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EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
THIS AGREEMENT made and entered into effective as of the 31st day of
July, 1996, by and between RTO, INC., a Delaware corporation (hereinafter
referred to as "Purchaser"), and the persons and entities identified on Exhibit
A hereto (hereinafter referred to collectively as "Sellers" and individually as
a "Seller"), being all of the shareholders of Action TV & Appliance Rental,
Inc., a Texas corporation ("Action");
W I T N E S S E T H:
WHEREAS, Sellers own all of the outstanding capital stock of Action;
and
WHEREAS, subject to the terms and conditions of this Agreement, Sellers
desire to sell, and Purchaser desires to purchase, all of the outstanding
capital stock of Action;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
Section 1. Purchase of Shares.
1.1. Transfer of Shares. On the terms and subject to the
conditions set forth in this Agreement, each Seller hereby sells, assigns,
transfers and delivers to Purchaser, and Purchaser hereby purchases from each
Seller, the number of shares of common stock, $1.00 par value, of Action shown
opposite the name of such Seller on Schedule 3.3 hereto (all of such shares
being sold hereunder being hereinafter referred to collectively as the
"Shares").
1.2. Purchase Price. As consideration for the Shares and for
certain other agreements of the Sellers in connection with the transactions
contemplated hereby, Purchaser hereby delivers to Sellers the sum of Forty-Five
Million Four Hundred Ninety Thousand One Hundred Eighty Seven Dollars
($45,290,187) in cash to Sellers, which has been paid to the Sellers by wire
transfer of the amounts shown on Schedule 1.2 to the bank accounts of the
Sellers shown on Schedule 1.2 (such price being hereinafter referred to as the
"Purchase Price").
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Section 2. Closing.
2.1. Deliveries at Closing. Contemporaneously with the
execution and delivery of this Agreement, Sellers have delivered to Purchaser
the following:
(a) The Share Certificates, duly endorsed in blank,
evidencing all of the Shares;
(b) Written consent of Comerica Bank;
(c) Written resignations of each of the officers and
directors of Action;
(d) The Noncompetition Agreement between Action and Xxxxx X.
Xxxxx, Xx. ("White");
(e) The Noncompetition Agreement between Action and Xxxxxxx
Xxxxx Xxxx;
(f) The Noncompetition Agreement between Action and Xxxxx X.
Xxxxx, Xx.;
(g) The Noncompetition Agreement between Action and R. Xxxxxx
Xxxxxxxx;
(h) Evidence satisfactory to Purchaser that the Split Dollar
Agreements have been terminated and that Action has no further obligation or
liability (whether accrued, contingent or otherwise) for the payment of any
premium or other amount in respect of the insurance policies described therein
and that Action has distributed to the Shareholders of Action the promissory
notes which, prior to the date hereof, were held by Action to evidence amounts
which have been paid by Action in respect of such insurance policies;
(i) Evidence satisfactory to Purchaser that Action and each
Seller has executed and delivered a waiver of their statutory preemptive rights
and their respective rights under Article VI, Sections 5-6, of Action's Bylaws
with respect to restrictions on the transfer of the Shares to Purchaser;
(j) Evidence reasonably satisfactory to Purchaser that the
"Shareholders Agreement for Common Stock in Action TV and Appliance Rental,
Inc." by and among Action and each Seller has been irrevocably terminated;
(k) Evidence reasonably satisfactory to Purchaser that all
accounts receivable, accounts payable, loan and other indebtedness by and
between Action, on the one hand, and any Seller or any company or other entity
in which such Seller has a direct or indirect financial interest, on the other
hand, has been paid in full;
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(l) Evidence satisfactory to Purchaser that all real estate
owned by Action has been conveyed and transferred by Action to a third party;
and
(m) Evidence satisfactory to Purchaser that any leases for
stores currently used by Action but executed in the name of White as the tenant
have been assigned to Action.
2.2. Further Assurances. Each Seller shall, from time to time
after the date hereof at Purchaser's reasonable request and without further
consideration, execute and deliver to Purchaser such instruments of transfer,
conveyance and assignment in addition to those delivered pursuant to Section 2.1
hereof as Purchaser shall reasonably request to transfer, convey and assign more
effectively the Shares owned by such Seller to Purchaser.
Section 3. Representations and Warranties of Xxxxx X.
Xxxxx, Xx.
White, the controlling shareholder of Action, but not the
other Sellers, hereby represents and warrants to Purchaser as follows:
3.1. Corporate Existence and Power. Action is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas. Action is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of the states listed in
Schedule 3.1 hereto and in each other state of the United States in which the
failure to so qualify would, or could reasonably be expected to, have a material
adverse effect on the business, assets, results of operations, condition
(financial or otherwise) or prospects of Action, and has all corporate power and
all material governmental licenses, authorizations, consents and approvals
required to carry out its business as now conducted.
3.2. Enforceability of Agreement. This Agreement has been duly
executed and delivered by each Seller and constitutes the legal, valid and
binding agreement of each Seller, enforceable against each Seller in accordance
with its terms.
3.3. Ownership of Shares. Each Seller is the owner of the
number of Shares listed opposite the name of such Seller on Schedule 3.3 hereto,
free and clear of all liens, charges and other encumbrances of any nature
whatsoever except as disclosed on Schedule 3.3. Schedule 3.3 sets forth a true
and complete list of all current beneficiaries of the trusts that are listed on
Schedule 3.3 as Sellers of Shares hereunder, and such beneficiaries constitute
the only persons, other than the Sellers, with any beneficial interest in the
Shares. The Shares constitute all the issued and outstanding shares of capital
stock of Action. Each Seller has the full legal right, power and authority to
sell, assign, transfer and deliver his Shares to Purchaser, free and clear of
all liens, charges and other encumbrances of any nature whatsoever except as
reflected on Schedule 3.3. By virtue of the transfer of the Shares and the
delivery of the stock certificates to Purchaser pursuant to Section 2.1 hereof,
Purchaser has obtained full and legal title to all of the Shares, free and clear
of any lien, charge or other encumbrance whatsoever except as reflected on
Schedule 3.3.
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3.4. Authorizations and Approvals. Assuming the accuracy of
Purchaser's representations and warranties hereafter set out regarding no
governmental filings, and except for those licenses described in Schedule 3.5 as
being nontransferable or requiring advance notice to the relevant authority, the
execution, delivery and performance by Sellers of this Agreement and the
consummation by Sellers of the transactions contemplated by this Agreement
require no action by or in respect of or filing with any governmental body,
agency, official or authority on the part of any Seller or Action other than
compliance with any applicable requirements of federal or state securities laws.
