1
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
among
ACTION RENT-TO-OWN OF FLORIDA, INC.
B&L CONCEPTS, INC.
XXXX XXXX
and
XXXXX XXXXXX
January 7, 1997
2
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE OF ASSETS..........................................................................1
1.1. Transfer of Assets..........................................................................1
1.2. Assumption of Liabilities...................................................................3
1.3. Purchase Price..............................................................................4
1.4. Payment of Purchase Price...................................................................4
1.5. Closing.....................................................................................5
1.6. Instruments of Conveyance and Assumption....................................................5
1.7. Further Assurances..........................................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PURCHASER.................................................6
2.1. Organization and Good Standing..............................................................6
2.2. Authorization and Validity..................................................................7
2.3. No Violation................................................................................7
2.4. Finder's Fee................................................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SHAREHOLDERS............................................................................7
3.1. Organization and Good Standing..............................................................7
3.2. Capitalization..............................................................................7
3.3. Power and Authority; Authorization and Validity.............................................7
3.4. Financial Statements........................................................................8
3.5. Absence of Undisclosed Liabilities..........................................................8
3.6. Benefit Matters.............................................................................9
3.7. Absence of Certain Changes.................................................................10
3.8. Title; Leased Assets; Environmental Conditions.............................................11
3.9. Insurance..................................................................................11
3.10. Patents, Trademarks and Copyrights.........................................................12
3.11. No Violation...............................................................................13
3.12. Taxes......................................................................................13
3.13. Consents...................................................................................14
3.14. Labor Relations............................................................................14
3.15. Compliance with Laws.......................................................................14
3.16. Finder's Fee...............................................................................14
3.17. Litigation or Warranties...................................................................14
3.18. Employees and Consultants..................................................................14
3.19. Condition of Assets........................................................................15
3.20. Suppliers..................................................................................15
3.21. Contracts and Commitments..................................................................15
- i -
3
3.22. Accounts Receivable........................................................................17
3.23. Investment Representations.................................................................17
3.24. Accuracy of Information Furnished..........................................................18
ARTICLE IV PURCHASER'S COVENANTS......................................................................18
4.1. Consummation of Agreement..................................................................18
4.2. Retention of Records.......................................................................18
4.3. Employment Arrangements....................................................................18
ARTICLE V SHAREHOLDERS' COVENANTS....................................................................18
5.1. Business Operations........................................................................18
5.2. Access.....................................................................................19
5.3. Material Change............................................................................19
5.4. Approvals of Third Parties.................................................................19
5.5. Employee Compensation......................................................................19
5.6. Contracts..................................................................................19
5.7. Capital Assets; Payments of Liabilities....................................................20
5.8. Mortgages, Liens...........................................................................20
5.9. Changes in Inventory.......................................................................20
5.10. No Disclosure or Negotiation with Others...................................................20
5.11. Other Agreements...........................................................................20
5.12. Post-Closing Access........................................................................21
ARTICLE VI PURCHASER'S CONDITIONS PRECEDENT...........................................................21
6.1. Representations and Warranties.............................................................21
6.2. Covenants..................................................................................21
6.3. Opinion....................................................................................21
6.4. Proceedings................................................................................21
6.5. No Material Adverse Change.................................................................21
6.6. Due Diligence and Review...................................................................22
6.7. Approval by Board..........................................................................22
6.8. Accounting.................................................................................22
6.9. Employment Arrangements....................................................................22
ARTICLE VII SHAREHOLDERS' CONDITIONS PRECEDENT.........................................................22
7.1. Representations and Warranties.............................................................22
7.2. Covenants..................................................................................22
7.3. Proceedings................................................................................22
7.4. Employment Arrangements....................................................................22
ARTICLE VIII INDEMNIFICATION............................................................................23
8.1. Shareholders' Indemnity....................................................................23
8.2. Purchaser's Indemnity......................................................................23
- ii -
4
8.3. Conditions of Indemnification..............................................................23
8.4. Exclusive Nature of Remedies...............................................................24
ARTICLE IX MISCELLANEOUS..............................................................................24
9.1. Amendment..................................................................................24
9.2. Assignment.................................................................................24
9.3. Notice.....................................................................................24
9.4. Confidentiality and Public Announcements...................................................25
9.5. Entire Agreement...........................................................................26
9.6. Costs, Expenses and Legal Fees.............................................................26
9.7. Severability...............................................................................26
9.8. Survival of Representations and Warranties.................................................26
9.9. Governing Law and Venue....................................................................26
9.10. Captions...................................................................................27
9.11. Counterparts...............................................................................27
9.12. Number and Gender..........................................................................27
9.13. Facsimile Transmissions....................................................................27
ARTICLE X TERMINATION................................................................................27
10.1. Termination by Purchaser...................................................................27
10.2. Termination by Shareholders................................................................27
10.3. Effect of Termination......................................................................28
10.4. Return of Information......................................................................28
EXHIBITS
A -- Form of Convertible Note
B -- Form of Assumption Agreement
C -- Form of Xxxxxx Noncompetition Agreement
D -- Form of Xxxx Noncompetition Agreement
E -- Form of License
- iii -
5
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated as of January 7, 1996, is by and among Xxxx Xxxx
("Xxxx") and Xxxxx Xxxxxx ("Xxxxxx"), individual residents of the State of
Florida (collectively, "Shareholders"), B&L Concepts, Inc. dba Champion Rent To
Own, a Florida corporation (the "Company") and Action Rent-To-Own of Florida,
Inc., a Florida corporation, ("Purchaser").
W I T N E S S E T H:
WHEREAS, RTO, Inc., a Delaware corporation ("RTO") desires to purchase
certain assets of the Company and to assume certain of the debts, obligations
and liabilities of the Company, and the Company desires to sell such assets to
RTO and to assign such debts, obligations and liabilities to RTO; and
WHEREAS, Purchaser is a wholly owned subsidiary of RTO;
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties to this Agreement, intending to be
legally bound, hereby agree as follows:
ARTICLE I
PURCHASE OF ASSETS
1.1. Transfer of Assets.
(a) Included Assets. On the terms and subject to the
conditions set forth in this Agreement, the Company hereby agrees to
sell, assign, transfer and deliver to Purchaser on the "Closing Date"
(as hereinafter defined), and Purchaser agrees to purchase from the
Company on the Closing Date, all of the rights, title and interest of
the Company in and to any and all assets owned by the Company on the
Closing Date, other than the assets described in Section 1.1(b)
hereof. The assets being transferred by the Company to Purchaser
hereunder (such assets being hereinafter collectively referred to as
the "Assets") shall include all the assets (other than the assets
described in Section 1.1(b) hereof) of every kind, nature and
description whatsoever, whether real, personal or mixed, tangible or
intangible, and wherever situated, which are owned by the Company on
the Closing Date, and shall include, without limitation:
(i) All cash, cash equivalents, marketable securities,
accounts receivable and prepaid expenses of the Company;
(ii) All notes receivable, deposits and advances of the
Company;
6
(iii) All finished products, work-in-process, raw
materials, spare parts, stores and supplies, and other
inventory items;
(iv) All machinery, equipment, business machines,
vehicles, furniture, fixtures, leasehold and building
improvements and other tangible property of the Company of
every kind utilized in connection with the operations of the
Company's business, whether or not carried on the Company's
books;
(v) All right, title and interest of the Company in all
contracts, agreements, or other instruments relating to the
Company's business, including, without limitation, all
contracts listed on Schedule 3.21 hereto, any purchase orders
for machinery, equipment, inventory, supplies and all other
items, and all sales contracts, broker agreements, leases of
real and personal property and licenses;
(vi) All books and records, customer lists, customer
credit information, technical data, sales literature,
correspondence and computer printouts;
(vii) All patents, copyrights, know-how, technical
documentation, trade secrets, trademarks and trade names (and
all applications therefor) owned by the Company, including,
without limitation, those set forth on Schedule 3.20 hereto;
(viii) All other rights of the Company with respect to
any patents, copyrights, know-how, technical documentation,
trade secrets, trademarks and tradenames; and
(ix) All other intangibles of any kind or description,
wherever located , that are carried on the books of the
Company or which are owned by the Company and utilized in the
operations of the Company's business.
(b) Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, there shall not be included in the Assets, and the
Company shall retain as its property, the following assets:
(i) The stock record books and minute books of the
Company;
(ii) Shares of capital stock of the Company held in the
treasury of the Company;
(iii) All rights to and claims for refunds of any
federal, state, local and foreign income taxes paid by the
Company, all tax returns and tax reports of the Company with
respect thereto and any amounts deposited with the Internal
Revenue Service pursuant to Section 7519 of the Internal
Revenue Code of 1986, as amended (the "Code");
- 2 -
7
(iv) Any licenses, permits or other intangibles
(including federal and state tax and employment
identification numbers) which by their nature are
nonassignable and contracts or contact rights which are
assignable only with the consent of another party, and which
consent is not obtained by the Company pursuant to Section
5.4 hereof;
(v) The personal and real property set forth on
Schedule 1.1(b)(v) hereto;
(vi) All rights of the Company under contracts,
agreements or commitments which give rise to, which were
entered into in connection with the creation of, or which
otherwise pertain to "Excluded Liabilities" (as hereinafter
defined); and
(vii) This Agreement and all rights of the Company
hereunder including, without limitation, the right of the
Company to receive the "Purchase Price" (as hereinafter
defined).
1.2. Assumption of Liabilities.
(a) Assumed Liabilities. On the terms and subject to the
conditions set forth in this Agreement, Purchaser agrees that, on the
Closing Date, Purchaser shall assume and agree to pay, perform and
discharge the "Assumed Liabilities" (as hereinafter defined). For the
purposes of this Agreement, the term "Assumed Liabilities" shall
include, and shall be limited to (i) all debts, obligations and
liabilities of the Company (other than the debts and liabilities
described in Section 1.2(b) hereof) which arose out of the business
operations of the Company conducted on or prior to the Closing Date
and (ii) the benefits payable to current and former employees of the
Company set forth on Schedule 1.2(a) hereto.
(b) Excluded Liabilities. Notwithstanding anything in this
Agreement to the contrary, the term "Assumed Liabilities" shall not
include any of the following debts, obligations or liabilities of the
Company and, therefore, Purchaser shall not be obligated to assume
hereunder or to pay, perform or discharge any of such debts,
obligations and liabilities (the "Excluded Liabilities") (it being
understood that all such debts, obligations and liabilities shall
continue to be debts, obligations and liabilities of the Company):
(i) Any federal, state, local or foreign income taxes
payable by the Company or any Shareholder or any interest or
penalties with respect thereto;
(ii) Any liability of the Company under any employee
benefit plan (including, without limitation, any profit
sharing plan or any pension plan);
- 3 -
8
(iii) Any liability of the Company for any finder's,
broker's or advisor's fee and expenses or the like incurred
in connection with the transactions contemplated by this
Agreement;
(iv) Any liability of the Company arising under this
Agreement or the transactions contemplated hereby;
(v) Any debt, obligation or liability of the Company or
to either Shareholder or any former shareholder;
(vi) Any debt, obligation or liability of the Company
under commitments to make charitable contributions;
(vii) Those debts, obligations and liabilities of the
Company to current and former employees of the Company set
forth on Schedule 1.2(b)(vii) hereto; and
(viii) Any liability of the Company arising under the
contacts, agreements or licenses set forth in Schedule
1.2(b)(viii) hereto which contracts, agreements and licenses
are not being purchased or assumed hereunder.
1.3. Purchase Price.
(a) On the terms and subject to the conditions set forth in
this Agreement, Purchaser shall, on the Closing Date, pay Thirteen
Million Seven Hundred Sixty One Thousand Eight Hundred Seventy Eight
Dollars ($13,761,878) to the Company in exchange for the Assets (such
consideration being referred to herein as the "Purchase Price"). The
parties hereto further agree that both Purchaser and the Company will
use said allocations for all federal and state income tax reporting
purposes that may affect the federal and state income tax liability of
any party to this Agreement.
(b) Purchaser and Seller agree that the Purchase Price shall
be allocated as required by Section 1060 of the Code. Such allocation
shall be prepared by Purchaser and shall be submitted to Seller within
ninety (90) days after the Closing Date. Seller shall have thirty (30)
days after receipt of Purchaser's allocation of consideration to
object by written notice to Purchaser. The parties shall attempt to
resolve any objections made by Seller as promptly as possible. All tax
returns and reports filed by Purchaser, Seller and Shareholders with
respect to the transactions contemplated by this Agreement shall be
consistent with such allocation.
