EXHIBIT 10
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SHARE PURCHASE AGREEMENT
among
UNITED RENTALS , INC.
and
THE PARTIES LISTED ON THE SIGNATURE PAGE HERETO
___________________________________
for all of the outstanding shares of
McCLINCH, INC.
___________________________________
July 30, 1998
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TABLE OF CONTENTS
Page
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1. Sale and Purchase of Shares 2
1.1 Sale and Purchase of Shares 2
1.2 Purchase Price Adjustment 2
1.3 Payment of Purchase Price 7
1.4 Delivery of Shares 8
2. Closing; Closing Date 8
3. Representations and Warranties of Each Seller 8
3.1 Title to the Shares 8
3.2 Authority to Execute and Perform Agreement 9
[3.3 Purchase for Investment 10
4. Representations and Warranties of the Sellers as
to the Company 11
4.1 Corporate Organization 11
4.2 Subsidiaries 11
4.3 Outstanding Capital Stock 12
4.4 Financial Statements 13
4.5 Liabilities; Ordinary Course 14
4.6 Contravention 15
4.7 Taxes 16
4.8 Claims and Proceedings 21
4.9 Contracts 22
4.10 Real Estate 24
4.11 Employee Benefit Plans 26
4.12 Insurance 28
4.13 Tangible Properties 29
4.14 Related Party Transactions 29
4.15 Banks 29
4.16 Permits 30
4.17 Compliance with Applicable Laws 30
4.18 Employment Agreements 31
4.19 Labor and Employment Matters 31
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4.20 Intangible Property 32
4.21 Environmental Compliance 33
4.22 Finders and Investment Bankers 34
4.23 Certain Actions 35
4.24 No Other Representations and Warranties 35
5. Representations and Warranties of the Buyer 35
5.1 Corporate Organization 35
5.2 Authority to Execute and Perform Agreement 36
5.3 Purchase for Investment 37
5.4 [Intentionally omitted] 37
5.5 Sources of Information 37
5.6 Finders and Investment Bankers 38
5.7 Litigation. 38
6. Covenants and Agreements 38
6.1 Conduct of Business of the Company 38
6.2 Access to Information; Confidentiality 42
6.3 Disclosure Supplements 44
6.4 Expenses 45
6.5 Further Assurances 45
6.6 [Intentionally Omitted] 46
6.7 Transfer Taxes. 46
6.8 Compliance with Antitrust Laws 46
6.9 SOC Rebates 47
6.10 Non-Compete 47
6.11 Excluded Assets and Liabilities. 51
6.12 Insurance Tail 51
6.13 Payment of Indebtedness 51
6.14 Rental Ready Adjustment 52
6.15 No Solicitation 55
6.16 Publicity 55
7. Tax and Related Matters 56
7.1 Taxes; Section 338(h)(10) Election 56
7.2 Tax Administration 60
7.3 Contests 65
8. Environmental Matters. 67
8.1 The Phase I Investigations. 67
8.2 The Phase II Investigations. 68
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8.3 Certain Procedures Relating to the Consultant's
Estimates 69
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 72
8.10 Sellers' Right to Control Remedial Action. 73
8.11 Environmental Indemnification Procedure 73
8.12 Access to Information 74
8.13 Matters Involving Third Parties 74
9. Conditions Precedent to the Obligation of the Buyer to Close 75
9.1 Representations and Covenants 75
9.2 HSR Act Filing 76
9.3 No Injunction or Violation of Law 76
9.4 Title Policies 76
9.5 Simultaneous Closing. 77
9.6 Resignations 77
9.7 Reports. 77
9.8 Escrow Agreement 77
9.9 Legal Opinions 77
9.10 Affidavits 78
9.11 Affiliate Contracts 78
9.12 Certificates 78
9.13 Lease of Company Headquarters 78
9.14 Employment/Consulting Agreements 78
9.15 Release of Guaranty 79
9.16 Material Adverse Effect 79
10. Conditions Precedent to the Obligation of the Sellers to Close 79
10.1 Representations and Covenants 79
10.2 HSR Act Filing 80
10.3 No Injunction or Violation of Law 80
[10.4 United Rentals, Inc. Warrants 80
10.5 Lease of Company Headquarters 81
10.6 Employment/Consulting Agreements 81
10.7 Simultaneous Closing 81
10.8 Reports. 81
10.9 Escrow Agreement 81
10.10 Legal Opinion 82
Page
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10.11 Certificate 82
10.12 Guaranty 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 93
13. Termination of Agreement 94
13.1 Termination 94
13.2 Survival After Termination 95
14. Miscellaneous 96
14.1 Certain Definitions 96
14.2 Nature of Obligations 101
14.3 Notices 102
14.4 Entire Agreement 103
14.5 Waivers and Amendments; Non-Contractual Remedies 103
14.6 Governing Law 104
14.7 Binding Effect; Assignment 104
14.8 Usage 104
14.9 Counterparts 104
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
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Schedule 1.2(b). 2
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Schedule 1.2(b) 3
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Schedule 1.2(b) 3
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Schedule 1.2(a) 4
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Schedule 1.3(a) 7
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Schedule 1.3(a) 7
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Schedule 1.3(b) 7
Schedule 3.2 10
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Schedule 4.1 11
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Schedule 4.2 11
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Schedule 4.2 11
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Schedule 4.3 12
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Schedule 4.3 12
Schedule 4.4 13
Schedule 4.4(b) 13
Schedule 4.5(a) 14
Schedule 4.5(b) 14
Schedule 4.6(a) 15
Schedule 4.6(b) 16
Schedule 4.7(h) 19
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Schedule 4.8 21
Schedule 4.9 22
Schedule 4.9 24
Schedule 4.10(a) 24
Schedule 4.10(b) 25
Schedule 4.11(a) 26
Schedule 4.11(c) 27
Schedule 4.11(d) 27
Schedule 4.11(f) 27
Schedule 4.12 28
Schedule 4.14 29
Schedule 4.14 29
Schedule 4.15 29
Schedule 4.15 30
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Schedule 4.17 30
Schedules Page
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Schedule 4.18 31
Schedule 4.19(a) 31
Schedule 4.19(a) 31
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Schedule 4.19(b) 31
Schedule 4.20 32
Schedule 4.20 32
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Schedule 4.21 33
Schedule 4.9 40
Schedule 4.18 41
Schedule 6.14(b) 54
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Schedule 4.10(a) 76
Schedule 14.1(b) 100
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Annex A
Annex B [Escrow Agreement]
Annex C [Addresses for Notices]
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SHARE PURCHASE AGREEMENT
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SHARE PURCHASE AGREEMENT, dated as of July __, 1998, among UNITED RENTALS,
INC., a Delaware corporation (the "Buyer"), and THE PERSONS LISTED ON THE
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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 McCLINCH,
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"), consisting
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of 897 shares of Common Stock, no par value per share.
