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EXHIBIT 10.1
FINAL
06/22/98
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT ("First Amendment") is made as of this
22nd day of June, 1998 by and among Alrenco, Inc., an Indiana corporation
("Company"), Comerica Bank-Texas and the other banks signatory hereto (
including the New Bank, each individually, a "Bank" and collectively, the
"Banks") and Comerica Bank, as agent for the Banks (in such capacity, "Agent").
RECITALS
A. Company, Agent and the Banks entered into that certain Alrenco
Amended and Restated Revolving Credit Agreement dated as of April 1, 1998 (the
"Credit Agreement") under which the Banks extended (or committed to extend)
credit to the Company, as set forth therein.
B. The Company has requested that Agent and the Banks (i) increase the
amount of the Revolving Credit facility, (ii) add a bank (the "New Bank") as a
Bank under the Credit Agreement and (iii) make certain other amendments to the
Credit Agreement, and Agent and the Banks are willing to do so, but only on the
terms and conditions set forth in this First Amendment.
NOW, THEREFORE, Company, Agent and the Banks agree:
l. Section 1 of the Credit Agreement is hereby amended, as follows:
(a) New definition "EBITDA" is hereby added to the Credit
agreement as follows:
"EBITDA" of any Person shall mean, for any period,
EBITDAR of such Person minus, to the extent added in the
computation of such EBITDAR, the amount of all Rental
Expenses, determined in each case in accordance with GAAP."
(b) New definition of "First Amendment Effective Date"
is added, as follows:
"First Amendment Effective Date" shall mean the
date on which all conditions are satisfied to the
effectiveness of the First Amendment to Credit Agreement
dated as of June 22, 1998 executed and delivered by and among
the Company, the Banks and the Agent."
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(c) The definition of "Interest Period" is amended by
adding in the second line thereof, between the words "three (3)"
and "six (6)" the word "or" and deleting in the second line
thereof, the words "or twelve (12)".
(d) New definition of "Interest Rate Protection
Agreement" is added, as follows:
"`Interest Rate Protection Agreement(s)' shall mean
any interest rate, swap, cap, floor, collar, forward rate
agreement or other rate protection transaction, or any
combination of such transactions or agreements or any option
with respect to any such transactions or agreements now
existing or hereafter entered into by Company or any of its
Subsidiaries to manage existing or anticipated interest rate
risk and not for speculative purposes."
(e) The definition of "Indebtedness" is amended and
restated in its entirety, as follows:
"`Indebtedness' shall mean all indebtedness and
liabilities (including without limitation interest, fees and
other charges) arising under this Agreement or any of the
other Loan Documents, whether direct or indirect, absolute or
contingent, of Company or any Guarantor to any of the Banks
or to the Agent, in any manner and at any time, whether
evidenced by the Notes, arising under any Guaranty, or any of
the other Loan Documents, due or hereafter to become due, now
owing or that may hereafter be incurred by Company or any
Guarantor to, any of the Banks or by Agent, and all net
obligations with respect to Interest Rate Protection
Agreements entered into between Company and/or any of its
Guarantors and a Bank or an Affiliate of a Bank and any
judgments that may hereafter be rendered on such indebtedness
or any part thereof, with interest according to the rates and
terms specified, or as provided by law, and any and all
consolidations, amendments, renewals, replacements,
substitutions or extensions of any of the foregoing;
provided, however that for purposes of calculating the
Indebtedness outstanding under the Notes or any of the other
Loan Documents, the direct and indirect and absolute and
contingent obligations of the Company and the Guarantors
(whether direct or contingent) shall be determined without
duplication."
(f) The definition of "Loan Documents" is amended by
inserting in the second line thereof, immediately following the
term "the Guaranty(ies), the words "and any Interest Rate
Protection Agreements entered into between the Company and/or any
of its Guarantors and a Bank or an Affiliate of a Bank".
