Exhibit 10.21
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ASSET PURCHASE AGREEMENT
BY AND AMONG
MCNABB ENTERPRISES, INC
THE STOCKHOLDERS OF MCNABB ENTERPRISES, INC
AND
BAT ACQUISITION CORP.
DATED AS OF JANUARY 16, 1998
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INDEX OF SCHEDULES
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Schedule of Stockholders
Excluded Assets Schedule
Organization Schedule
Subsidiaries Schedule
Conflicts Schedule
Financial Statements Schedule
Developments Schedule
Leases Schedule
Taxes Schedule
Contracts Schedule
Proprietary Rights Schedule
Brokerage Schedule
Permits Schedule
Employees Schedule
Insurance Schedule
Officers, Directors and Bank Accounts Schedule
Affiliated Transactions Schedule
Environmental Schedule
Purchase Price Allocation Schedule
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INDEX OF EXHIBITS
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Exhibit A - K. McNabb Employment Agreement
Exhibit B - S. McNabb Employment Agreement
Exhibit C - Lease
Exhibit D - Noncompetition Agreement
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Exhibit 10.23
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of January 16, 1998, by and
among McNabb Enterprises, Inc., a Nevada corporation (the "Seller"), the
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stockholders of the Seller listed on the Schedule of Stockholders attached
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hereto (each a "Stockholder" and collectively, the "Stockholders"), and BAT
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Acquisition Corp., a Delaware corporation (the "Purchaser"). The Seller, the
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Stockholders and the Purchaser are referred to herein collectively as the
"Parties" and individually as a "Party."
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WHEREAS, the Stockholders own beneficially and of record 100% of the
issued and outstanding shares of capital stock of the Seller;
WHEREAS, the Seller is engaged in the equipment rental business (the
"Business"); and
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WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Purchaser desires to acquire from the Seller, and the Seller
desires to sell to the Purchaser, substantially all of the Seller's business,
assets and properties (operating as a going concern) constituting the Business.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes hereof, the following terms, when used
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herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any Person means any other Person controlling,
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controlled by or under common control with such first Person, where "control"
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means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities or otherwise.
"Affiliated Group" means an affiliated group as defined in Section
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1504 of the Code (or any similar combined, consolidated or unitary group defined
under state, local or foreign income Tax law).
"Agreement" means this Asset Purchase Agreement, including all
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Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"Baseline Total Assets" means $917,000.
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"Business Day" means a day other than a Saturday, Sunday or other day
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on which commercial banks are authorized or required to close under the laws of
the United States.
"Cash" means cash, cash equivalents and marketable securities
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(including, without limitation, all money market accounts, mutual fund accounts
and repurchase agreements).
"CERCLA" means the Comprehensive Environmental Response, Compensation
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and Liability Act of 1980, as amended.
"Code" means the United States Internal Revenue Code of 1986, as
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amended.
"Environmental Affiliates" of any Person means, with respect to any
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particular matter, all other Persons whose liabilities or obligations with
respect to that particular matter have been assumed by, or are otherwise deemed
by law to be those of, such first Person.
"Environmental and Safety Requirements" means all federal, state,
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local and foreign statutes, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"Environmental Lien" means any Lien, whether recorded or unrecorded,
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in favor of any governmental entity or any department, agency or political
subdivision thereof relating to any liability of the Seller, any Subsidiary or
any Stockholder or any Environmental Affiliate of the Seller, any Subsidiary or
any Stockholder arising under any Environmental and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
"GAAP" means, at a given time, United States generally accepted
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accounting principles, consistently applied.
"Indebtedness" of any Person means, without duplication: (a)
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indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise (other than trade payables and other current
liabilities incurred in the ordinary course of business) and any commitment by
which such Person assures a creditor against loss, including contingent
reimbursement obligations with respect to letters of credit; (b) indebtedness
guaranteed in any manner by such Person, including a guarantee in the form of an
agreement to repurchase or reimburse; and (c) obligations under capitalized
leases in respect of which such Person is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such Person
assures a creditor against loss.
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"Insider" means, any officer, director, stockholder, partner or
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Affiliate, as applicable, of the Seller or any individual related by marriage or
adoption to any such individual or any entity in which any such Person owns any
beneficial interest.
"Licenses" means all permits, licenses, franchises, certificates,
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approvals and other authorizations of foreign, federal, state and local
governments or other similar rights.
"Liens" means any mortgage, pledge, security interest, encumbrance,
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lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Seller or any Affiliate, any filing or
agreement to file a financing statement as debtor under the Uniform Commercial
Code or any similar statute other than to reflect ownership by a third party of
property leased to the Seller or any of its Subsidiaries under a lease which is
not in the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of business).
"Loss" means, with respect to any Person, any diminution in value,
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consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any governmental entity or any department,
agency or political subdivision thereof) against or affecting such Person or
which, if determined adversely to such Person, would give rise to, evidence the
existence of, or relate to, any other Loss and the investigation, defense or
settlement of any of the foregoing.
"Material Adverse Effect" means any material adverse effect on the
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business, financial condition, operations, results of operations, employee
relations, customer or supplier relations, assets or future prospects of the
Seller or any of its Subsidiaries.
"Ordinary Course of Business" means the ordinary course of the
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Seller's or any of its Subsidiaries' business consistent with past practice
(including, without limitation, with respect to collection of accounts
receivable, purchases of inventory and supplies, repairs and maintenance,
payment of accounts payable and accrued expenses, levels of capital expenditures
and operation of cash management practices generally).
"Permitted Encumbrances" shall mean mechanics, carriers, workers,
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repairers and similar statutory liens arising or incurred in the ordinary course
of business for amounts which are not delinquent and which could not,
individually or in the aggregate, have a Material Adverse Effect on the Seller
or any of its Subsidiaries.
"Person" means an individual, a partnership, a corporation, an
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association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.
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"Proprietary Rights" means all (i) patents, patent applications,
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patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names, logos, internet domain names and corporate names and registrations
and applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
"Release" has the meaning set forth in CERCLA.
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"Subsidiary" means, with respect to any Person, any corporation a
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majority of the total voting power of shares of stock of which is entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or any partnership, limited liability
company, association or other business entity a majority of the partnership or
other similar ownership interest of which is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes of this definition, a Person is
deemed to have a majority ownership interest in a partnership, limited liability
company, association or other business entity if such Person is allocated a
majority of the gains or losses of such partnership, limited liability company,
association or other business entity or is or controls the managing director or
general partner of such partnership, limited liability company, association or
other business entity.
"Tax Returns" means returns, declarations, reports, claims for refund,
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information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Taxes" means any federal, state, local, or foreign income, gross
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receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, or other tax, fee, assessment or charge of any
kind whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Total Assets" means (i) the book value of the Acquired Assets,
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determined in accordance with GAAP, applied on a consistent basis.
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"Transaction Documents" means this Agreement, and all other
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agreements, instruments, certificates and other documents to be entered into or
delivered by any Party in connection with the transactions contemplated to be
consummated pursuant to this Agreement.
"Treasury Regulations" means the United States Treasury Regulations
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promulgated pursuant to the Code.
1.2 Other Definitional Provisions.
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(a) Accounting Terms. Accounting terms which are not otherwise
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defined in this Agreement have the meanings given to them under GAAP. To the
extent that the definition of accounting term that is defined in this Agreement
is inconsistent with the meaning of such term under GAAP, the definition set
forth in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and
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terms of similar import are references to this Agreement as a whole and not to
any particular provision of this Agreement. Section, clause, Schedule and
Exhibit references contained in this Agreement are references to Sections,
clauses, Schedules and Exhibits in or to this Agreement, unless otherwise
specified.
(c) Successor Laws. Any reference to any particular Code section or
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any other law or regulation will be interpreted to include any revision of or
successor to that section regardless of how it is numbered or classified.
1.3 Cross Reference of Other Definitions. Each capitalized term
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listed below is defined in the corresponding Section of this Agreement:
Term Section
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Accounts Receivable 2.3(d)
Allocation 9.13
Acquired Assets 2.1(a)
Actual Total Assets 2.3(b)
Agreement Preface
Applicable Limitation Date 8.1
Assumed Liabilities 2.1(c)
Business Recitals
Cash Portion 2.2
Closing 2.5(a)
Closing Date 2.5(a)
Closing Review 2.3(b)
Closing Transactions 2.5(b)
COBRA 5.18(a)
Confidential Information 9.10(c)
Continuing Employees 9.11(b)
Draft Balance Sheet 2.3(b)
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ERISA 5.18(a)
Estimated Total Assets 2.3(a)(i)
Excluded Assets 2.1(b)
Excluded Employees 9.11(b)
Excluded Liabilities 2.1(d)
Financial Statements 5.6(a)
Firm 2.3(b)
Holdback 2.2
HSR Act 3.1(f)
Improvements 5.10(f)
K. McNabb Employment Agreement 3.1(k)
Latest Balance Sheet 5.6(a)
Lease 3.1(m)
Leased Real Property 5.10(b)
Leases 5.10(b)
Licenses 5.16
Noncompetition Agreement 3.1(o)
Objection Notice 2.3(a)
Owned Real Property 5.10(a)
Party Preface
Pending Claim 2.3(d)
Plans 5.18(a)
Prime Rate 2.3(c)
Purchase Price 2.2
Purchaser Preface
Real Property Permits 5.10(f)
Receivables Determination Date 2.3(d)
Remaining Holdback 2.4
S. McNabb Employment Agreement 3.1(l)
Seller Preface
Stockholder Preface
Unassigned Contracts 9.14
Uncollected Receivable Amount 2.3(d)
WARN 5.17
ARTICLE II
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING
2.1 Purchase and Sale.
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(a) Acquired Assets. Upon the terms and subject to the condition
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s set forth in this Agreement, at the Closing the Seller shall sell, assign,
transfer and deliver to the Purchaser, and the Purchaser shall purchase, all
properties, assets, rights and interests of every kind and nature, whether
tangible or intangible, and wherever located and by whomever possessed, owned
by the Seller as of the Closing Date, except as set forth in Section 2.1(b)
below (collectively, the "Acquired Assets"), including, without limitation:
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(i) all accounts and notes receivables (whether current or
noncurrent);
(ii) all Cash, securities and other investments;
(iii) all Proprietary Rights, along with all income,
royalties, damages and payments due or payable as of the Closing or
thereafter, including, without limitation, damages and payments for past,
present or future infringements or misappropriations thereof, the right to
sue and recover for past infringements or misappropriations thereof and any
and all corresponding rights that, now or hereafter, may be secured
throughout the world;
(iv) all of the Seller's rights existing under leases,
contracts, licenses, permits, distribution arrangements, sales and purchase
agreements, accounts receivable, other agreements and business
arrangements, including, without limitation, all contracts and agreements
described on the Contracts Schedule attached hereto;
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(v) all rental equipment owned by the Seller wherever
located;
(vi) all real property owned or leased by the Seller, and all
plants, buildings and other improvements located on such owned or leased
property, and all easements, licenses, rights of way, permits and all
appurtenances to such owned or leased property, including, without
limitation, all appurtenant rights in and to public streets, whether or not
vacated (collectively, the "Real Property");
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(vii) all leasehold improvements and all machinery, equipment
(including all transportation and office equipment), fixtures, trade
fixtures, tools, dyes and furniture owned by the Seller wherever located,
including, without limitation, all such items which are located in any
building, warehouse, office or other space leased, owned or occupied by the
Seller or used in connection with the Real Property;
(viii) all inventories of work in process, semi-finished and
finished goods, stores, replacement and spare parts, packaging materials,
operating supplies, and fuels, owned by the Seller wherever located;
(ix) all office supplies, production supplies, spare parts,
other miscellaneous supplies, and other tangible property of any kind
wherever located, including, without limitation, all property of any kind
located in any building, office or other space leased, owned or occupied by
the Seller or in any warehouse where any of the Seller's properties and
assets may be situated;
(x) all prepayments and prepaid expenses;
(xi) all vehicles owned or leased by the Seller wherever
located;
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(xii) all of the Seller's claims, causes of action, choses in
action, rights of recovery and rights of set-off of any kind;
(xiii) the right to receive and retain mail, accounts
receivable payments and other communications relating to the Business;
(xiv) the right to bill and receive payment for products
shipped or delivered and services performed but unbilled or unpaid as of
the Closing;
(xv) all lists, records and other information pertaining to
accounts, personnel and referral sources, all lists and records pertaining
to suppliers and customers; and all books, ledgers, files and business
records of every kind; whether evidenced in writing, electronically
(including, without limitation, by computer) or otherwise;
(xvi) all advertising, marketing and promotional materials
and all other printed or written materials;
(xvii) all permits, licenses, certifications and approvals
from all permitting, licensing, accrediting and certifying agencies, and
the rights to all data and records held by such permitting, licensing and
certifying agencies;
(xviii) all telephone numbers (e.g. "800" numbers) used by the
Seller;
(xix) all goodwill as a going concern and all other
intangible properties;
(xx) the name "Eagle Scaffolding Equipment"; and
(xxi) except as specified in Section 2.1(b) below, all other
property owned by the Seller, or in which it has an interest on the Closing
Date, including, without limitation, all fixed assets included on the
Latest Balance Sheet and any and all subsequent improvements or additions
thereon through the Closing Date.
