<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
---------------
Date of Report (Date of earliest event reported):
February 26, 1998
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.)
714 East Kimbrough Street, Mesquite, Texas 75149
(Address of principal executive offices) (Zip Code)
(972) 288-9327
(Registrant's telephone number, including area code)
1736 East Main Street, New Albany, Indiana 47150
(Former name or former address, if changed since last report)
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<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On February 26, 1998 (the "Effective Time"), Alrenco, Inc. ("Alrenco")
completed its previously-announced merger with RTO, Inc. ("RTO"). Pursuant to
the terms of an Agreement and Plan of Merger, dated as of September 28, 1997, as
amended (the "Merger Agreement"), by and between Alrenco and RTO, RTO was merged
with and into Alrenco, with Alrenco as the surviving corporation (the "Merger").
In accordance with the Merger Agreement, each outstanding share of RTO common
stock was converted as of the Effective Time into the right to receive 89.795
shares of Alrenco common stock, with cash being paid in lieu of fractional
shares. Following the Merger, the business of the Alrenco will be conducted
primarily under the trade name "Home Choice Lease or Own." The principal
executive offices of Alrenco have been relocated to 714 East Kimbrough Street,
Mesquite, Texas 75149.
In accordance with the terms of the Merger Agreement, at the Effective
Time the incumbent directors of Alrenco except Michael D. Walts resigned and
were replaced by George D. Johnson, Jr., Billy W. White, Sr., Edward W. Phifer,
III and John S. Rainey. Mr. Walts will remain as a director of the Company.
In connection with the Merger, Alrenco entered into a consulting
agreement (the "Consulting Agreement") with Michael D. Walts. The Consulting
Agreement is attached as Exhibit 10.1 hereto.
A copy of the press release announcing the completion of the Merger is
attached as Exhibit 99 hereto and incorporated herein by reference.
Item 4. Changes in Registrant's Certifying Accountant
On February 26, 1998, immediately following the Merger, the Board of
Directors of Alrenco replaced Grant Thornton LLP as the principal independent
auditor of Alrenco. Effective February 26, 1998, Coopers and Lybrand L.L.P.,
previously the principal independent auditor for RTO, was engaged by Alrenco to
serve as the independent auditor of Alrenco's financial statements for the 1998
fiscal year. Grant Thornton LLP will continue to serve as the independent
auditor with respect to Alrenco's financial statements for the fiscal year ended
December 31, 1997.
Neither of the reports of Grant Thornton LLP on the financial
statements of Alrenco for the fiscal years ended December 31, 1995 and 1996
contained an adverse opinion or a disclaimer of an opinion or was qualified or
modified as to uncertainty, audit scope or accounting principles. The report of
Grant Thornton LLP with respect to the fiscal year ended December 31, 1997 has
not yet been issued, but Grant Thornton LLP has informed Alrenco that such
report will not contain an adverse opinion or a disclaimer of an opinion, nor
will such report be qualified or modified as to uncertainty, audit scope or
accounting principles.
During the two fiscal years ended December 31, 1997, and during the
interim periods preceding February 26, 1998, (i) there were no disagreements
with Grant Thornton LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure and (ii) there
were no "reportable events" (as defined in Item 304(a)(1)(v) of Regulation S-K).
Alrenco has presented a copy of this Form 8-K to Grant Thornton LLP
prior to the date hereof. The letter of Grant Thornton LLP addressed to the
Securities and Exchange Commission stating that it agrees with the statements
made by Alrenco in this Form 8-K is filed as an exhibit to this Form 8-K.
Item 5. Other Events.
On February 26, 1998, immediately following the Merger, the Company
entered into a Revolving Credit Agreement (the "Comerica Credit Agreement") with
Comerica Bank ("Comerica"), as lender and as agent for certain other lenders,
which provides for a $50.0 million secured three year credit facility. The
amount available under the Comerica Credit Agreement may be increased, if
certain conditions are met, up to an aggregate of $100.0 million. The Comerica
Credit Agreement will replace the existing Alrenco and RTO credit facilities.
The Comerica Credit Agreement provides for certain borrowing options for
advances based on a "Base Rate" of (i) Comerica's prime rate or (ii) the federal
funds rate plus 100 basis points, or a "Eurodollar Rate" adjusted for reserves
and other regulatory requirements, plus an applicable margin. The Comerica
Credit Agreement is for general corporate purposes including working capital and
permitted acquisition financing. The Comerica Credit Agreement generally
requires a first security interest from the Company in all accounts, notes and
contracts receivable, machinery and equipment, rental units, and substantially
all other assets. Additionally, the Comerica Credit Agreement requires the
pledge of stock of all subsidiaries of the Company. The Comerica Credit
Agreement is attached as Exhibit 10.2 hereto, and certain related agreements are
also attached as exhibits hereto.
In addition, the following supplemental consolidated financial
statements of Alrenco, Inc. are filed as a part of this report:
Supplemental Consolidated Financial Statements of Alrenco, Inc.
Report of Independent Accountants
Report of Independent Certified Public Accountants
Supplemental Consolidated Balance Sheet as of December 31,
1995 and 1996 and September 30, 1997 (unaudited)
Supplemental Consolidated Statement of Operations for the
years ended December 31, 1994, 1995 and 1996 and the nine
months ended September 30, 1996 and 1997 (unaudited)
Supplemental Consolidated Statement of Shareholders' Equity
(Deficit) for the three years ended December 31, 1994,
1995 and 1996 and the nine months ended September 30,
1997 (unaudited)
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1995 and 1996 and the
nine months ended September 30, 1996 and 1997
(unaudited)
Notes to Supplemental Consolidated Financial Statements
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
The following financial statements of RTO, Action TV and Appliance
Rental, Inc. and B&L Concepts, Inc. are incorporated herein by reference from
Alrenco's Registration Statement on Form S-4 (SEC File No. 333-44451) filed on
January 16, 1998.
Consolidated Financial Statements of RTO, Inc.
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1995 and
1996 and September 30, 1997 (unaudited)
Consolidated Statements of Operations for the years
ended December 31, 1994, 1995 and 1996 and the
nine months ended September 30, 1996 and 1997
(unaudited)
Consolidated Statements of Shareholders' Equity
(Deficit) for the three years ended December 31,
1994, 1995 and 1996 and the nine month period
ended September 30, 1997 (unaudited)
-2-
<PAGE> 3
Financial Statements of Action TV and Appliance Rental, Inc.
Report of Independent Accountants
Report of Independent Auditors
Balance Sheets as of December 31, 1994 and 1995 and
July 31, 1996
Statements of Operations for the years ended December
31, 1994 and 1995 and for the seven months ended
July 31, 1996
Statements of Shareholders' Equity for the years ended
December 31, 1994 and 1995 and for the seven months
ended July 31, 1996
Statements of Cash Flows for the years ended December
31, 1994 and 1995 and for the seven months ended
July 31, 1996
Notes to Financial Statements
Financial Statements of B&L Concepts, Inc.
Report of Independent Auditors
Balance Sheets as of December 23, 1995 and December 28,
1996
Statements of Income for the years ended December 23,
1995 and December 28, 1996
Statements of Stockholders' Equity for the years ended
December 23, 1995 and December 28, 1996
Statements of Cash Flows for the years ended December
23, 1995 and December 28, 1996
Notes to Financial Statements
(b) Pro Forma Financial Information.
The following pro forma financial information relating to the Merger is
incorporated herein by reference from Alrenco's Registration Statement on Form
S-4 (SEC File No. 333-44451) filed on January 16, 1998.
Pro Forma Financial Statements
Unaudited Pro Forma Condensed Combined Financial Statements
Condensed Combined Balance Sheet as of September 30, 1997
Condensed Combined Statement of Operations for the nine months
ended September 30, 1997
Condensed Combined Statement of Operations for the nine
months ended September 30, 1996
Condensed Combined Statement of Operations for the year
ended December 31, 1996
Condensed Combined Statement of Operations for the year
ended December 31, 1995
Condensed Combined Statement of Operations for the year
ended December 31, 1994
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
-3-
<PAGE> 4
(c) Exhibits.
The following exhibits are filed as a part of this report:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- -----------------------
<S> <C>
2.1 -- First Amendment to Agreement and Plan of Merger,
dated as of January 8, 1998, between Alrenco, Inc.
and RTO, Inc.
2.2 -- Certificate of Merger
2.3 -- Articles of Merger
3.1 -- Amended and Restated Articles of Incorporation of
Alrenco, Inc.
3.2 -- Amended and Restated Code of By-laws of Alrenco, Inc.
10.1 -- Noncompetition and Consulting Agreement dated as of
February 26, 1998, between Alrenco, Inc. and Michael
D. Walts.
10.2 -- Revolving Credit Agreement dated as of February 26,
1998, between Alrenco, Inc. and Comerica Bank.
10.3 -- Guaranty Agreement dated as of February 26, 1998.
10.4 -- Security Agreement dated as of February 26, 1998.
10.5 -- Pledge Agreement dated as of February 26, 1998, between
Alrenco, Inc. and Comerica Bank.
10.6 -- Pledge Agreement dated February 26, 1998, between RTO
Holding Co., Inc. and Comerica Bank,
16.1 -- Letter of Grant Thornton LLP
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Coopers & Lybrand L.L.P.
23.3 -- Consent of Coopers & Lybrand L.L.P.
23.4 -- Consent of Ernst & Young LLP
23.5 -- Consent of Ernst & Young LLP
23.6 -- Consent of Ernst & Young LLP
23.7 -- Consent of Grant Thornton LLP
99 -- Press release dated February 26, 1998 announcing
completion of the merger of Alrenco, Inc. and RTO,
Inc.
</TABLE>
-4-
<PAGE> 5
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 5, 1998
ALRENCO, INC.
By: /s/ K. David Belt
----------------------------------
K. David Belt
Chief Financial Officer
-5-
<PAGE> 6
Item 7.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Supplemental Consolidated Financial Statements of Alrenco, Inc.
Supplemental Consolidated Balance Sheet as of September 30,
1997
Supplemental Consolidated Statement of Operations for the nine
months ended September 30, 1997
Supplemental Consolidated Statement of Operations for the nine
months ended 30, 1996
Supplemental Consolidated Statement of Operations for the year
ended December 31, 1996
Supplemental Consolidated Statement of Operations for the year
ended December 31, 1995
Supplemental Consolidated Statement of Operations for the year
ended December 31, 1994
</TABLE>
F-1
<PAGE> 7
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
Alrenco, Inc.
We have audited the accompanying supplemental consolidated balance sheets of
Alrenco, Inc. and subsidiaries (the "Company") as of December 31, 1995 and 1996,
and the related supplemental consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1996, after restatement for the 1998 pooling of
interests with RTO, Inc. ("RTO") described in Note 1. These supplemental
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these supplemental
consolidated financial statements based on our audits. We did not audit the
financial statements of Alrenco, Inc. ("Alrenco") prior to the combination with
RTO, which statements reflect total assets constituting 59% and 37% of the
restated total assets as of December 31, 1995 and 1996, respectively, and total
revenues constituting 40%, 48%, and 51% of the restated totals for the years
ended December 31, 1994, 1995, and 1996, respectively. The contribution of
Alrenco represented net income of $3,663,378 compared to a restated supplemental
consolidated net income of $1,097,558 for the year ended December 31, 1996. The
contribution of Alrenco to supplemental consolidated net income represented 44%
and 24% of the restated totals for the years ended December 31, 1994 and 1995,
respectively. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Alrenco, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the other
auditors provide a reasonable basis for our opinion.
The supplemental consolidated financial statements give retroactive effect to
the merger of Alrenco and RTO on February 26, 1998, which has been accounted
for as a pooling of interests as described in Notes 1 and 3 to the supplemental
consolidated financial statements. Generally accepted accounting principles
proscribe giving effect to a consummated business combination accounted for by
the pooling of interests methods in financial statements that do not include
the date of consummation. These financial statements do not extend through the
date of consummation; however, they will become the historical consolidated
financial statements of the Company after financial statements covering the
date of consummation of the business combination are issued.
In our opinion, based on our audits and the report of the other auditors, the
supplemental consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company at December 31, 1995 and 1996, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles
applicable after financial statements are issued for a period which includes
the date of consummation of the business combination described in Note 1 of the
notes to the supplemental consolidated financial statements.
COOPERS & LYBRAND L.L.P
Spartanburg, South Carolina
February 26, 1998
<PAGE> 8
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Alrenco, Inc.
We have audited, prior to the restatement for the 1998 pooling of
interests with RTO, Inc., the balance sheets of Alrenco, Inc. as of December 31,
1995 and 1996, and the related statements of earnings, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996,
which are not presented herein. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Alrenco, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
As discussed in Note A to the financial statements, the Company, on
January 1, 1994, changed its method of accounting for investments and on January
1, 1995, changed its method of depreciating rental merchandise.
GRANT THORNTON LLP
Dallas, Texas
February 7, 1997
2
<PAGE> 9
ALRENCO, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ SEPTEMBER 30,
1995 1996 1997
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 1,110,011 $ 35,745,989 $ 5,009,710
Rental merchandise, net 21,742,162 58,723,990 80,552,218
Prepaid expenses and other assets 1,885,670 2,827,461 5,222,699
Deferred income taxes 308,357 3,044,867 3,181,176
Property and equipment, net 3,966,284 9,481,081 13,028,428
Notes receivable 1,011,931 1,252,857 100,948
Intangible assets, net 5,316,546 58,054,831 93,508,926
------------- ------------- -------------
Total assets $ 35,340,961 $ 169,131,076 $ 200,604,105
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, trade $ 4,765,990 $ 8,305,964 $ 7,308,468
Accrued liabilities 3,896,857 7,175,931 10,236,938
Deferred income taxes 164,956 532,580 556,829
Debt 23,064,204 6,772,269 34,459,951
------------- ------------- -------------
Total liabilities 31,892,007 22,786,744 52,562,186
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par; 1,000,000 shares authorized;
none issued or outstanding -- -- --
Common stock, no par: 20,000,000 shares authorized;
4,441,479, 16,903,197 and 16,957,119 shares issued and
outstanding in 1995, 1996 and 1997, respectively 4,473,963 148,719,632 149,323,527
Unamortized value of stock awards -- (1,182,138) (1,036,392)
Accumulated deficit (1,025,009) (1,193,162) (245,216)
------------- ------------- -------------
Total stockholders' equity 3,448,954 146,344,332 148,041,919
------------- ------------- -------------
Total liabilities and stockholders' equity $ 35,340,961 $ 169,131,076 $ 200,604,105
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE> 10
ALRENCO, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ------------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Rental and fee revenue $ 66,122,481 $ 74,990,274 $ 121,145,016 $ 79,230,310 $ 165,633,164
Cash sales and other revenue 2,658,620 2,538,450 3,016,344 2,191,117 3,794,077
------------- ------------- ------------- ------------- -------------
Total revenue 68,781,101 77,528,724 124,161,360 81,421,427 169,427,241
------------- ------------- ------------- ------------- -------------
Operating expenses:
Direct store expenses 56,461,769 65,020,893 104,180,816 66,656,068 139,792,670
Corporate expenses 7,064,278 7,988,273 10,710,565 6,933,859 16,086,010
Cost of business combinations -- -- 1,743,433 48,513 864,081
Amortization of intangibles 328,633 568,386 3,982,093 1,813,809 8,107,921
Key executive signing bonuses -- -- 1,485,641 1,485,641 400,119
------------- ------------- ------------- ------------- -------------
Total operating expenses 63,854,680 73,577,552 122,102,548 76,937,890 165,250,801
------------- ------------- ------------- ------------- -------------
Operating income 4,926,421 3,951,172 2,058,812 4,483,537 4,176,440
Other income (expense):
Interest expense (2,144,144) (2,467,652) (1,571,808) (1,317,391) (1,602,118)
Interest income 38,715 35,415 645,291 237,510 194,318
Other non-operating income
(expense), net 115,526 261,537 403,255 232,985 (6,113)
Gain on sale of stores -- 1,048,923 750,800 750,800 950,366
------------- ------------- ------------- ------------- -------------
Income before income
taxes and
extraordinary item 2,936,518 2,829,395 2,286,350 4,387,441 3,712,893
Income tax expense 764,168 877,177 1,188,792 1,580,409 2,688,331
------------- ------------- ------------- ------------- -------------
Income before
extraordinary item 2,172,350 1,952,218 1,097,558 2,807,032 1,024,562
Extraordinary item, net of income
tax expense -- 3,335,851 -- -- --
------------- ------------- ------------- ------------- -------------
Net income $ 2,172,350 $ 5,288,069 $ 1,097,558 $ 2,807,032 $ 1,024,562
============= ============= ============= ============= =============
Pro forma information (unaudited):
Income before extra-
ordinary item $ 2,172,350 $ 1,952,218 $ 1,097,558 $ 2,807,032 $ 1,024,562
Pro forma income tax expense
(benefit) 505,758 290,000 200,674 356,202 (213,833)
------------- ------------- ------------- ------------- -------------
Pro forma income
before extraordinary item 1,666,592 1,662,218 896,884 2,450,830 1,238,395
Extraordinary item, net of
income tax expense -- 3,335,851 -- -- --
------------- ------------- ------------- ------------- -------------
Pro forma net income $ 1,666,592 $ 4,998,069 $ 896,884 $ 2,450,830 $ 1,238,395
============= ============= ============= ============= =============
Pro forma income before
extraordinary item per share $ .37 $ .37 $ .09 $ .31 $ .07
Extraordinary item per share -- .74 -- -- --
------------- ------------- ------------- ------------- -------------
Pro forma net income per
share $ .37 $ 1.11 $ .09 $ .31 $ .07
============= ============= ============= ============= =============
Weighted average shares
outstanding 4,455,786 4,516,937 10,239,717 8,013,646 16,939,229
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE> 11
ALRENCO, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
AND NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK UNAMORTIZED
------------------------------ VALUE OF ACCUMULATED UNREALIZED
SHARES AMOUNT STOCK AWARDS DEFICIT GAIN TOTAL
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1993 4,323,040 $ 3,202,250 $ -- $ (6,310,764) $ -- $ (3,108,514)
Issuance of common stock 54,954 337,494 -- -- -- 337,494
Contributions of capital -- 405,440 -- -- -- 405,440
Distributions to S
corporation
shareholders -- -- -- (687,721) -- (687,721)
Unrealized gains from initial
adoption of statement of
Financial Accounting
Standards No. 115
effective January 1,
1994, net of tax
of $24,972 -- -- -- -- 35,313 35,313
Net change in unrealized
gains, net of tax
of $3,689 -- -- -- -- (5,216) (5,216)
Net income -- -- -- 2,172,350 -- 2,172,350
------------- ------------- ------------- ------------- ------------- -------------
December 31, 1994 4,377,994 3,945,184 -- (4,826,135) 30,097 (850,854)
Issuance of common stock 63,485 483,281 -- -- -- 483,281
Contributions of capital -- 45,498 -- -- -- 45,498
Distributions to S
corporation
shareholders -- -- -- (1,486,943) -- (1,486,943)
Net change in unrealized
gains, net of tax
of $21,283 -- -- -- -- (30,097) (30,097)
Net income -- -- -- 5,288,069 -- 5,288,069
------------- ------------- ------------- ------------- ------------- -------------
December 31, 1995 4,441,479 4,473,963 -- (1,025,009) -- 3,448,954
Issuance of common stock 12,356,118 142,336,038 -- -- -- 142,336,038
Restricted stock awards 105,000 1,470,000 (1,470,000) -- -- --
Exercise of stock options 600 8,400 -- -- -- 8,400
Amortization of stock
awards -- -- 287,862 -- -- 287,862
Contributions of capital -- 431,231 -- -- -- 431,231
Distributions to S
corporation
shareholders -- -- -- (1,265,711) -- (1,265,711)
Net income -- -- -- 1,097,558 -- 1,097,558
------------- ------------- ------------- ------------- ------------- -------------
December 31, 1996 16,903,197 148,719,632 (1,182,138) (1,193,162) -- 146,344,332
Issuance of common stock
(unaudited) 49,567 690,000 -- -- -- 690,000
Exercise of stock options
(unaudited) 21,416 179,574 -- -- -- 179,574
Amortization of stock
awards (unaudited) -- -- 145,746 -- -- 145,746
Purchase and retirement of
common stock from
dissenters (unaudited) (17,061) (265,679) -- -- -- (265,679)
Distributions to S
corporation
shareholders
(unaudited) -- -- -- (76,616) -- (76,616)
Net income (unaudited) -- -- -- 1,024,562 -- 1,024,562
------------- ------------- ------------- ------------- ------------- -------------
September 30, 1997
(unaudited) 16,957,119 $ 149,323,527 $ (1,036,392) $ (245,216) $ -- $ 148,041,919
============= ============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE> 12
ALRENCO, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ------------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,172,350 $ 5,288,069 $ 1,097,558 $ 2,807,032 $ 1,024,562
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Extraordinary gain -- (3,335,851) -- -- --
Loss on sale of property and equipment 79,547 183,225 157,743 -- 91,576
Gain on sale of stores -- (1,048,923) (750,800) (750,800) (950,366)
Depreciation and disposition of rental
merchandise 21,202,401 22,837,489 32,828,540 21,292,280 43,316,498
Amortization of intangibles 328,633 570,034 3,985,279 1,813,809 8,107,923
Depreciation of property and equipment 1,096,205 1,275,954 1,874,180 1,085,137 2,394,521
Deferred income taxes 244,694 71,845 (1,437,643) (539,134) (86,187)
Amortization of stock awards -- -- 287,862 107,006 145,746
Gain on sale of investments -- (99,930) -- -- --
Changes in operating assets and
liabilities, net of effects of
acquisitions of businesses and
dispositions of stores:
Purchase of rental merchandise (23,117,955) (23,313,063) (43,632,258) (25,195,422) (50,270,412)
Accounts payable and accrued expenses 54,796 1,297,974 3,148,167 1,972,648 70,234
Other assets (476,070) (663,999) 218,068 (860,324) (1,331,358)
Income taxes payable (93,208) 164,766 38,566 479,593 (423,808)
------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities 1,491,393 3,227,590 (2,184,738) 2,211,825 2,088,929
------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Purchase of property and equipment (1,495,533) (1,070,066) (3,036,474) (2,025,399) (4,007,676)
Proceeds from sale of property and
equipment 163,963 244,389 71,468 -- 484,702
Purchase of investments (129,628) (58,581) -- -- --
Proceeds from sale of investments -- 542,501 -- -- --
Acquisitions of businesses, net of cash
acquired (3,500,000) (7,205,060) (74,502,919) (71,508,598) (49,101,390)
Dispositions of stores, net of cash sold -- 2,700,000 1,043,058 1,043,058 3,031,691
Amounts advanced on notes receivable (23,797) (114,425) (336,225) -- --
Payments received on notes receivable 24,886 67,179 98,261 120,988 492,921
Increase in loan to stockholder (7,662) (7,466) (7,252) (7,252) (7,018)
------------- ------------- ------------- ------------- -------------
Net cash used in investing
activities (4,967,771) (4,901,529) (76,670,083) (72,377,203) (49,106,770)
------------- ------------- ------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock 182,400 483,281 142,336,038 141,166,013 --
Proceeds from stock options -- -- 8,400 -- 179,574
Proceeds from notes payable 5,133,554 6,925,654 2,393,150 334,589 30,798,080
Payments on notes payable and capital
leases (2,157,987) (4,350,105) (29,778,248) (27,661,316) (14,353,797)
Payments for deferred loan fees -- (16,090) -- -- --
Contributions of capital 33,234 45,498 51,610 51,610 --
Distributions to S corporation
shareholders (594,287) (1,328,012) (1,520,151) (1,091,002) (76,616)
Purchase of common stock from dissenters -- -- -- -- (265,679)
------------- ------------- ------------- ------------- -------------
Net cash provided by
financing activities 2,596,914 1,760,226 113,490,799 112,799,894 16,281,562
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash (879,464) 86,287 34,635,978 42,634,516 (30,736,279)
Cash at beginning of period 1,903,188 1,023,724 1,110,011 1,110,011 35,745,989
------------- ------------- ------------- ------------- -------------
Cash at end of period $ 1,023,724 $ 1,110,011 $ 35,745,989 $ 43,744,527 $ 5,009,710
============= ============= ============= ============= =============
Supplemental disclosure of cash flow
information:
Cash paid for:
Interest $ 2,585,027 $ 2,867,380 $ 1,676,893 $ 1,322,921 $ 1,603,555
============= ============= ============= ============= =============
Income taxes $ 910,047 $ 683,074 $ 2,615,322 $ 1,809,782 $ 2,669,596
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
6
<PAGE> 13
ALRENCO, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION
On February 26, 1998, Alrenco, Inc. ("Alrenco") acquired all of the
issued and outstanding stock of RTO, Inc. ("RTO"). The supplemental
consolidated financial statements of Alrenco have been prepared to give
retroactive effect to the merger with RTO on February 26, 1998. Generally
accepted accounting principles proscribe giving effect to a consummated
business combination accounted for by the pooling-of-interests method in
financial statements that do not include the date of consummation. These
financial statements do not extend through the date of consummation; however,
they will become the historical consolidated financial statements of Alrenco
and subsidiaries after financial statements covering the date of consummation
of the business combination are issued.
The supplemental consolidated financial statements include the
combination of Alrenco and RTO, the Purchase Acquisitions and the Pooling
Acquisitions (as described in Note 3) (collectively referred to as the
"Company") as required by Accounting Principles Board Opinion Number 16 ("APB
16").
The Company develops, acquires, owns and operates a chain of stores
that rents durable household products such as consumer electronics, appliances,
furniture, jewelry and home furnishing accessories under cancelable
rental-purchase agreements renewable on a weekly or monthly basis. At December
31, 1996, the Company operated 298 stores in seventeen states (see Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying supplemental consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.
RENTAL MERCHANDISE
Rental merchandise is carried at the lower of cost or net realizable
value. Depreciation is provided using the income forecasting method or
straight-line method over a period designed to approximate the income
forecasting method. The income forecasting method is designed to match as
closely as practicable the recognition of depreciation expense with the
consumption of the rental merchandise. The consumption of rental merchandise
occurs during periods of rental and directly coincides with the receipt of
rental revenue over the rental-purchase agreement period, generally 18 to 24
months. Under the income forecasting method, merchandise held for rent is not
depreciated, and merchandise on rent is depreciated in the proportion of rents
received to total rents required to obtain ownership as provided in the
rental-purchase agreement. The income forecasting method is an activity-based
method similar to the units of production method.
Rental merchandise acquired prior to January 1, 1995 by Alrenco is
being depreciated by the straight-line method over various estimated useful
lives, primarily 21 months. The range of the various estimated useful lives is
generally one to three years. The Company adopted the income forecasting method
because management believes that it provides a more systematic and rational
allocation of the cost of rental merchandise to operations as its useful life
expires. The effect of the change in accounting method was to increase net
income and pro forma income per share by approximately $470,000 and $0.10,
respectively, for the year ended December 31, 1995.
Effective January 1, 1997, RTO and its new subsidiaries elected to
depreciate all additions to rental merchandise acquired subsequent to December
31, 1996 using the income forecasting method and make other conforming changes
to the estimate of depreciation expense. These changes were made to more
accurately match revenues and expenses. The impact of these changes on the
results of operations for the nine months ended September 30, 1997 was to
increase net income by approximately $400,000 or $0.02 per share.
7
<PAGE> 14
RENTAL REVENUE
Merchandise is rented to customers pursuant to rental-purchase
agreements, which provide for predominantly weekly rental terms with
non-refundable rental payments. Rental revenue is recognized as collected, since
at the time of collection the rental merchandise has been placed in service and
costs of installation and delivery have been incurred. Generally, the customer
has the right to acquire title through either a purchase option or through
payment of all rentals required to obtain ownership as provided in the
rental-purchase agreement. The customers may terminate rental-purchase
agreements at any time, and if terminated, the rental merchandise is returned to
the Company. A provision is made for estimated losses of rental merchandise
damaged or not returned by customers.
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISKS
The Company maintained deposits and a money market mutual fund account
totaling $1,110,011 and $35,745,989 at December 31, 1995 and 1996, respectively,
with several financial institutions. Deposits in excess of $100,000 and mutual
funds are not insured by the Federal Deposit Insurance Corporation. During 1996,
the Company invested excess funds in a money market mutual fund account with a
bank, which invests in short-term instruments. The market value of the
securities as of December 31, 1996 in the mutual funds approximates the carrying
amount of approximately $25,000,000.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and on deposit and
highly liquid instruments with maturities of three months or less when
purchased. The carrying amount of cash and cash equivalents is the estimated
fair value at December 31, 1995 and 1996.
PROPERTY AND EQUIPMENT AND RELATED DEPRECIATION
Property and equipment are stated at cost. Expenditures for repairs and
maintenance are charged to expense as incurred and additions and improvements
that significantly extend the lives of depreciable assets are capitalized. Upon
sale or other retirement of depreciable property, the cost and accumulated
depreciation are removed from the related accounts and any gain or loss is
reflected in the results of operations. Depreciation of furniture and fixtures,
signs and vehicles is provided over the estimated useful lives of the respective
assets on a straight line and accelerated bases. Leasehold improvements are
amortized over the shorter of the useful life of the asset or the term of the
lease and renewal period, if applicable.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company continually evaluates the propriety of the carrying value
of property and equipment, goodwill and other intangible assets based on the
estimated future undiscounted cash flows of the related investment, as well as
the amortization period to determine whether current events and circumstances
warrant adjustments to carrying value and/or revised estimates of useful lives.
At this time, the Company believes that no significant impairment of the
long-lived assets has occurred and that no reduction of the estimated useful
lives is warranted.
INCOME TAXES
Income taxes for the Company are determined by use of the liability
method in which deferred income taxes are provided for temporary differences
between the financial reporting and income tax basis of assets and liabilities
using the income tax rates under existing legislation expected to be in effect
at the date such temporary differences are expected to reverse.
8
<PAGE> 15
Since certain of the business combinations accounted for as
poolings-of-interests as defined by APB 16 (see Note 3) involved companies which
were nontaxable enterprises prior to acquisition by the Company (e.g. S
Corporations), unaudited pro forma income tax expense (benefit) has been
presented for the nontaxable enterprises as if they had been a taxable
enterprise for all periods presented. Deferred tax assets and liabilities for
the tax effects of temporary differences for the nontaxable enterprises were
established through an adjustment to income tax expense (benefit) during the
period that the combinations were consummated (see Note 11).
ADVERTISING COSTS
Advertising costs amounting to $4,101,000, $4,839,000 and $7,534,000
for the years ended December 31, 1994, 1995, and 1996, respectively, are
expensed as incurred.
PRO FORMA NET INCOME PER SHARE
Pro forma net income per share is based on the weighted average
number of common shares and common share equivalents outstanding during the
period presented.
The Company will adopt Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per share," on December 31, 1997. SFAS No. 128
requires the Company to change its method of computing, presenting and
disclosing earnings per share information. Upon adoption, all prior period data
presented will be restated to conform to the provisions of SFAS No. 128. This
restatement is not expected to have a material impact on pro forma net income
or pro forma net income per share.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation" encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principals Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees" and related Interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an employee must pay to
acquire the stock.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and debt whose
carrying value approximates fair value at December 31, 1995 and 1996.
STATEMENTS OF CASH FLOWS
Excluded from the supplemental consolidated statements of cash flows
was the effect of certain noncash activities. For the nine months ended
September 30, 1997, the Company issued common stock to settle notes payable
totaling $690,000 to certain shareholders. Additionally, in connection with
certain Purchase Acquisitions, the Company issued a total of $7,100,000 of
notes payable to individuals.
9
<PAGE> 16
INTERIM FINANCIAL INFORMATION
The supplemental consolidated balance sheet as of September 30, 1997,
the supplemental consolidated statement of stockholders' equity for the nine
months then ended, the supplemental consolidated statements of operations and
cash flows for the nine months ended September 30, 1996 and 1997 and the notes
to supplemental consolidated financial statements with respect to September 30,
1996 and 1997 and for the nine month periods then ended, have been prepared by
the Company without audit. In the opinion of management, all adjustments (which
included only normal, recurring adjustments) necessary to present fairly the
financial position at September 30, 1997 and 1996, and the results of operations
and cash flows for the aforementioned interim periods presented have been made.
The results of operations for the interim periods are not necessarily indicative
of the operating results for the full year.
RECENT ACCOUNTING STANDARDS
During June 1997, the Financial Accounting Standards Board issued SFAS
No. 130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosures About
Segments of an Enterprise and Related Information". Preliminary analysis of
these new standards by the Company indicates that the standards will not have a
material impact on the Company. The standards are effective for financial
statements for fiscal years beginning after December 15, 1997.
RECLASSIFICATIONS
Certain reclassifications were made to prior year balances to conform
to the 1996 presentation.
3. ACQUISITIONS
During 1995, the Company purchased 16 rental-purchase stores for
$6,320,000, which were accounted for as a purchase. The operating results of
these acquired stores are included in the operating results of the Company
since the dates of aquisition.
The Company purchased all of the issued and outstanding common stock of
Action TV & Appliance Rental, Inc. ("Action"), a 102 store chain, effective
August 1, 1996 for cash of approximately $45,300,000 and $2,600,000 for
noncompetition agreements. The Company purchased 14 stores from a company doing
business as Easy Rentals on March 1, 1996 for cash of approximately $6,500,000.
On August 1, 1996, the Company completed the acquisition of 14 stores
through the purchase of the common stock of Network Rentals, Inc. ("Network"),
for cash of approximately $5,600,000. During 1996, the company also acquired
55 stores in 22 unrelated transactions for an aggregate cash purchase price of
approximately $14,300,000.
On January 2, 1997, the Company completed the acquisition of 28 stores
located in 4 states from Fastway Rentals, Inc. for an aggregate purchase price
of $11,900,000. The Company purchased the assets of twenty-seven rent-to-own
stores from B&L Concepts, Inc. ("B&L") on January 6, 1997 for total
consideration of $13,761,878 consisting of cash of $10,761,878 and a $3,000,000
convertible note (see Note 9).
10
<PAGE> 17
Additionally, during 1997, the Company acquired 56 stores in 7
unrelated transactions for an aggregate purchase price of approximately $27.1
million consisting of cash of $23 million and notes totalling $4,100,000 (see
Note 9).
The above acquisitions (collectively referred to as the "Purchase
Acquisitions") have been accounted for as purchases, as defined by APB 16 and,
accordingly, the operating results of the acquired businesses have been included
in the results of operations since their respective acquisition dates. The
purchase prices have been allocated as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Rental merchandise $ 2,166,681 $ 27,048,141
Property and equipment 326,224 4,580,086
Intangible assets 4,686,155 56,711,492
Other assets 26,000 3,967,194
Accounts payable and accrued expenses -- (3,886,758)
Notes payable assumed -- (13,917,236)
------------ ------------
Cash paid, net of cash acquired $ 7,205,060 $ 74,502,919
============ ============
</TABLE>
The following summary, prepared on an unaudited pro forma basis,
presents the results of operations (i) as if the above acquisitions had been
purchased as of the beginning of the year of acquisition and the beginning of
the year for the immediately preceding period, (ii) as if the initial
capitalization of RTO had occurred on January 1, 1995, and (iii) to include the
effect of adjustments of (i) and (ii) for amortization of intangibles, interest,
income taxes and the weighted average shares outstanding.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA RESULTS OF OPERATIONS
--------------------------------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------------- -----------------------------
1995 1996 1996 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 162,027,916 $ 230,622,179 $ 172,470,624 $ 181,171,928
Income (loss) before extraordinary item $ 3,103,527 $ (1,968,597) $ 270,821 $ (299,330)
Net income (loss) $ 6,439,378 $ (1,968,597) $ 270,821 $ (299,330)
Income (loss) before extraordinary
item per share $ .22 $ (.12) $ .02 $ (.02)
Net income (loss) per share $ .46 $ (.12) $ .02 $ (.02)
</TABLE>
The unaudited pro forma financial information is presented for
informational purposes only and is not necessarily indicative of operating
results that would have occurred had the acquisitions been consummated as of the
above dates, nor are they necessarily indicative of future operating results.
The Company entered into definitive agreements to merge with various
entities, which were consummated during 1996, 1997 and 1998. Under the terms of
each merger agreement, shares of common stock of each entity were multiplied by
an exchange ratio and exchanged for shares of the Company's common stock. A
summary of each merger follows:
11
<PAGE> 18
<TABLE>
<CAPTION>
SHARES
DATE OF OF COMPANY
POOLING ACQUISITIONS MERGER STOCK ISSUED
- ----------------------------------------------- ----------------- ------------
<S> <C> <C>
Home Choice, Inc. ("Home Choice") October 31, 1996 23,885
Yam's, Inc. ("Yam's") November 1, 1996 342,837
ARTO, Inc. ("ARTO") February 28, 1997 186,774
National TV Rental, Inc. ("National") February 28, 1997 188,659
Seajay Group ("Seajay") February 28, 1997 179,500
Showtyme Group ("Showtyme") February 28, 1997 214,520
ABC Group ("ABC") March 11, 1997 170,611
Discount Centers of America, Inc. ("Discount") May 12, 1997 98,415
The Hut Co. ("Hut") May 13, 1997 37,714
RTO, Inc. ("RTO") February 26, 1998 12,280,316
</TABLE>
The Pooling Acquisitions were accounted for as pooling-of interests.
Separate unaudited results of the pooled entities prior to each date of the
merger for the years ended December 31, 1994, 1995 and 1996 and the nine month
periods ended September 30, 1996 and 1997 are as follows:
<TABLE>
<CAPTION> YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------------------ ---------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenue:
Alrenco $ 27,800,152 $ 37,575,639 $ 63,855,808 $ 44,171,577 $ 76,171,375
RTO -- -- 25,157,509 10,018,730 88,135,815
Home Choice -- 319,772 834,748 583,180 --
Yam's 4,493,464 4,844,923 4,535,581 3,554,124 --
ARTO 3,553,723 3,811,243 4,153,355 3,186,045 684,753
National 7,328,178 7,260,425 6,378,971 5,115,697 850,086
Seajay 14,454,915 11,661,143 7,406,567 5,756,512 1,218,752
Showtyme 4,187,987 4,627,591 4,346,450 3,311,817 632,548
ABC 2,748,639 3,239,992 3,451,139 2,624,868 550,938
Discount 2,330,979 2,369,852 2,385,037 1,860,914 742,969
Hut 1,883,064 1,818,144 1,656,195 1,237,963 440,005
------------ ------------ ------------ ------------ ------------
Combined $ 68,781,101 $ 77,528,724 $124,161,360 $ 81,421,427 $169,427,241
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1994 1995 1996
-------------------------- -------------------------- --------------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss):
Alrenco $ 961,828 $ 961,828 $ 1,266,592 $ 1,266,592 $ 3,663,378 $ 3,663,378
RTO -- -- -- -- (3,175,692) (3,141,549)
Home Choice -- -- (221,073) (135,695) (129,993) (79,790)
Yam's 145,154 145,154 59,313 59,313 (17,711) (17,711)
ARTO 204,536 125,544 316,396 194,204 367,532 225,591
National 192,191 117,967 (6,232) (3,825) 204,135 125,298
Seajay (including
extraordinary item of
$3,335,851 in 1995) 80,141 80,141 3,385,544 3,385,544 220,813 220,813
Showtyme 726,485 445,916 579,037 355,413 211,647 129,909
ABC 186,363 114,390 82,779 50,810 (45,303) (27,807)
Discount (99,455) (99,455) (11,041) (11,041) (99,064) (99,064)
Hut (209,348) (209,348) (161,409) (161,409) (57,826) (57,826)
Conforming adjustments (15,545) (15,545) (1,837) (1,837) (44,358) (44,358)
----------- ----------- ----------- ----------- ----------- -----------
Combined $ 2,172,350 $ 1,666,592 $ 5,288,069 $ 4,998,069 $ 1,097,558 $ 896,884
=========== =========== =========== =========== =========== ===========
</TABLE>
12
<PAGE> 19
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------------------------------
1996 1997
-------------------------- --------------------------
ACTUAL PROFORMA ACTUAL PROFORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss):
Alrenco $ 2,749,674 $ 2,749,674 $ 4,126,556 $ 4,126,556
RTO (1,157,463) (1,157,463) (2,859,301) (2,716,745)
Home Choice (105,752) (64,913) -- --
Yam's 80,519 80,519 -- --
ARTO 417,158 256,051 9,636 9,636
National 362,372 222,424 (74,480) (52,813)
Seajay 249,140 249,140 (34,204) (34,204)
Showtyme 207,290 127,237 (2,776) (3,577)
ABC 41,256 25,323 (76,500) (26,089)
Discount (50,520) (50,520) (45,335) (45,335)
Hut 37,366 37,366 (6,299) (6,299)
Conforming adjustments (24,008) (24,008) (12,735) (12,735)
----------- ----------- ----------- -----------
Combined $ 2,807,032 $ 2,450,830 $ 1,024,562 $ 1,238,395
=========== =========== =========== ===========
</TABLE>
Conforming adjustments relate to conforming amortization policies, net
of the related tax benefit.
4. SALE OF STORES
During 1997, the Company sold eight stores for $3,031,691. In
connection with the transaction, the Company sold assets with a net book value
of $2,081,325, received cash of $3,031,691 and recorded a gain of $950,366.
During 1996, the Company sold four stores for $1,410,700. In
connection with the transaction, the Company sold assets with a net book value
of $659,900, received $1,043,058 in cash and $367,642 to repay a portion of its
debt, and recorded a gain of $750,800.
During 1995, the Company sold thirteen stores for $2,700,000. In
connection with the transaction, the Company sold assets with a net book value
of $1,651,077, received $2,700,000 in cash and recorded a gain of $1,048,923.
5. RENTAL MERCHANDISE
Cost and accumulated depreciation of rental merchandise are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Cost $ 44,127,126 $ 85,888,698 $128,991,346
Less accumulated depreciation 22,384,964 27,164,708 48,439,128
------------ ------------ ------------
Rental merchandise, net $ 21,742,162 $ 58,723,990 $ 80,552,218
============ ============ ============
</TABLE>
13
<PAGE> 20
6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
DEPRECIATION --------------------------
PERIOD 1995 1996
------------ ----------- -----------
<S> <C> <C> <C>
Buildings 20 years $ 493,672 $ 445,539
Furniture and equipment 3 - 7 years 6,407,600 10,420,777
Leasehold improvements 3 - 10 years 2,759,010 5,579,886
----------- -----------
9,660,282 16,446,202
Less: accumulated depreciation and amortization 5,821,458 7,080,548
----------- -----------
3,838,824 9,365,654
Land 127,460 115,427
----------- -----------
Property and equipment, net $ 3,966,284 $ 9,481,081
=========== ===========
</TABLE>
7. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
AMORTIZATION ---------------------------- SEPTEMBER 30,
PERIOD 1995 1996 1997
-------------- ------------ ------------ -------------
(Unaudited)
<S> <C> <C> <C> <C>
Customer rental agreements 15 - 24 months $ 548,000 $ 3,071,317 $ 4,901,461
Noncompetition agreements 2 - 10 years 913,675 4,566,300 7,754,191
Goodwill 10 - 30 years 4,874,029 55,423,368 93,771,714
Other various 25,385 26,811 --
------------ ------------ ------------
6,361,089 63,087,796 106,427,366
Less: accumulated amortization 1,044,543 5,032,965 12,918,440
------------ ------------ ------------
Intangible assets, net $ 5,316,546 $ 58,054,831 $ 93,508,926
============ ============ ============
</TABLE>
Customer rental agreements represent the fair value of active customer
agreements of acquired stores at the acquisition date and are amortized in
proportion to and over the period of related estimated rental income on an
accelerated basis. The noncompetition agreements are amortized on the
straight-line and accelerated methods. Goodwill is amortized on the
straight-line method.
14
<PAGE> 21
8. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
---------- ----------
<S> <C> <C>
Salaries, wages, taxes and benefits $1,060,019 $2,621,062
Property taxes 38,174 220,124
Sales and use taxes payable 596,778 773,264
Professional and advisory fees 146,973 884,207
Bonuses 258,978 468,842
Interest 178,509 94,668
Other 1,617,426 2,113,764
---------- ----------
Accrued expenses $3,896,857 $7,175,931
========== ==========
</TABLE>
9. NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to individuals with an interest rate of 9.25% payable
in equal annual installments of $700,000 plus accrued interest
through January 3, 1999 $ -- $ -- $ 1,400,000
Convertible note payable to individuals with an interest rate of 6%
payable quarterly with the principal due in January 1999 -- -- 3,000,000
Convertible note payable to individuals with an interest rate of 6%
payable quarterly with the principal due May 30, 1999 -- -- 2,000,000
Revolving credit facilities with lenders with variable interest rates
and fixed rates as discussed below: interest only payments;
certain facilities are renewable each year and others are due on
demand 14,481,373 1,317,593 26,920,912
Notes payable to banks with fixed rates at 10% and variable rates of
prime plus 5%; payments range from $1,600 to $5,671;
originally maturing on dates ranging from February 1999 to July
2014 6,250,348 3,119,987 --
Notes payable to affiliates 1,560,707 1,670,811 --
Notes payable to individuals with interest rates at 10% and 20%;
payments ranging from $1,822 to interest only; some maturing
on May 2002 and others with no stated maturity date 116,662 105,156 109,994
Equipment notes payable with interest rates ranging from 8% to
13.25%; payments ranging from $297 to $2,303 (principal and
interest); originally maturing on dates from January 1997 to June
2000 191,245 200,520 --
Vehicle notes payable with interest ranging from $380 to $597
(principal and interest); originally maturing on dates from May
1997 to June 1999 141,489 85,399 --
Capital lease obligations 322,380 272,803 1,029,045
----------- ----------- -----------
Notes payable $23,064,204 $ 6,772,269 $34,459,951
=========== =========== ===========
</TABLE>
The Company has two revolving credit facilities at September 30, 1997.
The first facility (the "First Facility") has a variable interest rate based on
LIBOR plus 2.5% and matures on October 1, 1998. The First Facility provides for
maximum borrowings of $16.5 million less any outstanding principal of the fixed
rate loan. Borrowings under the First Facility may also be limited based on
multiples of average monthly receipts and rental income, as defined by the First
Facility. At September 30, 1997, the Company had $5.2 million available under
the First Facility.
15
<PAGE> 22
The second facility (the "Second Facility"), which totaled $25,000,000,
carries a three-year term which expires in 1999 with interest rates ranging from
prime to prime plus 1 1/4 % depending upon level of indebtedness. Under the
terms of the Second Facility, the Company is required to pay a commitment fee of
.375% to .50% (depending on the level of indebtedness) per annum on the unused
portion of the Second Facility. As of December 31, 1996, the Company had no
outstanding borrowings under the Second Facility. As of September 30, 1997,
$15,625,092 was outstanding under the Second Facility.
The revolving credit facilities with lenders at December 31, 1995 and
1996 had interest rates ranging from prime plus 1% to prime plus 2.5% and a
fixed rate of 14.5%.
The First and Second Facilities, notes payable to bank, and certain
notes payable to affiliates are collateralized primarily by inventory and
property, plant and equipment of the Company. The equipment and vehicle notes
payable are guaranteed by the shareholders of the Company. The First and Second
Facilities restrict the Company's ability to pay dividends to a percentage of
annual income, require the Company to maintain minimum levels of tangible net
worth, as defined by the Facilities, subject the Company to a maximum ratio of
total liabilities to net tangible net worth, limit liabilities and capital
expenditures, and require certain interest coverage ratios.
On January 6, 1997 and May 28, 1997, the Company issued two notes in
the amounts of $3,000,000 and $2,000,000, respectively, in connection with the
acquisitions of B&L and Instant (see Note 3). Upon certain events these notes
are convertible into common stock of the Company at a conversion rate of $13.92
per share, which will be adjusted for stock splits, dividends, or
recapitalizations of the Company.
Aggregate maturities of note payable are as follows (excluding capital
leases):
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, 1997
------------------
<S> <C>
1998.......................................................... $11,355,974
1999.......................................................... 16,337,552
2000.......................................................... 5,712,460
2001.......................................................... 12,460
2002.......................................................... 12,460
-----------
$33,430,906
===========
</TABLE>
10. STOCK OPTION PLANS
On November 8, 1995, Alrenco approved a stock incentive plan ("Alrenco
Plan") under which 450,000 common shares were reserved. Under the Alrenco Plan,
the Company may grant its employees incentive stock options or nonqualified
stock options to purchase a specified number of shares of common stock at a
price not less that fair market value on the date of grant and for a term not to
exceed 10 years. In addition to the stock options, the Company may grant stock
appreciation rights ("SAR"), restricted stock awards and options to directors.
SARs and options to directors must be granted at a minimum of fair market value
at the date of grant and restricted stock awards at a price to be determined by
the Board of Directors' compensation committee. Directors who are not involved
in day-to-day management of the Company are initially entitled to a grant of
5,000 shares and on each of their next five anniversaries, an automatic 1,000
share grant. On January 23, 1996, the Company granted 105,000 shares of
restricted stock to two key employees which vested the earlier of a change in
control or at the end of seven years. As a result of the merger with RTO, these
shares automatically vested on February 26, 1998. At December 31, 1996, there
were 242,705 shares reserved for issuance under the Alrenco Plan.
RTO adopted the 1996 Employee Stock Option Plan (the "RTO Plan") to
attract and retain employees. Under the RTO Plan, options may be granted with
respect to a total of not more that 1,027,973 shares of common stock, subject to
antidilution and other adjustment provisions provided, however, that the maximum
number of shares subject to all options granted to an individual under the Plan
shall not exceed 50% of the shares of common stock authorized for issuance. No
options may be granted under the RTO Plan after the tenth anniversary of the RTO
Plan. The options vest over a four-year period and expire on the tenth
anniversary following the date of grant.
In August 1996, the compensation committee of RTO granted under the RTO
Plan, ten-year options to purchase common stock at an exercise price of $11.14
per share to numerous employees of RTO. Additional options have been granted
subsequent to this initial grant to employees joining RTO through acquisitions
or recruitment at exercise prices per share ranging from $11.14 to $15.59. The
option exercise price is equal to the fair market value of the stock on the date
16
<PAGE> 23
of grant, as determined by the Board of Directors. No options to purchase common
stock under the RTO Plan are exercisable as of December 31, 1996.
On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock Based Compensation" ("SFAS 123"). As permitted by SFAS 123, the Company
has chosen to apply APB Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related Interpretations in accounting for its Plans.
Accordingly, no compensation cost has been recognized for options granted under
the Plans. Had compensation cost for the Company's Plans been determined based
on fair value at the grant dates for awards under the Plans consistent with the
method outlined in SFAS 123, the Company's pro forma net income and pro forma
net income per share would have decreased to the pro forma amounts indicated
below for the year ended December 31, 1996. The Plans had not been adopted
during the year ended December 31, 1995; therefore, there are no pro forma
amounts for those periods.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1996
---------------------------
PRO FORMA SFAS 123
AS REPORTED PRO FORMA
----------- ----------
<S> <C> <C>
Pro forma net income $ 896,884 $ 46,595
========== ==========
Pro forma net income per share $ .09 $ .00
========== ==========
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model using the following assumptions for
grants in 1996:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1996
------------------
<S> <C>
Expected dividend rate 0%
Volatility rate 0% to 40%
Risk-free interest rate 5.75% to 6.30%
Expected life 5.5 to 6 years
</TABLE>
A summary of the status of the Plan as of December 31, 1996 and changes
during the period are presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
-------- --------
<S> <C> <C>
Outstanding as of January 1, 1996 -- $ --
Granted 730,052 11.64
Exercised (600) 14.00
Forfeited (27,159) 11.18
-------- ------
Outstanding as of December 31, 1996 702,293 $11.66
======== ======
Options exercisable at December 31, 1996 66,645
========
Weighted average fair value of options granted during the year ended December 31, 1996 $ 3.21
========
</TABLE>
The following table summarizes information about the Plan's stock
options at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------
WEIGHTED - WEIGHTED -
AVERAGE AVERAGE
NUMBER REMAINING EXERCISE
RANGE OF EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE PRICE
- ---------------------------- ------------- ------------------ ------------
<S> <C> <C> <C>
December 31, 1996
$11.14 573,072 9.64 years $11.14
13.92 27,926 9.89 years 13.92
14.00 101,295 9.00 years 14.00
-------
702,293
=======
</TABLE>
17
<PAGE> 24
RTO also adopted the 1996 Stock Option Plan for Non-Employee Directors
that provides for the granting to non-employee directors of stock options to
purchase up to 448,975 shares of the Company's common stock. The Company has
granted 50,644 shares at $15.59 per share, which vest over one year.
Effective September 30, 1995, the Company rescinded existing deferred
compensation plans. Despite the rescission, the Company agreed to compensate the
executives for amounts accrued under the plans through September 30, 1995.
Compensation recognized under the deferred compensation plans was $75,658 and
$119,603 for the years ended December 31, 1994 and 1995, respectively.
11. INCOME TAXES
The income tax expense (benefit) is comprised of the following
components:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal $ 339,436 $ 622,758 $ 1,962,036
State 180,038 182,574 664,399
----------- ----------- -----------
Total current 519,474 805,332 2,626,435
Deferred 244,694 71,845 (1,437,643)
----------- ----------- -----------
Total $ 764,168 $ 877,177 $ 1,188,792
=========== =========== ===========
</TABLE>
Significant components of the Company's deferred income taxes are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carry-forwards $ 40,726 $ 1,272,439
Rental merchandise 66,285 556,615
Property and equipment -- 282,000
Intangibles -- 454,000
Deferred compensation 88,309 34,644
Tax credits -- 414,581
Other 189,644 121,151
Valuation allowance (76,607) (90,563)
----------- -----------
308,357 3,044,867
----------- -----------
Deferred tax liabilities:
Intangible assets 154,137 518,580
Other 10,819 14,000
----------- -----------
164,956 532,580
----------- -----------
$ 143,401 $ 2,512,287
=========== ===========
</TABLE>
In 1996, a net deferred tax asset of approximately $400,000 was
established upon the acquisition of Action for the difference in the tax and
book basis of the net assets acquired.
At December 31, 1996, the Company had approximately $270,000 in general
business credit carryforwards which expire, if unused, beginning in the year
2000 and alternative minimum tax credits of approximately $145,000 which are not
subject to expiration. These credit carryforwards relate to the acquisition of
Network and utilization of these credits is limited to approximately $118,000
per year.
18
<PAGE> 25
As of December 31, 1996, the Company has a total of $3,300,000 of net
operating loss carry forwards for federal tax purposes, expiring 2007 and 2010.
The utilization may be subject to limitations under IRC Section 382.
Realization of the net deferred tax asset is dependent on generating
sufficient taxable income prior to expiration of the carryforwards. Although
realization is not assured, management believes it is more likely than not that
all of the net deferred tax asset will be realized. The amount of deferred tax
asset considered realizable; however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.
The income tax expense (benefit) reconciled to the tax computed at the
statutory Federal rate (34%) is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Federal income tax at the statutory rate $ 1,007,220 $ 963,044 $ 802,505
State income tax 233,202 193,651 267,932
Nondeductible goodwill amortization and acquisitions cost 283 283 272,177
Income from Subchapter S corporations, net (505,758) (290,000) (200,674)
Other 29,221 10,199 46,852
----------- ----------- -----------
$ 764,168 $ 877,177 $ 1,188,792
=========== =========== ===========
</TABLE>
12. BENEFIT PLANS
The Company has a defined contribution profit sharing plan covering
substantially all employees. The plan provides for Company contributions to be
determined annually by the Board of Directors. The Company contributed $50,000
to the plan during 1996.
The Company also has two qualified tax deferred retirement savings
plan under the provisions of Section 401(k) of the Internal Revenue Code. The
Plans cover all full-time employees who have completed six months of service
with the Company. Under the first plan, the Company matches the first 4% of an
eligible employee's elective contributions. Additional contributions are made at
the discretion of the Board of Directors. The Second Plan calls for the Company
to match 25% of the first 6% of eligible employees' elective contributions. The
Company contributed approximately $135,000 to the Plans for 1996.
13. COMMITMENTS AND CONTINGENCIES
The Company leases its office and store facilities and transportation
equipment under operating leases expiring in various years through 2010. Rental
expense was $3,706,000, $4,241,000 and $8,846,200 for the years ended December
31, 1994, 1995 and 1996, respectively. The Company also leases certain
transportation equipment under capital leases expiring in various years through
2002. Future minimum rental payments under operating leases with remaining
noncancelable terms in excess of one year at September 30, 1997 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
(UNAUDITED) (UNAUDITED)
----------- -----------
<C> <C> <C>
1997 $ 3,003,000 $ 131,000
1998 9,729,000 91,000
1999 6,977,000 373,000
2000 4,573,000 320,000
2001 2,489,000 284,000
Thereafter 1,390,000 --
----------- -----------
$28,161,000 1,199,000
===========
Amounts representing interest 170,000
-----------
$ 1,029,000
===========
</TABLE>
19
<PAGE> 26
The Company leases office space from a corporation owned by a
stockholder. Rental expense pursuant to the lease was $85,796, $94,800 and
$126,010, respectively, for each of the three years in the period ended
December 31, 1996. The Company from time to time on an as needed basis charters
an airplane from a company owned by one of its stockholders. Fees charged
during the year ended December 31, 1996 and for the nine months ended September
30, 1997 under this arrangement were $106,650 and $29,500, respectively.
The tax returns of the Company are currently under examination by the
Internal Revenue Service ("IRS"). In addition, the IRS has issued a revenue
ruling which could impact the manner in which the Company depreciates its rental
merchandise for income tax purposes. Management believes that no additional
provision will be required for the liability that may arise from prior periods
and the revenue ruling will not have a material effect on the financial
condition or results of operations of the Company. The Company is a defendant in
various lawsuits arising in the normal course of business. In the opinion of
management, the ultimate outcome of these lawsuits will not have a material
impact of the Company's financial position.
14. UNAUDITED QUARTERLY DATA
Summarized quarterly proforma financial data for 1995 and 1996 (in
thousands, except for per share amounts) is as follows:
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Revenue $ 21,843 $ 23,721 $ 35,857 $ 42,740
======== ======== ======== ========
Operating income (loss) $ 2,162 $ 2,034 $ 288 $ (2,425)
======== ======== ======== ========
Pro forma net income (loss) $ 1,107 $ 1,105 $ 239 $ (1,554)
======== ======== ======== ========
Pro forma net income (loss) per share $ .21 $ .19 $ .02 $ (.09)
======== ======== ======== ========
Year ended December 31, 1995:
Revenue $ 18,718 $ 19,243 $ 19,418 $ 20,150
======== ======== ======== ========
Operating income $ 618 $ 1,114 $ 956 $ 1,263
======== ======== ======== ========
Pro forma net income $ 250 $ 495 $ 3,682 $ 571
======== ======== ======== ========
Pro forma net income per share $ .05 $ .11 $ .82 $ .13
======== ======== ======== ========
</TABLE>
15. SUBSEQUENT EVENT
On February 26, 1998, immediately following the merger, the Company entered
into a new revolving credit facility (the "Comerica Credit Agreement") with
Comerica Bank, as lender and as agent for certain other lenders, which provides
for a $50,000,000 secured three year credit facility. The Comerica Credit
Agreement replaces the existing credit agreements described in Note 9. The
Comerica Credit Agreement provides for interest rates based on a base rate (as
defined), the agent's prime rate, or the federal funds rate plus 100 basic
points, or a "Eurodollar Rate", plus an applicable margin. The Comerica Credit
Agreement is collateralized by substantially all assets of the Company.
20
<PAGE> 1
EXHIBIT 2.1
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of
January 8, 1998 (the "First Amendment"), by and between ALRENCO, INC., an
Indiana corporation ("Alrenco"), and RTO, INC., a Delaware corporation ("RTO").
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Merger, dated September 28, 1997, by and between Alrenco and RTO (the "Merger
Agreement"), RTO will merge with and into Alrenco, with Alrenco as the surviving
corporation (the "Surviving Corporation"), and the stockholders of RTO will
receive shares of common stock of Alrenco at the ratio of 89.795 shares of
common stock of Alrenco for each share of common stock of RTO; and
WHEREAS, the parties wish to amend the Merger Agreement to modify
certain provisions;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Section 5.2(ii) of the Merger Agreement is hereby amended by
deleting the words "employee stock options to acquire 11,333 Shares" and
substituting in lieu thereof the words "employee stock options to acquire 11,236
Shares".
2. Section 9.2(a) of the Merger Agreement is hereby amended by deleting
the words "The Merger is not consummated on or before January 31, 1998" and
substituting in lieu thereof the words "The Merger is not consummated on or
before February 28, 1998".
3. Section 10.7(b) of the Merger Agreement is hereby amended by
deleting the words "IN THE EVENT (BUT ONLY IN THE EVENT) SUCH COURT DOES NOT
HAVE SUBJECT MATTER JURISDICTION OVER SUCH ACTION, SUIT OR PROCEEDING, IN THE
COURTS OF THE STATE OF INDIANA SITTING IN THE CITY OF JEFFERSONVILLE" and
substituting in lieu thereof the words "IN THE EVENT (BUT ONLY IN THE EVENT)
SUCH COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER SUCH ACTION, SUIT OR
PROCEEDING, IN THE COURTS OF THE STATE OF INDIANA SITTING IN THE CITY OF NEW
ALBANY".
4. Exhibit A of the Merger Agreement is hereby amended by deleting such
Exhibit A in its entirety and substituting in lieu thereof Exhibit A to this
First Amendment.
5. Except as amended hereby, the terms, conditions, covenants,
agreements, representations and warranties contained in the Merger Agreement
shall remain unaffected hereby and shall continue in full force and effect.
6. This First Amendment may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
ALRENCO, INC.
By: /s/ Michael D. Walts
--------------------------------------------
Name: Michael D. Walts
Title: Chairman of the Board and President
RTO, INC.
By: /s/ Billy W. White, Sr.
----------------------------------------------
Name: Billy W. White, Sr.
Title: President and Chief Executive Officer
<PAGE> 3
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
ALRENCO, INC.
ARTICLE I
NAME
The name of the corporation is Alrenco, Inc. (the "CORPORATION").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the Corporation's registered office in the State of
Indiana is 1736 East Main Street, New Albany, Indiana 47150. The name of its
registered agent whose business office is identical with the registered office
is Billy W. White, Sr.
ARTICLE III
PURPOSES AND POWERS
The purpose of the Corporation is to transact any and all lawful
business for which corporations may be incorporated under the Indiana Business
Corporation Law, Indiana Code ss. 23-1-17 et seq. (such act, as amended from
time to time, and its successors are hereinafter referred to as the "ACT"). The
Corporation shall have the power to do all acts allowed under the Act.
ARTICLE IV
CAPITAL STOCK
SECTION 4.1 AUTHORIZED STOCK. The total number of shares of capital
stock that may be issued by the Corporation is 85,000,000, consisting of (i)
75,000,000 shares of Common Stock, no par value ("Common Stock"), and (ii)
10,000,000 shares of Preferred Stock ("PREFERRED STOCK").
SECTION 4.2 COMMON STOCK PROVISIONS. Subject to the provisions of the
Act and the preferences of any Preferred Stock then outstanding, the holders of
the Common Stock shall be entitled to receive dividends at such times and in
such amounts as may be determined by the Board of Directors of the Corporation.
The holders of the Common Stock shall have one vote for each share on each
matter submitted to a vote of the shareholders of the Corporation. In the event
of any
A-1
<PAGE> 4
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts and other
liabilities of the Corporation and the preferential amounts to which the holders
of any Preferred Stock may be entitled, the holders of the Common Stock shall be
entitled to share ratably in the remaining assets of the Corporation.
SECTION 4.3 PREFERRED STOCK. The Board of Directors may determine the
preferences, limitations and relative rights, to the extent permitted by the
Act, of any series of shares of Preferred Stock before the issuance of any
shares of that series. Each series shall be appropriately designated by a
distinguishing designation prior to the issuance of any shares thereof. The
shares of Preferred Stock of any series shall have preferences, limitations and
relative rights identical with those of other shares of the same series.
SECTION 4.4 NO CUMULATIVE VOTING. Cumulative voting of shares of any
capital stock having voting rights is prohibited.
ARTICLE V
Preemptive Rights
No shareholder of the Corporation shall by reason of holding shares of
any class of capital stock of the Corporation have any preemptive or
preferential right to acquire or subscribe for any additional, unissued or
treasury shares (whether now or hereafter acquired) of any class of capital
stock of the Corporation now or hereafter to be authorized, or any notes,
debentures, bonds or other securities convertible into or carrying any right,
option or warrant to subscribe for or acquire shares of any class of capital
stock of the Corporation now or hereafter to be authorized, whether or not the
issuance of any such shares, or such notes, debentures, bonds or other
securities, would adversely affect the dividends or voting or other rights of
such stockholder, and the Board of Directors of the Corporation may issue or
authorize the issuance of shares of any class of capital stock of the
Corporation, or any notes, debentures, bonds or other securities convertible
into or carrying rights, options or warrants to subscribe for or acquire shares
of any class of capital stock of the Corporation, without offering any such
shares of any such class, either in whole or in part, to the existing
shareholders of any such class.
ARTICLE VI
DIRECTORS
SECTION 6.1 NUMBER. The number of directors of the Corporation shall be
fixed from time-to-time by or in the manner provided in the Bylaws, but the
number thereof shall never be less than three (3).
A-2
<PAGE> 5
SECTION 6.2 DIRECTION OF PURPOSE AND EXERCISE OF POWERS. The business
and affairs of the Corporation shall be managed and conducted by or under the
direction of the Board of Directors. The Board of Directors, subject to any
specific limitations or restrictions imposed by the Act or these Articles of
Incorporation, shall direct the carrying out of the purpose and exercise the
powers of the Corporation, without previous authorization or subsequent approval
by the shareholders of the Corporation.
SECTION 6.3 CLASSIFICATION OF DIRECTORS. The directors shall be divided
into three classes, each class to consist, as nearly as may be, of one-third of
the number of directors constituting the whole board. The term of office of
those of the first class shall expire at the annual meeting of shareholders to
be held in 1996. The term of office of the second class shall expire at the
annual meeting of shareholders to be held in 1997. The term of office of the
third class shall expire at the annual meeting of shareholders to be held in
1998. At each annual meeting of shareholders following such initial
classification and election, directors elected to succeed those directors whose
terms have expired shall be elected for a term of office to expire at the third
succeeding annual meeting of shareholders following their election. Each
director shall be entitled to serve for the term for which he was elected or
until his successor shall be elected and qualified, whichever period is longer.
SECTION 6.4 REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, directors shall be removed, but only upon a showing
of cause, by a vote of the majority of the shareholders then entitled to vote at
the election of directors, provided that if less than the entire Board of
Directors is removed, no director may be removed unless the number of votes cast
to remove such director exceeds the number of votes cast not to remove such
director. For purposes of this Section, "cause" shall mean the participation by
a director in any transaction in which his personal financial interests are in
conflict with the financial interests of the Corporation or its shareholders;
any act or omission not in good faith or which involves intentional misconduct
or which is known to a director to be a violation of law; or the participation
by a director in any transaction from which the director derived an improper
personal benefit.
SECTION 6.5 AMENDMENT. Anything contained in these Articles of
Incorporation to the contrary notwithstanding (and notwithstanding that a lesser
percentage may be specified or permitted by law), the affirmative vote of the
holders of at least 80% of the voting power of all of the then outstanding
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend
or repeal any provision of this Article VI.
ARTICLE VII
INDEMNIFICATION AND CONFLICT OF INTEREST TRANSACTION
SECTION 7.1 INDEMNIFICATION. The Corporation shall, to the fullest
extent permitted by the Act, indemnify any director, officer, employee or agent
of the Corporation from and against any and all reasonable costs and expense
(including, without limitation, attorneys' fees) and any
A-3
<PAGE> 6
liabilities (including, without limitation, judgments, fines, penalties and
reasonable settlements) paid by or on behalf of, or imposed against, such person
in connection with any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative, investigative or other
(including any appeal relating thereto), whether formal or informal, and whether
made or brought by or in the right of the Corporation or otherwise, in which
such person is, was or at any time becomes a named defendant or respondent or
witness, or is threatened to be made a named defendant or respondent or witness,
or otherwise, by reason of the fact that such person is, was or at any time
becomes a director, officer, employee or agent of the Corporation or, at the
Corporation's request, a director, officer, partner, member, manager, trustee,
employee or agent of another corporation, partnership, limited liability
company, joint venture, trust, employee benefit plan or other enterprise.
The indemnification authorized by this Section 7.1 shall not be
exclusive of any other right of indemnification which any such person may have
or hereafter acquire under any provision of these Amended and Restated Articles
of Incorporation or the Bylaws of the Corporation, agreement, vote of
shareholders or disinterested directors or otherwise. The Corporation may take
such steps as may be deemed appropriate by the board of directors to provide and
secure indemnification to any such person, including, without limitation, the
execution of agreements for indemnification between the Corporation and
individual directors, officers, employees or agents which may provide rights to
indemnification which are broader or otherwise different than the rights
authorized by this Section.
SECTION 7.2 CONFLICT OF INTEREST TRANSACTION. A conflict of interest
transaction, as defined in Indiana Code ss. 23-1-35-2(a), is not voidable by the
Corporation provided the conflict of interest transaction satisfies the
provisions specified in Indiana Code ss. 23-1-35-2.
ARTICLE VIII
BUSINESS AND AFFAIRS OF THE CORPORATION
SECTION 8.1 BYLAWS. The Board of Directors shall have the power,
without the assent or vote of the shareholders, to adopt, amend or repeal any
provision of the Bylaws of the Corporation.
SECTION 8.2 AMENDMENTS TO ARTICLES OF INCORPORATION. With the exception
of Article VI, notwithstanding any other provision of these Amended and Restated
Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding
that some lesser percentage may be specified by law), but in addition to any
vote of the holders of any class or series of the stock of this Corporation
required by law or these Amended and Restated Articles of Incorporation, the
affirmative vote of the holders of at least sixty-seven percent (67%) of the
voting power of all of the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal these Amended
and Restated Articles of Incorporation.
A-4
<PAGE> 1
EXHIBIT 2.2
CERTIFICATE OF MERGER
OF
RTO, INC.
WITH AND INTO
ALRENCO, INC.
(UNDER SECTION 252 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
ALRENCO, INC. hereby certifies that:
1. The name and state of incorporation of each of the constituent
corporations are:
a. RTO, Inc., a Delaware corporation; and
b. Alrenco, Inc., an Indiana corporation.
2. An agreement and plan of merger has been approved, adopted,
certified, executed and acknowledged by Alrenco, Inc. and by RTO, Inc. in
accordance with the provisions of subsection (c) of Section 252 of the General
Corporation Law of the State of Delaware (the "Merger Agreement").
3. The name of the surviving corporation is Alrenco, Inc. (the
"Surviving Corporation"). The Surviving Corporation is an Indiana corporation.
4. The Amended and Restated Articles of Incorporation of Alrenco, Inc.
will be the articles of the Surviving Corporation from the time of the merger
and until thereafter amended in accordance with the Indiana Business Corporation
Law. The following amendments in the Articles of Incorporation are desired to be
effected by the merger:
a. The Amended and Restated Articles of Incorporation increase the
authorized Common Stock and Preferred Stock from 20,000,000 shares to 75,000,000
shares, and from 1,000,000 shares to 10,000,000 shares, respectively.
b. The Amended and Restated Articles of Incorporation require the
affirmative vote of 67% of the Surviving Corporation's shareholders to amend or
repeal the Amended and Restated Articles of Incorporation, except for Article
VI, which requires 80% of the then outstanding shares entitled to vote generally
in the election of directors, voting together as a class.
5. The executed Merger Agreement pursuant to which the merger is being
consummated is on file at the principal place of business of the Surviving
Corporation. The address of the principal place of business of the Surviving
Corporation is 1736 East Main Street, New Albany, Indiana 47150.
<PAGE> 2
6. A copy of the Merger Agreement will be furnished by the Surviving
Corporation, on request and without charge, to any stockholder of RTO, Inc. or
Alrenco, Inc..
7. The Surviving Corporation, as a foreign corporation, agrees that it
may be served with process in Delaware in any proceeding for enforcement of any
obligation of RTO, Inc. as well as for enforcement of any obligation of the
Surviving Corporation arising from the merger. The Surviving Corporation hereby
irrevocably appoints the Secretary of State of Delaware as its agent to accept
service of process in any such proceeding. The address of the Surviving
Corporation's registered office in the State of Indiana is One North Capital
Avenue, Indianapolis, Indiana 46204. The name of the registered agent at that
address is C T Corporation System.
<PAGE> 3
IN WITNESS WHEREOF, Alrenco, Inc. has caused its duly authorized
officer to execute and deliver this Certificate of Merger as of the 26th day of
February, 1998.
Alrenco, Inc.
By: /s/ Michael D. Walts
--------------------------------------
Michael D. Walts
President and Chairman of the Board
<PAGE> 1
EXHIBIT 2.3
[ARTICLES OF MERGER SEAL]
State form 39036 (R4/6-95)
State Board of Accounts Approved 1995
<TABLE>
<S> <C>
SUE ANNE GILROY
SECRETARY OF STATE
CORPORATIONS DIVISION
302 W. Washington Street, Rm. E018
Indianapolis, IN 46204
Telephone: (317) 232-6576
INSTRUCTIONS: Use 8 1/2" X 11" white paper for inserts. Indiana Code 23-1-40-1 et. seq.
Present original and two (2) copies to address in upper right corner of this form. FILING FEE: $90.00
Please TYPE or PRINT
Upon completion of filing the Secretary of State will issue a receipt.
</TABLE>
ARTICLES OF MERGER
OF
RTO, INC., a Delaware corporation
-------------------------------------------------------------
(hereinafter "the nonsurviving corporation(s)")
INTO
ALRENCO, INC., an Indiana corporation
-------------------------------------------------------------
(hereinafter "the surviving corporation")
================================================================================
ARTICLE I-SURVIVING CORPORATION
================================================================================
SECTION 1
- ----------
The name of the corporation surviving the merger is: Alrenco, Inc.
---------------------------
and such name [ ] has [x] has not (designate which) been changed as a result
of the merger.
- --------------------------------------------------------------------------------
SECTION 2
- ----------
a. The surviving corporation is a domestic corporation existing pursuant to the
provisions of the Indiana Business Corporation Law incorporated on
February 29, 1980.
-----------------
b. The surviving corporation is a foreign corporation incorporated under the
laws of the State of __________________ and [ ] qualified [ ] not qualified
(designate which) to do business in Indiana.
If the surviving corporation is qualified to do business in Indiana, state the
date of qualification: ____________________.
(If Application for Certificate of Authority is filed concurrently herewith
state "Upon approval of Application for Certificate of Authority".)
<TABLE>
<CAPTION>
===================================================================================================================
ARTICLE II-NONSURVIVING CORPORATION
===================================================================================================================
<S> <C>
The name, state of incorporation, and date of incorporation or qualification (if applicable) respectively, of each
Indiana domestic corporation and Indiana qualified foreign corporation, other than the survivor, which is party to
the merger are as follows: N/A
- -------------------------------------------------------------------------------------------------------------------
Name of Corporation
RTO, Inc.
- -------------------------------------------------------------------------------------------------------------------
State of Domicile Date of Incorporation or qualification in Indiana (if applicable)
Delaware Not incorporated or qualified in Indiana
- -------------------------------------------------------------------------------------------------------------------
Name or Corporation
- -------------------------------------------------------------------------------------------------------------------
State of Domicile Date of Incorporation or qualification in Indiana (if applicable)
- -------------------------------------------------------------------------------------------------------------------
Name or Corporation
- -------------------------------------------------------------------------------------------------------------------
State of Domicile Date of Incorporation or qualification in Indiana (if applicable)
- -------------------------------------------------------------------------------------------------------------------
===================================================================================================================
ARTICLE III-PLAN OF MERGER OR SHARE EXCHANGE
===================================================================================================================
The Plan of Merger or Share Exchange, containing such information as required by Indiana Code 23-1-40-1(b), is
set forth in "Exhibit A", attached hereto and made a part hereof.
</TABLE>
<PAGE> 2
<TABLE>
===============================================================================================
ARTICLE IV-MANNER OF ADOPTION AND VOTE OF SURVIVING CORPORATION (Must complete Section 1 or 2)
===============================================================================================
<S> <C> <C>
SECTION 1 [ ] Shareholder vote not required.
- ----------
The merger / share exchange was adopted by the incorporators or board of directors without
shareholder action and shareholder action was not required.
- -----------------------------------------------------------------------------------------------
SECTION 2 [x] Vote of shareholders.
- ----------
The designation (i.e., common, preferred or any classification where different classes of
stock exist), number of outstanding shares, number of votes entitled to be cast by each
voting group entitled to vote separately on the merger and the number of votes of each
voting group represented at the meeting is set forth below:
- -----------------------------------------------------------------------------------------------
TOTAL A B C
- -----------------------------------------------------------------------------------------------
DESIGNATION OF EACH VOTING GROUP (i.e. preferred and common)
Common
- -----------------------------------------------------------------------------------------------
NUMBER OF OURSTANDING SHARES 6,095,516
- -----------------------------------------------------------------------------------------------
NUMBER OF VOTES ENTITLED TO BE CAST 6,095,516
- -----------------------------------------------------------------------------------------------
NUMBER OF VOTES REPRESENTED AT MEETING
- -----------------------------------------------------------------------------------------------
SHARES VOTED IN FAVOR
- -----------------------------------------------------------------------------------------------
SHARES VOTED AGAINST
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
================================================================================================
ARTICLE V-MANNER OF ADOPTION AND VOTE OF NONSURVIVING CORPORATION (Must complete Section 1 or 2)
================================================================================================
<S> <C> <C>
SECTION 1 [ ] Shareholder vote not required.
- ----------
The merger / share exchange was adopted by the incorporators or board of directors without
shareholder action and shareholder action was not required.
- ------------------------------------------------------------------------------------------------
SECTION 2 [x] Vote of shareholders.
- ----------
The designation (i.e., common, preferred or any classification where different classes of
stock exist), number of outstanding shares, number of votes entitled to be cast by each
voting group entitled to vote separately on the merger and the number of votes of each
voting group represented at the meeting is set forth below:
- ------------------------------------------------------------------------------------------------
TOTAL A B C
- ------------------------------------------------------------------------------------------------
DESIGNATION OF EACH VOTING GROUP (i.e. preferred and common)
Common
- ------------------------------------------------------------------------------------------------
NUMBER OF OURSTANDING SHARES 120,959
- ------------------------------------------------------------------------------------------------
NUMBER OF VOTES ENTITLED TO BE CAST 120,959
- ------------------------------------------------------------------------------------------------
NUMBER OF VOTES REPRESENTED AT MEETING
- ------------------------------------------------------------------------------------------------
SHARES VOTED IN FAVOR
- ------------------------------------------------------------------------------------------------
SHARES VOTED AGAINST
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C>
In Witness Whereof, the undersigned being the President & Chairman of the Board of the
surviving corporation executes these Articles of Merger and verifies, subject to
penalities of perjury that the statements contained herein are true, this 26th day of
February, 1998.
- ------------------------------------------------------------------------------------------------
Signature Printed name
/s/ Michael D. Walts Michael D. Walts
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
ALRENCO, INC.
ARTICLE I
NAME
The name of the corporation is Alrenco, Inc. (the "CORPORATION").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the Corporation's registered office in the State of
Indiana is 1736 East Main Street, New Albany, Indiana 47150. The name of its
registered agent whose business office is identical with the registered office
is Billy W. White, Sr.
ARTICLE III
PURPOSES AND POWERS
The purpose of the Corporation is to transact any and all lawful
business for which corporations may be incorporated under the Indiana Business
Corporation Law, Indiana Code ss. 23-1-17 et seq. (such act, as amended from
time to time, and its successors are hereinafter referred to as the "ACT"). The
Corporation shall have the power to do all acts allowed under the Act.
ARTICLE IV
CAPITAL STOCK
SECTION 4.1 AUTHORIZED STOCK. The total number of shares of capital
stock that may be issued by the Corporation is 85,000,000, consisting of (i)
75,000,000 shares of Common Stock, no par value ("Common Stock"), and (ii)
10,000,000 shares of Preferred Stock ("PREFERRED STOCK").
SECTION 4.2 COMMON STOCK PROVISIONS. Subject to the provisions of the
Act and the preferences of any Preferred Stock then outstanding, the holders of
the Common Stock shall be entitled to receive dividends at such times and in
such amounts as may be determined by the Board of Directors of the Corporation.
The holders of the Common Stock shall have one vote for each share on each
matter submitted to a vote of the shareholders of the Corporation. In the event
of any
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<PAGE> 2
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts and other
liabilities of the Corporation and the preferential amounts to which the holders
of any Preferred Stock may be entitled, the holders of the Common Stock shall be
entitled to share ratably in the remaining assets of the Corporation.
SECTION 4.3 PREFERRED STOCK. The Board of Directors may determine the
preferences, limitations and relative rights, to the extent permitted by the
Act, of any series of shares of Preferred Stock before the issuance of any
shares of that series. Each series shall be appropriately designated by a
distinguishing designation prior to the issuance of any shares thereof. The
shares of Preferred Stock of any series shall have preferences, limitations and
relative rights identical with those of other shares of the same series.
SECTION 4.4 NO CUMULATIVE VOTING. Cumulative voting of shares of any
capital stock having voting rights is prohibited.
ARTICLE V
Preemptive Rights
No shareholder of the Corporation shall by reason of holding shares of
any class of capital stock of the Corporation have any preemptive or
preferential right to acquire or subscribe for any additional, unissued or
treasury shares (whether now or hereafter acquired) of any class of capital
stock of the Corporation now or hereafter to be authorized, or any notes,
debentures, bonds or other securities convertible into or carrying any right,
option or warrant to subscribe for or acquire shares of any class of capital
stock of the Corporation now or hereafter to be authorized, whether or not the
issuance of any such shares, or such notes, debentures, bonds or other
securities, would adversely affect the dividends or voting or other rights of
such stockholder, and the Board of Directors of the Corporation may issue or
authorize the issuance of shares of any class of capital stock of the
Corporation, or any notes, debentures, bonds or other securities convertible
into or carrying rights, options or warrants to subscribe for or acquire shares
of any class of capital stock of the Corporation, without offering any such
shares of any such class, either in whole or in part, to the existing
shareholders of any such class.
ARTICLE VI
DIRECTORS
SECTION 6.1 NUMBER. The number of directors of the Corporation shall be
fixed from time-to-time by or in the manner provided in the Bylaws, but the
number thereof shall never be less than three (3).
A-2
<PAGE> 3
SECTION 6.2 DIRECTION OF PURPOSE AND EXERCISE OF POWERS. The business
and affairs of the Corporation shall be managed and conducted by or under the
direction of the Board of Directors. The Board of Directors, subject to any
specific limitations or restrictions imposed by the Act or these Articles of
Incorporation, shall direct the carrying out of the purpose and exercise the
powers of the Corporation, without previous authorization or subsequent approval
by the shareholders of the Corporation.
SECTION 6.3 CLASSIFICATION OF DIRECTORS. The directors shall be divided
into three classes, each class to consist, as nearly as may be, of one-third of
the number of directors constituting the whole board. The term of office of
those of the first class shall expire at the annual meeting of shareholders to
be held in 1996. The term of office of the second class shall expire at the
annual meeting of shareholders to be held in 1997. The term of office of the
third class shall expire at the annual meeting of shareholders to be held in
1998. At each annual meeting of shareholders following such initial
classification and election, directors elected to succeed those directors whose
terms have expired shall be elected for a term of office to expire at the third
succeeding annual meeting of shareholders following their election. Each
director shall be entitled to serve for the term for which he was elected or
until his successor shall be elected and qualified, whichever period is longer.
SECTION 6.4 REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, directors shall be removed, but only upon a showing
of cause, by a vote of the majority of the shareholders then entitled to vote at
the election of directors, provided that if less than the entire Board of
Directors is removed, no director may be removed unless the number of votes cast
to remove such director exceeds the number of votes cast not to remove such
director. For purposes of this Section, "cause" shall mean the participation by
a director in any transaction in which his personal financial interests are in
conflict with the financial interests of the Corporation or its shareholders;
any act or omission not in good faith or which involves intentional misconduct
or which is known to a director to be a violation of law; or the participation
by a director in any transaction from which the director derived an improper
personal benefit.
SECTION 6.5 AMENDMENT. Anything contained in these Articles of
Incorporation to the contrary notwithstanding (and notwithstanding that a lesser
percentage may be specified or permitted by law), the affirmative vote of the
holders of at least 80% of the voting power of all of the then outstanding
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend
or repeal any provision of this Article VI.
ARTICLE VII
INDEMNIFICATION AND CONFLICT OF INTEREST TRANSACTION
SECTION 7.1 INDEMNIFICATION. The Corporation shall, to the fullest
extent permitted by the Act, indemnify any director, officer, employee or agent
of the Corporation from and against any and all reasonable costs and expense
(including, without limitation, attorneys' fees) and any
A-3
<PAGE> 4
liabilities (including, without limitation, judgments, fines, penalties and
reasonable settlements) paid by or on behalf of, or imposed against, such person
in connection with any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative, investigative or other
(including any appeal relating thereto), whether formal or informal, and whether
made or brought by or in the right of the Corporation or otherwise, in which
such person is, was or at any time becomes a named defendant or respondent or
witness, or is threatened to be made a named defendant or respondent or witness,
or otherwise, by reason of the fact that such person is, was or at any time
becomes a director, officer, employee or agent of the Corporation or, at the
Corporation's request, a director, officer, partner, member, manager, trustee,
employee or agent of another corporation, partnership, limited liability
company, joint venture, trust, employee benefit plan or other enterprise.
The indemnification authorized by this Section 7.1 shall not be
exclusive of any other right of indemnification which any such person may have
or hereafter acquire under any provision of these Amended and Restated Articles
of Incorporation or the Bylaws of the Corporation, agreement, vote of
shareholders or disinterested directors or otherwise. The Corporation may take
such steps as may be deemed appropriate by the board of directors to provide and
secure indemnification to any such person, including, without limitation, the
execution of agreements for indemnification between the Corporation and
individual directors, officers, employees or agents which may provide rights to
indemnification which are broader or otherwise different than the rights
authorized by this Section.
SECTION 7.2 CONFLICT OF INTEREST TRANSACTION. A conflict of interest
transaction, as defined in Indiana Code ss. 23-1-35-2(a), is not voidable by the
Corporation provided the conflict of interest transaction satisfies the
provisions specified in Indiana Code ss. 23-1-35-2.
ARTICLE VIII
BUSINESS AND AFFAIRS OF THE CORPORATION
SECTION 8.1 BYLAWS. The Board of Directors shall have the power,
without the assent or vote of the shareholders, to adopt, amend or repeal any
provision of the Bylaws of the Corporation.
SECTION 8.2 AMENDMENTS TO ARTICLES OF INCORPORATION. With the exception
of Article VI, notwithstanding any other provision of these Amended and Restated
Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding
that some lesser percentage may be specified by law), but in addition to any
vote of the holders of any class or series of the stock of this Corporation
required by law or these Amended and Restated Articles of Incorporation, the
affirmative vote of the holders of at least sixty-seven percent (67%) of the
voting power of all of the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal these Amended
and Restated Articles of Incorporation.
A-4
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
CODE OF BYLAWS
OF
ALRENCO, INC.
---------------------
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held at such place, either within or
without the State of Indiana, on such date, and at such time, as the Board of
Directors may by resolution provide, or if the Board of Directors fails to
provide, then such meeting shall be held at the principal office of the
Corporation at 10:00 a.m., local time, on the second Wednesday in May of each
year, if not a legal holiday under the laws of the State of Indiana, and if a
legal holiday, on the next succeeding business day. The Board of Directors may
specify by resolution prior to any special meeting of shareholders held within
the year that such meeting shall be in lieu of the annual meeting.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors or by the Chairman of the Board. Such meeting
may be held at such place, either within or without the State of Indiana, as is
stated in the call and notice thereof.
Section 3. Notice of Meetings. A written or printed notice stating the
place, day and hour of the meeting, and in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered or
mailed by the Secretary of the Corporation to each holder of record of stock of
the Corporation at the time entitled to vote, at his address as it appears upon
the records of the Corporation, not less than 10 nor more than 60 days prior to
such meeting. Notice of such meeting may be waived in writing by any
shareholder. Notice of any adjourned meeting of the shareholders shall not be
required if the time and place to which the meeting is adjourned are announced
at the meeting at which the adjournment is taken, unless the Board of Directors
sets a new record date for such meeting in which case notice shall be given in
the manner provided in this Section 3.
