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EXHIBIT 10.5
PLEDGE AGREEMENT
(Alrenco, Inc.)
THIS STOCK PLEDGE ("Stock Pledge") made as of this 26th day of February,
1998 by and between Alrenco, Inc., an Indiana corporation ("Company") and
Comerica Bank, a Michigan banking corporation, as Agent for and on behalf of the
Banks (as defined below) ("Secured Party").
RECITALS:
A. Pursuant to that certain Alrenco Revolving Credit Agreement dated
as of February 26, 1998 (as may be amended, or otherwise modified from time to
time, the "Credit Agreement") by and among Company, Secured Party as Agent and
the financial institutions which are named in and are signatories to the Credit
Agreement ("Banks"), the Banks have agreed to extend credit to Company on the
terms set forth in the Credit Agreement.
B. As a condition to the performance of their respective obligations
under the Credit Agreement, the Banks, and Secured Party, as Agent for the
Banks, have required that Company provide this Stock Pledge to Secured Party, as
Agent for the Banks, granting various security interests, liens and other
encumbrances as security for the Company's obligations under its Notes, the
Credit Agreement and the other Loan Documents.
C. Agent is acting as Agent for the Banks pursuant to Section 13.1 of
the Credit Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
I. Creation of Security Interest
Company hereby grants to Secured Party, on behalf of Banks and the Agent,
a security interest in the property described in paragraph II, below
("Collateral").
II. Collateral.
The Collateral consists of the following:
(a) 100% of the outstanding shares of each class of stock, (or other
ownership interest) of each Subsidiary listed on Schedule A-1 hereto (as such
Schedule may be revised pursuant to Section III B.1 hereof), together with all
of the certificates and/or instruments representing such
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shares of stock (or other ownership interest), and all cash, securities,
dividends, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares;
(b) 100% of any additional shares of stock, (or other ownership
interest) of any of the Subsidiaries listed on Schedule A-1 hereto, at any time
and from time to time acquired by the Company in any manner, all of the cash,
securities, dividends, rights and other property at any time and from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
(c) All other property hereafter delivered to the Agent in
substitution for or in addition to the foregoing, all certificates and
instruments representing or evidencing such property, and all cash, securities,
interest, dividends, rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all thereof; and
(d) All products and proceeds of all of the foregoing.
III. Company's Obligations
A. Payment of Secured Indebtedness. The security interest created
herein is given as security for:
(1) All of Company's obligations contained in or arising under or in
connection with the Credit Agreement and the Notes issued by it from time to
time pursuant to the Credit Agreement, and all obligations of Company contained
in or arising under the other Loan Documents executed by Company;
(2) All of Company's obligations contained in or arising under any and
all Letter of Credit Agreements executed or to be executed by Company from time
to time pursuant to the Credit Agreement, and any Letters of Credit issued or to
be issued thereunder;
(3) The obligations of Company for payment of all sums hereafter
loaned, paid out, expended or advanced by or for the account of the Banks (or
any of them) or by the Secured Party under the terms of this Stock Pledge, the
Credit Agreement, or the other Loan Documents, in connection with the Collateral
or any of the documents or instruments described in this Stock Pledge, the
Credit Agreement or the other Loan Documents;
together with interest thereon as provided for herein or therein; and
also as security for all other indebtedness and liabilities, whether direct,
indirect, absolute or contingent, owing by the Company to the Banks in any
manner under the Credit Agreement or the Loan Documents, which hereafter become
due, or that may hereafter be incurred by the Company to or acquired (pursuant
to the Credit Agreement or the other Loan Documents) by the Banks, and all other
future obligations of the Company to the Banks, their successors and assigns,
howsoever created, arising or evidenced, whether joint or several, direct or
indirect, absolute or contingent, primary or secondary, and any
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judgments that may hereafter be rendered on such indebtedness or any part
thereof, with interest according to the rates and terms specified, or as
provided by law, and any and all replacements, consolidations, amendments,
renewals or extensions of the foregoing (collectively herein called the
"Indebtedness").