(b) Excluded Assets. Notwithstanding Section 2.1(a) above, the
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following assets are expressly excluded from the purchase and sale contemplated
hereby and, as such, are not Acquired Assets (collectively, the "Excluded
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Assets"):
(i) all monies to be received by the Seller from the
Purchaser;
(ii) all rights of the Seller under this Agreement;
(iii) all qualifications to do business as a foreign
corporation;
(iv) all arrangements with registered agents relating to
foreign qualifications;
(v) all taxpayer and other identification numbers; and
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(vi) all seals, minute books, stock transfer books, blank
stock certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a corporation.
(c) Assumed Liabilities. Subject to Section 2.1(d) below, as
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additional consideration for the Acquired Assets, at the Closing the Purchaser
will assume all liabilities and obligations of the Seller pursuant to executory
contracts, orders and commitments covering the purchase of inventory, equipment
and/or supplies or the sale or rental of equipment, merchandise or services
which are described on the attached Contracts Schedule (the "Assumed
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Liabilities").
(d) Excluded Liabilities. Except as set forth in Section 2.1(c)
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above, the Purchaser shall not assume or become liable for, and shall not be
deemed to have assumed or have become liable for, any of the Seller's
liabilities and obligations not expressly assumed by the Purchaser pursuant to
Section 2.1(c) above, whether accrued, absolute or contingent, whether known or
unknown, whether disclosed or undisclosed, whether due or to become due and
whether related to the Acquired Assets or otherwise, and regardless of when
asserted, including, without limitation, any liabilities or obligations arising
from or relating to the Acquired Assets or Seller's operation of the Business
prior to the Closing Date (the "Excluded Liabilities").
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2.2 PURCHASE PRICE FOR ACQUIRED ASSETS. The aggregate purchase
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price to be paid to Sellers for the Acquired Assets (the "Purchase Price") will
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consist of the assumption by Purchaser of the Assumed Liabilities and the
payment of $2,800,000, which amount shall be paid as follows: (a) the Purchaser
shall deliver to the Sellers $2,744,000 in cash (as adjusted pursuant to Section
2.3 below) in cash (as adjusted, the "Cash Portion"); and (b) the Purchaser
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shall maintain $56,000 in a book entry account of the Purchaser (the
"Holdback"). The Holdback shall be available to satisfy any amounts owing to
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the Purchaser pursuant to Section 2.3 and/or Section 9.2. The Purchase Price
will be allocated among the Sellers in the manner set forth in Schedule of
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Stockholders attached hereto.
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2.3 Purchase Price Adjustments.
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(a) Closing Date Adjustments. At the Closing, the Purchase Price
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will be adjusted dollar-for-dollar as set forth in this Section 2.3(a).
(i) Total Assets. Not more than ten (10) Business Days,
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but in no event less than five (5) Business Days, before the Closing Date,
the Seller and the Purchaser will, in good faith and in accordance with the
GAAP, jointly estimate the Total Assets as of the close of business on the
day before the Closing Date on a reasonable basis using the Seller's then
available financial information; provided, however, that if the Seller and
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the Purchaser cannot agree on an estimate of the Total Assets, such
estimate will be deemed to be equal to the average of the Seller's and the
Purchaser's good faith determinations thereof. The amount of the Total
Assets as finally estimated pursuant to this Section 2.3(a), is referred to
herein as the "Estimated Total Assets." At the Closing, if the Estimated
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Total Assets is less than the Baseline Total Assets, then the Purchase
Price will be decreased by the amount of such deficiency, and if the
Estimated Total Assets is greater than the Baseline Total Assets, then the
Purchase Price will be increased by the amount of such excess.
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(ii) Indebtedness. At the Closing, the Purchase Price will
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be decreased dollar-for-dollar by an amount equal to the amount necessary
to discharge fully the then outstanding balance of the Seller's and its
Subsidiaries' Indebtedness secured by any of the Acquired Assets
(including, without limitation, prepayment penalties and premiums).
(b) Post-Closing Determination. Within 90 days after the Closing
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Date, the Purchaser and its auditors will conduct a review (the "Closing
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Review") of the Total Assets as of the close of business on the day before the
Closing Date and will prepare and deliver to the Seller a computation of the
amount of the Total Assets as of the close of business on the day before the
Closing Date (the "Draft Balance Sheet"). The Purchaser and its auditors will
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make available to the Seller and its auditors all records and work papers used
in preparing the Draft Balance Sheet. If the Seller disagrees with the
computation of the Total Assets reflected on the Draft Balance Sheet, the Seller
may, within thirty (30) days after receipt of the Draft Balance Sheet, deliver a
notice (an "Objection Notice") to the Purchaser setting forth the Seller's
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calculation of the amount of the Total Assets as of the close of business on the
day before the Closing Date. The Purchaser and the Seller will use reasonable
best efforts to resolve any disagreements as to the computation of the Total
Assets, but if they do not obtain a final resolution within thirty (30) days
after the Purchaser has received the Objection Notice, the Purchaser and the
Seller will jointly retain an independent accounting firm of recognized national
standing (the "Firm") to resolve any remaining disagreements. If the Purchaser
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and the Seller are unable to agree on the choice of the Firm, then the Firm will
be a so-called "big-six" accounting firm (or successor thereof) selected by lot
(after excluding one firm designated by the Purchaser and one firm designated by
the Seller). The Purchaser and the Seller will direct the Firm to render a
determination within 30 days of its retention and the Purchaser, the Seller, the
Stockholders and their respective agents will cooperate with the Firm during its
engagement. The Firm will consider only those items and amounts in the Draft
Balance Sheet set forth in the Objection Notice which the Purchaser and the
Seller are unable to resolve. In resolving any disputed item, the Firm may not
assign a value to any item greater than the greatest value for such item claimed
by either party or less than the smallest value for such item claimed by either
party. The Firm's determination will be based solely on presentations by the
Purchaser and the Seller (i.e., not on independent review), and on the
definition of the Total Assets included herein. The determination of the Firm
will be conclusive and binding upon the Purchaser, the Seller and the
Stockholders. The Purchaser and the Seller shall bear the costs and expenses of
the Firm based on the percentage which the portion of the contested amount not
awarded to each party bears to the amount actually contested by such party. The
amount of the Total Assets, as finally determined pursuant to this Section
2.3(b), is referred to herein as the "Actual Total Assets."
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(c) Post-Closing Adjustment.
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(i) Payment by the Purchaser. If the Actual Total Assets is
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greater than the Estimated Total Assets, the Purchaser will, within five
(5) Business Days after the determination thereof, pay to the Seller an
amount equal to the sum of (A) the Actual Total Assets minus the Estimated
Total Assets plus (B) interest on such difference from the Closing Date to
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the date of payment at an interest rate equal to the "Prime Rate" as
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listed in the Wall Street Journal on the Closing Date (the "Prime Rate").
Such payment will be made by wire transfer or delivery of other immediately
available funds.
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(ii) Payment by the Stockholders. If the Actual Total
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Assets is less than the Estimated Total Assets, the Seller will, within
five (5) Business Days after the determination thereof, pay to the
Purchaser an amount equal to (A) the Estimated Total Assets minus the
Actual Total Assets plus (B) interest on such difference from the Closing
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Date to the date of payment at an interest rate equal to the Prime Rate.
Such payment will be made by wire transfer or delivery of other immediately
available funds.
(iii) Dispute. If, pursuant to Section 2.3(b) above, there
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dispute as to the final determination of the Actual Total Assets, the
Purchaser and the Seller shall promptly pay to the other, as appropriate,
such amounts as are not in dispute, pending final determination of such
dispute pursuant to Section 2.3(b).
(d) Accounts Receivable Adjustment. Notwithstanding anything
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herein to the contrary, and in addition to any other adjustments set forth in
this Agreement, the Cash Portion will be reduced dollar-for-dollar by the
aggregate amount of the net notes and accounts receivable of the Seller in
existence as of the Closing (the "Accounts Receivable"), which are uncollected
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by the Purchaser (the "Uncollected Receivables Amount") as of the 90th day
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following the Closing Date (the "Receivables Determination Date"). If there
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is an Uncollected Receivables Amount, the Purchaser shall be entitled to
receive the Uncollected Receivables Amount from the Holdback within two (2)
Business Days after the Receivables Determination Date; provided, however,
that if the amount then left in the Holdback is less than the amount of the
Uncollected Receivables Amount, the Seller shall pay to the Purchaser, within
two (2) Business Days after the Receivables Determination Date, the amount by
which the Holdback is less than Uncollected Receivables Amount by wire
transfer or delivery of other immediately available funds. For the purpose of
determining amounts collected by the Purchaser with respect to the Accounts
Receivable, (i) in the absence of a bona fide dispute between an account
debtor and the Purchaser regarding receivables of such account debtor accrued
prior to the Closing Date, all payments by an account debtor shall first be
applied to the oldest outstanding invoice due from that account debtor, and
(ii) in the case of a dispute between the Purchaser and an account debtor with
respect to a particular invoice, all payments shall be first applied to the
next oldest invoice due from that account debtor. The Purchaser shall not be
required to take any action out of the ordinary course of business to collect
any of the Accounts Receivable. To the extent that the Purchaser has not
collected the full amount of the Accounts Receivable and the Purchaser has
been compensated therefor in accordance with this Section, the Purchaser shall
assign any such uncollected Accounts Receivable to the Seller.
2.4 DISTRIBUTION OF HOLDBACK. On the 180th day after the Closing
------------------------
Date, the Purchaser shall pay to the Seller an amount equal to the amount of the
Holdback, if any, remaining after (i) all amounts owing to the Purchaser
pursuant to Section 2.3 have been satisfied and (ii) all claims of the Purchaser
under Section 9.2 which have theretofore been finally resolved have been
satisfied (the "Remaining Holdback") less any amount for which the Purchaser
------------------
claims, prior to such 180th day, that it is entitled to receive indemnification
pursuant to Section 9.2 (each, a "Pending Claim"). As soon as practicable
-------------
following final resolution of all Pending Claims, the Purchaser shall pay to the
Seller an aggregate amount equal to the portion, if any, of the Holdback which
remains after payment of the Remaining Holdback and final resolution of all
Pending Claims.
-11-
2.5 Closing Transactions.
--------------------
(a) Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis,
-------
200 East Randolph Drive, Chicago, Illinois 60601, commencing at 10:00 a.m. on
the business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself), or at such other place or on such other date as may be
mutually agreeable to the Purchaser and the Seller; provided that in any event,
if the Purchaser's senior lenders require that the Closing take place at the
offices of their attorneys, the Parties agree that the Closing shall take place
at such offices. The date and time of the Closing are herein referred to as the
"Closing Date."
