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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13d-101)
Under the Securities Exchange Act of 1934
HOME CHOICE HOLDINGS, INC.
(Name of Issuer)
Common Stock, $.01 Par Value
(Title of Class of Securities)
437063100
--------------
(CUSIP Number)
William E. Morgenstern
Rent-Way, Inc.
One Rent Way Place
Erie, Pennsylvania 16505
-------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 1, 1998
-----------------------------
(Date of Event Which Requires
Filing of This Statement)
Copy to:
John J. Zak
Hodgson, Russ, Andrews, Woods & Goodyear LLP
1800 One M&T Plaza
Buffalo, New York 14203
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13(d)- 1(f) or 13d-1(g), check the
following box: |_|.
Page 1 of 8 Pages
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CUSIP NO. 437063100 13 D Page 2 of 8 Pages
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(1) NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Rent-Way, Inc.
- -----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS*
N/A
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
- -----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Pennsylvania
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NUMBER OF (7) SOLE VOTING POWER 4,229,847*
SHARES
--------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER - 0 -
OWNED BY --------------------------------------------------------
(9) SOLE DISPOSITIVE POWER 4,229,847*
EACH REPORTING
--------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER - 0 -
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,229,847*
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(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
[ ]
- -----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%(1)
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(14) TYPE OF REPORTING PERSON
CO
- -----------------------------------------------------------------------------
- --------
(1) Assumes a total of 17,025,668 shares outstanding, adjusted to
reflect the issuance of the full amount of Home Choice Common Stock
pursuant to the Home Choice Option Agreement.
* The shares of Home Choice Common Stock of Home Choice, each as defined
below, covered by this item are purchasable by Rent-Way, as defined below,
upon the exercise of an option granted to Rent-Way on September 1, 1998 and
described in Items 3, 4 and 5 of this Statement. Prior to the exercise of
the option, Rent-Way is not entitled to any rights as a stockholder of Home
Choice with respect to the shares of Home Choice Common Stock covered by
the Home Choice Option, as defined below. Rent-Way disclaims any beneficial
ownership of the shares of Home Choice Common Stock which are purchasable
by Rent-Way upon exercise of the Home Choice Option on the grounds that the
Home Choice Option is not presently exercisable and only becomes
exercisable upon the occurrence of the events referred to in Item 4 below.
If the Home Choice Option were exercised, Rent-Way would have the sole
right to vote and to dispose of the shares of Home Choice Common Stock
issued as a result of such exercise.
Page 2 of 8 Pages
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SCHEDULE 13D
RELATING TO THE COMMON STOCK OF
HOME CHOICE HOLDINGS, INC.
Item 1. Security and Issuer
The class of equity securities to which this Statement on Schedule 13D
relates is the Common Stock, $.01 par value ("Home Choice Common Stock"), of
Home Choice Holdings, Inc. ("Home Choice"), a Delaware corporation. Home
Choice's principal executive offices are located at 714 E. Kimbrough Street,
Mesquite, Texas 75149.
Item 2. Identity and Background
(a) This Schedule 13D is filed by Rent-Way, Inc., a Pennsylvania
corporation ("Rent-Way"), pursuant to Rule 13d-1 of the General Rules and
Regulations under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"). Rent-Way is one of the largest operators of rental-purchase
stores in the United States. Rent-Way offers quality, brand name home
entertainment equipment, furniture, major appliances and jewelry to customers
under full-service rental agreements that generally allow the customer an option
to obtain ownership of the merchandise at the conclusion of the agreed upon
rental period or return the merchandise at any time without obligation or
penalty. Rent-Way's principal offices are located at One Rent-Way Place, Erie,
Pennsylvania 16505.
Other than the executive officers and directors of Rent-Way there are no
persons or corporations controlling or ultimately in control of Rent-Way. Each
executive officer and director of Rent-Way is a citizen of the United States.
The name, residence or business address, and present principal occupation or
employment of the executive officers and directors of Rent-Way are set forth in
Annex A to this Schedule 13D Statement and are specifically incorporated herein
by reference.
(d)-(e) During the last five years, neither Rent-Way, nor, to the best of
Rent-Way's knowledge, any executive officer or director of Rent-Way listed on
Annex A hereto, has (i) been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
As more fully described below, pursuant to the terms of the Home Choice
Option Agreement (as defined below), Rent-Way will have the right, upon the
occurrence of certain events specified therein, to purchase up to 4,229,847
shares of Home Choice Common Stock (subject to certain adjustments as provided
in the Home Choice Stock Option Agreement) at a price of $13.24 per share. At
the current exercise price, exercise of the Home Choice Option for the full
number of shares currently covered thereby would require aggregate funds of
$56,003,174. If Rent-Way purchases Home Choice Common Stock pursuant to the Home
Choice Stock Option Agreement, Rent-Way anticipates that the funds to finance
such purchase would come from a combination of borrowings and working capital,
although no definitive determination has been made at this time as to the source
of funds.
However, the Home Choice Option, as defined below, was granted in
consideration of entering into the Merger Agreement with Rent-Way granting a
reciprocal option to Home Choice, as discussed below. Rent-Way did not pay any
cash consideration in respect of the Home Choice Option and has not purchased
any shares of Home Choice Common Stock.
Item 4. Purpose of Transaction
(a)-(j) On September 1, 1998 Rent-Way and Home Choice, entered into an
Agreement and Plan of Merger, dated as of September 1, 1998 (the "Merger
Agreement"), a copy of which is attached as Exhibit A and incorporated herein by
reference. The Merger Agreement provides, among other things, for the merger of
Home Choice into Rent-Way (the "Merger") with Rent-Way being the corporation
surviving the Merger.
Pursuant to the Merger Agreement, at the Effective Time (as defined in the
Merger Agreement), each outstanding share of common stock (other than treasury
shares), par value $.01 per share, of Home Choice ("Home Choice Common Stock")
will be converted into the right to receive 0.588 shares of Rent-Way Common
Stock. Fractional shares will not be issued but the holders thereof will be paid
cash in an amount equal to the product of such fraction multiplied by the
closing sale price of one share of Rent-Way Common Stock on the Nasdaq National
Market or the New York Stock Exchange at the Effective Time.
Consummation of the Merger is subject to the satisfaction or waiver at or
prior to the Effective Time of certain conditions, including, but not limited to
(i) approval of the Merger Agreement, including the issuance of shares of
Rent-Way Common Stock pursuant to the Merger Agreement and the amendment of
Rent-Way's Articles of Incorporation to increase the authorized shares of
Rent-Way Common Stock from 20,000,000 to 50,000,000 by the holders of the
Rent-Way Common Stock, and (ii) approval of the Merger Agreement by the holders
of Home Choice Common Stock.
Page 3 of 8 Pages
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Concurrent with the execution of the Merger Agreement, as an inducement to
Rent-Way to enter into the Merger Agreement, Home Choice and Rent-Way entered
into a stock option agreement, dated as of September 1, 1998, (the "Home Choice
Option Agreement") a copy of which is attached hereto as Exhibit B and is
incorporated herein by reference. Pursuant to the Home Choice Stock Option
Agreement, Home Choice granted Rent-Way an irrevocable option to purchase,
following the occurrence of certain events, up to 4,229,847 shares, subject to
certain adjustments, of Home Choice Common Stock at a purchase price of $13.24
per share (the "Home Choice Option").
In addition, as an inducement to Home Choice to enter into the Merger
Agreement, Rent-Way and Home Choice entered into a second stock option
agreement, dated as of September 1, 1998, (the "Rent-Way Stock Option
Agreement"). Pursuant to the Rent-Way Stock Option Agreement, Rent-Way granted
Home Choice an irrevocable option to purchase, following the occurrence of
certain events, up to 2,740,908 shares, subject to certain adjustments, of
Rent-Way Common Stock at a purchase price of $29.42 per share (the "Rent-Way
Option"). The Rent-Way Stock Option Agreement is incorporated herein by
reference to Exhibit A to the Home Choice Schedule 13D filed on September 11,
1998.
The foregoing summaries of the Merger Agreement, the Home Choice Stock
Option Agreement and the Rent-Way Stock Option Agreement do not purport to be
complete and are qualified in their entirety by reference to the text of such
agreements attached or incorporated by reference hereto.
Pursuant to the Merger Agreement, the Board of Directors and officers of
Rent-Way, as the surviving corporation in the Merger, shall consist of the
current Board of Directors and officers of Rent-Way.
Item 5. Interest in Securities of the Issuer.
(a)-(b) Although the Home Choice Option does not allow Rent-Way to purchase
any shares of Home Choice Common Stock pursuant thereto unless the specified
conditions allowing exercise occur, assuming for purposes of this Item 5 that
such conditions occur and Rent-Way is entitled to exercise the Home Choice
Option, then upon purchasing the full amount of shares of Home Choice Common
Stock that Rent-Way presently is entitled to purchase pursuant to the Home
Choice Option, Rent-Way would own 4,229,847 shares of Home Choice Common Stock,
or approximately 19.9% of the total shares of Home Choice
Page 4 of 8 Pages
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Common Stock outstanding as of September 1, 1998 (adjusted to reflect the
issuance to Rent-Way of such 4,229,847 shares).
Under the Home Choice Option Agreement, Rent-Way presently does not have
the right to acquire any shares of Home Choice Common Stock unless specific
events occur. Accordingly, Home Choice does not have sole or shared voting or
dispositive power with respect to any shares of Home Choice Common Stock, and
Rent-Way therefore disclaims beneficial ownership (as that term is defined in
Rule 13d-3 ("Rule 13d-3") under the Act) of the Home Choice Common Stock subject
to the Home Choice Option until the events allowing exercise occur, if ever.
Assuming for purposes of this Item 5, however, that events occur that would
enable Home Choice to exercise the Rent-Way Option, Home Choice would have
the right to purchase up to 4,229,847 shares, subject to certain adjustments, of
Home Choice Common Stock, as to which it would have sole voting power and sole
dispositive power.
Other than the Home Choice Option, neither Rent-Way nor any of its
subsidiaries beneficially owns any shares of Home Choice Common Stock.
To the best of Rent Way's knowledge, no shares of Home Choice Common Stock
are beneficially owned by any executive officer or director of Rent-Way.
(c) Except for the issuance of the Home Choice Option described in response
to Items 3 and 4 (which response is specifically incorporated by reference
herein), no transactions in Home Choice Common Stock were affected during the
past 60 days by Rent-Way or, to the best of Rent-Way's knowledge, by any
executive officer or director of Rent-Way.
(d) No other person is known to have the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, the
securities described above.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
Other than the Merger Agreement described in response to Item 4 (which
response is specifically incorporated by reference herein), the Home Choice
Option Agreement described in response to Items 3 and 4 (which response is
specifically incorporated by reference herein) and the Rent-Way Option Agreement
described in response to Item 4 (which response is specifically incorporated by
reference herein), there are no contracts, arrangements, understandings or
relationships between Home Choice and any other person, or, to the best of
Rent-Way's knowledge, among any of Rent-Way's executive officers and directors
or between any of Rent-Way's executive officers and directors and any other
person, with respect to any securities of Home Choice.
Item 7. Material to be filed as Exhibits.
The following exhibits are filed as part of this Schedule 13D Statement:
Page 5 of 8 Pages
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Exhibit A -- Agreement and Plan of Merger, dated as
of September 1, 1998, by and between
Rent-Way and Home Choice.
Exhibit B -- Stock Option Agreement, dated as of
September 1, 1998, by and between Home Choice
and Rent-Way.
Exhibit C -- Stock Option Agreement, dated as of September 1,
1998, by and between Rent-Way and Home Choice
(incorporated by reference to Exhibit A to the
Home Choice Schedule 13D filed with the Commission
on September 11, 1998).
Exhibit D -- Joint Press Release dated September 2,
1998 of Rent-Way and Home Choice
(incorporated by reference to Exhibit 99.1
to Rent-Way's Current Report on Form 8-K
filed with the Commission on September 14, 1998).
Page 6 of 8 Pages
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: September 11, 1998.
RENT-WAY, INC.
By: /s/ JEFFREY A. CONWAY
----------------------------
Jeffrey A. Conway
Chief Financial Officer
Page 7 of 8 Pages
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ANNEX A
Name Address Occupation
---- ------- ----------
Gerald A. Ryan One Rent-Way Place Chairman of the Board
Erie PA 15606 (Rent-Way)
William E. Morgenstern One Rent-Way Place President and Chief
Erie PA 15606 Executive Officer
(Rent-Way)
Jeffrey A. Conway One Rent-Way Place Vice President and Chief
Erie PA 15606 Financial Officer
(Rent-Way)
Ronald D. DeMoss One Rent-Way Place Vice President and
Erie PA 15606 General Counsel
(Rent-Way)
Kirk R. Smithee One Rent-Way Place Vice President/
Erie PA 15606 Operations
(Rent-Way)
William Lerner, 420 E. Beau St. Attorney
Director Washington PA 15301
Vincent A. Currino, 3000 Sand Hill Road Brookhaven Capital, Inc.
Director Bldg. 3, Suite 105 President
Menlo Park CA 94025
Robert B. Fagenson, 19 Rector Street Fagenson & Co
Director (16th Floor) Principal
NY NY 10006
Marc W. Joseffer 41 North Woodside Lane Private Investor
Williamsville NY 14221
Paul N. Upchurch 71 Broadriven Road Attorney
Ormand Beach Florida
32174
Page 8 of 8 Pages
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EXHBIT A
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
RENT-WAY, INC.
AND
HOME CHOICE HOLDINGS INC.
DATED AS OF SEPTEMBER 1, 1998
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September
1, 1998, is made by and between Rent-Way, Inc., a Pennsylvania corporation
("Rent-Way"), and Home Choice Holdings Inc., a Delaware corporation ("HCI").
WHEREAS, the Board of Directors of Rent-Way deems it advisable and in the
best interests of Rent-Way's shareholders, and the Board of Directors of HCI
deems it advisable and in the best interests of HCI's stockholders, that HCI
merge with and into Rent-Way, and such Boards of Directors have approved the
merger (the "Merger") of HCI with and into Rent-Way upon the terms and subject
to the conditions set forth herein; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting and financial reporting purposes, it is intended
that the Merger shall be treated as a pooling of interests; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Rent-Way and HCI have entered into Option Agreements dated the date
hereof as described herein.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto (each, a "Party"), intending to be legally
bound, hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as hereinafter defined), HCI
shall merge with and into Rent-Way in accordance with the applicable provisions
of the laws of the Commonwealth of Pennsylvania and the State of Delaware. At
the Effective Time, the separate corporate existence of HCI shall cease and
Rent-Way shall be the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all of the rights and obligations of HCI in
accordance with the Pennsylvania Business Corporation Law.
Section 1.2 Effective Time of The Merger. The Merger shall become effective
when a properly executed Certificate of Merger (as hereinafter defined) is duly
filed with the Secretary of State of the State of Delaware and properly executed
Articles of Merger (as hereinafter defined) are duly filed with the Secretary of
State of the Commonwealth of Pennsylvania, or at such later time which Rent-Way
and HCI have agreed upon and designated in such filings in accordance with
Applicable Law (as hereinafter defined). Such filings shall be made as soon as
practicable after satisfaction or, to the extent permitted hereunder, waiver of
each condition to each Party's obligation to consummate the Merger contained in
Article VIII. When used in this Agreement, the term "Effective Time" shall mean
the date and time at which such Certificate of Merger and Articles of Merger
become effective.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation; Amendment. The Articles of
Incorporation of the Surviving Corporation at the Effective Time shall be the
Articles of Incorporation of Rent-Way as in effect on the date of this Agreement
except that Article 5 of the Articles of Incorporation of the Surviving
Corporation shall be amended to increase the number of authorized shares of
Rent-Way Common Stock (as hereinafter defined) from 20,000,000 to 50,000,000
shares (the "Amendment"). The Amendment shall be effectuated in the Articles of
Merger.
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Section 2.2 By-Laws. Subject to Section 7.9 hereof, the By-Laws of the
Surviving Corporation at the Effective Time shall be the By-Laws of Rent-Way
that are in effect on the date of this Agreement with such changes, if any, as
may be mutually agreed upon by HCI and Rent-Way.
Section 2.3 Directors of Surviving Corporation. The initial directors of
the Surviving Corporation at the Effective Time shall be the persons who are the
directors of Rent-Way as of such date, which persons shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualify in the manner provided in the Articles of Incorporation and By-Laws
of the Surviving Corporation or as otherwise provided by Applicable Law.
Section 2.4 Name of Surviving Corporation. The name of the Surviving
Corporation shall be Rent-Way, Inc.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
(a) Each of the shares of HCI's Common Stock, par value $.01 per share
(the "Shares"), issued and outstanding immediately prior to the Effective Time
(other than Shares held in the treasury of HCI) shall be converted into the
right to receive 0.588 (the "Exchange Ratio") shares of Rent-Way Common Stock,
without par value (the "Rent-Way Common Stock," and upon such conversion, the
"Rent-Way Shares"), issuable upon the surrender of the certificate formerly
representing such Share (provided, however, that the Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities convertible
into Rent-Way Common Stock or Shares), reorganization, recapitalization or other
like change with respect to Rent-Way Common Stock or Shares occurring after the
date hereof and prior to the Effective Time); and
(b) Each Share held in the treasury of HCI, if any, and each Share held
by Rent-Way or any subsidiary of Rent-Way immediately prior to the Effective
Time shall be canceled and retired and cease to exist, and no consideration
shall be delivered in exchange therefor.
Section 3.2 Exchange of Certificates Representing Shares.
(a) As of the Effective Time, Rent-Way shall deposit, or shall cause to
be deposited, with an exchange agent selected by Rent-Way and reasonably
satisfactory to HCI (the "Exchange Agent"), for the benefit of the holders of
Shares, for exchange in accordance with this Article III, (i) certificates
representing the number of Rent-Way Shares issuable in the Merger, to be issued
in respect of all Shares outstanding immediately prior to the Effective Time and
which are to be exchanged pursuant to the Merger (exclusive of Shares to be
canceled pursuant to Section 3.1(b)), and (ii) cash to be paid in lieu of the
issuance of fractional shares as provided in Section 3.4 hereof (such cash and
certificates for Rent-Way Shares being hereinafter referred to collectively as
the "Exchange Fund").
