ASSET PURCHASE AGREEMENT
Dated November 21, 1997
By and Among
RENT-WAY, INC.
(a Pennsylvania Corporation),
SOUTH CAROLINA RENTALS, INC.
(a Georgia Corporation),
PARADISE VALLEY HOLDINGS, INC.
(a Georgia Corporation),
L & B RENTS, INC.
(a Georgia Corporation)
and
XXXXX X. XXXXXX
- 31 -
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated November 21,
1997 is by and among RENT-WAY, INC., a Pennsylvania corporation ("Buyer"), SOUTH
CAROLINA RENTALS, INC., a Georgia corporation, PARADISE VALLEY HOLDINGS, INC., a
Georgia corporation, L & B RENTS, INC., a Georgia corporation (individually a
"Seller" and collective the "Sellers") and XXXXX X. XXXXXX ("Shareholder").
RECITALS:
A. Sellers own assets which are used to conduct Sellers' rental,
rental-purchase and video store business in South Carolina and California.
B. Buyer desires to purchase from Sellers, and Sellers desire to sell to
Buyer, substantially all of Sellers' assets upon the terms and conditions
contained in this Agreement.
C. As of the Closing Date, Shareholder will own all of the issued and
outstanding shares of stock of Sellers, and Buyer has conditioned its
willingness to enter into this Agreement upon Shareholder being a party to this
Agreement, upon the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, Buyer, Sellers and
Shareholder agree as follows:
ARTICLE 1
DEFINITIONS
1.1Defined Terms. As used in this Agreement, the terms below shall have
the following meanings:
(a)"Accounts" shall mean the customer accounts established and existing
under the Rental Contracts.
(b)"Active Rental Merchandise" shall mean rental merchandise of the
Business, including any service units, which is subject to a Rental Contract as
of the Effective Time.
(c)"Affiliate" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities,
ownership of partnership or other equity interests, by contract or otherwise).
(d)"Agreement" shall mean this Asset Purchase Agreement, together with
the Schedules and Exhibits attached to this Agreement and the certificates and
instruments to be executed and delivered in connection with this Agreement.
(e)"Assumed Contracts" shall mean (i) the Rental Contracts, (ii) the
Real Property Leases, (iii) the Vehicle Leases, (iv) the License Agreements and
(v) the Miscellaneous Contracts.
(f)"Assumed Liabilities" shall mean (i) liabilities under the Assumed
Contracts arising after the Effective Time (other than contingent liabilities
arising from events prior to the Effective Time), (ii) the Vehicle Indebtedness,
(iii) all costs and expenses directly related to the operation of the Store
Locations following the Effective Time in the ordinary course of business
including, but not limited to, non-delinquent rents, water, sewer, electricity
and other utilities, advertising expenses for advertising appearing after the
Effective Time and payroll related to store employees, managers and home office
personnel except that Sellers agree that Buyer shall have no liability for (A)
any negligent acts or omissions of Sellers or their agents nor (B) any
employment expenses relating to Shareholder, and (iv) the liabilities set forth
on Schedule 1.1(f), if any.
(g)"Average Monthly Revenues" shall mean all revenues received by
Sellers in the ordinary course of business (excluding vendor rebates and sales
taxes collected, but including video rentals) during the Test Months, divided by
three (3).
(h)"Business" shall mean the rental, rental-purchase and video store
business in South Carolina and California conducted by Sellers at the Store
Locations.
(i)"Business Records" shall mean all originals and copies of all
operating data and records of the Business on whatever media including, without
limitation, financial, accounting and bookkeeping books and records, purchase
and sale orders and invoices, sales and sales promotional data, advertising
materials, marketing analyses, past and present price lists, past and present
customer service and credit files, personnel records and other records
pertaining to the Purchased Assets.
(j)"Cash-in-Drawer" shall mean the cash on hand at each Store Location
which shall equal $150 per store or more on the Closing Date.
(k)"Closing Date" shall mean January 6, 1998, except that if all of the
conditions to Closing set forth in Articles 7 and 8 of this Agreement shall not
have been satisfied or waived on or prior to such date, "Closing Date" shall
mean the third business day after the satisfaction or waiver of all such
conditions to Closing, or on such other date as the parties may agree.
(l)"Code" shall mean the Internal Revenue Code of 1986, as amended to
date.
(m)"Defaulted Rental Purchase Contract" shall mean a Rental Purchase
Contract for which either of the following is true as of the Effective Time: (i)
a payment due within thirty (30) days prior to the Effective Time has not been
made by the customer which is the party thereto or (ii) the rental merchandise
covered thereby was lost, damaged or destroyed by theft or casualty.
(n)"Effective Time" shall mean midnight on December 31, 1997.
(o)"Encumbrance" shall mean any restriction, charge, lien, pledge,
option, easement, security interest, right-of-way, encumbrance or other similar
right of any Person.
(p)"Environmental Claims" shall mean any notice of violation, notice of
potential or actual responsibility or liability, claim, suit, action, demand,
directive or order by any Person for any damage (including, but not limited to,
personal injury, tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
environmental removal, response or remediation costs, nuisance, pollution,
contamination or other adverse effects on the environment or for fines,
penalties or restrictions on existing environmental permits or licenses)
resulting from or relating to (i) the presence of, the Release or threatened
Release into the environment of, or exposure to, any Hazardous Substance, (ii)
the generation, manufacture, processing, distribution, use, handling,
transportation, storage, treatment or disposal of any Hazardous Substance, (iii)
the violation, or alleged violation, of any Environmental Laws or (iv) the
non-compliance or alleged non-compliance with any Environmental Laws.
(q)"Environmental Laws" shall mean any applicable statutes, ordinances,
directives or other laws, any rules or regulations, orders, and any licenses,
permits, orders, judgments, notices or other requirements issued pursuant
thereto, enacted, promulgated or issued by any Governmental Authority, relating
to pollution or protection of public health or the environment (including, but
not limited to, any air, surface water, groundwater, land surface or sub-surface
strata, whether outside, inside or under any structure), or to the
identification, reporting, generation, manufacture, processing, distribution,
use, handling, treatment, storage, disposal, labeling, deposit, transporting,
presence, Release or threatened Release of, any Hazardous Substances,
pollutants, contaminants, wastes or any other substances or materials. Without
limiting the generality of the foregoing, Environmental Laws shall include in
the United States, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Toxic Substances Control Act, as amended,
the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Water Act, as amended, the
Safe Drinking Water Act, as amended, the Clean Air Act, as amended, and the
Occupational Safety and Health Act, as amended, all analogous laws enacted,
promulgated or lawfully issued by any Governmental Authority.
(r)"ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended.
(s)"Excluded Assets" shall mean:
(i) all cash (other than Cash-in-Drawer) of Sellers;
(ii) all employee accounts receivable of Sellers; and
(iii) certain home office assets of Sellers listed on
Schedule 1.1(s).
(t)"Future Rental Revenue Stream" shall mean, as of any date and as to
any Rental Purchase Contract, an amount equal to the total dollar amount of
remaining rental payments necessary for a customer to acquire ownership of the
rental merchandise under such Rental Purchase Contract. "Future Rental Revenue
Stream" shall be calculated by multiplying the monthly or weekly rental rate of
a Rental Purchase Contract by the remaining number of monthly or weekly payments
necessary for a customer to acquire ownership of the rental merchandise under
such Rental Purchase Contract.
(u)"GAAP" shall mean generally accepted accounting principles in the
United States.
(v)"Governmental Authority" shall mean any federal, state, local or
foreign government, or any political subdivision of any of the foregoing, or any
court, agency or other entity, body, organization or group, exercising any
executive, legislative, judicial, quasi-judicial, regulatory or administrative
function of government.
(w)"Governmental Requirement" shall mean any rule, regulation, code,
plan, injunction, judgment, order, decree, ruling or charge of any Governmental
Authority.
(x)"Hazardous Substances" shall mean any pollutants, contaminants,
substances, chemicals, carcinogens, wastes and any ignitable, corrosive,
reactive, toxic or other hazardous substances of materials, whether solids,
liquids or gases (including, but not limited to, petroleum and its derivatives,
PCBs, asbestos, radioactive materials, waste waters, sludge, slag and any other
substance, material or waste), as defined in or regulated by any Environmental
Laws or as determined by any Governmental Authority.
(y)"Inactive Rental Merchandise" shall mean the rental merchandise of
the Business which is not subject to a Rental Contract as of the Effective Time
including loaners and service units not subject to a Rental Contract as of the
Effective Time.
(z)"Intangible Property" shall mean (i) all right, title and interest of
Sellers in and to the telephone numbers used in the Business and set forth on
Schedule 1.1(z) and (ii) each copyright, patent, service xxxx, trademark, trade
secret and other intellectual property right used by Sellers to conduct the
Business (including, but not limited to, each such intellectual property right
listed on Schedule 1.1(z)).
(aa) "License Agreements" shall mean all computer software agreements
and other license agreements which relate to all computers and other equipment
used by the Sellers in the conduct of the Business, (including, but not limited
to, those agreements and licenses listed on Schedule 1.1(aa)).
(bb) "Miscellaneous Contracts" shall mean the contracts and agreements
listed on Schedule 1.1(ab).
(cc) "Net Book Value of Rental Merchandise" shall mean the combined net
book value of rental merchandise of the Sellers as determined in accordance with
GAAP applied on a consistent basis except that, with respect to depreciation, it
shall be calculated for purposes of this Agreement in a manner consistent with
Sellers' historical depreciation methods regardless of compliance with GAAP.
(dd) "Permits" shall mean all licenses, permits and other authorizations
used in the Business.
(ee) "Permitted Encumbrance" shall mean (i) liens for Taxes not yet due
and payable or for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings or (ii) other liens arising in the ordinary course of
business (not including any mechanic's lien) and not incurred in connection with
the borrowing of money.
(ff) "Person" shall mean any Governmental Authority, individual,
corporation, partnership, trust or other entity.
(gg) "Prepaid Expenses" shall mean all of Sellers' prepaid expenses
relating to the Business.
(hh) "Proceeding" shall mean any action, order, writ, injunction,
judgment, decree, claim, suit, litigation, dispute, grievance, arbitral action,
investigation or other proceeding.
(ii) "Purchase Price" shall mean, subject to adjustment after Closing in
accordance with Section 2.3 of this Agreement, $24,375,000;
(i) less the 1998 Revenues;
(ii) plus the 1998 Expenses;
(iii)less the amount, if any, that the Future Rental Revenue
Stream under all Rental Purchase Contracts (other than
Defaulted Rental Purchase Contracts) as of the Effective
Time is less than $20,000,000;
(iv) plus the aggregate amount of the security deposits held by
all landlords pursuant to the Real Property Leases;
(v) plus an amount equal to the Cash-in-Drawer at the Store
Locations on the Closing Time;
(vi) plus an amount equal to Sellers' rental product purchases
for the Test Months in excess of $400,000 for each month;
provided, however, that (I) if Sellers should fail to equal
or exceed Average Monthly Revenues of $1,750,000 for the
Test Months or (II) if on the Effective Time Sellers' Net
Book Value of Rental Merchandise is less than $5,000,000 or
Sellers' Future Rental Revenue Stream is less than
$20,000,000, then Buyer shall have no liability for these
amounts;
(vii)plus an amount not to exceed $20,000 for Sellers'
advertising costs during the ---- Test Months which exceed
the average monthly level of Sellers' advertising costs as
disclosed to Buyer through May 31, 1997, subject to Buyer's
review and approval prior to Sellers placing such
advertising; provided, however, that (I) if Sellers should
fail to equal or exceed Average Monthly Revenues of
$1,750,000 for the Test Months or (II) if as of the
Effective Time Sellers' Net Book Value of Rental Merchandise
is less than $5,000,000 or Sellers' Future Rental Revenue
Stream is less than $20,000,000, then Buyer shall have no
liability for these amounts;
(viii) plus an amount not to exceed $50,000 for Sellers' store
level bonus plan for the Test Months, subject to Buyer's
review and approval prior to the implementation of such
plan; provided, however, that (I) if Sellers should fail to
equal or exceed Average Monthly Revenues of $1,750,000 for
the Test Months or (II) if as of the Effective Time Sellers'
Net Book Value of Rental Merchandise is less than $5,000,000
or Sellers' Future Rental Revenue Stream is less than
$20,000,000, then Buyer shall have no liability for these
amounts; (ix) less the amount the Vehicle Indebtedness
exceeds $550,000, unless additional vehicles are purchased
by Sellers with Buyer's prior review and written approval,
in which case this amount shall be increased by the approved
amount of vehicle purchases.
(jj) "Purchased Assets" shall mean all right, title and interest of
Sellers in and to all of the assets of Sellers used in the Business and existing
as of the Effective Time (other than the Excluded Assets), including, without
limitation:
(i) Accounts;
(ii) the Assumed Contracts;
(iii) the Business Records;
(iv) the Cash-in-Drawer;
(v) the Intangible Property;
(vi) the Permits (to the extent assignable);
(vii) the Prepaid Expenses;
(viii) the Rental Contracts;
(ix) the Rental Merchandise; and (x) the
Tangible Personal Property.
(kk) "Release" shall mean any spillage, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the environment.
(ll) "Rental Contracts" shall mean all rental and rental-purchase
contracts relating to the Business (including, without limitation, video
rentals), which are duly signed by a customer, made in the ordinary course of
business and otherwise legally enforceable, providing for the rental to
customers of furniture, appliances, electronic equipment and/or other personal
property. Rental Contracts shall not include rental and rental-purchase
contracts that customers entered into as a part of a promotion or other
marketing strategy that did not require the customer to pay at least one week's
rent prior to delivery of the rental property; provided, however, that this
exclusion shall not apply to any rental or rental-purchase contracts for which a
free rental period has expired and the customer has paid at least one week's
rent prior to Closing.
(mm) "Rental Merchandise" shall mean (i) the Active Rental Merchandise,
(ii) the Inactive Rental Merchandise and (iii) all of Sellers' video tape
inventory.
(nn) "Rental Purchase Contracts" shall mean those Rental Contracts which
permit customers to acquire ownership of the rental merchandise.
(oo) "Representative" shall mean any officer, director, principal,
attorney, accountant, agent, employee or other representative of any Person.
(pp) "Store Locations" shall mean the rental store locations set forth
on Schedule 1.1(ap).
(qq) "Tangible Personal Property" shall mean all tangible personal
property (other than rental merchandise and certain home office assets of
Sellers set forth on Schedule 1.1(aq)) used to conduct the Business, including,
without limitation, vehicles, computers, modems, printers, fax machines, file
cabinets, desks, calculators, telephone systems, counters, safes and security
systems, together with any transferable manufacturer or vendor warranties
related thereto.
(rr) "Tax" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, startup, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, intangible property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not.
(ss) "Tax Return" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and any amendment thereof.
(tt) "Test Months" shall mean October, November and December 1997.
(uu) "Vehicle Indebtedness" shall mean the installment contract
indebtedness of Sellers for certain of the vehicles owned by Sellers and used in
the Business which remains unpaid as of the Effective Time (other than any
amounts which were payable on or prior to the Effective Time), as more
particularly set forth on Schedule 4.7; provided, however, that this amount
shall not exceed $550,000, net of interest, unless additional vehicles are
purchased by Sellers with Buyer's prior review and written approval, in which
case this amount shall be increased by the amount of the approved vehicle
purchases.
