agreement and
their respective legal representatives and permitted successors
and assignees, and any reference to a party to this Agreement
shall also be a reference to a successor or assign.
10.4 Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall
include the singular, and the gender of any pronoun shall include
the other genders.
<PAGE>
10.5 Captions; Certain Definitions. The table of contents
and titles and captions of or in this Agreement are inserted only
as a matter of convenience and for reference and in no way
define, limit, extend or describe the scope of this Agreement or
the intent of any provision of this Agreement.
10.6 Controlling Law; Integration; Amendment; Waiver. This
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York. This
Agreement (which includes all the Exhibits and Schedules) and the
other agreements contemplated by this Agreement supersede all
prior negotiations, agreements and understandings between the
parties with respect to the subject matter thereof, constitute
the entire agreement between the parties with respect to the
subject matter thereof and may not be altered or amended except
in writing signed by the Purchaser and the Seller. The failure
of any party to this Agreement at any time or times to require
performance of any provisions of this Agreement shall in no
manner affect the right to enforce the same. No waiver by any
party to this Agreement of any condition (or of the breach of any
provision) of this Agreement, whether by conduct or otherwise, in
any one or more instances shall be deemed or construed as a
further or continuing waiver of any such condition or breach or
as a waiver of any other provision (or of a breach of any other
provision) of this Agreement.
10.7 Severability. In the event that any court of competent
jurisdiction shall determine that any provision of this Agreement
is invalid, such determination shall not affect the validity of
<PAGE>
any other provision of this Agreement, which shall remain in full
force and effect and which shall be construed as to be valid
under applicable Law.
10.8 No Third-Party Beneficiaries. This Agreement is for
the sole benefit of the parties hereto and nothing herein,
express or implied, is intended to or shall confer upon any other
person or entity, including, but not limited to employees any
legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
10.9 Bulk Sales. Purchaser and Seller hereby waive
compliance by Purchaser and Seller with the bulk sales law and
any other similar laws in any applicable jurisdiction in respect
of the transactions contemplated by this Agreement. Seller shall
indemnify Purchaser from, and hold it harmless against, any
liabilities, damages, costs and expenses resulting from or
arising out of the parties' failure to comply with any of such
laws in respect of the transactions contemplated by this
Agreement.
10.10 Counterparts. This Agreement may be executed by
each party upon a separate copy, and in such case one counterpart
of this Agreement shall consist of enough of such copies to re-
flect the signature of all of the parties to this Agreement.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms of this
Agreement to produce or account for more than one of such
counterparts.
<PAGE>
10.11 Obligations of General Electric Capital
Corporation. GECC agrees that it shall be jointly and severally
obligated with Seller in respect of all obligations herein to
make payments to the Purchaser pursuant to Sections 2.6 and
Article 8; and all references to the Seller in such provisions
shall be deemed to include GECC. The Purchaser shall have the
right to enforce such obligations directly against GECC without
first having recourse to, or exhausting remedies in respect of,
General Electric Capital Technology Management Services
Corporation.
DULY EXECUTED by the parties hereto, under seal, on
__________, 1997.
THE SELLER: GENERAL ELECTRIC CAPITAL
TECHNOLOGY MANAGEMENT SERVICES
CORPORATION
By:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
Title:
THE PURCHASER:
ELECTRO RENT CORPORATION
By:
Title:
<PAGE>
November 14, 1997
Electro Rent Corporation
6060 Sepulveda Boulevard
Van Nuys, California
91411
Attention: William Weitzman
Re: Acquisition Agreement dated September 21, 1997 by
and among General Electric Capital Technology
Management Services Corporation, General Electric
Capital Corporation and Electro Rent Corporation
Gentlemen:
The undersigned are parties, with you, to the
Acquisition Agreement dated September 21, 1997 (the
"Agreement") by and among General Electric Capital
Technology Management Services Corporation ("Seller"),
General Electric Capital Corporation ("GECC") and Electro
Rent Corporation ("Purchaser"). Subsequent to the date of
the Agreement, we have jointly decided that at the Closing
referred to therein, Seller shall retain certain accounts
receivable and finance leases, and certain personnel and
assets associated therewith, which would otherwise have been
included within the Purchased Assets and have agreed upon
certain other matters. This letter (the "Amendment") is to
set forth our agreement that the above-referenced agreement
(the "Agreement") shall be amended as set forth herein, and
except as so set forth, shall continue in full force and
effect. Capitalized terms which are defined in the
Agreement shall have the meanings therein set forth, when
such terms are used herein.
