Exhibit No. 10.5
[RAC Letterhead]
February 7, 2003
VIA FACSIMILE (000) 000-0000
Rent-Way, Inc.
Rent-Way of Michigan, Inc.
Rent-Way of TTIG, L.P.
Attn: Chief Executive Officer
Xxx Xxxx Xxx Xxxxx
Xxxx, Xxxxxxxxxxxx 00000
Dear Sir:
Reference is made to that certain Asset Purchase Agreement, dated as of
December 17, 2002, by and among Rent-A-Center East, Inc., a Delaware corporation
(formerly known as Rent-A-Center, Inc.) ("ACQUIROR"), and Rent-Way, Inc. (the
"COMPANY"), Rent-Way of Michigan, Inc. ("RENT-WAY MICHIGAN") and Rent-Way of
TTIG, L.P. ("TTIG" and, together with Rent-Way Michigan, the "OPERATING
SUBSIDIARIES"), as amended by that certain letter agreement dated December 31,
2002 and that certain letter agreement dated January 7, 2003 (together, the
"ASSET PURCHASE AGREEMENT"). Capitalized terms not otherwise defined herein
shall have the meaning ascribed to such terms in the Asset Purchase Agreement.
WHEREAS, on January 29, 2002, the Company and the Operating Subsidiaries
delivered to Acquiror, pursuant to SECTION 4.6(B) of the Asset Purchase
Agreement, a Schedule Supplement (the "FIRST SCHEDULE SUPPLEMENT") related to
newly threatened litigation arising from alleged unpaid overtime wages (the
"THREATENED LITIGATION"); and
WHEREAS, the parties to the Asset Purchase Agreement desire to memorialize
their understanding with respect to various transitional and other matters.
NOW, THEREFORE, this letter agreement, in accordance with SECTION 7.4 of
the Asset Purchase Agreement, memorializes the understanding of the parties to
the Asset Purchase Agreement regarding certain changes thereto and hereby
amends, modifies and supplements the Asset Purchase Agreement as follows:
1. Extension of Supplemental Review Period. The parties hereby agree
that, notwithstanding the provisions of Section 4.6(b) of the Asset
Purchase Agreement, the Supplemental Review Period related to the
First Schedule Supplement shall extend until and include February 21,
2003, provided, however, that such period shall earlier
terminate on the date of the Settlement (as hereinafter defined) of
the Threatened Litigation.
2. Additional Closing Condition. The parties hereby agree that the Asset
Purchase Agreement be amended such that the Settlement (as hereinafter
defined) of the Threatened Litigation by the Company and the Operating
Subsidiaries shall be deemed an additional condition to Acquiror's
obligations to close under Section 5.2 of the Asset Purchase
Agreement. For purposes of this letter agreement, "SETTLEMENT" shall
mean that the named plaintiffs in the Threatened Litigation and the
Company and its Subsidiaries have entered into a signed, written final
agreement, whereby such plaintiffs agree to release the Company and
its Subsidiaries from their claims contemplated by the Threatened
Litigation and any and all other existing claims, and that proper
documents have been filed with the court of competent jurisdiction
seeking to dismiss all lawsuits filed by any of the plaintiffs against
the Company or its Subsidiaries. The Company and the Operating
Subsidiaries shall promptly notify Acquiror upon the Settlement of the
Threatened Litigation.
3. Closing Date.
(a) The parties hereby agree that, notwithstanding the provisions of
Section 1.6 of the Asset Purchase Agreement, in the event that
(i) all of the conditions to Closing set forth in Article V of
the Asset Purchase Agreement shall have been satisfied or waived
by the party entitled to waive the same on or prior to February
8, 2003, and (ii) the Settlement of the Threatened Litigation
shall have occurred on or prior to February 7, 2003, then the
Closing Date shall be February 8, 2003; provided, however, that
the Closing Date may be extended by (a) the entire Supplemental
Review Period required to evaluate any Supplemental Schedule in
addition to the First Supplemental Schedule delivered on or prior
to February 8, 2003 as set forth in Section 4.6(b) of the Asset
Purchase Agreement, (b) the entire period, including any
extension thereof, contemplated by Section 7.1(g) of the Asset
Purchase Agreement with respect to the delivery of opinions
contemplated by Section 5.2(k) and Section 5.2(l) of the Asset
Purchase Agreement, or (c) any period of time upon mutual
agreement in writing of the parties hereto. The parties hereby
acknowledge that, in the event the Closing occurs on February 8,
2003, the Creditor Payment and the Non-Competition Payment shall
be made on February 10, 2003, and, notwithstanding that fact, the
Closing Date shall be deemed to be February 8, 2003.