------------
(b) Closing Transactions. Subject to the conditions set forth
--------------------
in this Agreement, the Parties shall consummate the following transactions (the
"Closing Transactions") on the Closing Date:
--------------------
(i) the Stockholders shall cause the Seller to, and the
Seller shall convey to the Purchaser good and marketable title to all of
the Acquired Assets, free and clear of all Liens, and deliver to the
Purchaser warranty deeds, bills of sale, assignment of leases and contracts
and all other instruments of conveyance which are necessary or desirable to
effect transfer of the Acquired Assets, in form and substance satisfactory
to the Purchaser;
(ii) the Purchaser shall deliver to the Seller such
instruments of assumption as are required in order for the Purchaser to
assume the Assumed Liabilities;
(iii) the Seller shall repay, or cause to be repaid, all
amounts necessary to discharge fully the then outstanding balance of the
Seller's Indebtedness (including, without limitation, prepayment penalties
and premiums) by wire transfer of immediately available funds as directed
by the holders of such Indebtedness at or prior to the Closing, and the
Seller shall deliver to Purchaser all appropriate payoff letters and shall
make arrangements reasonably satisfactory to Purchaser for such holders to
deliver all related lien releases and canceled notes at the Closing;
(iv) The Purchaser shall deliver to the Seller the Purchase
Price by wire transfer of immediately available funds; and
(v) the Seller and the Purchaser, as applicable, shall
deliver the opinions, certificates and other documents and instruments
required to be delivered by or on behalf of such Party under Article III.
-12-
ARTICLE III
CONDITIONS TO CLOSING
---------------------
3.1 Conditions to the Purchaser's Obligations. The obligation
-----------------------------------------
of the Purchaser to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of the following conditions as of the Closing
Date:
(a) The representations and warranties set forth in Article V
hereof shall be true and correct in all material respects at and as of the
Closing Date as though then made and as though the Closing Date were substituted
for the date of this Agreement throughout such representations and warranties
(without taking into account any disclosures made by the Seller or the
Stockholders to the Purchaser pursuant to Sections 4.1(g) or 5.25 hereof);
(b) The Seller and each Stockholder shall have performed and
complied with all of the covenants and agreements required to be performed by
each of them under this Agreement on or prior to the Closing;
(c) All consents by third parties that are required for the
transfer of the Acquired Assets to the Purchaser and the consummation of the
other transactions contemplated hereby or that are required in order to prevent
a breach of, a default under, a termination or modification of, or any
acceleration of, any obligations under any material contract to which the Seller
or any of its Subsidiaries is a party shall have been obtained, all on terms
reasonably satisfactory to the Purchaser;
(d) All governmental filings, authorizations and approvals that
are required for the transfer of the Acquired Assets to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Purchaser;
(e) The purchase of Acquired Assets by the Purchaser hereunder
shall not be prohibited by any applicable law or governmental regulation, shall
not subject the Purchaser to any penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation, and shall be
permitted by laws and regulations of the jurisdictions to which the Purchaser is
subject;
(f) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or materially and adversely affect the right of the
Purchaser to own, operate or control the Acquired Assets, and no judgment,
decree, injunction, order or ruling shall have been entered which has any of the
foregoing effects;
(g) Since the date hereof, there shall have been no Material
Adverse Effect;
(j) Payoff letters with respect to all of the Seller's and its
Subsidiaries' Indebtedness outstanding as of the Closing and releases of any and
all Liens, including appropriate
-13-
UCC termination statements, held by third parties against the Acquired Assets
shall have been obtained, all on terms reasonably satisfactory to the Purchaser;
(h) Purchaser shall have received an opinion, dated the Closing
Date, of Jeffrey Shaner, counsel to the Seller and the Stockholders, in form and
substance satisfactory to Purchaser;
(i) On or prior to the Closing Date, the Stockholders shall have
delivered to Purchaser all of the following:
(i) a certificate from the Seller and the Stockholders in a form
reasonably satisfactory to the Purchaser, dated the Closing Date, stating
that the preconditions specified in Sections 3.1(a) through (i) have been
satisfied;
(ii) copies of all third party and governmental consents,
approvals, filings, releases and terminations required in connection with
the consummation of the transactions contemplated herein;
(iii) certified copies of the resolutions of the Stockholders and
the Seller's board of directors approving the transactions contemplated by
this Agreement;
(iv) certificates of the secretary of state of the State of Nevada
and any other state where the Seller or any of its Subsidiaries is
qualified to do business providing that the Seller or such Subsidiary is in
good standing;
(v) landlord consents and estoppel certificates from the Seller's
and any of its Subsidiaries' landlords in form and substance satisfactory
to the Purchaser; and
(vi) such other documents or instruments as the Purchaser may
reasonably request to effect the transactions contemplated hereby;
(j) Robert Kenneth McNabb and the Purchaser shall have entered
into an agreement relating to his employment with the Purchaser substantially in
the form of Exhibit A attached hereto, and such employment agreement shall be
---------
in full force and effect (the "K. McNabb Employment Agreement").
------------------------------
(k) Robert Steven McNabb and the Purchaser shall have entered into an
agreement relating to his employment with the Purchaser substantially in the
form of Exhibit B attached hereto, and such employment agreement shall be in
---------
full force and effect (the "S. McNabb Employment Agreement").
------------------------------
(l) The Stockholders and the Seller shall have entered into a lease
agreement with respect to the property located at 3629 West Hacienda, Las Vegas,
Nevada substantially in the form of Exhibit C attached hereto (the "Lease");
---------- -----
-14-
(m) The Seller shall have obtained a non-disturbance agreement in form
and substance satisfactory to the Purchaser and the Purchaser's lender from each
lender encumbering each parcel of Leased Real Property;
(n) The Purchaser shall have obtained debt financing for the
transactions contemplated herein and post-Closing working capital requirements
in amounts and on terms satisfactory to the Purchaser;
(o) The Purchaser, National Equipment Services, Inc. and the
Stockholders shall have entered into a noncompetition agreement substantially in
the form of Exhibit D attached hereto (the "Noncompetition Agreement"), and such
---------- ------------------------
Noncompetition Agreement shall be in full force and effect;
(p) All proceedings to be taken by the Seller, any of its Subsidiaries
and the Stockholders in connection with the consummation of the Closing
Transactions and the other transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to be delivered
by the Seller, any of its Subsidiaries and the Stockholders to effect the
transactions contemplated hereby reasonably requested by the Purchaser shall be
reasonably satisfactory in form and substance to the Purchaser.
Any condition specified in this Section 3.1 may be waived by the Purchaser;
provided that no such waiver shall be effective against the Purchaser unless it
is set forth in a writing executed by the Purchaser.
3.2 Conditions to the Seller's Obligation. The obligation of
-------------------------------------
the Seller to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article VI shall
be true and correct in all material respects at and as of the Closing Date as
though then made and as though the Closing Date were substituted for the date of
this Agreement throughout such representations and warranties (without taking
into account any disclosures made by the Purchaser to the Seller pursuant to
Sections 4.3(a) and 6.7 hereof);
(b) The Purchaser shall have performed and complied with all of the
covenants and agreements required to be performed by it under this Agreement on
or prior to the Closing;
(c) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Assets to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Seller;
(d) No action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable judgment,
decree, injunction, order or ruling would prevent the performance of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
-15-
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the right of the Purchaser to own,
operate or control the Acquired Assets, and no judgment, decree, injunction,
order or ruling shall have been entered which has any of the foregoing effects;
(e) The Purchaser and K. McNabb shall have entered into the K. McNabb
Employment Agreement;
(f) The Purchaser and S. McNabb shall have entered into the S. McNabb
Employment Agreement;
(g) On or prior to the Closing Date, the Purchaser shall have
delivered to the Seller all of the following:
(i) a certificate from the Purchaser in a form reasonably satisfactory
to the Seller, dated the Closing Date, stating that the preconditions
specified in Sections 3.2(a) through (d), inclusive, have been satisfied;
(ii) certificates of the secretary of state of the State of Delaware
providing that the Purchaser is in good standing;
(iii) certified copies of the resolutions of the Purchaser's board of
directors approving the transactions contemplated by this Agreement;
(iv) such other documents or instruments as the Seller may reasonably
request to effect the transactions contemplated hereby; and
(h) All proceedings to be taken by the Purchaser in connection with
the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to be delivered by the Purchaser to effect the transactions
contemplated hereby reasonably requested by the Seller shall be reasonably
satisfactory in form and substance to the Seller.
Any condition specified in this Section 3.2 may be waived by the Seller;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by the Seller.
ARTICLE IV
COVENANTS PRIOR TO CLOSING
4.1 AFFIRMATIVE COVENANTS OF THE SELLER AND EACH STOCKHOLDER.
--------------------------------------------------------
Prior to the Closing, unless the Purchaser otherwise agrees in writing and
except as expressly contemplated by this Agreement, the Stockholders shall cause
the Seller and each of its Subsidiaries to, the Seller and each of its
Subsidiaries shall and in the case of Sections 4.1(f), (g), (h) and (m) each
Stockholder also shall:
-16-
(a) conduct its business and operations only in the Ordinary Course of
Business;
(b) keep in full force and effect its corporate existence and all
rights, franchises and intellectual property relating or pertaining to its
business and use its reasonable best efforts to cause its current insurance (or
reinsurance) policies not to be canceled or terminated or any of the coverage
thereunder to lapse;
(c) use its reasonable best efforts to carry on the business of the
Seller and of each of its Subsidiaries in the same manner as presently conducted
and to keep the Seller's and each of its Subsidiaries' business organization and
properties intact, including its present business operations, physical
facilities, working conditions and employees and its present relationships with
lessors, licensors, suppliers and customers and others having business relations
with it;
(d) maintain the material assets of the Seller and each of its
Subsidiaries in good repair, order and condition (normal wear and tear excepted)
consistent with current needs, replace in accordance with prudent practices its
inoperable, worn out or obsolete assets with assets of good quality consistent
with prudent practices and current needs and, in the event of a casualty, loss
or damage to any of such assets or properties prior to the Closing Date, either
repair or replace such damaged property or use the proceeds of such insurance in
such other manner as mutually agreed upon by the Seller and the Purchaser;
(e) encourage employees to continue their employment with the
Purchaser and its Subsidiaries after the Closing;
(f) maintain the books, accounts and records of the Seller and each of
its Subsidiaries in accordance with past custom and practice as used in the
preparation of the Financial Statements;
(g) promptly (once the Seller or any Stockholder obtains knowledge
thereof) inform the Purchaser in writing of any variances from the
representations and warranties contained in Article V hereof or any breach of
any covenant hereunder by the Seller or the Stockholders;
(h) cooperate with the Purchaser and use reasonable best efforts to
cause the conditions to the Purchaser's obligation to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all third party and governmental notices, filings, authorizations,
approvals, consents, releases and terminations);
(i) use reasonable best efforts to obtain all third party and
governmental approvals and consents necessary or desirable to consummate the
transactions contemplated hereby and to cause the other conditions to the
Purchaser's obligations hereunder to be satisfied;
(j) maintain the existence of and use reasonable best efforts to
protect all Proprietary Rights used in the business of the Seller and each of
its Subsidiaries;
-17-
(k) maintain the existence of and protect all of the governmental
permits, licenses, approvals and other authorizations of the business of the
Seller and each of its Subsidiaries;
(l) comply with all applicable laws, ordinances, and regulations in
the operation of the business of the Seller and each of its Subsidiaries; and
(m) cooperate with the Purchaser in the Purchaser's investigation of
the business and properties of the Seller and each of its Subsidiaries, to
permit the Purchaser and its employees, agents, accounting, legal and other
authorized representatives to (i) have full access to the premises, books and
records of the Seller and each of its Subsidiaries at reasonable hours, (ii)
visit and inspect any of the properties of the Seller and each of its
Subsidiaries, and (iii) discuss the affairs, finances and accounts of the Seller
and each of its Subsidiaries with the directors, officers, partners, key
employees, key customers, key sales representatives, key suppliers and
independent accountants of the Seller and each of its Subsidiaries.
