EXHIBIT 10(o)
STOCK PURCHASE AGREEMENT
Dated as of October 20, 1997, by and among
United Rentals, Inc.
A & A Tool Rentals & Sales, Inc.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
A & A Tool Rentals & Sales, Inc.
Employee Stock Ownership Plan
TABLE OF CONTENTS
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1. PURCHASE OF CORPORATION'S STOCK........................... 1
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1.1 SHARES TO BE PURCHASED.................................... 1
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1.2 PURCHASE PRICE............................................ 1
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1.3 ADJUSTMENTS TO PURCHASE PRICE............................. 2
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1.4 HOLD BACK................................................. 3
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1.5 EXCLUDED ASSETS........................................... 5
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2. CLOSING TIME AND PLACE........................................... 5
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3. REPRESENTATIONS AND WARRANTIES OF THE
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CORPORATION AND THE SHAREHOLDERS................................. 5
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3.1 ORGANIZATION, STANDING AND QUALIFICATION.................... 5
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3.2 CAPITALIZATION.............................................. 5
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3.3 ALL STOCK BEING ACQUIRED.................................... 5
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3.4 AUTHORITY FOR AGREEMENT..................................... 6
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3.5 NO BREACH OR DEFAULT........................................ 6
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3.6 SUBSIDIARIES................................................ 6
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3.7 FINANCIAL STATEMENTS........................................ 6
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3.8 LIABILITIES................................................. 7
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3.9 RENTAL ASSET LISTING........................................ 8
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3.10 PERMITS AND LICENSES........................................ 8
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3.11 CERTAIN RECEIVABLES......................................... 9
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3.12 FIXED ASSETS AND REAL PROPERTY.............................. 9
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3.13 ACQUISITION/DISPOSAL OF ASSETS.............................. 10
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3.14 CONTRACTS AND AGREEMENTS; ADVERSE RESTRICTIONS.............. 11
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3.15 INSURANCE................................................... 11
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3.16 PERSONNEL................................................... 11
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3.17 BENEFIT PLANS AND UNION CONTRACTS........................... 12
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3.18 TAXES....................................................... 13
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3.19 COPIES COMPLETE............................................. 14
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3.20 PRODUCT QUALITY, WARRANTY CLAIMS, PRODUCT LIABILITY......... 14
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3.21 NO CHANGE WITH RESPECT TO CORPORATION....................... 14
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3.22 CLOSING DATE DEBT; CLOSING DATE CURRENT ASSETS AND CLOSING
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DATE CURRENT LIABILITIES.................................... 16
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3.23 BANK ACCOUNTS............................................... 16
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3.24 COMPLIANCE WITH LAWS........................................ 16
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3.25 POWERS OF ATTORNEY.......................................... 17
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3.26 UNDERGROUND STORAGE TANKS................................... 17
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3.27 PATENTS, TRADEMARKS, TRADE NAMES, ETC....................... 18
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3.28 ASSETS, ETC., NECESSARY TO BUSINESS......................... 18
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3.29 CONDEMNATION................................................ 18
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3.30 MANUFACTURERS, SUPPLIERS AND CUSTOMERS...................... 18
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3.31 ABSENCE OF CERTAIN BUSINESS PRACTICES...................... 19
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3.32 RELATED PARTY TRANSACTIONS................................. 19
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3.33 DISCLOSURE SCHEDULES....................................... 19
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3.34 NO MISLEADING STATEMENTS................................... 19
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3.35 ACCURATE AND COMPLETE RECORDS.............................. 19
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3.36 KNOWLEDGE.................................................. 19
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3.37 BROKERS; FINDERS........................................... 20
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3.38 NO ESOP LOANS; NO ESOP ASSETS HELD IN SUSPENSE ACCOUNT...... 20
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4. REPRESENTATIONS AND WARRANTIES OF UNITED......................... 20
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4.1 EXISTENCE AND GOOD STANDING................................. 20
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4.2 NO CONTRACTUAL RESTRICTIONS................................. 20
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4.3 AUTHORIZATION OF AGREEMENT.................................. 20
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4.4 NO MISLEADING STATEMENTS.................................... 21
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4.5 BROKERS; FINDERS............................................ 21
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4.6 DISCLOSURE SCHEDULES........................................ 21
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5. CLOSING DELIVERIES............................................... 21
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5.1 UNITED DELIVERIES........................................... 21
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5.2 SHAREHOLDERS DELIVERIES..................................... 21
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6. ADDITIONAL COVENANTS OF UNITED, THE CORPORATION
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AND THE SHAREHOLDERS............................................. 22
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6.1 FURTHER ASSURANCES AND ADDITIONAL CONVEYANCES............... 22
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6.2 RELEASE OF GUARANTIES....................................... 22
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6.3 CONFIDENTIALITY............................................. 23
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6.4 BROKERS AND FINDERS FEES.................................... 23
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6.5 TAXES....................................................... 23
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6.6 SHORT YEAR TAX RETURNS...................................... 23
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6.7 CONTINUED EMPLOYMENT BY ▇▇▇ AND ▇▇▇......................... 24
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6.8 SHAREHOLDERS' REPRESENTATIVE................................ 24
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6.9 GENERAL RELEASE BY SHAREHOLDERS............................. 25
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7. INDEMNIFICATION.................................................. 25
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7.1 INDEMNITY BY THE SHAREHOLDERS............................... 25
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7.2 LIMITATIONS ON SHAREHOLDERS' INDEMNITIES.................... 27
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7.3 NOTICE OF INDEMNITY CLAIM................................... 27
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7.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS...... 28
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7.5 NO EXHAUSTION OF REMEDIES OR SUBROGATION; RIGHT OF SET OFF.. 29
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8. OTHER POST-CLOSING COVENANTS OF THE SHAREHOLDERS AND UNITED...... 29
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8.1 RESTRICTIVE COVENANTS....................................... 29
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8.2 RIGHTS AND REMEDIES UPON BREACH............................. 31
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9. GENERAL.......................................................... 32
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9.1 ASSIGNMENT.................................................. 32
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9.2 COUNTERPARTS................................................ 32
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9.3 NOTICES..................................................... 32
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9.4 ATTORNEYS' FEES............................................. 33
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9.5 APPLICABLE LAW.............................................. 33
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9.6 PAYMENT OF FEES AND EXPENSES................................ 33
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9.7 INCORPORATION BY REFERENCE.................................. 33
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9.8 CAPTIONS.................................................... 33
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9.9 NUMBER AND GENDER OF WORDS; CORPORATION..................... 33
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9.10 ENTIRE AGREEMENT............................................ 33
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9.11 WAIVER...................................................... 34
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9.12 CONSTRUCTION................................................ 34
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10. ARBITRATION AND DISPUTE RESOLUTION............................... 34
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT, dated as of October 20, 1997, is entered into by
and among United Rentals, Inc., a Delaware corporation ("United"), A & A Tool
Rentals and Sales, Inc., a California corporation (the "Corporation"), ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ ("▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇"), and A & A Tool Rentals and Sales, Inc.
Employee Stock Ownership Plan (the "ESOP"), (collectively, the "Shareholders").
WHEREAS, the Corporation is engaged in the equipment, rental, sales and
service business in the Central Valley region of Northern California;
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of the Corporation (the "Corporation's Stock") in the amount set forth on
Schedule 3.2;
WHEREAS, United wishes to acquire from the Shareholders all of the issued
and outstanding capital stock of the Corporation owned by the Shareholders;
WHEREAS, concurrent with the execution of this Agreement, the Corporation,
as lessee, and ▇▇▇ and ▇▇▇, collectively as lessor, will enter into a Lease
Termination Agreement (the "Lease Termination Agreement") to terminate that
certain Lease dated June 1, 1973, amended on August 1, 1974, June 1, 1978,
February 1, 1980, January 1, 1981, May 31, 1983 and May 31, 1993.
WHEREAS, concurrent with the execution of this Agreement, the Corporation
will enter into a Lease (the "Lease") with ▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ (husband and
wife) and ▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (husband and wife), as tenants-in-common
(collectively, "Lessor"), of certain real estate located in Stockton,
California, used by the Corporation;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto, each intending to be bound hereby, agree as
follows:
1. PURCHASE OF CORPORATION'S STOCK
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1.1 SHARES TO BE PURCHASED. At the Closing (as hereinafter defined), the
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Shareholders sold and delivered to United all of the issued and outstanding
Corporation's Stock, being the number of shares of the Corporation set forth on
Schedule 3.2 opposite each Shareholder's name. At the Closing, United purchased
the Corporation's Stock and in exchange therefor delivered to the Shareholders
at the Closing or shall deliver thereafter as provided by this Agreement the
purchase price described in Section 1.2 (the "Purchase Price").
1.2 PURCHASE PRICE. The Purchase Price is ten million seven hundred fifty
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thousand dollars ($10,750,000), subject to adjustment as provided in Section The
Purchase Price, as so adjusted, less the Hold Back (as defined in Section 1.4)
was paid in cash at the Closing by wire transfer to the accounts of the
Shareholders as set forth on Schedule 3.2.
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1.3 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price was or shall be
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adjusted as follows:
(a) The Closing Date Debt was subtracted from the Purchase Price.
The Closing Date Debt is set forth on Schedule 1.3(a) and includes: (i)
the amount of the aggregate debt (excluding trade payables) of the
Corporation outstanding on the Closing Date to be repaid by United at or
immediately after the Closing Date and all prepayment penalties incurred or
to be incurred by United in connection with the repayment of any such debt;
(ii) the amount of the aggregate debt (excluding trade payables) of the
Corporation outstanding on the Closing Date which will remain outstanding
obligations of the Corporation after the Closing Date, including in each
case all interest accrued through and including the Closing Date; and (iii)
the aggregate amount of the present value of all capitalized lease
obligations (determined in accordance with generally accepted accounting
principals) of the Corporation. Schedule 1.3(a) includes wire transfer
instructions for creditors whose Closing Date Debt will be repaid by
United, and attached to Schedule 1.3(a) are pay-off letters or instructions
from such creditors.
(b) The amount by which the Closing Date Working Capital was greater
or less than zero was added to or subtracted from the Purchase Price, as
the case may be. The Closing Date Working Capital was determined by
subtracting the Closing Date Current Liabilities from the Closing Date
Current Assets. The Closing Date Current Assets consist of the amount of
the aggregate current assets of the Corporation as of the Closing Date,
including cash, prepaid expenses and other inventory, plus the accounts
receivable of the Corporation earned prior to the Closing Date and
collectible (valued as set forth below) on or after the Closing Date, plus
any earned but unbilled rental revenue existing on the Closing Date minus
the Inventory Value of the fuel and merchandise set forth on Schedule
1.3(c) and plus promotional and buying group rebates. The Closing Date
Current Liabilities consist of the amount of the aggregate current
liabilities (including any reserve for unpaid taxes and excluding the
current portion of long-term debt to the extent such current portion is
included in Closing Date Debt) and trade payables of the Corporation as of
the Closing Date. The Closing Date Working Capital, the Closing Date
Current Assets and the Closing Date Current Liabilities are set forth on
Schedule 1.3(b).
(c) There was added to the Purchase Price the Inventory Value (as
defined below) of the fuel and merchandise held for sale, which is set
forth on Schedule 1.3(c).
(d) There was added to the Purchase Price the invoice value of any
new Equipment listed on Schedule 1.3(d), which Equipment was not included
in the Rental Asset Listing described in Section 1.4(b) because it was
acquired by the Corporation after the date of the Rental Asset Listing with
United's consent.
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1.4 HOLD BACK.
