=============================================================================
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------
Commission File Number: 0-22026
RENT-WAY, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1407782
(State of incorporation) (I.R.S. Employer Identification No.)
One RentWay Place, Erie, Pennsylvania 16505
(Address of principal executive offices)
814-455-5378
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange on Which Registered
-------------- ------------------------------------
Common Stock, no par value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Based on the closing sales price on December 6, 1999, the aggregate market value
of stock held by non-affiliates of the registrant was $372,103,705.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AS OF DECEMBER 6, 1999
Common Stock 21,984,041
===============================================================================
Documents Incorporated by Reference Portions of the registrant's definitive
proxy statement for the annual meeting of shareholders to be held March 8, 2000
are incorporated by reference into Part III of this Form 10-K
<PAGE>
RENT-WAY, INC.
PART I
ITEM I BUSINESS
General
Rent-Way, Inc. (the "Company" or "Rent-Way") is the second largest operator
in the rental purchase industry with 1,114 stores in 41 states. The Company
offers home entertainment equipment, furniture, major appliances and jewelry to
customers under full-service rental-purchase agreements that generally allow the
customer to obtain ownership of the merchandise at the conclusion of an agreed
upon rental period. Management believes that these rental-purchase arrangements
appeal to a wide variety of customers by allowing them to obtain merchandise
that they might otherwise be unable or unwilling to obtain due to insufficient
cash resources or lack of access to credit or because they have a temporary,
short-term need for the merchandise or a desire to rent rather than purchase the
merchandise.
The Company's principal executive offices are located at One RentWay Place,
Erie, Pennsylvania 16505, and its telephone number is (814) 455-5378.
On December 10, 1998, the Company completed a merger (the "Merger") with
Home Choice Holdings, Inc. ("HMCH" or "Home Choice"). The Merger, as per the
terms of the agreement, was recorded as a pooling of interests, in accordance
with Accounting Principles Board ("APB") Opinion No. 16. Under the terms of the
agreement the Company issued 0.588 shares of common stock for each outstanding
share of HMCH common stock. The Merger increased the outstanding shares of the
Company by approximately 10,025,000 shares. HMCH, at the time of the Merger,
operated 458 stores in 26 states, primarily in the southeastern, midwestern, and
southwestern portions of the United States, with annual revenues of
approximately $260 million. As a result of the Merger, the Company became the
second largest company in the rental-purchase industry.
On February 26, 1998, Home Choice (formerly Alrenco, Inc.) merged with RTO,
Inc. The merger, as per the terms of the agreement, was recorded as a pooling of
interests, in accordance with APB Opinion No. 16. Under the terms of the
agreement, Home Choice issued 0.898 shares of common stock for each outstanding
share of RTO common stock.
Prior to the mergers, the management of the Company, Alrenco, and RTO grew
their operations through diverse strategies.
Rent-Way Acquistions
Rent-Way was formed in 1981 to operate a rental-purchase store in Erie,
Pennsylvania. In 1993, as a result of acquisitions and new store openings, the
Company was operating 19 stores in three states and had completed its initial
public offering. In 1994, the Company acquired 20 rental-purchase stores through
its acquisition of D.A.M.S.L. Corporation. In 1995, the Company acquired 50
rental-purchase stores, 46 through the acquisition of McKenzie Leasing
Corporation. In 1996, the Company acquired 32 rental-purchase stores in four
separate transactions. In 1997, the Company acquired 92 rental-purchase stores,
70 of which were acquired from Perry Electronics, Inc. d/b/a Rental King. In
1998, the Company acquired 226 rental-purchase stores, 50 of which were acquired
from Ace Rentals and 145 of which were acquired from Champion Rentals, Inc. The
Company also opened 13 new stores in 1998.
Alrenco Acquisitions
Alrenco grew primarily through the opening of new stores from its inception
in 1980 through 1990. During the period from 1990 to 1993, management focused
its efforts on improving the performance of its existing stores. As a result,
Alrenco increased its revenue from $16.3 million to $22.3 million, operating
profit from $0.9 million to $2.0 million, and net earnings from $0.1 million to
$1.0 million. In 1994, Alrenco acquired 18 rental-purchase stores. In 1995,
Alrenco acquired 15 stores. In 1996, Alrenco acquired 75 stores in 23 separate
transactions. In 1997, Alrenco acquired 54 stores and 13 rental-purchase
portfolios in 19 separate transactions.
RTO Acquisitions
RTO was incorporated on June 20, 1996 and since that time it has
aggressively sought to establish its store base through multiple significant
store acquisitions, new store openings, and smaller store acquisitions. In 1996,
RTO purchased 109 stores, 102 of which were acquired from Action TV & Appliance
Rentals, Inc. In 1997, RTO acquired 73 stores in a series of transactions. In
1996 and 1997, RTO acquired 59 stores in transactions accounted for as a
pooling-of-interests. Also in 1997, RTO opened 34 new stores. From January 1,
1998 until March 31, 1998, RTO opened eight additional stores.
Fiscal 1999 Acquisitions
On June 30, 1999, the Company acquired America's Rent-To-Own Center, Inc.
("America's Rent-To-Own"). The transaction value was approximately $7 million
and was paid for with a combination of 231,140 shares of Rent-Way's common stock
and the assumption of certain liabilities. America's Rent-To-Own operated 21
rental-purchase stores in Arkansas, Kansas, Missouri, and Oklahoma and had
annual revenues of approximately $8 million.
On September 23, 1999, the Company acquired all of the stock of RentaVision,
Inc. ("RentaVision") for a purchase price of approximately $74 million, which
was paid for with a combination of $69 million in cash and 278,801 shares of
Rent-Way's common stock and the assumption of certain liabilities. RentaVision
operated a chain of 250 rental-purchase stores in 16 states, 50 of which have
been opened during the past year, with annual revenues of approximately $75
million.
The Rental-Purchase Industry
Begun in the mid-to-late 1960s, the rental-purchase business is a relatively
new segment of the retail industry offering an alternative to traditional retail
installment sales. The rental-purchase industry provides brand name merchandise
to customers generally on a week-to-week or month-to-month basis under a full
service rental agreement, which in most cases includes a purchase option. The
customer may cancel the rental agreement at any time without further obligation
by returning the product to the rental- purchase operator.
The Association of Progressive Rental Organizations ("APRO"), the industry's
trade association, estimated that at the end of 1998 the U.S. rental-purchase
industry comprised approximately 8,000 stores providing 7.5 million products to
3.3 million households. Management believes that its customers generally have
annual household incomes ranging from $20,000 to $40,000. Based on APRO
estimates, the rental-purchase industry had gross revenues of $4.7 billion in
1998. The U.S. rental-purchase industry is highly fragmented, but is
experiencing increasing consolidation. Based on APRO estimates, management
believes that the ten largest industry participants account for approximately
50% of total industry stores and that the majority of the remaining portion of
industry consists of operations with fewer than 20 stores. See "--Strategy",
"--Competition."
Management believes that the rental-purchase industry is experiencing
increasing consolidation due to, among other factors, the recognition by smaller
operators of the increased operating efficiencies and better competitive
position achievable by combining with larger operators, greater availability of
capital for larger operators, and the willingness of older operators to sell as
a means of resolving business succession issues. Management believes that this
trend toward consolidation of operations in the industry presents an opportunity
for well-capitalized rental-purchase operators to continue to acquire additional
stores on favorable terms.
Strategy
Management believes that the Company's continued success depends on
successful implementation of the following business strategies:
Acquiring and Opening New Stores
The Company currently intends to expand its operations by acquiring existing
stores and opening new stores, both within its present market areas and in
geographic regions not currently served by the Company. At present, the majority
of that expansion is expected to be accomplished through acquisitions. The
Company believes that acquisitions can effectively increase the Company's market
share while simultaneously expanding its customer base. In addition, in pursuing
its growth strategies, the Company expects to benefit from both enhanced
purchasing power and the ability to leverage economies of scale for certain
operating expenses.
The Company continually reviews acquisition opportunities, and management
believes that a number of acquisition opportunities currently exist. The Company
presently has no plans, proposals, arrangements or understandings with respect
to significant acquisitions. In identifying targets for acquisition, the Company
intends to focus on operations that complement the Company's existing markets,
while remaining open to the possibility of making acquisitions in other areas.
The Company has not established formal criteria for potential acquisitions.
Generally, however, the Company seeks to acquire rental-purchase businesses that
operate profitably and are located in geographic markets that complement the
Company's existing stores or that the Company views as growth markets for the
rental-purchase industry. The Company seeks to acquire such businesses at
purchase prices that will permit the Company a prompt return on its investment
in the form of increased earnings. The Company has no formal policy with respect
to acquisitions with related entities. To date, no related party acquisitions
have been considered nor does the Company anticipate considering such
acquisitions in the future. Management believes that senior management's ability
and experience provides the Company with a competitive advantage in the
evaluation and consummation of acquisition opportunities.
Following consummation of an acquisition, the Company appoints a dedicated
team to oversee and monitor the integration of the acquired stores, including
determining staffing, store merchandise and facility needs, budgets and
performance goals. All acquired stores are promptly evaluated and, if necessary,
remodeled. Management seeks to integrate acquired stores and the management
information system of such stores within one to three months following an
acquisition. The Company completed the integration of the 250 RentaVision stores
acquired on September 23, 1999 by November 11, 1999.
In addition, in May 1999 the Company announced a new store opening plan
designed to complement its acquisition strategy. The Company plans to open an
additional 40-60 stores in the next twelve months. The new store openings will
occur in under-served markets near existing locations to leverage field
operating strength and advertising efficiencies. In fiscal 1999, the Company
opened 12 new stores and hopes to have opened a total of 21 new stores for the
15 month period ending December 31, 1999.
Customer-Focused Philosophy
Management believes that through the continued adherence to its "Welcome,
Wanted and Important" business philosophy, it should be able to increase its new
and repeat customer base, and thus the number of units it has on rent, thereby
increasing revenues and net income. The "Welcome, Wanted and Important"
philosophy is a method by which the Company seeks to create a store atmosphere
conducive to customer loyalty. The Company attempts to create this atmosphere
through the effective use of advertising and merchandising strategies, by
maintaining the clean and well-stocked appearance of its stores and by providing
a high level of customer service (such as the institution of a toll-free
1-800-RENTWAY complaint and comment line). The Company's advertising emphasizes
brand name merchandise from leading manufacturers. In addition, merchandise
selection within each product category is periodically updated to incorporate
the latest offerings from suppliers. Services provided by the Company to the
customer include home delivery, installations, ordinary maintenance and repair
services and pick-up during the term of the contract at no additional charge.
Store managers also work closely with each customer in choosing merchandise,
setting delivery dates and arranging a suitable payment schedule. As part of the
"Welcome, Wanted and Important" philosophy, store managers are empowered,
encouraged and trained to make decisions regarding store operations subject only
to certain Company-wide operating guidelines and general policies.
Expanding the Company's Product Lines
One of the Company's principal strategies is to provide the rental-purchase
customer with the opportunity to obtain merchandise of a higher quality than the
merchandise available from its competitors on competitive terms. To this end,
the Company attempts to maintain a broad selection of products while emphasizing
better quality, higher priced merchandise. The Company intends to continue
expanding its offerings of better quality, higher priced products in all product
areas. Management believes that previous offerings of these products have
succeeded in both increasing the Company's profitability and attracting new
customers to the Company's existing stores. In addition, the Company selectively
tests new merchandise and services. During the last quarter of the 1999 fiscal
year, a new program focusing on Compaq personal computers was implemented. In
addition, the Company has begun to act as an agent to provide prepaid phone
service through a third party. This program is currently being tested on a
limited basis. Management believes that opportunities exist to provide
additional non-traditional merchandise to its customers.
Monitoring Store Performance
The Company's management information system allows each store manager to
track rental and collection activity on a daily basis. The system generates
detailed reports that track inventory movement by piece and by product category
and the number and frequency of past due accounts and other collection activity.
Physical inventories are regularly conducted at each store to ensure the
accuracy of the management information system data. Senior management monitors
this information to ensure adherence to established operating guidelines. In
addition, each store is provided with a monthly profit and loss statement to
track store performance. Management believes the Company's management and
accounting information systems enhance its ability to monitor and affect the
operating performance of existing stores and to integrate and improve the
performance of newly acquired stores.
Results-Oriented Compensation
Management believes that an important reason for the Company's positive
financial performance and growth has been the structure of its management
compensation system. A significant portion of the Company's regional and store
managers' total compensation is dependent upon store performance. Regional and
store managers earn incentives by increasing both store revenues and operating
profits. As further incentive, the Company grants managers stock options.
Management believes that the Company's emphasis on incentive-based compensation
is instrumental in the Company's ability to attract, retain, and motivate its
regional and store managers.
Manager Training and Empowerment
The Company employs four full-time trainers who conduct classroom programs
in the areas of sales, store operations and personnel management. These training
programs often continue for several months and culminate in an exam. The Company
requires its managers to attend, at Company expense, leadership and management
programs offered by leading management and organization experts. The Company
empowers its store managers by permitting them to make significant decisions
involving store operations including personnel, merchandise, and collection
decisions. Management believes that well-trained and empowered store managers
are important to the Company's efforts to maximize individual store performance.
Operations
Company Stores
As of September 30, 1999, the Company operates 1,114 stores in 41 states as
follows:
<TABLE>
<CAPTION>
Number of Number of Number of Number of
Location Stores Location Stores Location Stores Location Stores
---------------- --------- --------------- --------- ----------------- --------- --------------- ----------
<S> <C> <C> <C> <C>
Texas................124 Arkansas.......... 37 Mississippi........ 12 Washington....... 4
Florida.............. 97 Kentucky.......... 36 Nebraska........... 12 Rhode Island..... 3
New York............. 84 Virginia.......... 33 Kansas............. 11 Utah............. 3
Pennsylvania......... 73 Michigan.......... 28 New Mexico......... 10 South Dakota..... 2
Ohio................. 63 Alabama........... 23 New Hampshire...... 9 Idaho............ 1
South Carolina....... 61 Oklahoma.......... 16 Nevada............. 7
North Carolina....... 45 Arizona........... 15 Vermont............ 7
Indiana.............. 43 Massachusetts..... 15 West Virginia...... 7
Louisiana............ 41 Maryland.......... 15 Iowa............... 6
Tennessee............ 41 Maine............. 13 Connecticut........ 5
Georgia.............. 40 Missouri.......... 13 Delaware........... 5
Illinois............. 38 Colorado.......... 12 California......... 4
</TABLE>
The Company's stores average approximately 3,500 square feet in floor space
and are generally located in strip shopping centers in or near low to middle
income neighborhoods. Often, such shopping centers offer convenient free parking
to the Company's customers. The Company's stores are generally uniform in
interior appearance and design and display of available merchandise. The stores
have separate storage areas, but generally do not use warehouse facilities. In
selecting store locations, the Company uses a variety of market information
sources to locate areas of a town or city that are readily accessible to low and
middle income consumers. The Company believes that within these areas, the best
locations are in neighborhood shopping centers that include a supermarket. The
Company believes this type of location makes frequent rental payments at its
stores more convenient for its customers. Generally, the Company refurbishes its
stores every two to five years.
Product Selection
The Company offers brand name home entertainment equipment (such as
television sets, VCRs, camcorders and stereos), furniture, major appliances and
jewelry. Major appliances offered by the Company include refrigerators, ranges,
washers and dryers. The Company's product line currently includes the Zenith,
RCA, Pioneer, JVC, Sharp and Panasonic brands in home entertainment equipment,
the Kenmore, Crosley and General Electric brands in major appliances and the
Ashley and New England Corsair brand in furniture. In June 1999, the Company
added Compaq computers to its product line. The Company closely monitors
customer rental requests and adjusts its product mix to offer rental merchandise
desired by customers.
For the year ended September 30, 1999, payments under rental-purchase
contracts for home entertainment products accounted for approximately 40.7%,
furniture for 28.3%, appliances for 26.5%, jewelry for 3.9% and other items for
0.6% of the Company's rental revenues. Customers may rent either new merchandise
or previously rented merchandise. Weekly rentals currently range from $14.99 to
$39.99 for home entertainment equipment, from $9.99 to $39.99 for furniture,
from $9.99 to $29.99 for major appliances and from $6.99 to $19.99 for jewelry.
Previously rented merchandise is typically offered at the same weekly or monthly
rental rate as is offered for new merchandise, but with an opportunity to obtain
ownership of the merchandise after fewer rental payments.
Rental-Purchase Agreements
Merchandise is provided to customers under written rental-purchase
agreements that set forth the terms and conditions of the transaction. The
Company uses standard form rental-purchase agreements which are reviewed by
legal counsel and customized to meet the legal requirements of the various
states in which they are to be used. Generally, the rental-purchase agreement is
signed at the store, but may be signed at the customer's residence if the
customer orders the product by telephone and requests home delivery. Customers
rent merchandise on a week-to-week and, to a lesser extent, on a month-to-month
basis with rent payable in advance. At the end of the initial and each
subsequent rental period, the customer retains the merchandise for an additional
week or month by paying the required rent or may terminate the agreement without
further obligation. If the customer decides to terminate the agreement, the
merchandise is returned to the store and is then available for rent to another
customer. The Company retains title to the merchandise during the term of the
rental-purchase agreement. If a customer rents merchandise for a sufficient
period of time, usually 12 to 24 months, ownership is transferred to the
customer without further payments being required. Rental payments are typically
made in cash or by check or money order. The Company does not extend credit. See
"--Government Regulation."
Product Turnover
Generally, a minimum rental term of between 12 and 24 months is required to
obtain ownership of new merchandise. Based upon merchandise returns for the year
ended September 30, 1999, the Company believes that the average period of time
during which customers rent merchandise is 16 to 17 weeks. However, turnover
varies significantly based on the type of merchandise being rented, with certain
consumer electronic products, such as camcorders and VCRs, generally being
rented for shorter periods, while appliances and furniture are generally rented
for longer periods. Each rental-purchase transaction requires delivery and
pickup of the product, weekly or monthly payment processing and, in some cases,
repair and refurbishment of the product. In order to cover the relatively high
operating expenses generated by greater product turnover, rental-purchase
agreements require larger aggregate payments than are generally charged under
installment purchase or credit plans.
Customer Service
The Company offers same day delivery, installation and pick-up of its
merchandise at no additional cost to the customer. The Company also provides any
required service or repair without charge, except for damage in excess of normal
wear and tear. If the product cannot be repaired at the customer's residence,
the Company provides a temporary replacement while the product is being
repaired. The customer is fully liable for damage, loss or destruction of the
merchandise, unless the customer purchases an optional loss/damage waiver. Most
of the products offered by the Company are covered by a manufacturer's warranty
for varying periods, which, subject to the terms of the warranty, is transferred
to the customer in the event that the customer obtains ownership. Repair
services are provided through in-house service technicians, independent
contractors or under factory warranties. The Company offers Rent-Way Plus, a
fee-based membership program that provides special loss and damage protection
and an additional one year of service protection on rental merchandise,
preferred treatment in the event of involuntary job loss, accidental death and
dismemberment insurance and discounted emergency roadside assistance, as well as
other discounts on merchandise and services.
Collections
Management believes that effective collection procedures are important to
the Company's success. The Company's collection procedures increase the revenue
per product with minimal associated costs, decrease the likelihood of default
and reduce charge-offs. Senior management, as well as store managers, use the
Company's computerized management information system to monitor cash collections
on a daily basis. In the event a customer fails to make a rental payment when
due, store management will attempt to contact the customer to obtain payment and
reinstate the contract or will terminate the account and arrange to regain
possession of the merchandise. However, store managers are given latitude to
determine the appropriate collection action to be pursued based on individual
circumstances. Depending on state regulatory requirements, the Company charges
for the reinstatement of terminated accounts or collects a delinquent account
fee. Such fees are standard in the industry and may be subject to state law
limitations. See "--Government Regulation." Despite the fact that the Company is
not subject to the federal Fair Debt Collection Practices Act, it is the
Company's policy to abide by the restrictions of such law in its collection
procedures. If an item on rent is not returned or payment thereon is not
received within 90 days of its due date, the Company's policy is to charge-off
the item. Charge-offs due to lost or stolen merchandise were approximately 2.9%,
3.1% and 3.4% of the Company's revenues for the years ended September 30, 1999,
1998, and 1997, respectively. The charge-off rate for chains with over 40 stores
reporting to APRO in 1998 was 3.3%.
Management
The Company's stores are organized geographically with several levels of
management. At the individual store level, each store manager is responsible for
customer relations, deliveries and pickups, inventory management, staffing and
certain marketing efforts. A Company store normally employs one store manager,
one assistant manager, two account managers, one full-time office manager and
one full-time delivery and installation technician. The staffing of a store
depends on the number of rental-purchase contracts serviced by the store.
Each store manager reports to one regional manager, each of whom typically
oversees six to eight stores. Regional managers are primarily responsible for
monitoring individual store performance and inventory levels within their
respective regions. The Company's regional managers, in turn, report to
directors of operations, who monitor the operations of their regions and through
their regional managers, individual store performance. The directors of
operations report to one of five Divisional Vice Presidents who monitor the
overall operations of their assigned geographic area. The Divisional Vice
Presidents report to the Vice President-Operations who is responsible for
overall Company-wide store operations. Senior management at the Company's
headquarters directs and coordinates purchasing, financial planning and
controls, management information systems, employee training, personnel matters
and acquisitions. Headquarters personnel also evaluate the performance of each
store.
Management Information System
The Company believes that its proprietary management information system
provides it with a competitive advantage over many small rental-purchase
operations. The Company uses an integrated computerized management information
and control system to track each unit of merchandise and each rental-purchase
agreement. The Company's system also includes extensive management software and
report generating capabilities. Reports for all stores are reviewed daily by
senior management and any irregularities are addressed the following business
day. Each store has the ability to track individual components of revenue, idle
items, items on rent, delinquent accounts and other account information.
Management electronically gathers each day's activity report. Company management
has access to operating and financial information about any store location or
region in which the Company operates and generates management reports on a
daily, weekly, month-to-date and year-to-date basis. Utilizing the management
information system, senior management, regional managers and store managers can
closely monitor the productivity of stores under their supervision compared to
Company-prescribed guidelines. This system has enabled the Company to expand its
operations while maintaining a high degree of control over cash receipts, rental
merchandise, and merchandise units in repair. The Company completed the
management information system integration of all stores acquired in the Home
Choice merger by March 31, 1999 and all stores acquired in the America's
Rent-To-Own acquisition by July 31, 1999. The management information sysyem
integration and conversion of all the stores from the RentaVision acquisition
was complete by November 11, 1999. While the Company believes its management
information system is adequate to meet its needs for the foreseeable future, it
continues to upgrade the system over time. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations, Year 2000 Issues".
Purchasing and Distribution
The Company's general product mix is determined by senior management, based
on an analysis of customer rental patterns and introduction of new products on a
test basis. Individual store managers are responsible for determining the
particular product selection for their store from a list of products approved by
senior management. All purchase orders are executed through regional managers
and the Company's purchasing department to insure that inventory levels and mix
throughout the store regions are appropriate. Merchandise is generally shipped
by vendors directly to each store, where it is held for rental. The Company
purchases its merchandise directly from manufacturers or distributors. The
Company generally does not enter into written contracts with its suppliers.
Although the Company currently expects to continue its existing relationships,
management believes there are numerous sources of products available to the
Company, and does not believe that the success of the Company's operations is
dependent on any one or more of its present suppliers.
Marketing and Advertising
The Company promotes its products and services through targeted direct mail,
spot and national television advertising and, to a lesser extent, through radio
and secondary print media advertisement. The Company also solicits business by
telephoning former and prospective customers. The Company is dedicating an
increasing percentage of its marketing dollars to television advertising to
build brand recognition in markets where it is economically attractive to do so.
The Company's print advertisements emphasize product and brand name selection,
prompt delivery and repair, and the absence of any downpayment, credit
investigation or long-term obligation. Advertising expense as a percentage of
revenue for the years ended September 30, 1999, 1998 and 1997 were 4.7%, 5.4%
and 5.6%, respectively. In addition to the Company's national advertising
efforts, a good deal of emphasis has been placed on the development of a local
store marketing plan to allow the stores to leverage market specific knowledge.
As the Company obtains new stores in its existing markets, the advertising
expenses of each store in the market can be reduced by listing all stores in the
same market-wide advertisement. In addition, the Company participates in
cooperative advertising programs with many of its major vendors.
Competition
The rental-purchase industry is highly competitive. The Company competes
with other rental-purchase businesses and, to a lesser extent, with rental
stores that do not offer their customers a purchase option. Competition is based
primarily on rental rates and terms, product selection and availability, and
customer service. With respect to consumers who are able to purchase a product
for cash or on credit, the Company also competes with department stores,
discount stores and retail outlets that offer an installment sales program or
offer comparable products and prices. The Company is the second largest operator
in the rental-purchase industry, second only to Rent-A-Center. Rent-A-Center is
national in scope and has significantly greater financial and operating
resources and name recognition than does the Company.
Personnel
As of September 30, 1999, the Company had approximately 5,617 employees, of
whom 202 are located at the corporate office in Erie, Pennsylvania. None of the
Company's employees are represented by a labor union. Management believes its
relations with its employees are good.
Government Regulation
Forty-six states have adopted legislation regulating or otherwise impacting
the rental-purchase transaction. These laws generally require certain
contractual and advertising disclosures concerning the nature of the transaction
and also provide varying levels of substantive consumer protection, such as
requiring a grace period for late payments and contract reinstatement rights in
the event the agreement is terminated for nonpayment.
Recent court decisions in Minnesota, New Jersey, and Wisconsin have created
a legal environment in those states which is prohibitive to rental-purchase
transactions. The Company does not operate in those states. The majority of the
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. Management believes that its operations are in
material compliance with applicable state rental-purchase laws.
No federal legislation has been enacted regulating the rental-purchase
transaction. The Company instructs its managers in procedures required by
applicable law through training seminars and policy manuals and believes that it
has operated in compliance with the requirements of applicable law in all
material respects.
Management believes that in the unlikely event federal legislation is
enacted regulating rental-purchase transactions as credit sales, the Company
would be able to adapt to the new laws and remain profitable by repositioning
itself as a rent-to-rent business.
Service Marks
The Company has registered the "Rent-Way" service mark under the Lanham Act.
The Company believes that this mark has acquired significant market recognition
and goodwill in the communities in which its stores are located. The service
mark "Rent-Way Because There's Really Only One Way" and "RentWay - the Right
Way" and the related designs have also been registered by the Company. The
Company has also prepared applications to register the following service marks:
"RentWay. The Right Way. Right Away.", "Lifetime Reinstatement", and "We're
Changing the Way America Rents". In connection with the Home Choice merger, the
Company acquired the "Home Choice" service mark, which is registered under the
Lanham Act.
Related Party Transactions
Although the Company has in the past and may in the future enter into
transactions with related parties, the Company has adopted no formal policies,
procedures or controls with respect to such transactions. Generally, however,
the Company requires that any transactions with related entities be on terms no
less favorable to the Company than would be available from an unrelated third
party.
<PAGE>
ITEM 2 DESCRIPTION OF PROPERTIES
The Company leases all of its store facilities under operating leases that
generally have terms of three to five years and require the Company to pay real
estate taxes, utilities and maintenance. The Company has optional renewal
privileges on most of its leases for additional periods ranging from three to
five years at rental rates generally adjusted for increases in the cost of
living. There is no assurance that the Company can renew the leases that do not
contain renewal options, or that if it can renew them, that the terms will be
favorable to the Company. Management believes that suitable store space is
generally available for lease and that the Company would be able to relocate any
of its stores without significant difficulty should it be unable to renew a
particular lease. Management also expects that additional space will be readily
available at competitive rates for new store openings. The Company's main
corporate offices are in Erie, Pennsylvania and consist of three buildings of
approximately 34,000, 11,000, and 10,000 square feet. In addition, the Company
leases administrative offices in Dallas, Texas, Daytona, Florida, Lexington,
Kentucky, and Raleigh, North Carolina. The Company also owns an office building
in Erie, Pennsylvania, which is used for record retention.
ITEM 3 LEGAL PROCEEDINGS
From time to time the Company is a party to various legal proceedings
arising in the ordinary course of its business. The Company is not currently a
party to any material litigation.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
<PAGE>
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "RWY." The Company began trading on the New York Stock Exchange on
October 8, 1998. The Company's common stock was previously traded on the NASDAQ
National Market under the symbol "RWAY". The following table sets forth, for the
periods indicated, the high and low sales prices per share of the Common Stock
as reported on the NASDAQ National Market and the New York Stock Exchange.
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, September 30,
1999 1998
---------------------- -----------------------
High Low High Low
<S> <C> <C> <C> <C>
First Quarter. $28.00 $17.50 $20.50 $15.75
Second Quarter 27.88 21.38 24.75 17.31
Third Quarter. 29.44 20.50 33.63 25.13
Fourth Quarter 25.06 19.00 32.00 22.00
</TABLE>
As of December 6, 1999, there were 194 record shareholders of the Common
Stock.
The Company has not paid any cash dividends to shareholders. The
declaration of any cash or stock dividends will be at the discretion of the
Board of Directors, and will depend upon earnings, capital requirements and the
financial position of the Company, general economic conditions and other
pertinent factors. At this time, the Company does not intend to pay any cash
dividends in the foreseeable future. Management intends to reinvest earnings, if
any, in the development and expansion of the Company's business for an
indefinite period of time. The Company's credit facility prohibits the payment
of dividends.
On June 30, 1999 and September 23, 1999, the Company issued 231,140 and
278,801 shares of its common stock as partial consideration in connection with
the acquisitions of America's Rent-To-Own and RentaVision, respectively. The
shares were issued in connection with acquisitions to unaffiliated persons and
bear restrictions on transfer. As such, the issuances of the shares is exempt
from registration under Section 4 (2) of the Securities Act of 1933, as amended.
<PAGE>
ITEM 6 SELECTED FINANCIAL DATA
The following selected financial data for the years ended September 30,
1995, 1996, 1997, 1998 and 1999 were derived from the financial statements of
Rent-Way which have been restated to reflect the Company's merger with Home
Choice. The historical financial data are qualified in their entirety by, and
should be read in conjunction with, Management's Discussion and Analysis of
Financial Condition and Results of Operations and the financial statements of
the Company and notes thereto included elsewhere in this document.
<TABLE>
<CAPTION>
Year Ended September 30, (1)
--------------------------------------------------
1995(2) 1996(3) 1997(4) 1998(5) 1999(6)
------- ------- ------- ------- -------
(Dollars in millions, except per share data)
Statement of Operations Data:
<S> <C> <C> <C> <C>
Total revenues.......................... $ 105,723 $175,333 $ 320,330 $ 436,031 $ 494,351
Gross profit............................ 6,531 8,710 10,998 14,529 46,715
Income (loss) before extraordinary item. 2,961 3,945 1,566 (1,838) 15,102
Net income (loss)....................... 2,961 3,945 1,297 (1,838) 14,583
Earnings (loss) applicable to common shares 2,923 3,816 1,577 (1,838) 14,583
Basic:
Income (loss) before extraordinary item $ 0.41 $ 0.34 $ 0.11 $ (0.09)$ 0.71
Net income (loss)..................... $ 0.41 $ 0.34 $ 0.09 $ (0.09)$ 0.68
Diluted:
Income (loss) before extraordinary item $ 0.41 $ 0.32 $ 0.11 $ (0.09)$ 0.68
Net income (loss)..................... $ 0.41 $ 0.32 $ 0.09 $ (0.09)$ 0.66
Weighted average shares outstanding:
Basic................................. 7,056 11,954 16,653 20,283 21,341
Diluted............................... 7,156 12,089 16,653 20,283 23,345
Balance Sheet Data:
Rental merchandise...................... $ 34,335 $ 76,586 $ 132,393 $ 176,022 $ 202,145
Total assets............................ 71,496 219,105 319,849 478,831 597,394
Debt.................................... 42,215 19,751 96,318 179,603 288,130
Stockholders' equity.................... 14,309 177,063 183,968 247,863 277,452
</TABLE>
(1) As a result of the Company's merger with Home Choice in a
pooling of interests, all periods prior to the year ended September 30,
1999 have been restated. The year ended September 30, 1998 reflects the
combination of the preceding twelve-month financial periods for each of
Rent-Way and Home Choice. All other years presented reflect the combination
of twelve months ended September 30 for Rent-Way and twelve months ended
December 31 for Home Choice.
(2) During the year ended September 30, 1995, the Company acquired 50
rental-purchase stores, 46 through the acquisition of McKenzie Leasing
Corporation in July 1995, which affects the comparability of the historical
financial information for the periods presented.
(3) During the year ended September 30, 1996, the Company acquired 190
rental-purchase stores, 102 through the acquisition of Action TV &
Appliance Rental, Inc., which affects the comparability of the historical
financial information for the periods presented.
(4) During the year ended September 30, 1997, the Company acquired 214
rental-purchase stores, 70 of which were acquired in February 1997 from
Perry Electronics, Inc. d/b/a Rental King, which affects the comparability
of the historical financial information for the periods presented.
(5) During the year ended September 30, 1998, the Company acquired 250
rental-purchase stores, 50 of which were acquired in January 1998 from Ace
Rentals and 145 of which were acquired in February 1998 from Champion,
which affects the comparability of the historical financial information for
the periods presented.
(6) During the year ended September 30, 1999, the Company acquired 275
rental-purchase stores, 250 of which were acquired in September 1999 from
RentaVision, which affects the comparability of the historical financial
information for the periods presented.
<PAGE>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Rent-Way is the second largest operator in the rental purchase industry with
1,114 stores located in 41 states. The Company offers quality brand name home
entertainment equipment, furniture, appliances, and jewelry to customers under
full-service rental-purchase agreements that generally allow the customer to
obtain ownership of the merchandise at the conclusion of an agreed upon rental
period.
On December 10, 1998, the Company completed a merger (the "Merger") with
Home Choice Holdings, Inc. ("HMCH" or "Home Choice"). The Merger, as per the
terms of the agreement, was recorded as a pooling of interests, in accordance
with Accounting Principles Board ("APB") Opinion No. 16. Under the terms of the
agreement the Company issued 0.588 shares of common stock for each outstanding
share of HMCH common stock. The Merger increased the outstanding shares of the
Company by approximately 10,025,000 shares. HMCH, at the time of the Merger,
operated 458 stores in 26 states, primarily in the southeastern, midwestern, and
southwestern portions of the United States, with annual revenues of
approximately $260 million. As a result of the Merger, the Company became the
second largest company in the rental-purchase industry.
On February 26, 1998, Home Choice (formerly Alrenco, Inc.) merged with RTO,
Inc. The merger, as per the terms of the agreement, was recorded as a pooling of
interests, in accordance with APB Opinion No. 16. Under the terms of the
agreement, Home Choice issued 0.898 shares of common stock for each outstanding
share of RTO common stock.
Prior to the mergers, the management of the Company, Alrenco, and RTO grew
their operations through diverse strategies.
Rent-Way Acquistions
Rent-Way was formed in 1981 to operate a rental-purchase store in Erie,
Pennsylvania. In 1993, as a result of acquisitions and new store openings, the
Company was operating 19 stores in three states and had completed its initial
public offering. In 1994, the Company acquired 20 rental-purchase stores through
its acquisition of D.A.M.S.L. Corporation. In 1995, the Company acquired 50
rental-purchase stores, 46 through the acquisition of McKenzie Leasing
Corporation. In 1996, the Company acquired 32 rental-purchase stores in four
separate transactions. In 1997, the Company acquired 92 rental-purchase stores,
70 of which were acquired from Perry Electronics, Inc. d/b/a Rental King. In
1998, the Company acquired 226 rental-purchase stores, 50 of which were acquired
from Ace Rentals and 145 of which were acquired from Champion Rentals, Inc. The
Company also opened 13 new stores in 1998.
Alrenco Acquisitions
Alrenco grew primarily through the opening of new stores from its inception
in 1980 through 1990. During the period from 1990 to 1993, management focused
its efforts on improving the performance of its existing stores. As a result,
Alrenco increased its revenue from $16.3 million to $22.3 million, operating
profit from $0.9 million to $2.0 million, and net earnings from $0.1 million to
$1.0 million. In 1994, Alrenco acquired 18 rental-purchase stores. In 1995,
Alrenco acquired 15 stores. In 1996, Alrenco acquired 75 stores in 23 separate
transactions. In 1997, Alrenco acquired 54 stores and 13 rental-purchase
portfolios in 19 separate transactions.
RTO Acquisitions
RTO was incorporated on June 20, 1996 and since that time it has
aggressively sought to establish its store base through multiple significant
store acquisitions, new store openings, and smaller store acquisitions. In 1996,
RTO purchased 109 stores, 102 of which were acquired from Action TV & Appliance
Rentals, Inc. In 1997, RTO acquired 73 stores in a series of transactions. In
1996 and 1997, RTO acquired 59 stores in transactions accounted for as a
pooling-of-interests. Also in 1997, RTO opened 34 new stores. From January 1,
1998 until March 31, 1998, RTO opened eight additional stores.
The number of stores operated by the Company has increased from 395 as of
September 30, 1996 to 1,114 as of September 30, 1999. The following table shows
the number of stores opened, acquired, and/or merged during this three-year
period.
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------
Stores 1997 1998 1999
-------------------------- ----- ----- -----
<S> <C> <C> <C>
Open at Beginning of Period 395 597 869
Opened.................... 16 65 12
Acquired.................. 214 250 275
Locations Sold............ 8 8 --
Closed or Combined........ 20 35 42
----- ----- -----
Open at End of Period..... 597 869 1,114
===== ===== =====
</TABLE>
In May 1999, the Company announced its plans to open 40-60 stores in the
next twelve months. The new store openings will occur in under-served markets
near existing locations to leverage field operating strength and advertising
efficiencies. The Company plans to open 25 new locations by the end of the
calendar year. Through November 1999, the Company had opened 16 new stores.
On June 30, 1999, the Company acquired America's Rent-To-Own Center, Inc.
("America's Rent-To-Own"). The transaction value was approximately $7 million
and was paid for with a combination of 231,140 shares of Rent-Way's common stock
and the assumption of certain liabilities. America's Rent-To-Own operated 21
rental-purchase stores in Arkansas, Kansas, Missouri, and Oklahoma and had
annual revenues of approximately $8 million.
On September 23, 1999, the Company acquired all of the stock of RentaVision,
Inc. ("RentaVision") for a purchase price of approximately $74 million.
RentaVision operated a chain of 250 rental-purchase stores in 16 states, 50 of
which have been opened during the past year, with annual revenues of
approximately $75 million.
Management continues to actively seek acquisition candidates with financial
and geographic profiles consistent with the Company's growth objectives.
In fiscal 1998 and 1999, the Company increased its staffing levels in field
management, accounting, computer information systems, purchasing, and human
resources to support its growth plans. As a result, in June 1998, the Company
purchased a 34,000 square foot building to be used as its new corporate
headquarters. The Company plans to construct a 30,000 square foot addition to
this building in fiscal 2000 to support the Company's growth in the foreseeable
future. The Company expects to benefit from leveraging these additional costs
over a larger store base as it continues to expand its operations. In addition,
the Company maintains administrative offices in Dallas, Texas, Daytona, Florida,
Lexington, Kentucky, and Raleigh, North Carolina.
RESULTS OF OPERATIONS
As an aid to understanding the Company's operating results, the following
table expresses certain items of the Company's Consolidated Statements of
Operations for the years ended September 30, 1999, 1998 and 1997 as a percentage
of total revenues.
<TABLE>
<CAPTION>
Years ended
September 30,
----------------------------
1999 1998 1997
--------- --------- ---------
Revenues:.........................
<S> <C> <C> <C>
Rental revenue.................. 86.4% 86.7% 86.6%
Other revenue................... 13.6 13.3 13.4
-------- -------- --------
Total revenues............... 100.0 100.0 100.0
Costs and operating expenses:
Depreciation and amortization:
Rental merchandise........... 25.0 24.9 25.0
Property and equipment....... 2.0 1.7 1.7
Amortization of goodwill..... 2.0 2.6 3.7
Salaries and wages.............. 26.0 27.6 27.9
Advertising..................... 4.7 5.4 5.6
Occupancy....................... 6.7 6.9 7.0
Name change expense............. -- 0.3 0.3
Business combination costs...... 3.4 2.6 0.3
Signing bonus................... -- -- 0.1
Other operating expense......... 20.8 24.7 25.0
-------- -------- --------
Total costs and operating
expenses.................... 90.6 96.7 96.6
-------- -------- --------
Operating income................ 9.4 3.3 3.4
Interest expense................ (3.3) (2.6) (1.8)
Other income (expenses), net.... (0.1) -- 0.4
-------- -------- --------
Income before income taxes
and extraordinary item...... 6.0 0.7 2.0
Income tax expense.............. 3.0 1.1 1.5
-------- -------- --------
Income (loss) before
extraordinary item.......... 3.0 (0.4) 0.5
Extraordinary item.............. (0.1) -- (0.1)
-------- -------- --------
Net income (loss)............ 2.9% (0.4)% 0.4%
======== ======== ========
</TABLE>
Fiscal 1999 compared to Fiscal 1998
Total revenues. Total revenues increased $58.4 million, or 13.4%, to $494.4
million from $436.0 million. The increase is attributable to the inclusion of a
full year's results for the stores acquired in fiscal 1998, a partial year's
operations for the stores acquired and opened in fiscal 1999, and increased same
store revenues. The stores acquired in the Champion acquisition, consummated on
February 5, 1998, accounted for $29.5 million, or 50.5%, of the increase. The
stores acquired in the Ace Rentals acquisition, consummated on January 7, 1998
accounted for $5.0 million, or 8.6%, of the increase. The stores acquired in
other 1998 acquisitions accounted for $12.2 million, or 20.9%, of the increase.
The stores acquired in 1999 acquisitions accounted for $3.4 million, or 5.8%, of
the increase. The stores opened in fiscal 1999 accounted for $2.7 million, or
4.6%, of the increase. The Company's same stores accounted for $5.6 million, or
9.6%, of the increase. The increase in same store revenues was primarily due to
a 0.4% increase as a percentage of total revenues in electronics rentals, a 0.4%
increase as a percentage of total revenues in furniture rentals, a 0.4% increase
as a percentage of total revenues in jewelry rentals, a 0.2% increase as a
percentage of total revenues in early purchase option sales, and a 0.6% increase
as a percentage of total revenues in sales of the Rent-Way Plus liability
protection plan offset by a 1.3% decrease as a percentage of total revenues in
sales of liability waivers, a 0.3% decrease as a percentage of total revenues in
processing fees, and a 0.2% decrease as a percentage of total revenues in pager
rentals. Appliance rentals and merchandise sales remained unchanged as a
percentage of total revenues. The Company expects increased same store revenues
in fiscal 2000 due to, among many other factors, the addition of new products
and services. During the last quarter of fiscal 1999, the Company added Compaq
personal computers to its product line. In addition, the Company has begun to
act as an agent to provide prepaid phone service through a third party. This
program is currently being tested on a limited basis. Management believes that
opportunities exist to provide additional non-traditional merchandise to its
customers.
Depreciation and amortization. Depreciation expense related to rental
merchandise increased slightly to 25.0% as a percentage of total revenues from
24.9%. This increase is primarily due to the depreciation expense related to the
new Compaq computers. These computers, added to the Company's product line in
June 1999, are depreciated on the straight-line basis over 15 months. The
Company believes that this computer depreciation may cause depreciation expense
as a percentage of total revenues to be slightly higher in fiscal 2000.
Depreciation expense related to property and equipment increased to 2.0% as
a percentage of total revenues from 1.7%. This increase is principally due to
the depreciation costs associated with the new corporate building purchased in
June 1998, new store signage and remodels associated with the Home Choice
stores, and the computer and software costs associated with the Company's
implementation of a PeopleSoft software package in January 1999.
Amortization of goodwill decreased to 2.0% as a percentage of total revenues
from 2.6%. This is attributable to the reduced amortization expense of 1996 and
1997 purchase acquisitions primarily for customer rental agreements, which are
amortized on an accelerated method over an estimated useful life of 18 months.
Salaries and wages. Salaries and wages increased by $8.2 million to $128.5
million from $120.3 million principally due to the addition of 526 new stores
and additions to corporate personnel. Salaries and wages decreased to 26.0% as a
percentage of total revenues from 27.6%. This decrease is due the Company's
ability to spread corporate and regional managers' payroll over an increased
store revenue base. This decrease is also attributable to the Company bringing
Home Choice payroll and store personnel levels within the Company's standards.
As a result of these factors, the Company expects a further decline in salaries
and wages as a percentage of total revenues in fiscal 2000.
Advertising. Advertising expense decreased to $23.4 million from $23.6
million and as a percentage of total revenues decreased to 4.7% from 5.4%. This
decrease is principally due to the Company's ability to focus advertising
efforts in cluster markets. It is also due to the Company's participation in
co-operative advertising programs with its vendors. As part of these
co-operative programs, the Company is able to recoup a portion of its
advertising costs from its vendors in the form of rebates for advertising their
products in Rent-Way ads.
Occupancy. Occupancy expense increased to $33.0 million from $30.0 million
principally due to the addition of the stores opened and acquired in fiscal 1998
and 1999.
Business combination costs. In conjunction with the Merger, the Company
incurred $16.8 million in costs which included investment banker fees of $6.5
million, proxy preparation, printing, and other professional fees of $1.3
million, employee severance and stay-put arrangement costs of $4.5 million, due
diligence and other costs of $0.9 million, costs related to closing or disposing
of duplicate corporate headquarters, equipment and stores in overlapping markets
of $2.1 million, and the write-off of prepaid assets which could not be used of
$1.5 million. In fiscal 1998, the Company incurred $11.2 million in business
combination costs associated with Home Choice's predecessor's merger with
Alrenco, Inc. in February 1998. These costs included investment banker fees,
proxy preparation, printing, and other professional fees, employee severance and
other costs associated with relocating the corporate headquarters from Indiana
to Texas, costs related to closing and merging stores in the same markets,
amortization expense of stock awards which vested fully upon the merger, and
costs associated with terminating certain leases.
Name change expense. Name change expense decreased to $0.1 million from $1.8
million. In 1997, Home Choice launched a program to change the name of all of
its stores from the various trade names acquired to "HomeChoice Lease or Own".
In connection with this program, Home Choice incurred nonrecurring costs which
included the write-off of the net carrying values of old signs and branded
supplies and the expensing of new vehicle decals. The Company currently operates
under both the RentWay and HomeChoice trade names.
Other operating expenses. Other operating expenses decreased to $103.0
million from $107.8 million and decreased to 20.8% as a percentage of total
revenues from 24.7%. This decrease is the result of the efficiencies gained by
the Company from its ability to spread certain fixed costs over an increased
store revenue base. These decreased fixed costs include liability insurance,
legal and professional fees, state and local taxes, and office supplies.
Operating income. Operating income increased to 9.4% from 3.3% due to the
factors discussed above. In connection with the Merger, the Company identified a
large number of rental merchandise items, which failed to meet the accepted
quality standards of the Company's operating procedures. Accordingly, the
Company experienced an excessive amount of inventory deletions during the three
month period ended December 31, 1998. The amount of excessive inventory
write-offs included in the other operating expenses in the Consolidated
Statement of Operations for the year ended September 30, 1999 was approximately
$1.1 million. Excluding these write-offs and the business combination costs
described above, operating income increased to 13.1% from 5.9%. The Company
anticipates its operating income to increase to approximately 16.0% in fiscal
2000 as a result of its continued ability to leverage costs over an increased
store revenue base.
Interest expense. Interest expense increased to 3.3% from 2.6% as a
percentage of total revenues. This increase is mainly due to a full year of
interest accruing on the $81.0 million in funds drawn on the Company's senior
credit facility to consummate the Champion acquisition compared to a partial
year of interest accruing in fiscal 1998.
Income tax expense. Income tax expense as a percentage of total revenues
increased to 3.1% from 1.1%. The increase was due to a significant increase in
pretax book income and operating income. The Company's effective tax rate
decreased from 1998 because nondeductible business combination costs represented
a smaller portion of pretax income in 1999 compared to 1998 and as a result of
$1,520 of favorable adjustments related to the completion of certain tax
authority audits and finalization of certain tax returns related to acquired
entities.
Extraordinary item. In connection with the Merger, the Company entered into
a new syndicated loan facility. As a result of this refinancing, the Company
wrote off the remainder of deferred financing costs associated with its and Home
Choice's previous credit facilities. The amount of the remaining deferred
financing costs was $0.9 million, $0.5 million net of tax benefit.
Net income. Net income increased to 2.9% from a net loss of 0.4% due to the
factors discussed above.
Fiscal 1998 compared to Fiscal 1997
Total revenues. Total revenues increased $115.7 million, or 36.1% to $436.0
million from $320.3 million. The increase is attributable to the inclusion of a
full year's results for the stores acquired and opened in fiscal 1997, a partial
year's operations for the stores acquired and opened in fiscal 1998, and
increased same store revenues. The stores acquired in the Champion acquisition
accounted for $51.1 million, or 44.2%, of the increase. The stores acquired in
the Ace Rentals acquisition, accounted for $15.9 million, or 13.7%, of the
increase. Other 1998 acquisitions accounted for $2.8 million, or 2.4%, of the
increase. Stores opened in fiscal 1998 accounted for $3.8 million, or 3.3%, of
the increase. The stores acquired in Rent-Way 1997 acquisitions accounted for
$17.8 million, or 15.4% of the increase. The stores acquired in Home Choice 1997
acquisitions accounted for $14.3 million, or 12.3% of the increase. The stores
opened in fiscal 1997 accounted for $9.1 million, or 7.9%, of the increase. The
Company's same stores accounted for $0.9 million, or 0.8%, of the increase.
Depreciation and amortization. Depreciation expense related to rental
merchandise increased to $108.4 million from $80.2 million, but decreased to
24.9% from 25.0% of total revenues principally due to increases in weekly rental
rates, lower purchase costs of rental merchandise due to increased volume, and
improved realization of collectible rent.
Depreciation expense related to property and equipment increased to $7.2
million from $5.5 million primarily due to the new store signage, remodels, and
computer equipment costs associated with the Champion acquisition and Ace
Rentals acquisition.
Amortization of goodwill decreased to 2.6% as a percentage of total revenues
from 3.7%. This is attributable to the reduced amortization expense of 1996 and
1997 purchase acquisitions primarily for customer rental agreements, which are
amortized on an accelerated method over an estimated useful life of 18 months.
Salaries and wages. Salaries and wages increased by $30.8 million to $120.3
million from $89.5 million principally due to the addition of the stores
associated with the Champion acquisition and Ace Rentals acquisition. Salaries
and wages as a percentage of total revenues decreased 0.3% to 27.6% from 27.9%.
Advertising. Advertising expense increased to $23.6 million from $17.9
million principally due to the addition of the stores associated with the
Champion acquisition and Ace Rentals acquisition. Advertising expense decreased
to 5.4% from 5.6% of total revenues.
Occupancy. Occupancy expense increased to $30.0 million from $22.3 million
principally due to the addition of the stores associated with the Ace Rentals
acquisition and Champion acquisition, but decreased to 6.9% from 7.0% of total
revenues.
Business combination costs. Business combination costs increased to 2.6% as
a percentage of total revenues from 0.3%. This increase is due to the $11.2
million in costs incurred by Home Choice's predecessor to effect the merger with
Alrenco, Inc. in February 1998. These costs included investment banker fees,
proxy preparation, printing, and other professional fees, employee severance and
other costs associated with relocating the corporate headquarters from Indiana
to Texas, costs related to closing and merging stores in the same markets,
amortization expense of stock awards which vested fully upon the merger, and
costs associated with terminating certain leases.
Name change expense. Name change expense increased to $1.8 million from $0.7
million. In 1997, Home Choice launched a program to change the name of all of
its stores from the various trade names acquired to "HomeChoice Lease or Own".
In connection with this program, Home Choice incurred nonrecurring costs which
included the write-off of the net carrying values of old signs and branded
supplies and the expensing of new vehicle decals.
Other operating expenses. Other operating expenses increased to $107.8
million from $80.0 million primarily due to the addition of the stores
associated with the Ace Rentals acquisition and Champion acquisition, but
decreased to 24.7% from 25.0%.
Operating income. Operating income decreased to 3.3% from 3.4%. This
decrease is principally due to the business combination costs described above.
Excluding these costs, operating income increased to 5.9% from 3.7%. This
increase is principally due to the Company's ability to spread fixed costs over
an increased store revenue base.
Interest expense. Interest expense increased to 2.6% as a percentage of
total revenues from 1.8%. This increase is mainly due to a full year of interest
accruing on borrowings drawn on the Company's credit facility in connection with
the acquisition of Bill Coleman TV in January 1997 and the $20.0 million of 7.0%
Convertible Subordinated Debentures due 2007 (the "Debentures") issued in
connection with the Rental King acquisition. This increase is also due to the
$81.0 million in funds drawn on the Company's senior credit facility in
connection with the Champion acquisition.
Income tax expense. Income tax as a percentage of total revenues decreased
to 1.1% from 1.5%. The decrease in fiscal 1998 was due to lower pretax income,
resulting from increased business combination costs incurred during 1998, a
portion of which were nondeductible for tax purposes.
Net income. The Company generated a net loss of 0.4% in fiscal 1998 as
compared to net income of 0.4% in fiscal 1997. This decrease is the result of
the business combination costs described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements relate primarily to acquisitions, new
store openings, and purchasing additional rental merchandise and replacing
rental merchandise that has been sold or is no longer suitable for rent. The
Company intends to increase the number of stores it operates through
acquisitions and new store openings. Such acquisitions will vary in size and the
Company will consider large acquisitions that could be material to the Company.
To provide any additional funds necessary for the continued pursuit of its
growth strategies, the Company may incur, from time-to-time, additional short
and long-term bank or other institutional indebtedness and may issue, in public
or private transactions, its equity and debt securities, depending upon market
and other conditions. There can be no assurance that such additional financing
will be available on terms acceptable to the Company.
Net cash provided by (used in) operating activities increased to $11.0
million for fiscal 1999 from ($12.9 million) for fiscal 1998. This increase is
principally due to a $16.4 million increase in net income, a $11.3 million
increase in deferred income taxes, a $5.2 million decrease in rental merchandise
purchases, and a $4.5 million increase in income taxes payable offset by a $27.1
million decrease in accounts payable and a $11.3 million decrease in other
liabilities.
Net cash used in investing activities decreased $45.1 million to $92.0
million in fiscal 1999 compared to $137.1 million in fiscal 1998. Capital
expenditures in fiscal 1999 included the purchase of 21 stores from America's
Rent-To-Own in June 1999 and 250 stores from RentaVision in September 1999. It
also included the purchase of new store signage and store remodeling costs
associated with the stores obtained in the Home Choice merger. Capital
expenditures in 1998 included the purchase of 50 stores from Ace Rentals in
January 1998, 145 stores from Champion in February 1998, and an additional 55
stores. It also included the purchase of a 34,000 square foot building to be
used as the Company's new corporate headquarters in June 1998. The purchase
price of the building was $3.7 million. In addition, 1998 capital expenditures
included the computer equipment and software costs related to the implementation
of a PeopleSoft software package for all accounting functions, payroll, human
resources, and benefit administration requirements and a J. Driscoll package for
cash management.
In fiscal 2000, the Company plans to construct a 30,000 square foot addition
to its current corporate headquarters facility. The Company estimates the cost
at approximately $3.5 million. The Company plans to fund this project with
borrowings on its senior credit facility.
Net cash provided by financing activities decreased to $84.4 million in
fiscal 1999 from $149.7 million in fiscal 1998. Cash flows from financing
activities have historically represented the Company's financing of its long
term growth.
On September 23, 1999, the Company amended its existing collaterized term
loan and revolving credit facility with a syndicate of banks led by Bank of
Montreal and National City Bank (the "Amended Facility"). The Amended Facility
provides for loans and letters of credit up to $325.0 million. Borrowings under
the Amended Facility bear interest at the Company's option either at a base rate
or a LIBOR based rate. The Amended Facility requires the Company to meet certain
financial covenants and ratios including maximum leverage, minimum interest
coverage, minimum tangible net worth, fixed charge coverage, and rental
merchandise usage ratios. As of September 30, 1999, the Company was in
compliance with all covenants contained in the Amended Facility. As of September
30, 1999 $268.0 million in borrowings is outstanding under the Amended Facility.
Of the $268.0 million outstanding, $43.0 million is related to a revolving
credit facility, which is payable September 30, 2004 and $225.0 million is in
the form of term notes.
The principal amount of the Term Notes A (with maximum borrowings of $125.0
million) are payable in quarterly payments due on the last day of each December,
March, June, and September, beginning with the quarter ending December 31, 1999,
and as follows:
<TABLE>
<CAPTION>
Quarter (s) Ending on Following Amount of Quarterly Payment of
Date or In The Following Period Principal Due on Each Payment Date
------------------------------- ----------------------------------
(in millions of $)
<S> <C> <C> <C> <C> <C> <C>
12-31-99 through 9-30-00............. $ 3.8
12-31-00 through 9-30-01............. 5.0
12-31-01 through 9-30-02............. 6.3
12-31-02 through 9-30-03............. 7.5
12-31-03 through 9-30-04............. 8.8
</TABLE>
The principal amount of each of the Term Notes B (with maximum borrowings
of $100.0 million) are payable in quarterly payments each in the amount of
$250,000 due on the last day of each December, March, June, and September,
beginning with the quarter ending December 31, 1999, and continuing through and
including September 30, 2004, followed by two annual payments on September 30,
2005 and September 30, 2006, each in the amount of $47.5 million.
The Company believes that it will generate sufficient amounts of cash from
operations to make the required quarterly principal repayments in fiscal 2000.
Management believes that sufficient resources will be available to meet the
Company's cash requirements through at least the next twelve months. The Company
believes that it can adequately fund its cash needs for the foreseeable future
through borrowings under the Amended Facility and cash generated from
operations. Cash requirements for periods beyond the next twelve months depend
on the Company's profitability, its ability to manage working capital
requirements, and its rate of growth.
Quantitative and Qualitative Disclosures About Market Risk
The Company's major market risk exposure is primarily due to possible
fluctuations in interest rates. The Company's policy is to manage interest rate
risk by utilizing interest rate swap agreements to convert a portion of the
floating interest rate debt to fixed interest rates. The Company does not enter
into derivative financial instruments for trading or speculative purposes. The
interest rate swap agreements are entered into with major financial institutions
thereby minimizing the risk of credit loss.
