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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
AUGUST 8, 1996 (JULY 25, 1996)
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Date of Report (Date of earliest event reported)
RENT-WAY, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
PENNSYLVANIA 000-22026 25-1407782
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(State or other jurisdiction (Commission File Number) (IRS Employer
of corporation) Identification No.)
3230 WEST LAKE ROAD, ERIE, PENNSYLVANIA 16505
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (814) 836-0618
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RENT-WAY, INC. FORM 8-K
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AUGUST 8, 1996
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 25, 1996, Rent-Way, Inc. (the "Company") acquired all of the outstanding
stock of Diamond Leasing Corporation ("Diamond") for consideration consisting
of 20,538 shares of the Company's Common Stock and $4,035,095 in cash. Prior to
the acquisition Diamond was wholly owned by Kenneth H. Moye and Lee Brady. The
amount and form of consideration paid to such persons for the stock of Diamond
was determined through arms length negotiations. Pursuant to the terms of the
acquisition, $325,000 of the purchase price was placed in escrow and held
subject to the terms on the escrow agreement. The escrow agreement provides for
$175,000 to be held pending completion of an audit of Diamond's financial
statements and $150,000 to be held for a period of three years after the closing
date. The cash paid in the acquisition was drawn against the Company's existing
line of credit with First Source Financial LLC.
Diamond operates a chain of 11 rental-purchase stores located in Delaware,
Maryland and Pennsylvania. Annual revenues for Diamond are approximately $7.0
million.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial statements of business acquired.
Financial statements required by Regulation S-B Item 310(c) will
be filed by amendment.
b. Proforma financial information.
Proforma financial information required by Regulation S-B Item
310(d) will be filed by amendment.
c. Exhibits in Accordance with the Provisions of Item 601 of
Regulation S-B.
Exhibit
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2.5 Stock Purchase Agreement between Rent-Way, Inc., Diamond
Leasing Corporation, Kenneth H. Moye and Lee Brady dated
July 20, 1996.
2.6 Closing Letter Agreement. Amendment to the Stock Purchase
Agreement between Rent-Way, Inc., Diamond Leasing Corporation,
Kenneth H. Moye and Lee Brady dated July 20, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RENT-WAY, INC.
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(Registrant)
/s/ JEFFREY A. CONWAY
Date August 8, 1996 ----------------------------
------------------------ (Signature)
JEFFREY A. CONWAY
CHIEF FINANCIAL OFFICER
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EXHIBIT 2.5
STOCK PURCHASE AGREEMENT
Dated July 20, 1996
Between
RENT-WAY, INC.
(a Pennsylvania Corporation),
DIAMOND LEASING CORPORATION
(a Delaware Corporation),
KENNETH H. MOYE,
and
LEE BRADY
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of July 20, 1996,
by and among RENT-WAY, INC., a Pennsylvania corporation with its principal
place of business at 3230 West Lake Road, Erie, Pennsylvania 16505 (the
"Buyer"); KENNETH H. MOYE, an individual residing at 44 Talley Ho Drive,
Fairhill, Maryland 21921 ("Moye") and LEE BRADY, an individual residing at 15
Blythe Court, New Castle, Delaware 19720 ("Brady") (Moye and Brady are herein
referred to individually as a "Seller" and collectively as the "Sellers"); and
DIAMOND LEASING CORPORATION, a Delaware corporation with its principal place of
business at 78 Southgate Boulevard, Southgate Industrial Center, New Castle,
Delaware 19720 (the "Corporation").
RECITALS:
WHEREAS, Moye owns all of the issued and outstanding shares of stock of the
Corporation; and
WHEREAS, Brady has an option to purchase 25% of the shares of the
Corporation (the "Brady Option"), which option is to be exercised as provided
herein; and
WHEREAS, Buyer desires to purchase from the Sellers, and Sellers desire to
sell to Buyer, all of the shares of the Corporation upon the terms and
conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, Buyer, Sellers and the
Corporation agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the terms below shall have
the following meanings:
(a) "ACCOUNTS" shall mean the customer accounts established and existing
under the Rental Contracts.
(b) "ACTIVE RENTAL MERCHANDISE" shall mean rental merchandise of the
Business which is subject to a Rental Contract as of the Closing Date.
(c) "AGREEMENT" shall mean this Stock Purchase Agreement, together with
the Schedules and Exhibits attached to this Agreement and the certificates and
instruments to be executed and delivered in connection with this Agreement.
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(d) "BUSINESS" shall mean the rental and rental-purchase business in
Maryland, Pennsylvania and Delaware conducted by the Corporation at the Store
Locations.
(e) "BUSINESS RECORDS" shall mean all originals and copies of all
operating data and records of the Business on whatever media including, without
limitation, financial, accounting and bookkeeping books and records, purchase
and sale orders and invoices, sales and sales promotional data, advertising
materials, marketing analyses, past and present price lists, past and present
customer service and credit files, personnel records and other records
pertaining to the Business.
(f) "CLOSING DATE" shall mean July 25, 1996, except that if all of the
conditions to Closing set forth in Articles 7 and 8 of this Agreement shall not
have been satisfied or waived on or prior to such date, "Closing Date" shall
mean the third business day after the satisfaction or waiver of all such
conditions to Closing, or on such other date as the parties may agree.
(g) "CODE" shall mean the Internal Revenue Code of 1986, as amended to
date.
(h) "DEFAULTED RENTAL PURCHASE CONTRACT" shall mean a Rental Purchase
Contract for which either of the following is true as of the Closing Date: (i)
thirty (30) or more days have passed since the last full payment was made by
the customer which is the party thereto or (ii) the rental merchandise covered
thereby was lost, damaged or destroyed by theft or casualty.
(i) "ENCUMBRANCE" shall mean any restriction, charge, lien, pledge,
option, easement, security interest, right-of-way, encumbrance or other similar
right of any Person.
(j) "ENVIRONMENTAL CLAIMS" shall mean any notice of violation, notice of
potential or actual responsibility or liability, claim, suit, action, demand,
directive or order by any Person for any damage (including, but not limited to,
personal injury, tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
environmental removal, response or remediation costs, nuisance, pollution,
contamination or other adverse effects on the environment or for fines,
penalties or restrictions on existing environmental permits or licenses)
resulting from or relating to (i) the presence of, the Release or threatened
Release into the environment of, or exposure to, any Hazardous Substance, (ii)
the generation, manufacture, processing, distribution, use, handling,
transportation, storage, treatment or disposal of any Hazardous Substance,
(iii) the violation, or alleged violation, of any Environmental Laws or (iv)
the non-compliance or alleged non-compliance with any Environmental Laws.
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(k) "ENVIRONMENTAL LAWS" shall mean any applicable statutes, ordinances,
directives or other laws, any rules or regulations, orders, and any licenses,
permits, orders, judgments, notices or other requirements issued pursuant
thereto, enacted, promulgated or issued by any Governmental Authority, relating
to pollution or protection of public health or the environment (including, but
not limited to, any air, surface water, groundwater, land surface or
sub-surface strata, whether outside, inside or under any structure), or to the
identification, reporting, generation, manufacture, processing, distribution,
use, handling, treatment, storage, disposal, labelling, deposit, transporting,
presence, Release or threatened Release of, any Hazardous Substances,
pollutants, contaminants, wastes or any other substances or materials. Without
limiting the generality of the foregoing, Environmental Laws shall include in
the United States, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Toxic Substances Control Act, as
amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Water Act, as amended, the
Safe Drinking Water Act, as amended, the Clean Air Act, as amended, and the
Occupational Safety and Health Act, as amended, all analogous laws enacted,
promulgated or lawfully issued by any Governmental Authority.
(l) "FUTURE RENTAL REVENUE STREAM" shall mean, as of any date and as to
any Rental Purchase Contract, an amount equal to the total dollar amount of
remaining rental payments necessary for a customer to acquire ownership of the
rental merchandise under such Rental Purchase Contract. "Future Rental Revenue
Stream" shall be calculated by multiplying the monthly rental rate of a Rental
Purchase Contract by the remaining number of monthly payments necessary for a
customer to acquire ownership of the rental merchandise under such Rental
Purchase Contract.
(m) "GAAP" shall mean generally accepted accounting principles in the
United States.
(n) "GOVERNMENTAL AUTHORITY" shall mean any federal, state, local or
foreign government, or any political subdivision of any of the foregoing, or
any court, agency or other entity, body, organization or group, exercising any
executive, legislative, judicial, quasi-judicial, regulatory or administrative
function of government.
(o) "GOVERNMENTAL REQUIREMENT" shall mean any rule, regulation, code,
plan, injunction, judgment, order, decree, ruling or charge of any Governmental
Authority.
(p) "HAZARDOUS SUBSTANCES" shall mean any pollutants, contaminants,
substances, chemicals, carcinogens, wastes and any ignitable, corrosive,
reactive, toxic or other hazardous substances of materials, whether solids,
liquids or gases (including, but not limited to, petroleum and its derivatives,
PCBs, asbestos, radioactive materials, waste
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waters, sludge, slag and any other substance, material or waste), as defined in
or regulated by any Environmental Laws or as determined by any Governmental
Authority.
(q) "INACTIVE RENTAL MERCHANDISE" shall mean the rental merchandise of the
Business which is not subject to a Rental Contract as of the Closing Date.
(r) "INTANGIBLE PROPERTY" shall mean all patents, trademarks, service
marks, tradenames, copyrights, inventions, know how, trade secrets, products or
other developments in progress and other intangible property owned or used
pursuant to a license agreement or otherwise, by the Corporation in the conduct
of the Business.
(s) "LIABILITIES" shall mean all liabilities and obligations of every
nature of the Corporation, whether absolute, accrued, contingent, known,
unknown, matured, unmatured or otherwise, and whether or not disclosed or
required to be disclosed or provided for in the Corporation's financial
statements in accordance with GAAP or pursuant to this Agreement, including but
not limited to (A) all trade accounts payable, (B) all liabilities and
obligations pursuant to any agreement the Corporation is a party to and (C) any
liability for Taxes, or loss of a tax benefit, for any period whether before or
after the Closing Date resulting from the Corporation's failure to use the
depreciation methods required for the Business or from the change after the
Closing Date to the proper method of depreciation or any other reason;
provided, however, that excluded from "Liabilities" are (x) contingent claims,
known or unknown, to the extent the Corporation carries adequate insurance
coverage; (y) the Deferred Tax Liability on the Corporation's balance sheet as
of June 30, 1996 to the extent that it does not exceed $30,000; and (z) all
interest charges, service charges, penalties or other like assessments accruing
from and after the Closing Date. If the Net Book Value of Total Assets exceeds
$2,490,000 as of the close of business on the day before the Closing, the
amount of Liabilities determined as set forth above shall be reduced by: (i)
$26,400 on account of prepaid federal income taxes and (ii) the amount of cash
and cash equivalents of the Corporation as of the close of business on the date
prior to Closing; provided, however, that the amount of such reduction shall
not exceed in aggregate the amount by which the Net Book Value of Total Assets
exceeds $2,490,000 as of the close of business on the day before the Closing.
(t) "NET BOOK VALUE OF TOTAL ASSETS" shall mean the net book value of the
Total Assets (as hereinafter defined) as determined in accordance with GAAP
applied on a consistent basis.
(u) "PERMITS" shall mean all licenses, permits and other authorizations
used in the Business.
(v) "PERSON" shall mean any Governmental Authority, individual,
corporation, partnership, trust or other entity.
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(w) "PROCEEDING" shall mean any action, order, writ, injunction, judgment,
decree, claim, suit, litigation, dispute, grievance, arbitral action,
investigation or other proceeding.
(x) "PURCHASE PRICE" shall mean $6,450,000 payable in cash, (i) less
Liabilities, (ii) less the difference, if positive, between (A) $5,300,000 and
(B) the Future Rental Revenue Stream under all Rental Purchase Contracts (other
than Defaulted Rental Purchase Contracts) as of the day prior to the Closing
Date and (iii) less the difference, if positive, between (A) $2,490,000 and (B)
the Net Book Value of Total Assets as of the day prior to the Closing Date,
subject to adjustment after the Closing in accordance with Section 2.2(b).
(y) "REAL PROPERTY" shall mean all real property currently owned or leased
by the Corporation or in which Corporation has any interest or previously owned
in the past 10 years.
(z) "RELEASE" shall mean any spillage, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment.
(aa) "RENTAL CONTRACTS" shall mean all rental and rental-purchase contracts
relating to the Business, which are duly signed by a customer, made in the
ordinary course of business and otherwise legally enforceable, providing for
the rental to customers of furniture, appliances, electronic equipment and
other personal property.
(ab) "RENTAL PURCHASE CONTRACTS" shall mean those Rental Contracts which
permit customers to acquire ownership of the rental merchandise.
(ac) "RENTAL MERCHANDISE" shall mean (i) the Active Rental Merchandise and
(ii) the Inactive Rental Merchandise.
(ad) "REPRESENTATIVE" shall mean any officer, director, principal,
attorney, accountant, agent, employee or other representative of any Person.
(ae) "SHARES" shall mean all of the issued and outstanding shares of stock
of the Corporation.
(af) "STORE LOCATIONS" shall mean the rental store locations set forth on
Schedule 1.1(af).
(ag) "TANGIBLE PERSONAL PROPERTY" shall mean all tangible personal property
(other than rental merchandise) used to conduct the Business, including,
without limitation,
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vehicles, computers, modems, printers, fax machines, file cabinets, desks,
calculators, telephone systems, counters, safes and security systems, together
with any transferable manufacturer or vendor warranties related thereto.
(ah) "TAX" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, start- up,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, intangible
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.
(ai) "TAX RETURN" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and any amendment thereof.
(aj) "TOTAL ASSETS" shall mean the assets of the Corporation in the classes
of assets included on the summary balance sheet of the Corporation which is
attached hereto as Schedule 1.1(aj).
1.2 OTHER DEFINED TERMS. The following terms shall have meanings defined
for such terms in the Sections set forth below:
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Term Section
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Business Reports 4.5
Closing 3.1
Consulting and Non-Compete Agreement 6.6
Employment and Non-Compete Agreement 6.5
Escrow Agent 2.3(b)
Escrow Funds 2.3(b)
Financial Statements 4.9
Indemnified Party 9.2(d)
Indemnifying Party 9.2(d)
Interim Financial Statements 4.9
Losses 9.2
Real Property Leases 4.10
Shareholder's Agreement 6.7
Third-Party Accountants 2.2(b)
Unconfirmed Rental Purchase Contracts 2.2(b)
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1.3 USAGE OF TERMS. Except where the context otherwise requires, words
importing the singular number shall include the plural number and vice versa.
1.4 REFERENCES TO ARTICLES, SECTIONS, EXHIBITS AND SCHEDULES. All
references in this Agreement to Articles, Sections (and other subdivisions),
Exhibits and Schedules refer to the corresponding Articles, Sections (and other
subdivisions), Exhibits and Schedules of or attached to this Agreement, unless
the context expressly, or by necessary implication otherwise requires. The
parties agree that Seller's will deliver the Schedules provided for in this
Agreement as soon as possible after the commencement of the due diligence
period provided for in Section 6.2 hereof, which Schedules shall be subject to
Buyer's approval.
ARTICLE 2
PURCHASE AND SALE OF SHARES
2.1 TRANSFER OF SHARES.
(a) Prior to the Closing Date, Brady shall exercise the Brady Option,
substantially in accordance with its terms; and
(b) Subject to the terms and conditions contained in this Agreement, on
the Closing Date Sellers shall sell, convey, transfer, assign and deliver to
Buyer, and Buyer shall acquire from Sellers, the Shares, free and clear of all
Encumbrances.
2.2 PURCHASE PRICE; POST-CLOSING ADJUSTMENT.
(a) At the Closing (as hereinafter defined) Buyer shall pay to Sellers for
the sale, transfer, assignment, conveyance and delivery of the Shares an amount
equal to the Purchase Price as provided in Sections 2.2 and 2.3.