3.5. No Conflict. Except as disclosed on Schedule 3.5, the
execution, delivery and performance by Sellers of this Agreement and the
consummation by Sellers of the transactions contemplated by this Agreement do
not and will not (a) contravene or conflict with the Certificate of
Incorporation or Bylaws of Action, (b) contravene or conflict or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to Sellers or Action, (c) to the knowledge
of White, constitute a default (or an event which with notice, the lapse of time
or both would become a default) under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Action or to a loss
of any benefit to which Action is entitled under any provision of any material
agreement or contract or other material instrument binding upon Action or any
material license or permit or similar material authorization held by Action, or
(d) result in the creation or imposition of any lien, encumbrance or charge of
any kind on any asset of Action.
3.6. Capitalization. Action's authorized capital stock
consists solely of ten thousand (10,000) shares of common stock, $1.00 par
value, of which one thousand (1,000) shares are issued and outstanding. All of
the outstanding shares of capital stock of Action have been duly authorized and
are duly and validly issued and outstanding, fully paid and nonassessable and
owned of record by Sellers. There are no shares of capital stock of Action held
in the treasury of Action. Except as disclosed on Schedule 3.6, there are no
existing or outstanding (i) options, warrants, contracts, preemptive rights,
proxies, calls, commitments or demands or rights of any character obligating
Action to issue any shares of capital stock of Action or options, warrants or
rights with respect thereto, (ii) securities of any kind convertible into or
exchangeable for shares of capital stock of Action, and (iii) agreements of any
kind relating to the issuance of any capital stock of Action, or any such
convertible or exchangeable securities or obligations, or any such options,
warrants or rights. There are no outstanding obligations of Action to
repurchase, redeem or otherwise acquire any outstanding capital stock of Action.
3.7. Certificate of Incorporation. Except as noted on Schedule
3.7, the Certificate of Incorporation, Bylaws, minute books and stock books of
Action which have been furnished to Purchaser are true and complete in all
material respects and contain all amendments thereto to date (in the case of the
Certificate of Incorporation and Bylaws), a record of all proceedings of the
Board of Directors of Action (and all committees of such Board) and the
shareholders of Action (in the case of the minute books), and a record of all
stock issuances and transfers (in the case of the stock books). Schedule 3.7
hereto contains a true and complete list of all of the current officers and
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directors of Action. The minutes of the Board of Directors and shareholders from
May 1995 until present have been misplaced and cannot be located. During that
time, the Board of Directors and shareholders authorized all transactions of
Action required to be so authorized and took no action which (i) has not been
disclosed to Purchaser; (ii) to the knowledge of White, has had or will have a
material adverse effect on the business, assets, results of operations,
condition (financial or otherwise) or prospects of Action and (iii) was not in
the ordinary course of business. The officers and directors of Action listed on
Schedule 3.7 have been duly elected by the Board of Directors and shareholders
of Action, respectively.
3.8. Subsidiaries. Action does not own, directly or
indirectly, any capital stock or other security of or interest in any other
corporation or any partnership, joint venture or other association.
3.9. 1996 Financial Statements. Prior to the date hereof,
Sellers have delivered to Purchaser the following financial statements
(including the respective notes thereto) for Action (such financial statements
being hereinafter referred to collectively as the "1996 Financial Statements"):
(a) The unaudited balance sheet of Action as at June 30,
1996 (the "1996 Balance Sheet"); and
(b) The unaudited statements of income for Action for
the period ended June 30, 1996.
The 1996 Financial Statements have been internally generated by Action and have
been prepared by Action on a basis consistent with prior years' internally
generated financial statements.
3.10. Absence of Undisclosed Liabilities. Except as and to the
extent reflected and adequately reserved against in the 1996 Balance Sheet, to
the knowledge of White, Action, as of June 30, 1996, had no material liability
or obligation whatsoever, whether accrued, absolute, contingent or otherwise,
required to be reflected or disclosed in the 1996 Financial Statements in
accordance with generally accepted accounting principles, except (i) for
liabilities and obligations (including, but not limited to equipment, vehicle
and real estate leases) incurred in the usual and ordinary course of business
consistent with past practice and (ii) those matters listed on Schedule 3.10. To
the knowledge of White, since June 30, 1996, Action has not incurred any
liability or obligation whatsoever, whether accrued, absolute, contingent or
otherwise, except in the usual and ordinary course of business. As of July 31,
1996, the outstanding balance under the Seajay Note was $2,206,957.79.
3.11. Tax Matters.
(a) Certain Definitions. "Tax" means any federal, state,
local, or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation,
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premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real or personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not. "Tax Return" means any return, declaration,
report, claim for refund or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof. "Code" means the Internal Revenue Code of 1986, as amended.
(b) Tax Returns and Liabilities. To the knowledge of
White, Action has filed all Tax Returns that it was required to file. To the
knowledge of White, all such Tax Returns were correct and complete in all
material respects. To the knowledge of White, all Taxes owed by Action (whether
or not shown on any Tax Return) have been paid other than as described on
Schedule 3.11(b). Except as set forth in Schedule 3.11(b) hereto, Action
currently is not the beneficiary of any extension of time within which to file
any Tax Return. Except as disclosed on Schedule 3.11(b), no overt claim has ever
been made against Action by an authority in a jurisdiction where Action does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
To the knowledge of White, there are no liens or other security interests on any
of the assets of Action that arose in connection with any failure or alleged
failure to pay any Tax assessed by any taxing authority against Action.
(c) Withholding. Action has withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(d) Tax Disputes. Except as reflected on Schedule
3.11(d), White has no knowledge of any claim by any authority to assess any
additional Taxes against Action for any period for which Tax Returns have been
filed with such authority. Except as reflected on Schedule 3.11(d), there is no
pending dispute or claim concerning any Tax liability of Action either (i)
raised by any authority in writing or (ii) as to which White has knowledge based
upon personal contact with any agent of such authority. Schedule 3.11(d) lists
all Tax Returns since 1991 that have been audited, and indicates those Tax
Returns that currently are the subject of audit. Action has made available or
delivered to Purchaser correct and complete copies of all federal income tax and
other Tax Returns filed by Action for taxable years ending after December 31,
1991, and all examination reports and statements of deficiencies relating
thereto.
(e) Waivers of Statutes of Limitations. Action has not
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
(f) Tax Elections and Filings: Tax Accounting Matters. On
or before January 1, 1993 Action elected to be treated as an S corporation for
federal income tax purposes for taxable years ending after December 31, 1992
(and for state income tax purposes in the states set forth on Schedule 3.11(f)
for taxable years so indicated) and has not terminated or revoked any such
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election. To White's knowledge, Action has not been subject to the Tax on
built-in gains imposed under Code Section 1374 in any taxable year. Action has
not filed a consent under Code ss. 341(f) concerning collapsible corporations.
