EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
by and among
Xxxx X. Xxxxx and Xxxxxx X. Xxxxx,
as "Sellers,"
Xxxxxx Xxxxx Equipment, Inc.
as "Buyer,"
Rental Service Corporation
as "Parent"
and
T&M Rental, Inc.
as the "Company"
April 2, 1998
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS.......................................... 1
1.1 Defined Terms............................................. 1
1.2 Other Defined Terms....................................... 6
ARTICLE II SALE AND TRANSFER OF SHARES.......................... 7
2.1 Transfer of Shares........................................ 7
2.2 Purchase Price............................................ 7
2.3 Employment and Non-Competition Agreements................. 8
2.4 Holdback and Escrow Agreement............................. 8
2.5 Purchase Price Adjustment................................. 9
2.6 Vesting...................................................11
ARTICLE III CLOSING.............................................11
3.1 Closing...................................................11
3.2 Conveyances at Closing....................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
SELLERS AND THE COMPANY.........................................12
4.1 Organization of the Company...............................13
4.2 Related Entities..........................................13
4.3 Authorization.............................................13
4.4 No Violation..............................................13
4.5 Capitalization............................................14
4.6 No Change in the Assets...................................15
4.7 Equipment and Other Assets; Absence of Encumbrances.......15
4.8 Facilities................................................15
4.9 Contracts and Commitments.................................16
4.10 Financial Statements......................................18
4.11 Books and Records.........................................18
4.12 Litigation................................................18
4.13 Labor Matters.............................................18
4.14 Compliance with Law.......................................18
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4.15 No Brokers................................................19
4.16 No Other Agreements to Sell the Company...................19
4.17 Proprietary Rights........................................19
4.18 Tax Matters...............................................20
4.19 Accounts Receivable.......................................21
4.20 Inventory.................................................21
4.21 Employees and Employee Benefits...........................21
4.22 Representations...........................................23
4.23 Compliance With Environmental Laws........................25
4.24 Liabilities...............................................29
4.25 Insurance.................................................29
4.26 Conduct of the Business...................................30
4.27 Securities Law Matters....................................30
4.28 Affiliate Transactions....................................31
4.29 HSR Act...................................................31
4.30 Disclosure................................................31
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT....31
5.1 Representations and Warranties of Buyer...................32
5.2 Representations and Warranties of Parent..................32
ARTICLE VI COVENANTS OF BUYER, THE COMPANY AND SELLERS..........34
6.1 Further Assurances........................................34
6.2 Employee Matters..........................................35
6.3 Environmental Assessments and Remediation.................35
6.4 Registration Rights.......................................36
6.5 Tax Attributes............................................37
6.6 Seller Notes..............................................37
ARTICLE VII CONDITIONS TO SELLERS' OBLIGATIONS..................37
7.1 Representations, Warranties and Covenants.................37
7.2 No Proceedings, Litigation or Laws........................37
7.3 Certificates..............................................38
7.4 No Cessation of Trading...................................38
7.5 Opinion Letter of Buyer's Attorneys.......................38
7.6 Buyer and Parent Corporate Documents......................39
ARTICLE VIII CONDITIONS TO BUYER'S OBLIGATIONS..................39
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8.1 Representations, Warranties and Covenants.................39
8.2 Consents..................................................39
8.3 Board Approval............................................39
8.4 No Proceedings or Litigation..............................39
8.6 Certificates..............................................41
8.7 Escrow Agreement..........................................42
8.8 Employment and Non-Competition Agreements.................42
8.9 New Lease.................................................42
8.10 Release of Encumbrances...................................42
8.11 Material Changes..........................................42
8.12 Corporate Documents.......................................42
8.13 Due Diligence Review......................................42
8.14 Completion of Environmental Remediation...................42
8.15 Financing.................................................42
8.16 Financial Statement Deliveries............................42
ARTICLE IX CONDUCT OF COMPANY AND BUYER PENDING THE CLOSING.....43
9.1 Company and Seller Covenants..............................43
9.2 No Negotiations...........................................45
9.3 Public Announcements......................................45
9.4 Confidentiality...........................................45
ARTICLE X RISK OF LOSS; CONSENTS TO ASSIGNMENT..................46
10.1 Intentionally Omitted.....................................46
ARTICLE XI ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING.......46
11.1 Books and Records; Tax Examinations.......................46
11.2 Survival of Representations, Etc..........................46
11.3 Indemnifications..........................................47
11.4 Employee Benefits.........................................51
ARTICLE XII MISCELLANEOUS.......................................51
12.1 Termination...............................................51
12.2 In the Event of Termination...............................52
12.3 Assignment................................................52
12.4 Notices...................................................52
12.5 Choice of Law.............................................54
12.6 Entire Agreement; Amendments and Waivers..................54
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12.7 Multiple Counterparts.....................................54
12.8 Expenses..................................................54
12.9 Invalidity................................................55
12.10 Titles....................................................55
12.11 Publicity; Confidentiality................................55
12.12 Cumulative Remedies.......................................55
12.13 Arbitration...............................................55
12.14 Seller Representative.....................................56
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of April 2, 1998 (the
"Agreement") to be effective March 1, 1998 by and among Xxxxxx Xxxxx Equipment,
Inc., a Mississippi corporation ("Buyer"), Rental Service Corporation, a
Delaware corporation ("Parent"), Xxxx Xxxxx and Xxxxxx X. Xxxxx, (Xxxx Xxxxx and
Xxxxxx X. Xxxxx are referred to herein individually as a "Seller" and
collectively, the "Sellers") and T&M Rental, Inc., an Indiana corporation (the
"Company").
RECITALS
--------
A. The Company is engaged in the business of equipment rental and sales.
X. Xxxxxxx own, of record and beneficially, all of the issued and
outstanding shares of capital stock of the Company (the "Shares") and, as of the
Closing Date (as defined below), will own, of record and beneficially, all of
the Shares.
C. Buyer desires to purchase from Sellers, and Sellers desire to sell to
Buyer, all of the Shares upon the terms and subject to the conditions of this
Agreement, whereupon Buyer will own all of the equity interests in the Company.
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Defined Terms. As used herein, the terms below shall have the
-------------
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
1.1.1 "Affiliate" shall have the meaning set forth in the Exchange
---------
Act.
1.1.2 "Agreement" shall have the meaning specified in the first
---------
paragraph of this Agreement.
1.1.3 "Ancillary Agreements" shall mean the Employment and
--------------------
Noncompetition Agreement of Xxxx Xxxxx, and Noncompetition Agreement of Xxxxxx
X. Xxxxx hereto as Exhibits 8.8.1, and 8.8.2, respectively, the Escrow Agreement
in the form of Exhibit 8.7, the New Lease for the Facility in the form of
Exhibit 8.9, and the Performance Incentive Agreement in the form of Exhibit 2.6,
each attached hereto.
1.1.4 "Assets" shall mean the assets of the Company as reflected
------
on the Interim Balance Sheet dated November 30, 1997, together with those assets
acquired (less those assets disposed of) in the ordinary course of business
since the Interim Balance Sheet Date.
1.1.5 "Balance Sheets" shall mean the unaudited balance sheets of the
--------------
Company at each of February 28, 1994, 1995, 1996 and 1997.
1.1.6 "Books and Records" shall mean (a) all records and lists
-----------------
pertaining to the Business, customers, suppliers or personnel of the Company,
(b) all product, business and marketing plans of the Company and (c) all books,
ledgers, subledgers, trial balances, files, reports, plans, drawings and
operating records of every kind maintained by the Company.
1.1.7 "Business" shall mean the Company's equipment rental and sales
--------
business, operating under the "T&M Rental" name or otherwise.
1.1.8 "Buyer" shall have the meaning specified in the first paragraph
-----
of this Agreement.
1.1.9 "Closing Date" shall mean April 2, 1998 or such other date as
------------
Buyer and Sellers shall mutually agree upon.
1.1.10 "Code" shall mean the Internal Revenue Code of 1986, as
----
amended, and the rules and regulations promulgated thereunder.
1.1.11 "Commission" shall mean the Securities and Exchange
----------
Commission.
1.1.12 "Company" shall have the meaning specified in the first
-------
paragraph of this Agreement.
1.1.13 "Contract" shall mean any agreement, contract, note, loan,
--------
evidence of indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to
compete, employment agreement, license, instrument, obligation or commitment to
which the Company is a party or is bound and which relates to the Business or
Assets, whether oral or written.
1.1.14 "Effective Date" shall mean March 1, 1998 (for certain purpose
--------------
the transaction contemplated by this Agreement shall be deemed to have occurred
on the Effective Date).
1.1.15 "Effective Date Balance Sheet" shall mean the unaudited balance
----------------------------
sheet of the Company as of February 28, 1998 attached hereto as Schedule 1.1.15.
---------------
1.1.16 "Encumbrance" shall mean any claim, lien, pledge, option,
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charge, easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
1.1.17 "Equipment" shall mean all of the furniture, fixtures,
---------
furnishings, rental fleet, machinery, automobiles, trucks, spare parts, tools,
supplies, equipment, telephones, office equipment, signs and other tangible
personal property owned by the Company and used in connection with the Business.
1.1.18 "ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974, as amended.
1.1.19 "Escrow Agent" shall mean the entity designated by Buyer and
------------
the Seller Representative to act as escrow agent under the Escrow Agreement.
1.1.20 "Escrow Agreement" shall mean that certain Escrow Agreement,
----------------
dated as of the Closing Date, by and among Buyer, Seller Representative and the
Escrow Agent, substantially in the form of Exhibit 8.7 attached hereto.
1.1.21 "Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as amended, and the rules and regulations promulgated thereunder.
1.1.22 "Facilities" shall mean the rental yards, stores, offices,
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maintenance and storage facilities, shops, warehouses, improvements and other
structures, together with all related fixtures and improvements, located at or
on the Leased Real Property.
3
1.1.23 "Financial Statements" shall mean the Year-End Financial
--------------------
Statements and the Interim Financial Statements.
1.1.24 "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
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Improvements Act of 1976, as amended.
1.1.25 "Interim Balance Sheet" shall mean the unaudited balance sheet
---------------------
of the Company as of November 30, 1997 based upon mutually agreed upon
adjustment for depreciation and bonus expense.
1.1.26 "Interim Balance Sheet Date" shall mean November 30, 1997.
--------------------------
1.1.27 "Interim Financial Statements" shall mean the Interim Balance
----------------------------
Sheet of the Company for the nine months ended on the Interim Balance Sheet
Date.
1.1.28 "Inventory" shall mean all of the Company's inventory held for
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resale, serialized and nonserialized and all of the Company's repair or
replacement parts, supplies bulk items, packaging items and similar items with
respect to the Business, in each case wherever the same may be located.
1.1.29 "Leased Real Property" shall mean all real property listed on
--------------------
Schedule 4.8 leased by the Company and which is used in the conduct of the
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Business, including without limitation, all rights, easements and privileges
appertaining or relating thereto, all buildings, fixtures, and improvements
located thereon and all Facilities thereon, if any.
1.1.30 "Material Adverse Effect" or "Material Adverse Change" shall
----------------------- -----------------------
mean with respect to the Business or the Assets any significant and substantial
adverse effect or change in the condition (financial or other), business,
results of operations, assets, liabilities, customer, supplier or employee
relations or operations of the Business or the Assets or on the ability of the
Sellers or the Company to consummate the transactions contemplated hereby, or
any event or condition which would, with the passage of time, constitute a
"Material Adverse Effect" or "Material Adverse Change."
1.1.31 "New Lease" shall mean the lease between Buyer and Xxxx X.
---------
Xxxxx and Xxxxxx X. Xxxxx for the real property located at 000 Xxxx Xxxxxxx
Xxxxxx, Xxxx Xxxxxxx, Xxxxxxx 00000.
1.1.32 "Parent" shall have the meaning specified in the first
------
paragraph of this Agreement.
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1.1.33 "Permits" shall mean all licenses, permits, franchises,
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approvals, authorizations, consents or orders of, or filings with, any
governmental authority, whether foreign, federal, state or local, or any other
person, necessary or desirable for the past, present or anticipated conduct of,
or relating to the operation of, the Business.
1.1.34 "Permitted Encumbrance" shall have the meaning set forth in
---------------------
Section 4.7.
1.1.35 "Related Entity" shall mean any corporation, partnership,
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trust or other organization in which the Company or any of the Sellers has a
material interest.
1.1.36 "Rental and Non-Rental Asset Listing" shall mean the asset
-----------------------------------
listing attached as Schedule 4.7 hereto, listing all assets, excluding
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Inventory, furniture and fixtures, as of November 30, 1997.
1.1.37 "Representative" shall mean any officer, director, principal,
--------------
attorney, agent, employee or other representative.
1.1.38 "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, and the rules and regulations promulgated thereunder.
1.1.39 "Sellers" shall have the meaning specified in the first
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paragraph of this Agreement.
1.1.40 "Shareholder Net Worth" shall be as set forth in the Interim
---------------------
Balance Sheet as adjusted based upon mutually agreed upon adjustments for
depreciation and certain bonus expenses and as adjusted for the net carrying
value or book value of the Transferred Assets.
1.1.41 "Seller Representative" shall mean Xxxx X. Xxxxx, whom Sellers
---------------------
have irrevocably made, constituted and appointed their agent pursuant to Section
12.14 hereof.
1.1.42 "Shares" shall mean all of the issued and outstanding shares
------
of capital stock of the Company.
1.1.43 "Tax" shall mean any federal, state, local, foreign or other
---
tax, levy, impost, fee, assessment or other government charge, including without
limitation income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including without
limitation interest, penalties and additions in connection therewith.
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1.1.44 "Transferred Assets" shall mean the assets set forth on
------------------
Schedule 1.1.44 which are being distributed to the Sellers.
---------------
1.1.45 "Year-End Financial Statements" shall mean the Balance Sheets
-----------------------------
and income statements dated as of February 28, 1994, 1995, 1996, 1997 and 1998
of the Company for the fiscal years then ended.
1.2 Other Defined Terms. The following terms shall have the meanings
-------------------
defined for such terms in the Sections set forth below:
Act....................................4.27.9
Actions..................................4.12
Average Share Price.....................2.2.2
Benefit Arrangement....................4.21.1
Cash Purchase Price.....................2.2.1
CERCLA.................................4.23.5
Claim..................................11.3.4
Claim Notice...........................11.3.4
Closing...................................3.1
Company................................4.23.2
Consultant..............................6.3.1
Contingent Purchase Price...............2.2.1
Damages................................11.3.1
Employee Plans.........................4.21.1
Environmental Conditions..............4.23.14
Environmental Laws.....................4.23.5
Environmental Assessments...............6.3.1
ERISA Affiliate........................4.21.1
GAAP.....................................4.10
General Holdback........................2.4.1
Governmental............................5.2.4
Hazardous Substance....................4.23.4
Holdback Amount.........................2.4.1
Insiders.................................4.28
Inventory Value.........................2.5.5
Multiemployer Plan.....................4.21.1
Parent Common Stock.....................2.2.1
Parent Material Adverse Effect..........5.2.3
PBGC...................................4.21.1
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Pension Plan...........................4.21.1
Post-Closing Environmental Liability...11.3.1
Proprietary Rights.....................4.17.1
Purchase Price..........................2.2.1
RCRA...................................4.23.5
Release................................4.23.3
Rental Ready............................2.5.4
Required Remediation....................6.3.2
Retained Employees........................6.2
SEC Documents...........................5.2.6
Seller Representative.................12.14.1
Welfare Plan...........................4.21.1
ARTICLE II
SALE AND TRANSFER OF SHARES
---------------------------
2.1 Transfer of Shares. Upon the terms and subject to the conditions
------------------
contained herein, at the Closing, Sellers will sell, convey, transfer, assign
and deliver to Buyer, and Buyer will acquire from Sellers, the Shares, for the
consideration specified in Section 2.2.1 subject to the Holdback Amount
specified in Section 2.4.1.