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(a) United held back from the Purchase Price the sum of one million
dollars ($1,000,000) (the "Hold Back"), which amount will be deposited by
United with First Trust of California (the "Escrow Agent") to be held
pursuant to an Escrow Agreement (the "Escrow Agreement") for later
distribution pending the determination of the amount of the Equipment
Adjustment, Inventory Adjustment and Working Capital Adjustment pursuant to
Sections 1.4(b), 1.4(c) and 1.4(d), respectively. United and the
Shareholders' Representative will use reasonable efforts to complete the
Equipment Adjustment, the Inventory Adjustment and the Working Capital
Adjustment within 90 days after the Closing Date, whereupon United shall
notify the Shareholders' Representative of the amount of such Adjustments.
If there is no disagreement between United and the Shareholders'
Representative regarding the Equipment Adjustment, the Inventory Adjustment
and the Working Capital Adjustment, United will adjust the Hold Back by the
amount of such Adjustments and will instruct the Escrow Agent to release
the Hold Back, as adjusted, to the Shareholders 120 days after the Closing
Date. In the event of any disagreement between United and Shareholders'
Representative regarding the dollar amount of any such adjustment, United
shall nevertheless adjust the Hold Back by the amount of such Adjustments
not in dispute and will instruct the Escrow Agent to release to the
Shareholders any portion of the Hold Back, as adjusted, that is not in
dispute. Promptly upon resolution of any such disagreement in accordance
with the terms hereof, United shall adjust the remaining portion of the
Hold Back and shall instruct the Escrow Agent to release to the
Shareholders any remaining portion of the Hold Back, as adjusted, to which
the Shareholders are entitled. Notwithstanding the foregoing, United shall
not be limited to the Hold Back as a sole remedy in the event that any
Purchase Price adjustment exceeds the Hold Back.
(b) The Rental Asset Listing attached as Schedule 1.4(b) sets forth
the asset description, make, model, original cost and net book value of all
equipment held for rent to customers as of September 30, 1997. The
Equipment is Rental Ready (as defined below). Within 30 days following the
Closing Date, United and the Shareholders' Representative jointly shall
complete a physical inventory of each item of Equipment on the Rental Asset
Listing, including by visiting renters' locations as necessary to inspect
such Equipment. The Purchase Price shall be reduced (the "Equipment
Adjustment") for each item of Equipment listed on the Rental Asset Listing
which has been sold, is missing, is not Rental Ready, or is otherwise not
available for rent to customers by the Corporation, but only to the extent
the aggregate fair market value of all such Equipment exceeds $75,000. The
reduction in the Purchase Price shall be calculated by the aggregate fair
market value (as determined by United and the Shareholders' Representative)
of all missing, non-Rental Ready or unavailable Equipment, and by the net
proceeds to the Corporation received from the sale of Equipment sold. In
the event of a Purchase Price reduction due to an Equipment Adjustment,
United shall be entitled to retain a portion of the Hold Back equal to such
reduction. For purposes of this Agreement, an item of Equipment is "Rental
Ready" only if all required maintenance has been performed and it does not
require any repairs in excess of $200 per item for those items having a net
book value of $5,000 or greater and $100 per item for those items
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having a net book value less than $5,000 per item. Any disputes as to the
physical count, fair market value or Rental Readiness of any item of
Equipment will, if possible, be resolved while the physical inventory of
such Equipment is being taken. Any disputes not so resolved will be
resolved by arbitration in accordance with Section 10.
(c) The Purchase Price shall be adjusted (the "Inventory
Adjustment") on a dollar-for-dollar basis pursuant to the procedures set
forth below by the amount, if any, by which the Inventory Value of the fuel
and merchandise included on Schedule 1.3(c) as of the Closing Date is
greater or less than the amount set forth on Schedule 1.3(c) plus or minus,
as the case may be, the lesser of $10,000 or two percent (2%) of the
Inventory Value. "Inventory Value" shall mean the lower of (x) vendor cost
as last received (including all freight) and (y) market value (excluding
any non-salable or obsolete merchandise, parts or supplies) as of the
Closing Date, as determined in accordance with generally accepted
accounting principles. Inventory Value shall be determined pursuant to a
physical inventory to be taken promptly following the Closing Date, and
shall be finalized within 90 days following the Closing Date. Any disputes
as to the physical condition, salability or obsolescence of any item of
Inventory will, if possible, by representatives of United and the
Shareholders' Representative be resolved while such physical inventory is
being taken. Any disputes regarding the foregoing not so resolved will be
resolved by arbitration in accordance with Section 10.
(d) The adjustment made to the Purchase Price wired on the Closing
Date pursuant to Section 1.3(b) is based on Schedule 1.3(b) as delivered at
the Closing, which the parties understand includes only an estimate of the
Closing Date Working Capital. Within 90 days after the Closing Date, United
will determine the actual Closing Date Working Capital and will advise the
Shareholders' Representative of such actual amount. If the Purchase Price
increases, United will promptly pay any additional amount due to the
Shareholders within 120 days after the Closing Date; if the Purchase Price
declines, United may deduct the amount by which the Purchase Price declines
from the Hold Back. To the extent the parties disagree on such amount,
United and the Shareholders' Representative will attempt to resolve such
dispute and, if they are unable to do so, such dispute shall be decided by
arbitration in accordance with Section 10. The Purchase Price shall also be
reduced 120 days after the Closing, on a dollar-for-dollar basis, by the
value of all accounts receivable included in Closing Date Current Assets
that have not been collected within 120 days after the Closing Date. United
will cause the Corporation to use reasonable efforts to collect all such
accounts receivable within 120 days after the Closing Date. All such
uncollected receivables shall then be assigned by the Corporation to the
Shareholders' Representative, who shall hold and attempt to collect them
for the benefit of the Shareholders. The Corporation shall have no right to
receive any of such collections. Payments received within 120 days after
the Closing Date on accounts receivable for customers who generate accounts
receivable before and after the Closing Date shall be credited to the
oldest receivables first until the payments have been fully credited. The
adjustments pursuant to this Section 1.4(d) are herein called the "Working
Capital Adjustment."
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1.5 EXCLUDED ASSETS. The Assets of the Corporation listed on
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Schedule 1.5 (the "Excluded Assets") shall be distributed to the Shareholders
prior to the Closing, and United shall acquire no interest in or claim to any of
the Excluded Assets.
2. CLOSING TIME AND PLACE
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The closing of the transactions contemplated herein (the "Closing") took
place simultaneous with the execution of this Agreement (the "Closing Date").
The Closing took place at the Law Offices of Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. At the
Closing, United and the Shareholders delivered to each other the documents,
instruments and other items described in Section 5 of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION AND THE SHAREHOLDERS
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The Corporation and the Shareholders, other than the ESOP except with
respect to Section 3.38, and the ESOP, with respect to Section 3.38, jointly and
severally, (i) represent and warrant that each of the following representations
and warranties is true as of the Closing Date with respect to the Shareholders
and the Corporation, as the case may be, and (ii) agree that such
representations and warranties shall survive the Closing.
3.1 ORGANIZATION, STANDING AND QUALIFICATION. The Corporation is duly
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organized, validly existing and in good standing under the laws of the State of
California. The Corporation has full corporate power and authority to own and
lease its properties and to carry on its business as now conducted. The
Corporation is not required to be qualified or licensed to conduct business as a
foreign corporation in any other jurisdiction.
3.2 CAPITALIZATION. Schedule 3.2 sets forth, as of the Closing Date, the
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authorized and outstanding capital stock of the Corporation, the name, addresses
and social security numbers or taxpayer identification numbers of the record and
beneficial owners thereof, and the number of shares so owned, and wire transfer
instructions for each Shareholder relating to the bank account to which the
Purchase Price should be sent. On the Closing Date, all of the issued and
outstanding shares of the capital stock of the Corporation were owned of record
and beneficially by the Shareholders, as set forth in Schedule 3.2, and were
free and clear of all liens, security interests, encumbrances and claims of
every kind. Each share of the capital stock of the Corporation is validly
authorized and issued, fully paid and nonassessable, and was not issued in
violation of any preemptive rights of any past or present shareholder of the
Corporation. Except as disclosed on Schedule 3.5, no option, warrant, call,
conversion right or commitment of any kind (including any of the foregoing
created in connection with any indebtedness of the Corporation) exists which
obligates the Corporation to issue any of its authorized but unissued capital
stock or other equity interest, or which obligates any Shareholder to transfer
any Corporation's Stock to any person.
3.3 ALL STOCK BEING ACQUIRED. The Corporation's Stock being acquired by
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United hereunder constitutes all of the outstanding capital stock of the
Corporation.
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3.4 AUTHORITY FOR AGREEMENT. The Corporation and each of the Shareholders
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has full right, power and authority to enter into this Agreement and to perform
its or his obligations hereunder. The execution and delivery of this Agreement
by the Corporation has been duly authorized by its Board of Directors. This
Agreement has been duly and validly executed and delivered by the Corporation
and each of the Shareholders and, subject to the due authorization, execution
and delivery by United, constitutes the legal, valid and binding obligation of
the Corporation and each of the Shareholders enforceable against the Corporation
and each of the Shareholders in accordance with its terms.
3.5 NO BREACH OR DEFAULT. Except as disclosed on Schedule 3.5, the
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execution and delivery by the Corporation and the Shareholders of this
Agreement, and the consummation by the Shareholders of the transactions
contemplated hereby, do not and will not:
(a) result in the breach of any of the terms or conditions of, or
constitute a default under, or allow for the acceleration or termination
of, in any manner release any party from any obligation under, require any
consent under, or will result in any lien, claim, or encumbrance on the
Corporation's Stock or the assets of the Corporation under, any mortgage,
lease, note, bond, indenture, or material contract, agreement, license or
other instrument or obligation of any kind or nature to which the
Corporation or any of the Shareholders is a party, or by which the
Corporation, or any of its assets, is or may be bound or affected; or
(b) violate any law or any order, writ, injunction or decree of any
court, administrative agency or governmental authority, or require the
approval, consent or permission of any governmental or regulatory
authority; or
(c) violate the Articles of Incorporation or Bylaws of the
Corporation.
3.6 SUBSIDIARIES. Schedule 3.6 lists as of the Closing Date any and all
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subsidiaries of the Corporation and any securities of any other corporation or
any securities or other interest in any other business entity owned by the
Corporation or any of its subsidiaries.
3.7 FINANCIAL STATEMENTS. The Corporation has delivered to United, as
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Schedule 3.7, copies of the following financial statements ("Financial
Statements"): financial statements for the fiscal year ended October 31, 1995
and 1996, reviewed by KPMG Peat Marwick LLP and unaudited interim Financial
Statements for the Corporation for the period ended August 31, 1997 (the
"Balance Sheet Date"). To the knowledge of the Corporation and the
Shareholders, the Financial Statements are true and correct and fairly present
(i) the financial position of the Corporation as of the respective dates of the
balance sheets included in said statements, and (ii) the results of operations
for the respective periods indicated. To the knowledge of the Corporation and
the Shareholders, the Financial Statements have been prepared in accordance with
generally accepted accounting principles, applied consistently with prior
periods. Except to the extent reflected or reserved against in the
Corporation's balance sheet as of the Balance Sheet Sate, or as disclosed on
Schedule 3.7 or Schedule 3.8, the Corporation had as of the Balance Sheet Date,
and had, as of the Closing Date, no liabilities of any nature, whether accrued,
absolute, contingent or otherwise, including, without limitation, tax
liabilities due.
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3.8 LIABILITIES. Schedules 3.8(a), (b), (c) and (d), are accurate lists
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and descriptions of all liabilities of the Corporation required to be described
below in the format set forth below.