(b) On the Closing Date, Sellers shall deliver to Buyer a certificate,
certified by an executive officer of the Corporation (the "Closing
Certificate"), setting forth (i) a pro forma estimate of the Liabilities as of
the Closing Date; (ii) a schedule of the Defaulted Rental Purchase Contracts
existing as of the Closing Date and a computation of the Future Rental Revenue
Stream as of the Closing Date under all Rental Purchase Contracts other than
Defaulted Rental Purchase Contracts; and (iii) a computation of the Net Book
Value of Total Assets as of the Closing Date. The Closing shall proceed, and
any adjustments to the Purchase Price shall be made based on the Closing
Certificate.
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There shall be conducted by Buyer within thirty (30) days following the
Closing Date an audit of (i) the Liabilities of the Corporation as of the day
prior to the Closing Date and (ii) the Corporation's financial statements and
Business Records to determine the existence of any Rental Purchase Contract
(other than a Defaulted Rental Purchase Contract disclosed to Buyer in the
Closing Certificate on the Closing Date) which meets any of the criteria set
forth on Schedule 2.2(b) (each, an "Unconfirmed Rental Purchase Contract") and
to determine the Net Book Value of Total Assets of the Corporation as of the
day prior to the Closing Date. Buyer shall report any increase in the amount
of the Liabilities, any Unconfirmed Rental Purchase Contract or any change in
the Net Book Value of Total Assets to Sellers upon discovery. As promptly as
reasonably possible, but in any event not later than thirty (30) days after the
day prior to the Closing Date, Buyer shall deliver the completed audit report
to Sellers. Sellers shall have fifteen (15) days after receipt of the
completed audit report (A) to object to any increase in the amount of
Liabilities and (B) to clear any Unconfirmed Rental Purchase Contract or
account for any changes in the Net Book Value of Total Assets. If Sellers are
unable, within such 15-day period, to clear any Unconfirmed Rental Contracts
and/or account for any changes in the Net Book Value of Total Assets, the
Purchase Price shall be further reduced by (i) the Future Rental Revenue Stream
of all Unconfirmed Rental Purchase Contracts and (ii) the difference, if
positive, between the Net Book Value of Total Assets set forth in the Closing
Certificate and the Net Book Value of Total Assets as determined in the Buyer's
audit. In addition, if the amount of Liabilities is in excess of the
Liabilities set forth on the Closing Certificate, the Purchase Price shall be
reduced by such amount.
Any adjustments to the Purchase Price pursuant to this Section shall be
borne 75% by Moye and 25% by Brady.
The amount of any such further reduction to the Purchase Price shall be
payable by Sellers within five (5) days after the expiration of such 15-day
period unless Seller contests such adjustment in which case all payments shall
be made within 5 days after the Third Party Accountants determination.
If the Buyer and the Sellers are unable to reach agreement as to any final
Purchase Price adjustment within 15 days after the end of Sellers' 15-day
review period, then Ernst & Young LLP (the "Third-Party Accountants") shall
promptly be retained to undertake the determination of any adjustments to the
Purchase Price necessary under this Section 2.2(b), which determination shall
be made as quickly as possible. Such determination of the Third-Party
Accountants shall be final and binding upon the Buyer and the Sellers, and all
expenses of the Third-Party Accountants shall be borne by the party found by
the Third-Party Accountants to be in the greatest error with respect to its
position on the amount of such adjustment.
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2.3 PAYMENT OF PURCHASE PRICE. On the Closing Date, Buyer shall pay the
Purchase Price to Sellers as follows:
(a) Buyer shall pay to Sellers the Purchase Price (as adjusted, if
applicable) minus the Escrow Funds (as hereinafter defined), as set forth in
Exhibit A hereto.
(b) Buyer shall deliver to Wilmington Trust (the "Escrow Agent") $325,000
(the "Escrow Funds") by wire transfer as instructed by the Escrow Agent in a
letter delivered to Buyer not less than two days prior to the Closing, such
funds to be held (i) to pay for any adjustments in the Purchase Price pursuant
to Section 2.2 and (ii) to provide partial security for Sellers' indemnity
obligations in Article 9 hereof. The Escrow Funds shall be held as follows:
$175,000 shall be held until the audit of the Corporation's financial
statements pursuant to Section 8.8, and $150,000 (the "Indemnity Escrow
Amount") shall be held for a period of three (3) years after the Closing Date.
Sellers and Buyer agree to jointly direct the release of the Escrow Funds,
other than the Indemnity Escrow Amount, as soon as practical after the Purchase
Price adjustment and audit are completed. The Indemnity Escrow Amount, as well
as the other Escrow Funds, shall be held and disbursed in accordance with, and
pursuant to, the terms and conditions of an Escrow Agreement among Sellers,
Buyer and Escrow Agent in substantially the form of Exhibit B.
2.4 SALES TAXES. Sellers shall be responsible for any transfer, sales or
use tax imposed by reason of the transfer of the Shares provided hereunder.
ARTICLE 3
CLOSING
3.1 CLOSING. The closing of the transaction contemplated in this
Agreement (the "Closing") shall be held at 9:00 a.m. local time on the Closing
Date at the offices of the Corporation in New Castle, Delaware, or at such
other place as shall be agreed to by Sellers and Buyer. The Closing shall be
effective as of the commencement of business on the Closing Date.
3.2 STOCK CERTIFICATES AND INSTRUMENTS OF ASSIGNMENT. To effect the
transfer referred to in Section 2.1 on the Closing Date, the Sellers shall
deliver to Buyer, each certificate representing any of the Shares held by the
Sellers and all stock powers or other instruments of assignment reasonably
requested by Buyer. Such instruments of assignment shall be in form and
substance, and shall be executed and delivered in a manner, satisfactory to
Buyer.
3.3 PURCHASE PRICE; CERTIFICATES. On the Closing Date, Buyer shall
deliver and tender the Purchase Price. Buyer and Sellers shall deliver the
certificates, agreements and other items described in Articles 7 and 8 of this
Agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE CORPORATION
Sellers and the Corporation, jointly and severally, represent and warrant to
Buyer that the following are true, correct and complete on the date of this
Agreement, and shall be true, correct and complete as of the Closing Date:
4.1 ORGANIZATION AND GOOD STANDING. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Schedule 4.1 sets forth each jurisdiction other than the
jurisdiction of organization where the Corporation is qualified to do business
and each tradename or assumed name used by the Corporation in the conduct of
the Business. The Corporation is duly qualified to do business in, and in good
standing under the laws of, each jurisdiction in which such qualification is
necessary under the applicable laws as result of the conduct of its respective
business or the ownership of its respective properties. The Corporation has
full power and authority to conduct its business as it is presently being
conducted and to own and lease its properties and assets. The Corporation has
no subsidiaries. The Corporation conducts the Business directly and not
through any association, joint venture, partnership or other business entity.
4.2 AUTHORITY; AUTHORIZATION; BINDING EFFECT. Sellers and the Corporation
have all necessary power and authority and have taken all action necessary to
execute and deliver this Agreement and the instruments to be executed and
delivered pursuant hereto, to consummate the transactions contemplated by this
Agreement and to perform their obligations under this Agreement. Copies of all
resolutions of the Board of Directors of the Corporation with respect to the
transactions contemplated by this Agreement, certified by the Secretary or an
Assistant Secretary of the Corporation in form satisfactory to counsel for
Buyer, have been or will be delivered to Buyer. This Agreement has been duly
executed and delivered by Sellers and the Corporation and constitutes a legal,
valid and binding obligation of Sellers and the Corporation enforceable against
Sellers and the Corporation in accordance with its terms, except as enforcement
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors rights generally
and (ii) the discretion of the appropriate court with respect to specific
performance, injunctive relief or other forms of equitable remedies.
4.3 NO CONFLICTS, VIOLATIONS OR PROCEEDINGS. The execution and delivery
of this Agreement, the consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not and will not result in
(i) a violation of or conflict with any provision of the Certificate of
Incorporation, Bylaws or other organization certificates or documents of the
Corporation, (ii) a breach of, or a default under, any
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material term or provision of any contract, agreement, indebtedness,
encumbrance, commitment, license, franchise, permit, authorization or
concession relating to the Business to which Sellers or the Corporation is a
party, (iii) a violation by Sellers or the Corporation in any material respect
of any statute, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree or award or (iv) an imposition of any Encumbrance on any of
the Shares. There is no pending or, to the knowledge of Sellers or the
Corporation, threatened or anticipated Proceeding against, relating to or
affecting the transactions contemplated by this Agreement.
4.4 NO CONSENTS OR APPROVALS. Except as otherwise set forth on Schedule
4.4, no consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Authority or any other Person is required
to be made or obtained by Sellers or the Corporation in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated by this Agreement.
4.5 CUSTOMER/ACCOUNT INFORMATION. The Corporation has delivered to Buyer
the reports set forth on Schedule 4.5 (the "Business Reports"). The Business
Reports are true and correct in all respects and fairly present the operations
of the Business.
4.6 TITLE TO SHARES. On the Closing Date, Sellers shall own all of the
Shares issued in their name free of any Encumbrance and subject to no
restrictions with respect to transferability, other than restrictions generally
applicable under federal or state securities laws.
4.7 CAPITALIZATION. Schedule 4.7 sets forth the authorized, issued and
outstanding shares of capital stock of the Corporation, the legal and
beneficial ownership thereof and any Encumbrances thereon. All of the Shares
are duly authorized, validly issued, fully paid and nonassessable, and were
issued in compliance with all applicable laws. All voting rights with respect
to the Corporation are vested in the Shares. Except as set forth in Schedule
4.7, (a) there are no outstanding shares of capital stock of the Corporation,
or outstanding securities convertible into or exchangeable or exercisable for
shares of capital stock of the Corporation, (b) there are no bonds, debentures,
notes, or other indebtedness having the right to vote on any matters on which
the Corporation's shareholders may vote, (c) there are no outstanding options,
warrants, rights, contracts, commitments, understandings or arrangements by
which the Corporation is bound to issue, repurchase or otherwise acquire or
retire any capital stock of the Corporation, (d) there are no voting
agreements, voting trusts, buy-sell agreements, options or rights or
obligations relating to the shareholders or the capital stock of the
Corporation, and (e) except for certain provisions of this Agreement, there are
no agreements between the Sellers and the Corporation which will survive the
Closing. Upon consummation of the transactions contemplated by this Agreement,
Buyer will acquire the Shares, free of any Encumbrance.
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4.8 CORPORATE RECORDS. Except as set forth on Schedule 4.8, the minute
books of the Corporation are complete and accurate and contain a complete and
accurate record of all meetings and actions of shareholders and directors and
of any executive committee or other committee of the shareholders or board of
directors. The stock record book of the Corporation is complete and accurate
and contains a complete and accurate record of all share transactions for the
Corporation from the date of its incorporation. True and complete copies of
the Business Records, the minute book and stock record book of the Corporation
have been made available for review by Buyer.
4.9 FINANCIAL STATEMENTS. The Corporation and Sellers have delivered or
will deliver to Buyer unaudited financial statements of the Corporation for
each of the years in the three-year period ended June 30, 1996 (consisting of a
balance sheet, statement of income, profit and loss and a statement of cash
flows), reviewed by the Corporation's accountants (the "Financial Statements").
Except as set forth on Schedule 4.9, the Financial Statements and the Interim
Financial Statements fairly present the financial condition and the results of
operations of the Corporation as of their respective dates and for the periods
then ended and the Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis. The books and records of the Corporation
fairly reflect the assets, liabilities and operations of the Corporation in
accordance with GAAP and the Financial Statements and the Interim Financial
Statements are in conformity therewith.
4.10 REAL PROPERTY. Schedule 4.10 lists and describes briefly all Real
Property. Except as set forth on Schedule 4.10, in the past ten years the
Corporation has not owned any Real Property and currently owns no Real
Property. The Corporation has delivered to Buyer correct and complete copies
of the leases and subleases, as amended to date, for the Real Property (the
"Real Property Leases"). With respect to each Real Property Lease: (i) the
lease or sublease is legal, valid, binding, enforceable and in full force and
effect, (ii) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby, provided, however, that
certain leases may require the landlord's consent to the sale of stock
contemplated by this Agreement, (iii) to the knowledge of the Corporation and
the Sellers no party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification or acceleration
thereunder, (iv) the Corporation has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold and (v) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules and
regulations.
4.11 TANGIBLE PERSONAL PROPERTY. Schedule 4.11, lists all Tangible
Personal Property owned or leased by the Corporation as of July 25, 1996. The
Tangible Personal
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Property constitutes all the tangible personal property used in the operation
of the Business and necessary to conduct the Business as presently conducted.
Except as set forth on Schedule 4.11, the Tangible Personal Property owned by
the Corporation is free and clear of all Encumbrances. All of the Tangible
Personal Property is located at the Real Property. The Corporation makes no
express warranties regarding the Tangible Personal Property set forth in
Schedule 4.11 and expressly disclaims the implied warranties of merchantability
and fitness for a particular purpose. The Tangible Personal Property is in all
material respects in good working order, ordinary wear and tear excepted.
4.12 INTANGIBLE PROPERTY. Schedule 4.12, lists all Intangible Property.
Except as set forth on Schedule 4.12, (i) the Intangible Property is legally
and beneficially owned exclusively by the Corporation and is used exclusively
by the Corporation and is not the subject of any pending or threatened
proceeding for opposition, cancellation, reexamination, revocation or
rectification and, to the knowledge of Sellers and the Corporation, there are
no facts or matters which might give rise to any such proceeding. To the
knowledge of Sellers or the Corporation, the use by the Corporation of the
Intangible Property is not infringing upon or otherwise violating the rights of
any third party in or to such Intangible Property, and no proceedings have been
instituted against, and no notices have been received by, the Corporation that
are presently outstanding alleging that the use by the Corporation of the
Intangible Property infringes upon or otherwise violates any rights of a third
party in or to such Intangible Property. To the knowledge of the Sellers or
the Corporation, the consummation of the transactions contemplated by this
Agreement will not result in the loss of or impairment of any of the
Corporation's rights in the Intangible Property. Except as set forth on
Schedule 4.12, no shareholder, director, officer or employee of the Corporation
owns, directly or indirectly, in whole or in part, any right in the Intangible
Property that the Corporation has used or the use of which is necessary for the
Business as now conducted.
4.13 COMPLIANCE WITH LAWS; PERMITS. Except as set forth in Schedule 4.13,
the Corporation and the conduct of the Business has duly complied with and is
in compliance with all Governmental Requirements. The Corporation has not
received any notice to the effect that, or otherwise been advised that, the
Corporation is not in compliance with any Governmental Requirement. The
Permits constitute all material permits, consents, licenses, franchises,
authorizations and approvals of any Governmental Authority or other Person (a)
which are used in the operation of the Business and (b) which are necessary to
conduct the Business as presently conducted, other than those the failure of
which to obtain would not have a material adverse effect on the Business,
assets or financial condition of the Corporation. All of the Permits are valid
and in full force and effect, no violations thereof have been issued or are
anticipated and no proceeding is pending, or to the knowledge of the
Corporation or the Sellers threatened, to revoke or limit any of them. Except
as set forth on Schedule 4.13, the consummation of the transactions
contemplated by this Agreement do not and will not violate or render any of the
Permits invalid, require any amendment or
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reissuance of any of the Permits or require the consent of the Governmental
Authority which has issued any of the Permits.
4.14 LITIGATION. Except as set forth in Schedule 4.14, there is no claim,
legal action, suit, arbitration, Governmental Authority investigation or other
legal or administrative proceeding, or any order, decree, or judgment pending,
or to the knowledge of the Corporation and the Sellers threatened, against or
relating to the Corporation, its officers, directors or employees, or its
properties, assets or business. Neither the Sellers nor the Corporation knows
of any basis or grounds for any such claim, legal action, suit, arbitration,
Governmental Authority investigation or other legal or administrative
proceeding. None of the matters disclosed in Schedule 4.14 has or will have a
material adverse affect on the Business or financial condition of the
Corporation.