(b) Promptly after the Effective Time, Rent-Way shall cause the Exchange
Agent to mail (or deliver at its principal office) to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented Shares (i) a letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the certificates for Shares
shall pass, only upon delivery of the certificates for Shares to the Exchange
Agent and shall be in such form and have such other provisions, including
appropriate provisions with respect to back-up withholding, as Rent-Way may
reasonably specify, and (ii) instructions for use in effecting the surrender of
the certificates for Shares. Upon surrender of a certificate for Shares for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, the
holder thereof shall be entitled to receive in exchange therefor that portion of
the Exchange Fund which such holder has the right to receive pursuant to the
provisions of this Article III, after giving effect to any required withholding
tax, and the certificate for Shares so surrendered shall forthwith be canceled.
No interest will be paid or accrued on the cash to be paid which is in the
Exchange Fund as part of the Exchange Ratio. In the event of any transfer of
ownership of Shares which has not been registered in the transfer records of
HCI,
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certificates representing the proper number of Rent-Way Shares, if any, together
with a check in an amount equal to the proper amount of the cash component, if
any, of the Exchange Fund, will be issued to the transferee of the certificate
representing the transferred Shares presented to the Exchange Agent, accompanied
by all documents required to evidence and effect the prior transfer thereof and
to evidence that any applicable stock transfer taxes associated with such
transfer were paid.
Section 3.3 Dividends; Transfer Taxes. No dividends that are declared on
Rent-Way Shares will be paid to persons entitled to receive certificates
representing Rent-Way Shares until such persons surrender their certificates
representing Shares. Upon such surrender, there shall be paid to the person in
whose name the certificates representing such Rent-Way Shares shall be issued,
any dividends which shall have become payable with respect to such Rent-Way
Shares between the Effective Time and the time of such surrender. In no event
shall the person entitled to receive such dividends be entitled to receive
interest on such dividends. If any certificates for any Rent-Way Shares are to
be issued in a name other than that in which the certificate representing Shares
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the person requesting such exchange shall pay to the Exchange
Agent any transfer or other taxes required by reason of the issuance of
certificates for such Rent-Way Shares in a name other than that of the
registered holder of the certificate surrendered or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, (i) neither the Exchange Agent nor
any Party hereto shall be liable to a holder of Shares for any Rent-Way Shares
or dividends thereon or, in accordance with Section 3.4 hereof, proceeds of the
sale of fractional interests, delivered to a public official pursuant to
Applicable Law and (ii) any Rent-Way Shares held by the Exchange Agent prior to
surrender of certificates representing Shares shall not be deemed issued.
Section 3.4 No Fractional Securities. No certificates or scrip representing
fractional Rent-Way Shares shall be issued upon the surrender for exchange of
certificates representing Shares pursuant to this Article III, and no dividend,
stock split or other change in the capital structure of HCI shall relate to any
fractional security, and such fractional interests shall not entitle the owner
thereof to vote or to any rights of a security holder of HCI. In lieu of any
such fractional securities, each holder of Shares who would otherwise have been
entitled to a fraction of a Rent-Way Share upon surrender of stock certificates
for exchange pursuant to this Article III will be paid cash upon such surrender
in an amount equal to the market value immediately prior to the Effective Time
of such fractional Rent-Way Share calculated based on the average closing price
on the Nasdaq National Market ("Nasdaq") or the New York Stock Exchange (the
"NYSE"), whichever is applicable, for the last five trading days immediately
preceding the day prior to the Effective Time. For this purpose, Shares of any
holder represented by two or more certificates may be aggregated, and in no
event shall any holder be paid a cash amount in respect of one or more than one
Rent-Way Share.
Section 3.5 Closing of HCI Transfer Books. At the Effective Time, the stock
transfer books of HCI shall be closed and no transfer of Shares shall thereafter
be made. If, after the Effective Time, certificates representing Shares are
presented to the Surviving Corporation, they shall be canceled and exchanged for
certificates representing Rent-Way Shares in accordance with this Article III.
Section 3.6 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hodgson, Russ,
Andrews, Woods & Goodyear, LLP, 1800 One M&T Plaza, Buffalo, New York 14203, at
10:00 a.m., local time, on the later of (a) the date of the Stockholders'
meetings referred to in Section 7.4 hereof or (b) the day on which each
condition set forth in Article VIII hereof is either satisfied or waived, or at
such other date, time and place as Rent-Way and HCI shall agree.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RENT-WAY
Except as otherwise disclosed to HCI in a letter delivered to it prior to
the execution hereof (which letter shall contain appropriate references to
identify the representations and warranties herein to which the information in
such letter relates) (the "Rent-Way Disclosure Letter"), Rent-Way represents and
warrants to HCI as follows:
Section 4.1 Organization. Rent-Way is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has the corporate power to carry on its business as it is
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now being conducted or presently proposed to be conducted. Rent-Way is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities make such qualification necessary, except
where the failure to be so qualified would not individually or in the aggregate
have a Rent-Way Material Adverse Effect (as hereinafter defined). Rent-Way has
delivered to HCI prior to the execution of this Agreement complete and correct
copies of its Articles of Incorporation and By-Laws, as amended to date. In all
material respects, the minute books of Rent-Way contain accurate records of all
meetings and accurately reflect all other actions taken by the stockholders, the
Board of Directors and all committees of the Board of Directors of Rent-Way
since October 1, 1994. For purposes of this Agreement, a "Rent-Way Material
Adverse Effect" shall mean any effect that is material and adverse to the
business, assets, liabilities, results of operations or financial condition of
Rent-Way and the Rent-Way Subsidiaries (as hereinafter defined) taken as a
whole; provided, that a Rent-Way Material Adverse Effect shall not be deemed to
include the impact of (i) changes in Applicable Law of general applicability or
implementation thereof by courts or Governmental Authorities, (ii) acts or
omissions of HCI or any HCI Subsidiary (as hereinafter defined) taken with the
prior written consent of Rent-Way in contemplation of the transactions
contemplated hereby, (iii) circumstances affecting the rental-purchase industry
generally, and (iv) the effects of the Merger and the compliance by either Party
with the provisions of this Agreement on the business, assets, liabilities,
results of operations or financial condition of Rent-Way or any Rent-Way
Subsidiary.
Section 4.2 Capitalization. The authorized capital stock of Rent-Way
consists of 20,000,000 shares of Rent-Way Common Stock, and 1,000,000 shares of
preferred stock, no par value. As of August 27, 1998, (i) 11,032,500 shares of
Rent-Way Common Stock were issued and outstanding, (ii) options to acquire
1,534,527 shares of Rent-Way Common Stock (the "Rent-Way Employee Stock
Options") were outstanding under all stock option plans of Rent-Way (the
"Rent-Way Employee Stock Option Plans"), (iii) 1,534,527 shares of Rent-Way
Common Stock including the shares set forth in Section (ii) were reserved for
issuance in connection with the Rent-Way Employee Stock Option Plans, (iv)
warrants to purchase an aggregate of 105,000 shares of Rent-Way Common Stock
(the "Rent-Way Warrants") were outstanding; and (v) convertible subordinated
debentures in the aggregate principal amount of $20,000,000 were outstanding
which, at a conversion price of $13.37 per share, are convertible into 1,495,886
shares of Rent-Way Common Stock. Section 4.2 of the Rent-Way Disclosure Letter
sets forth a complete and correct list, as of August 31, 1998, of the number of
shares of Rent-Way Common Stock subject to Rent-Way Employee Stock Options, the
Rent-Way Warrants or other rights to purchase or to receive Rent-Way Common
Stock granted under the Rent-Way Employee Stock Option Plans and the Rent-Way
Warrants, the dates of grant and the exercise prices thereof. As of August 31,
1998, Rent-Way had no treasury shares and no shares of Rent-Way Common Stock
were held by Rent-Way Subsidiaries. All of the issued and outstanding shares of
Rent-Way Common Stock are validly issued, fully paid and nonassessable and free
of preemptive rights. All of the shares of Rent-Way Common Stock issuable in
exchange for Shares at the Effective Time in accordance with this Agreement will
be, when so issued, duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights. Except as set forth in this
Agreement and except as provided in the Rent-Way Option Agreement (as
hereinafter defined), as of the date of this Agreement, there are no shares of
capital stock of Rent-Way issued or outstanding or any options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating Rent-Way to issue, transfer, sell, redeem, repurchase or
otherwise acquire any shares of its capital stock. Except as set forth in this
Agreement and the Rent-Way Option Agreement, after the Effective Time, Rent-Way
will have no obligation to issue, transfer or sell any shares of its capital
stock pursuant to any employee benefit plan or otherwise. Except as set forth in
this Agreement and the Rent-Way Option Agreement, there are not now, and at the
Effective Time there will not be, any outstanding options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating Rent-Way to issue, transfer or sell any securities of
Rent-Way. Other than agreements contemplated by this Agreement, there are not
now, and at the Effective Time there will not be, any voting trusts, standstill,
stockholder or other agreements or understandings to which Rent-Way is a party
or is bound with respect to the voting of, requiring the registration of, or
granting any preemptive rights or antidilution rights with respect to, the
capital stock of Rent-Way.
Section 4.3 Subsidiaries. Section 4.3 of the Rent-Way Disclosure Letter
lists all corporations, partnerships, joint ventures and other business
associations and entities, foreign and domestic, in which Rent-Way has any
direct or indirect ownership or economic interest. Such corporations,
partnerships, joint ventures or other business
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entities of which Rent-Way owns, directly or indirectly, greater than 50% of the
shares of capital stock or other equity interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
cast at least a majority of the votes that may be cast by all shares of equity
interests having ordinary voting power for the election of directors or other
governing body of such entity are hereinafter referred to as the "Rent-Way
Subsidiaries."
(a) Each Rent-Way Subsidiary that is a corporation is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each Rent-Way Subsidiary that is a partnership or
a limited liability company is duly formed, validly existing and in good
standing under the laws of its jurisdiction of formation.
(b) Each Rent-Way Subsidiary has the corporate power, the partnership
power or the company power, as the case may be, to carry on its business as it
is now being conducted or presently proposed to be conducted.
(c) Each Rent-Way Subsidiary that is a corporation is duly qualified as
a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified would not individually or in the aggregate have a
Rent-Way Material Adverse Effect. Each Rent-Way Subsidiary that is a partnership
is duly qualified as a foreign partnership authorized to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not individually or
in the aggregate have a Rent-Way Material Adverse Effect. Each Rent-Way
Subsidiary that is a limited liability company is duly qualified as a foreign
limited liability company authorized to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified would not individually or in the aggregate
have a Rent-Way Material Adverse Effect.
(d) All of the outstanding shares of capital stock of the Rent-Way
Subsidiaries that are corporations are duly authorized, validly issued, fully
paid and nonassessable and are free of preemptive rights. All of the outstanding
ownership interests of the Rent-Way Subsidiaries that are partnerships or
limited liability companies are duly authorized, validly issued, fully paid and
nonassessable and are free of preemptive rights.
(e) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Rent-Way Subsidiaries owned by Rent-Way or a
Rent-Way Subsidiary are owned by Rent-Way or by a Rent-Way Subsidiary free and
clear of any liens, claims, charges or encumbrances. Except as set forth in
Section 4.2 hereof, there are not now, and at the Effective Time there will not
be, any outstanding options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating Rent-Way or any
Rent-Way Subsidiary to issue, transfer or sell any securities of Rent-Way or any
Rent-Way Subsidiary.
(f) Other than agreements contemplated by this Agreement, there are not
now, and at the Effective Time there will not be, any voting trusts, standstill,
shareholder or other agreements or understandings to which Rent-Way or any of
the Rent-Way Subsidiaries is a party or is bound with respect to the voting of,
requiring the registration of, or granting any preemptive rights or antidilution
rights with respect to, the capital stock of Rent-Way or any of the Rent-Way
Subsidiaries.
Section 4.4 Authority Relative To This Agreement. Rent-Way has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation by Rent-Way of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Rent-Way and, except for the approval of Rent-Way's shareholders to
be sought at the shareholders' meeting contemplated by Section 7.4(b) hereof, no
other corporate action or proceedings on the part of Rent-Way are necessary to
authorize this Agreement or the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Rent-Way and constitutes a
valid and binding agreement of Rent-Way, enforceable against Rent-Way in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditors'
rights generally or to general principles of equity.
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Section 4.5 Consents and Approvals; No Violations. Except for applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), state laws
relating to takeovers, if applicable, state securities or blue sky laws, and the
filing and recordation of appropriate articles of merger (the "Articles of
Merger") in such form as required by, and executed in accordance with the
relevant provisions of, the Pennsylvania Business Corporation Law, no filing
with, and no permit, authorization, consent or approval of, any Governmental
Authority (as hereinafter defined) is necessary for the consummation by Rent-
Way of the transactions contemplated by this Agreement, except for such filings,
permits, authorizations, consents or approvals the failure of which to be made
or obtained would not individually or in the aggregate have a Rent-Way Material
Adverse Effect. Neither the execution and delivery of this Agreement by Rent-Way
nor the consummation by Rent-Way of the transactions contemplated hereby, nor
compliance by Rent-Way with any of the provisions hereof, will (a) conflict with
or result in any breach of any provisions of the Articles of Incorporation or
By-Laws of Rent-Way or any of the Rent-Way Subsidiaries, (b) result in a
violation or breach of, or constitute (with or without the notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation to which Rent-Way or any of the Rent-Way Subsidiaries is a party or
by which any of them or any of their properties or assets may be bound, or (c)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Rent-Way or any of the Rent-Way Subsidiaries or any of their
properties or assets, except in the case of clauses (b) and (c) for violations,
breaches or defaults which would not individually or in the aggregate have a
Rent-Way Material Adverse Effect.
Section 4.6 Reports and Financial Statements. Rent-Way has timely filed all
reports required to be filed with the Securities and Exchange Commission (the
"SEC") pursuant to the Exchange Act since October 1, 1997 (collectively, the
"Rent-Way SEC Reports"). As of their respective dates, the Rent-Way SEC Reports
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Rent-Way SEC Reports. None of such
Rent-Way SEC Reports, as of their respective dates, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the audited
balance sheets of Rent-Way and the related audited statements of operations,
stockholders equity and cash flows and unaudited interim financial statements
included in the Rent-Way SEC Reports complied as to form, as of their respective
dates of filing with the SEC, in all material respects, with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto and fairly presented the consolidated financial position and the
results of operations and the changes in financial position of Rent-Way and its
consolidated subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
otherwise noted therein.
Section 4.7 Absence of Certain Changes or Events. Except as set forth in
the Rent-Way SEC Reports or the Rent-Way Disclosure Letter, since September 30,
1997, Rent-Way has not: (a) taken any of the actions set forth in Section
6.2(b), 6.2(c) or 6.2(e) hereof; (b) suffered any material adverse change in the
business, financial condition, results of operations, properties, assets or
liabilities of Rent-Way or the Rent-Way Subsidiaries taken as a whole; or (c)
subsequent to such date, except as permitted by Section 6.2 hereof, conducted
its business and operations other than in the ordinary course of business and
consistent with past practices.
Section 4.8 Litigation. Except for litigation disclosed in (i) the notes to
the financial statements included in Rent-Way's Annual Report to Stockholders
for the year ended September 30, 1997 or (ii) the Rent-Way SEC Reports, there is
no suit, action or proceeding pending or, to the best of Rent-Way's knowledge,
threatened against or affecting Rent-Way, the outcome of which would
individually or in the aggregate have a Rent-Way Material Adverse Effect; nor is
there any judgment, decree, injunction, citation, settlement agreement, rule or
order of any federal, regional, state or local political subdivision, any
governmental or administrative body, instrumentality, department or agency or
any court, administrative hearing body, commission or similar dispute resolving
panel or body, or any other body exercising the executive, legislative,
judicial, regulatory or
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administrative functions of a government (collectively, a "Governmental
Authority") outstanding against Rent-Way having, or which, insofar as can
reasonably be foreseen, in the future may have, any such effect.
Section 4.9 Contracts and Commitments. Except as disclosed in the Rent-Way
SEC Reports or in the Rent-Way Disclosure Letter, neither Rent-Way nor any
Rent-Way Subsidiary is a party to or is bound by any of the following:
(i) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC);
(ii) any non-competition agreement or any other agreement or
obligation which purports to limit in any material respect the manner in
which, or the localities in which, the business of Rent-Way and the
Rent-Way Subsidiaries (including, for purposes of this Section 4.9, HCI and
the HCI Subsidiaries (as hereinafter defined), assuming the Merger has been
consummated) is or would be conducted; or
(iii) any contract or other agreement which would prohibit or
materially delay the consummation of the Merger or any of the other
transactions contemplated hereby (all such contracts of the type described
in clauses (i), (ii) and (iii) of this Section 4.9 being referred to herein
as "Rent-Way Material Contracts").
Each Rent-Way Material Contract is valid and binding on Rent-Way or, to the
extent that a Rent-Way Subsidiary is a party, such Rent-Way Subsidiary, and is
in full force and effect, and Rent-Way and each Rent-Way Subsidiary has in all
material respects performed all obligations to be performed by them to date
under each Rent-Way Material Contract, except where such nonperformance,
individually or in the aggregate, would not have a Rent-Way Material Adverse
Effect. Neither Rent-Way nor any Rent-Way Subsidiary knows of, or has received
notice of, any violation or default under (nor, to the knowledge of Rent-Way,
does there exist any condition which with the passage of time or the giving of
notice or both would result in such a violation or default under) any Rent-Way
Material Contract.
Section 4.10 Information in Disclosure Documents and Registration
Statement. None of the information to be supplied by Rent-Way for inclusion or
incorporation by reference in (a) the Registration Statement to be filed with
the SEC by Rent-Way on Form S-4 under the Securities Act for the purpose of
registering the offering of the Rent-Way Shares to be issued in the Merger (the
"Registration Statement") or (b) the joint proxy statement/prospectus to be
distributed in connection with Rent-Way's meeting of shareholders and HCI's
meeting of stockholders at which meetings this Agreement will be voted upon (the
"Proxy Statement") will, in the case of the Registration Statement, at the time
it becomes effective and at the Effective Time or, in the case of the Proxy
Statement or any amendments thereof or supplements thereto, at the time of the
mailing of the Proxy Statement and any amendments thereof or supplements thereto
and at the time of the meetings of shareholders and stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation or warranty is made
by Rent-Way with respect to statements made or incorporated by reference therein
based on written information supplied by HCI specifically for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement.