(g) The definition of "Revolving Credit Aggregate
Commitment" is amended and restated in its entirety, as follows:
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"Revolving Credit Aggregate Commitment" shall mean
Eighty Million Dollars ($80,000,000) subject to the increase
of the Revolving Credit Aggregate Commitment, pursuant to
Section 2.10 hereof, by an amount up to the amount of the
Revolving Credit Optional Increase and subject to reduction
or termination pursuant to Section 2.8 or 10.2 hereof."
(h) The definition of "Revolving Credit Optional Increase" is
amended and restated in its entirety, as follows:
"Revolving Credit Optional Increase" shall mean
an amount up to Twenty Million Dollars ($20,000,000)."
(i) New definition of "Total Debt to EBITDA Ratio" is added
as follows:
"Total Debt to EBITDA Ratio" shall mean as of the
end of each fiscal quarter, a ratio (i) the numerator of
which shall be equal to Total Debt as of the last day of such
fiscal quarter and (ii) the denominator of which shall be
EBITDA for the Measuring Period then ending. For the purposes
of this definition, " EBITDA for the Measuring Period then
ending" shall mean (x) for the fiscal quarter ending on June
30, 1998, EBITDA for the period beginning on January 1, 1998
and ending on June 30, 1998 multiplied by 2.00; (y) for the
fiscal quarter ending on September 30, 1998, EBITDA for the
period beginning on January 1, 1998 and ending on September
30, 1998 multiplied by 1.33; and (z) for the fiscal quarter
ending on December 31, 1998 and for each subsequent fiscal
quarter, EBITDA for the four preceding fiscal quarters."
2. Section 7 is amended by adding a new Section 7.22
immediately following Section 7.21, as follows:
"7.22 Year 2000 Requirement. The Company and its Guarantors
have reviewed the areas in their business and operations which could
be adversely affected by, and have developed or are developing a
program to address on a timely basis the risk that computer
applications used by the Company and its Guarantors may be unable to
recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999. Any
reprogramming required to permit the proper functioning, in and
following the year 2000, of (i) the Company's and its Guarantors'
computer systems and (ii) equipment containing embedded microchips
(including systems and equipment supplied by others or with which the
Company's or any Guarantor's systems interface) and the testing of all
such systems and equipment, as so reprogrammed, will be completed by
September 30, 1999. The cost to the Company and its Guarantors of such
reprogramming and testing and of the
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reasonably foreseeable consequences of year 2000 to the Company and
its Guarantors (including, without limitation, reprogramming errors
and the failure of others' systems or equipment) will not result in a
Default or a Material Adverse Effect. Except for such of the
reprogramming referred to in the preceding sentence as may be
necessary, the computer and management information systems of the
Company and its Guarantors are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Company and its Guarantors to conduct their
business without Material Adverse Effect."
3. New Section 8.12A is added to the Credit Agreement
immediately following Section 8.12 thereof, as follows:
"8.12A Total Debt to EBITDA Ratio. Maintain, as of the last
day of each fiscal quarter, a Total Debt to EBITDA Ratio of not more
than the ratio set forth below as of the last day of the applicable
fiscal quarter set forth below:
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QUARTER(S) ENDING RATIO
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June 30, 1998 and September 30, 1998 4.0 to 1.0
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December 31, 1998 and thereafter 3.5 to 1.0
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4. Section 9.1 (Indebtedness) of the Credit Agreement is amended by
deleting the word "and" at the end of clause (i) thereof, redesignating "clause
(j)" as "clause (k)" and adding a new "clause (j)" immediately following clause
(i), as follows:
"(j) Interest Rate Protection Agreements; and".
