<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
-----------------
Date of Report (Date of earliest event reported):
August 9, 1996
ALRENCO, INC.
(Exact name of registrant as specified in its charter)
Indiana 0-27490 35-1480655
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
1736 E. Main Street, New Albany, Indiana 47150
(Address of principal executive offices) (Zip Code)
(812) 949-3370
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
On August 9, 1996, pursuant to separate Stock Purchase Agreements of the
same date, Alrenco, Inc. in a transaction that was effective on August 1, 1996,
acquired all of the outstanding shares of common stock of Network Rental, Inc.,
a Georgia corporation ("Network Rental"), from Perry J. McNeal and the Vyrdilee
Brooks McNeal Scholarship Fund Charitable Remainder Trust. The following
financial statements of Network Rental are filed as a part of this report:
Report of Independent Certified Public Accountants
Balance Sheets - May 31, 1995 and 1996 and July 31, 1996
(unaudited)
Statements of Earnings - Years ended May 31, 1995 and 1996 and two
months ended July 31, 1995 and 1996 (unaudited)
Statements of Stockholders' Equity - Years ended May 31, 1995 and
1996
Statements of Cash Flows - Years ended May 31, 1995 and 1996 and
two months ended July 31, 1995 and 1996 (unaudited)
Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma financial statements relating to the
acquisition of Network Rental are filed as a part of this report:
Pro Forma Condensed Balance Sheet as of June 30, 1996
Pro Forma Condensed Statement of Earnings for the year ended
December 31, 1995
Pro Forma Condensed Statement of Earnings for the six months
ended June 30, 1996
Notes to Pro Forma Condensed Financial Statements
-2-
<PAGE>
(c) EXHIBITS.
The following exhibits are filed as a part of this report:
Exhibit
Number Description of Exhibit
- ------ ----------------------
2.1 -- Stock Purchase Agreement, dated August 9, 1996, by and
between Perry J. McNeal and Alrenco, Inc.
2.2 -- Stock Purchase Agreement, dated August 9, 1996, by and
between Vyrdilee Brooks McNeal Scholarship Fund Charitable
Remainder Trust, Network Rental, Inc. and Alrenco, Inc.
2.3 -- Noncompetition Agreement, dated August 9, 1996, by and
between Perry J. McNeal and Alrenco, Inc.
-3-
<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 28, 1996
ALRENCO, INC.
By: /s/ Theodore H. Wilson
-------------------------------------
Theodore H. Wilson
Executive Vice President and
Chief Financial Officer
-4-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Network Rental, Inc.
We have audited the accompanying balance sheets of Network Rental, Inc. (a
Georgia corporation) as of May 31, 1995 and 1996, and the related statements of
earnings, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the May 31, 1995 and 1996 financial statements referred to
above present fairly, in all material respects, the financial position of
Network Rental, Inc. as of May 31, 1995 and 1996, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
GRACE AND ASSOCIATES, P.C.
Atlanta, Georgia
July 19, 1996, except for Note 8 and Note 12
as to which the date is August 9, 1996
<PAGE>
NETWORK RENTAL, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MAY 31, JULY 31, 1996
---------------------------- -------------
1995 1996 (UNAUDITED)
------------- -------------
<S> <C> <C> <C>
Cash and cash equivalents (note 1)................................... $ 74,526 $ 161,936 $ 83,787
Rental merchandise, net (note 2)
On rent............................................................ 1,460,196 1,330,199 1,229,980
Held for rent...................................................... 264,685 269,310 229,495
Prepaid expenses and other assets.................................... 118,293 86,186 92,907
Deferred income taxes (note 7)....................................... 306,730 235,924 235,924
Property assets, net (note 3)........................................ 136,925 260,812 208,980
Loan to stockholder (note 9)......................................... 384,596 377,427 376,180
------------- ------------- -------------
TOTAL ASSETS......................................................... $ 2,745,951 $ 2,721,794 $ 2,457,253
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C>
LIABILITIES
Accounts payable.................................................. $ 272,721 $ 241,504 $ 168,312
Accrued expenses (note 4)......................................... 481,553 230,354 373,966
Capital lease obligation (note 6)................................. 58,080 197,378 152,826
Debt (note 5)..................................................... 1,445,000 1,086,000 769,000
------------- ------------- -------------
Total Liabilities............................................... 2,257,354 1,755,236 1,464,104
------------- ------------- -------------
STOCKHOLDERS' EQUITY
Common stock -- $.01 par value -- 2,000,000 shares
authorized; 900,000 shares issued and outstanding................ 9,000 9,000 9,000
Additional paid-in capital........................................ 69,167 69,167 69,167
Retained earnings................................................. 410,430 888,391 914,982
------------- ------------- -------------
Total stockholders' equity...................................... 488,597 966,558 993,149
------------- ------------- -------------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY........................................... $ 2,745,951 $ 2,721,794 $ 2,457,253
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NETWORK RENTAL, INC.
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
TWO MONTHS ENDED
YEAR ENDED MAY 31, JULY 31,
---------------------------- ------------------------------
1995 1996 1995 1996
------------- ------------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Rentals and fees................................... $ 6,949,250 $ 7,057,807 $ 1,180,901 $ 1,144,040
------------- ------------- -------------- --------------
OPERATING EXPENSES
Direct store expenses
Depreciation of rental merchandise............... 1,899,362 1,916,619 324,154 295,845
Other............................................ 3,076,112 3,136,591 515,903 526,986
------------- ------------- -------------- --------------
4,975,474 5,053,210 840,057 822,831
General and administrative expenses................ 1,114,110 1,192,487 178,961 286,776
------------- ------------- -------------- --------------
Total operating expenses....................... 6,089,584 6,245,697 1,019,018 1,109,607
------------- ------------- -------------- --------------
Operating profit............................... 859,666 812,110 161,883 34,433
OTHER EXPENSE (INCOME)
Interest expense................................... 279,941 155,414 28,295 19,102
(Gain) loss on sale of property assets............. 1,091 (18,762) -- --
Other.............................................. (194,153) (155,825) (35,724) (27,558)
------------- ------------- -------------- --------------
86,879 (19,173) (7,429) (8,456)
------------- ------------- -------------- --------------
Earnings before income taxes................... 772,787 831,283 169,312 42,889
INCOME TAX EXPENSE................................. 314,786 353,322 64,339 16,298
------------- ------------- -------------- --------------
NET EARNINGS................................... $ 458,001 $ 477,961 $ 104,973 $ 26,591
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NETWORK RENTAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
-------------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
----------- ------------- ----------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE --
MAY 31, 1994........................ 900,000 $ 9,000 $ 69,167 $ (47,571) $ 30,596
Net earnings...................... -- -- -- 458,001 458,001
----------- ------------- -------- ------------- -----------
BALANCE --
MAY 31, 1995........................ 900,000 9,000 69,167 410,430 488,597
Net earnings...................... -- -- -- 477,961 477,961
----------- ------------- -------- ------------- -----------
BALANCE --
MAY 31, 1996........................ 900,000 9,000 69,167 888,391 966,558
Net earnings (unaudited).......... -- -- -- 26,591 26,591
----------- ------------- -------- ------------- -----------
BALANCE --
JULY 31, 1996
(unaudited)......................... 900,000 $ 9,000 $ 69,167 $ 914,982 $ 993,149
----------- ------------- -------- ------------- -----------
----------- ------------- -------- ------------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NETWORK RENTAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWO MONTHS ENDED
YEAR ENDED MAY 31, JULY 31,
---------------------------- ------------------------
1995 1996 1995 1996
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
CASH FLOW FROM OPERATING ACTIVITIES
Net earnings.......................................... $ 458,001 $ 477,961 $ 104,973 $ 26,591
Adjustments needed to reconcile to net cash provided
by operations:
Depreciation of rental merchandise.................. 1,899,362 1,916,619 324,154 295,845
Depreciation of property assets..................... 75,305 99,332 13,500 18,549
(Gain) loss on sale of equipment.................... 1,543 (18,762) -- --
Deferred income tax................................. 152,321 70,806 76,047 --
Changes in operating assets and liabilities:
Rental merchandise.................................. (2,054,793) (1,794,525) (268,621) (155,811)
Prepaid expenses and other.......................... (615) 35,385 (4,356) (6,721)
Accounts payable.................................... (34,205) (31,217) (54,179) (73,192)
Accrued expenses.................................... 196,430 (251,199) (28,469) 143,612
------------- ------------- ----------- -----------
Net cash provided by operating
activities....................................... 693,349 504,400 163,049 248,873
------------- ------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property assets........................... (28,117) (226,727) -- --
Redemption of certificate of deposit.................. 50,000 -- -- --
Sale of property assets............................... -- 22,270 -- 33,283
Collection of stockholder note receivable............. 6,666 7,169 1,159 1,247
------------- ------------- ----------- -----------
Net cash provided by (used in) investing
activities....................................... 28,549 (197,288) 1,159 34,530
------------- ------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Additional lease obligations.......................... -- 197,588 -- --
Repayment of note payable............................. (1,300,022) (359,000) (4,291) (317,000)
Repayment of capital lease obligations................ (29,444) (58,290) (5,095) (44,552)
------------- ------------- ----------- -----------
Net cash used by financing activities............. (1,329,466) (219,702) (9,386) (361,552)
------------- ------------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.... (607,568) 87,410 154,822 (78,149)
CASH AND CASH EQUIVALENTS --
beginning of period.................................... 682,094 74,526 74,526 161,936
------------- ------------- ----------- -----------
CASH AND CASH EQUIVALENTS --
end of period.......................................... $ 74,526 $ 161,936 $ 229,348 $ 83,787
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Supplemental cash flow information:
Cash paid during the period for --
Interest.......................................... $ 268,028 $ 164,564 $ 28,295 $ 19,102
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Income taxes...................................... $ 6,610 $ 415,385 $ -- $ --
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NETWORK RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by the company
are as follows:
DESCRIPTION OF BUSINESS
Network Rental, Inc. rents household appliances and furniture for periods of
up to 18 months pursuant to rental agreements which are cancelable at any time.
Weekly or monthly rental payments are collected in advance, and ownership in the
related merchandise is transferred at the end of the designated rental period.
The company operates 14 rental-purchase stores in Atlanta and surrounding areas.
Additionally, it has three franchise locations in Georgia and receives monthly
royalty fees from the franchisees.
RENTAL MERCHANDISE
Rental revenue from merchandise on rent is recognized as rents are
collected. Rental agreements may be terminated at any time by a customer upon
the return of the merchandise. Depreciation is computed using the straight-line
method over 24 months, which represents the company's estimate of the useful
life of the rental merchandise. Upon transfer of ownership in the merchandise at
the end of the rental period, the remaining net book value of the merchandise,
if any, is charged to operations as depreciation expense. The Company does not
reserve for losses of rental merchandise damaged or not returned by customers.
The loss is recognized as they are incurred.
The Company includes in revenues the following income: rental fees,
franchise fees, collection fees, delivery fees, damage waivers and other fees.
Returned checks and refunds for 1995 are netted against revenues. For 1996, the
Company included the returned checks and refunds totaling $35,265 in other
direct store expenses, instead of netting them against revenues.
CASH AND CASH EQUIVALENTS
The company considers all money market accounts and highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
The Company's cash management policy is to use all excess cash to repay its
debt referred to in note 5.
PROPERTY ASSETS AND RELATED DEPRECIATION
Equipment and leasehold improvements are stated at cost. Expenditures for
repairs and maintenance are c h a rged to expense as incurred and additions and
improvements that significantly extend the lives of depreciable property are
capitalized. Upon sale or retirement of depreciable property, the cost and
accumulated depreciation are removed from the related accounts and any gain or
loss is reflected in operations. Depreciation on equipment is computed by using
an accelerated method based on the estimated useful lives of the depreciable
assets, principally three to five years. Leasehold improvements are amortized
over the respective lease terms using the straight-line method.
INCOME TAXES
Income taxes are computed based on the provisions of SFAS 109, "Accounting
for Income Taxes." Deferred tax assets and liabilities are recognized for the
estimated future tax effects attributed to temporary differences between book
and tax bases of assets and liabilities and for carryforward items. The
measurement of current and deferred tax assets and liabilities is based on
enacted tax law. Deferred tax assets are reduced, if necessary, by a valuation
allowance for the amount of tax benefits that may not be realized. Prior to
1994, income taxes were computed in accordance with APB Opinion No. 11.
<PAGE>
NETWORK RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTERIM FINANCIAL STATEMENTS
In the opinion of management, the unaudited interim financial statements for
each of the two month periods ended July 31, 1995 and July 31, 1996 include all
adjustments, consisting of normal recurring accruals necessary to present fairly
the Company's results of operations and cash flows.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts payable,
capital lease obligations and debt whose carrying value approximates fair value
at May 31, 1995 and 1996.
NOTE 2. -- RENTAL MERCHANDISE
Rental merchandise consists of the following at May 31:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
ON RENT
Cost...................................................................... $ 2,828,142 $ 2,790,090
Less accumulated depreciation............................................. 1,367,946 1,459,891
------------- -------------
$ 1,460,196 $ 1,330,199
------------- -------------
------------- -------------
HELD FOR RENT
Cost...................................................................... $ 502,812 $ 596,828
Less accumulated depreciation............................................. 238,127 327,518
------------- -------------
$ 264,685 $ 269,310
------------- -------------
------------- -------------
</TABLE>
NOTE 3. -- PROPERTY ASSETS
Equipment and leasehold improvements consist of the following major
classifications:
<TABLE>
<CAPTION>
1995 1996
-------------- --------------
<S> <C> <C>
Furniture and equipment....................................... $ 831,227 $ 831,710
Vehicles...................................................... 363,807 276,991
Equipment and vehicles under capital leases................... 119,807 321,234
Leasehold improvements........................................ 270,713 281,672
-------------- --------------
1,585,554 1,711,607
Accumulated depreciation...................................... (1,448,629) (1,450,795)
-------------- --------------
$ 136,925 $ 260,812
-------------- --------------
-------------- --------------
</TABLE>
NOTE 4. -- ACCRUED EXPENSES
Accrued expenses consist of the following major classifications:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Income taxes........................................................ $ 155,855 $ 23,236
Accrued salaries.................................................... 126,272 93,927
Accrued sales and other taxes....................................... 40,753 53,827
Deferred compensation............................................... 111,725 6,437
Accrued interest.................................................... 18,455 9,305
Other accrued expenses.............................................. 28,493 43,622
----------- -----------
$ 481,553 $ 230,354
----------- -----------
----------- -----------
</TABLE>
<PAGE>
NETWORK RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. -- DEBT
The Company obtained a $1,500,000 revolving line of credit from Comerica
Bank--Texas on June 26, 1995. Under terms of this loan, interest payments of 2%
above the bank's prime rate are due monthly, and the entire principal balance
plus any accrued interest are due on September 1, 1996. All of the Company's
assets are pledged as collateral under the loan, and the Company's stockholder
has personally guaranteed the loan. The Company is bound by various financial
covenants related to minimum net worth and debt/equity ratios under the terms of
the loan agreement.
Note payable on May 31, 1995 and 1996 consists of the following:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Prime Plus 3.5% Installment Note Payable to a Commercial Finance
Company--collateralized by substantially all of the company's
assets and the personal guaranty of the company's major
stockholder. Interest is payable monthly. Principal is payable
$35,000 per month through maturity with any remaining
principal due April 14, 1995.................................. $ 1,445,000 $ --
Prime plus 2% Revolving Line of Credit with Comerica
Bank--Texas................................................... -- 1,086,000
------------- -------------
$ 1,445,000 $ 1,086,000
------------- -------------
------------- -------------
</TABLE>
NOTE 6. -- LEASES
The company leases computer equipment and vehicles which qualify as capital
leases. A capital lease obligation of $3,099 is personally guaranteed by the
company's stockholder.
The company leases its facilities under noncancellable operating leases.
Future minimum lease payments under the capital leases and operating leases as
of May 31, 1996, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------- -----------
<S> <C> <C>
Year Ending
May 31, 1997.................................................... $89,985 $ 356,316
May 31, 1998.................................................... 65,656 205,304
May 31, 1999.................................................... 63,448 84,427
May 31, 2000.................................................... 22,048 43,704
May 31, 2001 and thereafter..................................... -- 11,899
----------- -----------
Total minimum lease payments........................................ 241,137 $ 701,650
-----------
-----------
Less: amount representing interest 43,759
-----------
Present value of net minimum lease payments......................... $197,378
-----------
-----------
</TABLE>
The capital leases are payable in monthly installments totaling $7,875,
including interest and sales taxes.
Rent expense totaled $349,249 for 1995 and $364,326 for 1996.
NOTE 7. -- PROVISION FOR INCOME TAXES
During the year ended May 31, 1994, the company implemented Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 establishes standards for financial accounting and reporting for
income taxes that are currently payable and for provisions
<PAGE>
NETWORK RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. -- PROVISION FOR INCOME TAXES (CONTINUED)
for deferred income taxes. The standard requires a change from the deferred
method to the asset and liability method of accounting for income taxes. The
cumulative effect of the change in accounting method was a benefit of $727,908.
The current provision for federal income taxes results from imposition of
the alternative minimum tax (AMT). AMT is imposed at a 20% rate on the company's
alternative minimum taxable income, which is determined by making statutory
adjustment to the company's regular taxable income (loss). The adjustments
consist primarily of limitations on depreciation deductions as calculated under
an alternative depreciation system and limitations on the application of net
operating loss carryforwards.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Current provision
Federal......................................................... $ 247,875 $ 266,637
Utilization of net operating loss carryforward.................. (109,155) (39,591)
----------- -----------
138,720 227,046
----------- -----------
State........................................................... 43,743 47,054
Utilization of net operating loss carryforward.................. (20,608) --
----------- -----------
23,135 47,054
----------- -----------
Deferred Provision
Federal......................................................... 126,849 67,617
State........................................................... 26,082 11,605
----------- -----------
152,931 79,222
----------- -----------
$ 314,786 $ 353,322
----------- -----------
----------- -----------
</TABLE>
As of May 31, 1996, the tax effect of components of net deferred tax assets
and liabilities is as follows:
<TABLE>
<CAPTION>
FEDERAL STATE
----------- ---------
<S> <C> <C>
Deferred tax assets
Capital leases................................................... 7,896 1,393
Stock options.................................................... 2,189 386
Depreciation..................................................... 72,433 11,292
AMT credit....................................................... 144,779 --
----------- ---------
227,297 13,071
----------- ---------
Deferred tax liabilities
State income tax benefit......................................... (4,444) --
----------- ---------
(4,444) --
----------- ---------
Net Deferred Tax Assets and Liabilities.......................... $ 222,853 $ 13,071
----------- ---------
----------- ---------
</TABLE>
As of May 31, 1996, the company has an Alternative Minimum Tax (AMT) credit
of $144,779 which may be carried forward indefinitely to reduce future taxable
income and taxes. The tax benefits of this carryforward is included in the
deferred tax assets presented above.
<PAGE>
NETWORK RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. -- PROVISION FOR INCOME TAXES (CONTINUED)
Additionally, the Company has investment tax credit carryovers totaling
$244,793 that will expire in the years 2000 and 2001. The investment tax credits
are not included in deferred tax assets.
NOTE 8. -- INCENTIVE STOCK OPTION PLAN
Under the company's incentive stock option plan, options to purchase shares
of the company's common stock are granted at a price equal to the estimated fair
market value of the stock at the date of the grant. Generally, the options
become exercisable in installments 2 years after the company has exceeded a
certain average monthly sales volume and unless exercised, expire at various
intervals not exceeding ten years from date of grant.
At May 31, 1996, options to purchase up to 4,500 shares with an option
prices of $1.71 per share have been granted. For the year ending May 31, 1996,
options equal to 8.58% of the Company's total common stock were exercised by
employees and were sold back to the Company at market value. The Company r e
corded compensation expense of $13,773 during 1996 related to the outstanding
options.
On August 2, 1996, all three remaining participants in the stock option plan
executed waivers to release the Company against any past and future claims under
the plan.
NOTE 9. -- RELATED PARTY TRANSACTIONS
Transactions and outstanding balances with the company's major stockholder
are summarized as follows:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Notes receivable.............................................................. $ 384,596 $ 377,427
Interest income............................................................... $ 28,342 $ 27,839
Rent expense.................................................................. $ 33,817 $ 52,271
Receivable.................................................................... $ 2,358 $ 2,328
</TABLE>
The note receivable is secured by real estate, bearing interest at 7.3% with
principal and interest payable monthly over twenty-five years through September
2017.
NOTE 10. -- PROFIT SHARING PLAN
During the year ended May 31, 1994, the company implemented a 401(k) profit
sharing plan covering substantially all employees. The company is required to
match employee voluntary contributions subject to certain limitations at a rate
of 25 percent. The company made matching contributions of $7,813 for 1996 and
$6,687 for 1995.
NOTE 11. -- COMMITMENTS AND CONTINGENCIES
Prior to January 1, 1996, management took the position that merchandise in
the hands of its customers was not part of its inventory and personal property
taxes due on these items were the responsibility of the customers. Network
Rental filed ad valorem taxes with the appropriate taxing authorities on an
annual basis and reported only unrented inventory. Management is aware that one
or more taxing authorities might assert a claim against the company for taxes on
property in the hands of customers.
Discussions by management with the various taxing authorities has indicated
that when such a claim is asserted, audits go back three years even though the
statute of limitations may be longer.
Legal counsel for the company advises that "the ad valorem taxes constitute
not only a lien against the property, but also the personal obligation of the
taxpayer. In this regard, the taxing authority could assert a claim against the
current owner of the property based on the lien or against
<PAGE>
NETWORK RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
the owner of the property on January 1 of each year. For this reason, it can be
assumed that Network Rental has some exposure in this area. However, the
exposure is contingent at best and as a practical matter appears to be limited
in scope."
Based on management's experience and investigation, its assessment is that
the company has an annual exposure of between nothing and $30,000.00 on this
contingent claim and a total exposure of between nothing and $60,000.00,
exclusive of any penalty and interest that might be assessed.
The Company depreciates its rental merchandise using the income forecasting
method for federal and state income tax purposes. This depreciation method has
been widely used in the industry and purports to match the depreciation
deductions against the revenues that the rental merchandise generates. However,
in 1994 the United States Tax Court in the case ABC RENTALS OF SAN ANTONIO,
INC., ET AL V. COMMISSIONER OF THE INTERNAL REVENUE, upheld the Internal Revenue
Service position that this method is not allowable for use by rental purchase
companies. Furthermore, the Internal Revenue Service issued in 1995 Revenue
Ruling 95-52 which effectively precludes any company taking a contrary position
from doing so without being in direct conflict with the Revenue Code.
The "ABC Rentals" case is on appeal in two U.S. Circuit Courts and the
industry has been putting forth effort to have the tax code amended to allow for
a three year accelerated depreciation method. As a result, the company h a s
continued to depreciate its rental merchandise under the income forecasting
method for years prior to June 1, 1995.
For the year ending May 31, 1996, the company converted to the prescribed
method of depreciation (MACRS 5 years) for all new rental merchandise purchased
during the year, which represents 53% of the Company's total rental merchandise
at year end. Since the rental merchandise is generally rented for periods of
less than 24 months, it is likely that the remaining assets that were
depreciated under the income forecasting method would be disposed by May 31,
1997. The Company, however, would remain liable for penalties and interest for
not converting to the proper method after the issuance of the 1995 Revenue
Ruling.
Network Rental, Inc. is contingently liable for letters of credit extended
to a major supplier and to the State of Georgia for the Company's warranty
program.
Network Rental, Inc. is contingently liable for cellular phone contracts
which have not expired.
During the year ending May 31, 1996, the Company's employees exercised
certain stock options. The difference between the fair market value of the
common stock and the exercise price is compensation subject to withholding taxes
for federal income tax purposes. The Company did not report the amounts as
employee compensation, nor did it withhold any employment taxes. Therefore, the
Company is contingently liable for employment taxes on $35,191 in compensation
plus penalties and interest.
A claim has been made by Aaron Rents, Inc. alleging that Network Rental,
Inc. violated the Lanham Act in connection with a commercial comparing the two
companies. Legal counsel for Network believes that Aaron Rents does not intent
to pursue any damage claim. However, a release has not been executed and the
claim may or may not be pursued. Management has ceased running the
advertisement, and is advised and believes that no claim will result from the
alleged violation.
An $8,750.00 claim has been made against the Company by its previous
auditors, Joseph Decosimo and Company, for unpaid accounting fees. Management
for Network Rental, Inc. believes that all fees were paid in full per agreement
and intends to dispute the claim. Legal counsel believes that litigation may
result.
<PAGE>
NETWORK RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. -- SUBSEQUENT EVENTS
As of August 8, 1996, Perry J. McNeal has negotiated to sell 107,100 of his
shares in the Company's common stock to Alrenco, Inc.
On July 26, 1996 Perry J. McNeal transferred 792,900 shares to the Vyrdilee
Brooks McNeal Scholarship Fund Charitable Remainder Trust. The Vyrdilee Brooks
McNeal Scholarship Fund Charitable Remainder Trust negotiated to sell all
792,900 shares to Alrenco, Inc. as of August 8, 1996.
On August 9, 1996, all 900,000 shares of the Company's common stock were
acquired by Alrenco, Inc.
