EXHIBIT 2.2
EXECUTION COPY
ASSET PURCHASE AGREEMENT
by and among
RENT-A-CENTER, INC.,
and
RENT-WAY, INC.,
RENT-WAY OF MICHIGAN, INC.
and
RENT-WAY OF TTIG, L.P.
--------------------------
Dated as of December 17, 2002
TABLE OF CONTENTS
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PAGE
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ARTICLE I SALE AND PURCHASE OF ASSETS....................................................................1
1.1 Assets.........................................................................................1
1.2 Excluded Assets................................................................................3
1.3 Acquisition of Assets by Acquiror..............................................................4
1.4 Allocation of Purchase Price...................................................................5
1.5 Assumption of Liabilities by Acquiror..........................................................6
1.6 Closing........................................................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR.................................................7
2.1 Organization...................................................................................8
2.2 Authority Relative to this Agreement...........................................................8
2.3 Consents and Approvals; No Violations..........................................................8
2.4 Sufficient Funds...............................................................................8
2.5 Broker's Fees..................................................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OPERATING SUBSIDIARIES...................9
3.1 Organization...................................................................................9
3.2 Certain Corporate Matters......................................................................9
3.3 Authority Relative to this Agreement...........................................................9
3.4 Consents and Approvals; No Violations.........................................................10
3.5 Reports.......................................................................................10
3.6 Profit and Loss Statements; No Undisclosed Liabilities........................................11
3.7 Events Subsequent to Profit and Loss Statements...............................................11
3.8 Property......................................................................................12
3.9 Tangible Property.............................................................................13
3.10 Inventory.....................................................................................13
3.11 Rental Purchase Agreements....................................................................13
3.12 Legal Compliance..............................................................................14
3.13 Assets Necessary to the Business..............................................................14
3.14 Books and Records; Internal Controls..........................................................14
3.15 Product Warranties............................................................................14
3.16 Inappropriate Payments........................................................................15
3.17 Environmental Matters.........................................................................15
3.18 Motor Vehicles and Equipment..................................................................15
3.19 Ordinances and Regulations....................................................................15
3.20 Insurance.....................................................................................15
3.21 Litigation....................................................................................15
3.22 Employment Matters............................................................................16
3.23 Taxes.........................................................................................17
3.24 Employee Benefit Plans........................................................................18
3.25 Broker's Fees.................................................................................19
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3.26 Solvency......................................................................................19
3.27 Average Monthly Revenue - Three Months........................................................19
3.28 Monthly Revenue - One Month...................................................................20
3.29 Average Weekly Revenue........................................................................20
3.30 Net Book Value of Inventory...................................................................20
3.31 Full Disclosure...............................................................................20
ARTICLE IV ADDITIONAL AGREEMENTS.........................................................................21
4.1 Interim Operations of the Company and the Operating Subsidiaries..............................21
4.2 Reasonable Efforts; Filings; Consents.........................................................22
4.3 No Solicitations..............................................................................23
4.4 Press Releases................................................................................24
4.5 Confidentiality; Access to Information........................................................24
4.6 Notice of Developments........................................................................26
4.7 Solvency Opinion..............................................................................26
4.8 Reasonably Equivalent Value Opinion...........................................................27
4.9 Employees.....................................................................................27
4.10 Designation by Acquiror of Acquiring Subsidiaries.............................................27
4.11 Acquiror Due Diligence Period.................................................................27
4.12 Little Rock Store Lease.......................................................................28
ARTICLE V CLOSING CONDITIONS............................................................................28
5.1 Conditions to Obligation of all Parties.......................................................28
5.2 Conditions to the Acquiror's Obligations......................................................29
5.3 Conditions to the Obligations of the Company and the Operating Subsidiaries...................31
ARTICLE VI POST-CLOSING COVENANTS........................................................................32
6.1 Apportionment.................................................................................32
6.2 License to Use Name...........................................................................32
6.3 Account Store Acquisition Option..............................................................32
6.4 Transition Period; Access to Stores; Cooperation..............................................33
6.5 Leased Employees..............................................................................34
6.6 Tax Matters...................................................................................34
6.7 Transition of Acquired Stores.................................................................35
ARTICLE VII TERMINATION...................................................................................35
7.1 Termination...................................................................................35
7.2 Automatic Termination.........................................................................36
7.3 Effect of Termination.........................................................................36
7.4 Amendment.....................................................................................37
7.5 Waiver........................................................................................37
7.6 Expenses......................................................................................37
ARTICLE VIII INDEMNIFICATION...............................................................................37
8.1 Survival of Representations and Warranties....................................................37
8.2 Indemnification by the Company and the Operating Subsidiaries.................................38
8.3 Indemnification by the Acquiror...............................................................39
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8.4 Holdback Amount; Right of Set Off.............................................................39
8.5 Method of Asserting Indemnity Claims, Etc.....................................................40
8.6 Limitation on Amount - Company and Operating Subsidiaries.....................................42
8.7 Limitation on Amount - Acquiror...............................................................42
8.8 Insurance and Tax Benefit.....................................................................42
ARTICLE IX GENERAL PROVISIONS............................................................................42
9.1 Certain Definitions...........................................................................42
9.2 Notices.......................................................................................50
9.3 Headings......................................................................................51
9.4 Severability..................................................................................51
9.5 Entire Agreement..............................................................................52
9.6 Assignment....................................................................................52
9.7 Parties in Interest...........................................................................52
9.8 Failure or Indulgence Not Waiver; Remedies Cumulative; Specific Performance...................52
9.9 Governing Law.................................................................................52
9.10 Counterparts..................................................................................53
9.11 No Consequential Damages......................................................................53
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TABLE OF EXHIBITS
EXHIBITS
EXHIBIT "A" Form of Bill of Sale, Assignment and Assumption Agreement
EXHIBIT "B" Form of Non-Competition and Non-Solicitation Agreement
EXHIBIT "C" Form of Opinion of Counsel to the Company
EXHIBIT "D" Form of Opinion of Counsel to Acquiror
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of December 17, 2002 (this
"AGREEMENT"), is entered into by and among RENT-A-CENTER, INC., a Delaware
corporation (the "ACQUIROR"), RENT-WAY, INC., a Pennsylvania corporation (the
"COMPANY"), RENT-WAY OF MICHIGAN, INC., a Delaware corporation and wholly owned
subsidiary of the Company ("RENT-WAY MICHIGAN") and RENT-WAY OF TTIG, L.P., an
Indiana limited partnership and indirect wholly owned subsidiary of the Company
("TTIG" and, together with Rent-Way Michigan, the "OPERATING SUBSIDIARIES").
RECITALS
WHEREAS, the Company and the Operating Subsidiaries are engaged in the
business of renting-to-own consumer household durable goods, including
televisions, video cassette recorders, stereos, appliances, computers,
furniture, accessories and other like merchandise to the public; and
WHEREAS, the parties desire to enter into a transaction in which the
Acquiror will purchase substantially all of the assets of the Company and the
Operating Subsidiaries used in, or related to, the operation of the 295
rent-to-own stores at each location listed on Schedule 1.1 (collectively, the
"STORES" and individually, a "STORE"), upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties hereto
agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 Assets. Subject to the terms and conditions of this Agreement, on
the Closing Date (hereinafter defined), the Company and the Operating
Subsidiaries shall sell, convey, transfer, assign and deliver to the Acquiror,
and the Acquiror shall accept and purchase all of the Company's and the
Operating Subsidiaries' right, title and interest in and to all of the assets
(other than the Excluded Assets) relating to the Stores (collectively, the
"ASSETS") including without limitation, the following:
(a) All (i) customer rental contracts, including without
limitation any rent-to-own agreements, lease-purchase
agreements and rent-to-rent agreements, and (ii)
disclosures, forms, applications and other ancillary
documents relating to such rental contracts relating
to the Stores (together, the "RENTAL PURCHASE
AGREEMENTS"), including all of the Company's and the
Operating Subsidiaries' rights under such Rental
Purchase Agreements;
(b) All products on rent, whether current or delinquent
in payment, pursuant to the Rental Purchase
Agreements, including any manufacturer's warranties
underlying such products;
(c) Any information, including all computer records and
software, pertaining to the Rental Purchase
Agreements;
(d) All rental merchandise presently in the Stores or
being serviced or repaired or in off-premises storage
for the Stores and not on rent pursuant to a Rental
Purchase Agreement as of the Closing, including any
manufacturer's warranties underlying such rental
merchandise (the "IDLE INVENTORY");
(e) All equipment, fixtures, supplies, office furniture,
computers (including peripherals), filing cabinets
and product displays which are located within the
Stores or are otherwise attributable to the Stores;
(f) Up to 220 cube motor vehicles owned or leased by the
Company or any Operating Subsidiary and used by the
Company or any Operating Subsidiary in connection
with the Stores as of the date hereof as set forth on
Schedule 3.18, such vehicles to be acquired hereunder
as designated by Acquiror no later than ten (10) days
prior to Closing and to be delivered by the Company
and the Operating Subsidiaries free and clear of
Encumbrances at Closing;
(g) Except as set forth in Section 1.2 or as referenced
in Section 1.2 hereof, (i) all books and records
relating to the operation of the Stores, including
but not limited to (a) all original Rental Purchase
Agreements relating to the Stores, (b) all original
books and records of account and other financial
records related to the operation of the Stores, and
(c) all price lists, customer lists and
correspondence, customer histories (including payment
histories), mailing lists, credit records and
correspondence and similar lists and correspondence
for the three year period ending on the Closing Date;
(ii) all manuals pertaining to merchandise,
materials, operations, maintenance and similar
matters relating to the operation of the Stores;
(iii) all records or lists pertaining to supply,
distribution, transportation, administration and
similar matters relating to the operation of the
Stores; and (iv) all Store telephone numbers;
(h) Except as set forth in Section 1.2, the real estate
leases related to the Stores; and
(i) Any deposits made in connection with the operation of
the Stores, including without limitation, deposits
relating to Store Leases, utility deposits and
deposits by customers pursuant to special rent-to-own
orders placed at the Stores.
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On the Closing Date, the Assets shall be delivered to Acquiror free and clear of
any and all pledges, mortgages, security interests, Liens, charges, burdens,
obligations, claims and other encumbrances whatsoever (whether absolute,
accrued, contingent or otherwise), including without limitation, chattel
mortgages, conditional sales contracts, collateral security arrangements and
other title or interest retention arrangements ("ENCUMBRANCES").
1.2 Excluded Assets. Notwithstanding anything in Section 1.1 to the
contrary, the Company and the Operating Subsidiaries will retain and will not
sell or transfer to the Acquiror and the Acquiror will not purchase or acquire,
the following assets with respect to the Stores (collectively, the "EXCLUDED
ASSETS"):
(a) the assets listed on Schedule 1.2 attached hereto and all
books, records and other information relating solely thereto;
(b) the Company's and the Operating Subsidiaries' corporate
charter, qualifications to conduct business as a foreign corporation or
limited partnership, as the case may be, arrangements with registered
agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books and
other documents relating to the organization, maintenance and existence
of the Company and the Operating Subsidiaries and all original books
and records of account and other financial records of such entities,
except as otherwise provided in Section 1.1(c) and Section 1.1(g);
provided, however, that Acquiror shall be permitted to review and copy
such books and records retained by the Company and the Operating
Subsidiaries to the extent relevant to the Assets;
(c) Rental Purchase Agreements used in the Stores (i) that
have terminated on or before the Closing Date, or (ii) for which the
Company or any of its Subsidiaries have filed any action, suit, claim,
complaint or proceeding seeking to collect merchandise rented pursuant
to such Rental Purchase Agreement, money damages or otherwise enforce
through judicial or administrative proceedings the terms of such Rental
Purchase Agreement;
(d) All fixtures which are located in each of the Stores set
forth on Schedule 1.2(d) (the "ACCOUNT STORES");
(e) All supplies, office furniture, computers (including
peripherals), equipment (other than filing cabinets, copiers and fax
machines, which shall be deemed Assets) and product displays which are
located in the Account Stores;
(f) The real estate leases related to the Account Stores;
(g) Any deposits made in connection with the operation of the
Account Stores, including without limitation, deposits relating to real
estate leases underlying such Account Stores and utility deposits (but
excluding deposits by customers pursuant to special rent-to-own orders
placed at the Account Stores, which shall be deemed Assets); and
(h) any real property owned by the Company or any of its
Subsidiaries; and
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(i) any contracts or agreements in effect on the Closing Date
providing for services to the Stores, including without limitation,
contracts for services relating to trash, water, sewage, alarm and
electricity service.
1.3 Acquisition of Assets by Acquiror.
(a) At the Closing, the Company, the Operating Subsidiaries
and the Acquiror shall each enter into a Bill of Sale, Assignment and
Assumption Agreement (the "ASSIGNMENT AND ASSUMPTION AGREEMENT"), in
the form attached hereto as Exhibit "A," and all such other
assignments, endorsements and instruments of transfer as shall be
necessary or appropriate to carry out the intent of this Agreement and
as shall be sufficient to vest in the Acquiror good, valid and
marketable title to all of the Assets and all right, title and interest
of the Company and the Operating Subsidiaries thereto. Subject to the
terms and conditions hereof and in consideration of the sale, transfer,
assignment and delivery of the Assets by the Company and the Operating
Subsidiaries to the Acquiror, the Acquiror hereby agrees that, as of
the Closing Date, it will acquire and accept all of the Company's and
the Operating Subsidiaries' right, title and interest in and to the
Assets, and, subject to the adjustments set forth in Section 1.3(b)
below, shall pay an aggregate amount of $101,500,000 (the "PURCHASE
PRICE"), of which (a) $91,000,000 (the "CREDITOR PAYMENT") shall be
paid by the Acquiror, on behalf of the Company and the Operating
Subsidiaries, directly to the Company's creditors set forth on Schedule
1.3, by wire transfer of immediately available funds on the Closing
Date, (b) $500,000 shall be paid to the Company, on behalf of the
Company and the Operating Subsidiaries, for consideration of the
Non-Competition and Non-Solicitation Agreement (the "NON-COMPETITION
PAYMENT" and, together with the Creditor Payment, the "CLOSING DATE
PAYMENT"), and (c) $10,000,000 of which Acquiror shall withhold in
partial support of the indemnification obligations of Seller pursuant
to Article VIII hereof (the "HOLDBACK AMOUNT").
(b) Reduction in Purchase Price. In the event that the
condition set forth in Section 5.2(a) shall not be satisfied on the
Closing Date as a result of the Company's and the Operating
Subsidiaries' failure to represent and warrant, on the Closing Date,
any of the representations and warranties set forth in Section 3.27,
Section 3.28, Section 3.29 or Section 3.30 with respect to Closing Date
amounts, then, except as set forth in Section 1.3(c) below, the
Purchase Price shall be reduced, and the corresponding amount paid to
the creditors set forth on Schedule 1.3 shall be reduced, as set forth
below (each, a "PURCHASE PRICE REDUCTION" and together, the "PURCHASE
PRICE REDUCTIONS"):
(i) with respect to the failure to represent and warrant
on the Closing Date the matters set forth in Section
3.27, the Purchase Price shall be reduced by an
amount equal to (a) $10,200,000, less the Closing
Three Month Revenue (the "SHORT AVERAGE MONTHLY
REVENUE AMOUNT"), (b) multiplied by twelve (12) (the
"SHORT AVERAGE MONTHLY REVENUE AMOUNT ADJUSTMENT");
(ii) with respect to the failure to represent and warrant
on the Closing Date the matters set forth in Section
3.28, the Purchase Price shall be reduced by an
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amount equal to (a) $10,200,000, less the Closing
Month Revenue (the "SHORT MONTHLY REVENUE AMOUNT"),
(b) multiplied by twelve (12) (the "SHORT MONTHLY
REVENUE AMOUNT ADJUSTMENT");
(iii) with respect to the failure to represent and warrant
on the Closing Date the matters set forth in Section
3.29, the Purchase Price shall be reduced by an
amount equal to (a) $2,355,000, less the Closing
Weekly Revenue (the "SHORT WEEKLY REVENUE AMOUNT"),
(b) multiplied by fifty two (52) (the "SHORT WEEKLY
REVENUE AMOUNT ADJUSTMENT" and together with the
Short Average Monthly Revenue Amount Adjustment and
the Short Monthly Revenue Amount Adjustment, the
"REVENUE PURCHASE PRICE REDUCTIONS"); and
(iv) with respect to the failure to represent and warrant
on the Closing Date the matters set forth in Section
3.30, the Purchase Price shall be reduced by an
amount equal to (a) $54,500,000, less the Closing
Inventory (net of 30-days past due) (the "SHORT
INVENTORY AMOUNT"), (b) multiplied by 1.5 (such
adjustment being referred to as the "SHORT INVENTORY
AMOUNT ADJUSTMENT").
Each Purchase Price Reduction (whether such Purchase Price Reduction is a
Revenue Purchase Price Reduction or a Short Inventory Amount Adjustment, or
both) shall be aggregated with all other Purchase Price Reductions, and the
Purchase Price shall correspondingly be reduced; provided, however, that in the
event more than one Revenue Purchase Price Reduction shall be required under
this Section 1.3(b), with respect to such Revenue Purchase Price Reductions,
only the highest adjustment of the applicable Revenue Purchase Price Adjustments
shall be made.