2.2 Purchase Price.
--------------
2.2.1 Purchase Price. At the Closing, upon the terms and subject to
--------------
the conditions set forth herein, Buyer shall pay to Sellers in consideration for
the Shares, the aggregate amount of Eighteen Million Nine Hundred Thousand
Twenty Five and 65/100 Dollars($18,900,025.65) (the "Purchase Price"), of which
Eighteen Million One Hundred Fifty Thousand Dollars ($18,150,000) (the "Cash
Purchase Price") shall be paid to Sellers by wire transfer of immediately
available funds to an account designated by Sellers and Seven Hundred Fifty
Thousand Twenty Five and 65/100 Dollars ($750,025.65) shall be paid in the form
of Common Stock, par value $.01 per share, of Parent (the "Parent Common Stock")
pursuant to the "vesting" provisions of Section 2.6 (the "Contingent Purchase
Price"), subject, however, to adjustment as set forth in Section 2.5 and the
------- -------
Holdback Amount as described below. The number of shares of Parent Common Stock
to be issued to Sellers shall be determined as set forth in Section 2.2.2. The
Purchase Price shall be subject, however, to adjustment as set forth in Section
2.5 and a cash amount of Two Million One Hundred Thousand Dollars ($2,100,000)
shall serve as the Holdback Amount as described in Section 2.4.1 below. The
Cash Purchase Price, the Parent Common Stock and the Holdback Amount (and any
remittance of the Holdback Amount pursuant to the Escrow Agreement) shall be
allocated among the Sellers pro rata in accordance with their respective
ownership interests in the Company, as set forth on Schedule 4.5.
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7
2.2.2 The number of shares of Parent Common Stock pursuant to the
Contingent Purchase Price which may be issued to Sellers shall be the result of
dividing Seven Hundred Fifty Thousand Twenty Five and 65/100 Dollars
($750,025.65) by the average closing price of Parent Common Stock on the New
York Stock Exchange during the five trading days beginning five trading days
prior to the Closing Date (the "Average Share Price").
2.2.3 If between the date of this Agreement and the date shares of
Parent Common Stock are issued pursuant to the terms of the Performance
Incentive Agreement, the outstanding shares of Parent Common Stock shall have
been changed into a different number of shares or a different class by reason of
any reclassification, recapitalization, split-up, stock dividend, stock
combination, exchange of shares or readjustment, the conversion ratio shall be
proportionately adjusted.
2.2.4 No fractional shares of Parent Common Stock shall be issued,
but in lieu thereof each Seller who would otherwise be entitled to receive a
fraction of a share of Parent Common Stock shall receive from Buyer an amount of
cash equal to the product of the fraction of a share of Parent Common Stock to
which such holder would otherwise be entitled, multiplied by the Average Share
Price.
2.3 Employment and Non-Competition Agreements. Buyer shall enter into (i)
-----------------------------------------
an Employment and Non-Competition Agreement with Xxxx Xxxxx, in substantially
the form attached hereto as Exhibit 8.8.1, and (ii) a Non-Competition Agreement
with Xxxxxx X. Xxxxx, in substantially the form attached hereto as Exhibit
8.8.2.
2.4 Holdback and Escrow Agreement.
-----------------------------
2.4.1 The "Holdback Amount" shall be a cash amount equal to Two
Million One Hundred Thousand Dollars ($2,100,000) which, at the Closing, Buyer
shall retain $-0- pending the determination of any purchase price adjustment
pursuant to Section 2.5, Sellers' indemnification obligations, if any, as set
forth in Section 11.3, and any remediation required under Section 6.3 hereof
which is not resolved by the Closing Date. Of such Holdback Amount, (i) $0 will
be allocated to the resolution of the Shareholder Net Worth adjustment pursuant
to Section 2.5.3 (ii) $100,000 will be allocated to the resolution of the
Equipment adjustment pursuant to Section 2.5.4, (iii) $-0- will be allocated to
the resolution of the Environmental obligations pursuant to Section 6.3, and
(iv) $2,000,000 will be allocated to any other obligations under this Agreement
(the "General Holdback"). The General Holdback shall be deposited in escrow
pursuant to the terms and conditions of the Escrow Agreement. The Escrow Agent
will remit to the Seller Representative 33.3% of the General Holdback on the
first anniversary of the Closing Date, an additional 33.3% on the second
anniversary of the Closing Date, and the final 33.4% on the third anniversary of
the
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Closing Date, in each case less any amounts necessary to cover undisputed
claims, unresolved adjustments, indemnification or environmental remediation
claims pursuant to Sections 2.5, 6.3 and/or 11.3, plus interest on the amount
remitted to the Seller Representative. Notwithstanding anything in the foregoing
to the contrary, if any portion of the Holdback Amount specified in this Section
2.4.1 proves to be insufficient for resolution of the matter subject to
adjustment therein, Buyer may in its sole discretion elect to transfer a portion
of the Holdback Amount allocated to another matter to resolve such deficiency.
Interest on the Holdback Account shall accrue to Sellers. Sellers shall be
entitled to all stock dividends and interest earned on investments held in
escrow. In the event of any disagreement between Buyer and Sellers regarding the
dollar amount of any such adjustment or indemnification or remediation
obligation, Buyer and Sellers shall submit such dispute to a nationally
recognized accounting firm for resolution pursuant to Section 2.5.1 (in the case
of a disagreement relating to the purchase price adjustment) or to a third-party
arbitrator for binding arbitration pursuant to Section 12.13 of this Agreement
in all other cases. Notwithstanding the foregoing, Buyer shall not be limited to
retention of the Holdback Amount as a sole remedy in the event that any purchase
price adjustment or indemnification or remediation obligation exceeds the
Holdback Amount; rather, in such event, Buyer shall have the right to collect
promptly from Sellers, in cash, the amount of such excess.
2.4.2 Buyer and the Seller Representative, acting on behalf of the
Sellers, shall enter into the Escrow Agreement, in substantially the form
attached hereto as Exhibit 8.7, pursuant to which Buyer shall deposit with the
Escrow Agent the Holdback Amount. All costs of the escrow shall be paid by the
Sellers as provided in the Escrow Agreement.
2.5 Purchase Price Adjustment.
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2.5.1 Closing Balance Sheet. Sellers delivered to Buyer the Interim
---------------------
Balance Sheet on January 22, 1998. On or before the Closing Date, the Sellers
shall deliver to Buyer the Effective Date Balance Sheet. The Effective Date
Balance Sheet will become final and binding on the parties unless within ten
business days following delivery of the Effective Date Balance Sheet to Buyer,
the Buyer notifies Sellers in writing that the Buyer objects thereto, which
objection shall be solely on the basis of mathematical errors in the calculation
thereof or the failure to present the Company's financial position consistent
with Buyer's previously agreed upon adjustments. If the Buyer so objects, Buyer
and the Sellers shall use their best efforts to resolve any differences with
respect to the Effective Date Balance Sheet. If, within ten business days
following such notice by the Buyer, such differences have been resolved, the
Effective Date Balance Sheet, as revised to reflect changes agreed to by Buyer
and the Sellers, shall be final, binding and conclusive. If by such date such
differences have not been resolved, then the Sellers and Buyer shall jointly
select a nationally recognized accounting firm not currently engaged by Buyer,
any Seller or any Affiliate of any of them, to perform a review of the Effective
Date Balance Sheet. Such reviewing firm's conclusions
9
shall be final, binding and conclusive as to such matters. Buyer will pay the
fees and expenses of such audit.
2.5.2 Intentionally Left Blank.
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2.5.3 Shareholder Net Worth Adjustment. The Purchase Price shall be
--------------------------------
subject to a dollar for dollar reduction if and to the extent that the
Shareholder Net Worth on the Effective Date, as reflected on the Effective Date
Balance Sheet, is less than the Shareholder Net Worth on the Interim Balance
Sheet. Buyer shall be entitled to a prompt distribution of the amount of such
reduction from the Holdback Amount. Schedule 2.5.3 sets forth the Shareholder
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Net Worth adjustment.
2.5.4 Missing or Non-Operating Equipment.
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(a) The gross rental equipment plus capitalized equipment leases shall
be as set forth on the Balance Sheet of the Company dated February 28, 1998.
(b) The Rental and Non-Rental Asset Listing, attached as Schedule
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2.5.4, sets forth the asset description, make, model, original cost and book
-----
value of all Equipment which, on the Closing Date, will be fully operable and
Rental Ready. On or prior to the 10th business day following the Closing Date,
personnel of Buyer and Sellers jointly shall complete a physical inventory of
each item of Equipment comprising Schedule 2.5.4, including by visiting renters'
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locations as necessary to inspect such equipment using Company's equipment file
as a basis for the inventory, which shall separately list capitalized equipment
leases. Based upon such inventory, Buyer in consultation with Sellers will
develop a schedule of overages and shortages. Within thirty (30) calendar days
after the Closing, the Purchase Price shall be adjusted, upward or downward, to
the extent the aggregate of overages and shortages that are also on the
depreciation ledger exceeds $25,000 in original cost. With respect to
shortgages, the reduction in Purchase Price pursuant to the preceding sentence
shall be based upon the book value of the missing or unavailable equipment as
mutually agreed upon between Buyer and Sellers.
(c) In the event of a Purchase Price reduction under the foregoing
provisions, Buyer shall be entitled to a prompt distribution of the amount of
such reduction from the Holdback Amount and/or to pursue to the other remedies
set forth in, Section 2.4.1. Any disputes as to the physical count or Rental
Readiness of any item of equipment will, if possible, be resolved while the
physical inventory of such equipment is being taken by Buyer and Sellers. Any
disputes regarding the foregoing not resolved by the 30th business day following
the Closing Date will be separately listed and settled pursuant to the
procedures set forth in Section 12.13 hereof, and in any event the
10
parties will attempt to resolve and pay out such disputes as appropriate no
later than the 45th day following the Closing.
(d) Within thirty (30) calendar days after the Closing, the Purchase
Price shall be reduced by the aggregate cost necessary to render all items of
Equipment listed on Schedule 2.5.4 Rental Ready. For purposes of this
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Agreement, an item of equipment is "Rental Ready" only if it is free of deferred
maintenance and it does not require any repairs in excess of $250 per item for
items with a cost of less than $5,000 or $500 per item for items with a cost
greater than or equal to $5,000.
2.5.5 Intentionally Left Blank.
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2.5.6 Transfer Taxes and Fees. Sellers shall be responsible for any
-----------------------
documentary and transfer taxes and any sales, use or other taxes imposed by
reason of the transfer of Shares provided hereunder and any deficiency, interest
or penalty asserted with respect thereto. Sellers shall pay the fees and costs
of recording or filing all UCC termination statements and other releases of
Encumbrances.
2.5.7 Closing of Books; Benefits and Risks of Ownership. The
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transactions contemplated by this Agreement shall be deemed effective as of the
Effective Date, and all profits and losses of the Company from and after March
1, 1998, shall be solely for the account of, and inure solely to the benefit or
detriment of, Buyer, except as otherwise set forth in this Agreement. The
accounting books and records of the company will be closed as of the close of
business on February 28, 1998. Sellers shall operate the Company subject to and
pursuant to the requirements of this Agreement by, from and after March 1, 1998,
until such time as this Agreement is terminated or closed. If this transaction
does not close for any reason on or prior to April 15, 1998, and is not extended
by agreement of the parties, then (i) the Buyer shall pay to Seller a fee of
$65,000 provided that the failure to close the transaction is not due to the
failure of any Seller to perform his obligations under the Agreement and (ii)
either (A) the Sellers and Company shall pay within seven (7) days to Buyer net
after tax profits accumulated during the period from March 1, 1998 to the date
this Agreement is terminated or (B) the Buyer shall within seven (7) days pay to
the Sellers and Company all losses accumulated (offset by any non-refundable
contributions made by Buyer to the Sellers and Company) by the Sellers and
Company during the period from March 1, 1998 to the date that the Closing is
deemed (not to occur). Without the consent of Buyer, until the Closing Date,
the Company or Sellers shall not repurchase, sell or transfer any Shares, make
or declare any dividends or make other distributions to shareholders or
otherwise take any action restricted under this Agreement.
2.6 Vesting. The Contingent Purchase Price shall consist of Parent Common
-------
Stock with a fair market value of up to $750,000, with the number of shares of
Parent Common Stock to be
11
issued to Sellers determined as set forth in Section 2.2.2. Such Parent Common
Stock shall be issuable to Sellers over a three-year period, in accordance with
the performance targets as described in the Performance Incentive Agreement by
and among the Buyer and Sellers attached hereto as Exhibit 2.6. The Contingent
Purchase Price shall be paid to Sellers only to the extent that the performance
of the Business meets the agreed-upon targets (or a percentage thereof, as
applicable), and if such targets (or a percentage thereof, as applicable) are
not met, no portion (or a reduced portion, as applicable) of the Contingent
Purchase Price shall be paid in accordance with the Performance Incentive
Agreement.
ARTICLE III
CLOSING
-------
3.1 Closing. The Closing of the transactions contemplated herein (the
-------
"Closing") shall be held on the Closing Date at a time and place as the parties
shall mutually agree.
3.2 Conveyances at Closing.
----------------------
3.2.1 Sellers' Delivery Obligations. To effect the sale and transfer
-----------------------------
referred to in Section 2.1 hereof, Sellers will, at the Closing, execute and
deliver to Buyer:
3.2.1.1 certificates evidencing the Shares, free and clear of
any Encumbrances of any nature whatsoever, duly endorsed in blank for transfer
or accompanied by stock powers duly executed in blank;
3.2.1.2 all Ancillary Agreements required to be executed by
any of the Sellers;
3.2.1.3 all certificates, opinions of counsel and other
documents described in Article VIII; and
3.2.1.4 all Permits and any other third party consents
required for the valid transfer of the Shares as contemplated by this Agreement,
or for the continued operation of the Business following such transfer.
3.2.2 Buyer's Delivery Obligations. To effect the sale and transfer
----------------------------
referred to in Section 2.1 hereof, Buyer will, at the Closing, execute and
deliver to Sellers:
12
3.2.2.1 all Ancillary Agreements required to be executed by
Buyer; and
3.2.2.2 all certificates, opinions of counsel and other
documents described in Article VII; and
3.2.2.3 the Purchase Price in accordance with Section 2.2
3.2.3 Form of Instruments. To the extent that a form of any document
-------------------
to be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to the recipient.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
---------------------------------------------------------
Sellers and the Company hereby, jointly and severally, represent and
warrant to Buyer as follows, which representations and warranties are, as of the
date hereof, and will be, as of the dates of delivery of the respective
Schedules and as of the Closing Date, true and correct:
4.1 Organization of the Company. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Indiana. Copies of the Articles of Incorporation and Bylaws of the Company, and
all amendments thereto, heretofore delivered to Buyer are accurate and complete
as of the date hereof. The Company is not required to be qualified or licensed
in any other State for the conduct of its business.
4.2 Related Entities.
----------------
4.2.1 Schedule 4.2(a) sets forth a complete and accurate list of all
---------------
of the Related Entities, all of which are, directly or indirectly, wholly-owned
by the Company, any or all of the Sellers, or some combination thereof. Schedule
--------
4.2(a) also sets forth the jurisdiction of incorporation of each of the Related
------
Entities, each jurisdiction in which each such Related Entity is qualified to do
business, the number of shares of such Related Entities outstanding, and the
ownership thereof .
4.2.2 Schedule 4.2(b) sets forth a list of all agreements among the
---------------
Company, any of the Sellers and the Related Entities.
4.2.3 Each Related Entity has been duly incorporated and is validly
existing and in good standing under the laws of the State of its incorporation
and is qualified to do business and is in good standing in each state in which
the character of its business requires it to do so.