(vv) "Vehicle Leases" shall mean the leases, as amended to date, for the
vehicles leased to Seller and used in the Business, as more particularly set
forth on Schedule 4.7.
(ww) "1998 Revenues" shall mean all operating revenues of the Sellers,
whether held in a bank account or otherwise, generated from the Effective Time
up to and through the Closing Date.
(xx) "1998 Expenses" shall mean any and all costs and expenses relating
to the operation of the Business in the ordinary course after the Effective Time
including, but not limited to, (a) non-delinquent payments under the Assumed
Contracts in respect of periods after the Effective Time, (b) non-delinquent
water, sewer, electricity and other utilities relating to the Store Locations,
(c) expenses incurred for advertising appearing after the Effective Time and (d)
wages, salary and other employment expenses of Sellers' employees (including
store and regional managers and home office) directly related to the operation
of the Business in the ordinary course but excluding any such employment
expenses relating to Shareholder, in each case which are actually paid by
Sellers.
1.2Other Defined Terms. The following terms shall have meanings defined
for such terms in the Sections set forth below:
Term Section
Benefit Arrangement 4.20(m)
Bank Accounts 4.23
Business Reports 4.5
Buyer's Accountant 2.3(c)
Buyer's Audit 2.3(c)
Closing 3.1
Closing Certificate 2.3(c)
COBRA 4.20(h)
Confidentiality Agreement 6.2
Default 2.7(b)(v)
Deposit 2.7
Deposit Escrow Agreement 2.7(b)(ii)
Employee Plans 4.20(a)
ERISA Affiliate 4.20(e)
Escrow Agent 2.4(c)
Escrow Funds 2.4(c)
Financial Statements 4.9
Indemnified Party 9.2(c)
Indemnifying Party 9.2(c)
Interim Financial Statement 4.9
Letter of Intent 6.2
Losses 9.2
New Bank Accounts 6.8(d)
Non-Compete Agreement 6.6
PBGC 4.20(k)
Pension Plans 4.20(a)
Real Property 4.10
Real Property Leases 4.10
Retained Liabilities 2.2
Third-Party Accountants 2.3(c)
Unconfirmed Rental Purchase Contract 2.3(c)
Welfare Plans 4.20(a)
1.3Usage of Terms. Except where the context otherwise requires, words
importing the singular number shall include the plural number and vice versa.
1.4References to Articles, Sections, Exhibits and Schedules. All
references in this Agreement to Articles, Sections (and other subdivisions),
Exhibits and Schedules refer to the corresponding Articles, Sections (and other
subdivisions), Exhibits and Schedules of or attached to this Agreement, unless
the context expressly, or by necessary implication otherwise requires.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1Transfer of Assets; Assumption of Assumed Liabilities. Subject to
the terms and conditions contained in this Agreement, on the Closing Date:
(a)Sellers shall sell, convey, transfer, assign, and deliver to Buyer,
and Buyer shall acquire from Sellers, the Purchased Assets, free and clear
of any Encumbrances.
(b)Buyer shall assume, effective as of the Effective Time, the Assumed
Liabilities.
2.2Liabilities Not Assumed. It is expressly understood and agreed that,
other than the Assumed Liabilities, Buyer shall not assume, nor shall it be
liable for, any liability, debt, obligation, claim against or contract of
Sellers of any kind or nature whatsoever, whether or not relating to the
Business, at any time existing or asserted, whether or not accrued, whether
fixed, contingent or otherwise, whether known or unknown, and whether or not
recorded on the books and records of Sellers, (including, without limitation,
any tax liability, any product warranty or other product liability, any
liability in respect of labor relations or practices or any employee benefit
plans, or any environmental, safety or health liability) (the "Retained
Liabilities").
2.3Purchase Price; Allocation of Purchase Price;Post-Closing Adjustment.
(a)Buyer shall pay to Sellers for the sale, transfer, assignment,
conveyance and delivery of the Purchased Assets an amount equal to the Purchase
Price (less the Deposit (as defined in Section 2.7)).
(b)Buyer and Sellers shall agree prior to the Closing Date on estimated
allocations of the Purchase Price to the extent necessary to permit the making
of any timely transfer tax filings. In addition, as soon as practicable after
the Closing Date, but in no event later than March 9, 1998, Buyer shall provide
to Sellers a proposed statement (the "Allocation Statement") allocating the
total of the Purchase Price, and any other payments made by Buyer pursuant to
this Agreement that are properly treated as additional purchase price for tax
purposes, among the different items of assets of the Sellers to be acquired,
using the fair market value thereof as of the Effective Time (the "Fair Market
Value Principle") except that the Buyer and Sellers have agreed that $500,000 of
the Purchase Price shall be allocated to the Non-Compete Agreement. Within
thirty (30) days following delivery of the proposed Allocation Statement,
Sellers may propose changes to the Allocation Statement. Buyer shall consider
Sellers' proposed changes in good faith, but shall have no obligation to amend
the Allocation Statement to reflect any proposed changes except to the extent
such changes are required to comply with the Fair Market Principle. Unless
otherwise agreed in writing by Buyer and Sellers, Buyer and Sellers shall (i)
reflect the Purchased Assets in their books and for tax reporting purposes in
accordance with such Allocation Statement, (ii) file all forms required under
Section 1060 of the Code and all other tax returns and reports in accordance
with and based upon such allocation and (iii) unless required to do so in
accordance with a "determination" as defined in Section 1313(a)(1) of the Code,
take no position in any tax return, tax proceeding, tax audit or otherwise which
is inconsistent with such allocation. Buyer and Sellers shall execute Form 8594
completed in accordance with the allocation procedure set forth in this Section
2.3(b) in a timely manner.
(c)On the Closing Date, Sellers shall deliver to Buyer a certificate,
certified by an executive officer of the Sellers (the "Closing Certificate"),
setting forth
(i) a schedule of the Defaulted Rental Purchase Contracts
existing as of the Effective Time and a computation of the
combined Future Rental Revenue Stream as of the Effective
Time under all Rental Purchase Contracts of Sellers other
than Defaulted Rental Purchase Contracts;
(ii) a computation of the combined Net Book Value of Rental
Merchandise as of the Effective Time;
(iii)a computation of the estimated 0000 Xxxxxxxx and the
estimated 1998 Expenses;
(iv) a computation of the Vehicle Indebtedness; and
(v) a computation of the Average Monthly Revenues for the Test
Months.
So long as the Net Book Value of Rental Merchandise is greater than
$5,000,000 and the Average Monthly Revenues for the Test Months is at least
$1,750,000, the Closing shall proceed, and any adjustments to the Purchase Price
shall be made based on the Closing Certificate.
There shall be conducted by Buyer's certified public accountants
("Buyer's Accountants") within ninety (90) days following the Closing Date an
audit of Sellers' financial statements and Business Records to determine the
existence of any Rental Purchase Contract (other than a Defaulted Rental
Purchase Contract disclosed to Buyer in the Closing Certificate on the Closing
Date) which meets any of the criteria set forth on Schedule 2.3(c) (each, an
"Unconfirmed Rental Purchase Contract") and to determine the Net Book Value of
Rental Merchandise of Sellers as of the Effective Time, the 1998 Revenues and
1998 Expenses, the Vehicle Indebtedness and the Average Monthly Revenue for the
Test Months (the "Buyer's Audit"). Buyer shall report any Unconfirmed Rental
Purchase Contract or any change in the Net Book Value of Rental Merchandise, the
1998 Revenues and 1998 Expenses, the Vehicle Indebtedness and the Average
Monthly Revenues for the Test Months to Sellers upon discovery. As promptly as
reasonably possible, but in any event not later than ninety (90) days after the
Closing Date, Buyer shall deliver the Buyer's Audit to Sellers. Sellers shall
have fifteen (15) days after receipt of the Buyer's Audit to clear any
Unconfirmed Rental Purchase Contract, account for any increases in the 0000
Xxxxxxxx or decreases in 1998 Expenses, or to account for any increases in the
Vehicle Indebtedness.
If Sellers are unable, within such 15-day period, to clear any
Unconfirmed Rental Purchase Contracts and/or account for any increases in the
1998 Revenues and the Vehicle Indebtedness, or any decreases in 1998 Expenses,
the Purchase Price shall be reduced on a dollar for dollar basis by (i) the
Future Rental Revenue Stream of all Unconfirmed Rental Purchase Contracts, (ii)
the amount that the 1998 Revenues as determined in the Buyer's Audit are greater
than the 1998 Revenues set forth on the Closing Certificate, (iii) the amount
that the 1998 Expenses as determined in the Buyer's Audit are less than the 1998
Expenses set forth on the Closing Certificate and (iv) the amount that the
Vehicle Indebtedness as determined in the Buyer's Audit exceeds the Vehicle
Indebtedness set forth on the Closing Certificate; provided, however, that any
dollar for dollar reduction in the Purchase Price on account of the Vehicle
Indebtedness shall only occur if the Vehicle Indebtedness set forth in the
Closing Certificate is in excess of $550,000, unless additional vehicles are
purchased by Sellers with Buyer's prior review and written approval in which
case this amount shall be increased by the amount of the approved vehicle
purchases. Otherwise, such dollar for dollar reduction in the Purchase Price
shall not occur unless and until, and, in such event, only to the extent that
the Vehicle Indebtedness, as calculated in the Buyer's Audit exceeds $550,000,
unless additional vehicles are purchased by Sellers with Buyer's prior review
and written approval in which case this amount shall be increased by the amount
of the approved vehicle purchases.
The amount of any such reduction to the Purchase Price shall be payable
by Sellers within five (5) days after the expiration of such 15-day period,
unless Sellers contest such adjustments in which case all payments shall be made
within five (5) days after the determination of the Third-Party Accountants as
set forth below.
If the Buyer and the Sellers are unable to reach agreement as to any
final Purchase Price adjustment within 15 days after the end of the 15-day
review period set forth above, then Ernst & Young LLP (the "Third-Party
Accountants") shall promptly be retained to undertake the determination of any
adjustments to the Purchase Price necessary under this Section 2.3(c), which
determination shall be made as quickly as possible. Such determination of the
Third-Party Accountants shall be final and binding upon the Buyer and the
Sellers, and all expenses of the Third-Party Accountants shall be borne by the
party found by the Third-Party Accountants to be in the greatest error with
respect to its position on the amount of such adjustment.
2.4Assumption of Assumed Liabilities; Payment of Purchase Price. On the
Closing Date, Buyer shall assume the Assumed Liabilities and pay the Purchase
Price to Sellers as follows:
(a)Buyer shall (i) pay all amounts set forth on Schedule 1.1(f) to be
paid at Closing, if any, (ii) pay to Sellers the Purchase Price (as adjusted if
applicable) minus the Escrow Funds (as hereinafter defined) and minus the
Deposit, in cash by wire transfer of immediately available funds in accordance
with written wire transfer instructions delivered by Sellers to Buyer not less
than three days prior to the Closing and (iii) cause the Deposit to be released
from escrow to Sellers.
(b)Buyer shall deliver to Manufacturers and Traders Trust Company (the
"Escrow Agent") $750,000 (the "Escrow Funds") by wire transfer as instructed by
the Escrow Agent in a letter delivered to Buyer not less than two days prior to
the Closing to be held (i) to pay for any adjustments in the Purchase Price
pursuant to Section 2.3(c) of this Agreement and (ii) to provide partial
security for Sellers' and Shareholder's indemnification obligations in Article 9
of this Agreement. Such funds shall be held for a period of 180 days following
the Closing Date; provided, however, that at the end of ninety (90) days
following the Closing Date, Buyer shall cause Escrow Agent to release to Sellers
an amount equal to $375,000 of the Escrow Funds minus an amount equal to 100% of
any claims asserted by Buyer, in its reasonable discretion, against the Escrow
Funds, all in accordance with, and pursuant to, the terms and conditions of an
Escrow Agreement among Sellers, Buyer and Escrow Agent in substantially the form
of Exhibit A.
2.5Sales Taxes. Sellers shall be responsible for any sales or use tax
imposed by reason of the transfer of the Purchased Assets provided hereunder.
2.6[RESERVED]
2.7Deposit. (a) Prior to the execution of this Agreement Buyer has
delivered a check for $100,000 (the "Deposit") to Escrow Agent. Subject to
Paragraph (b) below, the Deposit shall be held by Escrow Agent until the Closing
of the transactions provided for in this Agreement, in which case the Deposit
shall be released and credited against payment of the Purchase Price.
(b)If the Closing shall not have occurred by January 31, 1998, the
Deposit shall be either retained by Shareholder or returned to Buyer, as
follows:
i. If all of the conditions to Buyer's obligations to
consummate the transactions provided for in this Agreement
except for those set forth in Sections 8.5 and 8.7 shall
have been satisfied by January 31, 1998, and Buyer exercises
its rights under Article 8 hereof not to close because the
conditions in either Section 8.5 or 8.7 shall have not been
satisfied, then Shareholder shall be entitled to the Deposit
and Buyer shall have no further claim or interest in the
Deposit; or
ii. If all of the conditions to Buyer's obligations to
consummate the transactions provided for in this Agreement,
excluding those set forth in Sections 8.5 and 8.7, shall not
have been satisfied by January 31, 1998, and Buyer exercises
its rights under Article 8 hereof not to close, then Buyer
may so notify the Escrow Agent, and Escrow Agent shall then
return the Deposit to Buyer upon written notice to
Shareholder in accordance with the Escrow Agreement between
Buyer, Shareholder and Manufacturers and Traders Trust
Company, dated October 24, 1997 (the "Deposit Escrow
Agreement"); or
iii. If the conditions to Sellers' obligations to consummate the
transactions provided for in this Agreement which are set
forth in Sections 7.1, 7.4, 7.5, 7.6 and 7.7 shall have been
satisfied, and Sellers exercise their rights under Article 7
hereof not to close, because the conditions set forth in
Section 7.2 or Section 7.3 shall not have been satisfied,
then Buyer shall be entitled to the Deposit upon written
notice to Shareholder in accordance with the Deposit Escrow
Agreement; or
iv. If the conditions to Sellers' obligations to consummate the
transactions provided for in this Agreement which are set
forth in Sections 7.1, 7.4, 7.5, 7.6 and 7.7 shall not have
been satisfied, and Sellers exercise their rights under
Article 7 hereof not to close unless clause (ii) of this
Paragraph (b) shall also apply, then Shareholder shall be
entitled to the Deposit and Buyer shall have no further
claim or interest in the Deposit. If clause (ii) shall also
apply, then the Deposit shall be returned to Buyer; or
v. Notwithstanding the provisions of clause (i) - (iv) of this
Paragraph (b),(A) if Sellers shall breach or be in default
of any material covenant of Sellers set forth in this
Agreement and shall not have cured such breach or default
within five (5) days after notice from Buyer ("Default"),
then Buyer shall be entitled to a return of the Deposit; or
(B) if Buyer shall breach or be in default of any material
covenant of Buyer set forth in this Agreement and shall not
have cured such breach or default within five (5) days after
notice from Shareholder, then Shareholder shall be entitled
to the Deposit.
