EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ALRENCO, INC.
AND
RTO, INC.
DATED AS OF SEPTEMBER 28, 1997
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
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as of September 28, 1997, is made by and between Alrenco, Inc.,
an Indiana corporation ("Alrenco"), and RTO, Inc., a Delaware
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corporation ("RTO").
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WHEREAS, the Boards of Directors of Alrenco and RTO deem it
advisable and in the best interests of their respective
stockholders that RTO merge with and into Alrenco, and such
Boards of Directors have approved the merger (the "Merger") of
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RTO with and into Alrenco upon the terms and subject to the
conditions set forth herein; and
WHEREAS, for Federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"); and
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WHEREAS, for accounting and financial reporting purposes, it
is intended that the Merger shall be treated as a pooling of
interests; and
WHEREAS, contemporaneously with the execution and delivery
of this Agreement, Alrenco and RTO have entered into Option
Agreements dated the date hereof as described herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained
herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto (each, a "Party"), intending to be legally bound,
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hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time
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(hereinafter defined), RTO shall merge with and into Alrenco in
accordance with the applicable provisions of the laws of the
States of Indiana and Delaware. At the Effective Time, the
separate corporate existence of RTO shall cease and Alrenco shall
be the surviving corporation (the "Surviving Corporation") and
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shall succeed to and assume all of the rights and obligations of
RTO in accordance with the Indiana Business Corporation Law.
Section 1.2 Effective Time of The Merger. The Merger
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shall become effective when a properly executed Certificate of
Merger is duly filed with the Secretary of State of the State of
Delaware and properly executed Articles of Merger are filed with
the Secretary of State of the State of Indiana, which filings
shall be made as soon as practicable after satisfaction or, to
the extent permitted hereunder, waiver of all of the conditions
to each Party's obligation to consummate the Merger contained in
Article VIII. When used in this Agreement, the term "Effective
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Time" shall mean the date and time at which such Certificate of
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Merger and Articles of Merger are so filed.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation. The Articles of
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Incorporation of the Surviving Corporation at the Effective Time
shall be the Certificate of Incorporation of Alrenco as amended
and restated in accordance with Exhibit A attached hereto.
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Section 2.2 By-Laws. Subject to Section 7.9 hereof, the
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By-Laws of the Surviving Corporation at the Effective Time shall
be the By-Laws of Alrenco as amended and restated in accordance
with Exhibit B attached hereto.
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Section 2.3 Directors of Surviving Corporation. The
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initial Directors of the Surviving Corporation at the Effective
Time shall be the persons specified in Exhibit C attached hereto
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which persons shall hold office from the Effective Time until
their respective successors are duly elected or appointed and
qualify in the manner provided in the Articles of Incorporation
and By-Laws of the Surviving Corporation or as otherwise provided
by Applicable Law (hereinafter defined).
Section 2.4 Name of Surviving Corporation. The name of
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the Surviving Corporation shall be as agreed to between the
parties prior to the Effective Time.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio. At the Effective Time, by
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virtue of the Merger and without any action on the part of the
holder thereof:
(a) Each of the shares of RTO's Common Stock, par
value $.01 per share (the "Shares") issued and outstanding
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immediately prior to the Effective Time (other than Shares held
in the treasury of RTO) shall be converted into the right to
receive ninety (90) (the "Exchange Ratio") shares of Alrenco
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Common Stock, par value $.01 per share (the "Alrenco Common
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Stock," and upon such conversion, the "Alrenco Shares"), issuable
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upon the surrender of the certificate formerly representing such
Share; and
(b) Each Share held in the treasury of RTO, if any,
and each Share held by Alrenco or any subsidiary of Alrenco in
RTO immediately prior to the Effective Time shall be canceled and
retired and cease to exist.
Section 3.2 Exchange of Certificates Representing Shares.
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(a) As of the Effective Time, Alrenco shall deposit,
or shall cause to be deposited, with an exchange agent selected
by Alrenco and reasonably satisfactory to RTO (the "Exchange
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Agent"), for the benefit of the holders of Shares, for exchange
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in accordance with this Article III, (i) certificates
representing the number of Alrenco Shares issuable in the Merger,
to be issued in respect of all Shares outstanding immediately
prior to the Effective Time and which are to be exchanged
pursuant to the Merger (exclusive of Shares to be canceled
pursuant to Section 3.1(b)), and (ii) cash to be paid in lieu of
the issuance of fractional shares as provided in Section 3.4
hereof (such cash and certificates for Alrenco Shares being
hereinafter referred to collectively as the "Exchange Fund").