13
4.3 Authorization. Each of the Sellers and the Company has full power and
-------------
authority (corporate or other) to enter into this Agreement and the Ancillary
Agreements, as the case may be, and to carry out the transactions contemplated
hereby and thereby, and the Board of Directors of the Company and each of the
Sellers has taken all action required by law, its charter documents, as the case
may be, or otherwise, to be taken by it to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements, as the case may be,
and the consummation of the transactions contemplated hereby and thereby. This
Agreement and the Ancillary Agreements, as the case may be, are the legal, valid
and binding obligations of each of the Sellers and the Company, enforceable
against each of them in accordance with their respective terms. A copy of the
resolutions of the Company's board of directors and authorizing this Agreement
and the related transactions is attached hereto as Schedule 4.3.
------------
4.4 No Violation. None of the execution, delivery and performance of this
------------
Agreement and the Ancillary Agreements nor the consummation of the transactions
contemplated hereby and thereby will (i) violate any provision of the Articles
of Incorporation or Bylaws of the Company, (ii) violate, result in a breach of,
conflict with, or constitute a default (or an event which, with the giving of
notice or lapse of time or both, would constitute a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of any note, bond,
mortgage, or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which any Seller or the Company
is a party or by which any of the Shares or any of the assets or properties of
the Company or any Seller are bound or affected, (iii) result in the creation or
imposition of any Encumbrance upon any of the Shares or any property or Assets
of the Company or any Seller under, any agreement or commitment to which the
Company or any Seller is a party or by which the Company or any Seller is bound
or affected, or to which the property of the Company or any Seller is subject,
or (iv) violate, conflict with or result in the breach of (or cause an event
which could have a Material Adverse Effect as a result of) any statute or law or
any judgment, decree, order, regulation or rule of any court or governmental
authority to which any Seller, the Company, the Business or any of the
properties or Assets of any of the foregoing is subject. Except as set forth on
Schedule 4.4, no action, consent, approval or authorization by or filing with
------------
any person or entity, including, without limitation, any governmental authority,
is required in connection with the execution, delivery and performance by each
of the Sellers and the Company of this Agreement and the Ancillary Agreements,
as the case may be, or the consummation by each of the Sellers and the Company
of the transactions respectively contemplated by each of them herein and
therein.
4.5 Capitalization.
--------------
4.5.1 The authorized equity securities of the Company consist of
solely of 1,000 shares of common stock, no par value per share, of which 150
shares are issued and outstanding and
14
constitute the Shares. Sellers are and will be on the Closing Date the record
and beneficial owners and holders of the Shares as set forth on Schedule 4.5
------------
(which schedule also sets forth the address of each such Seller and the
certificate numbers of the certificates representing the Shares), free and clear
of all Encumbrances (other than a legend indicating only that the Shares have
not been registered under the Securities Act).
4.5.2 There are no other shares of capital stock of the Company
issued and outstanding and there are fifty shares of treasury stock. All Shares
are validly issued, fully paid and nonassessable. None of the issued and
outstanding shares of Common Stock was issued in violation of any preemptive
rights. There are no outstanding (i) securities convertible into or exchangeable
or exercisable for any of the Company's capital stock; (ii) options, warrants,
calls or other rights, including, without limitation, rights to demand
registration or to sell in connection with any registration by the Company under
the Securities Act, with respect to the issued capital stock of the Company, or
to purchase or subscribe to capital stock of the Company or securities
convertible into or exchangeable or exercisable for capital stock of the
Company; (iii) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale, transfer, and/or
assignment of any capital stock of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights; or (iv) Shares
pledged as collateral to secure any agreement or obligation. There are no voting
trust agreements or other contracts, agreements, arrangements, commitments,
plans, proxies or understanding restricting or otherwise relating to conveyance,
voting or dividend rights with respect to the Shares. Upon consummation of the
transactions contemplated by this Agreement and registration of the Shares in
the name of Buyer in the stock records of the Company, the Buyer will own all of
the issued and outstanding equity securities of the Company of every sort
whatsoever, free and clear of all Encumbrances.
4.6 No Change in the Assets. Since the Interim Balance Sheet Date:
-----------------------
4.6.1 there has been no actual or, to the best of the Company's or
the Sellers' knowledge, threatened adverse change in the financial condition or
results of operation of the Company, the Business or the Assets or any event,
condition or state of facts, in either case that is, or would result in a
Material Adverse Change in the Assets or the Business or the prospects for the
Business, including without limitation the loss of any material customers;
4.6.2 Except in the ordinary course, there has not been any sale or
other disposition of any Assets, or any Encumbrance placed on the Assets;
4.6.3 The Company has operated the Business in the ordinary course
consistent with the Company's past practice so as to preserve the Business
intact, to keep available to the Business the services of the Company's
employees, and to preserve the Business and the goodwill of the Company's
suppliers, customers, distributors and others having business relations with it;
15
4.6.4 Except as set forth on Schedule 4.6, the Company has not
------------
purchased, or entered into any agreement to purchase (i) any item of Inventory
with a cost in excess of $10,000, or (ii) any item of Equipment with a cost in
excess of $20,000, in each case without the consent of Buyer; and
4.6.5 The Company has not changed its accounting methods or practices
(including any change in depreciation or amortization policies or rates) or
revalued any of its assets.
4.7 Equipment and Other Assets; Absence of Encumbrances. (a) The Rental
---------------------------------------------------
and Non-Rental Asset Listing attached as Schedule 2.5.4 sets forth the asset
--------------
description, make, model, original cost or adjusted original cost of all
Equipment which, on the Closing Date, will be fully operable, accounted for and
Rental Ready. (b) All of the Assets are owned by the Company free and clear of
all Encumbrances, other than (i) Encumbrances reflected or reserved against on
the Interim Balance Sheet or (ii) Encumbrances set forth on Schedule 4.7 hereto
------------
(the "Permitted Encumbrances"). The Assets, including the Facilities,
constitute all assets necessary for the conduct of the Business as presently
conducted.
4.8 Facilities.
----------
4.8.1 Real Property. The Company does not own any real property. The
-------------
only real property leased by the Company is the parcel located at 000 Xxxx
Xxxxxxx Xxxxxx, Xxxx Xxxxxxx, Xxxxxxx 00000, as described on Schedule 4.8. The
------------
Sellers and the Company have delivered to Buyer an accurate copy of the leases
covering the Leased Real Property. Neither the Company nor any lessor under the
leases for the Leased Real Property is in material breach or default of its
obligations thereunder. The Company enjoys peaceful and undisturbed possession
of the Leased Real Property.
There are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements, written or
oral, granting to any person the right to purchase, use or occupy the Facilities
or any portion thereof. The Facilities are supplied with utilities and other
services necessary for the operation of the Business.
4.8.2 Improvements, Fixtures and Equipment. The Facilities and the
------------------------------------
improvements thereon, including without limitation all Equipment (including all
fixtures) and other tangible assets owned, leased or used by the Company at the
Facilities are (i) insured to the extent and in a manner customary in the
industry, (ii) structurally sound with no known material defects, (iii) in good
operating condition and repair, subject to ordinary wear and tear, (iv) not in
need of maintenance or repair except for ordinary routine maintenance and
repair, the cost of which would not be material, (v) sufficient for the
operation of the Business as presently conducted and (vi) in conformity with all
applicable laws, ordinances, orders, regulations and other requirements relating
thereto currently in effect except for violations which in the aggregate would
not have a Material Adverse Effect on
16
the Company or the Business. None of the improvements is subject to any
commitment or other arrangement for their sale or use by any Affiliate of the
Company or third parties.
4.8.3 Conformity. All Facilities have received all required
----------
approvals of governmental authorities (including without limitation, Permits and
a certificate of occupancy or other similar certificate permitting lawful
occupancy of the Facilities) required in connection with the operation thereof.
The Facilities are (and have been) operated and maintained in accordance with
applicable laws, rules, regulations and state, county, municipal or other local
ordinances, and conform to all other conditions necessary for the lawful conduct
of the Business as currently conducted at each such Facility.
4.9 Contracts and Commitments.
-------------------------
4.9.1 Contracts. Schedule 4.9 sets forth a complete and accurate
--------- ------------
list of all Contracts of the following categories:
4.9.1.1 Contracts not made in the ordinary course of the
Company's conduct of the Business;
4.9.1.2 Employment contracts, bonus agreements and severance
agreements;
4.9.1.3 Supply, purchase, distribution, franchise, license,
sales or commission contracts related to the Business;
4.9.1.4 Contracts involving expenditures or liabilities, in
excess of $5,000 or otherwise material to the Business, and not cancelable
(without liability) within 30 calendar days;
4.9.1.5 Contracts or commitments relating to commission
arrangements with others;
4.9.1.6 Promissory notes, loans, agreements, evidences of
indebtedness, letters of credit, guarantees, or other instruments relating to an
obligation to pay money, whether the Company shall be the borrower, lender or
guarantor thereunder or whereby any Equipment or Inventory are pledged
(excluding credit provided by the Company in the ordinary course of the Business
to its customers);
4.9.1.7 Leases of real and personal property not cancelable
(without liability) within 30 calendar days; and
17
4.9.1.8 Contracts containing covenants limiting the freedom of
the Company or any officer, director or shareholder of the Company to engage in
any line of business or compete with any person.
Sellers have delivered to Buyer true, correct and complete copies of all of the
Contracts listed on Schedule 4.9, including all amendments and supplements
------------
thereto.
4.9.2 Absence of Breaches or Defaults. All of the Contracts are valid
-------------------------------
and in full force and effect. The Company has duly performed all of its
obligations under the Contracts to the extent those obligations to perform have
accrued, and no violation of, or default or breach under any Contracts by the
Company or, to the best of the Company's or the Sellers' knowledge, has any
other party occurred and neither the Company, nor, to the best of the Company's
or the Sellers' knowledge, any other party has repudiated any provisions
thereof. All of the Contracts will be enforceable by the Company after the
Closing to the same extent as if the transactions contemplated by this Agreement
had not been consummated.
4.9.3 Permits. The Company has all Permits required to conduct the
--------
Business, except where the failure to obtain such Permits would not have a
Material Adverse Effect on the Business. All Permits of the Company related to
the Business are valid and in full force and effect and are listed on Schedule
--------
4.9.
---
4.10 Financial Statements. Attached hereto as Schedule 4.10 are the
-------------------- -------------
Financial Statements of the Company. The Financial Statements (a) are true,
correct and complete, (b) are in accordance with the underlying books and
records of the Company, (c) have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied throughout the
periods covered thereby (except as otherwise described in Schedule 4.10) and (d)
-------------
fairly and accurately present the assets, liabilities (including all reserves)
and financial position of the Business as of the respective dates thereof and
the results of operations and changes in cash flows for the periods then ended
(subject, in the case of the Interim Financial Statements, to normal year-end
adjustments). Except as otherwise described in Schedule 4.10 at the respective
-------------
dates of the Financial Statements, there were no liabilities of the Company,
which, in accordance with GAAP, should have been shown or reflected in the
Financial Statements or the notes thereto, which are not shown or reflected in
the Financial Statements or the notes thereto.
4.11 Books and Records. The Company has made and kept (and given Buyer
-----------------
access to) Books and Records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of the Company. The minute books
of the Company previously delivered to Buyer accurately and adequately reflect
all action previously taken by the shareholders, board of directors and
committees of the board of directors of the Company. The stock book records of
the Company
18
previously delivered to Buyer are true, correct and complete, and accurately
reflect all transactions effected in the Company's stock through and including
the date hereof.
4.12 Litigation. Except as set forth on Schedule 4.12, there is no
---------- -------------
action, order, writ, injunction, judgment or decree outstanding or any claim,
suit, litigation, proceeding, labor dispute, arbitral action, governmental audit
or investigation (collectively, "Actions") pending, or to the best of the
Company's or Sellers' knowledge, threatened or anticipated (a) against, related
to or affecting the Company or the Business or (b) seeking to delay, limit or
enjoin the transactions contemplated by this Agreement. The Company is not in
default with respect to or subject to any judgment, order, writ, injunction or
decree of any court or governmental agency, and there are no unsatisfied
judgments against the Company or the Business.
4.13 Labor Matters. Except as disclosed on Schedule 4.13 the Company is
------------- -------------
not a party to any labor agreement with respect to its employees with any labor
organization, union, group or association and there are no employee unions (nor
any other similar labor or employee organizations) under local statutes, custom
or practice. Except as disclosed on Schedule 4.13 the Company has not
-------------
experienced any attempt by organized labor or its representatives to make the
Company conform to demands of organized labor relating to its employees or to
enter into a binding agreement with organized labor that would cover the
employees of the Company.
4.14 Compliance with Law. The Company, the conduct of the Business and
-------------------
the operation of the Facilities have not violated and are in compliance with all
laws, statutes, ordinances, regulations, rules and orders of any foreign,
federal, state or local government and any other governmental department or
agency, and any judgment, decision, decree or order of any court or governmental
agency, department or authority relating to the Assets, Facilities or Business
or operations of the Company, except where the violation or failure to comply,
individually or in the aggregate, would not have a Material Adverse Effect on
the Facilities, the Equipment, Inventory or the Business. The Company and the
conduct of the Business and the operation of the Facilities are in conformity
with all energy, public utility, zoning, building and health codes, regulations
and ordinances, the Americans with Disabilities Act, ERISA, OSHA and all other
foreign, federal, state, and local governmental and regulatory requirements,
except where any nonconformity would not have a Material Adverse Effect,
individually or in the aggregate, on the Facilities, Assets or the Business.
The Company has not received any notice to the effect that, or otherwise been
advised that, it is not in compliance with any such statutes, regulations,
rules, judgments, decrees, orders, ordinances or other laws, and the Company has
no reason to anticipate that any existing circumstances are likely to result in
violations of any of the foregoing, which non-compliance or violation could, in
any one case or in the aggregate, have a Material Adverse Effect on the
Facilities, the Assets or the Business.
19
4.15 No Brokers. None of the Sellers, the Company or any of the Company's
----------
officers, directors, employees or Affiliates has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in an obligation on the part of the Company or Buyer to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.
4.16 No Other Agreements to Sell the Company. None of the Sellers has any
---------------------------------------
commitment or legal obligation, absolute or contingent, to any other person or
firm other than the Buyer to sell, assign, transfer or effect a sale of any of
the Shares or the Assets or to effect any merger, consolidation, liquidation,
dissolution or other reorganization of the Company.
4.17 Proprietary Rights.
------------------
4.17.1 Proprietary Rights. Schedule 4.17 lists all of the Company's
------------------ -------------
federal, state and foreign registrations of trademarks, service marks and other
marks, trade names or other trade rights, and all pending applications for any
such registrations, all other trademarks and other marks, trade names and other
trade rights or in which the Company has any interest whatsoever, and all other
trade secrets and other proprietary rights, whether or not registered, and all
computer software created or used by or on behalf of the Company other than off
the shelf software, in each case relating to the Business (collectively,
"Proprietary Rights"). The Proprietary Rights listed in Schedule 4.17 are all
those used by the Company in connection with the Business.
4.17.2 Royalties and Licenses. No person has a right to receive a
----------------------
royalty or similar payment in respect of any Proprietary Rights. The Company
has no licenses granted, sold or otherwise transferred by or to it or other
agreements to which it is a party, relating in whole or in part to any of the
Proprietary Rights.
4.17.3 Ownership and Protection of Proprietary Rights. The
----------------------------------------------
Company owns or licenses, and has the right to use or (if it so elects) to
sublicense each of the Proprietary Rights. None of the Proprietary Rights is
involved in any pending or to the best of the Company's or Sellers' knowledge,
threatened litigation. The Company has not received any notice of invalidity or
infringement of any rights of others with respect to such Proprietary Rights.
The Company has taken all reasonable and prudent steps to protect the
Proprietary Rights from infringement by any other firm, corporation, association
or person. The Company's use of the Proprietary Rights is not infringing upon or
otherwise violating the rights of any third party in or to such Proprietary
Rights, nor has such infringement been alleged by any third party. All of the
Proprietary Rights are valid and enforceable rights of the Company and will not
cease to be valid and in full force and effect by reason of the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated by this Agreement.