4.15 TAX MATTERS. Except as set forth on Schedule 4.15, the Corporation
has filed all Tax Returns relating to the Business that it was required to
file. All such Tax Returns were correct and complete in all respects provided,
however, that the Corporation has not filed tax returns depreciating the Rental
Merchandise using MACRS (as defined in the Code) and may need either to amend
returns for prior year or make application to the Internal Revenue Service for
a change in accounting method in order to recalculate depreciation in
accordance with MACRS. Sellers hereby acknowledge their liability for any
additional Taxes due as a result of such calculation. Except as set forth on
Schedule 4.15, all Taxes owed by the Corporation (whether or not shown on any
Tax Return) have been paid. There are no Encumbrances on any of the Shares
that arose in connection with any failure (or alleged failure) to pay any Tax.
The Corporation 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. Except as set forth on
Schedule 4.15, there are no federal, state, local or foreign tax liens upon any
of the properties or assets of the Corporation or the Shares, and there are no
unpaid taxes which are or could become a lien on the properties or assets of
the Corporation or the Shares, except for current taxes not yet due and
payable. The Corporation has delivered, or will deliver upon execution of this
Agreement, copies of all federal, state, local and foreign tax returns and
reports filed by the Corporation in the past three years. The Internal Revenue
Service has not raised any question with the Corporation regarding the
Corporation's depreciation methods.
4.16 RENTAL CONTRACTS; RENTAL MERCHANDISE.
(a) With respect to each Rental Contract: (i) the Rental Contract is in
full force and effect according to its terms, (ii) the Rental Contract will
continue to be in full force and effect following the consummation of the
transactions contemplated hereby, in the same manner and to the same extent as
it was prior to consummation and (iii) the Rental
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Contract complies in all respects with Maryland, Delaware or Pennsylvania law,
whichever shall properly apply to such Rental Contract.
(b) The Future Rental Revenue Stream under all Rental Purchase Contracts
(other than Defaulted Rental Purchase Contracts) as of the close of business on
the day before the Closing Date will be greater than or equal to $5,300,000;
provided, however, that Buyer's sole remedy in the event that such
representation is not true as of the Closing Date shall be to accept the
adjustment of the Purchase Price as provided in Section 2.2(b) and to proceed
with the Closing; except that if the Future Rental Revenue Stream under all
Rental Purchase Contracts (other than Defaulted Rental Purchase Contracts) as
of the close of business on the day before the Closing Date is less than
$5,035,000, then Buyer may, at its election, without liabilities to Sellers or
the Corporation, terminate this Agreement.
(c) The Net Book Value of Total Assets as of the close of business on the
day before the Closing Date will be greater than or equal to $2,490,000;
provided, however, that Buyer's sole remedy in the event that such
representation is not true as of the Closing Date shall be to accept the
adjustment of the Purchase Price as provided in Section 2.2(b) and to proceed
with the Closing; except that if the Net Book Value of Total Assets as of the
close of business on the day before the Closing Date is less than $2,365,500,
then Buyer may, at its election, without liability to Sellers or the
Corporation, terminate this Agreement.
(d) The average monthly total revenue under all Rental Contracts
(including such things as rent, processing fees, late fees and customer club
fees, but excluding any sales or other withholding or fiduciary taxes) for the
three months of the calendar year immediately preceding the month in which the
Closing occurs was not less than $584,000 per month.
(e) The Rental Merchandise is in good, merchantable and usable condition,
ordinary wear and tear excepted. Sellers and the Corporation have delivered to
the Buyer or will deliver to Buyer upon execution of this Agreement, an
itemized list of all of the Rental Merchandise as of July 25, 1996 showing the
date of purchase, the supplier, the cost, description of each item sufficient
to identify it to Buyer, and the location of each item. For purposes of this
Section, the term "good, merchantable and usable" shall mean merchandise which
is in good and merchantable condition and of the quality regularly rented to
customers of the Corporation in the usual course of the Business.
4.17 EMPLOYEES. Schedule 4.17 identifies all employees of the Business.
The Corporation is in compliance with all applicable laws respecting employment
practices, terms and conditions of employment, management-labor relations and
wages and hours which are in effect as of the date of this Agreement. The
Corporation is not a party to any labor agreement with any labor organization.
There is no unfair labor practice, charge or complaint against the Corporation
pending or to the knowledge of Sellers and the
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Corporation, threatened before any Governmental Authority. There is no labor
strike or labor disturbance pending or threatened against the Corporation nor
is any material grievance currently being asserted. The Corporation has not
experienced a work stoppage or work slowdown at any time during the three (3)
years immediately preceding the date of this Agreement. There is, to the
knowledge of Sellers and the Corporation, no organizational campaign being
conducted and no dispute as to the representation of any employees of the
Corporation. There is no employment agreement with any employee, officer or
director of the Corporation. The Corporation has good business relations with
its employees at the store manager level and above and, to the knowledge of
Sellers and the Corporation, there is no reason to believe that the transaction
contemplated by this Agreement will adversely affect such business relations.
4.18 CUSTOMERS. No records of customers who have rented merchandise from
the Corporation within the last two years have been destroyed. The customer
lists of the Business accurately identify all of the customers of the Business.
All transactions with customers have been and are currently conducted on an
arm's length basis.
4.19 ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 4.19, to the
best of the Sellers' and the Corporation's knowledge, the Corporation, and its
assets, properties and operations are now and, at all times prior to the
Closing Date, have been in compliance with all Environmental Laws. There has
been and is no Release or threatened Release of any Hazardous Substance at, on,
under, in, to or from any of the Real Property (or, to the knowledge of the
Corporation at, on, under, in, to or from any of the Real Property) whether as
a result of or in connection with the operations and activities at the Real
Property or otherwise, except as disclosed in Schedule 4.19. Neither the
Corporation, nor the Sellers have received any notice of alleged, actual or
potential responsibility for, or any inquiry or investigation regarding, the
presence, Release or threatened Release of any Hazardous Substance at any
location, whether at the Real Property or otherwise, which Hazardous Substances
were allegedly manufactured, used, generated, processed, treated, stored,
disposed or otherwise handled at or transported from the Real Property or
otherwise, except as set forth in Schedule 4.19. Neither the Corporation, nor
the Sellers have received any notice of any other claim, demand or action by
any Person alleging any actual or threatened injury or damage to any Person,
property, natural resource or the environment arising from or relating to the
presence, Release or threatened Release of any Hazardous Substances at, on,
under, in, to or from the Real Property or in connection with any operations or
activities thereat, except as set forth on Schedule 4.19. Neither the Real
Property nor any operations or activities thereat is or has been subject to any
judicial or administrative proceeding, order, consent, agreement or any lien
relating to any Environmental Laws or Environmental Claims. Except as set
forth on Schedule 4.19, (a) there are no underground storage tanks presently
located at the Real Property and to the knowledge of the Sellers and the
Corporation, there have been no releases of any Hazardous Substances from any
underground storage tanks or related piping at the Real Property, (b)
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there are no PCBs located at, on or in the Real Property and (c) there is no
asbestos or friable asbestos-containing material located at, on or in the Real
Property. To the knowledge of the Corporation and the Sellers, the Corporation
has delivered to Buyer or its Representatives copies of all information
requested by Buyer which has been supplied by or on behalf of the Corporation
to any Governmental Authority having the duties of regulation, registration,
authorization or enforcement of or under any Environmental Laws.
4.20 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 4.20, all of the
accounts receivable of the Corporation excluding amounts due under any Accounts
(the "Accounts Receivable") are bona fide receivables, arose during the
ordinary course of the Business and will be collected at their full face
amount, net of reserves. Except as set forth on Schedule 4.20, no Person has
any liens on the Accounts Receivable, there is no right of off-set on any of
the Accounts Receivable, and no agreement for reduction or discount has been
made with respect to any of the Accounts Receivable.
4.21 SUPPLIERS. Except as set forth in Schedule 4.21, within the last two
years, no supplier has indicated to the Corporation that it intends to
terminate its relationship with the Corporation. The Corporation has good
business relationships with each of its current suppliers. There are no
current problems with suppliers which are reasonably likely to adversely affect
the Corporation.
4.22 BANK ACCOUNTS. Schedule 4.22 contains true, complete and correct
lists of all bank accounts and safe deposit boxes maintained by the
Corporation, and all persons entitled to draw thereon, to withdraw therefrom
or, with access thereto.
4.23 BROKERS. Sellers and the Corporation shall pay any finder's fee,
broker's commission or similar payment due and owing to Edward Winn, III, Esq.,
or any Person in connection with the transaction contemplated by this
Agreement.
4.24 MATERIAL MISSTATEMENTS OR OMISSIONS. No representation or warranty by
Sellers or the Corporation in this Agreement, or in any document, exhibit,
statement, certificate, document or schedule furnished to Buyer pursuant to
this Agreement, or in connection with the transactions contemplated by this
Agreement, contains or will contain at the Closing Date any untrue statement of
a material fact, or intentionally omits or will omit to state any material fact
necessary to make the statements or facts contained therein not misleading.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers and the Corporation that the
following are true, correct and complete on the date hereof, and shall be true,
correct and complete as of the Closing Date:
5.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Buyer is duly qualified to do business and is in
good standing in each jurisdiction in which such qualification is necessary
under the applicable law as a result of the conduct of its business or the
ownership of its properties. Buyer has all necessary power and authority to
execute and deliver this Agreement, to consummate the transactions contemplated
by this Agreement and to perform its obligations under this Agreement.
5.2 AUTHORITY; AUTHORIZATION; BINDING EFFECT. Buyer has all necessary
power and authority and has taken all action necessary to execute and deliver
this Agreement and the instruments to be executed and delivered pursuant
hereto, to consummate the transactions contemplated by this Agreement and to
perform its obligations under this Agreement. This Agreement has been duly
executed and delivered by Buyer and constitutes a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except as enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors
rights generally and (ii) the discretion of the appropriate court with respect
to specific performance, injunctive relief or other forms of equitable
remedies.
5.3 NO CONFLICTS, VIOLATIONS OR PROCEEDINGS. The execution and delivery
of this Agreement, the consummation of the transactions contemplated by this
Agreement and the performance by Buyer of its obligations under this Agreement
do not and will not result in (i) a violation of or a conflict with any
provision of the Articles of Incorporation of Buyer or other organizational
documents of Buyer, (ii) a breach of, or a default under, any term or provision
of any contract, agreement, indebtedness, encumbrance, commitment, license,
franchise, permit, authorization or concession to which Buyer is a party or
(iii) a violation by Buyer of any statute, rule, regulation, ordinance, code,
order, judgment, writ, injunction, decree or award. There is no pending or, to
the knowledge of Buyer, threatened or anticipated Proceeding against, relating
to or affecting the transactions contemplated by this Agreement.
5.4 NO CONSENTS OR APPROVALS. No consent, approval or authorization of,
or declaration, filing or registration with, any Governmental Authority or any
other Person is required to be made or obtained by Buyer in connection with the
execution, delivery and
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performance of this Agreement and the consummation of the transaction
contemplated hereby.
5.5 NO BROKERS. Buyer has not entered into and will not enter into any
agreement, arrangement or understanding with any Person which will result in
the obligation of Sellers to pay any finder's fee, brokerage commission or
similar payment in connection with the transaction contemplated hereby.
5.6 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or warranties
by Buyer in this Agreement, or in any document, exhibit, statement,
certificate, document or schedule furnished to Sellers pursuant to this
Agreement, or in connection with the transaction contemplated by this
Agreement, contains or will contain any untrue statement of a material fact, or
intentionally omits or will omit to state any material fact necessary to make
the statements or facts contained therein not misleading.
ARTICLE 6
COVENANTS PRIOR TO CLOSING
Sellers and the Corporation on the one hand, and Buyer on the other hand,
each covenant with the other as follows:
6.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. The Corporation shall continue
to carry on the Business in the ordinary course and substantially in accordance
with past practice and will not take any action inconsistent therewith or with
the consummation of the transactions contemplated by this Agreement. The
Corporation shall inform Buyer of any material changes in the Business.
6.2 INVESTIGATION BY BUYER. For a period of 10 days beginning on the day
after the date of this Agreement, Buyer and each representative of Buyer shall
conduct a due diligence review with respect to the Corporation and the
Business. In connection with such due diligence review, the Corporation and
each representative of the Corporation shall, upon reasonable prior notice, (i)
cooperate with Buyer, each representative of Buyer (ii) provide all
information, and all documents and other tangible items containing or relating
to such information, reasonably requested by Buyer, any representative of Buyer
or any financial institution and (iii) permit each representative of Buyer to
inspect any part of the Business.
6.3 CONSENTS AND BEST EFFORTS. As soon as practicable, Buyer, Sellers and
the Corporation, as applicable, will commence all reasonable action required
hereunder to obtain all consents, approvals and agreements of, and to give all
notices and make all filings with, any Person as may be necessary to authorize,
approve or permit the full and complete sale, conveyance, assignment or
transfer of the Shares, free and clear of any Encumbrances, by a date early
enough to allow the sale hereunder to be consummated by the Closing Date.
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Buyer, Sellers and the Corporation agree to use commercially reasonable best
efforts to satisfy all conditions precedent to their respective obligations to
consummate the transactions contemplated by this Agreement.
6.4 CERTAIN PROHIBITED TRANSACTIONS. During the period beginning on the
date of this Agreement and ending on the Closing Date, the Corporation and the
Sellers shall not:
(a) except in the ordinary course of business, mortgage, pledge or
otherwise encumber or sell, transfer or otherwise dispose of any of the
Tangible Personal Property other than as contemplated by this Agreement;
(b) enter into or terminate any material contract or agreement, or make
any material change in any of its material contracts or agreements relating to
or otherwise affecting the Tangible Personal Property or the Business, other
than in the ordinary course of business and consistent with past practice or as
contemplated by this Agreement provided that, notwithstanding the foregoing,
the Corporation may use cash or cash equivalents to pay down Liabilities,
regardless of whether such paydown is within the ordinary course of business;
or
(c) do any other act which would cause any representation or warranty of
the Corporation or Sellers in this Agreement to be or become untrue in any
material respect.
6.5 EMPLOYMENT AND NON-COMPETE AGREEMENT. On the Closing Date, Buyer and
Brady shall enter into an employment and non-compete agreement substantially in
the form of Exhibit C (the "Employment and Non-Compete Agreement").
6.6 CONSULTING AND NON-COMPETE AGREEMENT. On the Closing Date, Moye and
Buyer shall enter into a consulting and non-compete agreement substantially in
the form of Exhibit D (the "Consulting and Non-Compete Agreement").
6.7 SHAREHOLDER'S AGREEMENT. On the Closing Date, Brady and Buyer shall
enter into a shareholder's agreement substantially in the form of Exhibit E
(the "Shareholder's Agreement").
6.8 INTANGIBLE PROPERTY. On or prior to the Closing Date, the Corporation
will cooperate with Buyer to enable Buyer to obtain and use on and after the
Closing Date the telephone numbers used in the Business.
6.9 NO RAIDING. If the transaction contemplated by this Agreement does
not close, for any reason whatsoever, then for two (2) years after the date of
this Agreement, Buyer shall not employ nor recruit or induce any employee or
officer of the Corporation to
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leave the employ of the Corporation (whether or not to be employed by or with
the Buyer) nor attempt to recruit or induce any employee or officer of the
Corporation to leave the employ of the Corporation, (whether or not to be
employed by or with the Buyer). Upon breach of this covenant, Buyer shall pay
to the Corporation all damages suffered by the Corporation as a result of any
employee leaving the Corporation due in whole or part to the efforts of Buyer.
