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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
March 26, 1998 April 1, 1998
(Date of earliest event reported)
RURAL/METRO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-22056 86-0746929
(Commission File Number) (IRS Employer Identification Number)
8401 EAST INDIAN SCHOOL ROAD
SCOTTSDALE, ARIZONA
85251
(Address of principal executive offices)
(Zip Code)
(602) 994-3886
(Registrant's telephone number, including area code)
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RURAL/METRO CORPORATION
FORM 8-K
CURRENT REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to a Purchase Agreement dated January 16, 1998 and a
Complementary Agreement dated March 26, 1998 between Registrant as buyer and
Messrs. Horacio Artagaveytia, Jose Mateo Campomar, Alberto Fluerquin, Carlos
Mezzera, Renato Ribeiro, Gervasio Reyes and Carlos Arturo Delmiro Marfetan, the
Registrant acquired all of the issued and outstanding stock of Peimu S.A., Recor
S.A., Marlon S.A. and Semercor S.A. ("the Companies"). The Companies provide
emergency transports and urgent home medical care in Argentina. The Registrant
intends to continue the operations of the Companies.
The purchase price consisted of cash of $25.0 million and 293,148
shares of the Registrant's common stock and liabilities assumed of approximately
$9.0 million. The acquisition will be accounted for as a purchase in accordance
with Accounting Principles Board Opinion No.
16.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited combined financial statements of Peimu S.A., Recor
S.A., Marlon S.A. and Semercor S.A. will be filed no later
than June 1, 1998.
(b) Pro Forma Financial Statements to be filed no later than June
1, 1998.
(c) Purchase Agreement between Rural/Metro Corporation and Messrs.
Horacio Artagaveytia, Jose Mateo Campomar, Alberto Fluerquin,
Carlos Mezzera, Renato Ribeiro, Gervasio Reyes and Carlos
Arturo Delmiro Marfetan, with respect to the stock of Peimu
S.A., Recor S.A., Marlon S.A. and Semercor S.A.
Complementary Agreement between Rural/Metro Corporation and
Messrs. Horacio Artagaveytia, Jose Mateo Campomar, Alberto
Fluerquin, Carlos Mezzera, Renato Ribeiro, Gervasio Reyes and
Carlos Arturo Delmiro Marfetan, with respect to the stock of
Peimu S.A., Recor S.A., Marlon S.A. and Semercor S.A.
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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.
RURAL/METRO CORPORATION
Date: April 1, 1998 By: /s/ Dean Hoffman
-----------------------------
Dean Hoffman - Vice President
and Principal Accounting Officer
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PURCHASE AGREEMENT
This agreement (hereinafter equally the "AGREEMENT" or the "CONTRACT") is made
on January 16th, 1998, between Mark Liebner, on behalf of RURAL/Metro
Corporation (a Delaware Corporation), in his capacity as attorney, its head
office at 8401 East Indian School Road, Scottsdale, Arizona, United States of
America, (hereinafter "RURAL"), and (i) Horacio Artagaveytia; Uruguayan,
identification document number 1.296.245-2 issued by Republica Oriental del
Uruguay, domiciled in Cesar Cortinas 2034, Montevideo, Republica Oriental del
Uruguay; (ii) Jose Mateo Campomar, Uruguayan, identification document number
1.325.707-0 issued by Republica Oriental del Uruguay, domiciled in General
Santander 1873, Montevideo, Republica Oriental del Uruguay; (iii) Alberto
Fluerquin, identification document number 1.440.520-4 issued by Republica
Oriental del Uruguay, domiciled in Avenida Rivera 7025, Montevideo, Republica
Oriental del Uruguay; (iv) Carlos Mezzera, Uruguayan, identification document
number 1.324.207-7 issued by Republica Oriental del Uruguay, domiciled in Santa
Monica 1975, Montevideo, Republica Oriental del Uruguay; (v) Renato Ribeiro,
Uruguayan, identification document number 982.647 issued by Republica Oriental
del Uruguay, identification national document number 92.658.172 issued by
Republica Argentina, domiciled in Sucre 1160, Cordoba, Republica Argentina; (vi)
Gervasio Reyes, Uruguayan, identification document number 1.377.853-1 issued by
Republica Oriental del Uruguay, domiciled in Iturriaga 3467, Montevideo,
Republica Oriental del Uruguay; and (vii) Carlos Arturo Delmiro Marfetan,
Uruguayan, identification document number 1.273.985-5 issued by Republica
Oriental del Uruguay, domiciled in Presidente Roca 905, 1(degree)A, Rosario,
Republica Argentina, (hereinafter all of them as a whole called "the SELLERS").
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1. BACKGROUND TO THE AGREEMENT.
1.1. The SELLERS, either directly or indirectly through the COMPANIES mentioned,
are the owners of all of the shares of stock hereinafter, representing the
hundred per cent of the stock and votes of Peimu S.A., Recor S.A., Marlon S.A.
and Semercor S.A., (hereinafter called "the COMPANIES"), as stated in Annex A
herein (hereinafter called "the SHARES").
2. OBJECTIVE.
2.1. RURAL on its own, or through one of its controlled/or related corporations,
either directly or indirectly, is interested in the acquisition of SHARES. In
compliance with the SUSPENSIVE CONDITIONS hereinafter, the SELLERS agree to sell
to RURAL (or to the controlled or related company to which RURAL transfers its
rights derived from the present AGREEMENT) and RURAL agrees to acquire the
SHARES. The acquisition will include the transfer in favor of RURAL of all the
economic and political rights issuing from the SHARES, including without any
limitation, dividends to be voted in the future, accounting revaluations,
capitalization of reserves, subscription of increases of capital, preference
rights and rights to accretion, and any other liquidated right or not, present
or future, emerging from or related to the SHARES, any other advance payment or
any other claim of a pecuniary nature that might entitle the SELLERS against the
COMPANIES, in relation to any consideration or title dated before the date of
transfer of the SHARES. Among the rights transferred with the SHARES are not
included: (i) the right to obtain the dividends the distribution of which had
been approved by previous shareholders' meetings, and (ii) the right to obtain
the dividends that the shareholders' meetings that will discuss the balance
sheets corresponding to fiscal year 1997 may decide to distribute pursuant to
section 68 of law 19.550. The parties will not fulfill their obligations
partially. Therefore the SELLERS shall deliver the total number of SHARES and
RURAL shall pay the whole price as stated in Section 6. The obligation of the
SELLERS under this AGREEMENT is indivisible, jointly and severally.
2.2. RURAL admits in favor of the SELLERS their right to receive the undivided
profits of fiscal year 1998 while the SELLERS hold the
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ownership of the SHARES. Herein above RURAL commits itself to pay the SELLERS a
cash amount which will be calculated by prorating the undivided profits
according to the time elapsed between the CLOSING DATE of the respective
commercial fiscal years 1997 and the date when the transfer of SHARES will be
held, irrespective of the allocation that the shareholders' meetings decide to
assign to the aforementioned results. By way of example: if the profits to be
distributed amount to $100.000 and between the closing date of fiscal year 1997
and the date of delivery of the SHARES six months have elapsed, the sum to be
paid by RURAL will amount to u$s50.000. The resulting credit shall be canceled
within 5 (five) days of the date the COMPANIES hold the meetings where the
balance sheets corresponding to their respective fiscal years 1998 will be
discussed, which in no way whatsoever will take place beyond the fifth month as
of the CLOSING DATE of the respective fiscal years. In case there was a delay,
and after a certifying notification has been issued for fifteen days, a fine of
u$s1.000 (one thousand United States dollars) per day will be applied.
3. DUE DILIGENCE.
3.1. In order to fully understand the balance sheets of the COMPANIES, and to
determine the viability of the acquisition of the SHARES, RURAL will hire the
services of Pistrelli, Diaz y Asociados, Arthur Andersen, Buenos Aires, to
review the audited balance sheets and profit and loss statements (the BALANCE
SHEETS) of the assets and liabilities of the COMPANIES corresponding to fiscal
year 1997. The BALANCE SHEETS of each of the COMPANIES have been audited by
Deloitte & Touche.
3.2. Deloitte & Touche will produce a REPORT containing the combined audited
financial statements of all of the COMPANIES ended September 30, 1997 ("the
REPORT"). The SELLERS hereby agree that the COMPANIES will allow RURAL, and its
representatives, as from the date of this AGREEMENT and until CLOSING DATE, to
have a reasonable possibility, during normal working hours, and provided there
is prior notice with
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a reasonable time in advance, to enter the premises of the COMPANIES to have all
the access possible to the accounting and operational information either abiding
by this contract or otherwise, without any limitation whatsoever to become
acquainted with all the accountancy, contractual, extracontractual, ownership,
managerial, environmental information or any information related to claims,
reports, either judicial or extrajudicial, administrative actions, trademarks,
patents, license agreements, know-how agreements and so on, and any other
information relating to the COMPANIES and/or the SHARES, which should be
provided upon request made by RURAL or its auditor. RURAL agrees to keep the
confidentiality of all the information, and it will not use or will not allow to
use the documentation, work papers and/or other materials that were made
available or produced or delivered, with any other intention than the intention
or purposes herein, until expiration date or in case this AGREEMENT is
rescinded.