4.18 Tax Matters.
-----------
20
4.18.1 Filing of Tax Returns. The Company has timely filed with the
---------------------
appropriate taxing authorities all returns (including without limitation,
information returns and supporting schedules) in respect of Taxes required to be
filed through the date hereof and will timely file any such returns required to
be filed on or prior to the Closing Date. The returns including supporting
schedules filed are complete and accurate in all material respects. Except as
specified in Schedule 4.18, neither the Company, nor any group of which the
-------------
Company now or was a member, has requested any extension of time within which to
file returns (including without limitation information returns) in respect of
any taxes. The Company has delivered to Buyer complete and accurate copies of
the Company's federal, state and local income tax returns for its fiscal years
ended February 28, 1994, 1995, and 1996 and will deliver to Buyer copies of the
Company's federal, state and local tax returns for the fiscal year ended
February 28, 1998 when completed.
4.18.2 Payment of Taxes. All Taxes, in respect of taxable periods
----------------
ending on or before the Closing Date, have been timely paid, or will be timely
paid prior to Closing, or to the extent not paid prior to Closing, the Company's
liability for such Taxes will be fully reserved against in the Tax Reserve
included on the Effective Date Balance Sheet. Any liability of the Company for
Taxes in excess of the amounts so paid or the Tax Reserve so established will be
subject to indemnification by Sellers in accordance with Section 11.3 hereof.
4.18.3 Audits, Investigations or Claims. Except as set forth in
--------------------------------
Schedule 4.18, the consolidated federal income tax returns and any required
-------------
state tax returns of the Company have not been examined by the Internal Revenue
Service and any applicable state taxing authority for all periods to and
including those set forth in Schedule 4.18, and except to the extent shown
-------------
therein, no deficiencies for Taxes, have been claimed, proposed or assessed by
any taxing or other governmental authority against the Company. Except as set
forth in Schedule 4.18, there are no pending or, to the best of the Company's or
-------------
Sellers' knowledge, threatened audits, investigations or claims for or relating
to any additional liability in respect of Taxes, and there are no matters under
discussion with any governmental authorities with respect to Taxes that in the
reasonable judgment of the Company, or its counsel, is likely to result in
additional liability for Taxes. Audits of federal, state, and local returns for
Taxes by the relevant taxing authorities have been completed for each period as
set forth in Schedule 4.18 and, except as set forth therein, the Company has not
-------------
been notified that any taxing authority intends to audit a return for any other
period. Except as set forth in Schedule 4.18, no extension of a statute of
-------------
limitations relating to Taxes is in effect with respect to the Company.
4.18.4 Lien. There are no liens for Taxes (other than as could be
----
asserted for current Taxes not yet due and payable) on the Assets.
4.18.5 Tax Reserve. The Company shall reserve a sufficient cash
-----------
amount on its Interim Balance Sheet and Effective Date Balance Sheet to satisfy
all liabilities of the Company
21
relating to Taxes for each tax year of the Company ending on or prior to the
Effective Date provided, however, to the extent any additional tax liability
arises on behalf of the Company solely as a result of the reserve for doubtful
accounts of the Company in the amount of $75,000, the Company is not required to
set aside amounts to satisfy such liability and Sellers are not liable for such
amount.
4.19 Accounts Receivable. The accounts receivable reflected in the
-------------------
Interim Balance Sheet, and all accounts receivable arising since the Interim
Balance Sheet Date, represent bona fide claims of the Company against debtors
for sales, services performed or other charges arising on or before the date
hereof, and all the goods delivered and services performed which gave rise to
said accounts were delivered or performed in accordance with the applicable
orders, Contracts or customer requirements. All of such accounts receivables are
collectible in the ordinary course of business except to the extent reserved
against on the Interim Balance Sheet or as will be reserved against on the
Effective Date Balance Sheet. The Company owns all such accounts receivable,
free and clear of all Encumbrances.
4.20 Inventory. Except as set forth on Schedule 4.20, all the Inventory
--------- -------------
of the Company is located at the Facility. The Company owns the Inventory free
and clear of all liens and Encumbrances except for Permitted Encumbrances.
4.21 Employees and Employee Benefits.
-------------------------------
4.21.1 As used in this Section 4.21, the following terms have the
meanings set forth below.
"Benefit Arrangement" shall mean any employment, consulting,
severance or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including without limitation any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits, life, health, disability or accident
benefits (including without limitation any "voluntary employees' beneficiary
association" as defined in Section 501(c)(9) of the Code providing for the same
or other benefits) or for deferred compensation, profit sharing bonuses, stock
options, stock appreciation rights, stock purchases or other forms of incentive
compensation or postretirement insurance, compensation or benefits which (A) is
not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is entered into,
maintained, contributed to or required to be contributed to, as the case may be,
by the Company or an ERISA Affiliate or under which the Company or any ERISA
Affiliate may incur any liability, and (C) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
22
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"ERISA Affiliate" shall mean any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, the Company as
defined in Section 414(b), (c), (m) or (o) of the Code, or under "common
control" with the Company, within the meaning of Section 4001(b)(1) of ERISA.
"Multiemployer Plan" shall mean any "multiemployer plan," as defined
in Section 4001(a)(3) of ERISA, (A) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which the Company or any ERISA Affiliate may
incur any liability and (B) which covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with such
entities).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA which (A) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
within the five years prior to the Closing Date, maintained, administered,
contributed to or was required to contribute to, or under which the Company or
any ERISA Affiliate may incur any liability; (B) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities); and (C) is not a Multiemployer Plan.
"Welfare Plan" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, which (A) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability; (B) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities); and (C) is not a Multiemployer Plan.
4.21.2 Schedule 4.21(a): (i) contains a list of all employees of the
----------------
Company, and their wage rates or salaries, as of the date of this Agreement, and
(ii) sets forth the dates of employment for such employees.
4.21.3 Disclosure; Delivery of Copies of Relevant Documents and Other
--------------------------------------------------------------
Information. Schedule 4.21(b) contains a complete list of Employee Plans. True
----------- ----------------
and complete copies of each of the following documents have been delivered by
the Company to Buyer: (i) each Welfare Plan and Pension Plan (and, if
applicable, related trust agreements) and all amendments
23
thereto, all written interpretations thereof and written descriptions thereof
which have been distributed to the Company's employees and all annuity contracts
or other funding instruments; (ii) each Benefit Arrangement including written
interpretations thereof and written descriptions thereof which have been
distributed to the Company's employees (including descriptions of the number and
level of employees covered thereby) and a complete description of any Benefit
Arrangement which is not in writing; (iii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each
Pension Plan and each Welfare Plan; and (iv) for the three most recent plan
years, Annual Reports on Form 5500 Series required to be filed with any
governmental agency for each Pension Plan and each Welfare Plan.
4.22 Representations.
---------------
4.22.1 Pension Plans. Except as provided in Schedule 4.22 (a), no
------------- -----------------
Pension Plan is subject to the minimum funding requirements of Title IV of ERISA
or Section 412 of the Code. Neither the Company nor any ERISA Affiliate is
required to provide security to a Pension Plan under Section 401(a)(29) of the
Code. Each Pension Plan which is intended to be qualified (and each related
trust agreement, annuity contract or other funding instrument) is qualified and
tax-exempt under the provisions of Code Sections 401(a) (or 403(a), as
appropriate) and 501(a) and has been so qualified during the period from its
adoption to date. Neither the Company nor any ERISA Affiliate has engaged in,
or is a successor or parent corporation to an entity that has engaged in, a
transaction described in Section 4069 of ERISA.
4.22.2 Multiemployer Plans. Except as provided in Schedule 4.22 (b),
------------------- -----------------
the Company nor any ERISA Affiliate has any Multiemployer Plans. The Company
only contributes to the Midwest Operating Engineers Welfare Fund and the Midwest
Operating Engineers Pension Fund.
4.22.3 Welfare Plans. Neither the Company, nor any ERISA Affiliate
-------------
has any present or future obligation to make available to any present or former
employee of the Company or any ERISA Affiliate, any retiree medical benefit
plan, or other retiree Welfare Plan. No condition exists which would prevent
the Company from amending or terminating any Welfare Plan. Each Welfare Plan
which is a "group health plan," as defined in Section 607(1) of ERISA, has been
operated in compliance with provisions of Part 6 of Title I, Subtitle B of ERISA
and Section 4980B of the Code at all times.
4.22.4 Compliance with Law. Each Employee Plan maintained by the
-------------------
Company has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Employee Plan, including without limitation ERISA
and the Code.
24
4.22.5 Employment at Will. Except as provided by law, the
------------------
employment of all persons presently employed or retained by the Company is
terminable at will.
4.22.6 Unrelated Business Taxable Income. No Employee Plan (or
---------------------------------
trust or other funding vehicle pursuant thereto) maintained by the Company is
subject to any tax under Code Section 511.
4.22.7 Deductibility of Payments. There is no contract, agreement,
-------------------------
plan or arrangement covering any employee or former employee of the Company
(with respect to its relationship with such entities) that, individually or
collectively, provides for the payment by the Company of any amount (i) that is
not deductible by the Company under Section 162(a)(1) or 404 of the Code,
whichever is applicable, (ii) for which the deduction by the Company would be
disallowed under Section 162(m) of the Code, or (iii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
4.22.8 Fiduciary Duties and Prohibited Transactions. Neither the
--------------------------------------------
Company nor any plan fiduciary of any Welfare Plan or Pension Plan has engaged
in any transaction in violation of Sections 404 or 406 of ERISA or any
"prohibited transaction," as defined in Section 4975(c)(1) of the Code, for
which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code, or has otherwise violated the provisions of Part 4 of Title I,
Subtitle B of ERISA. The Company has not been assessed any civil penalty under
Section 502(l) of ERISA.
4.22.9 Validity and Enforceability. Each Welfare Plan, Pension Plan,
---------------------------
related trust agreement, annuity contract or other funding instrument and
Benefit Arrangement is legally valid and binding and in full force and effect.
4.22.10 Litigation. There is no action, order, writ, injunction,
----------
judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral
action, governmental audit or investigation relating to or seeking benefits
under any Employee Plan that is pending, or to the best of the Company's or
Sellers' knowledge, threatened or anticipated against the Company, any ERISA
Affiliate or any Employee Plan.
4.22.11 No Amendments. Neither the Company nor any ERISA Affiliate
-------------
has any announced plan or legally binding commitment to create any additional
Employee Plans or to amend or modify any existing Employee Plan, other than any
amendments required to maintain any such Employee Plans' compliance with
applicable law.
4.22.12 No Other Material Liability. No event has occurred in
---------------------------
connection with which the Company or any ERISA Affiliate or any Employee Plan,
directly or indirectly, could be subject to any material liability (A) under any
statute, regulation or governmental order relating
25
to any Employee Plans or (B) pursuant to any obligation of the Company to
indemnify any person against liability incurred under any such statute,
regulation or order as they relate to the Employee Plans.
4.22.13 Unpaid Contributions. Neither the Company nor any ERISA
--------------------
Affiliate has any liability for unpaid contributions under Section 515 of ERISA
with respect to any Pension Plan or Welfare Plan.
4.22.14 Insurance Contracts. Neither the Company nor any Employee
-------------------
Plan holds as an asset of any Employee Plan any interest in any annuity
contract, guaranteed investment contract or any other investment or insurance
contract issued by an insurance company that is the subject of bankruptcy,
conservatorship or rehabilitation proceedings.
4.22.15 No Acceleration or Creation of Rights. Neither the execution
-------------------------------------
and delivery of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will result in the acceleration or creation of
any rights of any person to benefits under any Employee Plan (including, without
limitation, the acceleration of the vesting or exercisability of any stock
options, the acceleration of the vesting of any restricted stock, the
acceleration of the accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any severance, parachute or
change in control agreement).
4.23 Compliance With Environmental Laws. Any issues pertaining to
----------------------------------
compliance with Environmental Laws shall be governed by this Section 4.23.
4.23.1 Definitions. The following terms, when used in this Section
-----------
4.23, shall have the following meanings. Unless the context otherwise requires,
any of these terms may be used in the singular or the plural depending on the
reference.
4.23.2 "Company". For purposes of this Section 4.23 only, the term
-------
"Company" shall include (i) the Sellers, (ii) all predecessor or former
corporations, partnerships, joint ventures, organizations, businesses or other
entities, whether in existence as of the date hereof or at any time prior to the
date hereof, the assets or obligations of which have been expressly acquired or
assumed by the Company or to which the Company has expressly succeeded.
4.23.3 "Release" shall mean and include any spilling, leaking,
-------
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing into the environment or the work place
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
26
4.23.4 "Hazardous Substance" shall mean any quantity of asbestos in
-------------------
any form, urea formaldehyde, PCBs, radon gas, crude oil or any fraction thereof,
all forms of natural gas, petroleum products or by-products, any radioactive
substance, any toxic, infectious, reactive, corrosive, ignitible or flammable
chemical or chemical compound and any other hazardous substance, material or
waste (as defined in or for purposes of any Environmental Law), whether solid,
liquid or gas.
4.23.5 Compliance With Environmental Laws. Except as set forth on
----------------------------------
Schedule 4.23, the Facilities have been owned, leased, operated and maintained
-------------
in compliance with all federal, state, local or foreign laws, statutes,
ordinances, regulations, rules, judgments, orders, notice requirements, court
decisions, restrictions or licenses, which (i) regulate or relate to the
protection or clean-up of the environment, the use, treatment, storage,
transportation, handling or disposal of hazardous, toxic or otherwise dangerous
substances, wastes or materials (whether gas, liquid or solid), the preservation
or protection of waterways, groundwater, drinking water, air, wildlife, plants
or other natural resources, or the health and safety of persons or property,
including without limitation protection of the health and safety of employees or
(ii) impose liability with respect to any of the foregoing, including without
limitation the Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.),
Resource Conservation & Recovery Act (42 U.S.C. (S) 6901 et seq.) ("RCRA"), Safe
Drinking Water Act (21 U.S.C. (S) 349, 42 U.S.C. (S)(S) 201, 300f), Toxic
Substances Control Act (15 U.S.C. (S) 2601 et seq.), Clean Air Act (42 U.S.C.
(S) 7401 et seq.), the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. (S) 9601 et seq.) ("CERCLA"), or any other similar
federal, state or local law of similar effect, each as amended as of the Closing
Date (collectively, "Environmental Laws").
4.23.6 Facilities. The Facilities are, and to the best of the
----------
Sellers' and the Company's knowledge at all times have been, owned, leased and
operated in compliance with all Environmental Laws and to Sellers' best
knowledge in a manner that will not give rise to any liability under any
Environmental Laws.
4.23.7 Permits. The Company has, and to the best of the Sellers' and
-------
the Company's knowledge at all times has had, all Permits required under any
Environmental Law and the Facilities are, and, while operated by the Company,
have at all times been in compliance with all such Permits.
4.23.8 Permits Required. The consummation of any of the transactions
----------------
contemplated by this Agreement will not require an application for issuance,
renewal, transfer or extension of, or any other administrative action regarding,
any Permit required under any Environmental Law.
27
4.23.9 Notice of Violation. The Company has not received any notice
-------------------
from any governmental entity or agency at any time that it or the Facilities is
or were claimed to be in violation of the provisions of any Environmental Law or
in non-compliance with the conditions of any Permit, and there is no pending, or
to the best of the Company's or Sellers' knowledge, threatened lawsuit,
governmental or other legal action to that effect.
4.23.10 Pending Actions. There is not now pending, or to the best of
---------------
the Company's or Sellers' knowledge, threatened, nor to the best of Sellers'
knowledge is there any basis for, nor has there ever been, any Action against
the Company, nor any basis for any Action, under any Environmental Law or
otherwise with respect to any Release or mishandling of any Hazardous Substance.
4.23.11 Judgments. There are no consent decrees, judgments,
---------
judicial or administrative orders or agreements with, or liens by, any
governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate, bind or in any way affect the
Company or the Facilities.
