UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended: October 1, 1995
or
[ ] Transition Report Pursuant to Section 13 or (15(d) of the
Securities Exchange Act of 1934
For the transition period from_______________ to _______________
Commission file number: 0-1234-8
Advantage Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 48-1156618
(State or other jurisdiction of (I.R.S. Employer I. D. No.)
incorporation or organization)
9323 E. 37th St. North, Wichita, Kansas 67226-2000
(Address of principal executive office) (Zip Code)
Registrants telephone number, including area code:(316) 634-0333
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO ______
4,242,938 common shares were outstanding as of October 1, 1995.
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<TABLE>
Part 1. Financial Information
Item 1. Financial Statements
ADVANTAGE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
<CAPTION>
<S>
ASSETS
October 1, 1995 January 22, 1995
<C> <C>
Cash and cash equivalents $ 6,224,026 $ 2,304,731
Rental merchandise, net 18,031,369 18,517,632
Property and equipment, net 9,155,580 8,130,184
Franchise fees, net 964,957 1,008,947
Deferred income tax benefit 2,218,133 2,218,133
Prepaid expenses 498,628 311,721
Accounts receivable and other 499,345 411,255
__________ ___________
$37,592,038 $32,902,603
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<C> <C>
Accounts payable $ 3,241,531 $ 1,239,867
Accrued liabilities 1,606,558 1,648,441
Accrued compensation 2,442,824 2,765,218
Income taxes payable 500,395 355,802
Note payable -- 500,000
__________ __________
7,791,308 6,509,328
STOCKHOLDERS' EQUITY
Preferred stock 1,400,000 1,400,000
Common stock 43,740 43,740
Paid-in capital 5,433,200 5,445,075
Retained earnings 24,797,269 21,509,190
__________ ___________
31,674,209 28,398,005
Less common shares of treasury stock,
at cost (131,062 at October 1,
1995, and 141,562 at
January 22, 1995) 1,873,479 2,004,730
29,800,730 26,393,275
___________ ___________
$37,592,038 $32,902,603
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<TABLE>
ADVANTAGE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<CAPTION>
Twelve Weeks Ended Thirty-six Weeks Ended
Oct.1, 1995 Oct.2, 1994 Oct.1, 1995 Oct.2, 1994
<S> <C> <C> <C> <C>
Revenues
Rental income $15,071,794 $14,928,831 $47,725,833 $46,069,764
Sales of merchandise 941,509 931,058 3,148,344 3,012,281
16,013,303 15,859,889 50,874,177 49,082,045
Costs and operating expenses
Cost of merchandise sold 697,594 585,988 2,424,599 1,879,081
Depreciation and amortization
Rental merchandise 4,144,886 4,310,193 13,106,271 12,748,359
Other 658,614 561,154 1,915,032 1,637,215
Salaries and wages 4,095,181 3,598,171 12,155,823 10,559,854
Advertising 886,794 820,041 2,704,721 2,522,995
Other operating expenses 4,381,404 4,077,381 13,198,731 12,438,465
14,864,473 13,952,928 45,505,177 41,785,969
Operating income 1,148,830 1,906,961 5,369,000 7,296,076
Net interest income 46,602 1,836 102,944 22,753
Earnings before income taxes 1,195,432 1,908,797 5,471,944 7,318,829
Income taxes 436,517 715,663 2,057,865 2,778,507
-------- -------- --------- ---------
NET EARNINGS $758,915 $1,193,134 $3,414,079 $4,540,322
Earnings per common share
-primary and fully diluted $ .15 $ .24 $ .68 $ .90
Weighted average common
and common equivalent
shares outstanding 5,056,201 4,992,401 5,042,518 5,020,330
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
ADVANTAGE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Increase (decrease) in cash and cash equivalents
<CAPTION>
Thirty-six Weeks Ended
October 1, 1995 October 2, 1994
<S> <C> <C>
Net cash provided by operating
activities $18,101,466 $16,561,940
Cash flows from investing activities
Purchase of rental merchandise (14,014,190) (15,175,298)
Purchase of property and equipment (2,801,906) (2,538,190)
Payment of initial franchise fees (116,250) (45,000)
Proceeds from sales of rental merchandise 3,148,344 3,012,281
Proceeds from sales of property
and equipment 108,454 --
Net cash used in investing activities (13,675,548) (14,746,207)
Cash flows from financing activities
Purchase of treasury stock -- (1,527,857)
Proceeds from issuance of note payable -- 750,000
Repayment of note payable (500,000) (750,000)
Issuance of common stock 119,377 302,468
Payment of preferred stock dividends (126,000) (126,000)
Net cash used in financing activities (506,623) (1,351,389)
Net increase in cash and cash
equivalents 3,919,295 464,344
Cash and cash equivalents at beginning
of period 2,304,731 2,226,210
__________ _________
Cash and cash equivalents at end
of period $6,224,026 $2,690,554
========== ===========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE>
ADVANTAGE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. Condensed consolidated financial statements
The condensed consolidated balance sheet of Advantage Companies,
Inc. ("Advantage" or the "Registrant") as of October 1, 1995, the
consolidated statements of earnings for the twelve and thirty-six
week periods ended October 1, 1995 and October 2, 1994, and the
condensed consolidated statements of cash flows for the periods
then ended have been prepared by the Registrant, without audit. In
the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at October
1, 1995 and for all periods presented have been made.
The consolidated balance sheet at January 22, 1995 has been taken
from the audited consolidated financial statements at that date,
and condensed. Certain other information and footnote disclosures
normally included in the consolidated financial statements prepared
in accordance with generally accepted accounting principles have
been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
Registrant's audited consolidated financial statements and notes
thereto included in its January 22, 1995 annual report to
shareholders. The consolidated results of operations for the
periods ended October 1, 1995, are not necessarily indicative of
the consolidated operating results for the full year.
B. Income Taxes
The Internal Revenue Service (IRS) has examined the January 27,
1991 federal income tax return of COMCOA, Inc. ("COMCOA") and
proposed additional taxes of $1,132,571. The issue concerns the
depreciation method for rental merchandise. For income tax
reporting purposes, COMCOA uses the income forecasting method of
depreciation for rental merchandise which is widely used throughout
the rental-purchase industry and which COMCOA believes accurately
matches its depreciation expenses to revenues. The IRS
disallowance was based upon its determination that depreciation
expressed in terms of years must instead be utilized.
COMCOA paid the additional federal tax, plus interest in fiscal
1995 and anticipates paying additional state taxes. Accordingly, a
provision was included in the fiscal 1994 statements for interest
of $345,217 and federal and state taxes payable in the amount of
$1,250,767 with a corresponding increase in the deferred income tax
benefit. COMCOA filed a claim for refund which has been disallowed
by the IRS, and has the option to file a suit for refund in the
future.
COMCOA has continued to use the income forecasting method of
depreciating rental merchandise. The IRS has requested information
concerning the depreciation method used by COMCOA for rental
merchandise on its 1992, 1993 and 1994 tax returns. COMCOA is in
the process of providing this detail. It is expected that the IRS
will propose an adjustment to depreciation expense for these years,
resulting in additional tax to COMCOA. As these adjustments are
only for temperary differences, any additional tax owed would increase
the deferred income tax benefit.
C. Earnings per share
Class A preferred stock for the period is included in the per
share computations. Primary and fully diluted earnings per common
share are considered equal in all periods that are presented. The
data used in the computation of earnings per common share is as
follows:
Twelve Weeks Ended Thirty-six Weeks Ended
Oct. 1, 1995 Oct. 2, 1994 Oct. 1, 1995 Oct. 2, 1994
Weighted average common
shares 4,242,819 4,225,190 4,238,813 4,245,262
Add common stock equivalents:
Convertible preferred stock 700,000 700,000 700,000 700,000
Common stock options 113,382 67,211 103,705 75,068
__________ ________ __________ _________
5,056,201 4,992,401 5,042,518 5,020,330
D. Contingency
The Registrant was named as one of several defendants in a
lawsuit filed by THORN Americas, Inc. (THORN) concerning the
Registrant's Rent-A-Center franchise contract and development
agreement with THORN. The lawsuit was filed in response to the
defendant's involvement with AdvantEdge Rental Purchase, Inc.
("AdvantEdge"), a wholly-owned subsidiary. The lawsuit seeks to
enjoin the defendants from disclosing propriety information, or
operating or performing any duty or act in relation to the
operation of any stores owned by AdvantEdge or any other rental-
purchase stores other than Rent-A-Center franchise stores. The
suit also seeks to enjoin the Registrant from employing or seeking
to employ any person who has worked for THORN in the last six
months.
Negotiations between the parties have resulted in the signing of
a letter of intent between the Registrant and THORN pursuant to
which the Registrant would be acquired by THORN. The letter of
intent calls for consideration of $18.50 per share of Common Stock
to be paid to all Registrant's stockholders other than Daniel J.
Taylor, Robert W. Moore, Daniel M. Carney and Leslie G. Rudd, who
will receive $17.50 per share. THORN has stayed proceedings in the
lawsuit until November 30, 1995, and has agreed to further stay
proceedings until January 1996, for the purpose of allowing the
parties time to settle their disputes "through certain
acquisitions."
On September 25, 1995, the Registrant signed a formal Agreement
and Plan of Merger for a subsidiary of THORN Americas, Inc. to
acquire the Registrant. The transaction, with a cash purchase
price to the public shareholders of $18.50 per share of Registrant
common stock, is subject to the vote of the shareholders of
Registrant. Certain majority shareholders of Registrant have
entered into an option agreement in which they will vote in favor
of the sale of and grant THORN the option to purchase their
security holdings at $17.50 per share. The definitive agreement
sets a closing for January, 1996 and is subject to THORN's
satisfaction with the financial performance and condition of
Registrant.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The fiscal year-end of Advantage Companies, Inc. is based upon a
52- to 53-week period which ends four weeks after the last Sunday
in December. The following discussion pertains to the Company's
results of operations for the twelve and thirty-six week periods
ended October 1, 1995, and to its financial condition as of that
date, and as of the most recent fiscal year ended January 22, 1995.
RESULTS OF OPERATIONS
At the end of the third quarterly period of the current fiscal
year, the Registrant owned and was operating 98 Rent-A-Center
stores and 7 AdvantEdge Rental Purchase stores. During the same
period in the previous year, the Company owned and operated 93
Rent-A-Center stores.
Total revenues increased $153,414 or 1% compared to the same
quarter last year. Total revenues attributable to the Registrant's
subsidiary, AdvantEdge Rental Purchase, Inc., were $473,386 for the
quarter. The Registrant acquired this subsidiary in the fourth
quarter of last year. This increase in revenues from AdvanntEdge
Rental Purchase, Inc.more than offsets the decrease in revenues experienced
by the Registrant's other subsidiary, COMCOA, Inc., in its operation of
Rent-A-Center stores. Total revenues of COMCOA, Inc. decreased $319,972
or 2% for the quarter due to a decrease in the volume of rental agreements.
Management believes that the numerous hurricanes and tropical
storms affecting the southeastern United States had a significant
negative impact on the volume of rental agreements. Following is a
summary of consolidated revenue changes grouped by store
maturation:
SUMMARY OF THIRD QUARTER REVENUE CHANGES
ADVANTAGE COMPANIES, INC.
Twelve Weeks Twelve Weeks
No. of Fiscal Year Ended 10/1/95 Ended 10/2/94 Increase Percentage
Stores Opened Revenues Revenues (Decrease) Change
10 1996 $ 504,032 $ -- $ 504,032 N/A
6 1995 719,136 72,371 646,765 893.7%
10 1994 1,380,329 1,275,264 105,065 8.2%
4 1993 628,551 651,949 (23,398) (3.6%)
75 Prior to 1993 12,781,255 13,860,305 (1,079,050) (7.8%)
___ _________ ___________ ___________
105 TOTAL $16,013,303 $15,859,889 $ 153,414 1.0%
==== =========== =========== ============
Costs and operating expenses increased 6.5% over the same
quarter in the previous year. Depreciation expense of rental
merchandise decreased 4% from the prior year, primarily due to the
decrease in the number of rental agreements and the corresponding decrease
in items in rental inventory. Other costs and operating expenses increased
11.5%, due primarily to growth in the number of stores open.
Consolidated operating income for the quarter includes the
loss incurred by AdvantEdge in the amount of $448,979 due to
start-up costs and new store losses. Also included in
consolidated operations are the parent company's costs of
approximately $100,000 associated with the proposed acquisition
by THORN Americas, Inc. These two factors are responsible for
the majority of the 40% decrease in operating income.
Total revenues attributable to the Registrant's subsidiary,
AdvantEdge Rental Purchase, Inc., were $832,945 for the thirty-
six weeks ended October 1, 1995. The Registrant acquired this
subsidiary in the fourth quarter of last year. This accounts for
46% of the year to date increase in total revenues. The
remainder of the increase is derived from growth in COMCOA
stores. Following is a summary of consolidated revenue changes
grouped by store maturation:
SUMMARY OF THIRD QUARTER REVENUE CHANGES
ADVANTAGE COMPANIES, INC.
Thirty-six Weeks Thirty-six Weeks
No. of Fiscal Year Ended 10/1/95 Ended 10/2/94 Increase Percentage
Stores Opened Revenues Revenues (Decrease) Change
10 1996 $ 678,776 $ -- $ 678,776 N/A
6 1995 2,015,337 156,160 1,859,177 1190.6%
10 1994 4,517,360 3,644,923 872,437 23.9%
4 1993 2,054,223 1,997,733 56,490 2.8%
75 Prior to 1993 41,608,481 43,283,229 (1,674,748) (3.9%)
___ ___________ ___________ __________
105 TOTAL $50,874,177 $49,082,045 $1,792,132 3.7%
==== =========== =========== ==========
Costs and operating expenses increased 9% over the same
thirty-six week period in the previous year, due primarily to
growth in the number of stores. The increase in cost of
merchandise sold is due primarily to the higher undepreciated
value of merchandise purchased early or rented for the required
term by customers who rented merchandise for shorter terms than
previously available in a program introduced by the Registrant in
fiscal 1995. The Registrant introduced the program in response
to competitive pressures to offer shorter rental term
requirements for ownership.