NOTE 13. -- CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
The Company's 14 rental-purchase stores are located exclusively in the
Atlanta metropolitan area. The concentration of its operations in a single
metropolitan area increases the vulnerability that its operations may be
jeopardized if the entire area should experience an economic depression.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE>
ALRENCO, Inc.
PRO FORMA CONDENSED FINANCIAL STATEMENTS
(unaudited)
The accompanying unaudited pro forma condensed balance sheet as of June 30,
1996 is derived from the Company's balance sheet at June 30, 1996 and gives
effect to the acquisition of Network Rental, Inc. (Network) which occurred in
August 1996.
The accompanying unaudited pro forma condensed statements of earnings for the
year ended December 31, 1995 and the six months ended June 30, 1996 give
effect to the Network acquisition and the acquisition of Easy TV & Appliance
Rental Stores (Easy) which occurred on March 1, 1996 as though each had
occurred on January 1, 1995. The unaudited pro forma condensed statement of
earnings combine the Company's statement of earnings for the fiscal year
ended December 31, 1995 and the six months ended June 30, 1996 with the
statement of earnings for the businesses acquired for the same corresponding
periods.
The unaudited pro forma condensed statements of earnings are presented for
informational purposes only and do not purport to be indicative of the
operating results that actually would have occurred if the acquisitions had
been consummated as of January 1, 1995, nor which may result from future
operations. The pro forma adjustments are based upon available information
and certain assumptions that the Company believes are reasonable. The
acquisitions have been accounted for using the purchase method of accounting.
These pro forma financial statements should be read in conjunction with the
historical financial statements and related notes thereto.
<PAGE>
ALRENCO, Inc.
PRO FORMA CONDENSED BALANCE SHEET
June 30, 1996
(unaudited)
<TABLE>
<CAPTION>
COMPANY NETWORK ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ----------
(1)
<S> <C> <C> <C> <C>
ASSETS
Cash $ 970,449 $ 57,167 $ - $ 1,027,616
Rental merchandise 20,688,630 1,513,931 - 22,202,561
Property assets 3,116,893 252,576 - 3,369,469
Intangible assets 10,985,946 - 3,734,808 14,720,754
Other assets 797,957 699,693 240,000 1,737,650
---------- --------- --------- ----------
$36,559,875 $2,523,367 $3,974,808 $43,058,050
---------- --------- --------- ----------
---------- --------- --------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $ 4,052,323 $ 119,720 $ - $ 4,172,043
Accrued liabilities 347,977 287,132 125,000 760,109
Taxes other than income 310,382 - - 310,382
Debt 9,252,335 1,088,323 4,878,000 15,218,658
---------- --------- --------- ----------
13,963,017 1,495,175 5,003,000 20,461,192
Stockholders' equity 22,596,858 1,028,192 (1,028,192) 22,596,858
---------- --------- --------- ----------
$36,559,875 $2,523,367 $3,974,808 $43,058,050
---------- --------- --------- ----------
---------- --------- --------- ----------
</TABLE>
See notes to pro forma statements.
<PAGE>
ALRENCO, Inc.
PRO FORMA CONDENSED STATEMENT OF EARNINGS
Year ended December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Pro forma
for Easy Total
Company Easy Adjustments Acquisition Network Adjustments pro forma
---------- --------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $37,575,639 $9,865,336 $ - $47,440,975 $6,952,424 $ - $54,393,399
Operating expenses
Direct store expenses 30,023,179 3,452,729 - 33,475,908 5,052,866 - 38,528,774
General and administrative
expenses 4,338,583 6,337,383 - 10,675,966 794,559 - 11,470,525
Amortization of intangibles 284,901 - 333,781(2) 618,682 - 305,490(2) 924,172
---------- --------- ----------- ----------- --------- ----------- -----------
Total operating expenses 34,646,663 9,790,112 333,781 44,770,556 5,847,425 305,490 50,923,471
---------- --------- ----------- ----------- --------- ----------- -----------
Operating profit 2,928,976 75,224 (333,781) 2,670,419 1,104,999 (305,490) 3,469,928
Interest expense 894,003 288,593 296,407(3) 1,479,003 200,693 348,921(3) 2,028,617
Other, net (99,930) 50,874 - (49,056) - - (49,056)
---------- --------- ----------- ----------- --------- ----------- -----------
Earnings (loss) before
income taxes 2,134,903 (264,243) (630,188) 1,240,472 904,306 (654,411) 1,490,367
Income tax expense 868,311 - (363,811)(4) 504,500 362,901 (141,914)(4) 725,487
---------- --------- ----------- ----------- --------- ----------- -----------
NET EARNINGS (LOSS) $ 1,266,592 $ (264,243) $(266,377) $ 735,972 $ 541,405 $ (512,497) $ 764,880
---------- --------- ----------- ----------- --------- ----------- -----------
---------- --------- ----------- ----------- --------- ----------- -----------
Weighed average shares
outstanding 3,105,000 3,105,000 3,105,000
---------- ----------- -----------
---------- ----------- -----------
Earnings per share $.41 $.24 $.25
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
<PAGE>
ALRENCO, Inc.
PRO FORMA CONDENSED STATEMENT OF EARNINGS
Six Months Ended June 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Pro forma
for Easy Total
Company Easy Adjustments Acquisition Network Adjustments pro forma
---------- --------- ----------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $27,003,976 $1,697,979 $ - $28,701,955 $3,382,866 $ - $32,084,821
Operating expenses
Direct store expenses 21,207,111 594,269 - 21,801,380 2,477,554 - 24,278,934
General and administrative
expenses 2,440,443 1,029,581 - 3,470,024 454,964 - 3,924,988
Amortization of intangibles 387,067 - 116,224(2) 503,291 - 122,745(2) 626,036
---------- --------- ----------- ----------- --------- ----------- ----------
Total operating expenses 24,034,621 1,623,850 116,224 25,774,695 2,932,518 122,745 28,829,958
---------- --------- ----------- ----------- --------- ----------- ----------
Operating profit 2,969,355 74,129 (116,224) 2,927,260 450,348 (122,745) 3,254,863
Interest expense 182,034 48,099 49,401(3) 279,534 70,534 204,273(3) 554,341
---------- --------- ----------- ----------- --------- ----------- ----------
Earnings (loss) before
income taxes 2,787,321 26,030 (165,625) 2,647,726 379,814 (327,018) 2,700,522
Income tax expense 1,144,546 - (57,321)(4) 1,087,225 181,767 (82,880)(4) 1,186,112
---------- --------- ----------- ----------- --------- ----------- ----------
NET EARNINGS (LOSS) $ 1,642,775 $ 26,030 $ (108,304) $ 1,560,501 $ 198,047 $(244,138) $ 1,514,410
---------- --------- ----------- ----------- --------- ----------- ----------
---------- --------- ----------- ----------- --------- ----------- ----------
Weighed average shares
outstanding 4,206,653 4,206,653 4,206,653
---------- ----------- ----------
---------- ----------- ----------
Earnings per share $.39 $.37 $.36
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
<PAGE>
ALRENCO, Inc.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(unaudited)
(1) Gives effect to the consummation of the Network acquisition by the Company.
The consideration for Network consists of $4.9 million cash which was
financed by debt and $125,000 escrow payable. These adjustments allocate
the purchase price to the assets and liabilities of Network which consist
primarily of rental merchandise, property assets and debt.
(2) Amortization of amounts assigned to customer rental agreements over 15
months, noncompete agreements over 5 years and goodwill over 20 years.
(3) Adjustment to interest expense for debt of the Company incurred in
connection with the acquisitions.
(4) Tax effects of the pro forma adjustments.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and between
Perry J. McNeal
and
Alrenco, Inc.
* * * * * * * * * *
Closing Date: August 9, 1996
Effective Date: August 1, 1996
* * * * * * * * * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE OF STOCK . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Sale of Stock. . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. REPRESENTATIONS AND WARRANTIES
OF THE SELLER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.1 Ownership of Stock . . . . . . . . . . . . . . . . . . . 2
SECTION 2.2 Seller's Authority . . . . . . . . . . . . . . . . . . . 2
SECTION 2.3 Foreign Person . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.4 This Section Intentionally Blank . . . . . . . . . . . . 2
SECTION 2.5 Organization, Qualification and Corporate Power. . . . . 3
SECTION 2.6 Capitalization . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.7 Subsidiaries and Investments . . . . . . . . . . . . . . 3
SECTION 2.8 Books and Records. . . . . . . . . . . . . . . . . . . . 3
SECTION 2.9 Financial Statements . . . . . . . . . . . . . . . . . . 3
SECTION 2.10 Labor and Employee Relations . . . . . . . . . . . . . . 4
SECTION 2.11 Powers of Attorney; Absence of Limitations on
Competition; Guarantees. . . . . . . . . . . . . . . . . 4
SECTION 2.12 Significant Suppliers. . . . . . . . . . . . . . . . . . 5
SECTION 2.13 Governmental Approvals . . . . . . . . . . . . . . . . . 5
SECTION 2.14 Validity, Etc. . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.15 Absence of Adverse Change; Conduct of Business . . . . . 5
SECTION 2.16 Certain Practices. . . . . . . . . . . . . . . . . . . . 6
SECTION 2.17 Compliance with Law; Licenses and Permits. . . . . . . . 6
SECTION 2.18 Employee Benefits. . . . . . . . . . . . . . . . . . . . 7
SECTION 2.19 Fixed Assets . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.20 Motor Vehicles and Equipment . . . . . . . . . . . . . . 9
SECTION 2.21 Rental Contracts; Rental Merchandise . . . . . . . . . . 9
SECTION 2.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.23 Outstanding Contracts. . . . . . . . . . . . . . . . . . 11
SECTION 2.24 Outstanding Leases . . . . . . . . . . . . . . . . . . . 11
SECTION 2.25 Intellectual Properties. . . . . . . . . . . . . . . . . 12
SECTION 2.26 Proprietary Information of Third Parties . . . . . . . . 13
SECTION 2.27 Transactions With Affiliates . . . . . . . . . . . . . . 13
SECTION 2.28 Absence of Undisclosed Liabilities . . . . . . . . . . . 13
SECTION 2.29 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.30 Litigation . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.31 Environmental Matters. . . . . . . . . . . . . . . . . . 15
SECTION 2.32 Product Liability. . . . . . . . . . . . . . . . . . . . 17
SECTION 2.33 Broker's or Finder's Fees. . . . . . . . . . . . . . . . 17
SECTION 2.34 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE BUYER. . . . . . . . . . 18
SECTION 3.1 Organization . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.2 Corporate Power and Authority. . . . . . . . . . . . . . 18
SECTION 3.3 Validity, Etc. . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.4 Acquisition of Stock for Investment. . . . . . . . . . . 18
SECTION 3.5 Broker's or Finder's Fees. . . . . . . . . . . . . . . . 19
SECTION 3.6 Governmental Approvals . . . . . . . . . . . . . . . . . 19
SECTION 3.7 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV. COVENANTS AND AGREEMENTS. . . . . . . . . . . . . . . . . . . . 19
SECTION 4.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.2 Best Efforts . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.3 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.4 Investigations . . . . . . . . . . . . . . . . . . . . . 20
i
<PAGE>
SECTION 4.5 Conduct of Business in the Ordinary Course . . . . . . . 20
SECTION 4.6 Preservation of Business . . . . . . . . . . . . . . . . 20
SECTION 4.7 Notification of Material Changes and Litigation. . . . . 21
ARTICLE V. CONDITIONS TO THE BUYER'S OBLIGATIONS. . . . . . . . . . . . . . 21
SECTION 5.1 Intra-Company Debt . . . . . . . . . . . . . . . . . . . 21
SECTION 5.2 Representations, Warranties and Covenants. . . . . . . . 21
SECTION 5.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.4 Noncompetition Agreement . . . . . . . . . . . . . . . . 22
SECTION 5.5 No Actions, Suits or Proceedings . . . . . . . . . . . . 22
SECTION 5.6 Opinion of Counsel to Seller . . . . . . . . . . . . . . 22
SECTION 5.7 Investigation Satisfactory . . . . . . . . . . . . . . . 24
SECTION 5.8 Closing Documents. . . . . . . . . . . . . . . . . . . . 24
SECTION 5.9 Approval of the Buyer and Its Counsel. . . . . . . . . . 25
ARTICLE VI. CONDITIONS TO THE SELLER'S OBLIGATIONS. . . . . . . . . . . . . 25
SECTION 6.1 Representations, Warranties and Covenants. . . . . . . . 25
SECTION 6.2 No Actions, Suits or Proceedings . . . . . . . . . . . . 25
SECTION 6.3 Noncompetition Agreement . . . . . . . . . . . . . . . . 26
SECTION 6.4 Opinion of Stites & Harbison . . . . . . . . . . . . . . 26
SECTION 6.5 Closing Documents. . . . . . . . . . . . . . . . . . . . 26
SECTION 6.6 Approval of the Seller and Its Counsel . . . . . . . . . 26
ARTICLE VII. THE CLOSING AND CERTAIN CLOSING DELIVERIES . . . . . . . . . . 27
SECTION 7.1 Time and Place of Closing. . . . . . . . . . . . . . . . 27
SECTION 7.2 Deliveries by the Seller . . . . . . . . . . . . . . . . 27
SECTION 7.3 Deliveries by the Buyer. . . . . . . . . . . . . . . . . 28
ARTICLE VIII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8.1 Date Certain . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8.2 Mutual Consent . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8.3 Breaches . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IX. SURVIVAL; INDEMNIFICATION AND OFFSET. . . . . . . . . . . . . . 29
SECTION 9.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 9.2 Indemnification by the Seller. . . . . . . . . . . . . . 30
SECTION 9.3 Notice to Seller, Etc. . . . . . . . . . . . . . . . . . 30
SECTION 9.4 Indemnification by the Buyer . . . . . . . . . . . . . . 30
SECTION 9.5 Notice to the Buyer, Etc.. . . . . . . . . . . . . . . . 31
SECTION 9.6 Survival of Indemnification. . . . . . . . . . . . . . . 31
ARTICLE X. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 10.1 Knowledge of Seller. . . . . . . . . . . . . . . . . . . 31
SECTION 10.2 Knowledge of Buyer . . . . . . . . . . . . . . . . . . . 32
SECTION 10.3 "Person" Defined . . . . . . . . . . . . . . . . . . . . 32
SECTION 10.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 10.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . 33
SECTION 10.6 Modifications and Amendments . . . . . . . . . . . . . . 33
SECTION 10.7 Assignment/Binding Effect. . . . . . . . . . . . . . . . 33
SECTION 10.8 Parties in Interest. . . . . . . . . . . . . . . . . . . 33
SECTION 10.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . 34
SECTION 10.10 Arbitration. . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 10.11 Severability . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 10.12 Interpretation . . . . . . . . . . . . . . . . . . . . . 34
SECTION 10.13 Headings and Captions. . . . . . . . . . . . . . . . . . 34
SECTION 10.14 Reliance . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 10.15 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 10.17 Publicity. . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 10.18 Counterparts . . . . . . . . . . . . . . . . . . . . . . 35
ii
<PAGE>
INDEX TO EXHIBITS
EXHIBIT A -- Noncompetition Agreement
INDEX TO SCHEDULES
Schedule 2.5 -- Qualification
Schedule 2.9 -- Financial Statements
Schedule 2.11 -- Powers of Attorney
Schedule 2.12 -- Significant Suppliers
Schedule 2.13 -- Governmental Approvals
Schedule 2.14 -- Validity
Schedule 2.15 -- No Adverse Change
Schedule 2.17 -- Compliance with Laws
Schedule 2.18 -- Employee Benefits
Schedule 2.19 -- Fixed Assets
Schedule 2.20 -- Motor Vehicles and Equipment
Schedule 2.21 -- Rental Contracts
Schedule 2.22 -- Insurance
Schedule 2.23 -- Outstanding Contracts
Schedule 2.24 -- Outstanding Leases
Schedule 2.25 -- Intellectual Properties
Schedule 2.26 -- Proprietary Information of Third Parties
Schedule 2.27 -- Transactions with Affiliates
Schedule 2.28 -- Absence of Undisclosed Liabilities
Schedule 2.29 -- Taxes
Schedule 2.30 -- Litigation
Schedule 2.31 -- Environmental Matters
Schedule 2.32 -- Product Liability
Schedule 2.33 -- Broker's Fees
Schedule 5.3 -- Consents
iv
<PAGE>
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
on this 9th day of August, 1996 by and between Perry J. McNeal (the "Seller")
and ALRENCO, INC. an Indiana corporation (the "Buyer") and is effective as of
12:00:01 a.m. on August 1, 1996 (the "Effective Date").
PRELIMINARY STATEMENTS
Prior to August 1, 1996, the Seller owned all of the issued and outstanding
shares of common stock, par value $0.01 per share (the "Common Stock"), of
Network Rental, Inc., a Georgia corporation (the "Company").
Prior to August 1, 1996 the Seller transferred 792,900 shares of the Common
Stock to Vyrdilee Brooks McNeal Scholarship Fund Charitable Remainder Trust (the
"Trust").
Concurrently herewith, and effective as of the Effective Date, the Trust
and the Buyer entered into a separate agreement whereby the Buyer purchased the
remaining Common Stock from the Trust (the "Trust Stock Purchase Agreement").
The Seller now owns 107,100 shares of Common Stock (the "Shares").
The Company is engaged in the business of operating rental-purchase stores
which offer quality brand name consumer merchandise to individuals under
flexible rental-purchase agreements in the Atlanta, Georgia area (the
"Business").
The Buyer desires to purchase and the Seller desires to sell all of the
Shares upon the terms and subject to the conditions set forth in this Agreement.
In consideration of these preliminary statements and the mutual covenants,
representations, warranties and agreements hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I. PURCHASE AND SALE OF STOCK
SECTION 1.1 SALE OF STOCK. Upon the terms and subject to the conditions
set forth in this Agreement, on the Closing Date the Seller agrees to sell,
assign, transfer and deliver to the Buyer, and the Buyer agrees to purchase from
Seller the Shares representing 11.9% of all of the issued and outstanding shares
of Common Stock of the Company. The Shares combined with the shares of Common
Stock owned and held beneficially by the Trust comprise all of the issued and
outstanding Common Stock. The certificates representing the Shares shall be
duly endorsed in blank, or accompanied by stock powers duly executed in blank,
by the Seller.
SECTION 1.2 PURCHASE PRICE. Upon the terms and subject to satisfaction
of the conditions set forth in this Agreement, in consideration of the aforesaid
sale, assignment, transfer and delivery of all the Shares, the Buyer will pay to
Seller an aggregate purchase price of $500,000.00 (the "Purchase Price"), as
hereinafter defined as follows:
(a) On the date this Agreement is executed, the nonrefundable sum of
$200,000; and
(b) On the Closing Date, the sum of $300,000 (the "Closing Payment").
1
<PAGE>
ARTICLE II. REPRESENTATIONS AND WARRANTIES
OF THE SELLER
As an inducement to the Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the Seller represents and
warrants to the Buyer as follows:
SECTION 2.1 OWNERSHIP OF STOCK. The Seller represents and warrants that
he owns the Shares free and clear of all pledges, security interests, liens,
charges, encumbrances, equities, claims, options or limitations of every kind
("Claims") and the delivery to the Buyer of the Shares and the Common Stock
owned of record by the Trust pursuant to the provisions of this Agreement and
the Trust Stock Purchase Agreement will transfer to the Buyer valid title
thereto, free and clear of all Claims.
SECTION 2.2 SELLER'S AUTHORITY. The Seller represents and warrants that
(a) he has the power and authority to execute, deliver and perform this
Agreement, the Exhibits and Schedules hereto, and the other documents and
instruments contemplated hereby (collectively, this Agreement, the Exhibits and
Schedules hereto, and the other documents and instruments contemplated hereby
shall constitute the "Documents") and to consummate the transactions
contemplated hereby and thereby, and (b) that this Agreement and the other
Documents have been duly and validly executed and delivered by Seller and
constitute valid and binding obligations of the Seller, enforceable against
Seller, to the best of Seller's knowledge, in accordance with their terms.
SECTION 2.3 FOREIGN PERSON. The Seller represents and warrants that he
is not a foreign person as that term is defined in Section 1445(f)(3) of the
Code and applicable regulations.
SECTION 2.4 THIS SECTION INTENTIONALLY BLANK.
SECTION 2.5 ORGANIZATION, QUALIFICATION AND CORPORATE POWER.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia. Except as set forth on
SCHEDULE 2.5, the Company is not qualified to do business as a foreign
corporation in any other state. The nature of the Business does not require
Company to be licensed or qualified in any other jurisdiction. Seller has made
available to the Buyer complete and correct copies of the Articles of
Incorporation and Bylaws of the Company as currently in effect. The Company has
the corporate power and authority to own, lease, operate and hold its properties
and to carry on its business as now conducted, and is using no trade names.
SECTION 2.6 CAPITALIZATION. The Company has authorized capital
consisting of 2,000,000 shares of common stock, with a par value of $0.01 per
share, of which 900,000 shares are issued and outstanding and no shares are held
as treasury stock. All of the outstanding shares of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. None of the
outstanding shares of the Company have been issued in violation of any
preemptive right. There are no outstanding options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements of
any character providing for the purchase, issuance or sale of any shares of
capital stock of the Company, other than as contemplated by this Agreement.
SECTION 2.7 SUBSIDIARIES AND INVESTMENTS. The Company has no
subsidiaries and does not own, directly or indirectly, any capital stock or
other equity or ownership or proprietary
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interest in any other corporation, partnership, association, trust, joint
venture or other entity.
SECTION 2.8 BOOKS AND RECORDS. The minute books of the Company, which
have been and will be made available to the Buyer and its representatives,
contain accurate records of all meetings of and corporate actions or written
consents by the shareholders and Board of Directors of the Company set forth in
such minute books.
SECTION 2.9 FINANCIAL STATEMENTS. Seller has previously furnished to
the Buyer, and attached hereto as SCHEDULE 2.9 are, the audited balance sheet of
the Company as of May 31, 1996 (the "Balance Sheet Date") and 1995, the related
statements of income, stockholder's equity and cash flows for the years then
ended. All such financial statements (the "Financial Statements") have been
prepared, to the best of Seller's knowledge, in accordance with generally
accepted accounting principles consistently applied and were prepared from the
books and records of the Company. Such books and records are complete and
correct in all material respects, accurately reflect all transactions of the
Business, and have been made available to the Buyer for examination. To the
best of Seller's knowledge, the Financial Statements fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods ended on the dates thereof. To the
best of Seller's knowledge, the Financial Statements reflect reserves
appropriate and adequate for all known material liabilities and reasonably
anticipated losses as required by generally accepted accounting principles.
Since the Balance Sheet Date, (i) there has been no change in the assets,
liabilities or financial condition of the Company from that reflected in the
Financial Statements except for changes in the ordinary course of business
consistent with past practice and which have not been materially adverse, and
(ii) none of the business, prospects, financial condition, operations, property
or affairs of the Company has been materially adversely affected by any
occurrence or development, individually or in the aggregate, whether or not
insured against. The Seller has disclosed to the Buyer all material facts
relating to the preparation of the Financial Statements.
SECTION 2.10 LABOR AND EMPLOYEE RELATIONS. The Company is not a party to
or bound by any collective bargaining agreement with any labor organization,
group or association covering any of its employees, and Company has no knowledge
of any attempt to organize the Company's employees by any Person, unit or group
seeking to act as their bargaining agent. There are no pending or threatened
charges (by employees, their representatives or governmental authorities) of
unfair labor practices or of employment discrimination or of any other wrongful
action with respect to any aspect of employment of any person employed or
formerly employed by the Company. No union representation election relating to
employees of the Company has been scheduled by any governmental agency or
authority, no organizational effort is being made with respect to any of such
employees, and there is no investigation of the Company's employment policies or
practices by any governmental agency or authority pending or threatened. The
Company is not currently, nor has it been, involved in labor negotiations with
any unit or group seeking to become the bargaining unit for any employees of the
Company. The Company has not experienced any material work stoppages, and to
the best knowledge of Seller, no work stoppage is planned.
SECTION 2.11 POWERS OF ATTORNEY; ABSENCE OF LIMITATIONS ON COMPETITION;
GUARANTEES.
Except as set forth in SCHEDULE 2.11, (i) no power of attorney or similar
authorization given by the Company presently is in effect
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or outstanding; (ii) no contract or agreement to which the Company is a party or
is bound or to which the Company's properties or assets is subject limits the
freedom of the Company to compete in any line of business or with any Person;
and (iii) the Company is not a party to or bound by any guarantee of any debt or
obligation of any other Person.
SECTION 2.12 SIGNIFICANT SUPPLIERS. Set forth on Schedule 2.12 is a true
and correct list of the Company's ten largest suppliers for the most recent
twelve (12) month period ending December 31, 1995, together with the amount of
merchandise attributable to such suppliers expressed in dollars and as a
percentage of total purchased merchandise. None of the suppliers identified on
SCHEDULE 2.12 has terminated, materially reduced or threatened to terminate or
materially reduce its relationship with the Company during the period covered by
such schedule. Copies of the standard form of purchase or supply contracts used
by the Company are set forth on SCHEDULE 2.12.
