EXHIBIT 10(mm)
EXECUTION COPY
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SHARE PURCHASE AGREEMENT
among
UNITED RENTALS , INC.
and
THE PARTIES LISTED ON THE SIGNATURE PAGE HERETO
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for all of the outstanding shares of
GREY FOX EQUIPMENT, INC.
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July 30, 1998
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TABLE OF CONTENTS
Page
1. Sale and Purchase of Shares.....................................................................2
1.1 Sale and Purchase of Shares............................................................2
1.2 Purchase Price Adjustment..............................................................2
1.3 Payment of Purchase Price..............................................................7
1.4 Delivery of Shares.....................................................................8
2. Closing; Closing Date...........................................................................8
3. Representations and Warranties of Each Seller...................................................8
3.1 Title to the Shares....................................................................8
3.2 Authority to Execute and Perform Agreement.............................................9
4. Representations and Warranties of the Sellers as to the Company................................10
4.1 Corporate Organization................................................................10
4.2 Subsidiaries..........................................................................11
4.3 Outstanding Capital Stock.............................................................11
4.4 Financial Statements..................................................................12
4.5 Liabilities; Ordinary Course..........................................................13
4.6 Contravention.........................................................................14
4.7 Taxes.................................................................................15
4.8 Claims and Proceedings................................................................20
4.9 Contracts.............................................................................21
4.10 Real Estate...........................................................................23
4.11 Employee Benefit Plans................................................................25
4.12 Insurance.............................................................................27
4.13 Tangible Properties...................................................................28
4.14 Related Party Transactions............................................................28
4.15 Banks.................................................................................28
4.16 Permits...............................................................................29
4.17 Compliance with Applicable Laws.......................................................29
4.18 Employment Agreements.................................................................30
4.19 Labor and Employment Matters..........................................................30
4.20 Intangible Property...................................................................31
4.21 Environmental Compliance..............................................................32
4.22 Finders and Investment Bankers........................................................34
4.23 Certain Actions.......................................................................34
4.24 No Other Representations and Warranties...............................................34
5. Representations and Warranties of the Buyer....................................................34
5.1 Corporate Organization................................................................35
5.2 Authority to Execute and Perform Agreement............................................35
5.3 Purchase for Investment...............................................................36
5.4 [Intentionally omitted]...............................................................37
5.5 Sources of Information................................................................37
5.6 Finders and Investment Bankers........................................................37
5.7 Litigation............................................................................37
6. Covenants and Agreements.......................................................................38
6.1 Conduct of Business of the Company....................................................38
6.2 Access to Information; Confidentiality................................................41
6.3 Disclosure Supplements................................................................43
6.4 Expenses..............................................................................44
6.5 Further Assurances....................................................................44
6.6 Cooperation Regarding Landlords.......................................................45
6.7 Transfer Taxes........................................................................45
6.8 Compliance with Antitrust Laws........................................................45
6.9 SOC Rebates...........................................................................47
6.10 Non-Compete...........................................................................47
6.11 Excluded Assets and Liabilities.......................................................50
6.12 Insurance Tail........................................................................50
6.13 Payment of Indebtedness...............................................................51
6.14 Rental Ready Adjustment...............................................................51
6.15 No Solicitation.......................................................................54
6.16 Publicity.............................................................................54
7. Tax and Related Matters........................................................................55
7.1 Taxes; Section 338(h)(10) Election....................................................55
7.2 Tax Administration....................................................................59
7.3 Contests..............................................................................64
8. Environmental Matters..........................................................................66
8.1 The Phase I Investigations. ..........................................................66
8.2 The Phase II Investigations...........................................................67
8.3 Certain Procedures Relating to the Consultant's Estimates.............................68
8.4 Review of the Estimated Costs of Remediation..........................................69
8.5 The Sellers' Indemnification of Buyer.................................................70
8.6 Buyer's Indemnification of the Sellers................................................71
8.7 Exclusive Remedy......................................................................72
8.8 Limitation of Sellers' Duty to Indemnify..............................................72
8.9 Expenses in the Ordinary Course Excluded from Indemnification.........................73
8.10 Control of Remedial Action............................................................73
8.11 Environmental Indemnification Procedure...............................................75
8.12 Access to Information.................................................................75
8.13 Matters Involving Third Parties.......................................................75
9. Conditions Precedent to the Obligation of the Buyer to Close...................................77
9.1 Representations and Covenants.........................................................77
9.2 HSR Act Filing........................................................................77
9.3 No Injunction or Violation of Law.....................................................77
9.4 Title Policies........................................................................78
9.5 Simultaneous Closing..................................................................78
9.6 Resignations..........................................................................78
9.7 Reports...............................................................................78
9.8 Escrow Agreement......................................................................79
9.9 Legal Opinions........................................................................79
9.10 Affidavits............................................................................79
9.11 Affiliate Contracts...................................................................79
9.12 Certificates..........................................................................79
9.13 [Intentionally Omitted]...............................................................79
9.14 [Intentionally Omitted]...............................................................79
9.15 Release of Guarantees.................................................................80
9.16 Material Adverse Effect...............................................................80
10. Conditions Precedent to the Obligation of the Sellers to Close.................................80
10.1 Representations and Covenants.........................................................80
10.2 HSR Act Filing........................................................................81
10.3 No Injunction or Violation of Law.....................................................81
10.4 [Intentionally Omitted]...............................................................81
10.5 [Intentionally Omitted]...............................................................81
10.6 [Intentionally Omitted]. .............................................................81
10.7 Simultaneous Closing..................................................................82
10.8 Reports...............................................................................82
10.9 Escrow Agreement......................................................................82
10.10 Legal Opinion.........................................................................82
10.11 Certificate...........................................................................82
11. Survival of Representations, Warranties and Covenants..........................................82
11.1 General Survival......................................................................82
12. General Indemnification........................................................................83
12.1 Indemnification of the Buyer..........................................................83
12.2 Indemnification of the Sellers........................................................89
12.3 Notice and Opportunity to Defend......................................................90
12.4 Exclusive Remedies....................................................................92
12.5 Sellers' Representative...............................................................92
12.6 Nature of Payments....................................................................94
13. Termination of Agreement.......................................................................94
13.1 Termination...........................................................................94
13.2 Survival After Termination............................................................96
14. Miscellaneous..................................................................................96
14.1 Certain Definitions...................................................................96
14.2 Nature of Obligations................................................................102
14.3 Notices..............................................................................102
14.4 Entire Agreement.....................................................................103
14.5 Waivers and Amendments; Non-Contractual Remedies.....................................104
14.6 Governing Law........................................................................104
14.7 Binding Effect; Assignment...........................................................104
14.8 Usage................................................................................105
14.9 Counterparts.........................................................................105
14.10 Exhibits and Schedules.................................................................105
14.11 Headings...............................................................................105
14.12 Severability of Provisions.............................................................105
14.13 Consent to Jurisdiction................................................................106
ANNEX A
ANNEX B
ANNEX C
Schedules Page
Schedule 1.2(b)..........................................................................................2
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Schedule 1.2(b)..........................................................................................3
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Schedule 1.2(b)..........................................................................................3
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Schedule 1.2(a)..........................................................................................4
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Schedule 1.3(a)..........................................................................................7
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Schedule 1.3(a)..........................................................................................7
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Schedule 1.3(b)..........................................................................................7
Schedule 3.2............................................................................................10
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Schedule 4.1............................................................................................10
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Schedule 4.2............................................................................................11
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Schedule 4.2............................................................................................11
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Schedule 4.3............................................................................................11
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Schedule 4.3............................................................................................12
Schedule 4.4............................................................................................12
Schedule 4.4(b).........................................................................................12
Schedule 4.5(a).........................................................................................13
Schedule 4.5(b).........................................................................................13
Schedule 4.6(a).........................................................................................14
Schedule 4.6(b).........................................................................................15
Schedule 4.7(h).........................................................................................18
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Schedule 4.8............................................................................................20
Schedule 4.9............................................................................................21
Schedule 4.9............................................................................................23
Schedule 4.10(a)........................................................................................23
Schedule 4.10(b)........................................................................................23
Schedule 4.11(a)........................................................................................25
Schedule 4.11(c)........................................................................................26
Schedule 4.11(d)........................................................................................26
Schedule 4.11(f)........................................................................................26
Schedule 4.12...........................................................................................27
Schedule 4.14...........................................................................................28
Schedule 4.14...........................................................................................28
Schedule 4.15...........................................................................................28
Schedule 4.15...........................................................................................29
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Schedule 4.17...........................................................................................29
Schedule 4.18...........................................................................................30
Schedule 4.19(a)........................................................................................30
Schedule 4.19(a)........................................................................................30
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Schedule 4.19(b)........................................................................................30
Schedule 4.20...........................................................................................31
Schedule 4.20...........................................................................................31
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Schedule 4.21...........................................................................................32
Schedule 4.9............................................................................................39
Schedule 4.18...........................................................................................40
Schedule 6.14(b)........................................................................................53
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Schedule 4.10(a)........................................................................................78
Schedule 14.1(b).......................................................................................100
Annex A
Annex B [Escrow Agreement]
Annex C [Addresses for Notices]
SHARE PURCHASE AGREEMENT
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SHARE PURCHASE AGREEMENT, dated as of July 30, 1998, among UNITED
RENTALS, INC., a Delaware corporation (the "Buyer"), and THE PERSONS LISTED ON
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THE SIGNATURE PAGE HERETO AS SELLERS (the "Sellers"), for the purchase and sale
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of all of the issued and outstanding shares of capital stock of GREY FOX
EQUIPMENT, INC., a Connecticut corporation (the "Company").
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The Company is engaged in the business of renting, selling and
servicing aerial lifts, rough terrain forklifts, industrial forklifts, cranes,
material handling products, generators, welders, light towers and assorted
construction equipment in the Northeast and Mid-Atlantic regions of the United
States (the "Business").
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The Sellers are the beneficial and record owners of all of the issued
and outstanding shares of capital stock of the Company (the "Shares"),
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consisting of 100 shares of Common Stock, no par value per share.
The Sellers wish to sell the Shares to the Buyer, and the Buyer wishes
to purchase the Shares from the Sellers, upon the terms and subject to the
conditions of this Agreement.
Certain capitalized terms not otherwise defined and used in this
Agreement are defined in Section 14.1.
Accordingly, the parties agree as follows:
1. Sale and Purchase of Shares.
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1.1 Sale and Purchase of Shares. At the closing provided for in
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Article 2 (the "Closing"), upon the terms and subject to the conditions of this
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Agreement and in reliance upon the representations, warranties and agreements
contained herein, the
Sellers shall sell to the Buyer, and the Buyer shall purchase from the Sellers,
all of the Shares for an aggregate consideration (the "Purchase Price") equal to
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$6,400,000, subject to adjustment as provided in Section 1.2. The Purchase Price
shall be paid in accordance with Section 1.3.
1.2 Purchase Price Adjustment.
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(a) Determination of Net Worth. As used herein, the "Net Worth" of
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the Company as of any particular date shall mean an amount equal to the tangible
net worth of the Company and its consolidated Subsidiaries determined by
subtracting total liabilities of the Company and its consolidated Subsidiaries
as at such date from the total tangible assets of the Company and its
consolidated Subsidiaries as at such date, in each case as shown on the balance
sheet of the Company as at such date; provided, however, that for the purposes
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of the Preliminary Closing Balance Sheet and Audited Closing Balance Sheet, Net
Worth shall be calculated for the period from December 31, 1997 to the Closing
Date, using the depreciation methods set forth on Schedule 1.2(b).
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(b) Preparation of Closing Adjusted Net Worth Schedule. As soon as
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practicable, the Sellers or their designee shall prepare (based on data and
financial statements supplied by the Company) on a basis consistent with the
preparation of the Balance Sheet (as defined in Section 4.4) and as contemplated
by Schedule 1.2(b), and deliver to the Buyer and PricewaterhouseCoopers LLP, a
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consolidated balance sheet of the Company as of the close of business on the
Closing Date (the "Preliminary Closing Balance Sheet"). The Sellers shall cause
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the Preliminary Closing Balance Sheet to be audited by PricewaterhouseCoopers
LLP (the "Audited Closing Balance Sheet") which firm shall deliver an opinion
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stating that the Audited Closing Balance Sheet presents fairly, in all material
respects, the financial position of the Company and its consolidated
Subsidiaries at the Closing Date in accordance with GAAP applied on a basis
consistent
with the Balance Sheet. The Preliminary Closing Balance Sheet and the Audited
Closing Balance Sheet shall (i) not include (x) the assets of the Company or any
Subsidiary and the liabilities relating thereto set forth in Schedule 1.2(b)
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(the "Excluded Assets and Liabilities"), (y) any expenses, amounts or
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prepayment penalties incurred in connection with the prepayment or repayment of
any indebtedness of the Company or any Subsidiary at Closing except for any such
prepayment penalties in excess of $18,750 in the aggregate and (z) any amount
the Buyer is obligated to pay pursuant to this Agreement (other than amounts
referred to in clause (ii) below) or any amount the Sellers are obligated to pay
pursuant to Section 6.4 and (ii) include the principal amount of and interest
due on all indebtedness of the Company or any of its Subsidiaries as of the
Closing Date (whether or not such amounts are repaid by the Buyer on such date).
The Audited Closing Balance Sheet shall include a schedule (the "Closing
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Adjusted Net Worth Schedule"), prepared by PricewaterhouseCoopers LLP,
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calculating the Net Worth of the Company and its consolidated Subsidiaries as of
the close of business on the Closing Date, as adjusted in accordance with the
provisions of Schedule 1.2(a) (as so adjusted and as set forth on the Closing
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Adjusted Net Worth Schedule, the "Closing Adjusted Net Worth"). The Audited
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Closing Balance Sheet and the Closing Adjusted Net Worth Schedule shall be
provided by the Sellers to the Buyer promptly upon the availability thereof and
in any event within 75 days following the Closing Date. The Buyer will (and will
cause the Company to) provide the Sellers or their designee and
PricewaterhouseCoopers LLP full access to the books, ledgers, files, reports and
operating records of the Company and the then current employees of the Company
and will fully cooperate in the Sellers' preparation of the Preliminary Closing
Balance Sheet, the Audited Closing Balance Sheet and the Closing Adjusted Net
Worth Schedule. The fees and expenses incurred in connection with the
preparation of the Preliminary Closing Balance Sheet, the Audited Closing
Balance Sheet and the Closing Adjusted Net Worth Schedule shall be paid by the
Sellers.
(c) Buyer's Review. Upon receipt of the Audited Closing Balance Sheet
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and the Closing Adjusted Net Worth Schedule, the Buyer and its independent
accountants shall have the right during the succeeding 30-day period to examine
the Audited Closing Balance Sheet, the Closing Adjusted Net Worth Schedule and
all books and records used to prepare the Balance Sheet, the Audited Closing
Balance Sheet and the Closing Adjusted Net Worth Schedule. The Sellers shall
use commercially reasonable efforts to cause PricewaterhouseCoopers LLP to
provide access to the work papers used to prepare, audit and review the Balance
Sheet, the Audited Closing Balance Sheet and the Closing Adjusted Net Worth
Schedule and supporting their opinion referred to above, and the Sellers shall
provide the Buyer with access to the books and records used in, and employees
involved with, the preparation of the Balance Sheet, the Audited Closing Balance
Sheet and the Closing Adjusted Net Worth Schedule.
If the Buyer does not agree that the Closing Adjusted Net Worth has
been calculated on the basis set forth in Section 1.2(b), the Buyer shall so
notify the Sellers' Representative in writing (such notice, the "Disagreement
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Notice") on or before the last day of the 30-day period after delivery to the
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Buyer of the Audited Closing Balance Sheet and Closing Adjusted Net Worth
Schedule, setting forth a specific description of the Buyer's objections and the
amount of the adjustment which the Buyer believes should be made to each item of
its objection. If the Buyer does not deliver a Disagreement Notice within such
30-day period, the Audited Closing Balance Sheet, the Closing Adjusted Net Worth
Schedule and the Closing Adjusted Net Worth shall be deemed to have been
accepted by Buyer.
(d) Dispute Resolution. In the event that the Buyer delivers a
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Disagreement Notice in accordance with Section 1.2(c), the Sellers'
Representative and the Buyer shall attempt to resolve the objections set forth
therein within 15 days of the Sellers' receipt of such Disagreement Notice. The
objections set forth on the
Disagreement Notice that are resolved by the Buyer and the Sellers'
Representative in accordance with this Section 1.2(d) shall collectively be
referred to herein as the "Resolved Objections."
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(e) Differences. If the Sellers' Representative and the Buyer are
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unable to resolve all the objections set forth in the Disagreement Notice within
such 15-day period, they shall jointly appoint Deloitte & Touche LLP (the "CPA
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Firm") within five days of the end of such 15-day period. The CPA Firm, acting
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as experts and not as arbitrators, shall review the objections set forth in the
Disagreement Notice which are not Resolved Objections (collectively, the
"Differences") and determine, based on the requirements set forth in Section
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1.2(b) and only with respect to Differences submitted to the CPA Firm, whether
and to what extent the Closing Adjusted Net Worth Schedule requires adjustments.
The fees and disbursements of the CPA Firm shall be allocated 50% to the Buyer
and 50% to the Sellers. The Sellers and the Buyer shall (and shall cause the
Company to) provide to the CPA Firm full cooperation. The CPA Firm's resolution
of the Differences shall be conclusive and binding upon the parties. The
Differences as resolved by the CPA Firm in accordance with this Section 1.2(e)
shall collectively be referred to herein as the "CPA-Determined Differences."
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(f) Adjustment. On the fifth Business Day following the earliest to
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occur of (such fifth Business Day, the "Adjustment Payment Date") (x) the
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acceptance in full by the Buyer of the Audited Closing Balance Sheet, Closing
Adjusted Net Worth and Closing Adjusted Net Worth Schedule, (y) the resolution
by the Buyer and the Sellers' Representative of all objections set forth on the
Disagreement Notice, if any, and (z) the resolution by the CPA Firm of all
Differences, as an adjustment to the Purchase Price, either (i) the Buyer shall
pay to the Sellers an amount equal to the excess, if any, of the Closing
Adjusted Net Worth (as increased or decreased, as the case may be, by the
Resolved Objections and the CPA-Determined Differences) over the Year-End
Adjusted Net Worth (as hereinafter defined) or (ii) the Sellers shall pay to
the Buyer an amount equal to the excess (the "Overpayment Amount"), if any, of
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the Year-End Adjusted Net Worth over the Closing Adjusted Net Worth (as
increased or decreased, as the case may be, by the Resolved Objections and the
CPA-Determined Differences). In either case, such amount shall be payable on
the Adjustment Payment Date, with interest, based upon a year of 360 days for
the actual number of days elapsed, accrued from the Closing Date until, but not
including, the Adjustment Payment Date at the Reference Rate. Such payment shall
be made by wire transfer of immediately available funds to a bank account or
accounts designated by the Sellers or the Buyer, as the case may be. "Year-end
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Adjusted Net Worth" shall mean $712,000.
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1.3 Payment of Purchase Price. At the Closing, the Purchase
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Price shall be paid by the Buyer as follows:
(a) the Buyer shall deliver to each Seller cash by wire transfer of
immediately available funds to the account or accounts designated by each Seller
on Schedule 1.3(a) hereto, each such Seller's respective pro rata portion (the
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"Pro Rata Portion"), as specified on Schedule 1.3(a), of an amount equal to
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the Purchase Price minus the Escrow Amount.
