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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-87404
PRIMECO INC.
Texas 74-1951774
- ------------------------------- -----------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16225 Park Ten Place, Suite 200
Houston, Texas 77084
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(Address of principal executive offices)
(713) 578-5600
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(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- ------
As of August 13, 1996, 5,000 shares of Common Stock of Primeco Inc. and 5,000
shares of Series A Cumulative Convertible Preferred Stock are outstanding.
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PRIMECO INC.
<TABLE>
<CAPTION>
Part I. Financial Information Page
<S> <C>
Item 1. Financial Statements (unaudited):
Condensed Balance Sheet
June 30, 1996 and December 31, 1995 3
Condensed Statement of Operations
For the three month and six month periods
ended June 30, 1996 and 1995 4
Condensed Statement of Cash Flows
For the six months ended June 30, 1996 and 1995 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 5. Rider 1 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 16
</TABLE>
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PRIMECO INC.
CONDENSED BALANCE SHEET
(In Thousands Except for Share Amounts)
(unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
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<S> <C> <C>
A S S E T S
Cash and cash equivalents ....................................... $ 104 $ 174
Accounts receivable, net ........................................ 46,305 36,467
Inventories ..................................................... 23,376 17,399
Rental equipment, net ........................................... 246,412 181,798
Property, plant and equipment, net .............................. 28,929 22,334
Cost in excess of fair value of net assets acquired, net ........ 130,301 115,084
Other assets .................................................... 17,556 17,682
---------- ------------
Total assets .......................................... $ 492,983 $ 390,938
========== ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable ................................................ $ 8,330 $ 14,968
Accrued expenses ................................................ 28,971 27,737
Debt ............................................................ 334,000 255,000
Deferred income taxes ........................................... 30,446 21,897
Other liabilities ............................................... 9,041 1,552
Redeemable convertible preferred stock $.01 par value,
$2,000 per share liquidation value, 5,000 shares
authorized and outstanding ............................ 9,202 9,150
Common shareholder's equity:
Common stock, $.01 par value, 10,000 shares
authorized and 5,000 shares outstanding ............... 1 1
Additional paid-in capital ...................................... 76,936 68,336
Accumulated deficit ............................................. (3,944) (7,703)
---------- ------------
Common shareholder's equity ........................... 72,993 60,634
---------- ------------
Total liabilities and shareholder's equity ............ $ 492,983 $ 390,938
========== ============
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements.
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PRIMECO INC.
CONDENSED STATEMENT OF OPERATIONS
(In Thousands)
(unaudited)
<TABLE>
<CAPTION>
For The For The
Three Months Ended Six Months Ended
June 30 June 30
----------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rental revenue ........................................ $ 47,217 $ 33,634 $ 87,678 $ 64,198
New equipment sales ................................... 10,806 8,374 21,303 16,316
Rental equipment sales ................................ 10,243 5,668 17,148 12,303
Parts and merchandise sales ........................... 9,604 8,349 18,730 15,957
Service and other income .............................. 4,656 3,446 8,597 6,586
---------- ---------- ---------- ----------
82,526 59,471 153,456 115,360
---------- ---------- ---------- ----------
Cost of Sales:
Depreciation - rental equipment ....................... 10,193 8,006 18,097 15,808
Cost of new equipment sales ........................... 9,064 6,992 17,867 13,684
Cost of rental equipment sales, net of
accumulated depreciation ........................... 7,611 5,661 14,215 12,219
Cost of parts and merchandise sales ................... 6,904 6,370 13,622 12,176
Direct operating expenses ............................. 21,182 14,881 38,723 29,068
---------- ---------- ---------- ----------
54,954 41,910 102,524 82,955
---------- ---------- ---------- ----------
Gross profit .......................................... 27,572 17,561 50,932 32,405
---------- ---------- ---------- ----------
Selling, general and administrative expenses .................... 12,344 8,657 23,159 17,259
Depreciation and amortization:
Noncompete agreements ................................. 0 375 0 750
Cost in excess of fair value of assets acquired ....... 844 739 1,618 1,476
Property, plant and equipment ......................... 870 580 1,557 1,154
Interest expense, net of interest income ........................ 9,385 7,344 17,474 14,049
---------- ---------- ---------- ----------
23,443 17,695 43,808 34,688
---------- ---------- ---------- ----------
Income(loss) before income taxes and extraordinary
item ............................................... 4,129 (134) 7,124 (2,283)
Income tax expense(benefit) ..................................... 1,914 195 3,365 (310)
---------- ---------- ---------- ----------
Net income(loss) before extraordinary item ............ 2,215 (329) 3,759 (1,973)
Extraordinary loss .............................................. 0 0 0 (1,268)
---------- ---------- ---------- ----------
Net income(loss) ................................................ 2,215 (329) 3,759 (3,241)
Dividend requirement and accretion on redeemable
preferred stock ....................................... 380 381 761 758
---------- ---------- ---------- ----------
Net income(loss) applicable to common shareholder ............... $ 1,835 $ (710) $ 2,998 $ (3,999)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements.
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PRIMECO INC.
CONDENSED STATEMENT OF CASH FLOWS
(In Thousands)
(unaudited)
<TABLE>
<CAPTION>
For The
Six Months Ended
June 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income(loss) ..................................................... $ 3,759 $ (3,241)
Adjustments to reconcile net (loss)income to net cash
provided by operating activities:
Depreciation and amortization ..................... 21,272 19,188
Deferred income tax provision ..................... 1,255 (310)
Net (gain)loss on sale of rental equipment and
property, plant and equipment .................. (2,568) 212
Extraordinary loss ................................ 0 1,268
Effect of changes in operating assets and liabilities,
net of effects from purchase of AHL Inc.:
Increase in accounts receivable ................... (3,962) (1,737)
Increase in inventories ........................... (2,628) (4,969)
(Increase)decrease in other assets ................ 481 (2,378)
Increase(decrease) in accounts payable, accrued
expense, and other liabilities ................. (2,909) 2,710
---------- ----------
Net cash provided by operating activities ......... 14,700 10,743
---------- ----------
INVESTING ACTIVITIES:
Additions to rental equipment .............................. (50,513) (47,978)
Additions to property, plant and equipment ................. (2,449) (1,230)
Payments of acquisition costs .............................. (105) (325)
Purchase of AHL Inc. net of cash acquired .................. (66,503) 0
Proceeds from sales of rental equipment .................... 17,045 12,210
Proceeds from disposal of property, plant and equipment .... 63 63
---------- ----------
Net cash used in investing activities ............. (102,462) (37,260)
---------- ----------
FINANCING ACTIVITIES:
Net (payments)proceeds from revolving line of credit ....... 79,500 (4,000)
Payment of Subordinated Loan Facility ...................... (500) (75,500)
Proceeds from issuance of Senior Subordinated Debt ......... 0 100,000
Proceeds from Capital Contribution ......................... 9,400 0
Payment of financing costs ................................. 0 (3,906)
Payment of Dividend on Preferred Stock ..................... (708) (637)
---------- ----------
Net cash provided by financing activities ......... 87,692 15,957
---------- ----------
Decrease in cash and cash equivalents ............. (70) (10,560)
Cash and cash equivalents at beginning of period .. 174 12,090
---------- ----------
Cash and cash equivalents at end of period ........ $ 104 $ 1,530
========== ==========
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements.
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PRIMECO INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying financial statements of Primeco Inc. ("Primeco") have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. During interim periods, Primeco follows the accounting
policies set forth in its Annual Report to Stockholders on Form 10-K filed with
the Securities and Exchange Commission. Users of financial information
produced for interim periods are encouraged to refer to the footnotes contained
in the Annual Report to Stockholders when reviewing interim financial results.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation of
Primeco's financial condition, operating results and cash flows for the interim
periods presented have been included. Operating results and cash flows for the
quarter are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996.
2. The Company
The financial statements are the accounts of Primeco, a wholly-owned
subsidiary of Prime Holding, Inc. ("Holdings"). On December 2, 1994, Holdings
acquired Primeco (the "Acquisition") from a subsidiary of Artemis S.A. through
Holdings' subsidiary Prime Acquisition Corp. ("PAC"). Immediately following
the completion of the Acquisition, PAC merged into Primeco, as a result of
which Primeco became a wholly-owned subsidiary of Holdings.
On February 26, 1996, Primeco acquired Vibroplant U.S., Inc. (known as
American Hi-Lift Corporation), a company specializing in renting and selling
aerial lift equipment. The purchase price of Vibroplant U.S., Inc. was cash of
approximately $66.5 million. The Acquisition was accounted for under the
purchase method of accounting; accordingly, the total purchase price was
allocated to net assets based on estimated fair values. The results of
Vibroplant U.S., Inc.'s operations have been included in the financial
statements commencing February 26, 1996. In conjunction with this transaction,
certain existing stockholders of Holdings invested in additional common equity
of Holdings. Holdings then made a capital contribution of approximately $9.4
million to Primeco. Primeco used these funds, as well as approximately $57
million borrowings under its Senior Credit Facility, to fund the transaction.
The purchase price was allocated as follows: Current Assets $14.2 million;
Rental Equipment $51.5 million; Other Assets $.5 million; Goodwill $16.3
million; Current Liabilities $9.4 million; Deferred Tax $6.6 million; Debt
$57.1 million and Additional Paid-in Capital $9.4 million.
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PRIMECO INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Continued)
The following unaudited pro forma statement of operations presents the
results of operations for the six month periods ended June 30, 1996 and 1995 as
though the controlling ownership of American Hi-Lift had been acquired on
January 1, 1995, and assumes that there were no other changes in the operations
of Primeco. The pro forma results are not necessarily indicative of the
financial results that might have occurred had the transaction included in the
pro forma statements actually taken place on January 1, 1995, or of future
results of operations.
<TABLE>
<CAPTION>
(in thousands)
Pro Forma For
Six Months Ended June
-----------------------
1996 1995
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<S> <C> <C>
Revenues .............................................. $ 162,340 $ 141,511
---------- ----------
Net income(loss) ...................................... 3,979 (2,097)
---------- ----------
Net income(loss) applicable to common shareholder ..... $ 3,218 $ (2,855)
========== ==========
</TABLE>
3. Debt
On March 6, 1995 Primeco issued $100,000,000 of 12.75% Senior Subordinated
Notes due March 1, 2005, the proceeds of which were used primarily to retire
the Subordinated Loan Facility acquired at the Acquisition. The write-off of
debt issuance costs related to the Subordinated Facility of $2,062,000, net of
income tax benefits of $794,000, has been reflected as an extraordinary loss on
the Statement of Operations. With the acquisition of American Hi-Lift in 1996,
Primeco increased its outstanding debt by approximately $57 million. Bank
borrowing, as of June 30, 1996, includes $123.5 million of Term Debt and $110.5
million of Revolving Debt.
Maturities of debt under the bank credit agreement and the Senior Subordinated
Notes are as follows as of June 30, 1996 (in thousands):
<TABLE>
<CAPTION>
Senior Subordinated
June 30, Bank Borrowing Notes
------- -------------- --------------------
<S> <C> <C>
1996 ........................... $ 500 --
1997 ........................... 1,000 --
1998 ........................... 12,000 --
1999 ........................... 145,500 --
2000 and thereafter ............ 75,000 $100,000
-------- --------
$234,000 $100,000
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</TABLE>
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PRIMECO INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Continued)
4. Income Taxes
The differences between the statutory federal income tax rate on income
(loss) before income taxes and extraordinary item, and Primeco's effective
income tax rate relate primarily to the amortization of cost in excess of fair
value acquired. In connection with the Acquisition of Vibroplant U.S., Inc.
Primeco recorded an increase to deferred taxes of $6.6 million.
5. Subsequent Events
On July 29, 1996, pursuant to an Asset Purchase and Sale Agreement dated
as of May 13, 1996, as amended and supplemented by the Amendment and Supplement
to Asset Purchase and Sale Agreement, dated as of July 29, 1996 (together, the
"Purchase Agreement"), by and between Primeco and Alpine Equipment Rentals &
Supply Company, Inc., a Washington Corporation ("Alpine"), Primeco completed
the purchase of substantially all of the assets of Alpine
Primeco paid a purchase price of $11,015,000 for such assets, and also paid
$350,000 in respect of covenants not to compete for two senior executives of
Alpine. The amount of consideration paid by Primeco was determined by
arms-length negotiations with Alpine.
Alpine operated 6 rental locations in the State of Washington. Alpine,
which rented and sold a varied line of equipment to industrial and commercial
customers in its markets, had gross revenues of $10.8 million in the year ended
December 31, 1995. Primeco will continue to use the assets of Alpine in its
equipment rental and sales business.
Primeco used general working capital and borrowings under its revolving
credit facility, for which Chase Bank (formerly Chemical Bank) acts as agent,
to fund the transaction. Other than pursuant to the Purchase Agreement, none of
Primeco, its affiliates, officers, directors or associates of such officers or
directors has any material relationship with Alpine.
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<PAGE> 9
PRIMECO INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
Acquisition of American Hi-Lift Corporation
On February 26, 1996, Primeco acquired American Hi-Lift Corporation, a
company specializing in renting and selling aerial lift equipment. The purchase
price of American Hi-Lift Corporation was cash of approximately $66.5 million.
The Acquisition was accounted for under the purchase method of accounting;
accordingly, the financial statements as of and for the three months and six
months ended June 30, 1996, are not comparable to the prior period (see Footnote
2 of the financial statements included in this Form 10-Q and Form 8-K filed with
the Securities and Exchange Commission on March 12, 1996 for a complete
discussion of this Acquisition).
Results of Operations
This discussion and analysis compares the results of operations of Primeco
during the current three month and six month periods with the operating results
of operations during the corresponding period in the prior year.
Three Month Period Ended June 30, 1996 Compared With The Three Month Period
Ended June 30, 1995
Total Revenues for the three months ended June 30, 1996 increased 38.8% to
$82.5 million, when compared to revenues of $59.5 million for the same period
for the prior year. This increase is primarily a result of higher rental
revenues, an increase in the sale of new equipment, parts and merchandise and
the American Hi-Lift Acquisition.
Rental Revenue for the three months ended June 30, 1996 increased 40.4% to
$47.2 million, when compared with the corresponding prior period rental
revenues of $33.6 million. This increase is the result of continued
improvement in economic conditions, an increase in the average amount of
equipment available for rental and continued strong utilization of rental
equipment, plus the addition of equipment and rental yards associated with the
American Hi-Lift Acquisition.
New Equipment Sales for the three months ended June 30, 1996 increased
29.0% to $10.8 million, when compared with the corresponding prior period sales
of $8.4 million. This increase is due primarily to improved general economic
conditions and increases associated with the American Hi-Lift Acquisition.
Rental Equipment Sales for the three months ended June 30, 1996 increased
80.7% to $10.2 million, when compared with the corresponding prior period sales
of $5.7 million, primarily due to a continued strong demand for used rental
equipment and Primeco's efforts to dispose of older equipment acquired with
American Hi-Lift.
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PRIMECO INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS - (Continued)
Parts and Merchandise Sales for the three months ended June 30, 1996
increased 15.0% to $9.6 million, when compared with the corresponding prior
period sales of $8.3 million. This increase correlates to the higher rental
revenues and sales of new and used rental equipment.
Service and Other Income for the three months ended June 30, 1996
increased 35.1% to $4.6 million when compared with the corresponding prior
period sales of $3.4 million. This increase relates to the increased rental
revenue.
Gross Profit for the three months ended June 30, 1996 increased 57.0% to
$27.6 million, when compared with the corresponding prior period gross profit
of $17.6 million. The increase in gross profit is the result of increased
revenues, as previously discussed, with the most significant component being
the $13.6 million increase in rental revenue. Gross Profit was also impacted
by direct operating expenses which increased by $6.3 million, or 42.3%, to
$21.2 million from the prior period expense level of $14.9 million, and
reflects increased expense associated with the American Hi-Lift Acquisition.
Selling, General and Administrative Expenses for the three months ended
June 30, 1996 increased 42.6% to $12.3 million, when compared with the
corresponding prior period expenses of $8.7 million. The increase reflects
higher sales commissions due to increased rental and sales revenue and expenses
associated with the inclusion of the American Hi-Lift Acquisition into
Primeco's operations.
Interest expense (net of interest income) for the three months ended June
30, 1996 increased 27.8% to $9.4 million, when compared with the corresponding
prior period interest expense of $7.3 million. The increase primarily reflects
higher borrowing outstanding. Primeco's indebtedness, as of June 30, 1996,
totaled $334.0 million, compared to $245.5 million as of June 30, 1995,
primarily due to the American Hi-Lift Acquisition on February 26, 1996 and
borrowing to fund capital expenditures.
Six Month Period Ended June 30, 1996 Compared With The Six Month Period Ended
June 30, 1995
Total Revenues for the six months ended June 30, 1996 increased 33.0% to
$153.5 million, when compared to revenues of $115.4 million for the same period
in the prior year. The increase was primarily the result of increased rental
revenues, but, it also reflects increases in all of Primeco's revenue
components as well as the acquisition of American Hi-Lift.
Rental Revenues for the six months ended June 30, 1996 increased 36.6% to
$87.7 million, when compared with the corresponding prior period rentals of
$64.2 million. These results reflect a large rental equipment fleet base,
strong equipment utilization and the addition of yards associated with the
American Hi-Lift Acquisition.
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PRIMECO INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS - (Continued)
New Equipment Sales for the six months ended June 30, 1996 increased 30.6%
to $21.3 million, when compared with the corresponding prior period sales of
$16.3 million. The increase is due to strong general economic conditions,
increased demand for equipment as well as sales associated with the American
Hi-Lift Acquisition yards.
Rental Equipment Sales for the six months ended June 30, 1996 increased
39.4% to $17.1 million, when compared with the corresponding prior period sales
of $12.3 million, resulting, primarily, from continued strong demand for used
rental equipment and Primeco's efforts to dispose of older equipment purchased
with the American Hi-Lift Acquisition.
Parts and Merchandise Sales for the six months ended June 30, 1996
increased 17.4% to $18.7 million, when compared with the corresponding prior
period sales of $16.0 million. This increase correlates with the higher rental
revenues and sales of new and used rental equipment.
Service and Other Income for the six months ended June 30, 1996 increased
30.5% to $8.6 million when compared with the corresponding prior period sales
of $6.6 million. This increase relates to the increase in rental revenue.
Gross Profit for the six months ended June 30, 1996 increased 57.2% to
$50.9 million, when compared with the corresponding prior period gross profit
of $32.4 million. The increase is the result of increased revenues as
previously discussed with the most significant component being the $23.4
million increase in rental revenue. Gross Profit was also impacted by direct
operating expenses, which increased by 33.2% to $38.7 million, when compared to
the prior period expense level of $29.1 million. This increase primarily
reflects increased expenses associated with the American Hi-Lift Acquisition.
Selling, General and Administrative Expenses for the six months ended June
30, 1996 increased 34.2% to $23.2 million, when compared to the prior period
expenses of $17.3 million. The increase reflects higher sales commissions due
to increased rental and sales revenue and expenses associated with the
inclusion of the American Hi-Lift Acquisition into Primeco's operations.
Interest Expense (net of interest income) for the six months ended June
30, 1996 increased 24.4% to $17.5 million, when compared with the
corresponding prior period interest expense of $14.0 million. The increase
reflects higher borrowings outstanding. Primeco's indebtedness, as of June 30,
1996, totaled $334.0 million, compared to $245.5 million as of June 30, 1995.
This increase is due primarily to the American Hi-Lift Acquisition on February
26, 1996 and borrowings to fund capital expenditures.
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PRIMECO INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS - (Continued)
Liquidity and Capital Resources
Cash provided from operating activities totaled $14.7 million (net of the
effects from the purchase of American Hi- Lift) during the period ending June
30, 1996, compared to cash provided of $10.7 million for the period ending June
30, 1995. During the current period, cash flow from operations was higher than
net income primarily as a result of adjustments to net income for non-cash
expenses, such as depreciation and amortization. Netted against these positive
adjustments were increases in accounts receivables and payments associated with
increased inventories and decreases in accounts payable and accrued liability.
Primeco's primary capital requirements were for the $66.5 million purchase
of American Hi-Lift and the purchase of rental equipment to expand its business
and to replace rental equipment sold. The total purchases of rental equipment
were $50.5 million compared to $48.0 million for the corresponding period for
the prior year. Primeco continually evaluates the equipment in its rental
fleet and periodically sells used equipment based on that evaluation. Proceeds
from the sale of used rental equipment totaled $17.0 million for the three
month period ended June 30, 1996 compared to $12.2 million for the
corresponding prior year period.