B. Protection of Security Interest.
(1) Company shall take any and all steps required to protect the
Collateral, and in pursuance thereof Company agrees that Company shall deliver
or caused to be delivered to Secured Party and Secured Party shall receive
possession, on behalf of Banks, of certificates representing all of the pledged
shares referred to in Schedule A-1, properly endorsed or with assignments
separate from such certificates in blank for transfer. In addition Secured Party
shall receive proof that appropriate acknowledgments, governmental approvals,
share register entries, local pledge agreements, financing statements,
collateral and other documents covering the Collateral have been executed and
delivered by the appropriate parties and recorded on file with such Persons and
in such jurisdictions as necessary to perfect the security interests, or other
liens granted hereby and/or thereby. The Secured Party from time to time shall
revise Schedule A-1 hereto and promptly deliver a copy thereto to Company and
the Banks, on the effective date of the acquisition or creation by Company of a
Subsidiary, adding to Schedule A-1 the name of each such Subsidiary so acquired
or created, and upon such revision, Company shall be deemed to have pledged 100%
of the capital stock (or other ownership interests) of each such Subsidiary so
acquired or created to Secured Party for and on behalf of Banks.
(2) It will not sell, transfer, assign or otherwise dispose of any of
the Collateral or any interest therein or offer to do so without the prior
written consent of Secured Party, given at the direction of the Majority Banks,
or permit anything to be done that may materially impair the value of any of the
Collateral or the security intended to be afforded by this Stock Pledge.
(3) It will, subject to the applicable terms of the Credit Agreement,
pay all taxes and assessments upon the Collateral or for its use or operation
before any interest or penalty for nonpayment attaches thereto unless said
payment is being contested in good faith and it establishes a reserve as
required by generally accepted accounting principles.
(4) It will, subject to the applicable terms of the Credit Agreement,
sign and execute alone or with Secured Party any financing statement or other
document or procure any documents and pay all reasonable connected costs,
necessary to protect the security interest under this Stock Pledge against the
rights or interests of third persons.
(5) It will, subject to the applicable terms of the Credit Agreement,
reimburse Secured Party for all reasonable costs, including reasonable
attorneys' fees, incurred for any action taken by Secured Party to remedy an
Event of Default which Secured Party elects to remedy pursuant to its rights
under Article VI hereof.
(6) It will:
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(i) subject to the applicable terms of the Credit
Agreement, allow Secured Party to examine, audit and inspect
Company's books, accounts, records (including without limitation
all records relating to the Collateral or the Indebtedness),
ledgers and assets and properties of every kind and description
wherever located at all reasonable times during normal business
hours, upon oral or written request of Secured Party, and to make
and take away copies of any and all such books, accounts, records
and ledgers. An examination of the records or properties of the
Company may require revealment of proprietary and/or confidential
data and information, and the provisions of Section 14.12 of the
Credit Agreement are incorporated herein;
(ii) punctually and properly perform all of its covenants
and duties under any other security agreement, mortgage,
collateral pledge agreement or contract of any kind now or
hereafter existing as security for or in connection with payment
of the Indebtedness, or any part thereof;
(iii) perform its obligations under the Loan Documents;
(iv) promptly furnish Secured Party with any information
in writing which Secured Party may reasonably request concerning
the Collateral;
(v) promptly notify Secured Party of any material change
in any fact or circumstances warranted or represented by Company
in this Stock Pledge or in any other writing furnished by Company
to Secured Party in connection with the Collateral or the
Indebtedness;
(vi) promptly notify Secured Party of any material claim,
action or proceeding affecting the Collateral and title therein,
or in any part thereof, or the security interest created herein,
and, at the request of the Secured Party, appear in and defend, at
Company's expense, any such action or proceeding; and
(vii) promptly, after being requested by Secured Party,
pay to Secured Party the amount of all reasonable expenses,
including reasonable attorneys' fees and other legal expenses,
incurred by Secured Party in protecting and maintaining the
Collateral or its rights hereunder, or in connection with any
audit or inspection of the Collateral pursuant to the terms
hereof, and in enforcing the security interest created herein.
