EXHIBIT 10.22
AMENDED AND RESTATED
FRANCHISEE FINANCING AGREEMENT
This Amended and Restated Franchisee Financing Agreement ("Agreement")
is made and entered into by and among Wells Fargo Foothill, Inc., a Delaware
corporation ("Lender"), ColorTyme, Inc., a Texas corporation ("ColorTyme"), and
Rent-A-Center East, Inc., a Delaware corporation formerly known as
Rent-A-Center, Inc., which was formerly known as Renters Choice, Inc. ("RAC").
RECITALS
A. ColorTyme is a franchisor of "rent-to-own" stores (each, a
"Store") operated by franchisees licensed by ColorTyme (each, a "Franchisee"),
offering various home entertainment equipment, household equipment, and consumer
products and parts, accessories, and other goods used in connection therewith
(collectively, "Inventory").
B. Textron Financial Corporation ("TFC"), ColorTyme and RAC are
parties to that certain Amended and Restated Franchisee Financing Agreement,
dated March 27, 2002, as amended July 23, 2002, September 30, 2002, and March
24, 2003 (as previously amended, the "Original Agreement").
C. Effective as of the date hereof, TFC is assigning to Lender
all of TFC's right, title and interest in and to the Original Agreement, and
Lender, ColorTyme and RAC desire to amend and restate the Original Agreement.
AGREEMENT
In consideration of the premises and other valuable consideration, the
receipt and adequacy of which are hereby acknowledged, and intending to be
legally bound hereby, Lender, ColorTyme and RAC agree to amend and restate the
Original Agreement as follows:
ARTICLE I
CREDIT FACILITY
1.1 Credit Facility. Lender shall provide a credit facility for
Franchisees on the terms and subject to the conditions set forth in this
Agreement. The amount of the credit facility shall be up to, but not in excess
of, fifty million and no/100 dollars ($50,000,000.00).
1.2 Financing Procedures. The following procedures shall be
employed in determining the availability of financing for Franchisees under this
Agreement:
(a) In the event a Franchisee shall indicate an interest
in obtaining financing for any of the purposes described in Section
1.6, ColorTyme shall provide the Franchisee with a credit application
and other credit documentation, in form and substance acceptable to
Lender and ColorTyme, and ColorTyme shall assist the Franchisee in
completing such credit application and other credit documents.
(b) After the Franchisee has completed the credit
application and provided the other credit documents specified by
Lender, if such credit application and other credit documents are
acceptable to ColorTyme, ColorTyme shall promptly forward the executed
credit application and other credit documents to Lender at its office
in Dallas, Texas.
(c) If, following completion of its review of such credit
application and other credit documents and its credit investigation,
Lender determines that it will provide the financing requested, it
shall so notify the Franchisee and ColorTyme and, upon receipt of such
additional closing documents as Lender reasonably determines to be
necessary for the approval of the credit, Lender shall either (i)
establish a revolving line of credit for the Franchisee in accordance
with the terms of this Agreement (each such line of credit is referred
to herein as a "Line of Credit"), or (ii) provided Lender has
previously or contemporaneously established a Line of Credit for the
Franchisee, make a term loan to the Franchisee in accordance with the
terms of this Agreement (each such term loan is referred to herein as a
"Term Loan"). For purposes of this Agreement, the obligations of a
Franchisee to Lender under a Line of Credit and/or a Term Loan are
collectively referred to as a "Receivable."
1.3 Interest Rates. The interest rate on each Receivable shall be
determined in accordance with this Section 1.3.
(a) Unless otherwise agreed by Lender and ColorTyme and
except as otherwise provided in paragraphs (b) or (c) of this Section
1.3, the interest rate on each Receivable shall be the rate established
by the following schedule: (i) for each Line of Credit with a Credit
Limit (as that term is hereinafter defined) of $1,000,000 or less, the
rate will be the Prime Rate plus 4.75%; (ii) for each Line of Credit
with a Credit Limit of more than $1,000,000, the rate will be the Prime
Rate plus 3.75%; and (iii) for each Term Loan, the rate will be the
same as the rate applicable to the Franchisee's Line of Credit on the
date of such Term Loan. For purposes of this section, "Prime Rate"
shall mean the rate of interest announced within Wells Fargo Bank,
N.A., at its principal office in San Francisco as its "prime rate,"
with the understanding that the "prime rate" is one of Wells Fargo
Bank's base rates (not necessarily the lowest of such rates) and serves
as the basis upon which effective rates of interest are calculated for
those loans making reference thereto and is evidenced by the recording
thereof after its announcement in such internal publication or
publications as Wells Fargo Bank, N.A. may designate. The applicable
interest rate will be a floating rate; changes in such interest rate
will be established monthly, effective as of the last business day of
the preceding month. Interest will be calculated on the basis of a
360-day year.
(b) The interest rates specified in Section 1.3(a) of
this Agreement shall apply to all Receivables originated on or after
the date hereof from Franchisees not currently borrowing pursuant to
this Agreement and to all Receivables outstanding on such date, for
which the Franchisees obligated to Lender thereunder consent to the
change in the interest rates on such Receivables to those established
by this Section 1.3; the interest rates on all Receivables outstanding
on such date, for which the Franchisees obligated to Lender thereunder
do not consent to the change in the interest rates on such Receivables
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to those established by this Section 1.3 will continue at the existing
rates, subject to the right of Lender to terminate such Franchisee's
line of credit, in accordance with the terms of its governing
agreements. ColorTyme and RAC agree to assist Lender in obtaining the
consent of all Franchisees to the modifications of Receivables to
conform to the interest rates specified in Section 1.3(a) of this
Agreement.
1.4 Credit Limits. When a Line of Credit is established for a
Franchisee pursuant to this Agreement, Lender shall fix a credit limit for the
Franchisee of (i) two hundred fifty thousand dollars ($250,000) if such
Franchisee is not designated by ColorTyme as having prior "rent-to-own"
experience; (ii) three hundred thousand dollars ($300,000) if such Franchisee is
designated by ColorTyme as having prior "rent-to-own" experience; or (iii) such
other amount as may be agreed upon from time to time by Lender and ColorTyme
(the credit limit established for each Franchisee is referred to herein as the
"Credit Limit"). The amount of the Credit Limit may be adjusted from time to
time upon agreement by Lender and ColorTyme. When a Term Loan is made to a
Franchisee pursuant to this Agreement, the principal amount of the Term Loan and
the interest thereon shall not be included in or subject to the Credit Limit.
