EXHIBIT 10.1
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SHARE PURCHASE AGREEMENT
among
UNITED RENTALS , INC.
and
THE PARTIES LISTED ON THE SIGNATURE PAGE HERETO
___________________________________
for all of the outstanding shares of
McCLINCH EQUIPMENT SERVICES, INC.
___________________________________
July 30, 1998
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TABLE OF CONTENTS
Page
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1. Sale and Purchase of Shares 2
1.1 Sale and Purchase of Shares 2
1.2 Purchase Price Adjustment 2
1.3 Payment of Purchase Price 7
1.4 Delivery of Shares 8
2. Closing; Closing Date 8
3. Representations and Warranties of Each Seller 8
3.1 Title to the Shares 8
3.2 Authority to Execute and Perform Agreement 9
3.3 Purchase for Investment 10
4. Representations and Warranties of the Sellers
as to the Company 11
4.1 Corporate Organization 11
4.2 Subsidiaries 11
4.3 Outstanding Capital Stock 12
4.4 Financial Statements 13
4.5 Liabilities; Ordinary Course 13
4.6 Contravention 15
4.7 Taxes 16
4.8 Claims and Proceedings 21
4.9 Contracts 22
4.10 Real Estate 24
4.11 Employee Benefit Plans 26
4.12 Insurance 28
4.13 Tangible Properties 29
4.14 Related Party Transactions 29
4.15 Banks 29
4.16 Permits 30
4.17 Compliance with Applicable Laws 30
4.18 Employment Agreements 31
4.19 Labor and Employment Matters 31
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4.20 Intangible Property 32
4.21 Environmental Compliance 33
4.22 Finders and Investment Bankers 35
4.23 Certain Actions 35
4.24 No Other Representations and Warranties 35
5. Representations and Warranties of the Buyer 35
5.1 Corporate Organization 36
5.2 Authority to Execute and Perform Agreement 36
5.3 Purchase for Investment 37
5.4 [Intentionally omitted] 38
5.5 Sources of Information 38
5.6 Finders and Investment Bankers 38
5.7 Litigation. 38
6. Covenants and Agreements 39
6.1 Conduct of Business of the Company 39
6.2 Access to Information; Confidentiality 42
6.3 Disclosure Supplements 44
6.4 Expenses 45
6.5 Further Assurances 45
6.6 Cooperation Regarding Landlords 46
6.7 Transfer Taxes. 46
6.8 Compliance with Antitrust Laws 46
6.9 SOC Rebates 48
6.10 Non-Compete 48
6.11 Excluded Assets and Liabilities. 51
6.12 Insurance Tail 52
6.13 Payment of Indebtedness 52
6.14 Rental Ready Adjustment 53
6.15 No Solicitation 55
6.16 Publicity 56
7. Tax and Related Matters 56
7.1 Taxes; Section 338(h)(10) Election 56
7.2 Tax Administration 60
7.3 Contests 65
8. Environmental Matters. 67
8.1 The Phase I Investigations. 67
8.2 The Phase II Investigations. 69
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8.3 Certain Procedures Relating to the
Consultant's Estimates 69
8.4 Review of the Estimated Costs of Remediation 70
8.5 The Sellers' Indemnification of Buyer 71
8.6 Buyer's Indemnification of the Sellers. 72
8.7 Exclusive Remedy 73
8.8 Limitation of Sellers' Duty to Indemnify 73
8.9 Expenses in the Ordinary Course Excluded
from Indemnification 74
8.10 Control of Remedial Action. 74
8.11 Environmental Indemnification Procedure 76
8.12 Access to Information 76
8.13 Matters Involving Third Parties 76
9. Conditions Precedent to the Obligation of the
Buyer to Close 78
9.1 Representations and Covenants 78
9.2 HSR Act Filing 78
9.3 No Injunction or Violation of Law 79
9.4 Title Policies 79
9.5 Simultaneous Closing. 79
9.6 Resignations 79
9.7 Reports. 80
9.8 Escrow Agreement 80
9.9 Legal Opinions 80
9.10 Affidavits 80
9.11 Affiliate Contracts 80
9.12 Certificates 80
9.13 [Intentionally Omitted] 81
9.14 Employment/Consulting Agreements 81
9.15 Release of Guarantees 81
9.16 Material Adverse Effect 81
10. Conditions Precedent to the Obligation of the
Sellers to Close 81
10.1 Representations and Covenants 82
10.2 HSR Act Filing 82
10.3 No Injunction or Violation of Law 82
10.4 United Rentals, Inc. Warrants 83
10.5 [Intentionally Omitted] 83
10.6 [Intentionally Omitted]. 83
10.7 Simultaneous Closing 83
10.8 Reports. 83
10.9 Escrow Agreement 83
10.10 Legal Opinion 83
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10.11 Certificate 83
11. Survival of Representations, Warranties and Covenants 83
11.1 General Survival 84
12. General Indemnification 84
12.1 Indemnification of the Buyer 84
12.2 Indemnification of the Sellers 91
12.3 Notice and Opportunity to Defend 91
12.4 Exclusive Remedies 93
12.5 Sellers' Representative 94
12.6 Nature of Payments 95
13. Termination of Agreement 95
13.1 Termination 95
13.2 Survival After Termination 97
14. Miscellaneous 98
14.1 Certain Definitions 98
14.2 Nature of Obligations 103
14.3 Notices 104
14.4 Entire Agreement 105
14.5 Waivers and Amendments; Non-Contractual
Remedies 105
14.6 Governing Law 106
14.7 Binding Effect; Assignment 106
14.8 Usage 106
14.9 Counterparts 106
14.10 Exhibits and Schedules 107
14.11 Headings 107
14.12 Severability of Provisions 107
14.13 Consent to Jurisdiction 108
ANNEX A
ANNEX B
ANNEX C
Schedules Page
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Schedule 1.2(b). 2
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Schedule 1.2(b) 3
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Schedule 1.2(b) 3
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Schedule 1.2(a) 4
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Schedule 1.3(a) 7
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Schedule 1.3(a) 7
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Schedule 1.3(b) 7
Schedule 3.2 10
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Schedule 4.1 11
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Schedule 4.2 11
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Schedule 4.2 11
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Schedule 4.3 12
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Schedule 4.3 12
Schedule 4.4 13
Schedule 4.4(b) 13
Schedule 4.5(a) 13
Schedule 4.5(b) 14
Schedule 4.6(a) 15
Schedule 4.6(b) 15
Schedule 4.7(h) 18
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Schedule 4.8 21
Schedule 4.9 22
Schedule 4.9 24
Schedule 4.10(a) 24
Schedule 4.10(b) 24
Schedule 4.11(a) 26
Schedule 4.11(c) 27
Schedule 4.11(d) 27
Schedule 4.11(f) 27
Schedule 4.12 28
Schedule 4.14 29
Schedule 4.14 29
Schedule 4.15 29
Schedule 4.15 30
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Schedule 4.17 30
Schedules Page
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Schedule 4.18 31
Schedule 4.19(a) 31
Schedule 4.19(a) 31
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Schedule 4.19(b) 31
Schedule 4.20 32
Schedule 4.20 32
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Schedule 4.21 33
Schedule 4.9 40
Schedule 4.18 41
Schedule 6.14(b) 54
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Schedule 4.10(a) 79
Schedule 14.1(b) 102
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Annex A
Annex B [Escrow Agreement]
Annex C [Addresses for Notices]
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SHARE PURCHASE AGREEMENT
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SHARE PURCHASE AGREEMENT, dated as of July 30, 1998, among UNITED
RENTALS, INC., a Delaware corporation (the "Buyer"), and THE PERSONS LISTED
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ON THE SIGNATURE PAGE HERETO AS SELLERS (the "Sellers"), for the purchase and
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sale of all of the issued and outstanding shares of capital stock of McCLINCH
EQUIPMENT SERVICES, INC., a Connecticut corporation (the "Company").
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The Company is engaged in the business of renting, selling and
servicing aerial lifts, rough terrain forklifts, industrial forklifts,
cranes, material handling products, generators, welders, light towers and
assorted construction equipment in the Northeast and Mid-Atlantic regions of
the United States (the "Business").
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The Sellers are the beneficial and record owners of all of the issued
and outstanding shares of capital stock of the Company (the "Shares"),
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consisting of 100 shares of Common Stock, no par value per share.
The Sellers wish to sell the Shares to the Buyer, and the Buyer wishes
to purchase the Shares from the Sellers, upon the terms and subject to the
conditions of this Agreement.
Certain capitalized terms not otherwise defined and used in this
Agreement are defined in Section 14.1.
Accordingly, the parties agree as follows:
1. Sale and Purchase of Shares.
1.1 Sale and Purchase of Shares. At the closing provided for in
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Article 2 (the "Closing"), upon the terms and subject to the conditions of
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this Agreement and in reliance upon the representations, warranties and
agreements contained herein, the Sellers shall sell to the Buyer, and the
Buyer shall purchase from the Sellers, all of the Shares for an aggregate
consideration (the "Purchase Price") equal to $40,500,000 subject to
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adjustment as provided in Section 1.2. The Purchase Price shall be paid in
accordance with Section 1.3.
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1.2 Purchase Price Adjustment.
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(a) Determination of Net Worth. As used herein, the "Net
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Worth" of the Company as of any particular date shall mean an amount
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equal to the tangible net worth of the Company and its consolidated
Subsidiaries determined by subtracting total liabilities of the Company
and its consolidated Subsidiaries as at such date from the total
tangible assets of the Company and its consolidated Subsidiaries as at
such date, in each case as shown on the balance sheet of the Company as
at such date; provided, however, that for the purposes of the
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Preliminary Closing Balance Sheet and Audited Closing Balance Sheet, Net
Worth shall be calculated for the period from December 31, 1997 to the
Closing Date, using the depreciation methods set forth on Schedule
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1.2(b).
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(b) Preparation of Closing Adjusted Net Worth Schedule. As
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soon as practicable, the Sellers or their designee shall prepare (based
on data and financial statements supplied by the Company) on a basis
consistent with the preparation of the Balance Sheet (as defined in
Section 4.4) and as contemplated by Schedule 1.2(b), and deliver to the
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Buyer and PricewaterhouseCoopers LLP, a consolidated balance sheet of
the Company as of the close of business on the Closing Date (the
"Preliminary Closing Balance Sheet"). The Sellers shall cause the
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Preliminary Closing Balance Sheet to be audited by
PricewaterhouseCoopers LLP (the "Audited Closing Balance Sheet") which
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firm shall deliver an opinion stating that the Audited Closing Balance
Sheet presents fairly, in all material respects, the financial position
of the Company and its consolidated Subsidiaries at the Closing Date in
accordance with GAAP applied on a basis consistent with the Balance
Sheet. The Preliminary Closing Balance Sheet and the Audited Closing
Balance Sheet shall (i) not include (x) the assets of the Company or any
Subsidiary and the liabilities relating thereto set forth in Schedule
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1.2(b) (the "Excluded Assets and Liabilities"), (y) any expenses,
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amounts or prepayment penalties incurred in connection with the
prepayment or repayment of any
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indebtedness of the Company or any Subsidiary at Closing except for any
such prepayment penalties in excess of $18,750 in the aggregate and (z)
any amount the Buyer is obligated to pay pursuant to this Agreement
(other than amounts referred to in clause (ii) below) or any amount the
Sellers are obligated to pay pursuant to Section 6.4 and (ii) include
the principal amount of and interest due on all indebtedness of the
Company or any of its Subsidiaries as of the Closing Date (whether or
not such amounts are repaid by the Buyer on such date). The Audited
Closing Balance Sheet shall include a schedule (the "Closing Adjusted
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Net Worth Schedule"), prepared by PricewaterhouseCoopers LLP,
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calculating the Net Worth of the Company and its consolidated
Subsidiaries as of the close of business on the Closing Date, as
adjusted in accordance with the provisions of Schedule 1.2(a) (as so
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adjusted and as set forth on the Closing Adjusted Net Worth Schedule,
the "Closing Adjusted Net Worth"). The Audited Closing Balance Sheet
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and the Closing Adjusted Net Worth Schedule shall be provided by the
Sellers to the Buyer promptly upon the availability thereof and in any
event within 75 days following the Closing Date. The Buyer will (and
will cause the Company to) provide the Sellers or their designee and
PricewaterhouseCoopers LLP full access to the books, ledgers, files,
reports and operating records of the Company and the then current
employees of the Company and will fully cooperate in the Sellers'
preparation of the Preliminary Closing Balance Sheet, the Audited
Closing Balance Sheet and the Closing Adjusted Net Worth Schedule. The
fees and expenses incurred in connection with the preparation of the
Preliminary Closing Balance Sheet, the Audited Closing Balance Sheet and
the Closing Adjusted Net Worth Schedule shall be paid by the Sellers.
(c) Buyer's Review. Upon receipt of the Audited Closing
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Balance Sheet and the Closing Adjusted Net Worth Schedule, the Buyer and
its independent accountants shall have the right during the succeeding
30-day period to examine the Audited Closing Balance Sheet, the Closing
Adjusted Net Worth
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Schedule and all books and records used to prepare the Balance Sheet,
the Audited Closing Balance Sheet and the Closing Adjusted Net Worth
Schedule. The Sellers shall use commercially reasonable efforts to cause
PricewaterhouseCoopers LLP to provide access to the work papers used to
prepare, audit and review the Balance Sheet, the Audited Closing Balance
Sheet and the Closing Adjusted Net Worth Schedule and supporting their
opinion referred to above, and the Sellers shall provide the Buyer with
access to the books and records used in, and employees involved with,
the preparation of the Balance Sheet, the Audited Closing Balance Sheet
and the Closing Adjusted Net Worth Schedule.
If the Buyer does not agree that the Closing Adjusted Net Worth has
been calculated on the basis set forth in Section 1.2(b), the Buyer
shall so notify the Sellers' Representative in writing (such notice, the
"Disagreement Notice") on or before the last day of the 30-day period
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after delivery to the Buyer of the Audited Closing Balance Sheet and
Closing Adjusted Net Worth Schedule, setting forth a specific
description of the Buyer's objections and the amount of the adjustment
which the Buyer believes should be made to each item of its objection.
If the Buyer does not deliver a Disagreement Notice within such 30-day
period, the Audited Closing Balance Sheet, the Closing Adjusted Net
Worth Schedule and the Closing Adjusted Net Worth shall be deemed to
have been accepted by Buyer.
(d) Dispute Resolution. In the event that the Buyer delivers
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a Disagreement Notice in accordance with Section 1.2(c), the Sellers'
Representative and the Buyer shall attempt to resolve the objections set
forth therein within 15 days of the Sellers' receipt of such
Disagreement Notice. The objections set forth on the Disagreement
Notice that are resolved by the Buyer and the Sellers' Representative in
accordance with this Section 1.2(d) shall collectively be referred to
herein as the "Resolved Objections."
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(e) Differences. If the Sellers' Representative and the Buyer
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are unable to resolve all the objections set forth in the Disagreement
Notice within
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such 15-day period, they shall jointly appoint Deloitte & Touche LLP
(the "CPA Firm") within five days of the end of such 15-day period.
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The CPA Firm, acting as experts and not as arbitrators, shall review the
objections set forth in the Disagreement Notice which are not Resolved
Objections (collectively, the "Differences") and determine, based on the
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requirements set forth in Section 1.2(b) and only with respect to
Differences submitted to the CPA Firm, whether and to what extent the
Closing Adjusted Net Worth Schedule requires adjustments. The fees and
disbursements of the CPA Firm shall be allocated 50% to the Buyer and
50% to the Sellers. The Sellers and the Buyer shall (and shall cause the
Company to) provide to the CPA Firm full cooperation. The CPA Firm's
resolution of the Differences shall be conclusive and binding upon the
parties. The Differences as resolved by the CPA Firm in accordance with
this Section 1.2(e) shall collectively be referred to herein as the
"CPA-Determined Differences."
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(f) Adjustment. On the fifth Business Day following the
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earliest to occur of (such fifth Business Day, the "Adjustment Payment
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Date") (x) the acceptance in full by the Buyer of the Audited Closing
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Balance Sheet, Closing Adjusted Net Worth and Closing Adjusted Net Worth
Schedule, (y) the resolution by the Buyer and the Sellers'
Representative of all objections set forth on the Disagreement Notice,
if any, and (z) the resolution by the CPA Firm of all Differences, as an
adjustment to the Purchase Price, either (i) the Buyer shall pay to the
Sellers an amount equal to the excess, if any, of the Closing Adjusted
Net Worth (as increased or decreased, as the case may be, by the
Resolved Objections and the CPA-Determined Differences) over the Year-
End Adjusted Net Worth (as hereinafter defined) or (ii) the Sellers
shall pay to the Buyer an amount equal to the excess (the "Overpayment
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Amount"), if any, of the Year-End Adjusted Net Worth over the Closing
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Adjusted Net Worth (as increased or decreased, as the case may be, by
the Resolved Objections and the CPA-Determined Differences). In either
case, such amount shall be payable on the Adjustment Payment Date, with
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interest, based upon a year of 360 days for the actual number of days
elapsed, accrued from the Closing Date until, but not including, the
Adjustment Payment Date at the Reference Rate. Such payment shall be
made by wire transfer of immediately available funds to a bank account
or accounts designated by the Sellers or the Buyer, as the case may be.
"Year-end Adjusted Net Worth" shall mean $5,203,000.
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1.3 Payment of Purchase Price. At the Closing, the Purchase
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Price shall be paid by the Buyer as follows:
(a) the Buyer shall deliver to each Seller cash by wire
transfer of immediately available funds to the account or accounts
designated by each Seller on Schedule 1.3(a) hereto, each such Seller's
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respective pro rata portion (the "Pro Rata Portion"), as specified on
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Schedule 1.3(a), of an amount equal to the Purchase Price minus the
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Escrow Amount.
(b) the Buyer shall deliver to the escrow agent to be selected
by the Sellers' Representative and the Buyer prior to the Closing (the
"Escrow Agent") cash, by wire transfer of immediately available funds
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to the account of such Escrow Agent designated on Schedule 1.3(b), in
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an amount equal to $2,815,000 (the "Escrow Amount"), which shall be
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held by the Escrow Agent and applied as set forth herein and in the
escrow agreement among the Buyer, the Sellers' Representative and the
Escrow Agent (the "Escrow Agreement") in the form of Annex B hereto.
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1.4 Delivery of Shares. At the Closing, the Sellers shall
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deliver to the Buyer share certificates constituting all of the Shares,
free and clear of all Liens, duly endorsed in blank or accompanied by stock
powers duly executed in blank, in proper form for transfer.
2. Closing; Closing Date. The Closing of the sale and purchase of
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the Shares contemplated hereby shall take place at the offices of Xxxx, Weiss,
Rifkind, Xxxxxxx &
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Xxxxxxxx, 1285 Avenue of the Americas, New York, New York, on the date which
is the later to occur of August 27, 1998 and the third Business Day after all
of the conditions to the Closing set forth in Sections 9.2, 9.7, 10.2 and
10.10 have been satisfied or waived by the party entitled to waive the same or
on such other date as the Buyer and the Sellers' Representative may mutually
agree (such date being the "Scheduled Closing"). The time and date upon which
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the Closing occurs is herein called the "Closing Date."
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3. Representations and Warranties of Each Seller. The Sellers,
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jointly and severally (subject to Section 14.2), represent and warrant to the
Buyer as follows:
3.1 Title to the Shares. Each Seller owns the Shares set forth
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opposite such Seller's name on Annex A beneficially and of record, and,
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upon delivery of and payment for such Shares at the Closing as herein
provided, such Seller will convey to the Buyer good and valid title
thereto, free and clear of any Lien other than any restrictions imposed by
any state or federal securities laws.
