SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 4, 1999
NBC Acquisition Corp.
(Exact name of registrant as specified in its charter)
Delaware 333-48225 47-0793347
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
4700 South 19th Street
Lincoln, NE 68501-0529
(Address of Principal executive offices)
(402) 421-7300
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective June 4, 1999, Nebraska Book Company, Inc. ("NBC"), a wholly-owned
subsidiary of NBC Acquisition Corp. (the "Company"), acquired all of the
outstanding common stock of Triro, Inc., an independent college bookstore
operation owned by Dennis and Larry Rother with 17 retail bookstores located in
Texas, New Mexico, and Arizona. The purchase price was approximately $15.1
million, which consisted of $13.2 million paid to the former shareholders and
$1.9 million for the average annual debt level. The actual amount of debt
assumed and retired at closing was approximately $3.2 million, which exceeded
the average outstanding debt level of $1.9 million due to the seasonal
incurrence of debt to fund the buyback of used textbooks at the end of the
Spring semester. Offsetting the higher debt balances at Closing was a
compensating increase in net asset balances (consisting primarily of inventory).
The purchase price was determined based upon arms length negotiations between
NBC and Triro, Inc. NBC will account for this acquisition under the purchase
method of accounting.
The acquisition of Triro, Inc. was funded in part through a $10.3 million
capital contribution from the Company to NBC. The Company raised the $10.3
million in capital through the sale of 197,001 shares of its Class A Common
Stock to certain shareholders, including HWH Capital Partners, L.P and members
of senior management. The remaining funding was provided through available cash
funds and borrowings under NBC's revolving credit facility.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Audited financial statements of Triro, Inc. as of and for the
years ended March 31, 1999 and 1998 have not been included herein
and shall be filed by amendment by no later than August 12, 1999.
(b) Pro Forma Financial Information
Pro forma financial information as of and for the year ended
March 31, 1999 has not been included herein and shall be filed by
amendment by no later than August 12, 1999.
(c) Exhibits
2.1 Agreement for Purchase and Sale of Stock, dated as of May 26,
1999 between and among Nebraska Book Company, Inc. , Dennis
Rother, and Larry Rother [EDGAR filing only]
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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 thereunto duly authorized in the City of Lincoln, Nebraska, on June
11, 1999.
NBC ACQUISITION CORP.
/s/ Mark W. Oppegard
----------------------
Mark W. Oppegard
President, Secretary and Director
/s/ Bruce E. Nevius
----------------------
Bruce E. Nevius
Vice President and Treasurer
(Principal Financial and Accounting Officer)
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AGREEMENT FOR PURCHASE
AND SALE OF STOCK
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AGREEMENT FOR PURCHASE
AND SALE OF STOCK
THIS AGREEMENT made this ___ day of May, 1999, between and among
NEBRASKA BOOK COMPANY, INC., a Kansas corporation ("Buyer"), DENNIS ROTHER, an
individual residing in College Station, Texas, and LARRY ROTHER, an individual
residing in Austin, Texas (individually "Seller" and collectively the
"Sellers"), who own all of the issued and outstanding stock of TRIRO, INC., a
Texas corporation (the "Company"), and the Company.
WITNESSETH:
WHEREAS, Sellers own all of the issued and outstanding shares of
capital stock of the Company; and
WHEREAS, Sellers desire to sell to Buyer and Buyer desires to
purchase from Sellers all of the issued and outstanding shares of capital stock
of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and in reliance upon the representations and
warranties hereinafter set forth, the parties agree as follows:
ARTICLE I: AGREEMENT
1.01. Purchase and Sale of Stock. Subject to the terms and conditions
herein contained, at the Closing (as hereinafter defined), each Seller shall
sell, transfer, assign and deliver to Buyer, and the Buyer shall purchase from
each Seller, the number of shares of common stock of the Company, $1.00 par
value each (collectively, the "Stock"), set forth opposite each Seller's name on
Exhibit A hereto, which shares shall constitute all of the issued and
outstanding capital stock of the Company.
ARTICLE II: PURCHASE PRICE
2.01. Purchase Price. The purchase price for the Stock shall be Twelve
Million Six Hundred Six Thousand Dollars ($12,606,000) (herein the "Purchase
Price"). The Purchase Price shall be paid to Sellers on the terms set forth in
Section 2.02 hereof. Of this amount, the sum of Fifty Thousand Dollars ($50,000)
shall be allocated as consideration for the Covenant Not to Compete Agreements
with the Sellers, and the parties shall report such allocation consistent
herewith on their respective federal and state income tax returns.
2.02 Method of Payment. The Purchase Price shall be paid as three
components consisting of the Deposit, the Closing Payment, and the Deferred
Consideration, as described in this Section 2.02. All payments made by Buyer
shall be by wire transfer or cashier's or certified check, as directed by
Sellers. Buyer shall have no responsibility for allocating any amount between
Sellers.
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(a) Earnest Money Deposit. Buyer has deposited the sum of One Hundred
Fifty Thousand Dollars ($150,000) as an earnest money deposit (the "Deposit")
with U.S. Bank Trust, N.A., of Lincoln, Nebraska, (the " Initial Escrow Agent")
pursuant to the terms of an Escrow Agreement dated May 12, 1999. At the Closing,
the Deposit shall be paid to the Sellers and credited to Buyer as a portion of
the Purchase Price.
(b) Closing Payment. At the Closing, Buyer shall pay to Sellers the sum
of Eleven Million One Hundred Thirty-six Thousand Dollars ($11,136,000)
(the"Closing Payment") as a portion of the Purchase Price.
(c) Deferred Consideration. At the Closing, Buyer shall pay to First
American Bank, SSB of Bryan, Texas (the "Final Escrow Agent") the sum of One
Million Three Hundred Twenty Thousand Dollars ($1,320,000) (the "Deferred
Consideration") to be held in an interest bearing account of Sellers' choosing
and payable pursuant to the terms of this Agreement and the Escrow Agreement
attached hereto as Exhibit B.
(i) Two (2) weeks after receipt by Buyer of the Closing Balance
Sheet described in Article IV hereof, the amount of Deferred Consideration which
exceeds the sum of (A) Six Hundred Sixty Thousand Dollars ($660,000) plus (B)
the amount of Claims (as defined in Article IX hereof) asserted prior to the
date of such disbursement shall be paid to the Sellers by the Final Escrow
Agent.
(ii) The Final Escrow Agent shall hold the balance of the
Deferred Consideration which is not paid to Sellers under subsection 2.02(c)(i)
above in an interest-bearing escrow account of Sellers' choosing until the
expiration of one year after the Closing Date. The Deferred Consideration shall
be subject to reduction as provided in Article IX of this Agreement. If Buyer
incurs any loss or damage as described in said Article IX, Buyer shall have the
right to offset any such amounts against the Deferred Consideration as described
in Section 9.03 in addition to any other remedies to which it may be entitled.
ARTICLE III: CLOSING
3.01 Closing; Closing Date. The closing ("Closing") of the
purchase and sale of the Stock and of the other transactions contemplated herein
shall take place on the later of: (i) June 1, 1999, or (ii) the date that all
conditions of Closing set forth in this Agreement are satisfied or waived;
provided, however, that either party shall have the right to terminate this
Agreement by written notice to the other if this transaction has not closed by
the later of June 15, 1999 or two (2) business days after receipt by Buyer of
the Audited March 31 Statements, unless all parties mutually agree in writing to
extend the Closing beyond such date. The Closing shall take place at the offices
of West, Webb, Allbritton & Gentry, P.C., 1515 Emerald Plaza, College Station,
Texas, or at such other place as may be mutually agreed upon by Buyer and
Sellers. The day of the Closing is sometimes referred to herein as the Closing
Date.
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ARTICLE IV: CLOSING BALANCE SHEET
4.01 Physical Inventory; Closing Balance Sheet; Warranties. A
physical inventory for the Company shall be taken within one (1) week following
the Closing, with representatives of Buyer and Sellers participating, and as
soon as reasonably possible after the Closing, but in no event later than ninety
(90) days after the Closing, a balance sheet and related statements of income,
and changes in stockholders' equity for the Company (the "Closing Balance
Sheet") shall be prepared as of the Closing Date, in accordance with generally
accepted accounting principles consistently applied to fairly present the
financial condition, assets and liabilities of the Company as of such date. It
shall be Buyer's obligation to cause the Company to furnish such Closing Balance
Sheet with any and all expenses incurred in taking such physical inventory and
in completing the Closing Balance Sheet to be borne by Buyer. Lastly, it shall
be within the Buyer's sole discretion: (i) as to the type and extent of the
physical inventory to be taken under and pursuant to the provisions of this
Section 4.01; and (ii) as to whether or not the Closing Balance Sheet is audited
and, if so, the extent of any such audit.
ARTICLE V: REPRESENTATIONS AND WARRANTIES
5.01 Representations and Warranties of Shareholders. Except as
otherwise qualified in the schedule attached hereto as Exhibit C (herein
referred to as the "Disclosure Schedule") (such qualifications making specific
reference to the respective (sub)section of this Agreement to which they apply;
provided that failure to list all subsections to which a particular
qualification applies shall not make such qualification ineffective), the
Sellers, and each of them jointly and severally, represent and warrant to Buyer
that the following representations and warranties are true and correct in all
material respects, and shall be deemed remade at and as of the Closing Date:
(a) Organization, Power and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Texas, and has all requisite corporate power and authority to own or hold
under lease its properties and assets and to carry on its business as now
conducted; to execute, deliver and perform its obligations hereunder; and to
consummate the transactions contemplated thereby. The Company is qualified to do
business and is in good standing in every jurisdiction in which a failure to do
so could have an adverse effect on its assets, business or prospects. The
Company possesses all governmental and other permits, licenses and approvals
necessary to own or lease its properties and assets and to carry on its business
as now conducted. The states in which the Company is qualified to do business as
a foreign corporation, and a description of such permits, licenses and approvals
are listed on the Disclosure Schedule. True and complete copies of the articles
of incorporation, as amended to date, and the by-laws, as amended to date, of
the Company have been furnished to Buyer.