4.23.12 Hazardous Substances. There is not and to the best of the
--------------------
Sellers' and the Company's knowledge has not been any Hazardous Substance used,
generated, treated, stored, transported, disposed of, handled or otherwise
existing on, under, about or from any Facility, except for quantities of any
such Hazardous Substances stored or otherwise held on, under or about any such
Facility in full compliance with all Environmental Laws and related to the
operation of the Business.
4.23.13 Handling of Hazardous Substances. The Company has at all
--------------------------------
times used, generated, treated, stored, transported, disposed of or otherwise
handled its Hazardous Substances in compliance with all Environmental Laws and
to the best of Sellers' knowledge in a manner that will not result in liability
of the Company or Buyer under any Environmental Law. Schedule 4.23 sets forth a
-------------
list of all contractors and other third parties who at any time have hauled,
handled, stored, transported or disposed of any Hazardous Substance (i) on
behalf of the Company or the Business, or (ii) generated by the Company or the
Business, together with, to the best of the Sellers' and the Company's
knowledge, a complete list of all dumpsites and other off-site locations at
which such Hazardous Substances have been disposed of.
4.23.14 Environmental Conditions. There are no present or to the
------------------------
best of the Sellers' and the Company's knowledge past Environmental Conditions
(as defined below) in any way relating to the Business or Facilities.
"Environmental Conditions" means the introduction into the soil, groundwater or
environment of the Facilities (through leak, spill, release, discharge, escape,
emission, dumping, disposal or otherwise) of any pollution, including without
limitation any contaminant, irritant or pollutant or Hazardous Substance
(whether or not upon the property of the
28
Business and whether or not such pollution constituted at the time thereof a
violation of any Environmental Law) as a result of which either the Company or,
after the Closing, Buyer has or may become liable to any federal, state, or
local governmental authority or person or by reason of which any of the Assets
may suffer or be subjected to any lien.
4.23.15 CERCLA or RCRA. No current or to the best of the Sellers' and
--------------
the Company's knowledge past use, generation, treatment, transportation,
storage, disposal or handling practice of the Company with respect to any
Hazardous Substance has or will result in any liability under the CERCLA or RCRA
or any state or local law of similar effect.
4.23.16 Storage Tank or Pipeline. Except as set forth on Schedule
------------------------ --------
4.23, there is not now and to the best knowledge of the Sellers there has not
----
been at any time in the past any underground or above-ground storage tank or
pipeline at any Facility where the installation, use, maintenance, repair,
testing, closure or removal of such tank or pipeline was not in compliance with
all Environmental Laws and there has been no Release from or rupture of any such
tank or pipeline, including without limitation any Release from or in connection
with the filling or emptying of such tank.
4.23.17 Environmental Audits or Assessments. True, complete and
-----------------------------------
correct copies of the written reports, and all parts thereof, including any
drafts of such reports if such drafts are in the possession or control of the
Company, of all environmental audits or assessments which have been conducted at
any Facility within the past five years, either by the Company or any attorney,
environmental consultant or engineer engaged for such purpose, have been
delivered to Buyer and a list of all such reports, audits and assessments and
any other similar report, audit or assessment of which the Company or Sellers
have knowledge is included on Schedule 4.23.
-------------
4.23.18 Indemnification Agreements. The Company is not a party,
--------------------------
whether as a direct signatory or as successor, assign or third party
beneficiary, or to the best of the Sellers' and the Company's knowledge,
otherwise bound, to any lease or other Contract under which the Company is
obligated by or entitled to the benefits of, directly or indirectly, any
representation, warranty, indemnification, covenant, restriction or other
undertaking concerning Environmental Conditions.
4.23.19 Releases or Waivers. The Company has not released any other
-------------------
person from any claim under any Environmental Law or to its knowledge waived any
rights concerning any Environmental Condition.
4.23.20 Notices, Warnings and Records. The Company has given all
-----------------------------
notices and warnings, made all reports, and has kept and maintained all records
required by and in compliance with all Environmental Laws.
29
4.24 Liabilities. The Company has no liabilities or obligations
-----------
(absolute, accrued, contingent or otherwise) except (i) liabilities which are
reflected on the Interim Balance Sheet or which are not required under GAAP to
be reflected on the Interim Balance Sheet, (ii) liabilities incurred in the
ordinary course of the Business and consistent with past practice since the
Interim Balance Sheet Date, and (iii) liabilities arising under Contracts
identified in Schedule 4.9 to which the Company is a party.
------------
4.25 Insurance.
---------
4.25.1 Schedule 4.25 describes all policies of insurance (including
-------------
the insurer, type of insurance and period of coverage) to which the Company is a
party or under which the Company, or any employee, officer or director of the
Company (in his or her capacity as such) is or has been insured at any time
within the five years preceding the date of this Agreement; and any self-
insurance arrangement by or affecting the Company, including any reserves
established thereunder. All such policies, together with such self-insurance,
(i) provide adequate insurance coverage for the Assets and the operations of the
Company for all risks normally insured against by a person or entity carrying on
the same business or businesses as the Company, (ii) are sufficient for
compliance with all legal requirements and Contracts to which the Company is a
party or by which it is bound, and (iii) will continue in full force and effect
following the Closing.
4.25.2 Schedule 4.25 sets forth, by year, for the current policy year
-------------
and each of the five preceding policy years, a summary of the loss experience
under each policy, and summary of the loss experience for all claims that were
self-insured, including the number and aggregate cost of such claims.
4.25.3 None of the Sellers, nor the Company has received (i) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (ii) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect or
will not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
4.25.4 The Company has paid all premiums due, and has otherwise
performed all of its respective obligations, under each insurance policy
described above.
4.26 Conduct of the Business. Since the Interim Balance Sheet Date, the
-----------------------
Company has conducted its operations in the ordinary course of the Business and
substantially in accordance with past practice, and has not taken any action
that, if taken after the date hereof, would violate Section 9.1.
4.27 Securities Law Matters.
----------------------
30
4.27.1 Each Seller confirms that it is acquiring the Parent Common
Stock for its own account as principal, for investment purposes only, and not
with a view to, or for, resale or distribution thereof, and no other person has
or will have a direct or indirect beneficial interest in such Parent Common
Stock.
4.27.2 Each Seller understands that the offering and sale of the
Parent Common Stock is intended to be a transaction by an issuer not involving
any public offering exempt from registration under the Securities Act by virtue
of Section 4(2) of the Securities Act and the rules and regulations of the
Commission thereunder;
4.27.3 Each Seller represents that it is an "accredited investor" as
such term is defined in Rule 501 under the Securities Act;
4.27.4 Each Seller understands and acknowledges that there are
substantial risks of loss of investment involved in an investment in the Parent
Common Stock, and that the investment in the Parent Common Stock is an illiquid
investment subject to transfer restrictions, and Sellers represent and warrant
that they have the financial ability to bear the economic risk of such
investment;
4.27.5 Each Seller has such knowledge and experience in financial and
business matters, including investments of the type represented by the Parent
Common Stock, as to be capable of evaluating the merits of investment in
therein;
4.27.6 Each Seller has been furnished with a copy of the most recent
periodic report filed by Parent with the Commission under the Exchange Act and
any documents that may have been made available to the Sellers otherwise or upon
their request, have carefully read and understand such materials and have
evaluated the risks of an acquisition of the Parent Common Stock;
4.27.7 Each Seller has been given the opportunity to ask questions
of, and receive answers from, representatives of Parent in order for it to
evaluate the merits and risks of investment in the Parent Common Stock; and
4.27.8 No Seller has been furnished with or has relied upon any oral
or written representation, warranty or information in connection with the
offering of the Parent Common Stock except for that set forth in this Agreement
or included in the SEC Documents.
4.27.9 The instruments evidencing the Parent Common Stock shall bear
a restrictive legend in substantially the following form: "The securities
represented by this certificate have not been registered under the Securities
Act of 1933, as amended (the "Act"). These securities have
31
been acquired for investment and not with a view to distribution or resale, and
may not be sold, offered for sale, pledged or hypothecated in the absence of an
effective registration statement for such shares under the Act or an opinion of
counsel satisfactory in form and content to the issuer that such registration is
not required under such Act."
4.28 Affiliate Transactions. Except as set forth on Schedule 4.28, no
---------------------- -------------
officer, director, or any Seller or any member of the immediate family of any
such officer, director, or Seller, or any entity in which any of such persons
owns any beneficial interest (other than a publicly held corporation whose stock
is traded on a national securities exchange or in the over-the-counter market
and less than 1% of the stock of which is beneficially owned by any of such
persons) (collectively "Insiders") has any agreement with the Company or any
--------
interest in any property (real, personal, or mixed, tangible or intangible) used
in or pertaining to the Business or the Assets to be acquired hereunder. For
purposes of the preceding sentence, the members of the immediate family of an
officer, director, or, Seller shall consist of the spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers-
and sisters-in-law of such officer, director, or Seller.
4.29 HSR Act. As determined in accordance with the HSR Act, neither the
-------
Company nor any "acquired person" of which the Company may be deemed to be a
part: (i) is engaged in manufacturing, (ii) has total assets of $10,000,000 or
more, or (iii) has annual net sales of $100,000,000 or more.
4.30 Disclosure. Neither this Agreement nor any of the Schedules or
----------
Exhibits hereto contains or shall contain when delivered at Closing any untrue
statement of a material fact or shall omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they were made, not misleading, and there is no fact which has not been
disclosed to Buyer which to the best of Sellers' knowledge Materially Adversely
Affects or could reasonably be anticipated to Materially Adversely Affect the
Shares being transferred, Assets, Business, financial condition or results of
operations, customer, employee or supplier relations, or business condition of
the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
--------------------------------------------------
5.1 Representations and Warranties of Buyer. Buyer hereby represents and
---------------------------------------
warrants to Sellers as follows, which representations and warranties are, as of
the date hereof, and will be, as of the Closing Date, true and correct:
32
5.1.1 Organization of Buyer. Buyer is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of the State of
Mississippi. The Company is duly qualified or licensed to do business in the
State of Indiana.
5.1.2 Authorization. Buyer has all requisite corporate power and
-------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and each of the Ancillary Agreements, including the New Lease, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. This Agreement has been duly executed and
delivered by Buyer and is (and following their execution and delivery by Buyer
and Sellers or the Company, as applicable, each of the Ancillary Agreements will
be) a legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms.
5.1.3 No Conflict or Violation. Neither the execution, delivery or
------------------------
performance of this Agreement or the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby, nor compliance by Buyer with
any of the provisions hereof or thereof, will (a) violate or conflict with any
provision of the Certificate of Incorporation or Bylaws of Buyer, or (b)
violate, conflict with or result in a breach of any statute, rule, regulation,
ordinance, code, order, judgment, ruling, writ, injunction, decree or award
binding upon Buyer.
5.1.4 Consents and Approvals. No notice to, declaration, filing or
----------------------
registration with, or authorization, consent or approval of, or permit from, any
governmental or regulatory body or authority, or any other person or entity, is
required to be made or obtained by Buyer in connection with the execution,
delivery and performance of this Agreement or the Ancillary Agreements and the
consummation of the transactions contemplated hereby or thereby, except (a) as
may be required by Buyer to operate the Business after the Closing, (b) as has
been obtained on or prior to the date hereof or (c) as set forth in Schedule
--------
5.1.4.
-----
5.1.5 No Brokers. Neither Buyer nor any of its respective officers,
----------
directors, employees or, to its knowledge, shareholders have employed or made
any Agreement with any broker, finder or similar agent or any person or firm
which will result in an obligation to pay any finders fees, brokerage fees or
commission or similar payment in connection with the transactions contemplated
hereby for which Seller or the Company will bear any responsibility.
5.2 Representations and Warranties of Parent. Parent hereby represents and
----------------------------------------
warrants to Sellers as follows, which representations and warranties are, as of
the date hereof, and will be, as of the Closing Date, true and correct:
5.2.1 Organization of Parent. Parent is a corporation duly organized,
----------------------
validly existing, and in good standing under the laws of the State of Delaware.
33
5.2.2 Authorization. At the Closing, the execution and delivery of
-------------
this Agreement and the consummation of the transactions contemplated hereby will
be duly authorized by all requisite corporate action on the part of Parent.
This Agreement has been duly executed and delivered by Parent and is (and
following their execution and delivery by Parent, Buyer and Sellers or the
Company, as applicable, will be) a legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms.
5.2.3 No Conflicts or Violations. The execution and delivery of this
--------------------------
Agreement and the consummation of the transactions contemplated hereby will not
(i) violate any provision of the Certificate of Incorporation or Bylaws of
Parent, (ii) violate, conflict with or result in a breach of any applicable
provision of law or regulation, order, injunction, or decree, or any other
requirement of any governmental body or court relating to Parent or its
securities, property, or business, or (iii) (subject to Parent obtaining any
consent or approval required as a condition of Closing), violate, conflict
with, result in the breach or termination of, constitute a default under, or
result in the creation of any material lien, charge, or encumbrance upon any of
the properties or assets of Parent or any of its subsidiaries pursuant to any
agreement or instrument to which it or any of its subsidiaries is a party, which
violate, conflict, breach, termination, default, or creation would have a
material adverse effect on the business or financial condition of Parent and it
subsidiaries taken as a whole (a "Parent Material Adverse Effect").
5.2.4 Consents and Approvals. No notice to, declaration, filing or
----------------------
registration with, or authorization, consent or approval of, or permit
(collectively "Governmental Consents") from, any governmental or regulatory body
or authority, or any other person or entity, is required to be made or obtained
by Parent in connection with the execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement, and except for those Governmental Consents the failure of which to
make or obtain would not have a Parent Material Adverse Effect.
5.2.5 Parent Common Stock. The Shares of Parent Common Stock to be
-------------------
issued pursuant to this Agreement, when issued and delivered in accordance with
the terms of this Agreement, will be duly authorized, validly issued, fully
paid, and nonassessable and free of preemptive rights.
5.2.6 SEC Information Furnished Concerning Parent. For the period
-------------------------------------------
from January 1, 1997 to December 31, 1997, Parent has filed with the Commission
those filings and reports required pursuant to the Exchange Act (the "SEC
Documents"). The audited consolidated financial statements for the year ended
December 31, 1996, contained within the SEC Documents have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be otherwise noted therein) and fairly present the consolidated
financial position of Parent and its subsidiaries as of such date and the
consolidated results of operations of Parent and its
34
subsidiaries for the year then ended. To Parent's knowledge, as of their
respective dates, the SEC Documents, including, but not limited to, the
financial statements contained therein, did not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
5.2.7 Litigation. As of the date hereof, except as set forth in the
----------
SEC Documents, there are, and as of the Closing Date, except as set forth
therein or pursuant to a Commission report or filing made prior to the Closing
Date, no suits, actions or administrative, arbitration, or other proceedings
(including proceedings concerning labor disputes or grievances) or governmental
investigations pending or, to the knowledge of Parent, threatened against Parent
or its properties or business that could reasonably be expected to have a Parent
Material Adverse Effect.
5.2.8 No Brokers. Neither Parent nor any of its respective officers,
----------
directors, employees or, to its knowledge, shareholders have employed or made
any Agreement with any broker, finder or similar agent or any person or firm
which will result in an obligation to pay any finders fees, brokerage fees or
commission or similar payment in connection with the transactions contemplated
hereby for which Sellers or the Company will bear any responsibility.
ARTICLE VI
COVENANTS OF BUYER, THE COMPANY AND SELLERS
-------------------------------------------
Buyer, the Company and Sellers each covenant with the others as follows:
6.1 Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, each of the parties hereto agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using their respective best efforts (A)
to obtain all necessary waivers, consents and approvals from third parties;
provided, however, that Buyer shall not be required to make any payments,
commence litigation or agree to modifications of the terms of Contracts or
Leases in order to obtain any such waivers, consents or approvals, (B) to obtain
all necessary Permits as are required to be obtained under any federal, state,
local or foreign law or regulations, (C) to effect all necessary registrations
and filings, and all other submissions of information requested by governmental
authorities, and (D) to fulfill all conditions to this Agreement.
