Exhibit 2.11
ASSET PURCHASE AGREEMENT
by and among
RENT-A-CENTER, INC.,
and
RENT-WAY, INC.,
RENT-WAY OF MICHIGAN, INC.
and
RENT-WAY OF TTIG, L.P.
--------------------------
Dated as of December 17, 2002
TABLE OF CONTENTS
Page
ARTICLE I SALE AND PURCHASE OF ASSETS....................................................................1
1.1 Assets.........................................................................................1
1.2 Excluded Assets................................................................................3
1.3 Acquisition of Assets by Acquiror..............................................................4
1.4 Allocation of Purchase Price...................................................................5
1.5 Assumption of Liabilities by Acquiror..........................................................6
1.6 Closing........................................................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR.................................................7
2.1 Organization...................................................................................8
2.2 Authority Relative to this Agreement...........................................................8
2.3 Consents and Approvals; No Violations..........................................................8
2.4 Sufficient Funds...............................................................................8
2.5 Broker's Fees..................................................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OPERATING SUBSIDIARIES...................9
3.1 Organization...................................................................................9
3.2 Certain Corporate Matters......................................................................9
3.3 Authority Relative to this Agreement...........................................................9
3.4 Consents and Approvals; No Violations.........................................................10
3.5 Reports.......................................................................................10
3.6 Profit and Loss Statements; No Undisclosed Liabilities........................................11
3.7 Events Subsequent to Profit and Loss Statements...............................................11
3.8 Property......................................................................................12
3.9 Tangible Property.............................................................................13
3.10 Inventory.....................................................................................13
3.11 Rental Purchase Agreements....................................................................13
3.12 Legal Compliance..............................................................................14
3.13 Assets Necessary to the Business..............................................................14
3.14 Books and Records; Internal Controls..........................................................14
3.15 Product Warranties............................................................................14
3.16 Inappropriate Payments........................................................................15
3.17 Environmental Matters.........................................................................15
3.18 Motor Vehicles and Equipment..................................................................15
3.19 Ordinances and Regulations....................................................................15
3.20 Insurance.....................................................................................15
3.21 Litigation....................................................................................15
3.22 Employment Matters............................................................................16
3.23 Taxes.........................................................................................17
3.24 Employee Benefit Plans........................................................................18
3.25 Broker's Fees.................................................................................19
3.26 Solvency......................................................................................19
3.27 Average Monthly Revenue - Three Months........................................................19
3.28 Monthly Revenue - One Month...................................................................20
3.29 Average Weekly Revenue........................................................................20
3.30 Net Book Value of Inventory...................................................................20
3.31 Full Disclosure...............................................................................20
ARTICLE IV ADDITIONAL AGREEMENTS.........................................................................21
4.1 Interim Operations of the Company and the Operating Subsidiaries..............................21
4.2 Reasonable Efforts; Filings; Consents.........................................................22
4.3 No Solicitations..............................................................................23
4.4 Press Releases................................................................................24
4.5 Confidentiality; Access to Information........................................................24
4.6 Notice of Developments........................................................................26
4.7 Solvency Opinion..............................................................................26
4.8 Reasonably Equivalent Value Opinion...........................................................27
4.9 Employees.....................................................................................27
4.10 Designation by Acquiror of Acquiring Subsidiaries.............................................27
4.11 Acquiror Due Diligence Period.................................................................27
4.12 Little Rock Store Lease.......................................................................28
ARTICLE V CLOSING CONDITIONS............................................................................28
5.1 Conditions to Obligation of all Parties.......................................................28
5.2 Conditions to the Acquiror's Obligations......................................................29
5.3 Conditions to the Obligations of the Company and the Operating Subsidiaries...................31
ARTICLE VI POST-CLOSING COVENANTS........................................................................32
6.1 Apportionment.................................................................................32
6.2 License to Use Name...........................................................................32
6.3 Account Store Acquisition Option..............................................................32
6.4 Transition Period; Access to Stores; Cooperation..............................................33
6.5 Leased Employees..............................................................................34
6.6 Tax Matters...................................................................................34
6.7 Transition of Acquired Stores.................................................................35
ARTICLE VII TERMINATION...................................................................................35
7.1 Termination...................................................................................35
7.2 Automatic Termination.........................................................................36
7.3 Effect of Termination.........................................................................36
7.4 Amendment.....................................................................................37
7.5 Waiver........................................................................................37
7.6 Expenses......................................................................................37
ARTICLE VIII INDEMNIFICATION...............................................................................37
8.1 Survival of Representations and Warranties....................................................37
8.2 Indemnification by the Company and the Operating Subsidiaries.................................38
8.3 Indemnification by the Acquiror...............................................................39
8.4 Holdback Amount; Right of Set Off.............................................................39
8.5 Method of Asserting Indemnity Claims, Etc.....................................................40
8.6 Limitation on Amount - Company and Operating Subsidiaries.....................................42
8.7 Limitation on Amount - Acquiror...............................................................42
8.8 Insurance and Tax Benefit.....................................................................42
ARTICLE IX GENERAL PROVISIONS............................................................................42
9.1 Certain Definitions...........................................................................42
9.2 Notices.......................................................................................50
9.3 Headings......................................................................................51
9.4 Severability..................................................................................51
9.5 Entire Agreement..............................................................................52
9.6 Assignment....................................................................................52
9.7 Parties in Interest...........................................................................52
9.8 Failure or Indulgence Not Waiver; Remedies Cumulative; Specific Performance...................52
9.9 Governing Law.................................................................................52
9.10 Counterparts..................................................................................53
9.11 No Consequential Damages......................................................................53
TABLE OF EXHIBITS
Exhibits
--------
EXHIBIT "A" Form of ▇▇▇▇ of Sale, Assignment and Assumption Agreement
EXHIBIT "B" Form of Non-Competition and Non-Solicitation Agreement
EXHIBIT "C" Form of Opinion of Counsel to the Company
EXHIBIT "D" Form of Opinion of Counsel to Acquiror
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of December 17, 2002 (this
"Agreement"), is entered into by and among RENT-A-CENTER, INC., a Delaware
corporation (the "Acquiror"), RENT-WAY, INC., a Pennsylvania corporation (the
"Company"), Rent-Way of Michigan, Inc., a Delaware corporation and wholly owned
subsidiary of the Company ("Rent-Way Michigan") and Rent-Way of TTIG, L.P., an
Indiana limited partnership and indirect wholly owned subsidiary of the Company
("TTIG" and, together with Rent-Way Michigan, the "Operating Subsidiaries").
RECITALS
----------
WHEREAS, the Company and the Operating Subsidiaries are engaged in the
business of renting-to-own consumer household durable goods, including
televisions, video cassette recorders, stereos, appliances, computers,
furniture, accessories and other like merchandise to the public; and
WHEREAS, the parties desire to enter into a transaction in which the
Acquiror will purchase substantially all of the assets of the Company and the
Operating Subsidiaries used in, or related to, the operation of the 295
rent-to-own stores at each location listed on Schedule 1.1 (collectively, the
"Stores" and individually, a "Store"), upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties hereto
agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 Assets. Subject to the terms and conditions of this Agreement, on the
Closing Date (hereinafter defined), the Company and the Operating Subsidiaries
shall sell, convey, transfer, assign and deliver to the Acquiror, and the
Acquiror shall accept and purchase all of the Company's and the Operating
Subsidiaries' right, title and interest in and to all of the assets (other than
the Excluded Assets) relating to the Stores (collectively, the "Assets")
including without limitation, the following:
(a) All (i) customer rental contracts, including without limitation any
rent-to-own agreements, lease-purchase agreements and rent-to-rent
agreements, and (ii) disclosures, forms, applications and other
ancillary documents relating to such rental contracts relating to the
Stores (together, the "Rental Purchase Agreements"), including all of
the Company's and the Operating Subsidiaries' rights under such
Rental Purchase Agreements;
(b) All products on rent, whether current or delinquent in payment,
pursuant to the Rental Purchase Agreements, including any
manufacturer's warranties underlying such products;
(c) Any information, including all computer records and software,
pertaining to the Rental Purchase Agreements;
(d) All rental merchandise presently in the Stores or being serviced or
repaired or in off-premises storage for the Stores and not on rent
pursuant to a Rental Purchase Agreement as of the Closing, including
any manufacturer's warranties underlying such rental merchandise (the
"Idle Inventory");
(e) All equipment, fixtures, supplies, office furniture, computers
(including peripherals), filing cabinets and product displays which
are located within the Stores or are otherwise attributable to the
Stores;
(f) Up to 220 cube motor vehicles owned or leased by the Company or any
Operating Subsidiary and used by the Company or any Operating
Subsidiary in connection with the Stores as of the date hereof as set
forth on Schedule 3.18, such vehicles to be acquired hereunder as
designated by Acquiror no later than ten (10) days prior to Closing
and to be delivered by the Company and the Operating Subsidiaries
free and clear of Encumbrances at Closing;
(g) Except as set forth in Section 1.2 or as referenced in Section 1.2
hereof, (i) all books and records relating to the operation of the
Stores, including but not limited to (a) all original Rental Purchase
Agreements relating to the Stores, (b) all original books and records
of account and other financial records related to the operation of
the Stores, and (c) all price lists, customer lists and
correspondence, customer histories (including payment histories),
mailing lists, credit records and correspondence and similar lists
and correspondence for the three year period ending on the Closing
Date; (ii) all manuals pertaining to merchandise, materials,
operations, maintenance and similar matters relating to the operation
of the Stores; (iii) all records or lists pertaining to supply,
distribution, transportation, administration and similar matters
relating to the operation of the Stores; and (iv) all Store telephone
numbers;
(h) Except as set forth in Section 1.2, the real estate leases related to
the Stores; and
(i) Any deposits made in connection with the operation of the Stores,
including without limitation, deposits relating to Store Leases,
utility deposits and deposits by customers pursuant to special
rent-to-own orders placed at the Stores.
On the Closing Date, the Assets shall be delivered to Acquiror free and clear of
any and all pledges, mortgages, security interests, Liens, charges, burdens,
obligations, claims and other encumbrances whatsoever (whether absolute,
accrued, contingent or otherwise), including without limitation, chattel
mortgages, conditional sales contracts, collateral security arrangements and
other title or interest retention arrangements ("Encumbrances").
1.2 Excluded Assets. Notwithstanding anything in Section 1.1 to the contrary,
the Company and the Operating Subsidiaries will retain and will not sell or
transfer to the Acquiror and the Acquiror will not purchase or acquire, the
following assets with respect to the Stores (collectively, the "Excluded
Assets"):
(a) the assets listed on Schedule 1.2 attached hereto and all books,
records and other information relating solely thereto;
(b) the Company's and the Operating Subsidiaries' corporate charter,
qualifications to conduct business as a foreign corporation or
limited partnership, as the case may be, arrangements with registered
agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books and
other documents relating to the organization, maintenance and
existence of the Company and the Operating Subsidiaries and all
original books and records of account and other financial records of
such entities, except as otherwise provided in Section 1.1(c) and
Section 1.1(g); provided, however, that Acquiror shall be permitted
to review and copy such books and records retained by the Company and
the Operating Subsidiaries to the extent relevant to the Assets;
(c) Rental Purchase Agreements used in the Stores (i) that have
terminated on or before the Closing Date, or (ii) for which the
Company or any of its Subsidiaries have filed any action, suit,
claim, complaint or proceeding seeking to collect merchandise rented
pursuant to such Rental Purchase Agreement, money damages or
otherwise enforce through judicial or administrative proceedings the
terms of such Rental Purchase Agreement;
(d) All fixtures which are located in each of the Stores set forth on
Schedule 1.2(d) (the "Account Stores");
(e) All supplies, office furniture, computers (including peripherals),
equipment (other than filing cabinets, copiers and fax machines,
which shall be deemed Assets) and product displays which are located
in the Account Stores;
(f) The real estate leases related to the Account Stores;
(g) Any deposits made in connection with the operation of the Account
Stores, including without limitation, deposits relating to real
estate leases underlying such Account Stores and utility deposits
(but excluding deposits by customers pursuant to special rent-to-own
orders placed at the Account Stores, which shall be deemed Assets);
and
(h) any real property owned by the Company or any of its Subsidiaries;
and
(i) any contracts or agreements in effect on the Closing Date providing
for services to the Stores, including without limitation, contracts
for services relating to trash, water, sewage, alarm and electricity
service.
1.3 Acquisition of Assets by Acquiror.
(a) At the Closing, the Company, the Operating Subsidiaries and the
Acquiror shall each enter into a ▇▇▇▇ of Sale, Assignment and
Assumption Agreement (the "Assignment and Assumption Agreement"), in
the form attached hereto as Exhibit "A," and all such other
assignments, endorsements and instruments of transfer as shall be
necessary or appropriate to carry out the intent of this Agreement
and as shall be sufficient to vest in the Acquiror good, valid and
marketable title to all of the Assets and all right, title and
interest of the Company and the Operating Subsidiaries thereto.
Subject to the terms and conditions hereof and in consideration of
the sale, transfer, assignment and delivery of the Assets by the
Company and the Operating Subsidiaries to the Acquiror, the Acquiror
hereby agrees that, as of the Closing Date, it will acquire and
accept all of the Company's and the Operating Subsidiaries' right,
title and interest in and to the Assets, and, subject to the
adjustments set forth in Section 1.3(b) below, shall pay an aggregate
amount of $101,500,000 (the "Purchase Price"), of which (a)
$91,000,000 (the "Creditor Payment") shall be paid by the Acquiror,
on behalf of the Company and the Operating Subsidiaries, directly to
the Company's creditors set forth on Schedule 1.3, by wire transfer
of immediately available funds on the Closing Date, (b) $500,000
shall be paid to the Company, on behalf of the Company and the
Operating Subsidiaries, for consideration of the Non-Competition and
Non-Solicitation Agreement (the "Non-Competition Payment" and,
together with the Creditor Payment, the "Closing Date Payment"), and
(c) $10,000,000 of which Acquiror shall withhold in partial support
of the indemnification obligations of Seller pursuant to Article VIII
hereof (the "Holdback Amount").
(b) Reduction in Purchase Price. In the event that the condition set
forth in Section 5.2(a) shall not be satisfied on the Closing Date as
a result of the Company's and the Operating Subsidiaries' failure to
represent and warrant, on the Closing Date, any of the
representations and warranties set forth in Section 3.27, Section
3.28, Section 3.29 or Section 3.30 with respect to Closing Date
amounts, then, except as set forth in Section 1.3(c) below, the
Purchase Price shall be reduced, and the corresponding amount paid to
the creditors set forth on Schedule 1.3 shall be reduced, as set
forth below (each, a "Purchase Price Reduction" and together, the
"Purchase Price Reductions"):
(i) with respect to the failure to represent and warrant on the
Closing Date the matters set forth in Section 3.27, the
Purchase Price shall be reduced by an amount equal to (a)
$10,200,000, less the Closing Three Month Revenue (the "Short
Average Monthly Revenue Amount"), (b) multiplied by twelve
(12) (the "Short Average Monthly Revenue Amount Adjustment");
(ii) with respect to the failure to represent and warrant on the
Closing Date the matters set forth in Section 3.28, the
Purchase Price shall be reduced by an amount equal to (a)
$10,200,000, less the Closing Month Revenue (the "Short
Monthly Revenue Amount"), (b) multiplied by twelve (12) (the
"Short Monthly Revenue Amount Adjustment");
(iii) with respect to the failure to represent and warrant on the
Closing Date the matters set forth in Section 3.29, the
Purchase Price shall be reduced by an amount equal to (a)
$2,355,000, less the Closing Weekly Revenue (the "Short Weekly
Revenue Amount"), (b) multiplied by fifty two (52) (the "Short
Weekly Revenue Amount Adjustment" and together with the Short
Average Monthly Revenue Amount Adjustment and the Short
Monthly Revenue Amount Adjustment, the "Revenue Purchase Price
Reductions"); and
(iv) with respect to the failure to represent and warrant on the
Closing Date the matters set forth in Section 3.30, the
Purchase Price shall be reduced by an amount equal to (a)
$54,500,000, less the Closing Inventory (net of 30-days past
due) (the "Short Inventory Amount"), (b) multiplied by 1.5
(such adjustment being referred to as the "Short Inventory
Amount Adjustment").
Each Purchase Price Reduction (whether such Purchase Price Reduction is a
Revenue Purchase Price Reduction or a Short Inventory Amount Adjustment, or
both) shall be aggregated with all other Purchase Price Reductions, and the
Purchase Price shall correspondingly be reduced; provided, however, that in the
event more than one Revenue Purchase Price Reduction shall be required under
this Section 1.3(b), with respect to such Revenue Purchase Price Reductions,
only the highest adjustment of the applicable Revenue Purchase Price Adjustments
shall be made.
(c) Notwithstanding the provisions of Section 1.3(b) above, in the event
that any of (i) the Closing Three Month Revenue shall be equal to or
less than $10,000,000, (ii) the Closing Month Revenue shall be equal
to or less than $10,000,000, (iii) the Closing Weekly Revenue shall
be equal to or less than $2,350,000, (iv) or the Closing Inventory
shall be equal to or less than $53,500,000, then, at the option of
Acquiror, Acquiror may terminate this Agreement pursuant to Section
7.1(i).
1.4 Allocation of Purchase Price. The Purchase Price shall be allocated in
accordance with Schedule 1.4. After the Closing Date, the Company, the Operating
Subsidiaries and the Acquiror shall each make consistent use of the allocation,
fair market value and amortization specified in Schedule 1.4 for all tax
purposes and in any and all filings, declarations and reports with the Internal
Revenue Service in respect thereof, including the reports required to be filed
under Section 1060 of the Code, if applicable, it being understood that the
Company, the Operating Subsidiaries and the Acquiror will prepare and file their
respective asset acquisition statements on Form 8594 and, if required by Section
1060 of the Code or the Treasury Regulations thereunder, their respective
supplemental asset acquisition statements on Form 8594 in accordance with
Schedule 1.4. In any proceeding relating to the determination of any Tax,
neither the Acquiror nor the Company or the Operating Subsidiaries shall contend
or represent that such allocation is not a correct allocation.
1.5 Assumption of Liabilities by Acquiror.
(a) Notwithstanding anything to the contrary contained in this Agreement,
the Acquiror will not assume, pay, perform or discharge any debt,
liability or contract of the Company, of any kind or character
whatsoever (whether written or oral, existing, contingent or
inchoate), except for the liabilities specifically identified in
paragraph (b) of this Section 1.5.