5. Section 9.2 (Liens) is amended by amending and restating
in its entirety Section 9.2(d) as follows:
"(d) Liens in favor of Agent, as Security for the
Indebtedness, and Liens in favor of a Bank or an Affiliate of any Bank,
as Security for Interest Rate Protection Agreements,"
6. Section 9.7 (Limitation on Capital Expenditures) is
amended and restated in its entirety as follows:
"9.7 Limitation on Capital Expenditures. Except in connection
with the Merger, make or commit to make (by way of the acquisition of
securities of a Person or otherwise) any expenditure in respect of the
purchase or other acquisition of fixed or capital assets except for:
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(a) acquisitions permitted by Section 9.4, to the
extent assets are acquired pursuant to such acquisitions which
constitute Capital Expenditures;
(b) expenditures in the ordinary course of business
(but excluding expenditures in respect of any asset acquired in
connection with normal replacement and maintenance programs properly
charged to current operations) not exceeding, in the aggregate for
the Company and its Subsidiaries (i) during fiscal year 1998,
$6,000,000 and (ii) during any fiscal year thereafter, $3,000,000;
and
(c) expenditures in respect of any asset acquired in
connection with normal replacement and maintenance programs properly
charged to current operations, not exceeding, in the aggregate for
the Company and its Subsidiaries during any fiscal year, 1.5% of
"Total Revenues" of the Company for such fiscal year as such "Total
Revenues" are reported in its 10-Q and 10-K Reports filed with the
U.S. Securities and Exchange Commission.
7. Section 9.8 (Limitation on Investments) is amended by adding a new
clause (h) immediately following clause (g) (but before the period) as follows:
"; and
(h) Interest Rate Protection Agreements".
8. Section 14.12 of the Credit Agreement is hereby amended by
inserting in the parenthetical which begins of the second line thereof,
immediately following the word "employees", the words "or to employees of any
of its Affiliates".
9. Section 13.13 (Co-Agent) is hereby amended and restated in its
entirety as follows:
"13.13 Co-Agent and Documentation Agent. Bank One, Texas,
N.A. has been designated by the Company as "Co-Agent" and
NationsBanks, N.A. has been designated by the Company as
"Documentation Agent", each under this Agreement. Other than their
respective rights, powers, obligations, liabilities, responsibilities,
remedies and duties as a Bank hereunder, neither the Co-Agent nor the
Documentation Agent shall have any administrative, collateral or other
rights, powers, obligations, liabilities, responsibilities or duties
hereunder, provided, however, that Co-Agent and the Documentation
Agent shall be entitled to the benefits afforded to the Agent under
Sections 13.5 and 13.6 hereof."
10. This First Amendment shall become effective (the "First Amendment
Effective Date") (according to the terms and as of the date hereof) upon
satisfaction by the Company of the following conditions:
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(a) Agent shall have received:
(i) counterpart originals of this First Amendment,
in each case duly executed and delivered by Company, and the
Banks (including the New Bank), in form satisfactory to Agent
and the Banks;
(ii) new Notes or renewal and replacement Notes (the
"New Notes") substantially in the form of Exhibit B to the
Credit Agreement, payable to the order of each of the Banks
in the face amount of each such Bank's Percentage of the
Revolving Credit Aggregate Commitment as set forth in
Attachment I (Exhibit 1.2 -- Percentages) hereto;
(iii) certified copies of resolutions of the Boards
of Directors of each of the Company and each of the
Guarantors authorizing, as applicable, the execution and
delivery of this First Amendment, the New Notes and the other
Loan Documents required under this clause (a) and the
performance by the Company and the undersigned Guarantors of
each of their respective obligations under the Credit
Agreement as amended by this First Amendment and the new
Notes; and
(iv) an opinion of counsel to the Company and the
Guarantors.
(b) Company shall have paid to Agent, for distribution to the
Banks, as applicable (i) all interest, fees (including the Revolving
Credit Commitment Fee) and other amounts, if any, accrued to the First
Amendment Effective Date and (ii) all fees referenced in Agency Fee
Letter dated December 9, 1997.
11. New Schedule 1.2 (setting forth the applicable Percentages as
revised hereunder) attached hereto as Attachment I shall replace existing
Schedule 1.2 in its entirety.