1.5 Advance Limits. The amount of credit available under each
Receivable (notwithstanding the amount of a Franchisee's Credit Limit, in the
case of a Line of Credit) shall be limited to the product of the Franchisee's
Average Monthly Revenue multiplied by five (the advance limit established for
each Franchisee is referred to herein as the "Total Advance Limit"). For
purposes of this Agreement, a Franchisee's "Average Monthly Revenue" shall mean
the average monthly total revenue of the Franchisee (exclusive of sales tax)
from the sale, lease or rental of Inventory and other customary fees, calculated
in accordance with generally accepted accounting principles applied on a
consistent basis, for the three calendar months preceding the most recent
periodic review of such Franchisee's Receivable(s). Notwithstanding anything in
this section to the contrary, if the Total Advance Limit established pursuant to
this section would otherwise be an amount that is less than the then outstanding
balance of such Receivable (each such Receivable is referred to herein as an
"Overline Receivable"), the Total Advance Limit for such Overline Receivable
will be set at the then outstanding balance thereof, and such Overline
Receivable will continue to be administered as provided herein, unless Lender
and ColorTyme agree otherwise. The provisions of this section shall not apply to
any Receivable until all the Stores for which the financing was provided under
the Receivable have been open for business for one (1) year.
1.6 Use of Proceeds. Lender will advance funds pursuant to a
Franchisee's Line of Credit or Term Loans only for the following purposes: (i)
the Franchisee's acquisition of Inventory; (ii) the Franchisee's acquisition or
conversion of a Store; (iii) the buyout of an ownership interest in the
Franchisee; and/or (iv) the Franchisee's working capital.
(a) Inventory. Advances to a Franchisee for inventory
will be limited to the lesser of (i) the cost of the Inventory acquired
by such Franchisee; (ii) the amount of such Franchisee's Credit Limit;
or (iii) the amount of the Franchisee's Total Advance Limit after
deducting the outstanding balance of all Term Loans to such Franchisee.
(b) Store Acquisitions and Conversions. Advances to a
Franchisee for Store acquisitions and/or conversions (i.e., the
acquisition of existing ColorTyme Stores and/or
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the acquisition of other "rent-to-own" stores for conversion to
ColorTyme Stores) will be limited to the lesser of (i) in the case of a
Store that has been open for business (either as a ColorTyme Store or
as another "rent-to-own" store) for one (1) year or more, the product
of the Average Monthly Revenue of the individual Store multiplied by
nine (9); and (ii) the amount that, when added to the Credit Limit and
other Term Loans to such Franchisee, would cause the Debt-to-Revenue
Ratio for the Franchisee to equal or exceed 5:1. For purposes of this
paragraph, "Debt-to-Revenue Ratio" shall mean the ratio of (x) Funded
Debt to (y) the Average Monthly Revenue of the Franchisee (calculated
on an aggregate basis for all Stores owned and/or operated, including
such Stores to be acquired, by such Franchisee and any and all
affiliates of such Franchisee); and "Funded Debt" shall mean, as of any
date, the total amount of liabilities (including the advance
contemplated by this paragraph) that would be reflected on the
consolidated balance sheet of Franchisee and its parent and any and all
subsidiaries and affiliates, if any, in accordance with generally
accepted accounting principles applied on a consistent basis. All
Advances for Store acquisitions and/or conversions will be subject to
the approval of ColorTyme, but shall otherwise be at the sole
discretion of Lender.
(c) Franchisee Owner Buyouts. Advances for the buyout of
an ownership interest in a Franchisee, either by the Franchisee or by
one (1) or more other owners of interests in the Franchisee, will be
limited to the amount of the Franchisee's Total Advance Limit minus the
Franchisee's Credit Limit and minus the outstanding balance of all
other Term Loans to such Franchisee and owners. All Advances for
Franchisee owner buyouts will be subject to the approval of ColorTyme,
but shall otherwise be at the sole discretion of Lender.
(d) Working Capital. Advances to a Franchisee for working
capital will be limited to the lesser of (i) the amount by which
ColorTyme's minimum working capital requirement exceeds such
Franchisee's working capital available from other sources; (ii) sixty
thousand and no/100 dollars ($60,000.00); (iii) the amount of such
Franchisee's Total Advance Limit minus such Franchisee's Credit Limit
and minus the outstanding balance of all other Term Loans to such
Franchisee. Financing for working capital will be made available only
to Franchisees designated by ColorTyme as having prior "rent-to-own"
experience and approved by ColorTyme for such financing in connection
with the opening of a Store, but shall otherwise be at the sole
discretion of Lender.
For purposes of this section, Lender may rely fully on the representations
and/or agreements of the Franchisee with respect to the use of funds, with no
obligation to independently verify such information. The use of any such funds
by a Franchisee for any purpose not permitted by this section will not affect
the obligations of ColorTyme or RAC under this Agreement.
1.7 Payment Terms. Each Receivable will be repayable as follows:
(a) In the case of a Line of Credit, (i) accrued and
unpaid interest shall be payable monthly, and (ii) principal shall be
payable in monthly installments equal to 1/21 of the initial principal
amount of each advance made by Lender under such Line of Credit. Both
interest and principal shall generally be due and payable on the 26th
day of each month.
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(b) In the case of a Term Loan, (i) accrued and unpaid
interest shall be payable monthly, and (ii) principal shall be payable
in equal monthly installments over the term of the Term Loan, with the
amount of the monthly installments calculated by dividing the original
principal amount of the Term Loan by the number of months in the term
thereof. Both interest and principal shall generally be due and payable
on the 26th day of each month. The term of any Term Loan shall not
exceed sixty (60) months.
1.8 Suspension of Advances. Advances to a Franchisee under any
Line of Credit may, at Lender's sole discretion, be suspended or limited at any
time that the unpaid balance of all Advances under such Line of Credit, when
added to the outstanding principal balance of all Term Loans made to such
Franchisee exceeds the product of the Franchisee's Average Monthly Revenue
multiplied by four (4) where (i) the ratio of cash expenses (total annual
expenses, less depreciation directly related to the operation of the
Franchisee's Store(s), calculated in accordance with generally accepted
accounting principles applied on a consistent basis) to total revenue
(calculated in accordance with generally accepted accounting principles applied
on a consistent basis, excluding extraordinary items, based on a three (3) month
rolling average) exceeds 64%; (ii) the Franchisee fails to maintain the number
of rental contracts that are seven (7) or more days past due (calculated on a
three (3) month rolling average) at 8% or less of its total outstanding rental
contracts; (iii) expenses of a Store that has been open for business for less
than twelve (12) months cause the ratio of actual expenses to actual revenue to
exceed the ratio of expenses to revenue reflected in the proforma cash flow
projections for that Store; (iv) payments (principal and/or interest) under any
Receivable of the Franchisee are more than fifteen (15) days past due; (v) the
idle inventory percentage (the quotient of the idle inventory divided by the
total inventory, calculated on a three (3) month rolling average and based on
the idle inventory and total inventory figures reflected on the Franchisee's
monthly royalty reports) exceeds twenty-five percent (25%); or (vi) in Lender's
determination, the Receivable is otherwise in default.