(a) Schedule 3.8(a) lists, as of the Closing Date, other than with
respect to trade payables and as of the end of the month prior to the
Closing Date with respect to trade payables, all indebtedness for money
borrowed and all other fixed and uncontested liabilities of any kind,
character and description (excluding all real and personal property
leasehold interests included in Schedule 3.8 (d)), whether reflected or not
reflected on the Financial Statements and whether accrued or absolute, and
states as to each such liability the amount of such liability and to whom
payable. From the date as of which trade payables are listed through the
Closing Date, trade payables have been incurred only in the ordinary course
of business consistent with comparable prior periods.
(b) Schedule 3.8(b) lists, as of the Closing Date, all claims, suits
and proceedings which are pending against the Corporation and, to the
knowledge of the Corporation and the Shareholders, all contingent
liabilities and all claims, suits and proceedings threatened or anticipated
against the Corporation. For each such liability, the following is
provided in Schedule 3.8(b):
(i) a summary description of such liability together with
copies of all material documents, reports and other records relating
thereto;
(ii) all amounts claimed or relief sought with respect to such
liability and the identity of the claimant; and
(iii) without limitation of the foregoing, (A) the name of each
court, agency, bureau, board or body before which any such claim, suit
or proceeding is pending, (B) the date such claim, suit or proceeding
was instituted, (C) the parties to such claim, suit or proceeding, (D)
a description of the factual basis alleged to underlie such claim,
suit or proceeding, including the date or dates of all material
occurrences, (E) the amount claimed and other relief sought, and (F)
all material pleadings, briefs and other documents relating thereto to
the extent the same are in the possession or under the control of the
Corporation or the Shareholders.
(c) Schedule 3.8(c) lists, as of the Closing Date and to the extent
not otherwise included in Schedule 3.8(a), all liens, claims and
encumbrances secured by or otherwise affecting any asset of the Corporation
(including any Corporate Property, as hereafter defined), including a
description of the nature of such lien, claim or encumbrance, the amount
secured if it secures a liability, the nature of the obligation secured,
and the party holding such lien, claim or encumbrance.
(d) Schedule 3.8(d) lists, as of the Closing Date and to the extent
not otherwise included in Schedules 3.8(a) and (c), all real and personal
property leasehold interests or to which a Corporation is a party as lessor
or lessee or, to the knowledge of the Corporation or the Shareholders,
affecting or relating to any Corporate Property,
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including a description of the nature and principal terms of such leasehold
interest and the identity of the other party thereto.
Except as described on Schedules 3.8(a), (b), (c) and (d), neither the
Corporation nor any of the Shareholders has made any payment or committed to
make any payment since the Balance Sheet Date on or with respect to any of the
liabilities or obligations listed on Schedule 3.8(a), (b), (c) and (d) except,
in the case of liabilities and obligations listed on Schedule 3.8(a), (c) and
(d), periodic payments required to be made under the terms of the agreements or
instruments governing such obligations or liabilities.
3.9 RENTAL ASSET LISTING. The Rental Asset Listing attached as Schedule
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1.4(b) lists all of the Equipment owned by the Corporation for lease or rent to
customers, other than Equipment acquired after the date of the Rental Asset
Listing and included on Schedule 1.3(d) or disposed of since the date of the
Rental Asset Listing.
3.10 PERMITS AND LICENSES.
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(a) Schedule 3.10(a) is a full and complete list, and includes
copies, of all material permits, licenses, titles (including motor vehicle
titles and current registrations), fuel permits, zoning and land use
approvals and authorizations, including, without limitation, any
conditional or special use approvals or zoning variances, occupancy
permits, and any other similar documents constituting a material
authorization or entitlement or otherwise material to the operation of the
business of the Corporation (collectively the "Governmental Permits") owned
by, issued to, held by or otherwise benefiting the Corporation or the
Shareholders as of the Closing Date. Any material conditions to the
Governmental Permits to and, if applicable, the expiration dates thereof,
are also described in Schedule 3.10(a). Schedule 3.10(a) also sets forth
the name of any third party from whom the Shareholders, the Corporation or
United must obtain consent (the "Required Governmental Consents") in order
to effect a direct or indirect transfer of the Governmental Permits
required as a result of the consummation of the transactions contemplated
by this Agreement. Except as set forth on Schedule 3.10(a), all of
Governmental Permits enumerated and listed on Schedule 3.10(a) are adequate
for the operation of the business of the Corporation and of each Corporate
Property as presently operated and are valid and in full force and effect.
All of said Governmental Permits and agreements have been duly obtained and
are in full force and effect, and there are no proceedings pending or, to
the knowledge of the Corporation or the Shareholders, threatened which may
result in the revocation, cancellation, suspension or adverse modification
of any of the same. Neither the Corporation nor any of the Shareholders
has any knowledge of any reason why all such Governmental Permits and
agreements will not remain in effect after consummation of the transactions
contemplated hereby.
(b) Schedule 3.10(b) lists, as of the Closing Date, each facility
owned, leased, operated or otherwise used by the Corporation, the
ownership, lease, operation or use of which is being transferred to,
assumed by or otherwise acquired directly or indirectly by United pursuant
to this Agreement (each, a "Facility" and collectively, the "Facilities").
Except as otherwise disclosed on Schedule 3.10(b):
8
(i) Each Facility is fully licensed, permitted and authorized to
carry on its current business under all applicable federal, state and
local statutes, orders, approvals, zoning or land use requirements,
rules and regulations and no Facility is a non-conforming use or
otherwise subject to any restrictions regarding reconstruction.
(ii) All activities and operations at each Facility are being and
have been conducted in compliance in all material respects with the
requirements, criteria, standards and conditions set forth in all
applicable federal, state and local statutes, orders, approvals,
permits, zoning or land use requirements and restrictions, variances,
licenses, rules and regulations.
(iii) Each Facility is located on real property owned or leased by
the Corporation (each a "Facility Property") and each Facility
Property owned by the Corporation is legally described on the surveys
or site plans attached to Schedule 3.10(b) (the "Facility Surveys/Site
Plans"), each of which when delivered will accurately depict the
respective Facility Property.
(iv) There are no circumstances, conditions or reasons which are
likely to be the basis for revocation or suspension of any Facility's
site assessments, permits, licenses, consents, authorizations, zoning
or land use permits, variances or approvals relating to any Facility
owned by the Corporation or owned by any of the Shareholders or an
Affiliate (as hereinafter defined) of any of the Shareholders and
leased to the Corporation, and to the knowledge of the Corporation and
the Shareholders there are no circumstances, conditions or reasons
which are likely to be the basis for revocation or suspension of any
site assessment, permits, licenses, consents, authorizations, zoning
or land use permits, variances or approvals relating to any Facility.
3.11 CERTAIN RECEIVABLES. Schedule 3.11 is an accurate list as of the
-------------------
Closing Date of the accounts and notes receivable of the Corporation from and
advances to employees, former employees, officers, directors, the Shareholders
and Affiliates of the foregoing. For purposes of this Agreement, the term
"Affiliate" means, with respect to any person, any person that directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with such person, and in the case of the Corporation
includes directors and officers, in the case of individuals includes the
individual's spouse, father, mother, grandfather, grandmother, brothers,
sisters, children and grandchildren and in the case of a trust includes the
grantors, trustees and beneficiaries of the trust.
3.12 FIXED ASSETS AND REAL PROPERTY.
------------------------------
(a) Schedule 3.12(a) lists, as of the Closing Date, substantially
all the fixed assets (other than real estate, inventory subject to the
Inventory Adjustment and Equipment included in the Rental Asset Listing or
on Schedule 1.3(d)) of the Corporation, including, without limitation,
identification of each vehicle by description and serial number,
identification of machinery, equipment and general descriptions of
9
parts, supplies and inventory. Except as shall be described on Schedule
3.12(a), all of the Corporation's vehicles, machinery and equipment
necessary for the operation of its business and all of the Equipment listed
on Schedule 1.3(d) and the Rental Asset Listing are substantially free of
known defects that would cause them to fail. All leases of fixed assets are
in full force and effect and binding upon the parties thereto; neither the
Corporation nor any other party to such leases is in breach of any of the
material provisions thereof.
(b) Each parcel of real property leased, owned or being purchased by
the Corporation as of the Closing Date (the "Corporate Property"),
including the street address and, in the case of Corporate Property owned
or being purchased, the legal description thereof, is listed on Schedule
3.12(b) and attached to said Schedule 3.12(b) are copies of all leases,
deeds, outstanding mortgages, other encumbrances and existing title
insurance policies relating to each Corporate Property, as well as a
current commitments for title insurance issued by a title insurance company
satisfactory to United with respect to each Corporate Property owned or
being purchased by the Corporation together with copies of all of the title
exceptions referred to in said commitments. All leases listed on Schedule
3.12(b) are and shall be in full force and effect and binding on the
parties thereto. Except as described on Schedule 3.12(b) there are and
shall be as of the Closing Date no material physical or mechanical defects
in or any Facility located on any Corporate Property and each such Facility
is in good condition and repair.
(c) The Corporation has good, valid and marketable title to all
properties and assets, real, personal, and mixed, tangible and intangible,
actually used or necessary for the conduct of its business, free of any
encumbrance or charge of any kind except: (i) liens for current taxes not
yet due; (ii) minor imperfections of title and encumbrances, if any, that
are not substantial in amount, do not materially detract from the value of
the property subject thereto, do not materially impair the value of the
Corporation, and have arisen only in the ordinary course of business and
consistent with past practice; and (iii) the liens identified on Schedule
3.8(c) (collectively, the "Permitted Liens"). Except as described on
Schedule 3.12(b) there are and as of the Closing Date will be no leases,
occupancy agreements, options, rights of first refusal or any other
agreements or arrangements, either oral or written, that create or confer
in any person or entity the right to acquire, occupy or possess, now or in
the future, any Facility, any Corporate Property, or any portion thereof,
or create in or confer on any person or entity any right, title or interest
therein or in any portion thereof.
3.13 ACQUISITION/DISPOSAL OF ASSETS. Except as indicated on Schedule 3.13,
------------------------------
since the date of the Rental Asset Listing attached as Schedule 1.4(b), the
Corporation has not acquired or sold or otherwise disposed of any properties or
assets which have a value in excess of $7,500 with respect to any single asset
and $75,000 in the aggregate, or which are material to the operation of the
Corporation's business as presently conducted, without the prior written consent
of United.
10
CONTRACTS AND AGREEMENTS; ADVERSE RESTRICTIONS.
----------------------------------------------
(a) Schedule 3.14(a) lists, as of the Closing Date, and includes
copies of, all material contracts and agreements (other than standard
rental agreements with customers, leases included with Schedule 3.12(b) and
documents included with Schedule 3.12(b)) to which the Corporation is a
party or by which it or any of its property is bound (including, but not
limited to, joint venture or partnership agreements, contracts with any
labor organizations, promissory notes, loan agreements, bonds, mortgages,
deeds of trust, liens, pledges, conditional sales contracts or other
security agreements). Except as disclosed on Schedule 3.14(a), all such
contracts and agreements included in Schedule 3.14(a) are in full force and
effect and binding upon the parties thereto. Except as described or cross
referenced on Schedule 3.14(a), neither the Corporation nor, to any of the
Shareholders' knowledge, any other parties to such contracts and agreements
is in breach thereof, and none of the parties has threatened to breach any
of the material provisions thereof or notified the Corporation or any of
the Shareholders of a default thereunder, or exercised any options
thereunder. None of such contracts, agreements and licenses requires
notice to, or consent or approval of, any third party to any of the
transactions contemplated hereby, except such consents and approvals as are
listed on Schedule 3.14(a).
(b) Except as set forth on Schedule 3.14(b), there is no outstanding
judgment, order, writ, injunction or decree against the Corporation, the
result of which could materially adversely affect the Corporation or its
business or any of the Corporate Properties, nor has the Corporation been
notified that any such judgment, order, writ, injunction or decree has been
requested.