The Sellers wish to sell the Shares to the Buyer, and the Buyer wishes to
purchase the Shares from the Sellers, upon the terms and subject to the
conditions of this Agreement.
Certain capitalized terms not otherwise defined and used in this Agreement
are defined in Section 14.1.
Accordingly, the parties agree as follows:
1. Sale and Purchase of Shares.
1.1 Sale and Purchase of Shares. At the closing provided for in
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Article 2 (the "Closing"), upon the terms and subject to the conditions of
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this Agreement and in reliance upon the representations, warranties and
agreements contained herein, the Sellers shall sell to the Buyer, and the
Buyer shall purchase from the Sellers, all of the Shares for an aggregate
consideration (the "Purchase Price") equal to $56,300,000, subject to
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adjustment as provided in Section 1.2. The Purchase Price shall be paid in
accordance with Section 1.3.
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
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the purposes of the Preliminary Closing Balance Sheet and Audited Closing
Balance Sheet, Net Worth shall be calculated for the period from January 31,
1997 to the Closing Date, using the depreciation methods set forth on Schedule
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1.2(b).
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(b) Preparation of Closing Adjusted Net Worth Schedule. As 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 Coopers &
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Xxxxxxx L.L.P., a consolidated balance sheet of the Company as of the close of
business on the Closing Date (the "Preliminary Closing Balance Sheet"). The
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Sellers shall cause the Preliminary Closing Balance Sheet to be audited by
Coopers & Xxxxxxx L.L.P. (the "Audited Closing Balance Sheet") which firm
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shall deliver an opinion stating that the Audited Closing Balance Sheet
presents fairly, in all material respects, the financial position of the
Company and its consolidated Subsidiaries at the Closing Date in accordance
with GAAP applied on a basis consistent with the Balance Sheet. The
Preliminary Closing Balance Sheet and the Audited Closing Balance Sheet shall
(i) not include (x) the assets of the Company or any Subsidiary and the
liabilities relating thereto set forth in Schedule 1.2(b) (the "Excluded
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Assets and Liabilities"), (y) any expenses, amounts or prepayment penalties
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incurred in connection with the prepayment or repayment of any indebtedness of
the Company or any Subsidiary at Closing except for any
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such prepayment penalties in excess of $37,500/1/ in the aggregate and (z) any
amount the Buyer is obligated to pay pursuant to this Agreement (other than
amounts referred to in clause (ii) below) or any amount the Sellers are
obligated to pay pursuant to Section 6.4 and (ii) include the principal amount
of and interest due on all indebtedness of the Company or any of its
Subsidiaries as of the Closing Date (whether or not such amounts are repaid by
the Buyer on such date). The Audited Closing Balance Sheet shall include a
schedule (the "Closing Adjusted Net Worth Schedule"), prepared by Coopers &
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Xxxxxxx L.L.P., 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
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forth on the Closing Adjusted Net Worth Schedule, the "Closing Adjusted Net
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Worth"). The Audited Closing Balance Sheet and the Closing Adjusted Net
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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 Coopers & Xxxxxxx L.L.P. 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
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Sheet and the Closing Adjusted Net Worth Schedule, the Buyer and its
independent accountants shall have the right during the succeeding 30-day
period to examine the Audited Closing Balance Sheet, the Closing Adjusted Net
Worth Schedule and all books and records used to prepare the Balance Sheet,
the Audited Closing Balance Sheet and the Closing
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/1// Note to draft: This number will change in MES and Grey Fox Agreements.
4
Adjusted Net Worth Schedule. The Sellers shall use commercially reasonable
efforts to cause Coopers & Xxxxxxx L.L.P. 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 in writing (such notice, the "Disagreement Notice") on or
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before the last day of the 30-day period after delivery to the Buyer of the
Audited Closing Balance Sheet and Closing Adjusted Net Worth Schedule,
setting forth a specific description of the Buyer's objections and the amount
of the adjustment which the Buyer believes should be made to each item of its
objection. If the Buyer does not deliver a Disagreement Notice within such
30-day period, the Audited Closing Balance Sheet, the Closing Adjusted Net
Worth Schedule and the Closing Adjusted Net Worth shall be deemed to have
been accepted by Buyer.
(d) Dispute Resolution. In the event that the Buyer delivers 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 Firm") within five days of the end of such 15-day period. The CPA
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Firm, acting as experts and not as arbitrators, shall review the objections
set forth in the Disagreement Notice which are not Resolved Objections
(collectively, the "Differences") and determine, based on the requirements set
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5
forth in Section 1.2(b) and only with respect to Differences submitted to the
CPA Firm, whether and to what extent the Closing Adjusted Net Worth Schedule
requires adjustments. The fees and disbursements of the CPA Firm shall be
allocated 50% to the Buyer and 50% to the Sellers. The Sellers and the Buyer
shall (and shall cause the Company to) provide to the CPA Firm full
cooperation. The CPA Firm's resolution of the Differences shall be conclusive
and binding upon the parties. The Differences as resolved by the CPA Firm in
accordance with this Section 1.2(e) shall collectively be referred to herein
as the "CPA-Determined Differences."
