EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
by and among
XXXXX X. XXXXXXXX
as "Seller,"
XXXXXX XXXXX EQUIPMENT, INC.
as "Buyer,"
Rental Service Corporation
as "Parent"
and
XXXXX X. XXXXXXXX ENTERPRISES, INC.
as the "Company"
April 1, 1998
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.................................................1
1.1 Defined Terms..............................................1
1.2 Other Defined Terms........................................6
ARTICLE II SALE AND TRANSFER OF SHARES................................7
2.1 Transfer of Shares.........................................7
2.2 Purchase Price.............................................7
2.3 Holdback and Escrow Agreement..............................8
2.4 Purchase Price Adjustments.................................9
ARTICLE III CLOSING..................................................11
3.1 Closing...................................................11
3.2 Conveyances at Closing....................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
COMPANY.........................................................12
4.1 Organization of the Company...............................13
4.2 Authorization.............................................13
4.3 No Violation..............................................14
4.4 Capitalization............................................15
4.5 No Changes to the Assets..................................16
4.6 Related Entities..........................................16
4.7 Equipment and Other Assets; Absence of Encumbrances.......17
4.8 Facilities................................................17
4.9 Permits and Consents......................................18
4.10 Contracts and Commitments.................................18
4.11 Financial Statements......................................19
4.12 Books and Records.........................................19
4.13 Litigation................................................20
4.14 Labor Matters.............................................20
4.15 Compliance with Law.......................................20
4.16 Brokers...................................................20
4.17 No Other Agreements to Sell the Company...................21
4.18 Proprietary Rights........................................21
4.19 Tax Matters...............................................22
4.20 Accounts Receivable...................................... 24
4.21 Inventory.................................................25
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4.22 Employees and Employee Benefits...........................25
4.23 Representations...........................................27
4.24 Compliance With Environmental Laws........................29
4.25 Liabilities...............................................32
4.26 Insurance.................................................32
4.27 Conduct of the Business...................................33
4.28 Securities Law Matters....................................33
4.29 Affiliate Transactions....................................34
4.30 Disclosure................................................34
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.........35
5.1 Representation and Warranties of Buyer....................35
5.2 Representations and Warranties of RSC.....................36
ARTICLE VI COVENANTS OF BUYER, THE COMPANY AND SELLER................37
6.1 Further Assurances........................................37
6.2 Employee Matters..........................................38
6.3 Environmental Assessments and Remediation.................38
6.4 Registration Rights.......................................39
6.5 Key Man Life Insurance; Transferred Assets................40
6.6 Stock Options.............................................40
6.7 Tax Attributes............................................40
ARTICLE VII CONDITIONS TO SELLER'S OBLIGATIONS.......................40
7.1 Representations, Warranties and Covenants.................40
7.2 No Proceedings, Litigation or Laws....................... 40
7.3 Ancillary Agreements......................................41
7.4 Certificate...............................................41
7.5 No Cessation of Trading...................................41
7.6 Opinion Letter of Buyer's Attorneys.......................41
7.7 Buyer and RSC Corporate Documents.........................41
ARTICLE VIII CONDITIONS TO BUYER'S AND PARENT'S OBLIGATIONS..........41
8.1 Representations, Warranties and Covenants.................41
8.2 Consents..................................................42
8.3 Board Approval............................................42
8.4 No Proceedings or Litigation..............................42
8.5 Opinion of Counsel........................................42
8.6 Certificates..............................................42
8.7 Performance Incentive Agreement...........................42
8.8 Escrow Agreement..........................................42
8.9 Employment and Non-Competition Agreements.................42
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8.10 Release of Encumbrances...................................43
8.11 Material Changes..........................................43
8.12 Corporate Documents.......................................43
8.13 Due Diligence Review......................................43
8.14 Completion of Environmental Remediation...................43
8.15 Financing. ...............................................43
8.16 Tax Clearance Certificate.................................43
8.17 Audit.....................................................43
ARTICLE IX CONDUCT OF SELLER AND BUYER PENDING THE CLOSING...........43
9.1 Seller Covenants..........................................43
9.2 No Negotiations...........................................46
9.3 Public Announcements......................................46
9.4 Confidentiality...........................................46
ARTICLE X [INTENTIONALLY OMITTED]....................................47
ARTICLE XI ACTIONS BY SELLER AND BUYER AFTER THE CLOSING.............47
11.1 Books and Records; Tax Examinations.......................47
11.2 Survival of Representations, Etc..........................47
11.3 Indemnifications..........................................48
ARTICLE XII MISCELLANEOUS............................................51
12.1 Termination...............................................51
12.2 In the Event of Termination...............................52
12.3 Assignment................................................52
12.4 Notices...................................................52
12.5 Choice of Law.............................................54
12.6 Entire Agreement; Amendments and Waivers..................54
12.7 Multiple Counterparts.....................................54
12.8 Expenses..................................................54
12.9 Invalidity................................................54
12.10 Titles....................................................54
12.11 Publicity; Confidentiality................................55
12.12 Cumulative Remedies.......................................55
12.13 Arbitration...............................................55
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of April 1, 1998 (the
"Agreement") to be effective as of March 1, 1998 by and among Xxxxxx Xxxxx
Equipment, Inc., a Mississippi corporation ("Buyer"), Rental Service
Corporation, a Delaware corporation ("Parent or RSC") for the limited purpose
set forth herein, Xxxxx X. Xxxxxxxx, an individual ("Seller") and Xxxxx X.
Xxxxxxxx Enterprises, Inc., a Minnesota corporation (the "Company").
RECITALS
--------
A. Seller owns, of record and beneficially, all of the issued and
outstanding shares of capital stock of the Company (the "Shares") and, as of the
Closing Date (as defined below), will own, of record and beneficially, all of
the Shares.
B. Company owns all of the issued and outstanding shares of capital stock
of Metroquip, Inc. ("Metroquip").
C. Metroquip is engaged in the business of equipment rental and sales.
D. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, all of the Shares upon the terms and subject to the conditions of this
Agreement, whereupon Buyer will own all of the equity interests in the Company
and through the Company, Metroquip.
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
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1.1 Defined Terms. As used herein, the terms below shall have the
-------------
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
1.1.1 "Affiliate" shall have the meaning set forth in the Securities
---------
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
1.1.2 "Agreement" shall have the meaning specified in the first
---------
paragraph of this Agreement.
1.1.3 "Ancillary Agreements" shall mean the Performance Incentive
--------------------
Agreement, Escrow Agreement and the Employment and Noncompetition Agreement.
1.1.4 Assets" shall mean the assets of the Company and Metroquip as
------
reflected on the Consolidated December 31 Balance Sheet, together with those
assets acquired (less those assets disposed of) in the ordinary course of
business since the Consolidated December 31 Balance Sheet Date, less the assets
identified on Schedule 1.1.4 attached hereto ("Transferred Assets").
--------------
1.1.5 "Balance Sheets" shall mean the audited consolidated balance
--------------
sheets of the Company and Metroquip at each of December 31, 1994, 1995, 1996 and
1997.
1.1.6 "Books and Records" shall mean (a) all records and lists
-----------------
pertaining to the Business, customers, suppliers, or personnel of the Company
and Metroquip, (b) all product, business and marketing plans of the Company and
Metroquip and (c) all books, ledgers, subledgers, trial balances, files,
reports, plans, drawings, and operating records of every kind maintained by the
Company and Metroquip.
1.1.7 "Business" shall mean Metroquip's equipment rental and sales
--------
business, operating under the name "Metroquip" or otherwise.
1.1.8 "Buyer" shall have the meaning specified in the first paragraph
-----
of this Agreement.
1.1.9 "Closing Date" shall mean April 1, 1998 or such other date as
------------
Buyer and Seller shall mutually agree upon.
1.1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended,
----
and the rules and regulations promulgated thereunder.
1.1.11 "Commission" shall mean the Securities and Exchange Commission.
----------
1.1.12 "Company" shall have the meaning specified in the first
-------
paragraph of this Agreement.
1.1.13 "Consolidated December 31 Balance Sheet" shall mean the audited
--------------------------------------
consolidated balance sheet of Company and Metroquip dated December 31, 1997, as
adjusted on a mutually agreed upon basis between Buyer and Seller and attached
hereto as Schedule 1.1.13.
---------------
1.1.14 "Consolidated December 31 Balance Sheet Date" shall mean
-------------------------------------------
December 31, 1997.
1.1.15 "Consolidated December 31 Shareholder Net Worth" shall be as set
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forth on the Consolidated December 31 Balance Sheet.
1.1.16 "Contract" shall mean any agreement, contract, note, loan,
--------
evidence of indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license, instrument,
obligation or commitment to which the Company or Metroquip is a party or is
bound and which relates to the Business or Assets, whether oral or written.
1.1.17 "Effective Date" shall mean March 1, 1998.
--------------
1.1.18 "Effective Date Balance Sheet" shall mean the consolidated
----------------------------
balance sheet of the Company and Metroquip dated as of February 28, 1998 as
adjusted on a mutually agreed upon basis between Buyer and Seller and attached
hereto as Schedule 1.1.18.
---------------
1.1.19 "Encumbrance" shall mean any claim, lien, pledge, option,
-----------
charge, easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
1.1.20 "Equipment" shall mean all of the furniture, fixtures,
---------
furnishings, rental fleet, machinery, automobiles, trucks, spare parts, tools,
supplies, equipment, telephones, office equipment, signs and other tangible
personal property owned by the Company and Metroquip and used in connection with
the Business.
1.1.21 "ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974, as amended.
1.1.22 "Escrow Agent" shall mean the entity designated by Buyer and
------------
Seller to act as escrow agent under the Escrow Agreement.
1.1.23 "Escrow Agreement" shall mean that certain Escrow Agreement,
----------------
dated as of the Closing Date, by and among Buyer, Seller and the Escrow Agent,
substantially in the form of Exhibit 8.8 attached hereto.
3
1.1.24 "Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as amended, and the rules and regulations promulgated thereunder.
1.1.25 "Facilities" shall mean the rental yards, stores, offices,
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maintenance and storage facilities, shops, warehouses, improvements and other
structures, together with all related fixtures and improvements, located at or
on the Leased Real Property.
1.1.26 "Financial Statements" shall mean the Year-End Financial
--------------------
Statements and the Interim Financial Statements.
1.1.27 "Holdback Amount" shall mean collectively the Short-term Hold-
---------------
back Amount and the General Holdback Amount.
1.1.28 "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improve-
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ments Act of 1976, as amended.
1.1.29 "Interim Financial Statements" shall mean the unaudited balance
----------------------------
and profit and loss statements of the Company and Metroquip for the two month
period ended February 28, 1998.
1.1.30 "Inventory" shall mean all of the Company's and Metroquip's
---------
inventory held for resale and all of the Company's and Metroquip's new repair or
replacement parts, supplies and packaging items and similar items with respect
to the Business, in each case wherever the same may be located.
1.1.31 "Leased Real Property" shall mean all real property listed on
--------------------
Schedule 4.8 leased by the Company or Metroquip and which is used in the conduct
------------
of the Business, including without limitation, all rights, easements and
privileges appertaining or relating thereto, all buildings, fixtures, and
improvements located thereon and all Facilities thereon, if any.
1.1.32 "Material Adverse Effect" or "Material Adverse Change" shall
----------------------- -----------------------
mean with respect to the Company, Metroquip, Business or the Assets any
significant and substantial adverse effect or change in the condition (financial
or other), business, results of operations, prospects, assets, liabilities,
customer, supplier or employee relations or operations of the Business or the
Assets or on the ability of Seller or the Company to consummate the transactions
contemplated hereby, or any event or condition which would, with the passage of
time, constitute a "Material Adverse Effect" or "Material Adverse Change."
1.1.33 "Parent" shall have the meaning specified in the first paragraph
------
of this Agreement.
4
1.1.34 "Permits" shall mean all licenses, permits, franchises,
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approvals, authorizations, consents or orders of, or filings with, any
governmental authority, whether foreign, federal, state or local, or any other
person, necessary for the past or present conduct of, or relating to the
operation of, the Business.
1.1.35 "Related Entity" shall mean any corporation, partnership, trust
--------------
or other organization in which the Company, Metroquip or Seller has a material
interest.
1.1.36 "Rental and Non-Rental Asset Listing" shall mean the asset
-----------------------------------
listing attached as Schedule 2.4.3 hereto, listing all Assets as of the
--------------
Effective Date.
1.1.37 "Representative" shall mean any officer, director, principal,
--------------
attorney, agent, employee or other representative.
1.1.38 "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, and the rules and regulations promulgated thereunder.
1.1.39 "Seller" shall have the meaning specified in the first paragraph
------
of this Agreement.
1.1.40 "Shareholder Net Worth" shall be as set forth in the Con-
---------------------
solidated December 31 Balance Sheet excluding the net carrying value or book
value of the Transferred Assets and other adjustments mutually agreed to.
1.1.41 "Shares" shall mean all of the issued and outstanding shares of
------
capital stock of the Company.
1.1.42 "Tax or Taxes" shall mean any federal, state, provincial, local,
------------
foreign, or other income, alternative, minimum, accumulated earnings, personal
holding company, franchise, capital stock, net worth, capital, profits, windfall
profits, gross receipts, value added, privilege, sales, use, goods and services,
excise, customs duties, transfer, conveyance, mortgage, registration, stamp,
documentary, recording, premium, severance, environmental (including taxes under
Section 59A of the Code), real property, personal property, transfer, ad
valorem, intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers' compensation,
payroll, health care, registration, withholding, estimated, or other similar
tax, duty, or other governmental charge or assessment or deficiencies thereof
(including all interest and penalties thereon and additions thereto, whether
disputed or not).
1.1.43 "Tax Return" shall mean any return, report, declaration, form,
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report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
5
1.1.44 "Year-End Financial Statements" shall mean the Balance Sheets
-----------------------------
and the related statement of operations for the fiscal years then ended.
1.2 Other Defined Terms. The following terms shall have the meanings
-------------------
defined for such terms in the Sections set forth below:
Actions................................ 4.13
Benefit Arrangement.................... 4.2.1.1
Cash Purchase Price.................... 2.2.1
CERCLA................................. 4.24.5
Claim.................................. 11.3.4
Claim Notice........................... 11.3.4
Closing................................ 3.1
Consultant............................. 6.3.1
Damages................................ 11.3.1
Debt................................... 2.2.1
Employee Plans......................... 4.22.1
Environmental Conditions............... 4.24.14
Environmental Laws..................... 4.24.5
Environmental Assessments.............. 6.3.1
ERISA Affiliate........................ 4.22.1
GAAP................................... 4.11
General Holdback Amount................ 2.3.1
Governmental Consents.................. 5.1.4
Hazardous Substance.................... 4.24.4
Metroquip Shares....................... 4.4.2
Multiemployer Plan..................... 4.22.1
NYSE................................... 2.2.1
Parent Common Stock.................... 2.2.1
PBGC................................... 4.22.1
Pension Plan........................... 4.22.1
Performance Purchase Price............. 2.2.2
Post-Closing Environmental Liability... 11.3.1
Proprietary Rights..................... 4.8.1
Purchase Price......................... 2.2.1
RCRA................................... 4.24.5
Release................................ 4.24.3
Rental Ready........................... 2.4.3(c)
Required Remediation................... 6.3.2
Retained Employees..................... 6.2
6
RSC Material Adverse Effect............ 5.2.3
SEC.................................... 5.2.6
SEC Documents.......................... 5.2.6
Short-term Holdback Amount............. 2.3.1
Stock Purchase Price................... 2.2.1
Tax Adjustment......................... 2.4.5
ARTICLE II
SALE AND TRANSFER OF SHARES
---------------------------
2.1 Transfer of Shares. Upon the terms and subject to the conditions
------------------
contained herein, at the Closing, Seller will sell, convey, transfer, assign,
and deliver to Buyer, and Buyer will acquire from Seller, the Shares, for the
consideration specified in Section 2.2 and subject to the Holdback Amount
specified in Section 2.3.
2.2 Purchase Price.
--------------
2.2.1 Purchase Price. At the Closing, upon the terms and subject to
--------------
the conditions set forth herein, Buyer shall pay to Seller in consideration for
the Shares, the aggregate amount of Fifty-Five Million Four Hundred Thousand
Seventeen and 90/100 Dollars ($55,400,017.90) less the principal amount of that
certain debt listed on Schedule 2.2.1 (the "Debt") (the "Purchase Price"), of
--------------
which Fifty-One Million Four Hundred Thousand and no/100 Dollars
($51,400,000.00) less the cash portion of the Debt (the "Cash Purchase Price")
shall be paid to Seller by wire transfer of immediately available funds to an
account designated by Seller and Four Million Seventeen and 90/100 Dollars
($4,000,017.90) shall be paid by delivery to Seller of 182,337 shares of Common
Stock, par value $.01 per share, of Parent (the "Parent Common Stock") less the
stock portion of the Debt (the "Stock Purchase Price"). The number of shares of
Parent Common Stock to be issued to Seller as part of the Stock Purchase Price
was determined by dividing Four Million Seventeen and 90/100 Dollars
($4,000,017.90) by the closing price of a share of Parent Common Stock on the
New York Stock Exchange ("NYSE") on January 20, 1998, which was $21.9375 per
share. The Purchase Price shall be subject to adjustment as set forth in
Section 2.4, and the Short-term Holdback Amount as described in Section 2.4,
which amounts shall be deducted first from the Cash Purchase Price, and subject
to an upward adjustment as set forth in Section 2.2.2 below.
