<PAGE> 1
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) March 1, 1999
RAINBOW RENTALS, INC.
---------------------
(Exact name of registrant as specified in its charter)
OHIO 0-24333 34-1512520
---- ------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
3711 Starr Centre Drive
Canfield, Ohio 44406
----------------------- ----------
(Address of principal executive offices) (Zip Code)
(330) 533-5363
--------------
Registrant's telephone number, including area code
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
------------------------------------
Effective March 1, 1999, Rainbow Rentals, Inc. (the "Company") completed the
acquisition of substantially all of the assets of Blue Ribbon Rentals, Inc. and
Blue Ribbon Rentals II, Inc. (collectively, "Blue Ribbon"), consisting primarily
of 14,400 rental purchase agreements, the inventory of merchandise leased
thereunder and idle merchandise inventory, delivery vehicles and related store
furniture and fixtures. Blue Ribbon operated 15 rental stores in Ohio and
Pennsylvania. The Company intends to merge the business of some of the stores
into existing Company stores. The purchase price, which is subject to
post-closing adjustments, totaled approximately $10,300,000. The Company
financed the acquisition from funds available under the Company's existing
credit facility from Bank of America Illinois. In connection with the
acquisition, the size of the Company's credit facility has been increased from
$10 to $16 million.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(a) Financial Statements of Business Acquired
It is impracticable to provide the required financial statements of Blue Ribbon
at the time of filing this report on Form 8-K. The required financial statements
will be filed as soon as practicable but not later than 60 days after the date
by which this report must be filed.
(b) Pro Forma Financial Information
It is impracticable to provide the required pro forma financial statements with
respect to the acquisition of Blue Ribbon at the time of filing this report on
Form 8-K. The required financial statements will be filed as soon as practicable
but not later than 60 days after the date by which this report must be filed.
(c) Exhibits
See Exhibit Index on page 4 of this report.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
RAINBOW RENTALS, INC.
(Registrant)
Date: March 15, 1999 By: /s/ WAYLAND J. RUSSELL
--------------------------------
Wayland J. Russell, Chairman and
Chief Executive Officer
By: /s/ MICHAEL A. PECCHIA
--------------------------------
Michael A. Pecchia,
Chief Financial Officer
<PAGE> 4
RAINBOW RENTALS, INC.
FORM 8-K CURRENT REPORT
Exhibit Index
- -------------
Exhibit No. Description
- ----------- -----------
4.1 Consent and Amendment No. 11 to Loan and Security Agreement
between Rainbow Rentals, Inc. and Bank of America National
Trust & Savings Association, dated March 1, 1999
10.1 Amended and Restated Asset Purchase Agreement dated March 1,
1999 among Rainbow Rentals, Inc., Blue Ribbon Rentals,
Inc., Blue Ribbon Rentals II, Inc. and William Wendell
<PAGE> 1
Exhibit 4.1
FOURTH AMENDED AND RESTATED SUPPLEMENT A
TO LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 5, 1992
BETWEEN BANK OF AMERICA ILLINOIS
AND RAINBOW RENTALS, INC.
1. Loan Agreement Reference. This Fourth Amended and Restated
Supplement A, as it may be amended or modified from time to time, is a part of
the Loan and Security Agreement dated as of October 5, 1992 between Lender and
Borrower (together with all amendments, modifications and supplements thereto,
the "Loan Agreement") and amends and restates in its entirety that certain Third
Amended and Restated Supplement A dated July 15, 1998. Terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Loan
Agreement.
2. Revolving Credit Amount; Borrowing Base.
2.1. Revolving Credit Amount. The maximum amount of Revolving
Loans which Lender, in its discretion, will make available to Borrower (such
amount, as adjusted from time to time, is herein called the "Revolving Credit
Amount") is $16,000,000.
2.2. Borrowing Base. The term "Borrowing Base," as used
herein, shall mean an amount (the "Cash Receipts Availability") equal to the
lesser of (1) $16,000,000 or (2) 3.75 multiplied by the net amount of Borrower's
actual cash collections of Accounts Receivable from Account Debtors pursuant to
the terms of Rental Agreements for the immediately preceding two calendar months
(exclusive of collections for delivery, insurance, merchandise, sales and other
non-rental payments and after deduction of such reserves and allowances as
Lender deems proper and necessary).
2.3. Lender's Rights. Borrower agrees that nothing contained
in Supplement A (i) shall be construed as Lender's agreement to resort or look
to a particular type or item of Collateral as security for any specific Loan or
portion of the Liabilities or advance or in any way limit Lender's right to
resort to any or all of the Collateral as security for any of the Liabilities,
(ii) shall be deemed to limit or reduce any Lien upon any portion of the
Collateral or other security for the Liabilities or (iii) shall supersede
Section 2.9 of the Loan Agreement.
3. Interest.
3.1.1. Revolving Loans.
(a) Interest to Maturity. The unpaid principal balance of the
Revolving Loans (other than Overdraft Loans and Over Advances) shall bear
interest to maturity at a per annum rate equal to the Reference Rate in effect
from time to time plus the Applicable Margin; provided that pursuant to the
provisions of Section 3.1.3 below, from time to time Borrower may elect to have
all or any portion of the Revolving Loans bear interest at the IBOR Rate plus
the Applicable Margin.
<PAGE> 2
(b) Default Rate. If any amount of the Revolving Loans is not
paid when due, whether by acceleration or otherwise, the entire unpaid principal
balance of the Revolving Loans (other than Overdraft Loans and Over Advances)
shall bear interest until paid at a rate per annum equal to the greater of (i)
the rate otherwise from time to time if effect plus 2.00% and (ii) 2.00% above
the rate otherwise in effect at the time such amount becomes due.
3.1.2. Intentionally Omitted.
3.1.3. IBOR Option.
Borrower shall have the right, from time to time, to designate
IBOR Revolving Portions by means of an IBOR Request. All IBOR Requests must be
received by Lender not later than 10:00 a.m., Chicago time, two (2) Banking Days
prior to the date the applicable Interest Rate Period is to begin (or is to be
continued). Notwithstanding the foregoing, (x) all undesignated portions of the
Revolving Loan shall constitute Reference Rate Loans, (y) Borrower shall not
have the right to designate IBOR Rate Loans at any time that an Event of Default
or an Unmatured Event of Default is in existence, notwithstanding a contrary
designation by Borrower, and (z) in no event may more than four (4) IBOR Rate
Loans having different Interest Rate Periods be outstanding at any one time.
Each designation by Borrower of a IBOR Rate Loan shall be irrevocable; provided,
however, that Borrower may specify in any such IBOR Request a maximum IBOR Rate
which it will accept for the related Interest Rate Period and the IBOR Option
elected in such IBOR Request shall not become effective if the applicable IBOR
Rate determined by Lender shall exceed such specified maximum.
3.2. Overdraft Loans; Over Advances. Overdraft Loans and Over
Advances shall bear interest at the rate(s) determined pursuant to Section 2.7
or Section 2.8 of the Loan Agreement, as applicable.
3.3. Computation. Interest shall be calculated on the basis of
a year consisting of 360 days and paid for actual days elapsed; provided, that
the computation of interest on IBOR Rate Loans shall include the date on which
the applicable Interest Rate Period began, but shall exclude the last day of the
applicable Interest Rate Period. IBOR Rate Loans not repaid on the last day of
the Interest Rate Period applicable thereto shall be continued or converted into
Reference Rate Loans and shall bear interest at the applicable rate for
Reference Rate Loans of such type from and including the last day of such
Interest Rate Period. Changes in any interest rate provided for herein which are
due to changes in the Reference Rate shall take effect on the date of the change
in the Reference Rate.
3.4. Payment. Until maturity, interest on the Loans shall be
payable on the first day of each calendar quarter, and at maturity. After
maturity, whether by acceleration or otherwise, accrued interest shall be
payable on demand; provided, that interest on IBOR Rate Loans shall be payable
in arrears on the last day of the Interest Rate Period applicable thereto and at
maturity.
<PAGE> 3
3.5. Funding Indemnification. If any payment of a IBOR Rate
Loan occurs on a date which is not the last day of the applicable Interest Rate
Period, whether because of acceleration, prepayment or otherwise, Borrower will
indemnify Lender for any loss or cost incurred by it resulting therefrom,
including without limitation any loss or cost in liquidating or employing
deposits acquired to fund or maintain such Loan. Lender shall deliver a written
statement as to the amount due, if any, under this Section 3.5. Such written
statement shall set forth in reasonable detail the calculations upon which
Lender determined such amount and shall be final, conclusive and binding on
Borrower in the absence of manifest error. Determination of amounts payable
under this Section 3.5 shall be calculated as though Lender funded its IBOR Rate
Loans through the purchase of a deposit of the type and maturity corresponding
to the IBOR Rate Loan and applicable Interest Rate Period bearing interest at
the IBOR Base Rate, whether or not Lender actually funded the Loan in that
manner. The amount specified in the written statement shall be payable on demand
after receipt by Borrower of the written statement. This Section 3.5 shall apply
to all payments of IBOR Rate Loans prior to the last day of the applicable
Interest Rate Period, including without limitation any such payment required to
be made in order to permit Borrower to pay any installment of principal due in
respect of the Revolving Loan under this Agreement.
3.6. Availability of Interest Rate Options. If Lender
determines that maintenance of any of its IBOR Rate Loans would violate any
applicable law, rule, regulation or directive, whether or not having the force
of law, Lender shall suspend the availability of such IBOR Rate Loans and
require any IBOR Rate Loans outstanding and so affected to be repaid; or if
Lender determines that (i) deposits of a type or maturity appropriate to match
fund IBOR Rate Loans are not available, (ii) the IBOR Rate does not accurately
reflect the cost of making such Loans, or (iii) Lender's ability to make or
maintain IBOR Rate Loans has been materially adversely affected by the
occurrence of any event after the date hereof, then Lender shall suspend the
availability of the IBOR Rate Loans, as applicable, after the date of any such
determination.
4. Additional Covenants. From the Closing Date and thereafter
until all of Borrower's Liabilities under the Loan Agreement are paid in full,
Borrower agrees that, unless Lender otherwise consents in writing, it will:
4.1. Net Worth. Not permit Borrower's Net Worth at any time to
be less than the Minimum Net Worth Amount as such time.
4.2. Capital Expenditures. Not and not permit any of its
Subsidiaries to purchase or otherwise acquire (including without limitation,
acquisition by way of capitalized lease), or commit to purchase or acquire, any
fixed asset, if after giving effect to such purchase or other acquisition, the
aggregate cost of all such fixed assets purchased or otherwise acquired would
exceed $3,000,000 in any Fiscal Year.