12. By its execution of this First Amendment, the New Bank hereby
(a) confirms that it has received a copy of the Credit
Agreement and the exhibits and schedules referred to therein, and all
other Loan Documents which it considers necessary, together with
copies of the other documents which were required to be delivered
under the Credit Agreement as a condition to the making of the loans
thereunder;
(b) acknowledges and agrees that it: (i) has made and will
continue to make such inquiries and has taken and will take such care
on its own behalf as would have been the case had its commitment been
granted and its loans been made directly by such New Bank to the
Company without the intervention of the Agent or any other Bank; and
(ii) has made and will
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continue to make, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it has
deemed appropriate, its own credit analysis and decisions relating to
the Credit Agreement;
(c) acknowledges and agrees that the Agent has not made any
representations or warranties about the creditworthiness of the
Company or any other party to the Credit Agreement or any other of the
Loan Documents, or with respect to the legality, validity, sufficiency
or enforceability of the Credit Agreement, or any other of the Loan
Documents; and
(d) represents and warrants that it is a Person to which
assignments are permitted pursuant to Sections 14.8(c) and (d) of the
Credit Agreement.
13. Concurrently with the First Amendment Effective Date pursuant to
Section 10 hereof, each Bank (including the New Bank) shall have (i) a
Percentage equal to the percentage set forth in Attachment I hereto and (ii)
Revolving Loans (and participation in Letters of Credit) in its Percentage of
all Revolving Loans (and Letters of Credit) outstanding on the First Amendment
Effective Date. To facilitate the foregoing, each Bank (including the New Bank)
which as a result of the adjustments of Percentages evidenced by Attachment I
is to have a greater principal amount of Revolving Loans outstanding than such
Bank had outstanding under the Credit Agreement immediately prior to the First
Amendment Effective Date shall deliver to the Agent immediately available funds
to cover such Revolving Loans (and the Agent shall, to the extent of the funds
so received, disburse funds to each Bank which, as a result of the adjustment
of the Percentages, is to have a lesser principal amount of Revolving Loans
outstanding than such Bank had under the Credit Agreement immediately prior to
the First Amendment Effective Date). Each Bank which was a party to the Credit
Agreement prior the First Amendment Effective Date, upon receipt of its New
Note(s) (which Notes are to be in exchange for and not in payment of the
predecessor Revolving Credit Notes) issued by the Company to such Bank, shall
return its predecessor Revolving Credit Notes and, if applicable, its Swing
Line Note, to the Agent which shall stamp such Notes "Exchanged" and deliver
said Notes to the Company. The New Bank agrees that all interest and fees
accrued under the Credit Agreement prior to the First Amendment Effective Date
are the property of the Banks which were parties to the Credit Agreement prior
to the First Amendment Effective Date. Letter of Credit Fees paid prior to the
First Amendment Effective Date shall not be recalculated, redistributed or
reallocated by Agent to the Banks.
14. Each of Company and the undersigned Guarantor hereby represents
and warrants that, after giving effect to the amendments contained herein, (a)
execution and delivery of this First Amendment, the New Notes (as defined
above) and the other Loan Documents required to be delivered hereunder, and the
performance by the Company of its obligations under the Credit Agreement as
amended hereby (herein, as so amended, the "Amended Credit Agreement") are
within such undersigned's corporate powers, have been duly authorized, are not
in contravention of law or
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the terms of its articles of incorporation or bylaws or other organic documents
of the parties thereto, as applicable, and except as have been previously
obtained (or as referred to in Section 7.13 of the Amended Credit Agreement) do
not require the consent or approval, material to the amendments contemplated in
this First Amendment or the Amended Credit Agreement, of any governmental body,
agency or authority, and this First Amendment, the Amended Credit Agreement,
the New Notes and the other Loan Documents required to be delivered hereunder,
will constitute the valid and binding obligations of such undersigned parties
enforceable in accordance with its terms, except as enforcement thereof may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium, ERISA
or similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether enforcement is sought in a proceeding in
equity or at law), and (b) the continuing representations and warranties set
forth in Sections 7.1 through 7.22, inclusive, of the Amended Credit Agreement
are true and correct on and as of the date hereof, and such representations and
warranties are and shall remain continuing representations and warranties
during the entire life of the Amended Credit Agreement.