2.2.2 Should the "performance targets" as described in the
Performance Incentive Agreement attached as Exhibit 8.7 be met, Buyer shall pay
Seller a performance incentive amount of up to Two Million One Hundred Thousand
Eleven and 00/100 Dollars ($2,100,011.00) in Parent Common Stock ("Performance
Purchase Price"). The maximum number of shares of Parent Common Stock to be
issued to Seller as part of the Performance Purchase Price shall be the result
of dividing Two Million One Hundred Thousand Eleven and no/100 Dollars
($2,100,011.00) by the closing price of a share of Parent Common Stock on the
NYSE on January 20, 1998, which was
7
$21.9375 per share; therefore, the maximum number of shares to be issued is
95,727. The Parent Common Stock representing the Performance Purchase Price will
vest and be issued, equally over a three-year period based on performance
targets as set forth in the Performance Incentive Agreement.
2.2.3 If between the date of this Agreement or the date of issuance
of Parent Common Stock pursuant to the Performance Incentive Agreement, the
outstanding shares of Parent Common Stock shall be changed into a different
number of shares or a different class by reason of any reclassification,
recapitalization, split-up, stock dividend, stock combination, exchange of
shares or readjustment, the Performance Purchase Price shares shall be
proportionately adjusted.
2.2.4 No fractional shares of Parent Common Stock shall be issued,
but in lieu thereof Seller who would otherwise be entitled to receive a fraction
of a share of Parent Common Stock shall receive from Buyer an amount of cash
equal to the product of the fraction of a share of Parent Common Stock to which
such holder would otherwise be entitled, multiplied by $21.9375.
2.3 Holdback and Escrow Agreement.
-----------------------------
2.3.1 The Holdback Amount shall consist of cash and Parent Common
Stock in the amount of $5,075,000. Of such Holdback Amount in cash, (i) $0 shall
be allocated to the resolution of the Tax Adjustment pursuant to Section 2.4.5;
(ii) $25,000 shall be allocated to the resolution of the Equipment adjustment
pursuant to Section 2.4.3; (iii) $0 shall be allocated to the resolution of the
Inventory adjustment pursuant to Section 2.4.4; (iv) $50,000 shall be allocated
to the resolution of the Required Remediation pursuant to Section 6.3;
(collectively items (i) - (iv) shall be referred to as the "Short-term Holdback
Amount"), and $5,000,000.00, consisting of $2,425,766 in cash and 117,344 shares
of Parent Common Stock, will be allocated to any other obligations under this
Agreement ("General Holdback Amount"). Buyer shall remit to Seller the Short-
term Holdback Amount, except for the amount allocated to the Required
Remediation, thirty (30) days after the Closing Date, less any amounts necessary
to cover undisputed claims or unresolved adjustments pursuant to Section 2.4
hereof.
The General Holdback Amount shall be placed in escrow subject to the
terms and conditions set forth in the Escrow Agreement attached hereto as
Exhibit 8.8. Notwithstanding anything in this Agreement to the contrary, if any
portion of the Holdback Amount specified in this Section 2.3.1 proves to be
insufficient for resolution of the matter subject to adjustment therein, Buyer
may, in its sole discretion, elect to transfer a portion of the Holdback Amount
allocated to another matter to resolve such deficiency. Seller shall be
entitled to all stock and cash dividends and interest earned on investments held
in escrow and voting rights on the Parent Common Stock. In the event of any
disagreement between Buyer and Seller regarding the dollar amount of any such
adjustment, Buyer and Seller shall submit such dispute to a nationally
recognized accounting firm for resolution pursuant to Section 2.4.1 (in the case
of a disagreement relating to a Purchase Price
8
adjustment) or to a third-party arbitrator for binding arbitration pursuant to
Section 12.13 of this Agreement for indemnification claims.
2.3.2 Buyer and the Seller shall enter into the Escrow Agreement, in
substantially the form attached hereto as Exhibit 8.8, pursuant to which Buyer
shall deposit with the Escrow Agent the General Holdback Amount. All costs of
the escrow shall be paid one-half by Buyer, on the one hand, and one-half by the
Seller, on the other hand, all as further provided in the Escrow Agreement.
2.4 Purchase Price Adjustments.
--------------------------
2.4.1 Closing Balance Sheet. Seller has delivered to Buyer the
---------------------
Consolidated December 31 Balance Sheet. On or before the Closing Date, the
Seller shall deliver to Buyer the Effective Date Balance Sheet. The Effective
Date Balance Sheet will become final and binding on the parties unless within
ten business days following delivery of the Effective Date Balance Sheet to
Buyer, the Buyer notifies Seller in writing that the Buyer objects thereto,
which objection shall be solely on the basis of mathematical errors in the
calculation thereof or the failure to present the Company's financial position
consistent with mutually previously agreed upon adjustments. If the Buyer so
objects, Buyer and the Seller shall use their best efforts to resolve any
differences with respect to the Effective Date Balance Sheet. If, within ten
business days following such notice by the Buyer, such differences have been
resolved, the Effective Date Balance Sheet, as revised to reflect changes agreed
to by Buyer and the Seller, shall be final, binding and conclusive. If by such
date such differences have not been resolved, then the Seller and Buyer shall
jointly select a nationally recognized accounting firm not currently engaged by
Buyer, Seller or any Affiliate of either of them, to perform a review of the
Effective Date Balance Sheet. Such reviewing firm's conclusions shall be final,
binding and conclusive as to such matters. Seller and Buyer will share equally
the fees and expenses of such review.
2.4.2 Shareholder Net Worth Adjustment. At Closing, the Purchase
--------------------------------
Price shall be subject to a dollar for dollar reduction if and to the extent
that the Shareholder Net Worth set forth in the Effective Date Balance Sheet is
less than the Consolidated December 31 Shareholder Net Worth as adjusted. The
amount of the Shareholder Net Worth adjustment is set forth on Schedule 2.4.2.
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2.4.3 Rental Ready, Missing or Non-Operating Equipment Adjustment.
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(a) The Rental and Non-Rental Asset Listing, attached as Schedule
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2.4.3, sets forth the asset description, make, model, original cost and book
-----
value on the Effective Date of all Equipment. On or prior to the 10th business
day following the Closing Date, personnel of Buyer and Seller jointly shall
complete a physical inventory of each item of Equipment comprising Schedule
--------
2.4.3, including by visiting renters' locations as necessary to inspect such
-----
equipment using
9
Metroquip's equipment file as a basis for the inventory. Based
upon such inventory, Buyer in consultation with Seller will develop a schedule
of reconciling such inventory to Schedule 2.4.3. Within thirty (30) calendar
--------------
days after the Closing, the Purchase Price shall be adjusted. To determine the
adjustment of the Purchase Price, the aggregate book value of missing or
inoperative equipment will be divided by the aggregate original cost of such
equipment and the resulting factor applied to the aggregate original cost of
missing or inoperative equipment in excess of $35,000.
(b) In the event of a Purchase Price reduction under the foregoing
provisions, Buyer shall be entitled to a prompt distribution of the amount of
such reduction from the Holdback Amount. Any disputes as to the physical count
or Rental Readiness of any item of equipment will, if possible, be resolved
while the physical inventory of such equipment is being taken by Buyer and
Seller. Any disputes regarding the foregoing not resolved by the 30th business
day following the Closing Date will be separately listed and settled pursuant to
the procedures set forth in Section 2.4 hereof, and the Buyer and Seller will
attempt to resolve any dispute no later than the 45th day following the Closing.
(c) Within thirty (30) calendar days after the Closing, the
Purchase Price shall be reduced by the aggregate cost necessary to render all
items of Equipment listed on Schedule 2.4.3 Rental Ready. For purposes of this
--------------
Agreement, an item of equipment is "Rental Ready" only if it is free of deferred
maintenance and it does not require any repairs in excess of $100 per item for
items with a cost of less than $5,000 or $200 per item for items with a cost
greater than or equal to $5,000, subject to a cumulative $25,000 deductible for
repairs in excess of these amounts. Repairs shall not include cosmetic matters
(e.g., paint).
2.4.4 Inventory Adjustment. The Cash Purchase Price shall be reduced
--------------------
within thirty (30) calendar days of the Closing, on a dollar-for-dollar basis
pursuant to the procedures set forth below, by the amount, if any, by which the
cost of Inventory as of the Effective Date is less than the cost stated on the
Consolidated December 31 Balance Sheet, subject to a deductible of $15,000. In
the event of a Purchase Price reduction as contemplated hereby, Buyer shall be
entitled to a prompt distribution of the amount of such reduction from the
Short-term Holdback Amount. Any disputes as to the physical count, condition,
salability or obsolescence of any item of Inventory will, if possible, be
resolved while such physical inventory is being taken. Any disputes regarding
the foregoing not resolved by the 30th business day following the Closing Date
will be separately listed and settled pursuant to the procedures set forth in
Section 2.4 hereof, and the Buyer and Seller will attempt to resolve any dispute
no later than the 45th calendar day following the Closing.
2.4.5 Tax Adjustment. The Holdback Amount shall include an amount
--------------
sufficient to satisfy all liabilities of the Company and Metroquip relating to
Taxes for each tax year of the Company and Metroquip ending on or prior to the
Effective Date that is not reflected and accounted for on the Consolidated
December 31 Balance Sheet or Effective Balance Sheet (the "Tax
10
Adjustment"). The intent of this provision is that Seller shall bear all
economic responsibility for Taxes relating to pre-Effective Date periods by
accruing a sufficient amount to pay such Taxes.
2.4.6 Transfer Taxes and Fees. Seller shall be responsible for any
-----------------------
documentary and transfer taxes and any sales, use or other taxes imposed by
reason of the transfer of Shares provided hereunder and any deficiency, interest
or penalty asserted with respect thereto. Seller shall pay the fees and costs of
recording or filing all UCC termination statements and other releases of
Encumbrances.
2.4.7 Closing of Books; Benefits and Risks of Ownership. The
-------------------------------------------------
transactions contemplated by this Agreement shall be deemed effective as of the
Effective Date, and all profits and losses of the Company and Metroquip from and
after March 1, 1998, shall be solely for the account of, and inure solely to the
benefit or detriment of, Buyer, except as otherwise set forth in this Agreement.
The accounting books and records of the Company and Metroquip will be closed as
of the close of business on February 28, 1998. Seller shall operate the Company
and Metroquip subject to and pursuant to the requirements of this Agreement by,
from and after March 1, 1998, until such time as this Agreement is terminated or
closed. Without the consent of Buyer, until the Closing Date, the Company and
Metroquip or Seller shall not repurchase, sell or transfer any Shares, make or
declare any dividends or make other distributions to shareholders or otherwise
take any action restricted under this Agreement. If this transaction does not
close for any reason on or prior to April 15, 1998, and is not extended by
agreement of the parties, then (i) the Buyer shall pay to Seller a fee of
$10,000 provided that the failure to close the transaction is not due to
Seller's failure to perform his obligations under the Agreement and (ii) either
(A) the Company and Metroquip shall pay within ten days to Buyer net after tax
profits accumulated during the period from March 1, 1998 to the date this
Agreement is terminated or (B) the Buyer shall within ten days pay to the
Company and Metroquip all losses accumulated (offset by any non-refundable
contributions made by Buyer to the Company and Metroquip) by the Company and
Metroquip during the period from March 1, 1998 to the date that the Closing is
deemed not to occur.
2.4.8 Employment and Non-Competition Agreement. Buyer shall enter
----------------------------------------
into (i) an Employment and Non-Competition Agreement with Seller, in
substantially the form attached hereto as Exhibit 8.9.
2.4.9 Hayden and Nicolay Payments. Contemporaneous with the Closing
---------------------------
of the transactions contemplated by this Agreement, Company shall have paid and
satisfied any and all obligations to X. X. Xxxxxx, Xx. and Metroquip shall have
satisfied any and all obligations to Xxxx Xxxxxxx as set forth in Schedule
--------
2.2.1.
-----
ARTICLE III
CLOSING
-------
11
3.1 Closing. The Closing of the transactions contemplated herein (the
-------
"Closing") shall be held on the Closing Date at a time and place as the parties
shall mutually agree.
3.2 Conveyances at Closing
----------------------
3.2.1 Seller's Delivery Obligations. To effect the sale and transfer
-----------------------------
referred to in Section 2.1 hereof, Seller will, at the Closing, execute and
deliver to Buyer:
3.2.1.1 certificates evidencing the Shares, free and clear of
any Encumbrances of any nature whatsoever, duly endorsed in blank for transfer
or accompanied by stock powers duly executed in blank;
3.2.1.2 all Ancillary Agreements required to be executed by
Seller;
3.2.1.3 all certificates, opinions of counsel and other
documents described in Article VIII; and
3.2.1.4 all Permits and any other third party consents required
for the valid transfer of the Shares as contemplated by this Agreement, or for
the continued operation of the Business following such transfer.
3.2.1.5 evidence that the Metroquip shares are free and clear
of any Encumbrances of any nature whatsoever.
3.2.2 Buyer's Delivery Obligations. To effect the sale and transfer
----------------------------
referred to in Section 2.1 hereof, Buyer will, at the Closing, execute and
deliver to Seller:
3.2.2.1 all Ancillary Agreements required to be executed by
Buyer;
3.2.2.2 all certificates, opinions of counsel and other
documents described in Article VII;
3.2.2.3 the Purchase Price subject to the Holdback Amount; and
3.2.2.4 the General Holdback to the Escrow Agent, (provided,
however, Buyer may deliver the Stock Purchase Price up to ten days after
Closing).
12
3.2.3 Form of Instruments. To the extent that a form of any document
-------------------
to be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to the recipient.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
--------------------------------------------------------
Seller and the Company hereby, jointly and severally, represent and warrant
to Buyer as follows, which representations and warranties are, as of the date
hereof, and will be, as of the Closing Date, true and correct.
4.1 Organization of the Company
---------------------------
4.1.1 The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota. Copies of the
Articles of Incorporation and Bylaws of the Company, and all amendments thereto,
heretofore delivered to Buyer are accurate and complete as of the date hereof.
The Company is not qualified or licensed to do business as a foreign corporation
in any state other than Minnesota. Except as set forth in Schedule 4.1, the
------------
Company has no subsidiaries and no direct or indirect stock or other equity or
partnership, joint venture or other entity which engages in the equipment rental
business.
4.1.2 Metroquip is a corporation duly organized, validly existing and
in good standing under the laws of the State of Minnesota. Copies of the
Articles of Incorporation and Bylaws of Metroquip, and all amendments thereto,
heretofore delivered to Buyer are accurate and complete as of the date hereof.
Metroquip is duly qualified or licensed to do business as a foreign corporation
in good standing in the jurisdictions set forth on Schedule 4.1, which are the
------------
only jurisdictions in which ownership of property or the conduct of its business
requires such qualification. Except as set forth in Schedule 4.1, Metroquip has
------------
no subsidiaries and no direct or indirect stock or other equity or ownership
interest (whether controlling or not) in any corporation, association,
partnership, joint venture or other entity which engages in the equipment rental
business.
4.2 Authorization
-------------
4.2.1 Each of Seller and the Company has full power and authority
(corporate or other) to enter into this Agreement and the Ancillary Agreements
to which he or it is a party and to carry out the transactions contemplated
hereby and thereby, and each of the Board of Directors of the Company and Seller
has taken all action required by law, its charter documents, as the case may be,
or otherwise, to be taken by it to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements, as the case may be,
and the consummation of the transactions contemplated hereby and thereby. This
Agreement and the Ancillary Agreements, as
13
the case may be, (following the execution and delivery by Buyer and Parent) are
the legal, valid and binding obligations of Seller and the Company, enforceable
against each of them in accordance with their respective terms.
4.2.2 The Seller possesses the legal capacity to execute and deliver
this Agreement and each Ancillary Agreement to which he is a party, to perform
his obligations thereunder, and to consummate the transactions contemplated
hereby and thereby. Except as set forth on Schedule 4.2, the Seller is not
------------
subject to or obligated under, any provision of any agreement, arrangement or
understanding or any law, regulation, order, judgment or decree, which would be
breached or violated by the execution, delivery, performance of this Agreement
and the consummation by the Seller of the transactions contemplated hereby or
which would result in any Encumbrance on the Assets of the Company or Metroquip.