The Registration Statement and the Proxy Statement will comply as to form in all
material respects with the provisions of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations promulgated thereunder.
Section 4.11 Absence of Undisclosed Liabilities. Except for liabilities or
obligations which (i) are accrued or reserved against in Rent-Way's financial
statements (or reflected in the notes thereto) included in the Rent-Way SEC
Reports, or (ii) were incurred after September 30, 1997 in the ordinary course
of business and consistent in type and amount with past practices, neither
Rent-Way nor any Rent-Way Subsidiary has any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of a nature required by GAAP to be
reflected in a corporate balance sheet or the notes thereto.
Section 4.12 No Default. Neither Rent-Way nor any Rent-Way Subsidiary is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (a) its Articles of Incorporation or By-Laws, (b) any note,
bond, mortgage, indenture, license, agreement, contract, lease, commitment or
other obligation to which Rent-Way or any of the Rent-Way Subsidiaries is a
party or by which it or any of its properties or assets may be bound, or (c) any
order,
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writ, injunction, decree, statute, rule or regulation applicable to Rent-Way or
any of the Rent-Way Subsidiaries, except in the case of clauses (b) and (c)
above for defaults or violations which would not individually or in the
aggregate have a Rent-Way Material Adverse Effect.
Section 4.13 Tax Returns; Taxes.
(a) For purposes of this Agreement, "Tax" means any federal, state,
local or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duty, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not; "Tax Return" means any return, declaration,
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto and any amendment thereto.
(b) Rent-Way has filed all Tax Returns that it has been required to file
to date and all such Tax Returns were correct and complete in all respects. All
Taxes owed by Rent-Way (whether or not shown on any Tax Return) which are due
and payable have been paid except for such Taxes as would not, individually or
in the aggregate, have a Rent-Way Material Adverse Effect. Rent-Way is not
currently the beneficiary of any extension of time within which to file any Tax
Return. No taxing authority in a jurisdiction where Rent-Way does not file Tax
Returns has claimed in writing that Rent-Way is or may be subject to taxation by
that jurisdiction.
(c) Rent-Way 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.
(d) There is no dispute or claim concerning any Tax liability of
Rent-Way either (i) claimed or raised by any taxing authority in writing or (ii)
as to which any shareholder or employee of Rent-Way responsible for Tax matters
of Rent-Way has knowledge based upon personal contact with any agent of such
authority.
(e) Rent-Way has not waived any statute of limitations with respect to
Taxes or agreed to any extension of time with respect to assessment of Taxes.
(f) All accounting periods and methods used by Rent-Way for Tax purposes
are permissible periods and methods, and Rent-Way is not required to make any
adjustments to its income under Section 481 of the Code in taxable years for
which Tax Returns have not yet been filed. Rent-Way has not filed a consent
under Section 341(f) of the Code concerning collapsible corporations. Rent-Way
has not made any payments, is not obligated to make any payments, and is not a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Section 280G of the Code.
Rent-Way is not a party to any Tax allocation or sharing agreement. Rent-Way (i)
has not been a member of an affiliated group filing a consolidated federal
income Tax return in any taxable year ending after September 30, 1993 and (ii)
has no liability for the Taxes of any person other than Rent-Way under Treasury
Regulation Section 1.1502-6 or any similar provision of state, local or foreign
law, as a transferee or successor, by contract, or otherwise.
(g) The unpaid Taxes of Rent-Way did not, as of September 30, 1997,
exceed the reserve for Taxes (excluding any reserve for deferred taxes
attributable to differences between the timing of income or deductions for tax
and financial accounting purposes) set forth on the balance sheet as of
September 30, 1997 (excluding any notes thereto) contained in the Rent-Way SEC
Reports.
(h) Neither Rent-Way nor any of the Rent-Way Subsidiaries has taken any
action or has notice of any fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code.
(i) Rent-Way intends to continue the historic business of HCI and the
HCI Subsidiaries or to use a significant portion of the historic business assets
of HCI and the HCI Subsidiaries.
Section 4.14 Title to Properties; Encumbrances. Except as otherwise
provided in this Section 4.14, each of Rent-Way and the Rent-Way Subsidiaries
has good, valid and marketable title to, or a valid leasehold interest in, all
of its properties and assets (real, personal and mixed, tangible and
intangible), including, without limitation, all the properties and assets
reflected in the consolidated balance sheet of Rent-Way and the Rent-Way
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Subsidiaries as of September 30, 1997 included in Rent-Way's Annual Report on
Form 10-K for the period ended on such date (except for properties and assets
disposed of in the ordinary course of business and consistent with past
practices since September 30, 1997). None of such properties or assets are
subject to any liability, obligation, claim, lien, mortgage, pledge, security
interest, conditional sale agreement, charge or encumbrance of any kind (whether
absolute, accrued, contingent or otherwise), except for (i) minor imperfections
of title and encumbrances, if any, which are not substantial in amount, do not
materially detract from the value of the property or assets subject thereto and
do not impair the operations of Rent-Way, (ii) liens for Taxes that are not yet
due or that are being contested in good faith by appropriate proceedings and for
which adequate reserves have been established in accordance with GAAP, (iii)
mortgages on real property in an aggregate amount not greater than $50,000 and
(iv) with respect to leased property, the rights of the owner of such property.
Section 4.15 Compliance With Applicable Law. Each of Rent-Way and the
Rent-Way Subsidiaries is in compliance with all applicable laws (whether
statutory or otherwise), rules, regulations, orders, ordinances, judgments or
decrees of all governmental authorities (federal, state, local, or otherwise)
(collectively, "Applicable Law"), except where the failure to be in such
compliance would not individually or in the aggregate have a Rent-Way Material
Adverse Effect.
Section 4.16 Labor Matters.
(a) Neither Rent-Way nor any Rent-Way Subsidiary is a party to, or bound
by, any collective bargaining agreement with a labor union or labor
organization;
(b) There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of Rent-Way, threatened against Rent-Way or any of
the Rent-Way Subsidiaries relating to their business, except for such
proceedings which would not individually or in the aggregate have a Rent-Way
Material Adverse Effect; and
(c) To the knowledge of Rent-Way, there are no organizational efforts
with respect to the formation of a collective bargaining unit presently being
made or threatened involving employees of Rent-Way or any of the Rent-Way
Subsidiaries.
Section 4.17 Employee Benefit Plans; ERISA.
(a) With respect to each material bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance or termination
pay, hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan, program,
agreement (including but not limited to employment agreements) or arrangement,
currently maintained or contributed to or required to be contributed to by (i)
Rent-Way or (ii) any Rent-Way Subsidiaries (the "Rent-Way Plans"), for the
benefit of any employee or former employee of Rent-Way or any Rent-Way
Subsidiary, Rent-Way has heretofore delivered to HCI true and complete copies of
each of the following documents:
(i) a copy of each written Rent-Way Plan (including all written
amendments thereto);
(ii) a copy of the annual report and actuarial report, if required
under the Employee Retirement Income Security Act of 1974, as amended, and
the rules and regulations promulgated thereunder ("ERISA"), with respect to
each such Rent-Way Plan for the last two plan years ending prior to the
date hereof;
(iii) a copy of the most recent Summary Plan Description, together
with each Summary of Material Modifications, if required under ERISA, with
respect to such Rent-Way Plan;
(iv) if the Rent-Way Plan is funded through a trust or any other third
Party funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements with
respect to the last reporting period ended immediately prior to the date
hereof; and
(v) the most recent determination letter received prior to the date
hereof from the Internal Revenue Service with respect to each Rent-Way Plan
intended to qualify under section 401 of the Code.
(b) No liability under Title IV of ERISA has been incurred by Rent-Way,
any Rent-Way Subsidiary, or any trade or business, whether or not incorporated,
that together with Rent-Way is a "single employer" within the
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meaning of section 4001 of ERISA (any "Rent-Way ERISA Affiliate") that has not
been satisfied in full when due, and no condition exists that presents a
material risk to Rent-Way, any Rent-Way Subsidiary or any Rent-Way ERISA
Affiliate of incurring a liability under such Title which would individually or
in the aggregate have a Rent-Way Material Adverse Effect or give rise to a lien
under Title IV of ERISA.
(c) No Rent-Way Plan subject to the minimum funding requirements of
section 412 of the Code or section 302 of ERISA or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and section 412 of the Code), whether or not waived, as of
the last day of the most recent fiscal year of such Rent-Way Plan ended prior to
the date hereof; and all contributions required to be made with respect thereto
(whether pursuant to the terms of any such Rent-Way Plan or otherwise) on or
prior to the date hereof have been timely made.
(d) No Rent-Way Plan is a "multiemployer pension plan," as defined in
section 3(37) of ERISA, nor is any Rent-Way Plan a plan described in Section
4063(a) of ERISA.
(e) Each Rent-Way Plan intended to be "qualified" within the meaning of
section 401(a) of the Code either, (i) has received a favorable determination
letter from the Internal Revenue Service as to its qualification and, to the
knowledge of Rent-Way, no amendment has been made to any such Rent-Way Plan
since the date of such letter that is likely to result in the disqualification
of such Rent-Way Plan or (ii) is a standardized prototype plan, the form of
which has been approved by the Internal Revenue Service.
(f) Each of the Rent-Way Plans has been operated and administered in all
respects in accordance with Applicable Law, including, but not limited to, ERISA
and the Code, except for any failure to so operate or administer such Rent-Way
Plans that would not individually or in the aggregate have a Rent-Way Material
Adverse Effect.
(g) Neither the execution and delivery of this Agreement nor the Merger
nor the consummation of any of the other transactions contemplated by this
Agreement will:
(i) entitle any current or former officer, director, employee or
consultant of Rent-Way to severance pay, unemployment compensation or any
other payment, or
(ii) accelerate the time of payment or vesting, or increase the amount
of compensation due any such officer, director, employee or consultant.
(h) With respect to each Rent-Way Plan that is funded wholly or
partially through an insurance policy, Rent-Way and the Rent-Way Subsidiaries do
not have any current liability under any such insurance policy in the nature of
a retroactive rate adjustment or loss sharing arrangement arising wholly or
partially out of events occurring prior to the Closing other than any such
liability that individually or in the aggregate would not have a Rent-Way
Material Adverse Effect.
(i) There are no pending or, to the knowledge of Rent-Way, threatened
claims by or on behalf of any of the Rent-Way Plans, by any employee or
beneficiary covered under any such Rent-Way Plan involving any such Rent-Way
Plan (other than routine claims for benefits), other than any such claims that
would not individually or in the aggregate have a Rent-Way Material Adverse
Effect.
(j) Neither Rent-Way nor any Rent-Way Subsidiary or, to the knowledge of
Rent-Way, any Rent-Way ERISA Affiliate, any of the Rent-Way Plans, any trust
created thereunder, or any trustee or administrator thereof has engaged in a
transaction in connection with which Rent-Way or any Rent-Way Subsidiary or, to
the knowledge of Rent-Way, any Rent-Way ERISA Affiliate, any of the Rent-Way
Plans, any such trust, or any trustee or administrator thereof, or any party
dealing with the Rent-Way Plans or any such trust is likely to be subject to
either a civil liability under section 409 of ERISA or section 502(i) of ERISA,
or a tax imposed pursuant to section 4975 or 4976 of the Code, other than any
such liability or tax that would not individually or in the aggregate have a
Rent-Way Material Adverse Effect.
Section 4.18 Vote Required. Authorization of the Merger, the Amendment and
the issuance of the Rent-Way Shares to be issued in the Merger shall require the
affirmative vote of the holders of a majority of Rent-Way Common Stock voted at
the shareholders' meeting referred to in Section 7.4(b). No other vote of the
shareholders
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of Rent-Way is required by law, the Articles of Incorporation or By-Laws of
Rent-Way or otherwise in order for Rent-Way to consummate the Merger and the
transactions contemplated hereby.
Section 4.19 Vote of Board; Opinion of Financial Advisor. The Board of
Directors of Rent-Way (at a meeting duly called and held) has unanimously
determined that the transactions contemplated hereby are fair to and in the best
interests of Rent-Way. The Board of Directors of Rent-Way has received the
opinion of NationsBanc Montgomery Securities LLC ("NBM"), Rent-Way's financial
advisor, substantially to the effect that the Exchange Ratio is fair to the
shareholders of Rent-Way from a financial point of view.
Section 4.20 Takeover Status. The Board of Directors of Rent-Way has taken
all appropriate action so that the execution and delivery of this Agreement and
the Rent-Way Option Agreement and the consummation of the Merger and the other
transactions contemplated thereby will not be restricted by, or otherwise
subject to, the provisions of Section 2538 and Subchapters 25E, 25F, 25G and 25H
of the Pennsylvania Business Corporation Law.
Section 4.21 Accounting Matters. To Rent-Way's knowledge, neither Rent-Way
nor any of the Rent-Way Subsidiaries has taken or agreed to take any action that
would prevent the business combination to be effected by the Merger from being
accounted for as a pooling of interests and Rent-Way has no reason to believe
that the Merger will not qualify for pooling of interest accounting.
Section 4.22 Brokers. Except for NBM, Rent-Way's financial advisor, no
broker, finder or financial advisor is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Rent-Way, and Rent-Way's fee arrangements with NBM have been disclosed to HCI.
Section 4.23 Environmental Matters. Except as set forth in Section 4.23 to
the Rent-Way Disclosure Letter or except as to matters previously remediated in
accordance with Applicable Law, none of Rent-Way or any Rent-Way Subsidiaries
or, to Rent-Way's knowledge, any other person has caused or permitted (a) the
presence of any Hazardous Materials (as hereinafter defined) at, in, on, or
under any of Rent-Way's properties in any amount, form, or location that would
be unlawful, require investigation, notification of Government Authorities, or
remedial action, or otherwise result in potential material liabilities under any
applicable local, state, or federal environmental laws, or (b) any spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from Rent-Way's properties or at any other location as
a result of any construction on or operation and use of such properties, which
presence of occurrence would, individually or in the aggregate, have or is
reasonably likely to have a Rent-Way Material Adverse Effect; and in connection
with the use of Rent-Way's properties, Rent-Way and the Rent-Way Subsidiaries
have not failed to comply in any material respect with all applicable local,
state and federal environmental laws, regulations, ordinances and administrative
and judicial orders relating to the generation, use, recycling, reuse, sale,
storage, handling, transport and disposal of any Hazardous Materials. "Hazardous
Materials" means those substances, materials, and items, in any form, whether
solid, liquid, gaseous, semisolid, or any combination thereof, whether waste
materials, raw materials, chemicals, finished products, byproducts, or any other
material or article, which are regulated by or form the basis of liability under
federal, state or local environmental, health, and safety statutes or
regulations including, without limitation, hazardous wastes, hazardous
substances, pollutants, contaminants, asbestos, polychlorinated biphyenyls,
petroleum (including, but not limited to, crude oil, petroleum-derived
substances, waste, or breakdown or decomposition products thereof or any
fraction thereof), and radioactive substances.
Section 4.24 Insurance. Rent-Way maintains fire and casualty, general
liability and product liability insurance policies with reputable insurance
carriers, which Rent-Way reasonably believes provide full and adequate coverage
for all normal risks incident to the business of Rent-Way and the Rent-Way
Subsidiaries and their respective properties and assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HCI
Except as otherwise disclosed to Rent-Way in a letter delivered to it prior
to the execution hereof (which letter shall contain appropriate references to
identify the representations and warranties herein to which the
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information in such letter relates) (the "HCI Disclosure Letter"), HCI
represents and warrants to Rent-Way as follows:
Section 5.1 Organization. HCI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to carry on its business as it is now being conducted or
presently proposed to be conducted. HCI is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not, individually or in the aggregate, have a HCI Material
Adverse Effect (as hereinafter defined). HCI has delivered to Rent-Way prior to
the execution of this Agreement complete and correct copies of its Certificate
of Incorporation and By-laws, as amended to date. In all material respects, the
minute books of HCI contain accurate records of all meetings and accurately
reflect all other actions taken by the stockholders, the Board of Directors and
all committees of the Board of Directors of HCI since April 24, 1998. For
purposes of this Agreement, an "HCI Material Adverse Effect" shall mean any
effect that is material and adverse to the business, assets, liabilities,
results of operations or financial condition of HCI and the HCI Subsidiaries
taken as a whole; provided, that a HCI Material Adverse Effect shall not be
deemed to include the impact of (i) changes in Applicable Law of general
applicability or implementation thereof by courts or Governmental Authorities,
(ii) acts or omissions of Rent-Way or any Rent-Way Subsidiary taken with the
prior written consent of HCI in contemplation of the transactions contemplated
hereby, (iii) circumstances affecting the rental-purchase industry generally,
and (iv) the effects of the Merger and the compliance by either Party with the
provisions of this Agreement on the business, assets, liabilities, results of
operations or financial condition of HCI or any HCI Subsidiary.
Section 5.2 Capitalization. The authorized capital stock of HCI consists of
100,000,000 Shares, and 25,000,000 shares of preferred stock, par value $.01 per
share. As of August 28, 1998, (i) 17,025,668 Shares were issued and outstanding,
(ii) stock options to acquire 1,276,588 Shares (the "HCI Stock Options") were
outstanding under all stock option plans of HCI (collectively, the "HCI Stock
Option Plans"), and (iii) 2,926,948 Shares were originally reserved for issuance
in connection with the HCI Stock Option Plans. Section 5.2 of the HCI Disclosure
Letter sets forth a complete and correct list, as of August 31, 1998, of the
number of shares of HCI Common Stock subject to HCI Stock Options or other
rights to purchase or to receive HCI Common Stock granted under the HCI Stock
Option Plans, the dates of grant and the exercise prices thereof. As of August
31, 1998, HCI had no treasury shares and no Shares were held by HCI
Subsidiaries. All of the issued and outstanding Shares are validly issued, fully
paid and nonassessable and free of preemptive rights. Except as set forth in
this Agreement and except as set forth in the HCI Option Agreement (as
hereinafter defined), there are not now, and at the Effective Time there will
not be, any shares of capital stock of HCI issued or outstanding or any options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating HCI to issue, transfer, sell, redeem,
repurchase or otherwise acquire any shares of its capital stock. Except as set
forth in this Agreement and the HCI Option Agreement, after the Effective Time,
HCI will have no obligation to issue, transfer or sell any shares of its capital
stock pursuant to any employee benefit plan or otherwise. Other than the
agreements contemplated by this Agreement and the HCI Option Agreement, there
are not now, and at the Effective Time there will not be, any voting trusts,
standstill, stockholder or other agreements or understandings to which HCI is a
party or is bound with respect to the voting of, requiring the registration of,
or granting any preemptive rights or antidilution rights with respect to, the
capital stock of HCI.