(c) Notwithstanding the provisions of Section 1.3(b) above, in
the event that any of (i) the Closing Three Month Revenue shall be
equal to or less than $10,000,000, (ii) the Closing Month Revenue shall
be equal to or less than $10,000,000, (iii) the Closing Weekly Revenue
shall be equal to or less than $2,350,000, (iv) or the Closing
Inventory shall be equal to or less than $53,500,000, then, at the
option of Acquiror, Acquiror may terminate this Agreement pursuant to
Section 7.1(i).
1.4 Allocation of Purchase Price. The Purchase Price shall be allocated
in accordance with Schedule 1.4. After the Closing Date, the Company, the
Operating Subsidiaries and the Acquiror shall each make consistent use of the
allocation, fair market value and amortization specified in Schedule 1.4 for all
tax purposes and in any and all filings, declarations and reports with the
Internal Revenue Service in respect thereof, including the reports required to
be filed under Section 1060 of the Code, if applicable, it being understood that
the Company, the Operating Subsidiaries and the Acquiror will prepare and file
their respective asset acquisition statements on Form 8594 and, if required by
Section 1060 of the Code or the Treasury Regulations thereunder, their
respective supplemental asset acquisition statements on Form 8594 in accordance
with Schedule 1.4. In any proceeding relating to the determination of any Tax,
neither the Acquiror nor the Company or the Operating Subsidiaries shall contend
or represent that such allocation is not a correct allocation.
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1.5 Assumption of Liabilities by Acquiror.
(a) Notwithstanding anything to the contrary contained in this
Agreement, the Acquiror will not assume, pay, perform or discharge any
debt, liability or contract of the Company, of any kind or character
whatsoever (whether written or oral, existing, contingent or inchoate),
except for the liabilities specifically identified in paragraph (b) of
this Section 1.5.
(b) On the Closing Date, the Acquiror shall only assume those
liabilities or obligations of a kind or nature, whether absolute,
contingent, accrued, known or unknown, that are attributable to the
periods, events or circumstances after the Closing Date, and which
arise under, relate to or are in connection with the ownership, use,
possession, enjoyment or operation of the Assets after the Closing Date
(the "ASSUMED LIABILITIES"). The Acquiror, the Company and the
Operating Subsidiaries shall each enter into the Assignment and
Assumption Agreement with respect to the Assumed Liabilities. It is
expressly understood and agreed that the Acquiror shall assume only the
Assumed Liabilities and, except for the Assumed Liabilities, shall not
assume or have any responsibility with respect to any other obligation
or liability of the Company or the Operating Subsidiaries of any kind
or nature whatsoever not specifically included within the definition of
Assumed Liabilities. Without limiting the foregoing, the Assumed
Liabilities explicitly exclude the following: (i) any liabilities or
obligations of the Company or any of its Subsidiaries arising under,
accruing, attributable to or relating to periods, events or
circumstances on or before the Closing Date (or which would have prior
to the Closing Date with the giving of notice or passage of time); (ii)
any liabilities or obligations of any Person other than the Company or
any of the Operating Subsidiaries; (iii) any liabilities or obligations
of the Company or any of its Subsidiaries arising on or prior to the
Closing Date as a result of any express or implied warranty relating to
products or services; (iv) any liabilities or obligations arising out
of any contract or agreement of the Company or any of its Subsidiaries
or by which the Company or any of its Subsidiaries or the Excluded
Assets are bound that is not part of the Assets transferred hereunder,
including without limitation, any sales commission agreements,
employment agreements or vehicle lease agreements; (v) any accounts
payable, trade payables, salaries, bonuses, accrued expenses or
employee benefits of the Company or any of its Subsidiaries, including,
without limitation, any COBRA obligations, workers compensation claims,
health benefit claims or other costs of employees of the Company or any
of its Subsidiaries, or any expenses related to products that are not
part of the Assets transferred hereunder; (vi) any liabilities or
obligations arising out of actions taken, work done or contracts
entered into by the Company or any of its Subsidiaries after the
Closing Date; (vii) any liabilities or obligations of, or expenses owed
by, the Company or any of its Subsidiaries for any brokerage or
finder's commission relating to this Agreement or any of the
transactions contemplated hereby; (viii) any liabilities for any Taxes
that may become payable by the Company or any of its Subsidiaries in
respect of the sale of the Assets; (ix) any liabilities or obligations
arising out of currently pending, threatened or future litigation based
upon any conduct which occurred on or before the Closing Date against
the Company or any of its Subsidiaries; (x) any liabilities or
obligations arising out of any claims by or made on behalf of the
current or former employees of the Company or any of its Subsidiaries
relating to
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employment practices of the Company or any of its Subsidiaries; (xi)
any liabilities of the Company or any of its Subsidiaries for accrued
vacation, accrued sick pay, workers compensation claims, health benefit
claims, matching contribution or declared profit sharing contributions
under a Company Employee Benefit Plan, restorative payments under a
Company Employee Benefit Plan, flexible benefit plan claims and similar
employee benefit related matters; (xii) any liabilities or obligations
of the Company or any of its Subsidiaries relating to the
non-compliance or alleged non-compliance by any of them with applicable
Law, including without limitation, with respect to their respective
Rental Purchase Agreements (including by way of illustration and not of
limitation, any liabilities or obligations (a) arising out of customer
payments received by the Company or any of its Subsidiaries on or
before the Closing Date, (b) representations or statements made by the
Company or any of its Subsidiaries to customers on or before the
Closing Date, (c) disclosures made or not made by the Company or any of
its Subsidiaries on or before the Closing Date, (d) advertising issued
by or for the Company or any of its Subsidiaries on or before the
Closing Date, (e) statutory or common law violations based on terms of
Rental Purchase Agreements entered into by the Company or any of its
Subsidiaries on or before the Closing Date, and (f) the Company's or
any of its Subsidiaries' failure to make disclosures in Rental Purchase
Agreement forms or other writings entered into or issued on or before
the Closing Date); (xiii) any liabilities relating to, arising under or
otherwise pertaining to real property owned by the Company or any of
the Operating Subsidiaries; and (xiv) any liabilities of the Company or
any of its Subsidiaries with respect to real estate leases for any of
the Account Stores, except with respect to any Account Store which
Acquiror elects to assume pursuant to Section 6.3, and in such event,
Acquiror shall assume only such liabilities as set forth in the
assumption agreement referenced in Section 6.3 entered into in
connection therewith.
1.6 Closing. The closing of the transactions contemplated hereby (the
"CLOSING") shall take place at 10:00 a.m., Dallas, Texas Time, at the offices of
Winstead Sechrest & Minick P.C., 5400 Renaissance Tower, 1201 Elm Street,
Dallas, Texas 75270, on the Designated Date; provided, however, that on the
Designated Date all conditions to closing set forth in Article V have been
satisfied or waived by the party entitled to waive the same. If on the
Designated Date all conditions to the Closing set forth in Article V have not
been satisfied or waived by the party entitled to waive the same, the Closing
shall occur on the third Business Day following the satisfaction of the last
condition to closing under Article V or waiver by the party entitled to waive
the same. Notwithstanding the foregoing provisions, upon the mutual agreement in
writing of the parties hereto, the date, time and place of the Closing may be
extended to a date that is later than the Designated Date. The Designated Date
or such other date on which the Closing occurs is hereinafter referred to as the
"CLOSING DATE."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company and the Operating
Subsidiaries as follows:
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2.1 Organization. The Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the requisite corporate power to carry on its business as now conducted.
2.2 Authority Relative to this Agreement. The Acquiror has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by the Acquiror and the consummation by the Acquiror of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Acquiror and no other corporate action on the part of the Acquiror is necessary
to authorize this Agreement or the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Acquiror and
constitutes a valid and binding agreement of the Acquiror, enforceable against
the Acquiror in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity.
2.3 Consents and Approvals; No Violations. Except for applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR ACT"), no filing with, and no permit, authorization, consent or approval
of, any public body or authority is necessary for the consummation by the
Acquiror of the transactions contemplated by this Agreement. Neither the
execution and delivery of this Agreement by the Acquiror nor the consummation by
the Acquiror of the transactions contemplated hereby, nor compliance by the
Acquiror with any of the provisions hereof, will require any consent or approval
of any third party, or result in a violation or breach of, or conflict with or
constitute a default (or an event that, with notice or lapse of time or both,
would constitute a default) under any note, bond, indenture, mortgage, deed of
trust, lease, franchise, permit, authorization, license, contract, instrument or
other agreement or commitment or any order, judgment or decree to which, the
Acquiror is a party or by which the Acquiror or any of its assets or properties
are bound or encumbered, except (a) those that have already been given, obtained
or filed, or (b) such consents, approvals, violations, breaches, conflicts, or
defaults which would not, individually or in the aggregate, have a material
adverse effect on the Acquiror. Neither the execution and delivery of this
Agreement by the Acquiror, nor the consummation by the Acquiror of the
transactions contemplated hereby, nor compliance by the Acquiror with any of the
provisions hereof, will (i) conflict with or result in any breach of any
provisions of the Certificate of Incorporation or Bylaws of the Acquiror, or
(ii) violate in any material respect any existing Order, writ, injunction,
statute or Regulation applicable to the Acquiror or any of its properties or
assets.
2.4 Sufficient Funds. Acquiror has access to sufficient funds as of the
date hereof, and will have sufficient funds on the Closing Date, in an amount
necessary to fund the Purchase Price in connection with the transactions
contemplated by this Agreement.
2.5 Broker's Fees. Neither the Acquiror, nor anyone on its behalf, has
any liability to any broker, finder, investment banker or similar agent, or has
agreed to pay any brokerage fees, finder's fees or commissions, or to reimburse
any expenses of any broker, finder, investment banker or agent in connection
with the transactions contemplated hereby.
-8-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE OPERATING SUBSIDIARIES
The Company and the Operating Subsidiaries hereby jointly and severally
represent and warrant to Acquiror as follows:
3.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Pennsylvania, and
has the requisite corporate power to carry on its business as now conducted.
Rent-Way Michigan is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the requisite
corporate power to carry on its business as now conducted. TTIG is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Indiana, and has the requisite power to carry on its business as
now conducted.
3.2 Certain Corporate Matters. Each of the Company and Rent-Way
Michigan is duly licensed or qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the Assets are located. TTIG
is duly licensed or qualified to do business as a foreign entity and is in good
standing in each jurisdiction where the Assets are located. The Company and each
Operating Subsidiary have full corporate power and authority and all material
authorizations, licenses and Permits necessary to carry on their respective
businesses as presently conducted. The Company has delivered to the Acquiror
true, accurate and complete copies of its Articles of Incorporation and Bylaws
of the Company and Rent-Way Michigan, and all organization documents of TTIG,
which reflect all amendments made thereto at any time prior to the date of this
Agreement. Neither the Company nor any Operating Subsidiary is in default under
or in violation of any provision of their respective organizational documents
nor, except as set forth on Schedule 3.2, are any of them in material default or
in material violation of any restriction, Encumbrance, indenture, contract,
lease, sublease, loan agreement, note or other obligation or liability to which
any of the Assets held by any of them are subject.
3.3 Authority Relative to this Agreement. The Company and each
Operating Subsidiary has the corporate power and authority to enter into this
Agreement and to carry out their respective obligations hereunder. The
execution, delivery and performance of this Agreement by the Company and the
Operating Subsidiaries and the consummation by the Company and the Operating
Subsidiaries of the transactions contemplated by this Agreement have been duly
authorized, and no other action on the part of the Company or any Operating
Subsidiary is necessary to authorize this Agreement or the transactions
contemplated hereby. The execution, delivery and performance of the transactions
contemplated hereby by the Company and the Operating Subsidiaries have been
approved unanimously by the Board of Directors or similar governing body of such
entities and do not require the approval by the Company's or any of the
Operating Subsidiaries' shareholders or partners, as the case may be. This
Agreement has been duly executed and delivered by the Company and the Operating
Subsidiaries and, assuming due execution and delivery by the Acquiror,
constitutes the valid and binding agreement of the Company and the Operating
Subsidiaries, enforceable against each of them in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity.
-9-
3.4 Consents and Approvals; No Violations. Except for applicable
requirements of the HSR Act, no filing with, and no Permit, authorization,
consent or approval of, any public body or authority is necessary for the
consummation by the Company or the Operating Subsidiaries of the transactions
contemplated by this Agreement. Except as set forth on Schedule 3.4, neither the
execution and delivery of this Agreement by the Company or the Operating
Subsidiaries nor the consummation by the Company and the Operating Subsidiaries
of the transactions contemplated hereby, nor compliance by the Company and the
Operating Subsidiaries with any of the provisions hereof, will (a) require any
consent or approval of any third party, (b) result in the imposition of any
Encumbrance against any Asset, or (c) result in a violation or breach of, or
conflict with or constitute a default (or an event that, with notice or lapse of
time or both, would constitute a default) under any note, bond, indenture,
mortgage, deed of trust, lease, franchise, permit, authorization, license,
contract, instrument or other agreement or commitment to which the Company or
any of the Operating Subsidiaries is a party or by which the Company or any of
the Operating Subsidiaries or any of their respective assets or properties are
bound or encumbered, except (i) those that have already been given, obtained or
filed, or (ii) with respect to clauses (a) and (c) above, such consents,
approvals, violations, breaches, conflicts, or defaults which would not,
individually or in the aggregate, have a material adverse effect on the Company,
the Operating Subsidiaries, the Assets or the transactions contemplated hereby.
Neither the execution and delivery of this Agreement by the Company and the
Operating Subsidiaries, nor the consummation by the Company and the Operating
Subsidiaries of the transactions contemplated hereby, nor compliance by the
Company and the Operating Subsidiaries with any of the provisions hereof, will
(i) conflict with or result in any breach of any provisions of the
organizational documents of the Company or any Operating Subsidiary or (ii)
violate in any material respect any existing Order, writ, injunction, statute or
Regulation applicable to the Company or any Operating Subsidiary or any of their
respective properties or assets.
3.5 Reports.
(a) Except as set forth on Schedule 3.5(a), since December 28,
2001, the Company has filed (i) all SEC Reports required to be filed
with the Commission, and (ii) all Reports required to be filed with any
other Governmental Authorities. Such SEC Reports and other Reports,
including all those filed after the date of this Agreement and prior to
the Closing Date, (a) were prepared in all material respects in
accordance with the requirements of applicable Law (including, with
respect to the SEC Reports of the Company, the Securities Act and the
Exchange Act, as the case may be) and (b) in the case of the SEC
Reports, did not, at the time they were filed, contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) The Company's Consolidated Financial Statements and any
consolidated financial statements of the Company (including any related
notes thereto) contained in any SEC Reports of the Company filed with
the Commission after the date of this Agreement (i) have been or will
have been prepared in accordance with the published Regulations of the
Commission and in accordance with GAAP (except (A) to the extent
required by changes in GAAP and (B), with respect to the SEC Reports of
the Company
-10-
filed prior to the date of this Agreement, as may be indicated in the
notes thereto) and (ii) fairly present, or will fairly present, as the
case may be, the consolidated financial position of the Company and its
Subsidiaries as of the respective dates thereof and the consolidated
results of their operations and cash flows for the periods indicated
(subject to, in the case of any unaudited interim financial statements,
reasonable estimates of normal and recurring year-end adjustments).
3.6 Profit and Loss Statements; No Undisclosed Liabilities.
(a) The Company has delivered to Acquiror profit and loss
statements for each of Stores reflecting the operations of each Store
for each month from November 1, 2001 through October 31, 2002 (each, a
"PROFIT AND LOSS STATEMENT" and together, the "PROFIT AND LOSS
STATEMENTS"). Such Profit and Loss Statements are complete and correct,
represent actual, bona fide transactions, have been prepared from and
are in accordance with the accounting records of each Store, and fairly
present the transactions and the operations of the Stores for the
periods referred to in such Profit and Loss Statements. The revenues
set forth in the Profit and Loss Statements represent cash payments
received from customers of the Stores and deposited into bank accounts
of such Stores, are included as so set forth in the consolidated
financial statements of the Company for the corresponding periods and
have been reported in a manner consistent with the Company's financial
reporting accounting principles. Notwithstanding the foregoing, the DPI
revenue set forth on the Profit and Loss Statements reflects net
commissions. The expenses reflected on the Profit and Loss Statements
are included in the consolidated financial statements of the Company
for the corresponding periods and are consistent with the Company's
financial reporting accounting principles, subject to such changes due
to reclassifications that occur in the ordinary course of business and
are not material with respect to the operation of the Stores.
(b) The balance sheet information set forth on Schedule 3.6(b)
for each of the Stores has been derived from the accounting records of
each Store and fairly presents the information set forth thereon for
the date provided. Such information is included in the consolidated
financial statements of the Company as of the date referenced thereon
and reflects accounting treatment consistent with the Company's
financial reporting accounting principles.
(c) Except as set forth in the Company's Consolidated
Financial Statements, the Profit and Loss Statements or on Schedule
3.6(c), the Assets are not subject to any liability, commitment, debt
or obligation (of any kind whatsoever whether absolute or contingent,
accrued, fixed, known or unknown, matured or unmatured) (together,
"UNDISCLOSED LIABILITIES").