1.4. Payment of Purchase Price. On the Closing Date, Purchaser
shall pay the Purchase Price to the Company, in exchange for the Assets, in the
following manner:
- 4 -
9
(a) Purchaser shall pay to the Company, by wire transfer of
federal funds to an account at Xxxxxxx Bank, ABA No. 000000000
(Account No. 1000005238), Florida, an amount equal to Ten Million
Seven Hundred Sixty One Thousand Eight Hundred Seventy Eight Dollars
($10,761,878); and
(b) Purchaser shall deliver to the Company a convertible note
in the form attached hereto as Exhibit A (the "Note") in the aggregate
principal amount of Three Million Dollars ($3,000,000), which shall be
convertible into shares of common stock of RTO (the "RTO Stock").
Shareholders and the Company have advised Purchaser that simultaneously
with the delivery of the Purchase Price to the Company, the Company will
distribute (a) $6,755,939 of the cash portion of the Purchase Price delivered
pursuant to Section 1.4(a)(i) to Xxxx and (b) (i) $3,755,939 of the cash
portion of the Purchase Price delivered pursuant to Section 1.4(a)(i) and (ii)
the Note delivered pursuant to Section 1.4(a)(ii) to Xxxxxx. In addition, the
Company shall retain $250,000 of the Purchase Price to cover residual debts,
obligations and liabilities of the Company.
1.5. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 a.m., Atlanta, Georgia
time, at the offices of King & Spalding, 000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx
00000, on January 7, 1997, or on such other date as may be agreed upon by the
parties, in writing. The day on which the Closing occurs is hereinafter
referred to as the "Closing Date."
1.6. Instruments of Conveyance and Assumption.
(a) Transfer of Assets. On the Closing Date, the Company
shall execute and deliver to Purchaser all such instruments and
documents (the "Conveyance Documents") (including, without limitation,
bills of sale, assignments, certificates of title) as shall be
requested by Purchaser to effectuate the sale, assignment, transfer
and delivery of the Assets from the Company to Purchaser, provided,
however, that such instruments and documents shall not be inconsistent
with the terms hereof.
(b) Assumption of Liabilities. On the Closing Date, Purchaser
shall execute and deliver to the Company an assumption agreement (the
"Assumption Agreement"), substantially in the form of Exhibit B
hereto, pursuant to which Purchaser will assume and agree to pay,
perform and discharge the Assumed Liabilities.
(c) Further Assurances. The Company shall on the Closing Date
and from time to time thereafter at Purchaser's request and without
further consideration execute and deliver to Purchaser such
instruments of transfer, conveyance and assignment in addition to
those delivered pursuant to Section 1.6(a) hereof as Purchaser shall
request to transfer, convey and assign more effectively the Assets to
Purchaser. Similarly, Purchaser shall on the Closing Date and from
time to time thereafter at the Company's request and without further
- 5 -
10
consideration execute and deliver to the Company such instruments of
assumption in addition to the Assumption Agreement delivered pursuant
to Section 1.6(b) hereof as the Company shall request to evidence more
fully Purchaser's assumption of the Assumed Liabilities. The Company
shall deliver to Purchaser at the Closing a list of the material
suppliers of the Company.
(d) Other Closing Deliveries. In addition, at the Closing,
Shareholders shall execute and/or deliver to Purchaser the following:
(A) the Noncompetition Agreements as described in Section
5.11(a) of this Agreement (the "Xxxxxx Noncompetition
Agreements");
(B) the Noncompetition Agreement as described in Section
5.11(b) of this Agreement (the "Xxxx Noncompetition
Agreement"); and
(C) the License as described in Section 5.11(c) of this
Agreement.
At the Closing, each party also shall execute and deliver, or cause to be
executed and delivered, such other documents as may be required of such party
pursuant to this Agreement as well as such other appropriate and customary
documents as any other party or its counsel reasonably may request for the
purpose of consummating the transactions contemplated by this Agreement. All
actions taken at the Closing shall be deemed to have been taken simultaneously
at the time the last of any such actions is taken or completed.
1.7. Further Assurances. After the Closing, the parties shall
execute and deliver such additional documents and take such additional actions
as any party or its or his counsel may reasonably deem to be practical and
necessary or advisable in order to consummate the transactions contemplated by
this Agreement and to vest more fully in Purchaser the ownership of certain
assets of the Company as they existed immediately prior to the Closing, except
as otherwise provided in this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants that the following are true and
correct as of this date and will be true and correct through the Closing Date
as if made on that date:
2.1. Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite power and authority to carry on the
business in which it is engaged, to own the properties it owns and to execute
and deliver this Agreement to consummate the transactions contemplated hereby.
- 6 -
11
2.2. Authorization and Validity. The execution, delivery and
performance of this Agreement and the other agreements contemplated hereby by
Purchaser, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Purchaser. This Agreement and each other
agreement contemplated hereby have been or will be prior to Closing duly
executed and delivered by Purchaser and constitute or will constitute legal,
valid and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
2.3. No Violation. Neither the execution and performance of this
Agreement or the other agreements contemplated hereby, nor the consummation of
the transactions contemplated hereby or thereby, will (a) conflict with, or
result in a breach of the terms, conditions and provisions of, or constitute a
default under, the Certificate of Incorporation or Bylaws of Purchaser or any
agreement, indenture or other instrument under which Purchaser is bound, or (b)
violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or
body having jurisdiction over Purchaser or the properties or assets of
Purchaser.
2.4. Finder's Fee. Purchaser has not incurred any obligation for
any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders, jointly and severally, represent and
warrant that the following are true and correct as of this date and will be
true and correct through the Closing Date as if made on that date:
3.1. Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida with all requisite power and authority to carry on the
business in which it is engaged and to own the properties it owns. The Company
is, and always has been, duly qualified and licensed to do business and is in
good standing in all jurisdictions where the nature of its business makes such
qualification necessary, which jurisdictions are listed on Schedule 3.1 hereto,
except where the failure to be so qualified or licensed would not have a
material adverse effect on the business or assets of the Company. The Company
does not have any assets, employees or offices in any state other than the
States of Florida, Georgia and Alabama. The Company does not own, directly or
indirectly, any of the capital stock of any other corporation or any equity,
profit sharing, participation or other interest in any corporation,
partnership, joint venture or other entity.
3.2. Capitalization. The authorized capital stock of the Company
consists of 1,000 shares of common stock, $1.00 par value (the "B&L Stock"), of
which 500 shares are issued and
- 7 -
12
outstanding at the date hereof. Shareholders are the lawful record and
beneficial owners of all of the shares of B&L Stock outstanding.
3.3. Power and Authority; Authorization and Validity. The Company
and each Shareholder has full legal capacity to execute, deliver and perform
its or his obligations under this Agreement and all other agreements and
documents it or he is or will be executing in connection with this Agreement
and the transactions contemplated hereby. This Agreement and each other
agreement contemplated by this Agreement have been or will be duly executed and
delivered by the Company and each Shareholder and constitute or will constitute
legal, valid and binding obligations of the Company and each Shareholder,
enforceable against each of them in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies.
3.4. Financial Statements. The Company and Shareholders have
furnished to Purchaser an audited balance sheet as of December 31, 1995 and
unaudited balance sheets and related unaudited statements of income,
shareholders' equity and changes in financial position of the Company for the
fiscal years ending December 31, 1993 and 1994, including the notes thereto, as
well as the Company's unaudited balance sheets (the "Interim Balance Sheet")
and related unaudited statements of income, shareholders' equity and changes in
financial position for the ten month period ended October 31, 1996 (the
"Unaudited Financial Statements") (collectively, the "Financial Statements").
The Financial Statements have been prepared from, and are in accordance with,
the books and records of the Company and are true, correct and complete, fairly
reflect the financial condition and results of operations of the Company as of
the dates and for the periods indicated (subject to year-end adjustments
consistent with generally accepted accounting principles with respect to the
Unaudited Financial Statements) and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis with
prior periods. Since December 31, 1995 there has been no change in accounting
principles applicable to, or methods of accounting utilized by, the Company
except as noted in the Financial Statements.
3.5. Absence of Undisclosed Liabilities. Schedule 3.5 hereto sets
forth a complete and accurate list of the liabilities, contracts, commitments
and obligations of the Company of any nature, whether absolute, accrued,
contingent or otherwise as of the date of this Agreement which individually
exceeds $5,000 in value or in the aggregate exceed $20,000 in value. Each of
such liabilities, contracts, commitments or obligations is fully reflected,
accrued and reserved against, to the extent required by generally accepted
accounting principles, on the Unaudited Financial Statements that have been
given to Purchaser. Other than as set forth on Schedule 3.5, the Company is not
liable upon or with respect to, or obligated in any other way to provide funds
in respect of or to guarantee or assume in any manner, any debt, obligation or
liability of any person, corporation or other entity which individually exceeds
$5,000 or in the aggregate exceed $20,000. Shareholders, after due inquiry,
know of no basis for the assertion of any claims, liabilities or obligations
which if asserted and proven would be required to be listed on Schedule 3.5.
There are no defaults, events of default or events, occurrences or acts that,
with the giving of notice or lapse of time or both, would constitute defaults
or events of default by the Company or any other party thereto under any
contract,
- 8 -
13
commitment or obligation of the Company. Such contracts, commitments and
obligations are in full force and effect and are the valid and enforceable
obligations of the parties thereto in accordance with their terms, and no
defenses, off-sets or counterclaims have been asserted or may be asserted by
any party thereto, nor has the Company waived any rights thereunder.
3.6. Benefit Matters.
(a) Except as listed on Schedule 3.6 hereto, neither the
Company, nor any other corporation or trade or business under common
control with the Company (an "ERISA Affiliate") as determined under
Section 414(b), (c) or (m) of the Internal Revenue Code of 1986, as
amended (the "Code"), sponsors, maintains, or otherwise is a party to,
or has any accrued obligations under any pension, profit sharing or
other retirement plan, fringe benefit plan (including, but not limited
to, bonus, deferred compensation, severance, leave or other employee
benefit plan or program), health, group insurance or other welfare
benefit plan, or other similar plan, agreement, policy or
understanding, including, without limitation, any "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether formal or
informal under which the Company or an ERISA Affiliate has any current
or future obligation or liability or under which any present or former
employee of the Company or an ERISA Affiliate, or such present or
former employee's dependants or beneficiaries, has any current or
future right to benefits (each such plan, agreement, policy or
understanding being hereinafter referred to individually as a "Plan").
(b) Each Plan has been maintained, administered and operated
in all material respects in accordance with its terms and applicable
law and all reports required under ERISA or other applicable law to be
filed with any governmental agency with respect to each Plan have been
timely filed. No liability under ERISA or similar statute has been
incurred or, based upon existing facts, may be expected to be incurred
with respect to any Plan, that would, individually or in the
aggregate, be material in amount.
(c) The Company has not engaged in any transaction in
connection with which it, directly or indirectly, will be subject to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or
a tax imposed by Section 4975 of the Code. The Company does not have
any current or project liability in respect of post-employment or
post-retirement benefits for any retired or former employee of the
Company, or such present or former employee's dependents or
beneficiaries, except as required to avoid excise tax under Section
4980B of the Code. With respect to each Plan that is funded wholly or
partially through an insurance policy, there will be no liability of
the Company, as of the Closing Date, under any such insurance policy
or ancillary agreement with respect to such insurance policy. The
consummation of the transactions contemplated hereby will not
accelerate the time of payment or vesting, or increase the amount of
compensation or benefits, of any director, employee or former employee
of the Company under a Plan.
- 9 -
14
(d) The Company has made or will make all contributions
required to be made by the Company under each Plan for all periods
through and including the Closing Date or adequate accruals therefore
have been or will be provided.
(e) There are no actions, suits, claims or proceedings
(including any investigation or audit by any governmental authority)
pending or, to the knowledge of the Company or Shareholders,
threatened, nor does there exist any basis therefor, with respect to
any Plan or trust maintained in connection therewith that would result
in any liability to the Company which would, individually or in the
aggregate, be material in amount.
(f) Neither the Company nor any ERISA Affiliate has ever
sponsored, adopted, maintained or been obligated to contribute to a
single employer, multiple employer or multi-employer defined benefit
pension plan which is, or ever was, subject to the provisions of Title
IV of ERISA. Neither the Company nor any ERISA Affiliates has ever
sponsored, adopted, maintained or been obligated to contribute to a
Plan which is or ever was subject to the minimum funding standards of
Section 302 of ERISA and Section 412 of the Code. The Company does not
have any obligation in connection with any Plan pursuant to the terms
of a collective bargaining agreement.
(g) No termination or partial termination of any Plan in
accordance with its terms will result in any liability to the Company.