Such damages shall include, but shall not be limited to, the cost of recruiting
and training replacement employees. Notwithstanding any other provision of
this Agreement, Buyer agrees that the Court of Chancery in Wilmington, Delaware
shall possess jurisdiction over the subject matter and over Buyer's person for
the purpose of obtaining injunctive relief prohibiting violation of this
Section. Buyer further agrees to explicitly waive all provisions applicable in
the Court of Chancery relating to notice upon the initiation of an action for
injunctive relief, so that the Corporation may obtain ex parte relief. Buyer
agrees that it shall not object to the sufficiency of notice or of the
propriety of ex parte relief sought by the Corporation. Buyer further shall
pay to the Corporation the Corporation's reasonable legal and other fees
incurred by the Corporation in seeking enforcement of this Section. The
provisions of this Section shall survive the termination of this Agreement; and
shall inure to the benefit of any majority owner or owners of the Corporation
or majority owner or owners of the assets of the Corporation following a sale
of all or substantially all of the assets or stock of the Corporation by its
present ownership.
ARTICLE 7
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to consummate the transactions contemplated by
this Agreement are subject, in the discretion of Sellers, to the satisfaction,
on or prior to the Closing Date, of each of the following conditions (any of
which may, in Sellers' absolute and sole discretion, be waived in whole or in
part in writing):
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date, and Buyer shall have
performed all agreements and covenants required hereby to be performed by it
prior to or at the Closing Date.
7.2 CONSENTS. All consents, approvals and waivers necessary to permit
Sellers to transfer the Shares to Buyer as contemplated hereby shall have been
obtained, unless the failure to obtain any such consent, approval or waiver
would not have a material adverse effect upon Sellers.
7.3 NO PROCEEDINGS. No Proceeding by any Person shall have been
instituted or threatened which questions the validity or legality of the
transaction contemplated hereby and which could reasonably be expected to
affect materially the right or ability of Sellers to transfer the Shares to
Buyer.
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7.4 CERTIFICATES. Buyer will furnish Sellers with such certificates of
its officers and others to evidence compliance with the conditions set forth in
this Article 7 as may be reasonably requested by Sellers.
7.5 CORPORATE DOCUMENTS. Sellers shall have received from Buyer (i)
resolutions adopted by the board of directors of Buyer approving this Agreement
and the transactions contemplated hereby and (ii) a list of the officers of
Buyer executing this Agreement and any agreement contemplated by this
Agreement, certified by the Secretary or an Assistant Secretary of Buyer.
7.6 OTHER AGREEMENTS. Concurrently with the Closing, Buyer shall have
executed and delivered to Moye the Consulting and Non-Compete Agreement and
Buyer shall have executed and delivered to Brady the Employment and Non-Compete
Agreement and the Note (as defined in Article 6).
7.7 PAYMENT. Buyer shall have, concurrently with the Closing, paid the
Purchase Price.
7.8 PROOF OF BUYER FINANCING. Prior to the commencement of the due
diligence review contemplated by Section 6.2 hereof, Buyer shall have furnished
to the Corporation and Sellers a letter or a document from Buyer's financing
sources demonstrating to Sellers' reasonable satisfaction that Buyer has the
financial capability of consummating the transaction contemplated in this
Agreement.
ARTICLE 8
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transaction provided for hereby
are subject, in the discretion of Buyer, to the satisfaction, on or prior to
the Closing Date, of each of the following conditions (any of which may, in
Buyer's absolute and sole discretion, be waived in whole or in part in
writing):
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Sellers and the Corporation contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date, and
Sellers and the Corporation shall have performed all agreements and covenants
required hereby to be performed by each of them prior to or at the Closing
Date.
8.2 CONSENTS. All consents, approvals and waivers necessary to permit
Sellers to transfer the Shares to Buyer as contemplated hereby shall have been
obtained, except for consents which in the aggregate if not obtained would not
have any material adverse affect on the Business.
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8.3 NO PROCEEDINGS. No Proceeding by any Person shall have been
instituted or threatened which questions the validity or legality of the
transaction contemplated hereby and which could reasonably be expected to
affect materially the right or ability of Buyer to own or operate the Business
after the Closing.
8.4 CERTIFICATES. Sellers and the Corporation will furnish Buyer with
such certificates to evidence compliance with the conditions set forth in this
Article 8 as may be reasonably requested by Buyer.
8.5 DUE DILIGENCE. Buyer shall have completed its due diligence review
contemplated by Section 6.2 and shall not have found any material variance from
the representations and warranties in Sections 4.13, 4.14, 4.15, 4.16 or 4.19.
8.6 NO INTERRUPTION OR ADVERSE CHANGE. Prior to or at the time of
Closing, (i) no interruption or suspension of a material volume of the Business
as now conducted shall have occurred or been threatened and (ii) no adverse
change in the Business shall have occurred or been threatened.
8.7 CONSENT OF FINANCIAL INSTITUTION. The Buyer shall have received the
consent and approval of its financial institution to the transactions
contemplated by this Agreement.
8.8 DELIVERY OF FINANCIAL STATEMENTS. The Corporation shall have either
delivered its Financial Statements (including two years' income statements) in
such a form that, in the reasonable opinion of Buyer and its certified public
accountants, they can be audited by the Closing Date or within forty-five (45)
days thereafter or, in the event that Buyer and Sellers agree that Sellers'
certified public accountants perform such audit of the Corporation's Financial
Statements, instead of Buyer's certified public accountants, the Corporation
shall deliver to Buyer at Closing an engagement letter from its certified
public accountants stating that the accountants will provide such audit within
such 45-day period and that they will deliver, without charge to Buyer, all
manually signed consents to the use of the Corporation's Financial Statements
that Buyer may, in its sole discretion, request, including but not limited to,
consents in connection with quarterly filings with the Securities and Exchange
Commission, proxy statements, annual reports and private placement memorandums.
Notwithstanding any of the foregoing, it is not a condition to the Buyer's
obligations to consummate the transactions provided for hereby that the
Corporation's inventory has been previously audited within the meaning of
Generally Accepted Auditing Standards; and it is specifically understood by
Buyer that Corporation has not heretofore caused audited financial statements
to be prepared.
8.9 CORPORATE DOCUMENTS. Buyer shall have received from Sellers and the
Corporation (i) resolutions adopted by the board of directors and shareholders
of the
<PAGE> 25
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Corporation approving this Agreement and the transactions contemplated hereby
and (ii) a list of the officers of the Corporation executing this Agreement and
each agreement contemplated by this Agreement, certified by the Secretary or
Assistant Secretary of the Corporation.
8.10 OTHER AGREEMENTS. At or before the Closing, Brady shall have executed
and delivered to Buyer the Employment and Non-Compete Agreement and the
Shareholder's Agreement and Moye shall have executed and delivered to Buyer the
Consulting and Non-Compete Agreement.
ARTICLE 9
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Sellers and the Corporation, and of Buyer,
contained in this Agreement shall, without regard to any investigation made by
any of the parties hereto, survive the Closing Date until July 31, 1998;
provided, however, that the representations and warranties made in Section 4.6
(Title) shall survive the Closing indefinitely. The covenants and agreements
of Sellers, the Corporation and Buyer contained in this Agreement shall survive
the Closing Date until they have been fully satisfied or otherwise discharged.
9.2 INDEMNIFICATIONS.
(a) BY SELLERS. Sellers, jointly and severally, shall indemnify, save and
hold harmless Buyer (before and after the Closing) and the Corporation (after
the Closing only) from, against and in respect of the following (individually a
"Loss" and collectively "Losses"):
(i) any and all loss, liability, deficiency or damage suffered or
incurred by Buyer by reason of any untrue representation, breach of warranty or
nonfulfillment of any covenant or agreement by Sellers or the Corporation in
this Agreement or in any agreement, instrument or other writing delivered to
Buyer by Sellers or the Corporation pursuant to or in connection with this
Agreement;
(ii) any claim against the Corporation or Buyer for (x) a finder's fee,
investment banker's fee, or brokerage or other commission or (y) for legal
expenses, in each case by any Person for services alleged to have been rendered
at the instance of the Corporation or Sellers with respect to this Agreement or
the transaction contemplated by this Agreement;
<PAGE> 26
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(iii) any and all loss, liability, deficiency or damage suffered or
incurred by Buyer or the Corporation relating to any claim, suit, litigation or
proceeding with respect to events occurring prior to the Closing Date which is
not fully reserved for on the Corporation's Financial Statements, except to the
extent fully covered by insurance;
(iv) any liabilities and obligations for taxes which are or shall be
incurred with respect to the operation of the Corporation on or prior to the
Closing Date which shall not have been fully reserved or accrued for on the
Corporation's Financial Statements, except to the extent that any election by
the Buyer under any tax law shall have the effect of increasing any liability
or obligation for any tax with respect to the operations of the Corporation on
or prior to the Closing Date other than any election by Buyer or the
Corporation required in order for Buyer or the Corporation to be in compliance
with the Code or ERISA, including, but not limited to, MACRS;
(v) any and all loss, liability, deficiency or damage suffered or
incurred by Buyer or the Corporation in connection with any employee plan with
respect to the operation of the Corporation on or prior to the Closing Date
which is not fully reserved for on the Corporation's Financial Statements,
except to the extent any election by the Buyer under any law (including,
without limitation, the Code and ERISA and similar state laws) shall have the
effect of increasing any liability or obligation in connection with any
employee plan with respect to the operation of the Corporation on or prior to
the Closing Date;
(vi) any and all loss, liability, deficiency or damage suffered or
incurred by Buyer or the Corporation caused by or arising out of the
generation, treatment, handling, storage or disposal of Hazardous Substances or
noncompliance with any Environmental Laws prior to the Closing Date regardless
of whether or not the matter or matters giving rise to any such Losses were
disclosed to Buyer in Schedule 4.19 or known by the Sellers at the date of this
Agreement; and
(vii) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, (including, but not limited to,
legal fees and expenses) incident to any of the foregoing or incurred in
enforcing this Agreement or any agreement provided for in this Agreement.
(b) INDEMNIFICATION BY CORPORATION. The Corporation (with respect only to
all obligations of the Corporation prior to Closing) shall indemnify, save and
hold harmless Buyer from and against any and all damages incurred by Buyer the
reason of the breach or non-fulfillment of any covenant or agreement by the
Corporation contained in Sections 6.2, 6.3, 6.4, Article 9 and Sections 11.7
and 11.10 of this Agreement, and any and all actions, suits, proceedings,
claims, demand, assessments, judgments, costs and expenses (including, but not
limited to, legal and experts' fees) incident to any of the foregoing.
<PAGE> 27
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(c) BY BUYER. Buyer shall indemnify and save and hold harmless Sellers
from, against and in respect of the following (individually, a "Loss" and,
collectively, "Losses"):
(i) any and all loss, liability, deficiency or damage suffered or
incurred by Sellers, resulting from any untrue representation, breach of
warranty or nonfulfillment of any covenant or agreement by Buyer (including
failure to deliver the Purchase Price) contained in this Agreement or in any
agreement, instrument or other writing delivered to Sellers pursuant to or in
connection with this Agreement;
(ii) any claim against Sellers for a finder's fee, investment banker's
fee, or brokerage or other commission by any Person for services alleged to
have been rendered at the instance of Buyer with respect to this Agreement or
the transaction contemplated by this Agreement;
(iii) any and all loss, liability, deficiency or damage suffered or
incurred by Sellers relating to any claim, suit, litigation or proceeding with
respect to events occurring after the Closing Date; and
(iv) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, (including, but not limited to,
legal fees and expenses) incident to any of the foregoing or incurred in
enforcing this Agreement or any agreement provided for in this Agreement.
(d) LIMITATION ON SELLERS' LIABILITY. With respect to any Losses covered
by Sellers' indemnification obligations under Section 9.2(a)(i), the aggregate
liability of Sellers shall be limited to Losses which in the aggregate exceed
Seventy-Five Thousand Dollars ($75,000); provided, however, that such
limitation shall not apply to any other Losses covered by Section 9.2(a) nor to
any Losses incurred as a result of fraud and all obligations for
indemnification shall be apportioned 75% to Moye and 25% to Brady.
(e) NOTIFICATION OF CLAIMS. In the event that any party entitled to
indemnification pursuant to this Agreement (the "Indemnified Party") proposes
to make any claim for such indemnification, the Indemnified Party shall deliver
to the indemnifying party (the "Indemnifying Party"), which delivery with
respect to the Losses arising from breaches of representations and warranties
shall be on or prior to the date upon which the applicable representations and
warranties expire pursuant to Section 9.1 hereof, a signed certificate, which
certificate shall (i) state that Losses have been incurred or that a claim has
been made for which Losses may be incurred, (ii) specify the sections of this
Agreement under which such claim is made and (iii) specify in reasonable detail
each individual item of Loss or other claim including the amount thereof and
the date such Loss was incurred. In addition, each Indemnified Party shall
give notice to the Indemnifying Party within ten (10) days of its
<PAGE> 28
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receipt of service of any suit or proceeding which pertains to a matter for
which indemnification may be sought; provided, however, that the failure to
give such notice shall not relieve the Indemnifying Party of its obligations
hereunder if the Indemnifying Party has not been prejudiced thereby.
(f) DEFENSE OF THIRD PARTY CLAIMS AND EXTENSION OF STATUTE OF LIMITATIONS.
Any Indemnified Party shall in good faith cooperate and assist the Indemnifying
Party in defending against any claims or asserted claims with respect to which
the Indemnified Party seeks indemnification under this Agreement. If requested
by the Indemnifying Party, the Indemnified Party shall join in any action,
litigation, arbitration or proceeding, provided that the Indemnifying Party
shall pay the costs of the Indemnified Party, including reasonable attorney's
fees, caused by such joinder. The Indemnified Party shall not settle or
compromise any claim or asserted claim, nor agree to extend any statute of
limitations applicable to any claim or asserted claim, which the Indemnified
Party seeks indemnification under this Agreement, without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld. Any right of participation of the Indemnifying Party shall be
subject, as a condition precedent, to such party's acknowledging to the
Indemnified Party, in writing, the obligation of the Indemnifying Party to
indemnify the other party hereto in accordance with the terms of this
Agreement. Upon such acknowledgement, the Indemnified Party will provide the
Indemnifying Party will all reasonably available information, assistance, and
authority to enable the Indemnifying Party to jointly participate in such
defense or settlement, and upon the Indemnifying Party's payment of any amounts
due with respect to such Proceeding, the Indemnified Party will, to the extent
of such payment, assign or cause to be assigned to the Indemnifying Party the
claims of the Indemnified Party, if any, against such third parties with
respect to which such payment is made.
ARTICLE 10
COVENANTS AFTER THE CLOSING
10.1 BOOKS AND RECORDS. For a period of four years following the Closing
Date, Buyer shall afford to Sellers and its representatives, during normal
business hours, reasonable access to the books, records and other data of
Sellers in the possession of Buyer with respect to the period prior to the
Closing Date to the extent that such access may be reasonably required by
Sellers to facilitate (i) the preparation by Sellers of tax returns as they may
be required to file with respect to their operation of the Business prior to
Closing or in connection with any audit, amended return, claim for refund or
any proceeding with respect thereto, (ii) the investigation, litigation and
final disposition of any claims which may have been or may be made against
Sellers in connection with their operation of the Business prior to Closing,
(iii) the payment of any indemnity under this Agreement or (iv) any other
reasonable purpose. At any time after the Closing Date, Buyer may dispose of,
alter or destroy any such books, records and other data upon giving sixty (60)
days' prior notice to
<PAGE> 29
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Sellers to permit Sellers, at their expense, to examine, duplicate or repossess
such books, records and other data. For a period of four (4) years following
the Closing Date, Sellers shall afford to Buyer and its representatives, during
normal business hours, reasonable access to the books, records and other data
of Sellers which Sellers retains after the Closing Date. At any time after the
Closing Date, Sellers may dispose of, alter or destroy any such books, records
and other data upon giving sixty (60) days' prior written notice to Buyer to
permit it, at its expense, to examine, duplicate or possess such books, records
and other data.