3.7 Events Subsequent to Profit and Loss Statements. Since October 31,
2002, the Company and the Operating Subsidiaries have conducted the operation of
the Stores only in the ordinary course of business, and there has not been:
(a) any sale, lease, transfer, license or assignment of any
Store assets, tangible or intangible, other than in the ordinary course
of business;
-11-
(b) any damage, destruction or property loss, whether or not
covered by insurance, affecting adversely and materially the Assets;
(c) any subjection to any Encumbrance on any of the Assets,
other than Permitted Encumbrances;
(d) any incurrence of indebtedness or liability or assumption
of obligations by the Company or any Operating Subsidiary relating to
the Assets, other than those incurred in the ordinary course of
business;
(e) any cancellation or compromise by the Company or any
Operating Subsidiary of any material debt or claim relating to the
Assets, except for adjustments made in the ordinary course of business
which, in the aggregate, are not material;
(f) any waiver or release by the Company or any Operating
Subsidiary of any right of any material value relating to the Assets;
(g) any material adverse change in the business, operations,
prospects, assets or results of operations or condition of the Stores
or the Assets, and no event has occurred or circumstance exists that
may result in such a material adverse change;
(h) any change in the accounting policies with respect to the
Stores as in effect on November 30, 2002, including without limitation,
charge-off policies; or
(i) any action or failure to take any action that would result
in the occurrence of any of the foregoing.
3.8 Property. Each Store in which Acquiror will assume the real estate
lease hereunder is listed on Schedule 3.8 (together with the Owned Store, the
"ACQUIRED STORES"). With respect to any real estate lease underlying an Acquired
Store (each, a "STORE LEASE" and together, the "STORE LEASES"), a true and
complete copy of each such Store Lease has been delivered to the Acquiror. With
respect to each Store Lease, (a) the Store Lease has been validly executed and
delivered by the Company or the Operating Subsidiary, as the case may be, and by
the other party or parties thereto and is a binding agreement; (b) the Company
or the Operating Subsidiary, as the case may be, is not, and no other party to
the Store Lease is, in material breach or material default, and, no event has
occurred on the part of the Company or the Operating Subsidiary, as the case may
be, or on the part of any other party which, with notice or lapse of time, would
constitute such a breach or default or permit termination, modification or
acceleration under the Store Lease; (c) upon the assumption of the Store Lease
by Acquiror as contemplated by Section 1.5(b), except as set forth on Schedule
3.8, the Store Lease will continue to be binding on the Acquiror and the
Landlord in accordance with its terms immediately following the Closing Date;
(d) the Company or the Operating Subsidiary, as the case may be, has not
repudiated and no other party to the Store Lease has repudiated any provision
thereof; (e) there are no material disputes, oral agreements or delayed payment
programs in effect as to the Store Lease; and (f) all facilities leased under
each Store Lease are fit for the operation of the Store and have been reasonably
maintained. All heating, cooling, lighting, plumbing and electrical systems
under each Store Lease are in good repair and working order. All fixtures,
furnishings and improvements under each Store Lease, including but not
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limited to, mirrors, linoleum, shades, awnings, blinds, carpeting, curtains,
draperies and ceiling and wall lighting fixtures, are in reasonably good and
clean condition, subject to ordinary wear and tear.
3.9 Tangible Property. Except as set forth on Schedule 3.9, the Company
and the Operating Subsidiaries have good and valid title to the Assets held by
them, subject to no Encumbrances, except Permitted Encumbrances. At the Closing,
the Company and the Operating Subsidiaries shall deliver the Assets to the
Acquiror, free and clear of any Encumbrances, except for Permitted Encumbrances.
3.10 Inventory. All inventory relating to the Stores (including without
limitation, the Idle Inventory) was purchased, acquired or ordered in the
ordinary and regular course of business or pursuant to acquisitions and
consistent with the regular inventory practices of the Company and the Operating
Subsidiaries. All such inventory is of a quality usable and merchantable in the
operation of the Stores and is in good repair and condition, ordinary wear and
tear excepted, except for obsolete items which have been written off in the
Profit and Loss Statements or on the accounting records of the Company as of the
Closing Date, as the case may be.
3.11 Rental Purchase Agreements. The Company has provided to Acquiror
true and correct copies of all forms of Rental Purchase Agreements utilized in
the Stores during the Company's previous five (5) fiscal years. The form of each
Rental Purchase Agreement utilized in the Stores by the Company and any of its
Subsidiaries currently and during the previous five (5) fiscal years of the
Company is and was, as the case may be, in compliance with all federal and state
laws of the state in which such Rental Purchase Agreement was utilized. All
Rental Purchase Agreements relating to the Stores were entered into in the
ordinary and regular course of business in a manner consistent with the regular
business practices of the Company and any of its Subsidiaries. With respect to
each Rental Purchase Agreement relating to the Stores:
(a) such Rental Purchase Agreement is in full force and effect
and constitutes a valid, legal and binding obligation of the
contracting parties, enforceable against each of them in accordance
with its terms;
(b) the Company and the Operating Subsidiaries have complied
in all respects with the terms of such Rental Purchase Agreement;
(c) neither the Company nor any of the Operating Subsidiaries
are in breach, violation or default under such Rental Purchase
Agreement;
(d) no event has occurred which constitutes, or with the lapse
of time or the giving of notice, or both would constitute a breach,
violation or default under the Rental Purchase Agreement;
(e) the enforceability of such Rental Purchase Agreement and
the enjoyment of the rights and benefits thereunder will not be
affected in any respect by the execution and delivery of this
Agreement, the performance by the parties of their obligations
hereunder or the consummation of the transactions contemplated hereby;
-13-
except for those matters above which would not, individually or in the
aggregate, have a material adverse effect on the operation of the Stores or of
the Assets.
3.12 Legal Compliance. Except as set forth on Schedule 3.12, no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand or
notice has been filed, commenced, is pending or, to the knowledge of the
Company, threatened against the Company or any of its directors, officers,
employees, agents or Subsidiaries alleging a violation of any applicable Law or
Regulation. The Company and each of its Subsidiaries has conducted their
respective operations in compliance in all material respects with all applicable
Laws, including rules, Regulations, codes, plans, agreements, contracts,
injunctions, Orders, rulings and charges thereunder, and are not in default with
respect to any agreement, directive, memorandum of understanding or Order
applicable to the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries has been advised by any Governmental Authority that such
Governmental Authority is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any Order, memorandum of
understanding, commitment letter or similar submission. The Company and each of
its Subsidiaries has obtained all authorizations, licenses, product and
establishment registrations, franchises, Permits, easements, certificates and
consents necessary to the operation of the Stores and to own the Assets. All
such authorizations, licenses, registrations, franchises, Permits, easements,
certificates and consents are in full force and effect and, to the knowledge of
the Company, no suspension or cancellation of any of them is threatened.
3.13 Assets Necessary to the Business. The Assets, excluding the
Excluded Assets and the inventory related to the Stores, which is addressed in
Section 3.10, (a) constitute all of the assets, tangible and intangible,
necessary to operate the Stores, and (b) are in good operating condition and
repair, ordinary wear and tear excepted.
3.14 Books and Records; Internal Controls. The books and records of the
Company and the Operating Subsidiaries relating to the Assets, including without
limitation, the Profit and Loss Statements, fairly reflect the transactions to
which they are a party or by which the Assets are bound, and such books and
records are and since October 30, 2000, have been properly kept and maintained
in accordance with sound business practices and the requirements of Section
13(b)(2) of the Exchange Act (whether or not such entity is subject to such
Section), including the maintenance of an adequate system of internal controls.
There are no significant deficiencies in the design or operation of the
Company's or the Operating Subsidiaries' internal controls which could adversely
affect the Company's or the Operating Subsidiaries' ability to record, process,
summarize and report financial data. There are no material weaknesses in the
Company's or any of the Operating Subsidiaries internal controls. All financial
and operational information submitted by the Company and the Operating
Subsidiaries to the Acquiror, including without limitation, computer printouts,
accurately and fairly represent such amounts and the financial condition and the
results of operations of the Stores on and as of the dates for the periods
thereof.
3.15 Product Warranties. Except as set forth on Schedule 3.15, neither
the Company nor any of its Operating Subsidiaries has given or made any express
warranties to third parties, including without limitation customers, with
respect to any products rented or sold by them, except for the warranties
imposed by the provisions of applicable Law. Except as set forth on
-14-
Schedule 3.15, neither the Company nor any Operating Subsidiary has any
knowledge of any fact or event forming the basis of an actual or threatened
claim against the Company or any Operating Subsidiary for product liability on
account of any express or implied warranty.
3.16 Inappropriate Payments. Neither the Company, the Operating
Subsidiaries, nor any employee, agent or representative of any of them has,
directly or indirectly, made any bribes, kickbacks, illegal payments or illegal
political contributions using Company nor any Operating Subsidiary funds or made
any illegal payments from the Company's or the Operating Subsidiaries' funds to
obtain or retain business.
3.17 Environmental Matters. There are no claims, actions, suits,
complaints, proceedings or investigations pending, or to the knowledge of the
Company, threatened against or affecting the Stores at Law or in equity before
any Court or before or by any Governmental Authority relating to environmental
matters. Neither the Company nor any Operating Subsidiary is subject to any
Order, writ or injunction applicable to the Stores relating to any environmental
matter. With respect to the Stores, neither the Company nor any Operating
Subsidiary is in violation of or in default in any material respect with regards
to any existing statute, Regulation, writ, injunction or Order of any Court or
Governmental Authority relating to any environmental matter. The real property
on which the Stores are located is free from hazardous substance, petroleum or
other contamination which may give rise to liability to the Company or any
Operating Subsidiary, as owner or operator of the Stores, for clean up or a
required response action or which under any Store Leases may impose liability on
the operator of the Stores for such liability.
3.18 Motor Vehicles and Equipment. Set forth on Schedule 3.18 is a list
of the motor vehicles utilized by the Company or any of the Operating
Subsidiaries in the operation of the Stores on the date hereof. At the Closing,
the vehicles identified by Acquiror as set forth in Section 1.1(f) shall be
delivered free and clear of all Encumbrances on an "as is" basis.
3.19 Ordinances and Regulations. The Stores and the operation and
maintenance thereof, as now operated or maintained, do not contravene any zoning
ordinance or other administrative Regulations (whether or not permitted because
of prior nonconforming use) or violate any existing restrictive covenant or any
provision of existing and applicable Law, the effect of which in any respect
would interfere with or prevent the continued use of the properties for the
purposes for which they are now being used or would reduce the value thereof.
3.20 Insurance. The Company and the Operating Subsidiaries currently
maintain fire and casualty and general liability, workers compensation and
automobile policies with reputable insurance carriers. The Company and the
Operating Subsidiaries reasonably believe that such insurance policies provide
full and adequate coverage for all normal risks incident to the Stores and the
Assets.
3.21 Litigation.
(a) Litigation - Company and its Subsidiaries. Except as set
forth on Schedule 3.21(a), there are no actions, suits, investigations,
complaints or proceedings (including any proceedings in arbitration)
pending or, to the knowledge of the Company,
-15-
threatened against the Company or any of its Subsidiaries, at law or in
equity, in any Court or before any Governmental Authority, alleging
violation of the provisions of the Rental Purchase Agreements,
rent-to-own statutes or any other consumer protection Law.
(b) Litigation - Affecting the Stores. The Company has
furnished Acquiror copies of (i) all attorney responses to the request
of the independent auditors for the Company with respect to loss
contingencies as of September 30, 2002 in connection with the Company's
financial statements, and (ii) a written list of legal and regulatory
proceedings filed against the Company or any of the Operating
Subsidiaries which are pending (including matters which are on appeal
or have not been fully funded, and administrative matters that may be
closed but with respect to which the applicable statute of limitations
has not run) as of the date of this Agreement relating to, in
connection with or otherwise pertaining to the Stores. There are no
actions, suits, investigations, complaints or proceedings (including
any proceedings in arbitration) pending (including matters which are on
appeal or have not been fully funded, and administrative matters that
may be closed but with respect to which the applicable statute of
limitations has not run) or, to the knowledge of the Company,
threatened against the Company or any of the Operating Subsidiaries, or
any of their respective officers, directors, employees, agents, at Law
or in equity, in any Court or before any Governmental Authority
relating to or in connection with the operation of the Stores or
otherwise pertaining thereto, except actions, suits, investigations,
complaints or proceedings that are set forth on Schedule 3.21(b).
Except as set forth in Schedule 3.21(c), there are no actions, suits,
investigations, complaints or proceedings (including any proceedings in
arbitration) pending or, to the knowledge of the Company, threatened
against the Company or any of the Operating Subsidiaries, or any of
their respective officers, directors, employees, agents, at Law or in
equity, in any Court or before any Governmental Authority relating to
or in connection with the operation of the Stores or otherwise
pertaining thereto, alleging violations of federal or state Laws
respecting employment, including but not limited to, gender, race,
disability, national origin or age discrimination, violations of the
Occupational Safety and Health Act, Family and Medical Leave Act, terms
and conditions of employment or the federal or state wages and hours
Laws.
3.22 Employment Matters. Neither the Company nor any of its
Subsidiaries has been, and are not now, a party to any collective bargaining
agreement or other labor contract and there has not been, there is not presently
pending (including matters which are on appeal or have not been fully funded,
and administrative matters that may be closed but with respect to which the
applicable statute of limitations has not run) or existing, and, to the
Company's knowledge, there is not threatened, any strike, slowdown, picketing,
work stoppage or employee grievance process involving the Company or any of its
Subsidiaries. To the knowledge of the Company, no event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute and there is not pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries any
proceeding relating to the alleged violation of any legal requirement pertaining
to labor relations or employment matters, including any charge or complaint
filed with the National Labor Relations Board or any comparable governmental
body, and there is no organizational activity or other labor dispute against or
affecting the Company or any of its Subsidiaries or the Stores. No application
or petition for an election of or for certification of a collective bargaining
agent is pending and no grievance or
-16-
arbitration proceeding exists that might have an adverse effect upon the Company
or any of its Subsidiaries or the Stores. There is no lockout of any employees
by the Company or any of its Subsidiaries, and no such action is contemplated by
the Company or any of its Subsidiaries. To the knowledge of the Company, there
has been no charge of discrimination filed against or threatened against the
Company or any of its Subsidiaries with the Equal Employment Opportunity
Commission or similar governmental body.
3.23 Taxes.
(a) For purposes of this Agreement, (a) "TAX RETURN" means any
report, statement, form, return or other document or information
required to be supplied to a taxing authority in connection with Taxes
or any amendments thereto, and (b) "TAX" or "TAXES" means any federal,
state, local or foreign tax, including, without limitation, income tax,
ad valorem tax, excise tax, sales tax, use tax, franchise tax, gross
receipts tax, withholding tax, social security tax, occupation tax,
service tax, license tax, payroll tax, transfer and recording tax,
severance tax, customs tax, import tax, export tax, employment tax, or
any similar or other tax, assessment, duty, fee, levy or other
governmental charge, together with and including, without limitation,
any and all interest, fines, penalties, assessments and additions to
tax resulting from, relating to, or incurred in connection with any
such tax or any contest or dispute thereof.
(b) The Company and any affiliated, combined, consolidated,
unitary or similar group of which the Company is or was a member (a
"RELEVANT GROUP") has filed with the appropriate taxing authorities all
Tax Returns required to be filed prior to the date hereof, and will
file all such Tax Returns required to be filed by the Closing Date on
or before the Closing Date, including, but not limited to, all Tax
Returns the filing of which is necessary for the conduct of the
Company's and the Operating Subsidiaries' business. The Tax Returns so
filed are, and the Tax Returns to be filed will be, in all material
respects, complete, correct and accurate representations of the income,
franchise or other Tax liabilities of the Company and the Operating
Subsidiaries and such Tax Returns accurately set forth, and will set
forth, all items required to be reported thereon. Each such Tax Return
has been and will be prepared in all material respects in compliance
with all applicable laws and regulations. All Taxes due and payable by
the Company or any member of a Relevant Group, whether or not shown on
any Tax Return, have been paid or will be paid by the Closing Date,
except such Taxes, if any, as are being contested diligently and in
good faith and which are set forth on Schedule 3.23(b).
(c) There are no claims for Taxes pending against the Company
or any Relevant Group nor any threatened claim for Tax deficiencies or
adjustments against the Company or any Relevant Group for which the
Assets could be liable and the Company knows of no basis for such
claims. There exist no actual or, to the knowledge of the Company,
proposed additional assessments of Taxes by any Taxing authority to
which the Assets could be subject. There are no outstanding agreements
or waivers that would extend the statutory period in which a taxing
authority may assess or collect a Tax against the Company or any
Relevant Group and to which the Assets could be subject. There are no
Liens for Taxes, other than for current Taxes not yet due and payable,
upon the Assets.
-17-
(d) All Taxes that relate to the business of the Company or
any Relevant Group or the Assets and that will be due and payable on or
before the Closing Date shall have been paid in full on or before the
Closing Date.
(e) The Company has withheld or will cause to be withheld from
all employees and has timely paid or will cause to be paid to the
appropriate Governmental Authorities proper and accurate amounts for
all periods through the date hereof and the Closing Date in compliance
with all Tax withholding provisions of applicable federal, state,
foreign and local Law.