(b) the Buyer shall deliver to the escrow agent to be selected by the
Sellers' Representative and the Buyer prior to the Closing (the "Escrow Agent")
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cash, by wire transfer of immediately available funds to the account of such
Escrow Agent designated on Schedule 1.3(b), in an amount equal to $320,000
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(the "Escrow Amount"), which shall be held by the Escrow Agent and applied as
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set forth herein and in the escrow agreement among the Buyer, the Sellers'
Representative and the Escrow Agent (the "Escrow Agreement") in the form of
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Annex B hereto.
1.4 Delivery of Shares. At the Closing, the Sellers shall
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deliver to the Buyer share certificates constituting all of the Shares, free and
clear of all Liens, duly
endorsed in blank or accompanied by stock powers duly executed in blank, in
proper form for transfer.
2. Closing; Closing Date. The Closing of the sale and purchase of
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the Shares contemplated hereby shall take place at the offices of Xxxx, Weiss,
Rifkind, Xxxxxxx & Xxxxxxxx, 1285 Avenue of the Americas, New York, New York, on
the date which is the later to occur of August 27, 1998 and the third Business
Day after all of the conditions to the Closing set forth in Sections 9.2, 9.7,
10.2 and 10.10 have been satisfied or waived by the party entitled to waive the
same or on such other date as the Buyer and the Sellers' Representative may
mutually agree (such date being the "Scheduled Closing"). The time and date
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upon which the Closing occurs is herein called the "Closing Date."
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3. Representations and Warranties of Each Seller. The Sellers,
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jointly and severally (subject to Section 14.2), represent and warrant to the
Buyer as follows:
3.1 Title to the Shares. Each Seller owns the Shares set forth
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opposite such Seller's name on Annex A beneficially and of record, and, upon
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delivery of and payment for such Shares at the Closing as herein provided, such
Seller will convey to the Buyer good and valid title thereto, free and clear of
any Lien other than any restrictions imposed by any state or federal securities
laws.
3.2 Authority to Execute and Perform Agreement. Each Seller has
------------------------------------------
full legal right and power and all authority and approvals required to enter
into, execute and deliver as applicable, this Agreement, and each other
agreement, document, or instrument or certificate contemplated by this Agreement
to be executed by such Seller in connection with the consummation of the
transactions contemplated by this Agreement (together with this Agreement, the
"Seller Documents"), and to consummate the transactions contemplated hereby and
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thereby. This Agreement has been duly executed and delivered by such Seller
and, assuming due execution and delivery hereof by the other parties hereto,
this Agreement constitutes a legal, valid and binding obligation of such
Seller enforceable against such Seller in accordance with its terms except: (a)
as rights to indemnity hereunder may be limited by federal or state securities
laws or the public policies embodied therein; (b) as such enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the enforcement of creditors' rights generally; and (c) as the remedy
of specific performance and other forms of injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery by such Seller
of this Agreement and each of the other Seller Documents, the consummation of
the transactions contemplated hereby and thereby and the performance by such
Seller of this Agreement and each of the other Seller Documents in accordance
with its terms and conditions will not (i) require such Seller to obtain any
consent, approval, authorization or action of, or make any filing with or give
any notice to, any Governmental Entity or any other Person, (ii) violate or
conflict with the declaration of trust or related documents of such Seller or,
except as set forth in Schedule 3.2, violate, conflict with or result in the
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breach of any of the terms and conditions of, result in a modification of the
effect of, otherwise cause the termination of or give any other contracting
party the right to terminate, or constitute (or with notice or lapse of time or
both constitute) a default under, any material agreement, contract, indenture,
lease, license, mortgage, plan, arrangement, commitment or other instrument or
obligation (collectively, "Contracts") to which such Seller is a party or by or
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to which such Seller is or such Seller's Shares are or may be bound or subject,
or (iii) violate Applicable Law or an Order (as hereafter defined) of any
Governmental Entity applicable to such Seller or to such Seller's Shares.
4. Representations and Warranties of the Sellers as to the Company.
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The Sellers jointly and severally (subject to Section 14.2) represent and
warrant to the Buyer as follows:
4.1 Corporate Organization. The Company and each of its
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Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and lawful authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company and
each of its Subsidiaries is duly qualified or otherwise authorized as a foreign
corporation to transact business and is in good standing in each jurisdiction
listed on Schedule 4.1 hereto, which jurisdictions are the only jurisdictions
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where the failure to so qualify or be authorized would have a Material Adverse
Effect. The Sellers have heretofore delivered or made available to the Buyer
true and complete copies of the Articles of Incorporation and By-Laws of the
Company and each of its Subsidiaries as in effect on the date hereof.
4.2 Subsidiaries. Each of the Company's Subsidiaries is listed
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on Schedule 4.2. Except as set forth on Schedule 4.2, the Company does not,
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directly or indirectly, own or have the option or obligation to acquire or have
the power to vote the shares of any capital stock or other ownership interest or
ordinary voting power to elect the majority of directors of any corporation or
other entity or other Person or body performing a similar function of any such
entity, as the case may be. The Company owns all the outstanding shares of
capital stock of each Subsidiary free and clear of all Liens, and all of such
shares have been duly authorized for issuance and validly issued and are fully
paid and non-assessable and have not been issued in violation of the preemptive
or similar rights of any Person.
4.3 Outstanding Capital Stock. The Company is authorized to
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issue a total of 5,000 shares of Common Stock. All of the outstanding shares of
Common Stock, which constitute all of the Shares, were duly authorized for
issuance and are validly issued, fully paid and nonassessable and not issued in
violation of the preemptive or similar rights of any Person. The Company has
not issued and does not have outstanding any shares of preferred stock or any
other class of capital stock other than the Shares. Except as set forth in 1
Schedule 4.3 hereto, there are no outstanding rights, subscriptions,
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warrants, calls, unsatisfied preemptive rights, options or other agreements of
any kind to purchase or otherwise to receive from the Company or any of its
Subsidiaries any of the outstanding, authorized but unissued or unauthorized
capital stock or any other security of the Company or any of its Subsidiaries,
and there is no outstanding security of any kind of the Company or any of its
Subsidiaries convertible into or exercisable for the purchase of any such
capital stock or other security of the Company or any of its Subsidiaries.
Except as set forth on Schedule 4.3 (which agreements will terminate upon
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Closing), none of the Sellers nor the Company nor any of its Subsidiaries is a
party to any voting trust or other voting agreement with respect to any of the
Shares or to any agreement relating to the issuance, sale, redemption, transfer,
registration or other disposition of the capital stock of the Company or any of
its Subsidiaries.
4.4 Financial Statements. The consolidated balance sheets of
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the Company and its Subsidiaries as at December 31, 1996 and December 31, 1997
and the related statements of earnings and stockholders' equity and statements
of cash flows for the years then ended, including the footnotes thereto, which
are attached hereto as Schedule 4.4, and the consolidated balance sheet of the
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Company and its Subsidiaries as at March 31, 1998 and the related statements of
earnings and stockholders' equity and statements of cash flows for the three-
month period then ended, which are attached hereto as Schedule 4.4(b) (the
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"Interim Financials") have been prepared in accordance with GAAP, consistently
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applied, and fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as at such dates and
the consolidated results of operations and changes in cash flows of the Company
and its consolidated Subsidiaries for such respective periods, in each case in
accordance with GAAP consistently applied for the periods covered thereby and,
in the case of the Interim Financials, consistent with the Company's past
practices for its preparation of its unaudited financial statements (and subject
to normal year-end audit adjustments). (The
foregoing financial statements of the Company and its consolidated Subsidiaries
as at December 31, 1997 and for the year then ended are sometimes herein called
the "Annual Financials." The balance sheet included in the Annual Financials is
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sometimes herein called the "Balance Sheet" and December 31, 1997 is sometimes
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herein called the "Balance Sheet Date.")
------------------
4.5 Liabilities; Ordinary Course.
----------------------------
(a) Except as set forth on Schedule 4.5(a), the Company and its
---------------
Subsidiaries have not incurred any indebtedness, liability or obligation
(whether or not accrued, fixed, due, contingent or known) ("Liabilities") of a
-----------
kind required by GAAP to be set forth on the Balance Sheet which was not fully
reflected in, reserved against, or otherwise described in the Balance Sheet
except those Liabilities incurred in the ordinary course of business since the
Balance Sheet Date; and
(b) Between the Balance Sheet Date and the date hereof, there has been
no material adverse change in the properties, business, results of operations or
financial condition of the Company and its Subsidiaries taken as a whole,
without regard, however, to changes in general economic conditions. Except as
expressly contemplated by this Agreement or as set forth on Schedule 4.5(b),
---------------
since the Balance Sheet Date, the Business has been conducted in the ordinary
course and neither the Company nor any of its Subsidiaries have (i) declared or
paid any dividends or made any other non-cash distributions on the Shares or
redeemed, purchased or otherwise acquired any shares of Common Stock, (ii)(A)
increased the rate or terms of compensation payable or to become payable to its
directors, officers or employees except in the ordinary course of business
consistent with past practice and that in the aggregate does not result in a
material increase of the compensation or benefits expense of the Company, (B)
paid or agreed to pay any pension, retirement allowance or other employee
benefit not provided for by any Benefit Plan or Employment Agreement (as
hereafter defined) set forth in the Schedules hereto or
(C) announced an intention or committed itself to any additional pension,
profit-sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay, continuation
pay, termination pay, retirement or other employee benefit plan, agreement or
arrangement, or increased the rate or terms of any Benefit Plan, (iii) made any
change in its accounting or tax reporting methods or in the manner of keeping
its books and records or changed its current practices with respect to sales,
receivables, payables or accrued or deferred expenses, or (iv) amended,
terminated or renewed any lease of the Properties.
4.6 Contravention. Except as set forth on Schedule 4.6(a),
------------- ---------------
neither the execution and delivery of this Agreement or the other Seller
Documents nor the consummation of the transactions contemplated hereby or
thereby will (i) conflict with or result in any breach of any provision of the
Articles of Incorporation or By-Laws of the Company or any of its Subsidiaries,
(ii) require any consent, approval or notice under or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration
or increase the obligations or decrease the rights) under, any terms, conditions
or provisions of any Contract, (iii) violate Applicable Law or the terms of any
Permit or Order with respect to the Company or any of its Subsidiaries or (iv)
result in the creation of any Lien upon the properties or assets of the Company
or any of its Subsidiaries, except, in the case of clause (ii), (iii) and (iv),
for such violations, Liens, breaches or defaults as would not, individually or
in the aggregate, result in a Material Adverse Effect. Except as set forth on
Schedule 4.6(b), other than any filing required under the HSR Act, neither the
---------------
Company nor any Subsidiary is required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any Governmental
Entity in order for the parties to consummate the transactions contemplated by
this Agreement, except where the failure to give notice, to file, or to obtain
any authorization, consent, or approval would
not have a Material Adverse Effect.
4.7 Taxes.
-----
(a) The Company and each of its Subsidiaries have paid all Taxes
required to be paid by them through the date of this Agreement, and will pay all
Taxes required to be paid by them on or before the Closing Date (which will not
include a requirement to pay any Taxes shown as an accrual on the Audited
Closing Balance Sheet and reflected in the Audited Closing Adjusted Net Worth
(as increased or decreased, as the case may be, by the Resolved Objections and
the CPA - Determined Differences) but not yet due on the Closing Date).
(b) The Company and its Subsidiaries have timely filed or timely filed
extensions for all reports, declarations, information statements and returns
relating to the Taxes ("Tax Returns") required to be filed by or on behalf of
-----------
each of the Company and its Subsidiaries with the appropriate taxing authority
through the date of this Agreement and all such Tax Returns are true, complete
and correct in all material respects, and will prepare and timely file, in a
manner consistent with prior years and applicable laws and regulations, all Tax
Returns required to be filed by them on or before the Closing Date which Tax
Returns will be true, correct and complete in all material respects. No
penalties or other charges are or will become due with respect to the late
filing of any Tax Return or payment of any Tax of the Company or any Subsidiary
required to be filed or paid on or before the Closing Date.
(c) All deficiencies asserted or assessments made as a result of any
examinations by the IRS or any other taxing authority of the Tax Returns of or
covering or including the Company and each of its Subsidiaries have been fully
paid. There are no audits or investigations by any taxing authority in
progress, nor has any Seller, the Company or any of its Subsidiaries received
any notice from any taxing authority that it intends to conduct such an audit or
investigation. No issue has been
raised in writing by a federal, state, local or foreign taxing authority in any
current or prior examination which, by application of the same or similar
principles, could reasonably be expected to result in a proposed material
deficiency for any subsequent taxable period. None of the Company or any of its
Subsidiaries is subject to any private letter ruling of the IRS or comparable
rulings of other taxing authorities. No extension of time is in force with
respect to any date on which any Tax Return was or is to be filed and no waiver
or agreement is in force for the extension of time for the assessment or payment
of any Tax. To the Knowledge of the Sellers, there is no unassessed deficiency
proposed or threatened against the Company or any Subsidiary.
(d) None of the Sellers, the Company or any of its Subsidiaries has
(i) agreed to or is required to make any adjustments under Section 481(a) of the
Code or any similar provision of state, local or foreign law by reason of a
change in accounting method or otherwise or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company or any of its Subsidiaries, (ii) executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local or foreign law with respect to
the Company or any of its Subsidiaries, or (iii) any power of attorney with
respect to any Tax matter currently in force.
(e) The Company and its Subsidiaries have complied with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes and
have withheld or collected from each payment made to employees or otherwise in
connection with services rendered the amount of all Taxes required to be
withheld or collected therefrom, and the Company and its Subsidiaries has paid
all such Taxes when due to the proper Tax receiving officials.
(f) Except in connection with the Election (as hereinafter defined),
and except as set forth in Schedule 4.7(f), none of the Company or any of its
---------------
Subsidiaries has any material elections in effect for federal, state, local or
foreign income tax purposes and the Sellers will not permit or cause the Company
or any of its Subsidiaries to make any additional federal tax elections under
the Code with respect to the Company or any of its Subsidiaries for any tax
period ending after the Closing Date.
(g) Neither the Company nor any of its Subsidiaries has at any time
consented under Section 341(f)(1) of the Code to have the provisions of Section
341(f)(2) of the Code apply to any sale of its stock.
(h) Except as set forth on Schedule 4.7(h), neither the Company nor
---------------
any of its Subsidiaries has ever been, nor will be through the Closing Date, a
member of a consolidated, unitary, combined or affiliated group of corporations
for any Tax purpose.
(i) The Company has properly elected under Section 1362(a) of the
Code, and except as set forth on Schedule 4.7(i), under each analogous or
---------------
similar provision of state or local law in each jurisdiction where the Company
is required to file income Tax Returns, to be treated as an S Corporation for
its taxable period beginning with the taxable year ended December 31, 1995 and
will continue to qualify as an S Corporation for all federal, state and local
income tax purposes at all times through its taxable year ending on the day
before the Closing Date and, accordingly, has and will have no liability for
federal income taxes with respect to any taxable period beginning with its first
taxable year and through its taxable year ending on the Closing Date, including
as a result of the Election.
(j) The Buyer has received complete copies of (i) all federal, state,
local and foreign income or franchise Tax Returns of the Company and each of its
Subsidiaries relating to the last three taxable periods of the Company and each
of its
Subsidiaries and (ii) any audit report issued within the last three years
(or otherwise with respect to any audit or investigation in progress) relating
to Taxes due from or with respect to the Company and each of its Subsidiaries,
their respective income, assets or operations. With respect to all income and
franchise Tax Returns filed by or on behalf of the Company and each of its
Subsidiaries for the taxable years ended on the respective dates set forth on
Schedule 4.7(j), either (x) such Tax Returns have been examined by and settled
---------------
with the relevant taxing authority, or (y) the applicable statute of limitations
with respect to the taxable years covered by such Tax Returns has expired.
(k) Schedule 4.7(k) lists all material types of Taxes paid and
---------------
material types of Tax Returns filed by or on behalf of the Company and each of
its Subsidiaries. To the Knowledge of the Sellers, no claim has been made by a
taxing authority in a jurisdiction where the Company or any of its Subsidiaries
does not file Tax Returns such that it is or may be subject to taxation by that
jurisdiction.
(l) No property owned by the Company or any of its Subsidiaries is (i)
property required to be treated as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986,
(ii) constitutes "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code or (iii) is "tax-exempt bond financed property" within the
meaning of Section 168(g) of the Code.
(m) There are no Liens for or as a result of any unpaid Taxes on the
assets of the Company or any of its Subsidiaries except for Liens for current
Taxes not yet due.
(n) No Seller is a foreign person with the meaning of Section 1445 of
the Code.
(o) None of the Company or any of its Subsidiaries are
parties to any tax sharing or similar Contract or arrangement (whether or
not written).
(p) There is no Contract, plan or arrangement involving the Company or
any of its Subsidiaries and covering any Person that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by the Buyer, the Company or any of its Subsidiaries or their
respective Affiliates by reason of Section 280G of the Code.
(q) None of the Company or any of its Subsidiaries has any elections
in effect for federal income tax purposes under Section 168 of the Code or any
analogous or similar provision of state, local or foreign law.
4.8 Claims and Proceedings. Except as set forth on Schedule
---------------------- --------
4.8, there are (i) no suits, claims, actions or proceedings pending or, to the
---
Knowledge of Sellers, threatened, and (ii) to the Knowledge of Sellers, no
investigations are pending or threatened, in each case, against or relating to
the Company or any of its Subsidiaries or any material portion of their
respective properties or assets before any court or Governmental Entity, (x)
which if adversely determined, would result in a liability of the Company or any
of its Subsidiaries in excess of $100,000, with respect to any one such matter,
or $500,000, in the case of all such matters, or (y) which would (if successful)
require specific performance or an injunction by the Company, any of its
Subsidiaries or any of their respective directors, officers, employees,
shareholders, or Affiliates; and (iii) to the Knowledge of the Sellers no event
has occurred which is likely to result in any such action, proceeding or
investigation which would have a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries is engaged in any legal action to recover monies due
it or for damages sustained (other than ordinary course collections). No
material portion of the Company's or its Subsidiaries' properties or assets is
subject to any specific order, judgment, injunction or decree (collectively,
"Orders") of any court or Governmental Entity of which the Company, any of its
-------
Subsidiaries, or any Seller was
notified that would result in a Material Adverse Effect. All matters listed on
Schedule 4.8, whether litigation has been instituted or not, have been reported
------------
by the Company to its insurance carriers for coverage and such carriers have not
indicated that they will deny coverage in respect thereof.
4.9 Contracts. Schedule 4.9 sets forth, as of the date hereof,
--------- ------------
a list of all of the following Contracts to which the Company or any of its
Subsidiaries is a party or by which it or any material portion of their
respective properties or assets are bound or subject (together with the
agreements specifically identified in this Agreement or in the other Schedules
hereto, the "Scheduled Contracts"):
-------------------
(a) contracts and other agreements with any labor union, collective
bargaining unit or association representing any employee of the Company or any
of its Subsidiaries;
(b) agreements for acquisitions or dispositions (by merger, purchase
or sale of stock or otherwise) of material assets entered into in the last two
years or pursuant to which the Company has ongoing obligations (other than
acquisitions or dispositions of assets in the ordinary course) with a value in
excess of $200,000;
(c) contracts and other agreements relating to indebtedness of the
Company or such Subsidiary, guarantees of the indebtedness of any other Person
or the deferred purchase price of property where such deferred purchase price is
in excess of $200,000;
(d) all partnership, joint venture or other similar
Contracts, arrangements or agreements;
(e) any lease, license or other Contract pursuant to which any person
has the right to occupy or use any of the Owned Real Property or any portion of
the premises that are the subject of the Leases;
(f) each agreement that restricts or purports to restrict the
right of the Company or any Subsidiary of the Company to engage in any business
anywhere in the world or to compete with any Person with respect to any business
anywhere in the world;
(g) all license, sale, dealer, distribution, commission, marketing,
agent, franchise, technical assistance or similar agreements, other than
commission arrangements with employees of the Company or any of its
Subsidiaries, relating to or providing for the marketing or sale of the products
or services of or by the Company or any Subsidiary of the Company; and
(h) any other material contract whether or not made in the ordinary
course of business which provides for or would reasonably be expected to provide
for the payment by the Company or any Subsidiary of the Company after the date
of this Agreement of more than $200,000 per annum.
