<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1995
---------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-8966
----------------------------------------
RHODES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-0536190
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319
----------------------------------------
(Address of principal executive offices)
(Zip Code)
(404) 264-4600
----------------------------------------------------
(Registrant's telephone number, including area code)
NONE
----------------------------------------------------
(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 required 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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of September 30, 1995: 9,272,853 shares of common
stock without par value.
<PAGE> 2
RHODES, INC.
INDEX
<TABLE>
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Recent Developments
Condensed Consolidated Balance Sheets - -
August 31, 1995 and February 28, 1995
Condensed Consolidated Statements of Operations
for the Three and Six Months Ended August 31, 1995
and August 31, 1994
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended August 31, 1995
and August 31, 1994
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security-Holders
Item 6. Exhibits
</TABLE>
i
<PAGE> 3
RHODES, INC.
PART 1
FINANCIAL INFORMATION
RECENT DEVELOPMENTS
On September 28, 1995 Rhodes, Inc. and The Glick Furniture Company
announced an agreement for Rhodes to acquire the furniture store operations of
The Glick Furniture Company in Columbus, Ohio, subject to final documentation
and closing. The Glick Furniture Company, with seven stores and a distribution
center, is considered by Rhodes to be the leading furniture retailer in the
Columbus market with sales of $41 million for the year ended December 31, 1994.
On October 10, 1995 Rhodes, Inc. and Weberg Enterprises, Inc.
announced the signing of an agreement for Rhodes to acquire 21 store operations
and two distribution center operations from Weberg in the states of Colorado,
Texas and Illinois. The store locations scheduled for purchase recorded over
$100 million in sales for the year ended December 31, 1994.
1
<PAGE> 4
RHODES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
AUGUST 31, FEBRUARY 28,
1995 1995
---------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 831 $ 3,268
Accounts receivable 4,095 3,398
Inventories at LIFO cost 60,427 54,386
Prepaid expenses and other 5,187 5,356
Deferred tax assets 861 861
----------- -----------
Total Current Assets 71,401 67,269
----------- -----------
PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation and amortization of $36,055 at
August 31, 1995 and $34,007 at February 28, 1995 64,314 55,142
----------- -----------
CAPITALIZED REAL ESTATE LEASES, at cost, less
accumulated amortization of $5,262 at August 31, 1995
1994 and $4,883 at February 28, 1995 6,683 7,062
----------- -----------
INTANGIBLE ASSETS, net
Goodwill 59,420 60,319
Favorable leases 3,349 3,825
Other intangibles 2,233 2,387
----------- -----------
Total Intangible Assets 65,002 66,531
----------- -----------
OTHER ASSETS 1,803 2,406
----------- -----------
TOTAL ASSETS $ 209,203 $ 198,410
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes and loans payable $ 6,593 $ ---
Current maturities of long-term debt
and capital lease obligations 8,456 967
Accounts payable 39,741 35,403
Accrued liabilities 15,519 19,374
Accrued Interest 844 781
Deferred income 10,582 9,795
Current income taxes payable 2,100 460
Current portion deferred gain-sale/leasebacks 318 318
----------- -----------
Total Current Liabilities 84,153 67,098
----------- -----------
DEFERRED INCOME TAXES 7,070 7,070
----------- -----------
LONG-TERM DEBT, less current maturities 32,278 40,000
----------- -----------
OBLIGATIONS UNDER CAPITAL LEASES 13,489 14,035
----------- -----------
DEFERRED GAIN-SALE/LEASEBACKS 2,549 2,707
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 20,000 shares
authorized and 9,254 shares issued and outstanding
at August 31, 1995 and 9,463 shares issued and --- ---
outstanding at February 28, 1995
Paid-in-Capital 100,867 103,179
Accumulated deficit (31,203) (35,679)
----------- -----------
Total Shareholders' Equity 69,664 67,500
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 209,203 $ 198,410
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
2
<PAGE> 5
RHODES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER QUARTER SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
AUGUST 31, 1995 AUGUST 31, 1994 AUGUST 31, 1995 AUGUST 31, 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET SALES $ 95,379 $ 88,809 $ 184,818 $ 171,674
COST OF GOODS SOLD 49,817 45,669 96,161 87,267
------------ ----------- ----------- -----------
GROSS PROFIT 45,562 43,140 88,657 84,407
------------ ----------- ----------- -----------
FINANCE CHARGES and
INSURANCE COMMISSIONS 1,410 1,338 3,094 2,504
------------ ----------- ----------- -----------
OPERATING EXPENSES:
Selling 15,431 14,940 30,201 29,701
General and administrative 24,741 22,628 49,321 45,037
Amortization of intangibles 722 772 1,444 1,534
Provision for credit losses 21 33 42 52
Other (income) expense, net (41) 81 50 (83)
------------ ----------- ----------- -----------
40,874 38,454 81,058 76,241
------------ ----------- ----------- -----------
INCOME BEFORE INTEREST EXPENSE AND
INCOME TAXES 6,098 6,024 10,693 10,670
Interest expense - net 1,575 1,591 3,107 3,260
------------ ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 4,523 4,433 7,586 7,410
PROVISION FOR INCOME TAXES 1,854 1,817 3,110 3,038
------------ ----------- ----------- -----------
NET INCOME $ 2,669 $ 2,616 4,476 4,372
============ =========== =========== ===========
NET INCOME PER SHARE $ 0.29 $ 0.27 $ 0.48 $ 0.45
============ =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING 9,331 9,779 9,355 9,779
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
3
<PAGE> 6
RHODES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,476 $ 4,372
Adjustments to reconcile net income or loss to net cash
provided by operating activities:
Depreciation and amortization 3,765 3,382
Change in deferred income taxes --- 2,615
Amortization of intangibles 1,444 1,534
Non-cash interest expense --- ---
Amortization of gain-sale/leasebacks (159) (159)
Write-off of intangible assets 85 19
Changes in current assets and liabilities:
Receivables, net (697) (1,147)
Inventories (6,041) (8,436)
Prepaid expenses and other 169 278
Accounts payable and accrued
liabilities 2,186 4,245
Deferred income on warranties, undelivered
sales and credit commission 787 305
---------------- ----------------
Net cash from operating activities $ 6,015 $ 7,008
---------------- ----------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Retirements of property and equipment, net 771 292
Additions to property and equipment, (13,299) (6,580)
Additions to intangible assets --- (55)
Decrease (increase) in other assets 574 (29)
Decrease in obligations under capital leases (557) (380)
---------------- ----------------
Net cash used in investing activities $ (12,511) $ (6,752)
---------------- ----------------
CASH FLOWS FROM (USED BY) FINANCING ACTIVITIES:
Expenses incurred in stock registration --- (262)
Repayment of long-term debt (222) (2,402)
Repurchase of stock (2,490) ---
Proceeds from issuance of short-term debt, net 6,593 2,600
Purchase of stock-employee stock purchase plan 178 ---
Exercise of stock options --- 17
---------------- ----------------
Net cash from (used in) financing activities $ 4,059 $ (47)
---------------- ----------------
INCREASE (DECREASE) IN CASH (2,437) 209
CASH AT BEGINNING OF PERIOD 3,268 235
---------------- ----------------
CASH AT END OF PERIOD $ 831 $ 444
================ ================
SUPPLEMENTAL DISCLOSURE:
CASH PAYMENTS FOR:
Interest $ 3,107 $ 3,260
================ ================
Income taxes $ 2,332 549
================ ================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
4
<PAGE> 7
RHODES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
AUGUST 31, 1995
1. BASIS OF PRESENTATION
The financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission. This information reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion
of management, necessary to a fair statement of the financial position
of the Company as of August 31, 1995 and February 28, 1995, the
results of operations for the three and six months ended August 31,
1995 and August 31, 1994, and cash flows for the six months ended
August 31, 1995 and August 31, 1994. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading. Certain reclassifications of
prior years' amounts have been made to conform with fiscal 1996
amounts. These financial statements should be read in conjunction with
the historical financial statements and the notes thereto included in
the Company's latest annual report on Form 10-K.