3.24 Employee Benefit Plans.
(a) The Company has listed on Schedule 3.24(a) and has
delivered to the Acquiror true and complete copies of
(i) any nonqualified deferred, incentive compensation and
retirement plans or arrangements,
(ii) any qualified retirement plans or arrangements and
the most recent Form 5500s filed with the IRS with
respect to such plans or arrangements,
(iii) any other employee compensation, stock options,
severance or termination pay or welfare benefit
plans, programs or arrangements,
(iv) any other employee benefit plans, programs, or
arrangements, and
(v) any related trusts, insurance contracts or other
funding arrangements maintained, established or
contributed to by the Company or any entity (a
"COMPANY ERISA AFFILIATE") required to be aggregated
with the Company pursuant to the provisions of
Sections 414(b), (c), (m) or (o) of the Code or
Section 4001(a)(14) of ERISA within the last six
years or currently in effect to which the Company or
any Company ERISA Affiliate is a party or otherwise
is bound ("COMPANY EMPLOYEE BENEFIT PLANS"),
excluding any such plan, program, arrangement or
funding arrangement as to which the Company is not
(and has not been) a participating employer and has
no current or potential liability under the Code or
ERISA.
(b) The Company has listed on Schedule 3.24(b) hereto and has
delivered to the Acquiror true and complete copies of any applications
for Private Letter Rulings made to the IRS and any responses received
from the IRS regarding the same.
(c) One or more of the Company Employee Benefit Plans may be
covered by COBRA. If so, each such Company Employee Benefit Plan has
been operated in, and is in, compliance with COBRA in all material
respects. To the knowledge of the Company after due inquiry, all
notices required to be given under COBRA for each such Company Employee
Benefit Plan have been timely and properly given in accordance with
COBRA, and the rules and Regulations promulgated thereunder. No
employee, former employee
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or "qualified beneficiary" (as defined in COBRA) has any claim or
contingent claim against the Company, any Subsidiary of the Company or
any Company ERISA Affiliate for failure to comply with COBRA or the
rules and Company Regulations promulgated thereunder. The Company has
not communicated to any employee or former employee any intention or
commitment to modify any Company Employee Benefit Plan or to establish
or implement any other employee or retiree benefit or compensation
plans or arrangements.
3.25 Broker's Fees. Except as set forth on Schedule 3.25, neither the
Company nor anyone on its behalf has any liability to any broker, finder,
investment banker or agent, or has agreed to pay any brokerage fees, finder's
fees or commissions, or to reimburse any expenses of any broker, finder,
investment banker or agent in connection with this Agreement or the transactions
contemplated by this Agreement.
3.26 Solvency.
(a) The Company and each of the Operating Subsidiaries is not
now Insolvent and will not be rendered insolvent by the transactions
contemplated hereby. As used herein, "INSOLVENT" means that the sum of
the debtor's Debts is greater than all of the debtor's assets at a fair
valuation.
(b) Immediately after giving effect to the consummation of the
transactions contemplated hereby: (i) the Company and each of the
Operating Subsidiaries will be able to pay their liabilities as they
become due in the usual course of its business; (ii) the Company and
each of the Operating Subsidiaries will not have unreasonably small
capital with which to conduct their present or proposed business; (iii)
the Company and each of the Operating Subsidiaries will have assets
(calculated at fair market value) that exceed its liabilities; and (iv)
taking into account all pending and threatened litigation, final
judgments against the Company or any of its Subsidiaries in actions for
money damages are not reasonably anticipated to be rendered at a time
when, or in amounts such that, the Company or any of the Operating
Subsidiaries will be unable to satisfy any such judgments promptly in
accordance with their terms (taking into account the maximum probable
amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered) as well as
all other obligations of the Company and each of the Operating
Subsidiaries. The cash available to the Company and each of the
Operating Subsidiaries, after taking into account all other anticipated
uses of the cash, will be sufficient to pay all such Debts and
judgments promptly in accordance with their terms.
3.27 Average Monthly Revenue - Three Months. The average monthly
revenue of the Stores, calculated for the months of September 2002, October 2002
and November 2002 under the accounting methods set forth in the Profit and Loss
Statements, is no less than $10,062,311 per month. On the Closing Date, the
average monthly revenue of the Stores, calculated for the three full calendar
months immediately prior to the Closing Date and calculated under the accounting
methods set forth in the Profit and Loss Statements (the "CLOSING THREE MONTH
REVENUE"), will be no less than $10,200,000 per month (the "CLOSING THREE MONTH
REVENUE TARGET"); provided, however, that Acquiror's sole remedy in the event
that such representation is
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not true as of the Closing Date will be the Purchase Price Reduction provided
for in Section 1.3(b), except that if the Closing Three Month Revenue is equal
to or less than $10,000,000 (the "CLOSING THREE MONTH REVENUE MINIMUM"), then
Acquiror may, at its election, terminate this Agreement pursuant to the terms
set forth in Section 1.3(c).
3.28 Monthly Revenue - One Month. The monthly revenue of the Stores,
calculated for the month of November 2002 under the accounting methods set forth
in the Profit and Loss Statements, is no less than $10,200,000. On the Closing
Date, the monthly revenue of the Stores, calculated for the full calendar month
immediately prior to the Closing Date and calculated under the accounting
methods set forth in the Profit and Loss Statements (the "CLOSING MONTH
REVENUE"), will be no less than $10,200,000 (the "CLOSING MONTH REVENUE
TARGET"); provided, however, that Acquiror's sole remedy in the event that such
representation is not true as of the Closing Date will be the Purchase Price
Reduction provided for in Section 1.3(b), except that if the Closing Month
Revenue is equal to or less than $10,000,000 (the "CLOSING MONTH REVENUE
MINIMUM"), then Acquiror may, at its election, terminate this Agreement pursuant
to the terms set forth in Section 1.3(c).
3.29 Average Weekly Revenue. The average weekly revenue of the Stores,
calculated from December 1, 2002 to the date hereof under the accounting methods
set forth in the Profit and Loss Statements, is no less than $2,400,000. On the
Closing Date, the average weekly revenue of the Stores, calculated for each week
from the first day following the end of the month immediately preceding the
Closing Date to the Closing Date under the accounting methods set forth in the
Profit and Loss Statements (the "CLOSING WEEKLY REVENUE"), will be no less than
$2,355,000 (the "CLOSING WEEKLY REVENUE TARGET"); provided, however, that
Acquiror's sole remedy in the event that such representation is not true as of
the Closing Date will be the Purchase Price Reduction provided for in Section
1.3(b), except that if the Closing Weekly Revenue is equal to or less than
$2,350,000 (the "CLOSING WEEKLY REVENUE MINIMUM"), then Acquiror may, at its
election, terminate this Agreement pursuant to the terms set forth in Section
1.3(c).
3.30 Net Book Value of Inventory. The net book value of the Store
inventory being sold hereunder calculated under the accounting methods set forth
in the Company's consolidated financial statements is no less than $54,500,000
(net of 30-days past due) as of the date hereof. On the Closing Date, the net
book value of the Store inventory being sold hereunder calculated under the
accounting methods set forth in the Company's consolidated financial statements
(the "CLOSING INVENTORY") will be no less than $54,500,000 (net of 30-days past
due) (the "CLOSING INVENTORY TARGET"); provided, however, that Acquiror's sole
remedy in the event that such representation is not true as of the Closing Date
will be the Purchase Price Reduction provided for in Section 1.3(b), except that
if the Closing Inventory (net of 30-days past due) is equal to or less than
$53,500,000 (the "CLOSING INVENTORY MINIMUM"), then Acquiror may, at its
election, terminate this Agreement pursuant to the terms set forth in Section
1.3(c).
3.31 Full Disclosure. To the knowledge of the Company or any of the
Operating Subsidiaries, neither this Agreement nor any certificate, document or
communication furnished by the Company or any of the Operating Subsidiaries to
the Acquiror (including the principals thereof, acting in their individual
capacities) in connection herewith (whether prior to, on, or after the date
hereof) contains or will contain an untrue statement of a material fact or omits
to
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state or will state a material fact necessary to make the statements contained
herein correct and therein not misleading. There is no fact known to the Company
or any of the Operating Subsidiaries that materially and adversely affects the
use or enjoyment of, or title to the Assets, which has not been set forth
herein.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Interim Operations of the Company and the Operating Subsidiaries.
Except as contemplated by this Agreement, during the period from the date hereof
to the Closing Date, the Company shall, and shall cause the Operating
Subsidiaries to, conduct their respective businesses in the ordinary course of
business consistent with past practice, preserve their business organization
intact, use their best efforts to retain the services of their present principal
employees, and to preserve their goodwill and the goodwill of their suppliers,
customers and others having business relationships with it. Except as otherwise
contemplated by this Agreement, during the period from the date hereof to the
Closing Date, the Company will not, and will cause the Operating Subsidiaries
not to, without the prior written consent of Acquiror:
(a) sell, transfer, mortgage, encumber, pledge or otherwise
dispose of any of the Assets, except for sales of the Assets in the
ordinary course of business (excluding the sale of any Store, which is
specifically prohibited hereby);
(b) permit any insurance policy naming it as a beneficiary or
loss-payable payee covering the Assets to be cancelled or terminated;
(c) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization (by operation of law or otherwise) of the Company
or any of its Subsidiaries;
(d) except as set forth in Schedule 4.1(d), increase in any
manner the compensation payable or to become payable by the Company or
any of its Subsidiaries to any Store employee, other than in the
ordinary course of business consistent with past practice and disclosed
to Acquiror prior to the date hereof;
(e) amend or terminate any Store Lease being transferred
hereunder or enter into any new lease with respect to the Stores;
(f) except as set forth on Schedule 4.1(f), amend or terminate
any Company Employee Benefit Plan, including without limitation, any
bonus plans, except as required by Law or this Agreement;
(g) sell or otherwise dispose of any shares of the capital
stock of any of the Operating Subsidiaries;
(h) take any action to change its accounting policies with
respect to the Stores as in effect at November 30, 2002, including
without limitation, charge-off policies;
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(i) take any action or omit to take any action that would
cause any of the representations and warranties of the Company or the
Operating Subsidiaries herein to become untrue in any material respect;
or
(j) agree, commit or arrange to do any of the foregoing.
4.2 Reasonable Efforts; Filings; Consents.
(a) Subject to the terms of this Agreement, the parties hereto
will each use all commercially reasonable efforts (i) to take, or cause
to be taken, all appropriate action, and to do, or to cause to be done,
all things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective in the most expeditious
manner practicable, the transactions contemplated by this Agreement,
(ii) to obtain from any Governmental Authority any Permits or Orders
required to be obtained by Acquiror or the Company or any of their
respective Subsidiaries in connection with the authorization,
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, (iii) to make all
necessary filings, and thereafter make any other required submissions,
with respect to this Agreement and the transactions contemplated hereby
required under (A) the Securities Act and the Exchange Act, and any
other applicable federal or state securities laws, (B) the HSR Act, and
(C) any other applicable Law; (iv) subject to any restrictions under
antitrust Laws, promptly notify each other of any communication to that
party from any Governmental Authority with respect to this Agreement
and the transactions contemplated hereby and permit the other party to
review in advance any proposed written communication to any
Governmental Authority; (v) not agree to participate in any meeting
with any Governmental Authority in respect of any filings,
investigation or other inquiry with respect to this Agreement and the
transactions contemplated hereby unless it consults with the other
party in advance and, to the extent permitted by such Governmental
Authority, give the other party the opportunity to attend and
participate therein, in each case to the extent practicable; (vi)
subject to any restrictions under antitrust Laws, furnish the other
party with copies of all correspondence, filings and communications
(and memoranda setting forth the substance thereof) between it and its
affiliates and their respective representatives on the one hand, and
any Governmental Authority or members of its staff on the other hand,
with respect to this Agreement and the transactions contemplated hereby
(excluding documents and communications which are subject to
preexisting confidentiality agreements and to the attorney client
privilege or work product doctrine); and (vii) furnish the other party
with such necessary information and reasonable assistance as such other
party and its affiliates may reasonably request in connection with
their preparation of necessary filings or submission of information to
any Governmental Authority in connection with this Agreement and the
transactions contemplated hereby, including without limitation, any
filings necessary or appropriate under the provisions of the HSR Act.
(b) Subject to the terms of this Agreement, Acquiror, the
Company and the Operating Subsidiaries agree to cooperate and use all
commercially reasonable efforts to contest and resist any action,
including administrative or judicial action, and to have vacated,
lifted, reversed or overturned any Order (whether temporary,
preliminary or
-22-
permanent) of any Court or Governmental Authority that is or becomes in
effect and that restricts, prevents or prohibits the consummation of
the transactions contemplated by this Agreement; provided, however,
that nothing contained in this Agreement shall require Acquiror to
enter into a divestiture, hold-separate, business limitation or similar
agreement or undertaking which would, individually or in the aggregate,
in the judgment of Acquiror, adversely impact the economic or business
benefits to Acquiror of the transactions contemplated by this Agreement
or the ability of Acquiror to conduct its business substantially in the
manner such business is being conducted as of the date of this
Agreement.
(c) (i) Subject to the terms of this Agreement, each of the
Company, the Operating Subsidiaries and the Acquiror will give (or will
cause their respective Subsidiaries to give) any notices to third
persons, and use, and cause their respective subsidiaries to use, all
commercially reasonable efforts to obtain any consents from third
persons (A) necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, (B) otherwise required
under any contracts, licenses, leases or other agreements in connection
with the consummation of the transactions contemplated hereby, or (C)
required to prevent a material adverse effect on the Stores from
occurring prior to the Closing Date. The Company and the Operating
Subsidiaries shall notify Acquiror promptly, but in no event later than
two (2) days, following receipt of the consent contemplated by Section
5.2(d) hereof.
(ii) If the Company or the Operating Subsidiaries shall fail
to obtain any consent described in Section 4.2(c)(i) above from a third
person, the Company and the Operating Subsidiaries will use all
reasonable efforts, and will take any such actions reasonably requested
by Acquiror, to limit the adverse effect upon the Acquiror and its
Subsidiaries resulting, or which would result after the Closing Date,
from the failure to obtain such consent and will cooperate in good
faith with Acquiror to develop an alternative arrangement to ensure
that Acquiror obtains the benefits consistent with the economic results
intended by this Agreement.
4.3 No Solicitations.
(a) Neither the Company nor any of the Operating Subsidiaries
shall, directly or indirectly, through any officer, director, employee,
representative or agent solicit or encourage (including by way of
furnishing any information or assistance) the initiation or submission
of any inquiries, proposals or offers from any person regarding the
sale of any of the Assets to be sold to Acquiror hereby (other than as
permitted by Section 4.1(a)), whether or not in writing and whether or
not delivered to the Company or any of its Subsidiaries generally (an
"ACQUISITION PROPOSAL"); provided, however, that nothing contained in
this Agreement shall prevent the Board of Directors of the Company or
any of the Operating Subsidiaries from referring any third party to
this Section 4.3. The Company and the Operating Subsidiaries further
agree that neither the Company, the Operating Subsidiaries nor any of
their respective officers or directors shall, and that they shall each
direct and use their best efforts to cause their employees, agents and
representatives (including any investment banker, attorney or
accountant retained by the Company or any Operating Subsidiaries) not
to, directly or indirectly, enter into
-23-
negotiations concerning, or provide any confidential information or
data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to
make or implement an Acquisition Proposal.
(b) The Company shall immediately notify the Acquiror after
receipt (after the date hereof) of any Acquisition Proposal or any
request for nonpublic information relating to the Company or any of the
Operating Subsidiaries in connection with an Acquisition Proposal or
for access to the properties, books or records of the Company or any of
the Operating Subsidiaries that informs the Board of Directors of the
Company that it is considering making, or has made, an Acquisition
Proposal. The Company also agrees that it will promptly request each
person that has heretofore executed a confidentiality agreement in
connection with any such person's consideration of acquiring any of the
Assets to return all confidential information heretofore furnished to
such person by or on behalf of it.
(c) The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
of the foregoing. The Company agrees that it will take the necessary
steps to promptly inform the individuals or entities referred to above
of the obligations undertaken in this Section 4.3.
4.4 Press Releases. The Company, the Operating Subsidiaries and the
Acquiror will consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press releases or other public
statements with respect to any transactions described in this Agreement, and
shall not issue any such press releases or make any such public statement prior
to such consultation.
4.5 Confidentiality; Access to Information.
(a) The parties acknowledge that the Acquiror and the Company
have entered into that certain confidentiality and non-disclosure
agreement, dated as of November 16, 2002, as amended (the
"CONFIDENTIALITY AGREEMENT"), which will terminate upon the execution
of this Agreement. Notwithstanding the foregoing, the parties shall
remain liable in accordance with the terms of the Confidentiality
Agreement as if such agreement remained in effect for breaches, if any,
thereunder occurring prior to the date hereof.
(b) Each of the Company, the Operating Subsidiaries and the
Acquiror will, and will cause their respective officers, directors,
employees, agents and representatives to (i) hold in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of Law, all nonpublic information concerning the other
party furnished in connection with the transactions contemplated by
this Agreement until such time as such information becomes publicly
available (otherwise than through the wrongful act of such person) and
(ii) not release or disclose such information to any other person,
except in connection with this Agreement to its auditors, attorneys,
financial advisors, other consultants and advisors. In the event of
termination of this Agreement for any reason, the parties hereto will
promptly return or destroy all documents containing
-24-
nonpublic information so obtained from any other party hereto and any
copies made of such documents and any summaries, analyses or
compilations made therefrom.
