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EXHIBIT 10.1
NONCOMPETITION AND CONSULTING AGREEMENT
THIS NONCOMPETITION AND CONSULTING AGREEMENT (this "Agreement") is
entered into as of February 26, 1998 by and between ALRENCO, INC., an Indiana
corporation (the "Company"), and XXXXXXX X. XXXXX, an individual who at the time
of execution of this Agreement is a resident of the State of Indiana ("Xxxxx").
W I T N E S S E T H:
WHEREAS, the Company has entered into a Plan and Agreement of Merger
dated as of September 28, 1997 (the "Merger Agreement"), as amended, with RTO,
Inc. ("RTO"), pursuant to which RTO will merge with and into the Company (the
"Merger"); and
WHEREAS, Xxxxx has been Chairman and President of the Company since
1980; and
WHEREAS, Xxxxx has devoted substantial time and effort to the strategic
direction of the Company and the day-to-day operations of the Company; and
WHEREAS, Xxxxx has significant knowledge with respect to the
rent-to-own industry, potential acquisitions by the Company and the operations
of the Company and has significant contacts and is well known in the rent-to-own
industry; and
WHEREAS, Xxxxx received annual compensation as an employee of the
Company in 1996 that in the aggregate exceeded $500,000; and
WHEREAS, at the Effective Time (as defined in the Merger Agreement) of
the Merger, Xxxxx will resign as Chairman and President of the Company and will
not thereafter receive any compensation as an employee of the Company; and
WHEREAS, Xxxxx possesses important strategic knowledge about the
Company, its trade secrets and other confidential information and has
substantial relationships with key employees of the Company; and
WHEREAS, Xxxxx could have an adverse impact on the business operations,
financial condition and results of operations of the Company if Xxxxx formed a
competing business, invested in a competing business or served as an officer,
director, employee or consultant to a competing business; and
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WHEREAS, the Company believes that Xxxxx can provide significant
services to the Company immediately after consummation of the Merger and over a
longer period of time following the Merger; and
WHEREAS, the Company and Xxxxx have agreed to enter into this Agreement
for the purpose of setting forth certain understandings and agreements regarding
Xxxxx' role with the Company following the Merger and his business activities in
the rent-to-own industry following the Merger;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Xxxxx covenant and agree as follows:
1. SERVICES PROVIDED BY XXXXX.
(a) Subject to the terms and conditions set forth in this
Agreement, the Company hereby retains Xxxxx, and Xxxxx hereby agrees to provide
such consulting services regarding the Company's business as requested from time
to time by the Board of Directors of the Company.
(b) The Company anticipates that for a period of three (3)
months following the consummation of the Merger, the Company will require
substantial services from Xxxxx, and Xxxxx agrees that during such three (3)
month period, Xxxxx will devote all of his time and efforts to the performance
of the services requested by the Company hereunder.
(c) Xxxxx shall faithfully and diligently discharge his duties
and responsibilities under this Agreement in accordance with such policies and
guidelines as may be established by the Board of Directors of the Company.
2. COMPENSATION.
(a) Subject to the terms of this Agreement, as compensation
for all of Xxxxx' services provided and to be provided by Xxxxx to the Company
pursuant to Section 1 hereof and
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in consideration of the agreements and covenants of Xxxxx under Sections 3 and 4
hereof, the Company shall pay Xxxxx the sum of $400,000 for each of the five (5)
twelve-month periods following the date hereof, payable quarterly in arrears in
respect of each quarter on the first business day of the next quarterly period,
commencing April 1, 1998 (with such first payment being prorated from the date
hereof for the quarter ended March 31, 1998).
(b) In addition to the compensation described in subsection
(a) of this Section 2, the Company shall promptly reimburse Xxxxx for all
reasonable out-of-pocket expenses incurred by him in the performance of his
duties under this Agreement in accordance with such policies and guidelines
established by the Company for reimbursement of expenses incurred by employees
or consultants on behalf of the Company.
3. NON-SOLICITATION OF EMPLOYEES.
During the Noncompete Period (hereinafter defined), no Related
Party (hereinafter defined) shall (without the prior written consent of the
Company) directly or indirectly offer permanent employment, on its own behalf or
on behalf of any other person, firm or corporation, to any person who is or
becomes an employee of the Company or any subsidiary of the Company and who has
not thereafter ceased to be employed by the Company or any subsidiary of the
Company for a period of at least one year.
4. CONFIDENTIAL INFORMATION, TRADE SECRETS AND NONCOMPETITION
COVENANT.