3.3. The REPORT (which will include a combined balance sheet and profit and loss
statement of the COMPANIES ended September 30, 1997) should be ready within 30
calendar days as of today's date. Deloitte & Touche shall prepare the REPORT
with all the conclusions arising out of the BALANCE SHEETS and other information
requested by RURAL related with the requirements of compliance of the suspensive
conditions included in Section four of the present AGREEMENT, and a copy will be
provided to the SELLERS and another copy to RURAL. The REPORT will be delivered
simultaneously to RURAL and to the SELLERS, who will acknowledge receipt. In the
combined balance sheet and profit and loss statement that shall be drawn
pursuant to the Generally Accepted Accounting Principles (GAAP) in force in the
Argentine Republic, evidence will be stated that the aforementioned REPORT has
been prepared to fulfill the requirements of the present clause.
3.4. Within 25 calendar days as of today's date, SELLERS must furnish RURAL with
true, complete and correct copies of the unaudited financial statements of the
COMPANIES corresponding to the last quarter of 1997 (hereinafter the "INTERIM
FINANCIAL STATEMENTS"). The INTERIM FINANCIAL STATEMENTS must contain (i) the
unaudited balance sheets of the COMPANIES corresponding to the quarter ending
December 31st, 1997; and (ii) the unaudited financial statements of the
COMPANIES corresponding to the quarter ending December 31st, 1997.
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The INTERIM FINANCIAL STATEMENTS must be prepared according to the Generally
Accepted Accounting Principles in force in the Argentine Republic. The SELLERS
commit themselves to furnish RURAL copies of the audited balance sheets of each
of the COMPANIES corresponding to the business year 1996 within the term stated
here above.
4.SUSPENSIVE CONDITIONS
RURAL's obligation to buy SHARES from the SELLERS and the SELLERS' obligation to
sell them to RURAL, is subject to suspensive conditions, and the sale will only
be executed if:
a) According with the REPORT, the annual collections of the
COMPANIES for the 12-month period ending September 30th, 1997,
were not below forty three million pesos ($43.000.000).
b) According with the REPORT, the profits of the COMPANIES before
deducting directors' fees, amortization and income taxes, were
not below six million pesos ($6.000.000).
c) According with the REPORT and the INTERIM FINANCIAL
STATEMENTS, the net worth of the COMPANIES as a whole was not
below one million pesos ($1.000.000).
d) None of the COMPANIES had suffered or been really and
seriously threatened with any relevant material adverse change
in their activity, business or financial condition,
relationship with their customers, suppliers and employees.
e) RURAL and each of the COMPANIES had received all national,
provincial, municipal and regulatory approvals, permits,
consents and licenses deemed necessary for RURAL to continue
business of the COMPANIES.
f) All the documents furnished to RURAL or its auditors, lawyers
and/or representatives by or on behalf of the SELLERS, should
be true, complete and correct. All assertions and guarantees
contained in the present AGREEMENT and its annexes were true,
complete and did not
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conceal any datum or any material fact which, in the light of
the circumstances under which they were made should have been
stated.
g) After the CLOSING DATE of each corresponding BALANCE SHEET and
until the date of delivery of the REPORT there was no
significant material change in the financing debt position of
the COMPANIES, and until CLOSING DATE and since September
30th, 1997, the SELLERS have not directly or indirectly used
any funds of any of the COMPANIES allotted to repay any
financing debt. (If this fact occurred later than EXECUTION
DATE it shall be considered as a resolutory condition).
h) There should emerge from the INTERIM FINANCIAL STATEMENTS that the
liabilities had been canceled with current assets.
i) The SELLERS had sent to RURAL proper notification stating that on the
date of their signing, and except for their loans in dividends as here
before mentioned in Section 2, they do not possess any credit against
the COMPANIES, and that they have not assigned to third parties any
credits they may have against the COMPANIES. In case any right or
credit against the COMPANIES should exist, or if the aforementioned had
been assigned to third parties, the SELLERS and/or the third party
assignors should waive such rights or credits.
j) RURAL had received a note issued by the First Union Bank, domiciled in
Charlotte, North Carolina, United States of America, as agent bank,
which shall finance the payment of the price and shall authorize the
issuance of the promissory notes and the furnish of the pledge
according to Sections 6 and 8 of the present AGREEMENT, containing the
required waivers in order not to infringe the loan agreement.
5. EXECUTION OF THE AGREEMENT.
Unless RURAL issues a note addressed to the SELLERS announcing the non
fulfillment of one or several SUSPENSIVE CONDITIONS, the date of execution of
the present AGREEMENT (hereinafter called the "DATE OF EXECUTION") shall take
place on the furthest date in time from the following two dates: (a) fifteen
(15) days from the date of delivery of the REPORT (hereinafter called the "DATE
OF EXECUTION") or (b) forty five (45) days from the date of this AGREEMENT.
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6. PRICE.
6.1. The PRICE that RURAL shall pay the SELLERS for the purchase of the SHARES
amounts to thirty five million United States dollars (US$35.000.000)
(hereinafter called the "PRICE"). The PRICE shall be settled subject to the
following forms and terms:
(i) Twelve million five hundred thousand United States dollars (US$12.500.000)
at the CLOSING DATE, in cash or the most suitable manner that the SELLERS
stipulate.
(ii) Five million United States dollars (US$5.000.000) on the basis of payment
in kind of a number of common SHARES of RURAL/Metro Corporation having the same
characteristics and rights as the stocks traded in the NASDAQ National Market
subject to Rule 145 of the United States Securities Exchange Commission
(SEC)(hereinafter called the "RURL SHARES"), determined dividing the amount of
five million United States dollars (US$5.000.000) by the "RURAL/ Metro Average
Price". The "RURAL/ Metro Average Price" means the average of the closing prices
of the RURL SHARES reported daily in the NASDAQ National Market Issues during
the five (5) consecutive trading day period ending at the third (3rd) working
day preceding the CLOSING DATE. The RURL SHARES shall be duly registered in the
SEC within the purview of their issuance for the SELLERS in accordance with the
provisions set forth in the Securities Act of 1933 and its amendments. Copies of
the legal comments on the extent of Rule 145 of the SEC are supplied to the
SELLERS by RURAL and are included in the present AGREEMENT as Annex N. The
SELLERS irrevocably agree not to sell, make use of, transfer, assign, or tax in
any way whatsoever the RURL SHARES until ninety (90) days have elapsed after the
CLOSING DATE. Upon maturity of said term the RURL SHARES may be freely sold by
the SELLERS at the securities market of the United States of America. During the
aforementioned period, the RURL SHARES shall remain deposited under the custody
of the firm Salomon Smith Barney, domiciled in the city of New York. At CLOSING
DATE, RURAL shall deliver the SELLERS to their satisfaction the document that
proves the transfer of ownership of RURL SHARES to the SELLERS together with the
deposit of said SHARES under the name of the SELLERS in the
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firm Salomon Smith Barney. The aforementioned delivery shall be equivalent to
the transfer of the SHARES.
(iii) Twelve million five hundred thousand United States dollars (US$12.500.000)
no later than May 18th, 1998. Said payment shall be made effective either in
cash or in such reasonable manner as the SELLERS stipulate. The payment domicile
will be Estudio Severgnini, Robiola, Grinberg & Larrechea, Reconquista 336, 2nd
floor, Buenos Aires. Between the day of the CLOSING DATE and the payment day,
the aforementioned amount shall accrue a compensatory interest of eight per cent
(8%) per year which shall be paid simultaneously with the principal. The payment
of principal and interests shall be made effective by means of the issuance of a
promissory note on the CLOSING DATE payable in the United States of America
which shall be drawn to the satisfaction of the SELLERS and according to the
legislation of the United States of America.
(iv) The balance due of the PRICE (hereinafter called the "BALANCE OF THE
PRICE") that is, five million United States dollars (US$5.000.000) shall be
withheld by RURAL pursuant to Section 6.2 of the present AGREEMENT and shall be
settled a year after the CLOSING DATE. The BALANCE OF THE PRICE as of the
CLOSING DATE shall accrue a compensatory interest of eight per cent (8%) per
year. This compensatory interest shall be paid on the first year after the
CLOSING DATE. The payment of the aforementioned principal and its corresponding
interests shall be implemented by the issuance of a promissory note on the
CLOSING DATE which shall be drawn to the SELLERS' satisfaction, payable in the
United States of America according to the legislation of said country. This
promissory note shall be deposited by RURAL at the office of a notary public of
Buenos Aires that the parties shall choose by mutual agreement. RURAL shall
grant irrevocable instructions to the notary public to the effect that he shall
deliver said promissory note to the SELLERS in case RURAL defaulted its
obligation and failed to pay the amount of the settlement that it should submit
to the SELLERS in a year's time, according to Section 6.2 of the present
AGREEMENT. A sample of the promissory notes to be issued as provided in the
present paragraph and in the previous one, as well as the sample of certificate
of transfer and deposit of the RURL SHARES shall be supplied by RURAL to the
SELLERS at least ten (10) days in advance of CLOSING DATE.
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6.2. In order to face the INDEMNIFIABLE FACTS referred to in Sections 10.2, 10.4
and 10.5 of the present AGREEMENT, RURAL shall deduct from the BALANCE OF THE
PRICE the indemnifications that would correspond in case an INDEMNIFIABLE FACT
should occur. The BALANCE OF THE PRICE plus its compensatory interests, minus,
if applicable, the corresponding indemnifications according to itemized
settlement, shall be paid to the SELLERS on the first year after CLOSING DATE.