1.9 Financing Terms and Credit Standards. The specific terms of
any financing provided by Lender to Franchisees under this Agreement shall be
determined from time to time by Lender in accordance with its ordinary and
customary business practices. The credit standards for approval of any financing
provided by Lender to Franchisees under this Agreement shall be determined from
time to time by Lender and ColorTyme; provided however, the application of such
credit standards to particular transactions shall be at Lender's sole
discretion.
1.10 Credit Approval. Nothing herein shall obligate Lender to
accept or approve any application for financing submitted by or on behalf of any
Franchisee. Lender may, in its sole discretion, reject or decline any
application for financing submitted by or on behalf of any Franchisee; provided,
if Lender rejects or declines any such application, it shall inform ColorTyme
and the Franchisee of the reasons therefor.
1.11 Leased Stores. In connection with financing for Stores that
are leased by Franchisees, Lender may, at its sole discretion, approve any such
Franchisee's application for financing without any requirement that the
Franchisee provide (i) a copy of the ground or building lease; (ii) the
landlord's consent to the collateral assignment of such lease, (iii) a
disclaimer of the landlord's interest in the fixtures, equipment, inventory or
other goods in which Lender may obtain a security interest; or (iv) any other
consent, waiver or other matter related to
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such lease. Any approval by Lender of a Franchisee's application for financing
that does not require any such items related to the lease shall not in any way
affect the obligations of ColorTyme or RAC under this Agreement.
1.12 Collection Procedures. Lender may use its ordinary and
customary practices and procedures to collect outstanding Receivables, subject
to the provisions of this Agreement, which practices and procedures may or may
not be consistent with those used in the past by TFC.
1.13 Modification of Receivables. Notwithstanding anything in this
Agreement to the contrary, Lender reserves the right to make such modifications,
adjustments and/or revisions to any Receivables, including the Credit Limits,
payment terms and conditions for advances thereunder, as it deems necessary or
appropriate under the circumstances, provided Lender may not make any
modifications, adjustments or revisions to the extent such modifications,
adjustments and/or revisions have not been approved by ColorTyme. Lender may at
any time, at its sole discretion, amend payment schedules, defer payments or
otherwise modify the terms of any such Receivable, without in any way affecting
the obligations of ColorTyme or RAC under this Agreement, except to the extent
such amendment, deferral or other modification shall cause such Receivable to
exceed the Advance Limit for such Receivable determined in accordance with
Section 1.5 on the basis of information provided to the Lender on or before the
effective date of such amendment, deferral or other modification.
1.14 Periodic Review of Receivables. Lender may periodically review
any Receivable, at such times or intervals and taking into consideration such
matters (including without limitation the Average Monthly Revenue of the
Franchisee named in such Receivable) as may be agreed upon from time to time by
Lender and ColorTyme. Lender shall prepare a written report of each such
periodic review, and promptly provide ColorTyme with a copy of such report.
1.15 Payments to ColorTyme. Lender shall pay to ColorTyme, from the
interest portion of each payment received by Lender on account of each
Receivable (whether a Line of Credit or a Term Loan), an amount calculated by
multiplying the amount of each such interest payment by a fraction, the
denominator of which is the rate of interest applicable to such Receivable and
the numerator of which is determined on the following scale: (i) 2.00% if the
Franchisee's Credit Limit is $1,000,000 or less; or (ii) 1.50% if the
Franchisee's Credit Limit is greater than $1,000,000. The amounts payable
pursuant to this section shall be payable on a monthly basis within 20 days
after the end of the month in which an interest payment is received by Lender.
1.16 Franchisee Credit Facility Fee. Lender shall use commercially
reasonable efforts to amend the credit agreements with the Franchisees to
require the Franchisees to pay, directly to ColorTyme, a non-refundable credit
facility fee equal to eight-tenths of one percent (0.80%) of the Credit Limit
established for the Franchisee by Lender pursuant to such credit agreements,
such credit facility fee to be due and payable upon execution of such amendment.
The form and substance of the amendment to the credit agreements shall be
subject to ColorTyme's approval. ColorTyme shall be solely responsible for
collecting the credit facility fee from the Franchisees; Lender shall have no
obligation or responsibility to collect the credit facility fee from the
Franchisees. In the event any Franchisee fails to amend its applicable credit
agreement as described pursuant to this Section 1.16, then, at the request of
ColorTyme, Lender shall terminate such Franchisee's line of credit in accordance
with the terms of its governing agreements.
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ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 Representations and Warranties of ColorTyme and RAC. ColorTyme
and RAC, jointly and severally, represent and warrant to Lender that:
(a) ColorTyme. ColorTyme is a corporation duly organized,
validly existing and in good standing under and pursuant to the laws of
the State of Texas. ColorTyme has duly qualified and is authorized to
conduct business and is in good standing as a foreign corporation in
all jurisdictions where such qualification is necessary. ColorTyme has
all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions herein contemplated,
ColorTyme has taken all corporate action necessary to duly authorize
the execution of this Agreement and the consummation of all
transactions herein contemplated.
(b) RAC. RAC is a corporation duly organized, validly
existing and in good standing under and pursuant to the laws of the
State of Delaware. RAC has duly qualified and is authorized to conduct
business and is in good standing as a foreign corporation in all
jurisdictions where such qualification is necessary. RAC has all
requisite corporate power and authority to enter into this Agreement
and to consummate the transactions herein contemplated. RAC has taken
all corporate action necessary to duly authorize the execution of this
Agreement and the consummation of all transactions herein contemplated.
(c) Enforceable Agreement. This Agreement has been duly
executed and delivered by ColorTyme and RAC and is a legal, valid and
binding obligation of ColorTyme and RAC, fully enforceable in
accordance with its terms.