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(b) Authorization by Sellers. Each Seller has full power and
authority to execute and deliver this Agreement and all other documents to be
executed and delivered pursuant hereto and to consummate the transactions
contemplated hereby. This Agreement constitutes the valid and binding obligation
of each Seller, enforceable against each Seller in accordance with its terms,
except to the extent limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws of general application relating to
or affecting the enforcement of creditors' rights.
(c) Authorization by Company. The execution and delivery by the
Company of this Agreement and each other document to which the Company is a
party executed in connection herewith, and the performance of each of its
obligations hereunder and thereunder, have been duly authorized and approved by
all necessary corporate action prior to the date of this Agreement. This
Agreement and each other document to which the Company is a party executed in
connection herewith have been duly and validly executed and delivered by the
Company and, subject only to the approval of the Sellers, constitutes a valid
and binding obligation of the Company enforceable against it in accordance with
its terms, except to the extent limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors rights.
(d) No Violation By Company. The execution, delivery and
performance by the Company of this Agreement and each other document to which
the Company is a party executed in connection herewith and the consummation by
the Company of the transactions contemplated hereby and thereby and the
compliance by the Company with the provisions hereof and thereof, will not, with
or without the giving of notice or the passage of time, (a) violate any law,
ordinance, rule or regulation applicable to the Company, (b) violate any
judgment, writ, injunction, order or decree of any court, arbitrator or
governmental authority applicable to the Company or (c) except as set forth on
the Disclosure Schedule, result in the breach of or conflict with any term,
covenant, condition or provision of, result in the modification or termination
of, constitute a default or an event of acceleration under, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to its articles of
incorporation or by-laws, or any commitment, contract, indenture, mortgage, note
or other agreement or instrument to which the Company is a party or by which any
of its properties or assets are bound. Except as set forth in the Disclosure
Schedule, no consent, authorization or approval of, or waiver or exemption by,
or filing or registration with or notice to, any federal, state, or local
authority, or any other person or entity is required to be obtained or made by
the Company in connection with the execution, delivery and performance of this
Agreement and the other documents to be executed, delivered and performed
pursuant hereto by the Company, or the consummation of the transactions
contemplated thereby.
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(e) No Violation by Sellers. The execution, delivery and
performance by each Seller of this Agreement and each other document to which
the Sellers, or either of them, are a party executed in connection herewith and
the consummation by Sellers of the transactions contemplated hereby and thereby
and the compliance by Sellers with the provisions hereof and thereof, will not,
with or without the giving of notice or the passage of time, (a) violate any
law, ordinance, rule or regulation applicable to the Sellers, (b) violate any
judgment, writ, injunction, order or decree of any court, arbitrator or
governmental authority applicable to any Seller or (c) except as set forth on
the Disclosure Schedule, result in the breach of or conflict with any term,
covenant, condition or provision of, result in the modification or termination
of, constitute a default or an event of acceleration under, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon the Stock pursuant to any commitment, contract, indenture, mortgage, note
or other agreement or instrument to which any Seller is a party or by which the
Stock is bound. Except as set forth on the Disclosure Schedule, no consent,
authorization or approval of, or waiver or exemption by, or filing or
registration with or notice to, any federal, state, or local authority, or any
other person or entity is required to be obtained or made by Sellers in
connection with the execution, delivery and performance of this Agreement and
the other documents to be executed, delivered and performed pursuant hereto by
Sellers, or the consummation of the transactions contemplated thereby.
(f) Stock Ownership. Each Seller is the lawful and beneficial
owner of record of the number of shares of Stock set forth opposite his or her
name on Exhibit A hereto; and except as set forth on the Disclosure Schedule,
such ownership is free and clear of all pledges, liens, encumbrances, claims and
other charges of every kind, including, without limitation, subscriptions,
options, warrants, rights, or other agreements granting to any person, firm or
corporation any interest in or right to acquire from such Seller at any time, or
upon the happening of any stated event, any shares (or interests therein) of the
Stock owned by such Seller.
(g) Capitalization.
(i) Shares. The authorized capital stock of the Company consists
of 10,000 shares of common stock, $1.00 par value, of which 5,332
shares, and no more, are issued and outstanding and owned of record by
the Sellers as indicated on Exhibit A hereto.
(ii) No Restrictions. All of the issued and outstanding shares of
capital stock of the Company are duly authorized, validly issued and
outstanding, fully paid and nonassessable, and have not been issued in
violation of any shareholder rights under applicable law, or its
articles of incorporation or by-laws, or the terms of any agreement to
which it is a party or by which it is bound. All of the issued and
outstanding shares of the Company's capital stock have been issued in
compliance with all applicable securities laws. Other than as listed on
the Disclosure Schedule, the Company has no outstanding subscriptions,
options, warrants, rights or other agreements of any kind granting to
any person, firm or corporation any interest in or right to acquire from
it at any time, or which are convertible or exchangeable into, or upon
the happening of any stated event, any shares of capital stock of the
Company, or any class or interests therein.
(h) Investments. Except as set forth in the Disclosure Schedule,
the Company does not own, directly or indirectly, any stocks, bonds or
securities or any equity or other proprietary interest in any corporation,
general or limited partnership, joint venture, limited liability company or
partnership, business enterprise or other entity of any nature whatsoever.
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(i) Financial Statements. Sellers have delivered to Buyer true
and complete copies of (1) the audited financial statements and balance sheets
of the Company as of March 31 in each of the years 1998 and 1997, and the
related audited statements of income, changes in stockholders' equity, and cash
flows, together with the report thereon of Deloitte & Touche, L.L.P.,
independent certified public accountants ("Deloitte & Touche"); and (2) the
unaudited financial statements and balance sheets of the Company as of March 31,
1999 (the unaudited March 31, 1999 financial statements are referred to herein
as the "Unaudited March 31 Statements"). Prior to Closing, Sellers shall deliver
to Buyer true and complete copies of the audited financial statements and
balance sheets of the Company as of March 31, 1999, and the related audited
statements of income, changes in stockholders' equity, and cash flows, together
with the report thereon of Deloitte & Touche (the "Audited March 31
Statements"). The Unaudited March 31 Statements are attached hereto as Exhibit
D. The Unaudited March 31 Statements and the Audited March 31 Statements are
sometimes collectively referred to as the "March 31, 1999 Statements").
(i) All such balance sheets and related financial statements, have been
or will be prepared in accordance with generally accepted accounting
principles consistently applied and have or will fairly present the
financial condition, assets and liabilities of the Company as at the
dates thereof and the results of the operations of the Company for the
periods covered thereby.
(ii) The amount of assets, liabilities and stockholders' equity on the
Audited March 31 Statements, both by separate category and in the
aggregate, shall not be materially different from the amount of any such
category on the Unaudited March 31 Statements.
(iii) The amount of assets, liabilities and stockholders' equity on the
Closing Balance Sheet (as defined and set forth in Article IV hereof),
both by separate category and in the aggregate, shall not be materially
different from the amount of any such category on the Audited March 31
Statements, except as the same may have changed in the ordinary course
of business between March 31, 1999 and the effective date of the Closing
Balance Sheet, and except for the establishment of a reasonable reserve
for uncollectible accounts receivable on the Closing Balance Sheet
consistent with past experience related to uncollectible receivables.
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(j) Liabilities and Obligations. The Company has no liabilities
or obligations of any nature whatsoever, whether arising out of contract, tort,
statute or otherwise, including federal or state income tax liabilities, which
are not reflected, reserved against, or given affect to, in the March 31, 1999
Statements except: (i) those disclosed specifically in the Disclosure Schedule;
and (ii) liabilities and obligations reasonably incurred in the ordinary course
of the Company's business between March 31, 1999 and the Closing Date, all of
which shall be reflected, reserved against or given effect to in the Closing
Balance Sheet. Sellers are not aware of any basis for assertion against the
Company of any liabilities or obligations not reflected, reserved against or
given effect to in the March 31, 1999 Statements, or in the Disclosure Schedule
except for liabilities and obligations described in clause (ii) of this
paragraph (j), and Sellers shall disclose all such liabilities or obligations to
Buyer's representatives preparing the Closing Balance Sheet, and shall be
included on the Closing Balance Sheet.
(k) Absence of Certain Changes. Since January 1, 1999, there has
not been: (i) any material adverse change in the condition (financial or
otherwise), results of operations, assets, liabilities, or business of the
Company; (ii) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties, assets, liabilities, or business
of the Company; (iii) any declaration, setting aside, or payment of any dividend
or other distribution in respect of the capital stock of the Company, other than
an annual dividend of one dollar per share (an annual aggregate of $5,332), or
any direct or indirect redemption, retirement purchase or other acquisition of
any of such capital stock or any issuance of shares of capital stock or the
granting, issuance or exercise of any right, warrant, option or similar
commitment relating to the Company's authorized or issued capital stock; (iv)
any increase in the compensation, commissions or perquisites payable or to
become payable by the Company to any director, officer, employee or agent of the
Company except those incurred in the ordinary course of the business of the
Company consistent with past practice, or any payment of any bonus, profit
sharing or other extraordinary compensation to any employee of the Company
except those incurred in the ordinary course of business of the Company
consistent with past practice including, but not limited to, the bonuses that
the Company has paid or intends to pay prior to Closing based upon the results
of the March 31, 1999 Statements, such bonuses to be in the approximate amount
of $400,000 and to be paid in the ordinary course of the Company's business; (v)
any change in the accounting methods or practices followed by the Company or any
change in the amortization policies or rates theretofore adopted by the Company;
(vi) any cancellation of the debts owed to or claims held by the Company; (vii)
other than in the ordinary course of business, any sale, lease, abandonment or
other disposition by the Company of any real property or of any machinery,
equipment or other operating properties, or any intangible assets utilized in
the business of the Company; or (viii) except as set forth in the Disclosure
Schedule, any notice given to a management or executive employee of the Company
that any customer involving annual sales in excess of $1,000 has discontinued or
intends to discontinue doing business with the Company, or substantially reduce
the volume of such business. In addition, Sellers shall not make or cause any
such changes through the Closing Date, and they shall report all such changes
they become aware of in writing to Buyer's representatives preparing the Closing
Balance Sheet and pursuant to the notice provisions set forth in Section 10.10
of this Agreement.