3.2 Authority to Execute and Perform Agreement. Each Seller has
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full legal right and power and all authority and approvals required to
enter into, execute and deliver as applicable, this Agreement, and each
other agreement, document, or instrument or certificate contemplated by
this Agreement to be executed by such Seller in connection with the
consummation of the transactions contemplated by this Agreement (together
with this Agreement, the "Seller Documents"), and to consummate the
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transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by such Seller and, assuming due execution and
delivery hereof by the other parties hereto, this Agreement constitutes a
legal, valid and binding obligation of such Seller enforceable against such
Seller in accordance with its terms except: (a) as rights to indemnity
hereunder may be limited by federal or state securities laws or the public
policies embodied therein; (b) as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the enforcement of creditors' rights generally; and (c) as the
remedy of
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specific performance and other forms of injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery by such
Seller of this Agreement and each of the other Seller Documents, the
consummation of the transactions contemplated hereby and thereby and the
performance by such Seller of this Agreement and each of the other Seller
Documents in accordance with its terms and conditions will not (i) require
such Seller to obtain any consent, approval, authorization or action of, or
make any filing with or give any notice to, any Governmental Entity or any
other Person, (ii) violate or conflict with the declaration of trust or
related documents of such Seller or, except as set forth in Schedule 3.2,
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violate, conflict with or result in the breach of any of the terms and
conditions of, result in a modification of the effect of, otherwise cause
the termination of or give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both
constitute) a default under, any material agreement, contract, indenture,
lease, license, mortgage, plan, arrangement, commitment or other
instrument or obligation (collectively, "Contracts") to which such Seller
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is a party or by or to which such Seller is or such Seller's Shares are or
may be bound or subject, or (iii) violate Applicable Law or an Order (as
hereafter defined) of any Governmental Entity applicable to such Seller or
to such Seller's Shares.
3.3 Purchase for Investment. Each of Xxxxxxxx X. XxXxxxxx,
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Xxxxxx Xxxxxxx and Xxxxxx Xxxxx (a "Warrantholder") are acquiring the URI
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Warrants (as defined in Article 10) for their own account for investment
and not for resale or distribution. Each Warrantholder acknowledges that
the sale of the URI Warrants (as hereafter defined) has not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or any
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applicable state securities laws and that such URI Warrants and the shares
of Buyer Common Stock (as defined in Article 10) issuable upon the exercise
thereof may only be sold or otherwise disposed of under an effective
registration statement under the Securities Act or under an exemption
therefrom. Each Warrantholder has no contract, undertaking, agreement or
arrangement with any Person
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or entity to sell, hypothecate, pledge, donate, or otherwise transfer (with
or without consideration) to such Person any of the URI Warrants or such
shares, and each Warrantholder has no present plans or intention to enter
into any such contract, undertaking, agreement, or arrangement. Each
Warrantholder is an "accredited investor" as defined in Regulation D of the
Securities Act.
4. Representations and Warranties of the Sellers as to the Company.
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The Sellers jointly and severally (subject to Section 14.2) represent and
warrant to the Buyer as follows:
4.1 Corporate Organization. The Company and each of its
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Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and lawful authority to own, lease and
operate its properties and to carry on its business as now being conducted.
The Company and each of its Subsidiaries is duly qualified or otherwise
authorized as a foreign corporation to transact business and is in good
standing in each jurisdiction listed on Schedule 4.1 hereto, which
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jurisdictions are the only jurisdictions where the failure to so qualify or
be authorized would have a Material Adverse Effect. The Sellers have
heretofore delivered or made available to the Buyer true and complete
copies of the Articles of Incorporation and By-Laws of the Company and each
of its Subsidiaries as in effect on the date hereof.
4.2 Subsidiaries. Each of the Company's Subsidiaries is listed
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on Schedule 4.2. Except as set forth on Schedule 4.2, the Company does
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not, directly or indirectly, own or have the option or obligation to
acquire or have the power to vote the shares of any capital stock or other
ownership interest or ordinary voting power to elect the majority of
directors of any corporation or other entity or other Person or body
performing a similar function of any such entity, as the case may be. The
Company owns all the outstanding shares of capital stock of each Subsidiary
free and clear of all Liens, and all of such shares have been duly
authorized for issuance and
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validly issued and are fully paid and non-assessable and have not been
issued in violation of the preemptive or similar rights of any Person.
4.3 Outstanding Capital Stock. The Company is authorized to
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issue a total of 5,000 shares of Common Stock. All of the outstanding
shares of Common Stock, which constitute all of the Shares, were duly
authorized for issuance and are validly issued, fully paid and
nonassessable and not issued in violation of the preemptive or similar
rights of any Person. The Company has not issued and does not have
outstanding any shares of preferred stock or any other class of capital
stock other than the Shares. Except as set forth in Schedule 4.3 hereto,
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there are no outstanding rights, subscriptions, warrants, calls,
unsatisfied preemptive rights, options or other agreements of any kind to
purchase or otherwise to receive from the Company or any of its
Subsidiaries any of the outstanding, authorized but unissued or
unauthorized capital stock or any other security of the Company or any of
its Subsidiaries, and there is no outstanding security of any kind of the
Company or any of its Subsidiaries convertible into or exercisable for the
purchase of any such capital stock or other security of the Company or any
of its Subsidiaries. Except as set forth on Schedule 4.3 (which agreements
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will terminate upon Closing), none of the Sellers nor the Company nor any
of its Subsidiaries is a party to any voting trust or other voting
agreement with respect to any of the Shares or to any agreement relating to
the issuance, sale, redemption, transfer, registration or other disposition
of the capital stock of the Company or any of its Subsidiaries.
4.4 Financial Statements. The consolidated balance sheets of
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the Company and its Subsidiaries as at December 31, 1996 and December 31,
1997 and the related statements of earnings and stockholders' equity and
statements of cash flows for the years then ended, including the footnotes
thereto, which are attached hereto as Schedule 4.4, and the consolidated
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balance sheet of the Company and its Subsidiaries as at March 31, 1998 and
the related statements of earnings and stockholders' equity and statements
of cash flows for the three-month period then ended, which are attached
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hereto as Schedule 4.4(b) (the "Interim Financials") have been prepared in
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accordance with GAAP, consistently applied, and fairly present in all
material respects the consolidated financial position of the Company and
its consolidated Subsidiaries as at such dates and the consolidated results
of operations and changes in cash flows of the Company and its consolidated
Subsidiaries for such respective periods, in each case in accordance with
GAAP consistently applied for the periods covered thereby and, in the case
of the Interim Financials, consistent with the Company's past practices for
its preparation of its unaudited financial statements (and subject to
normal year-end audit adjustments). (The foregoing financial statements of
the Company and its consolidated Subsidiaries as at December 31, 1997 and
for the year then ended are sometimes herein called the "Annual
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Financials." The balance sheet included in the Annual Financials is
sometimes herein called the "Balance Sheet" and December 31, 1997 is
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sometimes herein called the "Balance Sheet Date.")
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4.5 Liabilities; Ordinary Course.
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(a) Except as set forth on Schedule 4.5(a), the Company and
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its Subsidiaries have not incurred any indebtedness, liability or
obligation (whether or not accrued, fixed, due, contingent or known)
("Liabilities") of a kind required by GAAP to be set forth on the
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Balance Sheet which was not fully reflected in, reserved against, or
otherwise described in the Balance Sheet except those Liabilities
incurred in the ordinary course of business since the Balance Sheet
Date; and
(b) Between the Balance Sheet Date and the date hereof, there
has been no material adverse change in the properties, business, results
of operations or financial condition of the Company and its Subsidiaries
taken as a whole, without regard, however, to changes in general
economic conditions. Except as expressly contemplated by this Agreement
or as set forth on Schedule 4.5(b), since the Balance Sheet Date, the
---------------
Business has been conducted in the
12
ordinary course and neither the Company nor any of its Subsidiaries have
(i) declared or paid any dividends or made any other non-cash
distributions on the Shares or redeemed, purchased or otherwise acquired
any shares of Common Stock, (ii)(A) increased the rate or terms of
compensation payable or to become payable to its directors, officers or
employees except in the ordinary course of business consistent with past
practice and that in the aggregate does not result in a material
increase of the compensation or benefits expense of the Company, (B)
paid or agreed to pay any pension, retirement allowance or other
employee benefit not provided for by any Benefit Plan or Employment
Agreement (as hereafter defined) set forth in the Schedules hereto or
(C) announced an intention or committed itself to any additional
pension, profit-sharing, bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance,
severance pay, continuation pay, termination pay, retirement or other
employee benefit plan, agreement or arrangement, or increased the rate
or terms of any Benefit Plan, (iii) made any change in its accounting or
tax reporting methods or in the manner of keeping its books and records
or changed its current practices with respect to sales, receivables,
payables or accrued or deferred expenses, or (iv) amended, terminated or
renewed any lease of the Properties.
4.6 Contravention. Except as set forth on Schedule 4.6(a),
------------- ---------------
neither the execution and delivery of this Agreement or the other Seller
Documents nor the consummation of the transactions contemplated hereby or
thereby will (i) conflict with or result in any breach of any provision of
the Articles of Incorporation or By-Laws of the Company or any of its
Subsidiaries, (ii) require any consent, approval or notice under or result
in a violation or breach of, or constitute (with or without notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or increase the obligations or decrease the
rights) under, any terms, conditions or provisions of any Contract, (iii)
violate Applicable Law or the terms of any Permit or Order with respect to
the Company or any of its Subsidiaries or (iv)
13
result in the creation of any Lien upon the properties or assets of the
Company or any of its Subsidiaries, except, in the case of clause (ii),
(iii) and (iv), for such violations, Liens, breaches or defaults as would
not, individually or in the aggregate, result in a Material Adverse Effect.
Except as set forth on Schedule 4.6(b), other than any filing required
---------------
under the HSR Act, neither the Company nor any Subsidiary is required to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Entity in order for the parties to
consummate the transactions contemplated by this Agreement, except where
the failure to give notice, to file, or to obtain any authorization,
consent, or approval would not have a Material Adverse Effect.
4.7 Taxes.
-----
(a) The Company and each of its Subsidiaries have paid all
Taxes required to be paid by them through the date of this Agreement,
and will pay all Taxes required to be paid by them on or before the
Closing Date (which will not include a requirement to pay any Taxes
shown as an accrual on the Audited Closing Balance Sheet and reflected
in the Audited Closing Adjusted Net Worth (as increased or decreased, as
the case may be, by the Resolved Objections and the CPA - Determined
Differences) but not yet due on the Closing Date).
(b) The Company and its Subsidiaries have timely filed or
timely filed extensions for all reports, declarations, information
statements and returns relating to the Taxes ("Tax Returns") required to
-----------
be filed by or on behalf of each of the Company and its Subsidiaries
with the appropriate taxing authority through the date of this Agreement
and all such Tax Returns are true, complete and correct in all material
respects, and will prepare and timely file, in a manner consistent with
prior years and applicable laws and regulations, all Tax Returns
required to be filed by them on or before the Closing Date which Tax
Returns will be true, correct and complete in all material respects. No
penalties or other charges are or
14
will become due with respect to the late filing of any Tax Return or
payment of any Tax of the Company or any Subsidiary required to be filed
or paid on or before the Closing Date.
(c) All deficiencies asserted or assessments made as a result
of any examinations by the IRS or any other taxing authority of the Tax
Returns of or covering or including the Company and each of its
Subsidiaries have been fully paid. There are no audits or
investigations by any taxing authority in progress, nor has any Seller,
the Company or any of its Subsidiaries received any notice from any
taxing authority that it intends to conduct such an audit or
investigation. No issue has been raised in writing by a federal, state,
local or foreign taxing authority in any current or prior examination
which, by application of the same or similar principles, could
reasonably be expected to result in a proposed material deficiency for
any subsequent taxable period. None of the Company or any of its
Subsidiaries is subject to any private letter ruling of the IRS or
comparable rulings of other taxing authorities. No extension of time is
in force with respect to any date on which any Tax Return was or is to
be filed and no waiver or agreement is in force for the extension of
time for the assessment or payment of any Tax. To the Knowledge of the
Sellers, there is no unassessed deficiency proposed or threatened
against the Company or any Subsidiary.
(d) None of the Sellers, the Company or any of its
Subsidiaries has (i) agreed to or is required to make any adjustments
under Section 481(a) of the Code or any similar provision of state,
local or foreign law by reason of a change in accounting method or
otherwise or has any knowledge that the IRS has proposed any such
adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any changes
in accounting methods that relate to the business or operations of the
Company or any of its Subsidiaries, (ii) executed or entered into a
closing agreement pursuant to Section 7121 of the Code or any
predecessor provision
15
thereof or any similar provision of state, local or foreign law with
respect to the Company or any of its Subsidiaries, or (iii) any power of
attorney with respect to any Tax matter currently in force.
(e) The Company and its Subsidiaries have complied with all
applicable laws, rules and regulations relating to the payment and
withholding of Taxes and have withheld or collected from each payment
made to employees or otherwise in connection with services rendered the
amount of all Taxes required to be withheld or collected therefrom, and
the Company and its Subsidiaries has paid all such Taxes when due to the
proper Tax receiving officials.
(f) Except in connection with the Election (as hereinafter
defined,) and except as set forth in Schedule 4.7(f), none of the
---------------
Company or any of its Subsidiaries has any material elections in effect
for federal, state, local or foreign income tax purposes and the Sellers
will not permit or cause the Company or any of its Subsidiaries to make
any additional federal tax elections under the Code with respect to the
Company or any of its Subsidiaries for any tax period ending after the
Closing Date.
(g) Neither the Company nor any of its Subsidiaries has at any
time consented under Section 341(f)(1) of the Code to have the
provisions of Section 341(f)(2) of the Code apply to any sale of its
stock.
(h) Except as set forth on Schedule 4.7(h), neither the
---------------
Company nor any of its Subsidiaries has ever been, nor will be through
the Closing Date, a member of a consolidated, unitary, combined or
affiliated group of corporations for any Tax purpose.
(i) The Company has properly elected under Section 1362(a) of
the Code, and except as set forth on Schedule 4.7(i), under each
---------------
analogous or similar provision of state or local law in each
jurisdiction where the Company is required to file income Tax Returns,
to be treated as an S Corporation for its
16
taxable period beginning with the taxable year ended December 31, 1990
and will continue to qualify as an S Corporation for all federal, state
and local income tax purposes at all times through its taxable year
ending on the day before the Closing Date and, accordingly, has and will
have no liability for federal income taxes with respect to any taxable
period beginning with its first taxable year and through its taxable
year ending on the Closing Date, including as a result of the Election.
(j) The Buyer has received complete copies of (i) all federal,
state, local and foreign income or franchise Tax Returns of the Company
and each of its Subsidiaries relating to the last three taxable periods
of the Company and each of its Subsidiaries and (ii) any audit report
issued within the last three years (or otherwise with respect to any
audit or investigation in progress) relating to Taxes due from or with
respect to the Company and each of its Subsidiaries, their respective
income, assets or operations. With respect to all income and franchise
Tax Returns filed by or on behalf of the Company and each of its
Subsidiaries for the taxable years ended on the respective dates set
forth on Schedule 4.7(j), either (x) such Tax Returns have been examined
---------------
by and settled with the relevant taxing authority, or (y) the applicable
statute of limitations with respect to the taxable years covered by such
Tax Returns has expired.
(k) Schedule 4.7(k) lists all material types of Taxes paid and
---------------
material types of Tax Returns filed by or on behalf of the Company and
each of its Subsidiaries. To the Knowledge of the Sellers, no claim has
been made by a taxing authority in a jurisdiction where the Company or
any of its Subsidiaries does not file Tax Returns such that it is or may
be subject to taxation by that jurisdiction.
(l) No property owned by the Company or any of its
Subsidiaries is (i) property required to be treated as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue
17
Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (ii) constitutes "tax-exempt
use property" within the meaning of Section 168(h)(1) of the Code or
(iii) is "tax-exempt bond financed property" within the meaning of
Section 168(g) of the Code.
(m) There are no Liens for or as a result of any unpaid Taxes
on the assets of the Company or any of its Subsidiaries except for Liens
for current Taxes not yet due.
(n) No Seller is a foreign person with the meaning of Section
1445 of the Code.
(o) None of the Company or any of its Subsidiaries are parties
to any tax sharing or similar Contract or arrangement (whether or not
written).
(p) There is no Contract, plan or arrangement involving the
Company or any of its Subsidiaries and covering any Person that,
individually or collectively, could give rise to the payment of any
amount that would not be deductible by the Buyer, the Company or any of
its Subsidiaries or their respective Affiliates by reason of Section
280G of the Code.
(q) None of the Company or any of its Subsidiaries has any
elections in effect for federal income tax purposes under Section 168 of
the Code or any analogous or similar provision of state, local or
foreign law.
4.8 Claims and Proceedings. Except as set forth on Schedule
---------------------- --------
4.8, there are (i) no suits, claims, actions or proceedings pending or, to
the Knowledge of Sellers, threatened, and (ii) to the Knowledge of Sellers,
no investigations are pending or threatened, in each case, against or
relating to the Company or any of its Subsidiaries or any material portion
of their respective properties or assets before any court or Governmental
Entity, (x) which if adversely determined, would result in a liability of
the Company or any of its Subsidiaries in excess of $100,000, with respect
to any one such matter, or $500,000, in the case of all such matters, or
(y) which would
18
(if successful) require specific performance or an injunction by the
Company, any of its Subsidiaries or any of their respective directors,
officers, employees, shareholders, or Affiliates; and (iii) to the
Knowledge of the Sellers no event has occurred which is likely to result in
any such action, proceeding or investigation which would have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is engaged
in any legal action to recover monies due it or for damages sustained
(other than ordinary course collections). No material portion of the
Company's or its Subsidiaries' properties or assets is subject to any
specific order, judgment, injunction or decree (collectively, "Orders") of
------
any court or Governmental Entity of which the Company, any of its
Subsidiaries, or any Seller was notified that would result in a Material
Adverse Effect. All matters listed on Schedule 4.8, whether litigation has
------------
been instituted or not, have been reported by the Company to its insurance
carriers for coverage and such carriers have not indicated that they will
deny coverage in respect thereof.
4.9 Contracts. Schedule 4.9 sets forth, as of the date hereof,
--------- ------------
a list of all of the following Contracts to which the Company or any of its
Subsidiaries is a party or by which it or any material portion of their
respective properties or assets are bound or subject (together with the
agreements specifically identified in this Agreement or in the other
Schedules hereto, the "Scheduled Contracts"):
-------------------
(a) contracts and other agreements with any labor union,
collective bargaining unit or association representing any employee of
the Company or any of its Subsidiaries;
(b) agreements for acquisitions or dispositions (by merger,
purchase or sale of stock or otherwise) of material assets entered into
in the last two years or pursuant to which the Company has ongoing
obligations (other than acquisitions or dispositions of assets in the
ordinary course) with a value in excess of $200,000 (other than the
exercise of the option to purchase the property at Egg
19
Harbor Township at a price no greater than $350,000, and on terms
reasonably acceptable to the Sellers and the Buyer);
(c) contracts and other agreements relating to indebtedness of
the Company or such Subsidiary, guarantees of the indebtedness of any
other Person or the deferred purchase price of property where such
deferred purchase price is in excess of $200,000;
(d) all partnership, joint venture or other similar Contracts,
arrangements or agreements;
(e) any lease, license or other Contract pursuant to which any
person has the right to occupy or use any of the Owned Real Property or
any portion of the premises that are the subject of the Leases;
(f) each agreement that restricts or purports to restrict the
right of the Company or any Subsidiary of the Company to engage in any
business anywhere in the world or to compete with any Person with
respect to any business anywhere in the world;
(g) all license, sale, dealer, distribution, commission,
marketing, agent, franchise, technical assistance or similar agreements,
other than commission arrangements with employees of the Company or any
of its Subsidiaries, relating to or providing for the marketing or sale
of the products or services of or by the Company or any Subsidiary of
the Company; and
(h) any other material contract whether or not made in the
ordinary course of business which provides for or would reasonably be
expected to provide for the payment by the Company or any Subsidiary of
the Company after the date of this Agreement of more than $200,000 per
annum.