1. Revisions to the Agreement.
Section 1.1(b). The Purchased Assets, as described in
Section 1.1(b) of the Agreement and in Exhibit A, attached
thereto, shall not include either of the following: (i)
accounts receivable for which customers of Seller have been
billed prior to the Closing Date, or which represent
unbilled accruals that are not for rentals and operating
leases where the period of performance began within the 32
days prior to the Closing; or (ii) equipment leases
classified as finance leases and direct financing leases on
the books and records of the Business, including the
equipment, deferred income and salvage value associated
therewith. The receivables to be excluded from the
Purchased Assets pursuant hereto are hereafter referred to
as "Retained Receivables" and the finance leases and direct
financing leases so excluded are hereafter referred to as
the "Finance Leases." Annex 1 sets forth all of the
Retained Receivables known to Seller as of March 31, 1997.
The book value as of March 31, 1997 of the Retained
Receivables is estimated at $45,513,000, net of allowance
for losses, and the book value of the Finance Leases as of
such date is estimated to be $29,892,000. In addition, the
Purchased Assets shall not include: (i) taxes receivable; or
(ii) vendor receivables.
Section 1.1(c). The Assumed Liabilities, as described
in Section 1.1(c) of the Agreement and in Exhibit B,
attached thereto, shall not include any amounts for employee
compensation or benefits, including payroll, sick leave,
vacation, bonus, commission or other incentive compensation
accruing prior to the Closing.
Section 1.1 (e). Section 1.1 is hereby amended by
adding a new subsection (e) as follows:
(e) In the event that the assignment to Purchaser
of any lease or other contract or agreement pursuant
hereto would constitute a breach or default thereunder,
or result in a loss of rights by Seller or Purchaser
thereunder, then this Agreement shall not constitute an
assignment of such lease or other contract or
agreement. From and after the Closing, Seller and
Purchaser shall cooperate in such sublease, agency,
subcontract or other arrangement as Purchaser may
reasonably request in order that Purchaser shall
receive the benefits of each such lease or other
contract or agreement and Purchaser shall discharge the
obligations of Seller thereunder. Following the
Closing, Seller shall use commercially reasonable
efforts to obtain such consent as may be required in
order that the assignment of each such lease or other
contract or agreement may be completed; provided that
as an alternative to obtaining the consent of the
landlord to assign any facilities lease, Seller may
elect to sublease the facility to Purchaser for the
same rent and on the same terms and conditions as the
lease to Seller and Purchaser shall accept any such
sublease. Seller agrees that it shall reimburse
Purchaser for any loss, cost or expense that may be
incurred by Purchaser by reason of the failure of
Seller to obtain any required consent to assignment of
any facility lease to Purchaser at the Closing
hereunder.
Section 1.2(a). The Purchase Price, as set forth in
Section 1.2(a) of the Agreement, shall be the sum of (i)
$240,773,000 subject to the adjustments referred to therein
and (ii) the assumption of the Assumed Liabilities.
Section 2.5. The amount deposited with the Escrow
Agent at the Closing shall be $7 million instead of $15
million.