(b) On the Closing Date, the Acquiror shall only assume those liabilities
or obligations of a kind or nature, whether absolute, contingent,
accrued, known or unknown, that are attributable to the periods,
events or circumstances after the Closing Date, and which arise
under, relate to or are in connection with the ownership, use,
possession, enjoyment or operation of the Assets after the Closing
Date (the "Assumed Liabilities"). The Acquiror, the Company and the
Operating Subsidiaries shall each enter into the Assignment and
Assumption Agreement with respect to the Assumed Liabilities. It is
expressly understood and agreed that the Acquiror shall assume only
the Assumed Liabilities and, except for the Assumed Liabilities,
shall not assume or have any responsibility with respect to any other
obligation or liability of the Company or the Operating Subsidiaries
of any kind or nature whatsoever not specifically included within the
definition of Assumed Liabilities. Without limiting the foregoing,
the Assumed Liabilities explicitly exclude the following: (i) any
liabilities or obligations of the Company or any of its Subsidiaries
arising under, accruing, attributable to or relating to periods,
events or circumstances on or before the Closing Date (or which would
have prior to the Closing Date with the giving of notice or passage
of time); (ii) any liabilities or obligations of any Person other
than the Company or any of the Operating Subsidiaries; (iii) any
liabilities or obligations of the Company or any of its Subsidiaries
arising on or prior to the Closing Date as a result of any express or
implied warranty relating to products or services; (iv) any
liabilities or obligations arising out of any contract or agreement
of the Company or any of its Subsidiaries or by which the Company or
any of its Subsidiaries or the Excluded Assets are bound that is not
part of the Assets transferred hereunder, including without
limitation, any sales commission agreements, employment agreements or
vehicle lease agreements; (v) any accounts payable, trade payables,
salaries, bonuses, accrued expenses or employee benefits of the
Company or any of its Subsidiaries, including, without limitation,
any COBRA obligations, workers compensation claims, health benefit
claims or other costs of employees of the Company or any of its
Subsidiaries, or any expenses related to products that are not part
of the Assets transferred hereunder; (vi) any liabilities or
obligations arising out of actions taken, work done or contracts
entered into by the Company or any of its Subsidiaries after the
Closing Date; (vii) any liabilities or obligations of, or expenses
owed by, the Company or any of its Subsidiaries for any brokerage or
finder's commission relating to this Agreement or any of the
transactions contemplated hereby; (viii) any liabilities for any
Taxes that may become payable by the Company or any of its
Subsidiaries in respect of the sale of the Assets; (ix) any
liabilities or obligations arising out of currently pending,
threatened or future litigation based upon any conduct which occurred
on or before the Closing Date against the Company or any of its
Subsidiaries; (x) any liabilities or obligations arising out of any
claims by or made on behalf of the current or former employees of the
Company or any of its Subsidiaries relating to employment practices
of the Company or any of its Subsidiaries; (xi) any liabilities of
the Company or any of its Subsidiaries for accrued vacation, accrued
sick pay, workers compensation claims, health benefit claims,
matching contribution or declared profit sharing contributions under
a Company Employee Benefit Plan, restorative payments under a Company
Employee Benefit Plan, flexible benefit plan claims and similar
employee benefit related matters; (xii) any liabilities or
obligations of the Company or any of its Subsidiaries relating to the
non-compliance or alleged non-compliance by any of them with
applicable Law, including without limitation, with respect to their
respective Rental Purchase Agreements (including by way of
illustration and not of limitation, any liabilities or obligations
(a) arising out of customer payments received by the Company or any
of its Subsidiaries on or before the Closing Date, (b)
representations or statements made by the Company or any of its
Subsidiaries to customers on or before the Closing Date, (c)
disclosures made or not made by the Company or any of its
Subsidiaries on or before the Closing Date, (d) advertising issued by
or for the Company or any of its Subsidiaries on or before the
Closing Date, (e) statutory or common law violations based on terms
of Rental Purchase Agreements entered into by the Company or any of
its Subsidiaries on or before the Closing Date, and (f) the Company's
or any of its Subsidiaries' failure to make disclosures in Rental
Purchase Agreement forms or other writings entered into or issued on
or before the Closing Date); (xiii) any liabilities relating to,
arising under or otherwise pertaining to real property owned by the
Company or any of the Operating Subsidiaries; and (xiv) any
liabilities of the Company or any of its Subsidiaries with respect to
real estate leases for any of the Account Stores, except with respect
to any Account Store which Acquiror elects to assume pursuant to
Section 6.3, and in such event, Acquiror shall assume only such
liabilities as set forth in the assumption agreement referenced in
Section 6.3 entered into in connection therewith.
1.6 Closing. The closing of the transactions contemplated hereby (the "Closing")
shall take place at 10:00 a.m., Dallas, Texas Time, at the offices of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., 5400 Renaissance Tower, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, on the Designated Date; provided, however, that on the Designated Date
all conditions to closing set forth in Article V have been satisfied or waived
by the party entitled to waive the same. If on the Designated Date all
conditions to the Closing set forth in Article V have not been satisfied or
waived by the party entitled to waive the same, the Closing shall occur on the
third Business Day following the satisfaction of the last condition to closing
under Article V or waiver by the party entitled to waive the same.
Notwithstanding the foregoing provisions, upon the mutual agreement in writing
of the parties hereto, the date, time and place of the Closing may be extended
to a date that is later than the Designated Date. The Designated Date or such
other date on which the Closing occurs is hereinafter referred to as the
"Closing Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company and the Operating
Subsidiaries as follows:
2.1 Organization. The Acquiror is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has the
requisite corporate power to carry on its business as now conducted.
2.2 Authority Relative to this Agreement. The Acquiror has the corporate power
and authority to enter into this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this Agreement by the
Acquiror and the consummation by the Acquiror of the transactions contemplated
hereby have been duly authorized by the Board of Directors of the Acquiror and
no other corporate action on the part of the Acquiror is necessary to authorize
this Agreement or the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Acquiror and constitutes a valid
and binding agreement of the Acquiror, enforceable against the Acquiror in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity.
2.3 Consents and Approvals; No Violations. Except for applicable requirements of
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), no
filing with, and no permit, authorization, consent or approval of, any public
body or authority is necessary for the consummation by the Acquiror of the
transactions contemplated by this Agreement. Neither the execution and delivery
of this Agreement by the Acquiror nor the consummation by the Acquiror of the
transactions contemplated hereby, nor compliance by the Acquiror with any of the
provisions hereof, will require any consent or approval of any third party, or
result in a violation or breach of, or conflict with or constitute a default (or
an event that, with notice or lapse of time or both, would constitute a default)
under any note, bond, indenture, mortgage, deed of trust, lease, franchise,
permit, authorization, license, contract, instrument or other agreement or
commitment or any order, judgment or decree to which, the Acquiror is a party or
by which the Acquiror or any of its assets or properties are bound or
encumbered, except (a) those that have already been given, obtained or filed, or
(b) such consents, approvals, violations, breaches, conflicts, or defaults which
would not, individually or in the aggregate, have a material adverse effect on
the Acquiror. Neither the execution and delivery of this Agreement by the
Acquiror, nor the consummation by the Acquiror of the transactions contemplated
hereby, nor compliance by the Acquiror with any of the provisions hereof, will
(i) conflict with or result in any breach of any provisions of the Certificate
of Incorporation or Bylaws of the Acquiror, or (ii) violate in any material
respect any existing Order, writ, injunction, statute or Regulation applicable
to the Acquiror or any of its properties or assets.
2.4 Sufficient Funds. Acquiror has access to sufficient funds as of the date
hereof, and will have sufficient funds on the Closing Date, in an amount
necessary to fund the Purchase Price in connection with the transactions
contemplated by this Agreement.
2.5 Broker's Fees. Neither the Acquiror, nor anyone on its behalf, has any
liability to any broker, finder, investment banker or similar agent, or has
agreed to pay any brokerage fees, finder's fees or commissions, or to reimburse
any expenses of any broker, finder, investment banker or agent in connection
with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE OPERATING SUBSIDIARIES
The Company and the Operating Subsidiaries hereby jointly and severally
represent and warrant to Acquiror as follows:
3.1 Organization. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Pennsylvania, and has the
requisite corporate power to carry on its business as now conducted. Rent-Way
Michigan is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has the requisite corporate power
to carry on its business as now conducted. TTIG is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Indiana, and has the requisite power to carry on its business as now conducted.
3.2 Certain Corporate Matters. Each of the Company and Rent-Way Michigan is duly
licensed or qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the Assets are located. TTIG is duly
licensed or qualified to do business as a foreign entity and is in good standing
in each jurisdiction where the Assets are located. The Company and each
Operating Subsidiary have full corporate power and authority and all material
authorizations, licenses and Permits necessary to carry on their respective
businesses as presently conducted. The Company has delivered to the Acquiror
true, accurate and complete copies of its Articles of Incorporation and Bylaws
of the Company and Rent-Way Michigan, and all organization documents of TTIG,
which reflect all amendments made thereto at any time prior to the date of this
Agreement. Neither the Company nor any Operating Subsidiary is in default under
or in violation of any provision of their respective organizational documents
nor, except as set forth on Schedule 3.2, are any of them in material default or
in material violation of any restriction, Encumbrance, indenture, contract,
lease, sublease, loan agreement, note or other obligation or liability to which
any of the Assets held by any of them are subject.
3.3 Authority Relative to this Agreement. The Company and each Operating
Subsidiary has the corporate power and authority to enter into this Agreement
and to carry out their respective obligations hereunder. The execution, delivery
and performance of this Agreement by the Company and the Operating Subsidiaries
and the consummation by the Company and the Operating Subsidiaries of the
transactions contemplated by this Agreement have been duly authorized, and no
other action on the part of the Company or any Operating Subsidiary is necessary
to authorize this Agreement or the transactions contemplated hereby. The
execution, delivery and performance of the transactions contemplated hereby by
the Company and the Operating Subsidiaries have been approved unanimously by the
Board of Directors or similar governing body of such entities and do not require
the approval by the Company's or any of the Operating Subsidiaries' shareholders
or partners, as the case may be. This Agreement has been duly executed and
delivered by the Company and the Operating Subsidiaries and, assuming due
execution and delivery by the Acquiror, constitutes the valid and binding
agreement of the Company and the Operating Subsidiaries, enforceable against
each of them in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity.
3.4 Consents and Approvals; No Violations. Except for applicable requirements of
the HSR Act, no filing with, and no Permit, authorization, consent or approval
of, any public body or authority is necessary for the consummation by the
Company or the Operating Subsidiaries of the transactions contemplated by this
Agreement. Except as set forth on Schedule 3.4, neither the execution and
delivery of this Agreement by the Company or the Operating Subsidiaries nor the
consummation by the Company and the Operating Subsidiaries of the transactions
contemplated hereby, nor compliance by the Company and the Operating
Subsidiaries with any of the provisions hereof, will (a) require any consent or
approval of any third party, (b) result in the imposition of any Encumbrance
against any Asset, or (c) result in a violation or breach of, or conflict with
or constitute a default (or an event that, with notice or lapse of time or both,
would constitute a default) under any note, bond, indenture, mortgage, deed of
trust, lease, franchise, permit, authorization, license, contract, instrument or
other agreement or commitment to which the Company or any of the Operating
Subsidiaries is a party or by which the Company or any of the Operating
Subsidiaries or any of their respective assets or properties are bound or
encumbered, except (i) those that have already been given, obtained or filed, or
(ii) with respect to clauses (a) and (c) above, such consents, approvals,
violations, breaches, conflicts, or defaults which would not, individually or in
the aggregate, have a material adverse effect on the Company, the Operating
Subsidiaries, the Assets or the transactions contemplated hereby. Neither the
execution and delivery of this Agreement by the Company and the Operating
Subsidiaries, nor the consummation by the Company and the Operating Subsidiaries
of the transactions contemplated hereby, nor compliance by the Company and the
Operating Subsidiaries with any of the provisions hereof, will (i) conflict with
or result in any breach of any provisions of the organizational documents of the
Company or any Operating Subsidiary or (ii) violate in any material respect any
existing Order, writ, injunction, statute or Regulation applicable to the
Company or any Operating Subsidiary or any of their respective properties or
assets.
3.5 Reports.
(a) Except as set forth on Schedule 3.5(a), since December 28, 2001, the
Company has filed (i) all SEC Reports required to be filed with the
Commission, and (ii) all Reports required to be filed with any other
Governmental Authorities. Such SEC Reports and other Reports,
including all those filed after the date of this Agreement and prior
to the Closing Date, (a) were prepared in all material respects in
accordance with the requirements of applicable Law (including, with
respect to the SEC Reports of the Company, the Securities Act and the
Exchange Act, as the case may be) and (b) in the case of the SEC
Reports, did not, at the time they were filed, contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. (b) The Company's Consolidated Financial Statements
and any consolidated financial statements of the Company (including
any related notes thereto) contained in any SEC Reports of the
Company filed with the Commission after the date of this Agreement
(i) have been or will have been prepared in accordance with the
published Regulations of the Commission and in accordance with GAAP
(except (A) to the extent required by changes in GAAP and (B), with
respect to the SEC Reports of the Company filed prior to the date of
this Agreement, as may be indicated in the notes thereto) and (ii)
fairly present, or will fairly present, as the case may be, the
consolidated financial position of the Company and its Subsidiaries
as of the respective dates thereof and the consolidated results of
their operations and cash flows for the periods indicated (subject
to, in the case of any unaudited interim financial statements,
reasonable estimates of normal and recurring year-end adjustments).
3.6 Profit and Loss Statements; No Undisclosed Liabilities.
(a) The Company has delivered to Acquiror profit and loss statements for
each of Stores reflecting the operations of each Store for each month
from November 1, 2001 through October 31, 2002 (each, a "Profit and
Loss Statement" and together, the "Profit and Loss Statements"). Such
Profit and Loss Statements are complete and correct, represent
actual, bona fide transactions, have been prepared from and are in
accordance with the accounting records of each Store, and fairly
present the transactions and the operations of the Stores for the
periods referred to in such Profit and Loss Statements. The revenues
set forth in the Profit and Loss Statements represent cash payments
received from customers of the Stores and deposited into bank
accounts of such Stores, are included as so set forth in the
consolidated financial statements of the Company for the
corresponding periods and have been reported in a manner consistent
with the Company's financial reporting accounting principles.
Notwithstanding the foregoing, the DPI revenue set forth on the
Profit and Loss Statements reflects net commissions. The expenses
reflected on the Profit and Loss Statements are included in the
consolidated financial statements of the Company for the
corresponding periods and are consistent with the Company's financial
reporting accounting principles, subject to such changes due to
reclassifications that occur in the ordinary course of business and
are not material with respect to the operation of the Stores.
(b) The balance sheet information set forth on Schedule 3.6(b) for each
of the Stores has been derived from the accounting records of each
Store and fairly presents the information set forth thereon for the
date provided. Such information is included in the consolidated
financial statements of the Company as of the date referenced thereon
and reflects accounting treatment consistent with the Company's
financial reporting accounting principles.
(c) Except as set forth in the Company's Consolidated Financial
Statements, the Profit and Loss Statements or on Schedule 3.6(c), the
Assets are not subject to any liability, commitment, debt or
obligation (of any kind whatsoever whether absolute or contingent,
accrued, fixed, known or unknown, matured or unmatured) (together,
"Undisclosed Liabilities").
3.7 Events Subsequent to Profit and Loss Statements. Since October 31, 2002, the
Company and the Operating Subsidiaries have conducted the operation of the
Stores only in the ordinary course of business, and there has not been:
(a) any sale, lease, transfer, license or assignment of any Store assets,
tangible or intangible, other than in the ordinary course of
business;
(b) any damage, destruction or property loss, whether or not covered by
insurance, affecting adversely and materially the Assets;
(c) any subjection to any Encumbrance on any of the Assets, other than
Permitted Encumbrances;
(d) any incurrence of indebtedness or liability or assumption of
obligations by the Company or any Operating Subsidiary relating to
the Assets, other than those incurred in the ordinary course of
business;
(e) any cancellation or compromise by the Company or any Operating
Subsidiary of any material debt or claim relating to the Assets,
except for adjustments made in the ordinary course of business which,
in the aggregate, are not material;
(f) any waiver or release by the Company or any Operating Subsidiary of
any right of any material value relating to the Assets;
(g) any material adverse change in the business, operations, prospects,
assets or results of operations or condition of the Stores or the
Assets, and no event has occurred or circumstance exists that may
result in such a material adverse change;
(h) any change in the accounting policies with respect to the Stores as
in effect on November 30, 2002, including without limitation,
charge-off policies; or
(i) any action or failure to take any action that would result in the
occurrence of any of the foregoing.
3.8 Property. Each Store in which Acquiror will assume the real estate lease
hereunder is listed on Schedule 3.8 (together with the Owned Store, the
"Acquired Stores"). With respect to any real estate lease underlying an Acquired
Store (each, a "Store Lease" and together, the "Store Leases"), a true and
complete copy of each such Store Lease has been delivered to the Acquiror. With
respect to each Store Lease, (a) the Store Lease has been validly executed and
delivered by the Company or the Operating Subsidiary, as the case may be, and by
the other party or parties thereto and is a binding agreement; (b) the Company
or the Operating Subsidiary, as the case may be, is not, and no other party to
the Store Lease is, in material breach or material default, and, no event has
occurred on the part of the Company or the Operating Subsidiary, as the case may
be, or on the part of any other party which, with notice or lapse of time, would
constitute such a breach or default or permit termination, modification or
acceleration under the Store Lease; (c) upon the assumption of the Store Lease
by Acquiror as contemplated by Section 1.5(b), except as set forth on Schedule
3.8, the Store Lease will continue to be binding on the Acquiror and the
Landlord in accordance with its terms immediately following the Closing Date;
(d) the Company or the Operating Subsidiary, as the case may be, has not
repudiated and no other party to the Store Lease has repudiated any provision
thereof; (e) there are no material disputes, oral agreements or delayed payment
programs in effect as to the Store Lease; and (f) all facilities leased under
each Store Lease are fit for the operation of the Store and have been reasonably
maintained. All heating, cooling, lighting, plumbing and electrical systems
under each Store Lease are in good repair and working order. All fixtures,
furnishings and improvements under each Store Lease, including but not limited
to, mirrors, linoleum, shades, awnings, blinds, carpeting, curtains, draperies
and ceiling and wall lighting fixtures, are in reasonably good and clean
condition, subject to ordinary wear and tear.
3.9 Tangible Property. Except as set forth on Schedule 3.9, the Company and the
Operating Subsidiaries have good and valid title to the Assets held by them,
subject to no Encumbrances, except Permitted Encumbrances. At the Closing, the
Company and the Operating Subsidiaries shall deliver the Assets to the Acquiror,
free and clear of any Encumbrances, except for Permitted Encumbrances.
3.10 Inventory. All inventory relating to the Stores (including without
limitation, the Idle Inventory) was purchased, acquired or ordered in the
ordinary and regular course of business or pursuant to acquisitions and
consistent with the regular inventory practices of the Company and the Operating
Subsidiaries. All such inventory is of a quality usable and merchantable in the
operation of the Stores and is in good repair and condition, ordinary wear and
tear excepted, except for obsolete items which have been written off in the
Profit and Loss Statements or on the accounting records of the Company as of the
Closing Date, as the case may be.
3.11 Rental Purchase Agreements. The Company has provided to Acquiror true and
correct copies of all forms of Rental Purchase Agreements utilized in the Stores
during the Company's previous five (5) fiscal years. The form of each Rental
Purchase Agreement utilized in the Stores by the Company and any of its
Subsidiaries currently and during the previous five (5) fiscal years of the
Company is and was, as the case may be, in compliance with all federal and state
laws of the state in which such Rental Purchase Agreement was utilized. All
Rental Purchase Agreements relating to the Stores were entered into in the
ordinary and regular course of business in a manner consistent with the regular
business practices of the Company and any of its Subsidiaries. With respect to
each Rental Purchase Agreement relating to the Stores:
(a) such Rental Purchase Agreement is in full force and effect and
constitutes a valid, legal and binding obligation of the contracting
parties, enforceable against each of them in accordance with its
terms;
(b) the Company and the Operating Subsidiaries have complied in all
respects with the terms of such Rental Purchase Agreement;
(c) neither the Company nor any of the Operating Subsidiaries are in
breach, violation or default under such Rental Purchase Agreement;
(d) no event has occurred which constitutes, or with the lapse of time or
the giving of notice, or both would constitute a breach, violation or
default under the Rental Purchase Agreement;
(e) the enforceability of such Rental Purchase Agreement and the
enjoyment of the rights and benefits thereunder will not be affected
in any respect by the execution and delivery of this Agreement, the
performance by the parties of their obligations hereunder or the
consummation of the transactions contemplated hereby; except for
those matters above which would not, individually or in the
aggregate, have a material adverse effect on the operation of the
Stores or of the Assets.