Except as disclosed on Schedule 4.9, each Scheduled Contract is a
-------------
legal, valid and binding obligation of the Company or of its Subsidiary, as the
case may be, and, to the Knowledge of Sellers, each other party thereto,
enforceable against each such party thereto in accordance with its material
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and subject to general principles of equity, and none of the Company, any
Subsidiary of the Company nor, to the Knowledge of Sellers, any other party
thereto, is (or with notice or lapse of time or both would be) in default
thereunder, except where such default would not have a Material Adverse Effect.
As of the date of this Agreement, the Company has not received notice to the
effect that any party to a Scheduled Contract intends to terminate or not renew
the same at its next renewal date. Complete and correct copies of each
Scheduled Contract have been previously delivered to Buyer.
4.10 Real Estate.
-----------
(a) The Company and its Subsidiaries are the owners of fee
title to all of the real property listed on Schedule 4.10(a) and all buildings,
----------------
structures and other improvements located thereon other than any real property
included in the Excluded Assets and Liabilities (the "Owned Real Property").
-------------------
(b) The Company and its Subsidiaries are the lessees of certain real
property (together with the Owned Real Property, the "Properties") pursuant to
----------
the leases listed on Schedule 4.10(b) (the "Leases"). The Company and its
---------------- ------
Subsidiaries have a valid, enforceable and binding leasehold interest in the
real property subject to each of the Leases. The Sellers have heretofore
delivered to, or have caused the Company to deliver to, the Buyer true, correct
and complete copies of the Leases (including any modifications, amendments and
supplements). Except as set forth in Schedule 4.10(b) with respect to the
----------------
Leases, there exists no default or circumstance which with notice or lapse of
time or both would constitute a default by the Company or any of its
Subsidiaries or, to the Knowledge of Sellers, any default or threatened default
by any third party thereunder. The Properties (together with the properties of
McClinch, Inc. ("MI") and McClinch Equipment Services, Inc. ("MES")) constitute
-- ---
all interests in real property currently used or currently held for use in
connection with the Business of the Company and its Subsidiaries and which are
necessary for the continued operation of the Business as currently conducted.
All of the Properties, buildings, fixtures and improvements thereon owned or
leased by the Company and its Subsidiaries are in condition and repair (subject
to the normal wear and tear) sufficient to operate the Business, with sufficient
access to roads and utilities to operate the Business as presently conducted.
With respect to the Owned Real Property, the Company has all material
certificates of occupancy. Neither the Company nor any Subsidiary owns or
holds, or is obligated under or a party to, any option, right of first refusal
or other contractual right to purchase, acquire, sell, assign or dispose of any
real estate or any portion thereof or interest therein.
(c) Except as set forth on Schedule 4.10(c), none of the
Owned Real Properties are subject to a Lien, other than Permitted Liens and
other than any other Lien that does not materially interfere with the value or
operation of the Owned Real Property as presently operated. No condemnation or
eminent domain proceeding is pending or, to the Knowledge of Sellers, threatened
which would preclude or impair in any material respect the use of any Owned Real
Property or, to the Knowledge of the Sellers, any property subject to the
Leases, for the uses for which it is currently being used.
4.11 Employee Benefit Plans.
----------------------
(a) Schedule 4.11(a) lists all Benefit Plans of the Company and its
----------------
Subsidiaries. With respect to each such Benefit Plan, the Sellers heretofore
have delivered, or have caused the Company heretofore to have made available to
the Buyer true, correct and complete copies of (i) all plan texts and agreements
and related trust agreements or annuity contracts, (ii) all summary plan
descriptions and material employee communications, (iii) the most recent annual
report (including all schedules thereto); or (iv) if the plan is intended to
qualify under Code section 401(a) or 403(a), the most recent determination
letter received from the IRS;
(b) Each Benefit Plan conforms in all material respects to, and its
administration is in compliance in all material respects with, all Applicable
Laws and regulations. Each Benefit Plan intended to be qualified under Code
section 401(a) has been determined to be so qualified by the IRS and each trust
established in connection with any Benefit Plan that is intended to be exempt
from federal income taxation under Code section 501(a) has been determined to be
so exempt by the IRS and no event has occurred and no condition or circumstance
has existed to adversely affect the qualified status of any Benefit Plan;
(c) Except as set forth on Schedule 4.11(c) or as contemplated by
----------------
this Agreement, the consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee to severance
pay, unemployment compensation or any similar payment or (ii) accelerate the
time of payment or vesting, or increase the amount of any compensation or
benefits due to, any current or former employee;
(d) Except as set forth on Schedule 4.11(d), no Benefit Plan is a
----------------
"multiple employer plan" or a "multiemployer plan" within the meaning of the
----------------------- ------------------
Code or ERISA and no Benefit Plan is subject to Title IV of ERISA;
(e) No "reportable event" as defined in Section 4043 of ERISA has
----------------
occurred with respect to any Benefit Plan and no accumulated funding deficiency,
whether or not waived, exists with respect to any Benefit Plan; and, to the
Knowledge of Sellers, there is no risk of termination of any Benefit Plan by the
PBGC under Section 4042 of ERISA and no event has occurred which has or is
likely to subject the Company or any of its Subsidiaries to liability under
Section 4062 of ERISA;
(f) Except as set forth on Schedule 4.11(f), each Benefit Plan can
----------------
be amended or terminated at any time, without the consent of any other party and
without liability other than for benefits accrued as of the date of such
amendment or termination;
(g) Neither the Company nor any of its Subsidiaries is obligated to
provide life insurance or health care benefits of any kind to its retired or
former officers, directors or employees pursuant to any Benefit Plan, including
any "group health plan" as such term is defined in Code section 5000(b)(1), or
-----------------
pursuant to any agreement or understanding, except as may be required under Part
6 of Title I of ERISA and at the sole expense of the participant or the
participant's beneficiary;
(h) Except as disclosed in Schedule 4.11(h), none of the assets of any
----------------
Benefit Plan is stock of the Company or any of its Affiliates, or property
leased to or jointly owned by the Company or any of its Affiliates;
(i) All contributions or other payments required to have been made by
the Company and its Subsidiaries to or under any Benefit Plan by Applicable Law
or by the terms of such Benefit Plan have been timely and properly made; and
(j) There are no pending or, to the Knowledge of the Sellers,
threatened actions, claims or proceedings against or relating to any Benefit
Plan other than routine claims by persons entitled to benefits thereunder.
4.12 Insurance. Schedule 4.12 sets forth a list of all
--------- -------------
material policies or binders of fire, liability, product liability, worker's
compensation, casualty, vehicular and other insurance held by or on behalf of
the Company or any of its Subsidiaries. Each such policy and binder is valid
and binding in accordance with its terms, is in full force and effect, and
neither the Company nor any of its Subsidiaries is in default with respect to
any provision contained in any such policy or binder nor has the Company or any
of its Subsidiaries failed to give any notice or present any claim under any
such policy or binder in due and timely fashion except to the extent such
default or failure would not have a Material Adverse Effect.
4.13 Tangible Properties. Each of the Company and its
-------------------
Subsidiaries has good and marketable title to, or leases with respect to, all of
its owned or leased tangible personal property which is necessary for the
conduct of its business in the ordinary course consistent with past practices
and is reflected in the Balance Sheet, except as indicated in the notes thereto,
and no such personal property is subject to any Lien (except for Liens reflected
in the Balance Sheet and Permitted Liens). Such tangible personal property has
been maintained by the Company or its Subsidiary, as the case may be, in a
manner consistent with past practices.
4.14 Related Party Transactions. Except as set forth on
--------------------------
Schedule 4.14, neither the Sellers nor any of their respective Affiliates
-------------
(other than MES and MI) has borrowed any moneys from the Company or any of its
Subsidiaries which has not
been repaid or has outstanding any indebtedness or other similar obligations to
the Company or any of its Subsidiaries. Except as set forth in Schedule 4.14,
-------------
none of the Sellers is, or owns any direct or indirect interest of any kind in
(other than any interest of less than 5% in any Person subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended), or controls or
is a director, officer, employee or partner of, or consultant to, or lender to
or borrower from or has the right to participate in the profits of, any Person
which is, (A) a competitor, supplier, customer, landlord, tenant, creditor or
debtor of the Company or any of its Subsidiaries, or (B) a party to any Contract
with the Company or any of its Subsidiaries.
4.15 Banks. Schedule 4.15 contains a complete and correct list
----- -------------
of the names and locations of all banks in which the Company or any of its
Subsidiaries has accounts or safe deposit boxes and the names of all persons
authorized to draw thereon or to have access thereto. Except as set forth on
Schedule 4.15, no Person holds a power of attorney to act on behalf of the
-------------
Company or any of its Subsidiaries.
4.16 Permits. The Company and its Subsidiaries have all material
-------
approvals, authorizations, certificates, consents, licenses, exemptions, orders
and permits or other similar authorizations of all Governmental Entities (the
"Permits") necessary for the operation of the Business in the manner currently
--------
operated, and each such Permit is valid and in full force and effect in all
material respects and there are no proceedings pending or, to the Knowledge of
the Sellers, threatened to revoke or cancel the same; provided, that nothing in
--------
this Section 4.16 shall be or be deemed to be a representation or warranty
concerning Environmental Laws or Permits with respect to environmental matters.
4.17 Compliance with Applicable Laws. Except as set forth on
-------------------------------
Schedule 4.17, the Company and each of its Subsidiaries have complied and are in
-------------
compliance with Applicable Law with respect to the Company and each of its
Subsidiaries
and the conduct of their business and the use of their properties, except in the
case where failure to comply or be in compliance would not have a Material
Adverse Effect; provided, that nothing in this Section 4.17 shall be or be
--------
deemed to be a representation or warranty concerning Environmental Laws or
Permits with respect to environmental matters.
4.18 Employment Agreements. Except as set forth on
---------------------
Schedule 4.18, there are no employment, consulting, severance pay, continuation
-------------
pay, termination pay or indemnification agreements or other similar agreements
(collectively, the "Employment Agreements") between the Company or any of its
---------------------
Subsidiaries and any current or former shareholder, officer, director or
employee or any consultant or agent of the Company or any of its Subsidiaries
that are currently in effect. True and complete copies of the Employment
Agreements have been delivered to Buyer.
4.19 Labor and Employment Matters.
----------------------------
(a) Except as set forth on Schedule 4.19(a), no collective
----------------
bargaining agreement existed or exists that is binding on the Company or any of
its Subsidiaries, and to the Knowledge of Sellers, no petition has been filed or
proceedings instituted by an employee or group of employees with any labor
relations board seeking recognition of a bargaining representative. Schedule
--------
4.19(a), to the Knowledge of Sellers, describes any organizational effort
-------
currently being made or threatened by or on behalf of any labor union to
organize any employees of the Company or any of its Subsidiaries; and
(b) Except as set forth on Schedule 4.19(b), (i) there is no labor
----------------
strike, dispute, slow down or stoppage pending or, to the Knowledge of Sellers,
threatened, against or directly affecting the Company or any of its
Subsidiaries, (ii) no grievance or arbitration proceeding arising out of or
under any collective bargaining agreement is pending, and to the Knowledge of
the Sellers, no claims therefor exist, and (iii) neither the Company nor any of
its Subsidiaries has received any notice of any labor
or civil rights dispute, controversy or grievance or any other unfair labor
practice proceeding or breach of contract claim or action with respect to claims
of, or obligations to, any employee or group of employees of the Company or any
of its Subsidiaries. The Company and its Subsidiaries are in material compliance
with all laws, regulations and orders relating to the employment of labor,
including all such laws, regulations and orders relating to wages, hours, WARN,
collective bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar tax except for immaterial non-compliance. There
has been no "mass layoff" or "plant closing" as defined by WARN with respect to
the Company and its Subsidiaries within the six (6) months prior to the Closing
Date.
4.20 Intangible Property. Other than generally available, "off-
------------------- ---
the-shelf" items containing intellectual property, Schedule 4.20 contains a
--------- -------------
complete and correct list of each patent, trademark, trade name, service xxxx
and copyright owned or used by Company and its Subsidiaries as well as all
registrations thereof and pending applications therefor, and each license or
other agreement relating thereto. Except as set forth on Schedule 4.20, each
-------------
of the foregoing is owned by the Company or its Subsidiaries free and clear of
all Liens and, to the Knowledge of the Sellers, is not the subject of any
ownership challenge. Neither the Company nor any Subsidiary has received any
written notice that any of the foregoing is invalid or conflicts with the
asserted rights of others.
4.21 Environmental Compliance. Except as set forth on Schedule
------------------------ --------
4.21 hereto:
----
(a) the operations and facilities (as defined by CERCLA) of the
Company and each of its Subsidiaries have been for the past three years, and are
in, material compliance with all applicable Environmental Laws and all Permits
issued pursuant to Environmental Laws;
(b) the Company and each of its Subsidiaries have obtained and
currently maintains all material Permits required under all applicable
Environmental Laws necessary to operate its business;
(c) neither the Company nor its Subsidiaries is the subject of any
outstanding proceeding, written claim, written order or Contract with any
Governmental Entity or Person with respect to (i) Environmental Law, (ii)
Remedial Action or (iii) any Release or threatened Release of a Hazardous
Material and, to the knowledge of the Sellers, no such proceedings, claims,
orders or contracts are threatened;
(d) neither the Company nor any of its Subsidiaries has received any
written communication or, to the Knowledge of the Sellers, any other
communication, alleging either or both that the Company or any of its
Subsidiaries, or any of their respective Properties or facilities may be in
violation of (i) any Environmental Law or (ii) any Permit issued pursuant to any
Environmental Law, or that the Company or any of its Subsidiaries may have any
liability under any Environmental Law;
(e) to the Knowledge of the Sellers, there are no investigations by
any Governmental Entity under or pursuant to Environmental Laws of the business,
operations, Properties or former properties of the Company or any of its
Subsidiaries pending or threatened;
(f) there is not now located at any of the Properties of the Company
or any of its Subsidiaries any underground storage tanks for which the Company
or the Subsidiaries has responsibility ("UST") nor, to the Knowledge of the
---
Sellers, any asbestos-containing material in a condition necessitating
abatement, nor equipment containing polychlorinated biphenyls necessitating
immediate removal or remediation;
(g) the Sellers have provided to the Buyer all environmentally related
Phase I and Phase II reports or other material environmental reports that have
been performed and provided to the Company or any of its Subsidiaries with
respect to the
Properties or former properties, assets or current operations of the Company or
any of its Subsidiaries and that are in the Company's or any of its
Subsidiaries' possession, custody or control; and
(h) as of the Closing Date, to the Knowledge of Sellers, there are no
conditions requiring Remedial Action on the Properties resulting from Releases
of Hazardous Materials prior to the Closing, other than conditions disclosed to
the Phase I or Phase II Consultants. To the Knowledge of Sellers, there are no
conditions on the formerly owned, operated or leased properties of the Company
or any Subsidiary requiring Remedial Action for which the Company may be
responsible, other than conditions described in the environmental reports
provided by the Sellers to the Buyer and listed on Schedule 4.21(h).
----------------
4.22 Finders and Investment Bankers. Except for Xxxxx Brothers
------------------------------
Xxxxxxxx & Co. ("Xxxxx Brothers"), no broker, finder, agent or similar
--------------
intermediary has acted on behalf of the Company in connection with this
Agreement, and that, except for the fees and expenses of Xxxxx Brothers, there
are no brokerage commissions, finders' fees or similar fees or commissions
payable in connection therewith based on any agreement, arrangement or
understanding with the Company or any action taken by the Company or any
Subsidiary of the Company.
4.23 Certain Actions. None of the Company, any of its
---------------
Subsidiaries nor any Person acting at the direction or on behalf of the Company
or any of its Subsidiaries has serviced, maintained, modified, altered or
refurbished any product sold, rented or distributed prior to the Closing Date by
the Company, any of its Subsidiaries or any of their respective predecessors in
a wanton, malicious, wilfully improper or criminally negligent manner.
4.24 No Other Representations and Warranties. Except for the
---------------------------------------
representations and warranties contained in Articles 3 and 4, the Sellers make
no other
express or implied representations or warranties concerning the Shares, the
Company, any Subsidiary or asset of the Company or any Seller or any of the
transactions contemplated hereby.
5. Representations and Warranties of the Buyer. The Buyer represents
-------------------------------------------
and warrants to the Sellers as follows:
5.1 Corporate Organization. The Buyer is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being and as
heretofore conducted.
5.2 Authority to Execute and Perform Agreement. The Buyer has
------------------------------------------
the full legal right and power and all authority and approvals required to enter
into, execute and deliver this Agreement and each other agreement, document, or
instrument or certificate contemplated by this Agreement to be executed by Buyer
in connection with the consummation of the transactions contemplated by this
Agreement (collectively the "Buyer Documents"), and to consummate the
---------------
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by the Buyer and, assuming due execution and delivery
hereof by the other parties hereto, this Agreement will be valid and binding
obligation of the Buyer enforceable against the Buyer in accordance with its
terms except: (a) as rights to indemnity hereunder may be limited by federal or
state securities laws or the public policies embodied therein; (b) as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the enforcement of creditors' rights
generally; and (c) as the remedy of specific performance and other forms of
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. The execution
and delivery by the Buyer of this Agreement and the other Buyer Documents, the
consummation of the transactions contemplated hereby and thereby and the
performance by the Buyer of this Agreement and the other Buyer Documents in
accordance with their respective terms and conditions will not (i) conflict with
or result in any breach of any provision of the Certificate of Incorporation or
By-Laws of the Buyer; (ii) require the Buyer to obtain any consent, approval,
authorization or action of, or make any filing with or give any notice to, any
Governmental Entity or any other Person other than any filings required under
the HSR Act and applicable securities laws except for the consent of the lenders
under the Buyer's credit agreement, which the Buyer has obtained; (iii) violate,
conflict with or result in the breach of any of the terms and conditions of,
result in a material modification of the effect of, otherwise cause the
termination of or give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both constitute) a default under,
any Contract to which the Buyer is a party or by or to which the Buyer or any of
its properties is or may be bound or subject; or (iv) violate Applicable Law or
Order of any Governmental Entity applicable to the Buyer.
5.3 Purchase for Investment. The Buyer is purchasing the Shares
-----------------------
for its own account for investment and not for resale or distribution. The
Buyer acknowledges that the sale of the Shares has not been registered under the
Securities Act, or any applicable state securities laws and that such Shares may
only be sold or otherwise disposed of under an effective registration statement
under the Securities Act or under an exemption therefrom. Except with respect
to the Buyer's credit agreement, the Buyer has no contract, undertaking,
agreement or arrangement with any Person or entity to sell, hypothecate, pledge,
donate, or otherwise transfer (with or without consideration) to any such Person
any of the Shares, and the Buyer has no present plans or intention to enter into
any such contract, undertaking, agreement, or arrangement.
