EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
among
NATIONAL EQUIPMENT SERVICES, INC.,
and
XXXX XXXX
and
XXXXXXXX X. XXXX
AS CO-TRUSTEES OF THE XXXX FAMILY TRUST U/A/D 11/20/1984
February 26, 1999
TABLE OF CONTENTS
-----------------
PAGE
"Accounts Receivable".......................................... 1
"Affiliate".................................................... 1
"Agreement".................................................... 1
"Base Value"................................................... 1
"Closing"...................................................... 1
"Closing Date"................................................. 1
"Code"......................................................... 1
"Company"...................................................... 2
"Company Assets"............................................... 2
"Contract"..................................................... 2
"Environmental Law"............................................ 2
"ERISA"........................................................ 3
"Financial Statements"......................................... 3
"GAAP"......................................................... 3
"Governmental Authority"....................................... 3
"Intellectual Property"........................................ 3
"Inventory".................................................... 4
"IRS".......................................................... 4
"Law".......................................................... 4
"Losses"....................................................... 4
"Material Contracts"........................................... 4
"Non-Competition Agreement".................................... 4
"Permits"...................................................... 4
"Person"....................................................... 4
"Pollutant".................................................... 4
"Real Property"................................................ 5
"Shares"....................................................... 5
"Taxes"........................................................ 5
"Tax Return"................................................... 5
ARTICLE 1. PURCHASE AND SALE OF SHARES.......................... 6
1.1 Purchase and Sale of Shares.......................... 6
1.2 Payment of Purchase Price............................ 6
1.3 Closing Balance Sheet................................ 7
1.4 Loan Pay-Off......................................... 7
1.5 Signal Light......................................... 7
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER............. 8
2.1 Due Organization..................................... 8
2.2 Due Authorization.................................... 8
2.3 Ownership of Shares.................................. 9
2.4 Capitalization....................................... 9
2.5 Financial Statements................................. 9
2.6 No Adverse Change.................................... 9
2.7 Assets............................................... 10
2.8 Real Property........................................ 10
2.9 Leases............................................... 10
2.10 Intellectual Property................................ 11
2.11 Inventory............................................ 11
2.12 Accounts Receivable.................................. 11
2.13 Insurance Policie.................................... 12
2.14 Bank Accounts........................................ 12
2.15 Employees............................................ 12
2.16 Contracts............................................ 12
2.17 Employee Benefit Plans............................... 14
2.18 Compliance with Law.................................. 16
2.19 Environmental Matters................................ 17
2.20 Litigation........................................... 18
2.21 Taxes................................................ 18
2.22 Debt................................................. 19
2.23 Affiliate Transactions............................... 20
2.24 Company's Warranties................................. 20
2.25 Brokers.............................................. 20
2.26 No Other Agreement................................... 20
2.27 Records.............................................. 20
2.28 Certain Payments..................................... 20
2.29 DBE Status........................................... 21
2.30 Claim Experience..................................... 21
2.31 Due Diligence Response............................... 21
2.32 Accuracy of Statements............................... 21
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER........... 21
3.1 Due Incorporation..................................... 21
3.2 Due Authorization .................................... 21
3.3 Consents.............................................. 21
ARTICLE 4. CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER.......................................... 22
4.1 Consents and Approvals................................ 22
4.2 Compliance............................................ 22
4.3 Opinion of Counsel.................................... 22
4.4 Deliveries............................................ 22
4.5 Actions or Proceedings................................ 22
ARTICLE 5. CONDITIONS PRECEDENT TO OBLIGATIONS
OF SELLER ............................................ 23
5.1 Compliance............................................ 23
5.2 Opinion of Counsel.................................... 23
5.3 Deliveries............................................ 23
5.4 Actions or Proceedings................................ 23
ARTICLE 6. CLOSING............................................... 23
6.1 Closing............................................... 23
6.2 Deliveries by the Seller.............................. 23
6.3 Deliveries by Purchaser............................... 25
ARTICLE 7. [INTENTIONALLY OMITTED]............................... 25
ii
ARTICLE 8. SURVIVAL; INDEMNIFICATION............................. 25
8.1 Survival.............................................. 25
8.2 Indemnification by Seller............................. 25
8.3 Indemnification by Purchase........................... 26
8.4 Notice of Claims...................................... 26
ARTICLE 9. MISCELLANEOUS......................................... 27
9.1 Expenses.............................................. 27
9.2 Notices............................................... 27
9.3 Effect of Investigations; Construction................ 28
9.4 Waivers............................................... 28
9.5 Counterparts.......................................... 28
9.6 Applicable Law........................................ 28
9.7 Assignment............................................ 28
9.8 Further Assurance..................................... 28
9.9 Entire Understanding.................................. 29
iii
SCHEDULES
---------
Schedule 1.2(a) Payment of Purchase Price
Schedule 2.1 Due Organization
Schedule 2.2 Due Authorization
Schedule 2.5 Financial Statements
Schedule 2.6 Adverse Changes
Schedule 2.7 Ownership of Assets
Schedule 2.9 Leases
Schedule 2.10 Intellectual Property
Schedule 2.11 Inventory
Schedule 2.12 Accounts Receivable
Schedule 2.13 Insurance
Schedule 2.14 Bank Accounts
Schedule 2.15 Employees
Schedule 2.16 Material Contracts
Schedule 2.17 Employee Benefit Plans
Schedule 2.18 Compliance with Law
Schedule 2.19 Environmental Matters
Schedule 2.20 Litigation
Schedule 2.21 Taxes
Schedule 2.22 Debt
Schedule 2.23 Affiliate Transactions
Schedule 2.24 Company's Warranties
Schedule 3.3 Purchaser Consents
iv
EXHIBITS
--------
Exhibit A Employment Agreement
Exhibit B Non-Competition Agreement
Exhibit C Opinion of Counsel to Seller
Exhibit D Opinion of Counsel to Purchaser
Exhibit E Form of Real Estate Leases
v
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT is made this 26th day of February, 1999, by
and among Xxxxxxx X. Xxxx, a/k/a Xxxx Xxxx and Xxxxxxxx X. Xxxx as co-trustees
of the Xxxx Family Trust u/a/d 11/20/1984 (Xxxx Xxxx and Xxxxxxxx X. Xxxx are
collectively referred to as "Seller") and National Equipment Services, Inc., a
Delaware corporation ("Purchaser").
IT IS AGREED as follows:
DEFINITIONS
-----------
The following terms shall have the meanings set forth herein:
"Accounts Receivable" shall mean any accounts receivable, trade
receivables, notes receivable, retainage receivables and other receivables
arising out of the business and operations of the Company.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Agreement" shall mean this Stock Purchase Agreement, including all
Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"Base Value" shall mean One Million Two Hundred Seventy Six Thousand One
Hundred Ninety Four Dollars ($1,276,194).
"Cash Payment" shall mean Seven Million Seven Hundred Twenty Thousand
Dollars ($7,720,000), payable as provided in Section 1.2.
-----------
"Closing" shall mean the consummation of the purchase of the Shares by
Purchaser, in accordance with Article 6 hereof.
---------
"Closing Balance Sheet" shall have the meaning set forth in Section 1.3.
-----------
"Closing Date" shall mean February 26, 1999.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
"Company" shall mean Barricade & Light Rental, Inc., an Arizona
corporation.
"Company Assets" shall mean all of the assets of the Company or used by
the Company in its business, whether real, personal, tangible or intangible,
including, without limitation, the assets reflected in the Financial Statements.
"Contract" shall mean any contract, lease, commitment, sales order,
purchase order, indenture, mortgage, note, bond, instrument, license or other
agreement.
"Debt" shall have the meaning set forth in Section 2.22.
------------
"Disbursement Date" shall mean the date 120 days after the Closing Date.