35
6.2 Employee Matters. Buyer shall retain only those employees of the
----------------
Company who pass a physical examination and drug and alcohol screening by a
licensed laboratory chosen by Buyer in compliance with Indiana law, and who
otherwise meet Buyer's customary criteria for employment, and Sellers shall
reasonably cooperate with Buyer in retaining all such employees (the "Retained
Employees"). Buyer agrees to give Retained Employees credit for their time of
employment with Company with respect to their seniority as an employee of Buyer
for the purpose of determining benefits eligibility. All Retained Employees will
be at-will employees of Buyer and may be terminated by Buyer in its sole
discretion, subject to the requirements of applicable laws governing employers
and employees.
6.3 Environmental Assessments and Remediation.
------------------------------------------
6.3.1 Buyer has retained Environmental Risk Management Services (the
"Consultant") to perform Phase 1 environmental assessments with respect to each
of the Facilities. Upon its availability, Consultant will deliver such
assessments to Buyer and the Company. In the event any such assessment
recommends the performance of additional investigation (including, without
limitation, Phase 2 environmental assessments), such additional investigation
shall, if requested by Buyer, be undertaken promptly and delivered to each of
the Company and Buyer. The environmental assessments and investigations
undertaken pursuant to this Section 6.3.1 are collectively referred to herein as
the "Environmental Assessments." Buyer shall be solely responsible for the cost
of the Environmental Assessments.
6.3.2 In the event any of the Environmental Assessments reveals any
remediation work, recognized environmental conditions, or other actions which
must be completed in order to bring the Facilities into compliance with
applicable Environmental Laws or eliminate any potential environmental
liability, the Consultant shall be directed to prepare and to deliver to each of
the Company and Buyer a written report setting forth in reasonable detail the
scope of required remediation and an estimate of the cost of completing such
remediation. For the purposes of Section 6.3, "required remediation" shall mean
any action necessary to (i) comply with any governmental order, (ii) comply with
any Environmental Law effective at the Closing, or (iii) install any required
wash-racks, as applicable to the Facilities or the operation thereof by the
Company as of the Closing Date (the "Required Remediation"). The owner of each
Facility shall be responsible for all reasonable costs and expenses related to
required remediation or the installation of wash-racks.
6.3.3 Promptly upon completion of the Consultant's report referred to
in Section 6.3.2 but in any event, within 60 days thereof, the Sellers shall
engage a reliable environmental engineering firm reasonably acceptable to Buyer
to perform any Required Remediation. The Sellers shall use their best efforts
to cause such Required Remediation to be completed on or before the Closing
Date, and the Sellers shall bear all costs of such Required Remediation,
including the costs associated with verifying that the Required Remediation is
complete; provided that the completion
36
of all such Required Remediation shall be a condition to Buyer's obligations to
consummate the transactions contemplated by this Agreement. Buyer may, in its
sole discretion, authorize Sellers to defer any portion of the Required
Remediation which the Company and its contractors are unable to complete prior
to Closing, in which case Sellers shall cause the portion of the Required
Remediation so deferred to be completed as promptly as practicable, but in no
event later than 60 days following Closing, at the Sellers' sole expense (which
may be satisfied from the Holdback Amount pursuant to the Escrow Agreement).
Buyer may monitor the performance of the Required Remediation, and at its
election may cause the Consultant to review the of the Required Remediation. If
Buyer directs the Consultant to undertake such review, the Required Remediation
shall be deemed completed only upon certification of its completion by the
Consultant. If, however, there is a dispute as to the performance of the
Required Remediation, any such dispute shall be settled by a mutually agreed-
upon environmental expert not otherwise involved in the Required Remediation,
whose determination shall be final and binding on the parties.
6.3.4 The Holdback Amount shall secure the completion by Sellers of
any Required Remediation which has not been resolved by the Closing Date
pursuant to this Section 6.3. Upon the completion of the Required Remediation,
certification of such completion by the Consultant or mutually agreed-upon third
party expert, and payment by Sellers of all expenses of such remediation, all in
accordance with the standards set forth in this Section 6.3, no further claims
may be made against the Holdback Amount on account of Sellers' obligations under
this Section 6.3. However, if such Required Remediation has not been completed
by Sellers and so certified on or prior to the date which is 60 days following
the Closing Date, Buyer shall be entitled to engage its own environmental
engineering firm to complete such Required Remediation, and to distribute from
escrow such portion of the Holdback Amount as is necessary to pay the fees and
costs of such firm, or other costs incurred, in completing such Required
Remediation.
6.4 Registration Rights. In the event that, at any time prior to the
-------------------
first anniversary of the receipt by Sellers of any shares of Parent Common Stock
pursuant to the Performance Incentive Agreement, Parent files a registration
statement under the Securities Act covering shares of Parent Common Stock,
other than a registration statement on Form S-4 or Form S-8, or a registration
statement filed pursuant to "demand" or similar contractual registration rights
of any other stockholders of Parent, then each Seller shall have the right to
include in such registration statement (on a "piggyback" basis) any or all of
its shares of Parent Common Stock, and to receive the benefit of any
representations, indemnities, opinions or comfort letters given by Parent (or
its counsel, auditors or underwriters) to any underwriter in connection with
such registration, subject to the obligations of the Sellers to (i) cooperate
with Parent in preparing each such registration and executing all such
agreements as any representative of the underwriters may deem reasonably
necessary in favor of the underwriters, (ii) promptly supply Parent with all
information, documents, representations and agreements as the underwriters or
Parent may deem reasonably necessary in connection with such registration and
(iii) confirm in writing not to sell or transfer any shares of the
37
capital stock of Parent not included in such registration during the period
beginning ten (10) days prior to the filing and ending ninety (90) days from the
effective date of such registration without the underwriters' or Parent's
consent; provided, however, that if the managing underwriter or underwriters in
-----------------
the registered offering advise Parent that the inclusion in the offering of all
or some of the shares of Parent Common Stock owned by Sellers would have a
material adverse effect on the marketability or price of the offering, then the
number of shares of Parent Common Stock to be included by Sellers shall be
reduced on a pro rata basis in proportion to the number of shares of Parent
Common Stock requested to be included by Sellers.
6.5 Tax Attributes. The Seller's recognize that in connection with the
--------------
sale of the Shares, that all tax attributes of Company including but not limited
to tax net operating losses, tax credits and other similar items generated
through and subsequent to the acquisition date will remain as tax attributes of
Company or its successors. Accordingly, any refunds or benefits obtained via
the carryback, carryforward or realization of such tax attributes of Company or
its successors shall remain as sole property of Company or its successors with
no amount being transferred to the Sellers as additional consideration for the
purchase of the Shares; provided, however, any tax audit which results in a
refund to the Company will be distributed to Sellers so long as Sellers are
responsible for the professional fees incurred in connection with such audit.
The parties hereto agree that the Sellers shall be responsible for preparing the
Company's tax returns for fiscal year 1998. Buyer shall have the right to
review the Company's tax returns for fiscal year 1998 and Sellers shall not file
any tax returns relating to the Company with any taxing authority unless Buyer
consents to such filing.
6.6 Seller Notes. Contemporaneous with the Closing, Buyer shall pay off
------------
all notes payable of the Company to the Sellers which are reflected on the
Interim Balance Sheet plus accrued interest on such notes through the Closing.
ARTICLE VII
CONDITIONS TO SELLERS' OBLIGATIONS
----------------------------------
The obligations of Sellers to consummate the transactions provided for
hereby are subject to the satisfaction, on or prior to the Closing Date, of each
of the following conditions, any of which may be waived by Sellers:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Buyer and Parent contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Buyer
shall have performed and satisfied all agreements and covenants required hereby
to be performed by it prior to or on the Closing Date.
38
7.2 No Proceedings, Litigation or Laws. No Action by any governmental
----------------------------------
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially damage Sellers if the
transactions contemplated hereunder are consummated. There shall not be any
statute, rule or regulation that makes the purchase and sale of the Business or
the Assets contemplated hereby illegal or otherwise prohibited.
7.3 Certificates. Buyer shall have executed the Ancillary Agreements.
------------
7.4 No Cessation of Trading. There shall have been no cessation of
-----------------------
trading of Parent's Common Stock on the New York Stock Exchange or a national
securities exchange, and there shall be no action, order or proceeding pending
or, to Parent's knowledge, threatened, by any regulatory agency to stop the
public trading of Parent's Common Stock.
7.5 Opinion Letter of Buyer's Attorneys. Sellers shall receive an opinion
-----------------------------------
of Xxxxx & Xxxxxx L.L.P., counsel for Buyer and Parent, dated as of the Closing
Date, in form and substance reasonably satisfactory to Sellers, to the effect
that:
7.5.1 Incorporation. Parent has been duly incorporated and is validly
-------------
existing and in good standing under the laws of the State of Delaware, with
corporate power to own or lease its properties and to carry on its business as
now conducted. Buyer has been duly incorporated and is validly existing and in
good standing under the laws of the State of Mississippi, with corporate power
to own or lease its properties and to carry on its Business as now conducted.
7.5.2 Corporation Power and Authority. The execution, delivery and
-------------------------------
performance of this Agreement and the consummation of the transaction
contemplated by the Agreement have been duly authorized by Parent and Buyer, and
the Agreement has been duly executed and delivered by Parent and Buyer.
7.5.3 Corporate Action. The Agreement constitutes a legally valid and
----------------
binding obligation of Buyer or Parent, as applicable, enforceable against Buyer
or Parent in accordance with their terms, except as limited by (i) bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to
creditors' rights generally or by equitable principles (whether considered in an
action at law or in equity), (ii) limitations imposed by federal or applicable
state law or equitable principles upon the availability of specific performance,
injunctive relief, or other equitable remedies, or (iii) other customary
limitations reasonably satisfactory to Seller's counsel;
7.5.4 Parent Common Stock. (i) The Parent Common Stock being
-------------------
delivered to Sellers under the terms of this Agreement has been duly authorized
and reserved and, when issued, will be validly issued, fully paid, and
nonassessable; and (ii) assuming the accuracy of the
39
representations and warranties in Section 4.27 of the Agreement, it is not
necessary to register the Parent Common Stock to be issued to Sellers pursuant
to the Agreement under the Securities Act of 1933, as amended.
For purposes of the foregoing opinions relating to Buyer, Buyer's counsel
may assume that the laws of Mississippi and Indiana, including the corporate law
of such states, are the same as the law of Arizona.
7.6 Buyer and Parent Corporate Documents. Buyer and Parent shall each
------------------------------------
have delivered to Sellers a copy of its articles of incorporation certified by
the Mississippi Secretary of State or a copy of its certificate of organization
certified by the Delaware Secretary of State, as the case may be, a good
standing certificate dated not more than ten days prior to Closing by the
Mississippi Secretary of State or the Delaware Secretary of State and a copy of
the resolutions adopted by Buyer and Parent in connection with this Agreement,
certified in each case by its corporate secretary.
ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to consummate the transactions provided for hereby
are subject, in the discretion of Buyer, to the satisfaction, on or prior to the
Closing Date, of each of the following conditions, any of which may be waived by
Buyer:
8.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Sellers and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the date of this Agreement and
at and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Sellers
and the Company shall have performed and satisfied all agreements and covenants
required hereby to be performed by them prior to or on the Closing Date.
8.2 Consents. All Permits and waivers necessary to the consummation of
--------
the transactions contemplated hereby and for the continued operation of the
Business after the Closing by Buyer shall have been obtained including, without
limitation (a) all required third party consents and (b) all required approvals
of Buyer's lender's.
8.3 Board Approval. Each of Parent and Buyer shall have received the
--------------
consent of its Board of Directors to consummate the transactions, subject to the
terms and conditions set forth herein.
40
8.4 No Proceedings or Litigation. No Action by any governmental authority
----------------------------
or other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer materially if the transactions
contemplated hereby are consummated, including without limitation any Material
Adverse Effect on the right or ability of the Buyer to own, operate, possess or
transfer the Assets after the Closing. There shall not be any statute, rule or
regulation that makes the purchase and sale of the Business or the Assets
contemplated hereby illegal or otherwise prohibited.
8.5 Opinion of Counsel. The Company shall have delivered to Buyer an
------------------
opinion of counsel to the Company and the Sellers, dated as of the Closing Date,
in form and substance reasonably satisfactory to Buyer, to the effect that:
8.5.1 Incorporation. The Company has been duly incorporated and is
-------------
validly existing and in good standing under the laws of the State of Indiana and
is qualified to do business and in good standing in each state in which the
character of its business requires it to do so.
8.5.2 Corporate Power and Authority. The Company has the necessary
-----------------------------
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby and to own, lease and operate the Assets and its
other properties and to conduct the Business as presently conducted;
8.5.3 Corporate Action. The execution, delivery and performance of
----------------
this Agreement and the Ancillary Agreements to which the Company is a party have
been duly authorized by all necessary corporate action of the Company, and this
Agreement and the Ancillary Agreements have been duly executed and delivered by
the Company or the Sellers, as applicable;
8.5.4 Obligation of the Company or Sellers. This Agreement and each
------------------------------------
Ancillary Agreement constitutes a legally valid and binding obligation of the
Company or the Sellers, as applicable, enforceable against the Company or the
Sellers in accordance with its terms, except as limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally or by equitable principles (whether considered in an
action at law or in equity), (ii) limitations imposed by federal or applicable
state law or equitable principles upon the availability of specific performance,
injunctive relief or other equitable remedies, or (iii) other customary
limitations reasonably satisfactory to Buyer's counsel;
8.5.5 No Breach. Neither the execution and delivery of this Agreement
---------
or the Ancillary Agreements by the Company or the Sellers, as applicable, nor
the consummation of the transactions contemplated hereby or thereby will (i)
violate or conflict with any provision of the Articles of Incorporation or
Bylaws of the Company or of any Seller that is not a natural person, (ii)
breach, or cause a default under, any term or provision of any material contract
listed on a schedule
41
to such opinion to which contract the Company or the Sellers are a party or by
which the Assets are bound, or (iii) violate any judgment, decree, injunction,
writ or order applicable to the Company or the Sellers;
8.5.6 No Permits Required. No Permit of, or filing with, any
-------------------
governmental authority or, to the best knowledge of such counsel, any other
person, is required for the execution and delivery of this Agreement or the
Ancillary Agreements by the Company or the Sellers, as applicable, or the
consummation by the Company or the Sellers of the transactions contemplated
hereby or thereby, except as set forth in this Agreement or the schedules or
exhibits hereto;
8.5.7 No Actions Pending. Except as set forth in this Agreement or
------------------
the schedules hereto, no Action is pending or to the best knowledge of such
counsel, threatened (i) against the Company or the Business, (ii) against any of
the officers or directors of the Company as such, (iii) in which the Company is
a plaintiff, or (iv) which questions the validity or legality of the
transactions contemplated hereby;
8.5.8 No Violation of Law. Neither the execution and delivery of this
-------------------
Agreement or the Ancillary Agreement by the Company or the Sellers, as
applicable, nor the consummation of the transactions contemplated hereby or
thereby will violate or result in a failure to comply with any statute, law,
ordinance, regulation, rule or order of any federal, state or local government
or any other governmental department or agency, or any judgment, decree or order
of any court, applicable to the Company, the Sellers or the Business; and, to
the best knowledge of such counsel, the Company has all licenses, franchises and
other authority required to conduct the Business as it is now being conducted;
8.5.9 Title to Shares. The authorized capital stock of the Company
---------------
consists solely of 1,000 shares of common stock, no par value per share, and the
issued and outstanding common stock of the Company consists solely of the
Shares, all of which are owned of record and beneficially by the Sellers, free
and clear of all Encumbrances. To the knowledge of such counsel, there are no
outstanding warrants, options or other rights to acquire, or securities
convertible into or exercisable or exchangeable for, shares of capital stock of
the Company, nor any commitments or agreements by the Company to issue any such
rights or securities or shares of capital stock. Upon Closing, Buyer will
acquire good and valid title to all of the Shares, free and clear of all
Encumbrances.