Included in the year-to-date consolidated operating income is
the loss incurred by AdvantEdge in the amount of $1,100,070, due
to start-up costs and new store losses. Also included in
consolidated operations are the parent company's costs of
approximately $100,000 associated with the proposed acquisition
by THORN Americas, Inc. and $190,000 in legal fees to defend a
lawsuit filed by THORN regarding AdvantEdge.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of funds to finance its business
has been its cash flow from operations and bank borrowings. The
funds are used chiefly to purchase and carry additional rental
merchandise for existing Rent-A-Center and AdvantEdge Rental
Purchase, Inc. stores as well as rental merchandise and the
related assets required for the opening of new stores.
During the third quarterly of fiscal 1996, the net cash
provided by operating activities totaled $18,101,466 compared to
$16,561,940 in the first thirty-six weeks of last year. The
Registrant currently has a revolving note payable agreement with
a financial institution that expires April 30, 1996. The note
provides for a maximum amount outstanding of $5 million.
Management believes that this resource, coupled with the
anticipated cash flows from operations, will be sufficient to
provide capital to finance existing stores.
PART II.
Item 1. Legal Proceedings.
The Registrant was named as one of several defendants in a
lawsuit filed by THORN Americas, Inc. ("THORN"), in the District
Court of Sedgwick County, Kansas on December 27, 1994. THORN is
the franchisor of COMCOA's Rent-A-Center stores. The lawsuit
sought declaratory judgment and injunctive relief with respect to
the development and operation of AdvantEdge's rent-to-own stores
and asserted various breaches of COMCOA's franchise contracts and
development agreements and violations of the Kansas Trade Secrets
Act.
While management continues in its belief that the Registrant
has good defenses to all of THORN's claims, settlement
negotiations between the parties have resulted in the signing of
the Agreement and Plan of Merger between the Registrant and
THORN. THORN has stayed proceedings until November 30, 1995, and
has agreed to further stay proceedings until January 1996, for
the express purpose of allowing the parties time to settle their
disputes "through certain acquisitions".
Item 5. Other Information.
On September 25, 1995, Registrant and THORN Americas, Inc.
signed an Agreement and Plan of Merger for THORN to acquire
Registrant. The transaction, with a cash purchase price to the
public shareholders of $18.50 per share of Advantage common
stock, is subject to the vote of the shareholders of Advantage.
Certain majority shareholders of Registrant representing
approximately 77% of Registrant's outstanding common stock and
equivalent, have entered into an option agreement ("Advantage
Agreement") in which they agreed to vote in favor of the merger
and granted THORN the option to purchase their security holdings
at $17.50 per share. On October 6, 1995 the Advantage Agreement
was amended to extend the expiration date of the option to
January 31, 1996. The definitive agreement calls for a closing on
or after January 2, 1996 and is subject to THORN's satisfaction
with the financial performance and condition of Advantage.
Item 6. Exhibit and Reports on Form 8-K
(a)Exhibits
2.02 Agreement and Plan of Merger by and among Advantage
Companies, Inc., THORN Americas, Inc. and THORN
Acquisition Corp.
99.03 First Amendment to the Advantage Agreement
(b) Reports on Form 8-K - Form 8-K was filed on July 24,
1995 with respect to events occurring on July 9, 1995.
The items reported pertain to the execution of the
Letter of Intent between the Registrant and THORN and
execution of the Advantage Agreement between THORN and
majority shareholders Daniel J. Taylor, Robert W.
Moore, Daniel M. Carney and Leslie G. Rudd. No
financial statements were filed with respect to the
Form 8-K. Exhibits included copies of the Letter of
Intent dated July 9, 1995, the Advantage Agreement
between THORN and Messrs. Taylor, Moore, Carney and
Rudd and the press release of the Registrant dated July
10, 1995.
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 thereunto duly authorized.
ADVANTAGE COMPANIES, INC.
(Registrant)
Date: November 10, 1995 By: /s/ Daniel J. Taylor
Daniel J. Taylor, Chief Executive
Officer and Chairman of the Board
Date: November 13, 1995 By: /s/ William A. Simon
William A. Simon
Senior Vice President -
Administration
and Chief Financial Officer
<PAGE>
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ADVANTAGE COMPANIES, INC.
THORN AMERICAS, INC.
AND
THORN ACQUISITION CORP.
DATED AS OF
SEPTEMBER 25, 1995
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 25,
1995, is by and among ADVANTAGE COMPANIES, INC., a Delaware
corporation (the "Company"), THORN AMERICAS, INC., a Delaware
corporation ("Parent"), and THORN ACQUISITION CORP., a Delaware
corporation ("Acquisition).
WHEREAS, the Boards of Directors of Parent, Acquisition and the
Company each have approved the acquisition of the Company by
Parent upon the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, in furtherance thereof, upon the terms and subject to
the conditions of this Agreement, (i) Acquisition would be merged
(the "Merger") with and into the Company in accordance with the
General Corporation Law of the State of Delaware ("Delaware Law")
and (ii) each share of common stock, par value $0.01 per share
(the "Common Stock"), of the Company (the "Shares"), issued and
outstanding immediately prior to the Effective Time (as defined
in Section 1.2 hereof) would, except as otherwise expressly
provided herein, be converted into the right to receive the
Merger Consideration (as defined in Section 1.7(a) hereof); and
WHEREAS, on July 9, 1995, Parent and certain stockholders of the
Company entered into an option agreement entitled the Advantage
Agreement, as amended on October 6, 1995 (the "Option
Agreement"), pursuant to which such stockholders agreed, among
other things, to grant Parent an irrevocable option to purchase
from them all of (i) the Common Stock owned by such stockholders
in exchange for $17.50 per Share (without interest) in cash, and
(ii) the Company's Class A Cumulative Convertible Preferred
Stock, par value $100 per share (the "Preferred Stock"), owned by
such stockholders in exchange for $17.50 multiplied by fifty
(50), or $875, for each share of Preferred Stock (without
interest) in cash.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time and upon the
terms and subject to the conditions of this Agreement and
Delaware Law, Acquisition shall be merged with and into the
Company, whereupon the separate corporate existence of
Acquisition shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation").
Section 1.2 Effective Time; Closing. As soon as practicable
after the later of (a) January 2, 1996 and (b) the satisfaction
or waiver of the conditions set forth in Article VI, the parties
hereto will file a certificate of merger with the Secretary of
State of the State of Delaware and make all other filings or
recordings required by Delaware Law in connection with the
Merger. The Merger shall become effective at such time as the
certificate of merger is duly filed with the Secretary of State
of the State of Delaware (the "Effective Time"). Prior to such
filing, a closing (the "Closing") shall be held at the offices of
Parent, 8200 East Rent-A-Center Drive, Wichita, Kansas 67226, or
such other place as the parties shall agree, for the purpose of
confirming the satisfaction or waiver of the conditions set forth
in Article VI. The date on which the Closing occurs is referred
to herein as the "Closing Date."
Section 1.3 Effects of the Merger; Subsequent Actions.
(a) The Merger shall have the effects set forth in Delaware Law.
Without limiting the generality of the foregoing, and subject
thereto and any other applicable laws, at the Effective Time all
of the properties, rights, privileges, powers and franchises of
the Company and Acquisition shall vest in the Surviving
Corporation, and all debts, liabilities, restrictions,
disabilities and duties of the Company and Acquisition shall
become the debts, liabilities, restrictions, disabilities and
duties of the Surviving Corporation.
(b) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets
of the Company or Acquisition acquired or to be acquired by the
Surviving Corporation as a result of or in connection with the
Merger, or otherwise to carry out this Agreement, the officers
and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Company or
Acquisition, all such deeds, bills of sale, assignments,
assumption agreements and assurances and to take and do, in the
name and on behalf of each of such corporations or otherwise, all
such other actions and things as may be necessary or desirable to
vest, perfect or confirm of record or otherwise any and all
right, title and interest in, to and under such rights,
properties or assets of the Surviving Corporation or otherwise to
carry out this Agreement.
Section 1.4 Certificate of Incorporation and By-Laws.
(a) The certificate of incorporation of Acquisition in effect
immediately prior to the Effective Time shall be the certificate
of incorporation of the Surviving Corporation until amended in
accordance with applicable law.
(b) The by-laws of Acquisition in effect at the Effective Time
shall be the by-laws of the Surviving Corporation until amended
in accordance with applicable law.
Section 1.5 Directors. The directors of Acquisition at the
Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the
certificate of incorporation and by-laws of the Surviving
Corporation and until his or her successor is duly elected and
qualified.
Section 1.6 Officers. The officers of Acquisition at the
Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the
certificate of incorporation and by-laws of the Surviving
Corporation and until his or her successor is duly appointed and
qualified.
Section 1.7 Conversion of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of
Parent, Acquisition, the Company or the holder of any of the
following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be cancelled pursuant to
Section 1.7(b) hereof and Dissenting Shares (as defined in
Section 2.1 hereof)), shall by virtue of the Merger and without
any action on the part of the holder thereof be converted into
the right to receive the Merger Consideration. As used herein,
"Merger Consideration" means (i) for stockholders other than
those party to the Option Agreement, $18.50 per Share (without
interest) in cash and (ii) for stockholders party to the Option
Agreement, $17.50 per Share (without interest) in cash.
(b) Each Share which is issued and outstanding immediately prior
to the Effective Time and owned by Parent or Acquisition or any
direct or indirect subsidiary of Parent or Acquisition, or which
is held in the treasury of the Company or any of its
subsidiaries, shall be cancelled and retired and no payment of
any consideration shall be made with respect thereto.
(c) Each share of common stock, par value $0.01 per share, of
Acquisition issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly
issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of the Surviving Corporation.
Section 1.8 Stock Options. Prior to the Effective Time, each
outstanding option ("Employee Option") issued, awarded or granted
pursuant to the Company's Restated 1988 Incentive Stock Option
Plan, the Company's Restated 1993 Non-Qualified Stock Option
Plan, the Restated and Extended Stock Option Agreement with
William A. Simon or the Company's 1995 Incentive Stock Option
Plan (the "Company Plans") to purchase Shares shall be cancelled
by the Company, and each holder of a cancelled Employee Option
who is not a party to the Option Agreement shall be entitled to
receive from the Company in consideration for the cancellation of
such Employee Option an amount in cash (less applicable
withholding Taxes (as defined in Section 3.10 hereof)) equal to
the product of (i) the number of Shares previously subject to
such Employee Option and (ii) the excess, if any, of $18.50 over
the exercise price per Share previously subject to such Employee
Option. The parties agree that the aggregate cash consideration
for cancellation of all outstanding options shall not exceed the
sum of $2,839,625, and that any such amounts paid in cancellation
of Employee Options may be subtracted, if necessary, from the
Total Equity Requirement set forth in Section 6.3(d) hereof.
Holders of Employee Options electing to receive the cash payment
referred to in this Section 1.8 shall not be entitled to receive
Common Stock upon the exercise of any Employee Option.
Section 1.9 Stockholders' Meeting. The Company, acting through
its Board of Directors (the "Board"), shall in accordance with
applicable law as soon as practicable following the date hereof:
(i) duly call, give notice of, convene and hold an annual or
special meeting of its stockholders (the "Stockholders' Meeting")
for the purpose of considering and taking action upon this
Agreement;
(ii) include in the Proxy Statement (as defined in Section 3.7
hereof), subject to the Board's fiduciary duties, the
recommendation of the Board that stockholders of the Company vote
in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby; and
(iii) use its reasonable best efforts (A) to obtain and furnish
the information required to be included by it in the Proxy
Statement and, after consultation with Parent and Acquisition,
respond promptly to any comments made by the Securities and
Exchange Commission (the "SEC") with respect to the Proxy
Statement and any preliminary version thereof and cause the Proxy
Statement to be mailed to its stockholders at the earliest
practicable time and (B) subject to the Board's fiduciary duties
under applicable law, to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated
hereby.
At such meeting, each of Parent and Acquisition will vote (and
will cause each of its affiliates to vote) any Shares owned by it
(or its affiliates) in favor of adoption of this Agreement and
the transactions contemplated hereby.
ARTICLE II
DISSENTING SHARES; EXCHANGE OF SHARES
Section 2.1 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior
to the Effective Time and held by a holder who has not voted in
favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Section 262
of Delaware Law ("Dissenting Shares") shall not be converted into
a right to receive the Merger Consideration unless such holder
fails to perfect or withdraws or otherwise loses his right to
appraisal. If, after the Effective Time, such holder fails to
perfect or withdraws or loses his right to appraisal, such Shares
shall be treated as if they had been converted as of the
Effective Time into the right to receive the Merger Consideration
without interest thereon. The Company shall give Acquisition or
Parent prompt notice of any demands received by the Company for
appraisal of Shares, and, prior to the Effective Time,
Acquisition shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior
to the Effective Time, the Company shall not, except with the
prior written consent of Acquisition, make any payment with
respect to, or settle or offer to settle, any such demands.
Section 2.2 Exchange of Certificates.
(a) From and after the Effective Time, a bank or trust company
to be designated by Parent (the "Paying Agent") shall act as
exchange agent in effecting the exchange for the Merger
Consideration of certificates (the "Certificates") that, prior to
the Effective Time, represented Shares. Upon the surrender of
each such Certificate formerly representing Shares, together with
a properly completed letter of transmittal, the Paying Agent
promptly shall pay the holder of such Certificate the Merger
Consideration multiplied by the number of Shares formerly
represented by such Certificate, in exchange therefor, and such
Certificate shall forthwith be cancelled. Until so surrendered
and exchanged, each such Certificate (other than Certificates
representing Dissenting Shares or Shares held by Parent,
Acquisition or the Company, or any direct or indirect subsidiary
thereof) shall represent solely the right to receive the Merger
Consideration. No interest shall be paid or accrue on the Merger
Consideration. If the Merger Consideration (or any portion
thereof) is to be delivered to any person other than the person
in whose name the Certificate formerly representing Shares
surrendered in exchange therefor is registered, it shall be a
condition to such exchange that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such exchange shall pay
to the Paying Agent any transfer or other Taxes required by
reason of the payment of the Merger Consideration to a person
other than the registered holder of the Certificate surrendered,
or shall establish to the satisfaction of the Paying Agent that
such Tax has been paid or is not applicable.
