EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Dated as of February 4, 2004
by and between
RENT-A-CENTER, INC.,
EAGLE ACQUISITION SUB, INC.
and
RAINBOW RENTALS, INC.
TABLE OF CONTENTS
PAGE
ARTICLE 1 THE MERGER............................................................................................. 2
1.1 The Merger..................................................................................... 2
1.2 Closing........................................................................................ 2
1.3 Effective Time................................................................................. 2
1.4 Effects of the Merger.......................................................................... 2
1.5 Articles of Incorporation and Code of Regulations.............................................. 2
1.6 Directors and Officers of the Surviving Corporation............................................ 2
ARTICLE 2 CANCELLATION AND CONVERSION OF SHARES; CONSIDERATION................................................... 3
2.1 Effect on Capital Stock........................................................................ 3
2.2 Company Stock Plans............................................................................ 3
2.3 Exchange of Certificates;...................................................................... 4
2.4 Dissenters' Rights............................................................................. 6
2.5 Certain Adjustments............................................................................ 7
2.6 Further Assurances............................................................................. 7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES......................................................................... 7
3.1 Representations and Warranties of the Company.................................................. 7
3.2 Representations and Warranties of Acquiror and Merger Sub...................................... 21
ARTICLE 4 PRE-CLOSING COVENANTS.................................................................................. 23
4.1 Conduct of Business............................................................................ 23
4.2 Other Actions.................................................................................. 25
4.3 Advice of Changes.............................................................................. 25
4.4 [Intentionally left blank]..................................................................... 25
4.5 No Solicitation By The Company................................................................. 26
ARTICLE 5 ADDITIONAL AGREEMENTS.................................................................................. 27
5.1 Preparation of the Proxy Statement; Shareholders Meeting....................................... 27
5.2 Access To Information; Confidentiality......................................................... 27
5.3 Commercially Reasonable Efforts; Cooperation................................................... 28
5.4 Director, Officer and Employee Indemnification................................................. 29
5.5 Public Announcements........................................................................... 32
5.6 Employees...................................................................................... 32
5.7 Delisting...................................................................................... 32
5.8 Noncompete Agreements.......................................................................... 32
5.9 Amendment to Headquarters Lease................................................................ 32
5.10 Litigation..................................................................................... 33
ARTICLE 6 CONDITIONS PRECEDENT................................................................................... 33
6.1 Conditions to Each Party's Obligation to Effect the Merger..................................... 33
6.2 Conditions to Obligations of Acquiror.......................................................... 33
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6.3 Conditions to Obligations of the Company....................................................... 34
6.4 Frustration of Closing Conditions.............................................................. 35
6.5 Postponement of Closing........................................................................ 35
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER...................................................................... 35
7.1 Termination.................................................................................... 35
7.2 Effect of Termination.......................................................................... 36
7.3 Fees and Expenses.............................................................................. 37
ARTICLE 8 GENERAL PROVISIONS..................................................................................... 37
8.1 Survival of Representations and Warranties..................................................... 37
8.2 Notices........................................................................................ 37
8.3 Counterparts................................................................................... 38
8.4 Entire Agreement; No Third-Party Beneficiaries................................................. 38
8.5 Governing Law.................................................................................. 38
8.6 Assignment..................................................................................... 38
8.7 Consent to Jurisdiction........................................................................ 39
8.8 Headings....................................................................................... 39
8.9 Severability................................................................................... 39
8.10 Amendment...................................................................................... 39
8.11 No Consequential Damages....................................................................... 39
8.12 Failure or Indulgence Not Waiver; Remedies Cumulative.......................................... 39
8.13 Extension; Waiver.............................................................................. 39
8.14 Specific Performance........................................................................... 40
EXHIBITS
EXHIBIT A Voting Agreement
EXHIBIT C ▇▇▇▇ ▇▇▇▇▇▇▇▇, L.P.A. Legal Opinion
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
4, 2004, among RAINBOW RENTALS, INC., an Ohio corporation (the "Company"),
RENT-A-CENTER, INC., a Delaware corporation ("Acquiror"), and EAGLE ACQUISITION
SUB, INC., an Ohio corporation, and an indirect wholly owned subsidiary of
Acquiror ("Merger Sub").
RECITALS
A. The respective Boards of Directors of the Company, Acquiror
and Merger Sub have approved the merger of Merger Sub with and into the Company
(the "Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby each issued and outstanding common share, without par value,
of the Company ("Company Common Stock"), other than (i) Dissenting Shares, (ii)
any Company Common Stock held in the treasury of the Company, or (iii) owned by
Acquiror or an Affiliate of Acquiror will be converted into the right to receive
the Merger Consideration;
B. The respective Boards of Directors of the Company, Acquiror
and Merger Sub have each determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, their respective
business strategies and goals;
C. The Company, Acquiror and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
D. The Board of Directors of the Company has resolved to
recommend the Merger to the holders of the Company Common Stock, has determined
that the consideration to be paid for each share of Company Common Stock in the
Merger is fair to the holders of such Company Common Stock, and has resolved to
recommend that the holders of such Company Common Stock accept the Merger
Consideration and approve this Agreement and each of the transactions
contemplated hereby upon the terms and subject to the conditions set forth
herein; and
E. Concurrently with the execution and delivery of this
Agreement, as a condition and inducement to Acquiror's and Merger Sub's
willingness to enter into this Agreement, certain shareholders of the Company
(the "Major Shareholders") have entered into a Voting Agreement, dated as of the
date of this Agreement, in the form attached hereto as Exhibit A (the "Voting
Agreement") pursuant to which each such Major Shareholder has, among other
things, agreed to vote the Company Common Stock held by such Major Shareholder,
the number of which shares is set forth on the signature page of the Voting
Agreement, for the Merger.
Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, hereby agree as follows. Capitalized terms used herein shall have
the meanings referred to or set forth in Appendix A hereto.
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Ohio Statutes, Merger Sub
shall be merged with and into the Company at the Effective Time and the separate
corporate existence of Merger Sub shall thereupon cease. Following the Effective
Time, the Company shall be the surviving corporation (the "Surviving
Corporation").
1.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the second Business Day after satisfaction or waiver (subject to
applicable law) of the conditions (excluding conditions that, by their terms,
cannot be satisfied until the Closing) set forth in ARTICLE 6, unless another
time or date is agreed to by the parties hereto (the "Closing Date"). The
Closing will be held at the offices of ▇▇▇▇ ▇▇▇▇▇▇▇▇, a legal professional
association, 2600 Erieview Tower, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
or such other location as the parties hereto shall agree to in writing.
1.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable after the satisfaction or, if permissible, the waiver of
the conditions set forth in ARTICLE 6, the parties shall file a Certificate of
Merger (the "Certificate of Merger") in such form as is required by and executed
in accordance with the relevant provisions of the Ohio Statutes. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Ohio, or at such later date or time
as the Company and Acquiror shall agree and specify in the Certificate of Merger
(the date and time the Merger becomes effective being the "Effective Time").
1.4 Effects of the Merger. The Merger shall have the effects set
forth in the Ohio Statutes. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall be vested in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.5 Articles of Incorporation and Code of Regulations. Subject to
SECTION 5.4, the articles of incorporation and code of regulations of Merger Sub
shall be the articles of incorporation and code of regulations, respectively, of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law; provided, however, that the name of the Surviving
Corporation shall be "Rainbow Rentals, Inc."
1.6 Directors and Officers of the Surviving Corporation. The
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation each to hold office in accordance with
the articles of incorporation and code of regulations of the Surviving
Corporation, and the officers of the Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, in each case,
until the earlier of their death, resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
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ARTICLE 2
CANCELLATION AND CONVERSION OF SHARES; CONSIDERATION
2.1 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
capital stock of the Company or Merger Sub:
(a) Cancellation of Treasury Stock and Acquiror-Owned
Stock. Each share of Company Common Stock that is (i) owned by Acquiror or an
Affiliate of Acquiror or (ii) held in the treasury of the Company shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Conversion of Company Common Stock. Subject to
SECTION 2.4 (Dissenters' Rights), each issued and outstanding share of Company
Common Stock shall be converted into the right to receive $16.00 in cash (the
"Merger Consideration").
(c) Capital Stock of Merger Sub. Each share of common
stock, no par value, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into one share of common stock of the
Surviving Corporation.
(d) Cancellation and Retirement of Company Common Stock.
All shares of Company Common Stock (other than shares to be canceled in
accordance with SECTION 2.1(a) and Dissenting Shares) shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration, without interest, upon surrender of
such certificate in accordance with SECTION 2.3.
2.2 Company Stock Plans. As of the Effective Time, each
outstanding Company Stock Option, vested or unvested, exercisable or
non-exercisable, shall be extinguished and converted into the right to receive a
cash amount equal to the product of (x) the excess, if any, of the Merger
Consideration, minus the exercise price, if any, of each such Company Stock
Option (with respect to each Company Stock Option, the "Option Shares Merger
Consideration"), multiplied by (y) the aggregate number of shares of the Company
Common Stock issuable upon the exercise in full of such Company Stock Option at
the Effective Time. No cash payment will be due in respect of such Company Stock
Option or its termination if the exercise price of such Company Stock Option is
equal to or exceeds the Merger Consideration. The Company shall take all actions
necessary to ensure that the Company's Stock Plans shall terminate as of the
Effective Time and the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company shall be terminated as of the Effective Time. In
addition, the Company shall take all action necessary to ensure that following
the Effective Time no participant in the Company Stock Plans or other plans,
programs or arrangements (each, an "Eligible Option Holder") shall have any
right thereunder to acquire or participate in changes in value of equity
securities of the Company, the Surviving Corporation, Merger Sub or any of their
respective subsidiaries and to terminate all such plans effective as of the
Effective Time.
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2.3 Exchange of Certificates; (a) Exchange Agent. The Parties
agree that Mellon Investor Services, LLC, or such other bank or trust company
which the Parties may designate, shall act as agent (the "Exchange Agent") of
Acquiror for purposes of, among other things, mailing and receiving transmittal
letters and distributing to the Company shareholders or holders of Company Stock
Options the proceeds payable to such holders under SECTION 2.1(b) (Conversion of
Company Common Stock) or SECTION 2.2 (Company Stock Plans) above. Immediately
prior to the Effective Time, Acquiror or Merger Sub shall deposit, or shall
cause to be deposited, with or for the account of the Exchange Agent, for the
benefit of the holders of Certificates (as defined herein) and the Eligible
Option Holders cash in an aggregate amount (the "Exchange Fund") equal to the
sum of (x) the product of (A) the Merger Consideration multiplied by (B) the
number of shares of Company Common Stock issued and outstanding at the Effective
Time plus (y) the aggregate Option Shares Merger Consideration for all Eligible
Option Holders as of the Effective Time (the "Aggregate Merger Consideration").
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, Acquiror shall direct the Exchange Agent
to mail or deliver to each holder of record of a stock certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates") whose shares
were converted into the right to receive the Merger Consideration pursuant to
SECTION 2.1(b), or (ii) each Eligible Option Holder entitled to receive his or
her Option Shares Merger Consideration pursuant to SECTION 2.2, as applicable,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as the Company and Acquiror may reasonably specify)
and (ii) instructions for use in surrendering the Certificates or evidence of
Company Stock Options in exchange for the Merger Consideration or Option Shares
Merger Consideration, as applicable. Upon surrender of a Certificate for
cancellation or evidence of Company Stock Options to the Exchange Agent,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by Acquiror, the Surviving Corporation
or the Exchange Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor a check or wire transfer of immediately available
funds representing the amount of cash such holder has the right to receive
pursuant to the provisions of this ARTICLE 2, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the Company, a
new Certificate representing the proper number of shares of Company Common Stock
may be issued to a Person other than the Person in whose name the Certificate so
surrendered is registered if such Certificate is properly endorsed or otherwise
in proper form for transfer and the Person requesting such issuance pays any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of such Certificate
or establishes to the satisfaction of Acquiror that such tax has been paid or is
not applicable. Until surrendered as contemplated by this SECTION 2.3, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration, that the
holder thereof has the right to receive in respect of such Certificate pursuant
to the provisions of this ARTICLE 2. No interest shall be paid or will accrue on
any cash payable to holders of Certificates pursuant to the provisions of this
ARTICLE 2.
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(c) No Further Ownership Rights in Company Common Stock.
The Merger Consideration or Option Shares Merger Consideration, as applicable,
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock, theretofore represented by such
Certificates or evidence of Company Stock Options, as applicable, subject,
however, to Acquiror's obligation to pay the Aggregate Merger Consideration, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates or evidence of Company Stock Options, as applicable, are
presented to the Surviving Corporation or the Exchange Agent for any reason,
they shall be canceled and exchanged as provided in this ARTICLE 2, except as
otherwise provided in SECTION 2.3(d) or by law.