Section 4. Quorum and Shareholder Vote. A quorum for action on any
subject matter at any annual or special meeting of shareholders shall exist when
the holders of shares entitled to vote a majority of the votes entitled to be
cast on such subject matter are represented in person or by proxy at such
meeting. If a quorum is present, the affirmative vote of such number of shares
as is required by the Indiana Business Corporation Law (as in effect at the time
the vote is taken), for approval of the subject matter being voted upon, shall
be the act of the shareholders, unless a greater vote is required by the
Articles of Incorporation or these Bylaws. If a quorum is not present, a meeting
of shareholders may be adjourned from time to time by the vote of shares having
a majority of the votes of the shares represented at such meeting, until a
quorum is present. When a quorum is present at the reconvening of any adjourned
meeting, and if the requirements of Section 3 of this Article I have been
observed, then any business may be transacted at such reconvened meeting in the
same manner and to the same extent as it might have been transacted at the
meeting as originally noticed.
Section 5. Proxies. A shareholder may vote either in person or by proxy
duly executed in writing by the shareholder. Unless written notice to the
contrary is delivered to the Corporation by the shareholder, a proxy for any
meeting shall be valid for any reconvention of any adjourned meeting.
Section 6. Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purpose, the
Board of
H-1
<PAGE> 2
Directors shall have the power to fix a date, not more than 70 days prior to the
date on which the particular action requiring a determination of shareholders is
to be taken, as the record date for any such determination of shareholders. A
record date for the determination of shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof shall not be set
less than 10 days prior to such meeting. In any case where a record date is set,
under any provision of this Section 6, only shareholders of record on the said
date shall be entitled to participate in the action for which the determination
of shareholders of record is made, whether the action is payment of a dividend,
allotment of any rights or any change or conversion or exchange of capital stock
or other such action, and, if the record date is set for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, only
such shareholders of record shall be entitled to such notice or vote,
notwithstanding any transfer of any shares on the books of the Corporation after
such record date.
Section 7. Notice of Shareholder Business. At an annual meeting of the
shareholders, only such business shall be conducted as shall have been brought
before the meeting (a) by or at the direction of the Board of Directors or (b)
by any shareholder of the Corporation who complies with the notice procedures
set forth in this Section 7 and only to the extent that such business is
appropriate for shareholder action under the provisions of the Indiana Business
Corporation Law. For business to be properly brought before an annual meeting by
a shareholder, the shareholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a shareholder's notice must
be delivered to or mailed and received at the principal executive offices of the
Corporation not later than the close of business on the 7th day following the
day on which notice of the date of the annual meeting was mailed or delivered to
such shareholder. A shareholder's notice to the Secretary shall set forth as to
each matter the shareholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and address, as they appear on the Corporation's books, of the
shareholder proposing such business, (c) the class and number of shares of stock
of the Corporation which are beneficially owned by the shareholder, and (d) any
material interest of the shareholder in such business. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 7. At
an annual meeting, the Chairman shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 7, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
Section 8. Notice of Shareholder Nominees. Only persons who are nominated
in accordance with the procedures set forth in this Section 8 shall be eligible
for election as Directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of shareholders (a) by or
at the direction of the Board of Directors or (b) by any shareholder of the
Corporation entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Section 8. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
later than the close of business on the 7th day following the day on which
notice of the date of the meeting was mailed or delivered to such shareholder.
Such shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or re-election as a Director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended; and (b) as to the shareholder giving the notice (i) the name and
address, as they appear on the Corporation's books, of such shareholder and (ii)
the class and number of shares of stock of the Corporation which are
beneficially owned by such shareholder. No person shall be eligible for election
as a Director of the Corporation unless nominated in accordance with the
procedures set forth in the Bylaws. The Chairman shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by the Bylaws, and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.
H-2
<PAGE> 3
ARTICLE II
DIRECTORS
Section 1. Powers of Directors. The Board of Directors shall manage the
business and affairs of the Corporation and, subject to any restrictions imposed
by law, by the Articles of Incorporation, or by these Bylaws, may exercise all
the powers of the Corporation.
Section 2. Number and Term of Directors. The Board of Directors shall
consist of from three (3) to eighteen (18) natural persons, as fixed by the
Board from time to time at its discretion, divided into classes and with terms
as provided in the Articles of Incorporation. No decrease in the number of
Directors shall shorten the term of an incumbent Director.
Section 3. Meetings of the Directors. The Board of Directors shall meet
each year immediately following the annual meeting of shareholders, and the
Board may by resolution provide for the time and place of other regular
meetings. Special meetings of the Directors may be called by the Chairman of the
Board or by any two of the Directors.
Section 4. Notice of Meetings. Notice of each meeting of the Directors
shall be given by the Secretary by mailing the same at least five days before
the meeting or by telephone, telegraph or cablegram or in person at least two
days before the meeting, to each Director, except that no notice need be given
of regular meetings fixed by the resolution of the Board or of the meeting of
the Board held at the place of and immediately following the annual meeting of
the shareholders. Any Director may waive notice, either before or after the
meeting, and shall be deemed to have waived notice if he is present at the
meeting.
Section 5. Action of Directors Without a Meeting. Any action required by
law to be taken at a meeting of the Board of Directors, or any action which may
be taken at a meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if written consent, setting forth the action so
taken, shall be signed by all the Directors, or all the members of the
committee, as the case may be, and be filed with the minutes of the proceedings
of the Board or the committee. Such consent shall have the same force and effect
as a unanimous vote of the Board or the committee, as the case may be.
Section 6. Committees. The Board of Directors may, in its discretion,
appoint committees, each consisting of one or more Directors, which shall have
and may exercise such delegated powers as shall be conferred on or authorized by
the resolutions appointing them, except that no such committee may take any
action not allowed by the Indiana Business Corporation Law, including: (i)
authorize distributions, except a committee may authority or approve a
reacquisition of shares or other distribution if done according to a formula or
method, or within a range, prescribed by the Board of Directors; (ii) approve or
propose to shareholders action that the Indiana Business Corporation Law
requires to be approved by shareholders; (iii) fill vacancies on the Board or
any of its committees; (iv) except as permitted by clause (vii) below, amend the
Articles of Incorporation of the Corporation; (v) adopt, amend or repeal these
Bylaws; (vi) approve a plan of merger not requiring shareholder approval; or
(vii) authorize or approve the issuance or sale or a contract for sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares, except the Board may authorize a
committee to take the actions described in this clause (vii) within limits
prescribed by the Board. A majority of any such committee may determine its
action, fix the time and place of its meetings, and determine its rules of
procedure. Each committee shall keep minutes of its proceedings and actions and
shall report regularly to the Board of Directors. The Board of Directors shall
have power at any time to fill vacancies in, change the membership of, or
discharge any such committee.
Section 7. Compensation. The Board of Directors shall have the authority
to determine from time to time the amount of compensation that shall be paid to
its members for attendance at meetings of, or service on, the Board of Directors
of any committee of the Board, except that no such compensation shall be paid to
Directors who are also employees of the Corporation. The Board of Directors also
shall have the power to reimburse Directors for reasonable expenses of
attendance at Directors' meetings and committee meetings.
H-3
<PAGE> 4
Section 8. Telephone Conference Meetings. Unless the Articles of
Incorporation otherwise provide, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board or committee by means of telephone conference or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 8 shall constitute presence in person at such meeting.
ARTICLE III
OFFICERS
Section 1. Officers. The officers of the Corporation shall consist of a
Chairman of the Board, a Chief Executive Officer, a President, one or more
Vice-Presidents, a Secretary and a Treasurer, and such other officers or
assistant officers as may be elected by the Board of Directors. Any two offices
may be held by the same person. The Board may designate a Vice-President as an
Executive Vice-President or a Senior Vice President, and may designate the order
in which the Vice-Presidents may act.
Section 2. Chairman of the Board. The Chairman of the Board shall under
the direction of the Board of Directors, have responsibility for the general
direction of the business, policies and affairs of the Corporation. He shall
preside at all meetings of the shareholders and all meetings of the Board of
Directors and shall have such other duties as the Board of Directors shall from
time to time prescribe.
Section 3. Chief Executive Officer. The Chief Executive Officer shall
supervise the President and other officers of the Corporation and shall be in
charge of the overall business strategy of the Corporation. He shall have such
further powers and duties as from time to time may be conferred on him by the
Board of Directors. In the absence of the Chairman of the Board, he shall
preside at all meetings of the shareholders and the Board of Directors.
Section 4. President. The President shall be the chief operating officer
of the Corporation. He shall, under the direction of the Chief Executive
Officer, supervise the management of the day-to-day business of the Corporation.
He shall have such further powers and duties as from time to time may be
conferred on him by the Board of Directors or the chief executive officer. In
the absence of the Chairman of the Board and the Chief Executive Officer, he
shall preside at all meetings of the shareholders and the Board of Directors.
Section 5. Vice-President. The Vice-President shall act in the case of
the absence or disability of the Chairman of the Board, the Chief Executive
Officer and the President. If there is more than one Vice-President, such
Vice-Presidents shall act in the order of precedence, as set out by the Board of
Directors.
Section 6. Treasurer. The Treasurer shall be responsible for the
maintenance of proper financial books and records of the Corporation.
Section 7. Secretary. The Secretary shall keep the minutes of the
meetings of the shareholders and the Directors (including any committees of the
Board of Directors) and shall have custody of and attest the seal of the
Corporation.
Section 8. Other Duties and Authorities. Each officer, employee and agent
shall have such other duties and authorities as may be conferred on them by the
Board of Directors.
Section 9. Removal. Any officer may be removed at any time by the Board
of Directors, and such vacancy may be filled by the Board of Directors. A
contract of employment for a definite term shall not prevent the removal of any
officer, but this provision shall not prevent the making of a contract of
employment with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract of
employment or upon the enforceability of any other provision of a contract of
employment.
Section 10. Compensation. The salaries of the officers shall be fixed
from time to time by the Board of Directors, subject to the provisions of any
applicable contracts of employment. No officer shall be prevented from receiving
such salary by reason of the fact that he is also a Director of the Corporation.
H-4
<PAGE> 5
ARTICLE IV
DEPOSITORIES, SIGNATURE AND SEAL
Section 1. Depositories. All funds of the Corporation shall be deposited
in the name of the Corporation in such depository or depositories as the Board
may designate and shall be drawn out on checks, drafts or other orders signed by
such officer, officers, agent or agents as the Board may from time to time
authorize.
Section 2. Contracts. All contracts and other instruments shall be signed
on behalf of the Corporation by the Chairman of the Board, the Chief Executive
Officer, the President, any Vice-President or by such other officer, officers,
agent or agents, as the Board of Directors, the Chief Executive Officer, or the
President designates from time to time or as the Board from time to time may by
resolution provide.
Section 3. Seal. The seal of the Corporation, if it elects to have one,
shall be in the form of a disc, with the name of the Corporation and "Indiana"
on the periphery thereof and the word "Seal" in the center. The seal may be
manually affixed to any document or may be lithographed or otherwise printed on
any document with the same force and effect as if it had been affixed manually.
The signature of the Secretary or Assistant Secretary shall attest the seal and
may be a facsimile if and to the extent permitted by law.
ARTICLE V
STOCK TRANSFERS
Section 1. Form and Execution of Certificates. The certificates of shares
of capital stock of the Corporation shall be in such form as may be approved by
the Board of Directors and shall be signed by the Chairman of the Board, the
Chief Executive Officer, the President or a Vice-President and by the Secretary
or any Assistant Secretary or the Treasurer or any Assistant Treasurer, provided
that any such certificate may be signed by the facsimile signature of any of
such officers imprinted thereon if the same is countersigned by a transfer agent
of the Corporation, and provided further that certificates bearing the facsimile
of the signature of such officers imprinted thereon shall be valid in all
respects as if such person or persons were still in office, even though such
officer or officers shall have died or otherwise ceased to be officers.
Section 2. Transfers of Shares. Shares of stock in the Corporation shall
be transferable only on the books of the Corporation by proper transfer signed
by the holder of record thereof or by a person duly authorized to sign for such
holder of record. The Corporation or its transfer agent or agents shall be
authorized to refuse any transfer unless and until it is furnished such evidence
as it may reasonably require showing that the requested transfer is proper.
Section 3. Lost, Destroyed or Stolen Certificates. Where the holder of
record of a share or shares of stock of the Corporation claims that the
certificate representing said share has been lost, destroyed or wrongfully
taken, the Board shall by resolution provide for the issuance of a certificate
to replace the original if the holder of record so requests before the
Corporation has notice that the certificate has been acquired by a bona fide
purchaser, files with the Corporation a sufficient indemnity bond, and furnishes
evidence of such loss, destruction or wrongful taking satisfactory to the
Corporation, in the reasonable exercise of its discretion. The Board may
authorize such officer or agent as it may designate to determine the sufficiency
of such an indemnity bond and to determine reasonably the sufficiency of the
evidence of loss, destruction or wrongful taking.
Section 4. Transfer Agent and Registrar. The Board may (but shall not be
required to) appoint a transfer agent or agents and a registrar or registrars to
transfers, and may require that all stock certificates bear the signature of
such transfer agent or of such transfer agent and registrar.
H-5
<PAGE> 6
ARTICLE VI
INDEMNIFICATION
Section 1. Indemnification. The Corporation shall indemnify to the
fullest extent permitted by the Indiana Business Corporation Law, and to the
extent that applicable law from time to time in effect shall permit
indemnification that is broader than provided in these Bylaws, then to the
maximum extent authorized by law, any individual made a party to a proceeding
(as defined in the Indiana Business Corporation Law) because he is or was a
director, officer, employee or agent, against liability (as defined in the
Indiana Business Corporation Law), incurred in the proceeding.
Section 2. Advances for Expenses. The Corporation shall pay for or
reimburse the reasonable expenses incurred by a director or officer who is a
party to a proceeding, and shall have the authority to pay for or reimburse the
reasonable expenses of an employee or agent of the Company who is a party to a
proceeding, in each case in advance of the final disposition of a proceeding if:
(a) Such person furnishes the Corporation a written affirmation of his
good faith belief that he has met the standard set forth in Section 1
above;
(b) Such person furnishes the Corporation a written undertaking,
executed personally or on his behalf to repay any advances if it is
ultimately determined that he did not meet the standard set forth in
Section 1 above; and
(c) A determination is made that the facts then known to those making
the determination would not preclude indemnification under the Indiana
Business Corporation Law.
The written undertaking required by paragraph (b) above must be an
unlimited general obligation of such person but need not be secured and may be
accepted without reference to financial ability to make repayment.
Section 3. Indemnification Not Exclusive. The right to indemnification
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VI shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, provision of these Bylaws,
agreement, vote of shareholders or disinterested directors or otherwise.
Section 4. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE VII
AMENDMENT OF BYLAWS
Section 1. Amendment. These Bylaws may be altered, amended, repealed or
new Bylaws adopted by the Board of Directors by the affirmative vote of a
majority of all directors then holding office.
H-6
<PAGE> 1
EXHIBIT 10.1
NONCOMPETITION AND CONSULTING AGREEMENT
THIS NONCOMPETITION AND CONSULTING AGREEMENT (this "Agreement") is
entered into as of February 26, 1998 by and between ALRENCO, INC., an Indiana
corporation (the "Company"), and MICHAEL D. WALTS, an individual who at the time
of execution of this Agreement is a resident of the State of Indiana ("Walts").
W I T N E S S E T H:
WHEREAS, the Company has entered into a Plan and Agreement of Merger
dated as of September 28, 1997 (the "Merger Agreement"), as amended, with RTO,
Inc. ("RTO"), pursuant to which RTO will merge with and into the Company (the
"Merger"); and
WHEREAS, Walts has been Chairman and President of the Company since
1980; and
WHEREAS, Walts has devoted substantial time and effort to the strategic
direction of the Company and the day-to-day operations of the Company; and
WHEREAS, Walts has significant knowledge with respect to the
rent-to-own industry, potential acquisitions by the Company and the operations
of the Company and has significant contacts and is well known in the rent-to-own
industry; and
WHEREAS, Walts received annual compensation as an employee of the
Company in 1996 that in the aggregate exceeded $500,000; and
WHEREAS, at the Effective Time (as defined in the Merger Agreement) of
the Merger, Walts will resign as Chairman and President of the Company and will
not thereafter receive any compensation as an employee of the Company; and
WHEREAS, Walts possesses important strategic knowledge about the
Company, its trade secrets and other confidential information and has
substantial relationships with key employees of the Company; and
WHEREAS, Walts could have an adverse impact on the business operations,
financial condition and results of operations of the Company if Walts formed a
competing business, invested in a competing business or served as an officer,
director, employee or consultant to a competing business; and
<PAGE> 2
WHEREAS, the Company believes that Walts can provide significant
services to the Company immediately after consummation of the Merger and over a
longer period of time following the Merger; and
WHEREAS, the Company and Walts have agreed to enter into this Agreement
for the purpose of setting forth certain understandings and agreements regarding
Walts' role with the Company following the Merger and his business activities in
the rent-to-own industry following the Merger;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Walts covenant and agree as follows:
1. SERVICES PROVIDED BY WALTS.
(a) Subject to the terms and conditions set forth in this
Agreement, the Company hereby retains Walts, and Walts hereby agrees to provide
such consulting services regarding the Company's business as requested from time
to time by the Board of Directors of the Company.
(b) The Company anticipates that for a period of three (3)
months following the consummation of the Merger, the Company will require
substantial services from Walts, and Walts agrees that during such three (3)
month period, Walts will devote all of his time and efforts to the performance
of the services requested by the Company hereunder.
(c) Walts shall faithfully and diligently discharge his duties
and responsibilities under this Agreement in accordance with such policies and
guidelines as may be established by the Board of Directors of the Company.
2. COMPENSATION.
(a) Subject to the terms of this Agreement, as compensation
for all of Walts' services provided and to be provided by Walts to the Company
pursuant to Section 1 hereof and
<PAGE> 3
in consideration of the agreements and covenants of Walts under Sections 3 and 4
hereof, the Company shall pay Walts the sum of $400,000 for each of the five (5)
twelve-month periods following the date hereof, payable quarterly in arrears in
respect of each quarter on the first business day of the next quarterly period,
commencing April 1, 1998 (with such first payment being prorated from the date
hereof for the quarter ended March 31, 1998).
(b) In addition to the compensation described in subsection
(a) of this Section 2, the Company shall promptly reimburse Walts for all
reasonable out-of-pocket expenses incurred by him in the performance of his
duties under this Agreement in accordance with such policies and guidelines
established by the Company for reimbursement of expenses incurred by employees
or consultants on behalf of the Company.
3. NON-SOLICITATION OF EMPLOYEES.
During the Noncompete Period (hereinafter defined), no Related
Party (hereinafter defined) shall (without the prior written consent of the
Company) directly or indirectly offer permanent employment, on its own behalf or
on behalf of any other person, firm or corporation, to any person who is or
becomes an employee of the Company or any subsidiary of the Company and who has
not thereafter ceased to be employed by the Company or any subsidiary of the
Company for a period of at least one year.
4. CONFIDENTIAL INFORMATION, TRADE SECRETS AND NONCOMPETITION
COVENANT.
4.1 CONFIDENTIAL INFORMATION. Walts hereby agrees that, except as
otherwise required in the course of his performance of any duties that he may
have as a consultant to the Company or any successor or affiliate of the
Company, during the period commencing on the date hereof and ending on the fifth
(5th) anniversary of the date hereof (the "Confidentiality Period"):
(a) Neither Walts, Walts' wife or children (his "Immediate
Family") nor any company or other business in which Walts or a member of Walts'
Immediate Family has an interest (Walts, the members of Walts' Immediate Family
and each company and other business in which Walts or a member of Walts'
Immediate Family has or acquires an interest being
<PAGE> 4
hereinafter referred to as a "Related Party"), will directly or indirectly own,
manage, operate, join, control or participate in the ownership, management,
operation or control of or be connected in any manner with, any business
conducted under the corporate or trade name of "Alrenco" or any corporate or
trade name of any subsidiary of the Company or any name similar thereto without
the prior written consent of the Company; and
(b) Each Related Party shall hold in confidence (unless and to
the extent compelled to disclose by judicial or administrative process or by
other applicable law) all knowledge and information of a material and
confidential nature with respect to the business of the Company and its
subsidiaries and will not disclose, publish or make use of same without the
prior written consent of the Company; provided, however, that this Section 4.1
shall not apply to (i) information that is or becomes known to the public other
than through a breach of this Agreement by Walts, (ii) information generally
known and widely used within the rent-to-own industry, or (iii) information
required to be disclosed pursuant to judicial or administrative process or by
other applicable law; provided, further, however, that prior to disclosure
pursuant to judicial or administrative process or as required by other
applicable law, as permitted above, of information to any third party, Walts
shall use his best efforts to give reasonable prior notice to the Company.
4.2 TRADE SECRETS.
(a) Each Related Party shall hold in confidence (unless and to
the extent compelled to disclose by judicial or administrative process or as
required by other applicable law) indefinitely any and all "Trade Secrets" (as
hereinafter defined) of the Company and its subsidiaries and shall not disclose,
publish or make use of same without the prior written consent of the Company.
"Trade Secrets" shall mean all information relating to the business of the
Company and its subsidiaries including, but not limited to, technical or
nontechnical data, a formula, pattern, compilation, program, device, method,
technique, drawing, process, financial data, financial plan, product plan, list
of actual or potential customers or suppliers, or other information similar to
any of the foregoing, which derives economic value, actual or potential,
<PAGE> 5
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can derive economic value from its disclosure or
use; provided, however, that Trade Secret does not mean (a) information that is
or becomes generally available to the public other than through breach of this
Agreement by Walts; (b) the general business skills and experience of Walts; (c)
information generally known and widely used within the rent-to-own industry, or
(d) information required to be disclosed pursuant to judicial or administrative
process or by other applicable law; provided, further, however, that prior to
disclosure pursuant to judicial or administrative process or as required by
other applicable law, as permitted above, of information to any third party,
Walts shall use his best efforts to give reasonable prior notice to the Company.
4.3 NONCOMPETITION.
(a) The Company, directly or indirectly through its
subsidiaries, is engaged in the business of owning, managing, operating and
developing rent-to-own stores (collectively, the "Purchaser Activities")
throughout the United States (the "Territory"). Walts represents and
acknowledges that the goodwill of the Company and the Purchaser Activities
extend throughout the Territory. Following the date hereof, the Company shall
continue to conduct the Purchaser Activities throughout the Territory. Walts
acknowledges that, to protect adequately the interests of the Company in its
businesses in the Territory, it is essential that any noncompete agreement with
respect thereto cover the entire Territory.
(b) In consideration of the consideration paid to Walts
pursuant to this Agreement, Walts hereby agrees that during the period
commencing on the date hereof and ending on the fifth (5th) anniversary of the
date hereof (the "Noncompete Period"), no Related Party shall (without the prior
written consent of the Company) directly or indirectly in the Territory engage
in, have any equity or profit interest in, make any loan to or guarantee any
obligation of or with respect to, or render services (of an executive,
advertising, marketing, sales, administrative, supervisory or consulting nature)
to, any business conducting Purchaser Activities, except in connection with the
course of the performance of any duties the Related
<PAGE> 6
Party may have as a consultant to the Company or any successor or affiliate of
the Company.
(c) If a judicial determination is made that any of the
provisions of this Section 4.3 constitutes an unreasonable or otherwise
unenforceable restriction against Walts, the provisions of this Section 4.3
shall be rendered void only to the extent that such judicial determination finds
such provisions to be unreasonable or otherwise unenforceable. In this regard,
the parties hereto hereby agree that any judicial authority construing this
Agreement shall be empowered to sever any portion of the Territory, any
prohibited business activity or any time period from the coverage of this
Section 4.3 and to apply the provisions of this Section 4.3 to the remaining
portion of the Territory, the remaining business activities or the remaining
time period not so severed by such judicial authority. The time period during
which the prohibitions set forth in this Section 4.3 shall apply shall be tolled
and suspended as to Walts for a period equal to the aggregate quantity of time
during which Walts violates such prohibitions in any respect.
5. TERMINATION.
(a) The Company shall have the right, exercisable at any time
during the term of this Agreement, to terminate this Agreement for any reason
whatsoever, upon sixty (60) days' written notice to Walts. In such event, Walts
shall be entitled to receive all amounts payable pursuant to Section 2 hereof
when and as such amounts would have been payable pursuant to Section 2 if this
Agreement had not been terminated.
(b) Walts shall have the right, exercisable at any time during
the term of this Agreement, to terminate this Agreement for any reason
whatsoever, upon sixty (60) days' written notice to the Company. In such event,
the Company shall have no further obligation under Section 2 hereof, except that
Walts shall be entitled to receive any amounts to which Walts may otherwise have
been entitled to hereunder prior to the effective date of termination of this
Agreement.
(c) Notwithstanding subsections (a) and (b) of this Section 5,
upon the death of Walts, this Agreement shall terminate automatically without
any action or notice by either party. In such event, the Company shall have no
further obligation under Section 2 hereof,
<PAGE> 7
except that Walts shall be entitled to receive any amounts to which Walts may
otherwise have been entitled to hereunder prior to the effective date of
termination of this Agreement.
(d) Upon termination of this Agreement prior to the end of its
term, the Company shall have no further obligation hereunder except as otherwise
provided herein. Walts, however, shall continue to have the obligations provided
for in Sections 3 and 4.
6. REASONABLENESS.
Walts acknowledges and agrees that the restrictions,
prohibitions and other provisions hereof are reasonable, fair and equitable in
scope, terms and duration, and are necessary to protect the legitimate business
interests of the Company.
7. WITHHOLDING.
Notwithstanding any other term or provision of this Agreement,
all amounts payable by the Company hereunder shall be subject to withholding of
such sums related to taxes as the Company may reasonably determine it should
withhold pursuant to applicable law or regulation.
8. SEVERABILITY.
Except as noted below, if any provision of this Agreement be
declared or determined by any court of competent jurisdiction to be
unenforceable or invalid for any reason, the validity of the remaining parts,
terms or provisions of this Agreement shall not be affected thereby and except
as provided in Section 9 the invalid or unenforceable part, term or provision
shall be deemed not to be a part of this Agreement.
9. REFORMATION.
If any of the covenants or promises of this Agreement are
determined by any court of law or equity, with jurisdiction over this matter, to
be unreasonable or unenforceable, in whole or in part, as written, Walts hereby
consents to and affirmatively requests that said court reform the covenant or
promise so as to be reasonable and enforceable and that said court enforce the
covenant or promise as reformed.
<PAGE> 8
10. INJUNCTIVE RELIEF.
Walts understands, acknowledges and agrees that in the event
of a breach or threatened breach of any of the covenants and promises contained
herein, the Company will suffer irreparable injury for which there is no
adequate remedy at law and the Company will therefore be entitled to injunctive
relief enjoining said breach or threatened breach. Walts further acknowledges,
however, that the Company shall have the right to seek a remedy at law as well
as or in lieu of equitable relief in the event of any such breach.
11. ASSIGNMENT.
This Agreement is personal in nature and may not be assigned
by either the Company or Walts; provided, however, that the provisions of this
Agreement shall inure to the benefit of the Company and its affiliates and their
respective successors and assigns, whether by merger, consolidation, transfer of
assets or otherwise.
12. WAIVER.
The waiver by any party to this Agreement of a breach of any
of the provisions of this Agreement shall not operate or be construed as a
waiver of any subsequent or simultaneous breach.
13. APPLICABLE LAW.
This Agreement has been entered into in and shall be governed
by and construed under the laws of the State of Indiana without regard to the
conflicts laws thereof.
14. HEADINGS AND CAPTIONS.
The headings and captions used in this Agreement are for
convenience of reference only, and shall in no way define, limit, expand or
otherwise affect the meaning or construction of any provision of this Agreement.
15. NOTICE.
Any notice required or permitted to be given pursuant to this
Agreement shall be deemed sufficiently given when delivered in person or when
deposited in the United States mail, first class postage prepaid.
<PAGE> 9
16. NO EMPLOYMENT RELATIONSHIP.
Walts understands and agrees that in performing consulting
services hereunder Walts shall be acting as an independent contractor and that
nothing in this Agreement is intended to or shall be interpreted as creating an
employment relationship between the Company and Walts. No act, statement or
conduct, of any nature whatsoever, of any representative of the Company shall
alter the nature of Walts' relationship as consultant to the Company except by a
written agreement that expressly refers to this Section 16.
17. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the
Company and Walts with respect to the subject matter of this Agreement and
supersedes any prior agreements or understandings between the Company and Walts
with respect to such subject matter. No amendment or waiver of this Agreement or
any provision hereof shall be effective unless in a writing signed by both of
the parties.
<PAGE> 10
Entered into and agreed this 26th day of February, 1998.
ALRENCO, INC.
By: /s/ Billy W. White, Sr.
-----------------------------------------
Billy W. White, Sr.
President and Chief Executive Officer
/s/ Michael D. Walts
----------------------------------------------
Michael D. Walts
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
2/26/98
==============================================================================
ALRENCO, INC.
REVOLVING CREDIT AGREEMENT
DATED AS OF FEBRUARY 26, 1998
COMERICA BANK, AS AGENT
==============================================================================
<PAGE> 2
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1. DEFINITIONS..............................................................................................1
2. REVOLVING CREDIT........................................................................................21
2.1 Revolving Credit Commitment....................................................................21
2.2 Accrual of Interest and Maturity...............................................................21
2.3 Requests for Advances and Requests for Refundings and Conversions of
Revolving Credit Advances......................................................................21
2.4 Disbursement of Revolving Credit Advances......................................................23
2.5 Prime-based Advance in Absence of Election or Upon Default.....................................24
2.6 Revolving Credit Commitment Fee................................................................25
2.7 Reduction of Indebtedness; Revolving Credit Aggregate Commitment...............................25
2.8 Optional Reduction or Termination of Revolving Credit Aggregate
Commitment.....................................................................................26
2.9 Extension of Revolving Credit Maturity Date....................................................26
2.10 Optional Increase in Commitment................................................................27
3. LETTERS OF CREDIT.......................................................................................29
3.1 Letters of Credit..............................................................................29
3.2 Conditions to Issuance.........................................................................29
3.3 Notice.........................................................................................30
3.4 Letter of Credit Fees..........................................................................31
3.5 Other Letter of Credit Fees....................................................................32
3.6 Draws and Demands for Payment Under Letters of Credit..........................................32
3.7 Obligations Irrevocable........................................................................33
3.8 Risk Under Letters of Credit...................................................................34
3.9 Indemnification................................................................................35
3.10 Right of Reimbursement.........................................................................36
4. SWING LINE CREDIT.......................................................................................37
4.1 Swing Line Advances............................................................................37
4.2 Accrual of Interest; Margin Adjustments........................................................37
4.3 Requests for Swing Line Advances...............................................................37
4.4 Disbursement of Swing Line Advances............................................................39
4.5 Refunding of or Participation Interest in Swing Line Advances..................................39
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5. MARGIN ADJUSTMENTS; INTEREST PAYMENTS...................................................................40
5.1 Margin Adjustments.............................................................................40
5.2 Prime-based Interest Payments..................................................................41
5.3 Eurocurrency-based Interest Payments...........................................................41
5.4 Quoted Rate Advance Interest Payments..........................................................42
5.5 Interest Payments on Conversions...............................................................42
5.6 Interest on Default............................................................................42
5.7 Prepayment.....................................................................................42
6. CONDITIONS..............................................................................................43
6.1 Execution of Notes and this Agreement..........................................................43
6.2 Corporate Authority............................................................................43
6.3 Collateral Documents and Guaranties............................................................44
6.4 Insurance......................................................................................44
6.5 Compliance with Certain Documents and Agreements...............................................44
6.6 Merger Documents...............................................................................45
6.7 Opinion of Counsel.............................................................................45
6.8 Company's Certificate..........................................................................45
6.9 Payment of Fees................................................................................45
6.10 Other Documents and Instruments................................................................45
6.11 Continuing Conditions..........................................................................46
7. REPRESENTATIONS AND WARRANTIES..........................................................................46
7.1 Corporate Authority............................................................................46
7.2 Due Authorization - Company....................................................................46
7.3 Due Authorization - Guarantors.................................................................46
7.4 Liens..........................................................................................47
7.5 Taxes..........................................................................................47
7.6 No Defaults....................................................................................47
7.7 Enforceability of Agreement and Loan Documents -- Company......................................47
7.8 Enforceability of Loan Documents -- Guarantors.................................................47
7.9 Compliance with Laws...........................................................................47
7.10 Non-contravention -- Company...................................................................48
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7.11 Non-contravention -- Guarantors................................................................48
7.12 No Litigation..................................................................................48
7.13 Consents, Approvals and Filings, Etc...........................................................48
7.14 Agreements Affecting Financial Condition.......................................................49
7.15 No Investment Company or Margin Stock..........................................................49
7.16 ERISA..........................................................................................49
7.17 Conditions Affecting Business or Properties....................................................50
7.18 Environmental and Safety Matters...............................................................50
7.19 Subsidiaries...................................................................................50
7.20 Accuracy of Information........................................................................50
7.21 No Change in Requirements of Laws..............................................................51
8. AFFIRMATIVE COVENANTS...................................................................................51
8.1 Financial Statements...........................................................................51
8.2 Certificates; Other Information................................................................52
8.3 Payment of Obligations.........................................................................53
8.4 Conduct of Business and Maintenance of Existence...............................................53
8.5 Maintenance of Property; Insurance.............................................................54
8.6 Inspection of Property; Books and Records, Discussions.........................................54
8.7 Notices........................................................................................54
8.8 Hazardous Material Laws........................................................................56
8.9 Minimum Tangible Net Worth.....................................................................56
8.10 Positive Net Income............................................................................56
8.11 Fixed Charge Coverage Ratio....................................................................56
8.12 Leverage Ratio.................................................................................56
8.13 Taxes..........................................................................................57
8.14 Governmental and Other Approvals...............................................................57
8.17 Offices........................................................................................58
8.18 Security.......................................................................................58
8.19 Performance of Contract Duties, Defense of Collateral..........................................58
8.20 Possessory Perfection in Contract Collateral...................................................58
8.21 Use of Proceeds................................................................................58
8.22 Future Subsidiaries............................................................................58
8.23 Royalty Payments on Licenses and Trademarks....................................................59
8.24 Further Assurances.............................................................................59
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9. NEGATIVE COVENANTS......................................................................................59
9.1 Limitation on Debt.............................................................................59
9.2 Limitation on Liens............................................................................61
9.3 Limitation on Guarantee Obligations............................................................61
9.4 Acquisitions...................................................................................61
9.5 Limitation on Mergers, or Sale of Assets.......................................................61
9.6 Dividends......................................................................................62
9.7 Limitation on Capital Expenditures.............................................................63
9.8 Limitation on Investments, Loans and Advances..................................................63
9.9 Transactions with Affiliates...................................................................64
9.10 Sale and Leaseback.............................................................................64
9.11 Limitation on Negative Pledge Clauses..........................................................64
9.12 Prepayment of Debts............................................................................64
10. DEFAULTS................................................................................................65
10.1 Events of Default..............................................................................65
10.2 Exercise of Remedies...........................................................................67
10.3 Rights Cumulative..............................................................................67
10.4 Waiver by Company of Certain Laws..............................................................67
10.5 Waiver of Defaults.............................................................................67
10.6 Set Off........................................................................................68
11. PAYMENTS, RECOVERIES AND COLLECTIONS....................................................................68
11.1 Payment Procedure..............................................................................68
11.2 Application of Proceeds of Collateral..........................................................70
11.3 Pro-rata Recovery..............................................................................70
12. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS........................................................70
12.1 Reimbursement of Prepayment Costs..............................................................70
12.2 Agent's Eurocurrency Lending Office............................................................71
12.3 Circumstances Affecting Eurocurrency-based Rate Availability...................................71
12.4 Laws Affecting Eurocurrency-based Advance Availability.........................................71
12.5 Increased Cost of Eurocurrency-based Advances..................................................72
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12.6 Indemnity......................................................................................73
12.7 Other Increased Costs..........................................................................73
12.8 Substitution of Banks..........................................................................74
13. AGENT...................................................................................................75
13.1 Appointment of Agent...........................................................................75
13.2 Deposit Account with Agent.....................................................................75
13.3 Scope of Agent's Duties........................................................................75
13.4 Successor Agent................................................................................76
13.5 Agent in its Individual Capacity...............................................................76
13.6 Credit Decisions...............................................................................77
13.7 Agent's Fees...................................................................................77
13.8 Authority of Agent to Enforce Notes and This Agreement.........................................77
13.9 Indemnification................................................................................77
13.10 Knowledge of Default...........................................................................78
13.11 Agent's Authorization; Action by Banks.........................................................78
13.12 Enforcement Actions by the Agent...............................................................78
14. MISCELLANEOUS...........................................................................................79
14.1 Accounting Principles..........................................................................79
14.2 Consent to Jurisdiction........................................................................79
14.3 Law of Michigan................................................................................79
14.4 Interest.......................................................................................79
14.5 Closing Costs and Other Costs; Indemnification.................................................79
14.6 Notices........................................................................................81
14.7 Further Action.................................................................................81
14.8 Successors and Assigns; Participations; Assignments............................................81
14.9 Indulgence.....................................................................................84
14.10 Counterparts...................................................................................85
14.11 Amendment and Waiver...........................................................................85
14.12 Confidentiality................................................................................85
14.13 Withholding Taxes..............................................................................86
14.14 Taxes and Fees.................................................................................86
14.15 WAIVER OF JURY TRIAL...........................................................................86
14.16 Interest.......................................................................................87
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14.17 Complete Agreement; Conflicts..................................................................87
14.18 Severability...................................................................................88
14.19 Table of Contents and Headings.................................................................88
14.20 Construction of Certain Provisions.............................................................88
14.21 Independence of Covenants......................................................................88
14.22 Reliance on and Survival of Various Provisions.................................................88
14.23 Amendment and Restatement......................................................................88
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TABLE OF CONTENTS
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SCHEDULES
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Schedule 1.1 Applicable L/C Fee Percentage, Applicable Revolving Commitment Fee
Percentage and Eurocurrency Margins
Schedule 1.2 Percentages
Schedule 2 Insurance Deposits
Schedule 6.2 Good Standing Certificates
Schedule 6.3(b) List of Jurisdictions in which UCC Financing Statements will be filed
Schedule 7.9 Consumer Credit Laws
Schedule 7.12 Litigation
Schedule 7.16 Pension Plans
Schedule 7.17 Conditions Affecting Business
Schedule 7.18 Environmental Matters
Schedule 7.19 Subsidiaries
Schedule 7.20 Contingent Obligations
Schedule 7.21 Changes in Requirements of Laws
Schedule 9.1 Indebtedness
Schedule 9.2 Liens
Schedule 9.3 Permitted Guarantees
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EXHIBITS
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Exhibit A Form of Request for Revolving Credit Advance
Exhibit B Form of Revolving Credit Note
Exhibit C Form of Notice of Letters of Credit
Exhibit D Form of Request for Swing Line Advance
Exhibit E Form of Swing Line Note
Exhibit F Form of Swing Line Participation Certificate
Exhibit G Form of New Bank Addendum
Exhibit H Form of Covenant Compliance Report
Exhibit I Form of Assignment Agreement
Exhibit J Form of Guaranty (including Exhibit "A" - Joinder Agreement) Company
Exhibit K Form of Borrowing Base Certificate
Exhibit L Form of Security Agreement
Exhibit M Form of Pledge Agreement
Exhibit N Form of Intercompany Note
Exhibit O Store Listings
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<PAGE> 9
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT ("Agreement") is made as of the 26th
day of February, 1998, by and among Comerica Bank-Texas and the other financial
institutions from time to time parties hereto as lenders of the Revolving
Credit (individually, "Revolving Credit Bank", and collectively "Revolving
Credit Banks"), Comerica Bank-Texas, as lender of the Swing Line Credit ("Swing
Line Bank" and together with Revolving Credit Banks, individually, a "Bank" and
any or all collectively referred to as the "Banks"), Comerica Bank, as agent
for the Banks (in such capacity, "Agent"), and Alrenco, Inc., an Indiana
corporation ("Company").
A. Company has requested that the Banks amend, renew and/or extend to
it revolving credit and letters of credit as previously extended to Company by
the Banks under (i) that certain Amended and Restated Loan and Security
Agreement dated as of May 1, 1991, among RTO, Action TV & Appliance Rental,
Inc. and Comerica Bank-Texas, as successor by merger to North Park National
Bank of Dallas, as amended from time to time (the "Prior Comerica Credit
Agreement") and (ii) that certain credit facility between Bank One, Kentucky
N.A. and the Company as in effect on the date hereof (the "Prior Bank One
Credit Agreement") on the terms and conditions set forth herein.
B. The Banks are prepared to extend such credit as aforesaid, by
amendment and renewal (but not in novation) of the Prior Credit Agreements, but
only upon the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the covenants contained herein,
Company, the Banks and Agent agree as follows:
COMPANY, AGENT AND BANKS AGREE:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
"Account Party(ies)" shall mean, with respect to any Letter of Credit,
the account party (which shall be Company or RTO Operating, with the
countersignature of the Company) named in an application to the Issuing Bank
for the issuance of such Letter of Credit.
"Action Rent-to-Own" shall mean Action Rent-to-Own Holdings of South
Carolina, Inc., a South Carolina corporation.
"Advance(s)" shall mean Revolving Credit Advance(s) and Swing Line
Advance(s).
<PAGE> 10
"Affected Lender" shall have the meaning set forth in Section 12.8.
"Affiliate" shall mean, with respect to any Person, any other Person
or group acting in concert in respect of the first Person that, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with such first Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person or group of Persons, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise. Unless otherwise specified to the contrary herein, or the context
requires otherwise, Affiliate shall refer to the Company's Affiliates.
"Agent" shall mean Comerica Bank, in its capacity as agent for the
Banks hereunder, or any successor agent appointed in accordance with Section
13.4 hereof.
"Agent's Fees" shall mean those agency, and other fees and expenses
required to be paid by Company to Agent under Section 13.7 hereof.
"Alternate Base Rate" shall mean, for any day, an interest rate per
annum equal to the Federal Funds Effective Rate in effect on such day, plus one
percent (1%).
"Applicable Commitment Fee Percentage" shall mean as of any date of
determination thereof, the applicable percentage used to calculate the
Revolving Credit Commitment Fee due and payable hereunder, determined (based
upon the Fixed Charge Coverage Ratio) by reference to the appropriate columns
in the pricing matrix attached to this Agreement as Schedule 1.1.
"Applicable L/C Fee Percentage" shall mean, as of any date of
determination thereof, the applicable percentage used to calculate the Letter
of Credit Fees due and payable hereunder, determined (based upon the Fixed
Charge Coverage Ratio) by reference to the appropriate columns in the pricing
matrix attached to this Agreement as Schedule 1.1.
"Applicable Interest Rate" shall mean (i) in respect of a Revolving
Credit Advance, the Eurocurrency-based Rate or the Prime-based Rate, applicable
to such Advance (in the case of a Eurocurrency-based Advance, for the relevant
Interest Period), and (ii) in respect of a Swing Line Advance, the Prime-based
Rate or the Quoted Rate, applicable to such Advance, for the relevant Interest
Period, as selected by Company from time to time subject to the terms and
conditions of this Agreement.
"Asset Sale" shall mean the sale, transfer or other disposition by the
Company or any Subsidiary of any asset to any Person, other than sales,
transfers or other dispositions of inventory in the ordinary course of
business.
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<PAGE> 11
"ATRO" shall mean "ATRO, Inc., formerly known as RTO Trademark
Company, Inc., a South Carolina corporation.
"Average Receipts" shall mean, as of any date of determination, an
amount calculated by taking the sum of the highest two of the immediately
preceding three calendar months' Rental Receipts, dividing such sum by two, and
multiplying the quotient by four. For the purposes of this definition, "Rental
Receipts" shall mean, as of any date of determination, the amount of gross
rental payments (including the amount of each such payment allocated to
liability damage waiver, club fees, delivery, reinstatement and late fees, but
excluding amounts allocated to any sales tax, early payouts and cash sales)
received by the Company or any Subsidiary in collected funds from the related
Obligor under any Rental Contract; and shall include rental payments received
under any Rental Contracts originated by a Person prior to the time such Person
became a Subsidiary of the Company (so long as such Person is a Subsidiary on
the applicable date of determination) and under any Rental Contracts acquired
by the Company or any Subsidiary of the Company, in either case pursuant to a
Permitted Acquisition (though such rental payments were not received by the
Company or such Subsidiary).
"Banks" shall mean Comerica Bank-Texas ("Comerica-Texas") and such
other financial institutions from time to time parties hereto as lenders and
shall include the Revolving Credit Banks, the Swing Line Bank, the Issuing Bank
and any assignee which becomes a Bank pursuant to Section 14.8 hereof.
"Borrowing Base" shall mean, as of any date of determination, the
lesser of the (a) Average Receipts, (b) 50% of the Rental Income Value and (c)
100% of Original Cost.
"Borrowing Base Certificate" shall mean a borrowing base certificate,
substantially in the form of Exhibit K, with appropriate insertions and
executed by a Responsible Officer.
"Business Day" shall mean any day on which commercial banks are open
for domestic and international business in Detroit, London and New York.
"Capital Expenditures" shall mean, without duplication, any amounts
accrued in respect of a period in respect of any purchase or other acquisition
for value of fixed or capital assets; provided that, in no event shall Capital
Expenditures include amounts expended in respect of normal repair and
maintenance of plant facilities, machinery, fixtures and other like capital
assets utilized in the ordinary conduct of business (to the extent such amounts
would not be capitalized in preparing a balance sheet determined in accordance
with GAAP).
"Collateral" shall mean all property or rights in which a security
interest, mortgage, lien or other encumbrance for the benefit of the Banks is
or has been granted or arises or has arisen, under or in connection with this
Agreement, the other Loan Documents, or otherwise.
3
<PAGE> 12
"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA or which is part of a group which includes the Company
and which is treated as a single employer under Section 414 of the Internal
Revenue Code.
"Company" is defined in the Preamble.
"Consumer Credit Laws" shall mean the requirements of all applicable
federal, state and local laws, ordinances, codes, rules, regulations and
guidelines (including consent decrees and administrative orders) relating to
consumer credit and protection or the rent-to-own industry, including without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, Federal Reserve Board Regulations B, M and Z, state
adaptations of the National Consumer Act and of the Uniform Consumer Credit
Code, and laws regarding unfair and deceptive practices, and any and all other
Consumer Credit Laws regarding the ability of a Person to charge interest or a
time price differential at a certain rate, and any equal credit opportunity,
discrimination and other disclosure laws and any other consumer credit or equal
opportunity disclosure.
"Contractual Obligation" shall mean as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Covenant Compliance Report" shall mean the report to be furnished by
Company to the Agent pursuant to Section 8.2(a) hereof, in the form of attached
Exhibit H and certified by a Responsible Officer, in which report Company shall
set forth, among other things, detailed calculations and the resultant ratios
or financial tests with respect to the financial covenants contained in
Sections 8.9 through 8.12 and Sections 9.6 and 9.8 of this Agreement.
"Debt" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP, including without limitation, any items so classified on
a balance sheet or the accompanying footnotes and any reimbursement obligations
in respect of letters of credit, obligations in respect of bankers acceptances,
payment obligations, if any, under interest rate protection agreements
(including without limitation interest rate swaps and similar agreements), and
currency swaps and hedges and similar agreements; provided, however that for
purposes of calculating the aggregate Debt of such Person and its Subsidiaries
(if any), the direct and indirect and absolute and contingent obligations of
such Person (whether direct or contingent) shall be determined without
duplication.
"De Minimis Matters" shall mean environmental or other matters, the
existence of which and any liability which may result therefrom, would not,
individually or in the aggregate, reasonably be
4
<PAGE> 13
expected to have a material adverse effect on the financial condition or
businesses of the Company and its Subsidiaries (taken as a whole) or on the
ability of the Company and Subsidiaries (taken as a whole) to pay their debts,
as such debts become due.
"Default" shall mean any event which with the giving of notice or the
passage of time, or both, would constitute an Event of Default under this
Agreement.
"Dollars" and the sign "$" shall mean lawful money of the United
States of America.
"EBITDAR" of any Person shall mean, for any period, the sum of (a) Net
Income for such period (without giving effect to (i) any one-time cash charges
in an aggregate amount not to exceed $8,000,000 and any one-time non-cash
charges in an aggregate amount not to exceed $1,000,000 arising from the Merger
and (ii) any one-time charges in an aggregate amount not to exceed $2,000,000
for the four fiscal quarters then ending arising from any acquisition and/or
mergers other than the Merger) plus (b) to the extent deducted in the
computation of such Net Income, (i) all amounts treated as expenses for
depreciation of fixed assets, amortization of intangible assets and interest
paid or payable on the Debt of such Person for such period, (ii) all accrued
taxes on or measured by income and (iii) the amount of all Rental Expenses,
determined in each case in accordance with GAAP.
"Effective Date" shall mean the date on which all the conditions
precedent set forth in Sections 6.1 through 6.10 have been satisfied.
"Eligible Rental Contract" shall mean a Rental Contract which has been
included in a Borrowing Base Certificate to determine the Borrowing Base and as
to which Rental Contract the following is true and accurate as of the time it
was utilized to determine the Borrowing Base and as of the time the Company has
requested an Advance to be based in part thereon:
(a) it is substantially in the form of the current form of
rental contract for the rental of goods with option to purchase approved for
use in each state in which such contract is intended to be used as customized
to meet the legal requirements of each such state by the Association of
Progressive Rental Organizations or is otherwise in compliance with applicable
state law; and
(b) it (and the interest of Company or the applicable
Subsidiary thereunder) has not been sold, transferred or otherwise assigned or
encumbered by the Company or such Subsidiary to any Person, other than to the
Banks as security for the Indebtedness hereunder; and
(c) the related Obligor thereunder is not an Affiliate of the
Company; and
(d) as of the last day in the calendar month referenced in
such Borrowing Base Certificate, the Rental Contract remains in full force and
effect and it is a valid, binding and enforceable obligation of such Obligor;
and
5
<PAGE> 14
(e) it complied at the time it was originated or made, and is
currently in compliance in all respects, with all applicable laws, rules and
regulations, including any Consumer Credit Laws; and
(f) subject to repair or replacement thereof by the Company
or the applicable Subsidiary in accordance with its obligations under the
applicable Rental Contract, the goods covered by the applicable Rental Contract
have been delivered to the related Obligor and, on the date of delivery,
satisfied all warranties, expressed or implied, made or deemed to be made to
such Obligor; and
(g) the Company or the applicable Subsidiary owns the goods
free and clear of all liens or encumbrances, except the security interest
granted by Company or such Subsidiary, as the case may be, to the Banks and
except for Liens permitted by Section 9.2 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code and the regulations in effect
from time to time thereunder.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which is part of a group which includes the Company and would be
treated as a single employer under Section 414(b) or (c) of the Internal
Revenue Code.
"Eurocurrency-based Advance" shall mean a Revolving Credit Advance
which bears interest at the Eurocurrency-based Rate.
"Eurocurrency-based Rate" shall mean, with respect to any
Eurocurrency-Interest Period, the per annum interest rate which is equal to the
sum of the Margin plus the quotient of:
(A) the per annum interest rate at which deposits in eurodollars
are offered to Agent's Eurocurrency Lending Office by other
prime banks in the eurodollar market in an amount comparable
to the relevant Eurocurrency-based Advance and for a period
equal to the relevant Eurocurrency-Interest Period at
approximately 11:00 a.m. Detroit time two (2) Business Days
prior to the first day of such Eurocurrency- Interest Period,
divided by
(B) an amount equal to one minus the stated maximum rate
(expressed as a decimal) of all reserve requirements
(including, without limitation, any marginal, emergency,
supplemental, special or other reserves) that is specified on
the first day of such Eurocurrency-Interest Period by the
Board of Governors of the Federal Reserve System (or any
successor agency thereto) for determining the maximum reserve
requirement with respect to eurodollar funding (currently
referred to as "eurocurrency liabilities" in Regulation D of
such Board) maintained by a member bank of such System,
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<PAGE> 15
all as conclusively determined (absent manifest error) by the Agent, such sum
to be rounded upward, if necessary, to the nearest whole multiple of 1/16th of
1%.
"Eurocurrency-Interest Period" shall mean the Interest Period
applicable to a Eurocurrency- based Advance.
"Eurocurrency Lending Office" shall mean, (a) with respect to the
Agent, Agent's office located at Grand Cayman, British West Indies or such
other branch or branches of Agent, domestic or foreign, as it may hereafter
designate as a Eurocurrency Lending Office by notice to Company and the Banks,
and (b) as to each of the Banks, its office, branch or affiliate located at its
address set forth on the signature pages hereof (or identified thereon as a
Eurocurrency Lending Office), or at such other office, branch or affiliate of
such Bank as it may hereafter designate as its Eurocurrency Lending Office by
notice to Company and Agent.
"Event of Default" shall mean each of the Events of Default specified
in Section 10.1 hereof.
"Federal Funds Effective Rate" shall mean, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by Agent from three Federal funds brokers of recognized standing
selected by it, all as conclusively determined by the Agent, such sum to be
rounded upward, if necessary, to the nearest whole multiple of 1/16th of 1%.
"Fees" shall mean the Revolving Credit Commitment Fee, the Letter of
Credit Fees, the Agent's Fees, and the other fees and charges payable by
Company to the Banks or Agent hereunder.
"Financing Lease" shall mean, as applied to any Person, any lease of
any personal property the discounted present value of the rental obligations of
such Person as lessee under which, in conformity with GAAP, is required to be
capitalized on the balance sheet of that Person, and shall exclude any
Operating Leases.
"Fixed Charge Coverage Ratio" shall mean as of any date of
determination, a ratio (i) the numerator of which shall be equal to the sum of
EBITDAR for the preceding four fiscal quarters then ending, and (ii) the
denominator of which shall be Fixed Charges.
"Fixed Charges" of any Person shall mean, for any date of
determination for the preceding four fiscal quarters then ending, the sum,
without duplication, of (i) all interest expense paid or payable during such
period on the Total Debt of such Person plus (ii) the amount of all Rental
Expenses of such Person during such period, all determined in accordance with
GAAP plus (iii) all cash dividends paid by Company pursuant to Section 9.6
hereof.
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<PAGE> 16
"Funded Debt" shall mean as of any applicable date of determination,
all Debt of a Person for borrowed money (but excluding Debt of such Person to
its Subsidiaries, Debt of Subsidiaries of such Person to such Person or to
other Subsidiaries, trade payables, accruals and deferred income taxes) or
which has been incurred in connection with the acquisition of assets (including
the acquisition of assets in connection with the Merger) in each case
determined on a consolidated basis and in accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect on the date hereof, consistently
applied.
"Governmental Obligations" means noncallable direct general
obligations of the United States of America or obligations the payment of
principal of and interest on which is unconditionally guaranteed by the United
States of America.
"Guarantor(s)" shall mean (a) as of the Effective Date, RTO Operating,
RTO Holding, ATRO and Action Rent-To-Own and (b) thereafter, each of the
entities referred to in clause (a) and each other Subsidiary which from time to
time guaranties the obligations of the Company hereunder and under the other
Loan Documents.
"Guaranty" shall mean the Guaranty to be made by each of the
Guarantors (whether by execution thereof, or by execution of the Joinder
Agreement attached as "Exhibit A" to the form of such Guaranty) in favor of the
Agent for the ratable benefit of the Banks, substantially in the form of
Exhibit J, as amended or otherwise modified from time to time.
"Guarantee Obligation" shall mean as to any Person (the "guaranteeing
person") (a) any obligation of the guaranteeing person or (b) any obligation of
another Person (including, without limitation, any bank under any letter of
credit), the creation of which was induced by a reimbursement, counter
indemnity or similar obligation issued by the guaranteeing person, in either
case guaranteeing or in effect guaranteeing any Debt, leases, dividends or
other obligations (the "primary obligations") of any other third Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person
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<PAGE> 17
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which
such guaranteeing person may be liable are not stated or determinable, in which
case the amount of such Guarantee Obligation shall be such guaranteeing
person's maximum reasonably anticipated liability in respect thereof as
determined by the Company in good faith.
"Hazardous Material" shall mean and include any hazardous, toxic or
dangerous waste, substance or material defined as such in (or for purposes of)
the Hazardous Material Laws.
"Hazardous Material Law(s)" shall mean all laws, codes, ordinances,
rules, regulations, orders, decrees and directives issued by any federal,
state, provincial, local, foreign or other governmental or quasi-governmental
authority or body (or any agency, instrumentality or political subdivision
thereof) pertaining to any hazardous, toxic or dangerous waste, substance or
material on or about any facilities owned, leased or operated by Company or any
of its Subsidiaries, or any portion thereof including, without limitation,
those relating to soil, surface, subsurface ground water conditions and the
condition of the ambient air; and any state and local laws and regulations
pertaining to any hazardous, toxic or dangerous waste, substance or material
and/or asbestos; any so-called "superfund" or "superlien" law; and any other
federal, state, provincial, foreign or local statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to, or imposing
liability or standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, as now or at any time hereafter in effect.
"Hereof", "hereto", "hereunder" and similar terms shall refer to this
Agreement and not to any particular paragraph or provision of this Agreement.
"Indebtedness" shall mean all indebtedness and liabilities (including
without limitation interest, fees and other charges) arising under this
Agreement or any of the other Loan Documents, whether direct or indirect,
absolute or contingent, of Company or any Guarantor to any of the Banks or to
the Agent, in any manner and at any time, whether evidenced by the Notes,
arising under any Guaranty, or any of the other Loan Documents, due or
hereafter to become due, now owing or that may hereafter be incurred by Company
or any Guarantor to, any of the Banks or by Agent, and any judgments that may
hereafter be rendered on such indebtedness or any part thereof, with interest
according to the rates and terms specified, or as provided by law, and any and
all consolidations, amendments, renewals, replacements, substitutions or
extensions of any of the foregoing; provided, however that for purposes of
calculating the Indebtedness outstanding under the Notes or any of the other
Loan Documents, the direct and indirect and absolute and contingent obligations
of the Company and the Guarantors (whether direct or contingent) shall be
determined without duplication.
"Intercompany Loan" shall mean any loan (or advance in the nature of a
loan) by the Company to any Guarantor or by any Guarantor to another Guarantor
provided, however that each such loan or advance is subordinated in right of
payment and priority to the Indebtedness on terms and conditions satisfactory
to Agent and the Banks; and provided further however that, all such loans shall
be evidenced by Intercompany Notes (originals of which shall have been
delivered to
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<PAGE> 18
Agent), which notes shall be pledged to the Agent for the benefit of the Banks
as security for the Indebtedness hereunder.
"Intercompany Loans, Advances or Investments" shall mean any
Intercompany Loan and any advance or investment by the Company or any Guarantor
(including without limitation any guaranty of obligations or indebtedness to
third parties) to or in any 100% Subsidiary.
"Intercompany Note" shall mean an Intercompany Note evidencing
Intercompany Loans substantially in the form of Exhibit N, and otherwise on
terms and conditions satisfactory to the Agent and the Banks.
"Interest Period" shall mean (a) with respect to a Eurocurrency-based
Advance, one (1), two (2), three (3), six (6) or twelve (12) months (or any
lesser or greater number of days agreed to in advance by Company, Agent and the
Revolving Credit Banks) as selected by Company pursuant to Section 2.3,
provided, however, that any Eurocurrency-Interest Period which commences on the
last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month
and (b) with respect to a Swing Line Advance, shall mean a period of one (1) to
thirty (30) days agreed to in advance by Company and the Swing Line Bank as
selected by Company pursuant to Section 4.3. Each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day, and no
Interest Period which would end after the Revolving Credit Maturity Date shall
be permitted with respect to any Advance.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and the regulations promulgated thereunder.
"Investment" shall mean, when used with respect to any Person, (a) any
loan, investment or advance made by such Person to any other Person (including,
without limitation, any contingent obligation) in respect of any capital stock,
Debt, obligation or liability of such other Person and (b) any other investment
made by such Person (however acquired) in stock or other ownership interests in
any other Person, including, without limitation, any investment made in
exchange for the issuance of shares of stock of such Person.
"Issuing Bank" shall mean Comerica Bank-Texas in its capacity as
issuer of one or more Letters of Credit hereunder.
"Issuing Office" shall mean Issuing Bank's office located at 8850
Boedeker St., Dallas, Texas 75225 or such other office as Issuing Bank shall
designate as its Issuing Office.
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"Joinder Agreement (Guaranty)" shall mean a joinder agreement in the
form attached as "Exhibit A" to the form of the Guaranty (Exhibit J to this
Agreement), to be executed and delivered by any Person required to be a
Guarantor pursuant to Section 8.21 of this Agreement.
"Letter(s) of Credit" shall mean any standby letters of credit issued
by Issuing Bank at the request of or for the account of an Account Party or
Account Parties pursuant to Article 3 hereof.
"Letter of Credit Agreement" shall mean, in respect of each Letter of
Credit, the application and related documentation satisfactory to the Issuing
Bank of an Account Party or Account Parties requesting Issuing Bank to issue
such Letter of Credit, as amended from time to time.
"Letter of Credit Fees" shall mean the fees payable to Agent for the
accounts of the Banks in connection with Letters of Credit pursuant to Section
3.4 hereof.
"Letter of Credit Maximum Amount" shall mean as of any date of
determination the lesser of:
(a) Two Million Dollars ($2,000,000); or
(b) the difference between (A) the lesser of (x) the Revolving Credit
Aggregate Commitment as of such date, and (y) the Borrowing Base
as of such date, MINUS (B) the aggregate principal amount of
Advances outstanding as of such date.
"Letter of Credit Obligations" shall mean at any date of
determination, the sum of (a) the aggregate undrawn amount of all Letters of
Credit then outstanding, (b) the aggregate face amount of all Letters of Credit
requested but not yet issued as of such date and (c) the aggregate amount of
Reimbursement Obligations which have not been reimbursed by the Company as of
such date.
"Letter of Credit Payment" shall mean any amount paid or required to
be paid by the Issuing Bank in its capacity hereunder as issuer of a Letter of
Credit as a result of a draft or other demand for payment under any Letter of
Credit.
"Leverage Ratio" shall mean as of the last day of any computation
period, the ratio of (a) Total Debt as of such day to (b) the sum of Total Debt
plus Total Shareholders' Equity as of such day.
"Lien" shall mean any pledge, assignment, hypothecation, mortgage,
security interest, deposit arrangement, option, trust receipt, conditional sale
or title retaining contract, sale and leaseback transaction, financing
statement or comparable notice or other filing or recording, Financing Lease,
subordination or any claim or right, or any other type of lien, charge,
encumbrance, preferential or priority arrangement or other claim or right,
whether based on common law or statute.
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<PAGE> 20
"Loan Documents" shall mean, collectively, this Agreement, the Notes,
the Letter of Credit Agreements, the Security Agreement, the Pledge Agreement,
the Guaranty(ies) and any other documents, certificates, instruments or
agreements executed pursuant to or in connection with any such document or this
Agreement, as such documents may be amended or otherwise modified from time to
time.
"Majority Banks" shall mean at any time Banks holding 66-2/3% of the
aggregate principal amount of the Indebtedness then outstanding under the Notes
(provided that, for purposes of determining Majority Banks hereunder,
Indebtedness outstanding under the Swing Line Notes shall be allocated among
the Banks based upon their respective Percentages), or, if no Indebtedness is
then outstanding, Banks holding 66-2/3% of the Percentages.
"Margin" shall mean, as of any date of determination thereof, the
applicable interest rate margin determined in accordance with the provisions of
Section 5.1 hereof (based upon the Fixed Charge Coverage Ratio) by reference to
the appropriate columns in the pricing matrix attached to this Agreement as
Schedule 1.1.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, operations, property, or financial condition of the Company and
its Subsidiaries taken as a whole, (b) the ability of the Company to perform
its obligations under this Agreement, the Notes or any other Loan Document to
which it is a party, or (c) the validity or enforceability of this Agreement,
any of the Notes or any of the other Loan Documents or the rights or remedies
of the Agent or the Banks hereunder or thereunder.
"Merger" shall mean the merger of RTO into the Company pursuant to and
in accordance with the Merger Documents.
"Merger Documents" shall mean the Agreement and Plan of Merger by and
between the Company and RTO dated as of September 28, 1997, as amended and the
Articles of Merger and Certificate of Merger issued by the secretary of state
of Indiana and Delaware, respectively.
"Multiemployer Plan" shall mean a Pension Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Net Income" shall mean the net income (or loss) of a Person for any
period determined in accordance with GAAP.
"New Bank Addendum" shall mean an Addendum, substantially in the form
of Exhibit G hereto, to be executed and delivered by each Bank becoming a party
to this Agreement pursuant to Section 2.10 hereof.
"Notes" shall mean the Revolving Credit Notes and the Swing Line Note.
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<PAGE> 21
"Obligor" shall mean the Person obligated for the payment of rent and
other sums under any Rental Contract; and "related Obligor" shall, when used
with respect to any Rental Contract, mean the Person so obligated thereunder.
"Operating Lease" shall mean any lease other than a Financing Lease
and shall include, without limitation, any store leases.
"Original Cost" shall mean as of any date of determination, the
original cost of goods which are or may hereafter be subject to a Rental
Contract and which goods, as of the date of determination, satisfy (if such
goods are, as of such date subject to a Rental Contract), or would satisfy (if
such goods are not, as of such date, subject to a Rental Contract) all
warranties, expressed or implied, made or deemed to be made to an Obligor under
a Rental Contract, and which goods are owned by the Company or such Subsidiary,
subject to the security interest granted by Company or the applicable
Subsidiary pursuant to the Loan Documents, free and clear of all liens or
encumbrances.
"PBGC" shall mean the Pension Benefit Guaranty Corporation under
ERISA, or any successor corporation
"Pension Plan" shall mean each employee pension benefit plan, as
defined in Section 3(2) of ERISA, of the Company or an ERISA Affiliate but only
to the extent such Pension Plan is subject to ERISA, as provided in Section 4
of ERISA, and is subject to Section 412 of the Internal Revenue Code and
Section 302 of ERISA.
"Percentage" shall mean, with respect to any Bank, its percentage
share, as set forth on Schedule 1.2 hereto, of the Revolving Credit Aggregate
Commitment and Letters of Credit, as the context indicates, as such Exhibit may
be revised from time to time by Agent in accordance with provisions of Section
14.8.
"Permitted Acquisition" shall mean any acquisition by the Company or
any of its Subsidiaries of assets, businesses or business interests or shares
of stock or other ownership interests of or in any Person, conducted while no
Default or Event of Default has occurred and is continuing hereunder (both
before and after giving effect thereto) which, in the case of an acquisition
pursuant to clause (c)(i) hereof, is approved in writing by the Majority Banks
prior to its consummation and is otherwise conducted in accordance with the
following requirements:
(a) Such acquisition is of a business or Person engaged in the
rent-to-own business;
(b) The board of directors (or other Person(s) exercising similar
functions) of the seller of the assets or issuer of the shares of stock or
other ownership interests being acquired shall not have disapproved such
transaction or recommended that such transaction be disapproved;
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<PAGE> 22
(c) in the event that the value of such proposed new acquisition,
computed on the basis of total acquisition consideration paid or incurred, or
to be paid or incurred, by the Company or its Subsidiaries with respect
thereto, including all indebtedness which is assumed or to which such assets,
businesses or business or ownership interests or shares, or any Person so
acquired, is subject, but excluding the value of any common shares transferred
as a part of such acquisition, shall be
(i) greater than or equal to Fifteen Million Dollars
($15,000,000), determined as of the date of such acquisition, then not
less than thirty (30) nor more than ninety (90) days prior to the date
each such proposed acquisition is scheduled to be consummated, the
Company provides written notice thereof to Agent, accompanied by (A)
draft of the letter of intent and, when available, all material
documents pertaining to such proposed acquisition, (B) detail setting
forth the acquisition price with supporting documentation and
historical financial information (including income statement, balance
sheet and cash flows) covering at least three complete fiscal years of
the acquisition target prior to the effective date of the acquisition
or the entire credit history of the acquisition target, whichever
period is shorter (provided, however, that, if the financial
information referred to in this subparagraph (B) is not available,
Company shall furnish Agent with financial information otherwise
reasonably satisfactory to the Majority Banks, and (C) Pro Forma
Projected Financial Information, or
(ii) less than Fifteen Million Dollars ($15,000,000), then not
less than ten (10) Business Days after date each such proposed
acquisition has been consummated, the Company provides written notice
thereof to Agent (with certified copies of all material documents
pertaining to such acquisition);
whereupon Agent shall promptly notify each of the Banks of its receipt thereof
and upon the written request of any Bank distribute copies of all notices and
other materials received from Company under this clause (c) to each Bank;
(d) on the date of any such acquisition, all necessary or appropriate
governmental, quasi-governmental, agency, regulatory or similar approvals of
applicable jurisdictions (or the respective agencies, instrumentalities or
political subdivisions, as applicable, of such jurisdictions) and all necessary
or appropriate non-governmental and other third-party approvals (other than
landlord consents for stores purchased in connection with the acquisition)
which, in each case, are material to such acquisition have been obtained and
are in effect, and the Company and its Subsidiaries are in full compliance
therewith, and all necessary or appropriate declarations, registrations or
other filings with any court, governmental or regulatory authority, securities
exchange or any other person have been made; and
(e) within thirty (30) days after any such acquisition has been
completed, the Company shall deliver to the Agent executed copies of all
material documents pertaining to such acquisition and the Company, its
Subsidiaries and any of the other business entities involved in such
acquisition
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shall execute or cause to be executed, and provide or cause to be provided to
Agent, for the Banks, any Loan Documents required by Section 8.22 hereof.
"Permitted Guarantees" shall mean those guaranties listed on Schedule
9.3
"Permitted Investments" shall mean
(a) Governmental Obligations;
(b) Obligations of a state of the United States, the District
of Columbia or any possession of the United States, or any political
subdivision thereof, which are described in Section 103(a) of the
Internal Revenue Code and are graded in any of the highest 3 major
grades as determined by at least one nationally recognized rating
agency; or secured, as to payments of principal and interest, by a
letter of credit provided by a financial institution or insurance
provided by a bond insurance company which itself or its debt is rated
in the highest 3 major grades as determined by at least one nationally
recognized rating agency;
(c) Banker's acceptances, commercial accounts, certificates
of deposit, or depository receipts issued by a Bank or a bank, trust
company, savings and loan association, savings bank or other financial
institution whose deposits are insured by the Federal Deposit
Insurance Corporation and whose reported capital and surplus equal at
least $500,000,000;
(d) commercial paper with a minimum rating of "A-1" (or
better) by S&P or "P-1" (or better) by Moody's, full faith and credit
direct obligations of the United States of America, certificates of
deposit, and other short term investments (each of a duration of one
year or less), maintained by the Company or any of its Subsidiaries
consistent with the present investment practices of such parties (as
classified in the current financial statements of such parties);
(e) Secured repurchase agreements against obligations
itemized in paragraph (a) above, and executed by a bank or trust
company or by members of the association of primary dealers or other
recognized dealers in United States government securities, the market
value of which must be maintained at levels at least equal to the
amounts advanced and repurchase agreements entered into with
counterparties having ratings in either of the highest two rating
categories by Moody's or S&P, or the highest rating category by Fitch
Investor Services, Duff & Phelps or Thompson Bank Watch and providing
for underlying securities to be held by a third party;
(f) Any fund or other pooling arrangement which exclusively
purchases and holds the investments itemized in (a) through (e) above;
and
(g) Commercial accounts maintained at a bank, trust company,
savings and loan association, savings bank or other financial
institution whose deposits are federally
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<PAGE> 24
insured, which accounts are maintained in the ordinary course of RTO
Operating's business with an individual maximum daily balance not to
exceed $35,000.
"Permitted Liens" shall mean:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the
Company in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlord's liens or other like Liens arising in the
ordinary course of business which are not overdue for a period of more
than 60 days or which are being contested in good faith by appropriate
proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation, and deposits securing liability to insurance carriers
under insurance or self-insurance arrangements (which deposits are
listed on Schedule 2);
(d) deposits to secure (i) the performance of bids, trade
contracts (other than for borrowed money), statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a
like nature in an aggregate amount not to exceed $100,000 at any one
time or (ii) the performance of leases permitted hereunder, in each
case given or incurred on terms, in amounts and otherwise in the
ordinary course of business; and
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Company.
"Person" shall mean a natural person, corporation, limited liability
company, partnership, limited liability partnership, trust, incorporated or
unincorporated organization, joint venture, joint stock company, or a
government or any agency or political subdivision thereof or other entity of
any kind.
"Pledge Agreement" shall mean a Pledge Agreement executed and
delivered by the Company and each of its Subsidiaries in favor of the Agent, in
each case substantially in the form of Exhibit M-1 or M-2, as the case may be,
as amended or otherwise modified from time to time.
"Prime-based Advance" shall mean an Advance which bears interest at
the Prime-based Rate.
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<PAGE> 25
"Prime-based Rate" shall mean, for any day, that rate of interest
which is equal to the greater of (i) the Prime Rate, or (ii) the Alternate Base
Rate.
"Prime Rate" shall mean the per annum rate of interest announced by
the Agent, at its main office from time to time as its "prime rate" (it being
acknowledged that such announced rate may not necessarily be the lowest rate
charged by the Agent, to any of its customers), which Prime Rate shall change
simultaneously with any change in such announced rate.
"Prior Bank One Credit Agreement" is defined in the Recitals.
"Prior Comerica Credit Agreement" is defined in the Recitals.
"Prior Credit Agreements" shall mean the Prior Comerica Credit
Agreement and the Prior Bank One Credit Agreement.
"Pro Forma Projected Financial Information" shall mean, as to any
proposed acquisition, a statement executed by a Responsible Officer of the
Company (supported by reasonable detail) setting forth the total consideration
to be paid or incurred in connection with the proposed acquisition and, pro
forma combined projected financial information for the Company and its
consolidated Subsidiaries and the acquisition target (if applicable),
consisting of projected balance sheets as of the proposed effective date of the
acquisition or the closing date and as of the end of at least the next
succeeding two (2) fiscal years of Company following the acquisition and
projected statements of income for each of those years, including sufficient
detail to permit calculation of the amounts and the financial covenants
described in Sections 8.9 through 8.12 hereof, as projected as of the effective
date of the acquisition and for those fiscal years and accompanied by (i) a
statement setting forth a calculation of the ratios and amounts so described,
(ii) a statement in reasonable detail specifying all material assumptions
underlying the projections and (iii) such other information as the Majority
Banks shall reasonably request.
"Prohibited Transaction" shall mean any transaction involving a
Pension Plan which constitutes a "prohibited transaction" as defined in ERISA
Section 406 and for which no statutory or administrative exemption applies
under ERISA Section 408, to the extent applicable to the GCC or any ERISA
Affiliate.
"Purchasing Lender" shall have the meaning set forth in Section 12.8.
"Quoted Rate" shall mean the rate of interest per annum offered by the
Swing Line Bank in its sole discretion with respect to a Swing Line Advance.
"Quoted Rate Advance" means any Swing Line Advance which bears
interest at the Quoted Rate.
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"Rating Agency" shall mean Moody's Investor Services, Standard and
Poor's Ratings Group or any other nationally recognized statistical rating
organization which is acceptable to the Agent.
"Reimbursement Obligation(s)" shall mean the obligation of an Account
Party or Account Parties under each Letter of Credit Agreement to reimburse the
Issuing Bank for each payment made by the Issuing Bank under the Letter of
Credit issued pursuant to such Letter of Credit Agreement, together with all
other sums, fees, charges and amounts which may be owing to the Issuing Bank
under such Letter of Credit Agreement.
"Rental Contract(s)" shall mean a rental purchase contract, originated
by Company or a Subsidiary of the Company and a related Obligor for the rental
of goods, whether such contract is now existing or hereafter arising, and which
Rental Contract provides by its terms that if the Obligor continuously renews
such contract for a set period (set forth in each such contract), or if the
Obligor exercises a specified early purchase option, the title to such rental
goods will be transferred to the Obligor at the end of such period, or upon
exercise of such purchase option.
"Rental Expense" shall mean with respect to any Person for any period,
the aggregate rental obligations of such Person paid or required to be paid in
respect of such period under Operating Leases, excluding vehicle leases in the
ordinary course of business, (net of income from sub-leases thereof, but
including taxes, insurance, maintenance and similar obligations under such
leases), whether or not such obligations are reflected as liabilities or
commitments on a balance sheet of such Person.
"Rental Income Value" shall mean, as of any date of determination, the
value of the rental payments remaining on all Eligible Rental Contracts,
assuming such Eligible Rental Contract will be continuously renewed by the
related Obligor until title to the goods rented thereunder has transferred to
such Obligor.
"Request for Revolving Credit Advance" shall mean a Request for
Revolving Credit Advance issued by Company under Section 2.3 of this Agreement
in the form annexed hereto as Exhibit A, as amended or otherwise modified.
"Request for Swing Line Advance" shall mean a Request for Swing Line
Advance issued by Company under Section 4.3 of this Agreement in the form
attached hereto as Exhibit D, as amended or otherwise modified.
"Requirement of Law" shall mean as to any Person, the certificate of
incorporation and bylaws, the partnership agreement or other organizational or
governing documents of such Person and any law, treaty, rule or regulation or
determination of an arbitration or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.
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<PAGE> 27
"Responsible Officer" shall mean the chief executive officer, chief
financial officer, or the president of the Company, or any other officer having
substantially the same authority and responsibility; or with respect to
compliance with financial covenants, the chief financial officer, the treasurer
or the vice president of finance of the Company, or any other officer having
substantially the same authority and responsibility.
"Revolving Credit" shall mean the revolving credit loan to be advanced
to the Company by the Revolving Credit Banks pursuant to Article 2 hereof, in
an aggregate amount (subject to the terms hereof), not to exceed, at any one
time outstanding, the Revolving Credit Aggregate Commitment.
"Revolving Credit Advance" shall mean a borrowing requested by Company
and made by Revolving Credit Banks under Section 2.1 of this Agreement,
including without limitation any readvance, refunding or conversion of such
borrowing pursuant to Section 2.3 hereof and any advance in respect of a Letter
of Credit under Section 3.6 hereof, and shall include, as applicable, a
Eurocurrency-based Advance and/or Prime-based Advance.
"Revolving Credit Aggregate Commitment" shall mean Fifty Million
Dollars ($50,000,000) subject to the increase of the Revolving Credit Aggregate
Commitment, pursuant to Section 2.10 hereof, by an amount up to the amount of
the Revolving Credit Optional Increase and subject to reduction or termination
pursuant to Section 2.8 or 10.2 hereof.
"Revolving Credit Banks" shall mean Comerica Bank-Texas, and such
other financial institutions from time to time parties hereto as lenders of the
Revolving Credit.
"Revolving Credit Commitment Fee" shall mean the fees payable to Agent
for distribution to the Revolving Credit Banks pursuant to Section 2.6 hereof.
"Revolving Credit Maturity Date" shall mean the earlier to occur of
(i) February 26, 2001 as such date may be extended from time to time pursuant
to Section 2.9 hereof, and (ii) the date on which the Revolving Credit
Aggregate Commitment shall be terminated pursuant to Section 2.8 or Section
10.2 hereof.
"Revolving Credit Notes" shall mean the revolving credit notes
described in Section 2.1 hereof, made by Company to each of the Revolving
Credit Banks in the form annexed to this agreement as Exhibit B, as such notes
may be amended or supplemented from time to time, and any other notes issued in
substitution, replacement or renewal thereof from time to time.
"Revolving Credit Optional Increase" shall mean an amount up to Fifty
Million Dollars ($50,000,000).
"RTO" shall mean RTO, Inc., a Delaware corporation.
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<PAGE> 28
"RTO Holding" shall mean RTO Holding Co., Inc., a Delaware
corporation.
"RTO Operating" shall mean RTO Operating, Inc., a Delaware
corporation.
"Security Agreement" shall mean the Security Agreement (including the
Trademark Agreement which shall be executed concurrently therewith) executed
and delivered by the Company and each Guarantor in favor of the Agent
substantially in the form of Exhibit L, as amended or otherwise modified from
time to time.
"Subsidiary(ies)" shall mean any other corporation, association, joint
stock company, business trust limited liability company or any other business
entity of which more than fifty percent (50%) of the outstanding voting stock,
share capital, membership or other interests, as the case may be, is owned
either directly or indirectly by any Person or one or more of its Subsidiaries,
or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by any Person and/or its
Subsidiaries. Unless otherwise specified to the contrary herein,
Subsidiary(ies) shall refer to the Company's Subsidiary(ies).
"Swing Line Advance" shall mean a borrowing made by Swing Line Bank to
Company pursuant to Section 4.1 hereof.
"Swing Line Credit" shall mean the revolving credit loan to be
advanced to the Company by the Swing Line Bank pursuant to Article 4 hereof, in
an aggregate amount (subject to the terms hereof), not to exceed, at any one
time outstanding, the amount set forth in Section 4.1.
"Swing Line Bank" shall mean Comerica Bank-Texas, in its capacity as
lender under Article 4 of this Agreement, and its successors and assigns.
"Swing Line Note" shall mean the swing line note described in Section
4.1 hereof, made by Company to Swing Line Bank in the form annexed hereto as
Exhibit E, as such Note may be amended or supplemented from time to time, and
any notes issued in substitution, replacement or renewal thereof from time to
time.
"Tangible Net Worth" shall mean, as of any applicable date of
determination, the difference between (i) net book value of all assets of the
Company (other than patents, patent rights, trademarks, trade names,
franchises, copyrights, licenses, goodwill and similar intangible assets),
minus (ii) all Debt of Company, in each case as reflected on the balance sheet
of the Company's most recently filed Form 10-Q or Form 10-K.
"Total Debt" shall mean, without duplication, the sum of (i) all
Funded Debt plus (ii) the amount of all Financing Leases, plus (iii) all
Guarantee Obligations (but excluding the Permitted Guarantees), of the Company
and its Subsidiaries in each case determined in accordance with GAAP.
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"Total Shareholders Equity" shall mean the total of shareholders'
equity (including capital stock, additional paid-in capital and retained
earnings after deducting treasury stock) of the Company, as determined in
accordance with GAAP.
"Uniform Commercial Code" shall mean the Uniform Commercial Code of
any applicable state, and, unless specified otherwise the Uniform Commercial
Code as in effect in the State of Michigan.
2. REVOLVING CREDIT
2.1 Revolving Credit Commitment. Subject to the terms and conditions
of this Agreement (including Section 2.3 hereof), each Revolving Credit Bank
severally and for itself alone agrees to make Advances of the Revolving Credit
to Company from time to time on any Business Day during the period from the
Effective Date hereof until (but excluding) the Revolving Credit Maturity Date
in an aggregate amount not to exceed at any one time outstanding each such
Revolving Credit Bank's Percentage of the Revolving Credit Aggregate
Commitment. All of such Advances hereunder shall be evidenced by the Revolving
Credit Notes, under which advances, repayments and readvances may be made,
subject to the terms and conditions of this Agreement.
2.2 Accrual of Interest and Maturity. (a) The Revolving Credit Notes,
and all principal and interest outstanding thereunder, shall mature and become
due and payable in full on the Revolving Credit Maturity Date, and each Advance
evidenced by the Revolving Credit Notes from time to time outstanding hereunder
shall, from and after the date of such Advance, bear interest at its Applicable
Interest Rate. The amount and date of each Revolving Credit Advance, its
Applicable Interest Rate, its Interest Period, and the amount and date of any
repayment shall be noted on Agent's records, which records may be kept
electronically and which will be conclusive evidence thereof, absent manifest
error; provided, however, that any failure by the Agent to record any such
information shall not relieve Company of its obligation to repay the
outstanding principal amount of such Advance, all interest accrued thereon and
any amount payable with respect thereto in accordance with the terms of this
Agreement and the Loan Documents.
2.3 Requests for Advances and Requests for Refundings and Conversions
of Revolving Credit Advances. Company may request a Revolving Credit Advance,
refund any Revolving Credit Advance in the same type of Revolving Credit
Advance or convert any Revolving Credit Advance to any other type of Revolving
Credit Advance only after delivery to Agent of a Request for Revolving Credit
Advance executed by a person authorized by the Company to make such requests on
behalf of Company subject to the following and to the remaining provisions
hereof:
(a) each such Request for Revolving Credit Advance shall set
forth the information required on the Request for Revolving Credit Advance
including without limitation:
(i) the proposed date of Revolving Credit Advance, which must
be a Business Day;
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(ii) whether the Revolving Credit Advance is a refunding
or conversion of an outstanding Revolving Credit
Advance; and
(iii) whether such Revolving Credit Advance is to be a
Prime-based Advance or a Eurocurrency-based
Advance, and, except in the case of a Prime-based
Advance, the Interest Period applicable thereto;
(b) each such Request for Revolving Credit Advance shall be
delivered to Agent by 11:00 a.m. (Detroit time) three (3) Business Days prior
to the proposed date of Revolving Credit Advance, except in the case of a
Prime-based Advance, for which the Request for Revolving Credit Advance must be
delivered by 10 a.m. (Detroit time) on such proposed date;
(c) the principal amount of such requested Revolving Credit
Advance, plus the principal amount of all other Advances then outstanding
hereunder, plus the Letter of Credit Obligations, less the principal amount of
any outstanding Swing Line Advance or Revolving Credit Advance to be refunded
by the requested Revolving Credit Advance shall not exceed the lesser of the
then applicable (i) Revolving Credit Aggregate Commitment and (ii) Borrowing
Base;
(d) in the case of a Prime-based Advance, the principal
amount of the initial funding of such Advance, as opposed to any refunding or
conversion thereof, shall be at least Two Million Dollars ($2,000,000) and (y)
in the case of a Eurocurrency-based Advance, the principal amount of such
Advance, plus the amount of any other outstanding Indebtedness under this
Agreement to be then combined therewith having the same Interest Period shall
be at least Two Million Dollars ($2,000,000) and at any one time there shall
not be in effect more than six (6) Interest Periods with respect to the
Revolving Credit;
(e) each Request for Revolving Credit Advance shall
constitute and include a certification by the Company as of the date thereof
that:
(i) both before and after the Revolving Credit Advance,
the obligations of the Company and the Guarantors
set forth in this Agreement and the other Loan
Documents, as applicable, are valid, binding and
enforceable obligations of such parties;
(ii) to the best knowledge of Company all conditions to
Advances of the Revolving Credit have been
satisfied;
(iii) there is no Default or Event of Default in
existence, and none will exist upon the making of
the Advance;
(iv) the representations and warranties contained in
this Agreement and the other Loan Documents
(except, in the case of refundings or conversions
of outstanding Advances, the representations set
forth in
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Sections 7.13 and 7.20) are true and correct in all
material respects and shall be true and correct in
all material respects as of and immediately after
the making of the Advance; and
(v) the execution of such Revolving Credit Advance will
not violate the material terms and conditions of any
material contract, agreement or other borrowing of
Company or any of its Subsidiaries.
(f) Notwithstanding the foregoing, however, during the period
beginning on the Effective Date and ending on a date which is the earlier to
occur of 180 days after the Effective Date and the activation by the Company of
the entire Optional Increase pursuant to Section 2.10 (or such lesser number of
days to which the Agent, in its sole discretion, may agree) thereafter and
unless the Agent shall agree otherwise, (i) any Advance carried at the
Eurocurrency-based Rate shall have an Interest Period of one month (or a lesser
number of days, as agreed to in Advance by the Company, the Agent and the
Banks), (ii) upon the completion of any such Advance, there shall be no more
than one (1) such Interest Period in effect for all Revolving Credit Advances
and (iii) all such Interest Periods shall end on the same day of the month.
Agent, acting on behalf of the Banks, may, at its option, lend under this
Section 2 upon the telephone request of an authorized officer of Company and,
in the event Agent makes any such Advance upon a telephone request, the
requesting officer shall, if so requested by Agent, fax to Agent, on the same
day as such telephone request, a Request for Revolving Credit Advance. Company
hereby authorizes Agent to disburse Advances under this Section 2 pursuant to
the telephone instructions of any person purporting to be a person identified
by name on a written list of persons authorized by the Company to make Requests
for Advance on behalf of the Company. Notwithstanding the foregoing, the
Company acknowledges that Company shall bear all risk of loss resulting from
disbursements made upon any telephone request. Each telephone request for an
Advance shall constitute a certification of the matters set forth in the
Request for Revolving Credit Advance form as of the date of such requested
Advance.
2.4 Disbursement of Revolving Credit Advances.
(a) Upon receiving any Request for a Revolving Credit Advance
from Company under Section 2.3 hereof, Agent shall promptly notify each
Revolving Credit Bank by wire, telecopy, telex or by telephone (confirmed by
wire, telecopy or telex) of the amount of such Revolving Credit Advance to be
made and the date such Advance is to be made by said Revolving Credit Bank
pursuant to its Percentage of the Revolving Credit Advance. Unless such
Revolving Credit Bank's commitment to make Revolving Credit Advances hereunder
shall have been suspended or terminated in accordance with this Agreement, each
Revolving Credit Bank shall send the amount of its Percentage of the Advance in
same day funds in Dollars to Agent at the office of Agent located at One
Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48226-3289 not later
than 3:00 p.m. (Detroit time) on the date of such Advance.