5.4 [Intentionally omitted].
5.5 Sources of Information. The Buyer acknowledges that it has
----------------------
conducted its own investigation of the business and affairs of the Company and
its Subsidiaries. The Buyer has been afforded the opportunity: (i) to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company and its Subsidiaries concerning the Company and
its Subsidiaries; and (ii) to obtain such additional information that the
Company and its Subsidiaries possess or can acquire without unreasonable effort
or expense that is reasonably necessary to verify the accuracy and completeness
of the information previously furnished to it by the Company and its
Subsidiaries; provided that no investigation by the Buyer shall affect the
--------
representations and warranties of the Sellers.
5.6 Finders and Investment Bankers. No broker, finder, agent or
------------------------------
similar intermediary has acted on behalf of the Buyer in connection with this
Agreement, and there are no brokerage commissions, finders' fees or similar fees
or commissions payable in connection therewith based on any agreement,
arrangement or understanding with the Buyer or any action taken by the Buyer.
5.7 Litigation. There are no legal proceedings pending or, to
----------
the Knowledge of the Buyer, threatened that are reasonably likely to prohibit or
restrain the ability of the Buyer to enter into this Agreement or any other
Buyer Document or consummate the transactions contemplated hereby or thereby.
6. Covenants and Agreements.
------------------------
6.1 Conduct of Business of the Company. Except as contemplated
----------------------------------
by this Agreement, during the period commencing on the date hereof and ending at
the Closing Date, the Sellers shall cause the Company and its Subsidiaries to
conduct their respective operations in accordance with their ordinary course of
business consistent with past practice. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, prior
to the Closing Date, neither the Company nor any of its Subsidiaries will,
without the prior written consent of the Buyer (which may not
be unreasonably withheld or delayed):
(a) amend or propose to amend its Articles of Incorporation or By-Laws
or merge or consolidate with or into any other Person;
(b) authorize for issuance, issue, sell, pledge, deliver or agree or
commit to issue, sell, pledge or deliver (whether through the issuance or
granting of any options, warrants, calls, subscriptions, stock appreciation
rights or other rights or agreements) any capital stock of any class or any
securities convertible into or exchangeable for shares of capital stock of any
class of the Company or such Subsidiary, as the case may be (except for the
issuance of securities of Subsidiaries issued to the Company or another
Subsidiary);
(c) split, combine or reclassify any shares of Common Stock;
(d) enter into any agreements, commitments or contracts that are
material to the Company and the Subsidiaries, taken as a whole, other than in
the ordinary course of business consistent with past practice, or otherwise make
any material change in (i) any existing agreement, commitment or arrangement
that is material to the Company and its Subsidiaries, taken as a whole or (ii)
the conduct of the Business;
(e) purchase or otherwise acquire assets from any Person
other than in the ordinary course of business;
(f) sell, assign, lease, license, transfer or otherwise dispose of, or
mortgage, pledge or encumber (other than with Permitted Liens), any Owned Real
Property or any of its assets, or amend, terminate or renew any of the Leases;
(g) amend or modify in any material respect or terminate any Contract
entered into by the Company after the date hereof which, if in existence on the
date hereof, would be required to be set forth in Schedule 4.9 as a Scheduled
------------
Contract (each, a "Subsequent Material Contract");
----------------------------
(h) enter into or commit or propose to enter into any
Subsequent Material Contract, except as necessary to permit the Company or its
Subsidiaries or the Sellers to carry out any of their respective covenants and
other obligations under this Agreement or any other Seller Document;
(i) except in the ordinary course of business, waive, cancel or take
any other action materially impairing any of its rights;
(j) make or commit to make any capital expenditure, or group of
related capital expenditures other than (A) the purchases of Equipment and
vehicles having an aggregate purchase price of no more than $7,000,000; provided
--------
that the funds used to purchase such Equipment or vehicles is obtained from the
Company's or its Subsidiaries' working capital, existing revolving credit
agreement or other indebtedness that may be prepaid without penalty, or (B)
other capital expenditures or group of related capital expenditures of no more
than $2,000,000 in the aggregate;
(k) create, incur, assume or guarantee any indebtedness for borrowed
money (except (i) in the ordinary course of business or (ii) to make the
purchases and other capital expenditures permitted under Section 6.1(j));
(l) (i) increase the rate or terms of compensation payable or to
become payable to its directors, officers or employees except with respect to
employees other than officers in the ordinary course of business consistent with
past custom and practice, (ii) announce an intention to or pay or agree to pay
any pension, retirement allowance or other employee benefit not provided for by
any Benefit Plan or Employment Agreement set forth in the Schedules hereto,
(iii) announce an intention to or commit itself to any additional pension,
profit sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay, continuation
pay, termination pay, retirement or other employee benefit plan, agreement or
arrangement, or increase the rate or terms of any Benefit Plan, (iv) enter into
any employment agreement with or for the benefit of any Person, or (v) increase
the rate of
compensation under or otherwise change the terms of any Employment Agreement set
forth in Schedule 4.18;
-------------
(m) except as set forth on Schedule 6.1(m), make any change in its
---------------
accounting or tax reporting methods or in the manner of keeping its books and
records or any change in its current practices with respect to inventory, sales,
receivables, payables or accrued expenses;
(n) declare or pay any dividend or make any distribution in respect of
Common Stock or, directly or indirectly, redeem, purchase or otherwise acquire
any of its Common Stock or make any other payments of any kind to the holders of
any of its Common Stock in respect thereof, or enter into any commitment
agreement to do any of the foregoing; provided, however, that the Subsidiaries
-------- -------
may declare and pay dividends to the Company of another Subsidiary and the
Company may distribute the Excluded Assets and Liabilities pursuant to Section
6.11;
(o) enter into or commit or propose to enter into any agreements,
commitments or contracts with an Affiliate of the Company or any Seller other
than MES and MI; or
(p) agree, commit or arrange to do any of the foregoing.
6.2 Access to Information; Confidentiality.
--------------------------------------
(a) Between the date of this Agreement and the Closing Date, the
Sellers shall cause the Company and its Subsidiaries to afford the Buyer and its
authorized representatives (including its accountants, financial advisors and
legal counsel) reasonable access during normal business hours to all of the
properties, personnel, Contracts, books and records of the Company and its
Subsidiaries and shall promptly deliver or make available to the Buyer
information concerning the business, properties, assets and personnel of the
Company and its Subsidiaries as the Buyer may from time to time reasonably
request;
(b) The Buyer shall hold, and shall cause its authorized
representatives (including its accountants, financial advisors and legal
counsel) to hold, all material subject to the Confidentiality Agreement dated
February 12, 1998, between MI and the Buyer (the "Confidentiality Agreement") in
-------------------------
confidence in accordance with the terms of the Confidentiality Agreement and, in
the event of the termination of this Agreement for any reason, the Buyer
promptly shall return or destroy all such material in accordance with the terms
of the Confidentiality Agreement;
(c) After the Closing, the Sellers and their respective Affiliates
will and will cause their respective representatives to treat any data and
information related to the Company and/or its Subsidiaries and the Business
confidentially and with commercially reasonable care and discretion, and will
not disclose any such information to third parties; provided, however, that the
-------- -------
foregoing shall not apply to (i) information in the public domain or that
becomes public through disclosure by a party other than Sellers or any of their
respective Affiliates or any of their respective representatives, so long as
such other party is not in breach of a confidentiality obligation to the Buyer
and (ii) information that may be required to be disclosed by Applicable Law.
(d) In the event that either a Seller or the Buyer, as the case may
be, is required, by subpoena or other legal process, in any action or proceeding
to disclose any such confidential information or material referred to in this
Section, such party will give the other party prompt notice of such request so
that such other party may seek an appropriate protective order or other
confidential treatment of such information and will cooperate with such other
party in obtaining such treatment; and
(e) Each of the parties acknowledges and agrees that in the event of
any breach of Section 6.2, money damages would not be an adequate remedy to the
Buyer, on the one hand, or the Sellers, on the other, for such breach and, even
if money damages were adequate, it would be impossible to ascertain or measure
with any
degree of accuracy the damages sustained by the Buyer, on the one hand, or the
Sellers, on the other, therefrom. Accordingly, if there should be a breach or
threatened breach by any Person of any provision of Section 6.2, the Buyer, on
the one hand, or the Sellers, on the other, shall be entitled, without showing
or providing actual damage sustained by the Buyer, on the one hand, or the
Sellers on the other, to an injunction restraining such Person from any breach.
Nothing in this Section 6.2(d) shall limit or otherwise affect the remedies that
the Buyer, the Company or the Sellers may otherwise have under Applicable Law.
6.3 Disclosure Supplements. Prior to the Closing, the Sellers
----------------------
may supplement or amend the schedules referred to in this Agreement with respect
to (i) any matter not existing on the date hereof which, if existing or
occurring at or prior to the date hereof, would have been required to be set
forth or described in a schedule or (ii) any matter arising after the date
hereof which is necessary to correct any information in a schedule or in any
representation and warranty of the Sellers which has been rendered inaccurate
thereby; provided that any such supplement or amendment shall not waive, limit
--------
or otherwise affect the condition to Closing set forth in Section 9.1, which
shall be based on the representations and warranties, covenants and agreements
made as of the date of this Agreement, but only the representations, warranties,
covenants and agreements made by the Sellers as amended or supplemented pursuant
to this Section 6.3 shall be the basis for any indemnification pursuant to
Article 7, 8 or 12.
6.4 Expenses. Except as otherwise expressly set forth in this
--------
Agreement, the parties to this Agreement shall bear their respective expenses
incurred in connection with the preparation, negotiation, execution and
performance of this Agreement and the contemplated transactions, including all
fees and expenses of agents, representatives, counsel and accountants, provided,
--------
however, that the Buyer is agreeing to pay the first $400,000 of the fee owed to
-------
Xxxxx Brothers by the Sellers pursuant to the
MI Agreement.
6.5 Further Assurances. Each of the parties shall execute such
------------------
certificates, bills of sale, agreements and other documents and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the contemplated transactions. Each such party shall use
its commercially reasonable efforts to fulfill or obtain the fulfillment of the
conditions to the Closing set forth in Articles 9 and 10. Between the date of
this Agreement and the Closing Date, each of the parties hereto shall promptly
notify the other parties in writing (a) if such party becomes aware of any fact
or condition that causes or would be reasonably likely to cause or constitute a
Material Adverse Effect or a breach of any of the representations and warranties
of such party set forth herein and (b) of the occurrence of any breach of any
covenant in this Agreement or of the occurrence of any event that may make the
satisfaction of the conditions to Closing set forth herein impossible or
unlikely.
6.6 Cooperation Regarding Landlords. The Sellers agree that
-------------------------------
they will cause the officers of the Company to reasonably cooperate with the
Buyer in obtaining consents and estoppel certificates from the landlords under
the Leases; provided, that the foregoing shall not require the Sellers or the
--------
Company to pay any amounts to any Person to obtain such consents or estoppels;
and; provided further, that the Buyer acknowledges that the receipt of such
-------- -------
consents or estoppel certificates is not a condition precedent to the
consummation of the transactions contemplated hereby.
6.7 Transfer Taxes. All sales, use, stamp, documentary, filing,
--------------
recording, transfer or similar fees or Taxes and governmental charges as levied
by any taxing authority or other Governmental Entity as a result of the transfer
of the Shares pursuant to this Agreement (other than those arising out of the
Election (as defined in Section 7.1(a)(i) below)) shall be borne 50% by the
Buyer and 50% by the Sellers.
6.8 Compliance with Antitrust Laws. Each of the parties hereto
------------------------------
shall
file an appropriate Notification and Report Form concerning the transactions
contemplated herein as promptly as practicable following the date hereof. Each
of the Buyer and each Seller shall cooperate (including by way of furnishing to
the other such documents and information as may reasonably be required) in
making filings under the HSR Act and shall use its commercially reasonable best
efforts to take, or cause to be taken, all actions necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including using its commercially
reasonable best efforts (including, without limitation, the Buyer agrees that it
will dispose of or hold separate any part of its or the Company's assets or
business; provided that in no event shall the Buyer be required to (or
--------
be required to agree to) dispose of or hold separate assets of the Combined
Business which generate in the aggregate more than $5 million per year of
revenues; and provided, further, that in no event shall the Buyer be required to
(or be required to agree to) dispose of any one of the following locations; the
Company's (and its Affiliates') location in Fairfield, Connecticut, the Buyer's
(or its subsidiary's) location in Burlington, New Jersey and the Buyer's (or its
subsidiary's) location in Baltimore, Maryland) in order to consummate or make
effective as promptly as practicable the transactions contemplated by this
Agreement to resolve such objections, if any, as the Antitrust Division of the
Department of Justice or the Federal Trade Commission or state antitrust
enforcement or other Governmental Entity (collectively, the "Regulatory
----------
Agencies") may assert under the federal or state antitrust laws with respect to
--------
the transactions contemplated hereby. In the event an action is instituted by
any Person challenging the transactions contemplated hereby as violative of the
antitrust laws, each of the Buyer and each Seller shall cooperate with the other
parties hereto and use its commercially reasonable best efforts to resist or
resolve such action. "Combined Business" means the existing business of the
Buyer or any of its current subsidiaries and the business of the Company, MI,
MES or any of their respective
Subsidiaries.
6.9 SOC Rebates. From and after the Closing Date, the Buyer
-----------
shall use its best efforts to collect all supplier-of-choice rebates owed to the
Company or any Subsidiary of the Company relating to equipment expenditures made
prior to the Closing and pass-through rebates for equipment purchased by Hertz
Equipment Rental Corp. during the period from and including August, 1, 1997
through and including July 31, 1998 (the "SOC Rebates"). All monies collected
-----------
on account of the SOC Rebates shall be held by the Buyer for the Sellers'
account. The Buyer shall pay or cause to be paid to the Sellers'
Representative, on behalf of the Sellers, on the first Business Day of each
month all monies so received during the prior month.
6.10 Non-Compete. For a period commencing on the Closing Date
-----------
and terminating five (5) years thereafter in the case of each of the Sellers
(the "Restricted Period"), the Sellers (i) shall not (except, in the case of
-----------------
Xxxxxxxx XxXxxxxx, in his capacity as a consultant to MI or another subsidiary
of the Buyer in accordance with his consulting agreement with MI to be entered
into as of the Closing Date), and shall cause their respective Affiliates not
to, in each case, without the express prior written consent of Buyer (which
consent may be withheld by Buyer in its sole and absolute discretion) for his,
her, or its or their, as the case may be, own account or jointly with any other
Person, directly or indirectly, own, manage, operate, join, control, finance,
invest in, bid for, advise (or advise others with respect to) or otherwise
participate in, or be connected with, or become or act as a partner, manager,
member, director, officer, employee, consultant, representative, agent or
landlord of (other than pursuant to the lease of 000 Xxxxxx Xxxxxx contemplated
by the MI Agreement), any business, individual, partnership, firm, corporation
(other than Buyer), limited liability company, association or other entity which
is in competition with, or is otherwise engaged anywhere in the United States of
America and the Provinces of Ontario and Quebec, Canada, in the Restricted
------------------
Business (as
hereafter defined); provided, however, that a Seller may own, directly or
-------- -------
indirectly, solely as an investment, (x) securities of the Buyer granted to such
Seller and (y) securities of any business traded on any national securities
exchange or NASDAQ, provided such Seller is not a controlling person of, or a
member of a group which controls or seeks to control, such business and further
provided that such Seller and its Affiliates do not, in the aggregate, directly
or indirectly, own 2% or more of any class of securities of such business; and
(ii) shall not, and shall cause their respective Affiliates not to, directly or
indirectly, for his, her, or its or their own account or jointly with another,
or for or on behalf of any Person, as principal, agent or otherwise, (A) solicit
or induce or in any manner attempt to solicit or induce any Person employed by
the Company or any of its Subsidiaries to leave such position or (B) interfere
with, disrupt or attempt to disrupt any relationship, contractual or otherwise,
between the Company or any of its Subsidiaries and any of the customers, clients
or suppliers of the Company or any of such Subsidiaries; provided that
--------
notwithstanding the foregoing the Sellers and their Affiliates may take any
action whatsoever (including without limitation legal action) against (x) any
customer in connection with any Reimbursable Trade Account Receivable with
respect to which the Sellers have an obligation to indemnify under Section
12.1(b) or (y) any supplier, manufacturer or any other Person relating to,
resulting from or in connection with any claims for indemnification by the Buyer
or a Buyer Indemnitee against the Sellers under Article 7, 8 or 12 of this
Agreement.
In addition, the Sellers shall not, and shall cause their respective
Affiliates not to, to any Person denigrate or derogate the Buyer or any of its
subsidiaries (including the Company), or any product or service or procedure of
any such company whether or not such denigrating or derogatory statements shall
be true or are based on acts or omissions which occurred or are learned by a
Seller prior to the date hereof or otherwise. A statement shall be deemed
denigrating or derogatory to any Person only if it (i) materially
adversely affects the esteem in which such Person is held by investors, lenders
or licensing, rating, or regulatory entities and (ii) is not privileged in law.
The Sellers acknowledge that irreparable harm would be suffered by the
parties relying on the Sellers' covenants and undertakings set forth herein in
the event that any of the provisions of this Section were not performed fully by
the Sellers in accordance with the terms specified herein, and that monetary
damages are an inadequate remedy for breach of this Section because of the
difficulty of ascertaining and quantifying the amount of damages that will be
suffered by the parties relying hereon in the event that the undertakings and
provisions contained in this Section were breached or violated. Accordingly,
each Seller agrees that Buyer shall be entitled to an injunction or injunctions
to restrain, enjoin and prevent breaches or threatened breaches of the
covenants, undertakings and provisions herein and to enforce specifically the
provisions hereof in any court of the United States or any state having
jurisdiction over the matter, it being understood that any such remedies shall
be in addition to, and not in lieu of, any other rights and remedies available
at law or in equity. The Sellers further acknowledge and agree that the
covenants contained in this Section shall not be deemed exclusive of any common
law or other rights of Buyer in connection with the matters covered hereby.
The provisions of this Section are severable, and the invalidity of
any provision shall not affect the validity of any other provision. It is the
intention of the parties that this Section be enforced to the fullest extent
permitted and, therefore, in the event that any provision of this Section or the
application thereof is held to be unenforceable in any jurisdiction because of
the duration or scope thereof, the parties hereto agree that the court or panel
of arbitrators making such determination shall have the power to reduce the
duration and scope of such provision to the extent necessary to make it
enforceable, and that this Section in its reduced form shall be valid and
enforceable to the full extent permitted by law, but no such reduction shall
affect the enforceability of the express terms
hereof in any other jurisdiction.
6.11 Excluded Assets and Liabilities. Prior to the Closing Date,
-------------------------------
the Company shall transfer all right, title and interest to, and all
responsibility in respect of, the Excluded Assets and Liabilities to the Sellers
or their respective designees. The Sellers hereby agree to indemnify the Buyer
Indemnitees from and against all Losses and Liabilities attributable to the
Excluded Assets and Liabilities.
6.12 Insurance Tail. The Buyer shall purchase and cause to be
--------------
maintained in effect at Closing and for a period of two years after the Closing
Date, for the benefit of the Company and its Subsidiaries, liability insurance
policies having at least the same coverage as, deductible amounts no greater
than, and which contain terms and conditions that are not less advantageous to
the Company and its Subsidiaries than, the liability insurance policies
maintained by the Company and its Subsidiaries as of the Closing Date; provided
--------
that the Buyer's obligation under this Section with respect to an employee
practice liability insurance policy is only to the extent that the maximum
premium therefore does not exceed $20,000 per annum.