4.2 Negative Covenants of the Seller and Each Stockholder.
-----------------------------------------------------
Prior to the Closing, unless Purchaser otherwise agrees in writing and except as
expressly contemplated by this Agreement, each Stockholder shall cause the
Seller and each of its Subsidiaries to not and Seller and each of its
Subsidiaries shall not:
(a) take any action that would require disclosure under Section 5.8;
(b) make any loans, enter into any transaction with any Insider or
make or grant any increase in any employee's or officer's compensation or make
or grant any increase in any employee benefit plan, incentive arrangement or
other benefit covering any of the employees of the Seller or its Subsidiaries;
(c) establish or, except in the Ordinary Course of Business,
contribute to any pension, retirement, profit sharing or stock bonus plan or
multiemployer plan covering the employees of the Seller or its Subsidiaries;
(d) except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length with unaffiliated Persons;
(e) declare, pay, make or otherwise effectuate any dividends,
distributions, redemptions, equity repurchases or other transactions involving
the Seller's or any of its Subsidiaries' capital stock or equity securities
(except with respect to (i) dividends paid for the purpose of reimbursing any
Stockholder for individual income tax liabilities related to the Seller or (ii)
dividends relating to the accumulated adjustments account);
(f) engage in any activity other than in the Ordinary Course of
Business which would accelerate the collection of its accounts or notes
receivable, delay the payment of its accounts payable, delay its capital
expenditures, or reduce or otherwise restrict the amount of inventory on hand;
or
-18-
(g) sell, transfer, contribute, distribute, or otherwise dispose of
any securities, capital stock or assets (other than marketable securities) of
the Seller or of its Subsidiaries, or agree to do any of the foregoing, to any
Person, or negotiate or have any discussions with any Person with respect to any
of the foregoing, other than in the Ordinary Course of Business.
4.3 Covenants of Purchaser. Prior to the Closing, the Purchaser
----------------------
shall:
(a) promptly (once it obtains knowledge thereof) inform the Seller in
writing of any variances from the representations and warranties contained in
Article VI or any breach of any covenant hereunder by Purchaser; and
(b) cooperate with Seller and use its reasonable best efforts to cause
the conditions to the Seller's obligation to close to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated
hereunder to be so executed and delivered and the making and obtaining of all
third party and governmental filings, authorizations, approvals, consents,
releases and terminations).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SELLER AND THE STOCKHOLDERS
------------------------------------------
As a material inducement to Purchaser to enter into this Agreement, the
Seller and the Stockholders hereby jointly and severally represents and warrants
that:
5.1 Organization and Corporate Power. The Seller is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and is qualified to do business in every jurisdiction in
which it is required to be qualified. All jurisdictions in which the Seller is
qualified to do business are set forth on the "Organization Schedule" attached
---------------------
hereto. The Seller has full power and authority and all licenses, permits and
authorizations necessary to own and operate its properties and to carry on its
business as now conducted. Correct and complete copies of the Seller's and each
of its Subsidiaries' articles of incorporation and by-laws have been furnished
to the Purchaser, which documents reflect all amendments made thereto at any
time prior to the date of this Agreement. Correct and complete copies of the
minute books containing the records of meetings of the stockholders and board of
directors, the stock certificate books and the stock record books of the Seller
and each of its Subsidiaries have been furnished to the Purchaser. Neither the
Seller nor any of its Subsidiaries is in default under or in violation of any
provision of its articles of incorporation or by-laws.
5.2 Authorization of Transactions. The Seller and the
-----------------------------
Stockholders have full power and authority to execute and deliver the
Transaction Documents to which they are a party and to consummate the
transactions contemplated hereby and thereby. The Stockholders and the board of
directors of the Seller have duly approved the Transaction Documents to which
the Stockholders and the Seller are a party and have duly authorized the
execution and delivery of such Transaction Documents and the consummation of the
transactions contemplated thereby. No other corporate proceedings on the part
of the Stockholders or the Seller are necessary to approve and authorize the
-19-
execution and delivery of the Transaction Documents to which the Stockholders
and the Seller are a party and the consummation of the transactions contemplated
thereby. All Transaction Documents to which the Stockholders and the Seller are
a party have been duly executed and delivered by the Stockholders and the Seller
and constitute the valid and binding agreements of the Stockholders and the
Seller, enforceable against the Stockholders and the Seller in accordance with
their terms.
5.3 Capitalization. The authorized, issued and outstanding
--------------
stock of the Seller consists of 10,000 shares of Common Stock, no par value, of
which 3,250 shares are issued and outstanding. All of the issued and
outstanding shares of the Seller's capital stock have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record and
beneficially by the Stockholders in the amounts set forth on the Schedule of
-----------
Stockholders and are not subject to, nor were they issued in violation of, any
- ------------
preemptive rights or rights of first refusal, and are owned of record and
beneficially by the respective Stockholders as set forth on the Schedule of
-----------
Stockholders free and clear of all Liens. There are no outstanding or
- ------------
authorized options, warrants, rights, contracts, calls, puts, rights to
subscribe, conversion rights or other agreements or commitments to which the
Seller is a party or which are binding upon the Seller providing for the
issuance, disposition or acquisition of any of its capital stock (other than
this Agreement). There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Seller or any of its
Subsidiaries. Except as set forth on the Schedule of Stockholders, there are no
------------------------
voting trusts, proxies or any other agreements or understandings with respect to
the voting of the capital stock of the Seller or any of its Subsidiaries.
Neither the Seller nor any of its Subsidiaries is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock.
5.4 Subsidiaries; Investments. The attached "Subsidiaries
------------------------- ------------
Schedule" correctly sets forth the name of each of the Seller's direct or
- --------
indirect Subsidiaries, the jurisdiction of its incorporation, the number of
authorized, issued and outstanding shares of capital stock of such Subsidiary
and the Persons owning the outstanding capital stock of such Subsidiary. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, possesses all requisite corporate
power and authority and all material licenses, permits and authorizations
necessary to own its properties and to carry on its businesses as now being
conducted and is qualified to do business in every jurisdiction in which its
ownership of property or the conduct of business requires it to qualify. All of
the outstanding shares of capital stock of each Subsidiary are validly issued,
full paid and nonassessable, and all such shares are owned by the Seller or
another Subsidiary free and clear of any Lien and not subject to any option or
right to purchase any such shares. Except as set forth on the Subsidiaries
------------
Schedule, neither the Seller nor any of its Subsidiaries owns or holds the right
- --------
to acquire any shares of stock or any other security or interest in any other
Person.
5.5 Absence of Conflicts. Except as set forth on the "Conflicts
-------------------- ---------
Schedule" attached hereto, the execution, delivery and performance of the
- --------
Transaction Documents and the consummation of the transactions contemplated
thereby by the Seller and each Stockholder do not and shall not (a) conflict
with or result in any breach of any of the terms, conditions or provisions of,
(b) constitute a default under, (c) result in a violation of, (d) give any third
party the right to modify, terminate or accelerate any obligation under, (e)
result in the creation of any Lien upon the Acquired Assets or (f) require any
authorization, consent, approval, exemption or other action by or
-20-
notice or declaration to, or filing with, any court or administrative or other
governmental body or agency, under the provisions of the articles of
incorporation or by-laws of the Seller or any of its Subsidiaries or any
indenture, mortgage, lease, loan agreement or other agreement or instrument to
which the Seller, any of its Subsidiaries or such Stockholder is bound or
affected, or any law, statute, rule or regulation to which the Seller, any of
its Subsidiaries or such Stockholder is subject or any judgment, order or decree
to which the Seller, any of its Subsidiaries or such Stockholder is subject.
5.6 Financial Statements and Related Matters.
----------------------------------------
(a) Financial Statements. Attached hereto as the "Financial
-------------------- ---------
Statements Schedule" are copies of the Seller's and its Subsidiaries' (i)
- -------------------
unaudited balance sheet as of November 30, 1997 (the "Latest Balance Sheet") and
--------------------
the related statement of income for the eleven-month period then ended and (ii)
audited balance sheets and statements of income for the fiscal years ended
December 31, 1996, 1995 and 1994. Each of the foregoing financial statements
(including in all cases the notes thereto, if any) (the "Financial Statements")
--------------------
is accurate and complete, is consistent with the Seller's books and records
(which, in turn, are accurate and complete), presents fairly the Seller's
financial condition and results of operations as of the times and for the
periods referred to therein, and, except as set forth on the "Financial
---------
Statements Schedule," has been prepared in accordance with GAAP, subject in the
- -------------------
case of unaudited financial statements to changes resulting from normal year-end
adjustments for recurring accruals (which shall not be material individually or
in the aggregate) and to the absence of footnote disclosure.
(b) Receivables. The Seller's and its Subsidiaries notes and accounts
-----------
receivable are valid receivables, current, and are subject to no valid
counterclaims or setoffs, at the aggregate amount recorded on the Seller's and
its Subsidiaries' books and records as of the Closing, net of an amount of
allowances for doubtful accounts which relate to those receivables computed in a
manner consistent with GAAP and the accounting practices used in the preparation
of the Latest Balance Sheet.
(c) Inventory. The Seller's and its Subsidiaries' inventory, net of
---------
the reserves applicable to such inventory, consists of a quantity and quality
which, except as reflected in such reserve, is usable and saleable in the
Ordinary Course of Business, and the items of such inventory are not defective,
slow-moving, obsolete or damaged and are merchantable and fit for their
particular use. The Seller and each of its Subsidiaries has good title to such
inventory, free and clear of all Liens (other than Permitted Encumbrances).
5.7 Absence of Undisclosed Liabilities. Neither the Seller nor
----------------------------------
any of its Subsidiaries has any obligations or liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether or not known, whether
due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the Closing, or any action or inaction
at or prior to the Closing, or any state of facts existing at or prior to the
Closing, except (i) obligations under executory contracts or commitments
described on the Contracts Schedule attached hereto or under executory contracts
------------------
and commitments which are not required to be disclosed thereon (but not
liabilities for breaches thereof), (ii) liabilities reflected on the liabilities
side of the Latest Balance Sheet, and (iii) liabilities which have arisen after
the date of the Latest Balance Sheet in the Ordinary Course of Business or
otherwise in accordance with the terms and conditions of this Agreement
-21-
(none of which is a liability for breach of contract, breach of warranty, tort
or infringement or a claim or lawsuit or an environmental liability).
5.8 Absence of Certain Developments. Except as set forth on the
-------------------------------
"Developments Schedule" attached hereto and except as expressly contemplated by
---------------------
this Agreement, since August 31, 1997, neither the Seller nor any of its
Subsidiaries has:
(a) suffered any change that has had or could reasonably be expected
to have a Material Adverse Effect or suffered any theft, damage, destruction or
casualty loss in excess of $50,000, to its assets, whether or not covered by
insurance or suffered any substantial destruction of its books and records;
(b) redeemed or repurchased, directly or indirectly, any shares of
capital stock or other equity security or declared, set aside or paid any
dividends or made any other distributions (whether in cash or in kind) with
respect to any shares of its capital stock or other equity security;
(c) issued, sold or transferred any equity securities, any securities
convertible, exchangeable or exercisable into shares of its capital stock or
other equity securities, or warrants, options or other rights to acquire shares
of its capital stock or other of its equity securities;
(d) incurred or become subject to any liabilities, except liabilities
incurred in the Ordinary Course of Business;
(e) subjected any portion of its properties or assets to any Lien
(other than Permitted Encumbrances)
(f) sold, leased, assigned or transferred (including, without
limitation, transfers to Stockholders or any Insider) a portion of its tangible
assets, except for sales of inventory in the Ordinary Course of Business, or
canceled without fair consideration any material debts or claims owing to or
held by it;
(g) sold, assigned, licensed or transferred (including, without
limitation, transfers to Stockholders or any Insider) any Proprietary Rights
owned by, issued to or licensed to it or disclosed any confidential information
(other than pursuant to agreements requiring the disclosure to maintain the
confidentiality of and preserving all its rights in such confidential
information) or received any confidential information of any third party in
violation of any obligation of confidentiality;
(h) suffered any extraordinary losses or waived any rights of material
value;
(i) entered into, amended or terminated any material lease, contract,
agreement or commitment, or taken any other action or entered into any other
transaction other than in the Ordinary Course of Business;
(j) entered into any other material transaction, or materially changed
any business practice;
-22-
(k) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee or sales representative, group of
employees or consultant or made or granted any increase in any employee benefit
plan or arrangement, or amended or terminated any existing employee benefit plan
or arrangement or adopted any new employee benefit plan or arrangement;
(l) made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business;
(m) conducted its cash management customs and practices other than in
the Ordinary Course of Business (including, without limitation, with respect to
collection of accounts receivable, purchases of inventory and supplies, repairs
and maintenance, payment of accounts payable and accrued expenses, levels of
capital expenditures and operation of cash management practices generally);
(n) made any capital expenditures or commitments for capital
expenditures that aggregate in excess of $20,000;
(o) made any loans or advances to, or guarantees for the benefit of,
any Person;
(p) made charitable contributions, pledges, association fees or dues
in excess of $10,000; or
(q) committed to do any of the foregoing.