(b) At Closing, Parent or Acquisition shall have deposited, or
caused to be deposited, in trust with the Paying Agent the Merger
Consideration to which holders of Shares shall be entitled at the
Effective Time pursuant to Section 1.7(a) hereof.
(c) The Merger Consideration shall be invested by the Paying
Agent, as directed by Parent, provided such investments shall be
limited to direct obligations of the United States of America,
obligations for which the full faith and credit of the United
States of America is pledged to provide for the payment of
principal and interest, commercial paper rated of the highest
quality by Moody's Investors Services, Inc. or Standard & Poor's
Corporation or certificates of deposit issued as to all principal
and interest by federal deposit insurance issued by a commercial
bank having at least $100,000,000 in assets.
(d) Promptly following the date which is six months after the
Effective Time, the Paying Agent shall deliver to Parent all cash
and documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall
terminate. Thereafter, each holder of a Certificate formerly
representing a Share may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor
the Merger Consideration, without any interest thereon.
(e) Promptly after the Effective Time, the Paying Agent shall
mail to each record holder of Certificates that immediately prior
to the Effective Time represented Shares a form of letter of
transmittal and instructions for use in surrendering such
Certificates and receiving the Merger Consideration in exchange
therefor.
(f) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of any Shares.
If, after the Effective Time, Certificates formerly representing
Shares are presented to the Surviving Corporation or the Paying
Agent, they shall be cancelled and exchanged for the Merger
Consideration, as provided in this Article II, subject to
applicable law in the case of Dissenting Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Parent and Acquisition as
follows:
Section 3.1 Organization and Qualification; Subsidiaries.
(a) Each of the Company and its subsidiaries is a corporation
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being
conducted and as proposed to be conducted.
(b) Each of the Company and its subsidiaries is duly qualified
or licensed and in good standing to do business in each
jurisdiction (including any foreign country) in which the
property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing
necessary.
(c) The Company has heretofore furnished to Parent true,
complete and correct copies of its certificate of incorporation
(the "Certificate of Incorporation") and its by-laws (the "By-
Laws") and the equivalent organizational documents of each of its
subsidiaries, each as amended to the date hereof. The
Certificate of Incorporation, By-Laws and such equivalent
organizational documents are in full force and effect. The
Company is not in violation of any of the provisions of the
Certificate of Incorporation or By-Laws and no subsidiary of the
Company is in violation of any of the provisions of such
subsidiary's equivalent organizational documents. All minutes of
the Company and each of its subsidiaries are contained in the
minute books of the Company and each of its subsidiaries, which
have been made available to Parent, and such minute books contain
a complete and accurate record of the substance of all actions
taken at all meetings of the Board, the board of directors of
each of the Company's subsidiaries and of all committees thereof.
(d) Schedule 3.1(d) sets forth a complete and correct list of
all subsidiaries of the Company, which list sets forth the amount
of capital stock of or other equity interests in such
subsidiaries owned by the Company, directly or indirectly. There
are no irrevocable proxies with respect to the shares of capital
stock of such subsidiaries, and no equity securities of any of
the subsidiaries are or may become required to be issued by
reason of any options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares
of any capital stock of any subsidiary, and there are no
contracts, commitments, understandings or arrangements by which
any subsidiary is bound to issue additional shares of its capital
stock or securities convertible into or exchangeable for such
shares. All of the shares of capital stock of such subsidiaries
so owned by the Company are owned by it free and clear of any
claim, lien, encumbrance or agreement with respect thereto. No
entity in which the Company owns, directly or indirectly, less
than a 50% equity interest is, individually or when taken
together with all other such entities, material to the business
of the Company and its subsidiaries, taken as a whole.
Section 3.2 Capitalization of the Company and its Subsidiaries.
The authorized capital stock of the Company consists of (i)
10,000,000 Shares of which, as of the date of this Agreement,
4,242,938 Shares were issued and outstanding and 131,062 Shares
were held as treasury shares of the Company, (ii) 15,000 shares
of Preferred Stock, of which, as of the date of this Agreement,
14,000 shares were issued and outstanding, and (iii) 50,000
shares of Class B Preferred Stock, par value $100 per share, of
which, as of the date of this Agreement, no shares were issued
and outstanding. All outstanding shares of capital stock of the
Company have been validly issued, duly authorized, fully paid,
nonassessable and free of preemptive rights. As of the date of
this Agreement, Employee Options to purchase an aggregate of
381,500 Shares were outstanding and the weighted average exercise
price of such Employee Options was $11.27 per Share. The only
Employee Options (or any other option or related stock
appreciation right) in existence are set forth above and no
additional Employee Options (or any other option or related stock
appreciation right) have been granted since June 1, 1995 (other
than extensions of preexisting Employee Options set forth on
Schedule 3.2). As of the date of this Agreement, 700,000 Shares
were issuable upon conversion of the Preferred Stock. Each share
of Preferred Stock is convertible into fifty (50) Shares. Except
as set forth above, there are outstanding (i) no shares of
capital stock or other voting securities of the Company, (ii) no
securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company,
(iii) no options, subscriptions, warrants, convertible
securities, calls or other rights to acquire from the Company,
and no obligation of the Company to issue, deliver or sell any
capital stock, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of the
Company and (iv) no equity equivalents, performance shares,
interests in the ownership or earnings of the Company or other
similar rights issued by the Company (collectively, "Company
Securities"). Except as contemplated by this Agreement, there
are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any
Company Securities, other than the Company's obligations
hereunder to redeem (subject to conversion by the holder thereof)
the Preferred Stock. Each of the outstanding shares of capital
stock of each of the Company's subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and is directly or
indirectly owned by the Company, free and clear of all security
interests, liens, claims, pledges, charges, voting agreements or
other encumbrances of any nature whatsoever (collectively,
"Liens"). There are no existing options, calls or commitments of
any character relating to the issued or unissued capital stock or
other equity securities of any subsidiary of the Company.
Section 3.3 Authority Relative to this Agreement; Fairness
Opinion. The Company has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. The Board, at a meeting duly called and
held prior to the date of this Agreement, (i) determined that
this Agreement and the transactions contemplated hereby,
including the Merger, are in the best interests of the
stockholders of the Company (other than stockholders who are
party to the Option Agreement, Parent, Acquisition or their
affiliates), (ii) approved this Agreement and the transactions
contemplated hereby, including the Merger, (iii) subject to its
fiduciary duties, resolved to recommend that the stockholders of
the Company approve and adopt this Agreement and the Merger and
(iv) resolved to redeem (subject to conversion by the holder
thereof), effective immediately prior to the Merger, all of the
outstanding Preferred Stock. George K. Baum & Company, the
Company's financial advisor, has delivered to the Board its
written opinion to the effect that, as of the date of such
opinion, the consideration to be received by the holders of
Shares (other than stockholders who are party to the Option
Agreement, Parent, Acquisition or their affiliates, and other
officers and employees specifically excluded from the opinion)
pursuant to the Merger is fair to such holders from a financial
point of view. As of the date hereof, the Company has been
authorized by George K. Baum & Company to permit the inclusion of
such fairness opinion in the Proxy Statement referred to in
Section 3.7 hereof. The execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board and no other corporate proceedings or action on the part of
the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than, with
respect to the Merger, the approval and adoption of this
Agreement by the holders of a majority of the outstanding Shares
and the filing of the appropriate merger documents as required by
Delaware Law). The Company elected not to be governed by Section
203 of the Delaware Law pursuant to Article XI of the Certificate
of Incorporation, so as to render inapplicable to such
transactions, including, without limitation, the Merger and the
purchase of Shares, if any, pursuant to the Option Agreement, the
restrictions on business combinations contained in Section 203 of
the Delaware Law. This Agreement has been duly and validly
executed and delivered by the Company and, assuming it
constitutes a valid and binding agreement of the other parties
hereto, constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its
terms.
Section 3.4 Non-Contravention; Required Filings and Consents.
Except as set forth on Schedule 3.4:
(a) The execution, delivery and performance by the Company of
this Agreement and the consummation of the transactions
contemplated hereby (including the Merger) do not and will not
(i) violate, breach, contravene, terminate or conflict with the
Certificate of Incorporation or By-Laws or the equivalent
organizational documents of any of the Company's subsidiaries;
(ii) assuming that all consents, authorizations and approvals
contemplated by subsection (b) below have been obtained and all
filings described therein have been made, contravene, violate or
conflict with or constitute a violation of any provision of any
law, rule, regulation, judgment, injunction, order, writ, award
or decree binding upon or applicable to the Company, any of its
subsidiaries or any of their respective properties; (iii)
conflict with, or result in the breach or termination of any
provision of or constitute a default (with or without the giving
of notice or the lapse of time or both) under, or give rise to
any right of termination, cancellation, or loss of any benefit to
which the Company or any of its subsidiaries is entitled under
any provision of any agreement, commitment, arrangement, trust,
lease, contract, license or other instrument binding upon the
Company, any of its subsidiaries or any of their respective
properties, or allow the acceleration of the performance of, any
debt, liability or obligation of the Company or any of its
subsidiaries under any indenture, mortgage, deed of trust,
license, lease, contract, instrument or other agreement to which
the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any of their respective
assets or properties is subject or bound; or (iv) result in the
creation or imposition of any Lien on any asset of the Company or
any of its subsidiaries.
(b) The execution, delivery and performance by the Company of
this Agreement and the consummation of the transactions
contemplated hereby (including the Merger) by the Company require
no action by or in respect of, or filing with, any governmental
body, agency, official or authority (either domestic or foreign)
other than (i) the filing of a certificate of merger in
accordance with Delaware Law; (ii) compliance with any applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"); (iii) compliance with any
applicable requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and state securities, takeover
and Blue Sky laws; and (iv) such actions or filings which, if not
taken or made, would not prevent the consummation by the Company
of the transactions contemplated by this Agreement.
<PAGE>
Section 3.5 SEC Reports.
(a) The Company has filed all required forms, reports and
documents with the SEC since January 1, 1990. The Company has
provided to Parent, in the form filed with the SEC, the Company's
(i) Annual Reports on Form 10-K for each of the last five fiscal
years, (ii) Quarterly Reports on Form 10-Q for the quarters ended
since January 1, 1990, (iii) all proxy statements or information
statements relating to meetings or actions by consent of the
Company's stockholders since January 1, 1990 and (iv) all other
reports or registration statements filed by the Company with the
SEC since January 1, 1990 (collectively, the "SEC Reports"). The
SEC Reports, as amended through the date of this Agreement, were
prepared in accordance with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and
the Exchange Act. As of their respective dates, none of the SEC
Reports, including, without limitation, any financial statements
or schedules included therein (the "Financial Statements"),
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except
as set forth on Schedule 3.5(a), the audited consolidated
financial statements and unaudited consolidated interim financial
statements of the Company included in the SEC Reports fairly
present, in conformity with generally accepted accounting
principles applied on a consistent basis, the consolidated
financial position of the Company and its consolidated
subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended.
The Company has heretofore provided complete and correct copies
of each of the SEC Reports to Parent.
(b) Except as disclosed in the Financial Statements or as set
forth on Schedule 3.5(b), the Company and its subsidiaries have
no debts, financial obligations or liabilities of any nature
(whether accrued, absolute, contingent or otherwise), except for
liabilities incurred in the ordinary course of business since
January 23, 1995.
Section 3.6 Absence of Certain Changes. Since January 23, 1995,
except as set forth in Schedule 3.6, neither the Company nor any
of its subsidiaries has (i) declared, set aside or paid any
dividend or other distribution (whether in cash, stock, or
property or any combination thereof) in respect of its capital
stock, (ii) entered into, adopted, terminated, amended or
increased the benefits paid or payable under any severance,
termination, deferred or other compensation agreement or
arrangement with any director, officer or employee, other than
extensions of preexisting Employee Options as set forth on
Schedule 3.2, (iii) changed any of the accounting principles, or
methods of application of said principles, or practices used by
the Company, (iv) settled any litigation for amounts in excess of
$5,000, (v) granted any Employee Options (or other options or
similar stock appreciation rights), other than extensions of
preexisting Employee Options as set forth on Schedule 3.2, (vi)
granted any bonuses other than as specifically permitted by this
Agreement, (vii) delayed or deferred payment of accounts payable
or other obligations of the Company or any of its subsidiaries or
accelerated the collection of receivables or other obligations
due the Company or any of its subsidiaries or (viii) entered into
any transaction, or conducted its business or operations, outside
of the ordinary course of business. Since January 23, 1995, no
event, fact, condition, change or effect has occurred that will
or could, individually or in the aggregate, have an adverse
effect on the business of the Company.
Section 3.7 Proxy Statement. The proxy or information statement
or similar materials distributed to the Company's stockholders in
connection with the Merger, including any amendments or
supplements thereto (the "Proxy Statement"), shall not, at the
time filed with the SEC, at the time mailed to the Company's
stockholders, at the time of the Stockholders' Meeting or at the
Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information
provided by Parent or Acquisition specifically for use in the
Proxy Statement. The Proxy Statement will comply with the
requirements of Section 1.9 hereof and will comply as to form
with the provisions of the Exchange Act and the rules and
regulations thereunder.
Section 3.8 Finder's Fee. No broker, finder, investment banker
or other intermediary is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by
and on behalf of the Company.
Section 3.9 Absence of Litigation. Except as disclosed in
Schedule 3.9, as of the date hereof, there is no action, suit,
claim, investigation or proceeding pending or threatened, nor is
there any valid basis for any claim, against the Company or any
of its subsidiaries or any of their respective properties before
any court or arbitrator or any administrative, regulatory or
governmental body, or any agency or official. Except as
disclosed on Schedule 3.9, as of the date hereof, there is no
action, suit, claim, investigation or proceeding pending or
threatened, nor is there any valid basis for any claim, against
the Company or any of its subsidiaries or any of their respective
properties before any court or arbitrator or any administrative,
regulatory or governmental body, or any agency or official which
(i) challenges or seeks to prevent, enjoin, alter or delay the
Merger or any of the other transactions contemplated hereby or
(ii) alleges criminal action or inaction. Except as disclosed on
Schedule 3.9, as of the date hereof, neither the Company nor any
of its subsidiaries nor any of their respective properties is
subject to any order, writ, judgment, injunction, decree,
determination or award which would prevent or delay the
consummation of the transactions contemplated hereby.