6.3. As regards future placing of RURL SHARES, RURAL binds itself, in case it
launched a new public issuance of shares, and subject to compliance with norms
and usage and practices of the New York securities market, to make its best
efforts in order to include said shares within the aforementioned placing in
case the SELLERS so decided (Piggy-back rights).
7. CLOSING DATE.
CLOSING DATE will take place at 10 a.m. on the tenth (10th) day after the DATE
OF EXECUTION at Reconquista 336, 2nd Floor, Capital Federal, at Estudio
Severgnini, Robiola, Grinberg & Larrechea.
8. SETTLEMENT OF THE PRICE, TRANSFER OF THE SHARES AND OF THE COMPANY'S
DOCUMENTATION. SHAREHOLDERS' MEETING. PLEDGE.
8.1 The transfer of the SHARES to RURAL and their corresponding nominalization
and filing in the Registry of Shareholders of the COMPANIES shall be effective
on the place and date of CLOSING DATE. Twenty-four hours in advance, special and
unanimous meetings of the COMPANIES will be held to discuss the following
agenda: (i) acceptance of the resignation of the board of directors; and (ii)
appointment of a new board of directors. The SELLERS, in their capacity of
shareholders, shall appoint as members of the respective boards of directors,
the individuals that RURAL had suggested. Previous to the meetings, the
directors who have submitted their resignation shall have: (i) delivered to
RURAL all the company, accounting, labor and contractual documentation of the
COMPANIES, together with a note by means of which they resign to their right to
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receive fees for their assignments as directors in the terms before CLOSING
DATE, and (ii) in general, performed all the actions pertinent with delivery of
the company's administration to the new boards of directors. Together with the
delivery of the SHARES and the documentation and books of the company, RURAL
shall pay the part of the PRICE that corresponds in accordance with the
stipulations set forth in Section 6.1, and shall perform the other actions
anticipated in Sections 6 and 8.2. In this transaction, the SELLERS grant
irrevocable agency in favor of Messrs. Horacio Artagaveytia and Jose Mateo
Campomar, who jointly or severally, are empowered to receive the PRICE (money,
promissory notes, certificates of deposit, etc.) acting for the SELLERS. As
there is an obligation to pay the price indivisibly, the SELLERS have no right
to demand its division in parts; therefore RURAL shall have complied with its
obligation if it delivered the PRICE to any of the representatives of the
SELLERS.
8.2. Pledge. In order to guarantee the compliance of the obligation of RURAL
under Section 6 (iii) of the present AGREEMENT, a pledge will be furnished on
all the shares of Semercor S.A. on CLOSING DATE. The pledged SHARES will be
deposited in the office of a notary public domiciled in Buenos Aires that the
parties will agree to appoint. The appointed notary public will receive from the
SELLERS in their capacity as pledgees, the irrevocable instructions: (a) to
release the pledged SHARES to RURAL when it shows the evidence of payment
granted by the SELLERS by means of which it proves the compliance of the
obligation enacted in Section 6 (iii) or, (b) to return the SHARES to the
SELLERS in case RURAL had not fulfilled the payment by August 18th, 1998. Under
no circumstances shall the SELLERS withdraw the SHARES from the office of the
notary public or initiate the foreclosure of their pledge before the
aforementioned date.
9. ASSERTIONS AND GUARANTEES
(A). ASSERTIONS AND GUARANTEES OF THE SELLERS
Both on the date of the present AGREEMENT and on CLOSING DATE the SELLERS assert
and guarantee to RURAL the following:
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9.1. Natural Persons: The SELLERS have full legal capacity to enter into this
AGREEMENT and there is no need to require marital consent except as otherwise
provided for herein.
9.2. Legal Persons: The persons underwriting this AGREEMENT on behalf of a
natural person are fully authorized by the COMPANIES to sign this AGREEMENT.
9.3 Contractual Incompatibilities: For this AGREEMENT to come into effect (i)
there is no need for the consent of third parties (except for marital consent as
provided for herein); (ii) it will not imply non-compliance or breach of any
statute or regulation, or of any other CONTRACT binding the COMPANIES.
9.4. Organization and By-Laws: The COMPANIES have been created as abiding by
law, and both the by-laws and the capital stock are duly registered in the
corresponding registers. The by-laws of each of the COMPANIES with their
corresponding modifications and proof of registration before the corresponding
registers are attached herewith as Annex B.
9.5. Capital Stock and Shares of the COMPANIES: Annex A attached herein, states
an itemization of the respective capital stocks of the COMPANIES, the number of
non-endorsable shares which represent them and the votes per share. The SHARES
are integrated totally in cash, not subject to additional supplies of capital.
There are neither dividends nor distributions of any other sort made or
committed by the COMPANIES nor paid distributions (or advanced payment of
dividends) subject to redemption. The COMPANIES have no authorized common stock
that have not been subscribed by the SELLERS.
9.6. Subsidiaries and Affiliates. Except as set forth in Annex C, the COMPANIES
do not have any subsidiary or affiliate COMPANIES, nor any other equity
investment in any equity. Except as set forth in Annex D the SELLERS have no
equity investment in any subsidiary company that transact business with any of
the COMPANIES. For the purpose of this Section, the term "subsidiary" shall mean
all
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entities in which SELLERS are either officers or directors, or in which SELLERS,
directly or indirectly, own or control ten percent (10%) or more of the equity
securities and votes of the entity.
9.7 Convertible Instruments: The COMPANIES have not issued nor have been
authorized the issuance of preferred shares (convertible or not into ordinary
shares), or other contracts (including stock options) or securities (including,
without limitation to, negotiable corporate bonds) convertible into or
interchangeable for, or which give right to acquire or receive shares (preferred
or ordinary) from any of the COMPANIES.
9.8 SELLERS's Shares: The details contained in Annex A herewith, referring to
the SHARES are exact, true to fact and correct. Those SHARES are (i) issued
bearing the name of the SELLERS and registered to their name in the
Shareholders' Registry of the COMPANIES, and (ii) free of any type of
encumbrance, restriction or interlocutory measure. The SELLERS are not forbidden
to dispose of their property in any manner whatsoever.
9.9 Restrictions: None of the COMPANIES are subject to restrictions under
contract for the distribution of dividends, for the payment of interests or for
the distributions of any other type or for the redemption of their SHARES.
9.10 Corporate Books and Documents: Each of the COMPANIES keeps its books and
records according to Accounting Principles and to statutory regulations and
other rules in force in the Argentine Republic. Entries are accounted for by the
corresponding support documentation which is legally valid and sufficient and
which is filed with the head office of the COMPANIES.
9.11 Accounting Statements: Each of the BALANCE SHEETS, the INTERIM FINANCIAL
STATEMENTS and the REPORT (the "ACCOUNTING STATEMENT") as appropriate: (a) are
entered into the corresponding inventory and balance sheet which are duly signed
and sealed; (b) have been made according to statutory regulations and other
rules in force in the Argentine Republic, and according to Accounting
Principles, on the basis of accounting records; (c) have been approved by the
Board of Directors and by the auditing commissions, and by the duly held
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assembly meetings of the shareholders of the COMPANIES; and (d) present
together with their notes a true to fact table showing the complete financing
and economic situation and the results of the COMPANIES without omitting in any
manner whatsoever any relevant information pertinent to the assets and
activities of the COMPANIES. Without limiting in any way whatsoever the previous
declaration, the Accounting Statements have provided for and predicted in a
correct way, or contain evidence in their notes, in due compliance with the
Principles of Accounting, of all the information about the totality of
liabilities direct, contingent or eventual, existing on the date therein.
9.12 Relevant Conduct prior to CLOSING DATE. Up to CLOSING DATE, the SELLERS
guarantee: a) that none of the COMPANIES will suffer any increase in liabilities
of any nature whatsoever, and that they will not spend money or make payments of
any nature which, in both cases, (i) do not result from the normal line of
business, supported by transactions in normal market conditions between
independent parties, or (ii) that they may result from breach of statutory law
or from breach of CONTRACT; (b) that none of the COMPANIES has been affected in
any manner to produce a serious and negative effect on its assets and line of
business other than a mere reduction in the volume of a normal and ordinary
course of business of the COMPANIES; (c) With exception to those indicated in
Section 2, none of the COMPANIES has paid any dividends or made any
distributions of any sort in favor of their shareholders (direct or indirect)
and directors; (d) that none of the COMPANIES has experienced any essential
modification in the composition, configuration and legal situation of their
assets, property, plant and equipment or fixed assets, intangible assets,
trademarks, patents, investments and direct or indirect participation in the
shares of other companies as well as the fact that such assets are not subject
to rights of third parties, encumbrances or restrictions of any other type,
which may be substantially superior to those indicated in the Financial
Statements; (e) that none of the COMPANIES has performed any negotiations or
signed any contract or made any payment which will not come into the normal line
of business of the
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COMPANIES in relation to negotiations in normal market conditions between
independent parties and f) the financial condition of the COMPANIES shall not be
worse than that stated on the REPORT. The existence of any of the facts stated
in paragraphs a) to f) here above, will be considered as a nonfulfillment of the
SELLERS' obligations under this AGREEMENT.