5.9 Assets. The Seller and each of its Subsidiaries have good
------
and marketable title to, or a valid leasehold interest in, the properties and
assets used by them, located on their premises or shown on the Latest Balance
Sheet or acquired thereafter, free and clear of all Liens, except for Permitted
Encumbrances and except for properties and assets disposed of in the ordinary
course of business since the date of the Latest Balance Sheet. The Seller's and
each of its Subsidiaries' buildings, equipment and other tangible assets are in
good operating condition and are fit for use in the ordinary course of business.
The Seller and each of its Subsidiaries owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. The Acquired Assets constitute all of the assets and
rights necessary for the conduct of the Business as it is presently conducted.
5.10 Title to Properties.
-------------------
(a) Owned Properties. The Seller does not own any real property.
----------------
(b) Leased Properties. The "Leases Schedule" sets forth a list of all
----------------- ---------------
of the leases and subleases (the "Leases") and each leased and subleased parcel
------
of real property in which the Seller or any of its Subsidiaries has a leasehold
and subleasehold interest (the "Leased Real Property"). Each of the Leases is
--------------------
in full force and effect and the Seller or its Subsidiary holds a valid and
existing leasehold or subleasehold interest under each of the Leases. The
Seller has delivered to the Purchaser true, correct, complete and accurate
copies of each of the Leases described in the Leases
------
-23-
Schedule. With respect to each Lease listed on the Leases Schedule: (i) the
- -------- ---------------
Lease is legal, valid, binding, enforceable and in full force and effect; (ii)
the Lease will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the Closing; (iii) neither the
Seller nor, to the knowledge of the Seller or any Stockholder, any other party
to the Lease is in breach or default, and no event has occurred which, with
notice or lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration under the Lease; (iv) no party to the
Lease has repudiated any provision thereof; (v) there are no disputes, oral
agreements, or forbearance programs in effect as to the Lease; (vi) the Lease
has not been modified in any respect, except to the extent that such
modifications are disclosed by the documents delivered to the Purchaser; and
(vii) neither the Seller nor any of its Subsidiaries has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Lease.
(c) Real Property Disclosure. Except as disclosed on the Leases
------------------------ ------
Schedule, there is no Real Property leased or owned by the Seller or any of its
- --------
Subsidiaries used in their businesses.
(d) No Proceedings. There are no proceedings in eminent domain or
--------------
other similar proceedings pending or, to the knowledge of the Seller or any
Stockholder, threatened, affecting any portion of the Leased Real Property.
There exists no writ, injunction, decree, order or judgment outstanding, nor any
litigation, pending or threatened, relating to the ownership, lease, use,
occupancy or operation by any person of the Leased Real Property.
(e) Condition and Operation of Improvements. All buildings and all
---------------------------------------
components of all buildings, structures and other improvements included within
the Leased Real Property (the "Improvements"), including, without limitation,
------------
the roofs and structural elements thereof and the heating, ventilation, air
conditioning, air pollution emission capture and abatement, plumbing,
electrical, mechanical, sewer, waste water and paving and parking equipment
systems and facilities included therein, are in good condition and repair and
adequate to operate such facilities as currently used and there are no facts or
conditions affecting any of the Improvements which would, individually or in the
aggregate, interfere in any significant respect with the use, occupancy or
operation thereof as currently used, occupied or operated or intended to be
used, occupied or operated. No Improvement or portion thereof is dependent for
its access, operation or utility on any land, building or other improvement not
included in the Leased Real Property.
(f) Permits. All certificates of occupancy, permits, licenses,
-------
franchises, approvals and authorizations (collectively, the "Real Property
-------------
Permits") of all governmental authorities having jurisdiction over the Leased
- -------
Real Property, required or appropriate to have been issued to the Seller or any
of its Subsidiaries to enable the Leased Real Property to be lawfully occupied
and used for all of the purposes for which it is currently occupied and used
have been lawfully issued and are, as of the date hereof, in full force and
effect. The Seller has delivered complete and correct copies of the Real
Property Permits to the Purchaser. Neither the Seller nor any of its
Subsidiaries has received or been informed by a third party of the receipt by it
of any notice from any governmental authority having jurisdiction over the
Leased Real Property threatening a suspension, revocation, modification or
cancellation of any Real Property Permit and, to the knowledge of the Seller or
any Stockholder, there is no basis for the issuance of any such notice or the
taking of any such action.
-24-
(g) Compliance with Laws. Neither the Seller nor any of its
--------------------
Subsidiaries has received any notice of violation or claimed violation of any
Real Property Law. There is no pending or, to the knowledge of the Seller or
any Stockholder, any anticipated change in any Real Property Law that will have
or result in a significant adverse effect upon the ownership, alteration, use,
occupancy or operation of the Leased Real Property or any portion thereof. No
current use by the Seller or its Subsidiary of the Leased Real Property is
dependent on a nonconforming use or other approval from a governmental
authority, the absence of which would significantly limit the use of any of the
properties or assets in the operation of the business of the Seller or any of
its Subsidiaries.
5.1 Taxes. Except as set forth on the attached "Taxes
----- -----
Schedule,"
(a) the Seller and each of its Subsidiaries has timely filed all Tax
Returns which are required to be filed, and all such Tax Returns are true,
complete and accurate in all respects and have been prepared in compliance with
applicable law;
(b) all Taxes due and payable by the Seller and each of its
Subsidiaries, whether or not shown on a Tax Return, have been paid by the Seller
or each such Subsidiary and no Taxes are delinquent;
(c) the amount accrued as a current liability for taxes on the Latest
Balance Sheet shall be sufficient to pay in full all Taxes for taxable periods
(or portions thereof) ending on or before the date of the Latest Balance Sheet,
whether or not such Taxes are due on or before such date and, since the date of
the Latest Balance Sheet, neither the Seller nor any of its Subsidiaries have
incurred any liability for Taxes other than in the Ordinary Course of Business;
(d) no deficiency for any amount of Tax which has not been resolved
has been asserted or assessed by a taxing authority against the Seller or any of
its Subsidiaries, and neither the Seller nor any Stockholder has knowledge that
any such assessment or asserted Tax liability shall be made;
(e) there is no action, suit, taxing authority proceeding or audit
now in progress, pending or, to the knowledge of the Seller or any Stockholder,
threatened against or with respect to the Seller or any of its Subsidiaries;
(f) neither the Seller nor the Stockholders reasonably expect any
taxing authority to claim or assess any additional Taxes in respect of the
Seller or any of its Subsidiaries for any period;
(g) neither the Seller nor any of its Subsidiaries has (A) waived any
statute of limitations, (B) agreed to any extension of the period for assessment
or collection or (C) executed or filed any power of attorney, in each case with
respect to any Taxes which waiver, agreement or power of attorney is currently
in force;
(h) neither the Seller nor any of its Subsidiaries has been a member
of an Affiliated Group (as defined in Section 1504 of the Code), or any similar
group defined under local, state or foreign Tax law and neither the Seller nor
any of its Subsidiaries has any liability for Taxes
-25-
of any Person other than the Seller or its Subsidiaries under Treasury
Regulations Section 1.1502-6 or any similar provision of local, state or foreign
Tax law;
(i) neither the Seller nor any of its Subsidiaries is a party to or
bound by any Tax allocation, sharing, indemnity or similar agreement or
arrangement with any Person and neither the Seller nor any of its Subsidiaries
has current or potential contractual obligation to indemnify any other Person
with respect to Taxes;
(j) neither the Seller nor any of its Subsidiaries has any obligation
to make any payment that could be non-deductible under Section 280G of the Code
(or any corresponding provision of state, local or foreign Tax law);
(k) no claim has ever been made by a taxing authority in a
jurisdiction where the Seller or any of its Subsidiaries does not pay Taxes or
file Tax Returns that the Seller or any such Subsidiary is or may be subject to
Taxes assessed by such jurisdiction;
(l) the Seller and each of its Subsidiaries have withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor or other third
party;
(m) a valid election to be an S Corporation (as defined in Section
1361 of the Code and any corresponding provision of state, local or foreign law)
has been in effect with respect to the Seller at all times since June 11, 1993;
(n) the Taxes Schedule contains a list of states, territories and
--------------
jurisdictions (whether foreign or domestic) in which the Seller and each of its
Subsidiaries are required to file Tax Returns relating to their respective
businesses; and
(o) neither the Seller nor any of its Subsidiaries will be required
to include any amount in taxable income for any taxable period (or portion
thereof) ending after the Closing Date that is attributable to any taxable
period (or portion thereof) ending on or before the Closing Date as a result of
(i) any change in method of accounting for a taxable period ending on or prior
to the Closing Date, (ii) any "closing agreement," as described in Section 7121
of the Code (or any corresponding provision of state, local or foreign income
Tax law), entered into on or before the Closing Date, (iii) any installment sale
made on or before the Closing Date, or (iv) any deferred intercompany gain
described in Treasury Regulation Section 1.15102-13 or any excess loss account
described in Treasury Regulation Section 1.1502-19 and 1.1502-32 (or any
corresponding or similar provision or administrative rule of federal, state,
local or foreign income tax law) arising on or before the Closing Date.
5.12 Contracts and Commitments.
-------------------------
(a) Except as specifically contemplated by this Agreement and except
as set forth on the "Contracts Schedule" attached hereto, neither the Seller nor
------------------
any of its Subsidiaries is a party to or bound by, whether written or oral, any:
-26-
(i) collective bargaining agreement or contract with any labor union
or any bonus, pension, profit sharing, retirement or any other form of
deferred compensation plan or any stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal or
informal;
(ii) any contract for the employment of any officer, individual
employee or other person on a full-time or consulting basis or any
severance agreements;
(iii) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a Lien on any of its assets;
(iv) contract under which the Seller or any of its Subsidiaries has
advanced or loaned any other Person amounts in the aggregate exceeding
$25,000;
(v) agreements with respect to the lending or investing of funds;
(vi) license or royalty agreements;
(vii) guaranty of any obligation, other than endorsements made for
collection;
(viii) management, consulting, advertising, marketing, promotion,
technical services, advisory or other contract or other similar arrangement
relating to the design, marketing, promotion, management or operation of
the Business;
(ix) outstanding powers of attorney executed on behalf of the Seller;
(x) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for
payments in excess of $10,000 annually;
(xi) lease or agreement under which it is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by it;
(xii) contract or group of related contracts with the same party
continuing over a period of more than six months from the date or dates
thereof, not terminable by it on 30 days or less notice without penalties
or involving more than $10,000;
(xiii) any confidentiality agreement or similar arrangement;
(xiv) contract which prohibits it from freely engaging in business
anywhere in the world; or
(xv) other agreement material to it whether or not entered into in
the Ordinary Course of Business.
-27-
(b) Except as disclosed on the Contracts Schedule, (i) no contract or
------------------
commitment required to be disclosed on the Contracts Schedule has been breached
------------------
or canceled by the other party and neither the Seller nor any Stockholder has
knowledge of any anticipated breach by any other party to any contract set forth
on the Contracts Schedule, (ii) no customer or supplier has indicated in writing
------------------
or orally to the Seller, any of its Subsidiaries or any Stockholder that it
shall stop or decrease the rate of business done with the Seller or any of its
Subsidiaries or that it desires to renegotiate its contract or current
arrangement with the Seller or any of its Subsidiaries, (iii) the Seller and
each of its Subsidiaries have performed all the obligations required to be
performed by them in connection with the contracts or commitments required to be
disclosed on the Contracts Schedule and are not in default under or in breach of
------------------
any contract or commitment required to be disclosed on the Contracts Schedule,
------------------
and no event has occurred which with the passage of time or the giving of notice
or both would result in a default or breach thereunder, (iv) neither the Seller
nor any of its Subsidiaries has any present expectation or intention of not
fully performing any obligation pursuant to any contract set forth on the
Contracts Schedule, and (vi) each agreement is legal, valid, binding,
- ------------------
enforceable and in full force and effect and will continue as such following the
consummation of the transactions contemplated hereby.