Section 3.10 Taxes. Except as set forth in Schedule 3.10, (a)
the Company and its subsidiaries have filed, been included in or
sent, all returns, declarations and reports and information
returns and statements required to be filed or sent by or
relating to any of them relating to any Taxes (as defined below)
with respect to any income, properties or operations of the
Company or any of its subsidiaries (collectively, "Returns"); (b)
as of the time of filing, the Returns correctly reflected in all
respects the facts regarding the income, business, assets,
operations, activities and status of the Company and its
subsidiaries and any other information required to be shown
therein; (c) the Company and its subsidiaries have timely paid
all Taxes that are due and payable, whether or not such Taxes
were shown on any Return; (d) the Company and its subsidiaries
have made or will make provision for all Taxes payable for any
periods that end before the Effective Time for which no Returns
have yet been filed and for any periods that begin before the
Effective Time and end after the Effective Time to the extent
such Taxes are attributable to the portion of any such period
ending at the Effective Time; (e) the charges, accruals and
reserves for taxes reflected on the books of the Company and its
subsidiaries are adequate to cover the Tax liabilities accruing
or payable by the Company and its subsidiaries in respect of
periods prior to the date hereof; (f) neither the Company nor any
of its subsidiaries is delinquent in the payment of any Taxes or
has requested any extension of time within which to file or send
any Return, which Return has not since been filed or sent; (g) no
deficiency for any Taxes has been proposed, asserted or assessed
against the Company or any of its subsidiaries (or any member of
any affiliated or combined group of which the Company or any of
its subsidiaries is or has been a member for which either the
Company or any of its subsidiaries could be liable); (h) neither
the Company nor any of its subsidiaries has granted any extension
of the limitation period applicable to any Tax claims; (i)
neither the Company nor any of its subsidiaries is subject to
liability for Taxes of any person (other than the Company or its
subsidiaries), including, without limitation, liability arising
from the application of U.S. Treasury Regulation Section 1.1502-6
or any analogous provision of state, local or foreign law; (j)
neither the Company nor any of its subsidiaries is or has been a
party to any tax sharing agreement with any corporation which is
not currently a member of the affiliated group of which the
Company is currently a member; (k) no claim has ever been made by
an authority in a jurisdiction where any of the Company and its
subsidiaries does not file Returns that it is or may be subject
to taxation by that jurisdiction; (l) each of the Company and its
subsidiaries has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder,
or other third party; (m) none of the Company and its
subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will
not be deductible under Code Sec. 162 (as unreasonable
compensation), Code Sec. 162(m) or Code Sec. 280G; and (n)
Schedule 3.10 lists all Returns that currently are the subject of
audit.
"Taxes" means with respect to any person (i) any net income,
gross income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, value-added,
windfall profits, custom duty or other tax, governmental fee,
capital stock, social security (or similar), unemployment,
disability, transfer, registration, alternative or add-on
minimum, estimated or other like assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition
to tax or additional amount imposed by any taxing authority
(domestic or foreign) on such person and (ii) any liability of
the Company or any subsidiary for the payment of any amount of
the type described in clause (i) as a result of being a member of
an affiliated or combined group.
Section 3.11 Employee Benefits.
(a) Schedule 3.11(a) contains a true and complete list of each
bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay,
hospitalization or other medical, dental, life, disability or
other insurance, supplemental unemployment benefits,
profit-sharing, pension, savings or retirement plan, program,
agreement or arrangement, plans within the meaning of section 125
of the Code, retiree medical plans and any trust fund, plan,
program or arrangement funding any plan (including any voluntary
employee beneficiary association within the meaning of section
501(c)(9) of the Code), and each other employee benefit plan,
program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by the Company,
any of its subsidiaries or by any trade or business, whether or
not incorporated (an "ERISA Affiliate"), that together with the
Company or any of its subsidiaries would be deemed a "single
employer" within the meaning of section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), for
the benefit of any employee or terminated employee of the
Company, any of its subsidiaries or any ERISA Affiliate (the
"Plans"). Schedule 3.11(a) identifies each of the Plans that is
an "employee benefit plan," as that term is defined in section
3(3) of ERISA (the "ERISA Plans").
(b) With respect to each Plan, the Company has heretofore
delivered to Parent true and complete copies of each of the
following documents (to the extent applicable):
(i) a copy thereof;
(ii) a copy of the three most recent annual reports and
actuarial reports, if required under ERISA, and the most recent
report prepared with respect thereto in accordance with Statement
of Financial Accounting Standards No. 87, Employer's Accounting
for Pensions;
(iii) a copy of the most recent actuarial report prepared with
respect thereto in accordance with Statement of Financial
Accounting Standards No. 106, Employer's Accounting for Non-
Pension Postretirement Benefits;
(iv) a copy of the most recent Summary Plan Description,
summaries of all modifications, administrative forms and other
documents that constitute a part of or are incident to the
administration of the Plans;
(v) copies of any insurance contracts and administrative service
contracts;
(vi) if the Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement
and the latest financial statements thereof;
(vii) the most recent determination letter received from the
Internal Revenue Service with respect to each Plan intended to
qualify under section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") and any pending determination
letter request; and
(viii) Schedule 3.11(a) also shall contain a written description
of all communications regarding any Plan to employees or former
employees who may be affected by this transaction.
(c) Neither the Company, nor any subsidiary, nor any ERISA
Affiliate or predecessor maintains or has ever maintained a plan
which is or was subject to (i) the minimum funding requirements
of ERISA or the Code or (ii) Title IV of ERISA.
(d) Neither the Company, nor any of its subsidiaries, nor any
ERISA Affiliate, nor any ERISA Plan, nor any trust created
thereunder, nor any trustee or administrator thereof has engaged
in a transaction in connection with which the Company, any of its
subsidiaries or any ERISA Affiliate, any ERISA Plan, any such
trust, or any trustee or administrator thereof, or any party
dealing with any ERISA Plan or any such trust could be in
violation of sections 404, 405, or 406 of ERISA or could be
subject to either a civil penalty assessed pursuant to section
409, 502(i) or 502(l) of ERISA or a Tax imposed pursuant to
section 4975 or 4976 of the Code.
(e) No ERISA Plan is a "multiemployer pension plan," as defined
in section 3(37) of ERISA, nor is any ERISA Plan a plan described
in section 4063(a) of ERISA. Neither the Company, nor any
subsidiary, nor any ERISA Affiliate or predecessor has ever
maintained, contributed to or been required to contribute to a
"multiemployer pension plan" as defined in section 3(37) of
ERISA.
(f) Each Plan has been operated and administered in accordance
with its terms and applicable law, including but not limited to
ERISA and the Code.
(g) Each ERISA Plan intended to be qualified within the meaning
of section 401(a) of the Code and each related trust intended to
be qualified within the meaning of section 501(a) of the Code has
been established and operated so as to be qualified and tax
exempt under such sections. Nothing has occurred or, in
connection with the transactions contemplated by this Agreement,
will occur, which would adversely affect the qualified status of
such plans and trusts. In the event the Company (or any
affiliated entity) sponsors or maintains a voluntary employee
beneficiary association with the meaning of section 501(c)(9) of
the Code, all necessary governmental approvals for obtaining tax
exempt status have been obtained, and such determination letter
is dated on or after January 1, 1985.
(h) No amounts payable under the Plans as a result of or in
connection with the consummation of the transactions contemplated
by this Agreement will fail to be deductible for federal income
tax purposes by application of section 162(m), section 280G or
section 404 of the Code.
(i) Except as set forth on Schedule 3.11(i), no Plan provides
benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former
employees of the Company or any ERISA Affiliate beyond their
retirement or other termination of service (other than (i)
coverage mandated by applicable law or (ii) death benefits or
retirement benefits under any "employee pension plan," as that
term is defined in section 3(2) of ERISA).
(j) Except as provided in Schedule 3.11(j), the consummation of
the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or officer of the Company
or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided
in this Agreement or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such
employee or officer.
(k) There are no pending or threatened claims by or on behalf of
any Plan, by any employee or beneficiary covered under any such
Plan, or otherwise involving any such Plan (other than routine
claims for benefits).
(l) The Company has reserved the right to amend or terminate any
Plan.
(m) Neither the Company nor any ERISA Affiliate has any
announced plan or legally binding commitment to create any
additional Plans which are intended to cover employees or former
employees of the Company or any ERISA Affiliate or to amend or
modify any existing Plan which covers or has covered employees or
former employees of the Company or any ERISA Affiliate.
(n) No event has occurred in connection with which the Company
or any ERISA Affiliate or any Plan, directly or indirectly, could
be subject to any liability (i) under any statute, regulation or
governmental order relating to any Plans or (ii) pursuant to any
obligation of the Company or any ERISA Affiliate to indemnify any
person against liability incurred under any such statute,
regulation or order as they relate to the Plans.
Section 3.12 Compliance. Except as set forth on Schedule 3.12,
neither the Company nor any of its subsidiaries is in violation
of, or has violated, or has received any notification of any
asserted present or past failure to comply with, any applicable
provisions of (i) any laws, rules, statutes, orders, ordinances
or regulations or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, or other
instrument or obligations to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties are
bound or affected.
Section 3.13 Environmental Matters.
(a) Except as set forth on Schedule 3.13, the Company and its
subsidiaries are in compliance with all applicable Environmental
Laws (which compliance includes, but is not limited to, the
possession by the Company and its subsidiaries of all permits and
other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions
thereof).
Except as set forth on Schedule 3.13, neither the Company nor any
of its subsidiaries has received any communication (written or
oral), whether from a governmental authority, private party,
citizens group, employee or otherwise, that alleges that the
Company is not in such compliance, and there are no past or
present actions, activities, circumstances, conditions, events or
incidents that would prevent or interfere with such compliance in
the future.
(b) Except as set forth on Schedule 3.13, there is no
Environmental Claim pending or threatened against the Company or
any of its subsidiaries or against any person or entity whose
liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed either contractually or by
operation of law.
(c) Except as set forth on Schedule 3.13, there are no past or
present actions, activities, circumstances, conditions, events or
incidents (including, without limitation, the release, emission,
discharge, presence or disposal of any Hazardous Material) which
could form the basis of any Environmental Claim against the
Company or any of its subsidiaries or against any person or
entity whose liability for any Environmental Claim the Company or
any of its subsidiaries has or may have retained or assumed
either contractually or by operation of law.
(d) Except as set forth on Schedule 3.13, neither the Company
nor any of its subsidiaries has, and no other person has,
Released, placed, stored, buried or dumped Hazardous Materials
on, beneath or adjacent to any property owned, operated or leased
or formerly owned, operated or leased by the Company or any of
its subsidiaries, and neither the Company nor any of its
subsidiaries has received notice that it is a potentially
responsible party for the Cleanup of any property, whether or not
owned or operated by the Company or any of its subsidiaries.
(e) The Company and its subsidiaries have delivered to Parent
true, complete and correct copies and results of any reports,
studies, analyses, tests or monitoring possessed or initiated by
the Company or any of its subsidiaries pertaining to Hazardous
Materials in, on, beneath or adjacent to the property owned or
leased by the Company or any of its subsidiaries or regarding the
Company's and its subsidiaries' compliance with applicable
Environmental Laws.
(f) Except as set forth on Schedule 3.13, no transfers of
permits or other governmental authorizations under Environmental
Laws, and no additional permits or other governmental
authorizations under Environmental Laws, will be required to
permit the Company and its subsidiaries or the Surviving
Corporation and its subsidiaries, as the case may be, to be in
full compliance with all applicable Environmental Laws for the
period immediately following the transactions contemplated
hereby, as conducted by the Company and its subsidiaries
immediately prior to the date hereof. To the extent that such
transfers or additional permits and other governmental
authorizations are required, the Company and its subsidiaries
agree to use reasonable best efforts to effect such transfers and
obtain such permits and other governmental authorizations at the
time such transfers, permits and other governmental
authorizations are required by law.
(g) The following terms as used in this Section shall have the
following meanings:
"Cleanup" means all actions required by governmental entities or
Environmental Laws to: (1) cleanup, remove, treat or remediate
Hazardous Materials in the indoor or outdoor environment; (2)
prevent the Release of Hazardous Materials so that they do not
migrate, endanger or threaten to endanger public health or
welfare of the indoor or outdoor environment; (3) perform
preremedial studies and investigations and postremedial
monitoring and care; or (4) respond to any government requests
for information or documents in any way relating to cleanup,
removal, treatment or remediation or potential cleanup, removal,
treatment or remediation of Hazardous Materials in the indoor or
outdoor environment.
"Environmental Claim" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity
alleging potential liability (including, without limitation,
potential liability for investigatory costs, Cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based
on or resulting from (a) the presence, or Release into the indoor
or outdoor environment, of any Hazardous Materials at any
location, whether or not owned or operated by the Company or any
of its subsidiaries or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all federal, state, local and foreign
laws, regulations and ordinances relating to pollution or
protection of human health or the environment, including without
limitation, laws relating to Releases or threatened Releases of
Hazardous Materials into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, Release, disposal, transport or handling of
Hazardous Materials and all laws, regulations and ordinances with
regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials.
"Hazardous Materials" means all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil
and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.
Section 300.5, or defined as such by, or regulated as such under, any
Environmental Law.
"Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
groundwater and surface or subsurface strata) or into or out of
any property, including the movement of Hazardous Materials
through or in the air, soil, surface water, groundwater or
property.
Section 3.14 Intellectual Property.