10.2 FURTHER ASSURANCES. Both before and after the Closing Date, each
party will cooperate in good faith with the other and will take all appropriate
action and execute any documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder.
ARTICLE 11
MISCELLANEOUS
11.1 TERMINATION. This Agreement may be terminated upon ten (10) days
prior written notice at any time prior to Closing without liability of any
party or any other party:
(i) by mutual written consent of Buyer and Sellers;
(ii) by Buyer, if Closing has not occurred on or before August 30, 1996
as a result of the nonfulfillment of any of the conditions to
Buyer's obligation to perform contained in Article 8 of this
Agreement after written notice of such nonfulfillment and reasonable
opportunity to cure; or
(iii) by Sellers if Closing has not occurred on or before August 30, 1996
as a result of the nonfulfillment of any of the conditions to its
obligations to perform contained in Article 7 of this Agreement
after written notice of such nonfulfillment and reasonable
opportunity to cure.
This Agreement may also be terminated by Sellers on the one hand, or Buyer, on
the other hand, upon ten (10) days prior written notice if a non-terminating
party has breached any material covenant to be performed by it pursuant to this
Agreement. Termination of this Agreement shall not affect in any way the
continuing obligations of the parties hereto pursuant to Section 11.7 hereof
relating to expenses.
<PAGE> 30
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11.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Sellers or the Corporation on the one
hand, or Buyer on the other hand, without the prior written consent of the
other parties. No assignment of this Agreement by Buyer shall relieve Buyer of
any of its obligations hereunder. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of Sellers, the Corporation and
Buyer and their respective successors and assigns, and no other Person shall
have any right or obligation under this Agreement.
11.3 NOTICES. Unless otherwise provided in this Agreement, any notice,
request, instruction or other document to be given hereunder by either party to
the other shall be in writing and delivered personally or mailed by certified
mail, postage prepaid, return receipt requested, or by telecopy, with a
confirmation via one of the preceding methods, as follows:
If to Moye or the Corporation, addressed to:
Kenneth H. Moye
44 Talley Ho Drive
Fairhill, Maryland 21921
Telephone: (410) 398-3593
With a copy to:
Overstreet, Winn & Edwards, P.C.
Edward L. Winn, III, Esq.
1208 West 5th Street
Austin, Texas 98703
Telephone: (512) 474-8436
Telecopy : (512) 476-3849
If to Brady, addressed to:
Lee Brady
15 Blythe Court
New Castle, Delaware 19720
Telephone: (302) 324-1967
<PAGE> 31
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With a copy to:
Murray Sawyer, Esq.
Sawyer, Akin & Herron
1220 N. Market Street
Suite 606
P.O. Box 25047
Wilmington, Delaware 19899
Telephone: (302) 655-5552
Telecopy: (302) 655-3697
If to Buyer, addressed to:
Rent-Way, Inc.
Attn: Ronald D. DeMoss,
Vice President and General Counsel
3230 West Lake Road
Erie, Pennsylvania 16505
Telephone: (814) 836-0618
Telecopy : (814) 835-6865
and to:
Hodgson, Russ, Andrews, Woods & Goodyear, LLP
Attn: Robert B. Fleming, Jr., Esq.
Paul J. Vallone, Esq.
1800 One M&T Plaza
Buffalo, NY 14203-2391
Telephone: (716) 856-4000
Telecopy : (716) 849-0349
and be effective (i) if given by hand delivery, when left at the address of the
addressee as above provided, (ii) if given by mail, on the third business day
after such communication is deposited in the mail, addressed as above provided,
and (iii) if given by telecopy, when telecopied to the number above provided,
except that notices of a change of address shall not be effective until
received; or to such other place and with such other copies as either party may
designate as to itself by written notice to the other party.
11.4 CHOICE OF LAW. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the
Commonwealth of Pennsylvania (without reference to the choice of law provisions
of Pennsylvania law) except
<PAGE> 32
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with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as
to those matters the law of the jurisdiction under which the respective entity
was incorporated shall govern.
11.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, together
with all Exhibits and Schedules hereto, constitutes the entire agreement
between Sellers, the Corporation and Buyer pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of Sellers, the Corporation and Buyer.
In addition, this Agreement shall not supersede the terms of a previously
executed Confidentiality Agreement between Moye and Buyer. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any provision of this
Agreement shall be deemed or shall constitute a waiver of any other provision
of this Agreement (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided in such writing.
11.6 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Any party may execute
this Agreement by facsimile signature and the other party shall be entitled to
rely on such facsimile signature as evidence that this Agreement has been duly
executed by such party. Any party executing this Agreement by facsimile
signature shall immediately forward to the other party an original signature
page by overnight mail.
11.7 EXPENSES. Except as otherwise specified in this Agreement, the
Corporation shall pay its own and the Sellers shall pay their own, and Buyer
shall pay its own, legal, accounting and other expenses incident to the
negotiation and preparation of this Agreement and the consummation of the
transactions contemplated hereby.
11.8 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.9 TITLES. The titles, captions or headings of the articles and sections
of this Agreement are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.10 PUBLICITY. Neither Sellers nor the Corporation shall issue any press
release or make any public statement regarding the transaction contemplated
hereby prior to
<PAGE> 33
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the Closing Date, without the prior approval of Buyer, except as may be
required by applicable law, in which case the party required to issue such
press release or make such
public statement will consult with the other party prior to issuing such press
release or making such public statement.
IN WITNESS WHEREOF, the Corporation and Buyer have caused this Agreement to
be duly executed on their respective behalf by their respective duly authorized
officers, and the Sellers have executed this Agreement, as of the day and year
indicated at the beginning of this Agreement. Any individual signing on behalf
of a corporation represents and warrants that he has power and authority to
bind the corporation.
RENT-WAY, INC.
By: /s/ WILLIAM E. MORGENSTERN
-------------------------------------------
William E. Morgenstern
President and Chief Executive Officer
DIAMOND LEASING CORPORATION
By: /s/ KENNETH H. MOYE
-------------------------------------------
Kenneth H. Moye
President
/s/ KENNETH H. MOYE
-------------------------------------------
Kenneth H. Moye
/s/ LEE BRADY
-------------------------------------------
Lee Brady
<PAGE> 34
SCHEDULES
<TABLE>
<CAPTION>
Schedule Description
-------- -----------
<S> <C>
Schedule 1.1(af) Store Locations
Schedule 1.1(aj) Total Assets
Schedule 4.1 Organization
Schedule 4.4 Consents and Approvals
Schedule 4.5 Customers
Schedule 4.7 Capitalization
Schedule 4.8 Corporate Records
Schedule 4.9 Financial Statements
Schedule 4.10 Real Property
Schedule 4.11 Tangible Personal Property
Schedule 4.12 Intangible Property
Schedule 4.13 Compliance with Laws
Schedule 4.14 Litigation
Schedule 4.15 Tax Matters
Schedule 4.17 Employees
Schedule 4.19 Environmental Matters
Schedule 4.20 Accounts Receivable
Schedule 4.21 Suppliers
Schedule 4.22 Bank Accounts
</TABLE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
A Payment of Purchase Price
B Escrow Agreement
C Employment and Non-Compete Agreement
D Consulting Agreement and Non Compete
Agreement
E Shareholder's Agreement
F Note
</TABLE>
<PAGE> 35
SCHEDULE 2.2(C)
UNCONFIRMED RENTAL PURCHASE CONTRACT CRITERIA
An "Unconfirmed Rental Purchase Contract" shall mean:
1. A Rental Purchase Contract which is fictitious.
2. A Rental Purchase Contract which meets one or more of the following
criteria:
a. The customer thereto has skipped, at or before the Closing, and cannot be
located; or
b. The Rental Merchandise covered thereby, at or before the Closing, was
destroyed or reported destroyed, was stolen or reported stolen, was
damaged and cannot be repaired, or was missing or reported missing;
An "Unconfirmed Rental Contract" may be cleared as follows:
1. To clear a fictitious Rental Contract, the Sellers must (i) establish that
the Rental Contract meets the definition of Rental Contract in Article
1.1(ab) of this Agreement, (ii) provide a valid address where the customer
resides, (iii) establish that the customer's Rental Merchandise is at the
customer's residence and that the merchandise is in "good, merchantable,
and usable" condition as that term is defined in Article 4.16(e) of this
Agreement, and (iv) obtain a payment that can be verified as being
received from the customer and that brings the customer's account current.
A fictitious Rental Contract shall not be confirmed merely by the recovery
of merchandise subject to it.
2. To clear a Rental Contract where the customer skipped at or before closing
and cannot be located, the Sellers must establish the same criteria
necessary to reinstate a fictitious Rental Contract.
3. To clear a Rental Contract where, at or before closing, the Rental
Merchandise was reported destroyed, missing, or stolen, the Sellers must
(i) recover the merchandise and (ii) restore the merchandise to "good,
merchantable, and usable" condition as that term is defined in Article
4.16(e) of this Agreement.
<PAGE> 36
SCHEDULE 4.5
BUSINESS REPORTS
1. Complete customer list for all open Accounts.
2. Complete list of all Rental Purchase Contracts with pertinent data.
3. Complete list of all past-due accounts.
4. Complete list of all Inactive Rental Merchandise.
5. Complete list of all Active Rental Merchandise.
6. Projected revenue report.
7. June 30, 1996 Balance Sheet
<PAGE> 37
EXHIBIT A
PAYMENT OF PURCHASE PRICE
1. Twenty-five percent (25%) of the Purchase Price subject to a cap of
$1,070,000 (as adjusted pursuant to Sections 2.2 and 2.3 of the Agreement)
(the "Brady Amount") shall be paid to Brady as follows:
2. The balance of the Purchase Price (as adjusted pursuant to Sections 2.2 and
2.3 of the Agreement) shall be paid by wire transfer to Moye at the Closing.
A. 20,358 Shares of Rent-Way, Inc. Common Stock having a Market Value (as
hereinafter defined) of $250,000 shall be delivered into an Escrow
Account to be established on terms mutually agreeable to Brady and Buyer
for a period of two (2) years. The shares shall be restricted stock,
subject to, among other regulations, Securities and Exchange Commission
Rule 144 holding period and other restrictions and otherwise subject to
the terms and conditions of a Shareholder's Agreement substantially in
the form of Exhibit E. The term "Market Value" shall mean the average
closing price of Rent-Way, Inc. Common Stock as reported in the Wall
Street Journal for the 20 trading days ending on the third business day
prior to the Closing Date. The balance of the Brady Amount shall be
paid in cash (the "Non-Stock Amount") as hereinafter provided.
B. $150,000 of the Non Stock Amount shall be paid by wire transfer to Brady
at the Closing.
C. For the balance of the Non-Stock Amount, the Buyer shall give Brady a
promissory note, substantially in the form of Exhibit F, providing for
the payment of $100,000 to Brady on the first anniversary of the Closing
Date and the balance to Brady on the second anniversary of the Closing
Date (the "Note"). In order to provide Brady with security that the
Company will have the funds to pay the amounts due under the Note, the
Company will deposit the amount provided for herein into an escrow
account with the Raymond James Company in Wilmington, Delaware the terms
of which will provide, among other things, that the payments provided
for in the Note will be paid or the dates provided for therein and that
the account will be in the name of Buyer, for the benefit of Brady. The
terms and conditions of this escrow agreement shall be an mutually
agreed upon by Brady and Buyer.
3. In addition to the Purchase Price, Brady shall receive an additional cash
payment at Closing of $20,000 which shall be paid by wire transfer to Brady.
[employment signing bonus]
<PAGE> 38
EXHIBIT A
PAYMENT OF PURCHASE PRICE
<PAGE> 39
EXHIBIT B
ESCROW AGREEMENT
THIS AGREEMENT dated July 25, 1996, by and among RENT-WAY, INC., a
Pennsylvania corporation ("Buyer"), KENNETH H. MOYE, an individual and LEE
BRADY, an individual (together the "Sellers" and individually a "Seller"), and
WILMINGTON TRUST, a Delaware banking corporation (the "Escrow Agent").
RECITALS:
A. Buyer, Sellers and Diamond Leasing Corporation, a Delaware corporation
("Diamond") entered into a Stock Purchase Agreement dated July 20, 1996 (the
"Purchase Agreement") pursuant to which Sellers are selling to Buyer and Buyer
is purchasing from Sellers all of the issued and outstanding shares of Diamond.
B. Pursuant to Section 2.3 of the Purchase Agreement, Buyer is required to
deposit with the Escrow Agent Three Hundred Twenty Five Thousand Dollars
($325,000.00) to be held and released in accordance with the Purchase Agreement
and this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the parties hereto agree as follows:
1. ESCROW OF COLLATERAL. Upon the delivery by Buyer of $325,000.00 in cash
by wire transfer in accordance with the wire transfer instructions set forth on
Schedule A attached hereto (such funds and all interest which may be earned
with respect thereto hereinafter being referred to as the "Deposit"), the
Escrow Agent agrees to hold the Deposit pursuant to the terms and conditions of
this Agreement. Simultaneously with the delivery of the Deposit to the Escrow
Agent, the parties shall cause to be delivered to the Escrow Agent appropriate
IRS Forms W-9. Interest on the Deposit shall be for the account of Sellers.
2. RELEASE OF DEPOSIT. Except as otherwise provided in this Agreement, no
portion of the Deposit shall be released by the Escrow Agent unless and until
any of the following conditions shall have occurred:
(a) The Escrow Agent shall have received an original release document
signed by Buyer and Sellers, specifically directing all or any portion of the
Deposit be delivered in the manner and to the recipients specified therein; or
(b) A final order or judgment of a court of competent jurisdiction shall
have been issued and a certified copy thereof shall have been delivered to the
Escrow Agent directing delivery of all or any portion of the Deposit in the
manner and to the recipients specified therein; or
<PAGE> 40
(c) Subject to Paragraph (d) below, upon receipt of notice from the Buyer
(the "Notice") that it is entitled to a payment pursuant to Section 9.2 of the
Purchase Agreement and the amount thereof, the Escrow Agent will, at least 11
days but not more than 15 days following receipt of such notice, disburse to
the Buyer an amount equal to the lesser of (i) the balance of the Deposit or
(ii) the amount specified in the Notice. Any Notice must specify with
reasonable detail the reasons why the requesting party is entitled to the
disbursement.
(d) Notwithstanding the foregoing, in the event that the Sellers object to
the disbursement of any portion of the Deposit pursuant to Paragraph (c) above,
they must so notify the Escrow Agent not more than 10 days from the date of the
Notice. Any objection must specify with reasonable detail the reasons why the
objecting party is objecting to the disbursement. Such a dispute will be
resolved in the manner set forth in Section 4 below and the Escrow Agent will
continue to hold the Deposit until it has received a signed arbitration award
or nonappealable court order from a court of competent jurisdiction directing
the disposition of such property, or until it has received appropriate written
instructions signed both by the Sellers and the Buyer.
(e) On the third anniversary of the date hereof, the Escrow Agent will set
aside and retain in escrow any amount specified in a Notice theretofore
received from the Buyer pursuant to Paragraph (c) of this Section 2 and not
theretofore disbursed or otherwise resolved and will disburse the remainder of
the Escrow Fund, if any, to the Sellers for distribution to the persons
entitled thereto in accordance with the Purchase Agreement (Moye shall be
entitled to 75% of such funds and Brady shall be entitled to 25% of such
funds). Once the Buyer's claim set forth in any such Notice has been
determined, the Escrow Agent will distribute the amount of such claim as
finally determined or agreed to the Buyer and will distribute the remainder to
the Sellers as set forth in the preceding sentence.
