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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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Date of Report (Date of earliest event reported):
July 31, 1997
ALRENCO, INC.
(Exact name of registrant as specified in its charter)
Indiana 0-27490 35-1480655
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
1736 E. Main Street, New Albany, Indiana 47150
(Address of principal executive offices) (Zip Code)
(812) 949-3370
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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<PAGE>
Item 5. Other Events.
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On July 31, 1997, Alrenco, Inc. (the "Company") established
a new $30 million revolving credit facility with Bank One,
Kentucky, NA. This facility replaces a smaller facility with
another bank. The term of the new debt facility is three years.
Borrowings under the new facility will bear interest at a rate
per annum equal to the bank's prime rate minus 1/2% and will be
secured by a lien on substantially all of the Company's assets.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
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(c) Exhibits.
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The following exhibit is filed as a part of this report:
Exhibit
Number Description of Exhibit
- ------- ----------------------
10 -- Loan Agreement dated July 31, 1997, between the
Company and Bank One, Kentucky, NA
<PAGE>
Signatures
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Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Dated: August 8, 1997
ALRENCO, INC.
By: /s/ Theodore H. Wilson
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Theodore H. Wilson
Executive Vice President and
Chief Financial Officer
<PAGE>
LOAN AGREEMENT
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THIS LOAN AGREEMENT is made and entered into as of the 31st
day of July, 1997, by and among BANK ONE, KENTUCKY, NA, a
national banking association with its office and principal place
of business at 416 West Jefferson Street, Louisville, Kentucky
40202 (the "Bank"), and ALRENCO, INC., an Indiana corporation,
with its principal office and place of business at 1736 East Main
Street, New Albany, Indiana 47151 (the "Borrower").
RECITALS:
WHEREAS, Borrower desires to obtain from the Bank a
revolving credit loan, in an amount not to exceed Thirty Million
and No/100 Dollars ($30,000,000.00) (the "Revolving Credit"),
pursuant to which Borrower may obtain advances, all upon the
terms and conditions contained herein; and
WHEREAS, Borrower desires to obtain certain Letters of
Credit from Bank up to the aggregate amount of $1,500,000.00.
NOW, THEREFORE, in consideration of the Recitals and the
mutual covenants and agreements set forth herein and for other
good and valuable consideration, the parties hereto agree as
follows:
1. DEFINITIONS. As used herein, the following terms shall have
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the meanings set forth below. Other terms and phrases are defined
elsewhere in this Loan Agreement and the meanings shall be
applicable throughout this Loan Agreement.
a. "Accounts" means the Borrower's rights to receive
payment for Inventory or any other items sold or leased by
Borrower (specifically including any payments owed to Borrower
pursuant to any Rental Agreement), or for services rendered by
Borrower which rights may be evidenced by an instrument or
chattel paper.
b. "Advance" means the disbursement of proceeds in excess
of $500,000.00 of the Revolving Credit in accordance with the
terms of this Loan Agreement.
c. "Agreement" means this Loan Agreement as the same may
be supplemented from time to time.
d. "Affiliate" means any entity in which more than twenty
percent (20%) of the ownership interest (or instruments
convertible into such interest) is owned by Borrower or any
Subsidiary
e. "Authorized Signatory" means Theodore Wilson, currently
CFO of Borrower.
f. "Average Monthly Balance on Rent (BOR)" means the
number of units rented at the first of the month plus deliveries
less returns, payouts and charge-offs on the first of the month
divided by the total number of stores.
g. "Average Rental Income" means the average of the
Borrower's Rental Income, as determined on a rolling three month
(calendar) basis.
h. "Borrower" shall have the meaning set out in the
introductory paragraph hereof.
i. "Borrowing Base" means the amount, computed pursuant to
and in accordance with the terms and provisions of Section 2.d
hereof, which the aggregate outstanding principal balance of the
Advances may not exceed at any time (subject in all events to the
maximum amount of the Revolving Credit established hereunder).
j. "Borrowing Base Certificate" means the certificate as
to the level and amount of the Borrowing Base in form and
substance acceptable to the Bank in the reasonable exercise of
its discretion (the current form of which being attached hereto
and incorporated herein as Exhibit "A"), certified to be true,
correct and accurate by an Authorized Signatory of the Borrower.
k. "Borrowing Rate" means a floating rate per annum equal
to (i) the Prime Rate minus one-half of one percent (0.5%) or
(ii) LIBOR Rate plus two and one quarter percent (2.25%), with
the applicable rate determined in accordance with this Agreement,
and both calculated on the basis of an assumed 360 day year for
the actual number of days elapsed in accordance with the Bank's
customary practice.
l. "Business Day" means all calendar days except
Saturdays, Sundays, and legal holidays of the United States
Government.
m. "Collateral" means any and all property acting as
security for any or all of the Indebtedness, whether now owned or
hereafter acquired.
n. "Company Prepared Financial Statement" means the
monthly financial statement prepared by Borrower, which shall be
in the form of Exhibit "B" attached hereto and incorporated
herein by reference.
o. "Default Rate" means the Borrowing Rate for the
Revolving Credit from time to time in effect, plus 5%. The
Default Rate is a floating rate calculated on a per annum basis.
p. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
q. "Earnings Before Interest and Taxes" means, for any
period, the sum of (i) the income (or deficit) of Borrower taken
on a consolidated basis, before provision for income taxes for
the period, calculated in accordance with GAAP, plus, (ii)
Interest Expense for such period.
r. "Event of Default" means the occurrence or happening of
any of the matters set forth in Section 11 hereof.
s. "Financial Covenants" means the covenants related to
the financial performance of the Borrower more fully described in
Section 8 hereof.
t. "GAAP" means generally accepted accounting principles
in the United States of America, as such accounting principles
are generally accepted by the accounting profession from time to
time, applied on a consistent basis.
u. "Indebtedness" means (collectively) all loans, debts,
letters of credit, obligations and liabilities of Borrower to the
Bank, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, or now or hereafter existing,
or due or to become due, under and in connection with the
Revolving Credit Note, the Letters of Credit and the Loan
Documents, and also all other indebtedness and/or other
obligations of the Borrower to the Bank, whether debt, lease,
contract or otherwise, and whether represented by a note or other
instrument, or otherwise, now existing or hereafter acquired or
arising either directly or indirectly by assignment or otherwise
or pursuant to a guaranty, including, without limitation, all
interest, charges, expenses, attorneys' fees, accountant's fees
or such other fees disbursements.
v. "Interest Expense" means for any period the interest
paid or accrued during such period on the Indebtedness of the
Borrower, on a consolidated basis.
w. "Inventory" means all inventory of Borrower as defined
in Section 9-106 of the Uniform Commercial Code, including,
without limitation, all goods held for sale or lease or to be
furnished under contracts of service or raw materials used,
consumed or sold by Borrower.
x. "Letters of Credit" means certain Letters of Credit up
to the aggregate amount of $1,500,000.00 which shall include the
Letter of Credit issued by the Bank for the account of Borrower
for the benefit of Reliance Insurance Company in the amount of
$450,000.00 as evidenced by an Application and Agreement for
Irrevocable Standby Letter of Credit and a Letter of Credit
issued by the Bank for the account of Borrower for the benefit of
ITT Speciality Risk Services, Inc. in the amount of $909,000.00
as evidenced by the Application and Agreement for Irrevocable
Standby Letter of Credit.
y. "LIBOR Rate" means, with respect to each interest
period, a rate of interest per annum equal to either (a) the rate
per annum for U.S. dollar deposits with a thirty (30) day
maturity in the London interbank Eurodollar market determined by
the Bank based on displays by the Bloomberg Financial Information
Reporting Service as of 11:00 a.m. (London time), on the day that
is two (2) Business Days before the first day of the applicable
Interest Period or (b) if the rate referred to in the preceding
subparagraph (a) is not available or cannot be determined, the
rate of interest per annum as determined by the Bank to be the
average (rounded upward to the nearest whole multiple of 1/100 of
1% per annum, if such average is not such a multiple) of the
rates per annum at which deposits in U.S. dollars are offered in
the London interbank Eurodollar market at 11:00 a.m. (London
time), in each case two (2) Business Days before the first day of
the applicable Interest Period, in an amount substantially equal
to the then outstanding balance of this Note and for a period
equal to thirty (30) days.
z. "Loan Documents" means this Loan Agreement, the Note,
the Letters of Credit, the Security Agreement, and all other
instruments or agreements related hereto, whether executed
contemporaneously with the execution of this Loan Agreement or
hereafter. Any reference to the Loan Documents shall mean such
Loan Documents as any of the same may be amended or modified in
writing by the Bank and Borrower.