SECTION 2.13 GOVERNMENTAL APPROVALS. Except as set forth on SCHEDULE
2.13, no registration or filing with, or consent or approval of or other action
by, any Federal, state or other governmental agency or instrumentality is or
will be necessary for the valid execution, delivery and performance by Seller of
this Agreement.
SECTION 2.14 VALIDITY, ETC. Except as set forth on SCHEDULE 2.14,
neither the execution and delivery of this Agreement or the other Documents, the
consummation of the transactions contemplated hereby or thereby, nor the
performance of this Agreement or the other Documents in compliance with the
terms and conditions hereof and thereof by the Seller will (i) violate, conflict
with or result in any breach of any trust agreement, Articles of Incorporation,
bylaw, judgment, decree, order, statute or regulation applicable to the Company,
(ii) violate, conflict with or result in a breach, default or termination or
give rise to any right of termination, cancellation or acceleration of the
maturity of any payment date of any of the obligations of the Company or
increase or otherwise affect the obligations of the Company under any law, rule,
regulation or any judgment, decree, order, governmental permit, license or order
or any of the terms, conditions or provisions of any mortgage, indenture, note,
license, agreement or other instrument or obligation related to the Company or
to the Seller's ability to consummate the transactions contemplated hereby or
thereby, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained in
writing and provided to the Buyer, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company.
SECTION 2.15 ABSENCE OF ADVERSE CHANGE; CONDUCT OF BUSINESS.
During the period from the Balance Sheet Date to and including the date of this
Agreement, except as set forth on SCHEDULE 2.15, the Company has not
(i) borrowed or agreed to borrow any material amount of funds or incurred any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise), or guaranteed or agreed to guarantee any obligations of others,
(ii) canceled any indebtedness owing to it or any claims that it might have
possessed, waived any material rights of substantial value or sold, leased,
encumbered, transferred or otherwise disposed of, or agreed to sell, lease,
encumber, or otherwise dispose of its assets or permitted any of its assets to
be subjected to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind, (iii) made any material capital expenditure
or commitment therefor, (iv) declared or paid any dividend or made any
distribution on
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any shares of its capital stock, or redeemed, purchased or otherwise acquired
any shares of its capital stock or any option, warrant or other right to
purchase or acquire any such shares, (v) increased its indebtedness for borrowed
money, or made any loan to any Person, (vi) written off as uncollectible any
notes or accounts receivable, except write-offs in the ordinary course of
business, (vii) made any material change in any method of accounting or auditing
practice, (viii) otherwise conducted its business or entered into any
transaction, except in the usual and ordinary manner, or (ix) agreed, whether or
not in writing, to do any of the foregoing.
SECTION 2.16 CERTAIN PRACTICES. None of the Seller, the Company nor any
of its directors or officers, or to the best knowledge of Seller, the Company's
employees have, directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds; violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended; established or maintained any unlawful or unrecorded
fund of corporate monies or other assets; made any false or fictitious entry on
the books or records of the Company or any subsidiary; made any bribe, rebate,
payoff, influence payment, kickback, or other unlawful payment; given any favor
or gift which is not deductible for federal income tax purposes; or made any
bribe, kickback, or other payment of a similar or comparable nature, whether
lawful or not, to any person or entity, private or public, regardless of form,
whether in money, business or to obtain special concessions, or to pay for
favorable treatment for business secured or for special concessions already
obtained.
SECTION 2.17 COMPLIANCE WITH LAW; LICENSES AND PERMITS.
Except as set forth on SCHEDULE 2.17, the Company has complied in all material
respects with all laws, ordinances, legal requirements, rules, regulations and
orders applicable to it, its operations, properties, assets, products and
services. Except as set forth on SCHEDULE 2.17, there is no existing law, rule,
regulation or order, and Company is not aware of any proposed law, rule,
regulation or order, whether Federal, state or local, which would prohibit or
materially restrict the Buyer from, or otherwise materially adversely affect the
Buyer in, conducting the Business in the manner heretofore conducted by the
Company in any jurisdiction in which the Business is now conducted. The Company
possesses all franchises, permits, licenses, certificates and consents required
from any governmental or regulatory authority in order for the Company to carry
on its business as currently conducted and to own and operate its properties and
assets as now owned and operated and all of such licenses and permits are set
forth on SCHEDULE 2.17.
SECTION 2.18 EMPLOYEE BENEFITS.
(a) Set forth on SCHEDULE 2.18 is a list of all pension, profit
sharing, retirement, deferred compensation, stock purchase, stock option,
incentive, bonus, vacation, severance, disability, hospitalization, medical
insurance, life insurance, fringe benefit, welfare and other employee benefit
plans, programs or arrangements pursuant to which the Company or its ERISA
Affiliates provides (directly or indirectly, individually or jointly through
others) benefits or compensation to or on behalf of employees or former
employees of the Company or its ERISA Affiliates, whether formal or informal,
whether or not written ("Employee Plan"). On request by the Buyer, Seller shall
furnish a copy of each Employee Plan and a copy of any related materials. The
Company will maintain the benefits listed on
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SCHEDULE 2.18 in full force and effect through the Closing Date. Except as set
forth on SCHEDULE 2.18, the Buyer shall not have any obligation or liability of
any kind or nature for any compensation or benefits of any kind or nature to the
employees or consultants of the Company for services rendered prior to the
Effective Date.
(b) Each Employee Plan covering any present or former employee of the
Company which is subject to the continuation health coverage requirements of
Section 4980B of the Code or Section 601 of ERISA or any applicable state law
has complied with all such requirements for continuation coverage.
(c) There are no actions, suits or claims pending (other than routine
claims for benefits) or threatened against or with respect to any Employee Plan
or the assets of any Employee Plan.
(d) Each Employee Plan (and the related trust or funding vehicle, if
any) has been administered and maintained in accordance with its terms and with
applicable law. Except as set forth on SCHEDULE 2.18(d), each Employee Plan
which is intended to be qualified under Section 401 of the Code and each
amendment to such plan is subject to a favorable determination letter from the
Internal Revenue Service and each such plan has at all times been maintained, by
its terms and in operation, in accordance with Section 401 of the Code. The
assets of each Employee Plan which is not funded through the general assets of
the Company are at least equal to the liabilities under such Employee Plan, and
all assets of each Employee Plan are shown on the books and records of such
Employee Plan at fair market value. No Employee Plan has unfunded liabilities
that as of the Closing Date are not accurately and fully reflected on the
Company's Balance Sheet.
(e) Neither the Company nor any of its ERISA Affiliates is or has
been a participant in, or is or has been obligated to maintain or to make
contributions to, a multi-employer plan (within the meaning of ERISA Section
3(37) and ERISA Section 4001(a)(3)) or an Employee Plan which is subject to
Title IV of ERISA. Neither the Company nor any ERISA Affiliate has sponsored,
contributed to or been obligated under Title I or IV of ERISA to contribute to a
"defined benefit plan" (as defined in ERISA Section 3(35)). The Company is not
obligated to provide post-retirement medical benefits or any other unfunded
post-retirement welfare benefits to or on behalf of any persons whatsoever
(except the benefits pursuant to the continuation health coverage requirements
under Section 4980B of the Code, ERISA Section 601, or applicable state law).
(f) Neither the Company nor its ERISA Affiliates is subject to and,
to the best knowledge of Seller, no facts exist which could subject the Company
or any of its ERISA Affiliates to, any liability whatsoever which is directly or
indirectly related to any Employee Plan, including, but not limited to,
liability for benefit payments or related claims, any liability for any tax or
related penalty under the Code, or liability for any damages or penalties
arising under Title I or Title IV of ERISA. No reportable event under Section
4043 of ERISA has occurred or, to the best knowledge of the Company, will occur
with respect to such Employee Plan.
(g) Termination of or withdrawal from any Employee Plan immediately
after the Closing Date would not subject the Buyer to any liability, tax or
penalty whatsoever.
(h) The execution or performance of the transactions contemplated by
this Agreement will not create, accelerate or increase any obligations under the
Employee Plans, including any
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obligation to make any payment which would not be deductible as an excess golden
parachute payment under Section 280G of the Code.
(i) All contributions to or under each Employee Plan and all expenses
of each Employee Plan are fully deductible for income tax purposes for the
taxable year for which such contributions are made or such expenses are paid.
All contributions to or under each Employee Plan have been made when due under
the terms of such Employee Plan in accordance with applicable law.
(j) Neither the Company nor its ERISA Affiliates have entered into
any contract, agreement or arrangement (whether oral or written) under which the
Company or its ERISA Affiliates have assumed any liability relating to their
clients' retirement plans, nor have the Company and/or its ERISA Affiliates made
any verbal representations that the use of any employees of the Company or its
ERISA Affiliates would have no adverse consequence on such client retirement
plans.
(k) For purposes of this Section 2.18, the term "ERISA" shall mean
the Employee Retirement Income Security Act of 1974, as amended, and the term
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Company is treated as a single employer
under Section 414(b), (c), (m), (o) or (t) of the Code.
SECTION 2.19 FIXED ASSETS. SCHEDULE 2.19 contains a true and complete
list of all of Company's fixed assets with a net book value of greater than
$1,000.00, whether owned or leased. Except as shown on SCHEDULE 2.19, the
Company has good and marketable title to all of its fixed assets, free and clear
of all claims, liens, mortgages, charges and encumbrances except as disclosed in
the Financial Statements.
SECTION 2.20 MOTOR VEHICLES AND EQUIPMENT. SCHEDULE 2.20 sets forth all
of the Company's vehicles, including the age, make, model and vehicle
identification number of each, and all other items of equipment owned by the
Company. Such vehicles and items of equipment are (a) to the best knowledge of
Seller, mechanically sound and in a condition to perform in a manner needed for
the operation of the Business; and (b) in compliance with all applicable
statutes, ordinances and regulations, including, without limitation, those
related to safety, in each case ordinary wear and tear excepted. Except as
shown on SCHEDULE 2.20, the Company has good and marketable title to all of its
vehicles and equipment, free and clear of all claims, liens, mortgages, charges
and encumbrances.
SECTION 2.21 RENTAL CONTRACTS; RENTAL MERCHANDISE.
(a) RENTAL CONTRACTS. There are no facts or circumstances which would
materially impair the validity or, to the best knowledge of Seller,
collectability of the rental due under any customer rental-purchase contracts
(including all rental, rental-purchase and rent-to-own agreements providing for
the rental to customers of furniture, appliances, equipment and other personal
property, the "Rental Contracts"). The forms of Rental Contracts used by the
Company comply as to form (including, without limitation, any instructions,
procedures or policies relating to the completion and processing of such Rental
Contracts) with all applicable laws, in all material respects, in each case
including but not limited to disclosure, billing, form, content, manner of
preparation and execution. A list of the Rental Contracts is attached hereto on
SCHEDULE 2.21.
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(b) UNITS OF RENTAL MERCHANDISE ON RENT. As of the close of business on
July 31, 1996, the Company had no fewer than 10,161 units of rental merchandise
on rent represented by Current Rental Contracts. For purposes of this Section
2.21, a "Current Rental Contract" shall mean a Rental Contract, duly signed by a
customer and otherwise legally enforceable and made in the ordinary course of
business, and a Current Rental Contract shall not include any contract on which
thirty (30) or more days have passed since the last full payment was made by the
customer.
(c) PAST DUE RENTAL CONTRACTS. As of the close of business on July 31,
1996, the total number of past due Rental Contracts, including all accounts
labeled "Skips and Stolens" did not exceed 33.4 percent of all active Rental
Contracts of the Company on that date. Said past due calculation was made in
the ordinary course of business, in strict accordance with the Company's past
business practices in making such calculation and taking into account only
payments by customers.
(d) CONDITION AND LOCATION. To the best knowledge of the Seller, the
rental merchandise of the Company is in good, merchantable and usable condition,
ordinary wear and tear excepted, and is reflected on the books and records of
the Company at the lower of cost or market value. Company has delivered to the
Buyer an itemized list of all of the Company's rental inventory (including idle
inventory) as of June 30, 1996, showing the date of purchase, the supplier, the
cost, description of each item sufficient to identify it to the Buyer, and the
location of each item. All of the rental merchandise is owned by the Company
and is maintained at the locations set forth on SCHEDULE 2.21.
SECTION 2.22 INSURANCE. The Company is, and will be through the Closing,
insured with insurers in respect of its properties, assets and businesses as set
forth on the attached SCHEDULE 2.22. SCHEDULE 2.22 lists the insurance coverage
carried by the Company, which insurance will remain in full force and effect
with respect to all events occurring prior to the Effective Date. Except as set
forth on SCHEDULE 2.22, the Company (i) has not failed to give any notice or
present any claim under any such policy or binder in due and timely fashion,
(ii) has not received notice of cancellation or non-renewal of any such policy
or binder, (iii) is not aware of any threatened or proposed cancellation or
non-renewal of any such policy or binder, (iv) has not received notice of any
insurance premiums which will be materially increased in the future, and (v) is
not aware of any insurance premiums which will be materially increased in the
future. There are no material outstanding claims under any such policy which
have gone unpaid for more than 45 days, or as to which the insurer has
disclaimed liability.
SECTION 2.23 OUTSTANDING CONTRACTS. SCHEDULE 2.23 sets forth a
description of all existing contracts, agreements, leases, commitments, licenses
and franchises, which involve obligations or commitments by the Company of
$10,000 or more and are not cancelable by the Company without penalty within 30
days (collectively "Contracts"), whether written or oral, relating to the
Company. Company has delivered or made available to the Buyer true, correct and
complete copies of all of the Contracts specified on SCHEDULE 2.23 which are in
writing, and such schedule sets forth a complete description of all Contracts
which are not in writing. All of the Contracts are in full force and effect and
enforceable in accordance with their terms, except to the extent that the
enforceability thereof may be subject to or affected by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, or other laws
relating to or affecting the rights of creditors generally. Except as set forth
on SCHEDULE 2.23 the Company and, to the best knowledge of
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Seller, each other party thereto has materially performed all the obligations
required to be performed by it, has received no notice of default and is not in
default (with due notice or lapse of time or both) under any of the Contracts.
The Company has no present expectation or intention of not fully performing all
its obligations under each of the Contracts, and Company has no knowledge of any
breach or anticipated breach by the other party to any of the Contracts to which
the Company is a party. Except as set forth on SCHEDULE 2.23, none of the
Contracts has been terminated; no notice has been given by any party thereto of
any alleged default by any party thereunder; and Company is not aware of any
intention or right of any party to declare another party to any of the Contracts
to be in default. Except as set forth on SCHEDULE 2.23, there exists no actual
or, to the best knowledge of Seller, threatened termination, cancellation or
limitation of the business relationship of the Company by any party to any of
the Contracts.
SECTION 2.24 OUTSTANDING LEASES. The Company owns no real property.
SCHEDULE 2.24 sets forth a description of each agreement by which the Company
leases each parcel of real property (the "Leased Parcels") used in connection
with the Business (collectively, the "Leases"). Company has delivered or made
available to the Buyer true, correct and complete copies of all of the Leases
specified on SCHEDULE 2.24. All rents due under the Leases have been paid. All
of the Leases are in full force and effect and enforceable in accordance with
their terms, except to the extent that the enforceability thereof may be subject
to or affected by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or other laws relating to or affecting the rights of
creditors generally. Except as set forth on SCHEDULE 2.24, the Company and to
the best knowledge of Seller, each other party thereto has performed all the
obligations required to be performed by it, has received no notice of default
and is not in default (with due notice or lapse of time or both) under any of
the Leases. The Company has no present expectation or intention of not fully
performing all its obligations under each of the Leases, and Company has no
knowledge of any breach or anticipated breach by the other party to any of the
Leases. Except as set forth on SCHEDULE 2.24, none of the Leases has been
terminated; no notice has been given by any party thereto of any alleged default
by any party thereunder; and Company is not aware of any intention or right of
any party to declare another party to any of the Leases to be in default. There
exists no actual or, to the best knowledge of Seller, threatened termination,
cancellation or limitation of the business relationship of the Company with any
party to any of the Leases.
SECTION 2.25 INTELLECTUAL PROPERTIES. SCHEDULE 2.25 contains an accurate
and complete list of all domestic and foreign letters patent, patents, patent
applications, patent licenses, software licenses and know-how licenses, trade
names, trademarks, copyrights, unpatented inventions, service marks, trademark
registrations and applications, service mark registrations and applications and
copyright registrations and applications, trade secrets or other confidential
proprietary information owned or used by the Company in the operation of the
Business (collectively the "Intellectual Property"). Except as set forth on
SCHEDULE 2.25 and except for commercial software licensed for use on personal
computers, the Company owns the entire right, title and interest in and to the
Intellectual Property, trade secrets and technology used in the operation of its
business and each item constituting part of the Intellectual Property and trade
secrets and technology which is owned by the Company has been, to the extent
indicated in SCHEDULE 2.25, duly registered with, filed in or issued by, as the
case may be, the United States Patent and Trademark office or such other
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government entities, domestic or foreign as are indicated in SCHEDULE 2.25 and
such registrations, filings and issuances remain in full force and effect.
There have been and are no pending or, to the best knowledge of Seller,
threatened proceedings or litigation or other adverse claims affecting or with
respect to the Intellectual Property. There is, to the best knowledge of
Seller, no reasonable basis upon which a claim may be asserted against the
Company for infringement of any domestic or foreign letters patent, patents,
patent applications, patent licenses and know-how licenses, trade names,
trademark registrations and applications, common law trademarks, service marks,
service mark registrations or applications copyrights, copyright registrations
or applications, trade secrets or other confidential proprietary information.
To the best knowledge of Seller, no Person is infringing the Intellectual
Property.
SECTION 2.26 PROPRIETARY INFORMATION OF THIRD PARTIES.
Except as disclosed on SCHEDULE 2.26, no third party has claimed or, to the best
knowledge of Seller, has reason to claim that any Person employed by or
consulting with the Company ("Related Person") has (i) violated or may be
violating any of the terms or conditions of such person's employment, non-
competition or non-disclosure agreement with such third party, (ii) disclosed or
may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party, or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees. No third party has
requested information from the Company which suggests that such a claim might be
contemplated. Except as disclosed on SCHEDULE 2.26, to the best knowledge of
Seller, no Related Person has employed or proposes to employ any trade secret or
any information or documentation proprietary to any former employer and, no
Related Person has violated any confidential relationship which such person may
have had with any third party, in connection with the development, or sale of
any service of the Company, and Seller has no reason to believe there will be
any such employment or violation.
SECTION 2.27 TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 2.27, to the best knowledge of Seller, no director, officer or
shareholder of the Company, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a beneficial interest greater than
5% or is an officer, director, trustee, partner or holder of any equity interest
greater than 5%, is a party to any transaction with the Company, including any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments or involving other obligations to any such person or firm.
SECTION 2.28 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Except as and to the extent of the amounts specifically reflected
or reserved against in the May 31, 1996 Financial Statements, or except as set
forth on SCHEDULE 2.28, the Company has no liabilities or obligations of any
nature whatsoever due or to become due, accrued, absolute, contingent or
otherwise, except for liabilities and obligations incurred since the date
thereof in the ordinary course of business and consistent with past practice.
Seller does not know of, and has no reason to know of, any basis for the
assertion against Company of any liability or obligation not fully reflected or
reserved against in the 1996 Financial Statement or SCHEDULE 2.28.
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(b) The Company is not bound by any agreement, or subject to any
charter or other corporate restriction or any legal requirement, which has, or
in the future can reasonably be expected to have, a material adverse effect on
the business or prospects of the Company.
SECTION 2.29 TAXES. Except as set forth on SCHEDULE 2.29, all federal,
state, local and foreign tax returns and tax reports required to be filed by the
Company on or before the date hereof have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed and all amounts shown as owing thereon have been paid. All
taxes (including, without limitation, income, accumulated earnings, property,
sales, use, franchise, value added, fuel, employees' income withholding and
social security taxes) which have become due or payable or are required to be
collected by the Company or are otherwise attributable to any periods ending on
or before the Closing and all interest and penalties thereon, whether disputed
or not, have been paid or will be paid in full or adequately reflected on the
Balance Sheet or the Company's books and records in accordance with generally
accepted principles on or prior to the Closing. Except as set forth on SCHEDULE
2.29, all deposits required by law to be made by the Company with respect to
employees' withholding taxes have been duly made, and as of the Closing Date all
such deposits due will have been made. The Seller has delivered to the Buyer
true and complete copies of all of Company's state and federal income tax
returns for the fiscal periods ended May 31, 1995, 1994 and 1993 and all reports
and results of income tax audits, if any, related thereto. Except as set forth
on SCHEDULE 2.29, no examination of any tax return of the Company is currently
in progress. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any such tax return.
SECTION 2.30 LITIGATION. Except as set forth on SCHEDULE 2.30, there is
no (i) action, suit, claim, proceeding or investigation pending or, to the best
knowledge of Seller, threatened against or affecting the Company (whether or not
such Company is a party or prospective party thereto), at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
(ii) arbitration proceeding pending relating to the Company or
(iii) governmental inquiry pending or threatened against or involving the
Company, and there is no basis for any of the foregoing. The Company has not
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to the business, prospects, financial
condition, operations, property or affairs of the Company. There are no
outstanding orders, writs, judgments, injunctions or decrees served upon the
Company by any court, governmental agency or arbitration tribunal against the
Company. There are no facts or circumstances which may result in institution of
any action, suit, claim or legal, administrative or arbitration proceeding or
investigation against, involving or affecting the Company or the transactions
contemplated hereby. The Company is not in default with respect to any order,
writ, injunction or decree known to or served upon it from any court or of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. Except as disclosed on
SCHEDULE 2.30, there is no action or suit by the Company pending or threatened
against others.
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SECTION 2.31 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. To the best of Seller's knowledge, the Company and
all Leased Parcels are in compliance, in all material respects, with all
applicable laws, rules, regulations, orders, ordinances, judgments and decrees
of all governmental authorities with respect to all environmental statutes,
rules and regulations. Except as set forth on SCHEDULE 2.31, the Company has
not received notice of, nor does Company have knowledge of, any past, present or
future events, conditions, circumstances, activities, practices, incidents,
actions or plans of the Company or the Company's predecessors, either
collectively, individually or severally, which may interfere with or prevent
continued compliance with, or which may give rise to any common law or legal
liability or otherwise form the basis of any claim, action, suit, proceeding,
hearing, or investigation, based on or related to the disposal, storage,
handling, manufacture, processing, distribution, use, treatment or transport, or
the emission, discharge, release or threatened release into the environment, of
any Substance. As used in this Section 2.31, the term "Substance" or
"Substances" shall mean any pollutant, hazardous substance, hazardous material,
hazardous waste or toxic waste, as defined in any presently enacted federal,
state or local statute or any regulation that has been promulgated pursuant
thereto. To the best of Seller's knowledge, no part of any of the Leased
Parcels has been listed or proposed for listing on the National Priorities List
established by the United States Environmental Protection Agency, or any other
such list by any federal, state or local authorities.
(b) ENVIRONMENTAL SUBSTANCE LIABILITY. No event has occurred or
condition exists or operating practice is being employed that could give rise to
liability, in any material respect, on the part of the Company, either at the
present time or in the future, for any losses, liabilities, damages (whether
consequential or otherwise), settlements, penalties, interest, expenses and
costs of responses, including any such liability on account of the right of any
governmental or private entity or person, and including closure expenses, costs
of assessment, containment, removal, or response (other than monitoring or
transportation or disposal of materials required to be transported or disposed
of in the ordinary course of business consistent with past practice) arising
under any rule or federal, state, or local statute, or any regulation that has
been promulgated pursuant thereto, or common law, as a result of or in
connection with, or alleged to be as a result of or in connection with, the
following:
(A) the handling, storage, use, transportation or disposal of
any Substances in or near or from, to the best of Seller's
knowledge, the Leased Parcels;
(B) the handling, storage, use, transportation or disposal of
any Substances by the Company or its predecessors which
Substances were a product, by-product or otherwise resulted
from the operations conducted by or on behalf of the Company
or its predecessors;
(C) any intentional or unintentional emission, discharge or
release of any Substances in or near or from facilities into
or upon the air, surface water, ground water or land or any
disposal, handling, manufacturing, processing, distribution,
use, treatment, or transport of such Substances in or near
or
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from facilities by or on behalf of the Company or its
predecessors; or
(D) the presence of any toxic or hazardous building materials
(including but not limited to asbestos or similar
substances) in any facilities of the Company, including but
not limited to the inclusion of such materials in the
exterior and interior walls, floors, ceilings, tile,
insulation or any other portion of building structures.
(c) ENVIRONMENTAL PERMITS. The Company has obtained and holds all
material registrations, permits, licenses, and approvals issued by or on behalf
of any federal, state or local governmental body or agency if any
("Environmental Permits") that are required in connection with the operation by
the Company, to the best of Seller's knowledge, the Leased Parcels, the
discharge or emission of Substances by the Company from, to the best of Seller's
knowledge, the Leased Parcels or the generation, treatment, storage,
transportation, or disposal of any such Substances by the Company. Such
Environmental Permits, which are described on SCHEDULE 2.31, are currently
effective and sufficient for the operation of, and to the best of Seller's
knowledge, the Leased Parcels and the business of the Company as currently
conducted and intended to be conducted. The Company is in compliance, in all
material respects, with all terms and conditions of the Environmental Permits,
and is also in compliance, in all material respects, with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables contained in those laws or provisions or contained in
any regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder and applicable to the
Company.