3.12 Legal Compliance. Except as set forth on Schedule 3.12, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed, commenced, is pending or, to the knowledge of the Company,
threatened against the Company or any of its directors, officers, employees,
agents or Subsidiaries alleging a violation of any applicable Law or Regulation.
The Company and each of its Subsidiaries has conducted their respective
operations in compliance in all material respects with all applicable Laws,
including rules, Regulations, codes, plans, agreements, contracts, injunctions,
Orders, rulings and charges thereunder, and are not in default with respect to
any agreement, directive, memorandum of understanding or Order applicable to the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has been advised by any Governmental Authority that such
Governmental Authority is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any Order, memorandum of
understanding, commitment letter or similar submission. The Company and each of
its Subsidiaries has obtained all authorizations, licenses, product and
establishment registrations, franchises, Permits, easements, certificates and
consents necessary to the operation of the Stores and to own the Assets. All
such authorizations, licenses, registrations, franchises, Permits, easements,
certificates and consents are in full force and effect and, to the knowledge of
the Company, no suspension or cancellation of any of them is threatened.
3.13 Assets Necessary to the Business. The Assets, excluding the Excluded Assets
and the inventory related to the Stores, which is addressed in Section 3.10, (a)
constitute all of the assets, tangible and intangible, necessary to operate the
Stores, and (b) are in good operating condition and repair, ordinary wear and
tear excepted.
3.14 Books and Records; Internal Controls. The books and records of the Company
and the Operating Subsidiaries relating to the Assets, including without
limitation, the Profit and Loss Statements, fairly reflect the transactions to
which they are a party or by which the Assets are bound, and such books and
records are and since October 30, 2000, have been properly kept and maintained
in accordance with sound business practices and the requirements of Section
13(b)(2) of the Exchange Act (whether or not such entity is subject to such
Section), including the maintenance of an adequate system of internal controls.
There are no significant deficiencies in the design or operation of the
Company's or the Operating Subsidiaries' internal controls which could adversely
affect the Company's or the Operating Subsidiaries' ability to record, process,
summarize and report financial data. There are no material weaknesses in the
Company's or any of the Operating Subsidiaries internal controls. All financial
and operational information submitted by the Company and the Operating
Subsidiaries to the Acquiror, including without limitation, computer printouts,
accurately and fairly represent such amounts and the financial condition and the
results of operations of the Stores on and as of the dates for the periods
thereof.
3.15 Product Warranties. Except as set forth on Schedule 3.15, neither the
Company nor any of its Operating Subsidiaries has given or made any express
warranties to third parties, including without limitation customers, with
respect to any products rented or sold by them, except for the warranties
imposed by the provisions of applicable Law. Except as set forth on Schedule
3.15, neither the Company nor any Operating Subsidiary has any knowledge of any
fact or event forming the basis of an actual or threatened claim against the
Company or any Operating Subsidiary for product liability on account of any
express or implied warranty.
3.16 Inappropriate Payments. Neither the Company, the Operating Subsidiaries,
nor any employee, agent or representative of any of them has, directly or
indirectly, made any bribes, kickbacks, illegal payments or illegal political
contributions using Company nor any Operating Subsidiary funds or made any
illegal payments from the Company's or the Operating Subsidiaries' funds to
obtain or retain business.
3.17 Environmental Matters. There are no claims, actions, suits, complaints,
proceedings or investigations pending, or to the knowledge of the Company,
threatened against or affecting the Stores at Law or in equity before any Court
or before or by any Governmental Authority relating to environmental matters.
Neither the Company nor any Operating Subsidiary is subject to any Order, writ
or injunction applicable to the Stores relating to any environmental matter.
With respect to the Stores, neither the Company nor any Operating Subsidiary is
in violation of or in default in any material respect with regards to any
existing statute, Regulation, writ, injunction or Order of any Court or
Governmental Authority relating to any environmental matter. The real property
on which the Stores are located is free from hazardous substance, petroleum or
other contamination which may give rise to liability to the Company or any
Operating Subsidiary, as owner or operator of the Stores, for clean up or a
required response action or which under any Store Leases may impose liability on
the operator of the Stores for such liability.
3.18 Motor Vehicles and Equipment. Set forth on Schedule 3.18 is a list of the
motor vehicles utilized by the Company or any of the Operating Subsidiaries in
the operation of the Stores on the date hereof. At the Closing, the vehicles
identified by Acquiror as set forth in Section 1.1(f) shall be delivered free
and clear of all Encumbrances on an "as is" basis.
3.19 Ordinances and Regulations. The Stores and the operation and maintenance
thereof, as now operated or maintained, do not contravene any zoning ordinance
or other administrative Regulations (whether or not permitted because of prior
nonconforming use) or violate any existing restrictive covenant or any provision
of existing and applicable Law, the effect of which in any respect would
interfere with or prevent the continued use of the properties for the purposes
for which they are now being used or would reduce the value thereof.
3.20 Insurance. The Company and the Operating Subsidiaries currently maintain
fire and casualty and general liability, workers compensation and automobile
policies with reputable insurance carriers. The Company and the Operating
Subsidiaries reasonably believe that such insurance policies provide full and
adequate coverage for all normal risks incident to the Stores and the Assets.
3.21 Litigation.
(a) Litigation - Company and its Subsidiaries. Except as set forth on
Schedule 3.21(a), there are no actions, suits, investigations,
complaints or proceedings (including any proceedings in arbitration)
pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, at law or in equity, in any Court
or before any Governmental Authority, alleging violation of the
provisions of the Rental Purchase Agreements, rent-to-own statutes or
any other consumer protection Law.
(b) Litigation - Affecting the Stores. The Company has furnished Acquiror
copies of (i) all attorney responses to the request of the
independent auditors for the Company with respect to loss
contingencies as of September 30, 2002 in connection with the
Company's financial statements, and (ii) a written list of legal and
regulatory proceedings filed against the Company or any of the
Operating Subsidiaries which are pending (including matters which are
on appeal or have not been fully funded, and administrative matters
that may be closed but with respect to which the applicable statute
of limitations has not run) as of the date of this Agreement relating
to, in connection with or otherwise pertaining to the Stores. There
are no actions, suits, investigations, complaints or proceedings
(including any proceedings in arbitration) pending (including matters
which are on appeal or have not been fully funded, and administrative
matters that may be closed but with respect to which the applicable
statute of limitations has not run) or, to the knowledge of the
Company, threatened against the Company or any of the Operating
Subsidiaries, or any of their respective officers, directors,
employees, agents, at Law or in equity, in any Court or before any
Governmental Authority relating to or in connection with the
operation of the Stores or otherwise pertaining thereto, except
actions, suits, investigations, complaints or proceedings that are
set forth on Schedule 3.21(b). Except as set forth in Schedule
3.21(c), there are no actions, suits, investigations, complaints or
proceedings (including any proceedings in arbitration) pending or, to
the knowledge of the Company, threatened against the Company or any
of the Operating Subsidiaries, or any of their respective officers,
directors, employees, agents, at Law or in equity, in any Court or
before any Governmental Authority relating to or in connection with
the operation of the Stores or otherwise pertaining thereto, alleging
violations of federal or state Laws respecting employment, including
but not limited to, gender, race, disability, national origin or age
discrimination, violations of the Occupational Safety and Health Act,
Family and Medical Leave Act, terms and conditions of employment or
the federal or state wages and hours Laws.
3.22 Employment Matters. Neither the Company nor any of its Subsidiaries has
been, and are not now, a party to any collective bargaining agreement or other
labor contract and there has not been, there is not presently pending (including
matters which are on appeal or have not been fully funded, and administrative
matters that may be closed but with respect to which the applicable statute of
limitations has not run) or existing, and, to the Company's knowledge, there is
not threatened, any strike, slowdown, picketing, work stoppage or employee
grievance process involving the Company or any of its Subsidiaries. To the
knowledge of the Company, no event has occurred or circumstance exists that
could provide the basis for any work stoppage or other labor dispute and there
is not pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries any proceeding relating to the
alleged violation of any legal requirement pertaining to labor relations or
employment matters, including any charge or complaint filed with the National
Labor Relations Board or any comparable governmental body, and there is no
organizational activity or other labor dispute against or affecting the Company
or any of its Subsidiaries or the Stores. No application or petition for an
election of or for certification of a collective bargaining agent is pending and
no grievance or arbitration proceeding exists that might have an adverse effect
upon the Company or any of its Subsidiaries or the Stores. There is no lockout
of any employees by the Company or any of its Subsidiaries, and no such action
is contemplated by the Company or any of its Subsidiaries. To the knowledge of
the Company, there has been no charge of discrimination filed against or
threatened against the Company or any of its Subsidiaries with the Equal
Employment Opportunity Commission or similar governmental body.
3.23 Taxes.
(a) For purposes of this Agreement, (a) "Tax Return" means any report,
statement, form, return or other document or information required to
be supplied to a taxing authority in connection with Taxes or any
amendments thereto, and (b) "Tax" or "Taxes" means any federal,
state, local or foreign tax, including, without limitation, income
tax, ad valorem tax, excise tax, sales tax, use tax, franchise tax,
gross receipts tax, withholding tax, social security tax, occupation
tax, service tax, license tax, payroll tax, transfer and recording
tax, severance tax, customs tax, import tax, export tax, employment
tax, or any similar or other tax, assessment, duty, fee, levy or
other governmental charge, together with and including, without
limitation, any and all interest, fines, penalties, assessments and
additions to tax resulting from, relating to, or incurred in
connection with any such tax or any contest or dispute thereof.
(b) The Company and any affiliated, combined, consolidated, unitary or
similar group of which the Company is or was a member (a "Relevant
Group") has filed with the appropriate taxing authorities all Tax
Returns required to be filed prior to the date hereof, and will file
all such Tax Returns required to be filed by the Closing Date on or
before the Closing Date, including, but not limited to, all Tax
Returns the filing of which is necessary for the conduct of the
Company's and the Operating Subsidiaries' business. The Tax Returns
so filed are, and the Tax Returns to be filed will be, in all
material respects, complete, correct and accurate representations of
the income, franchise or other Tax liabilities of the Company and the
Operating Subsidiaries and such Tax Returns accurately set forth, and
will set forth, all items required to be reported thereon. Each such
Tax Return has been and will be prepared in all material respects in
compliance with all applicable laws and regulations. All Taxes due
and payable by the Company or any member of a Relevant Group, whether
or not shown on any Tax Return, have been paid or will be paid by the
Closing Date, except such Taxes, if any, as are being contested
diligently and in good faith and which are set forth on Schedule
3.23(b).
(c) There are no claims for Taxes pending against the Company or any
Relevant Group nor any threatened claim for Tax deficiencies or
adjustments against the Company or any Relevant Group for which the
Assets could be liable and the Company knows of no basis for such
claims. There exist no actual or, to the knowledge of the Company,
proposed additional assessments of Taxes by any Taxing authority to
which the Assets could be subject. There are no outstanding
agreements or waivers that would extend the statutory period in which
a taxing authority may assess or collect a Tax against the Company or
any Relevant Group and to which the Assets could be subject. There
are no Liens for Taxes, other than for current Taxes not yet due and
payable, upon the Assets.
(d) All Taxes that relate to the business of the Company or any Relevant
Group or the Assets and that will be due and payable on or before the
Closing Date shall have been paid in full on or before the Closing
Date.
(e) The Company has withheld or will cause to be withheld from all
employees and has timely paid or will cause to be paid to the
appropriate Governmental Authorities proper and accurate amounts for
all periods through the date hereof and the Closing Date in
compliance with all Tax withholding provisions of applicable federal,
state, foreign and local Law.
3.24 Employee Benefit Plans.
(a) The Company has listed on Schedule 3.24(a) and has delivered to the
Acquiror true and complete copies of
(i) any nonqualified deferred, incentive compensation and
retirement plans or arrangements,
(ii) any qualified retirement plans or arrangements and the most
recent Form 5500s filed with the IRS with respect to such
plans or arrangements,
(iii) any other employee compensation, stock options, severance or
termination pay or welfare benefit plans, programs or
arrangements,
(iv) any other employee benefit plans, programs, or arrangements,
and
(v) any related trusts, insurance contracts or other funding
arrangements maintained, established or contributed to by the
Company or any entity (a "Company ERISA Affiliate") required
to be aggregated with the Company pursuant to the provisions
of Sections 414(b), (c), (m) or (o) of the Code or Section
4001(a)(14) of ERISA within the last six years or currently in
effect to which the Company or any Company ERISA Affiliate is
a party or otherwise is bound ("Company Employee Benefit
Plans"), excluding any such plan, program, arrangement or
funding arrangement as to which the Company is not (and has
not been) a participating employer and has no current or
potential liability under the Code or ERISA.
(b) The Company has listed on Schedule 3.24(b) hereto and has delivered
to the Acquiror true and complete copies of any applications for
Private Letter Rulings made to the IRS and any responses received
from the IRS regarding the same.
(c) One or more of the Company Employee Benefit Plans may be covered by
COBRA. If so, each such Company Employee Benefit Plan has been
operated in, and is in, compliance with COBRA in all material
respects. To the knowledge of the Company after due inquiry, all
notices required to be given under COBRA for each such Company
Employee Benefit Plan have been timely and properly given in
accordance with COBRA, and the rules and Regulations promulgated
thereunder. No employee, former employee or "qualified beneficiary"
(as defined in COBRA) has any claim or contingent claim against the
Company, any Subsidiary of the Company or any Company ERISA Affiliate
for failure to comply with COBRA or the rules and Company Regulations
promulgated thereunder. The Company has not communicated to any
employee or former employee any intention or commitment to modify any
Company Employee Benefit Plan or to establish or implement any other
employee or retiree benefit or compensation plans or arrangements.
3.25 Broker's Fees. Except as set forth on Schedule 3.25, neither the Company
nor anyone on its behalf has any liability to any broker, finder, investment
banker or agent, or has agreed to pay any brokerage fees, finder's fees or
commissions, or to reimburse any expenses of any broker, finder, investment
banker or agent in connection with this Agreement or the transactions
contemplated by this Agreement.
3.26 Solvency.
(a) The Company and each of the Operating Subsidiaries is not now
Insolvent and will not be rendered insolvent by the transactions
contemplated hereby. As used herein, "Insolvent" means that the sum
of the debtor's Debts is greater than all of the debtor's assets at a
fair valuation.
(b) Immediately after giving effect to the consummation of the
transactions contemplated hereby: (i) the Company and each of the
Operating Subsidiaries will be able to pay their liabilities as they
become due in the usual course of its business; (ii) the Company and
each of the Operating Subsidiaries will not have unreasonably small
capital with which to conduct their present or proposed business;
(iii) the Company and each of the Operating Subsidiaries will have
assets (calculated at fair market value) that exceed its liabilities;
and (iv) taking into account all pending and threatened litigation,
final judgments against the Company or any of its Subsidiaries in
actions for money damages are not reasonably anticipated to be
rendered at a time when, or in amounts such that, the Company or any
of the Operating Subsidiaries will be unable to satisfy any such
judgments promptly in accordance with their terms (taking into
account the maximum probable amount of such judgments in any such
actions and the earliest reasonable time at which such judgments
might be rendered) as well as all other obligations of the Company
and each of the Operating Subsidiaries. The cash available to the
Company and each of the Operating Subsidiaries, after taking into
account all other anticipated uses of the cash, will be sufficient to
pay all such Debts and judgments promptly in accordance with their
terms.
3.27 Average Monthly Revenue - Three Months. The average monthly revenue of the
Stores, calculated for the months of September 2002, October 2002 and November
2002 under the accounting methods set forth in the Profit and Loss Statements,
is no less than $10,062,311 per month. On the Closing Date, the average monthly
revenue of the Stores, calculated for the three full calendar months immediately
prior to the Closing Date and calculated under the accounting methods set forth
in the Profit and Loss Statements (the "Closing Three Month Revenue"), will be
no less than $10,200,000 per month (the "Closing Three Month Revenue Target");
provided, however, that Acquiror's sole remedy in the event that such
representation is not true as of the Closing Date will be the Purchase Price
Reduction provided for in Section 1.3(b), except that if the Closing Three Month
Revenue is equal to or less than $10,000,000 (the "Closing Three Month Revenue
Minimum"), then Acquiror may, at its election, terminate this Agreement pursuant
to the terms set forth in Section 1.3(c).
3.28 Monthly Revenue - One Month. The monthly revenue of the Stores, calculated
for the month of November 2002 under the accounting methods set forth in the
Profit and Loss Statements, is no less than $10,200,000. On the Closing Date,
the monthly revenue of the Stores, calculated for the full calendar month
immediately prior to the Closing Date and calculated under the accounting
methods set forth in the Profit and Loss Statements (the "Closing Month
Revenue"), will be no less than $10,200,000 (the "Closing Month Revenue
Target"); provided, however, that Acquiror's sole remedy in the event that such
representation is not true as of the Closing Date will be the Purchase Price
Reduction provided for in Section 1.3(b), except that if the Closing Month
Revenue is equal to or less than $10,000,000 (the "Closing Month Revenue
Minimum"), then Acquiror may, at its election, terminate this Agreement pursuant
to the terms set forth in Section 1.3(c).
3.29 Average Weekly Revenue. The average weekly revenue of the Stores,
calculated from December 1, 2002 to the date hereof under the accounting methods
set forth in the Profit and Loss Statements, is no less than $2,400,000. On the
Closing Date, the average weekly revenue of the Stores, calculated for each week
from the first day following the end of the month immediately preceding the
Closing Date to the Closing Date under the accounting methods set forth in the
Profit and Loss Statements (the "Closing Weekly Revenue"), will be no less than
$2,355,000 (the "Closing Weekly Revenue Target"); provided, however, that
Acquiror's sole remedy in the event that such representation is not true as of
the Closing Date will be the Purchase Price Reduction provided for in Section
1.3(b), except that if the Closing Weekly Revenue is equal to or less than
$2,350,000 (the "Closing Weekly Revenue Minimum"), then Acquiror may, at its
election, terminate this Agreement pursuant to the terms set forth in Section
1.3(c).
3.30 Net Book Value of Inventory. The net book value of the Store inventory
being sold hereunder calculated under the accounting methods set forth in the
Company's consolidated financial statements is no less than $54,500,000 (net of
30-days past due) as of the date hereof. On the Closing Date, the net book value
of the Store inventory being sold hereunder calculated under the accounting
methods set forth in the Company's consolidated financial statements (the
"Closing Inventory") will be no less than $54,500,000 (net of 30-days past due)
(the "Closing Inventory Target"); provided, however, that Acquiror's sole remedy
in the event that such representation is not true as of the Closing Date will be
the Purchase Price Reduction provided for in Section 1.3(b), except that if the
Closing Inventory (net of 30-days past due) is equal to or less than $53,500,000
(the "Closing Inventory Minimum"), then Acquiror may, at its election, terminate
this Agreement pursuant to the terms set forth in Section 1.3(c).