The following table presents information about the Company's market
sensitive financial instruments. The table illustrates the principle and
notional amounts, as well as the date of maturity, actual and weighted average
pay and receive rates for all significant financial and derivative financial
instruments in effect as of September 30, 1999:
<PAGE>
<TABLE>
<CAPTION>
Expected Maturity Dates
(dollars in millions): 1999 2000 2001 2002 2003 2004 Thereafter
-------------------------------------- ---- ---- ---- ---- ---- ---- ----------
Debt:
<S> <C>
Revolving credit facility, Base rate
option................................ $3.0
--Actual floating rate............... 9.250%
Revolving credit facility, Euro-rate
option................................ $40.0
--Actual floating rate............... 8.014%
Term Loan A Euro-rate option........ $15.0 $20.0 $25.0 $30.0 $35.0
--Actual floating rate............... 8.014% 8.014% 8.014% 8.014% 8.014% 8.014%
Term Loan B Euro-rate option........ $1.0 $1.0 $1.0 $1.0 $1.0 $95.0
--Actual floating rate............... 8.383% 8.383% 8.383% 8.383% 8.383% 8.383%
Convertible Subordinated Debentures. $20.0
--Actual fixed interest rate......... 7.0%
Interest rate swap agreements:
National City Bank, notional amount. $30.0
--Actual fixed interest rate pay rate 5.965%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Bank of America, notional amount.... $20.0
--Actual fixed interest rate pay rate 5.760%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Manufacturers and Traders Trust,
notional amount..................... $10.0
--Actual fixed interest rate pay rate 5.925%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Harris Bank, notional amount........ $20.0
--Actual fixed interest rate pay rate 5.090%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
SunTrust Bank, notional amount...... $10.0
--Actual fixed interest rate pay rate 5.105%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
LaSalle Bank, notional amount....... $10.0
--Actual fixed interest rate pay rate 5.095%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Bank of America, notional amount.... $10.0
--Actual fixed interest rate pay rate 5.120%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Harris Bank, notional amount........ $10.0
--Actual fixed interest rate pay rate 5.120%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Letters of credit:
Letter of credit, Base rate
option............................... $650
--Actual floating rate.............. N/A
Letter of credit, Base rate
option............................... $300
--Actual floating rate.............. N/A
Letter of credit, Base rate
option............................... $450
--Actual floating rate.............. N/A
Letter of credit, Base rate
option............................... $300
--Actual floating rate.............. N/A
</TABLE>
Seasonality and Inflation
Management believes that operating results may be subject to seasonality. In
particular, the fourth quarter generally exhibits a slight tightening of
customer spending habits commensurate with summer vacations, back-to-school
needs and other factors. Conversely, the first quarter typically has a greater
percentage of rentals because of traditional holiday shopping patterns.
Management plans for these seasonal variances and takes particular advantage of
the first quarter with product promotions, marketing campaigns, and employee
incentives. Because many of the Company's expenses do not fluctuate with
seasonal revenue changes, such revenue changes may cause fluctuations in the
Company's quarterly earnings.
During the year ended September 30, 1999, the cost of rental merchandise,
store lease rental expense and salaries and wages have increased modestly. These
increases have not had a significant effect on the Company's results of
operations because the Company has been able to charge commensurately higher
rental for its merchandise. This trend is expected to continue in the
foreseeable future.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standard Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", effective for fiscal years beginning after December 15,
1997. This Statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The Company adopted the provisions of this standard
effective October 1, 1998 and has had no items of other comprehensive income.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" effective for fiscal years beginning
after December 15, 1997. This Statement requires that public business
enterprises report certain information about operating segments in annual and
interim financial statements. It also requires that public business enterprises
report certain information about their products and services, the geographic
areas in which they operate, and their major customers. The Company has only one
segment.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date SFAS No. 133-an Amendment of FASB
Statement 133". This Statement delays the effective date for this standard until
fiscal years beginning after June 15, 2000. The Company is currently evaluating
the provisions of these statements.
The Accounting Standards Executive Committee Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"), issued in March 1998 and effective for fiscal years
beginning after December 15, 1998 with earlier application permitted, provides
guidance on accounting for the costs of computer software developed or obtained
for internal use. The Company adopted this statement for the year ended
September 30, 1999 resulting in no significant effect in the Company's
consolidated financial statements.
The Accounting Standards Executive Committee Statement of Position 98-5,
"Accounting for the Costs of Start-up Activities" ("SOP 98-5"), issued in April
1998 and effective for fiscal years beginning after December 15, 1998 with
earlier application permitted, provides guidance on financial reporting of start
up costs and organization costs. The Company is currently evaluating the
provisions of this statement.
Year 2000 Issues
The Company utilizes management information systems and software technology
that may be affected by Year 2000 issues throughout its operations. During
fiscal 1998 the Company began to implement plans to ensure those systems
continue to meet its internal and external requirements. All the Company's
remote locations operate on an internally developed point of sale system. This
system utilizes a peer to peer, Windows 95 local area network. Communications
between remote locations and the corporate office are handled via e-mail through
the internet. After completion of testing, the Company has determined that its
point of sale system is Year 2000 compliant. As a result of the Company's
growth, a decision was made to upgrade information systems at the corporate
office. The installation and implementation of a Year 2000 compliant PeopleSoft
software package was completed on January 1, 1999. This package encompasses all
accounting functions, payroll, human resources and benefit administration
requirements. The system operates in an n-tier environment on a Windows NT
platform. The cost of all hardware, software, training and implementation was
approximately $1.5 million, the majority of which was incurred in fiscal 1998.
In addition to the PeopleSoft package, the Company has implemented a Year 2000
compliant J. Driscoll Package for cash management. This package will operate on
the same platform as the PeopleSoft package.
The Company has developed questionnaires and contacted key suppliers
regarding their Year 2000 compliance to determine any impact on its operations.
In general, the suppliers have developed or are in the process of developing
plans to address Year 2000 issues. The Company will continue to monitor and
evaluate the progress of its suppliers on this matter. The Company is also
reviewing its non-information technology systems to determine the extent of any
changes that may be necessary and believes that there will be minimal changes
required for compliance.
Based on the progress the Company has made in addressing its Year 2000
issues and the Company's plan and timeline to complete its compliance program,
the Company does not foresee significant risks associated with its Year 2000
compliance at this time. As the Company's plan is to address its significant
Year 2000 issues prior to being affected by them, it has not developed a
comprehensive contingency plan. However, if the Company identifies significant
risks related to its Year 2000 compliance or its progress deviates from the
anticipated timeline, the Company will develop contingency plans as deemed
necessary at that time.
CAUTIONARY STATEMENT
This Report on Form 10-K and the foregoing Management's Discussion and
Analysis of Financial Condition and Results of Operations contains various
"forward looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Company's Annual Report to Shareholders, any Report on Form 10-Q
or Current Report on Form 8-K or any other written or oral statements made by or
on behalf of the Company may include forward looking statements. Forward-looking
statements represent the Company's expectations or beliefs concerning future
events. Any forward-looking statements made by or on behalf of the Company are
subject to uncertainties and other factors that could cause actual results to
differ materially from such statements. These uncertainties and other factors
include, but are not limited to, (i) the ability of the Company to acquire
additional rental-purchase stores on favorable terms, (ii) the ability of the
Company to improve the performance of such acquired stores and to integrate such
acquired stores into the Company's operations, (iii) the Company's ability to
open new stores in favorable locations and to cause such stores to become
profitable in a timely manner or at all, (iv) the Company's ability to improve
the revenue performance and profitability of the Home Choice stores and the
other stores acquired in fiscal 1999, (v) the impact of state and federal laws
regulating or otherwise affecting the rental-purchase transaction, and (vi)
unforeseen impacts arising from Year 2000 issues.
Undue reliance should not be placed on any forward-looking statements made
by or on behalf of the Company as such statements speak only as of the date
made. The Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, the
occurrence of future events or otherwise.
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
<S> <C>
Index to Financial Statements......................................... 21
Reports of Independent Accountants.................................. 22
Financial Statements:
Consolidated Balance Sheets, September 30, 1999 and 1998........... 24
Consolidated Statements of Operations, Years Ended September 30,
1999, 1998, 1997............................................... 25
Consolidated Statements of Shareholders' Equity, Years Ended
September 30, 1999, 1998, 1997................................. 26
Consolidated Statements of Cash Flows, Years Ended September 30,
1999, 1998, 1997............................................... 27
Notes to Consolidated Financial Statements........................ 28
</TABLE>
<PAGE>
RENT-WAY, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Rent-Way, Inc.:
In our opinion, based on our audits and in 1997 the report of other
auditors, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of Rent-Way,
Inc. and its Subsidiaries at September 30, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1999, in conformity with accounting principles generally
accepted in the United States. 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 did not audit the financial
statements of Alrenco, Inc. prior to its combination with RTO, Inc. on February
26, 1998, which 1997 statements reflect total revenues of 37% and net income of
$3,586,000 for the year ended December 31, 1997. Those statements were audited
by other auditors whose report thereon has been furnished to us, and our opinion
herein, insofar as it relates to amounts included for Alrenco, Inc., is based
solely on the report of the other auditors. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Cleveland, Ohio
December 22, 1999
<PAGE>
RENT-WAY, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Shareholders of Rent-Way, Inc.:
We have audited, prior to the restatement for the 1998 pooling of interests
with RTO, Inc., the statements of operations, shareholders' equity, and cash
flows of Alrenco, Inc. for the year ended December 31, 1997, 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Alrenco,
Inc. for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Dallas, Texas
January 30, 1998
<PAGE>
<TABLE>
<CAPTION>
RENT-WAY, INC.
CONSOLIDATED BALANCE SHEETS
(all dollars in thousands)
September 30,
------------------------------
1999 1998
------------ ------------
Assets
<S> <C> <C>
Cash and cash equivalents......................................... $ 8,646 $ 5,326
Prepaid expenses.................................................. 9,610 7,819
Income tax receivable............................................. -- 2,972
Rental merchandise, net........................................... 202,145 176,022
Deferred income taxes............................................. -- 5,301
Property and equipment, net....................................... 50,578 38,519
Goodwill, net of accumulated amortization of $26,411 and $16,627,
respectively..................................................... 305,900 225,354
Deferred financing costs, net of accumulated amortization of $487
and $571, respectively........................................... 3,688 1,575
Non-compete agreements and prepaid consulting fees, net of
accumulated amortization of $6,687 and $2,045, respectively...... 5,494 6,950
Other assets...................................................... 11,333 8,993
----------- -----------
$ 597,394 $ 478,831
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable.................................................. $ 8,417 $ 28,145
Other liabilities................................................. 15,861 23,220
Income taxes payable.............................................. 2,316 --
Deferred income taxes............................................. 5,218 --
Debt.............................................................. 288,130 179,603
----------- -----------
319,942 230,968
Commitments and contingencies (Note 9)........................... -- --
Shareholders' equity:
Preferred stock, without par value; 1,000,000 shares authorized;
no shares issued and outstanding at September 30, 1999 and 1998,
respectively......................................... -- --
Common stock, without par value; 50,000,000 shares authorized;
21,976,401 and 21,060,820 shares issued and outstanding at
September 30, 1999 and 1998, respectively........................ 256,755 241,749
Retained earnings................................................. 20,697 6,114
---------- ----------
Total shareholders' equity...................................... 277,452 247,863
---------- ----------
$ 597,394 $ 478,831
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RENT-WAY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(all dollars in thousands, except per share data)
For the Years Ended September 30,
--------------------------------------------
1999 1998 1997
-------------- -------------- ------------
Revenues:
<S> <C> <C> <C>
Rental revenue.............................. $ 427,093 $ 377,918 $ 277,261
Other revenue............................... 67,258 58,113 43,069
----------- ----------- -----------
Total revenues............................ 494,351 436,031 320,330
Costs and operating expenses:
Depreciation and amortization:
Rental merchandise........................ 123,511 108,367 80,165
Property and equipment.................... 9,603 7,238 5,506
Amortization of goodwill.................. 9,784 11,248 11,829
Salaries and wages.......................... 128,525 120,296 89,510
Advertising................................. 23,352 23,613 17,872
Occupancy................................... 33,016 29,974 22,349
Name change expense......................... 86 1,770 743
Business combination costs.................. 16,800 11,210 935
Signing bonus............................... -- -- 400
Other operating expenses.................... 102,959 107,786 80,023
----------- ----------- -----------
Total costs and operating expenses.......... 447,636 421,502 309,332
----------- ----------- -----------
Operating income....................... 46,715 14,529 10,998
Other income (expense):
Interest expense............................ (15,581) (10,949) (5,642)
Amortization--deferred financing costs...... (422) (358) (239)
Interest income............................. 29 251 219
Other income (expense), net................. (405) (540) 1,096
----------- ----------- -----------
Income before income taxes and
extraordinary item.................... 30,336 2,933 6,432
Income tax expense (Notes 4 and 11)......... 15,234 4,771 4,866
----------- ----------- -----------
Income (loss) before extraordinary item 15,102 (1,838) 1,566
Extraordinary item (Notes 1 and 7).......... (519) -- (269)
----------- ----------- -----------
Net income (loss)...................... 14,583 (1,838) 1,297
Preferred stock gain on redemption (Note 10) -- -- 280
----------- ----------- -----------
Earnings (loss) applicable to common shares. $ 14,583 $ (1,838) $ 1,577
=========== ============ ===========
Earnings (loss) per common share:
Basic earnings (loss) per share (adjusted to
give effect to preferred stock gain on
redemption):
Income (loss) before extraordinary item $ 0.71 $ (0.09) $ 0.11
=========== ============ ===========
Net income (loss)...................... $ 0.68 $ (0.09) $ 0.09
=========== ============ ===========
Diluted earnings (loss) per share (adjusted
to give effect to preferred stock gain on
redemption):
Income (loss) before extraordinary item $ 0.68 $ (0.09) $ 0.11
=========== ============ ===========
Net income (loss)...................... $ 0.66 $ (0.09) $ 0.09
=========== ============ ===========
Weighted average number of shares outstanding:
Basic.................................. 21,341 20,283 16,653
=========== =========== ===========
Diluted................................ 23,345 20,283 16,653
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RENT-WAY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended September 30, 1999, 1998 and 1997
(all dollars and shares in thousands)
Common Stock Total
----------------------- Retained Shareholders'
Shares Amount Earnings Equity
-------- -------- ---------- --------------
<S> <C> <C> <C> <C>
Balance at September 30, 1996......... 16,598 $ 175,446 $ 1,618 $ 177,064
Net income.......................... -- -- 1,297 1,297
Common stock returned to treasury
(Note 4)......................... (66) -- -- --
Purchases of business (Note 4)...... -- 107 -- 107
Issuance of common stock under stock
option plans including tax benefit
(Note 13)........................ 457 4,434 -- 4,434
Issuance of common stock to 401(k)
Plan (Note 15)................... 22 272 -- 272
Issuance of common stock............ 29 690 -- 690
Purchase and retirement of common
stock from dissenters............ (10) (266) -- (266)
Amortization of stock awards........ -- 194 -- 194
Distributions to S-Corporation
Shareholders....................... (77) (77)
Preferred stock (dividends)/gain on
redemption (Note 10)............. -- 280 (30) 250
----------- ------------ ---------- ------------
Balance at September 30, 1997......... 17,030 181,157 2,808 183,965
----------- ------------ ---------- ------------
Net (loss).......................... -- -- (1,838) (1,838)
Home Choice net income for the three
months ended December 31, 1997 due to
merger and resulting change in fiscal
year-end (Note 1).................. -- -- 5,144 5,144
Public stock offering,
net of expenses (Note 3)........... 2,888 47,053 -- 47,053
Conversion of convertible debt (Note
7)................................. 704 7,000 -- 7,000
Write-off deferred financing costs
on convertible debt (Note 7)........ -- (25) -- (25)
Purchase of business (Note 4)....... 16 425 -- 425
Issuance of common stock to 401(k)
Plan (Note 15)..................... 18 383 -- 383
Issuance of common stock under stock
option plans including tax benefit
(Note 13)......................... 404 4,768 -- 4,768
Amortization of stock awards........ -- 988 -- 988
----------- ------------ ------------ ------------
Balance at September 30, 1998......... 21,060 241,749 6,114 247,863
----------- ------------ ------------ ------------
Net income.......................... -- -- 14,583 14,583
Purchases of business (Note 4)...... 503 9,938 -- 9,938
Issuance of common stock to 401(k)
Plan (Note 15)................... 18 351 -- 351
Issuance of common stock under stock
option plans including tax benefit
(Note 13)........................ 395 4,717 -- 4,717
------------ ------------ ------------ ------------
21,976 $ 256,755 $ 20,697 $ 277,452
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RENT-WAY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all dollars in thousands)
For the Years Ended September 30,
---------------------------------------------
1999 1998 (A) 1997 (A)
------------- ------------- -------------
Operating activities:
<S> <C> <C> <C>
Net income (loss)............................. $ 14,583 $ (1,838) $ 1,297
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Loss on sale of property and equipment...... -- 989 229
Gain on sale of stores, net................. -- (174) (950)
Depreciation and amortization............... 143,320 127,211 97,739
Deferred income taxes....................... 10,748 (591) (1,117)
Deferred financing costs write-off.......... 865 682 324
Issuance of common stock to 401(k) plan..... -- 383 272
Changes in assets and liabilities:
Prepaid expenses............................ (1,585) (1,875) (42)
Rental merchandise.......................... (135,806) (141,043) (111,257)
Income tax receivable....................... 2,972 (43) --
Other assets................................ 1,950 (4,340) (4,482)
Accounts payable............................ (18,072) 8,961 12,897
Income taxes payable........................ 2,197 (2,266) (2,102)
Other liabilities........................... (10,195) 1,075 (837)
------------- ------------- ------------
Net cash provided by (used in) operating
activities............................. 10,977 (12,869) (8,029)
------------- ------------- ------------
Investing activities:
Purchase of businesses, net of cash acquired (69,985) (113,561) (76,579)
Purchases of property and equipment......... (22,051) (27,074) (14,373)
Proceeds from the sale of property and
equipment................................ -- -- 3,321
Dispositions of stores, net of cash sold.... -- 3,032 3,032
Payments received on notes receivable....... -- 521 1,098
Other....................................... -- -- (7)
------------- ------------- ------------
Net cash used in investing activities.... (92,036) (137,082) (83,508)
------------- ------------- ------------
Financing activities:
Book overdraft.............................. (2,994) 7,802 --
Proceeds from borrowings.................... 575,264 287,590 99,328
Payments on borrowings...................... (489,559) (197,148) (41,108)
Deferred financing costs.................... (3,400) (457) (1,661)
Issuance of common stock.................... 5,068 51,883 4,434
Preferred stock dividend.................... -- -- (30)
Preferred stock redemption.................. -- -- (841)
Purchase of common stock from dissenters.... -- -- (266)
Distributions to S corporation shareholders. -- -- (77)
------------- ------------- ------------
Net cash provided by financing activities 84,379 149,670 59,779
------------- ------------- ------------
Increase (decrease) in cash and cash
equivalents............................. 3,320 (281) (31,758)
Cash and cash equivalents at beginning
of year................................. 5,326 5,607 35,925
------------- ------------- ------------
Cash and cash equivalents at end of year.... $ 8,646 $ 5,326 $ 4,167
============= ============= ============
(A) See Note 1 for cash flows information related to the three months ended December 31, 1997.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollars in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business and Organization--Rent-Way, Inc. (the "Company") is a corporation
organized under the laws of the Commonwealth of Pennsylvania. The Company
operates a chain of stores that rent durable household products such as home
entertainment equipment, furniture, major appliances and jewelry to consumers on
a weekly or monthly basis in forty-one states. The stores are primarily located
in the Midwestern, Eastern and Southern regions of the United States.
On January 1, 1999, the Company formed four wholly-owned subsidiaries:
Rent-Way TTIG, L.P., an Indiana limited partnership, Rent-Way of Tomorrow, Inc.,
Rent-Way of Michigan, Inc., and Rent-Way Developments, Inc., all Delaware
corporations (collectively referred to herein as the "Company" or "Rent-Way").
Basis of Presentation--The Company presents an unclassified balance sheet to
conform to practice in the industry in which it operates.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
On December 10, 1998, Rent-Way completed a merger with Home Choice Holdings,
Inc. ("Home Choice") (see Note 4). Prior to the merger, Home Choice's year end
was December 31. As a result of the merger accounted for as a pooling of
interests, Rent-Way's financial statements have been restated to retroactively
combine Rent-Way with Home Choice as if the merger had occurred at the beginning
of the earliest period presented. The consolidated statements of operations and
cash flows for the year ended September 30, 1997 reflect the results of
operations and cash flows of Rent-Way for the twelve months ended September 30,
1997 combined with Home Choice's for the twelve months ended December 31, 1997.
As a result of Rent-Way and Home Choice having different fiscal years and the
subsequent merger of Home Choice into Rent-Way, Home Choice's results of
operations and cash flows for the three months ended December 31, 1997 have been
included in both fiscal years 1998 and 1997 results and, therefore have been
reflected as an adjustment to the Company's retained earnings at October 1,
1997. Home Choice had total revenues, costs and operating expenses and a net
loss of $61,242, $67,915, and $5,144, respectively, for the three months ended
December 31, 1997. Cash flows provided by (used in) operating activities,
investing activities and financing activities were $(10,768), $(3,085), and
$13,132, respectively, for the three months ended December 31, 1997.
On February 26, 1998, RTO, Inc. ("RTO") completed a merger with Alrenco,
Inc. ("Alrenco"), with Alrenco being the surviving corporation in the merger
(see Note 4). Alrenco subsequently changed its name to Home Choice. As a result
of the merger accounted for as a pooling of interests, Alrenco's financial
statements were restated to retroactively combine Alrenco with RTO as if the
merger had occurred at the beginning of the earliest period presented.
These consolidated financial statements include the combination of Rent-Way
and Home Choice, the purchase acquisitions and the pooling acquisitions (as
described in Note 4) as required by Accounting Principles Board Opinion ("APB")
No. 16.
Accounting 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, disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Rental Merchandise, Rental Revenue and Depreciation--Rental merchandise is
rented to customers pursuant to rental agreements, which provide for either
weekly or monthly rental payments collected in advance. 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. This method of revenue recognition does not produce materially
different results than if rental revenue was recognized over the weekly or
monthly rental term. At the end of each rental period, the customer can renew
the rental agreement.
Merchandise rented to customers or available for rent is classified in the
consolidated balance sheet as rental merchandise and is valued at cost on a
specific identification method. Write-offs of rental merchandise arising from
customers' failure to return merchandise and losses due to excessive wear and
tear of merchandise are recognized using the direct write-off method, which is
materially consistent with the results that would be recognized under the
allowance method.
The Company uses the units of activity depreciation method for all rental
merchandise except computers. Under the units of activity method, rental
merchandise is depreciated as revenue is collected. This rental merchandise is
not depreciated during periods
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued:
when it is not on rent and therefore not generating rental revenue. Computers,
added to the Company's product line in June 1999, are depreciated on the
straight-line basis over 15 months.
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 units of activity 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 the changes on the results of
operations for the year ended September 30, 1997 was to decrease net income by
$400 or $0.02 per basic and diluted share.
Other Revenue--Other revenue includes revenue from various services and
charges to rental customers, including late fees, liability waiver fees,
processing fees, and sales of used merchandise as well as revenue from prepaid
phone services. Other revenue is recognized as collected. This method of revenue
recognition does not produce materially different results than if other revenue
was recognized when earned.
Comprehensive Income--The Company has no items of other comprehensive
income.
Statement of Cash Flows Information--Cash and cash equivalents consist of
cash on hand and on deposit and highly liquid investments with maturities of
three months or less when purchased. Cash equivalents are stated at cost, which
approximates market value. The Company maintains deposits with several financial
institutions. Deposits in excess of $100 and mutual funds are not insured by the
Federal Deposit Insurance Corporation.
Supplemental disclosures of cash flow information for the years ended
September 30, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Cash paid during the year for:
<S> <C> <C> <C>
Interest..................................................... $ 16,019 $ 10,240 $ 5,044
Income taxes, net of refunds................................. 718 5,274 6,824
Noncash Investing activities:
Debt issued to seller in purchase business combinations
(Note 4)..................................................... $ -- $ -- $ 7,100
Assets acquired by assumption of liabilities in purchase
business combinations (Note 4).............................. 6,272 19,744 18,131
Also, in 1998 in conjunction with the asset purchase and exchange agreement with SKC the Company
exchanged cash of $1,100 and five stores with assets having a net book value of approximately $964
in exchange for seven stores having fair value of $2,385 (Note 4).
Noncash financing activities:
Common stock issued in purchase business combinations
(Note 4).................................................... $ 9,943 $ 425 $ --
Options issued to seller in purchase business combination
(Note 4)........................................ -- -- 107
Settlement of notes payable with common stock (Notes 7
and 12)..................................................... -- 7,000 690
Issuances of common stock under stock option plans (Note
13)......................................................... 4,717 4,768 4,434
Issuances of common stock to 401(k) plans (Note 15).......... 351 383 272
Preferred stock gain on redemption (Note 10)................. -- -- 280
</TABLE>
Property and Equipment and Related Depreciation and Amortization--Property
and equipment are stated at cost. 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. The Company's corporate headquarters and other buildings
are depreciated over periods ranging from 20 to 40 years on a straight-line
basis. Depreciation of furniture and fixtures, signs and vehicles is provided
over the estimated useful lives of the respective assets (three to five years)
on a straight-line or an accelerated basis. 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.
The Company reviews the recoverability of the carrying value of goodwill and
other long-term assets using an undiscounted cash flow method. 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--Deferred income taxes are recorded to reflect the tax
consequences on future years of differences between the tax and financial
statement basis of assets and liabilities at year end using income tax rates
under existing legislation expected to be in
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued:
effect at the date such temporary differences are expected to reverse.
Deferred income taxes are adjusted for tax rate changes as they occur.
Intangible Assets--Goodwill is stated at cost. Each acquisition is
independently evaluated to determine the appropriate period for amortization of
the resulting goodwill. Currently, amortization of goodwill is calculated on a
straight line basis over periods ranging from ten to thirty years. Periodically,
the Company will determine if there has been permanent impairment of goodwill by
comparing anticipated undiscounted future net cash flows from operating
activities of the acquired store locations with the carrying value of the
related goodwill. At September 30, 1999 and 1998, the Company concluded that
there was no impairment of goodwill. Deferred financing costs are stated at cost
less amortization calculated on a straight-line basis over the term of the
related debt agreements, which range from four to ten years. Non-compete
agreements and prepaid consulting fees are stated at cost less amortization
calculated on a straight-line basis over the term of the related agreements,
which range from two to seven years. Customer contracts are stated at cost less
amortization calculated on a straight-line basis over 18 months.
Advertising Expense--Advertising costs, net of co-op recoveries from
vendors, are expensed the first time the advertising occurs.
Advertising Rebates--The Company participates in vendor advertising rebate
programs with the majority of its rental merchandise suppliers. Rebates are
recognized in the period earned. On a quarterly basis, management calculates the
amount of the rebate and either submits a request for payment or credits the
balance due the respective vendor.
Earnings (Loss) Per Common Share--Basic earnings (loss) per common share is
computed using income available to common shareholders divided by the weighted
average number of common shares outstanding. Diluted earnings (loss) per common
share is computed using income available to common shareholders adjusted for
anticipated interest savings, net of related taxes, for convertible subordinated
notes and debentures and the weighted average number of shares outstanding is
adjusted for the potential impact of options, warrants and convertible
subordinated notes and debentures.
Fair Value Disclosures--Fair values of fixed interest debt instruments have
been determined through a combination of management's estimates, information
obtained from independent third parties, and discounted cash flow analysis. Fair
values of other assets and liabilities are estimated to approximate their
carrying values.
Derivative Financial Instruments--The Company uses derivative financial
instruments to reduce the impact on interest expense of fluctuations in interest
rates on a portion of its Amended Facility (see Notes 7 and 8). The Company does
not enter into derivative financial instruments for trading or speculative
purposes.
Extraordinary Item--As a result of the refinancing of its senior credit
facility in December 1998, the Company wrote off the remainder of deferred
financing costs associated with its previous credit facilities, which totaled
$865 ($519 net of tax benefit) at the time of refinancing.
As a result of the refinancing of its senior credit facility in November
1996, the Company incurred an extraordinary charge, net of tax benefit, of $269.
The extraordinary charge was composed of a $125 ($75 net of tax benefit)
prepayment penalty for early retirement of debt and a $324 ($194 net of tax
benefit) write-off of deferred finance costs associated with the refinanced debt
(see Note 7).
Stock-Based Compensation--The Company accounts for stock based compensation
issued to its employees and non-employee directors in accordance with APB No.
25, "Accounting For Stock Issued to Employees" and has elected to adopt the
"disclosure only" provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation".
Reclassifications--Certain amounts in the September 30, 1997 and 1998
consolidated financial statements were reclassified to conform to the September
30, 1999, presentation.
2. NEW ACCOUNTING STANDARDS:
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income", effective for fiscal years beginning
after December 15, 1997. This statement establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. The Company adopted the provisions of this
standard effective October 1, 1998 and has had no items of other comprehensive
income.
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
2. NEW ACCOUNTING STANDARDS, Continued:
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" effective for fiscal years beginning
after December 15, 1997. This statement requires that public business
enterprises report certain information about operating segments in annual and
interim financial statements. It also requires that public business enterprises
report certain information about their products and services, the geographic
areas in which they operate, and their major customers. The Company has only one
segment.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133-an Amendment
of FASB Statement 133". This Statement delays the effective date for this
standard until fiscal years beginning after June 15, 2000. The Company is
currently evaluating the provisions of these statements.
The Accounting Standards Executive Committee Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"), issued in March 1998 and effective for fiscal years
beginning after December 15, 1998 with earlier application permitted, provides
guidance on accounting for the costs of computer software developed or obtained
for internal use. The Company adopted this statement for the year ended
September 30, 1999 resulting in no significant effect in the Company's
consolidated financial statements.
The Accounting Standards Executive Committee Statement of Position 98-5,
"Accounting for the Costs of Start-up Activities" ("SOP 98-5"), issued in April
1998 and effective for fiscal years beginning after December 15, 1998 with
earlier application permitted, provides guidance on financial reporting of start
up costs and organization costs. The Company is currently evaluating the
provisions of this statement.
3. PUBLIC STOCK OFFERING:
On December 2, 1997, the Company completed a public stock offering
consisting of 2,500,000 shares of common stock offered by the Company and 87,250
shares of common stock offered by certain selling shareholders. In addition, on
December 30, 1997, the underwriters exercised a 30 day option to purchase
388,088 shares of common stock to cover over-allotments. The shares were offered
at a price of $17.25 per share. The Company received net proceeds (less
underwriters discount and selling expenses) of $47,053 including the
underwriters exercise of the over-allotment option. The Company used these
proceeds to repay outstanding borrowings of $23,022 under the Company's credit
agreement (see Note 7) and to fund the significant portion of the asset purchase
of South Carolina Rentals, Inc., Paradise Valley Holdings, Inc. and L & B Rents,
Inc. (collectively, "Ace Rentals") (see Note 4).
4. MERGERS, ACQUISITIONS AND DISPOSALS:
Pooling Acquisitions
On December 10, 1998, the Company completed a merger with Home Choice
Holdings, Inc. ("Home Choice"). The merger, as per the terms of the agreement,
was recorded as a pooling of interests, in accordance with APB No. 16. Under the
terms of the agreement the Company issued 0.588 shares of common stock for each
outstanding share of Home Choice common stock. The merger increased the
outstanding shares of the Company by approximately 10,025,000 shares. The
corporate offices of the combined company are located in Erie, Pennsylvania.
None of Home Choice's Board of Directors or executive officers retained a
position with the combined company. Following the merger, Gerald A. Ryan
remained as Chairman of the Board of the combined company, with William E.
Morgenstern as President and Chief Executive Officer and Jeffrey A. Conway as
Chief Financial Officer. In conjunction with the merger, certain costs were
incurred which were recorded by the Company during the year ended September 30,
1999. These costs aggregated $16,800 and included (i) investment banker fees of
$6,476, (ii) proxy preparation, printing and other professional fees of $1,341,
(iii) employee severance and stay-put arrangement costs of $4,516, (iv) due
diligence and other costs of $874, (v) costs related to closing or disposing of
duplicate corporate headquarters, equipment and stores in overlapping markets of
$2,142 and (iv) write-off of prepaid assets which could not be used of $1,453.
In addition, the Company identified a large number of rental merchandise items
which failed to meet the accepted quality standards of the Company's operating
procedures. Accordingly, the Company experienced an excessive amount of
inventory deletions during the three month period ended December 31, 1998. The
amount of excessive inventory write-offs included in other operating expenses in
the Consolidated Statement of Operations for the
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:
year ended September 30, 1999 was approximately $1,100. In conjunction with the
merger, the Company entered into a new syndicated loan facility (see Note 7).
On February 26, 1998, Home Choice (formerly Alrenco, Inc.) completed a
merger with RTO, Inc. The merger, as per the terms of the agreement, was
recorded as a pooling of interests, in accordance with APB No. 16. Under the
terms of the agreement, Alrenco issued 0.898 shares of common stock for each
outstanding share of RTO common stock. The merger increased the outstanding
shares of Alrenco by approximately 12,280,000 shares. The corporate offices of
the combined company were located in Mesquite, Texas. In accordance with the
terms of the merger agreement, 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 remained as
director. Bill W. White, Sr., James G. Steckhart, and K. David Belt, Chief
Executive Officer, Chief Operating Officer, and Chief Financial Officer,
respectively, of RTO continued in these roles for the combined company. George
D. Johnson, Jr., Chairman of RTO, was named Chairman of the combined company. In
conjunction with the merger, certain costs were incurred which were recorded by
the Company during the year ended September 30, 1998. These costs aggregated
$11,210 and included (i) investment banker fees, proxy preparation, printing,
and other professional fees, (ii) employee severance and other costs associated
with relocating the corporate headquarters from Indiana to Texas, (iii) costs
related to closing and merging stores in the same markets following the merger,
(iv) amortization expense of stock awards which vested fully upon the merger,
and (v) costs associated with terminating certain leases. In addition, Home
Choice initiated a program in 1997 to change the name of its stores to
"HomeChoice Lease or Own" from the various trade names it acquired. In
connection with this program, Home Choice incurred nonrecurring costs which
included the write-off of the net carrying values of old signs and branded
supplies and the expensing of new vehicles decals. The amount of these
nonrecurring costs included in name change expense in the Consolidated Statement
of Operations for the years ended September 30, 1999, 1998, and 1997 were
approximately $86, $1,770, and $743, respectively.
Alrenco merged with various other entities, which were consummated during
1997. 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
Alrenco's common stock. A summary of each merger follows:
<TABLE>
<CAPTION>
Shares of
Company
Pooling Acquisitions Date of Merger Stock Issued
-------------------- -------------- ------------
<S> <C> <C> <C> <C>
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
</TABLE>
The mergers, as per the terms of the merger agreements, were recorded as
poolings of interests, in accordance with APB No. 16. In conjunction with the
mergers, certain costs aggregating $935 were incurred by Alrenco during the year
ended December 31, 1997.
Separate unaudited results of the pooled entities prior to each date of the
merger for the years ended 1999, 1998, and 1997 are as follows:
<TABLE>
<CAPTION>
Year ended September 30, 1999
-----------------------------
Extraordinary Net Income
Revenues Item (Loss)
-------- ------------- ----------
Rent-Way October 1, 1998 to
<S> <C> <C> <C> <C> <C>
November 30, 1998.................... $ 37,171 $ -- $ 2,231
Home Choice October 1, 1998 to
November 30, 1998................... 44,270 -- (230)
Rent-Way and Home Choice December 1,
1998 to September 30, 1999.......... 412,910 (519) 12,582
--------- ---------- ----------
Total........................... $ 494,351 $ (519) $ 14,583
========= ========== ==========
</TABLE>
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:
<TABLE>
<CAPTION>
Year ended September 30, 1998
-----------------------------------------
Extraordinary Net Income
Revenues Item (Loss)
-------- ------------- ----------
<S> <C> <C> <C>
Rent-Way......................... $ 177,327 $ -- $ 12,577
Home Choice...................... 258,704 -- (14,415)
---------- ------------- ----------
Total....................... $ 436,031 $ -- $ (1,838)
========== ============= ==========
</TABLE>
<TABLE>
<CAPTION>
Year ended September 30, 1997
-------------------------------------------
Extraordinary Net Income
Revenues Item (Loss)
-------- ------------- ----------
<S> <C> <C> <C>
Rent-Way.............. $ 88,446 $ (269) $ 5,416
Alrenco............... 103,005 -- 3,586
RTO................... 123,739 -- (8,736)
ARTO.................. 687 -- 10
National.............. 853 -- (74)
Seajay................ 1,224 -- (34)
Showtyme.............. 635 -- (3)
ABC................... 553 -- (77)
Discount.............. 746 -- (45)
Hut................... 442 -- (6)
Conforming adjustments -- -- 1,261
-------------- ------------- ----------
Combined.............. $ 320,330 $ (269) $ 1,298
============== ============= ==========
Conforming adjustments relate to conforming amortization policies, net of the related tax benefit.
</TABLE>
Since certain of the business combinations accounted for as
pooling-of-interests involved companies which were nontaxable enterprises prior
to acquisition by Alrenco (e.g. S Corporations), unaudited pro forma income tax
expense (benefit) has been presented below for the year ended September 30, 1997
for the nontaxable enterprises as if they had been a taxable enterprise.
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):
<TABLE>
<CAPTION>
Unaudited Pro Forma
Information
Year Ended September 30,
1997
----------------------------
<S> <C>
Income before extraordinary item................... $ 1,566
Pro forma income tax benefit....................... (214)
------------------
Pro forma income before extraordinary item...... 1,780
Extraordinary item................................. (269)
-------------------
Pro forma net income............................ 1,511
Preferred stock gain on redemption................. 280
-------------------
Earnings applicable to common shares............ $ 1,791
===================
Pro forma earnings per common share:
Basic and diluted earnings per share (adjusted to
give effect to preferred stock gain on
redemption):
Income before extraordinary item................ $ 0.11
===================
Net income...................................... $ 0.11
===================
</TABLE>
Purchase Acquisitions
On September 23, 1999, the Company acquired all of the outstanding shares of
RentaVision, Inc. ("RentaVision"), a rental-purchase chain located in 16 states
with annual revenues of approximately $75,000. The consideration paid in
exchange for all the outstanding shares of RentaVision was $73,874 consisting of
$68,774 in cash and 278,801 shares of the Company's common stock (unregistered
shares subject to the provisions of Rule 144 of the Securities and Exchange
Act). Pursuant to the terms of the purchase agreement, 181,201 shares of common
stock equivalent to $4,000 of the purchase price was placed in escrow subject to
the terms and conditions of the escrow agreement to secure seller's
representations and warranties and any purchase price adjustments. The
acquisition was accounted for using the purchase method of accounting.
RentaVision's assets and liabilities were recorded at their fair values as of
the date of the acquisition. The purchase price is subject to adjustment pending
completion of an audit of the closing date balance sheet and future rental
revenue stream as defined in the purchase agreement. The final purchase price
allocation is subject to refinement upon finalization of the purchase price and
completion of a review of rental merchandise, property and equipment,
intangibles and certain accrued liabilities. The excess of the acquisition cost
over the estimated fair value of the net assets acquired ("goodwill") of $83,712
is being amortized on a straight-line basis over 30 years. The total cost of the
net assets acquired was
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:
$73,874 and consisted of assets of $99,260 less liabilities assumed of $25,168
and acquisition costs of $218. Assets acquired (at fair value) other than
goodwill consisted primarily of rental merchandise of $12,267, non-compete
agreement of $1,000, customer contracts of $1,200, cash of $725, and other
assets of $356. Liabilities assumed (at fair value) consisted primarily of debt
of $21,527, accrued liabilities of $2,684, and trade accounts payable of $958.
The Consolidated Statement of Operations for the year ended September 30, 1999
includes the results of operations of RentaVision since the date of acquisition.
On June 30, 1999, the Company acquired all the outstanding shares of
America's Rent-To-Own Center, Inc., ("America's Rent-To-Own"). At the time of
the acquisition, America's Rent-To-Own operated a chain of 21 rental-purchase
stores located in Arkansas, Kansas, Missouri, and Oklahoma with annual revenues
of approximately $8,000. The consideration paid in exchange for all the
outstanding shares of America's Rent-To-Own consisted of 231,140 shares of the
Company's common stock (unregistered shares subject to the provisions of Rule
144 of the Securities and Exchange Act). Pursuant to the terms of the purchase
agreement approximately $800 or 32,454 shares of the Company's common stock were
placed in escrow subject to the terms and conditions of the escrow agreement to
secure seller's representations and warranties and any purchase price
adjustments. As of September 30, 1999, the Company had not released any funds
from the escrow account due to final settlement of the purchase price. The
acquisition was accounted for using the purchase method of accounting. America's
Rent-To-Own assets and liabilities were recorded at their fair value at the date
of the acquisition. The excess of the acquisition cost over the fair value of
net assets acquired, ("goodwill") of $4,805 is being amortized on a straight
line basis over 30 years. The total cost of the net assets acquired was $4,838
and consisted of assets of $7,231 less liabilities assumed of $2,149 and
acquisition costs of $244. Assets acquired, other than goodwill (at fair value)
consisted of rental merchandise of $1,269, receivables of $632, prepaid and
other assets of $65, a deferred tax asset of $400, and a non-compete agreement
of $60. Liabilities assumed (at fair value) consisted of debt of $1,295, accrued
liabilities of $474 and trade accounts payables of $380. The Company is in the
process of finalizing the purchase price allocation. The Consolidated Statement
of Operations for the year ended September 30, 1999 includes the results of
operations of America's Rent-To-Own since the date of acquisition.
In March, April, May, and August 1999, the Company purchased the rental
merchandise and rental-purchase contracts of six rental-purchase stores located
in Pennsylvania, North Carolina, Indiana, and Texas, respectively, with combined
annual revenues of approximately $1,550. The Company paid cash in exchange for
the assets and each acquisition was accounted for using the purchase method of
accounting. The acquired assets were recorded at their estimated fair values at
the date of acquisition. The excess of the acquisition cost over the fair value
of net assets acquired, ("goodwill") of $602 is being amortized on a straight
line basis over 20 years. The total cost of the net assets acquired was $602.
The Consolidated Statement of Operations for the year ended September 30, 1999
includes the results of operations for these stores from the date of
acquisition.
On September 10, 1998, the Company purchased the rental merchandise and
rental contracts of Cari Rentals, Inc. ("Cari"), a privately owned chain of 23
rental purchase stores located in Iowa, Missouri, Nebraska and South Dakota,
with annual revenues of approximately $7,700 in exchange for consideration of
$7,325 consisting of 15,620 shares of the Company's common stock (unregistered
shares subject to the provisions of Rule 144 of the Securities and Exchange Act)
and $6,900 in cash. Pursuant to the terms of the acquisition, $500 of the
purchase price was placed in escrow subject to the terms and conditions of the
escrow agreement. Pursuant to the terms of the escrow agreement, the balance of
the purchase price was released to the sellers. The acquisition was accounted
for using the purchase method of accounting. Cari's assets were recorded at
their fair values as of the date of the acquisition. The excess of the
acquisition cost over the fair value of net assets acquired, ("goodwill") of
$6,110 is being amortized on a straight-line basis over 30 years. The total cost
of the net assets acquired was $7,325 and consisted of assets of $7,560 less
acquisition costs of $235. Assets acquired (at fair value) other than goodwill
consisted primarily of rental merchandise of $1,400 and a non-compete agreement
of $50. The Consolidated Statements of Operations for the years ended September
30, 1999 and 1998 include the results of operations of Cari since the date of
the acquisition.
On July 21, 1998, the Company acquired all the outstanding shares of Fast
Rentals, Inc. ("Fast Rentals"), a privately owned chain of eight rental purchase
stores located in Alabama and Georgia with annual revenues of approximately
$3,600 in exchange for consideration of $2,047 in cash. Pursuant to the terms of
the acquisition, $200 of the purchase price was placed in escrow, subject to the
terms of the escrow agreement to satisfy sellers' representations and warranties
and any purchase price adjustments. Pursuant to the terms of the escrow
agreement, the balance of the purchase price was released to the sellers. The
acquisition was accounted for using the purchase method of accounting. Fast
Rentals' assets and liabilities were recorded at their fair values as of the
date of the acquisition. The excess of the acquisition cost over the fair value
of net assets acquired, ("goodwill") of $2,321 is being amortized over 30 years
on a straight-line basis. The total cost of the net assets acquired was $2,047
and consisted of assets of $3,061 less liabilities assumed of $858 and
acquisition costs of $156. Assets acquired (at fair value) other than goodwill
consisted primarily of rental merchandise of $620, prepaid expenses of $33,
other assets of $12 and a non-compete agreement of $75. Liabilities assumed (at
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:
fair value) consisted primarily of trade payables of $29, accrued liabilities of
$43 and debt of $786. The Consolidated Statements of Operations for the years
ended September 30, 1999 and 1998 include the results of operations of Fast
Rentals since the date of the acquisition.
On February 5, 1998, the Company acquired all the outstanding shares of
Champion Rentals, Inc. ("Champion"). At the time of the acquisition, Champion
operated a chain of 145 rental-purchase stores located in Alabama, Arkansas,
Florida, Georgia, Kentucky, Louisiana, North Carolina, Ohio, South Carolina,
Tennessee and Virginia with annual revenues of approximately $75,000. The
consideration paid in exchange for all the outstanding shares of Champion was
$69,050 in cash. Pursuant to terms of the purchase agreement $2,500 of the
purchase price was placed in escrow subject to the terms of the escrow agreement
to satisfy sellers'representations and warranties and any purchase price
adjustments. Per the terms of the escrow agreement, $1,500 of the escrowed
amount was released in September 1998, following the completion of an audit of
Champion's closing date financial statements. As a result of this audit, $900 of
the released amount was given to the sellers with the balance being returned to
the Company. The balance of $1,000 was released February 5, 1999 per the terms
of the escrow agreement. The sellers received $800 of this amount and the
balance was returned to the Company. The acquisition was accounted for using the
purchase method of accounting. Champion's assets and liabilities were recorded
at their fair values at the date of the acquisition. The excess of the
acquisition cost over the fair value of net assets acquired, ("goodwill") of
$67,550 is being amortized on a straight-line basis over 30 years. The total
costs of net assets acquired was $69,050 and consisted of assets of $91,030 less
liabilities assumed of $18,408 and acquisition costs of $3,572. The acquisition
of Champion was funded with borrowings drawn on the Company's existing senior
credit facility. Assets acquired (at fair value), other than goodwill consisted
primarily of rental merchandise of $18,134, property and equipment of $159,
other assets of $3,219, prepaid expenses of $508, non-compete agreement of
$1,000 and customer contracts of $460. Liabilities assumed (at fair value)
consisted primarily of trade payables of $3,925, accrued liabilities of $2,356
and debt of $12,127. The Consolidated Statements of Operations for the years
ended September 30, 1999 and 1998 include the results of operations of Champion
since the date of the acquisition.
On January 7, 1998, the Company completed the asset purchase of South
Carolina Rentals, Inc., Paradise Valley Holdings, Inc., and L & B Rents, Inc.,
(collectively, "Ace Rentals"), assuming effective control of the results of
operations as of January 1, 1998. At the time of the acquisition, Ace Rentals
operated a chain of 50 rental-purchase stores located in California and South
Carolina with annual revenues of approximately $22,000. The consideration paid
in exchange for the assets of Ace Rentals was $25,348 in cash. Pursuant to the
terms of the purchase agreement, $750 of the purchase price was placed in
escrow, subject to the terms of the escrow agreement to satisfy seller's
representations and warranties and any purchase price adjustments. In May 1998,
$375 of the $750 escrow was released in accordance with the terms and conditions
of the escrow agreement. As of September 30, 1999, the remaining balance is
still held in escrow. The acquisition was accounted for using the purchase
method of accounting. Ace Rentals' assets and certain liabilities were recorded
at their fair values at the date of the acquisition. The excess of the
acquisition cost over the fair value of net assets acquired, ("goodwill") of
$21,495 is being amortized on a straight-line basis over 30 years. The total
costs of net assets acquired was $25,348 and consisted of assets of $26,767 less
a liability assumed of $478 and acquisition costs of $941. The acquisition of
Ace Rentals was primarily funded with proceeds received in connection with the
Company's public stock offering (see Note 3) with the balance being drawn on the
Company's existing senior credit facility. Assets acquired (at fair value) other
than goodwill consisted primarily of rental merchandise of $4,383, property and
equipment of $249, non-compete agreement of $500 and $140 in customer contracts.
The liability assumed (at fair value) was $478 of vehicle related debt. The
Consolidated Statements of Operations for the years ended September 30, 1999 and
1998 include the results of operations of Ace Rentals since January 1, 1998.
During calendar year 1998, the Company also purchased from six separate
entities the rental merchandise and contracts of 17 rental-purchase stores
located in Arizona, Florida, Texas, and Washington. The Company paid cash in
exchange for the assets and each acquisition was recorded using the purchase
method of accounting. The acquired assets were recorded at their fair values at
the date of the acquisition. The excess of the acquisition cost over the fair
value of net assets acquired, ("goodwill") of $3,052 is being amortized on a
straight-line basis over 30 years. The total cost of net assets acquired was
$4,903. The Consolidated Statements of Operations for the years ended September
30, 1999 and 1998 include the results of operations for these stores from the
date of acquisition.
On January 24, 1997, the Company signed a definitive purchase agreement to
acquire all the outstanding shares of Perry Electronics, Inc. d/b/a Rental King
("Rental King"). On February 6, 1997, the Company consummated the transaction
and acquired all the outstanding shares of Rental King, assuming effective
control of the results of operations as of February 1, 1997. At the time of
acquisition, Rental King operated a chain of seventy rental-purchase stores in
Colorado, Florida, Indiana, Kentucky, Michigan, Ohio and West Virginia with
annual revenues of approximately $24,000. The consideration paid in exchange for
all the outstanding shares of Rental King was $17,285 in cash. Pursuant to the
terms of the purchase agreement, $2,000 of the purchase price was placed in
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:
escrow, subject to the terms of the escrow agreement to satisfy seller's
representations and warranties and any purchase price adjustments. In June 1997,
the full amount of the escrow account was released. The acquisition was
accounted for using the purchase method of accounting. Rental King's assets and
liabilities were recorded at their fair values at the time of the acquisition.
The excess of the acquisition cost over the fair value of net assets acquired,
("goodwill") of $17,312 is being amortized on a straight-line basis over 20
years. The total costs of the net assets acquired was $17,285 and consisted of
assets of $25,290 less liabilities assumed of $6,337 and acquisition costs of
$1,668. The acquisition of Rental King was primarily funded by the net proceeds
received on a private placement of $20,000 in subordinated convertible
debentures (see Note 7). The balance of the cash paid on closing was drawn upon
the Company's existing line of credit. Assets acquired (at fair value) other
than goodwill consisted primarily of rental merchandise of $6,386, property and
equipment of $745, other assets of $347 and non-compete agreements of $500.
Liabilities assumed (at fair value) consisted primarily of trade payables of
$489, accrued liabilities of $2,085, bank debt of $2,939 and notes payable of
$824. The Consolidated Statements of Operations for the years ended September
30, 1999, 1998 and 1997 include the results of operations of Rental King since
the date of the acquisition.
On January 2, 1997, the Company acquired all the outstanding shares of Bill
Coleman TV, Inc., ("Coleman"), a privately owned chain of fifteen
rental-purchase stores operating in Michigan with annual revenues of
approximately $8,000, in exchange for consideration consisting of $2,680 in cash
and an option to purchase 25,000 shares of the Company's common stock at an
exercise price of $8.875 per share with a fair market value of $108. The 25,000
stock options are 100% exercisable and expire five years from the date of the
grant. The acquisition was accounted for using the purchase method of
accounting. Coleman's assets and liabilities were recorded at their fair values
as of the acquisition date. The excess of the acquisition cost over the fair
value of net assets acquired, ("goodwill") of $3,797 is being amortized on a
straight-line basis over 20 years. The total cost of the net assets acquired was
$2,788 ($2,680 in cash and $108 in stock options) and consisted of assets of
$7,992 less liabilities assumed of $4,549 and acquisition costs of $655. Assets
acquired (at fair value) other than goodwill, consisted primarily of rental
merchandise of $2,401, property and equipment of $42, a note receivable of $506,
a non-compete agreement of $300 and other assets of $946. Liabilities assumed
(at fair value) consisted primarily of trade accounts payable of $1,838, debt of
$2,474 and note payable of $237. The Consolidated Statements of Operations for
the years ended September 30, 1999, 1998 and 1997 include the operations of
Coleman since the date of the acquisition.
In July and September 1997, the Company purchased the rental merchandise and
rental-purchase contracts of seven rental-purchase stores located in
Pennsylvania, Maryland, and Virginia, with combined annual revenues of
approximately $4,300. The Company paid cash in exchange for the assets and each
acquisition was recorded using the purchase method of accounting. The acquired
assets were recorded at their fair values at the date of acquisition. The excess
of the acquisition cost over the fair value of net assets acquired, ("goodwill")
of $2,748 is being amortized on a straight-line basis over 20 years. The total
cost of the net assets acquired was $3,810 and consisted primarily of assets of
$3,978 less acquisition costs of $168. The Consolidated Statements of Operations
for the years ended September 30, 1999, 1998 and 1997 include the operating
results for these stores since the respective dates of acquisition.
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. The Company purchased the assets of 27 rent-to-own stores from B&L
Concepts, Inc. ("B+L") on January 6, 1997 for total consideration of
approximately $13,800 consisting of cash of approximately $10,800 and a $3,000
convertible note. Additionally, during 1997, the Company acquired 60 stores in 8
unrelated transactions for an aggregate purchase price of approximately $32,000
consisting of cash of $27,900 and notes totaling $4,100. Each acquisition was
recorded using the purchase method of accounting. The acquired assets and
liabilities were recorded at their fair values at the date of the acquisition.
The excess of the acquisition cost over the fair value of net assets acquired,
("goodwill") of $44,515 is being amortized on a straight-line basis over 20
years. The total cost of net assets acquired was $57,729 and consisted of assets
of $64,974 less liabilities assumed of $7,245. Assets acquired (at fair value)
other than goodwill consisted primarily of rental merchandise of $17,211,
property and equipment of $2,359, and other assets of $890. Liabilities assumed
(at fair value) consisted primarily of trade payables of $1,755, notes payable
of $5,152, and income taxes payable of $338. The Consolidated Statements of
Operations for the years ended September 30, 1999, 1998, and 1997 include the
results of operations for these stores from the date of acquisition.
The following are unaudited pro forma results of operations for the years
ended September 30, 1999 and 1998 assuming the acquisitions of Ace Rentals,
Champion, and RentaVision had occurred on October 1, 1998 and 1997,
respectively. The unaudited pro forma information does not include the results
of operations of the Fast Rentals Acquisition in July 1998, the Cari acquisition
in September 1998, and the America's Rent-To-Own acquisition in June 1999, which
were not significant. The results are not necessarily indicative of future
operations or what would have occurred had the acquisitions been consummated as
of October 1, 1998 and 1997.
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:
<TABLE>
<CAPTION>
Unaudited Pro Forma
Information
Years Ended September 30,
-----------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Total revenues..................................... $ 569,905 $ 527,613
Net income (loss).................................. $ 14,631 $ (152)
Diluted earnings (loss) per common share:
Income (loss) before extraordinary item....... $ 0.68 $ (0.01)
============ ==============
Net income (loss)............................. $ 0.66 $ (0.01)
============ ==============
</TABLE>
Disposals
On September 30, 1998, the Company entered into an asset purchase and
exchange agreement with SKC Enterprises, Inc. ("SKC") whereby the Company
exchanged five stores and approximately $1,100 in cash for seven SKC stores. The
Company recognized a gain of approximately $300 as a result of the transaction
with SKC. The following table summarizes the book value of the assets disposed
of and the fair value of the assets purchased from SKC:
<TABLE>
<CAPTION>
Book Value of Assets Sold to SKC
--------------------------------
<S> <C>
Rental merchandise...................... $ 837
Property and equipment.................. 127
--------
$ 964
========
</TABLE>
<TABLE>
<CAPTION>
Fair Value of Assets Purchased from SKC
---------------------------------------
<S> <C>
Rental merchandise...................... $ 1,147
Property and equipment.................. 91
Intangible assets....................... 1,142
Other assets............................ 5
--------
$ 2,385
========
</TABLE>
During 1997, the Company sold eight stores for $3,032. In connection with
the transaction, the Company sold assets with a net book value of $2,082,
received cash of $3,032, and recorded a gain of $950.
5. RENTAL MERCHANDISE AND PROPERTY AND EQUIPMENT:
Cost and accumulated depreciation of rental merchandise consists of the
following:
<TABLE>
<CAPTION>
September 30,
-----------------------------
1999 1998
-------------- -------------
<S> <C> <C>
Cost.............................................. $ 313,304 $ 268,509
Less accumulated depreciation..................... 111,159 92,487
------------ -------------
$ 202,145 $ 176,022
============ =============
</TABLE>
The Company uses a direct-ship policy from their vendors to the stores. As a
result, the Company has eliminated the need for internal warehousing and
distribution. The Company has acquired various entities, including Home Choice
and RentaVision, that used internal warehousing and distribution. The Company
has eliminated these warehouses and has applied direct-ship policies to these
stores. This policy has minimized the amount of rental merchandise not on rent.