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(l) Tax Returns and Reports. All federal, state, local and
foreign income, excise, property, sales, payroll and other tax returns and
reports required to be filed by the Company (the "Tax Returns") have either been
filed with the appropriate governmental agencies in all jurisdictions in which
such returns and reports are required to be filed, or the due dates of the same
have been appropriately extended. All such returns and reports already filed
properly reflect the taxes owed by the Company for the periods covered thereby.
All federal, state, local and foreign taxes, assessments, interest, penalties,
deficiencies, fees and other governmental charges or impositions which are
called for as due by the Tax Returns to any taxing authority from the Company
(the "Taxes"), have been properly accrued or paid. The Company has not received
any notice of assessment or proposed assessment by the Internal Revenue Service
or any other taxing authority in connection with any Tax Returns and there are
no pending tax examinations of or tax claims asserted against the Company or its
properties. There are no tax liens on any of the properties or assets of the
Company except for liens of current taxes not yet due and payable. There is no
basis for any additional assessment of any Taxes. The Company has not waived any
law or regulation fixing, or consented to the extension of, any period of time
for assessment of any Taxes which waiver or consent is currently in effect.
(m) Title and Condition of Assets. The Company owns and has good
marketable title to all of its properties and assets, including those assets and
properties reflected in the Unaudited March 31 Statements and the Closing
Balance Sheet and all properties and assets acquired by the Company between
March 31, 1999, and the Closing Date, free and clear of all mortgages, liens,
pledges, charges or encumbrances or other third party interests of any nature
whatsoever, except for (i) the lien of current taxes not yet due and payable,
(ii) properties and assets disposed of by the Company since the date of the
Unaudited March 31 Statements in the ordinary course of business for fair value,
and (iii) such secured indebtedness as is disclosed in the Unaudited March 31
Statements or the Closing Balance Sheet. The properties and assets of the
Company that are utilized in the operation of its business (including all
buildings) are in good operating condition and repair, normal wear and tear
excepted, adequate for the uses to which they are being put, and usable in the
ordinary course of its business and conform to all applicable statutes,
ordinances and regulations relating to their use and operation. A schedule of
the fixed assets of the Company is attached as Exhibit E.
(n) Real Estate and Leases. There is set forth in the Disclosure
Schedule a brief description of all real estate (including buildings and
improvements) owned by the Company according to the character of the property
and the location thereof, together with a legal description of such real estate.
The Company has good and marketable title to such owned real estate in fee
simple free and clear of any encumbrances whatsoever except as set forth on the
Disclosure Schedule or the lien of current taxes not yet due and payable. There
is also set forth in the Disclosure Schedule a brief description (including in
each case the monthly rental payable, the expiration date, a brief description
of the property covered and the name of the lessor, including for each lessor in
which any Seller has, directly or indirectly, any beneficial interest, the name
and extent of such interest and name of such Seller) of every lease or agreement
(written or oral) under which the Company is lessee of, or holds or operates,
any property, real or personal, owned by any third party. Each of such leases
and agreements is in full force and effect and constitutes a legal, valid and
binding obligation of the respective parties thereto. Neither the Company nor
any other party thereto is in default under any such lease or agreement nor has
any event occurred which with the passage of time or giving of notice would
constitute such a default. The real property and the buildings thereon owned or
utilized by the Company in the conduct of its business do not violate any
present building, zoning or other laws or ordinances, or any agreements
applicable thereto, and no notice of any such violation has been received by the
Company.
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(o) Contracts. All written or oral contracts, agreements, leases,
mortgages and commitments ("Contracts"), to which the Company is a party or by
which it may be bound (including without limitation, any and all guaranty and
indemnification Contracts; warranty Contracts; marketing, dealership,
distributorship, franchise and similar Contracts; powers of attorney; patent,
trademark and similar licenses; real and personal property leases, indentures,
deeds of trust, mortgages, chattel mortgages and similar Contracts; conditional
sales Contracts; labor and collective bargaining Contracts; employment
Contracts; and pension, profit sharing, bonus, incentive, deferred compensation,
group insurance, severance pay, retirement or other employee benefit Contracts
to which the Company is a party, or under which the Company may be obligated, or
to which the Company or any of the rights, properties or assets of the Company
may be subject or bound), but (i) excluding notes, security agreements and
similar contracts relating to motor vehicles owned by the Company; (ii)
excluding Contracts which involve a payment to or by the Company of less than
$1,000 and which can be terminated without penalty by the Company within 30 days
after written notice; (iii) excluding sales orders entered into in the ordinary
course of business involving future payments to the Company of less than $1,000
individually; and (iv) excluding purchase orders entered into in the ordinary
course of business involving future payment by the Company of less than $10,000
individually, are listed and briefly described in the Disclosure Schedule. To
the best of Sellers' knowledge, all Contracts constitute legal, valid and
binding obligations of the respective parties thereto, are in full force and
effect on the date hereof, and neither the Company nor any other party thereto
has violated any provision of, or committed or failed to perform any act which
with notice, lapse of time or both would constitute a default under the
provisions of any Contract, the termination of which could have a material
adverse effect upon the assets, liabilities, financial condition, or results of
operations of the Company, except as set forth in the Disclosure Schedule.
Correct and complete copies of all written Contracts disclosed on the Disclosure
Schedule have been made available to Buyer.
(p) Inventory. The inventory of the Company reflected in the
Unaudited March 31 Statements, the Good Faith Estimates (as described in Section
8.01(l) hereof), and to be reflected in the Closing Balance Sheet, and the
inventory acquired between March 31, 1999 and the Closing Date consists and
shall consist of items of quantity and quality which are usable and salable in
the ordinary course of the business of the Company consistent with past
experience and/or practice at prices at least equal to the values on its books.
All inventories are valued on the Unaudited March 31 Statements and will be
valued in the Closing Balance Sheet according to the retail inventory method for
all retail stores owned by the Company and according to the average cost method
for warehouse goods.
(q) Receivables. All accounts receivable of the Company shown on
the Unaudited March 31 Statements, the Good Faith Estimates, and to be reflected
in the Closing Balance Sheet (except to the extent reserved against thereon as
being uncollectible) and any such receivables which arose since the respective
dates thereof and prior to Closing (except to the extent reserved against on the
books and records of the Company as being uncollectible consistent with past
practices) are good and collectible in the ordinary course of business of the
Company, and have arisen in the ordinary course of the Company's business. The
amount of vendor credits are true and correct and the Company shall be entitled
to the entire amount of each such credit against future purchases.
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(r) No Default, Violation or Litigation. The Company is not in
violation of any law or order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
(including, without limitation, laws, regulations, orders and restrictions
applicable to environmental standards and controls, wages and hours, civil
rights and occupational health and safety), which violation would have a
material adverse effect upon the assets, liabilities, financial condition, or
results of operation of the Company or its right to conduct its business as
presently conducted, nor has it received any notice of noncompliance. There are
no lawsuits, proceedings, claims or governmental investigations pending or
threatened against, or involving the Company or its properties or business.
There is no basis known to the Sellers for any action which would have an
adverse effect upon the assets, liabilities, financial condition, or results or
operations of the Company or its right to conduct its business as presently
conducted. There are no judgments, consents, decrees, injunctions, or any other
judicial or administrative mandates outstanding against the Company which could
adversely affect the assets, liabilities, financial condition, or operations of
the Company or its right to conduct its business as presently conducted.
(s) Bank Accounts, Guarantees and Powers. The Disclosure Schedule
sets forth: (i) a list of all accounts and deposit boxes maintained by the
Company at any bank or other financial institution and the names of the persons
authorized to effect transactions in such accounts and pursuant to such
resolutions and with access to such boxes; (ii) all agreements or commitments of
the Company guaranteeing the payment of money or the performance of other
contracts by the Sellers or by any third persons; and (iii) the names of all
persons, firms, associations, corporations or business organizations holding
general or special powers of attorney from the Company together with a summary
of the terms thereof.
(t) Insurance. The Disclosure Schedule contains a list of all
insurance policies (specifying the insurer, the amount of the coverage, the type
of insurance, the policy number and any pending claims thereunder) maintained by
or on behalf of the Company on its properties, assets, business or personnel.
All such policies are in full force and effect, and the Company is not in
default with respect to any provision contained in any insurance policy, nor has
it failed to give any notice or present any claim thereunder in due and timely
fashion. The Company will keep all such policies in full force and effect to the
Closing Date.
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(u) Employment and Labor Relations. The Company is not a party to
or otherwise bound by any contracts, agreements or other commitments respecting
employment or compensation of any of its officers, directors, agents or
employees except as set forth in the Disclosure Schedule. There is no unfair
labor practice complaint, labor disturbance or other controversy respecting
persons or past employees pending, threatened or proposed against, or affecting
the business of the Company, and Sellers have no knowledge of any facts or
circumstances which would indicate that any claims, complaints or litigation
could be brought against the Company in connection with employment matters. The
Company is in compliance with all laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and it is not
engaged in any unfair labor practice. The Company is not a party to any
collective bargaining agreement with any labor union or organization, and none
of the employees of the Company are represented by any labor union or
organization. The Disclosure Schedule lists all current full-time employees and
part-time employees, showing each employee's current hourly or monthly earnings.
(v) Employee Benefits. For purposes of this Agreement, the term
"Employee Plan" includes any pension, retirement, disability, medical, dental or
other health plan, life insurance or other death benefit plan, profit sharing,
deferred compensation, stock option, bonus or other incentive plan, vacation
benefit plan, severance plan, or other employee benefit plan or arrangement,
including without limitation, any pension plan ("Pension Plan") as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any welfare plan as defined in Section 3(1) of ERISA ("Welfare
Plan"), whether or not any of the foregoing is funded, and whether written or
oral, (a) to which the Company is a party or by which it is bound or (b) with
respect to which the Company has made any payments or contributions, or may
otherwise have any liability (including any such plan or arrangement formerly
maintained by the Company).
(i) There are no Employee Plans other than those listed in the
Disclosure Schedule, and the Company has never been a party to any
multi-employer plan.
(ii) No Pension Plan to which the Company is a party is a
"defined benefit plan" as defined in ERISA.