3.7. Absence of Certain Changes. Except as set forth in Schedule
3.7 hereto or reflected in the Financial Statements, since January 1, 1996, the
Company has not (a) suffered any material adverse change in its financial
condition, assets, liabilities or business; (b) contracted for or paid any
capital expenditures in excess of $5,000 other than in the ordinary course of
business consistent with past practice both as to type and amount; (c) incurred
any indebtedness for borrowed money, issued or sold any debt securities or
discharged any liabilities or obligations other than in the ordinary course of
business consistent with past practice both as to type and amount; (d) paid any
material amount on any indebtedness prior to the due date, forgiven or canceled
any material debts or claims or released or waived any material rights or
claims, other than in the ordinary course of business consistent with past
practice both as to type and amount; (e) suffered any damage or destruction to
or loss of any assets (whether or not covered by insurance) that could or does
materially and adversely affect its business; (f) acquired or disposed of any
material assets or incurred any material liabilities or obligations, except the
rental and/or sale of inventory and trade debt incurred in the ordinary course
of business; (g) written up or written down the carrying value of any of its
assets other than in the ordinary course of business consistent with past
practice both as to type and amount and which, in the aggregate, are not
material to the Company; (h) changed the costing system or depreciation methods
of accounting for its assets; (i) waived any material rights or forgiven any
material claims; (j) lost or terminated employees, customers or suppliers that
could or does materially and adversely affect its business or assets; (k)
increased the compensation of any employee, other than in the ordinary course of
business consistent with past practice both as to type and amount; (l) made any
payments to or loaned any money to its affiliates; (m) formed or acquired or
disposed of any
- 10 -
15
interest in any corporation, partnership, joint venture or other entity; (n)
redeemed, purchased or otherwise acquired, or sold, granted or otherwise
disposed of, directly or indirectly, any of its capital stock or securities or
any rights to acquire such capital stock or securities, or agreed to change
terms and conditions of any such rights; or (o) entered into any other
commitment or transaction or experienced any other event that is material to
this Agreement or to any of the other agreements and documents executed or to be
executed pursuant to this Agreement or to the transactions contemplated hereby
or thereby, or that has affected, or could reasonably be expected to affect,
materially and adversely, the Company's business, operations, assets,
liabilities or financial condition.
3.8. Title; Leased Assets; Environmental Conditions.
(a) Except as described in the Financial Statements and
Schedule 3.8 hereto, the Company owns all assets used by the Company
used in or necessary to its business, including, its real and personal
property leaseholds, free and clear of all liens, claims and
encumbrances. The Company owns or validly leases and has good and
indefeasible record and beneficial title to all assets used in or
necessary to the conduct of the business of the Company as conducted
immediately before the date of this Agreement. Upon consummation of
the transactions contemplated by this Agreement, the Company shall be
entitled to continue to use all assets, leased or owned, used in or
necessary to its business, free and clear of all liens, claims and
encumbrances other than those described on Schedule 3.8.
(b) Except for those assets acquired or disposed of since
October 31, 1996 in the ordinary course of business consistent with
past practices both as to type and amount, all tangible properties and
assets material or necessary to the present operations of the Company
are reflected in the Financial Statements and the notes thereto in a
manner and to the extent required by generally accepted accounting
principles.
(c) Except as set forth on Schedule 3.8, no hazardous or
toxic material (as hereinafter defined) exists or has existed in any
structure located on, or exists or has existed on or under the surface
of, any real property owned, leased or otherwise used by the Company,
any predecessor or successor to the Company or affiliate of the
Company in its business. The Company has never been in violation of
any environmental law (as hereinafter defined). For purposes of this
section "hazardous or toxic material" shall mean waste, substance,
materials, smoke, gas or particulate matter designated as hazardous,
toxic or dangerous under any environmental law. For purposes of this
section, "environmental law" shall include the Comprehensive
Environmental Response Compensation and Liability Act, the Clean Air
Act, the Clean Water Act, and any other applicable federal, state or
local environmental, health or safety law, rule or regulation relating
to or imposing liability or standards concerning or in connection with
hazardous, toxic or dangerous waste, substance, materials, smoke, gas
or particulate matter. Except as set forth on Schedule 3.8, there are
no environmental assessments or audits of the Company or any of its
assets.
- 11 -
16
3.9. Insurance. Schedule 3.9 attached hereto contains a true,
complete and correct description (including type of insurance, named insured,
issuer name, policy limits, deductibles, premiums and expiration dates) of all
insurance policies currently owned by the Company or any other person or entity
for the benefit of the Company (the "Insurance Policies"). All of the Insurance
Policies have been issued by insurers of recognized responsibility in amounts
and against such risks and losses as are required by law or agreements to which
the Company is a party, or which are otherwise customary in the Company's
industry. All of the Insurance Policies are valid and enforceable, no notice of
termination or threatened termination of any of the Insurance Policies has been
received by the Company and all payments of premiums under the Insurance
Policies are current. The Company has not received any notice from any
insurance company of any defects or inadequacies in any real or personal
property owned or leased by the Company, or any part thereof, that would
adversely affect the insurability of such property or the premiums for the
insurance thereof. True, complete and correct copies of all of the Insurance
Policies have been delivered to Purchaser.
3.10. Patents, Trademarks and Copyrights.
(a) The Company owns all patents, trademarks and copyrights,
if any, necessary to conduct its business, or possesses adequate
licenses or other rights, if any, therefor, without conflict with the
rights of others. Set forth in Schedule 3.10 hereto is a true and
correct description of the following ("Proprietary Rights"):
(i) All trademarks, trade names, service marks and
other trade designations, including common law rights,
registrations and applications for registration, and all
patents, copyrights and applications currently owned, in
whole or in part, by the Company, and all licenses,
royalties, assignments and other similar agreements relating
to the foregoing to which the Company is a party (including
expiration dates if applicable); and
(ii) All agreements relating to technology, know-how
or processes that the Company is licensed or authorized to
use by others, or which it licenses or authorizes others to
use.
(b) The Company has the sole and exclusive right to use the
Proprietary Rights without infringing or violating the rights of any
third parties. No claim has been asserted by any person to the
ownership of or right to use any Proprietary Right or challenging or
questioning the validity or effectiveness of any such license or
agreement, and neither the Company nor Shareholders know of any valid
basis for any such claim. Each of the Proprietary Rights is valid and
subsisting, has not been canceled, abandoned or otherwise terminated
and, if applicable, has been duly issued or filed.
(c) The Company and Shareholders have no knowledge of any
claim that, or inquiry as to whether, any product, activity or
operation of the Company infringes upon or involves, or has resulted in
the infringement of, any Proprietary Right of any other person,
- 12 -
17
corporation or other entity; and no proceedings have been instituted,
are pending or, to the knowledge of Shareholders or the Company, are
threatened which challenge the rights of the Company with respect
thereto. The Company has not given and is not bound by any agreement of
indemnification for any Proprietary Right.
3.11. No Violation. Neither the execution and performance of this
Agreement or the agreements contemplated hereby nor the consummation of the
transactions contemplated hereby or thereby will (a) result in a violation or
breach of the Articles of Incorporation or Bylaws of the Company or any
agreement or other instrument under which the Company or any Shareholder is
bound or to which any of the assets of the Company or Shareholders are subject,
or result in the creation or imposition of any lien, charge or encumbrance upon
any of such assets, or (b) violate any applicable law or regulation or any
judgment or order of any court or governmental agency. The Company complied
with all applicable laws, regulations and licensing requirements, and has filed
with the proper authorities all necessary statements and reports related, or
required with respect, to the business of the Company. The Company possesses
all licenses, franchises, permits and governmental authorizations necessary to
conduct its business.
3.12. Taxes. Except as set forth on Schedule 3.12, the Company has
duly and timely filed all income, excise, corporate, franchise, property, sales,
payroll, withholding and other tax returns and reports required to be filed by
it as of the date hereof by the United States of America or any state or any
political subdivision thereof and has paid or established adequate reserves for
all taxes (including penalties and interest) which have or may become due
pursuant to such returns and any assessments which have been received by it or
otherwise. All such tax returns or reports fairly and correctly reflect the
taxes of the Company for the periods covered thereby. The Company is not
delinquent in the payment of any tax, charge or assessment or governmental
charge; there is no tax deficiency or delinquency asserted against the Company;
and there is no unpaid assessment, proposal for additional taxes, deficiency or
delinquency in the payment of any of the taxes of the Company that could be
asserted by any taxing authority. No federal, state or local audit of the
Company by any taxing authority is pending or threatened, and the results of any
completed audits are properly reflected in the Financial Statements. The Company
has not granted to any taxing authority any extension of the limitation period
during which any tax liability may be asserted. The Company has not committed a
violation of any federal, state, local or foreign tax laws. All taxes required
to be withheld or collected by the Company and the portion of any such taxes to
be paid by the Company to governmental agencies, have been collected or withheld
and either paid to the respective governmental agencies or set aside in accounts
for such purpose, or such monies have been approved, reserved against and
entered upon the books of the Company. The Company has never been a member of
any affiliated, consolidated, combined, or unitary group, or filed or been
included in a combined, consolidated or unitary return, and the Company is
currently under no contractual obligation to indemnify any other person with
respect to taxes. The Company is not and never has been a party to or bound by
any tax sharing, tax allocation, or similar agreement or arrangement. The
Company has never been a member of, or had an interest in, any partnership,
joint venture, trust, limited liability company or other entity, the taxable
income of which is or was required to be taken into account by the Company on
its tax returns, in whole or in part. Schedule 3.12 sets forth all
- 13 -
18
foreign, state and local jurisdictions where the Company has filed tax returns,
and no claim has ever been made by any taxing authority against the Company.
3.13. Consents. Except for the consents of the persons and entities
set forth on Schedule 3.13, no authorization, consent, permit or license of, or
filing with, any governmental or public body or authority, any lender or
lessor, any franchisor or any other person or entity is required or advisable
to authorize, or is required in connection with, the execution, delivery and
performance of this Agreement or the agreements contemplated hereby on the part
of the Company or Shareholders.
3.14. Labor Relations. The Company has not experienced and is not
currently experiencing, nor do the Company or Shareholders know of any reason
to expect, any labor troubles or strikes, work stoppages, slow-downs or other
material interference with or impairment of the business of the Company by
labor, nor has the Company committed any unfair labor practice. The Company is
not currently experiencing, nor do the Company or Shareholders know of, any
current or contemplated union organization efforts or negotiations, or requests
for negotiations, for any representation or any labor contract relating to the
employees of the Company.
3.15. Compliance with Laws. The Company and Shareholders have
complied in all materials respects with each, and there are no existing or past
violations of, or, to the Company's or Shareholders' knowledge, any proposed
change contemplated in, any applicable federal, state or local law or
regulation that could adversely affect the Company, Shareholders, their
property or business.
3.16. Finder's Fee. The Company and Shareholders have not incurred
any obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby.
3.17. Litigation or Warranties. Except as described in Schedule
3.17, neither the Company nor Shareholders have had any legal action or
administrative proceeding or investigation instituted or, to the best of the
knowledge of the Company and Shareholders, threatened, against or affecting, or
that could affect, any of the Company, Shareholders or their assets or
business. The Company and Shareholders are not (a) subject to any continuing
court or administrative order, judgment, writ, injunction or decree applicable
specifically to the Company or to its business, assets, operations or
employees, or (b) in default with respect to any such order, judgment, writ,
injunction or decree. The Company and Shareholders know of no basis for any
such action, proceeding or investigation. There is no claim against or
liability of the Company on account of product warranties or with respect to
the manufacture, sale or rental of defective products, and to the knowledge of
the Company and Shareholders, there is no basis for any such claim.
3.18. Employees and Consultants. Set forth on Schedule 3.18 hereto
is a complete and accurate list of all employees of the Company as of the date
of this Agreement, together with their positions and their annual salaries and
other compensation, including accruals for vacations through such date. Except
as set forth in Schedule 3.18, the Company has not granted or become obligated
to grant any increases in the wages or salary of, or paid or become obligated to
pay any bonus or
- 14 -
19
made or become obligated to make any similar payment to or grant any benefit to
or on behalf of, any officer, employee or agent. Except as set forth in Schedule
3.18, the Company has no direct or indirect, express or implied, obligation to
pay severance or termination pay to any officer or employee of the Company, or
to pay any amounts to any consultant, agent or similar person or entity. No
employee has any material claim against the Company, whether under federal or
state law, any employment agreement or otherwise. The Company and Shareholders
have no knowledge of any facts which would indicate that following the Closing
any employee of the Company will not continue employment with the Company on a
basis no less favorable than that upon which such employee is currently employed
by the Company.
3.19. Condition of Assets.
(a) All of the assets owned or leased by the Company are in
good condition and repair and are suitable for their intended use
(subject to normal wear and tear and obsolescence) in the ordinary
course of business and have been properly serviced and maintained and
conform in all material respects with all applicable ordinances,
regulations and other laws and there are no known structural or latent
defects therein.
(b) At least ninety-five percent (95%) in value of the rental
merchandise, parts, supplies and accessories of the Company included
in the Unaudited Financial Statements of the Company consisted of
items which are good and merchantable, within normal trade tolerances
and of a quality and quantity presently rentable, usable or saleable
in the usual and ordinary course of business of the Company.