(c) The Seller has provided the Purchaser with a true and correct copy
of all written contracts which are required to be disclosed on the Contracts
---------
Schedule, in each case together with all amendments, waivers or other changes
- --------
thereto (all of which are disclosed on the Contracts Schedule). The Contracts
------------------ ---------
Schedule contains an accurate and complete description of all material terms of
- --------
all oral contracts referred to therein.
5.13 Proprietary Rights.
------------------
(a) The attached "Proprietary Rights Schedule" contains a complete and
---------------------------
accurate list of all (a) patented or registered Proprietary Rights owned or used
by the Seller or any of its Subsidiaries, (b) pending patent applications and
applications for registrations of other Intellectual Property Rights filed by
the Seller or any of its Subsidiaries , (c) unregistered trade names, internet
domain names and corporate names owned or used by the Seller or any of its
Subsidiaries and (d) unregistered trademarks, service marks, and computer
software owned or used by the Seller or any of its Subsidiaries. The
Proprietary Rights Schedule also contains a complete and accurate list of all
- ---------------------------
licenses and other rights granted by the Seller or any of its Subsidiaries to
any third party with respect to any Proprietary Rights and all licenses and
other rights granted by any third party to the Seller or any of its Subsidiaries
with respect to any Proprietary Rights, in each case identifying the subject
Proprietary Rights. Except as set forth on the Proprietary Rights Schedule, the
---------------------------
Seller and each of its Subsidiaries own, free of all Liens (except Permitted
Encumbrances), all right, title and interest to, or have the right to use
pursuant to a valid written license, all Proprietary Rights necessary for the
operation of their businesses as presently conducted and such rights will be
owned or made available for use by the Seller and each of its Subsidiaries after
the Closing on terms and conditions identical to those under which they owned or
used such rights prior to the Closing. Except as set forth on the Proprietary
-----------
Rights Schedule, the loss or expiration of any Proprietary Rights or related
- ---------------
group of Proprietary Rights owned or used by the Seller or any of its
Subsidiaries has not had a Material Adverse Effect on the conduct of their
businesses and is not pending or, to the knowledge of the Seller or any
Stockholder, threatened or reasonably foreseeable.
-28-
(b) Except as set forth on the Proprietary Rights Schedule, (i) the
---------------------------
Seller and each of its Subsidiaries owns and possesses without restriction as to
use, all right, title and interest in and to the Proprietary Rights necessary
for the operation of the Seller's and each of its Subsidiaries' businesses as
currently conducted; (ii) neither the Seller nor any of its Subsidiaries has
received any notices of invalidity, infringement or misappropriation from any
third party with respect to any such Proprietary Rights; (iii) neither the
Seller nor any of its Subsidiaries has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Proprietary Rights of
any third parties; and (iv) to the knowledge of the Seller or any Stockholder,
no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Proprietary Rights of the Seller or its
Subsidiaries.
(c) None of the computer software, computer firmware, computer
hardware (whether general or special purpose) or other similar or related items
of automated, computerized or software systems that are used or relied on by the
Seller or by any of its Subsidiaries in the conduct of their respective
businesses will malfunction, will cease to function, will generate incorrect
data or will produce incorrect results when processing, providing or receiving
(i) date-related data from, into and between the twentieth and twenty-first
centuries or (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
(d) The transactions contemplated by this Agreement shall have no
adverse effect on the Seller's or any of its Subsidiaries' right, title and
interest in and to any of their Proprietary Rights. The Seller and each of its
Subsidiaries has taken all necessary and desirable actions to maintain and
protect their Proprietary Rights and shall continue to maintain and protect
those rights prior to the Closing so as to not adversely affect the validity or
enforcement of such Proprietary Rights.
5.14 Litigation; Proceedings. There are no actions, suits,
-----------------------
complaints, charges, proceedings, orders, investigations or claims pending or,
to the knowledge of the Seller or any Stockholder, threatened against or
affecting the Seller or any of its Subsidiaries (or to the knowledge of the
Seller or any Stockholder, pending or threatened against or affecting any of the
officers, directors or key employees of the Seller or any of its Subsidiaries
with respect to its businesses or proposed business activities) at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality (including, without limitation, any actions, suits,
complaints, charges, proceedings or investigations with respect to the
transactions contemplated by this Agreement); nor have there been any such
actions, suits, proceedings, orders, investigations or claims pending against or
affecting the Seller or any of its Subsidiaries during the past three years; and
neither the Seller nor any of its Subsidiaries is subject to any grievance
arbitration proceedings under collective bargaining agreements or otherwise or,
to the knowledge of the Seller or any Stockholder, any governmental
investigations or inquiries. Neither the Seller nor any of its Subsidiaries is
subject to any judgment, order or decree of any court or other governmental
agency (or settlement enforceable therein), and neither the Seller nor any of
its Subsidiaries has received any opinion or memorandum or legal advice from
legal counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business.
-29
5.15 Brokerage. Except as set forth on the "Brokerage Schedule"
--------- ------------------
attached hereto, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Seller, any of its Subsidiaries or any Stockholder.
5.16 Governmental Licenses and Permits. The "Permits Schedule"
--------------------------------- ----------------
attached hereto contains a complete listing and summary description of all
permits, licenses, certificates, approvals and other authorizations of any
governmental entity or any department, agency or political subdivision thereof,
or other similar rights (collectively, the "Licenses") owned or possessed by the
--------
Seller or any of its Subsidiaries or used by it in the conduct of its
businesses. Except as indicated on the Permits Schedule, the Seller and each of
----------------
its Subsidiaries own or possess all right, title and interest in and to all of
the Licenses that are necessary to conduct their businesses as presently
conducted, including, without limitation, all Licenses required under any
federal, state or local law relating to public health and safety, employee
health and safety, pollution or protection of the environment. The Seller and
each of its Subsidiaries are in compliance with the terms and conditions of such
Licenses and have received no notices that they are in violation of any of the
terms or conditions of such Licenses. The Seller and each of its Subsidiaries
have taken all necessary action to maintain such Licenses. No loss or
expiration of any such License is threatened, pending or reasonably foreseeable
other than expiration in accordance with the terms thereof. Except as indicated
on the Permits Schedule, all of the Licenses shall survive the transactions
----------------
contemplated hereby.
5.17 Employees. Except as set forth on the "Employees Schedule"
--------- ------------------
attached hereto, to the knowledge of the Seller or any Stockholder, no key
executive employee and no group of employees or independent contractors of the
Seller or any of its Subsidiaries has any plans to terminate his, her or its
employment or relationship as an independent contractor with the Seller or any
of its Subsidiaries. The Seller and each of its Subsidiaries have complied and
remain in compliance with all applicable laws relating to the employment of
personnel and labor. Neither the Seller nor any of its Subsidiaries is a party
to or bound by any collective bargaining agreement, nor has such party
experienced any strikes, grievances, unfair labor practices claims or other
material employee or labor disputes. Neither the Seller nor any of its
Subsidiaries has engaged in any unfair labor practice. Neither the Seller nor
any Stockholder has knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees of
the Seller or any of its Subsidiaries. Neither the Seller nor any of its
Subsidiaries has implemented any plant closing or mass layoff of employees as
those terms are defined in the Worker Adjustment Retraining and Notification Act
of 1988, as amended ("WARN"), or any similar state or local law or regulation,
----
and no layoffs that could implicate such laws or regulations will have been
implemented before Closing without advance notification to the Purchaser.
5.18 Employee Benefit Matters.
------------------------
(a) With respect to current or former employees of the Seller and each
of its Subsidiaries, neither the Seller nor any of its Subsidiaries maintains or
contributes to or has any actual or potential liability with respect to any (i)
deferred compensation or bonus or retirement plans or arrangements, (ii)
qualified or nonqualified defined contribution or defined benefit plans or
arrangements which are employee pension benefit plans (as defined in Section
3(2) of the Employee
-30-
Retirement Income Security Act of 1974, as amended ("ERISA")), or (iii) employee
-----
welfare benefit plans, (as defined in Section 3(1) of ERISA), stock option or
stock purchase plans, or material fringe benefit plans or programs whether in
writing or oral and whether or not terminated. Neither the Seller nor any of its
Subsidiaries has ever contributed to any multiemployer pension plan (as defined
in Section 3(37) of ERISA), and neither the Seller nor any of its Subsidiaries
has ever maintained or contributed to any defined benefit plan (as defined in
Section 3(35) of ERISA). The plans, arrangements, programs and agreements
referred to the preceding two sentences are referred to collectively as the
-----
"Plans." Neither the Seller nor any of its Subsidiaries maintains or contributes
to any Plan which provides health, accident or life insurance benefits to former
employees, their spouses or dependents, other than in accordance with Section
4980B of the Code ("COBRA").
-----
(b) The Seller and each of its Subsidiaries has not incurred and has
no reason to expect that it will incur, any liability to the Pension Benefit
Guaranty Corporation (other than routine premium payments ) or otherwise under
Title IV of ERISA (including any withdrawal liability) or under the Code with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) that the Seller or any member of its "controlled group" (within the
meaning of Code Section 414) maintains or ever has maintained or to which any of
them contributes, ever has contributed, or ever has been required to contribute.
5.19 Insurance. The "Insurance Schedule" attached hereto lists
--------- ------------------
and briefly describes each insurance policy maintained by the Seller and each of
its Subsidiaries with respect to its properties, assets and business, together
with a claims history for the past five years. All of such insurance policies
are in full force and effect, and neither the Seller nor any of its Subsidiaries
is in default with respect to its obligations under any such insurance policies
and neither the Seller nor any of its Subsidiaries has been denied insurance
coverage. Except as set forth on the Insurance Schedule, neither the Seller nor
------------------
any of its Subsidiaries has any self-insurance or co-insurance programs, and the
reserves set forth on the Latest Balance Sheet are adequate to cover all
anticipated liabilities with respect to self-insurance or coinsurance programs.
5.20 Officers and Directors; Bank Accounts. The "Officers,
------------------------------------- ---------
Directors and Bank Accounts Schedule" attached hereto lists all officers and
- ------------------------------------
directors of the Seller and each of its Subsidiaries, and all bank accounts,
safety deposit boxes and lock boxes (designating each authorized signatory with
respect thereto) for the Seller and each of its Subsidiaries.
5.21 Affiliate Transactions. Except as disclosed on the
----------------------
"Affiliated Transactions Schedule" attached hereto, no Insider is a party to any
- ---------------------------------
agreement, contract, commitment or transaction with the Seller or any of its
Subsidiaries or which is pertaining to the business of the Seller or any of its
Subsidiaries or has any interest in any property, real or personal or mixed,
tangible or intangible, used in or pertaining to the business of the Seller or
any of its Subsidiaries.
5.22 Compliance with Laws. The Seller, each of its Subsidiaries
--------------------
and their officers, directors, partners, agents and employees have complied with
and are in compliance with all applicable laws, regulations and ordinances of
foreign, federal, state and local governments and all agencies thereof which are
applicable to the business, business practices (including, but not limited to,
the Seller's and its Subsidiaries' marketing and sales of its products and
services) or any owned or leased properties of the Seller or any of
-31-
its Subsidiaries and to which the Seller or any of its Subsidiaries may be
subject, and no claims have been filed against the Seller or any of its
Subsidiaries alleging a violation of any such laws or regulations, and neither
the Seller nor any of its Subsidiaries has received notice of any such
violations.
5.23 ENVIRONMENTAL MATTERS. Except as set forth on the
---------------------
"Environmental Schedule" attached hereto:
- -----------------------
(a) The Seller and each of its Subsidiaries have complied with and are
currently in compliance with all Environmental and Safety Requirements, and
neither the Seller nor any of its Subsidiaries has received any oral or written
notice, report or information regarding any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and Safety
Requirements which relate to the Seller or any of its Subsidiaries or any of its
properties or facilities.
(b) Without limiting the generality of the foregoing, the Seller and
each of its Subsidiaries have obtained and complied with, and are currently in
compliance with, all permits, licenses and other authorizations that may be
required pursuant to any Environmental and Safety Requirements for the occupancy
of their properties or facilities or the operation of their business. A list of
all such permits, licenses and other authorizations which are material to the
Seller or any of its Subsidiaries is set forth on the Environmental Schedule.