3.31 Full Disclosure. To the knowledge of the Company or any of the Operating
Subsidiaries, neither this Agreement nor any certificate, document or
communication furnished by the Company or any of the Operating Subsidiaries to
the Acquiror (including the principals thereof, acting in their individual
capacities) in connection herewith (whether prior to, on, or after the date
hereof) contains or will contain an untrue statement of a material fact or omits
to state or will state a material fact necessary to make the statements
contained herein correct and therein not misleading. There is no fact known to
the Company or any of the Operating Subsidiaries that materially and adversely
affects the use or enjoyment of, or title to the Assets, which has not been set
forth herein.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Interim Operations of the Company and the Operating Subsidiaries. Except as
contemplated by this Agreement, during the period from the date hereof to the
Closing Date, the Company shall, and shall cause the Operating Subsidiaries to,
conduct their respective businesses in the ordinary course of business
consistent with past practice, preserve their business organization intact, use
their best efforts to retain the services of their present principal employees,
and to preserve their goodwill and the goodwill of their suppliers, customers
and others having business relationships with it. Except as otherwise
contemplated by this Agreement, during the period from the date hereof to the
Closing Date, the Company will not, and will cause the Operating Subsidiaries
not to, without the prior written consent of Acquiror:
(a) sell, transfer, mortgage, encumber, pledge or otherwise dispose of
any of the Assets, except for sales of the Assets in the ordinary
course of business (excluding the sale of any Store, which is
specifically prohibited hereby);
(b) permit any insurance policy naming it as a beneficiary or
loss-payable payee covering the Assets to be cancelled or terminated;
(c) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization (by operation of law or otherwise) of the Company or
any of its Subsidiaries;
(d) except as set forth in Schedule 4.1(d), increase in any manner the
compensation payable or to become payable by the Company or any of
its Subsidiaries to any Store employee, other than in the ordinary
course of business consistent with past practice and disclosed to
Acquiror prior to the date hereof;
(e) amend or terminate any Store Lease being transferred hereunder or
enter into any new lease with respect to the Stores;
(f) except as set forth on Schedule 4.1(f), amend or terminate any
Company Employee Benefit Plan, including without limitation, any
bonus plans, except as required by Law or this Agreement;
(g) sell or otherwise dispose of any shares of the capital stock of any
of the Operating Subsidiaries;
(h) take any action to change its accounting policies with respect to the
Stores as in effect at November 30, 2002, including without
limitation, charge-off policies;
(i) take any action or omit to take any action that would cause any of
the representations and warranties of the Company or the Operating
Subsidiaries herein to become untrue in any material respect; or
(j) agree, commit or arrange to do any of the foregoing.
4.2 Reasonable Efforts; Filings; Consents.
(a) Subject to the terms of this Agreement, the parties hereto will each
use all commercially reasonable efforts (i) to take, or cause to be
taken, all appropriate action, and to do, or to cause to be done, all
things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective in the most expeditious
manner practicable, the transactions contemplated by this Agreement,
(ii) to obtain from any Governmental Authority any Permits or Orders
required to be obtained by Acquiror or the Company or any of their
respective Subsidiaries in connection with the authorization,
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, (iii) to make
all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the transactions
contemplated hereby required under (A) the Securities Act and the
Exchange Act, and any other applicable federal or state securities
laws, (B) the HSR Act, and (C) any other applicable Law; (iv) subject
to any restrictions under antitrust Laws, promptly notify each other
of any communication to that party from any Governmental Authority
with respect to this Agreement and the transactions contemplated
hereby and permit the other party to review in advance any proposed
written communication to any Governmental Authority; (v) not agree to
participate in any meeting with any Governmental Authority in respect
of any filings, investigation or other inquiry with respect to this
Agreement and the transactions contemplated hereby unless it consults
with the other party in advance and, to the extent permitted by such
Governmental Authority, give the other party the opportunity to
attend and participate therein, in each case to the extent
practicable; (vi) subject to any restrictions under antitrust Laws,
furnish the other party with copies of all correspondence, filings
and communications (and memoranda setting forth the substance
thereof) between it and its affiliates and their respective
representatives on the one hand, and any Governmental Authority or
members of its staff on the other hand, with respect to this
Agreement and the transactions contemplated hereby (excluding
documents and communications which are subject to preexisting
confidentiality agreements and to the attorney client privilege or
work product doctrine); and (vii) furnish the other party with such
necessary information and reasonable assistance as such other party
and its affiliates may reasonably request in connection with their
preparation of necessary filings or submission of information to any
Governmental Authority in connection with this Agreement and the
transactions contemplated hereby, including without limitation, any
filings necessary or appropriate under the provisions of the HSR Act.
(b) Subject to the terms of this Agreement, Acquiror, the Company and the
Operating Subsidiaries agree to cooperate and use all commercially
reasonable efforts to contest and resist any action, including
administrative or judicial action, and to have vacated, lifted,
reversed or overturned any Order (whether temporary, preliminary or
permanent) of any Court or Governmental Authority that is or becomes
in effect and that restricts, prevents or prohibits the consummation
of the transactions contemplated by this Agreement; provided,
however, that nothing contained in this Agreement shall require
Acquiror to enter into a divestiture, hold-separate, business
limitation or similar agreement or undertaking which would,
individually or in the aggregate, in the judgment of Acquiror,
adversely impact the economic or business benefits to Acquiror of the
transactions contemplated by this Agreement or the ability of
Acquiror to conduct its business substantially in the manner such
business is being conducted as of the date of this Agreement.
(c) (i) Subject to the terms of this Agreement, each of the
Company, the Operating Subsidiaries and the Acquiror will give
(or will cause their respective Subsidiaries to give) any
notices to third persons, and use, and cause their respective
subsidiaries to use, all commercially reasonable efforts to
obtain any consents from third persons (A) necessary, proper
or advisable to consummate the transactions contemplated by
this Agreement, (B) otherwise required under any contracts,
licenses, leases or other agreements in connection with the
consummation of the transactions contemplated hereby, or (C)
required to prevent a material adverse effect on the Stores
from occurring prior to the Closing Date. The Company and the
Operating Subsidiaries shall notify Acquiror promptly, but in
no event later than two (2) days, following receipt of the
consent contemplated by Section 5.2(d) hereof. --------------
(ii) If the Company or the Operating Subsidiaries shall fail to
obtain any consent described in Section 4.2(c)(i) above from a
third person, the Company and the Operating Subsidiaries will
use all reasonable efforts, and will take any such actions
reasonably requested by Acquiror, to limit the adverse effect
upon the Acquiror and its Subsidiaries resulting, or which
would result after the Closing Date, from the failure to
obtain such consent and will cooperate in good faith with
Acquiror to develop an alternative arrangement to ensure that
Acquiror obtains the benefits consistent with the economic
results intended by this Agreement.
4.3 No Solicitations.
(a) Neither the Company nor any of the Operating Subsidiaries shall,
directly or indirectly, through any officer, director, employee,
representative or agent solicit or encourage (including by way of
furnishing any information or assistance) the initiation or
submission of any inquiries, proposals or offers from any person
regarding the sale of any of the Assets to be sold to Acquiror hereby
(other than as permitted by Section 4.1(a)), whether or not in
writing and whether or not delivered to the Company or any of its
Subsidiaries generally (an "Acquisition Proposal"); provided,
however, that nothing contained in this Agreement shall prevent the
Board of Directors of the Company or any of the Operating
Subsidiaries from referring any third party to this Section 4.3. The
Company and the Operating Subsidiaries further agree that neither the
Company, the Operating Subsidiaries nor any of their respective
officers or directors shall, and that they shall each direct and use
their best efforts to cause their employees, agents and
representatives (including any investment banker, attorney or
accountant retained by the Company or any Operating Subsidiaries) not
to, directly or indirectly, enter into negotiations concerning, or
provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal.
(b) The Company shall immediately notify the Acquiror after receipt
(after the date hereof) of any Acquisition Proposal or any request
for nonpublic information relating to the Company or any of the
Operating Subsidiaries in connection with an Acquisition Proposal or
for access to the properties, books or records of the Company or any
of the Operating Subsidiaries that informs the Board of Directors of
the Company that it is considering making, or has made, an
Acquisition Proposal. The Company also agrees that it will promptly
request each person that has heretofore executed a confidentiality
agreement in connection with any such person's consideration of
acquiring any of the Assets to return all confidential information
heretofore furnished to such person by or on behalf of it.
(c) The Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the
foregoing. The Company agrees that it will take the necessary steps
to promptly inform the individuals or entities referred to above of
the obligations undertaken in this Section 4.3.
4.4 Press Releases. The Company, the Operating Subsidiaries and the Acquiror
will consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press releases or other public
statements with respect to any transactions described in this Agreement, and
shall not issue any such press releases or make any such public statement prior
to such consultation.
4.5 Confidentiality; Access to Information.
(a) The parties acknowledge that the Acquiror and the Company have
entered into that certain confidentiality and non-disclosure
agreement, dated as of November 16, 2002, as amended (the
"Confidentiality Agreement"), which will terminate upon the execution
of this Agreement. Notwithstanding the foregoing, the parties shall
remain liable in accordance with the terms of the Confidentiality
Agreement as if such agreement remained in effect for breaches, if
any, thereunder occurring prior to the date hereof.
(b) Each of the Company, the Operating Subsidiaries and the Acquiror
will, and will cause their respective officers, directors, employees,
agents and representatives to (i) hold in confidence, unless
compelled to disclose by judicial or administrative process or by
other requirements of Law, all nonpublic information concerning the
other party furnished in connection with the transactions
contemplated by this Agreement until such time as such information
becomes publicly available (otherwise than through the wrongful act
of such person) and (ii) not release or disclose such information to
any other person, except in connection with this Agreement to its
auditors, attorneys, financial advisors, other consultants and
advisors. In the event of termination of this Agreement for any
reason, the parties hereto will promptly return or destroy all
documents containing nonpublic information so obtained from any other
party hereto and any copies made of such documents and any summaries,
analyses or compilations made therefrom.
(c) Between the date hereof and the Closing Date, the Company and the
Operating Subsidiaries will provide the Acquiror and its authorized
representatives (including counsel, financial advisors and auditors)
reasonable access during normal business hours to all employees,
offices, warehouses and other facilities and to all books and records
of the Company and the Operating Subsidiaries relating to the Assets
and the operation of the Stores, will permit the Acquiror to make
such inspections as the Acquiror may reasonably require and will
cause the Company's officers and those of its Subsidiaries to furnish
the Acquiror with such financial and operating data and other
information with respect to the business, properties and personnel of
the Company and its Subsidiaries relating to the Assets and the
Stores as the Acquiror may from time to time reasonably request,
provided that no investigation pursuant to this Section 4.5(c) shall
affect or be deemed to modify any of the representations or
warranties made by the Company or any of the Operating Subsidiaries
and each representation and warranty shall survive such
investigation.
(d) Between the date hereof and the Closing Date, the Company and the
Operating Subsidiaries will provide the firms retained by Acquiror to
deliver the Solvency Opinion and the Reasonably Equivalent Value
Opinion, and each of their respective employees and authorized
representatives, reasonable access during normal business hours to
all employees, offices, warehouses and other facilities and to all
books and records of the Company and each of its Subsidiaries,
including the Operating Subsidiaries, and will permit such firms to
make such inspections as reasonably required in order to obtain the
information necessary to render the Solvency Opinion and the
Reasonably Equivalent Value Opinion. The Company will cause its
officers and those of its Subsidiaries to furnish such firms with
such financial and operating data and other information with respect
to the financial condition, business, operations and properties of
the Company and its Subsidiaries as such firms may from time to time
reasonably request in the course of their investigation. It is
expressly understood among the parties that during the course of
their engagement and at any time thereafter, the firms retained by
Acquiror to deliver the Solvency Opinion and the Reasonably
Equivalent Value Opinion will not provide confidential information of
the Company or any of its Subsidiaries to the Acquiror.
Notwithstanding the foregoing, such firms will be permitted to review
such aspects of the confidential information as they deem appropriate
in their professional judgment and report to the Acquiror concerning
their satisfaction with the results of such review on rendering the
opinions to Acquiror contemplated by Section 4.7 and Section 4.8
without disclosing the content of the confidential information
reviewed by them to Acquiror.
(e) Between the date hereof and the Closing Date, the Company shall
furnish to the Acquiror no later than one (1) business day following
delivery thereof to management of the Company, such weekly and
monthly financial statements and other data (financial, operational
or otherwise) relating to the operation of the Stores as are
regularly prepared for distribution to Company management.
4.6 Notice of Developments.
(a) Prior to the Closing Date, each of the parties hereto shall promptly
notify the other in writing of all events, circumstances, facts and
occurrences, whether arising prior to or subsequent to the date of
this Agreement, that will or are reasonably likely to result in any
breach of a representation or warranty or covenant made by the
notifying party in this Agreement or in any failure to be satisfied
of any condition to the obligations of the party receiving such
notice under this Agreement.
(b) Should any event, circumstance, fact or occurrence relating to events
after the date hereof require any change to any Schedule provided by
the Company or the Operating Subsidiaries hereunder, the Company and
the Operating Subsidiaries shall promptly deliver to Acquiror a
supplement to such Schedule (a "Schedule Supplement") specifying such
change. Upon receipt of any such Schedule Supplement, Acquiror shall
have ten (10) days from delivery of each such Schedule Supplement
(each, a "Supplement Review Period") to review the contents of and
disclosures in each such Schedule Supplement and to request and
receive any additional information from the Company and the Operating
Subsidiaries relating to the contents and disclosures contained in
such Schedule Supplement. At any time through and including the
Supplement Review Period, Acquiror shall have the right to notify the
Company and the Operating Subsidiaries whether it elects to proceed
with the transactions contemplated by this Agreement, or to terminate
this Agreement. In the event Acquiror elects to terminate this
Agreement, the provisions of Article VII ----------- shall govern and
apply for all purposes. The termination of this Agreement by Acquiror
pursuant to this Section 4.6(b) as a result of receipt of any such
Schedule Supplement which would cause a representation --------------
or warranty of the Company or the Operating Subsidiaries to become
untrue shall not be or be deemed to be a termination of this
Agreement to which the provisions of Section 7.3(a) refers. In the
event that --------------- Acquiror does not elect to terminate this
Agreement during the Supplement Review Period as a result of
receiving any such Schedule Supplement, then Acquiror shall be
prohibited from seeking indemnification under Section 8.2(a) with
respect to the specific breach of the representation and warranty
resulting --------------- from the information included on such
Schedule Supplement. Notwithstanding the foregoing, no delivery of
any Schedule Supplement pursuant to this Section 4.6(b) will cure any
breach of any representation or -------------- warranty of the
Company or any Operating Subsidiary contained in this Agreement made
as of the date hereof or otherwise limit or affect the remedies
available hereunder to Acquiror with respect to such breach.
4.7 Solvency Opinion. Acquiror shall obtain a solvency opinion in the form and
substance satisfactory to the Acquiror from a firm selected by the Acquiror
providing that the Company and the Operating Subsidiaries are not Insolvent and
will not be rendered Insolvent by the transactions contemplated hereby and
otherwise addressing the items referenced in Section 3.26(b) as Acquiror deems
appropriate (the "Solvency Opinion"). The Solvency Opinion shall permit the
Company and the Operating Subsidiaries to reasonably rely thereon, and upon
receipt, Acquiror shall provide a copy of the Solvency Opinion to the Company
and the Operating Subsidiaries. The Company shall promptly reimburse the
Acquiror for the fees of such firm providing the Solvency Opinion up to an
aggregate amount that, together with the fees for the Reasonably Equivalent
Value Opinion, does not exceed $500,000; provided, however, that at Acquiror's
election, such aggregate fee amount may be credited against the Creditor Payment
at Closing or against the Holdback Account.
4.8 Reasonably Equivalent Value Opinion. The Acquiror shall obtain a written
opinion in the form and substance satisfactory to the Acquiror, from a firm
selected by Acquiror providing that the Purchase Price being paid by Acquiror
hereunder (taking into account the potential adjustments to the Purchase Price
contained in Section 1.3(b)) for the sale of the Assets hereunder by the Company
and the Operating Subsidiaries meets or exceeds the reasonably equivalent value
of such Assets (the "Reasonably Equivalent Value Opinion"). The Reasonably
Equivalent Value Opinion shall permit the Company and the Operating Subsidiaries
to reasonably rely thereon, and upon receipt, Acquiror shall provide a copy of
the Reasonably Equivalent Value Opinion to the Company and the Operating
Subsidiaries. The Company shall promptly reimburse the Acquiror for the fees of
such firm providing the Reasonably Equivalent Value Opinion up to an aggregate
amount that, together with the fees for the Solvency Opinion, does not exceed
$500,000; provided, however, that at Acquiror's election, such aggregate fee
amount may be credited against the Creditor Payment at Closing or against the
Holdback Account.
4.9 Employees. The Acquiror shall not assume the liability of the Company or the
Operating Subsidiaries with respect to the employees for accrued but unpaid
salaries (including deferred compensation), wages, vested vacation and sick pay,
workers compensation claims, health benefit claims, employer contributions to a
Company Employee Benefit Plan (including restorative payments) or incentive
compensation, and the Company and the Operating Subsidiaries shall remain
responsible for the payment of all the foregoing items through the date that is
the earlier of (a) the date of termination of such employee, or (b) the last day
of the Transition Period (the "Employee Termination Date"), such payment to be
made as soon as practicable after the Employee Termination Date or when such
payment would otherwise be due, but in no event later than five (5) business
days following the Employee Termination Date; provided, however, that
notwithstanding the terms of any Company Employee Benefit Plans to the contrary,
the Company shall remit to each of its and its Operating Subsidiaries' Store
employees, salary in the amount equal to such employee's accrued but unpaid
vacation as of such employee's Employee Termination Date. The Company and the
Operating Subsidiaries shall also remain responsible for payment of any and all
retention, change in control or other similar compensation or benefits which are
or may become payable to the employees in connection with the transactions
contemplated hereby, including without limitation, any severance payments or
other such obligations to employees in accordance with the terms of the Company
Employee Benefit Plans.
4.10 Designation by Acquiror of Acquiring Subsidiaries. No later than five (5)
days prior to the Closing Date, Acquiror shall provide a list to the Company and
the Operating Subsidiaries designating which Assets acquired hereunder will be
acquired, upon the Closing, by certain of Acquiror's Subsidiaries. The Company
and the Operating Subsidiaries shall execute all documents necessary to
transfer, upon the Closing, such Assets to such designated Acquiror
Subsidiaries.
4.11 Acquiror Due Diligence Period. Acquiror shall have the right to conduct due
diligence and shall be entitled to review the books, records and operations of
the Company and the Operating Subsidiaries and to receive from the Company and
any of the Operating Subsidiaries any and all financial, legal and other
information necessary in completing its due diligence investigation of the
Assets being acquired hereunder. On the fourteenth (14th) date following the
date hereof (the "Initial Investigation Period"), Acquiror shall evaluate the
status of its due diligence investigation, and the Acquiror, the Company and the
Operating Subsidiaries shall mutually agree on a reasonable period of no less
than six (6) days in which Acquiror shall be entitled to complete its due
diligence investigation following such fourteen (14) day period; provided,
however, that in the event the parties are unable to agree on a reasonable
period prior to the conclusion of such fourteen (14) day period, such fourteen
(14) day period shall be extended for six (6) days (such extended period as
agreed upon among the parties, or if no agreement among the parties is reached,
such six (6) day period being herein referred to as the "Extended Investigation
Period" and, together with the Initial Investigation Period, the "Due Diligence
Period"). In the event the last day of the Due Diligence Period shall fall on a
day that is not a Business Day, the next following Business Day shall be the
last day of the Due Diligence Period.
4.12 Little Rock Store Lease. Between the date hereof and the Closing Date, the
Acquiror and the Company shall enter into a real estate lease (the "Owned Store
Lease") with respect to the Owned Store. The Owned Store Lease will become
effective immediately following the Closing Date and contain terms reasonably
satisfactory to each party that are customary for a similar commercial real
estate lease in the same area.