(d) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed (including interest thereon) to the
holders of the Certificates or Eligible Option Holders for six months after the
Effective Time shall to the extent permitted by law, become the property of the
Surviving Corporation. Any holders of the Certificates or Eligible Option
Holders, as applicable, who have not theretofore surrendered their respective
Certificates or evidence of Company Stock Options and otherwise complied with
this ARTICLE 2 shall thereafter look only to the Surviving Corporation, and only
as a general creditor, for payment of their claim for Merger Consideration or
Option Shares Merger Consideration, as applicable, and without interest. If any
Certificates or evidence of Company Stock Options shall not have been
surrendered prior to five years after the Effective Time (or immediately prior
to such earlier date on which any payment in respect thereof would otherwise
escheat to or become the property of any Governmental Entity), the payment in
respect of such shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(e) No Liability. None of the Parties shall be liable to
any Person in respect of any Merger Consideration from the Exchange Fund,
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) Investment of Exchange Fund. The Exchange Agent shall
invest the Exchange Fund, as directed by the Surviving Corporation, in (i)
direct obligations of the United States of America, (ii) obligations for which
the full faith and credit of the United States of America is pledged to provide
for the payment of principal and interest, (iii) commercial paper rated the
highest quality by either ▇▇▇▇▇'▇ Investors Services, Inc. or Standard & Poor's
Corporation, or (iv) certificates of deposit, bank repurchase agreements or
bankers acceptances, of commercial banks with capital exceeding $1 billion, and
any net earnings with respect thereto shall be paid to the Surviving Corporation
as and when requested by the Surviving Corporation; provided, that any such
investment or any such payment of earnings shall not delay the receipt by
holders of Certificates or evidence of Company Stock Options of the Merger
Consideration or Option Shares Merger Consideration, as the case may be, or
otherwise impair such holders' respective rights hereunder.
(g) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon (i) the delivery of a Letter of Transmittal
stating as such, (ii) the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, (iii) evidence that
such
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Person is the beneficial owner of the Certificate claimed to be lost, stolen or
destroyed, and, (iv) if required by the Surviving Corporation, the posting by
such Person of a bond in such reasonable amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration.
(h) Withholding Rights. The Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Common Stock or Eligible
Option Holder such amounts as the Exchange Agent, Surviving Corporation, or
Acquiror is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law,
including, without limitation, withholdings required in connection with payments
with respect to Company Stock Options held by employees of the Company. To the
extent that amounts are so withheld by the Exchange Agent, Surviving
Corporation, or Acquiror, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder in respect of which
such deduction and withholding was made.
2.4 Dissenters' Rights.
(a) Notwithstanding any provision of this Agreement to
the contrary, any shares of Company Common Stock outstanding immediately prior
to the Effective Time and held by persons who shall have properly demanded
payment of the fair cash value of such shares of Company Common Stock in
accordance with Section 1701.85 of the Ohio Statutes (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration as provided in SECTION 2.1(b). Such persons
shall be entitled only to such rights as are granted under Section 1701.85 of
the Ohio Statutes, except that all Dissenting Shares held by persons who fail to
perfect or who effectively withdraw or lose their rights as dissenting
shareholders in respect of such shares under 1701.85 of the Ohio Statutes shall
thereupon be deemed to have been converted into, as of the Effective Time, the
right to receive the applicable portion of the Merger Consideration, without
interest thereon, upon surrender of the Certificate therefor in the manner
provided in SECTION 2.3.
(b) The Company or the Surviving Corporation shall give
Acquiror (i) prompt written notice of any demands by dissenting shareholders
received by the Company or the Surviving Corporation, withdrawals of such
demands and any other instruments served on the Company or the Surviving
Corporation and any material correspondence received by the Surviving
Corporation or the Company in connection with such demands and (ii) after the
Effective Date, the right to direct in all negotiations and proceedings with
respect to such demands and prior to the Effective Date to participate in such
negotiations and proceedings. Neither the Company nor the Surviving Corporation
shall, except with the prior written consent of Acquiror, make any payment with
respect to any demands for appraisal or offer to settle or settle any such
demands. Any funds paid to dissenting shareholders shall be paid out of the
Exchange Fund to the extent such payment is equal to or less than the Merger
Consideration and, if greater, the excess shall be paid out of the assets of the
Surviving Corporation.
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2.5 Certain Adjustments. If after the date hereof and on or prior
to the Effective Time, the outstanding shares of Company Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities shall be declared thereon with a record
date within such period, or any similar event shall occur, the Merger
Consideration shall be adjusted accordingly to provide to the holders of Company
Common Stock the same economic effect as contemplated by this Agreement prior to
such reclassification, recapitalization, split-up, combination, exchange or
dividend or similar event.
2.6 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized, (i) to
execute and deliver, in the name and on behalf of the Company or Merger Sub, any
deeds, bills of sale, assignments or assurances and (ii) to take and do, in the
name and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record in the Surviving Corporation any and all
right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company has
set forth information in the Company Disclosure Schedule delivered by the
Company to Acquiror simultaneously with the execution of this Agreement (the
"Company Disclosure Schedule") in a section that corresponds to the section of
this Agreement to which it relates. Such information shall be deemed disclosed
with respect to any other section of this ARTICLE 3 to which the matter relates,
so long as the applicability of such matter would be clearly evident on the face
of such disclosure. The Company hereby represents and warrants to Acquiror and
Merger Sub as follows:
(a) Organization, Standing and Corporate Power. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio and has the requisite corporate power and
authority to carry on its business as now being conducted. The Company is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except for those jurisdictions where the failure to be so qualified or licensed
or to be in good standing individually or in the aggregate would not have a
Material Adverse Effect. SECTION 3.1(a) of the Company Disclosure Schedules sets
forth each jurisdiction in which the Company is qualified to do business. The
Company has made available to Acquiror prior to the execution of this Agreement
complete and correct copies of its charter documents, each as amended to date.
(b) Subsidiaries. The Company has no Subsidiaries and
owns no capital stock or other voting or non-voting equity interest or debt
security of or in any other entity.
(c) Capital Structure. The authorized capital stock of
the Company consists of (i) 10,000,000 shares of Company Common Stock and (ii)
2,000,000 shares of preferred stock ("Company Preferred Stock"). At the date
hereof (the "Stock Reference Date"): (i) 5,932,653 shares
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of Company Common Stock are issued and outstanding; (ii) 463,291 shares of
Company Common Stock are held by the Company in its treasury; and (iii) 593,082
shares of Company Common Stock are subject to outstanding employee, consultants
and directors stock options to purchase Company Common Stock (collectively, the
"Company Stock Options") granted pursuant to the Company's incentive plans
(collectively, the "Company Stock Plans"), all such stock options are set forth
on SECTION 3.1(c) of the Company Disclosure Schedule. No shares of the Company
Preferred Stock have been issued or are outstanding. Other than the Company
Stock Options, no securities of the Company convertible into or exchangeable or
exercisable for shares of capital stock or voting securities are outstanding as
of the Stock Reference Date, and no warrants, calls, options or other rights to
acquire shares of capital stock or voting securities were outstanding as of the
Stock Reference Date. All outstanding shares of Common Stock of the Company are,
and all shares which may be issued will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and were not issued, and will not
be issued, in violation of any preemptive or similar rights of any Persons, and
were issued in accordance with the registration and qualification requirements
of the Securities Act and all Legal Requirements applicable to the offer and
sale of securities or pursuant to valid exemptions therefrom. Except for the
Company Stock Options and the issued and outstanding shares and treasury shares
described above, there are not issued, reserved for issuance or outstanding (A)
any shares of capital stock or other voting securities of the Company, (B) any
securities of the Company convertible into or exchangeable or exercisable for
shares of capital stock or voting securities of the Company or (C) any warrants,
calls, options or other rights to acquire from the Company any capital stock or
voting securities of the Company. There are no outstanding obligations of the
Company to repurchase, redeem or otherwise acquire any such securities. The
Company is not a party to any voting agreement with respect to the voting of any
such securities. There are no outstanding obligations of the Company to register
under the Securities Act any shares of its capital stock or to include in any
registration of its capital stock shares held by others.
(d) Authority; No Conflict. The Company has all requisite
power and authority to enter into this Agreement, and each instrument required
hereby to be executed, and delivered by it at the Closing, to perform its
obligations hereunder and thereunder, and, subject to the Company Shareholder
Approval, to consummate the transactions contemplated thereby and hereby. The
execution and delivery by the Company of this Agreement and each instrument
required hereby to be executed and delivered by it at the Closing, and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject to the Company Shareholder Approval. This Agreement has been duly
executed and delivered by the Company and, assuming due authorization, execution
and delivery by Acquiror and Merger Sub, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting the rights of creditors and to general principles of equity. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or passage of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of a benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company under (i) the articles of incorporation or
code of regulations of the Company, (ii) any loan or credit agreement, note,
bond,
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mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to the Company or its
properties or assets or (iii) subject to the governmental filings and other
matters referred to in SECTION 3.1(e), any Legal Requirement or regulation
applicable to the Company or its properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights,
losses or Liens that individually or in the aggregate would not (x) have, or be
reasonably likely to have, a Material Adverse Effect or (y) reasonably be
expected to materially impair or delay the ability of the Company to perform its
obligations under this Agreement.
(e) Consents. Except as set forth in SECTION 3.1(e) of
the Company Disclosure Schedule, the Company Shareholder Approval, and the
authorizations of Governmental Entities as specifically set forth below, no
Consent or approval of any third Person is required in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby. No consent, approval, order
or authorization of, action by or in respect of, or registration, declaration or
filing with, any federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental U.S. or foreign self-regulatory agency, commission or
authority or any arbitral tribunal (each, a "Governmental Entity") or other
Legal Requirement is required by the Company in connection with the execution
and delivery of this Agreement by the Company or the consummation by the Company
of the transactions contemplated hereby, except for: (1) the filing with the SEC
of (A) a proxy statement relating to the Company Shareholders Meeting (the
"Proxy Statement"), and (B) such reports under Sections 13(a), 13(d), 13(e),
15(d) or 16(a) of the Exchange Act, as may be required in connection with this
Agreement and the transactions contemplated hereby; (2) the filing of the
Certificate of Merger with the Secretary of State of the State of Ohio; (3) the
filing of a pre-merger notification and report form by the Company under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended ("HSR Act");
and (4) such filings, consents, approvals, orders or authorizations the failure
of which to be made or obtained individually or in the aggregate would not have
or reasonably be expected to have, a Material Adverse Effect.
(f) Reports; Undisclosed Liabilities; Books and
Records/Internal Controls. The Company has timely filed all required reports,
schedules, forms, statements and other documents (including exhibits and all
other information incorporated therein) with the SEC since January 1, 1999 (the
"Company SEC Documents") and has filed all material reports, schedules, forms,
statements, and other documents with all other Government Entities since January
1, 1999. As of their respective dates, the Company SEC Documents complied in all
material respects with the requirements of the Securities Act, or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents, and none of the Company SEC
Documents when filed, declared effective or mailed (as the case may be)
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company (including the related
schedules and notes thereto) included in the Company SEC Documents (or
incorporated therein by reference) comply, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a
9
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the consolidated statement
of operations, cash flows and shareholders' equity for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). The Company has no liabilities or obligations of any nature
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated and
whether due or to become due) except (A) as reflected in the September 30, 2003
financial statements or in the notes thereto; (B) for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby which are
on SCHEDULE 3.1(f)(i) of the Company Disclosure Schedule; (C) liabilities or
obligations incurred in the ordinary course of business from September 30, 2003
to the date hereof; (D) liabilities or obligations incurred as permitted
pursuant to SECTION 4.1 hereof; or (E) which, in the aggregate, do not exceed
$250,000.
There are no significant deficiencies or material weaknesses
in the Company's internal controls. The Company maintains accurate books and
records reflecting its assets and liabilities and maintains proper and adequate
internal accounting controls which provide assurance that (i) all transactions
are executed with management's authorization (ii) transactions are recorded as
necessary to permit preparation of the financial statements of the Company and
to maintain accountability for the Company's assets; (iii) access to the
Company's assets is permitted only in accordance with management's
authorization; (iv) the reporting of the Company's assets is compared with
existing assets at regular intervals; and (v) accounts and inventory are
recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis. The Company
maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15
under the Exchange Act; such controls and procedures are effective to ensure
that all material information concerning the Company is made known on a timely
basis to the individuals responsible for the preparation and execution of the
Company's filings with the SEC and other public disclosure documents, including,
without limitation, any certifications required to be filed by the Chief
Executive Officer and the Chief Financial Officer of the Company. SECTION
3.1(f)(ii) of the Company Disclosure Schedule lists, and the Company has
delivered to Acquiror copies of, all written descriptions of, and all policies,
manuals and other documents promulgating, such disclosure controls and
procedures.