3. PROOF OF CONDITIONS FOR RELEASE. The Escrow Agent may refuse to release
any part of the Deposit under Section 2 of this Agreement unless it has been
fully satisfied that the written notice referred to in such subsections
contains the genuine signature of Buyer or Seller. Nothing herein shall
require the Escrow Agent to establish the genuineness of any signature but,
instead, the Escrow Agent may in good faith rely upon any signature appearing
to be that of an officer of the Buyer or of the Sellers as being genuine and/or
duly authorized, in the absence of actual information to the contrary.
4. DISPUTES. If the Escrow Agent has fulfilled its duties under this
Agreement, the Escrow Agent shall not, without its consent, be made a party to
any action, proceeding or arbitration relating to this Agreement. Any dispute
arising under this Agreement between Buyer and Sellers shall be submitted to
the American Arbitration Association to be settled by arbitration to be
conducted in Erie, Pennsylvania in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect. Any dispute
arising under this Agreement involving the Escrow Agent shall not be submitted
to arbitration unless all parties to the dispute agree in writing to seek
arbitration. The award rendered in any such arbitration shall be final and
binding and may be entered in any court having jurisdiction thereof. The
Arbitrator or Arbitrators shall have the power to issue mandatory orders and
restraining orders, including orders of specific performance, in connection
with such arbitration. This Section 4 shall be enforceable under prevailing
<PAGE> 41
arbitration laws. During the continuance of any arbitration the parties shall
continue to perform their respective obligations hereunder.
5. ADDITIONAL REMEDIES. The parties acknowledge that any rights of the
Buyer to indemnification pursuant to this Agreement shall be in addition to any
rights available to the Buyer pursuant to the Purchase Agreement or any remedy
available at law or in equity.
6. TERM. This Agreement shall remain in effect until one of the following
conditions occurs:
(a) Buyer and Sellers shall have jointly given 30 days' advance written
notice of the cancellation of the designation of the Escrow Agent to act and
serve in such capacity, which notice shall contain directions to the Escrow
Agent for delivery of the Deposit;
(b) The Escrow Agent shall have resigned upon 30 days' advance written
notice to Buyer and Sellers;
(c) There shall have been full compliance with the terms of this
Agreement and the release of the Deposit; or
(d) A court of competent jurisdiction shall have issued a final order or
judgment ordering the termination of this Agreement, and all appeals of such
order or judgment shall have been exhausted or all periods in which to take an
appeal shall have expired without an appeal being taken.
In the event that the Escrow Agent resigns pursuant to subsection (b) of
this Section and Buyer and Sellers fail to agree on a successor escrow agent
within the said 30-day notice period, the Escrow Agent shall deposit the
Deposit into the registry of an appropriate court and request judicial
determination of the rights between Buyer and Sellers, by interpleader or other
appropriate action, and Buyer and Sellers hereby jointly and severally agree to
indemnify and hold the Escrow Agent harmless from and against any damages or
losses in connection therewith including, but not limited to, reasonable
attorneys' fees and court costs at all trial and appellate levels. Upon
termination of the duties of the Escrow Agent as set forth in subsection (a) or
(b) of this Section, the Escrow Agent shall deliver the Deposit to the newly
appointed escrow agent designated by Buyer and Sellers (or shall otherwise
dispose of the Deposit as instructed by Buyer and Sellers in writing), and the
Escrow Agent shall not otherwise have the right to withhold the Deposit from
said newly appointed escrow agent.
7. ESCROW AGENT FEES. Buyer and Sellers agree to pay all fees and expenses
of the Escrow Agent as specified on or determined in accordance with Schedule B
attached hereto. All such fees and expenses shall be borne equally by Buyer
and Sellers.
8. LIABILITY AND INDEMNIFICATION OF ESCROW AGENT. Buyer and Sellers hereby
agree that the duties of the Escrow Agent are purely ministerial in nature and
shall be expressly limited to the safekeeping of the Deposit and the
disposition of the same in
<PAGE> 42
accordance with the terms of this Agreement. The Deposit shall be invested by
the Escrow Agent in:
(a) certificates of deposit or interest bearing savings accounts (the
terms of which have no restrictions as to the date of withdrawal) in a
federally insured banking or thrift institution (including, without limitation,
the Escrow Agent or any affiliate);
(b) commercial paper having the highest rating conferred by a
nationally-recognized investment rating agency;
(c) money market funds which are investment companies registered under
the Investment Company Act of 1940, including, without limitation, those for
which the Escrow Agent or an affiliate acts as investment adviser; and/or
(d) securities issued or insured by the United States Government or an
agency or instrumentality thereof with a remaining term to maturity of no more
than one year.
The Escrow Agent shall have no liability to any party on account of any
investment of funds in accordance with this Agreement, or on account of any
failure to invest any funds. Buyer and Sellers hereby agree, jointly and
severally, to indemnify the Escrow Agent and hold it harmless from and against
any and all claims, liabilities, damages, costs, penalties, losses, actions,
suits or proceedings at law or in equity, or any other expenses, fees or
charges of any character or nature, which the Escrow Agent may incur or with
which it may be threatened, directly or indirectly, arising from or in any way
connected with this Agreement or which may result from the Escrow Agent's
following of instructions from either or both of Buyer and Sellers in
accordance with this Agreement, and in connection therewith, to indemnify the
Escrow Agent against any and all expenses, including attorneys' fees and the
cost of defending any action, suit or proceeding or resisting any claim,
whether or not litigation is instituted, but nothing herein shall be construed
to so indemnify the Escrow Agent to the extent that it is determined that the
Escrow Agent has acted in a grossly negligent or intentionally wrongful manner.
The provisions of this Section shall survive the termination of this Agreement.
9. NOTICES. All written communications to parties required hereunder shall
be in writing and (a) delivered in person, (b) mailed by registered or
certified mail, return receipt requested, (such mailed notice to be effective
four days after the date it is mailed) or (c) sent by facsimile transmission,
with confirmation sent by way of one of the above methods, to the party at the
address given below for such party (or to such other address as such party
shall designate in a writing complying with this Section 9, delivered to the
other parties):
<PAGE> 43
If to Buyer:
Rent-Way, Inc.
Attn: President
3230 West Lake Road
Erie, Pennsylvania 16505
Telephone: (814) 836-0618
Telecopy : (814) 835-6865
with a copy to:
Hodgson, Russ, Andrews, Woods & Goodyear, LLP
1800 One M&T Plaza
Buffalo, New York 14202
Attention: Robert B. Fleming, Jr., Esq.
Paul J. Vallone, Esq.
Telephone: (716) 856-4000
Telecopy: (716) 849-0349
If to Sellers:
Kenneth H. Moye
44 Talley Ho Drive
Fairhill, MD 21921
Telephone: (410) 398-3593
with a copy to:
Overstreet, Winn & Edwards
Attn: Edward L. Winn, III, Esq.
1208 West 5th Street
Austin, Texas 78768
Telephone: (512) 474-6436
Telecopy: (512) 476-3849
and to:
Lee Brady
15 Blythe Court
New Castle, Delaware 19720
Telephone: (302) 324-1967
<PAGE> 44
with a copy to:
Murray Sawyer, Esq.
Sawyer, Akin & Herron
1220 N. Market Street
Suite 606
P.O. Box 25047
Wilmington, Delaware 19899
Telephone: 302-655-5552
Telecopy: 302-655-3697
If to the Escrow Agent:
Wilmington Trust
---------------------------
Attention: [___________]
Telephone: (___) _____________
Telecopy: (___) _____________
10. CUMULATIVE RIGHTS. No right, power or remedy conferred upon the
Escrow Agent by this Agreement is exclusive of any other right, power or
remedy, but each and every such right, power or remedy shall be cumulative and
concurrent and shall be in addition to any other right, power or remedy the
Escrow Agent may have under this Agreement or now or hereafter existing at law,
in equity or by statute, and the exercise of one right, power or remedy by the
Escrow Agent shall not be construed or considered as a waiver of any other
right, power or remedy.
11. MISCELLANEOUS. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. The headings herein are for
convenience only and shall not be of substantive effect. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, heirs, successors and assignees. This
Agreement constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all prior negotiations, understandings
and writings (or any part thereof) whether oral or written between any of the
parties relating to the subject matter of this Agreement. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, and all of which taken together shall constitute one and the same
instrument.
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first above written.
BUYER:
RENT-WAY, INC.
By: /s/ WILLIAM E. MORGENSTERN
-----------------------------------
William E. Morgenstern
President and Chief Executive Officer
SELLERS:
/s/ KENNETH H. MOYE
----------------------------------
Kenneth H. Moye
/s/ LEE BRADY
----------------------------------
Lee Brady
ESCROW AGENT:
WILMINGTON TRUST
By:
-----------------------------------
Title
<PAGE> 46
SCHEDULE A
WIRE INSTRUCTIONS
Wilmington Trust
ABA#
ACCOUNT: [#_____________]
REFERENCE: RENT-WAY, INC.
ATTENTION:
<PAGE> 47
SCHEDULE B
ESCROW AGENT FEES
Escrow Agent Fee: $___________
<PAGE> 48
EXHIBIT C
EMPLOYMENT AND NON-COMPETE AGREEMENT
THIS AGREEMENT (this "Agreement"), dated July 25, 1996, between LEE BRADY,
an individual residing at 15 Blythe Court, New Castle, Delaware 19720
("Employee"), and RENT-WAY, INC., a Pennsylvania corporation with a principal
place of business at 3230 West Lake Road, Erie, Pennsylvania 16505 (the
"Corporation").
RECITALS:
A. The Corporation is engaged in the rental and rental-purchase business in
various states.
B. The Corporation has acquired on or about the date of this Agreement all
of the issued shares of Diamond Leasing Corporation ("Diamond") pursuant to a
Stock Purchase Agreement among the Corporation, Diamond, Employee and Kenneth
H. Moye, dated July 20, 1996 (the "Purchase Agreement"), including shares of
the Employee. The non-competition provisions of this Agreement are entered
into by Employee in consideration for the performance by the Corporation of its
obligations under the Purchase Agreement.
C. The Employee has expertise in the rental and rental-purchase industry.
The Corporation desires to employ the Employee, and the Employee desires to
accept employment with the Corporation, upon the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the Corporation and the Employee agree as follows:
1. EMPLOYMENT; TERM. Subject to the terms and conditions set forth in this
Agreement, the Corporation hereby agrees to employ the Employee, and the
Employee hereby accepts such employment, for the period beginning on the date
of this Agreement and continuing for a period of one (1) year or until the
earlier termination of the Employee's employment as provided in this Agreement.
2. DUTIES. The Employee shall serve as a Regional Manager of the
Corporation with responsibility for the management of multiple rental and
rental-purchase stores located in Delaware, Pennsylvania and Maryland, as more
particularly set forth in the job description attached to this Agreement as
Schedule A. The Employee shall perform such duties and discharge such
responsibilities as are commensurate with his position, and as the President of
the Corporation shall from time to time reasonably direct, recognizing the
nature and scope of the Employee's employment. The Employee agrees to perform
his duties and discharge his responsibilities in a faithful manner and to the
best of his ability and to use his best efforts to promote the interests of the
Corporation. The Employee further agrees that he will engage in no outside
business concerns or activities in the rental or rental purchase industry but
he may engage in other limited business activities so long as such activities
do not interfere with the performance of his duties under this Agreement and so
long as Employee notifies Corporation in writing of such activities. The
Corporation reserves the
<PAGE> 49
right from time to time to assign to the Employee additional duties and
responsibilities and to delegate to other employees of the Corporation duties
and responsibilities normally discharged by the Employee.
3. COMPENSATION. During the term of this Agreement, the Employee shall
receive an annual salary of $100,000, payable in accordance with the
Corporation's standard salary schedule. In addition, the Employee shall be
eligible for bonuses which shall not be substantially different from the
bonuses paid under the Bonus Plan for existing Regional Managers. The
Corporation shall deduct or withhold from all salary payments, and from all
other payments made to the Employee pursuant to this Agreement, all amounts
which may be required to be deducted or withheld under any applicable law now
in effect or which may become effective during the term of this Agreement
(including, but not limited to, Social Security contributions and income tax
withholdings).
4. OTHER BENEFITS.
(a) The Employee shall be entitled to participate in any health and
medical benefit plans or insurance from time to time offered by the Corporation
to its employees, and shall be entitled to vacation and sick leave in
accordance with policies of the Corporation in effect from time to time. These
plans are subject to change at the sole discretion of the Corporation.
(b) The Employee shall be entitled to any other fringe benefit from time
to time offered by the Corporation to employees of comparable status to the
Employee, including, any incentive plan.
5. REIMBURSEMENT FOR EXPENSES. The Corporation shall reimburse the
Employee for expenses which the Employee may from time to time reasonably incur
on behalf of and at the request of the Corporation in the performance of his
responsibilities and duties under this Agreement including an automobile
allowance to be mutually agreed upon between Employee and the Corporation;
provided, however, that the Employee shall be required to account to the
Corporation for such expenses in the manner prescribed by the Corporation.
6. CONFIDENTIAL INFORMATION. The Employee shall take all reasonable
precautions to safeguard the confidential nature of all confidential
information of or belonging to the Corporation and any other precautions with
respect thereto which the Corporation, in its sole discretion, may reasonably
request. For purposes of this Agreement, "confidential information" shall mean
all information pertaining to the business and operations of the Corporation
which is not generally available to the public and which the Corporation
desires to keep confidential, including, but not limited to, trade secrets,
financial information, information as to customers and customer lists, sales
and marketing information, information as to suppliers, production and pricing
information, information as to business methods, practices and strategies, and
all documents, electronic records and other tangible items relating to or
containing any such information.
<PAGE> 50
7. NON-COMPETITION. As an inducement to the Corporation's execution,
delivery and performance of the Purchase Agreement, and in consideration,
therefore, Employee agrees as follows:
(a) For the period beginning on the date of termination of this Agreement
and ending three (3) years thereafter (the "Covenant Period"), Employee agrees
that he will not:
(i) for his benefit or on behalf of any other person or entity, within a
twenty-five (25) mile radius of any rental or rental purchase store location
owned or operated by Diamond or the Corporation at the date of termination of
Employee's employment (the "Restricted Territory"), directly or indirectly,
own, manage, operate or control, or otherwise associate in any manner with,
engage in or have a financial interest in, any business which is the same as,
substantially similar to or directly or indirectly competitive with the
Business; or
(ii) for his own benefit or on behalf of any other person or entity,
anywhere in the Restricted Territory, solicit, divert or appropriate or attempt
to solicit, divert or appropriate, for the purpose of competing with Diamond or
the Corporation, or any present or future subsidiary or Affiliate of the
Corporation which is engaged in a business similar to the Business, any
customers or patrons of the Business that rented or purchased merchandise at
any time within the five (5) years immediately preceding the date of Employee's
ceasing to be employed by the Corporation or any prospective customers or
patrons; or
(iii) employ or solicit the employment of any person who was employed by
Diamond or the Corporation at the date of Employee's ceasing to be employed by
the Corporation or within six (6) months prior to such date.
(b) Employee acknowledges and agrees that the restrictions in this Section
7 are reasonable and necessary for the adequate protection of the legitimate
business interests of the Corporation.
(c) For purposes of this Agreement, the term "Affiliate" shall mean, as to
any person or entity, any other person or entity which directly or indirectly
controls or is under control with, or is controlled by such person or entity.
8. PERSONAL PROPERTY. All confidential information disclosed or made
available by the Corporation to the Employee shall at all times remain the
personal property of the Corporation and all documents, electronic records,
lists, plans, proposals, records and other tangible items supplied to the
Employee which constitute or contain confidential information shall, together
with all copies thereof, be returned to the Corporation immediately upon
termination of the Employee's employment or upon the demand of the Corporation.