(c) Between the date hereof and the Closing Date, the Company
and the Operating Subsidiaries will provide the Acquiror and its
authorized representatives (including counsel, financial advisors and
auditors) reasonable access during normal business hours to all
employees, offices, warehouses and other facilities and to all books
and records of the Company and the Operating Subsidiaries relating to
the Assets and the operation of the Stores, will permit the Acquiror to
make such inspections as the Acquiror may reasonably require and will
cause the Company's officers and those of its Subsidiaries to furnish
the Acquiror with such financial and operating data and other
information with respect to the business, properties and personnel of
the Company and its Subsidiaries relating to the Assets and the Stores
as the Acquiror may from time to time reasonably request, provided that
no investigation pursuant to this Section 4.5(c) shall affect or be
deemed to modify any of the representations or warranties made by the
Company or any of the Operating Subsidiaries and each representation
and warranty shall survive such investigation.
(d) Between the date hereof and the Closing Date, the Company
and the Operating Subsidiaries will provide the firms retained by
Acquiror to deliver the Solvency Opinion and the Reasonably Equivalent
Value Opinion, and each of their respective employees and authorized
representatives, reasonable access during normal business hours to all
employees, offices, warehouses and other facilities and to all books
and records of the Company and each of its Subsidiaries, including the
Operating Subsidiaries, and will permit such firms to make such
inspections as reasonably required in order to obtain the information
necessary to render the Solvency Opinion and the Reasonably Equivalent
Value Opinion. The Company will cause its officers and those of its
Subsidiaries to furnish such firms with such financial and operating
data and other information with respect to the financial condition,
business, operations and properties of the Company and its Subsidiaries
as such firms may from time to time reasonably request in the course of
their investigation. It is expressly understood among the parties that
during the course of their engagement and at any time thereafter, the
firms retained by Acquiror to deliver the Solvency Opinion and the
Reasonably Equivalent Value Opinion will not provide confidential
information of the Company or any of its Subsidiaries to the Acquiror.
Notwithstanding the foregoing, such firms will be permitted to review
such aspects of the confidential information as they deem appropriate
in their professional judgment and report to the Acquiror concerning
their satisfaction with the results of such review on rendering the
opinions to Acquiror contemplated by Section 4.7 and Section 4.8
without disclosing the content of the confidential information reviewed
by them to Acquiror.
(e) Between the date hereof and the Closing Date, the Company
shall furnish to the Acquiror no later than one (1) business day
following delivery thereof to management of the Company, such weekly
and monthly financial statements and other data (financial, operational
or otherwise) relating to the operation of the Stores as are regularly
prepared for distribution to Company management.
-25-
4.6 Notice of Developments.
(a) Prior to the Closing Date, each of the parties hereto
shall promptly notify the other in writing of all events,
circumstances, facts and occurrences, whether arising prior to or
subsequent to the date of this Agreement, that will or are reasonably
likely to result in any breach of a representation or warranty or
covenant made by the notifying party in this Agreement or in any
failure to be satisfied of any condition to the obligations of the
party receiving such notice under this Agreement.
(b) Should any event, circumstance, fact or occurrence
relating to events after the date hereof require any change to any
Schedule provided by the Company or the Operating Subsidiaries
hereunder, the Company and the Operating Subsidiaries shall promptly
deliver to Acquiror a supplement to such Schedule (a "SCHEDULE
SUPPLEMENT") specifying such change. Upon receipt of any such Schedule
Supplement, Acquiror shall have ten (10) days from delivery of each
such Schedule Supplement (each, a "SUPPLEMENT REVIEW PERIOD") to review
the contents of and disclosures in each such Schedule Supplement and to
request and receive any additional information from the Company and the
Operating Subsidiaries relating to the contents and disclosures
contained in such Schedule Supplement. At any time through and
including the Supplement Review Period, Acquiror shall have the right
to notify the Company and the Operating Subsidiaries whether it elects
to proceed with the transactions contemplated by this Agreement, or to
terminate this Agreement. In the event Acquiror elects to terminate
this Agreement, the provisions of Article VII shall govern and apply
for all purposes. The termination of this Agreement by Acquiror
pursuant to this Section 4.6(b) as a result of receipt of any such
Schedule Supplement which would cause a representation or warranty of
the Company or the Operating Subsidiaries to become untrue shall not be
or be deemed to be a termination of this Agreement to which the
provisions of Section 7.3(a) refers. In the event that Acquiror does
not elect to terminate this Agreement during the Supplement Review
Period as a result of receiving any such Schedule Supplement, then
Acquiror shall be prohibited from seeking indemnification under Section
8.2(a) with respect to the specific breach of the representation and
warranty resulting from the information included on such Schedule
Supplement. Notwithstanding the foregoing, no delivery of any Schedule
Supplement pursuant to this Section 4.6(b) will cure any breach of any
representation or warranty of the Company or any Operating Subsidiary
contained in this Agreement made as of the date hereof or otherwise
limit or affect the remedies available hereunder to Acquiror with
respect to such breach.
4.7 Solvency Opinion. Acquiror shall obtain a solvency opinion in the
form and substance satisfactory to the Acquiror from a firm selected by the
Acquiror providing that the Company and the Operating Subsidiaries are not
Insolvent and will not be rendered Insolvent by the transactions contemplated
hereby and otherwise addressing the items referenced in Section 3.26(b) as
Acquiror deems appropriate (the "SOLVENCY OPINION"). The Solvency Opinion shall
permit the Company and the Operating Subsidiaries to reasonably rely thereon,
and upon receipt, Acquiror shall provide a copy of the Solvency Opinion to the
Company and the Operating Subsidiaries. The Company shall promptly reimburse the
Acquiror for the fees of such firm providing the Solvency Opinion up to an
aggregate amount that, together with the fees for the Reasonably Equivalent
Value Opinion, does not exceed $500,000; provided, however, that at
-26-
Acquiror's election, such aggregate fee amount may be credited against the
Creditor Payment at Closing or against the Holdback Account.
4.8 Reasonably Equivalent Value Opinion. The Acquiror shall obtain a
written opinion in the form and substance satisfactory to the Acquiror, from a
firm selected by Acquiror providing that the Purchase Price being paid by
Acquiror hereunder (taking into account the potential adjustments to the
Purchase Price contained in Section 1.3(b)) for the sale of the Assets hereunder
by the Company and the Operating Subsidiaries meets or exceeds the reasonably
equivalent value of such Assets (the "REASONABLY EQUIVALENT VALUE OPINION"). The
Reasonably Equivalent Value Opinion shall permit the Company and the Operating
Subsidiaries to reasonably rely thereon, and upon receipt, Acquiror shall
provide a copy of the Reasonably Equivalent Value Opinion to the Company and the
Operating Subsidiaries. The Company shall promptly reimburse the Acquiror for
the fees of such firm providing the Reasonably Equivalent Value Opinion up to an
aggregate amount that, together with the fees for the Solvency Opinion, does not
exceed $500,000; provided, however, that at Acquiror's election, such aggregate
fee amount may be credited against the Creditor Payment at Closing or against
the Holdback Account.
4.9 Employees. The Acquiror shall not assume the liability of the
Company or the Operating Subsidiaries with respect to the employees for accrued
but unpaid salaries (including deferred compensation), wages, vested vacation
and sick pay, workers compensation claims, health benefit claims, employer
contributions to a Company Employee Benefit Plan (including restorative
payments) or incentive compensation, and the Company and the Operating
Subsidiaries shall remain responsible for the payment of all the foregoing items
through the date that is the earlier of (a) the date of termination of such
employee, or (b) the last day of the Transition Period (the "EMPLOYEE
TERMINATION DATE"), such payment to be made as soon as practicable after the
Employee Termination Date or when such payment would otherwise be due, but in no
event later than five (5) business days following the Employee Termination Date;
provided, however, that notwithstanding the terms of any Company Employee
Benefit Plans to the contrary, the Company shall remit to each of its and its
Operating Subsidiaries' Store employees, salary in the amount equal to such
employee's accrued but unpaid vacation as of such employee's Employee
Termination Date. The Company and the Operating Subsidiaries shall also remain
responsible for payment of any and all retention, change in control or other
similar compensation or benefits which are or may become payable to the
employees in connection with the transactions contemplated hereby, including
without limitation, any severance payments or other such obligations to
employees in accordance with the terms of the Company Employee Benefit Plans.
4.10 Designation by Acquiror of Acquiring Subsidiaries. No later than
five (5) days prior to the Closing Date, Acquiror shall provide a list to the
Company and the Operating Subsidiaries designating which Assets acquired
hereunder will be acquired, upon the Closing, by certain of Acquiror's
Subsidiaries. The Company and the Operating Subsidiaries shall execute all
documents necessary to transfer, upon the Closing, such Assets to such
designated Acquiror Subsidiaries.
4.11 Acquiror Due Diligence Period. Acquiror shall have the right to
conduct due diligence and shall be entitled to review the books, records and
operations of the Company and
-27-
the Operating Subsidiaries and to receive from the Company and any of the
Operating Subsidiaries any and all financial, legal and other information
necessary in completing its due diligence investigation of the Assets being
acquired hereunder. On the fourteenth (14th) date following the date hereof (the
"INITIAL INVESTIGATION PERIOD"), Acquiror shall evaluate the status of its due
diligence investigation, and the Acquiror, the Company and the Operating
Subsidiaries shall mutually agree on a reasonable period of no less than six (6)
days in which Acquiror shall be entitled to complete its due diligence
investigation following such fourteen (14) day period; provided, however, that
in the event the parties are unable to agree on a reasonable period prior to the
conclusion of such fourteen (14) day period, such fourteen (14) day period shall
be extended for six (6) days (such extended period as agreed upon among the
parties, or if no agreement among the parties is reached, such six (6) day
period being herein referred to as the "EXTENDED INVESTIGATION PERIOD" and,
together with the Initial Investigation Period, the "DUE DILIGENCE PERIOD"). In
the event the last day of the Due Diligence Period shall fall on a day that is
not a Business Day, the next following Business Day shall be the last day of the
Due Diligence Period.
4.12 Little Rock Store Lease. Between the date hereof and the Closing
Date, the Acquiror and the Company shall enter into a real estate lease (the
"OWNED STORE LEASE") with respect to the Owned Store. The Owned Store Lease will
become effective immediately following the Closing Date and contain terms
reasonably satisfactory to each party that are customary for a similar
commercial real estate lease in the same area.
ARTICLE V
CLOSING CONDITIONS
5.1 Conditions to Obligation of all Parties. The obligations of the
parties to effect the transactions contemplated by this Agreement are subject to
the satisfaction of the following conditions at or prior to the Closing Date:
(a) HSR Act. (i) The waiting periods (and any extensions
thereof) applicable to the transaction contemplated by this Agreement
under the HSR Act shall have been terminated or shall have expired, and
(ii) no condition shall have been imposed by any Governmental Authority
on the parties hereto adversely impacting the ability of the parties to
conduct their respective businesses substantially in the manner such
businesses are being conducted as of the date of this Agreement.
(b) Other Governmental Approvals. All material governmental
consents and approvals, if any, necessary to permit the consummation of
the transactions contemplated by this Agreement will have been
obtained.
(c) No Restraining Action. No action, suit, or proceeding
before any Court or Governmental Authority will be pending, no
investigation by any Governmental Authority will have been commenced
against the Acquiror, the Company or any of its Subsidiaries, or any of
the principals, officers or directors of any of them, seeking to
restrain, prevent or change the transactions contemplated hereby or
questioning the legality or validity of any such transactions or
seeking damages in connection with any such transactions.
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5.2 Conditions to the Acquiror's Obligations. The obligations of the
Acquiror to effect the transactions contemplated by this Agreement are subject
to the satisfaction of the following conditions at or prior to the Closing Date,
except to the extent waived in writing by the Acquiror:
(a) Representations and Warranties. Each of the
representations and warranties of the Company and the Operating
Subsidiaries contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the
Closing Date as though made again on and as of the Closing Date,
without giving effect to any Schedule Supplement; provided, however,
that (i) any representation of warranty contained in Article III which
contains an express materiality exception shall be accurate in all
respects, (ii) any representation or warranty set forth in Section
3.27, Section 3.28, Section 3.29 and Section 3.30, to the extent such
representations and warranties address financial performance (A) above
the Closing Three Month Revenue Minimum, but below the Closing Three
Month Revenue Target, (B) above the Closing Month Revenue Minimum but
below the Closing Month Revenue Target, (C) above the Closing Weekly
Revenue Minimum but below the Closing Weekly Revenue Target and (D)
above the Closing Inventory Minimum but below the Closing Inventory
Target, as applicable, shall be accurate in all respects and shall only
result in the Purchase Price Reductions contemplated by Section 1.3(b),
and (iii) any representation or warranty in Section 3.27, Section 3.28,
Section 3.29 and Section 3.30, to the extent such representations and
warranties address financial performance at or below the Closing Three
Month Revenue Minimum, the Closing Month Revenue Minimum, the Closing
Weekly Revenue Minimum and the Closing Inventory Minimum, as
applicable, shall be excluded from this Section 5.2(a) and covered by
Section 5.2(o) hereof. The Acquiror shall have received a certificate
of the Chief Executive Officer and the Chief Financial Officer of the
Company and each of the Operating Subsidiaries, dated as of the Closing
Date, to such effect.
(b) Agreements and Covenants. The Company and the Operating
Subsidiaries shall have each performed or complied in all material
respects with all agreements and covenants required by this Agreement
to be performed or complied with by them on or prior to the Closing
Date. The Acquiror shall have received a certificate of the Chief
Executive Officer and the Chief Financial Officer of the Company and
each of the Operating Subsidiaries, dated as of the Closing Date, to
such effect.
(c) No Material Adverse Effect. On or prior to the Closing
Date, no event shall have occurred from the date hereof which has a
material adverse effect on the Stores or the Assets. The Acquiror shall
have received a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company and each of the Operating
Subsidiaries, dated as of the Closing Date, to such effect.
(d) Senior Lender Consent. No later than ten (10) days from
the date of this Agreement, the Company shall have obtained the consent
of its senior lenders set forth on Schedule 3.4, consenting to the
Company's and each of the Operating Subsidiaries' execution, delivery
and performance of the transactions contemplated hereby.
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(e) Consents and Approvals. The consents listed on Schedule
5.2(e) shall have been received.
(f) Satisfactory Completion of Due Diligence Investigation by
Acquiror. The financial, legal and other due diligence investigation of
the Company, each of the Operating Subsidiaries and the Assets being
sold hereunder shall have been completed, and Acquiror shall have been
satisfied with the results thereof in its discretion; provided,
however, that if this Agreement shall not have terminated prior to the
date which is immediately following the end of the Due Diligence
Period, this condition to closing shall be deemed to have been
satisfied.
(g) Non-Competition and Non-Solicitation Agreement. The
Company and the Operating Subsidiaries shall have each entered into an
agreement (the "NON-COMPETITION AND NON-SOLICITATION AGREEMENT") with
the Acquiror, in substantially the form of Exhibit "B" hereto, pursuant
to which, among other things, the Acquiror shall pay to the Company, on
behalf of the Company and the Operating Subsidiaries, the
Non-Competition Payment at Closing in cash by wire transfer of
immediately available funds to an account designated by the Company.
(h) Assignment and Assumption Agreement. The Company and the
Operating Subsidiaries shall have each entered into the Assignment and
Assumption Agreement with the Acquiror.
(i) Motor Vehicle Titles. The receipt by the Acquiror of
certificates of title to all vehicles, whether owned or leased by the
Company and the Operating Subsidiaries on the date hereof, which
constitute Assets transferred hereunder, endorsed by the Company and
the Operating Subsidiaries, as the case may be, together with completed
originals of any forms required by the states in which such vehicles
are located to transfer the same, free and clear of Encumbrances, other
than Permitted Encumbrances.
(j) UCC-3 Termination Statements. The receipt by the Acquiror
of UCC-3 Termination Statements, with evidence of authorization by the
appropriate secured party, evidencing the release of the Encumbrances
listed on Schedule 3.9, unless such Encumbrances have been released
prior to the Closing Date, in which case the Company shall provide UCC
financing statement searches from the appropriate governmental
officials of the states and counties in which the Assets, are located
indicating that there are no financing statements affecting any of the
Assets, other than those evidencing Permitted Encumbrances.
(k) Reasonably Equivalent Value Opinion. The Acquiror shall
have received the Reasonably Equivalent Value Opinion, and such opinion
shall not have been withdrawn, revoked or modified prior to the Closing
Date; provided, however, that Acquiror shall not be entitled to waive
this condition.
(l) Solvency Opinion. The Acquiror shall have received the
Solvency Opinion, and such opinion shall not have been withdrawn,
revoked or modified prior to
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the Closing Date; provided, however, that Acquiror shall not be
entitled to waive this condition.
(m) Opinion of Counsel. The Acquiror shall have received the
opinion of Hodgson Russ, LLP, counsel for the Company and the Operating
Subsidiaries, dated as of the Closing Date, in substantially the form
as set forth in Exhibit "C" hereto.
(n) No Adverse Regulatory Condition. All material consents of
Governmental Authorities, including without limitation, those required
under the HSR Act, necessary to permit the consummation of the
transactions contemplated by this Agreement shall have been obtained to
Acquiror's satisfaction and no required approvals, licenses or consents
granted by any Governmental Authority (i) with respect to HSR Act
matters, shall have imposed any obligation on Acquiror and (ii) with
respect to non-HSR Act matters, shall have imposed any material
obligation on Acquiror.