SECTION 2.32 PRODUCT LIABILITY. Except as set forth on SCHEDULE 2.32
hereto, the Company has given or made no express warranties to third parties
with respect to any products rented or sold by it except for the warranties
imposed by the provisions of the applicable law. There is no fact or event
forming the basis of a claim against any the Company for product liability on
account of any express warranty.
SECTION 2.33 BROKER'S OR FINDER'S FEES. Except as set forth on SCHEDULE
2.33, no agent, broker, person or firm acting on behalf of Seller or the Company
is, or will be, entitled to any commission or broker's or finder's fees from the
Seller or the Company, or from any person controlling, controlled by or under
common control with the Seller or the Company, in connection with any of the
transactions contemplated herein.
SECTION 2.34 DISCLOSURE. All Documents delivered or to be delivered by
or on behalf of the Seller in connection with this Agreement and the
transactions contemplated hereby are true, complete and correct, except as
otherwise set forth herein. Neither this Agreement, nor any of the other
Documents contains any untrue statement of a material fact or omits a material
fact necessary to make the statements made by Seller herein or therein, in light
of the circumstances in which made, not misleading. There is no fact known to
the Seller which materially and adversely affects the business, prospects or
financial condition of the Company or its properties or assets, which has not
been set forth in the Documents.
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE BUYER
As an inducement to the Seller and Company to enter into this Agreement and
to consummate the transactions contemplated hereby, the Buyer represents and
warrants to the Seller and Company as follows:
SECTION 3.1 ORGANIZATION. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Indiana and
is duly qualified to transact business as a foreign corporation in each
jurisdiction in which the failure to so qualify would have a material adverse
impact on the Buyer's ability to purchase the Common Stock pursuant to this
Agreement and perform its obligations under this Agreement.
SECTION 3.2 CORPORATE POWER AND AUTHORITY. The Buyer has the corporate
power and authority to execute, deliver and perform this Agreement and the other
Documents. The execution, delivery and performance of the Documents
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby have been duly authorized and approved by all necessary corporate
action of the Buyer. The Documents to be executed and delivered by the Buyer
have been duly executed and delivered by, and constitute the legal, valid and
binding obligation of the Buyer enforceable against the Buyer in accordance with
their terms.
SECTION 3.3 VALIDITY, ETC. Neither the execution and delivery by the
Buyer of this Agreement and the other Documents, the consummation by the Buyer
of the transactions contemplated hereby or thereby, nor the performance by the
Buyer of this Agreement and such other agreements in compliance with the terms
and conditions hereof and thereof will (i) violate, conflict with or result in
any breach of any trust agreement, articles of incorporation, bylaw, judgment,
decree, order, statute or regulation applicable to the Buyer, (ii) violate,
conflict with or result in a breach of or default (or give rise to any right of
termination, cancellation or acceleration) under any law, rule or regulation or
any judgment, decree, order, governmental permit, license or order or any of the
terms, conditions or provisions of any mortgage, indenture, note, license,
agreement or other instrument to which the Buyer is a party, or (iii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer.
SECTION 3.4 ACQUISITION OF STOCK FOR INVESTMENT. The Buyer is acquiring
the shares of Common Stock for investment and not with a view toward, or for
sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling such shares of Common Stock. The Buyer
agrees that such shares of Common Stock may not be sold, transferred, offered
for sale, pledged, hypothecated or otherwise disposed of without registration
under the Securities Act of 1933, as amended, except pursuant to an exemption
from registration available under such Act. Buyer will not sell, offer to sell
or solicit offers to buy any of the shares of Common Stock in violation of the
Securities Act of 1933 or the securities law of any state. Buyer understands
that the shares of Common Stock have not been registered under federal or any
state's securities laws.
SECTION 3.5 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm
acting on behalf of the Buyer is, or will be, entitled to any commission or
broker's or finder's fees from the Buyer, or from any person controlling,
controlled by or under common control with the Buyer, in connection with any of
the transactions contemplated herein.
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SECTION 3.6 GOVERNMENTAL APPROVALS. No registration or filing with, or
consent or approval of or other action by, any Federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by Buyer of this Agreement.
SECTION 3.7 DISCLOSURE. All Documents delivered or to be delivered by
or on behalf of the Buyer in connection with this Agreement and the transactions
contemplated hereby are true, complete and correct, except as otherwise set
forth herein. Neither this Agreement, nor any of the other Documents contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements made by Buyer herein or therein, in light of the
circumstances in which made, not misleading. There is no fact known to the
Buyer which may have a material adverse effect on the Buyer's ability to pay its
obligations under this Agreement, which has not been set forth in the Documents.
ARTICLE IV. COVENANTS AND AGREEMENTS
SECTION 4.1 COOPERATION. Each of the parties hereto shall use their
best efforts in good faith to perform and fulfill all conditions and obligations
to be fulfilled or performed by it hereunder to the end that the transactions
contemplated hereby will be fully and timely consummated.
SECTION 4.2 BEST EFFORTS. Seller and Buyer shall each use its best
efforts to procure upon reasonable terms and conditions all consents and
approvals, completion of all filings, all registrations and certificates, and
satisfaction of all other requirements prescribed by law which are necessary for
the consummation of the transactions contemplated by this Agreement and the
Buyer's ownership and operation of the Company's Business after the Closing
Date. Prior to the Closing Date, Company will use its best efforts to preserve
Company's relationships with its employees, customers and others having business
relationships with the Company.
SECTION 4.3 TAX RETURNS. Seller shall cause to be prepared and timely
filed, at Seller's sole expense, all of Company's required tax returns for all
periods ending on or prior to the Effective Date.
SECTION 4.4 INVESTIGATIONS. To the extent of his authority, Seller
shall give Buyer and its employees, accountants, attorneys and other authorized
representatives full access during all reasonable times to all the premises,
properties, books and records, and furnish Buyer with such financial and
operating data, analyses and other information of any kind respecting Company's
business and properties as Buyer shall from time to time request. Any
investigation shall be conducted in a manner which does not unreasonably
interfere with business operations.
SECTION 4.5 CONDUCT OF BUSINESS IN THE ORDINARY COURSE.
Seller shall cause Company to conduct its business only in the ordinary course.
By way of amplification and not limitation, except as otherwise provided herein,
Seller shall cause Company not to do without the prior written consent of Buyer,
any of the following: (i) borrow or agree to borrow any material amount of funds
or incur any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), or guarantee or agree to guarantee any obligations of
others, (ii) cancel any indebtedness owing to it or any claims that it might
possess, waive any material rights of substantial value or sell, lease,
encumber, transfer or otherwise dispose of, or agree to sell,
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lease, encumber, or otherwise dispose of its assets or permit any of its assets
to be subjected to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind, (iii) make any material capital expenditure
or commitment therefor, (iv) declare or pay any dividend or make any
distribution on any shares of its capital stock, or redeem, purchase or
otherwise acquire any shares of its capital stock or any option, warrant or
other right to purchase or acquire any such shares, (v) increase its
indebtedness for borrowed money or make any loan to any Person, (vi) write off
as uncollectible any notes or accounts receivable, except write-offs in the
ordinary course of business charged to applicable reserves, (vii) make any
material change in any method of accounting or auditing practice, (viii)
otherwise conduct its business or enter into any transaction, except in the
usual and ordinary manner, or (ix) agree, whether or not in writing, to do any
of the foregoing.
SECTION 4.6 PRESERVATION OF BUSINESS. Seller shall cause Company to use
its best efforts to preserve the possession and control of all of its assets and
Business, to preserve the goodwill of its customers and others with whom it has
business relations, and to do nothing to impair its ability to keep and preserve
its Business as it exists on the date of this Agreement.
SECTION 4.7 NOTIFICATION OF MATERIAL CHANGES AND LITIGATION.
Seller shall provide Buyer with prompt written notice, accompanied by a detailed
description and analysis, (a) of any material adverse, or to the best knowledge
of Seller, potentially material adverse change in the condition, earnings or
business of Company, (b) of any event or condition of any character (whether
actual or, to the best knowledge of Seller, threatened) pertaining to the
financial condition, business or assets of Company that has materially and
adversely affected, or has a substantial possibility of materially and adversely
affecting, any of such financial condition, business or assets, or causing any
of such business to be carried on materially less profitably than prior to the
date of this Agreement, and (c) of all claims, regulatory proceedings and
litigation (whether actual or, to the best knowledge of Seller, threatened and
whether or not material) against or possibly involving Company or (where such
actual or threatened or claims, regulatory proceedings or litigation arise in
connection with actions taken or alleged to be taken by any officer, employer or
director of Company) in any capacity as an officer, employee or director of
Company. Such adverse or potentially adverse material changes or such claims,
proceedings or litigation shall include, without limitation, any adverse or
potentially adverse material change in or any litigation arising in connection
with any item or matter reported on any schedule, exhibit or document delivered
by Seller to Buyer in connection with this Agreement.
ARTICLE V. CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligation of the Buyer to make deliveries to the Seller pursuant to
Section 1.2 hereof and to consummate the other transactions contemplated hereby
is subject to the satisfaction, on or before the Closing Date, of the following
conditions each of which may be waived by the Buyer in its sole discretion:
SECTION 5.1 INTRA-COMPANY DEBT. All indebtedness of all directors,
officers and employees of the Company to the Company shall have been repaid in
full and the Seller shall have delivered to the Buyer a certificate, dated the
Closing Date, to such effect.
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SECTION 5.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Seller herein contained shall be true in
all respects as stated herein, both when made and with the same effect as
though made again as of the Closing Date except to the extent of changes
permitted by the terms of this Agreement. Seller shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by Seller and Company prior to the Closing Date.
In addition, Seller shall have delivered to Buyer his certificate dated as of
the Closing Date, to the effect that, except as disclosed in the certificate,
he does not know of any breach of any representation or warranty made by it
in this Agreement or any failure to perform any covenant made by it herein or
to satisfy any condition to Seller's obligations to effect the transactions
contemplated by this Agreement.
SECTION 5.3 CONSENTS. Except as set forth on SCHEDULE 5.3, all
requisite governmental approvals and consents of third parties identified on
such schedule or otherwise identified by the Seller as required to be received
to prevent any material license, permit or agreement relating to the Business
from terminating prior to its scheduled termination, as a result of the
consummation of the transactions contemplated hereby, shall have been obtained.
SECTION 5.4 NONCOMPETITION AGREEMENT. Perry J. McNeal shall have
entered into a Noncompetition Agreement with the Company in substantially the
form attached hereto as (the "Noncompetition Agreement") EXHIBIT A.
SECTION 5.5 NO ACTIONS, SUITS OR PROCEEDINGS. As of the Closing Date,
no action, suit, investigation or proceeding brought by any person, corporation,
governmental agency or other entity shall be pending or, to the best knowledge
of Seller, threatened, before any court or governmental body (i) to restrain,
prohibit, restrict or delay, or to obtain damages or a discovery order in
respect of this Agreement or the consummation of the transactions contemplated
hereby, or (ii) which has had or may have a materially adverse effect on the
condition, financial or otherwise, or prospects of the Company. No order,
decree or judgment of any court or governmental body shall have been issued
restraining, prohibiting, restricting or delaying, the consummation of the
transactions contemplated by this Agreement. No insolvency proceeding of any
character including without limitation, bankruptcy, receivership,
reorganization, dissolution or arrangement with creditors, voluntary or
involuntary, affecting the Company shall be pending, and the Company shall not
have taken any action in contemplation of, or which would constitute the basis
for, the institution of any such proceedings and Seller shall have delivered to
the Buyer a certificate, dated the Closing Date, to such effect.
SECTION 5.6 OPINION OF COUNSEL TO SELLER. The Buyer shall have received
from Thompson & Singer, P.A., counsel to Company, an opinion, dated as of the
Closing Date, in form and substance reasonably satisfactory to Buyer, and to the
following effect:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Georgia. The Company is not
qualified to do business as a foreign corporation in any other state. The
nature of the Business does not require Company to be licensed or qualified in
any other jurisdiction. The Company has the corporate power and authority to
own, lease, operate and hold its properties and to carry on its business as now
conducted;
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(b) (i) The Seller has the power and authority to execute, deliver
and perform this Agreement and the other Documents and to consummate the
transactions contemplated hereby and thereby, and (b) that this Agreement and
the other Documents have been duly and validly executed and delivered by Seller
and constitute valid and binding obligations of the Seller, enforceable against
Seller in accordance with their terms;
(c) The Company has authorized capital consisting of 2,000,000 shares
of common stock, with a par value of $0.01 per share, of which 900,000 shares
are issued and outstanding and no shares are held as treasury stock. All of the
outstanding shares of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. None of the outstanding shares of the
Company have been issued in violation of any preemptive right. There are no
outstanding options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of capital stock of the Seller, other
than as contemplated by this Agreement;
(d) The Company has no subsidiaries and does not own, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any other corporation, partnership, association, trust, joint
venture or other entity;
(e) No registration or filing with, or consent or approval of or
other action by, any Federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery and
performance by Seller of this Agreement;
(f) Except as set forth on SCHEDULE 2.29 to this Agreement, there is
no (i) action, suit, claim, proceeding or investigation pending or, to the best
knowledge of Counsel, threatened against or affecting the Company (whether or
not such Company is a party or prospective party thereto), at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
(ii) arbitration proceeding pending relating to the Company or
(iii) governmental inquiry pending or threatened against or involving the
Company, and, to the best knowledge of counsel, there is no basis for any of the
foregoing. The Company has not received any opinion or memorandum or legal
advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to the
business, prospects, financial condition, operations, property or affairs of the
Company. There are no outstanding orders, writs, judgments, injunctions or
decrees served upon the Company by any court, governmental agency or arbitration
tribunal against the Company. To the best knowledge of counsel, there are no
facts or circumstances which may result in institution of any action, suit,
claim or legal, administrative or arbitration proceeding or investigation
against, involving or affecting the Company or the transactions contemplated
hereby. The Company is not in default with respect to any order, writ,
injunction or decree known to or served upon it from any court or of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. There is no action or
suit by the Company pending or threatened against others; and
(g) The execution and delivery of this Agreement and the other
Documents, the consummation of the transactions contemplated hereby and thereby,
and the performance of the Agreement and such other agreements in compliance
with the terms and conditions hereof and thereof by the Seller will not, to the
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best knowledge of counsel, (i) violate, conflict with or result in any breach of
any trust agreement, articles of incorporation, bylaw, judgment, decree, order,
statute or regulation applicable to the Company, (ii) violate, conflict with or
result in a breach, default or termination or give rise to any right of
termination, cancellation or acceleration of the maturity of any payment date of
any of the obligations of the Company or increase or otherwise affect the
obligations of the Company under any law, rule, regulation or any judgment,
decree, order, governmental permit, license or order or any of the terms,
conditions or provisions of any mortgage, indenture, note, license, agreement or
other instrument or obligation related to the Company or to the Seller's ability
to consummate the transactions contemplated hereby or thereby, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained in writing and provided to the
Buyer, or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company.
SECTION 5.7 INVESTIGATION SATISFACTORY. The Buyer shall be satisfied in
all respects with the results of its investigation of the properties, prospects
and affairs of the Company.
SECTION 5.8 CLOSING DOCUMENTS. The Seller shall have delivered all of
the resolutions, certificates, documents and instruments required by this
Agreement.
SECTION 5.9 APPROVAL OF THE BUYER AND ITS COUNSEL. All actions,
proceedings, consents, instruments and documents required to be delivered by, or
at the behest or direction of, the Seller hereunder or incident to its
performance hereunder, and all other related matters, shall be reasonably
satisfactory as to form and substance to the Buyer and its counsel.
ARTICLE VI. CONDITIONS TO THE SELLER'S OBLIGATIONS
The obligation of the Seller to transfer the Shares to the Buyer and to
consummate the other transactions contemplated hereby is subject to the
satisfaction, on or before the Closing Date, of the following conditions, each
of which may be waived by the Seller in its sole discretion:
SECTION 6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Buyer herein contained shall be true in all
respects as stated herein, both when made and with the same effect as though
made again as of the Closing Date except to the extent of changes permitted
by the terms of this Agreement or except for breaches of representations and
warranties which would not have a material adverse effect on the Buyer's
ability to pay its obligations under this Agreement. Buyer shall have
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by Buyer prior to the Closing
Date. In addition, Buyer shall have delivered to Seller its certificate
dated as of the Closing Date and signed by one of its officers, to the effect
that, except as disclosed in the certificate, he does not know of any breach
of any representation or warranty made by Buyer in this Agreement, or of any
failure to perform any covenant made by Buyer herein or to satisfy any
condition to Buyer's obligations to effect the transactions contemplated by
this Agreement which would have a material adverse effect on the Buyer's
ability to pay its obligations under this Agreement.
SECTION 6.2 NO ACTIONS, SUITS OR PROCEEDINGS. As of the Closing Date,
no action, suit, investigation or proceeding brought by any person, corporation,
governmental agency or other
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entity shall be pending or, to the best knowledge of the Buyer, threatened,
before any court or governmental body to restrain, prohibit, restrict or delay,
or to obtain damages or a discovery order in respect of this Agreement or the
consummation of the transactions contemplated hereby. No order, decree or
judgment of any court or governmental body shall have been issued restraining,
prohibiting, restricting or delaying, the consummation of the transactions
contemplated by this Agreement. No insolvency proceeding of any character
including without limitation, bankruptcy, receivership, reorganization,
dissolution or arrangement with creditors, voluntary or involuntary, affecting
the Buyer shall be pending, and the Buyer shall not have taken any action in
contemplation of, or which would constitute the basis for, the institution of
any such proceedings and Buyer shall have delivered to Seller a certificate,
dated Closing Date, to such effect.
SECTION 6.3 NONCOMPETITION AGREEMENT. The Company shall have entered
into the Noncompetition Agreement.
SECTION 6.4 OPINION OF STITES & HARBISON. The Seller shall have
received from Stites & Harbison, counsel to Buyer, an opinion dated as of the
Closing Date, in form and substance reasonably satisfactory to Seller, and to
the following effect:
(a) The Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Indiana and is duly qualified to
transact business as a foreign corporation in each jurisdiction in which the
failure to so qualify would have a material adverse impact on the Buyer's
ability to pay its obligations under this Agreement;
(b) The Buyer has the corporate power and authority to execute,
deliver and perform the Agreement and the other Documents. The execution,
delivery and performance of the Agreement and the other Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly executed and delivered by Buyer and constitute the legal, valid and
binding obligations of Buyer enforceable against Buyer in accordance with their
terms; and
(c) The execution and delivery of the Agreement and the other
Documents, the consummation of the transactions contemplated hereby and thereby,
and the performance of the Agreement and such other agreements in compliance
with the terms and conditions hereof and thereof by the Buyer will not (i)
violate, conflict with or result in any breach of any trust agreement, articles
of incorporation, bylaw, judgment, decree, order, statute or regulation
applicable to the Buyer, (ii) violate, conflict with or result in a breach of or
default (or give rise to any right of termination, cancellation or acceleration)
under any law, rule or regulation or any judgment, decree, order, governmental
permit, license or order or any of the terms, conditions or provisions of any
mortgage, indenture, note, license, agreement or other instrument to which the
Buyer is a party, or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Buyer.
SECTION 6.5 CLOSING DOCUMENTS. The Buyer shall have delivered all of
the resolutions, certificates, documents and instruments required by this
Agreement.
SECTION 6.6 APPROVAL OF THE SELLER AND ITS COUNSEL. All actions,
proceedings, consents, instruments and documents required to be delivered by, or
at the behest or direction of, the Buyer hereunder or incident to its
performance hereunder, and all other related matters, shall be reasonably
satisfactory as to form and substance to the Seller and its counsel.
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ARTICLE VII. THE CLOSING AND CERTAIN CLOSING DELIVERIES
SECTION 7.1 TIME AND PLACE OF CLOSING. Upon the terms and subject to
the satisfaction or waiver of the conditions contained in this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Thompson & Singer, 3151 Maple Drive, N.E., Atlanta,
Georgia 30305, on August 9, 1996 or on such other date and time as may be
mutually agreed upon by the parties (the "Closing Date"). The transactions
contemplated by this Agreement shall be effective as of 12:00:01 a.m. August 1,
1996 (the "Effective Date").
SECTION 7.2 DELIVERIES BY THE SELLER. At the Closing, the Seller will
deliver or cause to be delivered to the Buyer the following:
(a) Stock certificates representing the Shares owned by the Seller,
accompanied by stock powers duly executed in favor of the Buyer or duly executed
instruments of transfer and any other documents that are necessary to transfer
to the Buyer good and marketable title to the Shares;
(b) The stock books, stock ledgers, minute books, and other corporate
records of the Company;
(c) Resignations dated the Closing Date of all of the directors and
officers of the Company as designated by the Buyer;
(d) All required consents of third parties to the sale conveyance,
transfer, assignment and delivery of the Shares or any assets of the Company
hereunder;
(e) Payment in full to the Company of all accrued principal and
interest due on the Shareholder's Promissory Note in the face principal amount
of $400,000;
(f) A certificate of the Secretary of the Company certifying as of
the Closing Date (i) a true, correct, and complete copy of the Articles of
Incorporation of the Company and all amendments thereto as in effect on the
Closing Date; (ii) a true, correct, and complete copy of the bylaws of the
Company and all amendments thereto as in effect on the Closing Date; and (iii)
Certificate of Good Standing from the Georgia Secretary of State;
(g) A certificate of the Seller (i) certifying a true, correct and
complete copy of the resolutions authorizing the transaction contemplated herein
and (ii) certifying the information required by Sections 5.2 and 5.5;
(h) The affidavit of the Seller certifying as to his non-foreign
status in accordance with Section 1445(b)(2) of the Code;
(i) The Noncompetition Agreement required by Section 5.4 above;
(j) The Opinion of Seller's Counsel required by Section 5.6 above;
(k) A Release from the Seller which releases the Company from any and
all claims, known or unknown, contingent or direct, which he may have against
the Company as of the Closing Date, other than claims arising under this
Agreement and the other Documents and the transactions contemplated hereby;
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(l) All other documents, instruments and writings required to be
delivered by the Seller at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith.
SECTION 7.3 DELIVERIES BY THE BUYER. At the Closing, the Buyer will
deliver the following to or for the account of Seller:
(a) The Closing Payment required by Section 1.2 above;
(b) The Noncompetition Agreement required by Section 6.3 above;
(c) The Opinion of Buyer's Counsel required by Section 6.4 above;
(d) A certificate of an officer of the Buyer certifying as of the
Closing Date (i) a true, correct, and complete copy of the Articles of
Incorporation of the Buyer and all amendments thereto as in effect on the
Closing Date; (ii) a true, correct, and complete copy of the bylaws of the Buyer
and all amendments thereto as in effect on the Closing Date; (iii) a true,
correct, and complete copy of the resolutions approved and adopted by the Board
of Directors of the Buyer authorizing the transactions contemplated herein;
(iv) Good Standing from the Indiana Secretary of State; and (v) certifications
required by Sections 6.1 and 6.2;
(e) All other documents, instruments and writings required to be
delivered by the Buyer at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith.
ARTICLE VIII. TERMINATION
This Agreement may be terminated at any time before the Closing Date:
SECTION 8.1 DATE CERTAIN. By Buyer or Seller, if for any reason the
transactions contemplated by this Agreement have not been consummated by not
later than August 16, 1996.
SECTION 8.2 MUTUAL CONSENT. By Buyer and Seller, if for any reason
consummation of the transactions contemplated by this Agreement is inadvisable
in the opinions of both Buyer and Seller.
SECTION 8.3 BREACHES. Buyer may, in addition to other remedies which
may be available, upon prior written notice, terminate this Agreement in the
event Seller materially breaches any representation, warranty or covenant in
this Agreement or upon the failure and nonwaiver of any condition precedent set
out in Article V unless within ten (10) days after the written notice from the
Buyer, Seller shall have cured such breach or failure to the reasonable
satisfaction of Buyer, or have taken material steps to cure such default.
Seller may, in addition to other remedies which may be available, upon prior
written notice, terminate this Agreement in the event Buyer materially breaches
any representation, warranty or covenant in this Agreement or upon the failure
and nonwaiver of any condition precedent set out in Article VI unless within ten
(10) days after the written notice from Seller, Buyer shall have cured such
breach or failure or have taken material steps to cure such default.
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ARTICLE IX. SURVIVAL; INDEMNIFICATION AND OFFSET
SECTION 9.1 SURVIVAL. All representations and warranties in this
Agreement and the other Documents shall survive the Closing of the purchase of
the Common Stock contemplated hereby and any investigation at any time made by
or on behalf of any party for a period of three years and all such
representations and warranties shall expire on the third anniversary of the
Closing Date, except that (a) claims, if any, asserted in writing prior to such
third anniversary identified as a claim for indemnification pursuant to this
Article IX shall survive until finally resolved and satisfied in full, and
(b) tax or environmental claims arising from a breach of Sections 2.29 and 2.31,
respectively, shall survive the Closing of the purchase of the Shares
contemplated hereby for a period of five years, notwithstanding any
investigation at any time made by or on behalf of any party. The
representations and warranties shall not be affected or otherwise diminished by
any investigation at any time by or on behalf of the party for whose benefit
such representations and warranties were made.