ARTICLE V
CLOSING CONDITIONS
5.1 Conditions to Obligation of all Parties. The obligations of the parties to
effect the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions at or prior to the Closing Date:
(a) HSR Act. (i) The waiting periods (and any extensions thereof)
applicable to the transaction contemplated by this Agreement under
the HSR Act shall have been terminated or shall have expired, and
(ii) no condition shall have been imposed by any Governmental
Authority on the parties hereto adversely impacting the ability of
the parties to conduct their respective businesses substantially in
the manner such businesses are being conducted as of the date of this
Agreement.
(b) Other Governmental Approvals. All material governmental consents and
approvals, if any, necessary to permit the consummation of the
transactions contemplated by this Agreement will have been obtained.
(c) No Restraining Action. No action, suit, or proceeding before any
Court or Governmental Authority will be pending, no investigation by
any Governmental Authority will have been commenced against the
Acquiror, the Company or any of its Subsidiaries, or any of the
principals, officers or directors of any of them, seeking to
restrain, prevent or change the transactions contemplated hereby or
questioning the legality or validity of any such transactions or
seeking damages in connection with any such transactions.
5.2 Conditions to the Acquiror's Obligations. The obligations of the Acquiror to
effect the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions at or prior to the Closing Date, except
to the extent waived in writing by the Acquiror:
(a) Representations and Warranties. Each of the representations and
warranties of the Company and the Operating Subsidiaries contained in
this Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as though
made again on and as of the Closing Date, without giving effect to
any Schedule Supplement; provided, however, that (i) any
representation of warranty contained in Article III which contains an
express materiality exception shall be accurate in all respects, (ii)
any representation or warranty set forth in Section 3.27, Section
3.28, Section 3.29 and Section 3.30, to the extent such
representations and warranties address financial performance (A)
above the Closing Three Month Revenue Minimum, but below the Closing
Three Month Revenue Target, (B) above the Closing Month Revenue
Minimum but below the Closing Month Revenue Target, (C) above the
Closing Weekly Revenue Minimum but below the Closing Weekly Revenue
Target and (D) above the Closing Inventory Minimum but below the
Closing Inventory Target, as applicable, shall be accurate in all
respects and shall only result in the Purchase Price Reductions
contemplated by Section 1.3(b), and (iii) any representation or
warranty in Section 3.27, Section 3.28, Section 3.29 and Section
3.30, to the extent such representations and warranties address
financial performance at or below the Closing Three Month Revenue
Minimum, the Closing Month Revenue Minimum, the Closing Weekly
Revenue Minimum and the Closing Inventory Minimum, as applicable,
shall be excluded from this Section 5.2(a) and covered by Section
5.2(o) hereof. The Acquiror shall have received a certificate of the
Chief Executive Officer and the Chief Financial Officer of the
Company and each of the Operating Subsidiaries, dated as of the
Closing Date, to such effect.
(b) Agreements and Covenants. The Company and the Operating Subsidiaries
shall have each performed or complied in all material respects with
all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date.
The Acquiror shall have received a certificate of the Chief Executive
Officer and the Chief Financial Officer of the Company and each of
the Operating Subsidiaries, dated as of the Closing Date, to such
effect.
(c) No Material Adverse Effect. On or prior to the Closing Date, no event
shall have occurred from the date hereof which has a material adverse
effect on the Stores or the Assets. The Acquiror shall have received
a certificate of the Chief Executive Officer and Chief Financial
Officer of the Company and each of the Operating Subsidiaries, dated
as of the Closing Date, to such effect.
(d) Senior Lender Consent. No later than ten (10) days from the date of
this Agreement, the Company shall have obtained the consent of its
senior lenders set forth on Schedule 3.4, consenting to the Company's
and each of the Operating Subsidiaries' execution, delivery and
performance of the transactions contemplated hereby.
(e) Consents and Approvals. The consents listed on Schedule 5.2(e) shall
have been received.
(f) Satisfactory Completion of Due Diligence Investigation by Acquiror.
The financial, legal and other due diligence investigation of the
Company, each of the Operating Subsidiaries and the Assets being sold
hereunder shall have been completed, and Acquiror shall have been
satisfied with the results thereof in its discretion; provided,
however, that if this Agreement shall not have terminated prior to
the date which is immediately following the end of the Due Diligence
Period, this condition to closing shall be deemed to have been
satisfied.
(g) Non-Competition and Non-Solicitation Agreement. The Company and the
Operating Subsidiaries shall have each entered into an agreement (the
"Non-Competition and Non-Solicitation Agreement") with the Acquiror,
in substantially the form of Exhibit "B" hereto, pursuant to which,
among other things, the Acquiror shall pay to the Company, on behalf
of the Company and the Operating Subsidiaries, the Non-Competition
Payment at Closing in cash by wire transfer of immediately available
funds to an account designated by the Company.
(h) Assignment and Assumption Agreement. The Company and the Operating
Subsidiaries shall have each entered into the Assignment and
Assumption Agreement with the Acquiror.
(i) Motor Vehicle Titles. The receipt by the Acquiror of certificates of
title to all vehicles, whether owned or leased by the Company and the
Operating Subsidiaries on the date hereof, which constitute Assets
transferred hereunder, endorsed by the Company and the Operating
Subsidiaries, as the case may be, together with completed originals
of any forms required by the states in which such vehicles are
located to transfer the same, free and clear of Encumbrances, other
than Permitted Encumbrances.
(j) UCC-3 Termination Statements. The receipt by the Acquiror of UCC-3
Termination Statements, with evidence of authorization by the
appropriate secured party, evidencing the release of the Encumbrances
listed on Schedule 3.9, unless such Encumbrances have been released
prior to the Closing Date, in which case the Company shall provide
UCC financing statement searches from the appropriate governmental
officials of the states and counties in which the Assets, are located
indicating that there are no financing statements affecting any of
the Assets, other than those evidencing Permitted Encumbrances.
(k) Reasonably Equivalent Value Opinion. The Acquiror shall have received
the Reasonably Equivalent Value Opinion, and such opinion shall not
have been withdrawn, revoked or modified prior to the Closing Date;
provided, however, that Acquiror shall not be entitled to waive this
condition.
(l) Solvency Opinion. The Acquiror shall have received the Solvency
Opinion, and such opinion shall not have been withdrawn, revoked or
modified prior to the Closing Date; provided, however, that Acquiror
shall not be entitled to waive this condition.
(m) Opinion of Counsel. The Acquiror shall have received the opinion of
▇▇▇▇▇▇▇ ▇▇▇▇, LLP, counsel for the Company and the Operating
Subsidiaries, dated as of the Closing Date, in substantially the form
as set forth in Exhibit "C" hereto.
(n) No Adverse Regulatory Condition. All material consents of
Governmental Authorities, including without limitation, those
required under the HSR Act, necessary to permit the consummation of
the transactions contemplated by this Agreement shall have been
obtained to Acquiror's satisfaction and no required approvals,
licenses or consents granted by any Governmental Authority (i) with
respect to HSR Act matters, shall have imposed any obligation on
Acquiror and (ii) with respect to non-HSR Act matters, shall have
imposed any material obligation on Acquiror.
(o) Financial Covenants. The Closing Three Month Revenue and the Closing
Month Revenue shall be greater than $10,000,000, the Closing Weekly
Revenue shall be greater than $2,350,000 and the Closing Inventory
shall be greater than $53,500,000.
5.3 Conditions to the Obligations of the Company and the Operating Subsidiaries.
The obligations of the Company and the Operating Subsidiaries to effect the
transactions contemplated by this Agreement are subject to the satisfaction of
the following conditions at or prior to the Closing, except to the extent waived
in writing by the Company and the Operating Subsidiaries:
(a) Representations and Warranties. Each of the representations and
warranties of the Acquiror contained in this Agreement shall be true
and correct in all material respects (without duplication of any
materiality exception contained in any individual representation or
warranty) as of the date of this Agreement and as of the Closing Date
as though made again on and as of the Closing Date. The Company and
the Operating Subsidiaries shall each have received a certificate of
the Chief Executive Officer and the Chief Financial Officer of the
Acquiror, dated as of the Closing Date, to such effect.
(b) Agreements and Covenants. The Acquiror shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on
or prior to the Closing Date. The Company and the Operating
Subsidiaries shall each have received a certificate of the Chief
Executive Officer and the Chief Financial Officer of the Acquiror,
dated as of the Closing Date, to such effect.
(c) Non-Competition and Non-Solicitation Agreement. The Acquiror shall
have entered into the Non-Competition and Non-Solicitation Agreement
with the Company and the Operating Subsidiaries.
(d) Assignment and Assumption Agreement. The Acquiror shall have entered
into the Assignment and Assumption Agreement with the Company and the
Operating Subsidiaries.
(e) Opinion of Counsel. The Company shall have received an opinion from
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., counsel for the Acquiror, dated as
of the Closing Date in substantially the form as set forth in Exhibit
"D" hereto.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 Apportionment. The Company and the Operating Subsidiaries, as the case may
be, shall be entitled to all income earned in or from the ownership or operation
of the Assets with respect to events occurring prior to and on the Closing Date,
and the Acquiror will be entitled to all income earned in or from the ownership
or operation of the Assets with respect to events occurring after the Closing
Date. Without limiting the generality of the foregoing, all cash receipts
received at the Stores on or prior to the Closing Date shall be the property of
the Company and the Operating Subsidiaries, as the case may be, and all cash
receipts received at the Stores after the Closing Date shall be the property of
the Acquiror. The parties hereto agree to cooperate with each other to ensure
that any amounts received are delivered to the party entitled to such amounts as
provided herein. All property taxes, rent, utilities and amounts under the Store
Leases shall be apportioned on an accrual basis as of the close of business on
the Closing Date between Acquiror, the Company and the Operating Subsidiaries
such that Acquiror shall be responsible only for property taxes, rent, utilities
and amounts under the Store Leases with respect to periods occurring after the
Closing Date.
6.2 License to Use Name. From and after the Closing, the Company shall grant to
the Acquiror and its Subsidiaries for a 30-day transition period a
non-exclusive, royalty-free license (the "License") to use the names "Rent-Way,"
"Home Choice" and "Rentavision" (collectively, the "Company Names"), but only in
connection with the business conducted by the Acquiror at the Stores. The
License is granted strictly on a non-exclusive basis, and in this regard, the
Company shall, after the Closing, have all rights to use and to grant and
license to others the right to use the Company Names in whole or in part, in any
location and in any manner whatsoever, subject to the terms of the
Non-Competition and Non-Solicitation Agreement. The Acquiror acknowledges that
as of the Closing it will have no property rights in and to the Company Names
other than the License specifically granted herein and will not use the Company
Names except pursuant to this Agreement. The License shall not be sublicensed or
assigned by the Acquiror in any manner, except that the Acquiror may assign the
License to any direct or indirect wholly-owned subsidiary of the Acquiror (i) in
connection with a transfer of some or all of the operations to such entity and
(ii) in connection with the matters as contemplated by Section 4.10 hereof (such
entities together being referred to as a "Permitted Transferee") provided that
prior to such transfer, the Permitted Transferee agrees to be bound by the
provisions of the License and the Acquiror and the Acquiror continue to be
liable for breach of the License by the Permitted Transferee.
6.3 Account Store Acquisition Option. For a period of thirty (30) days from the
date immediately following the Closing Date (the "Transition Period"), Acquiror
shall be entitled, upon delivery of written notice to the Company or the
Operating Subsidiaries, as the case may be (an "Additional Store Notice"), to
assume from the Company and any of the Operating Subsidiaries, as the case may
be, the real estate lease (and the fixtures related thereto) at no additional
cost for any of the Account Stores. In the event Acquiror exercises its rights
under this Section 6.3, Acquiror, the Company and the Operating Subsidiaries
shall enter into an assignment and assumption agreement with respect to such
real estate lease containing terms reasonably satisfactory to the parties and
including terms at a minimum of which, shall provide that Acquiror shall only
assume the obligations of the Company and the Operating Subsidiaries under such
real estate lease for obligations attributable to periods following such
assumption.
6.4 Transition Period; Access to Stores; Cooperation.
(a) With respect to each Account Store, the Company and each of the
Operating Subsidiaries will provide access to each of the Account
Stores through the Transition Period. Neither the Company, any of the
Operating Subsidiaries nor any of their representatives shall remove
any vehicles, fixtures, equipment or any other item from the Account
Stores during the Transition Period. The Company and each of the
Operating Subsidiaries shall reasonably cooperate with Acquiror in
the transition of the Assets and business operations to Acquiror,
including without limitation, providing staffing of the Company's and
its Operating Subsidiaries' employees to Acquiror sufficient to
permit the transition of such Account Store operations. The Company
and the Operating Subsidiaries acknowledge that all such personnel
utilized shall be the employees of the Company or the Operating
Subsidiaries, as the case may be (the "Transition Personnel"). The
duties of the Transition Personnel shall include without limitation
(i) the winding down of the business operations of the Account
Stores, (ii) the transfer of inventory and customer accounts to
designated stores of the Acquiror, (iii) the transitioning of
customer relationships to such Acquiror stores, (iv) assistance with
respect to the conversion of customer account records of the Account
Stores to Acquiror's computer information system, and (v) other
similar type duties.
(b) The Company and the Operating Subsidiaries shall be jointly and
severally liable for, and will each indemnify the Acquiror for, only
the costs, expenses and liabilities attributable to the operation and
transition of the Account Stores during the Transition Period as
follows:
(i) rent, utilities and all obligations, expenses and liabilities
under the leases underlying the Account Stores during the
Transition Period;
(ii) lease and related costs applicable to office equipment in the
Account Stores during the Transition Period (other than costs
of printer cartridges, paper and other consumables associated
with the operation of such equipment, which shall be
Acquiror's responsibility);
(iii) the costs associated with vehicles owned or leased by the
Company or any of the Operating Subsidiaries and used in
connection with the Account Stores (other than fuel costs in
excess of the costs of fuel in such vehicles as of the Closing
Date), including lease costs, insurance costs and maintenance
costs; and
(iv) employee payroll, health and other employee benefits, workers
compensation claims, health care claims, employment practices
claims (including without limitation, termination and related
claims) and all other costs, expenses and liabilities related
to the Transition Personnel; provided, however; that Acquiror
shall be responsible for liabilities (a) related to
third-party injury claims (other than employees of the Company
or its Subsidiaries, including the Transition Personnel)
arising out of the operation of the Account Stores, and (b)
liabilities relating to intentional acts by Transition
Employees that are directed by Acquiror and that constitute
violation of applicable Law. The Company and the Operating
Subsidiaries shall maintain sufficient insurance coverage to
cover applicable risks relative to the foregoing. At any time
through the Transition Period, the Acquiror may offer
employment to such employees of the Company and the Operating
Subsidiaries at the Stores as the Acquiror shall determine in
its sole discretion at wage or salary levels acceptable to the
Acquiror, and with employee benefits that are acceptable to
the Acquiror.
Acquiror shall be responsible for all other costs in connection with
the operation of the Account Stores during the Transition Period, such as
advertising costs, office equipment consumables referenced above, fuel charges
referenced above and office supplies.
6.5 Leased Employees. With respect to the Acquired Stores, the Company and the
Operating Subsidiaries shall lease to Acquiror through the Transition Period
such employees of the Company or the Operating Subsidiaries as may be designated
by Acquiror. Such employees shall at all times remain the employees of the
Company or the Operating Subsidiaries, as the case may be (the "Leased
Employees"). The Company and the Operating Subsidiaries shall be jointly and
severally liable for, and will each indemnify the Acquiror for, all costs,
expenses and liabilities of such Leased Employees, including without limitation,
employee payroll, health and other employee benefits, workers compensation
claims, health care claims, employment practices claims (including without
limitation, termination and related claims) and all other costs, expenses and
liabilities related to such Leased Employees attributable to the Transition
Period; provided, however, that Acquiror shall be responsible only for
liabilities (i) related to third-party injury claims (other than employees of
the Company or its Subsidiaries, including the Transition Personnel) arising out
of the operation of the Account Stores, and (ii) liabilities relating to
intentional acts by Transition Employees that are directed by Acquiror and that
constitute violation of applicable Law. At any time through the Transition
Period, the Acquiror may offer employment to such employees of the Company and
the Operating Subsidiaries at the Stores as the Acquiror shall determine in its
sole discretion at wage or salary levels acceptable to the Acquiror, and with
employee benefits that are acceptable to the Acquiror.
6.6 Tax Matters. The Company shall be responsible for the timely payments of,
and shall indemnify and hold harmless the Acquiror against, all sales
(including, without limitation, bulk sales), use, value added, documentary,
stamp, gross receipts, registration, transfer, conveyance, excise, recording,
firearm, ammunition, license and other similar taxes and fees ("Transfer
Taxes"), arising out of or in connection with or attributable to the
transactions effected pursuant to this Agreement. The Company shall prepare and
timely file all tax returns required to be filed in respect of Transfer Taxes;
provided, however, that the Acquiror shall be permitted to prepare any such Tax
Returns that are the primary responsibility of the Acquiror under applicable
Law.
6.7 Transition of Acquired Stores. With respect to the Acquired Stores, during
the Transition Period the Company and the Operating Subsidiaries shall make
available to the Acquiror and the Acquiror's employees Company personnel and, if
necessary, any software not included in the Assets transferred hereunder
necessary to effect an orderly transition from the Company's and the Operating
Subsidiaries' management information systems to the Acquiror's systems.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated by written notice to the
non-terminating party at any time prior the Closing Date:
(a) by mutual written consent of the Acquiror, the Company and the
Operating Subsidiaries;
(b) by Acquiror, if, on or after February 1, 2003, any action, suit or
proceeding before any Court or Governmental Authority is pending, or
any investigation by any Governmental Authority has been commenced,
against the Acquiror, the Company or any of the Company's
Subsidiaries, or any of the principals, officers or directors of any
of them, seeking to restrain, prevent or change the transactions
contemplated hereby or questioning the legality or validity of any
such transactions or seeking damages in connection with any such
transactions;
(c) by Acquiror, if the Company or the Operating Subsidiaries have
breached any covenant or agreement set forth in this Agreement, or if
any representation or warranty of the Company or the Operating
Subsidiaries shall have become untrue, in either case such that the
conditions set forth in Section 5.2(a) or Section 5.2(b) would not be
satisfied (a "Terminating Company Breach") and such Terminating
Company Breach is either not capable of being cured prior to the
Closing or, if such breach is capable of being cured, is not so cured
by the Company or the Operating Subsidiaries within a reasonable
amount of time (but in any event prior to the Closing);
(d) by the Company or the Operating Subsidiaries, if Acquiror shall have
breached any covenant or agreement set forth in this Agreement, or if
any representation or warranty of the Acquiror shall have become
untrue, in either case such that the conditions set forth in Section
5.3(a) or Section 5.3(b) would not be satisfied (a "Terminating
Acquiror Breach") and such Terminating Acquiror Breach is either not
capable of being cured prior to the Closing or, if such breach is
capable of being cured, is not so cured by the Acquiror within a
reasonable amount of time (but in any event prior to the Closing);
(e) by Acquiror, if the condition set forth in Section 5.2(d) shall not
have been satisfied;
(f) by either Acquiror or the Company and the Operating Subsidiaries, if
there shall be an Order which is final and nonappealable preventing
the consummation of the transactions contemplated hereby, unless the
party relying on such Order has not complied with its obligations
under Section 4.2 hereof;
(g) by either Acquiror or the Company and the Operating Subsidiaries, if
the transactions contemplated hereby shall not have been consummated
on or before February 28, 2003; provided, however, that the right to
terminate this Agreement pursuant to this Section 7.1(g) shall not be
available to any party whose failure to fulfill any of the
obligations contained in this Agreement have been the cause of, or
resulted in, the failure of the transactions contemplated hereby to
have occurred on or prior to the aforementioned date; and provided,
further, that this Agreement may be extended by written notice of
either the Acquiror, the Company or the Operating Subsidiaries for up
to sixty (60) days from February 28, 2003 if the transactions
contemplated hereby have not been consummated as a result of the
conditions set forth in Section 5.1(a), Section 5.1(c) or Section
5.2(n) not being satisfied; provided, further, that this Agreement
may be extended by Acquiror by written notice for up to a period not
to exceed sixty (60) days from February 28, 2003 if Acquiror, the
Company, the Operating Subsidiaries or any of the firms engaged to
provide the opinions referenced in Section 4.7 and Section 4.8 hereof
shall have received an oral or written threat of litigation of the
nature contemplated by Section 5.1(c).