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(b) Subject to submission of a Request for Revolving Credit
Advance delivered in accordance with Section 2.3 hereof by Company without
exceptions noted in the compliance certification therein and to the other terms
and conditions hereof, Agent shall make available to Company the aggregate of
the amounts so received by it from the Revolving Credit Banks under this
Section 2.4, in like funds, not later than 4:00 p.m. (Detroit time) on the date
of such Revolving Credit Advance by credit to an account of Company maintained
with Agent or to such other account or third party as Company may reasonably
direct.
(c) Unless Agent shall have been notified by any Revolving
Credit Bank prior to the date of any proposed Revolving Credit Advance that
such Revolving Credit Bank does not intend to make available to Agent such
Revolving Credit Bank's Percentage of the Revolving Credit Advance, Agent may
assume that such Revolving Credit Bank has made such amount available to Agent
on such date, as aforesaid and may, in its sole discretion and without
obligation to do so, in reliance upon such assumption, make available to
Company a corresponding amount. If such amount is not in fact made available to
Agent by such Revolving Credit Bank in accordance with Section 2.4(a), as
aforesaid, Agent shall be entitled to recover such amount on demand from such
Revolving Credit Bank. If such Revolving Credit Bank does not pay such amount
forthwith upon Agent's demand therefor, the Agent shall promptly notify
Company, and Company shall pay such amount to Agent. Agent shall also be
entitled to recover from such Revolving Credit Bank or from Company, as the
case may be but without duplication, interest on such amount in respect of each
day from the date such amount was made available by Agent to Company to the
date such amount is recovered by Agent, at a rate per annum equal to:
(i) in the case of such Revolving Credit Bank, the
Federal Funds Effective Rate for the first two (2)
Business Days such amount remains unpaid and at the
rate of interest applicable to the Revolving Credit
Advances thereafter; or
(ii) in the case of Company, the rate of interest then
applicable to the Revolving Credit Advance.
The obligation of any Revolving Credit Bank to make any Revolving
Credit Advance hereunder shall not be affected by the failure of any
other Revolving Credit Bank to make any Revolving Credit Advance
hereunder, and no Bank shall have any liability to the Company, the
Agent, any other Bank, or any other party for another Bank's failure
to make any loan or Revolving Credit Advance hereunder.
2.5 Prime-based Advance in Absence of Election or Upon Default. If, as
to any outstanding Eurocurrency-based Advance, Agent has not received payment
on the last day of the Interest Period applicable thereto, or does not receive
a timely Request for Revolving Credit Advance meeting the requirements of
Section 2.3 hereof with respect to the refunding or conversion of such Advance,
or, subject to Section 5.6 hereof, if on such day a Default or Event of Default
shall
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exist, the principal amount thereof which is not then prepaid shall be
converted automatically to a Prime-based Advance and the Agent shall thereafter
promptly notify Company of said action.
2.6 Revolving Credit Commitment Fee. From the Effective Date to the
Revolving Credit Maturity Date, the Company shall pay to the Agent on behalf of
Banks a Revolving Credit Commitment Fee quarterly in arrears commencing April
1, 1998 (in respect of the prior calendar quarter or portion thereof), and on
the first day of each Fiscal Quarter thereafter. The Revolving Credit
Commitment Fee shall be the sum of the Applicable Commitment Fee Percentage
times the daily average amount by which the Revolving Credit Aggregate
Commitment then applicable under Section 2.6 hereof exceeds the sum of (i) the
aggregate principal amount of Revolving Credit Advances outstanding during such
period, (ii) the Letter of Credit Obligations during such period, and (iii) the
aggregate principal amount of Swing Line Advances outstanding during such
period, in each case determined on a daily basis. The Revolving Credit
Commitment Fee shall be computed on the basis of a year of three hundred sixty
(360) days and assessed for the actual number of days elapsed. Whenever any
payment of the Revolving Credit Commitment Fee shall be due on a day which is
not a Business Day, the date for payment thereof shall be extended to the next
Business Day. Upon receipt of such payment, Agent shall make prompt payment to
each Bank of its share of the Revolving Credit Commitment Fee based upon its
respective Percentage. It is expressly understood that the Revolving Credit
Commitment Fees described in this Section are not refundable under any
circumstances.
2.7 Reduction of Indebtedness; Revolving Credit Aggregate Commitment.
(a) If at any time and for any reason the aggregate principal amount of Swing
Line Advances and Revolving Credit Advances hereunder to Company, plus the
Letter of Credit Obligations which shall be outstanding at such time, shall
exceed the lesser of the then applicable (i) Revolving Credit Aggregate
Commitment then in effect or (ii) the Borrowing Base, Company shall immediately
reduce any pending request for an Advance on such day by the amount of such
excess and, to the extent any excess remains thereafter, immediately repay an
amount of the Indebtedness equal to such excess and, to the extent such
Indebtedness consists of Letter of Credit Obligations, provide cash collateral
on the basis set forth in Section 10.2 hereof. Company acknowledges that, in
connection with any repayment required hereunder, it shall also be responsible
for the reimbursement of any prepayment or other costs required under Section
12.1 hereof; provided, however, that Company shall, in order to reduce any such
prepayment costs and expenses, first prepay such portion of the Indebtedness
then carried as a Prime-based Advance, if any.
(b) Immediately upon receipt by the Company or any Subsidiary of any
net cash proceeds from any Asset Sale, the Company shall prepay the principal
amount of Advances outstanding on such day by the amount of such net cash
proceeds. To the extent that, on the date any mandatory reduction of
outstanding Advances under this Section 2.7 is due, the outstanding Advances
are being carried being carried, in whole or in part, at the Eurocurrency-based
Rate and no Default or Event of Default has occurred and is continuing, the
Company shall first repay Advances being carried at the Prime-based rate, and
then the Company may deposit the amount of such mandatory repayment in a cash
collateral account to be held by the Agent, for and on behalf
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of the Banks (which shall be an interest-bearing account), on such terms and
conditions as are reasonably acceptable to Agent and the Majority Banks.
Subject to the terms and conditions of said cash collateral account, sums on
deposit in said cash collateral account shall be applied (until exhausted) to
reduce the principal balance of the Eurocurrency-based Advances on the last day
of each Interest Period attributable to such Eurocurrency-based Advances.
2.8 Optional Reduction or Termination of Revolving Credit Aggregate
Commitment. The Company may, upon at least five (5) Business Days' prior
written notice to Agent, permanently reduce the Revolving Credit Aggregate
Commitment in whole at any time, or in part from time to time, without premium
or penalty, provided that: (i) each partial reduction of the Revolving Credit
Aggregate Commitment shall be in an aggregate amount equal to at least Five
Million Dollars ($5,000,000) or a larger integral multiple of One Million
Dollars ($1,000,000); (ii) each reduction shall be accompanied by the payment
of the Revolving Credit Commitment Fee, if any, accrued to the date of such
reduction; (iii) the Company shall prepay in accordance with the terms hereof
the amount, if any, by which the sum of the aggregate unpaid principal amount
of Swing Line Advances and Revolving Credit Advances, plus the Letter of Credit
Obligations, exceeds the lesser of (1) the then applicable Revolving Credit
Aggregate Commitment, taking into account the aforesaid reductions thereof,
together with accrued but unpaid interest on the principal amount of such
prepaid Advances to the date of prepayment and (2) Borrowing Base; and (iv) no
reduction shall reduce the amount of the Revolving Credit Aggregate Commitment
to an amount which is less than the Letter of Credit Obligations at such time.
Reductions of the Revolving Credit Aggregate Commitment and any accompanying
prepayments of the Revolving Credit Notes shall be distributed by Agent to each
Revolving Credit Bank in accordance with such Bank's Percentage thereof, and
will not be available for reinstatement by or readvance to the Company and any
accompanying prepayments of the Swing Line Notes shall be distributed by Agent
to the Swing Line Bank and will not be available for reinstatement by or
readvance to the Company. Any reductions of the Revolving Credit Aggregate
Commitment hereunder shall reduce each Revolving Credit Bank's portion thereof
proportionately (based upon the applicable Percentages), and shall be permanent
and irrevocable. Any payments made pursuant to this Section shall be applied
first to outstanding Prime-based Advances under the Revolving Credit, next to
Swing Line Advances which bear interest at the Prime-based Rate, next to Quoted
Rate Advances and then to Eurocurrency-based Advances. Company acknowledges
that, in connection with any repayment required hereunder, it shall also be
responsible for the reimbursement of any prepayment or other costs required
under Section 12.1 hereof; provided, however, that Company shall, in order to
reduce any such prepayment costs and expenses, first prepay such portion of the
Indebtedness then carried as a Prime-based Advance, if any.
2.9 Extension of Revolving Credit Maturity Date. (a) Provided that no
Default or Event of Default has occurred and is continuing, Company may, by
written notice to Agent (with sufficient copies for each Bank) (which notice
shall be irrevocable and which shall not be deemed effective unless actually
received by Agent) prior to 60 days prior to Anniversary Date of fiscal years
1999 and/or 2000, as the case may be, request that the Banks extend the then
applicable Revolving Credit Maturity Date to a date that is one year later than
the Revolving Credit Maturity Date then in effect (each such request, a
"Request"). Each Bank shall, not later than thirty (30) calendar days following
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the date of its receipt of the Request, give written notice to the Agent
stating whether such Bank is willing to extend the Revolving Credit Maturity
Date as requested. If Agent has received the aforesaid written approvals of
such Request from each of the Banks, then, effective upon the date of Agent's
receipt of all such written approvals from the Banks, as aforesaid, the
Revolving Credit Maturity Date shall be so extended for an additional one year
period, the term Revolving Credit Maturity Date shall mean such extended date
and Agent shall promptly notify the Company that such extension has occurred.
In no event however, shall the Revolving Credit Maturity Date be extended
beyond February 26, 2003.
(b) If (i) any Bank gives the Agent written notice that it is
unwilling to extend the Revolving Credit Maturity Date as requested or (ii) any
Bank fails to provide written approval to Agent of such a Request within thirty
(30) calendar days of the date of such Bank's receipt of the Request, then (w)
the Banks shall be deemed to have declined to extend the Revolving Credit
Maturity Date, (x) the then-current Revolving Credit Maturity Date shall remain
in effect (with no further right on the part of Company to request extensions
thereof under this Section 2.9), and (y) the commitments of the Banks to make
Advances of the Revolving Credit hereunder shall terminate on the Revolving
Credit Maturity Date then in effect, and Agent shall promptly notify Company
thereof.
2.10 Optional Increase in Commitment. Provided that no Default or
Event of Default has occurred and is continuing, and provided that the Company
has not previously elected to reduce or terminate the Revolving Credit
Aggregate Commitment under Section 2.8 hereof, the Company may request up to
two increases in the Revolving Credit Aggregate Commitment in an aggregate
amount for such increases not to exceed the Revolving Credit Optional Increase,
subject, in each case, to Section 12.1 hereof and to the satisfaction
concurrently with or prior to the date of each such request of the following
conditions:
(a) the Company shall have delivered to the Agent at any time
during the period beginning on the Effective Date and expiring one
hundred eighty (180) days after the Effective Date a written request
for such increase, specifying the amount of Revolving Credit Optional
Increase thereby requested (each such request, a "Request for
Increase"); provided, however that in the event the Company has
previously delivered a Request for Increase pursuant to this Section
2.10, the Company may not deliver a subsequent Request for Increase
until all the conditions to effectiveness of such first Request for
Increase have been fully satisfied hereunder;
(b) a lender or lenders acceptable to the Company and the Agent
(the "New Bank(s)") shall have become a party to this Agreement by
executing and delivering a New Bank Addendum for a minimum amount for
each such New Bank of Ten Million Dollars ($10,000,000) and an
aggregate amount for all such New Banks of that portion of the
Revolving Credit Optional Increase, taking into account the amount of
any prior increase in the Revolving Credit Aggregate Commitment
pursuant to this Section 2.10), covered by the applicable request,
provided, however that each New Bank shall remit to the Agent funds
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in an amount equal to its Percentage (after giving effect to this
Section 2.10) of all Advances of the Revolving Credit then
outstanding, such sums to be reallocated among and paid to the
existing Banks based upon the new Percentages as determined below;
(c) The Company shall have paid to the Agent for distribution
to the existing Banks, as applicable, all interest, fees (including
the Revolving Credit Commitment Fee) and other amounts, if any,
accrued to the effective date of such increase and any breakage fees
attributable to the reduction (prior to the last day of the applicable
Interest Period) of any outstanding Eurocurrency-based Advances,
calculated on the basis set forth in Section 12.1 hereof as though
Company has prepaid such Advances;
(d) The Company shall have executed and delivered to the
Agent new Revolving Credit Notes payable to each of the New Banks in
the face amount of each such New Bank's Percentage of the Revolving
Credit Aggregate Commitment (after giving effect to this Section 2.10)
and, if applicable, renewal and replacement Revolving Credit Notes
payable to each of each of the existing Banks in the face amount of
each such Bank's Percentage of the Revolving Credit Aggregate
Commitment (after giving effect to this Section 2.10), each of such
Revolving Credit Notes to be substantially in the form of Exhibit B
hereto and dated as of the effective date of such increase (with
appropriate insertions relevant to such notes and acceptable to the
applicable Bank (including the New Banks));
(e) Except as disclosed pursuant to Section 7.20, there shall
have been no material adverse change in the condition (financial or
otherwise), properties, business, results or operations of Company or
any of its Subsidiaries, from the condition shown in the financial
information delivered to Agent on or before the Effective Date; nor
shall any omission, inconsistency, inaccuracy, or any change in
presentation or accounting standards which renders such financial
statements materially misleading have been determined by Agent to
exist; and
(f) Such other amendments, acknowledgments, supplemental
legal opinions, consents, instruments, any registrations, if any,
shall have been executed and delivered and/or obtained by Company with
respect to the Collateral as required by Agent, in its reasonable
discretion.
Promptly on or after the date on which all of the conditions to such Request
for Increase set forth above have been satisfied, Agent shall notify the
Company and each of the Banks of the amount of the Revolving Credit Aggregate
Commitment as increased pursuant this Section 2.10 and the date on which such
increase has become effective and shall prepare and distribute to Company and
each of the Banks (including the New Banks) a revised Schedule 1.2 to this
Agreement setting forth the applicable new Percentages of the Banks (including
the New Bank), taking into account such increase and assignments (if any).
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3. LETTERS OF CREDIT
3.1 Letters of Credit. Subject to the terms and conditions of this
Agreement, Issuing Bank shall through its Issuing Office, at any time and from
time to time from and after the date hereof until thirty (30) days prior to the
Revolving Credit Maturity Date, upon the written request of an Account Party
accompanied by a duly executed Letter of Credit Agreement, and such other
documentation related to the requested Letter of Credit as the Issuing Bank may
reasonably require, issue Letters of Credit for the account of such Account
Party, in an aggregate amount for all Letters of Credit issued hereunder at any
one time outstanding not to exceed the Letter of Credit Maximum Amount. Each
Letter of Credit shall be in a minimum face amount of Fifty Thousand Dollars
($50,000) and each Letter of Credit (including any renewal thereof) shall
expire not later than ten (10) Business Days prior to the Revolving Credit
Maturity Date in effect on the date of issuance thereof. The submission of all
applications and the issuance of each Letter of Credit hereunder shall be
subject in all respects to the Uniform Customs and Practices for Documenting
Credits of the International Chamber of Commerce, 1993 Revisions, ICC
Publication No. 500. Each Application for Letter of Credit shall have noted on
the first page thereof, or shall be deemed to have noted thereon:
"Note: This application is entered into in accordance with
that certain Alrenco, Inc. Revolving Credit Agreement dated as of
February 26, 1998, as amended or otherwise modified from time to time
(the "Credit Agreement") among the Banks signatory thereto, Comerica
Bank, as Agent for the Banks and Alrenco, Inc., and in the event of a
conflict between this application and the Credit Agreement, the terms
and conditions of the Credit Agreement shall govern."
3.2 Conditions to Issuance. No Letter of Credit shall be issued at the
request and for the account of any Account Party unless, as of the date of
issuance of such Letter of Credit:
(a) the face amount of the Letter of Credit requested plus the
Letter of Credit Obligations outstanding on such date does not exceed the
Letter of Credit Maximum Amount;
(b) the obligations of Company and the Guarantors set forth in
this Agreement and the other Loan Documents are valid, binding and enforceable
obligations of Company and each of the Guarantors and the valid, binding and
enforceable nature of this Agreement and the other Loan Documents has not been
disputed by Company or any of the Guarantors;
(c) both immediately before and immediately after issuance of the
Letter of Credit requested, no Default or Event of Default exists;
(d) the representations and warranties contained in this Agreement
and the other Loan Documents are true in all material respects as if made on
such date;
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(e) the execution of the Letter of Credit Agreement with respect
to the Letter of Credit requested will not violate the terms and conditions of
any material contract, agreement or other borrowing of Company or any
Guarantor;
(f) the Account Party requesting the Letter of Credit shall have
delivered to Issuing Bank at its Issuing Office (with a copy sent by Account
Party to the Agent), not less than five (5) Business Days prior to the
requested date for issuance (or such shorter time as the Issuing Bank, in its
sole discretion, may permit), the Letter of Credit Agreement related thereto,
together with such other documents and materials as may be required pursuant to
the terms thereof, and the terms of the proposed Letter of Credit shall be
satisfactory to Issuing Bank and its Issuing Office;
(g) no order, judgment or decree of any court, arbitrator or
governmental authority shall purport by its terms to enjoin or restrain Issuing
Bank from issuing the requested Letter of Credit, or any Bank from taking an
assignment of its Percentage thereof pursuant to Section 3.6 hereof, and no
law, rule, regulation, request or directive (whether or not having the force of
law) shall prohibit or request that Issuing Bank refrain from issuing, or any
Bank refrain from taking an assignment of its Percentage of, the Letter of
Credit requested or letters of credit generally;
(h) there shall have been no introduction of or change in the
interpretation of any law or regulation that would make it unlawful or unduly
burdensome for the Issuing Bank to issue or for any Bank to take an assignment
of its Percentage of the requested Letter of Credit, no declaration of a
general banking moratorium by banking authorities in the United States,
Michigan or the respective jurisdictions in which the Banks, the applicable
Account Party and the beneficiary of the requested Letter of Credit are located
(each a "Banking Authority"), and no establishment of any new material
restrictions by any Banking Authority on transactions involving letters of
credit or on banks materially affecting the issuance of letters of credit by
banks; and
(i) Issuing Bank shall have received the facing fee required in
connection with the issuance of such Letter of Credit pursuant to Section
3.4(b) hereof.
Each Letter of Credit Agreement submitted to Issuing Bank pursuant hereto shall
constitute the certification by the Company and the Account Party of the
matters set forth in this Section 3.2 (a) through (e). The Issuing Bank shall
be entitled to rely on such certification without any duty of inquiry.
3.3 Notice. The Issuing Bank will deliver to the Agent, concurrently
or promptly following its delivery of any Letter of Credit, a true and complete
copy of each Letter of Credit. Promptly upon its receipt thereof, Agent shall
give notice, substantially in the form attached as Exhibit C, to each Revolving
Credit Bank of the issuance of each Letter of Credit, specifying the amount
thereof and the amount of such Bank's Percentage thereof.
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3.4 Letter of Credit Fees. Company shall pay to the Agent for
distribution to the Issuing Bank and the Revolving Credit Banks in accordance
with the Percentages, Letter of Credit Fees as follows:
(a) A per annum Letter of Credit Fee with respect to the undrawn
amount of each Letter of Credit issued pursuant hereto in the amount of the
Applicable L/C Fee Percentage (determined with reference to Schedule 1.1 of
this Agreement), exclusive of the facing fee to be paid to Issuing Bank under
Section 3.4(b) hereof.
(b) A facing fee of one eighth percentage point (1/8%) per annum
on the undrawn amount of each Letter of Credit to be paid by the Company to the
Issuing Bank for its own account.
(c) If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose, modify or
cause to be deemed applicable any reserve, special deposit, limitation or
similar requirement against letters of credit issued by or participated in, or
assets held by, or deposits in or for the account of, Issuing Bank or any Bank
or (ii) impose on Issuing Bank or any of the Banks any other condition
regarding this Agreement or the Letters of Credit, and the result of any event
referred to in clause (i) or (ii) above shall be to increase in an amount
deemed material by Issuing Bank or such Bank the cost or expense to Issuing
Bank or the Banks of issuing or maintaining or participating in any of the
Letters of Credit (which increase in cost or expense shall be determined by the
Issuing Bank's or such Bank's reasonable allocation of the aggregate of such
cost increases and expense resulting from such events), then, upon demand by
the Issuing Bank or such Bank, as the case may be, the Company shall, within
thirty days following demand for payment, pay to Issuing Bank or such Bank, as
the case may be, from time to time as specified by the Issuing Bank or such
Bank, additional amounts which shall be sufficient to compensate the Issuing
Bank or such Bank for such increased cost and expense, together with interest
on each such amount from thirty days after the date demanded until payment in
full thereof at the Prime-based Rate. A certificate as to such increased cost
or expense incurred by the Issuing Bank or such Bank, as the case may be, as a
result of any event mentioned in clause (i) or (ii) above, shall be promptly
submitted to the Company and shall be conclusive evidence, absent manifest
error, as to the amount thereof.
(d) All payments by the Company to the Agent for distribution to
the Issuing Bank or the Revolving Credit Banks under this Section 3.4 shall be
made in Dollars and in immediately available funds at the principal office of
the Agent or such other office of the Agent as may be designated from time to
time by written notice to the Company by the Agent. The fees described in
clause (a) above shall be nonrefundable under all circumstances and shall be
payable annually in advance (or such lesser period, if applicable, for Letters
of Credit issued with stated expiration dates of less than one year) upon the
issuance of each such Letter of Credit, and shall be calculated on the basis of
a 360 day year and assessed for the actual number of days from the date of the
issuance thereof to the stated expiration thereof.
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3.5 Other Letter of Credit Fees. In connection with the Letters of
Credit, and in addition to the Letter of Credit Fees, the Company and the
applicable Account Party shall pay, for the sole account of the Issuing Bank,
standard documentation, administration, payment and cancellation charges
assessed by Issuing Bank or its Issuing Office, at the times, in the amounts
and on the terms set forth or to be set forth from time to time in the standard
fee schedule of Issuing Office in effect from time to time.
3.6 Draws and Demands for Payment Under Letters of Credit.
(a) The Company and each applicable Account Party agree to pay to
the Agent for the account of the Issuing Bank, on the day on which the Issuing
Bank shall honor a draft or other demand for payment presented or made under
any Letter of Credit, an amount equal to the amount paid by the Issuing Bank in
respect of such draft or other demand under such Letter of Credit and all
reasonable expenses paid or incurred by the Issuing Bank relative thereto.
Unless the Company or the applicable Account Party shall have made such payment
to the Agent for the account of the Issuing Bank on such day, upon each such
payment by the Issuing Bank, the Agent shall be deemed to have disbursed to the
Company, and the Company shall be deemed to have elected to substitute for its
Reimbursement Obligation, a Prime-based Advance from the Banks in an amount
equal to the amount so paid by the Issuing Bank in respect of such draft or
other demand under such Letter of Credit. Such Prime-based Advance shall be
disbursed notwithstanding any failure to satisfy any conditions for
disbursement of any Advance set forth in Article 2 hereof and, to the extent of
the Prime-based Advance so disbursed, the Reimbursement Obligation of the
Company or the applicable Account Party to the Agent under this Section 3.6
shall be deemed satisfied.
(b) If the Issuing Bank shall honor a draft or other demand for
payment presented or made under any Letter of Credit, the Issuing Bank shall
provide notice thereof to the Company and the applicable Account Party on the
date such draft or demand is honored, and to each Revolving Credit Bank on such
date unless the Company or applicable Account Party shall have satisfied its
Reimbursement Obligation under Section 3.6(a) by payment to the Agent on such
date. The Issuing Bank shall further use reasonable efforts to provide notice
to the Company or applicable Account Party prior to honoring any such draft or
other demand for payment, but such notice, or the failure to provide such
notice, shall not affect the rights or obligations of the Issuing Bank with
respect to any Letter of Credit or the rights and obligations of the parties
hereto, including without limitation the obligations of the Company or
applicable Account Party under Section 3.6(a) hereof.
(c) Upon issuance by the Issuing Bank of each Letter of Credit
hereunder, each Revolving Credit Bank shall automatically acquire a pro rata
risk participation interest in such Letter of Credit and related Letter of
Credit Payment based on its respective Percentage. Each Revolving Credit Bank,
on the date a draft or demand under any Letter of Credit is honored, shall make
its Percentage share of the amount paid by the Issuing Bank, and not reimbursed
by the Company or applicable Account Party by payment to the Agent on such day,
available in immediately available funds at the principal office of the Agent
for the account of the Issuing Bank.
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If and to the extent such Bank shall not have made such pro rata portion
available to the Agent, such Bank, the Company and the applicable Account Party
severally agree to pay to the Issuing Bank forthwith on demand such amount
together with interest thereon, for each day from the date such amount was paid
by the Issuing Bank until such amount is so made available to the Agent for the
account of the Issuing Bank at a per annum rate equal to the interest rate
applicable during such period to the related Advance disbursed under Section
3.6(a) in respect of the Reimbursement Obligation of the Company and the
applicable Account Party. If such Bank shall pay such amount to the Agent for
the account of the Issuing Bank together with such interest, such amount so
paid shall constitute a Prime-based Advance by such Bank disbursed in respect
of the Reimbursement Obligation of the Company or applicable Account Party
under Section 3.6(a) for purposes of this Agreement, effective as of the date
such amount was paid by the Issuing Bank. The failure of any Revolving Credit
Bank to make its pro rata portion of any such amount paid by the Issuing Bank
available to the Agent for the account of the Issuing Bank shall not relieve
any other Revolving Credit Bank of its obligation to make available its pro
rata portion of such amount, but no Bank shall be responsible for failure of
any other Bank to make such pro rata portion available to the Agent for the
account Issuing Bank.
Notwithstanding the foregoing however, no Bank shall acquire a pro rata risk
participation in a Letter of Credit or related Letter of Credit Payment if the
Issuing Bank was notified prior to the issuance thereof that the Agent had
received written notice from a Bank specifically stating that such Bank
believed that one or more of the conditions precedent to the issuance of
Letters of Credit were not be satisfied and, in fact, such conditions precedent
were not satisfied at the time of the issuance of such Letter of Credit;
provided, however that each Bank shall acquire a pro rata risk participation in
such Letter of Credit and the related Letter of Credit Payment upon the earlier
of occur of (x) the date on which the Bank notifies the Agent that such prior
notice is withdrawn and (y) the date on which all conditions precedent to the
issuing of such Letter of Credit have been satisfied (or waived by the Majority
Banks or all Banks, as applicable).
(d) Nothing in this Agreement shall be construed to require or
authorize any Bank other than the Issuing Bank to issue any Letter of Credit,
it being recognized that the Issuing Bank shall be the sole issuer of Letters
of Credit under this Agreement.
3.7 Obligations Irrevocable. The obligations of Company and any
Account Party to make payments to Agent for the account of the Issuing Bank or
of the Revolving Credit Banks with respect to Reimbursement Obligations under
Section 3.6 hereof, shall be unconditional and irrevocable and not subject to
any qualification or exception whatsoever, including, without limitation:
(a) Any lack of validity or enforceability of any Letter of Credit
or any documentation relating to any Letter of Credit or to any transaction
related in any way to such Letter of Credit (the "Letter of Credit Documents");
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(b) Any amendment, modification, waiver, consent, or any
substitution, exchange or release of or failure to perfect any interest in
collateral or security, with respect to any of the Letter of Credit Documents;
(c) The existence of any claim, setoff, defense or other right
which the Company or any Account Party may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any persons or
entities for whom any such beneficiary or any such transferee may be acting),
the Agent, the Issuing Bank or any other Bank or any other person or entity,
whether in connection with any of the Letter of Credit Documents, the
transactions contemplated herein or therein or any unrelated transactions;
(d) Any draft or other statement or document presented under any
Letter of Credit proving to be forged, fraudulent or invalid in any respect or
any statement therein being untrue or inaccurate in any respect;
(e) Any failure, omission, delay or lack on the part of the Agent,
the Issuing Bank or any other Bank or any party to any of the Letter of Credit
Documents to enforce, assert or exercise any right, power or remedy conferred
upon the Agent, the Issuing Bank, any other Bank or any such party under this
Agreement, any of the Loan Documents or any of the Letter of Credit Documents,
or any other acts or omissions on the part of the Agent, the Issuing Bank, any
other Bank or any such party; or
(f) Any other event or circumstance that would, in the absence of
this Section 3.7, result in the release or discharge by operation of law or
otherwise of Company or any Account Party from the performance or observance of
any obligation, covenant or agreement contained in Section 3.6.
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which Company or any Account Party has or may
have against the beneficiary of any Letter of Credit shall be available
hereunder to Company or any Account Party against the Agent, the Issuing Bank
or any other Bank. Nothing contained in this Section 3.7 shall be deemed to
prevent Company or the Account Parties, after satisfaction in full of the
absolute and unconditional obligations of Company and the Account Parties
hereunder, from asserting in a separate action any claim, defense, set off or
other right which they (or any of them) may have against Agent, the Issuing
Bank or any Bank.
3.8 Risk Under Letters of Credit. (a) In the handling of Letters of
Credit and any security therefor, or any documents or instruments given in
connection therewith, and notwithstanding the granting of risk participation
hereunder, the Issuing Bank shall have the sole right to take or refrain from
taking any and all actions under or upon the Letters of Credit.
(b) Subject to other terms and conditions of this Agreement,
Issuing Bank shall issue the Letters of Credit and shall hold the
documents related thereto in its own name
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and shall make all collections thereunder and otherwise administer the
Letters of Credit in accordance with Issuing Bank's regularly
established practices and procedures and, Issuing Bank will have no
further obligation with respect thereto. In the administration of
Letters of Credit, Issuing Bank shall not be liable for any action
taken or omitted on the advice of counsel, accountants, appraisers or
other experts selected by Issuing Bank with due care and Issuing Bank
may rely upon any notice, communication, certificate or other
statement from Company, any Account Party, beneficiaries of Letters of
Credit, or any other Person which Issuing Bank believes to be
authentic. Issuing Bank, will, upon request, furnish the Banks with
copies of Letter of Credit Agreements, Letters of Credit and documents
related thereto.
(c) In connection with the issuance and administration of
Letters of Credit and the assignments hereunder, Issuing Bank makes no
representation and shall, subject to Section 3.7 hereof, have no
responsibility with respect to (i) the obligations of Company or any
Account Party or, the validity, sufficiency or enforceability of any
document or instrument given in connection therewith, (ii) the
financial condition of, any representations made by, or any act or
omission of Company, the applicable Account Party or any other Person,
or (iii) any failure or delay in exercising any rights or powers
possessed by Issuing Bank in its capacity as issuer of Letters of
Credit, in the absence of its gross negligence or willful misconduct.
Each of the Banks expressly acknowledge that they have made and will
continue to make their own evaluations of Company's creditworthiness
without reliance on any representation of Issuing Bank or Issuing
Bank's officers, agents and employees.
(d) If at any time Agent or the Issuing Bank shall recover
any part of any unreimbursed amount for any draw or other demand for
payment under a Letter of Credit, or any interest thereon, Agent or
the Issuing Bank, as the case may be, shall receive same for the pro
rata benefit of the Banks in accordance with their respective
Percentage interests therein and shall promptly deliver to each
Revolving Credit Bank its share thereof, less such Bank's pro rata
share of the costs of such recovery, including court costs and
attorney's fees. If at any time any Revolving Credit Bank shall
receive from any source whatsoever any payment on any such
unreimbursed amount or interest thereon in excess of such Bank's
Percentage share of such payment, such Bank will promptly pay over
such excess to Agent, for redistribution in accordance with this
Agreement.
3.9 Indemnification. (a) The Company and each Account Party hereby
indemnifies and agrees to hold harmless the Banks, the Issuing Bank and the
Agent, and their respective officers, directors, employees and agents, from and
against any and all claims, damages, losses, liabilities, costs or expenses of
any kind or nature whatsoever which the Banks, the Issuing Bank or the Agent or
any such Person may incur or which may be claimed against any of them by reason
of or in connection with any Letter of Credit, and none of the Issuing Bank,
any Bank or the Agent or any of their respective officers, directors, employees
or agents shall be liable or responsible for: (i) the use which may be made of
any Letter of Credit or for any acts or omissions of any beneficiary in
connection therewith; (ii) the validity, sufficiency or genuineness of
documents or of any endorsement thereon, even if such documents should in fact
prove to be in any or all respects
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invalid, insufficient, fraudulent or forged; (iii) payment by the Issuing Bank
to the beneficiary under any Letter of Credit against presentation of documents
which do not strictly comply with the terms of any Letter of Credit (unless
such payment resulted from the gross negligence or willful misconduct of the
Issuing Bank), including failure of any documents to bear any reference or
adequate reference to such Letter of Credit; (iv) any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit; or (v)
any other event or circumstance whatsoever arising in connection with any
Letter of Credit; provided, however, that with respect to subparagraphs (a)(i)
through (a)(v) hereof, Company and Account Parties shall not be required to
indemnify the Issuing Bank, the other Banks and the Agent and such other
persons, and the Issuing Bank shall be liable to the Company and the Account
Parties to the extent, but only to the extent, of any direct, as opposed to
consequential or incidental, damages suffered by Company and the Account
Parties which were caused by the Issuing Bank's gross negligence, willful
misconduct or wrongful dishonor of any Letter of Credit after the presentation
to it by the beneficiary thereunder of a draft or other demand for payment and
other documentation strictly complying with the terms and conditions of such
Letter of Credit.
(b) It is understood that in making any payment under a Letter of
Credit the Issuing Bank will rely on documents presented to it under such
Letter of Credit as to any and all matters set forth therein without further
investigation and regardless of any notice or information to the contrary. It
is further acknowledged and agreed that Company or an Account Party may have
rights against the beneficiary or others in connection with any Letter of
Credit with respect to which the Banks are alleged to be liable and it shall be
a condition of the assertion of any liability of the Banks under this Section
that Company or applicable Account Party shall contemporaneously pursue all
remedies in respect of the alleged loss against such beneficiary and any other
parties obligated or liable in connection with such Letter of Credit and any
related transactions.
3.10 Right of Reimbursement. Each Revolving Credit Bank agrees to
reimburse the Issuing Bank on demand (by payment to the Agent for the account
of the Issuing Bank), pro rata in accordance with their Percentages, for (i)
the reasonable out-of-pocket costs and expenses of the Issuing Bank to be
reimbursed by Company or any Account Party pursuant to any Letter of Credit
Agreement or any Letter of Credit, to the extent not reimbursed by Company or
Account Party and (ii) any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, fees, expenses or disbursements of
any kind and nature whatsoever which may be imposed on, incurred by or asserted
against Issuing Bank (in its capacity as issuer of any Letter of Credit) in any
way relating to or arising out of this Agreement, any Letter of Credit, any
documentation or any transaction relating thereto, or any Letter of Credit
Agreement, except to the extent that such liabilities, losses, costs or
expenses were incurred by Issuing Bank as a result of Issuing Bank's gross
negligence or willful misconduct or wrongful dishonor of any Letter of Credit.
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4. SWING LINE CREDIT
4.1 Swing Line Advances. The Swing Line Bank shall, on the terms and
subject to the conditions hereinafter set forth (including Section 4.3), make
one or more advances (each such advance being a "Swing Line Advance") to
Company from time to time on any Business Day during the period from the date
hereof to (but excluding) the Revolving Credit Maturity Date in an aggregate
amount not to exceed Three Million Dollars ($3,000,000) at any time
outstanding; provided, however, that after giving effect to all Swing Line
Advances and all Revolving Credit Advances requested to be made on such date,
the sum of the aggregate principal amount of all outstanding Advances and
Letter of Credit Obligations shall not exceed the lesser of the then applicable
(a) Revolving Credit Aggregate Commitment and (b) Borrowing Base. All Swing
Line Advances shall be evidenced by the Swing Line Note, under which advances,
repayments and readvances may be made, subject to the terms and conditions of
this Agreement. Each Swing Line Advance shall mature and the principal amount
thereof shall be due and payable by Company on the last day of the Interest
Period applicable thereto. In no event whatsoever shall any outstanding Swing
Line Advance be deemed to reduce, modify or affect any Bank's commitment to
make Revolving Credit Advances based upon its Percentage.
4.2 Accrual of Interest; Margin Adjustments. Each Swing Line Advance
shall, from time to time after the date of such Advance, bear interest at its
Applicable Interest Rate. The amount and date of each Swing Line Advance, its
Applicable Interest Rate, its Interest Period, and the amount and date of any
repayment shall be noted on Agent's records, which records will be conclusive
evidence thereof, absent manifest error; provided, however, that any failure by
the Agent to record any such information shall not relieve Company of its
obligation to repay the outstanding principal amount of such Advance, all
interest accrued thereon and any amount payable with respect thereto in
accordance with the terms of this Agreement and the Loan Documents.
4.3 Requests for Swing Line Advances. Company may request a Swing Line
Advance only after delivery to Swing Line Bank of a Request for Swing Line
Advance executed by a person authorized by the Company to make such requests on
behalf of Company, subject to the following and to the remaining provisions
hereof:
(a) each such Request for Swing Line Advance shall set forth the
information required on the Request for Swing Line Advance including without
limitation:
(i) the proposed date of Swing Line Advance, which must be a
Business Day;
(ii) whether such Swing Line Advance is to be a Prime-based
Advance or Quoted Rate Advance; and
(iii) the duration of the Interest Period applicable thereto;
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(b) each such Request for Swing Line Advance shall be
delivered to Swing Line Bank by 12:00 p.m. (Detroit time) on the proposed date
of the Swing Line Advance;
(c) the principal amount of such requested Swing Line
Advance, plus the principal amount of all other Advances then outstanding
hereunder, plus the Letter of Credit Obligations, shall not exceed the lesser
of the then applicable (i) Revolving Credit Aggregate Commitment and (ii)
Borrowing Base;
(d) the principal amount of such Swing Line Advance shall be
at least Two Hundred Thousand Dollars ($200,000) or any larger amount in
multiples of One Hundred Thousand Dollars ($100,000);
(e) each Request for Swing Line Advance, once delivered to
Swing Line Bank, shall not be revocable by Company, and shall constitute a
certification by the Company as of the date thereof that:
(i) both before and after the Swing Line Advance, the
obligations of the Company and the Guarantors set
forth in this Agreement and the other Loan
Documents, as applicable, are valid, binding and
enforceable obligations of such parties;
(ii) to the best knowledge of Company all conditions to
Advances have been satisfied;
(iii) there is no Default or Event of Default in
existence, and none shall exist upon the making of
the Swing Line Advance; and
(iv) the representations and warranties contained in
this Agreement and the Loan Documents are true and
correct in all material respects and shall be true
and correct in all material respects as of and
immediately after the making of the Swing Line
Advance.
Swing Line Bank shall promptly deliver to Agent by telecopier a copy of any
Request for Swing Line Advance received.
Swing Line Bank, may, at its option, lend under this Section 4 upon
the telephone request of an authorized officer of Company and, in the event
Swing Line Bank makes any such Advance upon a telephone request, the requesting
officer shall, if so requested by Swing Line Bank, fax to Swing Line Bank, on
the same day as such telephone request, a Request for Swing Line Advance.
Company hereby authorizes Swing Line Bank to disburse Advances under this
Section 4 pursuant to the telephone instructions of any person purporting to be
a person identified by name on a written list of persons authorized by the
Company to make Requests for Advance on behalf of the Company. Notwithstanding
the foregoing, the Company acknowledges that Company shall bear all risk of
loss
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resulting from disbursements made upon any telephone request. Each telephone
request for an Advance shall constitute a certification of the matters set
forth in the Request for Swing Line Advance form as of the date of such
requested Advance.
4.4 Disbursement of Swing Line Advances. Subject to submission of an
executed Request for Swing Line Advance by Company without exceptions noted in
the compliance certification therein and to the other terms and conditions
hereof, Swing Line Bank shall make available to Company the amount so
requested, in same day funds, not later than 4:00 p.m. (Detroit time) on the
date of such Swing Line Advance by credit to an account of Company maintained
with Swing Line Bank or to such other account or third party as Company may
reasonably direct. Swing Line Bank shall promptly notify Agent of any Swing
Line Advance by telephone, telex or telecopier.
4.5 Refunding of or Participation Interest in Swing Line Advances.
(a) The Swing Line Bank, at any time in its sole and absolute
discretion, may on behalf of the Company (which hereby irrevocably directs the
Swing Line Bank to act on its behalf) request each Revolving Credit Bank
(including the Swing Line Bank in its capacity as a Revolving Credit Bank) to
make a Prime-based Advance of the Revolving Credit in an amount equal to such
Revolving Credit Bank's Percentage of the principal amount of the Swing Line
Advances (the "Refunded Swing Line Advances") outstanding on the date such
notice is given; provided that (i) at any time as there shall be a Swing Line
Advance outstanding for more than thirty days, or the aggregate outstanding
principal amount of all Swing Line Advances exceeds the Swing Line Commitment,
then the Agent shall, on behalf of the Company (which hereby irrevocably
directs the Agent to act on its behalf), promptly request each Revolving Credit
Bank (including the Swing Line Bank) to make a Revolving Credit Advance in an
amount equal to such Revolving Credit Bank's Percentage of the principal amount
of such outstanding Swing Line Advance, (ii) Swing Line Advances may be prepaid
by the Company in accordance with the provisions of Section 5.7 or Section 12.1
hereof and (iii) Quoted Rate Advances which are converted to Revolving Credit
Advances at the request of the Swing Line Bank at a time when no Default or
Event of Default has occurred and is continuing shall not be subject to Section
5.7 and no losses, costs or expenses may be assessed by the Swing Line Bank
against the Company or the other Banks as a consequence of any such conversion
covered by this clause (iii). Unless any of the events described in Section
10.1(j) shall have occurred (in which event the procedures of paragraph (b) of
this Section 4.5 shall apply) and regardless of whether the conditions
precedent set forth in this Agreement to the making of a Revolving Credit
Advance are then satisfied, each Revolving Credit Bank shall make the proceeds
of its Revolving Credit Advance available to the Agent for the ratable benefit
of the Swing Line Bank at the office of the Agent specified in Section 2.4(a)
prior to 11:00 a.m. Detroit time, in funds immediately available on the
Business Day next succeeding the date such notice is given. The proceeds of
such Revolving Credit Advances shall be immediately applied to repay the
Refunded Swing Line Advances.
(b) If, prior to the making of a Revolving Credit Advance pursuant
to paragraph (a) of this Section 4.5, one of the events described in Section
10.1(j) shall have occurred,
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each Revolving Credit Bank will, on the date such Revolving Credit Advance was
to have been made, purchase from the Swing Line Bank an undivided participating
interest in the Refunded Swing Line Advance in an amount equal to its
Percentage of such Refunded Swing Line Advance. Each Bank will immediately
transfer to the Agent, in immediately available funds, the amount of its
participation and upon receipt thereof the Agent will deliver to such Bank a
Swing Line Bank Participation Certificate in the form of Exhibit F dated the
date of receipt of such funds and in such amount.
(c) Each Bank's obligation to make Revolving Credit Advances and
to purchase participation interests in accordance with clauses (a) and (b)
above shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right which such Bank may have against Swing Line
Bank, the Company or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of any Default or Event of Default; (iii) any adverse
change in the condition (financial or otherwise) of the Company or any other
Person; (iv) any breach of this Agreement by the Company or any other Person;
(v) any inability of the Company to satisfy the conditions precedent to
borrowing set forth in this Agreement on the date upon which such participating
interest is to be purchased or (vi) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing. If any Bank does
not make available to the Agent the amount required pursuant to clause (a) or
(b) above, as the case may be, the Agent shall be entitled to recover such
amount on demand from such Bank, together with interest thereon for each day
from the date of non-payment until such amount is paid in full at the Federal
Funds Effective Rate for the first two Business Days and at the Alternate Base
Rate thereafter.
Notwithstanding the foregoing however, no Bank shall be required to
make any Revolving Credit Advance to refund a Swing Line Advance or to purchase
a participation in a Swing Line Advance if prior to the making of such Swing
Line Advance by the Swing Line Bank, the Agent received written notice from a
Bank specifically stating that such Bank believed that one or more of the
conditions precedent to the making of Swing Line Advance(s) had not been met
and, in fact, such conditions precedent were not satisfied at the time of the
making of such Advance; provided, however that the obligation of the Banks to
make such Revolving Credit Advance or purchase a participation in such Swing
Line Advance shall be acquired upon the earlier of occur of (x) the date on
which the Bank notifies the Agent that such prior notice is withdrawn and (y)
the date of which all conditions precedent to the making of such Swing Line
Advance have been satisfied (or waived by the Majority Banks or all Banks, as
applicable).
5. MARGIN ADJUSTMENTS; INTEREST PAYMENTS
5.1 Margin Adjustments. Adjustments in the Margin applicable to
Eurocurrency-based Advances, the Applicable Commitment Fee Percentage and the
Applicable L/C Fee Percentage, each based upon the Fixed Charge Coverage Ratio,
shall be implemented on a quarterly basis as follows:
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(a) Such adjustments shall be given prospective effect only,
effective (i) as to the Applicable Commitment Fee Percentage and the Applicable
L/C Fee Percentage, upon the required date of delivery of the financial
statements under Sections 8.1(a) and 8.1(b) hereunder, in each case
establishing applicability of the appropriate adjustment, and (ii) as to each
Eurocurrency- based Advance outstanding hereunder, effective upon the
expiration of the applicable Interest Period(s), if any, in effect on the date
of the delivery of such financial statements, in each case with no
retroactivity or claw-back. In the event Company fails timely to deliver the
financial statements required under Section 8.1(a) or 8.1(b), then from the
date delivery of such financial statements was required until such financial
statements are delivered, the margins and fee percentages shall be those set
forth under the Level IV Column of the pricing matrix attached to this
Agreement as Schedule 1.1.
(b) With respect to Eurocurrency-based Advances outstanding
hereunder, an adjustment hereunder, after becoming effective, shall remain in
effect only through the end of the applicable Interest Period(s) for such
Eurocurrency-based Advances if any; provided, however, that upon any change in
the Margin level then in effect, as aforesaid, or the occurrence of any other
event which under the terms hereof causes such adjustment no longer to be
applicable, then any such subsequent adjustment or no adjustment, as the case
may be, shall be effective (and said pricing shall thereby be adjusted up or
down, as applicable) with the commencement of each Interest Period following
such change or event, all in accordance with the preceding subparagraph.
(c) Such Margin adjustments under this Section 5.1 shall be made
irrespective of, and in addition to, any other interest rate adjustments
hereunder.
(d) From the date hereof until the required date of delivery under
Section 8.1(b) of the Company's financial statements for the fiscal quarter
ending June 30, 1998, the margins and fee percentages shall be those set forth
under the Level III column of the pricing matrix attached to this Agreement as
Schedule 1.1.
5.2 Prime-based Interest Payments. Interest on the unpaid balance of
all Prime-based Advances from time to time outstanding shall accrue from the
date of such Advances to the Revolving Credit Maturity Date (and until paid),
at a per annum interest rate equal to the Prime- based Rate, and shall be
payable in immediately available funds quarterly commencing on the first day of
the calendar quarter next succeeding the calendar quarter during which the
initial Advance is made and on the first day of each calendar quarter
thereafter. Interest accruing at the Prime-based Rate shall be computed on the
basis of a 360 day year and assessed for the actual number of days elapsed, and
in such computation effect shall be given to any change in the interest rate
resulting from a change in the Prime-based Rate on the date of such change in
the Prime-based Rate.
5.3 Eurocurrency-based Interest Payments. Interest on each
Eurocurrency-based Advance having a related Eurocurrency-Interest Period of 3
months or less shall accrue at its Eurocurrency- based Rate and shall be
payable in immediately available funds on the last day of the Interest Period
applicable thereto. Interest shall be payable in immediately available funds on
each Eurocurrency-
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based Advance outstanding from time to time having a Eurocurrency-Interest
Period of 6 months or longer, at intervals of 3 months after the first day of
the applicable Interest Period, and shall also be payable on the last day of
the Interest Period applicable thereto. Interest accruing at the
Eurocurrency-based Rate shall be computed on the basis of a 360 day year and
assessed for the actual number of days elapsed from the first day of the
Interest Period applicable thereto to, but not including, the last day thereof.
5.4 Quoted Rate Advance Interest Payments. Interest on each Quoted
Rate Advance shall accrue at its Quoted Rate and shall be payable in
immediately available funds on the last day of the Interest Period applicable
thereto. Interest accruing at the Quoted Rate shall be computed on the basis of
a 360 day year and assessed for the actual number of days elapsed from the
first day of the Interest Period applicable thereto to, but not including the
last day thereof.
5.5 Interest Payments on Conversions. Notwithstanding anything to the
contrary in Sections 5.2 and 5.3, all accrued and unpaid interest on any
Revolving Credit Advance refunded or converted pursuant to Section 2.3 hereof
shall be due and payable in full on the date such Advance is refunded or
converted.
5.6 Interest on Default. Notwithstanding anything to the contrary set
forth in Sections 5.2, 5.3 and 5.4, in the event and so long as any Event of
Default shall exist under this Agreement, interest shall be payable daily on
the principal amount of all Advances from time to time outstanding (and, to the
extent delinquent, on all other monetary obligations of Company hereunder and
under the other Loan Documents) at a per annum rate equal to the Applicable
Interest Rate (and, with respect to Eurocurrency-based Advances calculated on
the basis of the maximum Margins) in respect of each such Advance, plus, in the
case of Eurocurrency-based Advances and Quoted Rate Advances, two percent (2%)
per annum for the remainder of the then existing Interest Period, if any, and
at all other such times and for all Prime-based Advances, at a per annum rate
equal to the Prime- based Rate, plus two percent (2%).
5.7 Prepayment. Company may prepay all or part of the outstanding
balance of any Prime-based Advance(s) at any time, provided that the amount of
any partial prepayment shall be at least Five Hundred Thousand Dollars
($500,000) and the aggregate balance of Prime-based Advance(s) remaining
outstanding, if any, under the Revolving Credit Notes shall be at least One
Million Dollars ($1,000,000) and the aggregate amount outstanding under all
Swing Line Advances shall be at least Five Hundred Thousand Dollars ($500,000).
Company may prepay all or part of any Eurocurrency-based Advance (subject to
not less than three (3) Business Days' notice to Agent) only on the last day of
the Interest Period applicable thereto, provided that the amount of any such
partial prepayment shall be at least Five Hundred Thousand Dollars ($500,000),
and the unpaid portion of such Advance which is refunded or converted under
Section 2.7 shall be at least Two Million Dollars ($2,000,000). Company may
prepay Quoted Rate Advances only on the last day of the Interest Period
applicable thereto. Any prepayment made in accordance with this Section shall
be without premium, penalty or prejudice to the right to reborrow under the
terms of this Agreement. Any other prepayment of all or any portion of the
Revolving Credit, whether by acceleration,
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mandatory or required prepayment or otherwise, shall be subject to Section 12.1
hereof, but otherwise without premium, penalty or prejudice. All prepayments of
Revolving Credit Advances shall be made to the Agent for distribution ratably
to the Banks.
6. CONDITIONS
The obligations of Banks to make Advances and of the Issuing Bank to
issue Letters of Credit pursuant to this Agreement are subject to the following
conditions; provided, however that Sections 6.1 through 6.10 below shall only
apply to the initial Advances, Letters of Credit or loans hereunder:
6.1 Execution of Notes and this Agreement. Company shall have executed
and delivered to Agent for the account of each Bank, the Revolving Credit
Notes, the Swing Line Note, this Agreement and the other Loan Documents to
which it is a party (including all schedules, exhibits, certificates, opinions,
financial statements and other documents to be delivered pursuant hereto), and
such Notes, this Agreement and the other Loan Documents shall be in full force
and effect.
6.2 Corporate Authority. Agent shall have received, with a counterpart
thereof for each Bank:
(a) In connection with the Company, a certificate of Responsible
Officer as
to:
(i) resolutions of the board of directors of the Company
evidencing approval of the transactions contemplated by
this Agreement and the Notes and authorizing the
execution and delivery thereof and the borrowing of
Advances and the requesting of Letters of Credit
hereunder,
(ii) the incumbency and signature of the officers of the
Company executing any Loan Document,
(iii) a certificate of good standing or continued existence
(or the equivalent thereof) from the State of Indiana,
and from every state or other jurisdiction listed on
Schedule 6.2 hereof, if issued by such jurisdiction,
subject to the limitations (as to qualification and
authorization to do business) contained in Section 7.1;
and
(iv) copies of Company's articles of incorporation and bylaws
and/or other constitutional documents as in effect on
the Effective Date;
(b) in connection with each Guarantor, a certificate from an
authorized officer of such Guarantor as to:
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(i) resolutions of the board of directors of such Guarantor
evidencing approval of the transactions contemplated by
the Loan Documents to which such Guarantor is a party
and authorizing the execution and delivery thereof,
(ii) the incumbency and signature of the officers of such
Guarantor executing any Loan Document to which such
Guarantor is a party,
(iii) a certificate of good standing from the state or other
jurisdiction of such Guarantor's incorporation, and from
every state or other jurisdiction in which such
Guarantor is qualified to do business, if issued by such
jurisdiction, subject to the limitations (as to
qualification and authorization to do business)
contained in Section 7.1, hereof, and
(iv) copies of such Guarantor's articles of incorporation and
bylaws and/or other constitutional documents as in
effect on the Effective Date.
6.3 Collateral Documents and Guaranties. (a) As security for all
Indebtedness of Company to the Banks hereunder the Agent shall have received:
(i) the Pledge Agreement executed and delivered by the
Company;
(ii) the Security Agreement, executed and delivered by the
Company and each of the Guarantors; and
(iii) the Guaranty executed and delivered by each of the
Guarantors;
(b) Any documents (including, without limitation, financing
statements, amendments to financing statements and assignments of financing
statements, stock certificates and stock powers) required to be delivered
and/or filed in connection with the Security Agreement or the Pledge Agreement
to create, in favor of the Agent (for and on behalf of the Banks), a perfected
security interest in the Collateral thereunder, shall have been delivered to
the Agent and, as applicable, in a proper form for filing in each office in
each jurisdiction listed in Schedule 6.3 and with the United States Patent and
Trademark Office, or other office, as the case may be.
6.4 Insurance. The Agent shall have received evidence satisfactory to
it that the Company has obtained the insurance policies required by Section 8.5
hereof and that such insurance policies are in full force and effect.
6.5 Compliance with Certain Documents and Agreements. The Company and
each Guarantor (and any of their respective Subsidiaries or Affiliates) shall
have each performed and
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complied in all material respects with all agreements and conditions contained
in this Agreement, other Loan Documents, or any agreement or other document
executed thereunder and required to be performed or complied with by each of
them (as of the applicable date) and none of such parties shall be in material
default in the performance or compliance with any of the terms or provisions
hereof or thereof.
6.6 Merger Documents. The Merger shall have become effective pursuant
to the Merger Documents and the Agent shall have received executed copies of
the Merger Documents, the Bill of Sale, the Assignment, Assumption Agreement
(trademarks/service marks) and Assignment and Assumption Agreement (all
intangibles other than real property leases and trademarks/service marks) and
Assignment and Assumption Agreement (real property), in each case certified as
a true and correct copy as in effect on such date by a Responsible Officer of
the Company.
6.7 Opinion of Counsel. Company and each Guarantor shall furnish
Agent prior to the initial Advance under this Agreement, and with signed copies
for each Bank, opinions of counsel to the Company and such Guarantor, dated the
date hereof, and covering such matters as reasonably required by and otherwise
reasonably satisfactory in form and substance to the Agent and each of the
Banks.
6.8 Company's Certificate. The Agent shall have received, with a
signed counterpart for each Bank, a certificate of a Responsible Officer of
Company dated the date of the making of Advances hereunder, stating that to the
best of his or her knowledge after due inquiry, (a) the conditions of
paragraphs 6.1, 6.3, 6.4, 6.5 and 6.6 hereof have been fully satisfied; (b) the
representations and warranties made by Company, each Guarantor or any other
party to any of the Loan Documents (excluding the Agent and Banks) in this
Agreement or any of the Loan Documents, and the representations and warranties
of any of the foregoing which are contained in any certificate, document or
financial or other statement furnished at any time hereunder or thereunder or
in connection herewith or therewith shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects on and as of the Effective Date; and (c) no Default or Event of
Default shall have occurred and be continuing, and, except as previously
disclosed to Agent and Banks in writing, there shall have been no material
adverse change in the financial condition, properties, business, results or
operations of the Company and its Subsidiaries taken as a whole from December
31, 1997 to the date of the making of the first borrowing hereunder.
6.9 Payment of Fees. Company shall have paid to the Agent all fees,
costs and expenses required hereunder to be paid to Agent upon execution of
this Agreement.
6.10 Other Documents and Instruments. The Agent shall have received,
with a photocopy for each Bank, such other instruments and documents as each of
the Banks may reasonably request in connection with the making of Advances or
issuance of Letters of Credit hereunder, and all such instruments and documents
shall be satisfactory in form and substance to Agent and each Bank.
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6.11 Continuing Conditions. The obligations of the Banks to make
Advances (including the initial Advance) and the obligation of the Issuing Bank
to issue Letters of Credit (including the initial Letter of Credit) under this
Agreement shall be subject to the continuing conditions that:
(a) No Default or Event of Default shall exist as of the date of
the Advance or the request for the Letter of Credit; and
(b) Each of the representations and warranties contained in this
Agreement and in each of the other Loan Documents shall be true and correct in
all material respects as of the date of the Advance or Letter of Credit.
7. REPRESENTATIONS AND WARRANTIES
Company represents and warrants that as of the Effective Date:
7.1 Corporate Authority. Company is a corporation duly organized and
existing in good standing under the laws of the State of Indiana, each
Guarantor is a corporation or other business entity duly organized and existing
in good standing under the laws of the state of its incorporation; each other
Subsidiary is duly organized and existing in good standing under the laws of
the state of its incorporation; and each of the Company and each of its
Subsidiaries is duly qualified and authorized to do business as a foreign
corporation in each jurisdiction where the character of its assets or the
nature of its activities makes such qualification necessary and where failure
to be so qualified would have a material adverse effect on their respective
businesses.
7.2 Due Authorization - Company. Execution, delivery and performance
of this Agreement, the Merger, the other Loan Documents and any other documents
and instruments required under or in connection with this Agreement or the
other Loan Documents (or to be so executed and delivered), and the issuance of
the Notes by Company are within its corporate powers, have been duly
authorized, are not in contravention of law or the terms of the Company's
organizational documents and, except as have been previously obtained or as
referred to in Section 7.13, below, do not require the consent or approval,
material to the transactions contemplated by this Agreement and the other Loan
Documents, of any governmental body, agency or authority.
7.3 Due Authorization - Guarantors. Execution, delivery and
performance of the Guaranty, the other Loan Documents to which it is a party
and any other documents and instruments required of Guarantors under or in
connection with this Agreement and the other Loan Documents (or to be so
executed and delivered) are within the partnership or corporate powers of each
such Guarantor, have been duly authorized, are not in contravention of law or
the terms of such Guarantor's organizational documents, and, except as have
been previously obtained (or as referred to in Section 7.13 below), do not
require the consent or approval, material to the transactions contemplated by
this Agreement and the other Loan Documents, of any governmental body, agency
or authority not previously obtained.
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7.4 Liens. There are no security interests in, liens, mortgages, or
other encumbrances on and no financing statements on file with respect to any
of the property owned by Company or any of its Guarantors except for Liens
permitted pursuant to Section 9.2.
7.5 Taxes. Company and each of its Guarantors has filed on or before
their respective due dates or within the applicable grace periods, all federal,
and material state and foreign tax returns which are required to be filed or
has obtained extensions for filing such tax returns and is not delinquent in
filing such returns in accordance with such extensions and has paid all taxes
which have become due pursuant to those returns or pursuant to any assessments
received by any such party, as the case may be, to the extent such taxes have
become due, except to the extent such tax payments are being actively contested
in good faith by appropriate proceedings and with respect to which adequate
provision has been made on the books of Company or such Guarantor as may be
required by GAAP.
7.6 No Defaults. There exists no material default under the provisions
of any instrument evidencing any indebtedness for borrowed money of the Company
or any of its Guarantors which is permitted hereunder or of any agreement
relating thereto.
7.7 Enforceability of Agreement and Loan Documents -- Company. This
Agreement, each of the other Loan Documents to which Company is a party, and
all other certificates, agreements and documents executed and delivered by
Company under or in connection herewith or therewith have each been duly
executed and delivered by its duly authorized officers and constitute the valid
and binding obligations of Company, enforceable in accordance with their
respective terms, except as enforcement thereof may be limited by applicable
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or
similar laws affecting the enforcement of creditor's rights, generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in law or equity).
7.8 Enforceability of Loan Documents -- Guarantors. The Loan Documents
to which each of the Guarantors is a party, and all certificates, documents and
agreements executed in connection therewith by the Guarantors have each been
duly executed and delivered by the duly authorized officers of the Guarantors
and constitute the valid and binding obligations of such Guarantors,
enforceable in accordance with their respective terms, except as enforcement
thereof may be limited by applicable bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium or similar laws affecting the enforcement of
creditor's rights, generally and by general principles of equity (regardless of
whether enforcement is considered in a proceeding in law or equity).
7.9 Compliance with Laws. Except as disclosed on Schedule 7.9, each of
the Company and each of its Guarantors has complied with all applicable
federal, state and local laws, ordinances, codes, rules, regulations and
guidelines (including consent decrees and administrative orders) including
without limitation, all Consumer Credit Laws in effect from time to time,
except to the extent that failure to comply therewith would not materially
interfere with the conduct of the business of Company and its Guarantors taken
as a whole, or would not have a Material Adverse
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Effect; except for such matters as are not likely to have a Material Adverse
Effect, and except as set forth in Schedule 7.9 hereof, and without limiting
the generality of Section 7.12, there is no pending or threatened, litigation,
action, proceeding or controversy affecting the Company or any of its
Guarantors, and no pending or threatened complaint, notice or inquiry to the
Company or any of its Guarantors, regarding potential liability of the Company
or any of its Guarantors, or any officer, director, agent or employee of the
Company or any Guarantor under or arising from any Consumer Credit Law; and, to
the knowledge of the Company, no facts or situation exists that could form the
basis for any such litigation, action, proceeding, controversy, complaint,
notice or inquiry.
7.10 Non-contravention -- Company. The execution, delivery and
performance of this Agreement and the other Loan Documents and any other
documents and instruments required under or in connection with this Agreement
by Company are not in contravention of the terms of any indenture, agreement or
undertaking to which Company or any of its Guarantors is a party or by which
its or their properties are bound or affected where such violation would
reasonably be expected to have a Material Adverse Effect.
7.11 Non-contravention -- Guarantors. The execution, delivery and
performance of those Loan Documents signed by the Guarantors, and any other
documents and instruments required under or in connection with this Agreement
by the Guarantors are not in contravention of the terms of any indenture,
agreement or undertaking to which any Guarantor or Company is a party or by
which it or its properties are bound or affected where such violation would
reasonably be expected to have a Material Adverse Effect.
7.12 No Litigation. Except for De Minimis Matters or as set forth on
Schedule 7.12 hereof, there is no suit, action, proceeding, including, without
limitation, any bankruptcy proceeding, or governmental investigation pending
against or to the knowledge of Company, affecting Company or any Guarantor
(other than any suit, action or proceeding in which Company or such Guarantor
is the plaintiff and in which no counterclaim or cross-claim against Company or
such Guarantor has been filed), nor is Company or any of its Guarantors or any
of its or their officers or directors, as the case may be, subject to any suit,
action, proceeding or governmental investigation as a result of which any such
officer or director is or may be entitled to indemnification by Company or a
Guarantor, as applicable, which suits, if resolved adversely to Company or any
of its Guarantors, are reasonably likely to have a Material Adverse Effect.
Except as set forth on Schedule 7.12, there is not outstanding against Company
or any Guarantor any judgment, decree, injunction, rule, or order of any court,
government, department, commission, agency, instrumentality or arbitrator nor
is Company or any Guarantor in violation of any applicable law, regulation,
ordinance, order, injunction, decree or requirement of any governmental body or
court where such violation would reasonably be expected to have a Material
Adverse Effect.
7.13 Consents, Approvals and Filings, Etc. Except as have been
previously obtained, no authorization, consent, approval, license,
qualification or formal exemption from, nor any filing, declaration or
registration with, any court, governmental agency or regulatory authority or
any securities exchange or any other person or party (whether or not
governmental) is required in
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connection with the execution, delivery and performance: (i) by Company of this
Agreement, any of the other Loan Documents to which it is a party, or any other
documents or instruments to be executed and or delivered by Company in
connection therewith or herewith; (ii) by any Guarantor, of any of the other
Loan Documents to which such Guarantor is a party, or (iii) by Company or any
of the Guarantors, of the liens, pledges, mortgages, security interests or
other encumbrances granted, conveyed or otherwise established (or to be
granted, conveyed or otherwise established) by or under this Agreement or the
other Loan Documents, except for such filings to be made concurrently herewith
as are required by the Security Agreement to perfect liens in favor of the
Agent. All such authorizations, consents, approvals, licenses, qualifications,
exemptions, filings, declarations and registrations which have previously been
obtained or made, as the case may be, are in full force and effect and are not
the subject of any attack, or to the knowledge of Company threatened attack (in
any material respect) by appeal or direct proceeding or otherwise.
7.14 Agreements Affecting Financial Condition. Neither the Company nor
any of its Guarantors is party to any agreement or instrument or subject to any
charter or other corporate restriction which materially adversely affects the
financial condition or operations of the Company and its Guarantors (taken as a
whole).
7.15 No Investment Company or Margin Stock. Neither the Company nor
any of its Guarantors is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. Neither the Company nor any of its
Guarantors is engaged principally, or as one of its important activities,
directly or indirectly, in the business of extending credit for the purpose of
purchasing or carrying margin stock. None of the proceeds of any of the
Advances will be used by the Company or any of its Guarantors to purchase or
carry margin stock or will be made available by the Company or any of its
Guarantors in any manner to any other Person to enable or assist such Person in
purchasing or carrying margin stock. Terms for which meanings are provided in
Regulation U of the Board of Governors of the Federal Reserve System or any
regulations substituted therefor, as from time to time in effect, are used in
this paragraph with such meanings.
7.16 ERISA. Except as set forth in Schedule 7.16, neither the Company
nor any ERISA Affiliate maintains or contributes to any Pension Plan. As of the
Effective Date, (a) with respect to any Pension Plan for which the Company or
any ERISA Affiliate is the administrator or plan sponsor as defined in ERISA
ss.3(16)(A) and (B), there is no accumulated funding deficiency as defined in
ERISA ss.302(a)(2), or any existing material liability owed to the PBGC under
ERISA Sections 4062, 4063 or 4064, nor has any "reportable event" or any
"prohibited transaction" as defined in ERISA, occurred; and (b) all such
Pension Plans are in material compliance with the requirements of the Internal
Revenue Code and ERISA. As to any Multiemployer Plan, neither the Company nor
any ERISA Affiliate has had a complete or partial withdrawal from any
Multiemployer Plan which has resulted or could reasonably be expected to result
in a material liability under ERISA and neither the Company nor any ERISA
Affiliate has actual knowledge of or has received notice of reorganization
under ERISA ss.4242 or notice of plan insolvency under ERISA ss.4245(e).
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7.17 Conditions Affecting Business or Properties. Except as disclosed
in Schedule 7.17, neither the respective businesses nor the properties of
Company or any of its Guarantors is affected by any fire, explosion, accident,
strike, lockout or other dispute, drought, storm, hail, earthquake, embargo,
Act of God or other casualty (not covered by insurance), which materially
adversely affects, or if such event or condition were to continue for more than
ten (10) additional days would reasonably be expected to materially adversely
affect, any such businesses or properties of Company and its Guarantors (taken
as a whole).
7.18 Environmental and Safety Matters. Except as set forth in Schedule
7.18 and except for such matters as are not likely to have a Material Adverse
Effect:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Company or any of its Guarantors,
have been, and continue to be, owned or leased by the Company and the
Guarantors in material compliance with all Hazardous Material Laws;
(b) to the best knowledge of the Company, there have been no
past, and there are no pending or threatened
(i) claims, complaints, notices or requests for
information received by the Company or any of its Guarantors with
respect to any alleged violation of any Hazardous Material Law, or
(ii) complaints, notices or inquiries to the Company or any
of its Guarantors regarding potential liability under any Hazardous
Material Law; and
(c) no conditions exist at, on or under any property now or
previously owned or leased by the Company or any of its Guarantors
which, with the passage of time, or the giving of notice or both,
would give rise to liability under any Hazardous Material Law.
7.19 Subsidiaries. The Company has no Subsidiaries, except as
disclosed on Schedule 7.19 hereto.
7.20 Accuracy of Information. (a) Except to the extent the preparation
of such financial statements are affected by "pooling of interests" in
connection with acquisitions, each of the Company's financial statements
previously furnished to Agent and the Banks on or after February 1, 1997 has
been prepared in accordance with GAAP and is complete and correct in all
material respects and fairly presents (subject to year-end adjustments in the
case of interim statements) the financial condition of Company and the results
of its operations for the periods covered thereby.
(b) Since December 31, 1997 through the Effective Date, except as
previously disclosed in writing to the Agent and the Banks, there has been no
material adverse change in the financial condition of Company or its Guarantors
taken as a whole; to the best knowledge of
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Company, neither Company nor any of its Guarantors has any contingent
obligations (including any liability for taxes) not disclosed by or reserved
against in the December 31, 1997 balance sheets, as applicable, except as set
forth on Schedule 7.20 hereof, and at the present time there are no unrealized
or anticipated losses from any present commitment of Company or any of its
Guarantors which in the aggregate is likely to have a Material Adverse Effect.
7.21 No Change in Requirements of Laws. Except as disclosed in
Schedule 7.21 hereof, there has been no introduction of or change in any
Consumer Credit Laws or any other applicable federal, state, or local laws,
ordinances, codes, rules, regulations and guidelines (such as the enactment of
any proposed regulation of rental purchase transactions as credit sales subject
to interest rate limitations and other consumer lending restrictions) which
would have a Material Adverse Effect.
8. AFFIRMATIVE COVENANTS
Company covenants and agrees that it will, and, as applicable, cause
each of its Guarantors to, until the Revolving Credit Maturity Date and
thereafter until expiration of all Letters of Credit and final payment in full
of the Indebtedness and the performance by the Company of all other obligations
under this Agreement and the other Loan Documents:
8.1 Financial Statements. Furnish to the Agent with sufficient copies
for each Bank:
(a) as soon as available, but in any event within 120 days after
the end of each fiscal year of the Company a copy of the audited
consolidated and consolidating financial statements of the Company as
at the end of such year and the related audited statements of income,
accumulated earnings, cash flows and balance sheets for such year,
setting forth in each case in comparative form the figures for the
previous year, certified by a nationally recognized certified public
accountant satisfactory to the Agent and the Banks as being fairly
stated in all material respects; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each
fiscal year of the Company, the unaudited consolidating and
consolidating financial statements of the Company as at the end of
such quarter and the related unaudited statements of income,
accumulated earnings, cash flows and balance sheets of the Company for
the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly
stated in all material respects.
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such officer and disclosed therein), provided
however that the quarterly financial statements delivered hereunder will not be
required to include footnotes and will be subject to year-end adjustments.
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8.2 Certificates; Other Information. Furnish to the Issuing Bank with
sufficient copies for each Bank:
(a) as soon as available, but in any event not later than 20 days
after the end of each calendar month,
(i) a Borrowing Base Certificate executed by a Responsible
Officer, substantially in the form attached hereto as
Exhibit K; and
(ii) a Covenant Compliance Certificate executed by a
Responsible Officer, substantially in the form attached
hereto as Exhibit H; and
(iii) a "BOR Report" (reporting the total number of rental
units under Rental Contract as of the end of such
calendar month); and
(iv) a "Reconciliation Report" (showing the number of stores
opened, closed and/or acquired during such calendar
month; and for any stores which are opened or acquired
during such calendar month, the address (including the
county) of each such store); and
(v) an "Idle Inventory Report" (showing the amount of
inventory not under Rental Contract as of the end of
such calendar month); and
(vi) a "Delinquency Report" (showing the percentage of Rental
Contracts one day or more past due as of the last
Saturday of such calendar month);
(b) not later than 120 days following the end of each fiscal year
of the Company, a copy of the projections by the Company of the balance sheets,
operating budget and cash flow budget of the Company and its Subsidiaries,
covering, on a quarterly basis, the three year period following the last day of
the fiscal year then ending, such projections to be accompanied by a
certificate of a Responsible Officer to the effect that such projections have
been prepared on the basis of sound financial planning practice and that such
Officer has no reason to believe they are incorrect or misleading in any
material respect;
(c) "Same Store Sales Report": (x) deliver together with the
financial statements to be delivered pursuant to Sections 8.1(a) and 8.1(b)
hereof, which for all stores opened for 24 months or longer as of the end of
the fiscal quarter then ending, compares sales for the quarter then ending with
sales for the same quarter ending 12 months earlier) and (y) deliver together
with the annual financial statements to be delivered pursuant to Section 8.1(a)
hereof, which for all stores owned as of the last day of the fiscal year then
ending which were also owned as of the last day of the immediately preceding
fiscal year, compares annual revenues as for such stores as of the last day
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of the fiscal year then ending with annual revenues for such stores as of the
last day of the immediately preceding fiscal year.
(d) not later than 60 days following the end of each fiscal
quarter of the Company, a schedule of pending litigation of the Company in
which the amount in controversy exceeds $500,000, in form satisfactory to the
Agent and in reasonable detail (including the amount in controversy), certified
as to accuracy by a Responsible Officer to the best of such Responsible
Officer's knowledge;
(e) as soon as available, the Company's 10-Q and 10-K Reports
filed with the U.S. Securities and Exchange Commission, and in any event, with
respect to the 10-Q Report, within sixty (60) days of the end of each of the
Company's fiscal quarters, and with respect to the 10-K Report, within 120 days
after and as of the end of each of Company's fiscal years, and, as soon as
available, copies of all other documents filed by the Company with the
Securities and Exchange Commission (other than any registration statement and
prospectus included therein relating to an employee benefit plan and filed on
Form S-8 or any successor form) and copies of any orders in any proceedings to
which the Company or any Subsidiary is a party issued by any governmental
agency;
(f) promptly as issued, all press releases, notices to
shareholders and all other material written communications transmitted to the
general public or to the trade or industry in which the Company is engaged; and
(g) promptly, such additional financial and other information, or
other reports as any Bank may from time to time reasonably request.
8.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all of
its material obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Company.
8.4 Conduct of Business and Maintenance of Existence. Each of the
Company and each Guarantor shall:
(a) continue to engage primarily in the business (or in the
franchising of such business) as now conducted by it and preserve,
renew and keep in full force and effect its existence;
(b) take all reasonable action to maintain all rights, privileges
and franchises necessary or desirable in the normal conduct of its
business except as otherwise permitted pursuant to Section 9.4; and
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(c) comply with all Contractual Obligations and Requirements of
Law, except to the extent that failure to comply therewith could not,
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
8.5 Maintenance of Property; Insurance. The Company will maintain,
cause to be maintained or cause each Guarantor to maintain with responsible
insurance companies insurance with respect to the Collateral, its or their
properties and business, against such casualties and contingencies and of such
types and in such amounts as is customary in the case of similar businesses,
and will furnish to the Agent prior the initial Advance, and upon reasonable
request by any Bank at reasonable intervals thereafter, a certificate of a
Responsible Officer, as well as independent evidence of coverage, setting forth
the nature and extent of all insurance policies maintained by the Company or
any Guarantor in accordance with this Section. The Company shall give immediate
written notice to the Banks and to the insurers of any significant loss or
damage to the Collateral or other property to be insured and shall promptly
file proofs of loss with such insurers.
8.6 Inspection of Property; Books and Records, Discussions. Permit
Agent and each Bank, through their authorized attorneys, accountants and
representatives (a) to examine Company's and each Guarantor's books, accounts,
records, ledgers and assets and properties of every kind and description
(including without limitation, all promissory notes, security agreements,
customer applications, vehicle title certificates, chattel paper, Uniform
Commercial Code filings) wherever located at all reasonable times during normal
business hours, upon oral or written request of Agent or such Bank, and (b) at
any time and from time to time at the request of the Majority Banks, to conduct
full or partial collateral audits, provided, however that prior to the
occurrence and continuance of any Event of Default, the Company shall be
required to reimburse the Agent and the Banks for all reasonable costs and
expenses of no more than one full collateral audit per year and after the
occurrence and during the continuance of an Event of Default, the Company shall
be required to reimburse the Agent and the Banks for all reasonable costs and
expenses of all collateral audits; and permit Agent and each Bank or their
authorized representatives, at reasonable times and intervals, to visit all of
their respective offices, discuss their respective financial matters with their
respective officers and independent certified public accountants, and, by this
provision, Company authorizes such accountants to discuss the finances and
affairs of Company and its Guarantors (provided that Company is given an
opportunity to participate in such discussions) and examine any of its or their
books and other corporate records. Notwithstanding the foregoing, all
information furnished to the Agent or the Banks hereunder shall be subject to
the undertaking of the banks set forth in Section 14.12 hereof.
8.7 Notices. Promptly give notice to the Agent of:
(a) the occurrence of any Default or Event of Default of which the
Company has knowledge;
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(b) any (i) default or event of default under any Contractual
Obligation of the Company or any Guarantor or (ii) litigation,
investigation or proceeding which may exist at any time between the
Company or any Guarantor and any Governmental Authority, which in
either case, if not cured or if adversely determined, as the case may
be, would have a Material Adverse Effect;
(c) the following events, as soon as possible and in any
event within 30 days after the Company knows or has reason to know
thereof: (i) the occurrence or expected occurrence of any "reportable
event" as defined in ERISA with respect to any Pension Plan, or any
withdrawal from or the termination, reorganization or insolvency of
any Multiemployer Plan or (ii) the institution of proceedings or the
taking of any other action by the Pension Benefit Guaranty Corporation
or the Company or any Commonly Controlled Entity or any Multiemployer
Plan with respect to the withdrawal from or the terminating,
reorganization or insolvency of any Pension Plan;
(d) after the effectiveness thereof, any material amendment,
supplement or other modification of (i) the Company's management
information system which permits the daily tracking of each store's
rental and collection activity, or (ii) the Company's accounting
policies regarding its Rental Contracts;
(e) a material adverse change in the business, operations,
property, or financial condition of the Company; and
(f) promptly furnish to the Agent notice as to (i) any
development related to the business or financial condition of the
Company, its Affiliates or Guarantors, which would have or has a
Material Adverse Effect and (ii) any material and adverse litigation
or investigation to which the Company, any Affiliate or any Guarantor
is a party; and
(g) in the event that the Company or any Subsidiary shall
open any new retail location (other than those listed on Exhibit O
hereof), execute and deliver to the Agent all such amendments,
supplements and other modifications to this Agreement and the other
Loan Documents together with signed (or pre-signed) financing
statements and all other instruments of further assurance required by
the Agent or the Majority Banks, and will take such other actions as
the Agent or the Majority Banks reasonably request and deem necessary
or advisable in order for Agent to perfect its security interest in
the Collateral located at such new retail location.
(h) any introduction of or change in any Consumer Credit Laws
or any other applicable federal, state, or local laws, ordinances,
codes, rules, regulations and guidelines (such as the enactment of any
proposed regulation of rental purchase transactions as credit sales
subject to interest rate limitations and other consumer lending
restrictions) which would have a Material Adverse Effect.
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Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company proposes to take with respect thereto.
8.8 Hazardous Material Laws.
(a) Use and operate all of its facilities and properties in
material compliance with all material Hazardous Material Laws, keep
all necessary permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain
in material compliance therewith, and handle all Hazardous Materials
in material compliance with all applicable Hazardous Material Laws;
(b) Promptly notify Agent and provide copies upon receipt of all
written claims, complaints, notices or inquiries received by the
Company of a material nature relating to its facilities and properties
or compliance with Hazardous Material Laws, and shall promptly cure
and have dismissed with prejudice to the satisfaction of the Majority
Banks any actions and proceedings relating to compliance with
Hazardous Material Laws to which the Company is named as a party; and
(c) Provide such information and certifications which any Bank
may reasonably request from time to time to evidence compliance with
this Section 8.8.
8.9 Minimum Tangible Net Worth. Maintain at all times a minimum
Tangible Net Worth of $25,000,000.
8.10 Positive Net Income. Maintain as of the end of each fiscal
quarter beginning with the quarter ending March 31, 1998, Net Income (without
giving effect to any one-time charges in an aggregate amount not to exceed
$2,000,000 for the four fiscal quarters then ending arising from any
acquisition and/or mergers other than the Merger) greater than zero.
8.11 Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage
Ratio of not less than the ratio set forth below during the applicable period
set forth below:
Quarter ending: Ratio
March 31, 1998 1.5 to 1.0
June 30, 1998 1.75 to 1.0
September 31, 1998
and thereafter 2.00 to 1.0
8.12 Leverage Ratio. Maintain, as of the end of each fiscal quarter, a
Leverage Ratio of not more than 0.50 : 1.0.
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8.13 Taxes. Pay and discharge all taxes and other governmental
charges, and all material contractual obligations calling for the payment of
money, before the same shall become overdue, unless and to the extent only that
such payment is being contested in good faith by appropriate proceedings and is
reserved for, as required by GAAP on its balance sheet, or where the failure to
pay any such matter could not have a Material Adverse Effect.
8.14 Governmental and Other Approvals. Apply for, obtain and/or
maintain in effect, as applicable, all authorizations, consents, approvals,
licenses, qualifications, exemptions, filings, declarations and registrations
(whether with any court, governmental agency, regulatory authority, securities
exchange or otherwise) which are necessary in connection with the execution,
delivery and performance: (i) by Company, of this Agreement, the Loan
Documents, or any other documents or instruments to be executed and/or
delivered by Company in connection therewith or herewith; and (ii) by each of
the Guarantors, of the Loan Documents to which it is a party.
8.15 Compliance with ERISA. With respect to any Pension Plan for which
the Company or any ERISA Affiliate is the plan sponsor or administrator as
defined in ERISA ss.3(16)(A) and (B), materially comply with the requirements
imposed by ERISA as presently in effect or hereafter promulgated, including but
not limited to, the minimum funding requirements of any Pension Plan.
8.16 ERISA Notices. Promptly notify the Agent upon the occurrence of
any of the following events:
(a) the termination of any Pension Plan subject to Subtitle C of
Title IV of ERISA;
(b) the appointment of a trustee by a United States District
Court to administer any Pension Plan subject to Title IV of ERISA;
(c) the commencement by the Pension Benefit Guaranty Corporation,
or any successor thereto, of any proceeding to terminate any Pension
Plan subject to Title IV of ERISA;
(d) the failure of the Company or any ERISA Affiliate to make any
payment in respect of any Pension Plan required under Section 412 of
the Internal Revenue Code;
(e) the withdrawal of the Company or any ERISA Affiliate from any
multiemployer plan (as defined in Section 3(37) of ERISA; or
(f) the occurrence of a "reportable event" which is required to
be reported by the Company under Section 4043 of ERISA or a
"prohibited transaction" as defined in Section 406 of ERISA or Section
4975 of the Internal Revenue Code which is likely to have a Material
Adverse Effect.
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8.17 Offices. The Company agrees that it will and will cause each of
the Guarantors to operate each of its offices as a licensed location in the
jurisdiction requiring such license in conformity with all such licensing and
other laws applicable to the origination of Rental Contracts, Sales Finance
Agency Acts, or any other law regulating the rent-to-own industry if failure to
do so would reasonably be expected to have a Material Adverse Effect. To the
extent the Company does not have a license for each location, and such failure
could reasonably be expected to have a Material Adverse Effect, it will
immediately procure a license or advise the Agent of the reason that it is
exempt from such licensing requirement or that no such licensing requirement
exists in the jurisdiction of such location.
8.18 Security. The Company hereby agrees to take such actions as the
Majority Banks may from time to time reasonably request to establish and
maintain first perfected security interests in and Liens on all of its
Collateral.
8.19 Performance of Contract Duties, Defense of Collateral. The
Company warrants that it has performed, and covenants and agrees that it will
continue to perform, in all material respects its duties and obligations under
each Rental Contract. The Company covenants to defend the Collateral from any
Liens other than Liens permitted by Section 9.2.
8.20 Possessory Perfection in Contract Collateral. The Company
covenants that it will, beginning no later than the date 60 days after the
Effective Date, cause RTO Operating to prominently stamp or mark (or cause to
be so stamped or marked) each original Rental Contract originated on or after
such date with the legend set forth below:
"RTO Operating, Inc. has collaterally assigned its rights in this
Rental Contract to Comerica Bank as agent for itself and certain
other Banks."
8.21 Use of Proceeds. The initial Advances made to the Company shall
be used by Company (i) to pay the costs and expenses of the transactions
contemplated by this Agreement which are due and payable on the closing date,
and (ii) for the payment of any monies due in connection with the assignment of
the Prior Credit Agreements to the Agent and the Banks; proceeds of any
subsequent Advances made hereunder shall be used by Company solely for the
general business purposes including without limitation working capital and to
finance Permitted Acquisitions. Company shall not use any portion of the
proceeds of any such advances for the purpose of purchasing or carrying any
"margin stock" (as defined in Regulation G of the Board of Governors of the
Federal Reserve System) in any manner which violates the provisions of
Regulation G, T, U or X of said Board of Governors or for any other purpose in
violation of (x) any applicable statute or regulation or (y) the terms and
conditions of this Agreement.
8.22 Future Subsidiaries. With respect to each Person which becomes a
Subsidiary of the Company subsequent to the Effective Date, within sixty (60)
days of the date such new Subsidiary is created or acquired (but in any event
before any payments under the Rental Contracts owned by such Subsidiary shall
be included in the Borrowing Base),
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(a) (X) cause such Subsidiary to execute and deliver to Agent,
for and on behalf of each of the Banks, (i) a Joinder Agreement
whereby such Subsidiary becomes obligated as a Guarantor under the
Guaranty and (ii) a Security Agreement, and (Y) shall execute, or
cause to be executed, and deliver to the Agent a stock pledge
encumbering 100% of the share capital of each such Subsidiary; or
(b) merge, or cause such Subsidiary to enter into a merger with
RTO Operating, so long as RTO Operating is the surviving corporation;
together in each case with such supporting documentation, including without
limitation financing statements, stock certificates and stock powers (in the
case of clause (a) hereof) or certificates of merger (in the case of clause (b)
hereof) and in either case, corporate resolutions and other authority
documents, certificates and opinions of counsel, all as reasonably required by
the Agent and the Majority Banks.
8.23 Royalty Payments on Licenses and Trademarks. So long as no
Default or Event of Default has occurred and is continuing, and subject to
Section 9.9 hereof, any Guarantor may make royalty payments or pay licensing
fees to ATRO under royalty agreements or licensing agreements in an aggregate
amount for all such payments by all Guarantors not to exceed in any year 3% of
gross revenues of RTO Operating as shown on the financial statements delivered
under Section 8.1 hereof.
8.24 Further Assurances. Execute and deliver or cause to be executed
and delivered to Agent within a reasonable time following Agent's request, and
at the Company's expense, such other documents or instruments as Agent may
reasonably require to effectuate more fully the purposes of this Agreement or
the other Loan Documents.
9. NEGATIVE COVENANTS
Company covenants and agrees that, until the Revolving Credit Maturity
Date and thereafter until expiration of all Letters of Credit and final payment
in full of the Indebtedness and the performance by Company and the Guarantors
of all other obligations under this Agreement and the other Loan Documents it
will not, and will not permit any of the Subsidiaries, to:
9.1 Limitation on Debt. Create, incur, assume or suffer to exist any
Debt, except:
(a) Indebtedness in respect of the Notes, the Letters of Credit
and other obligations of the Company or any Guarantor under this
Agreement and the other Loan Documents to which it is a party;
(b) any Debt set forth in Schedule 9.1 attached hereto and any
renewals or refinancing of such Debt in amounts not exceeding the
scheduled amounts (less any required
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amortization according to the terms thereof), on substantially the
same terms and otherwise in compliance with this Agreement;
(c) Debt of the Company or RTO Operating incurred to finance
the acquisition of motor vehicles (whether pursuant to a loan or a
Financing Lease) in an aggregate principal amount not exceeding
$5,000,000 at any time outstanding and other Debt of the Company or
RTO Operating incurred to finance the acquisition of fixed or capital
assets other than motor vehicles (whether pursuant to a loan or a
Financing Lease) in an aggregate amount not exceeding $1,000,000 at
any time outstanding, and any renewals or refinancing of such Debt in
amounts not exceeding the scheduled amounts (less any required
amortization according to the terms thereof), on substantially the
same terms and otherwise in compliance with this Agreement;
(d) Debt of the Company or RTO Operating in connection with
non-competition agreements or signing bonus entered into by the
Company or RTO Operating in connection with Permitted Acquisitions, in
an aggregate amount not exceeding $3,000,000 at any one time;
(e) Debt in respect of taxes, assessments or governmental
charges to the extent that payment thereof shall not at the time be
required to be made in accordance with Section 8.13;
(f) current unsecured trade, utility or nonextraordinary
accounts payable arising in the ordinary course of Company's or such
Guarantor's businesses;
(g) Intercompany Loans from the Company to RTO Operating but
only to the extent permitted under the other applicable terms and
limitations of this Agreement, including but not limited to Section
9.8 hereof;
(h) Intercompany Loans from the Company to RTO Holding but
only to the extent such loans are immediately readvanced to RTO
Operating pursuant to the terms of the applicable Intercompany Note
and otherwise as permitted under the other applicable terms and
limitations of this Agreement, including but not limited to Section
9.8 hereof;
(i) Intercompany Loans from the Company or any Guarantor to
any Subsidiary but only to the extent permitted under the applicable
terms and limitations of this Agreement, including but not limited to
Section 9.8 hereof; and
(j) additional Debt of the Company or RTO Operating not
exceeding $5,000,000 in aggregate principal amount at any one time
outstanding, provided that only the principal component of obligations
shall be considered in calculating such $5,000,000 amount.