Section 2.6.
a. Notwithstanding their inclusion in Schedule 4.2(a)
none of: (i) the Retained Receivables, the Finance Leases,
and any reserves applicable thereto; (ii) taxes receivable;,
(iii) vendor receivables; nor (iv) the accruals for
employee compensation or benefits, including payroll, sick
leave, vacation, bonus, commission or other incentive
compensation referred to above in Section 1.1(c) shall be
included in the Closing Date Balance Sheet prepared pursuant
to Section 2.6. Thirty seven percent of the Oracle
capitalized software cost shall be reflected on the Closing
Balance Sheet, and the remainder of such capitalized cost
shall not be so reflected. No amounts representing
capitalized software costs after the implementation date of
the new billing system shall be reflected on the Closing
Balance Sheet. The Deferred Income account number 401-210-
000 referred to in Schedule 4.2(a), exclusive of amounts
pertaining to Finance Leases, will be reflected as a
liability on the Closing Balance Sheet and Statement of Net
Tangible Assets, notwithstanding any of the other agreements
set forth herein. Also, in Section 2.6(b), the amount
$279,250,000, to be used in computing any Balance Sheet
Shortfall or Balance Sheet Excess, shall be changed to
$203,845,000.
b. By way of clarification, the parties have agreed
on the following accounting policies to be followed in the
preparation of the Closing Balance Sheet:
(i) the depreciation start date concept heretofore
utilized by Seller;
(ii) the freight-in capitalization policy
heretofore utilized by Seller;
(iii) no reserve shall be required for
equipment in Status 24; and
(iv) the lease billing start dates that have
been used since Seller's new billing system was
implemented in June 1997.
Section 6.5.
(a) The employees identified on Annex 2 attached
hereto, who are engaged in the collection of the Retained
Receivables and rents under Finance Leases shall be Retained
Employees, for the purpose of Section 6.5, in addition to
the up to 37 persons designated or to be designated by
Purchaser as provided in Section 6.5(b). Purchaser shall
(except as otherwise provided in Section 2.A.(v) below)
reimburse Seller the actual out-of-pocket costs incurred
following the Closing for those Retained Employees engaged
in the collection and administration of the Retained
Receivables and Finance Leases, and the costs allocable to
their use of the Duluth and Hayward Facilities as provided
below, up to a maximum aggregate amount of $425,000, within
30 days of receipt of Seller's statement therefor
accompanied by reasonably detailed supporting documentation.
(b) The 7 employees identified on Annex 2A attached
hereto shall not be offered employment by Purchaser pursuant
to Section 6.5 and shall remain in the employ of Seller
following the Closing. Electro Rent shall reimburse Seller
for the cost of all severance payments for these employees,
including "lack of work" benefits, upon the termination of
their employment with Seller prior to March 30, 1998.
Section 6.9. Section 6.9 shall be amended to require
the delivery of audited financial statements of the Business
as of the Closing Date instead of October 31, 1997, in
addition to the other audited financial statements of the
Business referred to therein. All of the audited financial
statements referred to in Section 6.9 shall be delivered to
Purchaser not later than 60 days following the Closing Date,
rather than December 31, 1997.
Section 6.11. The second sentence of Section 6.11
shall be deleted.
Section 6.12. Section 6.12, amended to read in its
entirety as follows:
6.12 Repurchase of Certain Equipment.
(a) For a period of one hundred eighty (180) days
after the Closing, each of Purchaser and Seller shall
each use commercially reasonable efforts, consistent
with the level of effort, procedures and expenditures
made by Purchaser and Seller, respectively, with
respect to others of its receivables, to collect those
accounts receivable owned by it which constitute
"Subject Receivables" as defined below. For a period
of thirty (30) days following the expiration of such
180-day period, Purchaser shall have the option of
transferring title to any equipment subject to the same
rental agreement as a Subject Receiveable and which is
described in (c) below, for an amount equal to the book
value of such equipment as of the Closing Date, plus
interest on such amount from the Closing Date at the
90-day Treasury rate in effect on the Closing Date plus
1%. The option provided herein shall be exercised by
notice in writing to Seller, accompanied by reasonable
supporting detail. Payment for equipment transferred
to Seller hereunder shall be due within thirty (30)
business days following delivery of the notice and
supporting detail referred to in the preceding
sentence.