On-rent and held for rent levels of net rental merchandise consists of the
following:
<TABLE>
<CAPTION>
September 30,
----------------------------
1999 1998
----------- ------------
<S> <C> <C>
On-rent merchandise............................... $ 226,825 $ 185,372
Held for rent merchandise......................... 86,479 83,137
----------- ------------
$ 313,304 $ 268,509
=========== ============
</TABLE>
The Company uses the direct write-off method in accounting for losses (see
Note 1). These losses are recorded in other operating expenses and were incurred
as follows:
<TABLE>
<CAPTION>
Years ended September 30,
-------------------------------------------
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Lost merchandise.................................. $ 2,048 $ 1,380 $ 393
Stolen merchandise................................ 12,077 12,071 10,338
Discarded merchandise............................. 3,381 1,541 1,055
----------- ------------ ------------
$ 17,506 $ 14,992 $ 11,786
=========== ============ ============
</TABLE>
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
5. RENTAL MERCHANDISE AND PROPERTY AND EQUIPMENT, Continued:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30,
----------------------------
1999 1998
----------- ------------
<S> <C> <C>
Signs........................................... $ 7,405 $ 5,431
Transportation equipment........................ 4,551 3,201
Furniture and fixtures.......................... 25,341 17,626
Leasehold improvements.......................... 27,189 19,825
Buildings....................................... 3,968 4,167
Construction in progress........................ 351 --
Land............................................ 2,307 2,423
----------- ------------
71,112 52,673
Less accumulated depreciation and amortization.... 20,534 14,154
----------- ------------
$ 50,578 $ 38,519
=========== ============
</TABLE>
6. OTHER LIABILITIES:
Other liabilities consist of the following:
<TABLE>
<CAPTION>
September 30,
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Accrued salaries, wages and payroll taxes......... $ 4,205 $ 4,810
Accrued property taxes............................ 1,536 2,680
Sales taxes payable............................... 2,952 2,772
Accrued interest.................................. 639 1,077
Accrued bonuses................................... 344 190
Other............................................. 6,185 11,691
----------- -----------
$ 15,861 $ 23,220
=========== ===========
</TABLE>
7. DEBT:
Debt consists of the following:
<TABLE>
<CAPTION>
September 30,
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Senior Credit Facility............................ $ 268,000 $ 157,064
Convertible Subordinated Debentures............... 20,000 20,000
Notes Payable..................................... 130 2,539
----------- -----------
$ 288,130 $ 179,603
=========== ===========
</TABLE>
On September 23, 1999, the Company amended its existing collateralized term
loan and revolving credit facility ("Senior Credit Facility") with a syndicate
of banks led by National City Bank of Pennsylvania (the "Amended Facility"). The
Amended Facility, co-led by National City Bank, acting as administrative agent,
Bank of America, N.A., acting as documentation agent, and Bank of Montreal and
Harris Trust and Savings Bank, acting as syndication agents, provides for loans
and letters of credit of up to $325,000 (revolving notes and letters of credit
$100,000, Term Loans A $125,000 and Term Loans B $100,000). The syndicate
members and their ratable share of the Amended Facility are:
<TABLE>
<CAPTION>
<S> <C>
National City Bank of Pennsylvania............. 10.7692%
National City Bank, Cleveland.................. 15.3846%
Bank of America, N.A........................... 10.7692%
Harris Trust and Savings Bank.................. 10.7692%
Bank of Montreal............................... 15.3846%
Firstar Bank, National Association............. 7.6923%
LaSalle Bank, National Association............. 6.9231%
Sun Trust Bank, Central Florida, National
Association.................................... 6.1538%
Manufacturers and Traders Trust Company........ 6.1538%
PNC Bank, National Association................. 5.3846%
Bank Austria, Creitanstalt Corporate Finance,
Inc............................................ 4.6154%
</TABLE>
Under the Amended Facility, the Company may borrow funds under a base rate
option plan or euro-rate option plan. Under the base rate option plan, the
Company may borrow funds based on a spread of prime rate plus 0.0% to 1.5%
(prime rate at September 30, 1999 of 8.25%). The actual spread is determined
based on the ratio of debt to cash flows from operations during the period.
Under the euro-rate option, the Company may borrow funds based on a spread of
the London Interbank Offer Rate, ("LIBOR") plus 150 to 300 basis points (LIBOR
at September 30, 1999 of 5.514%). The actual spread is determined based on the
ratio of debt to cash flow generated from operations during the period.
Borrowings under the euro-rate option require the Company to select a fixed
interest period during which the euro-rate is applicable with the borrowed
amount not to be repaid prior to the last day of the selected interest period.
In addition, borrowing tranches under the euro-rate option must be in multiples
of $1,000. Commitment fees associated with
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
7. DEBT, Continued:
the Amended Facility are equal to 0.375% for each banks' commitment starting
with this facility. Borrowings under the base-rate option are at the Prime
interest rate plus 50 basis points. These borrowings may be repaid at any time.
As of September 30, 1999, the Company's debt under both the euro-rate option
and base-rate option plans were as follows:
<TABLE>
<CAPTION>
Borrowing option plan Amount Rate Expiration Date
--------------------- ------ ---- ---------------
<S> <C> <C> <C> <C>
Euro-rate tranche.............................. $ 125,000 8.01375% 12/31/99
Euro-rate tranche.............................. 100,000 8.38250% 10/25/99
Euro-rate tranche.............................. 40,000 8.01375% 12/31/99
Base-rate...................................... 3,000 9.25000% 09/30/04
---------
$ 268,000
=========
</TABLE>
The principal amount of the Term Notes A under the Amended Facility (with
maximum borrowings of $125,000 outstanding at September 30, 1999) shall be
payable in quarterly payments due on the last day of each December, March, June,
and September, beginning with the quarter ending December 31, 1999, and as
follows:
<TABLE>
<CAPTION>
Quarter (s) Ending on Following Amount of Quarterly Payment of
------------------------------- -----------------------------------
Date or In The Following Period Principal Due on Each Payment Date
------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
12-31-99 through 9-30-00......... $ 3,750
12-31-00 through 9-30-01......... 5,000
12-31-01 through 9-30-02......... 6,250
12-31-02 through 9-30-03......... 7,500
12-31-03 through 9-30-04......... 8,750
</TABLE>
The principal amount of each of the Term Notes B under the Amended Facility
(with maximum borrowings of $100,000 outstanding at September 30, 1999) shall be
payable in quarterly payments each in the amount of $250 due on the last day of
each December, March, June, and September, beginning with the quarter ending
December 31, 1999, and continuing through and including September 30, 2004,
followed by two annual payments on September 30, 2005 and September 30, 2006,
each in the amount of $47,500.
At September 30, 1999, the Company had $43,000 principal amount of the
revolving credit facility outstanding under the Amended Facility and $1,700 in
letters of credit outstanding (see Note 9). At September 30, 1999 there was
$55,300 of unused revolving notes and letters of credit available under the
Amended Facility.
The Amended Facility requires the Company to meet certain financial
covenants and ratios including maximum leverage, minimum interest coverage,
minimum tangible net worth, fixed charge coverage, and rental merchandise usage
ratios. In addition, the Company must meet requirements regarding monthly,
quarterly, and annual financial reporting. The Amended Facility also contains
non-financial covenants, which restrict actions of the Company with respect to
the payment of dividends, acquisitions, mergers, disposition of assets or
subsidiaries, issuance of capital stock, and capital expenditures. The Company
may at any time repay outstanding borrowings, in whole or part, without premium
or penalty, except with respect to restrictions identified with the selection of
the euro-rate option.
The Senior Credit Facility (the "Prior Facility") prior to the Amended
Facility was with a syndicate of banks led by National City Bank of
Pennsylvania, NationsBank, N.A., and Harris Trust and Savings Bank and was
signed on December 10, 1998. On March 10, 1999, the Company made two Credit
Agreement Joinders (the "Joinders") to the Prior Facility. The Joinders were
made by PNC Bank, National Association and Bank Austria Creditanstalt Corporate
Finance, Inc. (the "New Banks"). Each of the New Banks agreed to make a
revolving credit commitment in the amount of $3,889 and a term loan commitment
in the amount of $4,861. The Joinders increased the term loans available under
the Prior Facility to $125,000 and the revolving loans and letters of credit
available under the Prior Facility to $100,000. Following the Joinders, the
syndicate members and their ratable share of the Prior Facility were as follows:
<TABLE>
<CAPTION>
<S> <C>
National City Bank of Pennsylvania........................... 15.5556%
NationsBank, N.A............................................. 15.5556%
Harris Trust and Savings Bank................................ 15.5556%
Firstar Bank, N.A............................................ 11.1111%
LaSalle National Bank........................................ 10.0000%
SunTrust Bank, Central Florida, National
Association.................................................. 8.8889%
Manufacturers and Traders Trust Company...................... 8.8889%
Mercantile Bank of St. Louis, N.A............................ 6.6667%
PNC Bank, National Association............................... 3.8889%
Bank Austria Creditanstalt Corporate Finance, Inc............ 3.8889%
</TABLE>
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
7. DEBT, Continued:
On January 1, 1999, the Company amended the Prior Facility to add Rent-Way
of TTIG, L.P., an Indiana limited partnership, as a co-borrower. The amendment
also caused Rent-Way of Tomorrow, Inc., Rent-Way of Michigan, Inc., and Rent-Way
Developments, Inc., new subsidiaries of the Company incorporated in Delaware, to
become guarantors of the Prior Facility.
The Prior Facility required the Company to comply with certain covenants,
including financial covenants. These covenants generally restricted the Company
from incurring additional indebtedness, granting additional liens on its assets,
making dividends or distributions, disposing of assets other than in the
ordinary course, issuing additional stock, making additional acquisitions or
making capital expenditures, in each case subject to certain exceptions. Under
the Prior Facility, the Company was restricted from incurring additional
indebtedness except additional purchase money indebtedness not exceeding $100,
subordinated intercompany indebtedness, indebtedness incurred in connection with
certain acquisitions permitted under the Facility, certain capitalized leases or
purchases of fixed assets with payments that do not exceed $10,000 in the
aggregate in any fiscal year, and any other lease, which is not a capitalized
lease, or the rental of any real or personal property of another entity with
payments that do not (other than for leases of retail store sites and motor
vehicles) exceed $250 in the aggregate in any fiscal year. The Company was also
required to comply with certain financial covenants including maximum leverage,
minimum interest coverage, minimum net worth, and minimum fixed charge coverage
ratios.
As a result of entering into the Prior Facility, the Company wrote off the
remaining balance of deferred financing costs associated with Rent-Way's and
Home Choice's previous credit facilities. The amount of deferred finance costs,
$865 ($519 net of 40% tax) is shown as an extraordinary item on the Company's
Consolidated Statement of Operations for the year ended September 30, 1999.
The Senior Credit Facility existing in fiscal 1998 (the "1998 Facility") of
Rent-Way was with a syndicate of banks led by National City Bank of
Pennsylvania, provided for loans and letters of credit up to $120,000 and was
signed on February 5, 1998. The syndicate was composed of eight banks, with
National City Bank committed for a 15.00% ratable share, NationsBank, N.A.,
Harris Trust and Savings Bank, LaSalle National Bank, Manufacturers and Traders
Trust Company, and Star Bank, N.A. committed for an equal ratable share of
14.17%, and Sun Trust Bank, Central Florida, National Association and CoreStates
Bank, N.A. committed for an equal ratable share of 7.08%. The 1998 Facility
provided for borrowings at the prime rate plus 0.0% to 0.5% or borrowings under
an euro-rate option based on a spread of LIBOR plus 100 to 200 basis points, for
a fixed interest period. As of September 30, 1998, the Company had $80,000 of
floating rate debt under the euro-rate option and $17,264 of floating rate debt
under the base rate option, with interest rates of 7.594% and 8.750%,
respectively. The 1998 Facility required the Company to meet certain financial
covenants and ratios including maximum leverage, minimum interest coverage, and
minimum tangible net worth ratios. In addition, the Company was required to meet
requirements regarding monthly, quarterly, and annual financial reporting. The
1998 Facility also contained covenants which prohibited the actions of the
Company with respect to the payment of dividends, acquisitions, mergers,
disposition of assets or subsidiaries, issuance of capital stock, and capital
expenditures. The Company was permitted, at any time, to repay outstanding
borrowings, in whole or part, without premium or penalty, except with respect to
restrictions on the selection of the euro-rate interest option.
On February 26, 1998, immediately following the Alrenco/RTO merger (see
Note 4), Home Choice entered into a new revolving credit agreement (the
"Coamerica Credit Agreement") with Coamerica Bank, as lender and agent for
certain other lenders, which provided for a $50,000 collaterized three-year
credit facility. The Coamerica Credit Agreement replaced the existing credit
agreements of Alrenco and RTO. The Coamerica Credit Agreeement provided for
interest rates based on a base rate which was the greater of the agent's prime
rate, the federal funds rate plus 100 basis points, or a "Eurodollar Rate", plus
an applicable margin. Under the Coamerica Credit Agreeement, Home Choice had the
option, provided that certain conditions were met, to obtain an increase in the
amount available under the Coamerica Credit Agreement up to an aggregate amount
of $100,000. The Coamerica Credit Agreement was collaterized by substantially
all assets of Home Choice and by a pledge of the stock of Home Choice's
subsidiaries. On April 1, 1998, borrowings available under the Coamerica Credit
Agreement were increased to $60,000. On June 22, 1998 Home Choice signed the
First Amendment to the Coamerica Agreement whereby the borrowings available were
increased to $80,000 and additional financial covenants were provided. On August
17, 1998 Home Choice signed the second amendment to the Coamerica Credit
Agreement which modified the financial covenants. As of September 30, 1998 Home
Choice was in compliance with these modified financial covenants. As of
September 30, 1998, Home Choice had $59,800 outstanding under this agreement.
The Company's $20,000 Convertible Subordinated Debentures ("Debentures") due
February 1, 2007 are convertible, at any time, into shares of common stock,
without par value, of the Company at a conversion price of $13.37 per share. The
Debentures are subject to redemption at the option of the Company on and after
February 5, 2000 at a price of 103%. The redemption price will decrease at a
rate of 1% per year, reaching a price of 100% in the year 2003 and remain fixed
until the date of maturity. The indebtedness evidenced by the Debentures is
subordinated and junior in right of payment to all senior indebtedness. The
Debentures bear an annual interest
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
7. DEBT, Continued:
rate of 7% with semi-annual payments in August and February, beginning August 1,
1997. The terms of the Debentures require the Company to meet certain annual
financial reporting obligations. In addition, the Company must deliver to the
trustee compliance certificates representing management's compliance to all
conditions and covenants in the indenture governing the Debentures. In addition,
the Debentures contain covenants which prohibit the Company with respect to the
payment of dividends and other distributions.
The Company's Notes Payable consists of the following:
<TABLE>
<CAPTION>
September 30,
-------------
1999 1998
---- ----
<S> <C> <C> <C>
Note payable to Zurn Industries, Inc. with no interest payable June 1, 1999... $ -- $ 1,650
Note payable to an individual with an interest rate of 18.0% payable in
monthly installments of $3 through December 2006............................. 120 128
Note payable to individuals with an interest rate of 9.25% payable in equal
annual installments of $700, plus accrued interest through January 3, 1999... -- 700
Note payable to individuals with interest rates at 10% and 20%; payments
ranging from $1,822 to interest only; same maturing on May 2002 and others
no stated maturity date...................................................... -- 61
Vehicle notes payable......................................................... 10 --
------ -------
$ 130 $ 2,539
====== =======
</TABLE>
The Company's weighted average interest rate was 7.732%, 7.784% and 8.517%
for the years ended September 30, 1999, 1998 and 1997, respectively.
At September 30, 1999, the carrying values and the estimated fair values of
the Company's significant fixed interest debt instruments are as follows:
<TABLE>
<CAPTION>
September 30, 1999
--------------------------
Carrying Estimated
Values Fair Values
----------- -----------
<S> <C> <C> <C>
Convertible Subordinated Debentures 7%.. $ 20,000 $ 21,516
----------- -----------
$ 20,000 $ 21,516
=========== ===========
</TABLE>
At September 30, 1999, aggregate annual maturities of debt are as follows:
<TABLE>
<CAPTION>
September 30, 1999
------------------
<S> <C> <C>
2000....................................... $ 16,000
2001....................................... 21,000
2002....................................... 26,000
2003....................................... 31,000
2004....................................... 79,000
Thereafter................................. 115,130
------------
$ 288,130
============
</TABLE>
At September 30, 1999 and 1998, book overdrafts of $2,994 and $7,802,
respectively, were included in accounts payable in the accompanying Consolidated
Balance Sheets.
8. DERIVATIVE FINANCIAL INSTRUMENTS:
The Company uses derivative financial instruments to reduce the impact on
interest expense of fluctuations in interest rates on a portion of the
Amended Facility (see Note 7). Interest rate expense under the swap
agreements, which qualify for hedge accounting, is recorded as the net
effective interest rate of the hedged transactions. The Company does not
enter into derivative financial instruments for trading or speculative
purposes. As of September 30, 1999, the Company had in place eight interest
rate swaps, under which the Company agreed with counterparties to exchange,
at quarterly intervals, the interest payments on a variable pay rate of the
three-month LIBOR and a fixed pay rate for the notional amount of the
interest rate swap agreements. The Company actively evaluates the
creditworthiness of the financial institutions which are counterparties to
interest rate swap agreements, and it does not appear that any counterparty
will fail to meet their obligation. The following table illustrates the
notional amounts outstanding, maturity dates and the fixed pay and variable
receive rates of each of the interest rate swap agreements at September 30,
1999:
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
8. DERIVATIVE FINANCIAL INSTRUMENTS, Continued:
<TABLE>
<CAPTION>
Fixed Variable
Notional Maturity Pay Receive
Amount Date Rate Rate
------------- --------- -------
<S> <C> <C> <C> <C>
Interest rate swap, National City Bank.................... $ 30,000 May 2003 5.965% 5.514%
Interest rate swap, Bank of America....................... $ 20,000 May 2003 5.760% 5.514%
Interest rate swap, Manufacturers and Traders Trust Company $ 10,000 May 2003 5.925% 5.514%
Interest rate swap, Harris Bank........................... $ 20,000 Dec. 2003 5.090% 5.514%
Interest rate swap, SunTrust Bank......................... $ 10,000 Dec. 2003 5.105% 5.514%
Interest rate swap, LaSalle Bank.......................... $ 10,000 Dec. 2003 5.095% 5.514%
Interest rate swap, Bank of America....................... $ 10,000 Dec. 2003 5.120% 5.514%
Interest rate swap, Harris Bank........................... $ 10,000 Dec. 2003 5.120% 5.514%
</TABLE>
The fair value of the interest rate swap agreements based on settlement cost
as estimated by a dealer as of September 30, 1999 are as follows:
<TABLE>
<CAPTION>
Notional Fair
Amount Value
------------ ------------
<S> <C> <C>
Interest rate swap, National City Bank....................... $ 30,000 $ 278
Interest rate swap, Bank of America.......................... $ 20,000 $ (21)
Interest rate swap, Manufacturers and Traders Trust Company.. $ 10,000 $ 118
Interest rate swap, Harris Bank.............................. $ 20,000 $ 943
Interest rate swap, SunTrust Bank............................ $ 10,000 $ 485
Interest rate swap, LaSalle Bank............................. $ 10,000 $ 465
Interest rate swap, Bank of America.......................... $ 10,000 $ 458
Interest rate swap, Harris Bank.............................. $ 10,000 $ 460
</TABLE>
9. COMMITMENTS AND CONTINGENCIES:
The Company leases substantially all of its retail stores under
non-cancelable agreements generally for initial periods ranging from three to
five years. The store leases generally contain renewal options for one or more
periods of three to five years. Most leases require the payment of taxes,
insurance and maintenance costs by the Company. At September 30, 1999, future
minimum rental payments under non-cancelable operating leases are as follows:
<TABLE>
<CAPTION>
September 30, 1999
------------------
<S> <C> <C>
2000....................................... $ 28,883
2001....................................... 22,688
2002....................................... 15,729
2003....................................... 8,710
Thereafter................................. 5,368
---------------
Total minimum payments required............ $ 81,378
===============
</TABLE>
Rent expense under operating leases for the years ended September 30, 1999,
1998, and 1997 was $26,495, $25,737, and $18,197, respectively.
The Company is subject to legal proceedings and claims in the ordinary
course of its business that have not been finally adjudicated. Certain of these
cases have resulted in contingent liabilities ranging from $2,200 to $4,100. The
majority of such claims are, in the opinion of management, covered by insurance
policies or indemnification agreements and therefore should not have a material
effect on the consolidated financial position, results of operations or cash
flows of the Company. Additional claims exist in the range of $1,300 to $1,400
for which management believes it has meritorious defenses but for which the
likelihood of an unfavorable outcome is currently not determinable.
Additionally, claims exist for which management is not able to estimate a
potential loss. In management's opinion, each of these claims will either be
indemnified by the former shareholders of companies it has acquired or covered
by insurance policies and therefore will not have a material effect on the
consolidated financial position, results of operations or cash flows of the
Company.
In fiscal 2000, the Company plans to construct a 30,000 square foot addition
to its current corporate headquarters facility. The Company estimates the cost
at approximately $3,500. The Company plans to fund this project with borrowings
on its Senior Credit Facility.
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
9. COMMITMENTS AND CONTINGENCIES, Continued:
The Company is self-insured for certain losses related to workers'
compensation, employee medical and employee dental claims. The Company has
purchased stop-loss coverage in order to limit its exposure to any significant
levels of claims. Self-insurance reserves are accrued based upon the Company's
estimates of the aggregate liability for uninsured claims incurred using certain
actuarial assumptions followed in the insurance industry and the Company's
historical experience. The Company has obtained letters of credit of $1,700 to
guarantee the payment of future claims. The face value of the letters of credit
approximate their market value at September 30, 1999.
Also, see Note 12 for related party commitments.
10. REDEEMABLE PREFERRED STOCK:
On July 21, 1995, in connection with the acquisition of McKenzie Leasing
Corporation, the Company issued 27,500 shares of Series A Redeemable Preferred
Stock ("Preferred Stock"). In preference to shares of common stock, each share
was entitled to receive annual cumulative cash dividends in the amount of 7%
payable in quarterly installments on the first day of January, April, July and
October. During 1997 the Company declared and paid dividends totaling $30.
Holders of the Preferred Stock had no voting rights; however, there were certain
exceptions including the right to eight votes per share if the Company failed to
pay dividends for two quarters.
The Company was required to redeem all outstanding Preferred Stock on June
30, 2006 at a redemption price of $100 per share plus any accrued or unpaid
dividends. The Company had the right to redeem the Preferred Stock at any time
at the rate of $100 per share plus any accrued or unpaid dividends. The Company
also entered into option agreements with the holders of the Preferred Stock
which provided the holders with mandatory redemption rights. During 1996 the
following redemptions of the Series A Preferred Stock were made: $429 in
January, 1996, $68 in February, 1996, and $1,132 in April, 1996. In addition, on
November 26, 1996, the Company redeemed the remaining 11,207 outstanding shares.
These shares were redeemed at a twenty-five percent discount for an aggregate
purchase price of $841 and have reinstated the status of authorized and unissued
preferred shares undesignated as to series. As a result of redemption on a
discounted basis, a net gain on redemption of $280 was recognized. This amount
is added to net income in the calculation of earnings per share.
11. INCOME TAXES:
The Company's income tax expense (benefit) consists of the following
components:
<TABLE>
<CAPTION>
For the Years Ended September 30,
----------------------------------------------
1999 1998 1997
---- ---- ----
Current expense:
<S> <C> <C> <C>
Federal............................................. $ 3,499 $ 4,126 $ 4,604
State and local..................................... 987 1,236 1,379
----------- ----------- -----------
4,486 5,362 5,983
Deferred expense (benefit):
Federal............................................. 7,843 (438) (828)
State and local..................................... 2,905 (153) (289)
----------- ----------- -----------
10,748 (591) (1,117)
----------- ----------- -----------
Income tax expense.................................... $ 15,234 $ 4,771 $ 4,866
=========== =========== ===========
</TABLE>
A reconciliation of the income tax expense compared with the amount at the
U.S. statutory tax rate of 34% (35% for 1999) is shown below:
<TABLE>
<CAPTION>
For the Years Ended September 30,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Tax provision at U.S. statutory rate................... $ 10,618 $ 997 $ 2,187
State and local income taxes, net of federal benefit... 2,530 715 719
Nondeductible goodwill and purchase contracts.......... 881 999 1,243
Nondeductible acquisition costs........................ 2,625 1,917 198
Reserves not previously benefited...................... (1,520) - -
Other.................................................. 100 143 519
---------- ------------ ----------
Income tax expense..................................... $ 15,234 $ 4,771 $ 4,866
========== ============ ==========
</TABLE>
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
11. INCOME TAXES, Continued:
At September 30, 1999 and 1998, the components of the net deferred tax asset
(liability) are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Rental merchandise................................................... $ (21,339) $ (12,109)
Property and equipment............................................... 2,350 181
Operating loss carry forwards........................................ 8,959 12,969
Intangibles.......................................................... (1,115) 206
Other................................................................ 92 1,129
Tax credits.......................................................... 5,835 2,926
----------- -----------
Net deferred tax asset(liability).................................... $ (5,218) $ 5,301
=========== ===========
</TABLE>
In 1999, a net deferred tax asset of approximately $229 was established upon
the acquisition of America's Rent-To-Own for the difference in the tax and book
basis of the net assets acquired.
As of September 30, 1999, the Company has net operating loss carry-forwards
of approximately $22,731 for income tax purposes, expiring in years through
2018. These losses are subject to annual limitations under Internal Revenue Code
Section 382 due to prior ownership changes. Additionally, as of September 30,
1999, the Company has alternative minimum tax credits of approximately $5,835.
12. RELATED PARTY TRANSACTIONS:
During fiscal years ended September 30, 1999, 1998 and 1997 the Company
leased two locations from a principal shareholder or a company controlled by a
principal shareholder. Rent paid during these years related to these leases was
$65, $87, and $92, respectively.
The Company has entered into employment contracts with certain directors and
executive officers. The agreements are for a three year term commencing October
1, 1995. The Company paid $1,282 and $882 related to these agreements for the
years ended September 30, 1998 and 1997, respectively.
In connection with the acquisition of D.A.M.S.L. Corp. ("DAMSL") in fiscal
1994, the Company entered into consulting and non-compete agreements with the
former shareholders of DAMSL. The remaining payment terms for the consulting and
non-compete agreements is $319 for 2000.
In connection with the acquisition of McKenzie Leasing Corporation ("MLC")
in fiscal 1995, the Company entered into consulting and non-compete agreements
with McKenzie Development Corporation ("MDC"), an affiliate of MLC and the
principal shareholders of MDC, the former owners of MLC. The consulting and
non-compete agreements are for seven years and have payment terms of $1,250 on
July 21, 1995 and $200 per year for each of the following seven years.
In connection with the merger of Alrenco and RTO, Alrenco entered into a
non-compete agreement and consulting agreement dated February 26, 1998 with
Michael D. Walts, the Chairman, President and principal shareholder of Alrenco.
The consulting and non-compete agreement is for a term of five years and has
payment terms in the amount of $400 for each of the next five, twelve month
periods. The Company paid $400 and $200 on this agreement during fiscal 1999 and
1998, respectively.
During the year ended December 31, 1997, Home Choice issued common stock to
settle notes payable totaling $690 to certain stockholders.
13. STOCK OPTIONS:
In March 1999, the Board of Directors of the Company adopted, and the
shareholders approved, the Rent-Way, Inc. 1999 Stock Option Plan (the "1999
Plan") which authorizes the issuance of up to 2,500,000 shares of common stock
pursuant to stock options granted to officers, directors, key employees,
consultants, and advisors of the Company. The option exercise price will be at
least equal to the fair market value of the Company's common stock on the grant
date. The 1999 Plan will expire in March 2009 unless terminated earlier by the
Board of Directors. The authorized number of shares, the exercise price of
outstanding options, and the number of shares under option are subject to
appropriate adjustment for stock dividends, stock splits, reverse stock splits,
recapitalizations, and similar transactions. The 1999 Plan is administered by
the Stock Option Committee of the Board of Directors who select the optionees
and determine the terms and provisions of each option grant within the
parameters set forth in the 1999 Plan. As of September 30, 1999, 550,000 options
at an exercise price of $27.88 were granted under the 1999 Plan.
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
13. STOCK OPTIONS, Continued:
In June 1992, the Board of Directors of the Company adopted, and the
shareholders have approved, the Rent-Way, Inc. Stock Option Plan of 1992 (the
"1992 Plan") which authorizes the issuance of up to 600,000 shares of common
stock pursuant to stock options granted to officers, directors, key employees,
consultants, and advisors of the Company. The option exercise price will be at
least equal to the fair market value of the Company's common stock on the grant
date. The 1992 Plan will expire in June 2002 unless terminated earlier by the
Board of Directors. The authorized number of shares, the exercise price of
outstanding options and the number of shares under option are subject to
appropriate adjustment for stock dividends, stock splits, reverse stock splits,
recapitalizations and similar transactions. The 1992 Plan is administered by the
Compensation Committee of the Board of Directors who select the optionees and
determine the terms and provisions of each option grant within the parameters
set forth in the 1992 Plan.
The Board of Directors of the Company also adopted, and the shareholders
have approved the Rent-Way, Inc. 1995 Stock Option Plan (the "1995 Plan") which
authorizes the issuance of up to 2,000,000 shares of common stock pursuant to
stock options granted to officers, directors and key employees of the Company.
The 1995 Plan is administered by the Compensation Committee of the Board of
Directors and contains terms and provisions substantially identical to those
contained in the 1992 Plan.
On November 8, 1995, Alrenco approved a stock incentive plan (the "Alrenco
Plan") under which 450,000 common shares were reserved. Under the Alrenco Plan,
Alrenco was entitled to 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 than fair market value on the date of grant and for a
term not to exceed 10 years. In addition to the stock options, Alrenco was
entitled to grant stock appreciation rights ("SAR"), restricted stock awards and
options to directors. SARs and options to directors were required to 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 Alrenco Board of Directors'
compensation committee. Directors who were not involved in day-to-day management
of Alrenco were 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, Alrenco granted 105,000 shares of restricted stock to two key employees,
which vested at 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. Compensation expense of $988 and $194 was recorded related to
Alrenco Plan for the years ended September 30, 1999 and 1998.
RTO adopted the 1996 Employee Stock Option Plan (the "RTO Plan") to attract
and retain employees. Under the RTO Plan, RTO was entitled to grant options to
purchase a total of not more than 1,027,973 shares of common stock, subject to
anti-dilution and other adjustment provisions provided, however, that the
maximum number of shares subject to all options granted to an individual under
the Plan would not exceed 50% of the shares of common stock authorized for
issuance. No options could 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. RTO also adopted the 1996
Stock Option Plan for Non-Employee Directors (the "Director's Plan") that
provided for the granting to non-employee directors of stock options to purchase
up to 448,975 shares of RTO's common stock.
Pursuant to the terms of the merger agreement between Rent-Way and Home
Choice, each Home Choice stock option which was outstanding and unexercised at
the date of the merger was converted into an option to purchase Rent-Way's
common stock. The number of shares subject to the Home Choice options was equal
to the product of the number of shares of Home Choice common stock subject to
Home Choice options and 0.588, the exchange ratio.
The following is a summary of activity of the Company's stock options during
the years ended September 30, 1999, 1998 and 1997 and has been restated to
include the activity of Home Choice's stock options based on an exchange ratio
of 0.588:
<TABLE>
<CAPTION>
Weighted
Average
Price
Stock Options Shares Per Share
------------------ ----------- ---------
<S> <C> <C> <C> <C>
September 30, 1996 1,322,113 $ 10.51
Granted......... 1,149,522 $ 15.54
Exercised....... (306,278) $ 6.25
Forfeited....... (172,568) $ 15.30
-----------
September 30, 1997 1,992,794 $ 13.65
Granted......... 1,070,831 $ 23.48
Exercised....... (299,417) $ 10.27
Forfeited....... (443,702) $ 19.92
-----------
September 30, 1998 2,320,506 $ 17.42
Granted......... 1,364,263 $ 25.90
Exercised....... (403,610) $ 14.07
Forfeited....... (125,950) $ 25.29
-----------
September 30, 1999 3,155,209 $ 21.21
===========
</TABLE>
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
13. STOCK OPTIONS, Continued:
At September 30, 1999, stock options representing 1,432,515 shares are
exercisable at prices ranging from $5.83 to $33.63 per share.
The Company accounts for stock based compensation issued to its employees
and directors in accordance with APB No. 25 and has elected to adopt the
"disclosure only" provisions of SFAS No. 123.
For SFAS No. 123 purposes, the fair value of each option granted under the
1992 Plan, the 1995 Plan, and the 1999 Plan is estimated as of the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for options granted in fiscal 1999 and 1998: expected
volatility of 45.43%, risk-free interest rates between 6.07% and 4.21%, and an
expected life of five years.
If the Company had elected to recognize the compensation cost of its stock
option plans based on the fair value of the awards under those plans in
accordance with SFAS No. 123, net income (loss) and earnings (loss) per common
share would have been reduced to the pro-forma amounts below:
<TABLE>
<CAPTION>
September 30,
1999 1998
------------ -------------
Net income (loss) before extraordinary
item:
<S> <C> <C>
As reported............................ $ 15,102 $ (1,838)
Pro-forma.............................. 9,274 (4,243)
Net income (loss):
As reported............................ $ 14,583 $ (1,838)
Pro-forma.............................. 8,755 (4,243)
Diluted earnings (loss) per common share:
Income (loss) before extraordinary item
As reported............................ $ 0.68 $ (0.09)
=========== ===========
Pro-forma.............................. $ 0.43 $ (0.21)
=========== ===========
Net income (loss)
As reported............................ $ 0.66 $ (0.09)
=========== ===========
Pro-forma.............................. $ 0.41 $ (0.21)
=========== ===========
</TABLE>
14. STOCK PURCHASE WARRANTS:
During October, November and December 1992, Rent-Way issued warrants to
purchase up to 112,500 shares of common stock at $4.67 per share. The warrants
are exercisable at any time for a period of five years from their respective
issue dates and are subject to anti-dilution provisions providing for
appropriate adjustment in the event of any reclassification, stock dividend,
stock split, or similar transaction, and stock issuances below the warrant
exercise price. The agreements will expire five years from the respective dates
on which the warrants were issued, subject to earlier termination in certain
circumstances.
Upon the closing of the Company's initial public offering in August 1993 the
underwriters received warrants to purchase 105,000 shares of common stock at a
price of $6.77 per share exercisable for a period of four years commencing one
year from the date of the offering.
In July 1995, in connection with Rent-Way's acquisition of McKenzie Leasing
Corporation and the issuance of its Convertible Subordinated Debentures,
Rent-Way issued warrants to purchase 105,000 shares of common stock at $9.94 per
share to the holders thereof. The warrants are exercisable at any time for a
period of seven years from their issue dates and are subject to anti-dilution
provisions providing for appropriate adjustment in the event of any
reclassification, stock dividend, stock split, or similar transactions, and
stock issuances below the warrant exercise price.
In September 1995, Rent-Way issued warrants to purchase 37,500 shares of
common stock at $10.00 per share. The warrants are exercisable at any time for a
period of five years from their issue dates and are subject to anti-dilution
provisions providing for appropriate adjustment in the event of any
reclassification, stock dividend, stock split, or similar transactions, and
stock issuances below the warrant exercise price.
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
14. STOCK PURCHASE WARRANTS, Continued:
At September 30, 1999, the following warrants were outstanding:
<TABLE>
<CAPTION>
Number of Exercise Expiration Shares Shares
Warrant Date shares Price Date Exercised Remaining
--------------- ---------- -------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C>
October 1992 37,500 $ 4.67 October 1997 37,500 --
November 1992 37,500 $ 4.67 November 1997 37,500 --
December 1992 37,500 $ 4.67 December 1997 37,500 --
August 1993 105,000 $ 6.76 August 1998 105,000 --
July 1995 105,000 $ 9.94 July 2002 -- 105,000
September 1995 37,500 $ 10.00 September 2000 37,500 --
</TABLE>
15. EMPLOYEE BENEFIT PLANS:
Effective January 1, 1994, Rent-Way established the Rent-Way, Inc. 401(k)
Retirement Savings Plan (the "RentWay Plan"). Participation in the Plan is
available to all Company employees who meet the necessary service criteria as
defined in the Plan Agreement. Company contributions to the Plan are based on a
percentage of the employees' contributions, as determined by the Board of
Directors, and amounted to $351, $383 and $272 (in the form of the Company's
common stock) for the years ended September 30, 1999, 1998 and 1997,
respectively.
At September 30, 1999, the Company had three other active 401(k) retirement
savings plans: the America's Sales & Leasing 401(k) Plan (the "America's Plan"),
the Rent-A-Vision, Inc. 401(k) Plan (the "RentaVision Plan"), and the Home
Choice 401(k) and Profit Sharing Plan (the "Home Choice Plan"). The Company
incurred $6 of expense related to the America's Plan during fiscal 1999. No
expenses were incurred related to the RentaVision Plan. The Company contributed
$460, $515 and $338 to the Home Choice Plan for the years ended September 30,
1999 and 1998, and the twelve months ended December 31, 1997, respectively. Each
plan is available to all Company employees who meet the necessary service
criteria as defined in the plan agreements. Company contributions to the plans
are based on a percentage of the employees' contributions. The Company expects
to merge these plans with the RentWay Plan. The Home Choice Plan will be merged
in January 2000 and the America's Plan and RentaVision Plan will be merged in
July 2000.
The Company also has a frozen 401(k) retirement savings plan: the Amigo TV
Rentals, Inc. 401(K) Plan. The Company is working to dissolve this plan. There
were no expenses incurred for this plan during fiscal 1999 and 1998.
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
16. EARNINGS (LOSS) PER SHARE:
Basic earnings (loss) per common share is computed using earnings (loss)
available to common shareholders divided by weighted average number of common
shares outstanding. Diluted earnings (loss) per common share is computed using
earnings (loss) available to common shareholders adjusted for anticipated
interest savings, net of related taxes, on conversion of the Company's
convertible subordinated debentures and the weighted average number of shares
outstanding is adjusted for the potential impact of options, warrants, and the
convertible subordinated debentures where the effects are dilutive. The weighted
average shares outstanding prior to December 10, 1998 include the historical
weighted average shares of Home Choice, adjusted for the exchange ratio of 0.588
(see Note 4).
The following table discloses the reconciliation of numerators and
denominators of the basic and diluted earnings (loss) per share computation:
<TABLE>
<CAPTION>
September 30,
----------------------------------------------
COMPUTATION OF EARNINGS (LOSS) PER SHARE 1999 1998 1997
----------------------------------------------
BASIC
<S> <C> <C> <C>
Net income (loss)........................... $ 14,583 $ (1,838) $ 1,297
Preferred stock gain on redemption.......... -- -- 280
----------- ----------- -----------
Earnings (loss) applicable to common shares
for basic earnings per share................ $ 14,583 $ (1,838) $ 1,577
=========== =========== ===========
Weighted average common shares outstanding.. 21,341 20,283 16,653
=========== =========== ===========
Earnings (loss) per common share:
Income (loss) before extraordinary item... $ 0.71 $ (0.09) $ 0.11
=========== =========== ===========
Earnings (loss) applicable to common shares
$ 0.68 $ (0.09) $ 0.09
=========== =========== ===========
DILUTED
Earnings (loss) applicable to common shares
for basic earnings per share................ $ 14,583 $ (1,838) $ 1,577
Interest on 7% convertible debentures (net
of tax) (1)................................. 840 -- --
----------- ----------- -----------
Earnings (loss) applicable to common shares
for diluted earnings per share.............. $ 15,423 $ (1,838) $ 1,577
=========== =========== ===========
Weighted average common shares used in
calculating basic earnings per share........ 21,341 20,283 16,653
Add-incremental shares representing:
Shares issuable upon exercise of stock
options, stock warrants and escrowed shares
(1)......................................... 508 -- --
Shares issued on conversion of 7%
convertible debentures (1)................. 1,496 -- --
----------- ----------- -----------
Weighted average number of shares used in
calculation of diluted earnings (loss) per
share....................................... 23,345 20,283 16,653
=========== =========== ===========
Earnings (loss) per common share:
Income (loss) before extraordinary item... $ 0.68 $ (0.09) $ 0.11
=========== =========== ===========
Earnings (loss) applicable to common shares $ 0.66 $ (0.09) $ 0.09
=========== =========== ===========
(1) Including the effects of these items for the years ended September 30, 1997 and 1998 would be anti-dilutive.
Therefore, they are excluded from the calculation of diluted earnings (loss) per share for those periods.
</TABLE>
<PAGE>
RENT-WAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(all dollars in thousands, except per share data)
<TABLE>
<CAPTION>
17. SELECTED QUARTERLY FINANCIAL DATA (unaudited):
- --------------------------------------------- ------------------ ------------------ ------------------- ---------------------
Quarter Ended (9) September 30 (1) June 30 March 31 December 31 (2)(3)
- --------------------------------------------- ------------------ ------------------ ------------------- ---------------------
1999:
<S> <C> <C> <C> <C>
Total revenues $ 122,690 $ 121,951 $ 125,750 $ 123,959
Gross profit (loss) 19,784 17,666 16,353 (7,088)
Income (loss) before extraordinary item 9,395 8,123 7,115 (9,531)
Net income (loss) 9,395 8,123 7,115 (10,050)
Earnings (loss) applicable to common shares 9,395 8,123 7,115 (10,050)
Earnings (loss) per common share
Basic
Income (loss) before extraordinary item (8) $ 0.43 $ 0.38 $ 0.34 $ (0.45)
Net income (loss) (8) 0.43 0.38 0.34 (0.48)
Diluted
Income (loss) before extraordinary item (8) $ 0.41 $ 0.36 $ 0.32 $ (0.45)
Net income (loss) (8) 0.41 0.36 0.32 (0.48)
Weighted average shares outstanding
Basic 21,771 21,335 21,125 21,088
Diluted 23,678 23,378 23,142 21,088
- --------------------------------------------- ------------------ ------------------ ------------------- ----------------------
Quarter Ended (9) September 30 (4)(5)(6) June 30 (4)(5) March 31 (4)(7) December 31
- --------------------------------------------- ------------------ ------------------ ------------------- ----------------------
1998:
Total revenues $ 117,917 $ 118,546 $ 111,660 $ 87,908
Gross profit (loss) 11,033 7,394 (1,501) (2,397)
Income (loss) before extraordinary item 4,577 1,675 (4,982) (3,107)
Net income (loss) 4,577 1,675 (4,982) (3,107)
Earnings (loss) applicable to common shares 4,577 1,675 (4,982) (3,107)
Earnings (loss) per common share
Basic
Income (loss) before extraordinary item (8) $ 0.22 $ 0.08 $ (0.24) $ (0.17)
Net income (loss) (8) 0.22 0.08 (0.24) (0.17)
Diluted
Income (loss) before extraordinary item (8) $ 0.21 $ 0.08 $ (0.24) $ (0.17)
Net income (loss) (8) 0.21 0.08 (0.24) (0.17)
Weighted average shares outstanding
Basic 20,734 20,681 20,701 18,507
Diluted 22,899 22,945 20,701 18,507
(1) Includes the results of operations of America's Rent-To-Own Center since June 30, 1999 and RentaVision
since September 23, 1999. (see Note 4).
(2) In conjunction with the Merger, the Company incurred $16,800 in business combination costs and $1,100 in
inventory write-offs. (see Note 4).
(3) As a result of the refinancing of its senior credit facility in December
1998, the Company incurred an extraordinary charge of $519, net of tax
benefit. (see Notes 1 and 7).
(4) Includes the results of operations of Ace Rentals since January 1, 1998, Champion since February 5,
1998, 3 stores acquired by Home Choice. (see Note 4).
(5) Includes the results of operations of 7 stores acquired by Home Choice. (see Note 4).
(6) Includes the results of operations of Fast Rentals since July 21, 1998, Cari since September 10, 1998,
and Northwest Rent-to-Own.(see Note 4).
(7) Includes $11,210 in business combination charges related to Home
Choice's predecessor's merger with Alrenco, which occurred in February 1998.
(8) The sum of the 1999 and 1998 quarterly per share amounts does not equal annual per share amounts due to
the effect of rounding.
(9) All periods have been restated to reflect the merger with Home Choice (see Note 4).
</TABLE>
<PAGE>
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
There has been no change of accountants or reporting disagreements on any
matter of accounting principle, practice, financial statement disclosure or
auditing scope or procedure within the Company's two most recent fiscal years or
the current interim period.
<PAGE>
RENT-WAY, INC.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this item is incorporated herein by reference from
the Company's definitive proxy statement for the annual meeting of shareholders
to be held on March 8, 2000, which will be filed with the Securities and
Exchange Commission within 120 days after September 30, 1999.
ITEM 11 EXECUTIVE COMPENSATION
Information in response to this item is incorporated herein by reference from
the Company's definitive proxy statement for the annual meeting of shareholders
to be held on March 8, 2000, which will be filed with the Securities and
Exchange Commission within 120 days after September 30, 1999.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this item is incorporated herein by reference from
the Company's definitive proxy statement for the annual meeting of shareholders
to be held on March 8, 2000, which will be filed with the Securities and
Exchange Commission within 120 days after September 30, 1999.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this item is incorporated herein by reference from
the Company's definitive proxy statement for the annual meeting of shareholders
to be held on March 8, 2000, which will be filed with the Securities and
Exchange Commission within 120 days after September 30, 1999.
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1.)Financial Statements.
See Index to Financial Statements appearing at Item 8 of this Report.
(a)(2.) Financial Statement Schedules
Financial Statement schedules have been omitted because they are
inapplicable or the information is included in the Company's financial
statements and notes thereto.
(a)(3.) Exhibits
<PAGE>
Exhibit No. Description
- -------------------------------------------------------------------------------
2.1(1) Asset Purchase Agreement among the Company, AV Rentals/Warren, Inc.,
AV Rentals/Garystown, Inc., Best Rentals Northside, Inc. and C.
Dennis Goldman, dated February 24, 1995.
2.2(4) Agreement and Plan of Merger among the
Company, McKenzie Leasing Corporation, Steve
A. McKenzie, Brenda G. McKenzie and others,
dated June 9, 1995.
2.3(7) Stock Purchase Agreement by and among the
Company, Diamond Leasing Corporation, Kenneth
H. Moye and Lee Brady, dated July 20, 1996.
2.4(9) Stock Purchase Agreement by and among the Company, Bill Coleman TV,
Inc. and David Coleman, dated January 2, 1997.
2.5(6) Stock Purchase Agreement by and among the Company, Perry Electronics,
Inc., Robert L. Thomas, Norma J. Thomas, Randall D. Snyder and Niki
L. Snyder, dated January 24, 1997.
2.6(6) Closing Letter Agreement dated February 6,
1997 amending Stock Purchase Agreement by and
among the Company, Perry Electronics, Inc.,
Robert L.Thomas, Norma J. Thomas, Randall D. Snyder and Niki L.
Snyder.
2.7(10) Asset Purchase Agreement by and among the Company, South Carolina
Rentals,Inc., Paradise Valley Holdings, Inc., L & B Rents, Inc. and
James S. Archer, dated November 21, 1997.
2.8(11) Stock Purchase Agreement by and among the Company, Champion Rentals,
Inc., Bill C. Ogle, Sr. and others, dated as of January 30, 1998.
2.9(12) Agreement and Plan of Merger dated September 1, 1998 between the
Company and Home Choice Holdings, Inc.
2.10(14) Stock Purchase Agreement between the Company, RentaVision, Inc. and
Robert Natoli dated September 15, 1999.
3.1(13) Articles of Incorporation of the Company, as amended.
3.2(2) By-Laws of the Company, as amended.
4.1(1) Form of Stock Option Agreement between the Company and each of the
shareholders of McKenzie Leasing Corporation, dated July 21, 1995.
4.2(1) Registration Rights Agreement among the Company, Massachusetts
Mutual Life Insurance Co. and affiliates thereof ("MassMutual"),
dated July 15, 1995.
4.3(9) Shareholder's Agreement between the Company
and Lee Brady, dated July 20, 1996.
4.4(9) Stock Option Agreement between the Company
and David Coleman, dated January 2, 1997.
10.1(2) Company's Stock Option Plan of 1992.
10.2(1) Company's 1995 Stock Option Plan.
10.3(2) Form of Non-Plan Stock Option Agreement.
10.4(15) Company's 1999 Stock Option Plan.
10.4* Employment Agreement between William E. Morgenstern and the
Company, dated October 1, 1998.
10.5* Employment Agreement between Jeffrey A. Conway and the
Company, dated October 1, 1998.
10.6* Engagement Agreement between Gerald A.Ryan and the Company,
dated October 1, 1999.
10.7(1) Consulting Agreement between the Company and Marc Joseffer,
dated May 18, 1994.
10.8(1) Non-Competition Agreement between Marc Joseffer and the Company,
dated May 18, 1994.
10.9(1) Consulting Agreement between the Company and
McKenzie Development Corporation, dated July
21, 1995.
10.10(1) Non-Competition Agreement between the Company
and Steve A. McKenzie, dated July 21, 1995.
10.11(1) Non-Competition Agreement between the Company
and Brenda G. McKenzie, dated July 21, 1995.
10.12(4) Subordinated Note Agreement among the
Company and MassMutual, dated July 15, 1995.
10.13(1) Form of MassMutual Subordinated Note, dated July 15, 1995.
10.14(1) Form of MassMutual Warrant, dated July 15, 1995.
10.15(12) Non competition Agreement between the Company and George D. Johnson,
Jr.
10.16* Credit Agreement by and among Rent-Way, Inc., RentaVision, Inc., and
Rent-Way of TTIG, L.P. and the lenders party thereto and National
City Bank of Pennsylvania, Bank of America, N.A. and Bank
of Montreal and Harris Trust and Savings
Bank, as agents dated September 23, 1999, as
amended by Amendment No. 1 to Credit
Agreement dated November 17, 1999.
10.17(8) Form of the Company's 7% Convertible Subordinated Debentures due 2007
(the "Debentures").
10.18(8) Indenture, dated February 4, 1997, between
the Company and Manufacturers and Traders
Trust Company, as Trustee, in respect of the
Debentures.
10.19(13) Non-Compete Agreement between the Company, South Carolina Rentals,
Inc., Paradise Valley Holdings, Inc., L & B Rents, Inc. and James S.
Archer, dated January 7, 1998.
10.20(13) Non-Compete Agreement between Bill C. Ogle, Sr., Gary E. Jackson,
J. Lee Ogle, Bill C. Ogle, Jr., Cindy Harper, Teresa Ogle and the
Company, dated February 5, 1998.
10.21(13) Consulting Agreement between Paul N. Upchurch
and the Company, dated February 5, 1998.
21* Subsidiaries of the Company
23* Consent of PricewaterhouseCoopers LLP.
27* Financial Data Schedule.
- ----------
* Filed herewith
(1) Previously filed, as of January 5, 1996, pursuant to the Company's
Registration Statement on Form SB-2 (No. 333-116).
(2) Previously filed, as of December 8, 1992, pursuant to the Company's
Registration Statement on Form S-18 (No. 33-55562-NY).
<PAGE>
(3) Previously filed, as of July 9, 1993, pursuant to Amendment No. 2 to
the Company's Registration Statement of
Form S-18 (No. 33-55562-NY).
(4) Previously filed, as of August 15, 1995, as an exhibit to the Company's
Current Report on Form 8-K.
(5) Previously filed, as of December 28, 1995, as an exhibit to the Company's
Current Report on Form 10-KSB.
(6) Previously filed, as of February 21, 1997, as an exhibit to the Company's
Current Report on Form 8-K.
(7) Previously filed, as of August 8, 1996, as an exhibit to the Company's
Current Report on Form 8-K.
(8) Previously filed, as of May 9, 1997, pursuant to the Company's
Registration Statement on Form S-3 (No. 333-26835).
(9) Previously filed, as of November 6, 1997, as an exhibit to the
Company's Annual Report on Form 10-K.
(10) Previously filed, as of January 20, 1998, as an exhibit to the
Company's Current Report on Form 8-K.
(11) Previously filed, as of February 19, 1998, as an exhibit to the
Company's Current Report on Form 8-K.
(12) Previously filed, as of November 6, 1998, pursuant to the Company's
Registration Statement on Form S-4 (No. 333-66955).
(13) Previously filed, as of December 29, 1998, as an exhibit to the
Company's Annual Report on Form 10-K.
(14) Previously filed, as of October 12, 1999, as an exhibit to the
Company's Current Report on Form 8-K.
(15) Previously filed, as of February 12, 1999, as Exhibit A to the
Company's Proxy Statement on Schedule 14A.
(b) Reports on Form 8-K:
(1) On July 27, 1999, the Company filed a Current Report on Form
8-K which reported the issuance of a press release on June 30,
1999 announcing the acquisition of America's Rent-To-Own
Center, Inc.
(2) On August 16, 1999, the Company filed a Current Report on Form
8-K announcing the election of Jacqueline E. Woods to the
Board of Directors.
(3) On August 31, 1999, the Company filed a Current Report on Form
8-K announcing the resignation of Gerald A. Ryan as Chairman
of the Board of the Company.
(4) On September 24, 1999, the Company filed a Current Report on
Form 8-K which reported the issuance of a press release on
September 15, 1999 announcing the signing of a definitive
agreement to acquire the stock of RentaVision, Inc.
(5) On October 12, 1999, the Company filed a Current Report on
Form 8-K disclosing the completion of the RentaVision
acquisition and attaching the exhibits required under Item 7.
(6) On October 21, 1999, the Company filed a Current Report on
Form 8-K in response to numerous inquiries regarding the
decline in the price of its common stock.
(7) On December 3, 1999, the Company filed a Current Report on
Form 8-K/A amending the Current Report on Form 8-K filed
October 12, 1999 to file the financial statements and pro
forma financial information required under Item 7.
<PAGE>
RENT-WAY, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Registrant: RENT-WAY, INC.
By: /s/ WILLIAM E. MORGENSTERN By: /s/ JEFFREY A. CONWAY
- -------------------------------------------- ------------------------------
Chairman of the Board, President and Chief Senior Vice President and Chief
Executive Officer(Principal Executive Officer) Financial Officer
(Principal Financial Officer)
December 22, 1999
- -------------------------------------------- December 22, 1999
Date ------------------------------
Date
By: /s/ MATTHEW J. MARINI
- --------------------------------------------
Controller and Chief Accounting Officer
(Principal Accounting Officer)
December 22, 1999
- --------------------------------------------
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
---------------------------- ------------------- -----------------
/s/ GERALD A. RYAN Director December 22, 1999
----------------------------
Gerald A. Ryan
/s/ WILLIAM E. MORGENSTERN Director December 22, 1999
----------------------------
William E. Morgenstern
/s/ VINCENT CARRINO Director December 22, 1999
-----------------------------
Vincent Carrino
/s/ ROBERT FAGENSON Director December 22, 1999
-----------------------------
Robert Fagenson
/s/ MARC W. JOSEFFER Director December 22, 1999
-----------------------------
Marc W. Joseffer
/s/ WILLIAM LERNER Director December 22, 1999
-----------------------------
William Lerner
/s/ PAUL N. UPCHURCH Director December 22, 1999
-----------------------------
Paul N. Upchurch
/s/ JACQUELINE E. WOODS Director December 22, 1999
-----------------------------
Jacqueline E. Woods
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- -------------------------------------------------------------------------------
2.1(1) Asset Purchase Agreement among the Company, AV Rentals/Warren, Inc.,
AV Rentals/Garystown, Inc., Best Rentals Northside, Inc. and C.
Dennis Goldman, dated February 24, 1995.
2.2(4) Agreement and Plan of Merger among the
Company, McKenzie Leasing Corporation, Steve
A. McKenzie, Brenda G. McKenzie and others,
dated June 9, 1995.
2.3(7) Stock Purchase Agreement by and among the
Company, Diamond Leasing Corporation, Kenneth
H. Moye and Lee Brady, dated July 20, 1996.
2.4(9) Stock Purchase Agreement by and among the Company, Bill Coleman TV,
Inc. and David Coleman, dated January 2, 1997.
2.5(6) Stock Purchase Agreement by and among the Company, Perry Electronics,
Inc., Robert L. Thomas, Norma J. Thomas, Randall D. Snyder and Niki
L. Snyder, dated January 24, 1997.
2.6(6) Closing Letter Agreement dated February 6,
1997 amending Stock Purchase Agreement by and
among the Company, Perry Electronics, Inc.,
Robert L.Thomas, Norma J. Thomas, Randall D. Snyder and Niki L.
Snyder.
2.7(10) Asset Purchase Agreement by and among the Company, South Carolina
Rentals,Inc., Paradise Valley Holdings, Inc., L & B Rents, Inc. and
James S. Archer, dated November 21, 1997.
2.8(11) Stock Purchase Agreement by and among the Company, Champion Rentals,
Inc., Bill C. Ogle, Sr. and others, dated as of January 30, 1998.
2.9(12) Agreement and Plan of Merger dated September 1, 1998 between the
Company and Home Choice Holdings, Inc.
2.10(14) Stock Purchase Agreement between the Company, RentaVision, Inc. and
Robert Natoli dated September 15, 1999.
3.1(13) Articles of Incorporation of the Company, as amended.
3.2(2) By-Laws of the Company, as amended.
4.1(1) Form of Stock Option Agreement between the Company and each of the
shareholders of McKenzie Leasing Corporation, dated July 21, 1995.
4.2(1) Registration Rights Agreement among the Company, Massachusetts
Mutual Life Insurance Co. and affiliates thereof ("MassMutual"),
dated July 15, 1995.
4.3(9) Shareholder's Agreement between the Company
and Lee Brady, dated July 20, 1996.
4.4(9) Stock Option Agreement between the Company
and David Coleman, dated January 2, 1997.
10.1(2) Company's Stock Option Plan of 1992.
10.2(1) Company's 1995 Stock Option Plan.
10.3(2) Form of Non-Plan Stock Option Agreement.
10.4(15) Company's 1999 Stock Option Plan.
10.4* Employment Agreement between William E. Morgenstern and the
Company, dated October 1, 1998.
10.5* Employment Agreement between Jeffrey A. Conway and the
Company, dated October 1, 1998.
10.6* Engagement Agreement between Gerald A.Ryan and the Company,
dated October 1, 1999.
10.7(1) Consulting Agreement between the Company and Marc Joseffer,
dated May 18, 1994.
10.8(1) Non-Competition Agreement between Marc Joseffer and the Company,
dated May 18, 1994.
10.9(1) Consulting Agreement between the Company and
McKenzie Development Corporation, dated July
21, 1995.
10.10(1) Non-Competition Agreement between the Company
and Steve A. McKenzie, dated July 21, 1995.
10.11(1) Non-Competition Agreement between the Company
and Brenda G. McKenzie, dated July 21, 1995.
10.12(4) Subordinated Note Agreement among the
Company and MassMutual, dated July 15, 1995.
10.13(1) Form of MassMutual Subordinated Note, dated July 15, 1995.
10.14(1) Form of MassMutual Warrant, dated July 15, 1995.
10.15(12) Non competition Agreement between the Company and George D. Johnson,
Jr.
10.16* Credit Agreement by and among Rent-Way, Inc., RentaVision, Inc., and
Rent-Way of TTIG, L.P. and the lenders party thereto and National
City Bank of Pennsylvania, Bank of America, N.A. and Bank
of Montreal and Harris Trust and Savings
Bank, as agents dated September 23, 1999, as
amended by Amendment No. 1 to Credit
Agreement dated November 17, 1999.
10.17(8) Form of the Company's 7% Convertible Subordinated Debentures due 2007
(the "Debentures").
10.18(8) Indenture, dated February 4, 1997, between
the Company and Manufacturers and Traders
Trust Company, as Trustee, in respect of the
Debentures.
10.19(13) Non-Compete Agreement between the Company, South Carolina Rentals,
Inc., Paradise Valley Holdings, Inc., L & B Rents, Inc. and James S.
Archer, dated January 7, 1998.