9. EQUITABLE REMEDIES. The Employee (a) acknowledges that a remedy at law
for his failure to comply with Sections 6, 7 and 8 of this Agreement may be
inadequate and (b) consents to the Corporation obtaining from a court having
jurisdiction specific
<PAGE> 51
performance, an injunction, a restraining order or any other equitable relief
in order to enforce any such provision. The right to obtain such equitable
relief shall be in addition to any other remedy to which the Corporation is
entitled under applicable law (including, but not limited to, monetary
damages).
10. TERMINATION.
(a) This Agreement and the Employee's employment hereunder shall
automatically terminate upon the death or permanent disability of the Employee.
Permanent disability shall be determined in accordance with any disability
insurance policy maintained by the Corporation for the Employee or, if no such
policy is maintained, shall be determined by a physician selected by the
Corporation and reasonably satisfactory to the Employee. The Employee will
cooperate in any physical examination conducted pursuant to this paragraph.
(b) The Corporation may, at its sole option, terminate the Employee's
employment for cause upon 30 days' written notice to the Employee unless such
termination for cause is pursuant to subparagraphs (b), (c) or (d) of this
Section 10(b) in which case termination shall be upon written notice. For
purposes of this Agreement, "cause" shall mean (a) a material breach of or
substantial failure to perform any obligation of the Employee under this
Agreement which breach or failure remains uncured for thirty (30) days after
receipt of written notice thereof from the Corporation, (b) the conviction of
the Employee of a felony, (c) gross negligence or willful misconduct of the
Employee in the performance of his duties, (d) any fraudulent or dishonest act
by the Employee to the Corporation or (e) refusal of the Employee to accept
comparable employment with the Corporation outside of Delaware, Maryland and
Pennsylvania in the event that the Corporation ceases to do business in
Delaware, Maryland and Pennsylvania.
(c) In addition to any other termination rights pursuant to this
Agreement (and notwithstanding anything to the contrary contained in Section 1
hereof), the Employee shall have the right to terminate this Agreement without
cause at any time upon thirty (30) days prior written notice to the
Corporation.
11. FAILURE, DELAY OR WAIVER. No course of action or failure to act by
the Corporation or the Employee shall constitute a waiver by such party of any
right or remedy under this Agreement, and no waiver by either party of any
right or remedy under this Agreement shall be effective unless made in writing.
12. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be enforceable under applicable
law. However, if any provision of this Agreement shall be deemed unenforceable
under applicable law by a court having jurisdiction, such provision shall be
unenforceable only to the extent necessary to make it enforceable without
invalidating the remainder thereof or any of the remaining provisions of this
Agreement.
13. NOTICE. All notices and other communications given pursuant to this
Agreement shall be deemed to have been properly given if hand delivered or
mailed, addressed to the appropriate party at the address of such party as
shown at the beginning of
<PAGE> 52
this Agreement, postage prepaid, by certified or registered mail, return
receipt requested. Any party may from time to time designate by written notice
given in accordance with the provisions of this Section 13 any other address or
party to which such notice or communication or copies thereof shall be sent.
14. OTHER PAYMENTS. All additional amounts due and owing to Employee
pursuant to the Purchase Agreement and as identified in Exhibit "A" shall be
payable regardless of the termination of this Agreement, if any.
15. MISCELLANEOUS. This Agreement (a) may not be amended, modified or
terminated orally or by any course of conduct pursued by the Corporation or the
Employee, but may be amended, modified or terminated only by a written
agreement duly executed by the Corporation and the Employee, (b) is binding
upon the Employee and each of his heirs, representatives, successors and
assignees and inures to the benefit of the Corporation and each of its
successors and assignees, except that the Employee may not assign any of his
rights or obligations pursuant to this Agreement without the prior written
consent of the Corporation, (c) constitutes the entire agreement between the
Corporation and the Employee with respect to the subject matter of this
Agreement, and supersedes all oral and written proposals, representations,
understandings and agreements previously made or existing with respect to such
subject matter and (d) shall be governed by, and interpreted and construed in
accordance with, the laws of the Commonwealth of Pennsylvania, without regard
to principles of conflicts of law.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
RENT-WAY, INC.
By /s/ WILLIAM E. MORGENSTERN
---------------------------------------
William E. Morgenstern
President and Chief Executive Officer
/s/ LEE BRADY
---------------------------------------
Lee Brady
<PAGE> 53
SCHEDULE A
REGIONAL MANAGER JOB DESCRIPTION
<PAGE> 54
EXHIBIT D
CONSULTING AND NON-COMPETE AGREEMENT
THIS AGREEMENT (this "Agreement"), dated the 25 day of July, 1996, between
KENNETH H. MOYE, an individual residing at 44 Talley Ho Drive, Fairhill,
Maryland 21921 ("Consultant"), and RENT-WAY, INC., a Pennsylvania corporation
having an office at 3230 West Lake Road, Erie, Pennsylvania 16505 ("Rent-Way").
RECITALS:
WHEREAS, Consultant is the principal shareholder and an officer and director
of Diamond Leasing Corporation, a Delaware corporation ("Diamond"); and
WHEREAS, Consultant, Rent-Way, Lee Brady ("Brady") and Diamond are parties to
a certain Stock Purchase Agreement, dated as of July 20, 1996 (the "Purchase
Agreement"), pursuant to which Rent-Way will purchase all of the issued and
outstanding shares of stock of Diamond from Consultant and Brady; and
WHEREAS, Rent-Way is engaged in the rental, rental-purchase and rent-to-own
business and intends to operate the rent-to-own and other business of Diamond
on and after the closing of the transactions contemplated by the Purchase
Agreement; and
WHEREAS, during the course of many years, Consultant has had access to, and
has gained knowledge with respect to, the rental, rental-purchase and
rent-to-own business of Diamond;
WHEREAS, Rent-Way and Consultant each desire Consultant to provide certain
consulting services to Rent-Way and Diamond; and
WHEREAS, as a condition to closing the Purchase Agreement, Rent-Way has
required Consultant to agree not to compete with Rent-Way or Diamond;
NOW, THEREFORE, Consultant and Rent-Way agree as follows:
1. CONSULTING COMMITMENT. For the period beginning on the date of this
Agreement and ending one (1) year after the date of this Agreement, Rent-Way
hereby engages Consultant, and Consultant agrees, to provide consulting
services to Rent-Way and Diamond as an independent contractor and not an
employee, with respect to: (a) the business transition at Diamond resulting
from the sale of Diamond, (b) other business matters relevant to the continuing
operations and affairs of Diamond, and (c) such other matters relating to the
national rent-to-own business as Rent- Way may reasonably request. All
services provided by Consultant shall be at such place and times as the parties
may mutually agree upon. Any travel and other expenses incurred by Consultant
in connection with Consultant's services hereunder shall be
<PAGE> 55
reimbursed by Rent-Way, provided that any such expenditures shall have been
approved by Rent-Way in advance.
2. CONSIDERATION. In consideration of the services to be rendered by
Consultant pursuant to this Agreement, Rent-Way agrees to pay to Consultant
Fifty Thousand Dollars ($50,000) payable in one installment on the date of this
Agreement.
3. NON-COMPETITION. (a) For the period beginning on the date of this
Agreement and ending two (2) years thereafter (the "Covenant Period"),
Consultant agrees that he will not:
(i) for his benefit or on behalf of any other person or entity, within a
twenty-five (25) mile radius of any rental or rental purchase store location
owned or operated by Diamond or Rent-Way on the date of this Agreement (the
"Restricted Territory"), directly or indirectly, own, manage, operate or
control, or otherwise associate in any manner with, engage in or have a
financial interest in, any business which is the same as, substantially similar
to or directly or indirectly competitive with the Business; or
(ii) for his own benefit or on behalf of any other person or entity, anywhere
in the Restricted Territory, solicit, divert or appropriate or attempt to
solicit, divert or appropriate, for the purpose of competing with Diamond or
Rent-Way or any present or future subsidiary or Affiliate of Diamond or the
Rent-Way which is engaged in a business similar to the Business, any customers
or patrons of the Business that rented or purchased merchandise at any time
within the five (5) years immediately preceding the date of this Agreement or
any prospective customers or patrons; or
(iii) employ or solicit the employment of (x) any person who was employed by
the Rent-Way on the date of this Agreement or within six (6) months prior to
such date or (y) any person who was employed by Diamond on the date of this
Agreement or within six (6) months prior to such date.
(b) Consultant acknowledges and agrees that the restrictions in this Section
3 are reasonable, legitimate and fair to Consultant in light of the Rent-Way's
purchase of the Shares from Consultant pursuant to the Purchase Agreement.
(c) The Consultant agrees that the consideration he has received pursuant to
the Purchase Agreement is full and adequate compensation for his covenant in
this Section 3.
4. AFFILIATED DEFINED. For purposes of this Agreement, the term "Affiliate"
shall mean, as to any person or entity, any other person or entity which
directly or indirectly controls or is under control with, or is controlled by
such person or entity.
5. ATTORNEYS' FEES. If any action at law or equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs, and necessary disbursements in
addition to any other relief to which he may be entitled.
6. GOVERNING LAW. This Agreement shall be construed under and in accordance
with the laws of the Commonwealth of Pennsylvania.
<PAGE> 56
7. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors, and assigns where permitted
by this Agreement.
8. SEVERABILITY. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision hereof, and this Agreement shall be construed as if
such invalid, illegal, or unenforceable provision had never been contained
herein.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter of this Agreement, and
supersedes any prior understandings or written or oral agreements between the
parties with respect to the subject matter of this Agreement.
/s/ KENNETH H. MOYE
---------------------------------
Kenneth H. Moye
RENT-WAY, INC.
By: /s/ WILLIAM E. MORGENSTERN
----------------------------------
William E. Morgenstern, President
<PAGE> 57
EXHIBIT E
SHAREHOLDER'S AGREEMENT
This Agreement (the "Agreement"), is made as of the 25 day of July, 1996,
between RENT-WAY, INC., a Pennsylvania corporation (the "Company") and LEE
BRADY, an individual residing at 15 Blythe Court, New Castle, Delaware 19720
("Brady").
RECITALS:
Pursuant to a Stock Purchase Agreement dated July 20, 1996 the (the
"Purchase Agreement") the Company is issuing to Brady an aggregate of 20,538
shares of its common stock, without par value (the "Common Stock"), subject to
adjustment, which shares shall have a market value (as defined in the Purchase
Agreement) of $250,000 as of the date of issuance. The parties wish to set
forth certain obligations and restrictions with respect to the Common Stock and
to provide for certain registration rights with respect to the Common Stock
owned by Brady, as hereinafter set forth in this Agreement.
AGREEMENT:
In order to implement the foregoing and in consideration of the mutual
agreements contained in this Agreement and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings:
"Exchange Act" shall mean the Securities Exchange Act of 1934, and the rules
and regulations thereunder.
"Person" shall mean any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Shares" shall mean, as of any date, all shares of Common Stock issued to
Brady pursuant to the Purchase Agreement.
"SEC" shall mean the Securities and Exchange Commission, or any successor
commission or agency having similar powers.
"Securities Act" shall mean the Securities Act of 1933, and the rules and
regulations thereunder.
<PAGE> 58
2. REGISTRATION RIGHTS.
(a) Piggyback Registrations. For a period beginning one (1) year after
the date of this Agreement and continuing for a period of one (1) year
thereafter if the Company proposes to file a registration statement on Form S-1
to register any of its Common Stock under the Securities Act for sale to the
public under the Securities Act, the Company shall give Brady notice of such
proposed registration at least 30 days prior to the filing of a registration
statement. At the written request of Brady delivered to the Company within 15
days after the receipt of the notice from the Company, which request shall
state the number of Shares that Brady wishes to sell publicly under the
registration statement proposed to be filed by the Company (the "Registration
Shares"), the Company shall use its best efforts to include in any such
registration under the Securities Act (and in any related registration,
qualification or compliance under state blue sky laws) such Registration
Shares, and to cause such registration (the "Piggyback Registration") to become
and remain effective; provided, however, that (i) the Company may, without the
consent of Brady, withdraw such registration statement prior to its becoming
effective if the Company has abandoned its proposal to register its Common
Stock; (ii) the Company may, without the consent of Brady, delay the
effectiveness of such registration statement if in the opinion of the Board of
Directors such delay is in the best interests of the Company, and (iii) if a
registration pursuant to this Section 2(a) involves an underwritten offering
and the managing underwriter advises the Company that, in its written opinion
to Brady, the number of Registration Shares requested to be included in such
registration exceeds the number which can be sold in such offering, so as to be
likely to have an adverse affect on such offering as contemplated by the
Company (including the price at which the Company proposes to sell such Common
Stock), then the Company will include in such registration (x) first, all of
the Common Stock to be sold by the Company and (y) second, to the extent of the
number of Registration Shares requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without having
the adverse effect referred to above, the number of Registration Shares which
Brady and all other holders of the Company's Common Stock who, as of the date
of this Agreement, have contractual rights of registration have requested to be
included in such registration, such amount to be allocated pro rata among all
such requesting holders on the basis of the relative number of shares of Common
Stock then held by each such holder, provided that any such shares thereby
allocated to any such holder that exceeds such holder's request will be
reallocated among the remaining requesting holders in like manner.
(b) Registration Covenants of the Company. In the event that any
Registration Shares of Brady are to be registered pursuant to Section 2(a), the
Company covenants and agrees that it shall use its reasonable best efforts to
effect the registration and cooperate in the sale of the Registration Shares to
be registered and, subject to the Company's rights described in Section 2(a) to
withdraw certain registrations, it shall:
(i)(A) prepare and file with the SEC a registration statement registering
the Registration Shares (as well as any necessary amendments or supplements
thereto) (a "Registration Statement"); (B) provide Brady and his legal
representatives with a reasonable opportunity to review the Registration
(and any amendments thereto) before filing; and (C) use its reasonable best
efforts to cause the Registration Statement to become effective;
<PAGE> 59
(ii) notify Brady, promptly after the Company shall receive notice
thereof, of the time when the Registration Statement becomes effective or
when any amendment or supplement or any prospectus forming a part of the
Registration Statement has been filed;
(iii) notify Brady promptly of any request by the SEC for the amending or
supplementing of the Registration Statement or prospectus or for additional
information;
(iv)(A) advise Brady after the Company shall receive notice or otherwise
obtain knowledge of the issuance of any order by the SEC suspending the
effectiveness of the Registration Statement or any amendment thereto or of
the initiation or threatening of any proceeding for that purpose and (B)
promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal promptly if a stop order should be issued;
(v)(A) prepare and file with the SEC such amendments and supplements to
the Registration Statement and the prospectus forming a part thereof as may
be necessary to keep the Registration Statement effective for the lesser of
(I) a period of time necessary to permit Brady to dispose of the
Registration Shares in accordance with the intended methods of disposition
as set forth in the Registration Statement and (II) 120 days and (B) comply
with the provisions of the Securities Act with respect to the disposition of
the Registration Shares covered by the Registration Statement during such
period in accordance with the intended methods of disposition by Brady set
forth in the Registration Statement;
(vi) furnish to Brady such number of copies of the Registration Statement,
each amendment and supplement thereto, the prospectus included in the
Registration Statement (including each preliminary prospectus) and such
other documents as Brady may reasonably request in order to facilitate the
disposition of the Registration Shares owned by Brady;
(vii) use its best efforts to register or qualify such Registration Shares
under such other securities or blue sky laws of such jurisdictions as
determined by the underwriters after consultation with the Company and Brady
(or by the Company after consultation with Brady, if there is no
underwriter), and do any and all other acts and things which may be
reasonably necessary or advisable to enable Brady to consummate the
disposition in such jurisdictions of the Registration Shares (provided that
the Company shall not be required to (A) qualify generally to do business in
any jurisdiction in which it would not otherwise be required to qualify but
for this Section 2(b)(vii), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction);
(viii) notify Brady, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the Registration Statement would contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein
<PAGE> 60
or necessary to make the statements therein not misleading, and, at the
request of Brady, prepare a supplement or amendment to the Registration
Statement so that the Registration Statement shall not, to the Company's
knowledge, contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(c) Expenses. The parties agree as follows:
(i) Subject to clause (ii) of this Section 2(c) the Company shall pay, on
behalf of Brady all reasonable out-of-pocket expenses incurred in connection
with a Piggyback Registration pursuant to Section 2(a) of this Agreement,
including, but not limited to, all SEC and Blue Sky registration and filing
fees and related expenses; word processing, duplicating and printing expenses;
fees and disbursements of legal counsel for the Company including, if
different, Blue Sky counsel, and of the Company's independent public
accountants required by or incident to compliance with all applicable SEC and
Blue Sky laws, rules and regulations; and transfer agents' fees expenses in
connection with any Piggyback Registration.