Primeco's management believes that its cash flows from operating
activities, proceeds from the sale of used rental equipment and its borrowing
capacity under the revolving credit facility, (as of June 30, 1996 Primeco has
$57 million availability under its $175 million Revolving Credit Facility) will
be sufficient to finance its operations and anticipated capital expenditures
through 1996.
Statements regarding sufficiency of capital resources in the preceding
paragraph are "forward looking statements" made pursuant to the safe harbor
provisions of Section 21E of the Securities Exchange Act of 1934, as amended.
Changes in general economic conditions, changes in results of operations and
other factors could increase Primeco's need for capital resources beyond what
is currently available. Investors are cautioned that all forward looking
statements involve risks and uncertainties, including those detailed in
Primeco's other filings with the Securities and Exchange Commission.
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<PAGE> 13
PRIMECO INC.
PART II. OTHER INFORMATION
Item 5.
On July 29, 1996, pursuant to an Asset Purchase and Sale Agreement dated
as of May 13, 1996, as amended and supplemented by the Amendment and Supplement
to Asset Purchase and Sale Agreement, dated as of July 29, 1996 (together, the
"Purchase Agreement"), by and between Primeco and Alpine Equipment Rentals &
Supply Company, Inc., a Washington corporation ("Alpine"), Primeco completed
the purchase of substantially all of the assets of Alpine.
Primeco paid a purchase price of $11,015,000 for such assets, and also
paid $350,000 in respect of covenants not to compete for two senior executives
of Alpine. The amount of consideration paid by Primeco was determined by
arms-length negotiations with Alpine.
Alpine operated 6 rental locations in the State of Washington. Alpine,
which rented and sold a varied line of equipment to industrial and commercial
customers in its markets, had gross revenues of $10.8 million in the year ended
December 31, 1995. Primeco will continue to use the assets of Alpine in its
equipment rental and sales business.
Primeco used general working capital and borrowings under its revolving
credit facility, for which Chase Bank (formerly Chemical Bank) acts as agent,
to fund the transaction. Other than pursuant to the Purchase Agreement, none
of Primeco, its affiliates, officers, directors or associates of such officers
or directors has any material relationship with Alpine.
Pursuant to the requirements of Item 7 of Form 8-K, it is impracticable to
provide the financial statements and pro forma financial statements required by
paragraphs (a) and (b) of Item 7. The required financial statements and pro
forma financial statements shall be filed not later than 60 days after August
13, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Asset Purchase and Sale Agreement, dated as of May 13, 1996,
between Primeco Inc. and Alpine Equipment Rentals & Supply
Company, Inc.
2.2 Amendment and Supplement to Asset Purchase and Sale
Agreement, dated as of July 29, 1996, between Primeco Inc.
and Alpine Equipment Rentals & Supply Company, Inc.
10.1 Employment Agreement, dated as of April 1, 1996, between
Primeco Inc. and Brian Fontana
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<PAGE> 14
OTHER INFORMATION - (Continued)
10.2 Indemnity Agreement, dated as of April 1, 1996, between
Primeco Inc. and Brian Fontana.
99.1 Press Release, dated August 6, 1996
(b) Reports on Form 8-K
On March 12, 1996, Primeco filed a Current Report on Form
8-K, pursuant to Items 2 and 7 thereof, regarding its
acquisition of the capital stock of Vibroplant U.S., Inc.
(also known as American Hi- Lift). On May 13, 1996, Primeco
filed the audited financial statements and the pro forma
financial information in connection with the American Hi-Lift
acquisition required by Items 7(a) and (b) of Form 8-K under
the cover of a Form 8-K/A.
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<PAGE> 15
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.
PRIMECO INC.
August 13, 1996 /s/ BRIAN FONTANA
-----------------------------------
Brian Fontana
(Executive Vice President, Chief
Financial Officer)
/s/ JOHN D. LATIMER
-----------------------------------
John D. Latimer
(Controller)
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<PAGE> 16
INDEX TO EXHIBITS
2.1 Asset Purchase and Sale Agreement, dated as of May 13, 1996, between
Primeco Inc. and Alpine Equipment Rentals & Supply Company, Inc.
2.2 Amendment and Supplement to Asset Purchase and Sale Agreement, dated
as of July 29, 1996, between Primeco Inc. and Alpine Equipment
Rentals & Supply Company, Inc.
10.1 Employment Agreement, dated as of April 1, 1996, between Primeco Inc.
and Brian Fontana
10.2 Indemnity Agreement, dated as of April 1, 1996, between Primeco Inc.
and Brian Fontana
99.1 Press Release, dated August 6, 1996
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AND SALE AGREEMENT
by and between
PRIMECO INC., as Buyer
and
ALPINE EQUIPMENT RENTALS
& SUPPLY CO., INC., as Seller
and
GARY R. EIDE,
DALE V. HOUG,
JEROME G. SCHNEIDER, and
EDWARD M. ZAWISLAK,
together with Seller as Indemnitors
Dated as of the 13th
day of May, 1996
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TABLE OF CONTENTS
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ARTICLE 1. PURCHASE AND SALE OF ASSETS............................................... 1
1.1. Assets Purchased. .............................................. 1
1.2. Assignability and Consents. .................................... 3
1.3. Retained Assets. ............................................... 3
1.4. Assumed Obligations. ........................................... 3
1.5. Retained Liabilities. .......................................... 4
1.6. Name. .......................................................... 5
1.7. Cooperation After Closing. ..................................... 5
1.8. COBRA Matters. ................................................. 5
1.9. Rental Contracts. .............................................. 5
1.10. Environmental Assessment. ...................................... 5
1.11. Delivery of Acquired Assets. ................................... 6
ARTICLE 2. PURCHASE PRICE AND PAYMENT................................................ 6
2.1. Purchase Price. ................................................ 6
2.2. Payment of Trade Payables. ..................................... 6
2.3. Sales Tax. ..................................................... 6
2.4. Allocation of Purchase Price. .................................. 6
2.5. Expenses. ...................................................... 7
2.6. Determination of Accounts Receivable Balance. .................. 7
ARTICLE 3. CLOSING................................................................... 7
3.1. Date, Time and Place of Closing. ............................... 7
3.2. Termination. ................................................... 7
3.3. Schedules. ..................................................... 8
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER.................................. 8
4.1. Organization and Corporate Power. .............................. 8
4.2. Conflicts; Defaults. ........................................... 8
4.3. Enforceable Agreement. ......................................... 9
4.4. Acquired Assets; Title to the Acquired Assets. ................. 9
4.5. Real Property. ................................................. 9
4.6. Contracts. ..................................................... 10
4.7. Liabilities. ................................................... 10
4.8. Litigation. .................................................... 10
4.9. Customers and Suppliers. ....................................... 10
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4.10. Regulatory Compliance. ......................................... 11
4.11. Brokers, Finders and Agents. .................................... 11
4.12. Permits. ....................................................... 11
4.13. Collective Bargaining Agreements. .............................. 11
4.14. Employees and Employee Plans. .................................. 11
4.15. Changes in Circumstances. ...................................... 12
4.16. Taxes. ......................................................... 13
4.17. Insurance. ..................................................... 14
4.18. Books and Records. ............................................. 14
4.19. Seller's Name. ................................................ 14
4.20. Financial Statements. .......................................... 14
4.21. Environmental Matters. ......................................... 15
4.22. Information Regarding Assets. .................................. 15
4.23. Disclosure. .................................................... 15
4.24. Accounts Receivable. ........................................... 16
4.25. Intellectual Property. ......................................... 16
4.26. Consents and Approvals. ........................................ 16
4.27. Rental Contracts. .............................................. 16
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS............................ 16
5.1. Power and Authority. ........................................... 16
5.2. Disclosure. .................................................... 16
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER................................... 17
6.1. Organization and Standing; Power and Authority. ................ 17
6.2. Conflicts; Defaults. ........................................... 17
6.3. Brokers, Finders and Agents. .................................... 17
6.4. Disclosure. .................................................... 17
ARTICLE 7. COVENANTS OF SELLER....................................................... 17
7.1. Customer and Supplier Relationships; Assertion of Claims......... 17
7.2. Maintenance of, and Access to, Records. ........................ 18
7.3. Operation of Business. ......................................... 18
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7.4. Access to Real Property. ....................................... 19
7.5. Acquisition Proposals. ......................................... 19
7.6. Preservation of Business; Employee Relations. .................. 19
7.7. Access to Information. ......................................... 19
7.8. Consents. ...................................................... 19
7.9. Change of Seller's Name. ....................................... 20
7.10. Assistance with Audit. ......................................... 20
7.11. Seller 401(k) Plan. ............................................ 20
ARTICLE 8. CONDITIONS OF CLOSING..................................................... 20
8.1. Obligation of Buyer. ........................................... 20
8.2. Obligation of Seller. .......................................... 23
ARTICLE 9. INDEMNIFICATION........................................................... 24
9.1. Indemnification by Buyer. ...................................... 24
9.2. Indemnification by Seller and Shareholders. .................... 24
9.3. Procedures for Indemnification. ................................ 25
9.4. NEGLIGENCE OF INDEMNIFIED PARTY. ............................... 25
9.5. Limits on Indemnification. ..................................... 25
ARTICLE 10. MISCELLANEOUS............................................................. 26
10.1. Survival of Representations and Warranties. .................... 26
10.2. Amendments. .................................................... 26
10.3. Entire Agreement. .............................................. 26
10.4. Governing Law. ................................................. 26
10.5. Notices. ....................................................... 26
10.6. Counterparts. .................................................. 27
10.7. Assignment. .................................................... 27
10.8. Waivers. ....................................................... 28
10.9. Third Parties. ................................................. 28
10.10. Expenses. ...................................................... 28
10.11. Legal Fees and Expenses. ....................................... 28
10.12. Severability. .................................................. 28
10.13. Public Announcements. .......................................... 28
10.14. Headings; Pronouns. ............................................ 28
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10.15. Judicial Proceedings. .......................................... 28
ARTICLE 11. ARBITRATION............................................................... 29
11.1. Agreement to Arbitrate. ........................................ 29
11.2. Notice of Arbitration. ......................................... 29
11.3. Appointment of Arbitrators. .................................... 29
11.4. Award Final. ................................................... 30
11.5. Availability of Injunctive Relief. ............................. 30
</TABLE>
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<PAGE> 6
EXHIBITS
- --------
Exhibit A Eide Non-Compete Agreement
Exhibit B Schneider Non-Compete Agreement
Exhibit C Eide Consulting Agreement
Exhibit D Schneider Consulting Agreement
v
<PAGE> 7
SCHEDULES
Schedule 1.1(a) Inventory
Schedule 1.1(b) Rental equipment
Schedule 1.1(c) Tangible Personal Property
Schedule 1.1(d) Accounts Receivable
Schedule 1.1(e) Business Records
Schedule 1.1(h) Acquired Contracts
Schedule 1.1(i) Permits
Schedule 1.1(l) Bank Accounts
Schedule 1.1(m) Intellectual Property
Schedule 1.2 Necessary Consents
Schedule 1.3 Retained Assets
Schedule 2.1(a) Creditors of Seller
Schedule 4.2 Conflicts
Schedule 4.4 Title
Schedule 4.5 Real Property
Schedule 4.7 Liabilities
Schedule 4.8 Litigation
Schedule 4.9 Customers and Suppliers
Schedule 4.11 Brokers
Schedule 4.14 Benefit Plans
Schedule 4.15 Changes in Circumstances
Schedule 4.16 Taxes
Schedule 4.17 Insurance
Schedule 4.19 Business Names
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<PAGE> 8
Schedule 4.20 Financial Statements
Schedule 4.21 Environmental Matters
Schedule 4.22 Location of Tangible Assets
vii
<PAGE> 9
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is
dated as of May 13, 1996, by and between Primeco Inc., a Texas corporation,
doing business as PRIME Equipment ("BUYER"), Alpine Equipment Rentals & Supply
Co., Inc., a Washington corporation ("SELLER"), Gary R. Eide, Dale V. Houg,
Jerome G. Schneider and Edward M. Zawislak (Messrs. Eide, Houg, Schneider and
Zawislak, collectively, the "SHAREHOLDERS").
R E C I T A L S:
Seller is the owner and operator of a business specializing
in construction equipment rentals (the "BUSINESS"). Seller desires to sell and
Buyer desires to buy the assets relating to the Business, but Buyer is not
assuming any liabilities or obligations of Seller except for certain
obligations arising after the Closing Date (as hereinafter defined) as herein
specifically provided.
NOW THEREFORE, in consideration of the mutual promises
herein contained, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Seller and Buyer hereby
covenant and agree as follows:
A G R E E M E N T
ARTICLE 1.
PURCHASE AND SALE OF ASSETS
1.1. ASSETS PURCHASED. Subject to the terms and conditions contained
in this Agreement, and on the basis of the representations and warranties herein
set forth, on the Closing Date, Seller shall sell, assign, transfer and deliver,
or cause to be sold, assigned, transferred and delivered to Buyer, and Buyer
shall purchase, pay for and accept the assignment and delivery from Seller of
all of the assets of the Business of every kind, character and description,
whether tangible or intangible, including, without limitation, those assets
described in paragraphs (a) - (o) of this Section 1.1, but excluding those
assets described in Section 1.3, whether or not such acquired assets are
reflected on Seller's financial statements or on its books (collectively, the
"ACQUIRED ASSETS"):
(a) Inventory. All inventory of the Business other than
equipment held for rental or sale (including, without limitation,
work-in-process, parts and raw materials) (the "INVENTORY"), including without
limitation the Inventory listed or described on Schedule 1.1(a) attached
hereto;
(b) Rental Equipment. All equipment held for rental or
sale ("RENTAL EQUIPMENT"), including without limitation the Rental Equipment
listed on Schedule 1.1(b) attached hereto;
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(c) Tangible Personal Property. All of Seller's vehicles,
office equipment, tools, fixtures, accessories, leasehold and other
improvements and other tangible personal property heretofore regularly or
occasionally used in the conduct of the Business, other than Rental Equipment
or Inventory ("TANGIBLE PERSONAL PROPERTY"), including without limitation the
Tangible Personal Property listed or described on Schedule 1.1(c) attached
hereto (the Inventory, Rental Equipment and the Tangible Personal Property
shall be collectively referred to as the "TANGIBLE ASSETS");
(d) Accounts Receivable. All accounts receivable in
respect of goods leased or sold or services rendered by Seller in connection
with its operation of the Business as of the Closing Date (the "ACCOUNTS
RECEIVABLE"), including without limitation the Accounts Receivable listed or
described on Schedule 1.1(d) attached hereto, and the Accounts Receivable listed
on the Accounts Receivable Statement (as hereinafter defined). For each Account
Receivable listed on Schedule 1.1(d), Seller shall set forth on Schedule 1.1(d)
(i) the name of each person or entity owing money to Seller in respect of such
Account Receivable; (ii) the amount owed to Seller by such person or entity;
(iii) the number or numbers of the invoices representing such aggregate amount
and (iv) the age of such Account Receivable.
(e) Books, Records and Written Materials. The original
or a legible photocopy of all of Seller's books, records and written materials
relating to the Business in existence on the date of this Agreement including,
without limitation, all files, technical information, confidential information,
financial statements, price lists, invoices, forms, designs, diagrams, drawings,
production records, formulations, sales, use, and personal property tax returns,
fixed asset ledgers, and any other information which has been reduced to writing
("BUSINESS RECORDS"), including without limitation those business records listed
or described on Schedule 1.1(e) attached hereto;
(f) Customer Lists, Advertising Materials, Etc. All of
Seller's promotional, advertising and marketing materials relating to the
Business, including, without limitation, all catalogs, brochures, plans,
customer lists, supplier lists, manuals, handbooks, and dealer and distributor
lists ("PROMOTIONAL MATERIALS");
(g) Third Party Warranties. Any and all manufacturers'
and third party warranties and service or replacement programs relating to the
Business or any Acquired Asset which by their terms or by operation of law are
assignable;
(h) Contracts. All rights and benefits of Seller in, to
or under those licenses, contracts, leases, agreements, commitments and
undertakings, whether oral or written, to which Seller is a party or a
beneficiary on the Closing Date or by which any of the Acquired Assets are
bound, which are listed on Schedule 1.1(h) attached hereto, other than those
which Buyer elects not to purchase by providing written notice to Seller of such
election on or prior to the Closing Date (together with the Rental Contracts (as
hereinafter defined), the "ACQUIRED CONTRACTS");
(i) Permits and Approvals. All of the transferable
licenses, permits, approvals, variances, waivers or consents (collectively,
"PERMITS") issued to Seller by any United States, state or local governmental
entity or municipality or subdivision thereof or any authority,
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<PAGE> 11
department, commission, board, bureau, agency, court or instrumentality
(collectively, "GOVERNMENTAL AUTHORITIES"), which are listed on Schedule 1.1(i)
attached hereto;
(j) any and all rights Seller may have, including any
intellectual property rights, and any goodwill associated therewith, in the
name "Alpine Equipment Rentals & Supply Co.";
(k) all cash and cash equivalents of the Seller on the
date hereof;
(l) all rights to the bank accounts of Seller, including
without limitation the bank accounts listed on Schedule 1.1(l) attached hereto;
(m) all intellectual property and any goodwill associated
therewith, including without limitation patents, copyrights, trade secrets,
trademarks, service marks, applications, inventories, discoveries,
improvements, software, source and object code, documentation and other
rights, information and licenses, and process technology (the "INTELLECTUAL
PROPERTY"), including without limitation the Intellectual Property listed on
Schedule 1.1(m) attached hereto;
(n) all rental contracts as of the Closing Date pursuant
to which Seller is renting or leasing Rental Equipment (the "RENTAL CONTRACTS");
and
(o) all goodwill associated with the Business.
1.2. ASSIGNABILITY AND CONSENTS. Schedule 1.2 attached hereto sets
forth all Acquired Assets and Assumed Obligations (as hereinafter defined)
which, as of the date hereof, are non-assignable or non-transferable to Buyer,
or non-assignable or non-transferable without the consent of a third party. If
any such consent has not been obtained as of the Closing Date such Acquired
Asset or Assumed Obligation shall be retained by Seller, and Seller shall, upon
the written request of Buyer on or prior to the Closing Date and at Seller's
reasonable expense, use Seller's best efforts to make the full use and benefit
of such Acquired Asset available to Buyer to the same extent, as nearly as may
be possible, as if such impediment to assignment or transfer did not exist. This
Agreement shall not constitute a contract to assign any Acquired Assets or
assume any Assumed Obligation if such assignment or assumption would (i)
constitute a breach of the terms thereof, (ii) create rights in third parties
not desired by Buyer or (iii) create rights in third parties against Seller. The
provisions of this Section 1.2 shall not affect or impair Buyer's right not to
consummate the transactions contemplated by this Agreement if the conditions set
forth in Section 8.1(e) hereof are not fulfilled or waived.
1.3. RETAINED ASSETS. Notwithstanding any other provision of this
Agreement, Seller shall, and hereby does, retain (i) the assets listed on
Schedule 1.3 attached hereto, and (ii) the contracts and agreements listed on
Schedule 1.1(h) and not acquired by Buyer in accordance with Section 1.1(h).
1.4. ASSUMED OBLIGATIONS. On the terms and subject to the conditions
set forth in this Agreement, Buyer will assume, and shall, from and after the
Closing Date pay, perform and discharge as and when due the sale taxes payable
by Seller for the monthly period, and only for the monthly period, immediately
prior to the Closing as collected from rentals and sales of Rental
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<PAGE> 12
Equipment for the monthly period immediately prior to the Closing, the trade
payables of Seller outstanding as of the Closing (subject to Seller's
obligations to pay Seller the excess of such trade payables over $200,000) and
the obligations, and only such obligations, of Seller as may arise from and
after the Closing Date under the Acquired Contracts ("ASSUMED OBLIGATIONS"). The
Assumed Obligations shall not include, and Buyer shall have no liabilities in
connection with, any acts, omissions or defaults of Seller that have occurred
prior to the Closing Date. It is expressly understood and agreed that Buyer
shall not assume or be liable for, and Seller indemnifies and holds harmless
Buyer from and against, any and all liabilities and obligations whenever arising
on account of any breach or alleged breach or failure of performance by Seller
under any Acquired Contracts prior to the Closing Date.