"Disposition Amount" shall mean the sum of the following (in each case
occurring on or after October 31, 1998 and on or before the Closing Date): the
amount of any bonuses, distributions, dividends or payments in redemption made
to any employee, officer, director or stockholder of the Company.
"Employee Benefit Plans" shall have the meaning set forth in Section 2.17.
------------
"Employment Agreement" shall mean the employment agreement to be entered
into between Seller and the Company, to be dated the Closing Date, in the form
of Exhibit A hereto.
---------
"Encumbrance" shall mean any encumbrance or restriction of any kind,
including, without limitation, any pledge, security interest, lien, charge,
encumbrance, mortgage, hypothecation, trust deed, easement, lease, sublease,
claim, right of way, covenant, option, condition, voting trust, voting
agreement, put, call, right of first refusal or restriction (whether on sale,
transfer, disposition or otherwise, whether imposed by agreement, law or
otherwise and whether of record or otherwise).
"Environmental Law" shall mean any federal, state or local law, statute,
ordinance, regulation, rule, order, consent decree, permit, settlement
agreement, judicial or administrative decision, injunction or requirement of any
Governmental Authority which relates to or otherwise imposes liability or
standards of conduct concerning discharges, releases or threatened releases of
noises, odors or any Pollutants into ambient air, ground or surface water or
land, or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or handling
of Pollutants, including (but not limited to) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, any other so-called
"Superfund" or "Superlien" law, the Toxic Substances Control Act, as amended,
the Federal Water Pollution Control Act
2
of 1972, as amended, the Federal Clean Air Act, as amended, the Federal
Insecticide, Fungicide and Rodenticide Act, as amended, the Occupational Safety
and Health Act, as amended, or any other similar Federal, state or local
statutes.
"Environmental Permit" shall mean any Permit required by or pursuant to any
applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean, with respect to any person, any corporation,
trade or business which, together with such person, is a member of a controlled
group of corporations or a group of trades or businesses under common control
within the meaning of sections 414(b) or (c) of the Code.
"Financial Statements" shall mean (a) the unaudited balance sheet of the
Company as of June 30, 1998 and statement of income for the twelve months then
ended, and (b) the unaudited balance sheet of the Company as of December 31,
1998 and statement of income for the six months then ended.
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
"General Holdback" shall mean Three Hundred Eighty Six Thousand Dollars
($386,000).
"Governmental Authority" shall mean the government of the United States or
any state or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Intellectual Property" shall mean all United States and foreign patents,
trade names, trademarks, service marks, copyrights (and applications or licenses
for any of the foregoing), trade secrets, inventions, processes, designs, know-
how and formulae, used in or necessary to the conduct of the business of the
Company as presently and historically conducted and relating in any manner to
the traffic safety, control, signage and barricade industry.
"Inventory" shall mean the Company's inventory, including all raw
materials, work in process, finished goods, supplies inventory and rental
inventory, wherever located, as of the Closing Date.
"IRS" shall mean the Internal Revenue Service.
3
"Law" shall mean any law, regulation, rule, ordinance, order, consent
decree, judgement, stipulation or other requirement.
"Losses" shall mean any and all damages of any nature, liabilities, losses,
claims, actions, causes of action, investigations, proceedings, demands,
obligations, assessments, judgments, penalties, costs, expenses and fees
(including, without limitation, attorneys' fees and litigation expenses and
costs).
"Material Contracts" shall have the meaning set forth in Section 2.16.
------------
"Non-Competition Agreement" shall mean the non-competition agreements to
be executed and delivered by Seller in the form of Exhibit B hereto.
---------
"Non-Competition Payment" shall mean One Hundred Thousand Dollars
($100,000).
"Note Payment" shall mean Seven Hundred Forty Three Thousand Dollars
($743,000) plus accrued interest from November 1, 1998 through the Closing Date
at the per diem rate of $161.83.
"Permits" shall mean all of the licenses, permits, variances, interim
permits, permit applications, approvals or other authorizations under any Law
applicable to the Company or otherwise required in connection with the Company's
operation.
"Person" shall mean any individual, corporation, partnership, limited
liability company, association, trust, Governmental Authority or other entity or
organization.
"Pollutant" shall mean any substance presently listed, defined, designated
or classified as a pollutant or contaminant under any Environmental Law or as
hazardous, toxic, radioactive or dangerous under any Environmental Law. Without
limitation, Pollutant includes any toxic substance or waste, contaminant,
hazardous substance or waste, special waste, industrial substance, lead based
paint, petroleum, petroleum products, any derivative or by-product of petroleum,
polychlorinated biphenyl, radon, radioactive material, urea formaldehyde
asbestos or asbestos containing material.
"Purchase Price" shall mean the sum of (a) the Cash Payment and (b) the
Note Payment. The Purchase Price is subject to adjustment pursuant to Section
-------
1.2(e).
------
4
"Real Estate Leases" shall mean the leases of the Real Property to be
entered into as of the date hereof between the Company, as lessee and Seller, as
lessor.
"Real Property" shall mean the land, buildings, structures and
improvements leased by the Company and located at 3015 East Illini and 0000
Xxxxx 00xx Xxxxxx, Xxxxxxx, Xxxxxxx, 0000 Xxxx Xxxxx Xxxx, Xxxxxx, Xxxxxxx, 0000
Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx and 0000 0/0 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxx, Arizona.
"Shareholder's Equity" shall mean the shareholder's equity of the Company
as of the Closing Date as shown on the Closing Balance Sheet, determined in
accordance with the past practices of the Company, consistently applied.
"Shares" shall mean all of the issued and outstanding shares of common
stock of the Company, consisting of 10,500 shares of common stock, $1.00 par
value, owned by Seller.
"Taxes" shall mean all taxes, charges, fees, duties, levies or other
assessments, including (without limitation) income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational, interest equalization,
windfall profits, severance and employees' income withholding, unemployment and
Social Security taxes, which are imposed by the United States, or any state,
local or foreign government or subdivision or agency thereof, and such term
shall include any interest, penalties or additions to tax attributable to such
Taxes.
"Tax Indemnification Period" shall means the period (including all prior
taxable years) ending on and including the Closing Date. For any taxable year
of the Company that does not end on, and would otherwise extend beyond, the
Closing Date, there shall be a deemed short taxable year ending on and including
such date and a second deemed short taxable year beginning on and including the
day after such date and ending on the last day of the otherwise applicable tax
year. For purposes of allocating gross income and deductions between deemed
short taxable years, all amounts of income and deduction shall be deemed to have
accrued pro rata during the actual taxable years of the Company, except for
items of income or loss arising from an extraordinary event, which shall be
reflected in the period in which such event occurred.
"Tax Return" shall mean any report, return or other information required
to be supplied to a taxing authority in connection with Taxes.
5
"To the knowledge of Seller" shall refer to the knowledge of Xxxx Xxxx and
Xxxxxxxx X. Xxxx after reasonable investigation.
ARTICLE 1.
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares. Subject to the terms and conditions of
---------------------------
this Agreement, at the Closing Seller shall sell, assign, transfer, convey and
deliver to Purchaser, and Purchaser shall acquire and take assignment and
delivery of, the Shares free and clear of any Encumbrances. The purchase and
sale of the Shares hereunder shall be deemed to have occurred as of the Closing
Date.
1.2 Payment of Purchase Price.
-------------------------
(a) On the Closing Date, Purchaser shall pay to Seller
an amount equal to (i) the Cash Payment, less the General Holdback and (ii) the
Note Payment, each to the account specified in Schedule 1.2(a).
---------------
(b) On the Disbursement Date, Purchaser shall pay to
Seller the General Holdback, less (i) amounts retained by Purchaser pursuant to
Subsections 1.2(c), (d) or (e) below, (ii) amounts retained by Purchaser to
------------------ --- ---
satisfy claims pursuant to Section 8 herein, and (iii) amounts paid or payable
---------
by Purchaser relating to any Taxes which are the responsibility of Seller.