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9.2 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Permitted Liens;
(b) Liens securing Debt permitted by Section 9.1(c) incurred to
finance the acquisition of fixed or capital assets, provided that (i)
such Liens shall be created substantially simultaneously with the
acquisition of such motor vehicles, or fixed or capital assets, (ii)
such Liens do not at any time encumber any property other than the
property financed by such Debt, (iii) the amount of Debt secured
thereby is not increased and (iv) the principal amount of Debt secured
by any such Lien shall at no time exceed 100% of the original purchase
price of such property;
(c) any Lien securing indebtedness assumed pursuant to a Permitted
Acquisition, provided that such Lien is limited to the property so
acquired, and was not entered into, extended or renewed in
contemplation of such acquisition;
(d) Liens in favor of Agent, as security for the Indebtedness; and
(e) Liens securing Debt under any Intercompany Loans;
(f) other Liens, existing on the Effective Date, set forth on
Schedule 9.2.
9.3 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except the Guaranties or the Permitted
Guarantees.
9.4 Acquisitions. Other than Permitted Acquisitions and except as
permitted pursuant to Section 9.7 hereof, purchase or otherwise acquire or
become obligated for the purchase of all or substantially all or any material
portion of the assets or business interests of any Person, firm or corporation,
or any shares of stock (or other ownership interests) of any corporation,
trusteeship or association, or any business or going concern, or in any other
manner effectuate or attempt to effectuate an expansion of present business by
acquisition.
9.5 Limitation on Mergers, or Sale of Assets. Other than the Merger
and except as permitted under Section 9.4 hereof, enter into any merger or
consolidation or convey, sell, lease, assign, transfer or otherwise dispose of
any of its property, business or assets (including, without limitation,
receivables and leasehold interests), whether now owned or hereafter acquired,
except:
(a) inventory leased or sold pursuant to Rental Contracts in the
ordinary course of business;
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(b) obsolete or worn out property, property no longer useful in
the conduct of Company's business or property from closed offices, in
each case disposed of in the ordinary course of business;
(c) the merger of the Company into a Delaware corporation by way
of reincorporation so long as (x) the Company gives forty-five days
prior written notice of such reincorporation to the Agent and the
Banks, (y) the surviving entity assumes in writing all of the
obligations of the Company pursuant to this Agreement on terms and
conditions satisfactory to the Agent and the Banks and (z) the
surviving entity delivers authority documents, opinions, documents
evidencing the merger, financing statements, replacement notes and
such other documents as shall be required by the Agent and the Banks
in connection therewith;
(d) the merger of any Subsidiary (other than RTO Operating) with
and into the Company or RTO Operating, so long as the Company (if the
Company is a party to such merger) or RTO Operating (if RTO Operating
is a party to the merger)is the surviving corporation;
(e) Asset Sales (other than Asset Sales otherwise permitted by
this Section 9.5); provided however that in each case (X) the sales
price is at least equal to the fair market value of the assets sold or
otherwise disposed of and the transfer is on terms and conditions
satisfactory to the Agent and the Banks, (Y) promptly but in any event
no more than three (3) days following the date of such Asset Sale,
after giving effect to such sale, the Company shall deliver, or cause
to be delivered, a Borrowing Base Certificate executed by a
Responsible Officer, (Z) immediately upon receipt by the Company or
such Subsidiary of the proceeds of such Asset Sale, then pursuant to
Section 2.7 hereof, the Company shall prepay any outstanding Advances
by the amount of such proceeds (net of any reasonable direct expenses
of sale); and
(f) the sale, transfer or other disposition of other property in
an amount not to exceed and aggregate amount of $1,000,000 disposed of
during any fiscal year of the Company;
provided that, with respect to the sale, transfer or other disposition of
assets pursuant to clauses (c), (d), (e) or (f) above, no Default or Event of
Default shall have occurred and be continuing (both before and after giving
effect thereto).
9.6 Dividends. Declare or pay any dividends on or make any other
distribution with respect to any shares of its capital stock or other equity
interests (other than dividends or similar distributions payable solely in
common stock or membership interests), whether by reduction of stockholders'
equity or otherwise or permit any Subsidiary to make any such distributions,
except for:
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(a) dividends and other distributions by Subsidiaries of the
Company to Company; and
(b) so long as the Fixed Charge Coverage Ratio is greater than or
equal to 4.0:1 (both before and after giving effect thereto), cash
dividends by the Company;
provided that, with respect to the payment of dividends or other distributions
under clauses (a) or (b), above no Default or Event of Default has occurred and
is continuing at the time such dividends or other distributions are declared
and at the time such dividends or other distributions are paid.
9.7 Limitation on Capital Expenditures. Except in connection with the
Merger, make or commit to make (by way of the acquisition of securities of a
Person or otherwise) any expenditure in respect of the purchase or other
acquisition of fixed or capital assets (excluding any such asset acquired in
connection with normal replacement and maintenance programs properly charged to
current operations) except for:
(a) Permitted Acquisitions permitted by Section 9.4, to the extent
assets are acquired which constitute Capital Expenditures; and
(b) expenditures in the ordinary course of business not exceeding,
in the aggregate for the Company and its Subsidiaries (i) during
fiscal year 1998, $6,000,000 and (ii) during any fiscal year
thereafter, $3,000,000.
9.8 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities, of or any assets constituting a
business unit of, or make any other investment in, any Person, except:
(a) Permitted Investments;
(b) extensions of trade credit in the ordinary course of business;
(c) loans and advances to officers and employees of the
Company for travel and entertainment in the ordinary course of
business in an aggregate amount, not to exceed $200,000 at any one
time outstanding, and advances to employees for the purposes of
purchasing for personal use items otherwise classified as inventory,
in an aggregate amount for all such advances not to exceed $300,000 at
any one time;
(d) Permitted Acquisitions permitted pursuant to Section 9.4; and
(e) Intercompany Loans, Advances and Investments by the Company to
RTO Operating or to RTO Holding;
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(f) Intercompany Loan, Advances and Investments by RTO Holding to
RTO Operating, or by RTO Operating to RTO Holding; and
(g) loans, advances and investments by the Company or any
Guarantor in any Subsidiary other than RTO Holding and RTO Operating
in an aggregate outstanding amount not to exceed $500,000 at any time.
In valuing any Investments for the purpose of applying the limitations set
forth in this Section 9.9 (except as otherwise expressly provided herein), such
Investment shall be taken at the original cost thereof, without allowance for
any subsequent write-offs or appreciation or depreciation, but less any amount
repaid or recovered on account of capital or principal.
9.9 Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service, with any Affiliate of the Company
unless such transaction is otherwise permitted under this Agreement, is in the
ordinary course of the Company's or such Guarantor's business and is upon fair
and reasonable terms no less favorable to the Company or such Guarantor than it
would obtain in a comparable arms length transaction with a Person not a
Guarantor.
9.10 Sale and Leaseback. Except as permitted by Section 9.1(c), and
except in connection with any property acquired pursuant to a Permitted
Acquisition, enter into any arrangement with any Person providing for the
leasing by the Company or any Guarantor of real or personal property which has
been or is to be sold or transferred by the Company or such Guarantor to such
Person or to any other Person to whom funds have been or are to be advanced by
such Person on the security of such property or rental obligations of the
Company or such Guarantor, as the case may be.
9.11 Limitation on Negative Pledge Clauses. Except for Permitted Liens
and any other agreements, documents or instruments pursuant to which Liens not
prohibited by the terms of this Agreement are created, entered into, or allow
to exist, any agreement, document or instrument which would restrict or prevent
Company and its Guarantors from granting Agent on behalf of Banks liens upon,
security interests in and pledges of their respective assets which are senior
in priority to all other Liens.
9.12 Prepayment of Debts. Except in connection with Debt assumed in
connection with a Permitted Acquisition, prepay, purchase, redeem or defease
any Debt for money borrowed or any capital leases excluding, subject to the
terms hereof, the Indebtedness, and excluding paydowns from time to time of
permitted working capital facilities or other revolving debt and mandatory
payments, prepayments or redemptions for which Company or any Guarantor is
obligated as of the date hereof.
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10. DEFAULTS
10.1 Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) non-payment when due of (i) the principal or interest under
any of the Notes issued hereunder in accordance with the terms
thereof, (ii) any Reimbursement Obligation, or (iii) any Fees, and in
the case of interest payments and Fees, continuance thereof for three
(3) Business Days;
(b) non-payment of any money by Company under this Agreement or
by Company or any Guarantor under any of the Loan Documents, other
than as set forth in subsection (a), above within ten (10) Business
Days after notice from Agent that the same is due and payable;
(c) default in the observance or performance of any of the
conditions, covenants or agreements of Company set forth in Sections
2.7, 3.6, 8.1, 8.2, 8.4(a), 8.6, 8.7, 8.9 through 8.12, 8.20, or 9 (in
its entirety);
(d) default in the observance or performance of any of the other
conditions, covenants or agreements set forth in this Agreement by
Company and continuance thereof for a period of thirty (30)
consecutive days;
(e) any representation or warranty made by Company or any
Guarantor herein or in any instrument submitted pursuant hereto or by
any other party (other than the Agent or any Bank) to the Loan
Documents proves untrue or misleading in any material adverse respect
when made;
(f) default in the observance or performance of or failure to
comply with any of the conditions, covenants or agreements of Company
or any Guarantor set forth in any of the other Loan Documents, and the
continuance thereof beyond any period of grace or cure specified in
any such document;
(g) default (i) in the payment of any indebtedness for borrowed
money (other than Indebtedness hereunder) of Company or any Guarantor
in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate
when due (whether by acceleration or otherwise) and continuance
thereof beyond any applicable period of cure or (ii) failure to comply
with the terms of any other obligation of Company or any Guarantor
with respect to any indebtedness for borrowed money (other than
Indebtedness hereunder) in excess of Five Hundred Thousand Dollars
($500,000) in the aggregate, which with the giving of notice or
passage of time or both would permit the holder or holders thereto to
accelerate such other indebtedness for borrowed money or terminate its
commitment thereunder, as applicable;
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(h) the rendering of any judgment(s) for the payment of money
in excess of the sum of One Million Dollars ($1,000,000) individually
or in the aggregate against Company or any Guarantor, and such
judgments shall remain unpaid, unvacated, unbonded or unstayed by
appeal or otherwise for a period of forty five (45) consecutive days,
except as covered by adequate insurance with a reputable carrier and
an action is pending in which an active defense is being made with
respect thereto;
(i) (i) the Company or any ERISA Affiliate shall engage in
any Prohibited Transaction involving any Pension Plan or (ii) any
event described in Section 7.15 shall occur or (iii) the Company or
any ERISA Affiliate shall, or in the reasonable opinion of the
Majority Banks is likely to, incur any liability in connection with a
withdrawal from, or the insolvency, or reorganization of, a
Multiemployer Plan and in each case in clauses (i) through (iii)
above, (x) a period of sixty (60) days, or more, has elapsed from the
occurrence of such event or condition and (y) such event or condition,
together with all other such events or conditions, if any, could
reasonably be expected to have a Material Adverse Effect;
(j) a receiver, liquidator, custodian or trustee of the
Company or any Guarantor, or of all or any part of the property of the
Company or any Guarantor, shall be appointed by court order and such
order shall remain in effect for more than sixty (60) days, or an
order for relief shall be entered with respect to the Company or any
Guarantor, or the Company or any Guarantor shall be adjudicated a
bankrupt or insolvent; or any of the property of the Company or any
Guarantor shall be sequestered by court order and such order shall
remain in effect for more than sixty (60) days; or a petition shall be
filed against the Company or any Guarantor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, and shall not be dismissed within sixty (60) days
after such filing; or the Company or any Guarantor shall file a
petition in voluntary bankruptcy or seeking relief under any provision
of any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, or shall consent to
the filing of any petition against it under any such law; or the
Company or any Guarantor shall make an assignment for the benefit of
its creditors, or shall admit in writing its inability, or shall fail,
to pay its debts generally as they become due, or shall consent to the
appointment of a receiver, liquidator or trustee of the Company or any
Guarantor or of all or any part of the property of the Company or any
Guarantor.
(k) any provision of any Guaranty, the Pledge Agreement or
the Security Agreement shall at any time for any reason cease to be
valid and binding and enforceable against the Company or any of the
Guarantors, as applicable, or the validity, binding effect or
enforceability thereof shall be contested by any Person, or the
Company or any of the
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Guarantors shall deny that it has any or further liability or obligation under
the Guaranty, the Pledge Agreement or the Security Agreement, as the case may
be, or the Guaranty, the Pledge Agreement or the Security Agreement, as the
case may be, shall be terminated, invalidated, revoked or set aside or in any
way cease to give or provide to the Banks and the Agent the benefits purported
to be created thereby.
10.2 Exercise of Remedies. If an Event of Default has occurred and is
continuing hereunder: (a) the Agent shall, upon being directed to do so by the
Majority Banks, declare the Revolving Credit Aggregate Commitment terminated;
(b) the Agent shall, upon being directed to do so by the Majority Banks,
declare the entire unpaid principal Indebtedness, including the Notes,
immediately due and payable, without presentment, notice or demand, all of
which are hereby expressly waived by Company; (c) upon the occurrence of any
Event of Default specified in subsection 10.1(j), above, and notwithstanding
the lack of any declaration by Agent under preceding clause (b), the entire
unpaid principal Indebtedness, including the Notes, shall become automatically
and immediately due and payable, and the Revolving Credit Aggregate Commitment
shall be automatically and immediately terminated; (d) the Agent shall, upon
being directed to do so by the Majority Banks, demand immediate delivery of
cash collateral, and the Company and each Account Party agrees to deliver such
cash collateral upon demand, in an amount equal to the maximum amount that may
be available to be drawn at any time prior to the stated expiry of all
outstanding Letters of Credit, and (e) the Agent shall, if directed to do so by
the Majority Banks or the Banks, as applicable (subject to the terms hereof),
exercise any remedy permitted by this Agreement, the Loan Documents or law.
10.3 Rights Cumulative. No delay or failure of Agent and/or Banks in
exercising any right, power or privilege hereunder shall affect such right,
power or privilege, nor shall any single or partial exercise thereof preclude
any further exercise thereof, or the exercise of any other power, right or
privilege. The rights of Agent and Banks under this Agreement are cumulative
and not exclusive of any right or remedies which Banks would otherwise have.
10.4 Waiver by Company of Certain Laws. To the extent permitted by
applicable law, Company hereby agrees to waive, and does hereby absolutely and
irrevocably waive and relinquish the benefit and advantage of any valuation,
stay, appraisement, extension or redemption laws now existing or which may
hereafter exist, which, but for this provision, might be applicable to any sale
made under the judgment, order or decree of any court, on any claim for
interest on the Notes, or any security interest or mortgage contemplated by or
granted under or in connection with this Agreement. These waivers have been
voluntarily given, with full knowledge of the consequences thereof.
10.5 Waiver of Defaults. No Event of Default shall be waived by the
Banks except in a writing signed by an officer of the Agent in accordance with
Section 14.11 hereof. No single or partial exercise of any right, power or
privilege hereunder, nor any delay in the exercise thereof, shall preclude
other or further exercise of their rights by Agent or the Banks. No waiver of
any Event of Default shall extend to any other or further Event of Default. No
forbearance on the part of the
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Agent or the Banks in enforcing any of their rights shall constitute a waiver
of any of their rights. Company expressly agrees that this Section may not be
waived or modified by the Banks or Agent by course of performance, estoppel or
otherwise.
10.6 Set Off.
Upon the occurrence and during the continuance of any Event of
Default, each Bank may at any time and from time to time, without notice to the
Company but subject to the provisions of Section 11.3 hereof, (any requirement
for such notice being expressly waived by the Company) set off and apply
against any and all of the obligations of the Company now or hereafter existing
under this Agreement, whether owing to such Bank or any other Bank or the
Agent, 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 such Bank
to or for the credit or the account of the Company and any property of the
Company from time to time in possession of such Bank, irrespective of whether
or not such deposits held or indebtedness owing by such Bank may be contingent
and unmatured and regardless of whether any Collateral then held by Agent or
any Bank is adequate to cover the Indebtedness. Promptly following any such
setoff, such Bank shall give written notice to Agent and to Company of the
occurrence thereof. The Company hereby grants to the Banks and the Agent a lien
on and security interest in all such deposits, indebtedness and property as
collateral security for the payment and performance of all of the obligations
of the Company under this Agreement. The rights of each Bank under this Section
10.6 are in addition to the other rights and remedies (including, without
limitation, other rights of setoff) which such Bank may have.
11. PAYMENTS, RECOVERIES AND COLLECTIONS
11.1 Payment Procedure.
(a) All payments by Company of principal of, or interest on, the
Notes, or of Fees, shall be made without setoff or counterclaim on the
date specified for payment under this Agreement not later than 12:00
noon (Detroit time) in immediately available funds to Agent, for the
ratable account of the Banks, at Agent's office located at One Detroit
Center, Detroit, Michigan 48226-3289, (care of Agent's Eurocurrency
Lending Office, for Eurocurrency-based Advances). Upon receipt by the
Agent of each such payment, the Agent shall make prompt payment in
like funds received to each Bank as appropriate, or, in respect of
Eurocurrency-based Advances, to such Bank's Eurocurrency Lending
Office.
(b) Unless the Agent shall have been notified by Company prior to
the date on which any payment to be made by Company is due that
Company does not intend to remit such payment, the Agent may, in its
sole discretion and without obligation to do so, assume that the
Company has remitted such payment when so due and the Agent may, in
reliance upon such assumption, make available to each Bank on such
payment date an amount equal to such Bank's share of such assumed
payment. If Company has not in fact remitted such payment to the Agent
each Bank shall forthwith on demand repay to the Agent the amount
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of such assumed payment made available or transferred to such Bank,
together with the interest thereon, in respect of each day from and
including the date such amount was made available by the Agent to such
Bank to the date such amount is repaid to the Agent at a rate per
annum equal to (i) for Prime-based Advances, the Federal Funds
Effective Rate (daily average), as the same may vary from time to
time, and (ii) with respect to Eurocurrency- based Advances, Agent's
aggregate marginal cost (including the cost of maintaining any
required reserves or deposit insurance and of any fees, penalties,
overdraft charges or other costs or expenses incurred by Agent) of
carrying such amount.
(c) Subject to the definition of Interest Period, whenever
any payment to be made hereunder shall otherwise be due on a day which
is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included
in computing interest, if any, in connection with such payment.
(d) All payments to be made by the Company under this
Agreement or any of the Notes (including without limitation payments
under the Swing Line Note) shall be made without set-off or
counterclaim, as aforesaid, and without deduction for or on account of
any present or future withholding or other taxes of any nature imposed
by any governmental authority or of any political subdivision thereof
or any federation or organization of which such governmental authority
may at the time of payment be a member, unless Company is compelled by
law to make payment subject to such tax. In such event, Company shall:
(i) pay to the Agent for Agent's own account and/or, as
the case may be, for the account of the Banks (and,
in the case of Advances of the Swing Line, pay to
the Swing Line Bank which funded such Advances)
such additional amounts as may be necessary to
ensure that the Agent and/or such Bank or Banks
receive a net amount equal to the full amount which
would have been receivable had payment not been made
subject to such tax; and
(ii) remit such tax to the relevant taxing authorities
according to applicable law, and send to the Agent
or the applicable Bank (including the Swing Line
Bank) or Banks, as the case may be, such
certificates or certified copy receipts as the Agent
or such Bank or Banks shall reasonably require as
proof of the payment by the Company, of any such
taxes payable by the Company.
As used herein, the terms "tax", "taxes" and "taxation" include all
existing taxes, levies, imposts, duties, charges, fees, deductions and
withholdings and any restrictions or conditions resulting in a charge together
with interest thereon and fines and penalties with respect thereto which may be
imposed by reason of any violation or default with respect to the law regarding
such tax, assessed as a result of or in connection with the transactions
hereunder, or the payment and or
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receipt of funds hereunder, or the payment or delivery of funds into or out of
any jurisdiction other than the United States (whether assessed against
Company, Agent or any of the Banks).
11.2 Application of Proceeds of Collateral. Notwithstanding anything
to the contrary in this Agreement, after an Event of Default, the proceeds of
any Collateral, together with any offsets, voluntary payments by Company or any
Guarantor or others and any other sums received or collected in respect of the
Indebtedness, shall be applied, first, to the Notes and the Reimbursement
Obligations (if any) on a pro rata basis (or in such order and manner as
determined by the Majority Banks; subject, however, to the applicable
Percentages of the loans held by each of the Banks), next, to any other
Indebtedness on a pro rata basis, and then, if there is any excess, to Company
or the applicable Guarantor, as the case may be. The application of such
proceeds and other sums to the Revolving Credit Notes and the Reimbursement
Obligations (if any) shall be based on each Bank's Percentage of the aggregate
of the loans.
11.3 Pro-rata Recovery. If any Bank shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or
otherwise) on account of principal of, or interest on, any of the Indebtedness
in excess of its pro rata share of payments then or thereafter obtained by all
Banks upon principal of and interest on all Indebtedness, such Bank shall
purchase from the other Banks such participations in the Revolving Credit Notes
and/or Reimbursement Obligation held by them as shall be necessary to cause
such purchasing Bank to share the excess payment or other recovery ratably in
accordance with the Percentage with each of them; provided, however, that if
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing holder, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
12. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS
12.1 Reimbursement of Prepayment Costs. If Company makes any payment
of principal with respect to any Eurocurrency-based Advance or Quoted Rate
Advance on any day other than the last day of the Interest Period applicable
thereto (whether voluntarily, by acceleration, or otherwise), or if Company
fails to borrow any Eurocurrency-based Advance or Quoted Rate Advance after
notice has been given by Company to Agent in accordance with the terms hereof
requesting such Advance, or if Company fails to make any payment of principal
or interest in respect of a Eurocurrency-based Advance or Quoted Rate Advance
when due, then Company shall reimburse Agent and Banks, as the case may be on
demand for any resulting loss, cost or expense incurred by Agent and Banks, as
the case may be as a result thereof, including, without limitation, any such
loss, cost or expense incurred in obtaining, liquidating, employing or
redeploying deposits from third parties, whether or not Agent and Banks, as the
case may be shall have funded or committed to fund such Advance. Such amount
payable by Company to Agent and Banks, as the case may be may include, without
limitation, an amount equal to the excess, if any, of (a) the amount of
interest which would have accrued on the amount so prepaid, or not so borrowed,
refunded or converted, for the period from the date of such prepayment or of
such failure to borrow, refund or convert, through the last day of the relevant
Interest Period, at the applicable rate of interest for said
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Advance(s) provided under this Agreement, over (b) the amount of interest (as
reasonably determined by Agent and Banks, as the case may be) which would have
accrued to Agent and Banks, as the case may be on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
eurodollar market. Calculation of any amounts payable to any Bank under this
paragraph shall be made as though such Bank shall have actually funded or
committed to fund the relevant Advance through the purchase of an underlying
deposit in an amount equal to the amount of such Advance and having a maturity
comparable to the relevant Interest Period; provided, however, that any Bank
may fund any Eurocurrency-based Advance or Quoted Rate Advance, as the case may
be in any manner it deems fit and the foregoing assumptions shall be utilized
only for the purpose of the calculation of amounts payable under this
paragraph. Upon the written request of Company, Agent and Banks shall deliver
to Company a certificate setting forth the basis for determining such losses,
costs and expenses, which certificate shall be conclusively presumed correct,
absent manifest error.
12.2 Agent's Eurocurrency Lending Office. For any Advance to which the
Eurocurrency- based Rate is applicable, if Agent shall designate a Eurocurrency
Lending Office which maintains books separate from those of the rest of Agent,
Agent shall have the option of maintaining and carrying the relevant Advance on
the books of such Eurocurrency Lending Office.
12.3 Circumstances Affecting Eurocurrency-based Rate Availability. If
with respect to any Interest Period, Agent or the Banks (after consultation
with Agent) shall determine that, by reason of circumstances affecting the
interbank markets generally, deposits in eurodollars in the applicable amounts
are not being offered to the Agent for such Interest Period, then Agent shall
forthwith give notice thereof to the Company. Thereafter, until Agent notifies
Company that such circumstances no longer exist, the obligation of the Banks to
make Eurocurrency-based Advances, and the right of Company to convert an
Advance to or refund an Advance as a Eurocurrency-based Advance shall be
suspended, and the Company shall repay in full (or cause to be repaid in full)
the then outstanding principal amount of each such Eurocurrency-based Advance
covered hereby together with accrued interest thereon, any amounts payable (but
not yet paid) under Section 12.1, hereof, and all other amounts payable
hereunder on the last day of the then current Interest Period applicable to
such Advance. Upon the date for repayment as aforesaid and unless Company
notifies Agent to the contrary within two (2) Business Days after receiving a
notice from Agent pursuant to this Section, such outstanding principal amount
shall be converted to a Prime-based Advance as of the last day of such Interest
Period.
12.4 Laws Affecting Eurocurrency-based Advance Availability. In the
event that any applicable law, rule or regulation (whether domestic or foreign)
now or hereafter in effect and whether or not currently applicable to any Bank
or the Agent or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by the Agent or any of the Banks (or any of their
respective Eurocurrency Lending Offices) with any request or directive (whether
or not having the force of law) of any such authority, shall make it unlawful
or impossible for any of the Banks (or any of their respective Eurocurrency
Lending Offices) to honor its obligations hereunder to make or maintain any
Advance with interest
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at the Eurocurrency-based Rate, such Bank or the Agent shall forthwith give
notice thereof to Company and the Agent. Thereafter the Agent shall so notify
Company and the right of Company to convert an Advance or refund an Advance as
a Eurocurrency-based Advance, shall be suspended and thereafter Company may
select as Applicable Interest Rates only those which remain available and which
are permitted to be selected hereunder, and if any of the Banks may not
lawfully continue to maintain an Advance to the end of the then current
Interest Period applicable thereto as a Eurocurrency-based Advance, Company
shall immediately prepay such Advance, together with interest to the date of
payment, and any amounts payable under Sections 12.1 or 12.6 with respect to
such prepayment and the applicable Advance shall immediately be converted to a
Prime-based Advance and the Prime-based Rate shall be applicable thereto.
12.5 Increased Cost of Eurocurrency-based Advances. In the event that
any change in applicable law, rule or regulation (whether domestic or foreign)
now or hereafter in effect and whether or not currently applicable to any Bank
or the Agent or any interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Agent or any of the
Banks (or any of their respective Eurocurrency Lending Offices) with any
request or directive (whether or not having the force of law) made by any such
authority, central bank or comparable agency after the date hereof:
(a) shall subject the Agent or any of the Banks (or any of their
respective Eurocurrency Lending Offices) to any tax, duty or other
charge with respect to any Advance or any Note or shall change the
basis of taxation of payments to the Agent or any of the Banks (or any
of their respective Eurocurrency Lending Offices) of the principal of
or interest on any Advance or any Note or any other amounts due under
this Agreement in respect thereof (except for changes in the rate of
tax on the overall net income or revenues of the Agent or of any of
the Banks (or any of their respective Eurocurrency Lending Offices)
imposed by the United States of America or the jurisdiction in which
such Bank's principal executive office is located); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by the Agent or any of the Banks (or any of their respective
Eurocurrency Lending Offices) or shall impose on the Agent or any of
the Banks (or any of their respective Eurocurrency Lending Offices) or
the interbank markets any other condition affecting any Advance or any
of the Notes;
and the result of any of the foregoing is to increase the costs to the Agent or
any of the Banks of making, funding or maintaining any part of the Indebtedness
hereunder as a Eurocurrency-based Advance or to reduce the amount of any sum
received or receivable by the Agent or any of the Banks under this Agreement or
under the Notes in respect of a Eurocurrency-based Advance then Agent or such
Bank, as the case may be, shall promptly notify the Company of such fact and
demand compensation therefor and, within fifteen (15) days after such notice,
Company agrees to pay to
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Agent or such Bank such additional amount or amounts as will compensate Agent
or such Bank or Banks for such increased cost or reduction. A certificate of
Agent or such Bank setting forth the basis for determining such additional
amount or amounts necessary to compensate such Bank or Banks shall accompany
such demand for payment and shall be conclusively presumed to be correct save
for manifest error.
For purposes of this Section, a change in law, rule, regulation,
interpretation, administration, request or directive shall include, without
limitation, any change made or which becomes effective on the basis of a law,
rule, regulation, interpretation, administration, request or directive
presently in force, the effective date of which change is delayed by the terms
of such law, rule, regulation, interpretation, administration, request or
directive.
12.6 Indemnity. The Company will indemnify Agent and each of the Banks
against any loss or expense which may arise or be attributable to the Agent's
and each Bank's obtaining, liquidating or employing deposits or other funds
acquired to effect, fund or maintain the Advances (a) as a consequence of any
failure by the Company to make any payment when due of any amount due hereunder
in connection with a Eurocurrency-based Advance, (b) due to any failure of the
Company to borrow on a date specified therefor in a Request for Revolving
Credit Advance or (c) due to any payment or prepayment of any
Eurocurrency-based Advance on a date other than the last day of the Interest
Period for such Revolving Credit Advance, whether required by another provision
of this Agreement or otherwise. The Agent's and each Bank's (as applicable)
calculations of any such loss or expense shall be furnished to the Company and
shall be conclusively presumed correct, absent manifest error.
12.7 Other Increased Costs. In the event that after the date hereof
the adoption of or any change in any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect and whether or not
presently applicable to any Bank or Agent, or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Bank or Agent
with any guideline, request or directive of any such authority (whether or not
having the force of law), including any risk based capital guidelines, affects
or would affect the amount of capital required or expected to be maintained by
such Bank or Agent (or any corporation controlling such Bank or Agent) and such
Bank or Agent, as the case may be, determines that the amount of such capital
is increased by or based upon the existence of such Bank's or Agent's
obligations or Advances hereunder and such increase has the effect of reducing
the rate of return on such Bank's or Agent's (or such controlling
corporation's) capital as a consequence of such obligations or Advances
hereunder to a level below that which such Bank or Agent (or such controlling
corporation) could have achieved but for such circumstances (taking into
consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank or Agent to be material (collectively, "Increased Costs"),
then Agent or such Bank shall notify the Company, and thereafter the Company
shall pay to such Bank or Agent, as the case may be, from time to time, upon
request by such Bank or Agent, additional amounts sufficient to compensate such
Bank or Agent (or such controlling corporation) for any increase in the amount
of capital and reduced rate of return which such Bank or Agent reasonably
determines to be
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allocable to the existence of such Bank's or Agent's obligations or Advances
hereunder; provided, however that the Company shall not be obligated to
reimburse any Bank for any Increased Costs pursuant to this Section 12.7 unless
such Bank notifies Company and the Agent within 180 days after such affected
Bank has obtained actual knowledge of such Increased Costs (but in any event
within 365 days after such affected Bank is required to comply with the
applicable change in law). A statement as to the amount of such compensation,
prepared in good faith and in reasonable detail by such Bank or Agent, as the
case may be, shall be submitted by such Bank or by Agent to the Company,
reasonably promptly after becoming aware of any event described in this Section
12.7 and shall be conclusive, absent manifest error in computation.
12.8 Substitution of Banks. If (i) the obligation of any Bank to make
Eurocurrency-based Advances has been suspended pursuant to Section 12.3 or
Section 12.4 or (ii) any Bank has demanded compensation under Section 12.5 (in
each case, an "Affected Lender"), then Company shall have the right, with the
assistance of the Agent, to seek a substitute lender or lenders (which may be
one or more of the Banks (the "Purchasing Lender" or "Purchasing Lenders") to
purchase the Revolving Credit Note and assume the commitment (including without
limitation its participations in Swing Line Advances and Letters of Credit)
under this Agreement of such Affected Lender. The Affected Lender shall be
obligated to sell its Revolving Credit Note and assign its commitment to such
Purchasing Lender or Purchasing Lenders within fifteen days after receiving
notice from Company requiring it to do so, at an aggregate price equal to the
outstanding principal amount thereof plus unpaid interest accrued thereon up to
but excluding the date of the sale. In connection with any such sale, and as a
condition thereof, Company shall pay to the Affected Lender all fees accrued
for its account hereunder to but excluding the date of such sale, plus, if
demanded by the Affected Lender at least two Business Days prior to such sale,
(i) the amount of any compensation which would be due to the Affected Lender
under Section 12.1 if Company has prepaid the outstanding Eurocurrency-based
Advances of the Affected Lender on the date of such sale and (ii) any
additional compensation accrued for its account under Section 12.5 to but
excluding said date. Upon such sale, the Purchasing Lender or Purchasing
Lenders shall assume the Affected Lender's commitment and the Affected Lender
shall be released from its obligations hereunder to a corresponding extent. If
any Purchasing Lender is not already one of the Banks, the Affected Lender, as
assignor, such Purchasing Lender, as assignee, Company and the Agent, with the
subscribed consent of the Swing Line Bank shall enter into an Assignment
Agreement pursuant to Section 14.8 hereof, whereupon such Purchasing Lender
shall be a Bank party to this Agreement, shall be deemed to be an assignee
hereunder and shall have all the rights and obligations of a Bank with a
Percentage equal to its ratable share of the Revolving Credit Aggregate
Commitment of the Affected Lender. In connection with any assignment pursuant
to this Section 12.8, Company or the Purchasing Lender shall pay to the Agent
the administrative fee for processing such assignment referred to in Section
14.8. Upon the consummation of any sale pursuant to this Section 12.8, the
Affected Lender, the Agent and Company shall make appropriate arrangements so
that, if required, each Purchasing Lender receives a new Revolving Credit Note.
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13. AGENT
13.1 Appointment of Agent. Each Bank and the holder of each Note
irrevocably appoints and authorizes the Agent to act on behalf of such Bank or
holder under this Agreement and the other Loan Documents and to exercise such
powers hereunder and thereunder as are specifically delegated to Agent by the
terms hereof and thereof, together with such powers as may be reasonably
incidental thereto, including without limitation the power to execute or
authorize the execution of financing or similar statements or notices, and
other documents. In performing its functions and duties under this Agreement,
the Agent shall act solely as agent of the Banks and does not assume and shall
not be deemed to have assumed any obligation towards or relationship of agency
or trust with or for Company. Each Bank agrees (which agreement shall survive
any termination of this Agreement) to reimburse Agent for all reasonable
out-of-pocket expenses (including house and outside attorneys' fees and
disbursements) incurred by Agent hereunder or in connection herewith or with an
Event of Default or in enforcing the obligations of Company under this
Agreement or the other Loan Documents or any other instrument executed pursuant
hereto, and for which Agent is not reimbursed by Company, pro rata according to
such Bank's Percentage, but excluding any such expense resulting from Agent's
gross negligence or wilful misconduct. Agent shall not be required to take any
action under the Loan Documents, or to prosecute or defend any suit in respect
of the Loan Documents, unless indemnified to its satisfaction by the Banks
against loss, costs, liability and expense (excluding liability resulting from
its gross negligence or wilful misconduct). If any indemnity furnished to Agent
shall become impaired, it may call for additional indemnity and cease to do the
acts indemnified against until such additional indemnity is given.
13.2 Deposit Account with Agent. Company hereby authorizes Agent, in
Agent's sole discretion, to charge its general deposit account(s), if any,
maintained with Agent for the amount of any principal, interest, or other
amounts or costs due under this Agreement when the same become due and payable
under the terms of this Agreement or the Notes.
13.3 Scope of Agent's Duties. The Agent shall have no duties or
responsibilities except those expressly set forth herein, and shall not, by
reason of this Agreement or otherwise, have a fiduciary relationship with any
Bank (and no implied covenants or other obligations shall be read into this
Agreement against the Agent). None of Agent, its Affiliates nor any of their
respective directors, officers, employees or agents shall be liable to any Bank
for any action taken or omitted to be taken by it or them under this Agreement
or any document executed pursuant hereto, or in connection herewith or
therewith with the consent or at the request of the Majority Banks (or all of
the Banks for those acts requiring consent of all of the Banks) (except for its
or their own wilful misconduct or gross negligence), nor be responsible for or
have any duties to ascertain, inquire into or verify (a) any recitals or
warranties made by the Company, or any Subsidiary or Affiliate of the Company,
or any officer thereof contained herein or therein, (b) the effectiveness,
enforceability, validity or due execution of this Agreement or any document
executed pursuant hereto or any security thereunder, (c) the performance by
Company of its obligations hereunder or thereunder, or (d) the satisfaction of
any condition hereunder or thereunder, including without limitation the making
of any Advance or the issuance of any Letter of Credit. Agent and its
Affiliates shall be
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entitled to rely upon any certificate, notice, document or other communication
(including any cable, telegraph, telex, facsimile transmission or oral
communication) believed by it to be genuine and correct and to have been sent
or given by or on behalf of a proper person. Agent may treat the payee of any
Note as the holder thereof. Agent may employ agents and may consult with legal
counsel (who may be counsel for Company), independent public accountants and
other experts selected by it and shall not be liable to the Banks (except as to
money or property received by them or their authorized agents), for the
negligence or misconduct of any such agent selected by it with reasonable care
or for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
13.4 Successor Agent. Agent may resign as such at any time upon at
least 30 days prior notice to Company and all Banks. If Agent at any time shall
resign or if the office of Agent shall become vacant for any other reason,
Majority Banks shall, by written instrument, appoint successor agent(s)
satisfactory to such Majority Banks, and, so long as no Default or Event of
Default has occurred and is continuing, to Company. Such successor agent shall
thereupon become the Agent hereunder, as applicable, and shall be entitled to
receive from the prior Agent such documents of transfer and assignment as such
successor Agent may reasonably request. Any such successor Agent shall be a
commercial bank organized under the laws of the United States or any state
thereof and shall have a combined capital and surplus of at least $500,000,000.
If a successor is not so appointed or does not accept such appointment before
the resigning Agent's resignation becomes effective, the resigning Agent may
appoint a temporary successor to act until such appointment by the Majority
Banks is made and accepted or if no such temporary successor is appointed as
provided above by the resigning Agent, the Majority Banks shall thereafter
perform all of the duties of the resigning Agent hereunder until such
appointment by the Majority Banks is made and accepted. Such successor Agent
shall succeed to all of the rights and obligations of the resigning Agent as if
originally named. The resigning Agent shall duly assign, transfer and deliver
to such successor Agent all moneys at the time held by the resigning Agent
hereunder after deducting therefrom its expenses for which it is entitled to be
reimbursed. Upon such succession of any such successor Agent, the resigning
agent shall be discharged from its duties and obligations hereunder, except for
its gross negligence or wilful misconduct arising prior to its resignation
hereunder, and the provisions of this Article 13 shall continue in effect for
the benefit of the resigning Agent in respect of any actions taken or omitted
to be taken by it while it was acting as Agent.
13.5 Agent in its Individual Capacity. Comerica Bank, its Affiliates
and their respective successors and assigns, shall have the same rights and
powers hereunder as any other Bank and may exercise or refrain from exercising
the same as though Comerica Bank were not the Agent. Comerica Bank and its
Affiliates may (without having to account therefor to any Bank) accept deposits
from, lend money to, and generally engage in any kind of banking, trust,
financial advisory or other business with Company (or its Subsidiaries) as if
Comerica Bank were not acting as Agent hereunder, and may accept fees and other
consideration therefor without having to account for the same to the Banks.
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13.6 Credit Decisions. Each Bank acknowledges that it has,
independently of Agent and each other Bank and based on the financial
statements of Company and such other documents, information and investigations
as it has deemed appropriate, made its own credit decision to extend credit
hereunder from time to time. Each Bank also acknowledges that it will,
independently of Agent and each other Bank and based on such other documents,
information and investigations as it shall deem appropriate at any time,
continue to make its own credit decisions as to exercising or not exercising
from time to time any rights and privileges available to it under this
Agreement or any document executed pursuant hereto.
13.7 Agent's Fees. Company shall pay to Agent the annual agency fee
and such other fees and charges in the amounts and at the times set forth in
the letter agreement between Company and Agent dated December 9, 1997, as such
letter may be amended or restated from time to time. The Agent's Fees described
in this Section 13.7 shall not be refundable under any circumstances.
13.8 Authority of Agent to Enforce Notes and This Agreement. Each
Bank, subject to the terms and conditions of this Agreement, authorizes the
Agent with full power and authority as attorney-in-fact to institute and
maintain actions, suits or proceedings for the collection and enforcement of
the Notes and to file such proofs of debt or other documents as may be
necessary to have the claims of the Banks allowed in any proceeding relative to
Company, or any of its Subsidiaries, or their respective creditors or affecting
their respective properties, and to take such other actions which Agent
considers to be necessary or desirable for the protection, collection and
enforcement of the Notes, this Agreement or the other Loan Documents.
13.9 Indemnification. The Banks agree to indemnify the Agent and its
Affiliates (to the extent not reimbursed by Company, but without limiting any
obligation of Company to make such reimbursement), ratably according to their
respective Percentages, from and against any and all claims, damages, losses,
liabilities, costs or expenses of any kind or nature whatsoever (including,
without limitation, fees and disbursements of counsel) which may be imposed on,
incurred by, or asserted against the Agent and its Affiliates in any way
relating to or arising out of this Agreement, any of the other Loan Documents
or the transactions contemplated hereby or any action taken or omitted by the
Agent and its Affiliates under this Agreement or any of the Loan Documents;
provided, however, that no Bank shall be liable for any portion of such claims,
damages, losses, liabilities, costs or expenses resulting from the Agent's or
its Affiliates's gross negligence or willful misconduct. Without limitation of
the foregoing, each Bank agrees to reimburse the Agent and its Affiliates
promptly upon demand for its ratable share of any out-of-pocket expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent and its Affiliates in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement or any of the other
Loan Documents, to the extent that the Agent and its Affiliates is not
reimbursed for such expenses by Company, but without limiting the obligation of
Company to make such reimbursement. Each Bank agrees to reimburse the Agent and
its Affiliates promptly upon demand for its ratable share of any amounts owing
to the Agent and its Affiliates by the Banks pursuant to this Section, provided
that, if the
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Agent or its Affiliates is subsequently reimbursed by the Company for such
amounts, it shall refund to the Banks on a pro rata basis the amount of any
excess reimbursement. If the indemnity furnished to the Agent and its
Affiliates under this Section shall, in the judgment of the Agent, be
insufficient or become impaired, the Agent may call for additional indemnity
from the Banks and cease, or not commence, to take any action until such
additional indemnity is furnished.
13.10 Knowledge of Default. It is expressly understood and agreed that
the Agent shall be entitled to assume that no Event of Default has occurred and
is continuing, unless the officers of the Agent immediately responsible for
matters concerning this Agreement shall have been notified in a writing
specifying such Event of Default and stating that such notice is a "notice of
default" by a Bank or by Company. Upon receiving such a notice, the Agent shall
promptly notify each Bank of such Event of Default and provide each Bank with a
copy of such notice and, shall endeavor to provide such notice to the Banks
within three (3) Business Days (but without any liability whatsoever in the
event of its failure to do so). Agent shall also furnish the Banks, promptly
upon receipt, with copies of all other notices or other information required to
be provided by Company hereunder.
13.11 Agent's Authorization; Action by Banks. Except as otherwise
expressly provided herein, whenever the Agent is authorized and empowered
hereunder on behalf of the Banks to give any approval or consent, or to make
any request, or to take any other action on behalf of the Banks (including
without limitation the exercise of any right or remedy hereunder or under the
other Loan Documents), the Agent shall be required to give such approval or
consent, or to make such request or to take such other action only when so
requested in writing by the Majority Banks or the Banks, as applicable
hereunder. Action that may be taken by Majority Banks or all of the Banks, as
the case may be (as provided for hereunder) may be taken (i) pursuant to a vote
at a meeting (which may be held by telephone conference call) as to which all
of the Banks have been given reasonable advance notice, or (ii) pursuant to the
written consent of the requisite Percentages of the Banks as required
hereunder, provided that all of the Banks are given reasonable advance notice
of the requests for such consent.
13.12 Enforcement Actions by the Agent. Except as otherwise expressly
provided under this Agreement or in any of the other Loan Documents and subject
to the terms hereof, Agent will take such action, assert such rights and pursue
such remedies under this Agreement and the other Loan Documents as the Majority
Banks or all of the Banks, as the case may be (as provided for hereunder),
shall direct; provided, however, that the Agent shall not be required to act or
omit to act if, in the judgment of the Agent, such action or omission may
expose the Agent to personal liability or is contrary to this Agreement, any of
the Loan Documents or applicable law. Except as expressly provided above or
elsewhere in this Agreement or the other Loan Documents, no Bank (other than
the Agent, acting in its capacity as agent) shall be entitled to take any
enforcement action of any kind under any of the Loan Documents.
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14. MISCELLANEOUS
14.1 Accounting Principles. Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done, unless otherwise specified
herein, in accordance with GAAP. Furthermore, all financial statements required
to be delivered hereunder shall be prepared in accordance with GAAP.
14.2 Consent to Jurisdiction. Company, Agent and Banks hereby
irrevocably submit to the non-exclusive jurisdiction of any United States
Federal Court or Michigan state court sitting in Detroit, Michigan or Texas
state court sitting in Dallas County, Texas in any action or proceeding arising
out of or relating to this Agreement or any of the Loan Documents and Company,
Agent and Banks hereby irrevocably agree that all claims in respect of such
action or proceeding may be heard and determined in any such United States
Federal Court or Michigan state court or Texas state court. Company irrevocably
consents to the service of any and all process in any such action or proceeding
brought in any court in or of the State of Michigan or the State of Texas by
the delivery of copies of such process to Company at its address specified on
the signature page hereto or by certified mail directed to such address or such
other address as may be designated by Company in a notice to the other parties
that complies as to delivery with the terms of Section 14.6. Nothing in this
Section shall affect the right of the Banks and the Agent to serve process in
any other manner permitted by law or limit the right of the Banks or the Agent
(or any of them) to bring any such action or proceeding against Company or any
Guarantor or any of its or their property in the courts with subject matter
jurisdiction of any other jurisdiction. Company hereby irrevocably waives any
objection to the laying of venue of any such suit or proceeding in the above
described courts.
14.3 Law of Michigan. This Agreement and the Notes have been delivered
at Detroit, Michigan, and shall be governed by and construed and enforced in
accordance with the laws of the State of Michigan (without regard to its
conflict of laws provisions). Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
14.4 Interest. In the event the obligation of Company to pay interest on
the principal balance of the Notes is or becomes in excess of the maximum
interest rate which Company is permitted by law to contract or agree to pay,
giving due consideration to the execution date of this Agreement, then, in that
event, the rate of interest applicable with respect to such Bank's Percentage
shall be deemed to be immediately reduced to such maximum rate and all previous
payments in excess of the maximum rate shall be deemed to have been payments in
reduction of principal and not of interest.
14.5 Closing Costs and Other Costs; Indemnification. (a) Company agrees
to pay, or reimburse the Agent for payment of, on demand (i) all reasonable
closing costs and expenses,
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including, by way of description and not limitation, house and outside attorney
fees (but without duplication of fees and expenses for the same services
provided to the same party) and advances, appraisal and accounting fees, and
lien search fees incurred by Agent in connection with the commitment,
consummation and closing of the loans contemplated hereby or in connection with
the administration of this Agreement or any amendment, refinancing or
restructuring of the credit arrangements provided under this Agreement, (ii)
all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing, recording or amendment of this
Agreement and the Loan Documents and the consummation of the transactions
contemplated hereby, and any and all liabilities with respect to or resulting
from any delay in paying or omitting to pay such taxes or fees, (iii) in
connection with any Default or Event of Default, all reasonable costs and
expenses of the Agent or any of the Banks (including reasonable fees and
expenses of house and outside counsel (but without duplication of fees and
expenses for the same services) and whether incurred through negotiations,
legal proceedings or otherwise) in connection with the amendment, waiver or
enforcement of this Agreement, or the Loan Documents or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement and (iv) all reasonable costs and expenses of the Agent or any of the
Banks (including reasonable fees and expenses of house and outside counsel (but
without duplication of fees and expenses for the same services) in connection
with any action or proceeding relating to a court order, injunction or other
process or decree restraining or seeking to restrain the Agent or any of the
Banks from paying any amount under, or otherwise relating in any way to, any
Letter of Credit and any and all costs and expenses which any of them may incur
relative to any payment under any Letter of Credit. At Agent's option, all of
said amounts required to be paid by Company, if not paid when due, may be
charged by Agent as a Prime-based Advance against the Indebtedness.
(b) Company agrees to indemnify and save Agent and each of the Banks
harmless from all loss, cost, damage, liability or expenses, including
reasonable house and outside attorneys' fees and disbursements (but without
duplication of fees and expenses for the same services), incurred by Agent and
the Banks by reason of an Event of Default, or enforcing the obligations of
Company or any Guarantor under this Agreement or any of the other Loan
Documents or in the prosecution or defense of any action or proceeding
concerning any matter growing out of or connected with this Agreement or any of
the Loan Documents, excluding, however, any loss, cost, damage, liability or
expenses arising solely as a result of the gross negligence or willful
misconduct of the party seeking to be indemnified under this Section 14.5(b).
(c) Company agrees to defend, indemnify and hold harmless Agent and
each of the Banks, and their respective employees, agents, officers and
directors from and against any and all claims, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses of whatever kind or nature
arising out of or related to (i) the presence, disposal, release or threatened
release of any Hazardous Materials on, from or affecting any premises owned or
occupied by Company or any of its Subsidiaries, (ii) any personal injury
(including wrongful death) or property damage (real or personal) arising out of
or related to such Hazardous Materials, (iii) any lawsuit or other proceeding
brought or threatened, settlement reached or governmental order or decree
relating to such Hazardous Materials, (iv) the cost of removal of all Hazardous
Materials from all or any portion of
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any premises owned by Company or its Subsidiaries, (v) the taking of necessary
precautions to protect against the release of Hazardous Materials on or
affecting any premises owned by Company or any of its Subsidiaries, (vi)
complying with all Hazardous Material Laws and/or (vii) any violation of
Hazardous Material Laws, including without limitation, reasonable attorneys and
consultants fees, investigation and laboratory fees, environmental studies
required by Agent or any Bank in connection with the violation of Hazardous
Material Laws (whether before or after the occurrence of any Default or Event
of Default hereunder), court costs and litigation expenses, excluding however,
those arising as a result of its or their gross negligence or willful
misconduct. The obligations of Company under this Section 14.5(c) shall be in
addition to any and all other obligations and liabilities the Company may have
to Agent or any of the Banks at common law or pursuant to any other agreement.
14.6 Notices. Except as expressly provided otherwise in this Agreement,
all notices and other communications provided to any party hereto under this
Agreement or any other Loan Document shall be in writing and shall be given by
personal delivery, by mail, by reputable overnight courier, by telex or by
facsimile and addressed or delivered to it at its address set forth on the
signature pages hereof or at such other address as may be designated by such
party in a notice to the other parties that complies as to delivery with the
terms of this Section 14.6. Any notice, if personally delivered or if mailed
and properly addressed with postage prepaid and sent by registered or certified
mail, shall be deemed given when received or when delivery is refused; any
notice, if given to a reputable overnight courier and properly addressed, shall
be deemed given 2 Business Days after the date on which it was sent, unless it
is actually received sooner by the named addressee; and any notice, if
transmitted by telex or facsimile, shall be deemed given when received (answer
back confirmed in the case of telexes and receipt confirmed in the case of
telecopies). Agent may, but, except as specifically provided herein, shall not
be required to, take any action on the basis of any notice given to it by
telephone, but the giver of any such notice shall promptly confirm such notice
in writing or by telex or facsimile, and such notice will not be deemed to have
been received until such confirmation is deemed received in accordance with the
provisions of this Section set forth above. If such telephonic notice conflicts
with any such confirmation, the terms of such telephonic notice shall control.
14.7 Further Action. Company, from time to time, upon written request of
Agent will make, execute, acknowledge and deliver or cause to be made,
executed, acknowledged and delivered, all such further and additional
instruments, and take all such further action as may reasonably be required to
carry out the intent and purpose of this Agreement or the Loan Documents, and
to provide for Advances under and payment of the Notes, according to the intent
and purpose herein and therein expressed.
14.8 Successors and Assigns; Participations; Assignments.
(a) This Agreement shall be binding upon and shall inure to the
benefit of Company and the Banks and their respective successors and assigns.
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(b) The foregoing shall not authorize any assignment by Company, of
its rights or duties hereunder, and no such assignment shall be made (or
effective) without the prior written approval of the Banks.
(c) The Company and Agent acknowledge that each of the Banks may at
any time and from time to time, subject to the terms and conditions hereof,
assign or grant participations in such Bank's rights and obligations hereunder
and under the other Loan Documents to any commercial bank, savings and loan
association, insurance company, pension fund, mutual fund, commercial finance
company or other similar financial institution, the identity of which
institution is approved by Company and Agent, such approval not to be
unreasonably withheld or delayed; provided, however, that (i) the approval of
Company shall not be required upon the occurrence and during the continuance of
a Default or Event of Default, and (ii) the approval of Company and Agent shall
not be required for any such sale, transfer, assignment or participation to the
Affiliate of an assigning Bank, any other Bank or any Federal Reserve Bank. The
Company authorizes each Bank to disclose to any prospective assignee or
participant, once approved by Company and Agent, any and all financial
information in such Bank's possession concerning the Company which has been
delivered to such Bank pursuant to this Agreement; provided that each such
prospective participant shall execute a confidentiality agreement consistent
with the terms of Section 14.13 hereof.
(d) Each assignment by a Bank of any portion of its rights and
obligations hereunder and under the other Loan Documents shall be made pursuant
to an Assignment Agreement substantially (as determined by Agent) in the form
attached hereto as Exhibit I (with appropriate insertions acceptable to Agent)
and shall be subject to the terms and conditions hereof, and to the following
restrictions:
(i) each assignment shall cover all of the Notes issued by
Company hereunder to the assigning Bank (and not any
particular note or notes), and shall be for a fixed and not
varying percentage thereof, with the same percentage
applicable to each such Note;
(ii) each assignment shall be in a minimum amount of the lesser of
(X) Ten Million Dollars ($10,000,000) and (Y) the entire
remaining amount of assigning Bank's interest in the
Revolving Credit (and participations in any outstanding
Letters of Credit); provided however that, after giving
effect to any assignment pursuant to this Section 13.8(d), in
no event shall the entire remaining amount (if any) of
assigning Bank's interest in the Revolving Credit (and
participations in any outstanding Letters of Credit) be less
than $10,000,000;
(iii) no assignment shall violate any "blue sky" or other
securities law of any jurisdiction or shall require the
Company, or any other Person to file a registration statement
or similar application with the United States Securities
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and Exchange Commission (or similar state regulatory body) or
to qualify under the "blue sky" or other securities laws of
any jurisdiction; and
(iv) no assignment shall be effective unless Agent has received
from the assignee (or from the assigning Bank) an assignment
fee of $3,500 for each such assignment.
In connection with any assignment, Company and Agent shall be entitled to
continue to deal solely and directly with the assigning Bank in connection with
the interest so assigned until (x) the Agent shall have received a notice of
assignment duly executed by the assigning Bank and an Assignment Agreement
(with respect thereto) duly executed by the assigning Bank and each assignee;
and (y) the assigning Bank shall have delivered to the Agent the original of
each Note held by the assigning Bank under this Agreement. From and after the
date on which the Agent shall notify Company and the assigning Bank that the
foregoing conditions shall have been satisfied and all consents (if any)
required shall have been given, the assignee thereunder shall be deemed to be a
party to this Agreement. To the extent that rights and obligations hereunder
shall have been assigned to such assignee as provided in such notice of
assignment (and Assignment Agreement), such assignee shall have the rights and
obligations of a Bank under this Agreement and the other Loan Documents
(including without limitation the right to receive fees payable hereunder in
respect of the period following such assignment). In addition, the assigning
Bank, to the extent that rights and obligations hereunder shall have been
assigned by it as provided in such notice of assignment (and Assignment
Agreement), but not otherwise, shall relinquish its rights and be released from
its obligations under this Agreement and the other Loan Documents.
Within five (5) Business Days following Company's receipt of notice from the
Agent that Agent has accepted and executed a notice of assignment and the duly
executed Assignment Agreement, Company shall, to the extent applicable, execute
and deliver to the Agent in exchange for any surrendered Note, new Note(s)
payable to the order of the assignee in an amount equal to the amount assigned
to it pursuant to such notice of assignment (and Assignment Agreement), and
with respect to the portion of the Indebtedness retained by the assigning Bank,
to the extent applicable, new Note(s) payable to the order of the assigning
Bank in an amount equal to the amount retained by such Bank hereunder shall be
executed and delivered by the Company. Agent, the Banks and the Company
acknowledge and agree that any such new Note(s) shall be given in renewal and
replacement of the surrendered Notes and shall not effect or constitute a
novation or discharge of the Indebtedness evidenced by any surrendered Note,
and each such new Note may contain a provision confirming such agreement. In
addition, promptly following receipt of such Notes, Agent shall prepare and
distribute to Company and each of the Banks a revised Schedule 1.2 to this
Agreement setting forth the applicable new Percentages of the Banks (including
the assignee Bank), taking into account such assignment.
(e) Each Bank agrees that any participation agreement permitted
hereunder shall comply with all applicable laws and shall be subject to the
following restrictions (which shall be set forth in the applicable
Participation Agreement):
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(i) such Bank shall remain the holder of its Notes hereunder,
notwithstanding any such participation;
(ii) except as expressly set forth in this Section 14.8(e) with
respect to rights of setoff and the benefits of Section 12
hereof, a participant shall have no direct rights or
remedies hereunder;
(iii) a participant shall not reassign or transfer, or grant any
sub-participations in its participation interest hereunder
or any part thereof; and
(iv) such Bank shall retain the sole right and responsibility to
enforce the obligations of the Company relating to the Notes
and the other Loan Documents, including, without limitation,
the right to proceed against any Guaranties, or cause Agent
to do so (subject to the terms and conditions hereof), and
the right to approve any amendment, modification or waiver
of any provision of this Agreement without the consent of
the participant, except in the case of participations
granted to an Affiliate of such Lender and except for those
matters covered by Section 14.11(a) through (e) and (h)
hereof (provided that a participant may exercise approval
rights over such matters only on an indirect basis, acting
through such Bank, and Company, Agent and the other Banks
may continue to deal directly with such Bank in connection
with such Bank's rights and duties hereunder).
Company agrees that each participant shall be deemed to have the right of
setoff under Section 10.6 hereof in respect of its participation interest in
amounts owing under this Agreement and the other Loan Documents to the same
extent as if the Indebtedness were owing directly to it as a Bank under this
Agreement, shall be subject to the pro rata recovery provisions of Section 11.3
hereof and shall be entitled to the benefits of Section 12 hereof. The amount,
terms and conditions of any participation shall be as set forth in the
participation agreement between the issuing Bank and the Person purchasing such
participation, and none of the Company, the Agent and the other Banks shall
have any responsibility or obligation with respect thereto, or to any Person to
whom any such participation may be issued. No such participation shall relieve
any issuing Bank of any of its obligations under this Agreement or any of the
other Loan Documents, and all actions hereunder shall be conducted as if no
such participation had been granted.
(f) Nothing in this Agreement, the Notes or the other Loan Documents,
expressed or implied, is intended to or shall confer on any Person other than
the respective parties hereto and thereto and their successors and assignees
and participants permitted hereunder and thereunder any benefit or any legal or
equitable right, remedy or other claim under this Agreement, the Notes or the
other Loan Documents.
14.9 Indulgence. No delay or failure of Agent and the Banks in
exercising any right, power or privilege hereunder shall affect such right,
power or privilege nor shall any single or partial
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exercise thereof preclude any further exercise thereof, nor the exercise of any
other right, power or privilege. The rights of Agent and the Banks hereunder
are cumulative and are not exclusive of any rights or remedies which Agent and
the Banks would otherwise have.
14.10 Counterparts. This Agreement may be executed in several
counterparts, and each executed copy shall constitute an original instrument,
but such counterparts shall together constitute but one and the same
instrument.
14.11 Amendment and Waiver. No amendment or waiver of any provision of
this Agreement or any other Loan Document, nor consent to any departure by
Company or any Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Majority Banks (or by the Agent at
the written request of the Majority Banks) or, if this Agreement expressly so
requires with respect to the subject matter thereof, by all Banks (and, with
respect to any amendments to this Agreement or the other Loan Documents, by
Company or the Guarantors which are signatories thereto), and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Banks, do any of the
following: (a) increase any Bank's commitments hereunder, (b) reduce the
principal of, or interest on, the Notes or any Fees or other amounts payable
hereunder, (c) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any Fees or other amounts payable hereunder, (d)
waive any Event of Default specified in Sections 10.1(a) or (b) hereof, (e)
except as expressly permitted hereunder, or under the Security Agreement,
release or defer the granting or perfecting of a lien or security interest in
any Collateral or release any guaranty or similar undertaking provided by any
Person, except as shall be otherwise expressly permitted in this Agreement or
any other Loan Document, provided however that Agent shall be entitled to
release any Collateral which the Company or any Guarantor is permitted to sell
or transfer under the terms of this Agreement or the other Loan Documents
without notice to or any further action or consent of the Banks (f) terminate
or modify any indemnity provided to the Banks hereunder or under the other Loan
Documents, except as shall be otherwise expressly provided in this Agreement or
any other Loan Document, (g) take any action which requires the approval or
consent of all Banks pursuant to the terms of this Agreement or any other Loan
Document, (h) change the aggregate unpaid principal amount of the Notes which
shall be required for the Banks or any of them to take any action under this
Agreement or any Loan Document or (i) change the definition of "Majority Banks"
or this Section 14.11; provided further, that no amendment, waiver or consent
shall, unless in writing signed by the Swing Line Bank do any of the following:
(x) reduce the principal of, or interest on, the Swing Line Note or (y)
postpone any date fixed for any payment of principal of, or interest on, the
Swing Line Note; and provided further, however, that no amendment, waiver, or
consent shall, unless in writing and signed by the Agent in addition to all the
Banks, affect the rights or duties of the Agent under this Agreement or any
other Loan Document. All references in this Agreement to "Banks" or "the Banks"
shall refer to all Banks, unless expressly stated to refer to Majority Banks.
14.12 Confidentiality. Each Bank agrees that it will not disclose
without the prior consent of Company (other than to its employees, its
Guarantors, another Bank or to its auditors or counsel)
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any information with respect to Company, which is furnished pursuant to this
Agreement or any of the other Loan Documents; provided that any Bank may
disclose any such information (a) as has become generally available to the
public or has been lawfully obtained by such Bank from any third party under no
duty of confidentiality to Company, (b) as may be required or appropriate in
any report, statement or testimony submitted to, or in respect to any inquiry,
by, any municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Bank, including the Board of Governors of the Federal
Reserve System of the United States, the Office of the Comptroller of the
Currency or the Federal Deposit Insurance Corporation or similar organizations
(whether in the United States or elsewhere) or their successors, (c) as may be
required or appropriate in respect to any summons or subpoena or in connection
with any litigation, (d) in order to comply with any law, order, regulation or
ruling applicable to such Bank, and (e) to any permitted transferee or assignee
or to any approved participant of, or with respect to, the Notes, as aforesaid.
14.13 Withholding Taxes. If any Bank is not incorporated under the laws
of the United States or a state thereof, such Bank shall promptly deliver to
the Agent two executed copies of (i) Internal Revenue Service Form 1001
specifying the applicable tax treaty between the United States and the
jurisdiction of such Bank's domicile which provides for the exemption from
withholding on interest payments to such Bank, (ii) Internal Revenue Service
Form 4224 evidencing that the income to be received by such Bank hereunder is
effectively connected with the conduct of a trade or business in the United
States or (iii) other evidence satisfactory to the Agent and Company that such
Bank is exempt from United States income tax withholding with respect to such
income. Such Bank shall amend or supplement any such form or evidence as
required to insure that it is accurate, complete and non-misleading at all
times. Promptly upon notice from the Agent of any determination by the Internal
Revenue Service that any payments previously made to such Bank hereunder were
subject to United States income tax withholding when made, such Bank shall pay
to the Agent the excess of the aggregate amount required to be withheld from
such payments over the aggregate amount actually withheld by the Agent.
14.14 Taxes and Fees. Should any tax (other than as a result of a Bank's
failure to comply with Section 14.13 or a tax based upon the net income or
capitalization of any Bank or the Agent by any jurisdiction where a Bank or
Agent is located), recording or filing fee become payable in respect of this
Agreement or any of the other Loan Documents or any amendment, modification or
supplement hereof or thereof, the Company agrees to pay the same, together with
any interest or penalties thereon arising from the Company's act or omission,
and agrees to hold the Agent and the Banks harmless with respect thereto.
Notwithstanding the foregoing, nothing contained in this Section 14.14 shall
affect or reduce the rights of any Bank or the Agent under Section 12.7 hereof.
14.15 WAIVER OF JURY TRIAL. THE BANKS, THE AGENT AND THE COMPANY AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL
BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS
86
<PAGE> 95
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTION OF ANY OF THEM. NEITHER THE BANKS, THE
AGENT, NOR COMPANY SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY
SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT
BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE BANKS AND
THE AGENT OR COMPANY EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
14.16 Interest. It is the intention of the parties hereto that each Bank
and the Agent shall conform to usury laws applicable to them, if any.
Accordingly, if the transactions with any Bank or Agent contemplated hereby
would be usurious under such applicable laws, then, notwithstanding anything to
the contrary in the Notes or Loan Documents payable to such Bank, this
Agreement or any other agreement entered into in connection with or as security
for or guaranteeing this Agreement or the Indebtedness, it is agreed as
follows: (i) the aggregate of all consideration which constitutes interest
under applicable law that is contracted for, taken, reserved, charged or
received by such Bank under the Notes payable to such Bank, this Agreement, the
Loan Documents or under any other agreement entered into in connection with or
as security for or guaranteeing this Agreement or such Notes or Loan Documents
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be credited automatically, if theretofore
paid, on the principal amount of the Indebtedness owed to such Bank or, if no
Indebtedness to such Bank is outstanding, shall be refunded to Company by such
Bank, and (ii) in the event that the maturity of any such Note or other
Indebtedness is accelerated or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to such Bank may never include more than the maximum amount allowed
by such applicable law and excess interest, if any, to such Bank shall be
cancelled automatically as of the date of such acceleration or prepayment and,
if theretofore paid, shall be credited by such Bank on the principal amount of
the Indebtedness owed to such Bank by the Company or, if no Indebtedness to
such Bank is then outstanding, shall be refunded by such Bank to the Company.
Without limiting any provision of the Notes or Loan Documents, if for any
reason Texas law is applicable to this Agreement or any Note, it is expressly
agreed that Tex. Rev. Civ. Stat. Ann. art. 5069, Ch. 15 (which regulates
certain revolving credit loan accounts and revolving triparty accounts) shall
not apply to this Agreement, such Note, such Loan Documents, the Loans or any
transaction contemplated hereby, and unless changed in accordance with law, the
rate ceiling applicable to any Indebtedness to which Texas law is applicable
under Texas law shall be the indicated (weekly) rate ceiling from time to time
in effect as provided in Tex. Rev. Civ. Stat. Ann. 5069-1.04, as amended.
14.17 Complete Agreement; Conflicts. This Agreement, the Notes, any
Requests for Revolving Credit Advance and Requests for Swing Line Advance
hereunder, and the other Loan Documents contain the entire agreement of the
parties hereto, superseding all prior agreements, discussions and
understandings relating to the subject matter hereof, and none of the parties
shall
87
<PAGE> 96
be bound by anything not expressed in writing. In the event of any conflict
between the terms of this Agreement and the other Loan Documents, this
Agreement shall govern.
14.18 Severability. In case any one or more of the obligations of
Company under this Agreement, the Notes or any of the other Loan Documents
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining obligations of Company shall not
in any way be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of Company under this Agreement, the Notes or
any of the other Loan Documents in any other jurisdiction.
14.19 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for convenience of reference
only and shall in no way modify or affect any of the terms or provisions
hereof.
14.20 Construction of Certain Provisions. If any provision of this
Agreement or any of the Loan Documents refers to any action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
whether or not expressly specified in such provision.
14.21 Independence of Covenants. Each covenant hereunder shall be given
independent effect (subject to any exceptions stated in such covenant) so that
if a particular action or condition is not permitted by any such covenant
(taking into account any such stated exception), the fact that it would be
permitted by an exception to, or would be otherwise within the limitations of,
another covenant shall not avoid the occurrence of a Default or an Event of
Default.
14.22 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of Company or any party
to any of the Loan Documents made herein or in any of the Loan Documents or in
any certificate, report, financial statement or other document furnished by or
on behalf of Company or any Guarantor in connection with this Agreement or any
of the Loan Documents shall be deemed to have been relied upon by the Banks,
notwithstanding any investigation heretofore or hereafter made by any Bank or
on such Bank's behalf, and those covenants and agreements of Company set forth
in Section 12.6 hereof (together with any other indemnities of Company or any
Guarantor contained elsewhere in this Agreement or in any of the other Loan
Documents) and of Banks set forth in Section 13.9 hereof shall survive the
repayment in full of the Indebtedness and the termination of the Revolving
Credit Aggregate Commitment.
14.23 Amendment and Restatement. This Agreement constitutes an amendment
and restatement of the Prior Credit Agreements, which Prior Credit Agreement(s)
are fully superseded and amended and restated in their entirety hereby;
provided, however, that the Indebtedness
88
<PAGE> 97
governed by the Prior Credit Agreement shall remain outstanding and in full
force and effect and provided further that this Agreement does not constitute a
novation of such Indebtedness.
* * *
[Signatures follow on succeeding pages]
89
<PAGE> 98
WITNESS the due execution hereof as of the day and year first above
written.
<TABLE>
<CAPTION>
COMERICA BANK, ALRENCO, INC.
as Agent
<S> <C>
By: /s/ Valerie Kin By: /s/ Billy W. White, Sr.
--------------------------------------- -------------------------------------------
Its: Vice President Its: President
One Detroit Center 714 East Kimbrough
500 Woodward Avenue Mesquite, Texas 75149
9th Floor MC 3289 Attention: Chief Financial Officer
Detroit, Michigan 48226 Telephone: (972) 288-9327
Attention: Valerie Kin Facsimile No. (972) 288-7753
Telephone: (313) 222-9133 Copy to: General Counsel (same address)
Facsimile No. (313) 222-9434
SWING LINE BANK: COMERICA BANK - TEXAS
By: /s/ Reed Alton
-------------------------------------------
Eurocurrency Lending Office:
Comerica Bank Its: Vice President
One Detroit Center 8850 Boedeker St.
500 Woodward Ave. Dallas, Texas 75225
9th Floor MC 3289 Attention: Reed Allton
Detroit, Michigan 48226 Telephone: (214) 890-5367
Attention: Sandra Fields Facsimile No. (214) 890-5186
Telephone No. (313) 222-5265
Facsimile No. (313) 222-9434
</TABLE>
90
<PAGE> 99
<TABLE>
<CAPTION>
REVOLVING CREDIT BANKS: COMERICA BANK - TEXAS
<S> <C>
By:/s/ Reed Alton
-------------------------------------------
Eurocurrency Lending Office:
Comerica Bank Its: Vice President
One Detroit Center 8850 Boedeker St.
500 Woodward Ave. Dallas, Texas 75225
9th Floor MC 3289 Attention: Reed Allton
Detroit, Michigan 48226 Telephone: (214) 890-5367
Attention: Sandra Fields Facsimile No. (214) 890-5186
Telephone No. (313) 222-5265
Facsimile No. (313) 222-9434
</TABLE>
91
<PAGE> 100
SCHEDULES AND EXHIBITS
TO
ALRENCO, INC. REVOLVING CREDIT AGREEMENT (SEE WPD 0034816)
<TABLE>
<CAPTION>
SCHEDULES
<S> <C> <C>
Schedule 1.1 Applicable L/C Fee Percentage, Applicable Revolving Commitment
Fee Percentage and Eurocurrency Margins
Schedule 1.2 Percentages
Schedule 2 Insurance Deposits
Schedule 6.2 Good Standing Certificates
Schedule 6.3(b) List of Jurisdictions in which UCC Financing Statements will be filed
Schedule 7.9 Consumer Credit Laws
Schedule 7.12 Litigation
Schedule 7.16 Pension Plans
Schedule 7.17 Conditions at Closing Affecting Business
Schedule 7.18 Environmental Matters
Schedule 7.19 Subsidiaries
Schedule 7.20 Contingent Obligations
Schedule 7.21 Changes in Requirments of Laws
Schedule 9.1 Indebtedness
Schedule 9.2 Existing Liens
Schedule 9.3 Permitted Guarantees
EXHIBITS
Exhibit A Form of Request for Revolving Credit Advance
Exhibit B Form of Revolving Credit Note
Exhibit C Form of Notice of Letters of Credit
Exhibit D Form of Request for Swing Line Advance
Exhibit E Form of Swing Line Note
Exhibit F Form of Swing Line Participation Certificate
Exhibit G New Bank Addendum
Exhibit H Form of Covenant Compliance Report
Exhibit I Form of Assignment Agreement
Exhibit J Form of Guaranty (including Exhibit "A" - Joinder Agreement)
Exhibit K Form of Borrowing Base Certificate
Exhibit L Form of Security Agreement
Exhibit M Form of Pledge Agreements
Exhibit N Intercompany Note
Exhibit O Store Listings
</TABLE>
<PAGE> 101
SCHEDULE 1.1
APPLICABLE FEE PERCENTAGE
AND EUROCURRENCY MARGINS
<TABLE>
<CAPTION>
============================================================================================================
BASIS FOR PRICING LEVEL I LEVEL II LEVEL III* LEVEL IV
============================================================================================================
<S> <C> <C> <C> <C>
Fixed Charge >2.8 : 1 >2.25 : 1 <2.25 : 1.0
Coverage Ratio >4.0 : 1.0 - but - but
- <4.0 : 1 <2.8 : 1
- ------------------------------------------------------------------------------------------------------------
Commitment Fee 0.30% 0.375% 0.425% 0.50%
- ------------------------------------------------------------------------------------------------------------
Eurocurrency 1.10% 1.25% 1.40% 1.65%
Margin
- ------------------------------------------------------------------------------------------------------------
Letter of Credit 1.10% 1.25% 1.40% 1.65%
Fee
============================================================================================================
</TABLE>
* Initial Level
<PAGE> 102
SCHEDULE 1.2
PERCENTAGES AND ALLOCATIONS
<TABLE>
<CAPTION>
Bank Percentage Allocation
---- ---------- ----------
<S> <C> <C>
Comerica Bank-Texas 100.00% $50,000,000
------ -----------
Total: 100.00% $50,000,000
</TABLE>
<PAGE> 103
SCHEDULE 2
INSURANCE DEPOSITS
<TABLE>
<S> <C>
Insurance Deposits:
Risk Management-Workers Comp $ 8,000.00
Hartford Ins. Co.- Workers Comp $ 51,974.00
Risk Management-General Liability & Auto $ 20,000.00
American Comm-Health Insurance $ 52,248.02
Total $132,222.02
</TABLE>
<PAGE> 104
SCHEDULE 6.2
REQUIRED GOOD STANDING CERTIFICATES
Texas
<PAGE> 105
SCHEDULE 6.3(b)
JURISDICTIONS IN WHICH UCC FINANCING STATEMENTS
WILL BE FILED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ENTITY JURISDICTION JURISDICTION
STATE LOCAL
- --------------------------------------------------------------------------------
<S> <C> <C>
RTO OPERATING, Alabama, Secretary of State
INC.
- --------------------------------------------------------------------------------
Arizona, Secretary of State
- --------------------------------------------------------------------------------
Arkansas, Secretary of State
- --------------------------------------------------------------------------------
Clark County
- --------------------------------------------------------------------------------
Columbia County
- --------------------------------------------------------------------------------
Craighead County
- --------------------------------------------------------------------------------
Dallas County
- --------------------------------------------------------------------------------
Drew County
- --------------------------------------------------------------------------------
Faulkner County
- --------------------------------------------------------------------------------
Garland County
- --------------------------------------------------------------------------------
Hempstead County
- --------------------------------------------------------------------------------
Howard County
- --------------------------------------------------------------------------------
Independence County
- --------------------------------------------------------------------------------
Jefferson County
- --------------------------------------------------------------------------------
Mississippi County
- --------------------------------------------------------------------------------
Ouachita County
- --------------------------------------------------------------------------------
Pope County
- --------------------------------------------------------------------------------
Pulaski County
- --------------------------------------------------------------------------------
Sebastian County
- --------------------------------------------------------------------------------
Union County
- --------------------------------------------------------------------------------
Washington County
- --------------------------------------------------------------------------------
White County
- --------------------------------------------------------------------------------
Colorado, Secretary of State
- --------------------------------------------------------------------------------
Florida, Secretary of State
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ENTITY JURISDICTION JURISDICTION
STATE LOCAL
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mecklenburg County
- ---------------------------------------------------------------------------------------------------------
Person County
- ---------------------------------------------------------------------------------------------------------
Ohio, Secretary of State
- ---------------------------------------------------------------------------------------------------------
Butler County
- ---------------------------------------------------------------------------------------------------------
Clark County
- ---------------------------------------------------------------------------------------------------------
Cuyahoga County
- ---------------------------------------------------------------------------------------------------------
Franklin County
- ---------------------------------------------------------------------------------------------------------
Hamilton County
- ---------------------------------------------------------------------------------------------------------
Montgomery County
- ---------------------------------------------------------------------------------------------------------
Wood County
- ---------------------------------------------------------------------------------------------------------
Oklahoma County
- ---------------------------------------------------------------------------------------------------------
South Carolina, Secretary of
State
- ---------------------------------------------------------------------------------------------------------
Tennessee, Secretary of State
- ---------------------------------------------------------------------------------------------------------
Texas, Secretary of State
- ---------------------------------------------------------------------------------------------------------
Utah, Secretary of State
- ---------------------------------------------------------------------------------------------------------
Virginia, Secretary of State
- ---------------------------------------------------------------------------------------------------------
Independence City of Fredericksburg
- ---------------------------------------------------------------------------------------------------------
Independent City of Richmond
- ---------------------------------------------------------------------------------------------------------
Independent City of Danville
- ---------------------------------------------------------------------------------------------------------
Independent City of Lynchburg
- ---------------------------------------------------------------------------------------------------------
Independent City of Charlotesville
- ---------------------------------------------------------------------------------------------------------
Independent City of Roanoke
- ---------------------------------------------------------------------------------------------------------
Independent City of Petersburg
- ---------------------------------------------------------------------------------------------------------
Montgomery County
- ---------------------------------------------------------------------------------------------------------
Henry County
- ---------------------------------------------------------------------------------------------------------
West Virginia, Secretary of
State
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ENTITY JURISDICTION JURISDICTION
STATE LOCAL
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
RTO HOLDING CO., Delaware, Secretary of State
INC.
- ---------------------------------------------------------------------------------------------------------
Texas, Secretary of State
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
ATRO, INC. South Carolina, Secretary of
State
- ---------------------------------------------------------------------------------------------------------
Texas, Secretary of State
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
ACTION RENT-TO-OWN South Carolina, Secretary of
HOLDINGS OF SOUTH State
CAROLINA, INC.
- ---------------------------------------------------------------------------------------------------------
Texas, Secretary of State
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
ALRENCO, INC. Indiana, Secretary of State
- ---------------------------------------------------------------------------------------------------------
Texas, Secretary of State
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 108
SCHEDULE 7.9
CONSUMER CREDIT LAWS
Terry D. Smith and Mary Myles v. Alrenco, Inc. et. al., class action lawsuit
filed in the Circuit Court of Montgomery County, Alabama, Civil Action No.
CV-98-45-R, alleging breach of contract and fraud in charging late fee.
<PAGE> 109
SCHEDULE 7.12
LITIGATION
Crystal Angerstein v. RTO, Inc. (formerly d/b/a Action Rent to Own), Cause No.
97-11497, filed in the 261st Judicial District Court of Travis County, Texas,
alleging sexual harassment and hostile work environment.
Equal Employment Opportunity Commission ("EEOC") Charge No. 270970406 filed
with the New Orleans, Louisiana Division of the EEOC by Jimmy Fletcher, a
former employee of RTO, alleging discrimination on the basis of disability.
EEOC Charge No. 270980418 filed with the New Orleans, Louisiana District Office
of the EEOC, by Henry A. Sidney, a former employee of RTO, alleging
discrimination on the basis of race.
Nathan Hirschberg v. Alrenco, Inc., Case No. 96-25349-CA, filed in Dade County,
Florida Circuit Court, alleging personal injuries suffered while employee.
Renault Williams v. Alrenco, Inc., Case No. 97CVH-04-4781, filed in Franklin
County, Ohio Common Pleas, alleging racial discrimination of employee by
manager.
B & H Rentals, Inc. v. Alrenco, Inc., Case No. LKA970570, filed in Sixteenth
Judicial Court Kane County, Illinois, alleging conversion of accounts
receivable.
Norle Investments, Inc. v. Alrenco, Inc. et. al., Case No. 49D0Z9801CP000109,
filed in Marion Superior Court, Indiana, alleging breach of contract for not
providing insurance coverage for landlord's store which was destroyed by fire.
Terry D. Smith and Mary Myles v. Alrenco, Inc. et al., class action lawsuit
filed in the Circuit Court of Montgomery County, Alabama, Civil Action No.
CV-98-45-R, alleging breach of contract and fraud in charging late fee.
EEOC Charge filed with the Miami, Florida Office of the EEOC, by William
McWeeney, a former employee of Alrenco, Inc., alleging discrimination on the
basis of race and age.
EEOC Charge filed with the Miami, Florida Office of the EEOC, by Robert Taft, a
former employee of Alrenco, Inc., alleging discrimination on the basis of race
and sex.
EEOC Charge filed with the Indianapolis, Indiana Office of the EEOC, by Maurice
D. Kindle, alleging discrimination on the basis of sex.
Matters being handled by insurance carriers.
<PAGE> 110
SCHEDULE 7.16
PENSION PLANS SUBJECT TO TITLE IV OF ERISA
ALRENCO, INC.:
Life, AD&D, and Medical Insurance Plan
American Community Mutual Life Ins. Co.
Group #2185
Short Term Disability Plan
(Self-Administered)
Section 125 Plan
(Self-Administered)
Voluntary Term Life and AD & D Insurance Plan
Medical Life Insurance Company
Master Policy #ML2200
Dental Insurance
Medical Life Insurance Company
Policy #G3299
Long Term Disability Insurance Plan
Reliance Standard Life Insurance Co.
Policy #LTD-67885
401(k) Salary Reduction Plan
Lincoln National Life Insurance Co.
RTO, INC./RTO OPERATING, INC.:
Life and AD&D Insurance, Medical and Dental Plan
Great-West Life & Annuity Insurance Co.
Policy #52893
Long Term Disability Insurance Plan
Liberty Life Assurance Company of Boston
Policy #09-419313
401(k) and Profit Sharing Plan
Massachusetts Mutual Life Insurance Co.
Contract #SF-6945
Section 125 Plan
(Self-Administered)
<PAGE> 111
ACQUIRED WITH INSTANT RENT-TO-OWN, INC.:
401(k) Plan
Pan-American Life Insurance Co.
Contract# GA-95045
ACQUIRED WITH B & L CONCEPTS, INC. (ACTION RENT TO OWN OR FLORIDA, INC.):
401(k) Plan
Massachusetts Mutual Life Insurance Co.
Trustee - Frontier Trust Co.
Administered by: BISYS Plan Services
Client No. 003209
ACQUIRED WITH HUT COMPANY:
Profit Sharing Plan
Administered by: Commerce Bank, St. Louis, Mo.
STOCK OPTION PLANS:
Alrenco, Inc. 1995 Stock Incentive Plan
Alrenco, Inc. 1998 Stock Incentive Plan
RTO, Inc. 1996 Employee Stock Option Plan
RTO, Inc. 1996 Stock Option Plan for Non-Employee Directors
<PAGE> 112
SCHEDULE 7.17
MATTERS EFFECTING BUSINESS OR PROPERTIES
Norle Investments, Inc. v. Alrenco, Inc. et. al., Case No. 49D0Z9801CP000109,
filed in Marion Superior Court, Indiana, alleging breach of contract for not
providing insurance coverage for landlord's store which was destroyed by fire.
<PAGE> 113
SCHEDULE 7.18
ENVIRONMENTAL AND SAFETY MATTERS
With respect to the property located at 765 North Church Street, Spartanburg,
South Carolina, certain environmental reports have been prepared and tests
conducted, including but not limited to, a Phase I Environmental Site
Assessment, a Contaminated Soil Excavation Report, a Soil Removal Report, an
Underground Storage Tank Assessment and a Limited Asbestos Evaluation. These
tests and reports were prepared by or under the supervision of S&ME, Inc. of
Spartanburg, South Carolina. With respect to the property located at 1600 and
1604 S. Main Street, Little Rock, Arkansas, an Asbestos Survey & Assessment was
conducted and a related report prepared by TERRANEXT, Toxicology & Health
Related Sciences Division of Little Rock, Arkansas.
<PAGE> 114
SCHEDULE 7.19
SUBSIDIARIES
RTO Holding Co., Inc.
Action Rent-To-Own Holdings of South Carolina, Inc.
RTO Operating, Inc.
ATRO, Inc.
<PAGE> 115
SCHEDULE 7.20
CONTINGENT OBLIGATIONS
Two Letters of Credit for a total undrawn amount of approximately $1,400,000.
<PAGE> 116
SCHEDULE 7.21
CHANGES IN REQUIREMENTS OF LAWS
The following is as of the Effective Date:
Forty-eight states have adopted legislation regulating rental-purchase
transactions. Of those states, 45 require companies to provide certain
disclosures to customers regarding the terms of the rental-purchase
transaction. North Carolina, Wisconsin and Minnesota regulate rental-purchase
transactions as credit sales subject to consumer lending restrictions. North
Carolina and Minnesota subject the transactions to interest rate or finance
charge limitations. In addition, recent court decisions in New Jersey have
created a legal environment in that state which is prohibitive to
rental-purchase transactions. The Company operates in North Carolina, but does
not operate in the other three states. Twenty-two of the 23 states in which
the Company operates impose some type of disclosure requirements, either in
advertising or in the rental-purchase agreement, or both. The regulations in
these states also distinguish rental-purchase transactions from credit sales.
The management of the Company believes that the operations of the Company are in
material compliance with applicable state rental-purchase laws. Although
certain proposed federal regulations are under consideration, no federal
legislation has been enacted regulating rental-purchase transactions. As of
the Effective Date, two bills have been introduced in Congress that would
regulate the rental-purchase industry. One of the bills is supported by the
Association of Progressive Rental Organizations ("APRO") and the Company does
not believe that this bill, if enacted, would have a material adverse effect
upon the Company's operations. The other bill would regulate rental-purchase
transactions as credit sales, and if enacted, could have a Material Adverse
Effect.
<PAGE> 117
SCHEDULE 9.1
INDEBTEDNESS
Two Letters of Credit for a total undrawn amount of approximately $1,400,000.
Debt assumed in the acquisition of Seajay Investment Group, Inc. in connection
with real property in Killeen, Texas.
Convertible Promissory Note, dated January 7, 1997, wherein RTO, Inc. (Maker)
promises to pay to B&L Concepts, Inc. (Holder), the original principal sum of
$3,000,000.
Convertible Promissory Note, dated May 30, 1997, wherein RTO, Inc. (Maker)
promises to pay to Wayne Sutton (Holder), the original principal sum of
$2,000,000.
Debt described in Noncompetition Agreement, dated January 3, 1997, between RTO,
Inc. and Esther M. Pyle.
Debt described in Noncompetition Agreement, dated January 3, 1997, between RTO,
Inc. and David E. Pyle.
Debt described in Noncompetition Agreement, dated January 3, 1997, between RTO,
Inc. and Stephen L. Hardy.
Debt described in Noncompetition Agreement, dated January 3, 1997, between RTO,
Inc. and Tina M. Hardy.