----------------------
(c) Neither this Agreement or the other Transaction Documents nor the
consummation of the transactions contemplated hereby and thereby shall impose
any obligations on the Seller or its Subsidiaries or otherwise for site
investigation or cleanup, or notification to or consent of any government
agencies or third parties under any Environmental and Safety Requirements
(including, without limitation, any so called "transaction-triggered" or
"responsible property transfer" laws and regulations).
(d) None of the following exists at any property or facility owned,
occupied or operated by the Seller or any of its Subsidiaries: (i) underground
storage tanks or surface impoundments; (ii) asbestos-containing material in any
form or condition; (iii) materials or equipment containing polychlorinated
biphenyls; or (iv) landfills.
(e) Neither the Seller nor any of its Subsidiaries has treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled or Released any substance (including, without limitation, any hazardous
substance) or owned, occupied or operated any facility or property, so as to
give rise to liabilities of the Seller or any of its Subsidiaries for response
costs, natural resource damages or attorneys' fees pursuant to CERCLA or any
other Environmental and Safety Requirements.
(f) Without limiting the generality of the foregoing, no facts, events
or conditions relating to the past or present properties, facilities or
operations of the Seller or any of its Subsidiaries shall prevent, hinder or
limit continued compliance with Environmental and Safety Requirements, give rise
to any corrective, investigatory or remedial obligations pursuant to
Environmental and Safety Requirements
-32-
or give rise to any other liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental and Safety Requirements,
including, without limitation, those liabilities relating to onsite or offsite
Releases or threatened Releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.
(g) Neither the Seller nor any of its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any liability or
corrective investigatory or remedial obligation of any other Person relating to
any Environmental and Safety Requirements.
(h) No Environmental Lien has attached to any property owned, leased
or operated by the Seller or any of its Subsidiaries.
5.24 Disclosure. Neither this Agreement, the other Transaction
----------
Documents, nor any of the schedules, attachments or Exhibits hereto, contain any
untrue statement of a material fact or omit a material fact necessary to make
each statement contained herein or therein, not misleading; There is no fact
which has not been disclosed to the Purchaser of which the Seller or any
Stockholder has knowledge which has a Material Adverse Effect or could
reasonably be anticipated to have a Material Adverse Effect.
5.25 Closing Date. All of the representations and warranties
------------
contained in this Article V and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to the Purchaser are true and correct on the date of this Agreement
and shall be true and correct on the Closing Date, except to the extent that the
Seller or any Stockholder has advised the Purchaser otherwise in writing prior
to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER
-------------------------------------------------------
As a material inducement to the Seller to enter into this Agreement,
the Purchaser hereby represents and warrants to the Seller that:
6.1 Organization and Corporate Power. The Purchaser is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to enter into
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party and perform its obligations hereunder and thereunder.
6.2 Authorization of Transaction. The execution, delivery and
----------------------------
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
requisite corporate action on the part of the Purchaser, and no other corporate
proceedings on its part are necessary to authorize the execution, delivery or
performance of this Agreement. This Agreement constitutes, and each of the
other agreements contemplated hereby to which the Purchaser is a party shall
when executed constitute, a valid and binding obligation of the Purchaser,
enforceable in accordance with their terms.
6.3 No Violation. The Purchaser is not subject to or obligated
------------
under its certificate of incorporation, its by-laws, any applicable law, or rule
or regulation of any governmental authority,
-33-
or any agreement or instrument, or any license, franchise or permit, or subject
to any order, writ, injunction or decree, which would be breached or violated by
its execution, delivery or performance of this Agreement and the other
agreements contemplated hereby to which the Purchaser is a party.
6.4 Governmental Authorities and Consents. The Purchaser is not
-------------------------------------
required to submit any notice, report or other filing with any governmental
authority in connection with the execution or delivery by it of this Agreement
and the other agreements contemplated hereby to which the Purchaser is a party
or the consummation of the transactions contemplated hereby or thereby. No
consent, approval or authorization of any governmental or regulatory authority
or any other party or person is required to be obtained by the Purchaser in
connection with its execution, delivery and performance of this Agreement and
the other agreements contemplated hereby to which the Purchaser is a party or
the transactions contemplated hereby or thereby.
6.5 Litigation. There are no actions, suits, proceedings or
----------
orders pending or, to the Purchaser's knowledge, threatened against or affecting
the Purchaser at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect the
Purchaser's performance under this Agreement and the other agreements
contemplated hereby to which the Purchaser is a party or the consummation of the
transactions contemplated hereby or thereby.
6.6 Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Purchaser.
6.7 Closing Date. All of the representations and warranties
------------
contained in this Article VI and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to Stockholders are true and correct on the date of this Agreement and
shall be true and correct on the Closing Date, except to the extent that the
Purchaser has advised Stockholders otherwise in writing prior to the Closing.
ARTICLE VII
TERMINATION
-----------
7.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing:
(a) by mutual written consent of the Seller and the Purchaser;
(b) by the Seller or the Purchaser if there has been a material
misrepresentation or breach on the part of the other Party of the
representations, warranties or covenants set forth in this Agreement or if
events have occurred which have made it impossible to satisfy a condition
precedent to the terminating Party's obligations to consummate the transactions
contemplated hereby unless such terminating Party's willful or knowing breach of
this Agreement has caused the condition to be unsatisfied;
-34-
(c) by the Purchaser, at any time on or prior to December 31, 1997, if
the Purchaser is not satisfied with the results of its legal, accounting,
business, tax, environmental and other due diligence review of the Business;
(d) by the Seller or the Purchaser if the Closing has not occurred on
or prior to January 15, 1998; provided, however, that neither the Purchaser nor
the Seller shall be entitled to terminate this Agreement pursuant to this
Section 7.1(c) if such Party's willful or knowing breach of this Agreement has
prevented the consummation of the transactions contemplated hereby at or prior
to such time.
7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either the Seller or the Purchaser as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability on the
part of any Party to any other Party under this Agreement, except that the
provisions of Section 9.7 and Article X shall continue in full force and effect
and except that nothing herein shall relieve any Party from liability for any
breach of this Agreement prior to such termination.
ARTICLE VII
SURVIVAL
--------
8.1 Survival. All representations, warranties, covenants and
--------
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement shall survive the Closing Date and
the consummation of the transactions contemplated hereby and shall not be
affected by any examination made for or on behalf of any Party, the knowledge of
any of such Party's officers, directors, stockholders, employees or agents, or
the acceptance of any certificate or opinion. Notwithstanding the foregoing, no
Party shall be entitled to recover for any Loss unless written notice of a claim
thereof is delivered to the other Party prior to the Applicable Limitation Date.
For purposes of this Agreement, the term "Applicable Limitation Date" shall mean
--------------------------
the third anniversary of the Closing Date; provided that the Applicable
Limitation Date with respect to the following Losses shall be as follows: (i)
with respect to any Loss arising from or related to a breach of the
representations and warranties of the Seller and Stockholders set forth in
Sections 5.11 (Taxes) and 5.18 (Employee Benefits Matters), the Applicable
Limitation Date shall be the 60th day after expiration of the statute of
limitations (including any extensions thereto to the extent that such statute of
limitations may be tolled) applicable to the Tax or ERISA statute, regulation or
other authority which gave rise to such Loss, (ii) with respect to any Loss
arising from or related to a breach of the representations and warranties of the
Seller and Stockholders set forth in Section 5.23 (Environmental), the
Applicable Limitation Date shall be the fifth anniversary of the Closing Date,
and (iii) with respect to any Loss arising from or related to a breach of the
representations and warranties of the Seller and Stockholders set forth in
Section 5.1 (Organization and Corporate Power), Section 5.2 (Authorization of
Transactions), Section 5.3 (Capitalization), Section 5.5 (Absence of Conflicts),
or Section 5.15 (Brokerage) and with respect to any Loss arising from or related
to a breach of the representations and warranties of Purchaser set forth in
Section 6.1 (Organization and Corporate Power), 6.2 (Authorization of
Transactions), 6.3 (No Violation) or 6.6 (Brokerage), there shall be no
Applicable Limitation Date (i.e., such representations and warranties shall
survive forever).
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ARTICLE IX
ADDITIONAL AGREEMENTS
---------------------
9.1 Continuing Assistance. Subsequent to the Closing, the
---------------------
Seller, the Stockholders and the Purchaser (at their own cost) shall assist each
other (including making records available) in the preparation of their
respective Tax Returns and the filing and execution of Tax elections, if
required, as well as any audits or litigation that ensue as a result of the
filing thereof, to the extent that such assistance is reasonably requested.
9.2 Tax Matters.
-----------
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest thereon)
incurred in connection with this Agreement shall be paid by the Seller or the
Stockholders when due, and the Seller and the Stockholders shall, at his or its
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and if required by applicable law, the Purchaser shall, and
shall cause its affiliates to, join in the execution of any such Tax Returns and
other documentation.
(b) All real property taxes, personal property taxes, ad valorem
-- -------
obligations and similar taxes imposed on a periodic basis, in each case levied
with respect to the Acquired Assets, other than conveyance taxes provided for in
Section 9.2(a), for a taxable period which includes (but does not end on) the
Closing Date shall be apportioned between the Seller and the Purchaser as of the
Closing Date based on the number of days of such taxable period included in the
pre-Closing Tax period and the number of days of such taxable period included in
the post-Closing period. Seller shall be liable for the proportionate amount of
such Taxes that is attributable to the pre-Closing Tax period. Within 90 days
after the Closing, the Seller and the Purchaser shall present a reimbursement to
which each is entitled under this Section 9.2(b) together with such supporting
evidence as is reasonably necessary to calculate the proration amount. The
proration amount shall be paid by the party owing it to the other within 10 days
after delivery of such statement. Thereafter, the Seller shall notify the
Purchaser upon receipt of any bill for real or personal property taxes relating
to the Acquired Assets, part or all of which are attributable to the post-
Closing Tax period, and shall promptly deliver such bill to the Purchaser who
shall pay the same to the appropriate taxing authority, provided that if such
bill covers the pre-Closing Tax period, the Seller shall also remit prior to the
due date of assessment to the Purchaser payment for the proportionate amount of
such bill that is attributable to the pre-Closing Tax period. In the event that
either the Seller or the Purchaser shall thereafter make a payment for which it
is entitled to reimbursement under this Section 9.2(b), the other party shall
make such reimbursement promptly but in no event later than 30 days after the
presentation of a statement setting forth the amount of reimbursement to which
the presenting party is entitled along with such supporting evidence as is
reasonably necessary to calculate the amount of reimbursement. Any payment
required under this Section 9.2(b) and not made within 10 days of delivery of
the statement shall bear interest at the rate per annum determined, from time to
time, under the provisions of Section 6621(a)(2) of the Code for each day until
paid.
9.3 Press Releases and Announcements. Prior to the Closing
--------------------------------
Date, no press releases related to this Agreement and the transactions
contemplated herein, or other announcements
-41-
to the employees, customers or suppliers of the Seller shall be issued without
the mutual approval of all Parties, except for any public disclosure which any
Party in good faith believes is required by law or regulation (in which case the
disclosure shall be prepared jointly by the Seller and the Purchaser). After the
Closing Date, no press releases related to this Agreement and the transactions
contemplated herein, or other announcements to the employees, customers or
suppliers of the Seller shall be issued without the Purchaser's consent (which
shall not be unreasonably withheld).
9.4 Further Transfers. The Seller shall execute and deliver
-----------------
such further instruments of conveyance and transfer and take such additional
action as the Purchaser may reasonably request to effect, consummate, confirm or
evidence the transfer to the Purchaser of the Acquired Assets and any other
transactions contemplated hereby.
9.5 Specific Performance. The Seller and the Stockholders
--------------------
acknowledge that the Seller's Business is unique and recognizes and affirms that
in the event of a breach of this Agreement by the Seller or the Stockholders,
money damages may be inadequate and the Purchaser may have no adequate remedy at
law. Accordingly, the Seller and the Stockholders agree that the Purchaser
shall have the right, in addition to any other rights and remedies existing in
its favor, to enforce its rights and the Seller's and the Stockholders'
obligations hereunder not only by an action or actions for damages but also by
an action or actions for specific performance, injunctive and/or other equitable
relief.