(a) Schedule 3.14 contains an accurate and complete description
of all domestic and foreign patents, patent applications, patent
licenses, shop rights, trademarks, trademark registrations and
applications therefore, service marks, service mark registrations
and applications therefor, logos, trade names, assumed names,
copyright registrations and applications therefor, which are used
by the Company, any of its subsidiaries or which are presently
owned or held by the Company or any of its subsidiaries or under
which the Company or any of its subsidiaries owns or holds any
license, or in which the Company or any of its subsidiaries owns
or holds any direct or indirect interest, other than those rights
granted or licensed by Parent (collectively, the "Intellectual
Property Rights"). Schedule 3.14 further sets forth: (i) the
nature of such Intellectual Property Rights; (ii) the owner of
such Intellectual Property Right; (iii) the jurisdiction by or in
which such Intellectual Property Right has been issued or
registered or in which an application for such issuance or
registration has been filed, including the respective
registration or application numbers; and (iv) licenses,
sublicenses and other agreements as to which the Company or any
of its subsidiaries is a party and pursuant to which the Company,
any of its subsidiaries or any other person or entity is
authorized to use such Intellectual Property Right, process,
design, invention, know-how, trade secret or other proprietary
information (collectively, the "Company Intellectual Property").
(b) Except as set forth on Schedule 3.14, the Company or any of
its subsidiaries does not infringe or unlawfully or wrongly use
any patent, trademark, tradename, service mark, copyright, trade
secret, confidential or proprietary right or any similar rights
owned or claimed by another.
(c) Except as set forth in Schedule 3.14, the Company or any of
its subsidiaries does not know of any use that has been or is now
being made by another of the Company Intellectual Property or
that would infringe such rights.
(d) Except as set forth on Schedule 3.14, the Company or any of
its subsidiaries is the sole and exclusive owner of or possesses
valid licenses and rights to use all Company Intellectual
Property necessary to conduct the businesses of the Company and
any of its subsidiaries as they are currently being conducted.
(e) Except as set forth on Schedule 3.14, neither the Company
nor any of its subsidiaries has sold, licensed or otherwise
disposed of or transferred or granted any interest in the Company
Intellectual Property. The Company and each of its subsidiaries
have taken all reasonable measures, which may or may not have
included the institution of litigation, to maintain and protect
the Company Intellectual Property and all such rights remain
valid and enforceable.
(f) Except as set forth on Schedule 3.14, no claims have been
asserted by any person to the use or validity of any of the
Company Intellectual Property or challenging or questioning the
validity or effectiveness of any license or agreement related
thereto, and there is no valid basis for any such claim. None of
the Company Intellectual Property is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the
use thereof by the Company or any of its subsidiaries or
restricting the licensing thereof by the Company or any of its
subsidiaries to any other person or entity. Except as set forth
on Schedule 3.14, the Company and any of its subsidiaries have
not entered into any agreement to indemnify any other person or
entity against any charge of infringement of any Company
Intellectual Property.
Section 3.15 Insurance.
(a) Schedule 3.15(a) sets forth a complete and correct list of
all insurance policies (including a brief summary of the nature
and terms thereof and any amounts paid or payable to the Company
or any of its subsidiaries thereunder, their respective
expiration dates, deductibles and stop-loss thresholds) providing
coverage in favor of the Company or any of its subsidiaries or
any of their respective properties. Each such policy is valid,
in full force and effect and will remain in full force at least
through the respective dates set forth in Schedule 3.15(a) and
effect without the payment of additional premiums other than
additional premiums in the ordinary course prior to the Effective
Time, no notice of termination, cancellation or reservation of
rights has been received with respect to any such policy, there
is no default with respect to any provision contained in any such
policy, and there has not been any failure to give any notice or
present any claim under any such policy in a timely fashion or in
the manner or detail required by any such policy.
(b) The Company and its subsidiaries have insurance in an amount
and of a type normal in the ordinary course for businesses
similar to the Company and its subsidiaries. Other than as set
forth on Schedule 3.15(b), neither the Company nor any of its
subsidiaries has received notice of any proposed increase in
premiums or deductible amounts, decrease in coverage or
termination of any policy.
Section 3.16 Labor Matters. Except as set forth in Schedule
3.16, neither the Company nor any of its subsidiaries is a party
to any collective bargaining or other labor union contract or
labor union agreement applicable to persons employed by the
Company or any of its subsidiaries, no collective bargaining
agreement is being negotiated by the Company or any of its
subsidiaries and no activities or proceedings of any labor union
are being held to organize any of their respective employees.
There is no labor dispute, strike or work stoppage against the
Company or any of its subsidiaries pending or threatened which
may interfere with the respective business activities of the
Company or any of its subsidiaries. The Company and its
subsidiaries are in compliance with all federal, state and local
laws, including without limitation the rules and regulations of
the Department of Labor and the Office of Federal Contract
Compliance Programs, respecting employment and employment
practices, terms and conditions of employment and wages and hours
and not engaged in any unfair labor practice. There is no unfair
labor practice complaint against either the Company or any of its
subsidiaries pending or threatened before the National Labor
Relations Board. Except as set forth on Schedule 3.16, no
charges with respect to or relating to the Company or any of its
subsidiaries are threatened or pending before the Equal
Employment Opportunity Commission or any state, local or foreign
agency responsible for the enforcement of labor or employment
laws or for the conduct of an investigation of or relating to the
Company or any of its subsidiaries and no such investigation is
in process.
Section 3.17 Real Property. Except for the Company's Wichita
office, which will be sold prior to Closing, the Company and its
subsidiaries do not own any real property in fee simple.
Schedule 3.17(a) sets forth a list of all real property leased by
the Company or its subsidiaries (collectively, the "Properties").
The Company and its subsidiaries hold good and valid leasehold
title and estate in the Properties, in each case free and clear
of all mortgages, deeds of trust, pledges, liens, security
interests, claims, mechanic's or materialmen's liens, charges,
easements, restrictive covenants, rights-of-way and other
encumbrances. There are no eminent domain proceedings pending or
threatened against any of the Properties.
The Company hereby represents that:
(a) All buildings, structures and equipment located on the
Properties are structurally sound and are in good operating
condition and repair (ordinary wear and tear excepted), and are
usable in the ordinary course of business;
(b) Except as set forth in existing title insurance policies and
reports delivered to Parent pursuant to Section 3.15 hereto, the
Company and its subsidiaries have not received written notice (i)
of any dispute from any contiguous boundary owners concerning
contiguous boundary lines, (ii) that any of the Properties (or
the buildings, structures or improvements thereon), or the
Company's or any of its subsidiaries' operations, violate the
zoning or planning laws, ordinances, rules or regulations of the
city, county or state in which they are located, or any building
regulations or codes of such city, county or state, or land use
laws or regulations applicable to the Properties, and that no
such violations exist or (iii) of any claims of others to rights
over, under, across or through any of the Properties by virtue of
use or prescription;
(c) All permits, approvals, authorizations or licenses required
or necessary for the use of any of the Properties have been
obtained and are in full force and effect;
(d) Neither the Company nor any of its subsidiaries has sublet,
and is not subletting, all or any part of any of the Properties,
and has not assigned all or any part of its interest in any of
the leases;
(e) Schedule 3.17(e) sets forth a list of all service and
maintenance contracts affecting the Properties and all utility
and management contracts affecting the Properties to which the
Company or any of its subsidiaries is a party or to which said
properties are subject and which, in any individual contract,
obligate the Company to pay more than $12,000 in any year. All
such contracts are currently in full force and effect, and there
is no default, or action or omission which with the giving of
notice or passage of time or both would constitute a default,
thereunder. Copies of all such contracts have been delivered to
Parent. In addition, the Company has previously delivered to
Parent copies of the most recently issued bills for real estate
tax assessments against any or all of the Properties;
(f) All the Properties are free and clear of any agreements to
sublease (or to grant an assignment of lease), options to
sublease (or to grant an assignment of lease) or rights of first
refusal relating thereto. All real property with respect to
which the Company or any of its subsidiaries has an agreement to
purchase, lease or sublease, option to purchase, lease, or
sublease or right of first refusal relating thereto is set forth
on Schedule 3.17(f);
(g) All the Properties are currently zoned in the zoning
category which permits operation of said properties as now used,
operated and maintained. Neither the Company nor any of its
subsidiaries has requested, applied for, or given consent to, and
there are no pending, zoning variances or changes with respect to
any of the Properties. The consummation of the transactions
contemplated herein will not result in a violation of any
applicable zoning ordinance or the termination of any applicable
zoning variance now existing, and if the improvements on the
Properties are damaged or destroyed subsequent to the Effective
Time, the repair or replacement of the same by Parent to the
condition existing immediately prior to the Effective Time will
not violate applicable zoning ordinances (assuming there has been
no change in such zoning ordinances);
(h) All buildings, structures or improvements owned and/or
leased by the Company or any of its subsidiaries on any of the
Properties are located entirely within the property boundary
lines of such properties and do not encroach onto adjoining
lands, and there are no encroachments of buildings, structures or
improvements from adjoining lands onto such properties;
(i) The Properties (i) currently have access to, at or within
their property boundary lines to all gas, water, electricity,
storm sewer, sanitary sewer, telephone and all other utilities
necessary or beneficial to the current operation of the
Properties, and all of such utilities are adequate and sufficient
for the current operation of such properties and (ii) are
contiguous to and have vehicular and pedestrian access to and
from physically open and publicly dedicated public streets;
(j) Except as set forth on Schedule 3.17(j), and except for
repair and maintenance in the ordinary course of business, no
construction, improvements, or expansion is currently on-going at
any of the Properties;
(k) The Company or its subsidiaries hold valid leasehold estate
pursuant to each lease by which real properties are leased, as
shown on Schedule 3.17(a), and enjoys peaceful and undisturbed
possession thereunder. The Company has previously delivered to
Parent complete and accurate copies of all such scheduled leases.
All such leases shall continue in full force and effect (without
default) after the Effective Time and the consummation of the
transactions contemplated by this Agreement without the consent,
approval or act of any other party;
(l) Neither the Company nor any of its subsidiaries has received
written notice of any pending, proposed or threatened proceedings
or governmental or quasi-governmental actions to condemn or take
by the power of eminent domain (or to purchase in lieu thereof),
or otherwise to take or restrict the right to use or occupy, any
of the Properties; and
(m) Neither the Company nor any of its subsidiaries has received
notification that it is in violation of any applicable
antipollution, health or other law, ordinance or regulation in
respect of its structures or their operation, which violation
remains uncured, and no such violation exists.
Section 3.18 Contracts and Commitments. Schedule 3.18 contains
a true and complete list of (i) all agreements and other
commitments for the purchase of any materials or supplies; (ii)
all employment and consulting agreements; (iii) all license
agreements with third parties; (iv) other than rental agreements
with customers, all leases, whether for real property or personal
property; (v) all loan agreements, mortgages or indentures; (vi)
all agreements, arrangements or commitments with any director,
officer, employee, stockholder or beneficial owner of any of the
outstanding Common Stock or Preferred Stock of the Company or any
of their affiliates; and (vii) all other arrangements,
commitments and understandings (written or oral) to which the
Company or any of its subsidiaries is a party or by which it or
its properties are bound that require (or that the Company has
reason to believe it will require) payment by any party to the
agreement, commitment or understanding of, or the performance by
any party to the agreement, commitment or understanding of
services having a value of, more than $25,000 in the aggregate.
True and complete copies of the Company's and all of its
subsidiaries' agreements, commitments and understandings, or in
the case of unwritten agreements, commitments and understandings,
summaries thereof, referred to in Schedule 3.18 (collectively,
the "Commitments") have been delivered to Parent or Acquisition.
Except as set forth in Schedule 3.18, (i) all of the Commitments
are valid, binding and enforceable and in full force and effect
in accordance with their respective terms and there is no
existing default that would permit the other party to a
Commitment to terminate the Commitment, not to perform its
obligations under the Commitment or accelerate the payment of
money, and no condition exists that, with notice or lapse of time
or both, would constitute a default on any Commitment, by the
Company or any of its subsidiaries or any other party under any
Commitment; (ii) all of the respective parties' covenants and
obligations under all Commitments accrued to date have been
performed; (iii) no party has made or asserted or has any
defense, setoff or counterclaim under any Commitment; (iv)
neither the Company nor any of its subsidiaries has notice that
any party under any Commitment has exercised any option granted
to it to cancel or terminate its Commitment, to shorten the term
of its Commitment or to renew or extend the term (other than
automatic renewals) of the Commitment and the Company has not
received any notice of termination of any Commitment; (v) neither
the Company nor any of its subsidiaries has received any notice
(written or otherwise) of cancellation or termination of, or any
expression or indication of an intention or desire to cancel or
terminate, any of the Commitments; and (vi) no Commitment is the
subject of, or has been threatened to be made the subject of, any
arbitration, suit or other legal proceeding. Except as noted on
Schedule 3.18, every contract listed on such schedule may be
assigned or otherwise transferred pursuant to this Agreement or
the transactions contemplated hereby without the consent of any
third party.
Section 3.19 Employees. Except as set forth on Schedule 3.19,
the Company (i) has not been informed of any current plans of any
home office or multi-unit management personnel of the Company to
terminate their employment with the Company; (ii) agrees that
employees of the Company have no greater rights upon termination
as a result of this Agreement and the transactions contemplated
herein and (iii) agrees to use its reasonable best efforts to
ensure that this Agreement and the transactions contemplated
herein will not cause the termination of any employees of the
Company.
Section 3.20 Licenses and Permits. The Company and its
subsidiaries have obtained all licenses, product and
establishment registrations, franchises, permits, easements,
certificates, consents, rights and privileges necessary or
appropriate to the conduct of the Company's and its subsidiaries'
businesses (collectively, the "Licenses," all of which are set
forth on Schedule 3.20, which shall be delivered by the Company
as a supplemental Schedule at least two (2) business days prior
to Closing). The Licenses are valid and in full force at the
Effective Time and will remain valid and in full force from and
after the Effective Time.
Section 3.21 Products Liability. Except as set forth on the
Company's form customer agreements listed on Schedule 3.21,
neither the Company nor any of its subsidiaries has given or made
any warranties to third parties with respect to any products
rented or sold by it except for the warranties imposed by the
provisions of the applicable commercial codes. No state of facts
or the occurrence of any event exists to form the basis of any
present claim against the Company or any of its subsidiaries for
product liability on account of any express or implied warranty
which is not fully covered by insurance.