Debt described in Noncompetition Agreement, dated January 3, 1997, between RTO,
Inc. and Rita P. Wallace.
Debt described in Noncompetition Agreement, dated January 3, 1997, between RTO,
Inc. and Randy D. Brasher.
Debt described in Noncompetition Agreement, dated January 3, 1997, between RTO,
and David H. Pyle.
<PAGE> 118
SCHEDULE 9.2
LIENS
Comerica Bank-Texas liens.
Bank One liens.
Star Bank liens.
Landlord liens under leases.
<PAGE> 119
SCHEDULE 9.3
PERMITTED GUARANTEES
<PAGE> 120
EXHIBIT A
REQUEST FOR REVOLVING CREDIT ADVANCE
No._____________ Dated:______________
To: Comerica Bank - Agent
Re: Alrenco Revolving Credit Agreement by and among Comerica Bank, as
Agent, the lenders from time to time parties thereto (collectively,
"Banks"), and Alrenco, Inc. ("Company") dated as of February 26, 1998
(as amended from time to time, the "Agreement").
Pursuant to the Agreement, the Company requests an Advance from Banks
as follows:
A. Date of Advance: ___________
B. Amount of Advance:
$_________
[_] Comerica Bank Account No. ______________
[_] Other: _________________________________
__________________________________
C. Type of Activity:
1. Advance [_]
2. Refunding [_]
of a Revolving Credit Advance [_]
of a Swing Line Advance [_]
3. Conversion [_]
D. Interest Rate:
1. Prime-based Rate [_]
2. Eurocurrency-based Rate [_]
E. Interest Period (for Eurocurrency-based Advances only):
<PAGE> 121
1. One (1) Month [_]
2. Two (2) Months [_]
3. Three (3) Months [_]
4. Six (6) Months [_]
5. Twelve (12) Months [_]
F. Availability:
<TABLE>
<S> <C> <C>
1. Principal amount of requested $_____________________
Advance (new money only):
2. Principal amount of all Revolving $_____________________
Advances outstanding on the date of
this Request:
3. Principal amount of all Swing Line $_____________________
Advances outstanding on the date of
this Request:
4. Aggregate undrawn portion of Letters $_____________________
of Credit outstanding on the date of
this Request:
5. Aggregate face amount of all Letters $_____________________
of Credit requested but not yet issued
on the date of this Request:
6. Sum of Items 2 through 5: $_____________________
7. Revolving Credit Aggregate $_____________________
Commitment in effect on the date of this
Request:
8. Borrowing Base as of the most $_____________________
recently delivered certificate:
9. Lesser of Items 7 and 8: $_____________________
10. Item 9 minus Item 6 (Availability): $_____________________
Item 1 must be less than Item 10
</TABLE>
2
<PAGE> 122
The Company certifies to the matters specified in Section 2.3(e) of
the Agreement.
ALRENCO, INC.
By:
------------------------------------
Its:
-----------------------------------
Agent Approval:
------------------
3
<PAGE> 123
EXHIBIT B
REVOLVING CREDIT NOTE
$__________________ ______________, 1998
On the Revolving Credit Maturity Date, FOR VALUE RECEIVED, Alrenco,
Inc., a _____________ corporation ("Company") promises to pay to the order of
[insert Bank] ("Bank") at Detroit, Michigan, in care of Agent, in lawful money
of the United States of America, the sum of [Insert Amount derived from
Percentages] Dollars ($__________), or so much of said sum as may from time to
time have been advanced and then be outstanding hereunder pursuant to the
Alrenco Revolving Credit Agreement dated as of February 26, 1998, made by and
among the Company, certain banks, including the Bank, and Comerica Bank as
Agent for such banks, as the same may be amended from time to time (the
"Agreement"), together with interest thereon as hereinafter set forth.
Each of the Advances made hereunder shall bear interest at the
Applicable Interest Rate from time to time applicable thereto under the
Agreement or as otherwise determined thereunder, and interest shall be
computed, assessed and payable as set forth in the Agreement.
This Note is a note under which advances (including refundings and
conversions), repayments and readvances may be made from time to time, but only
in accordance with the terms and conditions of the Agreement. This Note
evidences borrowings under, is subject to, is secured in accordance with, and
may be accelerated or matured under, the terms of the Agreement, to which
reference is hereby made. Definitions and terms of the Agreement are hereby
incorporated by reference herein.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan (without regard to its conflict of laws principles).
Company hereby waives presentment for payment, demand, protest and
notice of dishonor and nonpayment of this Note and agrees that no obligation
hereunder shall be discharged by reason of any extension, indulgence, release,
or forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note.
<PAGE> 124
Nothing herein shall limit any right granted Bank by any other
instrument or by law.
ALRENCO, INC.
By:
------------------------------------
Its:
-----------------------------------
2
<PAGE> 125
EXHIBIT C
LETTER OF CREDIT NOTICE
TO: Members of the Bank Group
RE: Issuance of Letter of Credit pursuant to Article 3 of the Alrenco
Revolving Credit Agreement (as amended or otherwise modified from time
to time, "Agreement") dated February 26, 1998 among Alrenco, Inc.
("Company"), Agent and the Banks.
On ________________, 19__,(1) Issuing Bank, in accordance with Article
3 of the Agreement, issued its Letter of Credit number _____________, in favor
of ___________________(2) for the account of Company [and ________________].(3)
The face amount of such Letter of Credit is $__________________. The amount of
each Bank's participation in the Letter of Credit is as follows:(4)
Comerica Bank $______________________
Comerica Bank-Texas $______________________
This notification is delivered this day of , 19 , pursuant to Section
3.3 of the Agreement. Except as otherwise defined, capitalized terms used
herein have the meanings given them in the Agreement.
Signed:
COMERICA BANK, AS AGENT
By:
------------------------------------
Its:
-----------------------------------
- ----------------------
(1) Date of Issuance
(2) Beneficiary
(3) Other Account Party (i.e. Affiliate of Company), if any
(4) Amounts based on Percentages
<PAGE> 126
EXHIBIT D
REQUEST FOR SWING LINE ADVANCE
No.__________________ Dated:_________________
To: Comerica Bank-Texas, Swing Line Bank
Re: Alrenco Revolving Credit Agreement by and among Comerica Bank, as
Agent, the lenders from time to time parties thereto (collectively,
"Banks"), and Alrenco, Inc. ("Company") dated as of February 26, 1998
(as amended from time to time, the "Agreement").
Pursuant to the Agreement, the Company requests a Swing Line Advance
from the Swing Line Bank as follows:
A. Date of Advance:______________
B. Amount of Advance:
$_________
[_] Comerica Bank Account No. ______________
[_] Other: _________________________________
____________________________________
C. Interest Rate:
1. Prime-based Rate [_]
2. Quoted Rate [_]
D. Interest Period:
1. ____________ days(1)
- ---------------------------------
(1) Insert up to 30 days.
<PAGE> 127
<TABLE>
<S> <C> <C>
E. Availability:
1. Principal amount of requested Advance (new money $_____________
only):
2. Principal amount of all Revolving Advances $_____________
outstanding on the date of this Request:
3. Principal amount of all Swing Line Advances $_____________
outstanding on the date of this Request:
4. Aggregate undrawn portion of Letters of Credit $_____________
outstanding on the date of this Request:
5. Aggregate face amount of all Letters of Credit requested $_____________
but not yet issued on the date of this Request:
6. Sum of Items 2 through 5: $_____________
7. Revolving Credit Aggregate Commitment in effect on $_____________
the date of this Request:
8. Borrowing Base as of the most recently delivered $_____________
certificate:
9. Lesser of Items 7 and 8: $_____________
10. Item 9 minus Item 6 (Availability): Item 1 must be less $_____________
than Item 10
</TABLE>
The Company certifies to the matters specified in Section 4.3(e) of
the Agreement.
ALRENCO, INC.
By:
----------------------------------
Its:
---------------------------------
Swing Line Bank Approval:____________
2
<PAGE> 128
EXHIBIT E
SWING LINE NOTE
$3,000,000 February 26, 1998
On the Revolving Credit Maturity Date, FOR VALUE RECEIVED, Alrenco,
Inc., a ________ corporation ("Company") promises to pay to the order of
Comerica Bank-Texas ("Bank") at 500 Woodward Avenue, Detroit, Michigan, in care
of Agent, in lawful money of the United States of America, the sum of Three
Million Dollars ($3,000,000), or so much of said sum as may from time to time
have been advanced and then be outstanding hereunder pursuant to Article 4 of
the Alrenco Revolving Credit Agreement dated as of February 26, 1998, executed
by and among the Company, certain banks, including the Bank, and Comerica Bank
as Agent for such banks, as the same may be amended from time to time (the
"Agreement"), together with interest thereon as hereinafter set forth.
The unpaid principal indebtedness from time to time outstanding under
this Note shall be due and payable on the last day of the Interest Period
applicable thereto or as otherwise set forth in the Agreement, provided that no
Swing Line Advance may mature or be payable on a day later than the Revolving
Credit Maturity Date.
Each of the Swing Line Advances made hereunder shall bear interest at
the Prime-based Rate or the Quoted Rate from time to time applicable thereto
under the Agreement or as otherwise determined thereunder, and interest shall
be computed, assessed and payable as set forth in the Agreement.
This Note is a note under which advances, repayments and readvances
may be made from time to time, but only in accordance with the terms and
conditions of the Agreement. This Note evidences borrowings under, is subject
to, is secured in accordance with, and may be accelerated or matured under, the
terms of the Agreement, to which reference is hereby made. Definitions and
terms of the Agreement are hereby incorporated by reference herein.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan (without regard to its conflict of laws provisions).
Company hereby waives presentment for payment, demand, protest and
notice of dishonor and nonpayment of this Note and agrees that no obligation
hereunder shall be discharged by reason of any extension, indulgence, release,
or forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note.
<PAGE> 129
Nothing herein shall limit any right granted Bank by any other
instrument or by law.
ALRENCO, INC.
By:
-------------------------------------
Its:
-----------------------------------
2
<PAGE> 130
EXHIBIT F
FORM OF
SWING LINE LOAN PARTICIPATION CERTIFICATE
__________________, 19__
[Name of Bank]
- -------------------------
- -------------------------
Ladies and Gentlemen:
Pursuant to Section 4.5(b) of the Revolving Credit Agreement dated as
of February 26, 1998, among Alrenco, Inc., the Banks named therein and Comerica
Bank, as Agent, the undersigned hereby acknowledges receipt from you of
$___________________ as payment for a participating interest in the following
Swing Line Loan:
Date of Swing Line Loan:________________________________
Principal Amount of Swing Line Loan:____________________
The participation evidenced by this certificate shall be subject to the terms
and conditions of the Revolving Credit Agreement including without limitation
Section 4.5(b) thereof.
Very truly yours,
COMERICA BANK, as Agent
By:
------------------------------------------
Its:
-----------------------------------------
<PAGE> 131
EXHIBIT G
[FORM OF NEW BANK ADDENDUM]
NEW BANK ADDENDUM, dated____________, to the Alrenco Revolving Credit
Agreement dated as of February 26, 1998 (as amended or otherwise modified from
time to time, the "Credit Agreement"), among Alrenco, Inc. ("Company"), each of
the financial institutions party thereto (collectively, the "Banks") and
Comerica Bank, as Agent for the Banks.
W I T N E S S E T H:
WHEREAS, the Credit Agreement provides in Section 2.10 thereof that
any financial institution, although not originally a party thereto, may become
a party to the Credit Agreement with the consent of the Company and the Agent
by executing and delivering to the Agent a New Bank Addendum to the Credit
Agreement in substantially the form of this new bank addendum; and
WHEREAS, the undersigned was not an original party to the Credit
Agreement but now desires to become a party thereto;
NOW, THEREFORE, the undersigned hereby agrees as follows:
The New Bank hereby confirms that it has received a copy of the Credit
Agreement and the exhibits and schedules referred to therein, and all other
Loan Documents which it considers necessary, together with copies of the other
documents which were required to be delivered under the Credit Agreement as a
condition to the making of the loans thereunder. The New Bank acknowledges and
agrees that it: (a) has made and will continue to make such inquiries and has
taken and will take such care on its own behalf as would have been the case had
its commitment been granted and its loans been made directly by such New Bank
to the Company without the intervention of the Agent or any other Bank; and (b)
has made and will continue to make, independently and without reliance upon the
Agent or any other Bank, and based on such documents and information as it has
deemed appropriate, its own credit analysis and decisions relating to the
Credit Agreement. The New Bank further acknowledges and agrees that the Agent
has not made any representations or warranties about the creditworthiness of
the Company or any other party to the Credit Agreement or any other of the Loan
Documents, or with respect to the legality, validity, sufficiency or
enforceability of the Credit Agreement, or any other of the Loan Documents.
New Bank represents and warrants that it is a Person to which
assignments are permitted pursuant to Sections 14.8(c) and (d) of the Credit
Agreement.
Except as otherwise provided in the Credit Agreement, effective as of
the Effective Date (as defined below):
<PAGE> 132
(a) the New Bank (i) shall be deemed automatically to have become
a party to the Credit Agreement and the other Loan Documents,
and to have all the rights and obligations of a party to the
Credit Agreement and the other Loan Documents, as if it were
an original signatory; and (ii) agrees to be bound by the
terms and conditions set forth in the Credit Agreement and
the other Loan Documents as if it were an original signatory
thereto; and
(b) the New Bank shall be a Bank and its Percentage of the
Revolving Credit shall be as set forth in the attached
revised Schedule 1.2 (Percentages).
As used herein, the term "Effective Date" means the date on which all
of the following have occurred or have been completed, as reasonably determined
by the Agent:
(1) the Company shall have paid to the Agent, all interest, fees
(including the Revolving Credit Commitment Fee) and other
amounts, if any, accrued to the Effective Date for which
reimbursement is then owing under the Credit Agreement;
(2) New Bank shall have remitted to the Agent funds in an amount
equal to its Percentage of all Advances of the Revolving
Credit outstanding as of the Effective Date; and
(3) the Company shall have executed and delivered to the Agent
for the New Bank, new Revolving Credit Notes payable to such
New Bank in the face amount of such New Bank's Percentage of
the Revolving Credit Aggregate Commitment (after giving
effect to this New Bank Addendum, and any other New Bank
Addendum executed concurrently herewith).
The Agent shall notify the New Bank, along with Company, of the
Effective Date.
The New Bank hereby advises the Agent of the following administrative
details with respect to the assigned loans:
(A) Address for Notices:
Institution Name:
Address:
Attention:
Telephone:
Facsimile:
2
<PAGE> 133
(B) Payment Instructions:
Terms defined in the Credit Agreement and not otherwise defined herein
shall have their defined meanings when used herein.
IN WITNESS WHEREOF, the undersigned has caused this New Bank Addendum
to be executed and delivered by a duly authorized officer on the date first
above written.
[INSERT NAME OF BANK]
By
------------------------------------
Title:
Accepted this______________ day of
_________________________, 199__.
ALRENCO, INC.
By
-----------------------------------------
Title:
Accepted this_______________ day of
_________________________, 199__.
COMERICA BANK, as Agent
By
------------------------------------------
Title:
3
<PAGE> 134
EXHIBIT H
COVENANT COMPLIANCE REPORT
To: Comerica Bank, as Agent
Re: Alrenco Revolving Credit Agreement dated as of February 26, 1998
(as amended or otherwise modified from time to time, the
"Agreement")
This Covenant Compliance and Interest Rate Adjustment Report
("Report") is furnished pursuant to Section 8.2 of the Agreement and sets forth
various information as of _____________, 19__ (the "Computation Date").
1. Minimum Tangible Net Worth, Section 8.9. On the Computation Date,
the Tangible Net Worth which is required to be not less than $25,000,000 was
_______ as computed in the supporting documents attached hereto as Schedule 1.
2. Positive Net Income, Section 8.10. On the Computation Date, Net
Income (without giving effect to any one-time charges in an aggregate amount
not to exceed $2,000,000 for the four fiscal quarters then ending arising from
any acquisition and/or mergers other than the Merger) greater than zero, was
$______________ as computed in the supporting documents attached hereto as
Schedule 2.
3. Fixed Charge Coverage Ratio, Section 8.11. On the Computation
Date, the Fixed Charge Coverage Ratio, which is required to be not less than ___
to 1.0 was _______ as computed in the supporting documents attached as Schedule
3.
4. Leverage Ratio, Section 8.12. On the Computation Date, the
Leverage Ratio which is required to be not more than 0.50 to 1.0 was ________ as
computed in the supporting documents attached hereto as Schedule 4.
5. Eurocurrency Margin. The aggregate applicable Margin which shall
become effective pursuant to the provisions of Section 5.1 of the Agreement and
which is based on the Fixed Charge Coverage Ratio on the Computation Date is
_______ percent (___%).
6. Limitation on Debt, Section 9.1. On the Computation Date:
(a) Clause (c)(i): The aggregate principal
amount of Debt of the Company or a Guarantor incurred to
finance the acquisition of motor vehicles (whether pursuant
to a loan or a Financing Lease) which shall not exceed
$5,000,000 at any time outstanding, and any renewals or
refinancings thereof, was $________, as set forth in Schedule
6(a);
<PAGE> 135
(b) Clause (c)(ii): The aggregate amount of Debt
of the Company or a Guarantor incurred to finance the
acquisition of fixed or capital assets other than motor
vehicles (whether pursuant to a loan or a Financing Lease)
which shall not exceed $1,000,000 at any time outstanding,
and any renewals or refinancings thereof, was $_________ as
set forth in Schedule 6(b);
(c) Clause (d): The aggregate amount of Debt of
the Company or a Guarantor arising in connection with
non-competition agreements entered into by the Company or
such Guarantor in connection with Permitted Acquisitions (as
defined by the Agreement), which shall not exceed $3,000,000
at any one time, was $________ as set forth in Schedule 6(c);
(d) Clause (j): The aggregate principal amount
of "additional Debt" pursuant to Section 9.1(g) of the
Agreement, which shall not exceed $5,000,000 at any one time
outstanding, provided that only the principal component of
obligations shall be considered in calculating such amount,
was $_________.
7. Limitation on Mergers or Sale of Assets, Section 9.5. On the
Computation Date, "other property" disposed of pursuant to Section 9.5(e) of
the Agreement, which shall not exceed $1,000, 000 during any fiscal year of the
Company, was $__________.
8. Limitation on Capital Expenditures, Section 9.7. On the
Computation Date, the aggregate amount of capital expenditures pursuant to
Section 9.7(b) of the Agreement, which shall not exceed $6,000,000 for the
Company during fiscal year 1998 and $3,000,000 during any fiscal year
thereafter any fiscal year of the Company, was $ __________.
9. Limitation on Investments, Loans and Advances, Section 9.8.
On the Computation Date
(a) Clause (c): the aggregate amount of loans
and advances to officers and employees of the Company for
travel and entertainment in the ordinary course of business,
which shall not exceed $200,000 at any one time outstanding,
was $___________ and the aggregate amount of advances to
employees to purchase inventory for personal use, which shall
not exceed $300,000 at any one time outstanding, was
$____________;
(b) Clause (g): loans, advances or investments
by Company or any Guarantor in any Subsidiary (other than RTO
Holding or RTO Operating) which shall not exceed $500,000 at
any one time outstanding was $____________;
The undersigned officer of Company hereby certifies that:
A. All of the information set forth in this Report (and in any
Schedule attached hereto) is true and correct in all material respects.
2
<PAGE> 136
B. As of the Computation Date, the Company and its Subsidiaries has
observed and performed all of its covenants and other agreements contained in
the Agreement and in the Notes and any other Loan Documents to be observed,
performed and satisfied by them.
C. He/she has reviewed the Agreement and this Report is based on an
examination sufficient to assure that this Report is accurate.
D. Attached hereto as Exhibit D are the Same Store Reports as
required under the Credit Agreement.
E. Except as stated in Schedule D hereto (which shall describe any
existing Default or Event of Default and the notice and period of existence
thereof and any action taken with respect thereto or contemplated to be taken
by Company), no Default or Event of Default, has occurred and is continuing on
the date of this Report.
Capitalized terms used in this Report and in the schedules hereto,
unless specifically defined to the contrary, have the meanings given to them in
the Agreement.
IN WITNESS WHEREOF, Company has caused this Report to be executed and
delivered by its duly authorized officer this ______ day of __________________,
19__.
ALRENCO, INC.
By:
-------------------------------
Its:
------------------------------
3
<PAGE> 137
EXHIBIT I
FORM OF
ASSIGNMENT AGREEMENT
Date:___________
To: ALRENCO, INC.
and
COMERICA BANK, AS AGENT ("Agent")
Re: Alrenco Revolving Credit Agreement dated as of February 26, 1998 (as
amended or otherwise modified from time to time, the "Agreement"),
among Alrenco, Inc. ("Company"), Agent and certain Banks
Gentlemen and Ladies:
Reference is made to Section 14.8(c), (d) and (e) of the Agreement.
Unless otherwise defined herein or the context otherwise requires, all
initially capitalized terms used herein without definition shall have the
meanings specified in the Agreement.
This Agreement constitutes notice to each of you of the proposed
assignment and delegation by [insert assignor Bank] (the "Assignor") to [insert
proposed assignee] (the "Assignee") of a _____% undivided interest in
Assignor's Revolving Credit Note under the Agreement (the "Note"), such that
after giving effect to the assignment and assumption hereafter provided the
Assignee's interest in the Note shall equal $ ________ (1) and its Percentage
shall equal % under the Loan Documents.
Assignor does hereby sell, assign and transfer to Assignee effective on
the "Effective Date" (as hereafter defined) __% of Assignor's right, title and
interest in, to and under the Assignor's Note, the Agreement and the other Loan
Documents. It is acknowledged that Assignor, immediately after this Assignment,
shall hold ______ percentage (__%) interest in Assignor's Note.
- -----------------------------
(1) Such assignment shall be in a minimum amount of the lesser of (X)
Ten Million Dollars ($10,000,000) and (Y) the entire remaining amount of
assigning Bank's interest in the Revolving Credit (and participations in any
outstanding Letters of Credit); provided however that, after giving effect to
such assignment, in no event shall the entire remaining amount (if any) of
Assignor's interest in the Revolving Credit (and participations in any
outstanding Letters of Credit) be less than $10,000,000;
<PAGE> 138
The Assignor hereby instructs the Agent to make all payments from and
including the Effective Date hereof in respect of the interest assigned hereby,
directly to the Assignee. The Assignor and the Assignee agree that all interest
and fees accrued up to, but not including, the Effective Date of the assignment
and delegation being made hereby are the property of the Assignor, and not the
Assignee. The Assignee agrees that, upon receipt of any such interest or fees
accrued up to the Effective Date, the Assignee will promptly remit the same to
the Assignor.
The Assignee hereby confirms that it has received a copy of the
Agreement and the exhibits and schedules referred to therein, and all other
Loan Documents which it considers necessary, together with copies of the other
documents which were required to be delivered under the Agreement as a
condition to the making of the loans thereunder. The Assignee acknowledges and
agrees that it: (a) has made and will continue to make such inquiries and has
taken and will take such care on its own behalf as would have been the case had
its Percentage been granted and its loans been made directly by such Assignee
to the Company without the intervention of the Agent, the Assignor or any other
bank; and (b) has made and will continue to make, independently and without
reliance upon the Agent, the Assignor or any other bank, and based on such
documents and information as it has deemed appropriate, its own credit analysis
and decisions relating to the Agreement. The Assignee further acknowledges and
agrees that neither the Agent, nor the Assignor has made any representations or
warranties about the creditworthiness of the Company, or any other party to the
Agreement or any other of the Loan Documents, or with respect to the legality,
validity, sufficiency or enforceability of the Agreement, or any other of the
Loan Documents. This assignment shall be made without recourse to or warranty
by the Assignor, except as set forth herein.
Assignee represents and warrants that it is a Person to which
assignments are permitted pursuant to Section 14.8(c) of the Agreement.
Except as otherwise provided in the Agreement, effective as of the
Effective Date:
(a) the Assignee: (i) shall be deemed automatically to have
become a party to the Agreement, to have assumed all of the
Assignor's obligations thereunder to the extent of the
Assignee's percentage referred to in the second paragraph of
this Assignment Agreement, and to have all the rights and
obligations of a party to the Agreement, as if it were an
original signatory thereto to the extent specified in the
second paragraph hereof; and (ii) agrees to be bound by the
terms and conditions set forth in the Agreement as if it were
an original signatory thereto; and
(b) the Assignor's obligations under the Agreement shall be
reduced by the percentage referred to in the second paragraph
of this Assignment Agreement.
As used herein, the term "Effective Date" means the date on which all
of the following have occurred or have been completed, as reasonably determined
by the Agent:
(1) the delivery to the Agent of an original of this Assignment
Agreement executed by the Assignor and the Assignee;
2
<PAGE> 139
(2) the payment to the Agent, of all accrued fees, expenses and
other items for which reimbursement is then owing under the
Agreement;
(3) the payment to the Agent of the $3,500 processing fee
referred to in Section 14.8(d) (iv) of the Agreement; and
(4) all other restrictions and items noted in Sections 14.8(c),
(d) and (e) of the Agreement have been satisfied.
The Agent shall notify the Assignor, the Assignee and the Company of the
Effective Date.
The Assignee hereby advises each of you of the following
administrative details with respect to the assigned loans:
(A) Address for Notices:
Institution Name:
Address:
Attention:
Telephone:
Facsimile:
(B) Payment Instructions:
(C) Proposed effective date of assignment.
The Assignee has delivered to the Agent (or is delivering to the Agent
concurrently herewith) the tax forms referred to in Section 14.13 of the
Agreement, other forms reasonably requested by the Agent, and the original of
each Note held by the Assignor under the Agreement.
Please evidence your consent to and acceptance of the proposed
assignment and delegation set forth herein by signing and returning
counterparts hereof to the Assignor and the Assignee.
[ASSIGNOR]
By:
-------------------------------------
Its:
------------------------------------
3
<PAGE> 140
[ASSIGNEE]
By:
------------------------------------
Its:
-----------------------------------
ACCEPTED AND CONSENTED TO
this ___ day of ______, 199__
COMERICA BANK, Agent
By:
---------------------------------
Its:
--------------------------------
ALRENCO, INC.
By:
---------------------------------
Its:
--------------------------------
[This form of Assignment Agreement (including footnotes) is subject in all
respects to the terms and conditions of the Agreement which shall govern in the
event of any inconsistencies or omissions.]
4
<PAGE> 141
EXHIBIT J
FORM OF GUARANTY
This GUARANTY is made as of the 26th day of February, 1998 by each of the
undersigned guarantors, to Comerica Bank, as Agent ("Agent") for and on behalf
of the Banks (as defined below).
RECITALS
A. Pursuant to that certain Alrenco Credit Agreement dated as of
February 26, 1998 (as amended or otherwise modified from time to time, the
"Credit Agreement") by and among Alrenco, Inc., an Indiana corporation (the
"Company"), Agent and the banks which are named in and signatories to the Credit
Agreement ("Banks"), the Banks have agreed to extend credit to Company on the
terms set forth in the Credit Agreement, with such credit consisting of (i) the
Revolving Credit in an aggregate amount, subject to the terms of the Credit
Agreement, of up to Fifty Million Dollars ($50,000,000), as such amount may be
increased by an amount up to Fifty Million Dollars ($50,000,000) pursuant to
Section 2.10 of the Credit Agreement at any one time outstanding, to be
evidenced by the Revolving Credit Notes made or to be made by the Company to the
Banks ("Revolving Credit Notes"); (ii) a Swing Line facility to be evidenced by
the Swing Line Notes made or to be made by Company ("Swing Line Note"); and
(iii) a facility for the issuance of letter(s) of credit ("Letter(s) of Credit")
for the account of the Company, individually, or jointly and severally with
other Account Parties pursuant to Section 3 of the Credit Agreement, subject to
specified availability thereunder.
B. As a condition to entering into and performing their respective
obligations under the Credit Agreement, the Banks and the Agent have required
that the Guarantors provide to Agent, for and on behalf of the Banks, among
other guaranties, this Guaranty.
C. Each of the Guarantors desires to see the success of the Company
and, furthermore, shall receive direct and/or indirect benefits from extensions
of credit made or to be made pursuant to the Credit Agreement to the Company.
D. The Agent is acting as Agent for the Banks pursuant to Section 13
of the Credit Agreement.
NOW, THEREFORE, as a continuing inducement to the Agent and the Banks to
enter into and perform its obligations under the Credit Agreement, each of the
Guarantors has executed and delivered this guaranty ("Guaranty").
1. Definitions. Unless otherwise provided herein, all capitalized
terms used in this Guaranty shall have the meanings specified in the Credit
Agreement. The term "Banks" as used
<PAGE> 142
herein shall include any successors or permitted assigns of the Banks, in
accordance with the Credit Agreement.
2. Guaranty. Each of the Guarantors hereby guarantees to the Banks
the punctual payment to the Banks when due, whether by acceleration or
otherwise, of all amounts, including, without limitation, principal, interest
(including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding by such Guarantor, whether or not a claim for post-filing or
post-petition interest is allowed in such a proceeding), and all other
liabilities and obligations, direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter incurred, which may arise under, out
of, or in connection with:
(a) any and all Revolving Credit Notes made or to be made to
the order of the Banks (or any of them) by the Company, from time to time
pursuant to the terms and conditions of the Credit Agreement;
(b) the Swing Line Note made or to be made to the order of the
Swing Line Bank by the Company, from time to time pursuant to the terms
and conditions of the Credit Agreement;
(c) any and all Letter of Credit Agreements executed or to be
executed by the Company or the other Account Parties and any of them,
from time to time pursuant to the Credit Agreement, and any Letters of
Credit issued or to be issued thereunder;
(d) all other Indebtedness (as defined in the Credit Agreement)
of the Company, any other Guarantor and/or any Account Party, under or in
connection with the Credit Agreement or the other Loan Documents, whether
such Indebtedness is now existing or hereafter arising; and
(e) all extensions, renewals and amendments of or to the
Revolving Credit Notes and/or the Swing Line Note (collectively, and
either or any of such notes, the "Notes"), Letter of Credit Agreements,
Letters of Credit or such other Indebtedness, or any replacements or
substitutions therefor;
whether on account of principal, interest, reimbursement obligations, fees,
indemnities, and reasonable costs and expenses (including without limitation,
all reasonable fees and disbursements of counsel to the Agent or any Bank) or
otherwise, and hereby agrees that if Company shall fail to pay any of such
amounts when and as the same shall be due and payable, or shall fail to perform
and discharge any covenant, representation or warranty in accordance with the
terms of the Notes, the Credit Agreement, the Letter of Credit Agreements, the
Letters of Credit or any of the other Loan Documents (subject, in each case, to
any applicable periods of grace or cure), each such Guarantor will forthwith pay
to the Agent, on behalf of the Banks, an amount equal to any such amount or
cause Company to perform and discharge any such covenant, representation or
warranty, as the case may be, and will pay any and all damages that may be
incurred or suffered in consequence thereof
2
<PAGE> 143
by Agent or any of the Banks and all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by Agent in enforcing such covenant,
representation or warranty of Company, and in enforcing the covenants and
agreements of this Guaranty.
3. Unconditional Character of Guaranty. The obligations of each of
the Guarantors under this Guaranty, to the full extent of its guaranty of
Indebtedness hereunder, shall be absolute and unconditional, and shall be a
guaranty of payment and not of collection, irrespective of the validity,
regularity or enforceability of the Notes, the Credit Agreement, the Letter of
Credit Agreements, the Letters of Credit or any of the other Loan Documents, or
any provision thereof, the absence of any action to enforce the same, any waiver
or consent with respect to or any amendment of any provision thereof, the
recovery of any judgment against any Person or action to enforce the same, any
failure or delay in the enforcement of the obligations of Company under the
Notes, the Credit Agreement, the Letter of Credit Agreements, the Letters of
Credit or any of the other Loan Documents, or any setoff, counterclaim,
recoupment, limitation, defense or termination, whether with or without notice
to such Guarantor. Each of the Guarantors hereby waives diligence, demand for
payment, filing of claims with any court, any proceeding to enforce any
provision of the Notes executed by Company, or the Credit Agreement, the Letter
of Credit Agreements, the Letters of Credit or any of the other Loan Documents,
any right to require a proceeding first against Company, or against any other
guarantor or other party providing collateral, or to exhaust any security for
the performance of the obligations of Company, any protest, presentment, notice
or demand whatsoever, and such Guarantor hereby covenants that this Guaranty
shall not be terminated, discharged or released except, subject to Section 6.5
hereof, upon final payment in full (subject to no revocation or rescission) of
all amounts due and to become due from Company or any Account Party, as and to
the extent described above, and only to the extent of any such payment,
performance and discharge. Each of the Guarantors further covenants that no
security now or subsequently held by the Agent or the Banks for the payment of
the Indebtedness evidenced by the Notes made by Company, under the Credit
Agreement, or for the payment of any other Indebtedness of Company, to the Agent
or the Banks under the Credit Agreement, the Letter of Credit Agreements, the
Letters of Credit or the other Loan Documents, whether in the nature of a
security interest, pledge, lien, assignment, setoff, suretyship, guaranty,
indemnity, insurance or otherwise, and no act, omission or other conduct of
Agent or the Banks in respect of such security, shall affect in any manner
whatsoever the unconditional obligation of this Guaranty, and that the Agent and
each of the Banks, in their respective sole discretion and without notice to
Company, may release, exchange, enforce, apply the proceeds of and otherwise
deal with any such security without affecting in any manner the unconditional
obligation of this Guaranty.
Without limiting the generality of the foregoing, such obligations, and
the rights of the Agent to enforce the same on behalf of the Banks, by
proceedings, whether by action at law, suit in equity or otherwise, shall not be
in any way affected by (i) any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, winding up or other
proceeding involving or affecting Company, or others, or (ii) any change in the
ownership of the capital stock of Company, or any other party providing
collateral for any indebtedness covered by this Guaranty, or any of their
respective Affiliates.
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<PAGE> 144
Each of the Guarantors hereby waives to the fullest extent possible under
applicable law:
(a) any defense based upon the doctrine of marshalling of
assets or upon an election of remedies by Agent or the Banks, including, without
limitation, an election to proceed by non-judicial rather than judicial
foreclosure;
(b) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(c) any duty on the part of Agent or any of the Banks to
disclose to such Guarantor any facts Agent or the Banks may now or hereafter
know about the Company, regardless of whether Agent or any Bank has reason to
believe that any such facts materially increase the risk beyond that which such
Guarantor intends to assume or has reason to believe that such facts are unknown
to such Guarantor or has a reasonable opportunity to communicate such facts to
such Guarantor, since such Guarantor acknowledges that it is fully responsible
for being and keeping informed of the financial condition of Company and of all
circumstances bearing on the risk of non-payment of any Indebtedness hereby
guaranteed;
(d) any claim for reimbursement, contribution, exoneration,
indemnity or subrogation, or any other similar claim, which such Guarantor may
have or obtain against the Company, by reason of the existence of this Guaranty,
or by reason of the payment by such Guarantor of any Indebtedness or the
performance of this Guaranty or of any other Loan Documents, until the
Indebtedness has been repaid and discharged in full and no commitment to extend
any credit under the Credit Agreement or any of the Loan Documents (whether
optional or obligatory), or any Letter of Credit, remains outstanding, and any
amounts paid to such Guarantor on account of any such claim at any time when the
obligations of such Guarantor under this Guaranty shall not have been fully and
finally paid shall be held by such Guarantor in trust for Agent and the Banks,
segregated from other funds of such Guarantor, and forthwith upon receipt by
such Guarantor shall be turned over to Agent in the exact form received by such
Guarantor (duly endorsed to Agent by such Guarantor, if required), to be applied
to such Guarantor's obligations under this Guaranty, whether matured or
unmatured, in such order and manner as Agent may determine; and
(e) any other event or action (excluding compliance by such
Guarantor with the provisions hereof) that would result in the discharge by
operation of law or otherwise of such Guarantor from the performance or
observance of any obligation, covenant or agreement contained in this Guaranty.
The Agent and each of the Banks may deal with Company, and any security
held by them for the obligations of Company or any other Account Party (as
aforesaid), in the same manner and as freely as if this Guaranty did not exist
and the Agent shall be entitled, on behalf of Banks, without notice to the
Guarantors, among other things, to grant to the Company, such extension or
extensions of time to perform any act or acts as may seem advisable to such
Agent (on behalf of the Banks) at any time and from time to time, and to permit
the Company or any other Account Party to incur
4
<PAGE> 145
additional indebtedness to Agent, the Banks, or any of them, without
terminating, affecting or impairing the validity or enforceability of this
Guaranty or the obligations of the Guarantors hereunder.
The Agent may proceed, either in its own name (on behalf of the Banks) or
in the name of any of the Guarantors, or otherwise, to protect and enforce any
or all of its rights under this Guaranty by suit in equity, action at law or by
other appropriate proceedings, or to take any action authorized or permitted
under applicable law, and shall be entitled to require and enforce the
performance of all acts and things required to be performed hereunder by the
Guarantors. Each and every remedy of the Agent and of the Banks shall, to the
extent permitted by law, be cumulative and shall be in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity.
No waiver or release shall be deemed to have been made by the Agent or
any of the Banks of any of its rights hereunder unless the same shall be in
writing and signed by all of the Banks or on behalf of the Banks by the Agent,
and any such waiver shall be a waiver or release only with respect to the
specific matter involved and shall in no way impair the rights of the Agent or
any of the Banks or the obligations of the Guarantors under this Guaranty in any
other respect at any other time.
At the option of the Agent, any of the Guarantors may be joined in any
action or proceeding commenced by the Agent against Company, or any of the other
parties providing collateral for any indebtedness covered by this Guaranty in
connection with or based upon the Notes made by Company, the Credit Agreement,
the Letter of Credit Agreements, the Letters of Credit or any of the other Loan
Documents or other Indebtedness, or any provision thereof, and recovery may be
had against any such Guarantor in such action or proceeding or in any
independent action or proceeding against such Guarantor, without any requirement
that the Agent or the Banks first assert, prosecute or exhaust any remedy or
claim against Company, and/or any of the other parties providing collateral for
any Indebtedness covered by this Guaranty, or any other Indebtedness.
As a separate, additional and continuing obligation, each of the
Guarantors unconditionally and irrevocably undertakes and agrees with Agent
that, should the amounts referred to in Section 2 of this Guaranty not be
recoverable from such Guarantor in its capacity as a guarantor under this
Guaranty for any reason whatsoever (including, without limitation, by reason of
any provision of the Notes, the Credit Agreement, any Letter of Credit Agreement
or Letter of Credit, or any of the other Loan Documents being or becoming void,
unenforceable, or otherwise invalid under any applicable law) then,
notwithstanding any knowledge thereof by the Agent and the Banks or any of them
at any time, such Guarantor as sole, original and independent obligor, upon
demand by Agent, will make payment to Agent of all such amounts by way of a full
indemnity.
4. Representations and Warranties. Each of the Guarantors (a)
ratifies, confirms and, by reference thereto (as fully as though such matters
were expressly set forth herein), represents and warrants with respect to itself
those matters set forth in Sections 7.1, 7.3, 7.4, 7.5, 7.6, 7.8, 7.9, 7.11,
7.12 through 7.19, inclusive, of the Credit Agreement, and (b) agrees not to
engage in any action or
5
<PAGE> 146
inaction, the result of which would cause a violation of any term or condition
of the Credit Agreement.
5. Collateral for Guaranty. The obligations of the Guarantors under
this Guaranty shall be secured by the Security Agreement and, if applicable, a
Pledge Agreement, executed and delivered by each of the Guarantors to Agent,
pursuant to the Credit Agreement, together with such other Loan Documents as are
required to be executed and delivered by one or more of the Guarantors
concurrently with or subsequent to the date hereof, all pursuant to the terms
and conditions of the Credit Agreement and/or any of the other Loan Documents.
6. Miscellaneous.
6.1 Governing Law. This Guaranty has been delivered in Michigan
and shall be interpreted and the rights of the parties hereunder shall be
determined under the laws of, and be enforceable in, the State of Michigan
(without regard to its conflict of laws provisions), each of the Guarantors
hereby consenting to the jurisdiction of state and all federal courts sitting in
such state.
6.2 Severability. If any term or provision of this Guaranty, or
the application thereof to any circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Guaranty, or the application of such term
or provision to circumstances other than those as to which it is held invalid or
unenforceable, as the case may be, shall not be affected thereby, and each term,
provision and obligation of this Guaranty shall be valid and enforceable to the
fullest extent permitted by law.
6.3 Notice. All notices and other communications to be made or
given pursuant to this Guaranty shall be sufficient if made or given in
conformity with Section 14.6 of the Credit Agreement.
6.4 Right of Offset. Each of the Guarantors acknowledges the
rights of the Agent and of each of the Banks, upon the occurrence and during the
continuance of an Event of Default, to offset against the Indebtedness of such
Guarantor to the Banks under this Guaranty, any amount owing by the Agent or the
Banks, or either or any of them to such Guarantor, whether represented by any
deposit of such Guarantor with the Agent or any of the Banks or otherwise.
6.5 Release. Upon the satisfaction of the obligations of the
Guarantors hereunder, and when the Guarantors are not subject to any obligation
under the Credit Agreement or any of the other Loan Documents, the Agent shall
deliver to the Guarantors, upon written request therefor, a written release of
this Guaranty; provided however that the effectiveness of this Guaranty shall
continue or be reinstated, as the case may be, in the event that any payment
received or credit given by the Agent or the Banks, or any of them, is returned,
disgorged, rescinded or required to be recontributed to any party as an
avoidable preference, impermissible setoff, fraudulent conveyance, restoration
of capital or otherwise under any applicable state, federal or national law of
any jurisdiction, including without limitation laws pertaining to bankruptcy or
insolvency, and this Guaranty shall thereafter be enforceable against the
Guarantors as if such returned, disgorged,
6
<PAGE> 147
recontributed or rescinded payment or credit had not been received or given by
the Agent or the Banks, and whether or not the Agent or any Bank relied upon
such payment or credit or changed its position as a consequence thereof.
6.6 Amendments. The terms of this Guaranty may not be waived,
altered, modified, amended, supplemented or terminated in any manner whatsoever
except as provided herein and in accordance with the Credit Agreement. In
accordance with Section 8.22 of the Credit Agreement, all Subsidiaries of the
Company created or otherwise acquired after the Effective Date shall become
obligated as Guarantors hereunder (each as fully as though an original signatory
hereto) by executing and delivering to Agent and the Banks that certain joinder
agreement in the form attached to this Guaranty as Exhibit A.
6.7 Consent to Jurisdiction. Each of the Guarantors and each of
the Agent and the Banks (by accepting the benefits hereof) hereby irrevocably
submit to the non-exclusive jurisdiction of any United States Federal Court or
Michigan state court sitting in Detroit, Michigan or Texas state court sitting
in Dallas County, Texas in any action or proceeding arising out of or relating
to this Guaranty and each of the Guarantors and the Agent and the Banks hereby
irrevocably agree that claims in respect of such action or proceeding may be
heard and determined in any such United States Federal Court or Michigan state
court or Texas state court. Each of the Guarantors irrevocably consents to the
service of any and all process in any such action or proceeding brought in any
court in or of the State of Michigan or the State of Texas by the delivery of
copies of such process to such Guarantor at its address specified on the
signature page hereto or by certified mail directed to such address or such
other address as may be designated by the Guarantor in a notice to the other
parties that complies as to delivery with the terms of Section 6.3. Nothing in
this Section shall affect the right of the Banks and the Agent to serve process
in any other manner permitted by law or limit the right of the Banks or the
Agent (or any of them) to bring any such action or proceeding against any of the
Guarantors or any of its or their property in the courts of any other
jurisdiction. Each of the Guarantors hereby irrevocably waives any objection to
the laying of venue of any such suit or proceeding in the above described
courts.
6.8 Joint and Several Obligation, etc. The obligation of each
of the Guarantors under this Guaranty shall be several and also joint, each with
all and also each with any one or more of the others, and may be enforced
against each severally, any two or more jointly, or some severally and some
jointly. Any one or more of the Guarantors may be released from its obligations
hereunder with or without consideration for such release and the obligations of
the other Guarantors hereunder shall be in no way affected thereby. Agent, on
behalf of Banks, may fail or elect not to prove a claim against any bankrupt or
insolvent Guarantor and thereafter, Agent and the Bank may, without notice to
any Guarantors, extend or renew any part or all of any indebtedness of any of
the Guarantors, and may permit any of the Guarantors to incur additional
indebtedness, without affecting in any manner the unconditional obligation of
the remaining Guarantors. Such action shall not affect any right of contribution
among the Guarantors.
6.9 WAIVER OF JURY TRIAL. THE BANKS (BY ACCEPTING THE BENEFITS
HEREOF), THE AGENT (BY ACCEPTING THE BENEFITS HEREOF) AND
7
<PAGE> 148
EACH OF THE GUARANTORS AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT
WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF
THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY
COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTION OF
ANY OF THEM. NEITHER THE BANKS, THE AGENT, NOR ANY OF THE GUARANTORS SHALL SEEK
TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY
TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR
HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY THE BANKS AND THE AGENT OR THE GUARANTORS
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
6.10 Limitation under Applicable Insolvency Laws.
Notwithstanding anything to the contrary contained herein, it is the intention
of each of the Guarantors, Agent and the Banks that the amount of each
Guarantor's obligations hereunder shall be in, but not in excess of, the maximum
amount thereof not subject to avoidance or recovery by operation of applicable
law governing bankruptcy, reorganization, arrangement, adjustment of debts,
relief of debtors, dissolution, insolvency, fraudulent transfers or conveyances
or other similar laws (collectively, "Applicable Insolvency Laws"). To that end,
but only in the event and to the extent that a Guarantor's obligations hereunder
or any payment made pursuant thereto would, but for the operation of the
foregoing proviso, be subject to avoidance or recovery under Applicable
Insolvency Laws, the amount of such Guarantor's obligations hereunder shall be
limited to the largest amount which, after effect thereto, would not, under
Applicable Insolvency Laws, render such Guarantor's respective obligations
hereunder unenforceable or avoidable or subject to recovery under Applicable
Insolvency Laws. To the extent any payment actually made hereunder exceeds the
limitation contained in this Section 6.10, then the amount of such excess shall,
from and after the time of payment by the Guarantors (or any of them), be
reimbursed by the Banks upon demand by such Guarantor. The foregoing proviso is
intended solely to preserve the rights of the Agent and the Banks hereunder
against the Guarantors to the maximum extent permitted by Applicable Insolvency
Laws and neither Company nor any Guarantor nor any other Person shall have any
right or claim under this Section 6.10 that would not otherwise be available
under Applicable Insolvency Laws.
[SIGNATURES FOLLOW ON SUCCEEDING PAGE]
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<PAGE> 149
IN WITNESS WHEREOF, the undersigned each of the Guarantors has executed
this Guaranty as of the date first above written.
RTO OPERATING, INC.
By:
---------------------------------------
Its:
---------------------------------------
RTO HOLDING CO., INC.
By:
---------------------------------------
Its:
---------------------------------------
ATRO, INC.
By:
---------------------------------------
Its:
---------------------------------------
ACTION RENT-TO-OWN HOLDINGS OF
SOUTH CAROLINA, INC.
By:
---------------------------------------
Its:
---------------------------------------
SIGNATURE PAGE
GUARANTY
9
<PAGE> 150
EXHIBIT A
JOINDER AGREEMENT
THIS JOINDER AGREEMENT is dated as of ______________, 199_ by
_____________________, a ______________________ corporation ("New Guarantor").
WHEREAS, pursuant to Section 8.22 of that certain Alrenco Revolving
Credit Agreement dated as of February 26, 1998 (as amended or otherwise modified
from time to time, the "Credit Agreement") by and among Alrenco, Inc.
("Company"), the Banks signatory thereto and Comerica Bank, as Agent for the
Banks (in such capacity, "Agent"), and pursuant to Section 6.6 of that certain
Guaranty dated as of February 26, 1998 (the "Guaranty") executed and delivered
by the Guarantors named therein ("Guarantors") in favor of Agent, for and on
behalf of the Banks, the New Guarantor must execute and deliver a Joinder
Agreement in accordance with the Credit Agreement and the Guaranty.
NOW THEREFORE, as a further inducement to Banks to continue to provide
credit accommodations to Company and the Account Parties (as defined in the
Credit Agreement), New Guarantor hereby covenants and agrees as follows:
1. All capitalized terms used herein shall have the meanings
assigned to them in the Credit Agreement unless expressly
defined to the contrary.
2. New Guarantor hereby enters into this Joinder Agreement in
order to comply with Section 8.22 of the Credit Agreement and
Section 6.6 of the Guaranty and does so in consideration of
the Advances made or to be made from time to time under the
Credit Agreement (and the other Loan Documents, as defined in
the Credit Agreement), from which New Guarantor shall derive
direct and indirect benefit as with the other Guarantors (all
as set forth and on the same basis as in the Guaranty).
3. New Guarantor shall be considered, and deemed to be, for all
purposes of the Credit Agreement, the Guaranty and the other
Loan Documents, a Guarantor under the Guaranty as fully as
though New Guarantor had executed and delivered the Guaranty
at the time originally executed and delivered under the Credit
Agreement and hereby ratifies and confirms its obligations
under the Guaranty, all in accordance with the terms thereof.
4. Other than as disclosed to the Agent in writing prior to the
date hereof, no Default or Event of Default (each such term
being defined in the Credit Agreement) has occurred and is
continuing under the Credit Agreement.
5. This Joinder Agreement shall be governed by the laws of the
State of Michigan and shall be binding upon New Guarantor and
its successors and assigns.
<PAGE> 151
IN WITNESS WHEREOF, the undersigned New Guarantor has executed and
delivered this Joinder Agreement as of , 199 .
------------------ --
[NEW GUARANTOR]
By:
-------------------------------------
Its:
------------------------------------
SIGNATURE PAGE
JOINDER AGREEMENT TO GUARANTY
2
<PAGE> 152
EXHIBIT K
ALRENCO, INC.
BORROWING BASE CERTIFICATE
FOR MONTH ENDED:
---------
Comerica Bank, as Agent
and the Banks parties to the
Credit Agreement referred to below
500 Woodward Avenue
Detroit, Michigan 48226
This Borrowing Base Certificate ("Certificate") is furnished pursuant
to Section 8.2 of the Agreement and sets forth various information as of
, 19 (the "Computation Date").
- ------------- --
A. The Borrowing Base for the calendar month is calculated as follows:
----
<TABLE>
<S> <C> <C>
1. Average Receipts
(a) Rental Receipts for calendar month immediately $
preceding the Computation Date: --------------
(b) Rental Receipts for calendar month immediately $
preceding the calendar month in item 1(a): --------------
(c) Rental Receipts for calendar month immediately $
preceding the calendar month in item 1(b): --------------
(d) Sum of the highest two items of the above items 1(a), $
1(b) and 1(c): --------------
(e) Item 1(d) divided by 2 and multiplied by 4 (Average $
Receipts) --------------
2. Rental Income Value
(a) Value of all Rental Contracts $
--------------
(b) Value of all Eligible Rental Contracts $
--------------
(c) 50% of Item 2(b) (Rental Income Value) $
--------------
3. 100% of Original Cost determined on a consolidated basis.
$
--------------
4 The lesser of Items 1(e), 2(c) and 3 (Borrowing Base): $
--------------
</TABLE>
<PAGE> 153
B. Attached hereto as Exhibit A is the BOR Report for the calendar
month ending on the Computation Date.
C. Attached hereto as Exhibit B is the Reconciliation Report for the
calendar month ending on the Computation Date.
D. Attached hereto as Exhibit C is the Idle Inventory Report for the
calendar month ending on the Computation Date.
E. Attached hereto as Exhibit D is the Delinquency Report as of the
last Saturday in the Calendar month ending on the Computation
Date.
The undersigned officer of the Company hereby certifies that:
(a) All of the information set forth in this Certificate (and in any
Exhibit attached hereto) is true and correct in all material respects.
(b) As of the Computation Date, the Company and its Subsidiaries has
observed and performed all of its covenants and other agreements contained in
the Credit Agreement and in the Notes and any other Loan Documents to be
observed, performed and satisfied by them.
(c) He/she has reviewed the Credit Agreement and this Certificate is
based on an examination sufficient to assure that this Certificate is accurate.
D. Except as stated in Schedule 1 hereto (which shall describe any
existing Default or Event of Default and the notice and period of existence
thereof and any action taken with respect thereto or contemplated to be taken by
the Company), no Default or Event of Default, has occurred and is continuing on
the date of this Certificate.
Capitalized terms used in this Certificate and in the schedules hereto,
unless specifically defined to the contrary, have the meanings given to them in
the Agreement.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed and delivered by its duly authorized officer this day of
, 19 . ------
- ------------------ --
ALRENCO, INC.
By:
-----------------------------------
Its:
----------------------------------
2
<PAGE> 154
EXHIBIT L
FORM OF SECURITY AGREEMENT
This SECURITY AGREEMENT ("Security Agreement") is made as of this 26th
day of February, 1998 by and among Alrenco, Inc., an Indiana corporation (the
"Company"), RTO Operating, Inc., a Delaware corporation, RTO Holding Co., Inc.,
a Delaware corporation, ATRO, Inc., formerly known as RTO Trademark Company,
Inc., a South Carolina corporation, and Action Rent-to-Own Holdings of South
Carolina, Inc., a South Carolina corporation and such other persons or entities
which from time to time become parties hereto (collectively, including the
Company, the "Debtors" and individually each a "Debtor") and Comerica Bank, a
Michigan banking corporation, as Agent for and on behalf of the Banks (as
defined below) ("Secured Party").
RECITALS
A. WHEREAS, Pursuant to that certain Alrenco Credit Agreement dated
as of February 26, 1998 (as amended or otherwise modified from time to time, the
"Credit Agreement"), among the Company, each of the financial institutions party
thereto (collectively, the "Banks") and Secured Party, as Agent for the Banks,
the Banks have agreed, subject to the satisfaction of certain terms and
conditions, to make Advances to Company of the Revolving Credit and the Swing
Line and to provide for the issuance of Letters of Credit for the account of
Debtor, individually, or jointly and severally with certain of the other Account
Parties (as such terms are defined in the Credit Agreement), as provided
therein; and
B. WHEREAS, each of the Debtors (other than the Company) has executed
and delivered a guaranty (as amended or otherwise modified from time to time,
the "Guaranty") of the obligations of the Company under the Credit Agreement;
and
C. WHEREAS, the obligations of the Company under the Credit Agreement
and the obligations of each other Debtor under the Guaranty are to be secured
pursuant to this Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
I. Creation of Security Interest
As security for the Indebtedness (hereinafter defined), each Debtor
hereby pledges and grants to Secured Party, as Agent for and on behalf of Banks,
a security interest in the following described property of Debtor (the
"Collateral"):
<PAGE> 155
(a) all inventory, goods (including returned or repossessed
goods and all goods the sale of which gives rise to account receivables,
contract rights, chattel paper, general intangibles or instruments),
merchandise and other personal property, in each case whether now owned
or hereafter produced, manufactured or acquired by such Debtor which are
held for sale or lease or are furnished or to be furnished under a
contract of service or are raw materials, work in process or materials
used or consumed or to be used or consumed in such Debtor's business;
(b) all accounts; accounts receivable; contract rights; general
intangibles; chattel paper and instruments (including without limitation
instruments evidencing any obligation to such Debtor for payment for
goods sold or leased or services rendered or otherwise); tax refunds;
goodwill; licenses, permits and privileges; customer lists; rights of
indemnification;
(c) all machinery, equipment, furniture and other tangible
personal property and fixtures of such Debtor, together with all
accessions, additions, accessories, parts and equipment now or hereafter
affixed thereto or used in connection therewith;
(d) all patents, trademarks and other intellectual property and
proprietary rights, including without limitation those items of property
listed in Schedule 1 hereto;
(e) all Intercompany Notes payable to order of such Debtor; and
(f) all deposit accounts of such Debtor and all amounts in any
lockbox or in any collateral account, including all funds on deposit
therein, all investments arising out of such funds, all claims thereunder
or in connection therewith, and all cash, instruments, securities, rights
and other property at any time and from time to time received,
receivable, or otherwise distributed in respect of such accounts, such
funds or such investments;
whether any such property is now owned or hereafter acquired or existing by such
Debtor, and all records (including computer software) pertaining to the
foregoing, and all substitutions for, all proceeds and all products of the
foregoing, including insurance proceeds, to the fullest extent permitted by law,
subject in each case only to the Permitted Liens. The pledge and grant of a
security interest in proceeds hereunder shall not be deemed to give such Debtor
any right to dispose of any of the Collateral.
II. Debtors' Obligations
A. Payment of Secured Indebtedness. The security interest created
herein by each Debtor is given as security for the discharge and performance of
the following obligations:
(1) All of the Company's obligations contained in or arising under or
in connection with the Credit Agreement and all obligations of the Company
contained in or arising under the other Loan Documents executed by the Company;
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<PAGE> 156
(2) All of the Company's obligations contained in or arising under any
and all Letter of Credit Agreements executed or to be executed by the Company
from time to time pursuant to the Credit Agreement, and any Letters of Credit
issued or to be issued thereunder;
(3) All of each Debtor's obligations contained in or arising under or
in connection with the Guaranty executed by such Debtor and all obligations of
each such Debtor contained in or arising under the other Loan Documents executed
by such Debtor;
(3) The obligations of the Company and each other Debtor for payment
of all sums hereafter loaned, paid out, expended or advanced by or for the
account of the Banks (or any of them) or by the Agent under the terms of this
Security Agreement, the Pledge Agreements, the Guaranty, the Credit Agreement or
the other Loan Documents, in connection with the Collateral, or any of the
documents or instruments described in this the Security Agreement, the Pledge
Agreement, the Guaranty, the Credit Agreement or the other Loan Documents;
together with interest thereon as provided for herein or therein; and also as
security for all other indebtedness and liabilities, whether direct, indirect,
absolute or contingent, owing by the Company or any other Debtor to the Banks in
any manner under the Credit Agreement, the Guaranty or the other Loan Documents,
which hereafter become due, or that may hereafter be incurred by the Company or
any other Debtor to or acquired (whether pursuant to the Credit Agreement, the
Guaranty or the other Loan Documents) by the Banks, and all other future
obligations of the Company and the other Debtors to the Banks, their successors
and assigns, howsoever created, arising or evidenced, whether joint or several,
direct or indirect, absolute or contingent, primary or secondary, and any
judgments that may hereafter be rendered on such indebtedness or any part
thereof, with interest according to the rates and terms specified, or as
provided by law, and any and all replacements, consolidations, amendments,
renewals or extensions of the foregoing (collectively herein called the
"Indebtedness").
B. Protection of Collateral. Each Debtor shall take any and all
reasonable steps required to protect the Collateral, and in pursuance thereof,
each such Debtor agrees that:
(1) The Collateral will not be misused, wasted or allowed to
deteriorate, except for the ordinary wear and tear of its intended primary use
or to the extent no longer useful or necessary to such Debtor's business, and
will at all times be maintained in accordance with the applicable terms of the
Credit Agreement.
(2) The Collateral described in Section I.(a) will be insured
with insurance coverage by financially sound and reputable insurers and in such
forms and amounts and against such risks as prudent business judgment and then
current practice would dictate for companies or professional enterprises engaged
in the same or a similar business and owning and operating similar properties.
In the case of all such insurance policies, each such Debtor shall designate the
Secured Party, on behalf of Banks, as mortgagee and loss payee and such policies
shall provide that any loss be payable to each such Debtor and Secured Party, on
behalf of Banks, as mortgagee and loss payee, as their respective interests may
appear. Further, upon the request of the Secured Party acting at the
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<PAGE> 157
request of the Banks, each such Debtor shall deliver copies of all said
policies, including all endorsements thereon and those required hereunder, to
Secured Party; and each such Debtor assigns to Secured Party, on behalf of
Banks, as additional security hereunder, all its rights to receive proceeds of
insurance with respect to the Collateral. All such insurance shall, by its
terms, provide that no cancellation, lapse (including without limitation any
lapse for non-payment of premiums) or material change in coverage shall become
effective until thirty (30) days after receipt by Secured Party of written
notice from the applicable carrier. Each Debtor further shall provide Secured
Party upon request with evidence reasonably satisfactory to Secured Party that
each such Debtor is at all times in compliance with this paragraph. Secured
Party may act as each such Debtor's attorney-in-fact in obtaining, adjusting,
settling and compromising such insurance and endorsing any drafts. Upon default
in this covenant, Secured Party may procure such insurance and its costs
therefor shall be charged to Company, payable on demand, with interest at the
highest rate set forth in the Credit Agreement and added to the Indebtedness
secured hereby. The disposition of proceeds of any insurance on the Collateral
("Insurance Proceeds") shall be governed by the following:
(i) provided that no Event of Default has occurred and is
continuing hereunder, (a) if the amount of Insurance Proceeds in respect
of any loss or casualty does not exceed Five Hundred Thousand Dollars
($500,000), such Debtor shall be entitled, in the event of such loss or
casualty, to receive all such Insurance Proceeds and to apply the same
toward the replacement of the Collateral affected thereby; and (b) if the
amount of Insurance Proceeds in respect of any loss or casualty exceeds
Five Hundred Thousand Dollars ($500,000), such Insurance Proceeds shall
be paid to and received by Secured Party, for release to such Debtor for
the replacement of the Collateral affected thereby or, upon written
request of such Debtor (accompanied by reasonable supporting
documentation), for such other use or purpose as approved by the Majority
Banks, in their reasonable discretion, it being understood and agreed in
connection with any release of funds under this subparagraph (B), that
the Secured Party and Majority Banks may impose reasonable and customary
conditions on the disbursement of such Insurance Proceeds; and
(ii) if an Event of Default has occurred or is continuing
hereunder, all Insurance Proceeds in respect of any loss or casualty
shall be paid to and received by the Secured Party, to be applied by the
Secured Party against the Indebtedness and/or to be held by the Secured
Party as cash collateral for the Indebtedness, as the Majority Banks may
direct in their sole discretion.
(3) The Collateral (except inventory currently under lease) is
located in the premises set forth on Schedule II, and will not be moved to
premises other than those set forth on Schedule II, and such other locations
with respect to which each such Debtor shall have executed and delivered to
Secured Party all financing statements and other documents and instruments
necessary to perfect or continue the perfection of the Secured Party's security
interest in the Collateral. Subject to the applicable terms of the Credit
Agreement, upon request therefor by the Secured Party, each such Debtor will
inform the Secured Party in writing of the whereabouts of the Collateral and
Debtor will promptly arrange for any inspections requested by the Secured Party,
on behalf of Banks;
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<PAGE> 158
(4) Each such Debtor shall comply with all applicable laws,
rules, ordinances, regulations and orders of any governmental authority, whether
federal, state, local or foreign (including without limitation, Consumer Credit
Laws (as defined in the Credit Agreement)), in effect from time to time with
respect to the Collateral, to the full extent required under the Credit
Agreement.
(5) Secured Party, on behalf of the Banks, may, subject to the
applicable terms of the Credit Agreement, examine and inspect the Collateral at
any time wherever located.
C. Protection of Security Interest. Each Debtor agrees that:
(1) Except as permitted by Credit Agreement, it will not sell,
transfer, lease or otherwise dispose of any of the Collateral or any interest
therein or offer to do so (other than the sale or lease of inventory in the
ordinary course of business and the sale or other disposition of worn-out or
other unusable items of tangible personal property or items no longer useful to
or necessary in each such Debtor's business) without the prior written consent
of Secured Party, given at the written direction or with the written approval of
Banks, and will not create, incur, assume or suffer to exist any mortgage,
pledge, encumbrance, security interest, lien or charge of any kind upon any of
the Collateral (or any interest therein or portion thereof), other than in favor
of Secured Party, on behalf of the Banks and liens permitted under the Credit
Agreement.
(2) It will, to the full extent required under the Credit
Agreement, pay all taxes, assessments, governmental charges and levies upon the
Collateral or for its use or operation.
(3) It will sign and execute alone or with Secured Party any
financing statement or other document or procure any documents and pay all
connected costs, necessary to protect the security interest under this Security
Agreement against the rights or interests of third persons.
(4) It will reimburse Secured Party for all reasonable costs,
including reasonable attorneys' fees, incurred for any action taken by Secured
Party to remedy an Event of Default of Debtor which Secured Party elects to
remedy pursuant to its rights under Paragraph IV hereof.
(5) It will,
(i) subject to Section 8.6 of the Credit Agreement,
allow Secured Party, or any Bank, to examine, audit and inspect such Debtor's
books, accounts, and other records relating to the Collateral wherever located
at all reasonable times during normal business hours, upon oral or written
request of Secured Party, and to make and take away copies of any and all such
books, accounts, records and ledgers;
(ii) punctually and properly perform all of its covenants
and duties under any other security agreement, mortgage, collateral document,
pledge agreement or contract of any
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<PAGE> 159
kind now or hereafter existing as security for or in connection with payment of
the Indebtedness, or any part thereof;
(iii) perform its obligations under and comply with the
terms and provisions of the Credit Agreement and the other Loan Documents to
which it is or may become a party;
(iv) keep, at the addresses designated on Schedule II or
at the stores listed on Schedule IV hereto and such additional addresses as may
be provided from time to time for its records, all records concerning the
Collateral, which records will be of such character as will enable Secured Party
or its designees to determine at any time the status of the Collateral;
(v) give Secured Party not less than 30 days prior
written notice of all contemplated changes in such Debtor's name, legal
structure, or chief executive office, or in the location of the Collateral or
such Debtor's records concerning same and, prior to making any such changes,
file or cause to be filed (at the direction of Secured Party) all financing
statements or amendments or other documents or instruments determined by Secured
Party to be necessary or appropriate to establish and maintain a valid first
priority security interest in all the Collateral in accordance with the terms
hereof;
(vi) promptly furnish Secured Party with any information
in writing which Secured Party may reasonably request concerning the Collateral;
(vii) to the extent required under the Credit Agreement,
promptly notify Secured Party of any material claim, action or proceeding
affecting the Collateral and title therein, or in any part thereof, or the
security interest created herein, and, at the request of the Secured Party,
appear in and defend, at such Debtor's expense, any such action or proceeding;
(viii) promptly, after being requested by Secured Party,
pay to Secured Party the amount of all reasonable expenses, including reasonable
attorneys' fees and other legal expenses, incurred by Secured Party pursuant to
and in accordance with the Credit Agreement in protecting and maintaining the
Collateral or its rights hereunder, or in connection with any audit or
inspection of the Collateral pursuant to the terms hereof, and in enforcing the
security interest created herein; and
(ix) allow Secured Party, upon and so long as there
exists any Default or Event of Default, to correspond with its account debtors
to confirm its accounts receivable and Obligors under any Rental Contracts.
(6) With respect to any Collateral of a kind requiring an
additional security agreement, financing statement, or other writing to perfect
a security interest therein in favor of Secured Party, on behalf of Banks, such
Debtor will forthwith upon demand by Secured Party execute and deliver to
Secured Party on behalf of Banks, whatever documentation the Secured Party or
the requisite Banks shall reasonably deem necessary or proper for such purpose.
Should any
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<PAGE> 160
covenant, duty or agreement of such Debtor fail to be performed in accordance
with its terms hereunder resulting in an Event of Default, Secured Party may,
but shall never be obligated to, perform or attempt to perform such covenant,
duty or agreement on behalf of such Debtor, and any amount expended by Secured
Party in such performance or attempted performance shall become part of the
Indebtedness, and, at the request of Secured Party, such Debtor agrees to pay
such amount to Secured Party upon demand at Secured Party's office in Detroit,
Michigan together with interest thereon at the highest rate at which interest
accrues on amounts after the same become due pursuant to the terms of the Credit
Agreement, from the date of such expenditure by Secured Party until paid. With
respect to any Collateral (other than goods) in which such Debtor acquires any
rights subsequent to the date hereof and which, under applicable law, a security
interest is or can be perfected by possession, upon request of the Secured Party
or the Majority Banks, such Debtor agrees to deliver possession of such
Collateral to Secured Party immediately upon its acquisition of rights therein.
(7) It will hold the proceeds of any of the Collateral
(including accounts receivable and Rental Contracts) which is sold other than in
the ordinary course of such Debtor's business (or otherwise as permitted under
the Credit Agreement, subject to the terms thereof) in trust for Secured Party
on behalf of the Banks, will not commingle said proceeds with any other funds,
and, after an Event of Default, will deliver such proceeds to Secured Party
immediately upon its request.
(8) It will not, except as permitted under the Credit
Agreement, grant any rebate, refund, allowance or credit on any account
receivable, or on any amounts due under any Rental Contract, other than in the
ordinary course of business, without Secured Party's prior written consent.
(9) If Secured Party, acting in its sole discretion, redelivers
any Collateral to such Debtor or such Debtor's designee for the purpose of (i)
the ultimate sale or exchange thereof, or (ii)presentation, collection, renewal,
or registration of transfer thereof, or (iii) loading, unloading, storing,
shipping, transshipping, manufacturing, processing or otherwise dealing
therewith preliminary to sale or exchange; such redelivery shall not constitute
a release of Secured Party's security interest therein or in the proceeds
thereof unless Secured Party, with the consent of the Banks, specifically so
agrees in writing. If such Debtor requests any such redelivery, such Debtor will
deliver with such request a duly executed financing statement in form and
substance satisfactory to Secured Party.
(10) Subject to the applicable terms of the Credit Agreement,
Debtor shall take any and all other steps reasonably required under applicable
law to perfect the lien and security interest established hereby in favor of
Secured Party, on behalf of the Banks, including without limitation the
execution, delivery and/or performance of appropriate acknowledgments,
governmental acknowledgments, registrations or approvals, financing statements
and other documents and instruments, and the registration, recording and/or
filing of such instruments with such Persons and in such jurisdictions as
necessary to perfect the security interest and lien established hereby.
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<PAGE> 161
III. Default
The terms "Default" and "Event of Default", as used herein, shall mean
the occurrence of a Default or an Event of Default, as the case may be, under
the Credit Agreement.
IV. Secured Party's Rights and Remedies.
In addition to its rights and remedies under the Credit Agreement and the
other Loan Documents, and under applicable law, Secured Party shall have
available to it the following rights and remedies upon occurrence and during the
continuance of an Event of Default:
A. Right to Discharge Debtor's Obligations. Secured Party may, with
the approval of the Majority Banks, discharge taxes, liens or security interests
or other encumbrances at any time levied or placed on the Collateral, whether
senior or junior to the security interest herein granted, may remedy or cure any
default of a Debtor under the terms of any lease, rental agreement, land
contract or other document which in any way pertains to or affects such Debtor's
title to or interest in any of the Collateral, may pay for insurance on the
Collateral, and may pay for the maintenance and preservation of the Collateral,
unless such Debtor is contesting in good faith such obligations, and such Debtor
agrees to reimburse Secured Party, on demand, for any payment made or any
expense incurred by Secured Party pursuant to the foregoing authorization, with
interest, which payments and expenses shall be secured by the Collateral.
B. Remedies and Enforcement. Secured Party shall have and may
exercise, at the direction or with the approval of the Majority Banks, any and
all rights of enforcement and remedies afforded to a secured party under the
Uniform Commercial Code as adopted and in force in the State of Michigan or
other applicable uniform commercial code (or other applicable law), to the full
extent permitted by applicable law, on the date of this Security Agreement or
the date of such Debtor's default, together with any and all other rights and
remedies otherwise provided and available to Secured Party by applicable law
unless such application would result in the invalidity or unenforceability of
any provision hereof, in which case the law of the state in which any of the
Collateral is located shall apply to the extent necessary to render such
provision valid and enforceable; and, in conjunction with, in addition to, or
substitution for those rights, Secured Party may, at the direction or with the
approval of the Majority Banks, or with respect to subparagraph (3) below), all
of the Banks:
(1) Enter upon such Debtor's premises to take possession of,
assemble, collect and/or dispose of the Collateral and, if Secured Party
elects to do, to apply any of the Collateral against any of the
Indebtedness secured hereby;
(2) Require such Debtor to assemble the Collateral and make it
available at a place Secured Party designates to allow Secured Party to
take possession or dispose of the Collateral;
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<PAGE> 162
(3) Waive any default, or remedy any default, without waiving
its rights and remedies upon default and without waiving any other prior
or subsequent default;
(4) Without any notice to Debtor, notify any parties obligated
on any of the Collateral to make payment to the Secured Party, on behalf
of the Banks, of any amounts due or to become due thereunder and enforce
collection of any of the Collateral by suit or otherwise and surrender,
release or exchange all or any part thereof, or compromise or extend or
renew for any period (whether or not longer than the original period) the
indebtedness thereunder or evidenced thereby. Upon request of the Secured
Party, Debtor will, at its own expense, notify any parties obligated to
Debtor on any of the Collateral to make payment to the Secured Party of
any amounts due or to become due thereunder, and indicate on all billings
to such account debtors that their accounts must be paid to or as
directed by Secured Party. Debtor agrees that neither Secured Party nor
the Banks shall be liable for any loss or damage which Debtor suffers or
may suffer as a result of Secured Party's processing of items or its
exercise of any other rights or remedies under this Security Agreement,
including without limitation indirect, special or consequential damages,
loss of revenues or profits, or any claim, demand or action by any third
party not related to or affiliated with Debtor arising out of or in
connection with the processing of items (excluding only the claims of
such third parties in connection with the processing of items based
solely upon the gross negligence or willful misconduct of Secured Party)
or the exercise of any other rights or remedies hereunder. Debtor further
agrees to indemnify and hold Secured Party and the Banks harmless from
and against all such third party claims, demands or actions, including
without limitation litigation costs and reasonable attorneys' fees,
excepting only those claims, demands and actions arising solely as a
result of the gross negligence or willful misconduct of Secured Party or
any of the Banks;
(5) Appoint any officer or agent of Secured Party as Debtor's
true and lawful proxy and attorney-in-fact, with power, upon the
occurrence of any Event of Default (exercisable so long as such Event of
Default is continuing); to endorse such Debtor's name or any of its
officers or agents (if required) upon any notes, checks, drafts, money
orders, or other instruments of payment (including payments payable under
any policy of insurance on the Collateral) or Collateral that may come
into possession of the Secured Party in full or part payment of any
amounts owing to the Banks; to sign and endorse the name of such Debtor
and/or any of its officers or agents (if required) upon any invoice,
freight or express bill, bill of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in
connection with accounts, and any instrument or document relating thereto
or to such Debtor's rights therein; to execute on behalf of such Debtor
any financing statements, amendments, subordinations or other filings
pursuant to the Credit Agreement, this Security Agreement or the other
Loan Documents; such Debtor hereby granting unto Secured Party on behalf
of the Banks, as the proxy and attorney-in-fact of Debtor, full power to
do any and all things necessary to be done in and about the premises as
fully and effectually as Debtor might or could do, and hereby ratifying
all that said proxy and attorney shall lawfully do or cause to be done by
virtue hereof. The proxy and power of attorney described herein shall be
deemed to be coupled with an interest and shall be
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<PAGE> 163
irrevocable for the entire term of the Credit Agreement, the Notes and
all transactions thereunder and thereafter as long as any Indebtedness or
any of the commitments to lend (whether optional or obligatory) remain
outstanding under the Credit Agreement. The Secured Party shall have full
power to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof on behalf of the Banks in its own name or
in the name of such Debtor, provided that Secured Party shall act in a
commercially reasonable manner.
C. Right of Sale.
(1) Each Debtor agrees that upon the occurrence and continuance
of an Event of Default, Secured Party may, at its option, sell and
dispose of the Collateral at public or private sale without any previous
demand of performance. Each Debtor agrees that notice of such sale sent
to such Debtor's address, as set forth on the signature pages attached
hereto, by certified or registered mail sent at least five (5) Business
Days prior to such sale, shall constitute reasonable notice of sale. The
foregoing shall not require notice if none is necessary under applicable
law. The proceeds of sale shall be applied in the following order:
(i) to all reasonable costs and charges incurred by
Secured Party in the taking and causing the removal and sale of
said property, including such reasonable attorneys' fees as shall
have been incurred by Secured Party;
(ii) to the Indebtedness, including without limitation
all accrued interest thereon, premiums and make whole amounts, if
any, in the order set forth in the Credit Agreement; and
(iii) any surplus of such proceeds remaining shall be paid
to such Debtor, or to such other party who shall lawfully be
entitled thereto.
(2) At any sale or sales made pursuant to this Security
Agreement or in a suit to foreclose the same, the Collateral may be sold
en masse or separately, at the same or at different times, at the option
of the Secured Party or its assigns. Such sale may be public or private
with notice as required by the Uniform Commercial Code as then in effect
in the state in which the Collateral is located, and the Collateral need
not be present at the time or place of sale. At any such sale, the
Secured Party may bid for and purchase any of the property sold,
notwithstanding that such sale is conducted by the Secured Party or its
attorneys, agents, or assigns.
D. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Security Agreement, on behalf of Banks, in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Secured Party or any of the Banks in refraining from so doing at any
time or times. The failure of Secured Party or any of the Banks at any time or
times to enforce its rights under said provisions strictly in accordance with
the same shall not be construed as having created a custom in any way or manner
contrary to the specific provisions of this Security Agreement or as having in
any way or manner modified the same. All
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<PAGE> 164
rights and remedies of Secured Party and Banks hereunder shall be cumulative and
concurrent, and the exercise of one right or remedy shall not be deemed a waiver
or release of any other right or remedy.
VI. Representations, Warranties and Covenants of Debtors.
Each Debtor represents and warrants, and, after the date hereof,
covenants so long as any of the Credit Agreement, the Notes or Letter of Credit
Agreements remain in effect, that:
A. Such Debtor's chief executive office and principal place of
business are set forth in Schedule III hereto, and (except for Company's chief
executive office and principal place of business as set forth in Schedule III
hereto) such Debtor has not maintained its chief executive office and principal
place of business at any other location since October 15, 1997.
B. Each other location not set forth on Schedule II hereof where
Debtor maintains a place of business is set forth on Schedule IV.
C. No financing statement covering the Collateral, or any part
thereof, has been or will be filed with any filing officer, except as permitted
under the Credit Agreement.
D. No other agreement, pledge or assignment covering the Collateral,
or any part thereof, has been or will be made and no security interest, other
than the one created hereby or pursuant to security agreements and pledges
previously made in favor of Secured Party on behalf of the Banks, has or will be
attached or has been or will be perfected in the Collateral or in any part
thereof, except as permitted under the Credit Agreement.
E. No material dispute, right of setoff, counterclaim or defenses
exist with respect to any part of the Collateral (excluding accounts, accounts
receivable and rights to payment for services rendered), except as permitted
under the Credit Agreement.
F. At the time Secured Party's security interest attaches to any of
the Collateral or its proceeds, such Debtor will be the lawful owner thereof
with the right to transfer any interest therein (except for such interests which
in the aggregate would not have a Material Adverse Effect), such Collateral is
free and clear of all liens other than the one created hereby or permitted by
the Credit Agreement and that such Debtor will make such further assurances to
prove its title to the Collateral as may be reasonably required, will keep such
Collateral free and clear of all liens other than the one created hereby and
liens permitted by the Credit Agreement, and will take such action to defend the
Collateral and its proceeds against the lawful claims and demands of all persons
whomsoever. The delivery at any time by such Debtor to Secured Party of
Collateral, or financing statements covering any Collateral shall constitute a
representation and warranty by such Debtor under this Security Agreement that,
with respect to such Collateral, and each item thereof, such Debtor is owner of
the Collateral and the matters heretofore warranted in this paragraph are true
and correct in all material respects.
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<PAGE> 165
G. The representations and warranties contained in any of the Credit
Agreement and the Guaranty are incorporated by reference herein and are all made
as of the date hereof.
H. It shall, contemporaneously with the execution and delivery of
this Agreement, execute and deliver to the Agent an Agreement (Trademark) in the
form of Exhibit A hereto, and shall execute and deliver to the Agent any other
document required to acknowledge or register or perfect the Agent's and the
Banks' interest in any of the Collateral described in Section I(d).
VII. Mutual Agreements.
Each Debtor and Secured Party mutually agree as follows:
A. "Debtor" and "Secured Party" as used in this Security Agreement
include the successors and permitted assigns of those parties.
B. To the extent permitted by applicable law, except as otherwise
provided herein, the law governing this Security Agreement shall be that of the
State of Michigan.
C. This Security Agreement includes all amendments and supplements
hereto and all assignments hereof, provided, that such Debtor and Secured Party
shall not be bound by any amendment hereto unless such amendment is expressed in
a writing executed by each of them.
D. All capitalized or other terms not specifically defined herein are
used as defined in the Credit Agreement. To the extent not inconsistent
therewith, all such terms shall also be construed in conformity with the
Michigan or other applicable Uniform Commercial Code.
E. The security interest granted under this Security Agreement shall
be a continuing security interest in every respect (whether or not the
outstanding balance of the Indebtedness is from time to time temporarily reduced
to zero) and Secured Party's security interest in the Collateral as granted
herein shall continue in full force and effect for the entire duration that the
Credit Agreement remains in effect and until all of the Indebtedness is repaid
and discharged in full, and no commitment (whether optional or obligatory) to
extend any credit under the Credit Agreement or any of the Notes remains
outstanding.
F. THE PARTIES HERETO ACKNOWLEDGE THAT THIS SECURITY AGREEMENT IS
SUBJECT TO THE MUTUAL WAIVER OF JURY TRIAL CONTAINED IN THE APPLICABLE
PROVISIONS OF THE CREDIT AGREEMENT AND THE GUARANTY, AS APPLICABLE.
G. This Security Agreement has been executed and delivered pursuant
to the Credit Agreement, and in the event of any conflict between this Security
Agreement and the Credit Agreement, the Credit Agreement shall govern.
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<PAGE> 166
H. This Security Agreement amends and restates in part the Prior
Comerica Credit Agreement, and the security agreement executed and delivered in
connection with Prior Bank One Credit Agreement, in each case assigned to the
Agent for the benefit of the Banks pursuant to Assignment Agreements dated as of
the Effective Date.
I. Each of the Debtors hereby irrevocably submits to the
non-exclusive jurisdiction of any United States Federal Court or Michigan state
court sitting in Detroit, Michigan or Texas state court sitting in Dallas
County, Texas in any action or proceeding arising out of or relating to this
Security Agreement and hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in any such United States
Federal Court or Michigan state court or Texas state court. Each Debtor
irrevocably consents to the service of any and all process in any such action or
proceeding brought in any court in or of the State of Michigan or the State of
Texas by the delivery of copies of such process to such Debtor at its address
specified in Schedule II hereto or by certified mail directed to such address.
Nothing in this paragraph shall affect the right of the Banks and the Secured
Party to serve process in any other manner permitted by law or limit the right
of the Banks or the Secured Party (or any of them) to bring any such action or
proceeding against any of the Debtors or any of its or their property in the
courts of any other jurisdiction. Each of the Debtors hereby irrevocably waives
any objection to the laying of venue of any such suit or proceeding in the above
described courts.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
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<PAGE> 167
IN WITNESS WHEREOF, each of the undersigned Debtors and Secured Party
have executed this Security Agreement as of the day and year first above
written.
DEBTORS:
ALRENCO, INC.
By:
----------------------------
Its:
---------------------------
RTO OPERATING, INC.
By:
----------------------------
Its:
---------------------------
RTO HOLDING CO., INC.
By:
----------------------------
Its:
---------------------------
ATRO, INC. F/K/A RTO TRADEMARK
COMPANY, INC.
By:
----------------------------
Its:
---------------------------
SIGNATURE PAGE
SECURITY AGREEMENT
14
<PAGE> 168
ACTION RENT-TO-OWN HOLDINGS
OF SOUTH CAROLINA, INC.
By:
----------------------------
Its:
---------------------------
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By:
------------------------
Its:
-----------------------
The undersigned are executing a
counterpart hereof for purposes of
becoming parties hereto:
[FUTURE SUBSIDIARY]
By:
---------------------------
Its:
--------------------------
SIGNATURE PAGE
SECURITY AGREEMENT
15
<PAGE> 169
SCHEDULE I TO SECURITY AGREEMENT
Patents, Trade Marks
<PAGE> 170
THE UNITED STATES OF AMERICA
[SEAL]
NO. 1829703
CERTIFICATE OF REGISTRATION
This is to certify that the records of the Patent and Trademark Office
show that an application was filed in said Office for registration of the Mark
shown herein, a copy of said Mark and pertinent data from the Application being
annexed hereto and made a part hereof,
And there having been due compliance with the requirements of the law and
with the regulations prescribed by the Commissioner of Patents and Trademarks,
Upon examination, it appeared that the applicant was entitled to have said
Mark registered under the Trademark Act of 1946, as amended, and the said Mark
has been duly registered this day in the Patent and Trademark Office on the
PRINCIPAL REGISTER
to the registrant named herein.
This registration shall remain in force for TEN years unless sooner
terminated as provided by law.
In Testimony Whereof I have hereunto set
my hand and caused the seal of the Patent
and Trademark Office to be affixed this
fifth day of April 1994.
[SEAL]
BRUCE LEHMAN
Commissioner of Patents and Trademarks
<PAGE> 171
Int. Cl.: 42
Prior U.S. Cl.: 101 Reg. No. 1,829,703
United States Patent and Trademark Office Registered Apr. 3, 1994
SERVICE MARK
PRINCIPAL REGISTER
(ALRENCO LOGO)
ALRENCO, INC. (INDIANA CORPORATION)
1736 EAST MAIN STREET
NEW ALBANY, IN 47150
FOR: RETAIN STORE SERVICES IN THE FIELD OF FURNITURE, STEREOS AND
APPLIANCES, IN CLASS 42 (U.S. CL. 101).
FIRST USE 11-0-1190; IN COMMERCE 11-0-1990.
OWNER OF U.S. REG. NOS. 1,336,087 AND 1,607,835.
NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE "RENT TO OWN FOR THE HOME",
APART FROM THE MARK AS SHOWN.
THE DRAWING IS LINED FOR THE COLORS YELLOW, GREEN, BLUE, VIOLET AND RED.
SER. NO. 74-382,938, FILED 4-27-1993.
ANNA W. MANVILLE, EXAMINING ATTORNEY
<PAGE> 172
THE UNITED STATES OF AMERICA
[SEAL]
No. 1607835
CERTIFICATE OF REGISTRATION
This is to certify that the records of the Patent and Trademark Office show
that an application was filed in said Office for registration of the Mark shown
herein, a copy of said Mark and pertinent data from the Application being
annexed hereto and made a part hereof,
And there having been due compliance with the requirements of the law and
with the regulations prescribed by the Commissioner of Patents and Trademarks,
Upon examination, it appeared that the applicant was entitled to have said
Mark registered under the Trademark Act of 1946, as amended, and the said Mark
has been duly registered this day in the Patent and Trademark Office on the
PRINCIPAL REGISTER
to the registrant named herein.
This registration shall remain in force for TEN years unless sooner
terminated as provided by law.
In Testimony Whereof I have
hereunto set my hand and caused the
seal of the Patent and Trademark
Office to be affixed this
twenty-fourth day of July 1990.
[SEAL]
HARRY F. MANLESH, JR.
Commissioner of Patents
and Trademarks
<PAGE> 173
Int. Cl.: 42
Prior U.S. Cl.: 101
Reg. No. 1,607,835
United States Patent and Trademark Office Registered July 24, 1990
- --------------------------------------------------------------------------------
SERVICE MARK
PRINCIPAL REGISTER
(ALRENCO LOGO)
ALRENCO, INC. (INDIANA CORPORATION)
1736 EAST MAIN STREET
NEW ALBANY, IN 47150
FOR: RETAIL STORE SERVICES IN THE FIELD OF FURNITURE, STEREOS AND
APPLIANCES, IN CLASS 42 (U.S. CL. 101).
FIRST USE 5-1-1989; IN COMMERCE 5-1-1989.
OWNER OF U.S. REG. NO. 1,336,087.
NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE "RENT TO OWN FOR THE HOME",
APART FROM THE MARK AS SHOWN.
THE DRAWING IS LINED FOR THE COLORS YELLOW, GREEN, BLUE, VIOLET AND RED.
SER. NO. 73-839,488, FILED 11-15-1989.
DEBRA S. BUTENSKY, EXAMINING ATTORNEY
<PAGE> 174
THE UNITED STATES OF AMERICA
CERTIFICATE OF REGISTRATION
[SEAL]
This is to certify that the records of the Patent and Trademark Office
show that an application was filed in said Office for registration of the Mark
shown herein, a copy of said Mark and pertinent data from the Application being
annexed hereto and made a part hereof,
And there having been due compliance with the requirements of the law and
with the regulations prescribed by the Commissioner of Patents and
Trademarks,
Upon examination, it appeared that the applicant was entitled to have said
Mark registered under the Trademark Act of 1946, and the said Mark has been
duly registered this day in the Patent and Trademark Office on the
PRINCIPAL REGISTER
to the registrant named herein.
This registration shall remain in force for Twenty Years unless sooner
terminated as provided by law.
In Testimony Whereof I have hereunto set my hand and caused
the seal of the Patent and Trademark Office to be affixed
this fourteenth day of May, 1985.