4.1 CONFIDENTIAL INFORMATION. Xxxxx hereby agrees that, except as
otherwise required in the course of his performance of any duties that he may
have as a consultant to the Company or any successor or affiliate of the
Company, during the period commencing on the date hereof and ending on the fifth
(5th) anniversary of the date hereof (the "Confidentiality Period"):
(a) Neither Xxxxx, Xxxxx' wife or children (his "Immediate
Family") nor any company or other business in which Xxxxx or a member of Xxxxx'
Immediate Family has an interest (Xxxxx, the members of Xxxxx' Immediate Family
and each company and other business in which Xxxxx or a member of Xxxxx'
Immediate Family has or acquires an interest being
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hereinafter referred to as a "Related Party"), will directly or indirectly own,
manage, operate, join, control or participate in the ownership, management,
operation or control of or be connected in any manner with, any business
conducted under the corporate or trade name of "Alrenco" or any corporate or
trade name of any subsidiary of the Company or any name similar thereto without
the prior written consent of the Company; and
(b) Each Related Party shall hold in confidence (unless and to
the extent compelled to disclose by judicial or administrative process or by
other applicable law) all knowledge and information of a material and
confidential nature with respect to the business of the Company and its
subsidiaries and will not disclose, publish or make use of same without the
prior written consent of the Company; provided, however, that this Section 4.1
shall not apply to (i) information that is or becomes known to the public other
than through a breach of this Agreement by Xxxxx, (ii) information generally
known and widely used within the rent-to-own industry, or (iii) information
required to be disclosed pursuant to judicial or administrative process or by
other applicable law; provided, further, however, that prior to disclosure
pursuant to judicial or administrative process or as required by other
applicable law, as permitted above, of information to any third party, Xxxxx
shall use his best efforts to give reasonable prior notice to the Company.
4.2 TRADE SECRETS.
(a) Each Related Party shall hold in confidence (unless and to
the extent compelled to disclose by judicial or administrative process or as
required by other applicable law) indefinitely any and all "Trade Secrets" (as
hereinafter defined) of the Company and its subsidiaries and shall not disclose,
publish or make use of same without the prior written consent of the Company.
"Trade Secrets" shall mean all information relating to the business of the
Company and its subsidiaries including, but not limited to, technical or
nontechnical data, a formula, pattern, compilation, program, device, method,
technique, drawing, process, financial data, financial plan, product plan, list
of actual or potential customers or suppliers, or other information similar to
any of the foregoing, which derives economic value, actual or potential,
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from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can derive economic value from its disclosure or
use; provided, however, that Trade Secret does not mean (a) information that is
or becomes generally available to the public other than through breach of this
Agreement by Xxxxx; (b) the general business skills and experience of Xxxxx; (c)
information generally known and widely used within the rent-to-own industry, or
(d) information required to be disclosed pursuant to judicial or administrative
process or by other applicable law; provided, further, however, that prior to
disclosure pursuant to judicial or administrative process or as required by
other applicable law, as permitted above, of information to any third party,
Xxxxx shall use his best efforts to give reasonable prior notice to the Company.
4.3 NONCOMPETITION.
(a) The Company, directly or indirectly through its
subsidiaries, is engaged in the business of owning, managing, operating and
developing rent-to-own stores (collectively, the "Purchaser Activities")
throughout the United States (the "Territory"). Xxxxx represents and
acknowledges that the goodwill of the Company and the Purchaser Activities
extend throughout the Territory. Following the date hereof, the Company shall
continue to conduct the Purchaser Activities throughout the Territory. Xxxxx
acknowledges that, to protect adequately the interests of the Company in its
businesses in the Territory, it is essential that any noncompete agreement with
respect thereto cover the entire Territory.
(b) In consideration of the consideration paid to Xxxxx
pursuant to this Agreement, Xxxxx hereby agrees that during the period
commencing on the date hereof and ending on the fifth (5th) anniversary of the
date hereof (the "Noncompete Period"), no Related Party shall (without the prior
written consent of the Company) directly or indirectly in the Territory engage
in, have any equity or profit interest in, make any loan to or guarantee any
obligation of or with respect to, or render services (of an executive,
advertising, marketing, sales, administrative, supervisory or consulting nature)
to, any business conducting Purchaser Activities, except in connection with the
course of the performance of any duties the Related
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Party may have as a consultant to the Company or any successor or affiliate of
the Company.
(c) If a judicial determination is made that any of the
provisions of this Section 4.3 constitutes an unreasonable or otherwise
unenforceable restriction against Xxxxx, the provisions of this Section 4.3
shall be rendered void only to the extent that such judicial determination finds
such provisions to be unreasonable or otherwise unenforceable. In this regard,
the parties hereto hereby agree that any judicial authority construing this
Agreement shall be empowered to sever any portion of the Territory, any
prohibited business activity or any time period from the coverage of this
Section 4.3 and to apply the provisions of this Section 4.3 to the remaining
portion of the Territory, the remaining business activities or the remaining
time period not so severed by such judicial authority. The time period during
which the prohibitions set forth in this Section 4.3 shall apply shall be tolled
and suspended as to Xxxxx for a period equal to the aggregate quantity of time
during which Xxxxx violates such prohibitions in any respect.