15. Except as specifically set forth above, this First Amendment shall
not be deemed to amend or alter in any respect the terms and conditions of the
Credit Agreement, any of the Notes issued thereunder or any of the other Loan
Documents, or to constitute a waiver by the Banks or Agent of any right or
remedy under or a consent to any transaction not meeting the terms and
conditions of the Credit Agreement, any of the Notes issued thereunder or any
of the other Loan Documents.
16. Unless otherwise defined to the contrary herein, all capitalized
terms used in this First Amendment shall have the meaning set forth in the
Credit Agreement.
17. This First Amendment may be executed in counterpart in accordance
with Section 14.10 of the Credit Agreement.
18. This First Amendment shall be construed in accordance with and
governed by the laws of the State of Michigan.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
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WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK, ALRENCO, INC.
as Agent
By: By:
---------------------------- ----------------------------
Its: Its:
---------------------------- ----------------------------
One Xxxxxxx Xxxxxx
0xx Xxxxx - XX 0000
000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Corporate Finance
BANKS: COMERICA BANK-TEXAS
By:
----------------------------
Its:
---------------------------
BANK ONE, TEXAS, N.A.
By:
----------------------------
Its:
---------------------------
NATIONSBANK, N.A.
By:
----------------------------
Its:
---------------------------
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Acknowledgment of Guarantors
Each of the undersigned, an authorized officer of RTO Operating, Inc.
("RTO Operating"), Action Rent-To-Own Holdings of South Carolina, Inc.
("Action"), RTO Holding Co. ("RTO Holding") or, ATRO, Inc. ("ATRO, and
individually with each of RTO Operating, Action, and RTO Holding a "Guarantor",
and any or all of them, collectively the "Guarantors"), respectively, hereby
acknowledges on behalf of the Guarantor for which it is an authorized officer
that (a) the applicable Guarantor executed a Guaranty dated as of April 1, 1998
pursuant to which such Guarantor guaranteed the obligations of Alrenco, Inc.
(the "Company"), under that certain Alrenco Amended and Restated Credit
Agreement dated as of April 1, 1998 (the "Credit Agreement") by and among the
Company, certain financial institutions (the "Banks") and Comerica Bank as
agent for the Banks (the "Agent"), (b) the Company, the Banks (including the
New Bank, as defined therein) and the Agent have executed a First Amendment
dated as of date hereof (the "First Amendment") to such Credit Agreement (the
Credit Agreement as amended thereby, the "Amended Credit Agreement"). The
undersigned hereby ratifies and confirms, on behalf of the applicable
Guarantor, such Guarantor's obligations under the Amended Credit Agreement, and
agrees that the applicable Guaranty remains in full force and effect after
giving effect to the effectiveness of the First Amendment and that, upon such
effectiveness, all references in such Amended Credit Agreement to the "Credit
Agreement" or the "Notes" issued thereunder shall be references to the Amended
Credit Agreement and the Notes issued thereunder. Capitalized terms not
otherwise defined herein will have the meanings given in the Amended Credit
Agreement. This acknowledgment shall be governed by and construed in accordance
with the laws of, and be enforceable in, the State of Michigan.
Dated as of the 22nd day of June, 1998.
RTO OPERATING, INC.
By:
--------------------------
Its: RTO HOLDING CO., INC.
------------------------- By:
------------------------
ACTION RENT-TO-OWN HOLDINGS Its:
OF SOUTH CAROLINA, INC. -----------------------
By:
----------------------------
Its: ATRO, INC.
----------------------------
By:
------------------------
Its:
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ATTACHMENT 1
[Replacement Schedule 1.2 -- Percentages]
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BANK PERCENTAGE ALLOCATION
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Comerica Bank- Texas 43.75% $35,000,000
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Bank One, Texas, N.A. 31.25% $25,000,000
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NationsBank, N.A. 25.00% $20,000,000
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TOTAL 100.00% $80,000,000
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