Except as set forth on Schedule 4.2, no authorization, consent or approval to or
------------
filing with, any public body, court or authority is necessary on the part of the
Seller for the consummation by the Seller of the transaction contemplated by
this Agreement and each Ancillary Agreement and each other document to which
Seller is a party. At the Closing, (following the execution and delivery by
Buyer and Parent) each agreement and document delivered by Seller will be a
legal, valid, and binding obligation of the Seller enforceable against him in
accordance with its terms. The Seller owns 100% of the Shares, in the amounts
set forth on Schedule 4.2, and except as set forth on Schedule 4.2 the capital
------------ ------------
stock is free and clear of all Encumbrances, and there are no warrants, options
or rights in any third party to acquire any capital stock of Company.
4.3 No Violation. None of the execution, delivery and performance of this
------------
Agreement and the Ancillary Agreements nor the consummation of the transactions
contemplated hereby and thereby will (i) violate any provision of the Articles
of Incorporation or Bylaws of the Company or Metroquip, (ii) violate, result in
a breach of, conflict with, or constitute a default (or an event which, with the
giving of notice or lapse of time or both, would constitute a default) under,
require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of any note,
bond, mortgage, or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which Seller, Company or
Metroquip is a party or by which any of the Shares or any of the assets or
properties of the Company, Metroquip or Seller are bound or affected except as
set forth on Schedule 4.3, (iii) result in the creation or imposition of any
------------
Encumbrance upon any of the Shares or any property or Assets of the Company,
Metroquip or Seller under, any agreement or commitment to which the Company,
Metroquip or Seller is a party or by which the Company, Metroquip or Seller is
bound or affected, or to which the property of the Company, Metroquip or Seller
is subject, or (iv) violate, conflict with or result in the breach of (or cause
an event which could have a Material Adverse Effect as a result of) any statute
or law or any judgment, decree, order, regulation or rule of any court or
governmental authority to which Seller, the Company, Metroquip, the Business or
any of the properties or Assets of any of the foregoing is subject. Except as
set forth on Schedule 4.3, no action, consent, approval or authorization by or
------------
filing with any person or entity, including, without limitation, any
governmental authority, is required in connection with the execution, delivery
and performance by
14
each of the Seller and the Company of this Agreement and the Ancillary
Agreements to which he or it is a party, or the consummation by Seller and the
Company of the transactions respectively contemplated by each of them herein and
therein.
4.4 Capitalization
--------------
4.4.1 (a) The authorized equity securities of the Company consist
solely of 1000 shares of common stock, no par value, of which 500 shares are
issued and outstanding and constitute the Shares. Seller is and will be on the
Closing Date the record and beneficial owner and holder of all of the issued and
outstanding Shares as set forth on Schedule 4.4 (which schedule also sets forth
------------
the address of Seller and the certificate numbers of the certificates
representing the Shares), free and clear of all Encumbrances (other than a
legend indicating only that the Shares have not been registered under the
Securities Act.
(b) There are no other shares of capital stock of the Company
issued and outstanding and no shares of treasury stock. All Shares are validly
issued, fully paid and nonassessable. None of the Shares was issued in violation
of any preemptive rights. There are no outstanding (i) securities convertible
into or exchangeable or exercisable for any of the Company's capital stock; (ii)
options, warrants, calls or other rights, including, without limitation, rights
to demand registration or to sell in connection with any registration by the
Company under the Securities Act, with respect to the issued capital stock of
the Company, or to purchase or subscribe to capital stock of the Company or
securities convertible into or exchangeable or exercisable for capital stock of
the Company; (iii) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale, transfer, and/or
assignment of any capital stock of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights; or (iv) Shares
pledged as collateral to secure any agreement or obligation. There are no voting
trust agreements or other contracts, agreements, arrangements, commitments,
plans, proxies or understanding restricting or otherwise relating to conveyance,
voting or dividend rights with respect to the Shares. Upon consummation of the
transactions contemplated by this Agreement and registration of the Shares in
the name of Buyer in the stock records of the Company, the Buyer will own all of
the issued and outstanding equity securities of Company of every sort
whatsoever, free and clear of all Encumbrances.
4.4.2 (a) The authorized equity securities of Metroquip consist
solely of 250,000 shares of common stock, par value $.10 per share, of which
57,401 shares are issued and outstanding ("Metroquip Shares"). Company is and
will be on the Closing Date the record and beneficial owner and holder of all of
the issued and outstanding stock as set forth on Schedule 4.4 (which schedule
------------
also sets forth the address of Company and the certificate numbers of the
certificates representing the Metroquip Shares), free and clear of all
Encumbrances (other than a legend indicating only that the shares have not been
registered under the Securities Act and other than as set forth on Schedule
--------
4.2).
---
15
(b) There are no other shares of capital stock of Metroquip
issued and outstanding and no shares of treasury stock. The Metroquip Shares are
validly issued, fully paid and nonassessable. None of the Metroquip Shares was
issued in violation of any preemptive rights. There are no outstanding (i)
securities convertible into or exchangeable or exercisable for any of
Metroquip's capital stock; (ii) options, warrants, calls or other rights,
including, without limitation, rights to demand registration or to sell in
connection with any registration by Metroquip under the Securities Act, with
respect to the issued capital stock of Metroquip, or to purchase or subscribe to
capital stock of Metroquip or securities convertible into or exchangeable or
exercisable for capital stock of Metroquip; (iii) except as set forth in
Schedule 4.2, contracts, commitments, agreements, understandings or arrangements
------------
of any kind relating to the issuance, sale, transfer, and/or assignment of any
capital stock of Metroquip, any such convertible or exchangeable securities or
any such options, warrants or rights; or (iv) shares pledged as collateral to
secure any agreement or obligation. There are no voting trust agreements or
other contracts, agreements, arrangements, commitments, plans, proxies or
understanding restricting or otherwise relating to conveyance, voting or
dividend rights with respect to the Metroquip Shares.
4.5 No Changes to the Assets. Since the Consolidated December 31 Balance
------------------------
Sheet Date:
4.5.1 there has been no actual or threatened adverse change in the
financial condition or results of operation of the Company, Metroquip, the
Business or the Assets or any event, condition or state of facts, in either case
that is, or would result in a Material Adverse Change in the Company, Assets or
the Business or the prospects for the Business, including without limitation the
loss of any material customers;
4.5.2 Except in the ordinary course, there has not been any sale or
other disposition of any Assets, or any Encumbrance placed on the Assets;
4.5.3 Seller has operated the Company, Metroquip and Business in the
ordinary course consistent with Company's and Metroquip's past practice so as to
preserve the Business intact, to keep available to the Business the services of
Company's and Metroquip's employees, and to preserve the Business and the
goodwill of Company's and Metroquip's suppliers, customers, distributors and
others having business relations with them;
4.5.4 Except as set forth on Schedule 4.5.4, neither Company nor
--------------
Metroquip has purchased, or entered into any agreement to purchase (i) any item
of Inventory with a cost in excess of $10,000, or (ii) any item of Equipment
with a cost in excess of $20,000, in each case without the consent of Buyer; and
16
4.5.5 Except as set forth on Schedule 4.5.5 neither Company nor
--------------
Metroquip has changed its accounting methods or practices (including any change
in depreciation or amortization policies or rates) or revalued any of its
assets.
4.6 Related Entities.
----------------
4.6.1 Schedule 4.6(a) sets forth a complete and accurate list of all
---------------
of the Related Entities, all of which are, directly or indirectly, wholly-owned
by the Company, Metroquip, Seller, or some combination thereof. Schedule 4.6(a)
---------------
also sets forth the jurisdiction of incorporation of each of the Related
Entities, each jurisdiction in which each such Related Entity is qualified to do
business, the number of shares of such Related Entities outstanding, and the
ownership thereof.
4.6.2 Schedule 4.6(b) sets forth a list of all agreements among the
---------------
Company, Metroquip, Seller, and the Related Entities.
4.7 Equipment and Other Assets; Absence of Encumbrances. (a) The Rental
---------------------------------------------------
and Non-Rental Asset Listing attached as Schedule 2.4.3 sets forth the asset
--------------
description, make, model, original cost and net book value of all Equipment
which, on the Effective Date, will be fully operable, accounted for and Rental
Ready. (b) Except as set forth in Schedule 4.7 all of the Assets are owned by
------------
the Company or Metroquip free and clear of all Encumbrances, other than (i)
Encumbrances reflected or reserved against on the Consolidated December 31
Balance Sheet or (ii) Encumbrances that do not materially affect the value of
the Assets, the Company's or Metroquip's ability to conduct the Business.
4.8 Facilities
----------
4.8.1 Leased Real Property. Except as set forth on Schedule 4.8,
-------------------- ------------
neither the Company nor Metroquip own any real property. Schedule 4.8 sets
------------
forth a complete and accurate list and description of all real property leased
by the Company, Metroquip or Seller and used in the Business. The Seller and
the Company have delivered to Buyer an accurate copy of the Leases covering the
Leased Real Property. Neither the Company, Metroquip nor, to the best of
Seller's knowledge, any lessor under the Leases, is in material breach or
default of its obligations thereunder. The Company and Metroquip enjoy peaceful
and undisturbed possession of the Leased Real Property.
To the best of Seller's and the Company's knowledge, there are no
leases, subleases, licenses, occupancy agreements, options, rights, concessions
or other agreements or arrangements, written or oral, granting to any person the
right to purchase, use or occupy the Facilities or any portion thereof. The
Facilities are supplied with utilities and other services necessary for the
operation of the Business.
17
4.8.2 Improvements, Fixtures and Equipment. The Facilities and the
------------------------------------
improvements thereon, including without limitation all Equipment (including all
fixtures) and other tangible assets owned, leased or used by the Company or
Metroquip at the Facilities are (i) insured to the extent required by the
Company or Metroquip under third party leases and in a manner customary in the
industry, (ii) to the best of Seller's knowledge structurally sound with no
known material defects, (iii) in good operating condition and repair, subject to
ordinary wear and tear, (iv) not in need of maintenance or repair except for
ordinary routine maintenance and repair, the cost of which would not be
material, (v) sufficient for the operation of the Business as presently
conducted and (vi) as to their use by the Company and Metroquip, in conformity
with all applicable laws, ordinances, orders, regulations and other requirements
relating thereto currently in effect. None of the improvements is subject to
any commitment or other arrangement for their sale or use by any Affiliate of
the Company, Metroquip or to the best knowledge of Seller and Company, third
parties.
4.8.3 Conformity. All Facilities have received all required
----------
approvals of governmental authorities (including without limitation, Permits and
a certificate of occupancy or other similar certificate permitting lawful
occupancy of the Facilities) required in connection with Metroquip's operation
thereof. The Facilities are (and have been) operated and maintained by Metroquip
in accordance with applicable laws, rules, regulations and state, county,
municipal or other local ordinances, and conform to all other conditions
necessary for the lawful conduct of the Business as currently conducted at each
such Facility.
4.9 Permits and Consents. The Company or Metroquip has all Permits
--------------------
required to conduct the Business, except where the failure to obtain such
Permits would not have a Material Adverse Effect on the Assets or the Business.
All Permits of the Company or Metroquip related to the Business are valid and in
full force and effect and are listed on Schedule 4.9.
------------
4.10 Contracts and Commitments
-------------------------
4.10.1 Contracts. Schedule 4.10 sets forth a complete and accurate
--------- -------------
list of all Contracts of the following categories:
4.10.1.1 Contracts not made in the ordinary course of the
Company's or Metroquip's conduct of the Business;
4.10.1.2 Employment contracts, bonus agreements and severance
agreements;
4.10.1.3 Supply, purchase, distribution, franchise, license,
sales or commission contracts related to the Business;
18
4.10.1.4 Contracts involving expenditures or liabilities,
actual or potential, in excess of $5,000 or otherwise material to the Business,
and not cancelable (without liability) within 30 calendar days;
4.10.1.5 Contracts or commitments relating to commission
arrangements with others;
4.10.1.6 Promissory notes, loans, agreements, evidences of
indebtedness, letters of credit, guarantees, or other instruments relating to an
obligation to pay money, whether the Company or Metroquip shall be the borrower,
lender or guarantor thereunder or whereby any Equipment or Inventory are pledged
(excluding credit provided by the Company or Metroquip in the ordinary course of
the Business to its customers);
4.10.1.7 Leases of real and personal property not cancelable
(without liability) within 30 calendar days; and
4.10.1.8 Contracts containing covenants limiting the freedom of
the Company or Metroquip or any officer, director or shareholder of the Company
or Metroquip to engage in any line of business or compete with any person.
Seller has delivered or made available to Buyer true, correct, and complete
copies of all of the Contracts listed on Schedule 4.10, including all amendments
-------------
and supplements thereto.
4.10.2 Absence of Breaches or Defaults. All of the Contracts are
-------------------------------
valid and in full force and effect. The Company or Metroquip has duly performed
all of its obligations under the Contracts to the extent those obligations to
perform have accrued, and no violation of, or default or breach under any
Contracts by the Company or Metroquip or to the best knowledge of the Seller and
Company any other party has occurred and neither the Company or Metroquip nor to
the best knowledge of Seller and Company has any other party repudiated any
provisions thereof. All of the Contracts will be enforceable by the Company or
Metroquip, as the case may be, after the Closing to the same extent as if the
transactions contemplated by this Agreement had not been consummated.
4.11 Financial Statements. Attached hereto as Schedule 4.11 are the
-------------------- -------------
Financial Statements of the Company and Metroquip. The Financial Statements (a)
are true, correct and complete, (b) are in accordance with the underlying books
and records of the Company and Metroquip, (c) have been prepared in accordance
with generally accepted accounting principals ("GAAP") consistently applied
throughout the periods covered thereby (except as otherwise described in
Schedule 4.11) and (d) fairly and accurately present the assets, liabilities
-------------
(including all reserves) and financial position of the Business as of the
respective dates thereof and the results of operations and changes in cash flows
for the periods then ended. At the respective dates of the Financial Statements,
there were no liabilities of the Company or Metroquip, which, in accordance with
GAAP, should have been shown
19
or reflected in the Financial Statements or the notes thereto, which are not
shown or reflected in the Financial Statements or the notes thereto.
4.12 Books and Records. The Company and Metroquip have made and kept
-----------------
(and given Buyer access to) Books and Records and accounts, which, in reasonable
detail, accurately and fairly reflect the activities of the Company. The minute
books of the Company and Metroquip previously delivered to Buyer accurately and
adequately reflect all action previously taken by the shareholders, board of
directors and committees of the board of directors of the Company and Metroquip.
The stock book records of the Company and Metroquip previously delivered to
Buyer are true, correct, and complete, and accurately reflect all transactions
effected in the Company's and Metroquip's stock through and including the date
hereof.
4.13 Litigation. Except as set forth on Schedule 4.13, there is no
---------- -------------
action, order, writ, injunction, judgment or decree outstanding or any claim,
suit, litigation, proceeding, labor dispute, arbitral action, governmental audit
or investigation (collectively, "Actions") pending, or to the best of the
Company's or Seller's knowledge, threatened or anticipated (a) against, related
to or affecting the Company, Metroquip or the Business or (b) seeking to delay,
limit or enjoin the transactions contemplated by this Agreement. Neither the
Company nor Metroquip is in default with respect to or subject to any judgment,
order, writ, injunction or decree of any court or governmental agency, and there
are no unsatisfied judgments against the Company, Metroquip or the Business.
4.14 Labor Matters. Neither the Company nor Metroquip is a party to any
-------------
labor agreement with respect to its employees with any labor organization,
union, group or association and there are no employee unions (nor any other
similar labor or employee organizations) under local statutes, custom or
practice which represent the Company's or Metroquip's employees. In the last
five years, neither the Company nor Metroquip has experienced any attempt by
organized labor or its representatives to make the Company and Metroquip conform
to demands of organized labor relating to its employees or to enter into a
binding agreement with organized labor that would cover the employees of the
Company or Metroquip.
4.15 Compliance with Law. Except as set forth on Schedule 4.15, the
------------------- -------------
Company, Metroquip, and the conduct of the Business and the operation of the
Facilities by Metroquip have not violated and are in compliance with all laws,
statutes, ordinances, regulations, rules and orders of any foreign, federal,
state or local government and any other governmental department or agency, and
any judgment, decision, decree or order of any court or governmental agency,
department or authority, including without limitation Environmental Laws,
relating to the Assets, Facilities or Business or operations of the Company or
Metroquip and the conduct of the Business and the operation of the Facilities by
Metroquip are in conformity with all energy, public utility, zoning, building
and health codes, regulations and ordinances, the Americans with Disabilities
Act, ERISA, OSHA, and Environmental Laws, and all other foreign, federal, state,
and local governmental and regulatory requirements, except where the failure to
conform would not have a Material Adverse Effect, individually or in the
aggregate, on Metroquip, the Business or the Assets. Neither the
20
Company nor Metroquip has received any notice to the effect that, or otherwise
been advised that, it is not in compliance with any such statutes, regulations,
rules, judgments, decrees, orders, ordinances, or other laws, and neither the
Company nor Metroquip has any reason to anticipate that any existing
circumstances are likely to result in violations of any of the foregoing.