(b) As used herein, the term "Subject
Receivables" shall mean accounts receivable which arise
under the same equipment rental agreements as Retained
Receivables and that (i) were, as of the Closing Date,
unpaid thirty-one (31) days or more from the invoice
date, or (ii) are billed on other than a monthly basis
and were, as of the Closing Date, outstanding more than
sixty (60) days past the beginning of the rental or
lease period of performance ( i.e. the beginning of the
billing period).
(c) The equipment subject to transfer by
Purchaser to Seller pursuant to this Section 6.12 shall
be limited to such equipment as remains in possession
of the customer only (i) in the case of a customer's
inability to pay its obligations as they become due as
agreed to by Seller and Purchaser at the time, or in
the absence of such agreement, as determined by
Purchaser, together with the customer's documented
unwillingness to return the equipment, or (ii) in cases
where the customer and equipment cannot be located.
Section 6.13. All equipment subject to the Finance
Leases shall be excluded from the operation of Section 6.13.
Section 6.14. A new Section 6.14 shall be added,
reading as follows:
6.14 Invoicing and Collection for Accrued, Unbilled
Receivables. Following the Closing, Purchaser shall
invoice customers for all accrued, unbilled,
receivables existing as of the Closing Date, including
those accrued, unbilled, receivables which constitute
Retained Receivables and taxes receivable. Purchaser
shall use commercially reasonable efforts, consistent
with the level of effort, procedures and expenditures
made by Purchaser with respect to others of its
receiveables, to collect the foregoing receivables.
Purchaser shall have no liability or obligation to
Seller in the event of nonpayment by the customer of
any of such receivables. Further, Purchaser may, in
its sole discretion, at any time or from time to time
after 60 days following the Closing Date, elect to
cease further collection efforts with respect to any of
the foregoing receivables; provided that Purchaser: (i)
shall first have notified Seller in writing, not less
than 10 days prior to ceasing its collection efforts,
of its intention to do so (with any such notice to
identify the specific receivables involved); and (ii)
shall provide Seller with copies of such existing
documentation as shall be relevant and as Seller may
request for use in collecting such receivables.
Section 8.7. The initial amount of the Escrow Fund
shall be $7 million instead of $15 million. The amount to
be released from the Escrow Fund to the Seller upon
completion of the final settlements under the Closing Date
Balance Sheet shall be $3 million minus the amount, if any,
paid to the Purchaser pursuant to Section 2.6 instead of $11
million minus such amount.
2. Additions to the Agreement.
A. Cooperation, Access and Use of Facilities.
(i) Purchaser and Seller shall cooperate following the
Closing so that, without disrupting the normal business
operations of Purchaser, Seller shall have such access to
the relevant books, records, computer files and data,
invoices, bills, correspondence and other information,
included within the Purchased Assets, as it may reasonably
require for the purpose of collection, administration and
servicing of the Retained Receivables and Finance Leases.
(ii) For a period of 6 months following the Closing,
Purchaser shall make space, and necessary telephones, desks
and other office equipment, available for those Retained
Employees engaged in the collection of Retained Receiveables
and rents under Finance Leases at the facilities operated in
the Business at Duluth, Georgia (the "Duluth Facility") and
Hayward, California (the "Hayward Facility") including
parking places for such persons in the parking lot at such
facility. The premises to be occupied by the Retained
Employees are identified on Annex 3. During such period,
Purchaser shall provide or arrange access, utility services,
security, janitorial, refuse collection and other services
for the premises occupied by the Retained Employees on a
basis reasonably comparable to that provided for employees
of Purchaser working in the Duluth and Hayward Facilities.
All costs properly allocable to Seller's use of the Duluth
and Hayward Facilities, including base rent at the rate of
$1,512 and $284 , respectively, per month, fire and casualty
insurance, amortization of leaseholds, property taxes,
common area maintenance, utilities, telephone charges and
security, janitorial, refuse collection and other services
shall be paid by Seller to Purchaser monthly within 30 days
following submission by Purchaser to Seller of a statement
therefore, with reasonably detailed supporting
documentation.