(g) Company Proxy Materials. All of the information
supplied by the Company for inclusion in the Definitive Proxy Statement referred
to in SECTION 5.1(a), will not, on the date the Definitive Proxy Statement is
first mailed to the Company's shareholders, and the Definitive Proxy Statement,
as then amended or supplemented, will not, on the date of the Company
Shareholders Meeting referred to in SECTION 5.1(b) hereof, contain any statement
which is false or misleading with respect to any material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty regarding information furnished by Acquiror or Merger
Sub for inclusion in the Definitive Proxy Statement (or any amendment or
supplement thereto). The Definitive Proxy Statement will comply, with respect to
information supplied or to be supplied in writing by or on behalf of the Company
for inclusion in the Definitive Proxy Statement, in all material respects with
10
the requirements of the Exchange Act and the applicable rules and regulations of
the SEC thereunder.
(h) Absence of Certain Changes or Events. Since September
30, 2003, except for liabilities incurred in connection with this Agreement or
the transactions contemplated hereby, or as disclosed in SECTION 3.1(h) of the
Company Disclosure Schedules, the Company has conducted its business only in the
ordinary course, and there has not been (1) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock, (2) any split,
combination or reclassification of any of the Company's capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of the Company's capital stock,
except for issuances of Company Common Stock upon the exercise of Company Stock
Options outstanding on September 30, 2003, (3) (A) any granting by the Company
after September 30, 2003 to any current or former director, executive officer or
other key employee of the Company of any increase in compensation, bonus or
other benefits, except for normal increases in the ordinary course of business
or as was required under any employment agreements in effect as of September 30,
2003, (B) any granting by the Company after September 30, 2003 to any such
current or former director, executive officer or key employee of any increase in
severance or termination pay, or (C) any entry by the Company after September
30, 2003 into, or any amendment of, any employment, deferred compensation,
consulting, severance, termination or indemnification agreement with any such
current or former director, executive officer or key employee, (4) except as
required by a change in generally accepted accounting principles, any change in
accounting methods, principles or practices by the Company materially affecting
its assets, liabilities or business, (5) any tax election that individually or
in the aggregate would reasonably be expected to have a Material Adverse Effect
or any settlement or compromise of any material income tax liability, (6) any
change in the business, assets, financial condition or results of operations of
the Company or any other event which in any such case has had or could
reasonably be expected to have a Material Adverse Effect, (7) any damage,
destruction or loss affecting the assets of the Company, whether covered by
insurance or not, having a Material Adverse Effect, (8) the entry into any
agreement, commitment or transaction by the Company which is material to the
Company, (9) any change in the terms and conditions of the Company Stock Plans,
(10) any cancellation or compromise by the Company of any material debt or
claim, except for adjustments made in the ordinary course of business which,
either individually or in the aggregate, would not have a Material Adverse
Effect, (11) any waiver or release by the Company of any right of any material
value to the Company, (12) any revaluation by the Company of any asset
(including, without limitation, any writing down of the value of inventory),
other than in the ordinary course of business, (13) any transaction that if
taken after the date hereof would constitute a violation of SECTION 4.1 hereof,
or (14) any agreement or commitment, whether in writing or otherwise, to take
any action described in this SECTION 3.1(h).
(i) Compliance With Applicable Laws; Litigation.
(i) The Company holds all permits, licenses,
variances, exemptions, orders, registrations and approvals of all
Governmental Entities which are required for the operation of the
business of the Company (collectively, the "Company Permits"), except
where the failure to have any such Company Permits individually or in
the aggregate would not have a Material Adverse Effect. The Company is
in compliance with the terms of the
11
Company Permits and all applicable Legal Requirements, except where the
failure so to comply individually or in the aggregate would not have a
Material Adverse Effect. The Company is, or will timely be in all
material respects, in compliance with all current and proposed listing
and corporate governance requirements of the Nasdaq Stock Market, and
is in compliance in all material respects, and will continue to remain
in compliance through the Closing, with all rules, regulations, and
requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the SEC.
(ii) The Company has furnished Acquiror copies of
(a) all attorney responses to the request of the independent auditors
for the Company with respect to loss contingencies as of December 31,
2002 and to loss contingencies as of December 31, 2003 in connection
with the Company's financial statements, and (b) a written list of
legal and regulatory proceedings filed against the Company 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. 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 its
officers, directors, employees, agents, at law or in equity, in any
court or before any Governmental Entity, including, without limitation,
whistleblower claims, except actions, suits, investigations, complaints
or proceedings that are set forth on SECTION 3.1(i)(ii) of the Company
Disclosure Schedule. Except as set forth in SECTION 3.1(i)(ii) of the
Company Disclosure Schedule, 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, at law or in equity, in any court or before any
Governmental Entity, by persons alleging violation of the provisions of
the Rental Purchase Agreements, rent-to-own statutes or any other
consumer protection law. None of the Company, its officers or
employees, or to the Company's Knowledge, contractors, subcontractors
or agents have knowingly, with the intent to retaliate, taken any
action harmful to any person, including interference with the lawful
employment or livelihood of such person, because such individual
provided to a law enforcement officer or supervisor any truthful
information relating to the commission or possible commission of any
federal or state offense. Except as set forth in SECTION 3.1(i)(ii) of
the Company Disclosure Schedule, 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 officers, directors, employees,
agents, at law or in equity, in any court or before any Governmental
Entity, by persons 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 of 1970, as amended, Family and
Medical Leave Act of 1993, as amended, terms and conditions of
employment or the federal or state Legal Requirements regarding wages
and hours.
(j) Inventory. All Company inventory was ordered new,
purchased new, or acquired in the ordinary course of business or pursuant to
acquisitions and consistent with the regular inventory practices of the Company.
All such inventory is of a quality usable and merchantable in
12
the operation of the business and is in good repair and condition, ordinary wear
and tear excepted, except for obsolete items which have been written off in the
Company financial statements included in the Company SEC Documents or on the
accounting records of the Company as of the Closing Date, as the case may be.
(k) Rental Purchase Agreements. The Company has provided
to Acquiror true and correct copies of all forms of Rental Purchase Agreements
utilized by the Company during the previous five (5) years (the "Rental Purchase
Agreements"). Except as set forth on SCHEDULE 3.1(k) of the Company Disclosure
Schedule, the form of each Rental Purchase Agreement utilized by the Company
currently and during the previous five (5) years of the Company is and was, as
the case may be, in compliance with all federal and state laws. The Rental
Purchase Agreements were entered into in the ordinary course of business in a
manner consistent with the regular business practices of the Company at the time
at which such agreements were utilized. With respect to each Rental Purchase
Agreement to which the Company is currently a party:
(i) such Rental Purchase Agreement is in full
force and effect and constitutes a valid, legal and binding obligation
of the Company and to the Company's Knowledge, the other contracting
parties, enforceable against each of them in accordance with its terms;
(ii) the Company has complied in all respects
with the terms of such Rental Purchase Agreement;
(iii) the Company is not in breach, violation or
default under such Rental Purchase Agreement;
(iv) 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 by the Company;
(v) 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.
(l) Labor Matters. The Company has not been, and is not
now, a party to any collective bargaining agreement or other labor contract.
There has not been, nor is there 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. 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,
13
threatened against or affecting the Company 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 Entity, and there is no
organizational activity or other labor dispute against or affecting the Company.
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. There is
no lockout of any employees by the Company, and no such action is contemplated
by the Company. To the Knowledge of the Company, except as set forth on SECTION
3.1(L) of the Company Disclosure Schedule, there has been no charge of
discrimination filed against or threatened against the Company with the Equal
Employment Opportunity Commission or similar Governmental Entity.
(m) ERISA Matters.
(i) SECTION 3.1(m) of the Company Disclosure
Schedule lists all employee benefit plans of the Company (the "Benefit
Plans"). With respect to each such plan, the Company has delivered or
made available to Acquiror correct and complete copies of (1) all plan
texts and agreements and related trust agreements, (2) all summary plan
descriptions and material employee communications, (3) the most recent
annual report (including all schedules thereto), (4) the most recent
annual audited financial statement, (5) if the plan is intended to
qualify under Code Section 401(a) or 403(a), the most recent
determination letter, if any, received from the Internal Revenue
Service (the "IRS"), and (6) all material communications with any
Governmental Entity (including, without limitation, the Pension Benefit
Guaranty Company and the IRS).
(ii) There are no Benefit Plans that (i) are
subject to any of Code Section 412, ERISA Section 302 or Title IV of
ERISA, or (ii) are welfare plans within the meaning of and subject to
ERISA Section 3(1) that provide benefits to current or former Employees
beyond the end of the month in which the Employee retires or is
otherwise terminated (other than coverage mandated by COBRA or
applicable state law), or are self-insured "multiple employer welfare
arrangements," as such term is defined in Section 3(40) of ERISA.
Except as set forth on SECTION 3.1(m) of the Company Disclosure
Schedule, there are no Benefit Plans that are intended to qualify under
Code Section 401(a) or 403(a).
(iii) Each Benefit Plan conforms in all material
respects to, and its administration is in all material respects in
compliance with, all applicable laws and regulations
(iv) Except as set forth on SECTION 3.1(m) of the
Company Disclosure Schedule, the consummation of the Merger, this
Agreement and the transactions contemplated thereby and hereby will not
(1) entitle any current or former Employee to severance pay,
unemployment compensation or any similar payment or (2) accelerate the
time of payment or vesting, or increase the amount of any compensation
due to, any current or former employee, excluding stock options which
all accelerate and vest in connection with consummation of the Merger
14
(v) No Benefit Plan is a "multiemployer plan"
within the meaning of the Code or Section 3(37) of ERISA or a plan
subject to Title IV of ERISA or Section 412 of the Code.
(vi) In the six years preceding the date hereof
with respect to each Benefit Plan including, for this purpose, any
Benefit Plan maintained, sponsored or contributed to by any ERISA
Affiliate (1) no such plan that is or was subject to Title IV of ERISA
has been terminated; (2) no reportable event with the meaning of
Section 4043 or ERISA has occurred; (3) no filing of a notice of intent
to terminate such a plan has been made; and (4) the Pension Benefit
Guaranty Company has not initiated any proceeding to terminate any such
plan.
(vii) The Company is not a party to any agreement
that has resulted, or would result, in the payment of any compensation
to any current or former employee that would constitute a "parachute
payment" as defined in Section 280G of the Code.
(viii) The Company has no existing arrangement with
any of its employees providing for an excise tax gross up in respect of
any excise taxes imposed by Section 4999 of the Code.
(ix) Section 162(m) of the Code does not limit
the deduction for employee remuneration for the Company.
(n) Taxes.
(i) The Company has timely filed all tax returns
and reports required to be filed by it and all such returns and reports
are complete and correct in all material respects, or requests for
extensions to file such returns or reports have been timely filed,
granted and have not expired, except to the extent that such failures
to file, to be complete or correct or to have extensions granted that
remain in effect individually or in the aggregate would not have a
Material Adverse Effect. The Company has paid all Taxes shown as due on
such returns, and the most recent financial statements contained in the
Company SEC Documents reflect an adequate reserve for all Taxes payable
by the Company for all taxable periods and portions thereof accrued
through the date of such financial statements.
(ii) No deficiencies for any Taxes have been
proposed, asserted or assessed against the Company that are not
adequately reserved for, except for deficiencies that individually or
in the aggregate would not have a Material Adverse Effect.
(iii) No claim has ever been made or, to the
Company's Knowledge, is threatened to be made by any Governmental
Entity in a jurisdiction where the Company does not file Tax returns
that it is or may be subject to taxation by that jurisdiction.
(iv) SECTION 3.1(n) of the Company Disclosure
Schedule contains a complete and accurate list of all Tax returns of
the Company that have been audited or are currently under audit and
accurately describe any deficiencies or other amounts that were paid or
are currently being contested. To the Knowledge of the Company, no
undisclosed
15
deficiencies are expected to be asserted with respect to any such
audit. All deficiencies proposed as a result of such audits have been
paid, reserved against, settled or are being contested in good faith by
appropriate proceedings as described in SECTION 3.1(n) of the Company
Disclosure Schedule. The Company has delivered, or made available to
Acquiror, copies of any examination reports, statements or deficiencies
or similar items with respect to such audits. Except as provided in
SECTION 3.1(n) of the Company Disclosure Schedule, the Company has no
Knowledge that any Governmental Entity is likely to assess any
additional taxes for any period for which Tax returns have been filed.
There is no dispute or claim concerning any taxes of the Company either
(i) claimed or raised by any Governmental Entity in writing or (ii) as
to which the Company has Knowledge. Except as described in SECTION
3.1(n) of the Company Disclosure Schedule, the Company has not given or
been requested to give waivers or extensions (or is or would be subject
to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or for
which the Company may be liable.
(v) All Taxes that the Company is or was
required by Legal Requirements to withhold, deduct or collect have been
duly withheld, deducted and collected and, to the extent required, have
been paid to the proper Governmental Entity or other Person.