10.20(13) Non-Compete Agreement between Bill C. Ogle, Sr., Gary E. Jackson,
J. Lee Ogle, Bill C. Ogle, Jr., Cindy Harper, Teresa Ogle and the
Company, dated February 5, 1998.
10.21(13) Consulting Agreement between Paul N. Upchurch
and the Company, dated February 5, 1998.
21* Subsidiaries of the Company
23* Consent of PricewaterhouseCoopers LLP.
27* Financial Data Schedule.
- ----------
* Filed herewith
(1) Previously filed, as of January 5, 1996, pursuant to the Company's
Registration Statement on Form SB-2 (No. 333-116).
(2) Previously filed, as of December 8, 1992, pursuant to the Company's
Registration Statement on Form S-18 (No. 33-55562-NY).
<PAGE>
(3) Previously filed, as of July 9, 1993, pursuant to Amendment No. 2 to
the Company's Registration Statement of
Form S-18 (No. 33-55562-NY).
(4) Previously filed, as of August 15, 1995, as an exhibit to the Company's
Current Report on Form 8-K.
(5) Previously filed, as of December 28, 1995, as an exhibit to the Company's
Current Report on Form 10-KSB.
(6) Previously filed, as of February 21, 1997, as an exhibit to the Company's
Current Report on Form 8-K.
(7) Previously filed, as of August 8, 1996, as an exhibit to the Company's
Current Report on Form 8-K.
(8) Previously filed, as of May 9, 1997, pursuant to the Company's
Registration Statement on Form S-3 (No. 333-26835).
(9) Previously filed, as of November 6, 1997, as an exhibit to the
Company's Annual Report on Form 10-K.
(10) Previously filed, as of January 20, 1998, as an exhibit to the
Company's Current Report on Form 8-K.
(11) Previously filed, as of February 19, 1998, as an exhibit to the
Company's Current Report on Form 8-K.
(12) Previously filed, as of November 6, 1998, pursuant to the Company's
Registration Statement on Form S-4 (No. 333-66955).
(13) Previously filed, as of December 29, 1998, as an exhibit to the
Company's Annual Report on Form 10-K.
(14) Previously filed, as of October 12, 1999, as an exhibit to the
Company's Current Report on Form 8-K.
(15) Previously filed, as of February 12, 1999, as Exhibit A to the
Company's Proxy Statement on Schedule 14A.
(b) Reports on Form 8-K:
(1) On July 27, 1999, the Company filed a Current Report on Form
8-K which reported the issuance of a press release on June 30,
1999 announcing the acquisition of America's Rent-To-Own
Center, Inc.
(2) On August 16, 1999, the Company filed a Current Report on Form
8-K announcing the election of Jacqueline E. Woods to the
Board of Directors.
(3) On August 31, 1999, the Company filed a Current Report on Form
8-K announcing the resignation of Gerald A. Ryan as Chairman
of the Board of the Company.
(4) On September 24, 1999, the Company filed a Current Report on
Form 8-K which reported the issuance of a press release on
September 15, 1999 announcing the signing of a definitive
agreement to acquire the stock of RentaVision, Inc.
(5) On October 12, 1999, the Company filed a Current Report on
Form 8-K disclosing the completion of the RentaVision
acquisition and attaching the exhibits required under Item 7.
(6) On October 21, 1999, the Company filed a Current Report on
Form 8-K in response to numerous inquiries regarding the
decline in the price of its common stock.
(7) On December 3, 1999, the Company filed a Current Report on
Form 8-K/A amending the Current Report on Form 8-K filed
October 12, 1999 to file the financial statements and pro
forma financial information required under Item 7.
<PAGE>
Exhibit 10.4
RENT-WAY, INC.
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of October 1, 1998, and has been entered into
between Rent-Way, Inc., a Pennsylvania corporation with its principal offices at
One RentWay Place, Erie, Pennsylvania 16505 (the "Employer" or "Company"), and
William E. Morgenstern (the "Employee").
WHEREAS, the Company desires to employ the Employee on the terms and
conditions set forth herein; and
WHEREAS, the Employee desires to be employed by the Company on the terms
and conditions set forth herein;
NOW, THEREFORE, the Company and the Employee agree as follows:
I. EMPLOYMENT.
----------
The Company hereby employs the Employee, and the Employee hereby accepts
continue employment, upon the terms and conditions hereinafter set forth.
II. TERM.
----
Subject to the provisions of termination as hereinafter provided, the term of
this Agreement shall begin on October 1, 1998 and shall terminate on
September 30, 2001 (being three years after the commencement date); provided,
however, that commencing on the date which is one year prior to the date of
termination, and on each anniversary of such date (such date and the date of
each anniversary thereof being a "Renewal Date"), the term shall be
automatically extended so to terminate two (2) years from such Renewal Date,
unless at least sixty (60) days prior to such Renewal Date either party hereto
gives notice to the other that the term shall not be so extended.
III. POSITION AND DUTIES.
-------------------
During the term of this Agreement, the Employee shall serve as a President and
Chief Executive Officer of the Company with at least such statutory duties and
responsibilities as exist as of the date hereof and with such duties and
responsibilities as may be provided in the By-Laws of the Company. The place of
employment shall be at the principal executive offices of the Company in Erie,
Pennsylvania. The Employee agrees to devote all of his business time, skill,
attention and best efforts during normal business hours to the business of
the Company to the extent necessary to discharge the responsibilities
assigned during the term of employment hereunder, except for service on other
corporation, civic or charitable boards or committees not significantly
interfering with the Employee's duties hereunder and usual, ordinary and
customary periods of vacation.
<PAGE>
- 2 -
IV. COMPENSATION.
------------
A. Base Salary.
-----------
For all services rendered by Employee under this Agreement,
the Company shall pay a base salary of $300,000 per year during the first year
of the Agreement. The Employee will receive annual salary increases for the
second and the third years of the Agreement equivalent to 5% of the base salary
for each 10% increase in annual revenues. (For instance, if FY1998 revenues were
$200 million and FY1999 revenues are $400 million (a 100% increase), then for
FY1999 the Employee's compensation would increase by 50% to $450,000).
Commencing the fourth year of the Agreement (if extended in accordance with
paragraph 2 herein), the Employee's salary will be increased to reflect the
percentage increase in the Consumer Price Index for Western Pennsylvania (the
"CPI") for the most recently completed year. Upon issuance of the CPI for the
Western Pennsylvania region, Employee's Base Salary will be increased
retroactively to October of the year following the year for which the CPI is
issued. The Employee's salary will be paid in installments in conformity with
the regular payroll practices of the Company. The Employee's salary shall also
be reviewed annually by the Compensation Committee of the Board of Directors of
the Company and may be increased on the basis of individual and corporate
performance, by criteria and standards determined by the Compensation Committee.
Any increase in Salary or other compensation shall in no way limit or reduce any
other obligation of the Company to the Employee, and once established, and the
Employee's increased Base Salary shall not thereafter be reduced.
B. Incentive Compensation; Bonuses.
---------------------------------
In addition to the Base Salary, the
Employee shall be entitled to (i) participate in such incentive plans (including
the right to defer such bonus) made available by the Company to its executives
and key employees and (ii) to receive such additional bonus or discretionary
compensation payments as the Board of Directors of the Company or the
Compensation Committee may determine from time to time. Incentive plan
participation and additional bonus or discretionary compensation payments shall
be reviewed annually by the Compensation Committee of the Board of Directors and
shall be awarded, on the basis of corporate performance, by criteria and
standards established by the Board of Directors of the Compensation Committee of
the Board, in their sole discretion.
<PAGE>
C. Expenses.
--------
During the term of employment hereunder, the Employee shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred in
accordance with the policies and procedures of the Company, as may be in force
from time to time.
D. Benefits.
--------
During the term of employment, the Employee shall be entitled
to receive a package of benefits that includes all of the programs, plans and
perquisites currently provided by the Company to its employees, as long as such
programs, plans and perquisites are continued by the Company.
V.TERMINATION.
-----------
A. Termination for Disability.
--------------------------
In the event that Employee shall have been
prevented from substantially rendering the services required under this
Agreement by reason of his disability (as confirmed by medical authority
satisfactory to the Company and Social Security guidelines) for a period of six
(6) consecutive months (or 180 days), the Company shall have the right to
terminate this Agreement upon thirty (30) days written notice, provided such
disability continues during said notice period.
B. Termination for Employee's Breach.
----------------------------------
The Company shall have the right to
terminate this Agreement and the employment hereunder if Employee violates his
responsibilities under paragraph 3 of this Agreement and such violation
continues after the Employee's having received notice of such violation and
thirty (30) days to cure such violation(s) to the satisfaction of the Company's
Board of Directors. The Company may immediately terminate this Agreement upon
(i) determination by the Company's Board of Directors that Employee has
willfully defaulted on a material obligation of this Agreement, (ii)
determination by the Company's Board of Directors that there has been a
defalcation of the Company's funds by the Employee, (iii) conviction of Employee
on a felony charge or conviction of a misdemeanor which impairs the Employee's
ability to substantially perform his duties with the Company, or (iv)
determination by the Company's Board of Directors that the Employee has had
unauthorized discussions of the Company's business activities or improperly
disclosed trade secrets or confidential information concerning the Company's
business activities or proposed business activities. At such time as the
Company's Board of Directors addresses such charges, the Employee may submit a
written statement regarding such claims and present a defense against such
claims.
<PAGE>
C. Termination for Employer's Breach.
------------------------------------
Employee shall have the right to
terminate this Agreement if the Company materially breaches any of the
provisions hereof and such breach is not cured within thirty (30) days after the
Company has received written notice from the Employee. In such event, or in the
event of a wrongful termination of the Employee, all moneys due to the Employee
through the term of this Agreement shall be paid by the Company in a lump sum
amount within thirty (30) days of the Employee's termination, with bonuses to be
paid when earned through the remainder of the term of this Agreement. Employee
shall have no obligation to mitigate any losses or damages incurred as a result
of such termination.
D. Termination by Death. If employment terminates by reason of the
Employee's death, the Company will pay the Employee's estate a lump sum payment
equivalent to six (6) months salary; other benefits will be determined in
accordance with the Company's survivor's benefits, insurance and other
applicable programs and plans, then in effect.
VI. CONFIDENTIAL AND PROPRITARY INFORMATION.
---------------------------------------
Employee agrees to keep secret all confidential information, trade secrets
or proprietary information acquired by the Employee during his employment
concerning the business and affairs of the
Company (the "Information") and further agrees for a period of one (1) year
after the termination of his employment, for any reason, not to disclose any
such Information to any person, firm or corporation other than as directed by
the Employer, unless and until such Information becomes known outside of the
company (other than through a violation by the Employee of his obligations
hereunder). Employee agrees, upon the Company's request, to execute a
confidential nondisclosure agreement, if requested.
VII. MISCELLANEOUS PROVISIONS.
------------------------
<PAGE>
A. Successors.
----------
The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Employee to compensation from the Company in the
same amount and on the same terms as the Employee is entitled to hereunder if
the Employee terminated his employment for good cause.
B. Binding Agreement.
------------------
This Agreement shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Employee
should die while any amount would still be payable to the Employee hereunder
if the Employee had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement, to the employee's devisee, legatee or other designee, or,
if there is not such designee, to the Employees's estate.
C. Notices and Communications.
------------------------------
All notices and communications hereunder shall be in writing and shall be hand
delivered or sent postage prepaid by registered or certified mail, return
receipt requested, to the addresses first written or to such other address
of which notice shall have been given in the manner herein provided.
D. Entire Agreement; Non-Assignment.
---------------------------------
This Agreement may not be modified, amended, changed or discharged, except by
writing signed by the parties hereto, and then and only to the extent set
forth in the writing. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and any administrator, executor and successor
of the Company. This Agreement may not be assigned by either of the parties
without the prior written consent of the other party.
E. Validity; Governing Law.
------------------------
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement, which shallremain in full force and effect. The validity,
interpretation, construction and performance of this Agreement shall be
governed by and under the laws of the Commonwealth of Pennsylvania.
(6) Legal Expenses.
--------------
All legal fees and expenses incurred by
the Employee in attempts to receive the benefits granted hereunder or to enforce
this Agreement or any of its terms will be paid by the Company providing that
Employee's claims are not dismissed in a summary proceeding.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
to be effective as of the day and the year first written above.
EMPLOYEE: RENT-WAY, INC.
__________________________ By: ______________________________
William E. Morgenstern (Authorized Officer)
<PAGE>
Exhibit 10.5
RENT-WAY, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of October 1, 1998, and has been entered into
between Rent-Way, Inc., a Pennsylvania corporation with its principal offices at
One RentWay Place, Erie, Pennsylvania 16505 (the "Employer" or "Company"), and
Jeffrey A. Conway (the "Employee").
WHEREAS, the Company desires to employ the Employee on the terms and
conditions set forth herein; and
WHEREAS, the Employee desires to be employed by the Company on the terms
and conditions set forth herein;
NOW, THEREFORE, the Company and the Employee agree as follows:
I. EMPLOYMENT.
----------
The Company hereby employs the Employee, and the Employee
hereby accepts continue employment, upon the terms and conditions hereinafter
set forth.
II. TERM.
----
Subject to the provisions of termination as hereinafter
provided, the term of this Agreement shall begin on October 1, 1998 and shall
terminate on September 30, 2001 (being three years after the commencement date);
provided, however, that commencing on the date which is one year prior to the
date of termination, and on each anniversary of such date (such date and the
date of each anniversary thereof being a "Renewal Date"), the term shall be
automatically extended so to terminate two (2) years from such Renewal Date,
unless at least sixty (60) days prior to such Renewal Date either party hereto
gives notice to the other that the term shall not be so extended.
III. POSITION AND DUTIES.
---------------------
During the term of this
Agreement, the Employee shall serve as a Vice-President and Chief Financial
Officer of the Company with at least such statutory duties and responsibilities
as exist as of the date hereof and with such duties and responsibilities as may
be provided in the By-Laws of the Company. The place of employment shall be at
the principal executive offices of the Company in Erie, Pennsylvania. The
Employee agrees to devote all of his business time, skill, attention and best
efforts during normal business hours to the business of the Company to the
extent necessary to discharge the responsibilities assigned during the term of
employment hereunder, except for service on other corporation, civic or
charitable boards or committees not significantly interfering with the
Employee's duties hereunder and usual, ordinary and customary periods of
vacation.
<PAGE>
- 7 -
IV. COMPENSATION.
------------
A. Base Salary.
-----------
For all services rendered by Employee under
this Agreement, the Company shall pay a base salary of $180,000 per year during
the first year of the Agreement. The Employee will receive annual salary
increases for the second and the third years of the Agreement equivalent to 5%
of the base salary for each 10% increase in annual revenues. (For instance, if
FY1998 revenues were $200 million and FY1999 revenues are $400 million (a 100%
increase), then for FY1999 the Employee's compensation would increase by 50% to
$270,000). Commencing the fourth year of the Agreement (if extended in
accordance with paragraph 2 herein), the Employee's salary will be increased to
reflect the percentage increase in the Consumer Price Index for Western
Pennsylvania (the "CPI") for the most recently completed year. Upon issuance of
the CPI for the Western Pennsylvania region Employee's Base Salary will be
increased retroactively to October of the year following the year for which the
CPI is issued. The Employee's salary will be paid in installments in conformity
with the regular payroll practices of the Company. The Employee's salary shall
also be reviewed annually by the Compensation Committee of the Board of
Directors of the Company and may be increased on the basis of individual and
corporate performance, by criteria and standards determined by the Compensation
Committee. Any increase in Salary or other compensation shall in no way limit or
reduce any other obligation of the Company to the Employee and once established,
and the Employee's increased Base Salary shall not thereafter be reduced.
B. Incentive Compensation; Bonuses.
---------------------------------
In
addition to the Base Salary, the Employee shall be entitled to (i) participate
in such incentive plans (including the right to defer such bonus) made available
by the Company to its executives and key employees and (ii) to receive such
additional bonus or discretionary compensation payments as the Board of
Directors of the Company or the Compensation Committee may determine from time
to time. Incentive plan participation and additional bonus or discretionary
compensation payments shall be reviewed annually by the Compensation Committee
of the Board of Directors and shall be awarded, on the basis of corporate
performance, by criteria and standards established by the Board of Directors of
the Compensation Committee of the Board, in their sole discretion.
<PAGE>
C. Expenses.
--------
During the term of employment hereunder, the Employee
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred in accordance with the policies and procedures of the Company, as may
be in force from time to time.
D. Benefits.
--------
During the term of employment, the Employee shall be
entitled to receive a package of benefits that includes all of the programs,
plans and perquisites currently provided by the Company to its employees, as
long as such programs, plans and perquisites are continued by the Company.
V.TERMINATION.
-----------
A. Termination for Disability.
---------------------------
In the event
that Employee shall have been prevented from substantially rendering the
services required under this Agreement by reason of his disability (as confirmed
by medical authority satisfactory to the Company and Social Security guidelines)
for a period of six (6) consecutive months (or 180 days), the Company shall have
the right to terminate this Agreement upon thirty (30) days written notice,
provided such disability continues during said notice period.
B. Termination for Employee's Breach.
----------------------------------
The Company shall have the right to terminate this Agreement and the employment
hereunder if Employee violates his responsibilities under paragraph 3 of this
Agreement and such violation continues after the Employee's having received
notice of such violation and thirty (30) days to cure such violation(s) to the
satisfaction of the Company's Board of Directors. The Company may immediately
terminate this Agreement upon (i) determination by the Company's Board of
Directors that Employee has willfully defaulted on a material obligation of this
Agreement, (ii) determination by the Company's Board of Directors that there has
been a defalcation of the Company's funds by the Employee, (iii) conviction of
Employee on a felony charge or conviction of a misdemeanor which impairs the
Employee's ability to substantially perform his duties with the Company, or (iv)
determination by the Company's Board of Directors that the Employee has had
unauthorized discussions of the Company's business activities or improperly
disclosed trade secrets or confidential information concerning the Company's
business activities or proposed business activities. At such time as the
Company's Board of Directors addresses such charges, the Employee may submit a
written statement regarding such claims and present a defense against such
claims.
<PAGE>
C. Termination for Employer's Breach.
-----------------------------------
Employee shall have the right to terminate this Agreement if the Company
materially breaches any of the provisions hereof and such breach is not cured
within thirty (30) days after the Company has received written notice from the
Employee. In such event, or in the event of a wrongful termination of the
Employee, all moneys due to the Employee through the term of this Agreement
shall be paid by the Company in a lump sum amount within thirty (30) days of the
Employee's termination, with bonuses to be paid when earned through the
remainder of the term of this Agreement. Employee shall have no obligation to
mitigate any losses or damages incurred as a result of such termination.
D. Termination by Death.
---------------------
If employment terminates by
reason of the Employee's death, the Company will pay the Employee's estate a
lump sum payment equivalent to six (6) months salary; other benefits will be
determined in accordance with the Company's survivor's benefits, insurance and
other applicable programs and plans, then in effect.
VI. CONFIDENTIAL AND PROPRITARY INFORMATION.
---------------------------------------
Employee agrees to keep secret all
confidential information, trade secrets or proprietary information acquired by
the Employee during his employment concerning the business and affairs of the
Company (the "Information") and further agrees for a period of one (1) year
after the termination of his employment, for any reason, not to disclose any
such Information to any person, firm or corporation other than as directed by
the Employer, unless and until such Information becomes known outside of the
company (other than through a violation by the Employee of his obligations
hereunder). Employee agrees, upon the Company's request, to execute a
confidential nondisclosure agreement, if requested.
VII.MISCELLANEOUS PROVISIONS.
------------------------
<PAGE>
A. Successors.
----------
The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Employee to compensation from the Company in the
same amount and on the same terms as the Employee is entitled to hereunder if
the Employee terminated his employment for good cause.
B. Binding Agreement.
-----------------
This Agreement shall inure to the
benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Employee should die while any amount would still
be payable to the Employee hereunder if the Employee had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement, to the employee's devisee, legatee or other
designee, or, if there is not such designee, to the Employees's estate.
C. Notices and Communications.
---------------------------
All notices
and communications hereunder shall be in writing and shall be hand delivered or
sent postage prepaid by registered or certified mail, return receipt requested,
to the addresses first written or to such other address of which notice shall
have been given in the manner herein provided.
D. Entire Agreement; Non-Assignment.
---------------------------------
This
Agreement may not be modified, amended, changed or discharged, except by writing
signed by the parties hereto, and then and only to the extent set forth in the
writing. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and any administrator, executor and successor of the Company.
This Agreement may not be assigned by either of the parties without the prior
written consent of the other party.
E. Validity; Governing Law.
-------------------------
The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect. The validity, interpretation, construction and
performance of this Agreement shall be governed by and under the laws of the
Commonwealth of Pennsylvania.
(6) Legal Expenses.
--------------
All legal fees and expenses incurred by
the Employee in attempts to receive the benefits granted hereunder or to enforce
this Agreement or any of its terms will be paid by the Company providing that
Employee's claims are not dismissed in a summary proceeding.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
to be effective as of the day and the year first written above.
EMPLOYEE: RENT-WAY, INC.
__________________________ By: ______________________________
Jeffrey A. Conway (Authorized Officer)
<PAGE>
Exhibit 10.6
RENT-WAY, INC.
ENGAGEMENT AGREEMENT
THIS AGREEMENT is made as of October 1, 1999, and has been entered into
between Rent-Way, Inc., a Pennsylvania corporation with its principal offices at
One RentWay Place, Erie, Pennsylvania 16505 (the "Company"), and G. A. Ryan
("Ryan"), 10 Peninsula Drive, Erie, Pa. 16505.
WHEREAS, the Company desires to engage the services of Ryan on the terms
and conditions set forth herein; and
WHEREAS, Ryan desires to be engaged by the Company on the terms and
conditions set forth herein;
NOW, THEREFORE, the Company and Ryan agree as follows:
I. ENGAGEMENT.
----------
The Company hereby engages the services of Ryan, and Ryan hereby accepts
continued engagement, upon the terms and conditions hereinafter set forth.
II. TERM.
----
Subject to the provisions of termination as hereinafter provided,
the term of this Agreement shall begin on October 1, 1999, and shall terminate
on September 30, 2009 (being ten (10) years after the commencement date).
III. POSITION AND DUTIES.
-------------------
During the term of this Agreement, Ryan shall
serve as a Consultant to the Company with such duties and responsibilities as
may be assigned by the Company's Board of Directors. The place of engagement
shall be at the principal executive offices of the Company in Erie,
Pennsylvania. Ryan agrees to devote a sufficient amount of his business time,
skill, attention and best efforts during normal business hours to the business
of the Company to the extent necessary to discharge the responsibilities
assigned during the term of engagement hereunder, it being understood that Ryan
is involved with various other business activities. However, no other
work-related activities of Ryan shall be in competition with any of the
Company's activities and such activities shall be disclosed to the Company's
Board of Directors.
IV. COMPENSATION.
------------
<PAGE>
- 15 -
A. Base Compensation.
------------------
For all services rendered by Ryan under this
Agreement, the Company shall pay Ryan compensation of $100,000
per year ("Base Compensation"), which Base Compensation will be increased to
reflect the percentage increase in the Consumer Price Index for Western
Pennsylvania (the "CPI") for the most recently completed year. Upon issuance of
the CPI for the Western Pennsylvania region, Ryan's Base Compensation will be
increased retroactively to January of the year following the year for which the
CPI is issued. The Base Compensation will be paid in installments in conformity
with the regular payroll practices of the Company. The Base Compensation shall
also be reviewed annually by the Compensation Committee of the Board of
Directors of the Company and may be increased on the basis of individual and
corporate performance, by criteria and standards determined by the Compensation
Committee. Any increase in Base Compensation or other compensation shall in no
way limit or reduce any other obligation of the Company, hereunder, and once
established at an increased specified rate, Ryan's Base Compensation hereunder
shall not thereafter be reduced.
B. Expenses.
--------
During the term of engagement hereunder, Ryan shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred in
accordance with the policies and procedures of the Company, as may be in force
from time to time.
C. Benefits.
--------
During the term of engagement hereunder, Ryan shall be
entitled to receive a package of benefits that includes all of the programs,
plans and perquisites currently provided to Ryan by the Company, as long as such
programs, plans and perquisites are continued by the Company.
V. TERMINATION.
-----------
A. Termination for Disability.
----------------------------
In the event that Ryan shall have been
prevented from substantially rendering the services required under this
Agreement by reason of his disability (as confirmed by medical authority
satisfactory to the Company and Social Security guidelines) for a period of six
(6) consecutive months (or 180 days), the Company shall have the right to
terminate this Agreement upon thirty (30) days written notice, provided such
disability continues during said notice period.
<PAGE>
B. Termination for Ryan's Breach.
-------------------------------
The Company shall have the right to
terminate this Agreement and the employment
hereunder if Ryan violates his responsibilities under paragraph 3 of this
Agreement and such violation continues after Ryan's having received notice of
such violation and thirty (30) days to cure such violation(s) to the
satisfaction of the Company's Board of Directors. The Company may immediately
terminate this Agreement upon (i) determination by the Company's Board of
Directors that Ryan has willfully defaulted on a material obligation of this
Agreement, (ii) determination by the Company's Board of Directors that there has
been a defalcation of the Company's funds by Ryan, (iii) conviction of Ryan on a
felony charge or conviction of a misdemeanor which impairs Ryan's ability to
substantially perform his duties with the Company, or (iv) determination by the
Company's Board of Directors that Ryan has had unauthorized discussions of the
Company's business activities or improperly disclosed trade secrets or
confidential information concerning the Company's business activities or
proposed business activities. At such time as the Company's Board of Directors
addresses such charges, Ryan may submit a written statement regarding such
claims and present a defense against such claims.
C. Termination for Company's Breach.
--------------------------------
Ryan
shall have the right to terminate this Agreement if the Company materially
breaches any of the provisions hereof and such breach is not cured within thirty
(30) days after the Company has received written notice from Ryan. In such
event, or in the event of a wrongful termination of Ryan, all moneys due to Ryan
through the term of this Agreement shall be paid by the Company in a lump sum
amount within thirty (30) days of Ryan's termination with bonuses to be paid
when earned through the remainder of the term of this Agreement. Ryan shall have
no obligation to mitigate any losses or damages incurred as a result of such
termination.
D. Termination by Death.
---------------------
If employment terminates by
reason of Ryan's death, the Company will pay Ryan's estate a lump sum payment
equivalent to twelve (12) months compensation; other benefits will be determined
in accordance with the Company's survivor's benefits, insurance and other
applicable programs and plans, then in effect.
VI. CONFIDENTIAL AND PROPRIETARY INFORMATION.
-----------------------------------------
Ryan agrees to keep secret
all confidential information, trade secrets or proprietary information acquired
by Ryan during his employment concerning the business and affairs of the Company
(the "Information") and further agrees for a period of one (1) year after the
termination of his employment, for any reason, not to disclose any such
Information to any person, firm or corporation other than as directed by the
Company, unless and until such Information becomes known outside of the Company
(other than through a violation by Ryan of his obligations hereunder). Ryan also
agrees, upon the Company's request, to execute a confidential nondisclosure
agreement if requested.
VII. MISCELLANEOUS PROVISIONS.
------------------------
A. Successors.
----------
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle Ryan
to compensation from the Company in the same amount and on the same terms as
Ryan is entitled to hereunder if Ryan terminated his engagement for good cause.
<PAGE>
B. Binding Agreement.
------------------
This Agreement shall inure to the benefit of and be
enforceable by Ryan's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If Ryan
should die while any amount would still be payable to Ryan hereunder if Ryan had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement, to Ryan's devisee, legatee
or other designee or, if there is not such designee, to Ryan's estate.
C. Notices and Communications.
---------------------------
All notices and communications hereunder
shall be in writing and shall be hand delivered or sent postage prepaid by
registered or certified mail, return receipt requested, to the addresses first
written or to such other address of which notice shall have been given in the
manner herein provided.
D. Entire Agreement; Non-Assignment.
----------------------------------
This Agreement may not be modified,
amended, changed or discharged, except by writing signed by the parties hereto
and then and only to the extent set forth. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, and any administrator, executor
and successor of the Company. This Agreement may not be assigned by either of
the parties without the prior written consent of the other party.
E. Validity; Governing Law.
-------------------------
The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. The validity, interpretation, construction and performance of this
Agreement shall be governed by and under the laws of the Commonwealth of
Pennsylvania.
(6) Legal Expenses.
---------------
All legal fees and expenses incurred by Ryan in
attempts to receive the benefits granted hereunder or to enforce this Agreement
or any of its terms will be paid by the Company providing that Ryan's claims are
not dismissed in a summary proceeding.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
to be effective as of the day and year first written above.
ATTEST: RENT-WAY, INC.
__________________________ By: ___________________________
(Authorized Officer)
ATTEST:
- -------------------------- ------------------------------
G. A. Ryan
<PAGE>
Exhibit 10.16
$100,000,000 REVOLVING CREDIT FACILITY
$125,000,000 TERM LOAN A
$100,000,000 TERM LOAN B
CREDIT AGREEMENT
by and among
RENT-WAY, INC., RENTAVISION INC. and
RENT-WAY OF TTIG, L.P.
and
THE LENDERS PARTY HERETO
and
NATIONAL CITY BANK OF PENNSYLVANIA, as Administrative Agent
and
BANK OF AMERICA, N.A. as Documentation Agent
and
BANK OF MONTREAL and HARRIS TRUST
AND SAVINGS BANK, as Syndication Agents
Dated as of September 23, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
- vii
1. CERTAIN DEFINITIONS.........................................................................................1
<S> <C>
1.1 Certain Definitions......................................................................................1
1.2 Construction............................................................................................22
1.2.1 Number; Inclusion.................................................................................22
----- -----------------
1.2.2 Determination.....................................................................................22
----- -------------
1.2.3 Administrative Agent's Discretion and Consent.....................................................22
----- ---------------------------------------------
1.2.4 Documents Taken as a Whole........................................................................22
----- --------------------------
1.2.5 Headings..........................................................................................22
----- --------
1.2.6 Implied References to this Agreement..............................................................23
----- ------------------------------------
1.2.7 Persons...........................................................................................23
----- -------
1.2.8 Modifications to Documents........................................................................23
----- --------------------------
1.2.9 From, To and Through..............................................................................23
----- --------------------
1.2.10 Shall; Will.......................................................................................23
------ -----------
1.3 Accounting Principles...................................................................................23
--- ---------------------
2. REVOLVING CREDIT AND SWING LOAN FACILITIES.................................................................24
2.1 Revolving Credit Commitments............................................................................24
2.1.1 Revolving Credit Loans............................................................................24
2.1.2 Swing Loan Commitments............................................................................24
2.2 Nature of Lenders' Obligations with Respect to Revolving Credit Loans...................................24
--- ---------------------------------------------------------------------
2.3 Commitment Fees.........................................................................................25
--- ---------------
2.4 [Intentionally Omitted].................................................................................25
--- ------------------------
2.5 Revolving Credit Loan Requests; Swing Loan Requests.....................................................25
--- ---------------------------------------------------
2.5.1 Revolving Credit Loan Requests....................................................................25
2.5.2 Swing Loan Requests...............................................................................26
2.6 Making Revolving Credit Loans and Swing Loans...........................................................26
2.6.1 Making Revolving Credit Loans.....................................................................26
2.6.2 Making Swing Loans................................................................................26
2.7 Revolving Credit Notes; Swing Loan Note.................................................................27
2.7.1 Revolving Credit Notes............................................................................27
2.7.2 Swing Loan Note; Borrowings to Repay Swing Loans..................................................27
2.8 Use of Proceeds.........................................................................................27
--- ---------------
2.9 Letter of Credit Subfacility............................................................................28
--- ----------------------------
2.9.1 Issuance of Letters of Credit.....................................................................28
----- -----------------------------
2.9.2 Letter of Credit Fees.............................................................................28
----- ---------------------
2.9.3 Disbursements, Reimbursement......................................................................28
----- ----------------------------
2.9.4 Repayment of Participation Advances...............................................................30
----- -----------------------------------
2.9.5 Documentation.....................................................................................30
----- -------------
2.9.6 Determinations to Honor Drawing Requests..........................................................31
----- ----------------------------------------
2.9.7 Nature of Participation and Reimbursement Obligations.............................................31
----- -----------------------------------------------------
2.9.8 Indemnity.........................................................................................32
----- ---------
2.9.9 Liability for Acts and Omissions..................................................................32
----- --------------------------------
3. TERM LOANS.................................................................................................33
3.1 Term Loan Commitments...................................................................................33
3.1.1 Term Loan A Commitments...........................................................................33
3.1.2 Term Loan B Commitments...........................................................................33
3.2 Nature of Lenders' Obligations with Respect to Term Loans...............................................33
--- ---------------------------------------------------------
3.3 Term Loan Notes.........................................................................................34
--- ---------------
3.4 Use of Proceeds.........................................................................................34
--- ---------------
4. INTEREST RATES.............................................................................................34
4.1 Interest Rate Options...................................................................................35
4.1.1 Revolving Credit Interest Rate Options............................................................35
----- --------------------------------------
4.1.2 Term Loan A Interest Rate Options.................................................................35
----- ---------------------------------
4.1.3 Term Loan B Interest Rate Options.................................................................36
----- ---------------------------------
4.1.4 Rate Quotations...................................................................................36
----- ---------------
4.2 Interest Periods........................................................................................36
4.2.1 Ending Date and Business Day......................................................................37
4.2.2 Amount of Borrowing Tranche.......................................................................37
4.2.3 Termination Before Expiration Date................................................................37
4.2.4 Renewals..........................................................................................37
4.3 Interest After Default..................................................................................37
4.3.1 Letter of Credit Fees, Interest Rate..............................................................37
4.3.2 Other Obligations.................................................................................37
4.3.3 Acknowledgment....................................................................................37
4.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available..........................38
4.4.1 Unascertainable...................................................................................38
4.4.2 Illegality; Increased Costs; Deposits Not Available...............................................38
4.4.3 Administrative Agent's and Lender's Rights........................................................38
4.5 Selection of Interest Rate Options......................................................................39
--- ----------------------------------
5. PAYMENTS...................................................................................................39
5.1 Payments................................................................................................39
5.2 Pro Rata Treatment of Lenders...........................................................................40
5.3 Interest Payment Dates..................................................................................40
5.4 Voluntary Repayments....................................................................................40
5.4.1 Right to Repay....................................................................................40
----- --------------
5.4.2 Commitment Reductions.............................................................................42
----- ---------------------
5.4.3 Replacement of a Lender...........................................................................42
----- -----------------------
5.4.4 Change of Lending Office..........................................................................42
----- ------------------------
5.5 Mandatory Prepayments...................................................................................43
5.5.1 Excess Cash Flow..................................................................................43
5.5.2 Sale of Assets; Issuance of Stock ................................................................43
5.5.3 Application Among Interest Rate Options...........................................................44
5.6 Additional Compensation in Certain Circumstances........................................................44
5.6.1 Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital Adequacy Requirements,
Expenses, Etc..............................................................................................44
5.6.2 Indemnity.........................................................................................45
6. REPRESENTATIONS AND WARRANTIES.............................................................................46
6.1 Representations and Warranties..........................................................................46
6.1.1 Organization and Qualification....................................................................46
----- ------------------------------
6.1.2 Capitalization and Ownership......................................................................46
----- ----------------------------
6.1.3 Subsidiaries......................................................................................46
----- ------------
6.1.4 Power and Authority...............................................................................47
----- -------------------
6.1.5 Validity and Binding Effect.......................................................................47
----- ---------------------------
6.1.6 No Conflict.......................................................................................47
----- -----------
6.1.7 Litigation........................................................................................48
----- ----------
6.1.8 Title to Properties...............................................................................48
----- -------------------
6.1.9 Financial Statements..............................................................................48
----- --------------------
6.1.10 Use of Proceeds; Margin Stock.....................................................................49
------ -----------------------------
6.1.11 Full Disclosure...................................................................................49
------ ---------------
6.1.12 Taxes.............................................................................................49
------ -----
6.1.13 Consents and Approvals............................................................................50
------ ----------------------
6.1.14 No Event of Default; Compliance with Instruments..................................................50
------ ------------------------------------------------
6.1.15 Patents, Trademarks, Copyrights, Licenses, Etc....................................................50
------ ----------------------------------------------
6.1.16 Security Interests................................................................................50
------ ------------------
6.1.17 Mortgage Liens....................................................................................51
------ --------------
6.1.18 Status of the Pledge Collateral...................................................................51
------ -------------------------------
6.1.19 Insurance.........................................................................................51
------ ---------
6.1.20 Compliance with Laws..............................................................................52
------ --------------------
6.1.21 Material Contracts; Burdensome Restrictions.......................................................52
------ -------------------------------------------
6.1.22 Investment Companies; Regulated Entities..........................................................52
------ ----------------------------------------
6.1.23 Plans and Benefit Arrangements....................................................................52
------ ------------------------------
6.1.24 Employment Matters................................................................................53
------ ------------------
6.1.25 Environmental Matters.............................................................................54
------ ---------------------
6.1.26 Senior Debt Status................................................................................56
------ ------------------
6.1.27 Year 2000.........................................................................................56
------ ---------
6.2 Updates to Schedules....................................................................................56
--- --------------------
7. CONDITIONS OF LENDING......................................................................................56
7.1 First Loans.............................................................................................57
7.1.1 Officer's Certificate.............................................................................57
----- ---------------------
7.1.2 Secretary's Certificate...........................................................................57
----- -----------------------
7.1.3 Delivery of Loan Documents........................................................................58
----- --------------------------
7.1.4 Opinion of Counsel................................................................................58
----- ------------------
7.1.5 Legal Details.....................................................................................58
----- -------------
7.1.6 Payment of Fees...................................................................................59
----- ---------------
7.1.7 Consents..........................................................................................59
----- --------
7.1.8 Officer's Certificate Regarding MACs..............................................................59
----- ------------------------------------
7.1.9 No Violation of Laws..............................................................................59
----- --------------------
7.1.10 No Actions or Proceedings.........................................................................59
------ -------------------------
7.1.11 Insurance Policies; Certificates of Insurance; Endorsements.......................................59
------ -----------------------------------------------------------
7.1.12 Title Insurance...................................................................................60
------ ---------------
7.1.13 Filing Receipts...................................................................................60
------ ---------------
7.1.14 Amendment and Restatement of Existing Credit Agreement............................................60
------ ------------------------------------------------------
7.1.15 Continuation of Subordination.....................................................................60
------ -----------------------------
7.1.16 Consummation of Acquisition.......................................................................61
------ ---------------------------
7.2 Each Additional Loan....................................................................................61
--- --------------------
8. COVENANTS..................................................................................................61
8.1 Affirmative Covenants...................................................................................61
8.1.1 Preservation of Existence, Etc....................................................................61
----- ------------------------------
8.1.2 Payment of Liabilities, Including Taxes, Etc......................................................62
----- --------------------------------------------
8.1.3 Maintenance of Insurance..........................................................................62
----- ------------------------
8.1.4 Maintenance of Properties and Leases..............................................................63
----- ------------------------------------
8.1.5 Maintenance of Patents, Trademarks, Etc...........................................................63
----- ---------------------------------------
8.1.6 Visitation Rights.................................................................................63
----- -----------------
8.1.7 Keeping of Records and Books of Account...........................................................64
----- ---------------------------------------
8.1.8 Plans and Benefit Arrangements....................................................................64
----- ------------------------------
8.1.9 Compliance with Laws..............................................................................64
----- --------------------
8.1.10 Use of Proceeds...................................................................................64
------ ---------------
8.1.11 Further Assurances................................................................................65
------ ------------------
8.1.12 Subordination of Intercompany Loans...............................................................65
------ -----------------------------------
8.1.13 Interest Rate Protection..........................................................................65
------ ------------------------
8.2 Negative Covenants......................................................................................66
8.2.1 Indebtedness......................................................................................66
8.2.2 Liens.............................................................................................66
8.2.3 Guaranties........................................................................................66
8.2.4 Loans and Investments.............................................................................67
8.2.5 Dividends and Related Distributions...............................................................67
8.2.6 Liquidations, Mergers, Consolidations, Acquisitions...............................................67
8.2.7 Dispositions of Assets or Subsidiaries............................................................69
8.2.8 Affiliate Transactions............................................................................70
8.2.9 Subsidiaries, Partnerships and Joint Ventures.....................................................70
8.2.10 Continuation of or Change in Business.............................................................70
8.2.11 Plans and Benefit Arrangements....................................................................70
8.2.12 Fiscal Year.......................................................................................71
8.2.13 Issuance of Stock.................................................................................71
8.2.14 Changes in Organizational Documents...............................................................72
8.2.15 Capital Expenditures and Leases...................................................................72
8.2.16 Maximum Leverage Ratio (Total Funded Debt)........................................................72
8.2.17 Subordinated Loan Document Amendments.............................................................73
8.2.18 Minimum Interest Coverage Ratio...................................................................73
8.2.19 Minimum Net Worth.................................................................................73
8.2.20 Fixed Charge Coverage Ratio.......................................................................73
8.2.21 Rental Merchandise Usage..........................................................................73
8.2.22 Prepayments on Subordinated Debt..................................................................74
8.3 Reporting Requirements..................................................................................74
8.3.1 Monthly Financial Statements......................................................................74
8.3.2 Quarterly Financial Statements....................................................................74
8.3.3 Annual Financial Statements.......................................................................75
8.3.4 Certificate of the Borrower.......................................................................75
8.3.5 Notice of Default.................................................................................76
8.3.6 Notice of Litigation..............................................................................76
8.3.7 Certain Events....................................................................................76
8.3.8 Budgets, Forecasts, Other Reports and Information.................................................76
8.3.9 Notices Regarding Plans and Benefit Arrangements..................................................77
9. DEFAULT....................................................................................................79
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- 101 -
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
<S> <C>
SCHEDULE 1.1(A) - PRICING GRID
SCHEDULE 1.1(B) - COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 6.1.1 - QUALIFICATIONS TO DO BUSINESS
SCHEDULE 6.1.3 - SUBSIDIARIES
SCHEDULE 6.1.7 - LITIGATION
SCHEDULE 6.1.8 - OWNED AND LEASED REAL PROPERTY
SCHEDULE 6.1.13 - CONSENTS AND APPROVALS
SCHEDULE 6.1.15 - PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.
SCHEDULE 6.1.18 - PARTNERSHIP AGREEMENTS; LLC AGREEMENTS
SCHEDULE 6.1.19 - INSURANCE POLICIES
SCHEDULE 6.1.21 - MATERIAL CONTRACTS
SCHEDULE 6.1.23 - EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 6.1.25 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 8.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(C)(1) - COLLATERAL ASSIGNMENT
EXHIBIT 1.1(G)(1) - GUARANTOR JOINDER
EXHIBIT 1.1(G)(2) - GUARANTY AGREEMENT
EXHIBIT 1.1(I)(1) - INDEMNITY AGREEMENT
EXHIBIT 1.1(I)(2) - INTERCOMPANY SUBORDINATION AGREEMENT
EXHIBIT 1.1(M) - MORTGAGE
EXHIBIT 1.1(P)(1) - PATENT, TRADEMARK AND COPYRIGHT SECURITY AGREEMENT
EXHIBIT 1.1(P)(2) - PLEDGE AGREEMENT
EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE
EXHIBIT 1.1(S)(1) - SECURITY AGREEMENT
EXHIBIT 1.1(S)(2) - SWING LOAN NOTE
EXHIBIT 1.1(T)(1) - TERM NOTE A
EXHIBIT 1.1(T)(2) - TERM NOTE B
EXHIBIT 2.5 - LOAN REQUEST
EXHIBIT 2.5.2 - SWING LOAN REQUEST
EXHIBIT 7.1.4 - OPINION OF COUNSEL
EXHIBIT 8.3.4 - QUARTERLY COMPLIANCE CERTIFICATE
</TABLE>
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of September 23, 1999 and is
made by and among RENT-WAY, INC., a Pennsylvania corporation (the "Borrower"),
RENT-WAY OF TTIG, L.P., an Indiana Limited Partnership, and RENTAVISION INC., a
New York corporation (Rent-Way of TTIG, L.P. and Rentavision Inc. are referred
to herein collectively as the "Co-Borrowers" and each separately as a
"Co-Borrower"), each of the Guarantors (as hereinafter defined), the LENDERS (as
hereinafter defined), NATIONAL CITY BANK OF PENNSYLVANIA, in its capacity as
administrative agent for the Lenders under this Agreement (hereinafter referred
to in such capacity as the "Administrative Agent"), BANK OF AMERICA, N.A. in its
capacity as documentation agent for the Lenders, and BANK OF MONTREAL and HARRIS
TRUST AND SAVINGS BANK, in their capacity as syndication agents.
WITNESSETH:
WHEREAS, the Borrower and the Co-Borrowers have requested the
Administrative Agent and the Lenders to provide (i) a revolving credit facility
in an aggregate principal amount not to exceed $100,000,000, (ii) a term loan in
the amount of $125,000,000 ("Term Loan A") and (iii) a term loan in the amount
of $100,000,000 ("Term Loan B"); and
WHEREAS, the revolving credit facility shall be used to
refinance certain existing indebtedness, for working capital purposes and
general corporate purposes of the Borrower and its Subsidiaries including the
development of additional retail locations; and the Term Loan A and Term Loan B
shall be used to refinance certain existing indebtedness and to finance the
Borrower's acquisition of the outstanding capital stock of Rentavision Inc.
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in this
Agreement, the following words and terms shall have the following meanings,
respectively, unless the context hereof clearly requires otherwise:
Acquiring Person shall mean any Person or group of two or more Persons
(excluding the Management Group) acting as a partnership, limited partnership,
syndicate, or other group for the purpose of acquiring, holding or disposing of
Voting Stock of the Borrower, together with all affiliates and associates (as
defined in Rule 12b-2 under the Securities and Exchange Act of 1934, as amended)
of such Person or Persons.
Acquisition shall mean the purchase by the Borrower of all the outstanding
capital stock of Rentavision pursuant to the Acquisition Agreement.
Acquisition Agreement shall mean the Stock Purchase Agreement dated as of
September 15, 1999, among the Borrower, Rentavision and Robert J. Natoli.
Acquisition Consideration shall mean, without duplication, the aggregate
amount of cash and cash equivalents paid to the stockholders of Rentavision, the
value of the shares of the Borrower issued to the stockholders of Rentavision,
the value of any other property received by the stockholders of Rentavision in
connection with the Acquisition and any Indebtedness incurred or assumed by the
Borrower or its Subsidiaries pursuant to the Acquisition Agreement or any other
Acquisition Document.
Acquisition Documents shall mean the Acquisition Agreement and each of the
other documents executed or delivered in connection with the Acquisition
Agreement or relating to the Acquisition.
Administrative Agent shall mean National City Bank of Pennsylvania, and its
successors and assigns.
Affiliate as to any Person shall mean any other Person (i) which directly
or indirectly controls, is controlled by, or is under common control with such
Person, (ii) which beneficially owns or holds 5% or more of any class of the
voting or other equity interests of such Person, or (iii) 5% or more of any
class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as used in this
definition, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.
Agreement shall mean this Credit Agreement, as the same may be supplemented
or amended
from time to time, including all schedules and exhibits.
Annual Statements shall have the meaning assigned to
that term in Section 6.1.9((i)).
Applicable Commitment Fee Rate shall mean the percentage rate per annum
based on the Leverage Ratio then in effect according to the pricing grid on
Schedule 1.1(A) below the heading "Commitment Fee." The Applicable Commitment
Fee Rate shall be computed in accordance with the parameters set forth on
Schedule 1.1(A).
Applicable Margin shall mean, as applicable:
(A)......the percentage spread set forth on the pricing grid attached
hereto as Schedule 1.1(A) to be added to the Base Rate under the Base Rate
Option based upon the Leverage Ratio.
(B)......the percentage spread set forth on the pricing grid attached
hereto as Schedule 1.1(A) to be added to the Euro-Rate under the Euro-Rate
Option based upon the Leverage Ratio.
Assignment and Assumption Agreement shall mean an Assignment and Assumption
Agreement
by and among a Purchasing Lender, a Transferor Lender and the Administrative
Agent, as Administrative Agent and on behalf of the remaining Lenders,
substantially in the form of Exhibit 1.1(A).
Authorized Officer shall mean those individuals, designated by written
notice to the
Administrative Agent from the Borrower and the Co-Borrowers, authorized to
execute notices, reports and other documents on behalf of the Loan Parties
required hereunder. The Borrower and the Co-Borrowers may amend such list of
individuals from time to time by giving written notice of such amendment to the
Administrative Agent.
Base Net Worth shall mean the sum of $240,000,000 plus the amounts set
forth in (i) (ii) and (iii) below which occur during the period from the Closing
Date through the date of determination: (i) 75% of consolidated net income of
the Borrower and its Subsidiaries for each fiscal year in which net income was
earned (as opposed to a net loss) commencing with the fiscal year ended
September 30, 2000, (ii) 90% of any increase in the Consolidated Net Worth
resulting from a Permitted Acquisition and (iii) 90% of the amount of the net
proceeds received by the Loan Parties from any offering consummated with respect
to equity securities of the Borrower.
Base Rate shall mean the greater of (i) the interest rate per annum
announced from time to time by the Administrative Agent at its Principal Office
as its then prime rate, which rate may not be the lowest rate then being charged
commercial borrowers by the Administrative Agent, or (ii) the Federal Funds
Effective Rate plus one half percent (1/2%) per annum.
Base Rate Option shall mean either the Revolving Credit Base Rate Option,
the Term Loan A Base Rate Option or the Term Loan B Base Rate Option.
Benefit Arrangement shall mean at any time an "employee benefit plan,"
within the
meaning of Section 3(3) of ERISA, which is neither a Plan nor a Multiemployer
Plan and which is maintained, sponsored or otherwise contributed to by any
member of the ERISA Group.
Borrower shall mean Rent-Way, Inc., a corporation organized and existing
under the
laws of the Commonwealth of Pennsylvania.
Borrowing Date shall mean, with respect to any Loan, the date for the
making thereof or the renewal or conversion thereof at or to the same or a
different Interest Rate Option, which shall be a Business Day.
Borrowing Tranche shall mean specified portions of Loans outstanding as
follows: (i) any Loans to which a Euro-Rate Option applies which become subject
to the same
Interest Rate Option under the same Loan Request and which have the same
Interest Period shall constitute one Borrowing Tranche, and (ii) all Loans to
which the Base Rate Option applies shall constitute one Borrowing Tranche.
Business Day shall mean any day other than a Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required to be closed for
business in Pittsburgh, Pennsylvania.
Co-Borrowers shall mean collectively, and Co-Borrower shall mean
separately, Rent-Way
of TTIG, L.P., a limited partnership organized and existing under the laws of
the State of Indiana, and Rentavision Inc., a corporation organized and existing
under the laws of the State of New York, provided however, that after giving
effect to any merger of Rentavision into the Borrower in accordance with Section
8.2.6(1), all references to "Co-Borrowers" and "Co-Borrower" shall be deemed to
be solely references to Rent-Way of TTIG, L.P.
Closing Date shall mean the Business Day on which the
first Loan shall be made, which
shall be September 23, 1999 or, if all the conditions specified in Section 7
have not been satisfied or waived by such date, not later than October 6, 1999,
as designated by the Borrower by at least three (3) Business Days' advance
notice to the Administrative Agent at its Principal Office, or such other date
as the parties agree. The closing shall take place at 9:00 a.m., Pittsburgh
time, on the Closing Date at the offices of Buchanan Ingersoll Professional
Corporation, 301 Grant Street, Pittsburgh, Pennsylvania 15219, or at such other
time and place as the parties agree.
Collateral shall mean the Pledge Collateral, the UCC Collateral, the
Intellectual Property Collateral and the Real Property.
Collateral Assignments shall mean the Collateral Assignments in the form of
Exhibit
1.1(C).
Commitment shall mean as to any Lender the aggregate of its Revolving
Credit
Commitments, Term Loan A Commitments and Term Loan B Commitments, and in the
case of National City, its Swing Loan Commitment, and Commitments shall mean the
aggregate of the Revolving Credit Commitments, Term Loan A Commitments, Term
Loan B Commitments and Swing Loan Commitment of all of the Lenders.
Commitment Fee shall have the meaning assigned to
that term in Section 2.3.
Consideration shall mean with respect to any Permitted Acquisition, the
aggregate of (i) the cash paid by any of the Loan Parties, directly or
indirectly, to the seller in connection therewith, (ii) the capital stock of the
Borrower or any Loan Party issued to the seller in connection therewith, (iii)
the Indebtedness incurred or assumed by any of the Loan Parties, whether in
favor of the seller or otherwise and whether fixed or contingent, (iv) any
Guaranty
given or incurred by any Loan Party in connection therewith, and (v) any other
consideration given or obligation incurred by any of the Loan Parties in
connection therewith.
Consolidated Adjusted Cash Flow from Operations for any period of
determination shall mean (i) the sum of net income, amortization, interest
expense and income tax expense minus (ii) non-cash credits to net income, in
each case of the Borrower and its Subsidiaries for such period determined and
consolidated in accordance with GAAP. If the Borrower or any Loan Party shall
have made one or more Permitted Acquisitions as permitted under Section 8.2.6(2)
during the period of determination, Consolidated Adjusted Cash Flow from
Operations for such period shall be adjusted on a pro forma basis reasonably
acceptable to the Administrative Agent and based upon the historical financial
statements reasonably acceptable to the Administrative Agent of the Person or
assets acquired to give effect to such Permitted Acquisitions as if they had
occurred at the beginning of such period. The pro forma adjustment shall include
any income or loss attributable to the ownership interests or assets purchased,
excluding in the case of a stock acquisition of the Person acquired any income
on the historical financial statements attributable to stock or asset
dispositions made prior to the time of the Permitted Acquisition. The pro forma
adjustment shall exclude any income on the historical financial statements
attributable to stock or assets acquired under the Permitted Acquisition which
the Borrower or the Loan Party contemplate disposing of following the Permitted
Acquisition. The pro forma adjustment shall not include any projected cost
savings, cost reductions or similar synergistic adjustments forecasted by the
Borrower based upon the Permitted Acquisition. Consolidated Adjusted Cash Flow
from Operations shall also be adjusted on a pro forma basis reasonably
acceptable to the Administrative Agent based upon the historical financial
statements of Rentavision in the same manner and subject to the same criteria
described above with respect to Permitted Acquisitions.
Consolidated Cash Flow from Operations for any period of determination
shall mean (i) the sum of net income, depreciation (excluding depreciation of
Rental Merchandise), amortization, other non-cash charges to net income,
interest expense and income tax expense minus (ii) non-cash credits to net
income, in each case of the Borrower and its Subsidiaries for such period
determined and consolidated in accordance with GAAP. If the Borrower or any Loan
Party shall have made one or more Permitted Acquisitions as permitted under
Section 8.2.6(2) during the period of determination, Consolidated Cash Flow from
Operations for such period shall be adjusted on a pro forma basis reasonably
acceptable to the Administrative Agent and based upon the historical financial
statements reasonably acceptable to the Administrative Agent of the Person or
assets acquired to give effect to such Permitted Acquisitions as if they had
occurred at the beginning of such period. The pro forma adjustment shall include
any income or loss attributable to the ownership interests or assets purchased,
excluding in the case of a stock acquisition of the Person acquired any income
on the historical financial statements attributable to stock or asset
dispositions made prior to the time of the Permitted Acquisition. The pro forma
adjustment shall exclude any income on the historical financial statements
attributable to stock or assets acquired under the Permitted Acquisition which
the Borrower or the Loan Party contemplate disposing of following the Permitted
Acquisition. The pro forma adjustment shall not include any projected cost
savings, cost reductions or similar synergistic adjustments forecasted by the
Borrower based upon the Permitted Acquisition. Consolidated Cash Flow from
Operations shall also be adjusted on a pro
forma basis reasonably acceptable to the Administrative Agent based upon the
historical financial statements of Rentavision in the same manner and subject to
the same criteria described above with respect to Permitted Acquisitions.
Consolidated Funded Debt shall mean as of any date of determination, the
sum of
Indebtedness for borrowed money (including capitalized leases) and Letters of
Credit Outstanding, in each case of the Borrower and its Subsidiaries determined
and consolidated in accordance with GAAP.
Consolidated Net Worth shall mean as of any date of determination, total
stockholders' equity plus preferred stock (to the extent it is not already
included in the stockholders' equity), of the Borrower and its Subsidiaries as
of such date determined and consolidated in accordance with GAAP.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money of
the United States of America.
Drawing Date shall have the meaning assigned to that
term in Section 2.9.3.2.
Environmental Complaint shall mean any written complaint setting forth a
cause of action for personal or property damage or natural resource damage or
equitable relief, order, notice of violation, citation, request for information
issued pursuant to any Environmental Laws by an Official Body, subpoena or other
written notice of any type relating to, arising out of, or issued pursuant to,
any of the Environmental Laws or any Environmental Conditions, as the case may
be.
Environmental Conditions shall mean any conditions of the environment,
including the workplace, the ocean, natural resources (including flora or
fauna), soil, surface water, groundwater, any actual or potential drinking water
supply sources, substrata or the ambient air, relating to or arising out of, or
caused by, the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, emptying, discharging,
injecting, escaping, leaching, disposal, dumping, threatened release or other
management or mismanagement of Regulated Substances resulting from the use of,
or operations on, any Property.
Environmental Laws shall mean all federal, state, local and foreign Laws
and regulations, including permits, licenses, authorizations, bonds, orders,
judgments, and consent decrees issued, or entered into, pursuant thereto,
relating to pollution or protection of human health or the environment or
employee safety in the workplace.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
ERISA Group shall mean, at any time, the Borrower and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
the Borrower, are treated as a single employer under Section 414 of the Internal
Revenue Code.
Euro-Rate shall mean, with respect to any Loan comprising any Borrowing
Tranche to which the Euro-Rate Option applies for any Interest Period, the
interest rate per annum determined by the Administrative Agent by dividing (i)
the rate of interest determined by the Administrative Agent in accordance with
its usual procedures (which determination shall be conclusive absent manifest
error) to be the eurodollar rate at 11:00 a.m. Pittsburgh time two (2) Business
Days prior to the first day of such Interest Period for an amount comparable to
such Loan and having a borrowing date and a maturity comparable to such Interest
Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage.
The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding
on the effective date of any change in the Euro-Rate Reserve Percentage as of
such effective date. The Administrative Agent shall give prompt notice to the
Borrower, the Co-Borrowers and the Lenders of the Euro-Rate as determined or
adjusted in accordance herewith, which determination shall be conclusive absent
manifest error.
Euro-Rate Option shall mean either the Revolving Credit Euro-Rate Option,
the Term Loan A Euro-Rate Option or the Term Loan B Euro-Rate Option.