3.15 INSURANCE. Schedule 3.15 is a complete list and includes copies, as
---------
of the Closing Date, of all insurance policies in effect on the Closing Date or,
with respect to "occurrence" policies that were in effect, carried by the
Corporation in respect of the Facilities, the Corporate Properties or any other
property used by the Corporation specifying, for each policy, the name of the
insurer, the type of risks insured, the deductible and limits of coverage, and
the annual premium therefor. During the last five years, there has been no
lapse in any material insurance coverage of the Corporation. For each insurer
providing coverage for any of the contingent or other liabilities listed on
Schedule 3.8(b), except to the extent otherwise set forth in Schedule 3.8(b),
each such insurer, if required, has been properly and timely notified of such
liability, no reservation of rights letters have been received by the
Corporation and the insurer has assumed defense of each suit or legal
proceeding.
3.16 PERSONNEL. Schedule 3.16 is a complete list, as of the Closing Date,
---------
of all officers, directors and employees (by type or classification) of each
Corporation and their respective rates of compensation, including (i) the
portions thereof attributable to bonuses, (ii) any other salary, bonus, stock
option, equity participation, or other compensation arrangement made with or
promised to any of them, and (iii) copies of all employment agreements with non-
union officers, directors and employees. Schedule 3.16 shall also lists the
driver's license number for each driver of the Corporation's motor vehicles who
is required to have a
11
commercial, chauffeur's, or other special class of drivers license in order to
operate commercial or heavy vehicles used in the Corporation's business.
3.17 BENEFIT PLANS AND UNION CONTRACTS.
---------------------------------
(a) Schedule 3.17(a) is a complete list as of the Closing Date, and
includes complete copies (or, in the case of oral arrangements,
descriptions), of all employee benefit plans and agreements (written or
oral) currently maintained or contributed to by the Corporation, including
employment agreements and any other agreements containing "golden
parachute" provisions, retirement plans, welfare benefit plans and deferred
compensation agreements, together with copies of such plans, agreements and
any trusts related thereto, and classifications of employees covered
thereby as of the Closing Date. Except for the employee benefit plans
described on Schedule 3.17(a), the Corporation has no other pension,
retirement, welfare, profit sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plans or arrangements
with any party. Except as disclosed on Schedule 3.17(a), all employee
benefit plans listed on Schedule 3.17(a) are fully funded and in
substantial compliance with all applicable federal, state and local
statutes, ordinances and regulations. All such plans that are intended to
qualify under Section 401(a) of the Internal Revenue Code have been
determined by the Internal Revenue Service to be so qualified, and copies
of such determination letters are included as part of Schedule 3.17(a).
Except as disclosed on Schedule 3.17(a), all reports and other documents
required to be filed with any governmental agency or distributed to plan
participants or beneficiaries (including, but not limited to, actuarial
reports, audits or tax returns) have been timely filed or distributed, and
copies thereof are included as part of Schedule 3.17(a). All employee
benefit plans listed on such Schedule have been operated in accordance with
the terms and provisions of the plan documents and all related documents
and policies. The Corporation has not incurred any liability for excise
tax or penalty due to the Internal Revenue Service or U.S. Department of
Labor nor any liabilit Guaranty Corporation for any employee benefit plan,
nor has the Corporation, nor party-in-interest or disqualified person,
engaged in any transaction or other activity which would give rise to such
liability. The Corporation has not participated in or made contributions
to any "multi-employer plan" as defined in the Employee Retirement Income
Security Act of 1974 ("ERISA"), nor would the Corporation or any affiliate
be subject to any withdrawal liability with respect to such a plan if any
such employer withdrew from such a plan immediately prior to the Closing
Date. No employee pension benefit plan is under funded on a termination
basis as of the date of this Agreement.
(b) Schedule 3.17(b) is a complete list, as of the Closing Date, and
includes complete copies of all union contracts and agreements between the
Corporation and any collective bargaining group. The Corporation is in
compliance in all material respects with all applicable federal and state
laws respecting employment and employment practices,
terms and conditions of employment, wages and hours, and nondiscrimination
in employment, and is not engaged in any unfair labor practice. Except as
disclosed in Schedule 3.8(b), there is no charge pending or, to the
Corporation's or the Shareholders' knowledge, threatened, against the
Corporation before any court or agency and alleging
12
unlawful discrimination in employment practices and there is no charge of
or proceeding with regard to any unfair labor practice against it pending
before the National Labor Relations Board. There is no labor strike,
dispute, slow down or stoppage as of the Closing Date, existing or
threatened against the Corporation; no union organizational activity exists
respecting employees of the Corporation not currently subject to a
collective bargaining agreement; the union contracts or other agreements
delivered as part of Schedule 3.17(b) constitute all agreements with the
unions or other collective bargaining groups, and there are no other
arrangements or established practices relating to the employees covered by
any collective bargaining agreement; and Schedule 3.17(b) will contain as
of the date it is delivered a list of all arbitration or grievance
proceedings that have occurred since the Balance Sheet Date. No one has
petitioned within the last five years, and no one is now petitioning, for
union representation of any employees of the Corporation. The Corporation
has not experienced any labor strike, slow-down, work stoppage, labor
difficulty or other job action during the last five years.
(c) No payment made to any employee, officer, director or independent
contractor of the Corporation (the "Recipient") pursuant to any employment
contract, severance agreement or other arrangement (the "Golden Parachute
Payment") will be nondeductible by the Corporation because of the
application of Sections 280G and 4999 of the Code to the Golden Parachute
Payment, nor will a Corporation be required to compensate any Recipient
because of the imposition of an excise tax (including any interest or
penalties related thereto) on the Recipient by reason of Sections 280G and
4999 of the Code.
3.18 TAXES.
-----
(a) The Corporation has timely filed all requisite federal, state,
local and other tax and information returns due for all fiscal periods
ended on or before the Closing Date. All such returns are accurate and
complete. Except as set forth on Schedule 3.18, there are no open years,
examinations in progress, extensions of any statute of limitations or
claims against the Corporation relating to federal, state, local or other
taxes (including penalties and interest) for any period or periods prior to
and including the Closing Date and no notice of any claim for taxes has
been received. Copies of (i) any tax examinations, (ii) extensions of
statutory limitations and (iii) the federal income, and state franchise,
income and sales tax returns of the Corporation for its last three fiscal
years are attached as part of Schedule 3.18. Copies of all other federal,
state, local and other tax and information returns for all prior years of
the Corporation's existence have been made available to United and are
among the records of the Corporation which will accrue to United at the
Closing. The Corporation has not been contacted by any federal, state or
local taxing authority regarding a prospective examination.
(b) Except as set forth on Schedule 3.18 (which schedule also
includes the amount due with respect to such Corporation) the Corporation
has duly paid all taxes and other related charges required to be paid prior
to the Closing Date. The reserves for taxes contained in the Financial
Statements of the Corporation are adequate to cover their tax liability as
of the Closing Date.
13
(c) The Corporation has withheld all required amounts from its
employees for all pay periods in full and complete compliance with the
withholding provisions of applicable federal, state and local laws. All
required federal, state and local and other returns with respect to income
tax withholding, social security, and unemployment taxes have been duly
filed by the Corporation for all periods for which returns are due, and the
amounts shown on all such returns to be due and payable have been paid in
full.
3.19 COPIES COMPLETE. Except as disclosed on Schedule 3.19, the certified
---------------
copies of the Articles of Incorporation and Bylaws of the Corporation, both as
amended to the Closing Date, and the copies of all standard form rental
agreements, leases, instruments, agreements, licenses, permits, certificates or
other documents that have been delivered to United in connection with the
transactions contemplated hereby are complete and accurate as of the Closing
Date and are true and correct copies of the originals thereof. Except as
specifically disclosed on Schedule 3.19, the rights and benefits of the
Corporation will not be adversely affected by the transactions contemplated
hereby, and the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions thereof. None of such leases,
instruments, agreements, licenses, permits, site assessments, certificates or
other documents requires notice to, or consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby,
except such consents and approvals as are listed on Schedule 3.19 and which have
been given or obtained prior to the Closing.
3.20 PRODUCT QUALITY, WARRANTY CLAIMS, PRODUCT LIABILITY. All products and
---------------------------------------------------
services sold, rented, leased, provided or delivered by the Corporation to
customers on or prior to the Closing Date conform to applicable contractual
commitments, express and implied warranties, product and service specifications
and quality standards, and, to the knowledge of the Corporation and the
Shareholders, the Corporation has no liability (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against the Corporation giving rise to any liability)
for replacement or repair thereof or other damages in connection therewith. No
product or service sold, leased, rented, provided or delivered by the
Corporation to customers on or prior to the Closing Date is subject to any
guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions of sale, rent or lease. Except as set forth on Schedule 3.20, the
Corporation has no liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against the Corporation which might give rise to any liability) arising
out of any injury to a person or property as a result of the ownership,
possession, provision or use of any Equipment, product or service sold, rented,
leased, provided or delivered by the Corporation on or prior to the Closing
Date. All product liability claims that have been asserted against the
Corporation since January 1, 1991, whether covered by insurance or not and
whether litigation has resulted or not, are listed and summarized on Schedule
3.20.
3.21 NO CHANGE WITH RESPECT TO CORPORATION. Except as set forth on
-------------------------------------
Schedule 3.21, since the Balance Sheet Date, the business of the Corporation has
been conducted only in the ordinary course there has been no change in the
condition (financial or otherwise) of the assets, liabilities or operations of
the Corporation other than changes in the ordinary course of business, none of
which either singly or in the aggregate has been materially adverse.
Specifically, and
14
without limiting the generality of the foregoing, except as set forth on
Schedule 3.21, with respect to the Corporation, since the Balance Sheet Date,
there has not been:
(a) any change in its financial condition, assets, liabilities
(contingent or otherwise), income, operations or business which would have
a material adverse effect on the financial condition, assets, liabilities
(contingent or otherwise), income, operations or business of the
Corporation, taken as a whole;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting any material portion of its properties or
business;
(c) any change in or agreement to change (i) its shareholders, (ii)
ownership of its authorized capital or outstanding securities, or (iii) its
securities;
(d) any declaration or payment of, or any agreement to declare or
pay, any dividend or distribution in respect of its capital stock or any
direct or indirect redemption, purchase or other acquisition of any of its
capital stock;
(e) any increase or bonus or promised increase or bonus in the
compensation payable or to become payable by it, in excess of usual and
customary practices, to any of its directors, officers, employees or
agents, or any accrual or arrangement for or payment of any bonus or other
special compensation to any employee or any severance or termination pay
paid to any of its present or former officers or other key employees;
(f) any labor dispute or any other event or condition of any
character, materially adversely affecting its business or future prospects;
(g) any sale or transfer, or any agreement to sell or transfer, any
of its material assets, property or rights to any other person, including,
without limitation, the Shareholders and their Affiliates, other than in
the ordinary course of business;
(h) any cancellation, or agreement to cancel, any material
indebtedness or other material obligation owing to it, including, without
limitation, any indebtedness or obligation of any of the Shareholders or
any Affiliate thereof;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property
or rights or requiring consent of any party to the transfer and assignment
of any such assets, property or rights;
(j) any purchase or acquisition of, or any agreement, plan or
arrangement to purchase or acquire, any of its property, rights or assets
outside the ordinary course of its business;
(k) any waiver of any of its material rights or claims;
15
(l) any new or any amendment or termination of any existing material
contract, agreement, license, permit or other right to which it is a party;
(m) any decline in the stockholders equity of the Corporation of more
than $25,000 from the stockholders equity of the Corporation as of the
Balance Sheet Date other than a decline resulting from normal year end
accounting adjustments consistent with prior practices;
(n) any increase in the amount of indebtedness owed by the
Shareholders or their Affiliates to any person other than the Corporation
and secured by one or more Corporate Properties;
(o) any increase in the amount of aggregate indebtedness owed by the
Shareholders or their Affiliates to the Corporation; or
(p) any other transaction outside the ordinary course of its
business.