(c) Attached as Schedule 3.19 is a report as of December 21,
1996 which is true and correct in all material respects. Such report
reflects, as of the close of business on December 21, 1996, the number
of active rental agreements with customers of the Company and the
number of such rental agreements that are delinquent. The rental
agreements are bona fide agreements entered into in the usual and
ordinary course of business and, to the knowledge of the Company and
Shareholders, the rental agreements are not subject to any
counterclaim or set-off.
3.20. Suppliers. Set forth on Schedule 3.20 is a complete and
accurate list of the top ten suppliers of the Company in terms of purchases
during the fiscal year ending December 31, 1995 and during the fiscal year 1996
through October 31, 1996 showing the total purchases by the Company from each
supplier during each such fiscal period. There has not been any material
adverse change in the business relationship of the Company with any supplier
named in Schedule 3.20.
3.21. Contracts and Commitments. Schedule 3.21 hereto lists all of
the following types of contracts to which the Company is a party or which the
Company is subject to:
(a) requirements contracts (which do not terminate, or is not
terminable by the Company, prior to December 31, 1996) under which
sales or purchases are made;
- 15 -
20
(b) joint venture agreements or arrangements or other
agreements involving the sharing of profits;
(c) other "Material Contracts" (as hereinafter defined);
(d) contracts or agreements for the sale of its products or
the furnishing of services, or any sales agency, broker, distribution
or similar contracts, except contracts made in the ordinary and
regular course of business;
(e) (i) employment contracts with any officer, consultant,
director or employee, or (ii) plans, arrangements or contracts
providing for options, bonuses, stock purchases, pensions, deferred
compensation, retirement payments, profit-sharing or the like;
(f) collective bargaining or union contracts or agreements;
(g) contracts or agreements restricting it or otherwise
limiting its freedom to compete in any line of business or with any
person, or from otherwise carrying on its business anywhere in the
world;
(h) agreements or contracts setting forth liability or
obligation with respect to the return of inventory or merchandise in
the possession of wholesalers, distributors, retailers or other
customers;
(i) debt obligations, including guarantees of or agreements
to acquire any debt obligation of others;
(j) Except as set forth on the 1995 Balance Sheet, and except
for reasonable travel advances, agreements or contracts pursuant to
which there exists any outstanding loan to any person or entity; and
(k) powers of attorney from the Company.
The Company is not in default in any material respect of any contract,
agreement, lease, license, permit or concession described in Schedule 3.21. As
used herein, "Material Contract" shall mean any contract or agreement that could
reasonably be anticipated to involve sales or purchases by the Company in any
twelve (12) month period in excess of an aggregate of $50,000, or any contract
or agreement that by its terms requires the Company to make payments thereunder
in any twelve (12) month period in excess of an aggregate of $50,000.
- 16 -
21
3.22. Accounts Receivable. Except as and to the extent set forth in
Schedule 3.22 hereto, the accounts receivable of the Company at November 30,
1996, to Shareholders' knowledge, were good and collectible at the recorded
amounts thereof, were not subject to any counterclaims or setoffs (less the
amount of any applicable existing reserves for uncollectibility, counterclaims
or setoffs reflected or reserved against as set forth on the 1995 Balance Sheet)
and arose from bona fide transactions in the ordinary course of business. The
accounts receivable of the Company which will be included as a part of the
Assets will be , to Shareholders' knowledge, good and collectible at the
recorded amounts thereof, will not be subject to any counterclaims or setoffs
(other than the amount of any applicable existing reserves for uncollectibility,
counterclaims or setoffs) and shall have arisen from bona fide transactions in
the ordinary course of business.
3.23. Investment Representations. Each of the Company and Xxxxxx
(a) is acquiring the Note and, when it is converted, will
acquire the RTO Stock, for his own account, for investment, and not
with a view to the resale or distribution thereof in violation of the
Securities Act;
(b) has the ability to, and understands that it or he must,
bear the economic risk of its or his investment in RTO Stock
indefinitely, because (i) the issuance of RTO Stock will not be
registered under the Securities Act or any applicable state securities
laws, and (ii) RTO Stock may not be resold unless subsequently
registered under the Securities Act and such other laws or unless an
exemption from such registration is available;
(c) will not pledge, transfer, convey, or otherwise dispose
of any of RTO Stock, except (i) subject to an effective registration
statement under the Securities Act and any applicable state securities
laws, or (ii) after delivery to Purchaser of an opinion of counsel to
the effect that such registration is not required (which opinion and
counsel must be satisfactory to Purchaser and may be relied on by
Purchaser in making such determination);
(d) has had the opportunity to ask the management of
Purchaser questions regarding the business and financial condition of
Purchaser and the Note and the RTO Stock;
(e) has such knowledge and experience in financial and
business matters that it or he is capable of evaluating the merits and
risks of its or his investment in the Note and the RTO Stock;
(f) is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act;
(g) has received no representation, commitment or indication
from Purchaser or its representatives that Purchaser will register the
Note or the RTO Stock (including that received by Shareholders) under
federal or state securities laws at any time in the future; and
- 17 -
22
(h) acknowledges that Xxxxxx recognizes that the provisions
of Rule 144 promulgated under the Securities Act are not available for
the public resale of the Note or the RTO Stock received by Xxxxxx,
that Xxxxxx has no right to have the Note or such shares of RTO Stock
registered under the Securities Act to permit them to be resold, and
that there is no established market for such shares and no likelihood
that one will develop.
3.24. Accuracy of Information Furnished. All information furnished
to Purchaser by the Company or Shareholders herein or in any schedule hereto is
true, correct and complete in all material respects. Such information states all
material facts required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements are made,
true, correct and complete in all material respects.
ARTICLE IV
PURCHASER'S COVENANTS
4.1. Consummation of Agreement. Purchaser agrees to use its best
efforts to cause the consummation of the transactions contemplated by this
Agreement in accordance with their terms and conditions.
4.2. Retention of Records. Purchaser shall retain all books and
records of the Company which Purchaser receives from the Company for the entire
period required by the Internal Revenue Service, the Department of Labor, or
other authorities or agencies for which the Company is required to retain
records. After the Closing, the Company and its representatives shall have
reasonable access to all such books and records during normal business hours. In
addition, Purchaser shall, upon reasonable request of the Company, furnish to
the Company, without charge, copies of any such books or records.
4.3. Employment Arrangements. Purchaser shall use its best efforts
to enter into employment arrangements with Xxxxx Xxxxxx which shall contain the
terms described in Schedule 4.3.
ARTICLE V
SHAREHOLDERS' COVENANTS
Shareholders, jointly and severally, agree that from the execution
hereof and on or prior to the Closing:
5.1. Business Operations. The Company shall conduct its business
only in the ordinary and usual course of business consistent with past and
current practices, will not introduce any new method of management or operation,
and Shareholders shall use their best efforts to maintain and preserve the
business organization and goodwill of the Company intact, to retain the services
of its key officers and employees and retain its present customers and suppliers
so that they will be available to Purchaser after the Closing and to cause
consummation of the transactions contemplated by this
- 18 -
23
Agreement in accordance with its terms and conditions. Shareholders shall not
take any action that might impair the business or assets of the Company without
the prior consent of Purchaser or take or fail to take any action that would
cause or permit the representations made in Article III hereof to be inaccurate
at the time of Closing or preclude Shareholders from making such representations
and warranties at the Closing. The Company shall not declare, pay or set aside
for payment any dividends or distributions of any kind, other than normal S
Corporation or distributions not to exceed in the aggregate $62,000. The Company
shall not make any loan or advance to any shareholder, officer, director, or
employee or redeem, purchase, or otherwise acquire or sell or grant any of its
shares or any right to acquire such shares.
5.2. Access. The Company and Shareholders shall permit Purchaser
and its authorized representatives full access to, and make available for
inspection, all of the assets and business of the Company, including the
Company's employees, customers and suppliers, and furnish Purchaser all
documents, records and information relating thereto and with respect to the
affairs of the Company as Purchaser and its representatives may reasonably
request, all for the sole purpose of permitting Purchaser to become familiar
with the business and assets and liabilities of the Company.
5.3. Material Change. Prior to the Closing, the Company and
Shareholders shall promptly inform Purchaser in writing of any material adverse
change in the condition of the assets or business of the Company.
Notwithstanding the disclosure to Purchaser of any such material adverse change,
Shareholders shall not be relieved of any liability for, nor shall the providing
of such information by the Company and Shareholders to Purchaser be deemed a
waiver by Purchaser of, the breach of any representation or warranty of
Shareholders contained in this Agreement.
5.4. Approvals of Third Parties. As soon as practicable after the
execution of this Agreement, but in any event prior to the Closing Date, the
Company and Shareholders will use their best efforts to secure all necessary
approvals and consents of third parties to the consummation of the transactions
contemplated by this Agreement.
5.5. Employee Compensation. Except with Purchaser's prior written
consent or pursuant to contracts in existence as of the date hereof, no increase
will be made in the compensation or rate of compensation payable or to become
payable to the officers or employees of the Company, and no bonus (other than
those described in Schedule 3.18), profit sharing, retirement, insurance, death,
fringe benefit or other extraordinary or indirect compensation shall accrue, be
set aside or be paid to, for or on behalf of any of such officers or employees
other than as required by presently existing pension, profit sharing, bonus and
similar benefit plans as presently constituted, and no agreement or plan other
than those now in effect shall be adopted or committed for.
5.6. Contracts. Except with Purchaser's prior written consent, the
Company shall not waive any right or cancel any contract, debt or claim nor will
it assume or enter into any contract, lease, license, obligation, indebtedness,
commitment, purchase or sale, except for rental contracts executed in the
ordinary course of business.
- 19 -
24
5.7. Capital Assets; Payments of Liabilities. Except with
Purchaser's prior written consent, the Company will not acquire or dispose of
any capital asset having an initial cost of $5,000 or more, nor will the Company
discharge or satisfy any lien or encumbrance or pay or perform any obligation or
liability other than (i) liabilities and obligations reflected in the Financial
Statements, and (ii) current liabilities and obligations incurred in the usual
and ordinary course of business and, in either such case, only as required by
the express terms of the agreement or other instrument pursuant to which the
obligation or liability was incurred.
5.8. Mortgages, Liens. Except with Purchaser's prior written
consent, the Company will not enter into or assume any mortgage, pledge,
conditional sale or other title retention agreement, permit any lien,
encumbrance or claim of any kind to attach to any of its assets, whether now
owned or hereafter acquired, or guarantee or otherwise become contingently
liable for any stock or dividends of any corporation, business or other person
or obligations of another except obligations arising by reason of endorsement
for collection and other similar transactions in the usual and ordinary course
of business, or make any capital contributions or investments in any
corporation, business or other person.
5.9. Changes in Inventory. The Company will not alter the physical
contents or character of any of its inventories so as to affect the nature of
its business or result in a change in the total dollar valuation thereof.
5.10. No Disclosure or Negotiation with Others. The Company and
Shareholders will prevent the disclosure of any of the terms or conditions
hereof to any other person, other than to its employees, legal counsel and
accountants. Until this Agreement is terminated in accordance with its terms
without any breach by the Shareholders, Shareholders may not, nor will they
permit the Company to, directly or indirectly seek, solicit, encourage, or
consider indications of interest, or offers from, or negotiate or enter into any
letter of intent, memorandum of understanding, agreement or arrangement with,
any person with respect to any sale or transfer of any of the capital stock or
(other than in the ordinary course of business consistent with past practice)
the assets of the Company, or any merger or consolidation of the Company, that
is inconsistent with this Agreement or the transactions contemplated hereby. No
Shareholder will vote any shares of B&L Stock in favor of any such inconsistent
transaction. The Shareholders will promptly notify Purchaser of any proposal,
offer, inquiry, or contact by any person with respect to any such inconsistent
transaction.
5.11. Other Agreements.
(a) At the Closing, Xxxxxx shall enter into a Noncompetition
Agreement in the form attached hereto as Exhibit C.
(b) At the Closing, Xxxx shall enter into a Noncompetition
Agreement in the form attached hereto as Exhibit D.
- 20 -
25
(c) At the Closing, Shareholders shall deliver the license in the
form attached hereto as Exhibit E (the "License") relating to the right to use
the Champion trade name, computer system, and all other intellectual property
necessary to operate the business as it is currently being operated.
5.12. Post-Closing Access. The Company and Shareholders acknowledge
that Purchaser will assist Seller in the preparation of consolidated financial
statements of the Company's business, including results of the operations of the
Company prior to the consummation of the transactions contemplated herein. To
facilitate the preparation of such financial statements, the Company and
Shareholders shall permit Purchaser and its authorized representatives,
including any accounting firm designated thereby, full access to all books,
records, employees and information from and after the Closing. In addition, the
Company and Shareholders covenant and agree to prepare financial statements for
the Company for the year ended December 31, 1996 on an expedited basis and to
cooperate with the Purchaser and its authorized representatives, including any
accounting firm designated thereby, and, if requested, to provide a customary
letter of representation relating to the financial records of the Company prior
to the Closing.