<PAGE> 4
4.3. Maximum Funded Debt to Earnings Ratio. Not permit, for
the period ending on the last day of each calendar quarter ending during any
period (inclusive) set forth below, the ratio of (a) Borrower's Indebtedness for
interest bearing borrowed money on the last day of each such calendar quarter
during such period set forth below plus the product of rental expenses for the
twelve month period ending on the last day of such calendar quarter multiplied
by a factor of 4 to (b) the product of (i) the Annualizing Factor multiplied by
(ii) Borrower's consolidated net earnings before interest expense, provision for
Taxes, depreciation and amortization for such twelve month period plus rental
expenses minus the sum of inventory purchases and Capital Expenditures for such
period, to be greater than the ratio set forth below opposite such period:
Period Maximum Ratio
------ -------------
Calendar quarter ending June 30, 1999 3.25:1.00
Six month period ending September 30, 1999 3.25:1.00
Nine month period ending December 31, 1999 3.25:1.00
Twelve month period ending March 31, 2000, June 30,
2000, September 30, 2000 and December 31, 2000 3.00:1.00
Twelve month period ending March 31, 2001 and the
twelve month period ending on the last day of each
calendar quarter thereafter 2.75:1.00
For purposes of this Section 4.3 and Section 4.4, (i) consolidated net earnings
shall not include any gains on the sale or other disposition of Investments of
fixed assets and any extraordinary or nonrecurring items of income to the extent
that the aggregate of all such gains and extraordinary or nonrecurring items of
income exceeds the aggregate of losses on such sale or other disposition and
extraordinary or nonrecurring charges, and (ii) interest expense shall include,
without limitation, implicit interest expense on Capitalized Leases, and shall
exclude the amortization of the closing fee, the modification fee, or any other
fee paid to Lender in connection with the Loans. The Annualizing Factor means a
factor of 4.0 for the period ending June 30, 1999, a factor of 2.0 for the
period ending September 30, 1999, a factor of 1.33 for the period ending
December 31, 1999 and a factor of 1.0 for each period ending on or after March
31, 2000.
4.4. Minimum Fixed Charge Coverage Ratio. Not permit, for any
period set forth below, the ratio of (a) Borrower's consolidated net earnings
before interest expense and provision for Taxes and the rental payments for
Borrower's stores for such period to (b) the sum of (i) Borrower's interest
expense for such period, (ii) scheduled principal payments with
<PAGE> 5
respect to Borrower's Indebtedness for borrowed money during such period, and
(iii) the rental payments for Borrower's stores for such period, to be less than
the ratio set forth below opposite such period:
Period Minimum Ratio
------ -------------
Twelve month period ending June 30, 1999, September
30, 1999 and December 31, 1999 1.75:1.00
Twelve month period ending March 31, 2000 and the
twelve month period ending on the last day of each
calendar quarter thereafter 2.00:1.00
4.5. Percentage of Inventory on Rents. Not permit the
percentage of Inventory on rent to customers pursuant to valid and performing
rental agreements to total Inventory to be less than 80% at any time during the
first, second and fourth calendar quarters of each calendar year or less than
75% at any time during the third calendar quarter of each calendar year for
"Core Stores". "Core Stores" means Borrower's existing stores plus any acquired
stores which have been owned by Borrower for at least 120 days.
Borrower's Initials /s/ MAP
Lender's Initials _________
Date: March 1, 1999
<PAGE> 6
CONSENT AND AMENDMENT NO. 11 TO
LOAN AND SECURITY AGREEMENT
This Consent and Amendment No. 11 ("Amendment") to Loan and
Security Agreement is made as of March 1, 1999, between Rainbow Rentals, Inc.
(formerly known as Rainbow Home Rentals, Inc.) ("Borrower") and Bank of America
National Trust and Savings Association (formerly known as Bank of America
Illinois, formerly known as Continental Bank Illinois, formerly known as
Continental Bank N.A.) ("Lender").
Reference is made to that certain Loan and Security Agreement
between Borrower and Lender dated October 5, 1992 (as amended, the "Loan
Agreement").
Borrower has informed Lender that Borrower desires to enter
into that certain Asset Purchase Agreement dated as of February 8, 1999 among
Borrower, Blue Ribbon Rentals, Inc. and Blue Ribbon Rentals II, Inc. Borrower
acknowledges that the execution and delivery of the Asset Purchase Agreement
requires the consent of Lender and has requested that Lender provide such
consent.
Borrower has also requested that the Loan Agreement be amended
in certain respects.
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. Consent. Lender hereby consents to the execution and
delivery of the Asset Purchase Agreement, together with any amendments thereto
that do not change the purchase price or otherwise materially amend the nature
of the transaction. This Consent shall not constitute (a) a modification or
alteration of the terms, conditions or covenants of the Loan Agreement or any
document entered into in connection therewith, or (b) a waiver, release or
limitation upon the exercise by Lender of any of its rights, legal or equitable,
hereunder, except as to the matters to which Lender herein expressly consents.
Except as set forth above, Lender reserves any and all rights and remedies which
it has had, has or may have under the Loan Agreement.
3. Amendments to Loan Agreement. The Loan Agreement is hereby
amended as follows:
(a) Section 1.1 of the Loan Agreement is hereby amended by
amending and restating the definition of "Applicable Margin" as follows:
"Applicable Margin" means, with respect to any portion of the
Revolving Loans constituting an IBOR Rate Loan, a percentage equal to
two percent (2.00%), with respect to any portion of Revolving Loans
constituting a Reference Rate Loan, a percentage equal to zero, and
with respect to the
<PAGE> 7
non-use fee described in Section 2.4.2, a percentage equal to
one-quarter of one percent (0.25%); provided, that the Applicable
Margin will be adjusted on the first day of each calendar quarter,
commencing on January 1, 2000, depending on the Leverage Ratio on the
last day of the calendar quarter immediately preceding such calendar
quarter, as follows:
<TABLE>
<CAPTION>
Applicable IBOR Applicable Margin for Applicable Margin
Margin for Reference for
Leverage Ratio IBOR Rate Loans Rate Loans Non-Use Fee
-------------- --------------- ---------- -----------
<S> <C> <C> <C>
Greater than or equal to 2.25 % 0% 0.375%
1.75:1.00
Greater than or equal to 2.125% 0% 0.25 %
1.50:1.00, but less than
1.75:1.00
Greater than or equal to 2.00 % 0% 0.25 %
1.25:1.00, but less than
1.50:1.00
Less than 1.25:1.00 1.875% 0% 0.25 %
</TABLE>
The calculation of the Leverage Ratio as of the last day of a calendar quarter
shall be based on the financial statements received by Lender pursuant to
Section 5.1.1. Each adjustment to the Applicable Margin shall be effective
retroactively as of the first day of each calendar quarter. For purposes hereof,
Leverage Ratio means, for the period ending on the last day of a calendar
quarter, the ratio of (a) Borrower's Indebtedness for interest bearing borrowed
money on the last day of such calendar quarter to (b) Borrower's consolidated
earnings before interest expense and provision for Taxes for the twelve (12)
month period ending on the last day of such calendar quarter.
(b) Section 1.1 of the Loan Agreement is hereby amended by
amending and restating the definition of "Termination Date" as follows:
"Termination Date" means March 1, 2002.
(c) Section 1.1 of the Loan Agreement is hereby amended by
amending and restating the definition of "Minimum Net Worth Amount" as follows:
"Minimum Net Worth Amount" means (i) as of June 30, 1999, an
amount equal to at least Twenty-Seven Million Dollars ($27,000,000) and
(ii) at any time thereafter the sum of (A) Twenty-Seven Million Dollars
($27,000,000), plus (B) fifty percent (50%) of net income of Borrower,
determined in accordance with GAAP on a consolidated basis, for each
calendar quarter period that has ended on or after September 30, 1999;
provided, that any net loss of Borrower, determined in accordance with
GAAP on a consolidated basis, for any calendar quarter period shall not
be taken into account in the foregoing calculation.
<PAGE> 8
(d) Section 2.4.2 of the Loan Agreement is hereby amended to
replace the phrase "three hundred fifteen one thousandths of one percent
(0.315%) per annum on" with the phrase "the Applicable Margin for Non-Use Fee
multiplied by".
(e) Section 5.12 of the Loan Agreement is hereby amended and
restated as follows:
5.12 Merger, Purchase and Sale. Not, and not permit any
Subsidiary to: (a) be a party to any merger, liquidation or
consolidation; (b) except for sales or leases of Inventory in the
normal course of business, and except for sale of Equipment permitted
under Section 3.4(b) or the sale of its delivery vans, sell, transfer,
convey, lease or otherwise dispose of any of its assets; (c) sell or
assign, with or without recourse, any Accounts Receivable, Contract
Rights, notes receivable or chattel paper, except as provided in this
Agreement; or (d) purchase or otherwise acquire all or a part of the
assets or business of any Person outside the ordinary course of
business except the acquisition of substantially all of the assets or
equity interests in any Person that is in substantially the same line
of business as Borrower; provided, that (i) the aggregate consideration
for all such acquisitions (including, without limitation, cash purchase
price, liabilities assumed, deferred or financed purchase price and
purchase price characterized as consulting agreements, non-competition
payments and the like) in any Fiscal Year does not exceed Five Million
Dollars ($5,000,000) (for 1999, none of the acquisitions completed
prior to March 2, 1999, shall be counted against the foregoing
limitation), (ii) after giving effect to such proposed acquisition,
Borrower is in compliance with all covenants and representations and
warranties contained in this Agreement, (iii) no Default or Event of
Default has occurred and is continuing, (iv) Borrower gives the Lender
at least ten (10) Business Days prior written notice of any such
acquisition, (v) the Board of Directors and/or owners of the entity
whose business is proposed to be acquired by Borrower has approved the
proposed transaction; (vi) after giving effect to the proposed
acquisition, the ratio of Funded Debt to consolidated earnings of
Borrower before interest expense and provision for Taxes (for the most
recently ended twelve (12) month period) is less than 2:25:1.0, and
(vii) Borrower takes such actions as Lender shall request to grant and
perfect a security interest in the assets acquired in favor of Lender
to secure the Liabilities.
(f) Amendment and Restatement of Supplement A of the Loan
Agreement. Supplement A of the Loan Agreement is hereby amended in its entirety
in the form attached hereto as Exhibit A.
<PAGE> 9
4. Conditions Precedent. The amendment to the Loan Agreement
set forth in this Amendment shall become effective as of the date of this
Amendment upon the satisfaction of the following conditions precedent:
(a) No Default. No Event of Default, or event which, with the
giving of notice or the passage of time, or both, would become an Event of
Default, shall have occurred and be continuing.
(b) Resolutions. Borrower shall have delivered corporate
resolutions, in form and substance satisfactory to Lender, with respect to this
Amendment.
(c) Execution. The delivery of an executed copy of this
Amendment and the acknowledgments hereto to Lender.
(d) Closing Fee. Borrower shall have paid Lender a closing fee
of Twenty Thousand Dollars ($20,000).