3.22 CLOSING DATE DEBT; CLOSING DATE CURRENT ASSETS AND CLOSING DATE
---------------------------------------------------------------
CURRENT LIABILITIES. Schedule 1.3(a) accurately sets forth the Closing Date
-------------------
Debt of the Corporation. Schedule 1.3(b) accurately sets forth the Closing Date
Current Assets and Closing Date Current Liabilities of the Corporation.
3.22 BANK ACCOUNTS. Schedule 3.23 is a complete and accurate list, as of
-------------
the Closing Date, of:
(a) the name of each bank in which the Corporation has accounts or
safe deposit boxes;
(b) the name(s) in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or have access
thereto.
3.24 COMPLIANCE WITH LAWS. Except as disclosed on Schedule 3.24, the
--------------------
Corporation has materially complied with, and the Corporation is presently in
material compliance with, federal, state and local laws, ordinances, codes,
rules, regulations, Governmental Permits, orders, judgments, awards, decrees,
consent judgments, consent orders and requirements applicable to it
(collectively "Laws"), including, but not limited to, the Americans with
Disabilities Act, the Federal Occupational Safety and Health Act, and Laws
relating to the public health, safety or protection of the environment
(collectively, "Environmental Laws"). Except as disclosed on Schedule 3.24,
there has been no assertion by any party that the Corporation is in material
violation of any Laws. Specifically and without limiting the generality of the
foregoing, except as disclosed on Schedule 3.24: except as permitted under
Environmental Laws, the Corporation has not processed, handled, transferred,
generated, treated, stored or disposed of any Hazardous Material (as defined
below),(ii) no Hazardous Material, other than
16
that allowed under Environmental Laws has been disposed of, or otherwise
released on any Corporate Property, and no Corporate Property has ever been
subject to or received any notice of any private, administrative or judicial
action, or notice of any intended private, administrative or judicial action
relating to the presence or alleged presence of Hazardous Material in, under,
upon or emanating from any Corporate Property or any real property now or
previously owned or leased by the Corporation. As used in this Agreement,
"Hazardous Material" shall mean the substances defined as "Hazardous Waste" in
40 CFR 261, substances defined in any comparable California statute or
regulation and any substance the presence of which requires remediation pursuant
to any Environmental Laws.
3.25 POWERS OF ATTORNEY. The Corporation has not granted any power of
------------------
attorney (except routine powers of attorney relating to representation before
governmental agencies) or entered into any agency or similar agreement whereby a
third party may bind or commit the Corporation in any manner.
3.26 UNDERGROUND STORAGE TANKS. Except as set forth on Schedule 3.26, no
-------------------------
underground storage tanks containing petroleum products or wastes or other
hazardous substances regulated by 40 CFR 280 or Environmental Laws are currently
or have been located on any Corporate Property. Except as set forth on Schedule
3.26, the Corporation has never owned or leased any real property not included
in the Corporate Property having any underground storage tanks containing
petroleum products or wastes or other hazardous substances regulated by 40 CFR
280. As to each such underground storage tank ("UST") identified on Schedule
3.26, the Corporation has provided to United, on Schedule 3.26:
(a) the location of the UST, information and material, including any
available drawings and photographs, showing the location, and whether the
Corporation currently owns or leases the property on which the UST is
located (and if the Corporation does not currently own or lease such
property, the dates on which it did and the current owner or lessee of such
property);
(b) the date of installation and specific use or uses of the UST;
(c) copies of tank and piping tightness tests and cathodic protection
tests and similar studies or reports for each UST;
(d) a copy of each notice to or from a governmental body or agency
relating to the UST;
(e) other material records with regard to the UST, including, without
limitation, repair records, financial assurance compliance records and
records of ownership; and
(f) to the extent not otherwise set forth pursuant to the above, a
summary description of instances, past or present, in which, to the
Corporation's, or the Shareholders' knowledge, the UST failed to meet
applicable standards and regulations for tightness or otherwise and the
extent of such failure, and any other operational or
17
environmental problems with regard to the UST, including, without
limitation, spills, including spills in connection with delivery of
materials to the UST, releases from the UST and soil contamination.
Except to the extent set forth on Schedule 3.26, the Corporation has
complied with Environmental Laws regarding the installation, use, testing,
monitoring, operation and closure of any UST described on Schedule 3.26.
3.27 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Schedule 3.27 lists all
--------------------------------------
patents, tradenames, fictitious business names, trademarks, service marks, and
copyrights owned by the Corporation or which it is licensed to use (other than
licenses to use software for personal computer operating systems that were
provided when the computer was purchased and licenses to use software for
personal computers that are granted to retail purchasers of such software). No
patents, trade secrets, know-how, intellectual property, trademarks, trade
names, assumed names, copyrights, or designations used by the Corporation in its
business infringe on any patents, trademarks, or copyrights, or any other rights
of any person. Neither the Corporation nor any of the Shareholders knows or has
any reason to believe that there are any claims of third parties to the use of
any such names or any similar name, or knows of or has any reason to believe
that there exists any basis for any such claim or claims.
3.28 ASSETS, ETC., NECESSARY TO BUSINESS. The Corporation owns or leases
-----------------------------------
all properties and assets, real, personal, and mixed, tangible and intangible,
and, except as disclosed on Schedules 3.5, 3.10(a), 3.10(b), 3.14(a) and 3.19,
is a party to all Governmental Permits and other agreements necessary to permit
it to carry on its business as presently conducted. All of said Governmental
Permits and agreements have been duly obtained and, except as disclosed on
Schedules 3.5, 3.8(b), 3.10(a), 3.10(b), 3.14(a) and 3.19, are in full force and
effect and there are no proceedings pending or threatened which may result in
the revocation, cancellation, suspension or adverse modification of any of the
same. Neither the Corporation nor any of the Shareholders has any knowledge of
any reason why all such Governmental Permits and agreements will not remain in
effect after consummation of the transactions contemplated hereby.
3.29 CONDEMNATION. No Corporate Property owned or leased by the
------------
Corporation is the subject of, or would be affected by, any pending condemnation
or eminent domain proceedings, and, to the knowledge of the Corporation and the
Shareholders, no such proceedings are threatened.
3.30 MANUFACTURERS, SUPPLIERS AND CUSTOMERS. The relations between the
--------------------------------------
Corporation and its customers are good. Neither the Corporation nor any of the
Shareholders has knowledge of any fact (other than general economic and industry
conditions) which indicates that any of the manufacturers or suppliers supplying
products, components or materials to the Corporation intends to cease providing
such items to the Corporation, nor does the Corporation or any of the
Shareholders have knowledge of any fact (other than general economic and
industry conditions) which indicates that any of the customers of a Corporation
intends to terminate, limit or reduce its business relations with the
Corporation.
18
3.31 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Corporation nor
-------------------------------------
any of the Shareholders has directly or indirectly within the past five years
given or agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder the business of the Corporation in connection with any actual or proposed
transaction which (a) might subject the Corporation to any damage or penalty in
any civil, criminal or governmental litigation or proceeding, (b) if not given
in the past, might have had an adverse effect on the financial condition,
business or results of operations of the Corporation, or (c) if not continued in
the future, might adversely affect the financial condition, business or
operations of the Corporation or which might subject the Corporation to suit or
penalty in any private or governmental litigation or proceeding.
3.32 RELATED PARTY TRANSACTIONS. Except as disclosed in the Financial
--------------------------
Statements, none of the Shareholders nor their Affiliates owns any direct or
indirect interest of any kind in, or controls or is a director, officer,
employee, shareholder or partner of, or consultant to or lender to or borrower
from or has the right to participate in the profits of, any Person which is a
competitor, supplier, customer, landlord, tenant, creditor or debtor of the
Corporation.
3.33 DISCLOSURE SCHEDULES. Any matter disclosed on any Schedule to this
--------------------
Agreement shall be deemed to have been disclosed on every other Schedule that
refers to such Schedule by cross reference so long as the nature of the matter
disclosed is obvious from a fair reading of the Schedule on which the matter is
disclosed.
3.34 NO MISLEADING STATEMENTS. The representations and warranties of the
------------------------
Corporation and the Shareholders contained in this Agreement, the Exhibits and
Schedules hereto and all other documents and information furnished to United and
its representatives pursuant hereto are complete and accurate in all material
respects and do not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements made and to be made not
misleading.
3.35 ACCURATE AND COMPLETE RECORDS. The corporate minute books, stock
-----------------------------
ledgers, books, ledgers, financial records and other records of the Corporation:
(a) have been made available to United and its agents at the
Corporation's offices or at the offices of United's attorneys or the
Corporation's attorneys;
(b) have been, in all material respects, maintained in accordance
with all applicable laws, rules and regulations; and
(c) are accurate and complete, reflect all material corporate
transactions required to be authorized by the Boards of Directors and/or
shareholders of the Corporation and do not contain or reflect any material
discrepancies.
3.36 KNOWLEDGE. Wherever reference is made in this Agreement to the
---------
"knowledge" of the Shareholders, such term means the actual knowledge of the
Shareholders or any knowledge which should have been obtained by the
Shareholders upon reasonable inquiry by a reasonable business person. Wherever
reference is made in this Agreement to the "knowledge"
19
of the Corporation, such term means the actual knowledge of any management
employee, officer or director of the Corporation or any knowledge which should
have been obtained by any such person upon reasonable inquiry by a reasonable
business person. Wherever reference is made in this Agreement to the "knowledge"
of the ESOP, such term means the actual knowledge of the Trustees, or of either
of them, or any knowledge which should have been obtained by such person upon
reasonable inquiry by a reasonable person in the position of Trustee of an
employee stock ownership plan.
3.37 BROKERS; FINDERS. Except as set forth on Schedule 3.37, no person has
----------------
acted directly or indirectly as a broker, finder or financial advisor for the
Corporation or the Shareholders in connection with the transactions contemplated
by this Agreement and no person is entitled to any broker's, finder's, financial
advisory or similar fee or payment in respect thereof based in any way on any
agreement, arrangement or understanding made by or on behalf of the Corporation
or the Shareholders.
3.38 NO ESOP LOANS; NO ESOP ASSETS HELD IN SUSPENSE ACCOUNT. The ESOP has
------------------------------------------------------
not at any time engaged in any loan transaction, either in the form of an
"exempt loan" within the meaning of Treas. Reg. 54.4975-7(b) or in any other
form, and has not acquired any assets with the proceeds of any loan. The ESOP
has not held any assets in a "suspense account" within the meaning of Treas.
Reg. 54.4975-11(c).
4. REPRESENTATIONS AND WARRANTIES OF UNITED
----------------------------------------
United represents and warrants to the Shareholders that each of the
following representations and warranties is true as of the date of this
Agreement and will be true as of the Closing Date, and agrees that such
representations and warranties shall survive the Closing:
4.1 EXISTENCE AND GOOD STANDING. United is a Corporation duly organized,
---------------------------
validly existing and in good standing under the laws of the State of Delaware.
4.2 NO CONTRACTUAL RESTRICTIONS. No provisions exist in any article,
---------------------------
document or instrument to which United is a party or by which it is bound which
would be violated by consummation of the transactions contemplated by this
Agreement.