(h) by the Acquiror, from the date hereof through the date that is the
last day of the Due Diligence Period;
(i) by Acquiror, as provided in Section 1.3(c).
The right of any party hereto to terminate this Agreement pursuant to
Section 7.1 will remain operative and in full force and effect regardless of any
investigation made by or on behalf of any party hereto, any person controlling
any such party or any of their respective officers, directors, representatives
or agents, whether prior to or after the execution of this Agreement.
7.2 Automatic Termination. This Agreement shall terminate if either the
condition set forth in Section 5.2(k) or Section 5.2(l) shall not have been
satisfied on February 28, 2003, unless such date has been extended by Acquiror
pursuant to the third proviso in Section 7.1(g), in which termination shall
occur on such extended date. The termination of this Agreement pursuant to this
Section 7.2 shall be the sole remedy of the Company and the Operating
Subsidiaries with respect to the failure of the condition set forth in Section
5.2(k) or Section 5.2(l) to be satisfied.
7.3 Effect of Termination.
(a) Except with respect to Section 4.4, Section 4.5(b), the provisions of
this Article VII and Article IX of this Agreement, each of which
shall survive termination, in the event of termination of this
Agreement pursuant to Section 7.1 or Section 7.2, this Agreement will
forthwith be terminated, there will be no liability on the part of
the Acquiror, the Company or the Operating Subsidiaries or any of
their respective officers or directors to the other and all rights
and obligations of any party hereto will cease; provided, however,
that if this Agreement is terminated by a party due to the breach of
the Agreement by the other party or because one or more conditions to
the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
(b) In the event that this Agreement is terminated (i) pursuant to
Section 7.1(e) or Section 7.1(i), the Company shall pay or cause to
be paid to Acquiror, within two (2) Business Days from the date of
termination, an amount equal to Acquiror's actual and reasonably
documented Expenses incurred by Acquiror in connection with this
Agreement and the transactions contemplated hereby or (ii) pursuant
to Section 7.2, the Company shall pay or cause to be paid to
Acquiror, within two (2) Business Days from the date of termination,
an amount equal to (A) Acquiror's actual and reasonably documented
Expenses incurred by Acquiror in connection with this Agreement and
the transactions contemplated hereby and (B) the aggregate fees of
the firms engaged to provide the opinions referenced in Section 4.7
and Section 4.8, such aggregate fees not to exceed $500,000. The
rights hereunder are in addition to, and not in limitation of, any
other right or remedy (legal, equitable or otherwise) which may be
available to Acquiror.
7.4 Amendment. Subject to the requirements of Law, this Agreement may be amended
by the parties hereto only by action taken by or on behalf of their respective
boards of directors or applicable governing body at any time prior to the
Closing Date. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
7.5 Waiver. At any time prior to the Closing Date, any party hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other party hereto, (b) waive any inaccuracies in the representations or
warranties of the other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by the other party with any of the
agreements or conditions contained herein. Any such extension or waiver will be
valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
7.6 Expenses. Except as set forth in Section 7.3(b) hereof, all Expenses
incurred by the parties hereto will be borne solely and entirely by the party
which as incurred such expenses.
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties. All of the representations and
warranties of the Company and the Operating Subsidiaries contained in Article
III of this Agreement, the certificates delivered pursuant to Section 5.2(a),
Section 5.2(b) and Section 5.2(c) and any other document delivered pursuant to
this Agreement shall survive Closing and the consummation of the transactions
contemplated hereby and shall continue in full force and effect for the
four-year period following the Closing Date, with the exception that Section
3.10 shall survive for a period of ninety (90) days following the Closing Date.
8.2 Indemnification by the Company and the Operating Subsidiaries. Subject to
the other provisions of this Article VIII, from and after the Closing, the
Company and the Operating Subsidiaries shall jointly and severally indemnify and
hold the Acquiror and its officers, directors, employees, attorneys and agents
harmless from, against and in respect of any and all claims, demands, lawsuits,
proceedings, losses, judgments, restitution, assessments, taxes, costs of
abatement, fines, penalties, administrative orders, obligations, costs,
expenses, liabilities and damages, including interest, penalties, reasonable
attorneys' fees and costs and costs of investigation (all of the foregoing
hereinafter referred to collectively as "Indemnity Claims"), which arise or
result from and to the extent they are attributable to:
(a) the untruth, breach or failure of any representation or warranty made
by the Company or the Operating Subsidiaries pursuant to this
Agreement or any other agreement or document executed and delivered
by the Company or the Operating Subsidiaries in connection with the
transactions contemplated hereby;
(b) the breach of, or failure to perform, any of the covenants,
commitments, agreements or obligations of the Company or the
Operating Subsidiaries under or contained in this Agreement or any
other agreement or document executed and delivered by the Company or
the Operating Subsidiaries in connection with the transactions
contemplated hereby;
(c) the noncompliance with the provisions of any bulk sales laws,
including, without limitation, the bulk transfer provisions of the
Uniform Commercial Code of any state or any similar statute, if and
to the extent applicable to the transactions contemplated by this
Agreement;
(d) the Excluded Assets;
(e) the continued sponsorship by the Company of the Company Employee
Benefit Plans and any and all liability for violations under COBRA
occurring prior to the Closing Date, it being understood and agreed
to by the parties that the sponsorship and maintenance of any Company
Employee Benefit Plans shall in no way be the responsibility of the
Acquiror on or after the Closing Date;
(f) any Tax Claim asserted against Acquiror with respect to any Taxes
relating to the Assets or the operations of the Company or the
Operating Subsidiaries attributable to periods on or before the
Closing Date and as otherwise set forth in Section 6.6;
(g) any Indemnity Claims related to the Transition Period as set forth in
Section 6.4 and Section 6.5;
(h) any product or component thereof manufactured by, or any services
provided by, the Company or the Operating Subsidiaries in whole or in
part;
(i) all liabilities of the Company and its Subsidiaries, other than
Assumed Liabilities;
(j) any WARN Act and similar state or local Law liability that may result
from an employment loss, as defined by 29 U.S.C. Section 2101(a)(6),
caused by any action of the Company or the Operating Subsidiaries on
or before the last day of the Transition Period or by the Acquiror's
decision not to hire previous employees of the Company or the
Operating Subsidiaries related to the Stores;
(k) payments made under Rental Purchase Agreements by customers of the
Company or any of its Subsidiaries on or before the Closing Date;
(l) any costs, expenses or amounts (other than the payment of fees which
is covered by Section 4.7 and Section 4.8 hereunder) payable by the
Acquiror to the firms providing the opinions referenced in Section
4.7 and Section 4.8 hereof reasonably relating to or reasonably
associated with the delivery of such opinions by such firms; and
(m) any other debts, liabilities or obligations of the Company or the
Operating Subsidiaries, whether accrued, absolute, contingent, known,
unknown or otherwise, but excluding the Assumed Liabilities.
8.3 Indemnification by the Acquiror. Subject to the other provisions of this
Article VIII, from and after the Closing the Acquiror shall indemnify and hold
the Company and the Operating Subsidiaries and their respective officers,
directors, employees, attorneys and agents harmless from, against and in respect
of any and all Indemnity Claims which arise or result from and to the extent
they are attributable to:
(a) the untruth, breach or failure of any representation or warranty made
by the Acquiror pursuant to this Agreement or any other agreement or
document executed and delivered by the Acquiror in connection with
the transactions contemplated hereby;
(b) the breach of, or failure to perform, any of the covenants,
commitments, agreements or obligations of the Acquiror under or
contained in this Agreement or any other agreement or document
executed and delivered by the Acquiror in connection with the
transactions contemplated hereby; or
(c) the Assumed Liabilities.
8.4 Holdback Amount; Right of Set Off.
(a) On the Closing Date, Acquiror shall withhold the Holdback Amount for
the payment of claims asserted against the Company or any of the
Operating Subsidiaries and to provide for the payment in part the
indemnification rights of the Acquiror for a period of eighteen (18)
months following the Closing Date. Upon notice to the Company and the
Operating Subsidiaries, the Acquiror may set-off against the Holdback
Amount any amount to which it may be entitled under this Article
VIII. The exercise of Acquiror's right ------------ to make an
Indemnity Claim for set-off against the Holdback Amount in good
faith, whether or not ultimately determined to be justified, shall
not be deemed a breach of Acquiror's obligation to deliver the
Purchaser Price under this Agreement. Neither the exercise nor the
failure to exercise such right of set-off will constitute an election
of remedies or otherwise limit Acquiror in any manner in the
enforcement of any other remedies that may be available to it.
(b) On the 90th day following the Closing Date (the "Initial Distribution
Date"), the Acquiror shall disburse to the Company, on behalf of the
Company and the Operating Subsidiaries, the total of $5,000,000, less
the sum of (i) any amounts for Claims to which the Acquiror has
exercised its right of set-off pursuant to Section 8.4(a) and (ii)
any amounts representing unsatisfied Indemnity Claims ---------------
asserted by Acquiror under Section 8.4(a) which are unresolved on the
Initial Distribution Date. On the -------------- date that is
eighteen (18) months following the Closing Date (the "Final
Distribution Date"), upon the execution of all necessary
documentation reasonably required by Acquiror, the Acquiror shall
disburse to the Company, on behalf of the Company and the Operating
Subsidiaries, the amount of the Holdback Amount, less the sum of (i)
all amounts for Indemnity Claims to which the Acquiror has exercised
its right of set-off pursuant to Section 8.4(a), (ii) any amounts
representing unsatisfied Indemnity Claims asserted -------------- by
the Acquiror pursuant to Section 8.4(a) which are unresolved on the
Final Distribution Date, and --------------- (iii) the amount paid to
the Company, on behalf of the Company and the Operating Subsidiaries
on the Initial Distribution Date. At such time that any Indemnity
Claims which are unresolved on the Final Distribution Date are
subsequently resolved and which the Company and the Operating
Subsidiaries would have been entitled to additional amounts paid out
from the Holdback Amount (the "Excess"), then Acquiror shall deliver
the Excess to the Company, on behalf of the Company and the Operating
Subsidiaries, within five (5) business days of the final resolution
of such Indemnity Claims. Notwithstanding the foregoing, no portion
of the Holdback Amount shall be paid to the Company, on behalf of the
Company and the Operating Subsidiaries, until all Liens against the
Assets shall have been released of record.
8.5 Method of Asserting Indemnity Claims, Etc. All claims for indemnification by
any party under this Section 8.5 shall be asserted and resolved as follows:
(a) In the event that any claim or demand in respect of which any party
would be entitled to indemnification hereunder is asserted against
such party by a third party (a "Third Party Claim"), said party shall
within ninety (90) days thereof notify the indemnifying party of such
claim or demand, specifying the nature of and specific basis for such
claim or demand and the amount or the estimated amount thereof to the
extent then feasible, which estimate shall not be conclusive of the
final amount of such claim or demand (the "Indemnity Claim Notice");
provided, however, that the failure to notify the indemnifying party
of the commencement of such Indemnity Claim within such ninety (90)
day period will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that
the indemnifying party conclusively demonstrates that the defense of
such action was prejudiced by the indemnifying party's failure to
give such Indemnity Claim Notice. The indemnifying party shall have
thirty (30) days from the personal delivery or mailing of the
Indemnity Claim Notice (the "Notice Period") to notify the
indemnified party (i) whether or not it disputes entitlement of the
indemnified party to indemnification hereunder with respect to such
claim or demand, and (ii) whether or not it desires at no cost or
expense to the indemnified party, to defend the indemnified party
against such claim or demand; provided, however, that any indemnified
party is hereby authorized prior to and during the Notice Period to
file any motion, answer or other pleading which it shall deem
necessary or appropriate to protect its interests or those of the
indemnifying party and that are not materially prejudicial to the
indemnifying party. In the event that the indemnifying party notifies
the indemnified party within the Notice Period that it desires to
defend the indemnified party against such claim or demand and except
as hereinafter provided, the indemnifying party shall have the right
to defend by all appropriate proceedings, which proceedings shall be
promptly settled or prosecuted by it to a final conclusion. If the
indemnified party desires to participate in, but not control, any
such defense or settlement it may do so at its sole cost and expense.
If requested by the indemnifying party, the indemnified party agrees
to cooperate with the indemnifying party and its counsel in
contesting any claim or demand which the indemnifying party elects to
contest, or, if appropriate and related to the claim in question, in
making any counterclaim against the person asserting the third cross
complaint against any person. No claim may be settled without the
consent of the indemnifying party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, in connection
with a Third Party Claim asserted against both such indemnified party
and indemnifying party, if (i) such indemnified party has available
to it defenses which are in addition to those available to the
indemnifying party, (ii) such indemnified party has available to it
defenses which are inconsistent with the defenses available to the
indemnifying party, or (iii) a conflict exists or may reasonably be
expected to exist in connection with the representation of both such
indemnified party and indemnifying party by the legal counsel chosen
by the indemnifying party, such indemnified party shall have the
right to select its own legal counsel subject to the approval of such
legal counsel by the indemnifying party, such approval not to be
unreasonably withheld. If such indemnified party selects its own
legal counsel pursuant to the immediately preceding sentence and the
underlying Third Party Claim is otherwise subject to the scope of the
indemnification obligations of the indemnifying party pursuant to
this Article VIII, the reasonable fees and expenses of such legal
counsel will be included within the indemnification obligations of
the indemnifying party; provided, however, that under no
circumstances will the indemnifying party be obligated to indemnify
such indemnified party against the fees and expenses of more than one
legal counsel selected by such indemnified party in connection with a
single claim (notwithstanding the number of persons against whom the
Third Party Claim may be asserted). To the extent an Indemnity Claim
with respect to indemnification of representations and warranties is
made within the survival period set forth in Section 8.1, such
Indemnity Claim shall survive until such Indemnity Claim is resolved
pursuant to the provisions of Section 8.4 and Section 8.5 hereof,
notwithstanding the expiration of the applicable survival period set
forth in Section 8.1.
(b) In the event any indemnified party should have an indemnification
claim hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party,
the indemnified party shall send an Indemnity Claim Notice with
respect to such claim to the indemnifying party and, if applicable,
otherwise comply with the provisions of this Section 8.5. Any
Inventory Condition Indemnity Claim shall be made no later than
ninety (90) days after closing.
8.6 Limitation on Amount - Company and Operating Subsidiaries.
(a) The Company and the Operating Subsidiaries shall have no liability
with respect to the matters described under Section 8.2(a) until the
aggregate of all Indemnity Claims for which indemnity would otherwise
be payable by them exceeds $100,000 (the "Company Basket"); provided,
however, that in the event that the Indemnity Claims to which the
Acquiror shall be entitled exceed the Company Basket, the Company and
the Operating Subsidiaries shall be responsible for the total amount
of such Indemnity Claims without giving effect to the Company Basket,
but in no case shall the liability of the Company and the Operating
Subsidiaries with respect to matters set forth in Section 8.2(a)
hereunder exceed the Purchase Price. However, this Section 8.6 will
not apply to, and the Company's and the Operating Subsidiaries'
obligations hereunder shall be unlimited for any breach of the
Company's or the Operating Subsidiaries' representations and
warranties of which the Company or the Operating Subsidiaries had
knowledge at any time prior to the date on which such representation
and warranty is made.
(b) In the event that (i) an Indemnity Claim is made by Acquiror with
respect to the condition of the Store inventory sold hereunder as of
the Closing Date pursuant to a breach of Section 3.10, (an "Inventory
Condition Indemnity Claim"), and (ii) the Closing Inventory (net of
30-days past due) exceeds $54,500,000, then such Inventory Condition
Indemnity Claim shall be reduced by the amount in which the Closing
Inventory (net of 30-days past due) exceeds $54,500,000.
8.7 Limitation on Amount - Acquiror. Acquiror shall have no liability with
respect to the matters described under Section 8.3(a) until the aggregate of all
Indemnity Claims for which indemnity would otherwise be payable by Acquiror
exceeds $100,000 (the "Acquiror Basket"); provided, however, that in the event
that the Indemnity Claims to which the Company or the Operating Subsidiaries
shall be entitled to exceed the Acquiror Basket, the Acquiror shall be
responsible for the total amount of such Indemnity Claims without giving effect
to the Acquiror Basket, but in no case shall the liability of the Acquiror with
respect to matters set forth in Section 8.3(a) hereunder exceed the Purchase
Price.
8.8 Insurance and Tax Benefit. In calculating any amount due under this Article
VIII with respect to Indemnity Claims, such Indemnity Claims shall be reduced by
(a) any amounts actually recovered by the indemnified party under insurance
policies or third party indemnification obligations or other rights of recovery
with respect to such Indemnity Claims, and (b) the amount of any Net Tax Benefit
realized by the indemnified party from the incurrence or payment of such
Indemnity Claims.
ARTICLE IX
GENERAL PROVISIONS
9.1 Certain Definitions. For purposes of this Agreement:
-------------------
"Account Stores" has the meaning set forth in Section 1.2(d) hereof.
"Acquired Stores" has the meaning set forth in Section 3.8 hereof.
"Acquiror" means Rent-A-Center, Inc., a Delaware corporation, and its
successors and assigns.
"Acquiror Basket" has the meaning set forth in Section 8.7.
"Acquisition Proposal" has the meaning set forth in Section 4.3 hereof.
"Additional Store Notice" has the meaning set forth in Section 6.3
hereof.
"Agreement" has the meaning set forth in the preamble hereto.
"Assets" has the meaning set forth in Section 1.1 hereof.
"Assignment and Assumption Agreement" means that certain ▇▇▇▇ of Sale,
Assignment and Assumption Agreement to be entered into among the parties at
Closing effecting the sale of the Assets to Acquiror hereunder.
"Assumed Liabilities" has the meaning set forth in Section 1.5(b)
hereof.
"Business Day" shall mean any day other than a day on which banks in
the State of Texas or the State of New York are authorized or obligated to be
closed.
"Claim" means a right to payment or property, whether or not the right
is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured.
"Closing" means a meeting, which will be held in accordance with
Section 1.6 hereof, of all Persons interested in the transactions contemplated
by the Agreement at which all documents deemed necessary by the parties to the
Agreement to evidence the fulfillment or waiver of all conditions precedent to
the consummation of the transactions contemplated by the Agreement are executed
and delivered.
"Closing Date" means the date of the Closing as determined pursuant to
Section 1.6 hereof; provided, however, that if the Closing Date shall fall on a
date that is not a Business Day, the next following Business Day shall be the
Closing Date.
"Closing Date Payment" has the meaning set forth in Section 1.3 hereof.