5. Miscellaneous.
(a) Expenses. Borrower agrees to pay on demand all costs and
expenses of Lender (including the reasonable fees and expenses of outside
counsel for Lender) in connection with the preparation, negotiation, execution,
delivery and administration of this Amendment and all other instruments or
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith. In addition, Borrower agrees to pay, and save Lender
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Amendment, the borrowings
under the Loan Agreement, as amended hereby, and the execution and delivery of
any instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided in this Section
5.1 shall survive any termination of this Amendment or the Loan Agreement as
amended hereby.
(b) Governing Law. This Amendment shall be a contract made
under and governed by the internal laws of the State of Illinois.
(c) Counterparts. This Amendment may be executed in any number
of counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Amendment.
(d) Reference to Loan Agreement. Except as herein amended, the
Loan Agreement shall remain in full force and effect and is hereby ratified in
all respects. On and after the effectiveness of the amendments to the Loan
Agreement accomplished hereby, each reference in the Loan Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import, and each
reference to the Loan Agreement in any note and in any Related Agreements, or
other agreements, documents or other instruments executed and delivered pursuant
to the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Amendment.
<PAGE> 10
(e) Successors. This Amendment shall be binding upon Borrower,
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower, Lender and the successors and assigns of Borrower and
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized
and delivered at Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By /s/ MICHAEL A. PECCHIA
------------------------
Its CHIEF FINANCIAL OFFICER
BANK OF AMERICA ILLINOIS
By
------------------------
Its
------------------------
<PAGE> 1
Exhibit 10.1
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
BY AND AMONG
BLUE RIBBON RENTALS, INC.
AND
BLUE RIBBON RENTALS II, INC.
(COLLECTIVELY, "SELLER")
WILLIAM WENDELL
("BENEFICIARY")
AND
RAINBOW RENTALS, INC.
("BUYER")
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
ARTICLE I - SALE AND PURCHASE OF ASSETS..................................................................1
1.1 Sale of Assets.........................................................................1
1.2 Conveyance.............................................................................3
1.3 Purchase Price and Payment.............................................................3
1.4 Payment of Purchase Price..............................................................3
1.5 Prorations.............................................................................5
1.6 No Assumption of Liabilities...........................................................5
1.7 Leases.................................................................................5
1.8 Excluded Assets........................................................................6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLER
AND BENEFICIARY.................................................................................6
2.1 Corporate Matters......................................................................6
2.2 Mortgages, Security Interests, Liens and Other Encumbrances of Title...................7
2.3 Rental Contracts.......................................................................7
2.4 Condition..............................................................................7
2.5 Customer Deposits......................................................................7
2.6 Payment History........................................................................7
2.7 Product Warranties.....................................................................8
2.8 Claims, Litigation, Judgments, Orders and Consent Decrees..............................8
2.9 Compliance With Law/Governmental Authorizations........................................8
2.10 Permits, Licenses, Etc. ..............................................................8
2.11 Store Leases and Other Executory Contracts.............................................8
2.12 Labor Issues...........................................................................8
2.13 Environmental Matters..................................................................9
2.14 Insurance.............................................................................10
2.15 Financial Information.................................................................10
2.16 Trade Name and Trademarks.............................................................10
2.17 Absence of Certain Changes............................................................10
2.18 Taxes.................................................................................11
2.19 Broker's or Finder's Fees.............................................................11
2.20 Survival..............................................................................11
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF BUYER...................................................11
3.1 Authority, Enforceability, Etc........................................................11
3.2 No Breach of Statute or Contract......................................................12
3.3 Broker's or Finder's Fees.............................................................12
3.4 Survival..............................................................................12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV - FURTHER REQUIREMENTS.......................................................................12
4.1 Nondisclosure.........................................................................12
4.2 Further Assurances....................................................................13
4.3 Name and Computer Use.................................................................13
4.4 Conduct of Business...................................................................13
4.5 Vacation Credit.......................................................................13
4.6 Audited Financial Statements and Certificate..........................................13
ARTICLE V - INDEMNIFICATION AND REIMBURSEMENT...........................................................14
5.1 Indemnification by Seller and Beneficiary.............................................14
5.2 Indemnification by Buyer..............................................................15
5.3 Claims for Reimbursement..............................................................15
5.4 Defense of Third-Party Claims.........................................................15
5.5 Limitations on Indemnification........................................................16
ARTICLE VI - NON-DISCLOSURE AND NON-COMPETITION.........................................................16
6.1 Non-Disclosure........................................................................16
6.2 Non-Competition.......................................................................16
ARTICLE VII - CONDITIONS OF PURCHASE....................................................................17
[INTENTIONALLY OMITTED]
ARTICLE VIII - MISCELLANEOUS PROVISIONS.................................................................17
8.1 Closing...............................................................................17
8.2 Costs and Expenses....................................................................17
8.3 Termination; Amendment and Modification...............................................18
8.4 Assignment............................................................................18
8.5 Notices...............................................................................18
8.6 Counterparts..........................................................................19
8.7 Headings..............................................................................19
8.8 Recitals and Exhibits.................................................................19
8.9 Waiver; Remedies; Specific Performance................................................19
8.10 Governing Law.........................................................................19
8.11 Severability..........................................................................19
8.12 Arbitration...........................................................................19
8.13 Entire Agreement......................................................................19
</TABLE>
<PAGE> 4
Exhibit A Store Locations
Exhibit B Rental Contracts
Exhibit C General Assignment and Bill of Sale
Exhibit D [INTENTIONALLY OMITTED]
Exhibit E Purchase Price Allocation
Exhibit F [INTENTIONALLY OMITTED]
Exhibit G Vehicles
Exhibit H Delinquent Accounts
Exhibit I [INTENTIONALLY OMITTED]
Exhibit J [INTENTIONALLY OMITTED]
Exhibit J [INTENTIONALLY OMITTED]
Exhibit L [INTENTIONALLY OMITTED]
Exhibit M Employee Benefits
Exhibit M-1 Worker Compensation Claims
Exhibit M-2 Other Worker Claims
Exhibit M-3 List of Employees
Exhibit N Insurance
Exhibit 6.2 Areas of Dominant Influence
<PAGE> 5
AMENDED AND RESTATED
--------------------
ASSET PURCHASE AGREEMENT
------------------------
THIS AGREEMENT made and entered into effective as of March 1, 1999, by
and among BLUE RIBBON RENTALS, INC. and BLUE RIBBON RENTALS II, INC., both Ohio
corporations (collectively, "Seller"), WILLIAM WENDELL, the trustee and
beneficiary of the sole shareholder of Seller (the "Beneficiary"), and RAINBOW
RENTALS, INC., an Ohio corporation ("Buyer") is to evidence the following
agreements and understandings:
WITNESSETH:
-----------
WHEREAS, Seller operates a rental, leasing, rent to own and retail
sales business (the "Business") at the 15 locations in Ohio and Pennsylvania
listed on Exhibit "A" hereto (the "Stores"); and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, the Assets (as hereinafter defined), and Buyer is willing to
assume only those obligations of Seller specified herein regarding performance
under the Rental Contracts (as hereinafter defined), upon the terms and
conditions hereinafter set forth.
WHEREAS, the parties executed an Asset Purchase Agreement, dated as of
February 8, 1999;
WHEREAS, the parties desire to make changes to such Agreement and to
amend and restate such Agreement;
NOW, THEREFORE, in consideration of the mutual promises made herein and
other good and valuable consideration, the receipt, adequacy and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
SALE AND PURCHASE OF ASSETS
---------------------------
I.1 Sale of Assets. Subject to the terms and conditions of this
Agreement, Seller hereby sells, transfers, assigns, and delivers to Buyer, free
and clear of all mortgages, security interests, liens, charges and other
encumbrances of title, and free and clear of all adverse claims and defenses,
all of the following (the "Assets") (Items (a)-(d) of this subsection 1.1 shall
hereinafter collectively be referred to as the "Contract Assets"):
(1) All rental agreements ("Rental Contracts") with consumers for the
rental of any: (i) furniture, television, stereo system, VCRs, CD or laser disc
player, video camera, computers or similar electronic or entertainment device
("Brown Goods"); (ii) freezer, refrigerator, washer, dryer, washer/dryer
combination, stove, microwave oven or similar major household appliance ("White
Goods") or plant, painting, lamp, air conditioner and other miscellaneous items
("Miscellaneous Goods"). The Rental Contracts are listed on Exhibit "B" attached
hereto and incorporated herein by reference.
<PAGE> 6
(2) All items of Brown Goods, White Goods and Miscellaneous Goods which
are the subject of the Rental Contracts ("B.O.R. Units").
(3) All files and records relating to Rental Contracts and B.O.R. Units
("Files"), subject to Seller's right to inspect and copy for purposes of tax
audit, complaints, litigation or dispute between the parties.
(4) All warranty or other contract rights or claims of Seller against
third parties whether implied, express or otherwise, or refunds due to Seller
from third party manufacturers, vendors or carriers arising from or relating to
the Business ("Seller's Warranty Rights"), except for Seller's claims against
such parties arising from claims by a customer or a third party against the
Seller and all rights to the 1998 TRIB Buying Group rebate.
(5) All vehicles owned or used by Seller for deliveries and pick-ups,
and all vehicles owned by Seller and used by its regional or store managers as
identified on Exhibit "G" hereto.
(6) The leasehold improvements to the Stores leased from any related or
third parties.
(7) Seller's telephone numbers and listings, fax numbers and post
office boxes, if any, other than the corporate office's phone numbers and
listings ("Corporate Numbers").
(8) Except as expressly specified in Section 1.8 hereof, all other
tangible and intangible assets, including, if any, goodwill of Seller in
connection with the Business of every kind whatsoever and wherever situated.
In addition to the foregoing, the "Assets" shall include and
Buyer shall acquire up to one hundred (100) units of "Idle Inventory" (as
defined below) per Store, for an aggregate of fifteen hundred (1500) units (the
"Acquired Idle Stock"). Buyer shall have up to thirty (30) days following the
Closing Date to identify the Acquired Idle Stock, tag such merchandise and
advise Seller of its selection. "Idle Inventory" consists of Brown Goods, White
Goods and Miscellaneous Goods that are not B.O.R. Units and: (i) are located at
the stores and are suitable for rent as B.O.R. Units or (ii) are in the
possession of a third party repair service or on loan to a customer while his or
her unit is being repaired. Any idle inventory rented by Rainbow Rentals during
the month of March ("March Rentals") shall be included in the 100 units per
store defined as part of the Acquired Idle Stock. Buyer agrees to maintain
accurate records of March Rentals, which records shall be open for inspection by
Seller during normal business hours, with reasonable notice. Any item of
merchandise on loan to customers or on repair that are returned to the stores
will, at Buyer's option, be (a) purchased from Seller at a price equal to the
greater of (i) the depreciated book value of the item or (ii) one-third the
original book value, or (b) held at Buyer's store for pick-up by Seller for
subsequent sale in the liquidation sale.