(c) Purchaser shall retain from the General Holdback
the amount of any Accounts Receivables of the Company remaining unpaid as of the
Disbursement Date, net of reserves shown on the Closing Balance Sheet and shall
cause the Company to assign to the party designated by Seller such unpaid
Accounts Receivables. Such assignment shall be without recourse or warranty. To
the extent that the General Holdback is less than the amount of such unpaid
Accounts Receivable (net of reserves shown on the Closing Balance Sheet), Seller
shall pay such deficiency to Purchaser on the Disbursement Date. Seller or his
designee shall conduct any collection of such reassigned receivables in a
commercially reasonable manner and so as not to damage any ongoing relationship
between the Company and the account debtor.
(d) On the Disbursement Date, Seller shall pay
Purchaser the Disposition Amount. Purchaser shall be entitled to retain the
Disposition Amount from the General Holdback. To the extent that the General
Holdback is not sufficient to cover the Disposition Amount, Seller shall pay to
6
Purchaser, on the Disbursement Date, the amount of such deficiency.
(e) If (i) the Shareholder's Equity stated in the
Closing Balance Sheet exceeds the Base Value, Purchaser shall pay to Seller, on
the Disbursement Date, the amount by which the Shareholder's Equity stated in
the Closing Balance Sheet exceeds the Base Value (and the Purchase Price shall
be increased by such amount), or (ii) the Base Value exceeds the Shareholder's
Equity stated in the Closing Balance Sheet, Purchaser shall retain from the
General Holdback the amount by which the Base Value exceeds the Shareholder's
Equity stated in the Closing Balance Sheet (and the Purchase Price shall be
decreased by such amount). To the extent that the General Holdback is not
sufficient to cover the amount, if any, by which the Base Value exceeds the
Shareholder's Equity stated in the Closing Balance Sheet, Seller shall pay to
Purchaser, on the Disbursement Date, the amount of such deficiency.
(f) All payments required under this Section 1.2 shall
-----------
be made by wire transfer of immediately available funds to the account
designated by the party entitled to payment.
1.3 Closing Balance Sheet.
---------------------
(a) Within 30 days after the Closing Date, Seller shall prepare and
deliver to Purchaser a balance sheet as of the Closing Date (the "Closing
Balance Sheet") setting forth the Shareholder's Equity, which will include the
net income of the Company for the months of November 1998 through February 1999.
The Purchaser shall then have 45 to review the Closing Balance Sheet, at
Purchaser's expense, and confirm that it was prepared in a manner consistent
with the Company's past practices (including the same type of line items as the
balance sheet shown on the Financial Statements) and the terms of this
Agreement. Upon Purchaser's request, Seller shall make available to Purchaser
and its accountants such documents as Purchaser may reasonably request in
connection with the review of the Closing Balance Sheet.
(b) Within thirty (30) days after receipt of the amended Closing
Balance Sheet, Seller shall deliver to Purchaser a written statement describing
his objections, if any, thereto. Unless Seller so objects within such period,
the Closing Balance Sheet, as amended shall become final and binding upon all
parties. If Seller objects within such period, such objection shall be resolved
by the Chicago office of a "big five" accounting firm other than
PricewaterhouseCoopers, which shall be instructed to resolve such dispute within
thirty (30) days. The resolution of disputes by such firm shall be set forth in
writing and shall be conclusive and binding upon the parties and the
7
Closing Balance Sheet shall become final and binding upon the date of such
resolution. The fees and expenses of such accounting firm shall be paid one-half
by Purchaser and one-half by Seller. The parties shall cooperate promptly and in
good faith in resolving any dispute regarding the Closing Balance Sheet.
(c) In preparing the Closing Balance Sheet and determining the
Shareholders Equity, no effect shall be given to the payment, release or
discharge, in connection with the Closing, of the Company's promissory note to
Seller in the original principal amount of $743,000 or any other debt of the
Company, whether for borrowed funds, for trade debt or otherwise.
1.4 Loan Pay-off. As of the Closing Date, Purchaser will pay in full
------------
all of the Debt listed on Schedule 2.22 (other than the Premium Payment
-------------
Financing, which shall remain the responsibility of Seller) and provide evidence
to Seller, in form reasonably satisfactory to Seller's counsel, that Seller has
been released from any and all personal guarantees relating to the Debt.
1.5 Signal Light. Purchaser's acquisition of the Shares shall not
------------
include the acquisition of any patent or other property rights which Seller has
in his signal light design or the marketing or other production rights related
to such signal light, which rights shall remain with Seller.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller represents and warrants to Purchaser as of the Closing Date as
follows:
2.1 Due Organization. The Company is a corporation duly organized,
----------------
validly existing and in good standing under the laws of the State of Arizona
with all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. The Company is duly
qualified to do business and is in good standing in each jurisdiction where the
failure to be so qualified would, in the aggregate, have a material adverse
effect on the business or operation of the Company. Schedule 2.1 is a list of
------------
all jurisdictions in which the Company is so authorized. The Company has no
subsidiaries, either wholly or partially owned, and the Company does not hold
any interest in any other entity.
2.2 Due Authorization. Seller has full power and authority to enter into
-----------------
this Agreement and to carry out the transactions contemplated herein, and this
Agreement has been duly and validly
8
executed and delivered by Seller and constitutes the legal, valid and binding
obligation of Seller, enforceable in accordance with its terms. The execution,
delivery and performance by Seller of this Agreement and all other documents
contemplated hereby do not and will not violate any Law or Contract binding on
the Company, Seller, the Company Assets or the Shares including, without
limitation, the charter or by-laws of the Company. Except as set forth on
Schedule 2.2, no notice to or consent of any Person is required (i) for Seller
------------
to consummate the transactions contemplated hereby or (ii) before a change in
control of the Company can occur.
2.3 Ownership of Shares. Seller has good, valid and marketable legal and
-------------------
beneficial title to the Shares, free and clear of any Encumbrance. The Shares
are duly authorized, validly issued, fully paid and non-assessable and
constitute all of the issued and outstanding shares of capital stock of the
Company. At the Closing, Seller shall transfer to Purchaser good and valid
legal and beneficial title to the Shares free and clear of any Encumbrance.
2.4 Capitalization. The authorized capital stock of the Company consists
--------------
of 2,000,000 shares of common stock, $1.00 par value, of which [10,500] shares
are issued and outstanding. The Company has not granted any option, warrant,
subscription or similar right to any Person to purchase or acquire any rights
with respect to any shares of capital stock of the Company, and there exist no
securities convertible or exchangeable into shares of capital stock of the
Company. The Company holds no interest in any other entity.
2.5 Financial Statements. The Financial Statements fairly present the
--------------------
financial position, assets, liabilities and results of operation of the Company
and changes in financial position with respect to the dates thereof and the
periods covered thereby, and such statements are compilation statements prepared
consistent with the past practices of the Company. The Financial Statements,
including the notes thereto, make full and adequate disclosure of, and provision
for, all obligations and liabilities of the Company, as of the date thereof,
whether accrued, absolute, contingent or otherwise. Accurate and complete
copies of the Financial Statements are set forth on Schedule 2.5. The Financial
------------
Statements are in accordance with the books and records of the Company and do
not reflect any transactions that are not bona fide.