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(f) Adjustment. On the fifth Business Day following the 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 Adjusted Net Worth" shall mean $8,815,000.
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1.3 Payment of Purchase Price. At the Closing, the Purchase Price
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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
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portion (the "Pro Rata Portion"), as specified on Schedule 1.3(a), of an
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amount equal to 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
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Agent") cash, by wire transfer of immediately available funds to the account
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of such Escrow Agent designated on Schedule 1.3(b), in an amount equal to
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$2,815,000 (the "Escrow Amount"), which shall be held by the Escrow Agent and
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applied as set forth herein and in the escrow agreement among the Buyer, the
Sellers' Representative and the Escrow Agent (the "Escrow Agreement") in the
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form of Annex B hereto.
1.4 Delivery of Shares. At the Closing, the Sellers shall deliver
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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:
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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
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full legal right and power and all authority and approvals required to enter
into, execute and deliver as applicable, this Agreement, and each other
agreement, document, or instrument or certificate contemplated by this
Agreement to be executed by such Seller in connection with the consummation of
the transactions contemplated by this Agreement (together with this Agreement,
the "Seller Documents"), and to consummate the transactions contemplated
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hereby and thereby. This Agreement has been duly executed and delivered by
such Seller and, assuming due execution and delivery hereof by the other
parties hereto, this Agreement constitutes a legal, valid and binding
obligation of such Seller enforceable against such Seller in accordance with
its terms except: (a) as rights to indemnity hereunder may be limited by
federal or state securities laws or the public policies embodied therein; (b)
as such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the enforcement of creditors' rights
generally; and (c) as the remedy of 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
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3.2, violate, conflict with or result in the breach of any of the terms and
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conditions of, result
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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")
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to which such Seller is a party or by or to which such Seller is or such
Seller's Shares are or may be bound or subject, or (iii) violate Applicable
Law or an Order (as hereafter defined) of any Governmental Entity applicable
to such Seller or to such Seller's Shares.
3.3 Purchase for Investment. /2/ Each of Xxxxxxxx X. XxXxxxxx,
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Xxxxxx Xxxxxxx and Xxxxxx Xxxxx (a "Warrantholder") are acquiring the URI
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Warrants (as defined in Article 10) for their own account for investment and
not for resale or distribution. Each Warrantholder acknowledges that the sale
of the URI Warrants (as hereafter defined) has not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any applicable
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state securities laws and that such URI Warrants and the shares of Buyer
Common Stock (as defined in Article 10) issuable upon the exercise thereof may
only be sold or otherwise disposed of under an effective registration
statement under the Securities Act or under an exemption therefrom. Each
Warrantholder has no contract, undertaking, agreement or arrangement with any
Person or entity to sell, hypothecate, pledge, donate, or otherwise transfer
(with or without consideration) to such Person any of the URI Warrants or such
shares, and each Warrantholder has no present plans or intention to enter into
any such contract, undertaking, agreement, or arrangement. Each Warrantholder
is an "accredited investor" as defined in Regulation D of the Securities Act.
4. Representations and Warranties of the Sellers as to the Company.
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The Sellers jointly and severally (subject to Section 14.2) represent and
warrant to the Buyer as follows:
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/2// To appear in MES Agreement only.
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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
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jurisdictions where the failure to so qualify or be authorized would have a
Material Adverse Effect. The Sellers have heretofore delivered or made
available to the Buyer true and complete copies of the Articles of
Incorporation and By-Laws of the Company and each of its Subsidiaries as in
effect on the date hereof.
4.2 Subsidiaries. Each of the Company's Subsidiaries is listed on
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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 issue
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a total of 5,000 shares of Common Stock. All of the outstanding shares of
Common Stock, which constitute all of the Shares, were duly authorized for
issuance and are validly issued, fully paid and nonassessable and not issued
in violation of the preemptive or similar rights of any Person. The Company
has not issued and does not have outstanding any shares of preferred stock or
any other class of capital stock other than the Shares. Except as set forth
in Schedule 4.3 hereto, there are no outstanding rights, subscriptions,
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warrants, calls,
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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 Closing), none of the
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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 the
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Company and its Subsidiaries as at January 31, 1997 and January 31, 1998/3/
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 April 30, 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)
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(the "Interim Financials") have been prepared in accordance with GAAP,
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consistently applied, and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
Subsidiaries as at such dates and the consolidated results of operations and
changes in cash flows of the Company and its consolidated Subsidiaries for
such respective periods, in each case in accordance with GAAP consistently
applied for the periods covered thereby and, in the case of the Interim
Financials, consistent with the Company's past practices for its preparation
of its unaudited financial statements (and subject to normal year-end audit
adjustments). (The foregoing financial statements of the
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/3// Note to draft: Dates to change for MES and Grey fox Agreements.
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11
Company and its consolidated Subsidiaries as at January 31, 1998 and for the
year then ended are sometimes herein called the "Annual Financials." The
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balance sheet included in the Annual Financials is sometimes herein called the
"Balance Sheet" and January 31, 1998 is sometimes herein called the "Balance
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Sheet Date.")
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4.5 Liabilities; Ordinary Course.
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(a) Except as set forth on Schedule 4.5(a), the Company and its
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Subsidiaries have not incurred any indebtedness, liability or obligation
(whether or not accrued, fixed, due, contingent or known) ("Liabilities") of a
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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
12
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
13
requirement to pay any Taxes shown as an accrual (other than the portion of
such deferred tax reserve that relates to timing differences between book and
tax accounting) (such amounts being defined collectively herein as the
"Closing Balance Sheet Tax Reserve" 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
14
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,)] 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.
15
(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
[FIRST YEAR OF S CORP]] 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.]