(b) In the event that (i) all of the conditions to Closing set forth
in Article V of the Asset Purchase Agreement shall not have been
satisfied on or prior to February 8, 2003 or (ii) the Settlement
of the Threatened Litigation has not occurred on or prior to
February 7, 2003, the Closing shall occur on the earlier of (x)
the third Business Day following the date of Settlement of the
Threatened Litigation or (y) February 21, 2003; provided,
however, that the Closing Date may be extended by (a) the entire
Supplemental Review Period required to evaluate any Supplemental
Schedule in addition to the First Supplemental Schedule as set
forth in Section 4.6(b) of the Asset Purchase Agreement, (b) the
entire period,
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including any extension thereof, contemplated by Section 7.1(g)
of the Asset Purchase Agreement with respect to the delivery of
opinions contemplated by Section 5.2(k) and Section 5.2(l) of the
Asset Purchase Agreement, or (c) any period of time upon mutual
agreement in writing of the parties hereto. Nothing in this
paragraph shall be deemed to otherwise amend any other conditions
to closing set forth in Article V of the Asset Purchase
Agreement, each of which shall be satisfied or waived by the
party entitled to waive the same prior to the Closing Date
contemplated hereunder.
4. Amendment to Section 9.9. Section 9.9 of the Asset Purchase
Agreement is hereby amended to read in its entirety as follows:
"9.9 GOVERNING LAW; EXCLUSIVE JURISDICTION. THIS AGREEMENT
AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED
HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF
LAW PRINCIPLES). COURTS WITHIN THE STATE OF TEXAS WILL HAVE
EXCLUSIVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE
PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS
AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES CONSENT TO
AND AGREE TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH
COURTS. EACH OF THE PARTIES HEREBY WAIVES, AND AGREES NOT TO
ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY CLAIM THAT (i) SUCH PARTY IS NOT
PERSONALLY SUBJECT TO THE EXCLUSIVE JURISDICTION OF SUCH
COURTS, (ii) SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE
FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (iii) ANY
LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN
INCONVENIENT FORUM."
5. Amendment to Form of Non-Competition and Non-Solicitation
Agreement. Section 12 of the form of Non-Competition and
Non-Solicitation Agreement referenced in Section 5.2(g) of the
Asset Purchase Agreement and attached as Exhibit "B" thereto is
hereby amended to read in its entirety as follows:
"12. GOVERNING LAW; EXCLUSIVE JURISDICTION. THIS AGREEMENT
AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED
HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF
LAW PRINCIPLES). COURTS WITHIN THE STATE OF TEXAS WILL HAVE
EXCLUSIVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE
PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT
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OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS,
INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES
CONSENT TO AND AGREE TO SUBMIT TO THE EXCLUSIVE JURISDICTION
OF SUCH COURTS. EACH OF THE PARTIES HEREBY WAIVES, AND
AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (i) SUCH
PARTY IS NOT PERSONALLY SUBJECT TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS, (ii) SUCH PARTY AND SUCH
PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY
SUCH COURTS OR (iii) ANY LITIGATION COMMENCED IN SUCH COURTS
IS BROUGHT IN AN INCONVENIENT FORUM."
6. Inactive Rental Purchase Agreements. Notwithstanding Section
1.2(c) of the Asset Purchase Agreement, the parties hereby
acknowledge that, following the Closing Date, Acquiror may have
in its possession at the Stores certain Rental Purchase
Agreements of the Company or the Operating Subsidiaries which
have terminated on or before the Closing Date (the "INACTIVE
AGREEMENTS"). In the event that the Company or its Operating
Subsidiaries need a copy of one or more Inactive Agreements in
connection with the defense of pending or threatened litigation,
the parties hereby agree that upon specific written request by
the Company, the Acquiror shall use its reasonable efforts to
locate and (i) forward copies of any such Inactive Agreements
then in its possession or (ii) notify Company of its inability to
locate same within five (5) days of receipt of such request.
7. Gateway Computers. The parties hereby agree that Acquiror shall
reimburse the Company and the Operating Subsidiaries for fees
actually paid by the Company or the Operating Subsidiaries to
Gateway for the purchase and maintenance of internet service
charges for Gateway computers on rent in the Stores following the
Closing Date. Acquiror shall provide the Company with a list of
such computers that are no longer on rent at least four (4) days
prior to the first of each month.
8. Real Property Leases of Acquired Stores. The parties hereby
acknowledge that, with respect to the Acquired Stores, upon the
Closing, Acquiror shall notify the lessors of any real property
related to the Acquired Stores that the transactions contemplated
by the Asset Purchase Agreement have been consummated. The
Company and the Operating Subsidiaries shall cooperate in good
faith with Acquiror to obtain any consents of such lessors and
enter into any documents as are reasonably necessary to ensure
that such leases are properly assigned to Acquiror as
contemplated by the Asset Purchase Agreement.
9. Vehicles. The parties hereby agree that, notwithstanding the
provisions of SECTION 5.2(I) of the Asset Purchase Agreement, the
Company and the Operating Subsidiaries may provide at Closing, in
lieu of actual certificates of title on all vehicles which
constitute Assets, a letter from the lessor of such vehicles
stating that upon receipt of a specified amount of the Closing
Payment, such vehicles shall be transferred free and clear of all
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liens and encumbrances. The Company and the Operating
Subsidiaries shall provide the actual certificates of title to
Acquiror as promptly as practicable following the Closing Date.