SECTION 9.2 INDEMNIFICATION BY THE SELLER. Subject to the terms herein,
the Seller shall indemnify, defend, and hold the Company and the Buyer and the
respective officers, directors, and employees of the foregoing, and their
successors and assigns (the "Seller's Indemnities") harmless from, against and
with respect to any claim, liability, obligation, loss, damage, assessment,
judgment, cost and expense of any kind or character (the "Damages"), arising out
of or in any manner incident, relating or attributable to any inaccuracy in any
representation or breach of any warranty of the Seller contained in Section 2.1
and 2.2 of this Agreement.
Provided however that Seller's liability hereunder shall be limited to the
amount of the Purchase Price; and further provided that such Claims, which are
fully insured, are specifically excluded from this Section 9.2.
SECTION 9.3 NOTICE TO SELLER, ETC. If any of the matters as to which
the Seller's Indemnities are entitled to receive indemnification under Section
9.2 should entail litigation with or claims asserted by parties other than the
Seller, the Seller shall be given prompt notice thereof and shall have the
right, at its expense, to control such claim or litigation upon prompt notice to
Buyer of its election to do so. To the extent requested by Seller, the Buyer,
at its expense, shall cooperate with and assist the Seller, in connection with
such claim or litigation. Buyer shall have the right to appoint single counsel
to consult with and remain advised by Seller in connection with such claim or
litigation. Seller shall have final authority to determine all matters in
connection with such claim or litigation; PROVIDED, HOWEVER, that Seller shall
not settle any third party claim without the consent of the Buyer, which shall
not be unreasonably denied or delayed. Provided that if Buyer is in control of
such Claim, Buyer shall use its best efforts to conclude such Claim within two
(2) years of the date the Claim is asserted.
SECTION 9.4 INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify,
defend, and hold the Seller and its successors and assigns (the "Buyer's
Indemnities") harmless from, against and with respect to any claim, liability,
obligation, loss, damage, assessment, judgment, cost and expense of any kind or
character (the "Damages"), arising out of or in any manner incident, relating or
attributable to:
(a) Any inaccuracy in any representation or breach of warranty of the
Buyer contained in this Agreement;
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(b) Any failure by the Buyer to perform or observe, or to have
performed or observed, in full, any covenant, agreement or
condition to be performed or observed by it under any of the
Documents;
(c) Reliance by the Seller on any books or records of the Buyer or
reliance by the Seller on any written information furnished to
the Seller pursuant to this Agreement by or on behalf of the
Buyer in the event that such books and records or written
information are false or inaccurate; or
(d) The operation of the Business subsequent to the Closing Date.
Provided however that Buyer's liability hereunder shall be limited to the amount
of the Purchase Price; and further provides that such Claims, which are fully
insured are specifically excluded from this Section 9.4.
SECTION 9.5 NOTICE TO THE BUYER, ETC. If any of the matters as to which
the Buyer's Indemnities are entitled to receive indemnification under Section
9.4 should entail litigation with or claims asserted by parties other than the
Buyer, the Buyer shall be given prompt notice thereof and shall have the right,
at its expense, to control such claim or litigation upon prompt notice to Seller
of its election to do so. To the extent requested by the Buyer, the Seller, at
its expense, shall cooperate with and assist the Buyer, in connection with such
claim or litigation. Seller shall have the right to appoint single counsel to
consult with and remain advised by the Buyer in connection with such claim or
litigation. The Buyer shall have final authority to determine all matters in
connection with such claim or litigation; PROVIDED, HOWEVER, that the Buyer
shall not settle any third party claim without the consent of the Seller, which
shall not be unreasonably denied or delayed. Provided that if Buyer is in
control of such Claim, Buyer shall use its best efforts to conclude such Claim
within two (2) years of the date the Claim is asserted.
SECTION 9.6 SURVIVAL OF INDEMNIFICATION. The obligations to indemnify
and hold harmless pursuant to this Article IX shall survive the Closing of the
purchase of the Shares contemplated hereby for a period of three years,
notwithstanding any investigation at any time made by or on behalf of any party,
except that (a) claims, if any, asserted in writing prior to such third
anniversary identified as a claim for indemnification pursuant to this Article
IX shall survive until finally resolved and satisfied in full, and (b) tax or
environmental claims arising from a breach of Sections 2.28 and 2.30,
respectively, shall survive the Closing of the purchase of the Shares
contemplated hereby for a period of five years, notwithstanding any
investigation at any time made by or on behalf of any party.
ARTICLE X. MISCELLANEOUS
SECTION 10.1 KNOWLEDGE OF SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to the best
knowledge of Seller, Seller confirms that he has made due and diligent inquiry
of the Company's officers as to the matters that are the subject of such
representations and warranties.
SECTION 10.2 KNOWLEDGE OF BUYER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to the best
knowledge of Buyer, Buyer confirms that it has made due and diligent inquiry of
its President as to the
24
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matters that are the subject of such representations and warranties.
SECTION 10.3 "PERSON" DEFINED. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or other department or agency
thereof.
SECTION 10.4 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) sent by recognized overnight courier, (iii) made by telecopy or facsimile
transmission, or (iv) sent by registered or certified mail, return receipt
requested, postage prepaid.
If to the Buyer:
Alrenco, Inc.
P.O. Box 85
1736 East Main Street
New Albany, Indiana 47150-0085
Attn: Michael D. Walts, President
Fax No: (812) 948-2579
With a copy to:
Stites & Harbison
Court House Plaza
323 East Court Avenue
Jeffersonville, Indiana
Attn: Robert W. Lanum, Esq.
Fax No: (812) 284-5519
If to Seller:
Mr. Perry J. McNeal
200 Wicklawn Way
Roswell, Georgia 30076
Fax No: (770) 992-8570
With a copy to:
Thompson & Singer
3151 Maple Drive, N.E.
Atlanta, Georgia 30305
Attn: Douglas R. Thompson, Esq.
Fax No: (404) 385-5885
All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party set forth above, (ii) if sent
by overnight courier, on the next business day following the day such notice is
delivered to the courier service, (iii) if made by telecopy or facsimile
transmission, at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, or (iv) if sent by registered or certified
mail, on the fifth business day following the day such mailing is sent. The
address of any party herein may be changed at any time by written notice to the
parties.
SECTION 10.5 ENTIRE AGREEMENT. This Agreement and the other Documents
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior oral or written
agreements and
25
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understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement of any kind not expressly set
forth in the other Documents shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this Agreement.
SECTION 10.6 MODIFICATIONS AND AMENDMENTS. The terms and provisions of
this Agreement may be modified or amended only by written agreement executed by
all parties hereto.
SECTION 10.7 ASSIGNMENT/BINDING EFFECT. Neither this Agreement, nor any
right hereunder, may be assigned by any of the parties hereto without the prior
written consent of the other parties. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns.
SECTION 10.8 PARTIES IN INTEREST. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. Nothing in this
Agreement shall be construed to create any rights or obligations except among
the parties hereto and as set forth in Section 9.7, and no person or entity
shall be regarded as a third-party beneficiary of this Agreement.
SECTION 10.9 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF INDIANA WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 10.10 ARBITRATION. Any dispute or difference between the parties
hereto arising out of or relating to this Agreement shall be finally settled by
arbitration in accordance with the Commercial Rules of the American Arbitration
Association by a panel of three qualified arbitrators. The Seller and the Buyer
shall each choose an arbitrator and the third shall be chosen by the two so
chosen. If either the Seller or the Buyer fails to choose an arbitrator within
30 days after notice of commencement of arbitration or if the two arbitrators
fail to choose a third arbitrator within 30 days after their appointment, the
American Arbitration Association shall, upon the request of any party to the
dispute or difference, appoint the arbitrator or arbitrators to constitute or
complete the panel as the case may be. Arbitration proceedings hereunder may be
initiated by either the Seller, jointly, or the Buyer making a written request
to the American Arbitration Association, together with any appropriate filing
fee, at the office of the American Arbitration Association in Atlanta, Georgia.
All arbitration proceedings shall be held in Atlanta, Georgia. Any order or
determination of the arbitral tribunal shall be final and binding upon the
parties to the arbitration and may be entered in any court having jurisdiction.
SECTION 10.11 SEVERABILITY. In the event that any arbitral tribunal of
competent jurisdiction shall finally determine that any provision, or any
portion thereof, contained in this Agreement shall be void or unenforceable in
any respect, then such provision shall be deemed limited to the extent that such
arbitral tribunal determines it enforceable, and as so limited shall remain in
full force and effect. In the event that such arbitral tribunal shall determine
any such provision, or portion thereof, wholly unenforceable, the remaining
provisions of this Agreement shall nevertheless remain in full force and effect.
SECTION 10.12 INTERPRETATION. The parties hereto acknowledge and agree
that: (i) the rule of construction to the effect that any ambiguities are
resolved against the drafting
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party shall not be employed in the interpretation of this Agreement, and
(ii) the terms and provisions of this Agreement shall be construed fairly as to
all parties hereto and not in favor of or against any party, regardless of which
party was generally responsible for the preparation of this Agreement.
SECTION 10.13 HEADINGS AND CAPTIONS. The headings and captions of the
various subdivisions of this Agreement are for convenience of reference only and
shall in no way modify, or affect, or be considered in construing or
interpreting the meaning or construction of any of the terms or provisions
hereof.
SECTION 10.14 RELIANCE. The parties hereto agree that, notwithstanding
any right of any party to this Agreement to investigate the affairs of any other
party to this Agreement, the party having such right to investigate shall have
the right to rely fully upon the representations and warranties of the other
party expressly contained herein.
SECTION 10.15 EXPENSES. Each party shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) incurred in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
SECTION 10.16 GENDER. All pronouns and any variation thereof shall be
deemed to refer to the masculine, feminine, neuter, singular, or plural as the
identity of the person or entity or the context may require.
SECTION 10.17 PUBLICITY. Except by the mutual agreement between the
Seller and Buyer, no party shall issue any press release or otherwise make any
public statement with respect to the execution of, or the transactions
contemplated by, this Agreement except as may be required by law.
SECTION 10.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized officer all as of the day and year first
above written.
Buyer: ALRENCO, INC.
By: /s/ Michael D. Walts
----------------------------------------------
Title: President
-------------------------------------------
Seller:
/s/ Perry J. McNeal
--------------------------------------------------
Perry J. McNeal
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and between
Vyrdilee Brooks McNeal Scholarship Fund
Charitable Remainder Trust,
Network Rental, Inc.
and Alrenco, Inc.
* * * * * * * * * *
Closing Date: August 9, 1996
Effective Date: August 1, 1996
* * * * * * * * * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE OF STOCK....................................... 1
SECTION 1.1 Sale of Stock............................................ 1
SECTION 1.2 Purchase Price........................................... 1
SECTION 1.3 Retention of a Portion of the Purchase
Price and Offset......................................... 2
SECTION 1.4 Adjustments and 90-Day Post-Closing
Reconciliation........................................... 2
SECTION 2.1 Ownership of Stock....................................... 2
SECTION 2.2 Seller's Corporate Power and Authority................... 2
SECTION 2.3 Foreign Person........................................... 3
SECTION 2.4 Company's Corporate Authority............................ 3
SECTION 2.5 Organization, Qualification and
Corporate Power.......................................... 3
SECTION 2.6 Capitalization........................................... 3
SECTION 2.7 Subsidiaries and Investments............................. 4
SECTION 2.8 Books and Records........................................ 4
SECTION 2.9 Financial Statements..................................... 4
SECTION 2.10 Labor and Employee Relations............................. 4
SECTION 2.11 Powers of Attorney; Absence of
Limitations on Competition; Guarantees................... 5
SECTION 2.12 Significant Suppliers.................................... 5
SECTION 2.13 Governmental Approvals................................... 5
SECTION 2.14 Validity, Etc............................................ 5
SECTION 2.15 Absence of Adverse Change; Conduct of
Business................................................. 6
SECTION 2.16 Certain Practices........................................ 7
SECTION 2.17 Compliance with Law; Licenses and
Permits.................................................. 7
SECTION 2.18 Employee Benefits........................................ 7
SECTION 2.19 Fixed Assets............................................. 9
SECTION 2.20 Motor Vehicles and Equipment............................. 10
SECTION 2.21 Rental Contracts; Rental Merchandise..................... 10
SECTION 2.22 Insurance................................................ 11
SECTION 2.23 Outstanding Contracts.................................... 11
SECTION 2.24 Outstanding Leases....................................... 12
SECTION 2.25 Intellectual Properties.................................. 12
SECTION 2.26 Proprietary Information of Third
Parties.................................................. 13
SECTION 2.27 Transactions With Affiliates............................. 14
SECTION 2.28 Absence of Undisclosed Liabilities....................... 14
SECTION 2.29 Taxes.................................................... 14
SECTION 2.30 Litigation............................................... 15
SECTION 2.31 Environmental Matters.................................... 15
SECTION 2.32 Product Liability........................................ 17
SECTION 2.33 Broker's or Finder's Fees................................ 18
SECTION 2.34 Disclosure............................................... 18
SECTION 2.35 Certain Salaries......................................... 18
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE BUYER................... 18
SECTION 3.1 Organization............................................. 18
SECTION 3.2 Corporate Power and Authority............................ 18
SECTION 3.3 Validity, Etc............................................ 19
SECTION 3.4 Acquisition of Stock for Investment...................... 19
SECTION 3.5 Broker's or Finder's Fees................................ 19
SECTION 3.6 Governmental Approvals................................... 19
SECTION 3.7 Disclosure............................................... 19
ARTICLE IV. COVENANTS AND AGREEMENTS....................................... 20
SECTION 4.1 Cooperation.............................................. 20
SECTION 4.2 Best Efforts............................................. 20
SECTION 4.3 Tax Returns.............................................. 20
SECTION 4.4 Investigations........................................... 20
SECTION 4.5 Conduct of Business in the Ordinary
Course................................................... 20
SECTION 4.6 Preservation of Business................................. 21
SECTION 4.7 Notification of Material Changes and
Litigation............................................... 21
ARTICLE V. CONDITIONS TO THE BUYER'S OBLIGATIONS........................... 22
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SECTION 5.1 Intra-Company Debt....................................... 22
SECTION 5.2 Representations, Warranties and Covenants................ 22
SECTION 5.3 Consents................................................. 22
SECTION 5.4 Noncompetition Agreement................................. 22
SECTION 5.5 No Actions, Suits or Proceedings......................... 23
SECTION 5.6 Opinion of Counsel to Company............................ 23
SECTION 5.7 Opinion of Counsel to Seller............................. 25
SECTION 5.8 Investigation Satisfactory............................... 25
SECTION 5.9 Closing Documents........................................ 25
SECTION 5.10 Approval of the Buyer and Its Counsel.................... 26
ARTICLE VI. CONDITIONS TO THE SELLER'S OBLIGATIONS......................... 26
SECTION 6.1 Representations, Warranties and
Covenants................................................ 26
SECTION 6.2 No Actions, Suits or Proceedings......................... 26
SECTION 6.3 Opinion of Stites & Harbison............................. 27
SECTION 6.4 Closing Documents........................................ 27
SECTION 6.5 Approval of the Seller and Its Counsel................... 27
ARTICLE VII. THE CLOSING AND CERTAIN CLOSING DELIVERIES.................... 28
SECTION 7.1 Time and Place of Closing................................ 28
SECTION 7.2 Deliveries by the Seller and Company..................... 28
SECTION 7.3 Deliveries by the Buyer.................................. 29
ARTICLE VIII. TERMINATION.................................................. 30
SECTION 8.1 Date Certain............................................. 30
SECTION 8.2 Mutual Consent........................................... 30
SECTION 8.3 Breaches................................................. 30
ARTICLE IX. SURVIVAL; INDEMNIFICATION AND OFFSET........................... 30
SECTION 9.1 Survival................................................. 30
SECTION 9.2 Indemnification by the Seller............................ 31
SECTION 9.3 Notice to Seller, Etc.................................... 32
SECTION 9.4 Indemnification by the Buyer............................. 32
SECTION 9.5 Notice to the Buyer, Etc................................. 33
SECTION 9.6 Survival of Indemnification.............................. 33
SECTION 9.7 Offset................................................... 33
ARTICLE X. MISCELLANEOUS................................................... 33
SECTION 10.1 Knowledge of Company..................................... 33
SECTION 10.2 Knowledge of Buyer....................................... 34
SECTION 10.3 "Person" Defined......................................... 34
SECTION 10.4 Notices.................................................. 34
SECTION 10.5 Entire Agreement......................................... 35
SECTION 10.6 Modifications and Amendments............................. 35
SECTION 10.7 Assignment/Binding Effect................................ 35
SECTION 10.8 Parties in Interest...................................... 36
SECTION 10.9 Governing Law............................................ 36
SECTION 10.10 Arbitration.............................................. 36
SECTION 10.11 Severability............................................. 36
SECTION 10.12 Interpretation........................................... 37
SECTION 10.13 Headings and Captions.................................... 37
SECTION 10.14 Reliance................................................. 37
SECTION 10.15 Expenses................................................. 37
SECTION 10.17 Publicity................................................ 37
SECTION 10.18 Counterparts............................................. 37
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INDEX TO EXHIBITS
EXHIBIT A -- Noncompetition Agreement
INDEX TO SCHEDULES
Schedule 1.4(a) -- Purchase Price Adjustment
Schedule 1.4(b) -- Seller's Items
Schedule 2.5 -- Qualification
Schedule 2.9 -- Financial Statements
Schedule 2.11 -- Powers of Attorney
Schedule 2.12 -- Significant Suppliers
Schedule 2.13 -- Governmental Approvals
Schedule 2.14 -- Validity
Schedule 2.15 -- No Adverse Change
Schedule 2.17 -- Compliance with Laws
Schedule 2.18 -- Employee Benefits
Schedule 2.19 -- Fixed Assets
Schedule 2.20 -- Motor Vehicles and Equipment
Schedule 2.21 -- Rental Contracts
Schedule 2.22 -- Insurance
Schedule 2.23 -- Outstanding Contracts
Schedule 2.24 -- Outstanding Leases
Schedule 2.25 -- Intellectual Properties
Schedule 2.26 -- Proprietary Information of Third Parties
Schedule 2.27 -- Transactions with Affiliates
Schedule 2.28 -- Absence of Undisclosed Liabilities
Schedule 2.29 -- Taxes
Schedule 2.30 -- Litigation
Schedule 2.31 -- Environmental Matters
Schedule 2.32 -- Product Liability
Schedule 2.33 -- Broker's Fees
Schedule 2.35 -- Certain Salaries
Schedule 5.3 -- Consents
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This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
on this 9th day of August, 1996 by and between the Vyrdilee Brooks McNeal
Scholarship Fund Charitable Remainder Trust, a charitable remainder trust (the
"Seller"), NETWORK RENTAL, INC., a Georgia corporation (the "Company"), and
ALRENCO, INC. an Indiana corporation (the "Buyer") and is effective as of
12:00:01 a.m. August 1, 1996 (the "Effective Date").
PRELIMINARY STATEMENTS
The Seller owns 792,900 shares (the "Shares") of common stock, par value
$0.01 per share (the "Common Stock"), of the Company, or 88.1% of all of the
issued and outstanding Common Stock.
The Company is engaged in the business of operating rental-purchase stores
which offer quality brand name consumer merchandise to individuals under
flexible rental-purchase agreements in the Atlanta, Georgia area (the
"Business").
The Buyer desires to purchase and the Seller desires to sell all of the
Shares upon the terms and subject to the conditions set forth in this Agreement.
In consideration of these preliminary statements and the mutual covenants,
representations, warranties and agreements hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I. PURCHASE AND SALE OF STOCK
SECTION 1.1 SALE OF STOCK. Upon the terms and subject to the conditions
set forth in this Agreement, on the Closing Date the Seller agrees to sell,
assign, transfer and deliver to the Buyer, and the Buyer agrees to purchase from
Seller the Shares representing 88.1% of all of the issued and outstanding shares
of Common Stock of the Company. The certificates representing the Common Stock
shall be duly endorsed in blank, or accompanied by stock powers duly executed in
blank, by the Seller.
SECTION 1.2 PURCHASE PRICE. Upon the terms and subject to satisfaction
of the conditions set forth in this Agreement, in consideration of the aforesaid
sale, assignment, transfer and delivery of all outstanding shares of the Common
Stock, the Buyer will pay to Seller an aggregate purchase price of FIVE MILLION,
ONE HUNDRED FIFTY-SIX THOUSAND, TWO HUNDRED TWENTY DOLLARS ($5,156,220.00) (the
"Purchase Price") at the Closing, as hereinafter defined, as adjusted as
described in Section 1.4 herein.
SECTION 1.3 RETENTION OF A PORTION OF THE PURCHASE PRICE AND OFFSET.
Upon the terms set forth in this Agreement, the Seller hereby covenants and
agrees to retain at least $1,300,000 of the Purchase Price in the Trust for a
period of four (4) years following the Closing Date. THE SELLER AGREES THAT
THIS $1,300,000 PORTION OF THE PURCHASE PRICE IS EXPRESSLY SUBJECT TO BUYER'S
RIGHTS OF OFFSET SET FORTH IN SECTION 9.7 OF THIS AGREEMENT.
SECTION 1.4 ADJUSTMENTS AND 90-DAY POST-CLOSING RECONCILIATION.
(a) The Purchase Price shall be adjusted downward based on the
estimated deductions set forth on SCHEDULE 1.4(a). Within ninety days following
the Effective Date, the Buyer shall determine the actual amount of these
deductions. If such determination results in a greater amount of deductions,
Seller shall pay such amount to Buyer on a dollar for dollar basis; if
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such determination results in a lesser amount of deductions, Buyer shall pay
such amount to Seller on a dollar for dollar basis.
(b) The Purchase Price shall be adjusted upward based on the
estimated additions set forth on SCHEDULE 1.4(b). Within ninety (90) days
following the Effective Date, the Buyer shall determine the actual amount of
these additions. If such determination results in a greater amount of
additions, Buyer shall pay such amount to Seller on a dollar for dollar basis;
if such determination results in a lesser amount of additions, Seller shall pay
such amount to Buyer on a dollar for dollar basis.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND COMPANY
As an inducement to the Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company represents and
warrants to the Buyer as follows, unless otherwise stated:
SECTION 2.1 OWNERSHIP OF STOCK. The Seller represents and warrants that
it owns the Shares free and clear of all pledges, security interests, liens,
charges, encumbrances, equities, claims, options or limitations of every kind
("Claims") and the delivery to the Buyer of the Shares pursuant to the
provisions of this Agreement will transfer to the Buyer valid title thereto,
free and clear of all Claims.
SECTION 2.2 SELLER'S POWER AND AUTHORITY. The Seller represents and
warrants that it has the fiduciary power and authority to own and hold its
properties. The Seller (a) has the fiduciary power and authority to execute,
deliver and perform this Agreement, the Exhibits and Schedules hereto, and the
other documents and instruments contemplated hereby (collectively, this
Agreement, the Exhibits and Schedules hereto, and the other documents and
instruments contemplated hereby shall constitute the "Documents") and to
consummate the transactions contemplated hereby and thereby, (b) has taken all
necessary and required action to authorize and approve the execution, delivery
and performance of this Agreement and the other Documents and the consummation
of the transactions contemplated hereby and thereby, and (c) that this Agreement
and the other Documents have been duly and validly executed and delivered by
Seller, and to the best of Seller's knowledge, constitute valid and binding
obligations of the Seller, enforceable against Seller in accordance with their
terms.
SECTION 2.3 FOREIGN PERSON. The Seller represents and warrants that it
is not a foreign person as that term is defined in Section 1445(f)(3) of the
Code and applicable regulations.
SECTION 2.4 COMPANY'S CORPORATE AUTHORITY. The Company (a) has the
corporate power and authority to execute, deliver and perform this Agreement and
the other Documents and to consummate the transactions contemplated hereby and
thereby, (b) has taken all necessary corporate action to authorize and approve
the execution, delivery and performance of this Agreement and the other
Documents and the consummation of the transactions contemplated hereby and
thereby, and (c) that this Agreement and the other Documents have been duly and
validly executed and delivered by Company and, to the best of Company's
knowledge, constitute valid and binding obligations of the Company, enforceable
against Company in accordance with their terms.
SECTION 2.5 ORGANIZATION, QUALIFICATION AND CORPORATE POWER.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia. Except as set forth on
SCHEDULE 2.5, the Company is not qualified to do business as a foreign
corporation in any other state. The nature of the Business does not require
Company to be licensed or qualified in any other jurisdiction. Company has
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made available to the Buyer complete and correct copies of the Articles of
Incorporation and Bylaws of the Company as currently in effect. The Company
has the corporate power and authority to own, lease, operate and hold its
properties and to carry on its business as now conducted, and is using no
trade names.
SECTION 2.6 CAPITALIZATION. The Company has authorized capital
consisting of 2,000,000 shares of common stock, with a par value of $0.01 per
share, of which 900,000 shares are issued and outstanding and no shares are held
as treasury stock. All of the outstanding shares of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. None of the
outstanding shares of the Company have been issued in violation of any
preemptive right. There are no outstanding options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements of
any character providing for the purchase, issuance or sale of any shares of
capital stock of the Company, other than as contemplated by this Agreement.