1.5. RETAINED LIABILITIES. Except for the Assumed Obligations,
Seller shall retain, and Buyer shall not assume and shall not be deemed to
have assumed or be responsible or liable with respect to, any debt, claim,
obligation or other liability of Seller whether or not relating to the Business,
whether fixed, contingent or otherwise, and whether known or unknown
(collectively, the "RETAINED LIABILITIES"). Without limiting the generality of
the foregoing, Buyer shall be under no obligation to and shall not be deemed to
assume any obligation or liability of Seller (other than the Assumed
Obligations):
(a) For legal, accounting or other professional fees or
expenses associated with such services arising out of the transactions
contemplated by this Agreement;
(b) With respect to Seller's federal income or excess
profits tax or state or local income, excise or franchise taxes, arising by
virtue of the transactions contemplated by this Agreement or otherwise,
including, without limitation, federal income taxes due, if any, by reason of
depreciation recapture;
(c) With respect to any litigation, action, suit or other
proceeding involving Seller or the Business prior to the Closing Date,
including without limitation any litigation, action, suit or other legal
proceeding listed on Schedule 4.8;
(d) For any tort, crime, or worker's compensation claim
or any other claim (including claims of or by employees) based upon any facts,
acts or omissions occurring prior to the Closing Date;
(e) For any commissions due on sales or rentals of
products or equipment which occur prior to the Closing Date;
(f) For any premium or other liability or obligation
under or with respect to any insurance policy of Seller;
(g) Any indebtedness of Seller; and
(h) With respect to the Lease Agreement, dated as of
November 15, 1988, between Richard Calkins and Alpine Rentals, Inc., as
supplemented by an Addendum to Lease Agreement, dated as of November 15, 1988
(the "EVERETT MAINTENANCE LEASE").
4
<PAGE> 13
1.6. NAME. In order to assist customers in the transition resulting
from this Agreement, Buyer will obtain and have full right to use Seller's
tradename, known as "Alpine Equipment Rental & Supply Co.", and signage, on
and after the Closing Date.
1.7. COOPERATION AFTER CLOSING.
(a) Each party will cooperate, and will use its best
efforts to have its officers, directors and other employees cooperate, with the
other party, upon such other party's request, on and after the Closing Date, in
furnishing information, evidence, testimony and other reasonable assistance in
connection with any actions, proceedings, arrangements or disputes relating to
the adjustment of federal income and other taxes of Seller for all periods prior
to the Closing Date and in connection with any other actions, proceedings,
arrangements or disputes involving either party or based upon any Assumed
Obligations or any of Seller's contracts, agreements, acts or omissions which
were in effect during any such period.
(b) Seller, if requested by Buyer, shall use its
reasonable efforts to assist Buyer in the collection of any Accounts Receivable,
provided that Buyer shall reimburse Seller for all reasonable documented costs
and expenses incurred by Seller in connection with the collection of such
Accounts Receivable.
(c) Upon reasonable prior notice and for reasonable
purposes, Buyer shall provide Seller with reasonable access, during normal
business hours, to Seller's books, records and written materials relating to
the Acquired Assets, the Assumed Obligations, or the operation of the Business
prior to the Closing Date.
(d) Seller shall, at any time and from time to time after
the Closing Date, upon request of Buyer, take or cause to be taken such
further action and execute and deliver such further documents, as may
reasonably be required or appropriate, for the assignment, transfer, delivery,
assurance and confirmation to Buyer, or for assistance in the collection or
possession of, any and all of the Acquired Assets being sold or to be sold,
transferred, assigned and delivered hereunder.
1.8. COBRA MATTERS. On and after the Closing Date, Buyer agrees to
offer COBRA health care continuation coverage to employees of Seller to the
extent required by applicable law. Seller agrees to offer Ms. Irene Eskenazi and
employees of Seller not employed by Buyer COBRA health care continuation
coverage as if such persons were former employees of Buyer, to the extent
required by applicable law.
1.9. RENTAL CONTRACTS. Prior to the Closing, Seller shall provide
Buyer with a listing of all Rental Contracts, listing for each Rental Contract
the renter, the amount and type of Rental Equipment rented, the term of the
rental period, and the rental rate.
1.10. ENVIRONMENTAL ASSESSMENT. As soon as practicable after
completion of the Environmental Assessment (as hereinafter defined), and in any
event prior to Closing, Buyer shall deliver to Seller a copy of Buyer's
environmental consultant's estimate of Clean-Up Costs (as hereinafter defined)
with respect to the Real Property.
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1.11. DELIVERY OF ACQUIRED ASSETS. Any and all Acquired Assets on the
real property leased by Seller pursuant to the Everett Maintenance Lease shall
be moved to the Acquired Real Property prior to Closing.
ARTICLE 2.
PURCHASE PRICE AND PAYMENT
2.1. PURCHASE PRICE. In exchange and as consideration for the sale
by Seller to Buyer of the Acquired Assets and (in addition to Buyer's assumption
of the Assumed Obligations, payment of the Trade Payables Amount and additional
amounts provided for in the Non-Competition Agreements (as hereinafter
defined)), in full payment of the purchase consideration therefor, Buyer shall
pay to Seller an aggregate purchase price (the "PURCHASE PRICE") of Eleven
Million Fifteen Thousand Dollars ($11,015,000) as follows:
(a) Buyer shall pay each creditor of Seller listed on
Schedule 2.1(a) attached hereto, on behalf of Seller, the amount listed
opposite such creditor's name on a payoff schedule to be provided by Seller in
writing to Buyer prior to Closing (the "PAYOFF SCHEDULE"); and
(b) Buyer shall pay the Purchase Price less the
aggregate of the amounts listed on the Payoff Schedule to Seller, in cash by
wire transfer to an account designated in writing by Seller.
2.2. PAYMENT OF TRADE PAYABLES. Buyer shall assume and pay the trade
payables of Seller outstanding as of the Closing. Immediately prior to Closing,
Seller shall provide Buyer with a list of outstanding trade payables. To the
extent the trade payables of Seller at Closing exceed $200,000, the excess of
such trade payables over $200,000 shall be withheld from the Purchase Price. In
the event that Buyer pays trade payables of Seller relating to the period on or
prior to Closing and such trade payables in addition to the trade payables paid
at Closing exceed $200,000, upon written notice from Buyer to Seller, Seller
shall promptly pay the amount of such excess (to the extent not already adjusted
at Closing) to Buyer.
2.3. SALES TAX. All sales and transfer taxes due with respect to any
taxable transfers of assets between the parties as contemplated herein shall be
reported and paid by Seller when due under applicable state and local law;
provided, however, that Buyer shall pay to the applicable taxing authorities on
behalf of Seller not more than $70,000 in respect of such sales and transfer
taxes when such taxes are due.
2.4. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Acquired Assets, both tangible and intangible, as agreed by
Buyer and Seller in writing prior to Closing (the "PURCHASE PRICE ALLOCATION").
Buyer and Seller shall report the purchase and sale of the Acquired Assets
included in accordance with the Purchase Price Allocation for all federal, state
and local tax purposes. Buyer and Seller shall apply the allocations set forth
in the Purchase Price Allocation for purposes of all disclosures required under
Section 1060(b) of the federal Internal Revenue Code of 1986, as amended (the
"CODE"), including Form 8594, and any comparable provisions of state or local
law. In the event Buyer and Seller do not agree on such
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an allocation, each of Buyer and Seller shall report the purchase and sale of
the Acquired Assets as each of them deems appropriate.
2.5. EXPENSES.
(a) Without limiting any other provision of this
Agreement, Seller and Buyer agree that all non-Accounts Receivable expenses
relating to the Business that are due and payable through the close of business
on the day preceding the Closing Date, and non-Accounts Receivable revenues
(including, without limitation, taxes and customer credits, offsets or other
adjustments) relating to the Business through the close of business on the day
preceding the Closing Date, are for the benefit of, or the responsibility of,
Seller.
(b) In the event that Seller receives any payment
(including, without limitation, payments of Accounts Receivable) in respect of
the rental, lease, use or possession of the Acquired Assets for any period of
time after the Closing Date or any other payment to which Buyer is entitled
hereunder, Seller shall hold such payment in trust for the benefit of Buyer
and shall pay the same over to Buyer, in like kind if possible, within five
(5) days of receipt thereof.
2.6. DETERMINATION OF ACCOUNTS RECEIVABLE BALANCE. On the Closing
Date, Seller shall have prepared and delivered to Buyer a statement of the
Accounts Receivable as of the Closing Date (the "ACCOUNTS RECEIVABLE STATEMENT")
setting forth in detail (a) the name of each person or entity owing money to
Seller in respect of the Accounts Receivable, (b) the amount owed to Seller by
such person or entity, (c) the number or numbers of the invoices representing
such amount, (d) the age of such Accounts Receivable, (e) the total amount of
the Accounts Receivable, (f) the amount reflected on Seller's books and records
as of the Closing Date as reserves for doubtful accounts, and (g) the Accounts
Receivable net balance.
ARTICLE 3.
CLOSING
3.1. DATE, TIME AND PLACE OF CLOSING. The transfers and deliveries
provided for in this Agreement shall take place at a closing (the "CLOSING") to
be held at the offices of Casey & Pruzan, 18th Floor Pacific Building, 720 Third
Avenue, Seattle, Washington 98104 (or such other location as the parties may
mutually agree in writing), at 10:00 A.M., local time on (a) June 24, 1996, or
(b) such other date, time and place as shall be mutually agreed by Seller and
Buyer as soon as practicable after all of the conditions set forth in Article 8
have been satisfied or waived by both parties (the "CLOSING DATE").
3.2. TERMINATION. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Buyer upon written notice to Seller that Buyer's
investigation of Seller (not including the Environmental Assessment) disclosed
or confirmed matters which Buyer, in its reasonable judgment exercised in good
faith, believes to be either inconsistent in any material
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<PAGE> 16
respect with any of the representations and warranties of Seller contained in
this Agreement or of such significance as to materially and adversely affect, in
Buyer's reasonable judgment, the value of the assets and other benefits intended
to be acquired by Buyer under this Agreement or the prospects of the Business;
(c) by Buyer or Seller if the estimate by Buyer's
environmental consultant of clean up costs for the Real Property (as hereinafter
defined), including without limitation remediation costs, costs to bring the
Real Property into compliance with Environmental Laws (as hereinafter defined),
and other costs and expenses for which Seller has agreed to indemnify the Buyer
Group (as hereinafter defined) pursuant to Section 9.2 hereof (collectively,
"CLEAN-UP COSTS"), exceeds $650,000; or
(d) by Seller or Buyer if the Closing has not occurred
in accordance with Section 3.1 on or prior to July 24, 1996.
3.3. SCHEDULES. All references in this Agreement to "Schedules"
shall mean the separate schedules named in this Agreement, which (a) are
incorporated herein and shall be deemed a part of this Agreement for all
purposes, (b) shall be delivered by Seller to Buyer, concurrently with the
execution and delivery of this Agreement, and (c) which Schedules shall be
subject to acceptance by Buyer, in its sole discretion.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to Buyer as follows:
4.1. ORGANIZATION AND CORPORATE POWER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington and is duly qualified to conduct business in the State of Washington
and in each other state of the United States in which its ownership or lease of
property or conduct of the Business makes such qualification necessary. Seller
has the full corporate power and authority to own or lease the Acquired Assets,
to operate the Business, to execute and deliver this Agreement and to carry out
the transactions contemplated by this Agreement. This Agreement and the
transactions and other agreements contemplated hereby have been duly approved by
the Board of Directors and shareholders of Seller.
4.2. CONFLICTS; DEFAULTS. Except as set forth on Schedule 4.2,
neither the execution and delivery of this Agreement and the other agreements
and instruments executed in connection herewith by Seller, nor the performance
by Seller of the transactions contemplated hereby or thereby, will (a) violate,
conflict with, or constitute a default under, any of the terms of Seller's
Articles of Incorporation or Bylaws, or any provisions of, or result in the
acceleration of any obligation under, any contract, sales commitment, license,
purchase order, security agreement, mortgage, note, deed, lien, lease,
agreement, instrument, order, judgment, decree or other material agreement
relating to the Business or the Acquired Assets, or by which Seller or the
Acquired Assets are bound, including, without limitation, the Acquired
Contracts, (b) result in the
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creation or imposition of any Liens (as hereinafter defined) in favor
of any third party upon any of the Acquired Assets, (c) violate any law,
statute, judgment, decree, order, rule or regulation of any United States,
state, local, or other governmental entity or municipality or subdivision
thereof or any authority, department, commission, board, bureau, agency, court
or instrumentality thereof (collectively, "GOVERNMENTAL AUTHORITIES"), or (d)
constitute an event which, after notice or lapse of time or both, would result
in such violation, conflict, default, acceleration, or creation or imposition
of Liens (as hereinafter defined). Seller is not in violation of or in default
under its Articles of Incorporation or Bylaws, or any provisions of any
contract, sales commitment, license, purchase order, security agreement,
mortgage, note, deed, lien, lease, agreement, instrument, order, judgment or
decree relating to the Business or the Acquired Assets, or by which Seller or
the Acquired Assets are bound, including without limitation, the Acquired
Contracts, or in the payment of any of Seller's monetary obligations or debts,
and, to the best of Seller's knowledge, there exists no condition or event
which, after notice or lapse of time or both, would result in any such
violation or default.
4.3. ENFORCEABLE AGREEMENT. This Agreement has been duly and validly
executed and delivered by Seller and constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
4.4. ACQUIRED ASSETS; TITLE TO THE ACQUIRED ASSETS. The Acquired
Assets represent substantially all of the properties and assets used by Seller
in the conduct of the Business as now conducted by Seller. The Acquired Assets
being conveyed to Buyer under this Agreement constitute all of the assets
necessary to conduct the Business in substantially the same manner as it was
conducted by Seller prior to the Closing Date. All of the Acquired Assets used
in connection with the operation of the Business are in good operating condition
and repair, subject to normal wear and tear, and are suitable for the purposes
for which they are presently used. On the Closing Date, Seller will deliver to
Buyer the Acquired Assets which Acquired Assets are of the same nature and
amount as those listed or described in Section 1.1 hereof or any of the
Schedules referred to therein. Seller has good and marketable title to, is the
lawful owner of, and has the right to sell, convey, transfer, assign and deliver
to Buyer, each of the Acquired Assets, each of which is free and clear of all
mortgages, liens, encumbrances, claims, security interests and obligations to
other persons of every kind or character ("LIENS"), except for executory
obligations under the Acquired Contracts and except as set forth on Schedule
4.4. Except as set forth on Schedule 4.4, none of the Acquired Assets are
subject to or held under any lease, mortgage, security agreement, conditional
sales contract or other title retention agreement, or are other than in the sole
possession and under the sole control of Seller. The delivery to Buyer of the
instruments of transfer or ownership contemplated by this Agreement will vest
good, marketable and (except for possession by Seller's customers of those
assets pursuant to written rental, lease or lease option agreements as
specifically disclosed in the appropriate Schedules hereto) exclusive title to
the Acquired Assets in Buyer free and clear of all Liens and claims of any kind
or nature whatsoever.
4.5. REAL PROPERTY. Schedule 4.5 attached hereto contains a true,
correct and complete description of the real property leased by Seller (the
"REAL PROPERTY"). The Seller does not own any real property. The Real Property
other than that leased pursuant to the Everett Maintenance Lease is referred to
as the "ACQUIRED REAL PROPERTY".
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4.6. CONTRACTS. Schedule 1.1(h) attached hereto contains a complete
list or description of (a) all licenses, contracts, leases, agreements,
commitments and undertakings (whether written or oral) relating to the Real
Property or the Business, (b) each loan or credit agreement, security agreement,
guaranty, indenture, mortgage, pledge, conditional sale or title retention
agreement, equipment obligation, lease purchase agreement or other instrument
evidencing indebtedness relating to Seller, the Real Property or the Business or
which encumbers any Acquired Asset, or to which Seller is a party, (c) all
contracts or agreements relating to the Business or the Real Property with any
Governmental Authority, (d) all contracts, agreements, commitments or
undertakings, whether or not fully performed, between Seller and any officer,
director, consultant or other employee of Seller, (e) all agreements pursuant to
which Seller sells, distributes or leases Rental Equipment, regardless of the
size or term of such agreements, and (f) all manufacturer's or third party
warranties, guarantees, service, replacement programs or similar benefits
relating to the Business. Each of the Acquired Contracts is in full force and
effect, and is a valid, binding and enforceable obligation of or against the
parties thereto. Neither Seller nor, to the best of Seller's knowledge, after
due inquiry, any other party to any Acquired Contract, has breached or
improperly terminated any such Acquired Contract, or is in default under any
Acquired Contract by which it is bound, and to the best of Seller's knowledge,
after due inquiry, there exists no condition or event which after notice or
lapse of time or both, would constitute any such breach, termination or default.
Seller has delivered to Buyer true, correct and complete copies of each written
Acquired Contract, an accurate and complete description of each oral Acquired
Contract, and all modifications and amendments thereto. Except as set forth on
Schedule 1.2, none of the Acquired Contracts require the consent of a third
party for the valid assignment of such Acquired Contracts to Buyer.
4.7. LIABILITIES. Seller has no liabilities or obligations of any
nature whatsoever, whether absolute, accrued, contingent or otherwise, except
for the Assumed Obligations and those listed or described on Schedule 4.7
attached hereto, all of which have been incurred under the Acquired Contracts or
otherwise have arisen in transactions involving the purchase or sale of goods
and services in the ordinary and normal course of business consistent with past
practice.
4.8. LITIGATION. Except as set forth on Schedule 4.8, there exists
no litigation, action, suit, or proceeding pending at law or in equity or before
any Governmental Authority, or, to the best of Seller's knowledge, threatened,
against or affecting Seller, any officers, directors or employees thereof in
their capacity as such, the Business or the Acquired Assets, or which would
affect the transactions contemplated by this Agreement. None of the litigation,
actions, suits or proceedings listed on Schedule 4.8 can reasonably be expected
to result in any material adverse change to the Business, the Acquired Assets,
or Buyer's ability to freely use the Acquired Assets in the Business.
4.9. CUSTOMERS AND SUPPLIERS. Seller is not involved in any material
controversy with any of its customers or suppliers. Schedule 4.9 attached hereto
lists all customers and suppliers of the Business which, during the year ended
December 31, 1995, accounted for 5% or more of Seller's orders for the purchase,
rental or sale, as the case may be, of products, supplies, equipment, parts,
Rental Equipment, or Inventory of the Business. Neither Seller nor any officer,
director or employee of Seller, nor any spouse or child of any of them, has any
direct or indirect interest in any competitor, supplier or customer of Seller.
No material supplier or vendor of the
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Business and no customer of Seller has indicated any intention to terminate its
existing business relationship with Seller or has indicated to Seller any
intention not to conduct a business relationship with Buyer, whether as a result
of the transactions contemplated by this Agreement or otherwise, and Seller is
not aware of any facts or circumstances that could reasonably lend such supplier
or customer to any such intention.
4.10. REGULATORY COMPLIANCE. The Business has been conducted, and
the Acquired Assets have been maintained, in full compliance with all applicable
laws, regulations and other requirements of Governmental Authorities (including,
without limitation, those laws, regulations and other requirements relating to
civil rights, occupational health and safety, the environment and zoning, and
land use). Seller is not now in violation of any applicable laws, regulations or
orders of any Governmental Authority, the enforcement of which would have a
material adverse effect on the Acquired Assets or the results of operations,
condition (financial or other), results of operations, assets, prospects, or
properties of the Business, and no material expenditures are or will be required
in order to comply with any applicable laws, regulations or orders of any
Governmental Authorities.
4.11. BROKERS, FINDERS AND AGENTS. Except as set forth on Schedule
4.11, Seller is not directly or indirectly obligated to anyone acting as a
broker, finder or in any other similar capacity in connection with this
Agreement or the transactions contemplated hereby.
4.12. PERMITS. Schedules 1.1(e) and 4.21 contain a true, correct and
complete list of all Permits issued to Seller or relating to the Business or
Real Property and Schedule 1.1(i) lists separately those Permits relating to the
Business which are transferable to Buyer. Such Permits are all the Permits
necessary or required for the operation of the Business as it is currently being
operated. Seller has never been denied the grant or approval of any Permit that
it has applied for and Seller has no knowledge of any Permits that are necessary
for the conduct of Business and the operation and maintenance of the Acquired
Assets other than the Permits Seller currently has. No change has occurred in
the facts or circumstances reported or assumed in the application for or the
granting of such Permits, and each such Permit is in full force and effect.