6.13 Payment of Indebtedness. At Closing, the Buyer shall pay
-----------------------
all principal and interest owing with respect to the Stonington mortgage and
Sellers shall arrange to have the lenders with respect thereto deliver a "pay
off letter" and UCC-3 Termination Statements with respect thereto at Closing.
At Closing, the Buyer may, at its option, repay any other indebtedness of the
Company or any of its Subsidiaries. If the Buyer notifies the Sellers at least
10 Business Days prior to the Closing Date that it will repay any such
indebtedness at Closing, the Sellers shall arrange to have the lenders with
respect to such indebtedness deliver pay-off letters and UCC-3 Termination
Statements at the closing with respect to such indebtedness. If the Buyer elects
to repay any indebtedness of the Company or its Subsidiaries at Closing, neither
the Sellers nor the Company or any of its Subsidiaries shall have any liability
or obligation with respect
thereto (it being understood that any prepayment penalties resulting therefrom
in excess of $18,750 shall be included as a liability of the Company in the
Preliminary Closing Balance Sheet, the Audited Closing Balance Sheet and the
Closing Adjusted Net Worth Schedule pursuant to Section 1.2). The Buyer agrees
to pay the first $18,750 of any such prepayment penalties.
6.14 Rental Ready Adjustment. Sellers will deliver a Rental
-----------------------
Asset Listing to the Buyer at Closing ("Rental Asset Listing") which shall set
--------------------
forth as of the Closing Date (i) the asset description, make, model and original
cost, accumulated depreciation and net book value of all rental equipment
inventory held for rent to customers of the Company and its Subsidiaries (the
"Equipment") as of the Closing Date. The Sellers shall, subject to Sections
---------
12.1(c) (other than Section 12.1(c)(i)), 12.4 and 14.2, indemnify the Buyer for
(x) each item of Equipment listed on the Rental Asset Listing which is not
Rental Ready and (y) each item of Equipment which is listed on the Rental Asset
Listing and which is missing, in the amount calculated as described below (the
"Rental Ready Adjustment"). Within 15 days following the Closing Date, the Buyer
-----------------------
shall complete a physical inventory of each item of Equipment on the Rental
Asset Listing, including by visiting renters' locations as necessary to inspect
such Equipment, and the indemnification provided in this Section 6.14 shall be
based on the Rental Ready Adjustment resulting from the findings of such
physical inventory (the "Post Closing Rental Ready Adjustment"). The Sellers'
------------------------------------
Representative or its designee shall have the right to observe and consult with
the Buyer during the physical inventory. The amount of any indemnification
payment required under this Section shall equal (I) the lesser of (x) the repair
cost and (y) the replacement cost for each item of Equipment that is not Rental
Ready and (II) the fair market value (as determined by the Buyer and the
Sellers' Representative) for each item of Equipment that is missing; provided,
--------
that the Buyer shall be entitled to indemnification pursuant to this Section
6.14 only when and if the aggregate
fair market value (determined as aforesaid) of all such missing Equipment plus
the repair/replacement costs of all such non Rental Ready Equipment, exceeds
$25,000, and then only to the extent of such excess, and any indemnification
obligation shall be subject to Sections 12.1(c) (other than Section 12.1(c)(i)),
12.4 and 14.2. The amount of any such indemnification shall be paid to the Buyer
out of the Escrow Amount, and the Buyer and the Sellers' Representative shall
give instructions to the Escrow Agent to pay, an amount equal to such adjustment
within five Business Days of completion of the determination of the Rental Ready
Adjustment; provided that if such Post Closing Rental Ready Adjustment exceeds
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the Escrow Amount, the Sellers shall pay to the Buyer on such date the excess of
the Post Closing Rental Ready Adjustment over the Escrow Amount. For purposes of
this Agreement, an item of Equipment is "Rental Ready" if (i) no maintenance or
------------
repairs (other than routine maintenance) costing more than the greater of (x)
$750 per item and (y) 3.5% of the original cost of such item of Equipment, are
required with respect to such item to bring such item into condition for rental.
The repair cost with respect to any item of Equipment shall be determined based
upon the cost of a similar repair most recently performed by the Company or any
Subsidiary of the Company to the same or similar item of Equipment. The parties
agree that the items of Equipment listed in Schedule 6.14(b) shall not give rise
----------------
to a Rental Ready Adjustment. Any disputes as to the physical count, fair market
value or whether any item of Equipment is Rental Ready will, if possible, be
resolved while the physical inventory of such Equipment is being taken. Any
disputes not so resolved within 15 days shall be resolved by an independent
third party mutually acceptable to Buyer and the Sellers' Representative or, if
Buyer and the Sellers' Representative cannot agree on the designation of such
independent third party within five Business Days, by the CPA Firm, whose
determination shall be final, binding and conclusive on the parties hereto.
Unless otherwise agreed to by the Buyer and the Sellers' Representative in
writing, operating leases entered into by the Company or any of its Subsidiaries
shall not cause an adjustment to the Purchase Price pursuant to an Rental Ready
Adjustment.
6.15 No Solicitation. The Sellers will not, and will not cause
---------------
or permit the Company or any of its directors, officers, employees,
representatives or agents (collectively, "Agents") to, directly or indirectly,
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(i) discuss, negotiate, undertake, authorize, recommend, propose or enter into,
any transaction involving a merger, consolidation, business combination,
purchase or disposition of any
capital stock or other equity interest in, or any material amount of the assets
of, the Company, other than the transactions contemplated by this Agreement (an
"Acquisition Transaction"), (ii) facilitate, encourage, solicit, participate in
-----------------------
or initiate discussions, negotiations or submissions of proposals or offers in
respect of an Acquisition Transaction, (iii) furnish or cause to be furnished,
to any Person, any information concerning the business, operations, properties
or assets of the Company in connection with an Acquisition Transaction, or (iv)
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other Person to do or seek any of the
foregoing. The Sellers will inform the Buyer in writing immediately following
the receipt any Seller, the Company or any Agent of any proposal or inquiry in
respect of any Acquisition Transaction.
6.16 Publicity. None of the Buyer, the Sellers, the Company or
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the Agents shall issue any press release or public announcement concerning this
Agreement or the transactions contemplated hereby without obtaining the prior
written approval of the other parties hereto, which approval will not be
unreasonably withheld or delayed; provided, however, that the Buyer may make
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such disclosure as the Buyer deems is required by Applicable Law or by the
applicable rules of any stock exchange on which any securities of the Buyer are
listed. The Sellers acknowledge and agree that the Buyer may disclose
information concerning this Agreement to the extent required by law in any
filing with the Securities and Exchange Commission or in any offering memorandum
relating to a financing of the Buyer; provided that the Buyer shall give the
--------
Sellers' Representative an opportunity to review such disclosure (and an
opportunity to comment thereon) to the extent reasonably possible.
7. Tax and Related Matters.
-----------------------
7.1 Taxes; Section 338(h)(10) Election.
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(a) (i) At the election of the Buyer, the Buyer and the Sellers
shall file an election under Section 338(h)(10) of the Code and under any
comparable provisions of state, local, or foreign law with respect to the
purchase of the Shares (the "Election"). No later than 60 days after the
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Closing Date the Buyer shall notify the Sellers whether the Buyer will make
the Election. If the Election is made, the Election Tax Cost (as
determined hereunder) shall be paid as additional Purchase Price by the
Buyer to the Sellers and the Buyer and Sellers shall report, in connection
with the determination of Taxes, the transactions contemplated by this
Agreement in a manner consistent with the Election, the computation of the
Election Tax Cost, the Modified Aggregate Deemed Sales Price (as defined
below) and the Deemed Sales Price Allocation (as defined below). The
Sellers and the Buyer shall take no action which is inconsistent with the
Election or its validity under the Code and the applicable Treasury
Regulations.
(ii) On the Closing Date, the Sellers shall execute and deliver
to Buyer five copies of Internal Revenue Service Form 8023 provided by the
Buyer and any similar forms under applicable state, local and foreign law
(the
"Election Forms").
(iii) As soon as practicable after the Closing Date, but in no
event later than 60 days after the Closing Date, the Buyer shall deliver to
the Sellers a written notice of its intention to file the Election,
together with the Buyer's calculation of (A) the Modified Aggregate Deemed
Sales Price, (B) the allocation thereof among the assets of the Company in
accordance with the principles of Treasury Regulations (S) 1.338(h)(10)-
1(f)(1)(ii) (the "Deemed Sales Price Allocation") and (C) the Election Tax
Cost. The term "Modified Aggregate Deemed Sales Price" shall mean an
amount resulting from the Election, determined pursuant to Treasury
Regulation (S) 1.338(h)(10)-1(f) without regard to items described in
Treasury Regulation (S) 1.338(h)(10)-1(f)(4) (provided that the Sellers may
take such items into account in filing Tax Returns.) The term "Election
Tax Cost" shall mean, with respect to each Seller, (A) the excess, if any,
of (x) the net ordinary income and capital gain recognized by such Seller
as a consequence of the Election multiplied by a tax rate of 44% for
ordinary income and 24% for capital gain, as the case may be, over (y) the
net long-term capital gain that would have been recognized by such Seller
on the sale of his Shares if the Election had not been made multiplied by
24%, divided by (B) the excess of 100 percent over the applicable
percentage described in clause (x).
(iv) The Buyer shall be responsible for the preparation and
filing of all forms and documents required in connection with the Election.
The Buyer shall provide the Sellers with copies of (A) any necessary
corrections, amendments, or supplements to Form 8023, (B) all attachments
required to be filed therewith pursuant to applicable Treasury Regulations,
and (C) any comparable forms and attachments with respect to any applicable
state, foreign, or local elections included as part of the Election. The
Sellers shall execute and deliver to
the Buyer within five (5) days of receipt by the Sellers such documents or
forms as are required properly to complete the Election.
(v) The Sellers and the Buyer shall cooperate fully with each
other and make available to each other such Tax data and other information
as may be reasonably required by the Sellers or the Buyer in order for the
Buyer to (A) timely file the Election and any other required statements or
schedules (or any amendments or supplements thereto), (B) compute the
Modified Aggregate Deemed Sale Price and the Deemed Sale Price Allocation
and (C) compute the Election Tax Cost.
(b) Payment Mechanism. If the Buyer makes the Election pursuant to
-----------------
Section 7.1(a), the Buyer shall pay to the Sellers the amount of the Election
Tax Cost by March 15, 1999. The Buyer's determination of the Election Tax Cost
shall be final and binding upon the parties to this Agreement unless within
thirty (30) days after receipt by the Sellers of the Buyer's computation of the
Election Tax Cost the Sellers shall have delivered to the Buyer a notice (an
"ETC Disagreement Notice") setting forth specific objections to the amount or
-----------------------
calculations of the Election Tax Cost. If any ETC Disagreement Notice is
delivered by the Sellers to the Buyer in a timely manner indicating objections
to the amount of the Election Tax Cost, then during a period of ten (10)
Business Days following delivery by the Sellers of such ETC Disagreement Notice,
the Buyer and the Sellers shall attempt to resolve, in writing, any differences
they have with respect to any matter specified in the ETC Disagreement Notice
and to agree on the amounts of the calculations made in determining the Election
Tax Cost. If at the end of such 10-Business Day period, the Buyer and the
Sellers have failed to reach written agreement with respect to any of such
matters, then either of the Buyer or the Sellers may submit a demand for
resolution as to matters as to which they have failed to reach written agreement
to the CPA Firm (in such capacity, the "ETC Accountant"). The ETC
--------------
Accountant shall on or prior to the date that is thirty (30) days after any
information reasonably requested by the ETC Accountant to be provided shall have
been received by the ETC Accountant, deliver to the Buyer and the Sellers, a
statement stating that the calculations made in determining the Election Tax
Cost are correct or setting forth its resolution of any specific items of
disagreement and a calculation of any unpaid Election Tax Cost based upon such
resolution. The Buyer shall pay any such unpaid Election Tax Cost to the
affected Sellers within five (5) Business Days after receipt of the ETC
Accountant's statement. All fees and expenses payable to the ETC Accountant
incurred in connection with such disagreement shall be borne 50% by the Buyer
and 50% by the Sellers and all other expenses incurred in connection therewith
shall be borne by the party incurring such expenses.
7.2 Tax Administration.
------------------
(a) (i) The Sellers shall prepare or cause to be prepared and
shall timely file or cause to be timely filed all Tax Returns required to
be filed by or on behalf of the Company and any of its Subsidiaries any of
their respective operations and assets on or before the Closing Date
(taking into account applicable extensions of time) and shall cause to be
paid any Taxes shown to be due thereon. Such Tax Returns shall be prepared
in a manner consistent with prior practice and in accordance with
applicable law. The Sellers shall also prepare or cause to be prepared for
the Company, in a manner consistent with prior practice and in accordance
with applicable law all Tax Returns required to be filed or with respect to
the Company which relate to taxable periods (or portions thereof) ending on
or prior to the Closing Date ("Pre-Closing Date Tax Returns") and shall
----------------------------
remit or cause to be remitted to the Buyer any and all Taxes due, to the
extent such Taxes have not been provided for in the Closing Balance Sheet
Tax Reserve, with respect to such Pre-Closing Date Tax Returns. The
Sellers shall deliver or cause to be
delivered all such Pre-Closing Date Tax Returns to the Buyer not less than
20 Business Days prior to the due date therefor. The Buyer shall review and
comment upon such Tax Returns, and upon the Buyer's approval thereof, the
Buyer shall cause the Company to file such Pre-Closing Date Tax Returns.
Expenses relating to the preparation of the Tax Returns described in the
preceding sentences shall be borne 50% by the Buyer and 50% by the Sellers;
provided, however, that the amount of expense incurred by the Buyer in
-------- -------
connection with the preparation of such Tax Returns for the Company, MES
and MI shall not exceed, in the aggregate, $10,000. Except as otherwise
provided herein, the Buyer shall be responsible for preparing and filing or
causing to be prepared and filed all Tax Returns required to be filed by or
on behalf of the Company and any of its operations and/or assets after the
Closing Date (taking into account applicable extensions of time) and shall,
subject to this Section 7.2(a)(i) and Section 7.2(a)(ii) hereof, pay or
cause to be paid any Taxes shown to be due thereon.
(ii) With respect to any Tax Return required to be filed by the
Buyer for a taxable period of the Company or any of its Subsidiaries
beginning on or before and ending on or after the Closing Date, the Buyer
shall provide the Sellers with a statement setting forth the amount of Tax
shown on such Tax Return for which the Sellers are responsible pursuant to
Section 7.2(b)(i) hereof or that are allocable to the Sellers pursuant to
Section 7.2(b)(iii) hereof (as the case may be) (the "Statement") at least
---------
thirty (30) Business Days prior to the due date for filing of such Tax
Return (including extensions). Not later than 5 business days before the
due date (including extensions) for payment of Taxes with respect to such a
Tax Return the Sellers shall pay to Buyer an equal amount to the Taxes
shown on the Statement as being the responsibility of the Sellers pursuant
to Section 7.2(b)(i) hereof or allocable to the Sellers pursuant to Section
7.2(b)(iii)
hereof (as the case may be). No payment pursuant to this Section 7.2(a)(ii)
shall excuse the Sellers from their indemnification obligations pursuant to
Section 7.2(b) hereof should the amount of Taxes as ultimately determined
(on audit or otherwise), for the periods covered by such Tax Returns and
which are the responsibility of Sellers, exceed the amount of the Sellers'
payment under this Section 7.2(a)(ii).
(iii) The Sellers may not file any amended Tax Returns or refund
claims in respect of any taxable period of the Company or any of its
Subsidiaries ending on or prior to the Closing Date without the prior
written consent of the Buyer which shall not be unreasonably withheld.
(iv) The parties shall cooperate fully with and make available to
one another in a timely fashion such Tax data and other information as may
be reasonably required for the preparation by the Buyer or the Sellers, as
applicable, of any Tax Returns required to be prepared and filed hereunder.
The Sellers and the Buyer shall make available to the other, as reasonably
requested, all information, records or documents in their possession
relating to Tax liabilities of the Company or any of its Subsidiaries for
all taxable periods of the Company or any of its Subsidiaries, as the case
may be, ending on, prior to or including the Closing Date and shall
preserve all such information, records and documents until the expiration
of any applicable Tax statute of limitations or extensions thereof;
provided, however, that if a proceeding has been instituted for which the
-------- -------
information, records or documents is required prior to the expiration of
the applicable statute of limitations, such information, records or
documents shall be retained until there is a final determination with
respect to such proceeding.
(b) (i) The Sellers will, jointly and severally, be liable for,
and will hold the Buyer and the Company and their respective directors,
officers,
affiliates, successors and permitted assigns (each a "Buyer Indemnified
-----------------
Person") harmless from and against any and all Losses resulting from,
------
arising out of or based upon (A) any and all Taxes for which the Company or
any of its Subsidiaries may be liable for all taxable periods ending on or
before the Closing Date (the "Pre-Closing Period") and to the
------------------
extent provided in clause (iii) below, all taxable periods that include,
and end after the Closing Date in each case to the extent that such Taxes
exceed, in the aggregate, the Closing Balance Sheet Tax Reserve and (B) any
inaccuracy in or breach of any representation or warranty set forth in
Section 4.7 of this Agreement; provided, however, that if an audit
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adjustment for a Pre-Closing Period (x) gives rise to an indemnity
obligation under this Section 7.3(b)(i) and (y) is reasonably expected to
reduce the taxable income of the Company or any of its Subsidiaries for a
taxable year or period beginning after the Closing Date (such estimated
reduction in taxable income is referred to herein as a "Post-Closing Tax
----------------
Benefit"), then the amount required to be indemnified by the Sellers
-------
pursuant to this Section 7.3(b)(i) shall be reduced by the "net present
value" of such Post-Closing Tax Benefit. The "net present value" of a
Post-Closing Tax Benefit shall be determined by using a discount rate equal
to 6%. For purposes of making this determination, the parties shall assume
that a Post-Closing Tax Benefit shall be realized by the Company or
relevant Subsidiary at the time the relevant Tax Return is required to be
filed for the taxable year or period in which such Post-Closing Tax Benefit
is reasonably expected to be available and that the Company or relevant
Subsidiary is subject to Federal income tax, and any applicable state and
local taxes, at the maximum rates provided by law for such taxable year or
period.
(ii) The Buyer will indemnify and hold harmless the Sellers, any
trustee of any Seller in his or her individual capacity as trustee and any
beneficiary or trustee of any Seller in his or her capacity and their
respective successors from and against any and all Losses resulting from,
arising out of or based upon all Taxes for which the Company may be liable
for all taxable periods or portions thereof beginning after the Closing
Date.
(iii) For purposes of the foregoing, if a taxable period begins
before and ends after the Closing Date (the "Interim Period"), Taxes for
--------------
the portion of such taxable period ending on the Closing Date will be
determined by an interim closing the books of the Company or its relevant
Subsidiary and determining the amount of relevant Taxes that would have
been due had such taxable period ended on the Closing Date, without regard
to any events occurring after the Closing Date. Any Taxes for such taxable
period in excess of the foregoing amount will be deemed to be attributable
to the portion of such taxable period occurring after the Closing Date. To
the extent any Taxes are not susceptible to such allocation, such Taxes
shall be allocated by apportionment on the basis of elapsed days.