4.3 AUTHORIZATION OF AGREEMENT. This Agreement has been duly authorized,
--------------------------
executed and delivered by United and, subject to the due authorization,
execution and delivery by the Shareholders, constitutes a legal, valid and
binding obligation of United. United has full corporate power, legal right and
corporate authority to enter into and perform its obligations under this
Agreement and to carry on its business as presently conducted. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and the fulfillment of and compliance with the terms and
conditions hereof do not and will not, after the giving of notice, or the lapse
of time or otherwise: (a) violate any provisions of any judicial or
administrative order, award, judgment or decree applicable to United; (b)
conflict with any of the provisions of the Certificate of Incorporation or
Bylaws of United; or (c) conflict with, result in a breach of or constitute a
default under any material agreement or instrument to which United is a party or
by which it is bound.
20
4.4 NO MISLEADING STATEMENTS. The representations and warranties of
------------------------
United contained in this Agreement, the Exhibits and Schedules hereto and all
other documents and information furnished to the Shareholders pursuant hereto
are materially complete and accurate, and do not include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements made and to be made not misleading as of the Closing Date.
4.5 BROKERS; FINDERS. No person has acted directly or indirectly as a
----------------
broker, finder or financial advisor for United in connection with the
transactions contemplated by this Agreement and no person is entitled to any
broker's, finder's, financial advisory or similar fee or payment in respect
thereof based in any way on any agreement, arrangement or understanding made by
or on behalf of United.
4.6 DISCLOSURE SCHEDULES. Any matter disclosed by United on any Schedule
--------------------
to this Agreement shall be deemed to have been disclosed on every other Schedule
that refers to such Schedule by cross reference so long as the nature disclosed
is obvious from a fair reading of the Schedule on which the matter is disclosed.
5. CLOSING DELIVERIES
------------------
5.1 At the Closing, the respective parties made the deliveries indicated:
UNITED DELIVERIES.
-----------------
(a) United delivered to the Shareholders the portion of the Purchase
Price required to be delivered on the Closing Date pursuant to Section 1.2.
(b) United executed and delivered a Software License (the "Software
License") with Operation Management Systems, Inc.
(c) The Corporation executed and delivered the Lease.
(d) United delivered to the Shareholders an opinion of United's
counsel, dated as of the Closing Date.
(e) United executed and delivered the Escrow Agreement.
(f) ▇▇▇ and ▇▇▇ and the Corporation executed and delivered the Lease
Termination Agreement.
5.2 SHAREHOLDERS DELIVERIES.
-----------------------
(a) The Shareholders delivered to United the certificates
representing the outstanding Corporation's Stock, free and clear of all
liens, security interests, claims and encumbrances, accompanied by stock
powers duly executed in blank.
21
(b) The Shareholders delivered to United an opinion of counsel for
the ESOP, dated as of the Closing Date.
(c) The Shareholders delivered to United an opinion of counsel for
the Shareholders, dated as of the Closing Date.
(d) The Lessor executed and delivered the Lease.
(e) Except as provided in Section 6.7, the Corporation delivered to
United evidence satisfactory to United showing that all written employment
contracts and all oral employment contracts other than those that are
terminable "at will" without payment of severance (other than normal
severance benefits approved by United) or other benefits with non-union
employees of the Corporation (including, without limitation, stock options
or other rights to obtain equity in the Corporation) have been terminated,
effective on or before the Closing Date.
(f) The Shareholders caused each officer and director of the
Corporation to deliver a resignation as an officer and/or director of the
corporation together with a general release releasing the Corporation from
all obligations under any indemnification agreements, the charter documents
of the Corporation, or otherwise, arising out of or relating to this
Agreement or the consummation of the transactions contemplated thereby,
other than obligations arising after the Closing Date under this Agreement.
(g) ▇▇▇ and ▇▇▇ executed and delivered the Software License.
(h) The Shareholders caused ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), as lessor,
to execute and deliver a Consent to Assignment of Lease relating to that
certain Lease dated March 12, 1993, between ▇▇▇▇▇▇▇ and the Corporation, as
lessee, for certain real property in Modesto, California, used by the
Corporation.
(i) The Shareholders executed and delivered the Escrow Agreement.
6. ADDITIONAL COVENANTS OF UNITED, THE CORPORATION AND THE SHAREHOLDERS
--------------------------------------------------------------------
6.1 FURTHER ASSURANCES AND ADDITIONAL CONVEYANCES. Following the Closing,
---------------------------------------------
the Shareholders and United shall each deliver or cause to be delivered at such
times and places as shall be reasonably agreed upon such additional instruments
as United or the Shareholders may reasonably request for the purpose of carrying
out this Agreement. The Shareholders will cooperate with United and/or the
Corporation on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings or
disputes of any nature with respect to matters pertaining to all periods prior
to the Closing Date.
6.2 RELEASE OF GUARANTIES. United shall use reasonable efforts to obtain
---------------------
the termination and release promptly after the Closing Date of the personal
guaranties of the
22
Shareholders listed on Schedule 6.2, all of which relate to
indebtedness of the Corporation included in the Financial Statements as of the
Balance Sheet Date. United shall indemnify the Shareholders and hold them
harmless from and against all losses, expenses or claims by third parties to
enforce or collect indebtedness owed by the Corporation as of the Closing Date
which is personally guaranteed by the Shareholders pursuant to such guaranties.
The Shareholders may notify the obligees under such guaranties that they have
terminated their obligations under such guaranties. The Shareholders shall
cooperate with United in obtaining such releases.
6.3 CONFIDENTIALITY. Neither the Corporation nor any of the Shareholders
---------------
shall disclose or make any public announcements of the transactions contemplated
by this Agreement without the prior written consent of United, unless required
to make such disclosure or announcement by law, in which event the party making
the disclosure or announcement shall notify United at least 24 hours before such
disclosure or announcement is expected to be made.
6.4 BROKERS AND FINDERS FEES. Each party shall pay and be responsible for
------------------------
any broker's, finder's or financial advisory fee incurred by such party in
connection with the transactions contemplated by this Agreement.
6.5 TAXES. United shall reasonably cooperate, at the expense of the
-----
Shareholders, with the Shareholders with respect to any matters involving the
Shareholders arising out of the Shareholders' ownership of the Corporation prior
to the Closing, including matters relating to tax returns and any tax audits,
appeals, claims or litigation with respect to such tax returns or the
preparation of such tax returns. In connection therewith, United shall make
available to the Shareholders such files, documents, books and records of the
Corporation for inspection and copying as may be reasonably requested by the
Shareholders and shall cooperate with the Shareholders with respect to retaining
information and documents which relate to such matters.
6.6 SHORT YEAR TAX RETURNS. After the Closing Date, the Shareholders
----------------------
shall prepare at their sole cost and expense, all short year federal, state,
county, local and foreign tax returns required by law for the period beginning
with the first day of the Corporation's fiscal year in which the Closing occurs
and ending with the Closing Date. Each such return shall be prepared in a
financially responsible and conservative manner and shall be delivered to United
together with all necessary supporting schedules within 90 days following the
Closing Date for its approval (but such approval shall not relieve the
Shareholders of their responsibility for the taxes assessed under these
returns). The Shareholders shall be responsible for the payment of all taxes
(including without limitation any taxes arising as a result of the conversion of
the Corporation from a cash to an accrual basis of reporting) shown to be due or
that may come to be due on such returns or otherwise relating to the period
prior to the Closing Date in excess of the amount of any reserve for taxes
included in Closing Date Current Liabilities and, at the time of the delivery of
the returns, shall contemporaneously deliver to United checks payable to the
respective taxing authorities in amounts equal to that shown as being due on the
returns. United shall sign tax returns and cause such returns to be timely filed
with the appropriate authorities. The Shareholders shall be entitled to receive
all refunds shown on said returns and any such refunds received by the
Corporation or United shall be remitted to the Shareholders.
23
6.7 CONTINUED EMPLOYMENT BY ▇▇▇ AND ▇▇▇. ▇▇▇ and ▇▇▇ shall continue their
-----------------------------------
employment by the Company for a period of 90 days after the Closing Date on the
same terms and conditions as they are presently employed. At the expiration of
that period, ▇▇▇ and Pat's employment shall terminate without further liability
of the Corporation.
6.8 SHAREHOLDERS' REPRESENTATIVE.
----------------------------
(a) In order to administer efficiently the rights and obligations of
the Shareholders under this Agreement, the Shareholders hereby designate
and appoint ▇▇▇ as the Shareholders' Representative, to serve as the
Shareholders' agent and attorney-in-fact for the limited purposes set forth
in this Agreement.
(b) Each of the Shareholders hereby appoints the Shareholders'
Representative as such Shareholder's agent, proxy and attorney-in-fact,
with full power of substitution, for all purposes set forth in this
Agreement, including, without limitation, the full power and authority on
such Shareholder's behalf (i) to consummate the transactions contemplated
by this Agreement, (ii) to disburse any funds received hereunder to the
Shareholders, (iii) to execute and deliver on behalf of each Shareholder
any amendment or waiver under this Agreement, and to agree to resolution of
all Adjustments pursuant to Section 1.4 or 10, and of all Claims hereunder,
(iv) to retain legal counsel and other professional services, at the
expense of the Shareholders, in connection with the performance by the
Shareholders' Representative of this Agreement, and (v) to do each and
every act and exercise any and all rights which such Shareholder or
Shareholders are permitted or required to do or exercise under this
Agreement and the other agreements, documents and certificates executed in
connection herewith. Each of the Shareholders agrees that such agency and
proxy are coupled with an interest, are therefore irrevocable without the
consent of the Shareholders' Representative and shall survive the death,
bankruptcy or other incapacity of any Shareholder.
(c) Each of the Shareholders hereby agrees that any amendment or
waiver under this Agreement, and any action taken on behalf of the
Shareholders to enforce the rights of the Shareholders under this
Agreement, and any action taken with respect to any Adjustment or Claim
(including any action taken to object to, defend, compromise or agree to
the payment of such Adjustment or Claim), shall be effective if approved in
writing by the Shareholders' Representative and the holders of a majority
of the Corporation's Stock (including any Corporation's Stock held by the
Shareholders' Representative), or, in the case of any amendment or waiver
made or given or action taken after the Closing, if so approved by persons
who were the holders of a majority of the Corporation's Stock immediately
prior to the Closing, and that each and every action so taken shall be
binding and conclusive on every Shareholder, whether or not such
Shareholder had notice of, or approved, such amendment or waiver.
(d) ▇▇▇ shall serve as the Shareholders' Representative until he
resigns or is otherwise unable or unwilling to serve. In the event that a
Shareholders' Representative resigns from such position or is otherwise
unable or unwilling to serve, the remaining Shareholders shall select, by
the vote of the holders of a majority of the
24
Corporation's Stock immediately prior to the Closing, a successor
representative to fill such vacancy, shall provide prompt written notice to
United of such change and such substituted representative shall then be
deemed to be the Shareholders' Representative for all purposes of this
Agreement.
6.9 GENERAL RELEASE BY SHAREHOLDERS. Each Shareholder hereby fully
-------------------------------
releases and discharges the Corporation and its directors, officers, agents and
employees from all rights, claims and actions, known or unknown, of any kind
whatsoever, which such Shareholder now has or may hereafter have against the
Corporation and its directors, officers, agents and employees, arising out of or
relating to events arising prior to or on the Closing Date, except (a) as may be
described in written contracts disclosed in Schedule 6.9 and expressly described
and specifically excepted from this release in Schedule 6.9, (b) in the case of
Shareholders who are employees of the Corporation, compensation for current
periods expressly described and excepted from such releases, and (c) for the
obligations of the Corporation arising after the Closing Date under this
Agreement. Specifically, but not by way of limitation, each Shareholder waives
any right of indemnification, contribution or other recourse against the
Corporation which it now has or may hereafter have against each Corporation with
respect to representations, warranties or covenants made in this Agreement by
the Corporation.