4.16 Brokers. Seller and Company represent that except for the
-------
engagement of Xxxxxxxxx, Agio, Xxxxx, neither they nor Metroquip have employed
or made any agreement with any other broker, finder, or similar agent or any
person or firm which will result in an obligation on the part of the Seller,
Company, Metroquip or Buyer to pay any finder's fee, brokerage fees, or
commission, or similar payment in connection with the transactions contemplated
hereby.
4.17 No Other Agreements to Sell the Company. Seller has no commitments
---------------------------------------
or legal obligations, absolute or contingent, to effect a sale of any of the
Shares or the Assets or to effect any merger, consolidation, liquidation,
dissolution, or other reorganization of the Company or Metroquip.
4.18 Proprietary Rights
------------------
4.18.1 Proprietary Rights. Schedule 4.18 lists all of the
------------------ -------------
Company's or Metroquip's federal, state, and foreign registrations of
trademarks, service marks, and other marks, trade names or other trade rights,
and all pending applications for any such registrations, all other trademarks
and other marks, trade names and other trade rights or in which the Company or
Metroquip has any interest whatsoever, and all other trade secrets and other
proprietary rights, whether or not registered, and all computer software created
or used by or on behalf of the Company or Metroquip, in each case relating to
the Business (collectively, "Proprietary Rights"). The Proprietary Rights listed
in Schedule 4.18 are all those used by the Company or Metroquip in connection
-------------
with the Business.
4.18.2 Royalties and Licenses. No person has a right to receive
----------------------
a royalty or similar payment in respect of any Proprietary Rights. Except as set
forth in Schedule 4.18 neither the Company nor Metroquip has any licenses
-------------
granted, sold, or otherwise transferred by or to it or other agreements to which
it is a party, relating in whole or in part to any of the Proprietary Rights.
4.18.3 Ownership and Protection of Proprietary Rights. Except as
----------------------------------------------
set forth in Schedule 4.18, the Company or Metroquip owns or licenses, and has
-------------
the sole right to use or (if it so elects) to sublicense each of the Proprietary
Rights. None of the Proprietary Rights is involved in any pending or to the
best of Company's or Seller's knowledge, threatened litigation. Neither the
Company nor Metroquip has received any notice of invalidity or infringement of
any rights of others with respect to such Proprietary Rights. The Company has
taken all reasonable and prudent steps to protect the Proprietary Rights from
infringement by any other firm, corporation, association, or person. To the
best knowledge of Seller and the Company, the Company's and Metroquip's use of
the Proprietary Rights is not infringing upon or otherwise violating the rights
of any third party in
21
or to such Proprietary Rights, nor has such infringement been alleged by any
third party. All of the Proprietary Rights are valid and enforceable rights of
the Company and Metroquip and will not cease to be valid and in full force and
effect by reason of the execution, delivery, and performance of this Agreement
or the consummation of the transactions contemplated by this Agreement.
4.19 Tax Matters.
-----------
4.19.1 Filing of Tax Returns, Payment of Taxes. Except as set forth
---------------------------------------
in Schedule 4.19.1 , the Company and Metroquip have filed all Tax Returns that
----------------
the Company or Metroquip was required to file prior to the date hereof. All such
Tax Returns were correct and complete and were prepared and filed in accordance
with applicable law. Except as set forth in Schedule 4.19.1, all Taxes owed by
---------------
or with respect to the Company (whether or not shown on any Tax Return) with
respect to Tax Returns the due date of which preceded the date hereof have been
paid. Except as set forth in 4.19.1, all other Taxes due and payable by the
------
Company or Metroquip with respect to periods ending on or as of the Effective
Date or in respect of transactions entered into or any state of facts existing
as of the date of the Effective Date (whether or not a Tax Return is due on such
date) have been or will be paid on or before the date of the Effective Date or
have been or will be accrued on or before the date of the Effective Date as set
forth in Section 2.4.5. For purposes of the preceding sentence, in determining
the amount of Taxes due and payable by the Company with respect to periods
ending on or as of the Effective Date or in respect of transactions entered into
or any state of facts existing as of the Effective Date, the date of the
Effective Date shall be deemed to be the last day of any applicable tax period.
Except as set forth in Schedule 4.19.1, all Tax Returns the due date of which
---------------
(determined without extensions) shall be on or after the date hereof but on or
before the date of the Effective Date will be correct and complete and filed in
accordance with applicable law.
4.19.2 Taxing Jurisdictions. Schedule 4.19.2 lists (i) all
-------------------- ---------------
countries, states, cities, or other jurisdictions in which the Company or
Metroquip is currently subject to an obligation to file Tax Returns or to
collect sales or use Taxes, (ii) all elections for income Taxes made by the
Company or Metroquip that are currently in force or to which the Company or
Metroquip is bound, and (iii) (x) all countries, states, cities, or other
jurisdictions in which the Company or Metroquip is a beneficiary of any real
or personal property Tax exemptions or concessions, reduced rates, or Tax
credits, (y) the annual benefit of each such item, and (z) the terms
governing expiration or phase-out of each such item.
4.19.3 General Tax matters. Except as set forth in Schedule 4.19.3
------------------- ---------------
(which sets forth the open taxable periods of the Company and Metroquip for
sales, payroll, personal property, and federal and state income taxes), with
respect to each taxable period for the Company or Metroquip ending on or prior
to the date hereof or as of the Effective Date (or as of such other date as set
forth below), (i) either such taxable period has been audited by the relevant
taxing authority or the time for assessing or collecting Taxes with respect to
each such taxable period has
22
closed and each taxable period is not subject to review by a relevant taxing
authority; (ii) no deficiency or proposed adjustment that has not been settled
or otherwise resolved for any amount of Taxes has been asserted or assessed by
any taxing authority against the Company or Metroquip; (iii) neither the Company
nor Metroquip has consented to extend the time in which any Taxes may be
assessed or collected by any taxing authority; (iv) the Company or Metroquip has
not requested or been granted an extension of the time for filing any Tax
Return; (v) there is no action, suit, taxing authority proceeding, or audit or
claim for refund now in progress, pending, or to the knowledge of Seller or the
Company, threatened against or with respect to the Company or Metroquip
regarding Taxes; (vi) neither the Company nor Metroquip has made an election or
filed a consent under Section 341(f) of the Code (or any corresponding provision
of state, local or foreign law) or agreed to have Section 341(f)(2) of the Code
(or any corresponding provision of state, local or foreign law) apply to any
disposition of subsection (f) assets (as defined in Section 341(f)(4) of the
Code) owned by the Company or Metroquip; (vii) there are no liens, pledges,
charges, claims, security interests, or other encumbrances on the assets of the
Company or Metroquip relating or attributable to Taxes (other than liens for
sales and payroll Taxes not yet due and payable) and the Company, Metroquip and
the Seller have no knowledge of any reasonable basis for the assertion of any
claim relating or attributable to Taxes which, if adversely determined, would
result in any lien, pledge, charge, claim, security interest, or other
encumbrance on the assets of the Company or Metroquip; (viii) neither the
Company nor Metroquip will be required (A) as a result of a change in method of
accounting for a taxable period ending on or prior to the Effective Date, to
include any adjustment under Section 481 of the Code (or any corresponding
provision of state, local, or foreign law) in taxable income for any taxable
period (or portion thereof) beginning after the Effective Date or (B) as a
result of any "closing agreement," as described in Section 7121 of the Code (or
any corresponding provision of state, local, or foreign law) to include any item
of income or exclude any item of deduction from any taxable period (or portion
thereof) beginning after the Effective Date; (ix) neither the Company nor
Metroquip has been a member of an affiliated group (as defined in Section 1504
of the Code) or filed or been included in a combined, consolidated, or unitary
income Tax Return; (x) neither the Company nor Metroquip is a party to or bound
by any tax allocation or tax sharing agreement and has no current or potential
contractual or other obligation to indemnify any other Person with respect to
any Tax or pay the Taxes of any other Person under Treasury Regulations Section
1.1502-6 (or any similar provisions of state, local, or foreign law) as a
transferee or successor, by contract or otherwise; (xi) no claim has ever been
made by a taxing authority in a jurisdiction where the Company or Metroquip does
not file Tax Returns that the Company or Metroquip is or may be subject to Taxes
assessed by such jurisdiction; (xii) the Company does not have a permanent
establishment in any foreign country, as defined in the relevant tax treaty
between the United States of America and such foreign country; (xiii) neither
the Company nor Metroquip has been a "U.S. real property holding corporation"
(within the meaning of Code Section 897(c)(2)) during the applicable period
specified in Code Section 897(c)(1)(A)(ii); (xiv) the Company and Metroquip have
disclosed on each Tax Return filed by them all positions taken thereon that
could give rise to a substantial understatement of penalty of federal income
Taxes within the meaning of Code Section 6662; (xv) neither the Company nor
Metroquip acquired in a qualified stock purchase under Code Section 338(d)(3)
and no elections under Code Section 338(g), protective carryover basis
elections, or offset
23
prohibition elections are applicable to the Company or Metroquip; (xvi) neither
the Company nor Metroquip has made any payments, is not obligated to make any
payments, and is not a party to any agreement that under any circumstances could
obligate it to make any payments in the nature of compensation, that will not be
deductible under Code Sections 280G or 162; (xvii) no sales or use tax will be
payable by the Company or Metroquip as a result of the transactions contemplated
by this Agreement, and there will be no non-recurring intangible tax,
documentary stamp tax, or other excise tax (or comparable tax imposed by an
governmental entity) as a result of the transactions contemplated by this
Agreement; (xviii) Buyer will not be required to deduct and withhold any amount
with respect to Taxes upon consummation of the transactions contemplated by this
Agreement; (xix) none of the Company's or Metroquip's assets is property
required to be treated as being owned by any other Person under the "safe harbor
lease" provisions of former Section 168(f)(8) of the Internal Revenue Code of
1954, as amended, or (B) has been financed with or directly or indirectly
secures any bond or debt the interest of which is tax-exempt under Section
103(a) of the Code; (xx) the Company and Metroquip has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to an employee, independent contractor, shareholder, or other third party;
(xxi) no income under any arrangement or understanding to which the Company or
Metroquip is a party will be attributed to the Company or Metroquip which is not
represented by income to which the Company or Metroquip is legally entitled; and
(xxii) the Company owns no interest in any "controlled foreign corporation"
(within the meaning of Code Section 957), "passive foreign investment company"
(within the meaning of Code Section 1296) or other entity the income of which is
required to be included in the income of the Company or Metroquip whether or not
distributed
4.19.4 Tax Attributes. Set forth at Schedule 4.19.4 is a list
-------------- ---------------
reflecting the following information with respect to the Company and Metroquip
as of the date hereof as well as on an estimated pro forma basis as of the date
of the Effective Date (except as otherwise noted): (i) the basis of the Company
or Metroquip in its assets as of December 31, 1997, (ii) the amount of any net
operating loss, net capital loss, unused investment or other tax credit, unused
foreign tax or tax credit, or excess charitable contribution allocable to the
Company or Metroquip assets, and (iii) with respect to the preceding clause (ii)
any limitations on use of any of such attributes including any limitations
arising by reason of the transaction contemplated by this Agreement.
4.19.5 Copies of Tax Returns. Except as otherwise set forth in
---------------------
Schedule 4.19.5 the Company has furnished Buyer or Parent with copies of all
---------------
income and sales Tax Returns filed by or with respect to the Company or
Metroquip relating to the period encompassing the three taxable years of the
Company and Metroquip preceding the date hereof.
4.19.6 Definition. Any reference to the term "the Company" in this
----------
Section 4.19 shall refer to the Company, any predecessor entity, and any
subsidiary of the Company (whether or not such subsidiary entity qualifies as a
"qualified subchapter S subsidiary" within the meaning of Code Section
1361(b)(3)(B)). Further, any reference to any action of "the Company" in this
Section 4.19 shall encompass any action or actions taken by or at the direction
of the
24
Company or Metroquip whether or not such actions taken by or at the direction of
the Company or Metroquip were properly authorized.
4.20 Accounts Receivable. Except as set forth on Schedule 4.20, the
------------------- -------------
accounts receivable reflected in the Consolidated December 31 Balance Sheet, and
all accounts receivable arising since the Consolidated December 31 Balance Sheet
Date, represent bona fide claims of the Company or Metroquip against debtors for
sales, services performed, or other charges arising on or before the date
hereof, and all the goods delivered and services performed which gave rise to
said accounts were delivered or performed in accordance with the applicable
orders, Contracts, or customer requirements. All of such accounts receivables
are collectible in the ordinary course of business except to the extent reserved
against on the Consolidated December 31 Balance Sheet or as will be reserved
against on the Effective Date Balance Sheet. Except as set forth on Schedule
--------
4.7 the Company or Metroquip owns all such accounts receivable, free and clear
---
of all Encumbrances.
4.21 Inventory. Except as set forth on Schedule 4.21 all the Inventory
--------- -------------
is located at the Facilities. There has been no material decrease in the book
value or fair value of the Inventory since the Consolidated December 31 Balance
Sheet Date. The values at which the Inventory is shown on the Consolidated
December 31 Balance Sheet has been determined at lower of cost or market in
accordance with GAAP, consistently applied throughout the periods covered by the
Financial Statements, with adequate provisions or adjustments for excess
Inventory, slow-moving Inventory, and Inventory obsolescence and shrinkage.
Schedule 4.21 sets forth a complete and accurate list of all Inventory as of the
-------------
Effective Date.
4.22 Employees and Employee Benefits.
-------------------------------
4.22.1 As used in this Section 4.22, the following terms have the
meanings set forth below.
"Benefit Arrangement" shall mean any employment, consulting,
severance, or other similar contract, arrangement, or policy and each plan,
arrangement (written or oral), program, agreement, or commitment providing for
insurance coverage (including without limitation any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits, life, health, disability, or accident
benefits (including without limitation any "voluntary employees' beneficiary
association" as defined in Section 501(c)(9) of the Code providing for the same
or other benefits) or for deferred compensation, profit sharing bonuses, stock
options, stock appreciation rights, stock purchases or other forms of incentive
compensation or postretirement insurance, compensation or benefits which (A) is
not a Welfare Plan, Pension Plan, or Multiemployer Plan, (B) is entered into,
maintained, contributed to or required to be contributed to, as the case may be,
by the Company or Metroquip or an ERISA Affiliate or under which the Company or
Metroquip or any ERISA Affiliate may incur any liability, and (C) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities).
25
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"ERISA Affiliate" shall mean any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, the Company or
Metroquip as defined in Section 414(b), (c), (m) or (o) of the Code, or under
"common control" with the Company or Metroquip, within the meaning of Section
4001(b)(1) of ERISA.
"Multiemployer Plan" shall mean any "multiemployer plan," as defined
in Section 4001(a)(3) of ERISA, (A) which the Company, Metroquip or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or, after September 25, 1980, maintained, administered, contributed to or
was required to contribute to, or under which the Company or any ERISA Affiliate
may incur any liability and (B) which covers any employee or former employee of
the Company or any ERISA Affiliate (with respect to their relationship with such
entities).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (A) the
Company, Metroquip or any ERISA Affiliate maintains, administers, contributes to
or is required to contribute to, or, within the five years prior to the
Effective Date, maintained, administered, contributed to or was required to
contribute to, or under which the Company, Metroquip or any ERISA Affiliate may
incur any liability; (B) covers any employee or former employee of the Company
or any ERISA Affiliate (with respect to their relationship with such entities);
and (C) is not a Multiemployer Plan.
"Welfare Plan" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, which (A) the Company, Metroquip or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or under which the Company, Metroquip or any ERISA Affiliate may incur any
liability; (B) covers any employee or former employee of the Company or any
ERISA Affiliate (with respect to their relationship with such entities); and (C)
is not a Multiemployer Plan.
4.22.2 Schedule 4.22(a): (i) contains a list of all employees of
----------------
the Company and Metroquip, and their wage rates or salaries, as of the Closing
Date, and (ii) sets forth the dates of employment for such employees.
4.22.3 Disclosure; Delivery of Copies of Relevant Documents and
--------------------------------------------------------
Other Information. Schedule 4.22(b) contains a complete list of Employee Plans.