(vi) There is no tax sharing agreement, tax
allocation agreement, tax indemnity obligation or similar written or
unwritten agreement, arrangement, understanding or practice with
respect to Taxes (including any advance pricing agreement, closing
agreement or other agreement relating to Taxes) that will require any
payment by the Company.
(vii) The Company (A) has not been a member of an
affiliated group within the meaning of the Code Section 1504(a) (or any
similar group defined under a similar provision of state, local or
foreign law) and (B) has no liability for Taxes of any Person (other
than the Company) under Treas. Reg. Sect. 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor
by contract or otherwise.
The Company has disclosed on its federal income Tax returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662.
(o) Environmental Matters.
(i) Except for matters which would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, (A) no written notice, notification, demand,
request for information, citation, summons, complaint or order has been
received by, and no action, claim, suit, proceeding or review or, to
the Knowledge of the Company, investigation is pending or, to the
Knowledge of the Company, threatened by any Person against, the Company
with respect to any matters relating to or arising out of any
Environmental Law; and (B) the Company is in compliance with all
Environmental Laws.
16
(ii) For purposes of this Agreement, the term
"Environmental Laws" means federal, state, and local statutes, laws,
judicial decisions, regulations, ordinances, rules, judgments, orders,
codes, injunctions, permits and governmental agreements relating to
human health and the environment, including, but not limited to,
Hazardous Materials; and the term "Hazardous Material" means all
substances or materials regulated as hazardous, toxic, explosive,
dangerous, flammable or radioactive under any Environmental Law
including, but not limited to, (A) petroleum, asbestos or
polychlorinated biphenyls and (B) in the United States, all substances
defined as Hazardous Substances, Oils, Pollutants or Contaminants in
the National Oil and Hazardous Substances Pollution Contingency Plan,
40 C.F.R. Section 300.5.
(p) Opinion of Financial Advisor. The Company has
received the opinion of its Financial Advisor, to the effect that, as of the
date of its opinion, the Merger Consideration is fair from a financial point of
view to the holders of shares of Company Common Stock (the "Fairness Opinion").
(q) Takeover Statutes. The Company's Board of Directors,
at a meeting duly called and held, has approved, for purposes of Chapter 1704 of
the Ohio Statutes, the Merger and the acquisition by Acquiror of the shares of
common stock of the Company pursuant to the Merger. As of the date of this
Agreement, except for Chapter 1704 of the Ohio Statutes and Section 1701.831 of
the Ohio Statutes, no "fair price," "business combination," "moratorium,"
"control share acquisition" or other anti-takeover statute or similar statute or
regulation enacted by any state apply to the Merger or the other transactions
contemplated by this Agreement.
(r) Finders' or Advisors' Fees. Except for its Financial
Advisor, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of the Company who
might be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
(s) Intellectual Property; Software.
(i) Except in each case where the failure would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect and except as disclosed in SECTION 3.1(s) of
the Company Disclosure Schedule, (i) the Company owns all right, title
and interest in or has valid and enforceable rights to use, by license
or other agreements, all of the Intellectual Property that is currently
used in the conduct of the Company's business, free of all liens,
pledges, charges, options, rights of first refusal, security interests
or other encumbrances of any kind, (ii) no action, claim, arbitration,
proceeding, audit, hearing, investigation, litigation or suit (whether
civil, criminal, administrative, investigative or informal) has
commenced, been brought or heard by or before any Governmental Entity
or arbitrator or is pending or is threatened in writing by any third
Person with respect to any Intellectual Property owned by the Company
in connection with the business as currently conducted, including any
claim or suit that alleges that any such Intellectual Property
infringes, impairs, dilutes or otherwise violates the rights of others,
and the Company is not subject to any outstanding injunction, judgment,
order, decree, ruling, charge, settlement, or other dispute involving
any third Person's Intellectual Property, (iii) the Company has not
17
threatened or initiated any claim or action against any third party
with respect to any Intellectual Property, and (iv) the Company has no
Knowledge of any material conflict with or infringements of any
Intellectual Property of any third Person.
(ii) For purposes of this Agreement,
"Intellectual Property" means all (i) inventions, discoveries,
processes, designs, techniques, developments, technology, and related
improvements, whether or not patentable; (ii) United States patents and
applications therefor and all divisionals, reissues, renewals,
registrations, confirmations, re-examinations, certificates of
inventorship, extensions, continuations and continuations-in-part
thereof; (iii) United States, state and foreign trademarks, trade
dress, service marks, service names, trade names, brand names, logo or
business symbols, whether registered or unregistered, and pending
applications to register the foregoing, including all extensions and
renewals thereof and all goodwill associated therewith; (iv) United
States and foreign copyrights in writings, designs, software, mask
works or other works, whether registered or unregistered, and pending
applications to register the same, (v) technical, scientific, and other
know-how, trade secrets, methods, processes, practices, formulas and
techniques, computer software programs and software systems, including
all databases, compilations, tool sets, compilers, higher level or
"proprietary" languages, related documentation and materials, whether
in interpretive code, source code, object code or human readable form;
(vi) rights of publicity and privacy, "name and likeness" rights and
other similar rights, (vii) books and records kept in the ordinary
course of business describing or used in connection with any of the
foregoing; and (viii) claims or causes of action arising out of or
related to past, present or future infringement or misappropriation of
any of the foregoing. Without limiting the foregoing, the Intellectual
Property shall include the trademark registrations, trademark
applications, and right to register the domain names as set forth in
SECTION 3.1(s) of the Company Disclosure Schedules.
(t) Major Suppliers.
(i) SECTION 3.1(t) of the Company Disclosure
Schedule lists each of the Company's vendors or suppliers, the dollar
value of purchases from each of which constituted greater than 10% of
the Company's revenue for the year ended December 31, 2003 (each, a
"Major Supplier"), and the dollar amount of business done with each
Major Supplier in such period. The Company has furnished Acquiror and
Merger Sub with complete and accurate copies of all current written
agreements or written summaries of unwritten agreements with such Major
Suppliers. Except as set forth in SECTION 3.1(t) of the Company
Disclosure Schedules, (i) the Company is not engaged in a material
dispute with any Major Supplier, (ii) there has been no material change
in the business relationship of the Company and any Major Supplier
since December 31, 2003, and (iii) no Major Supplier has indicated in
writing or otherwise any material modification or change in the
business relationship with the Company.
(ii) Since January 1, 2002: (a) no supplier of
the Company has canceled or otherwise terminated its relationship with
the Company, except for such cancellations and terminations that,
individually or in the aggregate, have not had, or are not reasonably
expected to have, a Material Adverse Effect; (b) to the Knowledge of
the Company, no
18
supplier of the Company has provided written notice to the Company of
its intent either to terminate its relationship with the Company or to
cancel any Material Contract with the Company , except for such
terminations and cancellations that would not, individually or in the
aggregate, have, or be reasonably likely to have, a Material Adverse
Effect; (c) to the Knowledge of the Company, none of the suppliers of
the Company is unable to continue to supply the products or services
supplied to the Company by such supplier, except for such inabilities
that, individually or in the aggregate, have not had, or be reasonably
likely to have, a Material Adverse Effect; and (d) the Company has no
direct or indirect ownership interest in any supplier of the Company.
(u) Material Contracts. SECTION 3.1(u) of the Company's
Disclosure Schedule contains a true and complete list of the Material Contracts
of the Company. There have been delivered to or made available to Acquiror true
and complete copies of all of the Material Contracts and any other contracts or
agreements set forth in any section of the Company's Disclosure Schedule. Except
as set forth in Section 3.1(u) of the Company's Disclosure Schedule, all
Material Contracts to which the Company is a party are, to the Company's
Knowledge, in full force and effect, the Company has performed its obligations
thereunder to date and, shall continue to do so through the Closing Date and, to
the Knowledge of the Company, each other party thereto has performed its
obligations thereunder to date.
(v) Certain Business Practices. To the Knowledge of the
Company, within the past five years, none of the Company, or any directors,
officers, agents or employees of the Company has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
(w) Voting Requirements. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock at the
Company Shareholders Meeting to adopt this Agreement (the "Company Shareholder
Approval") is the only vote of the holders of any class or series of the
Company's capital stock necessary to adopt and approve this Agreement and the
Merger and the transactions contemplated hereby.
(x) Board Recommendation. As of the date hereof, the
Board of Directors of the Company has (i) full knowledge of the terms of the
Voting Agreement and (ii) recommended that the shareholders of the Company vote
for adoption of this Agreement and the consummation of the transactions
contemplated hereby.
(y) Monthly Revenue-One Month. The Company's Monthly
Recurring Revenue for the month of January 2004, was not less than $8,400,000.
(z) Net Book Value of Inventory. The net book value of
the Company's inventory, calculated in accordance with the Company's historical
practices, on an unaudited basis, as at December 31, 2003, was not less than
$40,500,000.
19
(aa) Property. A true and complete copy of all real estate
leases have been delivered to the Acquiror. With respect to the Headquarters
Lease and each real estate lease of the Company's stores (the "Store Leases"
and, together with the Headquarters Lease, the "Leases"), (i) each Lease has
been validly executed and delivered by the Company and is a binding agreement
therein and, to the Company's Knowledge, has been validly executed and delivered
by the other party or parties thereto and is binding thereon; (ii) the Company
is not, and, to the Company's Knowledge, no other party to the Lease is, in
material breach or material default, and, no event has occurred on the part of
the Company or, to the Knowledge of the Company, 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 Lease; (iii)
except as set forth on SECTION 3.1(aa) of the Company Disclosure Schedule, the
Lease will continue to be binding in accordance with its terms following the
Closing Date; (iv) the Company has not repudiated and, to the Company's
Knowledge, no other party to the Lease has repudiated any provision thereof; (v)
except as set forth on SECTION 3.1(aa) of the Company Disclosure Schedule, there
are no material disputes, oral agreements or delayed payment programs in effect
as to the Lease; and (vi) all facilities leased under each Lease are fit for the
operation of the store and have been reasonably maintained. All heating,
cooling, lighting, plumbing and electrical systems under each Lease are in good
repair and working order.
(bb) Vehicles. All vehicles and items of equipment
utilized by the Company, taken as a whole, are (i) mechanically sound and in a
condition to perform in the manner needed for the operation of the Company,
ordinary wear and tear excepted and (ii) in compliance with all applicable
statutes, ordinances and regulations, including without limitation, those
related to safety.
(cc) Insurance. The Company currently maintains fire and
casualty and general liability, workers compensation and automobile policies
with reputable insurance carriers. To the Company's Knowledge, such insurance
policies provide full and adequate coverage for all normal risks incident to the
Company.
(dd) Certifications. The Chief Executive Officer and the
Chief Financial Officer of the Company have signed, and the Company has
furnished to the SEC, all certifications required by Sections 302 and 906 of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002. Such certifications contain no qualifications or
exceptions to the matters certified therein and have not been modified or
withdrawn, and neither the Company nor any of its officers has received notice
from any Governmental Entity questioning or challenging the accuracy,
completeness, form or manner of filing or submission of such certifications.
(ee) Loans to Insiders. The Company has not, since July
30, 2002, extended or maintained credit, arranged for the extension of credit,
or renewed an extension of credit, in the form of a personal loan to or for any
director or executive officer (or equivalent thereof) of the Company. SECTION
3.1(EE) of the Company Disclosure Schedule identifies any loan or extension of
credit maintained by the Company to which the second sentence of Section
13(k)(1) of the Exchange Act applies.
(ff) Affiliate Transactions. SECTION 3.1(ff) of the
Company Disclosure Schedule contains a complete and correct list of all
agreements, contracts, transfers of assets or liabilities or
20
other commitments or transactions, whether or not entered into in the ordinary
course of business, to or by which the Company, on the one hand, and any
director or executive officer or any of their respective Affiliates (other than
the Company), on the other hand, are or have been a party or are otherwise bound
or affected, and that (i) are currently pending or in effect or (ii) involve
continuing liabilities and obligations (absolute, contingent or otherwise).
(gg) Disclosure. To the Company's Knowledge, this
Agreement and the Company Disclosure Schedule, taken as a whole, do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated herein or therein or necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
(hh) No Additional Representations or Warranties. Neither
the Company nor any other Person makes any other express or implied
representation on behalf of the Company other than as expressly set forth in
this ARTICLE 3.
3.2 Representations and Warranties of Acquiror and Merger Sub.
Acquiror and Merger Sub each hereby represents and warrants to the Company as
follows:
(a) No Prior Activities of Merger Sub. Merger Sub has not
conducted any business prior to the date hereof and has no, and prior to the
Effective Time will have no, assets, liabilities or obligations of any nature
other than those incident to its formation and required pursuant to this
Agreement and the Merger and the other transactions contemplated by this
Agreement.
(b) Organization, Standing and Corporate Power. Each of
Acquiror and Merger Sub is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the requisite corporate or other power, as the
case may be, and authority to carry on its business as now being conducted.