9.13. Liquidity. None of the COMPANIES has suffered any significant reduction in
its working capital, (the difference resulting from the Current Assets minus the
Current Liabilities for the purposes herein) as stated in the BALANCE SHEETS or
in the INTERIM FINANCIAL STATEMENTS.
9.14. Lawsuits. With the exception to the facts stated in Annex E, none of the
COMPANIES is party to a lawsuit as defendant, investigated or in any other
character within the frame of judicial or administrative proceedings, whoever
may be the plaintiff or any other party initiating proceedings, whether it be
filed in a court of law or not and whatever the cause of the claim and whatever
the nature of the proceedings, whether they may be initiated in a short time or
whether acts or omissions have occurred that may give rise to such lawsuits.
9.15. Tax Duties. With exception to those indicated in Annex F, each of the
COMPANIES has fully complied with the tax obligations in the jurisdiction where
they have been incorporated or where they perform any of their activities
(including, without limitation to, the tax obligations derived of statutory
regulations in force in the Argentine Republic), whether it be before the
Internal Revenue Service or before the Provincial or Municipal Revenue Service,
or other foreign ones, including, without limitation to, the fulfillment of the
formal duties (including, without limitation to, the presentation of the
corresponding income tax returns) and the payment of the corresponding taxes,
all of this according to statutory law, there being no valid and sufficient
reasons for the said tax bureaus to object the manner in which any of the
COMPANIES has complied with their obligations concerning the payment of taxes or
the filing of Income tax returns.
<PAGE> 18
9.16. Labor Obligations and Social Security. With the exception of the
provisions in Annex G, the COMPANIES have complied with all their obligations
concerning labor law and social security, arising out of statutory regulations
and obligations they are subject to in the jurisdiction where the COMPANIES are
incorporated or where any of their activities are developed, including, without
limitation to: (i) the obligation to keep updated books and registers as abiding
by the aforementioned regulations; (ii) the payments made to all agents and
employees including, without limitation to, the payment of wages, salaries or
any other type of compensation to be paid in currency or in kind; (iii)
retentions made and the corresponding deposit into the pertinent accounts with
the agencies in charge; (iv) the payment made to the pertinent agencies of the
contributions to be paid by the employer and, (v) the compliance with the
pertinent regulations concerning retirement and pensions for old age and
workers' compensation in case of industrial accident or diseases or other risks
while at work. Except for the information contained in Annex G, none of the
COMPANIES: (i) has granted their personnel any benefits above those mandatory
according to statutory law and regulations concerning labor law and social
security, including, without limitation to insurance, pensions and retirement
schemes; (ii) is, in respect to any person whatsoever, subject to a situation
that might be considered fraud or breach of labor law and/or that may originate
joint liability; (iii) is in conflict with its personnel and that no reasonable
motives may exist to consider probable any type of forceful means and (iv) is
bound by collective bargaining agreements. There are no employees other than
those reflected in the BALANCE SHEETS, INTERIM FINANCIAL STATEMENTS and the
REPORT and that the compensation therein is precise.
9.17. Contracts. With the exception to the statements in Annex H, none of the
COMPANIES is at present bound by contracts, either formal or not, of the types
and with the characteristics indicated as follows: a) agreements with their
controlling, controlled or related companies, any of the Affiliates or with
their directors, managers or shareholders; b) agreements that have not been made
in the normal and ordinary course of business and in normal market conditions
between
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<PAGE> 19
independent parties; c) agreements (including, but without limitation to,
securities) that imply an obligation to pay for whatever concept (including,
without limitation to, the payment of loans, rents and royalties); d) agreements
for association or joint venture or temporary unions of companies or groups of
companies or agreements that may bind the companies to share their profits with
other persons; e) agency, distribution and licensing agreements; f) agreements
for the provision of supplies to any of the companies that have an indeterminant
duration or that might last longer than the presentation date of the INTERIM
FINANCIAL STATEMENTS; g) agreements to lease real estate property belonging to
the COMPANIES, and h) bails, guarantees and any other agreement or act that may
guarantee the payment of debts to third parties.
9.18. Insurance. Annex I will indicate all the insurance coverage purchased by
the COMPANIES, indicating the underwriter, coverage term, risks covered and
premium. With exception to the contents of Annex I, the COMPANIES have purchased
all insurance (i) in compliance with the statutory regulations and other norms
applicable and (ii) those that according to the SELLERS are advisable in view of
the proper administration of the business. With the exception to what is
indicated in Annex I, all the insurance complies with statutory law and
applicable regulations, they cover all normal risks for companies similar to the
COMPANIES, they are valid and enforceable, are in force, manifesting that all
the premiums due have been paid.
9.19 Powers. Annex J will list all the powers granted by the COMPANIES which are
in force. The SELLERS guarantee that no other powers exist that are not included
in such Annex.
9.20 Assets Each of the COMPANIES has valid title in respect to all the assets
included in the REPORT and the INTERIM FINANCIAL STATEMENTS, with the exception
to that indicated in the notes to the financial statements. In case of assets,
property and rights (including, without limitation to, intellectual and
industrial property rights) that do not belong to the COMPANIES, but which the
COMPANIES are using or used in the past, have all the necessary authorizations
for their use, given by the respective owners or by legitimized persons having
no claims concerning those rights.
<PAGE> 20
9.21 Encumbrances and Restrictions. With exception to the contents in Annex K,
the personal property, real property and other property owned by the COMPANIES
are free of any type of encumbrance, restriction or limitation to ownership or
interlocutory measures.
9.22 Intellectual and Industrial Property. Annex L will list all the
intellectual and industrial property rights that are (i) property of the
COMPANIES and (ii) property of third parties which are used by the COMPANIES.
With the exception to the provisions of Annex L, the COMPANIES have not granted
licenses or authorizations for the use of intellectual and industrial property
rights which they own to third parties.
9.23 Compliance with the Law, the By-laws and the Agreements. Each of the
COMPANIES is doing business at present, and have been in business in the past in
accordance with the by-laws, the rules and regulations applicable to their
business and abiding by the contracts in force.
9.24 Licenses. Each of the COMPANIES has all the permits, licenses and
authorizations necessary to own their property and develop their activities and
they have paid all the taxes and rights necessary to that effect. None of the
permits, licenses or authorizations are subject to restrictions on transfer.
9.25 Bank Accounts. Annex M will list the name and location of each bank in
which the COMPANIES have current accounts, savings accounts, investments and
securities in safe deposit boxes. The full particulars of the above mentioned
current accounts, savings accounts, investments and securities in safe deposit
boxes are itemized in detail in Annex M.
9.26. Collections and Profits. (i) The collections received by the COMPANIES for
the 12-month period extending before closing of their respective fiscal years
1996, were not below forty-two million five hundred thousand pesos
($42.500.000), and (ii) the profits of the COMPANIES for the 12-month period
extending before closing of their respective fiscal years 1996, before deducting
directors' fees,
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amortization and income taxes, were not below six million pesos ($6.000.000).
9.27. Preciseness and Effect of the Declarations. The declarations and
guarantees effected in the present AGREEMENT (i) are considered renewed and
reaffirmed on the CLOSING DATE, without any need for a declaration or any other
type of additional act on the part of the SELLERS; (ii) the declarations and
guarantees are complete and correct to this date; (iii) they do not include
misrepresentation and they do not omit any information or circumstance that
might cause the declarations and guarantees herein to be considered incomplete,
false or misleading.
9.28. Annexes. Annexes E to M inclusive herein must be furnished to RURAL within
25 days of the date when the present AGREEMENT is signed.
(B). ASSERTIONS AND GUARANTEES OF RURAL
Both on the date of the present AGREEMENT and on CLOSING DATE, RURAL asserts and
guarantees to the SELLERS the following:
9.29. Legal Persons. The person underwriting this AGREEMENT on behalf or RURAL,
is fully authorized by the COMPANIES to sign this AGREEMENT. Without detriment
to this, RURAL binds itself on CLOSING DATE to deliver to the SELLERS a power of
attorney containing the necessary authorizations to perform on its behalf the
juridical acts set forth in Sections 6 and 8 of the present AGREEMENT.
9.30. Contractual Incompatibilities. For this AGREEMENT to come into effect (i)
there is no need for the consent of third parties; (ii) it will not imply
non-compliance or breach of any statute or regulation, or of any other CONTRACT
binding RURAL.
9.31. Organization and By-Laws. RURAL has been created as abiding by law, and
both its by-laws and its capital stock are duly registered in the corresponding
registers.
9.32. Shares. RURL SHARES are integrated totally in cash and are not subject to
additional supplies of capital. There are neither
<PAGE> 22
dividends nor distributions of any other sort made or committed by RURAL, nor
paid distributions (or advanced payment of dividends) subject to redemption. The
above mentioned shares are neither subject to encumbrances nor rights of third
parties.
9.33. Compliance with the Law, the By-Laws and the Agreements. RURAL is doing
business at present and has been in business in the past in accordance with the
by-laws, the rules and regulations applicable to its business and abiding by the
contracts in force.
9.34. Licenses. RURAL has all the permits, licenses and authorizations necessary
to own its property and develop its activities and it has paid all the taxes and
rights necessary to that effect. None of the permits, licenses or authorizations
are subject to restrictions on transfer.