Each Shareholder hereby waives and relinquishes all rights and
benefits afforded by Section 1542 of the California Civil Code, which states as
follows:
"A general release does not extend to claims to which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor ."
Each Shareholder understands and acknowledges the significance and consequence
of this waiver of Section 1542 and nevertheless elects to, and does, release
those claims described in this Section 6.9, known or unknown, that it may have
now or in the future arising out of or relating to any event arising on or prior
to the date of this Agreement.
7. INDEMNIFICATION
---------------
7.1 INDEMNITY BY THE SHAREHOLDERS. The Shareholders other than the ESOP,
-----------------------------
jointly and severally, subject to the limitations set forth in Section 7.2,
covenant and agree that they will indemnify and hold harmless United, the
Corporation and their respective directors, officers and agents and their
respective successors and assigns (collectively the "United Indemnitees"), from
and after the date of this Agreement, against any and all losses, damages,
assessments, fines, penalties, adjustments, liabilities, claims, deficiencies,
costs, expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation), expenditures, including, without
limitation, any "Environmental Site Losses" (as such term is hereinafter
defined) identified by a United Indemnitee in a Claims Notice (as defined in
Section 7.3(a)), or asserted by a United Indemnitee in litigation commenced
against the Shareholders other than the ESOP provided that in either case any
--------
such Claims Notice shall be given or the litigation commenced prior to the
expiration of the periods set forth in
25
Section 7.2(c) (irrespective of the date of discovery), with respect to each of
the following contingencies (all, the "Indemnity Events"):
(a) Any misrepresentation, breach of warranty, or nonfulfillment of
any agreement or covenant on the part of the Shareholders or the
Corporation pursuant to the terms of this Agreement or any
misrepresentation in or omission from any Exhibit, Schedule, list,
certificate, or other instrument furnished or to be furnished to United
pursuant to the terms of this Agreement, regardless of whether, in the case
of a breach of a representation or a warranty, United relied on the truth
of such representation or warranty or had any knowledge of any breach
thereof.
(b) "Environmental Site Losses," which shall mean any and all losses,
damages (including exemplary damages and penalties), liabilities, claims,
deficiencies, costs, expenses, and expenditures (including, without
limitation, expenses in connection with site evaluations, risk assessments
and feasibility studies) arising out of or required by an interim or final
judicial or administrative decree, judgment, injunction, mandate, interim
or final permit condition or restriction, cease and desist order, abatement
order, compliance order, consent order, clean-up order, exhumation order,
reclamation order or any other remedial action that is required to be
undertaken under federal, state or local law in respect of operating
activities on or affecting any Facility, any UST or any other site,
including, but not limited to (i) any actual or alleged violation of any
law or regulation respecting the protection of the environment, or any
other law or regulation respecting the protection of the air, water and
land occurring prior to the Closing Date and (ii) any remedies or
violations, whether by a private or public action, alleged or sought to be
assessed as a consequence, directly or indirectly, of any Release of
pollutants (including odors) or Hazardous Materials from any Facility, any
UST or any other environmental site resulting from activities thereat
occurring prior to the Closing Date, whether such Release is into the air,
water (including groundwater) or land and whether such Release occurring
before, during or after the Closing Date. The term "Release" as used herein
means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
ambient environment.
(c) Any liability arising from the Corporation's repurchase of shares
of its capital stock from ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(d) Any liability arising from the matters described on Schedule
3.8(b).
(e) Any and all liabilities and obligations of Operational Management
Systems, Inc., a former subsidiary of the Corporation ("OMS") that was sold
to ▇▇▇ and ▇▇▇ immediately prior to the Closing.
(f) All actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation)
incident to any of the foregoing.
26
7.2 LIMITATIONS ON SHAREHOLDERS' INDEMNITIES.
----------------------------------------
(a) The obligations of the Shareholders other than the ESOP to
indemnify the United Indemnitees as provided in Section 7.1 shall be equal
to the amount by which the cumulative amount of all such liabilities,
claims, damages deficiencies, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses, expenditures and
Environmental Site Losses with respect to any or all Indemnity Events
exceed $150,000 (the "General Deductible Amount"); provided, that the
--------
amount of any obligation of indemnity arising pursuant to Section 7.1 with
respect to any representation, warranty or covenant contained in Sections
3.1 through 3.5; and 3.12(c) hereof shall not be subject to the General
Deductible Amount and the amount of any indemnity obligation arising
pursuant to Section 3.9 or 3.22 with respect to Claims based on the
Inventory Value and the Equipment included on the Rental Asset Listing
shall be subject to the applicable amounts set forth in Sections 1.4(b) and
1.4(c) in lieu of the General Deductible Amount.
(b) The maximum amount which United can recover as a result of one or
more Indemnity Events pursuant to the provisions hereof for Claims shall
not in the aggregate exceed the Purchase Price.
(c) The obligations of the Shareholders other than the ESOP under
Section 7.1 shall expire, unless a Claims Notice is given or litigation is
commenced, on or prior to the following applicable dates: with respect to
Claims arising under Sections 3.1 through 3.5, 3.12(c), 3.18 and 3.24, and
pursuant to Section 7.1(b), the applicable statute of limitations; with
respect to all other Claims, the fifth anniversary of the Closing Date.
7.3 NOTICE OF INDEMNITY CLAIM.
-------------------------
(a) In the event that any claim ("Claim") is hereafter asserted
against or arises with respect to any United Indemnitee as to which such
Indemnitee may be entitled to indemnification hereunder, the United
Indemnitee shall notify the Shareholders other than the ESOP (collectively,
the "Indemnifying Party") in writing thereof (the "Claims Notice") within
10 days after (i) receipt of written notice of commencement of any third
party litigation against such United Indemnitee, (ii) receipt by such
United Indemnitee of written notice of any third party claim pursuant to an
invoice, notice of claim or assessment, against such United Indemnitee, or
(iii) such United Indemnitee becomes aware of the existence of any other
event in respect of which indemnification may be sought from the
Indemnifying Party (including, without limitation, any inaccuracy of any
representation or warranty or breach of any covenant). The Claims Notice
shall describe the Claim and the specific facts and circumstances in
reasonable detail, and shall indicate the amount, if known, or an estimate,
if possible, of the losses that have been or may be incurred or suffered by
the United Indemnitee.
(b) The Indemnifying Party may elect to defend any Claim for money
damages where the cumulative total of all Claims (including such Claims) do
not exceed the limit set forth in Section 7.2 at the time the Claim is
made, by the Indemnifying Party's own
27
counsel; provided, however, the Indemnifying Party may assume and undertake
the defense of such a third party Claim only upon written agreement by the
Indemnifying Party that the Indemnifying Party is obligated to fully
indemnify the United Indemnitee with respect to such action. The United
Indemnitee may participate, at the United Indemnitee's own expense, in the
defense of any Claim assumed by the Indemnifying Party. Without the written
approval of the United Indemnitee, which approval shall not be unreasonably
withheld, the Indemnifying Party shall not agree to any compromise of a
Claim defended by the Indemnifying Party.
(c) If, within 30 days of the Indemnifying Party's receipt of a
Claims Notice, the Indemnifying Party shall not have provided the written
agreement required by Section 7.3(b) and elected to defend the Claim, the
United Indemnitee shall have the right to assume control of the defense
and/or compromise of such Claim, and the costs and expenses of such
defense, including reasonable attorneys' fees, shall be added to the Claim.
The Indemnifying Party shall promptly, and in any event within 30 days
reimburse the United Indemnitee for the costs of defending the Claim,
including attorneys' fees and expenses.
(d) The party assuming the defense of any Claim shall keep the other
party reasonably informed at all times of the progress and development of
its or their defense of and compromise efforts with respect to such Claim
and shall furnish the other party with copies of all relevant pleadings,
correspondence and other papers. In addition, the parties to this
Agreement shall cooperate with each other and make available to each other
and their representatives all available relevant records or other materials
required by them for their use in defending, compromising or contesting any
Claim. The failure to timely deliver a Claims Notice or otherwise notify
the Indemnifying Party of the commencement of such actions in accordance
with this Section 7.3 shall not relieve the Indemnifying Party from the
obligation to indemnify hereunder but only to the extent that the
Indemnifying Party establishes by competent evidence that it has been
prejudiced thereby.
(e) In the event both the United Indemnitee and the Indemnifying
Party are named as defendants in an action or proceeding initiated by a
third party, they shall both be represented by the same counsel (on whom
they shall agree), unless such counsel, the United Indemnitee, or the
Indemnifying Party shall determine that such counsel has a conflict of
interest in representing both the United Indemnitee and the Indemnifying
Party in the same action or proceeding and the United Indemnitee and the
Indemnifying Party do not waive such conflict to the satisfaction of such
counsel.
7.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
------------------------------------------------------
representations and warranties of the parties contained in this Agreement and in
any certificate, Exhibit or Schedule delivered pursuant hereto, or in any other
writing delivered pursuant to the provisions of this Agreement (the
"Representations and Warranties") and the liability of the party making such
Representations and Warranties for breaches thereof shall survive the
consummation of the transactions contemplated hereby. The parties hereto in
executing and delivering and in carrying out the provisions of this Agreement
are relying solely on the representations, warranties,
28
Schedules, Exhibits, agreements and covenants contained in this Agreement, or in
any writing or document delivered pursuant to the provisions of this Agreement,
and not upon any representation, warranty, agreement, promise or information,
written or oral, made by any persons other than as specifically set forth herein
or therein.
7.5 NO EXHAUSTION OF REMEDIES OR SUBROGATION; RIGHT OF SET OFF. The
----------------------------------------------------------
Shareholders waive any right to require any United Indemnitee to (i) proceed
against the Corporation; (ii) proceed against any other person; or (iii) pursue
any other remedy whatsoever in the power of any United Indemnitee. United may,
but shall not be obligated to, set off against any and all payments due
Shareholders pursuant to the Hold Back, any amount to which any United
Indemnitee is entitled to be indemnified hereunder with respect to any Indemnity
Event. Such right of set off shall be separate and apart from any and all other
rights and remedies that the Indemnities may have against Shareholders or their
successors.
8. OTHER POST-CLOSING COVENANTS OF THE SHAREHOLDERS AND UNITED
-----------------------------------------------------------
8.1 RESTRICTIVE COVENANTS. As to the Corporation, the Shareholders and
---------------------
their Affiliates acknowledge that (i) United, as the purchaser of the
Corporation's Stock, is and will be engaged in the same business as the
Corporation (the "Business"); (ii) the Shareholders and their Affiliates are
intimately familiar with the Business; (iii) the Business is currently conducted
in the State of California and United intends to continue the Business in
California and intends, by acquisition or otherwise, to expand the Business into
other geographic areas of California where it is not presently conducted; (iv)
the Shareholders and their Affiliates have had access to trade secrets of, and
confidential information concerning, the Business; (v) the agreements and
covenants contained in this Section 8.1 are essential to protect the Business
and the goodwill being acquired; and (vi) the Shareholders and their Affiliates
have the means to support themselves and their dependents other than by engaging
in a business substantially similar to the Business and the provisions of this
Section 8 will not impair such ability. The Shareholders covenant and agree as
set forth in (a), (b) and (c) below with respect to the Corporation:
(a) NON-COMPETE. For a period commencing on the Closing Date and
-----------
terminating five years thereafter (the "Restricted Period"), neither the
Shareholders nor any of their Affiliates shall, anywhere in the counties of
San Joaquin, Stanislaus, Merced, Tuolumne, ▇▇▇▇▇▇, Calaveras, Sacramento,
Solano, Alameda, Santa ▇▇▇▇▇ and Contra Costa, California where United or
one of its subsidiaries owns or operates a business similar to the Business
(the "Restricted Counties"), directly or indirectly, acting individually or
as the owner, shareholder, partner, or employee of any entity, (i) engage
in the operation of any equipment rental, sales or leasing business; (ii)
enter the employ of, or render any personal services to or for the benefit
of, or assist in or facilitate the solicitation of customers for, or
receive remuneration in the form of salary, commissions or otherwise from,
any business engaged in such activities; or (iii) receive or purchase a
financial interest in, make a loan to, or make a gift in support of, any
such business in any capacity, including, without limitation, as a sole
proprietor, partner, shareholder, officer, director, principal, agent,
trustee or lender; provided, however, that any of the Shareholders may own,
directly or indirectly, solely as an investment, securities of any
29
business traded on any national securities exchange or NASDAQ, provided
none of the Shareholders is a controlling person of, or a member of a group
which controls, such business and further provided that the Shareholders do
not, in the aggregate, directly or indirectly, own 2% or more of any class
of securities of such business and provided further that nothing herein
shall prevent ▇▇▇ and ▇▇▇ from engaging, as directors, officers and/or
shareholders of OMS, in the business in which OMS was engaged on the
Closing Date and any other activities contemplated by the Software License.