2. INTERIM LIFO PROVISIONS
The actual valuation of inventory under the LIFO method can be made
only at the end of each year based on inventory levels, price indices
and costs at that time. Therefore, the interim provisions must be
considered as estimates subject to a final year-end LIFO inventory
calculation.
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
AUGUST 31, AUGUST 31,
---------- ----------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 52.2% 51.4% 52.0% 50.8%
------- ------- ------- ------
Gross Profit 47.8% 48.6% 48.0% 49.2%
------- ------- ------- ------
Finance Charge and Insurance Commissions 1.5% 1.5% 1.7% 1.5%
------- ------- ------- ------
Operating Expenses:
Selling 16.2% 16.8% 16.3% 17.3%
General and Administrative 25.9% 25.5% 26.7% 26.2%
Provision for Credit Losses 0.0% 0.0% 0.0% 0.0%
Amortization of Intangibles 0.8% 0.9% 0.8% 0.9%
Other (income) Expense, Net -0.0% 0.1% 0.0% -0.0%
------- ------- ------- ------
42.9% 43.3% 43.9% 44.4%
------- ------- ------- ------
Operating Income 6.4% 6.8% 5.8% 6.2%
Interest Expense, Net 1.7% 1.8% 1.7% 1.9%
------- ------- ------- ------
Income Before Income Taxes 4.7% 5.0% 4.1% 4.3%
Provision for Income Taxes 1.9% 2.0% 1.7% 1.8%
------- ------- ------- ------
Net Income 2.8% 2.9% 2.4% 2.5%
======= ======= ======= ======
</TABLE>
6
<PAGE> 9
OPERATING RESULTS
THREE MONTHS AND SIX MONTHS ENDED AUGUST 31, 1995 AND 1994 COMPARED
Net sales increased 7.4% to $95,379,000 from $88,809,000 for the three
months ended August 31, 1995 compared with the same period last year and
increased 7.7% to $184,818,000 from $171,674,000 for the six months compared
with last year. Comparable store sales growth was 5.9%, both for the three and
six months ended August 31, 1995, respectively. Comparable store sales
represent furniture and services sold and delivered by stores open for the same
months in each comparative period. Earnings per share of $.29 for the second
quarter and $.48 for the six months ended August 31, 1995 increased 7.4% and
6.7% compared with earnings per share of $.27 and $.45 for the quarter and six
months last year, respectively. Net income for the second quarter ended August
31, 1995 increased 2.0% to $2,669,000, compared with $2,616,000 for the same
quarter last year. Net income for the six months ended August 31, 1995
increased 2.4% to $4,476,000, compared with $4,372,000 for the six months last
year.
During the quarter, the Company opened two new stores in the Atlanta
market and closed two older stores whose customers will be better served by the
nearby new, larger stores. Also, two new stores were opened after the end of
the quarter in Kansas City, a new market, and the Nashville, Tennessee store
which was damaged by a tornado in May, 1995, reopened in October, 1995. At
August 31, 1995 the Company had 79 stores in operation compared with 78 at
August 31, 1994. The Company has leases signed on five additional stores
expected to open later this fiscal year, of which two will be located in
Atlanta, Georgia; two in Charlotte, North Carolina and one in Cincinnati, Ohio
(a new market). The Company may close as many as two stores in Atlanta this
year as newer stores are opened nearby. Two additional new store leases have
been signed and scheduled for opening next fiscal year. Rhodes is also in
various stages of negotiations for leases on several new stores, most of which
would open next fiscal year. During the quarter, four stores were completed
under the remodeling/refurbishment program, bringing the total completed to 46
since the program began in fiscal 1993. Five more stores are scheduled for
remodeling or refurbishment during this fiscal year.
7
<PAGE> 10
Gross profit as a percentage of net sales for the three months ended
August 31, 1995 decreased to 47.8%, down from 48.6%, compared with the same
period last year and for the six months ended August 31, 1994 decreased to
48.0% from 49.2%, compared with the same period last year. The decline in the
gross profit percentage was due to more aggressive price promotions during the
quarter and six months, with much of the gross profit decline recovered through
lower selling expense (discussed below), compared with the prior year.
Finance charge and insurance commission income derives from
commissions earned under the Company's merchant agreement whereby all newly
created accounts receivable are sold to Beneficial National Bank U.S.A. ("BNB")
and from commissions on credit insurance on credit customer balances. The
amounts earned increased for the three and six months ended August 31, 1995 due
to an increase since last year in the amounts paid to the Company by BNB for
origination of new accounts and an increase in the net insurance commissions
collected on customers' accounts.
Selling expense for the three and six months ended August 31, 1995
decreased as a percentage of net sales to 16.2% and 16.3%, respectively,
compared with 16.8% and 17.3%, for the same periods last year. The decrease is
due to less expensive interest-free and deferred payment credit promotions for
the first and second quarters this year compared with the respective periods of
the prior year, partially offset by an increase in advertising expense.
