UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
October 12, 1999 (September 24, 1999)
Date of Report (Date of earliest event reported)
Rent-Way, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 000-22026 25-1407782
(State or other jurisdiction) (Commission File Number) (IRS Employer
of corporation) Identification No.)
One Rentway Place, Erie, Pennsylvania 16505
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (814) 455-5378
<PAGE>
Item 2. Acquisition or Disposition of Assets
On September 24, 1999, Rent-Way, Inc. ("the Company") completed the stock
purchase of RentaVision, Inc. ("RentaVision"), a rental-purchase chain, for
consideration of $98.0 million ($92.0 million in cash and $6.0 million in
Company common stock) net of certain liabilities. Prior to the acquisition,
RentaVision was owned by Robert Natoli. The amount and form of consideration was
determined through arm's length negotiations. Pursuant to terms of the
acquisition, 181,201 shares of common stock equivalent to $4.0 million of the
purchase price was placed in escrow and held subject to terms of the escrow
agreement. The cash paid for the acquisition was drawn on the Company's existing
credit facility with a syndicate of banks co-led by National City Bank of
Pennsylvania and NationsBank, N.A.
RentaVision operated a chain of 250 rental-purchase stores located in 16
states. Annual revenues were approximately $75.0 million.
Item 7. Financial Statements and Exhibits
a. Financial statements of business acquired. Financial statements required
by Regulation S-X Article 3, Item 3-05 will be filed by amendment. b. Pro-forma
financial information. Pro-forma financial information required by Regulation
S-X Article 11 will be filed by amendment. c. Exhibits in Accordance with the
Provisions of Item 601 of Regulation S-K will be filed by amendment.
Exhibit
(2)-6 Stock Purchase Agreement between Rent-Way, Inc.,
RentaVision, Inc., and Robert Natoli, of RentaVision, Inc.,
dated September 15, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Rent-Way, Inc.
------------------------------------------------
(Registrant)
Date October 12, 1999 /s/ Jeffrey A. Conway
------------------- ------------------------------------------------
(Signature)
Jeffrey A. Conway
Senior Vice President and Chief Financial Officer
STOCK PURCHASE AGREEMENT
Dated September 15, 1999
By and Among
RENT-WAY, INC.
(a Pennsylvania corporation),
RENTAVISION INC.
(a New York corporation)
and
ROBERT J. NATOLI
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of September
15, 1999, is by and among RENT-WAY, INC., a Pennsylvania corporation with its
principal place of business at One RentWay Place, Erie, Pennsylvania 16505 (the
"Buyer"); ROBERT J. NATOLI, an individual having a business at 113-119 East
Bridge Street, Oswego, New York 13126 (the "Seller"); and RENTAVISION INC., a
New York corporation with its principal place of business at 113-119 East Bridge
Street, Oswego, New York 13126 (the "Corporation").
RECITALS:
WHEREAS, Seller owns all of the issued and outstanding shares of
stock of the Corporation; and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, all of the shares of the Corporation upon the terms and
conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, Buyer, Seller and the
Corporation agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms below shall have
the following meanings:
(a)"Accounts" shall mean the customer accounts established and existing
under the Rental Contracts.
(b)"Adverse Consequences" shall mean all actions, suits, proceedings,
hearings, investigations, charges, claims, injunctions, judgments, orders,
decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees,
including court costs and attorneys' fees and expenses incurred by Buyer.
(c)"Agreement" shall mean this Stock Purchase Agreement, together with
the Schedules and Exhibits attached to this Agreement and the certificates and
instruments to be executed and delivered in connection with this Agreement.
(d)"Average Stock Price" shall mean the average of the per share closing
prices on the New York Stock Exchange, Inc. of a share of Buyer Common Stock,
without par value, (as reported in the New York Stock Exchange Composite
Transactions) during the twenty (20) consecutive trading days ending on the
trading day immediately preceding the day on which Buyer and Seller publicly
announce the transaction contemplated hereby.
(e)"Business" shall mean the rental, rental-purchase and rent-to-own
business of consumer electronics, furniture and other home furnishings and home
appliances in Connecticut, Illinois, Indiana, Kentucky, Maine, Maryland,
Massachusetts, New Hampshire, New York, North Carolina, Pennsylvania, Rhode
Island, South Carolina, Tennessee, Vermont and Virginia conducted by the
Corporation at the Store Locations.
(f)"Business Records" shall mean all originals and copies of all
operating data and records of the Business on whatever media including, without
limitation, financial, accounting and bookkeeping books and records, purchase
and sale orders and invoices, present price lists, past and present customer
service and credit files, personnel records and other records pertaining to the
Business.
(g)"Closing Date" shall mean September 22, 1999, except that if all of
the conditions to Closing set forth in Articles 7 and 8 of this Agreement shall
not have been satisfied or waived on or prior to such date, "Closing Date" shall
mean the third business day after the satisfaction or waiver of all such
conditions to Closing, or on such other date as the parties may agree.
(h)"Code" shall mean the Internal Revenue Code of 1986, as amended to
date.
(i)"Defaulted Rental Purchase Contract" shall mean a Rental Purchase
Contract for which either of the following is true as of the Effective Time: (i)
the Rental Purchase Contract is thirty (30) days or more past due as of the
Effective Time or (ii) the Rental Merchandise covered thereby was lost, damaged
or destroyed by theft or casualty; provided, however, that for purposes of the
Business Records to be made available by the Corporation to Buyer pursuant to
this Agreement, lost, damaged or destroyed Rental Merchandise will be reported
as thirty (30) days or more past due.
(j)"Encumbrance" shall mean any restriction, charge, lien, pledge,
option, easement, security interest, right-of-way, encumbrance or other similar
right of any Person.
(k)"Environmental Claims" shall mean any notice of violation, notice of
potential or actual responsibility or liability, claim, suit, action, demand,
directive or order by any Person for any damage (including, but not limited to,
personal injury, tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
environmental removal, response or remediation costs, nuisance, pollution,
contamination or other adverse effects on the environment or for fines,
penalties or restrictions on existing environmental permits or licenses)
resulting from the Corporation's ownership of any Owned Real Property, or the
acts or omissions of the Corporation relating to (i) the presence of, the
Release or threatened Release into the environment of, or exposure to, any
Hazardous Substance, (ii) the generation, manufacture, processing, distribution,
use, handling, transportation, storage, treatment or disposal of any Hazardous
Substance, (iii) the violation, or alleged violation, of any Environmental Laws
or (iv) the non-compliance or alleged non-compliance with any Environmental Laws
by the Corporation.
(l)"Environmental Laws" shall mean any applicable statutes, ordinances,
directives or other laws, any rules or regulations, orders, and any licenses,
permits, orders, judgments, notices or other requirements issued pursuant
thereto, enacted, promulgated or issued by any Governmental Authority, relating
to pollution or protection of public health or the environment (including, but
not limited to, any air, surface water, groundwater, land surface or sub-surface
strata, whether outside, inside or under any structure), or to the
identification, reporting, generation, manufacture, processing, distribution,
use, handling, treatment, storage, disposal, labeling, deposit, transporting,
presence, Release or threatened Release of, any Hazardous Substances,
pollutants, contaminants, wastes or any other substances or materials. Without
limiting the generality of the foregoing, Environmental Laws shall include in
the United States, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, the Toxic Substances Control Act, as amended,
the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Water Act, as amended, the
Safe Drinking Water Act, as amended, the Clean Air Act, as amended, and the
Occupational Safety and Health Act, as amended, and all analogous laws enacted,
promulgated or lawfully issued by any Governmental Authority.
(m)"ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended.
(n)"Future Rental Revenue Stream" shall mean, as of any date and as to
any Rental Purchase Contract, an amount equal to the total dollar amount of
remaining rental payments necessary for a customer to acquire ownership of the
rental merchandise under such Rental Purchase Contract. "Future Rental Revenue
Stream" shall be calculated by multiplying the monthly or weekly rental rate of
a Rental Purchase Contract by the remaining number of monthly or weekly (whole
or partial) payments necessary for a customer to acquire ownership of the rental
merchandise under such Rental Purchase Contract.
(o)"GAAP" shall mean generally accepted accounting principles in the
United States.
(p)"Governmental Authority" shall mean any federal, state, local or
foreign government, or any political subdivision of any of the foregoing, or any
court, agency or other entity, body, organization or group, exercising any
executive, legislative, judicial, quasi-judicial, regulatory or administrative
function of government.
(q)"Governmental Requirement" shall mean any rule, regulation, code,
injunction, judgment, order, decree, or ruling of any Governmental Authority.
(r)"Hazardous Substances" shall mean any pollutants, contaminants,
substances, chemicals, carcinogens, wastes and any ignitable, corrosive,
reactive, toxic or other hazardous substances of materials, whether solids,
liquids or gases (including, but not limited to, petroleum and its derivatives,
PCBs, asbestos, radioactive materials, waste waters, sludge, slag and any other
substance, material or waste), as all such material is defined in or regulated
by any Environmental Laws or as determined by any Governmental Authority.
(s)"Intangible Property" shall mean all patents, trademarks, service
marks, trade names, copyrights, inventions, know how, trade secrets, products or
other developments in progress and other intangible property owned or used
pursuant to a license agreement or otherwise, by the Corporation in the conduct
of the Business.
(t)"Leased Real Property" shall mean any real property currently leased
by the Corporation.
(u)"Liabilities" shall mean all liabilities and obligations of every
nature of the Corporation as of the Effective Time, whether absolute, accrued,
contingent, known, unknown, matured, unmatured or otherwise, which are required
to be disclosed or provided for in the Corporation's Financial Statements in
accordance with GAAP, including but not limited to (A) all indebtedness for
borrowed monies (other than Vehicle Indebtedness), (B) all trade accounts
payable, (C) all liabilities and obligations accrued on the Corporation's
financial statements or pursuant to any agreement to which the Corporation is a
party and (D) any liability for Taxes (taking into account that the Corporation
is an S Corporation under the Code), but excluding obligations accruing after
the Effective Time under (i) the Real Property Leases, (ii) any capital leases
of the Corporation and (iii) liabilities accrued on the books of the Corporation
as of the Effective Time for claims under the Rentavision Health Plan to the
extent that they do not exceed the amount of the Rentavision Health Plan Reserve
as of such time.
(v)"Net Book Value of Rental Merchandise" shall mean the net book value
(i.e., the depreciated book value as carried on the Corporation's books and
records for financial statements purposes) of Rental Merchandise of the
Corporation which is in conformance to the representations and warranties with
respect to such Rental Merchandise set forth in Section 4.16(d), as determined
in accordance with GAAP applied on a consistent basis.
(w)"Owned Real Property" shall mean any real property currently owned by
the Corporation or which the Corporation owned in the previous ten years.
(x)"Permits" shall mean all licenses, permits and other governmental
authorizations used in the Business.
(y)"Person" shall mean any Governmental Authority, individual,
corporation, partnership, trust or other entity.
(z)"Proceeding" shall mean any action, order, writ, injunction,
judgment, decree, claim, suit, litigation, dispute, grievance, arbitral action,
investigation or other proceeding.
(aa) "Purchase Price" shall mean $98,000,000 payable as set forth in
Section 2.3, (i) less Liabilities net of all cash of the Corporation, other than
the amount of the Rentavision Health Plan Reserve, as of the Effective Time,
(ii) less the amount, if any, multiplied by 1.37, that the Future Rental Revenue
Stream under all Rental Purchase Contracts (other than Defaulted Rental Purchase
Contracts) as of the FRRS Date is less than $72,000,000 and (iii) less the
amount, if any, that the Net Book Value of Rental Merchandise as of the
Effective Time is less than $29,000,000, subject to adjustment after the Closing
in accordance with Section 2.2(b).
(ab) "Real Property" shall mean all Leased Real Property and all
Owned Real Property.
(ac) "Release" shall mean any spillage, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment.
(ad) "Rental Contracts" shall mean all rental and rental-purchase
contracts relating to the Business, which are duly signed by a customer, made in
the ordinary course of business and otherwise legally enforceable, providing for
the rental to customers of furniture, appliances, electronic equipment and/or
other personal property. Rental Contracts shall not include rental and
rental-purchase contracts that customers entered into as a part of a promotion
or other marketing strategy that did not require the customer to pay at least
one week's rent prior to delivery of the rental property; provided, however,
that this exclusion shall not apply to any rental or rental-purchase contracts
for which a free rental period has expired and the customer has paid at least
one week's rent prior to Closing.
(ae) "Rental Merchandise" shall mean all merchandise of the Business
which is the subject of a Rental Contract or which is maintained by the
Corporation for the Business for rent or rental purchase by customers.
(af) "Rentavision Health Plan" shall mean the Rentavision Inc. Group
Health Plan and the "Rentavision Health Plan Reserve" shall mean the cash
retained by the Corporation as a reserve to fund its obligations under the
Rentavision Health Plan ($300,000 as of the date of this Agreement).
(ag) "Rental Purchase Contracts" shall mean those Rental Contracts which
permit customers to acquire ownership of the rental merchandise.
(ah) "Representative" shall mean any officer, director, principal,
attorney, accountant, agent, or employee.
(ai) "Shares" shall mean all of the issued and outstanding shares of
stock of the Corporation.
(aj) "Share Consideration" shall mean shares of Common Stock, without
par value, of Buyer to be received by Seller pursuant to Section 2.3(d). The
number of shares of Common Stock, without par value, of Buyer to be received by
Seller as the Share Consideration shall be equal to $6,000,000 divided by the
Average Stock Price, rounded up to the nearest whole share.
(ak) "Store Locations" shall mean the rental store locations set forth
on Schedule 1.1(ak).
(al) "Tangible Personal Property" shall mean all tangible personal
property (other than Rental Merchandise) used to conduct the Business,
including, without limitation, vehicles, computers, modems, printers, fax
machines, file cabinets, desks, calculators, telephone systems, counters, safes
and security systems, together with any transferable manufacturer or vendor
warranties related thereto.