(7) With respect to any Collateral of a kind requiring an additional
security agreement, financing statement, or other writing to perfect a security
interest therein in favor of Secured Party, on behalf of Banks, Company will
forthwith execute and deliver to Secured Party on behalf of Banks, whatever the
Secured Party or the Majority Banks shall deem necessary or proper for such
purpose. Should any covenant, duty or agreement of Company fail to be performed
in accordance with its terms hereunder, Secured Party may, but shall never be
obligated to, perform or attempt to
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perform such covenant, duty or agreement on behalf of Company, and any amount
expended by Secured Party in such performance or attempted performance shall
become part of the Indebtedness, and, at the request of Secured Party, Company
agrees to pay such amount to Secured Party upon demand at Secured Party's office
in Detroit, Michigan together with interest thereon at the highest rate which
interest accrues on amounts after the same become due pursuant to the terms of
any note executed pursuant to the Credit Agreement from the date of such
expenditure by Secured Party until paid. With respect to any Collateral in which
Company acquires any rights subsequent to the date hereof and which, under
applicable law, a security interest is or can be perfected by possession,
Company agrees to deliver possession of such Collateral to Secured Party
immediately upon its acquisition of rights therein.
(8) Company will hold the proceeds of any of the Collateral in trust
for Secured Party on behalf of the Banks, will not commingle said proceeds with
any other funds, and, after an Event of Default, will deliver such proceeds to
Secured Party at its request.
(9) If Secured Party, acting in its sole discretion, redelivers any
Collateral to Company or Company's designee for the purpose of
(i) the ultimate sale or exchange thereof, or
(ii) presentation, collection, renewal, or registration
of transfer thereof,
such redelivery shall not constitute a release of Secured Party's security
interest therein or in the proceeds thereof unless Secured Party, with the
consent of the Majority Banks, specifically so agrees in writing.
(10) If Company requests any such redelivery, Company will deliver with
such request a duly executed financing statement in form and substance
satisfactory to Secured Party.
IV. Default
The term "Event of Default", as used herein, means the occurrence of any
Event of Default under the Credit Agreement.
V. Consequence of Default.
Upon an Event of Default, Secured Party shall be entitled, subject to
applicable law, to all of its remedies specified herein, in the Credit
Agreement, or in any other document executed in connection with the Credit
Agreement or this Stock Pledge, or provided by law. Additionally, upon an Event
of Default and subject to applicable law, Secured Party will be entitled to
receive all dividends payable in respect of the pledged shares evidencing the
Collateral pledged under this Stock Pledge, and may change the registration of
any registerable Collateral to any other name or form and is hereby authorized
to appoint any officer or agent of Secured Party as Company's true
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and lawful proxy and attorney-in-fact, with power, upon the occurrence of any
Event of Default (exercisable so long as such Event of Default is continuing),
to exercise all voting rights in respect of the shares evidencing the Collateral
pledged hereby; to endorse Company's name or any of its officers' names or
agents' names upon any notes, checks, drafts, money orders, or other instruments
of payment (including payments payable under any policy of insurance on the
Collateral) or Collateral that may come into possession of the Secured Party in
full or part payment of any amounts owing to the Banks; to give written notice
to such office and officials of the United States Post Office to effect such
change or changes of address so that all mail addressed to Company may be
delivered directly to Secured Party; to execute on behalf of Company any
financing statements, amendments, subordinations or other filings pursuant to
the Credit Agreement; granting unto Secured Party on behalf of the Banks, as the
proxy and attorney-in-fact of Company, full power to do any and all things
necessary to be done in and about the premises as fully and effectually as
Company might or could do, and hereby ratifying all that said proxy and attorney
shall lawfully do or cause to be done by virtue hereof. The proxy and power of
attorney described herein shall be deemed to be coupled with an interest and
shall be irrevocable for the term of the Credit Agreement, and all transactions
thereunder and thereafter as long as any Indebtedness or any of the commitments
to lend remain outstanding. The Secured Party shall have full power, subject to
applicable law to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof on behalf of the Banks in its own name or in the
name of Company provided that Secured Party shall act in a commercially
reasonable manner.
VI. Secured Party's Rights and Remedies.
Secured Party shall have available to it (subject to applicable law) the
following rights and remedies upon occurrence of an Event of Default:
A. Right to Assign. Secured Party may assign this Stock Pledge only
as provided in the Credit Agreement and if Secured Party does assign this Stock
Pledge, the assignee shall be entitled to the performance of all of Company's
obligations and agreements under this Stock Pledge, and the assignee shall be
entitled to all the rights and remedies of Secured Party under this Stock
Pledge.