Section 3.22 Inventory; Motor Vehicles; Accounts Receivable;
Assets Necessary to Business.
(a) Inventory. Each of the Company and its subsidiaries has
inventory of a quantity and quality sufficient to conduct, and
reasonably related to the needs of, its business. Except for
inventory in repair which shall not exceed 1,700 units of
inventory, all inventory of the Company and each of its
subsidiaries is in good working order and rentable condition.
(b) Motor Vehicles. All motor vehicles of the Company and each
of its subsidiaries are listed on Schedule 3.22(b). The Company
expressly warrants (i) that such vehicles, subject to ordinary
wear and tear, are mechanically sound and are in good working
order and condition to perform in the manner needed for the
operation of the Company's business; (ii) are in good cosmetic
condition, so as to convey the high quality image of the
Company's business; (iii) are in compliance with all applicable
statutes, ordinances and regulations, including, without
limitation, those related to safety; and (iv) are owned by the
Company or its subsidiaries free and clear of all liens, security
interests, encumbrances or other restrictions on title.
(c) Accounts Receivable. All accounts and notes receivable of
the Company or any of its subsidiaries, whether reflected in the
balance sheet(s) or otherwise, represent sales actually made in
the ordinary course of business, are assets of the Company or any
of its subsidiaries and are current and fully collectible net of
any reserves shown on the balance sheet(s) which reserves are
adequate and were calculated consistent with past practice and
experience). Except as set forth on Schedule 3.22(c), each of
the accounts and notes receivable either has been collected in
full or will be collected in full, without any setoff, within 30
days after the day on which it became due and payable.
(d) Assets Necessary to Business. The Company or its
subsidiaries have good, valid, indefeasible and marketable title
to all properties and assets, real, personal and mixed, tangible
and intangible, and are parties to all leases, licenses and other
agreements, currently being used or that are reasonably necessary
to permit it to carry on their businesses and operations as
presently conducted, except for the Company's Wichita office and
the furniture and equipment therein, which may be sold prior to
Closing.
Section 3.23 Bank Accounts. Schedule 3.23 sets forth the names
and locations of all banks in which the Company or its
subsidiaries have an account or safe deposit box, the amounts
therein or the contents thereof, and the names of all persons
authorized to draw thereon or have access thereto.
Section 3.24 Seller's Documentation. All documents supplied by
the Company and its subsidiaries to Parent or Acquisition for the
Company's and its subsidiaries' businesses including customer
agreements, payment cards, ledgers and similar records, and other
information related to the Company's and its subsidiaries'
businesses are true, accurate and complete.
Section 3.25 Disclosure. Schedule 3.25 lists any information,
of which management of the Company is aware, that is (a) material
to the business of the Company or to the transactions
contemplated by this Agreement, and (b) not already disclosed in
the Schedules hereto or in any representation or warranty to
Parent or Acquisition contained in this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Each of Parent and Acquisition represents and warrants to the
Company as follows:
Section 4.1 Organization. Each of Parent and Acquisition is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
Section 4.2 Authority Relative to this Agreement. Each of
Parent and Acquisition has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
board of directors of Acquisition and Parent, and no other
corporate proceedings on the part of Parent or Acquisition are
necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and
validly executed and delivered by each of Parent and Acquisition
and, assuming it constitutes a valid and binding agreement of the
other parties hereto, constitutes a legal, valid and binding
agreement of each of Parent and Acquisition, enforceable against
each of Parent and Acquisition in accordance with its terms.
Section 4.3 Non-Contravention; Required Filings and Consents.
(a) The execution, delivery and performance by Parent and
Acquisition of this Agreement and the consummation of the
transactions contemplated hereby (including the Merger) do not
and will not (i) contravene or conflict with the Certificate of
Incorporation or By-Laws of Parent or Acquisition; (ii) assuming
that all consents, authorizations and approvals contemplated by
subsection (b) below have been obtained and all filings described
therein have been made, contravene or conflict with or constitute
a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Parent
or Acquisition or any of their respective properties; (iii)
conflict with, or result in the breach or termination of any
provision of or constitute a default (with or without the giving
of notice or the lapse of time or both) under, or give rise to
any right of termination, cancellation, or loss of any benefit to
which Parent or Acquisition is entitled under any provision of
any agreement, contract, license or other instrument binding upon
Parent, Acquisition or any of their respective properties, or
allow the acceleration of the performance of, any obligation of
Parent or Acquisition under any indenture, mortgage, deed of
trust, lease, license, contract, instrument or other agreement to
which Parent or Acquisition is a party or by which Parent or
Acquisition or any of their respective assets or properties is
subject or bound; or (iv) result in the creation or imposition of
any Lien on any asset of Parent or Acquisition.
(b) The execution, delivery and performance by Parent and
Acquisition of this Agreement and the consummation of the
transactions contemplated hereby (including the Merger) by Parent
and Acquisition require no action by or in respect of, or filing
with, any governmental body, agency, official or authority
(either domestic or foreign) other than (i) the filing of a
certificate of merger in accordance with Delaware Law; (ii)
compliance with any applicable requirements of the HSR Act; (iii)
compliance with any applicable requirements of the Exchange Act
and state securities, takeover and Blue Sky laws; and (iv) such
actions or filings which, if not taken or made, would not,
individually or in the aggregate, prevent the consummation of the
Merger.
Section 4.4 Proxy Statement. None of the information provided
by Parent or Acquisition specifically for use in the Proxy
Statement shall, at the time filed with the SEC, at the time
mailed to the Company's stockholders, at the time of the
Stockholders' Meeting or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they are made, not misleading.
Section 4.5 Availability of Funds. Parent and Acquisition will
have available at the Closing sufficient funds to enable them to
consummate the transactions contemplated by this Agreement and
the Option Agreement.
Section 4.6 Absence of Litigation. As of the date hereof, there
is no action, suit, claim, investigation or proceeding pending or
threatened against, Parent or Acquisition or any of their
respective properties before any court or arbitrator or any
administrative, regulatory or governmental body, or any agency or
official which challenges or seeks to prevent, enjoin, alter or
delay the Merger or any of the date hereof, neither Parent nor
Acquisition nor any of their respective properties is subject to
any order, writ, judgment, injunction, decree, determination or
award which would prevent or delay the consummation of the
transactions contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of the Company. Except as
otherwise expressly provided in this Agreement, during the period
from the date hereof to the Effective Time, the Company and its
subsidiaries will each conduct its operations according to its
ordinary course of business consistent with past practice, and
the Company and its subsidiaries will each use its reasonable
best efforts to preserve intact its business organization, to
maintain the quantity and quality of its customer rental
agreements, to keep available the services of its officers and
employees and to maintain existing relationships with licensors,
licensees, suppliers, contractors, distributors, customers and
others having business relationships with it. Without limiting
the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, as required by law or as
set forth in Schedule 5.1, prior to the Effective Time, neither
the Company nor any of its subsidiaries will, without the prior
written consent of Parent:
(a) amend the Certificate of Incorporation or By-Laws or
equivalent organizational documents;
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights
to purchase or otherwise) any stock of any class or any other
securities or equity equivalents (including, without limitation,
stock appreciation rights), except for Employee Option payments
contemplated by Section 1.8 hereof with respect to Company Plans
as in effect as of June 1, 1995, or upon any redemption and
conversion of Preferred Stock in accordance with the terms of
this Agreement, or amend any of the terms of any such securities
or agreements outstanding as of the date hereof, other than the
extension and acceleration of vesting of the Employee Options;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock, or property or any
combination thereof) in respect of its capital stock (provided,
that the Company may pay its previously declared regular
quarterly Preferred Stock dividend on July 31, 1995, in an
aggregate amount not to exceed $42,000, subject to the provisions
of Section 6.3(d)), or, except for the redemption of the
Preferred Stock pursuant hereto, redeem, repurchase or otherwise
acquire any of its securities or any securities of its
subsidiaries, except for cash settlement of the Employee Options
in accordance with the terms of Section 1.8 hereof;
(d) (i) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse the obligations
of any other person; (ii) make any loans, advances or capital
contributions to, or investments in, any other person; (iii)
pledge or otherwise encumber shares of capital stock of the
Company or any of its subsidiaries; or (iv) mortgage or pledge
any of its assets, tangible or intangible, or create or suffer to
exist any Lien thereupon;
(e) enter into, adopt, amend or terminate (other than extensions
and acceleration of vesting of existing Employee Options in
accordance with Section 1.8 hereof) any bonus, profit sharing,
401(k) plan, compensation, severance, termination, stock option,
stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement,
deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee, or
increase in any manner the compensation or benefits of any
director, officer or employee (other than normal salary increases
in the ordinary course of business for non-executive employees)
or pay any benefit not required by any plan or arrangement as in
effect as of the date hereof or accelerate the terms for payment
of any benefit if such acceleration is not required by any plan
or arrangement as in effect as of the date hereof; provided,
however, that the Company may pay discretionary bonus amounts to
its employees prior to the Effective Time in an aggregate amount
not exceeding $1,400,000 subject to the provisions of Section
6.3(d) hereof; provided, in addition, that the Company may pay
accrued bonus amounts as such accrued bonuses become due and
payable in accordance with the terms of any plan or arrangement
as in effect as of the date hereof; provided, that such bonus
amounts may be paid only when due and may not be accelerated;
(f) acquire, sell, lease or dispose of any assets outside the
ordinary course of business or enter into any contract,
agreement, commitment or transaction outside the ordinary course
of business consistent with past practice; provided, however,
that the Company will sell the land, building and equipment used
by the Company as its home office in exchange for consideration
equal to an appraisal amount of not less than $500,000, subject
to the provisions of Section 6.3(d);
(g) change any of the accounting principles, or methods of
application of said principles, or practices used by it;
(h) except as set forth on Schedule 5.1, (i) acquire (by merger,
consolidation, or acquisition of stock or assets) any
corporation, partnership or other business organization or
division thereof; (ii) authorize any new capital expenditure or
expenditures which, individually, is in excess of $25,000; (iii)
settle any litigations for amounts in excess of $5,000; or (iv)
enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(i) make any Tax election or settle or compromise any Tax
liability, other than in the ordinary course of business;
(j) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction of liabilities in the ordinary course of business
consistent with past practice and in accordance with the terms of
such liabilities or obligations;
(k) delay or defer payment of accounts payable or other
obligations of the Company or any of its subsidiaries or
accelerate collection of receivables or other obligations due the
Company or any of its subsidiaries;
(l) take any action outside of the ordinary course of business
(except in accordance with the provisions of Sections 5.1(c), (e)
and (f) hereof), including but not limited to making any
unauthorized distributions; or
(m) take, or agree in writing or otherwise to take, any of the
actions described above in Section 5.1.
Section 5.2 Boards of Directors and Committees; Section 14(f).
(a) Promptly following the purchase by Acquisition, Parent or
their affiliates of Shares pursuant to the Option Agreement,
Acquisition shall be entitled to designate a majority of the
Company's Board, and the Company shall, upon request by
Acquisition, promptly either increase the size of the Board or
use its reasonable best efforts to secure the resignation of such
number of directors as is necessary to enable Acquisition's
designees to be elected to the Board and shall cause
Acquisition's designees to be so elected. Promptly upon request
by Acquisition, the Company will use its reasonable best efforts
to cause persons designated by Acquisition to constitute the same
percentage as is on the Board of (i) each committee of the Board,
(ii) each board of directors of each subsidiary of the Company
designated by Acquisition and (iii) each committee of each such
board.
(b) The Company's obligations to appoint designees to the Board
shall be subject to Section 14(f) of the Exchange Act, and Rule
14f-1 promulgated thereunder. As promptly as practicable
following the date of this Agreement, the Company shall take all
actions required pursuant to Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section 5.2 and shall
file with the SEC and distribute to its stockholders such
information as is required under Section 14(f) and Rule 14f-1.
Parent or Acquisition will supply to the Company in writing and
be solely responsible for any information with respect to either
of them and their nominees, officers, directors and affiliates
required by Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of Acquisition's
designees pursuant to this Section 5.2 and prior to the Effective
Time, any amendment of this Agreement or the Certificate of
Incorporation or By-Laws, any termination of this Agreement by
the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or
Acquisition or any waiver of any of the Company's rights
hereunder, will require the concurrence of a majority of the
directors of the Company then in office who are not designees of
Acquisition.
Section 5.3 Proxy Statement.
(a) The Company shall, as promptly as practicable following the
date hereof, prepare and file the Proxy Statement with the SEC
under the Exchange Act. As soon as practicable following
completion of review of the Proxy Statement by the SEC, the
Company shall mail the Proxy Statement to its stockholders who
are entitled to vote at the Stockholders' Meeting. Subject to
the Board's fiduciary duties, the Proxy Statement shall contain
the recommendation of the Board that the stockholders of the
Company approve and adopt this Agreement and the Merger.
(b) The Company, Parent and Acquisition shall cooperate with one
another in the preparation and filing of the Proxy Statement and
shall use their reasonable best efforts to promptly obtain and
furnish the information required to be included in the Proxy
Statement and to respond promptly to any comments or requests
made by the SEC with respect to the Proxy Statement. Each party
hereto shall promptly notify the other parties of the receipt of
comments of, or any requests by, the SEC with respect to the
Proxy Statement, and shall promptly supply the other parties with
copies of all correspondence between such party (or its
representatives) and the SEC (or its staff) relating thereto.
The Company, Parent and Acquisition each agrees to correct any
information provided by it for use in the Proxy Statement which
shall have become, or is, false or misleading.