ARTICLE VI
PURCHASER'S CONDITIONS PRECEDENT
Except as may be waived in writing by Purchaser, the obligations of
Purchaser hereunder are subject to the fulfillment at or prior to the Closing of
each of the following conditions:
6.1. Representations and Warranties. The representations and
warranties of Shareholders contained herein shall be true and correct in all
material respects as of the Closing, and Purchaser shall not have discovered any
material error, misstatement or omission therein.
6.2. Covenants. Shareholders shall have performed and complied in
all material respects with all covenants or conditions required by this
Agreement to be performed and complied with by them prior to the Closing.
6.3. Opinion. Counsel to the Company and Shareholders shall have
delivered to Purchaser its opinion, dated the Closing Date, in form and
substance reasonably satisfactory to Purchaser.
6.4. Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement.
6.5. No Material Adverse Change. No material, adverse change in
the assets, business, properties, results of operations, financial condition or
prospects of the Company shall have occurred after the date hereof and prior to
the Closing.
- 21 -
26
6.6. Due Diligence and Review. Completion to the satisfaction of
Purchaser of diligence review and examination of the Company by Purchaser and a
favorable report by Purchaser's advisors satisfactory to Purchaser concerning
the corporate status and proceedings of the Company and the other aspects of the
Company's business and operations as Purchaser may reasonably deem relevant.
6.7. Approval by Board. This Agreement has been approved by the
Board of Directors of Purchaser.
6.8. Accounting. A favorable review by Purchaser's independent
accountants of the Financial Statements and the absence of any absolute or
contingent liabilities of the Company, except
as reflected therein.
6.9. Employment Arrangements. Xxxxxx shall have entered into the
employment arrangements with Purchaser as described in Section 4.3.
ARTICLE VII
SHAREHOLDERS' CONDITIONS PRECEDENT
Except as may be waived in writing by Shareholders, the obligations of
Shareholders hereunder are subject to fulfillment at or prior to the Closing of
each of the following conditions:
7.1. Representations and Warranties. The representations and
warranties of Purchaser contained herein shall be true and correct in all
material respects as of the Closing and Shareholders shall not have discovered
any material error, misstatement or omission therein.
7.2. Covenants. Purchaser shall have performed and complied in all
material respects with all covenants or conditions required by this Agreement to
be performed and complied with by it prior to the Closing.
7.3. Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement.
7.4. Employment Arrangements. Xxxxxx shall have entered into the
employment arrangements as described in Section 4.3.
- 22 -
27
ARTICLE VIII
INDEMNIFICATION
8.1. Shareholders' Indemnity. Subject to the terms and conditions
of this Article VIII, the Company and Shareholders, jointly and severally,
hereby agree to indemnify, defend and hold Purchaser and its officers,
directors, agents, attorneys and affiliates ("Purchaser Affiliates") harmless
from and against all losses, claims, obligations, demands, assessments,
penalties, liabilities, costs, damages, reasonable attorneys' fees and expenses
(collectively, "Damages"), asserted against or incurred by Purchaser and/or any
Purchaser Affiliate by reason of, resulting from, or related to, any inaccuracy
in or breach of any representation, warranty, covenant or agreement of any
Shareholder contained in this Agreement or in any agreement executed at the
Closing by any of Shareholders.
8.2. Purchaser's Indemnity. Subject to the terms and conditions of
this Article VIII, Purchaser hereby agrees to indemnify, defend and hold
Shareholders, and each of them, harmless from and against all Damages asserted
against or incurred by any or all of the Shareholders by reason of, resulting
from, or related to, any inaccuracy in or breach of any representation,
warranty, covenant or agreement of Purchaser contained in this Agreement or in
any agreement executed at the Closing by Purchaser.
8.3. Conditions of Indemnification. The respective obligations and
liabilities of Shareholders and Purchaser (the "indemnifying party") to any
person to be indemnified (the "person to be indemnified") under Sections 8.1 and
8.2 hereof with respect to claims resulting from the assertion of liability by
third parties shall be subject to the following terms and conditions:
(a) Within 20 days (or such earlier time as might be required
to avoid prejudicing the indemnifying party's position) after receipt
of notice of commencement of any action evidenced by service of
process or other legal pleading, or with reasonable promptness after
the assertion in writing of any claim by a third party, the person to
be indemnified shall give the indemnifying party written notice
thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake
the defense thereof by representatives of its own choosing and at its
own expense; provided, however, that the person to be indemnified may
participate in the defense with counsel of its own choice and its own
expense and, provided further, that the failure of the person to be
indemnified to give timely notice shall not affect the right to
indemnification hereunder except to the extent (and then only to the
extent) the indemnifying party proves actual damages caused by such
failure.
(b) In the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the 10th
day preceding the day on which an answer or other pleading must be
served in order to prevent judgment by default in favor of the person
asserting such claim), does not elect to defend against such claim,
the person to be indemnified will (upon further notice to the
indemnifying party) have the right, but not the
- 23 -
28
obligation, to undertake the defense, compromise or settlement of such
claim on behalf of and for the account and risk of the indemnifying
party and at the indemnifying party's expense, subject to the right of
the indemnifying party to assume the defense of such claims at any
time prior to settlement, compromise or final determination thereof.
(c) Anything in this Section 8.3 to the contrary
notwithstanding, the indemnifying party shall not settle any claim
without the consent of the party to be indemnified unless such
settlement involves only the payment of money and the claimant
provides to the person to be indemnified a release from all liability
in respect of such claim. If the settlement of the claim involves more
than the payment of money, the indemnifying party shall not settle the
claim without the prior consent of the person to be indemnified, which
consent shall not be unreasonably withheld.
(d) The person to be indemnified and the indemnifying party
will each cooperate with all reasonable requests of the other.
8.4. Exclusive Nature of Remedies. Except for the remedy of
specific performance and other equitable remedies and except to the extent that
any of the parties shall have engaged in fraud in connection with this
Agreement, the rights and remedies set forth in this Article VIII shall be the
exclusive rights or remedies available to the persons to be indemnified with
respect to claims for which indemnification is authorized or provided pursuant
to this Article. Such limitation shall apply notwithstanding that such claims
are asserted by a cause of action or legal theory other than breach of contract.
ARTICLE IX
MISCELLANEOUS
9.1. Amendment. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all of the parties
hereto or, in case of an asserted waiver, signed by the party against which
enforcement of the waiver is sought.
9.2. Assignment. Neither this Agreement nor any right created
hereby shall be assignable by any party hereto, except by Purchaser to a
wholly-owned subsidiary of Purchaser.
9.3. Notice. Any notice or communication must be in writing and
given by depositing the same in the United States mail, addressed to the party
to be notified, postage prepaid and registered or certified with return receipt
requested, or by delivering the same in person. Such notice shall be deemed
received on the date on which it is hand-delivered or on the third business day
following the date on which it is so mailed. For purposes of notice, the
addresses of the parties shall be:
- 24 -
29
If to the Company or to Xxxx Xxxx:
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxxxxx, Xxxxxxx 00000
If to Xxxxx Xxxxxx: 14620 N. Nebraska Avenue
Building B - Suite 102
Tampa, Florida 33613-1431
If to Purchaser: Action TV & Appliance Rental, Inc.
Attn: K. Xxxxx Xxxx, CFO
000 Xxxx Xxxxxxxxx
Xxxxxxxx, Xxxxx 00000
with a copy to: Xxxx X. Xxxxxx, Xx., Esquire
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Any party may change its address for notice by written notice given to the
other parties in accordance with this Agreement.
9.4. Confidentiality and Public Announcements.
(a) The parties shall keep this Agreement and its terms
(including, but not limited to, the price paid by Purchaser for the
B&L Stock) confidential, but any party may make such disclosures after
the Closing as it reasonably considers are required by law, but each
party will notify the other parties in advance of any such disclosure.
In the event that the transactions contemplated by this Agreement are
not consummated for any reason whatsoever, the parties hereto agree
not to disclose or use any confidential information they may have
concerning the affairs of the other parties, except for information
which is required by law to be disclosed. Confidential information
includes, but is not limited to: customer lists and files, prices and
costs, business and financial records, surveys, reports, plans,
proposals, financial information relating to personnel contracts,
stock ownership, liabilities and litigation. Should the transactions
contemplated hereby not be consummated, nothing contained in this
Section shall be construed to prohibit the parties hereto from
operating a business in competition with each other.
(b) Purchaser and Shareholders will (i) mutually agree on the
text of any press release and (ii) consult with each other before
making any other public statement with respect to this Agreement and
the transactions consummated pursuant to this Agreement.
- 25 -
30
9.5. Entire Agreement. This Agreement and the schedules and
exhibits hereto supersede all prior agreements and understandings relating to
the subject matter hereof, except that the obligations of any party under any
agreement executed pursuant to this Agreement shall not be affected by this
Section.
9.6. Costs, Expenses and Legal Fees.
(a) Whether or not the transactions contemplated hereby are
consummated, each party hereto shall bear its own costs and expenses
(including attorneys' fees).
(b) Notwithstanding anything to the contrary contained
herein, Shareholders are responsible for payment of all stock transfer
and other taxes (and expenses relating thereto) imposed or incurred in
connection with the consummation of the transactions contemplated
hereby.
9.7. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present of future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
9.8. Survival of Representations and Warranties. The
representations and warranties contained herein shall survive the Closing for a
period of one (1) year, except for those statements contained in Sections 3.4,
3.5, 3.6, 3.7 and 3.12 herein which shall survive the Closing for a period of
two (2) years, and except for those statements contained in Section 3.2 shall
survive until the expiration of the applicable statute of limitations and all
statements contained in any certificate, exhibit or other instrument delivered
by or on behalf of Shareholders or Purchaser pursuant to this Agreement shall be
deemed to have been representations and warranties by Shareholders or Purchaser,
as the case may be, and shall survive the Closing for a period of one (1) year.
Notwithstanding the foregoing, any claim for indemnification as a result of
fraud in the making of such representation or warranty shall not be required to
be made within one (1) year of the Closing. No investigation by any party hereto
or on its behalf of any matter covered by the representations and warranties
included in this Agreement shall affect the right of the party to make a claim
for indemnification during the one year claims period described above.
9.9. Governing Law and Venue. THE PARTIES ACKNOWLEDGE AND AGREE
THAT THIS AGREEMENT AND THE OBLIGATIONS AND UNDERTAKINGS OF THE PARTIES
HEREUNDER WILL BE PERFORMABLE IN DALLAS, DALLAS COUNTY, TEXAS. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
- 26 -
31
WITH, THE LAWS OF THE STATE OF TEXAS. IF ANY ACTION IS BROUGHT TO ENFORCE OR
INTERPRET THIS AGREEMENT, EXCLUSIVE VENUE FOR SUCH ACTION SHALL BE IN DALLAS
COUNTY, TEXAS AND THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO
THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN DALLAS COUNTY, TEXAS
FOR SUCH PURPOSE.
9.10. Captions. The captions in this Agreement are for convenience
of reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
9.11. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
9.12. Number and Gender. Whenever the context requires, references
in this Agreement to the singular number shall include the plural, the plural
number shall include the singular and words denoting gender shall include the
masculine, feminine and neuter.
9.13. Facsimile Transmissions. This Agreement and all agreements,
documents and certificates delivered pursuant to this Agreement or in connection
with the transactions consummated pursuant to this Agreement may be executed by
any party and transmitted by such party to any other party or parties by
facsimile, and any such document shall be deemed to have full force and effect
as if the facsimile signature or signatures on such documents were originals.
ARTICLE X
TERMINATION
10.1. Termination by Purchaser. Purchaser may terminate this
Agreement by written notice to Shareholders prior to Closing if (a) any of the
conditions precedent to its obligation to close stated in Article VI has not
been fulfilled at or prior to the Closing Date; (b) in Purchaser's reasonable
opinion Shareholders have materially failed to comply with any term or condition
of this Agreement, or the Company, Shareholders or any of the Company's officers
has provided Purchaser with materially inaccurate information or has failed to
disclose fully to Purchaser any materially unfavorable information about the
business or assets of the Company; (c) there has been a materially adverse
change in the business or assets of the Company or in the ability of the Company
or Shareholders to carry out any obligation under this Agreement; or (d) for any
reason other than a default by Purchaser the Closing has not occurred by January
31, 1997.
10.2. Termination by Shareholders. The Company or the Shareholders
may terminate this Agreement by written notice to Purchaser prior to Closing if
(a) any of the conditions precedent to their obligation to close stated in
Article VII has not been fulfilled at or prior to the Closing Date; (b) in the
Company's or Shareholders' reasonable opinion Purchaser has materially failed to
comply with any term or condition of this Agreement; or (c) if for any reason
other than a default by the Company or the Shareholders the Closing has not
occurred by January 31, 1997.