(c) Authority; No Conflict. Each of Acquiror and Merger
Sub has all requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Acquiror and Merger Sub and the consummation
by Acquiror and Merger Sub of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Acquiror and
Merger Sub. This Agreement has been duly executed and delivered by Acquiror and
Merger Sub and, assuming the due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of Acquiror and
Merger Sub, enforceable against Acquiror and Merger Sub in accordance with its
terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws of general applicability relating to or affecting
the rights of creditors and general principles of equity. Except as set forth on
SECTION 3.2 of the Acquiror's Disclosure Schedule, the execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
by this Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under, (i)
the certificate of incorporation, articles of organization or other charter
documents of Acquiror or the articles of incorporation or code of
21
regulations of Merger Sub, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to Acquiror or Merger Sub
or their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any Legal
Requirement applicable to Acquiror or Merger Sub or their respective properties
or assets, other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, defaults, rights, losses or Liens that individually or in
the aggregate would not reasonably be expected to materially impair or delay the
ability of Acquiror or Merger Sub to perform their obligations under this
Agreement. Except as set forth on SECTION 3.2 of Acquiror's Disclosure Schedule,
no consent, approval, order or authorization of, action by, or in respect of, or
registration, declaration or filing with, any Governmental Entity is required by
Acquiror or Merger Sub in connection with the execution and delivery of this
Agreement by Acquiror or Merger Sub or the consummation by Acquiror or Merger
Sub of the transactions contemplated hereby, except: (1) the filing of the
Certificate of Merger with the Secretary of State of the State of Ohio; (2) the
filing of a pre-merger notification and report form by Acquiror under the HSR
Act; and, (3) such consents, approvals, orders or authorizations the failure of
which to be made or obtained individually or in the aggregate would not
reasonably be expected to materially impair or delay the ability of Acquiror or
Merger Sub to perform its respective obligations under this Agreement.
(d) Proxy Materials. All of the information to be
furnished by Acquiror or Merger Sub for inclusion in the Definitive Proxy
Statement (or any amendment or supplement thereto) will not, on the date the
Definitive Agreement is first mailed to the Company's shareholders, and the
Definitive Proxy Statement, as then amended or supplemented, on the date of the
Company Shareholders Meeting referred to in SECTION 5.1(b) or on the Closing
Date, contain any statement which is false or misleading with respect to any
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, Acquiror and Merger Sub make no representation or warranty regarding
information furnished by the Company for inclusion in the Definitive Proxy
Statement (or any amendment or supplement thereto). The information supplied or
to be supplied in writing by or on behalf of Acquiror or Merger Sub for
inclusion in the Definitive Proxy Statement will comply as to form and substance
in all material respects with the requirements of the Exchange Act and the
applicable rules and regulations of the SEC thereunder.
(e) Brokers. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquiror or Merger Sub.
(f) Financial Capability. Based on existing cash reserves
or availability under existing credit facilities Acquiror and Merger Sub have
the funds necessary to finance the transaction contemplated hereby, pay related
fees and expenses, and provide for the ongoing working capital needs of the
Surviving Corporation.
22
ARTICLE 4
PRE-CLOSING COVENANTS
4.1 Conduct of Business. Except as (i) set forth in SECTION 4.1 of
the Company Disclosure Schedules, (ii) as otherwise expressly contemplated by
this Agreement or (iii) consented to, in writing, by Acquiror, such consent not
to be unreasonably withheld or delayed, during the period from the date of this
Agreement to the Effective Time, the Company shall carry on its business in the
ordinary course consistent with past practice and in compliance in all material
respects with all applicable Legal Requirements and, to the extent consistent
therewith, use all reasonable efforts to preserve intact its current business
organizations (other than internal organizational realignments), use all
reasonable efforts to keep available the services of its current officers and
other key employees and preserve their relationships with those Persons having
business dealings with the Company to the end that its goodwill and ongoing
business shall not be impaired at the Effective Time. Without limiting the
generality of the foregoing (but subject to the above exceptions), during the
period from the date of this Agreement to the Effective Time or earlier
termination of this Agreement, the Company shall not:
(a) (i) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock, (ii)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, except for issuances of the Company Common
Stock upon the exercise of the Company Stock Options under the Company Stock
Plans outstanding as of the Stock Reference Date, and only in accordance with
their present terms or (iii) except pursuant to agreements entered into with
respect to the Company Stock Plans that are in effect as of the close of
business on the Stock Reference Date, purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities, other
than the issuance of Company Common Stock upon the exercise of the Company Stock
Options outstanding on the date hereof and in accordance with their present
terms;
(c) amend its articles of incorporation or code of
regulations or merge or consolidate with any Person;
(d) acquire or agree to acquire, or dispose of or agree
to dispose of, any assets (other than inventory in the ordinary course of
business consistent with past practice), any business or any Person;
(e) sell, lease, license, mortgage or otherwise encumber
or subject to any Lien abandon or otherwise dispose of any of its properties or
assets other than inventory in the ordinary course of business consistent with
past practice;
23
(f) take any action that would cause the representations
and warranties set forth in this Agreement to no longer be true and correct;
(g) make any change in accounting methods or cash
management;
(h) (i) grant any increase in the compensation payable or
to become payable by the Company to any of its officers, directors or employees,
except in the case of employees (who are not officers or directors) increases in
the ordinary course of business; or (ii) (A) adopt any new, (B) grant any award
under, or (C) except as required by applicable Legal Requirements, amend or
otherwise increase, or accelerate the payment or vesting of the amounts payable
or to become payable under, any existing Benefit Plan; or (iii) enter into or
modify or amend any employment or severance agreement with or, except as
required by applicable Legal Requirements, grant any severance or termination
rights to any officer, director or employee of the Company; (iv) enter into any
collective bargaining agreement or (v) make any loan to, or enter into any
material transaction of any other nature with, any director, executive officer
or employee of the Company;
(i) enter into, modify, amend or terminate in any
material respect, any Material Contract or waive, release or assign any material
rights or claims thereunder; provided, however, that for purposes of this clause
(i), Material Contracts includes contracts and agreements for the purchase of
services or non-inventory goods that (A) require payments by the Company in
excess of $50,000, or (B) are not terminable by the Company on notice of thirty
(30) days or less without penalty, and further provided that Store Leases for a
maximum of ten (10) stores may be extended for a maximum of six (6) months each
and store Leases may also be amended in other respects, so long as such
amendments do not increase the term or the rental amount and are entered into in
the ordinary course of business.
(j) (i) incur or assume any Indebtedness other than
Indebtedness with respect to working capital in amounts consistent with past
practice; (ii) materially modify any Indebtedness or other liability; (iii)
assume, guaranty, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other Person,
other than immaterial amounts in the ordinary course of business, and other than
the endorsement of negotiable instruments for collection in the ordinary course
of business; (iv) make any loans, advances or capital contributions to, or
investments in, any other person (other than customary advances to employees in
accordance with past practice); or (v) enter into any material commitment or
transaction other than the purchase of inventory in the ordinary course of
business;
(k) make any material Tax election (unless required by
law) or settle or compromise any material income Tax liability;
(l) (i) waive the benefits of, or agree to modify in any
material manner, any confidentiality, standstill or similar agreement to which
the Company is a party, or (ii) pay, discharge or satisfy any proceeding, other
than (A) a payment, discharge or satisfaction for which liabilities are
reflected on or are reserved against in the Company's most recent consolidated
financial statements (or the notes thereto) included in the Company SEC
Documents, but not to exceed the reserve therefor, in each case in complete
satisfaction, or (B) a payment, discharge or satisfaction in a non-material
amount shall be less than $50,000 individually and $250,000 in the aggregate),
and, in
24
either case, with a complete release, of such matter with respect to all parties
to such matter, of actions, suits, proceedings or claims; provided, however,
that this prohibition shall not preclude the Company from amending any
confidentiality or other agreement that is deemed necessary by the Board of
Directors of the Company in the exercise of its fiduciary duties under SECTION
4.5 hereof.
(m) make any payment or incur any liability or obligation
(excluding amounts of less than $50,000 in the aggregate) for the purpose of
obtaining any consent from any third party to the transactions contemplated
hereby;
(n) fail to keep in full force and effect insurance
comparable in amount and scope to coverage maintained by it (or on behalf of
it), including altering a self-insurance arrangement to an insured arrangement,
and visa versa, on the date hereof;
(o) fail to inform Acquiror of the occurrence of any
event which to the Knowledge of the Company could reasonably be expected to
result in a breach of any representation of warranty contained in SECTION 3.1,
such that the condition set forth in Section 6.2(a) would not be satisfied;
(p) form any directly or indirectly wholly-owned
subsidiary entities or other Affiliate;
(q) enter into any partnerships, joint ventures or
similar agreements related to the profit or expense sharing with a third Person;
(r) introduce any new product line, other than product
lines currently available in Acquiror's stores, or engage in any lines of
business other than the rent-to-own business;
(s) modify, amend, or terminate the Company's existing
vehicle leases or enter into any new vehicle leases; provided that this shall
not preclude the entry of any new vehicle lease for a store delivery vehicle
which replaces an existing vehicle lease, nor the extension, on a month-to-month
basis, of any store vehicle or other vehicle lease; or
(t) authorize, or commit or agree to take, any of the
foregoing actions.
4.2 Other Actions. Except as required by law, the Company and
Acquiror shall not, and neither shall permit any of their respective Affiliates
to, voluntarily take any action that would reasonably be expected to result in
any of the conditions to the Merger set forth in ARTICLE 6 (Conditions
Precedent) not being satisfied.
4.3 Advice of Changes. The Company and Acquiror shall promptly
advise the other party orally and in writing to the extent it has Knowledge of
any change or event having, or which, insofar as can reasonably be foreseen,
would reasonably be expected to have a Material Adverse Effect on such party or
on the truth of their respective representations and warranties or the ability
of the conditions set forth in ARTICLE 6 to be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement.
4.4 [Intentionally left blank].
25
4.5 No Solicitation By The Company.
(a) The Company shall not, nor shall it authorize or
permit any of its directors, officers or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
to, directly or indirectly, through another Person, (i) solicit, initiate or
encourage (including by way of furnishing any information or assistance), or
take any other action to facilitate or cause any inquiries or the making of any
proposal from any Person which constitutes any Company Takeover Proposal or (ii)
participate in any discussions or negotiations regarding any Company Takeover
Proposal; provided, however, that if, at any time, the Board of Directors of the
Company determines in good faith, after consultation with such legal, financial
and other advisors as it deems appropriate, that it is necessary to do so in
order to act in a manner consistent with its fiduciary duties under the Ohio
Statutes, including, without limitation, Section 1701.59, the Company may, prior
to the date of the Company Shareholders Meeting and only in response to a
Company Takeover Proposal that was not solicited by it or that did not otherwise
result from a breach of the foregoing restrictions under this SECTION 4.5(A),
(x) furnish non-public information with respect to the Company to any Person
making a Company Takeover Proposal pursuant to a confidentiality agreement and
(y) participate in discussions or negotiations regarding such Company Takeover
Proposal.
(b) In addition to the obligations of the Company set
forth in paragraph (a) of this SECTION 4.5, the Company shall immediately advise
Acquiror orally and in writing of any request for information or of any Company
Takeover Proposal and the material terms and conditions of such request or
Company Takeover Proposal, including the name of any Person making a Company
Takeover Proposal. The Company will keep Acquiror reasonably informed of the
status and details (including amendments and proposed amendments) of any such
request or Company Takeover Proposal. The Company may not accept a Company
Takeover Proposal from any Person, nor may it terminate this Agreement, unless
it has provided Acquiror (i) at least four calendar days notice of the exact
terms of the Company Takeover Proposal, including a copy of the proposed
agreement, and (ii) at least two calendar days notice of any and each amendment
to such Company Takeover proposal and proposed agreement.
(c) Except as set forth in this SECTION 4.5 or 7.1(E)
hereof, neither the Company's Board of Directors nor any committee thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in any manner adverse
to Acquiror, the approval or recommendation by the Company's Board of Directors
or any committee thereof of this Agreement and the transactions contemplated
hereby, (ii) approve or recommend, or propose to approve or recommend, any
competing transaction, or (iii) enter into any agreement, commitment,
understanding or other arrangement with respect to any Company Takeover
Proposal.
(d) Nothing contained in this SECTION 4.5 shall prohibit
the Company from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's shareholders if, in the good faith judgment of
the Board of Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable Legal Requirements.
26
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Preparation of the Proxy Statement; Shareholders Meeting.