7.3 Contests.
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(a) After the Closing Date, the Buyer shall promptly notify the
Sellers in writing of any written notice of a proposed assessment or claim in an
audit or administrative or judicial proceeding involving the Company or any of
its Subsidiaries which, if determined adversely to the Company or relevant
Subsidiary, would be grounds for indemnification under this Article 7; provided,
--------
however, that a failure to give such notice will not affect a Buyer Indemnified
-------
Person's right to indemnification hereunder except to the extent, if any, that,
but for such failure, the Sellers could have avoided the Tax liability in
question.
(b) Except as provided in Section 7.3(c) below, in the case of an
audit or administrative or judicial proceeding that relates to any Pre-Closing
Period, the
Sellers shall have the right at their own expense to control the conduct of such
audit or proceeding; provided that within 30 days after the Sellers have
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received the written notice from the Buyer that is required under Section 7.3(a)
above, and prior to taking any action with respect to such audit or
administrative or judicial proceeding, the Sellers acknowledge in writing their
joint liability under Section 7.3(b)(i) of this Agreement to hold any Buyer
Indemnified Person harmless against the full amount of any adjustment which may
be made as a result of such audit or proceeding that relates to the Pre-Closing
Period (to the extent such amount exceeds the Closing Balance Sheet Tax Reserve
after giving effect to all prior and concurrent payments made pursuant to
Section 7.3(b)(i) of this Agreement to any Buyer Indemnified Person); provided,
` --------
further, that the Sellers may not agree to a settlement or compromise to any
-------
such audit or proceeding that may reasonably be expected to have an adverse
effect on the tax liability of the Company for a taxable period after the
Closing Date without the prior written consent of the Buyer; provided,
--------
further, that if the Buyer does not consent to such settlement or compromise,
-------
the Sellers' liability to indemnify the Buyer as a result of such audit or
proceeding shall be limited to the amount that the Sellers would have paid had
the Buyer consented to such settlement or compromise. The Buyer also may
participate in any such audit or proceeding at its own expense and, if the
Sellers do not assume the defense of any such audit or proceeding, the Buyer may
defend the same at its own expense in such manner as it may deem appropriate,
including, but not limited to, settling such audit or proceeding, without any
effect to any Buyer Indemnified Person's right to indemnification under this
Article 7.
(c) Notwithstanding subsection (a) above, any contest and/or
settlement of any issue raised in an official inquiry, examination or proceeding
that relates to the validity or effect of the Election will be conducted by the
Buyer and the Company.
(d) In the case of an audit or administrative or judicial
proceeding that relates to the Interim Period, the Buyer shall have the right at
its own expense to control the conduct of such audit or proceeding; provided
--------
that the Buyer may not agree to a settlement or compromise in any such audit or
proceeding without the prior written consent of the Seller's Representative (as
defined in Section 12.5 below), which consent shall not be unreasonably
withheld. The Sellers also may participate in any such audit or proceeding at
their own expense and, if the Buyer does not assume the defense of any such
audit or proceeding, the Sellers may defend the same at its own expense in such
manner as it may deem appropriate, including, but not limited to, settling such
audit or proceeding, without any effect to the Sellers' right to indemnification
under this Article 7.
8. Environmental Matters.
---------------------
8.1 The Phase I Investigations.
--------------------------
(a) Within ten days of the execution of this Agreement, the Buyer
shall retain, at its sole expense, an environmental consulting firm reasonably
acceptable to the Sellers (the "Phase I Consultant") to perform an environmental
------------------
assessment for the Properties in accordance with ASTM Phase I Standard E 1527
and other sound practices and procedures normally employed in the Phase I
process (the "Phase I Assessments"). The Phase I Assessments shall be completed
-------------------
as soon as is reasonably practicable. The Phase I Consultant shall report its
findings simultaneously to the Buyer and the Sellers both orally and in writing.
(b) With respect to the leased Properties, the Phase I Assessment
shall provide the Phase I Consultant's estimate of the range of costs, from the
reasonable best to reasonable worst case, to remediate known or reasonably
suspected Releases of Hazardous Materials, on the leased Properties for which
the Company is obligated under Environmental Laws to perform Remedial Action, or
for which the Company would be obligated to perform Remedial Action if the
relevant Governmental Authorities were aware of the Release. The Phase I
Consultant shall also provide estimates for expenditures
necessary to correct violations of Environmental Laws on the leased Properties.
The Phase I Consultant shall assume the use of the most cost-effective,
reasonable and timely Remedial Action and shall consider the Company's status as
a lessee in evaluating the Company's potential obligations under Environmental
Laws.
(c) With respect to the Owned Real Properties for which sufficient
sampling data exists to enable the Phase I Consultant to provide a reasonable
range of estimates, the Phase I Assessment shall provide the Phase I
Consultant's estimate of the range of cost, from the reasonable best to
reasonable worst case, to remediate known or reasonably suspected Releases of
Hazardous Materials for which there is an obligation under Environmental Laws on
the part of the Company or any Subsidiary of the Company to perform Remedial
Action, or for which there would be such an obligation, if relevant Governmental
Entities had notice of the Release. The Phase I Consultant shall also provide
estimates for the expenditures necessary to correct violations of Environmental
Laws on the Owned Real Properties. In making its estimates, the Phase I
Consultant shall assume the use of the most cost-effective, reasonable and
timely Remedial Action. With respect to known or reasonably suspected Releases
of Hazardous Materials at the Owned Real Properties where there is not
sufficient information to enable the Phase I Consultant to estimate reasonably
the ranges of costs of the most cost-effective, timely and reasonable Remedial
Action, the Phase I Assessment shall recommend appropriate media sampling.
8.2 The Phase II Investigations. In the event that the Phase I
---------------------------
Report concludes that media sampling is necessary at one or more of the Owned
Real Properties, the Buyer shall retain at its sole expense an environmental
consulting firm reasonably acceptable to the Sellers (the "Phase II Consultant")
-------------------
to perform the necessary Phase II assessments (the "Phase II Assessment") using
-------------------
subcontractors of its choice. For properties subject to the Phase II process,
the Phase II Consultant shall be required to provide
simultaneously to the Buyer and the Sellers a report identifying each identified
Release of Hazardous Materials, or violation of Environmental Laws, not
addressed in the Phase I Assessments for which there is an obligation under
Environmental Law on the part of the Company or any Subsidiary of the Company to
undertake Remedial Action (which could include further investigation), or for
which there would be such an obligation if the relevant Governmental Entities
had notice of the Release or violation, and estimating the range of costs from
the reasonable best to reasonable worst case, of the actions reasonably
necessary to perform such Remedial Action. The Phase I Assessments prepared
pursuant to paragraph 8.1 and the Phase II Assessments are hereinafter referred
to collectively as the "Assessments."
8.3 Certain Procedures Relating to the Consultant's Estimates.
---------------------------------------------------------
(a) The Phase I and II Consultants' estimates shall be based upon the
assumption that the Buyer covenants (which the Buyer hereby does) to undertake,
or cause the Company to undertake, all reasonable actions necessary to insure
that the remediation of any area, or the correction of any violation of
Environmental Law, is accomplished in the most cost-effective, timely,
reasonable manner consistent with the present uses of the Properties, and that
the least onerous soil and groundwater cleanup criteria available under
applicable Environmental Laws are used in any such remediation. To the extent
reasonably necessary to achieve no further action status, such actions by the
Buyer and the Company shall include, but not be limited to, the execution of
consents by the Buyer and the Company to restrict the future use of the
Properties to commercial/industrial uses such as those in existence as of the
Closing Date.
(b) For each area or violation, the Consultants' estimates may be made
in ranges in which event the seventy-fifth percent of the range shall be deemed
to be the estimate for the purposes of this Agreement which shall be calculated
by multiplying the difference between the high and the low end by .75 and adding
the product
of that multiplication to the low end.
(c) In making its estimates, the Consultants shall assume that the
Company has responsibility for all investigative and remedial obligations that
must be performed under Environmental Laws (if any) as a result of the
transactions contemplated by this Agreement.
8.4 Review of the Estimated Costs of Remediation. In the event
--------------------------------------------
that either the Buyer or the Sellers disagree with the Phase I or Phase II
Consultants' estimate of the cost of necessary compliance action or Remedial
Action, then either (or both) may submit such disagreement to an independent
environmental consultant mutually acceptable to the Buyer and the Sellers'
Representative (the "Independent Consultant") for a final and binding
----------------------
determination. If the Buyer and the Sellers' Representative cannot agree on the
independent engineer, he or she shall be appointed by the President of the
National Society of Professional Engineers. Proceedings before the Independent
Consultant shall be restricted to the submission to him or her of the Phase I
Assessment and Phase II Assessment, and a statement of position with one
supporting affidavit by each party. Each statement of position shall set forth
the parties' estimate of the costs of the remediation or capital improvements
reasonably necessary to achieve compliance with Environmental Laws for each area
at which Releases of Hazardous Materials have been documented in the Phase I
Assessments and/or Phase II Assessments based upon the standards set forth in
this Section 8. The statements of position of each of the Buyer and the Sellers
shall be submitted to the Independent Consultant within 10 days of his or her
appointment. The Independent Consultant shall, within 14 days of receipt of such
statements, issue a report accepting the estimate of one or the other party for
each area in dispute (the "Independent Consultant's Report"). The Independent
-------------------------------
Consultant may employ counsel to assist it in the review process. Costs of the
Independent Consultant and its counsel shall be borne 50 percent by the Buyer
and 50 percent by the Sellers.
8.5 The Sellers' Indemnification of Buyer. Subject to Sections
-------------------------------------
12.1(c), 12.4 and 14.2, Sellers will defend, indemnify and hold harmless the
Buyer Indemnitees (as defined in Section 12.1) from all Pre-Closing
Environmental Losses. For the purposes of this Agreement, "Pre-Closing
-----------
Environmental Losses" means (1) all costs and expenses necessary to implement
--------------------
Remedial Action on the Owned Real Properties for which a determination has been
made in the Phase I Assessment or Phase II Assessment that (i) Remedial Action
by the Company or any Subsidiaries of the Company is necessary to discharge
obligations under (or to cure violations of) Environmental Laws, including
obligations to remediate Hazardous Materials in soil or ground water to the
extent applicable Environmental Laws require such remediation or (ii) such
Remedial Action would be necessary if applicable Governmental Authorities had
been notified of conditions on the Owned Real Properties; provided that costs
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and expenses shall be subject to indemnification under this clause (ii) only if
incurred in connection with a suit (whether brought by a Person or Governmental
Entity), or an order, investigation or directive of a Governmental Entity
commenced prior to the third anniversary of the Closing Date; and (2) Losses
arising out of or relating to any breach of the representations in Section 4.21
hereof; provided that in each of subsections (1) and (2) above the aggregate
--------
Losses that the Sellers shall be obligated to pay under this Agreement with
respect to Remedial Action in connection with Owned Real Property shall not
exceed the aggregate estimated remediation costs at the Owned Real Properties
set forth in the Phase I Assessments and the Phase II Assessments, in each case
as modified by the Independent Consultant's Report and reduced by any amounts
the Buyer or the Company pays to perform Remedial Action at such properties
which would be subject to indemnification under Article 8.5 but for the
existence of the Minimum Amount as established in Section 12.1(c)(i).
8.6 Buyer's Indemnification of the Sellers. Except with respect
--------------------------------------
to Losses for which the Buyer is entitled to indemnification under Section 8.5,
the Buyer
agrees to defend, indemnify and save harmless the Seller Indemnitees (as defined
in Section 12.2) from and against any Losses under or relating to Environmental
Laws incurred by the Seller Indemnitees resulting from, arising out of, relating
to, the operation of the Business or condition of the Properties, whether before
or after the Closing Date; provided, the Buyer shall not be obligated to
--------
indemnify the Seller Indemnitees for Losses resulting from, arising out of, or
related to the operation of the Business or condition of the Properties before
the Closing Date to the extent such Losses were caused by the Seller
Indemnitees' willful misconduct, violation of standards under Environmental
Laws, or to the extent such Losses arose out of a condition on the Properties of
which the Seller Indemnitees had knowledge prior to the Closing Date, but
concerning which the Sellers failed to make a disclosure to the Buyer or the
Phase I Consultant prior to such time.
8.7 Exclusive Remedy. Except with respect to claims for fraud,
----------------
the environmental indemnities in this Article shall be the sole and exclusive
remedy of the parties with respect to Losses under or relating to Environmental
Laws arising out of the operation of the Business or the condition of the
Properties prior to the Closing Date. The Buyer and the Sellers specifically
agree that, except to the extent that this Agreement is held to be invalid or is
unenforceable, they will not now or in the future pursue any claims against one
another, including, but not limited to, claims pursuant to CERCLA or any
analogous state law, with respect to environmental matters arising out of the
operation of the Business prior to the Closing Date or conditions on, in, under
or about the Properties as of the Closing Date except as provided in this
Agreement.
8.8 Limitation of Sellers' Duty to Indemnify. Notwith standing
----------------------------------------
anything herein to the contrary, the Sellers' obligation to indemnify the Buyer
Indemnitees pursuant to this Article 8 is limited to matters for which an
"Environmental Claim Notice" (as defined below) has been received by the Sellers
---------------------------
(a) within 180 days after the Closing Date with respect to the matters referred
to in clause (1)(i) of the definition of Pre-Closing
Environmental Losses or (b) on or prior to the third anniversary of the Closing
Date with respect to matters referred to in clauses 1(ii) and (2) of the
definition of Pre-Closing Environmental Losses.
8.9 Expenses in the Ordinary Course Excluded from
---------------------------------------------
Indemnification. Environmental Liabilities indemnifiable pursuant to this
---------------
Article 8 shall not include costs or expenses of nonremedial or noncorrective
activities undertaken in the ordinary course of business by the Company or any
of its Subsidiaries after the Closing Date, including, without limitation, costs
or expenses relating to the routine disposal of Hazardous Substances lawfully
accumulated, sampling undertaken pursuant to a Permit, or routine maintenance of
environmental control facilities unless undertaken to cure Pre-Closing
violations of Environmental Laws.
8.10 Control of Remedial Action.
--------------------------
(a) In the event that the transactions contemplated by this Agreement
trigger any investigative or remedial obligations under Environmental Laws with
respect to the Properties, including any responsibility under the Connecticut
Real Property Transfer Act and the New Jersey Industrial Site Recovery Act, the
Company shall have responsibility for the discharge of such obligations;
provided that Losses incurred by the Company to discharge any such obligation
--------
shall be subject to the indemnification by the Sellers to the extent provided in
this Article 8.
(b) Until exhaustion of the Minimum Amount established by Section
12.1(c)(i), the Company shall have the exclusive right to manage and control all
Remedial Actions for which the Buyer would be entitled to indemnification (but
for the Section 12.1(c) basket), and to negotiate with and fulfill any
requirements of or claims by a Governmental Entity or other Person with respect
to any such matter; provided that the Buyer shall keep the Sellers'
--------
Representative informed of all material developments, and provided further the
Sellers' Representative (or its designee) shall have the right to attend
and observe negotiations/ meetings with relevant Governmental Entities.
(c) The Sellers shall have the exclusive right to manage and control
all Remedial Actions for which the Buyer is fully indemnified hereunder and to
negotiate with any fulfill any requirements of or claims by a Governmental
Entity or other Person with respect to any such matter; provided that such
--------
remediation (and any settlement, agreement or ongoing obligations imposed in
connection therewith) shall not unreasonably interfere with the Buyer's or the
Company's use of the Properties, and provided further, that the Buyer shall have
-------- -------
the right to attend and observe negotiations/meetings with relevant Governmental
Entities and participate in any negotiations with respect to operational or use
restrictions; provided further, that the Buyer shall have the right to take
-------- -------
control of any Remedial Actions if (i) the Sellers fail to diligently conduct
the Remedial Action in light of an order or directive of a Governmental Entity
and the Sellers fail to implement the same within 30 days of receipt of notice
from the Buyer or the Company or (ii) the Buyer reasonably determines that the
Sellers are failing to adequately protect the environment, human health or
safety, including the health and safety of the Company's employees.
8.11 Environmental Indemnification Procedure. In order to seek
---------------------------------------
indemnification under this Article 8, the party seeking indemnification (the
"Indemnified Party") must submit to the party from which indemnification is
------------------
being sought (the "Indemnifying Party") (1) within 60 days of the discovery by
------------------
the Company or a Subsidiary of the Company of a matter which is likely to give
rise to indemnifiable Losses relating to environmental matters, and (2) within
30 days of receipt of a directive from a Governmental Entity or notice of claim
by a third party, a written notice of the claim for indemnification (an
"Environmental Claim Notice") which shall include a copy of the such directive
---------------------------
or notice of a third-party claim, if any; provided, however, failure to promptly
-------- -------
submit an Environmental Claim Notice shall not result in a loss of the right to
indemnification pursuant to this Article except to the extent that it results in
actual prejudice to the Indemnifying Party.
8.12 Access to Information. The Indemnified Party shall provide
---------------------
to the Indemnifying Party reasonable access to all information (including
documentary records, physical conditions and personnel at any property that is
the subject of the claim for indemnification) necessary to evaluate the claim
for indemnification contained in an Environmental Claim Notice.
8.13 Matters Involving Third Parties. If any Governmental Entity
-------------------------------
or other third party shall notify an Indemnified Party with respect to any
matter which may give rise to a claim for indemnification against any
Indemnifying Party under this Agreement, then the Indemnified Party shall notify
the Indemnifying Party thereof promptly; provided, however, that no delay on the
-------- -------
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is actually
prejudiced. In the event any Indemnifying Party notifies the Indemnified Party
within 15 days after the Indemnified Party has given notice of the matter that
the Indemnifying Party is assuming the defense thereof, (i) the Indemnifying
Party will defend the Indemnified Party against the matter with counsel of its
choice reasonably satisfactory to the Indemnified Party, (ii) the Indemnified
Party may retain separate co-counsel at its sole cost and expense (except that
the Indemnifying Party will be responsible for the fees and expenses of the
separate co-counsel if the Indemnified Party concludes reasonably that the
counsel the Indemnifying Party has selected has a conflict of interest with the
Indemnified Party), (iii) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld unreasonably), and
(iv) the Indemnifying Party will not consent to the entry of any judgment with
respect to the
matter, or enter into any settlement which does not include a provision whereby
the plaintiff or claimant in the matter releases the Indemnified Party from all
Loss with respect thereto, without the written consent of the Indemnified Party
(not to be withheld unreasonably). In the event the Indemnifying Party does not
notify the Indemnified Party within 15 days after the Indemnified Party has
given notice of the matter that the Indemnifying Party is assuming the defense
thereof, or does not timely thereafter assume such defense, the Indemnified
Party may defend against, or enter into any settlement with respect to, the
matter in any manner consistent with the terms of this Section at the expense of
the Indemnifying Party.
9. Conditions Precedent to the Obligation of the Buyer to Close. The
------------------------------------------------------------
obligation of the Buyer to complete the Closing is subject to the fulfillment on
or prior to the Closing Date of the following conditions, any one or more of
which may be waived by the Buyer to the extent permitted by Applicable Law:
9.1 Representations and Covenants. All representations and
-----------------------------
warranties of the Sellers contained herein that are qualified as to materiality
shall be true and correct, and the representations and warranties of the Sellers
contained herein not qualified as to materiality shall be true and correct in
all material respects, at and as of the Closing Date with the same effect as
though those representations and warranties had been made again at and as of the
Closing Date, except for those specifically relating to a date other than the
Closing Date, in which case at and as of such date. The Sellers shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by the
Sellers on or prior to the Closing Date. The Sellers shall have delivered to
the Buyer a certificate, dated the Closing Date and signed by or on behalf of
each of the Sellers, to the foregoing effect.