2.6 No Adverse Change. Except as set forth on Schedule 2.6, since June
----------------- ------------
30, 1998, the business of the Company has been conducted only in the ordinary
course consistent with past custom and practice and there has not been any: (a)
material adverse change in the financial condition, business, prospects, or
9
results of operations of the Company, including, without limitation, any loss or
threatened loss of any material customer or supplier or the termination of any
Material Contract; (b) material loss or damage (whether or not covered by
insurance) to any of the Company Assets; (c) sale, transfer or other disposition
of the Company Assets; (d) indebtedness for borrowed money incurred by the
Company; (e) loans, advances or capital contributions to, or investments in, any
Person; (f) changes in the accounting systems, policies or practices of the
Company; (g) transactions with any of the Company's Affiliates; (h) material
increase in prices charged by any supplier to the Company; (i) capital
improvements undertaken by, or capital expenditures made by, the Company; (j)
(1) declaration or payment of any dividend or distribution with respect to the
shares of the Company's capital stock, or (2) redemption, purchase or other
acquisition or issuance of any of the shares of the Company's capital stock; (k)
bonus or profit sharing payment or authorization thereof; (l) write off or write
down of any Accounts Receivable; (m) increase in wages, salaries, bonus or other
remuneration or compensation arrangement of any employee, officer, director,
shareholder, consultant or agent of the Company; (n) loss of any material
customer, supplier or employee (individually or in the aggregate); or (o) any
Contract entered into or commitment made by the Company with respect to any of
the foregoing. The Company is not delinquent in the payment of any account
payable.
2.7 Assets. Except as disclosed on Schedules 2.7 and 2.9, the Company
------ ------------- ---
has good and marketable title to, and is the sole and lawful owner of, the
Company Assets free and clear of all Encumbrances. Upon the purchase of the
Shares by Purchaser, the Company shall remain the sole and lawful owner of, and
have good and marketable title to, the Company Assets, free and clear of all
Encumbrances except as set forth on Schedule 2.7. The Company Assets and the
------------
property leased pursuant to the lease agreements set forth on Schedule 2.9
------------
constitute all of the assets and properties required for the operation of the
Company's business.
2.8 Real Property. The Real Property includes all land, structures and
-------------
improvements used for the Company's operation. Such structures, improvements and
real property do not violate any applicable zoning or safety or health or
similar law or any Environmental Law. No parcel of land included in the Real
Property relies on or regularly makes use of access to the nearest public road
or right-of-way over land owned by others. There is no pending or threatened
proceeding or governmental action to modify the zoning classification of, to
condemn or take by eminent domain or to otherwise restrict the use of all or any
part of the Real Property.
2.9 Leases. Schedule 2.9 contains a list and description of the terms of
------ ------------
all written or oral leases to which the Company
10
is a party (as lessee or lessor), relating to real or personal property. With
respect to each lease set forth in Schedule 2.9: (a) such lease is in full force
------------
and effect and fully enforceable in accordance with its terms; (b) all rents
under such lease have been paid; and (c) there exists no event of default or
condition (including the purchase of the Shares hereunder) which, with notice,
lapse of time or both, would constitute a default under such lease, of either
the Lessee or Lessor thereunder. Seller has delivered to Purchaser complete
copies of each lease listed on Schedule 2.9.
------------
2.10 Intellectual Property. Schedule 2.10 is a list of the Intellectual
--------------------- -------------
Property and any license agreement or arrangement pursuant to which the Company
uses any Intellectual Property. Except as set forth on Schedule 2.10: (a) the
-------------
Intellectual Property is owned by the Company; (b) none of the Intellectual
Property has been or is the subject of any pending or, to the knowledge of
Seller, threatened adverse claim; (c) no license agreement to which the Company
or Seller is a party is in default or the subject of any notice of termination,
nor does Seller have reason to anticipate any such default or notice or that the
transactions herein contemplated will result in any such termination; (d)
neither the Company nor Seller has granted any license with respect of any
Intellectual Property; (e) the Company is not obligated to pay any license or
royalty fee with respect to any of the Intellectual Property; and (f) the
Intellectual Property is owned by or licensed exclusively to the Company or
Seller, as the case may be, free and clear of any Encumbrance. The products
that the Company manufactures, sells or leases, and any process, method, part,
design or material it employs, or the marketing and use by the Company of any
such product or any service, do not infringe any trademark, trade name,
copyright, patent, trade secret or proprietary right of another, and the Company
has not received any notice contesting its right to use any trademark, trade
name, copyright, patent, product, process, design, computer program or written
work.
2.11 Inventory. The Company has good and valid title to the Inventory,
---------
free of any Encumbrance. Except as set forth in Schedule 2.11, the Inventory is
-------------
merchantable and usable in the ordinary operations of the Company and is not
obsolete. The Inventory is fairly reflected on the Financial Statements and
valued at its average cost. The Inventory is held in quantities that are
reasonable in light of the historic sales levels of the business of the Company
and is not subject to write down or write off.
2.12 Accounts Receivable. All Accounts Receivables represent a sale or
-------------------
lease transaction made in the ordinary course of business and which arose
pursuant to an enforceable written contract for a bona fide sale or purchase of
goods or for
11
services performed, and the Company has performed all of its obligations to
which such Accounts Receivable relates and such Accounts Receivables are good
and collectable in the ordinary course of business (subject to the allowance for
bad debts stated in the Financial Statements and as shown on Schedule 2.12), and
-------------
(b) no Accounts Receivable is subject to any claim for reduction, counterclaim,
set-off, prepayment, recoupment or other claim for credit, allowances or
adjustments by the obligor thereof and no obligor thereof is subject to
bankruptcy or similar proceedings. The Company is the sole owner of the Accounts
Receivables free from all Encumbrances, and no other person or entity has any
right or claim thereto. No pre-payments have been made under any Contracts with
customers. Since June 30, 1998, the Company has not compromised or canceled any
Accounts Receivable, except as disclosed on Schedule 2.12.
-------------
2.13 Insurance Policies. Schedule 2.13 is a list of all policies of
------------------ -------------
insurance currently held and maintained by the Company. All such insurance
provides coverage on an occurrence basis. A copy of each such policy has been
delivered to Purchaser. The Company has paid all premiums due with respect to
each such policy and each such policy is in full force and effect. Since
December 31, 1997, there has not been any material adverse change in the
Company's relationship with its insurers or in the premiums payable under such
policies. Seller has furnished Purchaser with an accurate and complete claims
history for the Company for the past five (5) years.
2.14 Bank Accounts. Schedule 2.14 sets forth the names and locations of
------------- -------------
each financial institution at which the Company has an account or safe deposit
box and the names of all persons authorized to draw thereon or have access
thereto.
2.15 Employees. Schedule 2.15 is a list of the Company's employees,
--------- -------------
indicating the rate of pay or salary of each such employee during the previous
twelve months. The Company's employees are not members of any union, there is
no ongoing effort by any union to enlist the employees of the Company and there
is no request for union or collective bargaining representation pending and, to
the knowledge of Seller, no question regarding union representation has been
raised. Within the last three years, the Company has not experienced any
strikes, picketing, boycott, work stoppage or slowdown, labor dispute or
complaint or union organizational activity. Seller has delivered to Purchaser
an accurate and complete copy of any employee handbook of the Company and any
written work rules pertaining to the Company. Neither the Company nor Seller
has received notice that any key employee of the Company intends to terminate
his employment with the Company or would not be willing to work for the Company
after the Closing. The Company has operated and is currently operating in full
compliance with all
12
Laws relating to employment and employment practices, terms and conditions of
employment, wages and hours and nondiscrimination. Other than Seller and
Xxxxxxxx X. Xxxx, there are no officers or directors of the Company.