(a) Proxy Statement. In connection with the Company
Shareholders Meeting contemplated by SECTION 5.1(b) below, within thirty (30)
days following the date hereof, the Company will prepare, pursuant to, and in
accordance with, Regulation 14A of the Exchange Act and file (after
consultations with Acquiror) a preliminary proxy statement relating to the
transactions contemplated by this Agreement (the "Preliminary Proxy Statement")
and will use its commercially reasonable efforts to respond to the comments of
the SEC, if any, thereon, and to cause a final proxy statement (such proxy
statement the "Definitive Proxy Statement") to be mailed to the Company's
shareholders, in each case as soon as reasonably practicable after providing
Acquiror with reasonable opportunity to comment thereon. Each party to this
Agreement will notify the other parties promptly of the receipt of the comments
of the SEC, if any, and of any request by the SEC for amendments or supplements
to the Preliminary Proxy Statement or the Definitive Proxy Statement or for
additional information, and will supply the others with copies of all
correspondence between such party or its representatives, on the one hand, and
the SEC or members of its staff, on the other hand, with respect to the
Preliminary Proxy Statement, the Definitive Proxy Statement or the Merger. If at
any time prior to the Company Shareholders Meeting, (i) any event should occur
relating to the Company which should be set forth in an amendment of, or a
supplement to, the Definitive Proxy Statement, or (ii) any event should occur
relating to Acquiror or Merger Sub or any of their respective Affiliates, in
either case that should be set forth in an amendment of, or a supplement to, the
Definitive Proxy Statement, then the Company or Acquiror (as applicable), will,
upon learning of such event, promptly inform the other of such event and the
Company shall prepare, file and, if required, mail such amendment or supplement
to the Company's shareholders; provided that, prior to such filing or mailing
the Company shall consult with Acquiror with respect to such amendment or
supplement and shall afford Acquiror reasonable opportunity to comment thereon.
Acquiror will furnish to the Company the information relating to Acquiror and
Merger Sub, their respective Affiliates, which is required to be set forth in
the Preliminary Proxy Statement or the Definitive Proxy Statement under the
Exchange Act and the rules and regulations of the SEC thereunder.
(b) The Company will take all action necessary in
accordance with applicable law and its governing documents to duly call, give
notice of, and, after SEC clearance of the Definitive Proxy Statement, convene a
meeting of its shareholders to consider and vote upon the adoption of this
Agreement (the "Company Shareholders Meeting"). The Board of Directors of the
Company shall recommend such adoption and approval, and subject to fiduciary
obligations under applicable law, shall not withdraw or modify such
recommendation other than in compliance with SECTION 4.5(a) and SECTION 7.1(e),
and shall, subject to SECTION 5.3 hereof, take all lawful action necessary to
obtain such shareholder approval.
5.2 Access To Information; Confidentiality.
(a) The parties hereby acknowledge the Confidentiality
Agreement dated January 8, 2004 between Acquiror and the Company (the
"Confidentiality Agreement") expires on execution of this Agreement. Each of the
Company and Acquiror will, and will cause their
27
respective officers, directors, employees, agents and representatives to (i)
hold in confidence, unless compelled to disclose by judicial or administrative
process or by other Legal Requirements, all "Confidential Information" (as such
term was defined in the Confidentiality Agreement) 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 non-public information so
obtained from any other party hereto and any copies made of such documents and
any summaries, analyses or compilations made therefrom.
(b) The Company shall, and shall cause its Affiliates,
together with its agents and representatives, to, afford to Acquiror and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of Acquiror, reasonable access during normal business hours
during the period prior to the Effective Time to make such inspections as
Acquiror may reasonably require of all of its properties, books, contracts,
commitments, personnel and records and, during such period, the Company shall,
and shall cause its Affiliates, together with its agents and representatives,
to, furnish promptly to Acquiror (i) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and (ii) all
other information concerning the Company's business, properties and personnel as
Acquiror may reasonably request. Acquiror will hold, and will cause its
officers, employees, accountants, counsel, financial advisors and other
representatives and Affiliates, and agents and representatives, to hold, any
non-public information in accordance with the terms of SECTION 5.2(a).
(c) Between the date hereof and the Effective Time, the
Company shall furnish to the Acquiror and Merger Sub (i) within five (5)
Business Days after the delivery thereof to management, such monthly financial
statements and data (financial, operational, compliance or otherwise) as are
regularly prepared for distribution to Company management and (ii) at the
earliest time they are available, such quarterly and annual financial statements
as are prepared for the Company's SEC filings, which (in the case of this clause
(ii)), shall be in accordance with the books and records of the Company.
5.3 Commercially Reasonable Efforts; Cooperation.
(a) Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (i) obtaining of all necessary actions
or non-actions, waivers, consents and approvals from Governmental Entities and
the making of all necessary registrations and filings and the taking of all
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) obtaining of all
necessary consents, approvals or waivers from third parties, (iii) defending any
lawsuits or other legal proceedings, whether judicial or administrative,
28
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and (iv)
executing and delivering of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement. Nothing set forth in this SECTION 5.3(a) will limit or affect actions
permitted to be taken pursuant to SECTION 4.2.
(b) Each of Acquiror and the Company shall (i) make the
filings required of such party under the HSR Act with respect to the Merger and
the other transactions contemplated by this Agreement within ten Business Days
after the date of this Agreement; (ii) comply at the earliest practicable date
with any request under the HSR Act for additional information, documents or
other materials received by such party from the Federal Trade Commission or the
Department of Justice or any other Governmental Entity in respect of such
filings or the Merger and the other transactions contemplated by this Agreement,
(iii) cooperate with the other party in connection with making any filing under
the HSR Act and in connection with any filings, conferences or other submissions
related to resolving any investigation or other inquiry by any such Governmental
Entity under the HSR Act with respect to the Merger and the other transactions
contemplated by this Agreement; and (iv) keep the other party apprised of the
status of any inquiries made by a Governmental Entity. Any and all fees required
in connection with the filing of the notices required under the HSR Act shall be
borne in equal portions by the Company and Acquiror.
(c) Acquiror and the Company shall (i) each use
commercially reasonable efforts to avoid the entry of, or to have vacated or
terminate, any decree, order, or judgment that would restrain, prevent or delay
the Closing, on or before June 30, 2004, including without limitation defending
through litigation on the merits and claim asserted in any court by any party;
and (ii) each take any and all steps necessary to avoid or eliminate each and
every impediment under any antitrust, competition or trade regulation law that
may be asserted by any Governmental Entity with respect to the Merger so as to
enable the Closing to occur as soon as reasonably possible (and in any event no
later than June 30, 2004, including without limitation proposing, negotiating,
committing to and effecting, by consent decree, hold separate order, or
otherwise, the sale, divestiture or disposition of such assets or businesses of
Acquiror or the Company (or any of their respective subsidiaries) or otherwise
take or commit to take any actions that limits its freedom of action with
respect to, or its ability to retain, any of the businesses or assets of the
Company, Acquiror or their respective subsidiaries, as may be required in order
to avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order, or other order in any suit or proceeding, which
would otherwise have the effect of delaying the Closing; provided, however, that
nothing herein shall require Acquiror to agree to the sale transfer, divestiture
or other disposition of 16 or more stores of the Company, the Acquiror or any of
its subsidiaries.
5.4 Director, Officer and Employee Indemnification.
(a) Acquiror shall, and shall cause the Surviving
Corporation to, and the Surviving Corporation shall, indemnify and hold
harmless, to the fullest extent permitted under applicable law, the individuals
who on or prior to the Effective Time were officers, directors or employees of
the Company (collectively, the "Indemnitees") with respect to all acts or
omissions by them in their capacities as such or taken at the request of the
Company at any time prior to the
29
Effective Time. With respect to all acts or omissions by them in their
capacities as such or taken at the request of the Company at any time prior to
the Effective Time, Acquiror agrees that, and Acquiror agrees to cause the
Surviving Corporation to agree that, all rights of the Indemnitees to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time as provided in the articles of incorporation
or code of regulations (or comparable organizational and governing documents) of
the Company as now in effect and any indemnification agreements or arrangements
of the Company shall survive the Merger and shall continue in full force and
effect in accordance with their terms. Such rights shall not be amended, or
otherwise modified in any manner that would adversely affect the rights of the
Indemnitees, unless such modification is required by law. In addition, the
Surviving Corporation shall pay any expenses of any Indemnitee under this
SECTION 5.4 as incurred to the fullest extent permitted under applicable law,
provided that the Person to whom expenses are advanced provides an undertaking
to repay such advances to the extent required by applicable law.
(b) From and after the Effective Time, but solely as it
may relate to events occurring before the Effective Time, Acquiror shall cause
the articles of incorporation and code of regulations of the Surviving
Corporation to contain provisions no less favorable with respect to limitation
of certain liabilities of directors, officers and employees and indemnification
than are set forth as of the date of this Agreement in the articles of
incorporation and code of regulations of the Company.
(c) In the event any action is asserted or made, any
determination required to be made with respect to whether an Indemnitee's
conduct complies with the standards set forth under the Ohio Statutes, the
applicable organizational documents of the Company or any indemnification
agreements or arrangements of the Company, as the case may be, shall be made by
independent legal counsel selected by such Indemnitee and reasonably acceptable
to the Acquiror; provided, however, that nothing in this SECTION 5.4 shall
impair any rights of any current or former director or officer of the Company,
including pursuant to the respective articles of incorporation or bylaws of
Surviving Corporation or the Company, or their respective subsidiaries, under
Ohio law or otherwise.
(d) Each of Acquiror, the Surviving Corporation and the
Indemnitee shall cooperate, and cause their respective Affiliates to cooperate,
in the defense of any action and shall provide access to properties and
individuals as reasonably requested and furnish or cause to be furnished
records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials or appeals, as may be reasonably requested in
connection therewith.
(e) For the six-year period commencing immediately after
the Effective Time, Surviving Corporation shall either (i) maintain in effect
the Company's current directors' and officers' liability insurance policies
providing coverage as respects acts or omissions occurring prior to the
Effective Time with respect to those persons who are currently covered by the
Company's directors' and officers' liability insurance policy on terms and at
limits no less favorable to the Company's directors and officers currently
covered by policies in effect on the date hereof or (ii) a directors' and
officers' insurance policy, which may include Acquiror's own directors' and
officers' insurance policy, that (w) benefits those persons who are currently
covered by the Company's directors' and officers' liability insurance policy,
(x) is from a financially sound and nationally reputable carrier, (y) is at
least as favorable to the Persons currently covered by the Company's
30
directors' and officers' liability insurance in effect as of the date hereof and
(z) will at a minimum have the same terms and limits as the Company's directors'
and officers' liability insurance policies in effect as of the date hereof;
provided, however, that, if the Company's current directors' and officers'
liability insurance expires, is terminated or is canceled during such six-year
period, Acquiror shall, or shall cause the Surviving Corporation to, obtain
directors' and officers' liability insurance covering such acts or omissions
with respect to each such Person on terms and at limits no less favorable to the
Company's directors and officers currently covered by policies in effect
immediately prior to the date of such expiration, termination or cancellation.
The Company and Acquiror shall cooperate to make any arrangements necessary to
obtain or continue such directors' and officers' liability insurance for such
six-year period, including the prepayment any fees or premiums to the applicable
insurance providers of such amounts as necessary to provide the coverage
contemplated by this SECTION 5.4; provided, however, that Surviving Corporation
will not be required to expend in any year an amount in excess of 150% of the
annual aggregate premiums currently paid by the Company for such insurance; and
provided, further, that if the annual premiums of such insurance coverage exceed
such amount, the Surviving Corporation will be obligated to obtain a policy with
the best coverage available, in the reasonable judgment of its Board of
Directors, for a cost not exceeding such amount. In lieu of providing the
foregoing annual insurance policies for the six (6) year period, the Surviving
Corporation or Acquiror may obtain a so-called "tail" policy providing such
coverage and being effective for the full six (6) year period referred to above;
provided, however, the Surviving Corporation or Acquiror shall not be required
to pay an aggregate premium therefor in excess of an amount equal to six (6)
times 150% of the annual aggregate premiums currently paid by the Company for
such insurance; and if the Surviving Corporation or Acquiror is unable to obtain
the "tail" insurance policy for such amount, it shall obtain as much comparable
insurance as possible for an aggregate premium equal to such maximum amount.
(f) The provisions of this SECTION 5.4 are intended to be
for the benefit of, and shall be enforceable by, each Indemnitee, such
Indemnitee's heirs and representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such Person may have by contract or otherwise.
(g) In the event that the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges into any other Person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume all of the obligations thereof set forth in this
SECTION 5.4.
(h) The obligations of Acquiror and the Surviving
Corporation under this SECTION 5.4 shall not be terminated or modified in such a
manner as to adversely affect any Indemnitee to whom this SECTION 5.4 applies
without the consent of the affected Indemnitee (it being expressly agreed that
the Indemnitees to whom this SECTION 5.4 applies shall be third party
beneficiaries of this SECTION 5.4), such consent not to be unreasonably
withheld.
(i) Notwithstanding the foregoing, no director, officer,
employee or other Person entitled to indemnity hereunder shall be indemnified
for any loss, damage or liability resulting to the extent indemnity is
unavailable under Section 1701.13 of the Ohio Statutes.