10. Inventory Adjustment Amendment. Section 1.3(b)(iv) of the Asset
Purchase Agreement is hereby amended and restated to read in its
entirety as follows:
"with respect to the failure to represent and warrant on the
Closing Date the matters set forth in SECTION 3.30, the Purchase
Price shall be reduced by an amount equal to (a) $54,500,000,
less the Closing Inventory (net of 30-days past due) (the "SHORT
INVENTORY AMOUNT"), (b) multiplied by 1.0 (such adjustment being
referred to as the "SHORT INVENTORY AMOUNT ADJUSTMENT")."
11. Closing Date Payment Adjustment. Solely for the purposes of
determining the Purchase Price adjustment required at Closing
pursuant to Section 1.3(b)(iv) of the Agreement as amended above,
the parties agree that, on the Closing Date, the net book value
of the Store inventory being sold pursuant to the Asset Purchase
Agreement calculated under the accounting methods set forth in
the Company's consolidated financial statements (including
inventory ordered on or before the Closing Date but not yet
delivered on the Closing Date), shall be $53,400,000 (the
"ESTIMATED CLOSING DATE INVENTORY"). Accordingly, the parties
agree that the Purchase Price shall be reduced by $1,100,000 for
purposes of the Closing Date Payment. No later than three (3)
days following the Closing Date, the parties shall determine the
actual net book value of the Store inventory calculated under the
accounting methods set forth in the Company's consolidated
financial statements as of the Closing Date (including inventory
ordered on or before the Closing Date but not yet delivered on
the Closing Date)(the "ACTUAL CLOSING DATE INVENTORY"). In the
event the Actual Closing Date Inventory amount shall exceed the
Estimated Closing Date Inventory amount, such resulting amount
shall be paid by Acquiror to the Company, on behalf of the
Company and the Operating Subsidiaries. In the event the Actual
Closing Date Inventory amount shall be less than the Estimated
Closing Date Inventory amount, such resulting amount shall be
paid by the Company, on behalf of the Company and the Operating
Subsidiaries, to Acquiror. All such payments shall be made
promptly by wire transfer upon the determination of such amount,
but in any event within two (2) Business Days.
12. Non-Competition Payment. Notwithstanding Section 1.3(a) of the
Asset Purchase Agreement, the parties hereby agree that, as
directed by the Company, the Non-Competition Payment shall be
paid, on behalf of the Company and the Operating Subsidiaries,
directly to the bank designated by the Company, together with the
Creditor Payment.
13. Entire Agreement. Notwithstanding the provisions of Section 9.5
of the Asset Purchase Agreement and consistent with Section 7.4
of the Asset Purchase Agreement, this letter agreement, together
with the Asset Purchase Agreement and all other documents and
instruments referred to therein, including, but not limited to,
the letter agreement from Acquiror to the Company and the
Operating Subsidiaries, dated December 31, 2002, relating to the
extension of the Due Diligence Period, and the letter agreement
from
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Acquiror to the Company and the Operating Subsidiaries, dated
January 7, 2003, relating to the Acquiror's internal
reorganization, constitutes the entire agreement and supersedes
all other prior agreements and undertakings, both written and
oral, among the parties with respect to the transactions
contemplated by the Asset Purchase Agreement.
14. No Further Amendments. Other than as specifically provided for
herein, all other terms and conditions of the Asset Purchase
Agreement shall remain in full force and effect in accordance
with its terms.
15. Governing Law. The provisions of Section 9.9 of the Asset
Purchase Agreement, as amended hereby, shall apply to this letter
agreement.
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RENT-A-CENTER EAST, INC.,
formerly known as Rent-A-Center, Inc.
By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
AGREED AND ACCEPTED:
RENT-WAY, INC.
By: /s/ XXXXXX X. XXXXXX
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Name: Xxxxxx X. Xxxxxx
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Title: Vice President and General Counsel
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RENT-WAY OF MICHIGAN, INC.
By: /s/ XXXXXX X. XXXXXX
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Name: Xxxxxx X. Xxxxxx
-------------------------------------------
Title: Vice President and General Counsel
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RENT-WAY OF TTIG, L.P.
By: Rent-Way Development, Inc.,
its general partner
By: /s/ XXXXXX X. XXXXXX
-------------------------------------------
Name: Xxxxxx X. Xxxxxx
-------------------------------------------
Title: Vice President and General Counsel
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cc: Xxxxxxx Xxxx, LLP
Xxx X&X Xxxxx, Xxxxx 0000
Xxxxxxx, Xxx Xxxx 00000-2391
Attention: Xxxx X. Xxx, Esq.
Telecopy: 000-000-0000
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