(d) The Receivables. The credit applications and other
credit documents provided to Lender by ColorTyme pursuant to Section
1.2. in connection with each application by a Franchisee for financing
pursuant to this Agreement will in each case be all the documents
received or acquired by ColorTyme or RAC in connection with such
application; to the best of ColorTyme's and RAC's knowledge, each such
document will have been duly executed by the persons whose signatures
purport to appear thereon; to the best of ColorTyme's and RAC's
knowledge, none of such documents or any other materials submitted
therewith will contain any false or misleading statements or
information; and at the time such documents are provided to Lender and,
if the application for financing is approved by Lender, at the time the
resulting Receivable is funded by Lender, neither ColorTyme nor RAC
will have any knowledge of any fact or circumstance that would
materially adversely affect the enforceability or collectability of the
Receivable or Lender's rights thereunder or in the collateral securing
such Receivable.
(e) Accurate Information. Neither ColorTyme nor RAC has
made any misstatement of material fact to Lender or provided Lender
with any false or misleading information relevant to this Agreement or
withheld from Lender any information known to ColorTyme or RAC which
would be material to Lender's decision to enter into this Agreement.
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2.2 Covenants of ColorTyme and RAC. At all times during which any
of the Receivables are outstanding or during which ColorTyme and/or RAC have any
obligations, including contingent obligations, to Lender under this Agreement,
unless Lender shall otherwise consent in writing:
(a) Consolidated Leverage Ratio. ColorTyme and RAC shall
not permit the Consolidated Leverage Ratio (as that term is defined in
the Credit Agreement among Rent-A-Center, Inc., as borrower, the
several lenders from time to time parties thereto, Morgan Stanley
Senior Funding Inc., as Documentation Agent, JPMorgan Chase Bank and
Bear, Stearns & Co., Inc., as Syndication Agents, Wachovia Bank,
National Association, UBS Warburg LLC, United Overseas Bank and Credit
Lyonnais, as Managing Agents, and Lehman Commercial Paper Inc., as
Administrative Agent, dated as of May 28, 2003 (as the same has been or
may be amended, restated or modified from time to time, the "Senior
Credit Agreement"), as of the last day of any period of four (4)
consecutive fiscal quarters to exceed 2.75 to 1.00.
(b) Consolidated Fixed Charge Coverage Ratio. ColorTyme
and RAC shall not permit the Consolidated Fixed Charge Coverage Ratio
(as that term is defined in the Senior Credit Agreement), for any
period of four (4) consecutive fiscal quarters of Rent-A-Center, Inc,
to be less than the ratio of 1.50 to 1.00.
(c) Receipt of Funds. If ColorTyme or RAC receive any
money or property as payment on any of the Receivables, they shall
receive and hold such money or property in trust for Lender and
immediately deliver such money or property to Lender with any necessary
endorsements.
(d) The Receivables. Neither ColorTyme nor RAC shall take
any action, or fail to take any action, which could adversely affect
Lender's rights with respect to any of the Receivables. Neither
ColorTyme nor RAC will make any misstatement of material fact to Lender
or provide Lender with any false or misleading information relevant to
any credit application or other credit documents submitted pursuant to
this Agreement or any Receivable or omit to provide Lender with any
information known to ColorTyme or RAC which would be material to
Lender's decision regarding any such credit application or Receivable.
(e) Confidentiality; Proprietary Rights. During the term
of this Agreement, Lender shall provide to ColorTyme various forms,
documents, procedures manuals and other information and materials for
use in connection with the financing contemplated by this Agreement.
ColorTyme and RAC acknowledge and agree that all such information and
materials are proprietary to Lender and constitute private business
information intended for Lender's exclusive benefit. Neither ColorTyme
nor RAC shall use, and neither shall permit its employees or agents to
use, any such materials or information for any purpose other than as
expressly contemplated by this Agreement. ColorTyme and RAC shall
maintain the confidentiality of all such materials and information with
the same degree of diligence as they use to protect their own
proprietary information and trade secrets from disclosure to other
parties.
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(f) Indemnity. ColorTyme and RAC, jointly and severally,
shall indemnify Lender and its successors, assigns and participants,
and their respective officers, directors, employees, attorneys and
agents, from, and shall hold each of them harmless against, any and all
losses, liabilities, claims, damages, costs and expenses (including
reasonable attorneys' fees) to which any of them may become subject
(INCLUDING LOSSES, LIABILITIES, CLAIMS, DAMAGES, COSTS AND EXPENSES
WHICH ARISE IN WHOLE OR IN PART OUT OF THE NEGLIGENCE OF LENDER) which
directly or indirectly arise from or relate to (i) this Agreement or
any of the transactions contemplated hereby, (ii) the sale of
franchises by ColorTyme or any dealings between ColorTyme and
Franchisees; (iii) the enforcement by Lender of its rights hereunder,
or (iv) any investigation, litigation or other proceeding, including,
without limitation, any threatened investigation, litigation or other
proceeding, relating to any of the foregoing, excluding, however, (x)
any losses, liabilities, claims, damages, costs and expenses which
arise exclusively from the willful misconduct or gross negligence of
Lender, and (y) expenses incurred by Lender pursuant to Section 3.2.
The obligations of ColorTyme and RAC under this section shall survive
the termination of this Agreement.
(g) Financial Statements and Reports. RAC shall provide
to Lender a copy of each Form l0-K, Form 10-Q and Form 8-K of
Rent-A-Center, Inc., filed with the U.S. Securities and Exchange
Commission, within two (2) business days after the filing thereof.
ColorTyme shall provide to Lender (i) a copy of its audited individual
and consolidated year-end financial statements within ninety (90) days
following the end of each fiscal year; (ii) a copy of its monthly
financial statements within thirty (30) days following the end of each
month; (iii) a copy of its Uniform Franchise Offering Circular and all
amendments thereto, within one hundred twenty (120) days following the
end of each fiscal year; and (iv) royalty reports and financial
statements for each Franchisee, promptly upon request by Lender. RAC
and ColorTyme shall provide to Lender a quarterly compliance
certificate in the form of Exhibit A attached hereto within thirty (30)
days following the end of each calendar quarter.
(h) Notification of Senior Credit Agreement Modification.
Each of ColorTyme and RAC agrees to provide, or cause to be provided,
to Lender a copy of each modification of the Senior Credit Agreement
within ten (10) business days after such modification has been duly
executed by all required parties and is deemed effective.
(i) Further Assurances. ColorTyme and RAC shall, upon
request of Lender, execute and deliver such additional documents and
instruments as may be reasonably required by Lender for carrying out
the purposes of this Agreement.
ARTICLE XII
RECEIVABLE DEFAULTS
3.1 Notice of Default. In the event any payments due under any of
the Receivables are delinquent by more than ninety (90) days or Lender otherwise
declares a default under any of the Receivables, Lender shall give notice
thereof to ColorTyme.