aa. "Loan" means the extension of credit by the Bank to the
Borrower pursuant to the Revolving Credit Loan.
ab. "Monthly Average Unit Yield" means Borrower's total
monthly (calendar) Rental Income divided by the number of Rented
Units for that particular calendar month.
ac. "Note" means the revolving draw note in the maximum
amount of $30,000,000.00 made by Borrower to the order of the
Bank, all as more fully described in Section 2 of this Agreement.
ad. "Net Book Value of the Borrower's Rental Merchandise
Inventory" means the cost of the Borrower's rental Inventory
held for rent or sale to the public, less accumulated
depreciation, all determined in accordance with GAAP.
ae. "Obligations" means and includes all loans, advances,
debits, debts, liabilities, obligations, letters of credit or
acceptance transactions, trust receipt transactions, or any other
financial accommodations, howsoever arising, owing by Borrower
and/or Subsidiaries to the Bank, of every kind and description
(whether or not evidenced by any note or other instrument and
whether or not for the payment of money), direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter arising pursuant to the terms of the Loan Documents
including, without limitation, all interest, fees, charges,
expenses, attorneys' fees and disbursements and accountants' fees
and disbursements chargeable to Borrower and/or Subsidiaries or
incurred by the Bank in connection with its dealings with
Borrower and/or Subsidiaries, or any Affiliate, and all
amendments, extensions or renewals thereof.
af. "Person" or "Party" means any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, other entity or group,
institution, party or government (whether federal, state, county,
city, municipal or other) or agency or division thereof.
ag. "Possible Default" means an event, condition, or thing
which, with the lapse of any applicable grace period or the
giving of notice, or both, would constitute an Event of Default
referred to in Section 11 hereof.
ah. "Rental Agreement" means the Rental Purchase Agreement,
the form of which is attached hereto as Exhibit "C" pursuant to
which Borrower rents Inventory owned by Borrower to the general
public.
ai. "Rental Income" means the gross revenues of the
Borrower from rentals to the public pursuant to a Rental
Agreement of the Borrower's Inventory, but excluding all of the
following: (i) customer deposits, (ii) taxes collected on the
sale or rental of any Inventory, (iii) rent payments made more
than 30 days in advance, (iv) proceeds from the sale of Inventory
, (v) any rental income derived from rentals with any Affiliate,
(vi) rental income in which the Bank does not, for any reason,
have a first, prior and perfected security interest, valid under
applicable law and securing all Indebtedness, and (vii) rental
income derived from the rental of video tapes or video game
cartridges.
aj. "Rented Units" means any item or items of Borrower's
Inventory that are owned by Borrower and are currently being
rented to the general public pursuant to the terms and conditions
of a Rental Agreement, but excluding any and all video tapes or
video game cartridges.
ak. "Revolving Credit" means the credit facility in the
maximum amount of Thirty Million and No/100 Dollars
($30,000,000.00) established by Bank for the benefit of the
Borrower pursuant to the terms and conditions set forth in
Section 2 of this Loan Agreement.
al. "Security Agreement" means the Security Agreement from
Borrower to Bank of even day whereby Borrower pledges its assets
as described therein.
am. "Subsidiary" means (i) any corporation more than fifty
percent (50%) of the outstanding stock of which having ordinary
voting power (irrespective of whether or not at the time stock of
any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned by
Borrower, and/or any Subsidiary, or any combination thereof; or
(ii) any partnership or other entity more than fifty percent
(50%) of the ownership interest (and/or rights convertible into
such interest) of which is owned directly or indirectly by
Borrower and/or any Subsidiary, or any combination thereof.
an. "Tangible Net Worth" means (A) the book value of all
assets of the Borrower, taken on a consolidated basis, but
excluding (i) all amounts owed to Borrower by any Affiliate; (ii)
all unamortized capitalized financing costs, and (iii) all
patents, copyrights, trademarks, trade names, franchises,
goodwill and all other assets which would be classified as
intangible assets in accordance with GAAP, minus (B) all of the
Borrower's Total Indebtedness, all as determined in accordance
with GAAP.
ao. "Total Indebtedness" means all current and long term
liabilities and other obligations (including the Indebtedness) of
the Borrower on a consolidated basis, as determined in accordance
with GAAP.
ap. "Total Units" means the total number of individual
units of Inventory that the Borrower owns and may have available
for rental to the general public (including any Rented Units) at
any given time, but excluding any and all video tapes or video
game cartridges.
aq. "Uniform Commercial Code" means the Uniform Commercial
Code in effect in the Commonwealth of Kentucky from time to time
as currently codified in Chapter 355 of the Kentucky Revised
Statutes.
2. REVOLVING CREDIT. The Bank hereby establishes a Revolving
----------------
Credit, which is evidenced by the Note in favor of the Borrower
as follows:
a. Amount. The total amount of the Revolving Credit
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established in favor of Borrower is Thirty Million and No/100
Dollars ($30,000,000.00) provided, however, that the aggregate
unpaid principal balance of the Advances at any time outstanding
may not exceed the lesser of (i) Thirty Million and No/100
Dollars ($30,000,000.00) or (ii) the Borrowing Base, calculated
as of such time.
b. Term of Revolving Credit. The Revolving Credit
------------------------
established pursuant to this Loan Agreement shall become
effective immediately as of the date of this Loan Agreement, and
as of the date hereof, Borrower may obtain Advances subject to
the terms and conditions contained herein. The Note shall bear
interest at the Borrowing Rate until such time as an Event of
Default occurs, at which time the Borrowing Rate may, at the
Bank's option, be increased to the Default Rate. The Revolving
Credit shall continue in effect until July 31, 2000 (the
"Maturity Date"). The occurrence of any Event of Default at any
time during the term of the Note shall be deemed a termination of
the Revolving Credit. As of the occurrence of any Possible
Default or Event of Default, Borrower shall have no right to
obtain any additional Advances hereunder. Upon termination of the
Revolving Credit by reason of the occurrence of any Event of
Default, or upon the Maturity Date, the unpaid balance of all the
Advances will be payable in full immediately upon written demand
for payment by the Bank. The termination of the Revolving Credit
by the Bank shall not in any way release or relieve the Borrower
from its liabilities and obligations incurred under the Loan
Documents, and the provisions of the Loan Documents shall
continue in full force and effect until all Indebtedness owed by
the Borrower to the Bank shall have been paid in full.
c. Advances. Subject to the terms and conditions of this
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Loan Agreement, the Bank shall grant Borrower such Advances on
the Note as the Borrower may from time to time request in
accordance with the provisions of this Loan Agreement; provided,
however, that in no event shall the aggregate unpaid principal
balance of the Advances outstanding at any time exceed the lesser
of (i) Thirty Million and No/100 Dollars ($30,000,000.00) or (ii)
the Borrowing Base. The Advances shall be evidenced by, shall
bear interest at the rates established in, and shall be payable
and otherwise be made on the terms set forth in the Note, and on
the terms established in this Loan Agreement. All payments on the
Note shall be made in immediately available funds at the Bank on
each date specified in the Revolving Note or this Loan
Agreement.
d. Borrowing Base.
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i. The "Borrowing Base" shall mean: an amount equal
to (i) 400% of the Borrower's Average Rental Income as set forth
in the most recently submitted Performance Summary and at all
times thereafter while any of the Indebtedness remains unpaid and
outstanding. If the aggregate principal balance of all Advances
outstanding at any time exceeds the Borrowing Base, Borrower
shall immediately, without demand or notice, reduce the
outstanding principal balance of the Revolving Note so that it
does not exceed the Borrowing Base, and failure to do so within
five (5) Business Days shall be an Event of Default hereunder.
ii. On a monthly basis, by no later than the 20th of
the month, the Borrower shall supply to the Bank the Loan
Agreement Performance Summary and Compliance Certificate in the
form of Exhibit "D" (the "Compliance Certificate") which shall
set forth the Borrower's Rental Income for the prior calendar
month, the Borrower's Average Rental Income for the three prior
calendar months, and show the calculation of the Financial
Covenants, along with the most recent Borrowing Base Certificate,
and such other information concerning them as the Bank may
reasonably request from time to time. Each Compliance Certificate
must be certified as true, correct, and accurate by an Authorized
Signatory of the Borrower. Failure to deliver the Compliance
Certificate and the Borrowing Base Certificate by the 20th of
each month shall be an Event of Default hereunder. If any
representation, warranty, or fact contained in any Borrowing Base
Certificate or Compliance Certificate shall prove to be untrue or
incorrect in any material respect, the Bank in their sole
discretion (i) may treat such event as an Event of Default under
this Loan Agreement, or (ii) may recalculate the Borrowing Base
after deletion, discount for or adjustment of such matters as are
untrue or incorrect, in which event (and to the extent thereafter
the outstanding aggregate balance of the Advances exceeds the
Borrowing Base). Borrower shall within five (5) Business Days of
the Bank giving the Borrower notice of such recalculation,
without further notice or demand, reduce the outstanding balance
on the Revolving Note so that it does not exceed the revised
Borrowing Base. Further, if any portion of the Rental Income
shall cease to meet the criteria for Rental Income, (the
"Disqualified Assets"), such Disqualified Assets shall
automatically be excluded from the Borrowing Base, and Borrower
shall, within five (5) Business Days and immediately without
further notice or demand, repay the Bank such amount of the
Advances as is based upon the Disqualified Assets if the
Borrowing Base, as recalculated, is insufficient otherwise to
support the amount of Advances based on the Disqualified Assets.