Euro-Rate Reserve Percentage shall mean the maximum percentage (expressed
as a decimal
rounded upward to the nearest 1/100 of 1%) as determined by the Administrative
Agent which is in effect during any relevant period, as prescribed by the Board
of Governors of the Federal Reserve System (or any successor) for determining
the reserve requirements (including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"Eurocurrency Liabilities") of a member bank in such System.
Event of Default shall mean any of the events described in Section 9.1 and
referred to therein as an "Event of Default."
Excess Cash Flow shall be computed as of the close of each fiscal year by
taking the difference between Consolidated Cash Flow from Operations plus
depreciation of Rental Merchandise for such fiscal year and the sum of (i)Fixed
Charges, (ii) capital expenditures and (iii) expenditures in connection with the
purchase of Rental Merchandise, each as calculated for such fiscal year. All
determinations of Excess Cash Flow shall be based on the immediately preceding
fiscal year and shall be made following the delivery by the Borrower to the
Administrative Agent of the Borrower's audited financial statements for such
preceding year.
Existing Credit Agreement shall mean the Credit Agreement dated as of
January 1, 1999, among the Borrower, Rent-Way of TTIG, L.P., certain of the
Guarantors, certain of the Lenders, and National City, as administrative agent.
Expiration Date shall mean, with respect to the Revolving Credit
Commitments, September 23, 2004.
Federal Funds Effective Rate for any day shall mean the rate per annum
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
Financial Projections shall have the meaning assigned to that term in
Section 6.1.9((ii)).
Fixed Charge Coverage Ratio shall mean, for any period of determination,
the ratio of
(i) Consolidated Cash Flow from Operations minus capital expenditures (excluding
Rental Merchandise) to (ii) Fixed Charges, in each case of the Borrower and its
Subsidiaries for such period determined and consolidated in accordance with
GAAP.
Fixed Charges shall mean, for any period of determination, the sum of
interest expense, income taxes, and the current portion of long term
Indebtedness (including capitalized leases), in each case of the Borrower and
its Subsidiaries for such period determined and consolidated in accordance with
GAAP.
GAAP shall mean generally accepted accounting principles as are in effect
from time to
time, subject to the provisions of Section 1.3, and applied on a consistent
basis both as to classification of items and amounts.
Governmental Acts shall have the meaning assigned to
that term in Section 2.9.8.
Guarantor shall mean each of the parties to this Agreement which is
designated as a "Guarantor" on the signature page hereof and each other Person
which joins this Agreement as a Guarantor after the date hereof pursuant to
Section 11.18.
Guarantor Joinder shall mean a joinder by a Person as a Guarantor under
this Agreement, the Guaranty Agreement and the other Loan Documents in the form
of Exhibit 1.1(G)(1).
Guaranty of any Person shall mean any obligation of such Person
guaranteeing or in effect guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any agreement to
indemnify or hold harmless any other Person, any performance bond or other
suretyship arrangement and any other form of assurance against loss, except
endorsement of negotiable or other instruments for deposit or collection in the
ordinary course of business.
Guaranty Agreement shall mean the Guaranty and Suretyship Agreement in
substantially the form of Exhibit 1.1(G)(2) executed and delivered by each of
the Guarantors to the Administrative Agent for the benefit of the Lenders.
Historical Statements shall have the meaning assigned to that term in
Section 6.1.9((i)).
Indebtedness shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under any letter of credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other interest rate management device,
(iv) any other transaction (including forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables and accrued
expenses incurred in the ordinary course of business which are not represented
by a promissory note or other evidence of indebtedness and which are not more
than thirty (30) days past due), or (v) any Guaranty of Indebtedness for
borrowed money.
Indemnity Agreement shall mean the Indemnity Agreement in the form of
Exhibit 1.1(I)(1) among the Lenders, the Administrative Agent and the Loan
Parties relating to possible environmental liabilities associated with any of
the Property.
Ineligible Security shall mean any security which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
Insolvency Proceeding shall mean, with respect to any Person, (a) case,
action or proceeding with respect to such Person (i) before any court or any
other Official Body under any bankruptcy, insolvency, reorganization or other
similar Law now or hereafter in effect, or (ii) for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of any Loan Party or otherwise relating to liquidation,
dissolution, winding-up or relief of such Person, or (b) any general assignment
for the benefit of creditors, composition, marshaling of assets for creditors,
or other, similar arrangement in respect of such Person's creditors generally or
any substantial portion of its creditors; undertaken under any Law.
Intellectual Property Collateral shall mean all of the property described
in the Patent, Trademark and Copyright Security Agreement.
Intercompany Subordination Agreement shall mean a Subordination Agreement
among the Loan Parties in the form attached hereto as Exhibit 1.1(I)(2).
Interest Coverage Ratio for any period of determination shall mean the
ratio of Consolidated Adjusted Cash Flow from Operations to interest expense, in
each case of the Borrower and its Subsidiaries for such period determined and
consolidated in accordance with GAAP.
Interest Period shall have the meaning assigned to
such term in Section 4.2.
Interest Rate Option shall mean any Euro-Rate Option
or the Base Rate Option.
Interest Rate Protection Agreements shall have the
meaning set forth in Section 8.1.13.
Interim Statements shall have the meaning assigned to
that term in Section 6.1.9((i)).
Internal Revenue Code shall mean the Internal Revenue Code of 1986, as the
same may be amended or supplemented from time to time, and any successor statute
of similar import, and the rules and regulations thereunder, as from time to
time in effect.
Labor Contracts shall mean all employment agreements, employment contracts,
collective bargaining agreements and other agreements among any Loan Party or
Subsidiary of a Loan Party and its employees.
Law shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
Lenders shall mean the financial institutions named on Schedule 1.1(B) and
their
respective successors and assigns as permitted hereunder, each of which is
referred to herein as a Lender.
Letter of Credit shall have the meaning assigned to
that term in Section 2.9.1.
Letter of Credit Borrowing shall mean an extension of credit resulting from
a drawing under any Letter of Credit which shall not have been reimbursed on the
date when made and shall not have been converted into a Loan under Section
2.9.3.2.
Letter of Credit Fee shall have the meaning assigned
to that term in Section 2.9.2.
Letters of Credit Outstanding shall mean at any time the sum of (i) the
aggregate undrawn face amount of outstanding Letters of Credit and (ii) the
aggregate amount of all unpaid and outstanding Reimbursement Obligations
(including Letter of Credit Borrowings).
Leverage Ratio shall mean the ratio of (i) the sum of Consolidated Funded
Debt plus
three times the Occupancy Expense, as measured at the end of each fiscal quarter
of the Borrower for the four quarters then ended, to (ii) Consolidated Cash Flow
from Operations plus Occupancy Expense, as measured at the end of each fiscal
quarter of the Borrower for the four quarters then ended.
Lien shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
Line of Business shall mean the rent-to-own business, the rental purchase
business, the rental business and related lines of business.
LLC Interests shall have the meaning given to such
term in Section 6.1.3.
Loan Documents shall mean this Credit Agreement, the Administrative Agent's
Fee Letter, the Collateral Assignment, the Guaranty Agreement, the Indemnity
Agreement, the Intercompany Subordination Agreement, the Mortgages, the Notes,
the Patent, Trademark and Copyright Security Agreement, the Pledge Agreement,
the Security Agreement, all Interest Rate Protection Agreements between any Loan
Party and any Lender or an Affiliate of any Lender, and any other instruments,
certificates or documents delivered or contemplated to be delivered hereunder or
thereunder or in connection herewith or therewith, as the same may be
supplemented or amended from time to time in accordance herewith or therewith,
and Loan Document shall mean any of the Loan Documents.
Loan Parties shall mean the Borrower, the
Co-Borrowers and the Guarantors.
Loan Request shall have the meaning given to such
term in Section 2.5.
Loans shall mean collectively and Loan shall mean separately all Revolving
Credit Loans, Swing Loans, the Term Loans A and the Term Loans B, or any
Revolving Credit Loan, Swing Loan, Term Loan A or Term Loan B.
Management Group shall mean William E. Morgenstern and all other members of
the board of directors of the Borrower and their respective Spouses,
descendants, Spouses of descendants and trustees of trusts established for the
benefit of such Persons, and the executors of estates of such Persons. "Spouses"
shall include widows and widowers until first remarried.
Managing Agents shall mean National City, in its capacity as Administrative
Agent, Bank of America, N.A., in its capacity as Documentation Agent, and Bank
of Montreal and Harris Trust and Savings Bank, in their capacity as Syndication
Agents.
Mass Mutual Warrants shall mean the warrants dated July 15, 1995, and all
modifications and replacements thereof, issued by the Borrower to Massachusetts
Mutual Life Insurance Company and its Affiliates to purchase common stock of the
Borrower.
Material Adverse Change shall mean any set of circumstances or events which
(a) has or
could reasonably be expected to have any material adverse effect whatsoever upon
the validity or enforceability of this Agreement or any other Loan Document, (b)
is or could reasonably be expected to be material and adverse to the business,
properties, assets, financial condition, results of operations or prospects of
the Loan Parties taken as a whole, (c) impairs materially or could reasonably be
expected to impair materially the ability of the Loan Parties taken as a whole
to duly and punctually pay or perform its Indebtedness, or (d) impairs
materially or could reasonably be expected to impair materially the ability of
the Administrative Agent or any of the Lenders, to the extent permitted, to
enforce their legal remedies pursuant to this Agreement or any other Loan
Document.
Month, with respect to an Interest Period under the Euro-Rate Option, shall
mean the interval between the days in consecutive calendar months numerically
corresponding to the first day of such Interest Period. If any Euro-Rate
Interest Period begins on a day of a calendar month for which there is no
numerically corresponding day in the month in which such Interest Period is to
end, the final month of such Interest Period shall be deemed to end on the last
Business Day of such final month.
Mortgage shall mean the Mortgages in substantially the form of Exhibit
1.1(M) with respect to the Real Property executed and delivered by the Borrower
to the Administrative Agent for the benefit of the Lenders.
Multiemployer Plan shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Borrower or any member of the ERISA Group is then making or accruing
an obligation to make contributions or, within the preceding five Plan years,
has made or had an obligation to make such contributions.
Multiple Employer Plan shall mean a Plan which has two or more contributing
sponsors
(including the Borrower or any member of the ERISA Group) at least two of whom
are not under common control, as such a plan is described in Sections 4063 and
4064 of ERISA.
National City shall mean National City Bank of Pennsylvania, a national
banking association, its successors and assigns.
Notes shall mean the Revolving Credit Notes, the
Swing Loan Note and the Term Notes.
Notices shall have the meaning assigned to that term
in Section 11.6.
NWB shall mean National Westminster Bank, Plc., its successors and assigns.
NWB is the placement agent with respect to the securities to be issued under the
NWB Indenture.
NWB Indenture shall mean the Indenture dated as of February 4, 1997 by and
between the Borrower and Manufacturers and Traders Trust Company, as the
trustee, with respect to $20,000,000 of Subordinated Debentures due 2007 issued
by the Borrower. NWB is the Placement Administrative Agent under the NWB
Indenture.
NWB Subordinated Loan Documents shall mean the NWB Indenture and the
Securities (as defined in the NWB Indenture) issued pursuant thereto and any
other documents evidencing or relating to the obligations of the Borrower or any
Loan Party to the Securityholders (as defined in the NWB Indenture).
Obligations shall mean collectively and Obligation shall mean separately
any obligation or liability of any of the Loan Parties to the Administrative
Agent or any of the Lenders or their Affiliates, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, under or in connection with this Agreement,
the Notes, the Letters of Credit, the Administrative Agent's Letter or any other
Loan Document.
Occupancy Expense for any period of determination shall mean the
consolidated rental
expense under operating leases for the retail store sites (including common area
maintenance charges, taxes and other amounts payable under lease agreements) of
the Borrower and its Subsidiaries as lessees, determined and consolidated in
accordance with GAAP. If the Borrower or any Loan Party shall have made one or
more Permitted Acquisitions as permitted under Section 8.2.6(2) during the
period of determination, the Occupancy Expense for such period shall be adjusted
on a pro forma basis acceptable to the Administrative Agent and based upon the
historical financial statements of the Person or assets acquired to give effect
to such Permitted Acquisitions as if they had occurred at the beginning of such
period.
Official Body shall mean any national, federal, state, local or other
government or
political subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality of either, or any court, tribunal,
grand jury or arbitrator, in each case whether foreign or domestic.
Participation Advance shall mean, with respect to any Lender, such Lender's
payment in respect of its participation in a Letter of Credit Borrowing
according to its Ratable Share pursuant to Section 2.9.4.
Partnership Interests shall have the meaning given to
such term in Section 6.1.3.
Patent, Trademark and Copyright Security Agreement shall mean the Patent,
Trademark and Copyright Security Agreement in substantially the form of Exhibit
1.1(P)(1) executed and delivered by each of the Loan Parties to the
Administrative Agent for the benefit of the Lenders.
PBGC shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
Permitted Acquisitions shall have the meaning
assigned to such term in Section 8.2.6.
Permitted Investments shall mean:
(i) direct obligations of the United States of America or any agency or
instrumentality thereof or obligations backed by the full faith and credit of
the United States of America maturing in twelve (12) months or less from the
date of acquisition;
(ii) commercial paper maturing in 180 days
or less rated not lower than
A-1 by Standard & Poor's or P-1 by Moody's Investors Service, Inc. on the
date of acquisition;
(iii) demand deposits, time deposits or certificates of deposit maturing
within one year in commercial banks whose obligations are rated A-1, A or the
equivalent or better by Standard & Poor's on the date of acquisition;
(iv) repurchase agreements collaterized by securities described in (i)
above with any registered broker/dealer or any commercial bank described in
(iii) above; and
(v) investments in money market funds registered under the Investment
Company Act of 1940 whose shares are registered under the Securities Act of 1933
and rated AAAm or AAAm-G by Standard & Poor's on the date of acquisition.
Permitted Liens shall mean:
(i) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business and which are not yet due and payable;
(ii) Pledges or deposits made in the ordinary course of business to secure
payment of workmen's compensation, or to participate in any fund in connection
with workmen's compensation, unemployment insurance, old-age pensions or other
social security programs;
(iii) Liens of mechanics, materialmen, warehousemen, carriers, or other
like Liens, securing obligations incurred in the ordinary course of business
that are not yet due and payable and Liens of landlords securing obligations to
pay lease payments that are not yet due and payable or in default;
(iv) Good-faith pledges or deposits made in the ordinary course of business
to secure performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases, not in excess of the aggregate amount due
thereunder, or to secure statutory obligations, or surety, appeal, indemnity,
performance or other similar bonds required in the ordinary course of business;
(v) Encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs the
use of such property or the value thereof, and none of which is violated in any
material respect by existing or proposed structures or land use;
(vi) Liens, security interests and mortgages in favor of the Administrative
Agent for the benefit of the Lenders;
(vii) Liens on property leased by any Loan Party or Subsidiary of a Loan
Party under capital and operating leases permitted in Section 8.2.15 securing
obligations of such Loan Party or Subsidiary to the lessor under such leases;
(viii) Any Lien existing on the date of this Agreement and described on
Schedule 1.1(P), provided that the principal amount secured thereby is not
hereafter increased, and no additional assets become subject to such Lien;
(ix) Purchase Money Security Interests, provided that the aggregate amount
of loans and deferred payments secured by such Purchase Money Security Interests
shall not exceed $100,000 (excluding for the purpose of this computation any
loans or deferred payments secured by Liens described on Schedule 1.1(P)); and
(x) The following, (A) if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings diligently
conducted so long as levy and execution thereon have been stayed and continue to
be stayed or (B) if a final judgment is entered and such judgment is discharged
within thirty (30) days of entry, and in either case they do not affect the
Collateral or, in the aggregate, materially impair the ability of any Loan Party
to perform its Obligations hereunder or under the other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges due and payable and
subject to interest or penalty, provided that the applicable Loan Party
maintains such reserves or other appropriate provisions as shall be required by
GAAP and pays all such taxes, assessments or charges forthwith upon the
commencement of proceedings to foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and defects of title to, real or
personal property other than the Collateral, including any attachment of
personal or real property or other legal process prior to adjudication of a
dispute on the merits; or
(3) Claims or Liens of mechanics, materialmen, warehousemen, carriers, or
other statutory nonconsensual Liens.
(4) Liens resulting from final judgments or orders described in Section
9.1.6.
(xi) Liens in favor of the Administrative
Agent for the benefit of the Lenders to secure Interest Rate
Protection Agreements entered into by the Borrower with the
Lenders.
Person shall mean any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, unincorporated
organization, joint venture, government or political subdivision or agency
thereof, or any other entity.
Plan shall mean at any time an employee pension benefit plan (including a
Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title
IV of ERISA or is subject to the minimum funding standards under Section 412 of
the Internal Revenue Code and either (i) is maintained by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at any
time within the preceding five years been maintained by any entity which was at
such time a member of the ERISA Group for employees of any entity which was at
such time a member of the ERISA Group.
Pledge Agreement shall mean the Pledge Agreement in substantially the form
of Exhibit 1.1(P)(2) to be executed and delivered by the Loan Parties to the
Administrative Agent for the benefit of the Lenders.
Pledge Collateral shall mean the property of the Loan Parties in which
security interests are to be granted under the Pledge Agreement or the
Collateral Assignment.
Potential Default shall mean any event or condition which with notice,
passage of time or a determination by the Administrative Agent or the Required
Lenders, or any combination of the foregoing, would constitute an Event of
Default.
Principal Office shall mean the main banking office of the Administrative
Agent in Pittsburgh, Pennsylvania.
Prior Security Interest shall mean a valid and enforceable perfected
first-priority
security interest under the Uniform Commercial Code in the UCC Collateral and
the Pledge Collateral which is subject only to Liens for taxes not yet due and
payable to the extent such prospective tax payments are given priority by
statute or Purchase Money Security Interests as permitted hereunder.
Prohibited Transaction shall mean any prohibited transaction as defined in
Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which
neither an individual nor a class exemption has been issued by the United States
Department of Labor.
Property shall mean all real property, both owned and leased, of any Loan
Party or
Subsidiary of a Loan Party.
Purchase Money Security Interest shall mean Liens upon tangible personal
property securing loans to any Loan Party or Subsidiary of a Loan Party or
deferred payments by such Loan Party or Subsidiary for the purchase of such
tangible personal property, provided that the Liens are limited to the property
acquired with the proceeds of the loan.
Purchasing Lender shall mean a Lender which becomes a party to this
Agreement by executing an Assignment and Assumption Agreement.
Quoted Rates shall mean collectively, and Quoted Rate shall mean
separately, an
overnight rate of interest quoted by National City to the Borrower and the
Co-Borrowers applicable to any proposed Swing Loans which may be requested
pursuant to Section 2.5.2, which rate shall be a margin over the Federal Funds
Effective Rate or a commercial paper, call money, overnight repurchase or other
commonly quoted rate, in each case to be selected in National City's sole
discretion as the basis for National City's quote.
Quoted Rate Option shall mean the option of the Borrower and the
Co-Borrowers to have Swing Loans bear interest at the Quoted Rates.
Ratable Share shall mean the proportion that a Lender's Commitment
(excluding the Swing Loan Commitment) bears to the Commitments (excluding the
Swing Loan Commitments) of all of the Lenders.
Real Property shall mean the real estate owned by the Borrower and located
in Millcreek Township, Erie County, Pennsylvania, and in the City of Erie, Erie
County, Pennsylvania, each of which shall be encumbered by a Mortgage.
Regulated Substances shall mean any substance, including any solid, liquid,
semisolid, gaseous, thermal, thoriated or radioactive material, refuse, garbage,
wastes, chemicals, petroleum products, by-products, coproducts, impurities,
dust, scrap, heavy metals, defined as a "hazardous substance," "pollutant,"
"pollution," "contaminant," "hazardous or toxic substance," "extremely hazardous
substance," "toxic chemical," "toxic waste," "hazardous waste," "industrial
waste," "residual waste," "solid waste," "municipal waste," "mixed waste,"
"infectious waste," "chemotherapeutic waste," "medical waste," or "regulated
substance" or any related materials, substances or wastes as now or hereafter
defined pursuant to any Environmental Laws, ordinances, rules, regulations or
other directives of any Official Body, the generation, manufacture, extraction,
processing, distribution, treatment, storage, disposal, transport, recycling,
reclamation, use, reuse, spilling, leaking, dumping, injection, pumping,
leaching, emptying, discharge, escape, release or other management or
mismanagement of which is regulated by the Environmental Laws.
Regulation U shall mean Regulation U, T, or X as promulgated by the Board
of Governors of the Federal Reserve System, as amended from time to time.
Reimbursement Obligation shall have the meaning assigned to such term in
Section 2.9.3.2.
Rental Contracts shall mean all rental and rental-purchase contracts of the
Loan
Parties made in the ordinary course of business providing for the rental to
customers of Rental Merchandise.
Rental Merchandise shall mean the furniture, appliances, electronic
equipment and other personal property of the Loan Parties acquired for the
purpose of lease or sale under the Rental Contracts.
Rentavision shall mean Rentavision Inc., a New York corporation.
Reportable Event shall mean a reportable event described in Section 4043 of
ERISA and regulations thereunder with respect to a Plan or Multiemployer Plan.
Required Lenders shall mean
(i) if there are no Loans, Reimbursement Obligations or Letter of Credit
Borrowings outstanding, Lenders whose Revolving Credit Commitments aggregate at
least 51% of the Commitments of all of the Lenders, or
(ii) if there are Loans, Reimbursement Obligations, or Letter of Credit
Borrowings outstanding, any Lender or group of Lenders if both (i) the sum of
the Revolving Credit Loans, Term Loans A, Reimbursement Obligations and Letter
of Credit Borrowings of such Lenders then outstanding aggregates at least 51% of
the total principal amount of all of such Revolving Credit Loans, Term Loans A,
Reimbursement Obligations and Letter of Credit Borrowings then outstanding and
(ii) the sum of the Term Loans B of such Lenders then outstanding aggregates at
least 51% of the total principal amount of all of Term Loans B then outstanding.
Reimbursement Obligations and Letter of Credit Borrowings shall be deemed, for
purposes of this definition, to be in favor of the Administrative Agent and not
a participating Lender if such Lender has not made its Participation Advance in
respect thereof and shall be deemed to be in favor of such Lender to the extent
of its Participation Advance if it has made its Participation Advance in respect
thereof.
Revolving Credit Base Rate Option shall mean the option of the Borrower and
the Co-Borrowers to have Revolving Credit Loans bear interest at the rate and
under the terms and conditions set forth in Section 4.1.1((i)).
Revolving Credit Commitment shall mean, as to any Lender at any time, the
amount initially set forth opposite its name on Schedule 1.1(B) in the column
labeled "Amount of Commitment for Revolving Credit Loans," and thereafter on
Schedule I to the most recent Assignment and Assumption Agreement, and Revolving
Credit Commitments shall mean the aggregate Revolving Credit Commitments of all
of the Lenders.
Revolving Credit Euro-Rate Option shall mean the option of the Borrower and
the
Co-Borrowers to have Revolving Credit Loans bear interest at the rate and under
the terms and conditions set forth in Section 4.1.1((ii)).
Revolving Credit Loans shall mean collectively and Revolving Credit Loan
shall mean separately all Revolving Credit Loans or any Revolving Credit Loan
made by the Lenders or one of the Lenders to the Borrower or the Co-Borrowers
pursuant to Section 2.1 or 2.9.3.
Revolving Credit Notes shall mean collectively and Revolving Credit Note
shall mean
separately all the Revolving Credit Notes of the Borrower and the Co-Borrowers
in the form of Exhibit 1.1(R) evidencing the Revolving Credit Loans together
with all amendments, extensions, renewals, replacements, refinancings or
refundings thereof in whole or in part.
Revolving Credit Ratable Share shall mean the proportion that a Lender's
Revolving Credit Commitment bears to the Revolving Credit Commitments of all of
the Lenders.
Revolving Facility Usage shall mean at any time the sum of the Revolving
Credit Loans outstanding, the Swing Loans outstanding and the Letters of Credit
Outstanding.
Section 20 Subsidiary shall mean the Subsidiary of the bank holding company
controlling any Lender, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
Security Agreement shall mean the Security Agreement in substantially the
form of Exhibit 1.1(S)(1) executed and delivered by each of the Loan Parties to
the Administrative Agent for the benefit of the Lenders.
Shares shall have the meaning assigned to that term
in Section 6.1.2.
Standard & Poor's shall mean Standard & Poor's
Ratings Services, a division of The
McGraw-Hill Companies, Inc.
Standby Letter of Credit shall mean a Letter of Credit issued to support
obligations of one or more of the Loan Parties, contingent or otherwise, which
finance the working capital and business needs of the Loan Parties incurred in
the ordinary course of business.
Subordinated Debt shall mean (i) Indebtedness of the Borrower to the
Securityholders
(as such term is defined in the NWB Indenture) and their successors and assigns,
evidenced by the NWB Subordinated Loan Documents and subject to the
subordination terms set forth in Section 11 thereof, and (ii) Indebtedness of
the Loan Parties to Persons which sell ownership interests or assets to the Loan
Parties under a Permitted Acquisition in accordance with Section 8.2.6.
Subordinated Loan Documents shall mean (i) the NWB Subordinated Loan
Documents, and (ii) all agreements evidencing the Subordinated Debt owed to
Persons which sell ownership interests or assets to the Loan Parties under a
Permitted Acquisition in accordance with Section 8.2.6.
Subsidiary of any Person at any time shall mean (i) any corporation or
trust of which 50% or more (by number of shares or number of votes) of the
outstanding capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more directors or trustees (regardless of any
contingency which does or may suspend or dilute the voting rights) is at such
time owned directly or indirectly by such Person or one or more of such Person's
Subsidiaries, (ii) any partnership of which such Person is a general partner or
of which 50% or more of the partnership interests is at the time directly or
indirectly owned by such Person or one or more of such Person's Subsidiaries,
(iii) any limited liability company of which such Person is a member or of which
50% or more of the limited liability company interests is at the time directly
or indirectly owned by such Person or one or more of such Person's Subsidiaries
or (iv) any corporation, trust, partnership, limited liability company or other
entity which is controlled or capable of being controlled by such Person or one
or more of such Person's Subsidiaries.
Subsidiary Shares shall have the meaning assigned to
that term in Section 6.1.3.
Swing Loan Commitment shall mean National City's commitment to make Swing
Loans to the Borrower and the Co-Borrowers pursuant to Section 2.1.2 hereof in
an aggregate principal amount up to $5,000,000.
Swing Loan Note shall mean the Swing Loan Note of the Borrower and the
Co-Borrowers in the form of Exhibit (S)(2) evidencing the Swing Loans, together
with all amendments, extensions, renewals, replacements, refinancings or
refundings thereof in whole or in part.
Swing Loan Request shall mean a request for Swing Loans made in accordance
with Section 2.5.2 hereof.
Swing Loans shall mean collectively and Swing Loan shall mean separately
all Swing Loans or any Swing Loan made by National City to the Borrower and the
Co-Borrowers pursuant to Section 2.6.2 hereof.
Syndication Agents shall mean Bank of Montreal and
Harris Trust and Savings Bank.
Syndications Period shall mean the period between the Closing Date and the
date upon which the Syndication Agents and National City Bank notify the
Borrower and the Co-Borrowers in writing that the syndication of the Term B
Loans is completed.
Term Loan A shall have the meaning given to such term
in Section 3.1; Term Loans A
shall mean collectively all of the Term Loans A.
Term Loan A Base Rate Option shall mean the option of the Borrower and the
Co-Borrowers to have Term Loans A bear interest at the rate and under the terms
and conditions set forth in Section 4.1.2((i)).
Term Loan A Commitment shall mean, as to any Lender at any time, the amount
initially set forth opposite its name on Schedule 1.1(B) in the column labeled
"Amount of Commitment for Term Loans A" and thereafter on Schedule I to the most
recent Assignment and Assumption Agreement, and Term Loan A Commitments shall
mean the aggregate Term Loan A Commitments of all of the Lenders.
Term Loan A Euro-Rate Option shall mean the option of the Borrower and the
Co-Borrowers to have Term Loans A bear interest at the rate and under the terms
and conditions set forth in Section 4.1.2((ii)).
Term Loan A Maturity Date shall mean September 30,
2004.
Term Notes A shall mean collectively and Term Note A
shall mean separately all of the
Term Notes of the Borrower and the Co-Borrowers in the form of Exhibit 1.1(T)(1)
evidencing the Term Loans A, together with all amendments, extensions, renewals,
replacements, refinancings or refunds thereof in whole or in part.
Term Loan B shall have the meaning given to such term
in Section 3.1; Term Loans B
shall mean collectively all of the Term Loans B.
Term Loan B Base Rate Option shall mean the option of the Borrower and the
Co-Borrowers to have Term Loans B bear interest at the rate and under the terms
and conditions set forth in Section 4.1.3(i).
Term Loan B Commitment shall mean, as to any Lender at any time, the amount
initially set forth opposite its name on Schedule 1.1(B) in the column labeled
"Amount of Commitment for Term Loans B" and thereafter on Schedule I to the most
recent Assignment and Assumption Agreement, and Term Loan B Commitments shall
mean the aggregate Term Loan B Commitments of all of the Lenders.
Term Loan B Euro-Rate Option shall mean the option of the Borrower and the
Co-Borrowers to have Term Loans B bear interest at the rate and under the terms
and conditions set forth in Section 4.1.3(ii).
Term Loan B Maturity Date shall mean September 30,
2006.
Term Notes B shall mean collectively and Term Note B
shall mean separately all of the
Term Notes B of the Borrower and the Co-Borrowers in the form of Exhibit
1.1(T)(2) evidencing the Term Loans B, together with all amendments, extensions,
renewals, replacements, refinancings or refunds thereof in whole or in part.
Term Notes shall mean collectively and Term Note shall mean separately all
of the Term Notes A and Term Notes B and each Term Note A and Term Note B.
Transferor Lender shall mean the selling Lender pursuant to an Assignment
and Assumption Agreement.
UCC Collateral shall mean the property of the Loan Parties in which
security interests are to be granted under the Security Agreement.
Uniform Commercial Code shall have the meaning
assigned to that term in Section 6.1.16.
Voting Stock shall mean any class or classes the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of the
corporate directors (or persons performing similar functions).
1.2 Construction.
Unless the context of this Agreement otherwise clearly
requires, the following rules of construction shall apply to this Agreement and
each of the other Loan Documents:
1.2.1 Number; Inclusion.
references to the plural include the singular, the plural, the part and the
whole; "or" has the inclusive meaning represented by the phrase "and/or," and
"including" has the meaning represented by the phrase "including without
limitation";
1.2.2 Determination.
references to "determination" of or by the Administrative Agent or the
Lenders shall be deemed to include good-faith estimates by the Administrative
Agent or the Lenders (in the case of quantitative determinations) and good-faith
beliefs by the Administrative Agent or the Lenders (in the case of qualitative
determinations) and such determination shall be conclusive absent manifest
error;
1.2.3 Administrative Agent's Discretion and Consent.
whenever the Administrative Agent or the Lenders are granted the right
herein to act in its or their sole discretion or to grant or withhold consent
such right shall be exercised in good faith;
1.2.4 Documents Taken as a Whole.
the words "hereof," "herein," "hereunder," "hereto" and similar terms in
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document as a whole and not to any particular provision of this Agreement
or such other Loan Document;
1.2.5 Headings.
the section and other headings contained in this Agreement or such other
Loan Document and the Table of Contents (if any), preceding this Agreement or
such other Loan
Document are for reference purposes only and shall not control or affect the
construction of this Agreement or such other Loan Document or the interpretation
thereof in any respect;
1.2.6 Implied References to this Agreement.
article, section, subsection, clause, schedule and exhibit references are
to this Agreement or other Loan Document, as the case may be, unless otherwise
specified;
1.2.7 Persons.
reference to any Person includes such Person's successors and assigns but,
if applicable, only if such successors and assigns are permitted by this
Agreement or such other Loan Document, as the case may be, and reference to a
Person in a particular capacity excludes such Person in any other capacity;
1.2.8 Modifications to Documents.
reference to any agreement (including this Agreement and any other Loan
Document together with the schedules and exhibits hereto or thereto), document
or instrument means such agreement, document or instrument as amended, modified,
replaced, substituted for, superseded or restated;
1.2.9 From, To and Through.
relative to the determination of any period of time, "from" means "from and
including," "to" means "to but excluding," and "through" means "through and
including"; and
1.2.10 Shall; Will.
references to "shall" and "will" are intended to have the same meaning.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters and all
financial statements to be delivered pursuant to this Agreement shall be made
and prepared in accordance with GAAP (including principles of consolidation
where appropriate), and all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP; provided, however, that all accounting
terms used in Section 8.2 (and all defined terms used in the definition of any
accounting term used in Section 8.2) shall have the meaning given to such terms
(and defined terms) under GAAP as in effect on the date hereof applied on a
basis consistent with those used in preparing the Annual Statements referred to
in Section 6.1.9((i)).
2. REVOLVING CREDIT AND SWING LOAN FACILITIES
2.1 Revolving Credit Commitments.
2.1.1 Revolving Credit Loans.
Subject to the terms and conditions hereof and relying upon
the representations and warranties herein set forth, each Lender with Revolving
Credit Commitments severally agrees to make Revolving Credit Loans to the
Borrower and the Co-Borrowers at any time or from time to time on or after the
date hereof to the Expiration Date, provided that after giving effect to such
Revolving Credit Loan (i) the aggregate amount of Revolving Credit Loans from
such Lender shall not exceed such Lender's Revolving Credit Commitment minus
such Lender's Revolving Credit Ratable Share of the Letters of Credit
Outstanding, and (ii) the Borrower shall not be in default of the covenant set
forth in Section 8.2.16 of this Agreement, as evidenced pursuant to the Loan
Request delivered pursuant to Section 2.5 hereof. Within such limits of time and
amount and subject to the other provisions of this Agreement, the Borrower and
the Co-Borrowers may borrow, repay and reborrow pursuant to this Section 2.1.
2.1.2 Swing Loan Commitments.
Subject to the terms and conditions hereof and relying upon
the representations and warranties herein set forth, National City may, at its
option, cancelable at any time for any reason whatsoever, make swing loans (the
"Swing Loans") to the Borrower and the Co-Borrowers at any time or from time to
time after the date hereof to, but not including, the Expiration Date, in an
aggregate principal amount up to but not in excess of $5,000,000 (the "Swing
Loan Commitment"), provided that the aggregate principal amount of National
City's Swing Loans and the Revolving Credit Loans and Letters of Credit
Outstanding of all the Lenders at any one time outstanding shall not exceed the
Revolving Credit Commitments of all the Lenders or cause the Loan Parties to be
in default of the covenant set forth in Section 8.2.16 of this Agreement. Within
such limits of time and amount and subject to the other provisions of this
Agreement, the Borrower and the Co-Borrowers may borrow, repay and reborrow
pursuant to this Section 2.1.2.
2.2 Nature of Lenders' Obligations with Respect to Revolving Credit Loans.
Each Lender with Revolving Credit Commitments shall be
obligated to participate in each request for Revolving Credit Loans pursuant to
Section 2.5 in accordance with its Revolving Credit Ratable Share of the
Revolving Credit Loans. The aggregate of each Lender's Revolving Credit Loans
outstanding hereunder to the Borrower and the Co-Borrowers at any time shall
never exceed its Revolving Credit Commitment minus its Revolving Credit Ratable
Share of the Letter of Credit Outstandings. The obligations of each Lender
hereunder are several. The failure of any Lender to perform its obligations
hereunder shall not affect the Obligations of the Borrower and the Co-Borrowers
to any other party nor shall any other party be liable for the failure of such
Lender to perform its obligations hereunder. The Lenders shall have no
obligation to make Revolving Credit Loans hereunder on or after the Expiration
Date.
2.3 Commitment Fees.
Accruing from the date hereof until the Expiration Date, the
Borrower and the Co-Borrowers agree to pay to the Administrative Agent for the
account of each Lender which makes a Revolving Credit Commitment, as
consideration for such Lender's Revolving Credit Commitment hereunder, a
nonrefundable commitment fee (the "Commitment Fee") equal to the Applicable
Commitment Fee Rate (computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed) on the average daily difference between
the amount of (i) such Lender's Revolving Credit Commitment, as the same may be
constituted from time to time (for purposes of this computation, National City's
Swing Loans shall be deemed not to be borrowed amounts under its Revolving
Credit Commitment) and (ii) the principal amount of such Lender's Revolving
Credit Ratable Share of Revolving Credit Loans and Letters of Credit
Outstanding. All Commitment Fees shall be payable in arrears on the first
Business Day of each October, January, April and July after the date hereof and
on the Expiration Date or upon acceleration of the Notes.
2.4 [Intentionally Omitted].
2.5 Revolving Credit Loan Requests; Swing Loan Requests.
2.5.1 Revolving Credit Loan Requests.
Except as otherwise provided herein, the Borrower and the
Co-Borrowers may from time to time prior to the Expiration Date request the
Lenders to make Revolving Credit Loans, or renew or convert the Interest Rate
Option applicable to existing Revolving Credit Loans or Term Loans pursuant to
Section 4.2, by delivering to the Administrative Agent, not later than 10:00
a.m., Pittsburgh time, (i) three (3) Business Days prior to the proposed
Borrowing Date with respect to the making of Revolving Credit Loans to which the
Euro-Rate Option applies or the conversion to or the renewal of the Euro-Rate
Option for any Loans; and (ii) one (1) Business Day prior to either the proposed
Borrowing Date with respect to the making of Revolving Credit Loans to which the
Base Rate Option applies or the last day of the preceding Interest Period with
respect to the conversion to the Base Rate Option for any Loan, of a duly
completed request therefor substantially in the form of Exhibit 2.5 (each, a
"Loan Request"), which includes a representation that the Borrower is in
compliance with Sections 8.2.16 after giving effect to the Loans subject to such
Loan Request. Each Loan Request shall be irrevocable and shall specify (i) the
proposed Borrowing Date; (ii) the aggregate amount of the proposed Loans
comprising each Borrowing Tranche, which shall be in integral multiples of
$1,000,000 and not less than $1,000,000 for each Borrowing Tranche to which the
Euro-Rate Option applies and not less than the lesser of $1,000,000 or the
maximum amount available for Borrowing Tranches to which the Base Rate Option
applies; (iii) whether the Euro-Rate Option or Base Rate Option shall apply to
the proposed Loans comprising the applicable Borrowing Tranche; and (iv) in the
case of a Borrowing Tranche to which the Euro-Rate Option applies, an
appropriate Interest Period for the Loans comprising such Borrowing Tranche.
2.5.2 Swing Loan Requests.
Except as otherwise provided herein, the Borrower and the Co-Borrowers may
from time to time prior to the Expiration Date request National City to make
Swing Loans by delivery to National City not later than 10:00 a.m. Pittsburgh
time on the proposed Borrowing Date of a duly completed request therefor
substantially in the form of Exhibit 2.5.2 hereto or a request by telephone
immediately confirmed in writing by letter, facsimile or telex (each, a "Swing
Loan Request"), it being understood that National City may rely on the authority
of any individual making such a telephonic request without the necessity of
receipt of such written confirmation. Each Swing Loan Request shall be
irrevocable and shall specify the proposed Borrowing Date and the principal
amount of such Swing Loan, which shall be not less than $100,000.
1.1. Making Revolving Credit Loans and Swing Loans.
2.6.1 Making Revolving Credit Loans.
The Administrative Agent shall, promptly after receipt by it
of a Loan Request pursuant to Section 2.5, notify the Lenders which have
Commitments which are the subject of the Loan Request of its receipt of such
Loan Request specifying: (i) the proposed Borrowing Date and the time and method
of disbursement of the Loans requested thereby; (ii) the amount and type of each
such Loan and the applicable Interest Period (if any); and (iii) in the case of
the a Loan Request for Revolving Credit Loans, the apportionment among the
Lenders of such Loans as determined by the Administrative Agent in accordance
with Section 2.2. In the case of the Revolving Credit Loans, each Lender shall
remit the principal amount of each Revolving Credit Loan to the Administrative
Agent such that the Administrative Agent is able to, and the Administrative
Agent shall, to the extent the Lenders have made funds available to it for such
purpose and subject to Section 7.2, fund such Revolving Credit Loans to the
Borrower and the Co-Borrowers in U.S. Dollars and immediately available funds at
the Principal Office prior to 2:00 p.m., Pittsburgh time, on the applicable
Borrowing Date, provided that if any Lender fails to remit such funds to the
Administrative Agent in a timely manner, the Administrative Agent may elect in
its sole discretion to fund with its own funds the Revolving Credit Loans of
such Lender on such Borrowing Date, and such Lender shall be subject to the
repayment obligation in Section 10.15.
2.6.2 Making Swing Loans.
So long as National City elects to make Swing Loans,
National City shall, after
receipt by it of a Swing Loan Request pursuant to Section 2.5.2, fund such Swing
Loan to the Borrower in U.S. Dollars and immediately available funds at the
Principal Office prior to 2:00 p.m. Pittsburgh time on the Borrowing Date.
2.7 Revolving Credit Notes; Swing Loan Note.
2.7.1 Revolving Credit Notes.
The Obligation of the Borrower and the Co-Borrowers to repay
the aggregate unpaid principal amount of the Revolving Credit Loans made to the
Borrower and the Co-Borrowers by each Lender with Revolving Credit Loan
Commitments, together with interest thereon, shall be evidenced by a Revolving
Credit Note dated the Closing Date (or if such Lender is not a party to this
Agreement on the Closing Date, the date that such Lender joins in this
Agreement), payable to the order of such Lender in a face amount equal to the
Revolving Credit Commitment of such Lender.
2.7.2 Swing Loan Note; Borrowings to Repay Swing Loans.
2.7.2.1 The obligation of the Borrower and the Co-Borrowers to repay the
unpaid principal amount of the Swing Loans made to the Borrower and the
Co-Borrowers by National City together with interest thereon shall be evidenced
by a demand promissory note of the Borrower and the Co-Borrowers dated the
Closing Date in substantially the form attached hereto as Exhibit 1.1(S)(2)
payable to the order of National City in a face amount equal to the Swing Loan
Commitment.
2.7.2.2 National City may, at its option, exercisable at any time for any
reason whatsoever, demand repayment of the Swing Loans, and each Lender making
Revolving Credit Commitments shall make a Revolving Credit Loan in an amount
equal to such Lender's Revolving Credit Ratable Share of the aggregate principal
amount of the outstanding Swing Loans, plus, if National City so requests,
accrued interest thereon, provided that no Lender shall be obligated in any
event to make Revolving Credit Loans in excess of its Revolving Credit
Commitment less its Revolving Credit Ratable Share of Letters of Credit
Outstanding. Revolving Credit Loans made pursuant to the preceding sentence
shall bear interest at the Base Rate Option and shall be deemed to have been
properly requested in accordance with Section 2.5.1 without regard to any of the
requirements of that provision. National City shall provide notice to the
Lenders, the Borrower and the Co-Borrowers (which may be telephonic or written
notice by letter, facsimile or telex) that such Revolving Credit Loans are to be
made under this Section 2.7.2.2 and of the apportionment among the Lenders with
Revolving Credit Commitments, and such Lenders shall be unconditionally
obligated to fund such Revolving Credit Loans (whether or not the conditions
specified in Section 2.5.1 are then satisfied) by the time National City so
requests, which shall not be earlier than 3:00 p.m. Pittsburgh time on the
Business Day next after the date the Lenders receive such notice from National
City.
2.8 Use of Proceeds.
The proceeds of the Revolving Credit Loans shall be used for
the refinancing of existing indebtedness of the Borrower, the Co-Borrowers and
the other Loan Parties, for the acquisition of stock or assets of Persons
engaged in the business of the Borrower and its Subsidiaries described in
Schedule 8.2.10, for the development of additional retail locations in
connections with such business, and for working capital and general corporate
purposes, all in accordance with Section 8.1.10.
2.9 Letter of Credit Subfacility.
2.9.1 Issuance of Letters of Credit.
Borrower and Co-Borrowers may request the issuance of one or more letters
of credit (each a "Letter of Credit") on behalf of the Borrower, either
Co-Borrower or another Loan Party by delivering to the Administrative Agent (i)
a completed application and agreement for letters of credit in such form as the
Administrative Agent may specify from time to time by no later than 10:00 a.m.,
Pittsburgh time, at least three (3) Business Days, or such shorter period as may
be agreed to by the Administrative Agent, in advance of the proposed date of
issuance and (ii) a Loan Request which includes the calculations showing
compliance with Sections 8.2.16 after giving effect to the issuance of the
Letter of Credit or Letters of Credit. Each Letter of Credit shall be a Standby
Letter of Credit. Subject to the terms and conditions hereof and in reliance on
the agreements of the other Lenders set forth in this Section 2.9, the
Administrative Agent will issue a Letter of Credit provided that each Letter of
Credit shall (A) have a maximum maturity of twelve (12) months from the date of
issuance, and (B) in no event expire later than one Business Day prior to the
Expiration Date and providing that in no event shall (i) the Letters of Credit
Outstanding exceed, at any one time, $10,000,000 or (ii) the Revolving Facility
Usage exceed, at any one time, the Revolving Credit Commitments.
2.9.2 Letter of Credit Fees.
The Borrower and the Co-Borrowers shall pay (i) to the Administrative Agent
for the ratable account of the Lenders with Revolving Credit Commitments a fee
(the "Letter of Credit Fee") equal to the Applicable Margin for the Revolving
Credit Euro-Rate Option per annum, and (ii) to the Administrative Agent for its
own account a fronting fee equal to one-eighth percent (1/8%) per annum, which
fees shall be computed on the daily Letters of Credit Outstanding and shall be
payable quarterly in arrears commencing with the first Business Day of each
October, January, April and July following issuance of each Letter of Credit and
on the Expiration Date. The Borrower and the Co-Borrowers shall also pay to the
Administrative Agent for the Administrative Agent's sole account the
Administrative Agent's then in effect customary fees and administrative expenses
payable with respect to the Letters of Credit as the Administrative Agent may
generally charge or incur from time to time in connection with the issuance,
maintenance, modification (if any), assignment or transfer (if any),
negotiation, and administration of Letters of Credit.
2.9.3....Disbursements, Reimbursement.
2.9.3.1 Immediately upon the Issuance of each Letter of Credit, each
Lender with Revolving Credit Commitments shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Administrative
Agent a participation in such Letter of Credit and each drawing thereunder in an
amount equal to such Lender's Revolving Credit Ratable Share of the maximum
amount available to be drawn under such Letter of Credit and the amount of such
drawing, respectively.
2.9.3.2 In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, the Administrative Agent will promptly
notify the Borrower and the Co-Borrowers. Provided that they shall have received
such notice, the Borrower and the Co-Borrowers shall reimburse (such obligation
to reimburse the Administrative Agent shall sometimes be referred to as a
"Reimbursement Obligation") the Administrative Agent prior to 11:00 a.m.,
Pittsburgh time on each date that an amount is paid by the Administrative Agent
under any Letter of Credit (each such date, an "Drawing Date") in an amount
equal to the amount so paid by the Administrative Agent. In the event the
Borrower and the Co-Borrowers fail to reimburse the Administrative Agent for the
full amount of any drawing under any Letter of Credit by 11:00 a.m., Pittsburgh
time, on the Drawing Date, the Administrative Agent will promptly notify each
Lender with Revolving Credit Commitments thereof, and the Borrower and the
Co-Borrowers shall be deemed to have requested that Revolving Credit Loans be
made by the Lenders under the Base Rate Option to be disbursed on the Drawing
Date under such Letter of Credit, subject to the amount of the unutilized
portion of the Revolving Credit Commitment and subject to the conditions set
forth in Section 7.2 other than any notice requirements. Any notice given by the
Administrative Agent pursuant to this Section 2.9.3.2 may be oral if immediately
confirmed in writing; provided that the lack of such an immediate confirmation
shall not affect the conclusiveness or binding effect of such notice.
2.9.3.3 Each Lender shall upon any notice pursuant to Section 2.9.3.2 make
available to the Administrative Agent an amount in immediately available funds
equal to its Revolving Credit Ratable Share of the amount of the drawing,
whereupon the participating Lenders shall (subject to Section 2.9.3.4) each be
deemed to have made a Revolving Credit Loan under the Base Rate Option to the
Borrower and the Co-Borrowers in that amount. If any Lender so notified fails to
make available to the Administrative Agent for the account of the Administrative
Agent the amount of such Lender's Revolving Credit Ratable Share of such amount
by no later than 3:30 p.m., Pittsburgh time on the Drawing Date, then interest
shall accrue on such Lender's obligation to make such payment, from the Drawing
Date to the date on which such Lender makes such payment, at a rate per annum
equal to the Federal Funds Effective Rate in effect from time to time during
such period. The Administrative Agent will promptly give notice of the
occurrence of the Drawing Date, but failure of the Administrative Agent to give
any such notice on the Drawing Date or in sufficient time to enable any Lender
to effect such payment on such date shall not relieve such Lender from its
obligation under this Section 2.9.3.3.
2.9.3.4 With respect to any unreimbursed drawing that is not converted into
Loans under the Base Rate Option to the Borrower and the Co-Borrowers in whole
or in part as contemplated by Section 2.9.3.2, because of the Borrower's and the
Co-Borrowers' failure to satisfy the conditions set forth in Section 7.2 other
than any notice requirements or for any other reason, the Borrower and the
Co-Borrowers shall be deemed to have incurred from the Administrative Agent a
Letter of Credit Borrowing in the amount of such drawing. Such Letter of Credit
Borrowing shall be due and payable on demand (together with interest) and shall
bear interest at the rate per annum applicable to the Revolving Credit Loans
under the Base Rate Option. Each Lender's payment to the Administrative Agent
pursuant to Section 2.9.3.3 shall be deemed to be a payment in respect of its
participation in such Letter of Credit Borrowing and shall constitute a
Participation Advance from such Lender in satisfaction of its participation
obligation under this Section 2.9.3.
2.9.4 Repayment of Participation Advances.
2.9.4.1 Upon (and only upon) receipt by the Administrative Agent for its
account of immediately available funds from the Borrower and the Co-Borrowers
(i) in reimbursement of any payment made by the Administrative Agent under the
Letter of Credit with respect to which any Lender has made a Participation
Advance to the Administrative Agent, or (ii) in payment of interest on such a
payment made by the Administrative Agent under such a Letter of Credit, the
Administrative Agent will pay to each Lender, in the same funds as those
received by the Administrative Agent, the amount of such Lender's Revolving
Credit Ratable Share of such funds, except the Administrative Agent shall retain
the amount of the Revolving Credit Ratable Share of such funds of any Lender
that did not make a Participation Advance in respect of such payment by
Administrative Agent.
2.9.4.2 If the Administrative Agent is required at any time to return to
any Loan Party, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by any
Loan Party to the Administrative Agent pursuant to Section 2.9.4.1 in
reimbursement of a payment made under the Letter of Credit or interest or fee
thereon, each Lender with Revolving Credit Commitments shall, on demand of and
one day's notice by the Administrative Agent, forthwith return to the
Administrative Agent the amount of its Revolving Credit Ratable Share of any
amounts so returned by the Administrative Agent plus interest thereon from the
date such demand is made to the date such amounts are returned by such Lender to
the Administrative Agent, at a rate per annum equal to the Federal Funds
Effective Rate in effect from time to time.
2.9.5 Documentation.
Each Loan Party agrees to be bound by the terms of the Administrative
Agent's application and agreement for letters of credit and the Administrative
Agent's written regulations and customary practices relating to letters of
credit, though such interpretation may be different from the such Loan Party's
own. In the event of a conflict between such application or agreement and this
Agreement, this Agreement shall govern. It is understood and agreed that, except
in the case of gross negligence or willful misconduct, the Administrative Agent
shall not be liable for any error, negligence and/or mistakes, whether of
omission or commission, in following any Loan Party's instructions or those
contained in the Letters of Credit or any modifications, amendments or
supplements thereto.
2.9.6 Determinations to Honor Drawing Requests.
In determining whether to honor any request for drawing under any Letter of
Credit by the beneficiary thereof, the Administrative Agent shall be responsible
only to determine that the documents and certificates required to be delivered
under such Letter of Credit have been delivered and that they comply on their
face with the requirements of such Letter of Credit.
2.9.7 Nature of Participation and Reimbursement Obligations.
Each Lender's obligation in accordance with this Agreement to make the
Loans or Participation Advances, as contemplated by Section 2.9.3, as a result
of a drawing under a Letter of Credit, and the Obligations of the Borrower and
the Co-Borrowers to reimburse the Administrative Agent upon a draw under a
Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Section 2.9 under all
circumstances, including the following circumstances:
(i) any set-off, counterclaim, recoupment, defense or other right which
such Lender may have against the Administrative Agent, the Borrower, the
Co-Borrowers or any other Person for any reason whatsoever;
(ii) the failure of any Loan Party or any other Person to comply, in
connection with a Letter of Credit Borrowing, with the conditions set forth in
Section 2.1, 2.5, 2.6 or 7.2 or as otherwise set forth in this Agreement for the
making of a Loan, it being acknowledged that such conditions are not required
for the making of a Letter of Credit Borrowing and the obligation of the Lenders
to make Participation Advances under Section 2.9.3;
(iii) any lack of validity or enforceability of any Letter of Credit;
(iv) the existence of any claim, set-off, defense or other right which any Loan
Party or any Lender may have at any time against a beneficiary or any transferee
of any Letter of Credit (or any Persons for whom any such transferee may be
acting), the Administrative Agent or any Lender or any other Person or, whether
in connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between any Loan
Party or Subsidiaries of a Loan Party and the beneficiary for which any Letter
of Credit was procured);
(v) any draft, demand, certificate or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
even if the Administrative Agent has been notified thereof;
(vi) payment by the Administrative Agent under any Letter of Credit
against presentation of a demand, draft or certificate or other document which
does not comply with the terms of such Letter of Credit;
(vii) any adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of any Loan Party or
Subsidiaries of a Loan Party;
(viii) any breach of this Agreement or any other Loan Document by any party
thereto;
(ix) the occurrence or continuance of an Insolvency Proceeding with respect
to any Loan Party;
(x) the fact that an Event of Default or a Potential Default shall have
occurred and be continuing;
(xi) the fact that the Expiration Date shall
have passed or this Agreement
or the Commitments hereunder shall have been terminated; and
(xii) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing; provided that each Lender's obligation to make Loans under
Section 2.9.3.3 is subject to the conditions set forth in Section 7.2.
2.9.8 Indemnity.
In addition to amounts payable as provided in Section 10.5, the Borrower
and the Co-Borrowers hereby agree to protect, indemnify, pay and save harmless
the Administrative Agent from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which the Administrative Agent may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of Credit,
other than as a result of (A) the gross negligence or willful misconduct of the
Administrative Agent as determined by a final judgment of a court of competent
jurisdiction or (B) subject to the following clause (ii), the wrongful dishonor
by the Administrative Agent of a proper demand for payment made under any Letter
of Credit, or (ii) the failure of the Administrative Agent to honor a drawing
under any such Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions herein called "Governmental
Acts").
2.9.9 Liability for Acts and Omissions.
As between any Loan Party and the Administrative Agent, such Loan Party
assumes all risks of the acts and omissions of, or misuse of the Letters of
Credit by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, the Administrative Agent
shall not be responsible for: (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for an issuance of any such Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged (even if the Administrative Agent shall have
been notified thereof); (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) the
failure of the beneficiary of any such Letter of Credit, or any other party to
which such Letter of Credit may be transferred, to comply fully with any
conditions required in order to draw upon such Letter of Credit or any other
claim of any Loan Party against any beneficiary of such Letter of Credit, or any
such transferee, or any dispute between or among any Loan Party and any
beneficiary of any Letter of Credit or any such transferee; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of the Administrative Agent, including any
Governmental Acts, and none of the above shall affect or impair, or prevent the
vesting of, any of the Administrative Agent's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by the Administrative
Agent under or in connection with the Letters of Credit issued by it or any
documents and certificates delivered thereunder, if taken or omitted in good
faith, shall not put the Administrative Agent under any resulting liability to
the Borrower, the Co-Borrowers or any Lender.
3. TERM LOANS
3.1 Term Loan Commitments.
3.1.1 Term Loan A Commitments.
Subject to the terms and conditions hereof, and relying upon
the representations and warranties herein set forth, each Lender with a Term
Loan A Commitment severally agrees to make a term loan (the "Term Loan A") to
the Borrower and the Co-Borrowers on the Closing Date in such principal amount
as the Borrower and the Co-Borrowers shall request up to, but not exceeding such
Lender's Term Loan A Commitment.
3.1.2 Term Loan B Commitments.
Subject to the terms and conditions hereof, and relying upon
the representations and warranties herein set forth, each Lender with a Term
Loan B Commitment severally agrees to make a term loan (the "Term Loan B") to
the Borrower and the Co-Borrowers on the Closing Date in such principal amount
as the Borrower and the Co-Borrowers shall request up to, but not exceeding such
Lender's Term Loan B Commitment.
3.2 Nature of Lenders' Obligations with Respect to Term Loans.
The obligations of each Lender to make Term Loans A to the
Borrower and the Co-Borrowers shall be in the proportion that such Lender's Term
Loan A Commitment bears to the Term Loan A Commitments of all Lenders; the
obligations of each Lender to make Term Loans B to the Borrower and the
Co-Borrowers shall be in the proportion that such Lender's Term Loan B
Commitment bears to the Term Loan B Commitments of all Lenders. Each Lender's
Term Loans to the Borrower and the Co-Borrowers shall never exceed its Term Loan
Commitments. The failure of any Lender to make a Term Loan shall not relieve any
other Lender of its obligations to make a Term Loan nor shall it impose any
additional liability on any other Lender hereunder. The Lenders shall have no
obligation to make Term Loans hereunder after the Closing Date. The Term Loan
Commitments are not revolving credit commitments, and the Borrower and the
Co-Borrowers shall not have the right to borrow, repay and reborrow under
Section 3.1.
3.3 Term Loan Notes.
The Obligation of the Borrower and the Co-Borrowers to repay
the unpaid principal amount of the Term Loans made to the Borrower and the
Co-Borrowers by each Lender, together with interest thereon, shall be evidenced
by a Term Note dated the Closing Date (or if such Lender is not a party to this
Agreement on the Closing Date, the date that such Lender joins in this
Agreement), payable to the order of each Lender in a face amount equal to the
Term Loan of such Lender. The principal amount of the Term Notes A shall be
payable in quarterly payments due on the last day of each December, March, June,
and September, beginning with the quarter ending December 31, 1999, and as
follows:
<TABLE>
<CAPTION>
Quarter(s) Ending on Following Date or Amount of Quarterly Payment of Principal
In The Following Period Due on Each Payment Date
<S> <C> <C> <C> <C> <C>
12-31-99 through 9-30-00 $3,750,000
12-31-00 through 9-30-01 $5,000,000
12-31-01 through 9-30-02 $6,250,000
12-31-02 through 9-30-03 $7,500,000
12-31-03 through 9-30-04 $8,750,000
</TABLE>
The principal amount of the Term Notes B shall be payable in
quarterly payments each in the amount of $250,000 due on the last day of each
December, March, June, and September, beginning with the quarter ending December
31, 1999, and continuing through and including September 30, 2004, followed by
two annual payments on September 30, 2005 and September 30, 2006, each in the
amount of $47,500,000.