9.6 Transition Assistance. Neither the Seller nor any
---------------------
Stockholder shall in any manner take any action which is designed, intended, or
might be reasonably anticipated to have the effect of discouraging customers,
suppliers, lessors, licensors and other business associates from maintaining the
same business relationships with the Purchaser after the date of this Agreement
as were maintained with the Seller prior to the date of this Agreement.
9.7 Expenses. Except as otherwise provided herein, the Seller
--------
and the Stockholders and the Purchaser shall pay all of their own fees, costs
and expenses (including, without limitation, fees, costs and expenses of legal
counsel, investment bankers, brokers or other representatives and consultants
and appraisal fees, costs and expenses) incurred in connection with the
negotiation of the this Agreement and the other agreements contemplated hereby,
the performance of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby.
9.8 Exclusivity. Until this Agreement is terminated by its
-----------
terms, neither the Seller nor any Stockholder (and neither the Seller nor any
Stockholder shall cause or permit any Insider or agent or any other Person
acting on behalf of any Stockholder, the Seller, or its Affiliates to), (a)
solicit, initiate or encourage the submission of any proposal or offer from any
Person (including any of them) relating to any (i) liquidation, dissolution or
recapitalization of, (ii) merger or consolidation with or into, (iii)
acquisition or purchase of assets of or any equity interest in or (iv) similar
transaction or business combination involving the Seller or (b) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any other Person to do or seek any of the foregoing. The Seller and
each Stockholder agree that they will discontinue immediately any negotiations
or discussion with respect to any of the foregoing. Until this Agreement is
-42-
terminated by its terms, the Stockholders and the Seller shall notify the
Purchaser immediately if any Person makes any proposal, offer, inquiry or
contact with respect to any of the foregoing.
9.9 Books and Records. Unless otherwise consented to in writing
-----------------
by the Seller or the Purchaser (as the case may be), the Purchaser and the
Seller will not, for a period of seven years following the date hereof, destroy,
alter or otherwise dispose of any of the books and records of the Seller
acquired by the Purchaser hereunder or retained by the Seller or any Stockholder
without first offering to surrender to the Seller, the Stockholders or the
Purchaser such books and records or any portion thereof of which the Seller, the
Stockholders or the Purchaser may intend to destroy, alter or dispose. The
Purchaser, the Seller and the Stockholders will allow the other party's
representatives, attorneys and accountants access to such books and records,
upon reasonable request for during such party's normal business hours, for the
purpose of examining and copying the same in connection with any matter whether
or not related to or arising out of this Agreement or the transactions
contemplated hereby.
9.10 CONFIDENTIALITY. The Seller and each Stockholder shall
---------------
treat and hold as confidential any information concerning the business and
affairs of the Business that is not already generally available to the public
(the "Confidential Information"), refrain from using any of the Confidential
------------------------
Information except in connection with this Agreement, and deliver promptly to
the Purchaser or destroy, at the request and option of the Purchaser, all
tangible embodiments (and all copies) of the Confidential Information which are
in his possession or under his control. In the event that the Seller or any
Stockholder is requested or required (by oral question or request for informa
tion or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, the Seller or such Stockholder shall notify the Purchaser promptly
of the request or requirement so that the Purchaser may seek an appropriate
protective order or waive compliance with the provisions of this Section 9.10.
If, in the absence of a protective order or the receipt of a waiver hereunder,
the Seller or any Stockholder is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, the Seller or such Stockholder may disclose the Confidential
Information to the tribunal; provided that such disclosing Stockholder or the
Seller shall use his or its reasonable best efforts to obtain, at the request of
the Purchaser, an order or other assurance that confidential treatment shall be
accorded to such portion of the Confidential Information required to be
disclosed as the Purchaser shall designate. The Seller and each Stockholder
acknowledges and agrees that in the event of a breach by any Stockholder of any
of the provisions of this Section 9.10, monetary damages shall not constitute a
sufficient remedy. Consequently, in the event of any such breach, the Seller,
Purchaser and/or their respective successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the provisions
hereof, in each case without the requirement of posting a bond or proving actual
damages.
9.11 EMPLOYEES.
---------
(a) The Seller has provided the Purchaser with a true, correct and
complete list of all of the Seller's employees indicating the rate of pay of
-43-
each such employee during the twelve months preceding the date hereof and the
status of each such employee as active, on leave, full-time, part-time or
otherwise.
(b) Except for the employees set forth on the "Excluded Employees
------------------
Schedule" attached hereto (the "Excluded Employees"), the Purchaser will offer
- -------- ------------------
at-will employment to all active full-time employees of Seller as of the Closing
Date (the "Continuing Employees") on terms and conditions which, in the
--------------------
aggregate, are substantially equivalent to those applicable to such persons'
terms and conditions of employment with the Seller immediately prior to the
Closing Date. Nothing in this Section 9.11 shall obligate Purchaser to continue
to employ any Continuing Employee for any period of time.
(c) The Seller will be responsible for and shall pay (and the
Stockholders shall cause the Seller to pay) to Seller's employees (i) all
amounts of wages, bonuses and other renumeration (including, without limitation,
discretionary benefits and bonuses) payable to such employees with respect to
the period ending on the day prior to the Closing Date, (ii) any workers'
compensation claims, amounts payable under Plans maintained by Seller and other
amounts payable on an ongoing basis to such employees in connection with events
or incidents occurring prior to the Closing Date, except to the extent that such
amounts are paid under insurance, (iii) amounts equal to the vacation pay, sick
leave pay and floating holiday pay earned or accrued by such employees as of the
close of business on the Closing Date, whether or not such pay is vested or has
been accrued on the books of the Seller at such close of business, based upon
the remuneration of such employees, normally used in computing such vacation
pay, sick leave pay and floating holiday pay and (iv) all severance payments, if
any, due to such employees as a result of the termination of their employment
with the Seller. Seller shall also be responsible for and shall pay any related
payroll burden (including, without limitation, FICA and other employment taxes)
with respect to payments made under this Section 9.11(c).
9.12 SELLER'S NAME CHANGE. As soon as practicable after the
--------------------
Closing, the Seller will change its corporate name to a name which is not (and
which is not confusingly similar to) "Eagle Scaffolding Equipment Co." it being
the intent of the Parties that from and after the Closing the Purchaser will
have the sole right as against the Seller and all other Persons to conduct
business under such name and that the Purchaser will commence doing so at the
time of the Closing.
9.13 ALLOCATION OF PURCHASE PRICE. The allocation ("Allocation")
---------------------------- ----------
of the Purchase Price among the Acquired Assets shall be made as set forth on
the "Purchase Price Allocation Schedule" attached hereto. The Allocation shall
----------------------------------
be determined jointly by the Purchaser and the Seller reasonably and in good
faith, and such Allocation shall be used by the Parties in preparing (a) Form
8594, Asset Acquisition Statement, for each of the Purchaser and the Seller, and
(b) all Tax Returns. Each of the Purchaser and the Seller shall file Form 8594,
prepared in accordance with this Section, with its federal income Tax Return for
its Tax period including the Closing Date.
9.14 Third Party Consents. Notwithstanding anything to the
--------------------
contrary contained in this Agreement, this Agreement shall not constitute an
agreement to transfer, sell or otherwise assign any instrument, contract, lease,
license, permit or other agreement or arrangement which is not permitted to be
assigned in connection with a transaction of the type contemplated by this
Agreement (collectively, the "Unassigned Contracts"). The beneficial interest
--------------------
-44-
in and to each Unassigned Contract shall in any event pass to the Purchaser at
the Closing; and the Seller covenants and agrees to cooperate with the Purchaser
in any lawful and economically feasible arrangement to provide the Purchaser
with the Seller's entire interest in the benefits under each of the Unassigned
Contracts. If and only if the Purchaser receives the economic benefits under an
Unassigned Contract, the Purchaser agrees to accept the burdens and perform the
obligations under such Unassigned Contract as subcontractor of the Seller.
Furthermore, if the other party(ies) to an Unassigned Contract subsequently
consent to the assignment of such contract to the Purchaser (without
modification thereto which is adverse to the Purchaser), the Purchaser shall
thereupon agree to assume and perform all liabilities and obligations arising
thereunder after the date of such consent, at which time such Unassigned
Contract shall be deemed an Acquired Asset. The Seller agrees to indemnify the
Purchaser and hold it harmless against any Losses which the Purchaser may
suffer, sustain or become subject to, as a result of any claims by any party to
any of the Unassigned Contracts for breach of contract in connection with the
consummation of the transactions contemplated by this Agreement.
9.15 Bulk Sales Law. The Seller will bear any loss, liability,
--------------
obligation or cost suffered by the Seller or the Purchaser as a result of the
Parties' noncompliance with any provision of any bulk sales law which is
applicable to the transfer of the Acquired Assets pursuant to this Agreement.
ARTICLE X
MISCELLANEOUS
-------------
10.1 Amendment and Waiver. This Agreement may be amended and any
--------------------
provision of this Agreement may be waived, provided that any such amendment or
waiver shall be binding upon a Party only if such amendment or waiver is set
forth in a writing executed by Purchaser, the Seller and the Stockholders. No
course of dealing between or among any persons having any interest in this
Agreement shall be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any Party under or by reason of
this Agreement.
10.2 Notices. All notices, demands and other communications
-------
given or delivered under this Agreement shall be in writing and shall be deemed
to have been given when personally delivered, mailed by first class mail, return
receipt requested, or delivered by express courier service or telecopied (with
hard copy to follow). Notices, demands and communications to the Stockholders,
the Seller and the Purchaser shall, unless another address is specified in
writing, be sent to the address or telecopy number indicated below:
Notices to the Seller and the Stockholders with a copy to:
- ------------------------------------------ --------------
c/o Robert Kenneth McNabb Jeffrey Shaner
3629 West Hacienda 715 South 6th
Las Vegas, Nevada 89118 Las Vegas, Nevada 89101
-45-
Notices to Purchaser: with a copy to:
- -------------------------------------- --------------------------------------
BAT Acquisition Corp. Kirkland & Ellis
1800 Sherman Avenue 200 East Randolph Drive
Suite 100 Chicago, Illinois 60601
Evanston, IL 60201 Attention: Sanford E. Perl, Esq.
Attention: Kevin Rodgers Telecopy: (312) 861-2200
Telecopy: (847) 733-1078
10.3 Binding Agreement; Assignment. This Agreement and all of
-----------------------------
the provisions hereof shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns; provided that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by the Seller or any Stockholder without the prior written
consent of Purchaser or by Purchaser (except as otherwise provided in this
Agreement) without the prior written consent of the Seller; provided further
that:
(a) the Purchaser may at any time prior to the Closing, at its sole
discretion, assign, in whole or in part, its rights and obligations pursuant to
this Agreement to one or more of its Affiliates;
(b) the Purchaser may assign its rights under this Agreement for
collateral security purposes to any lender providing financing to Purchaser or
any of its Affiliates and any such lender may exercise all of the rights and
remedies of the Purchaser hereunder; and
(c) the Purchaser may assign its rights under this Agreement, in whole
or in part, to any subsequent purchaser of the Purchaser or any material portion
of its assets (whether such sale is structured as a sale of stock, a sale of
assets, a merger or otherwise).
10.4 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
10.5 No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against any person.
10.6 Captions. The captions used in this Agreement are for
--------
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
10.7 Entire Agreement. This Agreement and the documents referred
----------------
to herein contain the entire agreement between the Parties and supersede any
-46-
prior understandings, agreements or representations by or between the Parties,
written or oral, which may have related to the subject matter hereof in any way.
10.8 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
10.9 Governing Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
10.10 Parties in Interest. Nothing in this Agreement, express or
-------------------
implied, is intended to confer on any person other than the Parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
* * * * *
-47-
IN WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement as
of the date first written above.
BAT ACQUISITION CORP.
By: /s/ Kevin P. Rodgers
--------------------------------------------
Its: CEO
--------------------------------------------
McNABB ENTERPRISES, INC.
By: /s/ R. K. McNabb
--------------------------------------------
Its: President
--------------------------------------------
STOCKHOLDERS: /s/ Robert Kenneth McNabb
--------------------------------------------------
Robert Kenneth McNabb
/s/ Robert Steven McNabb
--------------------------------------------------
Robert Steven McNabb
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