Notwithstanding the foregoing, the Bank shall retain its security
interest in all such Disqualified Assets.
iii. Borrower shall promptly upon learning of same,
notify the Bank in writing of any claim, offset, counterclaim or
the like which has been asserted in a civil action with respect
to the Rental Income owed Borrower.
e. Purposes of Advances. The Advances shall be used by
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Borrower to (i) acquire the assets or businesses of third parties
to expand Borrower's business; and (ii) provide for the
Borrower's general working capital needs.
f. Procedures and Conditions. The obtaining by Borrower of
-------------------------
each Advance pursuant hereto shall be subject to thefollowing
terms and conditions:
i. Borrower shall provide the Bank at its Lexington
office with a request for Advance by 11:00 a.m. Lexington time
and Bank shall make the Advance available to Borrower in
immediately available funds by crediting the amount of said
Advance to Borrower's account with the Bank on the same day. Any
request for Advance received after 11:00 a.m. Lexington time
shall be made available to Borrower on the next Business Day.
ii. Borrower shall not be entitled to obtain any
Advance if any Event of Default shall then exist.
iii. All Advances shall be made in strict compliance
with the terms and provisions of this Loan Agreement, unless the
Bank elects in its sole discretion to waive any of same in
writing. Each request by Borrower for an Advance shall, in and of
itself, constitute a continuing representation and warranty by
Borrower to the Bank: (a) that the Borrower then is, and at the
time the Advance is actually made will be, entitled under this
Loan Agreement to obtain that Advance, and (b) that all of the
covenants, agreements, representations and warranties made by the
Borrower herein, in the Loan Documents, and in any writing
delivered pursuant hereto or thereto are true and correct, and
have been fully complied with, as of such date.
iv. No material litigation, including, without
limitation, derivative actions, arbitration proceedings, or
governmental proceedings, and which has not been previously
disclosed in writing by the Borrower to the Bank prior to the
date of the execution and delivery of this Loan Agreement, shall
be known to be pending or known to be threatened against Borrower
or any Subsidiary. No material undisclosed development shall have
occurred in any previously disclosed litigation, including,
without limitation, derivative actions, arbitration proceedings
or governmental proceedings, that is likely to materially and
adversely affect the financial position or business of Borrower,
any Subsidiary, or impair the ability of any of them to perform
their obligations under the Loan Documents.
g. Application of Payments and Prepayments. Prior to an
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Event of Default, each payment upon the Revolving Credit Note
shall be applied first to unpaid interest, then to principal.
After an Event of Default, the Bank shall have the sole and
absolute right to determine how to apply any payments to the
Indebtedness. The principal amount outstanding under the
Revolving Credit Note from time to time shall be recorded by the
Bank in their records. The aggregate unpaid principal balance of
the Revolving Credit Note, and accrued but unpaid interest
thereon, as shown in the records of the Bank, shall be prima
facie evidence of the principal and interest owing and unpaid on
the Revolving Credit Note.
h. Disbursement of Advances. All disbursements of Advances
------------------------
proceeds pursuant hereto shall be made by the Bank to the general
deposit account of Borrower maintained with the Bank.
i. Revolving Credit Commitment Fee. In addition to
-------------------------------
accruing interest on the Revolving Credit Note, and all other
fees and expenses payable by the Borrower to the Bank under the
Loan Agreement and other Loan Documents, Borrower shall pay to
the Bank, upon execution of this Agreement the sum of Twenty Five
Thousand Dollars ($25,000.00) representing the remaining balance
due from Borrower of the total "Revolving Credit Commitment Fee"
of Fifty Thousand Dollars ($50,000.00), half of which has
previously been paid by Borrower. The Revolving Credit Commitment
Fee is not refundable and may not be applied to the Revolving
Note or any other Indebtedness of the Borrower to the Bank.
Borrower shall also pay the Bank an unused fee of 12.50 basis
points on that portion of the Revolving Credit which is not used
by Borrower which shall be assessed on a calendar quarter basis.
3. ISSUANCE OF LETTERS OF CREDIT
-----------------------------
a. Letters of Credit. Subject to the terms and conditions
-----------------
in the Application and Agreement for Irrevocable Standby Letter
of Credit, Bank shall issue the two Letters of Credit as
described therein.
b. Reimbursement Obligation. To evidence Borrower's
------------------------
obligations to repay to the Bank any sums advanced by the Bank
under the Letters of Credit, Borrower shall execute and deliver
to Bank two Applications and Agreement for Irrevocable Standby
Letters of Credit.
c. Letters of Credit Commitment Fee. Borrower shall pay
--------------------------------
the Bank a fee of 1% of the amount of the Letters of Credit upon
execution of this Agreement and the Letters of Credit. The fee
shall be due in advance for each twelve month period either
Letter of Credit is outstanding.
4. SECURITY FOR THE OBLIGATIONS TO BANK. The obligations to
------------------------------------
the Bank, including the Note, and the obligations under the
Letters of Credit as well as all other sums that are recoverable
by Bank under the Loan Documents, shall be secured by that
certain Security Agreement and accompanying Financing Statements,
executed and delivered by the Borrower to the Bank
contemporaneously or in connection with the execution of this
Loan Agreement, granting the Bank a first and prior security
interest in all personal property and fixtures of the Borrower,
all as more fully described therein.
5. CONDITIONS PRECEDENT. The Bank's obligations under this
--------------------
Loan Agreement, including the disbursement of any proceeds under
the Loan, shall be subject to the fulfillment to the Bank's
satisfaction of each of the following conditions precedent
("Conditions Precedent") unless such condition or conditions
shall be waived by the Bank in writing, in the sole discretion of
the Bank:
a. Resolutions and Approvals. Borrower shall furnish
-------------------------
certified copies of all consents, resolutions and approvals as
may be required by the Bank, evidencing approval of the execution
of the Loan Documents, all in form and substance acceptable to
the Bank.
b. Legal Opinion. The Bank shall have received a favorable
-------------
written opinion of counsel for the Borrower, dated and effective
as of the date on which the Loan Documents are executed and
delivered, addressed to the Bank and satisfactory to the Bank
rendering such opinions as are required by the Bank, with only
such modifications, exceptions, assumptions and qualifications as
shall be acceptable to the Bank and its counsel.
c. Loan Documents. All the Loan Documents, and such other
--------------
documents or instruments as the Bank may reasonably require, all
in form and substance acceptable to the Bank, shall have been
duly executed and delivered to the Bank, and, where appropriate,
duly recorded in the proper public offices.
d. Representations, Warranties and Covenants. All
-----------------------------------------
representations and warranties of the Borrower contained herein
and in any other Loan Document shall be true and correct and
Borrower shall be in compliance with all representations,
warranties, and covenants contained in this Loan Agreement and
the other Loan Documents.
e. Insurance. Satisfactory proof that policies of
---------
insurance of the types and coverage as specified in this Loan
Agreement are in full force and effect.
f. Consents of Third Parties. Such third party consents,
-------------------------
estoppels or agreements as the Bank may require, all of which
shall be in form and contents satisfactory to the Bank in its
sole discretion.
g. Lien Searches. UCC, tax lien, and judgment lien
-------------
searches performed on the Borrower in all appropriate locations
in all states in which Borrower does business, which shall
indicate that the Bank will have a first, prior, and perfected
security interest in the Collateral upon recording the financing
statements and termination statements as herein provided.
h. Corporate Matters. The Bank shall have been provided
-----------------
with certified copies of all articles of incorporation, by-laws
and corporate minutes of the Borrower, Certificates of Existence
or Good Standing of Borrower for each state in which the Borrower
conducts business, and a certificate signed by the Secretary of
Borrower certifying the names of the officers of Borrower who are
authorized to sign the Loan Documents.
i. Certificate of No Adverse Change. A certificate of
--------------------------------
Borrower stating that there has been no adverse change in the
financial condition of Borrower since the last submission of
financial information to the Bank.
j. Financial Information. The Bank shall have received
--------------------- all available financial
information from Borrower as required in Section 7(c) herein.
k. Compliance Certificate. A certificate as described in
----------------------
Section 2(d)(ii) properly certified on behalf of Borrower in the
form of Exhibit "D".
l. Additional Items. Such other documents, instruments, or
----------------
information as the Bank shall deem necessary, in the exercise of
its reasonable discretion.