9.35. Neither RURAL nor any person acting on behalf of RURAL has paid or entered
into any commitment to pay any fee or commission to any broker, agent or
intermediary for or in relation to the transfer of RURL SHARES stipulated in the
present AGREEMENT, and any fee, cost or commission related to the above
mentioned transfer shall be paid by RURAL.
9.36. Preciseness and Effect of the Declarations. The declarations and
guarantees effected in the present AGREEMENT (i) are considered renewed and
reaffirmed on the CLOSING DATE, without any need for a declaration or any other
type of additional act on the part of RURAL; (ii) the declarations and
guarantees are complete and correct to this date; (iii) they do not include
misrepresentation and they do not omit any information or circumstance that
might cause the declarations and guarantees herein to be considered incomplete,
false or misleading.
10. BREACH (NON - COMPLIANCE)
19
<PAGE> 23
10.1. Non-compliance on the part of the SELLERS. Failing to transfer on the due
date the totality of the SHARES will be considered a serious breach on the part
of the SELLERS, with RURAL empowered to rescind this AGREEMENT or to sue for
performance, given verifiable notification to comply within fifteen days. In
case rescission was chosen, the SELLERS jointly and severally should pay RURAL
as compensation for damages the sum of two million five hundred thousand United
States dollars (U$S2.500.000). If claiming performance was decided, the SELLERS
agree to pay RURAL jointly and severally a penalty amounting to U$S1.000 (one
thousand United States dollars) for each day of delay in the delivery of the
SHARES.
10.2. In case that after CLOSING DATE and within one and one half years of
CLOSING DATE it was proved that: (i) one or more of the assertions and
guarantees specified in Section 9 were false, erroneous or inexact and that
misrepresentation, mistake or inaccuracy could not be completely remedied by the
SELLERS within 60 days of verifiable notification made by RURAL, or (ii) that
any of the BALANCE SHEETS, the REPORT or the INTERIM FINANCIAL STATEMENTS, did
not fully reflect an existing liability or that the liabilities listed were not
enough, and that according to the Generally Accepted Accounting Principles
(GAAP) they should have been recorded, or recorded for higher amounts, or that
they omitted to record provisions or that the provisions were not enough and
that according with GAAP they should have been recorded, or recorded for higher
amounts, (the circumstances described in sub-paragraphs (i) and (ii) herein
above as a whole are called the "INDEMNIFIABLE FACTS"), then the SELLERS should
compensate RURAL because of INDEMNIFIABLE FACTS, a compensation which will be
determined by means of a final opinion on the part of any of the following
auditors that RURAL is entitled to choose: (a) Coopers & Lybrand; (b) Price
Waterhouse and (c) Ernst & Young. In the cases stated in paragraph (ii), the
amount of the compensation will be equivalent to the amount of the liability or
provision. The administrative or judicial labor claims that may eventually be
filed against the COMPANIES by medical doctors whose services are contracted as
independent professionals, will not be considered as a provision under this
Section and shall therefore not be considered INDEMNIFIABLE FACTS. However, the
actual filing of the above mentioned administrative or judicial claim of such
nature shall certainly constitute an INDEMNIFIABLE FACT under the rules of
<PAGE> 24
Sections 10.4 and 10.5 of the present AGREEMENT. In case the SELLERS should not
pay the amount of the compensation stipulated by the auditor within five days
after formal requirement, RURAL will have the right to deduct the amount from
the BALANCE OF PRICE.
10.3. The SELLERS will not compensate RURAL for INDEMNIFIABLE FACTS after
maturity of the Statute of Limitations applicable to the INDEMNIFIABLE FACT, in
case maturity was due before one and one half years from CLOSING DATE.
10.4. The lawsuits, claims or proceedings that third parties may have filed or
initiated against the COMPANIES prior to CLOSING DATE -for which there was no
contingency in the BALANCE SHEETS or the INTERIM FINANCIAL STATEMENTS, or in
case the contingency was not enough-, will constitute INDEMNIFIABLE FACTS
according to Section 10.2 of the present AGREEMENT. In such case the SELLERS
will have the right to appoint, at their own cost, the lawyer that shall defend
the COMPANIES, to which effect the COMPANIES shall grant said lawyer the
necessary powers and supply the information available. This right granted to the
SELLERS shall be exercised by means of verifiable notice addressed to RURAL
within five days of receiving proper notice from RURAL informing the SELLERS of
the existence of an INDEMNIFIABLE FACT that emerges from the filing of the
administrative or judicial claim. As long as the SELLERS exercise this right,
the COMPANIES will not accept any claim or settlement, and will not consent any
appealable contrary judgment without the previous written consent of the
SELLERS. The SELLERS must use good faith and best effort to reasonably settle
claims as quickly as possible. Without the previous consent of RURAL, the lawyer
appointed by the SELLERS, will not accept any claim or settlement when: (i) its
amount involves a higher amount than the amount withheld by RURAL as
compensation for INDEMNIFIABLE FACT or (ii) it will have any effect whatsoever
in the future on any of the equity or on the line of business of the COMPANIES.
In case the SELLERS should not exercise this right, the COMPANIES might, at the
sole discretion of RURAL, accept or reject the claim, counterclaim the lawsuit
or proceeding or else accept the judgment, or compromise the lawsuit or
proceeding or
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<PAGE> 25
consent any appealable contrary judgment without the consent of the SELLERS and
without liberating the SELLERS of their obligation to compensate RURAL, as
abided by in the present AGREEMENT. If RURAL failed to notify or delayed the
notification provided for in this clause, to the extent to which the SELLERS
might be harmed, the SELLERS will be free from any liability for the claim,
judgment or proceeding whatsoever. In case a claim was presented and the court
dismissed it, the contingency will be liberated and therefore RURAL will return
to the SELLERS the amount of the contingency that was deducted from the BALANCE
OF PRICE.
10.5 The lawsuits or proceedings filed or initiated by third parties against any
of the COMPANIES as of CLOSING DATE -but based on facts, acts or omissions prior
to CLOSING DATE for which there was no contingency or provision in the BALANCE
SHEETS or in the INTERIM FINANCIAL STATEMENTS-, will constitute INDEMNIFIABLE
FACT. In such cases, RURAL will notify the SELLERS before half the term
established to start defense proceedings has elapsed or as soon as possible if
there were no term. The SELLERS will have the right to appoint, at their own
cost, the lawyer that shall defend the COMPANIES, to which effect the COMPANIES
shall grant said lawyer the necessary powers and supply the information
available. RURAL should be notified in writing by the SELLERS about the exercise
of said right, within 3 days after receiving the notification herein above. As
long as the SELLERS exercise this right, the COMPANIES will not accept any claim
or settlement nor consent any appealable contrary judgment without the previous
written consent of the SELLERS. The SELLERS must use good faith and best effort
to reasonably settle claims as quickly as possible. Without the previous consent
of RURAL, the lawyer appointed by the SELLERS will not accept any claim or
settlement when: (i) its amount involves a higher amount than the amount
withheld by RURAL as compensation for INDEMNIFIABLE FACT or (ii) it will have
any effect whatsoever in the future on any of the equity or on the line of
business of the COMPANIES. In case the SELLERS should not exercise this right,
the COMPANIES may, at the sole discretion of RURAL, accept or reject the claim,
counterclaim the lawsuit or proceeding or else accept the judgment, or
compromise the lawsuit or proceeding or consent any appealable contrary judgment
without the consent of the SELLERS and without liberating the SELLERS of their
obligation to compensate RURAL, as abided by in the present AGREEMENT. If RURAL
<PAGE> 26
failed to notify or delayed the notification provided for in this clause, to the
extent to which the SELLERS might be harmed, the SELLERS will be free from any
liability for the claim, judgment or proceeding whatsoever. In case a claim was
presented and the court dismissed it, the contingency will be liberated and
therefore RURAL will return to the SELLERS the amount of the contingency that
was deducted from the BALANCE OF PRICE.
10.6. The responsibility of the SELLERS as abided by the stipulations set forth
in any clause of the present CONTRACT shall terminate as of any claim which had
not been made within one and a half years after CLOSING DATE.
10.7. Non-compliance by RURAL. If RURAL defaults its obligation to pay the
PRICE, to deliver the promissory notes and certificate of deposit and furnish
the pledge on CLOSING DATE, it should pay the SELLERS a penalty amounting to
US$1.000 (one thousand United States dollars) per day. If the default on the
part of RURAL was produced in relation to the part of the PRICE identified under
Section 6 (iii) herein, or in relation to the BALANCE OF THE PRICE, RURAL shall
pay the SELLERS an interest charged for late payment of one per cent (1%)
monthly for overdue to be calculated upon the amount unpaid. The SELLERS might
send verifiable notice to RURAL demanding the payment of principal and interest,
being duly warned that if fulfillment did not occur within a 15 days' term after
receiving the notification (i) a legal claim to complete the performance of the
AGREEMENT might be presented or (ii) rescission of the agreement might be
decided, in which case RURAL should pay the SELLERS in lieu of compensation for
damages, the sum of two million five hundred thousand United States dollars
(U$S2.500.000).
11. PUBLIC INFORMATION
Each of the parties to this AGREEMENT agrees that, except for the fulfillment of
the provisions of applicable law and regulations and the public announcement
that RURAL must do when this AGREEMENT becomes effective, neither press
communications nor any other type of
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<PAGE> 27
public announcements or communications related to the performance of this
AGREEMENT will be made in any manner whatsoever, except those specifically
approved in advance by the parties herein.