SECTION 2.7 SUBSIDIARIES AND INVESTMENTS. The Company has no
subsidiaries and does not own, directly or indirectly, any capital stock or
other equity or ownership or proprietary interest in any other corporation,
partnership, association, trust, joint venture or other entity.
SECTION 2.8 BOOKS AND RECORDS. The minute books of the Company, which
have been and will be made available to the Buyer and its representatives,
contain accurate records of all meetings of and corporate actions or written
consents by the shareholders and Board of Directors of the Company set forth in
such minute books.
SECTION 2.9 FINANCIAL STATEMENTS. Seller has previously furnished to
the Buyer, and attached hereto as SCHEDULE 2.9 are, the audited balance sheet of
the Company as of May 31, 1996 (the "Balance Sheet Date") and 1995, the related
statements of income, stockholder's equity and cash flows for the years then
ended. All such financial statements (the "Financial Statements") have been
prepared, to the best of Company's knowledge, in accordance with generally
accepted accounting principles consistently applied and were prepared from the
books and records of the Company. Such books and records are complete and
correct in all material respects, accurately reflect all transactions of the
Business, and have been made available to the Buyer for examination. To the
best of Company's knowledge, the Financial Statements fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods ended on the dates thereof. To the
best of Company's knowledge, the Financial Statements reflect reserves
appropriate and adequate for all known material liabilities and reasonably
anticipated losses as required by generally accepted accounting principles.
Since the Balance Sheet Date, (i) there has been no change in the assets,
liabilities or financial condition of the Company from that reflected in the
Financial Statements except for changes in the ordinary course of business
consistent with past practice and which have not been materially adverse, and
(ii) none of the business, prospects, financial condition, operations, property
or affairs of the Company has been materially adversely affected by any
occurrence or development, individually or in the aggregate, whether or not
insured against. The Seller has disclosed to the Buyer all material facts
relating to the preparation of the Financial Statements.
SECTION 2.10 LABOR AND EMPLOYEE RELATIONS. The Company is not a party to
or bound by any collective bargaining agreement with any labor organization,
group or association covering any of its employees, and Company has no knowledge
of any attempt to organize the Company's employees by any Person, unit or group
seeking to act as their bargaining agent. There are no pending or threatened
charges (by employees, their representatives or governmental authorities) of
unfair labor practices or of employment discrimination or of any other wrongful
action with respect to any aspect of employment of any person employed or
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formerly employed by the Company. No union representation election relating to
employees of the Company has been scheduled by any governmental agency or
authority, no organizational effort is being made with respect to any of such
employees, and there is no investigation of the Company's employment policies or
practices by any governmental agency or authority pending or threatened. The
Company is not currently, nor has it been, involved in labor negotiations with
any unit or group seeking to become the bargaining unit for any employees of the
Company. The Company has not experienced any material work stoppages, and to
the best knowledge of Company, no work stoppage is planned.
SECTION 2.11 POWERS OF ATTORNEY; ABSENCE OF LIMITATIONS ON COMPETITION;
GUARANTEES.
Except as set forth in SCHEDULE 2.11, (i) no power of attorney or similar
authorization given by the Company presently is in effect or outstanding; (ii)
no contract or agreement to which the Company is a party or is bound or to which
the Company's properties or assets is subject limits the freedom of the Company
to compete in any line of business or with any Person; and (iii) the Company is
not a party to or bound by any guarantee of any debt or obligation of any other
Person.
SECTION 2.12 SIGNIFICANT SUPPLIERS. Set forth on SCHEDULE 2.12 is a true
and correct list of the Company's ten largest suppliers for the most recent
twelve (12) month period ending December 31, 1995, together with the amount of
merchandise attributable to such suppliers expressed in dollars and as a
percentage of total purchased merchandise. None of the suppliers identified on
SCHEDULE 2.12 has terminated, materially reduced or threatened to terminate or
materially reduce its relationship with the Company during the period covered by
such schedule. Copies of the standard form of purchase or supply contracts used
by the Company are set forth on SCHEDULE 2.12.
SECTION 2.13 GOVERNMENTAL APPROVALS. Except as set forth on SCHEDULE
2.13, no registration or filing with, or consent or approval of or other action
by, any Federal, state or other governmental agency or instrumentality is or
will be necessary for the valid execution, delivery and performance by Seller of
this Agreement.
SECTION 2.14 VALIDITY, ETC. Except as set forth on SCHEDULE 2.14,
neither the execution and delivery of this Agreement or the other Documents, the
consummation of the transactions contemplated hereby or thereby, nor the
performance of this Agreement or the other Documents in compliance with the
terms and conditions hereof and thereof by the Seller or Company will (i)
violate, conflict with or result in any breach of any trust agreement, Articles
of Incorporation, bylaw, judgment, decree, order, statute or regulation
applicable to the Company, (ii) violate, conflict with or result in a breach,
default or termination or give rise to any right of termination, cancellation or
acceleration of the maturity of any payment date of any of the obligations of
the Company or increase or otherwise affect the obligations of the Company under
any law, rule, regulation or any judgment, decree, order, governmental permit,
license or order or any of the terms, conditions or provisions of any mortgage,
indenture, note, license, agreement or other instrument or obligation related to
the Company or to the Seller's ability to consummate the transactions
contemplated hereby or thereby, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained in writing and provided to the Buyer, or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company.
SECTION 2.15 ABSENCE OF ADVERSE CHANGE; CONDUCT OF BUSINESS.
During the period from the Balance Sheet Date to and including the date of this
Agreement, except as set forth on SCHEDULE 2.15, the Company has not
(i) borrowed or agreed to borrow any material amount of funds or incurred any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise), or guaranteed or agreed to guarantee any obligations of others,
(ii) canceled any indebtedness owing to it or any claims that it
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might have possessed, waived any material rights of substantial value or sold,
leased, encumbered, transferred or otherwise disposed of, or agreed to sell,
lease, encumber, or otherwise dispose of its assets or permitted any of its
assets to be subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind, (iii) made any material capital
expenditure or commitment therefor, (iv) declared or paid any dividend or made
any distribution on any shares of its capital stock, or redeemed, purchased or
otherwise acquired any shares of its capital stock or any option, warrant or
other right to purchase or acquire any such shares, (v) increased its
indebtedness for borrowed money, or made any loan to any Person, (vi) written
off as uncollectible any notes or accounts receivable, except write-offs in the
ordinary course of business, (vii) made any material change in any method of
accounting or auditing practice, (viii) otherwise conducted its business or
entered into any transaction, except in the usual and ordinary manner, or
(ix) agreed, whether or not in writing, to do any of the foregoing.
SECTION 2.16 CERTAIN PRACTICES. None of the Seller, the Company nor any
of its directors or officers, or to the best knowledge of Company, the Company's
employees have, directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds; violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended; established or maintained any unlawful or unrecorded
fund of corporate monies or other assets; made any false or fictitious entry on
the books or records of the Company or any subsidiary; made any bribe, rebate,
payoff, influence payment, kickback, or other unlawful payment; given any favor
or gift which is not deductible for federal income tax purposes; or made any
bribe, kickback, or other payment of a similar or comparable nature, whether
lawful or not, to any person or entity, private or public, regardless of form,
whether in money, business or to obtain special concessions, or to pay for
favorable treatment for business secured or for special concessions already
obtained.
SECTION 2.17 COMPLIANCE WITH LAW; LICENSES AND PERMITS.
Except as set forth on SCHEDULE 2.17, the Company has complied in all material
respects with all laws, ordinances, legal requirements, rules, regulations and
orders applicable to it, its operations, properties, assets, products and
services. Except as set forth on SCHEDULE 2.17, there is no existing law, rule,
regulation or order, and Company is not aware of any proposed law, rule,
regulation or order, whether Federal, state or local, which would prohibit or
materially restrict the Buyer from, or otherwise materially adversely affect the
Buyer in, conducting the Business in the manner heretofore conducted by the
Company in any jurisdiction in which the Business is now conducted. The Company
possesses all franchises, permits, licenses, certificates and consents required
from any governmental or regulatory authority in order for the Company to carry
on its business as currently conducted and to own and operate its properties and
assets as now owned and operated and all of such licenses and permits are set
forth on SCHEDULE 2.17.
SECTION 2.18 EMPLOYEE BENEFITS.
(a) Set forth on SCHEDULE 2.18 is a list of all pension, profit
sharing, retirement, deferred compensation, stock purchase, stock option,
incentive, bonus, vacation, severance, disability, hospitalization, medical
insurance, life insurance, fringe benefit, welfare and other employee benefit
plans, programs or arrangements pursuant to which the Company or its ERISA
Affiliates provides (directly or indirectly, individually or jointly through
others) benefits or compensation to or on behalf of employees or former
employees of the Company or its ERISA Affiliates, whether formal or informal,
whether or not written ("Employee Plan"). On request by the Buyer, Company
shall furnish a copy of each Employee Plan and a copy of any related materials.
The Company will maintain the benefits listed
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on SCHEDULE 2.18 in full force and effect through the Closing Date. Except as
set forth on SCHEDULE 2.18, the Buyer shall not have any obligation or liability
of any kind or nature for any compensation or benefits of any kind or nature to
the employees or consultants of the Company for services rendered prior to the
Effective Date.
(b) Each Employee Plan covering any present or former employee of the
Company which is subject to the continuation health coverage requirements of
Section 4980B of the Code or Section 601 of ERISA or any applicable state law
has complied with all such requirements for continuation coverage.
(c) There are no actions, suits or claims pending (other than routine
claims for benefits) or threatened against or with respect to any Employee Plan
or the assets of any Employee Plan.
(d) Each Employee Plan (and the related trust or funding vehicle, if
any) has been administered and maintained in accordance with its terms and with
applicable law. Except as set forth on SCHEDULE 2.18(d), each Employee Plan
which is intended to be qualified under Section 401 of the Code and each
amendment to such plan is subject to a favorable determination letter from the
Internal Revenue Service and each such plan has at all times been maintained, by
its terms and in operation, in accordance with Section 401 of the Code. The
assets of each Employee Plan which is not funded through the general assets of
the Company are at least equal to the liabilities under such Employee Plan, and
all assets of each Employee Plan are shown on the books and records of such
Employee Plan at fair market value. No Employee Plan has unfunded liabilities
that as of the Closing Date are not accurately and fully reflected on the
Company's Balance Sheet.
(e) Neither the Company nor any of its ERISA Affiliates is or has
been a participant in, or is or has been obligated to maintain or to make
contributions to, a multi-employer plan (within the meaning of ERISA Section
3(37) and ERISA Section 4001(a)(3)) or an Employee Plan which is subject to
Title IV of ERISA. Neither the Company nor any ERISA Affiliate has sponsored,
contributed to or been obligated under Title I or IV of ERISA to contribute to a
"defined benefit plan" (as defined in ERISA Section 3(35)). The Company is not
obligated to provide post-retirement medical benefits or any other unfunded
post-retirement welfare benefits to or on behalf of any persons whatsoever
(except the benefits pursuant to the continuation health coverage requirements
under Section 4980B of the Code, ERISA Section 601, or applicable state law).
(f) Neither the Company nor its ERISA Affiliates is subject to and,
to the best knowledge of Company, no facts exist which could subject the Company
or any of its ERISA Affiliates to, any liability whatsoever which is directly or
indirectly related to any Employee Plan, including, but not limited to,
liability for benefit payments or related claims, any liability for any tax or
related penalty under the Code, or liability for any damages or penalties
arising under Title I or Title IV of ERISA. No reportable event under Section
4043 of ERISA has occurred or, to the best knowledge of the Company, will occur
with respect to such Employee Plan.
(g) Termination of or withdrawal from any Employee Plan immediately
after the Closing Date would not subject the Buyer to any liability, tax or
penalty whatsoever.
(h) The execution or performance of the transactions contemplated by
this Agreement will not create, accelerate or increase any obligations under the
Employee Plans, including any obligation to make any payment which would not be
deductible as an excess golden parachute payment under Section 280G of the Code.
(i) All contributions to or under each Employee Plan and all expenses
of each Employee Plan are fully deductible for income tax purposes for the
taxable year for which such contributions are made or such expenses are paid.
All
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contributions to or under each Employee Plan have been made when due under the
terms of such Employee Plan in accordance with applicable law.
(j) Neither the Company nor its ERISA Affiliates have entered into
any contract, agreement or arrangement (whether oral or written) under which the
Company or its ERISA Affiliates have assumed any liability relating to their
clients' retirement plans, nor have the Company and/or its ERISA Affiliates made
any verbal representations that the use of any employees of the Company or its
ERISA Affiliates would have no adverse consequence on such client retirement
plans.
(k) For purposes of this Section 2.18, the term "ERISA" shall mean
the Employee Retirement Income Security Act of 1974, as amended, and the term
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Company is treated as a single employer
under Section 414(b), (c), (m), (o) or (t) of the Code.
SECTION 2.19 FIXED ASSETS. SCHEDULE 2.19 contains a true and complete
list of all of Company's fixed assets with a net book value of greater than
$1,000.00, whether owned or leased. Except as shown on SCHEDULE 2.19, the
Company has good and marketable title to all of its fixed assets, free and clear
of all claims, liens, mortgages, charges and encumbrances except as disclosed in
the Financial Statements.
SECTION 2.20 MOTOR VEHICLES AND EQUIPMENT. SCHEDULE 2.20 sets forth all
of the Company's vehicles, including the age, make, model and vehicle
identification number of each, and all other items of equipment owned by the
Company. Such vehicles and items of equipment are (a) to the best knowledge of
Company, mechanically sound and in a condition to perform in a manner needed for
the operation of the Business; and (b) in compliance with all applicable
statutes, ordinances and regulations, including, without limitation, those
related to safety, in each case ordinary wear and tear excepted. Except as
shown on SCHEDULE 2.20, the Company has good and marketable title to all of its
vehicles and equipment, free and clear of all claims, liens, mortgages, charges
and encumbrances.
SECTION 2.21 RENTAL CONTRACTS; RENTAL MERCHANDISE.
(a) RENTAL CONTRACTS. There are no facts or circumstances which
would materially impair the validity or , to the best of knowledge of Company,
collectability of the rental due under any customer rental-purchase contracts
(including all rental, rental-purchase and rent-to-own agreements providing for
the rental to customers of furniture, appliances, equipment and other personal
property, the "Rental Contracts"). The forms of Rental Contracts used by the
Company comply as to form (including, without limitation, any instructions,
procedures or policies relating to the completion and processing of such Rental
Contracts) with all applicable laws, in all material respects, in each case
including but not limited to disclosure, billing, form, content, manner of
preparation and execution. A list of the Rental Contracts is attached hereto on
SCHEDULE 2.21.
(b) UNITS OF RENTAL MERCHANDISE ON RENT. As of the close of business
on July 31, 1996, the Company had no fewer than 10,161 units of rental
merchandise on rent represented by Current Rental Contracts. For purposes of
this Section 2.21, a "Current Rental Contract" shall mean a Rental Contract,
duly signed by a customer and otherwise legally enforceable and made in the
ordinary course of business, and a Current Rental Contract shall not include any
contract on which thirty (30) or more days have passed since the last full
payment was made by the customer.
(c) PAST DUE RENTAL CONTRACTS. As of the close of business on July
31, 1996, the total number of past due Rental Contracts, including all accounts
labeled "Skips and Stolens" did not exceed 33.4 percent of all active Rental
Contracts of the Company on that date. Said past due calculation was made in
the ordinary course of business, in strict accordance with the
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Company's past business practices in making such calculation and taking into
account only payments by customers.
(d) CONDITION AND LOCATION. To the best knowledge of the Company,
the rental merchandise of the Company is in good, merchantable and usable
condition, ordinary wear and tear excepted, and is reflected on the books and
records of the Company at the lower of cost or market value. Company has
delivered to the Buyer an itemized list of all of the Company's rental inventory
(including idle inventory) as of June 30, 1996, showing the date of purchase,
the supplier, the cost, description of each item sufficient to identify it to
the Buyer, and the location of each item. All of the rental merchandise is
owned by the Company and is maintained at the locations set forth on SCHEDULE
2.21.
SECTION 2.22 INSURANCE. The Company is, and will be through the Closing,
insured with insurers in respect of its properties, assets and businesses as set
forth on the attached SCHEDULE 2.22. SCHEDULE 2.22 lists the insurance coverage
carried by the Company, which insurance will remain in full force and effect
with respect to all events occurring prior to the Effective Date. Except as set
forth on SCHEDULE 2.22, the Company (i) has not failed to give any notice or
present any claim under any such policy or binder in due and timely fashion,
(ii) has not received notice of cancellation or non-renewal of any such policy
or binder, (iii) is not aware of any threatened or proposed cancellation or
non-renewal of any such policy or binder, (iv) has not received notice of any
insurance premiums which will be materially increased in the future, and (v) is
not aware of any insurance premiums which will be materially increased in the
future. There are no material outstanding claims under any such policy which
have gone unpaid for more than 45 days, or as to which the insurer has
disclaimed liability.
SECTION 2.23 OUTSTANDING CONTRACTS. SCHEDULE 2.23 sets forth a
description of all existing contracts, agreements, leases, commitments, licenses
and franchises, which involve obligations or commitments by the Company of
$10,000 or more and are not cancelable by the Company without penalty within 30
days (collectively "Contracts"), whether written or oral, relating to the
Company. Company has delivered or made available to the Buyer true, correct and
complete copies of all of the Contracts specified on SCHEDULE 2.23 which are in
writing, and such schedule sets forth a complete description of all Contracts
which are not in writing. All of the Contracts are in full force and effect and
enforceable in accordance with their terms, except to the extent that the
enforceability thereof may be subject to or affected by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, or other laws
relating to or affecting the rights of creditors generally. Except as set forth
on SCHEDULE 2.23 the Company and, to the best knowledge of Company, each other
party thereto has materially performed all the obligations required to be
performed by it, has received no notice of default and is not in default (with
due notice or lapse of time or both) under any of the Contracts. The Company
has no present expectation or intention of not fully performing all its
obligations under each of the Contracts, and Company has no knowledge of any
breach or anticipated breach by the other party to any of the Contracts to which
the Company is a party. Except as set forth on SCHEDULE 2.23, none of the
Contracts has been terminated; no notice has been given by any party thereto of
any alleged default by any party thereunder; and Company is not aware of any
intention or right of any party to declare another party to any of the Contracts
to be in default. Except as set forth on SCHEDULE 2.23, there exists no actual
or, to the best knowledge of Company, threatened termination, cancellation or
limitation of the business relationship of the Company by any party to any of
the Contracts.
SECTION 2.24 OUTSTANDING LEASES. The Company owns no real property.
SCHEDULE 2.24 sets forth a description of each agreement by which the Company
leases each parcel of real property (the "Leased Parcels") used in connection
with the Business (collectively, the "Leases"). Company has delivered or made
available to the Buyer true, correct and complete copies of
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all of the Leases specified on SCHEDULE 2.24. All rents due under the Leases
have been paid. All of the Leases are in full force and effect and enforceable
in accordance with their terms, except to the extent that the enforceability
thereof may be subject to or affected by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, or other laws relating to or
affecting the rights of creditors generally. Except as set forth on SCHEDULE
2.24, the Company and to the best knowledge of Company, each other party thereto
has performed all the obligations required to be performed by it, has received
no notice of default and is not in default (with due notice or lapse of time or
both) under any of the Leases. The Company has no present expectation or
intention of not fully performing all its obligations under each of the Leases,
and Company has no knowledge of any breach or anticipated breach by the other
party to any of the Leases. Except as set forth on SCHEDULE 2.24, none of the
Leases has been terminated; no notice has been given by any party thereto of any
alleged default by any party thereunder; and Company is not aware of any
intention or right of any party to declare another party to any of the Leases to
be in default. There exists no actual or, to the best knowledge of Company,
threatened termination, cancellation or limitation of the business relationship
of the Company with any party to any of the Leases.
SECTION 2.25 INTELLECTUAL PROPERTIES. SCHEDULE 2.25 contains an accurate
and complete list of all domestic and foreign letters patent, patents, patent
applications, patent licenses, software licenses and know-how licenses, trade
names, trademarks, copyrights, unpatented inventions, service marks, trademark
registrations and applications, service mark registrations and applications and
copyright registrations and applications, trade secrets or other confidential
proprietary information owned or used by the Company in the operation of the
Business (collectively the "Intellectual Property"). Except as set forth on
SCHEDULE 2.25 and except for commercial software licensed for use on personal
computers, the Company owns the entire right, title and interest in and to the
Intellectual Property, trade secrets and technology used in the operation of its
business and each item constituting part of the Intellectual Property and trade
secrets and technology which is owned by the Company has been, to the extent
indicated in SCHEDULE 2.25, duly registered with, filed in or issued by, as the
case may be, the United States Patent and Trademark office or such other
government entities, domestic or foreign as are indicated in SCHEDULE 2.25 and
such registrations, filings and issuances remain in full force and effect.
There have been and are no pending or, to the best knowledge of Company,
threatened proceedings or litigation or other adverse claims affecting or with
respect to the Intellectual Property. There is, to the best knowledge of
Company, no reasonable basis upon which a claim may be asserted against the
Company for infringement of any domestic or foreign letters patent, patents,
patent applications, patent licenses and know-how licenses, trade names,
trademark registrations and applications, common law trademarks, service marks,
service mark registrations or applications copyrights, copyright registrations
or applications, trade secrets or other confidential proprietary information.
To the best knowledge of Company, no Person is infringing the Intellectual
Property.
SECTION 2.26 PROPRIETARY INFORMATION OF THIRD PARTIES.
Except as disclosed on SCHEDULE 2.26, no third party has claimed or, to the best
knowledge of Company, has reason to claim that any Person employed by or
consulting with the Company ("Related Person") has (i) violated or may be
violating any of the terms or conditions of such person's employment, non-
competition or non-disclosure agreement with such third party, (ii) disclosed or
may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party, or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees. No third party has
requested information from the Company which suggests that such a claim might be
contemplated. Except as disclosed on SCHEDULE 2.26, to the best knowledge of
Company, no Related Person has employed or proposes to employ any trade secret
or any information or
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documentation proprietary to any former employer and, no Related Person has
violated any confidential relationship which such person may have had with any
third party, in connection with the development, or sale of any service of the
Company, and Company has no reason to believe there will be any such employment
or violation.
SECTION 2.27 TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 2.27, to the best knowledge of Company, no director, officer or
shareholder of the Company, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a beneficial interest greater than
5% or is an officer, director, trustee, partner or holder of any equity interest
greater than 5%, is a party to any transaction with the Company, including any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments or involving other obligations to any such person or firm.
SECTION 2.28 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Except as and to the extent of the amounts specifically reflected
or reserved against in the May 31, 1996 Financial Statements, or except as set
forth on SCHEDULE 2.28, the Company has no liabilities or obligations of any
nature whatsoever due or to become due, accrued, absolute, contingent or
otherwise, except for liabilities and obligations incurred since the date
thereof in the ordinary course of business and consistent with past practice.
Company does not know of, and has no reason to know of, any basis for the
assertion against Company of any liability or obligation not fully reflected or
reserved against in the Balance Sheet.
(b) The Company is not bound by any agreement, or subject to any
charter or other corporate restriction or any legal requirement, which has, or
in the future can reasonably be expected to have, a material adverse effect on
the business or prospects of the Company.
SECTION 2.29 TAXES. Except as set forth on SCHEDULE 2.29, all federal,
state, local and foreign tax returns and tax reports required to be filed by the
Company on or before the date hereof have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed and all amounts shown as owing thereon have been paid. All
taxes (including, without limitation, income, accumulated earnings, property,
sales, use, franchise, value added, fuel, employees' income withholding and
social security taxes) which have become due or payable or are required to be
collected by the Company or are otherwise attributable to any periods ending on
or before the Closing and all interest and penalties thereon, whether disputed
or not, have been paid or will be paid in full or adequately reflected on the
Balance Sheet or the Company's books and records in accordance with generally
accepted principles on or prior to the Closing. Except as set forth on SCHEDULE
2.29, all deposits required by law to be made by the Company with respect to
employees' withholding taxes have been duly made, and as of the Closing Date all
such deposits due will have been made. The Company has delivered to the Buyer
true and complete copies of all of Company's state and federal income tax
returns for the fiscal periods ended May 31, 1995, 1994 and 1993 and all reports
and results of income tax audits, if any, related thereto. Except as set forth
on SCHEDULE 2.29, no examination of any tax return of the Company is currently
in progress. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any such tax return.
SECTION 2.30 LITIGATION. Except as set forth on SCHEDULE 2.30, there is
no (i) action, suit, claim, proceeding or investigation pending or, to the best
knowledge of Company, threatened against or affecting the Company (whether or
not such Company is a party or prospective party thereto), at law or in equity,
or before or by any Federal, state, municipal or other
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governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, (ii) arbitration proceeding pending relating to the Company
or (iii) governmental inquiry pending or threatened against or involving the
Company, and there is no basis for any of the foregoing. The Company has not
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to the business, prospects, financial
condition, operations, property or affairs of the Company. There are no
outstanding orders, writs, judgments, injunctions or decrees served upon the
Company by any court, governmental agency or arbitration tribunal against the
Company. There are no facts or circumstances which may result in institution of
any action, suit, claim or legal, administrative or arbitration proceeding or
investigation against, involving or affecting the Company or the transactions
contemplated hereby. The Company is not in default with respect to any order,
writ, injunction or decree known to or served upon it from any court or of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. Except as disclosed on
SCHEDULE 2.30, there is no action or suit by the Company pending or threatened
against others.