Section 5.3 Subsidiaries. Section 5.3 of the HCI Disclosure Letter lists
all corporations, partnerships, joint ventures and other business associations
and entities, foreign and domestic, in which HCI has any direct or indirect
ownership or economic interest. Such corporations, partnerships, joint ventures
or other business entities of which HCI owns, directly or indirectly, greater
than 50% of the shares of capital stock or other equity interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to cast at least a majority of the votes that may be cast by all
shares or equity interests having ordinary voting power for the election of
directors or other governing body of such entity are hereinafter referred to as
the "HCI Subsidiaries".
(a) Each HCI Subsidiary that is a corporation is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each HCI Subsidiary that is a partnership or a
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limited liability company is duly formed, validly existing and in good standing
under the laws of its jurisdiction of formation.
(b) Each HCI Subsidiary has the corporate power, the partnership power
or the company power, as the case may be, to carry on its business as it is now
being conducted or presently proposed to be conducted.
(c) Each HCI Subsidiary that is a corporation is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified would not individually or in the aggregate have
an HCI Material Adverse Effect. Each HCI Subsidiary that is a partnership is
duly qualified as a foreign partnership authorized to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not individually or
in the aggregate have an HCI Material Adverse Effect. Each HCI subsidiary that
is a limited liability company is duly qualified as a foreign limited liability
company authorized to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease or the nature of
its activities makes such qualification necessary, except where the failure to
be so qualified would not individually or in the aggregate have an HCI Material
Adverse Effect.
(d) All of the outstanding shares of capital stock of the HCI
Subsidiaries that are corporations are duly authorized, validly issued, fully
paid and nonassessable and are free of preemptive rights. All of the outstanding
ownership interests of the HCI Subsidiaries that are partnerships or limited
liability companies are duly authorized, validly issued, fully paid and
nonassessable and are free of preemptive rights.
(e) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the HCI Subsidiaries owned by HCI or an HCI
Subsidiary are owned by HCI or by an HCI Subsidiary free and clear of any liens,
claims, charges or encumbrances. Except as set forth in Section 5.2 hereof,
there are not now, and at the Effective Time there will not be, any outstanding
options, warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating HCI or any HCI Subsidiary to issue,
transfer or sell any securities of HCI or any HCI Subsidiary.
(f) Other than agreements contemplated by this Agreement and except as
disclosed in Section 5.3 of the HCI Disclosure Letter, there are not now, and at
the Effective Time there will not be, any voting trusts, standstill, stockholder
or other agreements or understandings to which HCI or any of the HCI
Subsidiaries is a party or is bound with respect to the voting of, requiring the
registration of, or granting any preemptive rights or antidilution rights with
respect to, the capital stock of HCI or any of the HCI Subsidiaries.
Section 5.4 Authority Relative To This Agreement. HCI has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation by HCI of the
transactions contemplated hereby have been duly authorized by HCI's Board of
Directors and, except for the approval of HCI's stockholders to be sought at the
stockholders meeting contemplated by Section 7.4(a) hereof, no other corporate
action or proceedings on the part of HCI are necessary to authorize this
Agreement or the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by HCI and constitutes a valid and binding
agreement of HCI, enforceable against HCI in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally or to general
principles of equity.
Section 5.5 Consents and Approvals; No Violations. Except for applicable
requirements of the HSR Act, the Securities Act, the Exchange Act, state laws
relating to takeovers, if applicable, state securities or blue sky laws, and the
filing and recordation of an appropriate certificate of Merger (the "Certificate
of Merger") as required by the Delaware General Corporation Law (the "DGCL"), no
filing with, and no permit, authorization, consent or approval of, any
Governmental Authority is necessary for the consummation by HCI of the
transactions contemplated by this Agreement, except for such filings, permits,
authorizations, consents or approvals the failure of which to be made or
obtained would not individually or in the aggregate have an HCI Material Adverse
Effect. Neither the execution and delivery of this Agreement by HCI, nor the
consummation by HCI of the transactions
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contemplated hereby, nor compliance by HCI with any of the provisions hereof,
will (a) conflict with or result in any breach of any provisions of the
Certificate of Incorporation or By-Laws of HCI or any of the HCI Subsidiaries,
(b) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation to which HCI or any of the HCI
Subsidiaries is a Party or by which any of them or any of their properties or
assets may be bound, or (c) violate any other, writ, injunction, decree,
statute, rule or regulation applicable to HCI, any of the HCI Subsidiaries or
any of their properties or assets, except in the case of clauses (b) and (c) for
violations, breaches or defaults which would not individually or in the
aggregate have an HCI Material Adverse Effect.
Section 5.6 Reports and Financial Statements. HCI has timely filed all
reports required to be filed with the SEC pursuant to the Exchange Act since
January 1, 1998 (collectively, the "HCI SEC Reports"). As of their respective
dates, the HCI SEC Reports complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
HCI SEC Reports. None of such HCI SEC Reports, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Each
of the audited balance sheets of HCI and the related audited statements of
operations, stockholders equity and cash flows and unaudited interim financial
statements included in the HCI SEC Reports complied as to form, as of their
respective dates of filing with the SEC, in all material respects, with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto and fairly presented the consolidated financial
position and the results of operations and the changes in financial position of
HCI and its consolidated subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP consistently
applied during the periods involved, except as otherwise noted therein.
Section 5.7 Absence of Certain Changes or Events. Except as set forth in
the HCI SEC Reports or the HCI Disclosure Letter, since December 31, 1997,
neither HCI nor any of the HCI Subsidiaries has: (a) taken any of the actions
set forth in Section 6.1(b), 6.1(c) or 6.1(e) hereof; (b) suffered any material
adverse change in the business, financial condition, results of operations,
properties, assets or liabilities of HCI and the HCI Subsidiaries taken as a
whole; or (c) subsequent to such date, except as permitted by Section 6.1
hereof, conducted its business and operations other than in the ordinary course
of business and consistent with past practices.
Section 5.8 Litigation. Except for litigation disclosed in (i) the notes to
the financial statements included in HCI's Annual Report to Stockholders for the
year ended December 31, 1997 or (ii) the HCI SEC Reports, there is no suit,
action or proceeding pending or, to the best of HCI's knowledge, threatened
against or affecting HCI, the outcome of which would individually or in the
aggregate have an HCI Material Adverse Effect; nor is there any judgment,
decree, injunction, citation, settlement agreement, rule or order of any
Governmental Authority outstanding against HCI having, or which, insofar as can
reasonably be foreseen, in the future may have, any such effect.
Section 5.9 Contracts and Commitments. Except as disclosed in the HCI SEC
Reports or in the HCI Disclosure Letter, neither HCI nor any HCI Subsidiary is a
party to or is bound by any of the following:
(i) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC);
(ii) any non-competition agreement or any other agreement or
obligation which purports to limit in any material respect the manner in
which, or the localities in which, the business of HCI and the HCI
Subsidiaries (including, for purposes of this Section 5.9, Rent-Way and the
Rent-Way Subsidiaries, assuming the Merger has been consummated) is or
would be conducted; or
(iii) any contract or other agreement which would prohibit or
materially delay the consummation of the Merger or any of the other
transactions contemplated hereby (all such contracts of the type described
in clauses (i), (ii) and (iii) of this Section 5.9 being referred to herein
as "HCI Material Contracts").
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Each HCI Material Contract is valid and binding on HCI (or, to the extent that
an HCI Subsidiary is a party, such HCI Subsidiary) and is in full force and
effect, and HCI and each HCI Subsidiary has in all material respects performed
all obligations to be performed by them to date under each HCI Material
Contract, except where such non-performance, individually or in the aggregate,
would not have an HCI Material Adverse Effect. Neither HCI nor any HCI
Subsidiary knows of, or has received notice of, any violation or default under
(nor, to the knowledge of HCI, does there exist any condition which with the
passage of time or the giving of notice or both would result in such a violation
or default under) any HCI Material Contract.
Section 5.10 Information in Disclosure Documents and Registration
Statement. None of the information to be supplied by HCI for inclusion or
incorporation by reference in the Proxy Statement or the Registration Statement
will, in the case of the Registration Statement, at the time it becomes
effective and at the Effective Time or, in the case of the Proxy Statement or
any amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and any amendments thereof or supplements thereto and at the
time of the meetings of stockholders to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they made, not misleading,
except that no representation or warranty is made by HCI with respect to
statements made or incorporated by reference therein based on information
supplied by Rent-Way specifically for inclusion or incorporation by reference in
the Registration Statement or the Proxy Statement.
Section 5.11 Absence of Undisclosed Liabilities. Except for liabilities or
obligations which (i) are accrued or reserved against in HCI's financial
statements (or reflected in the notes thereto) included in the HCI SEC Reports,
or (ii) were incurred after December 31, 1997 in the ordinary course of business
and consistent in type and amount with past practices, neither HCI nor any HCI
Subsidiary has any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of a nature required by GAAP to be reflected in a
corporate balance sheet or the notes thereto.
Section 5.12 No Default. Neither HCI nor any of the HCI Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (a) its Certificate of Incorporation or By-Laws, (b) any note,
bond, mortgage, indenture, license, agreement, contract, lease, commitment or
other obligation to which HCI or any of the HCI Subsidiaries is a party or by
which it or any of its properties or assets may be bound, or (c) any order,
writ, injunction, decree, statute, rule or regulation applicable to HCI or any
of the HCI Subsidiaries, except in the case of clauses (b) and (c) above for
defaults or violations which would not individually or in the aggregate have an
HCI Material Adverse Effect.
Section 5.13 Tax Returns; Taxes.
(a) HCI has filed all Tax Returns that it has been required to file to
date and all such Tax Returns were correct and complete in all respects. All
Taxes owed by HCI (whether or not shown on any Tax Return) which are due and
payable have been paid except such Taxes as would not, individually or in the
aggregate, have an HCI Material Adverse Effect. HCI is not currently the
beneficiary of any extension of time within which to file any Tax Return. No
taxing authority in a jurisdiction where HCI does not file Tax Returns has
claimed in writing that HCI is or may be subject to taxation by that
jurisdiction.
(b) HCI 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.
(c) There is no dispute or claim concerning any Tax liability of HCI
either (i) claimed or raised by any taxing authority in writing or (ii) as to
which any shareholder or employee of HCI responsible for Tax matters of HCI has
knowledge based upon personal contact with any agent of such authority.
(d) HCI has not waived any statute of limitations with respect to Taxes
or agreed to any extension of time with respect to assessment of Taxes.
(e) All accounting periods and methods used by HCI for Tax purposes are
permissible periods and methods, and HCI is not required to make any adjustments
to its income under Section 481 of the Code in taxable
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years for which Tax Returns have not yet been filed. HCI has not filed a consent
under Section 341(f) of the Code concerning collapsible corporations. HCI has
not made nay payments, is not obligated to make any payments, and is not a party
to any agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 28OG of the Code. HCI is not
a party to any Tax allocation or sharing agreement. HCI (or its predecessors)
(i) has not been a member of an affiliated group filing a consolidated federal
income Tax return in any taxable year ending after December 31, 1993 and (ii)
has no liability for the Taxes of any person other than HCI under Treasury
Regulation Section 1.1502-6 or any similar provision of state, local or foreign
law, as a transferee or successor, by contract, or otherwise.
(f) The unpaid Taxes of HCI did not, as of December 31, 1997, exceed the
reserve for Taxes (excluding any reserve for deferred taxes attributable to
differences between the timing of income or deductions for tax and financial
accounting purposes) set forth on the balance sheet as of December 31, 1997
(excluding any notes thereto) contained in the HCI Financial Statements.
(g) Neither HCI nor any of the HCI Subsidiaries has taken any action or
has notice of any fact, agreement, plan or other circumstance that is reasonably
likely to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code.
Section 5.14 Title To Properties; Encumbrances. Except as otherwise
provided in this Section 5.14, each of HCI and the HCI Subsidiaries has good,
valid and marketable title to, or a valid leasehold interest in, all of its
properties and assets (real, personal and mixed, tangible and intangible),
including, without limitation, all the properties and assets reflected in the
consolidated balance sheet of HCI and the HCI Subsidiaries as of December 31,
1997 included in HCI's Annual Report on Form 10-K for the period ended on such
date (except for properties and assets disposed of in the ordinary course of
business and consistent with past practices since December 31, 1997). None of
such properties or assets are subject to any liability, obligation, claim, lien,
mortgage, pledge, security interest, conditional sale agreement, charge or
encumbrance of any kind (whether absolute, accrued, contingent or otherwise),
except for (i) minor imperfections of title and encumbrances, if any, which are
not substantial in amount, do not materially detract from the value of the
property or assets subject thereto, and do not impair the operations of HCI and
the HCI Subsidiaries, (ii) liens for Taxes that are not yet due or that are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP, (iii) mortgages on real
property in an aggregate amount not greater than $50,000, and (iv) with respect
to leased property, the rights of the owner of such property.
Section 5.15 Compliance with Applicable Laws. Each of HCI and the HCI
Subsidiaries is in compliance with Applicable Law, except where the failure to
be in such compliance would not individually or in the aggregate have an HCI
Material Adverse Effect.
Section 5.16 Labor Matters.
(a) Neither HCI nor any of the HCI Subsidiaries is a party to, or bound
by, any collective bargaining agreement with a labor union or labor
organization;
(b) There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of HCI, threatened against HCI or any of the HCI
Subsidiaries relating to their business, except for any such proceeding which
would not individually or in the aggregate have an HCI Material Adverse Effect;
and
(c) To the knowledge of HCI, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made or
threatened involving employees of HCI or any of the HCI Subsidiaries.
Section 5.17 Employee Benefit Plans; ERISA.
(a) With respect to each material bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance or termination
pay, hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan, program,
agreement (including, but not limited to, employment agreements) or arrangement,
currently maintained or contributed to or required to be contributed to by (i)
HCI or (ii) any HCI Subsidiary for the benefit of any employee or former
employee of HCI or any HCI
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Subsidiary (the "HCI Plans"), HCI has heretofore delivered to Rent-Way true and
complete copies of each of the following documents:
(i) a copy of each written HCI Plan (including all written amendments
thereto);
(ii) a copy of the annual report and actuarial report, if required
under ERISA, with respect to each such HCI Plan for the last two plan years
ending prior to the date hereof;
(iii) a copy of the most recent Summary Plan Description, together
with each Summary of Material Modifications, if required under ERISA, with
respect to such HCI Plan;
(iv) if the HCI Plan is funded through a trust or any other third
Party funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements with
respect to the last reporting period ended immediately prior to the date
hereof; and
(v) the most recent determination letter received prior to the date
hereof from the Internal Revenue Service with respect to each HCI Plan
intended to qualify under section 401 of the Code.
(b) No liability under Title IV of ERISA has been incurred by HCI, any
HCI Subsidiary, or any trade or business, whether or not incorporated that
together with HCI or any HCI Subsidiary is a "single employer" within the
meaning of section 4001 of ERISA (an "HCI ERISA Affiliate") that has not been
satisfied in full when due, and no condition exists that presents a material
risk to HCI, any HCI Subsidiary or any HCI ERISA Affiliate of incurring a
liability under such Title which would individually or in the aggregate have an
HCI Material Adverse Effect, or give rise to a lien under Title IV of ERISA.
(c) No HCI Plan subject to the minimum funding requirements of section
412 of the Code or section 302 of ERISA or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of such HCI Plan ended prior to the date hereof; and
all contributions required to be made with respect thereto (whether pursuant to
the terms of any such HCI Plan or otherwise) on or prior to the date hereof have
been timely made.
(d) No HCI Plan is a "multiemployer pension plan," as defined in section
3(37) of ERISA, nor is any HCI Plan a plan described in section 4063(a) of
ERISA.
(e) Each HCI Plan intended to be "qualified" within the meaning of
section 401(a) of the Code either (i) has received a favorable determination
letter from the Internal Revenue Service as to its qualification and, to the
knowledge of HCI, no amendment has been made to any such HCI Plan since the date
of such letter that is likely to result in the disqualification of such HCI Plan
or (ii) is a standardized prototype plan, the form of which has been approved by
the Internal Revenue Service.
(f) Each of the HCI Plans has been operated and administered in all
respects in accordance with Applicable Law, including, but not limited to, ERISA
and the Code, except for any failure to so operate or administer such HCI Plans
that would not individually or in the aggregate have an HCI Material Adverse
Effect.
(g) Except as expressly provided in the HCI Disclosure Letter, neither
the execution and delivery of this Agreement nor the Merger nor the consummation
of any of the transactions contemplated by this Agreement will:
(i) entitle any current or former officer, director, employee or
consultant of HCI or any HCI Subsidiary to severance pay, unemployment
compensation or any other payment, or
(ii) accelerate the time of payment or vesting or increase the amount
of compensation due any such officer, director, employee or consultant.
(h) With respect to each HCI Plan that is funded wholly or partially
through an insurance policy, HCI and the HCI Subsidiaries do not have any
current liability under any such insurance policy in the nature of a retroactive
rate adjustment or loss sharing arrangement arising wholly or partially out of
events occurring prior to the Closing other than any such liability that
individually or in the aggregate would not have an HCI Material Adverse Effect.
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(i) There are no pending or, to the knowledge of HCI, threatened claims
by or on behalf of any of the HCI Plans, by any employee or beneficiary covered
under any such HCI Plan involving any such HCI Plan (other than routine claims
for benefits), other than any such claims that would not individually or in the
aggregate have an HCI Material Adverse Effect.