[SEAL]
DONALD J. ZUIGY
Acting Commissioner of Patents and Trademarks
<PAGE> 175
Int. CI.: 42
Prior U.S. CI.: 101
Reg. No. 1,336,087
United States Patent and Trademark Office Registered May 14, 1985
-----------------------------------------------------------------
SERVICE MARK
PRINCIPAL REGISTER
(ALRENCO LOGO)
ALRENCO, INC. (INDIANA CORPORATION)
1736 E. MAIN ST.
NEW ALBANY, IN 47150
FOR: RETAIL STORE SERVICES IN THE FIELD OF FURNITURE, STEREOS AND
APPLIANCES, IN CLASS 42 (U.S. CL. 101).
FIRST USE 2-23-1983; IN COMMERCE 3-16-1983.
NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE "INC.", APART FROM THE MARK
AS SHOWN.
THE LINING IS A FEATURE OF THE MARK.
SER. NO. 496,867, FILED 8-28-1984.
THOMAS S. LAMONE, EXAMINING ATTORNEY
<PAGE> 176
SCHEDULE II TO SECURITY AGREEMENT
Addresses of each Debtor, additional addresses at which Collateral or Records
are kept:
Alrenco, Inc.: 714 E. Kimbrough
Mesquite, Texas 75185
RTO Operating, Inc.: 714 E. Kimbrough
Mesquite, Texas 75185
RTO Holding Co., Inc.: 850 Library Avenue
Suite 204-H
Newark, Delaware 19715
ATRO, INC.: 961 E. Main Street
Spartanburg, South Carolina 29302
Action Rent-To-Own
Holdings of
South Carolina, Inc.: 961 E. Main Street
Spartanburg, South Carolina 29302
See attached.
<PAGE> 177
CORPORATE OFFICES:
714 E. Kimbrough
Mesquite, Texas 75149
DIVISION OFFICES:
Southeast Division -
14620 N. Nebraska Ave. Bldg. B
Tampa, Florida 33613-1431
East Division -
1736 E. Main Street
New Albany, Indiana 47150
Mid-South Division -
PO Box 425
1302 JW Davis Drive
Hammond, Louisiana 70404-0425
Southwest Division -
3939 E. Hwy 80, Ste. 303
Mesquite, Texas 75150
<PAGE> 178
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
599
308 1616 Goverment St Mobile AL 36604- (334) 471-2900 (334) 471-4909
231 3725 Airport Blvd. Ste. 101- Mobile AL 36608- (334) 342-4094 (334) 342-6078
396 27955 Hwy 98AA Daphne AL 36526- (334) 626-8877 (334) 626-1993
397 5441 Hwy 90 West Ste 26 Mobile AL 36619- (334) 666-4700 (334) 666-4877
398 414 North Craft Hwy Chickasaw AL 36611- (334) 457-3600 (334) 457-3054
400 1314 Government St Mobile AL 36604- (334) 432-6400 (334) 432-5360
447 2899 1/2 Citzens Pkwy Selma AL 36701- (334) 872-4800 (334) 872-9556
311 3036 Woodley Rd Montgomery AL 36116- (334) 288-8900 (334) 288-1119
340 92 15th St Tusacaloosa AL 35401- (205) 345-7368 (205) 345-6024
414 2082 Spingdale Lane Tarrant AL 35217 (205) 808-0080 (205) 808-0420
264 1307 E. Highland Ave. #203 Selma AL 36073- (334) 874-4418 (334) 874-7634
274 965 26th Avenue East Ste 1 Tuscaloosa AL 35404- (205) 562-8600 (205) 554-0290
226 2415-R E South Blvd Montgomery AL 36111- (334) 281-1011 (334) 281-2788
502 4317 University Blvd E Tuscaloosa AL 35040- (205) 554-1414 (205) 554-7779
227 1730-32 East Main ST Prattville AL 36066 (334) 361-3580 (334) 361-3583
313 609 Bessemer Super Hwy Birmingham AL 35228- (205) 426-1600 (205) 426-1066
460 1509 E Main St Ste G Russellville AR 72801- (501) 967-1433 (501) 967-1212
459 5205 Rodgers Ave Fort Smith AR 72903- (501) 484-0555 (501) 484-5421
458 2870 N College Ave Fayetteville AR 72703- (501) 442-8963 (501) 444-7507
911 Closed Arkansas AR (501) 234-6953
457 1115 S Thompson St Springdale AR 72764- (501) 750-3330 (501) 927-3630
456 2006 W Walnut St Rogers AR 72756-3 (501) 631-0001 (501) 631-6896
184 310 North 6th Blytheville AR 72315- (870) 763-8844 (870) 763-0804
120 1506 S Thompson Spingdale AR 72764- (501) 756-9267 (501) 756-0225
115 3901 S University Ave. Little Rock AR 72204- (501) 568-9267 (501) 568-3509
461 607 Oak St Conway AR 70232-4 (501) 327-0777 (501) 327-1592
119 3800 Towson Ave Fort Smith AR 72901- (501) 646-9267 (501) 648-4031
118 2901 Olive st. Pine Bluff AR 71601 (870) 535-9267 (501) 535-4563
116 1600 S Main Street Little Rock AR 72206- (501) 376-9267 (501) 376-3048
117 4515 Camp Robinson Rd. N Little Rock AR 72118- (501) 758-9267 (501) 758-9188
187 21125 Caraway Rd Jonesboro AR 72401- (870) 935-0313 (870) 931-7771
473 309 Fredrick St Magnolia AR 71753- (501) 234-0333 (501) 234-0984
128 508 S Main Nashville AR 71852- (870) 845-5680 (870) 845-7165
127 912 W 4TH Fordyce AR 71842- (870) 352-2665 (870) 352-8841
126 401 N HERVEY Hope AR 71801- (870) 777-9797 (870) 777-0113
123 725 California Ave. SW Camden AR 71701 (870) 836-3100 (870) 836-0314
122 708 E Main Magnolia AR 71753- (870) 234-5299 (870) 234-5066
121 803 NW Avenue El Dorado AR 71730 (870) 862-8431 (870) 875-2631
476 135 Northpark Dr Monticello AR 71655- (501) 367-5303 (501) 367-2208
469 243 W Grand Ave Hot Springs AR 71901- (501) 624-7771 (501) 624-4257
474 1324 N West Ave El Dorado AR 71730- (501) 863-0333 (501) 863-8970
462 1811 North First St Jacksonville AR 72076- (501) 982-1551 (501) 982-8667
468 3100 S Olive St Pine Bluff AR 71603- (501) 534-0333 (501) 535-0708
471 1203 Pine Park Dr Hope AR 71801- (501) 777-1770 (501) 777-3641
467 8803 Geyer Springs Rd Little Rock AR 72209- (501) 568-0333 (501) 568-0265
466 3901 S University Little Rock AR 72204- (501) 562-0222 (501) 562-5452
</TABLE>
Page 1
<PAGE> 179
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
465 2903 E Race Ave Searcy AR 72143- (501)268-0440 (501)268-2971
464 2150 E Harrison Batesville AR 72501- (501)793-6300 (501)793-8112
463 4117 E Broadway St N Little Rock AR 72111- (501)945-5656 (501)945-5689
475 1262 Spur #4 Camden AR 71701- (501)836-7770 (501)836-7774
470 1309 Pine St Arkadelphia AR 71923- (501)246-7444 (501)246-2515
997 1600 S Main St Little Rock AR 72206- (501)376-9120
84 7333 W Thomas Rd. #56 Phoenix AZ 85033- (603)245-1333 (602)247-0250
76 201 N. LITCHFIELD RD Goodyear AZ 85338- (603)932-4800 (602)932-4656
100 4248 W Indian School Rd. Phoenix AZ 85019- (602)272-3456 (602)447-0656
80 1916 W Baseline Rd. Mesa AZ 85202- (602)839-7000 (602)820-8531
81 4639 E Speedway Blvd Tucson AZ 85712- (520)881-7800 (520)327-1062
152 2350 Miracle Mile #306 Bullhead City AZ 86442- (520)758-1115 (520)758-9846
83 1990 E IRVINGTON Tucson AZ 85714- (520)573-1155 (520)573-0320
101 3650 W Glendale Ave. Phoenix AZ 85051- (602)973-3993 (602)973-0829
493 6544 W. Thomas Rd Ste 2 Phoenix AZ 85033- (602)247-5500 (602)247-8128
452 8033 N 35th Ave Phoenix AZ 85051- (602)246-7236 (602)246-7269
373 848 S Alma School Rd Mesa AZ 85210- (602)844-2233 (602)844-8347
372 3223 E McDowell Rd Phoenix AZ 85008- (602)267-0700 (602)267-8178
952 1642 N. Oatman Rd Ste F Bullhead City AZ 86442-
82 4015 N 16th St., Suite E-F Phoenix AZ 85016- (602)287-0032 (602)287-0924
79 3327 W Peoria Ave/ Phoenix AZ 85029- (602)866-9500 (602)942-7840
153 80 W 84TH AVE Thorton CO 80221- (303)657-9910 (303)657-9381
154 1551 Chambers Rd. Aurora CO 80011- (303)363-0775 (303)363-0715
158 1301 Lake Street Pueblo CO 81004- (719)583-0470 (719)583-9634
155 2600 W Alameda Denver CO 80219- (303)935-5940 (303)935-2410
159 1524 North Academy Colorado Sprin CO 80909- (719)638-0144 (719)638-0155
157 757 E 20TH AVE #350 Denver CO 80205- (303)832-1290 (303)839-8303
156 5800 E Colfax Ave. Denver CO 80220- (303)355-2663 (303)321-8868
912 12445 E 39th Ave #300 Denver CO 80239- (303)371-1216 (303)371-7630
175 1801 S State Rd., #7 Hollywood FL 33023- (954)989-8988 (954)989-1208
449 1288 NW 119th St Miami FL 33167- (305)687-6600 (305)687-6691
486 2859 S Military Trail Lake Worth FL 33415- (561)642-6701 (561)642-7067
487 856 US #1 Vero Beach FL 32960- (561)567-9454 (561)567-8175
444 2212 Jim Redman Pkwy Plant City FL 33566-7 (813)757-0211 (813)754-6833
171 17235 NW 27th Ave. Miami FL 33055- (305)625-1001 (305)625-7530
172 745 NE 167TH ST N Miami Beach FL 33162- (305)653-0777 (305)654-0270
174 1445-A N State Rd. Lauderhill FL 33313- (954)581-7990 (954)581-5959
485 3974 Okeechobee Blvd W Palm Beach FL 33409- (561)683-0330 (561)686-8903
201 1046 E Memorial Blvd. Lakeland FL 33801- (941)688-8163 (941)683-5290
315 120 Chief's Way Ste 11 Pensacola FL 32507- (904)455-4400 (904)455-1947
110 3405 W Oakland Park Blvd. Lauderdale Lak FL 33311- (954)739-3535 (954)739-3913
111 5371 W Atlantic Blvd. Margate FL 33063- (954)978-7000 (954)978-0321
385 2716 NW 79th Street Miami FL 33147- (305)693-6969 (305)693-2888
202 3094 Havendale Blvd. Winterhaven FL 33881- (941)967-8584 (941)967-5661
381 2220 E Hillsborough Ave Tampa FL 33610- (813)237-2262 (813)238-3769
329 3208 N Pace Blvd Pensacola FL 32505- (850)432-0457 (850)432-1448
394 657 West 23rd St Panama City FL 32405- (904)763-4400 (904)763-9667
</TABLE>
Page 2
<PAGE> 180
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
262 5335 N Military Trail #20 W Palm Beach FL 33407- (561)471-1990 (561)471-1112
168 19401 S Dixie Hwy. Miami FL 33157- (305)255-2515 (305)255-8510
263 1368 S Military Trail W Palm Beach FL 33415- (561)357-4650 (561)357-4661
169 6220 NW 6TH Ave. Miami FL 33150- (305)758-8010 (305)758-7393
376 13023 NW 7th Ave North Miami FL 33168- (305)685-9006 (305)685-0291
170 7900 NW 27TH AVE Miami FL 33147- (305)693-9900 (305)693-0306
380 300 34th St North St Petersburgh FL 33713- (815)321-3279 (813)321-4031
913 2099 W Atlantic Blvd Pompano Beac FL 33069- (954)974-3209 (954)974-8732
382 1230 North State Rd 7 Lauderhill FL 33313- (854)523-5200 (954)583-8015
383 549 NE 81st St Miami FL 33138- (305)754-6969 (305)757-0342
384 18227 NW 27th Ave Miami FL 33056- (305)625-6969 (305)623-7768
275 206 S. Tyndall Parkway Callaway FL 32404- (850)769-1919 (850)769-1016
481 2680 S Federal Hwy Stuart FL 34997- (561)220-1002 (561)220-1003
484 408 EN Park St Okeechobee FL 34972- (941)467-1377 (941)467-1378
173 2101 W Atlantic Pompano Beac FL 33069- (954)978-7078 (954)978-2217
377 17856 S Dixie Hwy Perrine FL 33157- (305)255-2626 (305)255-1208
215 2203 Fowler St. Ft Myers FL 33901- (941)337-0999 (941)337-7659
208 7663 49th St. North Pinellas Park FL 33781- (813)545-3850 (813)547-1746
212 1111 34TH Street South St Petersburg FL 33711- (813)323-1332 (813)321-9295
220 316 James Lee Blvd Crestview FL 32536- (850)689-3131 (850)682-4008
273 3 West Nine Mile Rd Pensacola FL 32534- (850)494-3000 (850)494-3070
219 2526 Bearss Ave East Tampa FL 33613- (813)977-7577 (813)971-7102
218 760 Sebring Square Sebring FL 33870- (941)385-3609 (941)385-4518
923 1814-C S Monroe St Tallahassee FL 32301- (850)656-9185 (850)878-6235
216 99 N Eglin Pkwy. #45 Ft Walton Beac FL 32548- (850)664-2242 (850)664-2240
221 14841 7th Street Dade City FL 33525- (352)523-0334 (352)523-0340
214 2031 US HWY 60 E Lake Wales FL 33853- (941)676-0717 (941)676-6798
213 1687 Hinson Ave. Haines City FL 33844- (941)422-6589 (941)421-2682
209 234 E Van Fleet Dr. Bartow FL 33830- (941)533-0385 (941)534-8319
210 4027 S Dale Mabry Hwy. Tampa FL 33611- (813)837-6700 (813)839-2944
482 2514 S Federal Hwy Ft Pierce FL 34982- (561)461-2900 (561)461-3302
211 3333 N Tamiami Trail., Ste Sarasota FL 34234- (941)359-2422 (941)358-1603
217 1234 S Broad St Brooksville FL 34601- (352)799-0960 (352)799-1192
178 5768 NW 183rd St Miami FL 33015- (305)822-2284 (305)822-6379
203 1233 Cleveland Street Clearwater FL 34615- (813)443-0694 (813)447-7637
204 8223 N Florida Ave. Tampa FL 33604- (813)933-7993 (813)932-3073
228 6512 Massachusetts New Port Rich FL 34653- (813)845-1850 (813)845-3867
914 14620 N Nebraska Ave, Bld Tampa FL 33613-1 (813)977-9800 (813)979-9632
229 7543 W Waters Ave. Tampa FL 33615- (813)249-1404 (813)249-1816
223 2525 S Monroe ST Tallahassee FL 32301- (850)656-9185 (850)878-6235
205 5034 10TH Ave. East Tampa FL 33619- (813)248-1889 (813)248-1819
180 1110 W Sunrise Blvd Ft Lauderdale FL 33311- (954)527-6666 (954)527-4655
181 801-803 W Sample Rd Pompano Beac FL 33064- (954)941-2100 (954)941-6747
182 2930 Braodway Riviera Beach FL 33404- (561)863-8135 (561)863-8167
206 1705-D Jim Redman Plant City FL 33566- (813)752-2423 (813)752-2654
183 21467 N.W. 2nd Ave Miami FL 33169- (305)770-3466 (305)653-6604
225 4477 Mobile Hwy Pensacola FL 32506- (850)453-4903 (850)456-2373
</TABLE>
Page 3
<PAGE> 181
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
207 713 44TH Ave. West Bradenton FL 34207- (941)756-0080 (941)739-1726
418 4739 Jonesboro Rd Forest Park GA 30050- (404)366-6969 (404)366-9494
413 811 Ralph D Abernathy Blv Atlanta GA 30310- (404)758-6200 (404)758-1663
425 1291 Bankhead Hwy Mableton GA 30059- (770)948-7088 (770)948-3662
427 2430 South Atlanta Rd Smyrna GA 30080- (770)434-8285 (770)434-0127
424 208 f North Broad St Winder GA 30680- (770)867-9000 (770)307-3509
415 665 N Expressway Griffin GA 30223- (770)228-1509 (770)228-1754
416 1307 South Park Carrollton GA 30117- (770)836-1930 (770)834-5666
412 3570 Memorial Dr Decatur GA 30032- (404)286-0700 (404)286-1971
495 5823 B Fairburn Rd Douglasville GA 30134- (770)942-9393 (770)920-8191
423 234 Grayson Hwy Lawrenceville GA 30245- (770)962-2600 (770)962-0279
417 5190 Old National Hwy Ste College Park GA 30349- (404)767-6333 (404)761-5199
421 853 Oak Street Atlanta GA 30310- (404)755-7070 (404)755-1051
419 3031 Headland Dr Atlanta GA 30311- (404)349-2300 (404)349-8705
224 1030-D Gordon Ave Albany GA 31701- (912)889-9500 (912)889-0750
222 727 S Patterson ST Valdosta GA 31606- (912)247-3334 (912)247-8104
428 9999 Hwy 92 Suite 120 Woodstock GA 30188- (770)928-9225 (770)928-8555
257 615 East Bypass S.E. Moultrie GA 31768- (912)890-3290 (912)890-5517
420 1239 Moreland Ave Atlanta GA 30316- (404)624-9775 (404)624-3551
429 1090 Eisenhower Pkwy Ste Macon GA 31206- (912)788-3500 (912)788-5620
434 919 East 8th St Anderson IN 46012- (317)641-7014 (317)622-0777
505 652 Twin Aire Dr Indianapolis IN 46203- (317)638-2000 (317)638-0264
370 8143 Pendelton Pike Indianapolis IN 46226- (317)899-3232 (317)899-1294
334 215 E Highway 131 Clarksville IN 47129- (812)949-9001 (812)841-3263
504 6441 E Washington St Indianapolis IN 46219- (317)359-8885 (317)359-2485
371 1106 E Prospect Indianapolis IN 46203- (317)633-7200 (317)633-1788
301 330 New Albany Plaza New Albany IN 47150- (812)949-1300 (812)941-7399
307 716 N Weinbach Ave Evansville IN 47711- (812)479-6100 (812)479-6126
367 4401 E 10th St #16 Indianapolis IN 46201- (317)352-1910 (317)352-1921
368 2774 Lafayette Rd Ste 16 Indianapolis IN 46222- (317)925-5000 (317)923-1926
369 2248 E 53rd St Indianapolis IN 46220- (317)466-1444 (317)466-1231
503 3404 S East St Indianapolis IN 46227- (317)782-4409 (317)782-4485
441 1060 Minnesota Ave Kansas City KS 66010- (913)371-7368 (913)371-4744
336 1607 Madison Ave Covington KY 41044- (606)291-9700 (606)291-9085
408 5022 Poplar Level Rd Louisville KY 40219- (502)966-3211 (502)966-4532
319 201 Eastland Shopping Ctr Lexington KY 40505- (606)255-4555 (606)231-1158
409 5316 S Third Louisville KY 40214- (502)367-2124 (502)367-9387
310 7100 Preston Hwy Louisville KY 40219- (502)968-1111 (502)961-9265
410 100 East Broadway Louisville KY 40202- (502)583-1661 (502)584-2025
302 4443 Cane Run Rd Ste 112 Louisville KY 40216- (502)447-6611 (502)447-6235
304 1311 US 127 South Franklin KY 40601- (502)875-5200 (502)226-6343
338 4749 Dixie Hwy Louisville KY 40216- (502)449-2244 (402)449-4994
439 1225 N Broadway St Lexington KY 40505-3 (606)255-9888 (606)255-7491
437 1430 Village Drive Lexington KY 40504- (606)255-9898 (606)252-2297
341 3501 Taylor Blvd Louisville KY 40215- (502)367-7900 (502)364-8987
430 7275 Turfway Florence KY 41042- (606)371-9231 (606)371-1635
438 674 Eastern By-Pass Richmond KY 40475- (606)623-5453 (606)626-1641
</TABLE>
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<PAGE> 182
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
375 421 W Tunnel Blvd Houma LA 70360- (504) 851-7116 (504) 851-7748
57 1438 MacArthur Dr. Alexandria LA 71301- (318) 448-1353 (318) 448-0829
266 56 Pine Tree Plaza Bogalusa LA 70427- (504) 732-1000 (504) 732-1006
916 1302 J W Davis Drive Hammond LA 70404-0 (504) 542-7932 (504) 542-0019
386 1939 Tulane Ave New Orleans LA 70112- (504) 522-9786 (504) 522-8424
387 87 Westbank Expy Ste 18C Gretna LA 70053- (504) 367-2428 (504) 367-1716
991 5905 Financial Plaza Ste 11 Shreveport LA 71129- (318) 683-0381
921 910 Pierremont Rd, Ste., 41 Shreveport LA 71106- (318) 861-8615 (318) 861-8614
60 900 N 5TH Ave. Leesville LA 71446- (318) 238-9662 (318) 238-0860
270 192 Gause Blvd Slidell LA 70460- (504) 781-6900 (504) 781-6951
99 617 S VIENNA Ruston LA 71270- (318) 255-7222 (318) 255-0801
191 5630 Plank Rd Baton Rouge LA 70805- (504) 359-6666 (504) 356-4924
277 916 Rees st Breaux Bridge LA 70517- (318) 322-4630 (318) 332-5945
278 930 Cresswell Lane Opelousas LA 70570- (318) 948-7800 (318) 948-4412
279 1081 E Laural Ave (Hwy 19 Eunice LA 70535- (318) 546-6700 (318) 546-0400
124 1107 Homer Rd. Minden LA 71055- (318) 371-1566 (318) 371-1564
919 692 E Admiral Doyle Dr. New Iberia LA 70560-
125 714 S Arkansas Springhill LA 71075- (318) 539-3800 (318) 539-3812
37 3717 Jewella Rd Shreveport LA 71109- (318) 631-9616 (318) 631-1211
920 1900 Cameron St Lafayette LA 70503-
69 112 Blanchard St. #1 West Monroe LA 71291- (318) 322-3221 (318) 387-7799
21 3125 E Texas St. Bossier City LA 70000- (318) 746-2194 (318) 741-1745
918 119 Chevy Lane Bunkie LA 71322-
395 115 N Morrison Blvd Hammond LA 70401- (504) 345-4633 (504) 345-8033
20 2746 W 70TH ST Shreveport LA 71108- (318) 631-9551 (318) 631-4559
193 3136 Louisville Ave Monroe LA 71201- (318) 323-4222 (318) 323-4230
189 2764 Old Erath Hwy Abbeville LA 70510- (318) 893-9333 (318) 893-4372
199 200 E Admiral Doyle Dr New Iberia LA 70560- (318) 365-6333 (318) 364-1408
68 1954 Louisville Ave. Monroe LA 71201- (318) 325-9699 (318) 322-7848
194 328 West Hwy 30 Gonzales LA 70737- (504) 647-5555 (504) 647-0508
374 124 N Broad St New Orleans LA 70119- (504) 821-2644 (504) 821-5557
192 8030 Florida Blvd Baton Rouge LA 70806- (504) 925-1666 (504) 924-0823
58 312 Dixie Plaza Natchitoches LA 71457- (318) 357-1720 (318) 352-6975
268 7520 Highway 90 East Morgan City LA 70280- (504) 385-9900 (504) 385-9927
389 6609 Airline Hwy Metairie LA 70003- (504 737-4444 (504) 734-9753
388 4431 Chef Menteur Hwy New Orleans LA 70126- (504) 288-1400 (504) 288-1114
269 1420 West Airline Highway LaPlace LA 70068- (504) 651-1800 (504) 651-1804
286 359-3 N. Canal Blvd. Thibodaux LA 70301-
197 1419 E Prien Lake Rd Lake Charles LA 70605- (318) 477-4747 (318) 474-0657
59 210 Elizabeth Many LA 71449- (318) 256-9211 (318) 352-5395
190 205 MacArthur Dr Alexandria LA 71301- (318) 442-2424 (318) 443-2949
196 1914 Cameron St Lafayette LA 70503- (318) 234-6699 (318) 232-6414
195 2420 w Thomas St Hammond LA 70401- (504) 542-9494 (504) 542-1017
276 1611 W Main St Franklin LA 70538- (318) 828-9400 (318) 828-4944
198 358 Moreau St Marksville LA 71351- (318) 253-0033 (318) 253-0573
440 6430 Troost Ave Kansas City MO 64131-1 (816) 523-7775 (816) 523-5552
185 Town Plaza Shoppin Center Cape Girardea MO 63701- (573) 334-3686 (573) 334-5548
</TABLE>
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<CAPTION>
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- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
232 106 N first St Marble Hill MO 63764- (573) 238-4636 (573) 238-4481
513 3441 Noland Rd Independence MO 64050- (816) 836-8500 (816) 836-4195
186 336 Festus Center Festus MO 63028- (314) 933-0116 (314) 933-4268
453 2101 W Broadway Ste CC Columbia MO 65203- (573) 446-5700 (573) 445-6350
454 2525 D Missouri Blvd Jefferson City MO 65101- (573) 636-9009 (573) 636-9179
455 420 N Rangeline Rd Ste 1 Joplin MO 64801-1 (417) 781-4443 (417) 781-9730
233 908 A Truman Blvd now Carutherville MO 63830- (573) 333-0088 (573) 333-1922
188 724 Market Farmington MO 63640- (573) 756-0051 (573) 756-7167
309 1335 Ellis Ave Jackson MS 39204- (601) 353-6800 (601) 353-6631
267 3510 Main St-Hwy 613 Moss Point MS 39564- (228) 474-9100 (228) 474-9142
250 261 D'Evereuz Dr Ste 10-B Natchez MS 39120- (601) 442-5566 (601) 442-9808
98 1164 Ellis Ave. Jackson MS 39209-6 (601) 354-4000 (601) 352-4444
253 69 Hardy Ct. Square Gulf Port MS 39507- (228) 822-9188 (228) 863-5738
478 1820 Highway 1 South Greenville MS 38701- (601) 335-3777 (601) 335-3797
479 404 W Park Ave Greenwood MS 38930- (601) 455-4444 (601) 455-2093
480 1229 A Sunset Dr Grenada MS 38901- (601) 226-0034 (601) 226-8206
477 1904 Clay St Vicksburg MS 39180- (601) 630-0050 (601) 636-0404
109 112-J Wilkesboro Blvd SE Lenoir NC 28645- (704) 758-7368 (704) 757-3957
108 215 N Madison Blvd. Roxboro NC 27573- (336) 597-4200 (336) 597-2747
105 2725-G North West Blvd. Newton NC 28658- (704) 464-5028 (704) 464-6699
104 909 W Union Street Morgantown NC 28655- (704) 438-9303 (704) 438-9554
107 115 Hilltop Village. Oxford NC 27565- (919) 693-4086
230 2636 Freedom DR Charlotte NC 28208- (704) 391-7770 (704) 391-9770
103 1228 - 1234 Hwy. 70 SW Hickory NC 28602- (704) 324-4016 (704) 324-4501
488 1070 Haywood Rd Asheville NC 28806- (704) 285-0095 (704) 285-0076
237 2719 Isleta, SW Albuquerque NM 87105- (505) 877-1976 (505) 877-1978
235 6211 North West 4th Albuquerque NM 87107- (505) 342-1367 (505) 342-1376
236 6221 Montgomery, NE Albuquerque NM 87109- (505) 880-1153 (505) 837-1381
238 6000 Zuni, SE Albuquerque NM 87108- (505) 266-1600 (505) 266-1304
239 1413 West 7th St Clovis NM 88101- (505) 763-2241 (505) 763-0537
917 621 - 4th Street Albuquerque NM 87105- (505) 880-0414 (505) 342-1376
240 1230 North Solano Las Cruces NM 88001- (505) 523-4800 (505) 523-5842
241 915 North Turner St Hobbs NM 88240- (505) 397-0742 (505) 379-0374
242 110 West McGaffey Roswell NM 88201- (505) 622-1915 (505) 622-3089
65 1611 N Prince St. Clovis NM 88101- (505) 762-8900 (505) 769-3958
67 2118 N Turner Hobbs NM 88240- (505) 393-5000 (505) 393-0389
243 524-C West Cordova Santa Fe NM 87501- (505) 983-1919 (505) 983-7308
261 560 North Nellis Blvd., Ste. Las Vegas NV 89110-
260 1967 Decatur Blvd. Las Vegas NV 89108-
151 2301 E Lake Mead Rd. N Las Vegas NV 89030- (702) 649-5000 (702) 649-8604
258 1746-1748 E. Charleston Bl Las Vegas NV 89104- (702) 388-8383 (702) 388-8377
259 1370 E. Flamingo, Ste., 27 Las Vegas NV 89119- (702) 699-5413 (702) 699-7061
365 11500 Lorain Ave Cleveland OH 44111- (216) 479-1060 (216) 479-8685
432 5712 Glenway Avenue Cincinnati OH 45238- (513) 922-5422 (513) 922-5114
328 3798 W Broad St Columbus OH 43228- (614) 276-8899 (614) 276-1688
364 7981 Euclid Ave Cleveland OH 44103- (216) 791-1200 (216) 791-8722
306 1916 Mitchell Blvd Springfield OH 45503- (513) 399-7000 (513) 399-0127
</TABLE>
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<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
305 3862 N Dixie Dr Dayton OH 45414- (937)275-9600 (937)275-6040
433 3491 W Siebenthaler Dayton OH 45406- (937)275-1275 (937)275-5849
366 1059 Meister Rd Lorian OH 44052- (216)960-7000 (216)960-7004
445 921 High St Columbus OH 43210- (614)291-3600 (614)291-7031
363 15700 Broadway Ave Maple Heights OH 44137- (216)557-1900 (216)587-3492
339 10968 Hamilton Ave Cincinnati OH 45231- (513)742-0300 (513)742-0625
327 3252 B Cleveland Ave Columbus OH 43224- (614)447-8200 (614)447-1137
312 4412 Lewis St Middletown OH 45044- (513)422-8888 (513)422-8840
333 3964 Linden Ave Dayton OH 45432- (937)254-1115 (937)254-1271
337 3855 Montgomery Rd Norwood OH 45212- (513)531-1800 (513)531-0381
335 890 S Hamilton Rd Columbus OH 43213- (614)868-1995 (614)868-0878
78 4733 SE 29TH ST Del City OK 73115- (405)672-6300 (405)672-2997
77 708 SW 59TH ST Oklahoma City OK 73109- (405)631-9700 (405)631-5432
62 9 S Sheridan Tulsa OK 74112- (918)838-2764 (918)838-2767
994 8305 SW 3rd Bldg. A#104 Oklahoma City OK 73127- (405)495-2324
71 5326 S PEORIA Tulsa OK 74105- (918)747-0477 (918)747-1480
56 1011 W Main Durant OK 74702- (405)920-0288 (405)920-0297
54 616 N Highway 81 Duncan OK 73533- (405)252-0735 (405)252-9511
73 625 S Main Sapulpa OK 74066- (918)227-4333 (918)227-7368
72 10680 E 31ST ST Tulsa OK 74135- (918)622-3425 (918)622-9564
18 320 N Commerce #5 Ardmore OK 73401- (580)226-2732 (580)223-7245
50 1906 Cache Rd., Ste B Lawton OK 73507- (580)248-4310 (580)248-4347
74 4449 NW 50TH St. Oklahoma City OK 73112- (405)942-3425 (405)949-9227
55 530 E Main Ada OK 74820- (580)332-6822 (580)332-6838
996 SERVICE CENTER Spartenburg SC 29303-
254 5124 Fairfield Rd Columbia SC 29203- (803)714-0706 (803)714-0310
160 118 Garner Rd. Spartenburg SC 29303- (864)597-1700 (864)583-6078
161 765 N Church St Spartanburg SC 29303- (864)542-8888 (864)542-2559
255 2300 Taylor St. Columbia SC 29204- (803)933-0601 (803)933-9895
166 5300-7 Rivers Ave. Charleston SC 29418- (803)566-9900 (803)566-0098
165 502 N Main St. Anderson SC 29621- (864)224-7000 (864)226-4299
163 1411 Laurens Rd. Greenville SC 29607- (864)298-0055 (864)370-0647
167 1015 King St. Charleston SC 29403- (803)577-9900 (803)577-5416
287 2315 Augusta Rd., Suite 5 West Columbia SC 29169- (803)936-1888 (803)936-9070
489 2807 S Main St Anderson SC 29624- (864)231-6888 (864)231-0790
251 3906 Two Notch St Columbia SC 29204- (803)333-0070 (803)333-0818
162 3219 W Blue Ridge Dr. Greenville SC 29607- (864)295-4400 (864)295-2935
164 710 E Wade Hampton Blvd. Greer SC 29651- (864)879-7122 (864)877-8053
324 924 New Providence Blvd Clarksville TN 37042- (614)553-0300 (615)645-4660
326 131 Old Hickory Blvd Jackson TN 38305- (901)664-3100 (901)664-3188
344 5510 Charlotte Ave Nashville TN 37209- (615)356-6700 (615)356-9695
323 3806 Nolensville Rd Nashville TN 37211- (615)781-8900 (615)331-9258
492 2675 Murfreesboro Rd Nashville TN 37217- (615)367-4005 (615)367-9070
325 1019 Gallatin Rd S Madison TN 37115- (615)865-2100 (615)864-9970
10 311 W 19th St San Angelo TX 76903- (915)658-2419 (915)653-3768
272 435-A Uvalde Houston TX 77015- (713)450-9766 (713)450-9866
271 400 Northline Mall Houston TX 77022-
</TABLE>
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<TABLE>
<CAPTION>
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- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
11 808 W Henderson Cleburne TX 76031- (817) 641-3387 (817) 558-8509
450 508 E Front St Tyler TX 75202- (903) 526-3336 (903) 526-1117
112 1808 WIRT RD Houston TX 77055-2 (713) 290-1885 (713) 686-9912
15 1703 NW Loop 281 Longview TX 75604- (903) 759-0783 (903) 759-0931
14 1111 S Texas Ave Bryan TX 77802- (409) 822-5778 (409) 823-3689
113 900 S Wayside #800 Houston TX 77023-3 (713) 921-5535 (713) 921-5623
114 9722 Fondren @ Houston TX 77096-3 (713) 771-4880 (713) 771-4943
12 1429 S Beckham Tyler TX 75701- (903) 595-4388 (903) 595-4125
442 3639 Gus Thomasson Rd Mesquite TX 75150- (972) 681-9271 (972) 681-3093
490 1400 F West Moore Terrell TX 75160- (972) 563-9103 (972) 551-1451
443 3217 Camp Wisdom Rd Dallas TX 75237- (214) 331-3306 (214) 331-1011
135 906 Bandera San Antonio TX 78228- (210) 434-1812
133 421 Spingtown Way San Marcos TX 78766- (512) 396-5500 (512) 396-5502
132 1575 Little York Plaza Houston TX 77093- (281) 590-9590 (281) 590-9764
131 743 Shotwell Houston TX 77020- (713) 672-0901 (713) 672-2314
130 1167 Edgebrook Houston TX 77034- (713) 910-6744 (713) 910-6747
13 426 E Main Grand Prairie TX 75050- (972) 262-9905 (972) 262-4091
129 5962 Renwick Houston TX 77081- (713) 664-9304 (713) 664-9327
472 4321 Texas Blvd Texarkana TX 75501- (903) 793-6690 (903) 794-0935
90 4102 N Navarro Victoria TX 77904- (512) 576-4574 (512) 576-6849
136 3890 S Gessner Houston TX 77063- (713) 780-7473 (713) 780-7873
140 1915 W Wheeler Aransas Pass TX 78336-4 (512) 758-7646 (512) 758-3654
91 PORT LAVACA CENTER Port Lavaca TX 77979-2 (512) 552-4501 (512) 552-9213
139 10729 Eastex Frwy. Houston TX 77093- (713) 691-4892 (713) 691-2988
613 4234 Ayers Corpus Christi TX 78415- (512) 857-5842 (512) 857-8125
146 1718 E Main Alice TX 78332-4 (512) 664-8888 (512) 664-6555
145 719 S 14TH ST Kingsville TX 78363-4 (512) 592-1111 (512) 592-5105
612 3315 Ayers Corpus Christi TX 78415-5 (512) 883-8991 (512) 882-8807
143 1502 Wildcat Drive Portland TX 78374-2 (512) 643-4557 (512) 643-1845
142 3751 Leopard Corpus Christi TX 78408-2 (512) 884-5977 (512) 884-5979
141 4232 Ayers Corpus Christi TX 78415-5 (512) 857-0041 (512) 857-0043
147 359 W Avenue J. Robstown TX 78380- (512) 387-8568 (512) 387-1052
134 201 C IH 35 WEST New Braunfels TX 78131- (830) 629-1500 (830) 629-1511
144 3902 S Padre Island Dr. Corpus Christi TX 78416-2 (512) 855-4391 (512) 851-1334
137 6848 Spencer Hwy. Pasadena TX 77505- (281) 487-5881 (281) 487-3098
995 5910 Business Park Dr. #10 San Antonio TX 78218- (210) 666-1393
992 2305 Ave. C NO 1C Lubbock TX 79404- (806) 741-0292 (806) 793-0293
511 1322 S Buckner Blvd Ste 31 Dallas TX 75217- (214) 398-5174 (214) 398-5709
898 706 E Kimbrough Mesquite TX 75149- (972) 288-9327 (972) 288-7753
508 302 W Jefferson Dallas TX 75208- (217) 946-9990 (214) 346-9995
16 208 E End Blvd Marshall TX 75670- (903) 938-8311 (903) 938-0974
96 2010 N 10TH Mc Allen TX 78501-4 (956) 630-9425 (956) 618-1257
95 409 University Dr. Edinberg TX 78539-3 (956) 383-8133 (956) 383-4036
94 1025 N Texas Blvd., STE 1 Weslaco TX 78596-4 (956) 969-3561 (956) 969-5925
93 807 N 77TH Harlingen TX 78550-8 (956) 425-1111 (956) 423-8507
92 44 Paredes Line Rd. Brownsville TX 78521-2 (956) 544-3954 (956) 504-3470
2 6007 Wesley Greenville TX 75401- (903) 454-6917 (903) 454-6924
</TABLE>
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<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
266 6118-B Scot Houston TX 77021- (713) 741-9611 (713) 741-5665
614 1926 Civic Circle Amarillo TX 79109- (806) 352-6000
393 2204 S Buckner Blvd Dallas TX 75227- (214) 388-5100 (214) 388-4615
6 222 Camp Wisdom Rd., Ste Duncanville TX 75116- (972) 780-0826 (972) 780-1158
252 2013 Richey or 2015 S. Ric Pasadena TX 77502- (713) 477-7202 (713) 477-0696
249 2516 34th St Lubbock TX 79410- (806) 793-8196 (806) 793-8199
248 3130 North Lee Trevino #11 El Paso TX 79936- (915) 590-6155 (915) 590-6586
247 105 S Festival El Paso TX 79912- (915) 584-8450 (915) 584-8716
246 8414 North Loop El Paso TX 79907- (915) 594-2777 (915) 594-3011
245 4122 Montana El Paso TX 79903- (915) 566-8666 (915) 566-0052
244 9224 Dyer St El Paso TX 79924- (915) 757-8697 (915) 757-8716
138 11209 Market St. Houston TX 77029- (713) 453-6600 (713) 450-2887
3 2000 Loy Lake Rd Sherman TX 75090- (903) 892-0608 (903) 868-2258
97 4842 Montana El Paso TX 79903-4 (915) 562-7368 (915) 562-9466
200 490 S Eleventh St Beaumont TX 77726-7 (409) 835-7667 (409) 835-1660
285 28469 Tomball Parkway Tomball TX 77375-
973 5250 Weber Rd., #200-E Corpus Christie TX 78411- (512) 853-7976 (512) 853-8432
847 924 N Valley Mills Waco TX 76710-
283 1408-A Loop 336 W Conroe TX 77304- (409) 756-8200 (409) 756-8238
282 5136 Avenue H Rosenberg TX 77471- (281) 238-0422 (281) 232-3191
1 110 Broadmoor Plaza Mesquite TX 75149- (972) 288-7611 (972) 288-8109
915 5002 Old Brwnsmill Rd Corpus Christi TX 78406-3 (512) 878-3000
179 6117/19/21 Telephone Rd Houston TX 77087- (713) 242-9412 (713) 242-9378
177 10800 S. Post Oak Houston TX 77035 (713) 723-9030 (713) 723-9594
176 12600 Bissonnet, Suite B-3 Houston TX 77099-0 (281) 575-9021 (281) 575-9549
265 604 B South Martin or S Za Laredo TX 78043- (956) 729-8669 (956) 729-8662
44 215 E University #107 Mc Kinney TX 75069 (972) 542-0324 (972) 542-0243
38 2026 CROCKETT Palestine TX 75801- (903) 729-3000 (903) 729-8894
39 330-D University Lubbock TX 79415- (806) 747-5555 (806) 747-5558
4 106 Plymouth Park S/C Irving TX 75061- (972) 986-7561 (972) 790-2353
40 9515 N Lamar Blvd., Ste 14 Austin TX 78753 (512) 339-8295 (512) 834-0122
41 500 W William Cannon Rd., Austin TX 78745 (512) 445-7245 (512) 445-7218
510 3701 W Northwest Hwy Ste Dallas TX 75220- (214) 351-9990 (214) 351-0910
43 1450 W Pleasant Run Rd. Lancaster TX 75146- (972) 227-8076 (972) 227-8465
34 3213-H S Western St. Amarillo TX 79109- (806) 358-8551 (806) 358-8554
45 922 Melbourne Rd. Hurst TX 76053- (817) 284-5161 (817) 284-5292
46 902 S Ft. Hood Rd. Killeen TX 76541 (254) 526-7766 (254) 526-2193
47 3400 B Olton Rd Plainview TX 79073- (806) 296-7011 (806) 296-7056
48 1205-B S Main Weatherford TX 76086- (817) 599-8659 (817) 613-0069
509 1449 Beltline Irving TX 75061- (972) 399-6099 (972) 399-8229
5 1103 S Josey Ln #119 Carrollton TX 75006- (972) 416-1757 (972) 416-4551
42 3909 N IH 35 BLDG G. STE Austin TX 78722- (512) 454-3555 (512) 454-3549
28 2603 Thornton Ln. Temple TX 76502- (254) 771-0888 (254) 771-0899
17 3402 N Buckner #304 Dallas TX 75228- (214) 328-6666 (214) 328-6840
19 612 W University Dr Denton TX 76201- (940) 382-2611 (940) 382-7502
22 1364 W Main Street Lewisville TX 75067- (972) 420-0833 (972) 436-3133
23 200 N 15TH ST Corsicana TX 75110- (903) 872-3925 (903) 872-3928
</TABLE>
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<CAPTION>
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<S> <C> <C> <C> <C> <C> <C>
24 1005 Kilgore Plaza Kilgore TX 75662- (903) 984-8611 (903) 983-1369
25 153 Pleasant Grove S/C Dallas TX 75217- (214) 398-2561 (214) 398-0757
36 1600 S Cherry Lane White Settleme TX 76108- (817) 246-2406 (817) 246-2408
27 1315 N Beach Fort Worth TX 76111- (817) 831-0777 (817) 831-2608
35 1500 Guylane Plaza Dumas TX 79029- (806) 935-3001 (806) 935-9263
29 3344 Franklin Waco TX 76710- (254) 754-5566 (254) 754-0440
30 5405 E Lancaster Forth Worth TX 76112- (817) 496-3100 (817) 496-3679
31 638 N University Drive Nacogdoches TX 75961- (409) 560-0100 (409) 569-2331
32 452 N Timberland Lufkin TX 75901- (409) 634-8296 (409) 632-7306
33 2605 Seymour Hwy., Ste D Wichita Falls TX 76301- (940) 761-5511 (940) 761-5514
51 939 Pioneer Pkwy. Arlington TX 76013- (817) 274-7351 (817) 274-7356
26 512 W Jefferson Dallas TX 75208- (214) 943-3333 (214) 943-3133
89 803 Castroville Rd. #214 San Antonio TX 78237-3 (210) 435-7368 (210) 433-2506
7 407 N Garland Ave Garland TX 75040- (972) 276-9541 (972) 494-0197
70 2125-B 50th Street Lubbock TX 79413- (806) 744-7368 (806) 744-0617
86 4555 Walzem Rd., STE 1 San Antonio TX 78218-6 (210) 653-4551 (210) 653-5634
49 527 N Stewart Azle TX 76020- (817) 444-1090 (817) 444-0660
52 9751 Webb Chapel, Ste. 90 Dallas TX 75220- (214) 351-3766 (214) 350-5985
87 1130 SW Military Dr San Antonio TX 78218- (210) 924-4100 (210) 924-9556
85 900 Palm Valley Blvd. Round Rock TX 79664- (512) 388-2244 (512) 388-5939
8 401 North Hwy. 77 Waxahachie TX 75165- (972) 937-0591 (972) 938-3535
9 3396 N 1st. St. Abilene TX 79603- (915) 672-0953 (915) 672-0956
66 800 N Buchanan Blvd. Amarillo TX 79107- (806) 379-8133 (806) 376-8255
64 3126 Andrews Hwy. Odessa TX 79762- (915) 363-8777 (915) 363-8790
63 #1 Meta Drive Midland TX 79703- (915) 686-8777 (915) 686-8781
61 1501 Clarksville Paris TX 75460- (903) 785-3312 (903) 785-8940
53 201 N GRAND Gainesville TX 76240- (940) 665-7001 (940) 665-7093
88 8236 Marbach Rd. San Antonio TX 78227-1 (210) 673-8888 (210) 678-0375
148 769 S State St. Salt Lake UT 84111- (801) 596-1000 (801) 596-1070
150 2700 Washington Blvd. Ogden UT 84401- (801) 621-6734 (801) 621-6754
149 2111 W 3500 South West Valley Cit UT 84119- (801) 973-2828 (801) 974-9430
351 2850 Riverside Dr Danville VA 24540- (804) 791-3900 (804) 799-0707
491 3506 Williamson Rd Roanoke VA 24012- (540) 366-4000 (540) 366-5378
350 2901 Memorial Ave Lynchburg VA 24501- (804) 846-1001 (804) 845-1561
348 601 21st ST NW Roanoke VA 24017- (540) 981-1000 (540) 345-7993
352 2422 Virginia Ave Collinsville VA 24078- (540) 647-3949 (540) 647-1867
353 310 Avon St Bldg 1 Ste 14 Charlottesville VA 22902- (804) 295-0000 (804) 295-0499
354 2542 S Crater Rd Petersburg VA 23805- (804) 733-1173 (804) 862-2892
355 4660 N Southside Plaza Richmond VA 23224- (804) 233-3005 (804) 233-5130
356 3099 Mechanicsville Turnpi Richmond VA 23223- (804) 643-3333 (804) 643-3565
357 439 Jefferson Davis Hwy Fredericksburg VA 22401- (540) 371-2378 (540) 371-8190
349 3035 N Franklin St Christainsburg VA 24073- (540) 381-1817 (540) 381-2193
318 1315 Plaza East Charleston WV 25301- (304) 345-9100 (304) 345-6970
322 731 9th Ave Huntington WV 25701- (304) 525-9500 (304) 525-5670
347 1178 W Main St Bridgeport WV 26330- (304) 842-5476 (304) 842-2739
378 34 Riverwalk Plaza S Charleston WV 25303- (304) 744-8219 (304) 744-8357
379 926 Division St Parkersburg WV 26101- (304) 428-1900 (304) 422-2419
</TABLE>
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Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
346 #27 By-Pass Plaza Beckley WV 25801- (304) 253-7368 (304) 253-7576
</TABLE>
Page 11
<PAGE> 189
SCHEDULE III TO SECURITY AGREEMENT
DEBTOR'S CHIEF EXECUTIVE OFFICE
AND
PRINCIPAL PLACE OF BUSINESS
Alrenco, Inc.: 714 E. Kimbrough
Mesquite, Texas 75185
RTO Operating, Inc.: 714 E. Kimbrough
Mesquite, Texas 75185
RTO Holding Co., Inc.: 850 Library Avenue
Suite 204-H
Newark, Delaware 19715
ATRO, INC.: 961 E. Main Street
Spartanburg, South Carolina 29302
Action Rent-To-Own
Holdings of
South Carolina, Inc.: 961 E. Main Street
Spartanburg, South Carolina 29302
<PAGE> 190
SCHEDULE IV TO SECURITY AGREEMENT
DEBTOR'S PLACES OF BUSINESS NOT
LISTED ON SCHEDULE II OR III
NONE.
<PAGE> 191
EXHIBIT A-1
to Security Agreement
AGREEMENT
(Trademark)
THIS AGREEMENT (TRADEMARK) (this "Agreement"), dated as of _____________,
1998, among RTO Operating, Inc. ("RTO Operating" and sometimes a "Debtor") and
ATRO, Inc., f/k/a RTO Trademark Company, Inc.(, "ATRO", and sometimes a "Debtor"
and together with RTO Operating, the "Debtors"), and Comerica Bank in its
capacity as agent for the Banks referred to below ("Secured Party").
WITNESSETH
A. WHEREAS, pursuant to that certain Alrenco Credit Agreement dated
as of February 26, 1998 (as amended or otherwise modified from time to time, the
"Credit Agreement"), among the Alrenco, Inc. ("Company"), each of the financial
institutions party thereto (collectively, the "Banks") and Secured Party, as
Agent for the Banks, the Banks have agreed, subject to the satisfaction of
certain terms and conditions, to make Advances to Company and to provide for the
issuance of Letters of Credit for the account of Company, individually, or
jointly and severally with certain of the other Account Parties (as such terms
are defined in the Credit Agreement), as provided therein; and
B. WHEREAS, in connection with the Credit Agreement, the Debtors has
executed and delivered a Security Agreement, dated as of the date hereof (as
amended or otherwise modified from time to time, the "Security Agreement"); and
C. WHEREAS, as a condition precedent to the making of the initial
Advances under the Credit Agreement, the Debtors are required to execute and
deliver this Agreement and to further confirm the grant to the Secured Party for
the benefit of the Banks a continuing security interest in all of the Trademark
Collateral (as defined below) to secure all Indebtedness.
NOW, THEREFORE, for good and valuable consideration the receipt of which
is hereby acknowledged, and in order to induce the Banks to make Advances
(including the initial Advance) to the Company pursuant to the Credit Agreement,
each of the Debtors agrees, for the benefit of the Banks, as follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided in the Security Agreement.
SECTION 2. Grant of Security Interest. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Indebtedness described in the Security Agreement each of the
Debtors does hereby mortgage, pledge and hypothecate to the
<PAGE> 192
Secured Party for the benefit of the Banks, and grant to the Secured Party for
the benefit of the Banks a security interest in, all of the following property
(the "Trademark Collateral"), whether now owned or hereafter acquired or
existing:
(a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service
marks, certification marks, collective marks, logos, other source of
business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of a like nature
(all of the foregoing items in this clause (a) being collectively called
a "Trademark") now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and
recordings thereof and all applications in connection therewith, whether
pending or in preparation for filing, including registrations, recordings
and applications in the United States Patent and Trademark Office or in
any office or agency of the United States of America or any State thereof
or any foreign country, including those referred to in Item A of
Attachment 1 hereto;
(b) all Trademark licenses, including each Trademark license
referred to in Item B of Attachment 1 hereto;
(c) all reissues, extensions or renewals of any of the items
described in clauses (a) and (b);
(d) all of the goodwill of the business connected with the use
of, and symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Debtors against third parties for past,
present, or future infringement or dilution of any Trademark, Trademark
registration, or Trademark license, including any Trademark, Trademark
registration or Trademark license referred to in Item A and Item B of
Attachment 1 hereto, or for any injury to the goodwill associated with
the use of any Trademark or for breach or enforcement of any Trademark
license.
SECTION 3. Security Agreement. This Agreement has been executed and
delivered by the Debtors for the purpose of registering the security interest of
the Secured Party and the Banks in the Trademark Collateral with the United
States Patent and Trademark Office and corresponding offices in other countries
of the world. The security interest granted hereby has been granted as a
supplement to, and not in limitation of, the security interest granted to the
Secured Party and the Banks under the Security Agreement. The Security Agreement
(and all rights and remedies of the Secured Party and the Banks thereunder shall
remain in full force and effect in accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full of all
Indebtedness and commitment (whether optional or obligatory) to extend any
credit under the Credit Agreement has been terminated, the Secured Party shall,
at the Debtors' expense, execute and deliver to the Debtors
2
<PAGE> 193
all instruments and other documents as may be necessary or proper to release the
lien on and security interest in the Trademark Collateral which has been granted
hereunder.
SECTION 5. Acknowledgment. Each of the Debtors does hereby further
acknowledge and affirm that the rights and remedies of the Secured Party for the
benefit of the Banks with respect to the security interest in the Trademark
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which (including the remedies provided for therein)
are incorporated by reference herein as if fully set forth herein.
SECTION 6. Loan Documents, etc. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
3
<PAGE> 194
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
DEBTORS:
RTO OPERATING, INC.
By:
-------------------------------------
Its:
-------------------------------------
Address: 714 E. Kimbrough
Mesquite, Texas 75149
Facsimile: 972-288-7753
ATRO, INC., f/k/a RTO Trademark Company, Inc.
By:
-------------------------------------
Its:
-------------------------------------
Address: 714 E. Kimbrough
Mesquite, Texas 75149
Facsimile: 972-288-7753
COMERICA BANK, as Agent for the Banks
By:
-------------------------------------
Its:
-------------------------------------
Address: One Detroit Center
9th Floor, MC 3289
Detroit, MI 48275-3289
Attention: Valerie Kin
Facsimile No: (313) 222-9434
SIGNATURE PAGE
TRADEMARK AGREEMENT
4
<PAGE> 195
ATTACHMENT 1
to
Agreement
(Trademark)
<TABLE>
<S> <C> <C> <C>
Item A. Trademarks
----------
REGISTERED TRADEMARKS
---------------------
Country* Trademark Registration No. Registration Date
-------- --------- ---------------- -----------------
PENDING TRADEMARK APPLICATIONS
------------------------------
Country* Trademark Registration No. Registration Date
-------- --------- ---------------- -----------------
TRADEMARK APPLICATIONS IN PREPARATION
-------------------------------------
Expected Products/
Country* Trademark Docket No. Filing Date Services
-------- --------- ---------- ----------- --------
Item B. Trademark Licenses
------------------
Expected Expiration
Country* Trademark Licensor Licensee Filing Date Date
-------- --------- -------- -------- ----------- ----
</TABLE>
- -------------------
* List items related to the United States first for ease of
recordation. List items related to other countries next, grouped by country and
in alphabetical order by country name.
<PAGE> 196
EXHIBIT M-1
PLEDGE AGREEMENT
(Alrenco, Inc.)
THIS STOCK PLEDGE ("Stock Pledge") made as of this 26th day of February,
1998 by and between Alrenco, Inc., an Indiana corporation ("Company") and
Comerica Bank, a Michigan banking corporation, as Agent for and on behalf of the
Banks (as defined below) ("Secured Party").
RECITALS:
A. Pursuant to that certain Alrenco Revolving Credit Agreement dated
as of February 26, 1998 (as may be amended, or otherwise modified from time to
time, the "Credit Agreement") by and among Company, Secured Party as Agent and
the financial institutions which are named in and are signatories to the Credit
Agreement ("Banks"), the Banks have agreed to extend credit to Company on the
terms set forth in the Credit Agreement.
B. As a condition to the performance of their respective obligations
under the Credit Agreement, the Banks, and Secured Party, as Agent for the
Banks, have required that Company provide this Stock Pledge to Secured Party, as
Agent for the Banks, granting various security interests, liens and other
encumbrances as security for the Company's obligations under its Notes, the
Credit Agreement and the other Loan Documents.
C. Agent is acting as Agent for the Banks pursuant to Section 13.1 of
the Credit Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
I. Creation of Security Interest
Company hereby grants to Secured Party, on behalf of Banks and the Agent,
a security interest in the property described in paragraph II, below
("Collateral").
II. Collateral.
The Collateral consists of the following:
(a) 100% of the outstanding shares of each class of stock, (or other
ownership interest) of each Subsidiary listed on Schedule A-1 hereto (as such
Schedule may be revised pursuant to Section III B.1 hereof), together with all
of the certificates and/or instruments representing such
<PAGE> 197
shares of stock (or other ownership interest), and all cash, securities,
dividends, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares;
(b) 100% of any additional shares of stock, (or other ownership
interest) of any of the Subsidiaries listed on Schedule A-1 hereto, at any time
and from time to time acquired by the Company in any manner, all of the cash,
securities, dividends, rights and other property at any time and from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
(c) All other property hereafter delivered to the Agent in
substitution for or in addition to the foregoing, all certificates and
instruments representing or evidencing such property, and all cash, securities,
interest, dividends, rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all thereof; and
(d) All products and proceeds of all of the foregoing.
III. Company's Obligations
A. Payment of Secured Indebtedness. The security interest created
herein is given as security for:
(1) All of Company's obligations contained in or arising under or in
connection with the Credit Agreement and the Notes issued by it from time to
time pursuant to the Credit Agreement, and all obligations of Company contained
in or arising under the other Loan Documents executed by Company;
(2) All of Company's obligations contained in or arising under any and
all Letter of Credit Agreements executed or to be executed by Company from time
to time pursuant to the Credit Agreement, and any Letters of Credit issued or to
be issued thereunder;
(3) The obligations of Company for payment of all sums hereafter
loaned, paid out, expended or advanced by or for the account of the Banks (or
any of them) or by the Secured Party under the terms of this Stock Pledge, the
Credit Agreement, or the other Loan Documents, in connection with the Collateral
or any of the documents or instruments described in this Stock Pledge, the
Credit Agreement or the other Loan Documents;
together with interest thereon as provided for herein or therein; and
also as security for all other indebtedness and liabilities, whether direct,
indirect, absolute or contingent, owing by the Company to the Banks in any
manner under the Credit Agreement or the Loan Documents, which hereafter become
due, or that may hereafter be incurred by the Company to or acquired (pursuant
to the Credit Agreement or the other Loan Documents) by the Banks, and all other
future obligations of the Company to the Banks, their successors and assigns,
howsoever created, arising or evidenced, whether joint or several, direct or
indirect, absolute or contingent, primary or secondary, and any
2
<PAGE> 198
judgments that may hereafter be rendered on such indebtedness or any part
thereof, with interest according to the rates and terms specified, or as
provided by law, and any and all replacements, consolidations, amendments,
renewals or extensions of the foregoing (collectively herein called the
"Indebtedness").
B. Protection of Security Interest.
(1) Company shall take any and all steps required to protect the
Collateral, and in pursuance thereof Company agrees that Company shall deliver
or caused to be delivered to Secured Party and Secured Party shall receive
possession, on behalf of Banks, of certificates representing all of the pledged
shares referred to in Schedule A-1, properly endorsed or with assignments
separate from such certificates in blank for transfer. In addition Secured Party
shall receive proof that appropriate acknowledgments, governmental approvals,
share register entries, local pledge agreements, financing statements,
collateral and other documents covering the Collateral have been executed and
delivered by the appropriate parties and recorded on file with such Persons and
in such jurisdictions as necessary to perfect the security interests, or other
liens granted hereby and/or thereby. The Secured Party from time to time shall
revise Schedule A-1 hereto and promptly deliver a copy thereto to Company and
the Banks, on the effective date of the acquisition or creation by Company of a
Subsidiary, adding to Schedule A-1 the name of each such Subsidiary so acquired
or created, and upon such revision, Company shall be deemed to have pledged 100%
of the capital stock (or other ownership interests) of each such Subsidiary so
acquired or created to Secured Party for and on behalf of Banks.
(2) It will not sell, transfer, assign or otherwise dispose of any of
the Collateral or any interest therein or offer to do so without the prior
written consent of Secured Party, given at the direction of the Majority Banks,
or permit anything to be done that may materially impair the value of any of the
Collateral or the security intended to be afforded by this Stock Pledge.
(3) It will, subject to the applicable terms of the Credit Agreement,
pay all taxes and assessments upon the Collateral or for its use or operation
before any interest or penalty for nonpayment attaches thereto unless said
payment is being contested in good faith and it establishes a reserve as
required by generally accepted accounting principles.
(4) It will, subject to the applicable terms of the Credit Agreement,
sign and execute alone or with Secured Party any financing statement or other
document or procure any documents and pay all reasonable connected costs,
necessary to protect the security interest under this Stock Pledge against the
rights or interests of third persons.
(5) It will, subject to the applicable terms of the Credit Agreement,
reimburse Secured Party for all reasonable costs, including reasonable
attorneys' fees, incurred for any action taken by Secured Party to remedy an
Event of Default which Secured Party elects to remedy pursuant to its rights
under Article VI hereof.
(6) It will:
3
<PAGE> 199
(i) subject to the applicable terms of the Credit
Agreement, allow Secured Party to examine, audit and inspect
Company's books, accounts, records (including without limitation
all records relating to the Collateral or the Indebtedness),
ledgers and assets and properties of every kind and description
wherever located at all reasonable times during normal business
hours, upon oral or written request of Secured Party, and to make
and take away copies of any and all such books, accounts, records
and ledgers. An examination of the records or properties of the
Company may require revealment of proprietary and/or confidential
data and information, and the provisions of Section 14.12 of the
Credit Agreement are incorporated herein;
(ii) punctually and properly perform all of its covenants
and duties under any other security agreement, mortgage,
collateral pledge agreement or contract of any kind now or
hereafter existing as security for or in connection with payment
of the Indebtedness, or any part thereof;
(iii) perform its obligations under the Loan Documents;
(iv) promptly furnish Secured Party with any information
in writing which Secured Party may reasonably request concerning
the Collateral;
(v) promptly notify Secured Party of any material change
in any fact or circumstances warranted or represented by Company
in this Stock Pledge or in any other writing furnished by Company
to Secured Party in connection with the Collateral or the
Indebtedness;
(vi) promptly notify Secured Party of any material claim,
action or proceeding affecting the Collateral and title therein,
or in any part thereof, or the security interest created herein,
and, at the request of the Secured Party, appear in and defend, at
Company's expense, any such action or proceeding; and
(vii) promptly, after being requested by Secured Party,
pay to Secured Party the amount of all reasonable expenses,
including reasonable attorneys' fees and other legal expenses,
incurred by Secured Party in protecting and maintaining the
Collateral or its rights hereunder, or in connection with any
audit or inspection of the Collateral pursuant to the terms
hereof, and in enforcing the security interest created herein.
(7) With respect to any Collateral of a kind requiring an additional
security agreement, financing statement, or other writing to perfect a security
interest therein in favor of Secured Party, on behalf of Banks, Company will
forthwith execute and deliver to Secured Party on behalf of Banks, whatever the
Secured Party or the Majority Banks shall deem necessary or proper for such
purpose. Should any covenant, duty or agreement of Company fail to be performed
in accordance with its terms hereunder, Secured Party may, but shall never be
obligated to, perform or attempt to
4
<PAGE> 200
perform such covenant, duty or agreement on behalf of Company, and any amount
expended by Secured Party in such performance or attempted performance shall
become part of the Indebtedness, and, at the request of Secured Party, Company
agrees to pay such amount to Secured Party upon demand at Secured Party's office
in Detroit, Michigan together with interest thereon at the highest rate which
interest accrues on amounts after the same become due pursuant to the terms of
any note executed pursuant to the Credit Agreement from the date of such
expenditure by Secured Party until paid. With respect to any Collateral in which
Company acquires any rights subsequent to the date hereof and which, under
applicable law, a security interest is or can be perfected by possession,
Company agrees to deliver possession of such Collateral to Secured Party
immediately upon its acquisition of rights therein.
(8) Company will hold the proceeds of any of the Collateral in trust
for Secured Party on behalf of the Banks, will not commingle said proceeds with
any other funds, and, after an Event of Default, will deliver such proceeds to
Secured Party at its request.
(9) If Secured Party, acting in its sole discretion, redelivers any
Collateral to Company or Company's designee for the purpose of
(i) the ultimate sale or exchange thereof, or
(ii) presentation, collection, renewal, or registration
of transfer thereof,
such redelivery shall not constitute a release of Secured Party's security
interest therein or in the proceeds thereof unless Secured Party, with the
consent of the Majority Banks, specifically so agrees in writing.
(10) If Company requests any such redelivery, Company will deliver with
such request a duly executed financing statement in form and substance
satisfactory to Secured Party.
IV. Default
The term "Event of Default", as used herein, means the occurrence of any
Event of Default under the Credit Agreement.
V. Consequence of Default.
Upon an Event of Default, Secured Party shall be entitled, subject to
applicable law, to all of its remedies specified herein, in the Credit
Agreement, or in any other document executed in connection with the Credit
Agreement or this Stock Pledge, or provided by law. Additionally, upon an Event
of Default and subject to applicable law, Secured Party will be entitled to
receive all dividends payable in respect of the pledged shares evidencing the
Collateral pledged under this Stock Pledge, and may change the registration of
any registerable Collateral to any other name or form and is hereby authorized
to appoint any officer or agent of Secured Party as Company's true
5
<PAGE> 201
and lawful proxy and attorney-in-fact, with power, upon the occurrence of any
Event of Default (exercisable so long as such Event of Default is continuing),
to exercise all voting rights in respect of the shares evidencing the Collateral
pledged hereby; to endorse Company's name or any of its officers' names or
agents' names upon any notes, checks, drafts, money orders, or other instruments
of payment (including payments payable under any policy of insurance on the
Collateral) or Collateral that may come into possession of the Secured Party in
full or part payment of any amounts owing to the Banks; to give written notice
to such office and officials of the United States Post Office to effect such
change or changes of address so that all mail addressed to Company may be
delivered directly to Secured Party; to execute on behalf of Company any
financing statements, amendments, subordinations or other filings pursuant to
the Credit Agreement; granting unto Secured Party on behalf of the Banks, as the
proxy and attorney-in-fact of Company, full power to do any and all things
necessary to be done in and about the premises as fully and effectually as
Company might or could do, and hereby ratifying all that said proxy and attorney
shall lawfully do or cause to be done by virtue hereof. The proxy and power of
attorney described herein shall be deemed to be coupled with an interest and
shall be irrevocable for the term of the Credit Agreement, and all transactions
thereunder and thereafter as long as any Indebtedness or any of the commitments
to lend remain outstanding. The Secured Party shall have full power, subject to
applicable law to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof on behalf of the Banks in its own name or in the
name of Company provided that Secured Party shall act in a commercially
reasonable manner.
VI. Secured Party's Rights and Remedies.
Secured Party shall have available to it (subject to applicable law) the
following rights and remedies upon occurrence of an Event of Default:
A. Right to Assign. Secured Party may assign this Stock Pledge only
as provided in the Credit Agreement and if Secured Party does assign this Stock
Pledge, the assignee shall be entitled to the performance of all of Company's
obligations and agreements under this Stock Pledge, and the assignee shall be
entitled to all the rights and remedies of Secured Party under this Stock
Pledge.
B. Right to Discharge Company's Obligations. Secured Party may (i)
with the approval of the Majority Banks, discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral
which are superior to the security interest herein granted, (ii) remedy or cure
any default of Company under the terms of any lease, rental agreement, land
contract or other document which in any way pertains to or affects Company's
title to or interest in any of the Collateral, (iii) pay for insurance on the
Collateral, and (iv) pay for the maintenance and preservation of the Collateral,
unless with respect to the obligations under clauses (i) or (ii) Company is
contesting in good faith such obligations, and Company agrees to reimburse
Secured Party, on demand, for any payment made or any expense incurred by
Secured Party pursuant to the foregoing authorization, with interest, which
payments and expenses shall be secured by the security intended to be afforded
by this Stock Pledge.
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<PAGE> 202
C. Remedies and Enforcement. Secured Party shall have and may
exercise any and all rights of enforcement and remedies afforded to a secured
party under the Uniform Commercial Code as adopted and in force in the State of
Michigan, to the extent permitted by applicable law, on the date of this Stock
Pledge or the date of Company's default together with any and all other rights
and remedies otherwise provided and available to Secured Party by law unless
such application would result in the invalidity or unenforceability of any
provision hereof, in which case the law of the state in which any of the
Collateral is located shall apply to the extent necessary to render such
provision valid and enforceable; and, in conjunction with, in addition to, or
substitution for those rights, at Secured Party's discretion, Secured Party may:
(1) Apply any of the Collateral against any of the Indebtedness
secured hereby;
(2) Waive any default, or remedy any default in any reasonable
manner, without waiving its rights and remedies upon default and without
waiving any other prior or subsequent default;
(3) Without any notice to Company, notify any parties obligated
on any of the Collateral to make payment to the Secured Party of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release or exchange
all or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) the indebtedness
thereunder or evidenced thereby. Upon request of the Secured Party,
Company will, at its own expense, notify any parties obligated to Company
on any of the Collateral to make payment to the Secured Party of any
amounts due or to become due thereunder. Company agrees that Secured
Party shall not be liable for any loss or damage which Company suffers or
may suffer as a result of Secured Party's processing of items or its
exercise of any other rights or remedies under this Stock Pledge,
including without limitation indirect, special or consequential damages,
loss of revenues or profits, or any claim, demand or action by any third
party not related to or affiliated with Company arising out of or in
connection with the processing of items (excluding only the claims of
such third parties in connection with the processing of items based
solely upon the gross negligence or willful misconduct of Secured Party)
or the exercise of any other rights or remedies hereunder. Company
further agrees to indemnify and hold Secured Party harmless from and
against all such third party claims, demands or actions, including
without limitation litigation costs and reasonable attorneys' fees.
D. Right of Sale.
(1) Company agrees that upon the occurrence of an Event of
Default (taking into account applicable periods of cure, if any), Secured
Party may, at its option, sell and dispose of the Collateral at public or
private sale without any previous demand of performance. Company agrees
that notice of such sale sent to Company's address, as set forth in the
Credit Agreement, by certified or registered mail sent at least five (5)
days prior to such sale, shall constitute reasonable notice of sale. The
foregoing shall not require notice
7
<PAGE> 203
if none is necessary under applicable law. The proceeds of sale shall be
applied in the following order:
(i) to all reasonable costs and charges incurred by
Secured Party in the taking and causing the removal and sale of
said property, including such reasonable attorneys' fees as shall
have been incurred by Secured Party;
(ii) to the Indebtedness, including all accrued interest
thereon; and
(iii) any surplus of such proceeds remaining shall be paid
to the Company, or to such other party who shall lawfully be
entitled thereto.
(2) At any sale or sales made pursuant to this Stock Pledge or
in a suit to foreclose the same, the Collateral may be sold en masse or
separately, at the same or at different times, at the option of the
Secured Party or its assigns. Such sale may be public or private with
notice as required by the Uniform Commercial Code as then in effect in
the state in which the Collateral is located, and the Collateral need not
be present at the time or place of sale. At any such sale, the Secured
Party or the holder of any note hereby secured may bid for and purchase
any of the property sold, notwithstanding that such sale is conducted by
the Secured Party or its attorneys, agents, or assigns.
E. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Stock Pledge on behalf of Banks in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Secured Party in refraining from so doing at any time or times. The
failure of Secured Party at any time or times to enforce its rights under said
provisions strictly in accordance with the same shall not be construed as having
created a custom in any way or manner contrary to the specific provisions of
this Stock Pledge or as having in any way or manner modified the same. All
rights and remedies of Secured Party and Banks are cumulative and concurrent,
and the exercise of one right or remedy shall not be deemed a waiver or release
of any other right or remedy.
VII. Representations and Warranties of Company.
Company represents and warrants, as continuing representations and
warranties so long as the Credit Agreement remains in effect, that:
A. The individual signatory hereto has authority to execute and
deliver this Stock Pledge on behalf of Company.
B. No financing statement covering the Collateral, or any part
thereof, has been filed with any filing officer other than in favor of Secured
Party.
C. No other agreement, pledge or assignment covering the Collateral,
or any part thereof, has been made and no security interest, other than the one
created hereby or pursuant to
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<PAGE> 204
pledges and security agreements previously made in favor of Secured Party on
behalf of the Banks, has attached or been perfected in the Collateral or in any
part thereof.
D. No material dispute, right of setoff, counterclaim or defenses
exist with respect to any part of the Collateral.
E. All information supplied and statements made in any financial or
credit statements or application for credit prior to the execution of this Stock
Pledge are true and correct as of the date hereof in all material respects.
F. The Collateral, (1) in the case of each Subsidiary, constitutes
all the issued and outstanding capital stock (or other ownership interests) of
each of the Subsidiaries, (2) have been duly authorized and issued to Company,
(3) is fully paid and non-assessable, (4) is freely and validly assignable by
Company, and (5) is not subject to any option, warrant right to call or
commitment of any kind or nature.
G. At the time Secured Party's security interest attaches to any of
the Collateral or its proceeds, Company will be the lawful owner with the right
to transfer any interest therein, and that Company will make such further
assurances as to prove its title to the Collateral as may be reasonably required
and will defend the Collateral and its proceeds against the lawful claims and
demands of all persons whomsoever. The delivery at any time by Company to
Secured Party of Collateral or financing statements covering Collateral shall
constitute a representation and warranty by Company under this Stock Pledge
that, with respect to such Collateral, and each item thereof, Company is owner
of the Collateral and the matters heretofore warranted in this paragraph are
true and correct.
VIII. Mutual Agreements.
Company and Secured Party mutually agree as follows:
A. "Company" and "Secured Party" as used in this Stock Pledge include
the successors and permitted assigns of those parties.
B. To the extent permitted by applicable law, except as otherwise
provided herein, the law governing this secured transaction shall be that of the
State of Michigan.
C. This Stock Pledge includes all amendments and supplements hereto
and assignments hereof and Company and Secured Party shall not be bound by any
amendment or undertaking not expressed in a writing executed by each of them.
D. All capitalized terms not specifically defined herein which are
defined in the Credit Agreement are used as defined in the Credit Agreement.
9
<PAGE> 205
E. This Stock Pledge shall be a continuing security interest in every
respect (whether or not the outstanding balance of the Indebtedness is reduced
to zero) and Secured Party's security interest in the Collateral as granted
herein shall continue in full force and effect until all of the Indebtedness is
indefeasibly repaid and discharged in full and no commitment (whether optional
or obligatory) to extend any credit under the Credit Agreement remains
outstanding.
F. The parties hereto acknowledge that this Stock Pledge is subject
to the mutual waiver of jury trial contained in Section 14.15 of the Credit
Agreement and to the consent to jurisdiction provisions contained in Section
14.2 of the Credit Agreement.
G. This Stock Pledge has been executed and delivered pursuant to the
Credit Agreement and in the event of any conflict between this Stock Pledge and
the Credit Agreement, the Credit Agreement shall govern.
[SIGNATURES FOLLOW ON SUCCEEDING PAGE]
10
<PAGE> 206
IN WITNESS WHEREOF, Company and Secured Party have executed this Stock
Pledge on the day and year first above written.
COMPANY:
ALRENCO, INC., an Indiana corporation
By:
------------------------------------
Its:
------------------------------------
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By:
------------------------------------
Its:
------------------------------------
SIGNATURE PAGE
PLEDGE AGREEMENT
11
<PAGE> 207
SCHEDULE A-1
<TABLE>
<CAPTION>
Shares Issued
Subsidiaries and Outstanding Shares Pledged
------------ --------------- --------------
<S> <C> <C>
RTO Operating, Inc. 100 100
RTO Holding Co., Inc. 100 100
Action Rent-to-Own Holdings of 1,000 1,000
South Carolina, Inc.
</TABLE>
<PAGE> 208
EXHIBIT M-2
PLEDGE AGREEMENT
(RTO Holding, Co., Inc.)
THIS STOCK PLEDGE ("Stock Pledge") made as of this 26th day of February,
1998 by and between RTO Holding, Co., Inc., a Delaware ("Pledgor") and Comerica
Bank, a Michigan banking corporation, as Agent for and on behalf of the Banks
(as defined below) ("Secured Party").
RECITALS:
A. Pursuant to that certain Alrenco Revolving Credit Agreement dated
as of February 26, 1998 (as may be amended, or otherwise modified from time to
time, the "Credit Agreement") by and among Company, Secured Party as Agent and
the financial institutions which are named in and are signatories to the Credit
Agreement ("Banks"), the Banks have agreed to extend credit to Company on the
terms set forth in the Credit Agreement.
B. As a condition to the performance of their respective obligations
under the Credit Agreement, the Banks, and Secured Party, as Agent for the
Banks, have required that Pledgor provide this Stock Pledge to Secured Party, as
Agent for the Banks, granting various security interests, liens and other
encumbrances as security for the Company's obligations under its Notes, the
Credit Agreement and the other Loan Documents.
C. Agent is acting as Agent for the Banks pursuant to Section 13.1 of
the Credit Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
I. Creation of Security Interest
Pledgor hereby grants to Secured Party, on behalf of Banks and the Agent,
a security interest in the property described in paragraph II, below
("Collateral").
II. Collateral.
The Collateral consists of the following:
(a) 100% of the outstanding shares of each class of stock, (or other
ownership interest) of each Subsidiary listed on Schedule A-1 hereto (as such
Schedule may be revised pursuant to Section III B.1 hereof), together with all
of the certificates and/or instruments representing such
<PAGE> 209
shares of stock (or other ownership interest), and all cash, securities,
dividends, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares;
(b) 100% of any additional shares of stock, (or other ownership
interest) of any of the Subsidiaries listed on Schedule A-1 hereto, at any time
and from time to time acquired by the Pledgor in any manner, all of the cash,
securities, dividends, rights and other property at any time and from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
(c) All other property hereafter delivered to the Agent in
substitution for or in addition to the foregoing, all certificates and
instruments representing or evidencing such property, and all cash, securities,
interest, dividends, rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all thereof; and
(d) All products and proceeds of all of the foregoing.
III. Pledgor's Obligations
A. Payment of Secured Indebtedness. The security interest created
herein is given as security for:
(1) All of Company's obligations contained in or arising under or in
connection with the Credit Agreement and the Notes issued by it from time to
time pursuant to the Credit Agreement, and all obligations of Company contained
in or arising under the other Loan Documents executed by Company;
(2) All of Company's obligations contained in or arising under any and
all Letter of Credit Agreements executed or to be executed by Company from time
to time pursuant to the Credit Agreement, and any Letters of Credit issued or to
be issued thereunder;
(3) The obligations of Pledgor for payment of all sums hereafter
loaned, paid out, expended or advanced by or for the account of the Banks (or
any of them) or by the Secured Party under the terms of this Stock Pledge or the
other Loan Documents, in connection with the Collateral or any of the documents
or instruments described in this Stock Pledge or the other Loan Documents;
together with interest thereon as provided for herein or therein; and
also as security for all other indebtedness and liabilities, whether direct,
indirect, absolute or contingent, owing by the Company to the Banks in any
manner under the Credit Agreement or the Loan Documents, which hereafter become
due, or that may hereafter be incurred by the Company to or acquired (pursuant
to the Credit Agreement or the other Loan Documents) by the Banks, and all other
future obligations of the Company to the Banks, their successors and assigns,
howsoever created, arising or evidenced, whether joint or several, direct or
indirect, absolute or contingent, primary or secondary, and any judgments that
may hereafter be rendered on such indebtedness or any part thereof, with
interest
2
<PAGE> 210
according to the rates and terms specified, or as provided by law, and any and
all replacements, consolidations, amendments, renewals or extensions of the
foregoing (collectively herein called the "Indebtedness").
B. Protection of Security Interest.
(1) Pledgor shall take any and all steps required to protect the
Collateral, and in pursuance thereof Pledgor agrees that Pledgor shall deliver
or caused to be delivered to Secured Party and Secured Party shall receive
possession, on behalf of Banks, of certificates representing all of the pledged
shares referred to in Schedule A-1, properly endorsed or with assignments
separate from such certificates in blank for transfer. In addition Secured Party
shall receive proof that appropriate acknowledgments, governmental approvals,
share register entries, local pledge agreements, financing statements,
collateral and other documents covering the Collateral have been executed and
delivered by the appropriate parties and recorded on file with such Persons and
in such jurisdictions as necessary to perfect the security interests, or other
liens granted hereby and/or thereby. The Secured Party from time to time shall
revise Schedule A-1 hereto and promptly deliver a copy thereto to Pledgor and
the Banks, on the effective date of the acquisition or creation by Pledgor of a
Subsidiary, adding to Schedule A-1 the name of each such Subsidiary so acquired
or created, and upon such revision, Pledgor shall be deemed to have pledged 100%
of the capital stock (or other ownership interests) of each such Subsidiary so
acquired or created to Secured Party for and on behalf of Banks.
(2) It will not sell, transfer, assign or otherwise dispose of any of
the Collateral or any interest therein or offer to do so without the prior
written consent of Secured Party, given at the direction of the Majority Banks,
or permit anything to be done that may materially impair the value of any of the
Collateral or the security intended to be afforded by this Stock Pledge.
(3) It will, subject to the applicable terms of the Credit Agreement,
pay all taxes and assessments upon the Collateral or for its use or operation
before any interest or penalty for nonpayment attaches thereto unless said
payment is being contested in good faith and it establishes a reserve as
required by generally accepted accounting principles.
(4) It will, subject to the applicable terms of the Credit Agreement,
sign and execute alone or with Secured Party any financing statement or other
document or procure any documents and pay all reasonable connected costs,
necessary to protect the security interest under this Stock Pledge against the
rights or interests of third persons.
(5) It will, subject to the applicable terms of the Credit Agreement,
reimburse Secured Party for all reasonable costs, including reasonable
attorneys' fees, incurred for any action taken by Secured Party to remedy an
Event of Default which Secured Party elects to remedy pursuant to its rights
under Article VI hereof.
(6) It will:
3
<PAGE> 211
(i) subject to the applicable terms of the Credit
Agreement, allow Secured Party to examine, audit and inspect
Pledgor's books, accounts, records (including without limitation
all records relating to the Collateral or the Indebtedness),
ledgers and assets and properties of every kind and description
wherever located at all reasonable times during normal business
hours, upon oral or written request of Secured Party, and to make
and take away copies of any and all such books, accounts, records
and ledgers. An examination of the records or properties of the
Pledgor may require revealment of proprietary and/or confidential
data and information, and the provisions of Section 14.12 of the
Credit Agreement are incorporated herein;
(ii) punctually and properly perform all of its covenants
and duties under any other security agreement, mortgage,
collateral pledge agreement or contract of any kind now or
hereafter existing as security for or in connection with payment
of the Indebtedness, or any part thereof;
(iii) perform its obligations under the Loan Documents;
(iv) promptly furnish Secured Party with any information
in writing which Secured Party may reasonably request concerning
the Collateral;
(v) promptly notify Secured Party of any material change
in any fact or circumstances warranted or represented by Pledgor
in this Stock Pledge or in any other writing furnished by Pledgor
to Secured Party in connection with the Collateral or the
Indebtedness;
(vi) promptly notify Secured Party of any material claim,
action or proceeding affecting the Collateral and title therein,
or in any part thereof, or the security interest created herein,
and, at the request of the Secured Party, appear in and defend, at
Pledgor's expense, any such action or proceeding; and
(vii) promptly, after being requested by Secured Party,
pay to Secured Party the amount of all reasonable expenses,
including reasonable attorneys' fees and other legal expenses,
incurred by Secured Party in protecting and maintaining the
Collateral or its rights hereunder, or in connection with any
audit or inspection of the Collateral pursuant to the terms
hereof, and in enforcing the security interest created herein.
(7) With respect to any Collateral of a kind requiring an additional
security agreement, financing statement, or other writing to perfect a security
interest therein in favor of Secured Party, on behalf of Banks, Pledgor will
forthwith execute and deliver to Secured Party on behalf of Banks, whatever the
Secured Party or the Majority Banks shall deem necessary or proper for such
purpose. Should any covenant, duty or agreement of Pledgor fail to be performed
in accordance with its terms hereunder, Secured Party may, but shall never be
obligated to, perform or attempt to perform such
4
<PAGE> 212
covenant, duty or agreement on behalf of Pledgor, and any amount expended by
Secured Party in such performance or attempted performance shall become part of
the Indebtedness, and, at the request of Secured Party, Pledgor agrees to pay
such amount to Secured Party upon demand at Secured Party's office in Detroit,
Michigan together with interest thereon at the highest rate which interest
accrues on amounts after the same become due pursuant to the terms of any note
executed pursuant to the Credit Agreement from the date of such expenditure by
Secured Party until paid. With respect to any Collateral in which Pledgor
acquires any rights subsequent to the date hereof and which, under applicable
law, a security interest is or can be perfected by possession, Pledgor agrees to
deliver possession of such Collateral to Secured Party immediately upon its
acquisition of rights therein.
(8) Pledgor will hold the proceeds of any of the Collateral in trust
for Secured Party on behalf of the Banks, will not commingle said proceeds with
any other funds, and, after an Event of Default, will deliver such proceeds to
Secured Party at its request.
(9) If Secured Party, acting in its sole discretion, redelivers any
Collateral to Pledgor or Pledgor's designee for the purpose of
(i) the ultimate sale or exchange thereof, or
(ii) presentation, collection, renewal, or registration
of transfer thereof,
such redelivery shall not constitute a release of Secured Party's security
interest therein or in the proceeds thereof unless Secured Party, with the
consent of the Majority Banks, specifically so agrees in writing.
(10) If Pledgor requests any such redelivery, Pledgor will deliver with
such request a duly executed financing statement in form and substance
satisfactory to Secured Party.
IV. Default
The term "Event of Default", as used herein, means the occurrence of any
Event of Default under the Credit Agreement.
V. Consequence of Default.
Upon an Event of Default, Secured Party shall be entitled, subject to
applicable law, to all of its remedies specified herein, in the Credit
Agreement, or in any other document executed in connection with the Credit
Agreement or this Stock Pledge, or provided by law. Additionally, upon an Event
of Default and subject to applicable law, Secured Party will be entitled to
receive all dividends payable in respect of the pledged shares evidencing the
Collateral pledged under this Stock Pledge, and may change the registration of
any registerable Collateral to any other name or form and is hereby authorized
to appoint any officer or agent of Secured Party as Pledgor's true and
5
<PAGE> 213
lawful proxy and attorney-in-fact, with power, upon the occurrence of any Event
of Default (exercisable so long as such Event of Default is continuing), to
exercise all voting rights in respect of the shares evidencing the Collateral
pledged hereby; to endorse Pledgor's name or any of its officers' names or
agents' names upon any notes, checks, drafts, money orders, or other instruments
of payment (including payments payable under any policy of insurance on the
Collateral) or Collateral that may come into possession of the Secured Party in
full or part payment of any amounts owing to the Banks; to give written notice
to such office and officials of the United States Post Office to effect such
change or changes of address so that all mail addressed to Pledgor may be
delivered directly to Secured Party; to execute on behalf of Pledgor any
financing statements, amendments, subordinations or other filings pursuant to
the Credit Agreement; granting unto Secured Party on behalf of the Banks, as the
proxy and attorney-in-fact of Pledgor, full power to do any and all things
necessary to be done in and about the premises as fully and effectually as
Pledgor might or could do, and hereby ratifying all that said proxy and attorney
shall lawfully do or cause to be done by virtue hereof. The proxy and power of
attorney described herein shall be deemed to be coupled with an interest and
shall be irrevocable for the term of the Credit Agreement, and all transactions
thereunder and thereafter as long as any Indebtedness or any of the commitments
to lend remain outstanding. The Secured Party shall have full power, subject to
applicable law to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof on behalf of the Banks in its own name or in the
name of Pledgor provided that Secured Party shall act in a commercially
reasonable manner.
VI. Secured Party's Rights and Remedies.
Secured Party shall have available to it (subject to applicable law) the
following rights and remedies upon occurrence of an Event of Default:
A. Right to Assign. Secured Party may assign this Stock Pledge only
as provided in the Credit Agreement and if Secured Party does assign this Stock
Pledge, the assignee shall be entitled to the performance of all of Pledgor's
obligations and agreements under this Stock Pledge, and the assignee shall be
entitled to all the rights and remedies of Secured Party under this Stock
Pledge.
B. Right to Discharge Pledgor's Obligations. Secured Party may (i)
with the approval of the Majority Banks, discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral
which are superior to the security interest herein granted, (ii) remedy or cure
any default of Pledgor under the terms of any lease, rental agreement, land
contract or other document which in any way pertains to or affects Pledgor's
title to or interest in any of the Collateral, (iii) pay for insurance on the
Collateral, and (iv) pay for the maintenance and preservation of the Collateral,
unless with respect to the obligations under clauses (i) or (ii) Pledgor is
contesting in good faith such obligations, and Pledgor agrees to reimburse
Secured Party, on demand, for any payment made or any expense incurred by
Secured Party pursuant to the foregoing authorization, with interest, which
payments and expenses shall be secured by the security intended to be afforded
by this Stock Pledge.