Except as disclosed on Schedule 4.9, each Scheduled Contract is a legal,
------------
valid and binding obligation of the Company or of its Subsidiary, as the case
may be, and, to the Knowledge of Sellers, each other party thereto, enforceable
against each such party thereto in
20
accordance with its material terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and subject to general principles of equity, and
none of the Company, any Subsidiary of the Company nor, to the Knowledge of
Sellers, any other party thereto, is (or with notice or lapse of time or both
would be) in default thereunder, except where such default would not have a
Material Adverse Effect. As of the date of this Agreement, the Company has not
received notice to the effect that any party to a Scheduled Contract intends to
terminate or not renew the same at its next renewal date. Complete and correct
copies of each Scheduled Contract have been previously delivered to Buyer.
4.10 Real Estate.
-----------
(a) The Company and its Subsidiaries are the owners of fee
title to all of the real property listed on Schedule 4.10(a) and all
----------------
buildings, structures and other improvements located thereon other than
any real property included in the Excluded Assets and Liabilities (the
"Owned Real Property").
--------------------
(b) The Company and its Subsidiaries are the lessees of
certain real property (together with the Owned Real Property, the
"Properties") pursuant to the leases listed on Schedule 4.10(b) (the
----------- ----------------
"Leases"). The Company and its Subsidiaries have a valid, enforceable
------
and binding leasehold interest in the real property subject to each of
the Leases. The Sellers have heretofore delivered to, or have caused the
Company to deliver to, the Buyer true, correct and complete copies of
the Leases (including any modifications, amendments and supplements).
Except as set forth in Schedule 4.10(b) with respect to the Leases,
----------------
there exists no default or circumstance which with notice or lapse of
time or both would constitute a default by the Company or any of its
Subsidiaries or, to the Knowledge of Sellers, any default or threatened
default by any third party thereunder. The Properties (together with the
properties of McClinch, Inc. ("MI") and Grey Fox Equipment, Inc.
--
("Grey Fox")) constitute all interests in real property currently
--------
21
used or currently held for use in connection with the Business of the
Company and its Subsidiaries and which are necessary for the continued
operation of the Business as currently conducted. All of the Properties,
buildings, fixtures and improvements thereon owned or leased by the
Company and its Subsidiaries are in condition and repair (subject to the
normal wear and tear) sufficient to operate the Business, with
sufficient access to roads and utilities to operate the Business as
presently conducted. With respect to the Owned Real Property, the
Company has all material certificates of occupancy. Except for the
option to purchase the Egg Harbor Township property, neither the Company
nor any Subsidiary owns or holds, or is obligated under or a party to,
any option, right of first refusal or other contractual right to
purchase, acquire, sell, assign or dispose of any real estate or any
portion thereof or interest therein.
(c) Except as set forth on Schedule 4.10(c), none of the Owned
Real Properties are subject to a Lien, other than Permitted Liens and
other than any other Lien that does not materially interfere with the
value or operation of the Owned Real Property as presently operated. No
condemnation or eminent domain proceeding is pending or, to the
Knowledge of Sellers, threatened which would preclude or impair in any
material respect the use of any Owned Real Property or the Xxxxxx
Property or, to the Knowledge of the Sellers, any property subject to
the Leases, for the uses for which it is currently being used.
4.11 Employee Benefit Plans.
----------------------
(a) Schedule 4.11(a) lists all Benefit Plans of the Company
----------------
and its Subsidiaries. With respect to each such Benefit Plan, the
Sellers heretofore have delivered, or have caused the Company heretofore
to have made available to the Buyer true, correct and complete copies of
(i) all plan texts and agreements and related trust agreements or
annuity contracts, (ii) all summary plan descriptions and material
employee communications, (iii) the most recent annual report
22
(including all schedules thereto); or (iv) if the plan is intended to
qualify under Code section 401(a) or 403(a), the most recent
determination letter received from the IRS;
(b) Each Benefit Plan conforms in all material respects to,
and its administration is in compliance in all material respects with,
all Applicable Laws and regulations. Each Benefit Plan intended to be
qualified under Code section 401(a) has been determined to be so
qualified by the IRS and each trust established in connection with any
Benefit Plan that is intended to be exempt from federal income taxation
under Code section 501(a) has been determined to be so exempt by the IRS
and no event has occurred and no condition or circumstance has existed
to adversely affect the qualified status of any Benefit Plan;
(c) Except as set forth on Schedule 4.11(c) or as contemplated
----------------
by this Agreement, the consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee to
severance pay, unemployment compensation or any similar payment or (ii)
accelerate the time of payment or vesting, or increase the amount of any
compensation or benefits due to, any current or former employee;
(d) Except as set forth on Schedule 4.11(d), no Benefit Plan
----------------
is a "multiple employer plan" or a "multiemployer plan" within the
---------------------- ------------------
meaning of the Code or ERISA and no Benefit Plan is subject to Title IV
of ERISA;
(e) No "reportable event" as defined in Section 4043 of ERISA
----------------
has occurred with respect to any Benefit Plan and no accumulated funding
deficiency, whether or not waived, exists with respect to any Benefit
Plan; and, to the Knowledge of Sellers, there is no risk of termination
of any Benefit Plan by the PBGC under Section 4042 of ERISA and no event
has occurred which has or is likely to subject the Company or any of its
Subsidiaries to liability under Section 4062 of ERISA;
23
(f) Except as set forth on Schedule 4.11(f), each Benefit Plan
----------------
can be amended or terminated at any time, without the consent of any
other party and without liability other than for benefits accrued as of
the date of such amendment or termination;
(g) Neither the Company nor any of its Subsidiaries is
obligated to provide life insurance or health care benefits of any kind
to its retired or former officers, directors or employees pursuant to
any Benefit Plan, including any "group health plan" as such term is
-----------------
defined in Code section 5000(b)(1), or pursuant to any agreement or
understanding, except as may be required under Part 6 of Title I of
ERISA and at the sole expense of the participant or the participant's
beneficiary;
(h) Except as disclosed in Schedule 4.11(h), none of the
----------------
assets of any Benefit Plan is stock of the Company or any of its
Affiliates, or property leased to or jointly owned by the Company or any
of its Affiliates;
(i) All contributions or other payments required to have been
made by the Company and its Subsidiaries to or under any Benefit Plan by
Applicable Law or by the terms of such Benefit Plan have been timely and
properly made; and
(j) There are no pending or, to the Knowledge of the Sellers,
threatened actions, claims or proceedings against or relating to any
Benefit Plan other than routine claims by persons entitled to benefits
thereunder.
4.12 Insurance. Schedule 4.12 sets forth a list of all material
--------- -------------
policies or binders of fire, liability, product liability, worker's
compensation, casualty, vehicular and other insurance held by or on behalf
of the Company or any of its Subsidiaries. Each such policy and binder is
valid and binding in accordance with its terms, is in full force and
effect, and neither the Company nor any of its Subsidiaries is in default
with respect to any provision contained in any such policy or binder nor
has the Company or any of its Subsidiaries failed to give any notice or
present any claim
24
under any such policy or binder in due and timely fashion except to the
extent such default or failure would not have a Material Adverse Effect.
4.13 Tangible Properties. Each of the Company and its
-------------------
Subsidiaries has good and marketable title to, or leases with respect to,
all of its owned or leased tangible personal property which is necessary
for the conduct of its business in the ordinary course consistent with past
practices and is reflected in the Balance Sheet, except as indicated in the
notes thereto, and no such personal property is subject to any Lien (except
for Liens reflected in the Balance Sheet and Permitted Liens). Such
tangible personal property has been maintained by the Company or its
Subsidiary, as the case may be, in a manner consistent with past practices.
4.14 Related Party Transactions. Except as set forth on
--------------------------
Schedule 4.14, neither the Sellers nor any of their respective Affiliates
-------------
(other than MI and Grey Fox) has borrowed any moneys from the Company or
any of its Subsidiaries which has not been repaid or has outstanding any
indebtedness or other similar obligations to the Company or any of its
Subsidiaries. Except as set forth in Schedule 4.14, none of the Sellers
-------------
is, or owns any direct or indirect interest of any kind in (other than any
interest of less than 5% in any Person subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended), or
controls or is a director, officer, employee or partner of, or consultant
to, or lender to or borrower from or has the right to participate in the
profits of, any Person which is, (A) a competitor, supplier, customer,
landlord, tenant, creditor or debtor of the Company or any of its
Subsidiaries, or (B) a party to any Contract with the Company or any of its
Subsidiaries.
4.15 Banks. Schedule 4.15 contains a complete and correct list
----- -------------
of the names and locations of all banks in which the Company or any of its
Subsidiaries has accounts or safe deposit boxes and the names of all
persons authorized to draw thereon or to have access thereto. Except as
set forth on Schedule 4.15, no Person holds a power of attorney to act on
-------------
behalf of the Company or any of its Subsidiaries.
25
4.16 Permits. The Company and its Subsidiaries have all
-------
material approvals, authorizations, certificates, consents, licenses,
exemptions, orders and permits or other similar authorizations of all
Governmental Entities (the "Permits") necessary for the operation of the
-------
Business in the manner currently operated, and each such Permit is valid
and in full force and effect in all material respects and there are no
proceedings pending or, to the Knowledge of the Sellers, threatened to
revoke or cancel the same; provided, that nothing in this Section 4.16
--------
shall be or be deemed to be a representation or warranty concerning
Environmental Laws or Permits with respect to environmental matters.
4.17 Compliance with Applicable Laws. Except as set forth on
-------------------------------
Schedule 4.17, the Company and each of its Subsidiaries have complied and
-------------
are in compliance with Applicable Law with respect to the Company and each
of its Subsidiaries and the conduct of their business and the use of their
properties, except in the case where failure to comply or be in compliance
would not have a Material Adverse Effect; provided, that nothing in this
--------
Section 4.17 shall be or be deemed to be a representation or warranty
concerning Environmental Laws or Permits with respect to environmental
matters.
4.18 Employment Agreements. Except as set forth on Schedule
--------------------- --------
4.18, there are no employment, consulting, severance pay, continuation pay,
----
termination pay or indemnification agreements or other similar agreements
(collectively, the "Employment Agreements") between the Company or any of
---------------------
its Subsidiaries and any current or former shareholder, officer, director
or employee or any consultant or agent of the Company or any of its
Subsidiaries that are currently in effect. True and complete copies of the
Employment Agreements have been delivered to Buyer.
4.19 Labor and Employment Matters.
----------------------------
(a) Except as set forth on Schedule 4.19(a), no collective
----------------
bargaining agreement existed or exists that is binding on the Company or
any of its
26
Subsidiaries, and to the Knowledge of Sellers, no petition has been
filed or proceedings instituted by an employee or group of employees
with any labor relations board seeking recognition of a bargaining
representative. Schedule 4.19(a), to the Knowledge of Sellers,
----------------
describes any organizational effort currently being made or threatened
by or on behalf of any labor union to organize any employees of the
Company or any of its Subsidiaries; and
(b) Except as set forth on Schedule 4.19(b), (i) there is no
----------------
labor strike, dispute, slow down or stoppage pending or, to the
Knowledge of Sellers, threatened, against or directly affecting the
Company or any of its Subsidiaries, (ii) no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement
is pending, and to the Knowledge of the Sellers, no claims therefor
exist, and (iii) neither the Company nor any of its Subsidiaries has
received any notice of any labor or civil rights dispute, controversy or
grievance or any other unfair labor practice proceeding or breach of
contract claim or action with respect to claims of, or obligations to,
any employee or group of employees of the Company or any of its
Subsidiaries. The Company and its Subsidiaries are in material
compliance with all laws, regulations and orders relating to the
employment of labor, including all such laws, regulations and orders
relating to wages, hours, WARN, collective bargaining, discrimination,
civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or social security taxes and
any similar tax except for immaterial non-compliance. There has been no
"mass layoff" or "plant closing" as defined by WARN with respect to the
Company and its Subsidiaries within the six (6) months prior to the
Closing Date.
4.20 Intangible Property. Other than generally available, "off-
------------------- ---
the-shelf" items containing intellectual property, Schedule 4.20 contains a
--------- -------------
complete and correct list of each patent, trademark, trade name, service
xxxx and copyright owned or used by Company and its Subsidiaries as well as
all registrations thereof and pending
27
applications therefor, and each license or other agreement relating
thereto. Except as set forth on Schedule 4.20, each of the foregoing is
-------------
owned by the Company or its Subsidiaries free and clear of all Liens and,
to the Knowledge of the Sellers, is not the subject of any ownership
challenge. Neither the Company nor any Subsidiary has received any written
notice that any of the foregoing is invalid or conflicts with the asserted
rights of others.
4.21 Environmental Compliance. Except as set forth on Schedule
------------------------ --------
4.21 hereto:
----
(a) the operations and facilities (as defined by CERCLA) of
the Company and each of its Subsidiaries have been for the past three
years, and are in, material compliance with all applicable Environmental
Laws and all Permits issued pursuant to Environmental Laws;
(b) the Company and each of its Subsidiaries have obtained and
currently maintains all material Permits required under all applicable
Environmental Laws necessary to operate its business;
(c) neither the Company nor its Subsidiaries is the subject of
any outstanding proceeding, written claim, written order or Contract
with any Governmental Entity or Person with respect to (i) Environmental
Law, (ii) Remedial Action or (iii) any Release or threatened Release of
a Hazardous Material and, to the knowledge of the Sellers, no such
proceedings, claims, orders or contracts are threatened;
(d) neither the Company nor any of its Subsidiaries has
received any written communication or, to the Knowledge of the Sellers,
any other communication, alleging either or both that the Company or any
of its Subsidiaries, or any of their respective Properties or facilities
may be in violation of (i) any Environmental Law or (ii) any Permit
issued pursuant to any Environmental Law,
28
or that the Company or any of its Subsidiaries may have any liability
under any Environmental Law;
(e) to the Knowledge of the Sellers, there are no
investigations by any Governmental Entity under or pursuant to
Environmental Laws of the business, operations, Properties or former
properties of the Company or any of its Subsidiaries pending or
threatened;
(f) there is not now located at any of the Properties of the
Company or any of its Subsidiaries any underground storage tanks for
which the Company or the Subsidiaries has responsibility ("UST") nor, to
---
the Knowledge of the Sellers, any asbestos-containing material in a
condition necessitating abatement, nor equipment containing
polychlorinated biphenyls necessitating immediate removal or
remediation;
(g) the Sellers have provided to the Buyer all environmentally
related Phase I and Phase II reports or other material environmental
reports that have been performed and provided to the Company or any of
its Subsidiaries with respect to the Properties or former properties,
assets or current operations of the Company or any of its Subsidiaries
and that are in the Company's or any of its Subsidiaries' possession,
custody or control; and
(h) as of the Closing Date, to the Knowledge of Sellers, there
are no conditions requiring Remedial Action on the Properties resulting
from Releases of Hazardous Materials prior to the Closing, other than
conditions disclosed to the Phase I or Phase II Consultants. To the
knowledge of Sellers, there are no conditions on the formerly owned,
operated or leased properties of the Company or any Subsidiary requiring
Remedial Action for which the Company may be responsible, other than
conditions described in the environmental reports provided by the
Sellers to the Buyer and listed on Schedule 4.21(h).
29
4.22 Finders and Investment Bankers. Except for Xxxxx Brothers
------------------------------
Xxxxxxxx & Co. ("Xxxxx Brothers"), no broker, finder, agent or similar
--------------
intermediary has acted on behalf of the Company in connection with this
Agreement, and that, except for the fees and expenses of Xxxxx Brothers,
there are no brokerage commissions, finders' fees or similar fees or
commissions payable in connection therewith based on any agreement,
arrangement or understanding with the Company or any action taken by the
Company or any Subsidiary of the Company.
4.23 Certain Actions. None of the Company, any of its
---------------
Subsidiaries nor any Person acting at the direction or on behalf of the
Company or any of its Subsidiaries has serviced, maintained, modified,
altered or refurbished any product sold, rented or distributed prior to the
Closing Date by the Company, any of its Subsidiaries or any of their
respective predecessors in a wanton, malicious, wilfully improper or
criminally negligent manner.
4.24 No Other Representations and Warranties. Except for the
---------------------------------------
representations and warranties contained in Articles 3 and 4, the Sellers
make no other express or implied representations or warranties concerning
the Shares, the Company, any Subsidiary or asset of the Company or any
Seller or any of the transactions contemplated hereby.
5. Representations and Warranties of the Buyer. The Buyer represents
-------------------------------------------
and warrants to the Sellers as follows:
5.1 Corporate Organization. The Buyer is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now
being and as heretofore conducted.
5.2 Authority to Execute and Perform Agreement. The Buyer has
------------------------------------------
the full legal right and power and all authority and approvals required to
enter into, execute and deliver this Agreement and each other agreement,
document, or instrument or
30
certificate contemplated by this Agreement to be executed by Buyer in
connection with the consummation of the transactions contemplated by this
Agreement (collectively the "Buyer Documents"), and to consummate the
---------------
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by the Buyer and, assuming due execution and
delivery hereof by the other parties hereto, this Agreement will be valid
and binding obligation of the Buyer enforceable against the Buyer in
accordance with its terms except: (a) as rights to indemnity hereunder may
be limited by federal or state securities laws or the public policies
embodied therein; (b) as such enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the
enforcement of creditors' rights generally; and (c) as the remedy of
specific performance and other forms of injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery by the Buyer
of this Agreement and the other Buyer Documents, the consummation of the
transactions contemplated hereby and thereby and the performance by the
Buyer of this Agreement and the other Buyer Documents in accordance with
their respective terms and conditions will not (i) conflict with or result
in any breach of any provision of the Certificate of Incorporation or By-
Laws of the Buyer; (ii) require the Buyer to obtain any consent, approval,
authorization or action of, or make any filing with or give any notice to,
any Governmental Entity or any other Person other than any filings required
under the HSR Act and applicable securities laws except for the consent of
the lenders under the Buyer's credit agreement, which the Buyer has
obtained; (iii) violate, conflict with or result in the breach of any of
the terms and conditions of, result in a material modification of the
effect of, otherwise cause the termination of or give any other contracting
party the right to terminate, or constitute (or with notice or lapse of
time or both constitute) a default under, any Contract to which the Buyer
is a party or by or to which the Buyer or any of its properties is or may
be bound or subject; or (iv) violate Applicable Law or Order of any
Governmental Entity applicable to the Buyer.
31
5.3 Purchase for Investment. The Buyer is purchasing the Shares
-----------------------
for its own account for investment and not for resale or distribution. The
Buyer acknowledges that the sale of the Shares has not been registered
under the Securities Act, or any applicable state securities laws and that
such Shares may only be sold or otherwise disposed of under an effective
registration statement under the Securities Act or under an exemption
therefrom. Except with respect to the Buyer's credit agreement, the Buyer
has no contract, undertaking, agreement or arrangement with any Person or
entity to sell, hypothecate, pledge, donate, or otherwise transfer (with or
without consideration) to any such Person any of the Shares, and the Buyer
has no present plans or intention to enter into any such contract,
undertaking, agreement, or arrangement.
5.4 [Intentionally omitted].