General and administrative expenses for the quarter ended August 31,
1995 increased to $24,741,000 (25.9% of net sales) from $22,628,000 (25.5% of
net sales) for the three months last year, and for the six months ended August
31, 1995 increased to $49,321,000 (26.7% of net sales) from $45,037,000 (26.2%
of net sales) for the same period last year. The increased expense for the
three and six month periods ended August 31, 1995 is due to having six new
stores this year, plus increases in employee expenses. The increase in the
percentage of net sales for the three and six months ended August 31, 1995
compared to the prior year is due principally to having more new stores than
last year. New stores have proportionally higher general and administrative
costs during their first year of operation.
8
<PAGE> 11
INCOME TAXES
The Company adopted SFAS No. 109 during fiscal 1992 and recorded the
effect of the adoption retroactive to March 1, 1991, in a manner similar to the
cumulative effect of a change in accounting principle. SFAS No. 109 requires
the determination of deferred income taxes using the liability method under
which deferred tax assets and liabilities are determined based on the
differences between the financial accounting and tax basis of assets and
liabilities. Deferred tax assets or liabilities at the end of each period are
determined using the currently enacted tax rate expected to apply to taxable
income in the periods in which the deferred tax asset or liability is expected
to be settled or realized. Accordingly, the Company recorded a provision for
income taxes for the six months ended August 31, 1995 in the amount of
$3,110,000 compared with a provision of $3,038,000 for income taxes recorded
for the six months ended August 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Currently, the Company's principal sources of liquidity are cash flow
from operations and additional borrowing capacity under its Revolving Credit
Agreement described below. Net cash provided by operating activities for the
six months ended August 31, 1995 was approximately $6.0 million compared with
$7.0 million cash provided for the six months last year. The Company's
principal uses of cash are capital expenditures, working capital needs and debt
service obligations.
For the three and six months ended August 31, 1995 FIFO inventory
turns were 3.5x and 3.4x, respectively, compared with 3.5x for both periods
last year. Inventories increased by $3.8 million at August 31, 1995 compared
with August 31, 1994 due to the new larger stores and due to inventory
purchased to support the new Kansas City stores which were not yet open at the
end of the quarter. The Company has historically had low or negative working
capital, primarily as a result of its tight inventory controls, low cash
balances and the inclusion in current liabilities of deferred revenues, such as
merchandise sold but not delivered and deferred warranty revenue. The Company
had a working capital deficit at August 31, 1995 of approximately $12.8
million. A significant portion of such deficit relates to the change in
classification from long-term to current of $7.5 million principal amount of
senior notes which represents a principal repayment due in June, 1996.
9
<PAGE> 12
The Company's capital expenditures for equipment and expansion and
remodeling or refurbishing of stores are estimated at $17.0 million for fiscal
1996 compared with $14.1 million for fiscal 1995. The increase reflects the
cost of the Company's plan to remodel or refurbish 15 stores and open 12 new
stores during fiscal 1996. The Company plans to have capital expenditures of
approximately $14 million in fiscal 1997 to fund the remodeling, refurbishing
or relocation of approximately 14 stores and the opening of approximately ten
new stores.
The Company maintains a Revolving Credit Agreement for up to $30.0
million or 50% of eligible inventory with Wachovia National Bank. The
agreement is secured by substantially all of the inventory of the Company. As
of October 11, 1995, there was no loan balance outstanding under the Revolving
Credit Agreement and approximately $27.3 million remains available under the
agreement.
During the second quarter, the Company purchased 110,200 shares at an
aggregate cost of $1.1 million under its previously announced $3.0 million
stock repurchase plan.
In connection with the two announced proposed acquisitions (see
"Recent Developments") the Company will assume operating leases for an
aggregate of 28 store locations and three distribution centers and will pay
additional consideration for inventory and operating assets aggregating
approximately $44.0 million. Funding will be provided through bank debt and
some seller financing.
10
<PAGE> 13
RHODES, INC.
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On July 24, 1995 the shareholders of the Company, acting at the annual
meeting of shareholders, re-elected the then current directors of the Company,
Messrs. Irwin L. Lowenstein, Holcombe T. Green, Jr., James R. Kuse, James V.
Napier, and Don L. Chapman. Shares were cast for each director, or shares
withheld authority from each nominee, as follows:
<TABLE>
<CAPTION>
DIRECTOR NOMINEE VOTES FOR VOTES WITHHELD
---------------- --------- --------------
<S> <C> <C>
Irwin L. Lowenstein 8,585,623 9,875
Holcombe T. Green, Jr. 8,585,821 9,677
James R. Kuse 8,587,791 7,707
James V. Napier 8,587,821 7,677
Don Chapman 8,587,653 7,845
</TABLE>
At such annual meeting, the shareholders of the Company also ratified
the appointment of Arthur Andersen & Co. as the Company's independent auditors
for the fiscal year ending February 28, 1996. An aggregate of 8,582,826 were
voted in favor of such ratification, and an aggregate of 4,026 shares were
voted against such ratification.
11
<PAGE> 14
ITEM 6. EXHIBITS
2 Asset Purchase Agreement by and between Weberg Enterprises,
Incorporated, John P. Weberg and Rhodes, Inc., dated as of
October 2, 1995
27 - Financial Data Schedule (for SEC purpose only)
12
<PAGE> 15
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.
RHODES, INC.
------------
(Registrant)
DATE: October 16, 1995 By: s/Joel H. Dugan
--------------------------
Joel H. Dugan
Senior Vice President--
Finance and Administration
<PAGE> 1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement"), is between WEBERG
ENTERPRISES, INCORPORATED, a Delaware corporation ("Seller"); John P. Weberg,
an individual (the "Shareholder") and RHODES, INC. a Georgia corporation
("Buyer"). For reference this Agreement is dated October 2, 1995.