(iii) For the period from the Closing through
December 31, 1997, Purchaser shall make space, and necessary
telephones, desks and other office equipment, available for
Seller's employees engaged in the conduct of its service
business (unrelated to the Business) at the Duluth Facility
and at the facility operated in the Business at Hayward,
California (the "Hayward Facility"), including parking
places for such persons in the parking lot at such facility.
The premises to be occupied by such employees are identified
on Annex 4. During such period, Purchaser shall provide or
arrange access, utility services, security, janitorial,
refuse collection and other services for the premises
occupied by such employees on a basis reasonably comparable
to that provided for employees of Purchaser working in the
Duluth and Hayward Facilities. All costs properly allocable
to Seller's use of such facilities, including base rent at
the rate of $3,631 and $270, respectively, per month, fire
and casualty insurance, amortization of leaseholds, property
taxes, common area maintenance, utilities, telephone charges
and security, janitorial, refuse collection and other
services shall be paid by Seller to Purchaser monthly within
30 days following submission by Purchaser to Seller of a
statement therefore, with reasonably detailed supporting
documentation.
(iv) For the period from the Closing through December
31, 1997, Seller shall make space, and necessary telephones,
desks and other office equipment, available for certain of
Purchaser's employees at Seller's facility at Norcross,
Georgia (the "Norcross Facility"), including parking places
for such persons in the parking lot at such facility. The
premises to be occupied by the Retained Employees are
identified on Annex 5. During such period, Seller shall
provide or arrange access, utility services, security,
janitorial, refuse collection and other services for the
premises occupied by such employees on a basis reasonably
comparable to that provided for employees of Seller working
in the Norcross Facility. All costs properly allocable to
Purchaser's use of the Facility, including base rent at the
rate of $6,562.50 per month, fire and casualty insurance,
amortization of leaseholds, property taxes, common area
maintenance, utilities, telephone charges and security,
janitorial, refuse collection and other services shall be
paid by Seller to Purchaser monthly within 30 days following
submission by Purchaser to Seller of a statement therefore,
with reasonably detailed supporting documentation.
(v) Seller agrees (a) to indemnify Purchaser for any
loss, cost, liability, claim, damage or expense, including
reasonable attorneys' fees, incurred by Purchaser in
connection with the use of the Duluth and Hayward Facilities
by employees of Seller, and (b) to provide public liability
insurance with respect to such employees through the self-
insurance program applicable to Seller and GECC, with
Purchaser to be provided benefits thereunder as an
additional insured. Seller agrees to instruct its employees
at the Duluth and Hayward Facilities to follow all rules and
regulations prescribed by Purchaser in connection with the
operation of such facilities. Seller acknowledges that the
rights granted to it hereunder are a mere license, and not a
lease, and that Purchaser shall have the right to revoke
such license at any time if the employees of Seller do not
adhere, in all material respects, to the rules and
regulations prescribed by Purchaser.
(vi) Purchaser agrees (a) to indemnify Seller for any
loss, cost, liability, claim, damage or expense, including
reasonable attorneys' fees, incurred by Seller in connection
with the use of the Norcross Facility by employees of
Purchaser, and (b) to provide public liability insurance
with respect to such employees through the insurance program
applicable to Purchaser, with Seller to be provided benefits
thereunder as an additional insured. Purchaser agrees to
instruct its employees at the Norcross Facility to follow
all rules and regulations prescribed by Seller in connection
with the operation of such facility. Purchaser acknowledges
that the rights granted to it hereunder are a mere license,
and not a lease, and that Seller shall have the right to
revoke such license at any time if the employees of
Purchaser do not adhere, in all material respects, to the
rules and regulations prescribed by Seller.