3.4 Use of Proceeds.
The proceeds of the Term Loans shall be used to refinance
existing indebtedness and for the acquisition of Rentavision and in accordance
with Section 8.1.10.
4. INTEREST RATES
4.1 Interest Rate Options.
The Borrower and the Co-Borrowers shall pay interest in
respect of the outstanding unpaid principal amount of the Loans as selected by
it from the Base Rate Option or Euro-Rate Option set forth below applicable to
the Loans, it being understood that, subject to the provisions of this
Agreement, the Borrower and the Co-Borrowers may select different Interest Rate
Options and different Interest Periods to apply simultaneously to the Loans
comprising different Borrowing Tranches and may convert to or renew one or more
Interest Rate Options with respect to all or any portion of the Loans comprising
any Borrowing Tranche, provided that there shall not be at any one time
outstanding more than seven (7) Borrowing Tranches in the aggregate among all of
the Loans accruing interest at a Euro-Rate Option, and provided further, that
only the Quoted Rate Option shall apply to the Swing Loans. If at any time the
designated rate applicable to any Loan made by any Lender exceeds such Lender's
highest lawful rate, the rate of interest on such Lender's Loan shall be limited
to such Lender's highest lawful rate.
4.1.1 Revolving Credit Interest Rate Options.
The Borrower and the Co-Borrowers shall have the right to select from the
following Interest Rate Options applicable to the Revolving Credit Loans:
(i) Base Rate Option: A fluctuating rate per annum (computed on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal
to the Base Rate plus the Applicable Margin, such interest rate to change
automatically from time to time effective as of the effective date of each
change in the Base Rate or Applicable Margin; or
(ii) Euro-Rate Option: A rate per annum (computed on the basis of a year of
360 days and actual days elapsed) equal to the Euro-Rate plus the Applicable
Margin, such interest rate to change automatically from time to time effective
as of the effective date of each change in the Applicable Margin.
4.1.2 Term Loan A Interest Rate Options.
The Borrower and the Co-Borrowers shall have the right to select from the
following Interest Rate Options applicable to the Term Loans A:
(i) Term Loan A Base Rate Option: A fluctuating rate per annum (computed on
the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed) equal to the Base Rate plus the Applicable Margin, such interest rate
to change automatically from time to time effective as of the effective date of
each change in the Base Rate or Applicable Margin; or
(ii) Term Loan A Euro-Rate Option: A rate per annum (computed on the basis
of a year of 360 days and actual days elapsed) equal to the Euro-Rate plus the
Applicable Margin, such interest rate to change automatically from time to time
effective as of the effective date of each change in the Applicable Margin.
4.1.3 Term Loan B Interest Rate Options.
The Borrower and the Co-Borrowers shall have the right to select from the
following
Interest Rate Options applicable to the Term Loans B:
(i) Term Loan B Base Rate Option: A fluctuating rate per annum (computed on
the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed) equal to the Base Rate plus the Applicable Margin, such interest rate
to change automatically from time to time effective as of the effective date of
each change in the Base Rate or Applicable Margin; or
(ii) Term Loan B Euro-Rate Option: A rate per annum (computed on the basis
of a year of 360 days and actual days elapsed) equal to the Euro-Rate plus the
Applicable Margin, such interest rate to change automatically from time to time
effective as of the effective date of each change in the Applicable Margin.
4.1.4 Rate Quotations.
The Borrower and the Co-Borrowers may call the Administrative Agent on or
before the date on which a Loan Request is to be delivered to receive an
indication of the rates then in effect, but it is acknowledged that such
projection shall not be binding on the Administrative Agent or the Lenders nor
affect the rate of interest which thereafter is actually in effect when the
election is made.
4.2 Interest Periods.
At any time when the Borrower and the Co-Borrowers shall
select, convert to or renew a Euro-Rate Option, the Borrower and the
Co-Borrowers shall notify the Administrative Agent thereof at least three (3)
Business Days prior to the effective date of such Euro-Rate Option by delivering
a Loan Request. The notice shall specify an interest period (the "Interest
Period") during which such Interest Rate Option shall apply, such Interest
Period to be (i) with respect to the Term Loans B, one Month if Borrower and the
Co-Borrowers select the Euro-Rate Option during the Syndications Period and (ii)
with respect to the Revolving Credit Loans, Term Loans A, and after the
Syndications Period has ended, the Term Loans B, one, two, three or six Months.
Notwithstanding the preceding sentence, the following provisions shall apply to
any selection of, renewal of, or conversion to a Euro-Rate Option:
4.2.1 Ending Date and Business Day.
any Interest Period which would otherwise end on a date which is not a
Business Day
shall be extended to the next succeeding Business Day unless such Business Day
falls in the next calendar month, in which case such Interest Period shall end
on the next preceding Business Day;
4.2.2 Amount of Borrowing Tranche.
each Borrowing Tranche of Euro-Rate Loans shall be in integral multiples of
$1,000,000;
4.2.3 Termination Before Expiration Date.
the Borrower and the Co-Borrowers shall not select, convert to or renew an
Interest Period for any portion of the Revolving Credit Loans that would end
after the Expiration Date, any portion of the Term Loans A that would end after
the Term Loan A Maturity Date, or any portion of the Term Loans B that would end
after the Term Loan B Maturity Date; and
4.2.4 Renewals.
in the case of the renewal of a Euro-Rate Option at the end of an Interest
Period, the first day of the new Interest Period shall be the last day of the
preceding Interest Period, without duplication in payment of interest for such
day.
4.3 Interest After Default.
To the extent permitted by Law, upon the occurrence of an
Event of Default and until such time such Event of Default shall have been cured
or waived:
4.3.1 Letter of Credit Fees, Interest Rate.
the Letter of Credit Fees and the rate of interest for each Loan otherwise
applicable pursuant to Section 2.9.2 or Section 4.1, respectively, shall be
increased by two percent (2%) per annum; and
4.3.2 Other Obligations.
each other Obligation hereunder if not paid when due shall bear interest at
a rate per annum equal to the sum of the rate of interest applicable under the
Base Rate Option plus an additional two percent (2%) per annum from the time
such Obligation becomes due and payable and until it is paid in full.
4.3.3 Acknowledgment.
The Borrower and the Co-Borrowers acknowledge that the increase in rates
referred to in this Section 4.3 reflects, among other things, the fact that such
Loans or other amounts have become a substantially greater risk given their
default status and that the Lenders are entitled to additional compensation for
such risk; and all such interest shall be payable by Borrower and the
Co-Borrowers upon demand by Administrative Agent.
4.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits Not
Available
4.4.1 Unascertainable.
If on any date on which a Euro-Rate would otherwise be determined, the
Administrative Agent shall have determined that:
(i) adequate and reasonable means do not exist for ascertaining such
Euro-Rate, or
(ii) a contingency has occurred which materially and adversely affects the
London interbank eurodollar market relating to the Euro-Rate, the Administrative
Agent shall have the rights specified in Section 4.4.3.
4.4.2 Illegality; Increased Costs; Deposits Not Available.
If at any time any Lender shall have determined that:
(i) the making, maintenance or funding of any Loan to which a Euro-Rate
Option applies has been made impracticable or unlawful by compliance by such
Lender in good faith with any Law or any interpretation or application thereof
by any Official Body or with any request or directive of any such Official Body
(whether or not having the force of Law), or
(ii) such Euro-Rate Option will not adequately and fairly reflect the cost
to such Lender of the establishment or maintenance of any such Loan, or
(iii) after making all reasonable efforts, deposits of the relevant amount
in Dollars for the relevant Interest Period for a Loan to which a Euro-Rate
Option applies are not available to such Lender in the London interbank market,
then the Administrative Agent shall have the rights specified in Section 4.4.3.
4.4.3 Administrative Agent's and Lender's Rights.
In the case of any event specified in Section 4.4.1 above, the
Administrative Agent shall promptly so notify the Lenders, the Borrower and the
Co-Borrowers thereof, and in the case of an event specified in Section 4.4.2
above, such Lender shall promptly so notify the Administrative Agent and endorse
a certificate to such notice as to the specific circumstances of such notice,
and the Administrative Agent shall promptly send copies of such notice and
certificate to the other Lenders, the Borrower and the Co-Borrowers. Upon such
date as shall be specified in such notice (which shall not be earlier than the
date such notice is given), the obligation of (A) the Lenders, in the case of
such notice given by the Administrative Agent, or (B) such Lender, in the case
of such notice given by such Lender, to allow the Borrower and the Co-Borrowers
to select, convert to or renew a Euro-Rate Option shall be suspended until the
Administrative Agent shall have later notified the Borrower and the
Co-Borrowers, or such Lender shall have later notified the Administrative Agent,
of the Administrative Agent's or such Lender's, as the case may be,
determination that the circumstances giving rise to such previous determination
no longer exist. If at any time the Administrative Agent makes a determination
under Section 4.4.1 and the Borrower and the Co-Borrowers have previously
notified the Administrative Agent of its selection of, conversion to or renewal
of a Euro-Rate Option and such Interest Rate Option has not yet gone into
effect, such notification shall be deemed to provide for selection of,
conversion to or renewal of the Base Rate Option otherwise available with
respect to such Loans. If any Lender notifies the Administrative Agent of a
determination under Section 4.4.2, the Borrower and the Co-Borrowers shall,
subject to the Borrower's and the Co-Borrowers' indemnification Obligations
under Section 5.6.2, as to any Loan of the Lender to which a Euro-Rate Option
applies, on the date specified in such notice either convert such Loan to the
Base Rate Option otherwise available with respect to such Loan or prepay such
Loan in accordance with Section 5.4. Absent due notice from the Borrower and the
Co-Borrowers of conversion or prepayment, such Loan shall automatically be
converted to the Base Rate Option otherwise available with respect to such Loan
upon such specified date.
4.5 Selection of Interest Rate Options.
If the Borrower and the Co-Borrowers fail to select a new
Interest Period to apply to any Borrowing Tranche of Loans under the Euro-Rate
Option at the expiration of an existing Interest Period applicable to such
Borrowing Tranche in accordance with the provisions of Section 4.2, the Borrower
and the Co-Borrowers shall be deemed to have converted such Borrowing Tranche to
the Revolving Credit Base Rate Option, the Term Loan A Base Rate Option or the
Term Loan B Base Rate Option, as applicable, commencing upon the last day of the
existing Interest Period.
5. PAYMENTS
5.1 Payments.
All payments and prepayments to be made in respect of
principal, interest, Commitment Fees, Letter of Credit Fees, Administrative
Agent's Fee or other fees or amounts due from the Borrower and the Co-Borrowers
hereunder shall be payable prior to 11:00 a.m., Pittsburgh time, on the date
when due without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by the Borrower and the Co-Borrowers, and
without set-off, counterclaim or other deduction of any nature, and an action
therefor shall immediately accrue. Such payments shall be made to the
Administrative Agent at the Principal Office for the account of National City
with respect to the Swing Loans and for the ratable accounts of the Lenders with
respect to the Revolving Credit Loans and the Term Loans in U.S. Dollars and in
immediately available funds, and the Administrative Agent shall promptly
distribute such amounts to the Lenders in immediately available funds, provided
that in the event payments are received by 11:00 a.m., Pittsburgh time, by the
Administrative Agent with respect to the Loans and such payments are not
distributed to the Lenders on the same day received by the Administrative Agent,
the Administrative Agent shall pay the Lenders the Federal Funds Effective Rate
with respect to the amount of such payments for each day held by the
Administrative Agent and not distributed to the Lenders. The Administrative
Agent's and each Lender's statement of account, ledger or other relevant record
shall, in the absence of manifest error, be conclusive as the statement of the
amount of principal of and interest on the Loans and other amounts owing under
this Agreement and shall be deemed an "account stated."
5.2 Pro Rata Treatment of Lenders.
Each borrowing shall be allocated to each Lender according to
its Ratable Share as such Ratable Share relates specifically to the Revolving
Credit Commitments, the Term Loan A Commitments and the Term Loan B Commitments
of all Lenders having such Commitments, and each selection of, conversion to or
renewal of any Interest Rate Option and each payment or prepayment by the
Borrower and the Co-Borrowers with respect to principal, interest, Commitment
Fees, Letter of Credit Fees, or other fees (except for the fees of the Managing
Agents) or amounts due from the Borrower and the Co-Borrowers hereunder to the
Lenders with respect to the Loans, shall (except as provided in Section 4.4.3 in
the case of an event specified in Section 4.4 [Euro-Rate Unascertainable;
Illegality; Increased Costs; Deposits Not Available], 5.4.3 [Voluntary
Prepayments] or 5.4 [Additional Compensation in Certain Circumstances]) be made
in proportion to the applicable Loans outstanding from each Lender and, if no
such Loans are then outstanding, in proportion to the Revolving Credit Ratable
Share of each Lender. Notwithstanding any of the foregoing, each borrowing or
payment or prepayment by the Borrower and the Co-Borrowers of principal,
interest, fees or other amounts from the Borrower and the Co-Borrowers with
respect to the Swing Loans shall be made by or to National City according to
Section 2.
5.3 Interest Payment Dates.
Interest on Loans to which the Base Rate Option applies shall
be due and payable in arrears on the first Business Day of each October,
January, April and July after the date hereof and on the Expiration Date or upon
acceleration of the Notes. Interest on Loans to which the Euro-Rate Option
applies shall be due and payable on the last day of each Interest Period for
those Loans and, if such Interest Period is longer than three (3) Months, also
on the 90th day of such Interest Period. Interest on the principal amount of
each Loan or other monetary Obligations shall be due and payable on demand after
such principal amount or other monetary Obligations become due and payable
(whether on the stated maturity date, upon acceleration or otherwise).
5.4 Voluntary Repayments.
5.4.1 Right to Repay.
The Borrower and the Co-Borrowers shall have the right at their option from
time to time to pay the Loans in whole or part without premium or penalty
(except as provided in Section 5.4.3 below or in Section 5.6):
(i) at any time with respect to any Loan to which the Base Rate Option
applies,
(ii) on the last day of the applicable Interest Period with respect to
Loans to which a Euro-Rate Option applies,
(iii) on the date specified in a notice by any Lender pursuant to Section
4.4 [Euro-Rate Unascertainable] with respect to any Loan to which a Euro-Rate
Option applies.
Whenever the Borrower and the Co-Borrowers desire to repay any part of the
Loans, they shall provide a repayment notice to the Administrative Agent at
least one (1) Business Day prior to the date of repayment of the Revolving
Credit Loans or the Term Loans or no later than 10:00 a.m. Pittsburgh time, on
the date of prepayment of the Swing Loans, setting forth the following
information:
(x) the date, which shall be a Business Day, on which the proposed
prepayment is to be made;
(y) a statement indicating the application of the
prepayment between the Swing Loans, Revolving Credit Loans and
Term Loans, provided however, that all prepayments which
relate to the Term Loans shall be applied by the
Administrative Agent to the outstanding principal balance of
the Term Loans A and Term Loans B based upon the Ratable Share
of such Term Loan to all the Term Loans, and provided further,
each Lender with principal outstanding under its Term Loan B
shall have the right to refuse such prepayment in accordance
with the term of Section 5.5.1[Excess Cash Flow]; and
(z) the total principal amount of such repayment,
which shall not be less than $100,000 for any Swing Loans or
$1,000,000 for any Revolving Credit Loans or Term Loans.
All repayment notices shall be irrevocable. The principal amount of the
Loans for which a repayment notice is given, together with interest on such
principal amount except with respect to Loans to which the Base Rate Option
applies, shall be due and payable on the date specified in such repayment notice
as the date on which the proposed repayment is to be made. All Term Loan
prepayments permitted pursuant to this Section 5.4.1 shall be applied to the
unpaid installments of principal of the Term Loans in the inverse order of
scheduled maturities. Except as provided in Section 4.4.3, if the Borrower and
the Co-Borrowers repay a Loan but fails to specify the applicable Borrowing
Tranche which the Borrower and the Co-Borrowers are repaying, the repayment
shall be applied (i) first to Revolving Credit Loans and then to Term Loans, as
provided in Section 5.5.1; and (ii) after giving effect to the allocations in
clause (i) above and in the preceding sentence, first to Loans to which the Base
Rate Option applies, then to Loans to which the Euro-Rate the Option applies.
Any repayment hereunder shall be subject to the Borrower's and the Co-Borrowers'
Obligation to indemnify the Lenders under Section 5.6.2.
5.4.2 Commitment Reductions.
The Borrower and the Co-Borrowers may at any time and from time to time
terminate in whole or reduce in part the Revolving Credit Commitments by giving
the Administrative Agent and the Lenders not less than seven (7) days prior
written notice to such effect. Notice of termination or reduction, having once
been given by the Borrower and the Co-Borrowers, shall be irrevocable on the
part of the Borrower and the Co-Borrowers. Each reduction of the Commitments
shall be in the aggregate amount of at least $5,000,000 and in multiples of
$500,000. After each such reduction of the Revolving Credit Commitments, the fee
payable pursuant to Section 2.3 shall be calculated upon the Revolving Credit
Commitments as so reduced. Upon any such reduction, the Revolving Credit
Commitments of the Lenders shall be reduced proportionately based upon each
Lender's Revolving Credit Ratable Share.
5.4.3 Replacement of a Lender.
In the event any Lender (i) gives notice under Section 4.4 or Section
5.6.1, (ii) does not fund Loans because the making of such Loans would
contravene any Law applicable to such Lender, (iii) does not approve any action
as to which consent of the Required Lenders is requested by the Borrower and the
Co-Borrowers and obtained hereunder, or (iv) becomes subject to the control of
an Official Body (other than normal and customary supervision), then the
Borrower and the Co-Borrowers shall have the right at their option, with the
consent of the Administrative Agent, which shall not be unreasonably withheld,
to prepay the Loans of such Lender in whole, together with all interest accrued
thereon, and terminate such Lender's Commitment within ninety (90) days after
(w) receipt of such Lender's notice under Section 4.4 or 5.6.1, (x) the date
such Lender has failed to fund Loans because the making of such Loans would
contravene Law applicable to such Lender, (y) the date of obtaining the consent
which such Lender has not approved, or (z) the date such Lender became subject
to the control of an Official Body, as applicable; provided that the Borrower
and the Co-Borrowers shall also pay to such Lender at the time of such
prepayment any amounts required under Section 5.6 and any accrued interest due
on such amount and any related fees; provided, however, that the Commitment and
any Term Loan of such Lender shall be provided by one or more of the remaining
Lenders or a replacement lender acceptable to the Administrative Agent;
provided, further, the remaining Lenders shall have no obligation hereunder to
increase their Commitments. Notwithstanding the foregoing, the Administrative
Agent may only be replaced subject to the requirements of Section 10.14 and
provided that all Letters of Credit have expired or been terminated or replaced.
5.4.4 Change of Lending Office.
Each Lender agrees that upon the occurrence of any event giving rise to
increased costs or other special payments under Section 4.4.2 [Illegality, etc.]
or 5.6.1 [Increased Costs, etc.] with respect to such Lender, it will if
requested by the Borrower and the Co-Borrowers, use reasonable efforts (subject
to overall policy considerations of such Lender) to designate another lending
office for any Loans or Letters of Credit affected by such event, provided that
such designation is made on such terms that such Lender and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the operation of such
Section. Nothing is this Section 5.4.4 shall affect or postpone any of the
Obligations of the Borrower, the Co-Borrowers or any other Loan Party or the
rights of the Administrative Agent or any Lender provided in this Agreement.
5.5 Mandatory Prepayments.
5.5.1 Excess Cash Flow.
Within five (5) Business Days of the delivery of the
Borrower's annual financial statements pursuant to Section 8.3.3 [Annual
Financial Statements], but in any event no later than January 5 of each year
during the term hereof (each, a "Mandatory Prepayment Date"), and in the event
that the Leverage Ratio for the fiscal year in question is greater than 2.5 to
1.0, the Borrower and the Co-Borrowers shall make a mandatory prepayment of
principal on the Term Loans equal to 50% of Excess Cash Flow for the immediately
preceding fiscal year, subject to a credit for voluntary prepayments made
pursuant to Section 5.4 [Voluntary Prepayments] during the immediately preceding
fiscal year, together with accrued interest on such principal amount (each, a
"Mandatory Prepayment of Excess Cash Flow"). Each Mandatory Prepayment of Excess
Cash Flow shall be applied by the Administrative Agent to the outstanding
principal balance of the Term Loans A and Term Loans B based upon the Ratable
Share of such Term Loan to all the Term Loans, in each case by application to
the unpaid installments of principal in the inverse order of scheduled
maturities. Upon its receipt of the annual financial statements of the Borrower
and receipt of payment by the Borrower and the Co-Borrowers of the Mandatory
Prepayment of Excess Cash Flow, the Administrative Agent shall give the Lenders
with outstanding principal on the Term Loans B notice of the amount of the
Mandatory Prepayment of Excess Cash Flow. In the event that any one or more
Lender with Term Loans B outstanding elects not to receive its pro rata share of
such prepayment, such Lender shall provide written notice of the amount it
elects not to receive in prepayment of its Term Loan B, and such amount shall be
reallocated to payment of the Term Loans A based upon the Ratable Share of the
Lenders with Term Loans A, to be applied by the Lenders with Term Loans A in the
inverse order of scheduled maturities. To the extent that a Mandatory Prepayment
of Excess Cash Flow exceeds the outstanding principal amount of the Term Loans,
such prepayment shall be limited to the amount necessary to prepay the Term
Loans in full.
5.5.2 Sale of Assets; Issuance of Stock .
Within five (5) Business Days of any sale of assets authorized by Section
8.2.7((v)) which involves the sale of assets having a market value or book value
in an amount equal to or greater than $10,000,000 in the aggregate in any fiscal
year, the Borrower and the Co-Borrowers shall make a mandatory prepayment of
principal equal to the after-tax proceeds of such sale (as estimated in good
faith by the Borrower and the Co-Borrowers), together with accrued interest on
such principal amount. Simultaneously with any issuance of capital stock by the
Borrower authorized by Section 8.2.13(iv), the Borrower shall make a mandatory
prepayment of principal equal to the net proceeds of such issuance. In the event
that the Required Lenders permit the incurrence of Indebtedness other than as
permitted under Section 8.2.1, the Borrower shall make a mandatory prepayment of
principal equal to the net proceeds of such Indebtedness. In the event that the
Administrative Agent does not disburse insurance proceeds in excess of $250,000
to the Loan Parties pursuant to Section 8.1.3, such proceeds shall be applied as
a mandatory prepayment of principal equal to the amount of such insurance
proceeds. All prepayments pursuant to this Section 5.5.2 shall be applied in
accordance with the provisions of Section 5.5.1, and upon payment in full of the
Term Loans, then as a permanent reduction to the Revolving Credit Commitments.
Notwithstanding the foregoing and in the case of asset sales authorized by
Section 8.2.7(v), to the extent that the after-tax proceeds of such sale are
used by the applicable Loan Party prior to the due date of the mandatory
prepayment to acquire substitute assets in the ordinary course of business of
such Loan Party and such substitute assets are subject to a Prior Security
Interest in favor of the Administrative Agent for the benefit of the Lenders,
then the mandatory prepayment shall be correspondingly reduced or terminated, as
the case may be.
5.5.3 Application Among Interest Rate Options.
All prepayments required pursuant to this Section 5.5 shall first be
applied among the Interest Rate Options to the principal amount of the Loans
subject to the Base Rate Option, then to Loans subject to a Euro-Rate Option. In
accordance with Section 5.6.2, the Borrower and the Co-Borrowers shall indemnify
the Lenders for any loss or expense, including loss of margin, incurred with
respect to any such prepayments applied against Loans subject to a Euro-Rate
Option on any day other than the last day of the applicable Interest Period.
5.6 Additional Compensation in Certain Circumstances.
5.6.1....Increased Costs or Reduced Return Resulting From Taxes, Reserves,
Capital Adequacy Requirements, Expenses, Etc.
If any Law, guideline or interpretation or any change in any Law, guideline
or interpretation or application thereof by any Official Body charged with the
interpretation or administration thereof or compliance with any request or
directive (whether or not having the force of Law) of any central bank or other
Official Body:
(i) subjects any Lender to any tax or changes the basis of taxation with
respect to this Agreement, the Notes, the Loans or payments by the Borrower and
the Co-Borrowers of principal, interest, Commitment Fees, or other amounts due
from the Borrower and the Co-Borrowers hereunder or under the Notes (except for
taxes on the overall net income of such Lender),
(ii) imposes, modifies or deems applicable any reserve, special deposit or
similar requirement against credits or commitments to extend credit extended by,
or assets (funded or contingent) of, deposits with or for the account of, or
other acquisitions of funds by, any Lender, or
(iii) imposes, modifies or deems applicable any capital adequacy or similar
requirement (A) against assets (funded or contingent) of, or letters of credit,
other credits or commitments to extend credit extended by, any Lender, or (B)
otherwise applicable to the obligations of any Lender under this Agreement,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Lender with respect to this Agreement, the Notes or the making, maintenance or
funding of any part of the Loans (or, in the case of any capital adequacy or
similar requirement, to have the effect of reducing the rate of return on any
Lender's capital, taking into consideration such Lender's customary policies
with respect to capital adequacy) by an amount which such Lender in its sole
discretion deems to be material, such Lender shall from time to time notify the
Borrower, the Co-Borrowers and the Administrative Agent of the amount determined
in good faith (using any averaging and attribution methods employed in good
faith) by such Lender to be necessary to compensate such Lender for such
increase in cost, reduction of income, additional expense or reduced rate of
return. Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrower and the
Co-Borrowers to such Lender ten (10) Business Days after such notice is given.
5.6.2 Indemnity.
In addition to the compensation required by Section 5.6.1, the Borrower and
the Co-Borrowers shall indemnify each Lender against all liabilities, losses or
expenses (including loss of margin, any loss or expense incurred in liquidating
or employing deposits from third parties and any loss or expense incurred in
connection with funds acquired by a Lender to fund or maintain Loans subject to
a Euro-Rate Option) which such Lender sustains or incurs as a consequence of any
(i) payment, prepayment, conversion or renewal of any Loan to which a
Euro-Rate Option applies on a day other than the last day of the corresponding
Interest Period (whether or not such payment or prepayment is mandatory,
voluntary or automatic and whether or not such payment or prepayment is then
due),
(ii) attempt by the Borrower or the Co-Borrowers to revoke (expressly, by
later inconsistent notices or otherwise) in whole or part any Loan Requests
under Section 2.5 or Section 4.2 or notice relating to prepayments under Section
5.4, or
(iii) default by the Borrower or the Co-Borrowers in the performance or
observance of any covenant or condition contained in this Agreement or any other
Loan Document, including any failure of the Borrower and the Co-Borrowers to pay
when due (by acceleration or otherwise) any principal, interest, Commitment Fee
or any other amount due hereunder.
If any Lender sustains or incurs any such loss or expense, it
shall from time to time notify the Borrower and the Co-Borrowers of the amount
determined in good faith by such Lender (which determination may include such
assumptions, allocations of costs and expenses and averaging or attribution
methods as such Lender shall deem reasonable) to be necessary to indemnify such
Lender for such loss or expense. Such notice shall set forth in reasonable
detail the basis for such determination. Such amount shall be due and payable by
the Borrower and the Co-Borrowers to such Lender ten (10) Business Days after
such notice is given.
6. REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties.
The Loan Parties, jointly and severally, represent and warrant
to the Administrative Agent and each of the Lenders as follows:
6.1.1 Organization and Qualification.
Each Loan Party and each Subsidiary of each Loan Party is a corporation,
partnership or limited liability company duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each Loan
Party and each Subsidiary of each Loan Party has the lawful power to own or
lease its properties and to engage in the business it presently conducts or
proposes to conduct. Each Loan Party and each Subsidiary of each Loan Party is
duly licensed or qualified and in good standing in each jurisdiction listed on
Schedule 6.1.1 and, except as indicated on Schedule 6.1.1, in all other
jurisdictions where the property owned or leased by it or the nature of the
business transacted by it or both makes such licensing or qualification
necessary.
6.1.2 Capitalization and Ownership.
The authorized capital stock of the Borrower consists of 50,000,000 shares
of common stock and 1,000,000 shares of preferred stock, of which 21,698,597
shares of common stock were issued and outstanding as of September 15, 1999, and
no shares of Series A preferred stock (collectively referred to herein as the
"Shares") are issued and outstanding.
6.1.3 Subsidiaries.
Schedule 6.1.3 states the name of each of the Borrower's Subsidiaries, its
jurisdiction of incorporation, its authorized capital stock, the issued and
outstanding shares (referred to herein as the "Subsidiary Shares") and the
owners thereof if it is a corporation, its outstanding partnership interests
(the "Partnership Interests") if it is a partnership and its outstanding limited
liability company interests, interests assigned to managers thereof and the
voting rights associated therewith (the "LLC Interests") if it is a limited
liability company. The Borrower and each Subsidiary of the Borrower has good and
marketable title to all of the Subsidiary Shares, Partnership Interests and LLC
Interests it purports to own, free and clear in each case of any Lien. All
Subsidiary Shares, Partnership Interests and LLC Interests have been validly
issued, and all Subsidiary Shares are fully paid and nonassessable. All capital
contributions and other consideration required to be made or paid in connection
with the issuance of the Partnership Interests and LLC Interests have been made
or paid, as the case may be. There are no options, warrants or other rights
outstanding to purchase any such Subsidiary Shares, Partnership Interests or LLC
Interests except as indicated on Schedule 6.1.3.
6.1.4 Power and Authority.
Each Loan Party has full power to enter into, execute, deliver and carry
out this Agreement and the other Loan Documents to which it is a party, to incur
the Indebtedness contemplated by the Loan Documents and to perform its
Obligations under the Loan Documents to which it is a party, and all such
actions have been duly authorized by all necessary proceedings on its part.
6.1.5 Validity and Binding Effect.
This Agreement has been duly and validly executed and delivered by each
Loan Party, and each other Loan Document which any Loan Party is required to
execute and deliver on or after the date hereof will have been duly executed and
delivered by such Loan Party on the required date of delivery of such Loan
Document. This Agreement and each other Loan Document constitutes, or will
constitute, legal, valid and binding obligations of each Loan Party which is or
will be a party thereto on and after its date of delivery thereof, enforceable
against such Loan Party in accordance with its terms, except to the extent that
enforceability of any of such Loan Document may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or limiting the right of specific
performance.
6.1.6 No Conflict.
Neither the execution and delivery of this Agreement or the other Loan
Documents by
any Loan Party nor the consummation of the transactions herein or therein
contemplated or compliance with the terms and provisions hereof or thereof by
any of them will conflict with, constitute a default under or result in any
breach of (i) the terms and conditions of the certificate of incorporation,
bylaws, certificate of limited partnership, partnership agreement, certificate
of formation, limited liability company agreement or other organizational
documents of any Loan Party or (ii) any Law or any material agreement or
instrument or order, writ, judgment, injunction or decree to which any Loan
Party or any of its Subsidiaries is a party or by which it or any of its
Subsidiaries is bound or to which it is subject, or result in the creation or
enforcement of any Lien, charge or encumbrance whatsoever upon any property (now
or hereafter acquired) of any Loan Party or any of its Subsidiaries (other than
Liens granted under the Loan Documents).
6.1.7 Litigation.
Except as set forth in Schedule 6.1.7, there are no actions, suits,
proceedings or investigations pending or, to the knowledge of any Loan Party,
threatened against such Loan Party or any Subsidiary of such Loan Party at law
or equity before any Official Body. None of such actions, suits, proceedings or
investigations, which if determined adversely to the Loan Parties, would
individually or in the aggregate result in any Material Adverse Change. Except
as set forth on Schedule 6.1.7 none of the Loan Parties or any Subsidiaries of
any Loan Party is in violation of any order, writ, injunction or any decree of
any Official Body. No such violations may result in any Material Adverse Change.
6.1.8 Title to Properties.
The real property owned or leased by each Loan Party
and each Subsidiary of each Loan
Party is described on Schedule 6.1.8. Each Loan Party and each Subsidiary of
each Loan Party has good and marketable title to or valid leasehold interest in
all properties, assets and other rights which it purports to own or lease or
which are reflected as owned or leased on its books and records, free and clear
of all Liens and encumbrances except Permitted Liens, and subject to the terms
and conditions of the applicable leases. All leases of property are in full
force and effect without the necessity for any consent which has not previously
been obtained upon consummation of the transactions contemplated hereby.
6.1.9 Financial Statements.
(i) Historical Statements. The Borrower has delivered to the Administrative
Agent copies of its audited consolidated year-end financial statements for and
as of the end of the four fiscal years ended September 30, 1998 (the "Annual
Statements"). In addition, the Borrower has delivered to the Administrative
Agent copies of its unaudited consolidated interim financial statements for the
fiscal year to date and as of the end of the fiscal quarter ended June 30, 1999
(the "Interim Statements"), (the Annual and Interim Statements being
collectively referred to as the "Historical Statements"). The Historical
Statements were compiled from the books and records maintained by the Borrower's
management, are correct and complete and fairly represent the consolidated
financial condition of the Borrower and its Subsidiaries as of their dates and
the results of operations for the fiscal periods then ended and have been
prepared in accordance with GAAP consistently applied, subject (in the case of
the Interim Statements) to normal year-end audit adjustments.
(ii) Financial Projections. The Borrower has delivered to the
Administrative Agent financial projections of the Borrower and its Subsidiaries
for the five fiscal years ended September 30, 1999, 2000, 2001, 2002 and 2003
derived from various assumptions of the Borrower's management (the "Financial
Projections"). The Financial Projections represent a reasonable range of
possible results in light of the history of the business, present and
foreseeable conditions and the intentions of the Borrower's management. The
Financial Projections accurately reflect the liabilities of the Borrower and its
Subsidiaries upon consummation of the transactions contemplated hereby as of the
Closing Date.
(iii) Accuracy of Financial Statements. Neither the Borrower nor any
Subsidiary of the Borrower has any liabilities, contingent or otherwise, or
forward or long-term commitments that are not disclosed in the Historical
Statements or in the notes thereto, and except as disclosed therein there are no
unrealized or anticipated losses from any commitments of the Borrower or any
Subsidiary of the Borrower which may cause a Material Adverse Change. Since
September 30, 1998, no Material Adverse Change has occurred.
6.1.10 Use of Proceeds; Margin Stock.
The Loan Parties intend to use the proceeds of the Loans in accordance with
Sections 2.8, 3.4 and 8.1.10. None of the Loan Parties or any Subsidiaries of
any Loan Party engages or intends to engage principally, or as one of its
important activities, in the business of extending credit for the purpose,
immediately, incidentally or ultimately, of purchasing or carrying margin stock
(within the meaning of Regulation U). No part of the proceeds of any Loan has
been or will be used, immediately, incidentally or ultimately, to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock or to refund Indebtedness originally
incurred for such purpose, or for any purpose which entails a violation of or
which is inconsistent with the provisions of the regulations of the Board of
Governors of the Federal Reserve System. None of the Loan Parties or any
Subsidiary of any Loan Party holds or intends to hold margin stock in such
amounts that more than 25% of the reasonable value of the assets of any Loan
Party or Subsidiary of any Loan Party are or will be represented by margin
stock.
6.1.11 Full Disclosure.
Neither this Agreement nor any other Loan Document, nor any certificate,
statement, agreement or other documents furnished to the Administrative Agent or
any Lender in connection herewith or therewith, contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to any Loan Party
which materially adversely affects the business, property, assets, financial
condition, results of operations or prospects of any Loan Party or Subsidiary of
any Loan Party which has not been set forth in this Agreement or in the
certificates, statements, agreements or other documents furnished in writing to
the Administrative Agent and the Lenders prior to or at the date hereof in
connection with the transactions contemplated hereby.
6.1.12 Taxes.
All federal, state, local and other tax returns required to have been filed
with
respect to each Loan Party and each Subsidiary of each Loan Party have been
filed, and payment or adequate provision has been made for the payment of all
taxes, fees, assessments and other governmental charges which have or may become
due pursuant to said returns or to assessments received, except to the extent
that such taxes, fees, assessments and other charges are being contested in good
faith by appropriate proceedings diligently conducted and for which such
reserves or other appropriate provisions, if any, as shall be required by GAAP
shall have been made. There are no agreements or waivers extending the statutory
period of limitations applicable to any federal income tax return of any Loan
Party or Subsidiary of any Loan Party for any period.
6.1.13 Consents and Approvals.
Except for the filing of financing statements and the Mortgage in the state
and county filing offices, no consent, approval, exemption, order or
authorization of, or a registration or filing with, any Official Body or any
other Person is required by any Law or any agreement in connection with the
execution, delivery and carrying out of this Agreement and the other Loan
Documents by any Loan Party, except as listed on Schedule 6.1.13, all of which
shall have been obtained or made on or prior to the Closing Date except as
otherwise indicated on Schedule 6.1.13.
6.1.14 No Event of Default; Compliance with Instruments.
No event has occurred and is continuing and no condition exists or will
exist after
giving effect to the borrowings or other extensions of credit to be made on the
Closing Date under or pursuant to the Loan Documents which constitutes an Event
of Default or Potential Default. None of the Loan Parties or any Subsidiaries of
any Loan Party is in violation of (i) any term of its certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, limited liability company agreement or
other organizational documents or (ii) any material agreement or instrument to
which it is a party or by which it or any of its properties may be subject or
bound where such violation would constitute a Material Adverse Change.
6.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.
Each Loan Party and each Subsidiary of each Loan Party owns or possesses
all the material patents, trademarks, service marks, trade names, copyrights,
licenses, registrations, franchises, permits and rights necessary to own and
operate its properties and to carry on its business as presently conducted and
planned to be conducted by such Loan Party or Subsidiary, without known
possible, alleged or actual conflict with the rights of others. All material
patents, trademarks, service marks, trade names, copyrights, licenses,
registrations, franchises and permits of each Loan Party and each Subsidiary of
each Loan Party are listed and described on Schedule 6.1.15.
6.1.16 Security Interests.
The Liens and security interests granted to the Administrative Agent for
the benefit of the Lenders pursuant to the Collateral Assignments, the Patent,
Trademark and Copyright Security Agreement, the Pledge Agreement and the
Security Agreement in the Collateral (other than the Real Property) constitute
and will continue to constitute Prior Security Interests under the Uniform
Commercial Code as in effect in each applicable jurisdiction (the "Uniform
Commercial Code") or other applicable Law entitled to all the rights, benefits
and priorities provided by the Uniform Commercial Code or such Law. Upon the
filing of financing statements relating to said security interests in each
office and in each jurisdiction where required in order to perfect the security
interests described above, taking possession of any stock certificates or other
certificates evidencing the Pledge Collateral and recordation of the Patent,
Trademark and Copyright Security Agreement in the United States Patent and
Trademark Office and United States Copyright Office, as applicable, all such
action as is necessary or advisable to establish such rights of the
Administrative Agent will have been taken, and there will be upon execution and
delivery of the Collateral Assignments, the Patent, Trademark and Copyright
Security Agreement, the Pledge Agreement and the Security Agreement, such
filings and such taking of possession, no necessity for any further action in
order to preserve, protect and continue such rights, except the filing of
continuation statements with respect to such financing statements within six
months prior to each five-year anniversary of the filing of such financing
statements. All filing fees and other expenses in connection with each such
action have been or will be paid by the Borrower and the Co-Borrowers.
6.1.17 Mortgage Liens.
The Liens granted to the Administrative Agent for the benefit of the
Lenders pursuant
to the Mortgage constitute a valid first priority Lien under applicable law
subject only to Permitted Liens. All such action as will be necessary or
advisable to establish such Lien of the Administrative Agent and its priority as
described in the preceding sentence will be taken at or prior to the time
required for such purpose, and there will be as of the date of execution and
delivery of the Mortgage no necessity for any further action in order to
protect, preserve and continue such Lien and such priority.
6.1.18 Status of the Pledge Collateral.
All the shares of capital stock, Partnership Interests or LLC Interests
included in the Pledge Collateral to be pledged pursuant to the Pledge Agreement
or the Collateral Assignment are or will be upon issuance validly issued and
nonassessable and owned beneficially and of record by the pledgor free and clear
of any Lien or restriction on transfer, except as otherwise provided by the
Pledge Agreement or the Collateral Assignment and except as the right of the
Lenders to dispose of the Shares, Partnership Interests or LLC Interests may be
limited by the Securities Act of 1933, as amended, and the regulations
promulgated by the Securities and Exchange Commission thereunder and by
applicable state securities laws. There are no shareholder, partnership, limited
liability company or other agreements or understandings with respect to the
shares of capital stock, Partnership Interests or LLC Interests included in the
Pledge Collateral except for the partnership agreements and limited liability
company agreements described on Schedule 6.1.18. The Loan Parties have delivered
true and correct copies of such partnership agreements and limited liability
company agreements to the Administrative Agent.
6.1.19 Insurance.
Schedule 6.1.19 lists all insurance policies and other bonds to which any
Loan Party or Subsidiary of any Loan Party is a party, all of which are valid
and in full force and effect. No notice has been given or claim made and no
grounds exist to cancel or avoid any of such policies or bonds or to reduce the
coverage provided thereby. Such policies and bonds provide adequate coverage
from reputable and financially sound insurers in amounts sufficient to insure
the assets and risks of each Loan Party and each Subsidiary of each Loan Party
in accordance with prudent business practice in the industry of the Loan Parties
and their Subsidiaries.
6.1.20 Compliance with Laws.
The Loan Parties and their Subsidiaries are in compliance in all material
respects with all applicable Laws (other than Environmental Laws which are
specifically addressed in Section 6.1.25) in all jurisdictions in which any Loan
Party or Subsidiary of any Loan Party is presently or will be doing business
except where the failure to do so would not constitute a Material Adverse
Change.
6.1.21 Material Contracts; Burdensome Restrictions.
Schedule 6.1.21 lists all material contracts relating to the business
operations of each Loan Party and each Subsidiary of any Loan Party, including
all employee benefit plans and Labor Contracts. All such material contracts are
valid, binding and enforceable upon such Loan Party or Subsidiary and each of
the other parties thereto in accordance with their respective terms, and there
is no default thereunder, to the Loan Parties' knowledge, with respect to
parties other than such Loan Party or Subsidiary. None of the Loan Parties or
their Subsidiaries is bound by any contractual obligation, or subject to any
restriction in any organization document, or any requirement of Law which could
result in a Material Adverse Change.
6.1.22 Investment Companies; Regulated Entities.
None of the Loan Parties or any Subsidiaries of any Loan Party is an
"investment
company" registered or required to be registered under the Investment Company
Act of 1940 or under the "control" of an "investment company" as such terms are
defined in the Investment Company Act of 1940 and shall not become such an
"investment company" or under such "control." None of the Loan Parties or any
Subsidiaries of any Loan Party is subject to any other Federal state statute or
regulation limiting its ability to incur Indebtedness for borrowed money.
6.1.23 Plans and Benefit Arrangements.
Except as set forth on Schedule 6.1.23:
(i) The Borrower and each other member of the ERISA Group are in compliance in
all material respects with any applicable provisions of ERISA with respect to
all Benefit Arrangements, Plans and Multiemployer Plans. There has been no
Prohibited Transaction with respect to any Benefit Arrangement or any Plan or,
to the best knowledge of the Borrower, with respect to any Multiemployer Plan or
Multiple Employer Plan, which could result in any material liability of the
Borrower or any other member of the ERISA Group. The Borrower and all other
members of the ERISA Group have made when due any and all payments required to
be made under any agreement relating to a Multiemployer Plan or a Multiple
Employer Plan or any Law pertaining thereto. With respect to each Plan and
Multiemployer Plan, the Borrower and each other member of the ERISA Group (i)
have fulfilled in all material respects their obligations under the minimum
funding standards of ERISA, (ii) have not incurred any liability to the PBGC,
and (iii) have not had asserted against them any penalty for failure to fulfill
the minimum funding requirements of ERISA.
(ii) To the best of the Borrower's and each Co-Borrower's knowledge, each
Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder
when due.
(iii) Neither the Borrower nor any other member of the ERISA Group has
instituted or intends to institute proceedings to terminate any Plan other than
a Plan of an acquired entity that was not intended to be continued after the
acquisition date or a reasonable time thereafter.
(iv) No event requiring notice to the PBGC under Section 302(f)(4)(A) of
ERISA has occurred or is reasonably expected to occur with respect to any Plan,
and no amendment with respect to which security is required under Section 307 of
ERISA has been made or is reasonably expected to be made to any Plan.
(v) The aggregate actuarial present value of all benefit liabilities
(whether or not vested) under each Plan, determined on a plan termination basis,
as disclosed in, and as of the date of, the most recent actuarial report for
such Plan, does not exceed the aggregate fair market value of the assets of such
Plan.
(vi) Neither the Borrower nor any other member of the ERISA Group has
incurred or reasonably expects to incur any material withdrawal liability under
ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither the Borrower
nor any other member of the ERISA Group has been notified by any Multiemployer
Plan or Multiple Employer Plan that such Multiemployer Plan or Multiple Employer
Plan has been terminated within the meaning of Title IV of ERISA and, to the
best knowledge of the Borrower, no Multiemployer Plan or Multiple Employer Plan
is reasonably expected to be reorganized or terminated, within the meaning of
Title IV of ERISA.
(vii) To the extent that any Benefit Arrangement is insured, the Borrower
and all other members of the ERISA Group have paid when due all premiums
required to be paid for all periods through the Closing Date. To the extent that
any Benefit Arrangement is funded other than with insurance, the Borrower and
all other members of the ERISA Group have made when due all contributions
required to be paid for all periods through the Closing Date.
(viii) All Plans, Benefit Arrangements and Multiemployer Plans have been
administered in accordance with their terms and applicable Law in all material
respects.
6.1.24 Employment Matters.
Each of the Loan Parties and each of their Subsidiaries is in compliance
with the Labor Contracts and all applicable federal, state and local labor and
employment Laws including those related to equal employment opportunity and
affirmative action, labor relations, minimum wage, overtime, child labor,
medical insurance continuation, worker adjustment and relocation notices,
immigration controls and worker and unemployment compensation, where the failure
to comply would constitute a Material Adverse Change. There are no outstanding
grievances, arbitration awards or appeals therefrom arising out of the Labor
Contracts or current or threatened strikes, picketing, handbilling or other work
stoppages or slowdowns at facilities of any of the Loan Parties or any of their
Subsidiaries which in any case would constitute a Material Adverse Change. The
Borrower has delivered to the Administrative Agent true and correct copies of
each of the Labor Contracts.
6.1.25 Environmental Matters.
Except as disclosed on Schedule 6.1.25:
(i) None of the Loan Parties or any Subsidiaries of any Loan Party has
received any Environmental Complaint from any Official Body or private Person
alleging that such Loan Party or Subsidiary or any prior or subsequent owner of
any of the Property is a potentially responsible party under the Comprehensive
Environmental Response, Cleanup and Liability Act, 42 U.S.C. ss. 9601, et seq.,
and none of the Loan Parties has any reason to believe that such an
Environmental Complaint might be received. There are no pending or, to any Loan
Party's knowledge, threatened Environmental Complaints relating to any Loan
Party or Subsidiary of any Loan Party or, to any Loan Party's knowledge, any
prior or subsequent owner of any of the Property pertaining to, or arising out
of, any Environmental Conditions.
(ii) There are no circumstances at, on or under any of the Property owned
by any Loan Party that constitute a breach of or non-compliance with any of the
Environmental Laws where the failure to comply would constitute or result in a
Material Adverse Change, and there are no past or present Environmental
Conditions at, on or under any of the Property owned by a Loan Party or, to any
Loan Party's knowledge, at, on or under adjacent property, that prevent
compliance with the Environmental Laws at any of the owned Property. There are
no circumstances at, on or under any of the Property leased by any Loan Party
that constitute a breach of or non-compliance with any of the Environmental Laws
where the failure to comply would constitute a Material Adverse Change. There
are no past or present Environmental Conditions at, on or under any of the
Property leased by a Loan Party or, to any Loan Party's knowledge, at, on or
under adjacent property, that prevent compliance with the Environmental Laws at
any of the leased Property, where the failure to comply would constitute a
Material Adverse Change.
(iii) Neither any of the Property owned by any Loan Party nor any
structures, improvements, equipment, fixtures, activities or facilities thereon
or thereunder contain or use Regulated Substances except in compliance with
Environmental Laws, except where the failure to comply would not constitute or
result in a Material Adverse Change. There are no processes, facilities,
operations, equipment or other activities at, on or under any of the owned
Property, or, to any Loan Party's knowledge, at, on or under adjacent property,
that currently result in the release or threatened release of Regulated
Substances onto any of the owned Property, except to the extent that such
releases or threatened releases are not a breach of or otherwise not a violation
of the Environmental Laws. Neither any of the Property leased by any Loan Party
nor any structures, improvements, equipment, fixtures, activities or facilities
thereon or thereunder contain or use Regulated Substances except in compliance
with Environmental Laws where the failure to comply would constitute a Material
Adverse Change. There are no processes, facilities, operations, equipment or
other activities at, on or under any of the leased Property, or, to any Loan
Party's knowledge, at, on or under adjacent property, that currently result in
the release or threatened release of Regulated Substances onto any of the leased
Property, except to the extent that such releases or threatened releases are not
a breach of or otherwise not a violation of the Environmental Laws where the
failure to comply would constitute a Material Adverse Change.
(iv) There are no aboveground storage tanks, underground storage tanks or
underground piping associated with such tanks, used for the management of
Regulated Substances at, on or under any of the Property owned by any Loan Party
that (a) do not have, to the extent required by Environmental Laws, a full
operational secondary containment system in place, and (b) are not otherwise in
compliance with all Environmental Laws. There are no abandoned underground
storage tanks or underground piping associated with such tanks, previously used
for the management of Regulated Substances at, on or under any of the owned
Property that have not either been closed in place in accordance with
Environmental Laws or removed in compliance with all applicable Environmental
Laws and no contamination associated with the use of such tanks exists on any of
the owned Property that is not in compliance with Environmental Laws. There are
no aboveground storage tanks, underground storage tanks or underground piping
associated with such tanks, used for the management of Regulated Substances at,
on or under any of the Property leased by any Loan Party that (a) do not have,
to the extent required by Environmental Laws, a full operational secondary
containment system in place, and (b) are not otherwise in compliance with all
Environmental Laws, where in the case of (a) or (b), the failure to comply with
such Environmental Laws would constitute a Material Adverse Change. There are no
abandoned underground storage tanks or underground piping associated with such
tanks, previously used for the management of Regulated Substances at, on or
under any of the leased Property that have not either been closed in place in
accordance with Environmental Laws or removed in compliance with all applicable
Environmental Laws and no contamination associated with the use of such tanks
exists on any of the leased Property that is not in compliance with
Environmental Laws, where the failure to comply would constitute a Material
Adverse Change.
(v) Each Loan Party and each Subsidiary of any Loan Party has all material
permits, licenses, authorizations, plans and approvals necessary under the
Environmental Laws for the conduct of the business of such Loan Party or
Subsidiary as presently conducted, except where the failure to do so would not
constitute or result in a Material Adverse Change. Each Loan Party and each
Subsidiary of any Loan Party has submitted all material notices, reports and
other filings required by the Environmental Laws to be submitted to an Official
Body which pertain to past and current operations on any of the Property.
(vi) All past and present on-site generation, storage, processing,
treatment, recycling, reclamation, disposal or other use or management of
Regulated Substances at, on, or under any of the Property owned by any Loan
Party and all off-site transportation, storage, processing, treatment,
recycling, reclamation, disposal or other use or management of Regulated
Substances have been done in accordance with the Environmental Laws, except
where the failure to do so would not constitute or result in a Material Adverse
Change. All past and present on-site generation, storage, processing, treatment,
recycling, reclamation, disposal or other use or management of Regulated
Substances at, on, or under any of the Property leased by any Loan Party and all
off-site transportation, storage, processing, treatment, recycling, reclamation,
disposal or other use or management of Regulated Substances have been done in
accordance with the Environmental Laws, except where to failure to comply with
such Environmental Laws would not constitute a Material Adverse Change.
6.1.26 Senior Debt Status.
The Obligations of each Loan Party under this Agreement, the Notes, the
Guaranty Agreement and each of the other Loan Documents to which it is a party
(i) do rank and will rank at least pari passu in priority of payment with all
other Indebtedness of such Loan Party except Indebtedness of such Loan Party to
the extent secured by Permitted Liens, and (ii) constitute "Senior Debt" as such
term is defined in the Subordinated Loan Documents. There is no Lien upon or
with respect to any of the properties or income of any Loan Party or Subsidiary
of any Loan Party which secures indebtedness or other obligations of any Person
except for Permitted Liens.
6.1.27 Year 2000.
The Loan Parties and their Subsidiaries have reviewed the areas within
their business
and operations which could be adversely affected by, and have developed or are
developing a program to address on a timely basis, the risk that certain
computer applications used by the Loan Parties and their Subsidiaries (or any of
their respective material suppliers, customers or vendors) may be unable to
recognize and perform properly date-sensitive functions involving dates prior to
and after December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem
will not result in any Material Adverse Change.
6.2 Updates to Schedules.
Should any of the information or disclosures provided on any of the
Schedules attached hereto become outdated or incorrect in any material respect,
the Borrower and the Co-Borrower shall promptly provide the Administrative Agent
in writing with such revisions or updates to such Schedule as may be necessary
or appropriate to update or correct same; provided, however, that no Schedule
shall be deemed to have been amended, modified or superseded by any such
correction or update, nor shall any breach of warranty or representation
resulting from the inaccuracy or incompleteness of any such Schedule be deemed
to have been cured thereby, unless and until the Required Lenders, in their sole
and absolute discretion, shall have accepted in writing such revisions or
updates to such Schedule.
7. CONDITIONS OF LENDING
The obligation of each Lender to make Loans and of the
Administrative Agent to issue Letters of Credit hereunder is subject to the
performance by each of the Loan Parties of its Obligations to be performed
hereunder at or prior to the making of any such Loans or issuance of such
Letters of Credit and to the satisfaction of the following further conditions:
7.1 First Loans.
On the Closing Date:
7.1.1 Officer's Certificate.
The representations and warranties of each of the Loan Parties contained in
Section 6 and in each of the other Loan Documents shall be true and accurate on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date (except representations and
warranties which relate solely to an earlier date or time, which representations
and warranties shall be true and correct on and as of the specific dates or
times referred to therein), and each of the Loan Parties shall have performed
and complied with all covenants and conditions hereof and thereof, no Event of
Default or Potential Default shall have occurred and be continuing or shall
exist; and there shall be delivered to the Administrative Agent for the benefit
of each Lender a certificate of each of the Loan Parties, dated the Closing Date
and signed by the Chief Executive Officer, President or Chief Financial Officer
of each of the Loan Parties, to each such effect. The certificate of the Loan
Parties shall contain calculations in sufficient detail to demonstrate
compliance as of the Closing Date with all financial covenants contained in
Section 8.2.
7.1.2 Secretary's Certificate.
There shall be delivered to the Administrative Agent for the benefit of
each Lender a certificate dated the Closing Date and signed by the Secretary or
an Assistant Secretary of each of the Loan Parties, certifying as appropriate as
to:
(i) all action taken by each Loan Party in connection with this Agreement
and the other Loan Documents;
(ii) the names of the officer or officers authorized to sign this
Agreement and the other Loan Documents and the true signatures of such officer
or officers and specifying the Authorized Officers permitted to act on behalf of
each Loan Party for purposes of this Agreement and the true signatures of such
officers, on which the Administrative Agent and each Lender may conclusively
rely; and
(iii) copies of its organizational documents, including its certificate or
articles of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, articles of organization and
operating agreement or regulations as in effect on the Closing Date certified by
the appropriate state official where such documents are filed in a state office
together with certificates from the appropriate state officials as to the
continued existence and good standing of each Loan Party in each state where
organized or qualified to do business.
7.1.3 Delivery of Loan Documents.
The Collateral Assignments, Indemnity Agreement, initial Loan Request,
Mortgages, Notes, Patent, Trademark and Copyright Security Agreement, Pledge
Agreement, and Security Agreement shall have been duly executed and delivered to
the Administrative Agent for the benefit of the Lenders, together with all
appropriate financing statements and appropriate stock powers and certificates
evidencing the Pledge Collateral.
7.1.4 Opinion of Counsel.
There shall be delivered to the Administrative Agent for the benefit of
each Lender a written opinion of Hodgson Russ Andrews Wood & Goodyear, LLP, and
Ronald D. DeMoss, counsel and general counsel, respectively, for the Loan
Parties (who may rely on the opinions of such other counsel as may be acceptable
to the Administrative Agent), dated the Closing Date and in form and substance
satisfactory to the Administrative Agent and its counsel:
(i) as to the matters set forth in Exhibit 7.1.4; and
(ii) as to such other matters incident to the transactions contemplated
herein as the Administrative Agent may reasonably request.
7.1.5 Legal Details.
All legal details and proceedings in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be in form and
substance satisfactory to the Administrative Agent and counsel for the
Administrative Agent, and the Administrative Agent shall have received all such
other counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and substance
satisfactory to the Administrative Agent and said counsel, as the Administrative
Agent or said counsel may reasonably request.
7.1.6 Payment of Fees.
The Borrower shall have paid or caused to be paid to the Administrative
Agent, for itself and for the account of the Lenders to the extent not
previously paid, all other commitment and other fees accrued through the Closing
Date and the costs and expenses for which the Administrative Agent and the
Lenders are entitled to be reimbursed.
7.1.7 Consents.
All material consents required to effectuate the transactions contemplated
hereby as set forth on Schedule 6.1.13 shall have been obtained. The Borrower
and the other purchasers of notes under the Subordinated Loan Documents shall
have executed and delivered an amendment in connection with this Agreement and
the Loans wherein the Borrower and the other note purchasers acknowledge and
agree that the terms of subordination in the Subordinated Loan Documents apply
to this Agreement, the Loan Documents and the Loans.
7.1.8 Officer's Certificate Regarding MACs.
Since June 30, 1999, no Material Adverse Change shall have occurred; prior
to the Closing Date, there shall have been no material change in the management
of any Loan Party or Subsidiary of any Loan Party; and there shall have been
delivered to the Administrative Agent for the benefit of each Lender a
certificate dated the Closing Date and signed by the Chief Executive Officer,
President or Chief Financial Officer of each Loan Party to each such effect.