----------------- ----------------
True and complete copies of each of the following documents have been delivered
by the Company to Buyer: (i) each
26
Welfare Plan, Pension Plan and Multiemployer Plan (and, if applicable, related
trust agreements) and all amendments thereto, all written interpretations
thereof and written descriptions thereof which have been distributed to the
Company's or Metroquip's employees and all annuity contracts or other funding
instruments; (ii) each Benefit Arrangement including written interpretations
thereof and written descriptions thereof which have been distributed to the
Company's or Metroquip's employees (including descriptions of the number and
level of employees covered thereby) and a complete description of any Benefit
Arrangement which is not in writing; (iii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each
Pension Plan and each Welfare Plan; (iv) for the three most recent plan years,
Annual Reports on Form 5500 Series required to be filed with any governmental
agency for each Pension Plan and each Welfare Plan; (v) all actuarial reports
prepared for the last three plan years for each Pension Plan; (vi) a description
of complete age, salary, service and related data as of the last day of the last
plan year for employees and former employees of the Company and Metroquip; and
(vii) a description setting forth the amount of any liability of the company as
of the Closing Date for payments more than thirty (30) calendar days past due
with respect to each Welfare Plan.
4.23 Representations.
---------------
4.23.1 Pension Plans. No Pension Plan is subject to the
-------------
minimum funding requirements of Title IV of ERISA or Section 412 of the Code.
Neither the Company, Metroquip nor any ERISA Affiliate is required to provide
security to a Pension Plan under Section 401(a)(29) of the Code. Each Pension
Plan which is intended to be qualified (and each related trust agreement,
annuity contract or other funding instrument) is qualified and tax-exempt under
the provisions of Code Sections 401(a) (or 403(a), as appropriate) and 501(a)
and has been so qualified during the period from its adoption to date. Neither
the Company, Metroquip nor any ERISA Affiliate has engaged in, or is a successor
or parent corporation to an entity that has engaged in, a transaction described
in Section 4069 of ERISA. There has been no "reportable event" (as defined in
Section 4043(c) of ERISA and the PBGC regulations under such Section) with
respect to any Pension Plan and neither the Company nor any ERISA Affiliate is
subject to Section 4043(b) of ERISA.
4.23.2 Multiemployer Plans. Neither the Company, Metroquip nor any
-------------------
ERISA Affiliate has any Multiemployer Plans.
4.23.3 Welfare Plans. None of the Company, Metroquip, any ERISA
-------------
Affiliate or any Welfare Plan has any present or future obligation to make any
payment to, or with respect to any present or former employee of the Company,
Metroquip or any ERISA Affiliate pursuant to, any retiree medical benefit plan,
or other retiree Welfare Plan, and no condition exists which would prevent the
Company or Metroquip from amending or terminating any such benefit plan or
Welfare Plan. Each Welfare Plan which is a "group health plan," as defined in
Section 607(1) of ERISA, has been operated in compliance with provisions of Part
6 of Title I, Subtitle B of ERISA and Section 4980B of the Code at all times.
27
4.23.4 Compliance with Law. Each Employee Plan has been maintained
-------------------
in compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such Employee
Plan, including without limitation ERISA and the Code.
4.23.5 Employment at Will. Except as provided by law, the
------------------
employment of all persons presently employed or retained by the Company and
Metroquip is terminable at will.
4.23.6 Unrelated Business Taxable Income. No Employee Plan (or
---------------------------------
trust or other funding vehicle pursuant thereto) is subject to any tax under
Code Section 511.
4.23.7 Deductibility of Payments. There is no contract, agreement,
-------------------------
plan or arrangement covering any employee or former employee of the Company or
Metroquip (with respect to its relationship with such entities) that,
individually or collectively, provides for the payment by the Company or
Metroquip of any amount (i) that is not deductible by the Company or Metroquip
under Section 162(a)(1) or 404 of the Code, whichever is applicable, (ii) for
which the deduction by the Company would be disallowed under Section 162(m) of
the Code, or (iii) that is an "excess parachute payment" pursuant to Section
280G of the Code.
4.23.8 Fiduciary Duties and Prohibited Transactions. Neither the
--------------------------------------------
Company, Metroquip nor any plan fiduciary of any Welfare Plan or Pension Plan
has engaged in any transaction in violation of Sections 404 or 406 of ERISA or
any "prohibited transaction," as defined in Section 4975(c)(1) of the Code, for
which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code, or has otherwise violated the provisions of Part 4 of Title I,
Subtitle B of ERISA. Neither the Company nor Metroquip has knowingly
participated in a violation of Part 4 of Title I, Subtitle B of ERISA by any
plan fiduciary of any Welfare Plan or Pension Plan (or other employee benefit
plan subject to ERISA) and has not been assessed any civil penalty under Section
502(l) of ERISA.
4.23.9 Validity and Enforceability. Each Welfare Plan, Pension
---------------------------
Plan, related trust agreement, annuity contract or other funding instrument and
Benefit Arrangement is legally valid and binding and in full force and effect.
4.23.10 Litigation. There is no action, order, writ, injunction,
----------
judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral
action, governmental audit or investigation relating to or seeking benefits
under any Employee Plan that is pending, or to the best of Company's or Seller's
knowledge, threatened or anticipated against the Company, Metroquip, any ERISA
Affiliate or any Employee Plan.
28
4.23.11 No Amendments. Neither the Company, Metroquip nor any ERISA
-------------
Affiliate has any announced plan or legally binding commitment to create any
additional Employee Plans or to amend or modify any existing Employee Plan.
4.23.12 No Other Material Liability. No event has occurred in
---------------------------
connection with which the Company, Metroquip or any ERISA Affiliate or any
Employee Plan, directly or indirectly, could be subject to any material
liability (A) under any statute, regulation or governmental order relating to
any Employee Plans or (B) pursuant to any obligation of the Company or Metroquip
to indemnify any person against liability incurred under any such statute,
regulation or order as they relate to the Employee Plans.
4.23.13 Unpaid Contributions. Neither the Company, Metroquip nor any
--------------------
ERISA Affiliate has any liability for unpaid contributions under Section 515 of
ERISA with respect to any Pension Plan or Welfare Plan.
4.23.14 Insurance Contracts. Neither the Company, Metroquip nor any
-------------------
Employee Plan holds as an asset of any Employee Plan any interest in any annuity
contract, guaranteed investment contract or any other investment or insurance
contract issued by an insurance company that is the subject of bankruptcy,
conservatorship or rehabilitation proceedings.
4.23.15 No Acceleration or Creation of Rights. Except as set forth in
-------------------------------------
Schedule 4.23.15, neither the execution and delivery of this Agreement by the
----------------
Company or Seller nor the consummation of the transactions contemplated hereby
will result in the acceleration or creation of any rights of any person to
benefits under any Employee Plan (including, without limitation, the
acceleration of the vesting or exercisability of any stock options, the
acceleration of the vesting of any restricted stock, the acceleration of the
accrual or vesting of any benefits under any Pension Plan or the acceleration or
creation of any rights under any severance, parachute or change in control
agreement).
4.24 Compliance With Environmental Laws.
----------------------------------
4.24.1 Definitions. The following terms, when used in this Section
-----------
4.24, shall have the following meanings. Unless the context otherwise requires,
any of these terms may be used in the singular or the plural depending on the
reference.
4.24.2 "Company". For purposes of this Section 4.24 only, the term
-------
"Company" shall include (i) all Related Entities of the Company including
Metroquip, including, without limitation Seller, (ii) all partnerships, joint
ventures and other entities or organizations in which the Company was at any
time or is a partner, joint venturer, member or participant and (iii) all
predecessor or former corporations, partnerships, joint ventures, organizations,
businesses or other entities, whether in existence as of the date hereof or at
any time prior to the date hereof, the
29
assets or obligations of which have been acquired or assumed by the Company or
to which the Company has succeeded.
4.24.3 "Release" shall mean and include any spilling, leaking,
-------
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing into the environment or the work place
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
4.24.4 "Hazardous Substance" shall mean any quantity of asbestos in
-------------------
any form, urea formaldehyde, PCBs, radon gas, crude oil or any fraction thereof,
all forms of natural gas, petroleum products or by-products, any radioactive
substance, any toxic, infectious, reactive, corrosive, ignitible or flammable
chemical or chemical compound and any other hazardous substance, material or
waste (as defined in or for purposes of any Environmental Law), whether solid,
liquid or gas.
4.24.5 Compliance With Environmental Laws. Except as set forth on
----------------------------------
Schedule 4.24, the Facilities have been leased, operated and maintained by the
-------------
Company or Metroquip in compliance with all federal, state, local or foreign
laws, statutes, ordinances, regulations, rules, judgments, orders, notice
requirements, court decisions, agency guidelines or principles of law,
restrictions or licenses, which (i) regulate or relate to the protection or
clean-up of the environment, the use, treatment, storage, transportation,
handling or disposal of hazardous, toxic or otherwise dangerous substances,
wastes or materials (whether gas, liquid or solid), the preservation or
protection of waterways, groundwater, drinking water, air, wildlife, plants or
other natural resources, or the health and safety of persons or property,
including without limitation protection of the health and safety of employees or
(ii) impose liability with respect to any of the foregoing, including without
limitation the Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.),
Resource Conservation & Recovery Act (42 U.S.C. (S) 6901 et seq.) ("RCRA"), Safe
Drinking Water Act (21 U.S.C. (S) 349, 42 U.S.C. (S)(S) 201, 300f), Toxic
Substances Control Act (15 U.S.C. (S) 2601 et seq.), Clean Air Act (42 U.S.C.
(S) 7401 et seq.), the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. (S) 9601 et seq.) ("CERCLA"), or any other similar
federal, state or local law of similar effect, each as amended (collectively,
"Environmental Laws").
4.24.6 Facilities. Except as set forth in Schedule 4.24 the
---------- -------------
Facilities are, and at all times have been, owned, leased and operated by the
Company or Metroquip in compliance with all Environmental Laws and in a manner
that will not give rise to any liability under any Environmental Laws.
4.24.7 Permits. The Company and Metroquip have, and at all times
-------
have had, all Permits required under any Environmental Law to be obtained by the
Company or Metroquip and the Facilities are, and at all times have been, in
compliance with all such Permits.
30
4.24.8 Permits Required. Except as set forth in Schedule 4.24 the
---------------- -------------
consummation of any of the transactions contemplated by this Agreement will not
require an application for issuance, renewal, transfer or extension of, or any
other administrative action regarding, any Permit required under any
Environmental Law.
4.24.9 Notice of Violation. Neither the Company nor Metroquip has
-------------------
received any notice at any time that it or the Facilities is or were claimed to
be in violation of the provisions of any Environmental Law or in non-compliance
with the conditions of any Permit, and there is no pending or to the best of
Company's or Seller's knowledge, threatened lawsuit, governmental or other legal
action to that effect.
4.24.10 Pending Actions. There is not now pending or to the best of
---------------
Company's or Seller's knowledge, threatened, nor any basis for, nor has there
ever been, any Action against the Company or Metroquip, nor any basis for any
Action, under any Environmental Law or otherwise with respect to any Release or
mishandling of any Hazardous Substance.
4.24.11 Judgments. There are no consent decrees, judgments, judicial
---------
or administrative orders or agreements with, or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way affect the Company, Metroquip or to the
best knowledge of Seller or the Company, the Facilities.
4.24.12 Hazardous Substances. There is not and has not been any
--------------------
Hazardous Substance used, generated, treated, stored, transported, disposed of,
handled or otherwise existing on, under, about or from any Facility while
operated by the Company or Metroquip, except for quantities of any such
Hazardous Substances stored or otherwise held on, under or about any such
Facility in full compliance with all Environmental Laws and necessary for the
operation of the Business.
4.24.13 Handling of Hazardous Substances. Except as set forth in
--------------------------------
Schedule 4.24 the Company and Metroquip have at all times used, generated,
-------------
treated, stored, transported, disposed of or otherwise handled its Hazardous
Substances in compliance with all Environmental Laws and in a manner that will
not result in liability of the Company, Metroquip or Buyer under any
Environmental Law. Schedule 4.24 sets forth a complete list of all contractors
-------------
and other third parties who at any time have hauled, handled, stored,
transported or disposed of any Hazardous Substance (i) on behalf of the Company,
Metroquip or the Business, or (ii) generated by the Company, Metroquip or the
Business, together with a complete list of all dumpsites and other off-site
locations at which such Hazardous Substances have been disposed of.
4.24.14 Environmental Conditions. There are no present or past
------------------------
Environmental Conditions (as defined below) in any way relating to the Business
or Facilities while operated by the Company or Metroquip. "Environmental
Conditions" means the introduction into the soil, groundwater or environment of
the Facilities (through leak, spill, release, discharge, escape, emission,
dumping, disposal or otherwise) of any pollution, including without limitation
any
31
contaminant, irritant or pollutant or Hazardous Substance (whether or not
upon the property of the Business and whether or not such pollution constituted
at the time thereof a violation of any Environmental Law) as a result of which
either the Company, Metroquip or, after the Closing, Buyer has or may become
liable to any federal, state or local governmental authority or person or by
reason of which any of the Assets may suffer or be subjected to any lien.
4.24.15 CERCLA or RCRA. No current or past use, generation,
--------------
treatment, transportation, storage, disposal or handling practice of the Company
or Metroquip with respect to any Hazardous Substance has or will result in any
liability under the CERCLA or RCRA or any state or local law of similar effect.
4.24.16 Storage Tank or Pipeline. Except as set forth on Schedule
------------------------ --------
4.24, there is not now and to the best of the Company's or Seller's knowledge
----
has not been at any time in the past any underground or above-ground storage
tank or pipeline at any Facility where the installation, use, maintenance,
repair, testing, closure or removal of such tank or pipeline was not in
compliance with all Environmental Laws and to the best knowledge of the Company
or Seller, there has not been any Release from or rupture of any such tank or
pipeline, including without limitation any Release from or in connection with
the filling or emptying of such tank.
4.24.17 Environmental Audits or Assessments. True, complete and
-----------------------------------
correct copies of the written reports, and all parts thereof, including any
drafts of such reports if such drafts are in the possession or control of the
Company or Metroquip, of all environmental audits or assessments which have been
conducted at any Facility within the past five years, either by the Company,
Metroquip or any attorney, environmental consultant or engineer engaged for such
purpose, have been delivered to Buyer and a list of all such reports, audits and
assessments and any other similar report, audit or assessment of which the
Company or Seller has knowledge is included on Schedule 4.24.
-------------
4.24.18 Indemnification Agreements. Except as set forth in Schedule
-------------------------- --------
4.24 neither the Company nor Metroquip is a party, whether as a direct signatory
----
or as successor, assign or third party beneficiary, or otherwise bound, to any
lease or other Contract under which the Company or Metroquip is obligated by or
entitled to the benefits of, directly or indirectly, any representation,
warranty, indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions.
4.24.19 Releases or Waivers. Neither the Company nor Metroquip has
-------------------
released any other person from any claim under any Environmental Law or waived
any rights concerning any Environmental Condition.
4.24.20 Notices, Warnings and Records. The Company and Metroquip has
-----------------------------
given all notices and warnings, made all reports, and has kept and maintained
all records required by and in compliance with all Environmental Laws.
32
4.25 Liabilities. Neither the Company nor Metroquip has any liabilities
-----------
or obligations (absolute, accrued, contingent or otherwise) except (i)
liabilities which are reflected on the Consolidated December 31 Balance Sheet or
which are not required under GAAP to be reflected on the Consolidated December
31 Balance Sheet, (ii) liabilities incurred in the ordinary course of the
Business and consistent with past practice since the Consolidated December 31
Balance Sheet Date, (iii) liabilities arising under Contracts identified in
Schedule 4.10 to which the Company or Metroquip is a party, and (iv) liabilities
-------------
arising out of events arising prior to the Effective Date which have been
adequately reflected for, accounted for or reserved against on the Effective
Date Balance Sheet.
4.26 Insurance.
---------
4.26.1 Schedule 4.26 describes all policies of insurance (including
-------------
the insurer, type of insurance and period of coverage) to which the Company or
any Related Entity is a party or under which the Company, any Related Entity, or
any employee, officer, or director of the Company, or any Related Entity (in his
or her capacity as such) is or has been insured at any time within the five
years preceding the date of this Agreement; and any self-insurance arrangement
by or affecting the Company or any Related Entity, including any reserves
established thereunder. All such policies, together with such self-insurance,
(i) provide adequate insurance coverage for the Assets and the operations of the
Company or Metroquip for all risks normally insured against by a person or
entity carrying on the same business or businesses as the Company or Metroquip,
(ii) are sufficient for compliance with all legal requirements and Contracts to
which the Company or Metroquip is a party or by which it is bound, and (iii)
will continue in full force and effect following the Closing.
4.26.2 Schedule 4.26 sets forth, by year, for the current policy
-------------
year and each of the five preceding policy years, a summary of the loss
experience under each policy, and summary of the loss experience for all claims
that were self-insured, including the number and aggregate cost of such claims.
4.26.3 None of the Seller, the Company or a Related Entity has
received (i) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (ii) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
4.26.4 The Company and any Related Entity has paid all premiums
due, and has otherwise performed all of its respective obligations, under each
insurance policy described above.