(iii) Each Employee Plan, the administrator and fiduciaries of
each Employee Plan, and the Company has at all times complied in all
material respects with the applicable requirements of ERISA, including
but not limited to the fiduciary responsibilities imposed by ERISA,
HIPPA (the Health Insurance Portability and Accountability Act of 1996)
and any other applicable law (including regulations and rulings
thereunder) governing each Employee Plan, and each Employee Plan has at
all times been properly administered in all material respects in
accordance with all such requirements of law. No lawsuits or complaints
to, or by, any person or governmental entity have been filed or are
pending and no Seller has knowledge of any state of facts or
contemplated event which could give rise to any such lawsuit or
complaint with respect to any Employee Plan. Without limiting the
foregoing, the following are true with respect to each Employee Plan:
(A) The Company has filed or caused to be filed on a
timely basis each and every return, report, statement, notice,
declaration and other document required by any government agency,
federal, state and local (including, without limitation, the
Internal Revenue Service and the Department of Labor) with
respect to each Employee Plan.
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(B) The Company has delivered or caused to be delivered to
every participant, beneficiary and other party entitled to such
material, all plan descriptions, returns, reports, schedules,
notices, statements and similar materials, including, without
limitation, summary descriptions and reports, as are required
under Title 1 of ERISA and/or the Internal Revenue Code, as
amended ("Code").
(C) The Company is not delinquent as to contributions or
payments to or in respect of any Employee Plan.
(iv) With respect to each Employee Plan, there has not occurred,
nor is any person or entity contractually bound to enter into, any
transaction giving rise to any tax under Section 4975 of the Code or
Section 406 of ERISA, or liability under Section 502(i) of ERISA.
(v) The financial statements for each Employee Plan accurately
reflect the financial condition and funding of the Employee Plan as of
the date of such financial statements, and no adverse change has
occurred with respect to the financial condition or funding of the
Employee Plan since the date of such financial statements. A description
of each financial statement is set forth on the Disclosure Schedule for
each Employee Plan, or if there is no financial statement, it is so
noted.
(w) Environmental Provisions. With respect to any real estate
owned or leased by the Company, and additionally, the Company represents
and warrants to Buyer, that:
(i) No claim, lawsuit, agency proceeding, or other legal,
quasi-legal or administrative challenge is pending or threatened
concerning the property, the operation of the property, or the existence
of any hazardous substances thereon.
(ii) To the best of their knowledge, the property has never been
used for any industrial or commercial operation that utilizes hazardous
substances except for limited usage of hazardous substances in the
Company's silk screen operations conducted at its corporate offices in
College Station, Texas (the "Silk Screen Operations").
(iii) There has been no spill, discharge, release, deposit, or
emplacement of any hazardous substance on the property, whether in
containers or other impoundments, or directly in the lands or waters of
the property in connection with the Silk Screen Operations resulting in
Damages, and to the best of their knowledge, there has been no spill,
discharge, release, deposit, or emplacement of any hazardous substance
on the property, whether in containers or other impoundments, or
directly in the lands or waters of the property otherwise by the
Company.
(iv) To the best of their knowledge, there is no
asbestos-containing or other hazardous materials in the structures on
the property.
(v) To the best of their knowledge, no electrical transformers,
fluorescent light fixtures or other electrical equipment containing PCBs
have been affixed or installed on or in the property.
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(vi) There are no storage tanks, barrels, sumps, impoundments, or
other containers or equipment (movable or fixed) for the containment of
hazardous substances in any part of the property except for those that
may be associated with the Silk Screen Operations as disclosed on the
Disclosure Schedule.
(vii) No governmental entity has served upon the Company any
notice claiming any violation of any statutes, ordinance, or regulations
or noting the need for any repair, construction, alteration, or
installation with respect to the property and hazardous substances or
requiring any change in the means or methods of those conducting
operations thereon. With respect to all operations by the Company,
including without limitation the Silk Screen Operations, the Company
has, at all times, complied with all federal, state and local laws,
ordinances and regulations relating to and involving (A) industrial
hygiene or to environmental conditions on, under or about such real
estate, including, but not limited to, soil and groundwater conditions;
and (B) the use, generation, manufacture, storage, disposal and
transportation of hazardous materials.
(x) Intellectual Property. Except as set forth in the Disclosure
Schedule, the Company owns or has the right to use all patents, trademarks,
trade names, service marks, franchises, and the technology necessary for the
conduct of its business as presently conducted without infringing upon or
conflicting with the rights of others, and the Company has not received any
notice from a party claiming such an infringement or conflict; and Sellers are
not aware of any facts or circumstances which would indicate that such an
infringement or conflict could exist. All such patents, trademarks, trade names,
service marks and franchises are described on the Disclosure Schedule and the
Company's interest therein is similarly described.
(y) Conflicts of Interest. Except as set forth on the Disclosure
Schedule, no Seller, director, officer or, to the best of Sellers' knowledge,
employee of the Company controls or is an employee, officer, director or agent
of any corporation, firm, association, partnership, limited liability company or
partnership, or other business entity which is a competitor, supplier or
customer of the Company.
(z) Disclosure; Capacity. Sellers have disclosed to Buyer all
facts material to the assets, liabilities or business of the Company. No
representation or warranty of the Sellers made hereunder or in the Disclosure
Schedule or in any certificate, statement, or other document delivered by or on
behalf of the Sellers hereunder contains any untrue statement or omission of a
material fact which would cause the general interpretation of the statements to
be misleading. Copies of all documents referred to on the Disclosure Schedule
have been delivered or made available to Buyer, are true, correct and complete
copies thereof, and include all amendments, supplements or modifications thereto
or waivers thereunder. All representations and warranties by Sellers hereunder
are made from knowledge acquired in their capacities as an individual,
shareholder, officer, director, employee and any other relationship of such
Seller to the Company.
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5.02 Representations and Warranties of Buyer. Buyer represents
and warrants to each Seller that the following representations and warranties
are true and correct in all material respects, and shall be deemed remade at and
as of the Closing Date:
(a) Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Kansas, with
full corporate power and authority to conduct its business as now conducted.
(b) Authorization. Buyer has all requisite corporate power and
authority to execute and deliver this Agreement and all other documents to be
executed and delivered pursuant hereto by it and to carry out the transactions
contemplated hereby. The execution and delivery of this Agreement and all other
documents to be executed and delivered pursuant hereto by Buyer, and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action of Buyer and this Agreement and all other
documents to be executed and delivered pursuant hereto by Buyer constitute the
valid and binding agreements of Buyer, enforceable against Buyer in accordance
with its terms, except to the extent limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors rights. No
consent of, or notice to, any federal, state or local authority, or any other
person or entity is required to be obtained or made by Buyer in connection with
the execution, delivery or performance of this Agreement and the other documents
to be executed, delivered and performed by Buyer pursuant hereto.
(c) No Public Offering. The purchase contemplated by this
Agreement has not involved any public offering and Buyer is purchasing the Stock
for its own account for investment and with no present intention of
distributing, reselling, or otherwise disposing of its interest in the Stock.
(d) Profit Sharing Plan. With regards to the Triro, Inc. Employee
Profit Sharing Plan and Trust (the "Plan") for the plan year ending December 31,
1999, Company employees who terminate service with the Company during the Plan
Year ending December 31, 1999, will be allowed to receive their vested portion
of their respective account balances in accordance with the Plan documents and
applicable law.
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ARTICLE VI: OPERATION OF BUSINESS
6.01 Ordinary Course. The Company shall operate its business in
the ordinary course until the Closing Date, and in connection therewith, all its
business activities, including, without limitation, each of the following
activities shall be operated in the ordinary course: ordering merchandise,
maintaining usual and customary inventory levels, collecting accounts
receivables, payment of expenses, and continuation of general promotional
activities. Lastly, those bonuses paid or to be paid by the Company in the
approximate amount of $400,000 and as referenced in subsection 5.01(k) hereof
shall be considered as having been paid in the ordinary course of the Company's
business and shall be taken into account by the parties as necessary when making
the comparisons called for by the Sellers' representations and warranties
relating to the various Company financial statements as set forth in subsection
5.01(i) hereof.
(a) Right to Inspect. Buyer shall have the right to conduct any
reasonable inspections or investigations with respect to the business of the
Company and its properties, either individually or by utilizing a third party.
(b) Access. Representatives of Buyer shall have free access to
the business and records pertaining to the Company in order that Buyer may have
full opportunity to make such investigation as it shall desire of the affairs of
the Company relating to its assets, liabilities and business, provided that
Buyer provides the Company reasonable prior notice of its desire to such access;
and such activities by Buyer shall not interfere with the Company's normal
business operations. Each party hereto shall have the right to make copies of
all books and records received or retained by the other party hereunder.
(c) Subsequent Events. If any Seller becomes aware of any fact or
circumstance which would change or affect the accuracy of a representation or
warranty in this Agreement, he shall immediately give written notice of any
change, fact or circumstance to Buyer, but such notice shall not relieve Sellers
of their liabilities or obligations with respect thereto.
(d) Capital Improvements. Until the Closing, the Company shall
continue to make capital improvements approved by Buyer on its bookstores at
Tempe, Arizona (at Arizona State University) and at its bookstore on Guadalupe
St. in Austin, Texas. In addition, the Company will continue acquiring and
installing furniture and fixtures for its new bookstore in Wichita Falls, Texas.
(e) Purchase of Certain Assets. With the written consent of
Buyer, the Sellers shall be permitted to purchase certain assets of the Company
as approved by Buyer for a price equal to the fair market value thereof as
mutually agreed by the parties. Such purchases shall be consummated at or prior
to Closing.
6.02 Trade Name; Post Closing. Within five (5) years after
Closing, the Company, including its successors and assigns, whether by merger,
consolidation or assignment, shall cease to use the name "Rother's" in
connection with any of its operations or business activities.
ARTICLE VII: DELIVERIES AT CLOSING
7.01 Deliveries by Sellers. At the Closing, Sellers covenant and
agree, jointly and severally, to deliver, or cause to be delivered, to Buyer the
following:
(a) Stock Certificates. The certificate or certificates
representing the number of shares of Stock of the Company set forth opposite his
or her name on Exhibit A, duly endorsed in blank (or with a stock power duly
endorsed in blank and affixed to such certificate(s)), in proper form for
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transfer, free and clear of all options, liens, claims, charges, restrictions,
equities and other encumbrances of any nature whatsoever.