(j) Neither HCI nor any HCI Subsidiary or, to the knowledge of HCI, any
HCI ERISA Affiliate, any of the HCI Plans, any trust created thereunder, or any
trustee or administrator thereof has engaged in a transaction in connection with
which HCI or any HCI Subsidiary or, to the knowledge of HCI, any HCI ERISA
Affiliate, any of the HCI Plans, any such trust or trustee or administrator
thereof, or any Party dealing with the HCI Plans or any such trust is likely to
be subject to either a civil liability under section 409 of ERISA or section
502(i) of ERISA, or a tax imposed pursuant to section 4975 or 4976 of the Code
other than any such liability or tax that would not individually or in the
aggregate have an HCI Material Adverse Effect.
Section 5.18 Vote Required. Approval of the Merger by the stockholders of
HCI shall require the affirmative vote of the holders of a majority of the
outstanding Shares at the stockholders' meeting referred to in Section 7.4(a).
No other vote of the stockholders of HCI is required by law, the Certificate of
Incorporation or By-Laws of HCI or otherwise in order for HCI to consummate the
Merger and the transactions contemplated hereby.
Section 5.19 Vote of Board; Opinion of Financial Advisor. The Board of
Directors of HCI (at a meeting duly called and held) has unanimously determined
that the transactions contemplated hereby are fair to and in the best interests
of HCI. The Board of Directors of HCI has received the opinions of Donaldson,
Lufkin & Jenrette Securities Corporation and Stephens, Inc., HCI's financial
advisors, each substantially to the effect that the Exchange Ratio is fair to
the stockholders of HCI from a financial point of view.
Section 5.20 Takeover Status. The Board of Directors of HCI has taken all
appropriate action so that Rent-Way will not be an "interested stockholder"
within the meaning of Section 203 of the DGCL by virtue of the execution and
delivery of this Agreement or the HCI Option Agreement or the consummation of
the Merger or any of the other transactions contemplated hereby.
Section 5.21 Accounting Matters. To its knowledge, neither HCI nor any of
the HCI Subsidiaries has taken or agreed to take any action that would prevent
the business combination to be effected by the Merger from being accounted for
as a pooling of interests and HCI has no reason to believe that the Merger will
not qualify for pooling of interest accounting.
Section 5.22 Brokers. Except for Donaldson, Lufkin & Jenrette Securities
Corporation and Stephens, Inc., HCI's financial advisors, no broker, finder or
financial advisor is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of HCI, and HCI's
fee arrangements with Donaldson, Lufkin & Jenrette Securities Corporation and
Stephens, Inc. have been disclosed to Rent-Way.
Section 5.23 Environmental Matters. Except as set forth in Section 5.23 to
the HCI Disclosure Letter or except as to matters previously remediated in
accordance with Applicable Law, none of HCI or any HCI Subsidiaries or, to HCI's
knowledge, any other person has caused or permitted (a) the presence of any
Hazardous Materials at, in, on, or under any of HCI's properties in any amount,
form, or location that would be unlawful, require investigation, notification of
Government Authorities, or remedial action, or otherwise result in potential
material liabilities under any applicable local, state, or federal environmental
laws, or (b) any spills, releases, discharges or disposal of Hazardous Materials
to have occurred or be presently occurring on or from HCI's properties or at any
other location as a result of any construction on or operation and use of such
properties, which presence or occurrence would, individually or in the
aggregate, have or is reasonably likely to have a HCI Material Adverse Effect;
and in connection with the use of HCI's properties, HCI and the HCI Subsidiaries
have not failed to comply in any material respect with all applicable local,
state and federal environmental laws, regulations, ordinances and administration
and judicial orders relating to the generation, use, recycling, reuse, sale,
storage, handling, transport and disposal of any Hazardous Materials.
Section 5.24 Insurance. HCI maintains fire and casualty, general liability,
product liability, and professional liability insurance policies with reputable
insurance carriers, which HCI reasonably believes provide full and
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adequate coverage for all normal risks incident to the business of HCI and the
HCI Subsidiaries and their respective properties and assets.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by HCI Pending the Merger. From the date of
this Agreement to the Effective Time, unless Rent-Way shall otherwise agree in
writing, or as otherwise contemplated by this Agreement, any Exhibit hereto or
the HCI Disclosure Letter:
(a) the respective businesses of HCI and the HCI Subsidiaries shall be
conducted only in the ordinary and usual course of business consistent with past
practices, and there shall be no material changes in the conduct of the
operations of HCI or any HCI Subsidiary;
(b) HCI shall not (i) sell or pledge or agree to sell or pledge any
stock owned by it in any of the HCI Subsidiaries; (ii) amend its Certificate of
Incorporation or By-Laws; or (iii) split, combine or reclassify any shares of
its outstanding capital stock or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or redeem or otherwise acquire
any shares of its capital stock or shares of the capital stock of any of the HCI
Subsidiaries;
(c) neither HCI nor any of the HCI Subsidiaries shall (i) authorize for
issuance, issue or sell any additional shares of, or rights of any kind to
acquire any shares of, its capital stock of any class (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) or grant any stock appreciation rights; (ii) acquire,
dispose of, transfer, lease, license, mortgage, pledge or encumber any fixed or
other assets in any one or series of related transactions that would require the
filing by HCI of a Current Report on Form 8-K pursuant to the Exchange Act or
would require that the Proxy Statement or Registration Statement include or
incorporate by reference financial statements of any business acquired pursuant
to Section 3-05 of Regulation S-X under the Securities Act; (iii) incur, assume
or prepay any indebtedness or any other material liabilities other than in the
ordinary course of business consistent with past practices; (iv) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any person other than an HCI
Subsidiary in the ordinary course of business consistent with past practices;
(v) make any loans, advances or capital contributions to, or investments in, any
other person, other than to HCI Subsidiaries and other than in the ordinary
course of business consistent with past practices; (vi) authorize capital
expenditures substantially in excess of the amount currently budgeted therefor;
(vii) permit any insurance policy naming HCI or any HCI Subsidiary as a
beneficiary or a loss payee to be canceled or terminated other than in the
ordinary course of business; or (viii) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(d) HCI shall use commercially reasonable efforts to preserve intact the
business organization of HCI and the HCI Subsidiaries, to keep available the
services of its and their present officers and key employees, and to preserve
the goodwill of those having business relationships with it and the HCI
Subsidiaries;
(e) neither HCI nor any of the HCI Subsidiaries shall make any change in
the compensation payable or to become payable to any of its officers, directors
or employees, enter into or amend any employment, severance, termination or
other similar agreement, adopt any new HCI Plan or amend in any material respect
any existing HCI Plan, or make any loans to any of its officers, directors or
employees or make any changes in its existing borrowing or lending arrangement
for or on behalf of any of such persons, whether contingent on consummation of
the Merger or otherwise, other than (i) in the ordinary course of business
consistent with past practices and (ii) as may be required under Applicable Law
or the terms of any existing HCI Plan; and
(f) neither HCI nor any of the HCI Subsidiaries shall (i) knowingly take
or allow to be taken any action which would jeopardize the treatment of the
Merger as a pooling of interests for accounting purposes; or (ii) knowingly
take, or allow any party related to HCI within the meaning of Treas. Reg.
Section 1.368-1(e)(3) to take, any action that would jeopardize qualification of
the Merger as a reorganization within the meaning of section 368(a)(1)(A) of the
Code, including, but not limited to, the redemption or other acquisition of any
shares of capital stock of HCI or any HCI Subsidiary.
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Section 6.2 Conduct of Business by Rent-Way Pending the Merger. From the
date of this Agreement to the Effective Time, unless HCI shall otherwise agree
in writing, or as otherwise contemplated by this Agreement, any Exhibit hereto
or the Rent-Way Disclosure Letter:
(a) the businesses of Rent-Way and the Rent-Way Subsidiaries shall be
conducted only in the ordinary and usual course of business consistent with past
practices, and there shall be no material changes in the conduct of the
operations of Rent-Way or any Rent-Way Subsidiary;
(b) Rent-Way shall not (i) sell, pledge or agree to sell or pledge any
stock owned by it in any of the Rent-Way Subsidiaries, (ii) amend its Articles
of Incorporation or By-Laws or (iii) split, combine or reclassify any shares of
its outstanding capital stock or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or redeem or otherwise acquire
any shares of its capital stock or shares of the capital stock of any of the
Rent-Way Subsidiaries;
(c) Neither Rent-Way nor any of the Rent-Way Subsidiaries shall (i)
authorize for issuance, issue or sell any additional shares of, or rights of any
kind to acquire any shares of, its capital stock of any class (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) or grant any stock appreciation rights, except
for the issuance of shares of Rent-Way Common Stock in connection with a
transaction permitted under clause (ii) of this Section 6.2(c); (ii) acquire,
dispose of, transfer, lease, license, mortgage, pledge or encumber any fixed or
other assets in any one or series of related transactions that would require the
filing by Rent-Way of a Current Report on Form 8-K pursuant to the Exchange Act
or required that the Proxy Statement or Registration Statement include or
incorporate by reference financial statements of any business acquired pursuant
to Section 3-05 of Regulation S-X under the Securities Act; (iii) incur, assume
or prepay any indebtedness or any other material liabilities other than in the
ordinary course of business consistent with past practices; (iv) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any person other than in the
ordinary course of business and consistent with past practices; (v) make any
loans, advances or capital contributions to, or investments in, any other
person, other than in the ordinary course of business and consistent with past
practices; (vi) authorize capital expenditures substantially in excess of the
amount currently budgeted therefor; (vii) permit any insurance policy naming
Rent-Way or any Rent-Way Subsidiary as a beneficiary or a loss payee to be
canceled or terminated other than in the ordinary course of business; or (viii)
enter into any contract, agreement, commitment or arrangement with respect to
any of the foregoing;
(d) Rent-Way shall use commercially reasonable efforts to preserve
intact the business organization of Rent-Way and the Rent-Way Subsidiaries, to
keep available the services of its and their present officers and key employees,
and to preserve the goodwill of those having business relationships with it and
the Rent-Way Subsidiaries;
(e) Neither Rent-Way nor any of the Rent-Way Subsidiaries shall make any
change in the compensation payable or to become payable to any of its officers,
directors or employees, enter into or amend any employment, severance,
termination or other similar agreement, adopt any new Rent-Way Plan or amend in
any material respect any existing Rent-Way Plan, or make any loans to any of its
officers, directors or employees or make any changes in its existing borrowing
or lending arrangement for or on behalf of any of such persons, whether
contingent on consummation of the Merger or otherwise, other than (i) in the
ordinary course of business and consistent with past practices and (ii) as may
be required under Applicable Law or the terms of any existing Rent-Way Plan; and
(f) Neither Rent-Way nor any of the Rent-Way Subsidiaries shall (i)
knowingly take or allow to be taken any action which would jeopardize the
treatment of the Merger as a pooling of interests for accounting purposes; or
(ii) knowingly take, or allow any party related to Rent-Way within the meaning
of Treas. Reg. Section 1.368-1(e)(3) to take, any action that would jeopardize
qualification of the Merger as a reorganization within the meaning of section
368(a)(1)(A) of the Code, including, but not limited to, the redemption or other
acquisition of any shares of HCI or any HCI Subsidiary other than as set forth
in Article III of this Agreement.
Section 6.3 Other Actions. Each of Rent-Way and HCI shall not, and shall
use commercially reasonable efforts to cause its respective subsidiaries not to,
take any action that would result in (i) any of the representations
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and warranties of such party become untrue or (ii) except as contemplated by
Section 7.2, any of the conditions to the Merger set forth in Article VIII not
being satisfied.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. HCI and Rent-Way shall each afford to
the other and to the other's financial advisors, legal counsel, accountants,
consultants and other agents and representatives full access at all reasonable
times throughout the period prior to the Effective Time to all of its books,
records, properties and personnel and, during such period, each shall furnish
promptly to the other (a) a copy of each report, schedule and other document
filed or received by it pursuant to the requirements of federal or state
securities laws, and (b) all other information as such other Party may
reasonably request, provided that no investigation pursuant to this Section 7.1
shall affect any representations or warranties made herein or the conditions to
the obligations of the respective Parties to consummate the Merger. Each Party
and its affiliates, advisors, legal counsel, accountants, consultants and other
agents and representatives shall hold in confidence all nonpublic information in
accordance with the terms of the confidentiality letter agreement dated August
24, 1998 (the "Confidentiality Agreement") between HCI and Rent-Way and, if this
Agreement is terminated, each Party will deliver to the other documents, work
papers and other material (including copies) obtained by such Party or on its
behalf from the other Party as a result of this Agreement or in connection
herewith, whether so obtained before or after the execution hereof, in
accordance with the terms of the Confidentiality Agreement.
Section 7.2 Acquisition Proposals.
(a) HCI shall not, nor shall HCI authorize or permit any officer,
director or employee of, or investment banker, attorney or other advisor or
representative or agent of, HCI or any HCI Subsidiary to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action intended to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that nothing contained in this Section
7.2(a) shall prohibit HCI's Board of Directors (and its authorized
representatives) from furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited Acquisition
Proposal if, and only to the extent that (A) HCI's Board of Directors, after
consultation with and based on the written opinion of outside legal counsel,
determines in good faith that in order for such HCI's Board of Directors to
comply with its fiduciary duties to stockholders under Applicable Law it should
take such action, (B) prior to taking such action, HCI receives from such person
or entity an executed agreement in reasonably customary form relating to the
confidentiality of information to be provided to such person or entity, and (C)
the Acquisition Proposal contains an offer of consideration that is superior to
the consideration represented by the Exchange Ratio.
Notwithstanding anything in this Agreement to the contrary, HCI shall
(i) promptly advise Rent-Way orally and in writing of (A) the receipt by it (or
any of the other entities or other persons referred to above) after the date
hereof of any Acquisition Proposal, or any inquiry which could reasonably be
expected to lead to any Acquisition Proposal, (B) the material terms and
conditions of such Acquisition Proposal or inquiry and (C) the identity of the
person making any such Acquisition Proposal or inquiry, (ii) keep Rent-Way
reasonably informed of the status and details of any such Acquisition Proposal
or inquiry, and (iii) negotiate with Rent-Way to make such adjustments in the
terms and conditions of this Agreement as would enable HCI to proceed with the
transactions contemplated herein. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the first
sentence of this Section 7.2 by any officer, director or employee of HCI or the
HCI Subsidiaries or any investment banker, attorney or other advisor,
representative or agent of HCI or the HCI Subsidiaries, whether or not such
person is purporting to act on behalf of HCI or otherwise, shall be deemed to be
a breach of this Section 7.2 by HCI. For purposes of this Agreement,
"Acquisition Proposal" means any bona fide proposal with respect to a merger,
consolidation, share exchange or similar transaction involving HCI or the HCI
Subsidiaries, or any purchase of all or any significant portion of the assets of
HCI or the HCI Subsidiaries other than the transactions contemplated hereby.
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(b) Except as set forth below, HCI's Board of Directors shall not (i)
withdraw, or modify in a manner materially adverse to Rent-Way, the approval or
recommendation by HCI's Board of Directors of this Agreement or the Merger, or
(ii) approve, recommend or cause HCI to enter into any agreement with respect to
any Acquisition Proposal. Notwithstanding the foregoing, if HCI receives an
unsolicited Acquisition Proposal and HCI's Board of Directors determines in good
faith, following consultation with and based on the written opinion of outside
legal counsel, that it is necessary to do so in order to comply with its
fiduciary duties to stockholders under Applicable Law, HCI's Board of Directors
may (w) withdraw or modify its approval or recommendation of this Agreement and
the Merger, (x) approve or recommend such Acquisition Proposal to HCI's
stockholders, (y) cause HCI to enter into an agreement with respect to such
Acquisition Proposal or (z) terminate this Agreement pursuant to Section 9.3(c);
provided, however, that prior to taking such action, HCI shall, and shall cause
its respective financial and legal advisors to, negotiate with Rent-Way to make
such adjustments in the terms and conditions of this Agreement as would enable
HCI to proceed with the transactions contemplated herein on such adjusted terms.
Notwithstanding anything contained in this Agreement to the contrary, any action
by the Board of Directors of HCI permitted by this Section 7.2(b) shall not
constitute a breach of this Agreement by HCI.
(c) If the Board of Directors of HCI takes any action described in
clause (y) or (z) of Section 7.2(b) or Rent-Way exercises its right to terminate
this Agreement under Section 9.4(d), based on HCI's Board of Directors having
taken any action described in clause (w), (x) or (y) of Section 7.2(b), HCI
shall, simultaneously with the taking of such action or upon such termination
pay to Rent-Way upon demand the sum of $10,000,000 plus all fees and expenses
incurred by Rent-Way in connection with the transactions contemplated by this
Agreement (including without limitation, investment bankers' fees and expenses),
payable in same-day funds, as liquidated damages and not as a penalty. If HCI
fails to pay to Rent-Way any amounts due under this Section 7.2(c), HCI shall
pay the costs and expenses (including reasonable legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other action,
taken by Rent-Way to collect payment, together with interest on the amount of
any unpaid fee at the publicly announced prime rate of Citibank, N.A. in effect
from time to time from the date such fee was required to be paid.
Section 7.3 Registration Statement; Listing Application.
(a) As promptly as practicable, Rent-Way and HCI shall prepare and file
with the SEC the Proxy Statement in form and substance satisfactory to each of
Rent-Way and HCI, and Rent-Way shall prepare and file with the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus. Rent-Way shall use commercially reasonable efforts to (i) respond to
any comments of the SEC and (ii) have the Registration Statement declared
effective under the Securities Act as promptly as practicable and to keep the
Registration Statement effective as long as is reasonably necessary to
consummate the Merger. Each Party will notify the other promptly of the receipt
of any comments from the SEC and of any request by the SEC for amendments or
supplements to the Registration Statement or the Proxy Statement or for
additional information and will supply the other with copies of all
correspondence between such Party or any of its representatives and the SEC with
respect to the Registration Statement or the Proxy Statement. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Registration Statement or the Proxy Statement, Rent-Way or HCI, as the case may
be, shall promptly inform the other of such occurrences and cooperate in filing
with the SEC and or mailing to the shareholders of Rent-Way and the stockholders
of HCI such amendment or supplement. The Proxy Statement shall include the
recommendations of the Board of Directors of Rent-Way in favor of the Merger
Agreement, the Amendment and the issuance of the Rent-Way Shares and the Board
of Directors of HCI as to the Merger Agreement, subject to the provisions of
Section 7.2. Rent-Way shall use commercially reasonable efforts to take any
action required to be taken under state securities or blue sky laws in
connection with the issuance of the Rent-Way Shares pursuant hereto and will pay
or cause to be paid all expenses incident thereto. HCI shall furnish Rent-Way
with all information concerning HCI and the holders of its capital stock and
shall take such other action as Rent-Way may reasonably request in connection
with such Proxy Statement and Registration Statement and issuance of Rent-Way
Shares.