Action has not made any payments, is not obligated to make any payments, and is
not a party to any agreement that could obligate it to make any payments that
will not be deductible under Code ss.280G. Action has not been a United States
real property holding corporation within the meaning of Code ss. 897(c)(2)
during the applicable period specified in Code ss. 897(c)(1)(A)(ii). To White's
knowledge, all accounting periods and methods used by Action for Tax purposes
are permissible periods and methods, and to White's knowledge, Action is not
required to take into account any adjustments to its income under Code ss. 481.
Action is not a party to any Tax allocation or sharing agreement and, except
with respect to a subsidiary of Action that was dissolved in 1992, has not been
a member of an affiliated group filing a consolidated federal income Tax Return
with any other corporation. Except as set forth on Schedule 3.11(f) hereto, to
the knowledge of White, Action is not a party to any contract other than those
listed on Schedule 3.11(f) by which it indemnifies any other party with respect
to Taxes or otherwise assumes responsibility for Taxes assessed against another
party.
3.12. Absence of Certain Changes and Events. Except as set
forth in Schedule 3.12 hereto, since June 30, 1996, the business of Action has
been operated only in the usual and ordinary course of business consistent with
past practice, and since June 30, 1996, there has not been:
(a) Any material adverse change in the financial
condition, assets, liabilities (whether absolute, accrued or
otherwise), reserves, business or results of operations of
Action;
(b) Any material damage, destruction or casualty loss
(whether or not covered by insurance) to the assets owned or
leased by Action; or
(c) Any material and adverse change in the operation of
the business of Action or any material transactions entered
into other than in the ordinary course of business consistent
with prior practice.
In addition, except as set forth in Schedule 3.12 hereto, since June
30, 1996, Action has not:
(i) Issued or sold, or granted options, warrants or
rights to purchase or to subscribe to, or entered into any
arrangement or contract with respect to, the issuance or sale
of, any of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital
stock, or made any changes in its capital stock, or made any
tax distributions to its shareholders;
(ii) Declared, paid or set aside for payment any
dividend or other distribution on or in respect of its capital
stock, or directly or indirectly redeemed, purchased or
otherwise acquired any shares of its capital stock any
securities convertible into or exchangeable for any shares of
its capital stock, or any options,
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warrants or other rights to purchase or subscribe for any of
the foregoing, or authorized the creation or issuance of or
issued, sold or committed to sell (or granted any options or
rights to purchase) any additional shares of its capital
stock, or agreed to take any such action, or sold, issued or
incurred (or agreed to sell, issue or incur) indebtedness for
borrowed money having a maturity in excess of one year;
(iii) Organized any subsidiary, acquired any capital
stock or other equity security of any entity or other business
or venture, or acquired any equity or ownership interest in
any entity or other business or venture;
(iv) To White's knowledge, other than in the ordinary
course of business consistent with past practice and not in
excess of current requirements, incurred any obligation or
liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise) or assumed, guaranteed, endorsed or
otherwise as an accommodation become responsible for the
obligations of any other entity, business or venture;
(v) Paid, discharged or satisfied any liability or
obligation (whether absolute, accrued, contingent or
otherwise), other than the payment, discharge or satisfaction
of liabilities and obligations in the usual and ordinary
course of business;
(vi) Mortgaged, pledged or subjected to a lien,
security interest, encumbrance, restriction or charge of any
kind any of its assets (real, personal or mixed, tangible or
intangible), except for involuntary statutory liens and
contractual landlord's liens under leases;
(vii) To White's knowledge, canceled or waived any
material claim against any third party or right held by any
such third party, or canceled, released or assigned any
indebtedness to any such third party, or other than rental
contracts entered into in the ordinary course of business,
sold, transferred, distributed or otherwise disposed of any
material assets or properties;
(viii) Disposed of or permitted to lapse any rights to
the use of any material patent, trademark, trade name, service
xxxx, license or copyright which has been used in its business
in the last five (5) years, or, except in connection with the
proposed sale of the Shares or the business of Action to
Purchaser, disclosed to any person not under any obligation of
confidentiality to the Sellers or Action, any trade secret,
formula, process or know-how not theretofore a matter of
public knowledge;
(ix) Increased the compensation payable to or to
become payable by Action to any officer, director, key
employee or agent of Action, or any commission or bonus
payable to or to become payable by Action to any such officer,
director, employee or agent, or in any insurance, pension or
other benefit plan, payment or
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arrangement made to, for or with any such officer, director,
employee or agent of Action;
(x) Other than in the ordinary course of business
consistent with past practice and not in excess of current
requirements, made any capital expenditure in excess of
$100,000 not previously committed or made any new commitment
in excess of $100,000 for additions to property, plant or
equipment;
(xi) Been the subject of or experienced any strike or
other work stoppage or concerted slow down or threat thereof,
union election or attempted collective bargaining of
employees;
(xii) Entered into any contract limiting the right of
Action at any time on or after the date of this Agreement to
engage in, or to compete with any person in, any business;
(xiii) Other than at the request of Purchaser, changed
any method of accounting or any accounting principle or
practice used by Action, except for any such change required
by reason of a concurrent change in generally accepted
accounting principles; or
(xiv) To White's knowledge, agreed, whether in writing
or not, to do any of the foregoing.