5.5 Sources of Information. The Buyer acknowledges that it has
----------------------
conducted its own investigation of the business and affairs of the Company
and its Subsidiaries. The Buyer has been afforded the opportunity: (i) to
ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company and its Subsidiaries concerning the
Company and its Subsidiaries; and (ii) to obtain such additional
information that the Company and its Subsidiaries possess or can acquire
without unreasonable effort or expense that is reasonably necessary to
verify the accuracy and completeness of the information previously
furnished to it by the Company and its Subsidiaries; provided that no
--------
investigation by the Buyer shall affect the representations and warranties
of the Sellers.
5.6 Finders and Investment Bankers. No broker, finder, agent or
------------------------------
similar intermediary has acted on behalf of the Buyer in connection with
this Agreement, and there are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with the Buyer or any action taken
by the Buyer.
32
5.7 Litigation. There are no legal proceedings pending or, to
----------
the Knowledge of the Buyer, threatened that are reasonably likely to
prohibit or restrain the ability of the Buyer to enter into this Agreement
or any other Buyer Document or consummate the transactions contemplated
hereby or thereby.
6. Covenants and Agreements.
------------------------
6.1 Conduct of Business of the Company. Except as contemplated
----------------------------------
by this Agreement, during the period commencing on the date hereof and
ending at the Closing Date, the Sellers shall cause the Company and its
Subsidiaries to conduct their respective operations in accordance with
their ordinary course of business consistent with past practice. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, prior to the Closing Date, neither the Company
nor any of its Subsidiaries will, without the prior written consent of the
Buyer (which may not be unreasonably withheld or delayed):
(a) amend or propose to amend its Articles of Incorporation or
By-Laws or merge or consolidate with or into any other Person;
(b) authorize for issuance, issue, sell, pledge, deliver or
agree or commit to issue, sell, pledge or deliver (whether through the
issuance or granting of any options, warrants, calls, subscriptions,
stock appreciation rights or other rights or agreements) any capital
stock of any class or any securities convertible into or exchangeable
for shares of capital stock of any class of the Company or such
Subsidiary, as the case may be (except for the issuance of securities of
Subsidiaries issued to the Company or another Subsidiary);
(c) split, combine or reclassify any shares of Common Stock;
(d) enter into any agreements, commitments or contracts that
are material to the Company and the Subsidiaries, taken as a whole,
other than in the ordinary course of business consistent with past
practice, or otherwise make any material change in (i) any existing
agreement, commitment or arrangement that is
33
material to the Company and its Subsidiaries, taken as a whole or (ii)
the conduct of the Business;
(e) except for the exercise of the option regarding the
property at Egg Harbor Township, purchase or otherwise acquire assets
from any Person other than in the ordinary course of business;
(f) sell, assign, lease, license, transfer or otherwise
dispose of, or mortgage, pledge or encumber (other than with Permitted
Liens), any Owned Real Property or any of its assets, or amend,
terminate or renew any of the Leases;
(g) amend or modify in any material respect or terminate any
Contract entered into by the Company after the date hereof which, if in
existence on the date hereof, would be required to be set forth in
Schedule 4.9 as a Scheduled Contract (each, a "Subsequent Material
------------ -------------------
Contract");
--------
(h) enter into or commit or propose to enter into any
Subsequent Material Contract, except as necessary to permit the Company
or its Subsidiaries or the Sellers to carry out any of their respective
covenants and other obligations under this Agreement or any other Seller
Document;
(i) except in the ordinary course of business, waive, cancel
or take any other action materially impairing any of its rights;
(j) make or commit to make any capital expenditure, or group
of related capital expenditures other than (A) the purchases of
Equipment and vehicles having an aggregate purchase price of no more
than $7,000,000; provided that the funds used to purchase such Equipment
--------
or vehicles is obtained from the Company's or its Subsidiaries' working
capital, existing revolving credit agreement or other indebtedness that
may be prepaid without penalty, or (B) other capital expenditures or
group of related capital expenditures of no more than $2,000,000 in the
aggregate;
34
(k) create, incur, assume or guarantee any indebtedness for
borrowed money (except (i) in the ordinary course of business or (ii) to
make the purchases and other capital expenditures permitted under
Section 6.1(j));
(l) (i) increase the rate or terms of compensation payable or
to become payable to its directors, officers or employees except with
respect to employees other than officers in the ordinary course of
business consistent with past custom and practice, (ii) announce an
intention to or pay or agree to pay any pension, retirement allowance or
other employee benefit not provided for by any Benefit Plan or
Employment Agreement set forth in the Schedules hereto, (iii) announce
an intention to or commit itself to any additional pension, profit
sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay,
continuation pay, termination pay, retirement or other employee benefit
plan, agreement or arrangement, or increase the rate or terms of any
Benefit Plan, (iv) enter into any employment agreement with or for the
benefit of any Person, or (v) increase the rate of compensation under or
otherwise change the terms of any Employment Agreement set forth in
Schedule 4.18;
-------------
(m) except as set forth on Schedule 6.1(m), make any change in
---------------
its accounting or tax reporting methods or in the manner of keeping its
books and records or any change in its current practices with respect to
inventory, sales, receivables, payables or accrued expenses;
(n) declare or pay any dividend or make any distribution in
respect of Common Stock or, directly or indirectly, redeem, purchase or
otherwise acquire any of its Common Stock or make any other payments of
any kind to the holders of any of its Common Stock in respect thereof,
or enter into any commitment agreement to do any of the foregoing;
provided, however, that the Subsidiaries may declare and pay dividends
-------- -------
to the Company of another Subsidiary
35
and the Company may distribute the Excluded Assets and Liabilities
pursuant to Section 6.11;
(o) enter into or commit or propose to enter into any
agreements, commitments or contracts with an Affiliate of the Company or
any Seller other than MI and Grey Fox; or
(p) agree, commit or arrange to do any of the foregoing.
6.2 Access to Information; Confidentiality.
--------------------------------------
(a) Between the date of this Agreement and the Closing Date,
the Sellers shall cause the Company and its Subsidiaries to afford the
Buyer and its authorized representatives (including its accountants,
financial advisors and legal counsel) reasonable access during normal
business hours to all of the properties, personnel, Contracts, books and
records of the Company and its Subsidiaries and shall promptly deliver
or make available to the Buyer information concerning the business,
properties, assets and personnel of the Company and its Subsidiaries as
the Buyer may from time to time reasonably request;
(b) The Buyer shall hold, and shall cause its authorized
representatives (including its accountants, financial advisors and legal
counsel) to hold, all material subject to the Confidentiality Agreement
dated February 12, 1998, between MI and the Buyer (the "Confidentiality
---------------
Agreement") in confidence in accordance with the terms of the
---------
Confidentiality Agreement and, in the event of the termination of this
Agreement for any reason, the Buyer promptly shall return or destroy all
such material in accordance with the terms of the Confidentiality
Agreement;
(c) After the Closing, the Sellers and their respective
Affiliates will and will cause their respective representatives to treat
any data and information related to the Company and/or its Subsidiaries
and the Business confidentially and with commercially reasonable care
and discretion, and will not
36
disclose any such information to third parties; provided, however, that
-------- -------
the foregoing shall not apply to (i) information in the public domain or
that becomes public through disclosure by a party other than Sellers or
any of their respective Affiliates or any of their respective
representatives, so long as such other party is not in breach of a
confidentiality obligation to the Buyer and (ii) information that may be
required to be disclosed by Applicable Law.
(d) In the event that either a Seller or the Buyer, as the
case may be, is required, by subpoena or other legal process, in any
action or proceeding to disclose any such confidential information or
material referred to in this Section, such party will give the other
party prompt notice of such request so that such other party may seek an
appropriate protective order or other confidential treatment of such
information and will cooperate with such other party in obtaining such
treatment; and
(e) Each of the parties acknowledges and agrees that in the
event of any breach of Section 6.2, money damages would not be an
adequate remedy to the Buyer, on the one hand, or the Sellers, on the
other, for such breach and, even if money damages were adequate, it
would be impossible to ascertain or measure with any degree of accuracy
the damages sustained by the Buyer, on the one hand, or the Sellers, on
the other, therefrom. Accordingly, if there should be a breach or
threatened breach by any Person of any provision of Section 6.2, the
Buyer, on the one hand, or the Sellers, on the other, shall be entitled,
without showing or providing actual damage sustained by the Buyer, on
the one hand, or the Sellers on the other, to an injunction restraining
such Person from any breach. Nothing in this Section 6.2(d) shall limit
or otherwise affect the remedies that the Buyer, the Company or the
Sellers may otherwise have under Applicable Law.
6.3 Disclosure Supplements. Prior to the Closing, the Sellers
----------------------
may supplement or amend the schedules referred to in this Agreement with
respect to (i) any
37
matter not existing on the date hereof which, if existing or occurring at
or prior to the date hereof, would have been required to be set forth or
described in a schedule or (ii) any matter arising after the date hereof
which is necessary to correct any information in a schedule or in any
representation and warranty of the Sellers which has been rendered
inaccurate thereby; provided that any such supplement or amendment shall
--------
not waive, limit or otherwise affect the condition to Closing set forth in
Section 9.1, which shall be based on the representations and warranties,
covenants and agreements made as of the date of this Agreement, but only
the representations, warranties, covenants and agreements made by the
Sellers as amended or supplemented pursuant to this Section 6.3 shall be
the basis for any indemnification pursuant to Article 7, 8 or 12.
6.4 Expenses. Except as otherwise expressly set forth in this
--------
Agreement, the parties to this Agreement shall bear their respective
expenses incurred in connection with the preparation, negotiation,
execution and performance of this Agreement and the contemplated
transactions, including all fees and expenses of agents, representatives,
counsel and accountants, provided, however, that the Buyer is agreeing to
-------- -------
pay the first $400,000 of the fee owed to Xxxxx Brothers by the Sellers
pursuant to the MI Agreement and the Sellers shall pay all amounts of such
fee to Xxxxx Brothers in excess of $400,000.
6.5 Further Assurances. Each of the parties shall execute such
------------------
certificates, bills of sale, agreements and other documents and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the contemplated transactions. Each such party shall
use its commercially reasonable efforts to fulfill or obtain the
fulfillment of the conditions to the Closing set forth in Articles 9 and
10. Between the date of this Agreement and the Closing Date, each of the
parties hereto shall promptly notify the other parties in writing (a) if
such party becomes aware of any fact or condition that causes or would be
reasonably likely to cause or constitute a Material Adverse Effect or a
breach of any of the representations and warranties of such party set forth
herein and (b) of the occurrence of any breach of
38
any covenant in this Agreement or of the occurrence of any event that may
make the satisfaction of the conditions to Closing set forth herein
impossible or unlikely.
6.6 Cooperation Regarding Landlords. The Sellers agree that
-------------------------------
they will cause the officers of the Company to reasonably cooperate with
the Buyer in obtaining consents and estoppel certificates from the
landlords under the Leases; provided, that the foregoing shall not require
--------
the Sellers or the Company to pay any amounts to any Person to obtain such
consents or estoppels; and; provided further, that the Buyer acknowledges
-------- -------
that the receipt of such consents or estoppel certificates is not a
condition precedent to the consummation of the transactions contemplated
hereby.
6.7 Transfer Taxes. All sales, use, stamp, documentary, filing,
--------------
recording, transfer or similar fees or Taxes and governmental charges as
levied by any taxing authority or other Governmental Entity as a result of
the transfer of the Shares pursuant to this Agreement (other than those
arising out of the Election (as defined in Section 7.1(a)(i) below)) shall
be borne 50% by the Buyer and 50% by the Sellers.
6.8 Compliance with Antitrust Laws. Each of the parties hereto
------------------------------
shall file an appropriate Notification and Report Form concerning the
transactions contemplated herein as promptly as practicable following the
date hereof. Each of the Buyer and each Seller shall cooperate (including
by way of furnishing to the other such documents and information as may
reasonably be required) in making filings under the HSR Act and shall use
its commercially reasonable best efforts to take, or cause to be taken, all
actions necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including using its commercially reasonable best efforts (including,
without limitation, the Buyer agrees that it will dispose of or hold
separate any part of its or the Company's assets or business; provided,
--------
that in no event shall the Buyer be required to (or be required to agree
to) dispose of or hold separate assets of the Combined Business which
generate in the aggregate more than $5 million per year of revenues; and
provided, further, that
39
in no event shall the Buyer be required to (or be required to agree to)
dispose of any one of the following locations; the Company's (and its
Affiliates') location in Fairfield, Connecticut, the Buyer's (or its
subsidiary's) location in Burlington, New Jersey and the Buyer's (or its
subsidiary's) location in Baltimore, Maryland) in order to consummate or
make effective as promptly as practicable the transactions contemplated by
this Agreement to resolve such objections, if any, as the Antitrust
Division of the Department of Justice or the Federal Trade Commission or
state antitrust enforcement or other Governmental Entity (collectively,
the "Regulatory Agencies") may assert under the federal or state antitrust
-------------------
laws with respect to the transactions contemplated hereby. In the event an
action is instituted by any Person challenging the transactions
contemplated hereby as violative of the antitrust laws, each of the Buyer
and each Seller shall cooperate with the other parties hereto and use its
commercially reasonable best efforts to resist or resolve such action.
"Combined Business" means the existing business of the Buyer or any of its
current subsidiaries and the business of the Company, MES, Grey Fox or any
of their respective Subsidiaries.
6.9 SOC Rebates. From and after the Closing Date, the Buyer
-----------
shall use its best efforts to collect all supplier-of-choice rebates owed
to the Company or any Subsidiary of the Company relating to equipment
expenditures made prior to the Closing and pass-through rebates for
equipment purchased by Hertz Equipment Rental Corp. during the period from
and including August, 1, 1997 through and including July 31, 1998 (the "SOC
---
Rebates"). All monies collected on account of the SOC Rebates shall be
-------
held by the Buyer for the Sellers' account. The Buyer shall pay or cause
to be paid to the Sellers' Representative, on behalf of the Sellers, on the
first Business Day of each month all monies so received during the prior
month.
6.10 Non-Compete. For a period commencing on the Closing Date
-----------
and terminating three (3) years thereafter in the case of Xxxxxx Xxxxxxx
and Xxxxxx Xxxxx and five (5) years thereafter in the case of each of the
other Sellers (the "Restricted Period"), the Sellers (i) shall not (except,
-----------------
(x) in the case of Xxxxxxxx
40
McClinch, in his capacity as a consultant to MI or another subsidiary of
the Buyer in accordance with his consulting agreement with MI to be entered
into as of the Closing Date and (y) in the case of Xxxxxx Xxxxxxx and
Xxxxxx Xxxxx, in their capacity as employees of MI or another Subsidiary of
the Buyer), and shall cause their respective Affiliates not to, in each
case, without the express prior written consent of Buyer (which consent may
be withheld by Buyer in its sole and absolute discretion) for his, her, or
its or their, as the case may be, own account or jointly with any other
Person, directly or indirectly, own, manage, operate, join, control,
finance, invest in, bid for, advise (or advise others with respect to) or
otherwise participate in, or be connected with, or become or act as a
partner, manager, member, director, officer, employee, consultant,
representative, agent or landlord of (other than pursuant to the lease of
000 Xxxxxx Xxxxxx contemplated by the MI Agreement), any business,
individual, partnership, firm, corporation (other than Buyer), limited
liability company, association or other entity which is in competition
with, or is otherwise engaged anywhere in the United States of America and
the Provinces of Ontario and Quebec, Canada, in the Restricted Business
------------------
(as hereafter defined); provided, however, that a Seller may own,
-------- -------
directly or indirectly, solely as an investment, (x) the URI Warrants and
Buyer Common Stock issued upon the exercise thereof (and any stock
dividends or other securities issued to holders thereof) and (y) securities
of any business traded on any national securities exchange or NASDAQ,
provided such Seller is not a controlling person of, or a member of a group
which controls or seeks to control, such business and further provided that
such Seller and its Affiliates do not, in the aggregate, directly or
indirectly, own 2% or more of any class of securities of such business ;
and (ii) shall not, and shall cause their respective Affiliates not to,
directly or indirectly, for his, her, or its or their own account or
jointly with another, or for or on behalf of any Person, as principal,
agent or otherwise, (A) solicit or induce or in any manner attempt to
solicit or induce any Person employed by the Company or any of its
Subsidiaries to leave such position or (B) interfere with, disrupt or
attempt to disrupt any relationship,
41
contractual or otherwise, between the Company or any of its Subsidiaries
and any of the customers, clients or suppliers of the Company or any of
such Subsidiaries; provided that notwithstanding the foregoing the Sellers
--------
and their Affiliates may take any action whatsoever (including without
limitation legal action) against (x) any customer in connection with any
Reimbursable Trade Account Receivable with respect to which the Sellers
have an obligation to indemnify under Section 12.1(b) or (y) any supplier,
manufacturer or any other Person relating to, resulting from or in
connection with any claims for indemnification by the Buyer or a Buyer
Indemnitee against the Sellers under Article 7, 8 or 12 of this Agreement.
In addition, the Sellers shall not, and shall cause their
respective Affiliates not to, to any Person denigrate or derogate the Buyer
or any of its subsidiaries (including the Company), or any product or service
or procedure of any such company whether or not such denigrating or
derogatory statements shall be true or are based on acts or omissions which
occurred or are learned by a Seller prior to the date hereof or otherwise. A
statement shall be deemed denigrating or derogatory to any Person only if it
(i) materially adversely affects the esteem in which such Person is held by
investors, lenders or licensing, rating, or regulatory entities and (ii) is
not privileged in law.
The Sellers acknowledge that irreparable harm would be suffered by
the parties relying on the Sellers' covenants and undertakings set forth
herein in the event that any of the provisions of this Section were not
performed fully by the Sellers in accordance with the terms specified herein,
and that monetary damages are an inadequate remedy for breach of this Section
because of the difficulty of ascertaining and quantifying the amount of
damages that will be suffered by the parties relying hereon in the event that
the undertakings and provisions contained in this Section were breached or
violated. Accordingly, each Seller agrees that Buyer shall be entitled to an
injunction or injunctions to restrain, enjoin and prevent breaches or
threatened breaches of the covenants, undertakings and provisions herein and
to enforce specifically the provisions hereof in any court of the United
States or any state having jurisdiction over the matter, it being
42
understood that any such remedies shall be in addition to, and not in lieu
of, any other rights and remedies available at law or in equity. The Sellers
further acknowledge and agree that the covenants contained in this Section
shall not be deemed exclusive of any common law or other rights of Buyer in
connection with the matters covered hereby.
The provisions of this Section are severable, and the invalidity of
any provision shall not affect the validity of any other provision. It is
the intention of the parties that this Section be enforced to the fullest
extent permitted and, therefore, in the event that any provision of this
Section or the application thereof is held to be unenforceable in any
jurisdiction because of the duration or scope thereof, the parties hereto
agree that the court or panel of arbitrators making such determination shall
have the power to reduce the duration and scope of such provision to the
extent necessary to make it enforceable, and that this Section in its reduced
form shall be valid and enforceable to the full extent permitted by law, but
no such reduction shall affect the enforceability of the express terms hereof
in any other jurisdiction.
6.11 Excluded Assets and Liabilities. Prior to the Closing
-------------------------------
Date, the Company shall transfer all right, title and interest to, and all
responsibility in respect of, the Excluded Assets and Liabilities to the
Sellers or their respective designees. The Sellers hereby agree to
indemnify the Buyer Indemnitees from and against all Losses and Liabilities
attributable to the Excluded Assets and Liabilities.
6.12 Insurance Tail. The Buyer shall purchase and cause to be
--------------
maintained in effect at Closing and for a period of two years after the
Closing Date, for the benefit of the Company and its Subsidiaries,
liability insurance policies having at least the same coverage as,
deductible amounts no greater than, and which contain terms and conditions
that are not less advantageous to the Company and its Subsidiaries than,
the liability insurance policies maintained by the Company and its
Subsidiaries as of the Closing Date; provided that the Buyer's obligation
--------
under this Section with
43
respect to an employee practice liability insurance policy is only to the
extent that the maximum premium therefore does not exceed $20,000 per
annum.