2.16 Contracts. Schedule 2.16 is a partial list of written or oral
--------- -------------
Contracts or arrangements as provided below to which the Company is a party, by
which the Company or the Company Assets are bound, to which the Shares are
subject or which otherwise directly relate to the business and operation of the
Company (the "Material Contracts"). Seller has complete copies of each listed
document at the Company's offices at 3015 East Illini in Phoenix and has
provided to Purchaser a written description of each oral arrangement so listed:
(1) any agreement or arrangement with any officer, director or
employee of the Company, or Seller, including, without limitation, agreements
relating to present or future compensation, severance pay or stay bonuses (other
than as set forth on Schedule 2.17);
-------------
(2) any Contract or other arrangement of any kind with any
Affiliate of the Company;
(3) any Contract or arrangement (other than those set forth on
Schedule 2.17) which (i) involves an unperformed commitment in excess of
-------------
$10,000; (ii) requires performance of any obligations by the Company over a
period in excess of one year, unless terminable by the Company without penalty
upon not more than 30 days' notice or (iii) imposes an obligation of indemnity
on the Company;
(4) any contract or arrangement pursuant to which the Company
has (i) made or will make loans or advances, or (ii) become a guarantor, surety
or pledged its credit on or otherwise become responsible with respect to any
undertaking of another;
(5) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement or commitment for financing;
(6) any agreement or arrangement involving (i) a partnership,
joint venture or other cooperative undertaking, or (ii) with respect to the
Company's business, any restrictions on the (A) geographical area in which the
Company is permitted to operate or (B) scope or type of business;
(7) any power of attorney or agency agreement;
(8) any warranty applicable to the Company; and
13
(9) all other Contracts not made in the ordinary course of
business.
With respect to each Material Contract (x) such Material Contract is in full
force and effect and fully enforceable in accordance with its terms, (y) there
exists no default thereunder or condition (including the purchase of the Shares
hereunder) which, with notice, lapse of time or both, would constitute a default
thereunder, and (z) there is not pending or threatened any claim with respect to
such Material Contract.
2.17 Employee Benefit Plans.
----------------------
(a) General. Except as set forth on Schedule 2.17, none of the Company or
------- -------------
any of its ERISA Affiliates maintains, is a party to, participates in or has any
liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee pension benefit
plan" (as those terms are defined in sections 3(1) and 3(2),
respectively, of ERISA, or a "multiemployer plan" (as defined in
section 3(37) of ERISA);
(ii) any retirement or deferred compensation plan, incentive compensation
plan, stock plan, unemployment compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangements for
any current or former employee, director, consultant or agent,
whether pursuant to contract, arrangement, custom or informal
understanding, which does not constitute an employee benefit plan (as
defined in section 3(3) of ERISA); or
(iii) any employment agreement or consulting agreement.
(b) Plan Documents and Reports. A true and correct copy of each of the
--------------------------
plans, arrangements, and agreements listed on Schedule 2.17 (referred to
-------------
hereinafter as "Employee Benefit Plans"), and all contracts relating thereto, or
to the funding thereof, including, without limitation, all trust agreements,
insurance contracts, administration contracts, investment management agreements,
subscription and participation agreements, and recordkeeping agreements, each as
in effect on the date hereof, has been supplied to the Purchaser. In the case
of any Employee Benefit Plan which is not in written form, the Purchaser has
been supplied with an accurate description of such Employee Benefit Plan as in
effect on the date hereof. A true and correct copy of the most recent annual
report, actuarial report, accountant's opinion of the plan's financial
statements, summary
14
plan description and IRS determination letter with respect to each Employee
Benefit Plan, to the extent applicable, and a current schedule of assets (and
the fair market value thereof assuming liquidation of any asset which is not
readily tradable) held with respect to any funded Employee Benefit Plan has been
supplied to the Purchaser, and there have been no material changes in the
financial condition in the respective plans from that stated in the annual
reports and actuarial reports supplied.
(c) Compliance with Laws; Liabilities. As to all Employee Benefit Plans:
---------------------------------
(i) All Employee Benefit Plans comply and have been administered in
form and in operation in all material respects with all
applicable requirements of Law, and no event has occurred which
will or could cause any such Employee Benefit Plan to fail to
comply with such requirements and no notice has been issued by
any governmental authority questioning or challenging such
compliance.
(ii) All Employee Benefit Plans which are employee pension benefit
plans comply in form and in operation with all applicable
requirements of sections 401(a) and 501(a) of the Code; there
have been no amendments to such plans which are not the subject
of a favorable determination letter issued with respect thereto
by the IRS; and no event has occurred which will or could give
rise to disqualification of any such plan under such sections or
to a tax under section 511 of the Code.
(iii) None of the assets of any Employee Benefit Plan are invested in
employer securities or employer real property.
(iv) There have been no "prohibited transactions" (as described in
section 406 of ERISA or section 4975 of the Code) with respect to
any Employee Benefit Plan and none of Seller or the Company has
engaged in any prohibited transaction.
(v) There have been no acts or omissions by Seller or the Company
which have given rise to or may give rise to fines, penalties,
taxes or related charges under section 502 of ERISA or Chapters
43, 47, 68 or 100 of the Code for which Seller or the Company may
be liable.
(vi) None of the payments contemplated by the Employee Benefit Plans
would, in the aggregate, constitute
15
excess parachute payments (as defined in section 280G of the Code
(without regard to subsection (b)(4) thereof)).
(vii) There are no actions, suits or claims (other than routine claims
for benefits) pending or threatened involving any Employee
Benefit Plan or the assets thereof and no facts exist which could
give rise to any such actions, suits or claims (other than
routine claims for benefits).
(viii) No Employee Benefit Plan is subject to Title IV of ERISA.
(ix) Each Employee Benefit Plan which constitutes a "group health
plan" (as defined in section 607(i) of ERISA or section
4980B(g)(2) of the Code), including any plans of current and
former affiliates which must be taken into account under sections
4980B and 414(t) of the Code or sections 601-608 of ERISA, have
been operated in compliance with applicable law, including
continuation coverage requirements of section 4980B of the Code
and section 601 of ERISA and the portability and
nondiscrimination requirements of sections 9801 and 9802 of the
Code and sections 701-707 of ERISA, to the extent such
requirements are applicable.
(x) None of the Company or any of its subsidiaries has any liability
or contingent liability for providing, under any Employee Benefit
Plan or otherwise, any post-retirement medical or life insurance
benefits, other than statutory liability for providing group
health plan continuation coverage under Part 6 of Title I of
ERISA and section 4980B of the Code.
(xi) Actuarially adequate accruals for all obligations under the
Employee Benefit Plans are reflected in the financial statements
of the Company and such obligations include a pro rata amount of
the contributions and PBGC premiums which would otherwise have
been made in accordance with past practices and applicable law
for the plan years which include the Closing Date.
(xii) There has been no act or omission that would impair the ability
of the Company (or any successor hereto) to unilaterally amend or
terminate any Employee Benefit Plan.
16
(d) Multiemployer Plans. None of the Company nor any of its ERISA
-------------------
Affiliates contributes to, has contributed to, or has any liability or
contingent liability with respect to a multiemployer plan.
2.18 Compliance with Law. Except as set forth on Schedule 2.18, none of
------------------- -------------
the Company, its personnel, the Company Assets, the Real Property or the
occupancy or operation thereof, violate any Law concerning zoning, building,
occupational health and safety, road safety, employment, fire, labor or contract
procurement or project procurement. Except as set forth in Schedule 2.18, the
-------------
Company is not subject to any charge, assessment or penalty. No notice from any
Governmental Authority has been served upon Seller or the Company claiming any
violation of any Law. The Company holds all of the Permits described on
Schedule 2.18, and no other Permits are necessary for the lawful operation of
-------------
the Company. None of the Permits listed on Schedule 2.18 will be terminated,
-------------
limited as to transfer or otherwise, or otherwise adversely affected by the
consummation of the transactions contemplated herein. The Company has paid all
fees required by such permits and to enable the Company to conduct its business
as presently conducted.