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3.2 Foreclosure. Following notice of a default under a Receivable
pursuant to Section 3.1, in the exercise of its sole and absolute discretion,
Lender shall attempt to collect the outstanding obligations under the Receivable
and, if necessary, commence appropriate legal actions to recover the collateral
securing such Receivable and to collect the accounts owing by the account
debtor(s) and other persons, if any, in connection with such collateral. The
costs incurred by Lender in connection with such actions shall be shared by
Lender and ColorTyme in accordance with subpart (z) of Section 3.4 and sub-part
(a) of Section 6.1 (i.e., the first one thousand dollars ($1,000.00) is to be
paid by ColorTyme, and all costs in excess of that amount are to be paid by
Lender). Lender may take collection actions consistent with those taken in the
past by TFC.
3.3 Letter of Credit. Within five (5) business days following
notice of a default under a Receivable pursuant to Section 3.1, RAC shall cause
a standby letter of credit to be issued to Lender in an amount equal to one
hundred fifteen percent (115%) of the outstanding balance of the defaulted
Receivable. The letter of credit shall secure the obligations of ColorTyme under
Section 3.4 with respect to such defaulted Receivable. Upon payment by ColorTyme
of the Recourse Amount (as that term is hereinafter defined) with respect to the
defaulted Receivable, such letter of credit shall be promptly returned to RAC
for cancellation. The letter of credit shall provide for a term of one (1) year;
shall be payable upon presentation to the issuing bank of a certificate of
Lender stating that ColorTyme has failed to pay all amounts due under Section
3.4 with respect to the Receivable for which the letter of credit was issued;
shall be issued by a bank located in the United States that is included in the
bank group party to the Senior Credit Agreement (or such other bank as may be
approved by Lender in its sole discretion), but excluding any bank that has a
participation interest in any of the Receivables or this Agreement, which bank
must have a senior unsecured issuer rating of Aa or above as determined by
Moody's Investors Service or a short-term issue credit rating of Al or above as
determined by Standard & Poors; and shall otherwise be acceptable to Lender in
all respects.
3.4 ColorTyme's Recourse Obligation; Assignment to ColorTyme.
ColorTyme shall pay to Lender an amount (the "Recourse Amount") equal to the sum
of (x) the outstanding principal balance of a defaulted Receivable, (y) all
accrued and unpaid interest thereon and (z) all reasonable expenses incurred by
Lender, including the fees and expenses of its legal counsel, in connection with
the enforcement of such Receivable, up to a maximum of one thousand and no/100
dollars ($1,000.00) per Receivable, upon the earliest to occur of (a)
repossession and/or foreclosure of the collateral securing the defaulted
Receivable, (b) the entry by a court of competent jurisdiction of an order
staying or barring such actions or adjudicating the rights of Lender with
respect to such collateral, (c) eleven (11) months following the issuance of the
letter of credit with respect to the defaulted Receivable pursuant to Section
3.3, or (d) thirty (30) days after Lender sends notice of a default in
accordance with Section 3.1 if, but only if, Lender has not received a letter of
credit issued in accordance with Section 3.3, whereupon Lender shall
contemporaneously assign to ColorTyme Lender's interest in the defaulted
Receivable and the collateral securing such defaulted Receivable, WITHOUT
RECOURSE OR WARRANTY OF ANY KIND WHATSOEVER.
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IV.
DEFAULT UNDER THIS AGREEMENT
4.1 Events of Default. An "Event of Default" shall exist if any
one or more of the following events (herein collectively called "Events of
Default") shall occur and be continuing:
(a) ColorTyme or RAC shall fail to pay any amount due
under the terms of this Agreement within ten (10) business days
following demand therefor.
(b) ColorTyme or RAC shall fail to perform, observe or
comply with any of their covenants, agreements or obligations contained
in this Agreement, and such failure shall remain uncured thirty (30)
days following notice thereof.
(c) Any representation or warranty made by ColorTyme or
RAC in this Agreement or any of the documents delivered to Lender
pursuant to this Agreement shall prove to be untrue, misleading or
inaccurate in any material respect.
(d) ColorTyme, RAC or any of their affiliates shall
default in their respective obligations to Lender under any other
agreement to which they, or any of them, are parties.
(e) ColorTyme, RAC or any of their affiliates shall
default in their respective obligations under agreements with their
primary lenders or any other agreement involving indebtedness in excess
of fifty thousand and no/100 dollars ($50,000.00).
(f) ColorTyme, RAC or any of their affiliates shall (i)
apply for or consent to the appointment of a receiver, custodian,
trustee, liquidator, or similar official for themselves or all or a
substantial part of their property, (ii) admit in writing that they are
unable to pay their debts generally as they become due, (iii) make a
general assignment for the benefit of creditors, (iv) file a petition
or answer seeking liquidation, reorganization or an arrangement with
creditors or to take advantage of any bankruptcy, reorganization or
insolvency laws, (v) file an answer admitting the material allegations
of or consent to or default in answering a petition filed against them
in any bankruptcy, reorganization or insolvency proceeding, (vi) become
the subject of an order for relief under any bankruptcy, reorganization
or insolvency proceeding which shall continue unstayed and in effect
for thirty (30) days, or (vii) an order, judgment or decree shall be
entered by any court of competent jurisdiction or other competent
authority approving a petition appointing a receiver, custodian,
trustee, liquidator or similar official for them or of all or a
substantial part of their property and such other, judgment or decree
shall continue unstayed and in effect for a period of thirty (30) days.
(g) ColorTyme or RAC shall cease doing business as a
going concern.
(h) This Agreement or any other documents delivered to
Lender pursuant to this Agreement or in connection herewith shall for
any reason cease to be in full force and effect, or shall be declared
null or unenforceable in whole or in material part, or the validity or
enforceability thereof shall be challenged or denied by any party
thereto excluding Lender.
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4.2 Remedies Upon Default. If an Event of Default shall occur and
be continuing, Lender at its sole discretion may, without notice (i) terminate
this Agreement, (ii) elect to have ColorTyme repurchase all Receivables then
held by Lender (without recourse or warranty by Lender), whereupon ColorTyme
shall so repurchase such Receivables for an amount equal to the outstanding
principal balance thereof plus all accrued and unpaid interest thereon, (iii)
reduce any claim to judgment, (iv) set off and apply against the obligation of
ColorTyme, without notice to ColorTyme or RAC, any and all deposits or other
sums at any time credited or held by Lender or owing from Lender to ColorTyme,
RAC or any of their affiliates, whether or not said obligations are then due,
and (v) without further notice of default or demand, pursue and enforce any of
Lender's rights and remedies under this Agreement and any of the other documents
delivered to Lender pursuant to this Agreement or otherwise provided under or
pursuant to any applicable law or any other agreement.