20
<PAGE> 7
I.2 Conveyance. The Assets will be conveyed to Buyer by execution and
delivery of a General Assignment and Bill of Sale in the form attached hereto as
Exhibit "C", together with such other instruments of transfer, if any, as Buyer
may reasonably request.
I.3 Purchase Price and Payment. The purchase price (the "Purchase
Price") for the Assets and Beneficiary's covenant not to compete (see Section 6
hereof) will be Ten Million Three Hundred Seventy-Three Thousand Six Hundred
Nineteen Dollars ($10,373,619), subject to adjustment as set forth in Section
1.4(c) below.
I.4 Payment of Purchase Price.
(1) Closing Date Disbursements. The Purchase Price shall be payable
on the Closing Date as follows:
(1) Buyer shall pay to Seller ninety percent (90%) of the
Purchase Price upon consummation of this Agreement and
delivery of the Assets (the "Closing") by wire transfer to
Seller's accounts at Star Bank the aggregate sum of
$9,322,280 and by wire transfer of $13,977 to Whirlpool
Corp.; and
(2) Ten percent (10%) of the Purchase Price or $1,037,362 (the
"Escrow") shall be paid by wire transfer to Seller's and
Buyer's joint escrow account at National City Bank,
Cleveland, Ohio.
All revenues collected on March 1, 1999 shall be the property of Buyer.
Buyer may reduce the amount due Seller under Section 1.4(a)(1)(ii) by the
$___________________ collected by Seller on March 1, 1999 and retained by it.
(2) Confirmation of Rental Contracts and B.O.R. Units. Following the
Closing Date, Buyer will have a period of one hundred twenty (120) days to
verify the validity of the Monthly Reoccurring Revenue, the validity of the
B.O.R. Units, the average price per B.O.R. Unit (the "APU") and the payment
history of each B.O.R. Unit showing the payments made and the remaining term of
the Rental Contracts (the "Remaining Term"). For purposes of this Section 1.4,
"Monthly Reoccurring Revenue" shall mean the reoccurring revenue occurring each
month under the Rental Contracts, including rental fees, renewal fees,
reinstatement fees, waiver fees and club fees, but not including taxes or
processing, delivery or similar fees.
For purposes of confirming the Validity of Rental Contracts ("Valid
B.O.R."), a Rental Contract shall not be considered Valid if as of the Closing
Date: (i) the related B.O.R. Unit has been returned by the customer; (ii) the
related B.O.R. Unit is not returned to Seller or Buyer and no renewal payments
have been made within the last 30 days of the rental; (iii) the Rental Contract
is unenforceable or void under applicable law; or, (iv) the Rental Contract is
otherwise delinquent for a period greater than 30 days.
21
<PAGE> 8
(3) Purchase Price Adjustment. Upon Buyer's confirmation of the
information set forth in Section 3.1(b), the Purchase Price will be adjusted as
follows:
(1) If the average Monthly Reoccurring Revenue received by
Seller under valid Rental Contracts during December, 1998
and January and February 1999 was greater or less than
$926,216, then the Purchase Price will be increased or
decreased by $11.20 for each dollar above or below $926,216.
There shall be added to the February revenue, for purposes
of this Section only, an amount equal to the average of the
revenue received on each Monday in February, i.e., February
1, 8, 15 and 22, 1999.
(2) If the number of Valid B.O.R. as of the Closing Date is less
than the number of B.O.R. as calculated by Seller as of
February 28, 1999 or 14,255 ("Base B.O.R."), then the
Purchase Price will be reduced by the following amount for
each Valid B.O.R. below Base B.O.R.: Purchase Price less
amount allocated to Noncompetition Provision, Security
Deposits, Fixed Assets and Idle Inventory divided by Valid
B.O.R. For example, if the Base B.O.R. is 10,000 and the
actual Valid B.O.R. is 9,600, and the Purchase Price less
deductions is $8 million, then the Purchase Price Reduction
is $320,000 (8,000,000 divided by 10,000 times 400).
(3) If, as of the Effective Time, the APU is less than $54, the
Purchase Price will be reduced by an amount equal to: the
difference between $54 and the actual APU times 11.20 times
Valid B.O.R. For example, if APU is $53.50 and actual Valid
B.O.R. is 10,000, then the Purchase Price reduction is
$56,000 ($0.50 times 11.2 times 10,000).
(4) If the Remaining Term of the Rental Contracts (excluding
Rental Contracts for Miscellaneous Goods) as of the
Effective Time averages less than 13 months (rounded up to
the nearest whole days with each month consisting of 30
days) per Rental Contract, then the Purchase Price shall be
reduced by an amount equal to: Term deficiency times Valid
B.O.R. times APU times 0.83. For example, if term deficiency
is 10 days, and APU and Valid B.O.R. are $54 and 10,000
units, respectively, the Purchase Price reduction is
$149,400 (10/30 times $54 times 10,000 times 0.83).
Buyer will deliver to Seller within the aforesaid one hundred twenty
(120) day period a written statement (the "Statement") sufficient for Seller to
verify Buyer's calculations. If the Purchase Price is reduced, Buyer may receive
such reduction from the Escrow. If the Escrow is insufficient to reimburse Buyer
for the reduction in the Purchase Price, then Seller and/or Beneficiary shall
remit the difference to Buyer within ten (10) days following receipt of Buyer's
statement. If the Escrow is insufficient to pay the Purchase Price, the Buyer
shall remit the deficiency to Seller upon delivery of the Statement. If the
parties are unable to mutually agree on the adjustments, the amount of the
reduction will be determined in accordance with Section 8.12 hereof.
22
<PAGE> 9
(4) The Escrow. The Escrow shall be maintained in an interest-bearing
account. Disbursements from the Escrow shall require the written authorization
of William Wendell and Wayland Russell, or such other representative of Seller
and Buyer, respectively, as may be designated by such parties. The cost of the
escrow, if any, shall be borne by Seller. At the end of the one hundred twenty
(120) day period commencing with the Closing Date, if Buyer has not made a claim
to the funds in Escrow pursuant to Section 1.4(c) above, the escrowed funds, or
such portion of funds not in dispute, shall automatically be paid to Seller,
together with all accrued interest.
(5) Allocation of Purchase Price. The Purchase Price represents the
amount agreed upon by the parties to be the fair market value of the Assets, the
covenant not to compete and goodwill, as set forth in the methodology shown on
Exhibit "E" hereto (the "Purchase Price Allocation"). Each of the parties hereby
covenants and agrees that it will not take a position on any federal, state or
local tax return, before any governmental agency charged with the collection of
any tax, or in any judicial proceeding that is in any way inconsistent with the
Purchase Price Allocation and will cooperate with one another in the timely
filing consistent with such Purchase Price Allocation on Form 8594 with the
Internal Revenue Service.
I.5 Prorations. All collections under Rental Contracts collected on and
after the Closing Date shall belong to Buyer and, if received by Seller after
the Closing Date, shall be remitted to Buyer. The parties agree to a proration
of all lease, personal property and other tax payments and prepaid expenses (the
benefit of which inures to Buyer) relating to the Stores with Seller accountable
for all expenses prior to the Closing Date and Buyer accountable for all
expenses on or after the Closing Date.
I.6 No Assumption of Liabilities. Buyer is taking the Assets subject
only to the obligations under the Rental Contracts arising on and after the
Closing Date and not resulting from any breach by Seller (the "Contract
Obligations"). The parties agree that Buyer is not purchasing, assuming, or
accepting any other debts, liabilities or obligations whatsoever of Seller,
absolute or contingent or of any other nature, liquidated or unliquidated,
asserted or unasserted, currently in existence, all of which remain the debts,
liabilities, and obligations of Seller ("Seller's Liabilities").
I.7 Leases. Buyer shall sublease from Seller each of the stores for up
to six months following the Closing Date, and shall assume all of lessee's
obligations under such lease for the period of its occupancy, provided, however,
that Buyer is liable for only one-half of the March rental obligations. Buyer
may terminate the sublease for any one or more stores, at any time, upon five
days written notice to Seller. Upon termination of sublease, if Buyer has not
negotiated a new lease with the original lessor or assumed the existing lease,
and, consequently, vacates all or part of the premises, it shall make a payment
to Seller equal to an amount equal to the lesser of (i) six months base rent on
the vacated premises, or (ii) the monthly base rent on the vacated premises for
one-half of the remaining term of the lease. Seller shall be responsible for any
and all lease termination fees, penalties or payments due on the unassumed
leases. If Buyer
23
<PAGE> 10
is successful in negotiating a new lease for any Store or portion thereof, the
payment to Seller under Section 1.7 shall be equal to the lesser of (i) the
amount Seller owes the landlord for early termination of the original lease, or
(ii) six month's base rent on the original lease.
I.8 Excluded Assets. Any Idle Inventory not acquired by Buyer as part
of the Acquired Idle Stock, including loaners returned to the stores, shall be
retained by Seller and Seller shall remove such merchandise from those Stores
operated by Buyer within the later of (i) ten days after Buyer's final
determination of the items included in Acquired Idle Inventory or (ii) 30 days
after the Closing Date. Seller shall also retain rights to the TRIB Buying Group
rebate for 1998, any manufacturer's rebates for orders placed before December
31, 1998, including specifically, the rebates due from Ashley Furniture and
Crosley Appliance, workers' compensation refunds, prepaid insurance premiums,
all real estate owed by Seller or William Wendell, individually or as
Beneficiary, any deposits on the unassumed leases and, subject to the provisions
of Section 4.3 hereof, the rights to the name "Blue Ribbon Rentals", all signage
displaying such name, and the stores operating computers and software and
Wendell's personal assets stored at the Stores.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF SELLER AND BENEFICIARY
--------------------------------------------------------
In order to induce Buyer to purchase the Assets and perform its other
obligations herein, Seller and Beneficiary hereby jointly and severally make the
following representations, warranties and covenants, each of which shall be true
and correct on the execution hereof and shall be true and correct as of the
Closing as if specifically made thereon. When used in this Article II, the term
"to the best of Seller's knowledge" or "to the Seller's knowledge" or words to
that effect, means to the actual knowledge of William Wendell, President, Amy
Topper, Chief Financial Officer, or Robert McKinney, Regional Manager, together
with the knowledge a reasonable business person, in any of the foregoing
respective offices, would have obtained with respect to the matters at hand
after making such inquiry and exercising such diligence as would be reasonable
and customary in connection with the ongoing operations of Seller's business.
II.1 Corporate Matters.
(1) Due Organization and Authority. Each Seller is a corporation duly
organized and validly existing under the laws of Ohio. Seller has the full power
and authority to own or lease its properties and to conduct its business.