2.19 Environmental Matters. Except as disclosed on Schedule 2.19: (a) the
--------------------- -------------
Company has obtained all Environmental Permits required or desirable for the
operation of the Company's business or the Company Assets and such Environmental
Permits are valid and in full force and effect; (b) neither any of the Company's
business, any of the Company Assets nor any of the Real Property violate any
applicable Environmental Law or Environmental Permit in effect as of the date
hereof and no condition or event has occurred which, with notice, lapse of time
or both, would constitute any such violation; (c) neither Seller nor the Company
or any other Person has stored or used any pollutants, contaminants or hazardous
or toxic wastes, substances or materials on or at the Real Property in violation
of any Environmental Law; (d) neither Seller nor the Company has received notice
from any Person advising that any of the Real Property or Company Assets or the
operation of the Company's business violates any Environmental Law or any
Environmental Permit or that Seller or the Company is responsible (or
potentially responsible) for the cleanup of any pollutants, contaminants or
hazardous or toxic wastes, substances or materials at, on or beneath the Real
Property or at, on or beneath any land adjacent thereto or any other property
and, to the knowledge of Seller, no such notice is threatened; (e) neither
Seller nor the Company is aware of any fact or circumstance that would give rise
to any claim, suit, proceeding or investigation related to the manufacture,
distribution, use, treatment, storage, disposal, discharge or release of any
industrial, toxic or hazardous substance or waste in connection
17
with the Company's business, the Company Assets or the Real Property; (f)
neither Seller nor the Company or any other Person has buried, dumped, disposed,
spilled or released any Pollutants on, beneath or about any Real Property or any
property adjacent thereto or any other property; (g) neither the Real Property
nor any land adjacent thereto has been used for the disposal, processing or
treatment of waste or as a dump site; and (h) no storage tanks are or have been
on, at or under the Real Property. The Company has timely filed all reports
required to be filed with respect to the Real Property, the Company Assets and
the operation of the Company's business and has generated and maintained all
required data, documentation and records under any applicable Environmental Laws
and Environmental Permits with respect thereto. Neither the Company nor the
operation thereof are the subject of any pending Federal, state, local or
private litigation or proceedings including, without limitation, any
administrative proceeding involving a demand for damages or other potential
liability with respect to violations of any Environmental Law.
2.20 Litigation. Except as disclosed in Schedule 2.20, (a) there are no
---------- -------------
actions, suits, disputes, litigation, proceedings or governmental investigations
whatsoever pending or, to the knowledge of Seller, threatened against or
relating to (i) the Company or Seller's ownership of the Shares, (ii) any
officers, directors, employees or shareholders of the Company in their capacity
as such, (iii) any of the Company Assets or businesses of the Company, or (iv)
the transactions contemplated by this Agreement, and (b) neither the Company nor
Seller is subject to any order, judgment, decree, stipulation, or consent of or
with any Governmental Authority.
2.21 Taxes. Except as disclosed in Schedule 2.21:
----- -------------
(a) The Company has filed (or has had filed on its behalf) on a
timely basis all Tax Returns as required by applicable law on or before the
Closing Date. Each such Tax Return is true, correct and complete in all
respects. All Taxes shown as due and owing on all such Tax Returns have been
paid. The Company has not requested an extension of time within which to file
any Tax Return in respect of any taxable year which has not since been filed.
(b) The Company has or will have no additional liability for Taxes
with respect to any Tax Return which was required by law to be filed on or
before the Closing Date, other than as reflected as liabilities on the Financial
Statements. The amounts provided as a liability on the Financial Statements for
all Taxes are adequate to cover all unpaid liabilities for all Taxes, whether or
not disputed, that have accrued with respect to or are applicable to the period
ended on and including the
18
Closing Date or to any years and periods prior thereto and for which the Company
and any of its subsidiaries may be directly or contingently liable in their own
right or as a transferee of the assets of, or successor to, any Person.
(c) No federal, state, local or foreign audits or other
administrative proceeding or court proceeding exist with regard to any Taxes or
Tax Returns of the Company. The Company has not received any written notice that
an audit or other administrative proceeding is pending or threatened with
respect to any Taxes due from or with respect to the Company or any Tax Return
filed by or with respect to the Company. The Company has not been granted or
been requested to grant any waiver of any statutes of limitations applicable to
any claim for Taxes.
(d) All Tax deficiencies which have been claimed, proposed or
asserted in writing against the Company has been fully paid or finally settled,
and no issue has been raised in writing in any examination which, by application
of similar principles, could be expected to result in the proposal or assertion
of a Tax deficiency for any other year not so examined.
(e) No written position has been taken on any Tax Return with respect
to the business or operations of the Company for a taxable year for which the
statute of limitations for the assessment of any Taxes with respect thereto has
not expired that is contrary to any publicly announced position of a
Governmental Authority or that is substantially similar to any position which a
Governmental Authority has successfully challenged in the course of an
examination of a Tax Return of the Company.
(f) All Taxes that the Company is required by law to withhold or
collect, including without limitation, sales and use taxes, and amounts required
to be withheld for Taxes of employees and other withholding taxes, have been
duly withheld or collected and, to the extent required, have been paid over to
the proper governmental agencies or are held in separate bank accounts for such
purpose.
(g) The Company has not made or become obligated to make, and will
not as a result of any event connected with any transaction contemplated herein
become obligated to make, any payments that could be nondeductible by reason of
Section 280G (without regard to subsection (b)(4) thereof) or 162(m) of the
Code.
(h) The Company is not required to include in income any adjustment
pursuant to Section 481(a) of the Code, for any period after the Closing Date,
by reason of any voluntary or involuntary change in accounting method (nor has
any taxing authority
19
proposed in writing any such adjustment or change of accounting method).
(i) The Company does not have any liability for Taxes of any person
other than itself under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law).
(j) None of the assets of the Company is subject to a consent
pursuant to Section 341(f) of the Code (or any predecessor provision).
2.22 Debt. Schedule 2.22 lists all outstanding amounts of borrowed money
---- -------------
owed or guaranteed by the Company (collectively, the "Debt"). With respect to
each component of the Debt, (a) there is no event of default in effect or
condition that, with notice, lapse of time or both, would constitute such an
event of default, and (b) Seller has delivered to Purchaser (i) complete and
correct copies of all documents evidencing the Debt and (ii) with respect to any
undocumented Debt, an accurate and complete written explanation of such Debt.
2.23 Affiliate Transactions. Except as set forth in Schedule 2.23, (a)
---------------------- -------------
Seller does not possess any interest in any supplier, customer, lessor or lessee
of, provider of services to, or competitor or potential competitor of, the
Company and (b) no supplier, customer, lessor or lessee of, provider of services
to, or competitor or potential competitor of, the Company possesses any
financial interest in the Company.
2.24 Company's Warranties. Schedule 2.24 contains a list of each express
-------------------- -------------
warranty, if any, given by the Company on units of equipment sold or leased or
services performed by the Company, that is outstanding on the Closing Date.
Seller has furnished Purchaser with a true and complete copy of each such
warranty.
2.25 Brokers. No broker or finder has acted for the Company or Seller in
-------
connection with this Agreement or the transactions contemplated hereby and no
broker or finder is entitled to any brokerage or finder's fee.
2.26 No Other Agreement. Except with respect to sales or rentals by the
------------------
Company of items of the Inventory in the ordinary course of business consistent
with past practice or the sale of the Shares under this Agreement, none of
Seller, the Company or any of their respective Affiliates has any contract,
agreement, arrangement or understanding with respect to the sale or other
disposition of the Company Assets, the Shares or any other shares of the
Company's stock.
20
2.27 Records. The copies of the articles of incorporation and by-laws of
-------
the Company that were provided to the Purchaser are true, accurate and complete
and reflect all amendments made through the date of this Agreement. The minute
books for the Company provided to the Purchaser for review contain the true
signatures of the persons purporting to have signed them, and such minute books
contain an accurate record of all corporate actions of the shareholders and
directors (and any committees thereof) of the Company taken by written consent
or at a meeting. All material corporate actions taken by the Company have been
duly authorized or ratified. The stock ledgers of the Company, as previously
provided to the Purchaser, contain accurate and complete records of all
issuances, transfers and cancellations of shares of the capital stock of the
Company.
2.28 Certain Payments. Neither the Company nor any director, officer,
----------------
agent, or employee thereof, or to Seller's knowledge any other Person associated
with or acting for or on behalf of the Company, has directly or indirectly (a)
made any contribution, gift, bribe, rebate, payoff, influence payment, kick-
back, or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
or (iv) in violation of any Law, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Company.