(c)The parties agree that, in the event that the Closing does not occur
and the Deposit is delivered to Sellers by the Escrow Agent, the payment by
Buyer and retention by the Sellers of the Deposit as provided for in this
Section 2.7 shall constitute Sellers' sole and exclusive remedy on account of
any failure by the Buyer to consummate the purchase of the Purchased Assets,
under this Agreement or on any other legal basis. The parties further agree
that, in the event that the Closing does not occur and the Deposit is to be
returned to Buyer, the Sellers shall not have any further monetary liability to
the Buyer, under this Agreement or on any other legal basis, unless the Sellers
(or any of them) shall have willfully breached any covenant by Sellers
hereunder, in which case Buyer shall be entitled to be indemnified by Sellers
for any Losses it may incur as a result of such breach as provided for in
Section 9.2.
(d)The obligations and provisions of this Section 2.7 supersede
Paragraph 14 of the Letter of Intent and shall survive the termination of this
Agreement.
ARTICLE 3
CLOSING
3.1Closing. The closing of the transaction contemplated in this
Agreement (the "Closing") shall be held at 9:00 a.m. local time on the Closing
Date at the offices of Sellers in Phoenix, Arizona, or at such other place as
shall be agreed to by Sellers and Buyer.
3.2Conveyances at Closing.
(a)Instruments and Possession. Upon the terms and conditions contained
in this Agreement, on the Closing Date Sellers shall deliver to Buyer (i)
assignments and bills of sale conveying title to Buyer in the aggregate of all
of the Purchased Assets, (ii) assignments of the Assumed Contracts, (iii) such
other instruments as shall be reasonably requested by Buyer to vest in Buyer
title in and to the Purchased Assets in accordance with the provisions of this
Agreement, including assignments in recordable form for any registered
trademarks of Sellers included in the Intangible Property (including but not
limited to "ACE TV RENTALS"), and (iv) such other documents and agreements as
are contemplated by this Agreement.
(b)Form of Instruments. All of such instruments shall be in form and
substance, and shall be executed and delivered in a manner, reasonably
satisfactory to Buyer and Sellers, but shall not diminish the status of title to
the Purchased Assets required to be delivered by Sellers pursuant to this
Agreement.
3.3Assumptions at Closing.
(a)Instruments. Upon the terms and conditions contained in this
Agreement, on the Closing Date Buyer shall deliver to Sellers (i) an assumption
of the Assumed Liabilities, (ii) such other instruments of assumption evidencing
Buyer's assumption of the Assumed Liabilities as Sellers shall deem necessary
and (iii) such other documents and agreements as are contemplated by this
Agreement.
(b)Form of Instruments. All such instruments shall be in form and
substance, and shall be executed and delivered in a manner, reasonably
satisfactory to Sellers and Buyer, but shall not increase or decrease the
liabilities and obligations required to be assumed by Buyer pursuant to this
Agreement.
3.4Consents to Assignment. Sellers shall use their best efforts to
obtain any consents required to consummate the transactions contemplated by this
Agreement.
3.5Certificates and Other Documents. Buyer and Sellers shall deliver the
certificates and other items provided for in Articles 6, 7 and 8 of this
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS AND SHAREHOLDER
Sellers and Shareholder, jointly and severally, represent and warrant to
Buyer that the following are true, correct and complete on the date of this
Agreement, and shall be true, correct and complete as of the Closing Date:
4.1Organization and Good Standing. The Sellers are corporations duly
organized, validly existing and in good standing in the jurisdictions set forth
on Schedule 4.1. Schedule 4.1 includes each jurisdiction other than the
jurisdiction of incorporation where each Seller is qualified to do business and
each trade name or assumed name used by each Seller in the conduct of the
Business. Sellers are duly qualified to do business in, and in good standing
under the laws of, each jurisdiction in which such qualification is necessary
under the applicable laws as result of the conduct of their respective business
or the ownership of their respective properties. Sellers have full power and
authority to conduct their business as it is presently being conducted and to
own and lease their properties and assets. Sellers have no subsidiaries. Sellers
conduct the Business directly and not through any association, joint venture,
partnership or other business entity.
4.2Authority; Authorization; Binding Effect. Shareholder and Sellers
have all necessary power and authority and have taken all action necessary to
execute and deliver this Agreement and the instruments to be executed and
delivered pursuant hereto, to consummate the transactions contemplated by this
Agreement and to perform their obligations under this Agreement. Copies of all
resolutions of the board of directors and shareholders of each of the Sellers
with respect to the transactions contemplated by this Agreement, certified by
the Secretary or an Assistant Secretary of each Seller in form satisfactory to
counsel for Buyer, have been or will be delivered to Buyer. This Agreement has
been duly executed and delivered by Shareholder and Sellers and constitutes a
legal, valid and binding obligation of Shareholder and Sellers enforceable
against Shareholder and Sellers in accordance with its terms, except as
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors
rights generally and (ii) the discretion of the appropriate court with respect
to specific performance, injunctive relief or other forms of equitable remedies.
4.3No Conflicts, Violations or Proceedings. The execution and delivery
of this Agreement, the consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not and will not result in
(i) a violation of or conflict with any provision of the Certificate of
Incorporation, Bylaws or other organization certificates or documents of any
Seller, (ii) a breach of, or a default under, any material term or provision of
any contract, agreement, indebtedness, encumbrance, commitment, license,
franchise, permit, authorization or concession relating to the Business to which
Shareholder or Sellers are a party, (iii) a violation by Shareholder or Sellers
in any material respect of any statute, rule, regulation, ordinance, code,
order, judgment, writ, injunction, decree or award or (iv) an imposition of any
Encumbrance on any of the Purchased Assets. There is no pending or, to the
knowledge of Shareholder or Sellers, threatened or anticipated Proceeding
against, relating to or affecting the transactions contemplated by this
Agreement.
4.4No Consents or Approvals. Except as otherwise set forth on Schedule
4.4, no consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Authority or any other Person is required to
be made or obtained by Shareholder or Sellers in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated by this Agreement.
4.5Customer/Account Information. Sellers have delivered to Buyer the
reports set forth on Schedule 4.5 (the "Business Reports"). The Business Reports
are true and correct in all respects and fairly present the operations of the
Business.
4.6Title to Purchased Assets; Sufficiency of Purchased Assets. Sellers
have good title to all of the Purchased Assets, free and clear of any
Encumbrance (other than any Permitted Encumbrances). The Purchased Assets
constitute substantially all assets which have been used and which are necessary
to conduct the Business as presently conducted by Sellers.
4.7Vehicles Leases; Vehicle Indebtedness. Sellers have delivered to
Buyer correct and complete copies of (i) the Vehicle Leases and (ii) each other
document evidencing the Vehicle Indebtedness. Schedule 4.7 sets forth the
Vehicle Leases and the Vehicle Indebtedness, and a list of the other vehicles
owned by Sellers and used in the Business. With respect to each Vehicle Lease:
(i) the lease is legal, valid, binding, enforceable and in full force and
effect, (ii) the lease will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby, (iii) to the knowledge of Sellers and
Shareholder no party to the lease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification or acceleration thereunder and (iv)
Sellers have not assigned, transferred or conveyed any interest in the lease.
With respect to the Vehicle Indebtedness, to the knowledge of Sellers and
Shareholder no party is in breach or default and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification or acceleration thereunder.
4.8Corporate Records. Except as set forth on Schedule 4.8, the minute
books of each Seller are complete and accurate and contain a complete and
accurate record of all meetings and actions of shareholders and directors and of
any executive committee or other committee of the shareholders or board of
directors. The stock record book of each Seller is complete and accurate and
contains a complete and accurate record of all share transactions for such
Seller from the date of its incorporation. True and complete copies of the
Business Records, the minute book and stock record book of Sellers have been
made available for review by Buyer.
4.9Financial Statements; Changes.
(a) Sellers and Shareholder have delivered or will deliver to Buyer
(i) unaudited financial statements of Sellers for each of the years in the
three-year period ended December 31, 1996 (consisting of a balance sheet,
statement of income, profit and loss and a statement of cash flows), which have
been prepared by Sellers' except for 1994, which was audited (the "Financial
Statements") and (ii) unaudited interim financial statements of Sellers
(consisting of a balance sheet, statement of income, profit and loss and a
statement of cash flows) for the 9-month period ended September 30, 1997 (the
"Interim Financial Statements"). Except as set forth on Schedule 4.9(a), the
Financial Statements and the Interim Financial Statements fairly present the
financial condition and the results of operations of Sellers as of their
respective dates and for the periods then ended and the Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis. The
books and records of Sellers fairly reflect the assets, liabilities and
operations of Sellers in accordance with GAAP and the Financial Statements and
the Interim Financial Statements are in conformity therewith.
(b) Except as set forth on Schedule 4.9(b), since the date of 1996
Financial Statements, there has not been, with respect to any Seller, any:
(i) Amendment to its certificate of incorporation or bylaws;
(ii) Increases in salary, bonus or other compensation of any
employee or officer other than the ordinary course of
business;
(iii) Material change in accounting methods used by such Seller;
(iv) Sale, lease or disposition of any asset or property of such
Seller, other than in the ordinary course of business; or
(v) Agreements, whether oral or written, by such Seller to do
any of the foregoing.
4.10 Real Property. Schedule 4.10 lists and describes briefly all real
property leased or subleased and used in the Business ("Real Property"). Sellers
have delivered to Buyer correct and complete copies of the leases and subleases,
as amended to date, for the Real Property (the "Real Property Leases"). With
respect to each Real Property Lease: (i) the lease or sublease is legal, valid,
binding, enforceable and in full force and effect, (ii) the lease or sublease
will continue to be legal, valid, binding, enforceable and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby, provided; however, that certain leases may require the
landlord's consent to assignment as contemplated by this Agreement, (iii) to the
knowledge of Sellers and Shareholder no party to the lease or sublease is in
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination, modification
or acceleration thereunder, (iv) Sellers have not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold and (v) all facilities leased or subleased thereunder
have received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules and
regulations.
4.11 Tangible Personal Property. Schedule 4.11, lists all Tangible
Personal Property owned or leased by Sellers as of October 31, 1997. The
Tangible Personal Property constitutes all the tangible personal property used
in the operation of the Business and necessary to conduct the Business as
presently conducted. Except as set forth on Schedule 4.11, the Tangible Personal
Property owned by Sellers is free and clear of all Encumbrances. All of the
Tangible Personal Property is located at the Real Property. The Tangible
Personal Property is in all material respects in good working order, ordinary
wear and tear excepted.
4.12 Intangible Property. Schedule 4.12, lists all Intangible Property.
Except as set forth on Schedule 4.12, (i) the Intangible Property is legally and
beneficially owned exclusively by Sellers and is used exclusively by Sellers and
is not the subject of any pending or threatened proceeding for opposition,
cancellation, reexamination, revocation or rectification and, to the knowledge
of Shareholder and Sellers, there are no facts or matters which might give rise
to any such proceeding. To the knowledge of Shareholder or Sellers, the use by
Sellers of the Intangible Property is not infringing upon or otherwise violating
the rights of any third party in or to such Intangible Property, and no
proceedings have been instituted against, and no notices have been received by,
Sellers that are presently outstanding alleging that the use by Sellers of the
Intangible Property infringes upon or otherwise violates any rights of a third
party in or to such Intangible Property. Except as set forth on Schedule 4.12,
to the knowledge of Shareholder or Sellers, the consummation of the transactions
contemplated by this Agreement will not result in the loss of or impairment of
any of Sellers' rights in the Intangible Property. Except as set forth on
Schedule 4.12, no shareholder, director, officer or employee of Sellers owns,
directly or indirectly, in whole or in part, any right in the Intangible
Property that Sellers have used or the use of which is necessary for the
Business as now conducted.
4.13 Compliance with Laws; Permits. Except as set forth in Schedule
4.13, Sellers and the Sellers' conduct of the Business have duly complied with
and are in compliance with all Governmental Requirements. Sellers have not
received any notice to the effect that, or otherwise been advised that, Sellers
are not in compliance with any Governmental Requirement. The Permits constitute
all material permits, consents, licenses, franchises, authorizations and
approvals of any Governmental Authority or other Person (a) which are used in
the operation of the Business and (b) which are necessary to conduct the
Business as presently conducted, other than those the failure of which to obtain
would not have a material adverse effect on the Business, assets or financial
condition of Sellers. All of the Permits are valid and in full force and effect,
no violations thereof have been issued or are anticipated and no proceeding is
pending, or to the knowledge of Sellers or Shareholder threatened, to revoke or
limit any of them. Except as set forth on Schedule 4.13, the consummation of the
transactions contemplated by this Agreement do not and will not violate or
render any of the Permits invalid, require any amendment or reissuance of any of
the Permits or require the consent of the Governmental Authority which has
issued any of the Permits.
4.14 Litigation. Except as set forth in Schedule 4.14, there is no
claim, legal action, suit, arbitration, Governmental Authority investigation or
other legal or administrative proceeding, or any order, decree, or judgment
pending, or to the knowledge of Sellers and Shareholder threatened, against or
relating to Sellers, their officers, directors or employees, or their
properties, assets or business. Neither Shareholder nor Sellers knows of any
basis or grounds for any such claim, legal action, suit, arbitration,
Governmental Authority investigation or other legal or administrative
proceeding. None of the matters disclosed in Schedule 4.14 has or will have a
material adverse affect on the Business or financial condition of Sellers.
4.15 Tax Matters. Except as set forth on Schedule 4.15, Sellers have
filed all Tax Returns relating to the Business that they were required to file.
All such Tax Returns were correct and complete in all respects. Except as set
forth on Schedule 4.15, all Taxes owed by Sellers (whether or not shown on any
Tax Return) have been paid or will be timely paid. There are no Encumbrances on
any of the Purchased Assets that arose in connection with any failure (or
alleged failure) to pay any Tax. Sellers have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third
party. Except as set forth on Schedule 4.15 and to Sellers' and Shareholder's
knowledge, there are no federal, state, local or foreign tax liens upon any of
the properties or assets of Sellers, and there are no unpaid taxes which are or
could become a lien on the properties or assets of Sellers or the Purchased
Assets, except for current taxes not yet due and payable. Sellers have
delivered, or will deliver upon execution of this Agreement, copies of all
federal, state, local and foreign tax returns and reports filed by Sellers in
the past five years.
4.16 Rental Contracts; Rental Merchandise.
(a)With respect to each Rental Contract: (i) the Rental Contract is in
full force and effect according to its terms, (ii) the Rental Contract will
continue to be in full force and effect following the consummation of the
transactions contemplated hereby, in the same manner and to the same extent as
it was prior to consummation and (iii) the Rental Contract complies in all
respects with South Carolina or California law, whichever shall properly apply
to such Rental Contract.
(b)The Net Book Value of Rental Merchandise, including video tape
inventory, as of the Effective Time will be greater than or equal to $5,000,000.