12. BUSINESS ADDRESSES AND NOTIFICATIONS
To all legal effects arising out of the present AGREEMENT, the parties institute
their Business Addresses as listed below, at which all the notifications that
must be made shall be valid: (i) the SELLERS (either jointly or individually) at
Estrada 833, Acassuso, Provincia de Buenos Aires; and (ii) RURAL at Reconquista
336, 2nd Floor, Buenos Aires. Each notification should be made in writing and
should be personally delivered or sent by Registered Letter with return receipt
requested and any of the addresses herein before may be by changed giving prior
notification of said change of address as established herein above, being
understood that the new address shall be in the City of Buenos Aires. Fax copies
of each notification filed with RURAL, must be sent by SELLERS to: Mr. Mark
Liebner (Fax: 1-602-4813279); (ii) Mr. John B. Furman (Fax: 1-602-263-2900), and
Mr. Arturo Alonso Pena (fax: 394-7263). In turn, of all the notifications that
RURAL sends to SELLERS a verifiable notification shall be dispatched to Dr.
Guillermo Walter Klein, domiciled at Avenida Cordoba 883, 7th Floor, Buenos
Aires.
13. MISCELLANEOUS PROVISIONS
13.1. Effects of the AGREEMENT. Assignments. The provisions in this AGREEMENT
will extend both actively and passively to the parties and to their respective
successors and assignees. Except as provided for in Section 2, none of the
parties may assign this AGREEMENT, nor the rights included in it, without the
consent of the other party, which might be denied at discretion. The obligations
under this AGREEMENT shall not be assigned.
13.2. Costs and Expenses. Except as otherwise agreed in writing, each of the
parties will bear its own legal, accounting, tax costs and expenses, or any
other costs in relation with the preparation, negotiation, signature and
compliance of this AGREEMENT. It is forbidden for the COMPANIES to assume
responsibility for any type of fee or expense arising from entering into the
present CONTRACT.
<PAGE> 28
13.3. Content of the Agreement herein:. The AGREEMENT herein contains the
totality of the agreement between the parties in relation to the affairs that
constitute its objective, and replaces all the previous agreements, assertions
and understandings between the parties, whether they be oral or in writing.
13.4. Modifications and Waivers. Neither any Annex nor addition or modification
or amendment of this AGREEMENT will be binding unless it is in writing and
signed by the parties herewith. Except as provided for in this AGREEMENT, no
waiver will be binding unless it is granted in writing by the party against
which the waiver may have effect. No waiver of any of the provisions of this
AGREEMENT will be considered or will imply a waiver of any other provision,
whether it be similar or not. The omission or delay of any of the parties in the
exercise of any right, authority or privilege issuing out of the present
AGREEMENT will neither be construed as a waiver of the AGREEMENT nor of any
other individual or partial exercise of the AGREEMENT and it will not preclude
any other use or exercise of the AGREEMENT at a later date or the exercise of
any other right, authority or privilege.
13.5. Confidentiality of the Present AGREEMENT. Except contrary to statutory
provisions, the parties commit themselves not to divulge to third parties the
terms of this AGREEMENT until after CLOSING DATE and neither of the parties will
make any public declaration in relation to this AGREEMENT unless there is
approval by the other party.
13.6. Additional Guarantees. The parties will immediately take the necessary
measures and will sign the additional documents to ensure that the provisions,
objectives and spirit of this AGREEMENT will be complied with and put into full
effect.
13.7. Severability of the Clauses. If any clause or provision in this AGREEMENT
became invalid, illegal or might not be enforced because of statutory
regulations or public order, the remaining
25
<PAGE> 29
clauses and provisions in this AGREEMENT will nevertheless remain in full force
and effect and the invalid clause or provision which is either invalid, illegal
or unenforceable will be modified by mutual agreement by the parties as it may
be necessary to adjust it to applicable law or to public order and to implement
as fully as possible the original intention of the parties.
13.8. Marital Consent. Mrs. Maria Isabel Mutio Cerdeiras, Mrs. Gabriela Renata
Peirano Allende, Mrs. Victoria Diaz Solsona, Mrs. Cecile Ferrere Turcatti, Mrs.
Ana Maria Saralegui Silva, Mrs. Celia De Leon and Mrs. Monica Beatriz Molina
subscribe the present AGREEMENT in proof of their conformity for the sale of
SHARES belonging to their respective spouses and they declare that said
conformity will not be revoked and will be understood as in force on the DATE OF
EXECUTION of this AGREEMENT without any need for any other additional
declaration on their part.
13.9. Governing Law. This AGREEMENT is a commercial agreement and will be
governed by the laws of the Argentine Republic and construed according to them.
13.10. Resolution of Controversies. Any controversy that occurs between the
parties in relation to this AGREEMENT, its existence, validity, qualification,
construction, reach, compliance or rescission, will be definitely resolved by
the Court of the General Arbitrate Tribunal of the Commercial Stock Exchange of
Buenos Aires in accordance with statutory regulations for the arbitration
according to law that the parties know and accept. The party that failed to
comply with the necessary formalities to render this arbitral agreement valid
and in full force should pay the other party a non redeemable penalty, amounting
to ten thousand United States dollars (U$S10.000) per day. The same penalty
shall be applied to the party that failed to comply with the arbitral award
which will be final and binding.
13.11. Interpretation of this AGREEMENT. In this AGREEMENT: (i) the titles to
Sections and clauses are included for better reference only and will be ignored
in case of construction of the AGREEMENT; (ii) each accounting term which has
not been defined in any other manner will have the meaning given by the
Principles of Accountancy;
<PAGE> 30
(iii) if the context so requires, words in the singular form include the plural
and vice versa, and words in the masculine or neuter gender include the
masculine, the feminine and the neuter; (iv) except if provided for otherwise,
all the references to Annexes are references to Annexes in this AGREEMENT
herewith (each of the Annexes will be considered an integral part of this
AGREEMENT), and (v) all the references to Sections or clauses are references to
Sections or clauses in this AGREEMENT.
13.12. Restraint of Trade Applied to the Sellers. The SELLERS, with the
exception of Messrs. Gervasio Reyes and Arturo Delmiro Marfetan, are bound for
the term of five years to be counted as of CLOSING DATE, and within the
territory of the cities of Cordoba, Tucuman and Rosario, to abstain from
performing activities that might be considered to be in competition with the
principal activity of the COMPANIES, consisting in the provision of medical
emergency services through ambulances especially prepared to that effect,
whether individually or through incorporation of companies or by means of making
contracts with third parties. In case of breach of the obligation of restraint
of trade on the part of: (i) sellers Artagaveytia and Campomar exclusively
commit themselves to pay RURAL for an only time a fine amounting to ten million
United States dollars (u$s10.000.000). In the assumption of the above mentioned
(i) the other sellers will have no liability whatsoever; or (ii) sellers
Fluerquin, Mezzera and Ribeiro, each one of them and only because of their own
non compliance, commit themselves to pay jointly, a fine of one million United
States dollars (u$s1.000.000). In the assumption of the above mentioned (ii)
Messrs. Artagaveytia and Campomar will have no liability whatsoever. As regards
the rest of the territory of the Argentine Republic, the restraint of trade will
last for two years as of CLOSING DATE, and the noncompliance of said restraint
will imply (i) in the case of Messrs. Artagaveytia and Campomar a joint and
several fine of two million United States dollars (u$s2.000.000) and (ii) a
joint fine of one million United States dollars (u$s1.000.000) in the case of
the three other sellers included under this clause. The activities of rendering
of medical and paramedical services in private hospitals that sellers Horacio
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<PAGE> 31
Artagaveytia and Jose Mateo Campomar indirectly perform through GEA S.A. are not
included within the reach of the present Section of restraint of trade. However,
if GEA S.A. hired the services rendered by the "ECCO" group through the
COMPANIES with third parties other than the COMPANIES, shall be considered as a
breach on the part of sellers Artagaveytia and Campomar of their obligation of
restraint of trade under the present Section. RURAL, in turn, through the share
control that it will exert on the COMPANIES, commits itself to have said
COMPANIES render their services to GEA S.A. under normal market conditions.
13.13. Restraint of Trade applied to RURAL. In case the present CONTRACT was not
executed because of non compliance with the suspensive conditions or rescission
due to the negligence of RURAL, RURAL commits itself, within the territory of
the cities of Cordoba, Rosario and Tucuman, for the term of five years as of the
date on which RURAL had informed the SELLERS its lack of interest in making the
acquisition because of non compliance of the suspensive conditions, not to
compete with the activities of the COMPANIES defined in Section 13.12 here
above, whether individually or through the incorporation of companies or
contracts with their parties. In case of non compliance, RURAL shall pay the
SELLERS a fine of ten million United States dollars (u$s10.000.000).
13.14. Exclusivity. The SELLERS commit themselves not to reveal to third parties
other than RURAL or its auditor any information related to the SHARES or the
assets or the business of the COMPANIES. Until RURAL sends notification to the
SELLERS informing them that as a consequence of non compliance with SUSPENSIVE
CONDITIONS it will not purchase the SHARES, the SELLERS bind themselves not to
negotiate with third parties the sale of the SHARES or of the assets of the
COMPANIES.