6.13 Payment of Indebtedness. At Closing, the Buyer may, at its
-----------------------
option, repay any other indebtedness of the Company or any of its
Subsidiaries. If the Buyer notifies the Sellers at least 10 Business Days
prior to the Closing Date that it will repay any such indebtedness at
Closing, the Sellers shall arrange to have the lenders with respect to such
indebtedness deliver pay-off letters and UCC-3 Termination Statements at
the closing with respect to such indebtedness. If the Buyer elects to
repay any indebtedness of the Company or its Subsidiaries at Closing,
neither the Sellers nor the Company or any of its Subsidiaries shall have
any liability or obligation with respect thereto (it being understood that
any prepayment penalties resulting therefrom in excess of $18,750 shall be
included as a liability of the Company in the Preliminary Closing Balance
Sheet, the Audited Closing Balance Sheet and the Closing Adjusted Net Worth
Schedule pursuant to Section 1.2). The Buyer agrees to pay the first
$18,750 of any such prepayment penalties.
6.14 Rental Ready Adjustment. Sellers will deliver a Rental
-----------------------
Asset Listing to the Buyer at Closing ("Rental Asset Listing") which shall
--------------------
set forth as of the Closing Date (i) the asset description, make, model and
original cost, accumulated depreciation and net book value of all rental
equipment inventory held for rent to customers of the Company and its
Subsidiaries (the "Equipment") as of the Closing Date. The Sellers shall,
---------
subject to Sections 12.1(c) (other than Section 12.1(c)(i)), 12.4 and 14.2,
indemnify the Buyer for (x) each item of Equipment listed on the Rental
Asset Listing which is not Rental Ready and (y) each item of Equipment
which is listed on the Rental Asset Listing and which is missing, in the
amount calculated as described below (the "Rental Ready Adjustment").
-----------------------
Within 15 days following the Closing Date, the Buyer shall complete a
physical inventory of each item of Equipment on the Rental Asset Listing,
including by visiting renters' locations as necessary to inspect such
Equipment, and the indemnification provided in this Section 6.14 shall be
based on the
44
Rental Ready Adjustment resulting from the findings of such
physical inventory (the "Post Closing Rental Ready Adjustment"). The
------------------------------------
Sellers' Representative or its designee shall have the right to observe and
consult with the Buyer during the physical inventory. The amount of any
indemnification payment required under this Section shall equal (I) the
lesser of (x) the repair cost and (y) the replacement cost for each item of
Equipment that is not Rental Ready and (II) the fair market value (as
determined by the Buyer and the Sellers' Representative) for each item of
Equipment that is missing; provided, that the Buyer shall be entitled to
--------
indemnification pursuant to this Section 6.14 only when and if the
aggregate fair market value (determined as aforesaid) of all such missing
Equipment plus the repair/replacement costs of all such non Rental Ready
Equipment, exceeds $100,000, and then only to the extent of such excess,
and any indemnification obligation shall be subject to Sections 12.1(c)
(other than Section 12.1(c)(i)), 12.4 and 14.2. The amount of any such
indemnification shall be paid to the Buyer out of the Escrow Amount, and
the Buyer and the Sellers' Representative shall give instructions to the
Escrow Agent to pay, an amount equal to such adjustment within five
Business Days of completion of the determination of the Rental Ready
Adjustment; provided that if such Post Closing Rental Ready Adjustment
--------
exceeds the Escrow Amount, the Sellers shall pay to the Buyer on such date
the excess of the Post Closing Rental Ready Adjustment over the Escrow
Amount. For purposes of this Agreement, an item of Equipment is "Rental
Ready" if (i) no maintenance or repairs (other than routine maintenance)
costing more than the greater of (x) $750 per item and (y) 3.5% of the
original cost of such item of Equipment, are required with respect to such
item to bring such item into condition for rental. The repair cost with
respect to any item of Equipment shall be determined based upon the cost of
a similar repair most recently performed by the Company or any Subsidiary
of the Company to the same or similar item of Equipment. The parties agree
that the items of Equipment listed in Schedule 6.14(b) shall not give rise
----------------
to a Rental Ready Adjustment. Any disputes as to the physical count, fair
market value or whether any item of Equipment is Rental Ready
45
will, if possible, be resolved while the physical inventory of such
Equipment is being taken. Any disputes not so resolved within 15 days shall
be resolved by an independent third party mutually acceptable to Buyer and
the Sellers' Representative or, if Buyer and the Sellers' Representative
cannot agree on the designation of such independent third party within five
Business Days, by the CPA Firm, whose determination shall be final, binding
and conclusive on the parties hereto. Unless otherwise agreed to by the
Buyer and the Sellers' Representative in writing, operating leases entered
into by the Company or any of its Subsidiaries shall not cause an
adjustment to the Purchase Price pursuant to an Rental Ready Adjustment.
6.15 No Solicitation. The Sellers will not, and will not cause
---------------
or permit the Company or any of its directors, officers, employees,
representatives or agents (collectively, "Agents") to, directly or
------
indirectly, (i) discuss, negotiate, undertake, authorize, recommend,
propose or enter into, any transaction involving a merger, consolidation,
business combination, purchase or disposition of any capital stock or other
equity interest in, or any material amount of the assets of, the Company,
other than the transactions contemplated by this Agreement (an "Acquisition
-----------
Transaction"), (ii) facilitate, encourage, solicit, participate in or
-----------
initiate discussions, negotiations or submissions of proposals or offers in
respect of an Acquisition Transaction, (iii) furnish or cause to be
furnished, to any Person, any information concerning the business,
operations, properties or assets of the Company in connection with an
Acquisition Transaction, or (iv) otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt by
any other Person to do or seek any of the foregoing. The Sellers will
inform the Buyer in writing immediately following the receipt any Seller,
the Company or any Agent of any proposal or inquiry in respect of any
Acquisition Transaction.
6.16 Publicity. None of the Buyer, the Sellers, the Company or
---------
the Agents shall issue any press release or public announcement concerning
this Agreement or the transactions contemplated hereby without obtaining
the prior written approval of
46
the other parties hereto, which approval will not be unreasonably withheld
or delayed; provided, however, that the Buyer may make such disclosure as
-------- -------
the Buyer deems is required by Applicable Law or by the applicable rules of
any stock exchange on which any securities of the Buyer are listed. The
Sellers acknowledge and agree that the Buyer may disclose information
concerning this Agreement to the extent required by law in any filing with
the Securities and Exchange Commission or in any offering memorandum
relating to a financing of the Buyer; provided that the Buyer shall give
--------
the Sellers' Representative an opportunity to review such disclosure (and
an opportunity to comment thereon) to the extent reasonably possible.
7. Tax and Related Matters.
-----------------------
7.1 Taxes; Section 338(h)(10) Election.
----------------------------------
(a) (i) At the election of the Buyer, the Buyer and the
Sellers shall file an election under Section 338(h)(10) of the Code and
under any comparable provisions of state, local, or foreign law with
respect to the purchase of the Shares (the "Election"). No later than
--------
60 days after the Closing Date the Buyer shall notify the Sellers
whether the Buyer will make the Election. If the Election is made, the
Election Tax Cost (as determined hereunder) shall be paid as additional
Purchase Price by the Buyer to the Sellers and the Buyer and Sellers
shall report, in connection with the determination of Taxes, the
transactions contemplated by this Agreement in a manner consistent with
the Election, the computation of the Election Tax Cost, the Modified
Aggregate Deemed Sales Price (as defined below) and the Deemed Sales
Price Allocation (as defined below). The Sellers and the Buyer shall
take no action which is inconsistent with the Election or its validity
under the Code and the applicable Treasury Regulations.
(ii) On the Closing Date, the Sellers shall execute and
deliver to Buyer five copies of Internal Revenue Service Form 8023
provided
47
by the Buyer and any similar forms under applicable state, local and
foreign law (the "Election Forms").
(iii) As soon as practicable after the Closing Date, but in
no event later than 60 days after the Closing Date, the Buyer shall
deliver to the Sellers a written notice of its intention to file the
Election, together with the Buyer's calculation of (A) the Modified
Aggregate Deemed Sales Price, (B) the allocation thereof among the
assets of the Company in accordance with the principles of Treasury
Regulations (S) 1.338(h)(10)-1(f)(1)(ii) (the "Deemed Sales Price
Allocation") and (C) the Election Tax Cost. The term "Modified
Aggregate Deemed Sales Price" shall mean an amount resulting from the
Election, determined pursuant to Treasury Regulation (S) 1.338(h)(10)-
1(f) without regard to items described in Treasury Regulation (S)
1.338(h)(10)-1(f)(4) (provided that the Sellers may take such items into
account in filing Tax Returns.) The term "Election Tax Cost" shall
mean, with respect to each Seller, (A) the excess, if any, of (x) the
net ordinary income and capital gain recognized by such Seller as a
consequence of the Election multiplied by a tax rate of 44% for ordinary
income and 24% for capital gain, as the case may be, over (y) the net
long-term capital gain that would have been recognized by such Seller on
the sale of his Shares if the Election had not been made multiplied by
24%, divided by (B) the excess of 100 percent over the applicable
percentage described in clause (x).
(iv) The Buyer shall be responsible for the preparation and
filing of all forms and documents required in connection with the
Election. The Buyer shall provide the Sellers with copies of (A) any
necessary corrections, amendments, or supplements to Form 8023, (B) all
attachments required to be filed therewith pursuant to applicable
Treasury Regulations, and (C) any comparable forms and attachments with
respect to any applicable state, foreign, or local elections included as
part of the Election. The Sellers shall execute and
48
deliver to the Buyer within five (5) days of receipt by the Sellers such
documents or forms as are required properly to complete the Election.
(v) The Sellers and the Buyer shall cooperate fully with each
other and make available to each other such Tax data and other
information as may be reasonably required by the Sellers or the Buyer in
order for the Buyer to (A) timely file the Election and any other
required statements or schedules (or any amendments or supplements
thereto), (B) compute the Modified Aggregate Deemed Sale Price and the
Deemed Sale Price Allocation and (C) compute the Election Tax Cost.
(b) Payment Mechanism. If the Buyer makes the Election
-----------------
pursuant to Section 7.1(a), the Buyer shall pay to the Sellers the
amount of the Election Tax Cost by March 15, 1999. The Buyer's
determination of the Election Tax Cost shall be final and binding upon
the parties to this Agreement unless within thirty (30) days after
receipt by the Sellers of the Buyer's computation of the Election Tax
Cost the Sellers shall have delivered to the Buyer a notice (an "ETC
---
Disagreement Notice") setting forth specific objections to the amount or
-------------------
calculations of the Election Tax Cost. If any ETC Disagreement Notice
is delivered by the Sellers to the Buyer in a timely manner indicating
objections to the amount of the Election Tax Cost, then during a period
of ten (10) Business Days following delivery by the Sellers of such ETC
Disagreement Notice, the Buyer and the Sellers shall attempt to resolve,
in writing, any differences they have with respect to any matter
specified in the ETC Disagreement Notice and to agree on the amounts of
the calculations made in determining the Election Tax Cost. If at the
end of such 10-Business Day period, the Buyer and the Sellers have
failed to reach written agreement with respect to any of such matters,
then either of the Buyer or the Sellers may submit a demand for
resolution as to matters as to which they have failed to reach written
agreement to the CPA Firm (in such capacity, the "ETC Accountant"). The
--------------
ETC Accountant shall on or prior to the date that is thirty
49
(30) days after any information reasonably requested by the ETC
Accountant to be provided shall have been received by the ETC
Accountant, deliver to the Buyer and the Sellers, a statement stating
that the calculations made in determining the Election Tax Cost are
correct or setting forth its resolution of any specific items of
disagreement and a calculation of any unpaid Election Tax Cost based
upon such resolution. The Buyer shall pay any such unpaid Election Tax
Cost to the affected Sellers within five (5) Business Days after receipt
of the ETC Accountant's statement. All fees and expenses payable to the
ETC Accountant incurred in connection with such disagreement shall be
borne 50% by the Buyer and 50% by the Sellers and all other expenses
incurred in connection therewith shall be borne by the party incurring
such expenses.
7.2 Tax Administration.
------------------
(a) (i) The Sellers shall prepare or cause to be prepared and
shall timely file or cause to be timely filed all Tax Returns required
to be filed by or on behalf of the Company and any of its Subsidiaries
any of their respective operations and assets on or before the Closing
Date (taking into account applicable extensions of time) and shall cause
to be paid any Taxes shown to be due thereon. Such Tax Returns shall be
prepared in a manner consistent with prior practice and in accordance
with applicable law. The Sellers shall also prepare or cause to be
prepared for the Company, in a manner consistent with prior practice and
in accordance with applicable law all Tax Returns required to be filed
or with respect to the Company which relate to taxable periods (or
portions thereof) ending on or prior to the Closing Date ("Pre-Closing
-----------
Date Tax Returns") and shall remit or cause to be remitted to the Buyer
----------------
any and all Taxes due, to the extent such Taxes have not been provided
for in the Closing Balance Sheet Tax Reserve, with respect to such Pre-
Closing Date Tax Returns. The Sellers shall deliver or cause to be
delivered all such Pre-Closing Date Tax Returns to the Buyer not less
than 20 Business Days prior to the due date therefor. The Buyer shall
review and
50
comment upon such Tax Returns, and upon the Buyer's approval thereof,
the Buyer shall cause the Company to file such Pre-Closing Date Tax
Returns. Expenses relating to the preparation of the Tax Returns
described in the preceding sentences shall be borne 50% by the Buyer and
50% by the Sellers; provided, however, that the amount of expense
-------- -------
incurred by the Buyer in connection with the preparation of such Tax
Returns for the Company, MI and Grey Fox shall not exceed, in the
aggregate, $10,000. Except as otherwise provided herein, the Buyer shall
be responsible for preparing and filing or causing to be prepared and
filed all Tax Returns required to be filed by or on behalf of the
Company and any of its operations and/or assets after the Closing Date
(taking into account applicable extensions of time) and shall, subject
to this Section 7.2(a)(i) and Section 7.2(a)(ii) hereof, pay or cause to
be paid any Taxes shown to be due thereon.
(ii) With respect to any Tax Return required to be filed by
the Buyer for a taxable period of the Company or any of its Subsidiaries
beginning on or before and ending on or after the Closing Date, the
Buyer shall provide the Sellers with a statement setting forth the
amount of Tax shown on such Tax Return for which the Sellers are
responsible pursuant to Section 7.2(b)(i) hereof or that are allocable
to the Sellers pursuant to Section 7.2(b)(iii) hereof (as the case may
be) (the "Statement") at least thirty (30) Business Days prior to the
---------
due date for filing of such Tax Return (including extensions). Not
later than 5 business days before the due date (including extensions)
for payment of Taxes with respect to such a Tax Return the Sellers shall
pay to Buyer an equal amount to the Taxes shown on the Statement as
being the responsibility of the Sellers pursuant to Section 7.2(b)(i)
hereof or allocable to the Sellers pursuant to Section 7.2(b)(iii)
hereof (as the case may be). No payment pursuant to this Section
7.2(a)(ii) shall excuse the Sellers from their indemnification
obligations pursuant to Section 7.2(b) hereof should the amount of Taxes
as ultimately determined (on audit or otherwise),
51
for the periods covered by such Tax Returns and which are the
responsibility of Sellers, exceed the amount of the Sellers' payment
under this Section 7.2(a)(ii).
(iii) The Sellers may not file any amended Tax Returns or
refund claims in respect of any taxable period of the Company or any of
its Subsidiaries ending on or prior to the Closing Date without the
prior written consent of the Buyer which shall not be unreasonably
withheld.
(iv) The parties shall cooperate fully with and make
available to one another in a timely fashion such Tax data and other
information as may be reasonably required for the preparation by the
Buyer or the Sellers, as applicable, of any Tax Returns required to be
prepared and filed hereunder. The Sellers and the Buyer shall make
available to the other, as reasonably requested, all information,
records or documents in their possession relating to Tax liabilities of
the Company or any of its Subsidiaries for all taxable periods of the
Company or any of its Subsidiaries, as the case may be, ending on, prior
to or including the Closing Date and shall preserve all such
information, records and documents until the expiration of any
applicable Tax statute of limitations or extensions thereof; provided,
--------
however, that if a proceeding has been instituted for which the
-------
information, records or documents is required prior to the expiration of
the applicable statute of limitations, such information, records or
documents shall be retained until there is a final determination with
respect to such proceeding.
(b) (i) The Sellers will, jointly and severally, be liable
for, and will hold the Buyer and the Company and their respective
directors, officers, affiliates, successors and permitted assigns (each
a "Buyer Indemnified Person") harmless from and against any and all
------------------------
Losses resulting from, arising out of or based upon (A) any and all
Taxes for which the Company or any of its Subsidiaries may be liable for
all taxable periods ending on or before the Closing Date (the "Pre-
---
Closing Period") and to the extent provided in clause (iii) below,
---------------
52
all taxable periods that include, and end after the Closing Date in each
case to the extent that such Taxes exceed, in the aggregate, the Closing
Balance Sheet Tax Reserve and (B) any inaccuracy in or breach of any
representation or warranty set forth in Section 4.7 of this Agreement;
provided, however, that if an audit adjustment for a Pre-Closing Period
-------- -------
(x) gives rise to an indemnity obligation under this Section 7.3(b)(i)
and (y) is reasonably expected to reduce the taxable income of the
Company or any of its Subsidiaries for a taxable year or period
beginning after the Closing Date (such estimated reduction in taxable
income is referred to herein as a "Post-Closing Tax Benefit"), then
------------------------
the amount required to be indemnified by the Sellers pursuant to this
Section 7.3(b)(i) shall be reduced by the "net present value" of such
Post-Closing Tax Benefit. The "net present value" of a Post-Closing Tax
Benefit shall be determined by using a discount rate equal to 6%. For
purposes of making this determination, the parties shall assume that a
Post-Closing Tax Benefit shall be realized by the Company or relevant
Subsidiary at the time the relevant Tax Return is required to be filed
for the taxable year or period in which such Post-Closing Tax Benefit is
reasonably expected to be available and that the Company or relevant
Subsidiary is subject to Federal income tax, and any applicable state
and local taxes, at the maximum rates provided by law for such taxable
year or period.
(ii) The Buyer will indemnify and hold harmless the Sellers,
any trustee of any Seller in his or her individual capacity as trustee
and any beneficiary or trustee of any Seller in his or her capacity and
their respective successors from and against any and all Losses
resulting from, arising out of or based upon all Taxes for which the
Company may be liable for all taxable periods or portions thereof
beginning after the Closing Date.
(iii) For purposes of the foregoing, if a taxable period
begins before and ends after the Closing Date (the "Interim Period"),
--------------
Taxes for the portion of such taxable period ending on the Closing Date
will be
53
determined by an interim closing the books of the Company or its
relevant Subsidiary and determining the amount of relevant Taxes that
would have been due had such taxable period ended on the Closing Date,
without regard to any events occurring after the Closing Date. Any Taxes
for such taxable period in excess of the foregoing amount will be deemed
to be attributable to the portion of such taxable period occurring after
the Closing Date. To the extent any Taxes are not susceptible to such
allocation, such Taxes shall be allocated by apportionment on the basis
of elapsed days.
7.3 Contests.
--------
(a) After the Closing Date, the Buyer shall promptly notify
the Sellers in writing of any written notice of a proposed assessment or
claim in an audit or administrative or judicial proceeding involving the
Company or any of its Subsidiaries which, if determined adversely to the
Company or relevant Subsidiary, would be grounds for indemnification
under this Article 7; provided, however, that a failure to give such
-------- -------
notice will not affect a Buyer Indemnified Person's right to
indemnification hereunder except to the extent, if any, that, but for
such failure, the Sellers could have avoided the Tax liability in
question.