Section 5.4 Access to Information. (a) Subject to applicable
law and the agreements set forth in Section 5.4(b), between the
date hereof and the Effective Time, the Company will give each of
Parent and Acquisition and their counsel, financial advisors,
auditors, and other authorized representatives reasonable access
to all employees, landlords, suppliers, customers, vendors,
plants, offices, warehouses and other facilities and to all books
and records of the Company and its subsidiaries, will permit each
of Parent and Acquisition and their respective counsel, financial
advisors, auditors and other authorized representatives to make
such inspections as Parent or Acquisition may reasonably require
and will cause the Company's officers and those of its
subsidiaries to furnish Parent or Acquisition or their
representatives with such financial and operating data and other
information with respect to the business and properties of the
Company and any of its subsidiaries as Parent or Acquisition may
from time to time reasonably request. No investigation pursuant
to this Section 5.4(a) shall affect any representations or
warranties of the parties herein or the conditions to the
obligations of the parties hereunder.
(b) Parent and Acquisition will keep confidential and not
divulge (except to its employees, counsel, accountants and other
advisors who need to know such information in connection with the
Merger) any confidential information obtained by them regarding
the business and finances of the Company; provided, however, that
this prohibition will not include any information (i) known
generally to the public, (ii) accessible to third parties on an
unrestricted basis or (iii) of a type generally considered
nonconfidential by persons engaged in the same or similar
business.
Section 5.5 Reasonable Best Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to
use its reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions
contemplated by this Agreement. Without limiting the generality
of the foregoing, Parent, Acquisition and the Company shall
cooperate with one another: (i) in the preparation and filing of
any required filings under the HSR Act and the other laws
referred to herein; (ii) in determining whether action by or in
respect of, or filing with, any governmental body, agency,
official or authority (either domestic or foreign) is required,
proper or advisable or any actions, consents, waivers or
approvals are required to be obtained from parties to any
contracts, in connection with the transactions contemplated by
this Agreement; and (iii) in seeking timely to obtain any such
actions, consents and waivers and to make any such filings. In
case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto
shall take all such necessary action.
Section 5.6 Public Announcements. Parent and Acquisition, on
the one hand, and the Company, on the other hand, will consult
with each other before issuing any press release with respect to
the transactions contemplated by this Agreement, and shall not
issue any such press release prior to such consultation, except
as may be required by applicable law or by applicable rules of
any securities exchange.
Section 5.7 Notification of Certain Matters. The Company shall
give prompt notice to Parent or Acquisition, and Parent or
Acquisition shall give prompt notice to the Company, upon
becoming aware of (i) the occurrence, or non-occurrence, of any
event the occurrence, or non-occurrence of which would cause any
representation or warranty contained in this Agreement to be
untrue or inaccurate, (ii) any fact which was in existence on the
date of this Agreement and, if known on such date, would have
been required to be set forth or described in the Schedules
hereto, and (iii) any failure of the Company, Parent or
Acquisition, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, that the delivery of any notice
pursuant to this Section 5.7 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such
notice.
Section 5.8 Treatment of Preferred Stock; Termination of Stock
Plans. (a) The Company will use its reasonable best efforts to
cause the holders of the Preferred Stock to convert their
Preferred Stock to Common Stock prior to the Effective Time;
provided that the Company will take all necessary actions to
cause any Preferred Stock not so converted to be redeemed for
$100 per share, together with the amount of accrued dividends as
may have accumulated thereon through the date of redemption, in
accordance with the terms of the Certificate of Incorporation
prior to the Effective Time.
(b) The Company shall terminate all of the Company Plans as of
the Effective Time.
Section 5.9 No Solicitation.
(a) The Company and its subsidiaries are not engaged in and will
not engage in any discussions or negotiations with any third
parties with respect to any Acquisition Proposal (as defined
below). The Company and its subsidiaries shall not, directly or
indirectly, through any officer, director, employee,
representative or agent or any of its subsidiaries, (i) solicit,
initiate, or encourage any inquiries or proposals that
constitute, or would lead to, a proposal or offer for a sale of
the Common Stock or the Preferred Stock, a merger, consolidation,
business combination, sale of substantial assets, sale of a
substantial percentage of shares of capital stock (including,
without limitation, by way of a tender offer) or similar
transactions involving the Company or any of its subsidiaries,
other than the transactions contemplated by this Agreement (any
of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"), (ii) subject to the
fiduciary duties of the Board under applicable law, engage in
negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to, any Acquisition
Proposal or (iii) subject to the fiduciary duties of the Board
under applicable law, agree to, approve or recommend any
Acquisition Proposal.
(b) The Company shall notify Parent immediately (in no case
later than 12 hours) after receipt by the Company or any of its
subsidiaries of any Acquisition Proposal or any request for non-
public information in connection with an Acquisition Proposal or
for access to the properties, books or records of the Company or
any of its subsidiaries by any person or entity that informs the
Company or any of its subsidiaries that it is considering making,
or has made, an Acquisition Proposal. Such notice shall indicate
the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact.
(c) Subject to the fiduciary duties of the Board under
applicable law, the Board will not withdraw or modify its
recommendation made pursuant to Section 1.9 hereof.
Section 5.10 Employee Matters. At or prior to the Effective
Time, Parent will offer to enter into two-year employment
agreements with James G. Steckart and A. Tracy Burton. In
addition, at or prior to the Effective Time, Parent will offer to
enter into one-year employment agreements with Messrs. Edward J.
Stanko, Michael S. Taylor and Kurt B. Doerr.
Section 5.11 Office Lease. At Parent's option at Closing, the
Surviving Corporation and the owner of the Company's Wichita
office will execute a lease allowing Acquisition to use the
Company's current office space at no cost for thirty (30) days
from the Closing Date; provided, however, that Parent shall pay
utility and telephone expenses for such office space during the
30-day period.
Section 5.12 Insurance. The Company and its subsidiaries shall
maintain the insurance coverage specified in Section 3.15 hereto
in full force and effect through the Closing.
Section 5.13 Consents of Third Parties. The Company and its
subsidiaries shall obtain, prior to Closing, consents of all
third parties to change in control of the Company with respect to
all leases, licenses, product and establishment registrations,
contracts and commitments that require such consents.
Section 5.14 Taxes. The Company and its subsidiaries shall be
responsible for payment of taxes, including any and all income
taxes, sales taxes, use taxes and personal property taxes related
to periods through the Closing Date including taxes arising out
of this transaction, such payments to be made in whole or in
part, but no later than such time as such taxes become due and
payable.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions to the Company's, Parent's and
Acquisition's Obligation to Effect the Merger. The respective
obligations of the Company, Parent and Acquisition to effect the
Merger are subject to the satisfaction or waiver at or prior to
the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
adopted by the affirmative vote of the stockholders of the
Company by the requisite vote in accordance with Delaware Law;
(b) HSR Act. Any waiting period applicable to the Merger under
the HSR Act shall have terminated or expired; and
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling, injunction or other order shall have been
enacted, entered, promulgated or enforced by any court or
governmental authority of competent jurisdiction which prohibits
the Merger or makes the Merger illegal.
Section 6.2 Conditions to Company's Obligation to Effect the
Merger. The obligations of the Company to effect the Merger are
subject to the satisfaction or waiver at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. All representations and
warranties of Parent and Acquisition shall be true and correct
when made and continuously shall remain true and be reaffirmed
and remade at and as of the Effective Time, as if made at and as
of such time;
(b) Covenants. Each of Parent and Acquisition shall have
performed all of its covenants and obligations under this
Agreement required to be performed by it prior to or at Closing;
and
(c) Dismissal of Lawsuit. The lawsuit captioned as Case No. 94
C 3532, THORN Americas, Inc. v. COMCOA, Inc.; Tidewater Rental
Corp.; AdvantEdge Rental Purchase Inc.; Advantage Companies,
Inc.; and certain other parties, pending in the 18th Judicial
District Court of Sedgwick County, Kansas, shall have been
dismissed with prejudice and the parties to such action shall
have entered into a mutual release from liability with respect to
the subject matter of such action.
Section 6.3 Conditions to Parent's and Acquisition's Obligations
to Effect the Merger. The obligations of Parent and Acquisition
to effect the Merger are subject to the satisfaction or waiver at
or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. All representations and
warranties of the Company (as supplemented pursuant to Section
5.7 of this Agreement) shall be true and correct as of the date
of this Agreement and at and as of the Effective Time, as if made
at and as of such time, and Parent and Acquisition shall have
received a certification of the Company signed by the president
and chief executive officer and the chief financial officer of
the Company to that effect dated the Closing Date;
(b) Covenants. The Company shall have performed all of its
covenants and obligations under this Agreement required to be
performed by it prior to or at Closing;
(c) Consents. The Company shall have obtained, prior to the
consummation of the Merger, all required governmental and third-
party consents required for consummation of the transactions
contemplated by this Agreement;
(d) Total Equity. The Total Equity of the Company and its
subsidiaries, as of November 26, 1995, was at least $30,600,000.
As used herein, "Total Equity" means the Company's stockholders'
equity, calculated in a manner consistent with the audited annual
financial statements of the Company; provided, that the Total
Equity calculation shall not include (i) any amounts attributable
to the exercise of, Employee Options pursuant to Section 1.8
hereof, (ii) any adjustment for any redemption of Preferred Stock
pursuant to Section 5.8(a) hereof or (iii) any adjustment related
to amounts recorded on the Financial Statements for the 1993
compensatory non-qualified stock option grants. The Company,
however, may subtract from the Total Equity requirement of
$30,600,000 amounts paid for early cancellation of Employee
Options pursuant to Section 1.8 hereof. Prior to the Closing
Date, Parent shall have verified that the Total Equity amount as
of November 26, 1995 was as required above. The accrual of bonus
amounts as set forth in Section 5.1(e) hereof must be reflected
in the calculation of the November 26 Total Equity. All earnings
for the period on and after November 27, 1995, through the
Closing Date shall accrue on a dollar for dollar basis and be
added to the November 26 Total Equity, and the entire amount of
such accrued Total Equity will be delivered to Parent and
Acquisition at Closing;
(e) Lease. The owner of the Company's Wichita office shall have
executed a lease allowing Acquisition to use the Company's
current office space at no cost for thirty (30) days in
accordance with Section 5.11;
(f) Reasonable Expenses. The Company's paid and payable
transaction expenses, including but not limited to, attorneys'
fees, accounting fees, financial advisor fees of George K. Baum &
Company, Proxy Statement printing and mailing costs
(collectively, "Reasonable Expenses"), shall not exceed $250,000;
(g) Preferred Stock. The Company's Preferred Stock shall have
been converted or redeemed prior to the Effective Time;
(h) Lawsuit Dismissal. All counterclaims relating to the
lawsuit captioned as Case No. 94 C 3532, THORN Americas, Inc. v.
COMCOA, Inc.; Tidewater Rental Corp.; AdvantEdge Rental Purchase
Inc.; Advantage Companies, Inc.; and certain other parties,
pending in the 18th Judicial District Court of Sedgwick County,
Kansas, shall have been dismissed with prejudice and the parties
to such action shall have entered into a mutual release from
liability with respect to the subject matter of such action;
(i) Officer's Certificate. Evidence satisfactory to Parent and
Acquisition, in the form of an officers' certificate of the
Company, signed by the president and chief executive officer and
the chief financial officer of the Company, certifying compliance
by the Company with the terms and conditions of Article V and
Section 6.3 hereof;
(j) Resignations. The directors and officers of the Company and
its subsidiaries immediately prior to the Closing shall have
resigned effective as of the Closing;
(k) Opinion of Counsel. Parent shall have received an opinion
of counsel to the Company, dated as of the Closing Date, in the
form of Exhibit A, hereto and satisfactory to Parent and its
counsel;
(l) Condition of Company. The Parent shall have determined, in
its sole discretion, that as of the Closing Date, the business,
operations, results of operations, condition, assets, prospects
and liabilities of the Company and each of its subsidiaries are
such that the acquisition of the Company pursuant to and in
accordance with the terms of this Agreement is in the best
interest of the Parent; provided that in making such
determination the Parent shall not be subject to any requirement
of reasonableness;
(m) Amendments to Indemnity Agreements. All parties to
indemnification agreements with the Company shall have executed
an amendment thereto in the form of Exhibit B attached hereto;
(n) Litigation Settlement. The litigation matters set forth on
Schedule 6.3(n) hereto shall have been settled by the Company or
reserves shall have been set forth in the Financial Statements
for such matters if such reserves are required by GAAP; and
(o) Computer Software Confidentiality. Parent shall have
received affidavits or confidentiality agreements, in a form
satisfactory to Parent, stating that Parent's proprietary
computer software system is not being used by unauthorized third
parties who obtained such computer information from the Company.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1 Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) by mutual written consent of Parent, Acquisition and the
Company;
(b) by Parent or the Company if any court or governmental
authority of competent jurisdiction shall have issued an order,
decree or ruling or taken any other action restraining, enjoining
or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and nonappealable;
(c) by Parent or the Company, at any time after January 31,
1996 if the Merger shall not have occurred by such date;
provided, that the right to terminate this Agreement under this
subparagraph (c) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been
the cause or resulted in the failure of the Merger to have
occurred by such date; and provided, further, that this date
shall be extended no more than ninety (90) days if the Merger has
not been consummated because of delays in the regulatory approval
process;
(d) by Parent, if (i) in Parent's sole discretion it determines
that any fact revealed pursuant to a supplemental representation
and warranty as required by Section 5.7 of this Agreement makes
it not in Parent's best interest to consummate the Merger, (ii)
there shall have been a breach of any representation or warranty
of the Company contained herein, (iii) there shall have been a
breach of any covenant or agreement of the Company contained
herein which shall not have been cured prior to ten (10) business
days following notice of such breach, or (iv) the Amendment to
the Advantage Agreement extending the termination date and
noncompete agreements shall not have been executed by each party
thereto prior to October 31, 1995; or
(e) by Company if there shall have been a breach of any
representation, warranty, covenant or agreement of Parent or
Acquisition contained herein which would prevent the consummation
of the Merger which shall not have been cured prior to ten (10)
business days following the notice of such breach.
Section 7.2 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section
7.1, this Agreement shall forthwith become void and have no
effect, without any liability on the part of any party hereto,
other than the provisions of Sections 5.4 and 7.3. The
termination of this Agreement shall not relieve any party from
liability for any breach of this Agreement.
Section 7.3 Fees and Expenses. Each party shall bear its own
expenses and costs in connection with this Agreement and the
transactions contemplated hereby.