- 27 -
32
10.3. Effect of Termination. In the event of termination of this
Agreement pursuant to this Article X, no party hereto (or any of its
shareholders, directors, officers or affiliates) shall have any liability or
further obligation to any other party to this Agreement except that nothing
herein will relieve any party from any breach of this Agreement, and Sections
9.3, 9.4, 9.5, 9.6, 9.7, 9.8, 9.9, this Section 10.3 and Section 10.4 shall
remain in full force and effect.
10.4. Return of Information. If this Agreement is terminated
pursuant to this Article X or for any other reason, each party will redeliver
all documents, work papers and other materials (inclusive of excerpts and all
copies thereof), of any other party relating to the transaction contemplated
hereby, whether so obtained before or after execution hereof, to the party
furnishing the same, and all information received by any party hereto with
respect of any other party shall not at any time be used for the advantage of,
or disclosed to third parties by such party, provided, however, that this
Section 10.4 shall not apply to any documents, work papers, material or
information which is a matter of public knowledge or which has heretofore been
published in any publication for public distribution or filed as public
information with any governmental authority by the party furnishing the same to
the other party.
- 28 -
33
PURCHASER
ACTION RENT-TO-OWN OF FLORIDA, INC.
/s/ Xxxxx X. Xxxxx Xx.
------------------------------------
Xxxxx X. Xxxxx, Xx.
President and CEO
COMPANY
B&L CONCEPTS, INC.
/s/ Xxxxxx X'Xxxxx
------------------------------------
Xxxxxx X'Xxxxx
Vice President and Chief Financial Officer
SHAREHOLDERS
/s/ Xxxx Xxxx
---------------------------------------
Xxxx Xxxx
/s/ Xxxxx Xxxxxx
---------------------------------------
Xxxxx Xxxxxx
- 29 -
34
EXHIBIT A
CONVERTIBLE PROMISSORY NOTE
Dallas, Texas
January ___, 1997
$3,000,000
FOR VALUE RECEIVED, RTO, INC., a Delaware corporation ("Maker"), promises
to pay to B&L CONCEPTS, INC. dba Champion Rent To Own, a Florida corporation
("Holder"), or its registered assigns (Holder and its registered assigns being
referred to herein as "Payee"), at Dallas, Texas, or at such other place as
Payee may from time to time designate in writing, the principal sum of Three
Million Dollars ($3,000,000), together with interest on the principal balance
hereof at the rate hereinafter provided, in accordance with the terms and
conditions hereof. Maker acknowledges that it is receiving consideration for
this Note by its acquisition, through a wholly owned subsidiary, of
substantially all of the assets of Holder pursuant to that certain Asset
Purchase Agreement dated as of January _, 1997 by and among Maker, Holder, Xxxx
Xxxx and Xxxxx Xxxxxx (the "Asset Purchase Agreement").
1. Principal and Interest. Commencing on the date hereof and continuing
until repayment of the sums due hereunder in full, the principal amount due
hereunder shall bear interest at a rate equal to 6% per annum. Interest on the
principal balance of this Note shall be payable quarterly on April 1, July 1,
October 1 and January 1, commencing April 1, 1997, and shall be computed on the
basis of a 360-day year for the actual number of days elapsed. Unless sooner
accelerated in accordance with the terms of this Note, the entire principal
amount due hereunder, together with all accrued but unpaid interest thereon,
shall be due and payable in full on January _, 1999.
2. Conversion. The Note shall be convertible into common stock of Maker
(the "RTO Stock") at a conversion rate of $ 1,250 per share of RTO Stock, which
shall be adjusted for any stock splits, stock dividends or recapitalizations
affecting the capital stock of Maker. Maker shall have the right to demand
conversion of the Note, in whole or in part, (a) concurrently with the
consummation of an initial public offering of the RTO Stock, (b) upon such time
as Maker is merged with, or a majority of Maker's outstanding common stock
is acquired by, an unrelated third party and (c) upon such time as Maker sells
all or substantially all of its assets to an unrelated third party. In such
event, Maker shall give Payee at least five business days written notice of
such conversion. Payee shall have the right, at any time, to demand conversion
of the Note, in whole or in part. In such event, Payee shall give Maker at
least five business days written notice of such conversion. At the time of any
such conversion, Payee shall enter into the Shareholders Agreement which shall
be in place at such time among the shareholders of Maker.
3. Adjustment. If 1997 actual annual gross revenues from the 27 stores
operated by B&L Concepts, Inc. as of November 14, 1996 (the "1997 Revenues")
are less than $15,000,000, then the Note shall be reduced by an amount (rounded
to the nearest multiple of $ 1,250) determined by multiplying (x) the
difference between $15,000,000 and the 1997 Revenues (stated as a
35
percentage of $15,000,000) by (y) $888,000; provided that such adjustment will
not exceed in any event $138,000. If the Note is converted into RTO Stock as
provided in Section 2 prior to the availability of the 1997 Revenues and the
calculation of any adjustment in the principal amount of the Note, at the time
of such conversion Maker shall deposit in an escrow account for Payee that
number of shares of RTO Stock having a value (calculated on the basis of $1,250
per share) of at least $138,000 and such shares shall remain in the escrow
account until calculation of any adjustment in the principal amount of the
Note. If any adjustment is required in the principal amount of the Note, Maker
shall withdraw from the escrow that number of shares of RTO stock having a
value (calculated on the basis of $1,250 per share) equal to the adjustment
amount and all other shares of RTO Stock in the escrow (if any) shall be
released to Payee.
4. Maximum Lawful Rate. This Note is hereby expressly limited so that in
no contingency or event whatsoever, whether by acceleration of maturity of the
indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to
be paid to Payee for the use, forbearance or detention of money exceed the
highest lawful rate permissible under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision hereof, at the time performance of such
provision occurs, shall involve payment of interest in excess of that authorized
by law, the obligation to be fulfilled shall be reduced to the limits so
authorized by law, and if, from any circumstances, Payee shall ever receive as
interest an amount which would exceed the highest lawful rate applicable to
Maker, such amount which would be excessive interest shall be applied to the
reduction of the unpaid principal balance hereof and not to the payment of
interest.
5. Method of Making Payments; Renewal of Obligations. All payments with
respect to principal and interest hereunder shall be made by wire transfer of
immediately available funds to such account as Payee has designated in writing
to Maker. Maker hereby expressly agrees that to the extent that Maker makes a
payment or payments on this Note and such payment or payments, or any part
thereof, are subsequently invalidated, declared to be fraudulent or
preferential, set aside or are required to be repaid to a trustee, receiver, or
any other party under any bankruptcy act, state or national law, common law or
equitable cause, then to the extent of such payment or repayment, the
indebtedness evidenced hereby which is intended to be satisfied by such payment
or payments shall be revived and continued in full force and effect as if said
payment or payments had not been made.
6. Events of Default. The occurrence of any one or more of the following
conditions or events shall constitute an "Event of Default":
(a) Failure to Pay. Maker fails to pay any payment of principal or
interest when due and payable or declared due and payable in accordance with
the terms of this Note and such failure shall continue for five (5) business
days; or
(b) Bankruptcy. (i) Maker shall commence proceedings seeking either
its own bankruptcy or to be granted a suspension of payments or any other
proceeding under any bankruptcy, reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution,
-2-
36
insolvency or liquidation or similar law of any jurisdiction, whether now
or hereafter in effect; (ii) any proceeding described in clause (i) of
this subsection 6(b) is commenced or applied to be commenced against
Maker, which proceeding remains undismissed for a period of sixty (60)
days or is dismissed on the ground of lack of funds sufficient to cover the
costs of such proceedings; (iii) a custodian, trustee, administrator or
similar official is appointed under any applicable law described in clause
(i) of this subsection 6(b) with respect to Maker, or such custodian,
trustee, administrator or similar official takes charge of all or any
substantial part of the property of Maker, (iv) an adjudication is made
that Maker is insolvent or bankrupt; (v) any order of relief or other
order is entered approving any case or proceeding described in clause (ii)
of this subsection 6(b); (vi) Maker makes a general assignment for the
benefit of its creditors; or (vii) Maker takes any corporate or similar
action for the purpose of effecting any of the actions, orders or events
described in the foregoing clauses of this subsection 6(b).
7. Prepayment. Maker shall have no right to prepay the Note. In the
event that Maker has not consummated an initial public offering of its common
stock prior to January 1, 1998 (the "Prepayment Date"), Payee shall have the
right to require prepayment of the Note, in full or in part, at any time after
the Prepayment Date and prior to the maturity date hereof by written notice to
Maker specifying the prepayment date, which date shall not be less than five
(5) business days after Maker's receipt of such prepayment notice. Upon the
receipt of such prepayment notice, Maker shall pay the amount of principal
specified in such prepayment notice, together with all accrued but unpaid
interest thereon, on the prepayment date specified in such prepayment notice.
8. Remedies. Upon the occurrence of an Event of Default, at the option
of Payee, all amounts payable by Maker to Payee under the terms of the Note
shall immediately become due and payable by Maker to Payee and Payee shall have
all the rights, powers and remedies available under the terms of this Note,
under applicable law or otherwise. Notwithstanding the foregoing, upon the
occurrence of an Event of Default described in Section 6(b) above the amounts
hereunder shall become automatically due and payable without presentment
protest or demand of any kind.
9. Costs of Collection. Maker agrees to pay all costs and expenses of
collection, including reasonable attorneys' fees and expenses arising in
connection with any enforcement action by Payee in which it shall prevail on
any of its rights under this Note whether by or through an attorney-at-law or
in an action in bankruptcy, insolvency or other judicial proceedings.
10. Waivers; Amendment. No delay or failure on the part of Payee to
exercise any right or remedy accruing to Payee hereunder, upon any default or
breach by Maker of any term or provision hereof, shall be held to be an
abandonment thereof. No delay on the part of Payee in exercising any of its
rights or remedies shall preclude Payee from the exercise thereof at any time
during the continuance of any default or breach. No waiver of a single default
or breach shall be deemed a waiver of any subsequent default or breach. Payee
may enforce any one or more remedies hereunder successively or concurrently, at
its option. All waivers under this Note must
-3-
37
be in writing signed by the Party entitled to enforce the right waived. All
amendments to this Note must be in writing and signed by both the Maker and the
Payee.
Maker, its successors and assigns, and all other persons liable for the
payment of this Note, waive presentment for payment, demand, protest, and
notice of demand, dishonor, protest and nonpayment, and consent to any and all
renewals, extensions or modifications that might be made by Payee and Maker as
to the time of payment of this Note from time to time.
11. Severability. The invalidity or unenforceability of any provision
hereof in any jurisdiction will not affect the validity or enforceability of
the remainder hereof in that jurisdiction or the validity or enforceability of
this Note, including that provision, in any other jurisdiction. To the extent
permitted by applicable law, each party hereto waives any provision of
applicable law that renders any provision hereof prohibited or unenforceable in
any respect. If any provision of this Note is held to be unenforceable for any
reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties hereto to the extent possible.
12. Notices. All notices and other communications required or permitted
under this Note shall be made in writing in accordance with Section 9.3 of the
Asset Purchase Agreement.
13. Captions. The captions herein set forth are for convenience only and
should not be deemed to define, limit or describe the scope or intent of this
Note.
14. Successors; Assignment. The terms and provisions of this Note shall
be binding upon and inure to the benefit of the successors and assigns of the
Maker and the successors and registered assigns of the Payee. This Note may not
be transferred or assigned by the Payee. Any purported transfer in violation of
the foregoing provision shall be null and void and of no force and effect
whatsoever.
15. Governing Law; Submission to Jurisdiction.
(a) This Note shall be deemed to be made in and in any and all
respects shall be governed by, and construed in accordance with, the laws of
the State of Texas (without regard to principles of conflict of laws).
(b) If any action is brought to enforce or interpret this Note,
exclusive venue for such action shall be in Dallas County, Texas and the
parties hereto irrevocably and unconditionally submit to the jurisdiction of
the state and federal courts located in Dallas County, Texas for such purpose.
16. Computation of Time. Whenever the last day for the exercise of any
privilege or the discharge of any duty under this Note shall fall on a day
other than a business day, the party having such privilege or duty shall have
until 5:00 p.m. (New York time) on the next succeeding business day to exercise
such privilege or to discharge such duty. For purposes of this Note, the
-4-
38
term "business day" shall mean any day other than a day which is a Saturday or
Sunday or other day on which commercial banks in the City of New York are
authorized or required to remain closed
-5-
39
IN WITNESS WHEREOF, Maker has caused this Note to be executed by its duly
authorized officer under its corporate seal as of the date first above written.
RTO, INC.
By:
-----------------------------------
By: K. Xxxxx Xxxx
Title: Chief Financial Officer
-6-
40
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is entered into this ____ day of
January, 1997, by and between B&L Concepts, Inc. dba Champion Rent To Own, a
Florida corporation ("Assignor"), and Action Rent-To-Own of Florida, Inc.