RECITALS:
Seller owns and operates retail furniture stores, warehouses and
distribution centers, and regional offices in Colorado, Texas and Illinois, and
its corporate departments identified by Seller as its Purchasing Department and
Operations Department (the "Business") at locations set forth in Attachment 1
("Property Locations"); and,
Seller desires to sell certain assets associated with the operation of
these Business, and Buyer desires to purchase such assets (the "Property");
NOW THEREFORE, in consideration of these premises and the respective terms,
covenants, and conditions contained herein, the parties agree as follows:
1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, Buyer hereby agrees to purchase, and Seller hereby agrees to sell,
on the Closing Date, the following Property:
1.1 INCLUDED ASSETS. The Property to be purchased and
sold shall consist of the following described assets of Seller related to and
in any way used in the operation of the Property at the Property Locations
("Included Assets"):
(a) all of Seller's merchandise inventory ("Inventory");
(b) all of Seller's leasehold improvements ("Leasehold
Improvements");
(c) all of Seller's computer equipment but not including
the GERS Data General computer ("Computer
Equipment");
(d) all of Seller's office equipment ("Office Equipment");
(e) all of Seller's warehouse equipment ("Warehouse
Equipment");
1
<PAGE> 2
(f) all of Seller's vehicles ("Vehicles");
(g) all of Sellers prepaid expenses and deposits
("Prepaid Expenses");
(h) all cash on hand ("Cash on Hand") in each store
location;
(i) all sales written prior to Closing Date but to be
delivered and booked after Closing Date ("Undelivered
Sales");
(j) copies of all business records ("Business Records")
relating to the Included Assets as may be requested
by Buyer: Both parties will cooperate to the fullest
extent in sharing historical financial and other
business records of the Business according to the
needs of each party;
(k) customer lists, goodwill, slogans, logos, trademarks,
service marks, tradenames (including without
limitation the tradename "Weberg's" either alone or
in combinations with one or more other words in
connection with the retail home furnishings or
furniture business) and computer software (excluding
software for the GERs Date General computer) used or
held for use in the operation of the Business and the
covenant not to compete of Seller and the Shareholder
described in Section 9.5 ("Intangible Assets"). Use
of the name "Weberg" by Shareholder, by Shareholder
d/b/a Weberg Properties, and by Seller in its
corporate name as permitted pursuant to Section 9.5,
is excluded. Rights to Seller's computer software
shall be conveyed on a non-exclusive basis;
(l) all of Seller's rights in all of the leases,
contracts and other agreements to be assumed by Buyer
pursuant to Section 4 hereof; and
(m) all transferable licenses, permits, registrations and
authorizations issued by any governmental authority
that are used in or necessary for the lawful
operation of the Business as currently operated by
Seller.
1.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the
Assets shall not include any of the following ("Excluded Assets"):
2
<PAGE> 3
(a) all cash or cash equivalents in transit or in bank
accounts;
(b) any tax refunds arising from taxes that accrued
during any period prior to the Closing Date;
(c) insurance policies, including any premium refunds in
respect to such policies and claims covered by such
policies arising prior to the Closing Date;
(d) that contract with GERS Retail Systems dated June 30,
1995 and referred to in Section 6.2 below, and all
hardware and software associated therewith;
(e) intangible assets not specifically included in
Section 1.1;
(f) all accounts receivable of Seller; and
(g) all land and building owned by Seller.
2. PURCHASE PRICE AND TERMS.
2.1 PURCHASE PRICE. The purchase price to be paid by Buyer to
Seller for the Included Assets (the "Purchase Price") is the total of the
following:
(a) For Inventory, the Book Value (landed cost). For
reference, Seller's book value as of August 31, 1995
was $22,967,439.
(b) For Leasehold Improvements, the Book Value
(depreciated cost) plus $350,000 representing the
depreciated value of the cantilever warehouse racks
now installed in the San Antonio Distribution Center
but not now included in the book value for leasehold
improvements. For reference, Seller's book value as
of August 31, 1995 was $4,858,050.
(c) For Computer Equipment, the Book Value (depreciated
cost). For reference, Seller's book value as of
August 31, 1995 was $270,496.
(d) For Office Equipment, the Book Value (depreciated
cost). For reference, Seller's book value as of
August 31, 1995 was $99,523.
(e) For Warehouse Equipment, the Book Value (depreciated
cost). For reference, Seller's book value as of
August 31, 1995 was $368,592.
3
<PAGE> 4
(f) For Vehicles, the Book Value (depreciated cost). For
reference, Seller's book value as of August 31, 1995
was $123,007.
(g) For Prepaid Expenses, the Book Value. For reference,
Seller's book value as of August 31, 1995 was
$374,205.
(h) For Cash on Hand, the Book Value. For reference,
Seller's book value as of August 31, 1995 was
$22,958.
(i) For Undelivered Sales, 30% of the book value (selling
price) of Seller's Undelivered Sales as of October
31, 1995, less Customer Deposits as shown on the
October 31, 1995 Interim Balance Sheet. For
reference, Seller's book value of Undelivered Sales
as of August 31, 1995 was $4,967,486. 30% of this
total would have been $1,490,246. For reference,
Seller's book value of Customer Deposits as of August
31, 1995 was $1,392,766. The net owed to Seller by
Buyer as of August 31, 1995 would therefore have been
$97,480.
(j) For Business Records and customer lists, the sum of
$1,000,000.
For purposes of this Agreement "Book Value" shall mean the value shown
on the October 31, 1995 Interim Balance Sheet.
2.2 ESTIMATED PURCHASE PRICE. The estimated purchase price
to be paid by Buyer to Seller for the Included Assets at Closing (the
"Estimated Purchase Price") is the total of the following:
(a) For Inventory, the book value (landed cost) shown on
the September 30, 1995 Interim Balance Sheet.
(b) For Leasehold Improvements, the book value
(depreciated cost) shown on the September 30, 1995
Interim Balance Sheet, plus $350,000 representing the
depreciated value of the cantilever warehouse racks
now installed in the San Antonio Distribution Center
but now included in the book value for leasehold
improvements.
(c) For Computer Equipment, the book value (depreciated
cost) shown on the September 30, 1995 Interim Balance
Sheet.
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(d) For Office Equipment, the book value (depreciated
cost) shown on the September 30, 1995 Interim Balance
Sheet.
(e) For Warehouse Equipment, the book value (depreciated
cost) shown on the September 30, 1995 Interim Balance
Sheet.
(f) For Vehicles, the book value (depreciated cost) shown
on the September 30, 1995 Interim Balance Sheet.
(g) For Prepaid Expenses, the book value shown on the
September 30, 1995 Interim Balance Sheet.
(h) For Cash on Hand, the book value shown on the
September 30, 1995 Interim Balance Sheet.
(i) For Undelivered Sales, 30% of the book value (selling
price) of Seller's Undelivered Sales as of September
30, 1995, less Customer Deposits as shown on the
September 30, 1995 Interim Balance Sheet.
(j) For Business Records and Intangible Assets, the sum
of $1,000,000.
2.3 EARNEST MONEY AND PAYMENT OF ESTIMATED PURCHASE PRICE AND
PURCHASE PRICE. As non-refundable Earnest Money, Buyer has paid concurrently
with the execution of this Agreement the sum of Three Hundred Thousand and
No/100 Dollars ($300,000.00). Earnest money paid shall be credited against the
Estimated Purchase Price at Closing. The Estimated Purchase Price, as
determined pursuant to this Section 2.1 and 2.2 of this Article 2 and Section
11.4 of Article 11 below, shall be paid by wire transfer into Seller's bank at
Closing. Seller's wire transfer instructions are attached as Schedule 2.3.