4.27 Conduct of the Business. Except as set forth on Schedule 4.27 since
----------------------- -------------
the Consolidated
33
December 31 Balance Sheet Date, the Company and Metroquip has conducted its
operations in the ordinary course of the Business and substantially in
accordance with past practice, and has not taken any action that, if taken after
the date hereof, would violate Section 9.1.
4.28 Securities Law Matters.
----------------------
4.28.1 Seller confirms that it is acquiring the Parent Common Stock
for its own account as principal, for investment purposes only, and not with a
view to, or for, resale or distribution thereof, and no other person has or will
have a direct or indirect beneficial interest in such Parent Common Stock.
4.28.2 Seller understands that the offering and sale of the Parent
Common Stock is intended to be a transaction by an issuer not involving any
public offering exempt from registration under the Securities Act by virtue of
Section 4(2) of the Securities Act and the rules and regulations of the
Commission thereunder;
4.28.3 Seller represents that he is an "accredited investor" as
such term is defined in Rule 501 under the Securities Act;
4.28.4 Seller understands and acknowledges that there are
substantial risks of loss of investment involved in an investment in the Parent
Common Stock, and that the investment in the Parent Common Stock is an illiquid
investment subject to transfer restrictions, and Seller represents and warrants
that he has the financial ability to bear the economic risk of such investment;
4.28.5 Seller has such knowledge and experience in financial and
business matters, including investments of the type represented by the Parent
Common Stock, as to be capable of evaluating the merits of investment in
therein;
4.28.6 Seller has been furnished with a copy of the recent periodic
reports filed by Parent with the Commission and any documents that may have been
made available otherwise or upon its request, have carefully read and understand
such materials and have evaluated the risks of an acquisition of the Parent
Common Stock;
4.28.7 Seller has been given the opportunity to ask questions of,
and receive answers from, representatives of Parent in order for it to evaluate
the merits and risks of investment in the Parent Common Stock; and
4.28.8 Seller has not been furnished with nor has Seller relied
upon any oral or written representation, warranty or information in connection
with the offering of the Parent Common Stock except for that set forth in this
Agreement.
34
4.28.9 The instruments evidencing the Parent Common Stock shall
bear a restrictive legend in substantially the following form: "The securities
represented by this certificate have not been registered under the Securities
Act of 1933, as amended (the "Act"). These securities have been acquired for
investment and not with a view to distribution or resale, and may not be sold,
offered for sale, pledged or hypothecated in the absence of an effective
registration statement for such shares under the Act or an opinion of counsel
satisfactory in form and content to the issuer that such registration is not
required under such Act."
4.29 Affiliate Transactions. Except as set forth on Schedule 4.6, neither
---------------------- ------------
Seller, or any officer or director of the Company or any member of the immediate
family of any such officer, director, or neither Company or Metroquip, or any
entity in which any of such persons owns any beneficial interest (other than a
publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by any of such persons) has any agreement with the
Company or Metroquip or any interest in any property (real, personal, or mixed,
tangible or intangible) used in or pertaining to the Company, Metroquip or
Business or the Assets to be acquired hereunder. For purposes of the preceding
sentence, the members of the immediate family of an officer, director, or,
Seller shall consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law of
such officer, director, or Seller.
4.30 Disclosure. Neither this Agreement nor any of the Schedules or
----------
Exhibits hereto contains or shall contain when delivered at Closing any untrue
statement of a material fact or shall omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they were made, not misleading, and to the best of Seller's knowledge
there is no fact which has not been disclosed to Buyer which Materially
Adversely Affects or could reasonably be anticipated to Materially Adversely
Affect the Shares being transferred, Assets, Business or financial condition of
the Company or Metroquip.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
--------------------------------------------------
5.1 Representation and Warranties of Buyer. Buyer hereby represents and
--------------------------------------
warrants to Seller as follows, which representations and warranties are, as of
the date hereof, and will be, as of the Closing Date, true and correct:
5.1.1 Organization of Buyer. Buyer is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of the State of Mississippi
and is qualified in each jurisdiction in which the failure to do so would have a
Material Adverse Effect on its business or its assets.
5.1.2 Authorization. Buyer has all requisite corporate power and
-------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and the Ancillary
35
Agreements to which it is a party, to consummate the transactions contemplated
hereby and thereby, and to perform its respective obligations hereunder and
thereunder. This Agreement and the Ancillary Agreements to which Buyer is a
party have been duly executed and delivered by Buyer and is, and (following its
execution and delivery by Parent, the Company, or the Seller, as applicable,
each of the Ancillary Agreements will be) a legal, valid, and binding obligation
of Buyer, as applicable, enforceable against Buyer, in accordance with its
terms.
5.1.3 No Conflict or Violation. Neither the execution, delivery, or
------------------------
performance of this Agreement or the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby, nor compliance by Buyer with
any of the provisions hereof or thereof, will (i) violate or conflict with any
provision of the Certificate of Incorporation or Bylaws of Buyer, or (ii)
violate any applicable provision of law or regulation, order, injunction, or
decree, or any other requirement of any governmental body or court relating to
Buyer, its property or business, or (iii) (subject to Buyer obtaining any
consent or approval required as a condition of Closing) violate conflict with,
result in the breach or termination of, constitute default under, or result in
the creation of any material lien, charge, or encumbrance upon any of the
properties or assets of Buyer pursuant to any agreement or instrument to which
it is a party, which would have a Material Adverse Effect in the business or
financial condition of Buyer.
5.1.4 Consents and Approvals. No notice to, declaration, filing or
----------------------
registration with, or authorization, consent or approval of, or permit
(collectively "Governmental Consents") from, any governmental or regulatory body
or authority, or any other person or entity, is required to be made or obtained
by Buyer in connection with the execution, delivery, and performance of this
Agreement or the Ancillary Agreements and the consummation of the transactions
contemplated hereby or thereby, except (a) as required by the HSR Act and except
for those Governmental Consents the failure of which to make or obtain would not
have a Material Adverse Effect or (b) as set forth in Schedule 5.1.4.
--------------
5.1.5 No Brokers. Neither Buyer nor any of its respective officers,
----------
directors, employees or, to its knowledge, shareholders have employed or made
any agreement with any broker, finder or similar agent or any person or firm
which will result in an obligation to pay any finders fees, brokerage fees or
commission or similar payment in connection with the transactions contemplated
hereby for which Seller will bear any responsibility.
5.2 Representations and Warranties of RSC. RSC hereby represents and
-------------------------------------
warrants to Company and the Seller which representations and warranties are, and
as of the Closing Date shall be, true and correct:
5.2.1 Organization of RSC. RSC is a corporation duly organized,
-------------------
validly existing, and in good standing under the laws of the State of Delaware.
5.2.2 Authorization. At the Closing, RSC shall have all requisite
-------------
corporate power
36
and authority, and shall have taken all corporate action necessary, to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party
and to consummate the transactions contemplated hereby and thereby, and to
perform its respective obligations hereunder and thereunder. This Agreement and
the Ancillary Agreements to which RSC is a party have been duly executed and
delivered by RSC and is (and following their execution and delivery by Buyer and
Seller or the Company, as applicable, will be) a legal, valid and binding
obligation of RSC, enforceable against RSC in accordance with its terms.
5.2.3 No Conflicts or Violations. The execution and delivery of
--------------------------
this Agreement and the Ancillary Agreements to which RSC is a party and the
consummation of the transactions contemplated hereby will not (i) violate any
provision of the Certificate of Incorporation or Bylaws of RSC, (ii) violate any
applicable provision of law or regulation, order, injunction, or decree, or any
other requirement of any governmental body or court relating to RSC or its
securities, property, or business, or (iii) (subject to RSC obtaining any
consent or approval required as a condition of Closing), violate, conflict with,
result in the breach or termination of, constitute a default under, or result in
the creation of any material lien, charge, or encumbrance upon any of the
properties or assets of RSC or any of its subsidiaries pursuant to any agreement
or instrument to which it or any of its subsidiaries is a party, which would
have a material adverse effect on the business or financial condition of RSC and
it subsidiaries taken as a whole (an "RSC Material Adverse Effect").
5.2.4 Consents and Approvals. No Governmental Consent is required to
----------------------
be made or obtained by RSC in connection with the execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement, except as required by the HSR Act and except for
those Governmental Consents the failure of which to make or obtain would not
have an RSC Material Adverse Effect or as set forth on Schedule 5.1.4.
--------------
5.2.5 RSC Common Stock. The Shares of Parent Common Stock to be
----------------
issued pursuant to this Agreement, when issued and delivered in accordance with
the terms of this Agreement, will be duly authorized, validly issued, fully
paid, and nonassessable and free of preemptive rights.
5.2.6 SEC Information Furnished Concerning RSC. For the period from
----------------------------------------
January 1, 1997 to December 31, 1997, RSC has filed with the Securities and
Exchange Commission ("SEC") those filings and reports required pursuant to the
Securities Exchange Act of 1934, as amended (the "SEC Documents"). The audited
consolidated financial statements for the year ended December 31, 1996,
contained within the SEC Documents have been prepared in accordance with GAAP
consistently applied (except as may be otherwise noted therein) and fairly
present the consolidated financial position of RSC and its subsidiaries as of
such date and the consolidated results of operations of RSC and its subsidiaries
for the year then ended. To RSC's knowledge, as of their respective dates, the
SEC Documents, including, but not limited to, the financial statements contained
therein, did not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein,
in the light of the circumstances under
37
which they were made, not misleading.
5.2.7 Litigation. As of the date hereof, except as set forth in the
----------
SEC Documents, there are, and as of the Closing Date, except as set forth
therein or pursuant to an SEC report or filing made prior to the Closing Date,
no suits, actions or administrative, arbitration, or other proceedings
(including proceedings concerning labor disputes or grievances) or governmental
investigations pending or, to the knowledge of RSC, threatened against RSC or
its properties or business that could reasonably be expected to have an RSC
Material Adverse Effect.
5.2.8 No Brokers. Neither RSC nor any of its respective officers,
----------
directors, employees or, to its knowledge, shareholders have employed or made
any agreement with any broker, finder or similar agent or any person or firm
which will result in an obligation to pay any finders fees, brokerage fees or
commission or similar payment in connection with the transactions contemplated
hereby for which Seller will bear any responsibility.
ARTICLE VI
COVENANTS OF BUYER, THE COMPANY AND SELLER
------------------------------------------
Buyer, the Company, and Seller each covenant with the others as follows:
6.1 Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, each of the parties hereto agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using their respective best efforts (A)
to obtain all necessary waivers, consents and approvals from third parties;
provided, however, that Buyer shall not be required to make any payments,
commence litigation or agree to modifications of the terms of Contracts or
Leases in order to obtain any such waivers, consents or approvals, (B) to obtain
all necessary Permits as are required to be obtained under any federal, state,
local or foreign law or regulations, (C) to effect all necessary registrations
and filings, including without limitation required filings under the HSR Act and
all other submissions of information requested by governmental authorities, and
(D) to fulfill all conditions to this Agreement.
6.2 Employee Matters. Buyer shall retain only those employees of the
----------------
Company or Metroquip who pass a physical examination and drug and alcohol
screening in compliance with Minnesota law, by a licensed laboratory chosen by
Buyer and who otherwise meet Buyer's customary criteria for employment, and
Seller shall reasonably cooperate with Buyer in retaining all such employees
(the "Retained Employees"). Buyer agrees to give Retained Employees credit for
their time of employment with Company or Metroquip with respect to their
seniority as an employee of Buyer for the purpose of determining benefits
eligibility. All Retained Employees will
38
be at-will employees of Buyer and may be terminated by Buyer in its sole
discretion, subject to the requirements of applicable laws governing employers
and employees.
6.3 Environmental Assessments and Remediation.
-----------------------------------------
6.3.1 Buyer has retained Environmental Risk Management Services (the
"Consultant") to perform Phase I environmental assessments with respect to each
of the Facilities. Upon its availability, Consultant will deliver such
assessments to Buyer and the Company. In the event any such assessment
recommends the performance of additional investigation (including, without
limitation, Phase II environmental assessments), such additional investigation
shall, if requested by Buyer, be undertaken promptly and delivered to each of
the Seller and Buyer. The environmental assessments and investigations
undertaken pursuant to this Section 6.3.1 are collectively referred to herein as
the "Environmental Assessments." Buyer shall be solely responsible for the cost
of the Environmental Assessments.
6.3.2 In the event any of the Environmental Assessments reveals any
remediation work which must be completed in order to bring the Facilities into
compliance with applicable Environmental Laws at the Effective Date, Seller
shall engage a reliable environmental engineering firm reasonably acceptable to
Buyer and authorized by any applicable federal, state, or local law, policy, or
regulation, to perform any required remediation. For the purposes of Section
6.3, "Required Remediation" shall mean any action necessary to (i) comply with
any governmental order, or (ii) comply with any Environmental Law effective at
the Effective Date identified in the Environmental Assessments or (iii) install
any wash-racks, as applicable to the Facilities or the operation thereof by the
Company or Metroquip as of the Effective Date. Seller shall be responsible for
all costs and expenses related to Required Remediation.
6.3.3 Promptly upon completion of the Consultant's report referred to
in Section 6.3.2 but in any event, within 60 days thereof, the Seller shall
engage a reliable environmental engineering firm reasonably acceptable to Buyer
to perform any Required Remediation, as well as to remove any underground
storage tanks and perform all Required Remediation in connection therewith. The
Seller shall use its best efforts to cause such Required Remediation to be
completed on or before the Closing Date, and the Seller shall bear all costs of
such Required Remediation; provided that the completion of all such Required
Remediation shall be a condition to Buyer's obligations to consummate the
transactions contemplated by this Agreement. Buyer may, in its sole discretion,
authorize Seller to defer any portion of the Required Remediation which the
Seller and its contractors are unable to complete prior to Closing, in which
case Seller shall cause the portion of the Required Remediation so deferred to
be completed as promptly as practicable, but in no event later than 60 days
following Closing, at Seller's sole expense (which may be satisfied from the
Holdback Amount). Buyer may monitor the performance of the Required
Remediation, and at its election may cause the Consultant to review the
performance of the Required Remediation. If Buyer directs the Consultant to
undertake such review, the Required Remediation shall be deemed completed only
upon certification of its completion by the Consultant. If, however, there is a
dispute
39
as to the performance of the Required Remediation any such dispute shall be
settled by a mutually agreed-upon environmental expert not otherwise involved in
the Required Remediation, whose determination shall be final and binding on the
parties.
6.3.4 The Holdback Amount shall secure the completion by Seller of any
Required Remediation which has not been resolved by the Closing Date pursuant to
this Section 6.3. Upon the completion of the Required Remediation,
certification of such completion by the Consultant or mutually agreed-upon third
party expert, and payment by Seller of all expenses of such remediation and
certification, all in accordance with the standards set forth in this Section
6.3, no further claims may be made against the Holdback Amount on account of
Seller's obligations under this Section 6.3, and Buyer will promptly remit to
Seller any remaining portion of the Short-term Holdback Amount which was
allocated to the resolution of the Required Remediation. However, if such
Required Remediation has not been completed by Seller and so certified on or
prior to the date which is 60 days following the Closing Date, and Buyer
reasonably believes remediation is not progressing satisfactorily, then Buyer
shall be entitled to engage its own environmental engineering firm to complete
such Required Remediation, and to distribute from the Holdback Amount that
portion as is necessary to pay the fees and costs of such firm, or other costs
incurred, in completing such Required Remediation.
6.4 Registration Rights. In the event that, at any time prior to the
-------------------
first anniversary of the receipt of Parent Common Stock (including the Parent
Common Stock which may be issued pursuant to the Performance Incentive
Agreement), Parent files a registration statement under the Securities Act
covering shares of Parent Common Stock, other than a registration statement on
Form S-4 or Form S-8, or a registration statement filed pursuant to "demand" or
similar contractual registration rights of any other stockholders of Parent,
then Seller shall have the right to include in such registration statement (on a
"piggyback" basis) any or all of its shares of Parent Common Stock, and to
receive the benefit of any representations, indemnities, opinions, or comfort
letters given by Parent (or its counsel or underwriters) to any underwriter in
connection with such registration, subject to the obligations of Seller to (i)
cooperate with Parent in preparing each such registration and executing all such
agreements as any representative of the underwriters may deem reasonably
necessary in favor of the underwriters, (ii) promptly supply Parent with all
information, documents, representations and agreements as the underwriters or
Parent may deem reasonably necessary in connection with such registration and
(iii) confirm in writing not to sell or transfer any shares of the capital stock
of Parent not included in such registration during the period beginning ten (10)
days prior to the filing and ending ninety (90) days from the effective date of
such registration without the underwriters' or Parent's consent; provided,
--------
however, that if the managing underwriter or underwriters in the registered
-------
offering advise Parent that the inclusion in the offering of shares of Parent
Common Stock owned by Seller would have a material adverse effect on the
marketability or price of the offering, then the number of shares of Parent
Common Stock to be included by Seller shall be reduced on a pro rata basis in
proportion to the number of shares of Parent Common Stock requested to be
included by Seller.