7.1.9 No Violation of Laws.
The making of the Loans and the issuance of the Letters of Credit shall not
contravene any Law applicable to any Loan Party or any of the Lenders.
7.1.10 No Actions or Proceedings.
No action, proceeding, investigation, regulation or legislation shall have
been instituted, threatened or proposed before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain damages in
respect of, this Agreement, the other Loan Documents or the consummation of the
transactions contemplated hereby or thereby or which, in the Administrative
Agent's sole discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents.
7.1.11 Insurance Policies; Certificates of Insurance; Endorsements.
The Loan Parties shall have delivered evidence acceptable to the
Administrative Agent that adequate insurance in compliance with Section 8.1.3 is
in full force and effect and that all premiums then due thereon have been paid,
together with a certified copy of each Loan Party's casualty insurance policy or
policies evidencing coverage satisfactory to the Administrative Agent, with
additional insured, mortgagee and lender loss payable special endorsements
attached thereto in form and substance satisfactory to the Administrative Agent
and its counsel naming the Administrative Agent as additional insured, mortgagee
and lender loss payee.
7.1.12 Title Insurance.
The Loan Parties shall deliver a title insurance policy or an endorsement
or binder in favor of the Administrative Agent for the benefit of the Lenders,
in customary ALTA current mortgagee's form, and in amounts not less than
$3,500,000, with premiums paid thereon, issued by a title insurance company
acceptable to the Administrative Agent and insuring the Mortgage on the Real
Property in the City of Erie, Pennsylvania as a valid first priority Lien upon
the applicable Loan Parties' fee simple title to such Real Property Collateral
and all improvements and all appurtenances thereto (including such easements and
appurtenances as may be required by the Administrative Agent), free and clear of
any and all defects and encumbrances whatsoever, subject only to such exceptions
as may be approved in writing by the Administrative Agent, with endorsements
thereto as to such matters as the Administrative Agent may designate.
7.1.13 Filing Receipts.
The Administrative Agent shall have received (1) copies of all filing
receipts and acknowledgments issued by any governmental authority to evidence
any recordation or filing necessary to perfect the Lien of the Lenders on the
Collateral or other satisfactory evidence of such recordation and filing and (2)
evidence in a form acceptable to the Administrative Agent that such Lien
constitutes a Prior Security Interest in favor of the Lenders and, in the case
of the Mortgage, a valid and perfected first priority Lien.
7.1.14 Amendment and Restatement of Existing Credit Agreement.
The revolving credit loans, term loans and other obligations of certain of
the Loan Parties under the Existing Credit Agreement, as amended, shall have
been amended and restated and evidenced by this Agreement, the Revolving Credit
Notes, the Term Loan A Notes and the other Loan Documents, without any novation
having occurred as a result thereof. Effective upon the Closing Date, all
letters of credit outstanding under the Existing Loan Agreement shall be deemed
to be Letters of Credit issued pursuant to the terms of this Agreement and
subject to the provisions of Section 2.9 of this Agreement. The liabilities of
Rentavision to Manufacturers and Traders Trust Company under the credit
facilities of such financial institution to Rentavision shall be satisfied on
the Closing Date and such credit facilities shall terminate.
7.1.15 Continuation of Subordination.
The Subordinated Debt evidenced by the NWB Subordinated Loan Documents
shall continue to be subordinated to the Obligations under the terms and
conditions of subordination set forth in the NWB Indenture.
7.1.16 Consummation of Acquisition.
The Loan Parties shall have consummated the Acquisition under terms and
conditions satisfactory to the Administrative Agent in accordance with the terms
of the Acquisition Agreement and the other Acquisition Documents. In connection
with the Acquisition, the Borrower and its Subsidiaries shall not pay or provide
Acquisition Consideration of more than $100,000,000 in the aggregate. After
giving effect to the Acquisition and the Acquisition Consideration given by the
Borrower and its Subsidiaries, the Borrower and the Co-Borrowers shall have the
ability to obtain additional Revolving Credit Loans under this Agreement in
amounts acceptable to the Managing Agents.
7.2 Each Additional Loan.
At the time of making any Loans or issuing any Letters of
Credit other than Loans made or Letters of Credit issued on the Closing Date and
after giving effect to the proposed extensions of credit: the representations
and warranties of the Loan Parties contained in Section 6 and in the other Loan
Documents shall be true on and as of the date of such additional Loan or Letter
of Credit with the same effect as though such representations and warranties had
been made on and as of such date (except representations and warranties which
expressly relate solely to an earlier date or time, which representations and
warranties shall be true and correct on and as of the specific dates or times
referred to therein) and the Loan Parties shall have performed and complied with
all covenants and conditions hereof; no Event of Default or Potential Default
shall have occurred and be continuing or shall exist; the making of the Loans or
issuance of such Letter of Credit shall not contravene any Law applicable to any
Loan Party or Subsidiary of any Loan Party or any of the Lenders; and the
Borrower and the Co-Borrowers shall have delivered to the Administrative Agent a
duly executed and completed Loan Request or application for a Letter of Credit
as the case may be.
8. COVENANTS
8.1 Affirmative Covenants.
The Loan Parties, jointly and severally, covenant and agree
that until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit Borrowings, and interest thereon, expiration or termination of all
Letters of Credit, satisfaction of all of the Loan Parties' other Obligations
under the Loan Documents and termination of the Commitments, the Loan Parties
shall comply at all times with the following affirmative covenants:
8.1.1 Preservation of Existence, Etc.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain its legal existence as a corporation, limited partnership or limited
liability company and its license or qualification and good standing in each
jurisdiction in which its ownership or lease of property or the nature of its
business makes such license or qualification necessary, except as otherwise
expressly permitted in Section 8.2.6.
8.1.2 Payment of Liabilities, Including Taxes, Etc. . Each Loan Party
shall, and shall cause each of its Subsidiaries to, duly pay and discharge all
liabilities to which it is subject or which are asserted against it, promptly as
and when the same shall become due and payable, including all taxes, assessments
and governmental charges upon it or any of its properties, assets, income or
profits, prior to the date on which penalties attach thereto, except to the
extent that such liabilities, including taxes, assessments or charges, are being
contested in good faith and by appropriate and lawful proceedings diligently
conducted and for which such reserve or other appropriate provisions, if any, as
shall be required by GAAP shall have been made, but only to the extent that
failure to discharge any such liabilities would not result in any additional
liability which would adversely affect to a material extent the financial
condition of any Loan Party or Subsidiary of any Loan Party or which would
affect the Collateral, provided that the Loan Parties and their Subsidiaries
will pay all such liabilities forthwith upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor.
8.1.3 Maintenance of Insurance.
Each Loan Party shall, and shall cause each of its Subsidiaries to, insure
its properties and assets against loss or damage by fire and such other
insurable hazards as such assets are commonly insured (including fire, extended
coverage, property damage, workers' compensation, public liability and business
interruption insurance) and against other risks (including errors and omissions)
in such amounts as similar properties and assets are insured by prudent
companies in similar circumstances carrying on similar businesses, and with
reputable and financially sound insurers, including self-insurance to the extent
customary, all as reasonably determined by the Administrative Agent. At the
request of the Administrative Agent, the Loan Parties shall deliver to the
Administrative Agent and each of the Lenders (x) on the Closing Date and
annually thereafter an original certificate of insurance signed by the Loan
Parties' independent insurance broker describing and certifying as to the
existence of the insurance on the Collateral required to be maintained by this
Agreement and the other Loan Documents, together with a copy of the endorsement
described in the next sentence attached to such certificate and (y) from time to
time a summary schedule indicating all insurance then in force with respect to
each of the Loan Parties. Such policies of insurance shall contain special
endorsements, in form and substance acceptable to the Administrative Agent in
its reasonable judgment, which shall (i) specify the Administrative Agent as an
additional insured, mortgagee and lender loss payee as its interests may appear,
with the understanding that any obligation imposed upon the insured (including
the liability to pay premiums) shall be the sole obligation of the applicable
Loan Parties and not that of the insured, (ii) provide that the interest of the
Lenders shall be insured regardless of any breach or violation by the applicable
Loan Parties of any warranties, declarations or conditions contained in such
policies or any action or inaction of the applicable Loan Parties or others
insured under such policies, (iii) provide a waiver of any right of the insurers
to set off or counterclaim or any other deduction, whether by attachment or
otherwise, (iv) provide that any and all rights of subrogation which the
insurers may have or acquire shall be, at all times and in all respects, junior
and subordinate to the prior payment in full of the Indebtedness hereunder and
that no insurer shall exercise or assert any right of subrogation until such
time as the Indebtedness hereunder has been paid in full and the Commitments
have terminated, (v) provide, except in the case of public liability insurance
and workmen's compensation insurance, that all insurance proceeds for losses of
less than $250,000 shall be adjusted with and payable to the applicable Loan
Parties and that all insurance proceeds for losses of $250,000 or more shall be
adjusted with and payable to the Administrative Agent, (vi) include effective
waivers by the insurer of all claims for insurance premiums against the
Administrative Agent, (vii) provide that no cancellation of such policies for
any reason (including non-payment of premium) nor any change therein shall be
effective until at least thirty (30) days after receipt by the Administrative
Agent of written notice of such cancellation or change, (viii) be primary
without right of contribution of any other insurance carried by or on behalf of
any additional insureds with respect to their respective interests in the
Collateral, and (ix) provide that inasmuch as the policy covers more than one
insured, all terms, conditions, insuring agreements and endorsements (except
limits of liability) shall operate as if there were a separate policy covering
each insured. The applicable Loan Parties shall notify the Administrative Agent
promptly of any occurrence causing a material loss or decline in value of the
Collateral and the estimated (or actual, if available) amount of such loss or
decline. Any monies received by the Administrative Agent constituting insurance
proceeds or condemnation proceeds (pursuant to the Mortgage) may, at the option
of the Administrative Agent, (i) be applied by the Administrative Agent to the
payment of the Loans in such manner as the Administrative Agent may reasonably
determine, or (ii) be disbursed to the applicable Loan Parties on such terms as
are deemed appropriate by the Administrative Agent for the repair, restoration
and/or replacement of property in respect of which such proceeds were received.
8.1.4 Maintenance of Properties and Leases.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain in good
repair, working order and condition (ordinary wear and tear excepted) in
accordance with the general practice of other businesses of similar character
and size, all of those properties useful or necessary to its business, and from
time to time, such Loan Party will make or cause to be made all appropriate
repairs, renewals or replacements thereof.
8.1.5 Maintenance of Patents, Trademarks, Etc.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain in full
force and effect all patents, trademarks, service marks, trade names,
copyrights, licenses, franchises, permits and other authorizations necessary for
the ownership and operation of its properties and business if the failure so to
maintain the same would constitute a Material Adverse Change.
8.1.6 Visitation Rights.
Each Loan Party shall, and shall cause each of its Subsidiaries to, permit
any of the officers or authorized employees or representatives of the
Administrative Agent or any of the Lenders to visit and inspect any of its
properties and to examine and make excerpts from its books and records and
discuss its business affairs, finances and accounts with its officers, all in
such detail and at such times and as often as any of the Lenders may reasonably
request, provided that each Lender shall provide the Borrower, the Co-Borrowers
and the Administrative Agent with reasonable notice prior to any visit or
inspection. In the event any Lender desires to conduct an audit of any Loan
Party, such Lender shall conduct such audit contemporaneously with any audit to
be performed by the Administrative Agent.
8.1.7 Keeping of Records and Books of Account.
The Borrower shall, and shall cause each Subsidiary of the Borrower to,
maintain and keep proper books of record and account which enable the Borrower
and its Subsidiaries to issue financial statements in accordance with GAAP and
as otherwise required by applicable Laws of any Official Body having
jurisdiction over the Borrower or any Subsidiary of the Borrower, and in which
full, true and correct entries shall be made in all material respects of all its
dealings and business and financial affairs.
8.1.8 Plans and Benefit Arrangements.
The Borrower shall, and shall cause each other member of the ERISA Group
to, comply with ERISA, the Internal Revenue Code and other applicable Laws
applicable to Plans and Benefit Arrangements except where such failure, alone or
in conjunction with any other failure, would not result in a Material Adverse
Change. Without limiting the generality of the foregoing, the Borrower shall
cause all of its Plans and all Plans maintained by any member of the ERISA Group
to be funded in accordance with the minimum funding requirements of ERISA and
shall make, and cause each member of the ERISA Group to make, in a timely
manner, all contributions due to Plans, Benefit Arrangements and Multiemployer
Plans.
8.1.9 Compliance with Laws.
Each Loan Party shall, and shall cause each of its Subsidiaries to, comply
with all applicable Laws, including all Environmental Laws, in all respects,
provided that it shall not be deemed to be a violation of this Section 8.1.9 if
any failure to comply with any Law would not result in fines, penalties,
remediation costs, other similar liabilities or injunctive relief which in the
aggregate would constitute a Material Adverse Change.
8.1.10 Use of Proceeds.
8.1.10.1 General.
The Loan Parties will use the Letters of Credit and the proceeds of the
Loans only for (i) general corporate purposes and for working capital, (ii) to
finance Permitted Acquisitions, or (iii) to develop additional retail locations
in connection with the business of the Loan Parties described in Schedule
8.2.10. The Loan Parties shall not use the Letters of Credit and the proceeds of
the Loans for any purposes which contravenes any applicable Law or any provision
hereof.
8.1.10.2Margin Stock.
The Loan Parties shall not use the proceeds of the Loans to purchase margin
stock as more fully provided in Section 6.1.10.
8.1.10.3Section 20 Subsidiaries.
The Loan Parties will not, directly or indirectly, use any portion of the
proceeds of the Loans (i) knowingly to purchase any Ineligible Securities from a
Section 20 Subsidiary during any period in which such Section 20 Subsidiary
makes a market in such Ineligible Securities, (ii) knowingly to purchase during
the underwriting or placement period Ineligible Securities being underwritten or
privately placed by a Section 20 Subsidiary, or (iii) to make payments of
principal or interest on Ineligible Securities underwritten or privately placed
by as Section 20 Subsidiary and issued by or for the benefit of any Loan Party
or any Affiliate of any Loan Party.
8.1.11 Further Assurances.
Each Loan Party shall, from time to time, at its expense, faithfully
preserve and
protect the Administrative Agent's Lien on and Prior Security Interest in the
Collateral as a continuing first priority perfected Lien, subject only to
Permitted Liens, and shall do such other acts and things as the Administrative
Agent in its sole discretion may deem necessary or advisable from time to time
in order to preserve, perfect and protect the Liens granted under the Loan
Documents and to exercise and enforce its rights and remedies thereunder with
respect to the Collateral.
8.1.12 Subordination of Intercompany Loans.
Each Loan Party shall cause any intercompany Indebtedness, loans or
advances owed by any Loan Party to any other Loan Party to be subordinated
pursuant to the terms of the Intercompany Subordination Agreement.
8.1.13 Interest Rate Protection.
Within thirty (30) days after the Closing Date, the
Loan Parties shall enter into one
or more interest rate protection agreements with one or more of the Lenders and
with the prior consent of the Administrative Agent, which consent shall not be
unreasonably withheld. Such interest rate protection agreements shall be in an
amount such that when aggregated with the interest rate protection agreements of
the Borrower in effect on the Closing Date, provide for interest rate protection
in a notional principal amount of at least $125,000,000 (the interest rate
protection agreements in effect on the Closing Date and those entered into
pursuant to this Section 8.1.13 are collectively referred to as the "Interest
Rate Protection Agreements"). Such Interest Rate Protection Agreement shall
contain such terms and conditions as shall be acceptable to the Administrative
Agent. Documentation for the Interest Rate Protection Agreement shall be in a
standard International Swap Dealer Association Agreement and shall provide for
the method of calculating the reimbursable amount of the provider's credit
exposure in a reasonable and customary manner. Such financial institution (if
other than a Lender) may be granted a security interest in the Collateral
pursuant to the Loan Documents and receive a Lien pari passu with the Lien of
the Administrative Agent upon terms acceptable to the Administrative Agent.
8.2 Negative Covenants.
The Loan Parties, jointly and severally, covenant and agree
that until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit Borrowings and interest thereon, expiration or termination of all Letters
of Credit, satisfaction of all of the Loan Parties' other Obligations hereunder
and termination of the Commitments, the Loan Parties shall comply with the
following negative covenants:
8.2.1 Indebtedness.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on Schedule 8.2.1 (including any
extensions or renewals thereof, provided there is no increase in the amount
thereof or other significant change in the terms thereof unless otherwise
specified on Schedule 8.2.1;
(iii) Capitalized and operating leases as and to the extent permitted under
Section 8.2.15;
(iv) Indebtedness secured by Purchase Money Security Interests not
exceeding $100,000;
(v) Indebtedness of a Loan Party to another Loan Party which is
subordinated in accordance with the provisions of Section 8.1.12; and
(vi) Indebtedness incurred in connection with Permitted Acquisitions
provided that after giving effect thereto, no Potential Default or Event of
Default exists.
8.2.2 Liens.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted Liens.
8.2.3 Guaranties.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time, directly or indirectly, become or be liable in
respect of any Guaranty, or assume, guarantee, become surety for, endorse or
otherwise agree, become or remain directly or contingently liable upon or with
respect to any obligation or liability of any other Person, except for (i)
Guaranties of Indebtedness of the Loan Parties permitted hereunder, (ii)
Guaranties of Subordinated Debt in existence on the Closing Date, and (iii)
Guaranties of Indebtedness permitted under Section 8.2.1(vi).
8.2.4 Loans and Investments.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time make or suffer to remain outstanding any loan or
advance to, or purchase, acquire or own any stock, bonds, notes or securities
of, or any partnership interest (whether general or limited) or limited
liability company interest in, or any other investment or interest in, or make
any capital contribution to, any other Person, or agree, become or remain liable
to do any of the foregoing, except:
(i) trade credit extended on usual and customary terms in the ordinary
course of business;
(ii) advances to employees to meet expenses incurred by such employees in
the ordinary course of business;
(iii) Permitted Acquisitions;
(iv) Permitted Investments; and
(v) loans, advances and investments in other Loan Parties, provided
however, that additional loans, advances and investments in Action Rent-to-Own
Holdings of South Carolina, Inc., a South Carolina corporation, shall be limited
to $500,000 in the aggregate.
8.2.5 Dividends and Related Distributions.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, make or pay, or agree to become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock, partnership interests or limited liability company interests on
account of the purchase, redemption, retirement or acquisition of its shares of
capital stock (or warrants, options or rights therefor), partnership interests
or limited liability company interests, except that (i) the Loan Parties may pay
dividends or other distributions payable to another Loan Party, and (ii) the
Borrower may pay principal, interest or dividends on the Subordinated Debt,
subject to (y) the restrictions on prepayments in Section 8.2.22 and (z) the
restrictions on payments contained in the subordination and other provisions
contained in the Subordinated Loan Documents.
8.2.6 Liquidations, Mergers, Consolidations, Acquisitions.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other Person,
provided that
(1)......any Loan Party other than the Borrower and the Co-Borrower may
consolidate or merge into another Loan Party which is wholly-owned by one or
more of the other Loan Parties, and Rentavision may merge with and into the
Borrower so long as the Borrower is the surviving corporation, provided, that
Borrower and the Co-Borrowers shall deliver to the Administrative Agent copies
of the applicable merger or consolidation documentation within five (5) Business
Days after the effective date of such merger or consolidation and the
appropriate Loan Parties shall promptly thereafter (but in no event in less than
five (5) Business Days after the Administrative Agent's request therefore)
execute and deliver to the Administrative Agent new UCC-1 financing statements
or amendments to filed UCC-1 financing statements, as appropriate in the
discretion of the Administrative Agent, and take such other action as is
necessary to maintain first priority Liens in the assets of the parties to such
merger or consolidation; and
(2)......any Loan Party may acquire, whether by purchase or by merger, (A)
all of the ownership interests of another Person or (B) substantially all of
assets of another Person or of a business or division of another Person (each an
"Permitted Acquisition"), provided that each of the following requirements is
met:
(i) such Person shall be a corporation, limited liability company or other
entity with respect to applicable state law providing that the owners of all
stock or other ownership interests in such entity shall not be liable for any
obligations of such entity or for the claims of any creditors thereof,
(ii) if the Loan Parties are acquiring the ownership interests in such
Person, such Person shall execute a Guarantor Joinder and join this Agreement as
a Guarantor pursuant to Section 11.18 and such Person and its owners shall grant
Liens in the assets and stock or other ownership interests in such Person and
otherwise comply with Section 11.18 on or before the date of such Permitted
Acquisition,
(iii) the board of directors or other equivalent governing body of such
Person shall have approved such Permitted Acquisition and the Loan Parties shall
have delivered to the Lenders written evidence of such approval prior to such
Permitted Acquisition,
(iv) the business acquired, or the business conducted by the Person whose
ownership interests are being acquired, as applicable, shall be substantially
the same as one or more line or lines of business conducted by the Loan Parties
and shall comply with Section 8.2.10,
(v) no Potential Default or Event of Default shall exist immediately prior
to and after giving effect to such Permitted Acquisition,
(vi) the Borrower and the Co-Borrowers shall have given the Administrative
Agent written notice of the acquisition at least five (5) days prior to its
consummation, which notice shall include a quarterly compliance certificate of
the Borrower in the form of Exhibit 8.3.4 which evidences that after giving
effect to the Permitted Acquisition and any Loans to be made in connection
therewith, the Borrower is not in default with respect the covenants set forth
in Sections 8.2.16,
(vii) any Consideration given by the Loan Parties in the form of
Indebtedness to be paid at a date after the closing date of the Permitted
Acquisition shall be subordinated to the Loans and other Obligations on terms
and conditions satisfactory to the Administrative Agent,
(viii) the Loan Parties shall have delivered to the Lenders such opinions
of counsel in form and substance satisfactory to the Administrative Agent or
such other evidence as shall be satisfactory to the Administrative Agent in its
sole discretion that the Loan Parties are in compliance with all applicable Law
in any additional states in which the Loan Parties do business after the
consummation of the Permitted Acquisition,
(ix) the business acquired, or the business conducted by the Person whose
ownership interests are being acquired, as applicable, shall be permitted by
Section 8.2.10, and
(x) if after giving effect to a Permitted Acquisition the Leverage Ratio is
greater than or equal to 2.0 to 1.0, the Consideration given by the Loan Parties
for such Permitted Acquisition shall not exceed $20,000,000 in value, and after
giving effect to such Permitted Acquisition, the aggregate Consideration given
by the Loan Parties for all Permitted Acquisitions made during the then fiscal
quarter of the Permitted Acquisition and during the prior three fiscal quarters
shall not exceed $50,000,000.
8.2.7 Dispositions of Assets or Subsidiaries.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, any of its properties or assets,
tangible or intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest, partnership interests or limited liability company interests of a
Subsidiary of such Loan Party), except:
(i) transactions involving the sale of inventory in the ordinary course of
business;
(ii) any sale, transfer, rental or lease of assets in the ordinary course
of business which are no longer necessary or required in the conduct of such
Loan Party's or such Subsidiary's business, including, without limitation, the
Real Property located at 3230 West Lake Road, Erie, Pennsylvania;
(iii) any sale, transfer or lease of assets by any wholly owned Subsidiary
of such Loan Party to another Loan Party;
(iv) any sale, transfer or lease of assets in the ordinary course of
business which does not cause the aggregate market value or the aggregate book
value of all such sales, transfers and leases in any fiscal year to exceed
$5,000,000 and which are replaced by substitute assets acquired or leased within
the parameters of Section 8.2.15, provided such substitute assets are subject to
the Lenders' Prior Security Interest; or
(v) any sale, transfer or lease of assets, other than those specifically
excepted pursuant to clauses (i) through (iv) above, which is approved by the
Required Lenders so long as the after-tax proceeds (as reasonably estimated by
the Borrower and the Co-Borrowers) are applied as a mandatory prepayment of the
Term Loans in accordance with the provisions of Section 5.5.2 above.
8.2.8 Affiliate Transactions.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, enter into or carry out any transaction (including purchasing
property or services from or selling property or services to any Affiliate of
any Loan Party or other Person) unless such transaction is not otherwise
prohibited by this Agreement, is entered into in the ordinary course of business
upon fair and reasonable arm's-length terms and conditions which are fully
disclosed to the Administrative Agent and is in accordance with all applicable
Law.
8.2.9 Subsidiaries, Partnerships and Joint Ventures.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, own or create directly or indirectly any Subsidiaries other
than (i) any Subsidiary which has joined this Agreement as Guarantor on the
Closing Date; and (ii) any Subsidiary formed after the Closing Date which joins
this Agreement as a Guarantor pursuant to Section 11.18, provided that the
Required Lenders shall have consented to such formation and joinder and that
such Subsidiary and the Loan Parties, as applicable, shall grant and cause to be
perfected first priority Liens to the Administrative Agent for the benefit of
the Lenders in the assets held by, and stock of or other ownership interests in,
such Subsidiary. Each of the Loan Parties shall not become or agree to (1)
become a general or limited partner in any general or limited partnership,
except that the Loan Parties may be general or limited partners in other Loan
Parties, (2) become a member or manager of, or hold a limited liability company
interest in, a limited liability company, except that the Loan Parties may be
members or managers of, or hold limited liability company interests in, other
Loan Parties, or (3) become a joint venturer or hold a joint venture interest in
any joint venture.
8.2.10 Continuation of or Change in Business.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to,
engage in any business other than the Line of Business substantially as
conducted and operated by such Loan Party or Subsidiary during the present
fiscal year, and such Loan Party or Subsidiary shall not permit any material
change in such business.
8.2.11 Plans and Benefit Arrangements.
Each of the Loan Parties shall not, and shall not
permit any of its Subsidiaries to:
(i) fail to satisfy the minimum funding requirements of ERISA and the
Internal Revenue Code with respect to any Plan;
(ii) request a minimum funding waiver from the Internal Revenue Service
with respect to any Plan;
(iii) engage in a Prohibited Transaction with any Plan, Benefit Arrangement
or Multiemployer Plan which, alone or in conjunction with any other
circumstances or set of circumstances resulting in liability under ERISA, would
constitute a Material Adverse Change;
(iv) permit the aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a plan
termination basis, as disclosed in the most recent actuarial report completed
with respect to such Plan, to exceed, as of any actuarial valuation date, the
fair market value of the assets of such Plan;
(v) fail to make when due any contribution to any Multiemployer Plan that
the Borrower or any member of the ERISA Group may be required to make under any
agreement relating to such Multiemployer Plan, or any Law pertaining thereto;
(vi) withdraw (completely or partially) from any Multiemployer Plan or
withdraw (or be deemed under Section 4062(e) of ERISA to withdraw) from any
Multiple Employer Plan, where any such withdrawal is likely to result in a
material liability of the Borrower or any member of the ERISA Group;
(vii) terminate, or institute proceedings to terminate, any Plan, where
such termination is likely to result in a material liability to the Borrower or
any member of the ERISA Group;
(viii) make any amendment to any Plan with respect to which security is
required under Section 307 of ERISA; or
(ix) fail to give any and all notices and make all disclosures and
governmental filings required under ERISA or the Internal Revenue Code, where
such failure is likely to result in a Material Adverse Change.
8.2.12 Fiscal Year.
The Borrower and the Co-Borrowers shall not, and shall not permit any
Subsidiary of the Borrower to, change its fiscal year from the twelve-month
period beginning October 1 and ending September 30.
8.2.13 Issuance of Stock.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, issue any additional shares of its capital stock or any
options, warrants or other rights in respect thereof, except that the Borrower
may issue additional shares of capital stock (i) for Permitted Acquisitions in
accordance with the provisions of Section 8.2.6, (ii) for distribution to
employees as provided for under the stock option plans and 401(k) plans set
forth on Schedule 6.1.21 as in effect on the Closing Date, (iii) in connection
with the conversion of Indebtedness incurred under the NWB Indenture into
capital stock of the Borrower pursuant to the terms of the NWB Subordinated Loan
Documents, (iv) in connection with the Mass Mutual Warrants or (v) if the net
proceeds of the issuance are used by the Borrower to reduce (a) the Loans
outstanding under this Agreement, and (b) the Commitments of the Lenders.
8.2.14 Changes in Organizational Documents.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, amend in any respect its certificate or articles of
incorporation (including any provisions or resolutions relating to capital
stock), by-laws, certificate of limited partnership, partnership agreement,
certificate of formation, articles of organization, operating agreement,
regulations or other organizational documents without providing at least thirty
(30) calendar days' prior written notice to the Administrative Agent and the
Lenders and, in the event such change would be adverse to the Lenders as
determined by the Administrative Agent in its sole discretion, obtaining the
prior written consent of the Required Lenders.
8.2.15 Capital Expenditures and Leases.
Excluding the purchase of Rental Merchandise, each of the Loan Parties
shall not, and shall not permit any of its Subsidiaries to, make any payments
exceeding $25,000,000 in the aggregate in any fiscal year on account of the
purchase or lease of any assets which if purchased would constitute fixed assets
or which if leased would constitute a capitalized lease, or any payments
exceeding $1,000,000 in the aggregate in any fiscal year on account of the
rental or lease of real or personal property of any other Person which does not
constitute a capitalized lease (other than leases of retail store sites and
motor vehicles), and all such capital expenditures and leases shall be made
under usual and customary terms and in the ordinary course of business.
8.2.16 Maximum Leverage Ratio (Total Funded Debt).
The Loan Parties shall not permit the Leverage Ratio of the Borrower and
its Subsidiaries to exceed the ratio set forth below for the four fiscal
quarters then ended.
<TABLE>
<CAPTION>
Period Ratio
<S> <C> <C> <C> <C>
Closing Date through 12/31/99 3.50 to 1.00
1/1/00 through 6/30/00 3.25 to 1.00
7/1/00 through 6/30/01 3.00 to 1.00
7/1/01 through 6/30/02 2.75 to 1.00
7/1/02 and thereafter 2.50 to 1.00
</TABLE>
8.2.17 Subordinated Loan Document Amendments.
The Loan Parties shall not amend the terms of the NWB Subordinated Loan
Documents without the prior written consent of the Administrative Agent.
8.2.18 Minimum Interest Coverage Ratio.
The Loan Parties shall not permit the Interest Coverage Ratio to be less
than the ratio set forth below for the four fiscal quarters then ended, as
calculated at the end of each fiscal quarter of the Borrower.
<TABLE>
<CAPTION>
Period Ratio
<S> <C> <C> <C> <C>
Closing Date through 12/31/99 3.75 to 1.00
1/1/00 through 6/30/00 4.00 to 1.00
7/1/00 through 12/31/00 4.25 to 1.00
1/1/01 through 6/30/01 4.50 to 1.00
7/1/01 through 3/31/02 4.75 to 1.00
4/1/02 and thereafter 5.00 to 1.00
</TABLE>
8.2.19 Minimum Net Worth.
The Borrower shall not at any time permit Consolidated Net Worth to be less
than the
Base Net Worth.
8.2.20 Fixed Charge Coverage Ratio.
The Borrower shall not at any time permit the Fixed Charge Coverage Ratio
to be less than 1.2 to 1.0 for the four fiscal quarters then ended, as
calculated at the end of each fiscal quarter of the Borrower.
8.2.21 Rental Merchandise Usage.
The Loan Parties shall not permit the value of the Rental Merchandise under
lease pursuant to Rental Contracts to be less than (i) 70% of the total value of
Rental Merchandise, as measured at the end of each fiscal quarter of the
Borrower commencing December 31, 1999 through and including June 30, 2000, and
(ii) 75% of the total value of Rental Merchandise, as measured at the end of
each fiscal quarter of the Borrower commencing September 30, 2000 and
thereafter. For purposes of this Section 8.2.21, the value of the Rental
Merchandise shall be as it is recorded on the books and records of the Loan
Parties, determined in accordance with GAAP.
8.2.22 Prepayments on Subordinated Debt.
The Loan Parties shall not make any voluntary prepayment, redemption or
repurchase on account of any of the Subordinated Debt, provided however, that
the Borrower may redeem the Subordinated Debt incurred pursuant to the NWB
Indenture in accordance with the terms of the NWB Indenture so long as no Event
of Default or Potential Default has occurred or would exist after giving effect
to the payments made to redeem such Subordinated Debt.
8.3 Reporting Requirements.
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans, Reimbursement Obligations and Letter of Credit
Borrowings and interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties' other Obligations hereunder and
under the other Loan Documents and termination of the Commitments, the Loan
Parties will furnish or cause to be furnished to the Administrative Agent and
each of the Lenders:
8.3.1 Monthly Financial Statements.
As soon as available and in any event within thirty (30) calendar days
after the end of each calendar month, the Borrower's financial statements,
consisting of a consolidated and consolidating balance sheet as of the end of
such month and related consolidated and consolidating statements of income,
stockholders' equity and cash flows for the month then ended and the fiscal year
through that date, all in reasonable detail and certified (subject to normal
year-end adjustments) by the Chief Executive Officer, President or Chief
Financial Officer of the Borrower as having been prepared in accordance with
GAAP, consistently applied, and setting forth in comparative form the respective
financial statements for the corresponding date and period in the previous
fiscal year.
8.3.2 Quarterly Financial Statements.
As soon as available and in any event within forty-five (45) calendar days
after the end of each of the first three fiscal quarters in each fiscal year,
the quarterly report of Form 10-Q for the Borrower and its consolidated
financial statements, consisting of a consolidated and consolidating balance
sheet as of the end of such fiscal quarter and related consolidated and
consolidating statements of income, stockholders' equity and cash flows for the
fiscal quarter then ended and the fiscal year through that date, all in
reasonable detail and certified (subject to normal year-end audit adjustments)
by the Chief Executive Officer, President or Chief Financial Officer of the
Borrower as having been prepared in accordance with GAAP, consistently applied,
and setting forth in comparative form the respective financial statements for
the corresponding date and period in the previous fiscal year.
8.3.3 Annual Financial Statements.
As soon as available and in any event within ninety (90) days after the end
of each fiscal year of the Borrower, the annual report on Form 10-K for the
Borrower and its consolidated financial statements, consisting of a consolidated
and consolidating balance sheet as of the end of such fiscal year, and related
consolidated and consolidating statements of income, stockholders' equity and
cash flows for the fiscal year then ended, all in reasonable detail and setting
forth in comparative form the financial statements as of the end of and for the
preceding fiscal year, and certified by PriceWaterhouseCoopers L.L.P. or such
other independent certified public accountants of comparable nationally
recognized standing satisfactory to the Administrative Agent in its reasonable
judgment. The consolidating statement of income shall include a schedule
detailing the income by each retail location of the Loan Parties. The
certificate or report of accountants shall be free of qualifications (other than
any consistency qualification that may result from a change in the method used
to prepare the financial statements as to which such accountants concur) and
shall not indicate the occurrence or existence of any event, condition or
contingency which would materially impair the prospect of payment or performance
of any covenant, agreement or duty of any Loan Party under any of the Loan
Documents. The Loan Parties shall deliver with such financial statements and
certification by their accountants a letter of such accountants to the
Administrative Agent and the Lenders substantially (i) to the effect that, based
upon their ordinary and customary examination of the affairs of the Borrower,
performed in connection with the preparation of such consolidated financial
statements, and in accordance with generally accepted auditing standards, they
are not aware of the existence of any condition or event which constitutes an
Event of Default or Potential Default or, if they are aware of such condition or
event, stating the nature thereof and confirming the Borrower's calculations
with respect to the certificate to be delivered pursuant to Section 8.3.4 with
respect to such financial statements and (ii) to the effect that the Lenders are
intended to rely upon such accountant's certification of the annual financial
statements and that such accountants authorize the Loan Parties to deliver such
reports and certificate to the Lenders on such accountants' behalf.
8.3.4 Certificate of the Borrower.
Concurrently with the financial statements of the Borrower furnished to the
Administrative Agent and to the Lenders pursuant to Sections 8.3.2 and 8.3.3, a
certificate of the Borrower signed by the Chief Executive Officer, President or
Chief Financial Officer of the Borrower, in the form of Exhibit 8.3.4, to the
effect that, except as described pursuant to Section 8.3.5, (i) the
representations and warranties of the Borrower contained in Section 6 and in the
other Loan Documents are true on and as of the date of such certificate with the
same effect as though such representations and warranties had been made on and
as of such date (except representations and warranties which expressly relate
solely to an earlier date or time) and the Loan Parties have performed and
complied with all covenants and conditions hereof, (ii) no Event of Default or
Potential Default exists and is continuing on the date of such certificate and
(iii) containing calculations in sufficient detail to demonstrate compliance as
of the date of such financial statements with all financial covenants contained
in Section 8.2.
8.3.5 Notice of Default.
Promptly after any officer of any Loan Party has learned of the occurrence
of an Event of Default or Potential Default, a certificate signed by the Chief
Executive Officer, President or Chief Financial Officer of such Loan Party
setting forth the details of such Event of Default or Potential Default and the
action which the such Loan Party proposes to take with respect thereto.
8.3.6 Notice of Litigation.
Promptly after the commencement thereof, notice of all actions, suits,
proceedings or
investigations before or by any Official Body or any other Person against any
Loan Party or Subsidiary of any Loan Party which relate to the Collateral,
involve a claim or series of claims in excess of $100,000 or which if adversely
determined would constitute a Material Adverse Change.
8.3.7 Certain Events.
Written notice to the Administrative Agent:
(i) at least fourteen (14) calendar days prior thereto, with respect to any
proposed sale or transfer of assets pursuant to Section 8.2.7((iv)) or ((v)),
(ii) within the time limits set forth in Section 8.2.14, any amendment to
the organizational documents of any Loan Party;
(iii) at least fourteen (14) calendar days
prior thereto, with respect to
any change in any Loan Party's locations from the locations set forth in
Schedule A to the Security Agreement, other than changes resulting from the
consummation of a Permitted Acquisition; and
(iv) at least five (5) calendar days prior
thereto, with respect to any
change in any Loan Party's locations from the locations set forth in Schedule A
to the Security Agreement resulting from the consummation of a Permitted
Acquisition.
8.3.8 Budgets, Forecasts, Other Reports and Information.
Promptly upon becoming available to the Borrower:
(i) the annual budget and any forecasts or projections of the Borrower, to
be supplied not later than sixty (60) days prior to commencement of the fiscal
year to which any of the foregoing may be applicable,
(ii) any reports including management letters submitted to the Borrower by
independent accountants in connection with any annual, interim or special audit,
(iii) any reports, notices or proxy statements generally distributed by the
Borrower to its stockholders on a date no later than the date supplied to such
stockholders, (iv) regular or periodic reports, including Forms 10-K, 10-Q and
8-K, registration statements and prospectuses, filed by the Borrower with the
Securities and Exchange Commission,
(v) a copy of any order in any proceeding to which the Borrower or any of
its Subsidiaries is a party issued by any Official Body, and
(vi) such other reports and information as any of the Lenders may from time
to time reasonably request. The Borrower shall also notify the Lenders promptly
of the enactment or adoption of any Law which may result in a Material Adverse
Change.
8.3.9 Notices Regarding Plans and Benefit Arrangements.
8.3.9.1 Certain Events.
Promptly upon becoming aware of the occurrence thereof, notice (including
the nature of the event and, when known, any action taken or threatened by the
Internal Revenue Service or the PBGC with respect thereto) of:
(i) any Reportable Event with respect to the Borrower or any other member
of the ERISA Group (regardless of whether the obligation to report said
Reportable Event to the PBGC has been waived),
(ii) any Prohibited Transaction which could subject the Borrower or any
other member of the ERISA Group to a civil penalty assessed pursuant to Section
502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue Code in
connection with any Plan, any Benefit Arrangement or any trust created
thereunder,
(iii) any assertion of material withdrawal liability with respect to any
Multiemployer Plan,
(iv) any partial or complete withdrawal from a Multiemployer Plan by the
Borrower or any other member of the ERISA Group under Title IV of ERISA (or
assertion thereof), where such withdrawal is likely to result in material
withdrawal liability,
(v) any cessation of operations (by the Borrower or any other member of the
ERISA Group) at a facility in the circumstances described in Section 4062(e) of
ERISA,
(vi) withdrawal by the Borrower or any other member of the ERISA Group from
a Multiple Employer Plan,
(vii) a failure by the Borrower or any other member of the ERISA Group to
make a payment to a Plan required to avoid imposition of a Lien under Section
302(f) of ERISA,
(viii) the adoption of an amendment to a Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA, or
(ix) any change in the actuarial assumptions or funding methods used for
any Plan, where the effect of such change is to materially increase or
materially reduce the unfunded benefit liability or obligation to make periodic
contributions.
8.3.9.2 Notices of Involuntary Termination and Annual Reports.
Promptly after receipt thereof, copies of (a) all notices received by the
Borrower or any other member of the ERISA Group of the PBGC's intent to
terminate any Plan administered or maintained by the Borrower or any member of
the ERISA Group, or to have a trustee appointed to administer any such Plan; and
(b) at the request of the Administrative Agent or any Lender each annual report
(IRS Form 5500 series) and all accompanying schedules, the most recent actuarial
reports, the most recent financial information concerning the financial status
of each Plan administered or maintained by the Borrower or any other member of
the ERISA Group, and schedules showing the amounts contributed to each such Plan
by or on behalf of the Borrower or any other member of the ERISA Group in which
any of their personnel participate or from which such personnel may derive a
benefit, and each Schedule B (Actuarial Information) to the annual report filed
by the Borrower or any other member of the ERISA Group with the Internal Revenue
Service with respect to each such Plan.
8.3.9.3 Notice of Voluntary Termination.
Promptly upon the filing thereof, copies of any Form 5310, or any successor
or equivalent form to Form 5310, filed with the PBGC in connection with the
termination of any Plan.
9. DEFAULT
9.1 Events of Default.
An Event of Default shall mean the occurrence or existence of
any one or more of the following events or conditions (whatever the reason
therefor and whether voluntary, involuntary or effected by operation of Law):
9.1.1 Payments Under Loan Documents.
The Borrower or either Co-Borrower shall fail to pay any principal of any
Loan (including mandatory prepayments or the payment due at maturity),
Reimbursement Obligation or Letter of Credit Borrowing or any other amount owing
hereunder or under the other Loan Documents after such principal or other amount
becomes due in accordance with the terms hereof or thereof, or the Borrower or
either Co-Borrower shall fail to pay any interest on any Loan, Reimbursement
Obligation or Letter of Credit Borrowing within five calendar days after such
interest becomes due in accordance with the terms hereof;
9.1.2 Breach of Warranty.
Any representation or warranty made at any time by any of the Loan Parties
herein or by any of the Loan Parties in any other Loan Document, or in any
certificate, other instrument or statement furnished pursuant to the provisions
hereof or thereof, shall prove to have been false or misleading in any material
respect as of the time it was made or furnished;
9.1.3 Breach of Negative Covenants or Visitation Rights.
Any of the Loan Parties shall default in the observance or performance of
any covenant contained in Section 8.1.6 or Section 8.2;
9.1.4 Breach of Other Covenants.
Any of the Loan Parties shall default in the observance or performance of
any other covenant, condition or provision hereof or of any other Loan Document
and such default shall continue unremedied for a period of ten (10) Business
Days after any officer of any Loan Party becomes aware of the occurrence thereof
(such grace period to be applicable only in the event such default can be
remedied by corrective action of the Loan Parties as determined by the
Administrative Agent in its sole discretion);
9.1.5 Defaults in Other Agreements or Indebtedness.
A default or event of default shall occur at any time
under the terms of any other
agreement involving borrowed money or the extension of credit or any other
Indebtedness including the Subordinated Debt under which any Loan Party or
Subsidiary of any Loan Party may be obligated as a borrower or guarantor in
excess of $300,000 in the aggregate, and such breach, default or event of
default consists of the failure to pay (beyond any period of grace permitted
with respect thereto, whether waived or not) any indebtedness when due (whether
at stated maturity, by acceleration or otherwise) or if such breach or default
permits or causes the acceleration of any indebtedness (whether or not such
right shall have been waived) or the termination of any commitment to lend;
9.1.6 Final Judgments or Orders.
Any final judgments or orders for the payment of money in excess of
$100,000 in the aggregate shall be entered against any Loan Party by a court
having jurisdiction in the premises, which judgment is not discharged, vacated,
bonded or stayed pending appeal within a period of thirty (30) days from the
date of entry;
9.1.7 Loan Document Unenforceable.
Any of the Loan Documents or any provision relating to or affecting
subordination contained in any Subordinated Loan Documents shall cease to be
legal, valid and binding agreements enforceable against the party executing the
same or such party's successors and assigns (as permitted under the Loan
Documents) in accordance with the respective terms thereof or shall in any way
be terminated (except in accordance with its terms) or become or be declared
ineffective or inoperative or shall in any way be challenged or contested or
cease to give or provide the respective Liens, security interests, rights,
titles, interests, remedies, powers or privileges intended to be created
thereby;
9.1.8 Uninsured Losses; Proceedings Against Assets.
There shall occur any material uninsured damage to or loss, theft or
destruction of any of the Collateral in excess of $250,000 or the Collateral or
any other of the Loan Parties' or any of their Subsidiaries' assets are
attached, seized, levied upon or subjected to a writ or distress warrant; or
such come within the possession of any receiver, trustee, custodian or assignee
for the benefit of creditors and the same is not cured within thirty (30) days
thereafter;
9.1.9 Notice of Lien or Assessment.
A notice of Lien or assessment in excess of $100,000
which is not a Permitted Lien is
filed of record with respect to all or any part of any of the Loan Parties' or
any of their Subsidiaries' assets by the United States, or any department,
agency or instrumentality thereof, or by any state, county, municipal or other
governmental agency, including the PBGC, or any taxes or debts owing at any time
or times hereafter to any one of these becomes payable and the same is not paid
within thirty (30) days after the same becomes payable;
9.1.10 Insolvency.
Any Loan Party or any Subsidiary of a Loan Party ceases to be solvent or
admits in writing its inability to pay its debts as they mature;
9.1.11 Events Relating to Plans and Benefit Arrangements.
Any of the following occurs: (i) any Reportable Event, which the
Administrative Agent
determines in good faith constitutes grounds for the termination of any Plan by
the PBGC or the appointment of a trustee to administer or liquidate any Plan,
shall have occurred and be continuing; (ii) proceedings shall have been
instituted or other action taken to terminate any Plan, or a termination notice
shall have been filed with respect to any Plan; (iii) a trustee shall be
appointed to administer or liquidate any Plan; (iv) the PBGC shall give notice
of its intent to institute proceedings to terminate any Plan or Plans or to
appoint a trustee to administer or liquidate any Plan; and, in the case of the
occurrence of (i), (ii), (iii) or (iv) above, the Administrative Agent
determines in good faith that the amount of the Borrower's or either
Co-Borrower's liability is likely to exceed 10% of Consolidated Net Worth less
intangibles; (v) the Borrower or any member of the ERISA Group shall fail to
make any contributions when due to a Plan or a Multiemployer Plan; (vi) the
Borrower or any other member of the ERISA Group shall make any amendment to a
Plan with respect to which security is required under Section 307 of ERISA;
(vii) the Borrower or any other member of the ERISA Group shall withdraw
completely or partially from a Multiemployer Plan; (viii) the Borrower or any
other member of the ERISA Group shall withdraw (or shall be deemed under Section
4062(e) of ERISA to withdraw) from a Multiple Employer Plan; or (ix) any
applicable Law is adopted, changed or interpreted by any Official Body with
respect to or otherwise affecting one or more Plans, Multiemployer Plans or
Benefit Arrangements and, with respect to any of the events specified in (v),
(vi), (vii), (viii) or (ix), the Administrative Agent determines in good faith
that any such occurrence would be reasonably likely to materially and adversely
affect the total enterprise represented by the Borrower and the other members of
the ERISA Group;
9.1.12 Cessation of Business.
Any Loan Party or Subsidiary of a Loan Party ceases to conduct its business
as contemplated, except as expressly permitted under Section 8.2.6 or 8.2.7, or
any Loan Party or Subsidiary of a Loan Party is enjoined, restrained or in any
way prevented by court order from conducting all or any material part of its
business and such injunction, restraint or other preventive order is not
dismissed within thirty (30) days after the entry thereof;
9.1.13 Change of Control.
(i) An Acquiring Person shall have acquired, or obtained the right to
acquire, legal or beneficial ownership of 50% or more of the outstanding shares
of the Voting Stock of the Borrower; (ii) all the outstanding partnership
interests and capital stock, as the case may be, of either Co-Borrower shall
cease to be owned beneficially and of record by the Borrower, the Borrower's
direct and indirect wholly-owned Subsidiaries or some combination of the
foregoing, or (iii) within a period of twelve (12) consecutive calendar months,
individuals who were directors of the Borrower on the first day of such period
shall cease to constitute a majority of the board of directors of the Borrower;
9.1.14 Involuntary Proceedings.
A proceeding shall have been instituted in a court
having jurisdiction in the premises
seeking a decree or order for relief in respect of any Loan Party or Subsidiary
of a Loan Party in an involuntary case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in effect, or
for the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of any Loan Party or Subsidiary
of a Loan Party for any substantial part of its property, or for the winding-up
or liquidation of its affairs, and such proceeding shall remain undismissed or
unstayed and in effect for a period of thirty (30) consecutive days or such
court shall enter a decree or order granting any of the relief sought in such
proceeding; or
9.1.15 Voluntary Proceedings.
Any Loan Party or Subsidiary of a Loan Party shall commence a voluntary
case under any applicable bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect, shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall consent to the
appointment or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator, conservator (or other similar official) of itself or for
any substantial part of its property or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any action in furtherance of any of the foregoing.
9.2 Consequences of Event of Default.
9.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization
Proceedings.
If an Event of Default specified under Sections 9.1.1 through 9.1.13 shall
occur and be continuing, the Lenders and the Administrative Agent shall be under
no further obligation to make Loans or issue Letters of Credit, as the case may
be, and the Administrative Agent may, and upon the request of the Required
Lenders, shall (i) by written notice to the Borrower and the Co-Borrowers,
declare the unpaid principal amount of the Notes then outstanding and all
interest accrued thereon, any unpaid fees and all other Indebtedness of the
Borrower and the Co-Borrowers to the Lenders hereunder and thereunder to be
forthwith due and payable, and the same shall thereupon become and be
immediately due and payable to the Administrative Agent for the benefit of each
Lender without presentment, demand, protest or any other notice of any kind, all
of which are hereby expressly waived, and (ii) require the Borrower and the
Co-Borrowers to, and the Borrower and the Co-Borrowers shall thereupon, deposit
in a non-interest bearing account with the Administrative Agent, as cash
collateral for its Obligations under the Loan Documents, an amount equal to the
maximum amount currently or at any time thereafter available to be drawn on all
outstanding Letters of Credit, and the Borrower and the Co-Borrowers hereby
pledge to the Administrative Agent and the Lenders, and grants to the
Administrative Agent and the Lenders a security interest in, all such cash as
security for such Obligations. Upon the curing of all existing Events of Default
to the satisfaction of the Required Lenders, the Administrative Agent shall
return such cash collateral to the Borrower and the Co-Borrowers; and
9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.
If an Event of Default specified under Section 9.1.14 or 9.1.15 shall
occur, the
Lenders shall be under no further obligations to make Loans hereunder and the
unpaid principal amount of the Notes then outstanding and all interest accrued
thereon, any unpaid fees and all other Indebtedness of the Borrower and the
Co-Borrowers to the Lenders hereunder and thereunder shall be immediately due
and payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived; and
9.2.3 Set-off.
If an Event of Default shall occur and be continuing, any Lender to whom
any Obligation is owed by any Loan Party hereunder or under any other Loan
Document or any participant of such Lender which has agreed in writing to be
bound by the provisions of Section 10.13 and any branch, Subsidiary or Affiliate
of such Lender or participant anywhere in the world shall have the right, in
addition to all other rights and remedies available to it, without notice to
such Loan Party, to set-off against and apply to the then unpaid balance of all
the Loans and all other Obligations of the Borrower and the Co-Borrowers and the
other Loan Parties hereunder or under any other Loan Document any debt owing to,
and any other funds held in any manner for the account of, the Borrower, the
Co-Borrowers or such other Loan Party by such Lender or participant or by such
branch, Subsidiary or Affiliate, including all funds in all deposit accounts
(whether time or demand, general or special, provisionally credited or finally
credited, or otherwise) now or hereafter maintained by the Borrower, the
Co-Borrowers or such other Loan Party for its own account (but not including
funds held in custodian or trust accounts) with such Lender or participant or
such branch, Subsidiary or Affiliate. Such right shall exist whether or not any
Lender or the Administrative Agent shall have made any demand under this
Agreement or any other Loan Document, whether or not such debt owing to or funds
held for the account of the Borrower, the Co-Borrowers or such other Loan Party
is or are matured or unmatured and regardless of the existence or adequacy of
any Collateral, Guaranty or any other security, right or remedy available to any
Lender or the Administrative Agent; and
9.2.4 Suits, Actions, Proceedings.
If an Event of Default shall occur and be continuing, and whether or not
the
Administrative Agent shall have accelerated the maturity of Loans pursuant to
any of the foregoing provisions of this Section 9.2, the Administrative Agent or
any Lender, if owed any amount with respect to the Notes, may proceed to protect
and enforce its rights by suit in equity, action at law and/or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement or the Notes, including as permitted by applicable
Law the obtaining of the ex parte appointment of a receiver, and, if such amount
shall have become due, by declaration or otherwise, proceed to enforce the
payment thereof or any other legal or equitable right of the Administrative
Agent or such Lender; and
9.2.5 Application of Proceeds.
From and after the date on which the Administrative Agent has taken any
action pursuant to this Section 9.2 and until all Obligations of the Loan
Parties have been paid in full, any and all proceeds received by the
Administrative Agent from any sale or other disposition of the Collateral, or
any part thereof, or the exercise of any other remedy by the Administrative
Agent, shall be applied as follows:
(i) first, to reimburse the Administrative Agent and the Lenders for
out-of-pocket costs, expenses and disbursements, including reasonable attorneys'
and paralegals' fees and legal expenses, incurred by the Administrative Agent or
the Lenders in connection with realizing on the Collateral or collection of any
Obligations of any of the Loan Parties under any of the Loan Documents,
including advances made by the Lenders or any one of them or the Administrative
Agent for the reasonable maintenance, preservation, protection or enforcement
of, or realization upon, the Collateral, including advances for taxes,
insurance, repairs and the like and reasonable expenses incurred to sell or
otherwise realize on, or prepare for sale or other realization on, any of the
Collateral;
(ii) second, to the repayment of all Indebtedness then due and unpaid of
the Loan Parties to the Lenders incurred under this Agreement or any of the
other Loan Documents, whether of principal, interest, fees, expenses or
otherwise, in such manner as the Administrative Agent may determine in its
discretion; and
(iii) the balance, if any, as required by Law.
9.2.6 Other Rights and Remedies.
In addition to all of the rights and remedies contained in this Agreement
or in any of the other Loan Documents (including the Mortgage), the
Administrative Agent shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code or other applicable Law, all of which
rights and remedies shall be cumulative and non-exclusive, to the extent
permitted by Law. The Administrative Agent may, and upon the request of the
Required Lenders shall, exercise all post-default rights granted to the
Administrative Agent and the Lenders under the Loan Documents or applicable Law.
9.3 Notice of Sale.
Any notice required to be given by the Administrative Agent of
a sale, lease, or other disposition of the Collateral or any other intended
action by the Administrative Agent, if given ten (10) days prior to such
proposed action, shall constitute commercially reasonable and fair notice
thereof to the Borrower and the Co-Borrowers.
10. THE AGENT
10.1 Appointment.
Each Lender hereby irrevocably designates, appoints and
authorizes National City to act as Administrative Agent for such Lender under
this Agreement and to execute and deliver or accept on behalf of each of the
Lenders the other Loan Documents. Each Lender hereby irrevocably authorizes, and
each holder of any Note by the acceptance of a Note shall be deemed irrevocably
to authorize, the Administrative Agent to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and any other
instruments and agreements referred to herein, and to exercise such powers and
to perform such duties hereunder as are specifically delegated to or required of
the Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. National City agrees to act as the Administrative
Agent on behalf of the Lenders to the extent provided in this Agreement.
10.2 Delegation of Duties.
The Administrative Agent may perform any of its duties
hereunder by or through agents or employees (provided such delegation does not
constitute a relinquishment of its duties as Administrative Agent) and, subject
to Sections 10.5 and 10.6, shall be entitled to engage and pay for the advice or
services of any attorneys, accountants or other experts concerning all matters
pertaining to its duties hereunder and to rely upon any advice so obtained.
10.3 Nature of Duties; Independent Credit Investigation.
The Administrative Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and no
implied covenants, functions, responsibilities, duties, obligations, or
liabilities shall be read into this Agreement or otherwise exist. The duties of
the Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement a fiduciary or
trust relationship in respect of any Lender; and nothing in this Agreement,
expressed or implied, is intended to or shall be so construed as to impose upon
the Administrative Agent any obligations in respect of this Agreement except as
expressly set forth herein. Without limiting the generality of the foregoing,
the use of the term "agent" in this Agreement with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable Law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties. Each Lender expressly acknowledges (i) that the
Administrative Agent has not made any representations or warranties to it and
that no act by the Administrative Agent hereafter taken, including any review of
the affairs of any of the Loan Parties, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender; (ii) that
it has made and will continue to make, without reliance upon the Administrative
Agent, its own independent investigation of the financial condition and affairs
and its own appraisal of the creditworthiness of each of the Loan Parties in
connection with this Agreement and the making and continuance of the Loans
hereunder; and (iii) except as expressly provided herein, that the
Administrative Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before the
making of any Loan or at any time or times thereafter.
10.4.....Actions in Discretion of Administrative Agent; Instructions from
the Lenders.
The Administrative Agent agrees, upon the written request of
the Required Lenders, to take or refrain from taking any action of the type
specified as being within the Administrative Agent's rights, powers or
discretion herein, provided that the Administrative Agent shall not be required
to take any action which exposes the Administrative Agent to personal liability
or which is contrary to this Agreement or any other Loan Document or applicable
Law. In the absence of a request by the Required Lenders, the Administrative
Agent shall have authority, in its sole discretion, to take or not to take any
such action, unless this Agreement specifically requires the consent of the
Required Lenders or all of the Lenders. Any action taken or failure to act
pursuant to such instructions or discretion shall be binding on the Lenders,
subject to Section 10.6. Subject to the provisions of Section 10.6, no Lender
shall have any right of action whatsoever against the Administrative Agent as a
result of the Administrative Agent acting or refraining from acting hereunder in
accordance with the instructions of the Required Lenders, or in the absence of
such instructions, in the absolute discretion of the Administrative Agent.