3.13. Material Contracts. Except as set forth on Schedule
3.13 hereto, Action has no:
(a) Contract or agreement involving amounts payable
by Action or amounts payable to Action in each case during any
12-month period which will aggregate $100,000 or more, other
than those disclosed on Schedules attached to this Agreement;
(b) "Action Employee Plan or Arrangement" (as
hereinafter defined);
(c) Contract or agreement for the purchase, sale or
lease of goods, materials, equipment, supplies or capital
assets or for the rendering of services involving payments by
Action which will aggregate $100,000 or more in any 12-month
period and which require more than thirty (30) days notice in
order for such commitments to be terminated without liability
to Action, other than those disclosed on Schedules attached
hereto;
(d) Contract or agreement with any distributor,
agent, dealer or sales representative which involves amounts
payable by Action during any 12-month period which will
aggregate $100,000 or more and which will require more than
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thirty (30) days notice in order for such contract or
agreement to be terminated without liability to Action;
(e) Contract or agreement of any nature whatsoever with
any Seller, with any director or officer of Action or with any
entity or other business or venture in which any Seller or
director or officer of Action has a direct or indirect
financial interest;
(f) Loan, factoring, credit line or subordination
agreement;
(g) Lease of real, personal or mixed property under
which Action is a lessor or lessee, other than rental
contracts pursuant to which Action leases property to
consumers in the ordinary and usual course of Action's
business and other leases reflected on Schedules attached
hereto;
(h) Joint venture or partnership agreement or other
agreement involving sharing of profits;
(i) Outstanding power of attorney empowering any person
or entity to act on behalf of Action;
(j) Outstanding offer or bid which, if accepted, would
result in a contract or agreement requiring Action to pay, or
that there be paid to Action, in the aggregate, $100,000 or
more in any 12-month period;
(k) Purchase commitment or contract for an amount which
is substantially in excess of the normal, ordinary and usual
requirements of its business, or purchase or contract
commitment or contract providing for prices substantially in
excess of the current market prices for comparable goods and
services on the date of such commitment or contract, or sales
commitment or contract providing for prices substantially
below current market prices for comparable goods and services
on the date of such sales commitment or contract;
(l) Outstanding guaranty, subordination or other similar
type of agreement; or
(m) Any material contract, commitment or obligation not
made in the usual and ordinary course of business other than
those disclosed on the Schedules attached hereto.
True and complete copies of all such contracts and agreements noted on Schedule
3.13 have been furnished or made available to Purchaser. To the knowledge of
White, Action has duly complied in all material respects with all provisions of
every contract or agreement noted on Schedule 3.13
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to which Action is a party and is not in default in any material respect as to
any such contract or agreement. To the knowledge of White, no condition or state
of facts exists which, with notice or the passage of time or both, would
constitute a material default under any contract or agreement noted on Schedule
3.13. To the knowledge of White, all contracts and agreements noted on Schedule
3.13 which, if individually or collectively, are not in full force and effect or
enforceable, could reasonably be expected to have a material adverse effect on
Action, are in full force and effect and are enforceable by Action against all
other parties thereto.
3.14. Litigation. Except as otherwise disclosed on Schedule
3.14 hereto, there is no claim, suit, action, governmental investigation or
litigation, or legal, administrative, arbitration or other proceeding of any
kind pending or to the knowledge of White overtly threatened against Action
(whether as plaintiff or defendant) or its property or business which if
determined adversely to Action could reasonably be expected to have a material
adverse effect on the business assets, results of operations, condition
(financial or otherwise) or prospects of Action.
3.15. Employees.
(a) Action has provided or made available a list of (i)
the names, titles, annual salaries and other compensation of all officers of
Action and all other employees of Action whose annual base salary exceeds
$50,000 and (ii) the wage rates for non-salaried employees of Action (by
classification). None of the employees referred to in clause (i) and no other
key employee of Action has disclosed to White or, to the knowledge of White, any
other officer, director or shareholder of Action, that he or she intends to
resign or retire as a result of the transactions contemplated by this Agreement
or otherwise for any reason within one year after the date of this Agreement.
(b) No employees of Action are on strike or threatening
any strike or work stoppage, and there is no pending union representation
election or negotiation of a collective bargaining agreement. Action is not
involved in any material controversy with any of its employees or any
organization representing any of its employees.
(c) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) result in
any payment (other than the Purchase Price) or benefit (including, without
limitation, severance, unemployment compensation, golden parachute or otherwise)
becoming due to any officer, director or employee of Action, (ii) increase any
benefits otherwise payable to any such officer, director or employee, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(d) The following agreements (collectively, the "Split
Dollar Agreements") constitute all of the agreements (oral or written) currently
in effect between Action and any officer, director, employee or shareholder of
Action or any affiliate of any such parties regarding the ownership by Action
of, or payment by Action of any premium with respect to, any insurance policy
(other than under Action's Group Plan) in effect on the life of any such
officer,
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director, employee or shareholder: the Collateral Assignment Split-Dollar Life
Insurance Agreement for Action TV & Appliance Rental, Inc. and The Xxxxx X.
Xxxxx, Xx. Dynasty Trust, dated February 11, 1993; the Collateral Assignment
Split-Dollar Life Insurance Agreement for Action TV & Appliance Rental, Inc. and
The Xxxxx Xxxx Belt Dynasty Trust, dated February 11, 1993; the Collateral
Assignment Split-Dollar Life Insurance Agreement for Action TV & Appliance
Rental, Inc. and Xxxxxxx Xxxxx Xxxx and Xxxxx Xxxx Belt, dated October 17, 1994;
the Collateral Assignment Split-Dollar Life Insurance Agreement for Action TV &
Appliance Rental, Inc. and Xxxxx X. Xxxxx, Xx. and Xxxxxxxx X. Xxxxx, dated
October 17, 1994; and the Collateral Assignment Split-Dollar Life Insurance
Agreement for Action TV & Appliance Rental, Inc. and White Grandchildren's Trust
Number Two dated December 31, 1994.
3.16. ERISA.
(a) Except as set forth in Schedule 3.16 hereto, Action
has not established or maintained and is not obligated to make contributions to
or under or otherwise participate in any bonus, compensation, employment,
severance or other agreement, contract, arrangement or policy or any plan or
arrangement (whether written or oral) providing for insurance coverage
(including any self insurance arrangement), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which covers any employee or former employee
of Action. The contracts, plans and arrangements that are set forth in Schedule
3.16, true and correct copies of all of which have been furnished or made
available to Purchaser, are referred to collectively herein as the "Action
Employee Plans and Arrangements." The Action Employee Plans and Arrangements
which are intended to qualify under Section 401(a) of the Code will be
identified separately on Schedule 3.16.
(b) Action and the members of Action's controlled group,
as that term is defined in Section 4001(a)(14) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), do not maintain and are not
obligated to contribute to and have never maintained or been obligated to
contribute to any plan subject to Title IV of ERISA.
(c) To the Knowledge of White, Schedule 3.16 fairly and
fully sets forth the assets and the current liabilities and unfunded past
service liabilities of Action with respect to any such employee benefit pension
plan within the meaning of ERISA based upon the assumption that all Action
Employee Plans and Arrangements will remain in force. Except as otherwise set
forth in Schedule 3.16, all contributions due through (or allocable to the
period ending on) the date hereof from Action have been paid in full by Action.
(d) Except as disclosed on Schedule 3.16, to the
knowledge of White, each Action Employee Plan and Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations that are
applicable to such Action Employee Plan and Arrangement, including, but not
limited to the
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requirement to timely file Form 5500 for each year in which such Action Employee
Plan and Arrangement was required to file a Form 5500.