3. REAL PROPERTY LEASES.
3.1 THIRD PARTY LEASES. All leases of properties in which the
Business is conducted not owned by John P. Weberg or Seller shall be assumed
by Buyer in accordance with their terms. All such third party leases are set
forth on Schedule 3.1.
3.2 WEBERG LEASES. The properties owned by John P. Weberg or
Seller in which the Business is conducted shall be leased to Buyer by execution
of original lease documents for each such property in the form attached on
Schedule 3.2.1, for the rent and terms set forth on Schedule 3.2.2.
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4. LEASES AND CONTRACTS.
4.1 LEASES, CONTRACTS AND OBLIGATIONS TO BE ASSUMED. Buyer shall
assume and agree to perform the following contracts only:
4.1.1 All leases provided to be assumed in Section 3.
4.1.2 All contracts and agreements affecting the operation
of the stores, the warehouses, the distribution centers and the corporate
purchasing and operations departments in which the Business is conducted. A
Schedule 4.1.2 is attached listing the material contracts and agreements.
4.2 CONTRACTS AND OBLIGATIONS NOT ASSUMED. Buyer expressly does
not assume the GERS Retail Systems agreements which Seller has entered into or
any other liabilities or obligations of Seller other than those listed in
Section 4.1.
5. CLOSE OF BUSINESS AND EMPLOYEES. Seller will cease retail
business operations at the business locations of the Property immediately
following the close of business on the Closing Date. Seller will terminate all
of its employees at the business locations of the Property effective
immediately following cessation of retail business operations on the Closing
Date. Buyer will hire on the day following Closing Date each prior employee of
Seller at the business locations of the Property who shall seek such
employment. Compensation at the rate in effect on Closing Date shall be
continued uninterrupted for such employees and such employees shall be entitled
to participate in employee benefit programs offered from time to time by Buyer
to its employees generally pursuant to Buyer's standard procedures for employee
participation in such programs; provided, however, that such employees shall be
eligible to participate in Buyer's group health and life program without a
waiting period and such employees shall retain all vacation days, to a maximum
of fifteen (15) work days, accrued but not used while working for Seller.
Attached as Schedule 5 is a list of those corporate employees who are expected
Schedule 5 is a list of those corporate employees who are expected to be
retained by Seller and Seller's employees following closing.
6. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDER.
Seller and the Shareholder represent and warrant to the Buyer:
6.1 ORGANIZATION AND STANDING. Seller is a corporation duly
organized, existing, and in good standing under the laws of the State of
Delaware. Except as set forth in Section 6.6 below, Seller has all requisite
corporate power and authority to carry on its business as it is presently being
conducted and to own or lease the Property and Included Assets, and is duly
qualified and in good standing in every state of the United States in which the
conduct
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of its business or the ownership of the Included Assets requires it to be so
qualified.
6.2 AUTHORIZATION: ENFORCEABLE OBLIGATIONS. Seller has the
corporate power, authority and legal right to execute, deliver and perform this
Agreement except as set forth in 6.6 below. On or before the Closing Date,
Seller shall have, by proper corporate proceedings, duly authorized the
execution, delivery and performance of this Agreement and the consummation of
all transactions called for herein. This Agreement has been duly executed by
Seller. This Agreement constitutes the legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except as the
same may be limited or otherwise affected by applicable bankruptcy, insolvency
or other laws affecting creditor's rights.
6.3 NO THIRD PARTY OPTIONS. Except as set forth in 6.6 below,
there are no existing agreements, options, commitments or rights with, of, or to
any person to acquire any of the Property or any interest therein, except for
those agreements entered into in the normal course of business consistent with
past practice for the sale of Inventory of Seller.
6.4 TITLE TO PROPERTIES. Except as set forth in 6.6 below,
the Seller has good and marketable title to the Property, subject to no
mortgage, deed of trust, security interest, pledge, lien, conditional sales
agreement, encumbrance or charge, except for those matters explicitly disclosed
in this Agreement including the obligations to be assumed by Buyer. If a
mortgage, deed of trust, security interest, pledge, lien, conditional sales
agreements, encumbrance or charge does exist that relates to the Property,
Seller shall cause it to be fully discharged and released prior to the Closing
Date.
6.5 LITIGATION. There is no litigation or proceeding (at law
or in equity or before any court, arbitrator or governmental authority or body)
pending or, to the best of Seller's knowledge, threatened against Seller which
relates to the Property or the transactions contemplated by this Agreement or
the result of which could adversely affect the Property or the transactions
contemplated by this Agreement, except a Workman's Compensation claim fully
insured, entitled Dyer v. Weberg Enterprises, Inc.
6.6 NO VIOLATION. The execution, delivery and performance of
the Agreement by Seller, and the consummation of the transactions contemplated
by this Agreement, will not violate or result in a breach of or constitute a
default under or require the consent of any other person under any provision of
any charter, bylaw, contract, lien, instrument, order, judgment, decree,
ordinance, regulation, law or any other restriction of any kind to which the
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Included Assets, Property or Seller are subject or by which Seller is bound
except for restrictions in the mortgage loan on the Denver Distribution Center,
the equipment loan on the warehouse racks installed in the Denver Distribution
Center, and provisions of the Weberg operating loan from First Interstate
Bank, each of which will be removed before Closing.
6.7 EMINENT DOMAIN. Seller has not received any notice, written
or oral, and has no knowledge of any eminent domain or condemnation proceeding
regarding any of the Property.
6.8 LABOR MATTERS. Seller is not a party to any collective
bargaining agreements, nor is there any collective bargaining agreement
currently being negotiated by Seller, and there is no labor strike, dispute,
slowdown, stoppage, solicitation or union certification cards or union
certifications petition actually pending or threatened against or involving
Seller with respect to Seller's employees employed at the Property.
6.9 CONDITION OF THE INCLUDED ASSETS. The Included Assets are in
good operating condition and reasonable state of repair, subject only to
ordinary wear and tear. Except for items in need of repair, to the extent of
that needed repair, the Inventory consists of items of a quality and quantity
readily usable or readily salable, in the normal course of business, at prices
at least equal to the values at which such items are reflected on the books of
Seller, and are valued so as to reflect the normal valuation policy of Seller
in accordance with GAAP but without conversion to LIFO or provision for uniform
capitalization costs. The Included Assets constitute all of the assets
necessary to operate the Business in substantially the same manner as operated
by Seller prior to the date hereof.