(c)The Future Rental Revenue Stream as of the Effective Time will be
greater than or equal to $20,000,000; provided, however, that Buyer's sole
remedy in the event that such representation is not true as of the Effective
Time shall be to accept the adjustment of the Purchase Price as provided in
Section 2.3(c) and to proceed with the Closing.
(d)The Average Monthly Revenues for the Test Months as of the Effective
Time will be greater than or equal to $1,750,000.
(e)To the knowledge of Sellers and Shareholder, the Rental Merchandise
is in good, merchantable and usable condition, ordinary wear and tear excepted.
Shareholder and Sellers have delivered to Buyer or will deliver to Buyer upon
execution of this Agreement, an itemized list of all of the Rental Merchandise
as of October 31, 1997 showing the date of purchase, the supplier, the cost,
description of each item sufficient to identify it to Buyer, and the location of
each item. For purposes of this Section, the term "good, merchantable and
usable" shall mean merchandise which is in good and merchantable condition and
of the quality regularly rented to customers of Sellers in the usual course of
the Business.
4.17 Employees. Schedule 4.17 identifies all employees of the Business.
Sellers are in compliance with all applicable laws respecting employment
practices, terms and conditions of employment, management-labor relations and
wages and hours which are in effect as of the date of this Agreement. Sellers
are not party to any labor agreement with any labor organization. There is no
unfair labor practice, charge or complaint against Sellers pending or to the
knowledge of Shareholder and Sellers, threatened before any Governmental
Authority. There is no labor strike or labor disturbance pending or threatened
against Sellers nor is any material grievance currently being asserted. Sellers
have not experienced a work stoppage or work slowdown at any time during the
three (3) years immediately preceding the date of this Agreement. There is no
organizational campaign being conducted and no dispute as to the representation
of any employees of Sellers. Except as set forth on Schedule 4.17, there is no
employment agreement with any employee, officer or director of Sellers. Sellers
have reasonably good business relations with their employees at the store
manager level and above and there is no reason to believe that the transactions
contemplated by this Agreement will adversely affect such business relations.
4.18 Customers. To the knowledge of Sellers and Shareholder no records
of customers who have rented merchandise from Sellers within the last two years
have been destroyed. The customer lists of the Business accurately identify all
of the customers of the Business. All transactions with customers have been and
are currently conducted on an arm's length basis.
4.19 Environmental Matters. Except as disclosed in Schedule 4.19,
Sellers, and their assets, properties and operations are now and, at all times
prior to the Closing Date, have been in compliance with all Environmental Laws.
There has been and is no Release or threatened Release of any Hazardous
Substance at, on, under, in, to or from any of the Real Property (or, to the
knowledge of Sellers at, on, under, in, to or from any of the Real Property)
whether as a result of or in connection with the operations and activities at
the Real Property or otherwise, except as disclosed in Schedule 4.19. Neither
Sellers, nor Shareholder have received any notice of alleged, actual or
potential responsibility for, or any inquiry or investigation regarding, the
presence, Release or threatened Release of any Hazardous Substance at any
location, whether at the Real Property or otherwise, which Hazardous Substances
were allegedly manufactured, used, generated, processed, treated, stored,
disposed or otherwise handled at or transported from the Real Property or
otherwise, except as set forth in Schedule 4.19. Neither Sellers, nor
Shareholder have received any notice of any other claim, demand or action by any
Person alleging any actual or threatened injury or damage to any Person,
property, natural resource or the environment arising from or relating to the
presence, Release or threatened Release of any Hazardous Substances at, on,
under, in, to or from the Real Property or in connection with any operations or
activities thereat, except as set forth on Schedule 4.19. Neither the Real
Property nor any operations or activities thereat is or has been subject to any
judicial or administrative proceeding, order, consent, agreement or any lien
relating to any Environmental Laws or Environmental Claims. Except as set forth
on Schedule 4.19, (a) there are no underground storage tanks presently located
at the Real Property and there have been no releases of any Hazardous Substances
from any underground storage tanks or related piping at the Real Property, (b)
there are no PCBs located at, on or in the Real Property and (c) there is no
asbestos or friable asbestos-containing material located at, on or in the Real
Property. Sellers have delivered to Buyer or its Representatives copies of all
information requested by Buyer which has been supplied by or on behalf of
Sellers to any Governmental Authority having the duties of regulation,
registration, authorization or enforcement of or under any Environmental Laws.
4.20 Employee Benefits Plans.
(a) Attached hereto as Schedule 4.20(a)(1), is a list identifying each "employee
pension benefit plan," as defined in Section 3(2) of ERISA, including any
"multi-employer plan," as defined in Section 3(37) of ERISA, (the "Pension
Plans") and as Schedule 4.20(a)(2), a list identifying each "employee welfare
benefit plan," as defined in Section 3(1) of ERISA, (the "Welfare Plans") that,
in either case, are maintained, administered or contributed to by Sellers, or
which cover any employee or former employee of Sellers. Collectively, the
Pension Plans and the Welfare Plans shall hereafter be referred to as the
"Employee Plans." Except as otherwise identified on Schedule 4.20(a)(1) and
Schedule 4.20(a)(2) and on Schedule 4.20(l), (i) no Employee Plan or Benefit
Arrangement (as defined in Section 4.20(l) of this Agreement) is maintained,
administered or contributed to by any entity other than Sellers, and (ii) no
Employee Plan is maintained under any trust arrangement which covers any
employee benefit arrangement which is not an Employee Plan.
(b)Sellers have delivered to Buyer true and complete copies of (i) the
Employee Plans (and related trust agreements and other funding arrangements, if
any, and adoption agreements, if any), (ii) any amendments to the Employee
Plans, (iii) written interpretations of the Employee Plans to the plan
administrator of such Plan, (iv) material employee communications by the plan
administrator of any Employee Plan (including, but not limited to, summary plan
descriptions and summaries of material modifications as defined under ERISA),
(v) the three most recent annual reports (e.g., the complete Form 5500 series)
prepared in connection with each Employee Plan (if any such report was
required), including all attachments (including without limitation the actuarial
valuation reports) and (vi) the three most recent actuarial valuation reports
prepared in connection with each Employee Plan (if any such report was
required).
(c)Each Employee Plan has been maintained in compliance with its terms
and the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to, ERISA and the Code, which are
applicable to such Employee Plan.
(d)There are no pending or, to the knowledge of Sellers or Shareholder,
threatened claims, suits or other proceedings by any employees, former employees
or plan participants or the beneficiaries, spouses or representatives of any of
them, against any Employee Plan, the assets held thereunder, the trustee of any
such assets, or Sellers relating to any of the Employee Plans, any other
employee benefit plans, contracts or arrangements, other than ordinary and usual
claims for benefits by participants or beneficiaries. Furthermore, there are no
pending or, to the knowledge of Sellers or Shareholder, threatened suits,
investigations or other proceedings by any federal, state, local or other
governmental agency or authority of or against any Employee Plan, the trustee of
any assets held thereunder, or Sellers relating to any of the Employee Plans,
any other employee benefit plans, contracts or arrangements. If any of the
actions described in this subsection are initiated prior to the Closing Date,
Sellers shall notify the Buyers of such action prior to the date of Closing.
(e)No liability has been incurred by Sellers or by a trade or business,
whether or not incorporated, which is deemed to be under common control or
affiliated with Sellers within the meaning of Section 4001 of ERISA or Sections
414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") for any tax, penalty
or other liability with respect to any Employee Plan and, to the knowledge of
Sellers or Shareholder, such Plans do not expect to incur any such liability
prior to the date of Closing. Sellers, for all periods ending on the prior to
the date of this Agreement, have administered, and between the date of this
Agreement and the date of Closing, will administer each Employee Plan in
compliance with the reporting, disclosure, fiduciary and all other requirements
applicable thereto under ERISA, the Code or any other applicable law.
(f)Sellers or Shareholder have not engaged in any transaction or acted
or failed to act in a manner that violates the fiduciary requirements of Section
404 of ERISA with respect to any Employee Plans, and will not so engage, act or
fail to act prior to the date of Closing. Sellers or Shareholder have not
engaged in any "prohibited transaction" within the meaning of Section 406(a) or
406(b) of ERISA, or of Section 4975(c) of the Code with respect to any Employee
Plan. Furthermore, to the knowledge of Sellers or Shareholder, no other "party
in interest," as defined in Section 3(14) of ERISA, or "disqualified person," as
defined in Section 4975(e)(2) of the Code, has engaged in any such "prohibited
transaction."
(g)No Employee Plan provides benefits, including without limitation,
death, disability, or medical benefits (whether or not insured), with respect to
current or former employees of Sellers beyond their retirement or other
termination of service other than (i) coverage mandated by applicable law, (ii)
death, disability or retirement benefits under any Pension Plan, (iii) deferred
compensation benefits accrued as liabilities on the financial statements of
Sellers, or (iv) benefits, the full cost of which is borne by the current or
former employee (or his or her beneficiary).
(h)The Welfare Plans that are group health plans (as defined for the
purposes of Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA, and all regulations thereunder, ("COBRA")) have materially complied at
all times, and will continue to materially comply through the date of Closing,
with requirements of COBRA to provide health care continuation coverage to
qualified beneficiaries who have elected, or may elect to have, such coverage.
Sellers, or their agents who administer any of the Welfare Plans, have complied
at all times and will continue to comply through the date of Closing, with the
notification and written notice requirements of COBRA. There are no pending, and
to the knowledge of Sellers or Shareholder, threatened claims, suits, or other
proceedings by any employee, former employee, participants or by the
beneficiary, dependent or representative of any such person, involving the
failure of any Welfare Plan or of any other group health plan ever maintained by
Sellers to comply with the health care continuation coverage requirements of
COBRA.
(i)Each Pension Plan is "qualified" within the meaning of Section 401(a)
of the Code, and has been qualified during the period from the date of its
adoption to the date of this Agreement, and each trust created thereunder is
tax-exempt under Section 501(a) of the Code. Sellers have delivered to the Buyer
the latest determination letters of the Internal Revenue Service relating to
each Pension Plan. Such determination letters have not been revoked.
Furthermore, there are no pending proceedings or, to the knowledge of Sellers or
Shareholder, threatened proceedings in which the "qualified" status of any
Pension Plan is at issue and in which revocation of the determination letter has
been threatened. Each such Pension Plan has not been amended or operated, since
the receipt of the most recent determination letter, in a manner that would
adversely affect the "qualified" status of the Plan. No distributions have been
made from any of the Pension Plans that would violate in any respect the
restrictions under Treas. Reg. Section 1.401(a)(4)-5(b), and none will have been
made by the date of Closing. To the knowledge of Sellers or Shareholder, there
has been no partial termination as defined in Section 411(d) of the Code and the
regulations thereunder, of any Pension Plan.
(j) Sellers have made all required contributions under each Pension Plan
on a timely basis or, if not yet due, adequate accruals therefore have been
provided for in the financial statements. No Pension Plan has incurred any
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Code and no Pension Plan has applied for or received a waiver
of the minimum funding standards imposed by Section 412 of the Code.
(k)Except for required premium payments, no liability to the Pension
Benefit Guaranty Corporation (the "PBGC") have been incurred by Sellers with
respect to any Pension Plan. Sellers have complied, or will comply, with all
requirements for premium payments, including any interest and penalty charges
for late payment, due to PBGC on or before the date of Closing with respect to
each Pension Plan for which any premiums are required. No proceedings to
terminate, pursuant to Section 4042 of ERISA, have been instituted or, to the
knowledge of the Sellers or the Shareholder, are threatened by the PBGC with
respect to any Pension Plan (or any Pension Plan maintained by an ERISA
Affiliate). There has been no termination or partial termination, as defined in
Section 411(d) of the Code and the regulations thereunder, of any Pension Plan.
No reportable event, within the meaning of Section 4043 of ERISA, has occurred
with respect to any Pension Plan.
(l)Sellers and their ERISA Affiliates have not been, nor will they
become through the date of Closing, liable to contribute to any "multi-employer
plan" (as defined in Section 3(37) of ERISA).
(m)Schedule 4.20(m) contains a list identifying each employment,
severance or similar contract, arrangement or policy (exclusive of any such
contract which is terminable within thirty (30) days without liability to
Shareholder and Sellers), and each plan or arrangement providing for insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental employment benefits, vacation benefits,
retirement benefits, deferred compensation, bonuses, profit-sharing, stock
options, stock appreciation rights, or other forms of incentive compensation or
post-retirement compensation or benefit which (i) is not an Employee Plan, (ii)
has been entered into or maintained, as the case may be, by Shareholder or
Sellers, and (iii) covers any employee or former employee of Sellers. Such
contracts, plans and arrangements are hereinafter referred to collectively as
the "Benefit Arrangements". True and complete copies or descriptions of the
Benefit Arrangements have been delivered to Buyer. Each Benefit Arrangement has
been maintained in substantial compliance with the requirements prescribed by
any and all statutes, orders, rules and regulations which are applicable to such
Benefit Arrangements.
(n)Except as set forth on Schedule 4.20(n), there has been no amendment
to, written interpretation or announcement (whether or not written) by Sellers
relating to, or change in employee participation or coverage under, any Employee
Plan or Benefit Arrangement that would increase materially the expense of
maintaining such Employee Plan or Benefit Arrangement above the level of expense
incurred in respect of such Employee Plan or Benefit Arrangement for the most
recent plan year with respect to Employee Plans or the most recent fiscal year
with respect to Benefit Arrangements.
(o)There is no contract, agreement, plan or arrangement covering any
employee or former employee of Sellers that, individually or in aggregate, could
give rise to the payment by Sellers, directly or indirectly, of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code.
4.21 Brokers. Sellers and Shareholder shall pay any finder's fee,
broker's commission or similar payment due and owing to Xxxxxx Xxxx, III, Esq.,
or any other Person in connection with the transactions contemplated by this
Agreement.
4.22 Insurance.
(a) Sellers have delivered to Buyer true and complete copies of all
policies of insurance to which any of Sellers are a party or under which any of
Sellers or any officer or director thereof, is or has been covered at any time
within the two (2) years immediately preceding the date of this Agreement.
(b) Schedule 4.22(b) describes:
(i) any self-insurance arrangement by or affecting any Seller,
including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by any
Seller; and
(iii)all obligations of Sellers to provide insurance coverage to
third parties (for example, under leases or service
agreements), and identifies the policy under which such
coverage is provided.
(c) Schedule 4.22(c) sets forth, by year, for the current policy year
and each of the two (2) preceding policy years:
(i) a summary of the loss experience under each policy of
insurance;
(ii) a statement describing each claim under a policy of
insurance for an amount in excess of $10,000, which sets
forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii)a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate
cost of such claims.