(b) Resignations. The written resignations of all directors and
officers of the Company from those positions, effective as of the Closing Date,
and the written resignation of Dennis Rother and Larry Rother as employees of
the Company, and release of claims.
(c) Corporate Records. All minute books, stock record books and
transfer ledgers, securities, corporate records, and corporate seals of the
Company.
(d) Opinion of Counsel. An opinion of legal counsel to the
Company dated the Closing Date and satisfactory to Buyer and its counsel.
(e) Title Insurance. With respect to each parcel of real estate
owned by the Company, and at the Company's expense, either an attorney's title
examination or an owner's title insurance policy on such form as may be
reasonably acceptable to Buyer issued as of the Closing Date (or by endorsement
to such a policy) by a title insurance company of national repute reasonably
acceptable to Buyer insuring fee simple title of such real estate in such
amounts as may be reasonably specified by Buyer subject only to (i) such matters
as are disclosed pursuant to Sections 5.01 (n) and (o) of this Agreement, (ii)
liens of current state and local property taxes, not yet due and payable, and
(iii) such covenants, conditions and restrictions of record, roads and highways,
and public utility easements which have not heretofore materially and adversely
affected, and will not hereafter materially and adversely affect, the value or
utility of such parcels of real estate (including any and all buildings,
structures, fixtures and other improvements located thereon) as heretofore used,
or as presently proposed to be used, by the Company and which have not
materially impaired or interfered with, the operations of the Company. Such
title insurance shall contain extended coverage over the general exceptions in
the title insurance policy.
(f) Survey. With respect to each parcel of real estate covered by
a title examination or insurance policy deliverable under Section 7.01(e) above,
and at the Company's expense, a survey (certified by a land surveyor registered
in the state in which such parcel is located) as of a date acceptable to Buyer,
in accordance with the Minimum Standard Detail Requirements for Land Surveys as
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping. Each such survey shall show, without limitation, with
respect to each such parcel of real estate (i) the legal description to each
such parcel of real estate, (ii) any and all buildings, structures and other
improvements located on such parcel of real estate and all "setback" lines and
other restrictions in respect thereof which are of record or which have been
established by any law, statute, code, ordinance, rule or regulation, (iii) any
and all easements and rights of way with respect to such parcel of real estate,
(iv) all entrances to and exits from such parcel of real estate from public
roads and highways and (v) no encroachments from or onto the parcel or any
violations of any building line or easement.
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(g) Covenants Not to Compete. Non-competition agreements from
each of the Sellers substantially in the form attached hereto as Exhibit F, and
from Ronald Walberg ("Walberg") in a form mutually agreed to between Walberg and
Buyer.
(h) Termination of Buy-Sell Agreement. A duly executed
termination of any agreement between or among the Company and/or Sellers which
purports to restrict or affect the sale or transfer of the Stock.
(i) Resignations-Profit Sharing Plan. The written resignations of
Sellers from their positions as trustees of the Plan.
(j) Notes Payable to Sellers. The originals of the promissory
notes payable to Sellers and heretofore executed by the Company as set forth and
more specifically described in subsection 8.03(f) hereof with the notation
thereon "paid" and initialed by Sellers.
(k) Life Insurance. Payment by Sellers to the Company for the
amounts owed by the Sellers to the Company under the Split-Dollar Life Insurance
Agreements as set forth and more specifically described in subsection 8.03(e)
hereof, which amount shall not be less than the greater of the cash surrender or
book value of such policies on the books and records of the Company.
(l) Estoppel Certificates. Estoppel letters, in form and content
satisfactory to Buyer, executed by the landlords of each of the real estate
properties leased by the Company, verifying that each lease is in full force and
effect, the remaining term and extension periods, rent payments are current,
amount of security deposit, and that no defaults of landlord or tenant exist.
(m) No Litigation. A certificate dated the Closing Date and
signed by Sellers, the truth and accuracy of which shall be a condition to
Buyer's obligation to consummate the transactions contemplated herein, to the
effect that other than as described on the Disclosure Schedule, there is no
action, suit or other proceeding pending before any court, tribunal or
governmental authority seeking or threatening to restrain or prohibit the
consummation of the transactions contemplated by this Agreement, or seeking to
obtain substantial damages in respect thereof, or involving a claim that
consummation thereof would result in the violation of any law, decree or
regulation of any governmental authority having appropriate jurisdiction.
(n) Accuracy of Representations; Performance of Covenants. A
certificate dated the Closing Date and signed by Sellers, the truth and accuracy
of which shall be a condition to Buyer's obligation to consummate the
transactions contemplated herein, to the effect that, other than as described on
the Disclosure Schedule, the representations and warranties of Sellers contained
in this Agreement (except for factual changes in the information contained in
the Disclosure Schedule or attachments hereto occurring after the execution of
this Agreement and before Closing, which changes shall be noted on amendments to
such information at Closing which are subject to approval by Buyer in its sole
and absolute discretion) are true and correct as of the Closing Date, and that
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Sellers have duly performed or complied with all of the obligations to be
performed or complied with by them under the terms of this Agreement on or prior
to Closing.
(o) Further Assurances. At and following the Closing, Sellers,
without further consideration, shall execute and deliver such other documents
and instruments and take such further actions as Buyer may reasonably request in
order to complete and perfect the transactions contemplated herein.
7.02 Deliveries by Buyer. Buyer hereby covenants and agrees with
each Seller, that at the Closing, Buyer will deliver, or cause to be delivered,
the following:
(a) Consideration for Stock. The Purchase Price shall be paid in
accordance with the terms of Article II hereof.
(b) Payment to Walberg. Payment by the Company to Ronald Walberg
in the amount of Five Hundred Ninety-Four Thousand Dollars ($594,000.00) less
appropriate reductions as set forth and more specifically described in
subsection 8.03(d) hereof.
(c) Notes Payable to Sellers. Payment by the Company to the
Sellers of the unpaid principal and accrued interest owing under those
promissory notes payable to Sellers and heretofore executed by the Company as
set forth and more specifically described in subsection 8.03(f) hereof.
(d) Board Resolution. A certified copy (dated as of the Closing)
of the resolution of Buyer's Board of Directors authorizing and approving this
Agreement and the consummation of each and every transaction contemplated by
this Agreement, together with a certificate of incumbency certified by Buyer's
Secretary.
(e) Life Insurance. Delivery by the Company to Sellers of the
necessary documents to release and transfer to Sellers all of its liens,
collateral assignments, and all other rights and interests to the insurance
policies which are the subject to such Split-Dollar Life Insurance Agreements
dated October 15, 1993 by and between the Company and the Sellers as set forth
and more specifically described in subsection 8.03(e) hereof.
(f) Accuracy of Representations; Performance of Covenants. A
certificate signed by an officer of Buyer, the truth and accuracy of which shall
be a condition to Sellers' obligation to consummate the transactions
contemplated herein, to the effect that the representations and warranties of
Buyer contained in this Agreement are true and correct as of the Closing Date,
and that Buyer has duly performed or complied with all of the obligations to be
performed or complied with by it under the terms of this Agreement on or prior
to Closing.
(g) Further Assurances. At and following the Closing, Buyer,
without further consideration, shall execute and deliver such other documents
and instruments and take such further actions as Sellers may reasonably request
in order to complete and perfect the transactions contemplated herein.
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7.03 Mutual Deliveries. Sellers and Buyer shall mutually execute
and deliver the following documents referred to herein:
(a) Escrow Agreement. The Escrow Agreement in form and substance
attached hereto as Exhibit B, with such changes as may be required by the Final
Escrow Agent and mutually satisfactory to the parties.
(b) Other Documents. Such other documents and instruments as are
referred to in this Agreement to be executed and delivered by both Sellers and
Buyer.
ARTICLE VIII: CONDITIONS OF CLOSING
8.01 Conditions to Buyer's Obligations. All obligations of Buyer
under this Agreement are subject to the fulfillment at Closing of each of the
following conditions:
(a) Sellers' representations and warranties contained in this
Agreement shall be true and correct in all material respects at the time of
Closing as though such representations and warranties were made at such time;
(b) Sellers shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with by
them prior to or at Closing;
(c) Sellers shall make, or cause to be made, all deliveries
described in Section 7.01 and Section 7.03 of this Agreement;
(d) Between March 31, 1999, and the Closing, no material adverse
change shall have occurred in the condition of the business, any leased
premises, or the property of the Company;
(e) All equipment, inventories, leased premises, and other
physical elements of the property of the Company shall be in good condition,
fully usable in the ordinary course of the operation of the business, and Buyer
shall be reasonably satisfied with any inspections it shall conduct or have
conducted with respect to the properties of the Company, including any
environmental inspections or audits;
(f) Buyer shall be reasonably satisfied that the business has
been conducted only in the ordinary course from and after March 31, 1999,
through the Closing Date;
(g) Buyer shall have been satisfied in its sole and reasonable
discretion with the results of any physical inventory described in Section 4.01
hereof, the Good Faith Estimates described in subsection 8.01(l) hereof; and
with the other asset and liability listings of the Company as of the Closing
Date;
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(h) Buyer shall have received a certificate of search for all UCC
or other liens against the assets of the Company, certified on or about the
Closing Date, indicating that there are no liens or claims against such assets
or the Stock other than as disclosed in the Disclosure Schedule and liens
against motor vehicles owned by the Company;
(i) Buyer shall have reviewed and approved, or negotiated
satisfactory terms, with respect to the lease of each of the real estate
properties subject to lease by the Company, and with respect to the leases
expiring (with no additional option period) within approximately three (3) years
after Closing, as appropriate, the Company shall have entered into a written
lease for the leased premises in form and substance satisfactory to Buyer to
become effective on or before the Closing Date, and assignable by Buyer or the
Company in the event Buyer reorganizes the Company with Buyer or with its parent
or an affiliate and each lease between the Company and the Sellers or a party
affiliated with the Sellers shall include a covenant whereby the Sellers or
their affiliate, as the case may be, agrees that it will not lease another site
in the building or property, or within an area with a radius of fifteen (15)
miles from the location of the bookstore locations now operated by the Company,
for the sale of college textbooks and apparel during the term of such leases
with the Company; provided, however, notwithstanding anything to the contrary
contained herein, should the lease between Sellers or their affiliated party and
the Company at the George Bush or Blinn College stores terminate or expire,
Sellers or their affiliated party shall be allowed to lease such store location
to another party engaged in the book or apparel business on such terms as it
deems desirable.