13.15. Nonsolicitation. The SELLERS commit themselves, for a two year term after
CLOSING DATE, not to hire the services of persons that until that date are or
have been employed by the COMPANIES. In case of breach of this duty, they should
pay RURAL jointly and severely a fine amounting to one million United States
dollars (u$s1.000.000).
<PAGE> 32
Without detriment to the calculation of certain terms in this AGREEMENT as of
today, the present AGREEMENT will become effective on January 21st, 1998. Five
identical copies of this AGREEMENT of the same tenor and to a single effect are
signed in Montevideo, Republica Oriental del Uruguay, on January 16th, 1998.
29
<PAGE> 33
Complementary Agreement
This agreement (hereinafter referred to as the "Complementary Agreement") is
entered into on the 26th day of the month of March, 1998 by and between Rural /
Metro Corporation, a corporation incorporated under the laws of the State of
Delaware, United States of America, domiciled at 8401 East Indian School Road,
Scottsdale, Arizona, United States of America, hereby represented by Mr. Mark
Liebner, hereinafter referred to as "RURAL", party of the first part, and
Messrs. (i) Horacio Artagaveytia; (ii) Jose Mateo Campomar; (iii) Alberto
Fluerquin; (iv) Carlos Mezzera; (v) Renato Ribeiro; (vi) Gervasio Reyes; and
(viii) Carlos Alberto Delmiro Marfetan (hereinafter jointly referred to as
the "SELLERS"), parties of the second part. RURAL and the SELLERS shall be
hereinafter jointly referred to as the PARTIES.
WHEREAS:
On January 16, 1998 RURAL and the SELLERS entered into a Stock Purchase
Agreement (hereinafter referred to as the "Agreement") pursuant to which,
subject to the fulfillment of the conditions precedent set forth in Section 4
thereof, RURAL agreed to buy and the SELLERS agreed to sell one hundred per cent
(100%) of the capital and voting stock of Peimu S.A., Recor S.A., Marlon S.A.
and Semercor S.A. directly or indirectly owned by the SELLERS (hereinafter
referred to as the STOCK);
RURAL agreed to the fulfillment of the conditions precedent set forth
for the SELLERS in Section 4 of the Agreement and requested the SELLERS to grant
an extension of the CLOSING DATE set forth in Section 7 of the Agreement until
March 26, 1998, to which the SELLERS agreed;
Likewise, RURAL has requested that the SELLERS establish an alternative
payment procedure to the one set forth in Section 6.1 of the Agreement, by
virtue of which RURAL shall have the right to make a choice on the CLOSING DATE
(pursuant to the definition of this term in the Agreement), to which the SELLERS
have agreed subject to the terms and conditions stipulated herein.
The PARTIES declare that the Agreement has been fulfilled and further
declare that it is their intention to modify said Agreement so as to include the
hereinabove mentioned alternative payment procedure and to carry out all other
necessary adjustments that said modification may require;
Therefore, the PARTIES agree as follows:
SECTION ONE: Notwithstanding the modifications provided for herein, the PARTIES
fully ratify the terms and conditions of the Agreement (including those relating
to applicable law and elected domiciles). Likewise, notwithstanding any written
disposition to the contrary, the terms and definitions herein shall bear the
meaning stipulated in the Agreement.
SECTION TWO: The PARTIES agree that, on CLOSING DATE, RURAL shall have the
option to pay the STOCK PRICE to the SELLERS either pursuant to the terms and
conditions set forth in Section 6.1. of the Agreement, or, at the sole
discretion of RURAL, pursuant to the conditions stipulated in this Complementary
Agreement. To such effect, it shall be considered that RURAL has irrevocably
decided to pay the PRICE pursuant to the conditions stipulated herein, by means
of the performance on the CLOSING DATE, of the acts mentioned in SECTION THREE.
<PAGE> 34
SECTION THREE: Pursuant to what is set forth in SECTION TWO of this
Complementary Agreement, on the CLOSING DATE RURAL shall have the right to
decide to pay the STOCK PRICE pursuant to the following terms and conditions:
twenty - five million U.S. dollars (U$S 25,000,000) on the CLOSING DATE in cash
or in a reasonable way the SELLERS may determine; five million U.S. dollars (U$S
5,000,000) by the transfer of a number of RURAL/Metro Corporation shares of
common stock with the same characteristics and rights than the ones quoted on
the Nasdaq National Market subject to Rule 145 of the Security Exchange
Commission of the United States of America (SEC) (hereinafter referred to as
"the RURL STOCK") resulting from dividing the amount of five million U.S.
dollars (U$S 5,000,000) by the "Average RURAL / Metro PRICE". The "Average
RURAL/Metro PRICE" shall stand for the average closing prices of the RURL STOCK
published in the "Nasdaq National Market" during the five consecutive working
days prior to the third working day prior to the CLOSING DATE. The RURL STOCK
shall be duly registered with the SEC for the purpose of its issuance to the
SELLERS pursuant to the provisions of the "Securities Act of 1933" and its
amendments. The RURL STOCK transferred to the SELLERS by virtue hereof shall be
fully paid in, and shall not be subject to any kind of additional payment of
premiums or others; likewise, they shall be free from all and any liens, so that
since their delivery to the SELLERS, SELLERS shall have full disposition
thereof, subject to Rule 145 of the SEC, and they shall be entitled to sell,
assign or transfer them pursuant to any title, as well as to impose any lien on
them.
As price balance (hereinafter referred to as the "PRICE BALANCE"), RURAL shall
owe the sum of five million U.S. dollars (U$S 5,000,000), which will be subject
to Section 6.2 of the Agreement and to what is established in Annex II hereto.
Such PRICE BALANCE shall accrue an annual interest amounting to 8% (eight per
cent) as from the CLOSING DATE for the term of one year. Payment of the PRICE
BALANCE shall be made as follows: RURAL shall transfer to the SELLERS on the
CLOSING DATE, as partial payment, RURL STOCK in the same amount and with the
same characteristics as the ones RURAL is bound to transfer pursuant to what is
set forth in paragraph (ii) hereinabove. The SELLERS irrevocably convene not to
sell, dispose of, transfer, assign or in any way impose a lien on the RURL STOCK
until 120 (one hundred and twenty) days from the CLOSING DATE have elapsed. Once
this term has elapsed, the RURL STOCK delivered pursuant to this paragraph may
be freely transferred by the SELLERS in the U.S. stock market. During this
period and until its transfer, the hereinabove mentioned RURL STOCK shall be
deposited with Salomon Smith Barney. Notwithstanding what has previously been
stipulated, the SELLERS are bound to irrevocably authorize RURAL pursuant to the
terms of the sample form attached hereto as Schedule III (called "Security
Account Limited Discretionary Authorization") so that, pursuant to the deposit
agreement entered into with Salomon Smith Barney, RURAL may order said company
to transfer the RURL STOCK deposited by virtue of this paragraph, to which the
SELLERS hereby agree. The SELLERS shall be entitled to request its sale at any
moment, once the term of one hundred and twenty days herein before mentioned has
elapsed. The SELLERS agree to carry out said sale through Salomon Smith Barney,
which shall collect the proceeds of the sale on behalf of the SELLERS and shall
keep them until it receives the joint instruction hereinafter mentioned,
pursuant to the sample form attached hereto as Schedule IV (called "Standing
Letter of Authorization to Transfer Funds"). The PARTIES agree that once the
RURL STOCK mentioned herein has been totally or partially sold, the sale
proceeds may only be transferred by Salomon Smith Barney to a trust account in
the Republic of Argentina that shall bear the characteristics set forth in
Schedule II of these presents (which is a part hereof), the opening of which
shall be requested by the PARTIES in order that said amount be kept therein,
said account being unavailable for a term of one year as from the CLOSING DATE,
to the effects stipulated in Section 6.2 of the Agreement; once this term has
<PAGE> 35
elapsed, the procedure shall be the one established in Schedule II. To such end,
the PARTIES agree to give Salomon Smith Barney said order of transfer within the
seventy - two hours following the sale of all or part of said RURL STOCK. In
such case, the signature of any one Mr. Horacio Artagaveytia or of Mr.
Jose Mateo Campomar shall suffice. The PRICE BALANCE pending payment up to
the amount of five million U.S. dollars (U$S 5,000,000) plus an 8% (eight per
cent) interest shall be canceled by RURAL pursuant to what set forth in Schedule
I hereof.
The delivery of the RURL STOCK mentioned in paragraphs (ii) and (iii) shall be
made as follows: on the CLOSING DATE, RURAL shall deliver to the SELLERS, to
their satisfaction, the document evidencing the transfer of ownership of said
RURL STOCK to the SELLERS by means of a deposit in their names with Salomon
Smith Barney in the following accounts: (a) the RURL STOCK mentioned in
paragraph (ii) in account No. xxx-xxxxx-x-x-xxx; and (b) the RURL STOCK
mentioned in paragraph (iii) in account No. xxx-xxxxx-x-x-xxx. The delivery of
said certificate of deposit shall be deemed as the transfer of said RURL STOCK.
SECTION FOUR: Given the fulfillment of the Agreement and the modification of
same as agreed upon herein, the PARTIES make the following modifications and/or
clarifications to the Agreement:
The stipulations of Section 4, subsection (j) of the Agreement is hereby
rendered ineffective.