"Closing Inventory" has the meaning set forth in Section 3.30 hereof.
"Closing Inventory Minimum" has the meaning set forth in Section 3.30
hereof.
"Closing Inventory Target" has the meaning set forth in Section 3.30
hereof.
"Closing Month Revenue" has the meaning set forth in Section 3.28
hereof.
"Closing Month Revenue Minimum" has the meaning set forth in Section
3.28 hereof.
"Closing Month Revenue Target" has the meaning set forth in Section
3.28 hereof.
"Closing Three Month Revenue" has the meaning set forth in Section 3.27
hereof.
"Closing Three Month Revenue Minimum" has the meaning set forth in
Section 3.27 hereof.
"Closing Three Month Revenue Target" has the meaning set forth in
Section 3.27 hereof.
"Closing Weekly Revenue" has the meaning set forth in Section 3.29
hereof.
"Closing Weekly Revenue Minimum" has the meaning set forth in Section
3.29 hereof.
"Closing Weekly Revenue Target" has the meaning set forth in Section
3.29 hereof.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and Regulations promulgated thereunder.
"Commission" means the United States Securities and Exchange Commission.
"Company" means Rent-Way, Inc., a Pennsylvania corporation, and its
successors and assigns.
"Company Basket" has the meaning set forth in Section 8.6 hereof.
"Company Employee Benefit Plans" has the meaning set forth in Section
3.24 hereof.
"Company ERISA Affiliate" has the meaning set forth in Section 3.24
hereof.
"Company Names" has the meaning set forth in Section 6.2 hereof.
"Company's Audited Consolidated Financial Statements" means the
consolidated balance sheets of the Company and its Subsidiaries as of September
30, 2000 and September 30, 2001 and the related consolidated statements of
operations, shareholders equity and cash flows for the years ended September 30,
1999, 2000 and 2001, together with the notes thereto, all as audited by
Pricewaterhouse Coopers, LLP, the Company's independent accountants, under their
report with respect thereto dated December 20, 2001, and included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2001 filed with the Commission.
"Company's Consolidated Balance Sheet" means the consolidated balance
sheet of the Company as of September 30, 2001, included in the Company's
Consolidated Financial Statements.
"Company's Consolidated Financial Statements" means the Company's
Audited Consolidated Financial Statements and the Company's Unaudited
Consolidated Financial Statements.
"Company's Unaudited Consolidated Financial Statements" means the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
June 30, 2002 and the related consolidated statements of income, stockholder
equity and cash flows for the three month periods ended June 30, 2002 and June
30, 2001, together with the notes thereto, included in the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2002 filed with the
Commission.
"Confidentiality Agreement" has the meaning set forth in Section 4.5(a)
hereof.
"Court" means any court or arbitration tribunal of the United States or
any domestic state, and any political subdivision thereof.
"Creditor Payment" has the meaning set forth in Section 1.3 hereof.
"Debt" means liability on a Claim.
"Designated Date" shall mean the date (or if such date is not a
Business Day, the next following Business Day) that is the earlier of (x)
January 31, 2003 and (y) the date that is the fifth day after the date upon
which all of the conditions to the Closing set forth in Section 5.1(a) and
Section 5.2(n) are satisfied; provided, however, that the Acquiror shall have
been provided, and the Designated Date shall be extended for (i) the entire ten
(10) day period contemplated in Section 1.1(f) with respect to the
identification of vehicles acquired hereunder, (ii) the entire period
contemplated by Section 4.11 pertaining to Acquiror's due diligence right, (iii)
the entire Supplement Review Period to evaluate any Supplemental Schedule as set
forth in Section 4.6(b), (iv) the entire period, including any extension
thereof, contemplated by Section 7.1(g) with respect to the delivery of the
opinions contemplated by Section 5.2(k) and Section 5.2(l); and (v) the five (5)
day period as contemplated by Section 4.10 with respect to the identification of
Acquiror affiliates acquiring the Assets hereunder.
"Due Diligence Period" has the meaning set forth on Section 4.11
hereof.
"Employee Termination Date" has the meaning set forth in Section 4.9
hereof.
"Encumbrances" has the meaning set forth in Section 1.1 hereof.
"Environmental Law or Laws" means any and all Laws, statutes,
ordinances, rules, Regulations, or Orders of any Governmental Authority
pertaining to human health or the environment currently in effect and applicable
to a specified Person and its Subsidiaries, including but not limited to the
Clean Air Act, as amended, CERCLA, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the RCRA,
the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Emergency Planning and Right-to-Know Act, as amended, the Hazardous
Materials Transportation Authorization Act, as amended, the Oil Pollution Act of
1990, as amended, any state or local Laws implementing the foregoing federal
Laws, and all other Laws pertaining to the protection of human health and the
environment (inclusive, in each case, of all regulations issued thereunder). For
purposes of the Agreement, the terms "hazardous substance" and "release" have
the meanings specified in CERCLA; provided, however, that, to the extent the
Laws of the state or locality in which the property is located establish a
meaning for "hazardous substance" or "release" that is broader than that
specified in CERCLA, such broader meaning will apply within the jurisdiction of
such state or locality, and the term "hazardous substance" will include all
dehydration and treating wastes, waste (or spilled) oil, and waste (or spilled)
petroleum products, and (to the extent in excess of background levels)
radioactive material, even if such are specifically exempt from classification
as hazardous substances pursuant to CERCLA or RCRA or the analogous statutes of
any jurisdiction applicable to the specified Person or its Subsidiaries or any
of their respective properties or assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the Regulations promulgated thereunder.
"Excess" has the meaning set forth in Section 8.4(b) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the Regulations promulgated thereunder.
"Excluded Assets" has the meaning set forth in Section 1.2 hereof.
"Expenses" means all reasonable out-of-pocket expenses (including all
fees and expenses of counsel, accountants, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and all other matters related to the consummation
of the transactions contemplated hereby.
"Extended Due Diligence Period" has the meaning set forth in Section
4.11 hereof.
"Final Distribution Date" has the meaning set forth in Section 8.4(b)
hereof.
"Form 8594" means Form 8594, Asset Acquisition Statement under Section
1060 of the Code.
"GAAP" means accounting principles generally accepted in the United
States consistently applied by a specified Person.
"Governmental Authority" means any governmental agency or authority
(other than a Court) of the United States or any domestic state, and any
political subdivision or agency thereof, and includes any authority having
governmental or quasi-governmental powers.
"Holdback Amount" has the meaning set forth in Section 1.3 hereof.
"HSR Act" means the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Idle Inventory" has the meaning set forth in Section 1.1(d) hereof.
"Indemnity Claim Notice" has the meaning set forth in Section 8.5
hereof.
"Indemnity Claims" has the meaning set forth in Section 8.2 hereof.
"Initial Distribution Date" has the meaning set forth in Section 8.4(b)
hereof.
"Initial Due Diligence Period" has the meaning set forth in Section
4.11 hereof.
"Initial Investigation Period" has the meaning set forth in Section
4.11 hereof.
"Insolvent" has the meaning set forth in Section 3.26 hereof.
"Inventory Condition Indemnity Claim" has the meaning set forth in
Section 8.6(b) hereof.
"IRS" means the United States Internal Revenue Service.
"Law" means all laws, statutes, ordinances and Regulations of the
United States, any foreign country, or any domestic or foreign state, and any
political subdivision or agency thereof, including all decisions of Courts
having the effect of Law in such jurisdiction.
"Leased Employees" has the meaning set forth in Section 6.5 hereof.
"License" has the meaning set forth in Section 6.2 hereof.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any agreement to give any of the foregoing),
any conditional sale or other title retention agreement, any lease in the nature
thereof or the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction.
"Net Tax Benefit" means the excess of (i) Taxes that would have been
incurred by the indemnified party if the applicable Indemnity Claim had not been
incurred by the indemnified party, and (ii) the actual Taxes payable by the
indemnified party (such Taxes being determined on a "grossed up" basis after
taking into account amounts calculated to be due hereunder).
"Non-Competition and Non-Solicitation Agreement" has the meaning set
forth in Section 5.2(g) hereof.
"Non-Competition Payment" has the meaning set forth in Section 1.3
hereof.
"Notice Period" has the meaning set forth in Section 8.5 hereof.
"Operating Subsidiaries" means Rent-Way Michigan and TTIG,
collectively.
"Operating Subsidiary" means Rent-Way Michigan and TTIG, individually.
"Order" means any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Owned Store" means that certain Company-owned Store located at ▇▇▇▇ ▇.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇.
"Owned Store Lease" has the meaning set forth in Section 4.12 hereof.
"Permit" means any and all permits, licenses, authorizations, orders,
certificates, registrations or other approvals granted by any Governmental
Authority.
"Permitted Encumbrances" means the following:
(1) Liens for Taxes, assessments and other governmental charges
not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that the specified
Person or one of its Subsidiaries will have set aside on its
books adequate reserves with respect thereto;
(2) Mechanics' and materialmen's Liens not filed of record and
similar charges not delinquent or which are filed of record
but are being contested in good faith by appropriate
proceedings; provided that, in the latter case, the specified
Person or one of its Subsidiaries will have set aside on its
books adequate reserves with respect thereto.
(3) Liens in respect of judgments or awards with respect to which
the specified Person or one of its Subsidiaries will in good
faith currently be prosecuting an appeal or other proceeding
for review and with respect to which such Person or such
Subsidiary will have secured a stay of execution pending such
appeal or such proceeding for review; provided that, such
Person or such Subsidiary will have set aside on its books
adequate reserves with respect thereto;
(4) easements, leases, reservations or other rights of others in,
or minor defects and irregularities in title to, property or
assets of a specified Person or any of its Subsidiaries;
provided that such easements, leases, reservations, rights,
defects or irregularities do not materially impair the use of
such property or assets for the purposes for which they are
held;
(5) any Lien or privilege vested in any lessor or licensor for
rent or other obligations of a specified Person or any of its
Subsidiaries thereunder so long as the payment of such rent or
the performance of such obligations is not delinquent; and
(6) encumbrances which secure deposits of public funds as required
by Law.
"Permitted Transferee" has the meaning set forth in Section 6.2 hereof.
"Person" means an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association or
unincorporated organization, or any other form of business or professional
entity, but does not include a Governmental Authority or Court.
"Profit and Loss Statement" and "Profit and Loss Statements" each has
the meaning set forth in Section 3.6(a) hereof.
"Purchase Price" has the meaning set forth in Section 1.3 hereof.
"Purchase Price Reduction" has the meaning set forth in Section 1.3(b)
hereof.
"Reasonably Equivalent Value Opinion" has the meaning set forth in
Section 4.8 hereof.
"Regulation" means any rule or regulation of any Governmental Authority
having the effect of Law.
"Relevant Group" has the meaning set forth in Section 3.23(b) hereof.
"Rent-Way Michigan" means Rent-Way of Michigan, Inc., a Delaware
corporation and wholly owned subsidiary of the Company.
"Rental Purchase Agreements" has the meaning set forth in Section
1.1(a) hereof.
"Reports" means, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority (other than the Commission).
"Revenue Purchase Price Reductions" has the meaning set forth in
Section 1.3(b)(ii) hereof.
"SEC Reports" means (i) all Annual Reports on Form 10-K promulgated
under the Exchange Act, (ii) all Quarterly Reports on Form 10-Q promulgated
under the Exchange Act, (iii) all proxy statements relating to meetings of
shareholders (whether annual or special), (iv) all Current Reports on Form 8-K
promulgated under the Exchange Act and (v) all other reports, schedules,
registration statements or other documents required to be filed during a
specified period by a Person with the Commission pursuant to the Securities Act
or the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the Regulations promulgated thereunder.
"Schedule Supplement" has the meaning set forth in Section 4.6(b)
hereof.
"Short Average Monthly Revenue Amount" has the meaning set forth in
Section 1.3(b)(i) hereof.
"Short Average Monthly Revenue Amount Adjustment" has the meaning set
forth in Section 1.3(b)(i) hereof.
"Short Inventory Amount" has the meaning set forth in Section
1.3(b)(iv) hereof.
"Short Inventory Amount Adjustment" has the meaning set forth in
Section 1.3(b)(iv) hereof.
"Short Monthly Revenue Amount" has the meaning set forth in Section
1.3(b)(ii) hereof.
"Short Monthly Revenue Amount Adjustment" has the meaning set forth in
Section 1.3(b)(ii) hereof.
"Short Weekly Revenue Amount" has the meaning set forth in Section
1.3(b)(iii) hereof.
"Short Weekly Revenue Amount Adjustment" has the meaning set forth in
Section 1.3(b)(iii) hereof.
"Solvency Opinion" has the meaning set forth in Section 4.7 hereof.
"Store" and "Stores" has the meaning set forth in the Recitals.
"Store Lease" has the meaning set forth in Section 3.8 hereof.
"Subsidiary" of a specified Person means any corporation, partnership,
limited liability company, joint venture or other legal entity of which the
specified Person (either alone or through or together with any other Subsidiary)
owns, directly or indirectly, twenty-five percent (25%) or more of the stock or
other equity or partnership interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or legal entity.
"Supplement Review Period" has the meaning set forth in Section 4.6(b)
hereof.
"Tax" has the meaning set forth in Section 3.23(a) hereof.
"Tax Return" has the meaning set forth in Section 3.23(a) hereof.
"Taxes" has the meaning set forth in Section 3.23(a) hereof.
"Terminating Acquiror Breach" has the meaning set forth in Section
7.1(d) hereof.
"Terminating Company Breach" has the meaning set forth in Section
7.1(c) hereof.
"Termination Fee" has the meaning set forth in Section 7.3(b) hereof.
"Third Party Claim" has the meaning set forth in Section 8.5 hereof.
"Transition Period" has the meaning set forth in Section 6.3 hereof.
"Transition Personnel" has the meaning set forth in Section 6.4 hereof.
"TTIG" means Rent-Way of TTIG, L.P., an Indiana limited partnership and
wholly owned subsidiary of the Company.
"Undisclosed Liabilities" has the meaning set forth in Section 3.6(c)
hereof.
9.2 Notices. All notices and other communications given or made pursuant hereto
shall be in writing and will be deemed to have been duly given, upon receipt, if
delivered personally (including by courier or overnight courier), mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses, or sent by electronic transmission to the
telecopier number specified below:
(a) if to the Acquiror:
Rent-A-Center, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
5400 Renaissance Tower
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to the Company or the Operating Subsidiaries:
Rent-Way, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇ ▇&▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Buffalo, New York 14203-2391
Attention: ▇▇▇▇ ▇. ▇▇▇, Esq.
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or telecopier number as any party may, from time to
time, designate in a written notice given in like manner. Notice given by the
telecopier will be deemed delivered on the day the sender receives telecopier
confirmation that such notice was reached at the telecopier number of the
addressee. Notices delivered personally shall be deemed delivered as of actual
receipt and mailed notices shall be deemed delivered three days after mailing.
9.3 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. References to Sections and Articles refer to sections and
articles of this Agreement unless otherwise stated.
9.4 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of Law or public policy, all
other conditions and provisions of this Agreement will nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
9.5 Entire Agreement. This Agreement (together with all other documents and
instruments referred to herein) constitutes the entire agreement among the
parties, and supersedes all other prior agreements and undertakings, both
written and oral, among the parties with respect to the subject matter hereof.
9.6 Assignment. This Agreement may not be assigned by operation of Law or
otherwise, except that Acquiror may assign, transfer or convey this Agreement
and the rights, interests and obligations hereof to any Subsidiary of Acquiror
provided that the Acquiror remains bound hereunder.
9.7 Parties in Interest. This Agreement will be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or will confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
9.8 Failure or Indulgence Not Waiver; Remedies Cumulative; Specific Performance.
No failure or delay on the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor will any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not alternative to or exclusive to,
and not exclusive of, any rights or remedies otherwise available.
Notwithstanding anything to the contrary contained herein, and without limiting
any other rights of the Acquiror hereunder, whether in law or in equity, the
parties agree that Acquiror shall be entitled to the remedy of specific
performance to enforce the obligations of the Company and of the Operating
Subsidiaries hereunder.
9.9 Governing Law. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS
CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF LAW PRINCIPLES). COURTS
WITHIN THE STATE OF TEXAS WILL HAVE JURISDICTION OVER ANY AND ALL DISPUTES
BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED
HEREBY. THE PARTIES CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH
COURTS. EACH OF THE PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH
DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (i)
SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (ii)
SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY
SUCH COURTS OR (iii) ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN
INCONVENIENT FORUM.
9.10 Counterparts. This Agreement may be executed in multiple counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed will be deemed to be an original but all of which taken together will
constitute one and the same agreement.
9.11 No Consequential Damages. Notwithstanding anything to the contrary
elsewhere in this Agreement, no party (or its affiliates) shall, in any event,
be liable to any other party (or its affiliates) for any consequential damages,
including, but not limited to, loss of revenue or income, cost of capital, or
loss of business reputation or opportunity relating to the breach or alleged
breach of this Agreement.
[Remainder of page intentionally left blank]
ASSET PURCHASE AGREEMENT
Signature Page
IN WITNESS WHEREOF, the Acquiror, the Company and the Operating
Subsidiaries have executed or caused this Agreement to be executed on the date
first written above.
RENT-A-CENTER, INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
RENT-WAY, INC.
By:
---------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
RENT-WAY OF MICHIGAN, INC.
By:
---------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
RENT-WAY OF TTIG, L.P.
By: Rent-Way Development, Inc.,
its general partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Exhibit "A"
Form of ▇▇▇▇ of Sale, Assignment and Assumption Agreement
THIS ▇▇▇▇ OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT (this
"Agreement"), dated as of ____________, 2003, is made and delivered pursuant to
Section 1.3 of that certain Asset Purchase Agreement, dated as of December 17,
2002 (the "Asset Purchase Agreement"), by and between RENT-WAY, INC., a
Pennsylvania corporation (the "Company"), RENT-WAY OF MICHIGAN, INC., a Delaware
corporation and wholly owned subsidiary of the Company ("Rent-Way Michigan"),
RENT-WAY OF TTIG, L.P., an Indiana limited partnership and indirect wholly owned
subsidiary of the Company ("TTIG" and together with Rent-Way Michigan, the
"Operating Subsidiaries"), and RENT-A-CENTER, INC., a Delaware corporation (the
"Acquiror"). Unless otherwise indicated, capitalized terms used and not defined
herein are as defined in the Asset Purchase Agreement.
WHEREAS, the Asset Purchase Agreement provides for Acquiror's
acquisition of the Assets, as well as the assumption by Acquiror of the Assumed
Liabilities.
NOW, THEREFORE, pursuant to the Asset Purchase Agreement and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged:
1. Each of the Company and the Operating Subsidiaries hereby sells,
transfers, assigns, conveys and delivers to Acquiror, its successors and
assigns, forever, without recourse, and except as set forth in the Asset
Purchase Agreement, without representation or warranty, all of such entity's
right, title and interest in and to the Assets, in each case free and clear of
any and all Encumbrances.
2. It is understood and agreed that the Company and the Operating
Subsidiaries are not transferring or assigning to Acquiror any right, title or
interest in or to any of the Excluded Assets.
3. Each of the Company and the Operating Subsidiaries, for itself and
for its successors and assigns, hereby covenants and agrees that, without
further consideration, at any time and from time to time after the date hereof,
it will promptly execute and deliver to Acquiror such further instruments of
sale, conveyance, assignment and transfer, and take such other action, all upon
the reasonable request of Acquiror, in order to more effectively sell, convey,
grant, assign, transfer and deliver all or any portion of the Assets to
Acquiror, and to assure and confirm to any other person the ownership of the
Assets by Acquiror, and to permit Acquiror to exercise any of the franchises,
rights, licenses or privileges intended to be sold, conveyed, assigned,
transferred and delivered by such entity to Acquiror pursuant to this Agreement.