6.10 FINANCIAL INFORMATION. (a) Attached hereto as Schedule 6.10
is a true, correct and complete copy of Seller's audited financial statements
as of and for the year ended December 31, 1994, and an unaudited interim
balance sheet as of August 31, 1995 (collectively, the "Financial Statements").
The Financial Statements are complete, have been prepared in accordance with
GAAP, fairly present the financial condition of Seller as of the dates thereof
and results of operation for the periods presented thereby, and disclose all
liabilities of Seller, whether absolute, contingent, accrued or otherwise,
existing as of the dates thereof which are of a nature required to be reflected
in financial statements prepared in accordance with GAAP. Seller has no
liability or obligation related to the Included Assets or the Business
(whether accrued, absolute, contingent or otherwise) except for (i) the
liabilities and obligations of Seller which are disclosed or reserved against
in the Financial Statements, to the extent and in the amounts so disclosed or
reserved against, and
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(ii) the liabilities incurred or accrued in the ordinary course of the Business
since August 31, 1995, and which do not, either individually or in the
aggregate, have a materially adverse effect on the Included Assets or the
Business.
(b) Seller will prepare unaudited interim balance sheets as of
September 30, 1995 (the "September 30, 1995 Interim Balance Sheet") and as of
October 31, 1995 (the "October 31, 1995 Interim Balance Sheet;" and
collectively with the September 30, 1995 Interim Balance Sheet, the "Interim
Balance Sheets"). The Interim Balance Sheets will be complete, will be
prepared in accordance with and consistent with GAAP (but without conversion to
LIFO or provision for uniform capitalization costs) and Seller's normal
accounting methods as used for the balance sheets for August 31, 1995 attached
to this Agreement as Attachment 2, and will fairly present the financial
condition of Seller as of the dates thereof.
6.11 PERMITS AND LICENSES. Seller holds, and is in compliance with
all material respects with, all licenses, permits, registrations and
authorizations necessary or required for the conduct of the Business.
6.12 CONSENTS AND APPROVALS. Except as set forth in Schedule 6.12
attached hereto, no consent or approval is required by virtue of the execution
hereof or the consummation of any of the transactions contemplated herein to
avoid the violation or breach of, or the default under, or the creation of a
lien on the Assets pursuant to the terms of, any regulation, order, decree or
award of any court or governmental agency or any lease, contract, mortgage,
note, license or any other instrument to which Seller is a party or to which it
or the Included Assets is subject.
6.13 LIMITATIONS. No representation or warranty of Seller shall be
and remain in effect beyond December 31, 2000.
7 COVENANTS OF SELLER. The Seller agrees that, subsequent to the date
of this Agreement and pending the Closing Date:
7.1 NEGATIVE COVENANTS AS TO FUTURE OPERATIONS. Seller will not,
unless provided for in this Agreement or written approval by Buyer being first
obtained:
(a) sell, assign, lease or otherwise transfer or dispose
of any of the Included Assets sold or leased under
this Agreement except Seller may sell the Inventory
in the ordinary course of business.
(b) enter into any contract or commitment or agree to
incur any liability of indebtedness except in the
ordinary course of the business consistent with
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past practice including orders for purchase of
Inventory and customer special orders; or
(c) implement any change in its policies or practices
with respect to credit approval, collections or
other operations.
7.2 AFFIRMATIVE COVENANTS AS TO THE FUTURE OPERATIONS.
Seller will:
(a) give Buyer and its representative full access,
during normal business hours, to the Property,
furnish all information as Buyer may reasonably
request concerning Seller's operations at the
Property, specifically to include all lease
agreements in effect that involve any of the
Property;
(b) disclose to Buyer any information contained in its
representations and warranties set forth in this
Agreement which because of an event occurring
after the date hereof, is incomplete or is no
longer correct as of all times after the date
hereof until the Closing Date;
(c) use its best efforts to conduct its business in
such a manner that on the Closing Date the
representations and warranties of Seller contained
in this Agreement shall be true as though such
representation and warranties were made on and as
of this date hereof and use its best efforts to
cause all of the conditions of its obligations to
Buyer under this Agreement to be satisfied on or
prior to the Closing Date;
(d) Seller shall conduct its business in all respects
in the ordinary course of business consistent with
prior practice;
(e) Seller shall provide Buyer with access to its
independent accountants and its financial records
and accounting papers to enable Purchaser to cause
such accountants to prepare any audited financial
statements deemed by Buyer to be necessary to file
with the Securities and Exchange Commission (the
"SEC") pursuant to the rules and regulations
promulgated by the SEC. All costs and expenses
associated with this paragraph and with filings
made with the SEC shall be paid by Buyer.
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(f) Seller shall cooperate with Purchaser to obtain
the consents necessary for the transfer of the
Included Assets, to make all necessary filings,
and thereafter make any other required submissions,
with respect to this Agreement and the
transactions contemplated hereby required under
the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act") and otherwise to
consummate the transactions contemplated hereby,
and shall use its best effort to cause each of the
conditions to Closing set forth in Section 11
below to be satisfied at the earliest practicable
date. All costs and expenses associated with
filings made pursuant to the HSR Act shall be paid
one-half by Buyer and one-half by Seller.
8 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer
represents and warrants to Seller as follows:
8.1 ORGANIZATION AND STANDING. Buyer is a corporation
duly organized, existing and in good standing under the laws of
Georgia. At Closing Date Buyer shall be duly qualified to do
business and shall be in good standing as a foreign corporation
in Colorado, Texas and Illinois.
8.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS. Buyer has the corporate power, authority and legal
right to execute, deliver and perform this Agreement. This
Agreement has been duly executed by Buyer. This Agreement
constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as
the same may be limited or otherwise affected by applicable
bankruptcy, insolvency or other laws affecting creditors' rights
generally.
8.3 ASSETS ACCEPTED ONLY IN ACCORDANCE WITH
REPRESENTATIONS. Buyer shall accept the Property in the condition
represented by Seller in this Agreement. Seller makes no
representations with respect to the condition of the Property
except as explicity made in this Agreement.
9 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. Buyer's
obligation to purchase the Included Assets is subject to the
fulfillment prior to or on the Closing Date of each of the
following conditions:
9.1 CONVEYANCE AND TRANSFER. Seller shall deliver to Buyer
such bills of sale, leases, endorsements, assignments and other
good and sufficient evidence of conveyance and transfer as in the
opinion of Buyer's counsel shall be effective to vest in Buyer
good
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and marketable title to the Included Assets.