SECTION 2.31 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. To the best of Seller's knowledge, the Company and
all Leased Parcels are in compliance, in all material respects, with all
applicable laws, rules, regulations, orders, ordinances, judgments and decrees
of all governmental authorities with respect to all environmental statutes,
rules and regulations. Except as set forth on SCHEDULE 2.31, the Company has
not received notice of, nor does Company have knowledge of, any past, present or
future events, conditions, circumstances, activities, practices, incidents,
actions or plans of the Company or the Company's predecessors, either
collectively, individually or severally, which may interfere with or prevent
continued compliance with, or which may give rise to any common law or legal
liability or otherwise form the basis of any claim, action, suit, proceeding,
hearing, or investigation, based on or related to the disposal, storage,
handling, manufacture, processing, distribution, use, treatment or transport, or
the emission, discharge, release or threatened release into the environment, of
any Substance. As used in this Section 2.31, the term "Substance" or
"Substances" shall mean any pollutant, hazardous substance, hazardous material,
hazardous waste or toxic waste, as defined in any presently enacted federal,
state or local statute or any regulation that has been promulgated pursuant
thereto. To the best of Seller's knowledge, no part of any of the Leased
Parcels has been listed or proposed for listing on the National Priorities List
established by the United States Environmental Protection Agency, or any other
such list by any federal, state or local authorities.
(b) ENVIRONMENTAL SUBSTANCE LIABILITY. No event has occurred or
condition exists or operating practice is being employed that could give rise to
liability, in any material respect, on the part of the Company, either at the
present time or in the future, for any losses, liabilities, damages (whether
consequential or otherwise), settlements, penalties, interest, expenses and
costs of responses, including any such liability on account of the right of any
governmental or private entity or person, and including closure expenses, costs
of assessment, containment, removal, or response (other than monitoring or
transportation or disposal of materials required to be transported or disposed
of in the ordinary course of business consistent with past practice) arising
under any rule or federal, state, or local statute, or any regulation that has
been promulgated pursuant thereto, or common law, as a result of or in
connection with, or alleged to be as a result of or in connection with, the
following:
(A) the handling, storage, use, transportation or disposal of
any Substances in or near or from, to the best of Seller's
knowledge, the Leased Parcels;
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(B) the handling, storage, use, transportation or disposal of
any Substances by the Company or its predecessors which
Substances were a product, by-product or otherwise resulted
from the operations conducted by or on behalf of the Company
or its predecessors;
(C) any intentional or unintentional emission, discharge or
release of any Substances in or near or from facilities into
or upon the air, surface water, ground water or land or any
disposal, handling, manufacturing, processing, distribution,
use, treatment, or transport of such Substances in or near
or from facilities by or on behalf of the Company or its
predecessors; or
(D) the presence of any toxic or hazardous building materials
(including but not limited to asbestos or similar
substances) in any facilities of the Company, including but
not limited to the inclusion of such materials in the
exterior and interior walls, floors, ceilings, tile,
insulation or any other portion of building structures.
(c) ENVIRONMENTAL PERMITS. The Company has obtained and holds all
material registrations, permits, licenses, and approvals issued by or on behalf
of any federal, state or local governmental body or agency if any
("Environmental Permits") that are required in connection with the operation by
the Company, to the best of Seller's knowledge, the Leased Parcels, the
discharge or emission of Substances by the Company, and to the best of Seller's
knowledge, the Leased Parcels or the generation, treatment, storage,
transportation, or disposal of any such Substances by the Company. Such
Environmental Permits, which are described on SCHEDULE 2.31, are currently
effective and sufficient for the operation of, and to the best of Seller's
knowledge, the Leased Parcels and the business of the Company as currently
conducted and intended to be conducted. The Company is in compliance, in all
material respects, with all terms and conditions of the Environmental Permits,
and is also in compliance, in all material respects, with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables contained in those laws or provisions or contained in
any regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder and applicable to the
Company.
SECTION 2.32 PRODUCT LIABILITY. Except as set forth on SCHEDULE 2.32
hereto, the Company has given or made no express warranties to third parties
with respect to any products rented or sold by it except for the warranties
imposed by the provisions of the applicable law. There is no fact or event
forming the basis of a claim against any the Company for product liability on
account of any express warranty.
SECTION 2.33 BROKER'S OR FINDER'S FEES. Except as set forth on SCHEDULE
2.33, no agent, broker, person or firm acting on behalf of Seller, Company or
the Company is, or will be, entitled to any commission or broker's or finder's
fees from the Seller, Company or the Company, or from any person controlling,
controlled by or under common control with the Seller or the Company, in
connection with any of the transactions contemplated herein.
SECTION 2.34 DISCLOSURE. All Documents delivered or to be delivered by
or on behalf of the Seller or the Company in connection with this Agreement and
the transactions contemplated hereby are true, complete and correct, except as
otherwise set forth herein. Neither this Agreement, nor any of the other
Documents contains any untrue statement of a material fact or omits a material
fact necessary to make the statements made by Seller or Company herein or
therein, in light of the circumstances in which made, not misleading. There is
no fact
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known to the Company which materially and adversely affects the business,
prospects or financial condition of the Company or its properties or assets,
which has not been set forth in the Documents.
SECTION 2.35 CERTAIN SALARIES. The current annual salaries of Jane
Madison and Stan Zolnik, Company's employees, are set forth on SCHEDULE 2.35.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE BUYER
As an inducement to the Seller and Company to enter into this Agreement and
to consummate the transactions contemplated hereby, the Buyer represents and
warrants to the Seller and Company as follows:
SECTION 3.1 ORGANIZATION. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Indiana and
is duly qualified to transact business as a foreign corporation in each
jurisdiction in which the failure to so qualify would have a material adverse
impact on the Buyer's ability to purchase the Common Stock pursuant to this
Agreement and perform its obligations under this Agreement.
SECTION 3.2 CORPORATE POWER AND AUTHORITY. The Buyer has the corporate
power and authority to execute, deliver and perform this Agreement and the other
Documents. The execution, delivery and performance of the Documents
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby have been duly authorized and approved by all necessary corporate
action of the Buyer. The Documents to be executed and delivered by the Buyer
have been duly executed and delivered by, and constitute the legal, valid and
binding obligation of the Buyer enforceable against the Buyer in accordance with
their terms.
SECTION 3.3 VALIDITY, ETC. Neither the execution and delivery by the
Buyer of this Agreement and the other Documents, the consummation by the Buyer
of the transactions contemplated hereby or thereby, nor the performance by the
Buyer of this Agreement and such other agreements in compliance with the terms
and conditions hereof and thereof will (i) violate, conflict with or result in
any breach of any trust agreement, articles of incorporation, bylaw, judgment,
decree, order, statute or regulation applicable to the Buyer, (ii) violate,
conflict with or result in a breach of or default (or give rise to any right of
termination, cancellation or acceleration) under any law, rule or regulation or
any judgment, decree, order, governmental permit, license or order or any of the
terms, conditions or provisions of any mortgage, indenture, note, license,
agreement or other instrument to which the Buyer is a party, or (iii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer.
SECTION 3.4 ACQUISITION OF STOCK FOR INVESTMENT. The Buyer is acquiring
the shares of Common Stock for investment and not with a view toward, or for
sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling such shares of Common Stock. The Buyer
agrees that such shares of Common Stock may not be sold, transferred, offered
for sale, pledged, hypothecated or otherwise disposed of without registration
under the Securities Act of 1933, as amended, except pursuant to an exemption
from registration available under such Act. Buyer will not sell, offer to sell
or solicit offers to buy any of the shares of Common Stock in violation of the
Securities Act of 1933 or the securities law of any state. Buyer understands
that the shares of Common Stock have not been registered under federal or any
state's securities laws.
SECTION 3.5 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm
acting on behalf of the Buyer is, or will be, entitled to any commission or
broker's or finder's fees from the Buyer, or from any person controlling,
controlled by or under common control with the Buyer, in connection with any of
the transactions contemplated herein.
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SECTION 3.6 GOVERNMENTAL APPROVALS. No registration or filing with, or
consent or approval of or other action by, any Federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by Buyer of this Agreement.
SECTION 3.7 DISCLOSURE. All Documents delivered or to be delivered by
or on behalf of the Buyer in connection with this Agreement and the transactions
contemplated hereby are true, complete and correct, except as otherwise set
forth herein. Neither this Agreement, nor any of the other Documents contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements made by Buyer herein or therein, in light of the
circumstances in which made, not misleading. There is no fact known to the
Buyer which may have a material adverse effect on the Buyer's ability to pay its
obligations under this Agreement, which has not been set forth in the Documents.
ARTICLE IV. COVENANTS AND AGREEMENTS
SECTION 4.1 COOPERATION. Each of the parties hereto shall use their
best efforts in good faith to perform and fulfill all conditions and obligations
to be fulfilled or performed by it hereunder to the end that the transactions
contemplated hereby will be fully and timely consummated.
SECTION 4.2 BEST EFFORTS. Seller, Company and Buyer shall each use its
best efforts to procure upon reasonable terms and conditions all consents and
approvals, completion of all filings, all registrations and certificates, and
satisfaction of all other requirements prescribed by law which are necessary for
the consummation of the transactions contemplated by this Agreement and the
Buyer's ownership and operation of the Company's Business after the Closing
Date. Prior to the Closing Date, Company will use its best efforts to preserve
Company's relationships with its employees, customers and others having business
relationships with the Company.
SECTION 4.3 TAX RETURNS. Seller shall be responsible for the payment
of, and will indemnify, defend and hold the Buyer harmless against all taxes due
or assessed which relate to the operations of the Business for all periods
ending on or prior to the Effective Date.
SECTION 4.4 INVESTIGATIONS. Company shall give Buyer and its employees,
accountants, attorneys and other authorized representatives full access during
all reasonable times to all the premises, properties, books and records, and
furnish Buyer with such financial and operating data, analyses and other
information of any kind respecting Company's business and properties as Buyer
shall from time to time request. Any investigation shall be conducted in a
manner which does not unreasonably interfere with business operations.
SECTION 4.5 CONDUCT OF BUSINESS IN THE ORDINARY COURSE.
Company shall conduct its business only in the ordinary course. By way of
amplification and not limitation, except as otherwise provided herein, Seller
shall not cause Company nor shall Company, without the prior written consent of
Buyer, do any of the following: (i) borrow or agree to borrow any material
amount of funds or incur any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise), or guarantee or agree to guarantee
any obligations of others, (ii) cancel any indebtedness owing to it or any
claims that it might possess, waive any material rights of substantial value or
sell, lease, encumber, transfer or otherwise dispose of, or agree to sell,
lease, encumber, or otherwise dispose of its assets or permit any of its assets
to be subjected to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind, (iii) make any material capital expenditure
or commitment therefor, (iv) declare or pay any dividend or make any
distribution on any shares of its capital stock, or redeem, purchase or
otherwise acquire any shares of its capital stock or any option, warrant or
other right to purchase or acquire any
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such shares, (v) increase its indebtedness for borrowed money or make any loan
to any Person, (vi) write off as uncollectible any notes or accounts receivable,
except write-offs in the ordinary course of business charged to applicable
reserves, (vii) make any material change in any method of accounting or auditing
practice, (viii) otherwise conduct its business or enter into any transaction,
except in the usual and ordinary manner, or (ix) agree, whether or not in
writing, to do any of the foregoing.
SECTION 4.6 PRESERVATION OF BUSINESS. Company shall use its best
efforts to preserve the possession and control of all of its assets and
Business, to preserve the goodwill of its customers and others with whom it has
business relations, and to do nothing to impair its ability to keep and preserve
its Business as it exists on the date of this Agreement.
SECTION 4.7 NOTIFICATION OF MATERIAL CHANGES AND LITIGATION.
Company shall provide Buyer with prompt written notice, accompanied by a
detailed description and analysis, (a) of any material adverse, or to the best
knowledge of Company, potentially material adverse change in the condition,
earnings or business of Company, (b) of any event or condition of any character
(whether actual or, to the best knowledge of Company, threatened) pertaining to
the financial condition, business or assets of Company that has materially and
adversely affected, or has a substantial possibility of materially and adversely
affecting, any of such financial condition, business or assets, or causing any
of such business to be carried on materially less profitably than prior to the
date of this Agreement, and (c) of all claims, regulatory proceedings and
litigation (whether actual or, to the best knowledge of Company, threatened and
whether or not material) against or possibly involving Company or (where such
actual or threatened or claims, regulatory proceedings or litigation arise in
connection with actions taken or alleged to be taken by any officer, employer or
director of Company) in any capacity as an officer, employee or director of
Company. Such adverse or potentially adverse material changes or such claims,
proceedings or litigation shall include, without limitation, any adverse or
potentially adverse material change in or any litigation arising in connection
with any item or matter reported on any schedule, exhibit or document delivered
by Seller to Buyer in connection with this Agreement.
ARTICLE V. CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligation of the Buyer to make deliveries to the Seller pursuant to
Section 1.2 hereof and to consummate the other transactions contemplated hereby
is subject to the satisfaction, on or before the Closing Date, of the following
conditions each of which may be waived by the Buyer in its sole discretion:
SECTION 5.1 INTRA-COMPANY DEBT. All indebtedness of all directors,
officers and employees of the Company to the Company shall have been repaid in
full and the Seller shall have delivered to the Buyer a certificate, dated the
Closing Date, to such effect.
SECTION 5.2 REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations and warranties of Company and Seller herein contained shall
be true in all respects as stated herein, both when made and with the same
effect as though made again as of the Closing Date except to the extent of
changes permitted by the terms of this Agreement. Seller and Company shall have
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by Seller and Company prior to the
Closing Date. In addition, each of Company and Seller shall have delivered to
Buyer its certificate dated as of the Closing Date, to the effect that, except
as disclosed in the certificate, it does not know of any breach of any
representation or warranty made by it in this Agreement or any failure to
perform any covenant made by it herein or to satisfy any condition to Seller's
obligations to effect the transactions contemplated by this Agreement.
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SECTION 5.3 CONSENTS. Except as set forth on SCHEDULE 5.3, all
requisite governmental approvals and consents of third parties identified on
such schedule or otherwise identified by the Company as required to be received
to prevent any material license, permit or agreement relating to the Business
from terminating prior to its scheduled termination, as a result of the
consummation of the transactions contemplated hereby, shall have been obtained.
SECTION 5.4 NONCOMPETITION AGREEMENT. Perry J. McNeal shall have
entered into a Noncompetition Agreement with the Company in substantially the
form attached hereto as (the "Noncompetition Agreement") EXHIBIT A.
SECTION 5.5 NO ACTIONS, SUITS OR PROCEEDINGS. As of the Closing Date,
no action, suit, investigation or proceeding brought by any person, corporation,
governmental agency or other entity shall be pending or, to the best knowledge
of Company, threatened, before any court or governmental body (i) to restrain,
prohibit, restrict or delay, or to obtain damages or a discovery order in
respect of this Agreement or the consummation of the transactions contemplated
hereby, or (ii) which has had or may have a materially adverse effect on the
condition, financial or otherwise, or prospects of the Company. No order,
decree or judgment of any court or governmental body shall have been issued
restraining, prohibiting, restricting or delaying, the consummation of the
transactions contemplated by this Agreement. No insolvency proceeding of any
character including without limitation, bankruptcy, receivership,
reorganization, dissolution or arrangement with creditors, voluntary or
involuntary, affecting the Company shall be pending, and the Company shall not
have taken any action in contemplation of, or which would constitute the basis
for, the institution of any such proceedings and Company shall have delivered to
the Buyer a certificate, dated the Closing Date, to such effect.
SECTION 5.6 OPINION OF COUNSEL TO COMPANY. The Buyer shall have
received from Thompson & Singer, P.A., counsel to Company, an opinion, dated as
of the Closing Date, in form and substance reasonably satisfactory to Buyer, and
to the following effect:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Georgia. The Company is not
qualified to do business as a foreign corporation in any other state. The
nature of the Business does not require Company to be licensed or qualified in
any other jurisdiction. The Company has the corporate power and authority to
own, lease, operate and hold its properties and to carry on its business as now
conducted;
(b) The Company (a) has the corporate power and authority to execute,
deliver and perform this Agreement, the Exhibits and Schedules hereto, and the
other documents and instruments contemplated hereby (collectively, this
Agreement, the Exhibits and Schedules hereto, and the other documents and
instruments contemplated hereby shall constitute the "Documents") and to
consummate the transactions contemplated hereby and thereby, (b) has taken all
necessary corporate action to authorize and approve the execution, delivery and
performance of this Agreement and the other Documents and the consummation of
the transactions contemplated hereby and thereby, and (c) that this Agreement
and the other Documents have been duly and validly executed and delivered by
Company and constitute valid and binding obligations of the Company, enforceable
against Company in accordance with their terms;
(c) The Company has authorized capital consisting of 2,000,000 shares
of common stock, with a par value of $0.01 per share, of which 900,000 shares
are issued and outstanding and no shares are held as treasury stock. All of the
outstanding shares of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. None of the outstanding shares of the
Company have been issued in violation of any preemptive right. There are no
outstanding options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans
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or other agreements of any character providing for the purchase, issuance or
sale of any shares of capital stock of the Company, other than as contemplated
by this Agreement;
(d) The Company has no subsidiaries and does not own, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any other corporation, partnership, association, trust, joint
venture or other entity;
(e) No registration or filing with, or consent or approval of or
other action by, any Federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery and
performance by Seller of this Agreement;
(f) Except as set forth on SCHEDULE 2.30 to this Agreement, there is
no (i) action, suit, claim, proceeding or investigation pending or, to the best
knowledge of Counsel, threatened against or affecting the Company (whether or
not such Company is a party or prospective party thereto), at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
(ii) arbitration proceeding pending relating to the Company or
(iii) governmental inquiry pending or threatened against or involving the
Company, and, to the best knowledge of counsel, there is no basis for any of the
foregoing. The Company has not received any opinion or memorandum or legal
advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to the
business, prospects, financial condition, operations, property or affairs of the
Company. There are no outstanding orders, writs, judgments, injunctions or
decrees served upon the Company by any court, governmental agency or arbitration
tribunal against the Company. To the best knowledge of counsel, there are no
facts or circumstances which may result in institution of any action, suit,
claim or legal, administrative or arbitration proceeding or investigation
against, involving or affecting the Company or the transactions contemplated
hereby. The Company is not in default with respect to any order, writ,
injunction or decree known to or served upon it from any court or of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. There is no action or
suit by the Company pending or threatened against others;
(g) The execution and delivery of this Agreement and the other
Documents, the consummation of the transactions contemplated hereby and thereby,
and the performance of the Agreement and such other agreements in compliance
with the terms and conditions hereof and thereof by the Seller will not, to the
best knowledge of counsel, (i) violate, conflict with or result in any breach of
any trust agreement, articles of incorporation, bylaw, judgment, decree, order,
statute or regulation applicable to the Company, (ii) violate, conflict with or
result in a breach, default or termination or give rise to any right of
termination, cancellation or acceleration of the maturity of any payment date of
any of the obligations of the Company or increase or otherwise affect the
obligations of the Company under any law, rule, regulation or any judgment,
decree, order, governmental permit, license or order or any of the terms,
conditions or provisions of any mortgage, indenture, note, license, agreement or
other instrument or obligation related to the Company or to the Seller's ability
to consummate the transactions contemplated hereby or thereby, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained in writing and provided to the
Buyer, or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company.
SECTION 5.7 OPINION OF COUNSEL TO SELLER. The Buyer shall have received
from Leon Pomerance, Esq., counsel to the Seller an opinion dated as of the
Closing Date in form and substance reasonably satisfactory to Buyer, and to the
following effect: The Seller has the corporate power and authority to own and
hold its properties. The Seller (a) has the corporate power
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and authority to execute, deliver and perform this Agreement and the other
Documents and to consummate the transactions contemplated hereby and thereby,
(b) has taken all necessary corporate action to authorize and approve the
execution, delivery and performance of this Agreement and the other Documents
and the consummation of the transactions contemplated hereby and thereby, and
(c) that this Agreement and the other Documents have been duly and validly
executed and delivered by Seller and constitute valid and binding obligations of
the Seller, enforceable against Seller in accordance with their terms.
SECTION 5.8 INVESTIGATION SATISFACTORY. The Buyer shall be satisfied in
all respects with the results of its investigation of the properties, prospects
and affairs of the Company.
SECTION 5.9 CLOSING DOCUMENTS. The Seller shall have delivered all of
the resolutions, certificates, documents and instruments required by this
Agreement.
SECTION 5.10 APPROVAL OF THE BUYER AND ITS COUNSEL. All actions,
proceedings, consents, instruments and documents required to be delivered by, or
at the behest or direction of, the Seller hereunder or incident to its
performance hereunder, and all other related matters, shall be reasonably
satisfactory as to form and substance to the Buyer and its counsel.
ARTICLE VI. CONDITIONS TO THE SELLER'S OBLIGATIONS
The obligation of the Seller to transfer the Common Stock to the Buyer and
to consummate the other transactions contemplated hereby is subject to the
satisfaction, on or before the Closing Date, of the following conditions, each
of which may be waived by the Seller in its sole discretion:
SECTION 6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations and warranties of Buyer herein contained shall be true in
all respects as stated herein, both when made and with the same effect as though
made again as of the Closing Date except to the extent of changes permitted by
the terms of this Agreement or except for breaches of representations and
warranties which would not have a material adverse effect on the Buyer's ability
to pay its obligations under this Agreement. Buyer shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by Buyer prior to the Closing Date. In addition,
Buyer shall have delivered to Seller its certificate dated as of the Closing
Date and signed by one of its officers, to the effect that, except as disclosed
in the certificate, he does not know of any breach of any representation or
warranty made by Buyer in this Agreement, or of any failure to perform any
covenant made by Buyer herein or to satisfy any condition to Buyer's obligations
to effect the transactions contemplated by this Agreement which would have a
material adverse effect on the Buyer's ability to pay its obligations under this
Agreement.
SECTION 6.2 NO ACTIONS, SUITS OR PROCEEDINGS. As of the Closing Date,
no action, suit, investigation or proceeding brought by any person, corporation,
governmental agency or other entity shall be pending or, to the best knowledge
of the Buyer, threatened, before any court or governmental body to restrain,
prohibit, restrict or delay, or to obtain damages or a discovery order in
respect of this Agreement or the consummation of the transactions contemplated
hereby. No order, decree or judgment of any court or governmental body shall
have been issued restraining, prohibiting, restricting or delaying, the
consummation of the transactions contemplated by this Agreement. No insolvency
proceeding of any character including without limitation, bankruptcy,
receivership, reorganization, dissolution or arrangement with creditors,
voluntary or involuntary, affecting the Buyer shall be pending, and the Buyer
shall not have taken any action in contemplation of, or which would constitute
the basis for, the institution of any such proceedings and Buyer shall have
delivered to Seller a certificate, dated Closing Date, to such effect.
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SECTION 6.3 OPINION OF STITES & HARBISON. The Seller shall have
received from Stites & Harbison, counsel to Buyer, an opinion dated as of the
Closing Date, in form and substance reasonably satisfactory to Seller, and to
the following effect:
(a) The Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Indiana and is duly qualified to
transact business as a foreign corporation in each jurisdiction in which the
failure to so qualify would have a material adverse impact on the Buyer's
ability to pay its obligations under this Agreement;
(b) The Buyer has the corporate power and authority to execute,
deliver and perform the Agreement and the other Documents. The execution,
delivery and performance of the Agreement and the other Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly executed and delivered by Buyer and constitute the legal, valid and
binding obligations of Buyer enforceable against Buyer in accordance with their
terms; and
(c) The execution and delivery of the Agreement and the other
Documents, the consummation of the transactions contemplated hereby and thereby,
and the performance of the Agreement and such other agreements in compliance
with the terms and conditions hereof and thereof by the Buyer will not (i)
violate, conflict with or result in any breach of any trust agreement, articles
of incorporation, bylaw, judgment, decree, order, statute or regulation
applicable to the Buyer, (ii) violate, conflict with or result in a breach of or
default (or give rise to any right of termination, cancellation or acceleration)
under any law, rule or regulation or any judgment, decree, order, governmental
permit, license or order or any of the terms, conditions or provisions of any
mortgage, indenture, note, license, agreement or other instrument to which the
Buyer is a party, or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Buyer.
SECTION 6.4 CLOSING DOCUMENTS. The Buyer shall have delivered all of
the resolutions, certificates, documents and instruments required by this
Agreement.
SECTION 6.5 APPROVAL OF THE SELLER AND ITS COUNSEL. All actions,
proceedings, consents, instruments and documents required to be delivered by, or
at the behest or direction of, the Buyer hereunder or incident to its
performance hereunder, and all other related matters, shall be reasonably
satisfactory as to form and substance to the Seller and its counsel.