Seller has no knowledge of any fact, error or omission relevant to any such
Permit that would permit the revocation or withdrawal, or the threatened
revocation or withdrawal, thereof.
4.13. COLLECTIVE BARGAINING AGREEMENTS. Seller is not a party to any
collective bargaining or union contract, and is aware of no current union
organizational effort with respect to Seller's employees.
4.14. EMPLOYEES AND EMPLOYEE PLANS.
(a) Except as set forth in Schedule 4.14 attached hereto,
Seller neither maintains nor contributes to any employee pension benefit or
welfare plans, as defined in the Employee Retirement Income Security Act of
1974 ("ERISA"), or any other employee plans ("EMPLOYEE PLANS") (other than
group life, medical, dental and health insurance plans), nor has Seller or any
of its officers or directors taken any action directly or indirectly to
obligate Seller to institute any such Employee Plan. Seller has (or in the
case of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), on the Closing Date shall have) fully
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complied with all of its obligations in respect to all such group life,
medical, dental and health insurance plans.
(b) No proceedings or claims are pending or, to the best
knowledge of Seller, threatened against Seller with respect to any violation
or alleged violation of any applicable federal, provincial, state or local
laws, rules, or regulations relating to the employment of labor, including,
without limitation, those related to wages, benefits, hours, or collective
bargaining. Seller has complied in all material respects with all applicable
laws and regulations relating to employment and dismissal of employees, wages,
benefits, and hours. Seller has made all payments and withholdings of taxes
and other sums as required by appropriate governmental authorities and has
withheld and paid to the appropriate governmental authorities, or is holding
for payment not yet due to such authorities, all amounts required to be
withheld from employees of Seller and is not liable for any arrears of wages,
taxes, penalties, or other sums for failure to comply with any laws, rules, or
regulations relating to the foregoing.
(c) All obligations of Seller relating to its employees,
whether arising by operation of law or by contract, for payments by Seller to
trusts or other funds or to any governmental agency with respect to workers
compensation, unemployment compensation, social security or any other benefits
for its employees with respect to employment of said employees through the
date hereof have been paid. All obligations of Seller with respect to such
employees, whether arising by operation of law or by contract for salaries,
vacation and holiday pay, sick pay, bonuses, other forms of compensation or
other benefits payable to such employees in respect of the services rendered
by any of them through the date hereof or their dismissal have been paid.
(d) A complete list of the names, and current effective
salaries or hourly wages of each employee of Seller used or employed in
connection with the Business is set forth on Schedule 4.14 attached hereto.
All of the employees listed on Schedule 4.14 are "at will" employees. There
are no pending or threatened proceedings or disputes of any kind, including
without limitation related to discrimination of any kind, wages or other
compensation, benefits or termination, between Seller and any of its
employees, and no events, actions or omissions have occurred that, to the best
of Seller's knowledge, could lead to such a proceeding or dispute or any claim
by any employee against Seller. The Seller has not made any representations or
promises to the employees regarding whether or not they will be hired by Buyer
or the terms of any employment by Buyer.
4.15. CHANGES IN CIRCUMSTANCES. Except as set forth on Schedule
4.15, since December 31, 1995 there has not been:
(a) any declaration or payment of a dividend or any
distribution of assets of any kind whatsoever by Seller, including any
distribution in redemption of, or as the purchase price for, any capital
stock, or in discharge or cancellation, in whole or in part, of any
indebtedness, whether in payment of principal, interest or otherwise, owing to
the stockholders of the Seller;
(b) any transaction by Seller not in the ordinary and
usual course of business consistent with past practice;
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(c) any change in or effect on the Seller or the Business
that is or is reasonably likely to be materially adverse to the business,
operations, properties, condition (financial or otherwise), assets,
liabilities, results of operations or prospects of the Seller (a "MATERIAL
ADVERSE EFFECT");
(d) any damage, destruction or loss, whether or not
covered by insurance, having a Material Adverse Effect;
(e) any material alteration in the manner in which the
Seller keeps its books, accounts or records or in the accounting practices
therein reflected;
(f) except for borrowings and payments in the ordinary
and usual course of business consistent with past practices, the incurrence or
issuance of any indebtedness for borrowed money or any commitment to borrow
money or any guaranty, direct or indirect, of indebtedness of others, or any
prepayment of long-term debt;
(g) a termination or, to Sellers' knowledge, threatened
termination, or a substantial modification of, the relationship of Seller with
a customer, supplier or vendor or the occurrence of any event affecting any
product or process used by the Seller having, in any such case or in the
aggregate, a Material Adverse Effect;
(h) except as provided elsewhere herein, any
acquisition or lease of or commitment to acquire or lease any realty or any
item of personal property in excess of $5,000, other than inventory or Rental
Equipment in the ordinary course of business;
(i) any change in the Articles of Incorporation or
bylaws of the Seller; or
(j) any change in the operations, business or manner of
conducting the business of the Seller, other than changes in the ordinary and
usual course of business consistent with past practice, none of which,
individually or in the aggregate, has had or is expected to have a Material
Adverse Effect.
4.16. TAXES. Within the times and in the manner prescribed by law,
Seller has correctly and completely prepared and filed or caused to be filed all
tax returns, declarations, reports, claims for refund, or information returns,
including any attachments and/or amendments thereof, (collectively, "TAX
RETURNS") for income, sales, use, real property, personal property, payroll, and
other taxes, including, without limitation, those relating to the Business
required to be filed by it with any Governmental Authority, and has paid in full
all taxes (and any other associated assessments, judgments, costs, interest and
penalties) owing to or assessed by each such Governmental Authority, whether or
not reported on such Tax Returns (collectively, "TAXES"). Except as set forth in
Schedule 4.16, (a) Seller is not currently the beneficiary of any extension of
time within which to file any Tax Returns, (b) no claim has been made by any
Governmental Authority in any jurisdiction in which the Seller does not file Tax
Returns claiming that Seller is or may be subject to any Taxes within that
jurisdiction, (c) no ongoing audits are being conducted against Seller by any
Governmental Authority, nor has Seller received any notice from any Governmental
Authority that any such audit will be conducted, (d) Seller has not waived any
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statute of limitations or agreed to any extension of time with respect to the
review of any Tax Returns or Taxes thereby imposed, (e) no security interests
have been filed, perfected or otherwise claimed on any of the assets of Seller
in connection with the failure to pay any Taxes, (f) Seller has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid for or owing to any employee, independent contractor, creditor,
stockholder, or other third party, and (g) Seller is not a party to any tax
allocation or sharing agreement with any third party and has not assumed the
liability of any other person under contract. Seller shall provide Buyer with a
tax status letter prior to the Closing Date with respect to all corporate
payroll, sales and use taxes for the State of Washington for reporting periods
ending as close as feasible prior to or concurrently with the Closing Date (the
"TAX CLEARANCES"). Seller has never filed and will not file on or before the
Closing Date any consent under Section 341(f) of the Code.
4.17. INSURANCE. Schedule 4.17 attached hereto contains a list of
all insurance policies (specifying the location covered by the policy, insured,
insurer, period of coverage, beneficiary of the policy, amount of coverage, type
of insurance and policy number) maintained by Seller in connection with the
Business or the Acquired Assets. Seller has in full force and effect, with all
premiums paid thereon, the policies of insurance, or renewals thereof, in the
amounts set forth on Schedule 4.17. The insurance policies set forth on Schedule
4.17 include insurance on all of the Acquired Assets and the Business of such
types, in such amounts and against all liabilities, claims and risks against
which it is customary to insure. No claim is pending under any of such policies.
Seller has not received notice from any insurance carrier of the intention of
such carrier to discontinue any insurance coverage afforded to Seller.
4.18. BOOKS AND RECORDS. Seller has made available to Buyer all of
its books and records, including, without limitation, contracts, distribution
agreements, customer lists, accounting records, tax returns, licenses, permits,
employment agreements, and personnel files relating to the Business or the
Acquired Assets.
4.19. SELLER'S NAME. Seller's right to use the name Alpine Equipment
Rentals & Supply Co., Inc. has been lawfully obtained by Seller. Seller is not
involved in any interference, opposition or cancellation proceedings, such name
has not been licensed to any third party, and such name does not infringe in any
material respect the proprietary rights of others. Seller has not received any
notice of conflict with the asserted rights of others, in Seller's use of such
trade and corporate name. Schedule 4.19 attached hereto contains a true and
complete list of all business names and addresses used by Seller within the
three (3) year period preceding the date hereof.
4.20. FINANCIAL STATEMENTS. Seller has delivered to Buyer copies of
the unaudited financial statements for the years ended December 31, 1995 and
1994, and the quarter ended March 31, 1996, each consisting of (i) the statement
of assets and liabilities and stockholders' equity and (ii) the statement of
revenues and expenses for the relevant periods then ended, copies of which are
attached hereto as Schedule 4.20 (the "FINANCIAL STATEMENTS"). The Financial
Statements (i) present fairly the financial position of the Business (including
the Acquired Assets), and the results of the operation of the Business as of the
date thereof and for the relevant periods then ended, in conformity with the
income tax basis method of accounting, consistently applied during the relevant
periods, and (ii) make adequate disclosure of all material obligations and
liabilities of Seller related to the Business as of the date thereof.
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4.21. ENVIRONMENTAL MATTERS. As used in this Agreement, "HAZARDOUS
MATERIALS" means any chemical, substance, material, controlled substance,
object, condition, waste or combination thereof which is or may be hazardous to
human health or safety or to the environment due to its radioactivity,
ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity,
infectiousness or other harmful or potentially harmful properties or effects,
including, without limitation, petroleum and petroleum products, asbestos,
radon, polychlorinated biphenyls (PCBs) and all of those chemicals, substances,
materials, controlled substances, objects, conditions, wastes or combinations
thereof which are now or become in the future listed, defined or regulated in
any manner or by any federal, state or local law based upon, directly or
indirectly, such properties or effects. As used in this Agreement,
"ENVIRONMENTAL LAWS" means any federal, state or local environmental, health
and/or safety-related law, decision of the courts, ordinance, rule, regulation,
code, order, directive, guideline, permit or permit condition, concurrently
existing and as amended, enacted, issued or adopted in the future which is
applicable to the Real Property or other real property presently or formerly
owned or leased by Seller. The Acquired Real Property and all adjacent property,
including, without limitation, the improvements thereon and the subsurface soils
and ground water, are now: (i) free of any Hazardous Materials, and (ii) in
compliance with all Environmental Laws. Neither Seller nor, to the best of
Seller's knowledge, any third party, has used, generated, manufactured, stored,
disposed of, discharged or released on, under or about the Acquired Real
Property or any adjacent property, or transported to or from the Acquired Real
Property any Hazardous Materials. No release, discharge, leak or dumping of any
Hazardous Materials has occurred at any time on the Acquired Real Property or
any adjacent property owned or leased by Seller or any related entity or
affiliate of Seller. Seller has not received any notice or warning from any
governmental agency or authority or any third party with respect to or claiming
the release or discharge of or exposure to any Hazardous Materials in, on, under
or about the Acquired Real Property or any other adjacent property or other real
property presently or formerly owned or leased by Seller or threatening any
investigation of the Acquired Real Property or adjacent property or other real
property presently or formerly owned or leased by Seller. There are no
environmental liens against the Acquired Real Property. All underground and
above ground storage tanks and related pumps and piping on the Acquired Real
Property (collectively, the "TANKS") are listed and described on Schedule 4.21
attached hereto and are all in compliance with all Environmental Laws to the
satisfaction and with all necessary approvals of all governmental agencies or
authorities with jurisdiction thereover. Seller shall deliver to Buyer as soon
as reasonably possible, but in no event later than the fifth (5th) day following
the date of this Agreement: all (i) reports; (ii) tests; (iii) governmental
permits, approvals, certificates, correspondence, closure plans, and any other
information or data; and (iv) any other information and/or data relating to
Hazardous Materials in, on, under or about the Real Property or adjacent
properties or other real property presently or formerly owned or leased by
Seller including, but not limited to the Tanks that Seller has in its
possession and control.
4.22. INFORMATION REGARDING ASSETS. Schedule 4.22 attached hereto
lists the present locations of all of the Tangible Assets.
4.23. DISCLOSURE. No representation or warranty made by Seller
contained in this Agreement or in any other writing furnished pursuant hereto
contains or will contain an untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the
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statements and facts contained herein or therein, in light of the circumstances
in which they were or are made, not false or misleading.
4.24. ACCOUNTS RECEIVABLE. The Accounts Receivable represent bona
fide indebtedness incurred by account debtors and arose in the ordinary course
of business of the Seller consistent with past practice. There are no facts
regarding consents, claims or rights of set-off contained in any written
agreement with any account debtor relating to the amount or validity of any
such Accounts Receivable.
4.25. INTELLECTUAL PROPERTY. The Seller owns or holds, and has the
right and authority to use, the Intellectual Property, free and clear of any
Liens or other rights or claims. The Seller has not received any notice that
it has infringed any patent, tradename, service mark, trademark, copyright or
trade secret of any person, business or other entity.
4.26. CONSENTS AND APPROVALS. No certificate, permit, consent,
approval, authorization, order of or filing or registration with any third party
or any Governmental Authority is or will be required for the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
4.27. RENTAL CONTRACTS. Each Rental Contract is substantially in the
form of the standard rental contract previously provided to Buyer. The Seller
has not rented any Rental Equipment at a rental rate of less than 75% of the
listed rental rate.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each Shareholder, severally and not jointly, represents and warrants
to and for the benefit of Buyer as follows:
5.1. POWER AND AUTHORITY. Each Shareholder has full power and
authority to make and perform this Agreement, and to perform the transactions
contemplated by this Agreement. This Agreement and all other agreements and
instruments executed and delivered by each Shareholder in connection herewith
have been duly executed and delivered by such Shareholder. This Agreement and
the transactions and other agreements and instruments contemplated by this
Agreement constitute a legal, valid and binding obligation of each Shareholder,
enforceable against each Shareholder in accordance with its terms.
5.2. DISCLOSURE. No representation or warranty made by each
Shareholder contained in this Agreement or in any other writing furnished
pursuant hereto contains or will contain an untrue statement of a material fact
or omits or will omit to state a material fact necessary to make the statements
and facts contained herein or therein, in light of the circumstances in which
they were or are made, not false or misleading.
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ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to and for the benefit of Seller as
follows:
6.1. ORGANIZATION AND STANDING; POWER AND AUTHORITY. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, and has full corporate power and authority to make and
perform this Agreement, and to perform the transactions contemplated by this
Agreement. This Agreement and all other agreements and instruments executed and
delivered by Buyer in connection herewith have been duly executed and delivered
by Buyer. This Agreement and the transactions and other agreements and
instruments contemplated by this Agreement constitute a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
6.2. CONFLICTS; DEFAULTS. Neither the execution and delivery of
this Agreement by Buyer, nor the performance by Buyer of the transactions
contemplated hereby, will violate, conflict with, or constitute a default under
any of the terms of Buyer's Articles of Incorporation or Bylaws.
6.3. BROKERS, FINDERS AND AGENTS. Buyer is not directly or
indirectly obligated to anyone acting as a broker, finder or in any other
similar capacity in connection with this Agreement or the transactions
contemplated hereby.
6.4. DISCLOSURE. No representation or warranty made by Buyer
contained in this Agreement or in any other writing furnished pursuant hereto
contains or will contain an untrue statement of a material fact or omits or will
omit to state a material fact necessary to make the statements and facts
contained herein or therein, in light of the circumstances in which they were or
are made, not false or misleading.
ARTICLE 7.
COVENANTS OF SELLER
7.1. CUSTOMER AND SUPPLIER RELATIONSHIPS; ASSERTION OF CLAIMS. From
the date of this Agreement, Seller shall use its best efforts to assist in the
transfer to Buyer of the goodwill and reputation associated with the Business,
and Seller's customer and supplier relationships pertaining to the Business.
Seller shall use its best efforts to assure that the current customers and
suppliers of the Business shall continue to do business with Buyer in accordance
with the terms and for the periods of time set forth in any contract, agreement,
commitment or undertaking (including the Acquired Contracts), whether oral or
written, and whether currently in effect or proposed to be entered into by
Seller. Seller covenants and agrees with Buyer that it shall give Buyer ten (10)
days' written notice prior to the Closing Date of its intent to assert any claim
against any former or current customer of Seller, and that failure to give such
notice within such period shall constitute a waiver and release of any such
claim.
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7.2. MAINTENANCE OF, AND ACCESS TO, RECORDS. Seller shall provide
Buyer all records relating to the Business in accordance with this Agreement.
Seller agrees to provide Buyer access to all Tax Returns and supporting
documentation and work papers for taxable periods prior to or including the
Closing Date. Buyer shall have the right upon reasonable prior notice to inspect
and make copies of such Tax Returns and supporting documentation and work papers
during normal business hours. Seller shall use reasonable efforts not to destroy
or allow the destruction of any such Tax Returns, documentation or work papers
without first offering in writing to deliver such documents to Buyer. After the
Closing, Buyer shall upon reasonable prior notice afford Seller access during
normal business hours to such records relating to the Business prior to the
Closing. Buyer shall use reasonable efforts not to destroy or allow the
destruction of any such records without first offering in writing to deliver
such records to Seller.
7.3. OPERATION OF BUSINESS. From the date hereof until Closing,
except as expressly permitted in writing by Buyer or otherwise contemplated by
this Agreement, Seller shall operate the Business in the ordinary course of
business in a manner consistent with past practice, and in any event shall not:
(a) sell, lease or dispose of any of the Acquired Assets
or subject any of the Acquired Assets to any Lien;
(b) sell any Rental Equipment;
(c) enter into an equipment rental contract with an
expected return date of more than 90 days, except in the ordinary course of
business consistent with past practice;
(d) amend, waive, release, dispose of or permit to lapse
any material right under any of the Acquired Contracts or the Rental Contracts
or any material right relating to the Business;
(e) lease or purchase any real property, renew, amend
or modify any existing lease of any of the Real Property or open a new facility;
(f) do, or permit to be done, anything which is
represented and warranted not to have occurred since December 31, 1995 in
Section 4.15 hereof;
(g) take any action, or cause any action to be taken
which causes a representation or warranty made by Seller to be untrue or causes
a failure in a condition to Closing;
(h) make any dividends, distributions, or other payments
to or for the benefit of Seller's shareholders, incur any obligation to Seller's
shareholders or engage in any transaction that would result in an obligation of
Seller to Seller's shareholders;
(i) pay or prepay any indebtedness of Seller other than
mandatory payments of principal and interest; or
(j) agree to do any of the above.
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<PAGE> 27
7.4. ACCESS TO REAL PROPERTY. Seller shall, to the extent possible,
provide Buyer and its agents and consultants with access to the Acquired Real
Property, during normal business hours and upon reasonable notice, for the
purpose of conducting an environmental, health and safety assessment, including,
without limitation, conducting such soil, groundwater and other sampling as
Buyer, its agents or consultants deem necessary or desirable of the Acquired
Real Property and the operations of the Business thereon (the "Environmental
Assessment"). Seller shall use its best efforts to obtain any consents necessary
for Buyer to conduct the Environmental Assessment. In the event Buyer and its
agents and consultants are not granted access to conduct the Environmental
Assessment at one of Seller's sites comprising part of the Acquired Real
Property, Buyer may at its option provide Seller with written notice that Buyer
declines to assume the lease regarding such site, and such site shall no longer
constitute part of the Acquired Real Property. If such site is excluded from the
Acquired Real Property, any obligations or liabilities of Seller under the lease
for such site shall be Retained Liabilities, and the Purchase Price shall be
decreased by $250,000. In the event Buyer and its agents and consultants are not
granted access to conduct the Environmental Assessment at two or more of
Seller's sites comprising part of the Acquired Real Property, Buyer may at its
option provide Seller with written notice that the Environmental Assessment was
not completed due to an inability to examine all of the Acquired Real Property.
Upon receipt by Seller of such written notice as to the inability of Buyer to
complete the Environmental Assessment, this Agreement shall be terminated and
shall be of no further force and effect, and Buyer shall have no further
obligation hereunder.
7.5. ACQUISITION PROPOSALS. Until the first to occur of the Closing
Date or the termination of this Agreement without Closing, Seller will not,
directly or indirectly, and will instruct and otherwise use its best efforts to
cause its officers, directors, employees, and agents, and all other advisors and
other representatives or consultants of Seller, not to, directly or indirectly,
solicit, initiate or engage in any proposals or offers from any third party
relating to any acquisition or purchase of all or a material amount of the
assets of, or any securities of, or any merger, consolidation or business
combination with, Seller.