V.
GUARANTY
5.1 Guaranty. RAC hereby guaranties the full and prompt payment
and performance of all debts, liabilities and obligations of ColorTyme to Lender
arising out of or in any way related to this Agreement (as amended, restated or
otherwise modified), whether for principal, interest (including any interest
which, but for the application of the provisions of the Bankruptcy Code, would
have accrued on such amounts), premium, reimbursement obligations, fees, costs,
expenses, recourse or indemnity obligations (collectively, the "Obligations").
RAC represents and warrants to Lender that it will receive a substantial
economic benefit from the financing provided by Lender pursuant to this
Agreement, and acknowledges that Lender would not provide such financing if it
did not receive this guaranty. RAC hereby waives promptness, diligence, notice
of acceptance and any other notice with respect to the Obligations or this
guaranty, and any requirement that Lender protect, secure, perfect or insure any
security interest or lien or any property subject thereto, or exhaust any right
or take any action against ColorTyme or any other person or entity or any
collateral. The liability of RAC under this guaranty shall be absolute,
unconditional, irrevocable and continuing, irrespective of any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to departure
from the terms of the Obligations. RAC hereby consents to any and all extensions
or other indulgences granted by Lender to ColorTyme and consents to the release
or substitution of any or all collateral securing the Obligations. RAC hereby
irrevocably waives any and all rights it may now or hereafter have under any
agreement or at law or in equity (including, without limitation, any law
subrogating it to the rights of Lender) to assert any claim or seek
contribution, indemnification or any other form of reimbursement from ColorTyme
for any payment made by RAC under or in connection with this guaranty. This
guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment of any of the Obligations is rescinded or must otherwise
be returned by Lender upon the insolvency, bankruptcy or reorganization of
ColorTyme or otherwise, all as though such payment had not been made. RAC agrees
that in light of the immediately foregoing waivers, the execution of this
Guaranty shall not be deemed to make RAC a "creditor" of ColorTyme, and that for
purposes of Sections 547 and 550 of the Bankruptcy Code, RAC shall not be deemed
a "creditor" of ColorTyme.
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To the maximum extent permitted by law, RAC hereby waives: (1) any
rights to assert against Lender any defense (legal or equitable), set-off,
counterclaim, or claim which RAC may now or at any time hereafter have against
ColorTyme or any other party liable to Lender; (2) any defense RAC has to
performance hereunder, except the defense of discharge by payment in full of the
Obligations and any right RAC has to be exonerated, provided by statute or
otherwise, arising by reason of any claim or defense based upon an election of
remedies by Lender including any defense based upon an election of remedies by
Lender; (3) the benefit of any statute of limitations affecting RAC's liability
hereunder or the enforcement thereof, and any act which shall defer or delay the
operation of any statute of limitations applicable to the Obligations shall
similarly operate to defer or delay the operation of such statute of limitations
applicable to RAC's liability hereunder; and (4) any discharge of ColorTyme's
obligations to Lender by operation of law as a result of Lender's intervention
or omission; or the acceptance by Lender of anything in partial satisfaction of
the Obligations. RAC consents and agrees that Lender shall be under no
obligation to marshal any assets of ColorTyme or any Franchisee or other
guarantor in favor of RAC, or against or in payment of any or all of the
Obligations.
RAC hereby waives any and all benefits or defenses arising directly or
indirectly under any state statutes pertaining to "anti-deficiency" or "one
action" statutes such as California's Code of Civil Procedure Sections 580a,
580d and 726, or any other similar statutes or judicial opinions concerning the
subject matter connected therewith. RAC understands that the effect of the
foregoing waivers may be that RAC may have liability hereunder for amounts with
respect to which RAC may be left without rights of subrogation, reimbursement,
contribution or indemnity against ColorTyme or other guarantors or sureties.
Lender shall have the right to seek recourse against RAC to the fullest
extent provided for herein, and no election by Lender to proceed in one form of
action or proceeding, or against any party, or on any obligation, shall
constitute a waiver of Lender's right to proceed in any other form of action or
proceeding or against other parties unless Lender has expressly waived such
right in writing. Specifically, but without limiting the generality of the
foregoing, no action or proceeding by Lender under any document or instrument
evidencing the Obligations shall serve to diminish the liability of RAC under
this Guaranty except to the extent that Lender finally and unconditionally shall
have realized indefeasible payment by such action or proceeding.
RAC hereby agrees that any and all present and future indebtedness of
ColorTyme owing to RAC is postponed in favor of and subordinated to payment, in
full, in cash, of the Obligations. In this regard, following notice from Lender
under Section 3.1, no payment of any kind whatsoever shall be made with respect
to such indebtedness until the Obligations have been indefeasibly paid in full.
ARTICLE VI
MISCELLANEOUS
6.1 Expenses. Each party hereto shall pay and be responsible for
its own expenses incurred in connection with this Agreement and the transactions
herein contemplated; provided, however, ColorTyme and RAC shall reimburse Lender
(and any participant in this Agreement or any of the Receivables) for all of its
reasonable out-of-pocket expenses, including the reasonable fees and expenses of
its legal counsel, incurred in connection with (a) the preparation,
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negotiation and execution of this Agreement and each amendment hereto, (b) the
enforcement and collection of Receivables that default, up to a maximum of one
thousand and no/100 dollars ($1,000.00) for each such default; and (c) the
enforcement or preservation of Lender's rights under this Agreement following an
Event of Default. All such expenses shall be paid promptly upon request by
Lender.
6.2 Relationship of the Parties. The parties are not engaged in a
partnership or joint venture, and nothing herein shall confer on any party
hereto the authority to act for or on behalf of the other party, except as
expressly provided herein. Lender has no fiduciary or other special relationship
with ColorTyme, the guarantor or any of their affiliates.
6.3 Compliance with Laws. Throughout the term of this Agreement,
ColorTyme, RAC and Lender shall each comply with all laws, regulations, rules
and orders applicable to them.
6.4 No Waiver; Cumulative Remedies. No failure to exercise, and no
delay in exercising, on the part of Lender, any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies provided for in
this Agreement and the other documents executed in connection herewith are
cumulative and not exclusive of any other rights or remedies provided by law.