(d) Except as set forth on Schedule 4.22(d):
(i) all policies of insurance to which any of Sellers is a party
or that provide coverage to any of Sellers or any officer or
director thereof:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that, to the knowledge of
Sellers and Shareholder, is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for
the assets and the operations of the Sellers for all
risks normally insured against by a Person carrying on
the same business or businesses as the Sellers; and
(D) to the knowledge of Sellers and Shareholder, are
sufficient for compliance with all legal requirements
and contracts to which any of the Sellers is a party or
by which it is bound;
(ii) Except as set forth on Schedule 4.22(d), no Seller has
received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any
policy of insurance is no longer in full force or effect or
that the issuer of any policy of insurance is not willing or
able to perform its obligations thereunder;
(iii)Each Seller has paid all premiums due, and has otherwise
performed all of its obligations, under each policy of
insurance to which it is a party or that provides coverage
to such Sellers or any officer or director thereof; and
(iv) Each Seller has given notice to the insurer of all claims
that may be insured thereby.
4.23 Bank Accounts. Schedule 4.23 contains true, complete and correct
lists of all bank accounts and safe deposit boxes maintained by the Sellers (the
"Bank Accounts"), and all persons entitled to draw thereon, to withdraw
therefrom or, with access thereto.
4.24 Material Misstatements or Omissions. No representation or warranty
by Shareholder or Sellers in this Agreement, or in any document, exhibit,
statement, certificate, document or schedule furnished to Buyer pursuant to this
Agreement, or in connection with the transactions contemplated by this
Agreement, contains or will contain at the Closing Date any untrue statement of
a material fact, or intentionally omits or will omit to state any material fact
necessary to make the statements or facts contained therein not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers and Shareholder that the
following are true, correct and complete on the date hereof, and shall be true,
correct and complete as of the Closing Date:
5.1Organization and Good Standing. Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Buyer is duly qualified to do business and is in
good standing in each jurisdiction in which such qualification is necessary
under the applicable law as a result of the conduct of its business or the
ownership of its properties. Buyer has all necessary power and authority to
execute and deliver this Agreement, to consummate the transactions contemplated
by this Agreement and to perform its obligations under this Agreement.
5.2Authority; Authorization; Binding Effect. Buyer has all necessary
power and authority and has taken all action necessary to execute and deliver
this Agreement and the instruments to be executed and delivered pursuant hereto,
to consummate the transactions contemplated by this Agreement and to perform its
obligations under this Agreement. This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except as
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors
rights generally and (ii) the discretion of the appropriate court with respect
to specific performance, injunctive relief or other forms of equitable remedies.
5.3No Conflicts, Violations or Proceedings. The execution and delivery
of this Agreement, the consummation of the transactions contemplated by this
Agreement and the performance by Buyer of its obligations under this Agreement
do not and will not result in (i) a violation of or a conflict with any
provision of the Articles of Incorporation of Buyer or other organizational
documents of Buyer, (ii) a breach of, or a default under, any term or provision
of any contract, agreement, indebtedness, encumbrance, commitment, license,
franchise, permit, authorization or concession to which Buyer is a party or
(iii) a violation of Buyer of any statute, rule, regulation, ordinance, code,
order, judgment, writ, injunction, decree or award. There is no pending or, to
the knowledge of Buyer, threatened or anticipated Proceeding against, relating
to or affecting the transactions contemplated by this Agreement.
5.4No Consents or Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any Governmental Authority or any
other Person is required to be made or obtained by Buyer in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transaction contemplated hereby.
5.5No Brokers. Buyer has not entered into and will not enter into any
agreement, arrangement or understanding with any Person which will result in the
obligation of Sellers or Shareholder to pay any finder's fee, brokerage
commission or similar payment in connection with the transaction contemplated
hereby.
5.6Material Misstatements or Omissions. No representations or warranties
by Buyer in this Agreement, or in any document, exhibit, statement, certificate,
document or schedule furnished to Sellers pursuant to this Agreement, or in
connection with the transaction contemplated by this Agreement, contains or will
contain any untrue statement of a material fact, or intentionally omits or will
omit to state any material fact necessary to make the statements or facts
contained therein not misleading.
ARTICLE 6
COVENANTS PRIOR TO CLOSING
Sellers and Shareholder on the one hand, and Buyer on the other hand,
each covenant with the other as follows:
6.1Conduct of Business Prior to Closing. Sellers shall continue to carry
on the Business in the ordinary course and substantially in accordance with past
practice and will not take any action inconsistent therewith or with the
consummation of the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, Sellers shall maintain the Purchased
Assets in substantially their current state of repair, excepting normal wear and
tear. Sellers shall inform Buyer of any material changes in the Business. In
addition, Sellers shall obtain Buyer's written approval (which shall not be
unreasonably withheld or delayed) prior to (i) purchasing any additional rental
products during the Test Months, (ii) placing additional advertising during the
Test Months, (iii) implementing any store level bonus or growth incentive plan
and (iv) making any capital expenditures in excess of $25,000.
6.2Investigation by Buyer. Sellers acknowledge and agree that between
the date of this Agreement and the Closing Date, Buyer and each Representative
of Buyer shall, with the prior consent of Sellers, which shall not be
unreasonably withheld or delayed, be allowed to conduct a due diligence review
with respect to the Purchased Assets. In connection with such due diligence
review, Sellers and each Representative of Sellers shall, upon reasonable prior
notice, (i) cooperate with Buyer and each Representative of Buyer, (ii) provide
all information, and all documents and other tangible items containing or
relating to such information, reasonably requested by Buyer, any Representative
of Buyer or any financial institution and (iii) permit each Representative of
Buyer to inspect any of the Purchased Assets. Buyer shall conduct its due
diligence investigation in a manner so as not to unreasonably disrupt the
Business. Buyer agrees that the letter of intent between Buyer and Sellers,
dated October 6, 1997 (the "Letter of Intent") shall apply to all information
disclosed pursuant to its due diligence investigation.
6.3Consents and Best Efforts. As soon as practicable, Buyer and Sellers
as applicable, will commence all reasonable action required hereunder to obtain
all consents, approvals and agreements of, and to give all notices and make all
filings with, any Person as may be necessary (a) to authorize, approve or permit
the full and complete sale, conveyance, assignment or transfer of the Purchased
Assets, free and clear of any Encumbrances, by a date early enough to allow the
sale hereunder to be consummated by the Closing Date and (b) to obtain consents
from any Person who is a party to a Real Property Lease or other material
contract with Sellers the terms of which give such Person a right to terminate
such lease or contract as a result of the transaction provided for in this
Agreement. Buyer and Sellers agree to use commercially reasonable best efforts
to satisfy all conditions precedent to their respective obligations to
consummate the transactions contemplated by this Agreement.
6.4Matters Relating to Employees.
(a)Offers of Employment to Sellers' Employees. Except as set forth on
Schedule 6.4(a), prior to or after the Closing, Buyer may offer employment to
any individual employed by Sellers in the Business immediately prior to the
Closing; provided, however, that notwithstanding anything to the contrary set
forth in this Agreement, it is understood that there is no obligation on the
part of Buyer to make any such offers of employment. With respect to employees
of Sellers who are hired by Buyer as of the Closing, Buyer and Sellers agree to
cooperate fully in the transition of any such employees to employment with
Buyer. Nothing contained in this Section shall be construed to affect any right
Buyer or its affiliates may have after the Closing to terminate the employment
of any employee at any time.
(b)No Rights to Employment. After the Closing, nothing herein expressed
or implied shall confer upon any former employee of Sellers, or any union,
collective bargaining agent or other person or entity any rights or remedies
(including, but not limited to, any right to employment, or continued
employment, for any specified period) or any right to any particular benefits in
connection with any employment of any nature or kind whatsoever under or by
reason of this Agreement.
(c)Actions By Seller. Sellers shall be responsible for all accrued but
unpaid obligations to each employee of Sellers through the Effective Time and
for providing all notices and other communications to employees of Sellers that
may be required under the Workers Adjustment and Retraining Notification Act or
other applicable law. Buyer shall assume no obligations or liabilities
whatsoever of Sellers in respect of workers' compensation, severance, payroll
and/or unemployment tax, pension, profit-sharing, health insurance, COBRA or
other employee benefit liabilities in respect of any employees of Sellers in the
Business employed by Buyer at or after the Closing.
6.5Certain Prohibited Transactions. During the period beginning on the
date of this Agreement and ending on the Closing Date, Sellers shall not:
(a)mortgage, pledge or otherwise encumber or sell, transfer or otherwise
dispose of any of the Purchased Assets other than in the ordinary course of
business and as contemplated by this Agreement;
(b)enter into or terminate any material contract or agreement, or make
any material change in any of its material contracts or agreements relating to
or otherwise affecting the Purchased Assets, other than in the ordinary course
of business and consistent with past practice or as contemplated by this
Agreement; or
(c)do any other act which would cause any representation or warranty of
Sellers in this Agreement to be or become untrue in any material respect.
6.6Non-Compete Agreement. On the Closing Date, Sellers, Shareholder and
Buyer shall enter into a non-compete agreement substantially in the form of
Exhibit B (the "Non-Compete Agreement").
6.7Intangible Property. On or prior to the Closing Date, Sellers will
cooperate with Buyer to enable Buyer to obtain and use on and after the Closing
Date the telephone numbers and other Intangible Property used in the Business.
6.8Additional Closing Arrangements. The parties agree that:
(a)All revenues and expenses of the Sellers prior to the Effective Time
shall be for the account and benefit of the Sellers.
(b)All revenues and expenses of the Sellers after the Effective Time
shall be for the account and benefit of the Buyer including, but not limited to,
the 1998 Revenues.
(c)All revenues received by the Sellers' stores on the Closing Date
shall be deposited in the existing Bank Accounts and all revenues received after
the Closing Date shall be deposited in New Bank Accounts, and Sellers shall
cooperate with Buyer in giving appropriate directions to that effect.
Shareholder and Sellers shall cooperate with Buyer in closing the Bank Accounts
or changing authorized signatures thereon in a reasonably prompt manner.
(d)For purposes hereof, "New Bank Accounts" shall mean bank accounts for
the stores of the Sellers opened by Buyer in its name prior to, or on or about,
the Closing Date.
6.9Tax Status Certificates. Sellers shall have delivered to Buyer
certificates or letters from the South Carolina and California tax departments
stating that Sellers owe no sales, use, franchise or other taxes to the
respective tax departments.
ARTICLE 7
CONDITIONS TO SELLERS' AND SHAREHOLDER'S OBLIGATIONS
The obligations of Sellers and Shareholder to consummate the
transactions contemplated by this Agreement are subject, in the discretion of
Sellers and Shareholder, to the satisfaction, on or prior to the Closing Date,
of each of the following conditions (any of which may, in Sellers' and
Shareholder's absolute and sole discretion, be waived in whole or in part):
7.1Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date, and Buyer shall have performed
all agreements and covenants required hereby to be performed by it prior to or
at the Closing Date.
7.2Consents. All consents, approvals and waivers necessary to permit
Sellers to transfer the Purchased Assets to Buyer as contemplated hereby shall
have been obtained, unless the failure to obtain any such consent, approval or
waiver would not have a material adverse effect upon Sellers.
7.3No Proceedings. No Proceeding by any Person shall have been
instituted or threatened which questions the validity or legality of the
transaction contemplated hereby and which could reasonably be expected to affect
materially the right or ability of Sellers to transfer the Purchased Assets to
Buyer.
7.4Certificates. Buyer will furnish Sellers with such certificates of
its officers and others to evidence compliance with the conditions set forth in
this Article 7 as may be reasonably requested by Sellers.
7.5Corporate Documents. Sellers shall have received from Buyer (i)
resolutions adopted by the board of directors of Buyer approving this Agreement
and the transactions contemplated hereby and (ii) a list of the officers of
Buyer executing this Agreement and any agreement contemplated by this Agreement,
certified by the Secretary or an Assistant Secretary of Buyer.
7.6Other Agreements. Concurrently with the Closing, Buyer shall have
executed and delivered to Sellers and Shareholder the Non-Compete Agreement.
7.7Payment. Buyer shall have, concurrently with the Closing, paid that
portion of the Purchase Price required to be paid on the Closing Date.
ARTICLE 8
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transaction provided for
hereby are subject, in the discretion of Buyer, to the satisfaction, on or prior
to the Closing Date, of each of the following conditions (any of which may, in
Buyer's absolute and sole discretion, be waived in whole or in part):
8.1Representations, Warranties and Covenants. All representations and
warranties of Sellers and Shareholder contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date, and Sellers
and Shareholder shall have performed all agreements and covenants required
hereby to be performed by them prior to or at the Closing Date.
8.2Consents.
(a)All consents, approvals and waivers necessary to permit Sellers to
transfer the Purchased Assets to Buyer (including, without limitation, consents
to the transfer and assignment of the Real Property Leases as set forth below)
as contemplated hereby shall have been obtained, except for consents which in
the aggregate if not obtained would not have any material adverse affect on the
Business or the Purchased Assets.
(b)Sellers shall have obtained consents from landlords with respect to
at least 50% of the Real Property Leases. With respect to landlord consents not
obtained by the Closing Date, Buyer and Sellers agree as follows:
(i) Buyer will accept a written consent to sublease from any
landlord in lieu of a written consent to assignment in full
satisfaction of Sellers' obligation under this Section.
(ii) If any landlord is unable or unwilling to furnish a consent
with due diligence, as appropriate in each case, as
reasonably determined by the parties, the parties will enter
into a sublease agreement for the premises for a term equal
to Seller's term under the original lease under which
sublease, Buyer will assume all of Seller's financial
obligations under the original lease with Seller as
sublessor and Buyer as sublessee. If Buyer is able to
operate in such store(s) until the expiration of the
original lease, including any periods covered by any renewal
options, Seller shall have no liability relating to such
sublease arrangement.
(iii)If any landlord who has withheld consent gives notice of
default or commences eviction procedures against Seller or
Buyer due to failure to obtain necessary consents of
assignment or sublease, then Buyer agrees to relocate the
assets of such store(s) prior to an eviction through
judicial process and Seller agrees to pay the reasonable
costs of such relocation, which costs the parties agree will
not exceed $25,000 for any one location, and which the
parties agree will be the limit of any liability per
location that Seller shall have due to the failure to obtain
any landlord's consent.
8.3No Proceedings. No Proceeding by any Person shall have been
instituted or threatened which questions the validity or legality of the
transaction contemplated hereby and which could reasonably be expected to affect
materially the right or ability of Buyer to own, operate or possess the
Purchased Assets after the Closing.
8.4Certificates. Sellers and Shareholder will furnish Buyer with such
certificates to evidence compliance with the conditions set forth in this
Article 8 as may be reasonably requested by Buyer.
8.5Due Diligence. Buyer shall have completed its due diligence review
contemplated by Section 6.2 and shall not have found any material variance from
the representations in this Agreement.
8.6No Interruption or Adverse Change. Prior to or at the time of
Closing, (i) no interruption or suspension of a material volume of the Business
as now conducted shall have occurred or been threatened and (ii) no adverse
change in the Business or Purchased Assets shall have occurred or been
threatened.
8.7Financing. Buyer shall have obtained all financing necessary to
consummate the transaction provided for in this Agreement.
8.8Corporate Documents. Buyer shall have received from Sellers (i)
resolutions adopted by the board of directors and shareholders of Sellers
approving this Agreement and the transactions contemplated hereby and (ii) a
list of the officers of Sellers executing this Agreement and each agreement
contemplated by this Agreement, certified by the Secretary or Assistant
Secretary of each Seller.