7.6. PRESERVATION OF BUSINESS; EMPLOYEE RELATIONS. Seller shall use
its best efforts prior to the Closing Date to preserve the business organization
of the Business intact and to preserve for Buyer the present relations between
Seller and its employees, including making payroll payments immediately prior to
the Closing Date to its employees of their accrued but unpaid wages as of the
Closing Date, it being understood that Buyer shall have no obligation to
continue any such relations with such employees, except to the extent Buyer has
assumed the Acquired Contracts or other obligations as provided herein.
7.7. ACCESS TO INFORMATION. During the period from the date hereof
to Closing, Seller shall afford to the officers, employees or other authorized
representatives of Buyer reasonable access during normal business hours to all
of the assets, properties, books and records of Seller relating to the Business
and the Seller and shall furnish or cause to be furnished copies of any such
books or records and such financial and operating data and other information
relating to the Business and Seller as Buyer may reasonably request.
7.8. CONSENTS. Seller shall use its best efforts to obtain any
consents of Governmental Authorities, suppliers, distributors, and other Persons
required in order for Seller to sell and
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<PAGE> 28
transfer the Business pursuant to this Agreement, including without limitation
the consents listed on Schedule 1.2.
7.9. CHANGE OF SELLER'S NAME. Immediately following the Closing,
Seller shall cease to use the name "Alpine Equipment Rentals & Supply Co." or
any similar name and as soon as practical thereafter will file with the office
of the Secretary of State of the State of Washington all documents necessary to
change the name of Seller to a name reasonably satisfactory to Buyer. Pending
the effectiveness of such name change, Seller shall file all necessary
documentation with the appropriate governmental authorities to evidence its
doing business as an entity using a name other than "Alpine Equipment Rentals &
Supply Co." Seller shall take the equivalent action with respect to such name in
any other jurisdiction where it has been, is or is licensed to be used.
7.10. ASSISTANCE WITH AUDIT. Immediately following the execution
hereof and continuing after Closing, Seller and the Shareholders shall cooperate
with Buyer and its agents and representatives, including Coopers & Lybrand LLP,
and Seller and the Shareholders shall allow Buyer and such agents and
representatives access to all records of Seller not otherwise transferred to
Buyer in accordance with this Agreement, to allow Buyer to prepare financial
statements of Seller in accordance with generally accepted accounting
principles, and to allow Coopers & Lybrand LLP to audit such financial
statements, for the years ended December 31, 1995, 1994 and 1993.
7.11. SELLER 401(K) PLAN. Seller shall terminate its Alpine
Equipment Rentals & Supply Retirement Savings Plan (the "ALPINE 401(K) PLAN")
and apply for a favorable United States Internal Revenue Service (the "IRS")
determination letter with respect to such termination within one year after the
Closing. After receiving notice from Seller of such termination and a copy of
such IRS determination letter, Buyer shall offer its employees who were
employees of Seller at Closing and who have an account balance in the Alpine
401(k) Plan the opportunity to roll over the funds held on behalf of such
employees in the Alpine 401(k) Plan to a similar Buyer plan, if available, to
the extent permitted by law.
ARTICLE 8.
CONDITIONS OF CLOSING
8.1. OBLIGATION OF BUYER. The obligation of Buyer to consummate the
purchase and sale contemplated by the provisions of this Agreement shall be
subject to the fulfillment on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties; Performance. The
representations and warranties of Seller set forth in this Agreement shall be
true and correct in all material respects both on the date hereof and at and
as of the Closing Date (as though such representations and warranties were
made at and as of such date) except with respect to the effect of transactions
specifically permitted by the provisions of this Agreement, and all agreements
and covenants to be performed by Seller on or before the Closing Date shall,
except to the extent that performance thereof shall have been waived in a
writing signed by an officer of Buyer, have been duly performed in all
material respects.
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<PAGE> 29
(b) Injunctive Action. No action or proceeding shall
have been instituted with the purpose or probable effect of enjoining or
preventing the consummation of this Agreement.
(c) Receipt of Closing Documents. Seller shall deliver
to Buyer:
(i) An opinion dated as of the Closing Date,
and in form and substance satisfactory to Buyer and its
counsel, executed by Casey & Pruzan, counsel to Seller.
(ii) A certificate, executed on behalf of
Seller by its President and dated the Closing Date, which
shall state that (A) all of the terms, covenants and
conditions herein to be performed or complied with by Seller
on or before the Closing Date have been fully performed or
complied with, (B) the representations and warranties made by
Seller herein are true and correct in all material respects,
on and as of the Closing Date, with the same force and effect
as though such representations and warranties had been made on
and as of the Closing Date, and (C) no change in or effect on
the Seller or Business that is or is reasonably likely to have
a Material Adverse Effect has occurred after the execution
hereof and prior to Closing.
(iii) A certificate, executed on behalf of
Seller by its President or Secretary and dated the Closing
Date, pursuant to which such officer shall certify (A) the due
adoption by the board of directors of Seller of resolutions
attached to such certificate authorizing, approving and
adopting the execution and delivery of this Agreement and all
transactions contemplated hereby; (B) the due adoption by the
shareholders of Seller of resolutions attached to such
certificate authorizing, approving and adopting the execution
and delivery of this Agreement and all transaction
contemplated hereby; (C) certifying that the copies of the
Articles of Incorporation and Bylaws of the Seller attached to
such certificate are true and correct copies thereof and that
such Articles of Incorporation and Bylaws have not be amended
except as reflected in such copy; and (D) the incumbency and
true signatures of those officers of Seller duly authorized to
act on its behalf in connection with the execution and
delivery of this Agreement and all transactions contemplated
hereby;
(iv) A good standing certificate from the
Secretary of State of Washington with respect to the good
standing and existence of Seller; and
(v) Such other bills of sale, confirmatory
bills of sale, endorsements, assignments, affidavits, and
other good and sufficient instruments of sale, assignment,
conveyance and transfer, in form and substance reasonably
satisfactory to Buyer and its counsel, in their sole
discretion, as may be required to effectively vest in Buyer
all of Seller's right, title and interest in and to all of the
Acquired Assets being transferred to Buyer on the Closing
Date, free and clear of any and all Liens.
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<PAGE> 30
(d) Proceedings and Documents. All corporate and other
proceedings and all documents incidental to the transaction to be effected at
the Closing shall be satisfactory in form and substance to Buyer and its
counsel, and Buyer shall have received all such counterpart originals or
certified or other copies of such documents as Buyer may reasonably request.
(e) Third Party Approvals. Seller shall have obtained and
delivered to Buyer such consents and approvals from third parties or
Governmental Authorities as may be required for the consummation of the
transactions contemplated by this Agreement, including without limitation any
consents required for assignment to Buyer of the Acquired Contracts and the
consents listed on Schedule 1.2.
(f) Tax Status Letter. All applicable tax authorities
shall have (i) issued all Tax Clearances which are either required by law or
otherwise available and requested by Buyer or (ii) the period prescribed by the
applicable Governmental Authorities for the issuance or effectiveness of such
Tax Clearances shall have elapsed from the date the Tax Clearance requests were
delivered, whichever occurs first.
(g) Release of Liens. Seller shall have delivered to
Buyer valid termination statements or releases with respect to any and all Liens
affecting the Acquired Assets, or other evidence in form and substance
satisfactory to Buyer and its counsel, in their sole discretion, from the
creditor or Lien-holder of Seller, that the liability or indebtedness
represented by any such Lien has been paid or satisfied as of the Closing Date.
(h) No Material Adverse Effect. No change in or effect
on the Seller or Business that is or is reasonably likely to have a Material
Adverse Effect shall have occurred after the execution hereof and prior to
Closing.
(i) Investigation. Prior to the Closing, Buyer shall not
have given Seller written notice pursuant to Section 3.2(b) hereof to the
effect that Buyer's investigation of Seller has disclosed or confirmed matters
which Buyer, in its reasonable judgment exercised in good faith, believes to
be either inconsistent in any material respect with any of the representations
and warranties of Seller contained in this Agreement or of such significance
as to materially and adversely affect, in Buyer's reasonable judgment, the
value of the assets and other benefits intended to be acquired by Buyer under
this Agreement or the prospects of the Business.
(j) Insurance. Written evidence, in form and substance
satisfactory to Buyer, in its sole discretion, that insurance policies are in
place, insuring such matters relating to Seller, the Acquired Assets, the
Business, and the Liabilities for which Buyer is indemnified under Section 8.2
hereof, as Buyer and Seller mutually determine is reasonably feasible and
economic to continue after the Closing Date, upon terms and for such periods
as Buyer and Seller may agree.
(k) Eide Non-Compete Agreement. Buyer shall have
entered into a Non-Compete Agreement with Gary Eide in substantially the
form attached hereto as Exhibit A (the "EIDE NON-COMPETE AGREEMENT").
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<PAGE> 31
(l) Schneider Non-Compete Agreement. Buyer shall have
entered into a Non-Compete Agreement with Jerome Schneider in substantially
the form attached hereto as Exhibit B (together with the Eide Non-Compete
Agreement, the "NON-COMPETE AGREEMENTS").
(m) Eide Consulting Agreement. Buyer shall have
entered into a Consulting Agreement with Gary Eide in substantially the form
attached hereto as Exhibit C.
(n) Schneider Consulting Agreement. Buyer shall have
entered into a Consulting Agreement with Jerome Schneider in substantially the
form attached hereto as Exhibit D.
8.2. OBLIGATION OF SELLER.
The obligation of Seller to consummate the purchase and sale
contemplated by the provisions of this Agreement shall be subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties; Performance. The
representations and warranties of Buyer set forth in this Agreement shall be
true and correct in all material respects both on the date hereof and at and
as of the Closing Date (as though such representations and warranties were
made at and as of such date) except with respect to the effect of transactions
specifically permitted by the provisions of this Agreement, and Buyer shall
have duly performed in all material respects all of its obligations under this
Agreement which are to be performed by it, except to the extent that
performance thereof shall have been waived in a writing signed by an officer
of Seller, on or prior to the Closing Date.
(b) Receipt of Closing Documents. Buyer shall deliver
to Seller:
(i) Certified copies of the resolutions of the
Board of Directors of Buyer authorizing and approving this
Agreement and all other transactions and agreements
contemplated hereby;
(ii) A certificate, executed on behalf of Buyer
by one of its executive officers and dated the Closing Date,
that shall state that (A) all the terms, covenants and
conditions herein to be performed or complied with by Buyer
on or before the Closing Date have been fully performed or
complied with, and (B) the representations and warranties
made by Buyer herein are true and correct in all material
respects, on and as of the Closing Date, with the same force
and effect as though such representations and warranties had
been made on and as of the Closing Date;
(iii) Payment of the Purchase Price as provided
in Section 2.1; and
(iv) Payment of the Trade Payables Amount as
provided in Section 2.2.
(c) Injunctive Action. No action or proceeding shall
have been instituted with the purpose of or probable effect of enjoining or
preventing the consummation of this Agreement.
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<PAGE> 32
(d) Proceedings and Documents. All corporate and other
proceedings and all documents incidental to the transactions to be effected at
the Closing shall be satisfactory in form and substance to Seller and their
counsel, and Seller shall have received all such counterpart originals or
certified or other copies of such documents as Seller may reasonably request.
ARTICLE 9.
INDEMNIFICATION
9.1. INDEMNIFICATION BY BUYER. Following the Closing Date, Buyer
shall indemnify, defend and hold Seller harmless from and against any and all
claims, losses, liabilities, damages, costs and expenses (including, without
limitation, attorneys' fees and disbursements) (collectively, "LIABILITIES")
that may be incurred by, imposed upon or asserted against Seller arising from:
(a) any failure or alleged failure of Buyer to assume, pay, perform and
discharge the Assumed Obligations arising under the Acquired Contracts, (b) any
inaccuracy in or breach of any representation, warranty, covenant, obligation or
agreement of Buyer contained herein or in any document or instrument delivered
pursuant hereto, and (c) the use and operation of the Acquired Assets after the
Closing, provided that such Liabilities do not arise or are not in connection
with any matter for which the Buyer Group (as hereinafter defined) is expressly
indemnified and held harmless pursuant to Section 9.2 hereof.
9.2. INDEMNIFICATION BY SELLER AND SHAREHOLDERS. Following the
Closing Date, Seller and the Shareholders (collectively the "INDEMNITORS") shall
jointly and severally indemnify, defend and hold Buyer and its employees,
officers, shareholders, lenders, contractors, directors, affiliates, agents,
successors and assigns (the "BUYER GROUP") harmless from and against any and all
Liabilities that may be incurred by, imposed upon or asserted against any member
of the Buyer Group arising from or relating to: (a) any failure or alleged
failure of Seller to assume, pay, perform and discharge the Retained Liabilities
relating to the Business, (b) any inaccuracy in or breach of any representation,
warranty, covenant, obligation or agreement of Seller or the Shareholders
contained herein, or in any document or instrument delivered pursuant hereto,
(c) any failure or alleged failure to comply with the laws of any jurisdiction
relating to so called bulk sales, bulk transfers or similar laws which may be
applicable to the transfer of the Acquired Assets to Buyer, (d) the operation of
the Business, the ownership, use , rental or sale of any product or Rental
Equipment of the Business by Seller prior to the Closing Date (including,
without limitation, any contract, tax, product, tort, employment, environmental
or other Liability or Liability under any Environmental Laws whatsoever), (e)
the termination of any of Seller's employees, (f) except as set forth in Section
2.3 hereof, all sales or transfer taxes due under applicable state or local law
by reason of the transfer of the Acquired Assets from Seller to Buyer, (g) the
termination or non-renewal of any lease, agreement or other contractual
arrangement contemplated by this Agreement and (h) Seller's use, leasing or
operation of the Real Property or other real property presently or formerly
owned or leased by Seller prior to the Closing Date, including, without
limitation, any use of underground or above ground storage tanks at the Real
Property.
Without limiting the generality of, and in addition to, the foregoing,
the Indemnitors shall jointly and severally indemnify, protect, defend and
hold harmless Buyer Group from and against
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any and all claims, judgments, damages, penalties, fines, taxes, costs,
liabilities, losses and expenses arising at any time as a result of or in
connection with the presence of any Hazardous Material, which was present on or
prior to the Closing Date hereof, on, under or about the Real Property or other
real property presently or formerly owned or leased by Seller. This obligation
by the Indemnitors to jointly and severally indemnify, protect, defend, and hold
harmless Buyer Group includes, without limitation: costs and expenses incurred
for or in connection with any investigation, cleanup, remediation, monitoring,
removal, restoration, or closure work required by any governmental agency or
authority by Indemnitees because of any Hazardous Materials present on, under,
or about the Real Property or other real property presently or formerly owned or
leased by Seller; the costs and expenses of restoring, replacing or acquiring
the equivalent of damaged natural resources; all reasonably foreseeable
consequential damages; damages for the loss or restriction on use of rentable or
usable space or of any amenity of the Acquired Real Property; all sums paid in
settlement of claims; reasonable attorneys' fees; litigation, arbitration and
administrative proceeding costs; and expert, consultant and laboratory fees.
9.3. PROCEDURES FOR INDEMNIFICATION. Each indemnified party under
this Article 9 shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against such indemnified party in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise have on account of the indemnity agreement under
this Article 9. In connection with any action, suit or proceeding as to which an
indemnified party is or claims to be entitled to indemnification hereunder, the
indemnified party may retain, at the expense of the indemnifying party, separate
legal counsel reasonably satisfactory to the indemnifying party; provided,
however that the indemnifying party shall be entitled to control the defense
thereof and enter into any settlement of any such action, suit or proceeding,
without the prior written consent of the indemnified party if the indemnifying
party shall have acknowledged and agreed fully to indemnify and hold harmless
such indemnified party from and against all Liabilities arising out of or
relating to such action, suit or proceeding.
9.4. NEGLIGENCE OF INDEMNIFIED PARTY. THE INDEMNIFICATION PROVIDED
FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE NEGLIGENCE OF THE
INDEMNIFIED PARTY IS ALLEGED OR PROVEN.
9.5. LIMITS ON INDEMNIFICATION.
(a) Threshold for Indemnification Claims. No claim for
indemnification under this Article 9 may be made for any individual claim
unless such claim is in excess of $5,000, and then such claim may be made for
the full amount of such claim.
(b) Maximum Indemnification Limits. Notwithstanding the
other provisions of this Article 9, the aggregate liability of the Buyer on
the one hand and the Indemnitors on the other for indemnification claims under
this Article 9 shall not exceed, for each of them, $7,000,000. For avoidance
of doubt each of the Indemnitors shall be jointly and severally liable under
this Article 9, but the aggregate liability of the Indemnitors collectively
under this Article 9 shall not exceed $7,000,000. Notwithstanding the
foregoing, the liability of each Shareholder for indemnification claims under
this Article 9 shall be joint and several, but each Shareholder's
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individual aggregate liability under this Article 9 shall not exceed the dollar
amount set forth opposite each such Shareholder's name:
<TABLE>
<S> <C>
Gary R. Eide $2,730,000
Dale V. Houg $490,000
Jerome G. Schneider $2,310,000
Edward M. Zawislak $1,470,000
</TABLE>
ARTICLE 10.
MISCELLANEOUS
10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties hereto made in this Agreement
shall not be affected by any information furnished to, or any investigation
conducted by, any of them or their representatives in connection with the
subject matter of this Agreement, and such representations and warranties shall
survive the Closing until April 30, 1998, except for the representations and
warranties contained in Sections 4.4, 4.6 and 4.21 which shall survive the
closing for a period of twenty-four (24) months following the Closing Date, and
the representation and warranties contained in Section 4.16, which shall survive
the Closing until the expiration of the applicable statute of limitations.
10.2. AMENDMENTS. This Agreement may be amended only by a writing
executed by all of the parties hereto.
10.3. ENTIRE AGREEMENT. This Agreement and the other agreements
expressly provided for herein set forth the entire understanding of the parties
hereto and supersede all prior contracts, agreements, arrangements,
communications, discussions, representations and warranties, whether oral or
written, between the parties.
10.4. GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the Laws of the State of Texas,
without giving effect to principles of choice or conflicts of law thereof,
except to the extent that the Laws of the State of Washington govern with
respect to the transfer of title to the Acquired Assets.
10.5. NOTICES. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given (a) upon receipt if personally delivered or sent by facsimile, (b) on the
day after such notice is sent if sent by overnight courier, or (c) on the fifth
business day after being sent by registered or certified mail, return receipt
requested, postage prepaid, to the parties at their respective addresses set
forth below.
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<TABLE>
<S> <C>
To Seller or any Shareholder: Alpine Equipment Rentals & Supply
Co., Inc.
9757 Juanita Drive N.E., Suite 200
Kirkland, Washington 98034
Attention: Gary Eide
Facsimile No.: (206) 820-0173
With copies to: Casey & Pruzan
18th Floor Pacific Building
720 Third Avenue
Seattle, Washington 98104
Attention: Gary R. English
Facsimile No.: (206) 623-3649
To Buyer: Primeco Inc.
16225 Park Ten Place
Suite 200
Houston, Texas 77084
Attention: Kevin L. Loughlin
Facsimile No.: (713) 647-5135
With copies to: Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
Attention: J. Keith Morgan
Facsimile No.: (212) 949-7606
</TABLE>
Any party may, by written notice to the other party in accordance with this
Section 10.5, change the address or the persons to whom notices or copies
thereof shall be directed.
10.6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together will constitute one and the same instrument.
10.7. ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of each party hereto, but no rights,
obligations or liabilities hereunder shall be assignable by Seller without the
prior written consent of Buyer. Buyer may assign, in whole or in part, this
Agreement or any interest herein or any right, benefit or any obligation arising
hereunder, to any direct or indirect affiliate of Buyer, provided, that Buyer
shall remain liable for the payment of the Purchase Price and its other
obligations hereunder upon the terms and subject to the conditions of this
Agreement. For the purposes of this Agreement, the term "affiliate" shall mean
any person, firm or corporation that directly, or indirectly through one or more
entities, controls or is controlled by, or is under control with, the person
specified or, directly or indirectly, is related to or otherwise associated with
any such person.
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10.8. WAIVERS. Any waiver by any party of any violation of, breach
of or default under any provision of this Agreement or any other agreements
provided for herein, by the other party shall not be construed as, or
constitute, a continuing waiver of such provision, or waiver of any other
violation of, breach of or default under any other provision of this Agreement
or any other agreements provided for herein.