(b) Except as provided in Section 7.3(c) below, in the case of
an audit or administrative or judicial proceeding that relates to any
Pre-Closing Period, the Sellers shall have the right at their own
expense to control the conduct of such audit or proceeding; provided
--------
that within 30 days after the Sellers have received the written notice
from the Buyer that is required under Section 7.3(a) above, and prior to
taking any action with respect to such audit or administrative or
judicial proceeding, the Sellers acknowledge in writing their joint
liability under Section 7.3(b)(i) of this Agreement to hold any Buyer
Indemnified Person harmless against the full amount of any adjustment
which may be made as a result of such audit or proceeding that relates
to the Pre-Closing Period (to the extent
54
such amount exceeds the Closing Balance Sheet Tax Reserve after giving
effect to all prior and concurrent payments made pursuant to Section
7.3(b)(i) of this Agreement to any Buyer Indemnified Person); provided,
--------
further, that the Sellers may not agree to a settlement or compromise
-------
to any such audit or proceeding that may reasonably be expected to have
an adverse effect on the tax liability of the Company for a taxable
period after the Closing Date without the prior written consent of the
Buyer; provided, further, that if the Buyer does not consent to such
-------- -------
settlement or compromise, the Sellers' liability to indemnify the Buyer
as a result of such audit or proceeding shall be limited to the amount
that the Sellers would have paid had the Buyer consented to such
settlement or compromise. The Buyer also may participate in any such
audit or proceeding at its own expense and, if the Sellers do not assume
the defense of any such audit or proceeding, the Buyer may defend the
same at its own expense in such manner as it may deem appropriate,
including, but not limited to, settling such audit or proceeding,
without any effect to any Buyer Indemnified Person's right to
indemnification under this Article 7.
(c) Notwithstanding subsection (a) above, any contest and/or
settlement of any issue raised in an official inquiry, examination or
proceeding that relates to the validity or effect of the Election will
be conducted by the Buyer and the Company.
(d) In the case of an audit or administrative or judicial
proceeding that relates to the Interim Period, the Buyer shall have the
right at its own expense to control the conduct of such audit or
proceeding; provided that the Buyer may not agree to a settlement or
--------
compromise in any such audit or proceeding without the prior written
consent of the Seller's Representative (as defined in Section 12.5
below), which consent shall not be unreasonably withheld. The Sellers
also may participate in any such audit or proceeding at their own
expense and, if the Buyer does not assume the defense of any such audit
or proceeding, the Sellers may defend the same at its own expense in
such manner as it may deem
55
appropriate, including, but not limited to, settling such audit or
proceeding, without any effect to the Sellers' right to indemnification
under this Article 7.
8. Environmental Matters.
---------------------
8.1 The Phase I Investigations.
--------------------------
(a) Within ten days of the execution of this Agreement, the
Buyer shall retain, at its sole expense, an environmental consulting
firm reasonably acceptable to the Sellers (the "Phase I Consultant") to
------------------
perform an environmental assessment for the Properties in accordance
with ASTM Phase I Standard E 1527 and other sound practices and
procedures normally employed in the Phase I process (the "Phase I
-------
Assessments"). The Phase I Assessments shall be completed as soon as is
-----------
reasonably practicable. The Phase I Consultant shall report its
findings simultaneously to the Buyer and the Sellers both orally and in
writing.
(b) With respect to the leased Properties, the Phase I
Assessment shall provide the Phase I Consultant's estimate of the range
of costs, from the reasonable best to reasonable worst case, to
remediate known or reasonably suspected Releases of Hazardous Materials,
on the leased Properties for which the Company is obligated under
Environmental Laws to perform Remedial Action, or for which the Company
would be obligated to perform Remedial Action if the relevant
Governmental Authorities were aware of the Release. The Phase I
Consultant shall also provide estimates for expenditures necessary to
correct violations of Environmental Laws on the leased Properties. The
Phase I Consultant shall assume the use of the most cost-effective,
reasonable and timely Remedial Action and shall consider the Company's
status as a lessee in evaluating the Company's potential obligations
under Environmental Laws.
(c) With respect to the Owned Real Properties for which
sufficient sampling data exists to enable the Phase I Consultant to
provide a reasonable range of estimates, the Phase I Assessment shall
provide the Phase I
56
Consultant's estimate of the range of cost, from the reasonable best to
reasonable worst case, to remediate known or reasonably suspected
Releases of Hazardous Materials for which there is an obligation under
Environmental Laws on the part of the Company or any Subsidiary of the
Company to perform Remedial Action, or for which there would be such an
obligation, if relevant Governmental Entities had notice of the Release.
The Phase I Consultant shall also provide estimates for the expenditures
necessary to correct violations of Environmental Laws on the Owned
Properties. In making its estimates, the Phase I Consultant shall assume
the use of the most cost-effective, reasonable and timely Remedial
Action. With respect to known or reasonably suspected Releases of
Hazardous Materials at the Owned Real Properties where there is not
sufficient information to enable the Phase I Consultant to estimate
reasonably the ranges of costs of the most cost-effective, timely and
reasonable Remedial Action, the Phase I Assessment shall recommend
appropriate media sampling.
8.2 The Phase II Investigations. In the event that the Phase I
---------------------------
Report concludes that media sampling is necessary at one or more of the
Owned Real Properties, the Buyer shall retain at its sole expense an
environmental consulting firm reasonably acceptable to the Sellers (the
"Phase II Consultant") to perform the necessary Phase II assessments (the
--------------------
"Phase II Assessment") using subcontractors of its choice. For properties
--------------------
subject to the Phase II process, the Phase II Consultant shall be required
to provide simultaneously to the Buyer and the Sellers a report identifying
each identified Release of Hazardous Materials, or violation of
Environmental Laws, not addressed in the Phase I Assessments for which
there is an obligation under Environmental Law on the part of the Company
or any Subsidiary of the Company to undertake Remedial Action (which could
include further investigation), or for which there would be such an
obligation if the relevant Governmental Entities had notice of the Release
or violation, and estimating the range of costs from the reasonable best to
reasonable worst case, of the actions reasonably necessary to perform such
Remedial
57
Action. The Phase I Assessments prepared pursuant to paragraph 8.1 and the
Phase II Assessments are hereinafter referred to collectively as the
"Assessments."
8.3 Certain Procedures Relating to the Consultant's Estimates.
---------------------------------------------------------
(a) The Phase I and II Consultants' estimates shall be based
upon the assumption that the Buyer covenants (which the Buyer hereby
does) to undertake, or cause the Company to undertake, all reasonable
actions necessary to insure that the remediation of any area, or the
correction of any violation of Environmental Law, is accomplished in the
most cost-effective, timely, reasonable manner consistent with the
present uses of the Properties, and that the least onerous soil and
groundwater cleanup criteria available under applicable Environmental
Laws are used in any such remediation. To the extent reasonably
necessary to achieve no further action status, such actions by the Buyer
and the Company shall include, but not be limited to, the execution of
consents by the Buyer and the Company to restrict the future use of the
Properties to commercial/industrial uses such as those in existence as
of the Closing Date.
(b) For each area or violation, the Consultants' estimates may
be made in ranges in which event the seventy-fifth percent of the range
shall be deemed to be the estimate for the purposes of this Agreement
which shall be calculated by multiplying the difference between the high
and the low end by .75 and adding the product of that multiplication to
the low end.
(c) In making its estimates, the Consultants shall assume that
the Company has responsibility for all investigative and remedial
obligations that must be performed under Environmental Laws (if any) as
a result of the transactions contemplated by this Agreement.
8.4 Review of the Estimated Costs of Remediation. In the event
--------------------------------------------
that either the Buyer or the Sellers disagree with the Phase I or Phase II
Consultants' estimate of the cost of necessary compliance action or
Remedial Action, then either (or
58
both) may submit such disagreement to an independent environmental
consultant mutually acceptable to the Buyer and the Sellers' Representative
(the "Independent Consultant") for a final and binding determination. If
----------------------
the Buyer and the Sellers' Representative cannot agree on the independent
engineer, he or she shall be appointed by the President of the National
Society of Professional Engineers. Proceedings before the Independent
Consultant shall be restricted to the submission to him or her of the Phase
I Assessment and Phase II Assessment, and a statement of position with one
supporting affidavit by each party. Each statement of position shall set
forth the parties' estimate of the costs of the remediation or capital
improvements reasonably necessary to achieve compliance with Environmental
Laws for each area at which Releases of Hazardous Materials have been
documented in the Phase I Assessments and/or Phase II Assessments based
upon the standards set forth in this Section 8. The statements of position
of each of the Buyer and the Sellers shall be submitted to the Independent
Consultant within 10 days of his or her appointment. The Independent
Consultant shall, within 14 days of receipt of such statements, issue a
report accepting the estimate of one or the other party for each area in
dispute (the "Independent Consultant's Report"). The Independent
-------------------------------
Consultant may employ counsel to assist it in the review process. Costs of
the Independent Consultant and its counsel shall be borne 50 percent by the
Buyer and 50 percent by the Sellers.
8.5 The Sellers' Indemnification of Buyer. Subject to Sections
-------------------------------------
12.1(c), 12.4 and 14.2, Sellers will defend, indemnify and hold harmless
the Buyer Indemnitees (as defined in Section 12.1) from all Pre-Closing
Environmental Losses. For the purposes of this Agreement, "Pre-Closing
-----------
Environmental Losses" means (1) all costs and expenses necessary to
--------------------
implement Remedial Action on the Owned Real Properties for which a
determination has been made in the Phase I Assessment or Phase II
Assessment that (i) Remedial Action by the Company or any Subsidiaries of
the Company is necessary to discharge obligations under (or to cure
violations of) Environmental Laws, including obligations to remediate
Hazardous Materials in soil or
59
ground water to the extent applicable Environmental Laws require such
remediation or (ii) such Remedial Action would be necessary if applicable
Governmental Authorities had been notified of conditions on the Owned Real
Properties; provided that costs and expenses shall be subject to
--------
indemnification under this clause (ii) only if incurred in connection with
a suit (whether brought by a Person or Governmental Entity), or an order,
investigation or directive of a Governmental Entity commenced prior to the
third anniversary of the Closing Date; and (2) Losses arising out of or
relating to any breach of the representations in Section 4.21 hereof;
provided that in each of subsections (1) and (2) above the aggregate
--------
Losses that the Sellers shall be obligated to pay under this Agreement with
respect to Remedial Action in connection with Owned Real Property shall not
exceed the aggregate estimated remediation costs at the Owned Real
Properties set forth in the Phase I Assessments and the Phase II
Assessments, in each case as modified by the Independent Consultant's
Report and reduced by any amounts the Buyer or the Company pays to perform
Remedial Action at such properties which would be subject to
indemnification under Article 8.5 but for the existence of the Minimum
Amount as established in Section 12.1(c)(i).
8.6 Buyer's Indemnification of the Sellers. Except with respect
--------------------------------------
to Losses for which the Buyer is entitled to indemnification under Section
8.5, the Buyer agrees to defend, indemnify and save harmless Seller
Indemnitees (as defined in Section 12.2) from and against any Losses under
or relating to Environmental Laws incurred by the Seller Indemnitees
resulting from, arising out of, relating to, the operation of the Business
or condition of the Properties, whether before or after the Closing Date;
provided, the Buyer shall not be obligated to indemnify Seller Indemnitees
--------
for Losses resulting from, arising out of, or related to the operation of
the Business or condition of the Properties before the Closing Date to the
extent such Losses were caused by the Seller Indemnitees' willful
misconduct, violation of standards under Environmental Laws, or to the
extent such Losses arose out of a condition on the Properties of which the
Seller Indemnitees had knowledge prior to the
60
Closing Date, but concerning which the Sellers failed to make a disclosure
to the Buyer or the Phase I Consultant prior to such time.
8.7 Exclusive Remedy. Except with respect to claims for fraud,
----------------
the environmental indemnities in this Article shall be the sole and
exclusive remedy of the parties with respect to Losses under or relating to
Environmental Laws arising out of the operation of the Business or the
condition of the Properties prior to the Closing Date. The Buyer and the
Sellers specifically agree that, except to the extent that this Agreement
is held to be invalid or is unenforceable, they will not now or in the
future pursue any claims against one another, including, but not limited
to, claims pursuant to CERCLA or any analogous state law, with respect to
environmental matters arising out of the operation of the Business prior to
the Closing Date or conditions on, in, under or about the Properties as of
the Closing Date except as provided in this Agreement.
8.8 Limitation of Sellers' Duty to Indemnify. Notwith standing
----------------------------------------
anything herein to the contrary, the Sellers' obligation to indemnify the
Buyer Indemnitees pursuant to this Article 8 is limited to matters for
which an "Environmental Claim Notice" (as defined below) has been received
--------------------------
by the Sellers (a) within 180 days after the Closing Date with respect to
the matters referred to in clause (1)(i) of the definition of Pre-Closing
Environmental Losses or (b) on or prior to the third anniversary of the
Closing Date with respect to matters referred to in clauses 1(ii) and (2)
of the definition of Pre-Closing Environmental Losses.
8.9 Expenses in the Ordinary Course Excluded from
---------------------------------------------
Indemnification. Environmental Liabilities indemnifiable pursuant to this
---------------
Article 8 shall not include costs or expenses of nonremedial or
noncorrective activities undertaken in the ordinary course of business by
the Company or any of its Subsidiaries after the Closing Date, including,
without limitation, costs or expenses relating to the routine disposal of
Hazardous Substances lawfully accumulated, sampling undertaken pursuant to
a Permit,
61
or routine maintenance of environmental control facilities unless
undertaken to cure Pre-Closing violations of Environmental Laws.
8.10 Control of Remedial Action.
--------------------------
(a) In the event that the transactions contemplated by this
Agreement trigger any investigative or remedial obligations under
Environmental Laws with respect to the Properties, including any
responsibility under the Connecticut Real Property Transfer Act and the
New Jersey Industrial Site Recovery Act, the Company shall have
responsibility for the discharge of such obligations; provided that
--------
Losses incurred by the Company to discharge any such obligation shall be
subject to the indemnification by the Sellers to the extent provided in
this Article 8.
(b) Until exhaustion of the Minimum Amount established by
Section 12.1(c)(i), the Company shall have the exclusive right to manage
and control all Remedial Actions for which the Buyer would be entitled
to indemnification (but for the Section 12.1(c) basket), and to
negotiate with and fulfill any requirements of or claims by a
Governmental Entity or other Person with respect to any such matter;
provided that the Buyer shall keep the Sellers' Representative informed
--------
of all material developments, and provided further the Sellers'
Representative (or its designee) shall have the right to attend and
observe negotiations/ meetings with relevant Governmental Entities.
(c) The Sellers shall have the exclusive right to manage and
control all Remedial Actions for which the Buyer is fully indemnified
hereunder and to negotiate with any fulfill any requirements of or
claims by a Governmental Entity or other Person with respect to any such
matter; provided that such remediation (and any settlement, agreement
--------
or ongoing obligations imposed in connection therewith) shall not
unreasonably interfere with the Buyer's or the Company's use of the
Properties, and provided further, that the Buyer shall have
-------- -------
62
the right to attend and observe negotiations/meetings with relevant
Governmental Entities and participate in any negotiations with respect
to operational or use restrictions; provided further, that the Buyer
-------- -------
shall have the right to take control of any Remedial Actions if (i) the
Sellers fail to diligently conduct the Remedial Action in light of an
order or directive of a Governmental Entity and Sellers fail to
implement the same within 30 days of receipt of notice from the Buyer or
the Company or (ii) the Buyer reasonably determines that the Sellers are
failing to adequately protect the environment, human health or safety,
including the health and safety of the Company's employees.
8.11 Environmental Indemnification Procedure. In order to seek
---------------------------------------
indemnification under this Article 8, the party seeking indemnification
(the "Indemnified Party") must submit to the party from which
-----------------
indemnification is being sought (the "Indemnifying Party") (1) within 60
------------------
days of the discovery by the Company or a Subsidiary of the Company of a
matter which is likely to give rise to indemnifiable Losses relating to
environmental matters, and (2) within 30 days of receipt of a directive
from a Governmental Entity or notice of claim by a third party, a written
notice of the claim for indemnification (an "Environmental Claim Notice")
--------------------------
which shall include a copy of the such directive or notice of a third-party
claim, if any; provided, however, failure to promptly submit an
-------- -------
Environmental Claim Notice shall not result in a loss of the right to
indemnification pursuant to this Article except to the extent that it
results in actual prejudice to the Indemnifying Party.
8.12 Access to Information. The Indemnified Party shall provide
---------------------
to the Indemnifying Party reasonable access to all information (including
documentary records, physical conditions and personnel at any property that
is the subject of the claim for indemnification) necessary to evaluate the
claim for indemnification contained in an Environmental Claim Notice.
63
8.13 Matters Involving Third Parties. If any Governmental
-------------------------------
Entity or other third party shall notify an Indemnified Party with respect
to any matter which may give rise to a claim for indemnification against
any Indemnifying Party under this Agreement, then the Indemnified Party
shall notify the Indemnifying Party thereof promptly; provided, however,
-------- -------
that no delay on the part of the Indemnified Party in notifying the
Indemnifying Party shall relieve the Indemnifying Party from any liability
or obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is actually prejudiced. In the event any
Indemnifying Party notifies the Indemnified Party within 15 days after the
Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, (i) the Indemnifying Party will
defend the Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the Indemnified
Party may retain separate co-counsel at its sole cost and expense (except
that the Indemnifying Party will be responsible for the fees and expenses
of the separate co-counsel if the Indemnified Party concludes reasonably
that the counsel the Indemnifying Party has selected has a conflict of
interest with the Indemnified Party), (iii) the Indemnified Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Indemnifying Party
(not to be withheld unreasonably), and (iv) the Indemnifying Party will not
consent to the entry of any judgment with respect to the matter, or enter
into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
Loss with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event the Indemnifying
Party does not notify the Indemnified Party within 15 days after the
Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, or does not timely thereafter assume
such defense, the Indemnified Party may defend against, or enter into any
settlement with respect to, the matter in any manner consistent with the
terms of this Section at the expense of the Indemnifying Party.
64
9. Conditions Precedent to the Obligation of the Buyer to Close. The
------------------------------------------------------------
obligation of the Buyer to complete the Closing is subject to the fulfillment
on or prior to the Closing Date of the following conditions, any one or more
of which may be waived by the Buyer to the extent permitted by Applicable Law:
9.1 Representations and Covenants. All representations and
-----------------------------
warranties of the Sellers contained herein that are qualified as to
materiality shall be true and correct, and the representations and
warranties of the Sellers contained herein not qualified as to materiality
shall be true and correct in all material respects, at and as of the
Closing Date with the same effect as though those representations and
warranties had been made again at and as of the Closing Date, except for
those specifically relating to a date other than the Closing Date, in which
case at and as of such date. The Sellers shall have performed and complied
in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by the Sellers on or prior to
the Closing Date. The Sellers shall have delivered to the Buyer a
certificate, dated the Closing Date and signed by or on behalf of each of
the Sellers, to the foregoing effect.
9.2 HSR Act Filing. Any Person required in connection with the
--------------
transactions contemplated by this Agreement to file a notification and
report form in compliance with the HSR Act shall have filed such form and
the applicable waiting period with respect to each such form (including any
extension thereof by reason of a request for additional information) shall
have expired or been terminated.
9.3 No Injunction or Violation of Law. No order, statute, rule,
---------------------------------
regulation, executive order, stay, decree, judgment or injunction shall
have been enacted, entered, promulgated or enforced by any court or
Governmental Entity which prohibits or prevents the consummation of the
transactions contemplated by this Agreement and which has not been stayed
or vacated by the Closing Date. The Buyer and each of the Sellers shall
each use their reasonable best efforts and shall cooperate
65
with each other to have any such order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction vacated or stayed.