(2) No Defaults or Violations. The execution and delivery of this
Agreement, and the performance of the obligations by Seller and Beneficiary
under this Agreement: (i) will not violate, contravene, be in conflict with,
result in a breach of, or constitute (with or without notice or lapses of time
or both) a default under: (A) any provision of law; (B) any judgment, order,
decree, rule or regulation of any court, arbitrator or other agency of
government; (C) any provision of the articles or code of regulations of Seller;
or (D) any material lease, indenture, agreement or other instrument to which
Seller, or the properties or assets of Seller is or may be bound; and (ii) will
not result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon the Assets.
24
<PAGE> 11
(3) Power and Authority to Enter Into Agreements. Seller and
Beneficiary have the right, power, legal capacity and authority to enter into
and perform their respective obligations under this Agreement and the other
agreements attached hereto or provided for herein. No consent, approval or
authorization of, or registration, declaration or filing with any court,
governmental authority (federal, state, or local), lending institution or other
third party is required in connection with the execution and delivery by Seller
and Beneficiary of this Agreement or their performance of, or compliance with,
the terms, provisions and conditions thereof.
(4) Due Execution and Enforceability. The execution, delivery and
performance of this Agreement and the other agreements provided for herein by
and on behalf of Seller and Beneficiary have been duly and validly authorized
and approved by the shareholders and the Boards of Directors of Seller, and
Seller and Beneficiary have taken all such other corporate action as is
necessary or required to enter into, execute and deliver this Agreement and the
other agreements provided for herein and to perform their respective obligations
hereunder and thereunder. This Agreement and the other agreements provided for
herein constitute the valid and legally binding obligations of Seller and
Beneficiary, enforceable against them in accordance with their respective terms
and conditions. This Agreement, together with the instruments contemplated
hereunder to be delivered at Closing, are sufficient to convey good and
marketable title to the Assets to Buyer.
(5) Stock Ownership. All of the issued and outstanding shares of
capital stock of each Seller are owned by the William M. Wendell Trust - 1999,
U/A dated March 1, 1999 (the "Trust"). The Beneficiary is the sole trustee and
beneficiary of the Trust.
II.2 Mortgages, Security Interests, Liens and Other Encumbrances of
Title. Except as to the Whirlpool Corp. security interest, Seller has good and
marketable title to all of the Assets to be transferred to Buyer hereunder and
the Assets are free and clear of all mortgages, security interests, liens,
claims, leasehold interests or other encumbrances of title.
II.3 Rental Contracts. To the best of Beneficiary's knowledge, the
Rental Contracts are legal, valid, binding and enforceable against the customers
signatory thereto. Neither Seller nor, to the best of Beneficiary's knowledge,
any customer is in breach under any Rental Contract, other than customers
delinquent in payment of their accounts as listed on Exhibit "H" hereof. No
customer has made or threatened any litigation or claim or defense under any
Rental Contract. No rebates or other sums are due Seller's customers at the end
of the rental terms of the Rental Contract.
II.4 Condition. Not more than two percent (2%) of the B.O.R. Units and
seven percent (7%) of the Idle Inventory require any service, repair or
replacement in order to maintain such Inventories in rentable condition at
normal rental rates for comparable B.O.R. Units in the general vicinity of the
Stores.
25
<PAGE> 12
II.5 Customer Deposits. Seller has no deposits, including security
deposits, from customers which are owed to customers in connection with the
Assets. Seller has received no advance payments in excess of one rental term,
(not to exceed one month) in connection with any Rental Contract.
II.6 Payment History. Seller has separately delivered to Buyer a true
and correct, in all material respects, list of the payment history of each
B.O.R. Unit showing the payments made and the Remaining Term as of the Effective
Time. Each such account shown therein arose in the ordinary course of the
Business and is valid and binding on the customer, and is not subject to any
counterclaim, deduction or set-off of any kind.
II.7 Product Warranties. Seller has separately delivered to Buyer true
and correct copies and informed Buyer of all product and service warranty
policies (written or oral, express or implied) offered or given to Seller by
manufacturers or sellers of Inventories.
II.8 Claims, Litigation, Judgments, Orders and Consent Decrees. Seller
is not subject to any pending or threatened claims, litigation or suits by any
person or governmental authority or to any judgment, ruling, injunction, order,
writ or decree of, or agreement with, any court, arbitrator or regulatory
authority limiting, restricting or adversely affecting the conduct of Seller's
Business, Seller's ownership of the Assets or the sale of the Assets pursuant to
this Agreement. No litigation or other claims have been asserted, in writing,
against Seller by a customer or other third party within the last three years
other than matters satisfied by insurance.
II.9 Compliance With Law/Governmental Authorizations. Seller has
complied and has conducted its business in accordance with all applicable
statutes, laws, regulations, rules and other requirements of all federal, state
and local governmental authorities having jurisdiction over Seller applicable to
the Assets or Seller's Business including, without limitation, payment of all
federal, state and local income, payroll, sales and other taxes, and compliance
with any provision of law relating to equal employment opportunities, civil
rights, working conditions, wages, hours and employee benefits and environmental
laws and regulations, except where the failure to so comply has not had and will
not have a material adverse effect on the Business or the Assets. Seller has not
received any notification of any asserted present or past failure by Seller to
comply with such statutes, laws, regulations or rules.
II.10 Permits, Licenses, Etc. Seller has all permits, licenses and
other governmental authorizations (collectively, "Permits") necessary to the
operation of the Stores and which the failure to obtain said Permits would have
a material adverse effect on the Stores.
II.11 Store Leases and Other Executory Contracts. Seller has received
no notice of default from any lessor under the Store leases, and there are no
defaults in the performance by Seller of its obligations under the Store leases.
Seller has provided Buyer with copies of all Stores' leases and other executory
contracts, and such copies include all modifications and amendments to such
documents and are accurate and complete. There are no oral agreements or
amendments with respect to the Store leases or other executory contracts.
26
<PAGE> 13
II.12 Labor Issues.
(1) No Violations of Law. Seller is not engaged in any unfair labor
practices nor violations of applicable labor laws in connection with the
operation of the stores. There is no strike, picketing or similar action pending
or, to the best of Seller's knowledge, threatened against Seller affecting the
Seller by its employees or any labor union. Seller, to the best of its
knowledge, is not engaged in any violations of the Fair Labor Standards Act or
its Ohio or Pennsylvania counterpart, the Occupational Safety Health Act or the
applicable state, or any immigration laws, including the Immigration Reform and
Control Act, in connection with the operation of the stores. None of the
employees working in the stores is covered by a collective bargaining agreement,
nor does Seller know of any action by or on behalf of Seller's employees at the
stores for the appointment or certification of one or more collective bargaining
agents.
(2) Employee Benefits. Exhibit "M" sets forth a brief description of
each bonus, deferred compensation, pension, profit sharing, retirement, stock
purchase and stock options plans, consulting, health, welfare, incentive
compensation arrangements or other fringe benefit in effect on the date hereof.
All reasonably anticipated obligations of the Stores with respect to employee
benefits, whether arising by operation of law, contract, past customs or
otherwise, including obligations for unemployment compensation benefits, pension
benefits, advances, salaries, bonuses, vacation and holiday pay, severance, sick
leave or other forms of compensation payable to the officers, directors, and
other employees or agents of the Seller in respect of the services rendered by
or the employment of any of them prior to the Closing Date have been or will be
paid by Seller.
(3) Workers' Compensation. Seller has provided Buyer with a Workers'
Compensation Claims List, Exhibit "M-1", describing all pending or, to the
knowledge of Seller, threatened or unasserted claims of past or present
employees for compensation for any injury, disability or illness arising out of
their employment by the Seller. The Workers' Compensation Claims List shall also
detail Workers' Compensation Claims filed and resolved or otherwise settled
since January 1, 1996.
(4) Other Workers' Claims. Seller has provided Buyer with an Employees'
Claim List, attached as Exhibit "M-2" hereof, of all pending or, to the
knowledge of Seller, threatened or unasserted claims of past or present
employees alleging wrongful discharge or age, sex, racial, religion, national
origin or disabilities discrimination and all claims under the U.S. or
applicable state Occupational Safety & Health Act, the Immigration Reform and
Control Act, the Fair Labor Standards Act and its applicable state counterpart,
and other applicable labor laws. The Employees' Claims List shall also detail
claims (whether filed or unfiled) resolved or otherwise settled since January 1,
1996 or, if the statement or judgment imposed any continuing obligation on
Seller, since January 1, 1996.
(5) Schedule of Employees. Attached as Exhibit "M-3" is a true and
accurate list of Seller's employees at the Stores. The list includes, for each
employee who was employed immediately prior to their termination in
contemplation of this transaction: name, social security number, employment
period, positions held, wage/salary levels, vacation time earned, health
coverage, pension and profit sharing plan benefits, and any other information
relating to the compensation and fringe benefits.
27
<PAGE> 14
II.13 Environmental Matters. With respect to environmental and
related matters:
(1) To the best knowledge of Seller, all activities and
operations of Seller in the operation of the stores meet in
all material respects the requirements of all applicable
environmental laws and regulations of all Governmental
Entities having jurisdiction over Seller or any of the
stores;
(2) With respect to the stores, Seller is not a party to any
suit or proceeding, and Seller has not received any written
notice from any Governmental Entity, with respect to a
release of hazardous substances, and Seller has not
received any written notice of any claims by any person or
entity relating to personal injuries from exposure to
hazardous substances; and
(3) To the best knowledge of Seller, with respect to the
operation of the stores, Seller has timely filed all
material reports, has acquired all material certificates,
approvals and permits, and has generated and maintained in
all material respects all data, documentation and records
required by applicable environmental laws.
II.14 Insurance. All insurance policies currently in force covering the
Assets and under which Seller is named as an insured party are listed on the
Insurance List identified as Exhibit "N". Such Schedule correctly states the
name of the insurer, type and amount of coverage, deductible amounts, if any,
and the expiration date for each such policy.
II.15 Financial Information. The balance sheets of Seller as at
December 31, 1996 and 1997 and the related statements of earnings, shareholders'
equity and cash flow for each of the two years then ended, certified in the case
of Blue Ribbon Rentals, Inc. only by Seller's certified public accountants, and
the unaudited balance sheet of Seller as at December 31, 1998 ("1998 Balance
Sheet"), and related statements of earnings, shareholders' equity and cash flow
for the twelve (12) months then ended, prepared by Seller and initialed by its
President for identification purposes, all of which have been furnished to
Buyer, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, and present fairly the financial
position of Seller as at the date of the respective balance sheets, and the
results of operations for the periods indicated, subject, in the case of the
1998 Balance Sheet and related financial statements, to year-end audit
adjustments, which in the aggregate are not expected to be material.
Notwithstanding the foregoing, Buyer acknowledges that Seller made a
distribution to its shareholder of $465,000 in December 1998.