6. FURTHER CONDITIONS PRECEDENT TO ALL ADVANCES UNDER THE
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REVOLVING CREDIT LOAN. The obligation of the Bank to make any
- ---------------------
Advances under the Note is further subject to the conditions
precedent that on the date of each Advance under the Note:
a. Bank shall have received a request for an Advance as
provided in Section 2 hereof and a Borrowing Base Certificate.
b. The Bank shall have received a Compliance Certificate
in the form of Exhibit D.
c. The Bank shall have received, at Borrower's expense,
such other approvals, opinions or documents as Bank may
reasonably request.
d. Borrower shall have paid all costs and expenses of the
Bank for which Borrower is responsible pursuant to the terms of
the Loan Documents.
7. AFFIRMATIVE COVENANTS. Borrower agrees that until the
---------------------
principal of and all interest on the Note and all the other
Indebtedness shall have been paid in full and this Loan Agreement
terminated, the Borrower shall perform and observe all of the
following terms and provisions:
a. Maintenance of Insurance. Borrower shall:(i) at its own
------------------------
cost and expense, procure, maintain and carry in full force and
effect general liability, public liability, workers' compensation
liability and property damage insurance with respect to its
actions and operations to such extent, in such amounts and with
such deductibles as are commonly carried by prudent businesses
similarly situated not to be less than $1,000,000 per occurrence
for any liability insurance policy. Without limiting the
foregoing, such insurance shall insure against any liability for
loss, injury, damage or claims caused by or arising out of or in
connection with the operation of Borrower's business including
injury to or death of Borrower's employees, agents, passengers or
any other persons and damage to or destruction of public or
private property. Without limiting the foregoing, such insurance
shall name Bank as an additional insured; (ii) at its own cost
and expense, insure all of its insurable properties to such
extent, against such hazards, in the amount of coverage and with
such deductibles as are commonly carried by prudent businesses
similarly situated, but in any event insuring against such
hazards and with such coverages and deductibles as are provided
in Borrower's insurance in effect on the date of this Loan
Agreement, and in any event Borrower shall maintain fire,
casualty and theft insurance. Without limiting the foregoing,
such insurance shall name Bank as an additional insured and loss
payee and shall provide for payment of the proceeds thereof to
Bank. All insurance which Borrower is required to maintain shall
be satisfactory to Bank in form, amount and insurer. Other than
the workers' compensation insurance required under this Loan
Agreement, such insurance shall provide that any loss thereunder
shall be payable notwithstanding any action, inaction, breach of
warranty or condition, breach of declarations, misrepresentation
or negligence of Borrower. Each policy shall contain an agreement
by the insurer that, notwithstanding lapse of a policy for any
reason, or right of cancellation by the insurer or any
cancellation by Borrower, such policy shall continue in full
force for the benefit of Bank for at least thirty (30) days after
written notice thereof to Bank and Borrower, and no alteration in
any such policy shall be made except upon thirty (30) days
written notice of such proposed alteration to Bank and Borrower
and written approval by Bank. Immediately upon request from Bank,
the Borrower shall provide Bank with certificates evidencing its
due compliance with the requirements of this Section.
b. Payment of Money Obligations. Borrower shall pay in
----------------------------
full: (i) prior in each case to the date when penalties would
attach, all taxes, assessments and governmental charges and
levies hereafter due by Borrower (except only those so long as
and to the extent that the same shall be contested in good faith
by appropriate and timely legal proceedings and for which a bond,
if required, staying execution or enforcement thereof shall have
been posted, all to the satisfaction of the Bank); and (ii) all
its debts, obligations and liabilities incurred after the date
hereof, on or prior to their respective due dates, for which it
may be or become liable or to which any or all of its properties
may be or become subject.
c. Financial Statements. (i) Borrower shall furnish to the
--------------------
Bank as soon as available, but in no event later than twenty (20)
days after the end of each calendar month a Company Prepared
Financial Statement certified by an Authorized Signatory of
Borrower to be true, correct and accurate. (ii) Borrower shall
furnish to the Bank as soon as available, but in no event later
than forty-five (45) days after the end of each fiscal quarter of
Borrower a financial statement of the Borrower for that quarter
and for the period from the beginning of the applicable fiscal
year of the Borrower to the end of such quarter, and a
consolidated financial statement of the Borrower as of the end of
such quarter, all of which shall be certified by an Authorized
Signatory of the Borrower as being true, correct, and accurate
and fairly presenting the Borrower's financial position and
results of its operations as of the date and for the period
indicated. (iii) Borrower shall furnish to the Bank, within one
hundred twenty (120) days after the end of the Borrower's 1997
fiscal year, and for all fiscal years thereafter, a complete,
unqualified, annual audit report of Borrower. The annual review
and the audited report shall both consist of balance sheet,
statement of profit and loss, application of funds, change in
financial position and the like, prepared and certified by a firm
of independent public accountants of recognized standing
acceptable to the Bank; and such other financial reports of the
Borrower as the Bank may reasonably request from time to time,
all of which shall be certified by an Authorized Signatory of
Borrower as being true, correct and accurate. At the time the
annual audit report requested above is delivered to the Bank, the
Borrower shall also supply consolidating financial statements
covering the same audit period of the Borrower and its
Subsidiaries, if any. Such consolidating statements may be
prepared by Borrower's management. (iv) Borrower shall furnish to
the Bank, within an agreed upon reasonable time period, upon the
Bank's written request, such other information about the
financial condition, properties and operations of the Borrower as
Bank may from time to time reasonably request. (v) As soon as
available, but no later than the last legal filing or extension
date prior to which penalties would begin to accrue, Borrower
shall furnish to the Bank copies of its signed Federal Income Tax
Returns for the then current filing year.(vi) All financial
statements shall be furnished to the Bank with comparative
figures for the corresponding period in the preceding fiscal
year; and all financial statements shall be prepared on the
accrual basis of accounting, in accordance with GAAP applied on a
basis consistent with prior years of the Borrower, on a
consolidated (and consolidating) basis and certified by an
Authorized Signatory of Borrower: (a) stating that there exists
no Event of Default or Possible Default hereunder or (b)
describing with particularity any Event of Default or Possible
Default. (vii) Borrower shall furnish to the Bank, prompt written
notice of any condition or event which has resulted in or will
likely result in (a) a material adverse change in the
consolidated condition (financial or otherwise) or operations of
the Borrower, or (b) a breach of or noncompliance with any term,
condition or covenant contained herein or in any document
delivered pursuant hereto, or (c) a material breach of, or
noncompliance with, any term, condition or covenant of any
material contract to which the Borrower and/or any of the
Subsidiaries are a party or by which they or their property may
be bound, which breach would cause a material adverse effect on
the financial condition or operations of the Borrower.
d. Delivery of Financial Information. On an annual basis,
---------------------------------
the Borrower shall deliver to the Bank the Borrower's annual
financial projections and the Borrower's cash flow budget for the
next fiscal year no later than the end of the then current fiscal
year.
e. Financial Records. Borrower shall: (i) At all times
-----------------
keep true and complete financial records in accordance with GAAP
consistently applied and, without limitation, making appropriate
accruals for estimated contingent losses and liabilities; (ii) At
all reasonable times, permit the Bank to examine any or all of
its financial and other records and to make excerpts therefrom
and transcripts thereof; and (iii) Maintain its books and records
at its then current principal office at New Albany, Indiana.
f. Maintenance of Properties and Business. Borrower shall
--------------------------------------
maintain its equipment, Inventory and other fixed and operating
assets in good condition and repair, subject only to normal wear
and tear; and the Bank shall have the right to inspect the same
from time to time.