(i) 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.
16
(j) 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.
(k) 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.
(l) 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.
(m) No Seller is a foreign person with the meaning of Section 1445
of the Code.
(n) None of the Company or any of its Subsidiaries are parties to
any tax sharing or similar Contract or arrangement (whether or not written).
(o) 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.
(p) 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.
17
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"):
-------------------
18
(a) contracts and other agreements with any labor union, collective
bargaining unit or association representing any employee of the Company or any
of its Subsidiaries;
(b) agreements for acquisitions or dispositions (by merger, purchase
or sale of stock or otherwise) of material assets entered into in the last two
years or pursuant to which the Company has ongoing obligations (other than
acquisitions or dispositions of assets in the ordinary course) with a value in
excess of $200,000 (other than the exercise of the option to purchase the
property at Egg Harbor Township at a price no greater than $350,000, and on
terms reasonably acceptable to the Sellers and the Buyer);
(c) contracts and other agreements relating to indebtedness of the
Company or such Subsidiary, guarantees of the indebtedness of any other Person
or the deferred purchase price of property where such deferred purchase price
is in excess of $200,000;
(d) all partnership, joint venture or other similar Contracts,
arrangements or agreements;
(e) any lease, license or other Contract pursuant to which any
person has the right to occupy or use any of the Owned Real Property or any
portion of the premises that are the subject of the Leases;
(f) each agreement that restricts or purports to restrict the right
of the Company or any Subsidiary of the Company to engage in any business
anywhere in the world or to compete with any Person with respect to any
business anywhere in the world;
(g) all license, sale, dealer, distribution, commission, marketing,
agent, franchise, technical assistance or similar agreements, other than
commission arrangements with employees of the Company or any of its
Subsidiaries, relating to or providing for the marketing or sale of the
products or services of or by the Company or any Subsidiary of the Company;
and
19
(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")
-------------------
and 000 Xxxxxx Xxxxxx Corporation owns the real property and the improvements
located thereon known as 000 Xxxxxx Xxxxxx, Xxxxxxxxx, XX (the "Xxxxxx
------
Property").
--------
(b) The Company and its Subsidiaries are the lessee 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
20
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 MES and Grey Fox) 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. Except for the option to purchase the Egg Harbor
Township property, neither the Company nor any Subsidiary owns or holds, or is
obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell, assign or dispose of any real
estate or any portion thereof or interest therein.
(c) Except as set forth on Schedule 4.10(c), none of the Owned Real
Properties are subject to a Lien, other than Permitted Liens and other than
any other Lien that does not materially interfere with the operation of the
Owned Real Property as presently operated. No condemnation or eminent domain
proceeding is pending or, to the Knowledge of Sellers, threatened which would
preclude or impair in any material respect the use of any Owned Real Property
or the Xxxxxx Property or, to the Knowledge of the Sellers, any property
subject to the Leases, for the uses for which it is currently being used.
4.11 Employee Benefit Plans.
---- ----------------------
(a) Schedule 4.11(a) lists all Benefit Plans of the Company and its
--- ----------------
Subsidiaries. With respect to each such Benefit Plan, the Sellers heretofore
have delivered, or have caused the Company heretofore to have made available
to the Buyer true,
21
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;
22
(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.
23
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 Grey Fox) has borrowed any moneys from the Company or any of its
Subsidiaries which has not been repaid or has outstanding any indebtedness or
other similar obligations to the Company or any of its Subsidiaries. Except
as set forth in Schedule 4.14, none of the Sellers is, or owns any direct or
-------------
indirect interest of any kind in (other than any interest of less than 5% in
any Person subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended), or controls or is a director, officer, employee or
partner of, or consultant to, or lender to or borrower from or has the right
to participate in the profits of, any Person which is, (A) a competitor,
supplier, customer, landlord, tenant, creditor or debtor of the Company or any
of its Subsidiaries, or (B) a party to any Contract with the Company or any of
its Subsidiaries.
4.15 Banks. Schedule 4.15 contains a complete and correct list of
---- ----- -------------
the names and locations of all banks in which the Company or any of its
Subsidiaries has accounts or safe deposit boxes and the names of all persons
authorized to draw thereon or to have access thereto. Except as set forth on
Schedule 4.15, no Person holds a power of attorney to act on behalf of the
-------------
Company or any of its Subsidiaries.
4.16 Permits. The Company and its Subsidiaries and 185 Xxxxxx
---- -------
Street Corporation (solely with respect to the Xxxxxx Property) have all
material approvals, authorizations, certificates, consents, licenses,
exemptions, orders and permits or other
24
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, each of its Subsidiaries and 000 Xxxxxx Xxxxxx
-------------
Corporation (solely with respect to the Xxxxxx Property) has complied and is
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,
----------------
25
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.
26
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
27
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.
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. The Sellers have provided the Buyer a true and
complete copy of the engagement letter with Xxxxx Brothers.
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
28
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
29
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
30
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;
31
(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) except for the exercise of the option regarding the property at
Egg Harbor Township, purchase or otherwise acquire assets from any Person
other than in the ordinary course of business;
(f) sell, assign, lease, license, transfer or otherwise dispose of,
or mortgage, pledge or encumber (other than with Permitted Liens), any Owned
Real Property or any of its assets, or amend, terminate or renew any of the
Leases;
(g) amend or modify in any material respect or terminate any
Contract entered into by the Company after the date hereof which, if in
existence on the date hereof, would be required to be set forth in Schedule
--------
4.9 as a Scheduled Contract (each, a "Subsequent Material Contract");
--- ----------------------------
(h) enter into or commit or propose to enter into any Subsequent
Material Contract, except as necessary to permit the Company or its
Subsidiaries or the Sellers to carry out any of their respective covenants and
other obligations under this Agreement or any other Seller Document;
32
(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
33
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 Grey Fox; or
(p) agree, commit or arrange to do any of the foregoing.
6.2 Access to Information; Confidentiality.
--- --------------------------------------
(a) Between the date of this Agreement and the Closing Date, the
Sellers shall cause the Company and its Subsidiaries to afford the Buyer and
its authorized representatives (including its accountants, financial advisors
and legal counsel) reasonable access during normal business hours to all of
the properties, personnel, Contracts, books and records of the Company and its
Subsidiaries and shall promptly deliver or make available to the Buyer
information concerning the business, properties, assets and personnel of the
Company and its Subsidiaries as the Buyer may from time to time reasonably
request;
(b) The Buyer shall hold, and shall cause its authorized
representatives (including its accountants, financial advisors and legal
counsel) to hold, all material subject to the Confidentiality Agreement dated
February 12, 1998, between the Company 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
34
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.
35
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 shall pay the first $400,000 of the fee owed
-------- -------
to Xxxxx Brothers by the Sellers and the Sellers shall pay all amounts of such
fee to Xxxxx Brothers in excess of $400,000.
6.5 Further Assurances. Each of the parties shall execute such
--- ------------------
certificates, bills of sale, agreements and other documents and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the contemplated transactions. Each such party shall
use its commercially reasonable efforts to fulfill or obtain the fulfillment
of the conditions to the Closing set forth in Articles 9 and 10. Between the
date of this Agreement and the Closing Date, each of the parties hereto shall
promptly notify the other parties in writing (a) if such party becomes aware
of any fact or condition that causes or would be reasonably likely to cause or
constitute a Material Adverse Effect or a breach of any of the representations
and warranties of such party set
36
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; 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. /4/
[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 and agree not to operate in
any geographic area or line of business provided that Buyer shall
----------
/4// Note to draft: Bracketed language for S Corporations only.
---
37
not be required to (or be required to agree to) dispose of or hold separate
any material part of the Combined Business or agree to any material
restrictions on the Combined Business. Combined Business shall mean the
business and operations of the Buyer and its subsidiaries in the Relevant
Territory and the Company, MES and Grey Fox and their respective
subsidiaries, taken as a whole. Relevant Territory shall mean the States of
Connecticut, Massachusetts, Rhode Island, New York, New Jersey, Pennsylvania,
Maryland, Delaware, Virginia, North Carolina and Washington, D.C. 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.]
6.9 SOC Rebates. From and after the Closing Date, the Buyer shall
--- -----------
use its best efforts to collect all supplier-of-choice rebates owed to the
Company or any Subsidiary of the Company relating to equipment expenditures
made prior to the Closing and pass-through rebates for equipment purchased by
Hertz Equipment Rental Corp. during the period from and including August, 1,
1997 through and including July 31, 1998 (the "SOC Rebates"). All monies
-----------
collected on account of the SOC Rebates shall be held by the Buyer for the
Sellers' account. The Buyer shall pay or cause to be paid to the Sellers'
Representative, on behalf of the Sellers, on the first Business Day of each
month all monies so received during the prior month.
6.10 Non-Compete. For a period commencing on the Closing Date and
---- -----------
terminating [three (3) years thereafter in the case of Xxxxxx Xxxxxxx and
Xxxxxx Xxxxx] /5/ and five (5) years thereafter in
----------
/5// To be in MES Agreement only.
---
38
the case of each of the [other] Sellers (the "Restricted Period"), the Sellers
-----------------
(i) shall not (except, (x) in the case of Xxxxxxxx XxXxxxxx, in his capacity
as a consultant to the Buyer in accordance with his consulting agreement with
the Buyer to be entered into as of the Closing Date and (y) in the case of
Xxxxxx Xxxxxxx and Xxxxxx Xxxxx, in their capacity as employees of the Company
or another Subsidiary of the Buyer), and shall cause their respective
Affiliates not to, in each case, without the express prior written consent of
Buyer (which consent may be withheld by Buyer in its sole and absolute
discretion) for his, her, or its or their, as the case may be, own account or
jointly with any other Person, directly or indirectly, own, manage, operate,
join, control, finance, invest in, bid for, advise (or advise others with
respect to) or otherwise participate in, or be connected with, or become or
act as a partner, manager, member, director, officer, employee, consultant,
representative, agent or landlord of (other than pursuant to the lease of 000
Xxxxxx Xxxxxx contemplated hereby), any business, individual, partnership,
firm, corporation (other than Buyer), limited liability company, association
or other entity which is in competition with, or is otherwise engaged anywhere
in the United States of America and the Provinces of Ontario and Quebec,
------------------
Canada, in the Restricted Business (as hereafter defined); provided, however,
-------- -------
that a Seller may own, directly or indirectly, solely as an investment, (x)
the URI Warrants and Buyer Common Stock issued upon the exercise thereof (and
any stock dividends or other securities issued to holders thereof) and (y)
securities of any business traded on any national securities exchange or
NASDAQ, provided such Seller is not a controlling person of, or a member of a
group which controls or seeks to control, such business and further provided
that such Seller and its Affiliates do not, in the aggregate, directly or
indirectly, own 2% or more of any class of securities of such business ; and
(ii) shall not, and shall cause their respective Affiliates not to, directly
or indirectly, for his, her, or its or their own account or jointly with
another, or for or on behalf of any Person, as principal, agent or otherwise,
(A) solicit or induce or in any manner attempt to solicit or induce any Person
employed by 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
39
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
40
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
41
arrange to have the lenders with respect thereto deliver a "pay
off letter" and UCC-3 Termination Statements with respect thereto at Closing.]
/6/ 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 $37,500 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) ./7/ The Buyer agrees to pay the first
$37,500 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
----------
/6// Note to draft: To be in GFE Agreement only.
---
/7// Note to draft: Number will change in MES and GFE.