4. Subject to the terms of the Asset Purchase Agreement, including
without limitation, the limits and conditions set forth in Section 1.5(b)
thereof, Acquiror hereby assumes and agrees to pay, perform, discharge, and
satisfy all of the Assumed Liabilities. Acquiror, for itself and its successors
and assigns, hereby covenants and agrees that, without further consideration, at
any time and from time to time after the date hereof, it will execute and
deliver to the Company and the Operating Subsidiaries such further instruments
of assumption, and take such other action, all upon the reasonable request of
any of the Company or the Operating Subsidiaries, in order more effectively to
assume or evidence the assumption of the Assumed Liabilities by Acquiror, and to
assure and confirm to any other person the assumption of the Assumed Liabilities
by Acquiror.
5. This Agreement is in accordance with and is subject to all of the
representations, warranties, covenants, exclusions and indemnities set forth in
the Asset Purchase Agreement, all of which are incorporated herein by reference.
In the event of a conflict between the provisions of this Agreement and the
provisions of the Asset Purchase Agreement, the provisions of the Asset Purchase
Agreement shall govern.
6. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns. This
Agreement shall be governed by and construed in accordance with the internal
substantive laws of the State of Texas without giving effect to conflict of laws
principles thereof.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company, the Operating Subsidiaries and the
Acquiror have caused this Agreement to be executed as of the date first above
written.
RENT-WAY, INC.
By:
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
RENT-WAY OF MICHIGAN, INC.
By:
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
RENT-WAY OF TTIG, L.P.
By: Rent-Way Developments, Inc.
Its: General Partner
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
RENT-A-CENTER, INC.
By:
---------------------------------------
Name:
---------------------------------------
Its:
---------------------------------------
Exhibit "B"
Form of Non-Competition and Non-Solicition Agreement
NON-COMPETITION AND
NON-SOLICITATION AGREEMENT
THIS NON-COMPETITION AND NON-SOLICITATION AGREEMENT (this "Agreement")
is made and entered into as of ____________, 2003, by and between RENT-WAY,
INC., a Pennsylvania corporation (the "Company"), RENT-WAY OF MICHIGAN, INC., a
Delaware corporation and wholly owned subsidiary of the Company ("Rent-Way
Michigan"), RENT-WAY OF TTIG, L.P., an Indiana limited partnership and indirect
wholly owned subsidiary of the Company ("TTIG" and together with Rent-Way
Michigan, the "Operating Subsidiaries"), and RENT-A-CENTER, INC., a Delaware
corporation (the "Acquiror"). Unless otherwise indicated, capitalized terms used
and not defined herein are as defined in the Asset Purchase Agreement.
W I T N E S S E T H:
WHEREAS, the Acquiror, the Company and the Operating Subsidiaries have
entered into that certain Asset Purchase Agreement, dated as of December 17,
2002 (the "Asset Purchase Agreement"), pursuant to which Acquiror will acquire
certain assets of the Company and the Operating Subsidiaries as more fully set
forth in the Asset Purchase Agreement (the "Assets"); and
WHEREAS, pursuant to the terms and conditions of the Asset Purchase
Agreement, Acquiror will acquire the Assets from certain stores operated by the
Company and the Operating Subsidiaries (each of which is herein referred to as a
"Store" and all of which are listed by location on Schedule 1.1 to the Asset
Purchase Agreement), which are engaged in the rent-to-own business (the
"Business"); and
WHEREAS, pursuant to Section 5.2(g) of the Asset Purchase Agreement,
Acquiror's purchase of the Assets is conditioned upon the Company's and the
Operating Subsidiaries' execution and delivery of a non-competition and
non-solicitation agreement; and
WHEREAS, pursuant to Section 1.3 of the Asset Purchase Agreement, the
Acquiror has agreed to pay to the Company and the Operating Subsidiaries a
Non-Competition Payment of $500,000 in addition to other good and valuable
consideration in connection with the execution and delivery of such
non-competition and non-solicitation agreement; and
WHEREAS, the Acquiror, the Company and the Operating Subsidiaries
acknowledge that the value of the Assets includes, without limitation, goodwill
associated with such Assets at the Stores where such Assets are located, which
is of limited or no value without the non-competition and non-solicitation
promises contained herein.
NOW, THEREFORE, in consideration of the premises and other
consideration as herein recited, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Covenant Not to Compete. For a period of four (4) years after the
Closing Date, the Company and the Operating Subsidiaries each covenant and agree
that they shall not (i) directly or indirectly, including without limitation in
the capacity of owner, partner, shareholder, investor, franchisor, franchisee,
consultant, lender, or advisor, alone or with others, engage in the business of
rent-to-own, rental, lease-purchase, or retail transactions within a seven (7)
mile radius around each Store; (ii) solicit for the purpose of the activities
described in (i) above, any customer of the Stores reflected on the customer
lists set forth in Section 1.1(g) of the Asset Purchase Agreement or those
customers of the Stores who are parties to Rental Purchase Agreements as of the
Closing Date; and (iii) operate any business within any of the above radiuses
that competes with any of Acquiror's rent-to-own stores or the rent-to-own
stores of any affiliate of Acquiror in any way; provided, however, that clauses
(i) and (iii) above shall not apply to those stores (excluding the Stores) owned
and operated by the Company, the Operating Subsidiaries or any of their
affiliates as of the Closing Date. This Section 1 shall not be deemed to
prohibit the Company or the Operating Subsidiaries from complying with their
respective duties and obligations as set forth in the Asset Purchase Agreement
with respect to (y) the Account Stores during the Transition Period; or (z) the
Leased Employees or any other of their respective duties or obligations related
to the Acquired Stores during the Transition Period.
2. Agreement Concerning Employees. For a period of two years following
the Closing Date, the Company and the Operating Subsidiaries each covenant and
agree that they will not, and will not permit any subsidiary or other affiliate
of the Company or the Operating Subsidiaries to, directly or indirectly
(including without limitation as an owner, partner, shareholder, investor,
franchisor, franchisee, lender, consultant or advisor), alone or with others,
solicit for employment, hire, employ or otherwise provide compensation for or to
any Person who was an employee of the Company or the Operating Subsidiaries at
any Store on the Closing Date; provided, however, that the Company and the
Operating Subsidiaries may, upon the expiration of the Transition Period,
solicit any Person who was an employee of the Company or any Operating
Subsidiary on the Closing Date, so long as such Person was not offered
employment by the Acquiror on or promptly after the end of the Transition
Period. This Section 2 shall not be deemed to prohibit the Company's or the
Operating Subsidiaries' (y) employment of or otherwise providing compensation
for any employee at any Account Store as the same shall be necessary for the
Company or the Operating Subsidiaries, as the case may be, to comply with their
respective duties and obligations related to the Account Stores during the
Transition Period as set forth in the Asset Purchase Agreement; or (z) from
complying with their respective duties and obligations with respect to the
Leased Employees or complying with any other of their respective duties and
obligations related to the Acquired Stores during the Transition Period as set
forth in the Asset Purchase Agreement.
3. Payment. As contemplated by Section 1.3(a) of the Asset Purchase
Agreement, Acquiror shall pay the Non-Competition Payment to the Company at
Closing.
4. Enforcement. The parties hereto agree that the covenants of each of
the Company and the Operating Subsidiaries contained in this Agreement are
special and unique, that a breach of any term or provision in this Agreement may
cause irreparable injury to Acquiror and that remedies at law for the breach of
any provision of this Agreement will be inadequate and that, in addition to any
other remedies it may have in the event of breach, Acquiror shall be entitled to
enforce specific performance of the terms and provisions of this Agreement, to
obtain temporary and permanent injunctive relief to prevent the continued breach
of such provisions without the necessity of posting bond or proving actual
damage. The covenants in this Agreement are independent, and the existence of
any claim or cause of action of the Company or the Operating Subsidiaries or any
other affiliate of the Company or the Operating Subsidiaries against Acquiror,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement of this Agreement by Acquiror.
5. Separate Covenants. The parties hereto intend that the covenants
contained in Sections 1 and 2 of this Agreement be construed as a series of
separate covenants, one for each defined region in each geographic area in which
any Store is located. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenants contained in
Sections 1 and 2 hereof. If, in any judicial proceeding, a court shall refuse to
enforce any of such separate covenants, then the unenforceable covenant(s) shall
be deemed eliminated from these provisions for the purpose of those proceedings
to the extent necessary to permit the remaining separate covenants to be
enforced; provided, however, in the event any such unenforceability is caused by
such separate covenant(s) being held to be excessively broad as to duration,
geographical scope, activity or subject, such separate covenant(s), at the
option of Acquiror, shall remain a part of this Agreement and shall be construed
by limiting and reducing it so as to be enforceable to the extent compatible
with the then applicable law.
6. Tolling of Term. If, during any calendar month within the term of
this Agreement, any of the Company or the Operating Subsidiaries is not in
compliance with the terms of this Agreement, Acquiror shall be entitled to,
among other remedies, compliance by the Company and the Operating Subsidiaries
with the terms of this Agreement for an additional number of calendar months
that equals the number of calendar months during which such noncompliance
occurred.
7. Reasonableness of Restrictions. The Company and the Operating
Subsidiaries each acknowledge that the geographic boundaries, scope of
prohibited activities, and time duration of the provisions of Sections 1 and 2
are reasonable and are no broader than are necessary to maintain and protect the
legitimate business interests of Acquiror.
8. Integration. This Agreement represents the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof,
and all other written or oral agreements relating to the subject matter hereof
are hereby superseded.
9. Amendment; Waiver. No modification or amendment hereof shall be
valid and binding unless it be in writing and signed by the parties hereto. The
waiver of any provision hereof shall be effective only in the specific instance
and for the particular purpose for which it was given. No failure to exercise,
and no delay in exercising, any right or power hereunder shall operate as a
waiver thereof.
10. Benefit; Assignment. No party may assign, by operation of law or
otherwise, any of its rights or delegate any of its obligations hereunder
without the prior written consent of the other parties, except that Acquiror may
assign any of its rights and delegate any of its obligations hereunder to any
entity controlled by the Acquiror and may collaterally assign its rights
hereunder to any financial institution providing financing to Acquiror. Subject
to the foregoing, this Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective successors.
11. Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of each such illegal,
invalid, or unenforceable provision, at the option of Acquiror, there shall be
added as a part of this Agreement a provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid, and enforceable.
12. Governing Law. This Agreement is to be interpreted and enforced
according to the laws of the State of Texas, without giving effect to the
principles of conflict of laws thereof.
13. Costs. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs, and necessary disbursements in addition to
any other relief to which it may be entitled.
14. Remedies Cumulative. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies by any party
hereto shall not constitute a waiver of the right to pursue other available
remedies.
15. Affiliates. As used herein, the term "affiliate" means any firm,
person, partnership, joint venture, corporation, unincorporated association, or
other entity (collectively, a "Person") controlling, controlled by, or under
common control with, the subject Person.
16. Multiple Counterparts. This Agreement may be executed in a number
of identical counterparts, each of which for all purposes is to be deemed an
original, and all of which constitute collectively, one Agreement; but in making
proof of this Agreement, it shall not be necessary to produce or account for
more than one such counterpart.
17. Cumulative Rights. The rights of the parties under this Agreement
are cumulative and in addition to all similar and other rights of the parties
under other agreements between them, or among them and others.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RENT-WAY, INC.
By:
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
RENT-WAY OF MICHIGAN, INC.
By:
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
RENT-WAY OF TTIG, L.P.
By: Rent-Way Developments, Inc.
Its: General Partner
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
RENT-A-CENTER, INC.
By:
Name:
Title:
Exhibit "C"
Form of Opinion of Counsel to the Company
[Closing Date]
Rent-A-Center, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: Acquisition of Certain Assets of Rent-Way, Inc., Rent-Way of
Michigan, Inc. and Rent-Way of TTIG, L.P. by Rent-A-Center, Inc.
Ladies and Gentlemen:
We have acted as counsel to Rent-Way, Inc., a Pennsylvania corporation
(the "Company"), and certain of its subsidiaries in connection with that certain
Asset Purchase Agreement, dated as of December 17, 2002 (the "Agreement"), by
and among the Company, Rent-A-Center, Inc., a Delaware corporation
("Rent-A-Center"), Rent-Way of Michigan, Inc., a Delaware corporation ("RentWay
Michigan"), Rent-Way of TTIG, L.P., an Indiana limited partnership ("TTIG") (the
Company, RentWay Michigan and TTIG shall hereinafter be referred to collectively
as the "Sellers"). This Opinion Letter is provided to you pursuant to Section
5.2(m) of the Agreement. Except as otherwise indicated herein, capitalized terms
used in this Opinion Letter are defined as set forth in the Agreement or the
Accord (see below).
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith.
The law covered by the opinions expressed herein is limited to the
Federal Law of the United States and the Law of the State of New York. To the
extent that matters covered by this Opinion Letter are governed by the laws of
any other jurisdiction, we have assumed, with your permission, for purposes of
this Opinion Letter that such laws are identical to the laws of the State of New
York. Accordingly, the opinions expressed herein concerning the Transaction
Documents governed by laws other than the State of New York, including, without
limitation, the opinion expressed in paragraph 3 below, are given as if the laws
of the State of New York governs without regard to the fact that such
Transaction Documents provide that the laws of such jurisdiction shall govern
the Transaction Documents.
As to questions of fact material to such Opinions, we have, where
relevant facts were not independently verified or established, relied upon
certifications by officers of each of the Sellers, a copy of each of which is
attached as Exhibit "A" to this Opinion Letter (the "Officer's Certificate").
Other Agreements and Court Orders shall be deemed to refer only to
those Other Agreements that are described on Exhibits "_" and "_" respectively,
to the Officer's Certificate and purporting to identify Material Contracts and
Court Orders.
The provisions of Sections 1 through 9 and 18 through 21, inclusive, of
the Accord shall be applicable to those opinions expressed below that are not
specifically addressed by the Accord. In addition, the General Qualifications
shall apply to the No Violation of Law Opinion expressed in Paragraph 5 below.
Based upon and subject to the foregoing and the other qualifications
and limitations stated in this Opinion Letter, we are of the opinion that:
(1) The Company is a corporation, validly existing and in good
standing under the laws of the State of Pennsylvania. RentWay
Michigan is a corporation, validly existing and in good
standing under the laws of the state of Delaware. TTIG is a
limited partnership, validly existing and in good standing
under the laws of the State of Indiana.
(2) Each of the Sellers has the corporate or partnership power and
authority to execute, deliver, and perform its respective
obligations under the Agreement. The Agreement has been duly
authorized by all necessary corporate or partnership action on
the part of each of the Sellers and has been duly executed and
delivered by each of the Sellers.
(3) The Agreement is enforceable against each of the Sellers.
(4) Execution and delivery by each of the Sellers of, and
performance of their respective agreements in, the Agreement
do not (i) violate any of their Constituent Documents, breach,
or result in a default under, any existing obligation of any
of the Sellers under any Other Agreements, or (ii) breach or
otherwise violate any existing obligation of any of the
Sellers under any Court Order.
(5) Execution and delivery by each of the Sellers of, and
performance of their respective agreements in, the Agreement
do not violate applicable provisions of statutory law or
regulation.
(6) No consent, approval, waiver, license or authorization or
other action by or filing with any governmental authority is
required under state or federal statutes or regulations in
connection with the execution and delivery by each of the
Sellers of the Agreement, except for those already obtained or
completed.
We hereby confirm to you that there are no actions or proceedings
against any of the Sellers pending before any court, governmental agency or
arbitrator which (i) seek to affect the enforceability of the Agreement, or (ii)
except as disclosed in the disclosure schedules to the Agreement or as disclosed
on Exhibit "_" of the Officer's Certificates, involve asserted claims in excess
of $5,000, which may affect the ability of the Sellers to transfer title to the
Assets to Acquiror free and clear of all Encumbrances (except Permitted
Encumbrances).
This Opinion Letter may be relied upon by you only in connection with
the Transaction and may not be used or relied upon by you or any other person
for any purpose whatsoever, except to the extent authorized in the Accord,
without in each instance our prior written consent.
Very truly yours,
▇▇▇▇▇▇▇ ▇▇▇▇, LLP
By:
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Name:
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Title:
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Exhibit "D"
Form of Opinion of Counsel to Acquiror
[Closing Date]
Rent-Way, Inc.
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▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Acquisition of Certain Assets of each of Rent-Way, Inc., Rent-Way of
Michigan, Inc. and Rent-Way of TTIG, L.P. by Rent-A-Center, Inc.
Ladies and Gentlemen:
We are counsel to Rent-A-Center, Inc., a Delaware corporation (the
"Acquiror"), in connection with that certain Asset Purchase Agreement, dated as
of December 17, 2002 (the "Agreement"), by and among the Acquiror, Rent-Way,
Inc., a Pennsylvania corporation ("Rent-Way"), Rent-Way of Michigan, Inc., a
Delaware corporation ("RentWay Michigan"), and Rent-Way of TTIG, L.P., an
Indiana limited partnership ("TTIG") (Rent-Way, RentWay Michigan and TTIG shall
hereinafter be referred to collectively as the "Sellers"). This Opinion Letter
is provided to you pursuant to Section 5.3(f) of the Agreement. Except as
otherwise indicated herein, capitalized terms used in this Opinion Letter are
defined as set forth in the Agreement or the Accord (see below).
Except as modified in this paragraph, this Opinion Letter is governed
by, and shall be interpreted in accordance with, the Legal Opinion Accord (the
"Accord") of the ABA Section of Business Law (1991). As a consequence, it is
subject to a number of qualifications, exceptions, definitions, limitations on
coverage and other limitations, all as more particularly described in the
Accord, and this Opinion Letter should be read in conjunction therewith. The law
covered by the opinions expressed herein is limited to the Federal Law of the
United States, the Law of the State of Texas and the Delaware General
Corporation Law.
As to questions of fact material to such Opinions, we have, where
relevant facts were not independently verified or established, relied upon
inquiry of officers of the Acquiror.
The provisions of Sections 1 through 9 and 18 through 21, inclusive, of
the Accord shall be applicable to those opinions expressed below that are not
specifically addressed by the Accord.
Based upon and subject to the foregoing and the other qualifications
and limitations stated in this Opinion Letter, we are of the opinion that:
[1] The Acquiror is a corporation, validly existing and in good
standing under the laws of the State of Delaware.
[2] The Acquiror has the corporate power and authority to execute,
deliver, and perform its obligations under the Agreement. The Agreement has been
duly authorized by all necessary corporate action on the part of the Acquiror
and has been duly executed and delivered by the Acquiror.
[3] The Agreement is enforceable against the Acquiror.
[4] The execution and delivery by the Acquiror of, and performance of
its agreements in, the Agreement do not violate the Constituent Documents of
Acquiror.
[5] No consent, approval, waiver, license or authorization or other
action by or filing with any governmental authority is required under Texas or
federal statutes or regulations in connection with the execution and delivery by
the Acquiror of the Agreement, except for those already obtained or completed.
We hereby confirm to you that there are no actions or proceedings
against the Acquiror pending before any court, governmental agency or arbitrator
which seek to affect the enforceability of the Agreement.
This Opinion Letter may be relied upon by you only in connection with
the Transaction and may not be used or relied upon by you or any other person
for any purpose whatsoever, except to the extent authorized in the Accord,
without in each instance our prior written consent.
Very truly yours,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.