g. Maintenance of Existence, Corporate Franchise and
-------------------------------------------------
Licenses. The Borrower shall preserve its corporate existence and
- --------
good standing and will be and remain qualified to do business as
a foreign corporation in good standing in all states in which it
conducts business and will maintain all permits, licenses and
other similar matters necessary or appropriate for its
businesses.
h. Notice to Bank. Borrower (acting by and through an
--------------
executive officer of Borrower) shall notify the Bank in writing,
within no more than five (5) Business Days (and without the
benefit of any grace period afforded in any provision of this
Loan Agreement or any Security Instrument) after the Borrower or
any of Borrower's officers or directors learns of any of the
following: (i) the existence or occurrence of any Event of
Default or Possible Default under this Loan Agreement, or any
default under the Note or any of the Security Instruments; (ii) a
material adverse change in the consolidated condition (financial
or otherwise) or operations of the Borrower; (iii) any
representation or warranty made herein, or in any related
writing, not being or ceasing to be, for any reason, in any
material respect, true and complete and not misleading; or (iv)
any claims, proceedings (including but not limited to an audit or
examination by the Internal Revenue Service) or disputes (whether
or not purportedly on behalf of Borrower) against, or to the
knowledge of Borrower, threatened or affecting Borrower which, if
adversely determined, would have a material adverse effect on the
business, properties or condition (financial or otherwise) of
Borrower or any Subsidiaries (without in any way limiting the
foregoing, claims, proceedings, or disputes involving monetary
amounts in excess of $50,000 not fully covered by insurance shall
be deemed to be material), or of any labor controversy resulting
in or threatening to result in a strike against Borrower, or of
any proposal by any public authority to acquire any of the
material assets or business of Borrower.
i. Compliance with Agreements. The Borrower shall timely
--------------------------
comply with all of its material agreements and valid obligations
to and with all parties, and shall not commit or permit to be
committed any material default thereunder.
j. Payment of Note and Other Indebtedness. The Borrower
--------------------------------------
shall timely pay the Note and all the other Indebtedness in
accordance with their respective terms. All payments on the Note
and the other Indebtedness shall be made to the Bank in
immediately available funds at the Bank's principal office on the
date due.
k. Compliance with Laws and Agreements. The Borrower shall
-----------------------------------
at all times comply with the applicable statutes, regulations,
ordinances and other laws applicable to its operations and
activities, non-compliance with which has or may have, with the
passage of time or such other event beyond the control of the
Borrower, if left unremedied, a material and adverse effect upon
its business or properties. The Borrower shall always apply for
and diligently pursue obtaining within due time proper
governmental permits, licenses, approvals, clearances and
authorizations necessary for the commencement and continuation of
its business operations.
l. Sale of Assets. The Borrower shall apply the proceeds
--------------
from the sale of any of the Borrower's assets in excess of
$100,000.00 on an aggregate calendar year basis to the Note and
other Indebtedness in such order and in such amounts as the Bank
determines in the exercise of its sole discretion.
m. Right of Inspection and Audit by Bank. At any
-------------------------------------
reasonable time and from time to time, Borrower will permit the
Bank or any representative thereof to examine and make copies of
and abstracts from Borrower's records and books of account, a
visit to its properties and to discuss its business affairs with
any of its officers.
8. NEGATIVE COVENANTS. The Borrower agrees that, until the
------------------
principal of and all interest on the Note and all the other
Indebtedness shall have been paid in full and this Loan Agreement
terminated, the Borrower shall observe and comply with each of
the following provisions:
a. Liens. The Borrower shall not incur, create, assume or
-----
suffer to exist any mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets, except
(i) the liens and security interests granted by the Borrower to
the Bank contemporaneously with or in connection with the
execution of this Loan Agreement; (ii) the lien of ad valorem
property taxes not yet due and payable; (iii) Landlord liens to
secure lease payments, but which would be inferior to the Bank's
lien; and (iv) liens on all vehicles.
b. Payment of Dividends. Without the prior written consent
--------------------
of the Bank, the Borrower shall not pay any actual or
constructive dividends in cash, stock or other property in excess
of fifty percent (50%) of the previous fiscal year's net income.
c. New Business. Borrower shall not materially change the
------------
nature of its business in any manner.
d. Indebtedness of Borrower. Without the prior written
------------------------
consent of the Bank, the Borrower shall not incur any
indebtedness for borrowed money whatsoever or guaranty or become
directly or contingently liable on any note or other evidence of
indebtedness, letter of credit, or contract of any kind, or enter
into any contract or agreement requiring it to make payments
regardless of the performance by the other party or that has the
effect of constituting a guaranty (and Borrower shall not make
any guaranty for any Affiliate) in excess of $1,000,000.00 in any
calendar year, except only for (i) trade payables incurred by
Borrower in the ordinary course of business; (ii) indebtedness
related to the purchase or lease, on commercially reasonable
terms, of cars, trucks, and other vehicles used by Borrower in
the ordinary course of Borrower's business; and (iii) real estate
leases for store locations and Borrower's corporate headquarters.
e. Loans and Advances. The Borrower shall not make any
------------------
loans other than the creation of accounts receivable in the
ordinary course of business, or advance any funds whatsoever in
excess of $100,000.00 in the aggregate in any calendar year,
without the prior written consent of the Bank.
f. Ratio of Indebtedness to Net Worth. The Borrower shall
----------------------------------
not permit the ratio of its consolidated Total Indebtedness to
its consolidated Tangible Net Worth to be more than 2.25 which
shall be tested on a quarterly basis while any of the
Indebtedness remains unpaid and outstanding.
g. Minimum Tangible Net Worth. Borrower shall not permit
--------------------------
its Tangible Net Worth to be less than $11,000,000.00 as of the
execution date of this Loan Agreement and at all times thereafter
while any of the Indebtedness remains unpaid and outstanding
which shall be tested on a quarterly basis. This shall increase
each fiscal year by 50% of Borrower's reported net income.
h. Coverage Ratio. The Borrower shall not permit the ratio
--------------
of its Earnings Before Interest and Taxes to Interest Expense to
be less than 5.0 from the execution date of this Loan Agreement
and at all times thereafter while any of the Indebtedness remains
unpaid and outstanding, which shall be tested on a quarterly
basis.
i. Ratio of Rented Units to Total Units. The Borrower
------------------------------------
shall not permit the ratio of its Rented Units to Total Units
Available for Rent (excluding jewelry) to be less than 70% based
on a three month rolling average measured monthly, and will not
permit the ratio of Rented Units to Total Units (excluding
jewelry) to be less than 65% for any month, as measured on the
last day each of calendar month, all of which shall be true while
any of the Indebtedness remains unpaid and outstanding.
j. Average Unit Yield. The Borrower shall not permit the
------------------
Monthly Average Unit Yield to be less than $50.00 per Rental
Unit, based on a three-month rolling average measured monthly, at
any time while any of the Indebtedness remains unpaid and
outstanding.
k. Total Unit Charge-Off. The Borrower shall not permit
---------------------
the total Rental Units charged off to exceed 5% of the total
Rented Units, based on a three-month rolling average measured
monthly, at any time while any of the Indebtedness remains unpaid
and outstanding.
9. WARRANTIES. The Borrower hereby represents and warrants to
----------
the Bank as follows (which warranties and representations shall
be deemed to be continuing and shall survive the execution of
this Loan Agreement and the making of all Advances hereunder and
shall be deemed to be remade and restated in full by the Borrower
each time an Advance is made):
a. Existence and Licenses. The Borrower is a duly
----------------------
organized and validly existing corporation in good standing under
the laws of the state of its incorporation and is qualified to do
business as a foreign corporation in good standing in all states
in which it owns any properties or carries on substantial
activities or is otherwise required to be so qualified, and has,
and shall at all times maintain, in full force and effect, all
licenses and permits necessary or appropriate for its business.
b. Authority and Enforceability. No registration with or
----------------------------
approval of any governmental agency or court of any kind is
required for the due execution and delivery of, or for the
enforceability of, this Loan Agreement, the Note or other Loan
Documents. The Borrower has the legal power and right to execute
and deliver this Loan Agreement, the Note and the other Loan
Documents and to observe and perform all of the provisions of
such instruments. Neither the Borrower's execution and delivery
of this Loan Agreement, the Note and the other Loan Documents or
of any other related writing, nor the performance or observance
by the Borrower of the provisions of any of such instruments,
violates or will violate any existing provision in the Borrower's
Articles of Incorporation or By-Laws, or any law applicable to it
or otherwise constitute a default or violation under any existing
contract or other obligation binding upon it or it's property,
with or without the passage of time or the giving of notice or
both. The officer executing and delivering this Loan Agreement,
the Note and other Loan Documents on behalf of the Borrower has
been duly authorized to do so, and this Loan Agreement, the Note
and the other Loan Documents are legally binding upon the
Borrower.