10.9. THIRD PARTIES. Except as set forth in Article 9 hereof,
nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or give any person or entity other than Buyer, Seller,
and the Shareholders any rights or remedies under or by reason of this
Agreement.
10.10. EXPENSES. Each party hereto will bear the legal, accounting
and other expenses incurred by such party in connection with this Agreement, and
the other agreements and transactions contemplated hereby.
10.11. LEGAL FEES AND EXPENSES. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party or parties shall be entitled to recover actual attorneys'
fees and other costs incurred in that action or proceeding, in addition to any
other relief to which it or they may be entitled. "Prevailing Party" within the
meaning of this Section 10.11 includes, without limitation, the party who agrees
to dismiss an action upon the other party's payment of all or a portion of the
sums allegedly due or performance of the covenants allegedly breached, or who
obtains substantially the relief sought by it.
10.12. SEVERABILITY. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
10.13. PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, Buyer and
Seller will consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or the
transactions contemplated hereby and shall not issue any such press release or
make any such public statement to which the other party shall reasonably object,
except as may be required by law.
10.14. HEADINGS; PRONOUNS. The headings used in this Agreement are
for convenience only and shall not be deemed to be a binding portion of this
Agreement. The pronouns he, she or it are also used for convenience, and in the
event that an improper pronoun has been used, it shall be deemed changed so as
to render the sentence in which it is contained effective in accordance with its
terms.
10.15. JUDICIAL PROCEEDINGS. Any judicial proceeding permitted by
this Agreement may be brought in any court of competent jurisdiction in Harris
County, Texas, and, by execution and delivery of this Agreement, each party
hereto (a) accepts, generally and unconditionally, the
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<PAGE> 37
nonexclusive jurisdiction of such courts and any related appellate court, and
irrevocably agrees to be bound by any judgment rendered thereby, subject to any
right of appeal, and (b) irrevocably waives any objection it may now or
hereafter have as to the venue or jurisdiction of any such proceeding brought in
such a court or that such court is an inconvenient forum.
ARTICLE 11.
ARBITRATION
11.1. AGREEMENT TO ARBITRATE. Except as expressly provided herein,
all disputes between Buyer, Seller and the Shareholders arising out of or in
connection with the execution, interpretation and performance of this Agreement
(including the validity, scope and enforceability of this Article 11) shall, to
the fullest extent permitted by law, be solely and finally settled by a board of
arbitrators consisting of either one arbitrator or three arbitrators, as set
forth below (the term "ARBITRATORS" shall refer to the board of arbitrators,
whether it consists of one or three members). THE ARBITRATION PROCEEDINGS SHALL
BE HELD IN HOUSTON, TEXAS, AND EXCEPT AS OTHERWISE MAY BE PROVIDED IN THIS
ARTICLE 11, THE ARBITRATION PROCEEDINGS SHALL BE CONDUCTED PURSUANT TO AND IN
ACCORDANCE WITH THE TEXAS GENERAL ARBITRATION ACT, TEX. CIV. PRAC. & REM. CODE
SS. 171.000 ET SEQ. (VERNON 1996) ("TGAA") AND THE COMMERCIAL ARBITRATION RULES
(THE "AAA RULES") OF THE AMERICAN ARBITRATION ASSOCIATION (THE "AAA"), TO THE
EXTENT THE AAA RULES ARE NOT INCONSISTENT WITH THE TGAA (THE TGAA AND THE AAA
RULES ARE COLLECTIVELY REFERRED TO AS THE "ARBITRATION RULES").
11.2. NOTICE OF ARBITRATION. If Buyer, Seller or any Shareholder
determines to submit a dispute to arbitration pursuant to this Article 11 such
party shall furnish the AAA and the other party(s) with a dated, written
statement (the "ARBITRATION NOTICE") indicating (i) such party's intent to
commence arbitration proceedings pursuant to this Article 11, (ii) the name and
address of such party and a designated officer or agent thereof, (iii) the
nature, with reasonable detail, of the dispute, (iv) the remedy such party will
seek and (v) any other information required under the Arbitration Rules.
11.3. APPOINTMENT OF ARBITRATORS.
(a) Within ten business days of the date of the Arbitration
Notice, the party commencing the arbitration (the "PETITIONER") and
the party with whom the Petitioner has its dispute (the "RESPONDENT")
shall attempt to agree on and then select one neutral arbitrator (the
"SOLE ARBITRATOR"). A "neutral" arbitrator shall be a person who
would not be subject to disqualification under Rule No. 19 of the AAA
Rules.
(b) If, within such ten day period, the Petitioner and
Respondent are unable to agree upon a Sole Arbitrator, each of them
shall have fifteen business days (following the expiration of the ten
day period) to select a qualifying arbitrator. A "qualifying"
arbitrator is a person who is not (i) an employee of either the
Petitioner, Respondent or any of their affiliates or (ii) counsel to
any such party at such time. If either the Petitioner or
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<PAGE> 38
Respondent fails to select a qualifying arbitrator or provide such
notice within the five day period, the AAA shall have the right to make
such selection in the manner provided under the AAA Rules. (Such
qualifying arbitrators hereafter may be referred to, respectively, as
the "FIRST ARBITRATOR" and the "SECOND ARBITRATOR.") Within ten
business days following their selection, the First and Second
Arbitrators shall select, and if they fail to do so the AAA shall
select in the manner provided under the AAA Rules (and provide written
notice of such selection to the parties hereto), a third arbitrator
(the "THIRD ARBITRATOR") from a list of members of the AAA's National
Panel of Commercial Arbitrators. The Third Arbitrator must be "neutral"
as that term is defined above. The Sole Arbitrator or the First, Second
and Third Arbitrators, as the case may be, shall be referred to
herein as the "ARBITRATORS".
11.4. AWARD FINAL. To the extent permissible under applicable law,
the parties hereto agree that the award of the Arbitrators shall be final and
shall not be subject to judicial review, except as permitted by Texas law.
Judgment on the arbitration award may be entered and enforced in any court
having jurisdiction over the parties or their assets. It is the intent of the
parties that the arbitration provisions hereof be enforced to the fullest extent
permitted by applicable law.
11.5. AVAILABILITY OF INJUNCTIVE RELIEF. Notwithstanding any other
provision of this Article 11, any party hereto may seek and receive injunctive
relief (whether as a temporary restraining order or preliminary injunction or
otherwise) or specific performance pending a decision of the Arbitrators, as the
case may be.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF the parties have hereunto set their hands
the day and year first above written.
PRIMECO INC.
By: /s/ Thomas E. Bennett
------------------------------------------
Name: Thomas E. Bennett
Title: President
ALPINE EQUIPMENT RENTALS & SUPPLY CO., INC.
By: /s/ Gary R. Eide
------------------------------------------
Name: Gary R. Eide
Title: President
/s/ Gary R. Eide
--------------------------------------------
Gary R. Eide
/s/ Dale V. Houg
--------------------------------------------
Dale V. Houg
/s/ Jerome G. Schneider
--------------------------------------------
Jerome G. Schneider
/s/ Edward M. Zawislak
--------------------------------------------
Edward M. Zawislak
31
<PAGE> 1
EXHIBIT 2.2
AMENDMENT AND SUPPLEMENT TO ASSET PURCHASE AND SALE AGREEMENT
This Amendment and Supplement to Asset Purchase and Sale Agreement
(this "AGREEMENT") is made and entered into as of the 29th day of July, 1996,
by and among Primeco Inc., a Texas corporation ("BUYER"), Alpine Equipment
Rentals & Supply Co, Inc., a Washington corporation ("ALPINE"), Gary R. Eide,
Dale V. Houg, Jerome G. Schneider, and Edward M. Zawislak (Messrs. Eide, Houg,
Schneider and Zawislak together, the "SHAREHOLDERS").
R E C I T A L S
A. Buyer, Seller and the Shareholders entered into an Asset
Purchase and Sale Agreement (the "Purchase Agreement"), dated as of May 13,
1996, pursuant to which, among other things, Seller agreed to sell, and Buyer
agreed to buy, substantially all of the assets of Seller.
B. Buyer, Seller and Shareholders desire to memorialize certain
amendments and supplements to the Purchase Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto covenant and
agree as follows:
1. AMENDMENT OF SECTION 2.1. Section 2.1 of the Purchase
Agreement is hereby amended and restated in its entirety as follows:
"2.1 PURCHASE PRICE. In exchange and as consideration for the sale
by Seller to Buyer of the Acquired Assets and (in addition to Buyer's
assumption of the Assumed Obligations, payment of the Trade Payables Amount and
additional amounts provided for in the Non-Competition Agreements (as
hereinafter defined)), in full payment of the purchase consideration therefor,
Buyer shall pay to Seller an aggregate purchase price (the "PURCHASE PRICE") of
Eleven Million Fifteen Thousand Dollars ($11,015,000) as follows:
(a) Buyer shall pay each creditor of Seller listed on
Schedule 2.1(a) attached hereto, on behalf of Seller, the amount listed
opposite such creditor's name on a payoff schedule to be provided by Seller in
writing to Buyer prior to Closing (the "PAYOFF SCHEDULE");
(b) Buyer shall pay $635,000 (the "ESCROW AMOUNT") to the
account (the "ESCROW ACCOUNT") designated by Texas Commerce Bank National
Association (the "ESCROW AGENT"); and
(c) Buyer shall pay the Purchase Price less (i) the
aggregate of the amounts listed on the Payoff Schedule, (ii) the Escrow Amount,
and (iii) any adjustments pursuant to Section 2.2 to Seller, in cash by wire
transfer to an account designated in writing by Seller."
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<PAGE> 2
2. AMENDMENT OF ARTICLE 9. Article 9 of the Purchase Agreement
is hereby amended by adding the following Section 9.6 thereto:
"9.6 MANNER OF INDEMNIFICATION.
(a) Environmental Claims Related to Seattle Property. In
the event Buyer has a claim under Section 9.2 arising from or in connection
with any claims, judgments, damages, penalties, fines, taxes, costs,
liabilities, lose or expenses arising at any time as a result of or in
connection with the presence of any Hazardous Material, which was present on or
prior to the Closing Date hereof, on, under or about the Real Property located
at 5421 First Avenue South, Seattle, Washington 98108, Buyer shall first
present such claim to the lessor of such Real Property. In the event such
lessor does not pay all of such claim within 10 days of receipt of such claim
for any reason (including without limitation any claim by such lessor that it
does not have to pay such claim due to Buyer's non-compliance with the terms or
provisions of any agreement between Buyer and such lessor), Buyer shall recover
such claim (or the portion of such claim remaining unpaid) from the Escrow
Account, until such time as the Escrow Account has been terminated or the funds
therein fully utilized. Upon termination of the Escrow Account or full
utilization of the funds therein, Buyer shall recover such claim (or the
portion of such claim remaining unpaid) directly from Seller and the
Shareholders. If Buyer recovers such claim (or a portion of such claim) from
Seller and the Shareholders (whether from the Escrow Account or otherwise),
Buyer shall assign to Seller and the Shareholders any indemnification or
contribution rights related to such claim it might have against such lessor.
Nothing in this Section 9.6(a) shall be deemed to amend, modify or impair the
obligations or liability of Seller and the Shareholders under Section 9.2.
(b) Other Indemnity Claims. All indemnity claims other
than those set forth in Section 9.6(a) shall be recovered initially from the
Escrow Account, until such time as the Escrow Account has been terminated of
the funds therein fully utilized. Seller and the Shareholders shall remain
liable under this Article 9 notwithstanding the termination of the Escrow
Account or full utilization of the funds therein."
3. EXTENSION OF LEASES. At the Closing, Buyer shall execute
extensions of the leases for the Real Property located in Tacoma, Washington,
and Bellingham, Washington, pursuant to the extensions of lease attached hereto
as Exhibits A and B, respectively.
4. ESCROW AGREEMENT.
(a) At Closing, Buyer, Seller and the Shareholders shall
execute and deliver the Escrow Agreement attached hereto as Exhibit C (the
"ESCROW AGREEMENT").
(b) Section 8.1 of the Purchase Agreement shall be
amended by adding the following subparagraph (o):
"(o) Buyer, Seller, the Shareholders and the Escrow Agent
shall have entered into the Escrow Agreement."
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<PAGE> 3
5. AMENDMENT OF SECTION 3.2(D). Section 3.2(d) of the Purchase
Agreement is hereby amended and restated in its entirety as follows:
"(d) by Seller or Buyer if the Closing has not occurred in
accordance with Section 3.1 on or prior to July 31, 1996."
6. FULL FORCE AND EFFECT. Except as expressly amended or
supplemented herein, the terms and conditions of the Purchase Agreement shall
remain in full force and effect.
[SIGNATURES ON NEXT PAGE]
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<PAGE> 4
IN WITNESS WHEREOF the parties have hereunto set their hands the day
and year first above written.
PRIMECO INC.
By: /s/ Kevin L. Loughlin
----------------------------------------
Name: Kevin L. Loughlin
Title: Director of Finance
ALPINE EQUIPMENT RENTALS & SUPPLY
CO., INC.
By: /s/ Gary R. Eide
----------------------------------------
Name: Gary R. Eide
Title: President
/s/ Gary R. Eide
-------------------------------------------
Gary R. Eide
/s/ Dale V. Houg
-------------------------------------------
Dale V. Houg
/s/ Jerome G. Schneider
-------------------------------------------
Jerome G. Schneider
/s/ Edward M. Zawislak
-------------------------------------------
Edward M. Zawislak
-4-
<PAGE> 1
EMPLOYMENT AGREEMENT
This Agreement is made and entered into effective as of April
1, 1996, by and between Primeco Inc., a Texas corporation ("Employer"), and
Brian Fontana ("Employee").
Employer hereby agrees to employ Employee, and Employee hereby
accepts such employment, on the terms and conditions hereinafter set forth.
1. Period of Employment. The period of Employee's
employment under this Agreement (the "Period of Employment") shall commence on
the date hereof (the "Effective Date") and shall expire on December 2, 1997
(the "Expiration Date"), subject to any extension as may be agreed or any
earlier termination of Employee's employment as provided in Section 6 hereof.
Upon the expiration of the initial term of this Agreement, and each subsequent
term or extension thereof, this Agreement shall automatically be extended for
an additional term of one year, unless the Employer or the Employee shall have
notified the other party hereto of its election to terminate this Agreement not
later than 90 days prior to the scheduled Expiration Date. If Employee's
employment is terminated pursuant to Section 6 hereof, the Period of Employment
shall expire as of the Date of Termination (as hereinafter defined).
2. Duties. During the Period of Employment, Employee
will faithfully perform those duties and responsibilities assigned by the Board
of Directors of the corporate parent ("Parent") of Employer (the "Board") or
the
<PAGE> 2
Chief Executive Officer of Employer and Employee will devote his full working
time and use his best efforts to advance the business and welfare of Employer
in furtherance of the policies established by the Board. During the Period of
Employment, Employee shall not engage in any other employment activities for
any direct or indirect remuneration without the concurrence of the Board,
except that Employee may continue to devote reasonable time to the management
of investments and to participation in community and charitable affairs, so
long as such activities do not interfere with his duties under this Agreement.
Employee shall have such title as the Board shall determine from time to time;
Employee's initial title is set forth on Exhibit A hereto.
3. Compensation.
3.1 Base Salary. During the Period of
Employment, Employer shall pay Employee a Base Salary at the rate of $160,000
per annum payable at least as frequently as bi-weekly and subject to payroll
deductions as may be necessary or customary in respect of Employer's salaried
employees in general. The amount of Employee's Base Salary shall be subject to
annual review by the Board, provided that the level of such Base Salary shall
not be subject to reduction.
3.2 Incentive Compensation. In addition to the
Base Salary provided for in Section 3.1 hereof, Employee shall participate in
the Management Cash Incentive Bonus Program (the "Program") as adopted by the
Board and pursuant
2
<PAGE> 3
to which Employee shall be entitled to annual cash bonuses as set forth on
Exhibit B hereto. Notwithstanding the foregoing, Employee's bonus payment, if
any, under the Program for fiscal 1996 shall be based upon achievement of the
applicable targets by Employer for the entire fiscal year, but the amount of
such bonus payment shall be prorated in accordance with the number of days
during the 1996 fiscal year that Employee was employed hereunder. Employer
agrees that it will not amend or modify the Program in any manner materially
adverse to Employee's interest thereunder without Employee's written consent.
It is understood that, at the discretion of the Board, the Program may be
terminated upon an initial public offering of the securities of Employer or
Parent ("IPO") and that by its terms the Program terminates at the end of the
1999 fiscal year unless extended beyond that date by the Board in its sole
discretion.
4. Benefits. During the Period of Employment, Employee
shall be entitled to participate in all fringe benefit programs maintained by
Employer that are available to its executive officers generally. Any payments
or benefits payable to Employee hereunder under any such fringe benefit
programs in respect of any calendar year during which Employee is employed by
Employer for less than the entire year shall, unless otherwise provided in the
applicable plan or arrangement, be prorated in accordance with the number of
days in such calendar year during which he is so employed. Employee
acknowledges that he shall have no vested rights
3
<PAGE> 4
under or to participate in any such program except as expressly provided under
the terms hereof or thereof.
5. Expenses. Employer will pay or reimburse Employee
for such reasonable travel, entertainment or other expenses as he may incur on
behalf of Employer during the Period of Employment in connection with the
performance of his duties hereunder but only to the extent that such expenses
were either specifically authorized by Employer or incurred in accordance with
policies established by the Board and provided that Employee shall furnish
Employer with such evidence relating to such expenses as Employer may
reasonably require to substantiate such expenses for tax purposes.
6. Termination of Employment.
6.1 Circumstances of Termination.
Notwithstanding the terms set forth in Section 1 hereof, Employee's employment
shall terminate under any of the following circumstances:
(a) Death. In the event of Employee's
death.
(b) Permanent Disability. If during the
Period of Employment Employee becomes physically or mentally incapacitated or
disabled so that (i) he is unable to perform for Employer substantially the
same services as he performed prior to incurring such incapacity or disability
or to devote his full working time or use his best efforts to advance the
business and welfare of Employer or otherwise to perform his duties under this
Agreement and (ii) such condition exists for
4
<PAGE> 5
an aggregate of six months in any 12 consecutive calendar month period
(Employer, at its option and expense, being entitled to retain a physician
reasonably acceptable to Employee to confirm the existence of such incapacity
or disability, and the determination of such physician being binding upon
Employer and Employee).
(c) Cause. At the option of Employer,
because Employee:
(i) has been convicted of, or has
pled guilty or nolo contendere to, a felony or a
crime involving moral turpitude, or
(ii) has embezzled or
misappropriated Employer funds or property, or
(iii) has continued use of alcohol or
drugs to an extent that interferes with the
performance by Employee of his employment
responsibilities, or
(iv) has violated Section 8.1,
Section 8.2, Section 8.3 or Section 8.4 hereof, or
(v) has willfully failed or refused
to perform those duties reasonably assigned or
delegated to him by the Board or the Chief Executive
Officer, which failure or refusal continues following
(a) the Board giving the Employee written notice
setting forth the facts or events constituting such
failure or refusal
5
<PAGE> 6
and (b) a reasonable opportunity to correct the
deficiencies or other problems specified in such
notice to the reasonable satisfaction of the Board.
(d) Not For Cause. At the option of
Employer at any time for any reason other than those referred to above or for
no reason at all, whereupon the Employer shall become obligated to make those
payments set forth in Section 7.1(d) hereof.
6.2 Notice of Termination. Any termination of
Employee's employment by Employer (other than termination pursuant to Section
6.1(a) hereof) or by Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 9.2. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice
terminating Employee's employment by Employer. If a Notice of Termination is
given by Employer, such notice shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances that provide a basis for termination of
Employee's employment under the provision so indicated. For purposes of this
Agreement, the "Date of Termination" shall be the date on which the Notice of
Termination is delivered except that with respect to Section 6.1(a) the "Date
of Termination" shall be the date of Employee's death.
6
<PAGE> 7
7. Payments Upon Termination of Employment.
7.1 Payments. In the event that Employee's
employment is terminated prior to the Expiration Date (including any extension
thereof), the Period of Employment shall expire as of the Date of Termination.