8.9Other Agreements. Concurrently with the Closing Sellers and
Shareholder shall have executed and delivered to Buyer the Non-Compete
Agreements.
8.10Lien Releases. Sellers shall have delivered financing statement
changes and such other documents as may be necessary to release any recorded
lien on the Purchased Assets.
8.11Opinion Letter. Buyer shall have received an opinion from
Xxxxxxxxxx, Xxxx & Xxxxxxx, P.C., counsel to Sellers and Shareholder,
substantially in the form hereto as Exhibit C.
8.12Financial Condition. Sellers Average Monthly Revenues for the Test
Months shall equal at least $1,750,000 and the combined Net Book Value of Rental
Merchandise as of the Effective Time shall equal at least $5,000,000.
8.13Sole Shareholder. Seller and Shareholder shall deliver evidence to
Buyer that Shareholder is the sole shareholder of Paradise Valley Holdings, Inc.
and L & B Rents, Inc.
ARTICLE 9
INDEMNIFICATION
9.1Survival of Representations, Warranties and Covenants. Except for the
representations of Sellers and Shareholder set forth in Sections 4.16(b) and
4.16(d) of this Agreement which are only conditions to closing and shall not
survive the Closing Date, the representations and warranties of Sellers and
Shareholder, and of Buyer, contained in this Agreement shall, without regard to
any investigation made by any of the parties hereto, survive the Closing Date
until December 31, 1998; provided, however, that the representations and
warranties made in Section 4.6 (Title) shall survive closing indefinitely. The
covenants and agreements of Sellers, Shareholder and Buyer contained in this
Agreement shall survive the Closing Date until they have been fully satisfied or
otherwise discharged.
9.2Indemnifications.
(a)By Sellers and Shareholder. Sellers and Shareholder, jointly and
severally, shall indemnify, save and hold Buyer harmless from, against and in
respect of the following (individually a "Loss" and collectively "Losses"):
(i) any and all loss, liability, deficiency or damage suffered or
incurred by Buyer by reason of (A) any untrue representation or breach of
warranty or (B) nonfulfillment of any covenant or agreement by Sellers or
Shareholder in this Agreement or in any agreement, instrument or other writing
delivered to Buyer by Sellers or Shareholder pursuant to or in connection with
this Agreement;
(ii) any claim against the Buyer for (x) a finder's fee, investment
banker's fee, or brokerage or other commission or (y) for legal expenses, in
each case by any Person for services alleged to have been rendered at the
instance of Shareholder or Sellers with respect to this Agreement or the
transactions contemplated by this Agreement;
(iii) other than the Assumed Liabilities, any and all loss,
liability, deficiency or damage suffered or incurred by Buyer relating to any
claim, suit, litigation or proceeding with respect to events occurring prior to
the Closing Date;
(iv) any liabilities and obligations for Taxes which are or shall be
incurred with respect to the operation of the Sellers prior to the Effective
Time and any costs and expenses (including legal fees) incurred on account of
any tax lien on any of the Purchased Assets;
(v) any and all loss, liability, deficiency or damage suffered or
incurred by Buyer in connection with any Employee Plan;
(vi) any and all loss, liability, deficiency or damage suffered or
incurred by Buyer caused by or arising out of the generation, treatment,
handling, storage or disposal of Hazardous Substances or noncompliance with any
Environmental Laws prior to the Closing Date regardless of whether or not the
matter or matters giving rise to any such Losses were disclosed to Buyer in
Schedule 4.19 or known by Sellers or Shareholder at the date of this Agreement;
(vii) any and all loss, liability, deficiency or damage suffered or
incurred by Buyer as a result of failure of Sellers or Buyer to comply with
applicable bulk sales provisions;
(viii)any and all loss, liability, deficiency or damage suffered or
incurred by Buyer from or as a result of claims from any former shareholder of
any of Sellers; and
(ix) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, (including, but not limited to,
legal fees and expenses) incident to any of the foregoing or incurred in
enforcing this Agreement or any agreement provided for in this Agreement.
With respect to any Losses covered by Sellers' and Shareholder's indemnification
obligations under Section 9.2(a)(i)(A), (a)(iii) or (a)(vi), the Sellers and
Shareholder shall have no liability until any such Losses in the aggregate shall
exceed Fifty Thousand Dollars ($50,000); provided, however, that (x) once such
any such Losses exceed $50,000 Sellers and Shareholder shall be liable for the
full dollars of such Losses and (y) such limitation shall not apply to any other
Losses covered by Section 9.2(a) nor to any Losses incurred as a result of
fraud.
Notwithstanding anything to the contrary contained in this Agreement, except for
indemnifiable Losses incurred as a result of fraud which may be completely
recovered, the maximum amount of indemnifiable Losses which may be recovered at
any time from Sellers and Shareholder arising out of this Article 9 shall be an
amount equal to the Purchase Price set forth in this Agreement.
(b)By Buyer. Buyer shall indemnify and save and hold harmless Sellers
and Shareholder from, against and in respect of the following (individually, a
"Loss" and, collectively, "Losses"):
(i) any and all loss, liability, deficiency or damage suffered or
incurred by Sellers or Shareholder, resulting from any untrue representation,
breach of warranty or nonfulfillment of any covenant or agreement by Buyer
(including failure to deliver the Purchase Price) contained in this Agreement or
in any agreement, instrument or other writing delivered to Sellers or
Shareholder pursuant to or in connection with this Agreement;
(ii) any claim against Sellers or Shareholder for a finder's fee,
investment banker's fee, or brokerage or other commission by any Person for
services alleged to have been rendered at the instance of Buyer with respect to
this Agreement or the transaction contemplated by this Agreement;
(iii) any and all loss, liability, deficiency or damage suffered or
incurred by Sellers or Shareholder relating to any claim, suit, litigation or
proceeding relating to the Sellers or the Business with respect to the operation
of the Business or events occurring after the Effective Time; and
(iv) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, (including, but not limited to,
legal fees and expenses) incident to any of the foregoing or incurred in
enforcing this Agreement or any agreement provided for in this Agreement.
(c)Notification of Claims. In the event that any party entitled to
indemnification pursuant to this Agreement (the "Indemnified Party") proposes to
make any claim for such indemnification, the Indemnified Party shall deliver to
the indemnifying party (the "Indemnifying Party"), a signed certificate, which
certificate shall (i) state that Losses have been incurred or that a claim has
been made for which Losses may be incurred, (ii) specify the sections of this
Agreement under which such claim is made and (iii) specify in reasonable detail
each individual item of Loss or other claim including the amount thereof and the
date such Loss was incurred. In addition, each Indemnified Party shall give
notice to the Indemnifying Party within ten (10) days of its receipt of service
of any suit or proceeding which pertains to a matter for which indemnification
may be sought; provided, however, that the failure to give such notice shall not
relieve the Indemnifying Party of its obligations hereunder if the Indemnifying
Party has not been prejudiced thereby.
(d)Defense of Third Party Claims. If the Indemnifying Party acknowledges
in writing its or their obligations to indemnify the Indemnified Party in
accordance with the provisions of this Agreement, then the Indemnifying Party
shall be entitled to assume and control the defense of all claims for which it
has received notice pursuant to paragraph (c) of this Section at its or their
expense and through counsel of its or their choice if they give notice of their
intention to do so to the Indemnified Party within ten days of the receipt of
such notice from the Indemnified Party; provided, however, that if there exists
or is reasonably likely to exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the Indemnified Party, for the same
counsel to represent both the Indemnified Party and the Indemnifying Party, then
the Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of the Indemnifying Party. Otherwise, the Indemnified Party shall be
entitled to participate in and follow the conduct of the defense with attorneys
of its own choosing and at its expense. If the Indemnifying Party exercises the
right to undertake the defense against a claim entitled to indemnification for
which notice has been received pursuant to paragraph (c) of this Section, the
Indemnified Party shall cooperate with the Indemnifying Party in such defense
and make available to the Indemnifying Party, at the Indemnifying Party's
expense, all witnesses, pertinent records, materials and information in the
Indemnified Party's possession or under the Indemnified Party's control relating
thereto as is reasonably required by the Indemnifying Party.
If the Indemnifying Party fails to give notice of its intent to assume
the defense of the claim as set forth above, then the Indemnified Party shall be
entitled to assume the defense of the claim and the Indemnifying Party shall pay
the reasonable costs of any such defense. In the event the Indemnified Party is
conducting the defense against a claim, the Indemnifying Party shall cooperate
within the Indemnified Party in such defense and make available to the
Indemnified Party, at the Indemnifying Party's expense, all such witnesses,
records and materials and information in the Indemnifying Party's possession or
under the Indemnifying Party's control relating thereto as is reasonably
required by the Indemnified Party. No claim may be settled by the Indemnified
Party without the prior written consent of the Indemnifying Party.
Notwithstanding the provisions of this Section, Sellers and Shareholder
shall not enter into any settlement which will result in an injunction or other
order from any Governmental Authority which will affect Buyer's operation of the
Business without Buyer's prior written consent.
ARTICLE 10
COVENANTS AFTER THE CLOSING
10.1 Payment of State Sales Taxes. Each Seller shall pay in a timely
manner all state sales and similar taxes and charges attributable to the
operation of the Business as and when they become due.
10.2 Payment of Retained Liabilities. Each Seller shall pay in full from
the proceeds of the Closing all sums due and owing to such Seller's creditors,
except with respect to obligations that comprise the Assumed Liabilities. If any
Taxes of Sellers or creditors are not so paid, or if Buyer is required or elects
in good faith to make any payments for which Buyer is entitled to
indemnification under Article 9 of this Agreement, Buyer may at any time after
the Closing Date elect to make all such payments directly (but shall have no
obligation to do so) and shall be entitled, among other remedies, to make a
claim for indemnification under Article 9 of this Agreement.
10.3 Reports and Records. Each Seller shall promptly complete, make, and
file all reports and returns required by applicable law relating to such
Seller's business as conducted using the Purchased Assets, to and including the
Effective Time. Buyer will be entitled to possession of all documents, books,
records, agreements, and financial data of any sort relating to the business to
be conducted by the Buyer utilizing the Purchased Assets.
10.4 Books and Records. For a period of four (4) years following the
Closing Date, Buyer shall afford to Sellers and their Representatives, during
normal business hours, reasonable access to the books, records and other data of
Sellers in the possession of Buyer with respect to the period prior to the
Closing Date to the extent that such access may be reasonably required by
Sellers to facilitate (i) the preparation by Sellers of tax returns as it may be
required to file with respect to its operations prior to Closing or in
connection with any audit, amended return, claim for refund or any proceeding
with respect thereto, (ii) the investigation, litigation and final disposition
of any claims which may have been or may be made against Sellers in connection
with its operations or the Purchased Assets prior to Closing, (iii) the payment
of any indemnity under this Agreement or (iv) any other reasonable purpose. At
any time after the Closing Date, Buyer may dispose of, alter or destroy any such
books, records and other data upon giving sixty (60) days' prior notice to
Sellers to permit them, at their expense, to examine, duplicate or repossess
such books, records and other data. For a period of four (4) years following the
Closing Date, Sellers shall afford to Buyer and its Representatives, during
normal business hours, reasonable access to the books, records and other data of
Sellers which Sellers retain after the Closing Date. At any time after the
Closing Date, Sellers may dispose of, alter or destroy any such books, records
and other data upon giving sixty (60) days' prior written notice to Buyer to
permit it, at its expense, to examine, duplicate or possess such books, records
and other data.
10.5 Further Assurances. Both before and after the Closing Date, each
party will cooperate in good faith with the other parties and will take all
appropriate action and execute any documents, instruments or conveyances of any
kind which are expressly called for in this Agreement or which may be reasonably
necessary or advisable to carry out any of the transactions contemplated
hereunder.
10.6 Use of Name. From and after the Closing, Buyer shall have the
exclusive right to use the name "Ace TV Rentals".
10.7 Customer and Other Business Relationships. Sellers and Shareholder
will cooperate with Buyer in its efforts to continue and maintain, with lessors,
licensors, customers, suppliers, or other business associates of any of the
Sellers, the same business relationships with Buyer after Closing as maintained
with the Sellers before the Closing, with respect to the business to be carried
on by the Buyer utilizing the Purchased Assets. Sellers and Shareholder will not
take any action designed or intended to have the effect of discouraging any
customer or such other person from continuing or maintaining the same such
business with Buyer after Closing Date.
10.8 Subrogation. If Buyer becomes liable for or suffers any damage with
respect to any matter that was covered by insurance maintained by Sellers or any
of them at or before the Closing Date, Buyer shall be and is hereby subrogated
to any rights of Sellers under the insurance coverage. Sellers shall promptly
remit to Buyer any insurance proceeds any of them may receive on account of any
such liability or damage; provided, however, that upon receipt of any such
proceeds, Buyer shall have no right to indemnification for any matter giving
rise to payment of such insurance up to the amount thereof.
ARTICLE 11
MISCELLANEOUS
11.1 Termination. This Agreement may be terminated upon ten (10) days
prior written notice at any time prior to Closing without liability of any party
or any other party:
(i) by mutual written consent of Buyer and Sellers;
(ii) by Buyer, if Closing has not occurred on or before January
31, 1998 as a result of the nonfulfillment of any of the
conditions to Buyer's obligation to perform contained in
Article 8 of this Agreement after written notice of such
nonfulfillment and reasonable opportunity to cure; or
(iii)by Sellers if Closing has not occurred on or before January
31, 1998 as a result of the nonfulfillment of any of the
conditions to its obligations to perform contained in
Article 7 of this Agreement after written notice of such
nonfulfillment and reasonable opportunity to cure.
This Agreement may also be terminated by Sellers on the one hand, or Buyer, on
the other hand, upon ten (10) days prior written notice if a non-terminating
party has breached any material covenant to be performed by it pursuant to this
Agreement. Termination of this Agreement shall not affect in any way the
continuing obligations of the parties hereto pursuant to Section 11.9 hereof
relating to expenses.
11.2 Rebate. Sellers shall be entitled to receive and collect any rebate
which may be forthcoming to Sellers for product purchases prior to the Effective
Time; provided, however, that rebates associated with purchases during the Test
Months which are reimbursed to Sellers (in excess of the $400,000 as stated in
Section 1.1(ai)(vi)) by Buyer, will be the property of Buyer.
11.3 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Sellers or Shareholder on the one hand,
or Buyer on the other hand, without the prior written consent of the other
party, except that Buyer may assign its rights under this Agreement to an
affiliate as the acquiring entity of the Purchased Assets. No assignment of this
Agreement by Buyer shall relieve Buyer of any of its obligations hereunder.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of Sellers, Shareholder and Buyer and their respective successors and
assigns, and no other Person shall have any right or obligation under this
Agreement.
11.4 Notices. Unless otherwise provided in this Agreement, any notice,
request, instruction or other document to be given hereunder by either party to
the other shall be in writing and delivered personally or mailed by certified
mail, postage prepaid, return receipt requested, or by telecopy, with a
confirmation via one of the preceding methods, as follows:
If to Sellers or Shareholder, addressed to:
South Carolina Rentals, Inc.
Paradise Valley Holdings, Inc.