6.5 Notices. All notices or other communications hereunder shall
be given in writing by either overnight courier service or pre-paid registered
or certified mail, to the respective addresses of the parties following their
names on the signature page of this Agreement. Such notice or other
communication shall be deemed to have been given upon actual delivery or one (1)
business day after depositing it with an overnight courier service or three (3)
business days after depositing it with the United States Postal Service.
6.6 Severability. If at any time any provision, or the application
of any provision, of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision, or the
application thereof, shall be of no force or effect, but the illegality or
unenforceability of such provision, or the application thereof, shall have no
effect upon and shall not impair the enforceability of any other provision of
this Agreement.
6.7 Entire Agreement; Amendments. This Agreement embodies the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements, conditions and understandings, and
may be amended only by an instrument executed in writing by an authorized
officer of the party against whom such amendment is sought to be enforced.
6.8 Survival. All agreements, representations and warranties
contained herein or made in writing by or on behalf of the ColorTyme or RAC in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement, and any investigation at any time made by
Lender, and the delivery of any documents to Lender pursuant to this Agreement
and payment of the obligations of ColorTyme hereunder and any sale or assignment
or other disposition by Lender of this Agreement, the Receivables or any other
- 14 -
documents delivered to Lender pursuant to this Agreement. All statements
contained in any certificate or other instrument delivered by or on behalf of
the ColorTyme or RAC pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed representations and warranties by such
parties hereunder.
6.9 Binding Effect; No Third Party Beneficiaries. This Agreement
shall inure to the benefit of, and the obligations created hereby shall be
binding upon, the parties and their permitted successors and assigns. This
Agreement is solely for the benefit of the parties hereto (and their successors
and permitted assigns); nothing herein shall be construed to give any other
person any right or claim with respect to this Agreement.
6.10 Assignment; Participations. Neither ColorTyme nor RAC may
assign any of their rights or obligations under this Agreement without the prior
written consent of Lender. Lender may at any time assign or sell this Agreement,
or any rights hereunder or interest herein, and the Receivables, without the
consent of ColorTyme or RAC; provided, that in the event Lender assigns or sells
all or substantially all of Lender's rights in this Agreement and the
Receivables, Lender (or its assignee or transferee) shall send, within at most
thirty (30) days after such assignment or sale, written notice to ColorTyme and
RAC of such assignment or sale (such notice is herein referred to as "Lender's
Assignment Notice"). After receipt of the Lender's Assignment Notice, ColorTyme
and RAC shall have the right, upon ninety (90) days' prior written notice to
Lender's assignee or transferee, to terminate this Agreement and arrange for the
payment in full of all Receivables (such notice is herein referred to as
"ColorTyme's Termination Notice" and the date specified in such notice for
termination and payment in full of all Receivables is herein referred to as the
"Early Termination Date"). Notwithstanding ColorTyme's Termination Notice and
termination of this Agreement, all rights of Lender (and its assignee or
transferee) and all duties and obligations of ColorTyme and RAC under this
Agreement with respect to outstanding Receivables and all advances made to
Franchisees pursuant to Lines of Credit prior to such termination shall continue
until all such Receivables are fully paid in accordance with their terms and all
such Lines of Credit are terminated. After receipt of ColorTyme's Termination
Notice, Lender, its assignee or transferee, may notify any or all Franchisees
obligated on outstanding Receivables that no advances will be made and all Lines
of Credit shall be terminated on the Early Termination Date, and Lender, its
assignee or transferee, shall have no obligation to make any advances to any
Franchisee from and after the Early Termination Date; provided however, so long
as no event of default has occurred and is continuing under the Receivables of
any Franchisee, Lender's assignee or transferee, as the case may be, shall
continue to make advances available under the applicable Line of Credit and/or
Term Loans to such Franchisee in accordance with such Franchisee's applicable
credit agreement and other credit documentation at all times prior to the Early
Termination Date. Lender may at any time sell to one or more persons
participating interests in any Receivables and this Agreement without the prior
consent of ColorTyme or RAC.
6.11 Audit. Lender shall have the right to inspect the books and
records of ColorTyme relating to Franchisees that are obligated to Lender under
Receivables, including the obligations of such Franchisees to ColorTyme. Lender
shall keep the information obtained from such books and records confidential;
nothing herein, however, shall limit (a) Lender's rights to use such information
in administering the Receivables or in enforcing its rights under the
Receivables or under this Agreement, or (b) Lender's rights to use such
information in connection with any
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prospective sale or assignment of any or all of the Receivables or this
Agreement, or any interest therein or herein, provided the prospective
purchaser, assignee or participant enters into a written agreement to maintain
the confidentiality of such information.
6.12 Term; Termination. This Agreement shall be effective on and as
of the date of its execution, and shall continue in effect until September 30,
2006; provided, that in the event the Senior Credit Agreement is modified and
such modification changes the definition of Consolidated Leverage Ratio or
Consolidated Fixed Charge Coverage Ratio in a manner that is not acceptable to
Lender, in its sole discretion, then Lender may terminate this Agreement by
sending to ColorTyme and RAC at least one hundred twenty days' prior written
notice. Notwithstanding the termination of this Agreement, all rights of Lender
and all duties and obligations of ColorTyme and RAC under this Agreement with
respect to outstanding Receivables and additional advances made to Franchisees
pursuant to Lines of Credit shall continue until all such Receivables are fully
paid in accordance with their terms and all such Lines of Credit are terminated.
6.13 Construction. Each of the parties to this Agreement
acknowledges that it has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and all the other
documents and instruments executed in connection herewith with its respective
legal counsel and that this Agreement and all other documents and instruments
executed in connection herewith shall be construed as if jointly drafted by all
the parties hereto.
6.14 Amendment and Restatement. This Agreement amends and restates
in its entirety the Original Agreement. The terms and provisions of the Original
Agreement are hereby superseded by this Agreement. This Agreement is given in
substitution for the Original Agreement. Each reference to the Original
Agreement in any other document, instrument or agreement executed and/or
delivered in connection therewith shall mean and be a reference to this
Agreement. This Agreement amends, restates and supersedes only the Original
Agreement. This Agreement is not a novation. Nothing contained herein, unless
expressly herein to the contrary, is intended to amend, modify or otherwise
affect any other instrument, document or agreement executed and/or delivered in
connection with the Original Agreement. This Agreement shall govern the rights
and obligations of the parties hereto with respect to all existing Receivables
arising out of the Original Agreement, as well as all future Receivables. All
obligations of ColorTyme under the Original Agreement and all obligations of RAC
under the Original Agreement shall hereafter be deemed obligations of such
parties under this Agreement.