(e) Except as disclosed on Schedule 3.16 and except with
regard to former employees of Action and their dependents who are currently
entitled to continuation of health coverage under a group health plan of Action,
or any current employee Action and such employee's dependents who may become
entitled to such continuation of coverage in connection with the transaction
contemplated by this Agreement, to the knowledge of White, Action has no current
or projected liability in respect of any post-retirement or post-employment
health or medical or life insurance benefits for retired, former or current
employees of Action. Except with regard to former employees of Action and their
dependents who are currently entitled to continuation of health coverage under a
group health plan of Action, or any current employee Action and such employee's
dependents who may become entitled to such continuation of coverage in
connection with the transaction contemplated by this Agreement, Action is not
subject to and no facts exist that are likely to result in liability under the
continuation of health coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985 with respect to its own group health plans or the
group health plans of any related employer.
(f) To the knowledge of White, Action is in compliance
in all material respects with all currently applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours and is not and has not engaged in any unfair labor practice, as
that term is defined in 29 U.S.C. ss. 158. There is no unfair labor practice
complaint pending or, to the knowledge of White, overtly threatened against
Action before the National Labor Relations Board.
(g) None of the assets of Action constitute the assets
of any employee benefit plan subject to Title I of ERISA or Section 4975 of the
Code.
(h) Action is not and has never been a party to any
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.
(i) To the knowledge of White, each of the Action
Employee Plans and Arrangements which is intended to satisfy the requirements of
Section 401(a) of the Code has at all times satisfied the applicable
qualification requirements under Section 401(a) of the Code and the related
sections of the Code and regulations thereunder.
3.17. Environmental Matters.
(a) As used in this Agreement:
(i) "Environmental Law" means federal, state and local
laws, regulations, ordinances and codes, as well as orders, decrees, judgments
or injunctions issued, promulgated, approved or entered thereunder, relating to
pollution, protection of the
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environment or public health and safety which are applicable
to Action or its business, including, but not limited to the
emission, discharge, release or threatened release of
Hazardous Substances (as hereinafter defined) into the
environment, or otherwise relating to the presence,
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Substances which are applicable to Action or its business.
(ii) "Hazardous Substance" means any pollutant,
contaminant, toxic or hazardous or extremely hazardous
substance, material, waste, constituent or chemical
(including, without limitation, petroleum or any product,
by-product, or fraction thereof, any form of natural gas,
asbestos and asbestos-containing materials, polychlorinated
biphenyls ("PCBs") and PCB-containing equipment, radon and
other radioactive elements, infectious, carcinogenic,
mutagenic or etiologic agents, pesticides, defoliants,
explosives, flammables, corrosives and urea formaldehyde) that
is regulated by, forms the basis of liability under, or the
presence of which in the environment is prohibited by or
requires notification, investigation or remediation under, any
Environmental Law or the presence of which causes or threatens
to cause a public or private nuisance.
(b) To the knowledge of White, except as set forth in
Schedule 3.17 hereto:
(i) Action has obtained all permits, licenses and
other authorizations and filed all notices which are required
to be obtained or filed by Action under any Environmental Law;
(ii) Action is in compliance in all material respects
with all terms and conditions of such required permits,
licenses and authorizations;
(iii) Action is in compliance in all material respects
with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules
and timetables contained in any Environmental Law;
(iv) there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or
plans related to the presence, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened
release into the environment, of any Hazardous Substance by
Action other than in compliance with applicable laws;
(v) the properties and plants owned or leased by
Action do not contain any asbestos, polychlorinated biphenyls,
aboveground or underground storage tanks in any form, any
surface impoundment, lagoon, landfill or other containment
facility
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for the storage, treatment or disposal of any Hazardous
Substance, or any wetlands area; and
(vi) Action has no knowledge and has not received notice
of any violation of any Environmental Law by Action nor has it
been advised by any governmental agency of any actual or
potential claim, liability or demand pursuant to any
Environmental Law against Action, including but not limited
to, a claim, notice or demand under the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C. ss.ss.9601 et. seq. ("CERCLA") or other similar state
law, brought by any governmental agency, private party or
other entity with respect to the assets or the operation of
the business of Action.
3.18. Title to Properties; Encumbrances. As of the Closing
Date, Action owns no real property. Action has good, valid and marketable title
to all properties and assets owned by Action, subject to no lien, encumbrance,
charge or other restriction except: (a) liens securing liabilities or
obligations shown on or reflected in the 1996 Financial Statements; (b) liens
incurred since June 30, 1996 in the usual and ordinary course of business
consistent with past practices and listed on Schedule 3.18 hereto; (c) in the
case of real property, building and use restrictions and other matters of record
which do not interfere with the use made of such property by Action; (d) liens
for current property taxes not yet due and delinquent; and (e) rights of third
parties (including, but not limited to, landlords and rental customers of
Action) under contracts entered into by Action in the ordinary and usual course
of business.
3.19. Plants, Inventory and Accounts Receivable. Except to the
extent set forth in Schedule 3.19 hereto:
(a) To the knowledge of White, the plants, structures
and equipment owned or leased by Action are structurally sound and in good
repair and operating condition, normal wear and tear excepted, and are fully
adequate and satisfactory for the operations for which they are being used by
Action. Action has not received notification that it is in violation of any
applicable building, zoning, anti-pollution, health, safety, environmental or
other law, ordinance or regulation in respect of its plants, structures or
equipment
(b) At least ninety-five percent (95%) in value of the
rental merchandise, parts, supplies and accessories of Action included in the
1996 Financial Statements consisted of items which are good and merchantable
within normal trade tolerances and of a quality and quantity presently rentable,
usable or saleable in the usual and ordinary course of business.
(c) Attached hereto as Schedule 3.19(c) is an Action
Consolidated Daily Report as of July 27, 1996, which is true and correct in all
material respects. Such report reflects, as of the close of business on July 27,
1996, the number of active Action rental agreements with customers of Action and
the number of such rental agreements that are delinquent. The rental
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agreements are bona fide agreements entered into in the usual and ordinary
course of business and, to the knowledge of White, the rental agreements are not
subject to any counterclaim or setoff.
(d) The accounts receivable of Action at June 30, 1996
arose from bona fide transactions in the usual and ordinary course of business
and, after taking into consideration the write offs and reclassification of
certain accounts receivable as reflected on Schedule 3.19, at least ninety
percent (90%) were good and collectible at the recorded amounts thereof and were
not subject to any counterclaim or setoffs.