9.2 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The
representations and warranties of Seller contained in this Agreement shall be
true at and as of the time of Closing as though such representations and
warranties were made at and as of such time and Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by Seller prior to or on the Closing Date. Seller
shall have furnished to Buyer a certificate dated the Closing Dated signed by a
duly authorized officer of Seller stating that all of Seller's representations
and warranties contained in this Agreement remain in all respects true and
correct as of the Closing Date and that Seller has performed and complied with
in all respects all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
9.3 NO ADVERSE CHANGE. There shall have been no material adverse
change in the Included Assets except Inventory fluctuations in the normal
course of business or in the financial condition, operation or prospects of the
Business since August 31, 1995.
9.4 CONSENTS. All consents, waivers and approvals required from
third parties or governmental authorities required in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained and remain in full force and effect, including without limitation the
expiration or termination of the applicable waiting period under the HSR Act.
9.5 COVENANT NOT TO COMPETE. Buyer shall have received from
Seller and the Shareholder a covenant not to compete in a form reasonably
satisfactory to Buyer. The covenant not to compete shall be limited to
competition in the retail furniture business in the States of Colorado, Texas,
and Illinois, and shall be for a period of five (5) years, but shall not
prohibit Seller or Shareholder from participating in the higher priced
furniture lines business under a name other than one containing the word
"Weberg."
10 INDEMNIFICATION BY SELLER AND THE SHAREHOLDER. On and after the
Closing Date, Seller and the Shareholder, jointly and severally, shall
indemnify and hold Buyer harmless against, defend and shall reimburse Buyer on
demand for any payment, including attorney fees, made by Buyer at any time
after the Closing Date in respect of: (i) any claim for brokerage or other
commissions arising from acts of Seller relating to this Agreement or to the
transactions contemplated hereby, (ii) any material inaccuracy in, or the
material breach of, any representation or warranty made by Seller herein or in
any Schedule or Exhibit hereto or in any other document or agreement executed
and delivered to Buyer pursuant
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hereto, (iii) any material failure of Seller to perform or observe any term,
provision, covenant or agreement hereunder on the part of Seller to be
performed or observed, (iv) the operation of the Business or use of the
Included Assets prior to the Closing, and (v) any liability, debt or obligation
relating in any way to the Included Assets, Property or operations or Seller
which is not specifically assumed by Buyer pursuant to this Agreement.
11 CLOSING. The closing of the sale and purchase of the Property (the
"Closing") shall take place at the law office of Anderson, Dude, Pifher &
Lebel, P.C., 104 South Cascade Ave., Suite 204, Colorado Springs, Colorado, at
9:00 MDT on October 31, 1995 (the "Closing Date") or at such other time and
place as the parties shall determine.
11.1 BUYER OBLIGATIONS. At the Closing, the Buyer shall deliver
to Seller the Estimated Purchase Price by wire transfer to Seller's bank.
11.2 SELLER OBLIGATIONS. At the Closing, Seller shall deliver to
the Buyer:
(a) Bill of sale to all personalty constituting the
Property except vehicles, sufficient to vest all of Seller's
interest in the Included Assets to the Buyer.
(b) Certificates of title properly endorsed for all
motor vehicles to be transferred.
(c) Assignments of all contracts to be assigned as part
of the Property.
(d) Leases and assignments of leases sufficient to
constitute Buyer as tenant of each of the leases provided for
in Section 3 above.
11.3 TAXES AND PRORATIONS. Buyer and Seller shall each pay
fifty percent (50%) of any and all sales and transfer taxes payable in
connection with this Agreement. Seller and Buyer shall prorate as of the
Closing Date all property taxes, including real property taxes, and business
personal property taxes and special assessment installments on the Included
Assets due and payable for 1995, if known, otherwise the said amount shall be
determined on the real estate taxes and special assessment installments of the
preceding year. At Closing the parties shall prorate rents, and common area
assessments and charges.
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11.4 ADJUSTMENTS RELATING TO CONDUCT OF BUSINESS. Sales which
shall have been written by Seller prior to Closing Date but which shall not
have been delivered to the customer shall be adjusted at Closing as follows:
11.4.1 Buyer shall pay to Seller at Closing the estimated
costs and profits from sales which were written but not delivered prior to
Closing Date calculated to be 30% of each such written but undelivered sale.
11.4.2 Seller shall pay to Buyer at Closing the amount of
all customer deposits held pending delivery of sales written but not delivered
prior to closing date.
11.5 POST CLOSING ADJUSTMENTS. On or before November 30, 1995 a
calculation shall be completed by the parties calculating the difference
between the Estimated Purchase Price paid at Closing based upon the September
30, 1995 Interim Balance Sheet and the Purchase Price. To the extent the
parties are in agreement with respect to Post Closing Adjustments, on or before
November 30, 1995, Seller shall pay to Buyer, or Buyer shall refund to Seller
the net difference between the actual Purchase Price and the Estimated Purchase
Price.
11.5.1 In the event of a disagreement between the parties
with respect to the September 31, 1995 Interim Balance Sheet, October 31, 1995
Interim Balance Sheet or the difference between the Estimated Purchase Price
and the Purchase Price or the Property purchased which cannot be resolved by
the parties prior to December 31, 1995, the parties hereto shall jointly select
a nationally recognized accounting firm to resolve such disputed items and the
decision of such firm shall be final and binding on the parties hereto. All
fees and expenses of the accounting firm selected pursuant to the provisions of
this Section 11.5.1, shall by paid one-half by Seller and one-half by Buyer.
On or before January 31, 1996, or on such later date as the accountant may
finally resolve any dispute between the parties, Seller shall pay to Buyer, or
Buyer shall refund to Seller, as the case may be, an amount equal to the amount
determined by such firm. Such payment shall be made by wire transfer to the
appropriate party pursuant to wire transfer instructions provided by such
party.
12 GENERAL PROVISIONS.
12.1 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
statements contained in any certificate or other instrument delivered by or on
behalf of either party pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed representations and warranties hereunder
and shall survive the Closing. Notwithstanding the above, no party will be
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entitled to rely on any certificate or other instrument, or the statements
therein unless it is attached to the Agreement at the time of Closing.
12.2 PARTIES IN INTEREST. All the terms and provision of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successor and assigns of Buyer and Seller.
12.3 LAW TO GOVERN. This Agreement is being made in Colorado and
shall be construed and enforced in accordance with the laws of Colorado.
12.4 NOTICES. All notices, requests, demands, waivers, consents,
approvals or other communication which are required or permitted hereunder
shall be in writing and shall be deemed to have been made when delivered
personally or by certified mail or by Federal Express to the party at its
address as follows:
Seller: Weberg Enterprises, Inc.