8.5.10 Other Opinions. Such other opinions as any lender to Buyer may
--------------
reasonably request, and the lenders to Buyer shall be entitled to rely upon such
opinions of Sellers' counsel.
In rendering such opinions, such counsel may rely as to factual
matters upon certificates and assurances of public officials, Sellers, and
officers of the Company. In addition, such
42
opinions may be subject to such additional qualifications and exceptions as are
reasonably acceptable to counsel to Buyer.
8.6 Certificates. Sellers and the Company shall furnish Buyer with such
------------
certificates of Sellers, the officers of the Company and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Buyer.
8.7 Escrow Agreement. The Company, the Sellers and Buyer shall have
----------------
entered into the Escrow Agreement substantially in the form attached as Exhibit
8.7.
8.8 Employment and Non-Competition Agreements. Buyer and Xxxx Xxxxx shall
-----------------------------------------
have entered into an Employment and Non-Competition Agreement in the form
attached as Exhibit 8.8.1 hereto and Buyer and Xxxxxx X. Xxxxx shall have
entered into a Non-Competition Agreement in the form attached as Exhibit 8.8.2
hereto.
8.9 New Lease. Buyer and Xxxx X. Xxxxx and Xxxxxx X. Xxxxx shall have
---------
entered into the New Lease in the form attached as Exhibit 8.9 hereto.
8.10 Release of Encumbrances. The Company shall have filed (where
-----------------------
necessary) and delivered to Buyer all documents necessary to release the Assets
from all Encumbrances (except for Encumbrances permitted under Section 4.7),
which documents shall be in a form reasonably satisfactory to Buyer's counsel.
8.11 Material Changes. Since the Interim Balance Sheet Date, there shall
----------------
not have been any Material Adverse Change with respect to the Business.
8.12 Corporate Documents. Buyer shall have received from the Company
-------------------
resolutions adopted by its board of directors approving this Agreement and the
Ancillary Agreements to which it will be a party, and the transactions
contemplated hereby and thereby.
8.13 Due Diligence Review. Buyer and its Representatives shall have
--------------------
conducted a due diligence review of the Company's Books and Records, Financial
Statements, and other records and accounts of the Business, and in the sole
discretion of Buyer, Buyer shall be satisfied with such review. Such review
shall have no effect whatsoever on the liability of Sellers or the Company to
Buyer under this Agreement or otherwise for breach of any representations,
warranties, or covenants of Sellers or the Company or hereunder.
8.14 Completion of Environmental Remediation. The Company or its agents
---------------------------------------
shall have completed any "Required Remediation" within the meaning of Section
6.3, subject to the procedures
43
set forth in Section 6.3 with respect to the certification of such completion
and the resolution of any disputes relating thereto.
8.15 Financing. Buyer shall have obtained all lender approvals and
---------
financing to pay the cash portion of the Purchase Price.
8.16 Financial Statement Deliveries. The Company shall have delivered to
------------------------------
Buyer unaudited financial statements for the year ended February 28, 1998.
These financial statements shall be subject to the same representations and
warranties of Section 4.10 of this Agreement.
ARTICLE IX
CONDUCT OF COMPANY AND BUYER PENDING THE CLOSING
------------------------------------------------
9.1 Company and Seller Covenants. The Company and Sellers hereby covenant
----------------------------
and agree that from the date hereof to the Closing Date:
9.1.1 Conduct of Business Pending the Closing. Except as specifically
---------------------------------------
contemplated in this Agreement or as disclosed in any Schedule hereto, the
Business of the Company shall be conducted only in, and the Company shall take
no action except in, the ordinary course, on an arm's length basis, and in
accordance with all applicable laws, rules, and regulations and past custom and
practice, including, without limitation, making any loans or any cash payments,
or transferring any other assets or properties of the Company to any employee,
officer, shareholder, or director of the Company; and the Company shall maintain
its Facilities in good operating condition, ordinary wear and tear excepted; and
the Company will not, directly or indirectly, do or permit to occur any of the
following:
(i) Cancel or terminate or permit to be canceled or terminated
its current insurance (or reinsurance) policies or permit any of the coverage
thereunder to lapse, unless simultaneous with such termination, cancellation, or
lapse, replacement policies providing coverage equal to or greater than the
coverage under the canceled, terminated, or lapsed policies are in full force
and effect;
(ii) Default under any material contract, agreement, commitment,
or undertaking;
(iii) Knowingly violate or fail to comply with any laws
applicable to it or the Business;
(iv) Commit any act or permit the occurrence of any event or the
existence of any condition of the type described in Section 4.6 hereof;
44
(v) Fail to maintain and repair its assets and properties in
accordance with good standards of maintenance and as required in any leases or
other agreements pertaining thereto;
(vi) Except in the ordinary course of business consistent with
historical practices enter into or modify any employment, severance, or similar
agreements or arrangements with, or grant any bonuses, salary increases, or
severance or termination pay to, any officers, directors, employees, or
consultants, or adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment, or other benefit
plan, trust, fund, or group arrangement for the benefit or welfare of any
officers, directors, or employees;
(vii) Directly or indirectly enter into or modify any
contract, agreement, or understanding or enter into any transaction not in the
ordinary course of business;
(viii) Cancel, without full payment, any note, loan, or other
obligation owing to the Company relating to the Business except in the ordinary
course of business;
(ix) Acquire (by merger, exchange, consolidation, acquisition of
stock or assets, or otherwise) any corporation, partnership, joint venture, or
other business organization or division or material assets thereof;
(x) Issue any additional shares of its capital stock or (except
with Buyer's reasonable consent) permit the transfer of any outstanding shares
of Capital Stock or declare any dividends or distributions other than in cash;
(xi) Issue or create any warrants, obligations, subscriptions,
options, convertible securities, or other commitments under which any additional
or effect any transfer outstanding shares of its capital stock of any class
might be directly or indirectly authorized, issued, or transferred from
treasury, or incur any indebtedness for borrowed money or issue any debt
securities except the borrowing of working capital in the ordinary course of
business and consistent with past practice;
(xii) Pay any obligation or liability, fixed or contingent,
except in the ordinary course of business;
(xiii) Waive or compromise any right or claim (other than as
required to resolve any pending or threatened litigation disclosed in the
Schedules attached hereto);
(xiv) Agree to do any of the actions described in the
preceding clauses (i) through (xiii).
45
9.1.2 Business Relationships. The Company will exercise its best
----------------------
efforts to preserve intact its business organization and goodwill, keep
available the services of its officers and employees as a group, and maintain
satisfactory relationships with suppliers, distributors, customers, and others
having business relationships with it.
9.1.3 Notification of Certain Matters. The Company shall (i) confer
-------------------------------
on a regular basis with representatives of Buyer and report operational matters
and the general status of ongoing operations, (ii) notify Buyer of Any Material
Adverse Change in the normal course of its business or in the operation of its
properties and of any governmental or third party complaints, investigations, or
hearings (or communications indicating that the same may be contemplated); and
(iii) promptly notify Buyer if the Company shall discover that any
representation or warranty made by it in this Agreement was when made, or has
subsequently become, untrue.
9.1.4 Closing. The Company shall use its best efforts to cause the
-------
conditions specified in Article VIII hereof to be satisfied at or prior to the
Closing Date hereof.
9.1.5 Seller's. Sellers shall exercise best efforts to ensure
--------
compliance with all covenants applicable to them and shall use responsible best
efforts to ensure compliance by the Company nor any of all of its covenants and
agreements hereunder.
9.2 No Negotiations. Neither the Company nor any Seller shall, directly
---------------
or indirectly, through any officer, director, agent, or otherwise, solicit,
initiate, or encourage submission of any proposal or offer from any person or
entity (including any of its or their officers or employees) relating to any
liquidation, dissolution, recapitalization, merger, consolidation, or
acquisition or purchase of all or a material portion of the assets of, or any
equity interest in, Company or other similar transaction or business combination
involving the Company, or participate in any negotiations regarding, or furnish
to any other person any information with respect to, or otherwise cooperate in
any way with, or assist, participate in, facilitate, or encourage, any effort or
attempt by any other person or entity to do or seek any of the foregoing. The
Company or any Seller shall promptly notify Buyer if any such proposal or offer,
or any inquiry from or contact with any person with respect thereto, is made and
shall promptly provide Buyer with such information regarding such proposal,
offer, inquiry, or contact as Buyer may request.
9.3 Public Announcements. The parties hereto shall not issue any press
--------------------
release or public announcement, including announcements by any party for general
reception by or dissemination to employees, agents, or customers, with respect
to this Agreement and the other transactions contemplated by this Agreement
without the prior written consent of the other parties hereto (which consent
shall not be withheld unreasonably); provided, however, that Buyer may make any
------------------
disclosure or announcement of information, it is obligated to make pursuant to
applicable law or regulation, including any applicable law or
46
regulation of the New York Stock Exchange or any other national securities
exchange, as applicable.
9.4 Confidentiality. Each party hereto, and its officers, directors,
---------------
agents, and affiliates, will hold in strict confidence, and will not divulge,
communicate, use to the detriment of any other party hereto or for the benefit
of any other person or persons, or misuse in any way, any financial information
or other data obtained in connection with this Agreement, including, without
limitation, any confidential information or trade secrets of such other party,
personnel information, secret processes, know how, customer lists, formulas, or
other technical data; and if the transactions contemplated by this Agreement are
not consummated, each party hereto, and its officers, directors, agents, and
affiliates, will return to each other party all such data and information,
including, without limitation, work sheets, test reports, manuals, lists,
memoranda, and other documents prepared by or made available in connection with
this transaction (and all copies of same). The parties hereto may disclose such
information to their respective attorneys, accountants and other agents so long
as they agree to keep such information confidential.
ARTICLE X
RISK OF LOSS; CONSENTS TO ASSIGNMENT
------------------------------------
10.1 Intentionally Omitted.
---------------------
ARTICLE XI
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
----------------------------------------------
11.1 Books and Records; Tax Examinations.
-----------------------------------
11.1.1 Books and Records. Each party agrees that it will cooperate
-----------------
with and make available to the other party, during normal business hours, all
Books and Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing Date which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
Books and Records, information or employees for any reasonable business purpose.
11.1.2 Cooperation and Records Retention. Sellers and Buyer shall
---------------------------------
(i) each provide the other with such assistance as may reasonably be requested
by any of them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain and provide the other with any
records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other with
any final determination of any
47
such audit or examination, proceeding, or determination that affects any amount
required to be shown on any tax return of the other for any period. Without
limiting the generality of the foregoing, Sellers and the Company shall each
retain, until the applicable statutes of limitations (including any extensions)
have expired, copies of all tax returns, supporting work schedules, and other
records or information that may be relevant to such returns for all tax periods
or portions thereof ending on or before the Closing Date and shall not destroy
or otherwise dispose of any such records without first providing the other
parties with a reasonable opportunity to review and copy the same.
11.2 Survival of Representations, Etc. All statements contained in any
--------------------------------
certificate, schedule, exhibit, instrument or conveyance delivered by or on
behalf of the parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the parties hereunder. The representations, warranties, covenants
and agreements of Sellers, the Company, Parent and Buyer contained herein shall
survive the consummation of the transactions contemplated hereby and the Closing
Date, without regard to any investigation made by any of the parties hereto;
provided, however, the representations and warranties of the Company shall
-------- -------
terminate as of the Closing. All such representations and warranties and all
claims and causes of action with respect thereto (other than the provisions of
Sections 4.5, 4.18, 4.23 and this Section 11.2, and all claims and causes of
action with respect thereto and other than any Claims and causes of action based
on fraud or intentional misrepresentation of the Sellers') shall terminate upon
expiration of two years after the Closing Date. The representations and
warranties in Sections 4.18 and 4.23 shall survive until the expiration of the
applicable statute of limitations (with extensions) with respect to the matters
addressed in such sections and the representations and warranties in Section 4.5
and those based on fraud or intentional misrepresentation shall survive
indefinitely. The termination of the representations and warranties provided
herein shall not affect the rights of a party in respect of any Claim made by
such party in a writing received by the other party prior to the expiration of
the applicable survival period provided herein.
11.3 Indemnifications.
----------------
11.3.1 By Sellers. Sellers shall indemnify, defend, save and hold
----------
harmless Buyer, its Affiliates and subsidiaries (including the Company from and
after the Closing Date), and its and their respective Representatives, from and
against any and all claims, damages, costs, losses (including without limitation
diminution in value), Taxes, liabilities, judgments, penalties, fines,
obligations, lawsuits, deficiencies, demands and expenses (whether or not
arising out of third-party claims), including without limitation interest,
penalties, costs of mitigation, losses in connection with any Environmental Law
(including without limitation any clean-up or remedial action), lost profits and
other losses resulting from any shutdown or curtailment of operations, damages
to the environment, reasonable attorneys' fees, experts' fees and all amounts
paid in investigation, defense or settlement of any of the foregoing (herein,
"Damages"), incurred in connection with, arising out
48
of, resulting from or incident to (i) any breach of any representation or
warranty, or the inaccuracy of any representation or warranty, made by the
Company or Sellers in or pursuant to this Agreement; (ii) any breach of any
covenant or agreement made by the Company or Sellers in or pursuant to this
Agreement; (iii) any liability arising under any Environmental Law on account of
the conduct of the Company or any Seller or prior owners or users of the
Facilities or other persons, or on account of the operation of the Business or
the Facilities, or related to any Environmental Condition existing, in each case
on or at any time prior to the Closing Date; or (iv) any Post-Closing
Environmental Liability; (v) any liability for Taxes in respect of taxable
periods ending on or before the Closing Date in excess of the Tax Reserve but
not including any tax liability arising solely out of Company's reserve of
$75,000 for doubtful accounts on the Effective Date Balance Sheet; or (vi) (A)
any claim of an unfair labor practice, or any claim under any state unemployment
compensation or worker's compensation law or regulation or under any federal or
state employment discrimination law or regulation, which shall have been
asserted on or prior to the Closing Date or is based on acts or omissions which
occurred on or prior to the Closing Date, (B) any liability arising from any
injury to or death of any person or damage to or destruction of any property,
whether based on negligence, breach of warranty, strict liability, enterprise
liability or any other legal or equitable theory arising from defects in
products sold or services performed by or on behalf of Seller or any other
person or entity on or prior to the Closing Date, or arising from any other
cause, including without limitation any liabilities arising (on a date of
occurrence basis or otherwise) on or prior to the Closing Date relating to the
use or misuse of Equipment or to traffic accidents, or (C) any liability or
obligation of Seller arising out of or related to any Action against Seller or
any Action which adversely affects the Assets and which shall have been asserted
on or prior to the Closing Date or to the extent the basis of which shall have
arisen on or prior to the Closing Date; or (vii) any claim or contingent
liability disclosed in any schedule to this Agreement arising prior to the
Effective Date and not adequately reflected for, accounted for or reserved
against on the Effective Date Balance Sheet. Without limiting the generality of
the foregoing, the indemnification provided herein, insofar as it relates to any
Environmental Law or Environmental Condition, shall specifically cover costs
incurred in connection with any investigation of site conditions (excepting the
cost of the Environmental Assessments) or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision or by the provisions of Section 6.3 hereof. For purposes
of this Section 11.3.1, "Post-Closing Environmental Liability" shall mean any
liability imposed on Buyer or the Company arising out of or related to events
occurring on or after the Closing Date and prior to and related to the
completion of all Required Remediation in accordance with Section 6.3 hereof,
and resulting from any Environmental Condition described in the Environmental
Assessments, including without limitation those Environmental Conditions
described therein but not identified as being in violation of any Environmental
Law and those related to the absence of any Permits, but excluding any liability
to the extent such liability results from the negligent acts or willful
misconduct of Buyer or its Representatives.