3.20. Leases. Schedule 3.20 hereto sets forth a true, correct
and complete list of all leases of Action of real or personal property other
than those included within the Action Consolidated Daily Report attached as
Schedule 3.19(c) and those customer rental contracts entered into or terminated
since July 27, 1996 in the usual and ordinary course of business. All such
leases listed on Schedule 3.20 and, subject to the delinquencies reflected
therein, all leases included within the Action Consolidated Daily Report
attached as Schedule 3.19(c), to the knowledge of White, are valid and are in
full force and effect; to the knowledge of White, there are no existing claims
of defaults by Action thereunder or any other party to such leases; and to the
knowledge of White, no event has occurred which (whether with notice, lapse of
time, both) would constitute a default by Action thereunder or by any other
party to such leases.
3.21. Patents, Trademarks, Trade Names. Action owns, or has
the right to use, all trademarks and trade names, used in or necessary for the
ordinary conduct of its business, and the consummation of the transactions
contemplated hereby will not alter or impair the use of any such rights by
Action. Action has sufficient rights to use all patents and copyrights used in
or necessary for the ordinary conduct of its business without the payment of any
amount to third parties, and the consummation of the transactions contemplated
hereby will not alter or impair the use of any such rights by Action. All
material patents, trademarks, trade names and copyrights currently used or
proposed to be used by Action and all applications or registrations therefor are
set forth and fully disclosed on Schedule 3.21 hereto. No claims have been
asserted during the past year by any person against the use by Action of any
patents, trademarks, trade names, copyrights, technology, know-how or processes
used by Action, or any license or agreement related thereto, except as disclosed
on Schedule 3.21, and Action's management does not know of any valid basis for
any such claim.
3.22. Insurance. All policies of fire, liability, workers'
compensation, life and all other forms of insurance owned or held by Action are
described on Schedule 3.22 hereto. All such policies are in full force and
effect.
3.23. Suppliers. Schedule 3.23 hereto sets forth a true,
complete and correct list of the ten largest suppliers of Action in terms of
purchases during the fiscal year ended December 31, 1995 and for fiscal year
1996 through June 30, 1996, showing the total purchases by Action from each such
supplier during each such fiscal period. There has not been any material adverse
change in the business relationship of Action with any supplier named in
Schedule 3.23 hereto
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3.24. Disclosure. To the knowledge of White, no
representations or warranties by White contained in this Agreement, and no
certificate, agreements, schedule, list, exhibit, instrument or other writing
furnished or to be furnished by Action or any Seller to Purchaser pursuant to
the provisions hereof contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
3.25. Acquisitions. Schedule 3.25 hereto sets forth a complete
list of acquisition agreements involving the acquisition by Action of
rent-to-own businesses entered into by Action in the past five years (the
"Acquisition Agreements') whether by way of an asset or a stock purchase, merger
or consolidation. White has no knowledge of facts or circumstances which could
reasonably give Action or any other party to the Acquisition Agreements (or
other agreements contemplated by the Acquisition Agreements) a right to seek
indemnification under the terms and conditions of the Acquisition Agreements
(and the other agreements contemplated by the Acquisition Agreements). To the
knowledge of White, Action has not cancelled, waived or released any of its
rights to indemnification under the Acquisition Agreements.
3.26. Seajay. Attached as Schedule 3.26 is the most recent
financial information provided to Action by Seajay Investment Group. White makes
no representation or warranty concerning the accuracy of such information or the
financial condition or solvency of Seajay Investment Group.
3.27. Brokers' and Finders' Fees. Neither Sellers nor Action
nor anyone acting on their behalf has done anything to cause or incur any
liability to any party for any brokers' or finders' fees or the like in
connection with this Agreement or any transaction contemplated hereby.
Section 4. Representations and Warranties by Purchaser.
Purchaser represents and warrants to Sellers as follows:
4.1. Corporate Existence and Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary corporate power and authority to
execute and deliver and perform its obligations under this Agreement.
4.2. Authorization; Enforceability of Agreement. This
Agreement and its execution, delivery and performance have been duly authorized
by all necessary corporate action on the part of Purchaser. This Agreement has
been duly executed and delivered by Purchaser and constitutes the legal, valid
and binding agreement of Purchaser, enforceable against Purchaser in accordance
with its terms.
4.3. Authorizations and Approvals. The execution, delivery
and performance by Purchaser of this Agreement and the consummation by Purchaser
of the transactions contemplated
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by this Agreement require no action by or in respect of or filing with any
governmental body, agency, official or authority or any third party on the part
of Purchaser other than compliance with any applicable requirements of federal
or state securities laws.
4.4. No Conflict. The execution, delivery and performance by
Purchaser of this Agreement and the consummation by Purchaser of the
transactions contemplated by this Agreement do not and will not (a) contravene
or conflict with the Certificate of Incorporation or Bylaws of Purchaser or (b)
assuming compliance with the laws referred to in Section 4.3, contravene or
conflict or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to Purchaser.
4.5. Brokers' and Finders' Fees. Neither Purchaser nor anyone
acting on its behalf has done anything to cause or incur any liability to any
party for any brokers' or finders' fees or the like in connection with this
Agreement or any transaction contemplated hereby.
4.6. Investment.
(a) Purchaser is acquiring the Shares for its own
account and not with a view to, or for sale in connection with, the
"distribution," as such term is used in Section 2(11) of the Securities Act of
1933, as amended (the "Securities Act"), of any of the Shares in violation of
the Securities Act; and
(b) Purchaser is an "accredited investor," as that term
is defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
Section 5. Covenants of the Parties.
5.1. Public Announcements. White and Purchaser will (i)
mutually agree on the text of any press release and (ii) consult with each other
before making any other public statement with respect to this Agreement and the
transactions consummated pursuant to this Agreement.
5.2. Indemnity of Directors, Officers and Key Employees.
Purchaser, as the sole shareholder of Action immediately following the Closing,
will amend the Bylaws of Action to provide as follows: "Officers and directors
of the corporation shall be indemnified to the fullest extent permitted by law."
Purchaser agrees that (i) such amendment shall be promptly adopted and such
indemnification shall apply to and extend to, and inure to the benefit of, those
officers, directors and key employees of Action in office or employed as of the
day immediately preceeding the effective date of this Agreement as fully as if
such Bylaw amendment had been in effect prior to the Closing; (ii) such
indemnification shall extend to such key employees notwithstanding that they are
not technically officers or directors; and (iii) such Bylaw provision shall
continue and no amendment or change shall be made thereto unless the effect of
such change or amendment is to expand the indemnification rights applicable to
such officers, directors and key employees.
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Section 6. Indemnification.