9.4 Title Policies. The Sellers shall have delivered or caused
--------------
to be delivered, prior to or on the Closing Date, title insurance policies
relating to each Owned Real Property set forth on Schedule 4.10(a) insuring
----------------
such Owned Real property in the amount set forth in Schedule 9.4 with
respect to such property.
9.5 Simultaneous Closing. The transactions contemplated by (i)
--------------------
that certain Share Purchase Agreement (the "MI Agreement") dated of even
------------
date herewith, by and among the Buyer and the shareholders of McClinch,
Inc., a Connecticut corporation ("MI") and (ii) that certain Share Purchase
--
Agreement ("Grey Fox Agreement") dated of even date herewith, by and among
------------------
the Buyer and the shareholders of Grey Fox Equipment, Inc., a Connecticut
corporation ("Grey Fox"), shall be consummated simultaneously with the
--------
transactions contemplated hereby.
9.6 Resignations. The Buyer shall have received the written
------------
resignations of each of the officers and directors of the Company and
releases in the form of Exhibit F from each Seller other than Xxxxxx Xxxxx
and Xxxxxx Xxxxxxx.
9.7 Reports. The Buyer shall have obtained the Phase I
-------
Assessment and Phase II Assessment reports as contemplated by Article 8
and, to the extent required by Article 8, the Independent Consultant's
Report.
9.8 Escrow Agreement. The Buyer shall have received a copy of
----------------
the Escrow Agreement, executed by the Sellers' Representative and the
Escrow Agent.
9.9 Legal Opinions. The Buyer shall have received the opinions
--------------
of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx and Xxxxx & Xxxx, P.C., counsel
to the Sellers, addressed to the Buyer, in form and substance reasonably
acceptable to Buyer.
9.10 Affidavits. Each of the Sellers shall have provided Buyer
----------
with an affidavit of non-foreign status that complies with Section 1445 of
the Code.
66
9.11 Affiliate Contracts. Buyer shall have received evidence
-------------------
satisfactory to it that all Contracts between the Company or any Subsidiary
and any of its Affiliates (other than MI and Grey Fox) shall have been
fully discharged and terminated as of the Closing Date without any further
liability (contingent or otherwise) of the Company thereunder.
9.12 Certificates. Buyer shall have received certificates of
------------
good standing with respect to the Company and each of its Subsidiaries
issued by the Secretary of State or comparable official of their respective
jurisdiction of organization and for each jurisdiction in which they are
qualified to do business as a foreign corporation.
9.13 [Intentionally Omitted].
9.14 Employment/Consulting Agreements. Each of Xxxxxx Xxxxxxx
--------------------------------
and Xxxxxx Xxxxx shall have executed and delivered the Employment
Agreement, and Xxxxxxxx X. XxXxxxxx shall have executed and delivered the
Consulting Agreement in the form of Exhibits C, D and E, respectively,
attached hereto.
9.15 Release of Guarantees. The guarantees by the Company and
---------------------
its Subsidiaries of (i) the synthetic aircraft lease between Fleet Capital
Corporation and McClinch Aviation, Inc., and (ii) the mortgage loan by
Fleet National Bank (formerly Shawmut Bank Connecticut, N.A.) to 000 Xxxxxx
Xxxxxx Corporation, shall each be terminated.
9.16 Material Adverse Effect. No event having a Material
-----------------------
Adverse Effect shall have occurred, other than (i) termination by any
customer or distributor of a contract or relationship with the Company
primarily as a result of the transactions contemplated by this Agreement,
(ii) other adverse events occurring solely as a result of the transactions
contemplated by this Agreement or (iii) the occurrence of a default under,
or termination of any Contracts listed on Schedule 4.6(a) occurring solely
as a result of the transactions contemplated by this Agreement
67
10. Conditions Precedent to the Obligation of the Sellers to Close.
--------------------------------------------------------------
The obligation of the Sellers to complete the Closing is subject, to the
fulfillment on or prior to the Closing Date of the following conditions, any
one or more of which may be unanimously waived by the Sellers to the extent
permitted by Applicable Law.
10.1 Representations and Covenants. All representations and
-----------------------------
warranties of the Buyer contained herein that are qualified as to
materiality shall be true and correct, and the representations and
warranties of the Buyer contained herein not qualified as to materiality
shall be true and correct in all material respects, at and as of the
Closing Date with the same effect as though those representations and
warranties had been made again at and as of the Closing Date, except for
those specifically relating to a date other than the Closing Date, in which
case at and as of such date. The Buyer shall have performed and complied
in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. The Buyer shall have delivered to the Sellers a certificate, dated
the Closing Date and signed by an authorized officer of the Buyer, to the
foregoing effect.
10.2 HSR Act Filing. Any Person required in connection with the
--------------
transactions contemplated by this Agreement to file a notification and
report form in compliance with the HSR Act shall have filed such form and
the applicable waiting period with respect to each such form (including any
extension thereof by reason of a request for additional information) shall
have expired or been terminated.
10.3 No Injunction or Violation of Law. No order, statute, rule,
---------------------------------
regulation, executive order, stay, decree, judgment or injunction shall
have been enacted, entered, promulgated or enforced by any court or
Governmental Entity which prohibits or prevents the consummation of the
transactions contemplated by this Agreement and which has not been stayed
or vacated by the Closing Date. The Buyer and each of the Sellers shall
each use their best efforts and shall cooperate with each
68
other to have any such order, statute, rule, regulation, executive order,
stay, decree, judgment or injunction vacated or stayed.
10.4 United Rentals, Inc. Warrants. Xxxxxxxx X. XxXxxxxx,
-----------------------------
Xxxxxx Xxxxxxx and Xxxxxx Xxxxx shall each have received a 10 year warrant
(collectively, the "URI Warrants") to purchase $200,000 worth of common
------------
stock of the Buyer ("Buyer Common Stock") substantially in the form
------------------
attached hereto as Exhibit A.
10.5 [Intentionally Omitted].
10.6 [Intentionally Omitted].
10.7 Simultaneous Closing. The transactions contemplated by (i)
--------------------
the MI Agreement and (ii) the Grey Fox Agreement shall be consummated
simultaneously with the transactions consummated by this Agreement.
10.8 Reports. The Sellers shall have received copies of the
-------
Phase I Assessment and Phase II Assessment reports as contemplated by
Article 8 and, to the extent required by Article 8, the Independent
Consultant's Report.
10.9 Escrow Agreement. The Sellers shall have received a copy
----------------
of the Escrow Agreement, executed by each of the Buyer and the Escrow
Agent.
10.10 Legal Opinion. The Sellers shall have received the
-------------
opinion of Weil, Gotshal & Xxxxxx LLP, counsel to the Buyer, addressed to
the Sellers in form and substance reasonably acceptable to the Sellers.
10.11 Certificate. Sellers shall have received a certificate of
-----------
good standing of the Buyer issued by the Secretary of State of the State of
Delaware.
11. Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
11.1 General Survival. Except as otherwise provided in this
----------------
Article 11, all representations, warranties, covenants, agreements and
obligations of each party contained herein, shall expire twenty-four (24)
months after the Closing Date, except for (i) covenants or obligations
(including covenants to indemnify) which by their terms shall be performed
after the Closing which shall survive the Closing and not expire
69
unless otherwise provided in this Agreement, (ii) the representations and
warranties contained in Sections 3.1 and 4.7 shall survive the Closing Date
until the expiration of any applicable statute of limitations, including
extensions thereof, (iii) the representations and warranties contained in
Section 4.21 shall survive the Closing Date and expire thirty-six (36)
months after the Closing Date, and (iv) the representations and warranties
in Section 4.10(a) and the first sentence of Section 4.10(c) shall not
survive the Closing.
12. General Indemnification.
12.1 Indemnification of the Buyer.
(a) Indemnification with Respect to Representations. Subject
-----------------------------------------------
to Sections 12.1(c), 12.4 and 14.2, the Sellers hereby agree to, jointly
and severally, indemnify and hold harmless the Buyer, its directors,
officers, employees, agents, Affiliates, successors and assigns, the
Company and its Subsidiaries (the "Buyer Indemnitees") from and against
-----------------
all losses, liabilities, obligations, damages, costs (including costs of
investigation) and expenses (including reasonable attorneys' and other
professionals' fees and expenses) (collectively, the "Losses") actually
------
incurred as a result of, or attributable to any inaccuracy in, or breach
of, any representation, warranty, covenant or agreement of the Sellers
in this Agreement; provided that this Section 12.1(a) shall not apply to
--------
any obligation of the Sellers to indemnify with respect to (i) Taxes,
which shall be governed exclusively by Article 7, (ii) Losses relating
to matters referred in Article 8, which shall be governed exclusively by
such Article and (iii) Losses relating to the noncollection of accounts
receivable which shall be governed exclusively by Section 12.1(b).
(b) Indemnification for Accounts Receivable. From and after
---------------------------------------
the Closing Date, the Buyer shall use its commercially reasonable best
efforts to cause the Company and its Subsidiaries to collect payment of
all trade accounts receivable of the Company and its Subsidiaries. In
the event that the Buyer and the
70
Company, after using their commercially reasonable best efforts
consistent with the past practices of the Company and its Subsidiaries
to collect payment in full of any Reimbursable Trade Account Receivable
(as defined below), has not received payment in full (net of bad debt
reserves and credit memo reserves reflected on the Audited Closing
Balance Sheet (as increased or decreased, as the case may be, by the
Resolved Objections and the CPA--Determined Differences)) on or before
the Due Date (as defined below), the Buyer shall notify the Sellers'
Representative of such event (which notice shall set forth the amount of
such Reimbursable Trade Account Receivable, the name of the customer and
the Due Date with respect thereto). Upon receipt of any such notice from
the Buyer, the Sellers' Representative shall review the information set
forth therein. If the Sellers' Representative so requests, the Buyer
shall make available to the Sellers' Representative such additional
information which is in the possession and control of either the Buyer,
the Company or any of their respective Subsidiaries with respect to such
Reimbursable Trade Account Receivable as the Sellers' Representative may
reasonably require. Subject to Sections 12.1(c), 12.4 and 14.2, within
fifteen (15) days of the receipt by the Sellers' Representative of such
notice (or such later date as is reasonably required for the Sellers'
Representative to review any additional information received from the
Buyer at the request of the Sellers' Representative), the Sellers shall
pay to the Buyer, an amount equal to the excess of (A) the amount of
such Reimbursable Trade Account Receivable that remains past due and
unpaid after the Due Date over (B) any amount for which a reserve with
respect to such Reimbursable Trade Account Receivable has been
established on the Audited Closing Balance Sheet (either as a bad debt
reserve or a credit memo reserve); provided that the Sellers shall have
--------
no obligation to pay (i) any amount under this Section if the Buyer (x)
fails to keep and maintain the collection operation of the Company and
its Subsidiaries in its present location under the supervision of Xxxxxx
Xxxxxxx or, in the case Xx. Xxxxxxx is not employed
71
by MI or its subsidiaries and was not terminated without cause (as
determined under Xx. Xxxxxxx'x Employment Agreement), his replacement,
and (y) reduces the size or the salary level of the staff below the
present level or changes (adversely) the commission basis for salesmen
or (z) reduces the collection expense budget below that which is
consistent with past practice or (ii) to the extent the Buyer takes any
action which would reduce such Reimbursable Trade Account Receivable or
otherwise interfere with its collection in full. From time to time at
the request of the Sellers' Representative, the Buyer shall supply the
Sellers with such information as the Sellers' Representative may
reasonably request concerning the aging of the Reimbursable Trade
Accounts Receivable of the Company and its Subsidiaries and any
conversion of the Company's computer system referred to below. As used
herein, the term "Reimbursable Trade Account Receivable" shall mean
-------------------------------------
any trade account receivable of the Company (i) reflected in the Audited
Closing Balance Sheet, (ii) for which payment has not been withheld or
disputed as a result of any right of setoff or other claim against the
Buyer, the Company or any Subsidiary of the Company in respect of
transactions arising after the Closing Date and (iii) which does not
reflect any other concession made after the Closing Date by the Buyer,
the Company or any Subsidiary of the Company to the customer in respect
of such trade account receivable. Except as specified in respect of any
payment received, all payments received from a customer shall be applied
first against the oldest receivables with respect to such customer. As
used herein, the term "Due Date" with respect to the Reimbursable Trade
---------
Account Receivables shall mean 180 days after the Closing Date;
provided, however that in the event that it is necessary for the Buyer
--------
to undertake a conversion of the Company's computer system, the Due Date
shall be extended for the period to be agreed by the Buyer and the
Sellers' Representative; provided that if such Persons fail to agree
--------
then the Due Date shall be 240 days after the Closing Date. To the
extent that the Buyer has not collected the full amount of any
Reimbursable Trade Account
72
Receivable and the Buyer has been compensated therefor as set forth in
this Section 12.1(b), the Buyer shall transfer and assign all right,
title and interest in an any such Reimbursable Trade Account Receivable
to the Sellers, free of any Liens. It is agreed and understood that in
exercising "commercially reasonable best efforts" in connection with the
collection of accounts receivable pursuant to this Section, the Buyer
and the Company shall have no obligation to take any action out of the
ordinary course of business consistent with past practice of the
Business; provided that the Buyer agrees that it shall (consistent with
--------
past practice of the Business) commence or threaten any litigation or
prepare or file any proof of claim in any bankruptcy or similar
proceeding or incur such expenses (consistent with past practice of the
Business) to collect such receivables.
(c) Limitation on Indemnification Obligations. The
-----------------------------------------
indemnification provided for in Article 8 and Article 12 shall be
subject to the following limitations:
(i) Anything in this Agreement to the contrary
notwithstanding, no indemnification payment shall be made pursuant to
this Agreement (other than pursuant to Sections 1.2, 6.4, 6.11 and 6.14
and Article 7 hereof) except to the extent that the amounts which would
otherwise be payable under this Agreement (other than pursuant to
Sections 1.2, 6.4, 6.11 and 6.14 and Article 7 hereof) would
collectively aggregate at least $450,000 (the "Minimum Amount") and such
--------------
Minimum Amount shall be deducted from the aggregate amount payable under
such provisions;
(ii) In no event shall the Sellers have any obligation or
liability to pay any amounts pursuant this Agreement (other than
pursuant to Sections 1.2, 6.4 and 6.11 and Article 7 hereof) in excess
of $40,500,000; provided that in no event shall the Sellers be obligated
--------
to pay more than $16,200,000 with respect to claims made under this
Agreement (other than pursuant
73
to Sections 1.2 and 6.4 and Article 7 hereof) by a Buyer Indemnitee on
or after 180 days after the Closing Date;
(iii) Notwithstanding anything herein to the contrary, the
Buyer shall have no right to any indemnification under this Article 12
for any matter to the extent (i) the Net Worth of the Company was
reduced because of such matter and either Buyer did not dispute the
amount of the reduction in the Audited Closing Balance Sheet or the
dispute as to the amount of the reduction was resolved pursuant to
Section 1.2, or (ii) the matter relates to whether any item of Equipment
was Rental Ready or missing or the fair market value or cost of repair
or replacement of any item of Equipment and such matter was not disputed
or was disputed in determining the amounts payable under Section 6.14
and resolved as contemplated by Section 6.14;
(iv) In no event shall the Sellers be liable for loss of
profits or consequential damages; and
(v) Notwithstanding anything in this Agreement to the
contrary, the Sellers shall not be obligated to indemnify the Buyer
Indemnities with respect to any Losses to the extent of (A) any proceeds
received in connection with such Losses by the Company or any Subsidiary
of the Company under any insurance policy of the Company or any
Subsidiary of the Company in effect on the Closing Date (including,
without limitation, the insurance policy described in Section 6.12 to
be purchased pursuant to such Section 6.12 (each, a "Company Insurance
-----------------
Policy")); (B) any proceeds recoverable in connection with such Losses
------
by the Company or any Subsidiary of the Company under any applicable
warranty claim, which claims the Buyer hereby undertakes to pursue using
its commercially reasonable best efforts; and (C) any amounts
recoverable by the Buyer, the Company or any of its Subsidiaries from
customers or other third parties who are, in whole or in part,
responsible for such Losses, and the Buyer hereby undertakes
74
to use its commercially reasonable best efforts to pursue such claims;
it being agreed that the Buyer shall use commercially reasonable best
efforts (including threatening or instituting proceedings) to recover
amounts referred to in clause (A), (B) or (C) of this clause (v) but the
Buyer shall have no obligation to threaten or institute proceedings
against any insurance carrier; provided, that this clause (v) shall
--------
not be applicable with respect to any amounts described in (A), (B) or
(C) above which are not received by the Company or the Buyer following
the exercise of the Buyer's undertakings therein and only if, upon
payment of the relevant indemnification claims by the Sellers, all of
the Buyer's or the Company's right, title and interest in and to all
claims for such amounts are transferred and assigned to the Sellers.
(d) Any amounts payable to any Buyer Indemnitee pursuant to
Article 7, 8 or 12 or Sections 6.4, 6.11 or 6.14 shall be paid by the
Escrow Agent to such Buyer Indemnitee from the Escrow Amount in
accordance with the Escrow Agreement until the Escrow Amount (including
interest thereon at the Reference Rate since the Closing Date) is
exhausted. After the earlier of (i) the time that the Escrow Amount
(and any interest thereon) has been exhausted or (ii) the date of the
termination of the Escrow Agreement in accordance with its terms and the
return of the remaining Escrow Amount, if any, to the Sellers in
accordance with the Escrow Agreement, any amounts payable to any Buyer
Indemnitee pursuant to Article 7, 8 or 12 or Sections 6.4, 6.11 or 6.14,
subject to the limitations set forth in Sections 12.1(c), 12.4 and 14.2,
shall be paid by the Sellers to such Buyer Indemnitee.
12.2 Indemnification of the Sellers. The Buyer hereby agrees to
------------------------------
indemnify and hold harmless each of the Sellers, any trustee of any Seller
in his or her capacity as trustee and any beneficiary or trustee of any
Seller in his or her capacity as such, and their respective successors,
assigns, agents and Affiliates (collectively, the "Seller Indemnitees")
------------------
against all Losses actually incurred as a result of, or attributable
75
to (i) any inaccuracy in, or breach of, any representation, warranty,
covenant or agreement made by the Buyer in this Agreement or (ii) by reason
of any act or failure to act by the Buyer, its Affiliates its successors or
assigns or, after the Closing Date, by the Company or any Subsidiary, in
connection with the ownership of the Company or any Subsidiary or the
operation of the Business after the Closing Date; provided that in no event
--------
shall the Buyer be liable for loss of profits or consequential damages.