9.2 HSR Act Filing. Any Person required in connection with the
--------------
transactions contemplated by this Agreement to file a notification and report
form in
compliance with the HSR Act shall have filed such form and the applicable
waiting period with respect to each such form (including any extension thereof
by reason of a request for additional information) shall have expired or been
terminated.
9.3 No Injunction or Violation of Law. No order, statute, rule,
---------------------------------
regulation, executive order, stay, decree, judgment or injunction shall have
been enacted, entered, promulgated or enforced by any court or Governmental
Entity which prohibits or prevents the consummation of the transactions
contemplated by this Agreement and which has not been stayed or vacated by the
Closing Date. The Buyer and each of the Sellers shall each use their reasonable
best efforts and shall cooperate with each other to have any such order,
statute, rule, regulation, executive order, stay, decree, judgment or injunction
vacated or stayed.
9.4 Title Policies. The Sellers shall have delivered or caused
--------------
to be delivered, prior to or on the Closing Date, title insurance policies
relating to each Owned Real Property set forth on Schedule 4.10(a) insuring
----------------
such Owned Real property in the amount set forth in Schedule 9.4 with respect to
such property.
9.5 Simultaneous Closing. The transactions contemplated by (i)
--------------------
that certain Share Purchase Agreement (the "MES Agreement") dated of even date
-------------
herewith, by and among the Buyer and the shareholders of McClinch Equipment
Services, Inc., a Connecticut corporation ("MES") and (ii) that certain Share
---
Purchase Agreement ("MI Agreement") dated of even date herewith, by and among
------------
the Buyer and the shareholders of MI, shall be consummated simultaneously with
the transactions contemplated hereby.
9.6 Resignations. The Buyer shall have received the written
------------
resignations of each of the officers and directors of the Company and releases
in the form of Exhibit F from each Seller.
9.7 Reports. The Buyer shall have obtained the Phase I
-------
Assessment and Phase II Assessment reports as contemplated by Article 8 and, to
the extent required
by Article 8, the Independent Consultant's Report.
9.8 Escrow Agreement. The Buyer shall have received a copy of
----------------
the Escrow Agreement, executed by the Sellers' Representative and the Escrow
Agent.
9.9 Legal Opinions. The Buyer shall have received the opinions
--------------
of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx and Xxxxx & Xxxx, P.C., counsel to
the Sellers, addressed to the Buyer, in form and substance reasonably acceptable
to Buyer.
9.10 Affidavits. Each of the Sellers shall have provided Buyer
----------
with an affidavit of non-foreign status that complies with Section 1445 of the
Code.
9.11 Affiliate Contracts. Buyer shall have received evidence
-------------------
satisfactory to it that all Contracts between the Company or any Subsidiary and
any of its Affiliates (other than MES and MI) shall have been fully discharged
and terminated as of the Closing Date without any further liability (contingent
or otherwise) of the Company thereunder.
9.12 Certificates. Buyer shall have received certificates of
------------
good standing with respect to the Company and each of its Subsidiaries issued by
the Secretary of State or comparable official of their respective jurisdiction
of organization and for each jurisdiction in which they are qualified to do
business as a foreign corporation.
9.13 [Intentionally Omitted].
9.14 [Intentionally Omitted].
9.15 Release of Guarantees. The guarantees by the Company and its
---------------------
Subsidiaries of (i) the synthetic aircraft lease between Fleet Capital
Corporation and McClinch Aviation, Inc., and (ii) the mortgage loan by Fleet
National Bank (formerly Shawmut Bank Connecticut, N.A.) to 000 Xxxxxx Xxxxxx
Corporation, shall each be terminated.
9.16 Material Adverse Effect. No event having a Material Adverse
-----------------------
Effect shall have occurred, other than (i) termination by any customer or
distributor of a
contract or relationship with the Company primarily as a result of the
transactions contemplated by this Agreement, (ii) other adverse events occurring
solely as a result of the transactions contemplated by this Agreement or (iii)
the occurrence of a default under, or termination of any Contracts listed on
Schedule 4.6(a) occurring solely as a result of the transactions contemplated by
this Agreement.
10. Conditions Precedent to the Obligation of the Sellers to Close.
--------------------------------------------------------------
The obligation of the Sellers to complete the Closing is subject, to the
fulfillment on or prior to the Closing Date of the following conditions, any one
or more of which may be unanimously waived by the Sellers to the extent
permitted by Applicable Law.
10.1 Representations and Covenants. All representations and
-----------------------------
warranties of the Buyer contained herein that are qualified as to materiality
shall be true and correct, and the representations and warranties of the Buyer
contained herein not qualified as to materiality shall be true and correct in
all material respects, at and as of the Closing Date with the same effect as
though those representations and warranties had been made again at and as of the
Closing Date, except for those specifically relating to a date other than the
Closing Date, in which case at and as of such date. The Buyer shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it on
or prior to the Closing Date. The Buyer shall have delivered to the Sellers a
certificate, dated the Closing Date and signed by an authorized officer of the
Buyer, to the foregoing effect.
10.2 HSR Act Filing. Any Person required in connection with the
--------------
transactions contemplated by this Agreement to file a notification and report
form in compliance with the HSR Act shall have filed such form and the
applicable waiting period with respect to each such form (including any
extension thereof by reason of a request for additional information) shall have
expired or been terminated.
10.3 No Injunction or Violation of Law. No order, statute, rule,
---------------------------------
regulation, executive order, stay, decree, judgment or injunction shall have
been enacted, entered, promulgated or enforced by any court or Governmental
Entity which prohibits or prevents the consummation of the transactions
contemplated by this Agreement and which has not been stayed or vacated by the
Closing Date. The Buyer and each of the Sellers shall each use their best
efforts and shall cooperate with each other to have any such order, statute,
rule, regulation, executive order, stay, decree, judgment or injunction vacated
or stayed.
10.4 [Intentionally Omitted].
10.5 [Intentionally Omitted].
10.6 [Intentionally Omitted].
10.7 Simultaneous Closing. The transactions contemplated by (i)
--------------------
the MES Agreement and (ii) the MI Agreement shall be consummated simultaneously
with the transactions consummated by this Agreement.
10.8 Reports. The Sellers shall have received copies of the
-------
Phase I Assessment and Phase II Assessment reports as contemplated by Article 8
and, to the extent required by Article 8, the Independent Consultant's Report.
10.9 Escrow Agreement. The Sellers shall have received a copy of
----------------
the Escrow Agreement, executed by each of the Buyer and the Escrow Agent.
10.10 Legal Opinion. The Sellers shall have received the opinion
-------------
of Weil, Gotshal & Xxxxxx LLP, counsel to the Buyer, addressed to the Sellers in
form and substance reasonably acceptable to the Sellers.
10.11 Certificate. Sellers shall have received a certificate of
-----------
good standing of the Buyer issued by the Secretary of State of the State of
Delaware.
11. Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
11.1 General Survival. Except as otherwise provided in this
----------------
Article 11, all representations, warranties, covenants, agreements and
obligations of each
party contained herein, shall expire twenty-four (24) months after the Closing
Date, except for (i) covenants or obligations (including covenants to indemnify)
which by their terms shall be performed after the Closing which shall survive
the Closing and not expire unless otherwise provided in this Agreement, (ii) the
representations and warranties contained in Sections 3.1 and 4.7 shall survive
the Closing Date until the expiration of any applicable statute of limitations,
including extensions thereof, (iii) the representations and warranties contained
in Section 4.21 shall survive the Closing Date and expire thirty-six (36) months
after the Closing Date, and (iv) the representations and warranties in Section
4.10(a) and the first sentence of Section 4.10(c) shall not survive the Closing.
12. General Indemnification.
-----------------------
12.1 Indemnification of the Buyer.
----------------------------
(a) Indemnification with Respect to Representations. Subject to
-----------------------------------------------
Sections 12.1(c), 12.4 and 14.2, the Sellers hereby agree to, jointly and
severally, indemnify and hold harmless the Buyer, its directors, officers,
employees, agents, Affiliates, successors and assigns, the Company and its
Subsidiaries (the "Buyer Indemnitees") from and against all losses, liabilities,
-----------------
obligations, damages, costs (including costs of investigation) and expenses
(including reasonable attorneys' and other professionals' fees and expenses)
(collectively, the "Losses") actually incurred as a result of, or attributable
------
to any inaccuracy in, or breach of, any representation, warranty, covenant or
agreement of the Sellers in this Agreement; provided that this Section 12.1(a)
--------
shall not apply to any obligation of the Sellers to indemnify with respect to
(i) Taxes, which shall be governed exclusively by Article 7, (ii) Losses
relating to matters referred in Article 8, which shall be governed exclusively
by such Article and (iii) Losses relating to the noncollection of accounts
receivable which shall be governed exclusively by Section 12.1(b).
(b) Indemnification for Accounts Receivable. From and after
---------------------------------------
the Closing Date, the Buyer shall use its commercially reasonable best efforts
to cause the Company and its Subsidiaries to collect payment of all trade
accounts receivable of the Company and its Subsidiaries. In the event that the
Buyer and the Company, after using their commercially reasonable best efforts
consistent with the past practices of the Company and its Subsidiaries to
collect payment in full of any Reimbursable Trade Account Receivable (as defined
below), has not received payment in full (net of bad debt reserves and credit
memo reserves reflected on the Audited Closing Balance Sheet (as increased or
decreased, as the case may be, by the Resolved Objections and the CPA--
Determined Differences)) on or before the Due Date (as defined below), the Buyer
shall notify the Sellers' Representative of such event (which notice shall set
forth the amount of such Reimbursable Trade Account Receivable, the name of the
customer and the Due Date with respect thereto). Upon receipt of any such notice
from the Buyer, the Sellers' Representative shall review the information set
forth therein. If the Sellers' Representative so requests, the Buyer shall make
available to the Sellers' Representative such additional information which is in
the possession and control of either the Buyer, the Company or any of their
respective Subsidiaries with respect to such Reimbursable Trade Account
Receivable as the Sellers' Representative may reasonably require. Subject to
Sections 12.1(c), 12.4 and 14.2, within fifteen (15) days of the receipt by the
Sellers' Representative of such notice (or such later date as is reasonably
required for the Sellers' Representative to review any additional information
received from the Buyer at the request of the Sellers' Representative), the
Sellers shall pay to the Buyer, an amount equal to the excess of (A) the amount
of such Reimbursable Trade Account Receivable that remains past due and unpaid
after the Due Date over (B) any amount for which a reserve with respect to such
Reimbursable Trade Account Receivable has been established on the Audited
Closing Balance Sheet (either as a bad debt reserve or a credit memo reserve);
provided that the Sellers shall have no obligation to pay (i) any amount under
--------
this Section
if the Buyer (x) fails to keep and maintain the collection operation of the
Company and its Subsidiaries in its present location under the supervision of
Xxxxxx Xxxxxxx or, in the case Xx. Xxxxxxx is not employed by MI or its
Subsidiaries and was not terminated without cause (as determined under Xx.
Xxxxxxx'x Employment Agreement), his replacement, and (y) reduces the size or
the salary level of the staff below the present level or changes (adversely) the
commission basis for salesmen or (z) reduces the collection expense budget below
that which is consistent with past practice or (ii) to the extent the Buyer
takes any action which would reduce such Reimbursable Trade Account Receivable
or otherwise interfere with its collection in full. From time to time at the
request of the Sellers' Representative, the Buyer shall supply the Sellers with
such information as the Sellers' Representative may reasonably request
concerning the aging of the Reimbursable Trade Accounts Receivable of the
Company and its Subsidiaries and any conversion of the Company's computer system
referred to below. As used herein, the term "Reimbursable Trade Account
--------------------------
Receivable" shall mean any trade account receivable of the Company (i) reflected
----------
in the Audited Closing Balance Sheet, (ii) for which payment has not been
withheld or disputed as a result of any right of setoff or other claim against
the Buyer, the Company or any Subsidiary of the Company in respect of
transactions arising after the Closing Date and (iii) which does not reflect any
other concession made after the Closing Date by the Buyer, the Company or any
Subsidiary of the Company to the customer in respect of such trade account
receivable. Except as specified in respect of any payment received, all
payments received from a customer shall be applied first against the oldest
receivables with respect to such customer. As used herein, the term "Due Date"
--------
with respect to the Reimbursable Trade Account Receivables shall mean 180 days
after the Closing Date; provided, however that in the event that it is necessary
--------
for the Buyer to undertake a conversion of the Company's computer system, the
Due Date shall be extended for the period to be agreed by the Buyer and the
Sellers' Representative; provided that if such Persons fail to agree then the
--------
Due Date shall be 240 days after the Closing Date. To the extent that the Buyer
has not collected the full amount of any Reimbursable Trade Account Receivable
and the Buyer has been compensated therefor as set forth in this Section
12.1(b), the Buyer shall transfer and assign all right, title and interest in an
any such Reimbursable Trade Account Receivable to the Sellers, free of any
Liens. It is agreed and understood that in exercising "commercially reasonable
best efforts" in connection with the collection of accounts receivable pursuant
to this Section, the Buyer and the Company shall have no obligation to take any
action out of the ordinary course of business consistent with past practice of
the Business; provided that the Buyer agrees that it shall (consistent with past
--------
practice of the Business) commence or threaten any litigation or prepare or file
any proof of claim in any bankruptcy or similar proceeding or incur such
expenses (consistent with past practice of the Business) to collect such
receivables.
(c) Limitation on Indemnification Obligations. The indemnification
-----------------------------------------
provided for in Article 8 and Article 12 shall be subject to the following
limitations:
(i) Anything in this Agreement to the contrary notwithstanding,
no indemnification payment shall be made pursuant to this Agreement (other
than pursuant to Sections 1.2, 6.4, 6.11 and 6.14 and Article 7 hereof)
except to the extent that the amounts which would otherwise be payable
under this Agreement (other than pursuant to Sections 1.2, 6.4, 6.11 and
6.14 and Article 7 hereof) would collectively aggregate at least $100,000
(the "Minimum Amount") and such Minimum Amount shall be deducted from the
--------------
aggregate amount payable under such provisions;
(ii) In no event shall the Sellers have any obligation or
liability to pay any amounts pursuant this Agreement (other than pursuant
to Sections 1.2, 6.4 and 6.11 and Article 7 hereof) in excess of
$6,400,000; provided that in no event shall the Sellers be obligated to pay
--------
more than $2,560,000 with respect to claims made under this Agreement
(other than pursuant to Sections 1.2 and 6.4 and Article 7 hereof) by a
Buyer Indemnitee on or after 180 days after the Closing Date;
(iii) Notwithstanding anything herein to the contrary, the Buyer
shall have no right to any indemnification under this Article 12 for any
matter to the extent (i) the Net Worth of the Company was reduced because
of such matter and either Buyer did not dispute the amount of the reduction
in the Audited Closing Balance Sheet or the dispute as to the amount of the
reduction was resolved pursuant to Section 1.2, or (ii) the matter relates
to whether any item of Equipment was Rental Ready or missing or the fair
market value or cost of repair or replacement of any item of Equipment and
such matter was not disputed or was disputed in determining the amounts
payable under Section 6.14 and resolved as contemplated by Section 6.14;
(iv) In no event shall the Sellers be liable for loss of profits
or consequential damages; and
(v) Notwithstanding anything in this Agreement to the contrary,
the Sellers shall not be obligated to indemnify the Buyer Indemnities with
respect to any Losses to the extent of (A) any proceeds received in
connection with such Losses by the Company or any Subsidiary of the Company
under any insurance policy of the Company or any Subsidiary of the Company
in effect on the Closing Date (including, without limitation, the insurance
policy described in Section 6.12 to be purchased pursuant to such Section
6.12 (each, a "Company Insurance Policy")); (B) any proceeds recoverable in
------------------------
connection with such Losses
by the Company or any Subsidiary of the Company under any applicable
warranty claim, which claims the Buyer hereby undertakes to pursue using
its commercially reasonable best efforts; and (C) any amounts recoverable
by the Buyer, the Company or any of its Subsidiaries from customers or
other third parties who are, in whole or in part, responsible for such
Losses, and the Buyer hereby undertakes to use its commercially reasonable
best efforts to pursue such claims; it being agreed that the Buyer shall
use commercially reasonable best efforts (including threatening or
instituting proceedings) to recover amounts referred to in clause (A), (B)
or (C) of this clause (v) but the Buyer shall have no obligation to
threaten or institute proceedings against any insurance carrier; provided,
--------
that this clause (v) shall not be applicable with respect to any amounts
described in (A), (B) or (C) above which are not received by the Company or
the Buyer following the exercise of the Buyer's undertakings therein and
only if, upon payment of the relevant indemnification claims by the
Sellers, all of the Buyer's or the Company's right, title and interest in
and to all claims for such amounts are transferred and assigned to the
Sellers.
(d) Any amounts payable to any Buyer Indemnitee pursuant to Article 7,
8 or 12 or Sections 6.4, 6.11 or 6.14 shall be paid by the Escrow Agent to such
Buyer Indemnitee from the Escrow Amount in accordance with the Escrow Agreement
until the Escrow Amount (including interest thereon at the Reference Rate since
the Closing Date) is exhausted. After the earlier of (i) the time that the
Escrow Amount (and any interest thereon) has been exhausted or (ii) the date of
the termination of the Escrow Agreement in accordance with its terms and the
return of the remaining Escrow Amount, if any, to the Sellers in accordance with
the Escrow Agreement, any amounts payable to any Buyer Indemnitee pursuant to
Article 7, 8 or 12 or Sections 6.4, 6.11 or 6.14, subject to the limitations set
forth in Sections 12.1(c), 12.4 and 14.2, shall be paid by the Sellers
to such Buyer Indemnitee.
12.2 Indemnification of the Sellers. The Buyer hereby agrees to
------------------------------
indemnify and hold harmless each of the Sellers, any trustee of any Seller in
his or her capacity as trustee and any beneficiary or trustee of any Seller in
his or her capacity as such, and their respective successors, assigns, agents
and Affiliates (collectively, the "Seller Indemnitees") against all Losses
------------------
actually incurred as a result of, or attributable to (i) any inaccuracy in, or
breach of, any representation, warranty, covenant or agreement made by the Buyer
in this Agreement or (ii) by reason of any act or failure to act by the Buyer,
its Affiliates its successors or assigns or, after the Closing Date, by the
Company or any Subsidiary, in connection with the ownership of the Company or
any Subsidiary or the operation of the Business after the Closing Date; provided
--------
that in no event shall the Buyer be liable for loss of profits or consequential
damages.
12.3 Notice and Opportunity to Defend.
--------------------------------
(a) Notice of Asserted Liability. The party making a claim under this
----------------------------
Article 12 is referred to as the "Indemnitee," and the party against whom such
----------
claims are asserted under this Article 12 is referred to as the "Indemnifying
------------
Party." All claims by any Indemnitee under this Article 12 shall be asserted
-----
and resolved as follows: promptly after receipt by the Indemnitee of notice of
any claim or circumstances which, with the lapse of time, would or might give
rise to a claim or the commencement (or threatened commencement) of a claim
including any action, proceeding or investigation (an "Asserted Liability") that
------------------
may result in a Loss, the Indemnitee shall give notice thereof (the "Claims
------
Notice") to the Indemnifying Party; provided that no delay on the part of the
------ --------
Indemnitee in notifying the Indemnifying Party shall relieve the Indemnifying
Party from any liability or obligation under this Article unless (and then
solely to the extent) the Indemnifying Party thereby is actually prejudiced.