6.1. Sellers.
(a) Indemnity. White shall defend and indemnify
Purchaser and hold Purchaser wholly harmless from and against any and all
losses, liabilities, damages, costs (including, without limitation, court costs)
and expenses (including, without limitation, reasonable attorneys fees) which
Purchaser incurs as a result of, or with respect to, any inaccuracy in or breach
of any representation, warranty, covenant or agreement of any Seller contained
in this Agreement.
(b) Claims. In the event that Purchaser shall receive
written notice of any claim or proceeding that, if successful, might result in a
claim under this Section 6.1 by Purchaser, Purchaser shall give White written
notice of such claim or proceeding and shall permit White to participate in the
defense of such claim or proceeding by one counsel selected by White and at the
expense of White. White and Purchaser shall cooperate in the defense or
prosecution thereof and shall furnish such records, information and testimony,
and attend such conferences, discovery proceedings, hearings, trials and
appeals, as may be reasonably requested in connection therewith.
6.2. Purchaser.
(a) Indemnity. Purchaser shall defend and indemnify
Sellers and hold Sellers wholly harmless from and against any and all losses,
liabilities, damages, costs (including, without limitation, court costs) and
expenses (including, without limitation, reasonable attorneys fees) which
Sellers or any of them incur as a result of, or with respect to, any inaccuracy
in or breach of any representation, warranty, covenant or agreement by or on
behalf of Purchaser contained in this Agreement.
(b) Claims. In the event that Sellers shall receive
written notice of any claim or proceeding that, if successful, might result in a
claim under this Section 6.2 by Sellers, Sellers shall give Purchaser written
notice of such claim or proceeding and shall permit Purchaser to participate in
defense of such claim or proceedings by counsel selected by the Purchaser and at
the expense of Purchaser. Sellers and Purchaser shall cooperate in the defense
or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith.
6.3. Notice of Claim. Purchaser or White (individually or as
the representative of any Seller), as the case may be (the "Indemnified Party"),
shall promptly notify the other (the "Indemnifying Party") in writing of any
claim for indemnification hereunder, specifying in reasonable detail the basis
of such claim, the facts pertaining thereto and, if known, the amount, or an
estimate of the amount, of the liability arising therefrom. The Indemnified
Party shall provide
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to the Indemnifying Party, as promptly as practicable thereafter, information
and documentation reasonably requested by the Indemnifying Party to support and
verify the claim asserted.
6.4. Limitations. Notwithstanding anything to the contrary
contained herein:
(a) Purchaser shall not assert any claim against White
or any Seller under or pursuant to this Agreement unless and until the amount of
Purchaser's losses, liabilities, damages, costs and expenses resulting from
inaccuracy in or breach of any representation, warranty, covenant or agreement
of Sellers, or any of them, contained in this Agreement (collectively,
"Damages") exceeds Seventy-Five Thousand Dollars ($75,000) in the aggregate (the
"Indemnification Threshold") and then Purchaser shall only be entitled to seek
and recover its Damages in excess of, but not those below, the Indemnification
Threshold;
(b) the maximum aggregate liability of White and the
other Sellers for all claims made by Purchaser pursuant to or under this
Agreement is Five Million Dollars ($5,000,000). Such limit shall apply
notwithstanding that such claims are asserted by a cause of action or legal
theory other than breach of contract;
(c) Purchaser acknowledges and agrees that it shall
look solely to White, and not the other Sellers, for indemnification with
respect to inaccuracy in or breach of any representation, warranty, covenant or
agreement contained in Articles 1, 2, 3, 5, 6 or 7 of this Agreement; and
(d) Except for the remedy of specific performance, the
rights and remedies of the parties hereto set forth in this Article 6 shall be
the exclusive rights or remedies available to Purchaser or the Sellers with
respect to claims for which indemnification is provided or authorized pursuant
to this Article.
Section 7. Miscellaneous.
7.1. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their respective
successors and permitted assigns and, in the case of Sellers, upon their
respective heirs and legatees and may not be assigned, in whole or in part, by
any party without the prior written consent of each other party.
7.2. Governing Law. This Agreement shall be deemed to be made
in, and in any and all respects shall be interpreted, construed and governed by
and in accordance with, the laws of the State of Texas (without regard to
principles of conflict of laws).
7.3. Expenses. Except as otherwise expressly provided herein,
Sellers shall pay the expenses incurred by Sellers in connection with the
preparation and execution of this Agreement and in connection with the
transactions contemplated hereby, and Purchaser shall pay the expenses so
incurred by Purchaser.
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7.4. Headings. The section and paragraph headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
7.5. Notices. All communications provided for hereunder shall
be in writing and shall be deemed to be given when delivered in person or three
(3) business days after being deposited in the United States mail, first class,
registered or certified, return receipt requested, with proper postage prepaid
and,
(a) If to Sellers, addressed to:
Addresses of Sellers
on Exhibit A
with a copy to:
Gardere & Xxxxx, LLP
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Attn: Xxx X. Xxxxxx
Telephone: 214/000-0000
Telecopy: 214/999-4828
(b) If to Purchaser, addressed to:
RTO, Inc.
X.X. Xxx 0000
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn.: Xxx X. Xxxxxxx, Xx.
Telephone: 864/000-0000
Telecopy: 864/594-5856
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with a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn.: Xxxx X. Xxxxxx, Xx.
Telephone: 404/000-0000
Telecopy: 404/572-5145
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto.
7.6. Schedules and Exhibits. The following schedules and
exhibits are attached hereto and are hereby made a part of this Agreement by
this reference:
Schedule 1.2 - Purchase Price
Schedule 3.1 - Corporate Existence and Power
Schedule 3.3 - Ownership of Shares; Liens or Encumbrances on Shares
Schedule 3.5 - Conflicting Agreements
Schedule 3.6 - Capitalization
Schedule 3.7 - Officers and Directors of Action
Schedule 3.10 - Undisclosed Liabilities
Schedule 3.11 - Tax Returns and Liabilities
Schedule 3.12 - Changes or Events Occurring Subsequent
to June 30, 1996
Schedule 3.13 - Material Contracts
Schedule 3.14 - Litigation
Schedule 3.16 - Action Employee Plans and Arrangements; ERISA
Schedule 3.17 - Environmental Matters
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Schedule 3.18 - Liens on Properties
Schedule 3.19 - Property, Inventory and Accounts Receivable
Schedule 3.20 - Leases
Schedule 3.21 - Patents, Trademarks and Trade Names
Schedule 3.22 - Insurance
Schedule 3.23 - Suppliers
Schedule 3.25 - Acquisitions
Schedule 3.27 - Brokers' and Finders' Fees - Sellers
Exhibit A - Names and Addresses of Sellers
7.7. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
7.8. Entire Agreement; Amendments. This Agreement embodies
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter. This Agreement may be modified
only by written instrument signed by each of the parties hereto.