---
42
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
$150,000, /8/ and then only to the extent of such excess, and any
indemnification obligation shall be subject to Sections 12.1(c) (other than
Section 12.1(c)(i)), 12.4 and 14.2. The amount of any such indemnification
shall be paid to the Buyer out of the Escrow Amount, and the Buyer and the
Sellers' Representative shall give instructions to the Escrow Agent to pay, an
amount equal to such adjustment within five Business Days of completion of the
determination of the Rental Ready Adjustment; provided that if such Post
--------
Closing Rental Ready Adjustment exceeds the Escrow Amount, the Sellers shall
pay to the Buyer on such date the excess of the Post Closing Rental Ready
Adjustment over the Escrow Amount. For purposes of this Agreement, an item of
Equipment is "Rental Ready" if (i) no maintenance or repairs (other than
------------
routine maintenance) costing more than the greater of (x) $750 per item and
(y) 3.5% of the original cost of such item of Equipment, are required with
respect to such item to bring such item into condition for rental. The repair
cost with respect to any item of Equipment shall be determined based upon the
cost of a similar repair most recently performed by the Company or any
Subsidiary of the Company to the same or similar item of Equipment. The
parties agree that the items of Equipment listed in Schedule 6.14(b) shall not
----------------
give rise to a Rental Ready Adjustment. Any disputes as to the physical
count, fair market value or whether any
----------
/8// Note to draft: Basket will be different in MES and GFE.
---
43
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,
------
(i) discuss, negotiate, undertake, authorize, recommend, propose or enter
into, any transaction involving a merger, consolidation, business combination,
purchase or disposition of any capital stock or other equity interest in, or
any material amount of the assets of, the Company, other than the transactions
contemplated by this Agreement (an "Acquisition Transaction"), (ii)
-----------------------
facilitate, encourage, solicit, participate in or initiate discussions,
negotiations or submissions of proposals or offers in respect of an
Acquisition Transaction, (iii) furnish or cause to be furnished, to any
Person, any information concerning the business, operations, properties or
assets of the Company in connection with an Acquisition Transaction, or (iv)
otherwise cooperate in any way with, or assist or participate in, facilitate
or encourage, any effort or attempt by any other Person to do or seek any of
the foregoing. The Sellers will inform the Buyer in writing immediately
following the receipt any Seller, the Company or any Agent of any proposal or
inquiry in respect of any Acquisition Transaction.
6.16 Publicity. None of the Buyer, the Sellers, the Company or the
---- ---------
Agents shall issue any press release or public announcement concerning this
Agreement or the transactions contemplated hereby without obtaining the prior
written approval of the other parties hereto, which approval will not be
unreasonably withheld or delayed; provided,
--------
44
however, that the Buyer may make such disclosure as the Buyer deems is
-------
required by Applicable Law or by the applicable rules of any stock exchange on
which any securities of the Buyer are listed. The Sellers acknowledge and
agree that the Buyer may disclose information concerning this Agreement to the
extent required by law in any filing with the Securities and Exchange
Commission or in any offering memorandum relating to a financing of the Buyer;
provided that the Buyer shall give the Sellers' Representative an opportunity
--------
to review such disclosure (and an opportunity to comment thereon) to the
extent reasonably possible.
7. Tax and Related Matters.
-- -----------------------
7.11 Taxes; Section 338(h)(10) Election. /9/
---- ----------------------------------
(a) (i) At the election of the Buyer, the Buyer and the Sellers
shall file an election under Section 338(h)(10) of the Code and under any
comparable provisions of state, local, or foreign law with respect to the
purchase of the Shares (the "Election"). No later than 60 days after the
--------
Closing Date the Buyer shall notify the Sellers whether the Buyer will make
the Election. If the Election is made, the Election Tax Cost (as determined
hereunder) shall be paid as additional Purchase Price by the Buyer to the
Sellers and the Buyer and Sellers shall report, in connection with the
determination of Taxes, the transactions contemplated by this Agreement in a
manner consistent with the Election, the computation of the Election Tax Cost,
the Modified Aggregate Deemed Sales Price (as defined below) and the Deemed
Sales Price Allocation (as defined below). The Sellers and the Buyer shall
take no action which is inconsistent with the Election or its validity under
the Code and the applicable Treasury Regulations.
(ii) On the Closing Date, the Sellers shall execute and
deliver to Buyer five copies of Internal Revenue Service Form 8023
provided by the Buyer and any similar forms under applicable state,
local and foreign law (the "Election Forms").
----------
/9// Sections 7.1 and 7.2 necessary only in the purchase agreements for
---
McClinch Equipment Services, Inc. and Grey Fox Equipment, Inc. (i.e., the S
corporations).
45
(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.
46
(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 __, 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
47
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 each of the Company,
MES and Grey Fox shall not exceed, in the aggregate, $10,000. Except as
otherwise provided herein, the Buyer shall
48
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
49
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 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
50
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.
--- --------
(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
51
which, if determined adversely to the Company or relevant Subsidiary, would be
grounds for indemnification under this Article 7; provided, however, that a
-------- -------
failure to give such notice will not affect a Buyer Indemnified Person's right
to indemnification hereunder except to the extent, if any, that, but for such
failure, the Sellers could have avoided the Tax liability in question.
(b) [Except as provided in Section 7.3(c) below,] in the case of an
audit or administrative or judicial proceeding that relates to any Pre-Closing
Period, the Sellers shall have the right at their own expense to control the
conduct of such audit or proceeding; provided that within 30 days after the
--------
Sellers have received the written notice from the Buyer that is required under
Section 7.3(a) above, and prior to taking any action with respect to such
audit or administrative or judicial proceeding, the Sellers acknowledge in
writing their joint liability under Section 7.3(b)(i) of this Agreement to
hold any Buyer Indemnified Person harmless against the full amount of any
adjustment which may be made as a result of such audit or proceeding that
relates to the Pre-Closing Period (to the extent 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 which consent shall not be unreasonably withheld;
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,
52
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.] /10/
(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 five 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.