2.29 No Special Status. No contract or project has been awarded to the
-----------------
Company pursuant to the Company meeting the requirements of a disadvantaged
business enterprise, a small business enterprise, a minority owned enterprise, a
woman owned enterprise or similar classification under any federal, state or
local law.
2.30 Claim Experience. The amount of claims made by customers and third
----------------
parties with respect to the Company's products or services in each of the past
three (3) years has not exceeded .5% of the Company's net sales for each such
year. For purposes of the foregoing, "the amount of claims made" refers to (a)
the amount of the originally asserted claim, and (b) shall be limited to claims
under theories of breach of contract, breach of warranty (express or implied),
strict liability or product liability.
2.31 Due Diligence Materials. Seller has provided, or otherwise made
-----------------------
available, to Purchaser or its representatives all documents of the character
and type described in the Due Diligence Request of Purchaser dated September
1998, and there are no material documents of a material nature in the possession
21
of Seller or any of its agents or representatives of a character or type
described in such request which have not been so provided to Purchaser.
2.32 Accuracy of Statements. Neither this Agreement nor any response,
----------------------
schedule, statement, certificate or other information furnished by or on behalf
of Seller or the Company in connection herewith contains any untrue statement of
a material fact or omits a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading.
Each of the foregoing representations and warranties shall be deemed remade
on and as of the Closing Date.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as of the Closing Date as
follows:
3.1 Due Incorporation. Purchaser is a corporation duly organized, validly
-----------------
existing and in good standing under the laws of the State of Delaware, with all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
3.2 Due Authorization. Purchaser has all requisite corporate power and
-----------------
authority to enter into this Agreement and to carry out its obligations under
this Agreement. The execution, delivery and performance of this Agreement by
Purchaser has been duly authorized by all necessary corporate action on the part
of Purchaser. This Agreement has been duly executed and delivered by Purchaser
and constitutes the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms.
3.3 Consents. Except as set forth on Schedule 3.3, no notice to, filing
-------- ------------
with, authorization of, exemption by, or consent of any Person is required in
order for Purchaser to consummate the transactions contemplated hereby.
Each of the foregoing representations and warranties shall be deemed remade
on and as of the Closing Date.
22
ARTICLE 4.
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
The obligations of Purchaser under Article 1 of this Agreement are, at the
option of Purchaser, subject to satisfaction of the following conditions
precedent on or before the Closing Date:
4.1 Consents and Approvals. All consents and approvals in writing
----------------------
reasonably satisfactory to Purchaser shall have been received from any lenders,
lessors, Governmental Authorities or other persons or entities whose consent or
approval is required. Purchaser shall have received financing to complete the
transactions contemplated herein on terms satisfactory to Purchaser.
4.2 Compliance. Seller shall, in all material respects, have performed
----------
all of his obligations and agreements to be performed and complied with by him
on or prior to the Closing Date. The representations and warranties of Seller
shall be true and correct on the Closing Date as if made thereon. Seller shall
have delivered to Purchaser a certificate dated as of the Closing Date, signed
by Seller, certifying all of the foregoing.
4.3 Opinion of Counsel. Purchaser shall have received an opinion, dated
------------------
the Closing Date, of Xxxxxxxxx & Xxxxxxx, counsel for Seller, to the effect set
forth on Exhibit C hereto.
---------
4.4 Deliveries. All of the other agreements, certificates and
----------
instruments to be delivered to Purchaser at the Closing pursuant to Article 6.2
-----------
shall have been delivered to Purchaser.
4.5 Actions or Proceedings. No action or proceeding by any Governmental
----------------------
Authority or other party shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in respect
of, this Agreement or the complete consummation of the transactions as
contemplated by this Agreement, and no court order shall have been entered in
any action or proceeding which enjoins, restrains or prohibits this Agreement or
the complete consummation of the transactions as contemplated by this Agreement.
ARTICLE 5.
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under Article 1 of this Agreement are, at the
option of Seller, subject to the satisfaction of the following conditions
precedent on or before the Closing Date:
23
5.1 Compliance. Purchaser shall, in all material respects, have performed
----------
all obligations and agreements to be performed and complied with by it on or
prior to the Closing Date. The representations and warranties of Purchaser shall
be true and correct on the Closing Date as if made thereon. Purchaser shall have
delivered to Seller a certificate, dated as of the Closing Date, of the
President or a Vice President of Purchaser certifying all of the foregoing.
5.2 Opinion of Counsel. Seller shall have received an opinion, dated the
------------------
Closing Date, of Xxxxx, Xxxxx & Xxxxx, counsel for Purchaser, to the effect set
forth on Exhibit D.
---------
5.3 Deliveries. All of the other agreements, certificates and
----------
instruments to be delivered pursuant to Section 6.3 shall have been delivered.
-----------
5.4 Actions or Proceedings. No action or proceeding by any governmental
----------------------
agency or other party shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in respect
of, this Agreement or the complete consummation of the transactions as
contemplated by this Agreement, and no court order shall have been entered in
any action or proceeding that enjoins, restrains, or prohibits this Agreement or
the complete consummation of the transactions as contemplated by this Agreement.
ARTICLE 6.
CLOSING
6.1 Closing. The Closing shall take place at the offices of Xxxxx, Xxxxx
-------
& Xxxxx, 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, at 10:00 A.M. on the
Closing Date.
6.2 Deliveries by the Seller. At the Closing, Seller will deliver:
------------------------
i. certificates evidencing all of the Shares, which
certificates shall be duly endorsed in blank or
accompanied by duly executed stock powers with
signatures guaranteed;
ii. the certificate referred to in Section 4.2;
-----------
iii. the opinion referred to in Section 4.3;
-----------
iv. the Articles of Incorporation of the Company,
certified as of a recent date by the Secretary of
State of Arizona,
24
indicating amendments thereto to (A) abolish the debt
incurrence restriction stated at Article VIII thereof and
(B) provide for the perpetual existence of the Company;
v. a good standing certificate for the Company, issued as of a
recent date by the Secretary of State of Arizona;
vi. the By-Laws of the Company, certified by the Secretary or
Assistant Secretary of the Company as true and correct;
vii. the stock record book and minute book of the Company and the
corporate seal, if any;
viii. resignations of all directors and officers of the Company;
ix. the Employment Agreement, duly executed by Seller;
x. an affidavit of Seller stating, under penalties of perjury,
Seller's U.S. taxpayer identification number and that Seller
is not a "foreign person" as defined in Section 1445 of the
Code;
xi. the Non-Competition Agreement;
xii. the Real Estate Leases of the Real Property, in the form of
Exhibit E hereto, duly executed by the lessors thereunder;
---------
xiii. a certificate of Seller certifying the Disposition Amount
and any amount due under Section 1.2.
-----------
xiv. a release by Seller of the Company's promissory note to
Seller in the original principal amount of $743,000; and
xv. a release by Seller of any indemnification obligation the
Company may have to him by reason of his status as an
officer or director of the Company, including, without
limitation,
25
any such obligation arising under the Company's by-laws.
6.3 Deliveries by Purchaser. At the Closing, Purchaser will deliver to
-----------------------
Seller:
i. the payment required by Section 1.2;
-----------
ii. the certificate referred to in Section 5.2;
-----------
iii. the opinion referred to in Section 5.3;
-----------
iv. the Employment Agreement, duly executed by the Company;
v. The Real Estate Leases, duly executed by the Company;
vi. Landlord lien waivers as required by Purchaser; and
vii. The payment and evidence of release required under Section
1.4.
ARTICLE 7.
[INTENTIONALLY OMITTED]
ARTICLE 8.