40
6.5 Key Man Life Insurance; Transferred Assets. Prior to the Closing
------------------------------------------
Date, the Company shall transfer to the insured parties thereunder all life
insurance policies owned by the Company or Metroquip as set forth on Schedule
--------
1.1.4 and transfer the Transferred Assets identified in Schedule 1.1.4 without
----- --------------
giving rise to any tax liability to the Company or Metroquip.
6.6 Stock Options. Buyer shall grant at Closing, to the key team members
-------------
of Metroquip's strategy team the incentive options for Parent Common Stock set
forth opposite such member's name as listed on Schedule 6.6, based on Parent's
------------
formula for similar positions with Parent.
6.7 Tax Attributes. The Seller recognizes that in connection with the
--------------
sale of the Shares, that all tax attributes of Company and Metroquip, including
but not limited to tax net operating losses, tax credits and other similar items
generated through and subsequent to the Effective Date, will remain as tax
attributes of Company, Metroquip or its successors. Accordingly, any refunds or
benefits obtained via the carryback, carryforward or realization of such tax
attributes of Company or Metroquip or its successors shall remain the sole
property of Company or Metroquip or its successors with no amount being
transferred to the Seller as additional consideration for the purchase of the
Shares.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------
The obligations of Seller to consummate the transactions provided for
hereby are subject to the satisfaction, on or prior to the Closing Date, of each
of the following conditions, any of which may be waived by Seller:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Buyer and Parent contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Buyer or
Parent, as may be the case, shall have performed and satisfied all agreements
and covenants required hereby to be performed by either of them prior to or on
the Closing Date.
7.2 No Proceedings, Litigation or Laws. No Action by any governmental
----------------------------------
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially damage Seller if the
transactions contemplated hereunder are consummated. The waiting period under
the HSR Act shall have expired or been terminated, and there shall not be any
statute, rule or regulation that makes the purchase and sale of the Company,
Business or the Assets contemplated hereby illegal or otherwise prohibited.
41
7.3 Ancillary Agreements. Buyer and Parent, where applicable, shall have
--------------------
executed the Ancillary Agreements.
7.4 Certificates. Buyer and Parent shall furnish Seller with such
------------
certificates of Buyer and Parent to evidence compliance with the conditions set
forth in this Article VII as may be reasonably requested by Seller.
7.5 No Cessation of Trading. There shall have been no cessation of
-----------------------
trading of RSC's Common Stock on the New York Stock Exchange or a national
securities exchange, and there shall be no action, order or proceeding pending
or, to RSC's knowledge, threatened, by any regulatory agency to stop the public
trading of RSC's Common Stock.
7.6 Opinion Letter of Buyer's Attorneys. Seller shall receive an opinion
-----------------------------------
of Xxxxx & Xxxxxx L.L.P., counsel for Buyer and RSC, dated as of the Closing
Date, in form and substance reasonably satisfactory to Seller, in the form of
Exhibit 7.6 attached hereto. For the purpose of the opinions relating to Buyer,
Buyer's counsel may assume that the laws of Mississippi and Minnesota,
including the corporate laws of such states, are the same as the law of Arizona.
7.7 Buyer and RSC Corporate Documents. Buyer and RSC shall each have
---------------------------------
delivered to Seller a copy of its articles of incorporation certified by the
Mississippi Secretary of State or a copy of its certificate of organization
certified by the Delaware Secretary of State, as the case may be, a good
standing certificate dated not more than ten days prior to Closing by the
Mississippi Secretary of State or the Delaware Secretary of State and a copy of
the resolutions adopted by Buyer and RSC in connection with this Agreement,
certified in each case by its corporate secretary or assistant secretary.
ARTICLE VIII
CONDITIONS TO BUYER'S AND PARENT'S OBLIGATIONS
----------------------------------------------
The obligations of Buyer and Parent to consummate the transactions provided
for hereby are subject, in the discretion of Buyer, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by Buyer:
8.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Seller and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the date of this Agreement and
at and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Seller
and the Company shall have performed and satisfied all agreements and covenants
required hereby to be performed by them prior to or on the Closing Date.
8.2 Consents. All Permits and waivers necessary to the consummation of
--------
the transactions
42
contemplated hereby and for the operation of the Business by Buyer shall have
been obtained including, without limitation, (a) all required third party
waivers or consents to the assignment of the Assumed Contracts to be assumed by
Buyer (b) all required approvals of Buyer's lenders, and (c) the waiting period
under the HSR Act shall have expired or been terminated.
8.3 Board Approval. Each of RSC and Buyer shall have received the consent
--------------
of its Board of Directors to consummate the transactions, subject to the terms
and conditions set forth herein.
8.4 No Proceedings or Litigation. No Action by any governmental authority
----------------------------
or other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer materially if the transactions
contemplated hereby are consummated, including without limitation any Material
Adverse Effect on the right or ability of the Company to own, operate, possess
or transfer the Assets after the Closing. The waiting period under the HSR Act
shall have expired or been terminated, and there shall not be any statute, rule
or regulation that makes the purchase and sale of the Business or the Assets
contemplated hereby illegal or otherwise prohibited.
8.5 Opinion of Counsel. Seller and the Company shall have delivered to
------------------
Buyer an opinion of Xxxxxxxxxx & Xxxxx, P.A., counsel to the Company, Metroquip
and Seller, dated as of the Closing Date, in form and substance reasonably
satisfactory to Buyer's counsel in the form attached hereto as Exhibit 8.5.
In rendering such opinions, such counsel may rely as to factual
matters upon certificates and assurances of public officials, Seller, and
officers of the Company. In addition, such opinions may be subject to such
additional qualifications and exceptions as are reasonably acceptable to counsel
to Buyer, lenders to Buyer shall be entitled to rely upon the opinion of
Seller's counsel.
8.6 Certificates. Seller and the Company shall furnish Buyer with such
------------
certificates of Seller, the officers of the Company and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Buyer.
8.7 Performance Incentive Agreement. The Seller, Buyer and Parent shall
-------------------------------
have entered into the Performance Incentive Agreement substantially in the form
attached as Exhibit 8.7.
8.8 Escrow Agreement. The Company, Seller, and Buyer shall have entered
----------------
into the Escrow Agreement substantially in the form attached as Exhibit 8.8.
8.9 Employment and Non-Competition Agreements. Buyer and Seller shall
-----------------------------------------
have entered into an Employment and Non-Competition Agreement in the form
attached as Exhibit 8.9 hereto.
8.10 Release of Encumbrances. The Company shall have filed (where
-----------------------
necessary) and/or
43
delivered to Buyer all documents (such as payoff letters) necessary to release
the Assets from all Encumbrances which documents shall be in a form reasonably
satisfactory to Buyer's counsel.
8.11 Material Changes. Since the Consolidated December 31 Balance Sheet
----------------
Date, there shall not have been any Material Adverse Change with respect to the
Business.
8.12 Corporate Documents. Buyer shall have received from the Company
-------------------
resolutions adopted by its board of directors approving this Agreement and the
Ancillary Agreements to which it will be a party, and the transactions
contemplated hereby and thereby.
8.13 Due Diligence Review. Buyer and its Representatives shall have
--------------------
conducted a due diligence review of the Company's and Metroquip's Books and
Records, Financial Statements, and other records and accounts of the Business,
and in the sole discretion of Buyer, Buyer shall be satisfied with such review.
Such review shall have no effect whatsoever on the liability of Seller or prior
to Closing, the Company to Buyer under this Agreement or otherwise for breach
of any representations, warranties, or covenants of Seller or the Company or
hereunder.
8.14 Completion of Environmental Remediation. Seller or his agents shall
---------------------------------------
have completed any Required Remediation within the meaning of Section 6.3,
subject to the procedures set forth in Section 6.3 with respect to the
certification of such completion and the resolution of any disputes relating
thereto.
8.15 Financing. Buyer shall have obtained all lender approvals and
---------
financing to pay the cash portion of the Purchase Price.
8.16 Tax Clearance Certificate. Company shall have provided to Buyer with
-------------------------
a clearance certificate or similar document(s) that may be required by any state
taxing authority in order to relieve Buyer of any obligation to withhold any
portion of the Purchase Price other than the Holdback.
8.17 Audit. Virchow, Xxxxxx & Company, L.L.P. shall have completed their
-----
audit of Company's financial statements for the year ended December 31, 1997 and
shall have issued an unqualified opinion for 1997 and consent to Buyer that it
may include such audit in its SEC filings.
ARTICLE IX
CONDUCT OF SELLER AND BUYER PENDING THE CLOSING
-----------------------------------------------
9.1 Seller Covenants. Company and Seller hereby covenant and agree that
----------------
from the Effective Date to the Closing Date:
9.1.1 Conduct of Business Pending the Closing. Except as specifically
---------------------------------------
contemplated in this Agreement or as disclosed in any Schedule hereto, the
Business of Company
44
and Metroquip shall be conducted only in, and Company and Metroquip shall take
no action except in, the ordinary course, on an arm's length basis, and in
accordance with all applicable laws, rules, and regulations and past custom and
practice, including, without limitation, making any loans or any cash payments,
or transferring any other assets or properties of Company or Metroquip to any
employee, officer, shareholder, or director of Company or Metroquip; and Company
and Metroquip shall maintain its Facilities in good operating condition,
ordinary wear and tear excepted; and Company will not, directly or indirectly,
do or permit to occur any of the following:
(i) Cancel or terminate or permit to be canceled or terminated its
current insurance (or reinsurance) policies or permit any of the coverage
thereunder to lapse, unless simultaneous with such termination, cancellation, or
lapse, replacement policies providing coverage equal to or greater than the
coverage under the canceled, terminated, or lapsed policies are in full force
and effect;
(ii) Default under any material contract, agreement, commitment, or
undertaking;
(iii) Knowingly violate or fail to comply with any laws applicable to
it or the Business;
(iv) Commit any act or permit the occurrence of any event or the
existence of any condition of the type described in Section 4.3 hereof;
(v) Fail to maintain and repair its assets and properties in
accordance with good standards of maintenance and as required in any leases or
other agreements pertaining thereto;
(vi) Except in the ordinary course of business consistent with
historical practices enter into or modify any employment, severance, or similar
agreements or arrangements with, or grant any bonuses, salary increases, or
severance or termination pay to, any officers, directors, employees, or
consultants, or adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment, or other benefit
plan, trust, fund, or group arrangement for the benefit or welfare of any
officers, directors, or employees;
(vii) Directly or indirectly enter into or modify any contract,
agreement, or understanding or enter into any transaction in either case not in
the ordinary course of business;
(viii) Cancel, without full payment, any note, loan, or other
obligation owing to Seller relating to the Business except in the ordinary
course of business;
(ix) Acquire (by merger, exchange, consolidation, acquisition of
stock or assets, or otherwise) any corporation, partnership, joint venture, or
other business organization or division or material assets thereof;
45
(x) Issue any additional shares of its capital stock or (except
with Buyer's reasonable consent) permit the transfer of any outstanding shares
of capital stock or declare any dividends or distributions other than in cash;
(xi) Issue or create any warrants, obligations, subscriptions,
options, convertible securities, or other commitments under which any additional
or effect any transfer outstanding shares of its capital stock of any class
might be directly or indirectly authorized, issued, or transferred from
treasury, or incur any indebtedness for borrowed money or issue any debt
securities except the borrowing of working capital in the ordinary course of
business and consistent with past practice;
(xii) Pay any obligation or liability, fixed or contingent, except in
the ordinary course of business;
(xiii) Waive or compromise any right or claim except in the ordinary
course of business (other than as required to resolve any pending or threatened
litigation disclosed in the Schedules attached hereto);
(xiv) Participate in any discussions or approve any extensions of the
Penske Logistics Agreement; or
(xv) Agree to do any of the actions described in the preceding
clauses (i) through (xiv).
9.1.2 Business Relationships. Company will exercise its best efforts
----------------------
to preserve intact its business organization and goodwill, keep available the
services of its officers and employees as a group, and maintain satisfactory
relationships with suppliers, distributors, customers, and others having
business relationships with it.
9.1.3 Notification of Certain Matters. Seller and Company shall (i)
-------------------------------
confer on a regular basis with representatives of Buyer and report operational
matters and the general status of ongoing operations, (ii) notify Buyer of any
Material Adverse Change in the normal course of its business or in the operation
of its properties and of any governmental or third party complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated); and (iii) promptly notify Buyer if Seller shall discover that
any representation or warranty made by it in this Agreement was when made, or
has subsequently become, untrue.
9.1.4 Closing. Company shall use its best efforts to cause the
-------
conditions specified in Article VIII hereof to be satisfied at or prior to the
Closing Date hereof.
9.1.5 Seller Covenants. Seller shall exercise best efforts to ensure
----------------
compliance with all covenants and agreements hereunder.
46
9.2 No Negotiations. Neither Company nor Seller shall, directly or
---------------
indirectly, through any officer, director, agent, or otherwise, solicit,
initiate, or encourage submission of any proposal or offer from any person or
entity (including any of its or their officers or employees) relating to any
liquidation, dissolution, recapitalization, merger, consolidation, or
acquisition or purchase of all or a material portion of the assets of, or any
equity interest in, Seller or other similar transaction or business combination
involving Seller, or participate in any negotiations regarding, or furnish to
any other person any information with respect to, or otherwise cooperate in any
way with, or assist, participate in, facilitate, or encourage, any effort or
attempt by any other person or entity to do or seek any of the foregoing.
Seller or any Seller Stockholder shall promptly notify Buyer if any such
proposal or offer, or any inquiry from or contact with any person with respect
thereto, is made and shall promptly provide Buyer with such information
regarding such proposal, offer, inquiry, or contact as Buyer may request.
9.3 Public Announcements. The parties hereto shall not issue any
--------------------
press release or public announcement, including announcements by any party for
general reception by or dissemination to employees, agents, or customers, with
respect to this Agreement and the other transactions contemplated by this
Agreement without the prior written consent of the other parties hereto (which
consent shall not be withheld unreasonably); provided, however, that Buyer may
-----------------
make any disclosure or announcement of information, it is obligated to make
pursuant to applicable law or regulation, including any applicable law or
regulation of the New York Stock Exchange or any other national securities
exchange, as applicable.
9.4 Confidentiality. Each party hereto, and its officers, directors,
---------------
agents, and affiliates, will hold in strict confidence, and will not divulge,
communicate, use to the detriment of any other party hereto or for the benefit
of any other person or persons, or misuse in any way, any financial information
or other data obtained in connection with this Agreement, including, without
limitation, any confidential information or trade secrets of such other party,
personnel information, secret processes, know how, customer lists, formulas, or
other technical data; and if the transactions contemplated by this Agreement are
not consummated, each party hereto, and its officers, directors, agents, and
affiliates, will return to each other party all such data and information,
including, without limitation, work sheets, test reports, manuals, lists,
memoranda, and other documents prepared by or made available in connection with
this transaction (and all copies of same). The parties hereto may disclose such
information to their respective attorneys, accountants and other agents so long
as they agree to keep such information confidential.
47
ARTICLE X
[INTENTIONALLY OMITTED]
-----------------------
ARTICLE XI
ACTIONS BY SELLER AND BUYER AFTER THE CLOSING
---------------------------------------------
11.1 Books and Records; Tax Examinations.
-----------------------------------
11.1.1 Books and Records. Each party agrees that it will cooperate
-----------------
with and make available to the other party, during normal business hours, all
Books and Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing Date which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
Books and Records, information or employees for any reasonable business purpose.
11.1.2 Cooperation and Records Retention. Seller and Buyer shall (i)
---------------------------------
each provide the other with such assistance as may reasonably be requested by
any of them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain and provide the other with any
records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other with
any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return of
the other for any period. Without limiting the generality of the foregoing,
Seller and the Company shall each retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of all tax returns,
supporting work schedules, and other records or information that may be relevant
to such returns for all tax periods or portions thereof ending on or before the
Closing Date and shall not destroy or otherwise dispose of any such records
without first providing the other parties with a reasonable opportunity to
review and copy the same.
11.2 Survival of Representations, Etc. All written statements contained
--------------------------------
in any certificate, schedule, exhibit, instrument or conveyance delivered by or
on behalf of the parties pursuant to this Agreement and the agreements
identified in Schedule 11.2 shall be deemed to be representations and warranties
-------------
by the parties hereunder. The representations, warranties, covenants and
agreements of Seller, the Company, Parent and Buyer contained herein shall
survive the consummation of the transactions contemplated hereby and the Closing
Date, without regard to any investigation made by any of the parties hereto;
provided, however, the representations and warranties of the Company shall
terminate as of the Closing. All such representations and warranties and all
Claims and causes of action with respect thereto (other than the provisions of
Sections 4.4, 4.19 and 4.24 and all Claims and causes of action with respect
thereto and other than any Claims and causes of action based on fraud or
intentional misrepresentation of the Seller) shall terminate upon expiration of
two years after the Closing Date. The representations and warranties in Sections
4.4, 4.19 and 4.24 shall survive
48
until the expiration of the applicable statute of limitations (with extensions)
with respect to the matters addressed in such sections and the representations
and warranties in Section 4.4 and those based on fraud and intentional
misrepresentation shall survive indefinitely. The termination of the
representations and warranties provided herein shall not affect the rights of a
party in respect of any Claim made by such party in a Claim Notice received by
the other party prior to the expiration of the applicable survival period
provided herein.