c. Litigation and Taxes. Other than as disclosed on
--------------------
Exhibit E attached hereto, no litigation or proceeding involving
Borrower in excess of $10,000.00 is known to be pending or known
to be threatened in any court or administrative agency, federal,
state or local. The charges, accruals and reserves in respect of
taxes on the financial statements of the Borrower are adequate as
determined in accordance with GAAP. Other than as disclosed on
Exhibit F attached hereto, the Borrower knows of no proposed
material tax assessment against it in excess of $10,000.00, and
no extension of time for the assessment of federal, state or
local taxes of the Borrower is in effect or has been requested
except as disclosed in the financial statements furnished to the
Bank pursuant to this Loan Agreement.
d. Financial Statements. The Borrower's audited financial
--------------------
statements furnished to the Bank prior to the execution of this
Loan Agreement are true and complete, have been prepared on a
consolidated basis, in accordance with GAAP, omit no material
contingent liabilities of any kind that are not disclosed or
otherwise reflected therein, and fairly present their respective
financial conditions as of their dates and the results of the
Borrower's operations for the respective fiscal periods then
ending. Since the respective dates of such statements, there has
been no material adverse change in the Borrower's respective
financial condition, properties or businesses. The Borrower has
no contingent liabilities which, if determined adversely to it
(either singly or in the aggregate), would have a material
adverse effect on the Borrower.
e. No Defaults. No Possible Default or Event of Default
-----------
exists under this Loan Agreement, nor will any such default begin
to exist immediately after the execution and delivery hereof.
f. Subsidiaries. The Borrower has no Subsidiaries, nor
------------
does it own any stock in other corporations or other interests of
any kind in any other business.
g. Ownership and Liens. Borrower has good title to all of
-------------------
its properties and assets and the properties of the Borrower are
subject only to those liens and encumbrances permitted this
Agreement.
h. Loans to Related Parties. There are no loans or
------------------------
advances made by the Borrower to any Affiliate outstanding as of
the date hereof.
i. ERISA. The Borrower is not liable under any employee
-----
benefit plan or similar plan that is subject to ERISA.
j. Investment Company Act. Borrower is not an "investment
----------------------
company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended.
k. Regulation U. Borrower is not engaged principally or as
------------
one of its important activities is in the business of extending
credit for the purpose of purchasing or carrying margin stock
within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System. No part of the proceeds of the Note
will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve
System, or for the purpose of purchasing or carrying or trading
in any securities.
l. Rental Agreements. The Borrower makes the following
-----------------
representations and warranties as to each Rental Agreement: (i)
Borrower is the owner of the property described in the Rental
Agreement being leased to the rental customer (the "Property")
free from all security interest, liens and encumbrances except
for the right of the rental customer under the Rental Agreement
and any security interest or liens in favor of the Bank, (ii)
only one Rental Agreement will cover any one particular item of
Property at any one time, (iii) all signatures, names, addresses,
Property descriptions, amounts and other statements of fact
contained in the Rental Agreements, to Borrower's knowledge, are
true and correct, (iv) the Property has been delivered to the
rental customer pursuant to the Rental Agreement and has been
accepted by the rental customer, (v) each Rental Agreement
contains the entire agreement between the Borrower and each
rental customer, and there are no other agreements or
documentation, written or oral, pertaining to the Rental
Agreement or the Property covered by any Rental Agreement, and
(vi) the Rental Agreement complies with all federal, state, or
local laws, regulations, ordinances and rules applicable to the
Rental Agreement, the Property covered by the Rental Agreement
and insurance coverage. The foregoing items are hereby deemed to
be representations and warranties of the Borrower as to all
existing Rental Agreements and Property covered thereby, and are
also covenants of the Borrower as to any and all future Rental
Agreements and the Property covered thereby.
10. OPERATIONAL AUDITS. An annual operational audit will be
------------------
performed on the Borrower and its operations by an independent
accountant or accounting firm chosen by the Bank in the exercise
of its sole discretion during the third week of any given month.
The Borrower will not have advance notice of the audit, and
agrees to cooperate fully with the Bank and the independent
accountant or accounting firm selected to perform the audit. The
audit will include, but is not limited to, (i) verification of
monthly rental income through bank deposit checks, (ii)
verification of rental contracts through a random identification
of clients (minimum of 20), and (iii) verification of inventory
(minimum 2 stores). Audit expenses are the responsibility of, and
shall be paid by the Borrower up to $3,000.00, and any unpaid
amounts are part of the Indebtedness hereby secured.
11. EVENTS OF DEFAULT. Each of the following shall constitute an
-----------------
Event of Default hereunder:
a. Payment Default. If any installment of principal or
---------------
interest on any of the Indebtedness, including but not limited to
the Note, is not be paid in full punctually when due and payable
subject to any applicable grace period.
b. Defaults Under Loan Agreement. If Borrower violates or
-----------------------------
fails to perform or observe any covenant, agreement, condition or
other provision contained or referred to in this Loan Agreement
and does not take action to correct such violation or failure
within thirty (30) days after notice thereof or such violation or
failure is not materially cured or corrected within sixty (60)
days after notice thereof.
c. Defaults Under Other Documents. If any Event of Default
------------------------------
occurs under any other Loan Document, subject to any applicable
cure period.
d. Exceeding Borrowing Base/Failure to Deliver Performance
-------------------------------------------------------
Summary. If the aggregate principal balance of Advances
- -------
outstanding at any time exceeds the Borrowing Base, and Borrower
fails to reduce the outstanding principal balance of the
Revolving Note so that it does not exceed the Borrowing Base
within five (5) Business Days, or if Borrower does not deliver a
Performance Summary to the Bank on the 20th day of each month, as
required pursuant to this Loan Agreement.
e. Failure to Pay Other Indebtedness. If Borrower fails to
---------------------------------
pay or perform any other material obligation it may have or be
subject to with respect to any Person within any applicable grace
period unless it is being disputed or contested in good faith.
f. Accuracy of Statements. If any representation or
----------------------
warranty or other statement of fact contained herein or in any of
the Security Instruments or in any writing, certificate, report
or statement at any time furnished by or for the Borrower to the
Bank pursuant to or in connection with this Loan Agreement or
otherwise in connection with the transactions contemplated hereby
is false or misleading in any material respect or omits to state
a material fact required to be stated therein in order to make
the statements contained therein, in light of the circumstances
under which made, not misleading, on the date as of which made
whether or not made with knowledge of same.
g. Judgments and Liens. If a final judgment or judgments
-------------------
for the payment of money in excess of the sum of One Hundred
Thousand ($100,000.00) in the aggregate is rendered against
Borrower and such judgment or judgments shall remain unsatisfied
and in effect and has not been discharged within thirty (30)
consecutive days after the entry thereof and execution thereon
has not been stayed pending appeal, or if so stayed, ten (10)
days after the expiration of such stay, or if a lien or notice of
lien is filed against Borrower's assets (other than the liens
allowed pursuant to this Loan Agreement), including state and
federal tax liens, and the same is not released within thirty
(30) days after the filing thereof, or if an action to enforce a
lien upon or security interest in any asset of Borrower is
commenced.
h. Material Adverse Financial Change. If there should be
---------------------------------
any material adverse change in the financial condition of
Borrower from the financial statements and information provided
to the Bank to induce them to enter into this Loan Agreement, and
such material adverse change is not fully corrected to the Bank's
satisfaction within sixty (60) days after notice from Bank.
i. Termination of Existence. If Borrower or any Person or
------------------------
Party affiliated with Borrower takes any action that is intended
to result in the dissolution, or liquidation of Borrower.