6
<PAGE> 214
C. Remedies and Enforcement. Secured Party shall have and may
exercise any and all rights of enforcement and remedies afforded to a secured
party under the Uniform Commercial Code as adopted and in force in the State of
Michigan, to the extent permitted by applicable law, on the date of this Stock
Pledge or the date of Pledgor's default together with any and all other rights
and remedies otherwise provided and available to Secured Party by law unless
such application would result in the invalidity or unenforceability of any
provision hereof, in which case the law of the state in which any of the
Collateral is located shall apply to the extent necessary to render such
provision valid and enforceable; and, in conjunction with, in addition to, or
substitution for those rights, at Secured Party's discretion, Secured Party may:
(1) Apply any of the Collateral against any of the Indebtedness
secured hereby;
(2) Waive any default, or remedy any default in any reasonable
manner, without waiving its rights and remedies upon default and without
waiving any other prior or subsequent default;
(3) Without any notice to Pledgor, notify any parties obligated
on any of the Collateral to make payment to the Secured Party of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release or exchange
all or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) the indebtedness
thereunder or evidenced thereby. Upon request of the Secured Party,
Pledgor will, at its own expense, notify any parties obligated to Pledgor
on any of the Collateral to make payment to the Secured Party of any
amounts due or to become due thereunder. Pledgor agrees that Secured
Party shall not be liable for any loss or damage which Pledgor suffers or
may suffer as a result of Secured Party's processing of items or its
exercise of any other rights or remedies under this Stock Pledge,
including without limitation indirect, special or consequential damages,
loss of revenues or profits, or any claim, demand or action by any third
party not related to or affiliated with Pledgor arising out of or in
connection with the processing of items (excluding only the claims of
such third parties in connection with the processing of items based
solely upon the gross negligence or willful misconduct of Secured Party)
or the exercise of any other rights or remedies hereunder. Pledgor
further agrees to indemnify and hold Secured Party harmless from and
against all such third party claims, demands or actions, including
without limitation litigation costs and reasonable attorneys' fees.
D. Right of Sale.
(1) Pledgor agrees that upon the occurrence of an Event of
Default (taking into account applicable periods of cure, if any), Secured
Party may, at its option, sell and dispose of the Collateral at public or
private sale without any previous demand of performance. Pledgor agrees
that notice of such sale sent to Pledgor's address, as set forth in the
Credit Agreement, by certified or registered mail sent at least five (5)
days prior to such sale, shall constitute reasonable notice of sale. The
foregoing shall not require notice
7
<PAGE> 215
if none is necessary under applicable law. The proceeds of sale shall be
applied in the following order:
(i) to all reasonable costs and charges incurred by
Secured Party in the taking and causing the removal and sale of
said property, including such reasonable attorneys' fees as shall
have been incurred by Secured Party;
(ii) to the Indebtedness, including all accrued interest
thereon; and
(iii) any surplus of such proceeds remaining shall be paid
to the Pledgor, or to such other party who shall lawfully be
entitled thereto.
(2) At any sale or sales made pursuant to this Stock Pledge or
in a suit to foreclose the same, the Collateral may be sold en masse or
separately, at the same or at different times, at the option of the
Secured Party or its assigns. Such sale may be public or private with
notice as required by the Uniform Commercial Code as then in effect in
the state in which the Collateral is located, and the Collateral need not
be present at the time or place of sale. At any such sale, the Secured
Party or the holder of any note hereby secured may bid for and purchase
any of the property sold, notwithstanding that such sale is conducted by
the Secured Party or its attorneys, agents, or assigns.
E. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Stock Pledge on behalf of Banks in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Secured Party in refraining from so doing at any time or times. The
failure of Secured Party at any time or times to enforce its rights under said
provisions strictly in accordance with the same shall not be construed as having
created a custom in any way or manner contrary to the specific provisions of
this Stock Pledge or as having in any way or manner modified the same. All
rights and remedies of Secured Party and Banks are cumulative and concurrent,
and the exercise of one right or remedy shall not be deemed a waiver or release
of any other right or remedy.
VII. Representations and Warranties of Pledgor.
Pledgor represents and warrants, as continuing representations and
warranties so long as the Credit Agreement remains in effect, that:
A. The individual signatory hereto has authority to execute and
deliver this Stock Pledge on behalf of Pledgor.
B. No financing statement covering the Collateral, or any part
thereof, has been filed with any filing officer other than in favor of Secured
Party.
C. No other agreement, pledge or assignment covering the Collateral,
or any part thereof, has been made and no security interest, other than the one
created hereby or pursuant to
8
<PAGE> 216
pledges and security agreements previously made in favor of Secured Party on
behalf of the Banks, has attached or been perfected in the Collateral or in any
part thereof.
D. No material dispute, right of setoff, counterclaim or defenses
exist with respect to any part of the Collateral.
E. All information supplied and statements made in any financial or
credit statements or application for credit prior to the execution of this Stock
Pledge are true and correct as of the date hereof in all material respects.
F. The Collateral, (1) in the case of each Subsidiary, constitutes
all the issued and outstanding capital stock (or other ownership interests) of
each of the Subsidiaries, (2) have been duly authorized and issued to Pledgor,
(3) is fully paid and non-assessable, (4) is freely and validly assignable by
Pledgor, and (5) is not subject to any option, warrant right to call or
commitment of any kind or nature.
G. At the time Secured Party's security interest attaches to any of
the Collateral or its proceeds, Pledgor will be the lawful owner with the right
to transfer any interest therein, and that Pledgor will make such further
assurances as to prove its title to the Collateral as may be reasonably required
and will defend the Collateral and its proceeds against the lawful claims and
demands of all persons whomsoever. The delivery at any time by Pledgor to
Secured Party of Collateral or financing statements covering Collateral shall
constitute a representation and warranty by Pledgor under this Stock Pledge
that, with respect to such Collateral, and each item thereof, Pledgor is owner
of the Collateral and the matters heretofore warranted in this paragraph are
true and correct.
VIII. Mutual Agreements.
Pledgor and Secured Party mutually agree as follows:
A. "Pledgor" and "Secured Party" as used in this Stock Pledge include
the successors and permitted assigns of those parties.
B. To the extent permitted by applicable law, except as otherwise
provided herein, the law governing this secured transaction shall be that of the
State of Michigan.
C. This Stock Pledge includes all amendments and supplements hereto
and assignments hereof and Pledgor and Secured Party shall not be bound by any
amendment or undertaking not expressed in a writing executed by each of them.
D. All capitalized terms not specifically defined herein which are
defined in the Credit Agreement are used as defined in the Credit Agreement.
E. This Stock Pledge shall be a continuing security interest in every
respect (whether or not the outstanding balance of the Indebtedness is reduced
to zero) and Secured Party's security
9
<PAGE> 217
interest in the Collateral as granted herein shall continue in full force and
effect until all of the Indebtedness is indefeasibly repaid and discharged in
full and no commitment (whether optional or obligatory) to extend any credit
under the Credit Agreement remains outstanding.
F. The parties hereto acknowledge that this Stock Pledge is subject
to the mutual waiver of jury trial contained in Section 14.15 of the Credit
Agreement and to the consent to jurisdiction provisions contained in Section
14.2 of the Credit Agreement.
G. This Stock Pledge has been executed and delivered pursuant to the
Credit Agreement and in the event of any conflict between this Stock Pledge and
the Credit Agreement, the Credit Agreement shall govern.
[SIGNATURES FOLLOW ON SUCCEEDING PAGE]
10
<PAGE> 218
IN WITNESS WHEREOF, Pledgor and Secured Party have executed this Stock
Pledge on the day and year first above written.
Pledgor:
RTO HOLDING, CO., INC., a Delaware
corporation
By:
---------------------------------
Its:
---------------------------------
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By:
---------------------------------
Its:
---------------------------------
SIGNATURE PAGE
PLEDGE AGREEMENT
11
<PAGE> 219
SCHEDULE A-1
<TABLE>
<CAPTION>
Shares Issued
Subsidiaries and Outstanding Shares Pledged
------------ --------------- --------------
<S> <C> <C>
ATRO, Inc. 100 100
</TABLE>
<PAGE> 220
EXHIBIT N
INTERCOMPANY NOTE
[RTO OPERATING, INC., AS MAKER]
[RTO HOLDINGS CO., INC., AS HOLDER]
February 26, 1998
ON DEMAND, FOR VALUE RECEIVED, RTO OPERATING, INC., a Delaware
corporation ("MAKER") promises to pay to the order of RTO HOLDINGS CO., INC., a
Delaware corporation ("HOLDER") at such place as shall be designated from time
to time by Maker to Holder, in lawful money of the United States of America or
in such other currencies applicable to any particular advance made hereunder
(each an "Advance" and, collectively, the "Advances") which may, from time to
time, be outstanding hereunder or on the books of the Holder the aggregate
amount of such Advances as may from time to time have been advanced by Holder to
Maker and then be outstanding hereunder, together with interest thereon as
hereinafter set forth.
Each Advance shall bear interest at a per annum rate as the Maker and
the Holder shall mutually agree to.
Interest on the unpaid balance of all Advances shall be payable in
immediately available funds quarterly commencing on April 1, 1998 and on the
first day of each calendar quarter thereafter. Interest accruing shall be
computed on the basis of a 360 day year and assessed for the actual number of
days elapsed.
This Note is a note under which advances, repayments and readvances may
be made from time to time, subject to the Funds Flow Agreement dated as of
February 26, 1998 by and among (inter alia) the Maker, the Holder and Comerica
Bank, as Agent (as such term is defined below). This Note is secured by liens
granted pursuant to that certain Security Agreement dated as of the February 26,
1998 between Maker as debtor and Holder as secured party.
Upon the occurrence and during the continuance of an Event of Default,
as defined in that certain Alrenco Revolving Credit Agreement dated as of
February 26, 1998 (as amended, or otherwise modified from time to time, the
"Credit Agreement") by and among Alrenco, Inc.("Company"), certain financial
institutions from time to time signatory thereto (the "Banks") and Comerica
Bank, as Agent for the Banks (the "Agent"), and following receipt of notice from
the Agent, (A) no payments may be made of the principal of or interest on this
Note, and (B) this Note shall be fully subordinated in all respects to the
Indebtedness (as defined in the Credit Agreement).
During the period when payments of interest hereon are not permitted by
the preceding paragraph, interest shall accrue and be added to principal on each
interest payment date.
<PAGE> 221
Maker agrees, and Holder by accepting this Note agrees, that: (A) the
obligations evidenced by this Note are subordinated in right of payment, to the
prior payment in full of all the Indebtedness; the subordination is for the
benefit of the holders of the Indebtedness, and each holder of Indebtedness
whether now outstanding or hereafter created, incurred, assumed or guaranteed
shall be deemed to have acquired Indebtedness in reliance upon the covenants and
provisions contained in this Note; (B) if Maker is prohibited by the terms of
this Note from making any payment of principal, interest or any other sum under
or in respect of this Note when due, and therefore the Maker shall fail to pay
when due any such sum, such failure shall not constitute a default or event of
default under and in respect of this Note (provided that interest shall continue
to accrue as provided herein and be added to principal as herein set forth); and
(C) no revision to any provision of this Note applicable or relevant to the
subordination of this Note to the Indebtedness shall be made or become effective
until approved in writing by the holders of the Indebtedness.
Holder waives notice of acceptance of this Note and presentment,
demand, protest, notice of protest, dishonor, notice of dishonor, notice of
default and diligence in collecting any Indebtedness. This Note is immediately
binding on the Holder. Holder further waives any and all other notices to which
Holder might otherwise be entitled. Holder acknowledges and agrees that the
Agent's rights under this Note are not conditioned upon pursuit by the Agent of
any remedy the Agent may have against the Company or any other person or any
other security. The absence of the Company's signature at the end of this Note
shall in no way impair or affect the validity of this Note.
The relative priorities of the Agent and Holder in the Collateral as
set forth in this Note control irrespective of the time, method or order of
attachment or perfection of the liens and security interests acquired by the
parties in the Collateral and irrespective of the priorities as would otherwise
be determined by reference to the Uniform Commercial Code or other applicable
laws.
Possession by the Agent of any note or other evidence of indebtedness
made, endorsed or guaranteed by Borrower shall be conclusive evidence (but not
the only means of establishing) that Borrower is indebted to the Agent and that
this indebtedness is covered by this Note.
This Note shall constitute a continuing agreement of subordination,
even though at times Borrower is not indebted to the Agent. The Agent may
continue, in reliance on this Note, without notice to Holder, to lend monies,
extend credit, modify, renew or make other financial accommodations, to or for
the account of Borrower. From time to time, the Agent may enter into any
agreements with the Borrower or any party who may have pledged property or be
responsible for payment of any Indebtedness, as the Agent may determine,
extending the time of payment or renewing or otherwise altering the terms of all
or any of the Indebtedness and the agreements related to it or the Collateral or
affecting any security (including without limit the Collateral), pledge, or
guaranty for it, or may exchange, sell, release, surrender or otherwise deal
with any such security (including without limit the Collateral), pledge, or
guaranty or may release any balance of funds of the Borrower with the Agent,
without notice to the Holder and without in any way impairing or affecting this
Note.
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<PAGE> 222
Upon any distribution (whether cash, securities or other property, by
setoff or otherwise) to creditors of Maker in a liquidation or dissolution of
Maker or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Maker or its property: (A) holders of Indebtedness shall
be entitled to payment in full of all obligations with respect to the
Indebtedness (including interest after the commencement of any such proceeding
at the rates specified for the applicable Indebtedness) to the date of payment
of the Indebtedness before Holder shall be entitled to receive any payment of
any obligations with respect to this Note; and (B) until all obligations with
respect to the Indebtedness are paid in full, any distribution to which Holder
would be entitled shall be made to holders of Indebtedness as their interests
may appear.
No right of any holder of Indebtedness to enforce the subordination of
the indebtedness evidenced by this Note shall be impaired by any act or failure
to act by the Maker or by its failure to comply with the terms and conditions of
this Note.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Maker hereby waives presentment for payment, demand, protest and notice
of dishonor and nonpayment of this Note and agrees that no obligation hereunder
shall be discharged by reason of any extension, indulgence, release, or
forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note.
Nothing herein shall limit any right granted Holder by any other
instrument or by law.
RTO OPERATING, INC.
By:
------------------------------
Its:
------------------------------
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EXHIBIT O
STORE LISTINGS
<PAGE> 1
EXHIBIT 10.3
GUARANTY
This GUARANTY is made as of the 26th day of February, 1998 by each of the
undersigned guarantors, to Comerica Bank, as Agent ("Agent") for and on behalf
of the Banks (as defined below).
RECITALS
A. Pursuant to that certain Alrenco Credit Agreement dated as of
February 26, 1998 (as amended or otherwise modified from time to time, the
"Credit Agreement") by and among Alrenco, Inc., an Indiana corporation (the
"Company"), Agent and the banks which are named in and signatories to the Credit
Agreement ("Banks"), the Banks have agreed to extend credit to Company on the
terms set forth in the Credit Agreement, with such credit consisting of (i) the
Revolving Credit in an aggregate amount, subject to the terms of the Credit
Agreement, of up to Fifty Million Dollars ($50,000,000), as such amount may be
increased by an amount up to Fifty Million Dollars ($50,000,000) pursuant to
Section 2.10 of the Credit Agreement at any one time outstanding, to be
evidenced by the Revolving Credit Notes made or to be made by the Company to the
Banks ("Revolving Credit Notes"); (ii) a Swing Line facility to be evidenced by
the Swing Line Notes made or to be made by Company ("Swing Line Note"); and
(iii) a facility for the issuance of letter(s) of credit ("Letter(s) of Credit")
for the account of the Company, individually, or jointly and severally with
other Account Parties pursuant to Section 3 of the Credit Agreement, subject to
specified availability thereunder.
B. As a condition to entering into and performing their respective
obligations under the Credit Agreement, the Banks and the Agent have required
that the Guarantors provide to Agent, for and on behalf of the Banks, among
other guaranties, this Guaranty.
C. Each of the Guarantors desires to see the success of the Company
and, furthermore, shall receive direct and/or indirect benefits from extensions
of credit made or to be made pursuant to the Credit Agreement to the Company.
D. The Agent is acting as Agent for the Banks pursuant to Section 13
of the Credit Agreement.
NOW, THEREFORE, as a continuing inducement to the Agent and the Banks to
enter into and perform its obligations under the Credit Agreement, each of the
Guarantors has executed and delivered this guaranty ("Guaranty").
1. Definitions. Unless otherwise provided herein, all capitalized
terms used in this Guaranty shall have the meanings specified in the Credit
Agreement. The term "Banks" as used
<PAGE> 2
herein shall include any successors or permitted assigns of the Banks, in
accordance with the Credit Agreement.
2. Guaranty. Each of the Guarantors hereby guarantees to the Banks
the punctual payment to the Banks when due, whether by acceleration or
otherwise, of all amounts, including, without limitation, principal, interest
(including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding by such Guarantor, whether or not a claim for post-filing or
post-petition interest is allowed in such a proceeding), and all other
liabilities and obligations, direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter incurred, which may arise under, out
of, or in connection with:
(a) any and all Revolving Credit Notes made or to be made to
the order of the Banks (or any of them) by the Company, from time to time
pursuant to the terms and conditions of the Credit Agreement;
(b) the Swing Line Note made or to be made to the order of the
Swing Line Bank by the Company, from time to time pursuant to the terms
and conditions of the Credit Agreement;
(c) any and all Letter of Credit Agreements executed or to be
executed by the Company or the other Account Parties and any of them,
from time to time pursuant to the Credit Agreement, and any Letters of
Credit issued or to be issued thereunder;
(d) all other Indebtedness (as defined in the Credit Agreement)
of the Company, any other Guarantor and/or any Account Party, under or in
connection with the Credit Agreement or the other Loan Documents, whether
such Indebtedness is now existing or hereafter arising; and
(e) all extensions, renewals and amendments of or to the
Revolving Credit Notes and/or the Swing Line Note (collectively, and
either or any of such notes, the "Notes"), Letter of Credit Agreements,
Letters of Credit or such other Indebtedness, or any replacements or
substitutions therefor;
whether on account of principal, interest, reimbursement obligations, fees,
indemnities, and reasonable costs and expenses (including without limitation,
all reasonable fees and disbursements of counsel to the Agent or any Bank) or
otherwise, and hereby agrees that if Company shall fail to pay any of such
amounts when and as the same shall be due and payable, or shall fail to perform
and discharge any covenant, representation or warranty in accordance with the
terms of the Notes, the Credit Agreement, the Letter of Credit Agreements, the
Letters of Credit or any of the other Loan Documents (subject, in each case, to
any applicable periods of grace or cure), each such Guarantor will forthwith pay
to the Agent, on behalf of the Banks, an amount equal to any such amount or
cause Company to perform and discharge any such covenant, representation or
warranty, as the case may be, and will pay any and all damages that may be
incurred or suffered in consequence thereof
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<PAGE> 3
by Agent or any of the Banks and all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by Agent in enforcing such covenant,
representation or warranty of Company, and in enforcing the covenants and
agreements of this Guaranty.
3. Unconditional Character of Guaranty. The obligations of each of
the Guarantors under this Guaranty, to the full extent of its guaranty of
Indebtedness hereunder, shall be absolute and unconditional, and shall be a
guaranty of payment and not of collection, irrespective of the validity,
regularity or enforceability of the Notes, the Credit Agreement, the Letter of
Credit Agreements, the Letters of Credit or any of the other Loan Documents, or
any provision thereof, the absence of any action to enforce the same, any waiver
or consent with respect to or any amendment of any provision thereof, the
recovery of any judgment against any Person or action to enforce the same, any
failure or delay in the enforcement of the obligations of Company under the
Notes, the Credit Agreement, the Letter of Credit Agreements, the Letters of
Credit or any of the other Loan Documents, or any setoff, counterclaim,
recoupment, limitation, defense or termination, whether with or without notice
to such Guarantor. Each of the Guarantors hereby waives diligence, demand for
payment, filing of claims with any court, any proceeding to enforce any
provision of the Notes executed by Company, or the Credit Agreement, the Letter
of Credit Agreements, the Letters of Credit or any of the other Loan Documents,
any right to require a proceeding first against Company, or against any other
guarantor or other party providing collateral, or to exhaust any security for
the performance of the obligations of Company, any protest, presentment, notice
or demand whatsoever, and such Guarantor hereby covenants that this Guaranty
shall not be terminated, discharged or released except, subject to Section 6.5
hereof, upon final payment in full (subject to no revocation or rescission) of
all amounts due and to become due from Company or any Account Party, as and to
the extent described above, and only to the extent of any such payment,
performance and discharge. Each of the Guarantors further covenants that no
security now or subsequently held by the Agent or the Banks for the payment of
the Indebtedness evidenced by the Notes made by Company, under the Credit
Agreement, or for the payment of any other Indebtedness of Company, to the Agent
or the Banks under the Credit Agreement, the Letter of Credit Agreements, the
Letters of Credit or the other Loan Documents, whether in the nature of a
security interest, pledge, lien, assignment, setoff, suretyship, guaranty,
indemnity, insurance or otherwise, and no act, omission or other conduct of
Agent or the Banks in respect of such security, shall affect in any manner
whatsoever the unconditional obligation of this Guaranty, and that the Agent and
each of the Banks, in their respective sole discretion and without notice to
Company, may release, exchange, enforce, apply the proceeds of and otherwise
deal with any such security without affecting in any manner the unconditional
obligation of this Guaranty.
Without limiting the generality of the foregoing, such obligations, and
the rights of the Agent to enforce the same on behalf of the Banks, by
proceedings, whether by action at law, suit in equity or otherwise, shall not be
in any way affected by (i) any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, winding up or other
proceeding involving or affecting Company, or others, or (ii) any change in the
ownership of the capital stock of Company, or any other party providing
collateral for any indebtedness covered by this Guaranty, or any of their
respective Affiliates.
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<PAGE> 4
Each of the Guarantors hereby waives to the fullest extent possible under
applicable law:
(a) any defense based upon the doctrine of marshalling of
assets or upon an election of remedies by Agent or the Banks, including, without
limitation, an election to proceed by non-judicial rather than judicial
foreclosure;
(b) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(c) any duty on the part of Agent or any of the Banks to
disclose to such Guarantor any facts Agent or the Banks may now or hereafter
know about the Company, regardless of whether Agent or any Bank has reason to
believe that any such facts materially increase the risk beyond that which such
Guarantor intends to assume or has reason to believe that such facts are unknown
to such Guarantor or has a reasonable opportunity to communicate such facts to
such Guarantor, since such Guarantor acknowledges that it is fully responsible
for being and keeping informed of the financial condition of Company and of all
circumstances bearing on the risk of non-payment of any Indebtedness hereby
guaranteed;
(d) any claim for reimbursement, contribution, exoneration,
indemnity or subrogation, or any other similar claim, which such Guarantor may
have or obtain against the Company, by reason of the existence of this Guaranty,
or by reason of the payment by such Guarantor of any Indebtedness or the
performance of this Guaranty or of any other Loan Documents, until the
Indebtedness has been repaid and discharged in full and no commitment to extend
any credit under the Credit Agreement or any of the Loan Documents (whether
optional or obligatory), or any Letter of Credit, remains outstanding, and any
amounts paid to such Guarantor on account of any such claim at any time when the
obligations of such Guarantor under this Guaranty shall not have been fully and
finally paid shall be held by such Guarantor in trust for Agent and the Banks,
segregated from other funds of such Guarantor, and forthwith upon receipt by
such Guarantor shall be turned over to Agent in the exact form received by such
Guarantor (duly endorsed to Agent by such Guarantor, if required), to be applied
to such Guarantor's obligations under this Guaranty, whether matured or
unmatured, in such order and manner as Agent may determine; and
(e) any other event or action (excluding compliance by such
Guarantor with the provisions hereof) that would result in the discharge by
operation of law or otherwise of such Guarantor from the performance or
observance of any obligation, covenant or agreement contained in this Guaranty.
The Agent and each of the Banks may deal with Company, and any security
held by them for the obligations of Company or any other Account Party (as
aforesaid), in the same manner and as freely as if this Guaranty did not exist
and the Agent shall be entitled, on behalf of Banks, without notice to the
Guarantors, among other things, to grant to the Company, such extension or
extensions of time to perform any act or acts as may seem advisable to such
Agent (on behalf of the Banks) at any time and from time to time, and to permit
the Company or any other Account Party to incur
4
<PAGE> 5
additional indebtedness to Agent, the Banks, or any of them, without
terminating, affecting or impairing the validity or enforceability of this
Guaranty or the obligations of the Guarantors hereunder.
The Agent may proceed, either in its own name (on behalf of the Banks) or
in the name of any of the Guarantors, or otherwise, to protect and enforce any
or all of its rights under this Guaranty by suit in equity, action at law or by
other appropriate proceedings, or to take any action authorized or permitted
under applicable law, and shall be entitled to require and enforce the
performance of all acts and things required to be performed hereunder by the
Guarantors. Each and every remedy of the Agent and of the Banks shall, to the
extent permitted by law, be cumulative and shall be in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity.
No waiver or release shall be deemed to have been made by the Agent or
any of the Banks of any of its rights hereunder unless the same shall be in
writing and signed by all of the Banks or on behalf of the Banks by the Agent,
and any such waiver shall be a waiver or release only with respect to the
specific matter involved and shall in no way impair the rights of the Agent or
any of the Banks or the obligations of the Guarantors under this Guaranty in any
other respect at any other time.
At the option of the Agent, any of the Guarantors may be joined in any
action or proceeding commenced by the Agent against Company, or any of the other
parties providing collateral for any indebtedness covered by this Guaranty in
connection with or based upon the Notes made by Company, the Credit Agreement,
the Letter of Credit Agreements, the Letters of Credit or any of the other Loan
Documents or other Indebtedness, or any provision thereof, and recovery may be
had against any such Guarantor in such action or proceeding or in any
independent action or proceeding against such Guarantor, without any requirement
that the Agent or the Banks first assert, prosecute or exhaust any remedy or
claim against Company, and/or any of the other parties providing collateral for
any Indebtedness covered by this Guaranty, or any other Indebtedness.
As a separate, additional and continuing obligation, each of the
Guarantors unconditionally and irrevocably undertakes and agrees with Agent
that, should the amounts referred to in Section 2 of this Guaranty not be
recoverable from such Guarantor in its capacity as a guarantor under this
Guaranty for any reason whatsoever (including, without limitation, by reason of
any provision of the Notes, the Credit Agreement, any Letter of Credit Agreement
or Letter of Credit, or any of the other Loan Documents being or becoming void,
unenforceable, or otherwise invalid under any applicable law) then,
notwithstanding any knowledge thereof by the Agent and the Banks or any of them
at any time, such Guarantor as sole, original and independent obligor, upon
demand by Agent, will make payment to Agent of all such amounts by way of a full
indemnity.
4. Representations and Warranties. Each of the Guarantors (a)
ratifies, confirms and, by reference thereto (as fully as though such matters
were expressly set forth herein), represents and warrants with respect to itself
those matters set forth in Sections 7.1, 7.3, 7.4, 7.5, 7.6, 7.8, 7.9, 7.11,
7.12 through 7.19, inclusive, of the Credit Agreement, and (b) agrees not to
engage in any action or
5
<PAGE> 6
inaction, the result of which would cause a violation of any term or condition
of the Credit Agreement.
5. Collateral for Guaranty. The obligations of the Guarantors under
this Guaranty shall be secured by the Security Agreement and, if applicable, a
Pledge Agreement, executed and delivered by each of the Guarantors to Agent,
pursuant to the Credit Agreement, together with such other Loan Documents as are
required to be executed and delivered by one or more of the Guarantors
concurrently with or subsequent to the date hereof, all pursuant to the terms
and conditions of the Credit Agreement and/or any of the other Loan Documents.
6. Miscellaneous.
6.1 Governing Law. This Guaranty has been delivered in Michigan
and shall be interpreted and the rights of the parties hereunder shall be
determined under the laws of, and be enforceable in, the State of Michigan
(without regard to its conflict of laws provisions), each of the Guarantors
hereby consenting to the jurisdiction of state and all federal courts sitting in
such state.
6.2 Severability. If any term or provision of this Guaranty, or
the application thereof to any circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Guaranty, or the application of such term
or provision to circumstances other than those as to which it is held invalid or
unenforceable, as the case may be, shall not be affected thereby, and each term,
provision and obligation of this Guaranty shall be valid and enforceable to the
fullest extent permitted by law.
6.3 Notice. All notices and other communications to be made or
given pursuant to this Guaranty shall be sufficient if made or given in
conformity with Section 14.6 of the Credit Agreement.
6.4 Right of Offset. Each of the Guarantors acknowledges the
rights of the Agent and of each of the Banks, upon the occurrence and during the
continuance of an Event of Default, to offset against the Indebtedness of such
Guarantor to the Banks under this Guaranty, any amount owing by the Agent or the
Banks, or either or any of them to such Guarantor, whether represented by any
deposit of such Guarantor with the Agent or any of the Banks or otherwise.
6.5 Release. Upon the satisfaction of the obligations of the
Guarantors hereunder, and when the Guarantors are not subject to any obligation
under the Credit Agreement or any of the other Loan Documents, the Agent shall
deliver to the Guarantors, upon written request therefor, a written release of
this Guaranty; provided however that the effectiveness of this Guaranty shall
continue or be reinstated, as the case may be, in the event that any payment
received or credit given by the Agent or the Banks, or any of them, is returned,
disgorged, rescinded or required to be recontributed to any party as an
avoidable preference, impermissible setoff, fraudulent conveyance, restoration
of capital or otherwise under any applicable state, federal or national law of
any jurisdiction, including without limitation laws pertaining to bankruptcy or
insolvency, and this Guaranty shall thereafter be enforceable against the
Guarantors as if such returned, disgorged,
6
<PAGE> 7
recontributed or rescinded payment or credit had not been received or given by
the Agent or the Banks, and whether or not the Agent or any Bank relied upon
such payment or credit or changed its position as a consequence thereof.
6.6 Amendments. The terms of this Guaranty may not be waived,
altered, modified, amended, supplemented or terminated in any manner whatsoever
except as provided herein and in accordance with the Credit Agreement. In
accordance with Section 8.22 of the Credit Agreement, all Subsidiaries of the
Company created or otherwise acquired after the Effective Date shall become
obligated as Guarantors hereunder (each as fully as though an original signatory
hereto) by executing and delivering to Agent and the Banks that certain joinder
agreement in the form attached to this Guaranty as Exhibit A.
6.7 Consent to Jurisdiction. Each of the Guarantors and each of
the Agent and the Banks (by accepting the benefits hereof) hereby irrevocably
submit to the non-exclusive jurisdiction of any United States Federal Court or
Michigan state court sitting in Detroit, Michigan or Texas state court sitting
in Dallas County, Texas in any action or proceeding arising out of or relating
to this Guaranty and each of the Guarantors and the Agent and the Banks hereby
irrevocably agree that claims in respect of such action or proceeding may be
heard and determined in any such United States Federal Court or Michigan state
court or Texas state court. Each of the Guarantors irrevocably consents to the
service of any and all process in any such action or proceeding brought in any
court in or of the State of Michigan or the State of Texas by the delivery of
copies of such process to such Guarantor at its address specified on the
signature page hereto or by certified mail directed to such address or such
other address as may be designated by the Guarantor in a notice to the other
parties that complies as to delivery with the terms of Section 6.3. Nothing in
this Section shall affect the right of the Banks and the Agent to serve process
in any other manner permitted by law or limit the right of the Banks or the
Agent (or any of them) to bring any such action or proceeding against any of the
Guarantors or any of its or their property in the courts of any other
jurisdiction. Each of the Guarantors hereby irrevocably waives any objection to
the laying of venue of any such suit or proceeding in the above described
courts.
6.8 Joint and Several Obligation, etc. The obligation of each
of the Guarantors under this Guaranty shall be several and also joint, each with
all and also each with any one or more of the others, and may be enforced
against each severally, any two or more jointly, or some severally and some
jointly. Any one or more of the Guarantors may be released from its obligations
hereunder with or without consideration for such release and the obligations of
the other Guarantors hereunder shall be in no way affected thereby. Agent, on
behalf of Banks, may fail or elect not to prove a claim against any bankrupt or
insolvent Guarantor and thereafter, Agent and the Bank may, without notice to
any Guarantors, extend or renew any part or all of any indebtedness of any of
the Guarantors, and may permit any of the Guarantors to incur additional
indebtedness, without affecting in any manner the unconditional obligation of
the remaining Guarantors. Such action shall not affect any right of contribution
among the Guarantors.
6.9 WAIVER OF JURY TRIAL. THE BANKS (BY ACCEPTING THE BENEFITS
HEREOF), THE AGENT (BY ACCEPTING THE BENEFITS HEREOF) AND
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<PAGE> 8
EACH OF THE GUARANTORS AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT
WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF
THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY
COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTION OF
ANY OF THEM. NEITHER THE BANKS, THE AGENT, NOR ANY OF THE GUARANTORS SHALL SEEK
TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY
TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR
HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY THE BANKS AND THE AGENT OR THE GUARANTORS
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
6.10 Limitation under Applicable Insolvency Laws.
Notwithstanding anything to the contrary contained herein, it is the intention
of each of the Guarantors, Agent and the Banks that the amount of each
Guarantor's obligations hereunder shall be in, but not in excess of, the maximum
amount thereof not subject to avoidance or recovery by operation of applicable
law governing bankruptcy, reorganization, arrangement, adjustment of debts,
relief of debtors, dissolution, insolvency, fraudulent transfers or conveyances
or other similar laws (collectively, "Applicable Insolvency Laws"). To that end,
but only in the event and to the extent that a Guarantor's obligations hereunder
or any payment made pursuant thereto would, but for the operation of the
foregoing proviso, be subject to avoidance or recovery under Applicable
Insolvency Laws, the amount of such Guarantor's obligations hereunder shall be
limited to the largest amount which, after effect thereto, would not, under
Applicable Insolvency Laws, render such Guarantor's respective obligations
hereunder unenforceable or avoidable or subject to recovery under Applicable
Insolvency Laws. To the extent any payment actually made hereunder exceeds the
limitation contained in this Section 6.10, then the amount of such excess shall,
from and after the time of payment by the Guarantors (or any of them), be
reimbursed by the Banks upon demand by such Guarantor. The foregoing proviso is
intended solely to preserve the rights of the Agent and the Banks hereunder
against the Guarantors to the maximum extent permitted by Applicable Insolvency
Laws and neither Company nor any Guarantor nor any other Person shall have any
right or claim under this Section 6.10 that would not otherwise be available
under Applicable Insolvency Laws.
[SIGNATURES FOLLOW ON SUCCEEDING PAGE]
8
<PAGE> 9
IN WITNESS WHEREOF, the undersigned each of the Guarantors has executed
this Guaranty as of the date first above written.
RTO OPERATING, INC.
By: /s/ Billy W. White, Sr.
---------------------------------------
Its: President
---------------------------------------
RTO HOLDING CO., INC.
By: /s/ Daniel C. Breeden, Sr.
---------------------------------------
Its: Vice President
---------------------------------------
ATRO, INC.
By: /s/ Billy W. White, Sr.
---------------------------------------
Its: President
---------------------------------------
ACTION RENT-TO-OWN HOLDINGS OF
SOUTH CAROLINA, INC.
By: /s/ Billy W. White, Sr.
---------------------------------------
Its: President
---------------------------------------
SIGNATURE PAGE
GUARANTY
9
<PAGE> 10
EXHIBIT A
JOINDER AGREEMENT
THIS JOINDER AGREEMENT is dated as of ______________, 199_ by
_____________________, a ______________________ corporation ("New Guarantor").
WHEREAS, pursuant to Section 8.22 of that certain Alrenco Revolving
Credit Agreement dated as of February 26, 1998 (as amended or otherwise modified
from time to time, the "Credit Agreement") by and among Alrenco, Inc.
("Company"), the Banks signatory thereto and Comerica Bank, as Agent for the
Banks (in such capacity, "Agent"), and pursuant to Section 6.6 of that certain
Guaranty dated as of February 26, 1998 (the "Guaranty") executed and delivered
by the Guarantors named therein ("Guarantors") in favor of Agent, for and on
behalf of the Banks, the New Guarantor must execute and deliver a Joinder
Agreement in accordance with the Credit Agreement and the Guaranty.
NOW THEREFORE, as a further inducement to Banks to continue to provide
credit accommodations to Company and the Account Parties (as defined in the
Credit Agreement), New Guarantor hereby covenants and agrees as follows:
1. All capitalized terms used herein shall have the meanings
assigned to them in the Credit Agreement unless expressly
defined to the contrary.
2. New Guarantor hereby enters into this Joinder Agreement in
order to comply with Section 8.22 of the Credit Agreement and
Section 6.6 of the Guaranty and does so in consideration of
the Advances made or to be made from time to time under the
Credit Agreement (and the other Loan Documents, as defined in
the Credit Agreement), from which New Guarantor shall derive
direct and indirect benefit as with the other Guarantors (all
as set forth and on the same basis as in the Guaranty).
3. New Guarantor shall be considered, and deemed to be, for all
purposes of the Credit Agreement, the Guaranty and the other
Loan Documents, a Guarantor under the Guaranty as fully as
though New Guarantor had executed and delivered the Guaranty
at the time originally executed and delivered under the Credit
Agreement and hereby ratifies and confirms its obligations
under the Guaranty, all in accordance with the terms thereof.
4. Other than as disclosed to the Agent in writing prior to the
date hereof, no Default or Event of Default (each such term
being defined in the Credit Agreement) has occurred and is
continuing under the Credit Agreement.
5. This Joinder Agreement shall be governed by the laws of the
State of Michigan and shall be binding upon New Guarantor and
its successors and assigns.
<PAGE> 11
IN WITNESS WHEREOF, the undersigned New Guarantor has executed and
delivered this Joinder Agreement as of , 199 .
------------------ --
[NEW GUARANTOR]
By:
-------------------------------------
Its:
------------------------------------
SIGNATURE PAGE
JOINDER AGREEMENT TO GUARANTY
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<PAGE> 1
EXHIBIT 10.4
SECURITY AGREEMENT
This SECURITY AGREEMENT ("Security Agreement") is made as of this 26th
day of February, 1998 by and among Alrenco, Inc., an Indiana corporation (the
"Company"), RTO Operating, Inc., a Delaware corporation, RTO Holding Co., Inc.,
a Delaware corporation, ATRO, Inc., formerly known as RTO Trademark Company,
Inc., a South Carolina corporation, and Action Rent-to-Own Holdings of South
Carolina, Inc., a South Carolina corporation and such other persons or entities
which from time to time become parties hereto (collectively, including the
Company, the "Debtors" and individually each a "Debtor") and Comerica Bank, a
Michigan banking corporation, as Agent for and on behalf of the Banks (as
defined below) ("Secured Party").
RECITALS
A. WHEREAS, Pursuant to that certain Alrenco Credit Agreement dated
as of February 26, 1998 (as amended or otherwise modified from time to time, the
"Credit Agreement"), among the Company, each of the financial institutions party
thereto (collectively, the "Banks") and Secured Party, as Agent for the Banks,
the Banks have agreed, subject to the satisfaction of certain terms and
conditions, to make Advances to Company of the Revolving Credit and the Swing
Line and to provide for the issuance of Letters of Credit for the account of
Debtor, individually, or jointly and severally with certain of the other Account
Parties (as such terms are defined in the Credit Agreement), as provided
therein; and
B. WHEREAS, each of the Debtors (other than the Company) has executed
and delivered a guaranty (as amended or otherwise modified from time to time,
the "Guaranty") of the obligations of the Company under the Credit Agreement;
and
C. WHEREAS, the obligations of the Company under the Credit Agreement
and the obligations of each other Debtor under the Guaranty are to be secured
pursuant to this Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
I. Creation of Security Interest
As security for the Indebtedness (hereinafter defined), each Debtor
hereby pledges and grants to Secured Party, as Agent for and on behalf of Banks,
a security interest in the following described property of Debtor (the
"Collateral"):
<PAGE> 2
(a) all inventory, goods (including returned or repossessed
goods and all goods the sale of which gives rise to account receivables,
contract rights, chattel paper, general intangibles or instruments),
merchandise and other personal property, in each case whether now owned
or hereafter produced, manufactured or acquired by such Debtor which are
held for sale or lease or are furnished or to be furnished under a
contract of service or are raw materials, work in process or materials
used or consumed or to be used or consumed in such Debtor's business;
(b) all accounts; accounts receivable; contract rights; general
intangibles; chattel paper and instruments (including without limitation
instruments evidencing any obligation to such Debtor for payment for
goods sold or leased or services rendered or otherwise); tax refunds;
goodwill; licenses, permits and privileges; customer lists; rights of
indemnification;
(c) all machinery, equipment, furniture and other tangible
personal property and fixtures of such Debtor, together with all
accessions, additions, accessories, parts and equipment now or hereafter
affixed thereto or used in connection therewith;
(d) all patents, trademarks and other intellectual property and
proprietary rights, including without limitation those items of property
listed in Schedule 1 hereto;
(e) all Intercompany Notes payable to order of such Debtor; and
(f) all deposit accounts of such Debtor and all amounts in any
lockbox or in any collateral account, including all funds on deposit
therein, all investments arising out of such funds, all claims thereunder
or in connection therewith, and all cash, instruments, securities, rights
and other property at any time and from time to time received,
receivable, or otherwise distributed in respect of such accounts, such
funds or such investments;
whether any such property is now owned or hereafter acquired or existing by such
Debtor, and all records (including computer software) pertaining to the
foregoing, and all substitutions for, all proceeds and all products of the
foregoing, including insurance proceeds, to the fullest extent permitted by law,
subject in each case only to the Permitted Liens. The pledge and grant of a
security interest in proceeds hereunder shall not be deemed to give such Debtor
any right to dispose of any of the Collateral.
II. Debtors' Obligations
A. Payment of Secured Indebtedness. The security interest created
herein by each Debtor is given as security for the discharge and performance of
the following obligations:
(1) All of the Company's obligations contained in or arising under or
in connection with the Credit Agreement and all obligations of the Company
contained in or arising under the other Loan Documents executed by the Company;
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<PAGE> 3
(2) All of the Company's obligations contained in or arising under any
and all Letter of Credit Agreements executed or to be executed by the Company
from time to time pursuant to the Credit Agreement, and any Letters of Credit
issued or to be issued thereunder;
(3) All of each Debtor's obligations contained in or arising under or
in connection with the Guaranty executed by such Debtor and all obligations of
each such Debtor contained in or arising under the other Loan Documents executed
by such Debtor;
(3) The obligations of the Company and each other Debtor for payment
of all sums hereafter loaned, paid out, expended or advanced by or for the
account of the Banks (or any of them) or by the Agent under the terms of this
Security Agreement, the Pledge Agreements, the Guaranty, the Credit Agreement or
the other Loan Documents, in connection with the Collateral, or any of the
documents or instruments described in this the Security Agreement, the Pledge
Agreement, the Guaranty, the Credit Agreement or the other Loan Documents;
together with interest thereon as provided for herein or therein; and also as
security for all other indebtedness and liabilities, whether direct, indirect,
absolute or contingent, owing by the Company or any other Debtor to the Banks in
any manner under the Credit Agreement, the Guaranty or the other Loan Documents,
which hereafter become due, or that may hereafter be incurred by the Company or
any other Debtor to or acquired (whether pursuant to the Credit Agreement, the
Guaranty or the other Loan Documents) by the Banks, and all other future
obligations of the Company and the other Debtors to the Banks, their successors
and assigns, howsoever created, arising or evidenced, whether joint or several,
direct or indirect, absolute or contingent, primary or secondary, and any
judgments that may hereafter be rendered on such indebtedness or any part
thereof, with interest according to the rates and terms specified, or as
provided by law, and any and all replacements, consolidations, amendments,
renewals or extensions of the foregoing (collectively herein called the
"Indebtedness").
B. Protection of Collateral. Each Debtor shall take any and all
reasonable steps required to protect the Collateral, and in pursuance thereof,
each such Debtor agrees that:
(1) The Collateral will not be misused, wasted or allowed to
deteriorate, except for the ordinary wear and tear of its intended primary use
or to the extent no longer useful or necessary to such Debtor's business, and
will at all times be maintained in accordance with the applicable terms of the
Credit Agreement.
(2) The Collateral described in Section I.(a) will be insured
with insurance coverage by financially sound and reputable insurers and in such
forms and amounts and against such risks as prudent business judgment and then
current practice would dictate for companies or professional enterprises engaged
in the same or a similar business and owning and operating similar properties.
In the case of all such insurance policies, each such Debtor shall designate the
Secured Party, on behalf of Banks, as mortgagee and loss payee and such policies
shall provide that any loss be payable to each such Debtor and Secured Party, on
behalf of Banks, as mortgagee and loss payee, as their respective interests may
appear. Further, upon the request of the Secured Party acting at the
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<PAGE> 4
request of the Banks, each such Debtor shall deliver copies of all said
policies, including all endorsements thereon and those required hereunder, to
Secured Party; and each such Debtor assigns to Secured Party, on behalf of
Banks, as additional security hereunder, all its rights to receive proceeds of
insurance with respect to the Collateral. All such insurance shall, by its
terms, provide that no cancellation, lapse (including without limitation any
lapse for non-payment of premiums) or material change in coverage shall become
effective until thirty (30) days after receipt by Secured Party of written
notice from the applicable carrier. Each Debtor further shall provide Secured
Party upon request with evidence reasonably satisfactory to Secured Party that
each such Debtor is at all times in compliance with this paragraph. Secured
Party may act as each such Debtor's attorney-in-fact in obtaining, adjusting,
settling and compromising such insurance and endorsing any drafts. Upon default
in this covenant, Secured Party may procure such insurance and its costs
therefor shall be charged to Company, payable on demand, with interest at the
highest rate set forth in the Credit Agreement and added to the Indebtedness
secured hereby. The disposition of proceeds of any insurance on the Collateral
("Insurance Proceeds") shall be governed by the following:
(i) provided that no Event of Default has occurred and is
continuing hereunder, (a) if the amount of Insurance Proceeds in respect
of any loss or casualty does not exceed Five Hundred Thousand Dollars
($500,000), such Debtor shall be entitled, in the event of such loss or
casualty, to receive all such Insurance Proceeds and to apply the same
toward the replacement of the Collateral affected thereby; and (b) if the
amount of Insurance Proceeds in respect of any loss or casualty exceeds
Five Hundred Thousand Dollars ($500,000), such Insurance Proceeds shall
be paid to and received by Secured Party, for release to such Debtor for
the replacement of the Collateral affected thereby or, upon written
request of such Debtor (accompanied by reasonable supporting
documentation), for such other use or purpose as approved by the Majority
Banks, in their reasonable discretion, it being understood and agreed in
connection with any release of funds under this subparagraph (B), that
the Secured Party and Majority Banks may impose reasonable and customary
conditions on the disbursement of such Insurance Proceeds; and
(ii) if an Event of Default has occurred or is continuing
hereunder, all Insurance Proceeds in respect of any loss or casualty
shall be paid to and received by the Secured Party, to be applied by the
Secured Party against the Indebtedness and/or to be held by the Secured
Party as cash collateral for the Indebtedness, as the Majority Banks may
direct in their sole discretion.
(3) The Collateral (except inventory currently under lease) is
located in the premises set forth on Schedule II, and will not be moved to
premises other than those set forth on Schedule II, and such other locations
with respect to which each such Debtor shall have executed and delivered to
Secured Party all financing statements and other documents and instruments
necessary to perfect or continue the perfection of the Secured Party's security
interest in the Collateral. Subject to the applicable terms of the Credit
Agreement, upon request therefor by the Secured Party, each such Debtor will
inform the Secured Party in writing of the whereabouts of the Collateral and
Debtor will promptly arrange for any inspections requested by the Secured Party,
on behalf of Banks;
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<PAGE> 5
(4) Each such Debtor shall comply with all applicable laws,
rules, ordinances, regulations and orders of any governmental authority, whether
federal, state, local or foreign (including without limitation, Consumer Credit
Laws (as defined in the Credit Agreement)), in effect from time to time with
respect to the Collateral, to the full extent required under the Credit
Agreement.
(5) Secured Party, on behalf of the Banks, may, subject to the
applicable terms of the Credit Agreement, examine and inspect the Collateral at
any time wherever located.
C. Protection of Security Interest. Each Debtor agrees that:
(1) Except as permitted by Credit Agreement, it will not sell,
transfer, lease or otherwise dispose of any of the Collateral or any interest
therein or offer to do so (other than the sale or lease of inventory in the
ordinary course of business and the sale or other disposition of worn-out or
other unusable items of tangible personal property or items no longer useful to
or necessary in each such Debtor's business) without the prior written consent
of Secured Party, given at the written direction or with the written approval of
Banks, and will not create, incur, assume or suffer to exist any mortgage,
pledge, encumbrance, security interest, lien or charge of any kind upon any of
the Collateral (or any interest therein or portion thereof), other than in favor
of Secured Party, on behalf of the Banks and liens permitted under the Credit
Agreement.
(2) It will, to the full extent required under the Credit
Agreement, pay all taxes, assessments, governmental charges and levies upon the
Collateral or for its use or operation.
(3) It will sign and execute alone or with Secured Party any
financing statement or other document or procure any documents and pay all
connected costs, necessary to protect the security interest under this Security
Agreement against the rights or interests of third persons.
(4) It will reimburse Secured Party for all reasonable costs,
including reasonable attorneys' fees, incurred for any action taken by Secured
Party to remedy an Event of Default of Debtor which Secured Party elects to
remedy pursuant to its rights under Paragraph IV hereof.
(5) It will,
(i) subject to Section 8.6 of the Credit Agreement,
allow Secured Party, or any Bank, to examine, audit and inspect such Debtor's
books, accounts, and other records relating to the Collateral wherever located
at all reasonable times during normal business hours, upon oral or written
request of Secured Party, and to make and take away copies of any and all such
books, accounts, records and ledgers;
(ii) punctually and properly perform all of its covenants
and duties under any other security agreement, mortgage, collateral document,
pledge agreement or contract of any
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<PAGE> 6
kind now or hereafter existing as security for or in connection with payment of
the Indebtedness, or any part thereof;
(iii) perform its obligations under and comply with the
terms and provisions of the Credit Agreement and the other Loan Documents to
which it is or may become a party;
(iv) keep, at the addresses designated on Schedule II or
at the stores listed on Schedule IV hereto and such additional addresses as may
be provided from time to time for its records, all records concerning the
Collateral, which records will be of such character as will enable Secured Party
or its designees to determine at any time the status of the Collateral;
(v) give Secured Party not less than 30 days prior
written notice of all contemplated changes in such Debtor's name, legal
structure, or chief executive office, or in the location of the Collateral or
such Debtor's records concerning same and, prior to making any such changes,
file or cause to be filed (at the direction of Secured Party) all financing
statements or amendments or other documents or instruments determined by Secured
Party to be necessary or appropriate to establish and maintain a valid first
priority security interest in all the Collateral in accordance with the terms
hereof;
(vi) promptly furnish Secured Party with any information
in writing which Secured Party may reasonably request concerning the Collateral;
(vii) to the extent required under the Credit Agreement,
promptly notify Secured Party of any material claim, action or proceeding
affecting the Collateral and title therein, or in any part thereof, or the
security interest created herein, and, at the request of the Secured Party,
appear in and defend, at such Debtor's expense, any such action or proceeding;
(viii) promptly, after being requested by Secured Party,
pay to Secured Party the amount of all reasonable expenses, including reasonable
attorneys' fees and other legal expenses, incurred by Secured Party pursuant to
and in accordance with the Credit Agreement in protecting and maintaining the
Collateral or its rights hereunder, or in connection with any audit or
inspection of the Collateral pursuant to the terms hereof, and in enforcing the
security interest created herein; and
(ix) allow Secured Party, upon and so long as there
exists any Default or Event of Default, to correspond with its account debtors
to confirm its accounts receivable and Obligors under any Rental Contracts.
(6) With respect to any Collateral of a kind requiring an
additional security agreement, financing statement, or other writing to perfect
a security interest therein in favor of Secured Party, on behalf of Banks, such
Debtor will forthwith upon demand by Secured Party execute and deliver to
Secured Party on behalf of Banks, whatever documentation the Secured Party or
the requisite Banks shall reasonably deem necessary or proper for such purpose.
Should any
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covenant, duty or agreement of such Debtor fail to be performed in accordance
with its terms hereunder resulting in an Event of Default, Secured Party may,
but shall never be obligated to, perform or attempt to perform such covenant,
duty or agreement on behalf of such Debtor, and any amount expended by Secured
Party in such performance or attempted performance shall become part of the
Indebtedness, and, at the request of Secured Party, such Debtor agrees to pay
such amount to Secured Party upon demand at Secured Party's office in Detroit,
Michigan together with interest thereon at the highest rate at which interest
accrues on amounts after the same become due pursuant to the terms of the Credit
Agreement, from the date of such expenditure by Secured Party until paid. With
respect to any Collateral (other than goods) in which such Debtor acquires any
rights subsequent to the date hereof and which, under applicable law, a security
interest is or can be perfected by possession, upon request of the Secured Party
or the Majority Banks, such Debtor agrees to deliver possession of such
Collateral to Secured Party immediately upon its acquisition of rights therein.
(7) It will hold the proceeds of any of the Collateral
(including accounts receivable and Rental Contracts) which is sold other than in
the ordinary course of such Debtor's business (or otherwise as permitted under
the Credit Agreement, subject to the terms thereof) in trust for Secured Party
on behalf of the Banks, will not commingle said proceeds with any other funds,
and, after an Event of Default, will deliver such proceeds to Secured Party
immediately upon its request.
(8) It will not, except as permitted under the Credit
Agreement, grant any rebate, refund, allowance or credit on any account
receivable, or on any amounts due under any Rental Contract, other than in the
ordinary course of business, without Secured Party's prior written consent.
(9) If Secured Party, acting in its sole discretion, redelivers
any Collateral to such Debtor or such Debtor's designee for the purpose of (i)
the ultimate sale or exchange thereof, or (ii)presentation, collection, renewal,
or registration of transfer thereof, or (iii) loading, unloading, storing,
shipping, transshipping, manufacturing, processing or otherwise dealing
therewith preliminary to sale or exchange; such redelivery shall not constitute
a release of Secured Party's security interest therein or in the proceeds
thereof unless Secured Party, with the consent of the Banks, specifically so
agrees in writing. If such Debtor requests any such redelivery, such Debtor will
deliver with such request a duly executed financing statement in form and
substance satisfactory to Secured Party.
(10) Subject to the applicable terms of the Credit Agreement,
Debtor shall take any and all other steps reasonably required under applicable
law to perfect the lien and security interest established hereby in favor of
Secured Party, on behalf of the Banks, including without limitation the
execution, delivery and/or performance of appropriate acknowledgments,
governmental acknowledgments, registrations or approvals, financing statements
and other documents and instruments, and the registration, recording and/or
filing of such instruments with such Persons and in such jurisdictions as
necessary to perfect the security interest and lien established hereby.
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<PAGE> 8
III. Default
The terms "Default" and "Event of Default", as used herein, shall mean
the occurrence of a Default or an Event of Default, as the case may be, under
the Credit Agreement.
IV. Secured Party's Rights and Remedies.
In addition to its rights and remedies under the Credit Agreement and the
other Loan Documents, and under applicable law, Secured Party shall have
available to it the following rights and remedies upon occurrence and during the
continuance of an Event of Default:
A. Right to Discharge Debtor's Obligations. Secured Party may, with
the approval of the Majority Banks, discharge taxes, liens or security interests
or other encumbrances at any time levied or placed on the Collateral, whether
senior or junior to the security interest herein granted, may remedy or cure any
default of a Debtor under the terms of any lease, rental agreement, land
contract or other document which in any way pertains to or affects such Debtor's
title to or interest in any of the Collateral, may pay for insurance on the
Collateral, and may pay for the maintenance and preservation of the Collateral,
unless such Debtor is contesting in good faith such obligations, and such Debtor
agrees to reimburse Secured Party, on demand, for any payment made or any
expense incurred by Secured Party pursuant to the foregoing authorization, with
interest, which payments and expenses shall be secured by the Collateral.
B. Remedies and Enforcement. Secured Party shall have and may
exercise, at the direction or with the approval of the Majority Banks, any and
all rights of enforcement and remedies afforded to a secured party under the
Uniform Commercial Code as adopted and in force in the State of Michigan or
other applicable uniform commercial code (or other applicable law), to the full
extent permitted by applicable law, on the date of this Security Agreement or
the date of such Debtor's default, together with any and all other rights and
remedies otherwise provided and available to Secured Party by applicable law
unless such application would result in the invalidity or unenforceability of
any provision hereof, in which case the law of the state in which any of the
Collateral is located shall apply to the extent necessary to render such
provision valid and enforceable; and, in conjunction with, in addition to, or
substitution for those rights, Secured Party may, at the direction or with the
approval of the Majority Banks, or with respect to subparagraph (3) below), all
of the Banks:
(1) Enter upon such Debtor's premises to take possession of,
assemble, collect and/or dispose of the Collateral and, if Secured Party
elects to do, to apply any of the Collateral against any of the
Indebtedness secured hereby;
(2) Require such Debtor to assemble the Collateral and make it
available at a place Secured Party designates to allow Secured Party to
take possession or dispose of the Collateral;
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(3) Waive any default, or remedy any default, without waiving
its rights and remedies upon default and without waiving any other prior
or subsequent default;
(4) Without any notice to Debtor, notify any parties obligated
on any of the Collateral to make payment to the Secured Party, on behalf
of the Banks, of any amounts due or to become due thereunder and enforce
collection of any of the Collateral by suit or otherwise and surrender,
release or exchange all or any part thereof, or compromise or extend or
renew for any period (whether or not longer than the original period) the
indebtedness thereunder or evidenced thereby. Upon request of the Secured
Party, Debtor will, at its own expense, notify any parties obligated to
Debtor on any of the Collateral to make payment to the Secured Party of
any amounts due or to become due thereunder, and indicate on all billings
to such account debtors that their accounts must be paid to or as
directed by Secured Party. Debtor agrees that neither Secured Party nor
the Banks shall be liable for any loss or damage which Debtor suffers or
may suffer as a result of Secured Party's processing of items or its
exercise of any other rights or remedies under this Security Agreement,
including without limitation indirect, special or consequential damages,
loss of revenues or profits, or any claim, demand or action by any third
party not related to or affiliated with Debtor arising out of or in
connection with the processing of items (excluding only the claims of
such third parties in connection with the processing of items based
solely upon the gross negligence or willful misconduct of Secured Party)
or the exercise of any other rights or remedies hereunder. Debtor further
agrees to indemnify and hold Secured Party and the Banks harmless from
and against all such third party claims, demands or actions, including
without limitation litigation costs and reasonable attorneys' fees,
excepting only those claims, demands and actions arising solely as a
result of the gross negligence or willful misconduct of Secured Party or
any of the Banks;
(5) Appoint any officer or agent of Secured Party as Debtor's
true and lawful proxy and attorney-in-fact, with power, upon the
occurrence of any Event of Default (exercisable so long as such Event of
Default is continuing); to endorse such Debtor's name or any of its
officers or agents (if required) upon any notes, checks, drafts, money
orders, or other instruments of payment (including payments payable under
any policy of insurance on the Collateral) or Collateral that may come
into possession of the Secured Party in full or part payment of any
amounts owing to the Banks; to sign and endorse the name of such Debtor
and/or any of its officers or agents (if required) upon any invoice,
freight or express bill, bill of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in
connection with accounts, and any instrument or document relating thereto
or to such Debtor's rights therein; to execute on behalf of such Debtor
any financing statements, amendments, subordinations or other filings
pursuant to the Credit Agreement, this Security Agreement or the other
Loan Documents; such Debtor hereby granting unto Secured Party on behalf
of the Banks, as the proxy and attorney-in-fact of Debtor, full power to
do any and all things necessary to be done in and about the premises as
fully and effectually as Debtor might or could do, and hereby ratifying
all that said proxy and attorney shall lawfully do or cause to be done by
virtue hereof. The proxy and power of attorney described herein shall be
deemed to be coupled with an interest and shall be
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irrevocable for the entire term of the Credit Agreement, the Notes and
all transactions thereunder and thereafter as long as any Indebtedness or
any of the commitments to lend (whether optional or obligatory) remain
outstanding under the Credit Agreement. The Secured Party shall have full
power to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof on behalf of the Banks in its own name or
in the name of such Debtor, provided that Secured Party shall act in a
commercially reasonable manner.
C. Right of Sale.
(1) Each Debtor agrees that upon the occurrence and continuance
of an Event of Default, Secured Party may, at its option, sell and
dispose of the Collateral at public or private sale without any previous
demand of performance. Each Debtor agrees that notice of such sale sent
to such Debtor's address, as set forth on the signature pages attached
hereto, by certified or registered mail sent at least five (5) Business
Days prior to such sale, shall constitute reasonable notice of sale. The
foregoing shall not require notice if none is necessary under applicable
law. The proceeds of sale shall be applied in the following order:
(i) to all reasonable costs and charges incurred by
Secured Party in the taking and causing the removal and sale of
said property, including such reasonable attorneys' fees as shall
have been incurred by Secured Party;
(ii) to the Indebtedness, including without limitation
all accrued interest thereon, premiums and make whole amounts, if
any, in the order set forth in the Credit Agreement; and
(iii) any surplus of such proceeds remaining shall be paid
to such Debtor, or to such other party who shall lawfully be
entitled thereto.
(2) At any sale or sales made pursuant to this Security
Agreement or in a suit to foreclose the same, the Collateral may be sold
en masse or separately, at the same or at different times, at the option
of the Secured Party or its assigns. Such sale may be public or private
with notice as required by the Uniform Commercial Code as then in effect
in the state in which the Collateral is located, and the Collateral need
not be present at the time or place of sale. At any such sale, the
Secured Party may bid for and purchase any of the property sold,
notwithstanding that such sale is conducted by the Secured Party or its
attorneys, agents, or assigns.
D. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Security Agreement, on behalf of Banks, in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Secured Party or any of the Banks in refraining from so doing at any
time or times. The failure of Secured Party or any of the Banks at any time or
times to enforce its rights under said provisions strictly in accordance with
the same shall not be construed as having created a custom in any way or manner
contrary to the specific provisions of this Security Agreement or as having in
any way or manner modified the same. All
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rights and remedies of Secured Party and Banks hereunder shall be cumulative and
concurrent, and the exercise of one right or remedy shall not be deemed a waiver
or release of any other right or remedy.
VI. Representations, Warranties and Covenants of Debtors.
Each Debtor represents and warrants, and, after the date hereof,
covenants so long as any of the Credit Agreement, the Notes or Letter of Credit
Agreements remain in effect, that:
A. Such Debtor's chief executive office and principal place of
business are set forth in Schedule III hereto, and (except for Company's chief
executive office and principal place of business as set forth in Schedule III
hereto) such Debtor has not maintained its chief executive office and principal
place of business at any other location since October 15, 1997.
B. Each other location not set forth on Schedule II hereof where
Debtor maintains a place of business is set forth on Schedule IV.
C. No financing statement covering the Collateral, or any part
thereof, has been or will be filed with any filing officer, except as permitted
under the Credit Agreement.
D. No other agreement, pledge or assignment covering the Collateral,
or any part thereof, has been or will be made and no security interest, other
than the one created hereby or pursuant to security agreements and pledges
previously made in favor of Secured Party on behalf of the Banks, has or will be
attached or has been or will be perfected in the Collateral or in any part
thereof, except as permitted under the Credit Agreement.
E. No material dispute, right of setoff, counterclaim or defenses
exist with respect to any part of the Collateral (excluding accounts, accounts
receivable and rights to payment for services rendered), except as permitted
under the Credit Agreement.
F. At the time Secured Party's security interest attaches to any of
the Collateral or its proceeds, such Debtor will be the lawful owner thereof
with the right to transfer any interest therein (except for such interests which
in the aggregate would not have a Material Adverse Effect), such Collateral is
free and clear of all liens other than the one created hereby or permitted by
the Credit Agreement and that such Debtor will make such further assurances to
prove its title to the Collateral as may be reasonably required, will keep such
Collateral free and clear of all liens other than the one created hereby and
liens permitted by the Credit Agreement, and will take such action to defend the
Collateral and its proceeds against the lawful claims and demands of all persons
whomsoever. The delivery at any time by such Debtor to Secured Party of
Collateral, or financing statements covering any Collateral shall constitute a
representation and warranty by such Debtor under this Security Agreement that,
with respect to such Collateral, and each item thereof, such Debtor is owner of
the Collateral and the matters heretofore warranted in this paragraph are true
and correct in all material respects.
11
<PAGE> 12
G. The representations and warranties contained in any of the Credit
Agreement and the Guaranty are incorporated by reference herein and are all made
as of the date hereof.
H. It shall, contemporaneously with the execution and delivery of
this Agreement, execute and deliver to the Agent an Agreement (Trademark) in the
form of Exhibit A hereto, and shall execute and deliver to the Agent any other
document required to acknowledge or register or perfect the Agent's and the
Banks' interest in any of the Collateral described in Section I(d).
VII. Mutual Agreements.
Each Debtor and Secured Party mutually agree as follows:
A. "Debtor" and "Secured Party" as used in this Security Agreement
include the successors and permitted assigns of those parties.
B. To the extent permitted by applicable law, except as otherwise
provided herein, the law governing this Security Agreement shall be that of the
State of Michigan.
C. This Security Agreement includes all amendments and supplements
hereto and all assignments hereof, provided, that such Debtor and Secured Party
shall not be bound by any amendment hereto unless such amendment is expressed in
a writing executed by each of them.
D. All capitalized or other terms not specifically defined herein are
used as defined in the Credit Agreement. To the extent not inconsistent
therewith, all such terms shall also be construed in conformity with the
Michigan or other applicable Uniform Commercial Code.
E. The security interest granted under this Security Agreement shall
be a continuing security interest in every respect (whether or not the
outstanding balance of the Indebtedness is from time to time temporarily reduced
to zero) and Secured Party's security interest in the Collateral as granted
herein shall continue in full force and effect for the entire duration that the
Credit Agreement remains in effect and until all of the Indebtedness is repaid
and discharged in full, and no commitment (whether optional or obligatory) to
extend any credit under the Credit Agreement or any of the Notes remains
outstanding.
F. THE PARTIES HERETO ACKNOWLEDGE THAT THIS SECURITY AGREEMENT IS
SUBJECT TO THE MUTUAL WAIVER OF JURY TRIAL CONTAINED IN THE APPLICABLE
PROVISIONS OF THE CREDIT AGREEMENT AND THE GUARANTY, AS APPLICABLE.
G. This Security Agreement has been executed and delivered pursuant
to the Credit Agreement, and in the event of any conflict between this Security
Agreement and the Credit Agreement, the Credit Agreement shall govern.
12
<PAGE> 13
H. This Security Agreement amends and restates in part the Prior
Comerica Credit Agreement, and the security agreement executed and delivered in
connection with Prior Bank One Credit Agreement, in each case assigned to the
Agent for the benefit of the Banks pursuant to Assignment Agreements dated as of
the Effective Date.
I. Each of the Debtors hereby irrevocably submits to the
non-exclusive jurisdiction of any United States Federal Court or Michigan state
court sitting in Detroit, Michigan or Texas state court sitting in Dallas
County, Texas in any action or proceeding arising out of or relating to this
Security Agreement and hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in any such United States
Federal Court or Michigan state court or Texas state court. Each Debtor
irrevocably consents to the service of any and all process in any such action or
proceeding brought in any court in or of the State of Michigan or the State of
Texas by the delivery of copies of such process to such Debtor at its address
specified in Schedule II hereto or by certified mail directed to such address.
Nothing in this paragraph shall affect the right of the Banks and the Secured
Party to serve process in any other manner permitted by law or limit the right
of the Banks or the Secured Party (or any of them) to bring any such action or
proceeding against any of the Debtors or any of its or their property in the
courts of any other jurisdiction. Each of the Debtors hereby irrevocably waives
any objection to the laying of venue of any such suit or proceeding in the above
described courts.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
13
<PAGE> 14
IN WITNESS WHEREOF, each of the undersigned Debtors and Secured Party
have executed this Security Agreement as of the day and year first above
written.
DEBTORS:
ALRENCO, INC.
By:/s/ Billy W. White, Sr.
----------------------------
Its: President
---------------------------
RTO OPERATING, INC.
By: /s/ Billy W. White, Sr.
----------------------------
Its: President
---------------------------
RTO HOLDING CO., INC.
By: /s/ Daniel C. Breeden, Sr.
----------------------------
Its: Vice President
---------------------------
ATRO, INC. F/K/A RTO TRADEMARK
COMPANY, INC.
By: /s/ Billy W. White, Sr.
----------------------------
Its: President
---------------------------
SIGNATURE PAGE
SECURITY AGREEMENT
14
<PAGE> 15
ACTION RENT-TO-OWN HOLDINGS
OF SOUTH CAROLINA, INC.
By: /s/ Billy W. White, Sr.
----------------------------
Its: President
---------------------------
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By: /s/ Valerie Kin
------------------------
Its: Vice President
-----------------------
The undersigned are executing a
counterpart hereof for purposes of
becoming parties hereto:
[FUTURE SUBSIDIARY]
By:
---------------------------
Its:
--------------------------
SIGNATURE PAGE
SECURITY AGREEMENT
15
<PAGE> 16
SCHEDULE I TO SECURITY AGREEMENT
Patents, Trade Marks
<PAGE> 17
THE UNITED STATES OF AMERICA
[SEAL]
NO. 1829703
CERTIFICATE OF REGISTRATION
This is to certify that the records of the Patent and Trademark Office
show that an application was filed in said Office for registration of the Mark
shown herein, a copy of said Mark and pertinent data from the Application being
annexed hereto and made a part hereof,
And there having been due compliance with the requirements of the law and
with the regulations prescribed by the Commissioner of Patents and Trademarks,
Upon examination, it appeared that the applicant was entitled to have said
Mark registered under the Trademark Act of 1946, as amended, and the said Mark
has been duly registered this day in the Patent and Trademark Office on the
PRINCIPAL REGISTER
to the registrant named herein.
This registration shall remain in force for TEN years unless sooner
terminated as provided by law.
In Testimony Whereof I have hereunto set
my hand and caused the seal of the Patent
and Trademark Office to be affixed this
fifth day of April 1994.
[SEAL]
BRUCE LEHMAN
Commissioner of Patents and Trademarks
<PAGE> 18
Int. Cl.: 42
Prior U.S. Cl.: 101 Reg. No. 1,829,703
United States Patent and Trademark Office Registered Apr. 3, 1994
SERVICE MARK
PRINCIPAL REGISTER
(ALRENCO LOGO)
ALRENCO, INC. (INDIANA CORPORATION)
1736 EAST MAIN STREET
NEW ALBANY, IN 47150
FOR: RETAIN STORE SERVICES IN THE FIELD OF FURNITURE, STEREOS AND
APPLIANCES, IN CLASS 42 (U.S. CL. 101).
FIRST USE 11-0-1190; IN COMMERCE 11-0-1990.
OWNER OF U.S. REG. NOS. 1,336,087 AND 1,607,835.
NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE "RENT TO OWN FOR THE HOME",
APART FROM THE MARK AS SHOWN.
THE DRAWING IS LINED FOR THE COLORS YELLOW, GREEN, BLUE, VIOLET AND RED.
SER. NO. 74-382,938, FILED 4-27-1993.
ANNA W. MANVILLE, EXAMINING ATTORNEY
<PAGE> 19
THE UNITED STATES OF AMERICA
[SEAL]
No. 1607835
CERTIFICATE OF REGISTRATION
This is to certify that the records of the Patent and Trademark Office show
that an application was filed in said Office for registration of the Mark shown
herein, a copy of said Mark and pertinent data from the Application being
annexed hereto and made a part hereof,
And there having been due compliance with the requirements of the law and
with the regulations prescribed by the Commissioner of Patents and Trademarks,
Upon examination, it appeared that the applicant was entitled to have said
Mark registered under the Trademark Act of 1946, as amended, and the said Mark
has been duly registered this day in the Patent and Trademark Office on the
PRINCIPAL REGISTER
to the registrant named herein.
This registration shall remain in force for TEN years unless sooner
terminated as provided by law.
In Testimony Whereof I have
hereunto set my hand and caused the
seal of the Patent and Trademark
Office to be affixed this
twenty-fourth day of July 1990.
[SEAL]
HARRY F. MANLESH, JR.
Commissioner of Patents
and Trademarks
<PAGE> 20
Int. Cl.: 42
Prior U.S. Cl.: 101
Reg. No. 1,607,835
United States Patent and Trademark Office Registered July 24, 1990
- --------------------------------------------------------------------------------
SERVICE MARK
PRINCIPAL REGISTER
(ALRENCO LOGO)
ALRENCO, INC. (INDIANA CORPORATION)
1736 EAST MAIN STREET
NEW ALBANY, IN 47150
FOR: RETAIL STORE SERVICES IN THE FIELD OF FURNITURE, STEREOS AND
APPLIANCES, IN CLASS 42 (U.S. CL. 101).
FIRST USE 5-1-1989; IN COMMERCE 5-1-1989.
OWNER OF U.S. REG. NO. 1,336,087.
NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE "RENT TO OWN FOR THE HOME",
APART FROM THE MARK AS SHOWN.
THE DRAWING IS LINED FOR THE COLORS YELLOW, GREEN, BLUE, VIOLET AND RED.
SER. NO. 73-839,488, FILED 11-15-1989.
DEBRA S. BUTENSKY, EXAMINING ATTORNEY
<PAGE> 21
THE UNITED STATES OF AMERICA
CERTIFICATE OF REGISTRATION
[SEAL]
This is to certify that the records of the Patent and Trademark Office
show that an application was filed in said Office for registration of the Mark
shown herein, a copy of said Mark and pertinent data from the Application being
annexed hereto and made a part hereof,
And there having been due compliance with the requirements of the law and
with the regulations prescribed by the Commissioner of Patents and
Trademarks,
Upon examination, it appeared that the applicant was entitled to have said
Mark registered under the Trademark Act of 1946, and the said Mark has been
duly registered this day in the Patent and Trademark Office on the
PRINCIPAL REGISTER
to the registrant named herein.
This registration shall remain in force for Twenty Years unless sooner
terminated as provided by law.
In Testimony Whereof I have hereunto set my hand and caused
the seal of the Patent and Trademark Office to be affixed
this fourteenth day of May, 1985.
[SEAL]
DONALD J. ZUIGY
Acting Commissioner of Patents and Trademarks
<PAGE> 22
Int. CI.: 42
Prior U.S. CI.: 101
Reg. No. 1,336,087
United States Patent and Trademark Office Registered May 14, 1985
-----------------------------------------------------------------
SERVICE MARK
PRINCIPAL REGISTER
(ALRENCO LOGO)
ALRENCO, INC. (INDIANA CORPORATION)
1736 E. MAIN ST.
NEW ALBANY, IN 47150
FOR: RETAIL STORE SERVICES IN THE FIELD OF FURNITURE, STEREOS AND
APPLIANCES, IN CLASS 42 (U.S. CL. 101).
FIRST USE 2-23-1983; IN COMMERCE 3-16-1983.
NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE "INC.", APART FROM THE MARK
AS SHOWN.
THE LINING IS A FEATURE OF THE MARK.
SER. NO. 496,867, FILED 8-28-1984.
THOMAS S. LAMONE, EXAMINING ATTORNEY
<PAGE> 23
SCHEDULE II TO SECURITY AGREEMENT
Addresses of each Debtor, additional addresses at which Collateral or Records
are kept:
Alrenco, Inc.: 714 E. Kimbrough
Mesquite, Texas 75185
RTO Operating, Inc.: 714 E. Kimbrough
Mesquite, Texas 75185
RTO Holding Co., Inc.: 850 Library Avenue
Suite 204-H
Newark, Delaware 19715
ATRO, INC.: 961 E. Main Street
Spartanburg, South Carolina 29302
Action Rent-To-Own
Holdings of
South Carolina, Inc.: 961 E. Main Street
Spartanburg, South Carolina 29302
See attached.