----------
/10// Bracketed language applicable to S Corporations only.
53
(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 Authorities had notice of the Release. The Phase I Consultant
shall also provide estimates for the expenditures necessary to correct
violations of Environmental Laws on the Owned Properties. In making its
estimates, the Phase I Consultant shall assume the use of the most cost-
effective, reasonable and timely Remedial Action. With respect to known or
reasonably suspected Releases of Hazardous Materials at the Owned Real
Properties where there is not sufficient information to enable the Phase I
Consultant to estimate reasonably the ranges of costs of the most cost-
effective, timely and reasonable Remedial Action, the Phase I Assessment shall
recommend appropriate media sampling.
8.2 The Phase II Investigations. In the event that the Phase I
--- ---------------------------
Report concludes that media sampling is necessary at one or more of the Owned
Real Properties,
54
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 Authorities 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.
55
(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.
(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.
56
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 or
(ii) such Remedial Action would be necessary if applicable Governmental
Authorities had been notified of conditions on the Owned Real Properties;
provided that costs and expenses shall be subject to indemnification under
--------
this clause (ii) only if incurred in connection with a suit (whether brought
by a Person or Governmental Entity), or an order, investigation or directive
of a Governmental Entity commenced prior to the third anniversary of the
Closing Date; and (2) Losses arising out of or relating to any breach of the
representations in Section 4.21 hereof; provided that in each of subsections
--------
(1) and (2) above the aggregate Losses that the Sellers shall be obligated to
pay under this Agreement with respect to Remedial Action in connection with
Owned Real Property shall not exceed the aggregate estimated remediation costs
at the Owned Real Properties set forth in the Phase I Assessments and the
Phase II Assessments, in each case as modified by the Independent Consultant's
Report and reduced by any amounts the Buyer or the Company pays to perform
Remedial Action at such properties which would be subject to indemnification
under Article 8.5 but for the existence of the basket as established in
Section 12.1(c).
8.6 Buyer's Indemnification of the Sellers. Except with respect to
--- --------------------------------------
Losses for which the Buyer is entitled to indemnification under Section 8.5,
the Buyer agrees to defend, indemnify and save harmless Seller Indemnitees (as
defined in Section 12.2) from and against any Losses under or relating to
Environmental Laws incurred by the Seller Indemnitees resulting from, arising
out of, relating to, the operation of the Business or condition of the
Properties, whether before or after the Closing Date; provided, the Buyer
--------
57
shall not be obligated to indemnify Seller Indemnitees for Losses resulting
from, arising out of, or related to the operation of the Business or condition
of the Properties before the Closing Date to the extent such Losses were
caused by the Seller Indemnitees' willful misconduct, violation of standards
under Environmental Laws, or to the extent such Losses arose out of a
condition on the Properties of which the Seller Indemnitees had knowledge
prior to the 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
58
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 basket established by Section 12.1(c),
the Company shall have the exclusive right to manage and control all Remedial
Actions for which 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 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
59
Governmental Entities and participate in any negotiations with respect to
operational or use restrictions; provided further, that the Buyer shall have
-------- -------
the right to take control of any Remedial Actions if (i) the Sellers fail to
diligently conduct the Remedial Action in light of an order or directive of a
Governmental Entity and Sellers fail to implement the same within 30 days of
receipt of notice from the Buyer or the Company or (ii) 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,
--------
60
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:
61
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) (other than
----------------
000 Xxxxxx Xxxxxx) insuring such Owned Real property in the amount set forth
in Schedule 9.4 with respect to such property.
62
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 ("Grey Fox Agreement") dated of even date herewith, by and
------------------
among the Buyer and the shareholders of Grey Fox Equipment, Inc., a
Connecticut corporation ("Grey Fox"), shall be consummated simultaneously with
--------
the transactions contemplated hereby.
9.6 Resignations. The Buyer shall have received the written
--- ------------
resignations of each of the officers and directors of the Company and releases
in the form of Exhibit F from each Seller other than Xxxxxx Xxxxx and Xxxxxx
Xxxxxxx.
9.7 Reports. The Buyer shall have obtained the Phase I Assessment
--- -------
and Phase II Assessment reports as contemplated by Article 8 and, to the
extent required by Article 8, the Independent Consultant's Report.
9.8 Escrow Agreement. The Buyer shall have received a copy of the
--- ----------------
Escrow Agreement, executed by the Sellers' Representative and the Escrow
Agent.
9.9 Legal Opinions. The Buyer shall have received the opinions of
--- --------------
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx and Xxxxx & Xxxx, P.C., counsel to
the Sellers, addressed to the Buyer, in form and substance reasonably
acceptable to Buyer.
9.10 Affidavits. Each of the Sellers shall have provided Buyer
---- ----------
with an affidavit of non-foreign status that complies with Section 1445 of the
Code.
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 Grey Fox) shall have been fully
discharged and terminated as of the Closing Date without any further liability
(contingent or otherwise) of the Company thereunder.
9.12 Certificates. Buyer shall have received certificates of good
---- ------------
standing with respect to the Company and each of its Subsidiaries issued by
the Secretary of
63
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 Lease of Company Headquarters. Xxxxxxxx X. XxXxxxxx or his
---- -----------------------------
Affiliates shall have entered into a 7-year, triple net lease arrangement for
the Company's present headquarters at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, XX 00000
substantially in the form attached hereto as Exhibit B. /11/
9.14 Employment/Consulting Agreements. Each of Xxxxxx Xxxxxxx and
---- --------------------------------
Xxxxxx Xxxxx shall have executed and delivered the Employment Agreement, and
Xxxxxxxx X. XxXxxxxx shall have executed and delivered the Consulting
Agreement in the form of Exhibits C, D and E, respectively, attached hereto.