II.16 Trade Name and Trademarks. To the best of its knowledge, Seller
possesses the exclusive right to use the trade name "Blue Ribbon Rentals" in
Ohio and Pennsylvania. Seller has received no notice of any claims by others
concerning any trademark, trade name, copyright or license violation or
infringement by Seller, nor does Seller know of any such violation or
infringement of Seller's intellectual property by third parties.
28
<PAGE> 15
II.17 Absence of Certain Changes. Since November 30, 1998, there has
not occurred (i) any adverse change in the financial condition, results of
operations, properties, assets, prospects or business of the Seller that is
material, individually or, with other adverse changes, in the aggregate; (ii)
any damage, destruction or loss, whether or not covered by insurance, materially
and adversely affecting the properties or business of the Seller; (iii) any
increase or adoption of a plan of increase in the compensation payable or to
become payable by Seller to any of its employees, other than increases made in
the ordinary course of business and consistent with past practices; (iv) any
sale or other disposition of any assets of the Seller, other than sales or
dispositions made in the ordinary course of business or as otherwise permitted
in this Agreement; (v) any payment, discharge or satisfaction of any claim,
liability or obligation (absolute, accrued, contingent or otherwise), other than
in the ordinary course of business and consistent with past practice; (vi) any
material reduction of aggregate marketing, advertising and promotional expenses
of the Seller as compared to historical levels; or (vii) any failure to maintain
the furniture, fixtures and equipment of the Seller in good operating condition
and repair consistent with past practices.
II.18 Taxes. Seller has filed with the appropriate governmental
agencies all tax returns and tax reports to be due thereon. Seller has no
liability, contingent or otherwise, for any taxes except (i) as shown on the
1998 Balance Sheet, (ii) with respect to the conduct of its business since
December 31, 1998, and (iii) real estate and personal property taxes which are a
lien but not yet due and payable.
II.19 Broker's or Finder's Fees. No person or firm other than Seller
(and its directors, officers, employees and independent accountants and
attorneys) have arranged, or participated in arranging, on behalf of Seller the
transactions contemplated hereunder. There are no broker's or finder's fees to
be paid by Seller or Beneficiary, and Seller and Beneficiary have no knowledge
of any claim (or the reasonable basis therefor) for a broker's or finder's fee
to be paid by Buyer in connection with the consummation of the transactions
provided for herein.
II.20 Survival. The representations and warranties made by Seller and
Beneficiary in this Agreement, including, but not limited, to those contained in
this Article, shall survive the Closing (irrespective of any investigation of
the Assets or the Business made by Buyer and/or its representatives) for a
period of three (3) years following the Closing Date, except as to those
representations and warranties in Sections 2.1, 2.2, 2.9, 2.13 and 2.18 which
shall have no limitation of time. The foregoing time limitation shall not apply
with respect to those pending claims for indemnification for which written
notice was given by Buyer to Seller and the Beneficiary within the applicable
time period.
29
<PAGE> 16
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer, in order to induce Seller to sell the Assets and perform its
other obligations hereunder, hereby makes the following representations and
warranties to Seller and Beneficiary, each of which shall be true and correct as
of the execution hereof and shall be true and correct as of the Closing.
III.1 Authority, Enforceability, Etc.
(1) Due Organization and Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Ohio and is
qualified as a foreign corporation in good standing in the Commonwealth of
Pennsylvania. Buyer has the power and authority to enter into and perform its
obligations under this Agreement and the other agreements provided for herein.
(2) Due Execution and Enforceability. The execution, delivery and
performance of this Agreement and the other agreements provided for herein by
and on behalf of Buyer have been duly and validly authorized and Buyer has taken
all such other action as is necessary or required to enter into, execute and
deliver this Agreement and the other agreements provided for herein and to
perform Buyer's obligations hereunder and thereunder. This Agreement and the
other agreements provided for herein constitute the valid and legally binding
obligations of Buyer, enforceable in accordance with their respective terms and
conditions.
(3) Power and Authority to Enter into Agreements. Buyer has the right,
power, legal capacity and authority to enter into and perform its obligations
under this Agreement and the other agreements attached hereto or provided for
herein. No consent, approval or authorization of, or registration, declaration
or filing with any court, governmental authority (federal, state, or local),
lending institution or other third party is required in connection with the
execution and delivery by Buyer of this Agreement or its performance of, or
compliance with, the terms, provisions and conditions thereof.
III.2 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement and the other agreements provided for herein, nor
compliance with the terms and provisions hereof and thereof on the part of Buyer
will breach or violate in any material manner, or constitute a material default
under: (a) any statute, law, ordinance, rule or regulation of any governmental
authority, domestic or foreign; (b) any of the terms, conditions or provisions
of the Articles of Incorporation or Code of Regulations of Buyer, or (c) any
judgment, order, injunction, decree or material contract, agreement or other
instrument to which Buyer is a party or by which any of its properties, rights
or assets are bound.
III.3 Broker's or Finder's Fees. No person or firm other than Buyer and
its affiliated companies (and their respective partners, directors, officers,
employees and independent accountants and attorneys) have arranged or
participated in arranging, on behalf of Buyer, the transactions provided for
herein. There are no broker's or finder's fees to be paid by Buyer, and Buyer
has no knowledge of any claim (or the reasonable basis therefor) for a broker's
or finder's fee to be paid by Seller in connection with the consummation of the
transactions provided for herein.
30
<PAGE> 17
III.4 Survival. The representations and warranties made by Buyer in
this Agreement, including but not limited to those contained in this Article,
shall survive the Closing.
ARTICLE IV
----------
FURTHER REQUIREMENTS
--------------------
IV.1 Nondisclosure. Seller and Beneficiary will not disclose, directly
or indirectly, the terms of or reveal the existence of this Agreement or its
Exhibits to any person, firm or entity other than their respective attorneys,
accountants, lenders, and representatives who are required to be informed
thereof in connection with their representation of the parties in connection
with the transactions contemplated by this Agreement, or as may otherwise be
required by law or in connection with any pending or future litigation or
governmental investigation. Buyer may issue a press release at any time after
the execution of this Agreement, provided that no disclosure may be made by
Buyer until the parties have reached a written agreement on the items referenced
in Section 7.2 hereof. No press release or governmental notification report or
other filing by Seller shall be made without Buyer's approval of the content
thereof; provided that, after Buyer's release of its press release, Seller may
make any disclosure of the information contained in the press release to any
third party.
IV.2 Further Assurances. Buyer, on the one hand, and Seller and
Beneficiary, on the other hand, each agree that they will, at any time and from
time to time, do, execute, acknowledge and deliver all such additional deeds,
assignments, transfers, conveyances, powers of attorneys and assurances as may
be required for the better assigning, transferring, granting, conveying, or
assuring to Buyer, or its successors or assigns, any or all of the Assets.
IV.3 Name and Computer Use. Buyer is licensed, on a royalty-free basis,
to use the name "Blue Ribbon Rentals" at each of the Stores or their successor
location for six months after the Closing Date. At the end of such six-month
period, or, on a store-by-store basis, such shorter period as Buyer deems
appropriate, Seller may remove, at its cost, all signage, displays or similar
merchandising property using the Blue Ribbon Rental name. Any property utilizing
the Blue Ribbon Rental name not claimed by Seller at the end of the six-month
period may be discarded by Buyer. Notwithstanding the foregoing, Buyer shall
retain the rights to the telephone directory listing of Blue Ribbon Rentals
within the Areas of Dominant Influence (as defined in Section 6.2) for a period
of two years following the Closing. Additionally, on a rent-free basis, Buyer
may use the store computers and applicable software for a period not to exceed
60-days after the Closing, to enable Buyer to make a smooth transition to its
replacement store computers. At the end of said sixty day period, Seller, at its
costs, may remove the computers from the stores.
IV.4 Conduct of Business. Between the date of this Agreement and the
Closing, Seller shall conduct the Business only in the ordinary course,
consistent with prior practices, and will refrain from changing or introducing
any new method of operations, including any promotion or plan that accelerates
into February the payment of rental amounts.
31
<PAGE> 18
IV.5 Vacation Credit. All employees of Seller that are hired by Buyer
shall be new employees of Buyer for all purposes, provided that service with
Seller shall be included in calculating vacation eligibility (but Buyer is not
liable for any accrued vacation due upon termination of an employee's employment
for any reason).
IV.6 Audited Financial Statements and Certificate. As soon as possible
but in no event later than April 30, 1999, Seller will prepare in conformity
with generally accepted accounting principles consistently applied and to
deliver to and to be received by Buyer audited balance sheets of Seller as at
December 31, 1998, and, in the case of Blue Ribbon Rentals II, Inc., December
31, 1997, and related statements of income and retained earnings and cash flows
for the year or years ended on that date, together with a report thereon by
Grant Thornton LLP, Seller's CPA, all of which shall be in form and substance
satisfactory to Buyer. Notwithstanding the foregoing, Buyer may elect its
auditors, KPMG Peat Marwick, to do the audit of Blue Ribbon Rentals, II. Seller
and the Beneficiary will deliver to Buyer at the time of the delivery to Buyer
of such financial statements a certificate executed by Beneficiary in which
Beneficiary shall represent and warrant to Buyer that such financial statements
are complete and correct, in all material respects, and present fairly and
accurately the financial positions of Seller as at the dates so specified and
results of operations of Seller for the periods ended on such date in conformity
with generally accepted accounting principles consistently applied. Seller will
cause Grant Thornton LLP to agree that its audit may be included in Buyer's 8-K
SEC filing to be filed on or about May 15, 1999, and Seller will request Grant
Thornton LLP to consent for the inclusion of its report in any subsequent
Buyer's SEC filings under the Securities Act of 1933 and Securities Exchange Act
of 1934.
ARTICLE V
---------
INDEMNIFICATION AND REIMBURSEMENT
---------------------------------
V.1 Indemnification by Seller and Beneficiary. In order to induce Buyer
to enter into this Agreement and to consummate the transactions contemplated
hereby, Seller and Beneficiary, jointly and severally (except as to claims under
Article VI for which claims may only be brought against the breaching party),
covenant and agree to and shall indemnify Buyer and its shareholders, directors,
officers, employees and agents, and their heirs, executors, administrators,
personal representatives, successors and assigns (collectively, the "Buyer's
Indemnitees") and shall hold the Buyer's Indemnitees harmless against and with
respect to any and all damage, loss, efficiency, cost and expense (including
without limitation, interest, penalties, reasonable attorneys' and accountants'
fees and expenses, collectively, "Loss") incurred in connection with or arising
out of or resulting from or incident to:
(1) any breach of any representation, warranty, covenant or agreement,
or non-fulfillment of any obligation, on the part of Seller or Beneficiary under
this Agreement, its Exhibits or under any document delivered by Seller in
connection with this Agreement;
(2) Seller's failure to pay in a timely manner or otherwise perform any
or all of Seller's Liabilities;
32
<PAGE> 19
(3) the conduct or operation of Seller's Business prior to the Closing
Date;
(4) any claims, violations or alleged violations by Seller of any laws,
statutes, codes, ordinances, rules or regulations whether foreign or domestic,
state, federal or local;
(5) the filing (or failure to file) or payment (or non-payment) of any
taxes by Seller, pursuant to any federal, state, local or foreign income tax,
excise or franchise tax, ad valorem, sales and use tax, payroll tax, and/or
F.I.C.A. taxes or any deficiencies in any taxes payable by or on behalf of
Seller;
(6) any and all actions, suits, proceedings, demands, assessments,
penalties, fines, judgments, reasonable costs and legal and other expenses
incident to any of the foregoing; and
(7) any of the obligations under the Contract Obligations for periods
prior to the Closing Date.