(b) CONFIDENTIAL INFORMATION. During the Restricted Period and
------------------------
thereafter, the Shareholders and their Affiliates shall keep secret and
retain in strictest confidence, and shall not use for the benefit of
themselves or others, all data and information relating to the Business
("Confidential Information"), including without limitation, know-how, trade
secrets, customer lists, supplier lists, details of contracts, pricing
policies, operational methods, marketing plans or strategies, bidding
information, practices, policies or procedures, product development
techniques or plans, and technical processes; provided, however, that the
term "Confidential Information" shall not include information that (i) is
or becomes generally available to the public other than as a result of
disclosure by the Shareholders, or (ii) is general knowledge in the
equipment rental, sales or leasing business and not specifically related to
the Business.
(c) PROPERTY OF THE BUSINESS. All memoranda, notes, lists, records
------------------------
and other documents or papers (and all copies thereof) relating to the
Business, including such items stored in computer memories, on microfiche
or by any other means, made or compiled by or on behalf of the Shareholders
or the Corporation or made available to them relating to the Business, but
excluding any materials (other than the minute books of the Corporation)
maintained by any attorneys for the Corporation or the Shareholders prior
to the Closing, are and shall be the property of United and have been
delivered or will be delivered or made available to United at the Closing.
(d) NON-SOLICITATION. Without the consent of United, which may be
----------------
granted or withheld by United in its discretion, the Shareholders and their
Affiliates shall not solicit any employees of the Corporation to leave the
employ of the Corporation and join the Shareholders or any Affiliate in any
business endeavor owned or pursued by the Shareholders.
(e) NO DISPARAGEMENT. From and after the Closing Date, none of the
----------------
Shareholders shall, in any way or to any person or entity or governmental
or regulatory body or agency, denigrate or derogate United or any of its
subsidiaries, or any officer, director or employee, or any product or
service or procedure of any such company whether or not such denigrating or
derogatory statements shall be true and are based on acts or omissions
which are learned by the Shareholders from and after the date hereof or on
acts or omissions which occur from and after the date hereof, or otherwise.
A statement shall be deemed denigrating or derogatory to any person or
entity if it adversely affects the regard or esteem in which such person or
entity is held by investors, lenders or licensing, rating, or regulatory
entities. Without limiting the generality of the foregoing, none of the
Shareholders shall, directly or indirectly in any way in respect of
30
any such company or any such directors or officers, communicate with, or
take any action which is adverse to the position of any such company with
any person, entity or governmental or regulatory body or agency who or
which has dealings or prospective dealings with any such company or
jurisdiction or prospective jurisdiction over any such company. This
paragraph does not apply to the extent that testimony is required by legal
process, provided that United has received not less than five days' prior
written notice of such proposed testimony.
8.2 RIGHTS AND REMEDIES UPON BREACH. If the Shareholders or any Affiliate
-------------------------------
breaches, or threatens to commit a breach of, any of the provisions of Section
8.1 herein (the "Restrictive Covenants"), United shall have the following rights
and remedies, each of which rights and remedies shall be independent of the
others and severally enforceable, and each of which is in addition to, and not
in lieu of, any other rights and remedies available to United at law or in
equity:
(a) SPECIFIC PERFORMANCE. The right and remedy to have the
--------------------
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to United and that
money damages would not provide an adequate remedy to United. Accordingly,
in addition to any other rights or remedies, United shall be entitled to
injunctive relief to enforce the terms of the Restrictive Covenants and to
restrain the Shareholders from any violation thereof.
(b) ACCOUNTING. The right and remedy to require the Shareholders to
----------
account for and pay over to United all compensation, profits, monies,
accruals, increments or other benefits derived or received by the
Shareholders as the result of any transactions constituting a breach of the
Restrictive Covenants.
(c) SEVERABILITY OF COVENANTS. The Shareholders acknowledge and
-------------------------
agree that the Restrictive Covenants are reasonable and valid in
geographical and temporal scope and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall
not thereby be affected and shall be given full effect, without regard to
the invalid portions.
(d) BLUE-PENCILING. If any court determines that any of the
--------------
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographic scope of such provision, such court shall reduce the
duration or scope of such provision, as the case may be, to the extent
necessary to render it enforceable and, in its reduced form, such provision
shall then be enforced.
(e) ENFORCEABILITY IN JURISDICTION. United and the Shareholders
------------------------------
intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographic scope
of the Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of United and the
31
Shareholders that such determination not bar or in any way affect United's
right to the relief provided above in the courts of any other jurisdiction
within the geographic scope of the Restrictive Covenants as to breaches of
such covenants in such other respective jurisdictions, such covenants as
they relate to each jurisdiction being, for this purpose, severable into
diverse and independent covenants.
9. GENERAL
-------
9.1 ASSIGNMENT. This Agreement shall be binding upon and shall inure to
----------
the benefit of the parties hereto, the successors or assigns of United and the
heirs, legal representatives or assigns of the Shareholders; provided, however,
that any such assignment shall be subject to the terms of this Agreement and
shall not relieve the assignor of its or his responsibilities under this
Agreement.
9.2 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
9.3 NOTICES. All notices, requests, demands and other communications
-------
hereunder shall be deemed to have been duly given if in writing and either
delivered personally, sent by facsimile transmission or by air courier service,
or mailed by postage prepaid registered or certified U.S. mail, return receipt
requested, to the addresses designated below or such other addresses as may be
designated in writing by notice given hereunder, and shall be effective upon
personal delivery or facsimile transmission thereof or upon delivery by
registered or certified U.S. mail or one business day following deposit with an
air courier service:
If to the Shareholders: at their respective addresses set
forth on Schedule 3.2
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
or
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to United: United Rentals, Inc.
Four ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
32
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
9.4 ATTORNEYS' FEES. In the event of any dispute or controversy between
---------------
United on the one hand and the Corporation or the Shareholders on the other hand
relating to the interpretation of this Agreement or to the transactions
contemplated hereby, the prevailing party shall be entitled to recover from the
other party reasonable attorneys' fees and expenses incurred by the prevailing
party. Such award shall include post-judgment attorney's fees and costs.
9.5 APPLICABLE LAW. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of California without regard to its
conflict of laws provisions.
9.6 PAYMENT OF FEES AND EXPENSES. Whether or not the transactions herein
----------------------------
contemplated shall be consummated, each party hereto will pay its own fees,
expenses and disbursements incurred in connection herewith and all other costs
and expenses incurred in the performance and compliance with all conditions to
be performed hereunder (including, in the case of the Shareholders, any such
fees, expenses and disbursements paid or accrued by, or charged to, the
Corporation).
9.7 INCORPORATION BY REFERENCE. All Schedules and Exhibits attached
--------------------------
hereto are incorporated herein by reference as though fully set forth at each
point referred to in this Agreement.
9.8 CAPTIONS. The captions in this Agreement are for convenience only and
--------
shall not be considered a part hereof or affect the construction or
interpretation of any provisions of this Agreement.
9.9 NUMBER AND GENDER OF WORDS; CORPORATION. Whenever the singular number
---------------------------------------
is used herein, the same shall include the plural where appropriate, and shall
apply to all of such number, and to each of them, jointly and severally, and
words of any gender shall include each other gender where appropriate.
9.10 ENTIRE AGREEMENT. This Agreement (including the Schedules and
----------------
Exhibits hereto) and the other documents delivered pursuant hereto constitute
the entire Agreement and understanding between the Corporation, the Shareholders
and United and supersedes any prior
33
agreement and understanding relating to the subject matter of this Agreement.
This Agreement may be modified or amended only by a written instrument executed
by the Corporation, the Shareholders and United acting through its officers,
thereunto duly authorized by its Board of Directors.
9.11 WAIVER. No waiver by any party hereto at any time of any breach of,
------
or compliance with, any condition or provision of this Agreement to be performed
by any other party hereto may be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or at any prior or subsequent time.
9.12 CONSTRUCTION. The language in all parts of this Agreement must be in
------------
all cases construed simply according to its fair meaning and not strictly for or
against any party. Unless expressly set forth otherwise, all references herein
to a "day" are deemed to be a reference to a calendar day. All references to
"business day" mean any day of the year other than a Saturday, Sunday or a
public or bank holiday in Connecticut or California. Unless expressly stated
otherwise, cross-references herein refer to provisions within this Agreement and
are not references to the overall transaction or to any other document.
10. ARBITRATION AND DISPUTE RESOLUTION. THE PARTIES WAIVE THEIR RIGHT TO
----------------------------------
SEEK REMEDIES IN COURT, INCLUDING ANY RIGHT TO A JURY TRIAL, WITH RESPECT TO ANY
DISPUTE CONCERNING DETERMINATION OF THE ADJUSTMENTS TO THE PURCHASE PRICE UNDER
SECTIONS 1.3 AND 1.4 ONLY. The parties agree that in the event United and the
Shareholders are unable to resolve a dispute concerning determination of the
Adjustments to the Purchase Price, such dispute shall be resolved exclusively by
arbitration to be conducted only in San Francisco, California in accordance with
the rules of the Judicial Arbitration and Mediation Service ("JAMS") applying
the laws of California. The parties agree that such arbitration shall be
conducted by a retired judge who is experienced in dispute resolution regarding
business acquisitions and accounting matters, that discovery shall not be
permitted except as required by the rules of JAMS, that the arbitration award
shall not include factual findings or conclusions of law, and that no punitive
damages shall be awarded. The parties understand that any party's right to
appeal or to seek modification of any ruling or award of the arbitrator is
severely limited. Any award rendered by the arbitrator shall be final and
binding, and judgment may be entered on it in any court of competent
jurisdiction as otherwise provided by law. The preceding portion of this Section
does not apply to any dispute relating to any other provision of the Agreement,
or to any other aspect of the transactions contemplated herein, and such other
disputes may be resolved by the parties by any means available, including
without limitation court action and a jury trial. The parties expressly do not
waive any right to pursue any remedy available with respect to any dispute other
than one concerning determination of the Adjustments to the Purchase Price under
Sections 1.3 and 1.4, and expressly do not waive the right to trial with respect
any other dispute.
34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
persons thereunto duly authorized as of the date first above written.
THE CORPORATION: A & A Tool Rentals and Sales, Inc.
By: --------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
THE SHAREHOLDERS:
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee of the A & A
Tool Rentals and Sales, Inc. Employee
Stock Ownership Plan
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee of the A &
A Tool Rentals and Sales, Inc.
Employee Stock Ownership Plan
UNITED: UNITED RENTALS, INC.
By:
▇▇▇▇ ▇▇▇▇▇, Vice Chairman and
Chief Acquisition Officer
35