10.5 Reimbursement and Indemnification of Administrative Agent.
The Borrower and the Co-Borrowers unconditionally agree to pay
or reimburse the Administrative Agent and hold the Administrative Agent harmless
against (a) liability for the payment of all reasonable out-of-pocket costs,
expenses and disbursements, including fees and expenses of counsel (including
the allocated costs of staff counsel), appraisers and environmental consultants,
incurred by the Administrative Agent (i) in connection with the development,
negotiation, preparation, printing, execution, administration, syndication,
interpretation and performance of this Agreement and the other Loan Documents,
(ii) relating to any requested amendments, waivers or consents pursuant to the
provisions hereof, (iii) in connection with the enforcement of this Agreement or
any other Loan Document or collection of amounts due hereunder or thereunder or
the proof and allowability of any claim arising under this Agreement or any
other Loan Document, whether in bankruptcy or receivership proceedings or
otherwise, and (iv) in any workout or restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms hereof or
of any rights hereunder or under any other Loan Document or in connection with
any foreclosure, collection or bankruptcy proceedings, and (b) all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Administrative Agent, in its capacity as
such, in any way relating to or arising out of this Agreement or any other Loan
Documents or any action taken or omitted by the Administrative Agent hereunder
or thereunder, provided that the Borrower and the Co-Borrowers shall not be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements if the
same results from the Administrative Agent's gross negligence or willful
misconduct, or if the Borrower and the Co-Borrowers were not given notice of the
subject claim and the opportunity to participate in the defense thereof, at
their expense (except that the Borrower and the Co-Borrowers shall remain liable
to the extent such failure to give notice does not result in a loss to the
Borrower and the Co-Borrowers), or if the same results from a compromise or
settlement agreement entered into without the consent of the Borrower and the
Co-Borrowers, which shall not be unreasonably withheld. In addition, the
Borrower and the Co-Borrowers agree to reimburse and pay all reasonable
out-of-pocket expenses of the Administrative Agent's regular employees and
agents engaged periodically to perform audits of the Loan Parties' books,
records and business properties.
10.6 Exculpatory Provisions; Limitation of Liability.
Neither the Administrative Agent nor any of its directors,
officers, employees, agents, attorneys or Affiliates shall (a) be liable to any
Lender for any action taken or omitted to be taken by it or them hereunder, or
in connection herewith including pursuant to any Loan Document, unless caused by
its or their own gross negligence or willful misconduct, (b) be responsible in
any manner to any of the Lenders for the effectiveness, enforceability,
genuineness, validity or the due execution of this Agreement or any other Loan
Documents or for any recital, representation, warranty, document, certificate,
report or statement herein or made or furnished under or in connection with this
Agreement or any other Loan Documents, or (c) be under any obligation to any of
the Lenders to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions hereof or thereof on the part of the
Loan Parties, or the financial condition of the Loan Parties, or the existence
or possible existence of any Event of Default or Potential Default. No claim may
be made by any of the Loan Parties, any Lender, the Administrative Agent or any
of their respective Subsidiaries against the Administrative Agent, any Lender or
any of their respective directors, officers, employees, agents, attorneys or
Affiliates, or any of them, for any special, indirect or consequential damages
or, to the fullest extent permitted by Law, for any punitive damages in respect
of any claim or cause of action (whether based on contract, tort, statutory
liability, or any other ground) based on, arising out of or related to any Loan
Document or the transactions contemplated hereby or any act, omission or event
occurring in connection therewith, including the negotiation, documentation,
administration or collection of the Loans, and each of the Loan Parties, (for
itself and on behalf of each of its Subsidiaries), the Administrative Agent and
each Lender hereby waive, releases and agree never to sue upon any claim for any
such damages, whether such claim now exists or hereafter arises and whether or
not it is now known or suspected to exist in its favor. Each Lender agrees that,
except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Administrative Agent hereunder or given to the
Administrative Agent for the account of or with copies for the Lenders, the
Administrative Agent and each of its directors, officers, employees, agents,
attorneys or Affiliates shall not have any duty or responsibility to provide any
Lender with an credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Loan Parties which may come into the possession of the Administrative Agent
or any of its directors, officers, employees, agents, attorneys or Affiliates.
10.7 Reimbursement and Indemnification of Administrative Agent by Lenders.
Each Lender agrees to reimburse and indemnify the
Administrative Agent (to the extent not reimbursed by the Borrower and the
Co-Borrowers and without limiting the Obligation of the Borrower and the
Co-Borrowers to do so) in proportion to its Ratable Share from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
and reasonable costs, expenses or disbursements, including reasonable attorneys'
fees and disbursements (including the allocated costs of staff counsel), and
costs of appraisers and environmental consultants, of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent, in its capacity as such, in any way relating to or arising
out of this Agreement or any other Loan Documents or any action taken or omitted
by the Administrative Agent hereunder or thereunder, provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
(a) if the same results from the Administrative Agent's gross negligence or
willful misconduct, or (b) if such Lender was not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its expense
(except that such Lender shall remain liable to the extent such failure to give
notice does not result in a loss to the Lender), or (c) if the same results from
a compromise and settlement agreement entered into without the consent of such
Lender, which shall not be unreasonably withheld. In addition, each Lender
agrees promptly upon demand to reimburse the Administrative Agent (to the extent
not reimbursed by the Borrower and the Co-Borrowers and without limiting the
Obligation of the Borrower and the Co-Borrowers to do so) in proportion to its
Ratable Share for all amounts due and payable by the Borrower and the
Co-Borrowers to the Administrative Agent in connection with the Administrative
Agent's periodic audit of the Loan Parties' books, records and business
properties.
10.8 Reliance by Administrative Agent.
The Administrative Agent shall be entitled to rely upon any
writing, telegram, telex or teletype message, resolution, notice, consent,
certificate, letter, cablegram, statement, order or other document or
conversation by telephone or otherwise believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons, and upon
the advice and opinions of counsel and other professional advisers selected by
the Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action hereunder unless it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action.
10.9 Notice of Default.
The Administrative Agent shall not be deemed to have knowledge
or notice of the occurrence of any Potential Default or Event of Default unless
the Administrative Agent has received written notice from a Lender, the Borrower
or the Co-Borrowers referring to this Agreement, describing such Potential
Default or Event of Default and stating that such notice is a "notice of
default."
10.10 Notices.
The Administrative Agent shall promptly send to each Lender a
copy of all notices received from the Borrower and the Co-Borrowers pursuant to
the provisions of this Agreement or the other Loan Documents promptly upon
receipt thereof. The Administrative Agent shall promptly notify the Borrower,
the Co-Borrowers and the other Lenders of each change in the Base Rate and the
effective date thereof. Upon the request of any Lender, the Administrative Agent
shall provide such Lender with any report provided by the Borrower and the
Co-Borrowers to the Administrative Agent pursuant to the provisions of this
Agreement or the Loan Documents which are not required to be provided to all the
Lenders.
10.11 Lenders in Their Individual Capacities.
With respect to its Revolving Credit Commitment, the Revolving
Credit Loans, the Term Loan A Commitment, the Term Loan A, the Term Loan B
Commitment and the Term Loan B made by it and any other rights and powers given
to it as a Lender hereunder or under any of the other Loan Documents, the
Administrative Agent shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not the Administrative
Agent, and the term "Lenders" shall, unless the context otherwise indicates,
include the Administrative Agent in its individual capacity. National City and
its Affiliates and each of the Lenders and their respective Affiliates may,
without liability to account, except as prohibited herein, make loans to, accept
deposits from, discount drafts for, act as trustee under indentures of, and
generally engage in any kind of banking or trust business with, the Loan Parties
and their Affiliates, in the case of the Administrative Agent, as though it were
not acting as Administrative Agent hereunder and in the case of each Lender, as
though such Lender were not a Lender hereunder. The Lenders acknowledge that,
pursuant to such activities, the Administrative Agent or its Affiliates may (i)
receive information regarding the Loan Parties (including information that may
be subject to confidentiality obligations in favor of the Loan Parties) and
acknowledge that the Administrative Agent shall be under no obligation to
provide such information to them, and (ii) accept fees and other consideration
from the Loan Parties for services in connection with this Agreement and
otherwise without having to account for the same to the Lenders.
10.12 Holders of Notes.
The Administrative Agent may deem and treat any payee of any
Note as the owner thereof for all purposes hereof unless and until written
notice of the assignment or transfer thereof shall have been filed with the
Administrative Agent. Any request, authority or consent of any Person who at the
time of making such request or giving such authority or consent is the holder of
any Note shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
10.13 Equalization of Lenders.
The Lenders and the holders of any participations in any Notes
agree among themselves that, with respect to all amounts received by any Lender
or any such holder for application on any Obligation hereunder or under any Note
or under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Lenders and such
holders in proportion to their interests in payments under the Notes, except as
otherwise provided in Section 4.4.3, 5.4.3 or 5.6. The Lenders or any such
holder receiving any such amount shall purchase for cash from each of the other
Lenders an interest in such Lender's Loans in such amount as shall result in a
ratable participation by the Lenders and each such holder in the aggregate
unpaid amount under the Notes, provided that if all or any portion of such
excess amount is thereafter recovered from the Lender or the holder making such
purchase, such purchase shall be rescinded and the purchase price restored to
the extent of such recovery, together with interest or other amounts, if any,
required by law (including court order) to be paid by the Lender or the holder
making such purchase.
10.14 Successor Administrative Agent.
The Administrative Agent (i) may resign as Administrative
Agent or (ii) shall resign if such resignation is requested by the Required
Lenders (if the Administrative Agent is a Lender, the Administrative Agent's
Loans and its Commitment shall be considered in determining whether the Required
Lenders have requested such resignation) or required by Section 5.4.3, in either
case of (i) or (ii) by giving not less than thirty (30) days' prior written
notice to the Borrower and the Co-Borrowers. If the Administrative Agent shall
resign under this Agreement, then either (a) the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, subject to the consent
of the Borrower and the Co-Borrowers, such consent not to be unreasonably
withheld, or (b) if a successor agent shall not be so appointed and approved
within the thirty (30) day period following the Administrative Agent's notice to
the Lenders of its resignation, then the Administrative Agent shall appoint,
with the consent of the Borrower and the Co-Borrowers, such consent not to be
unreasonably withheld, a successor agent who shall serve as Administrative Agent
until such time as the Required Lenders appoint and the Borrower and the
Co-Borrowers consent to the appointment of a successor agent. Upon its
appointment pursuant to either clause (a) or (b) above, such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent, and
the term "Administrative Agent" shall mean such successor agent, effective upon
its appointment, and the former Administrative Agent's rights, powers and duties
as Administrative Agent shall be terminated without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement. After the resignation of any Administrative Agent hereunder, the
provisions of this Section 0 shall inure to the benefit of such former
Administrative Agent and such former Administrative Agent shall not by reason of
such resignation be deemed to be released from liability for any actions taken
or not taken by it while it was an Administrative Agent under this Agreement.
10.15 Availability of Funds.
The Administrative Agent may assume that each Lender has made
or will make the proceeds of a Loan available to the Administrative Agent unless
the Administrative Agent shall have been notified by such Lender on or before
the later of (1) the close of Business on the Business Day preceding the
Borrowing Date with respect to such Loan or (2) 24 hours before the time on
which the Administrative Agent actually funds the proceeds of such Loan to the
Borrower and the Co-Borrowers (whether using its own funds pursuant to this
Section 10.15 or using proceeds deposited with the Administrative Agent by the
Lenders and whether such funding occurs before or after the time on which
Lenders are required to deposit the proceeds of such Loan with the
Administrative Agent). The Administrative Agent may, in reliance upon such
assumption (but shall not be required to), make available to the Borrower and
the Co-Borrowers a corresponding amount. If such corresponding amount is not in
fact made available to the Administrative Agent by such Lender, the
Administrative Agent shall be entitled to recover such amount on demand from
such Lender (or, if such Lender fails to pay such amount forthwith upon such
demand from the Borrower and the Co-Borrowers) together with interest thereon,
in respect of each day during the period commencing on the date such amount was
made available to the Borrower and the Co-Borrowers and ending on the date the
Administrative Agent recovers such amount, at a rate per annum equal to the
applicable interest rate in respect of the Loan.
10.16 Calculations.
In the absence of gross negligence or willful misconduct, the
Administrative Agent shall not be liable for any error in computing the amount
payable to any Lender whether in respect of the Loans, fees or any other amounts
due to the Lenders under this Agreement. In the event an error in computing any
amount payable to any Lender is made, the Administrative Agent, the Borrower,
the Co-Borrowers and each affected Lender shall, forthwith upon discovery of
such error, make such adjustments as shall be required to correct such error,
and any compensation therefor will be calculated at the Federal Funds Effective
Rate.
10.17 Beneficiaries.
Except as expressly provided herein, the provisions of this
Section 10 are solely for the benefit of the Administrative Agent and the
Lenders, and the Loan Parties shall not have any rights to rely on or enforce
any of the provisions hereof. In performing its functions and duties under this
Agreement, the Administrative Agent shall act solely as agent of the Lenders and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any of the Loan Parties.
11. MISCELLANEOUS
11.1 Modifications, Amendments or Waivers.
With the written consent of the Required Lenders, the
Administrative Agent, acting on behalf of all the Lenders, and the Borrower and
the Co-Borrowers, on behalf of the Loan Parties, may from time to time enter
into written agreements amending or changing any provision of this Agreement or
any other Loan Document or the rights of the Lenders or the Loan Parties
hereunder or thereunder, or may grant written waivers or consents to a departure
from the due performance of the Obligations of the Loan Parties hereunder or
thereunder. Any such agreement, waiver or consent made with such written consent
shall be effective to bind all the Lenders and the Loan Parties; provided, that,
without the written consent of all the Lenders, no such agreement, waiver or
consent may be made which will:
11.1.1 Increase of Commitment; Extension or Expiration Date.
Increase the amount of the Revolving Credit Commitment, the Term Loan A
Commitment or the Term Loan B Commitment of any Lender hereunder or extend the
Expiration Date, the Term Loan A Maturity Date or the Term Loan B Maturity Date;
11.1.2...Extension of Payment; Reduction of Principal Interest or Fees;
Modification of Terms of Payment.
Whether or not any Loans are outstanding, extend the time for payment of
principal or interest of any Loan (excluding the due date of any mandatory
prepayment of a Loan or any mandatory Commitment reduction in connection with
such a mandatory repayment hereunder except for mandatory reductions of the
Commitments on the Expiration Date), the Commitment Fee or any other fee payable
to any Lender, or reduce the principal amount of or the rate of interest borne
by any Loan or reduce the Commitment Fee or any other fee payable to any Lender,
or otherwise affect the terms of payment of the principal of or interest of any
Loan, the Commitment Fee or any other fee payable to any Lender;
11.1.3 Release of Collateral or Guarantor.
Except for sales of assets permitted by Section 8.2.7, release any
Collateral, any Guarantor from its Obligations under the Guaranty Agreement or
any other security for any of the Loan Parties' Obligations; or
11.1.4 Miscellaneous
Amend Section 5.2 [Pro Rata Treatment of Lenders], 10.6 [Exculpatory
Provisions, etc.] or 10.13 [Equalization of Lenders] or this Section 11.1, alter
any provision regarding the pro rata treatment of the Lenders, change the
definition of Required Lenders, or change any requirement providing for the
Lenders or the Required Lenders to authorize the taking of any action hereunder;
provided, further, that no agreement, waiver or consent which would modify the
interests, rights or obligations of the Administrative Agent in its capacity as
Administrative Agent or as the issuer of Letters of Credit shall be effective
without the written consent of the Administrative Agent; provided further, that
notwithstanding any provision of this Section 11.1 to the contrary, during the
Syndications Period any provision of this Agreement that affects the structure,
terms or pricing of the Term Loans B or the Term Loan B Commitments (including,
without limitation, the interest rates or interest rate margins applicable
thereto and the amortization of the Term Loans B subsequent to the occurrence of
the Expiration Date and the Term Loan A Maturity Date) may be amended, modified
or waived with the written consent of (i) the holders of one hundred percent
(100%) of the Term Loans B outstanding (or, if no Term Loans B are outstanding,
one hundred percent (100%) of the Term Loan B Commitments), (ii) the
Administrative Agent, and (iii) the Borrower and the Co-Borrowers, for
themselves and on behalf of the Loan Parties, except that in no event may the
amount of the Term Loan B Commitments or the Term Loans B be reduced pursuant to
any such amendment, modification or waiver.
11.2 No Implied Waivers; Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of the
Administrative Agent or any Lender in exercising any right, power, remedy or
privilege under this Agreement or any other Loan Document shall affect any other
or future exercise thereof or operate as a waiver thereof, nor shall any single
or partial exercise thereof or any abandonment or discontinuance of steps to
enforce such a right, power, remedy or privilege preclude any further exercise
thereof or of any other right, power, remedy or privilege. The rights and
remedies of the Administrative Agent and the Lenders under this Agreement and
any other Loan Documents are cumulative and not exclusive of any rights or
remedies which they would otherwise have. Any waiver, permit, consent or
approval of any kind or character on the part of any Lender of any breach or
default under this Agreement or any such waiver of any provision or condition of
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing.
11.3 Reimbursement and Indemnification of Lenders; Taxes.
The Borrower and the Co-Borrowers agree unconditionally upon
demand to pay or reimburse to each Lender (other than the Administrative Agent,
as to which the Borrower's and the Co-Borrowers' Obligations are set forth in
Section 10.5) and to save such Lender harmless against (i) liability for the
payment of all reasonable out-of-pocket costs, expenses and disbursements
(including fees and expenses of counsel (including allocated costs of staff
counsel) for each Lender), incurred by such Lender (a) in connection with the
enforcement of this Agreement or any other Loan Document, or collection of
amounts due hereunder or thereunder or the proof and allowability of any claim
arising under this Agreement or any other Loan Document, whether in bankruptcy
or receivership proceedings or otherwise, and (b) in any workout or
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings, or (ii) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against such Lender, in its capacity as such, in any way relating to or arising
out of this Agreement or any other Loan Documents or any action taken or omitted
by such Lender hereunder or thereunder, provided that the Borrower and the
Co-Borrowers shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements (A) if the same results from such Lender's gross
negligence or willful misconduct, or (B) if the Borrower and the Co-Borrowers
were not given notice of the subject claim and the opportunity to participate in
the defense thereof, at its expense (except that the Borrower and the
Co-Borrowers shall remain liable to the extent such failure to give notice does
not result in a loss to the Borrower and the Co-Borrowers), or (C) if the same
results from a compromise or settlement agreement entered into without the
consent of the Borrower and the Co-Borrowers, which shall not be unreasonably
withheld. The Lenders will attempt to minimize the fees and expenses of legal
counsel for the Lenders which are subject to reimbursement by the Borrower and
the Co-Borrowers hereunder by considering the usage of one law firm to represent
the Lenders and the Administrative Agent if appropriate under the circumstances.
The Borrower and the Co-Borrowers agree unconditionally to pay all stamp,
document, transfer, recording or filing taxes or fees and similar impositions
now or hereafter determined by the Administrative Agent or any Lender to be
payable in connection with this Agreement or any other Loan Document, and the
Borrower and the Co-Borrowers agree unconditionally to save the Administrative
Agent and the Lenders harmless from and against any and all present or future
claims, liabilities or losses with respect to or resulting from any omission to
pay or delay in paying any such taxes, fees or impositions.
11.4 Holidays.
Whenever payment of a Loan to be made or taken hereunder shall
be due on a day which is not a Business Day such payment shall be due on the
next Business Day and such extension of time shall be included in computing
interest and fee, except that the Loans shall be due on the Business Day
preceding the Expiration Date if the Expiration Date is not a Business Day.
Whenever any payment or action to be made or taken hereunder (other than payment
of the Loans) shall be stated to be due on a day which is not a Business Day,
such payment or action shall be made or taken on the next following Business Day
(except as provided in Section 4.2 with respect to Interest Periods under the
Euro-Rate Option), and such extension of time shall not be included in computing
interest or fees, if any, in connection with such payment or action.
11.5 Funding by Branch, Subsidiary or Affiliate.
11.5.1 Notional Funding.
Each Lender shall have the right from time to time, without notice to the
Borrower or the Co-Borrowers, to deem any branch, Subsidiary or Affiliate (which
for the purposes of this Section 11.5 shall mean any corporation or association
which is directly or indirectly controlled by or is under direct or indirect
common control with any corporation or association which directly or indirectly
controls such Lender) of such Lender to have made, maintained or funded any Loan
to which the Euro-Rate Option applies at any time, provided that immediately
following (on the assumption that a payment were then due from the Borrower and
the Co-Borrowers to such other office), and as a result of such change, the
Borrower and the Co-Borrowers would not be under any greater financial
obligation pursuant to Section 5.6 than they would have been in the absence of
such change. Notional funding offices may be selected by each Lender without
regard to such Lender's actual methods of making, maintaining or funding the
Loans or any sources of funding actually used by or available to such Lender.
11.5.2 Actual Funding.
Each Lender shall have the right from time to time to make or maintain any
Loan by arranging for a branch, Subsidiary or Affiliate of such Lender to make
or maintain such Loan subject to the last sentence of this Section 11.5.2. If
any Lender causes a branch, Subsidiary or Affiliate to make or maintain any part
of the Loans hereunder, all terms and conditions of this Agreement shall, except
where the context clearly requires otherwise, be applicable to such part of the
Loans to the same extent as if such Loans were made or maintained by such
Lender, but in no event shall any Lender's use of such a branch, Subsidiary or
Affiliate to make or maintain any part of the Loans hereunder cause such Lender
or such branch, Subsidiary or Affiliate to incur any cost or expenses payable by
the Borrower and the Co-Borrowers hereunder or require the Borrower and the
Co-Borrowers to pay any other compensation to any Lender (including any expenses
incurred or payable pursuant to Section 5.6) which would otherwise not be
incurred.
11.6 Notices.
All notices, requests, demands, directions and other
communications (as used in this Section 11.6, collectively referred to as
"Notices") given to or made upon any party hereto under the provisions of this
Agreement shall be by telephone or in writing (including telex or facsimile
communication) unless otherwise expressly permitted hereunder and shall be
delivered or sent by telex or facsimile to the respective parties at the
addresses and numbers set forth under their respective names on Schedule 1.1(B)
hereof or in accordance with any subsequent unrevoked written direction from any
party to the others. All Notices shall, except as otherwise expressly herein
provided, be effective (a) in the case of telex or facsimile, when received, (b)
in the case of hand-delivered Notice, when hand-delivered, (c) in the case of
telephone, when telephoned, provided, however, that in order to be effective,
telephonic Notices must be confirmed in writing no later than the next day by
letter, facsimile or telex, (d) if given by mail, four (4) days after such
communication is deposited in the mail with first-class postage prepaid, return
receipt requested, and (e) if given by any other means (including by air
courier), when delivered; provided, that Notices to the Administrative Agent
shall not be effective until received. Any Lender giving any Notice to any Loan
Party shall simultaneously send a copy thereof to the Administrative Agent, and
the Administrative Agent shall promptly notify the other Lenders of the receipt
by it of any such Notice.
11.7 Severability.
The provisions of this Agreement are intended to be severable.
If any provision of this Agreement shall be held invalid or unenforceable in
whole or in part in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
11.8 Governing Law.
Each Letter of Credit and Section 2.9 shall be subject to the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, as the same may be
revised or amended from time to time, and to the extent not inconsistent
therewith, the internal laws of the Commonwealth of Pennsylvania without regard
to its conflict of laws principles and the balance of this Agreement shall be
deemed to be a contract under the Laws of the Commonwealth of Pennsylvania and
for all purposes shall be governed by and construed and enforced in accordance
with the internal laws of the Commonwealth of Pennsylvania without regard to its
conflict of laws principles.
11.9 Prior Understanding.
This Agreement, the other Loan Documents and the letter
agreement dated September 22, 1999, between the Administrative Agent, the
Syndication Agents, and the Borrower supersede all prior understandings and
agreements, whether written or oral, between the parties hereto and thereto
relating to the transactions provided for herein and therein, including any
prior confidentiality agreements and commitments.
11.10 Duration; Survival.
All representations and warranties of the Loan Parties
contained herein or made in connection herewith shall survive the making of
Loans and issuance of Letters of Credit and shall not be waived by the execution
and delivery of this Agreement, any investigation by the Administrative Agent or
the Lenders, the making of Loans, issuance of Letters of Credit, or payment in
full of the Loans. All covenants and agreements of the Loan Parties contained in
Sections 8.1, 8.2 and 8.3 herein shall continue in full force and effect from
and after the date hereof so long as the Borrower and the Co-Borrowers may
borrow or request Letters of Credit hereunder and until termination of the
Commitments and payment in full of the Loans and expiration or termination of
all Letters of Credit. All covenants and agreements of the Borrower and the
Co-Borrowers contained herein relating to the payment of principal, interest,
premiums, additional compensation or expenses and indemnification, including
those set forth in the Notes, Section 5 and Sections 10.5, 10.7 and 11.3, shall
survive payment in full of the Loans, expiration or termination of the Letters
of Credit and termination of the Commitments.
11.11 Successors and Assigns.
(i) This Agreement shall be binding upon and shall inure to the benefit of
the Lenders, the Administrative Agent, the Loan Parties and their respective
successors and assigns, except that none of the Loan Parties may assign or
transfer any of its rights and Obligations hereunder or any interest herein.
Each Lender may, at its own cost, make assignments of or sell participations in
all or any part of its Commitment and the Loans made by it to one or more banks
or other entities, subject to the consent of the Borrower, the Co-Borrowers and
the Administrative Agent with respect to any assignee, such consent not to be
unreasonably withheld, provided that (1) no consent of the Borrower or the
Co-Borrowers shall be required in the case of an assignment by a Lender to an
Affiliate of such Lender or to the extent an Event of Default has occurred and
is continuing, and (2) assignments may not be made in amounts less than
$1,000,000. In the case of an assignment, upon receipt by the Administrative
Agent of the Assignment and Assumption Agreement, the assignee shall have, to
the extent of such assignment (unless otherwise provided therein), the same
rights, benefits and obligations as it would have if it had been a signatory
Lender hereunder, the Commitments shall be adjusted accordingly, and the
Assignor shall be relieved from all obligations and liabilities which accrue
after the Assignment and based upon the Commitment and related rights assigned
to the Assignee. Upon surrender of any Note subject to such assignment, the
Borrower and the Co-Borrowers shall execute and deliver a new Note to the
assignee in an amount equal to the amount of the Revolving Credit Commitment,
the Term Loan A or the Term Loan B assumed by it and a new Revolving Credit
Note, Term Note A or Term Note B to the assigning Lender in an amount equal to
the Revolving Credit Commitment, Term Loan A or Term Loan B retained by it
hereunder. The assigning Lender shall pay to the Administrative Agent a service
fee in the amount of $3,500 for each assignment. In the case of a participation,
the participant shall only have the rights specified in Section 9.2.3 (the
participant's rights against such Lender in respect of such participation to be
those set forth in the agreement executed by such Lender in favor of the
participant relating thereto and not to include any voting rights except with
respect to changes of the type referenced in Sections 11.1.1, 11.1.2, or
11.1.3), all of such Lender's obligations under this Agreement or any other Loan
Document shall remain unchanged, and all amounts payable by any Loan Party
hereunder or thereunder shall be determined as if such Lender had not sold such
participation.
(ii) Any assignee or participant which is not incorporated under the Laws
of the United States of America or a state thereof shall deliver to the Borrower
and the Co-Borrowers and the Administrative Agent the form of certificate
described in Section 11.17 relating to federal income tax withholding. Each
Lender may furnish any publicly available information concerning any Loan Party
or its Subsidiaries and any other information concerning any Loan Party or its
Subsidiaries in the possession of such Lender from time to time to assignees and
participants (including prospective assignees or participants), provided that
such assignees and participants agree to be bound by the provisions of Section
11.12.
(iii) Notwithstanding any other provision in this Agreement, any Lender may
at any time pledge or grant a security interest in all or any portion of its
rights under this Agreement, its Note and the other Loan Documents to any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR Section 203.14 without notice to or consent of the Borrower,
the Co-Borrowers or the Administrative Agent. No such pledge or grant of a
security interest shall release the transferor Lender of its obligations
hereunder or under any other Loan Document.
11.12 Confidentiality.
The Administrative Agent and the Lenders each agree to keep
confidential all information obtained from any Loan Party or its Subsidiaries
which is nonpublic and confidential or proprietary in nature (including any
information the Borrower and the Co-Borrowers specifically designates as
confidential), except as provided below, and to use such information only in
connection with their respective capacities under this Agreement and for the
purposes contemplated hereby. The Administrative Agent and the Lenders shall be
permitted to disclose such information (i) to outside legal counsel, Affiliates,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement, subject to
agreement of such Persons to maintain the confidentiality, (ii) to potential
assignees and participants as contemplated by Section 11.11, (iii) to the extent
requested by any bank regulatory authority or, with notice to the Borrower and
the Co-Borrowers (to the extent permitted by applicable Law), as otherwise
required by applicable Law or by any subpoena or similar legal process, or in
connection with any investigation or proceeding arising out of the transactions
contemplated by this Agreement, (iv) if it becomes publicly available other than
as a result of a breach of this Agreement or becomes available from a source not
known to be subject to confidentiality restrictions, or (v) if the Borrower or
the Co-Borrowers shall have consented to such disclosure.
11.13 Counterparts.
This Agreement may be executed by different parties hereto on
any number of separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.
11.14 Administrative Agent's or Lender's Consent.
Whenever the Administrative Agent's or any Lender's consent is
required to be obtained under this Agreement or any of the other Loan Documents
as a condition to any action, inaction, condition or event, the Administrative
Agent and each Lender shall be authorized to give or withhold such consent in
its sole and absolute discretion and to condition its consent upon the giving of
additional collateral, the payment of money or any other matter.
11.15 Exceptions.
The representations, warranties and covenants contained herein
shall be independent of each other, and no exception to any representation,
warranty or covenant shall be deemed to be an exception to any other
representation, warranty or covenant contained herein unless expressly provided,
nor shall any such exceptions be deemed to permit any action or omission that
would be in contravention of applicable Law.
11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY AND
THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH
LOAN PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 0 AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES
ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. EACH LOAN PARTY, THE AGENT AND THE LENDERS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
11.17 Tax Withholding Clause.
Each Lender or assignee or participant of a Lender that is not
incorporated under the Laws of the United States of America or a state thereof
agrees that it will deliver to each of the Borrower, the Co-Borrowers and the
Administrative Agent two (2) duly completed copies of the following: (i)
Internal Revenue Service Form W-9, 4224 or 1001, or other applicable form
prescribed by the Internal Revenue Service, certifying that such Lender,
assignee or participant is entitled to receive payments under this Agreement and
the other Loan Documents without deduction or withholding of any United States
federal income taxes, or is subject to such tax at a reduced rate under an
applicable tax treaty, or (ii) Internal Revenue Service Form W-8 or other
applicable form or a certificate of such Lender, assignee or participant
indicating that no such exemption or reduced rate is allowable with respect to
such payments. Each Lender, assignee or participant required to deliver to the
Borrower, the Co-Borrowers and the Administrative Agent a form or certificate
pursuant to the preceding sentence shall deliver such form or certificate as
follows: (A) each Lender which is a party hereto on the Closing Date shall
deliver such form or certificate at least five (5) Business Days prior to the
first date on which any interest or fees are payable by the Borrower and the
Co-Borrowers hereunder for the account of such Lender; (B) each assignee or
participant shall deliver such form or certificate at least five (5) Business
Days before the effective date of such assignment or participation (unless the
Administrative Agent in its sole discretion shall permit such assignee or
participant to deliver such form or certificate less than five (5) Business Days
before such date in which case it shall be due on the date specified by the
Administrative Agent). Each Lender, assignee or participant which so delivers a
Form W-8, W-9, 4224 or 1001 further undertakes to deliver to each of the
Borrower, the Co-Borrowers and the Administrative Agent two (2) additional
copies of such form (or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the
Borrower, the Co-Borrowers or the Administrative Agent, either certifying that
such Lender, assignee or participant is entitled to receive payments under this
Agreement and the other Loan Documents without deduction or withholding of any
United States federal income taxes or is subject to such tax at a reduced rate
under an applicable tax treaty or stating that no such exemption or reduced rate
is allowable. The Administrative Agent shall be entitled to withhold United
States federal income taxes at the full withholding rate unless the Lender,
assignee or participant establishes an exemption or that it is subject to a
reduced rate as established pursuant to the above provisions.
11.18 Joinder of Guarantors.
Any Subsidiary of the Borrower which is required to join this Agreement as
a Guarantor pursuant to Section 8.2.6 or Section 8.2.9 shall execute and deliver
to the Administrative Agent (i) a Guarantor Joinder in substantially the form
attached hereto as Exhibit 1.1(G)(1) pursuant to which it shall join as a
Guarantor each of the documents to which the Guarantors are parties; (ii)
documents in the forms described in Section 7.1 [First Loans] modified as
appropriate to relate to such Subsidiary; and (iii) documents necessary to grant
and perfect Prior Security Interests to the Administrative Agent for the benefit
of the Lenders in all assets held by such Subsidiary and in the stock or other
ownership interests of such Subsidiary. The Loan Parties shall deliver such
Guarantor Joinder and related documents to the Administrative Agent within five
(5) Business Days after the date of the acquisition of the Subsidiary or the
date of the filing of such Subsidiary's articles of incorporation if the
Subsidiary is a corporation, the date of the filing of its certificate of
limited partnership if it is a limited partnership or the date of its
organization if it is an entity other than a limited partnership or corporation.
11.19 Joint and Several Liability of Borrower and Co-Borrowers.
The Obligations of the Borrower and the Co-Borrowers under this Agreement,
the Notes and the Loan Documents to which the Borrower and the Co-Borrowers are
parties shall be joint and several obligations and liabilities of the Borrower
and each Co-Borrower, and such Obligations may be enforced by the Administrative
Agent and the Lenders in their sole discretion against the Borrower and either
Co-Borrower either individually in any action brought against the Borrower or
either Co-Borrower or jointly in any action brought against both the Borrower
and one or more Co-Borrowers For purposes of advancing funds, rendering
statements, receiving requests from, or otherwise communicating with the
Borrower and the Co-Borrowers or in the Administrative Agent's administration of
this Agreement and the related transactions, each Co-Borrower hereby authorizes
the Administrative Agent to treat the Borrower as the sole agent for such
Co-Borrower under the Loan Documents and to deal with it exclusively, and any
act done or omitted or any document, certificate, or instrument executed or
delivered by the Borrower shall be binding on each of them. To induce the
Lenders to enter into this Agreement and to make advances of the Loans in the
manner set forth in this Agreement, the Borrower and each of the Co-Borrowers
hereby represents, warrants, covenants and states to each of the Lenders that
(i) the Borrower and each Co-Borrower shares with the other common management
and ownership, (ii) the Borrower and each Co-Borrower desires to utilize their
borrowing potential on a consolidated basis to the full extent possible, and
consistent with realizing such potential, to make available to the Lenders
security commensurate with the amount and nature of their aggregate borrowings,
(iii) the Borrower and each Co-Borrower has determined that it will benefit
specifically and materially from the advances of credit contemplated by this
Agreement and that under a joint and several loan facility it is able to obtain
financing on terms more favorable than otherwise available to it separately, and
(iv) the Borrower and each Co-Borrower have requested and bargained for the
structure and terms of and security for the advances contemplated by this
Agreement.
Until indefeasible payment in full of the Loans and termination of all
Letters of
Credit and Commitments, the Borrower and each Co-Borrower waives and agrees not
to enforce any of the rights it may have against the Borrower or any
Co-Borrower, including, but not limited to: (i) any right to be subrogated in
whole or in part to any right or claim with respect to any Obligations or any
portion thereof owed to the Lenders which might otherwise arise from payment by
the Borrower or either Co-Borrower on the account of the Obligations or any
portion thereof until all the Obligations are indefeasibly paid in full and the
Letters of Credit and Commitments have terminated; and (ii) any right of the
Borrower or either Co-Borrower to require the marshalling of assets of the
Borrower, either Co-Borrower or any Guarantor which might otherwise arise from
payment by the Borrower, either Co-Borrower or any Guarantor to the Lenders on
account of the Obligations or any portion thereof.
The Borrower and each Co-Borrower agree that the Administrative Agent and
the Lenders
may from time to time and as many times as the Administrative Agent and the
Lenders, in their absolute discretion, deem appropriate, do any of the following
without notice to the Borrower or the Co-Borrowers and without adversely
affecting the validity or enforceability of the joint and several liability of
the Borrower and the Co-Borrowers under this Agreement and the Notes: (i)
release, surrender, exchange, compromise, or settle the Obligations or any
portion thereof; (ii) change, renew, or waive the terms of the Obligations or
any portion thereof; (iii) grant any extension or indulgence with respect to the
payment to the Lenders of the Obligations or any portion thereof; (iv) enter
into any agreement of forbearance with respect to the Obligations or any portion
thereof; (v) release, surrender, exchange or compromise any security held by the
Lenders for the Obligations; (vi) release any Person who is a Guarantor or
surety or otherwise liable with respect to the Obligations or any portion
thereof; and (vii) release, surrender, exchange or compromise any security or
Lien held by the Administrative Agent for the benefit of the Lenders for the
liabilities of any Person who is a Guarantor or surety for the Obligations or
any portion thereof. The Borrower and each Co-Borrower agrees that the
Administrative Agent and the Lenders may do any of the above as they deem
necessary or advisable, in their sole discretion, without giving any notice to
the Borrower or the Co-Borrowers, and that the Borrower and the Co-Borrowers
will remain jointly and severally liable for full payment to the Administrative
Agent and the Lenders of the Obligations.
If the joint and several liability of either Co-Borrower under this
Agreement would be held or determined to be void, invalid or unenforceable on
account of the amount of such Co-Borrower's aggregate liability under this
Agreement, then, notwithstanding any other provision of this Agreement to the
contrary, the aggregate amount of such liability shall, without any further
action by the Lenders, the Borrower, the Co-Borrowers or any other Person, be
automatically limited and reduced to the highest amount which is valid and
enforceable as determined in such action or proceeding, which may be an amount
which is not greater than the greater of:
(i) the fair consideration actually received by such Co-Borrower under the
terms of and as a result of this Agreement and the related transactions,
including, without limiting the generality of the foregoing, advances made to
such Co-Borrower or the transfer of property to such Co-Borrower, or
(ii) ninety-five percent (95%) of the excess of (1) the amount of the fair
saleable value of the assets of such Co-Borrower as of the date of this
Agreement as determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors as in effect on the date
thereof, over (2) the amount of all liabilities of such Co-Borrower as of the
date of this Agreement, also as determined on the basis of applicable federal
and state laws governing the insolvency of debtors as in effect on the date
thereof.
[SIGNATURE PAGES TO FOLLOW]
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1.1(A)
PRICING GRID
- ------------------------------------------------------------------------------------------------------------------------------------
Revolving Credit and Revolving Credit and
Leverage Ratio Term Loan A Term Loan A Term Loan B Term Loan B
Level Euro-Rate Spread and Base Rate Spread Euro-Rate Base Rate Commitment Fee
-----
Letter of Credit Fee Spread Spread rate
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
I Less than or equal to 2.0 to 1.0 1.500% 0.000% 3.000% 1.500% .375%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
II Greater than 2.0 to 1.0 but less 1.750% 0.250% 3.000% 1.500% .375%
than or equal to 2.5 to 1.0
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
III* Greater than 2.5 to 1.0 but less 2.125% 0.625% 3.000% 1.500% .375%
than or equal to 3.0 to 1.0
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
IV* Greater than 3.0 to 1.0 but less 2.500% 1.000% 3.000% 1.500% .500%
than or equal to 3.5 to 1.0
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
VI Greater than 3.5 to 1.0 see default rate see default rate see default see default .500%
rate rate
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of determining the Applicable Margin, the Applicable
Commitment Fee Rate and Letter of Credit Fee:
(a) Except for the effect of an Event of Default and the imposition of
the Default Rate, the Applicable Margin, Applicable Commitment Fee Rate and
Letter of Credit Fee shall be deemed to be at Level IV from the Closing Date
until the later of (i) April 1, 2000, or (ii) the date which results in a
decrease of the Applicable Margin, Applicable Commitment Fee and Letter of
Credit Fee in accordance with paragraph (b) below.
(b) Subject to the initial pricing period set forth in paragraph (a)
above, the Applicable Margin, Applicable Commitment Fee Rate and Letter of
Credit Fee shall be adjusted, and any increase or decrease therein shall become
effective on the first day of each month following the due date for the delivery
of each Compliance Certificate in the form of Exhibit 8.3.4, based on the
Leverage Ratio as calculated in such Compliance Certificate.
*The default rate will apply to Levels III and IV based upon changes in
the Leverage Ratio pursuant to Section 8.2.16
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1.1(B)
COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES
SCHEDULE 1.1(B)COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES
Part 1 - Commitments of Lenders and Addresses for Notices to Lenders
Amount of Amount of
Amount of Commitment for Term Commitment for Term
Lender Commitment for Loans A Loans B Total Commitment
Revolving Credit
Loans
<S> <C> <C> <C> <C> <C> <C>
National City Bank of Pennsylvania
National City Center, 20 Stanwix Street
Pittsburgh, PA 15222-4802
Attention: Stephen C. Findlay,
Corporate Banking Group
Telephone: (814) 871-1375
Telecopy: (814) 455-5495
Bank of America
NationsBank Corporate Center
100 N. Tryon Street, 8th Floor
NC1-007-08-04
Charlotte, NC 28255
Attention: Timothy Spanos
Telephone: (704) 386-4507
Telecopy: (704) 388-0960
Harris Trust and Savings Bank
111 West Monroe, P.O. Box 755
Chicago, IL 60609
Attention: William A. McDonnell,
Vice President
Telephone: (312) 750-8708
Telecopy: (312) 750-3834
Bank of Montreal
111 West Monroe, P.O. Box 755
Chicago, IL 60609
Attention: William A. McDonnell,
Vice President
Telephone: (312) 750-8708
Telecopy: (312) 750-3834
LIST ADDITIONAL BANKS
Total $100,000,000 $125,000,000 $100,000,000 $325,000,000
=========== =========== =========== ===========
<PAGE>
Firstar Bank, National Association
425 Walnut Street, ML 9220
Cincinnati, OH 45202
Attention: Kenneth Kilmer
Telephone: (513) 632-3019
Telecopy: (513) 632-2040
LaSalle National Bank
135 South LaSalle Street
Chicago IL 60603
Attention: David P. Gibson,
Commercial Banking
Telephone: (312) 904-7641
Telecopy: (312) 904-5483
SunTrust Bank, Central Florida,
National Association
200 South Orange Avenue, Tower 4
Orlando, FL 32801
Attention: Rhonda Smith,
Vice President
Telephone: (407) 237-4924
Telecopy: (407) 237-6894
Manufacturers and Traders Trust
Company
One Fountain Plaza
Buffalo, NY 14203-1495
Attention: Chris Kania
Vice President
Telephone: (716) 848-7335
Telecopy: (716) 848-7318
Mercantile Bank of St. Louis, N.A.
One Merchantile Center
12th Floor
St. Louis, MO 63101
Attention: Timothy W. Hassler,
Vice President
Telephone: (314) 418-8046
Telecopy: (314) 418-2203
PNC Bank, National Association
9th and State Streets
P.O. Box 8480
Erie, PA 16553
Attention: David O. Matthews
Senior Vice President
Telephone: (814) 871-9292
Telecopy: (814) 871-9583
Bank Austria Creditanstalt Corporate
Finance, Inc.
Two Greenwich Plaza
Greenwich, CT 06830
Attention: Catherine MacDonald
Telephone: (203) 861-6592
Telecopy: (203) 861-0297
Total $100,000,000 $125,000,000 $100,000,000 $325.000,000
=========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1.1(B)
COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES
Part 2 - Addresses for Notices to Borrower, Co-Borrower and Guarantors
<S> <C> <C> <C> <C> <C> <C>
AGENT
NATIONAL CITY BANK OF PENNSYLVANIA
National City Center
20 Stanwix Street
Pittsburgh, PA 15222-4802
Attention: Stephen C. Findlay
Senior Vice President, Corporate Banking Group
Telephone: (814) 871-1375
Telecopy: (814) 455-5495
BORROWER:
RENT-WAY, INC.
One Rent-Way Place
Erie, PA 16505
Attention: Jeffrey A. Conway
Vice President and Chief Financial Officer
Telephone: (814) 836-0618
Telecopy: (814) 835-6865
CO-BORROWERS:
RENT-WAY OF TTIG, L.P.
One Rent-Way Place
Erie, PA 16505
Attention: Jeffrey A. Conway
Vice President and Chief Financial Officer
Telephone: (814) 836-0618
Telecopy: (814) 835-6865
RENTAVISION INC.
One Rent-Way Place
Erie, PA 16505
Attention: Jeffrey A. Conway
Vice President and Chief Financial Officer
Telephone: (814) 836-0618
Telecopy: (814) 835-6865
GUARANTORS:
Send to each Guarantor, in care of the Borrower, at Borrower's
address.
</TABLE>
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (the "Amendment") is dated as
of November 17, 1999, and is made by and among RENT-WAY, INC., a Pennsylvania
corporation (the "Borrower"), RENT-WAY OF TTIG, L.P., an Indiana limited
partnership, and RENTAVISION INC., a New York Corporation (Rent-Way of TTIG,
L.P. and Rentavision Inc. are referred to herein collectively as the
"Co-Borrowers" and each separately as a "Co-Borrower"), each of the GUARANTORS,
each of the LENDERS (as defined in the Credit Agreement defined below), NATIONAL
CITY BANK OF PENNSYLVANIA in its capacity as administrative agent for the
Lenders under the Credit Agreement (hereinafter referred to in such capacity as
the "Administrative Agent"), BANK OF AMERICA, N.A., in its capacity as
documentation agent for the Lenders, and BANK OF MONTREAL and HARRIS TRUST AND
SAVINGS BANK, in their capacity as syndication agents.
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to that certain Credit
Agreement dated as of September 23, 1999 (the "Credit Agreement"), pursuant to
which the Lenders provided to the Borrower and the Co-Borrowers a $100,000,000
revolving credit facility, $125,000,000 in Term Loans A and $100,000,000 in Term
Loans B;
WHEREAS, the Borrower and the Co-Borrowers have requested the
Lenders to amend the Credit Agreement (i) to permit the Borrower to repurchase
outstanding capital stock of the Borrower, and (ii) to permit the Loan Parties
to make an investment in and a loan to dPi Teleconnect, L.L.C., a Delaware
limited liability company ("dPi").
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree as follows:
1. Definitions. Defined terms used herein unless otherwise defined herein
shall have the meanings ascribed to them in the Credit Agreement.
2. Section 8.2.4 is hereby amended and restated as follows:
"8.2.4............Loans and Investments.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time make or suffer to remain outstanding any loan or
advance to, or purchase, acquire or own any stock, bonds, notes or securities
of, or any partnership interest (whether general or limited) or limited
liability company interest in, or any other investment or interest in, or make
any capital contribution to, any other Person, or agree, become or remain liable
to do any of the foregoing, except:
.........(i)......trade credit extended on usual and customary terms in the
ordinary course of business;
.........(ii).....advances to employees to meet expenses incurred by such
employees in the ordinary course of business;
.........(iii)....Permitted Acquisitions;
.........(iv).....Permitted Investments;
.........(v)......loans, advances and investments in other Loan Parties,
provided however, that additional loans, advances and investments in Action
Rent-to-Own Holdings of South Carolina, Inc., a South Carolina corporation,
shall be limited to $500,000 in the aggregate; and .........(vi).....an
investment not in excess of $6,500,000 for the purchase of a sixty percent (60%)
ownership interest in the limited liability company interests of dPi
Teleconnect, L.L.C., a Delaware limited liability company ("dPi"), and loans and
advances not in excess of $3,000,000 to dPi at any one time outstanding,
provided however, that the Loan Parties' ownership interests in dPi and the note
obligations of dPi to the Loan Parties shall be pledged to the Administrative
Agent for the benefit of the Lenders. For purposes of this Credit Agreement, the
financial results of dPi shall be included in the consolidated financial
statements of the Borrower, as determined and consolidated in accordance with
GAAP, but dPi shall not otherwise constitute a Subsidiary subject to the terms
and conditions of this Credit Agreement and the Loan Documents which relate to
the Subsidiaries of the Loan Parties.
3. Section 8.2.5 is hereby amended and restated as follows:
"8.2.5............Dividends and Related Distributions.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, make or pay, or agree to become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock, partnership interests or limited liability company interests on
account of the purchase, redemption, retirement or acquisition of its shares of
capital stock (or warrants, options or rights therefor), partnership interests
or limited liability company interests, except that (i) the Loan Parties may
make dividends or other distributions payable to another Loan Party, (ii) the
Borrower may pay principal, interest or dividends on the Subordinated Debt,
subject to (y) the restrictions on prepayments in Section 8.2.22 and (z) the
restrictions on payments contained in the subordination and other provisions
contained in the Subordinated Loan Documents, and (iii) so long as no Event of
Default or Potential Default shall exist prior to or after giving effect to a
repurchase of the Borrower's outstanding capital stock, the Borrower may redeem
or repurchase in the market shares of its outstanding capital stock in an amount
such that the consideration paid by the Borrower does not exceed $5,000,000 in
the aggregate for all such redemptions and repurchases."
<PAGE>
4. Section 8.2.9 is hereby amended and restated as follows:
"8.2.9............Subsidiaries, Partnerships and Joint Ventures.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, own or create directly or indirectly any Subsidiaries other
than (i) any Subsidiary which has joined this Agreement as Guarantor on the
Closing Date; (ii) any Subsidiary formed after the Closing Date which joins this
Agreement as a Guarantor pursuant to Section 11.18, provided that the Required
Lenders shall have consented to such formation and joinder and that such
Subsidiary and the Loan Parties, as applicable, shall grant and cause to be
perfected first priority Liens to the Administrative Agent for the benefit of
the Lenders in the assets held by, and stock of or other ownership interests in,
such Subsidiary; and (iii) the investment in dPi permitted in accordance with
Section 8.2.4(vi). Each of the Loan Parties shall not become or agree to (1)
become a general or limited partner in any general or limited partnership,
except that the Loan Parties may be general or limited partners in other Loan
Parties, (2) become a member or manager of, or hold a limited liability company
interest in, a limited liability company (other than the investment in dPi
permitted in accordance with Section 8.2.4(vi)), except that the Loan Parties
may be members or managers of, or hold limited liability company interests in,
other Loan Parties, or (3) become a joint venturer or hold a joint venture
interest in any joint venture.
5. Conditions of Effectiveness of this Amendment and Restatement. The
effectiveness of this Amendment is expressly conditioned upon satisfaction of
each of the following conditions precedent:
(a) Representations and Warranties; No Defaults. The representations and
warranties of the Borrower and the Co-Borrowers contained in Article 6 of the
Credit Agreement shall be true and accurate on the date hereof with the same
effect as though such representations and warranties had been made on and as of
such date (except representations and warranties which relate solely to an
earlier date or time, which representations and warranties shall be true and
correct on and as of the specific dates or times referred to therein), and the
Borrower and the Co-Borrowers shall have performed and complied with all
covenants and conditions hereof; no Event of Default or Potential Default under
the Credit Agreement shall have occurred and be continuing or shall exist. The
execution by the Borrower and the Co-Borrower of this Amendment shall be deemed
to be a certification of all such matters as of the date hereof.
(b) Loan Documents. The Administrative Agent shall be in receipt of such Loan
Documents and amendments to existing Loan Documents and related UCC financing
statements and such promissory notes and ownership certificates as requested by
the Administrative Agent in connection with the Collateral to be granted to the
Administrative Agent for the benefit of the Lenders as a result of the Loan
Parties investments in and loans to dPi.
(c) Legal Details; Counterparts. All legal details and proceedings in connection
with the transactions contemplated by this Amendment shall be in form and
substance satisfactory to the Administrative Agent. The Administrative Agent
shall have received counterparts of this Amendment duly executed by the
Borrower, the Co-Borrowers, the Guarantors and the Required Lenders, and the
Administrative Agent shall have received all such other counterpart originals or
certified or other copies of such documents and proceedings in connection with
such transactions, in form and substance satisfactory to the Administrative
Agent. This Amendment may be executed by the parties hereto in any number of
separate counterparts, each of which when taken together and duly executed and
delivered shall together constitute one and the same instrument.
6. Force and Effect. Except as expressly modified by this Amendment, the Credit
Agreement and the other Loan Documents are hereby ratified and confirmed and
shall remain in full force and effect after the date hereof. By their execution
and delivery of this Amendment, the Guarantors acknowledge and agree that their
respective obligations and liabilities under the Guaranty Agreement extend to
all Obligations of the Borrower and the Co-Borrowers, or either one of them. The
Loan Parties acknowledge and agree that the Security Agreements previously
executed by the Loan Parties and all other Loan Documents, including without
limitation, all documents which grant liens and security interests in favor of
the Administrative Agent for the benefit of the Lenders, remain in full force
and effect and secure the joint and several Obligations of the Borrower and the
Co-Borrowers, and to the extent set forth in such Loan Documents, the other Loan
Parties.
7. Governing Law. This Amendment shall be deemed to be a contract under the laws
of the Commonwealth of Pennsylvania and for all purposes shall be governed by
and construed and enforced in accordance with the internal laws of the
Commonwealth of Pennsylvania without regard to its conflict of laws principles.
8. Effective Date. This Amendment shall be dated as of and shall be effective as
of the date and year first above written, which date shall be the date of the
satisfaction of all conditions precedent to effectiveness set forth in this
Amendment.
[SIGNATURES BEGIN ON NEXT PAGE]
<PAGE>
[SIGNATURE PAGE 1 OF 11 TO AMENDMENT NO. 1]
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1 to Credit Agreement as of the day and year first above written.
WITNESS/ATTEST: RENT-WAY, INC., "Borrower"
By:
Name: ______________________________
Title: _______________________________
[Seal]
WITNESS/ATTEST: RENT-WAY OF TTIG,L.P.,"Co-Borrower"
By: Rent-Way Developments, Inc.,
its General Partner
By:
Name: ______________________________
Title: _______________________________
[Seal]
WITNESS/ATTEST: RENTAVISION INC., "Co-Borrower"
By:
Name: ______________________________
Title: _______________________________
[Seal]
WITNESS/ATTEST: ACTION RENT-TO-OWN HOLDINGS OF
SOUTH CAROLINA, INC., "Guarantor"
By:
Name: ______________________________
Title: _______________________________
[Seal]
<PAGE>
[SIGNATURE PAGE 2 OF 11 TO AMENDMENT NO. 1]
WITNESS/ATTEST: RENT-WAY OF TOMORROW, INC.
"Guarantor"
By:
Name: ______________________________
Title : ______________________________
[Seal]
WITNESS/ATTEST: RENT-WAY OF MICHIGAN, INC.
"Guarantor"
By:
Name: ______________________________
Title: _______________________________
[Seal]
WITNESS/ATTEST: RENT-WAY DEVELOPMENTS, INC.
"Guarantor"
By:
Name: ______________________________
Title: _______________________________
[Seal]
WITNESS/ATTEST: AMERICA'S RENT-TO-OWN CENTER,
INC., "Guarantor"
By:
Title: _______________________________
[Seal]
<PAGE>
[SIGNATURE PAGE 3 OF 11 1 TO AMENDMENT NO. 1]
NATIONAL CITY BANK OF
PENNSYLVANIA, as Administrative
Agent and as a Lender
By:
Title:
NATIONAL CITY BANK
By:
Title:
<PAGE>
[SIGNATURE PAGE 4 OF 11 TO AMENDMENT NO. 1]
HARRIS TRUST AND SAVINGS BANK, as a
Syndication Agent and as a Lender
By:
Title:
BANK OF MONTREAL, as a Syndication
Agent and as a Lender
By:
Title:
By:
Title:
<PAGE>
[SIGNATURE PAGE 5 OF 11 TO AMENDMENT NO. 1]
BANK OF AMERICA, N.A., as
Documentation Agent and as a
Lender
By:
Title:
<PAGE>
[SIGNATURE PAGE 6 OF 11 TO AMENDMENT NO. 1]
LASALLE BANK NATIONAL ASSOCIATION
By:
Title:
<PAGE>
[SIGNATURE PAGE 7 OF 11 TO AMENDMENT NO. 1]
SUNTRUST BANK, CENTRAL
FLORIDA, N.A.
By:
Title:
<PAGE>
[SIGNATURE PAGE 8 OF 11 TO AMENDMENT NO. 1]
MANUFACTURERS AND TRADERS TRUST COMPANY
By:
Title:
<PAGE>
[SIGNATURE PAGE 9 OF 11 TO AMENDMENT NO. 1]
FIRSTAR BANK, NATIONAL
ASSOCIATION
By:
Title:
<PAGE>
[SIGNATURE PAGE 10 OF 11 TO AMENDMENT NO. 1]
PNC BANK, NATIONAL ASSOCIATION
By:
Title:
<PAGE>
[SIGNATURE PAGE 11 OF 11 TO AMENDMENT NO. 1]
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By:
Title:
Title:
<PAGE>
Exhibit 21
Subsidiaries
RTO Holding Co., Inc., a Delaware corporation
ATRO, Inc., a South Carolina corporation
Action Rent-To-Own Holdings of South Carolina, Inc., a South Carolina
corporation
RTO Operating, Inc., a Delaware corporation doing business as Home Choice
Lease or Own
<PAGE>
Exhibit 23
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statement
of Rent-Way, Inc. on Form S-8 (File Nos. 33-86090, 333-13355, 333-49355 and
333-87855) of our report dated November 24, 1999 on our audits of the
consolidated financial statements of Rent-Way, Inc. and its Subsidiaries, as of
September 30, 1999 and 1998, and for the years ended September 30, 1999, 1998
and 1997, which report is included in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Cleveland, Ohio
December 22, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000893046
<NAME> Rent-Way, Inc.
<MULTIPLIER> 1
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 8,646
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 202,145
<CURRENT-ASSETS> 0
<PP&E> 50,578
<DEPRECIATION> 0
<TOTAL-ASSETS> 597,394
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 256,755
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 597,394
<SALES> 427,093
<TOTAL-REVENUES> 494,351
<CGS> 123,511
<TOTAL-COSTS> 447,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,581
<INCOME-PRETAX> 30,336
<INCOME-TAX> 15,234
<INCOME-CONTINUING> 15,102
<DISCONTINUED> 0
<EXTRAORDINARY> 519
<CHANGES> 0
<NET-INCOME> 14,583
<EPS-BASIC> 0.68
<EPS-DILUTED> 0.66
</TABLE>