(b) Rent-Way shall promptly prepare and submit to Nasdaq or the NYSE a
listing application covering the Rent-Way Shares to be issued in connection with
the Merger and this Agreement and shall use commercially
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reasonable efforts to obtain, prior to the Effective Time, approval for the
listing of such Rent-Way Shares, subject to official notice of issuance.
Section 7.4 Proxy Statements; Stockholder Approvals.
(a) Rent-Way and HCI shall cause the definitive Proxy Statement to be
mailed to their respective shareholders and stockholders as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act. It shall be a condition precedent to HCI's obligation to mail
the Proxy Statement that the opinions of Donaldson, Lufkin & Jenrette Securities
Corporation and of Stephens, Inc. referred to Section 5.19 not have been
withdrawn. It shall be a condition precedent to Rent-Way's obligation to mail
the Proxy Statement that the opinion of NBM referred to in Section 4.19 not have
been withdrawn. At the shareholders and stockholders' meetings, each of Rent-Way
and HCI shall vote or cause to be voted in favor of authorization, approval and
adoption of this Agreement and the Merger and, in the case of Rent-Way, the
Amendment and the issuance of the Rent-Way Shares to be issued in the Merger,
all capital stock entitled to vote as to which it holds proxies at such time.
(b) In connection with the preparation of the Proxy Statement and the
Registration Statement, Rent-Way shall use reasonable efforts to cause to be
delivered to Rent-Way and HCI prior to the mailing of the Proxy Statement to the
stockholders of Rent-Way and HCI the opinion of Hodgson, Russ, Andrews, Woods &
Goodyear LLP, dated the date of the Proxy Statement, substantially to the effect
that the Merger will constitute a reorganization for federal income tax purposes
within the meaning of Section 368(a)(1)(A) of the Code.
(c) Each of HCI's and Rent-Way's obligations under this Section 7.4
shall at all times remain subject to their fiduciary duties imposed under
Applicable Law and Section 7.2 of this Agreement, in the event that, if required
by such fiduciary duties as advised in writing by outside counsel, the Board of
Directors of HCI or Rent-Way, as the case may be, shall have withdrawn or
modified its recommendation that shareholders or stockholders authorize, approve
and adopt this Agreement and the Merger, in the case of Rent-Way and HCI, or
that shareholders authorize the Amendment and the issuance of the Rent-Way
Shares to be issued in connection with the Merger, in the case of Rent-Way.
(d) HCI, acting through its Board of Directors, shall, in accordance
with Applicable Law and its Certificate of Incorporation and By-Laws:
(i) promptly and duly call, give notice of, convene and hold as soon
as practicable (but in no event sooner than 20 business days following the
date the Proxy Statement is mailed to its Stockholders) following the date
upon which the Registration Statement becomes effective a meeting of its
stockholders for the purpose of voting to authorize, approve and adopt this
Agreement and the Merger and shall use commercially reasonable efforts to
obtain such stockholder approval; and
(ii) recommend authorization, approval and adoption of this Agreement
and the Merger by the stockholders of HCI and take all lawful action to
solicit such approval.
(e) Rent-Way, acting through its Board of Directors, shall, in
accordance with Applicable Law and its Articles of Incorporation and By-Laws:
(i) promptly and duly call, give notice of, convene and hold as soon
as practicable (but in no event sooner than 20 business days following the
date the Proxy Statement is mailed to its shareholders) following the date
upon which the Registration Statement becomes effective a meeting of its
shareholders for the purpose of voting to authorize; approve and adopt this
Agreement and the Merger, the Amendment and the issuance of the Rent-Way
Shares to be issued in the Merger and shall use commercially reasonable
efforts to obtain such shareholder approval; and
(ii) recommend authorization, approval and adoption of this Agreement
and the Merger, the Amendment and the issuance of the Rent-Way Shares to be
issued in the Merger by the shareholders of Rent-Way and include in the
Proxy Statement such recommendation and take all lawful action to solicit
such approval.
Section 7.5 Antitrust Laws. As promptly as practicable, HCI and Rent-Way
shall make all filings and submissions under the HSR Act as may be reasonably
required to be made in connection with this Agreement
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and the transactions contemplated hereby. Subject to Section 7.1 hereof, HCI
will furnish to Rent-Way, and Rent-Way will furnish to HCI, such information and
assistance as the other may reasonably request in connection with the
preparation of any such filings or submissions. Subject to Section 7.1 hereof,
HCI will provide Rent-Way, and Rent-Way will provide HCI, with copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such Party or any of its representatives, on the one
hand, and any Governmental Authority or members of its staff, on the other hand,
with respect to this Agreement and the transactions contemplated hereby.
Section 7.6 Voting Agreements and Option Agreements. Concurrently herewith,
HCI is entering into voting agreements with each of Gerald A. Ryan and William
E. Morgenstern substantially in the form attached hereto as Exhibit A (together,
the "Rent-Way Voting Agreements"); Rent-Way is entering into voting agreements
with each of GDJ, Jr. Investments, L.P., and Michael D. Walts substantially in
the form attached hereto as Exhibit B (collectively, the "HCI Voting Agreements"
and together with the Rent-Way Voting Agreements referred to herein as the
"Voting Agreements"); HCI and Rent-Way are entering into an option agreement
substantially in the form attached hereto as Exhibit C (the "HCI Option
Agreement"); and Rent-Way and HCI are entering into an option agreement
substantially in the form attached hereto as Exhibit D (the "Rent-Way Option
Agreement" and together with the HCI Option Agreement referred to herein as the
"Option Agreements").
Section 7.7 HCI Employee Stock Options and HCI Director Stock Options.
Except as provided in this Agreement or as may occur automatically pursuant to
the provisions of the HCI Stock Option Plans as in effect on the date hereof
from the date hereof HCI will not accelerate the vesting or exerciseability of
or otherwise modify the terms and conditions applicable to the HCI Stock
Options. Except as provided in this Agreement, Rent-Way will not exercise any
right under any of the Rent-Way Employee Stock Option Plans from the date hereof
to accelerate the vesting or exerciseability of or otherwise modify the terms
and conditions applicable to the Rent-Way Employee Stock Options. At the
Effective Time, each of the HCI Stock Options which is outstanding and
unexercised at the Effective Time shall be converted automatically into an
option to purchase Rent-Way Shares in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the HCI
Stock Option Plans governing the HCI Stock Options):
(1) The number of Rent-Way Shares to be subject to the new option
shall be equal to the product of the number of Shares subject to the
original option and the Exchange Ratio, provided that any fractional Rent-
Way Share resulting from such multiplication shall be rounded down to the
nearest share and Rent-Way shall pay an amount in cash to the holder of
such HCI Stock Option within thirty (30) days after the Effective Time
equal to the fair market value immediately prior to the Effective Time of
such fractional Rent-Way Share calculated based on the average closing
price on Nasdaq or the NYSE National Market for the last five trading days
immediately preceding the day prior to the Effective Time; and
(2) The exercise price per Rent-Way Share under the new option shall
be equal to the aggregate exercise price of the shares issuable pursuant to
the original option divided by the total number of full Rent-Way Shares
subject to the new option (as determined under (1) immediately above),
provided that such exercise price shall be rounded up the nearest cent.
Rent-Way shall assume the obligations of HCI under the HCI Stock Option Plans in
respect of each such new option. The duration and other terms of the new option
shall be the same as that of the original option, except that all references to
HCI shall be deemed to be references to Rent-Way. Rent-Way shall file with the
SEC a registration statement on Form S-8 (or other appropriate form) as promptly
as practicable after the Effective Time for purposes of registering all Rent-Way
Shares issuable after the Effective Time upon exercise of the HCI Stock Options,
and shall have such registration statement or post-effective amendment become
effective and comply, to the extent applicable, with state securities or blue
sky laws with respect thereto at the Effective Time.
Section 7.8 Benefit Plans. After the Effective Time, Rent-Way shall provide
benefits to employees of HCI and the HCI Subsidiaries that are not less
favorable to such employees than those provided to similarly situated employees
of Rent-Way and the Rent-Way Subsidiaries. With respect to any Rent-Way Plan
that is an "employee benefit plan" as defined in Section 3(3) of ERISA, solely
for purposes of satisfying the service requirements, if any, to participate in
such plans and to vest in benefits payable under such plans (but not for
purposes of computing the amount of the benefits, or the existence of a benefit,
under such plans), service with HCI or any
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HCI Subsidiary (or a predecessor entity to either of them) shall be treated as
service with Rent-Way or the Rent-Way Subsidiaries (as applicable); provided,
however, that such service shall not be recognized to the extent that such
recognition would result in a duplication of benefits (or is not otherwise
recognized for such purposes under the Rent-Way Plans.
Section 7.9 Public Announcements. Rent-Way, on the one hand, and HCI, on
the other hand, agree that they will not issue any press release or otherwise
make any public statement or respond to any press inquiry with respect to this
Agreement or the transactions contemplated hereby without the prior approval of
the other Party, except as may be required by Applicable Law.
Section 7.10 Continuance of Existing Indemnification Rights.
(a) From and after the Effective Time, Rent-Way shall indemnify, defend
and hold harmless to the fullest extent permitted under Applicable Law each
person who is now, or has been at any time prior to the date hereof, an officer
or director of Rent-Way or HCI or any HCI Subsidiary (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties"), against all
losses, claims, damages, liabilities, costs or expenses (including attorneys'
fees and expenses), judgments, fines, penalties and amounts paid in settlement
in connection with any claim, action, suit, proceeding or investigation arising
out of or pertaining to acts or omissions, or alleged acts or omissions, by them
in their capacities as such occurring at or prior to the Effective Time. In the
event of any such claim, action, suit, proceeding or investigation (an
"Action"), (i) any Indemnified Party wishing to claim indemnification shall
promptly notify Rent-Way thereof, (ii) Rent-Way shall pay the reasonable fees
and expenses of counsel selected by the Indemnified Party, which counsel shall
be reasonably acceptable to Rent-Way, in advance of the final disposition of any
such Action to the full extent permitted by Applicable Law, upon receipt of any
undertaking required by Applicable Law, and (iii) Rent-Way will cooperate in the
defense of any such matter; provided, however, that Rent-Way shall not be liable
for any settlement effected without its written consent (which consent will not
be unreasonably withheld) and provided, further, that Rent-Way shall not be
obligated pursuant to this Section 7.9 to pay the fees and disbursements of more
than one counsel for all Indemnified Parties in any single Action except to the
extent that, in the opinion of counsel for the Indemnified Parties, two of more
of such Indemnified Parties have conflicting interests in the outcome of such
action.
(b) Rent-Way shall keep in effect provisions in its Articles of
Incorporation and Bylaws providing for exculpation of director and officer
liability and its indemnification of the Indemnified Parties to the fullest
extent permitted under Applicable Law, which provisions shall not be amended
except as required by Applicable Law or except to make changes permitted by law
that would enlarge the Indemnified Parties' right of indemnification.
(c) Rent-Way shall cause to be maintained in effect for a period ending
not sooner than the sixth anniversary of the Effective Time directors' and
officers' liability insurance providing at least the same coverage with respect
to the officers and directors of HCI and the HCI Subsidiaries as the policies
maintained on behalf of directors and officers of HCI and the HCI Subsidiaries
as of the date hereof, and containing terms and conditions which are no less
advantageous, with respect to matters occurring on or prior to the Effective
Time (to the extent such insurance is available with respect to such matters).
(d) If in the event that Rent-Way or any of its successors and assigns
(i) consolidates or merges into any other person or shall not be the continuing
or surviving corporation or entity of which consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, to the extent necessary, proper provision shall be
made so that the successors and assigns of Rent-Way shall assume the obligations
of Rent-Way under this Section 7.10.
(e) The provisions of this Section 7.10 are intended to be for the
benefit of, and shall be enforceable by, the officers and directors of HCI and
each HCI Subsidiary and his or her heirs and representatives.
Section 7.11 Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the Party incurring such
expenses except that (a) (i) a filing fee in connection with any HSR Act filing
and (ii) the expenses incurred in connection with the printing and mailing of
the Proxy Statement shall be shared equally by Rent-Way and HCI and (b) all
transfer taxes shall be paid by HCI.
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Section 7.12 Additional Agreements.
(a) Subject to terms and conditions herein provided, each of the Parties
hereto agrees to use all commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under Applicable Law and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using all
commercially reasonable efforts to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, Rent-Way and HCI shall cause their
respective proper officers and/or directors to take all such necessary action.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the Parties agree that, to the extent that the consummation of the
transactions contemplated hereby requires that HCI or any HCI Subsidiary obtain
the consent of a landlord under any store lease of HCI or such HCI Subsidiary,
HCI will use commercially reasonable efforts to obtain the consent of the
landlord under each such store lease specified by Rent-Way to HCI in writing
within ten (10) days after the date hereof, and the Parties further agree that,
if despite its commercially reasonable efforts HCI is not able to obtain any
such consent prior to the Effective Time, such failure by HCI shall not
constitute a breach by HCI of any representation, warranty, covenant or
agreement in this Agreement or constitute a failure by HCI to satisfy any
condition of Rent-Way to its obligation to consummate the transactions
contemplated hereby at the Effective Time or otherwise give Rent-Way the right
to terminate this Agreement.
Section 7.13 Affiliate Agreements.
(a) HCI shall, prior to the Effective Time, deliver to Rent-Way a list
(reasonably satisfactory to counsel for Rent-Way), setting forth the names and
addresses of all persons who are, at the time of the HCI stockholder's meeting
referred to in Section 7.4(a) hereof, in HCI's reasonable judgment, "affiliates"
of HCI for purposes of Rule 145 under the Securities Act or under applicable SEC
accounting releases with respect to pooling of interests accounting treatment.
HCI shall furnish such information and documents as Rent-Way may reasonably
request for the purpose of reviewing such list. HCI shall use commercially
reasonable efforts to cause each person who is identified as an "affiliate" in
the list furnished pursuant to this Section 7.12 to execute a written agreement
on or prior to the Effective Time, in substantially the form of Exhibit E
attached hereto (the "HCI Affiliate Agreements").
(b) Rent-Way shall, prior to the Effective Time, deliver to HCI a list
(reasonably satisfactory to counsel for HCI) setting forth the names and
addresses of all persons who are, at the time of the Rent-Way stockholders
meeting referred to in Section 7.4(b) hereof, in Rent-Way's reasonable judgment,
"affiliates" of Rent-Way under applicable SEC accounting releases with respect
to pooling of interests accounting treatment. Rent-Way shall furnish such
information and documents as HCI may reasonably request for the purpose of
reviewing such list. Rent-Way shall use its commercially reasonable efforts to
cause each person who is identified as an affiliate in the list furnished
pursuant to this Section 7.12 to execute a written agreement on or prior to the
Effective Time, in substantially the form of Exhibit F attached hereto (the
"Rent-Way Affiliate Agreements" and, together with the HCI Affiliate Agreements
referred to collectively herein as the "Affiliate Agreements").
Section 7.14 Publication of Post Merger Financial Results. HCI and Rent-Way
agree that the Surviving Corporation shall publish financial results covering at
least thirty (30) days of combined operations as soon as practicable after the
Effective Time; provided that if the Effective Time occurs after February 28,
1999, HCI and Rent-Way agree that upon the written request of any person who
shall have executed an Affiliate Agreement pursuant to Section 7.12, the
Surviving Corporation shall publish such combined financial results at the end
of the first full calendar month following the Effective Date which notice shall
be given at least thirty (30) days prior to the end of such first full calendar
month following the Effective Date.
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each Party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated, and no action shall
have been instituted by the Department of Justice or Federal Trade Commission
challenging or seeking to enjoin the consummation of this transaction, which
action shall have not been withdrawn or terminated.
(b) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no proceeding
for such purpose shall be pending before or threatened by the SEC.
(c) This Agreement and the Merger shall have been authorized, approved
and adopted by the requisite vote of the stockholders of HCI and the
shareholders of Rent-Way, and the Amendment and the issuance of the Rent-Way
Shares in connection with the Merger shall have been authorized and approved by
the requisite vote of the shareholders of Rent-Way, in each case in accordance
with Applicable Law.
(d) No temporary restraining order, preliminary or permanent injunction
or other order by any federal or state court in the United States which
prohibits the consummation of the Merger shall have been issued and remain in
effect.
(e) Subject to Section 7.12(b), each of HCI and Rent-Way shall have
obtained such consents from third parties and Governmental Authorities in
addition to the HSR Act as shall be required and which are material to Rent-Way
and HCI and to consummation of the transactions contemplated hereby.
(f) Each of Rent-Way and HCI shall have received a letter from
PricewaterhouseCoopers, LLP dated the Effective Time, addressed to Rent-Way and
HCI stating that the Merger will qualify as a pooling of interests transaction
under Opinion No. 16 of the Accounting Principles Board and that Rent-Way and
HCI meet the conditions to qualify for a pooling of interests transaction under
opinion No. 16 of the Accounting Principles Board, "Business Combinations," and
the related published interpretations of the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board, and the
published rules and regulations of the SEC.
(g) Each of Rent-Way and HCI shall have received an opinion of Hodgson,
Russ, Andrews, Woods & Goodyear, LLP, in form and substance reasonably
satisfactory to Rent-Way and HCI, dated the date of the Proxy Statement, which
opinion shall be reconfirmed as of the Effective Time, substantially to the
effect that the Merger will constitute a reorganization for federal income tax
purposes within the meaning of section 368(a)(1)(A) of the Code.