B. Right to Discharge Company's Obligations. Secured Party may (i)
with the approval of the Majority Banks, discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral
which are superior to the security interest herein granted, (ii) remedy or cure
any default of Company under the terms of any lease, rental agreement, land
contract or other document which in any way pertains to or affects Company's
title to or interest in any of the Collateral, (iii) pay for insurance on the
Collateral, and (iv) pay for the maintenance and preservation of the Collateral,
unless with respect to the obligations under clauses (i) or (ii) Company is
contesting in good faith such obligations, and Company agrees to reimburse
Secured Party, on demand, for any payment made or any expense incurred by
Secured Party pursuant to the foregoing authorization, with interest, which
payments and expenses shall be secured by the security intended to be afforded
by this Stock Pledge.
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C. Remedies and Enforcement. Secured Party shall have and may
exercise any and all rights of enforcement and remedies afforded to a secured
party under the Uniform Commercial Code as adopted and in force in the State of
Michigan, to the extent permitted by applicable law, on the date of this Stock
Pledge or the date of Company's default together with any and all other rights
and remedies otherwise provided and available to Secured Party by law unless
such application would result in the invalidity or unenforceability of any
provision hereof, in which case the law of the state in which any of the
Collateral is located shall apply to the extent necessary to render such
provision valid and enforceable; and, in conjunction with, in addition to, or
substitution for those rights, at Secured Party's discretion, Secured Party may:
(1) Apply any of the Collateral against any of the Indebtedness
secured hereby;
(2) Waive any default, or remedy any default in any reasonable
manner, without waiving its rights and remedies upon default and without
waiving any other prior or subsequent default;
(3) Without any notice to Company, notify any parties obligated
on any of the Collateral to make payment to the Secured Party of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release or exchange
all or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) the indebtedness
thereunder or evidenced thereby. Upon request of the Secured Party,
Company will, at its own expense, notify any parties obligated to Company
on any of the Collateral to make payment to the Secured Party of any
amounts due or to become due thereunder. Company agrees that Secured
Party shall not be liable for any loss or damage which Company suffers or
may suffer as a result of Secured Party's processing of items or its
exercise of any other rights or remedies under this Stock Pledge,
including without limitation indirect, special or consequential damages,
loss of revenues or profits, or any claim, demand or action by any third
party not related to or affiliated with Company arising out of or in
connection with the processing of items (excluding only the claims of
such third parties in connection with the processing of items based
solely upon the gross negligence or willful misconduct of Secured Party)
or the exercise of any other rights or remedies hereunder. Company
further agrees to indemnify and hold Secured Party harmless from and
against all such third party claims, demands or actions, including
without limitation litigation costs and reasonable attorneys' fees.
D. Right of Sale.
(1) Company agrees that upon the occurrence of an Event of
Default (taking into account applicable periods of cure, if any), Secured
Party may, at its option, sell and dispose of the Collateral at public or
private sale without any previous demand of performance. Company agrees
that notice of such sale sent to Company's address, as set forth in the
Credit Agreement, by certified or registered mail sent at least five (5)
days prior to such sale, shall constitute reasonable notice of sale. The
foregoing shall not require notice
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if none is necessary under applicable law. The proceeds of sale shall be
applied in the following order:
(i) to all reasonable costs and charges incurred by
Secured Party in the taking and causing the removal and sale of
said property, including such reasonable attorneys' fees as shall
have been incurred by Secured Party;
(ii) to the Indebtedness, including all accrued interest
thereon; and
(iii) any surplus of such proceeds remaining shall be paid
to the Company, or to such other party who shall lawfully be
entitled thereto.
(2) At any sale or sales made pursuant to this Stock Pledge or
in a suit to foreclose the same, the Collateral may be sold en masse or
separately, at the same or at different times, at the option of the
Secured Party or its assigns. Such sale may be public or private with
notice as required by the Uniform Commercial Code as then in effect in
the state in which the Collateral is located, and the Collateral need not
be present at the time or place of sale. At any such sale, the Secured
Party or the holder of any note hereby secured may bid for and purchase
any of the property sold, notwithstanding that such sale is conducted by
the Secured Party or its attorneys, agents, or assigns.
E. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Stock Pledge on behalf of Banks in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Secured Party in refraining from so doing at any time or times. The
failure of Secured Party at any time or times to enforce its rights under said
provisions strictly in accordance with the same shall not be construed as having
created a custom in any way or manner contrary to the specific provisions of
this Stock Pledge or as having in any way or manner modified the same. All
rights and remedies of Secured Party and Banks are cumulative and concurrent,
and the exercise of one right or remedy shall not be deemed a waiver or release
of any other right or remedy.