7.9. Waiver of Conditions. Any party may, at its option,
waive in writing any or all of the conditions herein contained to which its
obligations hereunder are subject. No waiver of any provision of this Agreement,
however, shall constitute a waiver of any other provision (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
7.10. Survival of Representations, Warranties and Covenants.
Each of the representations, warranties, obligations, covenants and agreements
of the parties included or provided for herein or in any schedule, certificate
or other document delivered pursuant to this Agreement shall survive the
consummation of the transactions contemplated by this Agreement, notwithstanding
any investigation heretofore or hereafter made by any of them or on behalf of
any of them; provided, however, (i) the representations and warranties of White
contained herein (other than Sections 3.3, 3.6 and 3.11 hereof) shall not lapse
or expire on the Closing Date but shall survive until the second anniversary of
the Closing Date and (ii) no claim for indemnification for any inaccuracy in, or
breach of, any such representation or warranty may be made or asserted after the
second anniversary of the Closing Date; and provided, further, that (a) the
representations and
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warranties of White under Sections 3.3, 3.6 and 3.11 shall not lapse or expire
on the Closing Date but shall survive until the applicable statute of
limitations has expired and (b) no claim for indemnification for any inaccuracy
in, or breach of, any such representation or warranty in Sections 3.3, 3.6 and
3.11 may be made or asserted after the expiration of the applicable statute of
limitations. The respective expiration and bar dates set forth in the
immediately preceding sentence shall not affect indemnification claims asserted
(i.e. the party seeking indemnification has notified the other party in writing
of its claim) prior to the respective expiration and bar dates.
7.11. Assignment. This Agreement and all of the provisions
hereof shall be binding upon, and inure to the benefit of, the Sellers and
Purchaser and their respective successors and permitted assigns and, in the case
of the Sellers, their respective personal representatives, executors, heirs,
beneficiaries and permitted assigns.
7.12. Tax Election. Purchaser and the Sellers shall consent to
and timely file the Tax election under Code Section 1362(e)(3) necessary not to
have the pro rata allocation of S Corporation items under Code Section
1362(e)(2).
7.13. Failure to Obtain Landlord Consents. Action currently
leases 106 locations from which it conducts its day-to-day rental operations. A
list of those locations is attached as Schedule 3.20. Some of those leases
provide that a transaction of the nature contemplated by this Agreement will
constitute an event of default, breach or termination under such leases unless
the landlord's prior written consent to such transaction is obtained. Purchaser
agrees that failure by Action or Sellers to obtain any or all such consents,
either prior to or after the Closing Date, shall not be deemed in and of itself
(i) a breach of this Agreement or any representation, warranty, covenant or
agreement contained herein, or (ii) a failure or nonfulfillment of a condition
precedent to Purchaser's obligation to close the transactions contemplated by
this Agreement. Purchaser has agreed to close the transactions contemplated by
this Agreement notwithstanding that all such landlord consents have not been
obtained and none of the Sellers shall have any liability or responsibility for
failure to obtain such consents; provided, however, that White shall use his
best efforts to obtain such consents before and after the Closing Date.
7.14. Severability. If any provision of this Agreement shall
be held to be invalid, illegal or unenforceable, the parties agree that such
provision shall be enforced to the maximum extent permissible so as to effect
the intent of the parties, and the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby. If necessary to effect the intent of the parties hereto, the
parties will negotiate in good faith to amend this Agreement to replace the
unenforceable language with enforceable language which as closely as possible
reflects such intent.
7.15. Effective Date. The parties agree that, notwithstanding
the actual closing date of the transactions contemplated hereby, the
transactions shall be deemed to be effective and have closed as of the close of
business on July 31, 1996.
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7.16. Imputation of Knowledge. The parties agree that, for
purposes of those representations and warranties which are limited to the
"knowledge of White" or similar wording, the knowledge of facts and
circumstances by K. Xxxxx Xxxx shall constitute knowledge of White and
"knowledge" shall be deemed to mean actual knowledge.
7.17. Facsimile Transmissions. This Agreement and all
agreements, documents and certificates delivered pursuant to this Agreement or
in connection with the transactions consummated pursuant to this Agreement may
be executed by any party and transmitted by such party to any other party or
parties by facsimile, and any such document shall be deemed to have full force
and effect as if the facsimile signature or signatures on such document were
originals.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SELLERS:
/s/ Xxxxx X. Xxxxx, Xx.
--------------------------------------
Xxxxx X. Xxxxx, Xx.
XXXXX X. XXXXX ANNUITY TRUST
By: /s/ Xxxxx X. Belt
---------------------------------
Xxxxx X. Belt, Trustee
XXXXXX X. XXXXX ANNUITY TRUST
By: /s/ Xxxxx X. Belt
---------------------------------
Xxxxx X. Belt, Trustee
/s/ Xxxxx X. Belt
--------------------------------------
Xxxxx X. Belt
/s/ K. Xxxxx Xxxx
--------------------------------------
K. Xxxxx Xxxx
/s/ Xxxxx X. Xxxxx, Xx.
--------------------------------------
Xxxxx X. Xxxxx, Xx.
/s/ Xxxxxxxx Xxxxx
--------------------------------------
Xxxxxxxx Xxxxx
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XXXXXXX XXXXX BELT QSST TRUST
By: /s/ Xxxxx X. Belt
---------------------------------
Xxxxx X. Belt, Trustee
XXXXX XXXXX XXXX QSST TRUST
By: /s/ Xxxxx X. Belt
---------------------------------
Xxxxx X. Belt, Trustee
XXXXXX XXXX BELT QSST TRUST
By: /s/ Xxxxx X. Belt
---------------------------------
Xxxxx X. Belt, Trustee
XXXXXX XXXX XXXXX QSST TRUST
By: /s/ Xxxxx X. Xxxxx, Xx.
---------------------------------
Xxxxx X. Xxxxx, Xx., Trustee
XXXXXX XXXXXXXXX XXXXX QSST
TRUST
By: /s/ Xxxxx X. Xxxxx, Xx.
---------------------------------
Xxxxx X. Xxxxx, Xx., Trustee
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PURCHASER:
RTO, INC.
By: /s/ Xxx X. Xxxxxxx, Xx.
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Name: Xxx X. Xxxxxxx, Xx.
Title: Vice President, Treasurer and Secretary
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