<PAGE> 24
CORPORATE OFFICES:
714 E. Kimbrough
Mesquite, Texas 75149
DIVISION OFFICES:
Southeast Division -
14620 N. Nebraska Ave. Bldg. B
Tampa, Florida 33613-1431
East Division -
1736 E. Main Street
New Albany, Indiana 47150
Mid-South Division -
PO Box 425
1302 JW Davis Drive
Hammond, Louisiana 70404-0425
Southwest Division -
3939 E. Hwy 80, Ste. 303
Mesquite, Texas 75150
<PAGE> 25
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
599
308 1616 Goverment St Mobile AL 36604- (334) 471-2900 (334) 471-4909
231 3725 Airport Blvd. Ste. 101- Mobile AL 36608- (334) 342-4094 (334) 342-6078
396 27955 Hwy 98AA Daphne AL 36526- (334) 626-8877 (334) 626-1993
397 5441 Hwy 90 West Ste 26 Mobile AL 36619- (334) 666-4700 (334) 666-4877
398 414 North Craft Hwy Chickasaw AL 36611- (334) 457-3600 (334) 457-3054
400 1314 Government St Mobile AL 36604- (334) 432-6400 (334) 432-5360
447 2899 1/2 Citzens Pkwy Selma AL 36701- (334) 872-4800 (334) 872-9556
311 3036 Woodley Rd Montgomery AL 36116- (334) 288-8900 (334) 288-1119
340 92 15th St Tusacaloosa AL 35401- (205) 345-7368 (205) 345-6024
414 2082 Spingdale Lane Tarrant AL 35217 (205) 808-0080 (205) 808-0420
264 1307 E. Highland Ave. #203 Selma AL 36073- (334) 874-4418 (334) 874-7634
274 965 26th Avenue East Ste 1 Tuscaloosa AL 35404- (205) 562-8600 (205) 554-0290
226 2415-R E South Blvd Montgomery AL 36111- (334) 281-1011 (334) 281-2788
502 4317 University Blvd E Tuscaloosa AL 35040- (205) 554-1414 (205) 554-7779
227 1730-32 East Main ST Prattville AL 36066 (334) 361-3580 (334) 361-3583
313 609 Bessemer Super Hwy Birmingham AL 35228- (205) 426-1600 (205) 426-1066
460 1509 E Main St Ste G Russellville AR 72801- (501) 967-1433 (501) 967-1212
459 5205 Rodgers Ave Fort Smith AR 72903- (501) 484-0555 (501) 484-5421
458 2870 N College Ave Fayetteville AR 72703- (501) 442-8963 (501) 444-7507
911 Closed Arkansas AR (501) 234-6953
457 1115 S Thompson St Springdale AR 72764- (501) 750-3330 (501) 927-3630
456 2006 W Walnut St Rogers AR 72756-3 (501) 631-0001 (501) 631-6896
184 310 North 6th Blytheville AR 72315- (870) 763-8844 (870) 763-0804
120 1506 S Thompson Spingdale AR 72764- (501) 756-9267 (501) 756-0225
115 3901 S University Ave. Little Rock AR 72204- (501) 568-9267 (501) 568-3509
461 607 Oak St Conway AR 70232-4 (501) 327-0777 (501) 327-1592
119 3800 Towson Ave Fort Smith AR 72901- (501) 646-9267 (501) 648-4031
118 2901 Olive st. Pine Bluff AR 71601 (870) 535-9267 (501) 535-4563
116 1600 S Main Street Little Rock AR 72206- (501) 376-9267 (501) 376-3048
117 4515 Camp Robinson Rd. N Little Rock AR 72118- (501) 758-9267 (501) 758-9188
187 21125 Caraway Rd Jonesboro AR 72401- (870) 935-0313 (870) 931-7771
473 309 Fredrick St Magnolia AR 71753- (501) 234-0333 (501) 234-0984
128 508 S Main Nashville AR 71852- (870) 845-5680 (870) 845-7165
127 912 W 4TH Fordyce AR 71842- (870) 352-2665 (870) 352-8841
126 401 N HERVEY Hope AR 71801- (870) 777-9797 (870) 777-0113
123 725 California Ave. SW Camden AR 71701 (870) 836-3100 (870) 836-0314
122 708 E Main Magnolia AR 71753- (870) 234-5299 (870) 234-5066
121 803 NW Avenue El Dorado AR 71730 (870) 862-8431 (870) 875-2631
476 135 Northpark Dr Monticello AR 71655- (501) 367-5303 (501) 367-2208
469 243 W Grand Ave Hot Springs AR 71901- (501) 624-7771 (501) 624-4257
474 1324 N West Ave El Dorado AR 71730- (501) 863-0333 (501) 863-8970
462 1811 North First St Jacksonville AR 72076- (501) 982-1551 (501) 982-8667
468 3100 S Olive St Pine Bluff AR 71603- (501) 534-0333 (501) 535-0708
471 1203 Pine Park Dr Hope AR 71801- (501) 777-1770 (501) 777-3641
467 8803 Geyer Springs Rd Little Rock AR 72209- (501) 568-0333 (501) 568-0265
466 3901 S University Little Rock AR 72204- (501) 562-0222 (501) 562-5452
</TABLE>
Page 1
<PAGE> 26
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
465 2903 E Race Ave Searcy AR 72143- (501)268-0440 (501)268-2971
464 2150 E Harrison Batesville AR 72501- (501)793-6300 (501)793-8112
463 4117 E Broadway St N Little Rock AR 72111- (501)945-5656 (501)945-5689
475 1262 Spur #4 Camden AR 71701- (501)836-7770 (501)836-7774
470 1309 Pine St Arkadelphia AR 71923- (501)246-7444 (501)246-2515
997 1600 S Main St Little Rock AR 72206- (501)376-9120
84 7333 W Thomas Rd. #56 Phoenix AZ 85033- (603)245-1333 (602)247-0250
76 201 N. LITCHFIELD RD Goodyear AZ 85338- (603)932-4800 (602)932-4656
100 4248 W Indian School Rd. Phoenix AZ 85019- (602)272-3456 (602)447-0656
80 1916 W Baseline Rd. Mesa AZ 85202- (602)839-7000 (602)820-8531
81 4639 E Speedway Blvd Tucson AZ 85712- (520)881-7800 (520)327-1062
152 2350 Miracle Mile #306 Bullhead City AZ 86442- (520)758-1115 (520)758-9846
83 1990 E IRVINGTON Tucson AZ 85714- (520)573-1155 (520)573-0320
101 3650 W Glendale Ave. Phoenix AZ 85051- (602)973-3993 (602)973-0829
493 6544 W. Thomas Rd Ste 2 Phoenix AZ 85033- (602)247-5500 (602)247-8128
452 8033 N 35th Ave Phoenix AZ 85051- (602)246-7236 (602)246-7269
373 848 S Alma School Rd Mesa AZ 85210- (602)844-2233 (602)844-8347
372 3223 E McDowell Rd Phoenix AZ 85008- (602)267-0700 (602)267-8178
952 1642 N. Oatman Rd Ste F Bullhead City AZ 86442-
82 4015 N 16th St., Suite E-F Phoenix AZ 85016- (602)287-0032 (602)287-0924
79 3327 W Peoria Ave/ Phoenix AZ 85029- (602)866-9500 (602)942-7840
153 80 W 84TH AVE Thorton CO 80221- (303)657-9910 (303)657-9381
154 1551 Chambers Rd. Aurora CO 80011- (303)363-0775 (303)363-0715
158 1301 Lake Street Pueblo CO 81004- (719)583-0470 (719)583-9634
155 2600 W Alameda Denver CO 80219- (303)935-5940 (303)935-2410
159 1524 North Academy Colorado Sprin CO 80909- (719)638-0144 (719)638-0155
157 757 E 20TH AVE #350 Denver CO 80205- (303)832-1290 (303)839-8303
156 5800 E Colfax Ave. Denver CO 80220- (303)355-2663 (303)321-8868
912 12445 E 39th Ave #300 Denver CO 80239- (303)371-1216 (303)371-7630
175 1801 S State Rd., #7 Hollywood FL 33023- (954)989-8988 (954)989-1208
449 1288 NW 119th St Miami FL 33167- (305)687-6600 (305)687-6691
486 2859 S Military Trail Lake Worth FL 33415- (561)642-6701 (561)642-7067
487 856 US #1 Vero Beach FL 32960- (561)567-9454 (561)567-8175
444 2212 Jim Redman Pkwy Plant City FL 33566-7 (813)757-0211 (813)754-6833
171 17235 NW 27th Ave. Miami FL 33055- (305)625-1001 (305)625-7530
172 745 NE 167TH ST N Miami Beach FL 33162- (305)653-0777 (305)654-0270
174 1445-A N State Rd. Lauderhill FL 33313- (954)581-7990 (954)581-5959
485 3974 Okeechobee Blvd W Palm Beach FL 33409- (561)683-0330 (561)686-8903
201 1046 E Memorial Blvd. Lakeland FL 33801- (941)688-8163 (941)683-5290
315 120 Chief's Way Ste 11 Pensacola FL 32507- (904)455-4400 (904)455-1947
110 3405 W Oakland Park Blvd. Lauderdale Lak FL 33311- (954)739-3535 (954)739-3913
111 5371 W Atlantic Blvd. Margate FL 33063- (954)978-7000 (954)978-0321
385 2716 NW 79th Street Miami FL 33147- (305)693-6969 (305)693-2888
202 3094 Havendale Blvd. Winterhaven FL 33881- (941)967-8584 (941)967-5661
381 2220 E Hillsborough Ave Tampa FL 33610- (813)237-2262 (813)238-3769
329 3208 N Pace Blvd Pensacola FL 32505- (850)432-0457 (850)432-1448
394 657 West 23rd St Panama City FL 32405- (904)763-4400 (904)763-9667
</TABLE>
Page 2
<PAGE> 27
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
262 5335 N Military Trail #20 W Palm Beach FL 33407- (561)471-1990 (561)471-1112
168 19401 S Dixie Hwy. Miami FL 33157- (305)255-2515 (305)255-8510
263 1368 S Military Trail W Palm Beach FL 33415- (561)357-4650 (561)357-4661
169 6220 NW 6TH Ave. Miami FL 33150- (305)758-8010 (305)758-7393
376 13023 NW 7th Ave North Miami FL 33168- (305)685-9006 (305)685-0291
170 7900 NW 27TH AVE Miami FL 33147- (305)693-9900 (305)693-0306
380 300 34th St North St Petersburgh FL 33713- (815)321-3279 (813)321-4031
913 2099 W Atlantic Blvd Pompano Beac FL 33069- (954)974-3209 (954)974-8732
382 1230 North State Rd 7 Lauderhill FL 33313- (854)523-5200 (954)583-8015
383 549 NE 81st St Miami FL 33138- (305)754-6969 (305)757-0342
384 18227 NW 27th Ave Miami FL 33056- (305)625-6969 (305)623-7768
275 206 S. Tyndall Parkway Callaway FL 32404- (850)769-1919 (850)769-1016
481 2680 S Federal Hwy Stuart FL 34997- (561)220-1002 (561)220-1003
484 408 EN Park St Okeechobee FL 34972- (941)467-1377 (941)467-1378
173 2101 W Atlantic Pompano Beac FL 33069- (954)978-7078 (954)978-2217
377 17856 S Dixie Hwy Perrine FL 33157- (305)255-2626 (305)255-1208
215 2203 Fowler St. Ft Myers FL 33901- (941)337-0999 (941)337-7659
208 7663 49th St. North Pinellas Park FL 33781- (813)545-3850 (813)547-1746
212 1111 34TH Street South St Petersburg FL 33711- (813)323-1332 (813)321-9295
220 316 James Lee Blvd Crestview FL 32536- (850)689-3131 (850)682-4008
273 3 West Nine Mile Rd Pensacola FL 32534- (850)494-3000 (850)494-3070
219 2526 Bearss Ave East Tampa FL 33613- (813)977-7577 (813)971-7102
218 760 Sebring Square Sebring FL 33870- (941)385-3609 (941)385-4518
923 1814-C S Monroe St Tallahassee FL 32301- (850)656-9185 (850)878-6235
216 99 N Eglin Pkwy. #45 Ft Walton Beac FL 32548- (850)664-2242 (850)664-2240
221 14841 7th Street Dade City FL 33525- (352)523-0334 (352)523-0340
214 2031 US HWY 60 E Lake Wales FL 33853- (941)676-0717 (941)676-6798
213 1687 Hinson Ave. Haines City FL 33844- (941)422-6589 (941)421-2682
209 234 E Van Fleet Dr. Bartow FL 33830- (941)533-0385 (941)534-8319
210 4027 S Dale Mabry Hwy. Tampa FL 33611- (813)837-6700 (813)839-2944
482 2514 S Federal Hwy Ft Pierce FL 34982- (561)461-2900 (561)461-3302
211 3333 N Tamiami Trail., Ste Sarasota FL 34234- (941)359-2422 (941)358-1603
217 1234 S Broad St Brooksville FL 34601- (352)799-0960 (352)799-1192
178 5768 NW 183rd St Miami FL 33015- (305)822-2284 (305)822-6379
203 1233 Cleveland Street Clearwater FL 34615- (813)443-0694 (813)447-7637
204 8223 N Florida Ave. Tampa FL 33604- (813)933-7993 (813)932-3073
228 6512 Massachusetts New Port Rich FL 34653- (813)845-1850 (813)845-3867
914 14620 N Nebraska Ave, Bld Tampa FL 33613-1 (813)977-9800 (813)979-9632
229 7543 W Waters Ave. Tampa FL 33615- (813)249-1404 (813)249-1816
223 2525 S Monroe ST Tallahassee FL 32301- (850)656-9185 (850)878-6235
205 5034 10TH Ave. East Tampa FL 33619- (813)248-1889 (813)248-1819
180 1110 W Sunrise Blvd Ft Lauderdale FL 33311- (954)527-6666 (954)527-4655
181 801-803 W Sample Rd Pompano Beac FL 33064- (954)941-2100 (954)941-6747
182 2930 Braodway Riviera Beach FL 33404- (561)863-8135 (561)863-8167
206 1705-D Jim Redman Plant City FL 33566- (813)752-2423 (813)752-2654
183 21467 N.W. 2nd Ave Miami FL 33169- (305)770-3466 (305)653-6604
225 4477 Mobile Hwy Pensacola FL 32506- (850)453-4903 (850)456-2373
</TABLE>
Page 3
<PAGE> 28
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
207 713 44TH Ave. West Bradenton FL 34207- (941)756-0080 (941)739-1726
418 4739 Jonesboro Rd Forest Park GA 30050- (404)366-6969 (404)366-9494
413 811 Ralph D Abernathy Blv Atlanta GA 30310- (404)758-6200 (404)758-1663
425 1291 Bankhead Hwy Mableton GA 30059- (770)948-7088 (770)948-3662
427 2430 South Atlanta Rd Smyrna GA 30080- (770)434-8285 (770)434-0127
424 208 f North Broad St Winder GA 30680- (770)867-9000 (770)307-3509
415 665 N Expressway Griffin GA 30223- (770)228-1509 (770)228-1754
416 1307 South Park Carrollton GA 30117- (770)836-1930 (770)834-5666
412 3570 Memorial Dr Decatur GA 30032- (404)286-0700 (404)286-1971
495 5823 B Fairburn Rd Douglasville GA 30134- (770)942-9393 (770)920-8191
423 234 Grayson Hwy Lawrenceville GA 30245- (770)962-2600 (770)962-0279
417 5190 Old National Hwy Ste College Park GA 30349- (404)767-6333 (404)761-5199
421 853 Oak Street Atlanta GA 30310- (404)755-7070 (404)755-1051
419 3031 Headland Dr Atlanta GA 30311- (404)349-2300 (404)349-8705
224 1030-D Gordon Ave Albany GA 31701- (912)889-9500 (912)889-0750
222 727 S Patterson ST Valdosta GA 31606- (912)247-3334 (912)247-8104
428 9999 Hwy 92 Suite 120 Woodstock GA 30188- (770)928-9225 (770)928-8555
257 615 East Bypass S.E. Moultrie GA 31768- (912)890-3290 (912)890-5517
420 1239 Moreland Ave Atlanta GA 30316- (404)624-9775 (404)624-3551
429 1090 Eisenhower Pkwy Ste Macon GA 31206- (912)788-3500 (912)788-5620
434 919 East 8th St Anderson IN 46012- (317)641-7014 (317)622-0777
505 652 Twin Aire Dr Indianapolis IN 46203- (317)638-2000 (317)638-0264
370 8143 Pendelton Pike Indianapolis IN 46226- (317)899-3232 (317)899-1294
334 215 E Highway 131 Clarksville IN 47129- (812)949-9001 (812)841-3263
504 6441 E Washington St Indianapolis IN 46219- (317)359-8885 (317)359-2485
371 1106 E Prospect Indianapolis IN 46203- (317)633-7200 (317)633-1788
301 330 New Albany Plaza New Albany IN 47150- (812)949-1300 (812)941-7399
307 716 N Weinbach Ave Evansville IN 47711- (812)479-6100 (812)479-6126
367 4401 E 10th St #16 Indianapolis IN 46201- (317)352-1910 (317)352-1921
368 2774 Lafayette Rd Ste 16 Indianapolis IN 46222- (317)925-5000 (317)923-1926
369 2248 E 53rd St Indianapolis IN 46220- (317)466-1444 (317)466-1231
503 3404 S East St Indianapolis IN 46227- (317)782-4409 (317)782-4485
441 1060 Minnesota Ave Kansas City KS 66010- (913)371-7368 (913)371-4744
336 1607 Madison Ave Covington KY 41044- (606)291-9700 (606)291-9085
408 5022 Poplar Level Rd Louisville KY 40219- (502)966-3211 (502)966-4532
319 201 Eastland Shopping Ctr Lexington KY 40505- (606)255-4555 (606)231-1158
409 5316 S Third Louisville KY 40214- (502)367-2124 (502)367-9387
310 7100 Preston Hwy Louisville KY 40219- (502)968-1111 (502)961-9265
410 100 East Broadway Louisville KY 40202- (502)583-1661 (502)584-2025
302 4443 Cane Run Rd Ste 112 Louisville KY 40216- (502)447-6611 (502)447-6235
304 1311 US 127 South Franklin KY 40601- (502)875-5200 (502)226-6343
338 4749 Dixie Hwy Louisville KY 40216- (502)449-2244 (402)449-4994
439 1225 N Broadway St Lexington KY 40505-3 (606)255-9888 (606)255-7491
437 1430 Village Drive Lexington KY 40504- (606)255-9898 (606)252-2297
341 3501 Taylor Blvd Louisville KY 40215- (502)367-7900 (502)364-8987
430 7275 Turfway Florence KY 41042- (606)371-9231 (606)371-1635
438 674 Eastern By-Pass Richmond KY 40475- (606)623-5453 (606)626-1641
</TABLE>
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<CAPTION>
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- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
375 421 W Tunnel Blvd Houma LA 70360- (504) 851-7116 (504) 851-7748
57 1438 MacArthur Dr. Alexandria LA 71301- (318) 448-1353 (318) 448-0829
266 56 Pine Tree Plaza Bogalusa LA 70427- (504) 732-1000 (504) 732-1006
916 1302 J W Davis Drive Hammond LA 70404-0 (504) 542-7932 (504) 542-0019
386 1939 Tulane Ave New Orleans LA 70112- (504) 522-9786 (504) 522-8424
387 87 Westbank Expy Ste 18C Gretna LA 70053- (504) 367-2428 (504) 367-1716
991 5905 Financial Plaza Ste 11 Shreveport LA 71129- (318) 683-0381
921 910 Pierremont Rd, Ste., 41 Shreveport LA 71106- (318) 861-8615 (318) 861-8614
60 900 N 5TH Ave. Leesville LA 71446- (318) 238-9662 (318) 238-0860
270 192 Gause Blvd Slidell LA 70460- (504) 781-6900 (504) 781-6951
99 617 S VIENNA Ruston LA 71270- (318) 255-7222 (318) 255-0801
191 5630 Plank Rd Baton Rouge LA 70805- (504) 359-6666 (504) 356-4924
277 916 Rees st Breaux Bridge LA 70517- (318) 322-4630 (318) 332-5945
278 930 Cresswell Lane Opelousas LA 70570- (318) 948-7800 (318) 948-4412
279 1081 E Laural Ave (Hwy 19 Eunice LA 70535- (318) 546-6700 (318) 546-0400
124 1107 Homer Rd. Minden LA 71055- (318) 371-1566 (318) 371-1564
919 692 E Admiral Doyle Dr. New Iberia LA 70560-
125 714 S Arkansas Springhill LA 71075- (318) 539-3800 (318) 539-3812
37 3717 Jewella Rd Shreveport LA 71109- (318) 631-9616 (318) 631-1211
920 1900 Cameron St Lafayette LA 70503-
69 112 Blanchard St. #1 West Monroe LA 71291- (318) 322-3221 (318) 387-7799
21 3125 E Texas St. Bossier City LA 70000- (318) 746-2194 (318) 741-1745
918 119 Chevy Lane Bunkie LA 71322-
395 115 N Morrison Blvd Hammond LA 70401- (504) 345-4633 (504) 345-8033
20 2746 W 70TH ST Shreveport LA 71108- (318) 631-9551 (318) 631-4559
193 3136 Louisville Ave Monroe LA 71201- (318) 323-4222 (318) 323-4230
189 2764 Old Erath Hwy Abbeville LA 70510- (318) 893-9333 (318) 893-4372
199 200 E Admiral Doyle Dr New Iberia LA 70560- (318) 365-6333 (318) 364-1408
68 1954 Louisville Ave. Monroe LA 71201- (318) 325-9699 (318) 322-7848
194 328 West Hwy 30 Gonzales LA 70737- (504) 647-5555 (504) 647-0508
374 124 N Broad St New Orleans LA 70119- (504) 821-2644 (504) 821-5557
192 8030 Florida Blvd Baton Rouge LA 70806- (504) 925-1666 (504) 924-0823
58 312 Dixie Plaza Natchitoches LA 71457- (318) 357-1720 (318) 352-6975
268 7520 Highway 90 East Morgan City LA 70280- (504) 385-9900 (504) 385-9927
389 6609 Airline Hwy Metairie LA 70003- (504 737-4444 (504) 734-9753
388 4431 Chef Menteur Hwy New Orleans LA 70126- (504) 288-1400 (504) 288-1114
269 1420 West Airline Highway LaPlace LA 70068- (504) 651-1800 (504) 651-1804
286 359-3 N. Canal Blvd. Thibodaux LA 70301-
197 1419 E Prien Lake Rd Lake Charles LA 70605- (318) 477-4747 (318) 474-0657
59 210 Elizabeth Many LA 71449- (318) 256-9211 (318) 352-5395
190 205 MacArthur Dr Alexandria LA 71301- (318) 442-2424 (318) 443-2949
196 1914 Cameron St Lafayette LA 70503- (318) 234-6699 (318) 232-6414
195 2420 w Thomas St Hammond LA 70401- (504) 542-9494 (504) 542-1017
276 1611 W Main St Franklin LA 70538- (318) 828-9400 (318) 828-4944
198 358 Moreau St Marksville LA 71351- (318) 253-0033 (318) 253-0573
440 6430 Troost Ave Kansas City MO 64131-1 (816) 523-7775 (816) 523-5552
185 Town Plaza Shoppin Center Cape Girardea MO 63701- (573) 334-3686 (573) 334-5548
</TABLE>
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<TABLE>
<CAPTION>
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- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
232 106 N first St Marble Hill MO 63764- (573) 238-4636 (573) 238-4481
513 3441 Noland Rd Independence MO 64050- (816) 836-8500 (816) 836-4195
186 336 Festus Center Festus MO 63028- (314) 933-0116 (314) 933-4268
453 2101 W Broadway Ste CC Columbia MO 65203- (573) 446-5700 (573) 445-6350
454 2525 D Missouri Blvd Jefferson City MO 65101- (573) 636-9009 (573) 636-9179
455 420 N Rangeline Rd Ste 1 Joplin MO 64801-1 (417) 781-4443 (417) 781-9730
233 908 A Truman Blvd now Carutherville MO 63830- (573) 333-0088 (573) 333-1922
188 724 Market Farmington MO 63640- (573) 756-0051 (573) 756-7167
309 1335 Ellis Ave Jackson MS 39204- (601) 353-6800 (601) 353-6631
267 3510 Main St-Hwy 613 Moss Point MS 39564- (228) 474-9100 (228) 474-9142
250 261 D'Evereuz Dr Ste 10-B Natchez MS 39120- (601) 442-5566 (601) 442-9808
98 1164 Ellis Ave. Jackson MS 39209-6 (601) 354-4000 (601) 352-4444
253 69 Hardy Ct. Square Gulf Port MS 39507- (228) 822-9188 (228) 863-5738
478 1820 Highway 1 South Greenville MS 38701- (601) 335-3777 (601) 335-3797
479 404 W Park Ave Greenwood MS 38930- (601) 455-4444 (601) 455-2093
480 1229 A Sunset Dr Grenada MS 38901- (601) 226-0034 (601) 226-8206
477 1904 Clay St Vicksburg MS 39180- (601) 630-0050 (601) 636-0404
109 112-J Wilkesboro Blvd SE Lenoir NC 28645- (704) 758-7368 (704) 757-3957
108 215 N Madison Blvd. Roxboro NC 27573- (336) 597-4200 (336) 597-2747
105 2725-G North West Blvd. Newton NC 28658- (704) 464-5028 (704) 464-6699
104 909 W Union Street Morgantown NC 28655- (704) 438-9303 (704) 438-9554
107 115 Hilltop Village. Oxford NC 27565- (919) 693-4086
230 2636 Freedom DR Charlotte NC 28208- (704) 391-7770 (704) 391-9770
103 1228 - 1234 Hwy. 70 SW Hickory NC 28602- (704) 324-4016 (704) 324-4501
488 1070 Haywood Rd Asheville NC 28806- (704) 285-0095 (704) 285-0076
237 2719 Isleta, SW Albuquerque NM 87105- (505) 877-1976 (505) 877-1978
235 6211 North West 4th Albuquerque NM 87107- (505) 342-1367 (505) 342-1376
236 6221 Montgomery, NE Albuquerque NM 87109- (505) 880-1153 (505) 837-1381
238 6000 Zuni, SE Albuquerque NM 87108- (505) 266-1600 (505) 266-1304
239 1413 West 7th St Clovis NM 88101- (505) 763-2241 (505) 763-0537
917 621 - 4th Street Albuquerque NM 87105- (505) 880-0414 (505) 342-1376
240 1230 North Solano Las Cruces NM 88001- (505) 523-4800 (505) 523-5842
241 915 North Turner St Hobbs NM 88240- (505) 397-0742 (505) 379-0374
242 110 West McGaffey Roswell NM 88201- (505) 622-1915 (505) 622-3089
65 1611 N Prince St. Clovis NM 88101- (505) 762-8900 (505) 769-3958
67 2118 N Turner Hobbs NM 88240- (505) 393-5000 (505) 393-0389
243 524-C West Cordova Santa Fe NM 87501- (505) 983-1919 (505) 983-7308
261 560 North Nellis Blvd., Ste. Las Vegas NV 89110-
260 1967 Decatur Blvd. Las Vegas NV 89108-
151 2301 E Lake Mead Rd. N Las Vegas NV 89030- (702) 649-5000 (702) 649-8604
258 1746-1748 E. Charleston Bl Las Vegas NV 89104- (702) 388-8383 (702) 388-8377
259 1370 E. Flamingo, Ste., 27 Las Vegas NV 89119- (702) 699-5413 (702) 699-7061
365 11500 Lorain Ave Cleveland OH 44111- (216) 479-1060 (216) 479-8685
432 5712 Glenway Avenue Cincinnati OH 45238- (513) 922-5422 (513) 922-5114
328 3798 W Broad St Columbus OH 43228- (614) 276-8899 (614) 276-1688
364 7981 Euclid Ave Cleveland OH 44103- (216) 791-1200 (216) 791-8722
306 1916 Mitchell Blvd Springfield OH 45503- (513) 399-7000 (513) 399-0127
</TABLE>
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<CAPTION>
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<S> <C> <C> <C> <C> <C> <C>
305 3862 N Dixie Dr Dayton OH 45414- (937)275-9600 (937)275-6040
433 3491 W Siebenthaler Dayton OH 45406- (937)275-1275 (937)275-5849
366 1059 Meister Rd Lorian OH 44052- (216)960-7000 (216)960-7004
445 921 High St Columbus OH 43210- (614)291-3600 (614)291-7031
363 15700 Broadway Ave Maple Heights OH 44137- (216)557-1900 (216)587-3492
339 10968 Hamilton Ave Cincinnati OH 45231- (513)742-0300 (513)742-0625
327 3252 B Cleveland Ave Columbus OH 43224- (614)447-8200 (614)447-1137
312 4412 Lewis St Middletown OH 45044- (513)422-8888 (513)422-8840
333 3964 Linden Ave Dayton OH 45432- (937)254-1115 (937)254-1271
337 3855 Montgomery Rd Norwood OH 45212- (513)531-1800 (513)531-0381
335 890 S Hamilton Rd Columbus OH 43213- (614)868-1995 (614)868-0878
78 4733 SE 29TH ST Del City OK 73115- (405)672-6300 (405)672-2997
77 708 SW 59TH ST Oklahoma City OK 73109- (405)631-9700 (405)631-5432
62 9 S Sheridan Tulsa OK 74112- (918)838-2764 (918)838-2767
994 8305 SW 3rd Bldg. A#104 Oklahoma City OK 73127- (405)495-2324
71 5326 S PEORIA Tulsa OK 74105- (918)747-0477 (918)747-1480
56 1011 W Main Durant OK 74702- (405)920-0288 (405)920-0297
54 616 N Highway 81 Duncan OK 73533- (405)252-0735 (405)252-9511
73 625 S Main Sapulpa OK 74066- (918)227-4333 (918)227-7368
72 10680 E 31ST ST Tulsa OK 74135- (918)622-3425 (918)622-9564
18 320 N Commerce #5 Ardmore OK 73401- (580)226-2732 (580)223-7245
50 1906 Cache Rd., Ste B Lawton OK 73507- (580)248-4310 (580)248-4347
74 4449 NW 50TH St. Oklahoma City OK 73112- (405)942-3425 (405)949-9227
55 530 E Main Ada OK 74820- (580)332-6822 (580)332-6838
996 SERVICE CENTER Spartenburg SC 29303-
254 5124 Fairfield Rd Columbia SC 29203- (803)714-0706 (803)714-0310
160 118 Garner Rd. Spartenburg SC 29303- (864)597-1700 (864)583-6078
161 765 N Church St Spartanburg SC 29303- (864)542-8888 (864)542-2559
255 2300 Taylor St. Columbia SC 29204- (803)933-0601 (803)933-9895
166 5300-7 Rivers Ave. Charleston SC 29418- (803)566-9900 (803)566-0098
165 502 N Main St. Anderson SC 29621- (864)224-7000 (864)226-4299
163 1411 Laurens Rd. Greenville SC 29607- (864)298-0055 (864)370-0647
167 1015 King St. Charleston SC 29403- (803)577-9900 (803)577-5416
287 2315 Augusta Rd., Suite 5 West Columbia SC 29169- (803)936-1888 (803)936-9070
489 2807 S Main St Anderson SC 29624- (864)231-6888 (864)231-0790
251 3906 Two Notch St Columbia SC 29204- (803)333-0070 (803)333-0818
162 3219 W Blue Ridge Dr. Greenville SC 29607- (864)295-4400 (864)295-2935
164 710 E Wade Hampton Blvd. Greer SC 29651- (864)879-7122 (864)877-8053
324 924 New Providence Blvd Clarksville TN 37042- (614)553-0300 (615)645-4660
326 131 Old Hickory Blvd Jackson TN 38305- (901)664-3100 (901)664-3188
344 5510 Charlotte Ave Nashville TN 37209- (615)356-6700 (615)356-9695
323 3806 Nolensville Rd Nashville TN 37211- (615)781-8900 (615)331-9258
492 2675 Murfreesboro Rd Nashville TN 37217- (615)367-4005 (615)367-9070
325 1019 Gallatin Rd S Madison TN 37115- (615)865-2100 (615)864-9970
10 311 W 19th St San Angelo TX 76903- (915)658-2419 (915)653-3768
272 435-A Uvalde Houston TX 77015- (713)450-9766 (713)450-9866
271 400 Northline Mall Houston TX 77022-
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C>
11 808 W Henderson Cleburne TX 76031- (817) 641-3387 (817) 558-8509
450 508 E Front St Tyler TX 75202- (903) 526-3336 (903) 526-1117
112 1808 WIRT RD Houston TX 77055-2 (713) 290-1885 (713) 686-9912
15 1703 NW Loop 281 Longview TX 75604- (903) 759-0783 (903) 759-0931
14 1111 S Texas Ave Bryan TX 77802- (409) 822-5778 (409) 823-3689
113 900 S Wayside #800 Houston TX 77023-3 (713) 921-5535 (713) 921-5623
114 9722 Fondren @ Houston TX 77096-3 (713) 771-4880 (713) 771-4943
12 1429 S Beckham Tyler TX 75701- (903) 595-4388 (903) 595-4125
442 3639 Gus Thomasson Rd Mesquite TX 75150- (972) 681-9271 (972) 681-3093
490 1400 F West Moore Terrell TX 75160- (972) 563-9103 (972) 551-1451
443 3217 Camp Wisdom Rd Dallas TX 75237- (214) 331-3306 (214) 331-1011
135 906 Bandera San Antonio TX 78228- (210) 434-1812
133 421 Spingtown Way San Marcos TX 78766- (512) 396-5500 (512) 396-5502
132 1575 Little York Plaza Houston TX 77093- (281) 590-9590 (281) 590-9764
131 743 Shotwell Houston TX 77020- (713) 672-0901 (713) 672-2314
130 1167 Edgebrook Houston TX 77034- (713) 910-6744 (713) 910-6747
13 426 E Main Grand Prairie TX 75050- (972) 262-9905 (972) 262-4091
129 5962 Renwick Houston TX 77081- (713) 664-9304 (713) 664-9327
472 4321 Texas Blvd Texarkana TX 75501- (903) 793-6690 (903) 794-0935
90 4102 N Navarro Victoria TX 77904- (512) 576-4574 (512) 576-6849
136 3890 S Gessner Houston TX 77063- (713) 780-7473 (713) 780-7873
140 1915 W Wheeler Aransas Pass TX 78336-4 (512) 758-7646 (512) 758-3654
91 PORT LAVACA CENTER Port Lavaca TX 77979-2 (512) 552-4501 (512) 552-9213
139 10729 Eastex Frwy. Houston TX 77093- (713) 691-4892 (713) 691-2988
613 4234 Ayers Corpus Christi TX 78415- (512) 857-5842 (512) 857-8125
146 1718 E Main Alice TX 78332-4 (512) 664-8888 (512) 664-6555
145 719 S 14TH ST Kingsville TX 78363-4 (512) 592-1111 (512) 592-5105
612 3315 Ayers Corpus Christi TX 78415-5 (512) 883-8991 (512) 882-8807
143 1502 Wildcat Drive Portland TX 78374-2 (512) 643-4557 (512) 643-1845
142 3751 Leopard Corpus Christi TX 78408-2 (512) 884-5977 (512) 884-5979
141 4232 Ayers Corpus Christi TX 78415-5 (512) 857-0041 (512) 857-0043
147 359 W Avenue J. Robstown TX 78380- (512) 387-8568 (512) 387-1052
134 201 C IH 35 WEST New Braunfels TX 78131- (830) 629-1500 (830) 629-1511
144 3902 S Padre Island Dr. Corpus Christi TX 78416-2 (512) 855-4391 (512) 851-1334
137 6848 Spencer Hwy. Pasadena TX 77505- (281) 487-5881 (281) 487-3098
995 5910 Business Park Dr. #10 San Antonio TX 78218- (210) 666-1393
992 2305 Ave. C NO 1C Lubbock TX 79404- (806) 741-0292 (806) 793-0293
511 1322 S Buckner Blvd Ste 31 Dallas TX 75217- (214) 398-5174 (214) 398-5709
898 706 E Kimbrough Mesquite TX 75149- (972) 288-9327 (972) 288-7753
508 302 W Jefferson Dallas TX 75208- (217) 946-9990 (214) 346-9995
16 208 E End Blvd Marshall TX 75670- (903) 938-8311 (903) 938-0974
96 2010 N 10TH Mc Allen TX 78501-4 (956) 630-9425 (956) 618-1257
95 409 University Dr. Edinberg TX 78539-3 (956) 383-8133 (956) 383-4036
94 1025 N Texas Blvd., STE 1 Weslaco TX 78596-4 (956) 969-3561 (956) 969-5925
93 807 N 77TH Harlingen TX 78550-8 (956) 425-1111 (956) 423-8507
92 44 Paredes Line Rd. Brownsville TX 78521-2 (956) 544-3954 (956) 504-3470
2 6007 Wesley Greenville TX 75401- (903) 454-6917 (903) 454-6924
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C>
266 6118-B Scot Houston TX 77021- (713) 741-9611 (713) 741-5665
614 1926 Civic Circle Amarillo TX 79109- (806) 352-6000
393 2204 S Buckner Blvd Dallas TX 75227- (214) 388-5100 (214) 388-4615
6 222 Camp Wisdom Rd., Ste Duncanville TX 75116- (972) 780-0826 (972) 780-1158
252 2013 Richey or 2015 S. Ric Pasadena TX 77502- (713) 477-7202 (713) 477-0696
249 2516 34th St Lubbock TX 79410- (806) 793-8196 (806) 793-8199
248 3130 North Lee Trevino #11 El Paso TX 79936- (915) 590-6155 (915) 590-6586
247 105 S Festival El Paso TX 79912- (915) 584-8450 (915) 584-8716
246 8414 North Loop El Paso TX 79907- (915) 594-2777 (915) 594-3011
245 4122 Montana El Paso TX 79903- (915) 566-8666 (915) 566-0052
244 9224 Dyer St El Paso TX 79924- (915) 757-8697 (915) 757-8716
138 11209 Market St. Houston TX 77029- (713) 453-6600 (713) 450-2887
3 2000 Loy Lake Rd Sherman TX 75090- (903) 892-0608 (903) 868-2258
97 4842 Montana El Paso TX 79903-4 (915) 562-7368 (915) 562-9466
200 490 S Eleventh St Beaumont TX 77726-7 (409) 835-7667 (409) 835-1660
285 28469 Tomball Parkway Tomball TX 77375-
973 5250 Weber Rd., #200-E Corpus Christie TX 78411- (512) 853-7976 (512) 853-8432
847 924 N Valley Mills Waco TX 76710-
283 1408-A Loop 336 W Conroe TX 77304- (409) 756-8200 (409) 756-8238
282 5136 Avenue H Rosenberg TX 77471- (281) 238-0422 (281) 232-3191
1 110 Broadmoor Plaza Mesquite TX 75149- (972) 288-7611 (972) 288-8109
915 5002 Old Brwnsmill Rd Corpus Christi TX 78406-3 (512) 878-3000
179 6117/19/21 Telephone Rd Houston TX 77087- (713) 242-9412 (713) 242-9378
177 10800 S. Post Oak Houston TX 77035 (713) 723-9030 (713) 723-9594
176 12600 Bissonnet, Suite B-3 Houston TX 77099-0 (281) 575-9021 (281) 575-9549
265 604 B South Martin or S Za Laredo TX 78043- (956) 729-8669 (956) 729-8662
44 215 E University #107 Mc Kinney TX 75069 (972) 542-0324 (972) 542-0243
38 2026 CROCKETT Palestine TX 75801- (903) 729-3000 (903) 729-8894
39 330-D University Lubbock TX 79415- (806) 747-5555 (806) 747-5558
4 106 Plymouth Park S/C Irving TX 75061- (972) 986-7561 (972) 790-2353
40 9515 N Lamar Blvd., Ste 14 Austin TX 78753 (512) 339-8295 (512) 834-0122
41 500 W William Cannon Rd., Austin TX 78745 (512) 445-7245 (512) 445-7218
510 3701 W Northwest Hwy Ste Dallas TX 75220- (214) 351-9990 (214) 351-0910
43 1450 W Pleasant Run Rd. Lancaster TX 75146- (972) 227-8076 (972) 227-8465
34 3213-H S Western St. Amarillo TX 79109- (806) 358-8551 (806) 358-8554
45 922 Melbourne Rd. Hurst TX 76053- (817) 284-5161 (817) 284-5292
46 902 S Ft. Hood Rd. Killeen TX 76541 (254) 526-7766 (254) 526-2193
47 3400 B Olton Rd Plainview TX 79073- (806) 296-7011 (806) 296-7056
48 1205-B S Main Weatherford TX 76086- (817) 599-8659 (817) 613-0069
509 1449 Beltline Irving TX 75061- (972) 399-6099 (972) 399-8229
5 1103 S Josey Ln #119 Carrollton TX 75006- (972) 416-1757 (972) 416-4551
42 3909 N IH 35 BLDG G. STE Austin TX 78722- (512) 454-3555 (512) 454-3549
28 2603 Thornton Ln. Temple TX 76502- (254) 771-0888 (254) 771-0899
17 3402 N Buckner #304 Dallas TX 75228- (214) 328-6666 (214) 328-6840
19 612 W University Dr Denton TX 76201- (940) 382-2611 (940) 382-7502
22 1364 W Main Street Lewisville TX 75067- (972) 420-0833 (972) 436-3133
23 200 N 15TH ST Corsicana TX 75110- (903) 872-3925 (903) 872-3928
</TABLE>
Page 9
<PAGE> 34
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
24 1005 Kilgore Plaza Kilgore TX 75662- (903) 984-8611 (903) 983-1369
25 153 Pleasant Grove S/C Dallas TX 75217- (214) 398-2561 (214) 398-0757
36 1600 S Cherry Lane White Settleme TX 76108- (817) 246-2406 (817) 246-2408
27 1315 N Beach Fort Worth TX 76111- (817) 831-0777 (817) 831-2608
35 1500 Guylane Plaza Dumas TX 79029- (806) 935-3001 (806) 935-9263
29 3344 Franklin Waco TX 76710- (254) 754-5566 (254) 754-0440
30 5405 E Lancaster Forth Worth TX 76112- (817) 496-3100 (817) 496-3679
31 638 N University Drive Nacogdoches TX 75961- (409) 560-0100 (409) 569-2331
32 452 N Timberland Lufkin TX 75901- (409) 634-8296 (409) 632-7306
33 2605 Seymour Hwy., Ste D Wichita Falls TX 76301- (940) 761-5511 (940) 761-5514
51 939 Pioneer Pkwy. Arlington TX 76013- (817) 274-7351 (817) 274-7356
26 512 W Jefferson Dallas TX 75208- (214) 943-3333 (214) 943-3133
89 803 Castroville Rd. #214 San Antonio TX 78237-3 (210) 435-7368 (210) 433-2506
7 407 N Garland Ave Garland TX 75040- (972) 276-9541 (972) 494-0197
70 2125-B 50th Street Lubbock TX 79413- (806) 744-7368 (806) 744-0617
86 4555 Walzem Rd., STE 1 San Antonio TX 78218-6 (210) 653-4551 (210) 653-5634
49 527 N Stewart Azle TX 76020- (817) 444-1090 (817) 444-0660
52 9751 Webb Chapel, Ste. 90 Dallas TX 75220- (214) 351-3766 (214) 350-5985
87 1130 SW Military Dr San Antonio TX 78218- (210) 924-4100 (210) 924-9556
85 900 Palm Valley Blvd. Round Rock TX 79664- (512) 388-2244 (512) 388-5939
8 401 North Hwy. 77 Waxahachie TX 75165- (972) 937-0591 (972) 938-3535
9 3396 N 1st. St. Abilene TX 79603- (915) 672-0953 (915) 672-0956
66 800 N Buchanan Blvd. Amarillo TX 79107- (806) 379-8133 (806) 376-8255
64 3126 Andrews Hwy. Odessa TX 79762- (915) 363-8777 (915) 363-8790
63 #1 Meta Drive Midland TX 79703- (915) 686-8777 (915) 686-8781
61 1501 Clarksville Paris TX 75460- (903) 785-3312 (903) 785-8940
53 201 N GRAND Gainesville TX 76240- (940) 665-7001 (940) 665-7093
88 8236 Marbach Rd. San Antonio TX 78227-1 (210) 673-8888 (210) 678-0375
148 769 S State St. Salt Lake UT 84111- (801) 596-1000 (801) 596-1070
150 2700 Washington Blvd. Ogden UT 84401- (801) 621-6734 (801) 621-6754
149 2111 W 3500 South West Valley Cit UT 84119- (801) 973-2828 (801) 974-9430
351 2850 Riverside Dr Danville VA 24540- (804) 791-3900 (804) 799-0707
491 3506 Williamson Rd Roanoke VA 24012- (540) 366-4000 (540) 366-5378
350 2901 Memorial Ave Lynchburg VA 24501- (804) 846-1001 (804) 845-1561
348 601 21st ST NW Roanoke VA 24017- (540) 981-1000 (540) 345-7993
352 2422 Virginia Ave Collinsville VA 24078- (540) 647-3949 (540) 647-1867
353 310 Avon St Bldg 1 Ste 14 Charlottesville VA 22902- (804) 295-0000 (804) 295-0499
354 2542 S Crater Rd Petersburg VA 23805- (804) 733-1173 (804) 862-2892
355 4660 N Southside Plaza Richmond VA 23224- (804) 233-3005 (804) 233-5130
356 3099 Mechanicsville Turnpi Richmond VA 23223- (804) 643-3333 (804) 643-3565
357 439 Jefferson Davis Hwy Fredericksburg VA 22401- (540) 371-2378 (540) 371-8190
349 3035 N Franklin St Christainsburg VA 24073- (540) 381-1817 (540) 381-2193
318 1315 Plaza East Charleston WV 25301- (304) 345-9100 (304) 345-6970
322 731 9th Ave Huntington WV 25701- (304) 525-9500 (304) 525-5670
347 1178 W Main St Bridgeport WV 26330- (304) 842-5476 (304) 842-2739
378 34 Riverwalk Plaza S Charleston WV 25303- (304) 744-8219 (304) 744-8357
379 926 Division St Parkersburg WV 26101- (304) 428-1900 (304) 422-2419
</TABLE>
Page 10
<PAGE> 35
Connie Add List
<TABLE>
<CAPTION>
STO ADD1 CITY ST ZIP PHONE1 FAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
346 #27 By-Pass Plaza Beckley WV 25801- (304) 253-7368 (304) 253-7576
</TABLE>
Page 11
<PAGE> 36
SCHEDULE III TO SECURITY AGREEMENT
DEBTOR'S CHIEF EXECUTIVE OFFICE
AND
PRINCIPAL PLACE OF BUSINESS
Alrenco, Inc.: 714 E. Kimbrough
Mesquite, Texas 75185
RTO Operating, Inc.: 714 E. Kimbrough
Mesquite, Texas 75185
RTO Holding Co., Inc.: 850 Library Avenue
Suite 204-H
Newark, Delaware 19715
ATRO, INC.: 961 E. Main Street
Spartanburg, South Carolina 29302
Action Rent-To-Own
Holdings of
South Carolina, Inc.: 961 E. Main Street
Spartanburg, South Carolina 29302
<PAGE> 37
SCHEDULE IV TO SECURITY AGREEMENT
DEBTOR'S PLACES OF BUSINESS NOT
LISTED ON SCHEDULE II OR III
NONE.
<PAGE> 38
EXHIBIT A-1
to Security Agreement
AGREEMENT
(Trademark)
THIS AGREEMENT (TRADEMARK) (this "Agreement"), dated as of _____________,
1998, among RTO Operating, Inc. ("RTO Operating" and sometimes a "Debtor") and
ATRO, Inc., f/k/a RTO Trademark Company, Inc.(, "ATRO", and sometimes a "Debtor"
and together with RTO Operating, the "Debtors"), and Comerica Bank in its
capacity as agent for the Banks referred to below ("Secured Party").
WITNESSETH
A. WHEREAS, pursuant to that certain Alrenco Credit Agreement dated
as of February 26, 1998 (as amended or otherwise modified from time to time, the
"Credit Agreement"), among the Alrenco, Inc. ("Company"), each of the financial
institutions party thereto (collectively, the "Banks") and Secured Party, as
Agent for the Banks, the Banks have agreed, subject to the satisfaction of
certain terms and conditions, to make Advances to Company and to provide for the
issuance of Letters of Credit for the account of Company, individually, or
jointly and severally with certain of the other Account Parties (as such terms
are defined in the Credit Agreement), as provided therein; and
B. WHEREAS, in connection with the Credit Agreement, the Debtors has
executed and delivered a Security Agreement, dated as of the date hereof (as
amended or otherwise modified from time to time, the "Security Agreement"); and
C. WHEREAS, as a condition precedent to the making of the initial
Advances under the Credit Agreement, the Debtors are required to execute and
deliver this Agreement and to further confirm the grant to the Secured Party for
the benefit of the Banks a continuing security interest in all of the Trademark
Collateral (as defined below) to secure all Indebtedness.
NOW, THEREFORE, for good and valuable consideration the receipt of which
is hereby acknowledged, and in order to induce the Banks to make Advances
(including the initial Advance) to the Company pursuant to the Credit Agreement,
each of the Debtors agrees, for the benefit of the Banks, as follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided in the Security Agreement.
SECTION 2. Grant of Security Interest. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Indebtedness described in the Security Agreement each of the
Debtors does hereby mortgage, pledge and hypothecate to the
<PAGE> 39
Secured Party for the benefit of the Banks, and grant to the Secured Party for
the benefit of the Banks a security interest in, all of the following property
(the "Trademark Collateral"), whether now owned or hereafter acquired or
existing:
(a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service
marks, certification marks, collective marks, logos, other source of
business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of a like nature
(all of the foregoing items in this clause (a) being collectively called
a "Trademark") now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and
recordings thereof and all applications in connection therewith, whether
pending or in preparation for filing, including registrations, recordings
and applications in the United States Patent and Trademark Office or in
any office or agency of the United States of America or any State thereof
or any foreign country, including those referred to in Item A of
Attachment 1 hereto;
(b) all Trademark licenses, including each Trademark license
referred to in Item B of Attachment 1 hereto;
(c) all reissues, extensions or renewals of any of the items
described in clauses (a) and (b);
(d) all of the goodwill of the business connected with the use
of, and symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Debtors against third parties for past,
present, or future infringement or dilution of any Trademark, Trademark
registration, or Trademark license, including any Trademark, Trademark
registration or Trademark license referred to in Item A and Item B of
Attachment 1 hereto, or for any injury to the goodwill associated with
the use of any Trademark or for breach or enforcement of any Trademark
license.
SECTION 3. Security Agreement. This Agreement has been executed and
delivered by the Debtors for the purpose of registering the security interest of
the Secured Party and the Banks in the Trademark Collateral with the United
States Patent and Trademark Office and corresponding offices in other countries
of the world. The security interest granted hereby has been granted as a
supplement to, and not in limitation of, the security interest granted to the
Secured Party and the Banks under the Security Agreement. The Security Agreement
(and all rights and remedies of the Secured Party and the Banks thereunder shall
remain in full force and effect in accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full of all
Indebtedness and commitment (whether optional or obligatory) to extend any
credit under the Credit Agreement has been terminated, the Secured Party shall,
at the Debtors' expense, execute and deliver to the Debtors
2
<PAGE> 40
all instruments and other documents as may be necessary or proper to release the
lien on and security interest in the Trademark Collateral which has been granted
hereunder.
SECTION 5. Acknowledgment. Each of the Debtors does hereby further
acknowledge and affirm that the rights and remedies of the Secured Party for the
benefit of the Banks with respect to the security interest in the Trademark
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which (including the remedies provided for therein)
are incorporated by reference herein as if fully set forth herein.
SECTION 6. Loan Documents, etc. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
3
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
DEBTORS:
RTO OPERATING, INC.
By:
-------------------------------------
Its:
-------------------------------------
Address: 714 E. Kimbrough
Mesquite, Texas 75149
Facsimile: 972-288-7753
ATRO, INC., f/k/a RTO Trademark Company, Inc.
By:
-------------------------------------
Its:
-------------------------------------
Address: 714 E. Kimbrough
Mesquite, Texas 75149
Facsimile: 972-288-7753
COMERICA BANK, as Agent for the Banks
By:
-------------------------------------
Its:
-------------------------------------
Address: One Detroit Center
9th Floor, MC 3289
Detroit, MI 48275-3289
Attention: Valerie Kin
Facsimile No: (313) 222-9434
SIGNATURE PAGE
TRADEMARK AGREEMENT
4
<PAGE> 42
ATTACHMENT 1
to
Agreement
(Trademark)
<TABLE>
<S> <C> <C> <C>
Item A. Trademarks
----------
REGISTERED TRADEMARKS
---------------------
Country* Trademark Registration No. Registration Date
-------- --------- ---------------- -----------------
PENDING TRADEMARK APPLICATIONS
------------------------------
Country* Trademark Registration No. Registration Date
-------- --------- ---------------- -----------------
TRADEMARK APPLICATIONS IN PREPARATION
-------------------------------------
Expected Products/
Country* Trademark Docket No. Filing Date Services
-------- --------- ---------- ----------- --------
Item B. Trademark Licenses
------------------
Expected Expiration
Country* Trademark Licensor Licensee Filing Date Date
-------- --------- -------- -------- ----------- ----
</TABLE>
- -------------------
* List items related to the United States first for ease of
recordation. List items related to other countries next, grouped by country and
in alphabetical order by country name.
<PAGE> 1
EXHIBIT 10.5
PLEDGE AGREEMENT
(Alrenco, Inc.)
THIS STOCK PLEDGE ("Stock Pledge") made as of this 26th day of February,
1998 by and between Alrenco, Inc., an Indiana corporation ("Company") and
Comerica Bank, a Michigan banking corporation, as Agent for and on behalf of the
Banks (as defined below) ("Secured Party").
RECITALS:
A. Pursuant to that certain Alrenco Revolving Credit Agreement dated
as of February 26, 1998 (as may be amended, or otherwise modified from time to
time, the "Credit Agreement") by and among Company, Secured Party as Agent and
the financial institutions which are named in and are signatories to the Credit
Agreement ("Banks"), the Banks have agreed to extend credit to Company on the
terms set forth in the Credit Agreement.
B. As a condition to the performance of their respective obligations
under the Credit Agreement, the Banks, and Secured Party, as Agent for the
Banks, have required that Company provide this Stock Pledge to Secured Party, as
Agent for the Banks, granting various security interests, liens and other
encumbrances as security for the Company's obligations under its Notes, the
Credit Agreement and the other Loan Documents.
C. Agent is acting as Agent for the Banks pursuant to Section 13.1 of
the Credit Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
I. Creation of Security Interest
Company hereby grants to Secured Party, on behalf of Banks and the Agent,
a security interest in the property described in paragraph II, below
("Collateral").
II. Collateral.
The Collateral consists of the following:
(a) 100% of the outstanding shares of each class of stock, (or other
ownership interest) of each Subsidiary listed on Schedule A-1 hereto (as such
Schedule may be revised pursuant to Section III B.1 hereof), together with all
of the certificates and/or instruments representing such
<PAGE> 2
shares of stock (or other ownership interest), and all cash, securities,
dividends, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares;
(b) 100% of any additional shares of stock, (or other ownership
interest) of any of the Subsidiaries listed on Schedule A-1 hereto, at any time
and from time to time acquired by the Company in any manner, all of the cash,
securities, dividends, rights and other property at any time and from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
(c) All other property hereafter delivered to the Agent in
substitution for or in addition to the foregoing, all certificates and
instruments representing or evidencing such property, and all cash, securities,
interest, dividends, rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all thereof; and
(d) All products and proceeds of all of the foregoing.
III. Company's Obligations
A. Payment of Secured Indebtedness. The security interest created
herein is given as security for:
(1) All of Company's obligations contained in or arising under or in
connection with the Credit Agreement and the Notes issued by it from time to
time pursuant to the Credit Agreement, and all obligations of Company contained
in or arising under the other Loan Documents executed by Company;
(2) All of Company's obligations contained in or arising under any and
all Letter of Credit Agreements executed or to be executed by Company from time
to time pursuant to the Credit Agreement, and any Letters of Credit issued or to
be issued thereunder;
(3) The obligations of Company for payment of all sums hereafter
loaned, paid out, expended or advanced by or for the account of the Banks (or
any of them) or by the Secured Party under the terms of this Stock Pledge, the
Credit Agreement, or the other Loan Documents, in connection with the Collateral
or any of the documents or instruments described in this Stock Pledge, the
Credit Agreement or the other Loan Documents;
together with interest thereon as provided for herein or therein; and
also as security for all other indebtedness and liabilities, whether direct,
indirect, absolute or contingent, owing by the Company to the Banks in any
manner under the Credit Agreement or the Loan Documents, which hereafter become
due, or that may hereafter be incurred by the Company to or acquired (pursuant
to the Credit Agreement or the other Loan Documents) by the Banks, and all other
future obligations of the Company to the Banks, their successors and assigns,
howsoever created, arising or evidenced, whether joint or several, direct or
indirect, absolute or contingent, primary or secondary, and any
2
<PAGE> 3
judgments that may hereafter be rendered on such indebtedness or any part
thereof, with interest according to the rates and terms specified, or as
provided by law, and any and all replacements, consolidations, amendments,
renewals or extensions of the foregoing (collectively herein called the
"Indebtedness").
B. Protection of Security Interest.
(1) Company shall take any and all steps required to protect the
Collateral, and in pursuance thereof Company agrees that Company shall deliver
or caused to be delivered to Secured Party and Secured Party shall receive
possession, on behalf of Banks, of certificates representing all of the pledged
shares referred to in Schedule A-1, properly endorsed or with assignments
separate from such certificates in blank for transfer. In addition Secured Party
shall receive proof that appropriate acknowledgments, governmental approvals,
share register entries, local pledge agreements, financing statements,
collateral and other documents covering the Collateral have been executed and
delivered by the appropriate parties and recorded on file with such Persons and
in such jurisdictions as necessary to perfect the security interests, or other
liens granted hereby and/or thereby. The Secured Party from time to time shall
revise Schedule A-1 hereto and promptly deliver a copy thereto to Company and
the Banks, on the effective date of the acquisition or creation by Company of a
Subsidiary, adding to Schedule A-1 the name of each such Subsidiary so acquired
or created, and upon such revision, Company shall be deemed to have pledged 100%
of the capital stock (or other ownership interests) of each such Subsidiary so
acquired or created to Secured Party for and on behalf of Banks.
(2) It will not sell, transfer, assign or otherwise dispose of any of
the Collateral or any interest therein or offer to do so without the prior
written consent of Secured Party, given at the direction of the Majority Banks,
or permit anything to be done that may materially impair the value of any of the
Collateral or the security intended to be afforded by this Stock Pledge.
(3) It will, subject to the applicable terms of the Credit Agreement,
pay all taxes and assessments upon the Collateral or for its use or operation
before any interest or penalty for nonpayment attaches thereto unless said
payment is being contested in good faith and it establishes a reserve as
required by generally accepted accounting principles.
(4) It will, subject to the applicable terms of the Credit Agreement,
sign and execute alone or with Secured Party any financing statement or other
document or procure any documents and pay all reasonable connected costs,
necessary to protect the security interest under this Stock Pledge against the
rights or interests of third persons.
(5) It will, subject to the applicable terms of the Credit Agreement,
reimburse Secured Party for all reasonable costs, including reasonable
attorneys' fees, incurred for any action taken by Secured Party to remedy an
Event of Default which Secured Party elects to remedy pursuant to its rights
under Article VI hereof.
(6) It will:
3
<PAGE> 4
(i) subject to the applicable terms of the Credit
Agreement, allow Secured Party to examine, audit and inspect
Company's books, accounts, records (including without limitation
all records relating to the Collateral or the Indebtedness),
ledgers and assets and properties of every kind and description
wherever located at all reasonable times during normal business
hours, upon oral or written request of Secured Party, and to make
and take away copies of any and all such books, accounts, records
and ledgers. An examination of the records or properties of the
Company may require revealment of proprietary and/or confidential
data and information, and the provisions of Section 14.12 of the
Credit Agreement are incorporated herein;
(ii) punctually and properly perform all of its covenants
and duties under any other security agreement, mortgage,
collateral pledge agreement or contract of any kind now or
hereafter existing as security for or in connection with payment
of the Indebtedness, or any part thereof;
(iii) perform its obligations under the Loan Documents;
(iv) promptly furnish Secured Party with any information
in writing which Secured Party may reasonably request concerning
the Collateral;
(v) promptly notify Secured Party of any material change
in any fact or circumstances warranted or represented by Company
in this Stock Pledge or in any other writing furnished by Company
to Secured Party in connection with the Collateral or the
Indebtedness;
(vi) promptly notify Secured Party of any material claim,
action or proceeding affecting the Collateral and title therein,
or in any part thereof, or the security interest created herein,
and, at the request of the Secured Party, appear in and defend, at
Company's expense, any such action or proceeding; and
(vii) promptly, after being requested by Secured Party,
pay to Secured Party the amount of all reasonable expenses,
including reasonable attorneys' fees and other legal expenses,
incurred by Secured Party in protecting and maintaining the
Collateral or its rights hereunder, or in connection with any
audit or inspection of the Collateral pursuant to the terms
hereof, and in enforcing the security interest created herein.
(7) With respect to any Collateral of a kind requiring an additional
security agreement, financing statement, or other writing to perfect a security
interest therein in favor of Secured Party, on behalf of Banks, Company will
forthwith execute and deliver to Secured Party on behalf of Banks, whatever the
Secured Party or the Majority Banks shall deem necessary or proper for such
purpose. Should any covenant, duty or agreement of Company fail to be performed
in accordance with its terms hereunder, Secured Party may, but shall never be
obligated to, perform or attempt to
4
<PAGE> 5
perform such covenant, duty or agreement on behalf of Company, and any amount
expended by Secured Party in such performance or attempted performance shall
become part of the Indebtedness, and, at the request of Secured Party, Company
agrees to pay such amount to Secured Party upon demand at Secured Party's office
in Detroit, Michigan together with interest thereon at the highest rate which
interest accrues on amounts after the same become due pursuant to the terms of
any note executed pursuant to the Credit Agreement from the date of such
expenditure by Secured Party until paid. With respect to any Collateral in which
Company acquires any rights subsequent to the date hereof and which, under
applicable law, a security interest is or can be perfected by possession,
Company agrees to deliver possession of such Collateral to Secured Party
immediately upon its acquisition of rights therein.
(8) Company will hold the proceeds of any of the Collateral in trust
for Secured Party on behalf of the Banks, will not commingle said proceeds with
any other funds, and, after an Event of Default, will deliver such proceeds to
Secured Party at its request.
(9) If Secured Party, acting in its sole discretion, redelivers any
Collateral to Company or Company's designee for the purpose of
(i) the ultimate sale or exchange thereof, or
(ii) presentation, collection, renewal, or registration
of transfer thereof,
such redelivery shall not constitute a release of Secured Party's security
interest therein or in the proceeds thereof unless Secured Party, with the
consent of the Majority Banks, specifically so agrees in writing.
(10) If Company requests any such redelivery, Company will deliver with
such request a duly executed financing statement in form and substance
satisfactory to Secured Party.
IV. Default
The term "Event of Default", as used herein, means the occurrence of any
Event of Default under the Credit Agreement.
V. Consequence of Default.
Upon an Event of Default, Secured Party shall be entitled, subject to
applicable law, to all of its remedies specified herein, in the Credit
Agreement, or in any other document executed in connection with the Credit
Agreement or this Stock Pledge, or provided by law. Additionally, upon an Event
of Default and subject to applicable law, Secured Party will be entitled to
receive all dividends payable in respect of the pledged shares evidencing the
Collateral pledged under this Stock Pledge, and may change the registration of
any registerable Collateral to any other name or form and is hereby authorized
to appoint any officer or agent of Secured Party as Company's true
5
<PAGE> 6
and lawful proxy and attorney-in-fact, with power, upon the occurrence of any
Event of Default (exercisable so long as such Event of Default is continuing),
to exercise all voting rights in respect of the shares evidencing the Collateral
pledged hereby; to endorse Company's name or any of its officers' names or
agents' names upon any notes, checks, drafts, money orders, or other instruments
of payment (including payments payable under any policy of insurance on the
Collateral) or Collateral that may come into possession of the Secured Party in
full or part payment of any amounts owing to the Banks; to give written notice
to such office and officials of the United States Post Office to effect such
change or changes of address so that all mail addressed to Company may be
delivered directly to Secured Party; to execute on behalf of Company any
financing statements, amendments, subordinations or other filings pursuant to
the Credit Agreement; granting unto Secured Party on behalf of the Banks, as the
proxy and attorney-in-fact of Company, full power to do any and all things
necessary to be done in and about the premises as fully and effectually as
Company might or could do, and hereby ratifying all that said proxy and attorney
shall lawfully do or cause to be done by virtue hereof. The proxy and power of
attorney described herein shall be deemed to be coupled with an interest and
shall be irrevocable for the term of the Credit Agreement, and all transactions
thereunder and thereafter as long as any Indebtedness or any of the commitments
to lend remain outstanding. The Secured Party shall have full power, subject to
applicable law to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof on behalf of the Banks in its own name or in the
name of Company provided that Secured Party shall act in a commercially
reasonable manner.
VI. Secured Party's Rights and Remedies.
Secured Party shall have available to it (subject to applicable law) the
following rights and remedies upon occurrence of an Event of Default:
A. Right to Assign. Secured Party may assign this Stock Pledge only
as provided in the Credit Agreement and if Secured Party does assign this Stock
Pledge, the assignee shall be entitled to the performance of all of Company's
obligations and agreements under this Stock Pledge, and the assignee shall be
entitled to all the rights and remedies of Secured Party under this Stock
Pledge.
B. Right to Discharge Company's Obligations. Secured Party may (i)
with the approval of the Majority Banks, discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral
which are superior to the security interest herein granted, (ii) remedy or cure
any default of Company under the terms of any lease, rental agreement, land
contract or other document which in any way pertains to or affects Company's
title to or interest in any of the Collateral, (iii) pay for insurance on the
Collateral, and (iv) pay for the maintenance and preservation of the Collateral,
unless with respect to the obligations under clauses (i) or (ii) Company is
contesting in good faith such obligations, and Company agrees to reimburse
Secured Party, on demand, for any payment made or any expense incurred by
Secured Party pursuant to the foregoing authorization, with interest, which
payments and expenses shall be secured by the security intended to be afforded
by this Stock Pledge.
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<PAGE> 7
C. Remedies and Enforcement. Secured Party shall have and may
exercise any and all rights of enforcement and remedies afforded to a secured
party under the Uniform Commercial Code as adopted and in force in the State of
Michigan, to the extent permitted by applicable law, on the date of this Stock
Pledge or the date of Company's default together with any and all other rights
and remedies otherwise provided and available to Secured Party by law unless
such application would result in the invalidity or unenforceability of any
provision hereof, in which case the law of the state in which any of the
Collateral is located shall apply to the extent necessary to render such
provision valid and enforceable; and, in conjunction with, in addition to, or
substitution for those rights, at Secured Party's discretion, Secured Party may:
(1) Apply any of the Collateral against any of the Indebtedness
secured hereby;
(2) Waive any default, or remedy any default in any reasonable
manner, without waiving its rights and remedies upon default and without
waiving any other prior or subsequent default;
(3) Without any notice to Company, notify any parties obligated
on any of the Collateral to make payment to the Secured Party of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release or exchange
all or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) the indebtedness
thereunder or evidenced thereby. Upon request of the Secured Party,
Company will, at its own expense, notify any parties obligated to Company
on any of the Collateral to make payment to the Secured Party of any
amounts due or to become due thereunder. Company agrees that Secured
Party shall not be liable for any loss or damage which Company suffers or
may suffer as a result of Secured Party's processing of items or its
exercise of any other rights or remedies under this Stock Pledge,
including without limitation indirect, special or consequential damages,
loss of revenues or profits, or any claim, demand or action by any third
party not related to or affiliated with Company arising out of or in
connection with the processing of items (excluding only the claims of
such third parties in connection with the processing of items based
solely upon the gross negligence or willful misconduct of Secured Party)
or the exercise of any other rights or remedies hereunder. Company
further agrees to indemnify and hold Secured Party harmless from and
against all such third party claims, demands or actions, including
without limitation litigation costs and reasonable attorneys' fees.
D. Right of Sale.
(1) Company agrees that upon the occurrence of an Event of
Default (taking into account applicable periods of cure, if any), Secured
Party may, at its option, sell and dispose of the Collateral at public or
private sale without any previous demand of performance. Company agrees
that notice of such sale sent to Company's address, as set forth in the
Credit Agreement, by certified or registered mail sent at least five (5)
days prior to such sale, shall constitute reasonable notice of sale. The
foregoing shall not require notice
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<PAGE> 8
if none is necessary under applicable law. The proceeds of sale shall be
applied in the following order:
(i) to all reasonable costs and charges incurred by
Secured Party in the taking and causing the removal and sale of
said property, including such reasonable attorneys' fees as shall
have been incurred by Secured Party;
(ii) to the Indebtedness, including all accrued interest
thereon; and
(iii) any surplus of such proceeds remaining shall be paid
to the Company, or to such other party who shall lawfully be
entitled thereto.
(2) At any sale or sales made pursuant to this Stock Pledge or
in a suit to foreclose the same, the Collateral may be sold en masse or
separately, at the same or at different times, at the option of the
Secured Party or its assigns. Such sale may be public or private with
notice as required by the Uniform Commercial Code as then in effect in
the state in which the Collateral is located, and the Collateral need not
be present at the time or place of sale. At any such sale, the Secured
Party or the holder of any note hereby secured may bid for and purchase
any of the property sold, notwithstanding that such sale is conducted by
the Secured Party or its attorneys, agents, or assigns.
E. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Stock Pledge on behalf of Banks in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Secured Party in refraining from so doing at any time or times. The
failure of Secured Party at any time or times to enforce its rights under said
provisions strictly in accordance with the same shall not be construed as having
created a custom in any way or manner contrary to the specific provisions of
this Stock Pledge or as having in any way or manner modified the same. All
rights and remedies of Secured Party and Banks are cumulative and concurrent,
and the exercise of one right or remedy shall not be deemed a waiver or release
of any other right or remedy.
VII. Representations and Warranties of Company.
Company represents and warrants, as continuing representations and
warranties so long as the Credit Agreement remains in effect, that:
A. The individual signatory hereto has authority to execute and
deliver this Stock Pledge on behalf of Company.
B. No financing statement covering the Collateral, or any part
thereof, has been filed with any filing officer other than in favor of Secured
Party.
C. No other agreement, pledge or assignment covering the Collateral,
or any part thereof, has been made and no security interest, other than the one
created hereby or pursuant to
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<PAGE> 9
pledges and security agreements previously made in favor of Secured Party on
behalf of the Banks, has attached or been perfected in the Collateral or in any
part thereof.
D. No material dispute, right of setoff, counterclaim or defenses
exist with respect to any part of the Collateral.
E. All information supplied and statements made in any financial or
credit statements or application for credit prior to the execution of this Stock
Pledge are true and correct as of the date hereof in all material respects.
F. The Collateral, (1) in the case of each Subsidiary, constitutes
all the issued and outstanding capital stock (or other ownership interests) of
each of the Subsidiaries, (2) have been duly authorized and issued to Company,
(3) is fully paid and non-assessable, (4) is freely and validly assignable by
Company, and (5) is not subject to any option, warrant right to call or
commitment of any kind or nature.
G. At the time Secured Party's security interest attaches to any of
the Collateral or its proceeds, Company will be the lawful owner with the right
to transfer any interest therein, and that Company will make such further
assurances as to prove its title to the Collateral as may be reasonably required
and will defend the Collateral and its proceeds against the lawful claims and
demands of all persons whomsoever. The delivery at any time by Company to
Secured Party of Collateral or financing statements covering Collateral shall
constitute a representation and warranty by Company under this Stock Pledge
that, with respect to such Collateral, and each item thereof, Company is owner
of the Collateral and the matters heretofore warranted in this paragraph are
true and correct.
VIII. Mutual Agreements.
Company and Secured Party mutually agree as follows:
A. "Company" and "Secured Party" as used in this Stock Pledge include
the successors and permitted assigns of those parties.
B. To the extent permitted by applicable law, except as otherwise
provided herein, the law governing this secured transaction shall be that of the
State of Michigan.
C. This Stock Pledge includes all amendments and supplements hereto
and assignments hereof and Company and Secured Party shall not be bound by any
amendment or undertaking not expressed in a writing executed by each of them.
D. All capitalized terms not specifically defined herein which are
defined in the Credit Agreement are used as defined in the Credit Agreement.
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<PAGE> 10
E. This Stock Pledge shall be a continuing security interest in every
respect (whether or not the outstanding balance of the Indebtedness is reduced
to zero) and Secured Party's security interest in the Collateral as granted
herein shall continue in full force and effect until all of the Indebtedness is
indefeasibly repaid and discharged in full and no commitment (whether optional
or obligatory) to extend any credit under the Credit Agreement remains
outstanding.
F. The parties hereto acknowledge that this Stock Pledge is subject
to the mutual waiver of jury trial contained in Section 14.15 of the Credit
Agreement and to the consent to jurisdiction provisions contained in Section
14.2 of the Credit Agreement.
G. This Stock Pledge has been executed and delivered pursuant to the
Credit Agreement and in the event of any conflict between this Stock Pledge and
the Credit Agreement, the Credit Agreement shall govern.
[SIGNATURES FOLLOW ON SUCCEEDING PAGE]
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<PAGE> 11
IN WITNESS WHEREOF, Company and Secured Party have executed this Stock
Pledge on the day and year first above written.
COMPANY:
ALRENCO, INC., an Indiana corporation
By: /s/ Billy W. White, Sr.
------------------------------------
Its: President
------------------------------------
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By: /s/ Valerie Kin
------------------------------------
Its: Vice President
------------------------------------
SIGNATURE PAGE
PLEDGE AGREEMENT
11
<PAGE> 12
SCHEDULE A-1
<TABLE>
<CAPTION>
Shares Issued
Subsidiaries and Outstanding Shares Pledged
------------ --------------- --------------
<S> <C> <C>
RTO Operating, Inc. 100 100
RTO Holding Co., Inc. 100 100
Action Rent-to-Own Holdings of 1,000 1,000
South Carolina, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.6
PLEDGE AGREEMENT
(RTO Holding, Co., Inc.)
THIS STOCK PLEDGE ("Stock Pledge") made as of this 26th day of February,
1998 by and between RTO Holding, Co., Inc., a Delaware ("Pledgor") and Comerica
Bank, a Michigan banking corporation, as Agent for and on behalf of the Banks
(as defined below) ("Secured Party").
RECITALS:
A. Pursuant to that certain Alrenco Revolving Credit Agreement dated
as of February 26, 1998 (as may be amended, or otherwise modified from time to
time, the "Credit Agreement") by and among Company, Secured Party as Agent and
the financial institutions which are named in and are signatories to the Credit
Agreement ("Banks"), the Banks have agreed to extend credit to Company on the
terms set forth in the Credit Agreement.
B. As a condition to the performance of their respective obligations
under the Credit Agreement, the Banks, and Secured Party, as Agent for the
Banks, have required that Pledgor provide this Stock Pledge to Secured Party, as
Agent for the Banks, granting various security interests, liens and other
encumbrances as security for the Company's obligations under its Notes, the
Credit Agreement and the other Loan Documents.
C. Agent is acting as Agent for the Banks pursuant to Section 13.1 of
the Credit Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
I. Creation of Security Interest
Pledgor hereby grants to Secured Party, on behalf of Banks and the Agent,
a security interest in the property described in paragraph II, below
("Collateral").
II. Collateral.
The Collateral consists of the following:
(a) 100% of the outstanding shares of each class of stock, (or other
ownership interest) of each Subsidiary listed on Schedule A-1 hereto (as such
Schedule may be revised pursuant to Section III B.1 hereof), together with all
of the certificates and/or instruments representing such
<PAGE> 2
shares of stock (or other ownership interest), and all cash, securities,
dividends, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares;
(b) 100% of any additional shares of stock, (or other ownership
interest) of any of the Subsidiaries listed on Schedule A-1 hereto, at any time
and from time to time acquired by the Pledgor in any manner, all of the cash,
securities, dividends, rights and other property at any time and from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
(c) All other property hereafter delivered to the Agent in
substitution for or in addition to the foregoing, all certificates and
instruments representing or evidencing such property, and all cash, securities,
interest, dividends, rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all thereof; and
(d) All products and proceeds of all of the foregoing.
III. Pledgor's Obligations
A. Payment of Secured Indebtedness. The security interest created
herein is given as security for:
(1) All of Company's obligations contained in or arising under or in
connection with the Credit Agreement and the Notes issued by it from time to
time pursuant to the Credit Agreement, and all obligations of Company contained
in or arising under the other Loan Documents executed by Company;
(2) All of Company's obligations contained in or arising under any and
all Letter of Credit Agreements executed or to be executed by Company from time
to time pursuant to the Credit Agreement, and any Letters of Credit issued or to
be issued thereunder;
(3) The obligations of Pledgor for payment of all sums hereafter
loaned, paid out, expended or advanced by or for the account of the Banks (or
any of them) or by the Secured Party under the terms of this Stock Pledge or the
other Loan Documents, in connection with the Collateral or any of the documents
or instruments described in this Stock Pledge or the other Loan Documents;
together with interest thereon as provided for herein or therein; and
also as security for all other indebtedness and liabilities, whether direct,
indirect, absolute or contingent, owing by the Company to the Banks in any
manner under the Credit Agreement or the Loan Documents, which hereafter become
due, or that may hereafter be incurred by the Company to or acquired (pursuant
to the Credit Agreement or the other Loan Documents) by the Banks, and all other
future obligations of the Company to the Banks, their successors and assigns,
howsoever created, arising or evidenced, whether joint or several, direct or
indirect, absolute or contingent, primary or secondary, and any judgments that
may hereafter be rendered on such indebtedness or any part thereof, with
interest
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<PAGE> 3
according to the rates and terms specified, or as provided by law, and any and
all replacements, consolidations, amendments, renewals or extensions of the
foregoing (collectively herein called the "Indebtedness").
B. Protection of Security Interest.
(1) Pledgor shall take any and all steps required to protect the
Collateral, and in pursuance thereof Pledgor agrees that Pledgor shall deliver
or caused to be delivered to Secured Party and Secured Party shall receive
possession, on behalf of Banks, of certificates representing all of the pledged
shares referred to in Schedule A-1, properly endorsed or with assignments
separate from such certificates in blank for transfer. In addition Secured Party
shall receive proof that appropriate acknowledgments, governmental approvals,
share register entries, local pledge agreements, financing statements,
collateral and other documents covering the Collateral have been executed and
delivered by the appropriate parties and recorded on file with such Persons and
in such jurisdictions as necessary to perfect the security interests, or other
liens granted hereby and/or thereby. The Secured Party from time to time shall
revise Schedule A-1 hereto and promptly deliver a copy thereto to Pledgor and
the Banks, on the effective date of the acquisition or creation by Pledgor of a
Subsidiary, adding to Schedule A-1 the name of each such Subsidiary so acquired
or created, and upon such revision, Pledgor shall be deemed to have pledged 100%
of the capital stock (or other ownership interests) of each such Subsidiary so
acquired or created to Secured Party for and on behalf of Banks.
(2) It will not sell, transfer, assign or otherwise dispose of any of
the Collateral or any interest therein or offer to do so without the prior
written consent of Secured Party, given at the direction of the Majority Banks,
or permit anything to be done that may materially impair the value of any of the
Collateral or the security intended to be afforded by this Stock Pledge.
(3) It will, subject to the applicable terms of the Credit Agreement,
pay all taxes and assessments upon the Collateral or for its use or operation
before any interest or penalty for nonpayment attaches thereto unless said
payment is being contested in good faith and it establishes a reserve as
required by generally accepted accounting principles.
(4) It will, subject to the applicable terms of the Credit Agreement,
sign and execute alone or with Secured Party any financing statement or other
document or procure any documents and pay all reasonable connected costs,
necessary to protect the security interest under this Stock Pledge against the
rights or interests of third persons.
(5) It will, subject to the applicable terms of the Credit Agreement,
reimburse Secured Party for all reasonable costs, including reasonable
attorneys' fees, incurred for any action taken by Secured Party to remedy an
Event of Default which Secured Party elects to remedy pursuant to its rights
under Article VI hereof.
(6) It will:
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<PAGE> 4
(i) subject to the applicable terms of the Credit
Agreement, allow Secured Party to examine, audit and inspect
Pledgor's books, accounts, records (including without limitation
all records relating to the Collateral or the Indebtedness),
ledgers and assets and properties of every kind and description
wherever located at all reasonable times during normal business
hours, upon oral or written request of Secured Party, and to make
and take away copies of any and all such books, accounts, records
and ledgers. An examination of the records or properties of the
Pledgor may require revealment of proprietary and/or confidential
data and information, and the provisions of Section 14.12 of the
Credit Agreement are incorporated herein;
(ii) punctually and properly perform all of its covenants
and duties under any other security agreement, mortgage,
collateral pledge agreement or contract of any kind now or
hereafter existing as security for or in connection with payment
of the Indebtedness, or any part thereof;
(iii) perform its obligations under the Loan Documents;
(iv) promptly furnish Secured Party with any information
in writing which Secured Party may reasonably request concerning
the Collateral;
(v) promptly notify Secured Party of any material change
in any fact or circumstances warranted or represented by Pledgor
in this Stock Pledge or in any other writing furnished by Pledgor
to Secured Party in connection with the Collateral or the
Indebtedness;
(vi) promptly notify Secured Party of any material claim,
action or proceeding affecting the Collateral and title therein,
or in any part thereof, or the security interest created herein,
and, at the request of the Secured Party, appear in and defend, at
Pledgor's expense, any such action or proceeding; and
(vii) promptly, after being requested by Secured Party,
pay to Secured Party the amount of all reasonable expenses,
including reasonable attorneys' fees and other legal expenses,
incurred by Secured Party in protecting and maintaining the
Collateral or its rights hereunder, or in connection with any
audit or inspection of the Collateral pursuant to the terms
hereof, and in enforcing the security interest created herein.
(7) With respect to any Collateral of a kind requiring an additional
security agreement, financing statement, or other writing to perfect a security
interest therein in favor of Secured Party, on behalf of Banks, Pledgor will
forthwith execute and deliver to Secured Party on behalf of Banks, whatever the
Secured Party or the Majority Banks shall deem necessary or proper for such
purpose. Should any covenant, duty or agreement of Pledgor fail to be performed
in accordance with its terms hereunder, Secured Party may, but shall never be
obligated to, perform or attempt to perform such
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<PAGE> 5
covenant, duty or agreement on behalf of Pledgor, and any amount expended by
Secured Party in such performance or attempted performance shall become part of
the Indebtedness, and, at the request of Secured Party, Pledgor agrees to pay
such amount to Secured Party upon demand at Secured Party's office in Detroit,
Michigan together with interest thereon at the highest rate which interest
accrues on amounts after the same become due pursuant to the terms of any note
executed pursuant to the Credit Agreement from the date of such expenditure by
Secured Party until paid. With respect to any Collateral in which Pledgor
acquires any rights subsequent to the date hereof and which, under applicable
law, a security interest is or can be perfected by possession, Pledgor agrees to
deliver possession of such Collateral to Secured Party immediately upon its
acquisition of rights therein.
(8) Pledgor will hold the proceeds of any of the Collateral in trust
for Secured Party on behalf of the Banks, will not commingle said proceeds with
any other funds, and, after an Event of Default, will deliver such proceeds to
Secured Party at its request.
(9) If Secured Party, acting in its sole discretion, redelivers any
Collateral to Pledgor or Pledgor's designee for the purpose of
(i) the ultimate sale or exchange thereof, or
(ii) presentation, collection, renewal, or registration
of transfer thereof,
such redelivery shall not constitute a release of Secured Party's security
interest therein or in the proceeds thereof unless Secured Party, with the
consent of the Majority Banks, specifically so agrees in writing.
(10) If Pledgor requests any such redelivery, Pledgor will deliver with
such request a duly executed financing statement in form and substance
satisfactory to Secured Party.
IV. Default
The term "Event of Default", as used herein, means the occurrence of any
Event of Default under the Credit Agreement.
V. Consequence of Default.
Upon an Event of Default, Secured Party shall be entitled, subject to
applicable law, to all of its remedies specified herein, in the Credit
Agreement, or in any other document executed in connection with the Credit
Agreement or this Stock Pledge, or provided by law. Additionally, upon an Event
of Default and subject to applicable law, Secured Party will be entitled to
receive all dividends payable in respect of the pledged shares evidencing the
Collateral pledged under this Stock Pledge, and may change the registration of
any registerable Collateral to any other name or form and is hereby authorized
to appoint any officer or agent of Secured Party as Pledgor's true and
5
<PAGE> 6
lawful proxy and attorney-in-fact, with power, upon the occurrence of any Event
of Default (exercisable so long as such Event of Default is continuing), to
exercise all voting rights in respect of the shares evidencing the Collateral
pledged hereby; to endorse Pledgor's name or any of its officers' names or
agents' names upon any notes, checks, drafts, money orders, or other instruments
of payment (including payments payable under any policy of insurance on the
Collateral) or Collateral that may come into possession of the Secured Party in
full or part payment of any amounts owing to the Banks; to give written notice
to such office and officials of the United States Post Office to effect such
change or changes of address so that all mail addressed to Pledgor may be
delivered directly to Secured Party; to execute on behalf of Pledgor any
financing statements, amendments, subordinations or other filings pursuant to
the Credit Agreement; granting unto Secured Party on behalf of the Banks, as the
proxy and attorney-in-fact of Pledgor, full power to do any and all things
necessary to be done in and about the premises as fully and effectually as
Pledgor might or could do, and hereby ratifying all that said proxy and attorney
shall lawfully do or cause to be done by virtue hereof. The proxy and power of
attorney described herein shall be deemed to be coupled with an interest and
shall be irrevocable for the term of the Credit Agreement, and all transactions
thereunder and thereafter as long as any Indebtedness or any of the commitments
to lend remain outstanding. The Secured Party shall have full power, subject to
applicable law to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof on behalf of the Banks in its own name or in the
name of Pledgor provided that Secured Party shall act in a commercially
reasonable manner.
VI. Secured Party's Rights and Remedies.
Secured Party shall have available to it (subject to applicable law) the
following rights and remedies upon occurrence of an Event of Default:
A. Right to Assign. Secured Party may assign this Stock Pledge only
as provided in the Credit Agreement and if Secured Party does assign this Stock
Pledge, the assignee shall be entitled to the performance of all of Pledgor's
obligations and agreements under this Stock Pledge, and the assignee shall be
entitled to all the rights and remedies of Secured Party under this Stock
Pledge.
B. Right to Discharge Pledgor's Obligations. Secured Party may (i)
with the approval of the Majority Banks, discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral
which are superior to the security interest herein granted, (ii) remedy or cure
any default of Pledgor under the terms of any lease, rental agreement, land
contract or other document which in any way pertains to or affects Pledgor's
title to or interest in any of the Collateral, (iii) pay for insurance on the
Collateral, and (iv) pay for the maintenance and preservation of the Collateral,
unless with respect to the obligations under clauses (i) or (ii) Pledgor is
contesting in good faith such obligations, and Pledgor agrees to reimburse
Secured Party, on demand, for any payment made or any expense incurred by
Secured Party pursuant to the foregoing authorization, with interest, which
payments and expenses shall be secured by the security intended to be afforded
by this Stock Pledge.
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<PAGE> 7
C. Remedies and Enforcement. Secured Party shall have and may
exercise any and all rights of enforcement and remedies afforded to a secured
party under the Uniform Commercial Code as adopted and in force in the State of
Michigan, to the extent permitted by applicable law, on the date of this Stock
Pledge or the date of Pledgor's default together with any and all other rights
and remedies otherwise provided and available to Secured Party by law unless
such application would result in the invalidity or unenforceability of any
provision hereof, in which case the law of the state in which any of the
Collateral is located shall apply to the extent necessary to render such
provision valid and enforceable; and, in conjunction with, in addition to, or
substitution for those rights, at Secured Party's discretion, Secured Party may:
(1) Apply any of the Collateral against any of the Indebtedness
secured hereby;
(2) Waive any default, or remedy any default in any reasonable
manner, without waiving its rights and remedies upon default and without
waiving any other prior or subsequent default;
(3) Without any notice to Pledgor, notify any parties obligated
on any of the Collateral to make payment to the Secured Party of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release or exchange
all or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) the indebtedness
thereunder or evidenced thereby. Upon request of the Secured Party,
Pledgor will, at its own expense, notify any parties obligated to Pledgor
on any of the Collateral to make payment to the Secured Party of any
amounts due or to become due thereunder. Pledgor agrees that Secured
Party shall not be liable for any loss or damage which Pledgor suffers or
may suffer as a result of Secured Party's processing of items or its
exercise of any other rights or remedies under this Stock Pledge,
including without limitation indirect, special or consequential damages,
loss of revenues or profits, or any claim, demand or action by any third
party not related to or affiliated with Pledgor arising out of or in
connection with the processing of items (excluding only the claims of
such third parties in connection with the processing of items based
solely upon the gross negligence or willful misconduct of Secured Party)
or the exercise of any other rights or remedies hereunder. Pledgor
further agrees to indemnify and hold Secured Party harmless from and
against all such third party claims, demands or actions, including
without limitation litigation costs and reasonable attorneys' fees.
D. Right of Sale.
(1) Pledgor agrees that upon the occurrence of an Event of
Default (taking into account applicable periods of cure, if any), Secured
Party may, at its option, sell and dispose of the Collateral at public or
private sale without any previous demand of performance. Pledgor agrees
that notice of such sale sent to Pledgor's address, as set forth in the
Credit Agreement, by certified or registered mail sent at least five (5)
days prior to such sale, shall constitute reasonable notice of sale. The
foregoing shall not require notice
7
<PAGE> 8
if none is necessary under applicable law. The proceeds of sale shall be
applied in the following order:
(i) to all reasonable costs and charges incurred by
Secured Party in the taking and causing the removal and sale of
said property, including such reasonable attorneys' fees as shall
have been incurred by Secured Party;
(ii) to the Indebtedness, including all accrued interest
thereon; and
(iii) any surplus of such proceeds remaining shall be paid
to the Pledgor, or to such other party who shall lawfully be
entitled thereto.
(2) At any sale or sales made pursuant to this Stock Pledge or
in a suit to foreclose the same, the Collateral may be sold en masse or
separately, at the same or at different times, at the option of the
Secured Party or its assigns. Such sale may be public or private with
notice as required by the Uniform Commercial Code as then in effect in
the state in which the Collateral is located, and the Collateral need not
be present at the time or place of sale. At any such sale, the Secured
Party or the holder of any note hereby secured may bid for and purchase
any of the property sold, notwithstanding that such sale is conducted by
the Secured Party or its attorneys, agents, or assigns.
E. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Stock Pledge on behalf of Banks in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Secured Party in refraining from so doing at any time or times. The
failure of Secured Party at any time or times to enforce its rights under said
provisions strictly in accordance with the same shall not be construed as having
created a custom in any way or manner contrary to the specific provisions of
this Stock Pledge or as having in any way or manner modified the same. All
rights and remedies of Secured Party and Banks are cumulative and concurrent,
and the exercise of one right or remedy shall not be deemed a waiver or release
of any other right or remedy.
VII. Representations and Warranties of Pledgor.
Pledgor represents and warrants, as continuing representations and
warranties so long as the Credit Agreement remains in effect, that:
A. The individual signatory hereto has authority to execute and
deliver this Stock Pledge on behalf of Pledgor.
B. No financing statement covering the Collateral, or any part
thereof, has been filed with any filing officer other than in favor of Secured
Party.
C. No other agreement, pledge or assignment covering the Collateral,
or any part thereof, has been made and no security interest, other than the one
created hereby or pursuant to
8
<PAGE> 9
pledges and security agreements previously made in favor of Secured Party on
behalf of the Banks, has attached or been perfected in the Collateral or in any
part thereof.
D. No material dispute, right of setoff, counterclaim or defenses
exist with respect to any part of the Collateral.
E. All information supplied and statements made in any financial or
credit statements or application for credit prior to the execution of this Stock
Pledge are true and correct as of the date hereof in all material respects.
F. The Collateral, (1) in the case of each Subsidiary, constitutes
all the issued and outstanding capital stock (or other ownership interests) of
each of the Subsidiaries, (2) have been duly authorized and issued to Pledgor,
(3) is fully paid and non-assessable, (4) is freely and validly assignable by
Pledgor, and (5) is not subject to any option, warrant right to call or
commitment of any kind or nature.
G. At the time Secured Party's security interest attaches to any of
the Collateral or its proceeds, Pledgor will be the lawful owner with the right
to transfer any interest therein, and that Pledgor will make such further
assurances as to prove its title to the Collateral as may be reasonably required
and will defend the Collateral and its proceeds against the lawful claims and
demands of all persons whomsoever. The delivery at any time by Pledgor to
Secured Party of Collateral or financing statements covering Collateral shall
constitute a representation and warranty by Pledgor under this Stock Pledge
that, with respect to such Collateral, and each item thereof, Pledgor is owner
of the Collateral and the matters heretofore warranted in this paragraph are
true and correct.
VIII. Mutual Agreements.
Pledgor and Secured Party mutually agree as follows:
A. "Pledgor" and "Secured Party" as used in this Stock Pledge include
the successors and permitted assigns of those parties.
B. To the extent permitted by applicable law, except as otherwise
provided herein, the law governing this secured transaction shall be that of the
State of Michigan.
C. This Stock Pledge includes all amendments and supplements hereto
and assignments hereof and Pledgor and Secured Party shall not be bound by any
amendment or undertaking not expressed in a writing executed by each of them.
D. All capitalized terms not specifically defined herein which are
defined in the Credit Agreement are used as defined in the Credit Agreement.
E. This Stock Pledge shall be a continuing security interest in every
respect (whether or not the outstanding balance of the Indebtedness is reduced
to zero) and Secured Party's security
9
<PAGE> 10
interest in the Collateral as granted herein shall continue in full force and
effect until all of the Indebtedness is indefeasibly repaid and discharged in
full and no commitment (whether optional or obligatory) to extend any credit
under the Credit Agreement remains outstanding.
F. The parties hereto acknowledge that this Stock Pledge is subject
to the mutual waiver of jury trial contained in Section 14.15 of the Credit
Agreement and to the consent to jurisdiction provisions contained in Section
14.2 of the Credit Agreement.
G. This Stock Pledge has been executed and delivered pursuant to the
Credit Agreement and in the event of any conflict between this Stock Pledge and
the Credit Agreement, the Credit Agreement shall govern.
[SIGNATURES FOLLOW ON SUCCEEDING PAGE]
10
<PAGE> 11
IN WITNESS WHEREOF, Pledgor and Secured Party have executed this Stock
Pledge on the day and year first above written.
Pledgor:
RTO HOLDING, CO., INC., a Delaware
corporation
By: /s/ Daniel C. Breeden, Jr.
---------------------------------
Its: Vice President
---------------------------------
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By: /s/ Valerie Kin
---------------------------------
Its: Vice President
---------------------------------
SIGNATURE PAGE
PLEDGE AGREEMENT
11
<PAGE> 12
SCHEDULE A-1
<TABLE>
<CAPTION>
Shares Issued
Subsidiaries and Outstanding Shares Pledged
------------ --------------- --------------
<S> <C> <C>
ATRO, Inc. 100 100
</TABLE>
<PAGE> 1
Exhibit 16.1
March 6, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We have read Item 4 included in the attached Form 8-K dated March 6, 1998 of
Alrenco, Inc. to be filed with the Securities and Exchange Commission and are in
agreement with the statements contained therein.
Very truly yours,
/s/ Grant Thorton LLP
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Accountants
We consent to the incorporation by reference in this Current Report on
Form 8-K of our report dated May 28, 1997, on our audit of the consolidated
financial statements of RTO, Inc. and subsidiaries as of December 31, 1995 and
1996, and for the three years in the period ended December 31, 1996, appearing
in the registration statement on Form S-4 (SEC File No. 333-44451) of Alrenco,
Inc. filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933.
COOPERS & LYBRAND L.L.P.
Spartanburg, South Carolina
May 28, 1997
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Accountants
We consent to the incorporation by reference in this Current Report on Form 8-K
of our report dated January 31, 1997, on our audit of the consolidated
financial statements of Action TV & Appliance Rental, Inc. as of July 31, 1996,
and for the seven month period then ended, appearing in the registration
statement on Form S-4 (SEC File No. 333-44451) of Alrenco, Inc. filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933.
COOPERS & LYBRAND L.L.P.
Spartanburg, South Carolina
January 31, 1997
<PAGE> 1
EXHIBIT 23.3
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statement
of Alrenco, Inc. on Form S-8 (SEC File No. 333-08915), which became effective
on July 26, 1996, of our report dated May 28, 1997, on our audits of the
consolidated financial statements of RTO, Inc. and subsidiaries as of December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996 and our report dated January 31, 1997, on our audit of the financial
statements of Action TV & Appliance Rental, Inc. as of and for the seven month
period ended July 31, 1996, appearing in the registration statement on Form S-4
(SEC File NO. 333-44451) of Alrenco, Inc. filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933. We also consent to
the incorporation by reference in the registration statement of Alrenco, Inc.
on the aforementioned Form S-8 of our report dated February 26, 1998 on our
audits of the supplemental consolidated financial statements of Alrenco, Inc.
and subsidiaries, after restatement for the 1998 pooling of interest with RTO,
Inc. as described in Note 1 to those financial statements, as of December 31,
1995 and 1996 and for each of the three years in the period ended December 31,
1996, which report is included in this Current Report on Form 8-K.
COOPERS & LYBRAND L.L.P.
Spartanburg, South Carolina
March 5, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Current Report (Form 8-K)
of our report dated November 4, 1996 with respect to the financial statements of
Action TV & Appliance Rental, Inc. included in the Registration Statement (Form
S-4 No. 333-44451) of Alrenco, Inc. for the registration of 12,280,316 shares of
its common stock, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Dallas, Texas
November 4, 1996
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Current Report (Form 8-K)
of our report dated January 16, 1997 with respect to the financial statements of
B&L Concepts, Inc. included in the Registration Statement (Form S-4 No.
333-44451) of Alrenco, Inc. for the registration of 12,280,316 shares of its
common stock, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Orlando, Florida
January 16, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-08915) of Alrenco, Inc and in the related Prospectus of our reports
a) dated November 4, 1996 with respect to the financial statements of Action TV
& Appliance Rental, Inc. and b) dated January 16, 1997 with respect to the
financial statements of B&L Concepts, Inc., each included in the Registration
Statement (Form S-4 No. 333-44451)of Alrenco, Inc. for the registration of
12,280,316 shares of its common stock, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Dallas, Texas
March 4, 1998
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 7, 1997, covering the financial
statements of Alrenco, Inc., which is included in this Form 8-K. We hereby
consent to the incorporation by reference of said report in the registration
statement of Alrenco, Inc. on Form S-8 (File No. 33-08915, effective July 26,
1996).
Grant Thornton LLP
Dallas, Texas
March 5, 1998
<PAGE> 1
EXHIBIT 99
ALRENCO, INC.
714 E. KIMBROUGH
MESQUITE, TEXAS 75149 NEWS RELEASE
==================================================================
FOR IMMEDIATE RELEASE Contact: K. David Belt
Chief Financial Officer
or
Patricia Disbrow
Investor Relations
972-288-9327
ALRENCO AND RTO COMPLETE MERGER
COMBINED COMPANY THIRD LARGEST OPERATOR OF RENTAL - PURCHASE STORES IN U.S.
NEW ALBANY, IN and MESQUITE, TX (February 26, 1998) - Alrenco, Inc. (Nasdaq/NM:
RNCO)and RTO, Inc. today announced the completion of the previously announced
merger of the two companies in a transaction valued at approximately $273
million. The combined company, which will operate primarily under the trade
name Home Choice Lease or Own, had pro forma revenues of $242.6 million in
1997. with 440 stores in 23 states, Alrenco becomes the third largest operator
of rental-purchase stores in the U.S.
Under terms of the transaction, which shareholders of both companies
overwhelmingly approved in special shareholder meetings held earlier today,
each outstanding share of RTO common stock was converted into the right to
receive 89.795 shares of Alrenco common stock. On February 25, 1998,
Alrenco's stock closed at $16.00 per share. The merger is to be accounted for
as a pooling-of-interests and is a tax-free reorganization.
George D. Johnson, Jr., chairman of RTO, Inc., was named chairman of
the combined company. Mr. Johnson currently serves as the chief executive
officer of Extended Stay America (NYSE:ESA) and formerly served as president of
Blockbuster Consumer Division. Bill White, Sr., James G. Steckart, and K. David
Belt, chief executive officer, chief operating officer, and chief financial
officer, respectively, of RTO, Inc., will continue in these roles for the
combined company. Michael D. Walts, who founded and was chairman of Alrenco,
will remain on the Board of Directors for the combined company and will serve
as a consultant to the company.
-MORE-
<PAGE> 2
Alrenco and RTO Complete Merger
Page 2
February 26, 1998
Johnson said, "The merger of RTO and Alrenco creates one of the
largest and most dynamic operations in the rental purchase industry, with a
national footprint. RTO has established an excellent track record for
aggressive store openings and acquisitions, and we well continue that strategy,
building on our national presence."
The combined company, which will be headquartered in Mesquite, Texas,
offers high-quality, brand name, consumer merchandise under flexible, renewable
rental-purchase agreements, also known as rent-to-own agreements. Products
offered include consumer electronics, appliances, furniture, jewelry and home
furnishing accessories.
-END-