Should RURAL choose the payment procedure stipulated in SECTIONS TWO and THREE
hereof, the provisions of Sections 6.3. and 8.2 of the Agreement shall not
apply.
RURAL and the SELLERS ratify the full application of their declarations and
guaranties regarding the signature hereof as well as regarding the RURL STOCK
transferred pursuant to what is stipulated herein.
Should RURAL choose the payment procedure stipulated herein, the procedure set
forth in Schedule II hereof shall replace what is stipulated in the last
sentence of Section 10.2 of the Agreement which provides as follows: "Should the
SELLERS fail to pay the amount of the compensation indicated by the auditor
within the following five days counted as from the date they were formally
required to, RURAL shall be entitled to deduct such amount from the PRICE
BALANCE".
Section 10.7, as well as other sections of the Agreement not expressly modified
herein, shall apply should RURAL fail to fulfill any of its obligations,
including those which may result from choosing the payment procedure stipulated
in this Complementary Agreement.
SECTION FIVE: Any fee owed to Salomon Smith Barney regarding the deposit and
transfer of the RURL STOCK described in paragraph (iii) of Section THREE of this
Complementary Agreement, shall be borne exclusively by RURAL, which shall
release the SELLERS from any loss or delay deriving from said company taking
part in the transfer and payment procedure.
IN WITNESS WHEREOF, 5 copies of the same tenor and to the same effects are
signed in Buenos Aires, Argentina.
Schedule I
Payment of the PRICE BALANCE
Pursuant to what is set forth in paragraph (iii) of SECTION THREE of the
Complementary Agreement, the PRICE BALANCE owed by RURAL shall amount to the sum
<PAGE> 36
of five million U.S. Dollars (U$S 5,000,000) plus an annual interest of 8%
(eight per cent). RURAL shall deliver the RURL STOCK mentioned in said section
and paragraph as advance payment, which shall be subject to what is thereby
stated. Once the RURL STOCK is sold, the resulting amount shall be transferred
to the "Trust Account" (as defined in Schedule II hereto) stipulated in the same
section. Thus, should the amount transferred and credited to the herein before
mentioned Trust Account on the fifth day after the expiration of the term of 120
(one hundred and twenty) days counted as from the CLOSING DATE set forth in
paragraph (iii) of Section THREE of the Complementary Agreement be less than
five million U.S. Dollars (U$S 5,000,000), RURAL shall, within the following
twenty working days, pay in the difference by means of a transfer to or a
deposit in said Trust Account so that the total credited balance amounts to said
sum. Should the amount be higher than the hereinbefore mentioned sum, the
surplus shall be deemed as payment on account of the interest accrued and to be
accrued for the PRICE BALANCE, up to a maximum amount of four hundred thousand
U.S. Dollars (U$S 400,000). The remaining surplus of the total amount of five
million four hundred thousand U.S. Dollars (U$S 5,400,000) shall be reimbursed
to RURAL, or placed for its disposal, within five working days after said
surplus occurs.
Schedule II
Pursuant to what is set forth in paragraph (iii) of Section THREE of the
Complementary Agreement, the PARTIES shall request the opening of a Trust
Account (hereinafter referred to as the "Trust Account") in the Republic of
Argentina and they shall be subject to the following terms and conditions:
1-Both PARTIES shall request the opening of the Trust Account within the term of
30 (thirty) days of the CLOSING DATE, with a first-line bank in the city of
Buenos Aires, (hereinafter referred to as the "Trustee").
2-To that effect, the SELLERS shall sign, in their capacity as trustors, a trust
agreement together with the trustee so that the latter opens, jointly in the
name of the SELLERS and RURAL in their capacity as Beneficiaries, an account in
U.S. Dollars where the amount resulting from the sale of RURL STOCK as well as
any other amount in cash as may be necessary for purposes of complying with the
payment of the BALANCE PRICE, pursuant to paragraph (iii), Section THREE of the
Complementary Agreement and its Schedule I, shall be deposited.
3-The Beneficiaries of the Trust shall be the SELLERS and RURAL, each one
according to what it is owed to them at the expiration of the term agreed upon
in the following paragraph 5 pursuant to the hereinafter mentioned settlement.
4-The order of transfer by the PARTIES to Salomon Smith Barney stipulated in
paragraph (iii), Section THREE shall only instruct said company to transfer the
amount resulting from the sale of RURL STOCK therein mentioned to the Trust
Account.
5-The funds credited in the Trust Account shall remain deposited therein for the
term of a year as from the CLOSING DATE; during that period, the funds shall not
be available to the PARTIES except as otherwise agreed upon in writing by them.
6-The agreement with the Trustee shall state that the funds deposited in the
Trust Account accrue an interest according to the market conditions. Said
interest shall be considered payment on account of the interest of the PRICE
BALANCE stipulated in paragraph (iii), Section THREE of the Complementary
Agreement. The PARTIES undertake to instruct the Trustee to invest the funds
deposited in the Trust Account in fixed-term deposits or similar type
investments.
7-Once the term set forth in paragraph 5 has elapsed, the procedure shall be the
following:
The SELLERS and RURAL shall agree on the drawing up of a settlement establishing
each of the INDEMNIFIABLE EVENTS (according to its definition in Section 10.2 of
the Agreement). The amounts that the SELLERS shall reimburse to RURAL pursuant
<PAGE> 37
to the agreement, due to the existence of INDEMNIFIABLE EVENTS which were paid
to third parties by RURAL, shall accrue in favor of RURAL an interest amounting
to 8% as from the date in which payment has been made by RURAL up to the date of
the settlement of the INDEMNIFIABLE EVENTS stipulated in this Schedule.
Likewise, the addition of all the stated events shall be made, so that the total
amount corresponding to the INDEMNIFIABLE EVENTS appears clearly from the
settlement.
In case of controversy concerning one or more INDEMNIFIABLE EVENTS (regarding
pertinence, occurrence, amount or others), hereinafter referred to as the
CONTROVERTED INDEMNIFIABLE EVENTS, the settlement shall clearly state the total
amount paid by RURAL on account of them, which shall include the 8% interest as
from the date of payment, or, if applicable, the amount resulting from a
reasonable estimation made on the basis of generally accepted accounting
principles in the Argentine Republic.
Both PARTIES shall agree on the drawing up of the settlement, and shall submit
it to the trustee within the first five working days after the expiration of the
terms referred to in paragraph 5.
Within the following seventy two hours after the submission of the settlement or
other reasonably short term which may be agreed upon with the trustee, the
latter shall proceed as follows: a) he shall deliver, or place for its disposal,
the total amount corresponding to INDEMNIFIABLE EVENTS herein before mentioned
in paragraph (i), RURAL being the beneficiary to that extent; as RURAL may
reasonably instruct; b) he shall keep in his capacity as trustee (not being
available to the PARTIES) the total amount of the CONTROVERTED INDEMNIFIABLE
EVENTS (hereinafter referred to "the AMOUNT WITHHELD") which shall accrue an
interest rate according to the market conditions. As far as the rest of the
agreement is concerned, he shall be subject to what set forth in paragraph (v);
c) he shall deliver, or place for its disposal, the total BALANCE which results
from subtracting the total amount corresponding to INDEMNIFIABLE EVENTS
mentioned in paragraph (i), plus the AMOUNT WITHHELD from the total amount
deposited in the Trust Account, as the SELLERS may reasonably instruct; (to that
effect, such instruction may be given or signed either Mr. Horacio Artagaveytia
or by Mr. Jose Mateo Campomar).
Regarding the CONTROVERTED INDEMNIFIABLE EVENTS, the PARTIES shall submit the
issue to the auditing companies mentioned in Section 10.2 of the Agreement, such
that the report of the auditing company selected by RURAL shall not be subject
to appeal. The PARTIES shall instruct the Trustee to comply with the report of
the auditing company selected by RURAL, which shall submit written evidence
within 40 (forty) days after the expiration of the term stated in paragraph 5,
which, for being unappealable, shall be conformed by both PARTIES and submitted
to the Trustee within seventy - two hours after its submission. Such evidence
shall clearly state which part of the AMOUNT WITHHELD corresponds to be paid to
RURAL on account of INDEMNIFIABLE EVENTS. Thus, within seventy - two hours after
written evidence has been submitted (or other reasonably short term which may be
agreed upon with the Trustee), the Trustee shall allot the total sum of the
AMOUNT WITHHELD as follows: a) he shall deliver, or place for its disposal, as
RURAL may reasonably instruct, the total amount corresponding to INDEMNIFIABLE
EVENTS acknowledged as such by the auditing company, RURAL being a beneficiary
to that extent; b) he shall deliver, or place for its disposal, the total
balance resulting from subtracting the stated amount in (a) from the AMOUNT
WITHHELD to the SELLERS as they may reasonably instruct (and to that effect,
such instruction may be given or signed either by Mr. Horacio Artagaveytia or by
Mr. Jose Mateo Campomar).
The fees of the Trustee as well as other expenses corresponding to the opening
of the Trust Account and its administration shall be borne by RURAL. If once the
report of the auditing company mentioned in Section (v) above has been issued,
and in spite of the fact that said report is not subject to question,
<PAGE> 38
the SELLERS would object to same or in any other way obstruct its presentation
within the term therein specified, then RURAL shall be entitled to require the
SELLERS to reimburse 50% of the fees and expenses mentioned in this Section
(vi).