11.3 Indemnifications.
----------------
11.3.1 By Seller. Seller shall indemnify, defend, save and hold
---------
harmless Buyer, its Affiliates and subsidiaries (including the Company from and
after the Closing Date), and its and their respective Representatives, from and
against any and all claims, damages, costs, losses (including without limitation
diminution in value), Taxes, liabilities, judgments, penalties, fines,
obligations, lawsuits, deficiencies, demands and expenses (whether or not
arising out of third-party claims), including without limitation interest,
penalties, costs of mitigation, losses in connection with any Environmental Law
(including without limitation any clean-up or remedial action), lost profits and
other losses resulting from any shutdown or curtailment of operations, damages
to the environment, attorneys' fees, experts' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (herein,
"Damages"), incurred in connection with, arising out of, resulting from or
incident to (i) any breach of any representation or warranty, or the inaccuracy
of any representation or warranty, made by the Company or Seller in or pursuant
to this Agreement; (ii) any breach of any covenant or agreement made by the
Company or Seller in or pursuant to this Agreement; (iii) any Post-Closing
Environmental Liability or (iv) any claim or contingent liability disclosed in
any schedule to this Agreement which arises out of events prior to the Effective
Date which has not been adequately reflected for, accounted for or reserved
against in the Effective Date Balance Sheet. Without limiting the generality of
the foregoing, the indemnification provided herein, insofar as it relates to any
Environmental Law or Environmental Condition, shall specifically cover costs
incurred in connection with any investigation of site conditions (excepting the
cost of the Environmental Assessments) or any Required Remediation pursuant to
Section 6.3 hereof. For purposes of this Section 11.3.1, "Post-Closing
Environmental Liability" shall mean any liability imposed on Buyer, the Company
or Metroquip arising out of or related to events occurring on or after the
Effective Date and prior to the completion of all Required Remediation in
accordance with Section 6.3 hereof, and resulting from any Environmental
Condition described in the Environmental Assessments, including without
limitation those Environmental Conditions described therein but not identified
as being in violation of any Environmental Law and those related to the absence
of any Permits, but excluding any liability to the extent such liability results
from the negligent acts or willful misconduct of Buyer or its Representatives.
11.3.2 By Parent and Buyer. Parent and Buyer shall indemnify and
-------------------
save and hold harmless Seller, his Affiliates and his Representatives from and
against any and all Damages incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty,
or the inaccuracy of any representation or warranty, made by Parent or
49
Buyer in or pursuant to this Agreement; or (ii) any breach of any covenant or
agreement made by Parent or Buyer in or pursuant to this Agreement; or (iii) any
obligations or liabilities of the Company or Metroquip or Buyer arising from
actions occurring from and after the Closing Date.
11.3.3 Cooperation. The indemnified party shall cooperate in all
-----------
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
11.3.4 Defense of Claims. If a claim for Damages (a "Claim") is to be
-----------------
made by a party entitled to indemnification hereunder against the indemnifying
party, the party claiming such indemnification shall, subject to Section 11.2,
give written notice (a "Claim Notice") to the indemnifying party and the Escrow
Agent pursuant to the Escrow Agreement as soon as practicable after the party
entitled to indemnification becomes aware of any fact, condition, or event which
may give rise to Damages for which indemnification may be sought under this
Section 11.3. The Claim Notice shall include the amounts the party entitled to
indemnification hereunder believes in good faith are subject to indemnification
(of which it shall notify Escrow Agent) and a brief description of the Claim
describing in reasonable detail the nature of such Claim and the facts upon
which it is based. The party claiming indemnification may reasonably revise its
estimate of any Claim by notice to the indemnifying party and Escrow Agent. If
any lawsuit or enforcement action is filed against any party entitled to the
benefit of indemnity hereunder, written notice thereof shall be given to the
indemnifying party as promptly as practicable (and in any event within fifteen
(15) calendar days after the service of the citation or summons). The failure of
any indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice (which shall be reasonably acceptable to the indemnified party)
to handle and defend the same, at the indemnifying party's cost, risk and
expense unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has been
advised in writing by counsel that there may be one or more legal defenses
available to such indemnified party that are different from or additional to
those available to the indemnifying party, and (iii) to compromise or settle
such Claim, which compromise or settlement shall be made only with the written
consent of the indemnified party, such consent not to be unreasonably withheld;
provided, however, if the remediation or resolution of any such Claim will occur
on or at any Facility or is reasonably expected to have a Material Adverse
Effect on the indemnified party's business operations, then, notwithstanding the
foregoing, the indemnified party shall be entitled to control such remediation
or resolution, including without limitation to take control of the defense and
investigation of such lawsuit or action, to employ and engage attorneys of its
own choice to
50
handle and defend the same, at the indemnifying party's cost, risk and expense,
and to compromise or settle such Claim. If the indemnifying party fails to
assume the defense of such Claim within fifteen (15) calendar days after receipt
of the Claim Notice, the indemnified party against which such claim has been
asserted will (upon delivering notice to such effect to the indemnifying party)
have the right to undertake, at the indemnifying party's cost and expense, the
defense, compromise or settlement of such Claim on behalf of and for the account
and risk of the indemnifying party. In the event the indemnified party assumes
the defense of the Claim, the indemnified party will keep the indemnifying party
reasonably informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any settlement of any
action effected pursuant to and in accordance with this Section 11.3 and for any
final judgment (subject to any right of appeal), and the indemnifying party
agrees to indemnify and hold harmless an indemnified party from and against any
Damages by reason of such settlement or judgment.
11.3.5 Buyer's Right to Distribution of Holdback Amount. Buyer must
------------------------------------------------
first collect any amount due from Seller pursuant to Seller's indemnification
obligations under this Section 11.3 by distribution of an applicable portion of
the Holdback Amount from the Escrow Agreement, in accordance with the procedures
set forth therein.
11.3.6 Limitations.
-----------
(i) Seller shall not be liable to Buyer under this Section
11.3 for any Damages until the amount otherwise due Buyer exceeds One Hundred
Fifty Thousand $150,000 in the aggregate; in which case the Seller will be
liable to the Buyer for all such amounts, in excess of $150,000 provided such
claims aggregate $10,000 or more. Notwithstanding the preceding sentence, this
limitation shall not apply with respect to Damages arising out of a breach of a
representation or warranty contained in Sections 4.4, 4.19 or 4.24 or fraud or
intentional misrepresentation.
(ii) Notwithstanding any other provision of this Agreement to
the contrary, the parties agree that the indemnification obligations of Seller
shall be capped at $5,000,000, provided, however, the indemnification limitation
set forth in this Section 11.3.6 shall not apply to the title to the Shares
(Section 4.4); any breach of Section 4.19 (Taxes), any breach of Section 4.24
(Environmental) or fraud or intentional misrepresentation, in each case for
which there shall be no limitation as to Seller's indemnification obligation or
the purchase price adjustments of Section 2.4, which are separate matters.
11.3.7 Liability and Remedies, etc. Except as set forth below, no
----------------------------
individual Representative of any party shall be personally liable for any
Damages under the provisions contained in this Section 11.3 provided, however,
Seller shall remain personally liable. Nothing herein shall relieve either
party of any liability to make any payment expressly required to be made by such
party pursuant to this Agreement. The term "Damages" as used in this Section
11.3 is not limited to matters asserted by third parties against Seller or
Buyer, but includes Damages incurred or sustained by an indemnified party in the
absence of third party claims. Payments by an
51
indemnified party of amounts for which such party is indemnified hereunder shall
not be a condition precedent to recovery but a legally binding obligation to
make such payments shall be a condition to recovery. Buyer's rights to indemnity
under Section 11.3 hereof shall be its sole remedy with respect to any Damages
it may suffer arising out of, resulting from, or incident to any of the matters
set forth in clauses (i) through (iv) of Section 11.3.1. Seller's rights to
indemnity under Section 11.3 hereof shall be his sole remedy with respect to any
Damages he may suffer arising out of, resulting from, or incident to any of the
matters set forth in clauses (i) through (iii) of Section 11.3.2; provided,
however, nothing herein shall limit Buyer's or Seller's right to injunctive
relief or specific performance. Buyer and Seller agree and acknowledge that
collection under the Escrow Agreement shall be Buyer's first, but not exclusive
method of receiving indemnification from Seller pursuant to Section 11.3.
11.3.8 Further Action. After the Closing, Seller shall take all
--------------
actions reasonably necessary to effect the conveyance of the Shares to Buyer
free and clear of all Encumbrances and otherwise required by Buyer's lenders.
11.3.9 Tax Audits. After the Closing, in the event that any tax
----------
audits arise which cover only tax years of the Company or Metroquip prior to the
Effective Date, Seller shall be responsible for the reasonable costs and
expenses of all professional fees in connection with such audits. After the
Closing, in the event any tax audits arise which cover only tax years of the
Company or Metroquip after the Effective Date, Seller shall have no
responsibility for the costs and expenses of professional fees in connection
with such audit. After the Closing, in the event any tax audits arise for tax
years of the Company or Metroquip both prior to and following the Effective
Date, Seller shall be responsible for a portion of the reasonable costs and
expenses of all professional fees in connection with such audits. Such portion
will be based upon a fraction, the numerator of which is the additional taxes
payable pursuant to such audits for years of the Company or Metroquip prior to
the Effective Date and the denominator of which is the additional taxes payable
pursuant to such audits for all years covered by such audits.
ARTICLE XII
MISCELLANEOUS
-------------
12.1 Termination. This Agreement may be terminated at any time prior to
-----------
Closing:
12.1.1 By mutual written consent of Buyer and Seller;
12.1.2 By Buyer or Seller if the Closing shall not have occurred on
or before April 15, 1998; provided, however, that this provision shall not be
-------- -------
available to Buyer if Seller has the right to terminate this Agreement under
Section 12.1.4, and this provision shall not be available to Seller if Buyer has
the right to terminate this Agreement under Section 12.1.3;
52
12.1.3 By Buyer if there is a material breach of any representation
or warranty set forth in Article IV hereof or any covenant or agreement to be
complied with or performed by Seller or the Company pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VIII to be
satisfied (and such condition is not waived in writing by Buyer) on or prior to
the Closing Date, or the occurrence of any event which results or would result
in the failure of a condition set forth in Article VIII to be satisfied on or
prior to the Closing Date, provided that Buyer may not terminate this Agreement
prior to the Closing if either Seller or the Company have not had an adequate
opportunity to cure such failure; or
12.1.4 By Seller if there is a material breach of any representation
or warranty set forth in Article V hereof or of any covenant or agreement to be
complied with or performed by Buyer pursuant to the terms of this Agreement or
the failure of a condition set forth in Article VII to be satisfied (and such
condition is not waived in writing by Seller) on or prior to the Closing Date,
or the occurrence of any event which results or would result in the failure of a
condition set forth in Article VII to be satisfied on or prior to the Closing
Date; provided that Seller may not terminate this Agreement prior to the Closing
Date if Buyer has not had an adequate opportunity to cure such failure.
12.2 In the Event of Termination. In the event of termination of this
---------------------------
Agreement:
12.2.1 Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same; and
12.2.2 No party hereto shall have any liability or further
obligation to any other party to this Agreement, except as stated in Sections
2.4.6, 12.8, 12.11, 12.2.1 or this Section 12.2.2, and except for any willful
breach of this Agreement occurring prior to the proper termination of this
Agreement. The foregoing provisions shall not limit or restrict the availability
of specific performance or other injunctive relief to the extent that specific
performance or such other relief would otherwise be available to a party
hereunder.
12.3 Assignment. Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Parent or Buyer may, without such
consent, assign all such rights to any lender as collateral security, and Buyer
may assign all such rights and obligations to a wholly-owned subsidiary or
subsidiaries of Parent or Buyer (or a partnership controlled by Parent or Buyer)
which shall assume all obligations and liabilities of Buyer under this
Agreement. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, and no other person shall have any right, benefit or
obligation under this Agreement as a third party beneficiary or otherwise.
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12.4 Notices. All notices, requests, demands and other communications
-------
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to the Company, addressed to:
Xxxxx Xxxxxxxx Enterprises, Inc.
0000 Xxxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn.: Xxxxx X. Xxxxxxxx
with a copy to:
Xxxx X. Xxxxxxx
Xxxxxxxxxx & Xxxxx, P.A.
1100 International Centre
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
If to Seller, addressed to:
Xxxxx X. Xxxxxxxx
00000 Xxxxx Xxxxxx, Xxxxx
Xxxxxxxx, XX 00000
with a copy to:
Xxxx X. Xxxxxxx
Xxxxxxxxxx & Xxxxx, P.A.
1100 International Centre
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
If to Parent or Buyer, addressed to:
Rental Service Corporation
0000 Xxxx Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
54
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Xxxxx Xxxxxx, Esq.
Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
12.5 Choice of Law. This Agreement shall be construed, interpreted and the
-------------
rights of the parties determined in accordance with the laws of the State of
Minnesota (without reference to the choice of law provisions thereof), except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
12.6 Entire Agreement; Amendments and Waivers. This Agreement, together
----------------------------------------
with all exhibits and schedules hereto and the Ancillary Agreements, constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
12.7 Multiple Counterparts. This Agreement may be executed in one or more
---------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.8 Expenses. Except as otherwise specified in this Agreement, each
--------
party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect. The legal, accounting, and
other related expenses of this transaction after December 31, 1997 and up to the
Closing Date, will not be accrued on the Effective Balance Sheet of, or become
an obligation of the Company or Metroquip in any manner.
12.9 Invalidity. In the event that any one or more of the provisions
----------
contained in this
55
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, then to the
maximum extent permitted by law, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
instrument.
12.10 Titles. The titles, captions or headings of the Articles, Sections
------
and subsections herein are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
12.11 Publicity; Confidentiality. None of Parent, Buyer, Seller, the
--------------------------
Company or their respective Affiliates or Representatives shall issue any press
release or make any public statement regarding, or disclose to any third party
(except as required by law or legal process, and except to each party's lenders
if such lenders so require) any of the terms of, the transactions contemplated
hereby, without prior written approval of the other party, provided that Parent,
Buyers, Seller, and the Company may, if they mutually agree, issue or make an
appropriate press release or public announcement after the Closing Date. In the
event that this Agreement is terminated prior to Closing, Buyer agrees to return
to Seller and the Company all correspondence and documents furnished by Seller
or the Company's Representatives, and agrees not to disclose or use for its own
purposes any confidential or proprietary information of Seller that has been
furnished to it by Seller or the Company's Representatives.
12.12 Cumulative Remedies. All rights and remedies of either party hereto
-------------------
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
12.13 Arbitration. Any controversy arising after the Closing out of or
-----------
relating to this Agreement (including, without limitation, pursuant to Section
2.4 except as otherwise set forth in Section 2.4.1 or 11.3, but excluding for
purposes of this Section 12.13, the employment and non-competition agreements
attached as Exhibit hereto), or relating to the breach hereof, shall be settled
by arbitration conducted in Minneapolis, Minnesota in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect (except as otherwise expressly provided in this Agreement). The award
rendered by the arbitrator(s) shall be final and judgment upon the award
rendered by the arbitrator(s) may be entered upon it in any court having
jurisdiction thereof. The arbitrator(s) shall possess the powers to issue
mandatory orders and restraining orders in connection with such arbitration.
The expenses of the arbitration shall be borne by the losing party unless
otherwise allocated by the arbitrator(s). The agreement to arbitrate shall be
specifically enforceable under the prevailing arbitration law. During the
continuance of any arbitration proceedings, the parties shall continue to
perform their respective obligations under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
XXXXX X. XXXXXXXX ENTERPRISES, INC.
By: /s/ Xxxxx X. Xxxxxxxx
_________________________________________
Name: Xxxxx X. Xxxxxxxx
Its: President
(the "Company")
XXXXXX XXXXX EQUIPMENT, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
_________________________________________
Name: Xxxxxxx X. Xxxxxxxx
Its: Assistant Secretary
("Buyer")
SELLER
By: /s/ Xxxxx X. Xxxxxxxx
_________________________________________
Name: Xxxxx X. Xxxxxxxx
("Seller")
RENTAL SERVICE CORPORATION
for the limited purpose set forth herein
By: /s/ Xxxxxxx X. Xxxxxxxx
_________________________________________
Name: Xxxxxxx X. Xxxxxxxx
Its: Assistant Secretary
("Parent")
57