(o) Financial Covenants. The Closing Three Month Revenue and
the Closing Month Revenue shall be greater than $10,000,000, the
Closing Weekly Revenue shall be greater than $2,350,000 and the Closing
Inventory shall be greater than $53,500,000.
5.3 Conditions to the Obligations of the Company and the Operating
Subsidiaries. The obligations of the Company and the Operating Subsidiaries to
effect the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions at or prior to the Closing, except to
the extent waived in writing by the Company and the Operating Subsidiaries:
(a) Representations and Warranties. Each of the
representations and warranties of the Acquiror contained in this
Agreement shall be true and correct in all material respects (without
duplication of any materiality exception contained in any individual
representation or warranty) as of the date of this Agreement and as of
the Closing Date as though made again on and as of the Closing Date.
The Company and the Operating Subsidiaries shall each have received a
certificate of the Chief Executive Officer and the Chief Financial
Officer of the Acquiror, dated as of the Closing Date, to such effect.
(b) Agreements and Covenants. The Acquiror shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with
by it on or prior to the Closing Date. The Company and the Operating
Subsidiaries shall each have received a certificate of the Chief
Executive Officer and the Chief Financial Officer of the Acquiror,
dated as of the Closing Date, to such effect.
(c) Non-Competition and Non-Solicitation Agreement. The
Acquiror shall have entered into the Non-Competition and
Non-Solicitation Agreement with the Company and the Operating
Subsidiaries.
(d) Assignment and Assumption Agreement. The Acquiror shall
have entered into the Assignment and Assumption Agreement with the
Company and the Operating Subsidiaries.
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(e) Opinion of Counsel. The Company shall have received an
opinion from Winstead Sechrest & Minick P.C., counsel for the Acquiror,
dated as of the Closing Date in substantially the form as set forth in
Exhibit "D" hereto.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 Apportionment. The Company and the Operating Subsidiaries, as the
case may be, shall be entitled to all income earned in or from the ownership or
operation of the Assets with respect to events occurring prior to and on the
Closing Date, and the Acquiror will be entitled to all income earned in or from
the ownership or operation of the Assets with respect to events occurring after
the Closing Date. Without limiting the generality of the foregoing, all cash
receipts received at the Stores on or prior to the Closing Date shall be the
property of the Company and the Operating Subsidiaries, as the case may be, and
all cash receipts received at the Stores after the Closing Date shall be the
property of the Acquiror. The parties hereto agree to cooperate with each other
to ensure that any amounts received are delivered to the party entitled to such
amounts as provided herein. All property taxes, rent, utilities and amounts
under the Store Leases shall be apportioned on an accrual basis as of the close
of business on the Closing Date between Acquiror, the Company and the Operating
Subsidiaries such that Acquiror shall be responsible only for property taxes,
rent, utilities and amounts under the Store Leases with respect to periods
occurring after the Closing Date.
6.2 License to Use Name. From and after the Closing, the Company shall
grant to the Acquiror and its Subsidiaries for a 30-day transition period a
non-exclusive, royalty-free license (the "LICENSE") to use the names "Rent-Way,"
"Home Choice" and "Rentavision" (collectively, the "COMPANY NAMES"), but only in
connection with the business conducted by the Acquiror at the Stores. The
License is granted strictly on a non-exclusive basis, and in this regard, the
Company shall, after the Closing, have all rights to use and to grant and
license to others the right to use the Company Names in whole or in part, in any
location and in any manner whatsoever, subject to the terms of the
Non-Competition and Non-Solicitation Agreement. The Acquiror acknowledges that
as of the Closing it will have no property rights in and to the Company Names
other than the License specifically granted herein and will not use the Company
Names except pursuant to this Agreement. The License shall not be sublicensed or
assigned by the Acquiror in any manner, except that the Acquiror may assign the
License to any direct or indirect wholly-owned subsidiary of the Acquiror (i) in
connection with a transfer of some or all of the operations to such entity and
(ii) in connection with the matters as contemplated by Section 4.10 hereof (such
entities together being referred to as a "PERMITTED TRANSFEREE") provided that
prior to such transfer, the Permitted Transferee agrees to be bound by the
provisions of the License and the Acquiror and the Acquiror continue to be
liable for breach of the License by the Permitted Transferee.
6.3 Account Store Acquisition Option. For a period of thirty (30) days
from the date immediately following the Closing Date (the "TRANSITION PERIOD"),
Acquiror shall be entitled, upon delivery of written notice to the Company or
the Operating Subsidiaries, as the case may be (an "ADDITIONAL STORE NOTICE"),
to assume from the Company and any of the Operating Subsidiaries, as the case
may be, the real estate lease (and the fixtures related thereto) at no
additional cost for any of the Account Stores. In the event Acquiror exercises
its rights under
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this Section 6.3, Acquiror, the Company and the Operating Subsidiaries shall
enter into an assignment and assumption agreement with respect to such real
estate lease containing terms reasonably satisfactory to the parties and
including terms at a minimum of which, shall provide that Acquiror shall only
assume the obligations of the Company and the Operating Subsidiaries under such
real estate lease for obligations attributable to periods following such
assumption.
6.4 Transition Period; Access to Stores; Cooperation.
(a) With respect to each Account Store, the Company and each
of the Operating Subsidiaries will provide access to each of the
Account Stores through the Transition Period. Neither the Company, any
of the Operating Subsidiaries nor any of their representatives shall
remove any vehicles, fixtures, equipment or any other item from the
Account Stores during the Transition Period. The Company and each of
the Operating Subsidiaries shall reasonably cooperate with Acquiror in
the transition of the Assets and business operations to Acquiror,
including without limitation, providing staffing of the Company's and
its Operating Subsidiaries' employees to Acquiror sufficient to permit
the transition of such Account Store operations. The Company and the
Operating Subsidiaries acknowledge that all such personnel utilized
shall be the employees of the Company or the Operating Subsidiaries, as
the case may be (the "TRANSITION PERSONNEL"). The duties of the
Transition Personnel shall include without limitation (i) the winding
down of the business operations of the Account Stores, (ii) the
transfer of inventory and customer accounts to designated stores of the
Acquiror, (iii) the transitioning of customer relationships to such
Acquiror stores, (iv) assistance with respect to the conversion of
customer account records of the Account Stores to Acquiror's computer
information system, and (v) other similar type duties.
(b) The Company and the Operating Subsidiaries shall be
jointly and severally liable for, and will each indemnify the Acquiror
for, only the costs, expenses and liabilities attributable to the
operation and transition of the Account Stores during the Transition
Period as follows:
(i) rent, utilities and all obligations, expenses and
liabilities under the leases underlying the Account
Stores during the Transition Period;
(ii) lease and related costs applicable to office
equipment in the Account Stores during the Transition
Period (other than costs of printer cartridges, paper
and other consumables associated with the operation
of such equipment, which shall be Acquiror's
responsibility);
(iii) the costs associated with vehicles owned or leased by
the Company or any of the Operating Subsidiaries and
used in connection with the Account Stores (other
than fuel costs in excess of the costs of fuel in
such vehicles as of the Closing Date), including
lease costs, insurance costs and maintenance costs;
and
(iv) employee payroll, health and other employee benefits,
workers compensation claims, health care claims,
employment practices claims
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(including without limitation, termination and
related claims) and all other costs, expenses and
liabilities related to the Transition Personnel;
provided, however; that Acquiror shall be responsible
for liabilities (a) related to third-party injury
claims (other than employees of the Company or its
Subsidiaries, including the Transition Personnel)
arising out of the operation of the Account Stores,
and (b) liabilities relating to intentional acts by
Transition Employees that are directed by Acquiror
and that constitute violation of applicable Law. The
Company and the Operating Subsidiaries shall maintain
sufficient insurance coverage to cover applicable
risks relative to the foregoing. At any time through
the Transition Period, the Acquiror may offer
employment to such employees of the Company and the
Operating Subsidiaries at the Stores as the Acquiror
shall determine in its sole discretion at wage or
salary levels acceptable to the Acquiror, and with
employee benefits that are acceptable to the
Acquiror.
Acquiror shall be responsible for all other costs in connection with
the operation of the Account Stores during the Transition Period, such as
advertising costs, office equipment consumables referenced above, fuel charges
referenced above and office supplies.
6.5 Leased Employees. With respect to the Acquired Stores, the Company
and the Operating Subsidiaries shall lease to Acquiror through the Transition
Period such employees of the Company or the Operating Subsidiaries as may be
designated by Acquiror. Such employees shall at all times remain the employees
of the Company or the Operating Subsidiaries, as the case may be (the "LEASED
EMPLOYEES"). The Company and the Operating Subsidiaries shall be jointly and
severally liable for, and will each indemnify the Acquiror for, all costs,
expenses and liabilities of such Leased Employees, including without limitation,
employee payroll, health and other employee benefits, workers compensation
claims, health care claims, employment practices claims (including without
limitation, termination and related claims) and all other costs, expenses and
liabilities related to such Leased Employees attributable to the Transition
Period; provided, however, that Acquiror shall be responsible only for
liabilities (i) related to third-party injury claims (other than employees of
the Company or its Subsidiaries, including the Transition Personnel) arising out
of the operation of the Account Stores, and (ii) liabilities relating to
intentional acts by Transition Employees that are directed by Acquiror and that
constitute violation of applicable Law. At any time through the Transition
Period, the Acquiror may offer employment to such employees of the Company and
the Operating Subsidiaries at the Stores as the Acquiror shall determine in its
sole discretion at wage or salary levels acceptable to the Acquiror, and with
employee benefits that are acceptable to the Acquiror.
6.6 Tax Matters. The Company shall be responsible for the timely
payments of, and shall indemnify and hold harmless the Acquiror against, all
sales (including, without limitation, bulk sales), use, value added,
documentary, stamp, gross receipts, registration, transfer, conveyance, excise,
recording, firearm, ammunition, license and other similar taxes and fees
("TRANSFER TAXES"), arising out of or in connection with or attributable to the
transactions effected pursuant to this Agreement. The Company shall prepare and
timely file all tax returns required to be filed in respect of Transfer Taxes;
provided, however, that the Acquiror shall be
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permitted to prepare any such Tax Returns that are the primary responsibility of
the Acquiror under applicable Law.
6.7 Transition of Acquired Stores. With respect to the Acquired Stores,
during the Transition Period the Company and the Operating Subsidiaries shall
make available to the Acquiror and the Acquiror's employees Company personnel
and, if necessary, any software not included in the Assets transferred hereunder
necessary to effect an orderly transition from the Company's and the Operating
Subsidiaries' management information systems to the Acquiror's systems.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated by written notice to
the non-terminating party at any time prior the Closing Date:
(a) by mutual written consent of the Acquiror, the Company and
the Operating Subsidiaries;
(b) by Acquiror, if, on or after February 1, 2003, any action,
suit or proceeding before any Court or Governmental Authority is
pending, or any investigation by any Governmental Authority has been
commenced, against the Acquiror, the Company or any of the Company's
Subsidiaries, or any of the principals, officers or directors of any of
them, seeking to restrain, prevent or change the transactions
contemplated hereby or questioning the legality or validity of any such
transactions or seeking damages in connection with any such
transactions;
(c) by Acquiror, if the Company or the Operating Subsidiaries
have breached any covenant or agreement set forth in this Agreement, or
if any representation or warranty of the Company or the Operating
Subsidiaries shall have become untrue, in either case such that the
conditions set forth in Section 5.2(a) or Section 5.2(b) would not be
satisfied (a "TERMINATING COMPANY BREACH") and such Terminating Company
Breach is either not capable of being cured prior to the Closing or, if
such breach is capable of being cured, is not so cured by the Company
or the Operating Subsidiaries within a reasonable amount of time (but
in any event prior to the Closing);
(d) by the Company or the Operating Subsidiaries, if Acquiror
shall have breached any covenant or agreement set forth in this
Agreement, or if any representation or warranty of the Acquiror shall
have become untrue, in either case such that the conditions set forth
in Section 5.3(a) or Section 5.3(b) would not be satisfied (a
"TERMINATING ACQUIROR BREACH") and such Terminating Acquiror Breach is
either not capable of being cured prior to the Closing or, if such
breach is capable of being cured, is not so cured by the Acquiror
within a reasonable amount of time (but in any event prior to the
Closing);
(e) by Acquiror, if the condition set forth in Section 5.2(d)
shall not have been satisfied;
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(f) by either Acquiror or the Company and the Operating
Subsidiaries, if there shall be an Order which is final and
nonappealable preventing the consummation of the transactions
contemplated hereby, unless the party relying on such Order has not
complied with its obligations under Section 4.2 hereof;
(g) by either Acquiror or the Company and the Operating
Subsidiaries, if the transactions contemplated hereby shall not have
been consummated on or before February 28, 2003; provided, however,
that the right to terminate this Agreement pursuant to this Section
7.1(g) shall not be available to any party whose failure to fulfill any
of the obligations contained in this Agreement have been the cause of,
or resulted in, the failure of the transactions contemplated hereby to
have occurred on or prior to the aforementioned date; and provided,
further, that this Agreement may be extended by written notice of
either the Acquiror, the Company or the Operating Subsidiaries for up
to sixty (60) days from February 28, 2003 if the transactions
contemplated hereby have not been consummated as a result of the
conditions set forth in Section 5.1(a), Section 5.1(c) or Section
5.2(n) not being satisfied; provided, further, that this Agreement may
be extended by Acquiror by written notice for up to a period not to
exceed sixty (60) days from February 28, 2003 if Acquiror, the Company,
the Operating Subsidiaries or any of the firms engaged to provide the
opinions referenced in Section 4.7 and Section 4.8 hereof shall have
received an oral or written threat of litigation of the nature
contemplated by Section 5.1(c).
(h) by the Acquiror, from the date hereof through the date
that is the last day of the Due Diligence Period;
(i) by Acquiror, as provided in Section 1.3(c).
The right of any party hereto to terminate this Agreement pursuant to
Section 7.1 will remain operative and in full force and effect regardless of any
investigation made by or on behalf of any party hereto, any person controlling
any such party or any of their respective officers, directors, representatives
or agents, whether prior to or after the execution of this Agreement.
7.2 Automatic Termination. This Agreement shall terminate if either the
condition set forth in Section 5.2(k) or Section 5.2(l) shall not have been
satisfied on February 28, 2003, unless such date has been extended by Acquiror
pursuant to the third proviso in Section 7.1(g), in which termination shall
occur on such extended date. The termination of this Agreement pursuant to this
Section 7.2 shall be the sole remedy of the Company and the Operating
Subsidiaries with respect to the failure of the condition set forth in Section
5.2(k) or Section 5.2(l) to be satisfied.
7.3 Effect of Termination.
(a) Except with respect to Section 4.4, Section 4.5(b), the
provisions of this Article VII and Article IX of this Agreement, each
of which shall survive termination, in the event of termination of this
Agreement pursuant to Section 7.1 or Section 7.2, this Agreement will
forthwith be terminated, there will be no liability on the part of the
Acquiror, the Company or the Operating Subsidiaries or any of their
respective officers
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or directors to the other and all rights and obligations of any party
hereto will cease; provided, however, that if this Agreement is
terminated by a party due to the breach of the Agreement by the other
party or because one or more conditions to the terminating party's
obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies
will survive such termination unimpaired.
(b) In the event that this Agreement is terminated (i)
pursuant to Section 7.1(e) or Section 7.1(i), the Company shall pay or
cause to be paid to Acquiror, within two (2) Business Days from the
date of termination, an amount equal to Acquiror's actual and
reasonably documented Expenses incurred by Acquiror in connection with
this Agreement and the transactions contemplated hereby or (ii)
pursuant to Section 7.2, the Company shall pay or cause to be paid to
Acquiror, within two (2) Business Days from the date of termination, an
amount equal to (A) Acquiror's actual and reasonably documented
Expenses incurred by Acquiror in connection with this Agreement and the
transactions contemplated hereby and (B) the aggregate fees of the
firms engaged to provide the opinions referenced in Section 4.7 and
Section 4.8, such aggregate fees not to exceed $500,000. The rights
hereunder are in addition to, and not in limitation of, any other right
or remedy (legal, equitable or otherwise) which may be available to
Acquiror.
7.4 Amendment. Subject to the requirements of Law, this Agreement may
be amended by the parties hereto only by action taken by or on behalf of their
respective boards of directors or applicable governing body at any time prior to
the Closing Date. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
7.5 Waiver. At any time prior to the Closing Date, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of the other party hereto, (b) waive any inaccuracies in the representations or
warranties of the other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by the other party with any of the
agreements or conditions contained herein. Any such extension or waiver will be
valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
7.6 Expenses. Except as set forth in Section 7.3(b) hereof, all
Expenses incurred by the parties hereto will be borne solely and entirely by the
party which as incurred such expenses.
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties. All of the
representations and warranties of the Company and the Operating Subsidiaries
contained in Article III of this Agreement, the certificates delivered pursuant
to Section 5.2(a), Section 5.2(b) and Section 5.2(c) and any other document
delivered pursuant to this Agreement shall survive Closing and the consummation
of the transactions contemplated hereby and shall continue in full force and
effect for the four-year period following the Closing Date, with the exception
that Section 3.10 shall survive for a period of ninety (90) days following the
Closing Date.
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8.2 Indemnification by the Company and the Operating Subsidiaries.