(a) If Employer terminates Employee's
employment for Cause or if Employee voluntarily terminates his employment,
Employer's obligation to compensate Employee shall in all respects cease as of
the Date of Termination, except that Employer shall pay Employee the Base
Salary accrued under Section 3 and the reimbursable expenses incurred under
Section 5 of this Agreement up to such Date of Termination (the "Accrued
Obligations");
(b) If Employee's employment is
terminated upon the death of Employee, Employer's obligation to compensate
Employee shall in all respects cease as of the Date of Termination, except that
within thirty (30) days after the Date of Termination Employer shall (i) pay
Employee's estate or legal representative the Accrued Obligations and a lump
sum payment equal to 25% of the Employee's annual Base Salary payable under
Section 3 hereof at the rate in effect immediately prior to such termination
and (ii) continue to maintain during the three-month period following the Date
of Termination for the benefit of the Employee's dependents, basic health and
dental insurance and related medical expenses coverage on terms no less
favorable to the Employee than
7
<PAGE> 8
Employer provides to its executive officers generally, as such benefits may be
modified from time to time during such period;
(c) If Employee's employment is
terminated upon the Permanent Disability of Employee, Employer's obligation to
compensate Employee shall in all respects cease as of the Date of Termination,
except that within thirty (30) days after the Date of Termination Employer
shall (i) pay Employee Accrued Obligations and a lump sum payment equal to 50%
of the Employee's annual Base Salary payable under Section 3 hereof at the rate
in effect immediately prior to such termination less the amount of any
disability payments payable to Employee during the six- month period following
the Date of Termination pursuant to any Employer-paid or state sponsored
insurance policy or employer self-insured program and (ii) continue to maintain
during the six-month period following the Date of Termination for the benefit
of Employee and his dependents, basic health, disability and dental insurance
and related medical expenses coverage on terms no less favorable to the
Employee than Employer provides to its executive officers generally, as such
benefits may be modified from time to time during such period provided that the
Employee shall continue to be obligated to make any contributions or payments
in connection with such benefits to the same extent as other executive officers
generally; and
(d) If Employee's employment is
terminated by Employer pursuant to Section 6.1(d), Employer's
8
<PAGE> 9
obligation to compensate Employee shall in all respects cease, except that
within thirty (30) days after the Date of Termination Employer shall pay to
Employee the Accrued Obligations and during the period ending on the earlier of
the Expiration Date or the first anniversary of the Date of Termination (the
"Severance Period"), Employer shall (i) pay to Employee on a monthly basis the
sum of one-twelfth (1/12th) of the annual Base Salary of Employee in effect at
the Date of Termination (the "Continuation Payments") and (ii) continue to
maintain, during the Severance Period for the benefit of the Employee and his
dependents, basic health, dental and life insurance and related medical
expenses coverage (including disability and hospitalization coverage) (the
"Continuation Benefits") on terms no less favorable to the Employee than the
Employer provides to its executive officers generally, as such benefits may be
modified from time to time during the Severance Period. During the Severance
Period, Employee shall be required to make any contributions required to
maintain such Continuation Benefits, which may be withheld from the
Continuation Payments; provided that such contributions are also required to be
made by the Employer's executive officers generally. If at any time during the
Severance Period Employee shall obtain employment with a third party (the
"Substitute Employer") in which Employee is entitled to receive basic health
benefits in connection with such employment on terms provided by the Substitute
Employer to its similarly situated employees generally, the Employer shall no
9
<PAGE> 10
longer be required to provide Continuation Benefits to the Employee, regardless
of whether such benefits differ in any respect from the Continuation Benefits.
The Employer shall be excused from its obligations to make payments under this
Section 7.1(d) if the Employee breaches its obligations hereunder (including
its obligations under Article 8 hereof).
7.2 Release and Satisfaction. With respect to
Employee, his heirs, successors and assigns, payment by Employer of the amounts
provided under this Section 7 shall release, relinquish and forever discharge
Employer and any director, officer, employee, shareholder or agent of Employer
from any and all claims, damages, losses, costs, expenses, liabilities or
obligations, whether known or unknown (other than any such claims, damages,
losses, costs, expenses, liabilities or obligations (a) covered by any
indemnification arrangement of Employer with respect to Employee or (b) arising
under any written employee benefit plan or arrangement (whether or not tax-
qualified) covering Employee), which Employee has incurred or suffered or may
incur or suffer as a result of Employee's employment by Employer or the
termination of such employment.
7.3 Effect on This Agreement. Any termination of
Employee's employment and any expiration of the Period of Employment under this
Agreement shall not affect the continuing operation and effect of Sections 7.2,
8.1, 8.2, 8.3, 8.4 and 8.5 hereof, which shall continue in full force and
effect with respect to Employer and Employee, and its and
10
<PAGE> 11
his heirs, successors and assigns. Nothing in Section 7.1 hereof shall be
deemed to operate or shall operate as a release, settlement or discharge of any
liability of Employee to Employer or others from any action or omission by
Employee enumerated in Section 6.1(c) hereof as a possible basis for
termination of Employee's employment for Cause.
7.4 No Duty to Mitigate. Subject to the
provisions of Sections 8.1, 8.2, 8.3, 8.4 and 8.5 hereof, Employee shall be
free to accept such employment and engage in such business as Employee may
desire following the termination of his employment hereunder, and no
compensation received by Employee therefrom shall reduce or affect any payments
required to be made by Employer hereunder except to the extent expressly
provided in the benefit plans of Employer.
8. Non-disclosure of Proprietary Information, Surrender
of Records; Inventions and Patents; Non-Compete.
8.1 Proprietary Information. Employee shall not
during the Period of Employment or at any time thereafter (irrespective of the
circumstances under which Employee's employment by Employer terminates),
directly or indirectly use for his own purpose or for the benefit of any person
or entity other than Employer, nor otherwise disclose, any proprietary
information, as defined below, to any individual or entity, unless such
disclosure has been authorized in writing by the Board or is otherwise required
by law. For purposes of this Agreement, the term "proprietary information"
shall include, but is not limited to: (a) the name or address of any
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<PAGE> 12
customer, vendor or affiliate of Employer or any information concerning the
transactions or relations of any customer, vendor or affiliate of Employer with
Employer or any of its shareholders; (b) any information concerning any
product, technology or procedure employed by Employer but not generally known
to its customers, vendors or competitors, or under development by or being
tested by Employer but not at the time offered generally to customers or
vendors; (c) any information relating to Employer's computer software, computer
systems, pricing or marketing methods, sales margins, cost of goods, cost of
material, capital structure, operating results, borrowing arrangements or
business plans; (d) any information which is generally regarded as confidential
or proprietary in any line of business engaged in by Employer; (e) any
information contained in any of Employer's written or oral policies and
procedures or employee manuals; (f) any information belonging to customers,
vendors or affiliates of Employer which Employer has agreed to hold in
confidence; (g) any inventions, innovations or improvements covered by Section
8.3 below; (h) any other information which the Board has reasonably determined
by resolution and communicated to Employee to be confidential or proprietary;
and (i) all written, graphic and other material relating to any of the
foregoing. Information that is not novel or copyrighted or patented may
nonetheless be proprietary information. However, proprietary information shall
not include (i) any information that is or becomes generally known to the
industries in which
12
<PAGE> 13
Employer competes through sources independent of Employer or through authorized
publication to persons other than Employer's employees by Employer or (ii)
other non-sensitive information that may be disclosed by Employee in the
ordinary course of business, the disclosure of which is not reasonably likely
to adversely affect Employer's business operations, their relationships with
customers, vendors or employees or the results of their operations.
8.2 Confidentiality and Surrender of Records.
Employee shall not during the Period of Employment or at any time thereafter
(irrespective of the circumstances under which Employee's employment by
Employer terminates), except as required by law, directly or indirectly give
any "confidential records" (as hereinafter defined) to, or permit any
inspection or copying of confidential records by, any individual or entity
other than in the course of such individual's or entity's employment or
retention by Employer, nor shall he retain, and will deliver promptly to
Employer, any of the same following termination of his employment. For
purposes hereof, "confidential records" means all correspondence, memoranda,
files, manuals, books, lists, financial, operating or marketing records,
magnetic tape, or electronic or other media or equipment of any kind which may
be in Employee's possession or under his control or accessible to him which
contain any proprietary information as defined in Section 8.1. above. All
confidential records shall be and remain the sole property of Employer during
the Period of Employment and thereafter.
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<PAGE> 14
8.3 Inventions and Patents. All inventions,
innovations or improvements in Employer's method of conducting its business
(including policies, procedures, products, improvements, software, ideas and
discoveries, whether patentable or copyrightable or not) conceived or made by
Employee, either alone or jointly with others, during the Period of Employment
belong to Employer. Employee will promptly disclose in writing such
inventions, innovations or improvements to the Board and perform all actions
reasonably requested by the Board to establish and confirm such ownership by
Employer, including, but not limited to, cooperating with and assisting
Employer in obtaining patents for Employer in the United States and in foreign
countries. Any patent application filed by Employee within a year after
termination of his employment hereunder shall be presumed to relate to an
invention which was made during the Period of Employment unless Employee can
provide evidence to the contrary.
8.4 Covenant Not to Compete; No Solicitation.
(a) Employee acknowledges and recognizes
the highly competitive nature of Employer's business and, in consideration of
the payment by Employer to Employee of amounts that may hereafter be paid to
Employee pursuant to Sections 7.1 and 8.4(d) hereof, Employee agrees that
during the period (the "Covered Time") beginning on the Date of Termination and
ending (i) if Employee's employment is terminated for any reason other than
pursuant to Section 6.1(d) hereof, on the second anniversary of the Date of
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<PAGE> 15
Termination or (ii) if Employee's employment is terminated pursuant to Section
6.1(d) hereof and subject to Section 8.4(d) hereof, on the earlier of (A) the
first anniversary of the Date of Termination or (B) the last day of the Period
of Employment remaining under Section 1 hereof immediately prior to the Date of
Termination, Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in the "Covered
Business" (as hereinafter defined) in any state of the United States of America
in which the Employer is conducting business or proposes to conduct business as
of the Date of Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area"). For purposes of
this Agreement, (i) "Covered Business" shall mean the renting and selling of
the following types of equipment (and parts and supplies for such equipment):
high-reach booms, forklifts, tractors, dump trucks, air compressors and
high-reach scissor lifts, and small tools such as electrical generators, power
saws and hand tools; and (ii) the phrase "engage, directly or indirectly" shall
mean engaging directly or having an interest, directly or indirectly, as owner,
partner, shareholder, independent contractor, capital investor, lender,
renderer of consultation services or advice or otherwise (other than as the
holder of less than 2% of the outstanding stock of a publicly-traded
corporation), either alone or in association with others, in the operation of
any aspect of any type of business or enterprise engaged in any
15
<PAGE> 16
aspect of the Covered Business. Employee shall be deemed engaged in business
in the Covered Area if his place of business is located in the Covered Area or
if he solicits customers located anywhere in, or delivers products anywhere in,
the Covered Area.
(b) Employee agrees that during the term
of this Agreement (including any extensions thereof) and during the Covered
Time he shall not (i) directly or indirectly solicit or attempt to solicit any
of the employees, agents or representatives of Employer or affiliates of
Employer to leave any of such entities; (ii) directly or indirectly solicit or
attempt to solicit any of the employees, agents, consultants or representatives
of Employer or affiliates of Employer to become employees, agents,
representatives or consultants of any other person or entity; or (iii) directly
or indirectly solicit or attempt to solicit any customer, vendor or distributor
of Employer or affiliates of Employer with respect to any product or service
being furnished, made, sold, leased or rented by Employer.
(c) Employee understands that the
provisions of Section 8.4(a) may limit his ability to earn a livelihood in a
business similar to the business of Employer but nevertheless agrees and hereby
acknowledges that the consideration provided under this Agreement, including
any amounts or benefits provided under Section 7 hereof, is sufficient to
justify the restrictions contained in such provisions and in consideration
thereof and in light of
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<PAGE> 17
Employee's education, skills and abilities, Employee agrees that he will not
assert that, and it should not be considered that, such provisions prevent him
from earning a living or otherwise are void or unenforceable or should be
voided or held unenforceable. Employee acknowledges and agrees that his duties
with Employer are of an executive nature and that he is a member of Employer's
management group.
(d) If Employee's employment is
terminated pursuant to Section 6.1(d) hereof, Employer may extend the Covered
Time to extend up to and through the second anniversary of the Date of
Termination by delivering written notice to Employee (specifying the duration
of the extended Covered Time), within ten (10) days of such Date of
Termination, that Employer has elected to continue to pay to Employee the
Continuation Payments and provide the Continuation Benefits (on terms no less
favorable to Employee than Employer provides to its executive officers
generally, as such benefits may be modified from time to time) for each month
of such extended Covered Time. During the extended Covered Time, Employee
shall be required to make any contributions required to maintain such
Continuation Benefits, which may be withheld from the Continuation Payments;
provided that such contributions are also required to be made by the Employer's
executive officers generally. If at any time during the extended Covered Time
Employee shall obtain employment with a Substitute Employer in which Employee
is entitled to receive basic health benefits in connection with
17
<PAGE> 18
such employment on terms provided by the Substitute Employer to its similarly
situated employees generally, Employer shall no longer be required to provide
Continuation Benefits to the Employee, regardless of whether such benefits
differ in any respect from the Continuation Benefits. Employer shall be
excused from its obligations to make payments under this Section 8.4(d) if
Employee breaches its obligations hereunder.
8.5 Litigation Assistance. Employee agrees that
after the Date of Termination he shall, at the request of Employer, render all
assistance and perform all lawful acts that Employer considers necessary or
advisable in connection with any litigation involving Employer or any director,
officer, employee, shareholder, agent, representative, consultant, customer or
vendor of Employer. In the event that Employer requests Employee's assistance
under this Section 8.5, Employer shall pay to Employee for each day such
assistance is rendered an amount equal to the annual Base Salary of Employee in
effect at the Date of Termination divided by 250 and shall promptly pay or
reimburse Employee for such reasonable travel expenses as he may incur in
connection with rendering assistance hereunder.
8.6 Definition of Employer. For purposes of this
Section 8, the term Employer shall include Employer and any and all of its
subsidiaries, ventures or affiliates, whether currently existing or hereafter
formed, which are engaged in the Covered Business or a portion thereof, as well
18
<PAGE> 19
as any person to whom this Agreement is assigned as permitted by Section 9.8
hereof.
8.7 Enforcement.
(a) The parties hereto agree and
acknowledge that the covenants and agreements contained herein are reasonably
necessary in duration and to protect the reasonable competitive business
interests of Employer, including, without limitation, the value of the
proprietary information and goodwill of Employer.
(b) Employee agrees that the covenants
and undertakings contained in Article 8 of this Agreement relate to matters
which are of a special, unique and extraordinary character and that Employer
cannot be reasonably or adequately compensated in damages in an action at law
in the event Employee breaches any of these covenants or undertakings.
Therefore, Employee agrees that Employer shall be entitled, as a matter of
course, without the need to prove irreparable injury, to an injunction,
restraining order or other equitable relief from any court of competent
jurisdiction, restraining any violation or threatened violation of any of such
terms by Employee and such other persons as the court shall order. Employee
agrees to pay costs and legal fees incurred by Employer in obtaining such
injunction.
(c) Rights and remedies provided for in
this Section are cumulative and shall be in addition to rights
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<PAGE> 20
and remedies otherwise available to the parties under any other agreement or
applicable law.
(d) In the event that any provision of
this Agreement shall to any extent be held invalid, unreasonable or
unenforceable in any circumstances, the parties hereto agree that the remainder
of this Agreement and the application of such provision of this Agreement to
other circumstances shall be valid and enforceable to the fullest extent
permitted by law. If any provision of this Agreement, or any part thereof, is
held to be unenforceable because of the scope or duration of or the area
covered by such provision, the parties hereto agree that the court or
arbitrator making such determination shall reduce the scope, duration and/or
area of such provision (and shall substitute appropriate provisions for any
such unenforceable provisions) in order to make such provision enforceable to
the fullest extent permitted by law, and/or shall delete specific words and
phrases, and such modified provision shall then be enforceable and shall be
enforced. The parties hereto recognize that if, in any judicial proceeding, a
court shall refuse to enforce any of the separate covenants contained in this
Agreement, then that unenforceable covenant contained in this Agreement shall
be deemed eliminated from these provisions to the extent necessary to permit
the remaining separate covenants to be enforced. In the event that any court
or arbitrator determines that the time period or the area, or both, are
unreasonable and that any of the covenants
20
<PAGE> 21
is to that extent unenforceable, the parties hereto agree that such covenants
will remain in full force and effect, first, for the greatest time period, and
second, in the greatest geographical area that would not render them
unenforceable.
9. Miscellaneous.
9.1 Key Man Insurance. Employee recognizes and
acknowledges that Employer or its affiliates may seek and purchase one or more
policies providing key man life insurance with respect to Employee, the
proceeds of which would be payable to Employer or such affiliate. Employee
hereby consents to Employer or its affiliates seeking and purchasing such
insurance and will provide such information, undergo such medical examinations
(at Employer's expense), execute such documents, and otherwise take any and all
actions necessary or desirable in order for Employer or its affiliates to seek,
purchase and maintain in full force and effect such policy or policies.
9.2 Notice. Any notice required or permitted to
be given hereunder shall be deemed sufficiently given if sent by registered or
certified mail, postage prepaid, addressed to the addressee at his or its
address last provided the sender in writing by the addressee for purposes of
receiving notices hereunder or, unless or until such address shall be so
furnished, to the address indicated opposite his or its signature to this
Agreement. For purposes of this Agreement, notice sent in conformity with this
Section 9.2
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<PAGE> 22
shall be deemed to have been received on the third business day following the
date on which such notices are so sent.
9.3 Modification and No Waiver of Breach. No
waiver or modification of this Agreement shall be binding unless it is in
writing signed by the parties hereto. No waiver by a party of a breach hereof
by the other party shall be deemed to constitute a waiver of a future breach,
whether of a similar or dissimilar nature, except to the extent specifically
provided in any written waiver under this Section 9.3.
9.4 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AND ALL QUESTIONS RELATING TO THE VALIDITY AND PERFORMANCE
HEREOF AND REMEDIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
9.5 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same agreement.
9.6 Captions. The captions used herein are for
ease of reference only and shall not define or limit the provisions hereof.
9.7 Entire Agreement. This Agreement constitutes
the entire agreement between the parties hereto relating to the matters
encompassed hereby and supersedes any prior oral or written agreements.
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<PAGE> 23
9.8 Assignment. The rights of Employer under
this Agreement may, without the consent of Employee, be assigned by Employer to
any person, firm, corporation, or other business entity which at any time,
whether by purchase, merger, or otherwise, directly or indirectly, acquires all
or material portions of the stock, assets or any line of business of Employer.
9.9 Non-Transferability of Interest. None of the
rights of Employee to receive any form of compensation payable pursuant to this
Agreement shall be assignable or transferable except through a testamentary
disposition or by the laws of descent and distribution upon the death of
Employee. Any attempted assignment, transfer, conveyance, or other disposition
(other than as aforesaid) of any interest in the rights of Employee to receive
any form of compensation to be made by Employer pursuant to this Agreement
shall be void.
9.10 Arbitration. The parties shall endeavor to
settle all disputes by amicable negotiations. Except as otherwise provided
herein, any claim, dispute, disagreement or controversy that arises among the
parties relating to this Agreement that is not amicably settled shall be
resolved by arbitration, as follows:
(a) Any such arbitration shall be heard
in The City of New York, New York, before a panel consisting of one (l) to
three (3) arbitrators, each of whom shall be impartial. Upon the written
Request of Arbitration of either party hereto to commence arbitration
hereunder, the parties
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<PAGE> 24
shall attempt to mutually agree as to the number and identity of the
arbitrator(s), within thirty (30) days of the date of such Request. Except as
the parties may otherwise agree, all arbitrators (if not selected by the
parties hereto within thirty (30) days of a written Request for Arbitration)
shall be appointed pursuant to the commercial arbitration rules of the American
Arbitration Association. In determining the number and appropriate background
of the arbitrators, the appointing authority shall give due consideration to
the issues to be resolved, but his or her decision as to the number of
arbitrators and their identity shall be final.
(b) An arbitration may be commenced by
any party to this Agreement by the service of a written Request for Arbitration
upon the other affected parties. Such Request for Arbitration shall summarize
the controversy or claim to be arbitrated.
(c) All attorneys' fees and costs of the
arbitration shall in the first instance be borne by the respective party
incurring such costs and fees, but the arbitrators shall have the discretion to
award costs and/or attorneys' fees as they deem appropriate under the
circumstances. The parties hereby expressly waive punitive damages, and under
no circumstances shall an award contain any amount that in any way reflects
punitive damages.