("Assignee"), a Florida corporation and a wholly owned subsidiary of RTO, Inc.,
a Delaware corporation ("RTO").
WHEREAS, Assignor, Assignee and RTO are parties to an Asset Purchase
Agreement dated as of January ___, 1997 (the "Asset Purchase Agreement"),
pursuant to which Assignor has agreed to sell to Assignee and Assignee has
agreed to purchase from Assignor substantially all of the assets of Assignor
and Assignee has agreed to assume the Assumed Liabilities, all as more fully
described in the Asset Purchase Agreement, for consideration in the amount and
on the terms and conditions provided therein; and
WHEREAS, all capitalized terms used and not otherwise defined shall have
the meanings ascribed to such terms in the Asset Purchase Agreement; and
WHEREAS, all the terms and conditions precedent provided in the Asset
Purchase Agreement have been met and performed or waived by the parties
thereto, and the parties now desire to consummate the transactions contemplated
by the Asset Purchase Agreement; and
WHEREAS, in accordance with the terms of the Asset Purchase Agreement,
Assignor desires to assign to Assignee all of its rights, duties and obligations
under certain agreements and arrangements, and the Assignee desires to accept
such assignment.
NOW THEREFORE, in consideration of the premises and of other valuable
consideration to Assignor in hand paid by Assignee at or before the execution
and delivery hereof, the receipt and sufficiency of which are hereby
acknowledged by Assignor:
1. Assignor does hereby assign, bargain sell, transfer, convey and
delegate all of its interest in and rights, duties and obligations in the
contracts, documents and agreements referred to on Exhibit A hereto to Assignee.
2. Assignee does hereby undertake, agree and assume to perform, pay
punctually and faithfully or otherwise discharge the debts, obligations and
liabilities as more particularly described on Exhibit B hereto and which are to
be assumed by Assignor pursuant to the terms of the Asset Purchase Agreement.
3. Nothing contained in this Assignment and Assumption Agreement shall
reduce or otherwise affect the right of Assignor or Assignee to be indemnified
by the other in accordance with the terms of the Asset Purchase Agreement.
41
IN WITNESS WHEREOF, the parties hereto have executed this Assignment and
Assumption Agreement as of the date and year first above written.
ASSIGNEE:
ACTION RENT TO OWN, INC.
a Florida corporation
By:
----------------------
Xxxxx X. Xxxxx, Xx.
President and CEO
CORPORATE SEAL
ATTEST:
--------------------------
Xxxxxx X. Xxxxxxx, Xx.
Secretary ASSIGNOR:
B&L CONCEPTS, INC.
a Florida corporation
By:
-------------------
Xxxxxx X. X'Xxxxx
CORPORATE SEAL Vice President and Chief Financial
Officer
ATTEST:
--------------------------
Xxxxx X. Xxxxxxxxx
Secretary
-2-
42
EXHIBIT C
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT ("Agreement"), made and entered into
effective as of the _ day of January, 0000, xxxxxxx XXX, Xxx., a Delaware
corporation ("RTO"), and Xxxxx Xxxxxx (hereinafter referred to as "Xx.
Xxxxxx").
WITNESSETH:
WHEREAS, Action Rent-To-Own of Florida, Inc. ("Action"), a wholly owned
subsidiary of RTO, has agreed to purchase certain assets (the "Assets") of B&L
Concepts, Inc. dba Champion Rent To Own, a Florida corporation ("B&L") and to
assume certain of the debts, obligations and liabilities of B&L pursuant to
an Asset Purchase Agreement, dated as of the _____ day of January, 1997, between
Action B&L the shareholders of (the "Asset Purchase
WHEREAS, Xx. Xxxxxx is a shareholder of B&L;
WHEREAS, the execution and delivery of this Agreement by Xx. Xxxxxx is a
condition for RTO to consummate the acquisition of the Assets pursuant to the
Asset Purchase Agreement (the "Closing");
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
SECTION 1. COMPENSATION.
In consideration of Xx. Xxxxxx'x agreements hereunder, Xx. Xxxxxx will
receive a portion of the proceeds paid to B&L pursuant to the Asset Purchase
Agreement, concurrently with the execution and delivery of this Agreement.
SECTION 2. CONFIDENTIAL INFORMATION, TRADE SECRETS AND NONCOMPETITION COVENANT.
2.1. Confidential Information. Xx. Xxxxxx hereby agrees that, except as
otherwise required in the course of his performance of any duties he may have
as an employee of RTO or any subsidiary of RTO, during the period commencing on
the date hereof and ending on the fifth (5th) anniversary of the date on which
Xx. Xxxxxx ceases to be employed by RTO or any such subsidiary of RTO (the
"Confidentiality Period"):
(i) Neither Xx. Xxxxxx, Xx. Xxxxxx'x wife and children (his
"Immediate Family") nor any company or other business in which Xx. Xxxxxx or a
member of Xx. Xxxxxx'x Immediate Family has a controlling interest (Xx. Xxxxxx,
the members of Mr.
43
Xxxxxx'x Immediate Family and each company and other business in which Xx.
Xxxxxx or a member of Xx. Xxxxxx'x Immediate Family has or acquires a
controlling interest being hereinafter referred to as a "Related Party"),
will directly or indirectly own, manage, operate, join, control or
participate in the ownership, management, operation or control of or be
connected in any manner with, any business conducted under the corporate or
trade name of RTO, B&L or Champion Rent To Own or under any corporate or
trade name of any subsidiary of RTO or any name similar thereto without the
prior written consent of RTO; and
(ii) Each Related Party shall hold in confidence (unless and to the
extent compelled to disclose by judicial or administrative process or by
other applicable law) all knowledge and information of a material and
confidential nature with respect to the business of RTO and its
subsidiaries and will not disclose, publish or make use of same without the
prior written consent of RTO; provided, however, that this Section 2.1
shall not apply to information which is or becomes known to the public or
to the trade other than through a breach of this Agreement by Xx. Xxxxxx;
provided, further, however, that prior to disclosure pursuant to judicial
or administrative process or as required by other applicable law, as
permitted above, of information to any third party, Xx. Xxxxxx shall use
his best efforts to give reasonable prior notice to RTO.
2.2. Trade Secrets. Each Related Party shall hold in confidence (unless and
to the extent compelled to disclose by judicial or administrative process or as
required by other applicable law) indefinitely any and all "Trade Secrets" (as
hereinafter defined) of RTO and its subsidiaries and shall not disclose,
publish or make use of same without the prior written consent of RTO. "Trade
Secrets" shall mean all in formation relating to the business of RTO and its
subsidiaries including, but not limited to, technical or nontechnical data, a
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, financial plan, product plan, list of actual or
potential customers or suppliers, or other information similar to any of the
foregoing, which derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can derive economic value from its disclosure or use;
provided, however, that Trade Secret does not mean (a) information that is or
becomes generally available to the public other than as a result of a
disclosure by RTO or any of its subsidiaries or Xx. Xxxxxx subsequent to the
date of this Agreement; (b) the general business skills and experience of Xx.
Xxxxxx; or (c) information generally known and used within the rent-to-own
industry; provided, further, however, that prior to disclosure pursuant to
judicial or administrative process or as required by other applicable law, as
permitted above, of information to any third party, Xx. Xxxxxx shall use his
best efforts to give reasonable prior notice to RTO.
2.3. Noncompetition
(a) Coverage. RTO, directly or indirectly through its subsidiaries is
engaged in the business of owning, managing, operating and developing
rental-purchase stores (collectively, the
-2-
44
"Purchaser Activities") in the Areas of Dominant Influence in which the
rental-purchase stores owned and operated by B&L Concepts, Inc. as of January
2, 1997 are located (the "Territory"). Xx. Xxxxxx represents and acknowledges
that the goodwill of RTO and sales and leasing of equipment and other
properties of RTO and its subsidiaries extend throughout the Territory.
Following the date hereof, RTO shall continue to conduct the Purchaser
Activities throughout the Territory. Xx. Xxxxxx acknowledges that, to protect
adequately the interests of RTO in its businesses in the Territory, it is
essential that any noncompete with respect thereto cover the entire Territory.
(b) Covenants: In consideration of (i) the purchase of the Assets
pursuant to the Asset Purchase Agreement and (ii) the consideration paid to Xx.
Xxxxxx pursuant to this Agreement, Xx. Xxxxxx hereby agrees as follows:
(A) during the period commencing on the date hereof and ending on
the fifth (5th) anniversary of the date hereof (the "Noncompete Period"),
no Related Party shall (without the prior written consent of RTO) directly
or indirectly in the Territory engage in, have any equity or profit
interest in, make any loan to or guarantee any obligation of or with
respect to, or render services (of an executive, advertising, marketing,
sales, administrative, supervisory or consulting nature) to, any business
conducting Purchaser Activities, except in connection with the course of
the performance of any duties the Related Party may have as an employee of
RTO or any subsidiary of RTO; and
(B) during the Noncompete Period, no Related Party shall (without
the prior written consent of RTO) directly or indirectly offer permanent
employment, on its own behalf or on behalf of any other person, firm or
corporation, to any person who is or becomes an employee of RTO or any
subsidiary of RTO and who has not thereafter ceased to be employed by RTO
or any subsidiary of RTO for a period of at least one year.
Notwithstanding anything contained herein to the contrary, Xx Xxxxxx shall
not be prohibited from (i) being a member, officer, director or representative
of, lobbying for or on behalf of or participating or being active in any
rent-to-own or similar trade association or (ii) owning, directly or
indirectly, up to 10% of the outstanding equity interest of any company in the
rent-to-own industry the stock of which is publicly traded on a national
securities exchange or in the over-the-counter market.
(c) Severability If a judicial determination is made that any of the
provisions of this Section 2.3 constitutes an unreasonable or otherwise
unenforceable restriction against Xx. Xxxxxx, the provisions of this Section 2.3
shall be rendered void only to the extent that such judicial determination finds
such provisions to be unreasonable or otherwise unenforceable. In this regard,
the parties hereto hereby agree that any judicial authority construing this
Agreement shall be empowered to sever any portion of the Territory, any
prohibited business activity or any time period from the coverage of this
Section 2.3 and to apply the provisions of this Section 2.3 to the remaining
portion of the Territory, the remaining business activities or the remaining
time period
-3-
45
not so severed by such authority. The time period during which the prohibitions
set forth in this Section 2.3 shall apply shall be tolled and suspended as to
Xx. Xxxxxx for a period equal to the aggregate quantity of time during which
Xx. Xxxxxx violates such prohibitions in any respect.
(d) Termination Without Cause. Notwithstanding any provision in this
Agreement, this Agreement shall immediately terminate and Xx. Xxxxxx shall have
no further obligations or be subject to any further restrictions in the event
Xx. Xxxxxx is terminated by RTO without cause.
2.4. Injunctive Relief. Xx. Xxxxxx hereby agrees that any remedy at law
for any breach of the provisions contained in Sections 2.1, 2.2 and 2.3 hereof
shall be inadequate and that RTO shall be entitled to injunctive relief in
addition to any other remedy they might have under this Agreement.
SECTION 3. INDEMNIFICATION.
Xx. Xxxxxx hereby agrees to indemnify and defend RTO and to hold RTO
wholly harmless from and against any and all losses, liabilities, damages,
deficiencies, costs (including, without limitation, court costs), and expenses
(including, without limitation, attorneys' fees) incurred by RTO or any of
their affiliates and arising out of or due to any breach of any representation,
warranty, covenant or agreement of any Related Party contained in this
Agreement.
SECTION 4. MISCELLANEOUS.
4.1. Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Xx. Xxxxxx and RTO and their respective successors and
permitted assigns; provided, however, that Xx. Xxxxxx may not assign or
otherwise delegate any of his obligations or rights hereunder without the prior
written consent of RTO.
4.2. Governing Law. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in accordance
with, the laws of the State of Texas (without regard to the conflicts of law
principles thereof).
4.3. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
4.4. Notices. All communications provided for hereunder shall be in
writing and shall be deemed to be given when delivered in person or thirty (30)
days after being deposited in the United States mail, first class, registered
or certified, return receipt requested, with proper postage prepaid and,
-4-
46
(a) If to Xx. Xxxxxx, addressed to:
Mr. Xxxxx Xxxxxx
14620 N. Nebraska Avenue
Building B - Suite 102
Tampa, Florida 33613- 1431
with a copy to:
Xxxx, Xxxxx & Xxxxxx
00000 Xxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Mr. Xxxx Xxxxx
Telecopy No.: (214)_______________
(b) If to RTO, addressed to:
Action TV & Appliance Rental, Inc.
000 X. Xxxxxxxxx Xx.
Xxxxxxxx, Xxxxx 00000
Attn: Mr. Xxxx Xxxxx
Telecopy No.: (000) 000-0000
with a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxxx, Xx.
Telecopy No.: (000) 000-0000
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto.