B. Purchaser's Right to Acquire Retained Receivables
and Finance Leases Following the Closing. Following the
Closing, at any time or from time to time, Purchaser shall
have the right to purchase from Seller the Retained
Receivables owing by any customer or group of customers for
an amount equal to the full face amount thereof as shown on
the books and records of the Business as of the Closing
Date, reduced by the amount of any payments thereon
received, and any credits or reductions applicable thereto
arising, following the Closing, or for such other amount as
Purchaser and Seller may agree. Upon any such purchase, the
accounts receivable or leases subject thereto shall no
longer constitute Retained Receivables or Finance Leases for
purposes of this agreement. Purchaser's right of purchase
may be exercised by notice in writing to Seller, which
notice shall specify the Retained Receivables to be
Purchased and the amount payable therefor (determined as set
forth above). Payment for the Retained Receivables so
purchased shall be made concurrently with delivery of the
foregoing notice, by wire transfer of immediately available
funds to such account as Seller shall specify. Any such
purchase shall be effective upon delivery of the foregoing
notice and payment as provided herein. In the event of any
disagreement between Purchaser and Seller with respect to
the amount payable for any Retained Receivables purchased by
Purchaser hereunder, if the parties are unable to resolve
such disagreement within 30 days following the purchase,
either Seller or Purchaser may cause such dispute to be
resolved as provided in Section 2.D. below. Any purchase of
Retained Receiveables hereunder shall be without recourse to
Seller.
C. Cash Receipts.
(i) Following the Closing, Purchaser and Seller shall
report to each other, with reasonable supporting detail,
within 3 business days following the end of each calendar
week, of all funds received in respect of the Retained
Receivables and Finance Leases during such month. Purchaser
shall promptly pay over to Seller any amounts received by it
which are properly allocable to Retained Receivables or
Finance Leases owned by Seller; and Seller shall promptly
pay over to Purchaser any amounts received by it which are
properly allocable to accounts receivable or leases not
constituting Retained Receivables or Finance Leases. All
amounts payable pursuant to this Section 2.C. shall be paid
within 3 days following the end of the calendar week
referred to above, and thereafter shall bear interest at the
90-day Treasury Rate in effect as of such calendar month
end, plus 1%.
(ii) Any amounts received by Purchaser or Seller from a
customer which has outstanding amounts owing pursuant to
both one or more Retained Receivables and/or Finance Leases,
as well as receivables or leases owned by Purchaser, shall
be handled as follows if they are not designated for, and
cannot otherwise be designated to, a specific invoice: Such
amounts shall be applied on a proportional basis over all of
the obligations of such customer (with such amounts applied,
as to each contract, first to the earliest claim under each
rental or lease agreement). Any amounts received by
Purchaser or Seller which constitute partial payment of an
invoice which reflects both one or more Retained Receivables
and/or Finance Leases, as well as receivables or leases
owned by Purchaser, shall be applied to the amounts owed to
Purchaser and Seller on a basis proportional to the amounts
due to each on the invoice.
(iii) Seller and Purchaser shall each make prompt
reimbursement to the other, as may be required to correct a
payment previously made, in the event: (a) any amount is
required by law to be refunded to the customer or its legal
representative, after the relevant receipt has been paid
over to Purchaser or Seller pursuant to the foregoing; or
(b) any incorrect payment is made between them as the result
of a computational error.
D. Resolution of Disagreements. In the event of any
disagreement between Purchaser and Seller in respect of any
amount owing pursuant to this Amendment, each of the parties
shall make available to the other for inspection all books,
records and documents in its possession which contain
relevant information; and the parties shall endeavor to
resolve their disagreement. If, at the end of 30 days, the
parties shall be unable to do so, the parties will submit
the unresolved issue to Price Waterhouse LLP, or such other
accounting firm acceptable to the parties, to resolve the
issue and make a determination binding on the parties;
provided that this dispute resolution procedure shall not be
available to the parties unless the aggregate cumulative
amount of all such disputes shall exceed $25,000. In making
such determination, said accounting firm shall follow such
procedures as it reasonably deems appropriate, it being the
desire of the parties that any disagreement with respect to
the calculation be resolved expeditiously and as
economically as practicable. The fees and expenses charged
by Price Waterhouse LLP, or such other accounting firm
acceptable to the parties, shall be shared one-half by
Seller and one-half by the Purchaser. Promptly following
any determination by Price Waterhouse LLP, or such other
accounting firm acceptable to the parties, Seller or
Purchaser (as the case may be) shall make payment as
aforesaid of any additional amount owing to it hereunder
based upon such determination.