Section 8.2 Conditions to Obligation of HCI to Effect the Merger. The
obligation of HCI to effect the Merger shall be subject to the satisfaction at
or prior to the Effective Time of the following additional conditions:
(a) Rent-Way shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time and the representations and warranties of Rent-Way contained
in this Agreement shall be true and correct in all material respects at and as
of the Effective Time as if made at and as of such time, except (i) for changes
specifically permitted by this Agreement and (ii) that those representations and
warranties which address matters only as of a particular date shall remain true
and correct in all material respects as of such date, and HCI shall have
received a certificate of the President of Rent-Way as to the satisfaction of
this condition.
(b) HCI shall have received an opinion from Hodgson, Russ, Andrews,
Woods & Goodyear, LLP, counsel to Rent-Way, dated the Effective Time,
substantially to the effect that:
(i) Rent-Way is a corporation validly existing under the laws of the
Commonwealth of Pennsylvania.
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(ii) Rent-Way has the corporate power to enter into this Agreement
and to consummate the transactions contemplated hereby; and the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by requisite corporate action
taken on the part of Rent-Way.
(iii) This Agreement has been executed and delivered by Rent-Way and
is a valid and binding obligation of Rent-Way, enforceable against Rent-Way
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and general principles of equity.
(iv) Neither the execution and delivery of this Agreement by
Rent-Way, nor the consummation by Rent-Way of the transactions contemplated
hereby, will violate the Articles of Incorporation or By-Laws of Rent-Way
or, to the knowledge of such counsel, and except as set forth in the
Rent-Way Disclosure Letter without having made any independent
investigation, will constitute a violation of or a default under (except
for any such violation or default as to which requisite waivers or consents
either shall have been obtained by Rent-Way prior to the Effective Time or
shall have been waived by HCI in writing) any material contract, agreement
or instrument to which Rent-Way or any of the Rent-Way Subsidiaries is
subject and which has been specifically identified to such counsel by
Rent-Way in connection with rendering such opinion.
(v) The Rent-Way Shares to be issued in connection with the
transactions contemplated by this Agreement are duly authorized and
reserved for issuance and, when issued as contemplated by this Agreement,
will be validly issued, fully paid and nonassessable.
(vi) While such counsel assumes no responsibility for any event,
occurrence or statement of fact relating to Rent-Way or for the accuracy
completeness or fairness of any statements contained or incorporated by
reference in or omitted from the Registration Statement or the Proxy
Statement, and while such counsel expresses no opinion as to the financial
statements or other financial or statistical data contained or incorporated
by reference therein with respect to information in the Registration
Statement or the Proxy Statement relating to Rent-Way, the Registration
Statement complies as to form in all material respects with the
requirements of the Securities Act and the applicable rules and regulations
promulgated thereunder.
In addition, in such opinion, such counsel shall state that such
counsel has no reason to believe that the Registration Statement or the
Proxy Statement, as amended or supplemented to the date of such opinion,
insofar as it relates to Rent-Way, contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, except
such counsel expresses no belief as to the financial statements or other
financial or statistical data contained or incorporated by reference in the
Registration Statement or the Proxy Statement.
As to any matter in such opinion which involves matters of fact, such
counsel may rely upon the certificates of officers and directors of
Rent-Way and of public officials and as to any matter in such opinion which
involves matters relating to laws other than the laws of the United States
or the corporate laws of the State of Delaware and the Commonwealth of
Pennsylvania, such counsel may rely on opinions of local counsel,
reasonably acceptable to HCI.
(c) The listing application referred to in Section 7.3(b) shall have
been approved by the National Association of Securities Dealers for listing of
the Rent-Way Shares on Nasdaq or shall have been approved by the NYSE for
listing on the NYSE, subject to official notice of issuance.
(d) From the date of this Agreement through the Effective Time, there
shall not have occurred any condition or event relating to the financial
condition, business or operations of Rent-Way or the Rent-Way Subsidiaries,
taken as a whole, that has had or would be reasonably likely to have a Rent-Way
Material Adverse Effect and HCI shall have received a certificate of the
President or Chief Financial Officer of Rent-Way as to the satisfaction of such
condition.
(e) Rent-Way shall have executed indemnification agreements with the
members of the HCI Board of Directors if, immediately prior to the Effective
Time, any such agreements are in effect between Rent-Way and its
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Board of Directors, in which case, the form of agreement shall be substantially
similar to any such Rent-Way agreement.
Section 8.3 Conditions to Obligations of Rent-Way to Effect the Merger. The
obligations of Rent-Way to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) HCI shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the Effective
Time and the representations and warranties of HCI contained in this Agreement
shall be true and correct in all material respects at and as of the Effective
Time as if made at and as of such time, except (i) for changes specifically
permitted by this Agreement and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and correct
in all material respects as of such date and Rent-Way shall have received a
Certificate of the President and Chief Executive Officer of HCI as to the
satisfaction of this condition.
(b) Rent-Way shall have received an opinion from King & Spalding,
counsel for HCI, dated the Effective Time, substantially to the effect that:
(i) HCI is a corporation validly existing under the laws of the State
of Delaware.
(ii) HCI has the corporate power to enter into this Agreement and to
consummate the transactions contemplated hereby; and the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by requisite corporate action
taken on the part of HCI.
(iii) This Agreement has been executed and delivered by HCI and is a
valid and binding obligation of HCI, enforceable against HCI in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and general principles of equity.
(iv) Neither the execution and delivery of this Agreement by HCI, nor
the consummation by HCI of the transactions contemplated hereby, will
violate the Certificate of Incorporation or By-Laws of HCI or, to the
knowledge of such counsel, and except as set forth in the HCI Disclosure
Letter without having made any independent investigation, will constitute a
violation of or a default under (except for any such violation or default
as to which requisite waivers or consents either shall have been obtained
by HCI prior to the Effective Time or shall have been waived by Rent-Way in
writing) any material contract, agreement or instrument to which HCI or any
of the HCI Subsidiaries is subject and which has been specifically
identified to such counsel by HCI in connection with rendering such
opinion.
In addition, in such opinion, such counsel shall state that such
counsel has no reason to believe that the Registration Statement or the
Proxy Statement, as amended or supplemented to the date of such opinion,
insofar as it relates to HCI, contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, except such
counsel expresses no belief as to the financial statements or other
financial or statistical data contained or incorporated by reference in the
Registration Statement or the Proxy Statement.
As to any matter in such opinion which involves matters of fact, such
counsel may rely upon the certificates of officers and directors of HCI and
of public officials and as to any matter in such opinion which involves
matters relating to laws other than the laws of the United States or the
corporate laws of the State of Delaware, such counsel may rely on opinions
of local counsel, reasonably acceptable to HCI.
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred any condition or event relating to the financial
condition, business or operations of HCI or the HCI Subsidiaries, taken as a
whole, that has had or would be reasonably likely to have an HCI Material
Adverse Effect and Rent-Way shall have received a certificate of the President
or Chief Financial Officer of HCI as to the satisfaction of this condition.
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(d) Rent-Way and George D. Johnson, Jr. shall have entered into a
noncompetition agreement in the form attached hereto as Exhibit G (the "Johnson
Noncompetition Agreement").
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination by Mutual Consent. This Agreement may be terminated
at any time prior to the Effective Time by mutual written consent of the
Parties.
Section 9.2 Termination by Either Rent-Way or HCI. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of Rent-Way or HCI if:
(a) The Merger is not consummated on or before February 28, 1999 (or
such later date as shall have been approved by Rent-Way and HCI) (the
"Termination Date"), provided, however, that the right to terminate this
Agreement under this Section 9.2(a) shall not be available to any Party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before the
Termination Date, and provided, further, that if on the Termination Date the
conditions to the Closing set forth in Section 8.1(a) or (e) shall not have been
fulfilled, but all other conditions to the Closing shall be fulfilled or shall
be capable of being fulfilled, then the Termination Date shall automatically be
extended to April 30, 1999; and provided, further that if on the Termination
Date the condition to the Closing set forth in Section 8.1(b) shall not have
been fulfilled, but all other conditions to the Closing shall be fulfilled or
shall be capable of being fulfilled, the Termination Date shall automatically be
extended to April 30, 1999; or
(b) A court of competent jurisdiction or Governmental Authority shall
have issued an order, decree or ruling or taken any other action (which order,
decree or ruling the parties shall use their commercially reasonable efforts to
lift), in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable.
Section 9.3 Termination by HCI. This Agreement may be terminated and the
Merger may be abandoned by action of the Board of Directors of HCI if:
(a) There shall have been any event or condition that has had a Rent-Way
Material Adverse Effect since the date hereof which is not cured within thirty
(30) days after notice thereof to Rent-Way, or if Rent-Way shall have breached
Section 7.2, 7.4 or 7.5 and, in the case of Sections 7.4 and 7.5, such breach
has not been cured within thirty (30) days' notice thereof to Rent-Way;
(b) This Agreement and the Merger, the Amendment and the issuance of the
Rent-Way Shares in connection with the Merger shall not have been authorized,
approved and adopted by the requisite vote of the stockholders of Rent-Way; or
(c) The Board of Directors of HCI shall have exercised any of its rights
set forth in Section 7.2(b).
Section 9.4 Termination by Rent-Way. This Agreement may be terminated and
the Merger may be abandoned by action of the Board of Directors of Rent-Way if:
(a) There shall have been any event or condition that has had a HCI
Material Adverse Effect since the date hereof which is not cured within thirty
(30) days after notice thereof to HCI, or if HCI shall have breached Section
7.2, 7.4 or 7.5 and, in the case of Sections 7.4 and 7.5, such breach has not
been cured within thirty (30) days' notice thereof to HCI;
(b) This Agreement and the Merger shall not have been authorized,
approved and adopted by the requisite vote of the stockholders of HCI; or
(c) The Board of Directors of HCI shall have (i) withdrawn or modified
in a manner adverse to Rent-Way its recommendation of this Agreement and the
Merger; (ii) approved or recommended an Acquisition Proposal; or (iii) caused
HCI to enter into an agreement with respect to an Acquisition Proposal.
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Section 9.5 Effect of Termination and Abandonment. In the event of the
termination and abandonment of this Agreement under this Article IX, this
Agreement shall become void and have no effect, without any liability on the
part of any Party or its Directors, officers or stockholders except (i) as
provided in Sections 7.1, 7.2 and 7.10 and (ii) to the extent that such
termination results from the willful breach by any Party hereto of any material
representation, warranty, covenant or agreement hereunder.
Section 9.6 Amendment. This Agreement may be amended by the Parties
pursuant to a writing adopted by action taken by all of the Parties at any time
before the Effective Time, provided, however, that after approval by the
stockholders of HCI or Rent-Way, whichever shall occur first, no amendment may
be made which would (a) alter or change the amount or kinds of consideration to
be received by the holders of Shares upon consummation of the Merger, (b) alter
or change any term of the Certificate of Incorporation of HCI or the Articles of
Incorporation of Rent-Way, or (c) alter or change any of the terms and
conditions of this Agreement if such alteration or change would adversely affect
the holders of any class or series of securities of HCI or Rent-Way. This
Agreement may not be amended except by an instrument in writing signed by the
Parties.
Section 9.7 Waiver. At any time before the Effective Time, any Party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other Parties (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, and
(c) waive compliance with any of the agreements or conditions contained herein.
Any agreement on the part of a Party to any such extension of waiver shall be
valid only as against such Party and only if set forth in an instrument in
writing signed by such Party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Survival of Representations, Warranties and Agreements. No
representations, warranties, covenants or agreements contained herein shall
survive beyond the Effective Time, except that the representations, warranties,
covenants or agreements contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 7.1, 7.8,
7.9, 7.10, 7.11 and 7.13 and this Article X shall survive beyond the Effective
Time.
Section 10.2 Notices. All notices and other communications required or
permitted by this Agreement shall be made in writing and any such notice or
communication shall be deemed delivered when delivered in person, transmitted by
telex or telecopier, or seven (7) days after it has been sent by air mail, as
follows:
Rent-Way: Rent-Way, Inc.
One RentWay Place
Erie, Pennsylvania 16505
Attention: William E. Morgenstern
Tel: (814) 455-5378
Fax: (814) 455-3267
with a copy to: Hodgson, Russ, Andrews, Woods & Goodyear, LLP
1800 One M&T Plaza
Buffalo, New York 14203
Attention: Robert B. Fleming, Jr.
Tel: (716) 856-4000
Fax: (716) 849-0349
HCI: Home Choice Holdings Inc.
714 East Kimbrough Street
Mesquite, Texas 75149
Attention: James G. Steckart
Tel: (972) 288-9327
Fax: (972) 288-7753
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with a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: John D. Capers, Jr.
Tel: (404) 572-4658
Fax: (404)572-5145
The Parties shall promptly notify each other in the manner provided in this
Section 10.2 of any change in its address. A notice of change of address shall
not be deemed to have been given until received by the addressee. Communications
by telex or telecopier shall also be sent concurrently by mail, but shall in any
event be effective as stated above.
Section 10.3 Assignment. No Party shall assign this Agreement or any
rights, interests or obligations hereunder, or delegate performance of any of
its obligations hereunder, without the prior written consent of the other Party.
Section 10.4 Entire Agreement. This Agreement, the Exhibits hereto, the
Rent-Way Disclosure Letter, the HCI Disclosure Letter, the Voting Agreements,
the Option Agreements, the Johnson Noncompetition Agreement, the Affiliate
Agreements and the Confidentiality Agreement embody the entire agreement and
understanding of the Parties in respect of the subject matter contained herein.
This Agreement supersedes all prior agreements and understandings between the
Parties with respect to such subject matter.
Section 10.5 Waiver, Amendment, etc. This Agreement may not be amended or
supplemented, and no waivers of or consents to departures from the provisions
hereof shall be effective, unless set forth in a writing signed by, and
delivered to, both Parties. No failure to delay of a Party in exercising any
power or right under this Agreement will operate as a waiver thereof, nor will
any single or partial exercise of any right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any other or
further exercise thereof or the existence of any other right or power.
Section 10.6 Binding Agreement; No Third Party Beneficiaries. This
Agreement will be binding upon and inure to the benefit of the Parties and their
successors and permitted assigns. Nothing expressed or implied herein is
intended or will be construed to confer upon or to give any third Party any
rights or remedies by virtue hereof.
Section 10.7 Governing Law; Dispute Resolution; Equitable Relief.
(a) HIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE (REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW).
(b) EACH PARTY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION,
SUIT OR PROCEEDING AGAINST IT WITH RESPECT TO ITS OBLIGATIONS OR LIABILITIES
UNDER OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT
ONLY IN THE UNITED STATES DISTRICT COURT FOR THE STATE OF DELAWARE OR, IN THE
EVENT (BUT ONLY IN THE EVENT) SUCH COURT DOES NOT HAVE SUBJECT MATTER
JURISDICTION OVER SUCH ACTION, SUIT OR PROCEEDING, IN THE COURTS OF THE STATE OF
DELAWARE, AND EACH PARTY HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO THE
JURISDICTION OF EACH OF THE AFORESAID COURTS IN PERSONAM, WITH RESPECT TO ANY
SUCH ACTION, SUIT OR PROCEEDING (INCLUDING CLAIMS FOR INTERIM RELIEF,
COUNTERCLAIMS, ACTIONS WITH MULTIPLE DEFENDANTS AND ACTIONS IN WHICH SUCH PARTY
IS IMPLED). EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT THAT IT
MAY HAVE TO A JURY TRIAL IN ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT
TO, OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
(c) EACH PARTY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM (IN SUCH
CAPACITY, THE "PROCESS AGENT"), AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE,
FOR AND ON ITS BEHALF, SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY LEGAL
ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, AND SUCH SERVICE
SHALL BE
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DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT, PROVIDED THAT IN THE
CASE OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY EFFECTING SUCH
SERVICE SHALL ALSO DELIVER A COPY THEREOF TO THE OTHER PARTY IN THE MANNER
PROVIDED IN SECTION 10.2. EACH PARTY SHALL TAKE ALL SUCH ACTION AS MAY BE
NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO APPOINT
ANOTHER AGENT SO THAT SUCH PARTY WILL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF
PROCESS FOR THE ABOVE PURPOSES IN THE STATE OF DELAWARE. IN THE EVENT OF THE
TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS AND BUSINESS OF THE PROCESS
AGENT TO ANY OTHER CORPORATION BY CONSOLIDATION, MERGER, SALE OF ASSETS OR
OTHERWISE, SUCH OTHER CORPORATION SHALL BE SUBSTITUTED HEREUNDER FOR THE PROCESS
AGENT WITH THE SAME EFFECT AS IF NAMED HEREIN IN PLACE OF CT CORPORATION SYSTEM.
EACH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION, SUIT OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED AIR MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS
ADDRESS SET FORTH IN THIS AGREEMENT, SUCH SERVICE OF PROCESS TO BE EFFECTIVE
UPON ACKNOWLEDGMENT OF RECEIPT OF SUCH REGISTERED MAIL. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW. EACH PARTY EXPRESSLY ACKNOWLEDGES THAT THE FOREGOING WAIVER IS
INTENDED TO BE IRREVOCABLE UNDER THE LAWS OF THE STATE OF DELAWARE AND OF THE
UNITED STATES OF AMERICA.
(d) EACH PARTY AGREES THAT MONEY DAMAGES WOULD NOT BE A SUFFICIENT
REMEDY FOR THE OTHER PARTY FOR ANY BREACH OF THIS AGREEMENT BY IT, AND THAT IN
ADDITION TO ALL OTHER REMEDIES THE OTHER PARTY MAY HAVE, SUCH OTHER PARTY SHALL
BE ENTITLED TO SPECIFIC PERFORMANCE AND TO INJUNCTIVE OR OTHER EQUITABLE RELIEF
AS A REMEDY FOR ANY SUCH BREACH. EACH PARTY AGREES NOT TO OPPOSE THE GRANTING OF
SUCH RELIEF IN THE EVENT A COURT DETERMINES THAT A BREACH HAS OCCURRED, AND
AGREES TO WAIVE ANY REQUIREMENT FOR THE SECURING OR POSTING OF ANY BOND IN
CONNECTION WITH SUCH REMEDY.