L & B Rents, Inc.
Attn: Xxxxx X. Xxxxxx
0000 X. Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Telecopy : 000-000-0000
With a copy to:
Xxxxxxxxxx, Xxxx & Xxxxxxx, P.C.
Attn: Xxxxxx X. Xxxx, III, Esq.
0000 Xxxx Xxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy : 000-000-0000
If to Buyer, addressed to:
Rent-Way, Inc.
Attn: Xxxxxx X. XxXxxx,
Vice President and General Counsel
0000 Xxxx Xxxx Xxxx
Xxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy : (000) 000-0000
and to:
Xxxxxxx, Xxxx, Xxxxxxx, Xxxxx & Goodyear, LLP
Attn: Xxxxxx X. Xxxxxxx, Xx., Esq.
Xxxx X. Xxxxxxx, Esq.
0000 Xxx X&X Xxxxx
Xxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Telecopy : (000) 000-0000
and be effective (i) if given by hand delivery, when left at the address of the
addressee as above provided, (ii) if given by mail, on the third business day
after such communication is deposited in the mail, addressed as above provided,
and (iii) if given by telecopy, when telecopied to the number above provided,
except that notices of a change of address shall not be effective until
received; or to such other place and with such other copies as either party may
designate as to itself by written notice to the other party.
11.5 Choice of Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the
Commonwealth of Pennsylvania (without reference to the choice of law provisions
of Pennsylvania law) except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement, and as to those matters the law of the jurisdiction
under which the respective entity was incorporated shall govern.
11.6 Entire Agreement; Amendments and Waivers. This Agreement, together
with all Exhibits and Schedules hereto, the Letter of Intent, a letter dated
October 6, 1997 between Buyer, Sellers and Shareholder amending the Letter of
Intent and the Deposit Escrow Agreement, constitute the entire agreement between
Sellers, Shareholder and Buyer pertaining to the subject matter hereof and
except for the Letter of Intent supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of Sellers, Shareholder
and Buyer. No supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any provision of this Agreement shall be deemed or shall constitute a waiver
of any other provision of this Agreement (whether or not similar), nor shall
such waiver constitute a continuing waiver unless otherwise expressly provided
in such writing.
11.7 Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Any party may execute
this Agreement by facsimile signature and the other party shall be entitled to
rely on such facsimile signature as evidence that this Agreement has been duly
executed by such party. Any party executing this Agreement by facsimile
signature shall immediately forward to the other party an original signature
page by overnight mail.
11.8 Expenses. Except as otherwise specified in this Agreement, each of
Sellers, Shareholder and Buyer shall pay its own legal, accounting and other
expenses incident to the negotiation and preparation of this Agreement and the
consummation of the transactions contemplated hereby.
11.9 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.10 Titles. The titles, captions or headings of the articles and
sections of this Agreement are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
11.11 Publicity. Neither Sellers nor Shareholder shall issue any press
release or make any public statement regarding the transaction contemplated
hereby prior to the Closing Date, without the prior approval of Buyer, except as
may be required by applicable law, in which case the party required to issue
such press release or make such public statement will consult with the other
party prior to issuing such press release or making such public statement.
IN WITNESS WHEREOF, Sellers and Buyer have caused this Agreement to be
duly executed on their respective behalf by their respective duly authorized
officers, and Shareholder has executed this Agreement, as of the day and year
indicated at the beginning of this Agreement.
RENT-WAY, INC.
By:___________________________________________
Xxxxxxx X. Xxxxxxxxxxx
President and Chief Executive Officer
SOUTH CAROLINA RENTALS, INC.
By:___________________________________________
Xxxxx X. Xxxxxx
President
PARADISE VALLEY HOLDINGS, INC.
By:___________________________________________
Xxxxx X. Xxxxxx
President
L & B RENTS, INC.
By:___________________________________________
Xxxxx X. Xxxxxx
President
----------------------------------------------
Xxxxx X. Xxxxxx, individually
CORPORATE:146454_7 (3506_7)
SCHEDULES
Schedule Description
Schedule 1.1(f) Assumed Liabilities
Schedule 1.1(s) Other Excluded Assets
Schedule 1.1(z) Intangible Property
Schedule 1.1(aa) License Agreements
Schedule 1.1(ab) Miscellaneous Contracts
Schedule 1.1(ap) Store Locations
Schedule 2.3(c) Unconfirmed Rental Purchase Contracts
Schedule 4.1 Organization
Schedule 4.4 Consents and Approvals
Schedule 4.5 Customers
Schedule 4.6 Title to Assets
Schedule 4.7 Vehicles
Schedule 4.8 Corporate Records
Schedule 4.9 Financial Statements
Schedule 4.10 Real Property
Schedule 4.11 Tangible Personal Property
Schedule 4.12 Intangible Property
Schedule 4.13 Compliance with Laws
Schedule 4.14 Litigation
Schedule 4.15 Tax Matters
Schedule 4.17 Employees
Schedule 4.19 Environmental Matters
Schedule 4.20 Accounts Receivable
Schedule 4.21 Suppliers
Schedules 4.20 Employee Benefits
Schedules 4.22 Insurance
Schedule 4.23 Bank Accounts
Schedule 6.4(a) Employment Matters
Exhibit Description
A Escrow Agreement
B Non-Compete Agreement
C Form of Opinion Letter
Schedule 1.1(f)
Additional Assumed Liabilities
- NONE -
Schedule 2.3(c)
Unconfirmed Rental Purchase Contracts
An "Unconfirmed Rental Purchase Contract" shall mean:
1. A Rental Purchase Contract which is fictitious.
2. A Rental Purchase Contract which meets one or more of the following criteria:
a. The customer thereto has skipped, at or before the Closing,
and cannot be located; or
b. The Rental Merchandise covered thereby, at or before the
Closing, was destroyed or reported destroyed, was stolen or
reported stolen, was damaged and cannot be repaired, or was
missing or reported missing;
An "Unconfirmed Rental Contract" may be cleared as follows:
1. To clear a fictitious Rental Contract, the Sellers must (i) establish
that the Rental Contract meets the definition of Rental Contract in
Article 1.1(al) of this Agreement, (ii) provide a valid address where
the customer resides, (iii) establish that the customer's Rental
Merchandise is at the customer's residence and that the merchandise is
in "good, merchantable, and usable" condition as that term is defined
in Article 4.16(e) of this Agreement, and (iv) obtain a payment that
can be verified as being received from the customer and that brings the
customer's account current. A fictitious Rental Contract shall not be
confirmed merely by the recovery of merchandise subject to it.
2. To clear a Rental Contract where the customer skipped at or before
closing and cannot be located, the Seller must establish the same
criteria necessary to reinstate a fictitious Rental Contract.
3. To clear a Rental Contract where, at or before closing, the Rental
Merchandise was reported destroyed, missing, or stolen, the Sellers
must (i) recover the merchandise and (ii) restore the merchandise to
"good, merchantable, and usable" condition as that term is defined in
Article 4.16(e) of this Agreement.
Schedule 4.5
Business Reports
1. Complete customer list for all open Accounts.
2. Complete list of all Rental Purchase Contracts with pertinent data.
3. Complete list of all past-due accounts.
4. Complete list of all Inactive Rental Merchandise.
5. Complete list of all Active Rental Merchandise.
6. Projected revenue report.
EXHIBIT A
ESCROW AGREEMENT
THIS AGREEMENT dated January __, 1998, is by and among RENT-WAY, INC., a
Pennsylvania corporation ("Buyer"), SOUTH CAROLINA RENTALS, INC., a Georgia
corporation, PARADISE VALLEY HOLDINGS, INC., a Georgia corporation, L & B RENTS,
INC., a California corporation (together the "Sellers" and individually a
"Seller"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking
corporation (the "Escrow Agent").
RECITALS:
A. Buyer, Sellers and Xxxxx X. Xxxxxx entered into an Asset Purchase
Agreement dated October ___, 1997 (the "Purchase Agreement") pursuant to which
Sellers are selling to Buyer and Buyer is purchasing from Sellers substantially
all of the assets of Sellers.
B. Pursuant to Section 2.3 of the Purchase Agreement, Buyer is required
to deposit with the Escrow Agent Seven Hundred Fifty Thousand Dollars
($750,000.00) to be held and released in accordance with the Purchase Agreement
and this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the parties hereto agree as follows:
1. Escrow of Collateral. Upon the delivery by Buyer of $750,000.00 in
cash by wire transfer in accordance with the wire transfer instructions set
forth on Schedule A attached hereto (such funds and all interest which may be
earned with respect thereto hereinafter being referred to as the "Deposit"), the
Escrow Agent agrees to hold the Deposit pursuant to the terms and conditions of
this Agreement. Simultaneously with the delivery of the Deposit to the Escrow
Agent, the parties shall cause to be delivered to the Escrow Agent appropriate
IRS Forms W-9. Interest on the Deposit shall be for the account of Sellers.
2. Release of Deposit. Except as otherwise provided in this Agreement,
no portion of the Deposit shall be released by the Escrow Agent unless and until
any of the following conditions shall have occurred:
(a)The Escrow Agent shall have received an original release document
signed by Buyer and Sellers, specifically directing all or any portion of the
Deposit be delivered in the manner and to the recipients specified therein; or
(b)A final order or judgment of a court of competent jurisdiction shall
have been issued and a certified copy thereof shall have been delivered to the
Escrow Agent directing delivery of all or any portion of the Deposit in the
manner and to the recipients specified therein; or
(c)On [__________________], 1998 [90 days from closing], if (i) none of
the conditions in subsections (a) or (b) of this Section 2 shall have occurred
and the Escrow Agent shall not have received an original notice signed by Buyer
notifying the Escrow Agent that there is a dispute as to Buyer's or Sellers'
entitlement to all or any portion of the Deposit or (ii) any of such conditions
shall have occurred but the Escrow Agent shall have received an original notice
signed by Buyer and Sellers specifically confirming that there is no pending
dispute as to Buyer's or Sellers' entitlement to all or any portion of the
Deposit, then the Escrow Agent shall pay to Sellers $375,000 of the Deposit.
(d)On [_______________], 1998 [180 days from closing], if (i) none of
the conditions in subsections (a) or (b) of this Section 2 shall have occurred
and the Escrow Agent shall not have received an original notice signed by Buyer
notifying the Escrow Agent that there is a dispute as to Buyer's or Sellers'
entitlement to all or any portion of the Deposit or (ii) any of such conditions
shall have occurred but the Escrow Agent shall have received an original notice
signed by Buyer and Sellers specifically confirming that there is no pending
dispute as to Buyer's or Sellers' entitlement to all or any portion of the
Deposit or the remaining portion thereof held by the Escrow Agent, then the
Escrow Agent shall pay to Sellers the Deposit or such remaining portion which it
then holds.
(e)Notwithstanding the foregoing, in the event that either Buyer or
Sellers object to the disbursement of any portion of the Deposit pursuant to
this Section, they must immediately so notify the Escrow Agent in writing. Any
objection must specify with reasonable detail the reasons why the objecting
party is objecting to the disbursement. Such a dispute will be resolved in the
manner set forth in Section 4 below and the Escrow Agent will continue to hold
the Deposit until it has received a signed arbitration award or nonappealable
court order from a court of competent jurisdiction directing the disposition of
the Deposit, or until it has received appropriate written instruction signed
both by Sellers and Buyer.
3. Proof of Conditions for Release. The Escrow Agent may refuse to
release any part of the Deposit under Section 2 of this Agreement unless it has
been fully satisfied that the written notice referred to in such subsections
contains the genuine signature of Buyer or Sellers. Nothing herein shall require
the Escrow Agent to establish the genuineness of any signature but, instead, the
Escrow Agent may in good faith rely upon any signature appearing to be that of
an officer of Buyer or of Sellers as being genuine and/or duly authorized, in
the absence of actual information to the contrary.
4. Disputes. If the Escrow Agent has fulfilled its duties under this
Agreement, the Escrow Agent shall not, without its consent, be made a party to
any action, proceeding or arbitration relating to this Agreement. Any dispute
arising under this Agreement between Buyer and Sellers shall be submitted to the
American Arbitration Association to be settled by arbitration to be conducted in
Erie, Pennsylvania in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. Any dispute arising under this
Agreement involving the Escrow Agent shall not be submitted to arbitration
unless all parties to the dispute agree in writing to seek arbitration. The
award rendered in any such arbitration shall be final and binding and may be
entered in any court having jurisdiction thereof. The Arbitrator or Arbitrators
shall have the power to issue mandatory orders and restraining orders, including
orders of specific performance, in connection with such arbitration. This
Section 4 shall be enforceable under prevailing arbitration laws. During the
continuance of any arbitration the parties shall continue to perform their
respective obligations hereunder.
5. Term.This Agreement shall remain in effect until one of the following
conditions occurs:
(a) Buyer and Sellers shall have jointly given 30 days' advance
written notice of the cancellation of the designation of the Escrow Agent to act
and serve in such capacity, which notice shall contain directions to the Escrow
Agent for delivery of the Deposit;
(b) The Escrow Agent shall have resigned upon 30 days' advance
written notice to Buyer and Sellers;
(c) There shall have been full compliance with the terms of this
Agreement and the release of the Deposit; or
(d) A court of competent jurisdiction shall have issued a final order
or judgment ordering the termination of this Agreement, and all appeals of such
order or judgment shall have been exhausted or all periods in which to take an
appeal shall have expired without an appeal being taken.
In the event that the Escrow Agent resigns pursuant to subsection (b) of
this Section and Buyer and Sellers fail to agree on a successor escrow agent
within the said 30-day notice period, the Escrow Agent shall deposit the Deposit
into the registry of an appropriate court and request judicial determination of
the rights between Buyer and Sellers, by interpleader or other appropriate
action, and Buyer and Sellers hereby jointly and severally agree to indemnify
and hold the Escrow Agent harmless from and against any damages or losses in
connection therewith including, but not limited to, reasonable attorneys' fees
and court costs at all trial and appellate levels. Upon termination of the
duties of the Escrow Agent as set forth in subsection (a) or (b) of this
Section, the Escrow Agent shall deliver the Deposit to the newly appointed
escrow agent designated by Buyer and Sellers (or shall otherwise dispose of the
Deposit as instructed by Buyer and Sellers in writing), and the Escrow Agent
shall not otherwise have the right to withhold the Deposit from said newly
appointed escrow agent.
6. Escrow Agent Fees. Buyer and Sellers agree to pay all fees and
expenses of the Escrow Agent as specified on or determined in accordance with
Schedule B attached hereto. All such fees and expenses shall be borne one-half
by Buyer and one-half by Sellers.