E. Software License. Effective from and after the
Closing, Purchaser hereby grants to Seller a perpetual,
worldwide, royalty free, non-exclusive license to use the
computer programs identified below in the conduct of its
business. Such license does not include the right to sub-
license or assign, except that Seller may grant one or more
sub-licenses for the use of such software to any person
controlled by or under common control with Seller, or to any
purchaser of all or any substantial part of its business;
provided that any such sub-license shall expressly prohibit
the use of the licensed software in connection with any
activities involving the rental of computers or other
electronic equipment. The computer programs covered by this
license are as follows:
Central invoice processing system
Sales analysis system (SAS)
Ross accounts receivable
Demand billing (DSBS)
Finance lease billing (CMS
If the foregoing is in accordance with your
understanding of our agreement, please sign in the space
provided below, whereupon this letter shall evidence our
legally enforceable agreement.
Sincerely yours,
General Electric Capital
Technology Management Services
Corporation
by__________________________
General Electric Capital
Corporation
by__________________________
Accepted and agreed as set forth above
Electro Rent Corporation
by______________________
FOR IMMEDIATE RELEASE
________________________________________________________________
NEIL G. BERKMAN ASSOCIATES Company Contact:
1900 AVENUE OF THE STARS Daniel Greenberg
SUITE 2850 Chairman & CEO
LOS ANGELES, CA 90067 Electro Rent Corporation
(310) 277-5162 (818) 786-2525
________________________________________________________________
ELECTRO RENT CORPORATION COMPLETES THE ACQUISITION
OF THE COMPUTER AND TEST AND MEASUREMENT EQUIPMENT RENTAL
BUSINESSES FROM A DIVISION OF GE CAPITAL SERVICES
VAN NUYS, CALIFORNIA, November 17, 1997 - Electro Rent
Corporation (NASDAQ:ELRC) announced today that it has completed
the acquisition of the computer and test and measurement
equipment rental business of GE Capital Technology Management
Services (TMS). The purchase price was $241 million in cash,
reflecting the retention of certain receivables and finance
leases by GE Capital TMS and certain other adjustments.
"This acquisition more than doubles our size - in terms of
revenue, the value of our equipment portfolio, and our employee
base - and transforms Electro Rent into the largest company in
our industry. In addition, we believe that the acquisition will
be accretive to earnings after certain merger-related and
integration costs have been accounted for. We will work
diligently to complete the integration as quickly as possible,"
said Daniel Greenberg, chairman and chief executive officer of
Electro Rent. He said that Electro Rent plans to continue the
local support services currently provided by GE Capital TMS in
major cities nationwide.
"The acquisition will allow us to capitalize on Electro
Rent's operating leverage by significantly expanding our
transaction volume and sales and marketing presence in every
market we serve, and by dramatically expanding our resources -
people as well as equipment - so that we can move ever closer to
the goal of total customer satisfaction. This acquisition
creates many new challenges and opportunities for continued
growth. We believe it is the right transaction at the right time
for Electro Rent," Greenberg added.
Electro Rent Corporation, with 500 employees and a rental
equipment portfolio valued at over $140 million, provides
short-term rental and leasing of personal computers, workstations
and general purpose electronic test equipment. For the fiscal
year ended May 31, 1997, Electro Rent reported net income of
$24.1 million, or $1.94 per share, on revenue of $150.5 million.
In conjunction with the provisions of the new "Safe Harbor"
section of the Private Securities Litigation Reform Act of 1995,
this press release may contain forward-looking statements
pertaining to future anticipated projected plans, performance and
developments, as well as other statements relating to future
operations. All such forward-looking statements are necessarily
only estimates of future results and there can be no assurance
that actual results will not materially differ from expectations.
Further information on potential factors which could affect
Electro Rent Corporation are included in the company's Form 10Q
and Form 10K filed with the Securities and Exchange Commission.