(am) "Tax" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, start-up, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, intangible property, sales, use,
transfer, registration, value added, alternative or add-on minimum, or other tax
of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.
(an) "Tax Return" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and any amendment thereof.
(ao) "Vehicle Indebtedness" shall mean (i) all indebtedness for borrowed
monies used by the Corporation to purchase vehicles used in the Business and
(ii) any vehicle leases entered into prior to the Closing Date for vehicles used
in Business.
1.2 Other Defined Terms. The following terms shall have meanings
defined for such terms in the Sections set forth below:
Term Section
---- -------
Accounts Receivable 4.20
Act 2.4
Adjusted Liabilities 2.2(b)
Allocation Statement 10.3(b)
Bank Accounts 4.22
Bank Payoff 2.3(c)
Benefit Arrangement 4.23(m)
Business Reports 4.5
Buyer's Accountant 2.2(b)
Buyer's Audit 2.2(b)
Closing 3.1
Closing Certificate 2.2(b)
COBRA 4.23(h)
Common Stock 5.7
Confidentiality Agreement 6.2
Corporate Records 10.1
Corporation's Bank 2.3(c)
Effective Time 3.1
Employee Plans 4.23(a)
ERISA Affiliate 4.23(e)
Escrow Agreement 2.3(b)
Escrow Shares 2.3(b)
Final S Period(s) Tax Returns 10.3(c)
Financial Statements 4.9
FRRS Date 2.2(b)
HSR Act 6.8
Indemnified Party 9.2(c)
Indemnifying Party 9.2(c)
Indemnity Escrow Amount 2.3(b)
Interim Financial Statements 4.9
Losses 9.2
1934 Act 5.8(a)
NBV Date 2.2(b)
Non-Compete Agreement 6.5
PBGC 4.23(k)
Pension Plans 4.23(a)
Real Property Leases 4.10
Rent-Way SEC Reports 5.8(a)
Restricted Persons 6.5
Restricted Person Agreements 6.5
SEC 5.8(a)
Section 338(h)(10) Elections 10.3(a)
Shareholder's Agreement 2.4
Third-Party Accountants 2.2(b)
Vermont Investigation 9.2(f)
Vermont Litigation 9.2(f)
Welfare Plans 4.23(a)
1.3Usage of Terms. Except where the context otherwise requires, words
importing the singular number shall include the plural number and vice versa.
For purposes of this Agreement, Seller will be deemed to have "knowledge" of a
particular fact or matter if he is actually aware of such fact or other matter
or if he could be expected to discover or become aware of such fact or matter by
conducting a reasonably diligent investigation of such fact or other matter. The
Corporation will be deemed to have "knowledge" of a particular fact or other
matter if any of the officers designated in the next succeeding sentence of this
Section 1.3 has, or at any time in the last two (2) years had, actual knowledge
of such fact or other matter or could be expected to discover or become aware of
such fact or other matter in the course of conducting a reasonably diligent
investigation concerning the existence of such fact or matter. For purposes of
this Agreement, a "reasonably diligent investigation" by Seller and any other
officer listed in this Section shall mean inquiries by such individual directed
to all employees of the Corporation who report directly to said individual with
respect to the existence of such fact or matter. For purposes hereof, the
officers are the Seller, the Corporation's Vice President of Operations, the
Corporation's Vice President of Human Resources and the Corporation's Treasurer.
1.4References to Articles, Sections, Exhibits and Schedules. All
references in this Agreement to Articles, Sections (and other subdivisions),
Exhibits and Schedules refer to the corresponding Articles, Sections (and other
subdivisions), Exhibits and Schedules of or attached to this Agreement, unless
the context expressly, or by necessary implication otherwise requires.
ARTICLE 2
PURCHASE AND SALE OF SHARES
2.1Transfer of Shares. Subject to the terms and conditions contained in
this Agreement, on the Closing Date Seller shall sell, convey, transfer, assign
and deliver to Buyer, and Buyer shall acquire from Seller, the Shares, free and
clear of all Encumbrances.
2.2Purchase Price; Post-Closing Adjustment.
(a)At the Closing (as hereinafter defined) Buyer shall pay to Seller for
the sale, assignment and delivery of the Shares an amount equal to the Purchase
Price as provided in Sections 2.2 and 2.3.
(b)Not later than two business days prior to the Closing Date, Seller
shall deliver to Buyer a certificate, certified by an executive officer of the
Corporation (the "Closing Certificate"), setting forth:
(i) a schedule of the Defaulted Rental Purchase
Contracts existing as of September 15, 1999
and a computation of the Future Rental
Revenue Stream as of September 15, 1999
under all Rental Purchase Contracts of the
Corporation other than Defaulted Rental
Purchase Contracts; provided, however, that
Seller may substitute therefor a schedule
and computation of the Future Rental Revenue
Stream as of September 16, 17 or 18 and the
date finally specified by Seller shall be
the "FRRS Date";
(ii) a pro forma estimate of the Net Book Value
of Rental Merchandise as of September 15,
1999; provided, however, that Seller may
substitute therefor a proforma estimate of
the Net Book Value of Rental Merchandise as
of September 16, 17, or 18 and the date
finally specified by Seller shall be the
"NBV Date"; and
(iii) a pro forma estimate of the Adjusted
Liabilities, with the amount of the
Liabilities, the amount of the Rentavision
Health Plan Reserve and the Corporation's
cash as of the Effective Time separately
indicated.
For purposes of this Section 2.2, the term "Adjusted Liabilities" shall mean the
Liabilities of the Corporation as of the Effective Time reduced by the
Corporation's cash as of the Effective Time other than the amount of the
Rentavision Health Plan Reserve. The Closing shall proceed, and any adjustments
to the Purchase Price shall be made based on the Closing Certificate.
There shall be conducted by Buyer's certified public accountants
("Buyer's Accountants") within one hundred and twenty (120) days following the
Closing Date an audit of the Corporation's financial statements and Business
Records to determine the Future Rental Revenue Stream of all Rental Purchase
Contracts of the Corporation other than Defaulted Rental Purchase Contracts as
of the FRRS Date and to determine the Net Book Value of Rental Merchandise as of
the NBV Date and the Liabilities net of cash of the Corporation as of the
Effective Time (the "Buyer's Audit"). Buyer shall report any decrease in the
Future Rental Reserve Stream as of the FRRS Date, any decrease in the Net Book
Value of Rental Merchandise as of the NBV Date or any change in the Adjusted
Liabilities as of the Effective Time to Seller upon discovery. As promptly as
reasonably possible Buyer shall deliver the Buyer's Audit to Seller. Seller
shall have thirty (30) days after receipt of the Buyer's Audit to account for
any decrease in the Net Book Value of Rental Merchandise as of the NBV Date and
to account for any decrease or any increase in the Liabilities net of cash as of
the Effective Time.
If Buyer determines that the Future Rental Revenue Stream of all Rental
Purchase Contracts as of the FRRS Date is less than $72,000,000 and that it
failed to discover such fact as a result of fraud on the part of Seller or the
Corporation, the Purchase Price shall be reduced by multiplying 1.37 by the
amount that the Future Rental Revenue Stream is below $72,000,000; provided,
however, that such reduction in the Purchase Price shall not occur unless and
until the Future Rental Revenue Stream of all Rental Purchase Contracts is
reduced below $72,000,000 and, in such event, only to the extent that the Future
Rental Revenue Stream of all Rental Purchase Contracts is reduced below
$72,000,000.
In addition, if Seller is unable within such thirty (30) day period to
account for any decreases in the Net Book Value of Rental Merchandise as of the
NBV Date the Purchase Price shall be reduced on a dollar-for-dollar basis by the
amount that the Net Book Value of Rental Merchandise as of the NBV Date as
determined in the Buyer's Audit is less than the Net Book Value of Rental
Merchandise as set forth on the Closing Certificate; provided, however, that
such dollar-for-dollar reduction in the Purchase Price shall occur only if the
Net Book Value of Rental Merchandise set forth in the Closing Certificate is
below $29,000,000; otherwise such dollar-for-dollar reduction in the Purchase
Price shall not occur unless and until, and in such event, only to the extent
that, the Net Book Value of Rental Merchandise as calculated in the Buyer's
Audit is below $29,000,000.
In addition, if (A) the amount of the Adjusted Liabilities as of the
Effective Time as finally determined pursuant to this Section 2.2(b) is in
excess of the Adjusted Liabilities set forth on the Closing Certificate, the
Purchase Price shall be further reduced by the amount of such excess or (B) the
amount of such Adjusted Liabilities as finally determined pursuant to this
Section 2.2(b) is less than the Adjusted Liabilities set forth on the Closing
Certificate, the Purchase Price shall be increased by an amount equal to the
amount by which the amount of the Adjusted Liabilities set forth on the Closing
Certificate exceed the Adjusted Liabilities as finally determined pursuant to
this Section 2.2(b).
If Buyer and Seller are unable to reach agreement as to any final
Purchase Price adjustment within 15 days after the end of Seller's 30-day review
period, then Ernst & Young or, if they are unwilling to be engaged as
contemplated hereby, such other firm of certified public accountants as mutually
agreed to by Buyer and Seller (the "Third-Party Accountants") shall promptly be
retained to undertake the determination of any adjustments to the Purchase Price
necessary under this Section 2.2(b), which determination shall be made as
quickly as possible. Such determination of the Third-Party Accountants shall be
final and binding upon Buyer and Seller, and all expenses of the Third-Party
Accountants shall be borne as determined by the Third-Party Accountants.
The amount of any final adjustment to the Purchase Price shall be
payable by Seller or Buyer, as the case may be, within five (5) days after the
parties have agreed upon the amount of any such adjustment or within five (5)
days after any final determination by the Third-Party Accountants. Any
adjustment to the Purchase Price pursuant to this Section 2.2(b) payable by
Buyer shall be paid in cash by Buyer. Any adjustments to the Purchase Price
pursuant to this Section 2.2(b) payable by Seller shall be payable at Seller's
option, either in cash by Seller or from the Escrow Shares (as defined in
Section 2.3(b)), and in any event any Purchase Price adjustment due and owing
from Seller to Buyer in excess of the Escrow Shares shall be payable in cash by
Seller.
2.3Payment of Purchase Price. On the Closing Date, Buyer shall pay the
Purchase Price to Seller as follows:
(a)Buyer shall (i) pay the Purchase Price (as adjusted, if applicable)
minus the dollar value of the Share Consideration, to the Seller by wire
transfer of immediately available funds, and (ii) deliver to Seller share
certificates representing that portion of the Share Consideration equal to
$2,000,000 as determined by dividing $2,000,000 by the Average Stock Price.
(b)Buyer shall deliver to Manufacturers and Traders Trust Company,
Buffalo, New York (the "Escrow Agent") that portion of the Share Consideration
equal to $4,000,000 as determined by dividing $4,000,000 by the Average Stock
Price (the "Escrow Shares") to be held (i) to pay for any adjustments in the
Purchase Price pursuant to Section 2.2 and (ii) to provide partial security for
Seller's indemnity obligations in Article 9 hereof. The Escrow Shares shall be
held for a period of one (1) year after the Closing Date. Seller and Buyer agree
to jointly direct the release of the required number of Escrow Shares, if any,
(depending on whether there is any reduction of the Purchase Price pursuant to
Section 2.2) within fifteen (15) days after the Purchase Price adjustment and
Buyer's Audit are completed under Section 2.2. The Escrow Shares, shall be held
and disbursed in accordance with, and pursuant to, the terms and conditions of
an Escrow Agreement among Seller, Buyer and Escrow Agent in substantially the
form of Exhibit A (the "Escrow Agreement"). Any Purchase Price adjustment that
Seller desires to pay using Escrow Shares and any claim for indemnification by
Buyer under Article 9 shall be paid by returning to Buyer Escrow Shares in an
amount equal to such Purchase Price adjustment or amount of indemnification. For
purposes of Section 2.2 and this Section, the number of shares of Buyer Common
Stock, without par value, returned to Buyer shall be determined by dividing the
dollar amount of such Purchase Price adjustment or indemnification by the
average closing price for a share of Buyer Common Stock, without par value, for
the 20 trading days immediately preceding the date of such return of shares (as
reported in the New York Exchange Composite Transaction or such other exchange
that the Buyer Common Stock, without par value, is then listed on). Any amount
of indemnification in excess of the value of the Escrow Shares shall be promptly
paid by Seller directly to Buyer in cash.
(c)At the Closing, Buyer shall pay to Manufacturers and Traders Trust
Company ("Corporation's Bank") an amount equal to the indebtedness of the
Corporation to Corporation's Bank as of the Closing Date (the "Bank Payoff").
2.4Restrictions on Transfer. The shares of Buyer Common Stock, without
par value, received by Seller as the Share Consideration have not been
registered under Securities Act of 1933, as amended (the "Act") and may not be
transferred by Seller except (i) pursuant to a registration statement which has
been declared effective under the Act or (ii) in accordance with an exemption
from the registration requirements of the Act. The shares of Buyer Common Stock,
without par value, received by Seller shall be subject to the terms and
conditions of a Shareholder's Agreement substantially in the form attached
hereto as Exhibit B (the "Shareholder's Agreement").
2.5Taxes. All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any corporate-level gains tax
triggered by the sale of the Shares and any similar tax imposed in other states
or subdivisions), shall be paid by Seller when due, and Seller will, at his own
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable law, Buyer will, and will cause its
affiliates to, join in the execution of any such Tax Returns and other
documentation, all in accordance with Section 10.3 below.
ARTICLE 3
CLOSING
3.1Closing. The closing of the transactions contemplated in this
Agreement (the "Closing") shall be held at 9:00 a.m. local time on the Closing
Date at the offices of the Corporation or at such other place as shall be agreed
to by Seller and Buyer. The Closing shall be effective as of the close of
business of the Corporation at all Store Locations on the Closing Date (the
"Effective Time").
3.2Stock Certificates and Instruments of Assignment. To effect the
transfer referred to in Section 2.1 on the Closing Date, Seller shall deliver to
Buyer, each certificate representing any of the Shares held by Seller and all
stock powers or other instruments of assignment reasonably requested by Buyer.
Such instruments of assignment shall be in form and substance, and shall be
executed and delivered in a manner, satisfactory to Buyer.
3.3Purchase Price; Certificates and Agreements. On the Closing Date,
Buyer shall deliver and tender the Purchase Price to Seller, make the other
payments provided for in Article 2 and deliver stock certificates representing
the required portions of the Share Consideration to Seller and the Escrow Agent,
respectively. Buyer and Seller shall deliver the certificates, agreements and
other items described in Articles 7 and 8 of this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE CORPORATION
Seller and the Corporation, jointly and severally, represent and warrant
to Buyer that the following are true, correct and complete on the date of this
Agreement, and shall be true, correct and complete as of the Closing Date:
4.1Organization and Good Standing. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Schedule 4.1 sets forth each jurisdiction other than New York where
the Corporation is qualified to do business and each trade name or assumed name
used by the Corporation in the conduct of the Business. The Corporation is duly
qualified to do business in, and in good standing under the laws of, each
jurisdiction in which such qualification is necessary under the applicable laws
as result of the conduct of its respective business or the ownership of its
respective properties. Except as disclosed on Schedule 4.1, the Corporation has
full power and authority to conduct its business as it is presently being
conducted and to own and lease its properties and assets. The Corporation has no
subsidiaries, and has never had any subsidiaries. The Corporation conducts the
Business directly and not through any association, joint venture, partnership or
other business entity.
4.2Authority; Authorization; Binding Effect. Seller and the Corporation
have all necessary power and authority and have taken all action necessary to
execute and deliver this Agreement and the instruments to be executed and
delivered pursuant hereto, to consummate the transactions contemplated by this
Agreement and to perform their obligations under this Agreement. This Agreement
has been duly executed and delivered by Seller and the Corporation and
constitutes a legal, valid and binding obligation of Seller and the Corporation
enforceable against Seller and the Corporation in accordance with its terms,
except as enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors
rights generally and (ii) the discretion of the appropriate court with respect
to specific performance, injunctive relief or other forms of equitable remedies.
4.3No Conflicts, Violations or Proceedings. The execution and delivery
of this Agreement, the consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not and will not result in
(i) a violation of or conflict with any provision of the Certificate of
Incorporation, Bylaws or other organization certificates or documents of the
Corporation, (ii) a breach of, or a default under, any material term or
provision of any contract, agreement, indebtedness, encumbrance, commitment,
license, franchise, permit, authorization or concession relating to the Business
to which Seller or the Corporation is a party other than under the Real Property
Leases, (iii) a violation by Seller or the Corporation in any material respect
of any statute, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree or award or (iv) an imposition of any Encumbrance on any of
the Shares. There is no pending or, to the knowledge of Seller or the
Corporation, threatened or anticipated Proceeding against, relating to or
affecting the transactions contemplated by this Agreement.
4.4No Consents or Approvals. Except for the filing required under the
HSR Act and except as otherwise set forth on Schedule 4.4, no consent, approval
or authorization of, or declaration, filing or registration with, any
Governmental Authority or any other Person is required to be made or obtained by
Seller or the Corporation in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement.
4.5Customer/Account Information. The Corporation has delivered or made
available to Buyer the reports set forth on Schedule 4.5 (the "Business
Reports"). The Business Reports are true and correct in all material respects.
4.6Title to Shares. On the Closing Date, Seller shall own all of the
Shares issued in his name free of any Encumbrance and subject to no restrictions
with respect to transferability, other than restrictions generally applicable
under federal or state securities laws.
4.7Capitalization. Schedule 4.7 sets forth the authorized, issued and
outstanding shares of capital stock of the Corporation, the legal and beneficial
ownership thereof and any Encumbrances thereon. All of the Shares are duly
authorized, validly issued, fully paid and nonassessable, and were issued in
compliance with all applicable laws. All voting rights with respect to the
Corporation are vested in the Shares. Except as set forth in Schedule 4.7, (a)
there are no outstanding shares of capital stock of the Corporation, or
outstanding securities convertible into or exchangeable or exercisable for
shares of capital stock of the Corporation, (b) there are no bonds, debentures,
notes, or other indebtedness having the right to vote on any matters on which
the Corporation's shareholders may vote, (c) there are no outstanding options,
warrants, rights, contracts, commitments, understandings or arrangements by
which the Corporation is bound to issue, repurchase or otherwise acquire or
retire any capital stock of the Corporation, (d) there are no voting agreements,
voting trusts, buy-sell agreements, options or rights or obligations relating to
the shareholders or the capital stock of the Corporation, and (e) except for
certain provisions of this Agreement, there are no agreements between Seller and
the Corporation which will survive the Closing. Upon consummation of the
transactions contemplated by this Agreement, Buyer will acquire the Shares, free
of any Encumbrance.
4.8Corporate Records. Except as set forth on Schedule 4.8, the minute
books of the Corporation are complete and accurate and contain a complete and
accurate record of all meetings and actions of shareholders and directors and of
any executive committee or other committee of the shareholders or board of
directors. The stock record book of the Corporation is complete and accurate and
contains a complete and accurate record of all share transactions for the
Corporation from the date of its incorporation. True and complete copies of the
Business Records, the minute book and stock record book of the Corporation have
been made or will be made available for review by Buyer.
4.9Financial Statements. The Corporation and Seller have delivered or
will deliver to Buyer (a) financial statements of the Corporation for each of
the years in the three-year period ended December 31, 1998 (consisting of a
balance sheet, statement of income, profit and loss and a statement of cash
flows), which have been audited by the Corporation's accountants (the "Financial
Statements") and (b) unaudited interim financial statements of the Corporation
(consisting of a balance sheet, statement of income, profit and loss and a
statement of cash flows) for the 5-month period ended May 31, 1999 (the "Interim
Financial Statements"). Except as set forth on Schedule 4.9, the Financial
Statements and the Interim Financial Statements fairly present the financial
condition and the results of operations of the Corporation as of their
respective dates and for the periods then ended, and the Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis. The
books and records of the Corporation fairly reflect the assets, liabilities and
operations of the Corporation in accordance with GAAP, and the Financial
Statements and the Interim Financial Statements are in conformity therewith,
except that the Interim Financial Statements do not contain footnotes and are
subject to customary year-end adjustments applied on a basis consistent with the
Corporation's past experience.
4.10 Real Property. Schedule 4.10 lists and describes briefly all Real
Property. Except as set forth on Schedule 4.10, the Corporation currently owns
no Owned Real Property. The Corporation will deliver to Buyer correct and
complete copies of the leases and subleases, as amended to date, for the Leased
Real Property (including all closed stores and warehouses) (the "Real Property
Leases"). With respect to each Real Property Lease: (i) the lease or sublease is
legal, valid, binding, enforceable and in full force and effect, (ii) the lease
or sublease will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby, provided, however, that certain leases may
require the landlord's consent to the sale of stock contemplated by this
Agreement, (iii) to the knowledge of the Corporation and Seller no party to the
lease or sublease is in breach or default, and no event has occurred which, with
notice or lapse of time, would constitute a breach or default or permit
termination, modification or acceleration thereunder, (iv) the Corporation has
not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered
any interest in the leasehold or subleasehold and (v) to the knowledge of Seller
and the Corporation, all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules and regulations.
4.11 Tangible Personal Property. Except as set forth on Schedule 4.11,
Schedule 4.11 lists all Tangible Personal Property owned or leased by the
Corporation as of ___________, 1999. To the knowledge of Seller and the
Corporation, the Tangible Personal Property constitutes all the material
tangible personal property used in the operation of the Business and necessary
to conduct the Business as presently conducted. Except as set forth on Schedule
4.11, the Tangible Personal Property owned by the Corporation is free and clear
of all Encumbrances. All of the Tangible Personal Property is located at the
Real Property.
4.12 Intangible Property. Schedule 4.12 lists all Intangible Property
other than software (which is listed on Schedule 4.11). Except as set forth on
Schedule 4.12, the Intangible Property is legally and beneficially owned
exclusively by the Corporation and is used exclusively by the Corporation and is
not the subject of any pending or threatened proceeding for opposition,
cancellation, reexamination, revocation or rectification and there are no facts
or matters which might give rise to any such proceeding. To the knowledge of the
Seller and the Corporation, the use by the Corporation of the Intangible
Property is not infringing upon or otherwise violating the rights of any third
party in or to such Intangible Property, and no proceedings have been instituted
against, and no notices have been received by, the Corporation that are
presently outstanding alleging that the use by the Corporation of the Intangible
Property infringes upon or otherwise violates any rights of a third party in or
to such Intangible Property. The consummation of the transactions contemplated
by this Agreement will not result in the loss of or impairment of any of the
Corporation's rights in the Intangible Property. Except as set forth on Schedule
4.12, no shareholder, director, officer or employee of the Corporation owns,
directly or indirectly, in whole or in part, any right in the Intangible
Property that the Corporation has used or the use of which is necessary for the
Business as now conducted.
4.13 Compliance with Laws; Permits. Except as set forth in Schedule
4.13, the Corporation at all times during the last three (3) years has duly
complied with, and is in compliance with, all applicable Governmental
Requirements. Except as set forth in Schedule 4.13, the Corporation has not
received any notice to the effect that, or otherwise been advised that, the
Corporation is not in compliance with any Governmental Requirement. Except as
set forth in Schedule 4.13, to the knowledge of Seller and the Corporation, the
Permits set forth on Schedule 4.13 constitute all material permits, consents,
licenses, franchises, authorizations and approvals of any Governmental Authority
or other Person (a) which are used in the operation of the Business and (b)
which are necessary to conduct the Business as presently conducted, other than
those the failure of which to obtain would not have a material adverse effect on
the Business, assets or financial condition of the Corporation. All of the
Permits are valid and in full force and effect, no violations thereof have been
issued or are anticipated and no proceeding is pending, or to the knowledge of
the Corporation or Seller threatened, to revoke or limit any of them. To the
knowledge of Seller and the Corporation, except as set forth on Schedule 4.13,
the consummation of the transactions contemplated by this Agreement do not and
will not violate or render any of the Permits invalid, require any amendment or
reissuance of any of the Permits or require the consent of the Governmental
Authority which has issued any of the Permits.
4.14 Litigation. Except as set forth in Schedule 4.14, there is no
claim, legal action, suit, arbitration, Governmental Authority investigation or
other legal or administrative proceeding, or any order, decree, or judgment
pending, or to the knowledge of the Corporation and Seller threatened, against
or relating to the Corporation, its officers, directors or employees, or its
properties, assets or business. Except as set forth in Schedule 4.14, neither
Seller nor the Corporation knows of any basis or grounds for any such claim,
legal action, suit, arbitration, Governmental Authority investigation or other
legal or administrative proceeding. To the knowledge of Seller and the
Corporation, none of the matters disclosed in Schedule 4.14 has or will have a
material adverse affect on the Business or financial condition of the
Corporation.
4.15 Tax Matters. Except as set forth on Schedule 4.15, the Corporation
has filed all Tax Returns relating to the Business that it was required to file.
All such Tax Returns were correct and complete in all respects. The Corporation
(and any predecessor of the Corporation) has been a validly electing S
corporation within the meaning of Code Sections 1361 and 1362 and for state and
local income tax purposes at all times since January 1, 1988 and the Corporation
will be an S corporation up to and including the Closing Date. The Corporation
and Seller will not revoke the Corporation's elections under federal, state, and
local law, to be taxed as an S corporation within the meaning of Code Sections
1361 and 1362. The Corporation and Seller will not take or allow any action that
would result in the termination of Corporation's status as a validly electing S
corporation within the meaning of Code Sections 1361 and 1362. Except as set
forth on Schedule 4.15, all Taxes owed by the Corporation and the Seller
(whether or not shown on any Tax Return) prior to the date hereof have been paid
in full. There are no Encumbrances on any of the Shares that arose in connection
with any failure (or alleged failure) to pay any Tax. The Corporation has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party. Except as set forth on Schedule
4.15, there are no federal, state, local or foreign tax liens upon any of the
properties or assets of the Corporation or the Shares, and there are no unpaid
taxes which are or could become a lien on the properties or assets of the
Corporation or the Shares, except for current taxes not yet due and payable. The
Corporation has delivered, or will deliver upon execution of this Agreement,
copies of all federal and state tax returns and reports filed by the Corporation
in the past three years (1996, 1997 and 1998). Neither the Corporation nor any
qualified subchapter S subsidiary of the Corporation has, in the past 10 years,
(A) acquired assets from another corporation in a transaction in which the
Corporation's tax basis for the acquired assets was determined, in whole or in
part, by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor or (B) acquired the stock of any
corporation which is a qualified subchapter S subsidiary.
4.16 Rental Contracts; Rental Merchandise.
(a)The Rental Contracts of the Corporation are in all respects: (i) in
full force and effect according to their terms, (ii) will continue to be in full
force and effect following the consummation of the transactions contemplated
hereby, in the same manner and to the same extent as it was prior to
consummation and (iii) comply in all respects with the laws of each state the
laws of which may apply to such Rental Contract.
(b)The Net Book Value of Rental Merchandise as of the NBV Date will be
greater than or equal to $29,000,000; provided, however, that Buyer's sole
remedy in the event that such representation is not true as of the NBV Date
shall be to accept the adjustment of the Purchase Price provided in Section
2.2(b) and to proceed with the Closing; except that if the proforma estimated
Net Book Value of Rental Merchandise as of the NBV Date is less than
$28,000,000, then Buyer may, at its election, without liability to Seller or the
Corporation, terminate this Agreement.
(c)The Future Rental Revenue Stream under all Rental Purchase Contracts
(other than Defaulted Rental Purchase Contracts) as of the FRRS Date will be
greater than or equal to $72,000,000; provided, however, that Buyer's sole
remedy in the event that such representation is not true as of the Closing Date
shall be to accept the adjustment of the Purchase Price provided in Section
2.2(b) and to proceed with the Closing; except that if the Future Rental Revenue
Stream under all Rental Purchase Contracts (other than Defaulted Rental Purchase
Contracts) as of the FRRS Date is less than $71,000,000, then Buyer may, at its
election, without liability to Seller or the Corporation, terminate this
Agreement.
(d)The Rental Merchandise is in good, merchantable and usable condition,
ordinary wear and tear excepted. Seller and the Corporation will make available
to Buyer or will deliver to Buyer upon execution of this Agreement, an itemized
list of all of the Rental Merchandise as showing the date of purchase, the
supplier, the cost, description of each item sufficient to identify it to Buyer,
and the location of each item. For purposes of this Section, the term "good,
merchantable and usable" shall mean merchandise which is in good condition and
of the quality regularly rented to customers of the Corporation in the usual
course of the business, subject to normal portions thereof which are being
serviced or repaired. Except as set forth on Schedule 4.16(d), the Rental
Merchandise is owned by the Corporation free and clear of all Encumbrances.
4.17 Employees. Schedule 4.17 identifies all employees of the Business
as of September __, 1999. The Corporation is in compliance with all applicable
laws respecting employment practices, terms and conditions of employment,
management-labor relations and wages and hours which are in effect as of the
date of this Agreement. The Corporation is not a party to any labor agreement
with any labor organization. There is no unfair labor practice, charge or
complaint against the Corporation pending or, to the knowledge of Seller and the
Corporation, threatened before any Governmental Authority. There is no labor
strike or labor disturbance pending or, to the knowledge of Seller and the
Corporation, threatened against the Corporation nor is any material grievance
currently being asserted. The Corporation has not experienced a work stoppage or
work slowdown at any time during the three (3) years immediately preceding the
date of this Agreement. There is no organizational campaign being conducted and
no dispute as to the representation of any employees of the Corporation. As of
September 1, 1999, the Corporation had good business relations with its
employees at the store manager level and above and, to the knowledge of Seller
and the Corporation, there is no reason to believe that the transactions
contemplated by this Agreement will adversely affect such business relations.
4.18 Customers. To the knowledge of Seller and the Corporation, records
of customers who have rented merchandise from the Corporation within the last
two years have not been destroyed (except for computer stored information
deleted in the ordinary course of business). The customer lists of the Business
accurately identify the customers of the Business in all material respects. All
transactions with customers have been and are currently conducted on an arm's
length basis.
4.19 Environmental Matters. Except as disclosed in Schedule 4.19, to the
knowledge of Seller and the Corporation, the Corporation and its assets,
properties and operations are now and, at all times prior to the Closing Date,
have been in compliance with all Environmental Laws. To the knowledge of Seller
and the Corporation, there has been and is no Release or threatened Release of
any Hazardous Substance at, on, under, in, to or from any of the Real Property
(or, to the knowledge of the Corporation at, on, under, in, to or from any of
the Real Property) whether as a result of or in connection with the operations
and activities at the Real Property or otherwise, except as disclosed in
Schedule 4.19. Neither the Corporation nor Seller have received any notice of
alleged, actual or potential responsibility for, or any inquiry or investigation
regarding, the presence, Release or threatened Release of any Hazardous
Substance at any location, whether at the Real Property or otherwise, which
Hazardous Substances were allegedly manufactured, used, generated, processed,
treated, stored, disposed or otherwise handled at or transported from the Real
Property or otherwise, except as set forth in Schedule 4.19. Neither the
Corporation nor Seller have received any notice of any Environmental Claim by
any Person alleging any actual or threatened injury or damage to any Person,
property, natural resource or the environment arising from or relating to the
presence, Release or threatened Release of any Hazardous Substances at, on,
under, in, to or from the Real Property or in connection with any operations or
activities thereat, except as set forth on Schedule 4.19. Neither the Owned Real
Property or, to the knowledge of Seller and the Corporation, the Leased Real
Property, nor any operations or activities thereat is or has been subject to any
judicial or administrative proceeding, order, consent, agreement or any lien
relating to any Environmental Laws or Environmental Claims. Except as set forth
on Schedule 4.19, to the knowledge of Seller and the Corporation, (a) there are
no underground storage tanks presently located at the Real Property and there
have been no releases of any Hazardous Substances from any underground storage
tanks or related piping at the Real Property, (b) there are no PCBs located at,
on or in the Real Property and (c) there is no asbestos or friable
asbestos-containing material located at, on or in the Real Property. The
Corporation has delivered to Buyer or its Representatives copies of all
information requested by Buyer which has been supplied by or on behalf of the
Corporation to any Governmental Authority having the duties of regulation,
registration, authorization or enforcement of or under any Environmental Laws.
4.20 Accounts Receivable. Except as set forth on Schedule 4.20, all of
the accounts or notes receivable of the Corporation excluding amounts due under
any Accounts (the "Accounts Receivable") are bona fide receivables, arose during
the ordinary course of the Business and are collectable at their full face
amount, net of reserves. Except as set forth on Schedule 4.20, no Person has any
liens on the Accounts Receivable, there is no right of off-set on any of the
Accounts Receivable, and no agreement for reduction or discount has been made
with respect to any of the Accounts Receivable.
4.21 Securities Matters.
(a)The shares of Rent-Way Common Stock, without par value, that the
Seller is acquiring as the Share Consideration pursuant to this Agreement are
being acquired for his own account as principal, for investment and not with a
view to resale or distribution of any such shares.
(b)The Seller understands and agrees that the shares of Rent-Way Common
Stock, without par value, he is receiving as the Share Consideration have not
been registered under the Act in reliance upon exemptions therefrom and may not
be transferred other than pursuant to a registration statement filed with
respect to such shares or pursuant to an exemption from registration available
under the Act and the 1934 Act.
(c)In acquiring the shares of Common Stock, without par value, of Buyer
which comprises the Share Consideration, Seller is relying solely on the
Rent-Way SEC Reports and the representations and warranties of Buyer set forth
in Article 5 of this Agreement, and Seller represents and warrants that he has
not relied on any other representations or warranties of Buyer with respect to
its business nor on any advice of Buyer with respect to the advisability of
acquiring the Share Consideration or the tax consequences thereof.
(d)The Seller is an "accredited investor" as such term is defined in
Rule 504 promulgated by the SEC under the Act.
4.22 Bank Accounts. Schedule 4.22 contains true, complete and correct
lists of all bank accounts and safe deposit boxes maintained by the Corporation
(the "Bank Accounts"), and all persons entitled to draw thereon, to withdraw
therefrom or, with access thereto.
4.23 Employee Benefits Plans.
(a)Attached hereto as Schedule 4.23(a)(1), is a list identifying each
"employee pension benefit plan," as defined in Section 3(2) of ERISA, including
any "multiemployer plan," as defined in Section 3(37) of ERISA, (the "Pension
Plans") and as Schedule 4.23(a)(2), a list identifying each "employee welfare
benefit plan," as defined in Section 3(1) of ERISA, (the "Welfare Plans") that,
in either case, are maintained, administered or contributed to by the
Corporation, or which cover any employee or former employee of the Corporation.
Collectively, the Pension Plans and the Welfare Plans shall hereafter be
referred to as the "Employee Plans." Except as otherwise identified on Schedule
4.23(a)(1) and Schedule 4.23(a)(2) and on Schedule 4.23(m), (i) no Employee Plan
or Benefit Arrangement (as defined in Section 4.23(m) of this Agreement) is
maintained, administered or contributed to by any entity other than the
Corporation, and (ii) no Employee Plan is maintained under any trust arrangement
which covers any employee benefit arrangement which is not an Employee Plan.
(b)Seller has delivered or will deliver to Buyer true and complete
copies of (i) the Employee Plans (and related trust agreements and other funding
arrangements, if any, and adoption agreements, if any), (ii) any amendments to
the Employee Plans, (iii) written interpretations of the Employee Plans to the
plan administrator of such Plan (iv) material employee communications by the
plan administrator of any Employee Plan (including, but not limited to, summary
plan descriptions and summaries of material modifications as defined under
ERISA), (v) the three most recent annual reports (e.g., the complete Form 5500
series) prepared in connection with each Employee Plan (if any such report was
required), including all attachments (including without limitation the actuarial
valuation reports) and (vi) the three most recent actuarial valuation reports
prepared in connection with each Employee Plan (if any such report was
required).
(c)To the knowledge of Seller and the Corporation, each Employee Plan
has been maintained in compliance with its terms and the requirements prescribed
by any and all statutes, orders, rules and regulations, including but not
limited to, ERISA and the Code, which are applicable to such Employee Plan.
(d)There are no pending or, to the knowledge of the Corporation or the
Seller, threatened claims, suits or other proceedings by any employees, former
employees or plan participants or the beneficiaries, spouses or representatives
of any of them, against any Employee Plan, the assets held thereunder, the
trustee of any such assets, or the Corporation relating to any of the Employee
Plans, any other employee benefit plans, contracts or arrangements, other than
ordinary and usual claims for benefits by participants or beneficiaries.
Furthermore, there are no pending or, to the knowledge of the Corporation or the
Seller, threatened suits, investigations or other proceedings by any federal,
state, local or other governmental agency or authority of or against any
Employee Plan, the trustee of any assets held thereunder, or the Corporation
relating to any of the Employee Plans, any other employee benefit plans,
contracts or arrangements. If any of the actions described in this subsection
are initiated prior to the Closing Date, the Seller shall notify the Buyers of
such action prior to the date of Closing.
(e)No liability has been incurred by the Corporation or by a trade or
business, whether or not incorporated, which is deemed to be under common
control or affiliated with the Corporation within the meaning of Section 4001 of
ERISA or Sections 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") for
any tax, penalty or other liability with respect to any Employee Plan and, to
the knowledge of the Corporation or the Seller, such Plans do not expect to
incur any such liability prior to the date of Closing. To the knowledge of
Seller and the Corporation, the Corporation, for all periods ending on the prior
to the date of this Agreement, have administered, and between the date of this
Agreement and the date of Closing, will administer each Employee Plan in
compliance with the reporting, disclosure, fiduciary and all other requirements
applicable thereto under ERISA, the Code or any other applicable law.
(f)Neither the Corporation nor the Seller have engaged in any
transaction or acted or failed to act in a manner that violates the fiduciary
requirements of Section 404 of ERISA with respect to any Employee Plans, and
will not so engage, act or fail to act prior to the date of Closing. Neither the
Corporation nor the Seller have engaged in any "prohibited transaction" within
the meaning of Section 406(a) or 406(b) of ERISA, or of Section 4975(c) of the
Code with respect to any Employee Plan. Furthermore, to the knowledge of the
Corporation or the Seller, no other "party in interest," as defined in Section
3(14) of ERISA, or "disqualified person," as defined in Section 4975(e)(2) of
the Code, has engaged in any such "prohibited transaction."
(g)No Employee Plan provides benefits, including without limitation,
death, disability, or medical benefits (whether or not insured), with respect to
current or former employees of the Corporation beyond their retirement or other
termination of service other than (i) coverage mandated by applicable law, (ii)
death, disability or retirement benefits under any Pension Plan, (iii) deferred
compensation benefits accrued as liabilities on the financial statements of the
Corporation, or (iv) benefits, the full cost of which is borne by the current or
former employee (or his or her beneficiary).
(h)The Welfare Plans that are group health plans (as defined for the
purposes of Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA, and all regulations thereunder, ("COBRA")) have complied at all times,
and will continue to comply through the date of Closing, with requirements of
COBRA to provide health care continuation coverage to qualified beneficiaries
who have elected, or may elect to have, such coverage. To the knowledge of
Seller and the Corporation, the Corporation, or its agents who administer any of
the Welfare Plans, have complied at all times and will continue to comply
through the date of Closing, with the notification and written notice
requirements of COBRA. There are no pending, and to the knowledge of the
Corporation or the Seller, threatened claims, suits, or other proceedings by any
employee, former employee, participants or by the beneficiary, dependent or
representative of any such person, involving the failure of any Welfare Plan or
of any other group health plan ever maintained by the Corporation to comply with
the health care continuation coverage requirements of COBRA.
(i)Each Pension Plan is "qualified" within the meaning of Section 401(a)
of the Code, and has been qualified during the period from the date of its
adoption to the date of this Agreement, and each trust created thereunder is
tax-exempt under Section 501(a) of the Code. The Seller has delivered or will
deliver to the Buyers the latest determination letters of the Internal Revenue
Service relating to each Pension Plan. Such determination letters have not been
revoked. Furthermore, there are no pending proceedings or, to the knowledge of
the Corporation or the Seller, threatened proceedings in which the "qualified
status of any Pension Plan is at issue and in which revocation of the
determination letter has been threatened. Each such Pension Plan has not been
amended or operated, since the receipt of the most recent determination letter,
in a manner that would adversely affect the "qualified" status of the Plan. No
distributions have been made from any of the Pension Plans that would violate in
any respect the restrictions under Treas. Reg. Section 1.401(a)(4)-5(b), and
none will have been made by the date of Closing. To the knowledge of the
Corporation or Seller, there has been no partial termination as defined in
Section 411(d) of the Code and the regulations thereunder, of any Pension Plan.
(j)The Corporation has made all required contributions under each
Pension Plan on a timely basis or, if not yet due, adequate accruals therefore
have been provided for in the financial statements. No Pension Plan has incurred
any "accumulated funding deficiency" within the meaning of Section 302 of ERISA
or Section 412 of the Code and no Pension Plan has applied for or received a
waiver of the minimum funding standards imposed by Section 412 of the Code.
(k)Except for required premium payments, no liability to the Pension
Benefit Guaranty Corporation (the "PBGC") has been incurred by the Corporation
with respect to any Pension Plan. The Corporation has complied, or will comply,
with all requirements for premium payments, including any interest and penalty
charges for late payment, due to PBGC on or before the date of Closing with
respect to each Pension Plan for which any premiums are required. No proceedings
to terminate, pursuant to Section 4042 of ERISA, have been instituted or, to the
knowledge of the Corporation or the Seller, are threatened by the PBGC with
respect to any Pension Plan (or any Pension Plan maintained by an ERISA
Affiliate). There has been no termination or partial termination, as defined in
Section 411(d) of the Code and the regulations thereunder, of any Pension Plan.
No reportable event, within the meaning of Section 4043 of ERISA, has occurred
with respect to any Pension Plan.
(l)The Corporation and its ERISA Affiliates have not been, nor will they
become through the date of Closing, liable to contribute to any "multiemployer
plan" (as defined in Section 3(37) of ERISA).
(m)Schedule 4.23(m) contains a list identifying each employment,
severance or similar contract, arrangement or policy (exclusive of any such
contract which is terminable within thirty (30) days without liability to the
Seller and the Corporation), and each plan or arrangement providing for
insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental employment benefits, vacation
benefits, retirement benefits, deferred compensation, bonuses, profit-sharing,
stock options, stock appreciation rights, or other forms of incentive
compensation or post-retirement compensation or benefit which (i) is not an
Employee Plan, (ii) has been entered into or maintained, as the case may be, by
the Seller or the Corporation, and (iii) covers any employee or former employee
of the Corporation. Such contracts, plans and arrangements are hereinafter
referred to collectively as the "Benefit Arrangements". True and complete copies
or descriptions of the Benefit Arrangements have been or will be delivered to
Buyer. To the knowledge of Seller and the Corporation, each Benefit Arrangement
has been maintained in substantial compliance with the requirements prescribed
by any and all statutes, orders, rules and regulations which are applicable to
such Benefit Arrangements.
(n)There has been no amendment to, written interpretation or
announcement (whether or not written) by the Corporation relating to, or change
in employee participation or coverage under, any Employee Plan or Benefit
Arrangement that would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of expense incurred in
respect of such Employee Plan or Benefit Arrangement for the most recent plan
year with respect to Employee Plans or the most recent fiscal year with respect
to Benefit Arrangements.
(o)There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Corporation that, individually or in
aggregate, could give rise to the payment by the Corporation, directly or
indirectly, of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code.
4.24 Vehicle Indebtedness. Schedule 4.24 sets forth a list of the
vehicles owned by the Corporation and used in the Business and all Vehicle
Indebtedness. All vehicles owned by the Corporation free and clear of all
Encumbrances are noted on Schedule 4.24.
4.25 Insurance.
(a)The Corporation has delivered to Buyer true and complete copies of
all policies of insurance to which the Corporation is a party or under which the
Corporation or any officer or director thereof, is or has been covered at any
time within the three (3) years immediately preceding the date of this
Agreement.
(b)Schedule 4.25(b) describes:
(i) any self-insurance arrangement by or affecting the Corporation,
including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by the Corporation; and
(iii) all obligations of the Corporation to provide insurance
coverage to third parties (for example, under leases or service agreements), and
identifies the policy under which such coverage is provided.
(c) Seller will make available for review by Buyer, by year, for the
current policy year and each of the three (3) preceding policy years:
(i) a summary of the loss experience under each policy of insurance;
(ii) a statement describing each claim under a policy of insurance
for an amount in excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer,
type of insurance, and period of coverage; and
(C) the amount and a brief description of
the claim.
(iii) a statement describing the loss experience for
all claims that were self-insured, including the number and aggregate
cost of such claims.
(d) Except as set forth on Schedule 4.25(d):
(i) all policies of insurance to which the
Corporation is a party or that provide coverage to the Corporation or
any officer or director thereof:
(A) are valid, outstanding, and
enforceable;
(B) to the knowledge of Seller and the
Corporation are issued by an insurer
that is financially sound and
reputable;
(C) to the knowledge of the Corporation
taken together, provide adequate
insurance coverage for the assets
and the operations of the
Corporation for all risks normally
insured against by a Person carrying
on the same business or businesses
as the Corporation; and
(D) to the knowledge of Seller and the
Corporation are sufficient for
compliance with all legal
requirements and contracts to which
of the Corporation is a party or by
which it is bound.
(ii) Except as set forth on Schedule 4.25(d), the
Corporation has not received (A) any refusal of coverage or any notice
that a defense will be afforded with reservation of rights which is
still effective, or (B) any notice of cancellation or any other
indication that any policy of insurance is no longer in full force or
effect or that the issuer of any policy of insurance is not willing or
able to perform its obligations thereunder;
(iii) The Corporation has paid all premiums
due, and has otherwise performed all of its obligations, under each
policy of insurance to which it is a party or that provides coverage
to the Corporation or any officer or director thereof; and
(iv) To the Corporation's knowledge, the
Corporation has given notice to the insurer of all claims that may be
insured thereby.
4.26 Brokers. Neither Seller nor the Corporation have
entered into and will not enter into any agreement, arrangement or
understanding with any Person which will result in the obligation of
Buyer to pay any finder's fee, brokerage commission or similar payment
in connection with the transaction contemplated hereby.
4.27 Material Contracts. Except as listed on Schedule
4.27, and except for the Real Property Leases and any other contract
required to be disclosed in another Schedule, the Corporation is not a
party to any contract, agreement, mortgage, commitment or obligation,
whether oral or written, express or implied, that is legally binding
and:
(a) which involves performance of services or
the delivery of goods to the Corporation of an amount or value in
excess of $5,000;
(b) which was not entered into in the ordinary course
of business and that involves expenditures or receipt by the
Corporation of an amount or value in excess of $10,000;
(c) which is for capital expenditures in excess
of $10,000;
(d) which is a guaranty, warranty or similar
undertaking by the Corporation;
(e) which is a power of attorney;
(f) which restricts or purports to restrict the
business activity of the Corporation or
Seller; or
(g) which involves a licensing arrangement
with respect to trademarks, patents,
copyrights or other intellectual
property.
4.28 Material Misstatements or Omissions. No
representation or warranty by Seller or the Corporation in this Agreement, or
in any document, exhibit, statement, certificate, document or schedule furnished
to Buyer pursuant to this Agreement, or in connection with the transactions
contemplated by this Agreement (a) contains or to the knowledge of the Seller
and the Corporation, will contain at the Closing Date any untrue statement of
a material fact or (b) intentionally omits or will omit to state any material
fact necessary to make the statements or facts contained therein not
misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and
the Corporation that the following are true, correct and complete on
the date hereof, and shall be true, correct and complete as of the
Closing Date:
5.1 Organization and Good Standing. Buyer is a
corporation, duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania. Buyer is duly
qualified to do business and is in good standing in each jurisdiction
in which such qualification is necessary under the applicable law as a
result of the conduct of its business or the ownership of its
properties. Buyer has all necessary power and authority to execute and
deliver this Agreement, to consummate the transactions contemplated by
this Agreement and to perform its obligations under this Agreement.
5.2 Authority; Authorization; Binding Effect. Buyer
has all necessary power and authority and has taken all action
necessary to execute and deliver this Agreement and the instruments to
be executed and delivered pursuant hereto, to consummate the
transactions contemplated by this Agreement and to perform its
obligations under this Agreement. This Agreement has been duly executed
and delivered by Buyer and constitutes a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as enforcement may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors rights generally and (ii) the
discretion of the appropriate court with respect to specific
performance, injunctive relief or other forms of equitable remedies.
5.3 No Conflicts, Violations or Proceedings. The
execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement and the performance by
Buyer of its obligations under this Agreement do not and will not
result in (i) a violation of or a conflict with any provision of the
Articles of Incorporation of Buyer or other organizational documents of
Buyer, (ii) a breach of, or a default under, any term or provision of
any contract, agreement, indebtedness, encumbrance, commitment,
license, franchise, permit, authorization or concession to which Buyer
is a party or (iii) a violation by Buyer of any statute, rule,
regulation, ordinance, code, order, judgment, writ, injunction, decree
or award. There is no pending or, to the knowledge of Buyer, threatened
or anticipated Proceeding against, relating to or affecting the
transactions contemplated by this Agreement.
5.4 No Consents or Approvals. Except for the filing
required under the HSR Act, no consent, approval or authorization of,
or declaration, filing or registration with, any Governmental Authority
or any other Person is required to be made or obtained by Buyer in
connection with the execution, delivery and performance of this
Agreement and the consummation of the transaction contemplated hereby.
5.5 No Brokers. Buyer has not entered into and will
not enter into any agreement, arrangement or understanding with any
Person which will result in the obligation of Seller to pay any
finder's fee, brokerage commission or similar payment in connection
with the transaction contemplated hereby.
5.6 Investment. The Shares being acquired by Buyer
pursuant to this Agreement are being acquired for Buyer's own account
as principal, for investment and not with a view to resale or
distribution of any such Shares.
5.7 Buyer's Capital Structure. The authorized capital
stock of Buyer consists of 50,000,000 shares of Common Stock without
par value ("Common Stock") and 1,000,000 shares of Preferred Stock. As
of September 1, 1999: (i) 21,697,042 shares of Common Stock were issued
and outstanding, all of which are validly issued, fully paid and
non-assessable; (ii) no shares of Common Stock were held in the
treasury of Buyer or by any subsidiaries of Buyer; (iii) 2,510,788
shares of Common Stock were reserved for issuance pursuant to stock
options granted and outstanding under Buyer's stock option plans and
(iv) no shares of Preferred Stock were issued and outstanding. Between
September 1, 1999 and the date hereof, (i) no additional shares of
capital stock have been reserved for issuance by Buyer and (ii) the
only issuances of shares of capital stock of Common Stock have been
issuances of Common Stock upon the exercise of outstanding stock
options and pursuant to Buyer's 401(k) plan. All shares of Common Stock
to be issued to Seller as the Share Consideration, upon issuance
pursuant to the terms and conditions specified in the instruments
pursuant to which they are issuable, shall be duly authorized, validly
issued, fully paid and non-assessable. There are no obligations,
contingent or otherwise, of Buyer or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of Common Stock.
5.8 SEC Filings; Financial Statements. () Buyer has
filed all reports required to be filed by Buyer with the Securities and
Exchange Commission ("SEC") pursuant to the Securities Exchange Act of
1934, as amended (the "1934 Act") since October 1, 1997 (the "Rent-Way
SEC Reports"). Buyer has made available to the Seller or his legal
counsel all Rent-Way SEC Reports. The Rent-Way SEC Reports (i) at the
time filed, complied in all material respects with the applicable
requirements of the Act and the 1934 Act, as the case may be, and (ii)
did not at the time they were filed (or if amended or superceded by a
subsequent filing, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required
to be stated in such Rent-Way SEC Reports or necessary in order to make
the statements in such Rent-Way SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of
Buyer's subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements
(including, in each case, any related notes) contained in the Rent-Way
SEC Reports, including any Rent-Way SEC Reports filed from the date of
this Agreement until the Closing, complied or will comply in all
material respects with the applicable published rules and regulations
of the SEC with respect thereto, was or will be prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q or
8-K promulgated by the SEC), and fairly presented or will fairly
present the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in
amount. The unaudited consolidated balance sheet of Buyer as of June
30, 1999 is referred to herein as the "Balance Sheet".
5.9 Absence of Undisclosed Liabilities. Except as
disclosed in the Rent-Way SEC Reports filed and publicly available
prior to the date of this Agreement, Buyer and its subsidiaries do not
have any liabilities, either accrued or contingent (whether or not
required to be reflected in financial statements in accordance with
GAAP, and whether due or to become due), which individually or in the
aggregate could reasonably be expected to have a Material Adverse
Effect on Buyer, other than (i) liabilities reflected in the Balance
Sheet, and (ii) normal or recurring liabilities incurred since June 30,
1999 in the ordinary course of business consistent with past practices
which would not individually or in the aggregate have a Material
Adverse Effect on Buyer. For purposes of this Article 5, a "Material
Adverse Effect" shall mean any effect that is material and adverse to
the business, assets, liabilities, results of operations or financial
condition of Buyer and its subsidiaries taken as a whole; provided,
that a Material Adverse Effect with respect to Buyer shall not be
deemed to include the impact of (i) changes in applicable law of
general applicability or implementation thereof by any Governmental
Authority, (ii) acts or omissions of Rentavision taken with the prior
written consent of the Buyer in contemplation of the transactions
contemplated hereby, (iii) circumstances affecting the rental-purchase
industry generally, and (iv) the effects of the transactions
contemplated by, and the compliance by either party with the provisions
of, this Agreement on the business, assets, liabilities, results of
operations or financial condition of Buyer or any of its subsidiaries.
5.10 Absence of Certain Changes or Events. Between
the date of the Balance Sheet and the date hereof, Buyer and its
subsidiaries have conducted their businesses only in the ordinary
course in a manner consistent with past practice (except as disclosed
in the Rent-Way SEC Reports filed and publicly available prior to the
date of this Agreement). Since the date of the Balance Sheet there has
not been: (a) any Material Adverse Effect on Buyer or any facts or
circumstances that could reasonably be expected to result in a Material
Adverse Effect on Buyer; (b) any damage, destruction or loss (whether
or not covered by insurance) with respect to Buyer or any of its
subsidiaries having a Material Adverse Effect on Buyer; (c) any
material change by Buyer or any of its subsidiaries in its accounting
methods, principles or practices; (d) any revaluation by Buyer or any
of its subsidiaries in its accounting methods, principles or practices;
or (e) any revaluation by Buyer or any of its subsidiaries of any of
its assets having a Material Adverse Effect on Buyer.
5.11 Compliance with Applicable Law. Each of Buyer
and its subsidiaries has at all times during the last three (3) years
duly complied with, and 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) except where the failure to be in
such compliance would not individually or in the aggregate have a
Material Adverse Effect on Buyer.
5.12 Litigation. Except for litigation disclosed in
(i) the notes to the financial statements included in Buyer's Annual
Report to its stockholders for the year ended September 30, 1998 or
(ii) the Rent-Way's SEC Reports, there is no suit, action or proceeding
pending or, to Buyer's knowledge, threatened against or affecting Buyer
or any of its subsidiaries, the outcome of which would individually or
in the aggregate have a Material Adverse Effect on Buyer; nor is there
any judgment, decree, injunction, citation, settlement agreement, rule
or order of any Governmental Authority outstanding against Buyer
having, or which, insofar as can reasonably be foreseen, in the future
may have, any such effect.
5.13 Tax Matters. Buyer has filed all Tax Returns
relating to its business that it was required to file. All such Tax
Returns were correct and complete in all respects. All Taxes owed by
Buyer prior to the date hereof have been paid in full except for such
Taxes as would not, individually or in the aggregate, have a Material
Adverse Effect on Buyer. Buyer 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. There are no federal, state, local or foreign tax liens
upon any of the properties or assets of Buyer, and there are no unpaid
taxes which are or could become a lien on the properties or assets of
Buyer, except for current taxes not yet due and payable.
5.14 Environmental Matters. Except as to matters
previously remediated in accordance with applicable law, none of Buyer
or its subsidiaries or, to Buyer's knowledge, any other Person has
caused or permitted (a) the presence of any Hazardous Substance at, in,
on, or under any of Buyer's properties in any amount, form, or location
that would be unlawful, require investigation, notification of
Governmental 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 Substances to have occurred or be presently
occurring on or from Buyer'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 Material Adverse Effect on
Buyer; and in connection with the use of Buyer's properties, Buyer and
its 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 Substances.
5.15 Material Misstatements or Omissions. No
representations or warranties by Buyer in this Agreement, or in any
document, exhibit, statement, certificate, document or schedule
furnished to Seller pursuant to this Agreement, or in connection with
the transaction contemplated by this Agreement, contains or will
contain any untrue statement of a material fact, or intentionally omits
or will omit to state any material fact necessary to make the
statements or facts contained therein not misleading.
ARTICLE 6
COVENANTS PRIOR TO CLOSING
Seller and the Corporation on the one hand, and Buyer
on the other hand, each covenant with the other as follows:
6.1 Conduct of Business Prior to Closing. The
Corporation shall continue to carry on the Business in the ordinary
course and substantially in accordance with past practice and will not
take any action inconsistent therewith or with the consummation of the
transactions, except as expressly provided for in this Agreement. The
Corporation shall promptly inform Buyer of any material changes in the
Business.
6.2 Investigation by Buyer.
(a) Seller acknowledges and agrees that between the
date of this Agreement and the Closing Date, Buyer and each
Representative of Buyer shall continue to conduct a due diligence
review with respect to the Corporation and the Business. In connection
with such due diligence review, the Corporation and each Representative
of the Corporation shall, upon reasonable prior notice, (i) cooperate
with Buyer and each Representative of Buyer, (ii) provide all
information, and all documents and other tangible items containing or
relating to such information, reasonably requested by Buyer, any
Representative of Buyer or any financial institution and (iii) permit
each Representative of Buyer to inspect any part of the Business. Buyer
shall conduct its due diligence investigation in a manner so as not to
unreasonably disrupt the Business. For purposes of this Section 6.2,
Buyer shall designate and notify Seller or the Corporation of all of
its employee Representatives having authority to contact the
Corporation. Buyer agrees that the Confidentiality Agreement between
Buyer and the Corporation, dated __________, 1999 (the "Confidentiality
Agreement") shall apply to all information disclosed to Buyer pursuant
to it due diligence investigation.
(b) To the extent that Buyer discovers or is made
aware prior to the Closing that the representations and warranties made
by Seller and the Corporation in Section 4.13 are false, it shall
notify the Seller. If Buyer does not exercise its rights under Section
7.1 to not consummate the transactions contemplated by this Agreement
and proceeds to the Closing, Buyer shall not have a right after Closing
to be indemnified by Seller under Section 9.2(a)(i)(A) for any breach
of Section 4.13; provided, however, that this Section 6.2(b) shall not
limit, restrict or eliminate Buyer's right to seek indemnification from
Seller under any other provision of Section 9.2
6.3 Consents and Best Efforts. As soon as
practicable, Buyer, Seller and the Corporation, as applicable, will
commence all reasonable action required hereunder to obtain all
consents, approvals and agreements of, and to give all notices and make
all filings with, any Person as may be necessary (a) to authorize,
approve or permit the full and complete sale, conveyance, assignment or
transfer of the Shares, free and clear of any Encumbrances, by a date
early enough to allow the sale hereunder to be consummated by the
Closing Date and (b) to obtain consents from any Person who is a party
to a Real Property Lease or other material contract with the
Corporation, the terms of which give such Person a right to terminate
such lease or contract as a result of the transactions provided for in
this Agreement; provided, however, that Seller shall not be required to
pay any money in connection with assisting Buyer in obtaining any
landlord consent nor shall Buyer have the right to terminate this
Agreement if any such landlord consent is not obtained. Buyer, Seller
and the Corporation agree to use commercially reasonable best efforts
to satisfy all conditions precedent to their respective obligations to
consummate the transactions contemplated by this Agreement.
6.4 Certain Prohibited Transactions. Except as
contemplated by Section 6.5, during the period beginning on the date of
this Agreement and ending on the Closing Date, the Corporation and
Seller shall not:
(a) except in the ordinary course of business,
mortgage, pledge or otherwise encumber or sell, transfer or otherwise
dispose of any of the Tangible Personal Property other than as
contemplated by this Agreement;
(b) enter into or terminate any material contract or
agreement, or make any material change in any of its material contracts
or agreements relating to or otherwise affecting the Tangible Personal
Property or the Business, other than in the ordinary course of business
and consistent with past practice;
(c) borrow any money, enter into any agreement or
commitment to borrow any money or otherwise take any action which will
materially increase the indebtedness of the Corporation over the
indebtedness of the Corporation as of the Effective Time; or
(d) do any other act which would cause any
representation or warranty of the Corporation or Seller in this
Agreement to be or become untrue in any material respect.
6.5 Pre-Closing Transactions. Buyer and Seller agree
that, prior to the Closing, the actions involving the Corporation set
forth on Schedule 6.5 will be effectuated.
6.6 Non-Compete Agreements. On the Closing Date,
Seller and Buyer shall enter into a non-compete agreement substantially
in the form of Exhibit C (the "Non-Compete Agreement"). In addition,
the parties agree that, prior to the Closing, the Corporation will
enter into separate agreements with each of the individuals listed
below ("Restricted Persons") pursuant to which, in consideration for
separate payments the amounts of which have been heretofore disclosed
to Buyer, each of such Restricted Persons shall agree to covenants
which shall prohibit such Restricted Persons from competing with the
Corporation (or any successor thereto) after their termination of
employment by the Corporation (or any successor thereto) and which
shall be the same in all material respects as those which will restrict
the Seller in the Non-Compete Agreement (the "Restricted Person
Agreements"): Henry Kon, James Nabywaniek, Mark Virkler, Tony DiPierro
and Gary Mace.
6.7 Additional Closing Arrangements.
The parties agree that:
(a) All revenues and expenses of the Corporation
prior to the Effective Time shall be for the account and benefit of the
Seller.
(b) All revenues and expenses of the Corporation on
and after the Effective Time shall be for the account and benefit of
the Buyer.
(c) The Seller shall not allow the indebtedness of
the Corporation to Corporation's Bank as of the Closing Date to exceed
the amount of such indebtedness as of the Effective Time.
6.8 Hart-Scott-Rodino Antitrust Improvements Act.
Each party hereto agrees to make an appropriate filing pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), with respect to the transactions contemplated by this
Agreement and to supply, as promptly as practicable, to the appropriate
Governmental Authority any additional information and documentary
materials that may be requested pursuant to the HSR Act.
6.9 Office Lease. Following the Closing, the
Corporation shall be entitled to lease the office space in Oswego, New
York currently used as the Corporation's corporate offices from Seller
for a period of up to one hundred and twenty (120) days pursuant to the
terms and conditions of a lease substantially in the form of Exhibit D
hereto (the "Lease").
ARTICLE 7
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the
transactions contemplated by this Agreement are subject, in the
discretion of Seller, to the satisfaction, on or prior to the Closing
Date, of each of the following conditions (any of which may, in
Seller's absolute and sole discretion, be waived in whole or in part in
writing):
7.1 Representations, Warranties and Covenants. All
representations and warranties of Buyer contained in this Agreement
shall be true and correct in all material respects at and as of the
Closing Date, and Buyer shall have performed all agreements and
covenants required hereby to be performed by it prior to or at the
Closing Date.
7.2 Consents. All consents, approvals and waivers
necessary to permit Seller to transfer the Shares to Buyer as
contemplated hereby shall have been obtained, unless the failure to
obtain any such consent, approval or waiver would not have a material
adverse effect upon Seller and the expiration or early termination of
the waiting period under the HSR Act shall have occurred.
7.3 No Proceedings. No Proceeding by any Person shall
have been instituted or threatened which questions the validity or
legality of the transaction contemplated hereby and which could
reasonably be expected to affect materially the right or ability of
Seller to transfer the Shares to Buyer.
7.4 Certificates. Buyer will furnish Seller with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article 7 as may be reasonably requested
by Seller.
7.5 Corporate Documents. Seller shall have received
from Buyer (i) resolutions adopted by the board of directors of Buyer
approving this Agreement and the transactions contemplated hereby and
(ii) a list of the officers of Buyer executing this Agreement and any
agreement contemplated by this Agreement, certified by the Secretary or
an Assistant Secretary of Buyer.
7.6 Other Agreements. Concurrently with the Closing,
Buyer shall have executed and delivered the Non-Compete Agreement, the
Shareholder's Agreement and the Lease to Seller, Buyer shall have
executed and delivered the Escrow Agreement to Seller and Escrow Agent
and Seller and the Corporation shall have completed the transfer of the
real property located in Oswego, New York as contemplated on Schedule
6.5.
7.7 Payment. Buyer shall have, concurrently with the
Closing, delivered the Purchase Price to Seller, delivered the Bank
Payoff to Corporation's Bank, and issued the Share Consideration in the
names of the Seller and delivered such Escrow Shares to the Escrow
Agent and the Seller.
7.8 Opinion Letter. Seller shall have received an
opinion from Hodgson, Russ, Andrews, Woods & Goodyear, LLP, counsel to
Buyer, substantially in the form attached hereto as Exhibit E.
ARTICLE 8
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the
transaction provided for hereby are subject, in the discretion of
Buyer, to the satisfaction, on or prior to the Closing Date, of each of
the following conditions (any of which may, in Buyer's absolute and
sole discretion, be waived in whole or in part in writing):
8.1 Representations, Warranties and Covenants. All
representations and warranties of Seller and the Corporation contained
in this Agreement shall be true and correct in all material respects at
and as of the Closing Date, and Seller and the Corporation shall have
performed all agreements and covenants required hereby to be performed
by each of them prior to or at the Closing Date.
8.2 Consents. All consents, approvals and waivers
necessary to permit Seller to transfer the Shares to Buyer as
contemplated hereby [except for any landlord consents] shall have been
obtained, except for consents which in the aggregate if not obtained
would not have any material adverse affect on the Business and the
expiration or early termination of the waiting period under the HSR Act
shall have occurred; provided, however, that with respect to any
landlord consents, Seller shall only be required to cooperate in
assisting Buyer to obtain such consents.
8.3 No Proceedings. No Proceeding by any Person shall
have been instituted or threatened which questions the validity or
legality of the transactions contemplated hereby and which could
reasonably be expected to affect materially the right or ability of
Buyer to own or operate the Business after the Closing.
8.4 Certificates. Seller and the Corporation will
furnish Buyer with such certificates to evidence compliance with the
conditions set forth in this Article 8 as may be reasonably requested
by Buyer.
8.5 Due Diligence. Buyer shall have completed its due
diligence review contemplated by Section 6.2 and been satisfied by the
results thereof, including but not limited to not having found any
material variance from the representations and warranties in set forth
in Article 4.
8.6 No Interruption or Adverse Change. Prior to or at
the time of Closing, (i) no interruption or suspension of a material
volume of the Business as now conducted shall have occurred or been
threatened and (ii) no material adverse change in the Business shall
have occurred or been threatened since May 31, 1999.
8.7 Financing. Buyer shall have obtained all
financing necessary to consummate the transactions contemplated by this
Agreement.
8.8 Corporate Documents. Buyer shall have received
from Seller and the Corporation (i) resolutions adopted by the board of
directors and shareholders of the Corporation approving this Agreement
and the transactions contemplated hereby and (ii) a list of the
officers of the Corporation executing this Agreement and each agreement
contemplated by this Agreement, certified by the Secretary or Assistant
Secretary of the Corporation.
8.9 Other Agreements. At or before the Closing,
Seller shall have executed and delivered the Non-Compete Agreement and
the Lease to Buyer, Seller shall have executed and delivered the Escrow
Agreement to Buyer and Escrow Agent, and Seller shall have provided
evidence to Buyer that the Restricted Person Agreements have been
executed and delivered to the Corporation.
8.10 Opinion Letter. Buyer shall have received an
opinion from Saperston & Day, P.C., counsel to Seller, substantially in
the form attached hereto as Exhibit F.
8.11 Resignations. Buyer shall have received
resignations from the officers and directors of the Corporation in form
and substance reasonably satisfactory to Buyer.
.8.12 Lien Releases. Seller shall have delivered
Uniform Commercial Code termination statements from Manufacturers and
Traders Trust Company to Buyer releasing Manufacturers and Traders
Trust Company's lien on the Corporation's assets.
ARTICLE 9
INDEMNIFICATION
9.1 Survival of Representations, Warranties and
Covenants. The representations and warranties of Seller and the
Corporation, and of Buyer, contained in this Agreement shall, without
regard to any investigation made by any of the parties hereto (except
as provided for in Section 6.2(b)), survive the Closing Date until
December 31, 2000; provided, however, that the representations and
warranties made in Section 4.6 (Title) shall survive the Closing
indefinitely. The covenants and agreements of Seller, the Corporation
and Buyer contained in this Agreement, including but not limited to
those set forth in Section 9.2, shall survive the Closing Date until
they have been fully satisfied or otherwise discharged or waived.
9.2 Indemnifications and Payment of Losses.
(a) By Seller. Seller shall indemnify, save and hold
harmless Buyer (before and after the Closing) and the Corporation
(after the Closing only) and each of Buyer's Representatives from,
against and in respect of and will pay to such Persons, whether or not
involving a third party claim, the following (individually a "Loss" and
collectively "Losses"):
(i) any and all loss, liability,
deficiency or damage suffered or incurred by Buyer by reason of (A)
any untrue representation or breach of warranty or (B)
nonfulfillment of any covenant or agreement by Seller or the
Corporation in this Agreement or in any agreement, instrument or other
writing delivered to Buyer by Seller or the Corporation pursuant to or
in connection with this Agreement;
(ii) any claim by any Person for (A) a
finder's fee, investment banker's fee, or brokerage or other commission
or (B) subject to Section 11.7, any legal expenses, in each case by any
Person for services alleged to have been rendered at the instance
of the Corporation or Seller with respect to this Agreement or
the transactions contemplated by this Agreement;
(iii) any and all loss, liability,
deficiency or damage suffered or incurred by Buyer or the
Corporation or any Buyer Representative relating to any claim, suit,
litigation or proceeding with respect to events occurring prior to the
Closing Date which are not fully reserved for on the Corporation's
Financial Statements or Interim Financial Statements (and, therefore,
treated as a Liability for purposes of this Agreement), including, but
not limited to, any claim by any Person that any of the Corporation's
operations failed to comply with any applicable Governmental
Requirement;
(iv) any liabilities and obligations for (A)
Taxes which are or shall be incurred by Buyer or the Corporation with
respect to the operation of the Corporation on or prior to the Closing
Date or (B) pursuant to Section 10.3(a) relating to the Section
338(h)(10) Elections;
(v) any and all loss, liability, deficiency
or damage suffered or incurred by Buyer, the Corporation or any Buyer
Representative, including but not limited to, benefit payments, in
connection with the establishment, maintenance and operation of any
Employee Plan of the Corporation on or prior to the Closing Date
which is not fully reserved for on the Corporation's Financial
Statements or Interim Financial Statements (and, therefore, other
than liabilities under the Rentavision Health Plan excluded from
the definition of Liabilities under Section 1.1.(u)(iii), treated as a
Liability for purposes of this Agreement);
(vi) any and all loss, liability, deficiency
or damage suffered or incurred by Buyer, the Corporation or any
Representative of Buyer caused by or arising out of any Environmental
Claim including but not limited to the generation, treatment,
handling, storage or disposal of Hazardous Substances or
noncompliance with any Environmental Laws by the Corporation on or
prior to the Closing Date regardless of whether or not the matter or
matters giving rise to any such Losses were disclosed to Buyer in
Schedule 4.19 or known by Seller at the date of this Agreement, in each
case which is not fully reserved for on the Corporation's Financial
Statements or Interim Financial Statements (and, therefore, treated as
a Liability for purposes of this Agreement);
(vii) any matter described in Schedule 4.14
to this Agreement; and
(viii)any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs
and expenses, (including, but not limited to, legal fees and expenses)
incident to any of the foregoing or incurred in enforcing this
Agreement or any agreement provided for in this Agreement.
With respect to any Losses covered by Seller's indemnification
obligations under Section 9.2(a)(i)(A), the Seller shall have liability
for such Losses only if the aggregate amount of any such Losses exceed
Two Hundred Fifty Thousand Dollars ($250,000), in which case Seller
shall indemnify Buyer (or any other indemnified person hereunder) for
all Losses (beginning with the first dollar thereof); provided,
however, that such limitation shall not apply to any other Losses
covered by Section 9.2(a) nor to any Losses incurred as a result of
fraud.
(b) By Buyer. Buyer shall indemnify and save and hold
harmless Seller and each of Seller's Representatives from, against and
in respect of and will pay to such Persons, whether or not involving a
third party claim, the following (individually, a "Loss" and,
collectively, "Losses"):
(i) any and all loss, liability, deficiency
or damage suffered or incurred by Seller, resulting from any untrue
representation, breach of warranty or nonfulfillment of any
covenant or agreement by Buyer (including failure to deliver the
Purchase Price) contained in this Agreement or in any agreement,
instrument or other writing delivered to Seller pursuant to
or in connection with this Agreement;
(ii) any claim by any Person for (A) a
finder's fee, investment banker's fee, or brokerage or
other commission or (B) any legal expenses, in each case by any Person
for services alleged to have been rendered at the instance of Buyer
with respect to this Agreement or the transaction contemplated by this
Agreement;
(iii) any and all loss, liability,
deficiency or damage suffered or incurred by Seller relating
to any claim, suit, litigation or proceeding relating to the
Corporation or the Business with respect to the operation of the
Business or events occurring after the Closing Date; and
(iv) any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs
and expenses, (including, but not limited to, legal fees and expenses)
incident to any of the foregoing or incurred in enforcing this
Agreement or any agreement provided for in this Agreement.
(c) Notification of Claims. In the event that any
party entitled to indemnification pursuant to this Agreement (the
"Indemnified Party") proposes to make any claim for such
indemnification, the Indemnified Party shall deliver to the
indemnifying party (the "Indemnifying Party"), which delivery with
respect to the Losses arising from breaches of representations and
warranties shall be on or prior to the date upon which the applicable
representations and warranties expire pursuant to Section 9.1 hereof, a
signed certificate, which certificate shall (i) state that Losses have
been incurred or that a claim has been made for which Losses may be
incurred, (ii) specify the sections of this Agreement under which such
claim is made and (iii) specify in reasonable detail each individual
item of Loss or other claim including the amount thereof and the date
such Loss was incurred. In addition, each Indemnified Party shall give
notice to the Indemnifying Party within ten (10) days of its receipt of
service of any suit or proceeding initiated by a third party which
pertains to a matter for which indemnification may be sought; provided,
however, that the failure to give such notice shall not relieve the
Indemnifying Party of its obligations hereunder if the Indemnifying
Party has not been prejudiced thereby.
(d) Defense of Third Party Claims and Extension of
Statute of Limitations. Any Indemnified Party shall in good faith
cooperate and assist the Indemnifying Party in defending against any
claims or asserted claims with respect to which the Indemnified Party
seeks indemnification under this Agreement. If requested by the
Indemnifying Party, the Indemnified Party shall join in any action,
litigation, arbitration or proceeding, provided that the Indemnifying
Party shall pay the costs of the Indemnified Party, including
reasonable attorney's fees, caused by such joinder. The Indemnified
Party shall not settle or compromise any claim or asserted claim, nor
agree to extend any statute of limitations applicable to any claim or
asserted claim, for which the Indemnified Party seeks indemnification
under this Agreement, without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld.
Any right of participation of the Indemnifying Party shall be subject,
as a condition precedent, to such party's acknowledging to the
Indemnified Party, in writing, the obligation of the Indemnifying Party
to indemnify the other party hereto in accordance with the terms of
this Agreement. Upon such acknowledgment, the Indemnified Party will
provide the Indemnifying Party will all reasonably available
information, assistance, and authority to enable the Indemnifying Party
to jointly participate in such defense or settlement, and upon the
Indemnifying Party's payment of any amounts due with respect to such
Proceeding, the Indemnified Party will, to the extent of such payment,
assign or cause to be assigned to the Indemnifying Party the claims of
the Indemnified Party, if any, against such third parties with respect
to which such payment is made.
(e) Escrow. Upon a notice by Buyer to Seller pursuant
to Section 9.2(c), Buyer may give a Notice (as defined in the Escrow
Agreement) under the Escrow Agreement for the amount of Loss specified
therein. Neither the exercise of nor the failure to exercise such right
to give a Notice under the Escrow Agreement will constitute an election
of remedies or limit Buyer in any manner in the enforcement of any
other remedies that may be available to it.
(f) Vermont Investigation.
(i) Seller has disclosed on Schedule
4.14 a pending investigation of the Corporation's operations in the
State of Vermont (the "Vermont Investigation"), and Seller is
required under Section 9.2(a)(iii) and Section 9.2(a)(vii) to
indemnify Buyer and the Corporation after the Closing against any Loss
arising from the activities that are the subject of the Vermont
Investigation. Seller and Buyer agree that, subject to Paragraph (ii)
of this Section 9.2(f), Seller shall have the right, at its own cost
and expense, to control (A) the management and settlement of the
Vermont Investigation and (B) the defense of any claim or other
litigation against the Corporation (or any successor thereof) arising
out of the Vermont Investigation ("Vermont Litigation"), in each case
by counsel reasonably satisfactory to Buyer; provided that the
Corporation and Buyer shall be entitled at any time, at their own cost
and expense, which expense shall not be recoverable from the Seller
unless the Seller is not adequately representing or, because of a
conflict of interest, may not adequately represent, the interests of
the Corporation (or its successors), to participate in such management
and/or defense and to be represented by attorneys of its own or their
own choosing. For purposes of this Section 9.2(f)(i), Saperston & Day
P.C. shall be considered as counsel satisfactory to the Buyer. If Buyer
and the Corporation elect to participate in the management and/or
defense of the Vermont Investigation or any Vermont Litigation, they
will cooperate with Seller in the conduct of such management and/or
defense. Neither the Corporation nor Buyer may concede, or compromise
the Vermont Investigation or any Vermont Litigation without the prior
consent of the Seller which will not be unreasonably withheld.
(ii) In the management and/or defense of the Vermont
Investigation or any Vermont Litigation, Seller shall not, except with
the prior approval of Buyer (which approval will not be unreasonably
withheld), consent to any entry of any judgment or enter into any
settlement of the Vermont Investigation or any Vermont Litigation which
does not include as an unconditional term thereof the giving by the
State of Vermont to the Corporation (or any successor thereof) a full
and complete release of all liability in respect of all then pending
claims and litigation. In addition, notwithstanding Section 9.2(f)(i),
Seller shall not have any right to consent to the entry of any order,
injunction or other equitable relief against the Corporation which
Buyer reasonably determines, after conferring with its outside counsel,
would impair the ability of the Corporation to operate its business in
the State of Vermont in the same manner as the Corporation has
heretofore operated such business in all material respects.
9.3 Reduction for Insurance Proceeds. If an
Indemnified Party actually receives any insurance proceeds following an
indemnification payment by an Indemnifying Party pursuant to Section
9.2 (including but not limited to the delivery of any Indemnity Escrow
Amount to Buyer), and the proceeds relate to the same event or events
for which such indemnification payment was made, the Indemnified Party
shall return the indemnification payment to such Indemnifying Party up
to the actual amount of insurance proceeds received in respect of such
same event or events.
9.4 Sole Remedy. Except for Losses incurred as a
result of fraud, Buyer and Seller each acknowledges and agrees that his
or its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to
the indemnification provisions set forth in this Article 9. In
furtherance of the foregoing, Buyer and Seller each hereby waives, to
the fullest extent permitted by law, any and all rights, claims and
causes of action he or it may have against the other party arising
under or based on any federal, state or local law, or otherwise except
to the extent specifically provided in this Article 9.
ARTICLE 10
COVENANTS AFTER THE CLOSING
10.1 Books and Records. Seller shall deliver the
Corporation's original minute books and stock record books to Buyer
(the "Corporate Records") at the Closing. In addition, for a period of
three (3) years following the Closing Date, Buyer shall afford Seller
and his Representatives, during normal business hours, reasonable
access to the Corporate Records and Business Records with respect to
the period prior to the Closing Date to the extent that such access may
be reasonably required by Seller to facilitate (i) the preparation by
Seller of tax returns as he may be required to file with respect to his
operation of the Business prior to Closing or in connection with any
audit, amended return, claim for refund or any proceeding with respect
thereto, (ii) the investigation, litigation and final disposition of
any claims which may have been or may be made against Seller in
connection with his operation of the Business prior to Closing, (iii)
the payment of any indemnity under this Agreement or (iv) any other
reasonable purpose. At any time after December 31, 2002, Buyer may
dispose of, alter or destroy any such Corporate Records and Business
Records upon giving sixty (60) days' prior notice to Seller to permit
Seller, at his expense, to examine, duplicate or repossess such
Corporate Records and Business Records.
10.2 Further Assurances. Both before and after the
Closing Date, each party will cooperate in good faith with the other
and will take all appropriate action and execute any documents,
instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the transactions
contemplated hereunder.
10.3 Tax Related Matters.
(a) Section 338(h)(10) Elections. Seller and Buyer
shall take all actions necessary and appropriate (including timely
filing such forms, tax returns, elections, schedules and other
documents as may be required), at each party's cost and expense, to
effect and preserve a timely Section 338(h)(10) election in accordance
with the requirements of Section 338(h)(10) of the Code (and any
corresponding elections under state or local tax law) (collectively,
the "Section 338(h)(10) Elections"), and Seller and Buyer shall report
the sale of the Shares pursuant to this Agreement consistently with the
Section 338(h)(10) Elections and shall take no position contrary
thereto or inconsistent therewith in any Tax Return, any discussion
with or proceeding before any taxing authority, or otherwise. Seller
will include any income, gain, loss, deduction, or other tax item
resulting from the Section 338(h)(10) Elections on their Tax Returns to
the extent permitted by applicable law. Seller shall also pay any tax
imposed on the Corporation attributable to the making of the Section
338(h)(10) Election, including, but not limited to, (i) any Tax imposed
under Code Section 1374, (ii) any tax imposed under Reg.
ss.1.338(h)(10) - 1(e)(5) under the Code, or (iii) any state, local or
foreign tax imposed on the Corporation's gain, and Seller shall
indemnify Buyer and the Corporation against any Adverse Consequences
arising out of any failure to pay such taxes.
(b) Allocation of Purchase Price.
(i) Buyer and Seller agree that the
Purchase Price and the Liabilities shall be allocated to the assets of
the Corporation for all purposes (including tax and financial
accounting) in a manner consistent with the fair market
values of such assets which shall not exceed the tax basis of any
tangible assets. Buyer and Seller shall agree prior to the Closing Date
on an estimated allocation of the Purchase Price, consistent with the
foregoing, for purposes of making any timely transfer tax filings and
for purposes of this Section 10.3(b) (the "Estimated Allocation
Statement" a form of which is attached hereto as Schedule 10.3(b)). In
addition, as soon as practicable after the Closing Date, but in no
event later than 120 days following the Closing Date, Buyer shall
provide to Seller a proposed statement (the "Allocation Statement")
allocating the total Purchase Price, and any other payments made by
Buyer pursuant to this Agreement that are properly treated as
additional purchase price for tax purposes, among the different classes
of assets of the Corporation to be acquired pursuant to the rules of
Section 338(h)(10) of the Code and the regulations thereunder. Within
ten (10) days following delivery of the proposed Allocation Statement,
Seller may propose changes to the Allocation Statement. Buyer shall
consider Seller's proposed changes in good faith, but shall have no
obligation to amend the Allocation Statement to reflect any proposed
changes to which Buyer objects unless it relates to a material
difference between the Estimated Allocation Statement and the
Allocation Statement (for purposes hereof, material shall mean a change
of 5% or more in the aggregate amount of the non-Intangible Assets).
Within five (5) days following delivery to Buyer of Seller's proposed
changes, Buyer shall deliver to Seller a statement of objections (if
any) to such proposed changes. If Buyer and Seller are unable, within
five (5) days after receipt by Seller of Buyer's statement of
objections, to resolve the disputed objections, such disputed
objections shall be referred to the Third-Party Accountants. The scope
of the Third-Party Accountants' review will be restricted to addressing
only any such disputed objections. The Third-Party Accountants shall,
within ten (10) business days following referral of the dispute(s) (or
such longer period as may be proposed by the Third Party Accountants
and agreed to by Buyer and Seller), deliver to Seller and Buyer a
written resolution of the disputed objections. Such resolution shall be
conclusive and binding upon the parties hereto for all purposes, and
the Allocation Statement shall be adjusted to reflect such resolution.
The fees and disbursements of the Third-Party Accountants acting under
this Section shall be shared equally by Buyer and Seller. The parties
shall cooperate with one another and with each other's Representatives
in order to resolve any and all matters in dispute as quickly as
practicable.
(ii) Buyer, the Corporation and Seller shall
file and cause to be filed all Tax Returns, and
execute such other documents as may be required by any taxing
authority, in a manner consistent with the Allocation Statement as
revised from time to time. Buyer shall prepare the Form 8023 under
Section 338(h)(10) of the Code relating to the transactions
contemplated by this Agreement based on the Allocation Statement and
shall deliver such Form 8023 to Seller within 30 calendar days after
finalization of the Allocation Statement as provided above. Buyer and
Seller shall timely file, or cause the timely filing of, such Form 8023
with each relevant taxing authority, and shall refrain, and cause their
affiliates to refrain, from taking any position inconsistent with such
Allocation Statement as revised from time to time with any taxing
authority unless, and then only to the extent, required to do so by a
taxing authority.
(c) Termination of Corporation's Subchapter S Election.
(i) On the Closing Date, the Corporation's
Subchapter S election will terminate and the termination will be
effective as of the Effective Time. The Corporation
will close its books as of the Closing Date and assign items of income,
gain, loss, deduction, and credit to the final short S corporation tax
year (ending on the Closing Date) based on the Corporation's normal
methods of accounting. Seller agrees to prepare, and Buyer agrees to
cause to be timely filed, federal and state Tax Returns for all periods
ending prior to and on the Closing Date which are properly filed after
the Closing Date, including the Corporation's final short S corporation
year ending on the Closing Date ("Final S Period(s) Tax Returns").
Seller shall control preparation of the Final S Period(s) Tax Returns,
shall be responsible for any Taxes due on those returns, and shall pay
all costs associated with the preparation of those returns; provided,
however, such returns shall be submitted to the Corporation and Buyer
for filing. Buyer shall file such returns unless it shall have
delivered a written notice to Seller on or prior to the due date
objecting to such filing; and, provided, further, that all tax returns
relating to the final S corporation tax year shall be prepared on a
basis consistent with that used in making the determination provided
for in Section 10.3(a) and (b). The parties shall use their best
efforts to promptly resolve any disagreements as to the Final S
Period(s) Tax Returns. Any remaining disagreements will be referred to
the Third Party Accountants for resolution, provided that (x) the scope
of review by the Third Party Accountants shall be limited to the
disputed items and (y) any resolution must comply with the provisions
of Section 10.3(a) and (b).
(ii) Buyer shall cause the Corporation to
timely file all tax returns required to be filed by
the Corporation after the Closing, including any and all Final S
Period(s) Tax Returns. Buyer agrees that the Corporation shall be
responsible for and pay all Taxes, in respect of periods beginning
after the Closing Date.
(d) Cooperation on Tax Matters.
(i) Buyer, the Corporation and Seller shall
cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of all Tax
Returns pursuant to this Section and any audit, litigation or other
Proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records
and information which are reasonably relevant to any such audit,
litigation or other Proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Notwithstanding Section
10.1, the Corporation and Seller agree (A) to retain all books and
records with respect to Tax matters pertinent to the Corporation
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent
notified by Buyer or Seller, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give Buyer
reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the Buyer so requests,
Corporation or Seller, as the case may be, shall allow the Buyer to
take possession of such books and records.
(ii) Buyer and Seller further agree, upon
request, to use their best efforts to obtain any
certificate or other document from any Governmental Authority or any
other Person as may be necessary to mitigate, reduce or eliminate any
Tax that could be imposed (including, but not limited to, with respect
to the transactions contemplated hereby).
ARTICLE 11
MISCELLANEOUS
11.1 Termination. This Agreement may be terminated
upon ten (10) days prior written notice at any time prior to Closing
without liability of any party or any other party:
(i) by mutual written consent of Buyer and
Seller;
(ii) by Buyer, if Closing has not occurred
on or before October 6, 1999 as a result of
the nonfulfillment of any of the conditions
to Buyer's obligation to perform contained
in Article 8 of this Agreement after written
notice of such nonfulfillment and reasonable
opportunity to cure; or
(iii) by Seller if Closing has not occurred
on or before October 6, 1999 as a result of
the nonfulfillment of any of the conditions
to its obligations to perform contained in
Article 7 of this Agreement after written
notice of such nonfulfillment and reasonable
opportunity to cure.
This Agreement may also be terminated by Seller on the one hand, or
Buyer, on the other hand, upon ten (10) days prior written notice if a
non-terminating party has breached any material covenant to be
performed by it pursuant to this Agreement and such breaching party has
not cured such breach within 10 days' of notice of breach from the
non-breaching party. Termination of this Agreement shall not affect in
any way the continuing obligations of the parties hereto pursuant to
Section 11.7 hereof relating to expenses.
11.2 Assignment. Neither this Agreement nor any of
the rights or obligations hereunder may be assigned by Seller or the
Corporation on the one hand, or Buyer on the other hand, without the
prior written consent of the other parties. Notwithstanding the
preceding sentence, Buyer may collaterally assign its rights under this
Agreement to National City Bank of Pennsylvania, as Agent or any
successor lender to Buyer. No assignment of this Agreement by Buyer
shall relieve Buyer of any of its obligations hereunder. Subject to the
foregoing, this Agreement shall be binding upon and inure to the
benefit of Seller, the Corporation and Buyer and their respective
successors and assigns, and no other Person shall have any right or
obligation under this Agreement.
11.3 Notices. Unless otherwise provided in this
Agreement, any notice, request, instruction or other document to be
given hereunder by either party to the other shall be in writing and
delivered personally or mailed by certified mail, postage prepaid,
return receipt requested, or by telecopy or courier, with a
confirmation via one of the preceding methods, as follows:
If to Seller or the Corporation, before the Closing,
addressed to:
Robert J. Natoli
113-119 East Bridge Street
Oswego, New York 13126
Telephone: (315) 342-1851
Facsimile: (315) 342-4615
If to Seller after the Closing, address to:
Robert J. Natoli
113-119 East Bridge Street
Oswego, New York 13126
Telephone: (315) 342-1851
Facsimile: (315) 342-4615
With a copy in either case to:
Attention: John B. Elleman, Esq.
Saperston & Day, P.C.
500 S. Salina Street, Suite 300
Syracuse, New York 13202
Telephone: (315) 422-5900
Facsimile: (315) 422-6196
If to Buyer, addressed to:
Rent-Way, Inc.
Attn: Ronald D. DeMoss,
Vice President and General Counsel
One RentWay Place
Erie, Pennsylvania 16505
Telephone: (814) 455-5378
Facsimile: (814) 455-0078
With a copy to:
Hodgson, Russ, Andrews, Woods & Goodyear,LLP
Attn: Robert B. Fleming, Jr., Esq.
Paul J. Vallone, Esq.
One M&T Plaza, Suite 2000
Buffalo, NY 14203-2391
Telephone: (716) 856-4000
Facsimile: (716) 849-0349
and be effective (i) if given by hand delivery, when left at the
address of the addressee as above provided, (ii) if given by mail, on
the third business day after such communication is deposited in the
mail, addressed as above provided, and (iii) if given by telecopy, when
telecopied to the number above provided, except that notices of a
change of address shall not be effective until received; or to such
other place and with such other copies as either party may designate as
to itself by written notice to the other party.
11.4 Choice of Law. This Agreement shall be
construed, interpreted and the rights of the parties determined in
accordance with the laws of the State of New York (without reference to
the choice of law provisions of New York law) except with respect to
matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the
respective entity was incorporated shall govern.
11.5 Entire Agreement; Amendments and Waivers. This
Agreement, together with all Exhibits and Schedules hereto, constitutes
the entire agreement between Seller, the Corporation and Buyer
pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral
or written, of Seller, the Corporation and Buyer. However, this
Agreement shall not supersede the terms of a previously executed
Confidentiality Agreement between the Corporation and Buyer. No
supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver
of any provision of this Agreement shall be deemed or shall constitute
a waiver of any other provision of this Agreement (whether or not
similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided in such writing.
11.6 Multiple Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Any party may execute this Agreement by facsimile signature
and the other party shall be entitled to rely on such facsimile
signature as evidence that this Agreement has been duly executed by
such party. Any party executing this Agreement by facsimile signature
shall immediately forward to the other party an original signature page
by overnight mail.
11.7 Expenses. Except as otherwise specified in this
Agreement, the Corporation shall pay its own and Seller's, and Buyer
shall pay its own, legal, accounting and other expenses incident to the
negotiation and preparation of this Agreement and the consummation of
the transactions contemplated hereby for services rendered through the
Closing Date; provided, however, that (i) any obligation accrued for
services rendered by Seller's and/or Corporation's legal counsel,
accountants or other professional advisors on or prior to the Closing
Date shall constitute a Liability for purposes of determining the
Purchase Price and (ii) neither the Corporation nor Buyer shall pay or
be responsible for the fees or expenses of any legal, accounting or
other professional advisors incurred on behalf of the Seller for
services rendered after the Closing Date.
11.8 Invalidity. In the event that any one or more of
the provisions contained in this Agreement or in any other instrument
referred to herein, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum extent
permitted by law, such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement or any other such
instrument.
11.9 Titles. The titles, captions or headings of the
articles and sections of this Agreement are inserted for convenience of
reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement.
11.10 Publicity. Neither Seller nor the Corporation
shall issue any press release or make any public statement regarding
the transaction contemplated hereby prior to the Closing Date, without
the prior approval of Buyer, except as may be required by applicable
law, in which case the party required to issue such press release or
make such public statement will consult with the other party prior to
issuing such press release or making such public statement. Buyer shall
provide a copy of any press release regarding the transaction
contemplated hereby to Seller, and consult with Seller, prior to making
such press release public.
[SIGNATURES APPEAR ON NEXT PAGE]
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IN WITNESS WHEREOF, the Corporation and Buyer have caused this
Agreement to be duly executed on their respective behalf by their
respective duly authorized officers, and Seller has executed this
Agreement, as of the day and year indicated at the beginning of this
Agreement. Any individual signing on behalf of a corporation represents
and warrants that he has power and authority to bind the corporation.
RENT-WAY, INC.
By:_____________________________________
William E. Morgenstern
President and Chief Executive Officer
RENTAVISION INC.
By:_____________________________________
Robert J. Natoli, President
SELLER:
-------------------------------------
Robert J. Natoli
BFLODOCS:261220_6 (5LK406)
<PAGE>