j. Solvency and Other Matters. If Borrower (i)
--------------------------
discontinues business, or (ii) makes a general assignment for the
benefit of creditors, (iii) applies for or consents to the
appointment of a custodian, receiver, trustee or liquidator of
all or a substantial part of its assets, (iv) is adjudicated a
bankrupt or insolvent, (v) files a voluntary petition in
bankruptcy or file a petition or an answer seeking a composition,
reorganization or an arrangement with creditors or seeking to
take advantage of any other law (whether federal or state)
relating to relief for debtors, or admits (by answer, default or
otherwise) the material allegations of any petition filed against
them in any bankruptcy, reorganization, composition, insolvency
or other proceeding (whether federal or state) relating to relief
for debtors, (vi) permits to continue unstayed and in effect for
thirty (30) consecutive days any judgment, decree or order
entered by a court or governmental agency of competent
jurisdiction, which assumes control of Borrower or approves a
petition seeking a reorganization, composition or arrangement of
Borrower or any other judicial modification of the rights of any
of its creditors, or appoints a custodian, receiver, trustee or
liquidator for Borrower or for all or a substantial part of any
of its business or assets, (vii) generally is not paying its
debts as they become due, (viii) is enjoined or restrained from
conducting all or a material part of any of its business as now
conducted and the same is not dismissed and dissolved within
thirty (30) days after the entry thereof, or (ix) has an
involuntary petition in bankruptcy filed against it which is not
dismissed within sixty (60) days
12. REMEDIES UPON DEFAULT. Notwithstanding any contrary
---------------------
provision or inference herein or elsewhere:
a. Optional Acceleration. If any Event of Default referred
---------------------
to in Section 9 hereof shall occur and shall not have been cured
within any applicable cure period, the Bank, in its absolute
discretion, without further notice to the Borrower may declare
all or any of the Indebtedness, including but not limited to the
Note to be, whereupon the same shall be, accelerated and
immediately due and payable in full, all without any presentment,
demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower, and avail itself of all
remedies available to Bank under the Loan Documents, including,
without limitation, the right to proceed with an action or to
repossess the Collateral.
b. Offsets. If any Event of Default shall occur, the Bank
-------
shall have the right then, or at any time thereafter, to set off
against, and to appropriate and apply toward the payment of the
Indebtedness (in such order as the Bank may select in its sole
discretion),including but not limited to the indebtedness
evidenced by the Note, whether or not such indebtedness shall
then have matured or be due and payable and whether or not the
Bank has declared the Notes and/or other Indebtedness to be in
default and immediately due, any and all deposit balances and
other sums and indebtedness and other property then held or owed
by the Bank to or for the credit or account of Borrower in and on
all of which the Borrower hereby grants the Bank a first security
interest and lien to secure all the Indebtedness, all without
notice to or demand upon the Borrower or any other Person, all
such notices and demands being hereby expressly waived.
c. Termination of Disbursements. Upon the occurrence of
----------------------------
any Event of Default the Bank shall thereafter have no obligation
under any circumstances to make any further Advances under the
Note and may pursue all other remedies available to the Bank
hereunder.
d. Rights Under Loan Documents. If any Event of Default
---------------------------
shall occur, the Bank shall also have all rights and remedies
granted it under any and all of the Security Agreement or other
Loan Documents securing the Indebtedness, including, without
limitation, the right to appoint a receiver to maintain the
Collateral.
e. Rights Cumulative. All of the rights and remedies of
-----------------
the Bank upon the occurrence of an Event of Default or Possible
Default hereunder shall be cumulative to the greatest extent
permitted by law and shall be in addition to all those rights and
remedies afforded the Bank at law or equity. Any exercise of any
right or remedy shall not be deemed to be an election of that
right or remedy to the exclusion of any other right or remedy.
f. Waiver of Marshaling of Assets. Borrower hereby waives
------------------------------
any requirement of marshaling of assets and/or any other legal or
equitable doctrine which might require Bank to proceed against
any Person or any of the collateral securing any of the
Indebtedness, or upon any other property or with respect to any
other rights in any particular order. Upon an Event of Default,
Bank may choose to exercise any of its rights or enforce any of
its security interests or other liens or decline to enforce any
of its rights or enforce any of its security interest or other
liens, at Bank's sole discretion. The failure of Bank to exercise
any rights or enforce any security interest shall not release any
Person or property with respect to which Bank has any rights or
any security interest, or in any way limit or diminish the Bank's
right with respect to any such property or Person.
g. Sale of Collateral. Upon the occurrence of an Event of
------------------
Default, Bank has the right to repossess and sell the Collateral
at public or private sale, and shall have the right to bid upon
and purchase the Collateral at any sale. Notice of any sale
shall be deemed reasonable provided the Bank gives the Borrower
twenty (20) days notice of such sale.
13. MISCELLANEOUS.
-------------
a. No Implied Waiver; Cumulative Remedies. No delay or
--------------------------------------
failure of Bank in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise thereof or any abandonment or discontinuance
of steps to enforce such a right, power or remedy preclude any
other or further exercise thereof or the exercise of any other
right, power or remedy. The rights and remedies provided
hereunder are cumulative and not exclusive of any rights or
remedies (including, without limitation, the right of specific
performance) which Bank would otherwise have.
b. Writing Required; Amendments. Any waiver, permit,
----------------------------
consent or approval of any kind or character on the part of Bank
of any breach or default under this Agreement, the Note or any
other Loan Documents or any such waiver of any provision or
condition hereof or thereof must be in writing and shall be
effective only to the extent in such writing specifically set
forth. Borrower acknowledges that with respect to this Agreement
and its terms, Borrower is not authorized nor entitled to rely on
any representations, modifications or assurances in any form or
as to any subject from any officer of Bank unless and until such
representation, modification or assurance is set forth in writing
and signed by such officer of Bank.
c. Taxes. Borrower agrees to pay or cause to be paid any
-----
and all stamp, document, transfer or recording taxes, and similar
impositions payable or hereafter determined to be payable in
connection with this Agreement and any other Loan Document or
other documents, instruments or transactions pursuant to or in
connection herewith, and agrees to save Bank harmless from and
against any and all present or future claims or liabilities with
respect to, or resulting from any delay in paying or omission to
pay, any such taxes or similar impositions, unless caused by
Bank's negligence.
d. Holidays. Whenever any payment or action to be made or
--------
taken hereunder or under the Note shall be stated to be due on a
day which is not a Business Day, such payment or action shall be
made or taken on the next succeeding Business Day and such
extension of time shall be included in computing interest or
fees, if any, in connection with such payment or action.
e. Notices. All notices given to or made upon any party
-------
hereto in connection with this Agreement, the Note or any other
Loan Documents shall, except as herein or therein otherwise
expressly provided, be in writing and delivered by certified
mail, return receipt requested, to the addresses set forth on
page 1 hereof, or at such other address as shall be specifically
designated by any such party.
f. Reimbursement for Certain Expenses. Borrower agrees to
----------------------------------
pay or cause to be paid and save Bank harmless against liability
for the payment of reasonable out-of-pocket expenses, including
reasonable counsel fees, incurred by Bank relating to the
preparation of these Loan Documents up to $5,000.00. Further,
Borrower agrees to pay and save Bank harmless against liability
of reasonable out-of-pocket expenses, including reasonable
counsel fees incurred by Bank relating to (i) any requested
amendments, waivers, consents or other matters with respect
hereto or to the transactions contemplated hereby in the future;
and (ii) arising in connection with the enforcement of this
Agreement and with the other Loan Documents and in the collection
of the Note, the Letters of Credit, and any other agreements or
instruments delivered pursuant hereto.
g. Time of Essence. Time shall be of the essence as to
---------------
all provisions of this Agreement.
h. Severability. The provisions of this Agreement are
------------
severable, and if any clause or provision of this Agreement shall
be held invalid or unenforceable in whole or in part, then such
clause or provision shall be ineffective to the extent of such
invalidity or enforceability without in any manner affecting the
validity or enforceability or the remaining provisions hereof.
i. Governing Law. This Agreement, the Note and the other
-------------
Loan Documents (other than the Letters of Credit which shall be
governed by the laws of the State of New York) and the rights and
obligations of the parties hereto and thereto shall be governed
by and construed and enforced in accordance with the substantive
law of the Commonwealth of Kentucky.
j. Survival. All representations, warranties, covenants
--------
and agreements contained herein, in the Loan Documents or any
other agreement, certificate or instrument delivered pursuant
hereto or made in writing in connection herewith or therewith
shall survive the execution and delivery hereof and thereof, the
making of the Loan hereunder and the issuance of the Note and
shall continue in full force and effect so long as Borrower may
borrow hereunder and until payment in full of his obligations
hereunder and under the Note, and shall be deemed to be remade
and restated by Borrower at the time of each Advance
k. Benefit and Binding Effect of Agreement. This
---------------------------------------
Agreement shall be binding upon and inure to the benefit of Bank,
the Borrower and their respective successors and assigns, except
that neither Borrower nor Bank may assign or transfer their
rights hereunder or any interest herein without the prior written
consent of the other party. Provided, however, Bank may sell a
portion of the Loan to other lenders so long as Bank remains the
lead or agent bank in such participation.