5. TERMINATION.
(a) The Company shall have the right, exercisable at any time
during the term of this Agreement, to terminate this Agreement for any reason
whatsoever, upon sixty (60) days' written notice to Xxxxx. In such event, Xxxxx
shall be entitled to receive all amounts payable pursuant to Section 2 hereof
when and as such amounts would have been payable pursuant to Section 2 if this
Agreement had not been terminated.
(b) Xxxxx shall have the right, exercisable at any time during
the term of this Agreement, to terminate this Agreement for any reason
whatsoever, upon sixty (60) days' written notice to the Company. In such event,
the Company shall have no further obligation under Section 2 hereof, except that
Xxxxx shall be entitled to receive any amounts to which Xxxxx may otherwise have
been entitled to hereunder prior to the effective date of termination of this
Agreement.
(c) Notwithstanding subsections (a) and (b) of this Section 5,
upon the death of Xxxxx, this Agreement shall terminate automatically without
any action or notice by either party. In such event, the Company shall have no
further obligation under Section 2 hereof,
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except that Xxxxx shall be entitled to receive any amounts to which Xxxxx may
otherwise have been entitled to hereunder prior to the effective date of
termination of this Agreement.
(d) Upon termination of this Agreement prior to the end of its
term, the Company shall have no further obligation hereunder except as otherwise
provided herein. Xxxxx, however, shall continue to have the obligations provided
for in Sections 3 and 4.
6. REASONABLENESS.
Xxxxx acknowledges and agrees that the restrictions,
prohibitions and other provisions hereof are reasonable, fair and equitable in
scope, terms and duration, and are necessary to protect the legitimate business
interests of the Company.
7. WITHHOLDING.
Notwithstanding any other term or provision of this Agreement,
all amounts payable by the Company hereunder shall be subject to withholding of
such sums related to taxes as the Company may reasonably determine it should
withhold pursuant to applicable law or regulation.
8. SEVERABILITY.
Except as noted below, if any provision of this Agreement be
declared or determined by any court of competent jurisdiction to be
unenforceable or invalid for any reason, the validity of the remaining parts,
terms or provisions of this Agreement shall not be affected thereby and except
as provided in Section 9 the invalid or unenforceable part, term or provision
shall be deemed not to be a part of this Agreement.
9. REFORMATION.
If any of the covenants or promises of this Agreement are
determined by any court of law or equity, with jurisdiction over this matter, to
be unreasonable or unenforceable, in whole or in part, as written, Xxxxx hereby
consents to and affirmatively requests that said court reform the covenant or
promise so as to be reasonable and enforceable and that said court enforce the
covenant or promise as reformed.
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10. INJUNCTIVE RELIEF.
Xxxxx understands, acknowledges and agrees that in the event
of a breach or threatened breach of any of the covenants and promises contained
herein, the Company will suffer irreparable injury for which there is no
adequate remedy at law and the Company will therefore be entitled to injunctive
relief enjoining said breach or threatened breach. Xxxxx further acknowledges,
however, that the Company shall have the right to seek a remedy at law as well
as or in lieu of equitable relief in the event of any such breach.
11. ASSIGNMENT.
This Agreement is personal in nature and may not be assigned
by either the Company or Xxxxx; provided, however, that the provisions of this
Agreement shall inure to the benefit of the Company and its affiliates and their
respective successors and assigns, whether by merger, consolidation, transfer of
assets or otherwise.
12. WAIVER.
The waiver by any party to this Agreement of a breach of any
of the provisions of this Agreement shall not operate or be construed as a
waiver of any subsequent or simultaneous breach.
13. APPLICABLE LAW.
This Agreement has been entered into in and shall be governed
by and construed under the laws of the State of Indiana without regard to the
conflicts laws thereof.
14. HEADINGS AND CAPTIONS.
The headings and captions used in this Agreement are for
convenience of reference only, and shall in no way define, limit, expand or
otherwise affect the meaning or construction of any provision of this Agreement.
15. NOTICE.
Any notice required or permitted to be given pursuant to this
Agreement shall be deemed sufficiently given when delivered in person or when
deposited in the United States mail, first class postage prepaid.
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16. NO EMPLOYMENT RELATIONSHIP.
Xxxxx understands and agrees that in performing consulting
services hereunder Xxxxx shall be acting as an independent contractor and that
nothing in this Agreement is intended to or shall be interpreted as creating an
employment relationship between the Company and Xxxxx. No act, statement or
conduct, of any nature whatsoever, of any representative of the Company shall
alter the nature of Xxxxx' relationship as consultant to the Company except by a
written agreement that expressly refers to this Section 16.
17. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the
Company and Xxxxx with respect to the subject matter of this Agreement and
supersedes any prior agreements or understandings between the Company and Xxxxx
with respect to such subject matter. No amendment or waiver of this Agreement or
any provision hereof shall be effective unless in a writing signed by both of
the parties.
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Entered into and agreed this 26th day of February, 1998.
ALRENCO, INC.
By: /s/ Xxxxx X. Xxxxx, Xx.
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Xxxxx X. Xxxxx, Xx.
President and Chief Executive Officer
/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