422 Wembley Court
Colorado Springs, Colorado 80906
Fax (719) 576-5139
with a copy to
Lawrence A. Hecox
Anderson, Dude, Pifher & Lebel, P.C.
104 South Cascade
Suite 204
Colorado Springs, CO 80903
Fax (719) 632-5452
Buyer: Rhodes, Inc.
4370 Peachtree St., N.E.
Atlanta, Georgia 30319
Fax: (404) 264-4781
Attention: Mr. Joel Lanham
with copy to
King & Spalding
120 West 45th Street
New York, New York 10036
Fax: (212) 556-2222
Attention: E. William Bates, II
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication
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will be deemed to have been given as of the date so delivered or mailed,
whichever occurs first.
12.5 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
12.6 FURTHER ASSISTANCE. From time to time (whether at or
after the Closing) Seller and Buyer shall execute and deliver such further
instruments of conveyance and transfer or take such other action as either
party may reasonable require in order to more effectively convey and transfer
to Buyer the Property.
12.7 COSTS. Each party shall bear its own expenses and costs
incurred in connection with the preparation of this Agreement and the
consummation of the transactions contemplated hereby, subject to the rights of
the parties to include such expenses and costs in any claim for damages
sustained as a result of a breach of this Agreement.
12.8 NO ASSIGNMENT. This Agreement is not assignable by either
party without the written consent of the other. Nothing in this Agreement is
intended to confer, expressly or by implication, upon any person who is not a
party, or successor or assign to a party, any rights or remedies under or by
reason of this Agreement.
12.9 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
between them and, except as otherwise provided, supersedes all previous
negotiations, commitments and writings.
12.10 ALTERATION. No alteration, modification or change of this
Agreement shall be valid unless made in writing and executed by the parties
hereto.
12.11 NO WAIVER. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder (and no course of dealing
between or among any of the parties) shall operate as a waiver of any right,
power or privilege. No waiver of any default on any one occasion shall
constitute a waiver of any subsequent or other default. No single or partial
exercise of any right, power or privilege shall preclude the further or full
exercise thereof.
12.12 HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.13 PUBLIC DISCLOSURE. Except as required by law, neither
of the parties hereto shall make any disclosure to third parties except
accountants, attorneys or other professional persons
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employed to assist in this transaction, nor otherwise make any public statements
or releases concerning this Agreement or the transaction contemplated hereby
except for such written information as shall have been approved in writing as
to form and content by each of the parties hereto, said approval shall not be
unreasonably withheld.
12.14 DEFAULT/REMEDIES. In the event that the Buyer shall
breach this Agreements by failure to pay the sums required herein, and Seller
shall not have breached any of its representations, warranties, covenants or
obligations, the Seller, upon 5 days written notice to Buyer, shall have the
right to terminate this Agreement, seek specific enforcement, damages or such
other relief as it may elect, including to declare the entire unpaid balance
immediately due and payable, retake possession of all property transferred by
this Agreement, or any one or more of the above, and shall have the right and
option to bring any action at law or equity to enforce the terms of this
Agreement, and seek restitution or damages, if said sum is not paid within five
(5) days of Buyer's receipt of a notice to that effect sent by Seller.
In the event that either party shall otherwise substantially fail to comply
with the terms, conditions, warranties, or representations of this Agreement,
excluding the timely payment of sums as referred to in the paragraph
immediately above, and said failure to comply is not cured within thirty (30)
days of written notice by one party to the other setting forth said failure to
comply, or if either party shall be adjudicated bankrupt or if any proceeding
against either seeking any reorganization, arrangement, liquidation,
dissolution, or other similar relief under the present or any future federal
bankruptcy code shall remain undismissed or unstayed for an aggregate of sixty
(60) days, then in such event, a default may be declared by the party not in
breach etc., in written notice to the other, and the non-breaching party may
declare the entire unpaid balance due hereunder immediately due and payable,
retake possession of all property transferred by this Agreement, or any one or
more of the above, and shall have the right and option to bring an action at
law or equity to enforce the terms of this Agreement, and seek restitution,
damages and specific performance.
17
<PAGE> 18
AGREED TO AND ACCEPTED on this 7th day of October, 1995.
WEBERG ENTERPRISES, INC.
By: /s/ John Weberg
------------------------
Its: CEO
-----------------------
/s/ John P. Weberg
- ---------------------------
John P. Weberg
RHODES, INC.
By: Irwin Lowenstein
-------------------------
Its: CEO
------------------------
18
<PAGE> 19
EXHIBITS TO
ASSET PURCHASE AGREEMENT
BETWEEN WEBERG ENTERPRISES, INC., JOHN WEBERG
AND RHODES, INC.
ATTACHMENT 1 : PROPERTY LOCATIONS
ATTACHMENT 2 : BALANCE SHEETS
SCHEDULE 2.3 : WIRE TRANSFER INSTRUCTIONS
SCHEDULE 3.1 : THIRD PARTY LEASES
SCHEDULE 3.2.1 : LEASE FORM FOR WEBERG LEASES
SCHEDULE 3.2.2 : RENT AND BUSINESS TERMS FOR WEBERG
LEASES
SCHEDULE 4.1.2 : CONTRACTS AND AGREEMENTS
SCHEDULE 5 : CORPORATE EMPLOYEES TO REMAIN
WITH SELLER
SCHEDULE 6.10 : SELLER'S FINANCIAL STATEMENTS
SCHEDULE 6.12 : CONSENTS AND APPROVALS REQUIRED
RHODES AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY
EXHIBIT HERETO TO THE SECURITIES AND EXCHANGE COMMISSION
UPON REQUEST.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF RHODES, INC. FOR THE YEAR/QUARTER ENDED AUGUST 31, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 831
<SECURITIES> 0
<RECEIVABLES> 4,095
<ALLOWANCES> 0
<INVENTORY> 60,427
<CURRENT-ASSETS> 71,401
<PP&E> 100,369
<DEPRECIATION> 36,055
<TOTAL-ASSETS> 209,203
<CURRENT-LIABILITIES> 84,153
<BONDS> 32,278
<COMMON> 0
0
0
<OTHER-SE> 69,664
<TOTAL-LIABILITY-AND-EQUITY> 209,203
<SALES> 184,818
<TOTAL-REVENUES> 184,818
<CGS> 96,161
<TOTAL-COSTS> 96,161
<OTHER-EXPENSES> 81,016
<LOSS-PROVISION> 42
<INTEREST-EXPENSE> 3,107
<INCOME-PRETAX> 7,586
<INCOME-TAX> 3,110
<INCOME-CONTINUING> 4,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,476
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