6.15 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA (EXCLUDING THE
LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
6.16 Acknowledgments by ColorTyme and RAC. Each of ColorTyme and
RAC acknowledges, represents, warrants and agrees that (a) as of the date hereof
and after giving effect to this Agreement, no Event of Default or condition, or
event which would with notice or the lapse of time, or both, result in an Event
of Default, has occurred and is continuing, and it is not aware of the
occurrence or continuance of any default with respect to the Original Agreement
on the date hereof, (b) it does not have any grounds and hereby agrees not to
challenge (or to allege or to pursue any matter, cause or claim arising under or
with respect to the Original
- 16 -
Agreement or any of the existing Receivables, the existing Recourse Amount or
the existing Obligations or the status of any thereof as legal, valid and
binding obligations enforceable in accordance with their respective terms; and,
to the best of its knowledge, it does not possess (and hereby forever waives,
remises, releases, discharges and holds harmless the Lender, and its parents,
subsidiaries, affiliates, stockholders, directors, officers, employees,
attorneys, agents and representatives and each of their respective heirs,
executors, administrators, successors and assigns (collectively, the "Lender
Parties") from and against, and agree not to allege or pursue) any action, cause
of action, suit, debt, claim, counterclaim, cross-claim, demand, defense,
offset, opposition, demand and other right of action whatsoever, whether in law,
equity or otherwise (which it, all those claiming by, through or under it, or
its successors or assigns, have or may have) against the Lender Parties, or any
of them, prior to or as of the date of this Agreement for, upon, or by reason
of, any matter, cause or thing whatsoever, arising out of, or relating to, the
Original Agreement, the existing Receivables, the Recourse Amount, the
Obligations or any other document, instrument or agreement relating to any of
the foregoing (including, without limitation, any payment, performance, validity
or enforceability of any or all of the indebtedness, covenants, promises,
agreements, provisions, rights, remedies, obligations, duties and liabilities
thereunder) or any transaction relating to any of the foregoing, or any or all
actions, courses of conduct or other matters in any manner whatsoever relating
to or otherwise connected with any of the foregoing, provided, that the
foregoing agreement shall not affect any action, cause of action, suit, debt,
claim, counterclaim, cross-claim, demand, defense, offset, opposition, demand or
other right of action whatsoever, whether in law, equity or otherwise that
ColorTyme or RAC may have with respect to TFC, provided, further, that none of
the foregoing rights with respect to TFC shall offset or be the basis of a
counterclaim or otherwise affect the obligations of ColorTyme or RAC under this
Agreement, and (c) it is obligated to pay to Lender on the effective date of
this Agreement a fee in the amount set forth in a fee letter agreement between
Lender, ColorTyme and RAC.
6.17 Receivables Purchase Obligation. In connection with the
assignment by TFC to Lender of TFC's interest in the Original Agreement, and in
accordance with Section 1.3(b) hereof, ColorTyme and RAC agree to use
commercially reasonable efforts in assisting Lender in obtaining from each
Franchisee executed amendments and restatements or modifications of each loan
document evidencing each Receivable transferred by TFC to Lender (each, a
"Receivable Modification"), the form of such Receivable Modification to be in
form and substance reasonably acceptable to each of ColorTyme and Lender.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
1st day of October, 2003.
COLORTYME, INC.
5700 Tennyson Parkway, Suite 180
Plano, Texas 75024
By: /s/ Steve Arendt
----------------------------
Title: President and Chief
Executive Officer
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RENT-A-CENTER EAST, INC.
5700 Tennyson Parkway, 3rd Floor
Plano, Texas 75024
By: /s/ Mitchell E. Fadel
----------------------------------
Title: Vice President
WELLS FARGO FOOTHILL, INC.
2450 Colorado Avenue, Suite 3000 West
Santa Monica, California 90404
By: /s/ David B. Fricke
----------------------------------
Title: Vice President
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EXHIBIT A
COMPLIANCE CERTIFICATE
This Compliance Certificate is executed and delivered to Wells Fargo Foothill,
Inc. ("Lender") by Rent-A-Center East, Inc. ("RAC") and ColorTyme, Inc.
("ColorTyme") this ____ day of ____________, 20___, pursuant to Section ___ of
that certain Amended and Restated Franchisee Financing Agreement (the
"Franchisee Financing Agreement") dated September ____, 2003 among Lender,
ColorTyme and RAC. All capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Franchisee Financing Agreement. The
undersigned hereby certify to Lender as follows:
1. The undersigned are the duly elected, qualified and acting ____________
of ColorTyme and ____________ of RAC, and as such officers, are
authorized to make and deliver this Compliance Certificate.
2. The undersigned have reviewed the provisions of the Franchisee
Financing Agreement and confirm that, as of the date hereof:
a. The representations and warranties contained in the Franchisee
Financing Agreement are true and correct in all material
respects on and as of the date hereof with the same force and
effect as though made on the date hereof;
b. ColorTyme and RAC have complied with all the terms, covenants
and conditions set forth in the Franchisee Financing
Agreement;
c. No Event of Default, and no event that with notice or the
passage of time or both will constitute an Event of Default,
has occurred and is continuing; and
d. Attached hereto as Schedule A is a report prepared by the
undersigned setting forth information and calculations that
demonstrate compliance (or noncompliance) with each of the
covenants set forth in Section 2.2 of the Franchisee Financing
Agreement.
The foregoing certificate is given in our respective capacities as officers of
ColorTyme and RAC, and not in our individual capacities.
COLORTYME, INC. RENT-A-CENTER EAST, INC.
By:___________________________ By:_______________________
Name:_________________________ Name:_____________________
Its:__________________________ Its:______________________
SCHEDULE A
TO
COMPLIANCE CERTIFICATE
Consolidated Leverage Ratio
ColorTyme and RAC shall not permit the Consolidated Leverage Ratio, as
of the last day of any period of four (4) consecutive fiscal quarters of
Rent-A-Center, Inc., to exceed 2.75 to 1.00.
Covenant Satisfied: __________________________
Covenant Not Satisfied: __________________________
Consolidated Fixed Charge Coverage Ratio
ColorTyme and RAC shall not permit the Consolidated Fixed Charge
Coverage Ratio, for any period of four (4) consecutive fiscal quarters
of Rent-A-Center, Inc., to be less than the ratio of 1.50 to 1.00.
Covenant Satisfied: _______________
Covenant Not Satisfied: _______________