(j) Buyer shall have entered into any employment agreements with
key employees of the Company which it deems necessary, and Buyer shall be
satisfied that those key employees who do not enter into employment agreements
will continue to be employed with the Company after Closing;
(k) Buyer shall have been satisfied in its sole and reasonable
discretion that the business of the Company will not be materially affected by
any products, equipment or software failing to be year 2000 compatible, and
further, that the costs to Buyer to become year 2000 compatible will not be
material;
(l) Sellers shall deliver to Buyer unaudited statements prepared
by the Company and approved by the Sellers which constitute the good faith
estimate of the Company and the Sellers of the following financial statement
components of the Company as of April 30 and the Closing Date; cash and cash
equivalents, accounts receivable, inventory levels, accounts payable and
indebtedness (the "Good Faith Estimates"). Indebtedness shall mean the sum of
(A) indebtedness for borrowed money or for the deferred purchase price of
property or services, including, without limitation, notes payable, credit line
borrowing and long term debt, (B) obligations under leases which shall have been
or should be, in accordance with generally accepted accounting principles,
recorded as capital leases, and (C) accrued and unpaid taxes;
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(m) Sellers shall deliver to Buyer a list of all increases in
compensation, commissions or perquisites payable or to become payable by the
Company to any salaried employee of the Company since January 1, 1999, and a
list of all bonuses paid or payable as described in Section 5.01(k) hereof;
(n) Sellers shall have obtained the consent or approval of the
third parties identified on the Disclosure Schedule related to the defaults
identified under Sections 5.01 hereof;
(o) Sellers shall deliver to Buyer a written description of
actions taken by the Company out of the ordinary course of business as described
in Section 5.01(k) hereof, and a written description of tax returns under
extension as set forth in Section 5.01(l) hereof; and
(p) Buyer shall have been satisfied in its sole discretion with
the results of its due diligence investigations.
8.02 Noncompliance. If any one or more of the conditions
precedent set forth in Section 8.01 above shall not be in effect, complied with,
or fulfilled on the Closing Date, after a reasonable period of time to correct
by Sellers, Buyer may, by written notice to Sellers, elect in its sole and
absolute discretion to either (i) cancel this Agreement and all obligations of
Buyer hereunder, or (ii) execute a written waiver of compliance with any one or
more of the said conditions precedent and close this transaction, provided that
such waiver shall not release or relieve the Sellers from any liability if such
waiver causes Damages to Buyer as provided in Article IX hereunder. Moreover,
notwithstanding anything to the contrary contained in this Agreement, the
non-fulfillment of, or the noncompliance by Sellers with, any of the conditions
other than those set forth in subsections 7.01 (a), (b), (c), (h), (i), (j), (k)
and (o), subsection 7.03 (a) and subsections 8.01(a) and (l) hereof, shall not
be considered a "default" by either Seller under this Agreement as that term is
used in the Escrow Agreement referenced under subsection 2.02(a) of this
Agreement; provided, however, Sellers' failure to cooperate in good faith to
consummate the transaction described herein on the terms set forth herein shall
constitute a default for the purposes of said Escrow Agreement.
8.03 Conditions to Sellers' Obligations. All obligations of the
Sellers under this Agreement are subject to the fulfillment at Closing of the
following conditions:
(a) The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at the time of
Closing as though such representations and warranties were made at such time.
(b) Buyer shall have performed and completed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
(c) Buyer shall make all deliveries described in Section 7.02
and Section 7.03 of this Agreement.
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(d) The Company's payment to Walberg of the sum of Five Hundred
Ninety-Four Thousand Dollars ($594,000.00), less any applicable federal income
tax withholdings and employee's portion of employment taxes due, representing
the amount owing by the Company to Walberg under that certain Net Profit
Agreement dated March 31, 1992 by and between Walberg and the Company. Moreover,
with regard to such payment to Walberg by the Company, the parties hereto
acknowledge and agree that such payment shall be taken into account by the
parties as necessary when making the comparisons called for by the Sellers'
representations and warranties relating to the various Company financial
statements as set forth in the subsection 5.01(i) hereof.
(e) The Sellers shall pay the Company the amount owed to the
Company (which amount shall be not less than the greater of the cash surrender
or book value on the Closing Balance Sheet) under those Split-Dollar Life
Insurance Agreements dated October 15, 1993 by and between the Company and each
of the Sellers, and upon such payment, such agreements shall be terminated and
the Company shall release to Sellers all of its liens, collateral assignments,
and all other rights and interests in and to the insurance policies which are
the subject of such Split-Dollar Life Insurance Agreements. Such payments by the
Sellers under this subsection 8.03(e) may be in the form of offset against other
amounts owed by the Company to Sellers at Closing.
(f) The Company's payment to Sellers of the unpaid balance of
principal and accrued interest owing to Sellers by the Company under: (i) that
certain promissory note dated June 20, 1997 in the original principal amount of
Fifty Thousand Dollars ($50,000.00) executed by the Company and payable to
Dennis E. Rother; and (ii) that certain promissory note dated June 20, 1997 in
the original principal amount of Fifty Thousand Dollars ($50,000.00) executed by
the Company and payable to Larry W. Rother.
8.04 Failure of Conditions. In the event of default by any party
which is not cured prior to the Closing Date, the non-defaulting party shall
have the option to rescind this Agreement in addition to all other remedies at
law or in equity arising from such default, including the remedy of specific
performance.
ARTICLE IX: INDEMNIFICATION; SETOFF
9.01 Indemnification by Sellers. Subject to the limitations set
forth in this Article IX, from and after the Closing, each Seller, jointly and
severally, covenants and agrees, to reimburse and indemnify and hold Buyer
(which term, for the purposes hereof shall include Buyer and the Company)
harmless from, against and in respect of any and all Damages (as defined in
Section 9.04 hereof) asserted against, imposed upon or incurred by Buyer by
reason of or resulting from:
(a) Any misrepresentation or omission, breach of warranty or
nonfulfillment of any covenant or agreement of Sellers or the Company under this
Agreement, including without limitation, the Disclosure Schedule, or any other
written agreement, statement, list, certificate or other instrument furnished to
Buyer by or on behalf of Sellers or the Company pursuant to this Agreement; and
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(b) any and all actions, suits, claims, proceedings,
investigations, audits, demands, assessments, fines, judgments, costs and other
expenses (including, without limitation, reasonable audit and legal fees)
arising out of or resulting from (i) any misrepresentation, breach of warranty
or nonfulfillment of any covenant or agreement by the Sellers; or (ii) the
operation of the Company prior to the Closing save and except for ordinary
operating expenses previously incurred by the Company or costs and expenses
reflected on the Disclosure Schedule or in the March 31, 1999 Statements. Any
incident, amount or omission described under paragraphs (a) or (b) above are
herein referred to as a "Claim".
9.02 Method of Asserting Claims, etc. Buyer will give prompt
written notice to Sellers (or the appropriate Seller) of any Claim which it
discovers or of which it receives notice after the Closing and which might give
rise to Damages under Section 9.01 hereof, stating the nature, basis and (to the
extent known) amount thereof. If the Claim under Section 9.01 involves a suit by
a third party or by any governmental body, or any legal, administrative or
arbitration proceeding, Sellers shall be entitled to participate therein, and,
to the extent desired by them, to assume the defense thereof, and after notice
from Sellers to Buyer of the election so to assume the defense thereof, Sellers
will not be liable to Buyer for any legal or other expenses subsequently
incurred by Buyer in connection with the defense thereof, unless Sellers do not
actually assume the defense thereof following notice of such election. Buyer and
Sellers will render to each other such assistance as may reasonably be required
of each other in order to insure proper and adequate defense of any such suit,
claim or proceeding. Buyer will not settle any Claim and incur any Damages
without the written consent of the Sellers (or the appropriate Seller), which
consent shall not be unreasonably withheld. Buyer and/or the Company shall
assign to Sellers all right, title and interest in any Claim which is paid by
Sellers hereunder.
9.03 Right of Setoff. In order to secure Sellers' obligations
pursuant to this Agreement, Buyer shall have the right to offset its Damages
against the Deferred Consideration described in subsection 2.02(c) hereof,
provided, however, that the amount of Damages that Buyer may be entitled to
recover from the Sellers pursuant to this right of indemnity shall not be
limited to the Deferred Consideration, and Buyer shall have the right to pursue
any other remedies at law or in equity to which it may be entitled.
Notwithstanding any other provision in this Agreement to the contrary, and
pursuant to the terms of the Escrow Agreement, Buyer may instruct the escrow
agent to withhold payment of any portion of the Deferred Consideration at the
expiration of the one (1) year period which Buyer reasonably estimates may be
required to offset Damages which it may incur based on Claims which have been
made known to Buyer prior to such date.
9.04 Damages. "Damages" as used in this Article IX shall mean
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, judgments, settlements, fines, out of pocket costs and expenses,
including, without limitation, interest and penalties, and reasonable and actual
attorneys' fees, disbursements and expenses. "Damages" shall not include (i) any
amount received by the Company or Buyer from any insurance proceeds in
connection with such loss or damage; nor (ii) any aggregate amount of Damages up
to, but not exceeding, Eighty-five Thousand Dollars ($85,000). Buyer will use
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its best efforts to obtain a waiver of subrogation rights with respect to claims
against the Sellers from which insurance proceeds are received.