49
11.3.2 By Parent and Buyer. Parent and Buyer shall indemnify, defend
-------------------
and save and hold harmless Sellers, their Affiliates and their Representatives
from and against any and all Damages incurred in connection with, arising out
of, resulting from or incident to (i) any breach of any representation or
warranty, or the inaccuracy of any representation or warranty, made by Parent or
Buyer in or pursuant to this Agreement; or (ii) any breach of any covenant or
agreement made by Parent or Buyer in or pursuant to this Agreement.
11.3.3 Cooperation. In connection with third party lawsuits or
-----------
actions, the indemnified party shall cooperate in all reasonable respects with
the indemnifying party and such attorneys in the investigation, trial and
defense of such lawsuit or action and any appeal arising therefrom; provided,
however, that the indemnified party may, at its own cost (except as provided in
Section 11.3.4 hereof), participate in the investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom. The parties shall
cooperate with each other in any notifications to insurers.
11.3.4 Defense of Claims. If a claim for Damages (a "Claim") is to be
-----------------
made by a party entitled to indemnification hereunder against the indemnifying
party, the party claiming such indemnification shall, subject to Section 12.2,
give written notice (a "Claim Notice") to the indemnifying party and the Escrow
Agent pursuant to the Escrow Agreement as soon as practicable after the party
entitled to indemnification becomes aware of any fact, condition or event which
may give rise to Damages for which indemnification may be sought under this
Section 11.3. The Claim Notice shall include the amounts the indemnified party
believes in good faith are subject to indemnification (of which it shall notify
Escrow Agent) and a brief basis of the claim. Buyer or Sellers may revise its
estimate of any claim by notice to the indemnified party and Escrow Agent. If
any lawsuit or enforcement action is filed against any party entitled to the
benefit of indemnity hereunder, written notice thereof shall be given to the
indemnifying party as promptly as practicable (and in any event within fifteen
(15) calendar days after the service of the citation or summons). The failure
of any indemnified party to give timely notice hereunder shall not affect rights
to indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice (which shall be reasonably acceptable to the indemnified party)
to handle and defend the same, at the indemnifying party's cost, risk and
expense unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has been
advised in writing by counsel that there may be one or more legal defenses
available to such indemnified party that are different from or additional to
those available to the indemnifying party, in which case the indemnified party
shall be able to retain its own counsel at the reasonable expense of the
indemnifying party), and (iii) to
50
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the indemnified party, such consent not to be
unreasonably withheld; provided, however, if the remediation or resolution of
any such Claim will occur on or at any Facility or is reasonably expected to
have a Material Adverse Effect on the indemnified party's business operations,
then, notwithstanding the foregoing, the indemnified party shall be entitled to
control such remediation or resolution, including without limitation to take
control of the defense and investigation of such lawsuit or action, to employ
and engage attorneys of its own choice to handle and defend the same, at the
indemnifying party's cost, risk and expense, and to compromise or settle such
Claim. If the indemnifying party fails to assume the defense of such Claim
within fifteen (15) calendar days after receipt of the Claim Notice, the
indemnified party against which such Claim has been asserted will (upon
delivering notice to such effect to the indemnifying party) have the right to
undertake, at the indemnifying party's cost and expense, the defense, compromise
or settlement of such Claim on behalf of and for the account and risk of the
indemnifying party. In the event the indemnified party assumes the defense of
the Claim, the indemnified party will keep the indemnifying party reasonably
informed of the progress of any such defense, compromise or settlement. The
indemnifying party shall be liable for any settlement of any action effected
pursuant to and in accordance with this Section 11.3 and for any final judgment
(subject to any right of appeal), and the indemnifying party agrees to indemnify
and hold harmless an indemnified party from and against any Damages by reason of
such settlement or judgment.
11.3.5 Buyer's Right of Offset. Anything in this Agreement to the
-----------------------
contrary notwithstanding, Buyer may withhold and set off any amount as to which
Sellers are obligated to indemnify Buyer pursuant to this Section 11.3 against
the portion of the Holdback Amount allocable to the resolution of Seller's
indemnification obligations under this Section 11.3.
11.3.6 Limits on Indemnity.
-------------------
(i) Neither Buyer nor Sellers shall be liable to the other
under this Section 11.3 for any Damages until the amount otherwise due the party
being indemnified exceeds $100,000 in the aggregate, in which case such
indemnifying party will be liable to the indemnified party for all such amounts,
in excess of the first $100,000. Notwithstanding the preceding sentence, this
limitation shall not apply with respect to Damages arising out of a breach of a
representation or warranty contained in Sections 4.5, 4.18 or 4.23, any Claims
or causes of action based on fraud or intentional misrepresentation of any
Seller, or any claim or contingent liability disclosed in any schedule to this
Agreement. Buyer shall give Sellers prompt notice of any Damages that might
apply toward the first $100,000.
(ii) Notwithstanding any other provision of this Agreement to
the contrary, except as set forth below, the parties agree that the
indemnification obligation of the Sellers shall be limited as follows: except
with respect to Damages arising out of a breach of a
51
representation or warranty contained in Sections 4.5, 4.18 or 4.23, any Claims
or causes of action based on fraud or intentional misrepresentation of any
Seller, or any claim or contingent liability disclosed in any schedule to this
Agreement or reserved against or disclosed in the Effective Date Balance Sheet,
Sellers' indemnification obligation in the aggregate shall be limited to
$2,400,000; provided, however, with respect to Damages arising out of a breach
of a representation or warranty contained in Sections 4.5, 4.18 or 4.23,
Sellers' indemnification obligation shall be limited to the Purchase Price; and
further provided there will be no limitation on Sellers' indemnification
obligation with respect to Damages arising out of any Claims or causes of action
based on fraud or intentional misrepresentation of any Seller, or any claim or
contingent liability disclosed in any schedule to this Agreement. The
indemnification limitation set forth in this Section 11.3.6 shall not apply to
the Purchase Price adjustments of Section 2.5 of this Agreement which are
separate matters.
11.3.7 Liability and Remedies, etc. Except as set forth below, no
----------------------------
individual Representative of any party shall be personally liable for any
Damages under the provisions contained in this Section 11.3. Nothing herein
shall relieve either party of any liability to make any payment expressly
required to be made by such party pursuant to this Agreement. The term
"Damages" as used in this Section 11.3 is not limited to matters asserted by
third parties against Sellers or Buyer, but includes Damages incurred or
sustained by an indemnified party in the absence of third party claims.
Payments by an indemnified party of amounts for which such party is indemnified
hereunder shall not be a condition precedent to recovery. Buyer and Sellers
agree and acknowledge that collection under the Escrow Agreement shall not be
Buyer's exclusive method of receiving indemnification from Sellers pursuant to
Section 11.3; rather, Buyer and its Affiliates and Representatives will have all
other remedies provided by law or in this Agreement.
11.3.8 Further Action. After the Closing, Sellers shall take all
--------------
actions reasonably necessary to effect the conveyance of the Shares to Buyer
free and clear of all Encumbrances and otherwise required by Buyer's lenders.
11.3.9 Tax Audits. After the Closing in the event any tax audits
----------
arise for tax years of Company prior to the Closing, Sellers shall be
responsible for the costs and expenses of all professional fees in connection
with such audits.
11.4 Employee Benefits. In the event Buyer and Parent make available to
-----------------
Company employees the Employee Plans covering Buyer's employees, Company
employees shall be credited with their period of service with the Company for
all eligibility, vesting and waiting period purposes under such Plans. Sellers
shall take all appropriate actions prior to Closing to terminate all Benefit
Arrangements, Pension Plans, and Welfare Plans, as of a date on or before the
Closing.
ARTICLE XII
52
MISCELLANEOUS
-------------
12.1 Termination. This Agreement may be terminated at any time prior to
-----------
Closing:
12.1.1 By mutual written consent of Buyer and the Seller
Representative;
12.1.2 By Buyer or Sellers if the Closing shall not have occurred on
or before April 15, 1998; provided, however, that this provision shall not be
available to Buyer if Sellers have the right to terminate this Agreement under
Section 12.1.4, and this provision shall not be available to Sellers if Buyer
has the right to terminate this Agreement under Section 12.1.3;
12.1.3 By Buyer if there is a material breach of any representation
or warranty set forth in Article IV hereof or any covenant or agreement to be
complied with or performed by Sellers or the Company pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VIII to be
satisfied (and such condition is not waived in writing by Buyer) on or prior to
the Closing Date, or the occurrence of any event which results or would result
in the failure of a condition set forth in Article VIII to be satisfied on or
prior to the Closing Date, provided that Buyer may not terminate this Agreement
prior to the Closing if Sellers or the Company have not had an adequate
opportunity to cure such failure; or
12.1.4 By Sellers if there is a material breach of any representation
or warranty set forth in Article V hereof or of any covenant or agreement to be
complied with or performed by Buyer pursuant to the terms of this Agreement or
the failure of a condition set forth in Article VII to be satisfied (and such
condition is not waived in writing by Sellers) on or prior to the Closing Date,
or the occurrence of any event which results or would result in the failure of a
condition set forth in Article VII to be satisfied on or prior to the Closing
Date; provided that Sellers may not terminate this Agreement prior to the
Closing Date if Buyer has not had an adequate opportunity to cure such failure.
12.2 In the Event of Termination. In the event of termination of this
---------------------------
Agreement:
12.2.1 Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same; and
12.2.2 No party hereto shall have any liability or further obligation
to any other party to this Agreement, except as stated in Sections 12.8, 12.11,
12.2.1 or this Section 12.2.2, and except for any willful breach of this
Agreement occurring prior to the proper termination of this Agreement. The
foregoing provisions shall not limit or restrict the availability of specific
53
performance or other injunctive relief to the extent that specific performance
or such other relief would otherwise be available to a party hereunder.
12.3 Assignment. Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Parent or Buyer may, without such
consent, assign all such rights to any lender as collateral security, and Buyer
may assign all such rights and obligations to a wholly-owned subsidiary or
subsidiaries of Parent or Buyer (or a partnership controlled by Parent or Buyer)
which shall assume all obligations and liabilities of Buyer under this
Agreement. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, and no other person shall have any right, benefit or
obligation under this Agreement as a third party beneficiary or otherwise.
12.4 Notices. All notices, requests, demands and other communications
-------
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to the Company, addressed to:
T&M Rental, Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxxx Xxxxxxx, Xxxxxxx 00000
with a copy to:
Lane X. Xxxxx, Esq.
Vedder, Price, Xxxxxxx & Kammholz
000 X. XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
If to Sellers, addressed to:
Xxxx X. Xxxxx
000 Xxxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
and
54
Xxxxxx X. Xxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxx 00000
with a copy to:
Lane X. Xxxxx, Esq.
Vedder, Price, Xxxxxxx & Kammholz
000 X. XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
If to Parent or Buyer, addressed to:
Rental Service Corporation
00000 X. Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Xxxxx & Xxxxxx, L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
12.5 Choice of Law. This Agreement shall be construed, interpreted and
-------------
the rights of the parties determined in accordance with the laws of the State of
Indiana (without reference to the choice of law provisions thereof), except with
respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
55
12.6 Entire Agreement; Amendments and Waivers. This Agreement, together
----------------------------------------
with all exhibits and schedules hereto and the Ancillary Agreements, constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
12.7 Multiple Counterparts. This Agreement may be executed in one or more
---------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.8 Expenses. Except as otherwise specified in this Agreement, each
--------
party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect; provided, however, that, if
-------- -------
the transactions contemplated hereby are consummated, the Company may pay such
expenses of the Sellers up to an amount equal to the lesser of (1) $15,000, or
(2) one-half of such expenses of the Sellers. Such expenses must be accrued in
the Company's February 28, 1998 balance sheet or paid by February 28, 1998.
12.9 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
12.10 Titles. The titles, captions or headings of the Articles, Sections
------
and subsections herein are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
12.11 Publicity; Confidentiality. None of Parent, Buyer, Sellers, the
--------------------------
Company or their respective Affiliates or Representatives shall issue any press
release or make any public statement regarding, or disclose to any third party
(except as required by law or legal process, and except to each party's lenders
if such lenders so require) any of the terms of, the transactions contemplated
hereby, without prior written approval of the other party, provided that Parent,
Buyers, Sellers and the Company may, if they mutually agree, issue or make an
appropriate press release or public
56
announcement after the Closing Date. In the event that this Agreement is
terminated prior to Closing, Buyer agrees to return to Sellers and the Company
all correspondence and documents furnished by Sellers or the Company's
Representatives, and agrees not to disclose or use for its own purposes any
confidential or proprietary information of Sellers that has been furnished to it
by Sellers or the Company's Representatives.
12.12 Cumulative Remedies. All rights and remedies of either party hereto
-------------------
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
12.13 Arbitration. Any controversy arising after the Closing out of or
-----------
relating to this Agreement (including, without limitation, pursuant to Section
2.5 or 11.3, but excluding for purposes of this Section 12.13, the employment
and non-competition agreements attached as Exhibits hereto), or relating to the
breach hereof, shall be settled by arbitration conducted in Chicago, Illinois in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect (except as otherwise expressly provided in this
Agreement). The award rendered by the arbitrator(s) shall be final and judgment
upon the award rendered by the arbitrator(s) may be entered upon it in any court
having jurisdiction thereof. The arbitrator(s) shall possess the powers to
issue mandatory orders and restraining orders in connection with such
arbitration. The expenses of the arbitration shall be borne by the losing party
unless otherwise allocated by the arbitrator(s). The agreement to arbitrate
shall be specifically enforceable under the prevailing arbitration law. During
the continuance of any arbitration proceedings, the parties shall continue to
perform their respective obligations under this Agreement.
12.14 Seller Representative.
---------------------
12.14.1 The Sellers irrevocably make, constitute and appoint Xxxx
Xxxxx as their agent (the "Seller Representative") and authorize and empower him
to fulfill the role of Seller Representative hereunder and under the Escrow
Agreement. In the event of the resignation, death or incapacity of a Seller
Representative, his successor shall be appointed within 21 days of his death or
incapacity by mutual agreement of the remaining Sellers, and such successor
either shall be a Seller or shall otherwise be acceptable to Buyer. If the
Sellers fail to appoint a successor within such 21-day period, then Buyer shall
have the right to appoint the successor from among the Sellers. The choice of a
successor Seller Representative appointed in any manner permitted above shall be
final and binding upon all of the Sellers. The decisions and actions of any
successor Seller Representative shall be, for all purposes, those of a Seller
Representative as if originally named herein.
12.14.2 Each Seller has made, constituted and appointed and by the
execution of this Agreement hereby irrevocably makes, constitutes and appoints
the Seller Representative as
57
such person's true and lawful attorney in fact and agent, for such person and in
such person's name, (i) to execute and perform the Escrow Agreement on behalf of
each Seller, (ii) to receive all notices and communications directed to such
Seller under this Agreement or the Escrow Agreement and to take any action (or
to determine to take no action) with respect thereto, as he may deem appropriate
as effectively as such Seller could act for himself or herself, including
without limitation, the settlement or compromise of any dispute or controversy,
and (iii) to execute and deliver all instruments and documents of every kind
incident to the foregoing to all intents and purposes and with the same effect
as such Seller could do personally, and each such Seller hereby ratifies and
confirms as his or her own act, all that the Seller Representative shall do or
cause to be done pursuant to the provisions hereof.
12.14.3 The death or incapacity of any Seller shall not terminate the
authority and agency of the Seller Representative.
58
IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
T & M Rental, Inc.
By: /s/ Xxxx X. Xxxxx
_____________________________________
Name: Xxxx X. Xxxxx
Its: President
(the "Company")
XXXXXX XXXXX EQUIPMENT, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
_____________________________________
Name: Xxxxxxx X. Xxxxxxxx
Its: Assistant Secretary
("Buyer")
/s/ XXXX X. XXXXX
----------------------------------------
XXXX X. XXXXX
/s/ XXXXXX X. XXXXX
----------------------------------------
XXXXXX X. XXXXX
RENTAL SERVICE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
_____________________________________
Name: Xxxxxxx X. Xxxxxxxx
Its: Assistant Secretary
("Parent")
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