4.5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.6. Entire Agreement; Amendments. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. This Agreement may be modified only by written
instrument signed by each of the parties hereto.
-5-
47
4.7. Waiver of Conditions. Any party may, at its option, waive in writing
any or all of the conditions herein contained to which its obligations
hereunder are subject. No waiver of any provision of this Agreement, however,
shall constitute a waiver of any other provision (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
4.8. Survival. Each of the representations, obligations and agreements of
the parties included or provided for herein shall survive the consummation of
the transactions contemplated by this Agreement, notwithstanding any
investigation heretofore or hereafter made by any of them or on behalf of any
of them.
4.9. Assignment. This Agreement and all of the provisions hereof shall be
binding upon, and inure to the benefit of, Xx. Xxxxxx and RTO and their
respective successors and permitted assigns and, in the case of Xx. Xxxxxx, his
personal representatives, executors, heirs, beneficiaries and permitted
assigns. The parties acknowledge and agree that RTO shall be a third-party
beneficiary to this Agreement.
4.10. Consent to Jurisdiction. Each of the parties hereto (i) hereby
irrevocably consents and agrees that any legal or equitable action or
proceeding arising under or in connection with this Agreement shall be brought
in any federal or state court located in the State of Texas, (ii) by execution
and delivery of this Agreement irrevocably submits to and accepts, with respect
to any such action or proceeding for such party and in respect of such party's
properties and assets, generally and unconditionally, the jurisdiction of the
aforesaid courts, and irrevocably waives any and all rights such party may have
to object to such jurisdiction under the laws of the State of Texas or
otherwise, and (iii) irrevocably consents that service of process upon such
party in any such action or proceeding shall be valid and effective against
such party if made in the manner provided in Section 4.4 hereof for delivery of
notices hereunder.
-6-
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the date first above written.
--------------------------------------
Xxxxx Xxxxxx
RTO, INC.
By:
-----------------------------------
Name: Xxx X. Xxxxxxx, Xx.
Title: Vice President
-7-
49
EXHIBIT D
MUTUAL NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (Agreement) made and entered into effective
as of the day of January, 1997, between RTO Inc., a Delaware corporation
(hereinafter referred to as "RTO"), and Xxxx Xxxx (hereinafter referred to as
"Xx. Xxxx").
WITNESSETH:
WHEREAS, Action Rent-To-Own of Florida, Inc. ("Action"), a wholly owned
subsidiary of RTO, has agreed to purchase certain assets (the "Assets") of B&L
Concepts, Inc. dba Champion Rent To Own, a Florida corporation ("B&L") and to
assume certain of the debts, obligations and liabilities of B&L pursuant to an
Asset Purchase Agreement, dated as of the day of January, 1997, between
Action, B&L and the shareholders of B&L (the "Asset Purchase Agreement");
WHEREAS, Xx. Xxxx is a shareholder of B&L;
WHEREAS, the execution and delivery of this Agreement by Xx. Xxxx is a
condition for RTO to consummate the acquisition of the Assets pursuant to the
Asset Purchase Agreement (the "Closing");
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
SECTION 1. COMPENSATION.
In consideration of Xx. Xxxx'x agreements hereunder, Xx. Xxxx will receive
a portion of the proceeds paid to B&L pursuant to the Asset Purchase
Agreement, concurrently with the execution and delivery of this Agreement.
SECTION 2. CONFIDENTIAL INFORMATION, TRADE SECRETS AND NONCOMPETITION COVENANT.
2.1. Confidential Information. Xx. Xxxx hereby agrees that, during the
period commencing on the date hereof and ending on the date that is eighteen
(l8) months from the date hereof (the "Confidentiality Period"), Xx. Xxxx, any
member of Xx. Xxxx'x immediate family and any company or other business in
which Xx. Xxxx or a member of Xx. Xxxx'x immediate family has a direct or
indirect financial interest (Xx. Xxxx, the members of Xx. Xxxx'x immediate
family and each company and other business in which Xx. Xxxx or a member of Xx.
Xxxx'x immediate family has or acquires a direct or indirect financial interest
being hereinafter referred to as a "Related Party"), will hold in confidence
(unless and to the extent compelled to disclose by judicial or administrative
process or by other applicable law) all knowledge and information of a
50
material and confidential nature with respect to the business of RTO and will
not disclose, publish or make use of same without the prior written consent of
RTO; provided, however, that this Section 2.1 shall not apply to information
which is or becomes known to the public or to the trade other than through a
breach of this Agreement by Xx. Xxxx; provided, further, however, that prior to
disclosure pursuant to judicial or administrative process or as required by
other applicable law, as permitted above, of information to any third party, Xx.
Xxxx shall use his best efforts to give reasonable prior notice to RTO.
2.2. Trade Secrets. Each Related Party shall hold in confidence (unless and
to the extent compelled to disclose by judicial or administrative process or as
required by other applicable law) indefinitely any and all "Trade Secrets" (as
hereinafter defined) of RTO and shall not disclose, publish or make use of same
without the prior written consent of RTO. "Trade Secrets" shall mean all
information relating to the business of RTO including, but not limited to,
technical or nontechnical data, a formula, pattern, compilation, program,
device, method, technique, drawing, process, financial data, financial plan,
product plan, list of actual or potential customers or suppliers, or other
information similar to any of the foregoing, which derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its disclosure or use; provided, however, that Trade Secret does not mean
(a) information that is or becomes generally available to the public other than
as a result of a disclosure by RTO or any of its subsidiaries or Xx. Xxxx
subsequent to the date of this Agreement; (b) the general business skills and
experience of Xx. Xxxx; or (c) information generally known and used within the
rent-to-own industry; provided, further, however, that prior to disclosure
pursuant to judicial or administrative process or as required by other
applicable law, as permitted above, of information to any third party, Xx. Xxxx
shall use his best efforts to give reasonable prior notice to RTO.
2.3. Noncompetition.
(a) Covenants. In consideration of (i) the purchase of the Assets of B&L
pursuant to the Asset Purchase Agreement and (ii) the consideration paid to Xx.
Xxxx pursuant to this Agreement, RTO and Xx. Xxxx hereby agree as follows:
(1) During the period commencing on the date hereof and ending on
the date that is eighteen (18) months from the date hereof (the
"Noncompete Period"), Xx. Xxxx shall not, and shall cause any Related
Party not to, either directly or indirectly, internally develop and open a
new rental-purchase store in any of the locations described on Schedule
2.3(a)(1) hereto which constitute the communities where the
rental-purchase stores operated by B&L are located immediately prior to
the consummation of the transactions contemplated by the Asset Purchase
Agreement. The covenants contained in this Section 2.3(a)(1) shall continue
to be applicable whether such rental-purchase stores are operated by RTO
or any subsidiary of RTO or by any nominee, successor, assign or affiliate
of either. This covenant shall not affect the right of Xx. Xxxx or his
affiliates to acquire rental-purchase stores existing on the date hereof
in any location. Further, for a
-2-
51
period of six months following the expiration of the Noncompete Period Xx.
Xxxx shall not and shall cause any related party not to, either directly or
indirectly, internally develop and open a new rental-purchase store in the
Tampa, St. Petersburg Area of Dominant Influence, as defined by Arbitron.
(2) During the Noncompete Period, neither RTO nor any subsidiary of
RTO shall, either directly or indirectly, internally develop and open a
new rental-purchase store in the Greater Orlando area. The covenants
contained in this Section 2.3(a)(2) shall continue to be applicable
whether the rental-purchase stores of Xx. Xxxx or his affiliates in the
Greater Orlando area are owned or operated by RTO or any subsidiary of
RTO. This covenant shall not affect the right of RTO or any subsidiary of
RTO to acquire rental-purchase stores existing on the date hereof in any
location.
(b) Severability. If a judicial determination is made that any of the
provisions of this Section 2.3 constitutes an unreasonable or otherwise
unenforceable restriction against RTO or Xx. Xxxx, the provisions of this
Section 2.3 shall be rendered void only to the extent that such judicial
determination finds such provisions to be unreasonable or otherwise
unenforceable. In this regard, the parties hereto hereby agree that any judicial
authority construing this Agreement shall be empowered to sever any portion of
the restricted territory any prohibited business activity or any time period
from the coverage of this Section 2.3 and to apply the provisions of this
Section 2.3 to the remaining portion of the restricted territory, the remaining
business activities or the remaining time period not so severed by such judicial
authority. The time period during which the prohibitions set forth in this
Section 2.3 shall apply shall be tolled and suspended as to RTO or Xx. Xxxx, as
applicable, for a period equal to the aggregate quantity of time during which
RTO or Xx. Xxxx, as applicable, violates such prohibitions in any respect.
2.4. Injunctive Relief. RTO and Xx. Xxxx hereby agree that any remedy at
law for any breach of the provisions contained in Sections 2.1, 2.2 and 2.3
hereof shall be inadequate and that RTO, on the one hand, and Xx. Xxxx, on the
other, shall be entitled to injunctive relief in addition to any other remedy
they might have under this Agreement.
SECTION 3. INDEMNIFICATION.
3.1 Xx. Xxxx. Xx. Xxxx hereby agrees to indemnify and defend RTO and to
hold RTO wholly harmless from and against any and all losses, liabilities,
damages, deficiencies, costs (including, without limitation, court costs), and
expenses (including, without limitation, attorneys' fees) incurred by RTO or
any of their affiliates and arising out of or due to any breach of any
representation, warranty, covenant or agreement of any Related Person contained
in this Agreement.
3.2 RTO. RTO hereby agree to indemnify and defend Xx. Xxxx and to hold
Xx. Xxxx wholly harmless from and against any and all losses, liabilities,
damages, deficiencies, costs (including, without limitation, court costs), and
expenses (including, without limitation, attorneys'
-3-
52
fees) incurred by Xx. Xxxx or any Related Person and arising out of or due to
any breach of any representation, warranty, covenant or agreement of RTO
contained in this Agreement.
SECTION 4. MISCELLANEOUS.
4.1. Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Xx. Xxxx, RTO and their respective successors and
permitted assigns; provided, however, that Xx. Xxxx may not assign or otherwise
delegate any of his obligations or rights hereunder without the prior written
consent of RTO.
4.2. Governing Law. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in accordance
with, the laws of the State of Texas (without regard to the conflicts of law
principles thereof).
4.3. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
4.4. Notices. All communications provided for hereunder shall be in
writing and shall be deemed to be given when delivered in person or thirty (30)
days after being deposited in the United States mail, first class, registered
or certified, return receipt requested, with proper postage prepaid and,
(a) If to Xx. Xxxx, addressed to:
Xx. Xxxx Xxxx
000 Xxxxxxxx Xxxx - Xxxxx 000
Xxxxx Xxxxxxx, Xxxxxxx 00000
(b) If to RTO, addressed to:
Action TV & Appliance Rental, Inc.
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Attn: Mr. Xxxx Xxxxx
Telecopy No.: (000) 000-0000
with a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxxx, Xx.
-4-
53
Telecopy No. (000) 000-0000
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto.
4.5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.6. Entire Agreement; Amendments. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. This Agreement may be modified only by written
instrument signed by each of the parties hereto.
4.7. Waiver of Conditions. Any party may, at its option, waive in
writing any or all of the conditions herein contained to which its obligations
hereunder are subject. No waiver of any provision of this Agreement, however,
shall constitute a waiver of any other provision (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
4.8. Survival. Each of the representations, obligations and agreements of
the parties included or provided for herein shall survive the consummation of
the transactions contemplated by this Agreement, notwithstanding any
investigation heretofore or hereafter made by any of them or on behalf of any
of them.
4.9. Assignment. This Agreement and all of the provisions hereof shall be
binding upon, and inure to the benefit of, Xx. Xxxx RTO and their respective
successors and permitted assigns and, in the case of Xx. Xxxx, his personal
representatives, executors, heirs, beneficiaries and permitted assigns. The
parties acknowledge and agree that RTO shall be a third-party beneficiary to
this Agreement.
4.10. Consent to Jurisdiction. Each of the parties hereto (i) hereby
irrevocably consents and agrees that any legal or equitable action or
proceeding arising under or in connection with this Agreement shall be brought
in any federal or state court located in the State of Texas, (ii) by execution
and delivery of this Agreement irrevocably submits to and accepts, with respect
to any such action or proceeding for such party and in respect of such party's
properties and assets, generally and unconditionally, the jurisdiction of the
aforesaid courts, and irrevocably waives any and all rights such party may have
to object to such jurisdiction under the laws of the State of Texas or
otherwise, and (iii) irrevocably consents that service of process upon such
party in any such action or proceeding shall be valid and effective against
such party if made in the manner provided in Section 4.4 hereof for delivery of
notices hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly
-5-
54
executed, as of the date first above written.
-------------------------------------------
Xxxx Xxxx
RTO, INC.
By:
----------------------------------------
Name: Xxx X. Xxxxxxx, Xx.
Title: Vice President
-6-