31
5.5 Public Announcements. Acquiror and the Company will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as either party may
determine is required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
5.6 Employees.
(a) As of the Effective Time the Surviving Corporation
shall offer employment at will to all employees of the Company that are actively
employed by the Company immediately prior to the Effective Time; provided,
however, that nothing in this SECTION 5.6(a) shall apply to those individuals
listed in SECTION 5.6(a) of the Company Disclosure Schedule. Except as otherwise
set forth in SECTION 5.6(a) of the Company Disclosure Schedule, the Surviving
Corporation agrees to honor the terms of all existing employment contracts
previously entered into by the Company. Notwithstanding any other provision of
this SECTION 5.6, nothing herein shall require the continuation of any
employment or any terms of employment after the Effective Time.
(b) Except as set forth in SECTION 5.6(b) of the Acquiror
Disclosure Schedule, for purposes of eligibility to participate, employees of
the Company as of the Effective Time shall receive credit under any employee
benefit plan, program or arrangement established or maintained by Acquiror or
the Surviving Corporation and made available to such employees for service
accrued prior to the Effective Time with the Company.
5.7 Delisting. Each of the parties hereto shall cooperate with
each other in taking, or causing to be taken, all actions necessary to delist
all of the Company Common Stock from the Nasdaq National Market and to terminate
registration under the Exchange Act; provided, that such delisting and
termination shall not be effective until after the Effective Time.
5.8 Noncompete Agreements. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Executive Officers") shall enter into
Noncompetition Agreements, effective as of the Effective Date, in the form
attached to SCHEDULE 5.8 of the Acquiror Disclosure Schedule (the
"Noncompetition Agreements").
5.9 Amendment to Headquarters Lease. Within fifteen (15) days of
the date hereof, the Company shall enter into an amendment to the Headquarters
Lease, in a form reasonably acceptable to Acquiror, providing that such lease
will terminate ninety (90) days after the Effective Time with no further
obligations imposed on the Surviving Corporation upon Acquiror's payment on the
Effective Date of a termination fee (which includes three (3) months rental) of
One Hundred Thousand Dollars ($100,000). Such amendment shall provide that the
Company agrees to abandon to lessor all furniture, fixtures and equipment on the
property, except for such assets relating to and necessary for the operation of
the business of the Company.
32
5.10 Litigation. The Company will use its reasonable efforts to
promptly settle, prior to Closing, the litigation set forth on SCHEDULE 5.10 of
the Company Disclosure Schedule.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. The Company Shareholder
Approval shall have been obtained.
(b) Governmental and Regulatory Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental Entity
required of the Company, Acquiror, or Merger Sub to consummate the Merger and
the other transactions contemplated hereby (other than consents, approvals, and
actions of, filings with and notices to any Government Entity required under the
HSR Act and which are specified in SECTION 6.1(d)) shall have been obtained.
(c) No Injunctions or Restraints. No judgment, order,
decree, statute, law, ordinance, rule or regulation, entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or prohibition affecting the
Closing or seeking to prohibit the transactions contemplated under this
Agreement (collectively, "Restraints") shall be in effect; provided, however,
that each of the parties shall have used its commercially reasonable efforts to
prevent the entry of any such Restraints and to appeal as promptly as possible
any such Restraints that may be entered.
(d) HSR Act. Any applicable waiting period (and any
extensions thereto), filings or approvals under the HSR Act applicable to the
transaction contemplated by this Agreement shall have expired, been terminated,
been made, or been obtained.
6.2 Conditions to Obligations of Acquiror. The obligation of
Acquiror to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Company set forth herein shall be true and
correct, in all materials respects, both when made and at and as of the Closing
Date, as if made at and as of such time (except to the extent expressly made as
of an earlier date, in which case as of such date); provided, however, that any
representation or warranty contained in SECTION 3.1 which contains an express
materiality exception shall be accurate in all respects as written in ARTICLE 3.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date.
(c) No Material Adverse Change. At any time after the
date of this Agreement there shall not have occurred any Material Adverse
Change.
33
(d) Monthly Revenue-One Month. The Company's Monthly
Recurring Revenue for the first full month immediately preceding the Closing
Date, calculated in a manner consistent with the accounting principles utilized
by the Company (the "Closing Month Revenue"), shall be no less than $7,600,000
("Closing Month Revenue Minimum"); provided, however, that in the event that the
first full month immediately preceding the Closing Date is February 2004, the
Closing Month Revenue Minimum shall be $7,300,000.
(e) Net Book Value of Inventory. The net book value of
the Company's inventory, on the last day of the month preceding the Closing
Date, prepared in a manner consistent with the accounting principles utilized by
the Company (the "Closing Inventory"), shall be no less than $36,000,000 (net of
30-days past due).
(f) Noncompetition Agreements. The Executive Officers
shall have entered into the Noncompetition Agreements with Acquiror.
(g) Opinion of Counsel. The Acquiror shall have received
an opinion dated the Closing Date, from ▇▇▇▇ ▇▇▇▇▇▇▇▇, counsel to the Company,
in substantially the form and substance as set forth on Exhibit "C" hereto.
(h) Dissenting Shares. The ten (10) day notice period for
dissenter's demands with respect to the Merger provided by Section 1701.85 of
the Ohio Statutes shall have expired, and the number of Dissenting Shares shall
not exceed fifteen percent (15%) of the number of outstanding shares of Company
Common Stock as of the Effective Time.
(i) Voting Agreement. The Voting Agreement shall remain
in full force and effect and the Major Shareholders shall have complied in all
respects with the Voting Agreement and shall have performed all of their
respective obligations thereunder.
(j) Outstanding Shares. The total number of shares of
Company Common Stock outstanding and subject to issuance upon exercise of all
Company Stock Options shall not exceed 6,525,735.
(k) Consents. The Company shall have received all of the
consents and approvals set forth in SECTION 3.1(i) of the Company Disclosure
Schedule, except as otherwise provided on SECTION 6.3(k) of the Company
Disclosure Schedule.
(l) Officers' Certificate. Acquiror shall have received
the certificate of the Chief Executive Officer and Chief Financial Officer of
the compliance by the Company with the conditions of SECTIONS 6.2(a), (b),(c),
(d) and (e).
6.3 Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Acquiror set forth herein shall be true and
correct, in all material respects, both when made and at and as of the Closing
Date, as if made at and as of such time (except to the extent expressly made as
of an earlier date, in which case as of such date), provided, however, that any
representation or
34
warranty contained in SECTION 3.2 which contains an express materiality
exception shall be accurate in all respects as written in ARTICLE 3.
(b) Performance of Obligations of Acquiror. Acquiror
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
6.4 Frustration of Closing Conditions. Neither Acquiror nor the
Company may rely on the failure of any condition set forth in SECTION 6.1
(Conditions to Each Party's Obligation to Effect the Merger), SECTION 6.2
(Conditions to Obligations of the Acquiror),or SECTION 6.3 (Conditions to
Obligations of the Company), as the case may be, to be satisfied if such failure
was caused by such party's failure to use commercially reasonable efforts to
consummate the Merger and the other transactions contemplated by this Agreement,
as required by and subject to SECTION 5.3 (Commercially Reasonable Efforts;
Cooperation).
6.5 Postponement of Closing. In the event all of the conditions
set forth in SECTION 6.1 and SECTIONS 6.2(c), (h), (i), (j) and (k) shall have
been satisfied during the first four (4) days of a calendar month, the parties
agree that the Company can postpone the Closing Date until the next Business
Day.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Shareholder
Approval:
(a) By mutual written consent of Acquiror and the
Company;
(b) By either Acquiror or the Company:
(i) if the Merger shall not have been
consummated by June 30, 2004; provided, however, that the right to
terminate this Agreement pursuant to this SECTION 7.1(b)(i) shall not
be available to any party whose failure to perform any of its
obligations under this Agreement is the basis for the failure of the
Merger to be consummated by such time; and further provided, that if
the condition set forth in SECTION 6.1(d) has not been satisfied on
June 30, 2004, and on such date, the conditions set forth in SECTIONS
6.1(a) and (c) and SECTIONS 6.2(c), (h), (i), (j) and (k) shall have
been satisfied, then the date shall be August 2, 2004.
(ii) if the Company Shareholder Approval shall
not have been obtained at a Company Shareholders Meeting duly convened
therefor or at any adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects
set forth in SECTION 6.1(c) shall be in effect and shall have become
final and nonappealable; provided, however, that the party seeking to
terminate this Agreement pursuant to this SECTION 7.1(b)(iii) shall
have used commercially reasonable efforts to prevent the entry of and
to remove such Restraint;
35
(c) By Acquiror, if the Company shall have breached or
failed to perform in any of its representations, warranties, covenants or other
agreements contained in this Agreement, such that the conditions set forth in
SECTION 6.2(a) or SECTION 6.2(b) would not be satisfied; provided, however, that
the Acquiror may not terminate under this section if such breach or failure (A)
is cured by the Company within thirty (30) days after written notice thereof or
(B) is capable of being cured by the Company and the Company continues to
exercise reasonable efforts to cure such breach.
(d) By the Company, if Acquiror shall have breached or
failed to perform in any of its representations, warranties, covenants or other
agreements contained in this Agreement, such that the conditions set forth in
SECTION 6.3(a) or SECTION 6.3(b) would not be satisfied; provided, however, that
the Company may not terminate under this section if such breach or failure is
(A) cured by the Acquiror within thirty (30) days after written notice thereof
or (B) is capable of being cured by Acquiror and the Acquiror continues to
exercise reasonable efforts to cure such breach;
(e) By the Company upon the Company's execution of a
binding agreement with a third party with respect to a Company Takeover
Proposal;
(f) By Acquiror, if the Company or the Board of Directors
of the Company shall have (i) withdrawn or modified, in a manner adverse to
Acquiror or Merger Sub,(x) the approval by the Board of Directors of the Company
of this Agreement or the transactions contemplated hereby or (y) the
recommendation of the Company's board of directors that the shareholders approve
this Agreement and the Merger (an "Adverse Recommendation") (it being understood
and agreed that any communication by the Company or its board of directors to
the shareholders that indicates that the board of directors had determined not
to withdraw or modify such recommendation, in whole or in part, because such
action would or might give rise to a right on the part of Acquiror to terminate
this Agreement and/or obligate the Company to comply with the provisions of
SECTION 7.3(a) of this Agreement shall nevertheless be deemed to be an Adverse
Recommendation), or (ii) approved or entered into a definitive agreement with
respect to a Company Takeover Proposal with a third party;
(g) By Acquiror in the event there is a Material Adverse
Change;
(h) By Acquiror in the event that Governmental Entities
require the divestiture of 16 or more stores of the Company, Acquiror and its
subsidiaries; or
(i) By Acquiror in the event the condition in SECTION
6.2(i) is not satisfied.
7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Acquiror as provided in SECTION 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Acquiror or the Company, other than the provisions
of SECTION 5.2(a), this SECTION 7.2, SECTION 7.3 and ARTICLE 8, which provisions
survive such termination; provided, however, that nothing herein shall relieve
any party from any liability for any willful and material breach by such party
of any of its representations, warranties, covenants or agreements set forth in
this Agreement.
36
7.3 Fees and Expenses.
(a) Expenses. If this Agreement is terminated (i) in
connection with any of the circumstances described in SECTION 7.3(b), or (ii) in
connection with any of the circumstances described in SECTION 7.1(c), the
Company shall reimburse Acquiror and Merger Sub for all reasonable out-of-pocket
expenses and fees payable by Acquiror or Merger Sub in connection with the
proposed Merger; provided, however, that the Company shall not be obligated to
reimburse Acquiror and Merger Sub for expenses in excess of Five Hundred
Thousand Dollars ($500,000) in the aggregate. Any such required reimbursement
shall take place on the later of the termination of this Agreement or submission
of evidence of such incurred expenses to the Company.
(b) Termination Fee. If this Agreement is terminated
pursuant to SECTION 7.1(e) or SECTION 7.1(f), or if this Agreement is terminated
pursuant to SECTION 7.1(b)(ii) or SECTION 7.1(i), then the Company shall pay
Buyer a fee of Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000)
in cash, which amount shall be payable in same day funds (the "Termination Fee")
simultaneously with such termination of this Agreement.
(c) Other Expenses. Except as provided otherwise in
paragraph (a) above or SECTION 5.3(b), all costs and expenses incurred in
connection with this Agreement, and the transactions contemplated hereby shall
be paid by the party incurring such expenses, whether or not the Merger is
consummated.
ARTICLE 8
GENERAL PROVISIONS
8.1 Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This SECTION 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to the Company, to: Rainbow Rentals, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (330)
533-8658
Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇▇, A Legal
Professional Association
37
2600 Erieview Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Facsimile No.: (216)
623-4912
Attention: ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇, Esq.
And:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Esq.
(b) if to Acquiror or Merger Sub, to:
Rent-A-Center, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.:
▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ P.C.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (214)
745-5390
Attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq.