9.15 Release of Guarantees. The guarantees by the Company and its
---- ---------------------
Subsidiaries of (i) the synthetic aircraft lease between Fleet Capital
Corporation and McClinch Aviation, Inc., and (ii) the mortgage loan by Fleet
National Bank (formerly Shawmut Bank Connecticut, N.A.) to 000 Xxxxxx Xxxxxx
Corporation, shall each be terminated.
9.16 Material Adverse Effect. No event having a Material Adverse
---- -----------------------
Effect shall have occurred, other than (i) termination by any customer or
distributor of a contract or relationship with the Company primarily as a
result of the transactions contemplated by this Agreement, (ii) other adverse
events occurring solely as a result of the transactions contemplated by this
Agreement or (iii) the occurrence of a default under, or termination of any
Contracts listed on Schedule 4.6(a) occurring solely as a result of the
transactions contemplated by this Agreement.
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.
----------
/11// Note to draft: For McClinch, Inc. Agreement only.
---
64
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 United Rentals, Inc. Warrants. Xxxxxxxx X. XxXxxxxx, Xxxxxx
-----------------------------
Xxxxxxx and Xxxxxx Xxxxx shall each have received a 10 year warrant
(collectively, the
65
"URI Warrants") to purchase $200,000 worth of common stock of the Buyer
------------
("Buyer Common Stock") substantially in the form attached hereto as
------------------
Exhibit A.] /12/
10.5 Lease of Company Headquarters. The Company shall have entered
---- -----------------------------
into a 7-year, triple net lease arrangement for the Company's present
headquarters at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, XX 00000 substantially in the
form attached hereto as Exhibit B. /13/
10.6 Employment/Consulting Agreements. The Buyer and the Company
---- --------------------------------
shall have executed and delivered to each of Xxxxxx Xxxxxxx and Xxxxxx Xxxxx
an Employment Agreement and (ii) the Buyer shall have executed and delivered
to Xxxxxxxx X. XxXxxxxx a Consulting Agreement in the form of Exhibits C, D
and E, respectively, attached hereto.
10.7 Simultaneous Closing. The transactions contemplated by (i)
---- --------------------
the MES Agreement and (ii) the Grey Fox Agreement shall be consummated
simultaneously with the transactions consummated by this Agreement.
10.8 Reports. The Sellers shall have received copies of the Phase
---- -------
I Assessment and Phase II Assessment reports as contemplated by Article 8 and,
to the extent required by Article 8, the Independent Consultant's Report.
10.9 Escrow Agreement. The Sellers shall have received a copy of
---- ----------------
the Escrow Agreement, executed by each of the Buyer and the Escrow Agent.
10.10 Legal Opinion. The Sellers shall have received the opinion
----- -------------
of Weil, Gotshal & Xxxxxx LLP, counsel to the Buyer, addressed to the Sellers
in form and substance reasonably acceptable to the Sellers.
10.11 Certificate. Sellers shall have received a certificate of
----- -----------
good standing of the Buyer issued by the Secretary of State of the State of
Delaware.
11. Survival of Representations, Warranties and Covenants.
--- -----------------------------------------------------
----------
/12// Note to draft: For MES Agreement only.
/13// Note to draft: For McClinch, Inc. Agreement only.
---
66
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 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
67
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 the Buyer and was not
terminated without cause (as determined under Xx. Xxxxxxx'x
68
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 any period in which the Company's
computer system with respect to trade accounts receivable is not fully
operational. 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
69
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 $600,000 (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 $56,300,000; provided that in no event shall the Sellers be obligated
--------
to pay more than $22,520,000 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
70
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
71
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.
---- --------------------------------
72
(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
73
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
74
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.
--- ------------------------
75
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 (i) 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 Grey
Fox Agreement exceed a dollar amount equal to $1,000,000 less the aggregate
estimated remediation costs for the Owned Real Properties set forth in the
Assessments and the Assessments referred to in the MES and Grey Fox Agreements
(but in no event less than $0); provided, however, Buyer shall not have any
-------- -------
right of termination pursuant to this subsection (i) 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 basket set forth in Section 8.5, 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;
76
(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 Grey Fox Agreement exceed $51,600,000;
(f) at the election of the Sellers' Representative, if the aggregate
remediation costs for the Properties set forth in the Phase I Assessment,
Phase II Assessment and the Phase I and Phase II Assessments referred to in
the MES Agreement and the Grey Fox Agreement exceed $2,300,000; and
(g) at any time on or prior to the Closing Date, by mutual written
consent of the Sellers' Representative and the Buyer.
If this Agreement so terminates, it shall become null and void and have
no further force or effect, except as provided in Section 13.2.
13.2 Survival After Termination. If this Agreement terminates
---- --------------------------
pursuant to Section 12.1 and the contemplated transactions are not
consummated, this Agreement shall become null and void and have no further
force or effect, except that any such termination shall be without prejudice
to the rights of any party on account of the nonsatisfaction of the conditions
set forth in Articles 9 and 10 resulting from the intentional or willful
breach or violation of the representations, warranties, covenants or
agreements of another party under this Agreement. 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:
77
"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.
---
78
"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
79
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 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
80
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, Grey Fox and/or their respective Subsidiaries are engaged on
the Closing Date and (b) the business of renting, leasing, acting as a dealer
or distributor for, repairing, servicing or selling light to heavy
construction and industrial equipment (including, without limitation, aerial
lifts (including boom and scissor lifts), cranes, backhoes, digging
equipment, forklifts, tractors, skid-steer loaders, scaffolding, compressors,
pumps and generators), and/or general tools and equipment (including, without
limitation, power tools, hand tools, high-pressure washers, paint sprayers,
gardening and landscaping
81
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 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
82
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 each Seller's and the
Sellers' Representatives 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
83
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
84
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
85
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.
86
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:
ANNEX A
Name of Shareholder Number of Shares
------------------ ----------------
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TOTAL
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ANNEX B
[Escrow Agreement -- to come]
ANNEX C
[Addresses for Notices -- to come]