ARTICLE X: MISCELLANEOUS
10.01 Releases and Indemnification. It is acknowledged by the
parties hereto that Sellers, prior to the date hereof, have either personally
guaranteed or joined with the Company as a co-obligor under the leases, debt
instruments, and other obligations hereinafter set forth. In connection with
each such referenced lease, debt instrument, or other obligation, Buyer agrees
as follows:
(a) Leases. As soon as reasonably practicable after Closing,
Buyer shall use its reasonable best efforts to procure Sellers' release from
their guaranty or co-lessee obligations under the following leases or
guaranties. Such releases shall evidence that the appropriate third party has
fully and unconditionally released Sellers from any personal liability under
such leases or guaranties as hereinafter described. If Buyer is unable to
procure such releases, Buyer shall and does hereby indemnify and hold Sellers
harmless from any and all resulting claims, actions, demands, losses, costs, and
damages (including, without limitation, settlement costs and legal or other
expenses for investigating or defending any such actions and including the loss
of personal collateral pledged to secure any debt or obligation hereby
indemnified) reasonably incurred by Sellers in connection with, or as a result
of, their obligations under such instruments with respect to activities from and
after the Closing Date: (i) Guaranty of Lease Agreement by and between Granite
Chief Realty, Ltd. and Larry W. Rother dated the 19th day of August, 1994, along
with a Guaranty of Lease Agreement by and between Granite Chief Realty, Ltd. and
Dennis E. Rother of the same date, both guaranteeing the performance of the
Company's obligations under a Standard Form of Shopping Center Lease dated
August 22, 1994; (ii) Lease Contract by and between H. H. Williams and Margaret
Williams and the Company and Larry Rother, Howard Rother, and Dennis Rother
dated the 1st day of January, 1983; (iii) Two Year Guaranty by and between
Sellers and Keleher Realty, Inc., dated the 8th day of October, 1997, whereby
Sellers guarantee the performance of the Company's obligations under a certain
Lease Agreement of same date; and (iv) Lease Agreements by and between Naru Chen
and Larry Rother and the Company dated June 30, 1992, November 2, 1992, and
August 14, 1995, all as extended per Naru Chen's letter of April 15, 1996. The
indemnity obligation shall relate solely to obligations of and enforceable
against the Company for liabilities and obligations accruing or arising from and
after the Closing Date, and assuming there is no uncured default or claim
thereunder as of the Closing Date.
(b) Debt Instruments. Within sixty (60) days from and after the
date of Closing hereunder, Buyer shall either fully and finally pay all Company
indebtedness owing to the lender referenced hereinbelow, thereby terminating
Sellers' obligations under the referenced guaranties or Buyer shall procure a
full and unconditional release of Sellers from any personal liability under such
guaranties:
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(i) A Continuing and Unconditional Guaranty dated July 30,
1997 by and between Dennis Rother and NationsBank of
Texas, N.A. and a Continuing and Unconditional Guaranty of
the same date by and between Larry Rother and NationsBank
of Texas, N.A. whereby Sellers guarantee the full and
prompt payment of all of the Company's indebtedness either
owing or to become owing to such lender; and
(ii) A Continuing and Unconditional Guaranty dated July 13,
1998 by and between NationsBank, N.A. and Dennis Rother,
whereby Dennis Rother guarantees the full and prompt
payment of all of the Company's indebtedness then owing or
to become owing to such lender.
Provided, however, that there is no uncured default or claim under any such
guaranty at the Closing Date, and all obligations guaranteed thereunder
constitute obligations of and enforceable against the Company and are set forth
on the Disclosure Schedule.
(c) Other Obligations. Buyer shall and does hereby indemnify and
hold Sellers harmless from any and all claims, actions, demands, losses, costs,
and damages (including, without limitation, settlement costs and legal or other
expenses for investigating or defending any such actions and including the loss
of personal collateral pledged to secure any debt or obligation hereby
indemnified) reasonably incurred by Sellers in connection with, or as a result
of, their written guaranty of any other debt or obligation of the Company
previously incurred in the ordinary course of business of the Company involving
transactions from and after the Closing Date, provided that such obligations
constitute obligations of and are enforceable against the Company.
10.02 Company Indebtedness to Howard P. Rother and Patsy M.
Rother. The parties hereto acknowledge and agree that the Company has heretofore
executed a Real Estate Lien Note in the original principal amount of $200,000.00
dated August 1, 1985, payable to Howard P. Rother and wife, Patsy M. Rother of
Brazos County, Texas, with an approximate present balance of $66,384.81 as of
June 1, 1999. Such Real Estate Lien Note is secured by, among other things, 667
shares of Company treasury stock. The parties hereto agree that upon the Closing
Date, the Company shall pay to Howard P. Rother and Patsy M. Rother, the unpaid
balance of principal and accrued interest then owing under such Real Estate Lien
Note obligation of the Company. Upon payment of the same, Sellers shall pay any
sums they owe to such obligees and shall cause Howard P. Rother and Patsy M.
Rother to simultaneously deliver the original of said note to the Company
endorsed and marked "paid", along with an appropriate release of any Company
stock held by Howard P. Rother and Patsy M. Rother as security under said note
and any other obligations of the Company related thereto.
10.03 Estoppel Certificates. No later than thirty (30) days after
the Closing, Sellers shall cause to be delivered to Buyer estoppel letters, in
form and contents satisfactory to Buyer, executed by the landlords of each of
the real estate properties leased by the Company, which are not delivered to
Buyer at the Closing under subsection 7.01(l) hereof with Buyer's approval.
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10.04 Notice to Suppliers. The parties hereto acknowledge and
agree that Sellers shall be allowed, subsequent to Closing, to send written
notice to past or present suppliers of the Company and any other Company
creditors (reasonably approved by Buyer) informing such suppliers and creditors:
(i) that Sellers are no longer involved or associated with the Company as an
owner, director, officer, or employee; and (ii) that Sellers will no longer be
liable for any debts, liabilities, or obligations of the Company incurred on or
after the Closing Date. The form of such notice shall be subject to approval by
both Buyer and Sellers.
10.05 Survival. All statements made by Sellers herein or in the
Disclosure Schedule, or in any other document, instrument, certificate, schedule
or list delivered to Buyer hereunder shall be deemed representations and
warranties of Sellers regardless of any investigation made by or on behalf of
Buyer. All representations, warranties, agreements, covenants and
indemnifications made by the parties in this Agreement, specifically including,
without limitation, the right to indemnification by Sellers and setoff against
the Deferred Consideration, or in any document delivered pursuant hereto, shall
survive the Closing regardless of any investigation at any time made by or on
behalf of Buyer or Sellers.
10.06 Waiver of Terms. Any of the terms or conditions of this
Agreement may be waived at any time by the party or parties entitled to the
benefit thereof but only by a written notice signed by the party or parties
waiving such terms or conditions.
10.07 Amendment of Agreement. This Agreement may be amended or
supplemented at any time only by written instrument duly executed by Buyer and
the Sellers.
10.08 Payment of Expenses. Except as specified in Section 4.01,
each of Sellers and Buyer shall be solely responsible for, and shall pay all of
its own expenses associated with the transaction described in this Agreement,
including but not limited to its accounting, consultants, legal fees, and
out-of-pocket expenses incurred in connection with this Agreement, or the
transactions herein contemplated. The Company shall be responsible for the
routine audit costs for the regular audit for the FYE March 31, 1999, which
shall be charged as an expense on the Closing Balance Sheet. All reasonable
audit costs incurred by third parties associated with the inventory and
preparation of the Closing Balance Sheet shall be paid by Buyer.
10.09 Entire Agreement, Assignment, etc. This Agreement sets
forth the entire understanding of the parties with respect to the subject matter
hereof. Any previous agreements or understandings between the parties regarding
the subject matter hereof are merged into and superseded by this Agreement. All
representations, warranties, covenants, terms and conditions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, legal representatives, successors and assigns of the parties
hereto and the Company; provided, however, that none of the rights or
obligations of any of the parties hereto may be assigned without the prior
written consent of, in the case of assignment by Sellers, Buyer, or, in the case
of assignment by Buyer, Sellers, which consent shall not unreasonably be
withheld.
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10.10 Notices. All notices, consents, waivers or other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date (i) delivered by hand (with written
confirmation of receipt), (ii) sent by telecopier (with written confirmation of
receipt) with a copy mailed by certified mail, return receipt requested, or (c)
when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), to the person and address set forth below:
If to Sellers: Dennis Rother and Larry Rother
P.O. Box 10071
College Station, TX 77842
with a copy to: Steven N. Allbritton, Esq.
West, Webb, Allbritton & Gentry, P.C.
1515 Emerald Plaza
College Station, TX 77845
Facsimile No.: (409) 694-8000
or to such other person or address as the Sellers may designate in writing.
If to Buyer: Nebraska Book Company, Inc.
Attention: Mark W. Oppegard, President
4700 So. 19th Street
P. O. Box 80529
Lincoln, NE 68501-0529
Facsimile No.: (402) 421-0507
with a copy to: Alan D. Slattery, Esq.
Rembolt Ludtke & Berger
1201 Lincoln Mall, Ste. 102
Lincoln, NE 68508
Facsimile No.: (402) 475-5087
or to such other person or address as Buyer may designate in writing.
10.11 Commission and Finder's Fees. Buyer and the Sellers
mutually represent and warrant each to the other that none of them has retained
or used the services of any individual, firm or corporation in such manner as to
entitle such individual, firm or corporation to any compensation for brokers' or
finders' fees with respect to the transactions contemplated hereby for which the
other or the Company may be liable.
10.12 Severability. In the event that any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
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enforceability of any such provision in every other respect and of the remaining
provisions of this Agreement shall not be in any way impaired.
10.13 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
10.14 Headings. The headings of the Sections and the subsections
of this Agreement are inserted for the convenience of reference only and shall
not constitute a part hereof.
10.15 Governing Law. The validity of this Agreement and any other
agreements entered into by and between the parties hereto in connection with the
subject transaction, as well as any of the terms or provisions of the same, as
well as the rights and duties of the parties hereunder and thereunder shall be
governed, construed and enforced in accordance with the laws of the State of
Texas, without regard to conflict of law principles.
10.16 Jurisdiction. The parties hereto agree that this Agreement
has been executed in and is partly performable in the State of Texas.
Accordingly, the parties hereto agree that they are subject to the jurisdiction
of the courts of the State of Texas, and any legal proceeding arising out of,
under, or in connection with or in anyway related to this Agreement or any other
agreements executed in connection therewith, shall be brought solely in any
state or federal court of competent jurisdiction in the State of Texas.
10.17 Exhibits. All Exhibits attached to this Agreement and the
Disclosure Schedule are incorporated herein and made a part of this Agreement.
IN WITNESS WHEREOF, this Agreement had been duly executed by the
parties hereto on the day and year first above written.
ATTEST: NEBRASKA BOOK COMPANY, INC.