Section 10.8 Severability. The invalidity or unenforceability of any
provision hereof in any jurisdiction will not affect the validity or
enforceability of the remainder hereof in that jurisdiction or the validity or
enforceability of this Agreement, including that provision in any other
jurisdiction. To the extent permitted by Applicable Law, each Party waives any
provision of Applicable Law that renders any provision hereof prohibited or
unenforceable in any respect. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than avoided, if
possible, in order to achieve the intent of the Parties to the extent possible.
Section 10.9 Counterparts. This Agreement may be executed in one or more
counterparts each of which when so executed and delivered will be deemed an
original but all of which will constitute one and the same Agreement.
Section 10.10 Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
Section 10.11 Incorporation of Exhibits. The Rent-Way Disclosure Letter,
the HCI Disclosure Letter, the Voting Agreements, the Option Agreements, the
Johnson Noncompetition Agreement, the Affiliate Agreements and the
Confidentiality Agreement attached hereto or referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
[SIGNATURES FOLLOW ON NEXT PAGE]
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IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
RENT-WAY, INC.
By: /s/ WILLIAM E. MORGENSTERN
--------------------------------------------------------
William E. Morgenstern
President and Chief Executive Officer
HOME CHOICE HOLDINGS INC.
By: /s/ JAMES G. STECKART
--------------------------------------------------------
James G. Steckart
President and Chief Executive Officer
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<PAGE> 44
EXHIBIT B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, dated as of September 1, 1998 (this
"Agreement"), by and between HOME CHOICE HOLDINGS INC., a Delaware corporation
("Issuer"), and RENT-WAY, INC., a Pennsylvania corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer propose to enter into an Agreement and Plan of
Merger dated as of September 1, 1998 (the "Merger Agreement"; capitalized terms
not defined herein shall have the meanings set forth in the Merger Agreement),
providing for, among other things, the merger of Issuer with and into Grantee,
with Grantee as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's willingness to enter
into the Merger Agreement, Grantee has requested that Issuer agree, and Issuer
has agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein and in the Merger
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Issuer and Grantee agree as
follows:
1. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 19.9% (as adjusted as set forth herein) shares (the "Option Shares") of
Common Stock, par value $.01 per share ("Issuer Common Stock"), of Issuer at a
purchase price of $13.24 per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, in whole or in
part, at any time and from time to time following the occurrence of a Purchase
Event (as defined below); provided, however, that, except as provided in the
last sentence of this Section 2(a), the Option shall terminate and be of no
further force and effect upon the earliest to occur of (i) the Effective Time,
(ii) twelve (12) months after the first occurrence of a Purchase Event or (iii)
termination of this Agreement in accordance with Section 11(k); and provided,
further that any purchase of shares upon exercise of the Option shall be subject
to compliance with Applicable Law. The rights set forth in Sections 7 and 8
shall not terminate when the right to exercise the Option terminates as set
forth herein, but shall extend to such time as is provided in Sections 7 and 8,
respectively. Notwithstanding the termination of the Option, Grantee shall be
entitled to purchase those Option Shares with respect to which it has exercised
the Option in accordance with the terms hereof prior to the termination of the
Option.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), or shall have filed
a registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common Stock such that, upon consummation of
such offer, such person would own or control 10% or more of the then
outstanding Issuer Common Stock;
(ii) Issuer or any subsidiary of Issuer, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced an intention to authorize, recommend or
propose, or entered into, an agreement with any person (other than Grantee
or any subsidiary of Grantee) to (A) effect a merger, consolidation or
similar transaction involving Issuer or any subsidiary of Issuer, (B) sell,
lease or otherwise dispose of assets of Issuer or its subsidiaries
representing 15% or more of the consolidated assets of Issuer and its
subsidiaries or (C) issue, sell or otherwise dispose of (including by way
of merger, consolidation, share exchange or any similar transaction)
securities representing 10% or more of the voting power of Issuer or any of
its subsidiaries (any of the foregoing an "Acquisition Transaction");
provided, however, that any merger of an HCI Subsidiary into HCI shall not
constitute an Acquisition Transaction;
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(iii) any person shall have acquired beneficial ownership or the right
to acquire beneficial ownership of, or any group shall have been formed
which beneficially owns or has the right to acquire beneficial ownership
of, 10% or more of the then outstanding Issuer Common Stock; provided,
however, that it shall not constitute a Purchase Event for any person who
on the date of this Agreement owns or has the right to acquire beneficial
ownership of Issue Common Stock to continue to own or to acquire such
Issuer Common Stock; or
(iv) the holders of Issuer Common Stock shall not have authorized,
approved and adopted the Merger Agreement and the Merger at the meeting of
such stockholders held for the purpose of voting on the Merger Agreement
and the Merger, such meeting shall not have been held or shall have been
canceled prior to termination of the Merger Agreement or Issuer's Board of
Directors shall have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with respect to the
Merger Agreement and the Merger, in each case after any person (other than
Grantee or any subsidiary of Grantee) shall have publicly announced a
proposal, or publicly disclosed an intention to make a proposal, to engage
in an Acquisition Transaction. As used in this Agreement, "person" shall
have the meaning specified in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act.
(c) In the event Grantee wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three (3) business days nor later than fifteen (15) business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided that
if the closing of the purchase and sale pursuant to the Option cannot be
consummated by reason of any Applicable Law, the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
such restriction on consummation has expired or been terminated.
(d) Notwithstanding Section 2(c), in no event shall any Closing Date be
more than eighteen (18) months after the related Notice Date, and if the Closing
Date shall not have occurred within eighteen (18) months after the related
Notice Date, the exercise of the Option effected on the Notice Date shall be
deemed to have expired.
3. Payment and Delivery of Certificates. (a) On each Closing Date, Grantee
shall pay to Issuer in immediately available funds by wire transfer to a bank
account designated by Issuer in writing an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased on such Closing Date.
(b) At each closing, simultaneously with the delivery of immediately
available funds as provided in Section 3(a), Issuer shall deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such closing, which Option Shares shall be free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever, and Grantee shall deliver to
Issuer a letter agreeing that Grantee shall not offer to sell or otherwise
dispose of such Option Shares in violation of Applicable Law.
(c) Certificates for the Option Shares delivered at each closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
4. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer. This Agreement has been duly executed and delivered by Issuer and
constitutes a valid and binding obligation of Issuer, enforceable in accordance
with its terms.
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(b) Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and, subject to obtaining the governmental and
other approvals and consents referred to herein, to permit it to issue, and, at
all times from the date hereof until the obligation to deliver Issuer Common
Stock upon the exercise of the Option terminates, will have reserved for
issuance, upon exercise of the Option, shares of Issuer Common Stock necessary
for Grantee to exercise the Option, and Issuer will take all necessary corporate
action to authorize and reserve for issuance all additional shares of Issuer
Common Stock or other securities which may be issued pursuant to Section 6 upon
exercise of the Option. The shares of Issuer Common Stock to be issued upon due
exercise of the Option, including all additional shares of Issuer Common Stock
or other securities which may be issuable pursuant to Section 6, upon issuance
pursuant hereto, shall be duly and validly issued, fully paid and nonassessable,
and shall be delivered free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever, including any preemptive rights
of any stockholder of Issuer.
(c) No Conflicts. Except as disclosed pursuant to the Merger Agreement, the
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation pursuant to any provision of the Certificate of Incorporation or
By-laws of Issuer or any subsidiary of Issuer or, subject to obtaining any
approvals or consents contemplated hereby, result in any violation of any loan
or credit agreement, note, mortgage, indenture, lease or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Issuer or any
subsidiary of Issuer or their respective properties or assets which violation
would have an HCI Material Adverse Effect (as defined in the Merger Agreement).
(d) Board Action. The Board of Directors of Issuer has taken all necessary
action to approve this Agreement and the consummation of the transactions
contemplated hereby and the provisions of Section 243 of the Delaware General
Corporation Law will not apply to this Agreement or the purchase of shares of
Issuer Common Stock pursuant to this Agreement.
5. Representations and Warranties of Grantee. Grantee hereby represents and
warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been duly executed
and delivered by Grantee and constitutes a valid and binding obligation of
Grantee, enforceable in accordance with its terms.
(b) No Conflicts. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby will not result in
any violation pursuant to any provision of the Articles of Incorporation or
By-laws of Grantee or, subject to obtaining any approvals or consents
contemplated hereby, result in any violation of any loan or credit agreement,
note, mortgage, indenture, lease or other agreement, obligation, instrument
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Grantee or its properties or assets
which violation would have a Rent-Way Material Adverse Effect (as defined in the
Merger Agreement).
(c) Purchase Not for Distribution. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be taken with a view to
the public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
the Securities Act.
6. Adjustment upon Changes in Capitalization, etc. (a) In the event of any
change in Issuer Common Stock by reason of a stock dividend, split-up,
recapitalization, combination, exchange of shares or similar transaction, the
type and number of shares or securities subject to the Option shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction, so that Grantee shall receive upon exercise of the Option and
payment of the aggregate Purchase Price hereunder the number and class of shares
or other securities or property that Grantee would have received in respect of
Issuer Common Stock if the Option had been exercised in full immediately prior
to such event, or the record date therefor, as applicable. Whenever the number
of shares of Issuer Common Stock purchasable upon exercise of the Option is
adjusted as provided in this Section 6, the Purchase Price shall be adjusted by
multiplying the Purchase Price by a fraction, the numerator of
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which shall be equal to the number of shares of Issuer Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Issuer Common Stock purchasable after the adjustment. If any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 6(a) and other than in connection with the exercise of stock
options of Issuer outstanding on the date hereof), the number of shares of
Issuer Common Stock subject to the Option shall be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of Issuer Common Stock then
issued and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or a subsidiary of
Grantee, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or a
subsidiary of Grantee, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property or the then outstanding shares of Issuer Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or a
subsidiary of Grantee, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute Option")
to purchase, at the election of Grantee, of either (X) shares of capital stock
of the Acquiring Corporation (as defined below) or (Y) shares of capital stock
of any person that controls the Acquiring Corporation.
(c) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (B) Issuer in a merger in which Issuer is the continuing or
surviving person, and (C) the transferee of all or substantially all of
Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Grantee
may elect.
(d) The Substitute Option shall have the same terms as the Option, provided
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Grantee. The issuer of the Substitute Option shall also
enter into an agreement with the Grantee of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option. Without limiting the generality of the foregoing, the
provisions of Sections 7, 8, 9 and 10 shall apply with respect to the Substitute
Option and any securities for which the Substitute Option becomes exercisable
with the same effect as if all references to "Issuer" in such Sections were
references to the "Substitute Option Issuer," all references to "Issuer Common
Stock" were references to "Substitute Common Stock," and all references to the
"Option" were references to the "Substitute Option."
(e) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Applicable Price (as defined below)
multiplied by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Purchase
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
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(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (f), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Grantee equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (f)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (f). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Grantee.
(g) Issuer shall not enter into any transaction described in subsection (b)
of this Section 6 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
7. Repurchase at the Option of Grantee. (a) At the request of Grantee at
any time during the period commencing upon the first occurrence of a Repurchase
Event (as defined below) and ending twelve (12) months immediately thereafter,
Issuer (or any successor entity thereof) shall repurchase from Grantee (x) the
Option, unless the Option shall have expired or been terminated in accordance
with the terms hereof, and (y) all shares of Issuer Common Stock purchased by
Grantee pursuant to the Option with respect to which Grantee then has beneficial
ownership. The date on which Grantee exercises its rights under this Section 7
is referred to as the "Request Date." Such repurchase shall be at an aggregate
price (the "Section 7 Repurchase Consideration") equal to the sum of:
(i) the aggregate exercise price paid by Grantee for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Grantee then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 6), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 6) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Grantee for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Grantee then has beneficial ownership, multiplied by
the number of such shares.
(b) If Grantee exercises its rights under this Section 7, Issuer shall,
within ten (10) business days after the Request Date, pay the Section 7
Repurchase Consideration to Grantee in immediately available funds, and Grantee
shall surrender to Issuer the Option and the certificates evidencing the shares
of Issuer Common Stock purchased thereunder with respect to which Grantee then
has beneficial ownership, and Grantee shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and clear of
all liens, claims, charges and encumbrances of any kind whatsoever. If any
regulatory authority disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 7, Issuer shall promptly give notice of such fact to
Grantee and redeliver to Grantee the Option Shares it is then prohibited from
repurchasing, and Grantee shall have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the number of shares as to which payment has been made pursuant to Section
7(a)(ii); provided that if the Option shall have terminated prior to the date of
such notice or shall be scheduled to terminate at any time before the expiration
of a period ending on the thirtieth (30th) business day after such date, Grantee
shall nonetheless have the right so to exercise the Option or exercise its
rights under Section 8 until the expiration of such period of thirty (30)
business days.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share at which a tender or exchange offer
has been made for shares of Issuer Common Stock after the date hereof and on or
prior to the Request Date, (ii) the price per share to be paid by any third
party for shares of Issuer Common Stock or the consideration per share to be
received by holders of Issuer Common Stock, in each case pursuant to an
agreement for a merger or other business combination transaction with Issuer
entered into on or prior to the Request Date or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the
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New York Stock Exchange (the "NYSE") (or, if Issuer Common Stock is not quoted
on the NYSE, the highest bid price per share as quoted on the Nasdaq National
Market ("Nasdaq") or, if the shares of Issuer Common Stock are not quoted
thereon, on the principal trading market on which such shares are traded as
reported by a recognized source) during the sixty (60) business days preceding
the Request Date. If the consideration to be offered, paid or received pursuant
to either of the foregoing clauses (i) or (ii) shall be other than in cash, the
value of such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm selected by Grantee and reasonably
acceptable to Issuer, which determination shall be conclusive for all purposes
of this Agreement.
(d) As used herein, a "Repurchase Event" means any of the following events:
(i) the occurrence of any of the Purchase Events specified in Section
2(b)(ii), (iii) or (iv); or
(ii) there shall have occurred any of the Purchase Events specified in
Section 2(b)(i) and thereafter the holders of Issuer Common Stock shall not
have authorized, approved and adopted the Merger Agreement and the Merger
at the meeting of such stockholders held for the purpose of voting on the
Merger Agreement and the Merger or such meeting shall not have been held or
shall have been canceled prior to termination of the Merger Agreement.
8. Registration Rights. Issuer shall, if requested by Grantee at any time
and from time to time within three (3) years of the first exercise of the
Option, as expeditiously as possible, prepare and file up to two registration
statements under the Securities Act if such registration is necessary in order
to permit the sale or other disposition of any or all shares of Issuer Common
Stock or other securities that have been acquired by or are issuable to Grantee
upon exercise of the Option in accordance with the intended method of sale or
other disposition stated by Grantee, including a "shelf" registration statement
under Rule 415 under the Securities Act or any successor provision, and Issuer
shall use its best efforts to qualify such shares or other securities under any
applicable state securities laws. Grantee agrees to use all reasonable efforts
to cause, and to cause any underwriters of any sale or other disposition to
cause, any sale or other disposition pursuant to such registration statement to
be effected on a widely distributed basis so that upon consummation thereof no
purchaser or transferee shall own beneficially more than 2% of the then
outstanding voting power of Issuer. Issuer shall use all reasonable efforts to
cause each such registration statement to become effective, to obtain all
consents or waivers of other parties which are required therefor and to keep
such registration statement effective for such period not in excess of 180 days
from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The obligations
of Issuer hereunder to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time not exceeding
sixty (60) days in the aggregate if the Board of Directors of Issuer shall have
determined that the filing of such registration statement or the maintenance of
its effectiveness would require disclosure of nonpublic information that would
materially and adversely affect Issuer. Any registration statement prepared and
filed under this Section 8, and any sale covered thereby, shall be at Issuer's
expense except for underwriting discounts or commissions, brokers' fees and the
fees and disbursements of Grantee's counsel related thereto. Grantee shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If during the time period referred
to in the first sentence of this Section 8 Issuer effects a registration under
the Securities Act of Issuer Common Stock for its own account or for any other
stockholders of Issuer (other than on Form S-4 or Form S-8, or any successor
form), it shall allow Grantee the right to participate in such registration, and
such participation shall not affect the obligation of Issuer to effect two
registration statements for Grantee under this Section 8; provided that, if the
managing underwriters of such offering advise Issuer in writing that in their
opinion the number of shares of Issuer Common Stock requested to be included in
such registration exceeds the number which can be sold in such offering, Issuer
shall include the shares requested to be included therein by Grantee pro rata
with the shares intended to be included therein by Issuer. In connection with
any registration pursuant to this Section 8, Issuer and Grantee shall provide
each other and any underwriter of the offering with customary representations,
warranties, covenants, indemnification and contribution in connection with such
registration.
9. Listing. If Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on the NYSE or the Nasdaq, Issuer,
upon the request of Grantee, will promptly file an application to list the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the
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NYSE or Nasdaq, as applicable, and will use its best efforts to obtain approval
of such listing as soon as practicable.
10. Division of Option. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
11. Miscellaneous. (a) Expenses. Except as otherwise provided in Sections 7
and 8, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability, etc. Except
as otherwise set forth in the Merger Agreement, this Agreement (including the
Merger Agreement and the other documents and instruments referred to herein and
therein) (a) 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 and (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory agency to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Grantee to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 2 and 7 (as adjusted pursuant to Section
6), it is the express intention of Issuer to allow Grantee to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
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<PAGE> 51
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered 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):
If to Issuer to: Home Choice Holdings Inc.
714 East Kimbrough Street
Mesquite, Texas 75149
Attention: James G. Steckart
with copies to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: John D. Capers, Jr., Esq.
If to Grantee to: Rent-Way, Inc.
One Rent Way Place
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.
(g) Counterparts. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have 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.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
(k) Termination. This Agreement and all rights and obligations hereunder
shall terminate upon the termination of the Merger Agreement prior to the
occurrence of a Purchase Event.
[SIGNATURES FOLLOW ON NEXT PAGE]
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<PAGE> 52
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
HOME CHOICE HOLDINGS INC.
By: /s/ JAMES G. STECKART
------------------------------------
James G. Steckart
President and Chief Executive
Officer
RENT-WAY, INC.
By: /s/ WILLIAM E. MORGENSTERN
------------------------------------
William E. Morgenstern
President
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