12.3 Notice and Opportunity to Defend.
--------------------------------
(a) Notice of Asserted Liability. The party making a claim
----------------------------
under this Article 12 is referred to as the "Indemnitee," and the party
----------
against whom such claims are asserted under this Article 12 is referred
to as the "Indemnifying Party." All claims by any Indemnitee under this
------------------
Article 12 shall be asserted and resolved as follows: promptly after
receipt by the Indemnitee of notice of any claim or circumstances which,
with the lapse of time, would or might give rise to a claim or the
commencement (or threatened commencement) of a claim including any
action, proceeding or investigation (an "Asserted Liability") that may
------------------
result in a Loss, the Indemnitee shall give notice thereof (the "Claims
------
Notice") to the Indemnifying Party; provided that no delay on the part
------ --------
of the Indemnitee in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any liability or obligation under this Article
unless (and then solely to the extent) the Indemnifying Party thereby is
actually prejudiced. The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount
(estimated, if necessary and to the extent feasible) of the Loss that
has been or may be suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may elect
---------------------
to compromise or defend, at its own expense and by its own counsel which
shall be reasonably acceptable to the Indemnitee, any Asserted
Liability; provided that in the event that under then applicable
--------
standards of professional conduct the
76
Indemnitee is required to be represented by separate counsel and the
Indemnitee elects to be represented by separate counsel, the
Indemnifying Party shall pay the fees and expenses of one law firm
incurred by the Indemnitee in the compromise of, or defense against,
such matter; and provided further that if the Asserted Liability
-------- -------
includes only a request for injunctive relief, the Indemnitee may
control the defense thereof (at the Indemnifying Party's expense) and if
the Asserted Liability includes a request for injunctive relief and
other remedies, the Indemnitee may (at its own expense) share control of
the defense thereof to the extent of the injunctive relief claims. If
the Indemnifying Party elects to compromise or defend such Asserted
Liability, it shall within 30 days (or sooner, if the nature of the
Asserted Liability so requires) notify the Indemnitee of its intent to
do so, and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against, such
Asserted Liability. If the Indemnifying Party elects not to compromise
or defend the Asserted Liability or fails to notify the Indemnitee of
its election as herein provided, or otherwise fails to timely assume
such defense the Indemnitee may pay, compromise or defend such Asserted
Liability at the Indemnifying Party's expense. Notwithstanding the
foregoing, neither the Indemnifying Party nor the Indemnitee may settle
or compromise any Asserted Liability over the objection of the other;
provided, however, consent to settlement or compromise shall not be
-------- -------
unreasonably withheld or delayed. In any event, the Indemnitee and the
Indemnifying Party may participate, at their own expense, in the defense
of such Asserted Liability. If the Indemnifying Party chooses to defend
any Asserted Liability, the Indemnitee shall make available to the
Indemnifying Party any books, records or other documents within its
control that are necessary or appropriate for such defense.
12.4 Exclusive Remedies. Notwithstanding anything in this
------------------
Agreement to the contrary, the remedies provided in this Agreement shall be
the sole and exclusive remedies for any inaccuracy and for any breach of
any representation,
77
warranty, covenant or agreement of, or obligation or liability of, the
Buyer or the Sellers, contained herein or in any certificate or instrument
delivered pursuant to this Agreement or otherwise relating hereto or
thereto; provided, however, that nothing in this Section 12.4 shall be
-------- -------
construed to limit any right or remedy that the Buyer or the Sellers may
have with respect to fraud.
12.5 Sellers' Representative. Each Seller hereby irrevocably
-----------------------
appoints Xxxxxxxx X. XxXxxxxx as Sellers' Representative (or his designee,
the "Sellers' Representative"), and the Sellers' Representative hereby
-----------------------
accepts such appointment and agrees to act as such Sellers' Representative,
who shall, in such capacity, have full power and authority to make, on
behalf of the Sellers, all decisions relating to the defense or settlement
of any claims for which any Buyer Indemnitee may claim to be entitled to
indemnity or payment pursuant to this Agreement and otherwise to act on
behalf of the Sellers in all respects with respect to this Agreement. All
decisions and actions by the Sellers' Representative shall be binding upon
all of the Sellers, and no Seller shall have the right to object to,
dissent from, protest or otherwise contest the same. The Buyer shall not
have the right to object to, protest or otherwise contest any matter
related to the procedures for action being taken by the Sellers'
Representative. By the execution of this Agreement by or on behalf of such
Seller, each Seller shall be deemed to have agreed that (i) the provisions
of this Section 12.5 are independent and severable, are irrevocable and
coupled with an interest and shall be enforceable notwithstanding any
rights or remedies any Seller may have in connection with the transactions
contemplated by this Agreement, (ii) the remedy at law for any breach of
the provisions of this Section 12.5 would be inadequate, (iii) the
provisions of this Section 12.5 shall be binding upon the successors and
assigns of each Seller and (iv) any references in this Agreement to a
Seller or the Sellers shall mean and include the successors to the Seller's
rights hereunder. In addition, by the execution of this Agreement by or on
behalf of such Seller, each Seller shall be deemed to have waived any
claims they may have or assert,
78
including those that may arise in the future, against the Sellers'
Representative for any action or inaction taken or not taken by the
Sellers' Representative except to the extent that such action or inaction
shall have been held by a court of competent jurisdiction to constitute
willful misconduct. In consideration for serving as the Sellers'
Representative, the Sellers' Representative shall be released by each
Seller from any liability for any action or inaction taken or not taken by
such Sellers' Representative except to the extent that such action or
inaction shall have been held by a court of competent jurisdiction to
constitute willful misconduct.
12.6 Nature of Payments. Any payment under this Article 12
------------------
shall be treated for tax purposes as an adjustment of the Purchase Price
given or received, as the case may be, with respect to the Shares to the
extent such characterization is proper and permissible under relevant Tax
authorities, including court decisions, statutes, regulations and
administrative promulgations.
13. Termination of Agreement.
------------------------
13.1 Termination. This Agreement may be terminated prior to the
-----------
Closing as follows:
(a) at the election of the Sellers' Representative, if any one
or more of the conditions to the obligation of the Sellers to close set
forth in Article 10 has not been fulfilled as of the Scheduled Closing;
(b) at the election of the Buyer, if any one or more of the
conditions to the obligation of the Buyer to close set forth in Article
9 has not been fulfilled as of the Scheduled Closing;
(c) at the election of the Buyer or the Sellers'
Representative, if the transactions contemplated by this Agreement have
not been consummated by November 15, 1998; provided, that the right to
--------
terminate this Agreement pursuant to this Section 13.1(c) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in,
79
the failure of the consummation of the transactions contemplated by this
Agreement to occur on or prior to such date; or
(d) at the election of the Buyer if the aggregate remediation
costs set forth in the Phase I Assessment for the leased Properties and
the Phase I Assessments for the leased properties in the MI Agreement
and Grey Fox Agreement exceed a dollar amount equal to $1,000,000 less
the aggregate estimated remediation costs for the Owned Real Properties
set forth in the Assessments and the Assessments referred to in the MI
and Grey Fox Agreements (but in no event less than $0); provided,
--------
however, Buyer shall not have any right of termination pursuant to this
-------
subsection (d) if the Sellers notify Buyer within 10 days of receipt of
the Phase I and II Assessments that the Sellers agree to amend the
indemnification provisions of Section 8.5 to include an indemnity in the
Buyer's favor covering the leased Properties in the same manner as the
Owned Real Properties, such that such indemnity will, among other
things, be subject to the same Minimum Amount as defined in Section
12.1(c)(i), it being understood that the Loss limitations for the leased
Properties will be the remediation estimates for the leased Properties
set forth in the Assessments;
(e) at the election of the Buyer if the aggregate remediation
estimates for the Properties set forth in the Phase I Assessment, Phase
II Assessment and the Phase I and Phase II Assessments referred to in
the MI Agreement and the Grey Fox Agreement exceed $51,600,000;
(f) at the election of the Sellers' Representative, if the
aggregate remediation costs for the Properties set forth in the Phase I
Assessment, Phase II Assessment and the Phase I and Phase II Assessments
referred to in the MI Agreement and the Grey Fox Agreement exceed
$2,300,000; and
(g) at any time on or prior to the Closing Date, by mutual
written consent of the Sellers' Representative and the Buyer.
80
If this Agreement so terminates, it shall become null and void and
have no further force or effect, except as provided in Section 13.2.
13.2 Survival After Termination. If this Agreement terminates
--------------------------
pursuant to Section 12.1 and the contemplated transactions are not
consummated, this Agreement shall become null and void and have no further
force or effect, except that any such termination shall be without
prejudice to the rights of any party on account of the nonsatisfaction of
the conditions set forth in Articles 9 and 10 resulting from the
intentional or willful breach or violation of the representations,
warranties, covenants or agreements of another party under this Agreement
or the breach of the representation and warranty set forth in clause (ii)
of third sentence of Section 5.2 with respect to the bank consent.
Notwithstanding anything in this Agreement to the contrary, (i) the
provisions of Section 6.2 relating to the obligation of the Buyer to keep
confidential and not to use certain information and data obtained by it
from the Company, and to return documents to the Company and (ii) the
provisions of Sections 6.4, this Section 13.2 and Article 14 shall survive
any termination of this Agreement.
14. Miscellaneous.
-------------
14.1 Certain Definitions. As used in this Agreement, the
-------------------
following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
---------
controlling, controlled by or under common control with, or the parents,
spouse, lineal descendants or beneficiaries of, such Person.
"Applicable Law" means with respect to any Person, any domestic or
--------------
foreign, federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction,
directive, policy, guidance, judgment, decree or other requirement of any
Governmental Entity applicable to such Person or its properties, business,
operations or assets.
81
"Benefit Plan" means any employee benefit plan, arrangement, policy
------------
or commitment (whether or not an employee benefit plan within the meaning of
section 3(3) of ERISA), including any employment, consulting or deferred
compensation agreement, executive compensation, retention, change in control,
bonus, incentive, pension, profit-sharing, savings, retirement, stock option,
stock award, stock purchase or severance pay plan or arrangement, any life,
health, disability or accident insurance plan, any fringe benefit plan or
arrangement or any holiday or vacation practice, as to which the Company or
any Subsidiary has or in the future would have any direct or indirect, actual
or contingent liability.
"Business Day" means any day of the year (other than a Saturday or
------------
Sunday) on which national banking institutions in Greenwich, Connecticut are
open to the public for conducting business and are not required or authorized
to close.
"Closing Balance Sheet Tax Reserve" means the portion of the
---------------------------------
deferred tax reserve shown on the Audited Closing Balance Sheet (and
reflected in the Audited Closing Adjusted Net Worth, as increased or
decreased, as the case may be, by the Resolved Objections and the CPA--
Determined Differences) that does not relate to timing differences between
book and tax accounting.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"DOL" means the United States Department of Labor.
---
"Employee" means any individual employed by the Company or any
--------
Subsidiary of the Company.
"Environmental Laws" means all applicable laws relating to
------------------
Hazardous Substances, the environment or natural resources, including the
Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA"), the Clean
Air Act, the Water Pollution Control Act, the Safe Drinking Water Act, and
the Toxic Substances Control Act
82
("TSCA"), and any requirements promulgated pursuant to these applicable laws
or any analogous state or local applicable laws.
"Environmental Liabilities" means all Liabilities of a Person
-------------------------
(whether such Liabilities are owed by such Person to Governmental
Authorities, third parties or otherwise) which arise under or relate to any
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
-----
as amended.
"GAAP" means generally accepted accounting principles in the United
----
States applied in a consistent basis during the relevant periods.
"Governmental Entity" means any foreign, domestic, federal,
-------------------
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any regulatory,
administrative or other agency or any political or other subdivision,
department or branch of the any of the foregoing.
"Hazardous Substance" means any substance, material or waste: (i)
-------------------
the presence of which in the environment requires investigation or
remediation under any applicable law; or (ii) that is defined characterized
or otherwise classified as a "hazardous waste," "hazardous substance," "toxic
--------------- -------------------
material" or "toxic waste" or words of similar connotation under any
Environmental Law; or (iii) that is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic or mutagenic or otherwise hazardous and
is regulated pursuant to any Environmental Law; (iv) the presence of which
causes a nuisance, trespass or other tortious condition; or (v) without
limitation, that contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenols (PCBs) or asbestos.
"IRS" means the Internal Revenue Service.
---
"Knowledge of Sellers" shall have the meaning assigned to it in
--------------------
that certain letter agreement among the parties hereto and others of even
date herewith.
83
"Lien" means any lien, pledge, mortgage, deed of trust, security
----
interest, claim, lease, license, charge, option, right of first refusal,
easement, servitude or transfer restriction and, with respect to the Shares,
voting trusts, proxies, stockholder or similar agreements, encumbrances or
restrictions of any nature whatsoever.
"Material Adverse Effect" means material adverse effect on the
-----------------------
properties, business, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole, or on their ability to
consummate the transactions contemplated by this Agreement on the terms set
forth herein.
"Pension Plan" means any Benefit Plan which is a pension plan
------------
within the meaning of ERISA section 3(2) (regardless of whether the plan is
covered by ERISA).
"Permitted Liens" means (i) Liens for Taxes or governmental
---------------
assessments, charges or claims the payment of which is not yet due, or for
Taxes the validity of which is being contested in good faith by appropriate
proceedings and for which adequate reserves are reflected on the Balance
Sheet; (ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other similar Persons and other Liens imposed by
applicable law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith; (iii) Liens relating to deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or to
secure the performance of leases, trade contracts or other similar
agreements; (iv) Liens specifically identified on the Balance Sheet; (v)
Liens securing executory obligations under any lease that constitutes an
"operating lease" under GAAP; and (vi) other Liens set forth on Schedule
---------------- --------
14.1(b) hereto.
-------
"Person" means any individual, corporation, partnership, limited
------
liability company, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Entity or other entity.
84
"property" or "properties" means real, personal or mixed property,
-------- ----------
tangible or intangible.
"Reference Rate" means the per annum rate of interest publicly
--------------
announced from time to time by Chase Manhattan Bank as its prime rate (or
reference rate). Any change in the Reference Rate shall take effect at the
opening of business on the day specified in the public announcement of such
change.
"Release" means any release, spill, emission, leaking, pumping,
-------
pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching or migration of Hazardous Materials on or into the
environment.
"Remedial Action" has the meaning ascribed to it on the
---------------
definitional provisions of CERCLA and also means such actions as are
necessary to cause fixtures and operations on the Properties (not including
movable equipment leased by the Company and its Subsidiaries in the ordinary
course) to be in compliance with Environmental Laws, assuming use of such
fixtures and operations in a manner consistent with past practices of the
Company and its Subsidiaries.
"Restricted Business" means, collectively, (a) any business in
-------------------
which the Company, MI, Grey Fox and/or their respective Subsidiaries are
engaged on the Closing Date and (b) the business of renting, leasing, acting
as a dealer or distributor for, repairing, servicing or selling light to
heavy construction and industrial equipment (including, without limitation,
aerial lifts (including boom and scissor lifts), cranes, backhoes, digging
equipment, forklifts, tractors, skid-steer loaders, scaffolding, compressors,
pumps and generators), and/or general tools and equipment (including, without
limitation, power tools, hand tools, high-pressure washers, paint sprayers,
gardening and landscaping equipment and roto tillers) and, in each case, any
related merchandise, accessories or parts.
85
"Subsidiary" means any Person of which a majority of the
----------
outstanding voting securities or other voting equity interests are owned,
directly or indirectly, by the Company.
"Tax" means all taxes of any nature including any United States
---
federal, state, local or foreign income, sales and use, excise, franchise,
real and personal property, transfer, gross receipts, license, payroll,
employment, withholding, estimated or other tax or charge imposed by any
governmental entity, together with any interest and penalties related thereto
or to the nonpayment thereof and any loss in connection with the
determination, settlement or litigation of any tax liability.
14.2 Nature of Obligations.
---------------------
(a) The representations, warranties, and covenants of the
Sellers in this Agreement are joint and several obligations.
Notwithstanding the foregoing, the aggregate amount a Seller shall be
required to pay to the Buyer or any Buyer Indemnitee hereunder shall not
exceed such Seller's Pro Rata Portion of the Purchase Price.
14.3 Notices. Any notice or other communication required or
-------
permitted hereunder shall be in writing and shall be delivered personally,
sent by facsimile transmission sent by overnight courier or sent by
certified, registered or express mail, postage prepaid. Any such notice
shall be deemed given when so delivered personally, or sent by facsimile
transmission or if sent by overnight courier, one Business Day after the
date so sent, or, if mailed, five Business Days after the date of deposit
in the United States mails, as follows:
(i) If to Buyer or, after the Closing Date, the Company:
United Rentals, Inc.
Four Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxx
Facsimile: (000) 000-0000
with copies to:
86
Xxxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
(ii) if to the Sellers or the Sellers' Representative, to
the addresses set forth beside the Sellers'
Representative's name on Annex C
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may by notice given in accordance with this Section to the other
parties designate another address or Person for receipt of notices hereunder.
14.4 Entire Agreement. The Confidentiality Agreement, this
----------------
Agreement and any other collateral agreements executed in connection with
the consummation of the transactions contemplated by this Agreement contain
the entire agreement among the parties with respect to the purchase of the
Shares and supersede all prior agreements, written or oral, with respect
thereto.
14.5 Waivers and Amendments; Non-Contractual Remedies. This
------------------------------------------------
Agreement may be amended, superseded, canceled, renewed or extended, and
the terms hereof may be waived, only by a written instrument signed by the
Buyer and the Sellers' Representative or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder shall
87
operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise
of any such right, power or privilege, preclude any further exercise
thereof or the exercise of any other such right, power or privilege. The
rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in
equity.
14.6 Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed entirely within such State.
14.7 Binding Effect; Assignment. This Agreement shall be
--------------------------
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable;
provided, however, that the Buyer may assign this Agreement to a wholly-
--------
owned subsidiary of the Buyer; and provided further, that no such
-------- -------
assignment shall release the Buyer from any of its obligations hereunder.
14.8 Usage. All pronouns and any variations thereof refer to
-----
the masculine, feminine or neuter, singular or plural, as the context may
require. All terms defined in this Agreement in their singular or plural
forms have correlative meanings when used herein in their plural or
singular forms, respectively. Unless otherwise expressly provided, the
words "include," "includes" and "including" do not limit the preceding
words or terms and shall be deemed to be followed by the words "without
limitation."
14.9 Counterparts. This Agreement may be executed by the
------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed
by all of the parties hereto.
88
14.10 Exhibits and Schedules. The Exhibits and Schedules are a
----------------------
part of this Agreement as if fully set forth herein and all references to
this Agreement shall be deemed to include the Exhibits and Schedules. All
references herein to Sections, Exhibits and Schedules shall be deemed
references to such parts of this Agreement, unless the context shall
otherwise require. Any matter disclosed on one Schedule hereto shall be
deemed to have been disclosed on any other Schedule provided the relevance
of such matter to such other Schedule is reasonably discernible from the
information provided in the Schedule on which such disclosure appears.
14.11 Headings. The headings in this Agreement are for
--------
reference only, and shall not affect the interpretation of this Agreement.
14.12 Severability of Provisions.
--------------------------
(a) If any provision or any portion of any provision of this
Agreement shall be held invalid or unenforceable, the remaining portion
of such provision and the remaining provisions of this Agreement shall
not be affected thereby; provided, that the material economic terms
--------
provided for herein are not affected thereby in a manner adverse to the
Buyer or any Seller.
(b) If the application of any provision or any portion of any
provision of this Agreement to any Person or circumstance shall be held
invalid or unenforceable, the application of such provision or portion
of such provision to Persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby;
provided, that the material economic terms provided for herein are not
--------
affected thereby in a manner adverse to the Buyer or any Seller.
14.13 Consent to Jurisdiction. Each of the parties hereto
-----------------------
hereby irrevocably submits to the exclusive jurisdiction of any U.S.
District Court for the District of Connecticut; and irrevocably agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such court. Each of the parties
89
hereto further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set
forth in Section 14.3 shall be effective service of process for any action,
suit or proceeding in the State of Connecticut with respect to any matters
to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the U.S. District Court for the District of
Connecticut, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any action, suit or
proceeding brought in any such court has been brought in an inconvenient
forum.
90
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
UNITED RENTALS, INC.
By:
Name:
Title:
SELLERS:
-------
ANNEX A
Name of Shareholder Number of Shares
------------------- ----------------
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TOTAL
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ANNEX B
[Escrow Agreement]
ANNEX C
[Addresses for Notices ]
Sellers' Representative
Xxxxxxxx X. XxXxxxxx
c/x Xxxxx & Xxxx P.C.
000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