l. Right of Set Off. Upon the occurrence and during the
----------------
continuance of any Event of Default, Bank is hereby authorized at
any time and from time to time, without notice to Borrower (any
such notice being expressly waived), to set off and apply any and
all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing
by Bank to or for the credit or the account of Borrower against
any and all of the obligations of Borrower now or hereafter
existing under this Agreement or the Note or any other Loan
Document, irrespective of whether or not Bank shall have made any
demand under this Agreement or the Note or such other Loan
Document and although such obligations may be unmatured. Bank
agrees promptly to notify Borrower after any such set off and
application, provided that the failure to give such notice shall
not affect the validity of such set off and application. The
rights of Bank under this section are in addition to other rights
and remedies (including, without limitation, other rights of set
off) which Bank may have.
m. Waiver of Rights to Jury Trial. The Bank and Borrower
------------------------------
hereby voluntarily, expressly and intentionally waive any right
that either of them may have to a trial by jury in respect of any
litigation arising from or connected with the Note, this
Agreement or the other Loan Documents.
n. Jurisdiction and Venue. The parties agree that the
----------------------
sole proper venue for the determination of any litigation
commenced by Bank against Borrower or Borrower against Bank on
any basis shall be in a court of competent jurisdiction which is
located in either the Circuit Court in Jefferson County,
Kentucky, or the United States District Court for the Western
District of Kentucky, Louisville Division, and the parties hereby
expressly declare that any other venue shall be improper and
Borrower expressly waives any right to a determination of any
such litigation against Bank by a court in any other venue.
Borrower further agrees that service of process by any judicial
officer or by registered or certified U.S. mail shall establish
personal jurisdiction over Borrower and Borrower waives any
rights under the laws of any state to object to jurisdiction
within the Commonwealth of Kentucky. Provided, however, nothing
contained in this section shall prevent Bank from bringing any
action or exercising any rights against any security or against
Borrower within any other state. Initiating such proceedings or
taking such action in any other state shall in no event
constitute a waiver of the agreement contained herein that the
laws of the Commonwealth of Kentucky shall govern the rights and
obligations of the parties hereunder or of the submission herein
made by Borrower to personal jurisdiction within the Commonwealth
of Kentucky. The aforesaid means of obtaining personal
jurisdiction and perfecting service of process are not intended
to be exclusive, but are cumulative and in addition to all other
means of obtaining personal jurisdiction and perfecting service
of process now or hereafter provided by the laws of the
Commonwealth of Kentucky or by any other state in an action
brought by Bank in such state.
o. No Third Party Beneficiaries. All conditions on the
----------------------------
obligations of any party hereunder, including the obligation of
Bank to make Advances, are imposed solely and exclusively for the
benefit of the other parties to this Agreement and Bank's
successors and assigns. No other Person shall have standing to
require satisfaction of such conditions in accordance with their
terms or be entitled to assume that Bank will refuse or decline
to make Advances in the absence of strict compliance with any or
all thereof, and no other Person shall, under any circumstances,
be deemed to be a beneficiary of such conditions, any and all of
which may be freely waived in whole or in part by the respective
party to whom the performance of any such condition shall run at
any time if in the sole discretion of such party it deems it
desirable to do so, or if it fails to do so for any other reason.
p. No Agency. Bank is not the agent or representative of
---------
Borrower and Borrower is not the agent or representative of Bank,
and nothing in this Agreement shall be construed to make Bank
liable to anyone for goods delivered to or services performed
with respect to the Collateral or for debts or claims accruing
against Borrower. Nothing herein, nor the acts of the parties
hereto, shall be construed to create a partnership or joint
venture between Bank and Borrower or any other relationship
except as creditor, debtor, and guarantor.
q. Bank's Performance of Borrower's Covenants and Duties.
-----------------------------------------------------
Should Borrower fail to perform any of its covenants, duties and
agreements in accordance with the terms hereof and an Event of
Default shall thereby result, Bank may, at its election and at
Borrower's expense, perform or attempt to perform such covenant,
duty or agreement on behalf of Borrower, but in no event shall
Bank have any obligation to do so. Borrower shall, at the
request of Bank, promptly pay, upon demand, any reasonable amount
expended by Bank in such performance or attempted performance to
Bank, together with interest thereon at the default rate under
the Note from the date such amount was requested by Bank to be
paid until paid; provided that Bank does not assume and shall
never have, except by a subsequent, express written undertaking
of Bank, any liability for the performance of any duties of
Borrower under or in connection with all or any part of the
Collateral. Bank shall be subrogated to all rights, titles,
liens and security interests securing the payment of any debt,
claim, tax or assessment for the payment of which Bank may make
an advance or that Bank may pay.
r. Course of Dealing; Waiver. No course of dealing in
-------------------------
respect of, or any omission or delay in the exercise of, any
right, power, remedy or privilege by Bank shall operate as a
waiver thereof, nor shall any right, power, remedy or privilege
of Bank be exclusive of any other right, power, remedy or
privilege referred to herein or in any related document or now or
hereafter available at law, in equity, in bankruptcy, by statute
or otherwise. Each such right, power, remedy or privilege may be
exercised by Bank, either independently or concurrently with
others, and as often and in such order as Bank may deem
expedient. No waiver or consent granted by Bank with respect to
this Agreement, the Note or any other Loan Document or related
writing shall be binding upon Bank, unless specifically granted
in writing by a duly authorized officer of Bank, which writing
shall be strictly construed.
s. Absence of Oral Representations. Borrower represents
-------------------------------
and warrants that no promises, assurances or commitments have
been made to it by Bank or have been relied on by it regarding
any extension, renewal or future financing, Borrower understands
and agrees that Bank is entitled to enforce this Agreement, the
Note and all other Loan Documents strictly in accordance with
their terms, and any commitment or obligation to extend or renew
any financing or provide additional financing shall not be
binding on Bank, except to the extent contained in a writing
signed by every Person who is to be bound thereby. Borrower
further acknowledges that (i) Bank does not presently anticipate
renewing, extending or further modifying the financing referenced
in this Agreement, and (ii) Bank anticipates the Note will be
fully paid in accordance with its terms on or before maturity.
Borrower agrees and represents to Bank (which representation
Borrower acknowledges Bank is relying on in executing this
Agreement) that it will not rely on any (i) commitment or
representation from Bank with respect to any future financing,
including, but not limited to, renewals, extensions and
modifications, unless signed in writing by Bank, and (ii) waiver
of any right existing at any time, and from time to time, either
now or in the future, except to the extent evidenced by a writing
signed by the person effecting such waiver.
t. Indemnity. Borrower shall indemnify Bank from and hold
---------
Bank harmless against any loss suffered or liability incurred by
Bank on account of any damage to the person or property of the
parties hereto or to third parties by reason of the operation of
Borrower's business, or otherwise arising out of or connected to
the conduct of Borrower, or their officers, managers, directors,
employees or agents, in connection with any matters which are the
subject of this Agreement.
u. References. Any and all references in this Agreement
----------
to any document or documents shall be references to such document
or documents as the same may be from time to time modified,
amended, renewed, consolidated or extended, with the consent of
Bank.
v. Entire Agreement. This Agreement constitutes the
----------------
entire agreement and the understanding between the parties with
respect to the subject matter hereof and the Agreement supersedes
all previous and contemporaneous negotiations and agreements
between the parties and no parole evidence of any prior or other
agreements shall be permitted to contradict or vary the terms
hereof. Borrower acknowledges that, except as set forth herein,
there have been no promises for additional extensions of time for
payment of the Indebtedness nor have there been any agreements
made to provide additional funding to Borrower.
BANK ONE, KENTUCKY, NA
BY:
-----------------------------
TITLE:
----------------------------
ALRENCO, INC.
BY:
-----------------------------
TITLE:
----------------------------
STATE OF INDIANA )
COUNTY OF FLOYD )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by
______________________ as ____________________, for and on behalf
of Bank One, Kentucky, NA, on this ____ day of _____________,
1997.
My Commission Expires:
-----------------------------------
-----------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF INDIANA )
COUNTY OF FLOYD )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by
_____________________ as _______________, for and on behalf of
Alrenco, Inc., on this ____ day of ________________, 1997.
My Commission Expires:
-----------------------------------
-----------------------------------
NOTARY PUBLIC