Section 7.4 Amendment. Subject to Section 5.2(c), this
Agreement may be amended by action taken by the Company, Parent
and Acquisition at any time before or after adoption of the
Merger by the stockholders of the Company but, after any such
approval, no amendment shall be made which decreases the Merger
Consideration to the stockholders who are not parties to the
Option Agreement or changes the form thereof or which adversely
affects the rights of the Company's stockholders hereunder
without the approval of such stockholders. This Agreement may
not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 7.5 Extension; Waiver. Subject to Section 5.2(c), at
any time prior to the Effective Time, the Company, on the one
hand, and Parent and Acquisition, on the other hand, may (i)
extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained
herein or in any document, certificate or writing delivered
pursuant hereto, or (iii) waive compliance by the other party
with any of the agreements or conditions contained herein. Any
agreement on the part of any party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party
hereto to assert any of its rights hereunder shall not constitute
a waiver of such rights.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Survival. The representations, warranties,
covenants and agreements made herein shall not survive beyond the
Effective Time.
Section 8.2 Entire Agreement; Assignment. This Agreement
(including the Schedules hereto) (i) constitutes the entire
agreement among the parties hereto with respect to the subject
matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof and (ii) shall not be
assigned by operation of law or otherwise; provided that
Acquisition may assign its rights and obligations in whole or in
part to any subsidiary or affiliate of Parent (provided that such
transferee agrees in writing to be bound by this Agreement), but
no such assignment shall relieve Acquisition of its obligations
hereunder if such assignee does not perform such obligations.
Section 8.3 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be
given (and shall be deemed to have been duly given upon receipt)
by delivery in person, by facsimile or by registered or certified
mail (postage prepaid, return receipt requested), to the other
party as follows:
if to Parent or Acquisition:
THORN Americas, Inc.
8200 East Rent-A-Center Drive
Wichita, Kansas 67226-2799
Fax: 316-636-7328
Attention: P. David Egan, Senior
Vice President and General Counsel
with copies to:
Shook, Hardy & Bacon P.C.
One Kansas City Place
1200 Main Street, Suite 3100
Kansas City, Missouri 64105-2118
Fax: 816-421-5547
Attention: Jennings J. Newcom
if to the Company:
Advantage Companies, Inc.
9323 East 37th Street North
Wichita, Kansas 67226-2000
Fax: 316-634-3340
Attention: Law Department
with copies to:
Shughart, Thomson & Kilroy, P.C.
1800 Twelve Wyandotte Plaza
120 West 12th Street
Kansas City, Missouri 64105
Fax: 816-374-0509
Attention: Robert T. Schendel
or to such other address as the person to whom notice is given
may have previously furnished to the other in writing in the
manner set forth above.
Section 8.4 Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of
Delaware, without regard to the principles of conflicts of law
thereof.
Section 8.5 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto
and its successors and permitted assigns, and nothing in this
Agreement, express or implied, is intended to or shall confer
upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
Section 8.6 Remedies. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in
equity.
Section 8.7 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation
of this Agreement.
Section 8.8 Consent to Jurisdiction. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to
jurisdiction of the courts of the State of Kansas for any
litigation arising out of or relating to this Agreement and the
transactions contemplated hereby, waives any objection to laying
of venue of any such litigation in the courts located in the
State of Kansas and agrees not to plead or claim in any court in
the State of Kansas that such litigation brought therein has been
brought in an inconvenient forum.
Section 8.9 Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first
mentioned person;
(b) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or
cause the direction of the management policies of a person,
whether through the ownership of stock, as trustee or executor,
by contract or credit arrangement or otherwise;
(c) "generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity
as may be approved by a significant segment of the accounting
profession in the United States, in each case applied on a basis
consistent with the manner in which the audited financial
statements for the fiscal year of the Company ended January 22,
1995 were prepared;
(d) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act); and
(e) "subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of
which such person (either alone or through or together with any
other subsidiary), owns, directly or indirectly, any stock or
other equity interests the holder of which is generally entitled
to vote for the election of the board of directors or other
governing body of such corporation, partnership, joint venture or
other legal entity.
Section 8.10 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its representatives thereunto
duly authorized, all as of the day and year first above written.
THORN AMERICAS, INC.
By:
Name:
Title:
THORN ACQUISITION CORP.
By:
Name:
Title:
ADVANTAGE COMPANIES, INC.
By: /s/ Daniel J. Taylor
Name: Daniel J. Taylor
Title: Chief Executive Officer
and Chairman of the Board
TABLE OF CONTENTS
ARTICLE I THE MERGER . . . . . . . . .. . . . . . . . . . . . . . 2
Section 1.1 The Merger. . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Effective Time; Closing . . . . . . . . . . . . . . 2
Section 1.3 Effects of the Merger; Subsequent Actions . . . . . 2
Section 1.4 Certificate of Incorporation and By-Laws. . . . . . 3
Section 1.5 Directors . . . . . . . . . . . . . . . . . . . . . 3
Section 1.6 Officers. . . . . . . . .. . . . . . . . . . . . . . 3
Section 1.7 Conversion of Shares. . . . . .. . . . . . . . . . . 3
Section 1.8 Stock Options . . . . . . .. . . . . . . . . . . . . 3
Section 1.9 Stockholders' Meeting . . .. . . . . . . . . . . . . 4
ARTICLE II DISSENTING SHARES; EXCHANGE OF SHARES. . . . . . . . . . 5
Section 2.1 Dissenting Shares . . . . . . .. . . . . . . . . . . 5
Section 2.2 Exchange of Certificates. . . . .. . . . . . . . . . 5
ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 6
Section 3.1 Organization and Qualification; Subsidiaries. .. . . 6
Section 3.2 Capitalization of the Company and its
Subsidiaries. . . . . . . . . . . .. . . . . . . . . 7
Section 3.3 Authority Relative to this Agreement; Fairness
Opinion . . . . . . . . . . . .. . . . . . . . . . . . 8
Section 3.4 Non-Contravention; Required Filings and Consents. . . 9
Section 3.5 SEC Reports. . . . . . . . . . . . . . . . . . . . 10
Section 3.6 Absence of Certain Changes. . . . . . . . . . . . . 10
Section 3.7 Proxy Statement . . . . . .. . . . . . . . . . . . . 11
Section 3.8 Finder's Fee. . . . . . . .. . . . . . . . . . . . . 11
Section 3.9 Absence of Litigation . . . . . . . . . . . . . . . 11
Section 3.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.11 Employee Benefits . . . . . .. . . . . . . . . . . . 13
Section 3.12 Compliance. . . . . . . . . . . . . . . . . . . . . 16
Section 3.13 Environmental Matters . . . . . . . .. . . . . . . . 16
Section 3.14 Intellectual Property . . . . . . . . . . . . . . . 19
Section 3.15 Insurance. . . . . . . . . . . . . . . . . . . . . 20
Section 3.16 Labor Matters . . . . . . . . . . . . . . . . . . . 20
Section 3.17 Real Property . . . . . . . . . . . . .. . . . . . . 21
Section 3.18 Contracts and Commitments . . . . . . . . . . . . . 24
Section 3.19 Employees . . . . . . . . . . . . . . . . . . . . . 25
Section 3.20 Licenses and Permits. . . . . . . . . . . . . . . . 25
Section 3.21 Products Liability . . . . . . . . . .. . . . . . . 25
Section 3.22 Inventory; Motor Vehicles; Accounts Receivable;
Assets Necessary to Business. . . . . . . . . . . . 25
Section 3.23 Bank Account . . . . . . . . . . . 26
Section 3.24 Seller's Documentation. . . . . . . . . . . . . .. . 26
Section 3.25 Disclosure. . . . . . . . . . . . . . . . . . . .. . 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
ACQUISITION. . . . . . . . . . . . . . . . . . . . .. . . 27
Section 4.1 Organization. . . . . . . . . . . . . . . . . . . . . 27
Section 4.2 Authority Relative to this Agreement. . . . . . . . . 27
Section 4.3 Non-Contravention; Required Filings and Consents. . . 27
Section 4.4 Proxy Statement . . . . . . . . . . . . . . . . . . . 28
Section 4.5 Availability of Funds . . . . . . . . . . . . . . . . 28
Section 4.6 Absence of Litigation . . . . . . . . . . . . . . . . 28
ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.1 Conduct of Business of the Company. . . . . . . . . . 29
Section 5.2 Boards of Directors and Committees;
Section 14(f) . . . . . . . . . . . . . . . . . . . . 31
Section 5.3 Proxy Statement. . . . . . . . . . . . . . . . . . . 32
Section 5.4 Access to Information . . . . . . . . . . . . . . . . 32
Section 5.5 Reasonable Best Efforts . . . . . . . . . . . . . . . 33
Section 5.6 Public Announcements. . . . . . . . . . . . . . . . . 33
Section 5.7 Notification of Certain Matters. . . . . . . . . . . 34
Section 5.8 Treatment of Preferred Stock; Termination of
Stock Plans . . . . . . . . . . . . . . . . . . . . . 34
Section 5.9 No Solicitation . . . . . . . . . . . . . . . . . . . 34
Section 5.10 Employee Matters. . . . . . . . . . . . . . . . . . . 35
Section 5.11 Office Lease. . . . . . . . . . . . . . . . . . . . 35
Section 5.12 Insurance . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.13 Consents of Third Parties . . . . . . . . . . . . . . 35
Section 5.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . 36
Section 6.1 Conditions to the Company's, Parent's and
Acquisition's Obligation to Effect the Merger . . . . 36
Section 6.2 Conditions to Company's Obligation to Effect
the Merger. . . . . . . . . . . . . . . . . . . . . . 36
Section 6.3 Conditions to Parent's and Acquisition's
Obligations to Effect the Merger. . . . . . . . . . . 37
ARTICLE VII TERMINATION; AMENDMENT; WAIVER . . . . . . . . . . . .. . 39
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . 39
Section 7.2 Effect of Termination . . . . . . . . . . . . . . . . 40
Section 7.3 Fees and Expenses . . . . . . . . . . . . . . . . . . 40
Section 7.4 Amendment . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.5 Extension; Waiver . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 41
Section 8.1 Survival. . . . . . . . . . . . . . . . . . . . . . 41
Section 8.2 Entire Agreement; Assignment. . . . . . . . . . . . 41
Section 8.3 Notices . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.4 Governing Law . . . . . . . . . . . . . . . . . . . 42
Section 8.5 Parties in Interest . . . . . . . . . . . . . . . . 42
Section 8.6 Remedies. . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.7 Descriptive Headings. . . . . . . . . . . . . . . . . 43
Section 8.8 Consent to Jurisdiction . . . . . . . . . . . . . . . 43
Section 8.9 Certain Definitions . . . . . . . . . . . . . . . . . 43
Section 8.10 Counterparts. . . . . . . . . . . . . . . . . . . . . 44
SCHEDULES
Schedule 3.1(d) Subsidiaries
Schedule 3.2 Extensions of Pre-Existing Employee Options
Schedule 3.4 Non-Contravention; Filings and Consents
Schedule 3.5(a) Financial Statement Disclosure
Schedule 3.5(b) Undisclosed Financial Obligations
Schedule 3.6 Changes Since January 23, 1995
Schedule 3.9 Litigation
Schedule 3.10 Taxes
Schedule 3.11(a) Employee Benefit Plans
Schedule 3.11(i) Benefits Beyond Retirement or Termination
Schedule 3.11(j) Severance Pay and Acceleration of Vesting of
Stock Options
Schedule 3.12 Compliance
Schedule 3.13 Environmental Matters
Schedule 3.14 Intellectual Property
Schedule 3.15(a) Insurance Policies
Schedule 3.15(b) Notice of Insurance Matters
Schedule 3.16 Labor Matters
Schedule 3.17(a) Leased Real Property
Schedule 3.17(e) Real Property Service and Maintenance Contracts
Schedule 3.17(f) Agreements or Options to Purchase Real Property
Schedule 3.17(j) Construction, Improvement or Expansion Projects
Schedule 3.18 Contracts and Commitments
Schedule 3.19 Employee Matters
Schedule 3.20 Licenses and Permits
Schedule 3.21 List of Form Customer Agreements
Schedule 3.22(b) Motor Vehicles
Schedule 3.22(c) Accounts Receivable
Schedule 3.23 Bank Accounts
Schedule 3.25 Material Matters
Schedule 5.1 Conduct of Business Prior to Closing
Schedule 6.3(n) Litigation Matters to be Settled or Reserved for
in Financial Statements
EXHIBITS
A Opinion of Company's Counsel
B Amendment to Indemnity Agreement
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JAN-28-1996 JAN-28-1996
<PERIOD-END> OCT-1-1995 OCT-1-1995
<CASH> 6,224,026 6,224,026
<SECURITIES> 0 0
<RECEIVABLES> 499,345 499,345
<ALLOWANCES> 0 0
<INVENTORY> 18,031,369<F1> 18,031,369<F1>
<CURRENT-ASSETS> 0<F2> 0<F2>
<PP&E> 17,097,995 17,097,995
<DEPRECIATION> 7,942,415 7,942,415
<TOTAL-ASSETS> 37,592,038 37,592,038
<CURRENT-LIABILITIES> 0<F2> 0<F2>
<BONDS> 0 0
<COMMON> 43,740 43,740
0 0
1,400,000 1,400,000
<OTHER-SE> 28,356,990 28,356,990
<TOTAL-LIABILITY-AND-EQUITY> 37,592,038 37,592,038
<SALES> 941,509 3,148,344
<TOTAL-REVENUES> 16,013,303 50,874,177
<CGS> 697,594 2,424,599
<TOTAL-COSTS> 14,864,473 45,505,177
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,195,432 5,471,944
<INCOME-TAX> 436,517 2,057,865
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 758,915 3,414,079
<EPS-PRIMARY> .15 .68
<EPS-DILUTED> .15 .68
<FN>
<F1> Inventory consists of merchandise rented or available to be rented to
customers. Inventory is carried at actual cost of 35,695,377 less
accumulated depreciation of 17,664,008.
<F2> The Company does not use a classified balance sheet.
</FN>
</TABLE>