7. Liability and Indemnification of Escrow Agent. Buyer and Sellers
hereby agree that the duties of the Escrow Agent are purely ministerial in
nature and shall be expressly limited to the safekeeping of the Deposit and the
disposition of the same in accordance with the terms of this Agreement. The
Deposit shall be invested by the Escrow Agent in the Vision Money Market Mutual
Fund. The Escrow Agent shall have no liability to any party on account of any
investment of funds in accordance with this Agreement, or on account of any
failure to invest any funds. Buyer and Sellers hereby agree, jointly and
severally, to indemnify the Escrow Agent and hold it harmless from and against
any and all claims, liabilities, damages, costs, penalties, losses, actions,
suits or proceedings at law or in equity, or any other expenses, fees or charges
of any character or nature, which the Escrow Agent may incur or with which it
may be threatened, directly or indirectly, arising from or in any way connected
with this Agreement or which may result from the Escrow Agent's following of
instructions from either or both of Buyer and Sellers in accordance with this
Agreement, and in connection therewith, to indemnify the Escrow Agent against
any and all expenses, including attorneys' fees and the cost of defending any
action, suit or proceeding or resisting any claim, whether or not litigation is
instituted, but nothing herein shall be construed to so indemnify the Escrow
Agent to the extent that it is determined that the Escrow Agent has acted in a
grossly negligent or intentionally wrongful manner. The provisions of this
Section shall survive the termination of this Agreement.
8. Notices. All written communications to parties required hereunder
shall be in writing and (a) delivered in person, (b) mailed by registered or
certified mail, return receipt requested, (such mailed notice to be effective
four days after the date it is mailed) or (c) sent by facsimile transmission,
with confirmation sent by way of one of the above methods, to the party at the
address given below for such party (or to such other address as such party shall
designate in a writing complying with this Section 9, delivered to the other
parties):
If to Buyer:
Rent-Way, Inc.
Attn: President
0000 Xxxx Xxxx Xxxx
Xxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxx, Xxxxxxx, Xxxxx & Goodyear, LLP
0000 Xxx X&X Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Xx., Esq.
Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Sellers:
c/o Xxxxx X. Xxxxxx
0000 X. Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: ______________________
Telecopy: ______________________
with a copy to:
Xxxxxxxxxx, Xxxx & Xxxxxxx, P.C.
Attn: Xxxxxx X. Xxxx, III, Esq.
0000 Xxxx Xxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy : 000-000-0000
If to the Escrow Agent:
Manufacturers and Traders Trust Company
One M&T Plaza
Buffalo, New York 14203
Attention: Xxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
9. Cumulative Rights. No right, power or remedy conferred upon the
Escrow Agent by this Agreement is exclusive of any other right, power or remedy,
but each and every such right, power or remedy shall be cumulative and
concurrent and shall be in addition to any other right, power or remedy the
Escrow Agent may have under this Agreement or now or hereafter existing at law,
in equity or by statute, and the exercise of one right, power or remedy by the
Escrow Agent shall not be construed or considered as a waiver of any other
right, power or remedy.
10.Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. The headings herein are for
convenience only and shall not be of substantive effect. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, heirs, successors and assignees. This
Agreement constitutes the entire agreement among the parties with respect to the
subject matter hereof and, supersede all prior negotiations, understandings and
writings (or any part thereof) whether oral or written between any of the
parties relating to the subject matter of this Agreement. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
and all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the date first above written.
BUYER:
RENT-WAY, INC.
By:______________________________________
Xxxxxxx X. Xxxxxxxxxxx
President and Chief Executive Officer
SELLERS:
SOUTH CAROLINA RENTALS, INC.
By:_______________________________________
Xxxxx X. Xxxxxx
President
PARADISE VALLEY HOLDINGS, INC.
By:______________________________________
Xxxxx X. Xxxxxx
President
L & B RENTS, INC.
By:______________________________________
Xxxxx X. Xxxxxx
President
ESCROW AGENT:
MANUFACTURERS AND TRADERS TRUST COMPANY
By:_______________________________________
Xxxxxx X. Xxxxxxxx
Assistant Vice President
CORPORATE:146454_7 (3506_7)
Schedule A
Wire Instructions
Manufacturers and Traders Trust Company
ABA# 000000000
MFRS BUFF
CC # 880
ACCOUNT: #
REFERENCE: RENT-WAY, INC.
ATTENTION: Xxxxx Xxxxxx
Schedule B
Escrow Agent Fees
Escrow Agent Fee: [$__________________]
EXHIBIT B
NON-COMPETE AGREEMENT
THIS AGREEMENT (this "Agreement"), dated the ____ day of _______, 1998,
between SOUTH CAROLINA RENTALS, INC., a Georgia corporation ("SCR"), PARADISE
VALLEY HOLDINGS, INC., a Georgia corporation ("PVH"), L & B RENTS, INC., a
California corporation (L & B"), XXXXX X. XXXXXX ("Xxxxxx") (SCR, PVH, L & B,
and Xxxxxx being collectively the "Covenantors" and individually a
"Covenantor"), and RENT-WAY, INC., a Pennsylvania corporation having an office
at 0000 Xxxx Xxxx Xxxx, Xxxx, Xxxxxxxxxxxx 00000 ("Rent-Way").
RECITALS:
WHEREAS, Covenantors and Rent-Way are parties to a certain Asset
Purchase Agreement, dated as of October __, 1997 (the "Purchase Agreement"),
pursuant to which Rent-Way will purchase substantially all of the assets of SCR,
PVH and L & B (the "Assets"); and
WHEREAS, Xxxxxx is the sole shareholder of each of SCR,PVH and L & B;and
WHEREAS, Rent-Way is engaged in the rental, rental-purchase and
rent-to-own business (the "Business") and intends to operate the rent-to-own and
other business of SCR, PVH and L & B on and after the closing of the
transactions contemplated by the Purchase Agreement; and
WHEREAS, during the course of many years, Xxxxxx has had access to, and
have gained knowledge with respect to, the rental, rental-purchase and
rent-to-own business of SCR, PVH and L & B; and
WHEREAS, as a condition to closing the Purchase Agreement, Rent-Way has
required Covenantors to agree not to compete with Rent-Way;
NOW, THEREFORE, Covenantors and Rent-Way agree as follows:
1. Non-Competition. (a) For the period beginning on the date of this
Agreement and ending five (5) years thereafter (the "Covenant Period"),
Covenantors agree that they will not:
(i) for their benefit or on behalf of any other person or entity,
within a twenty-five (25) mile radius of any rental or rental-purchase store
location owned or operated by SCR, PVH, L & B or Rent-Way on the date of this
Agreement (the "Restricted Territory"), directly or indirectly, own, manage,
operate or control, or otherwise associate in any manner with, engage in or have
a financial interest in, any business which is the same as, substantially
similar to or directly or indirectly competitive with the Business; or
(ii) for their own benefit or on behalf of any other person or
entity, anywhere in the Restricted Territory, solicit, divert or appropriate or
attempt to solicit, divert or appropriate, for the purpose of competing with
Rent-Way or any present or future subsidiary or Affiliate of Rent-Way which is
engaged in a business similar to the Business, any customers or patrons of the
Business that rented or purchased merchandise from SCR, PVH, L & B or Rent-Way
at any time within the five (5) years immediately preceding the date of this
Agreement or any prospective customers or patrons; or
(iii) employ or solicit the employment of (x) any person who was
employed by the Rent-Way on the date of this Agreement or within six (6) months
prior to such date or (y) any person who was employed by SCR, PVH or L & B on
the date of this Agreement or within six (6) months prior to such date.
(b)Covenantors acknowledge and agree that the restrictions in this
Section 1 are reasonable, legitimate and fair to Covenantors in light of the
Rent-Way's purchase of the Assets from SCR, PVH or L & B pursuant to the
Purchase Agreement.
2. Consideration. Covenantors shall receive no consideration in
connection with this Agreement other than any consideration to be received by
them pursuant to the Purchase Agreement, and Covenantors agree that such
consideration is full and adequate compensation for their covenants in Section
1.
3. Affiliated Defined. For purposes of this Agreement, the term
"Affiliate" shall mean, as to any person or entity, any other person or entity
which directly or indirectly controls or is under control with, or is controlled
by such person or entity.
4. Attorneys' Fees. If any action at law or equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs, and necessary disbursements in
addition to any other relief to which he may be entitled.
5. Governing Law. This Agreement shall be construed under and in
accordance with the laws of the Commonwealth of Pennsylvania.
6. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors, and assigns where permitted
by this Agreement.
7. Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.
8. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter of this Agreement, and
supersedes any prior understandings or written or oral agreements between the
parties with respect to the subject matter of this Agreement.
RENT-WAY, INC.
By:_______________________________________
Xxxxxxx X. Xxxxxxxxxxx, President
SOUTH CAROLINA RENTALS, INC.
Page 1
By:_______________________________________
Xxxxx X. Xxxxxx, President
PARADISE VALLEY HOLDINGS, INC.
By:_______________________________________
Xxxxx X. Xxxxxx, President
L & B RENTS, INC.
By:_______________________________________
Xxxxx X. Xxxxxx, President
------------------------------------------
Xxxxx X. Xxxxxx
January __, 1998
Page 1
EXHIBIT C
FORM OF OPINION
[Legal Opinion of counsel for Sellers]
January ___, 1998
Rent-Way, Inc.
0000 Xxxx Xxxx Xxxx
Xxxx, Xxxxxxxxxxxx 00000
Ladies and Gentlemen:
Re:Asset Purchase Agreement, dated October ___, 1997, among Rent-Way,
Inc., South Carolina Rentals, Inc.,Paradise Valley Holdings, Inc., L & B Rents,
Inc. and Xxxxx X. Xxxxxx
We have acted as counsel to Xxxxx X. Xxxxxx ("Shareholder"); and South
Carolina Rentals, Inc., ("SCR"), Paradise Valley Holdings, Inc., ("PVH") and L &
B Rents, Inc., ("L & B") (collectively the "Sellers" and individually a
"Seller") in connection with
The execution and delivery to you of:
(a) an Asset Purchase Agreement, dated October __, 1997, among
Rent-Way, Inc. ("Buyer"),Sellers and Shareholder (the "Asset
Purchase Agreement");
(b) an Escrow Agreement, dated January __, 1998, among Buyer,
Sellers and Manufacturers and Traders Trust Company; and
(c) a Non-Compete Agreement, dated January __, 1998, between
Buyer and Sellers;
(collectively the "Seller Documents" and individually a "Seller Document"); and
This letter is being delivered to you pursuant to Section 8.11 of the
Asset Purchase Agreement.
The opinions set forth in this letter are subject to the following
qualifications:
[INSERT OPINION LETTER QUALIFICATIONS]
Subject to the qualifications set forth in the letter, it is our opinion
that:
1. SCR is a corporation duly incorporated, validly existing and in good
standing under the law of the State of Georgia. PVH is a corporation duly
incorporated, validly existing and in good standing under the law of the State
of Georgia. L & B is a corporation duly incorporated, validly existing and in
good standing under the law of the State of California. Each Seller is duly
qualified to do business as a foreign corporation in each jurisdiction in which
it owns or leases its properties or which it conducts its business so as to
require such qualifications.
Page 5
2. Each Seller has the corporate power to execute, deliver and perform
each Seller Document executed by it.
3. The execution, delivery and performance by the Sellers of the Seller
Documents has been duly authorized by all necessary corporate action of each
Seller.
4. Each Seller Document executed by Sellers (a) has been duly executed
and delivered by Sellers and (b) constitutes a valid and binding obligation of
Sellers and is enforceable against Sellers in accordance with its terms, except
that such enforceability may be affected by any bankruptcy or other similar
statute or principles of equity.
5. Each Shareholder Document executed by Shareholder (a) has been duly
executed and delivered by Shareholder and (b) constitutes a valid and binding
obligation of Shareholder and is enforceable against Shareholder in accordance
with its terms, except that such enforceability may be affected by any
bankruptcy or other similar statute or principles of equity.
6. Except as disclosed in the Schedules to the Asset Purchase Agreement,
no filing with, notice to, consent or authorization of, or other act by any
Georgia, South Carolina, California or United States federal court or other
Georgia, South Carolina, California or United States federal governmental
authority is required in connection with the execution and delivery by the
Sellers and the Shareholder of the Seller Documents, and the performance by the
Sellers and Shareholder of the Seller Documents.
7. The execution and delivery by the Sellers of each Seller Document
executed by them does not, and the performance by the Sellers of the Seller
Documents, if such performance were to occur on the date of this letter, would
not, (a) violate the Certificate of Incorporation or By-Laws of the Sellers, (b)
except as otherwise disclosed in the Schedules to the Asset Purchase Agreement,
violate, result in a violation of, constitute (whether immediately or after
notice, after lapse of time or after both notice and lapse of time) any default
under, or result in or require the imposition or creation of any security
interest in, or of any other lien or encumbrance upon, any asset of the Sellers
pursuant to, any material contract to which the Sellers are a party, (c) to our
knowledge, except as disclosed in the Schedules to the Asset Purchase Agreement,
violate any judgment, decree or order of any court or other governmental
authority applicable to the Sellers or (d) assuming the non-existence of any
judgment, decree or order of any court or other governmental authority that
would be violated by such execution, delivery and performance, (i) violate the
California General Corporation Law ("CGCL"), the South Carolina Business
Corporation Act ("SCBCA"), the Georgia Business Corporation Code ("GBCC") or any
United States federal statute, rule or regulation or (ii) require any order,
consent, approval or authorization of, or any declaration or filing with, any
Georgia, South Carolina or California court or other Georgia, South Carolina or
California governmental authority pursuant to the CGCL, the SCBCA, the GBCC or
any United States federal court or other United States federal governmental
authority.
8. The execution and delivery by the Shareholder of each Seller Document
executed by him does not, and the performance by the Shareholder of each Seller
Document performed by him, if such performance were to occur on the date of this
letter, would not, (a) to our knowledge, violate any judgment, decree or order
of any court or other governmental authority applicable to Shareholder, (b)
except as otherwise disclosed in the Schedules to the Asset Purchase Agreement
violate, result in a violation of, constitute (whether immediately or after
notice, after lapse of time or after both notice and lapse of time) any default
under, or result in or require the imposition or creation of any security
interest in, or of any other lien or encumbrance upon, any asset of the Sellers
pursuant to, any contract, or (c) assuming the non-existence of any judgment,
decree or order of any court or other governmental authority that would be
violated by such execution, delivery and performance, (i) violate the CGCL, the
SCBCA, the GBCC or any United States federal statute, rule or regulation or (ii)
require any order, consent, approval or authorization of, or any declaration or
filing with, any Georgia, South Carolina or California court or other Georgia,
South Carolina or California governmental authority pursuant to the CGCL, the
SCBCA, the GBCC or United States federal court or other United States federal
governmental authority.
9. To our knowledge, except as disclosed in the Schedules to the Asset
Purchase Agreement, there is no pending or overtly threatened action, suit,
proceeding, inquiry or investigation by or before any court or other
governmental authority that is against or involves the Sellers or the
Shareholder that threatens or questions the transactions contemplated by the
Asset Purchase Agreement.
00.Xx our knowledge, except as disclosed in the Schedules to the Asset
Purchase Agreement, no unsatisfied judgment, order, writ, injunction, decree,
directive or assessment or other command of any court or other governmental
authority has been entered against or served upon the Sellers or the
Shareholder.
This letter is intended solely for the benefit of the parties to whom it
is addressed, and each of their respective successors and assignees, and,
without our express written consent, may not be relied upon, referred to or
otherwise used by any other person or other than in connection with the Seller
Documents.
Very truly yours,