- ----------------------------- By: -----------------------------
Vice President Its President
SELLERS:
- ----------------------------- -----------------------------------
Dennis Rother Larry Rother
ATTEST: TRIRO, INC.
- ----------------------------- By: -----------------------------
Its Secretary Its President
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SCHEDULE OF EXHIBITS
Exhibit A: Stockholder List
Exhibit B: Escrow Agreement
Exhibit C: Disclosure Schedule
Exhibit D: Unaudited March 31 Statements
Exhibit E: Schedule of Fixed Assets
Exhibit F: Covenant Not to Compete Agreements
Exhibits A through E to the Agreement for Purchase and Sale of Stock have been
omitted for purposes of filing Exhibit 2.1 to the Form 8-K. Such exhibits will
be made available to the Securities and Exchange Commission upon request.
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- --------------------------------------------------------------------------------
EXHIBIT F
COVENANT NOT TO COMPETE AGREEMENT
This Covenant Not to Compete Agreement ("Agreement") is made this
June __, 1999, among TRIRO, INC., a Texas corporation (the "Company"), and
________________, of _______, Texas ("Rother").
RECITALS
A. Concurrent with the execution hereof, Nebraska Book Company,
Inc., a Kansas corporation ("Nebraska Book") has purchased all of the capital
stock of the Company from Rother and others, pursuant to the terms of an
Agreement For Purchase And Sale Of Stock dated May ___, 1999 (the "Stock
Purchase Agreement").
B. The Company operates approximately 17 retail stores engaged in
the sale of books and apparel, such stores located at the street addresses which
are listed on Exhibit A attached hereto and incorporated herein by this
reference, such business activities including the wholesale sale and
distribution of books and apparel, and related administrative activities
(collectively referred to as the "Business");
C. For several years, Rother has served as an officer and
director of the Company, and managed and directed that portion of its affairs
which dealt with the Business, and in connection with the consummation of the
Stock Purchase Agreement, Rother has terminated his employment and all other
relationships with the Company; and
D. As a condition of the Stock Purchase Agreement, Nebraska Book
intends that Rother not engage in any business activity which competes with the
Business on the terms set forth herein, and in order to induce Nebraska Book to
effectuate the Stock Purchase Agreement, Rother agrees to the covenants
contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Recitals. The recitals set forth above are a material part
of this Agreement and are incorporated herein by this reference.
2. Term. The term of this Agreement shall be a period of five (5)
years, commencing on the date of execution hereof, which is the date that Rother
sells his stock of the Company to Nebraska Book.
3. Consideration. In consideration of the duties and obligations
of Rother hereunder, Rother acknowledges receipt of the consideration paid and
benefits received as specified in the Stock Purchase Agreement as full and
adequate consideration therefor.
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4. Non-Compete and Non-Interference Agreement. (a) Nebraska Book
and the Company desire to preserve the goodwill of the Company by preventing
Rother from engaging in certain activities competitive with the Company,
including its successors and assigns, which would in the immediate future
diminish the value of the assets, goodwill and business of the Company.
Therefore, Rother covenants and agrees that for a period of five (5) years from
and after the date hereof, Rother will not, without the prior written permission
of the Company, separately or on behalf of or in conjunction with any other
person or entity, either directly or indirectly, own, be employed by, render
consulting services to, manage, operate, join, control or participate in the
ownership, management, operation or control of, or lease any real or personal
property to, any bookstore or apparel business, or any related services or
retail businesses, competing with the Business, within fifteen (15) miles in any
direction from any of the retail locations described on Exhibit A (the
"Restricted Area"). It is understood and agreed that the foregoing sentence is
intended to prevent Rother from soliciting customers and from competing with the
Company for the business of its customers and clientele services in the
Restricted Area; provided, however, that nothing contained herein shall prohibit
Rother, with or without the Company's permission, from making a passive
investment in companies that advertise and sell sports memorabilia, collegiate
apparel, and related items (excluding textbooks) exclusively over the internet.
The parties hereby stipulate that the time period and area covered by this
Agreement are reasonable under the circumstances. Notwithstanding the foregoing,
if the Company, including its successors and assigns, vacates its leased
premises at either (i) 340 George Bush Drive, College Station, Texas, or (ii)
2008 E. 29th Street, Bryan, Texas, then Rother shall be permitted to relet such
premises to a bookstore or apparel business to any third party other than any
individual who is a bookstore manager of the Company at the date of execution
hereof, and such lease shall not constitute a default under this Section 4(a)
provided that Rother has no other relationship described herein with such
bookstore or apparel business other than as a landlord.
(b) Rother agrees that , for the term set forth in Section 2
hereof, he shall not, directly or indirectly, either for himself or on behalf of
any other person, (i) solicit or induce, or attempt to solicit or induce, any
employee or officer of the Company for the purposes of employing him or her or
obtaining his or her services for hire or otherwise causing him or her to leave
his or her employment with the Company or in any way interfere with the
relationship between the Company and any employee of the Company, or (ii)
induce, or attempt to induce, any person that is a customer, supplier or
business relation of the Company to cease doing business with the Company, or in
any way interfere with the business relationship between any customer, supplier
or business relation of the Company.
5. Trade Secrets. Rother possesses certain confidential
information owned by the Company related to the bookstore and apparel business,
and which constitutes confidential trade secrets owned solely and exclusively by
the Company, and its successors and assigns. All such confidential information
is herein referred to as the "Confidential Information", and includes, without
limitation, the following:
(i) financial information, including operating statements, sales
information, earnings and reporting systems, bookkeeping and accounting;
(ii) customer lists and business plan, including growth plans and
strategies;
(iii) employee management, including training manuals, employee
identification and performance, compensation and incentives, employee
selection and training techniques;
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(iv) pricing and marketing strategies and advertising policies;
(v) proprietary rights in certain valuable trade names, service marks
and trademarks; and
(vi) manuals covering business practices and policies.
Rother covenants and agrees to keep secret, and not use, disclose or reveal, any
portion of the Confidential Information to any person or entity other than (i)
the Company and its authorized representatives; (ii) per the prior written
consent of the Company to Rother; and (iii) as a consequence of a valid and
enforceable order of a duly authorized regulatory body or court of competent
jurisdiction. Rother shall have no right to use or to license the use of any
name, mark or other intellectual property right associated with the Confidential
Information. The covenants and agreements set forth in this section shall
continue so long as such Confidential Information remains a trade secret of the
Company and shall survive the termination of this Agreement.
6. Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the remainder of this Agreement, which shall be given full effect without regard
to the invalid portions. If any provision of this Agreement, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby, the Company and Rother agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, such provision shall then be
enforceable.
7. Default; Remedies. The parties hereto agree that the remedy at
law for any breach of any covenant in this Agreement will be inadequate and the
Company shall be entitled to injunctive relief, including specific performance,
and setoff, in addition to any other relief to which Nebraska Book is entitled
at law or in equity.
8. Binding Effect; Assignability. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
permitted successors and assigns. The interest of Rother under this Agreement
shall not be assignable, transferable, or subject to the claims of any creditor.
The interests of the Company under this Agreement, either in whole or in part,
may be assigned at its option to Nebraska Book or to any other party with an
interest in any of the bookstore locations constituting the Business.
9. Amendment. This Agreement may be amended at any time by a
written instrument agreed to both by the Company and by Rother.
10. Contingencies. The parties understand and agree that, in the
event the Stock Purchase Agreement terminates or is cancelled as provided in the
Stock Purchase Agreement, this Agreement shall have no further force and effect
and no compensation shall be paid by Nebraska Book to Rother. This Agreement
does not depend upon the execution of a similar agreement with any other party
to be enforceable.
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11. Third Party Beneficiary. Nebraska Book is an intended third
party beneficiary of this Agreement and Rother hereby agrees that Nebraska Book
shall be fully entitled to enforce all the rights and privileges granted to the
Company hereunder.
12. Governing Law. The validity of this Agreement, as well as the
rights and duties of the parties hereunder, shall be governed, construed and
enforced in accordance with the laws of the State of Texas, without regard to
conflict of law principles.
13. Jurisdiction. The parties hereto agree that this Agreement
has been executed in and is partly performable in the State of Texas.
Accordingly, the parties hereto agree that they are subject to the jurisdiction
of the courts of the State of Texas, and any legal proceeding arising out of,
under, or in connection with or in anyway related to this Agreement or any other
agreements executed in connection therewith, shall be brought solely in a
federal or state court of competent jurisdiction in the State of Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first above written.
ATTEST: TRIRO, INC., a Texas corporation
________________________________ By _______________________________________
_____________________________________
_______________________
NEBRASKA BOOK COMPANY, INC.,
ATTEST: a Kansas corporation
__________________________ By: ______________________________
Mark W. Oppegard, President
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EXHIBIT A
Rother's Bookstore (GB)
340 George Bush Drive
College Station, TX 77840
Bevo's Bookstore (NR)
11900 Metric Blvd., Suite B
Austin, TX 78758
Bevo's Bookstore (BW)
2304 Guadalupe
Austin, TX 78705
Bevo's Bookstore (DM)
2025 Guadalupe
Suite 146A
Austin, TX 78705
Rother's Bookstore (WS)
907 Harvey Road
College Station, TX 77840
Rother's Bookstore (SM)
425 North LBJ Dr.
San Marcos, TX 78666
Rother's Bookstore (RH)
3503 Elgin
Houston, TX 77004
Bevo's Bookstore (AC)
1202 West Ave.
Austin, TX 78701
Rother's Bookstore (RA)
625 East Apache
Tempe, AZ 85281
Rother's Bookstore (RC)
801 West 12th Street
Austin, TX 78701
Rother's Bookstore (RT)
501 North Park Ave.
Tucson, AZ 85719
Rother's Bookstore (NG)
303 College Ave.
College Station, TX 77840
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Rother's Bookstore (RD)
525 Dutton Ave
Waco, TX 76706
Rother's Bookstore (RB)
2008 E. 29th Street
Bryan, TX 77802
Rother's Bookstore (AB)
2122 Central SE
Albuquerque, NM 87106
Rother's Bookstore (ST)
1603 W. Washington
Stephenville, TX 76401
Rother's Bookstore (WF)
2301 Midwestern Parkway
Suite 106
Wichita Falls, TX 76308