(ii) All underwriting discounts and selling commissions relating to
Registration Shares in connection with a Piggyback Registration shall be borne
by the holders of such Registration Shares pro rata.
(d) Assignment of Registration Rights. Brady may assign his rights under
this Article 2 only to his spouse or any descendant of Brady, or to any trust
for the benefit of any of such persons; provided that no such assignment shall
increase the Company's obligations to effect registrations or pay expenses
thereof.
(e) Compliance with Law. In consideration for the Company agreeing to its
obligations under this Article 2, Brady agrees, with respect to any Piggyback
Registration, not to sell, make any short sale of, pledge, loan, grant any
option for the purchase of, or otherwise dispose of any Registration Shares in
any manner that would violate any applicable law, rule or regulation.
3. INDEMNIFICATION.
(a) Indemnification by the Company. In the event of any registration,
qualification or compliance effected with respect to Registration Shares under
the Securities Act, state blue sky laws or otherwise, the Company shall, and
hereby does, indemnify and hold harmless Brady, each other Person who
participates as an underwriter in the offering or sale of Registration Shares
and each other Person, if any, who controls any such underwriter within the
meaning of Section 15 of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which Brady or any such
underwriter or controlling person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which the
Registration Shares were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any other document, or any omission or
alleged omission to state therein a material fact required to be stated therein
or
<PAGE> 61
necessary to make the statements therein in light of the circumstances in which
they were made not misleading, and the Company shall reimburse Brady, and each
such underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement or other document in reliance upon and in conformity
with information furnished to the Company through an instrument duly executed
by or on behalf of Brady or such underwriter, as the case may be, specifically
stating that it is for use in the preparation thereof; and provided further
that the Company shall not be liable to any Person who participates as an
underwriter in the offering or sale of Registration Shares or any other Person,
if any, who controls such underwriter within the meaning of the Securities Act,
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registration Shares to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Shareholders, or any such controlling person and shall
survive the transfer of the Registration Shares by Brady.
(b) Indemnification by Brady. In the event of any registration,
qualification or compliance effected with respect to Registration Shares under
the Securities Act, state blue sky laws or otherwise, Brady shall, and hereby
does, indemnify and hold harmless (in the same manner and to the same extent as
set forth in Section 3(a)) the Company, each director of the Company, each
officer of the Company and each other Person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
other document, if such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with information about
Brady furnished to the Company through an instrument duly executed by Brady
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement or other document. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer by such seller of the securities of the Company being registered.
(c) Shareholder Information. Brady shall provide the Company with such
information with respect to the Registration Shares to be sold, the plans for
the proposed disposition thereof and such other information as shall, in the
opinion of counsel for the Company, be necessary to enable the Company to
include in such registration statement all material facts required to be
disclosed with respect to Brady.
(d) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in Section
<PAGE> 62
3(a) or 3(b), such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 3(a) or 3(b), except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist or the indemnified party may
have defenses not available to the indemnifying party in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof
other than reasonable costs of investigation. No indemnifying party shall be
liable for any settlement of any action or proceeding effected without its
written consent. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.
(e) Indemnification Payments. Any indemnification payment required by
this Section 3 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
4. RESTRICTIONS ON TRANSFER OF SHARES; RULE 144.
(a) Restrictions on Transfer of Shares. Except as otherwise expressly
provided for in this Agreement, Brady agrees that he will not sell, transfer,
pledge, hypothecate or otherwise dispose of any Shares for a period of two (2)
years from the date of this Agreement. The certificates representing the
Shares shall have placed thereon the following legend:
"The Shares represented by this certificate have not been registered
under the Securities Act and may not be sold or transferred except in
compliance with such Act. In addition, the Shares represented by this
Certificate are subject to the provisions of a Shareholder's Agreement
dated as of July 25, 1996 between Rent-Way, Inc. and one of the
shareholders of Rent-Way, Inc., a copy of which is on file at the
office of Rent-Way, Inc."
(b) Rule 144. The Company shall take all actions reasonably necessary to
enable Brady to sell the Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC, including filing on a timely
basis all reports required to be filed under the Exchange Act. Upon the
request of Brady, the Company shall deliver to Brady a written statement as to
whether it has complied with such requirements. The Company shall cooperate
with Brady to enable such sales to be made in accordance with applicable laws,
rules and regulations, the requirements of the
<PAGE> 63
Company's transfer agent and the reasonable requirements of any broker through
which the sales are proposed to be executed, and shall, upon request, furnish
unlegended certificates representing Shares in such numbers and denominations
as any Shareholder shall reasonably require for delivery pursuant to such
sales.
5. GENERAL PROVISIONS.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed by each of the parties hereto. Any failure of a party to
comply with any obligation, covenant, agreement or condition contained in this
Agreement may be waived by the other party only by a written instrument signed
by such other party, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure of compliance.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed effective upon receipt (or refusal of receipt) and
shall be delivered personally or sent by telex, telecopy or registered,
overnight or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) if to the Company, to:
Rent-Way, Inc.
3230 West Lake Road
Erie, Pennsylvania 16505
Attention: William E. Morgenstern
with a copy to:
Hodgson, Russ, Andrews, Woods & Goodyear, LLP
1800 One M&T Plaza
Buffalo, New York 14203
Attention: Robert B. Fleming, Jr., Esq.
Paul J. Vallone, Esq.
(ii) if to Brady, as follows:
Lee Brady
15 Blythe Court
New Castle, Delaware 19720
<PAGE> 64
with a copy to:
Murray Sawyer, Esq.
Sawyer, Akin & Herron
1220 N. Market Street
Suite 606
P.O. Box 25047
Wilmington, Delaware 19899
(c) Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, Exhibit
to or Schedule to this Agreement, unless otherwise indicated. 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. Wherever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one of the counterparts has been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
(e) Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire Agreement and supersedes
all prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
conflict of law rules.
IN WITNESS WHEREOF, the Company and Brady have caused this Agreement to be
signed by the respective persons thereunto duly authorized, all as of the date
first written above.
RENT-WAY, INC.
By /s/ WILLIAM E. MORGENSTERN
---------------------------------------
William E. Morgenstern
President and Chief Executive Officer
/s/ LEE BRADY
---------------------------------------
Lee Brady
<PAGE> 1
EXHIBIT 2.6
July 25, 1996
Kenneth H. Moye,
Lee Brady
and Diamond Leasing Corporation
78 Southgate Boulevard
Southgate Industrial Center
New Castle, Delaware 19720
Gentlemen:
Re: Closing Letter Agreement
Reference is made to a certain Stock Purchase Agreement among each of you
and Rent-Way, Inc., dated on or about July 20, 1996 (the "Purchase Agreement").
This letter is intended to set forth certain agreements and understandings with
respect to the Closing of the transactions provided for in, and certain
amendments of, the Purchase Agreement, as follows:
1. Each specially capitalized term not otherwise defined in this letter
agreement shall have the meaning set forth in the Purchase Agreement.
2. Based on the Closing Certificate, the preliminary Purchase Price
adjustment pursuant to Section 2.2(b) results in a reduction of the Purchase
Price by $2,164,904.74.
3. The Purchase Agreement is amended as follows:
i. Exhibit A to the Purchase Agreement is amended to read in its entirety
as set forth on Attachment A to this letter agreement.
ii. A new Section 1.1(s) is hereby amended to read in its entirety as
follows:
"(s) "Liabilities" shall mean all liabilities and obligations of every
nature of the Corporation, whether absolute, accrued, contingent, known,
unknown, matured, unmatured or otherwise, and whether or not disclosed
or required to be disclosed or
<PAGE> 2
July 25, 1996
Page 2
provided for in the Corporation's financial statements in accordance with
GAAP or pursuant to this Agreement, including but not limited to (A) all
trade accounts payable, and (B) all liabilities and obligations pursuant to
any agreement the Corporation is a party to; provided, however, that excluded
from "Liabilities" are (w) any liability for any period prior to the Closing
Date resulting from the Corporation's change in depreciation methods to the
proper method (as effectuated by its filing of IRS Form 3115 on or about July
24, 1996 so long as other deductions available to the Corporation result in
no Taxes being paid by the Corporation on account of such change; (x)
contingent claims, known or unknown, to the extent the Corporation carries
adequate insurance coverage; (y) the Deferred Tax Liability on the
Corporation's balance sheet as of June 30, 1996 to the extent that it does
not exceed $30,000; and (z) all interest charges, service charges, penalties
or other like assessments accruing from and after the Closing Date. If the
Net Book Value of Total Assets exceeds $2,490,000 as of the close of business
on the day before the Closing, the amount of Liabilities determined as set
forth above shall be reduced by: (i) $26,400 on account of prepaid federal
income taxes and (ii) the amount of cash and cash equivalents of the
Corporation as of the close of business on the date prior to Closing;
provided, however, that the amount of such reduction shall not exceed in
aggregate the amount by which the Net Book Value of Total Assets exceeds
$2,490,000 as of the close of business on the day before the Closing."
iii. Brady and Buyer agree that, for purposes of Section 2.3(a) and
Exhibit A (as amended), the "Market Price" shall be determined based
on the 20 consecutive trading days ending on July 22, 1996 and shall
be $12.28.
iv. Section 4.15 is hereby amended to change the third sentence thereof
to read in its entirety as follows:
"Sellers hereby acknowledge their liability for any additional Taxes due
as a result of the Corporation's failure to use MACRS or as a result of
any such change in depreciation method; provided, however, that Buyer
agrees that Sellers' liability hereunder shall
<PAGE> 3
July 25, 1996
Page 3
be limited to the amount by which the dollar amount of the additional Taxes
exceeds the amount of tax benefit obtained by the Corporation or Buyer
resulting from any allowable expense deduction on account of Brady's exercise
of the Option.
v. Section 9.1 is hereby amended to add the words "and Section 4.15 (Tax
Matters)" immediately after the word "(Title)" in said Section 9.1.
vi. Section 9.2(a)(iv) is hereby amended to read in its entirety as
follows:
"(iv) any liabilities and obligations for taxes which are or shall be
incurred with respect to the operation of the Corporation on or prior to
the Closing Date which shall not have been fully reserved or accrued for
on the Corporation's Financial Statements, except to the extent that any
election by the Buyer under any tax law shall have the effect of
increasing any liability or obligation for any tax with respect to the
operations of the Corporation or prior to the Closing Date; in addition,
Sellers agree to indemnify the Buyer and Corporation for all Taxes to
the extent provided for in the third sentence of Section 4.15 (as
amended) and further agree that the third sentence of Section 4.15 is a
covenant and agreement, and not a representation and warranty."
vii. A new Section 10.3 is added to the Purchase Agreement that shall read
in its entirety as follows:
"10.3 Tax Returns and Related Matters.
(a) Sellers shall cause to be prepared, on a timely basis and at
Seller's expense, all tax returns required to be filed by the
Corporation for any period which ends prior to June 30, 1996, provided
that all such returns shall be submitted to Buyer prior to filing and
shall not be filed without the prior written consent of Buyer. Buyer
and Sellers shall cause such returns to be filed on a prompt and
timely basis.
(b) Buyer shall cause Coopers & Lybrand LLP to prepare, on a timely
basis and at Buyer's expense, all tax returns required to be filed by
the Corporation for any
<PAGE> 4
July 25, 1996
Page 4
period beginning after June 30, 1996, provided that all such returns shall be
submitted to Sellers for review prior to filing. Buyer and Sellers shall
cause such returns to be filed on a prompt and timely basis.
(c) Buyer and Sellers shall cooperate and assist each other regarding
all such returns. Any elections permitted to be made by or on behalf
of the Corporation shall be made by Buyer; provided, however, that the
foregoing shall not supersede the provisions of Section 9.2(a)(iv) and
(a)(v)."
4. The following pages of the Purchase Agreement have been corrected and
attached hereto as Attachment B in their restated form: Pages 1, 15, 20, 22,
27, 29, 30, 31, A1, B4, C5 and F2, which, the parties agree shall be
substituted for the initial, marked or incomplete pages. In addition, the
Schedules to the Purchase Agreement are attached hereto as part of Attachment
B.
5. Simultaneously herewith, Brady has delivered to the Corporation a letter
in which he has agreed to pay to the Corporation or its successors all
withholding taxes within the time period set forth therein.
If the foregoing correctly sets forth our agreement, please so confirm by
signing a copy of this letter and returning it to the undersigned.
Very truly yours,
RENT-WAY, INC.
By /s/ WILLIAM E. MORGENSTERN
--------------------------
(Title)
AGREED TO AND CONFIRMED
as of the date of this letter
/s/ KENNETH H. MOYE
- -------------------
Kenneth H. Moye
<PAGE> 5
July 25, 1996
Page 5
/s/ LEE BRADY
- -------------
Lee Brady
DIAMOND LEASING CORPORATION
By /s/ KENNETH H. MOYE
------------------------
Kenneth H. Moye, President
CORPORATE:72527_1 (1JYN_1)
<PAGE> 6
ATTACHMENT A
[Amended Exhibit A is attached hereto]
<PAGE> 7
EXHIBIT A
PAYMENT OF PURCHASE PRICE
1. $2,970,071.45 of the Purchase Price, representing seventy-five percent
(75%) of the Purchase Price, (as adjusted pursuant to Sections 2.2 and 2.3
of the Agreement) shall be paid by check or wire transfer to Moye at the
Closing.
2. $990,023.81 of the Purchase Price, representing twenty-five (25%) of
the Purchase Price, (as adjusted pursuant to Sections 2.2 and 2.3 of the
Agreement) (the "Brady Amount") shall be paid to, or for the account of,
Brady as follows:
A. 20,358 shares of Rent-Way, Inc. Common Stock having a Market Value (as
hereinafter defined) of $250,000 shall be delivered into an Escrow
Account to be established on terms mutually agreeable to Brady and Buyer
for a period of two (2) years. The shares shall be restricted stock,
subject to, among other regulations, Securities and Exchange Commission
Rule 144 holding period and other restrictions and otherwise subject to
the terms and conditions of a Shareholder's Agreement substantially in
the form of Exhibit E. The term "Market Value" shall mean the average
closing price of Rent-Way, Inc. Common Stock as reported in the Wall
Street Journal for the 20 trading days ending on July 22, 1996. The
balance of the Brady Amount shall be paid in cash (the "Non-Stock
Amount") as hereinafter provided.
B. $150,000 of the Non-Stock Amount shall be wire transferred to Brady at the
Closing.
C. The Buyer shall wire transfer the balance of the Non-Stock Amount to
Brady's attorneys for deposit Raymond James Associates, Inc. ("RJA") to
be held and disbursed by RJA in the manner provided for in the Escrow
Agreement attached hereto as Appendix A and providing for (a)
disbursement of monies to Brady to pay federal and state taxes and (b)
the payment of $100,000 to Brady on the first anniversary of the Closing
Date and the balance to Brady on the second anniversary of the Closing
Date. Brady's attorneys are also authorized to disburse funds to
Diamond representing Brady's federal tax liabilities as set forth in
that letter of July 25, 1996 attached hereto as Attachment D.
3. In addition to the Purchase Price, Brady shall receive an additional cash
payment at Closing of $20,000 which shall be paid by wire transfer to Brady.
[employment signing bonus]