The indemnification of this Section shall survive the Closing.
Buyer may, at its sole election, set-off against any payment
obligations to Seller, an amount equal to the sum of all claims which are the
subject of indemnification by Seller and Beneficiary under this Section 5.1. The
foregoing right of set-off is in addition to, and not in limitation of, any
other rights and remedies available to Buyer under this Agreement, at law or in
equity.
V.2 Indemnification by Buyer. In order to induce Seller and Beneficiary
to enter into this Agreement and to consummate the transactions contemplated
hereby, Buyer covenants and agrees to and shall indemnify Seller, its directors,
officers, employees, agents, successors and assigns, and Beneficiary, his heirs,
executors, administrators, personal representatives, successors and assigns
(collectively, the "Seller's Indemnitees") and shall hold the Seller's
Indemnitees harmless against and with respect to any and all Loss incurred in
connection with or arising out of or resulting from or incident to:
(1) any breach of any representation, warranty, covenant or agreement,
or non-fulfillment of any obligation, on the part of Buyer under this Agreement,
the Exhibits or under any document delivered by Buyer in connection with this
Agreement;
(2) any of the Contract Obligations or obligations under the Assumed
Leases for periods on or after the Closing Date; and
(3) the conduct of the Business on or after the Closing Date; and
(4) any and all actions, suits, proceedings, demands, assessments,
penalties, fines, judgments, reasonable costs and legal and other expenses
incident to any of the foregoing.
The indemnification in this Section shall survive the Closing.
33
<PAGE> 20
V.3 Claims for Reimbursement. In the event that the Buyer's Indemnitees
or the Seller's Indemnitees shall have suffered any Loss with respect to any
liability or claim to which the foregoing indemnities relate, the Buyer's
Indemnitees or the Seller's Indemnitees, as the case may be (the "Indemnified
Party"), shall give Seller and Beneficiary or Buyer, as the case may be (the
"Indemnifying Party"), prompt written notice of the nature and amount of such
Loss and the Indemnified Party's claim for reimbursement therefor.
V.4 Defense of Third-Party Claims. If any lawsuit or enforcement action
is filed against an Indemnified Party by a third party and the Indemnified Party
is entitled to indemnification pursuant to this Agreement, written notice
thereof shall be given to the Indemnifying Party as promptly as practicable.
After such notice, if the Indemnifying Party shall acknowledge in writing to
such Indemnified Party that such Indemnifying Party may be obligated under the
terms of its indemnity hereunder in connection with such lawsuit or action, then
the Indemnifying Party shall be entitled, if it so elects, to control the
defense and investigation of such lawsuit or action, and to employ and engage
attorneys of its own choice to handle and defend its interests in same, at the
Indemnifying Party's cost, risk and expense; and the Indemnified Party shall
cooperate in all reasonable respects, with the Indemnifying Party and such
attorneys in the investigation, trial and defense of such lawsuit or action and
any appeal arising therefrom; provided, that, the Indemnified Party shall not be
obligated to incur out-of-pocket expenses in connection with such cooperation,
unless the Indemnifying Party agrees to assume such expenses. Should any
Indemnified Party employ a second counsel to monitor or assist counsel retained
by the Indemnifying Party, the cost of such second counsel shall be borne by the
Indemnified Party.
V.5 Limitations on Indemnification. Buyer shall not be entitled to
indemnification from Seller and/or Beneficiary, and Seller and/or Beneficiary
shall not be required to pay Buyer, under this Article V unless the aggregate of
Seller's and the Beneficiary's indemnification obligations to the Buyer pursuant
to this Article V exceeds $25,000 ("Basket Amount"). In the event Buyer's claims
exceed the Basket Amount, Buyer shall be entitled to indemnification from Seller
and/or the Beneficiary for all claims from dollar one; provided, however that
the Basket Amount shall apply only for breaches of representations and
warranties and not for claims based on Seller's failure to pay or otherwise
perform any Seller's Liabilities.
ARTICLE VI
----------
NON-DISCLOSURE AND NON-COMPETITION
----------------------------------
VI.1 Non-Disclosure. Seller and Beneficiary severally agree that,
without the prior written consent of Buyer, Seller and Beneficiary shall not at
any time, directly or indirectly, use for their own benefit or purposes or for
the benefit or purposes of any other person, firm, or business organization, or
disclose in any manner to any person, firm, or business organization, any trade
secrets, information, data or know-how of Seller relating to the Assets.
The foregoing shall not limit William Wendell from being a consultant
to other rental purchase companies or other parties located outside the Areas of
Dominant Influence referenced in Section 6.2.
34
<PAGE> 21
VI.2 Non-Competition. Seller and Beneficiary severally agree that none
of them shall engage (whether as a sole proprietor or a partner, employee or
agent of a partnership or a member, employee or agent of a limited liability
company; as an officer, director, employee or shareholder or agent of any
corporation other than Buyer; or as a trustee, fiduciary, consultant,
independent contractor, agent or other representative; or as a lender, guarantor
or surety), for a period of five (5) years after the Closing Date, directly or
indirectly, in any or all of the following activities within the counties or
portions of the counties within the "Areas of Dominant Influence" (see Exhibit
6.2) that include one or more of the cities within which the Stores are located
(the "Area"):
(1) enter into or engage in any rental or leasing business involving
Brown Goods or White Goods (a "Competitive Business");
(2) promote the business of any person, firm, association, or
corporation engaged in a Competitive Business;
(3) solicit, divert or take away or attempt to solicit, divert or take
away, any of the Buyer's customers or accounts within the Area; or
(4) knowingly employ or engage or attempt to employ or engage in any
capacity any person employed by Buyer at any of the Stores.
The Areas of Dominant Influence shall be those territories established
by the Nielsen marketing firm in determining television markets and are
illustrated on the Maps attached hereto as Exhibit 6.2.
Notwithstanding the provisions of this Section 6.2, during the period
April 1, 1999 through June 30, 1999, Seller may conduct and advertise a
liquidation sale in the Cleveland, Ohio area of all of its inventory of
merchandise not acquired by Buyer.
Seller and Beneficiary severally agree that each of the covenants set
forth above are separate and distinct covenants, independent of each other, and
that the illegality or invalidity of any one or more of them or any part of one
or more of them shall not render any other illegal or invalid, and that if the
invalidity or unenforceability is due to the unreasonableness of the time or
geographical area covered by said covenants and restrictions, said covenants and
restrictions shall nevertheless be enforced to the maximum extent permitted by
law and effective for such period of time and for such area as may be determined
to be reasonable by a court of competent jurisdiction. Seller and Beneficiary
severally further agree that Buyer may assign the provisions of this Article 6
and Seller and Beneficiary will severally execute a confirmation of this Article
6 in favor of any assignee of Buyer.
35
<PAGE> 22
ARTICLE VII
-----------
CONDITIONS OF PURCHASE
----------------------
[INTENTIONALLY LEFT BLANK.]
ARTICLE VIII
------------
MISCELLANEOUS PROVISIONS
------------------------
VIII.1 Closing. The Closing shall occur on March 2, 1999, effective as
of the opening of business on March 1, 1999 (the "Closing Date"). The Closing
shall occur at the offices of Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A.,
1301 E. Ninth St., Suite 2600, Cleveland, Ohio 44114.
VIII.2 Costs and Expenses. Each party covenants and agrees that it
shall be responsible for and bear its respective costs and expenses (including
attorneys' fees and transfer taxes, if any) in connection with, or arising out
of, the negotiation and execution of this Agreement and consummation of the
transactions provided for herein. Notwithstanding the foregoing, Seller shall
pay the cost of the Blue Ribbon Rentals, Inc. audit and Buyer shall pay the cost
of the Blue Ribbon Rentals II, Inc. audit required under Section 4.6.
VIII.3 Termination; Amendment and Modification. This Agreement may be
terminated by any party if the Closing Date has not occurred by March 15, 1999.
This Agreement may be amended, modified or supplemented only in writing executed
by each of the parties hereto.
VIII.4 Assignment. No party to this Agreement shall assign, in whole or
in part, this Agreement or their respective rights or obligations hereunder
without the prior written consent of the other parties, and, absent such
consent, any assignment (including, without limitation, any assignment by
merger, death, dissolution or operation of law) shall be null and void.
VIII.5 Notices. All notices, requests, demands or other communications
hereunder must be in writing and executed by an authorized representative of the
party responsible therefor, and must be given either by hand or telex, telecopy,
telefax or other telecommunications device capable of creating a written record
(confirmed by registered or certified mail or by overnight courier) as follows
or to such other person or place as any party shall furnish to the others in
writing:
To Buyer: Rainbow Rentals, Inc.
Attention: Mr. Wayland Russell,
Chairman and Chief Executive Officer
3711 Starr Centre Drive
Canfield, Ohio 44406
Telecopier No.: (330) 533-8658
By Mail: P.O. Box 9006
Boardman, Ohio 44513-0006
With a copy to: Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A.
2600 Tower at Erieview
1301 East Ninth Street
Cleveland, Ohio 44114-1824
Attention: Michael A. Ellis, Esq.
Telecopier No.: (216) 696-1009
36
<PAGE> 23
To Seller or Blue Ribbon Rentals, Inc.
Beneficiary: c/o William Wendell
2680 State Road
Cuyahoga Falls, Ohio 44223
Telecopier No.: 330-923-1180
With a copy to: James D. Kraus, Esq.
Buckingham, Doolittle & Burroughs, LLP
P.O. Box 1500
50 S. Main Street
Akron, Ohio 44309
Telecopier No.: 330-252-5483
VIII.6 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 but one and the same instrument.
VIII.7 Headings. Section and paragraph headings in this Agreement are
provided for convenience of reference only and shall not be deemed to constitute
a part hereof.
VIII.8 Recitals and Exhibits. The recitals contained at the beginning
of this Agreement, and all Exhibits attached hereto shall be deemed an integral
part of this Agreement and are incorporated herein by reference.