SURVIVAL; INDEMNIFICATION
8.1 Survival. Subject to the next sentence, the respective
--------
representations and warranties contained herein or in any certificate or other
writing delivered pursuant hereto shall survive the Closing until the second
anniversary of the Closing Date. Notwithstanding the foregoing, (x) the
representations and warranties set forth at Sections 2.1, 2.2, 2.3 and 2.4,
------------ --- --- ---
shall survive the Closing for a period of ten (10) years, (y) the
representations and warranties in Section 2.19 shall survive until the sixth
------------
anniversary of the Closing and (z) the representations and warranties in Section
-------
2.17 and Section 2.21 survive until the 90th day after the applicable statute of
---- ------------
limitations.
8.2 Indemnification by Seller. Seller shall indemnify, defend and hold
-------------------------
harmless Purchaser and each of its Affiliates (including, without limitation,
the Company) from and against any Losses arising out of or relating to: (i) any
breach of or inaccuracy in any representation or warranty made by Seller
pursuant to this Agreement or any document delivered pursuant to
26
this Agreement; (ii) any failure by Seller to perform any covenant (including,
without limitation, the covenants contained in Article 1) under this Agreement
---------
or any document delivered pursuant to this Agreement; (iii) any and all Taxes
that have become due and payable during, or which have accrued with respect to
the Company for, any period included in the Tax Indemnification Period and that
have not been paid prior to the Closing Date (any Taxes attributable to the
operations of the Company payable as a result of an audit of any Tax Return
shall be deemed to have accrued in the period to which such Taxes are
attributable); and (iv) the ownership of the Shares and the business or
operation of the Company on or prior to the Closing Date (including, without
limitation, any Losses from lawsuits pending as of the Closing Date or relating
to the operation of the Company on or prior to the Closing Date, which Losses
are not otherwise covered by existing insurance).
8.3 Indemnification by Purchaser. Purchaser shall indemnify, defend and
----------------------------
hold harmless Seller and his Affiliates from and against any Losses arising out
of or relating to: (a) any breach of or inaccuracy in any representation or
warranty made by Purchaser pursuant to this Agreement; (b) any failure by
Purchaser to perform any covenant or obligation of Purchaser under this
Agreement; (c) the business or operation of the Company after the Closing Date
(other than such matters for which Seller is responsible hereunder); and (d) any
default in the Company's obligations for borrowed funds, but only to the extent
such obligations are identified on Schedule 2.22.
-------------
8.4 Notice of Claims. The indemnified party shall promptly, and in any
----------------
event within 30 days of learning of such matter, notify the indemnifying party
in writing of all matters which may give rise to the right to indemnification
hereunder. If the indemnifying party does not receive notice of any matter known
to the indemnified party and as to which the indemnified party is entitled to
indemnification hereunder within such time period, the indemnifying party shall
not be obligated to indemnify the indemnified party for any increase in the
amount of indemnification obligations under this Agreement that the indemnifying
party can demonstrate is attributable to the failure of the indemnified party to
so notify the indemnifying party within such time period. The indemnified party
shall have the right: (a) with the consent of each party, which shall not be
unreasonably withheld or delayed, to settle all indemnifiable matters related to
claims by third parties which are susceptible to being settled; and (b) to
participate in the defense, through counsel of its own choosing, at its own
expense, of any action which may be brought by a third party in connection
therewith (it being understood that the indemnifying party shall have the right
to defend such third party actions with counsel reasonably acceptable to the
indemnified party). Each party shall keep each
27
other reasonably informed of the progress of any litigation or settlement
negotiations with third parties in connection with a matter indemnified against
hereunder. Subject to non-waiver of applicable legal privileges, each party
shall permit each other reasonable access to books and records and otherwise
cooperate with any indemnifiable matter resulting from a claim by a third party.
ARTICLE 9.
MISCELLANEOUS
9.1 Expenses. Each party hereto shall bear its own expenses with respect
--------
to this transaction. Seller shall pay all taxes, assessments, charges and fees,
if any, required to be paid in connection with the transfer of the Shares.
9.2 Notices. Any notice, request or instruction to be given hereunder
-------
shall be in writing and shall be deemed to have been given, (a) when received if
given in person, (b) on the date of transmission, if sent by facsimile (receipt
confirmed), (c) one day after being delivered to a nationally recognized
overnight courier or (d) three days after being deposited in the U.S. mail,
certified or registered mail, postage prepaid:
If to Seller, addressed as follows:
__________________
__________________
__________________
__________________
Facsimile: (___) ________
with a copy to:
Xxxxxxxxx & Xxxxxxx
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
If to Purchaser, addressed as follows:
National Equipment Services, Inc.
0000 Xxxxxxx Xxx., Xxxxx 000
Xxxxxxxx, Xxxxxxxx
Attention: Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
28
with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
or to such other individual or address as a party hereto may designate by notice
given as herein provided.
9.3 Effect of Investigations; Construction. Any due diligence review,
--------------------------------------
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not waive, limit, qualify or modify the Seller's representations,
warranties, covenants and indemnities in this Agreement or any of Purchaser's
remedies with respect thereto, irrespective of the knowledge and information
received (or which should have been received) therefrom by Purchaser. The
parties acknowledge that Purchaser is undertaking the transactions contemplated
herein in express reliance on such representations, warranties, covenants and
indemnities. This Agreement has been reviewed by each party and its counsel,
and any rule of construction interpreting this Agreement against the drafting
party shall not apply. No specific representation or warranty shall operate to
qualify or limit a more general representation or warranty addressing the same
matter. Each of Xxxx Xxxx and Xxxxxxxx X. Xxxx, individually, shall be jointly
and severally liable for the representations, warranties and covenants made to
Purchaser hereunder.
9.4 Waivers. The failure of a party hereto to require performance of any
-------
provision hereof shall in no manner affect its right at a later time to enforce
the same. No waiver by a party of any condition or any covenant, representation
or warranty contained herein shall be effective unless in writing. No waiver in
any one instance shall be deemed to be a further or continuing waiver in any
other instance or a waiver of any other condition or covenant, representation or
warranty.
9.5 Counterparts. This Agreement may be executed simultaneously in
------------
counterparts, all of which together shall constitute one and the same
instrument.
9.6 Applicable Law; Forum. This Agreement shall be governed by and
---------------------
construed in accordance with the internal laws of the State of Arizona. The
proper venue for any proceeding at law or in equity will be Maricopa County,
Arizona, and the parties waive any right to object to the venue.
29
9.7 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. Neither party may assign its rights
hereunder to another Person without the written consent of the other parties,
which shall not be unreasonably withheld or delayed, except that the Purchaser
may assign its rights hereunder to an Affiliate or its lenders so long as
Purchaser remains responsible for its obligations hereunder.
9.8 Further Assurance. Upon the reasonable request of Purchaser, Seller
-----------------
will execute and deliver to Purchaser such other documents, releases,
assignments and other instruments as may be required to effect the transfer and
assignment to Purchaser of, and to vest in Purchaser title to, each of the
Shares.
9.9 Entire Understanding. This Agreement sets forth the entire agreement
--------------------
and understanding of the parties hereto in respect to the transactions
contemplated hereby and supersedes all prior agreements and discussions relating
to the subject matter hereof and is not intended to confer upon any other person
any rights or remedies hereunder. This Agreement may be amended, modified or
supplemented but only in writing signed by all of the parties hereto. The
schedules and exhibits attached hereto and referenced herein are incorporated
into, and form a part of, this Agreement.
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
Purchaser:
NATIONAL EQUIPMENT SERVICES, INC.
By: /s/ Xxxxxx X. X'Xxxxxx
------------------------------------
Name: Xxxxxx X. X'Xxxxxx
------------------------------
Title: CFO
-----------------------------
Seller:
/s/ Xxxxxxx Xxxx
----------------------------------------
XXXX XXXX
/s/ Xxxxxxxx X. Xxxx
----------------------------------------
XXXXXXXX X. XXXX
31