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 the actual receipt and overnight couriered notices shall be deemed
delivered one day after sending.
8.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
8.4 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein), (a) constitutes
the entire agreement, and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter of
this Agreement and (b) except for the provisions of SECTION 5.4 and SECTION 5.6,
are not intended to confer upon any Person other than the parties any rights or
remedies.
8.5 Governing Law. This Agreement and the agreements, instruments,
and documents contemplated hereby unless otherwise noted, shall be governed by,
and construed in accordance with, the laws of the State of Delaware , without
regard to principles of conflict of laws thereof.
8.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties; provided, however, that Acquiror and
Merger Sub may assign their respective rights and obligations hereunder to any
direct or indirect wholly-owned subsidiary of Acquiror. Any assignment in
violation of the preceding sentence shall be void. Subject to the preceding two
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
38
8.7 Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Delaware or any Delaware state court, in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of Delaware or a Delaware state court.
8.8 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.
8.9 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 shall 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 shall
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 so that the
transactions contemplated hereby are fulfilled to the extent possible.
8.10 Amendment. This Agreement may be amended by the parties upon
action taken by or on behalf of their respective boards of directors at any time
before or after the Company Shareholder Approval; provided, however, that after
any such Company Shareholder Approval, there shall not be made any amendment
affecting the Merger Consideration or that by law requires further approval by
the shareholders of the Company without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
8.11 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.
8.12 Failure or Indulgence Not Waiver; Remedies Cumulative. 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.
8.13 Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of another party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) subject to the
proviso of SECTION 8.11, waive compliance by any party with any of the
agreements or conditions contained in this
39
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.
8.14 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement required to be performed by the Company were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Acquiror shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction without the necessity of posting a bond, this being in
addition to any other remedy to which Acquiror is entitled at law or in equity.
[THIS SPACE LEFT BLANK INTENTIONALLY.]
40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Merger to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
RAINBOW RENTALS, INC.
By:______________________________________
Name:_________________________________
Title:________________________________
RENT-A-CENTER, INC.
By:______________________________________
Name:_________________________________
Title:________________________________
EAGLE ACQUISITION SUB, INC.
By:______________________________________
Name:_________________________________
Title:________________________________
41
APPENDIX A
INTERPRETATION
When a reference is made in this Agreement to an Article, Section or
Exhibit, such reference shall be to an Article or Section of, or an Exhibit to,
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or statute defined or referred to herein or
in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
DEFINITIONS
For purposes of this Agreement:
"Acquiror" has the meaning set forth in the Recitals.
"Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such first Person.
"Aggregate Merger Consideration" has the meaning set forth in Section
2.4(a).
"Agreement" has the meaning set forth in the Recitals.
"Benefit Plans" has the meaning set forth in Section 3.1(m)(i).
"Business Day" shall mean any day other than a day on which banks in
the States of Ohio, Texas, or New York are authorized or obligated to be closed.
"Certificates" has the meaning set forth in Section 2.3(b).
"Certificate of Merger" has the meaning set forth in Section 1.3.
"Closing" has the meaning set forth in Section 1.2.
"Closing Date" has the meaning set forth in Section 1.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the Recitals.
"Company Common Stock" has the meaning set forth in the Recitals.
"Company Disclosure Schedule" means the schedule referenced in Section
3.1.
"Company Permits" has the meaning set forth in Section 3.1(i).
"Company Preferred Stock" has the meaning set forth in Section 3.1(c).
"Company SEC Documents" has the meaning set forth in Section 3.1(f).
"Company Stock Options" has the meaning set forth in Section 3.1(c).
"Company Stock Plans" has the meaning set forth in Section 3.1(c).
"Company Shareholder Approval" has the meaning set forth in Section
3.1(u).
"Company Shareholders Meeting" has the meaning set forth in Section
5.1(b).
"Company Takeover Proposal" means any inquiry, proposal or offer from
any person relating to any (a) direct or indirect acquisition or purchase of a
business that constitutes 25% or more of the net revenues, net income or the
assets of the Company, taken as a whole, (b) direct or indirect acquisition or
purchase of 25% or more of any class of equity securities of the Company whose
business constitutes 25% or more of the net revenues, net income or assets of
the Company, taken as a whole, (c) tender offer or exchange offer that if
consummated would result in any person beneficially owning 25% or more of any
class of equity securities of the Company whose business constitutes 25% or more
of the net revenues, net income or assets of the Company, taken as a whole, or
(d) merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company whose business
constitutes 50% or more of the net revenues, net income or assets of the
Company, taken as a whole, other than the transactions contemplated by this
Agreement.
"Consent" shall mean any approval consent, ratification, permission,
waiver or authorization (including any License or Governmental authorization).
"Consultants" shall have the meaning set forth in Section 5.8.
"Consulting Agreements" shall have the meaning set forth in Section
5.8.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Definitive Proxy Statement" has the meaning set forth in Section
5.1(a).
ii
"Dissenting Shares" has the meaning set forth in Section 2.5.
"Effective Time" has the meaning set forth in Section 1.3.
"Eligible Option Holders" has the meaning set forth in Section 2.2.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business, whether or not
incorporated, that together with the Company would be deemed to be a "single
employer" within the meaning of Section 4001(b) of ERISA.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Agent" has the meaning set forth in Section 2.3(a).
"Exchange Fund" has the meaning set forth in Section 2.3(a).
"Fairness Opinion" shall mean the opinion referenced in Section 3.1(o).
"Financial Advisor" means NatCity Investments, Inc.
"Governmental Entity" has the meaning set forth in Section 3.1(e).
"HSR Act" has the meaning set forth in Section 3.1(e).
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person, (i) the
principal of and premium, if any, in respect of any indebtedness of such Person
for money borrowed, (ii) the principal, premium, if any, and interest of such
Person with respect to obligations evidenced by bonds, debentures, notes or,
except for accrued liabilities arising in the ordinary course of business, other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses (other than trade payables which
are not overdue or in default), (iii) all obligations of such Person in respect
of letters of credit or other similar instruments (including reimbursement
obligations with respect thereto) but only to the extent of drawings thereunder,
(iv) every obligation of such Person issued or assumed as the deferred purchase
price of property or services (excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not overdue or
in default), (v) every capital lease obligation (determined in accordance with
GAAP) of such Person, (vi) all Indebtedness of other Persons secured by a Lien
on any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of such Indebtedness shall be the
lesser of (A) the fair market value of such asset at such date of determination
and (B) the amount of such Indebtedness of such other Persons, (vii) every
obligation to pay rent or other payment amounts of such Person with respect to
any sale-leaseback transaction to which such Person is a party, payable through
the stated maturity of such sale-leaseback transaction, (viii) factoring
arrangements of such Person, whether or not such arrangements appear on the
balance sheet of such Person; and (ix) every obligation of the type referred to
in clauses (i) through (viii) of another Person
iii
the payment of which, in any case, such Person has guaranteed or is responsible
or liable, directly or indirectly, as obligor, guarantor or otherwise.
"Indemnitees" have the meaning set forth in Section 5.4(a).
"Intellectual Property" has the meaning set forth in Section 3.1(r).
"Knowledge" means the actual knowledge, after due inquiry, of the
Company's Chief Executive Officer, the President, the Chief Operating Officer,
and the Chief Financial Officer, and the actual knowledge of the Marketing
Director, Vice-President, Controller and Director of Human Resources as it
relates to their specific assigned areas.
"Legal Requirement" means any federal, state, local, municipal, or
other order, constitution, law, rule, ordinance, permit, judgment, principle of
common law, regulation, statute or treaty.
"Lien" means any pledge, claim, lien, tax, charge, encumbrance or
security interest of any kind or nature whatsoever.
"Material Adverse Change" means any Material Adverse Effect and,
specifically including:
(a) The commencement of any actions, suits,
investigations, complaints or proceedings, at law or in equity, in any court or
before any Governmental Entity, by a person or persons seeking class action
status and alleging violation of the provisions of the Rental Purchase
Agreements, rent-to-own statutes or any other consumer protection law; provided
that such action involves five (5) or more stores; and
(b) The commencement of any actions, suits,
investigations, complaints, or proceedings, at law or in equity, in any court or
before any Governmental Entity, by a person or persons seeking class action
status and 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 of 1970, as
amended, Family and Medical Leave Act of 1993, as amended, terms and conditions
of employment or the federal or state Legal Requirements regarding wages and
hours; provided, however, that the commencement of any such actions, suits,
investigations, complaints or proceedings shall not constitute a Material
Advance Change in the event the Company can demonstrate to the reasonable
satisfaction of the Acquiror that the potential size of the purported class does
not exceed twenty-five (25) persons.
"Material Adverse Effect" means any change, effect, event, occurrence
or state of facts that is, has had or will have a material and adverse effect to
the business, condition (financial or other), results of operations, or
properties of the Company taken as a whole, other than any change, effect, event
or occurrence (i) relating to the economy or securities markets of the United
States or any other region in general, or (ii) relating to its business,
financial condition or results of operations that has been disclosed in writing
to the other party prior to the date of this Agreement.
"Material Contract" shall mean (i) any contract within the meaning set
forth in Item 601(b)(10) of Regulation S-K of the SEC; (ii) any noncompetition
agreement or other agreement that limits or will limit the Company for engaging
in any line of business, (iii) any agreement, contract or
iv
commitment not in the ordinary course of business involving the excess of
$50,000; (iv) the scheduled severance payments and Stay Bonuses and Change of
Control Agreements; (v) any franchise agreement, (vi) any contract or agreement
relating to the acquisition or disposition of assets having a value in excess of
$100,000 other than the purchase or sale of inventory in the ordinary course of
business; (vii) any material licenses, registrations or memberships required by
a Government Entity, (viii) any shareholder, voting trust or similar contract or
agreement relating to the voting of shares of Company Common Stock, (iv) joint
venture agreements, partnership agreements and other similar contracts involving
a sharing of profits and expenses, (x) any material agreement or commitment
relating to the borrowing of money in excess of $100,000 or guaranty, including
security agreement therewith, (xi) the Leases, (xii) contracts and agreements
for the purchase of inventories, goods or other materials, by or for the
furnishing of services to the Company that (A) requires payments in excess of
$150,000 or (B) are not terminable by the Company on notice of ninety (90) days
or less without penalty, and (xiii) all employment agreements.
"Material Supplier" has the meaning set forth in Section 3.1(t).
"Merger" has the meaning set forth in the Recitals.
"Merger Consideration" has the meaning set forth in Section 2.1(b).
"Merger Sub" has the meaning set forth in the Recitals.
"Monthly Recurring Revenues" means all of the revenues in any month
from all Rental Purchase Agreements (including, without limitation, rental
income (including final month(s) rental or sale price), reinstatement fees and
in-home pick-up fees), but not including retail sales during the month, as shown
on the unaudited Company-generated monthly reports, prepared on a consistent
basis in accordance with past practices. Monthly Recurring Revenues does not
include revenue from merchandise sales or from the exercise of early purchase
options under Rental Purchase Agreements.
"Ohio Statutes" means the Ohio General Corporation Law.
"Option Shares Merger Consideration" has the meaning set forth in
Section 2.2.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
"Preliminary Proxy Statement" has the meaning set forth in Section
5.1(a).
"Proxy Statement" has the meaning set forth in Section 3.1(e).
"Purchase Price Reduction" has the meaning set forth in Section 2.3(a)
hereof.
"Rental Purchase Agreement" has the meaning set forth in Section
3.1(k).
"Restraints" has the meaning set forth in Section 6.1(c).
"SEC" means the United States Securities and Exchange Commission.
v
"Securities Act" means the Securities Act of 1933.
"Stock Reference Date" has the meaning set forth in Section 3.1(c).
"Subsidiary" of any Person means another Person of which sufficient
voting securities, other voting ownership, or voting partnership interests (or,
if there are no such voting interests, 50% or more of the equity interests) of
such Person to elect at least a majority of its Board of Directors or other
governing body are owned, directly or indirectly, by such first Person.
"Surviving Corporation" has the meaning set forth in Section 1.1.
"Taxes" means all (x) federal, state, local or foreign net and gross
income, alternative or add-on minimum, environmental, gross receipts, ad
valorem, value added, goods and services, capital stock, profits, license,
single business, employment, severance, stamp, unemployment, customs, property,
sales, excise, use, occupation, service, transfer, payroll, social security,
franchise, withholding and other taxes or similar governmental duties, charges,
fees, levies or other assessments including any interest, penalties or additions
with respect thereto, (y) liability for the payment of any amounts of the type
described in clause (x) as a result of being a member of an affiliated,
consolidated, combined or unitary group, and (z) liability for the payment of
any amounts as a result of being party to any tax sharing agreement or as a
result of any express or implied obligation to indemnify any other person with
respect to the payment of any amounts of the type described in clause (x) or
(y).
"Termination Fee" has the meaning set forth in Section 7.3(b).
"Voting Agreement" has the meaning set forth in the Recitals.
vi