ARTICLE VII. THE CLOSING AND CERTAIN CLOSING DELIVERIES
SECTION 7.1 TIME AND PLACE OF CLOSING. Upon the terms and subject to
the satisfaction or waiver of the conditions contained in this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Thompson & Singer, 3151 Maple Drive, N.E., Atlanta,
Georgia on August 9, 1996 or on such other date and time as may be mutually
agreed upon by the parties (the "Closing Date"). The transactions contemplated
by this Agreement shall be effective as of 12:00:01 a.m. August 1, 1996 (the
"Effective Date").
SECTION 7.2 DELIVERIES BY THE SELLER AND COMPANY. At the Closing, the
Seller and Company will deliver or cause to be delivered to the Buyer the
following:
(a) Stock certificates representing all of the issued and outstanding
shares of Common Stock owned by the Seller, accompanied by stock powers duly
executed in favor of the Buyer or duly executed instruments of transfer and any
other documents that are necessary to transfer to the Buyer good and marketable
title to all issued and outstanding shares of Common Stock;
(b) The stock books, stock ledgers, minute books, and other corporate
records of the Company;
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(c) Resignations dated the Closing Date of all of the directors and
officers of the Company as designated by the Buyer;
(d) All required consents of third parties to the sale conveyance,
transfer, assignment and delivery of the Common Stock or any assets of the
Company hereunder;
(e) A certificate of the Secretary of the Company certifying as of
the Closing Date (i) a true, correct, and complete copy of the Articles of
Incorporation of the Company and all amendments thereto as in effect on the
Closing Date; (ii) a true, correct, and complete copy of the bylaws of the
Company and all amendments thereto as in effect on the Closing Date; and (iii)
Certificate of Good Standing from the Georgia Secretary of State;
(f) A certificate of the Seller (i) certifying a true, correct and
complete copy of the resolutions authorizing the transaction contemplated herein
and (ii) certifying the information required by Sections 5.2 and 5.5;
(g) A certificate of the Company's controller and President
certifying the true, correct and complete amount of rental fees received by the
Company for the period beginning on the Effective Date through the date
immediately prior to the Closing Date.
(h) The affidavit of the Seller certifying as to its non-foreign
status in accordance with Section 1445(b)(2) of the Code;
(i) The Noncompetition Agreement required by Section 5.4 above;
(j) The Opinion of Company's Counsel required by Section 5.6 above;
(k) The Opinion of Seller's Counsel required by Section 5.7 above;
(l) A Release from the Seller which releases the Company from any and
all claims, known or unknown, contingent or direct, which he may have against
the Company as of the Closing Date, other than claims arising under this
Agreement and the other Documents and the transactions contemplated hereby;
(m) All other documents, instruments and writings required to be
delivered by the Seller at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith.
SECTION 7.3 DELIVERIES BY THE BUYER. At the Closing, the Buyer will
deliver the following to or for the account of Seller:
(a) The Purchase Price, as adjusted, required by Section 1.2 and 1.4
above;
(b) The Noncompetition Agreement required by Section 6.3 above;
(c) The Opinion of Buyer's Counsel required by Section 6.4 above;
(d) A certificate of an officer of the Buyer certifying as of the
Closing Date (i) a true, correct, and complete copy of the Articles of
Incorporation of the Buyer and all amendments thereto as in effect on the
Closing Date; (ii) a true, correct, and complete copy of the bylaws of the Buyer
and all amendments thereto as in effect on the Closing Date; (iii) a true,
correct, and complete copy of the resolutions approved and adopted by the Board
of Directors of the Buyer authorizing the transactions contemplated herein;
(iv) Good Standing from the Indiana Secretary of State; and (v) certifications
required by Sections 6.1 and 6.2;
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(e) All other documents, instruments and writings required to be
delivered by the Buyer at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith.
ARTICLE VIII. TERMINATION
This Agreement may be terminated at any time before the Closing Date:
SECTION 8.1 DATE CERTAIN. By Buyer or Seller, if for any reason the
transactions contemplated by this Agreement have not been consummated by not
later than August 16, 1996.
SECTION 8.2 MUTUAL CONSENT. By Buyer and Seller, if for any reason
consummation of the transactions contemplated by this Agreement is inadvisable
in the opinions of both Buyer and Seller.
SECTION 8.3 BREACHES. Buyer may, in addition to other remedies which
may be available, upon prior written notice, terminate this Agreement in the
event Seller materially breaches any representation, warranty or covenant in
this Agreement or upon the failure and nonwaiver of any condition precedent set
out in Article V unless within ten (10) days after the written notice from the
Buyer, Seller shall have cured such breach or failure to the reasonable
satisfaction of Buyer, or have taken material steps to cure such defaults.
Seller may, in addition to other remedies which may be available, upon prior
written notice, terminate this Agreement in the event Buyer materially breaches
any representation, warranty or covenant in this Agreement or upon the failure
and nonwaiver of any condition precedent set out in Article VI unless within ten
(10) days after the written notice from Seller, Buyer shall have cured such
breach or failure, or have taken material steps to cure such defaults.
ARTICLE IX. SURVIVAL; INDEMNIFICATION AND OFFSET
SECTION 9.1 SURVIVAL. All representations and warranties in this
Agreement and the other Documents shall survive the Closing of the purchase of
the Common Stock contemplated hereby and any investigation at any time made by
or on behalf of any party for a period of three years and all such
representations and warranties shall expire on the third anniversary of the
Closing Date, except that (a) claims, if any, asserted in writing prior to such
third anniversary identified as a claim for indemnification pursuant to this
Article IX shall survive until finally resolved and satisfied in full, and
(b) tax or environmental claims arising from a breach of Sections 2.29 and 2.31,
respectively, shall survive the Closing of the purchase of the Shares
contemplated hereby for a period of five years, notwithstanding any
investigation at any time made by or on behalf of any party. The
representations and warranties shall not be affected or otherwise diminished by
any investigation at any time by or on behalf of the party for whose benefit
such representations and warranties were made.
SECTION 9.2 INDEMNIFICATION BY THE SELLER. Subject to the terms herein,
the Seller shall indemnify, defend, and hold the Company and the Buyer and the
respective officers, directors, and employees of the foregoing, and their
successors and assigns (the "Seller's Indemnitees") harmless from, against and
with respect to any claim, liability, obligation, loss, damage, assessment,
judgment, cost and expense of any kind or character (the "Damages"), arising out
of or in any manner incident, relating or attributable to:
(a) Any inaccuracy in any representation or breach of any warranty of
the Seller or Company contained in this Agreement;
(b) Any failure by the Seller or Company to perform or observe, or to
have performed or observed, in
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full, any covenant, agreement or condition to be performed or
observed by it under this Agreement;
(c) Reliance by the Buyer on any books or records of the Company or
written information furnished to the Buyer pursuant to this
Agreement by or on behalf of the Seller, Company or the Company
in the event that such books and records or written information
are false or materially inaccurate; or
(d) Liabilities or obligations of, or claims against, the Company or
the Buyer (whether absolute, accrued, contingent or otherwise)
relating to, or arising out of, the operation of the Business
prior to the Closing Date or facts and circumstances relating
specifically to the Business, the Leased Parcels, or the Company
existing at or prior to the Closing Date, whether or not such
liabilities, obligations or claims were known on such date,
excluding only liabilities set forth on Schedule 1.4(a) and
liabilities and obligations incurred since the date thereof in
the ordinary course of business and consistent with past
practice.
Provided, however, Seller's Indemnitees shall not be entitled to indemnification
or offset hereunder until Damages in total exceed $10,000 and then only to the
extent of aggregate Damages in excess of $10,000; and further provided that
Seller's liability hereunder (except for Seller's breach of its representation
and warranty set forth in Section 2.1 hereinabove) shall be limited to
$1,300,000; and further provided that such Claims, which are fully insured, are
specifically excluded from this Section 9.2.
SECTION 9.3 NOTICE TO SELLER, ETC. If any of the matters as to which
the Seller's Indemnitees are entitled to receive indemnification under Section
9.2 should entail litigation with or claims asserted by parties other than the
Seller, the Seller shall be given prompt notice thereof and shall have the
right, at its expense, to control such claim or litigation upon prompt notice to
Buyer of its election to do so. To the extent requested by Seller, the Buyer,
at its expense, shall cooperate with and assist the Seller, in connection with
such claim or litigation. Buyer shall have the right to appoint single counsel
to consult with and remain advised by Seller in connection with such claim or
litigation. Seller shall have final authority to determine all matters in
connection with such claim or litigation; PROVIDED, HOWEVER, that Seller shall
not settle any third party claim without the consent of the Buyer, which shall
not be unreasonably denied or delayed. Provided that if Buyer is in control of
such Claim, Buyer shall use its best efforts to conclude such claim within two
(2) years of the date the Claim is asserted.
SECTION 9.4 INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify,
defend, and hold the Seller and its successors and assigns (the "Buyer's
Indemnitees") harmless from, against and with respect to any claim, liability,
obligation, loss, damage, assessment, judgment, cost and expense of any kind or
character (the "Damages"), arising out of or in any manner incident, relating or
attributable to:
(a) Any inaccuracy in any representation or breach of warranty of the
Buyer contained in this Agreement;
(b) Any failure by the Buyer to perform or observe, or to have
performed or observed, in full, any covenant, agreement or
condition to be performed or observed by it under any of the
Documents;
(c) Reliance by the Seller on any books or records of the Buyer or
reliance by the Seller on any written information furnished to
the Seller pursuant to this Agreement by or on behalf of the
Buyer in the event that such books and records or written
information are false or inaccurate; or
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(d) The operation of the Business subsequent to the Closing Date.
Provided, however, Buyer's Indemnitees shall not be entitled to indemnification
hereunder until Damages in total exceed $10,000 and then only to the extent of
aggregate damages in excess of $10,000; and further provided that Buyer's
liability hereunder shall be limited to $1,300,000; and further provided that
such Claims, which are fully insured, are specifically excluded from this
Section 9.4.
.
SECTION 9.5 NOTICE TO THE BUYER, ETC. If any of the matters as to which
the Buyer's Indemnitees are entitled to receive indemnification under Section
9.4 should entail litigation with or claims asserted by parties other than the
Buyer, the Buyer shall be given prompt notice thereof and shall have the right,
at its expense, to control such claim or litigation upon prompt notice to Seller
of its election to do so. To the extent requested by the Buyer, the Seller, at
its expense, shall cooperate with and assist the Buyer, in connection with such
claim or litigation. Seller shall have the right to appoint single counsel to
consult with and remain advised by the Buyer in connection with such claim or
litigation. The Buyer shall have final authority to determine all matters in
connection with such claim or litigation; PROVIDED, HOWEVER, that the Buyer
shall not settle any third party claim without the consent of the Seller, which
shall not be unreasonably denied or delayed. Provided that if Buyer is in
control of such Claim, Buyer shall use its best efforts to conclude such claim
within two (2) years of the date the Claim is asserted.
SECTION 9.6 SURVIVAL OF INDEMNIFICATION. The obligations to indemnify
and hold harmless pursuant to this Article IX shall survive the Closing of the
purchase of the Common Stock contemplated hereby for a period of three years,
notwithstanding any investigation at any time made by or on behalf of any party,
except that (a) claims, if any, asserted in writing prior to such third
anniversary identified as a claim for indemnification pursuant to this Article
IX shall survive until finally resolved and satisfied in full, and (b) tax or
environmental claims arising from a breach of Sections 2.29 and 2.31,
respectively, shall survive the Closing of the purchase of the Shares
contemplated hereby for a period of five years, notwithstanding any
investigation at any time made by or on behalf of any party.
SECTION 9.7 OFFSET. Seller acknowledges and agrees that the Buyer shall
be entitled to offset the following indemnity claims under Section 9.2 of this
Agreement against the $1,300,000 portion of the Purchase Price held by the
Seller in the Trust pursuant to Section 1.3 hereof, in the following manner. In
the event of a claim of offset, Buyer shall give Seller notice in the manner as
set out in Section 9.3 and Seller shall have ninety (90) days to investigate or
resolve the claim, provided that Seller shall keep Buyer fully advised of its
conduct in resolving the claim. If Seller has not resolved the claim or a
dispute concerning the claim remains, then the amount of such claim shall be
held in the Trust until such claim has been approved under an appropriate order
or determination of the arbitral tribunal provided for in Section 10.10 below.
ARTICLE X. MISCELLANEOUS
SECTION 10.1 KNOWLEDGE OF COMPANY. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to the best
knowledge of Company, Company confirms that it has made due and diligent inquiry
of the Company's officers as to the matters that are the subject of such
representations and warranties.
SECTION 10.2 KNOWLEDGE OF BUYER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to the best
knowledge of Buyer, Buyer confirms that it has made due and diligent inquiry of
its President as to the
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matters that are the subject of such representations and warranties.
SECTION 10.3 "PERSON" DEFINED. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or other department or agency
thereof.
SECTION 10.4 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) sent by recognized overnight courier, (iii) made by telecopy or facsimile
transmission, or (iv) sent by registered or certified mail, return receipt
requested, postage prepaid.
If to the Buyer:
Alrenco, Inc.
P.O. Box 85
1736 East Main Street
New Albany, Indiana 47150-0085
Attn: Michael D. Walts, President
Fax No: (812) 948-2579
With a copy to:
Stites & Harbison
Court House Plaza
323 East Court Avenue
Jeffersonville, Indiana
Attn: Robert W. Lanum, Esq.
Fax No: (812) 284-5519
If to Seller:
Vyrdilee Brooks McNeal Scholarship Fund
Charitable Remainder Trust
15060 Crabapple Lake Drive
Roswell, Georgia 30076
Attn: Trustee
Fax No: (404) 239-5692
With a copy to:
Thompson & Singer, P.A.
3151 Maple Drive, N.E.
Atlanta, Georgia 30305
Attn: Douglas R. Thompson, Esq.
Fax No: (404) 385-6885
If to Company:
c/o Mr. Perry J. McNeal
200 Wicklawn Way
Roswell, Georgia 30076
Fax No: (770) 992-8570
With a copy to:
Thompson & Singer, P.A.
3151 Maple Drive, N.E.
Atlanta, Georgia 30305
Attn: Douglas R. Thompson, Esq.
Fax No: (404) 385-6885
All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party set forth above, (ii) if sent
by overnight courier, on the next business day following the day such notice is
delivered to the courier service, (iii) if made by telecopy or facsimile
transmission, at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, or (iv) if sent by registered or certified
mail, on the fifth business day
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following the day such mailing is sent. The address of any party herein may be
changed at any time by written notice to the parties.
SECTION 10.5 ENTIRE AGREEMENT. This Agreement and the other Documents
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in the other Documents shall affect, or be used to
interpret, change or restrict, the express terms and provisions of this
Agreement.
SECTION 10.6 MODIFICATIONS AND AMENDMENTS. The terms and provisions of
this Agreement may be modified or amended only by written agreement executed by
all parties hereto.
SECTION 10.7 ASSIGNMENT/BINDING EFFECT. Neither this Agreement, nor any
right hereunder, may be assigned by any of the parties hereto without the prior
written consent of the other parties. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns.
SECTION 10.8 PARTIES IN INTEREST. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. Nothing in this
Agreement shall be construed to create any rights or obligations except among
the parties hereto, and no person or entity shall be regarded as a third-party
beneficiary of this Agreement.
SECTION 10.9 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF INDIANA WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 10.10 ARBITRATION. Any dispute or difference between the parties
hereto arising out of or relating to this Agreement shall be finally settled by
arbitration in accordance with the Commercial Rules of the American Arbitration
Association by a panel of three qualified arbitrators. The Seller and the Buyer
shall each choose an arbitrator and the third shall be chosen by the two so
chosen. If either the Seller or the Buyer fails to choose an arbitrator within
30 days after notice of commencement of arbitration or if the two arbitrators
fail to choose a third arbitrator within 30 days after their appointment, the
American Arbitration Association shall, upon the request of any party to the
dispute or difference, appoint the arbitrator or arbitrators to constitute or
complete the panel as the case may be. Arbitration proceedings hereunder may be
initiated by either the Seller, jointly, or the Buyer making a written request
to the American Arbitration Association, together with any appropriate filing
fee, at the office of the American Arbitration Association in Atlanta, Georgia.
All arbitration proceedings shall be held in Atlanta, Georgia. Any order or
determination of the arbitral tribunal shall be final and binding upon the
parties to the arbitration and may be entered in any court having jurisdiction.
SECTION 10.11 SEVERABILITY. In the event that any arbitral tribunal of
competent jurisdiction shall finally determine that any provision, or any
portion thereof, contained in this Agreement shall be void or unenforceable in
any respect, then such provision shall be deemed limited to the extent that such
arbitral tribunal determines it enforceable, and as so limited shall remain in
full force and effect. In the event that such arbitral tribunal shall determine
any such provision, or portion thereof, wholly unenforceable, the remaining
provisions of this Agreement shall nevertheless remain in full force and effect.
SECTION 10.12 INTERPRETATION. The parties hereto acknowledge and agree
that: (i) the rule of construction to the effect that any ambiguities are
resolved against the drafting party shall not be employed in the interpretation
of this
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Agreement, and (ii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in favor of or against any
party, regardless of which party was generally responsible for the preparation
of this Agreement.
SECTION 10.13 HEADINGS AND CAPTIONS. The headings and captions of the
various subdivisions of this Agreement are for convenience of reference only and
shall in no way modify, or affect, or be considered in construing or
interpreting the meaning or construction of any of the terms or provisions
hereof.
SECTION 10.14 RELIANCE. The parties hereto agree that, notwithstanding
any right of any party to this Agreement to investigate the affairs of any other
party to this Agreement, the party having such right to investigate shall have
the right to rely fully upon the representations and warranties of the other
party expressly contained herein.
SECTION 10.15 EXPENSES. Each party shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) incurred in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
SECTION 10.16 GENDER. All pronouns and any variation thereof shall be
deemed to refer to the masculine, feminine, neuter, singular, or plural as the
identity of the person or entity or the context may require.
SECTION 10.17 PUBLICITY. Except by the mutual agreement between the
Seller and Buyer, no party shall issue any press release or otherwise make any
public statement with respect to the execution of, or the transactions
contemplated by, this Agreement except as may be required by law.
SECTION 10.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized officer all as of the day and year first
above written.
Buyer: ALRENCO, INC.
By: /s/ Michael D. Walts
------------------------------------------
Title: President
---------------------------------------
Seller: Vyrdilee Brooks McNeal Scholarship
Fund Charitable Remainder Trust
By: /s/ John J. Harlacher
------------------------------------------
Title: Trustee
Company: NETWORK RENTAL, INC.
/s/ Perry J. McNeal
----------------------------------------------
Perry J. McNeal, President
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NONCOMPETITION AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into August 9, 1996, by
and between Perry J. McNeal (the "Shareholder"), and ALRENCO, INC., an Indiana
corporation ("Alrenco").
PRELIMINARY STATEMENTS
As of the date hereof, Alrenco has acquired substantially all of the common
stock ("Common Stock") of NETWORK RENTAL, INC., a Georgia corporation (the
"Company") pursuant to certain stock purchase agreements.
Prior to the execution of the stock purchase agreements, the Shareholder,
in addition to being the sole shareholder of the Company was a director, officer
and employee of the Company and desires to enter into this Agreement to further
induce Alrenco to purchase all of the Common Stock.
NOW THEREFORE, in consideration of the premises and mutual promises and
agreements contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. CONFIDENTIAL INFORMATION AND NON-COMPETITION COVENANT.
1.1. CONFIDENTIAL INFORMATION AND TRADE SECRETS. In consideration of the
purchase of the Common Stock on the date hereof and to further induce Alrenco
to purchase the Common Stock, the Shareholder hereby agrees that he shall hold
in confidence all temporary help lists, customer lists, supplier lists, price
lists, financial information, operating manual and forms, plans, notes, computer
programs, systems and software (including, without limitation, documentation and
related source and object codes), and all other knowledge or information of a
confidential or proprietary nature with respect to the business of the Company
(the "Proprietary Information"), and the Shareholder will not disclose, publish
or make use of such knowledge or information.
1.2. NON-COMPETITION. The Company is engaged in the business of operating
rental-purchase stores which offer quality brand name consumer merchandise to
individuals under flexible rental-purchase agreements throughout the geographic
area referred to as the Area of Dominant Influence (ADI), as defined in the
Standard Rate and Data Service, where all stores owned or operated by the
Company are located (such geographic area being hereinafter referred to as the
"Territory"). The Shareholder acknowledges that the goodwill of the Company and
marketing, sales, and support of services and products of the Company extends
throughout the Territory. In consideration of the purchase of the Common Stock
on the date hereof and to further induce Alrenco to purchase the
<PAGE>
Common Stock, the Shareholder hereby agrees that for the period commencing on
the date hereof and ending five (5) years from the date hereof (the "Noncompete
Period"), the Shareholder shall not (without the prior written consent of the
Company), in any manner, directly or indirectly,
(i) engage in, have any equity or profit interest in, make any loan
to or for the benefit of, guaranty the repayment of any funds by, or render
services of any executive, advertising, marketing, sales, administrative,
supervisory, engineering, computer program or system development, maintenance or
consulting nature to any business conducting operations in the Territory which
are competitive with the business activities being directly engaged in by the
Company as of the date of this Agreement; or
(ii) solicit to employ, on his own behalf or on behalf of any other
person, firm or corporation, any person who was employed by the Company as of
the date of this Agreement and who has not thereafter ceased to be employed by a
Related Company for a period of at least one year.
As used in this Section 1, the term "Related Company" shall mean Alrenco,
any subsidiary of Alrenco or any other corporation, twenty percent of whose
stock is owned by Alrenco, and any other corporation owning at least 20 percent
of the capital stock of Alrenco, any subsidiary thereof, and any successor to
any of them.
Notwithstanding anything contained herein to the contrary, the Shareholder
shall not be prohibited from owning, directly or indirectly, up to 5% of the
outstanding equity interest of any company, which is in competition with Alrenco
and the stock of which is publicly traded.
1.3. SEVERABILITY. If a judicial determination is made that any of the
provisions of this Section 1 constitutes an unreasonable or otherwise
unenforceable restriction against the Shareholder, the provisions of this
Section 1 shall be rendered void only to the extent that such judicial
determination finds such provisions to be unreasonable or otherwise
unenforceable. In this regard, the parties hereto hereby agree that any
judicial authority construing this Agreement shall be empowered to sever any
portion of the Territory or any prohibited business activity from the coverage
of this Section 1, and to reduce the duration of the Noncompete Period and to
apply the provisions of this Section 1 to the remaining portion of the Territory
or the remaining business activities not to be severed by such judicial
authority and to the duration of the Noncompete Period as reduced by judicial
determination.
1.4. INJUNCTIVE RELIEF. The Shareholder hereby agrees that any breach or
threatened breach by the Shareholder of Sections 1.1 or 1.2 of this Agreement
will irreparably injure Alrenco and that
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<PAGE>
any remedy at law for any breach or threatened breach by the Shareholder of the
provisions contained in Sections 1.1 and 1.2 hereof shall be inadequate, and
that Alrenco shall be entitled to injunctive relief in addition to any other
remedy it might have under this Agreement or at law or in equity. The
Shareholder further agrees that the grant of such injunctive relief and the
enforcement of the terms of this Agreement shall not deprive him of his ability
to earn a living.
SECTION 2. MISCELLANEOUS.
2.1. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the Shareholder and his executor, administrator, heirs,
personal representative and assigns, and the Alrenco and its successors and
assigns.
2.2. GOVERNING LAW. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in accordance
with, the laws of the State of Indiana without regard to conflicts of laws
principles.
2.3. HEADINGS. The section and paragraph heading contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
2.4. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) sent by
recognized overnight courier, or (iii) sent by registered or certified mail,
return receipt requested, postage prepaid.
If to Alrenco:
Alrenco, Inc.
P.O. Box 85
1736 East Main Street
New Albany, Indiana 47150-0085
Attn: Michael D. Walts, President
With a copy to:
Stites & Harbison
Court House Plaza
323 East Court Avenue
Jeffersonville, Indiana
Attn: Robert W. Lanum, Esq.
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<PAGE>
If to the Shareholder:
Mr. Perry J. McNeal
200 Wicklawn Way
Roswell, Georgia 30076
With a copy to:
Thompson & Singer
3151 Maple Drive, N.E.
Atlanta, Georgia 30305
Attn: Douglas R. Thompson, Esq.
All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party set forth above, (ii) if sent
by overnight courier, on the next business day following the day such notice is
delivered to the courier service, or (iii) if sent by registered or certified
mail, on the fifth business day following the day such mailing is sent.
Any party to this Agreement may change his or its address upon written
notice delivered pursuant to this Section.
2.5. ENTIRE AGREEMENT. This Agreement is intended by the parties hereto to
be the final expression of their agreement with respect to the subject matter
hereof and is the complete and exclusive statement of the terms thereof
notwithstanding any representations, statements or agreements to the contrary
heretofore made. This Agreement may be modified only by a written instrument
signed by each of the parties hereto.
IN WITNESS WHEREOF, Alrenco has caused its duly authorized officer to
execute this Agreement and the Shareholder has executed this Agreement as of the
date first above written.
SHAREHOLDER:
/s/ Perry J. McNeal
--------------------------------------------
Perry J. McNeal ("Shareholder")
ALRENCO INC. ("Alrenco"):
By: /s/ Michael D. Walts
---------------------------------------
Title: President
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