VII. Representations and Warranties of Company.
Company represents and warrants, as continuing representations and
warranties so long as the Credit Agreement remains in effect, that:
A. The individual signatory hereto has authority to execute and
deliver this Stock Pledge on behalf of Company.
B. No financing statement covering the Collateral, or any part
thereof, has been filed with any filing officer other than in favor of Secured
Party.
C. No other agreement, pledge or assignment covering the Collateral,
or any part thereof, has been made and no security interest, other than the one
created hereby or pursuant to
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pledges and security agreements previously made in favor of Secured Party on
behalf of the Banks, has attached or been perfected in the Collateral or in any
part thereof.
D. No material dispute, right of setoff, counterclaim or defenses
exist with respect to any part of the Collateral.
E. All information supplied and statements made in any financial or
credit statements or application for credit prior to the execution of this Stock
Pledge are true and correct as of the date hereof in all material respects.
F. The Collateral, (1) in the case of each Subsidiary, constitutes
all the issued and outstanding capital stock (or other ownership interests) of
each of the Subsidiaries, (2) have been duly authorized and issued to Company,
(3) is fully paid and non-assessable, (4) is freely and validly assignable by
Company, and (5) is not subject to any option, warrant right to call or
commitment of any kind or nature.
G. At the time Secured Party's security interest attaches to any of
the Collateral or its proceeds, Company will be the lawful owner with the right
to transfer any interest therein, and that Company will make such further
assurances as to prove its title to the Collateral as may be reasonably required
and will defend the Collateral and its proceeds against the lawful claims and
demands of all persons whomsoever. The delivery at any time by Company to
Secured Party of Collateral or financing statements covering Collateral shall
constitute a representation and warranty by Company under this Stock Pledge
that, with respect to such Collateral, and each item thereof, Company is owner
of the Collateral and the matters heretofore warranted in this paragraph are
true and correct.
VIII. Mutual Agreements.
Company and Secured Party mutually agree as follows:
A. "Company" and "Secured Party" as used in this Stock Pledge include
the successors and permitted assigns of those parties.
B. To the extent permitted by applicable law, except as otherwise
provided herein, the law governing this secured transaction shall be that of the
State of Michigan.
C. This Stock Pledge includes all amendments and supplements hereto
and assignments hereof and Company and Secured Party shall not be bound by any
amendment or undertaking not expressed in a writing executed by each of them.
D. All capitalized terms not specifically defined herein which are
defined in the Credit Agreement are used as defined in the Credit Agreement.
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E. This Stock Pledge shall be a continuing security interest in every
respect (whether or not the outstanding balance of the Indebtedness is reduced
to zero) and Secured Party's security interest in the Collateral as granted
herein shall continue in full force and effect until all of the Indebtedness is
indefeasibly repaid and discharged in full and no commitment (whether optional
or obligatory) to extend any credit under the Credit Agreement remains
outstanding.
F. The parties hereto acknowledge that this Stock Pledge is subject
to the mutual waiver of jury trial contained in Section 14.15 of the Credit
Agreement and to the consent to jurisdiction provisions contained in Section
14.2 of the Credit Agreement.
G. This Stock Pledge has been executed and delivered pursuant to the
Credit Agreement and in the event of any conflict between this Stock Pledge and
the Credit Agreement, the Credit Agreement shall govern.
[SIGNATURES FOLLOW ON SUCCEEDING PAGE]
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IN WITNESS WHEREOF, Company and Secured Party have executed this Stock
Pledge on the day and year first above written.
COMPANY:
ALRENCO, INC., an Indiana corporation
By: /s/ Xxxxx X. Xxxxx, Xx.
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Its: President
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ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By: /s/ Xxxxxxx Xxx
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Its: Vice President
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SIGNATURE PAGE
PLEDGE AGREEMENT
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SCHEDULE A-1
Shares Issued
Subsidiaries and Outstanding Shares Pledged
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RTO Operating, Inc. 100 100
RTO Holding Co., Inc. 100 100
Action Rent-to-Own Holdings of 1,000 1,000
South Carolina, Inc.