Subject to the other provisions of this Article VIII, from and after the
Closing, the Company and the Operating Subsidiaries shall jointly and severally
indemnify and hold the Acquiror and its officers, directors, employees,
attorneys and agents harmless from, against and in respect of any and all
claims, demands, lawsuits, proceedings, losses, judgments, restitution,
assessments, taxes, costs of abatement, fines, penalties, administrative orders,
obligations, costs, expenses, liabilities and damages, including interest,
penalties, reasonable attorneys' fees and costs and costs of investigation (all
of the foregoing hereinafter referred to collectively as "INDEMNITY CLAIMS"),
which arise or result from and to the extent they are attributable to:
(a) the untruth, breach or failure of any representation or
warranty made by the Company or the Operating Subsidiaries pursuant to
this Agreement or any other agreement or document executed and
delivered by the Company or the Operating Subsidiaries in connection
with the transactions contemplated hereby;
(b) the breach of, or failure to perform, any of the
covenants, commitments, agreements or obligations of the Company or the
Operating Subsidiaries under or contained in this Agreement or any
other agreement or document executed and delivered by the Company or
the Operating Subsidiaries in connection with the transactions
contemplated hereby;
(c) the noncompliance with the provisions of any bulk sales
laws, including, without limitation, the bulk transfer provisions of
the Uniform Commercial Code of any state or any similar statute, if and
to the extent applicable to the transactions contemplated by this
Agreement;
(d) the Excluded Assets;
(e) the continued sponsorship by the Company of the Company
Employee Benefit Plans and any and all liability for violations under
COBRA occurring prior to the Closing Date, it being understood and
agreed to by the parties that the sponsorship and maintenance of any
Company Employee Benefit Plans shall in no way be the responsibility of
the Acquiror on or after the Closing Date;
(f) any Tax Claim asserted against Acquiror with respect to
any Taxes relating to the Assets or the operations of the Company or
the Operating Subsidiaries attributable to periods on or before the
Closing Date and as otherwise set forth in Section 6.6;
(g) any Indemnity Claims related to the Transition Period as
set forth in Section 6.4 and Section 6.5;
(h) any product or component thereof manufactured by, or any
services provided by, the Company or the Operating Subsidiaries in
whole or in part;
(i) all liabilities of the Company and its Subsidiaries, other
than Assumed Liabilities;
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(j) any WARN Act and similar state or local Law liability that
may result from an employment loss, as defined by 29 U.S.C. Section
2101(a)(6), caused by any action of the Company or the Operating
Subsidiaries on or before the last day of the Transition Period or by
the Acquiror's decision not to hire previous employees of the Company
or the Operating Subsidiaries related to the Stores;
(k) payments made under Rental Purchase Agreements by
customers of the Company or any of its Subsidiaries on or before the
Closing Date;
(l) any costs, expenses or amounts (other than the payment of
fees which is covered by Section 4.7 and Section 4.8 hereunder) payable
by the Acquiror to the firms providing the opinions referenced in
Section 4.7 and Section 4.8 hereof reasonably relating to or reasonably
associated with the delivery of such opinions by such firms; and
(m) any other debts, liabilities or obligations of the Company
or the Operating Subsidiaries, whether accrued, absolute, contingent,
known, unknown or otherwise, but excluding the Assumed Liabilities.
8.3 Indemnification by the Acquiror. Subject to the other provisions of
this Article VIII, from and after the Closing the Acquiror shall indemnify and
hold the Company and the Operating Subsidiaries and their respective officers,
directors, employees, attorneys and agents harmless from, against and in respect
of any and all Indemnity Claims which arise or result from and to the extent
they are attributable to:
(a) the untruth, breach or failure of any representation or
warranty made by the Acquiror pursuant to this Agreement or any other
agreement or document executed and delivered by the Acquiror in
connection with the transactions contemplated hereby;
(b) the breach of, or failure to perform, any of the
covenants, commitments, agreements or obligations of the Acquiror under
or contained in this Agreement or any other agreement or document
executed and delivered by the Acquiror in connection with the
transactions contemplated hereby; or
(c) the Assumed Liabilities.
8.4 Holdback Amount; Right of Set Off.
(a) On the Closing Date, Acquiror shall withhold the Holdback
Amount for the payment of claims asserted against the Company or any of
the Operating Subsidiaries and to provide for the payment in part the
indemnification rights of the Acquiror for a period of eighteen (18)
months following the Closing Date. Upon notice to the Company and the
Operating Subsidiaries, the Acquiror may set-off against the Holdback
Amount any amount to which it may be entitled under this Article VIII.
The exercise of Acquiror's right to make an Indemnity Claim for set-off
against the Holdback Amount in good faith, whether or not ultimately
determined to be justified, shall not be deemed a breach of Acquiror's
obligation to deliver the Purchaser Price under this Agreement. Neither
the exercise nor the failure to exercise such right of set-off will
constitute an
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election of remedies or otherwise limit Acquiror in any manner in the
enforcement of any other remedies that may be available to it.
(b) On the 90th day following the Closing Date (the "INITIAL
DISTRIBUTION DATE"), the Acquiror shall disburse to the Company, on
behalf of the Company and the Operating Subsidiaries, the total of
$5,000,000, less the sum of (i) any amounts for Claims to which the
Acquiror has exercised its right of set-off pursuant to Section 8.4(a)
and (ii) any amounts representing unsatisfied Indemnity Claims asserted
by Acquiror under Section 8.4(a) which are unresolved on the Initial
Distribution Date. On the date that is eighteen (18) months following
the Closing Date (the "FINAL DISTRIBUTION DATE"), upon the execution of
all necessary documentation reasonably required by Acquiror, the
Acquiror shall disburse to the Company, on behalf of the Company and
the Operating Subsidiaries, the amount of the Holdback Amount, less the
sum of (i) all amounts for Indemnity Claims to which the Acquiror has
exercised its right of set-off pursuant to Section 8.4(a), (ii) any
amounts representing unsatisfied Indemnity Claims asserted by the
Acquiror pursuant to Section 8.4(a) which are unresolved on the Final
Distribution Date, and (iii) the amount paid to the Company, on behalf
of the Company and the Operating Subsidiaries on the Initial
Distribution Date. At such time that any Indemnity Claims which are
unresolved on the Final Distribution Date are subsequently resolved and
which the Company and the Operating Subsidiaries would have been
entitled to additional amounts paid out from the Holdback Amount (the
"EXCESS"), then Acquiror shall deliver the Excess to the Company, on
behalf of the Company and the Operating Subsidiaries, within five (5)
business days of the final resolution of such Indemnity Claims.
Notwithstanding the foregoing, no portion of the Holdback Amount shall
be paid to the Company, on behalf of the Company and the Operating
Subsidiaries, until all Liens against the Assets shall have been
released of record.
8.5 Method of Asserting Indemnity Claims, Etc. All claims for
indemnification by any party under this Section 8.5 shall be asserted and
resolved as follows:
(a) In the event that any claim or demand in respect of which
any party would be entitled to indemnification hereunder is asserted
against such party by a third party (a "THIRD PARTY CLAIM"), said party
shall within ninety (90) days thereof notify the indemnifying party of
such claim or demand, specifying the nature of and specific basis for
such claim or demand and the amount or the estimated amount thereof to
the extent then feasible, which estimate shall not be conclusive of the
final amount of such claim or demand (the "INDEMNITY CLAIM NOTICE");
provided, however, that the failure to notify the indemnifying party of
the commencement of such Indemnity Claim within such ninety (90) day
period will not relieve the indemnifying party of any liability that it
may have to any indemnified party, except to the extent that the
indemnifying party conclusively demonstrates that the defense of such
action was prejudiced by the indemnifying party's failure to give such
Indemnity Claim Notice. The indemnifying party shall have thirty (30)
days from the personal delivery or mailing of the Indemnity Claim
Notice (the "NOTICE PERIOD") to notify the indemnified party (i)
whether or not it disputes entitlement of the indemnified party to
indemnification hereunder with respect to such claim or demand, and
(ii) whether or not it desires at no cost or expense to the indemnified
party, to defend the indemnified party against such claim or demand;
provided, however, that
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any indemnified party is hereby authorized prior to and during the
Notice Period to file any motion, answer or other pleading which it
shall deem necessary or appropriate to protect its interests or those
of the indemnifying party and that are not materially prejudicial to
the indemnifying party. In the event that the indemnifying party
notifies the indemnified party within the Notice Period that it desires
to defend the indemnified party against such claim or demand and except
as hereinafter provided, the indemnifying party shall have the right to
defend by all appropriate proceedings, which proceedings shall be
promptly settled or prosecuted by it to a final conclusion. If the
indemnified party desires to participate in, but not control, any such
defense or settlement it may do so at its sole cost and expense. If
requested by the indemnifying party, the indemnified party agrees to
cooperate with the indemnifying party and its counsel in contesting any
claim or demand which the indemnifying party elects to contest, or, if
appropriate and related to the claim in question, in making any
counterclaim against the person asserting the third cross complaint
against any person. No claim may be settled without the consent of the
indemnifying party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, in connection with a Third Party Claim
asserted against both such indemnified party and indemnifying party, if
(i) such indemnified party has available to it defenses which are in
addition to those available to the indemnifying party, (ii) such
indemnified party has available to it defenses which are inconsistent
with the defenses available to the indemnifying party, or (iii) a
conflict exists or may reasonably be expected to exist in connection
with the representation of both such indemnified party and indemnifying
party by the legal counsel chosen by the indemnifying party, such
indemnified party shall have the right to select its own legal counsel
subject to the approval of such legal counsel by the indemnifying
party, such approval not to be unreasonably withheld. If such
indemnified party selects its own legal counsel pursuant to the
immediately preceding sentence and the underlying Third Party Claim is
otherwise subject to the scope of the indemnification obligations of
the indemnifying party pursuant to this Article VIII, the reasonable
fees and expenses of such legal counsel will be included within the
indemnification obligations of the indemnifying party; provided,
however, that under no circumstances will the indemnifying party be
obligated to indemnify such indemnified party against the fees and
expenses of more than one legal counsel selected by such indemnified
party in connection with a single claim (notwithstanding the number of
persons against whom the Third Party Claim may be asserted). To the
extent an Indemnity Claim with respect to indemnification of
representations and warranties is made within the survival period set
forth in Section 8.1, such Indemnity Claim shall survive until such
Indemnity Claim is resolved pursuant to the provisions of Section 8.4
and Section 8.5 hereof, notwithstanding the expiration of the
applicable survival period set forth in Section 8.1.
(b) In the event any indemnified party should have an
indemnification claim hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by a
third party, the indemnified party shall send an Indemnity Claim Notice
with respect to such claim to the indemnifying party and, if
applicable, otherwise comply with the provisions of this Section 8.5.
Any Inventory Condition Indemnity Claim shall be made no later than
ninety (90) days after closing.
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8.6 Limitation on Amount - Company and Operating Subsidiaries.
(a) The Company and the Operating Subsidiaries shall have no
liability with respect to the matters described under Section 8.2(a)
until the aggregate of all Indemnity Claims for which indemnity would
otherwise be payable by them exceeds $100,000 (the "COMPANY BASKET");
provided, however, that in the event that the Indemnity Claims to which
the Acquiror shall be entitled exceed the Company Basket, the Company
and the Operating Subsidiaries shall be responsible for the total
amount of such Indemnity Claims without giving effect to the Company
Basket, but in no case shall the liability of the Company and the
Operating Subsidiaries with respect to matters set forth in Section
8.2(a) hereunder exceed the Purchase Price. However, this Section 8.6
will not apply to, and the Company's and the Operating Subsidiaries'
obligations hereunder shall be unlimited for any breach of the
Company's or the Operating Subsidiaries' representations and warranties
of which the Company or the Operating Subsidiaries had knowledge at any
time prior to the date on which such representation and warranty is
made.
(b) In the event that (i) an Indemnity Claim is made by
Acquiror with respect to the condition of the Store inventory sold
hereunder as of the Closing Date pursuant to a breach of Section 3.10,
(an "INVENTORY CONDITION INDEMNITY CLAIM"), and (ii) the Closing
Inventory (net of 30-days past due) exceeds $54,500,000, then such
Inventory Condition Indemnity Claim shall be reduced by the amount in
which the Closing Inventory (net of 30-days past due) exceeds
$54,500,000.
8.7 Limitation on Amount - Acquiror. Acquiror shall have no liability
with respect to the matters described under Section 8.3(a) until the aggregate
of all Indemnity Claims for which indemnity would otherwise be payable by
Acquiror exceeds $100,000 (the "ACQUIROR BASKET"); provided, however, that in
the event that the Indemnity Claims to which the Company or the Operating
Subsidiaries shall be entitled to exceed the Acquiror Basket, the Acquiror shall
be responsible for the total amount of such Indemnity Claims without giving
effect to the Acquiror Basket, but in no case shall the liability of the
Acquiror with respect to matters set forth in Section 8.3(a) hereunder exceed
the Purchase Price.
8.8 Insurance and Tax Benefit. In calculating any amount due under this
Article VIII with respect to Indemnity Claims, such Indemnity Claims shall be
reduced by (a) any amounts actually recovered by the indemnified party under
insurance policies or third party indemnification obligations or other rights of
recovery with respect to such Indemnity Claims, and (b) the amount of any Net
Tax Benefit realized by the indemnified party from the incurrence or payment of
such Indemnity Claims.
ARTICLE IX
GENERAL PROVISIONS
9.1 Certain Definitions. For purposes of this Agreement:
"ACCOUNT STORES" has the meaning set forth in Section 1.2(d) hereof.
"ACQUIRED STORES" has the meaning set forth in Section 3.8 hereof.
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"ACQUIROR" means Rent-A-Center, Inc., a Delaware corporation, and its
successors and assigns.
"ACQUIROR BASKET" has the meaning set forth in Section 8.7.
"ACQUISITION PROPOSAL" has the meaning set forth in Section 4.3 hereof.
"ADDITIONAL STORE NOTICE" has the meaning set forth in Section 6.3
hereof.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"ASSETS" has the meaning set forth in Section 1.1 hereof.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means that certain Bill of Sale,
Assignment and Assumption Agreement to be entered into among the parties at
Closing effecting the sale of the Assets to Acquiror hereunder.
"ASSUMED LIABILITIES" has the meaning set forth in Section 1.5(b)
hereof.
"BUSINESS DAY" shall mean any day other than a day on which banks in
the State of Texas or the State of New York are authorized or obligated to be
closed.
"CLAIM" means a right to payment or property, whether or not the right
is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured.
"CLOSING" means a meeting, which will be held in accordance with
Section 1.6 hereof, of all Persons interested in the transactions contemplated
by the Agreement at which all documents deemed necessary by the parties to the
Agreement to evidence the fulfillment or waiver of all conditions precedent to
the consummation of the transactions contemplated by the Agreement are executed
and delivered.
"CLOSING DATE" means the date of the Closing as determined pursuant to
Section 1.6 hereof; provided, however, that if the Closing Date shall fall on a
date that is not a Business Day, the next following Business Day shall be the
Closing Date.
"CLOSING DATE PAYMENT" has the meaning set forth in Section 1.3 hereof.
"CLOSING INVENTORY" has the meaning set forth in Section 3.30 hereof.
"CLOSING INVENTORY MINIMUM" has the meaning set forth in Section 3.30
hereof.
"CLOSING INVENTORY TARGET" has the meaning set forth in Section 3.30
hereof.
"CLOSING MONTH REVENUE" has the meaning set forth in Section 3.28
hereof.
"CLOSING MONTH REVENUE MINIMUM" has the meaning set forth in Section
3.28 hereof.
"CLOSING MONTH REVENUE TARGET" has the meaning set forth in Section
3.28 hereof.
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"CLOSING THREE MONTH REVENUE" has the meaning set forth in Section 3.27
hereof.
"CLOSING THREE MONTH REVENUE MINIMUM" has the meaning set forth in
Section 3.27 hereof.
"CLOSING THREE MONTH REVENUE TARGET" has the meaning set forth in
Section 3.27 hereof.
"CLOSING WEEKLY REVENUE" has the meaning set forth in Section 3.29
hereof.
"CLOSING WEEKLY REVENUE MINIMUM" has the meaning set forth in Section
3.29 hereof.
"CLOSING WEEKLY REVENUE TARGET" has the meaning set forth in Section
3.29 hereof.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and Regulations promulgated thereunder.
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMPANY" means Rent-Way, Inc., a Pennsylvania corporation, and its
successors and assigns.
"COMPANY BASKET" has the meaning set forth in Section 8.6 hereof.
"COMPANY EMPLOYEE BENEFIT PLANS" has the meaning set forth in Section
3.24 hereof.
"COMPANY ERISA AFFILIATE" has the meaning set forth in Section 3.24
hereof.
"COMPANY NAMES" has the meaning set forth in Section 6.2 hereof.
"COMPANY'S AUDITED CONSOLIDATED FINANCIAL STATEMENTS" means the
consolidated balance sheets of the Company and its Subsidiaries as of September
30, 2000 and September 30, 2001 and the related consolidated statements of
operations, shareholders equity and cash flows for the years ended September 30,
1999, 2000 and 2001, together with the notes thereto, all as audited by
Pricewaterhouse Coopers, LLP, the Company's independent accountants, under their
report with respect thereto dated December 20, 2001, and included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2001 filed with the Commission.
"COMPANY'S CONSOLIDATED BALANCE SHEET" means the consolidated balance
sheet of the Company as of September 30, 2001, included in the Company's
Consolidated Financial Statements.
"COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS" means the Company's
Audited Consolidated Financial Statements and the Company's Unaudited
Consolidated Financial Statements.
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"COMPANY'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS" means the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
June 30, 2002 and the related consolidated statements of income, stockholder
equity and cash flows for the three month periods ended June 30, 2002 and June
30, 2001, together with the notes thereto, included in the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2002 filed with the
Commission.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 4.5(a)
hereof.
"COURT" means any court or arbitration tribunal of the United States or
any domestic state, and any political subdivision thereof.
"CREDITOR PAYMENT" has the meaning set forth in Section 1.3 hereof.
"DEBT" means liability on a Claim.
"DESIGNATED DATE" shall mean the date (or if such date is not a
Business Day, the next following Business Day) that is the earlier of (x)
January 31, 2003 and (y) the date that is the fifth day after the date upon
which all of the conditions to the Closing set forth in Section 5.1(a) and
Section 5.2(n) are satisfied; provided, however, that the Acquiror shall have
been provided, and the Designated Date shall be extended for (i) the entire ten
(10) day period contemplated in Section 1.1(f) with respect to the
identification of vehicles acquired hereunder, (ii) the entire period
contemplated by Section 4.11 pertaining to Acquiror's due diligence right, (iii)
the entire Supplement Review Period to evaluate any Supplemental Schedule as set
forth in Section 4.6(b), (iv) the entire period, including any extension
thereof, contemplated by Section 7.1(g) with respect to the delivery of the
opinions contemplated by Section 5.2(k) and Section 5.2(l); and (v) the five (5)
day period as contemplated by Section 4.10 with respect to the identification of
Acquiror affiliates acquiring the Assets hereunder.
"DUE DILIGENCE PERIOD" has the meaning set forth on Section 4.11
hereof.
"EMPLOYEE TERMINATION DATE" has the meaning set forth in Section 4.9
hereof.
"ENCUMBRANCES" has the meaning set forth in Section 1.1 hereof.
"ENVIRONMENTAL LAW OR LAWS" means any and all Laws, statutes,
ordinances, rules, Regulations, or Orders of any Governmental Authority
pertaining to human health or the environment currently in effect and applicable
to a specified Person and its Subsidiaries, including but not limited to the
Clean Air Act, as amended, CERCLA, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the RCRA,
the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Emergency Planning and Right-to-Know Act, as amended, the Hazardous
Materials Transportation Authorization Act, as amended, the Oil Pollution Act of
1990, as amended, any state or local Laws implementing the foregoing federal
Laws, and all other Laws pertaining to the protection of human health and the
environment (inclusive, in each case, of all regulations issued thereunder). For
purposes of the Agreement, the terms "hazardous substance" and "release" have
the meanings specified in CERCLA; provided, however, that, to the extent the
Laws of the state or locality in which the property is located establish a
meaning for "hazardous
-45-
substance" or "release" that is broader than that specified in CERCLA, such
broader meaning will apply within the jurisdiction of such state or locality,
and the term "hazardous substance" will include all dehydration and treating
wastes, waste (or spilled) oil, and waste (or spilled) petroleum products, and
(to the extent in excess of background levels) radioactive material, even if
such are specifically exempt from classification as hazardous substances
pursuant to CERCLA or RCRA or the analogous statutes of any jurisdiction
applicable to the specified Person or its Subsidiaries or any of their
respective properties or assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the Regulations promulgated thereunder.
"EXCESS" has the meaning set forth in Section 8.4(b) hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the Regulations promulgated thereunder.
"EXCLUDED ASSETS" has the meaning set forth in Section 1.2 hereof.
"EXPENSES" means all reasonable out-of-pocket expenses (including all
fees and expenses of counsel, accountants, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and all other matters related to the consummation
of the transactions contemplated hereby.
"EXTENDED DUE DILIGENCE PERIOD" has the meaning set forth in Section
4.11 hereof.
"FINAL DISTRIBUTION DATE" has the meaning set forth in Section 8.4(b)
hereof.
"FORM 8594" means Form 8594, Asset Acquisition Statement under Section
1060 of the Code.
"GAAP" means accounting principles generally accepted in the United
States consistently applied by a specified Person.
"GOVERNMENTAL AUTHORITY" means any governmental agency or authority
(other than a Court) of the United States or any domestic state, and any
political subdivision or agency thereof, and includes any authority having
governmental or quasi-governmental powers.
"HOLDBACK AMOUNT" has the meaning set forth in Section 1.3 hereof.
"HSR ACT" means the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended.
"IDLE INVENTORY" has the meaning set forth in Section 1.1(d) hereof.
"INDEMNITY CLAIM NOTICE" has the meaning set forth in Section 8.5
hereof.
"INDEMNITY CLAIMS" has the meaning set forth in Section 8.2 hereof.
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"INITIAL DISTRIBUTION DATE" has the meaning set forth in Section 8.4(b)
hereof.
"INITIAL DUE DILIGENCE PERIOD" has the meaning set forth in Section
4.11 hereof.
"INITIAL INVESTIGATION PERIOD" has the meaning set forth in Section
4.11 hereof.
"INSOLVENT" has the meaning set forth in Section 3.26 hereof.
"INVENTORY CONDITION INDEMNITY CLAIM" has the meaning set forth in
Section 8.6(b) hereof.
"IRS" means the United States Internal Revenue Service.
"LAW" means all laws, statutes, ordinances and Regulations of the
United States, any foreign country, or any domestic or foreign state, and any
political subdivision or agency thereof, including all decisions of Courts
having the effect of Law in such jurisdiction.
"LEASED EMPLOYEES" has the meaning set forth in Section 6.5 hereof.
"LICENSE" has the meaning set forth in Section 6.2 hereof.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any agreement to give any of the foregoing),
any conditional sale or other title retention agreement, any lease in the nature
thereof or the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction.
"NET TAX BENEFIT" means the excess of (i) Taxes that would have been
incurred by the indemnified party if the applicable Indemnity Claim had not been
incurred by the indemnified party, and (ii) the actual Taxes payable by the
indemnified party (such Taxes being determined on a "grossed up" basis after
taking into account amounts calculated to be due hereunder).
"NON-COMPETITION AND NON-SOLICITATION AGREEMENT" has the meaning set
forth in Section 5.2(g) hereof.
"NON-COMPETITION PAYMENT" has the meaning set forth in Section 1.3
hereof.
"NOTICE PERIOD" has the meaning set forth in Section 8.5 hereof.
"OPERATING SUBSIDIARIES" means Rent-Way Michigan and TTIG,
collectively.
"OPERATING SUBSIDIARY" means Rent-Way Michigan and TTIG, individually.
"ORDER" means any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"OWNED STORE" means that certain Company-owned Store located at 1600 S.
Main Street, Little Rock, Arkansas.
"OWNED STORE LEASE" has the meaning set forth in Section 4.12 hereof.
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"PERMIT" means any and all permits, licenses, authorizations, orders,
certificates, registrations or other approvals granted by any Governmental
Authority.
"PERMITTED ENCUMBRANCES" means the following:
(1) Liens for Taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that the specified Person or
one of its Subsidiaries will have set aside on its books adequate
reserves with respect thereto;
(2) Mechanics' and materialmen's Liens not filed of record and
similar charges not delinquent or which are filed of record but are
being contested in good faith by appropriate proceedings; provided
that, in the latter case, the specified Person or one of its
Subsidiaries will have set aside on its books adequate reserves with
respect thereto.
(3) Liens in respect of judgments or awards with respect to
which the specified Person or one of its Subsidiaries will in good
faith currently be prosecuting an appeal or other proceeding for review
and with respect to which such Person or such Subsidiary will have
secured a stay of execution pending such appeal or such proceeding for
review; provided that, such Person or such Subsidiary will have set
aside on its books adequate reserves with respect thereto;
(4) easements, leases, reservations or other rights of others
in, or minor defects and irregularities in title to, property or assets
of a specified Person or any of its Subsidiaries; provided that such
easements, leases, reservations, rights, defects or irregularities do
not materially impair the use of such property or assets for the
purposes for which they are held;
(5) any Lien or privilege vested in any lessor or licensor for
rent or other obligations of a specified Person or any of its
Subsidiaries thereunder so long as the payment of such rent or the
performance of such obligations is not delinquent; and
(6) encumbrances which secure deposits of public funds as
required by Law.
"PERMITTED TRANSFEREE" has the meaning set forth in Section 6.2 hereof.
"PERSON" means an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association or
unincorporated organization, or any other form of business or professional
entity, but does not include a Governmental Authority or Court.
"PROFIT AND LOSS STATEMENT" and "PROFIT AND LOSS STATEMENTS" each has
the meaning set forth in Section 3.6(a) hereof.
"PURCHASE PRICE" has the meaning set forth in Section 1.3 hereof.
"PURCHASE PRICE REDUCTION" has the meaning set forth in Section 1.3(b)
hereof.
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"REASONABLY EQUIVALENT VALUE OPINION" has the meaning set forth in
Section 4.8 hereof.
"REGULATION" means any rule or regulation of any Governmental Authority
having the effect of Law.
"RELEVANT GROUP" has the meaning set forth in Section 3.23(b) hereof.
"RENT-WAY MICHIGAN" means Rent-Way of Michigan, Inc., a Delaware
corporation and wholly owned subsidiary of the Company.
"RENTAL PURCHASE AGREEMENTS" has the meaning set forth in Section
1.1(a) hereof.
"REPORTS" means, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority (other than the Commission).
"REVENUE PURCHASE PRICE REDUCTIONS" has the meaning set forth in
Section 1.3(b)(ii) hereof.
"SEC REPORTS" means (i) all Annual Reports on Form 10-K promulgated
under the Exchange Act, (ii) all Quarterly Reports on Form 10-Q promulgated
under the Exchange Act, (iii) all proxy statements relating to meetings of
shareholders (whether annual or special), (iv) all Current Reports on Form 8-K
promulgated under the Exchange Act and (v) all other reports, schedules,
registration statements or other documents required to be filed during a
specified period by a Person with the Commission pursuant to the Securities Act
or the Exchange Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the Regulations promulgated thereunder.
"SCHEDULE SUPPLEMENT" has the meaning set forth in Section 4.6(b)
hereof.
"SHORT AVERAGE MONTHLY REVENUE AMOUNT" has the meaning set forth in
Section 1.3(b)(i) hereof.
"SHORT AVERAGE MONTHLY REVENUE AMOUNT ADJUSTMENT" has the meaning set
forth in Section 1.3(b)(i) hereof.
"SHORT INVENTORY AMOUNT" has the meaning set forth in Section
1.3(b)(iv) hereof.
"SHORT INVENTORY AMOUNT ADJUSTMENT" has the meaning set forth in
Section 1.3(b)(iv) hereof.
"SHORT MONTHLY REVENUE AMOUNT" has the meaning set forth in Section
1.3(b)(ii) hereof.
"SHORT MONTHLY REVENUE AMOUNT ADJUSTMENT" has the meaning set forth in
Section 1.3(b)(ii) hereof.
"SHORT WEEKLY REVENUE AMOUNT" has the meaning set forth in Section
1.3(b)(iii) hereof.
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"SHORT WEEKLY REVENUE AMOUNT ADJUSTMENT" has the meaning set forth in
Section 1.3(b)(iii) hereof.
"SOLVENCY OPINION" has the meaning set forth in Section 4.7 hereof.
"STORE" and "STORES" has the meaning set forth in the Recitals.
"STORE LEASE" has the meaning set forth in Section 3.8 hereof.
"SUBSIDIARY" of a specified Person means any corporation, partnership,
limited liability company, joint venture or other legal entity of which the
specified Person (either alone or through or together with any other Subsidiary)
owns, directly or indirectly, twenty-five percent (25%) or more of the stock or
other equity or partnership interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or legal entity.
"SUPPLEMENT REVIEW PERIOD" has the meaning set forth in Section 4.6(b)
hereof.
"TAX" has the meaning set forth in Section 3.23(a) hereof.
"TAX RETURN" has the meaning set forth in Section 3.23(a) hereof.
"TAXES" has the meaning set forth in Section 3.23(a) hereof.
"TERMINATING ACQUIROR BREACH" has the meaning set forth in Section
7.1(d) hereof.
"TERMINATING COMPANY BREACH" has the meaning set forth in Section
7.1(c) hereof.
"TERMINATION FEE" has the meaning set forth in Section 7.3(b) hereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8.5 hereof.
"TRANSITION PERIOD" has the meaning set forth in Section 6.3 hereof.
"TRANSITION PERSONNEL" has the meaning set forth in Section 6.4 hereof.
"TTIG" means Rent-Way of TTIG, L.P., an Indiana limited partnership and
wholly owned subsidiary of the Company.
"UNDISCLOSED LIABILITIES" has the meaning set forth in Section 3.6(c)
hereof.
9.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and will be deemed to have been duly given,
upon receipt, if delivered personally (including by courier or overnight
courier), mailed by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses, or sent by
electronic transmission to the telecopier number specified below:
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(a) if to the Acquiror:
Rent-A-Center, Inc.
5700 Tennyson Parkway, 4th Floor
Plano, Texas 75024
Attention: Chief Executive Officer
Telecopy: 972-943-0116
With a copy to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Attention: Thomas W. Hughes, Esq.
Telecopy: 214-745-5390
(b) if to the Company or the Operating Subsidiaries:
Rent-Way, Inc.
One Rent Way Place
Erie, Pennsylvania 16505
Attention: Chief Executive Officer
Telecopy: 814-461-5401
With a copy to:
Hodgson Russ, LLP
One M&T Plaza, Suite 2000
Buffalo, New York 14203-2391
Attention: John J. Zak, Esq.
Telecopy: 716-849-0349
or to such other address or telecopier number as any party may, from time to
time, designate in a written notice given in like manner. Notice given by the
telecopier will be deemed delivered on the day the sender receives telecopier
confirmation that such notice was reached at the telecopier number of the
addressee. Notices delivered personally shall be deemed delivered as of actual
receipt and mailed notices shall be deemed delivered three days after mailing.
9.3 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
9.4 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other
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provision is invalid, illegal or incapable of being enforced, the parties hereto
will negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
9.5 Entire Agreement. This Agreement (together with all other documents
and instruments referred to herein) constitutes the entire agreement among the
parties, and supersedes all other prior agreements and undertakings, both
written and oral, among the parties with respect to the subject matter hereof.
9.6 Assignment. This Agreement may not be assigned by operation of Law
or otherwise, except that Acquiror may assign, transfer or convey this Agreement
and the rights, interests and obligations hereof to any Subsidiary of Acquiror
provided that the Acquiror remains bound hereunder.
9.7 Parties in Interest. This Agreement will be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or will confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
9.8 Failure or Indulgence Not Waiver; Remedies Cumulative; Specific
Performance. No failure or delay on the part of any party hereto in the exercise
of any right hereunder will impair such right or be construed to be a waiver of,
or acquiescence in, any breach of any representation, warranty or agreement
herein, nor will any single or partial exercise of any such right preclude other
or further exercise thereof or of any other right. All rights and remedies
existing under this Agreement are cumulative to, and not alternative to or
exclusive to, and not exclusive of, any rights or remedies otherwise available.
Notwithstanding anything to the contrary contained herein, and without limiting
any other rights of the Acquiror hereunder, whether in law or in equity, the
parties agree that Acquiror shall be entitled to the remedy of specific
performance to enforce the obligations of the Company and of the Operating
Subsidiaries hereunder.
9.9 Governing Law. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF LAW PRINCIPLES).
COURTS WITHIN THE STATE OF TEXAS WILL HAVE JURISDICTION OVER ANY AND ALL
DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS
CONTEMPLATED HEREBY. THE PARTIES CONSENT TO AND AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS. EACH OF THE PARTIES HEREBY WAIVES, AND AGREES NOT
TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY CLAIM THAT (i) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF SUCH COURTS, (ii) SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY
LEGAL PROCESS ISSUED BY SUCH COURTS OR (iii) ANY LITIGATION COMMENCED IN SUCH
COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
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9.10 Counterparts. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
9.11 No Consequential Damages. Notwithstanding anything to the contrary
elsewhere in this Agreement, no party (or its affiliates) shall, in any event,
be liable to any other party (or its affiliates) for any consequential damages,
including, but not limited to, loss of revenue or income, cost of capital, or
loss of business reputation or opportunity relating to the breach or alleged
breach of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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ASSET PURCHASE AGREEMENT
Signature Page
IN WITNESS WHEREOF, the Acquiror, the Company and the Operating
Subsidiaries have executed or caused this Agreement to be executed on the date
first written above.
RENT-A-CENTER, INC.
By: /s/ Mark E. Speese
----------------------------------------
Name: Mark E. Speese
---------------------------------
Title: Chairman of the Board and
---------------------------------
Chief Executive Officer
---------------------------------
RENT-WAY, INC.
By: /s/ William F. Morgenstern
----------------------------------------
Name: William F. Morgenstern
---------------------------------
Title: President
---------------------------------
RENT-WAY OF MICHIGAN, INC.
By: /s/ William F. Morgenstern
----------------------------------------
Name: William F. Morgenstern
---------------------------------
Title: President
---------------------------------
RENT-WAY OF TTIG, L.P.
By: Rent-Way Development, Inc.,
its general partner
By: /s/ William F. Morgenstern
-----------------------------------
Name: William F. Morgenstern
----------------------------
Title: President
----------------------------
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