(d) Judgment on the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof.
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<PAGE> 25
(e) It is intended that controversies or
claims submitted to arbitration under this Section 9.10 shall remain
confidential, and to that end it is agreed by the parties that neither the
facts disclosed in the arbitration, the issues arbitrated, nor the views or
opinions of any persons concerning them, shall be disclosed to third persons at
any time, except to the extent necessary to enforce an award or judgment or as
required by law or in response to legal process or in connection with such
arbitration.
(f) Any arbitration under this Section
9.10 shall be conducted pursuant to the commercial arbitration rules of the
American Arbitration Association.
9.11 Jurisdiction; Venue. Subject to Section 9.10
hereof, the parties hereto irrevocably and unconditionally submit to the
exclusive jurisdiction of any State or Federal court sitting in The City of New
York over any suit, action or proceeding arising out of or relating to this
Agreement. Service of any process, summons, notice or document by registered
mail addressed to any party as provided in Section 9.2 hereof shall be
effective service of process for any action, suit or proceeding brought against
such party in any such court. The parties hereto irrevocably and
unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. A final judgment in any suit, action or proceeding brought
in
25
<PAGE> 26
any such court shall be conclusive and binding upon the parties and may be
enforced in any other courts to whose jurisdiction a party is or may be
subject, by suit upon such judgment.
[SIGNATURES ON NEXT PAGE]
26
<PAGE> 27
IN WITNESS WHEREOF, this Agreement has been duly executed
effective as of the day and year first written above.
Address for notices: PRIMECO INC.
16225 Park Ten Place
Suite 200
Houston, Texas 77084
Attention: Thomas E. Bennett
By: /s/ Thomas E. Bennett
------------------------
With a copy to:
INVESTCORP International Inc.
280 Park Avenue, 37th Floor
New York, New York 10017
Attention: Christopher J. O'Brien
EMPLOYEE
- ------------------------------------- /s/ Brian Fontana
----------------------------
- ------------------------------------- Brian Fontana
27
<PAGE> 28
EXHIBIT A
Employee's initial title shall be:
Executive Vice President
and Chief Financial Officer
<PAGE> 29
EXHIBIT B
Management Cash Bonus Incentive Program
The following is the bonus formula for Employee for fiscal
years 1996 through 1999:
<TABLE>
EBITDA(1) TARGETS
-----------------
<S> <C>
1996 $90 million
1997 $108 million
1998 $120 million
1999 $132 million
</TABLE>
- -----------------------
(1) Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined as:
a. Consolidated Net Income (loss) of Prime Holding, Inc.
("Holding") and its subsidiaries as it would appear on a statement of
income (loss), which shall reflect a reduction for all management and
employee bonuses payable with respect to the Fiscal Year, of consolidated
Holding prepared in accordance with U.S. GAAP, consistently applied; plus
(minus)
b. Any provision (benefit) for taxes (including franchise
taxes) deducted (added) in calculating such consolidated net income
(loss); plus
c. Any interest expense (net of interest income), deducted in
calculating such consolidated net income (loss); (minus)
d. Costs charged against any purchase accounting reserves
established in connection with the acquisition of Employer by Holding;
(minus)
e. The effects of the reversal of any excess purchase
accounting reserves established in connection with the acquisition of
Employer by Holding; plus
f. Amortization expenses deducted in calculating
consolidated net income (loss); plus
g. Depreciation expense deducted in calculating
consolidated net income (loss); plus
h. Management fees paid to Investcorp; plus (minus)
i. Any unusual losses (gains) deducted (added) in calculating
consolidated net income (loss). (Unusual items are intended to include
transactions considered outside the ordinary course of business. EBITDA
will be adjusted to eliminate the effects, if any, of such
[Footnote continued on next page]
<PAGE> 30
<TABLE>
<CAPTION>
% of EBITDA % of Base
Target Achieved Salary Payable
--------------- as Bonus(2)
--------
Equal To Or But Less
Greater Than: Than:
------------- --------
<S> <C> <C>
0 85 0
85 90 10-15
90 95 27-40
95 100 43-65
100 110 67-100
110 120 80-120
120 130 93-140
130 140 107-160
140 150 120-180
150 160 133-200
160 170 147-220
170 180 160-240
180 190 173-260
190 200 187-280
200 --- 200-300
</TABLE>
- -----------------------
[Footnote continued from previous page]
transactions, the intent being to calculate EBITDA as if such
transactions had not occurred); plus (minus)
j. Any compensation expense (income) deducted (added) in
calculating consolidated net income (loss) attributable to transactions
involving equity securities of Holding or its subsidiaries.
EBITDA shall be determined based upon the Management Case Financial
Model dated 1:44 PM December 5, 1994. The Employee and his representative
shall be provided reasonable opportunity to review the computation of
EBITDA and reasonable access to the data and information supporting such
computation and shall have the right to challenge in good faith such
computation.
(2) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the
bottom of the range. The bonus percentage will be determined on an
individual basis and may differ among eligible employees.
<PAGE> 1
EXHIBIT 10.2
INDEMNITY AGREEMENT
AGREEMENT (this "Agreement") dated as of April 1, 1996, by and
between PRIMECO INC., a Texas corporation (the "Corporation"), and Brian
Fontana (the "Indemnitee").
RECITALS
The Indemnitee is a director and/or officer of the Corporation
and/or an Affiliate Indemnitee (as hereafter defined). Both the Corporation
and the Indemnitee recognize the increased risk of litigation and other claims
being asserted against directors and officers in today's environment.
Article VII of the Bylaws of the Corporation requires the
Corporation to indemnify its directors and officers as currently provided
therein, and the Indemnitee has been serving and continues to serve as a
director and/or officer of the Corporation in part in reliance on such
provision. The Bylaws of the Corporation permit the Corporation to purchase
and maintain insurance or to furnish similar protection or make other
arrangements (any such insurance, protection or arrangement, an
"Indemnification Arrangement") on behalf of the Indemnitee against personal
liability (including, but not limited to, providing for Advanced Amounts as
hereafter defined), asserted against him or incurred by or on behalf of him in
such capacity as a director or officer of the Corporation or as an Affiliate
Indemnitee, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Agreement or under the Texas Business Corporation Act
(the "TBCA"), as it may then be in effect.
In part to provide the Indemnitee with specific contractual
assurance of substantial protection against personal liability (regardless of,
among other things, any amendment to or revocation of the aforementioned
provisions of the Corporation's Bylaws or any change in the composition of the
Corporation's Board of Directors or control of the Corporation), the
Corporation desires to enter into this Agreement. TBCA Article 2.02-1
expressly recognizes that the indemnification provisions of the TBCA are not
exclusive of any other rights permitted by law to which a person seeking
indemnification may be entitled under the Articles of Incorporation or Bylaws
of the Corporation, or an agreement providing for indemnification, or a
resolution of stockholders or directors, or otherwise, and Section 7.05 of the
Bylaws of the Corporation expressly recognizes that the indemnification
provisions of the Bylaws of the Corporation shall be deemed exclusive of, and
shall not affect, any other rights permitted by law to which a person seeking
indemnification may be
<PAGE> 2
entitled under any agreement, and this Agreement is being entered into pursuant
to the Bylaws of the Corporation as permitted by the TBCA as authorized by the
stockholders of the Corporation.
In order to induce the Indemnitee to serve as a director
and/or officer of the Corporation and in consideration of the Indemnitee's so
serving, the Corporation desires to hold harmless and indemnify the Indemnitee
and to make arrangements pursuant to which the Indemnitee may be advanced or
reimbursed expenses incurred by the Indemnitee in certain proceedings, in every
case to the fullest extent authorized or permitted by the TBCA or any other
applicable law, or by any amendment thereof or other statutory provisions
authorizing or permitting such indemnification which are adopted after the date
hereof (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than the TBCA or other applicable law permitted the Corporation to provide
prior to such amendment).
NOW THEREFORE, in consideration of the foregoing recitals and
of the Indemnitee's continuing to serve the Corporation as a director and/or
officer, the parties agree as follows:
1. Indemnification. To the full extent allowed by law,
the Corporation shall hold harmless and indemnify the Indemnitee, his
executors, administrators or assigns, against any and all judgments, penalties
(including excise and similar taxes), fines, settlements, and reasonable
expenses (including attorneys' fees) actually incurred by the Indemnitee (net
of any related insurance proceeds or other amounts received by the Indemnitee
or paid by or on behalf of the Corporation on the Indemnitee's behalf in
compensation of such judgments, penalties, fines, settlements or expenses), in
connection with any threatened, actual or completed action, suit or proceeding,
whether civil, criminal, arbitral, administrative or investigative, or any
appeal in such action, suit or proceeding, to which the Indemnitee was, is, or
is threatened to be made a named defendant or respondent (a "Proceeding"),
because such person is or was a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent, or similar functionary
(an "Affiliate Indemnitee") of another corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan, or other enterprise (each, a
"Company Affiliate"). Upon authorization of indemnification of the Indemnitee
by the Board of Directors in accordance with the provisions of the TBCA, the
Indemnitee shall be presumed to be entitled to such indemnification under this
Agreement upon submission of a Claim (as hereinafter defined). Thereafter, the
Corporation shall have the burden of proof to overcome the
2
<PAGE> 3
presumption that the Indemnitee is so entitled. Such presumption shall only be
overcome by a judgment or other final adjudication after all appeals and all
time for appeals has expired ("Final Determination") adverse to the Indemnitee
establishing that such indemnification is not permitted hereunder or by law.
An actual determination by the Corporation (including its Board of Directors,
legal counsel, or its stockholders) that the Indemnitee has not met the
applicable standard of conduct for indemnification shall not be a defense to
the action or create a presumption that the Indemnitee has not met the
applicable standard of conduct. The purchase, establishment, or maintenance of
any Indemnification Arrangement shall not in any way diminish, restrict, limit
or affect the rights and obligations of the Corporation or of the Indemnitee
under this Agreement except as expressly provided herein, and the execution and
delivery of this Agreement by the Corporation and the Indemnitee shall not in
any way diminish, restrict, limit or affect the Indemnitee's right to
indemnification from the Corporation or any other party or parties under any
other Indemnification Arrangement, the Articles of Incorporation or Bylaws of
the Corporation or the TBCA.
2. Insurance. Subject only to the provisions of this
Section 2, as long as the Indemnitee shall continue to serve as a director
and/or officer of the Corporation (or shall continue at the request of the
Corporation to serve as an Affiliate Indemnitee) and thereafter as long as the
Indemnitee shall be subject to any possible Proceeding by reason of the fact
that the Indemnitee was or is a director and/or officer of the Corporation (or
served in any of said other capacities), the Corporation will, unless no such
policies are available in any market, purchase and maintain in effect for the
benefit of the Indemnitee one or more valid, binding, and enforceable policies
(the "Insurance Policies") of directors' and officers' liability insurance
("D&O Insurance") providing adequate liability coverage for the Indemnitee's
acts as a director and/or officer of the Corporation or as an Affiliate
Indemnitee. The Corporation shall promptly notify the Indemnitee of any lapse,
amendment or failure to renew said policy or policies or any provision thereof
relating to the extent or nature of coverage provided thereunder. In the event
the Corporation does not purchase and maintain in effect said policy or
policies of D&O Insurance pursuant to the provisions of this Section 2, the
Corporation shall, to the full extent permitted by law, in addition to and not
in limitation of the other rights granted the Indemnitee under this Agreement,
hold harmless and indemnify the Indemnitee to the full extent of coverage which
would otherwise have been provided for the benefit of the Indemnitee pursuant
to the Insurance Policies.
3. Claims for Payments. The Indemnitee shall have the
right to receive from the Corporation on demand, or at his
3
<PAGE> 4
option to have the Corporation pay promptly on his behalf, in advance of a
Final Determination of a Proceeding all expenses payable by the Corporation
pursuant to the terms of this Agreement as corresponding amounts are expended
or incurred by the Indemnitee in connection with such Proceeding or otherwise
expended or incurred by the Indemnitee (such amounts so expended or incurred
being referred to as "Advanced Amounts"). In making any claim for payment by
the Corporation of any expenses, including any Advanced Amount, pursuant to
this Agreement, the Indemnitee shall submit to the Corporation a written
request for payment (a "Claim"), which includes a schedule setting forth in
reasonable detail the dollar amount expended (or incurred or expected to be
expended or incurred). Each item on such schedule shall be supported by the
bill, agreement, or other documentation relating thereto, a copy of which shall
be appended to the schedule as an exhibit.
Where the Indemnitee is requesting Advanced Amounts, the
Indemnitee must also provide (i) written affirmation of such Indemnitee's good
faith belief that he has met the standard of conduct required by law for
indemnification, and (ii) a written undertaking to repay such Advanced Amounts
if a Final Determination is made that the Indemnitee is not entitled to
indemnification hereunder.
4. Section 16(b) Liability. The Corporation shall not
be liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee for an accounting of profits made from the purchase
or sale by the Indemnitee of securities of the Corporation within the meaning
of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto
or similar provisions of any state statutory law or common law.
5. Continuation of Indemnity. All agreements and
obligations of the Corporation contained herein shall continue during the
period the Indemnitee is a director and/or officer of the Corporation (or is
serving at the request of the Corporation as an Affiliate Indemnitee) and shall
continue thereafter so long as the Indemnitee shall be subject to any possible
Proceeding by reason of the fact that the Indemnitee was a director or officer
of the Corporation or was serving as such an Affiliate Indemnitee.
6. Successors: Binding Agreement. This Agreement shall
be binding on and shall inure to the benefit of and be enforceable by the
Corporation's successors and assigns and by the Indemnitee's personal or legal
representatives, executors, administrators, successors, heirs, distributes,
divisees, and legatees. The Corporation shall require any successor or
assignee (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or assets of the
Corporation, by written agreement in form and substance reasonably satisfactory
to the
4
<PAGE> 5
Corporation and to the Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Corporation
would be required to perform if no such succession or assignment had taken
place.
7. Notification and Defense of Claim. Promptly after
receipt by the Indemnitee of notice of the commencement of any Proceeding, the
Indemnitee shall, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof, but the omission so to notify the Corporation will not relieve the
Corporation from any liability which it may have to the Indemnitee. With
respect to any such Proceeding:
(i) The Corporation shall be entitled to participate
therein at its own expense;
(ii) Except with prior written consent of the Indemnitee,
the Corporation shall not be entitled to assume the defense
of any Proceeding; and
(iii) The Corporation shall not settle any Proceeding in any
manner which would impose any penalty or limitation on the
Indemnitee without the Indemnitee's prior written consent.
The Indemnitee shall not settle any Proceeding with respect to which the
Indemnitee has received indemnified amounts or Advanced Amounts without the
Corporation's prior written consent, nor will the Indemnitee unreasonably
withhold consent to any proposed settlement.
8. Enforcement. (a) The Corporation has entered into
this Agreement and assumed the obligations imposed on the Corporation hereby in
order to induce the Indemnitee to act as a director and/or officer of the
Corporation or as an Affiliate Indemnitee, and acknowledges that the Indemnitee
is relying upon this Agreement in continuing in such capacity.
(b) In the event the Indemnitee has requested
payment of any amount under this Agreement and has not received payment thereof
within thirty (30) days of such request, the Indemnitee may bring any action to
enforce rights or collect moneys due under this Agreement and if the Indemnitee
is successful in such action, the Corporation shall reimburse the Indemnitee
for all of the Indemnitee's fees and expenses in bringing and pursuing such
action. The Indemnitee shall be entitled to the advancement of such amounts to
the full extent contemplated by Section 3 hereof in connection with such
Proceeding.
9. Separability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or
5
<PAGE> 6
unenforceable for any reason whatsoever, (i) the validity, legality and
enforceability of the remaining provisions of this Agreement (including,
without limitation, all portions of any sections or subsections of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not be themselves invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby, and (ii) to the fullest
extent possible, the provisions of any section or subsections of this Agreement
containing any such provisions held to be invalid, illegal, or unenforceable,
that are not themselves invalid, illegal or unenforceable) shall be construed
so as to give effect to the intent of the parties that the Corporation provide
protection to the Indemnitee to the fullest enforceable extent.
10. Miscellaneous. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior oral or written understandings relating to the subject
matter hereof. No provision of this Agreement may be modified, waived, or
discharged unless such modification, waiver, or discharge is agreed to in
writing signed by the Indemnitee and an officer of the Corporation designated
by the Board of Directors. No waiver by either party at any time of any branch
by the other party of, or of compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or at any prior
or subsequent time. THE VALIDITY, INTERPRETATION, CONSTRUCTION, AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
TEXAS, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
THE INDEMNITEE MAY BRING AN ACTION SEEKING RESOLUTION OF DISPUTES OR
CONTROVERSIES ARISING UNDER OR IN ANY WAY RELATED TO THIS AGREEMENT IN THE
STATE OR FEDERAL COURT JURISDICTION IN WHICH THE INDEMNITEE RESIDES OR IN WHICH
HIS PLACE OF BUSINESS IS LOCATED, AND IN ANY RELATED APPELLATE COURTS, AND THE
CORPORATION CONSENTS TO THE JURISDICTION OF SUCH COURTS AND TO SUCH VENUE.
11. Notices. For the purposes of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, as follows:
If to the Indemnitee: Brian Fontana
INVESTCORP International Inc.
280 Park Avenue
37th Floor - West
New York, NY 10017
6
<PAGE> 7
If to the Corporation: Primeco Inc.
200 Park Avenue, 47th Floor
New York, NY 10166-0193
Attn: Thomas E. Bennett
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
12. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all
of which together shall constitute one and the same instrument.
13. Effectiveness. This Agreement shall be effective as
of the day and year first above written.
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed as of the day and year first above written.
PRIMECO INC.
By: /s/ Thomas E. Bennett
-------------------------------------
Thomas E. Bennett
President and Chief Executive
Officer
INDEMNITEE
/s/ Brian Fontana
----------------------------------------
Brian Fontana
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 104
<SECURITIES> 0
<RECEIVABLES> 46,305<F1>
<ALLOWANCES> 0
<INVENTORY> 23,376
<CURRENT-ASSETS> 69,785
<PP&E> 275,341<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 492,983
<CURRENT-LIABILITIES> 37,301
<BONDS> 334,000
<COMMON> 1
9,202
0
<OTHER-SE> 72,992
<TOTAL-LIABILITY-AND-EQUITY> 492,983
<SALES> 57,181
<TOTAL-REVENUES> 153,456
<CGS> 45,704
<TOTAL-COSTS> 102,524
<OTHER-EXPENSES> 43,808
<LOSS-PROVISION> 314
<INTEREST-EXPENSE> 17,474
<INCOME-PRETAX> 7,124
<INCOME-TAX> 3,365
<INCOME-CONTINUING> 3,759
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,759<F3>
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
<F2>INCLUDES EQUIPMENT FOR RENT AND IS NET OF ACCUMULATED DEPRECIATION
<F3>BEFORE DIVIDENDS AND ACCRETION ON REDEEMABLE PREFERRED STOCK
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
[PRIMECO INC. LOGO] Primeco Inc.
16225 Park Ten Place, Suite 200
Houston, TX 77084
713/578-5600
713/647-5135 Fax
FOR IMMEDIATE RELEASE Contact: Brian Fontana
Chief Financial Officer
(713) 647-5006
#101
PRIMECO ACQUIRES
ALPINE EQUIPMENT RENTALS & SUPPLY COMPANY
(Houston, TX) August 6, 1996 - Primeco Inc., which does business as
PRIME Equipment, today announced that on Monday, July 29, 1996, it completed
its previously announced acquisition of substantially all of the assets of
Alpine Equipment Rentals & Supply Company, Inc.
Alpine operates six rental locations in the state of Washington, and
offers PRIME Equipment the opportunity to expand into the northwestern United
States. Alpine offers a varied line of equipment to industrial and commercial
customers in its markets, and had gross revenues of $10.8 million in the year
ended December 31, 1995.
Primeco operates under the PRIME Equipment name through 96 equipment
rental locations in 13 states and is engaged in the rental and sale of
equipment to the industrial maintenance and commercial construction markets in
the sun-belt region of the United States. PRIME has over $347 million in
rental fleet and, taking into account the pro forma effect of PRIME's recent
acquisition of American Hi-Lift, generated gross revenues of $296.5 million in
the year ended December 31, 1995.
###