VIII.9 Waiver; Remedies; Specific Performance. No waiver of any breach
of any provision of this Agreement shall be held to be a waiver of any other
subsequent breach, and the failure of a party to enforce at any time any
provision hereof shall not be deemed a waiver of any right of such party to
subsequently enforce such provision or any other provision hereof. All remedies
afforded in this Agreement shall be taken and construed as cumulative, that is,
in addition to every other remedy provided herein or by law.
VIII.10 Governing Law. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Ohio.
VIII.11 Severability. In the event that any provision or any portion of
any provision of this Agreement shall be held invalid, illegal or unenforceable
under applicable law, the remainder of this Agreement shall remain valid and
enforceable to the maximum extent permitted by law.
VIII.12 Arbitration. Any dispute arising between the parties hereto
shall be resolved by arbitration in Cleveland, Ohio (or such other location as
otherwise agreed to by the parties) in accordance with the Rules of the American
Arbitration Association, and the award of the arbitrator(s) shall be final and
binding upon the parties. In the event a demand for arbitration is filed
pursuant hereto, the parties shall have the same rights to discovery under the
Ohio Rules of Civil Procedure as if the dispute had been filed as an original
action in an Ohio Court of original jurisdiction, and any Court located in
Cleveland, Ohio or elsewhere shall have jurisdiction and shall be authorized to
enforce said rights as if the entire dispute were pending before said Court. All
parties consent, agree and submit to Ohio personal jurisdiction.
37
<PAGE> 24
VIII.13 Entire Agreement. This Agreement, the Exhibits hereto and the
ancillary documents executed hereunder, set forth the entire agreement and
understanding between the parties hereto with respect to the transactions
provided for herein and supersede and cancel any and all prior discussions,
correspondence, agreements or understandings (whether oral or written) between
the parties hereto with respect to such matters. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or corporation other than the parties hereto and their successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Agreement to be executed by their authorized representatives as
of the date first above set forth.
BLUE RIBBON RENTALS, INC.
By: /s/ WILLIAM WENDELL
--------------------------------------------------
William Wendell, President
BLUE RIBBON RENTALS II, INC
By: /s/ WILLIAM WENDELL
--------------------------------------------------
William Wendell, President
/s/ WILLIAM WENDELL
--------------------------------------------------
William Wendell, Trustee of the William M. Wendell
Trust - 1999, U/A dated March 1, 1999
RAINBOW RENTALS, INC.
By: /s/ WAYLAND J. RUSSELL
--------------------------------------------------
Wayland J. Russell,
Chairman and Chief Executive Officer
38
<PAGE> 25
EXHIBIT "A"
-----------
STORE LOCATIONS
---------------
BLUE RIBBON RENTALS #1
1400 South Arlington Street
Akron, OH 44306
BLUE RIBBON RENTALS #2
1430 South Hawkins Avenue
Akron, OH 44320
BLUE RIBBON RENTALS #3
450 East Main Street
Alliance, OH 44601
BLUE RIBBON RENTALS #4
3620 Belmont Avenue
Youngstown, OH 44505
BLUE RIBBON RENTALS #5
Town Plaza
226 Federal Avenue NW
Massillon, OH 44646
BLUE RIBBON RENTALS #6
4026 Market Street
Youngstown, OH 44512
BLUE RIBBON RENTALS #7
2885 State Road
Cuyahoga Falls, OH 44223
BLUE RIBBON RENTALS #130
220 High Street
Wadsworth, OH 44281
BLUE RIBBON RENTALS-II #301
212 S. Main Street
Butler, PA 16001
<PAGE> 26
BLUE RIBBON RENTALS-II #302
1281 Park Avenue West
Mansfield, OH 44906-2856
BLUE RIBBON RENTALS-II
#303 Olympia Shopping Center
4313 Walnut Street
McKeesport, PA 15132
BLUE RIBBON RENTALS-II #304
1703 W. Market Street
Warren, OH 44485
BLUE RIBBON RENTALS-II #305
13 E. Main Street
Uniontown, PA 15401
BLUE RIBBON RENTALS-II #306
4443 Main Avenue
Ashtabula, OH 44004
BLUE RIBBON RENTALS-II #307
2040 Route 286 South
Indiana, PA 15701
<PAGE> 27
EXHIBIT "B"
-----------
RENTAL CONTRACTS
----------------
<PAGE> 28
EXHIBIT C
---------
GENERAL ASSIGNMENT AND BILL OF SALE
-----------------------------------
(Assets)
THIS GENERAL ASSIGNMENT AND BILL OF SALE dated as of the 1st day of
March, 1999, by BLUE RIBBON RENTALS, INC. and BLUE RIBBON RENTALS II, INC., each
Ohio corporations (collectively, "Seller") in favor of RAINBOW RENTALS, INC., an
Ohio corporation ("Buyer"), is to evidence the following agreements and
understandings: (Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Purchase Agreement (as defined below)).
W I T N E SS E T H:
-------------------
WHEREAS, pursuant to an Amended and Restated Asset Purchase Agreement,
dated March 1, 1999, (the "Purchase Agreement") by and among Buyer, Seller and
William Wendell, trustee and beneficiary of the sole shareholder of Seller,
Buyer is purchasing substantially all of Seller's Assets relating to or used in
connection with the operation of Seller's Stores.
WHEREAS, Seller desires to execute and deliver this instrument in
furtherance of the Purchase Agreement.
NOW, THEREFORE, Seller, for good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged and pursuant
to the terms and conditions contained in the Purchase Agreement, hereby sells,
transfers, assigns and delivers to Buyer, its successors and assigns, free and
clear of all mortgages, security interests, liens, charges and other
encumbrances of title, and free and clear of all adverse claims and defenses,
all of the Assets (as defined in Section 1.1 of the Purchase Agreement).
This General Assignment and Bill of Sale and the covenants and
agreements contained herein shall inure to the benefit of Buyer and its
successors and shall bind Seller and its successors.
This General Assignment and Bill of Sale shall be governed by and
construed in accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, Seller has caused this General Assignment and Bill
of Sale to be duly executed and delivered this 2nd day of March, 1999, effective
as of the opening of business on March 1, 1999.
BLUE RIBBON RENTALS, INC.
By: /s/ WILLIAM WENDELL
-----------------------------
William Wendell, President
BLUE RIBBON RENTALS II, INC.
By: /s/ WILLIAM WENDELL
-----------------------------
William Wendell, President
<PAGE> 29
EXHIBIT "D"
-----------
[INTENTIONALLY OMITTED]
-----------------------
<PAGE> 30
EXHIBIT "E"
-----------
PURCHASE PRICE ALLOCATION
-------------------------
Inventories The lesser of Seller's book value or the value
based on income forecasting method.
Furniture, Fixtures and
Leasehold Improvements Fair market value, which approximates book value
Covenant Not to Compete $300,000
Security Deposits Actual Cash Value
Goodwill Balance
The Purchase Price will be allocated between Blue Ribbon Rental and
Blue Ribbon Rental II based on location of the assets and the covenant not to
compete will be allocated equally between the companies.
<PAGE> 31
EXHIBIT "F"
-----------
[INTENTIONALLY OMITTED]
<PAGE> 32
EXHIBIT "G"
-----------
VEHICLES
--------
Year Make Serial Number
- ---- ---- -------------
1998 Ford 1FDWE30L1WHA16026
1997 Ford E150 Van 1FTEE1468VHB73897
1997 Ford 3FTH25HOVMA20832
1997 Ford 1FDJE37L2VHA79604
1997 Ford 1FTEE1428VHB82614
1997 Ford 1FDKE30L4VHA85984
1997 Ford 1FTEE1425VHB49909
1997 Ford 1FDKE30L4VHB13704
1996 Ford IFDKE37H6THA22058
1996 Ford IFDKE37H4THA22057
1996 Ford 1FDKE37H3THB40794
1995 Chevy Van 1GBEG2524SF146975
1995 Ford 1FDKE37H6SHA24715
1995 Ford 1FTHF25Y55EA60485
1995 Ford 1FTHF25Y7SEA60486
1995 Ford 1FTHF25YXSNB27629
1995 Ford 1FTHF25Y8SNB27631
1994 Dodge Maxi 2B7HB21Y6RK159310
1994 Dodge Van 2B7HB21XORK159309
1994 Ford 1FTJE34Y7RHC15588
1993 Buick 1G4CW53LXP1619090
1993 Dodge Maxi 2B7HB21Y5PK520359
1993 Toyota JT5VN94T2P0032373
1993 Toyota JT5VN94T8P0032572
1993 Toyota JT5VN94T5P0032531
1993 Toyota JT5VN94T8P0030448
1993 Toyota JT5VN94TXP0032850
1993 Toyota JT5VN94TXP0032802
1993 Toyota JT5VN94T6P0032568
1993 Toyota JT5VN94TXP0032539
1993 Toyota JT5VN94T1P0032350
1992 Dodge Van 2B7HB21Y9NK105610
1992 Ford Van 1FTEE14N7NHB26867
1992 GMC Cube 2GDHG31K5N4519129
1992 Toyota JT5VN94TON0027718
1992 Toyota JT5VN94T9N0028141
1992 Toyota JT5VN94T2N0027722
<PAGE> 33
Year Make Serial Number
- ---- ---- -------------
1992 Utilimaster 45VXA02B8NW002982
1990 Ford 1FTFE24N9LHA16751
1989 Utilimaster 45VXA01BXKW000454
1989 Iveco Cube ZCFDS9139K1150333
1989 Iveco Cube ZCFDS9131K1150276
1989 Dodge Van 2B7HB21X8KK392974
1988 Ford 1FTDE14NXJHA56514
1987 Issuzu Cube JAMJP7486H9402776
1987 GMC 1GDHP32T5H3500281
1986 Issuzu Cube JAMJP7464G9402904
<PAGE> 34
EXHIBIT "H"
-----------
DELINQUENT ACCOUNTS
-------------------
SEE ATTACHED SHEETS
<PAGE> 35
EXHIBIT "I"
-----------
[INTENTIONALLY OMITTED]
<PAGE> 36
EXHIBIT "J"
-----------
[INTENTIONALLY OMITTED]
<PAGE> 37
EXHIBIT "K"
-----------
[INTENTIONALLY OMITTED]
<PAGE> 38
EXHIBIT "L"
-----------
[INTENTIONALLY OMITTED]
<PAGE> 39
EXHIBIT "M"
-----------
EMPLOYEE BENEFITS
<PAGE> 40
EXHIBIT "M-1"
-------------
WORKER COMPENSATION CLAIMS
SEE ATTACHED SHEETS
<PAGE> 41
EXHIBIT "M-2"
-------------
OTHER WORKER CLAIMS
<PAGE> 42
EXHIBIT "M-3"
-------------
LIST OF EMPLOYEES
<PAGE> 43
EXHIBIT "N"
-----------
INSURANCE