The Claims Notice shall describe the Asserted Liability in reasonable detail,
and shall indicate the amount
(estimated, if necessary and to the extent feasible) of the Loss that has been
or may be suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may elect to
---------------------
compromise or defend, at its own expense and by its own counsel which shall be
reasonably acceptable to the Indemnitee, any Asserted Liability; provided that
--------
in the event that under then applicable standards of professional conduct the
Indemnitee is required to be represented by separate counsel and the Indemnitee
elects to be represented by separate counsel, the Indemnifying Party shall pay
the fees and expenses of one law firm incurred by the Indemnitee in the
compromise of, or defense against, such matter; and provided further that if the
-------- -------
Asserted Liability includes only a request for injunctive relief, the Indemnitee
may control the defense thereof (at the Indemnifying Party's expense) and if the
Asserted Liability includes a request for injunctive relief and other remedies,
the Indemnitee may (at its own expense) share control of the defense thereof to
the extent of the injunctive relief claims. If the Indemnifying Party elects to
compromise or defend such Asserted Liability, it shall within 30 days (or
sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the
expense of the Indemnifying Party, in the compromise of, or defense against,
such Asserted Liability. If the Indemnifying Party elects not to compromise or
defend the Asserted Liability or fails to notify the Indemnitee of its election
as herein provided, or otherwise fails to timely assume such defense the
Indemnitee may pay, compromise or defend such Asserted Liability at the
Indemnifying Party's expense. Notwithstanding the foregoing, neither the
Indemnifying Party nor the Indemnitee may settle or compromise any Asserted
Liability over the objection of the other; provided, however, consent to
-------- -------
settlement or compromise shall not be unreasonably withheld or delayed. In any
event, the Indemnitee and the Indemnifying Party may participate, at their own
expense, in the defense of such Asserted Liability. If the Indemnifying Party
chooses to defend any Asserted Liability, the Indemnitee shall make available to
the Indemnifying Party any books, records or other documents within its control
that are necessary or appropriate for such defense.
12.4 Exclusive Remedies. Notwithstanding anything in this
------------------
Agreement to the contrary, the remedies provided in this Agreement shall be the
sole and exclusive remedies for any inaccuracy and for any breach of any
representation, warranty, covenant or agreement of, or obligation or liability
of, the Buyer or the Sellers, contained herein or in any certificate or
instrument delivered pursuant to this Agreement or otherwise relating hereto or
thereto; provided, however, that nothing in this Section 12.4 shall be construed
-------- -------
to limit any right or remedy that the Buyer or the Sellers may have with respect
to fraud.
12.5 Sellers' Representative. Each Seller hereby irrevocably
-----------------------
appoints Xxxxxxxx X. XxXxxxxx as Sellers' Representative (or his designee, the
"Sellers' Representative"), and the Sellers' Representative hereby accepts such
------------------------
appointment and agrees to act as such Sellers' Representative, who shall, in
such capacity, have full power and authority to make, on behalf of the Sellers,
all decisions relating to the defense or settlement of any claims for which any
Buyer Indemnitee may claim to be entitled to indemnity or payment pursuant to
this Agreement and otherwise to act on behalf of the Sellers in all respects
with respect to this Agreement. All decisions and actions by the Sellers'
Representative shall be binding upon all of the Sellers, and no Seller shall
have the right to object to, dissent from, protest or otherwise contest the
same. The Buyer shall not have the right to object to, protest or otherwise
contest any matter related to the procedures for action being taken by the
Sellers' Representative. By the execution of this Agreement by or on behalf of
such Seller, each Seller shall be deemed to have agreed that (i) the provisions
of this Section 12.5 are independent and severable, are irrevocable and coupled
with an interest and shall be enforceable notwithstanding any rights or remedies
any Seller may have in connection with the transactions contemplated by this
Agreement, (ii) the remedy at law for any breach of the provisions of this
Section 12.5 would be inadequate, (iii) the provisions of this Section 12.5
shall be binding upon the successors and assigns of each Seller and (iv) any
references in this Agreement to a Seller or the Sellers shall mean and include
the successors to the Seller's rights hereunder. In addition, by the execution
of this Agreement by or on behalf of such Seller, each Seller shall be deemed to
have waived any claims they may have or assert, including those that may arise
in the future, against the Sellers' Representative for any action or inaction
taken or not taken by the Sellers' Representative except to the extent that such
action or inaction shall have been held by a court of competent jurisdiction to
constitute willful misconduct. In consideration for serving as the Sellers'
Representative, the Sellers' Representative shall be released by each Seller
from any liability for any action or inaction taken or not taken by such
Sellers' Representative except to the extent that such action or inaction shall
have been held by a court of competent jurisdiction to constitute willful
misconduct.
12.6 Nature of Payments. Any payment under this Article 12 shall
------------------
be treated for tax purposes as an adjustment of the Purchase Price given or
received, as the case may be, with respect to the Shares to the extent such
characterization is proper and permissible under relevant Tax authorities,
including court decisions, statutes, regulations and administrative
promulgations.
13. Termination of Agreement.
------------------------
13.1 Termination. This Agreement may be terminated prior to the
-----------
Closing as follows:
(a) at the election of the Sellers' Representative, if any one or more
of the conditions to the obligation of the Sellers to close set forth in Article
10 has not been fulfilled as of the Scheduled Closing;
(b) at the election of the Buyer, if any one or more of the
conditions to the obligation of the Buyer to close set forth in Article 9 has
not been fulfilled as of the Scheduled Closing;
(c) at the election of the Buyer or the Sellers' Representative, if
the transactions contemplated by this Agreement have not been consummated by
November 15, 1998; provided, that the right to terminate this Agreement pursuant
--------
to this Section 13.1(c) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the consummation of the transactions contemplated by this
Agreement to occur on or prior to such date; or
(d) at the election of the Buyer if the aggregate remediation costs
set forth in the Phase I Assessment for the leased Properties and the Phase I
Assessments for the leased properties in the MES Agreement and MI Agreement
exceed a dollar amount equal to $1,000,000 less the aggregate estimated
remediation costs for the Owned Real Properties set forth in the Assessments and
the Assessments referred to in the MES and MI Agreements (but in no event less
than $0); provided, however, Buyer shall not have any right of termination
-------- -------
pursuant to this subsection (d) if the Sellers notify Buyer within 10 days of
receipt of the Phase I and II Assessments that the Sellers agree to amend the
indemnification provisions of Section 8.5 to include an indemnity in the Buyer's
favor covering the leased Properties in the same manner as the Owned Real
Properties, such that such indemnity will, among other things, be subject to the
same Minimum Amount (as defined in Section 12.1(c)(i)), it being understood that
the Loss limitations for the leased Properties will be the remediation estimates
for the leased Properties set forth in the Assessments;
(e) at the election of the Buyer if the aggregate remediation
estimates for the Properties set forth in the Phase I Assessment, Phase II
Assessment and the Phase I and Phase II Assessments referred to in the MES
Agreement
and the MI Agreement exceed $51,600,000;
(f) at the election of the Sellers' Representative, if the aggregate
remediation costs for the Properties set forth in the Phase I Assessment, Phase
II Assessment and the Phase I and Phase II Assessments referred to in the MES
Agreement and the MI Agreement exceed $2,300,000; and
(g) at any time on or prior to the Closing Date, by mutual written
consent of the Sellers' Representative and the Buyer.
If this Agreement so terminates, it shall become null and void and
have no further force or effect, except as provided in Section 13.2.
13.2 Survival After Termination. If this Agreement terminates
--------------------------
pursuant to Section 12.1 and the contemplated transactions are not consummated,
this Agreement shall become null and void and have no further force or effect,
except that any such termination shall be without prejudice to the rights of any
party on account of the nonsatisfaction of the conditions set forth in Articles
9 and 10 resulting from the intentional or willful breach or violation of the
representa tions, warranties, covenants or agreements of another party under
this Agreement or the breach of the representation and warranty set forth in
clause (ii) of the third sentence of Section 5.2 with respect to the bank
consent. Notwithstanding anything in this Agreement to the contrary, (i) the
provisions of Section 6.2 relating to the obligation of the Buyer to keep
confidential and not to use certain information and data obtained by it from the
Company, and to return documents to the Company and (ii) the provisions of
Sections 6.4, this Section 13.2 and Article 14 shall survive any termination of
this Agreement.
14. Miscellaneous.
-------------
14.1 Certain Definitions. As used in this Agreement, the
-------------------
following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
---------
controlling, controlled by or under common control with, or the parents, spouse,
lineal descendants or beneficiaries of, such Person.
"Applicable Law" means with respect to any Person, any domestic or
--------------
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, policy,
guidance, judgment, decree or other requirement of any Governmental Entity
applicable to such Person or its properties, business, operations or assets.
"Benefit Plan" means any employee benefit plan, arrangement, policy or
------------
commitment (whether or not an employee benefit plan within the meaning of
section 3(3) of ERISA), including any employment, consulting or deferred
compensation agreement, executive compensation, retention, change in control,
bonus, incentive, pension, profit-sharing, savings, retirement, stock option,
stock award, stock purchase or severance pay plan or arrangement, any life,
health, disability or accident insurance plan, any fringe benefit plan or
arrangement or any holiday or vacation practice, as to which the Company or any
Subsidiary has or in the future would have any direct or indirect, actual or
contingent liability.
"Business Day" means any day of the year (other than a Saturday or
------------
Sunday) on which national banking institutions in Greenwich, Connecticut are
open to the public for conducting business and are not required or authorized to
close.
"Closing Balance Sheet Tax Reserve" means the portion of the deferred
---------------------------------
tax reserve shown on the Audited Closing Balance Sheet (and reflected in the
Audited Closing Adjusted Net Worth, as increased or decreased, as the case may
be, by the Resolved Objections and the CPA--Determined Differences) that does
not relate to timing differences between book and tax accounting.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"DOL" means the United States Department of Labor.
---
"Employee" means any individual employed by the Company or any
--------
Subsidiary of the Company.
"Environmental Laws" means all applicable laws relating to Hazardous
------------------
Substances, the environment or natural resources, including the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), the Clean Air Act, the Water
Pollution Control Act, the Safe Drinking Water Act, and the Toxic Substances
Control Act ("TSCA"), and any requirements promulgated pursuant to these
applicable laws or any analogous state or local applicable laws.
"Environmental Liabilities" means all Liabilities of a Person (whether
-------------------------
such Liabilities are owed by such Person to Governmental Authorities, third
parties or otherwise) which arise under or relate to any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended.
"GAAP" means generally accepted accounting principles in the United
----
States applied in a consistent basis during the relevant periods.
"Governmental Entity" means any foreign, domestic, federal,
-------------------
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency or any political or other subdivision, department or branch of the any of
the foregoing.
"Hazardous Substance" means any substance, material or waste: (i) the
-------------------
presence of which in the environment requires investigation or remediation under
any applicable law; or (ii) that is defined characterized or otherwise
classified as a "hazardous waste," "hazardous substance," "toxic material" or
--------------- -------------------
"toxic waste" or words of similar connotation under any Environmental Law; or
(iii) that is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic or mutagenic or otherwise
hazardous and is regulated pursuant to any Environmental Law; (iv) the presence
of which causes a nuisance, trespass or other tortious condition; or (v) without
limitation, that contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenols (PCBs) or asbestos.
"IRS" means the Internal Revenue Service.
---
"Knowledge of Sellers" shall have the meaning assigned to it in that
--------------------
certain letter agreement among the parties hereto and others of even date
herewith.
"Lien" means any lien, pledge, mortgage, deed of trust, security
----
interest, claim, lease, license, charge, option, right of first refusal,
easement, servitude or transfer restriction and, with respect to the Shares,
voting trusts, proxies, stockholder or similar agreements, encumbrances or
restrictions of any nature whatsoever.
"Material Adverse Effect" means material adverse effect on the
-----------------------
properties, business, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole, or on their ability to
consummate the transactions contemplated by this Agreement on the terms set
forth herein.
"Pension Plan" means any Benefit Plan which is a pension plan within
------------
the meaning of ERISA section 3(2) (regardless of whether the plan is covered by
ERISA).
"Permitted Liens" means (i) Liens for Taxes or governmental
---------------
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which is being contested in good faith by appropriate
proceedings and for which adequate reserves are reflected on the Balance Sheet;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other similar Persons and other Liens imposed by
applicable law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith; (iii) Liens relating to deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or to
secure the performance of leases, trade contracts or other similar agreements;
(iv) Liens specifically identified on the Balance Sheet; (v) Liens securing
executory obligations under any lease that constitutes an "operating lease"
---------------
under GAAP; and (vi) other Liens set forth on Schedule 14.1(b) hereto.
----------------
"Person" means any individual, corporation, partnership, limited
------
liability company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Entity or other entity.
"property" or "properties" means real, personal or mixed
-------- ----------
property, tangible or intangible.
"Reference Rate" means the per annum rate of interest publicly
--------------
announced from time to time by Chase Manhattan Bank as its prime rate (or
reference rate). Any change in the Reference Rate shall take effect at the
opening of business on the day specified in the public announcement of such
change.
"Release" means any release, spill, emission, leaking, pumping,
-------
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching or migration of Hazardous Materials on or into the environment.
"Remedial Action" has the meaning ascribed to it on the definitional
---------------
provisions of CERCLA and also means such actions as are necessary to cause
fixtures and operations on the Properties (not including movable equipment
leased by the Company and its Subsidiaries in the ordinary course) to be in
compliance with Environmental Laws, assuming use of such fixtures and operations
in a manner consistent with past practices of the Company and its Subsidiaries.
"Restricted Business" means, collectively, (a) any business in which
-------------------
the Company, MES, MI and/or their respective Subsidiaries are engaged on the
Closing Date and (b) the business of renting, leasing, acting as a dealer or
distributor for, repairing,
servicing or selling light to heavy construction and industrial equipment
(including, without limitation, aerial lifts (including boom and scissor lifts),
cranes, backhoes, digging equipment, forklifts, tractors, skid-steer loaders,
scaffolding, compressors, pumps and generators), and/or general tools and
equipment (including, without limitation, power tools, hand tools, high-pressure
washers, paint sprayers, gardening and landscaping equipment and roto tillers)
and, in each case, any related merchandise, accessories or parts.
"Subsidiary" means any Person of which a majority of the outstanding
----------
voting securities or other voting equity interests are owned, directly or
indirectly, by the Company.
"Tax" means all taxes of any nature including any United States
---
federal, state, local or foreign income, sales and use, excise, franchise, real
and personal property, transfer, gross receipts, license, payroll, employment,
withholding, estimated or other tax or charge imposed by any governmental
entity, together with any interest and penalties related thereto or to the
nonpayment thereof and any loss in connection with the determination, settlement
or litigation of any tax liability.
14.2 Nature of Obligations.
---------------------
(a) The representations, warranties, and covenants of the Sellers in
this Agreement are joint and several obligations. Notwithstanding the
foregoing, the aggregate amount a Seller shall be required to pay to the Buyer
or any Buyer Indemnitee hereunder shall not exceed such Seller's Pro Rata
Portion of the Purchase Price.
14.3 Notices. Any notice or other communication required or
-------
permitted hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission sent by overnight courier or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, or
sent by facsimile transmission or if sent by overnight courier, one Business Day
after the date so sent, or, if mailed, five Business Days after the date of
deposit in the United States mails, as follows:
(i) If to Buyer or, after the Closing Date, the Company:
United Rentals, Inc.
Four Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxx
Facsimile: (000) 000-0000
with copies to:
Xxxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
(ii) if to the Sellers or the Sellers' Representative, to
the addresses set forth beside the Sellers'
Representative's name on Annex C
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may by notice given in accordance with this Section to the other
parties designate another address or Person for receipt of notices hereunder.
14.4 Entire Agreement. The Confidentiality Agreement, this
----------------
Agreement and any other collateral agreements executed in connection with the
consummation of the transactions contemplated by this Agreement contain the
entire agreement among the parties with respect to the purchase of the Shares
and supersede all prior agreements, written or oral, with respect thereto.
14.5 Waivers and Amendments; Non-Contractual Remedies. This
------------------------------------------------
Agreement may be amended, superseded, canceled, renewed or extended, and the
terms hereof may be waived, only by a written instrument signed by the Buyer and
the Sellers' Representative or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
14.6 Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
14.7 Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the parties and their respective successors and
legal representatives. This Agreement is not assignable; provided, however,
--------
that the Buyer may assign this Agreement to a wholly-owned subsidiary of the
Buyer; and provided further, that no such assignment shall release the Buyer
-------- -------
from any of its obligations hereunder.
14.8 Usage. All pronouns and any variations thereof refer to the
-----
masculine, feminine or neuter, singular or plural, as the context may require.
All terms defined in this Agreement in their singular or plural forms have
correlative meanings
when used herein in their plural or singular forms, respectively. Unless
otherwise expressly provided, the words "include," "includes" and "including" do
not limit the preceding words or terms and shall be deemed to be followed by the
words "without limitation."
14.9 Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
14.10 Exhibits and Schedules. The Exhibits and Schedules are a
----------------------
part of this Agreement as if fully set forth herein and all references to this
Agreement shall be deemed to include the Exhibits and Schedules. All references
herein to Sections, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require. Any matter
disclosed on one Schedule hereto shall be deemed to have been disclosed on any
other Schedule provided the relevance of such matter to such other Schedule is
reasonably discernible from the information provided in the Schedule on which
such disclosure appears.
14.11 Headings. The headings in this Agreement are for reference
--------
only, and shall not affect the interpretation of this Agreement.
14.12 Severability of Provisions.
--------------------------
(a) If any provision or any portion of any provision of this Agreement
shall be held invalid or unenforceable, the remaining portion of such provision
and the remaining provisions of this Agreement shall not be affected thereby;
provided, that the material economic terms provided for herein are not affected
--------
thereby in a manner adverse to the Buyer or any Seller.
(b) If the application of any provision or any portion of any
provision of this Agreement to any Person or circumstance shall be held invalid
or unenforceable, the application of such provision or portion of such provision
to Persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby; provided, that the material
--------
economic terms provided for herein are not affected thereby in a manner adverse
to the Buyer or any Seller.
14.13 Consent to Jurisdiction. Each of the parties hereto hereby
-----------------------
irrevocably submits to the exclusive jurisdiction of any U.S. District Court for
the District of Connecticut; and irrevocably agrees that all claims in respect
of any such action or proceeding may be heard and determined in such court. Each
of the parties hereto further agrees that service of any process, summons,
notice or document by U.S. registered mail to such party's respective address
set forth in Section 14.3 shall be effective service of process for any action,
suit or proceeding in the State of Connecticut with respect to any matters to
which it has submitted to jurisdiction as set forth above in the immediately
preceding sentence. Each of the parties hereto irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in the
U.S. District Court for the District of Connecticut, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any action, suit or proceeding brought in any such court has
been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
UNITED RENTALS, INC.
By:
--------------------------------
Name:
Title:
SELLERS:
-------
Xxxxxxxx X. XxXxxxxx
Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxxx
Xxxxx X. XxXxxxxx
FUND A UNDER AGREEMENT DATED
AUGUST 5, 1986
By:
--------------------------------
Name:
Title:
XXXXXX X. XxXXXXXX TRUST
DATED APRIL 3, 1981
By:
--------------------------------
Name:
Title:
