AGREEMENT AND PLAN OF MERGER
BY AND AMONG
U.S. PAWN, INC.,
U.S PAWN NEBRASKA, INC.
AND
PAWN WAREHOUSE OUTLET, INC.,
▇▇▇▇ ▇▇▇▇▇ AND ▇▇▇▇ ▇▇▇▇▇▇▇
DATED 16, 1997
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated 16, 1997 (the "Agreement"), by and
among U.S. PAWN, INC., a Colorado corporation ("Parent"), U.S. PAWN NEBRASKA,
INC., a Colorado Corporation and a wholly-owned subsidiary of Parent ("USPN"),
and PAWN WAREHOUSE OUTLET, INC., a Nebraska corporation ("Company"), ▇▇▇▇ ▇▇▇▇▇
("LW"), and ▇▇▇▇ ▇▇▇▇▇▇▇ ("MS")(Collectively, LW AND MS, the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of advancing money to
customers on the security of pledged goods and, if appropriate, selling such
pledged goods, otherwise known as a pawnshop (the "Business"), located at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in Papillion, Nebraska;
WHEREAS, the Boards of Directors of Parent and the Company have determined
that the merger of the Company with and into USPN (the "Merger") is consistent
with and in furtherance of the long-term business strategy of Parent and the
Company and is fair to, and in the best interests of, Parent and the Company and
their respective stockholders.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2) in accordance
with the Colorado Business Corporation Act (the "CBCA") and the Nebraska
Business Corporation Act("NBCA"), the Company shall be merged with and into USPN
and the separate existence of the Company shall thereupon cease. USPN shall be
the surviving corporation in the Merger and is hereinafter sometimes referred to
as the "Surviving Corporation."
SECTION 1.2 Effective Time of the Merger. The Merger shall become effective
at such time (the "Effective Time") as shall be stated in a Articles of Merger,
in a form mutually acceptable to Parent and the Company, to be filed with the
Secretaries of State of Colorado and Nebraska in accordance with the CBCA and
the N__, respectively (the "Merger Filing"). The Merger Filing shall be made
simultaneously with or as soon as practicable after the closing of the Merger in
accordance with Section 3.5.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 Officers. The officers of the Surviving Corporation shall be:
Chief Executive Officer and
President ▇▇▇▇▇▇ ▇▇▇▇▇▇
Secretary and Treasurer ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and such officers shall serve in accordance with the Bylaws of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified.
SECTION 2.2 Directors. The director of the Surviving Corporation shall be
▇▇▇▇▇▇ ▇▇▇▇▇▇, and such director shall serve in accordance until the next annual
meeting of the Surviving Corporation or until his successor is duly elected and
qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 Conversion of Company Shares in the Merger. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any shares of Company Common Stock, no par value ("Company Common Stock"):
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into, and shall
thereafter represent only, the right to receive the Merger Consideration (as
defined in Section 3.2).
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(b) No share of Company Common Stock shall be deemed to be outstanding
or to have any rights other than those set forth in this Section 3.1 after the
Effective Time.
SECTION 3.2 Consideration.
(a) The consideration to be issued in the Merger for each share (or
fraction thereof) of Company Common Stock shall be the number of shares of the
Parent's common stock (the "Merger Consideration") equal to the results obtained
by (i) dividing Two Hundred and Seventy-Five Thousand Dollars ($275,000) by the
average closing price per share of Parent's common stock, as reported on the
NASDAQ SmallCap Market, for the ten trading days immediately preceding the
Closing Date and (ii) dividing the results of (i) above by 704 (representing the
number of shares of the Company Common Stock issued and outstanding on the
Closing Date (as defined in Section 3.4)) to be distributed in accordance with
Section 3.3 below.
(b) The shares of Parent's common stock issued as the Merger
Consideration shall be "restricted securities" as defined in Rule 144 under the
Securities Act of 1933, as amended (the "Act").
(c) In addition to the Merger Consideration, simultaneously with the
Closing, USPN or Parent shall pay off the outstanding balance of the line of
credit and all other outstanding liabilities of the Company payable to American
National Bank and obtain a release of liability for all lines of credit, notes
and guarantees executed by MS and his family members relating to the Company. In
addition, once all of the foregoing have been paid, USPN or Parent shall pay off
the outstanding balance of all loans and notes, whether in writing or otherwise,
owed by the Company to MS. Notwithstanding the foregoing, USPN and Parent shall
not be obligated to pay more than $400,000 to pay off the foregoing lines of
credit, notes , guarantees and loans and any amounts in excess of $400,000 shall
be paid at Closing by the Stockholders.
(d) The Merger Consideration shall be subject to equitable adjustment
in the event of any stock split, stock dividend, reverse stock split or other
change in the number of shares of Company Common Stock outstanding prior to
Closing (as defined in Section 3.4).
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SECTION 3.3 Cancellation of Company Common Stock Certificates.
(a) From and after the Effective Time, all Company Common Stock shall
no longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing shares of
Company Common Stock shall cease to have any rights with respect thereto, except
the right to receive in exchange therefor, upon surrender thereof at or after
the Effective Time, the amount of Merger Consideration to which each holder of
Company Common Stock is entitled pursuant to the terms hereof.
(b) Upon surrender of Company Common Stock certificates to ("Company
Certificates") Parent for cancellation on or after the Closing Date, together
with such other documents as Parent shall reasonably require, the holder of such
Company Certificates shall be entitled to receive in exchange therefore the
Merger Consideration into which the shares of Company Common Stock theretofore
represented by the Company Certificates so surrendered shall have been converted
pursuant to the provisions of Section 3.1, and the Company Certificates so
surrendered shall be cancelled. Notwithstanding the foregoing, none of Parent or
the Surviving Corporation shall be liable to a holder of Company Common Stock
for any Merger Consideration delivered to a public official pursuant to
applicable abandoned property, escheat and similar laws.
SECTION 3.4 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Parent on June
13, 1997 at 10:00 a.m. or such other place, time or date as the parties shall
agree (the date on which the Closing occurs is referred to in this Agreement as
the "Closing Date").
SECTION 3.5 Closing of the Company's Transfer Books. At and after the
Effective Time, holders of Company Common Stock shall cease to have any rights
as stockholders of the Company, except for the rights described herein. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time shall thereafter be made. If, after the Effective
Time, subject to the terms and conditions of this Agreement, Company
Certificates formerly representing Company Common Stock are presented to Parent,
they shall be cancelled and exchanged for Merger Consideration in accordance
with this Article III.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 General Statement. The parties make the representations and
warranties to each other which are set forth in this Article IV. The survival of
all such representations and warranties shall be in accordance with Section 9.1
hereof. All representations and warranties of the parties are made subject to
the exceptions which are noted in the respective schedules delivered by the
parties to each other concurrently herewith.
SECTION 4.2 Representations and Warranties of Parent and USPN. Parent and
USPN represent and warrant to the Company and the Stockholders, as of the date
hereof and at the Closing Date, as follows:
(a) Organization. Each of Parent and USPN is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado.
(b) Authorization of Transaction. The execution, delivery and
performance by each of the Parent and USPN of this Agreement and the
consummation of the transactions contemplated hereby are within Parent's and
USPN's respective power and have been duly authorized by all necessary corporate
action. This Agreement constitutes a valid and binding obligation of each of
Parent and USPN enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance and transfer, and
moratorium or other similar laws of general application affecting the
enforcement of creditors' rights generally.
(c) Brokers' Fees. Neither Parent nor USPN has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent
engaged by Parent or USPN with respect to the transactions contemplated by this
Agreement.
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SECTION 4.3 Representations and Warranties of the Company and the
Stockholders. The Stockholders and the Company, jointly and severally, represent
and warrant to Parent and USPN as of the date hereof and at the Closing Date, as
follows:
(a) Organization, Qualification and Corporate Power. The Company is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Nebraska. The Company is duly authorized to conduct the
Business and is duly qualified as a foreign corporation to do business, and is
in good standing, under the laws of each jurisdiction where such qualification
is required. The Company has the legal right, full corporate power and authority
to carry on the Business and to own and use the properties owned and used by it.
Copies of the Articles of Incorporation and Bylaws of the Company have
heretofore been provided to Parent, and such copies are accurate and complete as
of the date hereof and as of the Closing Date. No portion of the Business is
presently conducted by any legal entity other than the Company. The Company does
not, and has not, conducted any business other than the Business. No actions,
proceedings or transactions have been commenced or undertaken by either the
Company or the Stockholders which (i) give or would give rights to any person,
other than Parent, in any of the Company Common Stock or any of the Company's
assets or (ii) interfere with the consummation of the transactions contemplated
by this Agreement. The Company has no subsidiaries and has no equity or other
ownership interest in any other entity or business enterprise.
(b) Capitalization. The entire authorized capital stock of the Company
consists of 10,000 shares of common stock, $1.00 par value, of which 704 shares
are issued and outstanding. All of the Company Common Stock has been duly
authorized and is validly issued, fully paid, and nonassessable. Other than the
Company Common Stock, the Company has no outstanding capital stock and there are
no outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Company.
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(c) Ownership of Company Common Stock. The Company Common Stock is
owned as follows: LW--454 shares, MS--250 shares. Each of the Stockholders owns
the respective Company Common Stock set forth by their name above as the sole
and exclusive record and beneficial owner free and clear of all liens, charges,
security interests and similar rights of third parties (collectively,
"Encumbrances"). Each of the Stockholders possesses and on the Closing Date
shall possess, good and merchantable title to his respective Company Common
Stock, and will own such Company Common Stock free and clear of any and all
Encumbrances. Each of the Stockholders has the absolute and unconditional right
to sell, assign, transfer and deliver his respective Company Common Stock for
cancellation in accordance with the terms of this Agreement.
(d) Authority and Binding Effect. The Company has the full corporate
power and each of the Stockholders has the full power and authority to execute
and deliver this Agreement and each agreement referenced herein to which they
are a party and to consummate the transactions contemplated by, and comply with
their obligations under, such agreements. Upon execution, this Agreement and
each agreement referenced herein to which the Company is a party, and the
consummation by the Company of its obligations herein and therein, have been
duly authorized by all necessary corporate action of the Company. As of the
Closing Date, this Agreement and each agreement referenced herein to which the
Company is a party, if required, will have approval by all of the Company's
stockholders in accordance with applicable law. This Agreement has been duly
executed and delivered by the Stockholders and the Company, and the Stockholders
and the Company will, at the Closing, duly execute and deliver the agreements
referenced herein to which they are a party. This Agreement is a valid and
binding obligation of each Stockholder and the Company enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally, and (ii) general
principles of equity regardless of whether such enforceability is considered in
a proceeding in equity or at law. No further action is required to be taken by
the Stockholders or the Company, nor is it necessary for the Stockholders or the
Company to obtain any action, approval or consent by or from any third persons,
governmental or other, to enable the Stockholders or the Company to enter into
or perform its obligations under this Agreement and each agreement referred to
herein to which it is a party.
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(e) Noncontravention. Except as disclosed on Schedule 4.3(e), neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Company is subject or by which any of its assets are bound, (ii) conflict with
or violate any provision of the Articles of Incorporation, any provision of the
Bylaws of the Company or any shareholders' agreement to which the Company or the
Sellers is a party or (iii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Company is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any security interest upon any of its
assets), except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation or failure to give notice would not have
a material adverse effect on either (i) the assets, operations, financial
condition or prospects of the Business, or (ii) Stockholders' or the Company's
(as applicable) ability to consummate the transactions contemplated hereby (a
"Material Adverse Effect"). Except as set forth on Schedule 4.3(e), the Company
does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or obtain any
authorization, consent, or approval would not have a Material Adverse Effect.
(f) Financial Statements. The Stockholders have delivered to Parent
financial statements of the Company consisting of an unaudited balance sheet and
a related statement of income, as of and for the period ended March 31, 1997.
True, correct and complete copies of the Company's unaudited financial
statements from January 1, 1996 through December 31, 1996 are attached as
Schedule 4.3(f) hereto (the "Financial Statements"). Except as otherwise set
forth in the footnotes contained therein, the Financial Statements were prepared
in accordance with generally accepted accounting principles ("GAAP"). The
Financial Statements fairly present the financial condition of the Company and
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the results of its operations as of the relevant dates thereof and for the
respective periods covered thereby. Except as set forth in the Financial
Statements, the Company does not have any debts, obligations, liabilities or
commitments of any nature, whether due or to become due, absolute, contingent or
otherwise, that, in accordance with GAAP, are required to be disclosed in a
balance sheet or the footnotes thereto, and are not shown on the March 31, 1997
balance sheet delivered pursuant hereto, other than liabilities incurred after
March 31, 1997 in the ordinary course of business and consistent with past
practice. Such post-March 31, 1997 liabilities are not material in amount and
have not had and are not expected to have, individually or in the aggregate, a
material adverse effect on the financial condition or results of operations of
the Company or the business. As to each liability, debt, obligation or
commitment, fixed or contingent, that is set forth in the Financial Statements,
the Stockholders shall provide the following information, in writing as an
attachment to such Schedule: (i) a summary description of the liability, debt,
obligation or commitment, together with copies of all relevant documentation
relating thereto, the amounts claimed and any other action or relief sought and,
if in connection with a claim, suit or proceeding, the name of the claimant and
all other parties involved therewith and the identity of the court or agency in
which such claim, suit or proceeding is being prosecuted, and (ii) the best
estimate of the Stockholders of the maximum amount, if any, which is likely to
become payable with respect to any contingent liability. For purposes hereof, if
no written estimate is provided, such best estimate shall be deemed to be zero.
To the best of Stockholders' and the Company's knowledge, except as noted on
Schedule 4.3(f), all outstanding notes and accounts receivable of the Company
are collectible.
(g) Absence of Certain Changes. Except as set forth in Schedule 4.3(g)
hereto, during the period from December 31, 1996 to the date hereof, there has
not been with respect to or affecting the Company or the Business: (i) any
amendment, termination or revocation, or any threat known to the Stockholders or
the Company of any amendment, termination or revocation, of any lease, licenses,
permit, franchise, purchase order, sales order or other agreement or binding
commitment, whether or not in written form (a "Contract") to which the Company
is a party; (ii) except for the transactions contemplated hereby, any sale,
transfer, mortgage, pledge or subjection to any Encumbrance, of, on or affecting
any of the Company's assets, except sales or utilization of the Company's
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inventory that have been made in the ordinary course of Business consistent with
past practices, and liens for current taxes not yet due and payable; (iii) other
than as contemplated in connection with the transactions contemplated hereby,
any increase in the compensation paid or to become payable or in the fringe
benefits provided to any officers or employees of the Company, (iv) any damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting the Company or the Business; (v) the incurrence of any
indebtedness, either for borrowed money or in connection with any purchase of
assets that is not reflected in the March 31, 1997 balance sheet which
individually, or in the aggregate, involves more than $1,000, except in the
ordinary course of business consistent with past practices; (vi) any purchase or
lease, or commitment for the purchase or lease, of equipment, machinery,
leasehold improvements or other capital items not disclosed in the Financial
Statements which involves amounts exceeding $1,000 individually or $2,500 in the
aggregate, or obligates the Company to purchase goods or services for a period
of 90 days or more except in the ordinary course of business consistent with
past practices; (vii) the execution by the Company of any agreement or Contract
that is, or could reasonably be expected to become, material to the Business;
(viii) any material change in the collection, payment or credit experience or
practices of the Business or in the accounting practices, procedures or methods
of the Company; (ix) the occurrence subsequent to December 31, 1996 of any other
event or circumstance which could materially and adversely affect any of the
Company's assets, the Business, or the ability of the Stockholders or the
Company to consummate the transactions contemplated hereby or (x) any commitment
with respect to any of the foregoing.
(h) Title to and Adequacy of Company Assets. Except as disclosed on
Schedule 4.3(h) hereto, the Company has, and at the Closing will have, good,
complete and marketable title to all of its assets necessary for USPN to own and
operate the Business substantially in the same manner as it is being now
conducted (the "Company Assets"). Except as set forth on Schedule 4.3(h), all of
the Company Assets are in the exclusive possession and control of the Company.
The Company Assets have been maintained in good working condition (normal wear
and tear excepted) and are sufficient for the conduct of the Business. The
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Company's accounts receivable and pawn loans receivable represent bona fide
obligations arising in the ordinary course of the Business and to the best of
the Stockholders' and the Company's knowledge, are fully collectible by the
Company or adequately collateralized, net of reserves for doubtful accounts as
reflected on the Financial Statements. The assets reflected on the Financial
statements constitute all of the assets, properties and other rights used in the
conduct of the Business except for those assets acquired or disposed of in the
ordinary course of business subsequent to the date of the Financial Statements.
(i) Undisclosed Liabilities. To the best of Stockholders' and the
Company's knowledge, the Company has no liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), except for (i) liabilities set forth in the balance sheets dated as of
March 31, 1997, and outstanding on the Closing Date, and (ii) liabilities which
have arisen after March 31, 1997, in the ordinary course of business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by breach of contract, breach of warranty, tort, infringement, or
violation of law or which individually or in the aggregate will have a Material
Adverse Effect). Except as disclosed on Schedule 4.3(i), the Company has no
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, or whether due or to become due) for Taxes (as defined
below). Notwithstanding anything in the foregoing to the contrary, as of the
Closing Date, the Company will not have any accounts payable or other
outstanding liabilities other than those incurred in the ordinary course of
business.
(j) Brokers' Fees. None of the Stockholders nor the Company has paid
or is obligated to pay any brokerage commissions, finders' fees or similar
compensation (including any payments to employees of the Company but excluding
fees to attorneys and accountants) in connection with the transactions
contemplated by this Agreement.
(k) Taxes. With respect to Taxes (as defined below):
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(1) The Company has filed, within the time and in the manner
prescribed by law, all returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed
under federal, state, local or any foreign laws by the Company, and
all such Returns are true, correct and complete in all material
respects.
(2) The Company has, within the time and in the manner prescribed
by law, paid (and until the Closing Date will, within the time and in
the manner prescribed by law, pay) all Taxes that are due, or claimed
or asserted by any taxing authority to be due, from or with respect to
the Company for all periods prior to the Closing Date, whether or not
shown on any Return.
(3) With respect to any period for which Returns have not yet
been filed, or for which Taxes are not yet due or owing, the Company
has no liability for Taxes other than that set forth on the Financial
Statements or incurred subsequent to the date of the Financial
Statements in the ordinary course of business. The Company has made
all required current estimated Tax payments sufficient to avoid any
underpayment penalties.
(4) The Company has established (and until the Closing Date will
establish) on its respective books and records reserves (to be
specifically designated as an increase to current liabilities) that
are adequate for the payment of all Taxes not yet due and payable.
(5) There are no liens for Taxes upon the assets of the Company
or any subsidiary of the Company except liens for Taxes not yet due.
(6) The Company has not filed (and will not file prior to the
Closing Date) any consent agreement under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code") or agree to
have Section 341(f)(2) of the Code apply to any disposition of the
subsection (f) asset (as such term is defined in Section 341(f)(4) of
the Code) owned by the Company.
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(7) Except as set forth in Schedule 4.3(k)(7) (which shall set
forth the type of return, date filed, and date of expiration of the
statute of limitations), (i) no extensions of the statute of
limitations for the assessment of federal income taxes have been
granted for any federal income tax returns of the Company ; (ii) no
extensions of the statute of limitations for the assessment of state,
local and foreign income taxes have been granted for any applicable
Returns of the Company and such Returns have been examined by the
appropriate tax authorities for all periods through December 31, 1995;
and (iii) no deficiency for any Taxes has been proposed, asserted or
assessed against the Company which has not been resolved and paid in
full.
(8) There are no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect
to any Taxes or Returns that have been given by the Company.
(9) Except as set forth in Schedule 4.3(k)(9) (which shall set
forth the nature of the proceeding, the type of Return, the
deficiencies proposed or assessed and the amount thereof, and the
taxable year in question), no federal, state, local or foreign audits
or other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Returns.
(10) The Company is not a party to any tax-sharing or allocation
agreement, nor does the Company owe any amount under any tax-sharing
or allocation agreement.
(11) No amounts payable under any agreement will fail to be
deductible for federal income tax purposes by virtue of Section 280G
or 162(m) of the Code.
(12) The Company has complied (and until the Closing Date will
comply) in all respect with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 or 1442 of
the Code or similar provisions under any foreign laws) and have,
within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities,
all amounts required to be so withheld and paid over under all
applicable laws.
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(13) The Company has never been (or has any liability for
unpaid Taxes because it once was) a member of an "affiliated
group" within the meaning of Section 1502 of the Code during any
part of any consolidated return year within any part of which
year any corporation other than the Company was also a member of
such affiliated group.
(14) Schedule 4.3(k)(14) contains a list of all
jurisdictions (whether foreign or domestic) in which the company
presently files Returns. No claim has ever been made by an
authority in a jurisdiction where the Company does not file
Returns that it is or may be subject to taxation by that
jurisdiction.
For purposes of this Agreement, "Taxes" shall mean all taxes, charges,
fees, levies, or other assessments of whatever kind or nature, including,
without limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, estimated, severance, stamp, occupancy or property taxes,
customs duties, fees, assessments or charges of any kind whatsoever (together
with any interest and any penalties, additions to tax or additional amounts)
imposed by any taxing authority (domestic or foreign) upon or payable by the
Company.
(l) Leases. Schedule 4.3(l) is a list and brief description of each of
the facilities or real properties leased by the Company and used in Business
(the "Real Property Leases"). The description sets forth, among other things,
the address of each facility or real property leased and the name and address of
the landlord. Schedule 4.3(l) also contains a list of all leases under which the
Company possesses or uses personal property in connection with the conduct or
operation of the Business. The personal property leases set forth in Schedule
4.3(l) are sometimes collectively referred to as the "Personal Property Leases."
True, correct and complete copies of the Real Property Leases and Personal
Property Leases (collectively, the "Leases") have been delivered to Parent. All
of the facilities covered by the Real Property Leases are equipped in
substantial conformity with laws and governmental regulations applicable to the
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Company or the Business. The zoning of each parcel of real property permits the
presently existing improvements thereon and continuation of the Business
presently conducted thereon and no changes therein are pending or are
threatened. To the best of the Company's and Stockholders' knowledge, after due
inquiry, no condemnation or similar proceedings are pending or, to the best
knowledge of the Company and Stockholders, after due inquiry, threatened against
any of the real properties described on Schedule 4.3(l). None of the Leases
contains any provisions which, after the Closing Date, would (i) hinder or
prevent USPN from continuing to use any of the properties or assets which are
the subject of the Leases in the manner in which they are currently used or (ii)
impose any additional costs (other than scheduled rental increases) or material
requirements as a condition to their continued use which are not currently in
effect. Except for the Leases, none of the Company Assets are held under, or
used by the Company in connection with the Business pursuant to, any lease or
conditional sales contract.
(m) Contracts, Agreements and Commitments. Schedule 4.3(m) hereto
contains an accurate and compete list of all contracts, agreements, leases,
licenses and instruments, not otherwise disclosed in Schedule 4.3(l) to which
the Company is a party or is bound and (i) which relate to and materially affect
any of the Company Assets or the Business, or (ii) which could hinder
consummation of the transactions contemplated by this Agreement or would affect
USPN's title to or its ability, after the Closing, to conduct the Business as it
is being conducted on the date hereof, or its ability to dispose of any of the
Company Assets following the Closing. Schedules 4.3(l) and (m) include, without
limitation, all contracts and agreements and all leases, licenses and
instruments, which (i) grant a security interest or permit or provide for the
imposition of any Encumbrance on, or provide for the disposition of, any of the
Company Assets; (ii) require the consent of any third party to the consummation
by the Company or Stockholders of the transactions contemplated by this
Agreement, or (iii) would restrict the use or disposition by USPN after the
Closing of any of the Company Assets. True, correct and complete copies of all
items so listed on Schedules 4.3(l) and (m) have been furnished to Parent. Each
of such contracts, agreements, leases, licenses and instruments so listed, or
required to be so listed on Schedules 4.3(l) and (m) is a valid and binding
15
obligation of the Company or Stockholders, as applicable, and to the best
knowledge of the Company and Stockholders, the other parties thereto,
enforceable in accordance with their terms, except as may be affected by
bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights
generally and general principles of equity relating to the availability of
equitable remedies. Except as otherwise set forth on Schedules 4.3(l) and (m)
hereto, there have not been any defaults by the Company, or to the best
knowledge of the Company and Stockholders after due inquiry, defaults or any
claims of default or claims of nonenforceability by the other party or parties
which, individually or in the aggregate, would have a Material Adverse Effect
and, to the best of the Company's and Stockholders' knowledge after due inquiry,
there are no facts or conditions that have occurred or that the Company or
Stockholders (without independent investigation) anticipate to occur which,
through the passage of time or the giving of notice, or both, would constitute a
default by the Company or Stockholders, or by the other party or parties, under
any of such Contracts, agreements, leases, licenses and instruments or would
cause a creation of an Encumbrance upon any of the Company Assets or otherwise
cause a Material Adverse Effect.
(n) Employees and Plans. Attached hereto as Schedule 4.3(n) is a list
of each compensation arrangement for each employee of the Company as of the date
hereof. The Company has no employee pension plan, employee profit sharing plan
or employee welfare benefit plan subject to the Employee Income Retirement
Security Act of 1974 or any other employee pension plan, employee profit sharing
plan and employee welfare benefit plan.
(o) Licenses. The Company owns and holds all licenses and permits
necessary or required by applicable law in order to conduct its Business as now
conducted and, if required, the Company and Stockholders shall take all actions
necessary to assist the Company in transferring such licenses and permits to
USPN.
(p) Labor unions. There are no agreements with any labor union, other
labor organization or labor representatives applicable to or covering the
employees of the Company, nor are any discussions or negotiations in
anticipation of any such agreement presently under way or anticipated, nor has
there been any request made to enter any such negotiations or to hold any type
of election relating to employer/employee relations or bargaining.
16
(q) Environmental laws. Except as set forth on Schedule 4.3(q) and
except for such of the following as, individually or in the aggregate, do not
and will not have a Material Adverse Effect:
(1) The Company is and has been in compliance at all times with
all applicable Environmental and Safety Requirements (as defined
below), and the Company has received no notice, report or information
regarding any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), or any corrective, investigatory or
remedial obligations, arising under Environmental and Safety
Requirements with respect to the past or present operations or
properties of the Business.
(2) The Company has obtained, and is and has been in compliance
at all times with all terms and conditions of, all permits, licenses
and other authorizations required pursuant to Environmental and Safety
Requirements for the occupation of the properties of the Business and
the conduct of its operations.
(3) To the best of the Company's and the Stockholders' knowledge,
none of the following exists at any property owned or occupied by the
Company: asbestos-containing material in any form or condition;
polychlorinated biphenyl-containing materials or equipment;
underground storage tanks; or any other toxic or hazardous material
regulated by Environmental and Safety Requirements.
(4) The transactions contemplated by this Agreement do not impose
any obligations under Environmental and Safety Requirements for site
investigation or cleanup or notification to or consent of any
government agencies or third parties.
(5) To the best of the Company's and the Stockholders' knowledge,
based on Environmental and Safety Requirements as currently in effect,
no facts, events or conditions relating to the past or present
properties or operations of the Business or properties contiguous
thereto will (x) prevent, hinder or limit continued compliance by the
17
Company with Environmental and Safety Requirements, (y) give rise to
any corrective, investigatory or remedial obligations on the part of
the Company pursuant to Environmental and Safety Requirements, or (z)
give rise to any liabilities on the part of the Company (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental and Safety Requirements, including without limitation
those liabilities relating to onsite or offsite hazardous substance
releases, personal injury, property damage or natural resources
damage.
(6) The Company has not assumed any liabilities or obligations of
any third party under Environmental and Safety Requirements.
For the purposes of this subsection, "Environmental and Safety
Requirements" means all federal, state and municipal statutes, regulations,
common law and similar provisions having force or effect of law, including all
required orders, permits, licenses and approvals, with respect to environmental,
public health and safety, occupational health and safety, product liability and
transportation matters, including without limitation those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labelling, testing, processing, discharge,
release, control or cleanup of any contaminant, waste, hazardous materials or
substances, chemical substances or mixtures, pesticides, toxic compounds or
materials, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
(r) Reports. Stockholders have delivered or made available to Parent
true, complete and correct copies of all environmental reports, analyses, tests
or monitoring in the possession of Stockholders or the Company pertaining to any
property owned or operated in connection with the Business and a true, complete
and correct list identifying all third party facilities at which contaminants
generated in connection with the Business, if any, (whether by the Company or
any prior owner or occupant) have been transported, treated, stored, handled or
18
disposed within the past five years. The premises currently occupied by the
Company satisfy all local ordinances and Nebraska statutes and the Company has
complied in all material respects with all environmental laws, including
hazardous or toxic waste disposal laws and regulations applicable to the Company
and the Business.
(s) Compliance with Law/Permits. The Business has been conducted in
compliance with all applicable laws and regulations of governmental authorities,
except for such violations that have been cured or that, individually or in the
aggregate, may not reasonably be expected to have a Material Adverse Effect. The
Company possesses, and is in compliance in all material respects with, all
franchise, contract, license, marketing right, permit, authorization, approval
or other operating authority issued by any governmental or regulatory body
("Governmental Permit") necessary to the conduct of the Business, and except as
set forth on Schedule 4.3(s) such Governmental Permits will be in full force and
effect for the benefit of the USPN following the Closing Date.
(t) Litigation and Proceedings. Except as set forth in Schedule 4.3(t)
hereto, there is no action, suit, proceeding or investigation, or any counter or
cross-claim in any action brought by or on behalf of the Company or
Stockholders, whether at law or in equity, or before or by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind, that is pending or, to the best
knowledge of the Company or Stockholders, after due inquiry, threatened, against
the Company or the Stockholders, which (i) could reasonably be expected to
affect adversely the Company's or Stockholders' ability to perform its
obligations under this Agreement or the agreements referenced herein or complete
any of the transactions contemplated hereby or thereby, or (ii) which, if
adversely determined, individually or in the aggregate, would have a Material
Adverse Effect. The Company is not subject to any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the Company, any of its assets or the Business.
(u) Insurance. Schedule 4.3(u) contains a complete listing of all
policies of insurance carried by the Company, including the type and amount of
coverage, deductible levels and expiration dates. All premiums due with respect
to such policies have been paid and such policies are in full force and effect
and will remain in full force and effect through the Closing Date. The Company
19
shall assume all risk of loss due to destruction or damage due to fire or other
casualty up to the time of Closing. Parent or USPN shall have no right to
terminate this Agreement unless such loss is "substantial" (resulting in a total
stoppage of the Business for a period of time in excess of 15 business days). In
the event of a substantial loss, this Agreement shall be terminated and Parent
and USPN waive any claims for damages against the Stockholders or the Company
for such loss or for the curtailment or interruption of the Business prior to
Closing.
(v) Affiliate Interests. Except as disclosed in Schedule 4.3(v), the
Company is not a party to any transaction with (a) any Stockholder, (b) any
employee, officer or director of the Company, (c) any relative of any
Stockholder or of any such employee, officer or director, or (d) any entity,
corporation or partnership that, directly or indirectly, is controlled by or
under common control with any Stockholder or with any such employee, officer,
director or relative, including without limitation any contract, agreement or
other arrangement (i) providing for the furnishing of services by such person,
(ii) providing for the rental of real or personal property from or to such
person, (iii) providing for the guaranty of any obligation of such person, (iv)
requiring any payment to such person which will continue beyond the Closing
Date, or (v) establishing any right or interest of such person in any of the
assets or rights of the Company.
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business. Stockholders and the Company agree that
from the date hereof and to the Closing Date or earlier termination of this
Agreement as follows:
(a) Full Access. Between the date of this Agreement and the Closing
Date, Stockholders and the Company will (i) give Parent and its authorized
representatives (including lenders, legal counsel and accountants) reasonable
access to all employees, offices, warehouses and other facilities and property
of the Business and to its books and records, (ii) permit Parent and its
authorized representatives to make such inspections thereof as Parent may
20
reasonably require, and (iii) furnish Parent and its representatives and
advisers with such financial and operating data and other information with
respect to the Business and properties of the Company as Parent may from time to
time reasonably request; provided, however, that any such investigation shall be
conducted in such a manner as not to interfere unreasonably with the operation
of the Business.
(b) Confidentiality. If the transactions contemplated by this
Agreement are not consummated, Purchaser will maintain the confidentiality of
all information and materials obtained from Stockholders and will not use or
permit others to use such information for any other purpose, except to the
extent disclosure of any such information is authorized by Stockholders or
required by law. The provisions of this Section will not apply to any
information, documents or material which are in the public domain other than by
reason of a breach of this Section by Parent or USPN.
(c) Operation of Business. Neither the Company nor the Stockholders
will engage in any practice, take any action, or enter into any transaction
outside the ordinary course of the Business. Without limiting the generality of
the foregoing, neither the Company nor the Stockholders:
(1) will authorize or effect any change in the Company's Articles
of Incorporation or Bylaws;
(2) will grant any options, warrants, or other rights to purchase
or obtain any of its capital stock or issue, sell, or otherwise
dispose of any of its capital stock;
(3) will declare, set aside, or pay any dividend or distribution
with respect to its capital stock (whether in cash or in kind), or
redeem, repurchase, or otherwise acquire any of its capital stock;
(4) will issue any note, bond, or other debt security or create,
incur, assume, or guarantee any indebtedness for borrowed money or
capitalized lease obligation;
(5) will create or permit the creation of any Encumbrance upon
any of the Company Assets other than non- consensual liens arising by
operation of law;
21
(6) will make any capital investment in, make any loan to, or
acquire the securities or assets of any other person or entity outside
the ordinary course of business;
(7) will make any change in employment terms for any of its
directors, officers, and employees or enter into any employment
agreements or commitment to any employees of the Company outside the
ordinary course of business; or
(8) will commit to any of the foregoing.
In addition, the Stockholders and the Company will:
(1) maintain working capital at current levels subject to normal
fluctuation consistent with past experience;
(2) keep in full force and effect insurance comparable in amount
and scope of coverage to insurance now carried with respect to the Business;
(3) perform in all material respects all obligations under
leases, agreements, contracts and instruments relating to or affecting the
Business;
(4) maintain the books of account and records of the Business in
the usual, regular and ordinary manner; and
(5) comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to the conduct of the Business;
(d) Exclusivity. Neither Stockholders nor the Company shall directly
or indirectly through any officer, director, employee, agent, partner, affiliate
or otherwise; (i) enter into any agreement, agreement in principle or other
commitment (whether or not legally binding) relating to any business combination
with, recapitalization of, or acquisition or purchase of all or a significant
portion of the assets or operations of, or ownership interest in, the Company or
relating to any other similar transaction (a "Competing Transaction"); (ii)
solicit, initiate or encourage the submission of any proposal or offer from any
person or entity (including any of their officers, directors employees, and
22
agents) relating to any Competing Transaction; or (iii) participate in any
discussions or negotiations regarding, furnishing to any other person or entity
any information with respect to, or encourage any effort or attempt by any
person or entity to effect, a Competing Transaction. Stockholders and the
Company shall notify Parent immediately if any person makes any proposal, offer,
inquiry or contact with respect to any of the foregoing and shall immediately
upon receipt forward a copy of such (if in writing) to Parent. In addition, the
Company will immediately terminate all discussions, negotiations, or agreements
now pending with other potential buyers with respect to a Competing Transaction.
(e) Amendment of Disclosure Schedules. From time to time prior to the
Closing Date, Stockholders and the Company will supplement or amend the
schedules hereto with respect to any matter known to them which, if existing or
occurring at or prior to the date of this Agreement, would have been required to
be set forth or described in the schedules hereto or which is necessary to
correct any information in such schedules or in any representation or warranty
of Stockholders or the Company which has been rendered inaccurate thereby. Such
supplemented or updated disclosures shall not be deemed a modification of
Stockholders' and the Company's representations and warranties and shall not
affect Parent's or USPN's rights hereunder.
SECTION 5.2 Third Party Consents. Each party to this Agreement shall use
its best efforts to obtain, as soon as reasonably practicable, all permits,
authorizations, consents, waivers and approvals from third parties or
governmental authorities necessary to consummate this Agreement and the
transactions contemplated hereby or thereby, including, without limitation, any
permits, authorizations, consents, waivers and approvals required in connection
with the Agreement.
SECTION 5.3 Sale of Merger Consideration. The Stockholders hereby agree
that they will comply with the limitations on the amount of securities sold
contained in Rule 144(e) (or any successor provision) of the Act with regard to
any resale of the Merger Consideration so long as any such Stockholder owns any
Merger Consideration (notwithstanding any shorter compliance period contained in
Rule 144).
23
SECTION 5.4 Exchange Act Filings. Parent covenants that it will timely file
all reports required to be filed by it under the Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). So long as Parent is subject to
the periodic reporting requirements of the Exchange Act, Parent covenants to
make publicly available such information as may be necessary to permit the sale
of the Merger Consideration without registration under the Act pursuant to the
exemption provided by Rule 144 under the Act, as such rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission. Upon the request of any holder of the Merger
Consideration at any time, Parent will deliver to such holder or such holder's
prospective transferee such information as may be necessary to permit the sale
of the Merger Consideration pursuant to Rule 144 under the Act, as such rule may
be amended from time to time. Upon request of any holder of the Merger
Consideration, Parent will deliver to such holder a written statement as to
whether it has complied with such information requirements.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholder Approval. The Company shall, as promptly as
practicable, submit this Agreement and the transactions contemplated hereby for
the approval of its stockholders at a meeting of stockholders and, subject to
the fiduciary duties of the Board of Directors of the Company under applicable
law, shall use its reasonable best efforts to obtain stockholder approval and
adoption (the "Company Stockholders' Approval") of this Agreement and the
transactions contemplated hereby. The Company shall, through its Board of
Directors, but subject to the fiduciary duties of the members thereof, recommend
to its stockholders approval of the transactions contemplated by this Agreement.
The Company (i) acknowledges that a breach of its covenant contained in this
Section 6.1 to convene a meeting of its stockholders and call for a vote thereat
with respect to the approval of this Agreement and the Merger will result in
irreparable harm to Parent which will not be compensable in money damages and
(ii) agrees that such covenant shall be specifically enforceable and that
specific performance and injunctive relief shall be a remedy properly available
to Parent for a breach of such covenant.
24
SECTION 6.2 Expenses and Fees. Each party hereto agrees to bear its own
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement
SECTION 6.3 Agreement to Cooperate.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable pursuant to all agreements, contracts, indentures or other instruments
to which the parties hereto are a party, or under any applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its reasonable efforts to (i) obtain all
necessary or appropriate waivers, consents and approvals from lenders,
landlords, security holders or other parties whose waiver, consent or approval
is required to consummate the Merger, (ii) effect all necessary registrations,
filings and submissions and (iii) lift any injunction or other legal bar to the
Merger (and, in such case, to proceed with the Merger as expeditiously as
possible)
(b) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, Parent shall have
the right, at its own expense, to participate therein, and the Company will not
settle any such litigation without the consent of Parent, which consent will not
be unreasonably withheld.
SECTION 6.4 Public Statements. Unless required by law, the parties shall
not make any news releases or other public disclosure with respect to this
Agreement without the prior consent of the other parties, which consent shall
not be unreasonably withheld. In addition, each of the parties hereto will be
furnishing to each other certain information which is either non-public,
confidential or proprietary in nature. Each of the parties agrees that all such
information furnished or otherwise obtained, directly or indirectly, by such
party, its directors, officers, partners, employees, agents or representatives
including, without limitation, attorneys, accountants, partners, experts and
25
consultants (collectively "Representatives") and all reports , analysis,
compilations, data, studies or other documents prepared by such party or its
Representatives containing or based, in whole or in part, on any such furnished
information (collectively the "Information") will be kept strictly confidential
and will not, without the prior written consent of the other party, be disclosed
to any other individual, corporation, partnership, joint venture, trust or
association in any manner whatsoever, in whole or in part and will not be used
for any purpose other than evaluation the transactions described herein;
provided that if either party receives an opinion of counsel that it is legally
obligated to release the Information, such party may do so after notice to and
consultation with the other party.
SECTION 6.5 Notification of Certain Matters. Each of the Company, the
Stockholders, Parent and USPN agrees to give prompt notice to each other of, and
to use their respective reasonable best efforts to prevent or promptly remedy,
(i) the occurrence or failure to occur or the impending or threatened occurrence
or failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time, and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.5 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
ARTICLE VII
CONDITIONS
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger.
Unless waived by the parties, the respective obligations of each party to effect
the Merger shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) No injunction, order, or decree by any Federal, state or foreign
court which prevents the consummation of the Merger shall have been issued;
26
(b) No statute or regulation shall exist or be enacted which would
prevent consummation of the Merger; and,
(c) Subject to Section 7.3(f) below, all governmental consents and
approvals required for Merger shall have been obtained.
SECTION 7.2 Conditions to Obligations of Stockholders and the Company to
Effect the Merger. Unless waived by the Stockholders and the Company, the
obligation of Stockholders and the Company to consummate the Merger is subject
to fulfillment of all of the following conditions precedent at or prior to the
Closing Date:
(a) All of Parent's and USPN's representations and warranties
contained herein shall be true and correct in all material respects;
(b) Parent and USPN shall have performed and complied with all
covenants under this Agreement.
(c) The Employment Agreement, substantially in the form attached
hereto, shall be executed by USPN.
SECTION 7.3 Conditions to Obligations of USPN to Consummate the Merger.
Unless waived by USPN and Parent, the obligations of USPN and Parent to
consummate the Merger are subject to the fulfillment of all of the following
conditions precedent at or prior to the Closing Date:
(a) The representations and warranties made by the Stockholder's and
the Company are true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date;
(b) The Company and Stockholders shall have performed and complied in
all material respects with all of their respective obligations under this
Agreement required to be performed or complied with by Stockholders or the
Company on or prior to the Closing Date;
(c) No action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or change would (i)
27
prevent consummation of the Merger; or (ii) materially and adversely affect the
right of the USPN to own the Company Assets and to operate the Business (and no
such injunction, judgment, order, decree, ruling or charge shall be in effect);
(d) Subject to subsection (f) below, all consents and approvals
necessary for the operation of the Business post-Closing shall have been
obtained;
(e) No material adverse change has occurred in the Business,
operations or prospects of the Company;
(f) Approval of the transfer or new issuance to USPN of the Business'
pawnshop license, firearms license and secondhand license pursuant to the
provisions of applicable ordinances or laws in the municipality or county where
the Business is located provided, however, that if, at the time of approval of
the transfer of the pawnshop license and the secondhand license, USPN has not
received approval for such transfer of the firearms licenses, then the Merger
shall be consummated and LW and/or MS, as the case may be, shall, and hereby
agrees to, for nominal consideration and compensation, enter into a management
agreement in form and substance acceptable to USPN for a period not to exceed 90
days regarding the sale of firearms at the Business, whereby LW and/or MS, as
the case may be, shall utilize thier firearms license to enable USPN to continue
the firearms portion of the Business, pending the approval of the firearms
license for the Business;
(g) Execution of a new lease with terms and conditions satisfactory to
USPN between USPN and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (or modification of the existing lease)
for the building known as ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ with
substantially the following terms: (i) the lease shall commence on the Closing
Date and provide for a term ending on the date which is five years from the
Closing Date; (ii) the lease shall provide for two options, exercisable by USPN
each for an additional five year term; and (iii) the lease shall provide that
USPN will be granted a right of first refusal in the event of any proposed sale
of the aforesaid premises to purchase such premises on substantially the same
terms of such proposed sale;
(h) The execution of Articles of Merger in form satisfactory for
filing with the Secretaries of State of the States of Colorado and Nebraska;
(i) Parent shall have received an opinion from counsel to the Company,
effective as of the Closing Date, in form and substance reasonably satisfactory
to Parent;
(j) Since the date hereof, there shall have been no changes that
constitute, and no event or events shall have occurred which have resulted in or
constitute, a material adverse change in the business, operations, properties,
assets, condition (financial or other) or results of operations of the Company;
and
28
(k) The Employment Agreement, substantially in the form attached
hereto as Exhibit A, shall be executed by ▇▇▇▇ ▇▇▇▇▇.
SECTION 7.4 Contingencies. In addition to the foregoing, this Agreement and
USPN's and Parent's obligation to perform hereunder is specifically contingent
upon and subject to the Parent's satisfaction, in its sole discretion, with its
due diligence examination of the following which will be performed and completed
by Parent its agents within 15 business days of the execution of this Agreement;
(a) An accounting and audit verification of all assets and liabilities
of the Company by agents of Parent;
(b) Verification of the corporate status of the Company with the
Nebraska Secretary of State;
(c) Review of Company Articles of Incorporation, Bylaws, minutes of
any meetings of shareholders and board of directors, and stock certificate
records and ledgers of the Company which will be provided to Parent upon
execution of this Agreement;
(d) Review of pawn and other required business licenses of the Company
to conduct the Business in the state and local governmental jurisdictions; and
(e) Any other Business review procedures or documents required to
close the Merger as may be required or recommended by legal, accounting or tax
advisers to Parent.
If the Parent is not satisfied, in Parent's sole opinion, with its review
of any of the above, the Parent and USPN may terminate this Agreement in writing
on or before 20 business days from the execution of this Agreement, in which
event this Agreement and all obligations of the Parent hereunder shall
terminate.
29
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. Anything to the contrary notwithstanding, this
Agreement may be terminated at any time prior to the Closing Date:
(a) By mutual written consent of Parent, USPN, the Company and the
Stockholders;
(b) By either Parent, USPN, the Company or the Stockholders if (i) the
Merger shall not have been consummated on or before August 31, 1997 (the
"Termination Date"), or (ii) any court or competent jurisdiction in the United
States or any State shall have issued an order, judgment or decree (other than a
temporary restraining order) restraining, enjoining or otherwise prohibiting the
consummation of the Merger and such order, judgment or decree shall have become
final and nonappealable; or
(c) This Agreement may be terminated by Parent or USPN, by written
notice to the Company and the Stockholders, if any governmental or regulatory
body, the consent of which is a condition to the obligations of USPN to
consummate the transactions contemplated hereby, shall have determined not to
grant its consent.
SECTION 8.2 Effect of Termination. In the event of termination of this
Agreement by either Parent, USPN, the Company or the Stockholders as provided
herein, this Agreement shall forthwith become void and there shall be no
liability on the part of Parent, USPN, the Company, the Stockholders or their
respective officers or directors. Nothing in this Section shall relieve any
party from liability for any breach of this Agreement.
30
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Survival of Representations and Warranties. All
representations, warranties, covenants and agreements made by any party in this
Agreement or pursuant hereto shall survive the Closing until December 31, 1998,
except for the representations, warranties, covenants and agreements regarding
Taxes which shall survive the Purchase until the expiration of the applicable
statutes of limitations with respect to such matters and Section 5.2 which shall
survive so long as any Stockholder owns any Merger Consideration.
SECTION 9.2 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the parties. At any time prior to the Effective Time, the parties hereto may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant thereto,
and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party. No waiver by any party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
SECTION 9.3 Press Releases and Public Announcements. No party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior approval of the other parties; provided,
however, that any party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing party will use its
reasonable best efforts to advise the other party prior to making the
disclosure).
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SECTION 9.4 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (i) hand
delivered; (ii) sent by a nationally recognized overnight courier; (iii) sent by
registered or certified mail, return receipt requested, postage prepaid; or (iv)
sent by telephone facsimile transmission (with prompt oral confirmation of
receipt) as follows:
If to the Company:
Pawn Warehouse Outlet, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.
Copy To:
(post-Closing)
U.S. Pawn Nebraska, Inc.
c/o U.S. Pawn, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
(pre-Closing)
▇▇▇▇ ▇▇▇▇▇
Pawn Warehouse Outlet, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.
If to Parent or USPN:
U.S. Pawn Nebraska, Inc.
U.S. Pawn, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
32
Copy To:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇. #▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇ Hyatt ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Stockholders:
▇▇▇▇ ▇▇▇▇▇
Pawn Warehouse Outlet, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.
and
▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
parties notice in the manner herein set forth.
SECTION 9.5 Entire Agreement. This Agreement (including the documents
referred to herein) fully sets forth the agreement of the parties described in
the letter dated February 26, 1997 and constitutes the entire agreement among
the parties and supersedes any prior understandings, agreements, or
representations by or among the parties, written or oral, to the extent they
related in any way to the subject matter hereof.
33
SECTION 9.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
SECTION 9.7 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
SECTION 9.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF COLORADO WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF COLORADO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF COLORADO. IN ANY ACTION
BROUGHT UNDER OR ARISING OUT OF THIS AGREEMENT, THE PARTIES HEREBY CONSENT TO
THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF COLORADO AND CONSENT
TO SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY THE LAWS OF SUCH STATE.
SECTION 9.9 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other parties provided, however, that Parent and USPN may assign
their rights under this Agreement to a wholly owned subsidiary entity of Parent
without any prior consent.
SECTION 9.10 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.11 Expenses. Except as otherwise provided herein, each of the
parties will bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
SECTION 9.12 Exhibits and Schedules. All Exhibits and Schedules referred to
in this Agreement shall be attached hereto and are incorporated herein by
reference.
34
SECTION 9.13 Non-competition and confidentiality.
(a) Non-Compete. MS and LW each agrees that for a period of five years
after the date hereof, without the prior written consent of the Board of
Directors of USPN, MS or LW will not (i) enter into any agreement with or
directly or indirectly, solicit or attempt to solicit employees (whether
full-time, part-time or temporary) or representatives of USPN or Parent, for the
purpose of causing, inviting or encouraging them to alter or terminate his, his
or its employment (whether or not such employment is pursuant to written
agreement, is for a determined period or is at will) or business relationship
with USPN or Parent; (ii) accept employment with, serve as a consultant to,
acquire an equity interest in, make loans to or for the benefit of, render any
services to, or accept compensation from any person, firm or corporation
(including any new business started by MS or LW alone or with others or at the
direction of MS or LW) whose business is similar to the business or whose
services compete with those offered by USPN or Parent (such similar products or
services include other pawn shop or similar buy/sell operations, but shall not
include the retail sale only of similar products or services) within a 25 mile
radius of any entity (now existing or, provided MS or LW does not have a prior
business presence similar to the Business within such geographic area, in the
future existing) 5% or more of which is directly or indirectly owned by USPN or
Parent and which engages in a business similar to the Business or in any
geographic market in which, to MS or LW's knowledge, as applicable, USPN or
Parent plans to do business, or (iii) contact, divert, appropriate or solicit or
attempt to contact, divert, appropriate or solicit, any customers of USPN or
Parent, for the purpose of diverting any existing or future business of such
customers to a competing source.
Notwithstanding the foregoing, ownership of not more than two
percent of the voting stock of a corporation whose stock is traded on a national
securities exchange or over-the-counter or employment with another affiliate of
USPN or Parent shall not of itself constitute a violation of this Section 9.13.
(b) Confidentiality. MS and LW each recognizes and acknowledges that
any and all compilations and lists of USPN's customers are valuable, special and
unique assets of the Business. MS and LW each agrees that he or she will not,
without the prior written consent of USPN, (1) disclose any trade secrets,
35
intellectual property or information of the USPN, Parent or any affiliate
thereof (collectively, the "U.S. Pawn Entities") (including but not limited to
cost of pricing information, software specifications, customer lists, supply
information, internal business procedures, market studies, financial statements
or other financial information, information concerning pending or contemplated
acquisitions or expansion plans or the existence of negotiations concerning the
same, and similar non-public information relating to the U.S. Pawn Entities'
internal operations, business, plans, policies or practices (collectively,
"Confidential Information")) to any third party or (ii) use or permit the use of
any of the U.S. Pawn Entities' trade secrets or Confidential Information in any
way to compete (directly or indirectly) with the U.S. Pawn Entities or in any
other manner adverse to the U.S. Pawn Entities; provided; however, that the
trade secrets and Confidential Information referenced in the foregoing provision
shall not include any form of information or knowledge which: (i) is already in
the public domain, or enters the public domain, under any circumstances other
than a wrongful act by MS or LW; (ii) is received by MS or LW, as the case may
be, from any third party without similar restrictions and without breach of this
Non-Compete Section; or (iii) is lawfully required to be disclosed by any
governmental agency or applicable law; provided that, disclosure of such
information would not, directly or indirectly, place any of the U.S. Pawn
entities at a competitive disadvantage or otherwise adversely affect any of the
U.S. Pawn Entities, or their current or future operations or prospects, as
determined by USPN's Board of Directors, in its reasonable business judgment.
36
IN WITNESS WHEREOF, Parent, USPN, the Company and the Stockholders have
caused this Agreement to be signed as of the date first written above.
U.S. PAWN, INC.
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Chief Executive Officer
U.S. PAWN NEBRASKA, INC.
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
COMPANY:
PAWN WAREHOUSE OUTLET, INC.
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT
STOCKHOLDERS:
/s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
217585.2
[6679\1]
37