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(b) Promptly after the Effective Time, Alrenco shall
cause the Exchange Agent to mail (or deliver at its principal
office) to each holder of record of a certificate or certificates
representing Shares (i) a letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and
title to the certificates for Shares shall pass, only upon
delivery of the certificates for Shares to the Exchange Agent and
shall be in such form and have such other provisions, including
appropriate provisions with respect to back-up withholding, as
Alrenco may reasonably specify, and (ii) instructions for use in
effecting the surrender of the certificates for Shares. Upon
surrender of a certificate for Shares for cancellation to the
Exchange Agent, together with such letter of transmittal, duly
executed and completed in accordance with the instructions
thereto, the holder thereof shall be entitled to receive in
exchange therefor that portion of the Exchange Fund which such
holder has the right to receive pursuant to the provisions of
this Article III, after giving effect to any required withholding
tax, and the certificate for Shares so surrendered shall
forthwith be canceled. No interest will be paid or accrued on
the cash to be paid which is in the Exchange Fund as part of the
Exchange Ratio. In the event of any transfer of ownership of
Shares which has not been registered in the transfer records of
RTO, certificates representing the proper number of Alrenco
Shares, if any, together with a check in an amount equal to the
proper amount of the cash component, if any, of the Exchange
Fund, will be issued to the transferee of the certificate
representing the transferred Shares presented to the Exchange
Agent, accompanied by all documents required to evidence and
effect the prior transfer thereof and to evidence that any
applicable stock transfer taxes associated with such transfer
were paid.
Section 3.3 Dividends; Transfer Taxes. No dividends that
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are declared on Alrenco Shares will be paid to persons entitled
to receive certificates representing Alrenco Shares until such
persons surrender their certificates representing Shares. Upon
such surrender, there shall be paid to the person in whose name
the certificates representing such Alrenco Shares shall be
issued, any dividends which shall have become payable with
respect to such Alrenco Shares between the Effective Time and the
time of such surrender. In no event shall the person entitled to
receive such dividends be entitled to receive interest on such
dividends. If any certificates for any Alrenco Shares are to be
issued in a name other than that in which the certificate
representing Shares surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the
person requesting such exchange shall pay to the Exchange Agent
any transfer or other taxes required by reason of the issuance of
certificates for such Alrenco Shares in a name other than that of
the registered holder of the certificate surrendered or shall
establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. Notwithstanding the
foregoing, (i) neither the Exchange Agent nor any Party hereto
shall be liable to a holder of Shares for any Alrenco Shares or
dividends thereon or, in accordance with Section 3.4 hereof,
proceeds of the sale of fractional interests, delivered to a
public official pursuant to Applicable Law and (ii) any Alrenco
Shares held by the Exchange Agent prior to surrender of
certificates representing Shares shall not be deemed issued.
Section 3.4 No Fractional Securities. No certificates or
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scrip representing fractional Alrenco Shares shall be issued upon
the surrender for exchange of certificates representing Shares
pursuant to this Article III, and no dividend, stock split or
other change in the capital structure of RTO shall relate to any
fractional security, and such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security
holder. In lieu of any such fractional securities, each holder
of Shares who would otherwise have been entitled to a fraction of
an Alrenco Share upon surrender of stock certificates for
exchange pursuant to this Article III will be paid cash upon such
surrender in an amount equal to the product of such fraction
multiplied by the closing sale price of one share of Alrenco
Common Stock on the Nasdaq National Market on the day of the
Effective Time or, if shares of Alrenco Common Stock are not so
traded on such day, the closing sale price of one such share on
the next preceding day on which such share was traded on the
Nasdaq National Market. For this purpose, Shares of any holder
represented by two or more certificates may be aggregated, and in
no event shall any holder be paid an amount in respect of more
than one Alrenco Share.
Section 3.5 Closing of RTO Transfer Books. At the
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Effective Time, the stock transfer books of RTO shall be closed
and no transfer of Shares shall thereafter be made. If, after
the Effective Time, certificates representing Shares are
presented to the Surviving Corporation, they shall be canceled
and exchanged for certificates representing Alrenco Shares.
Section 3.6 Closing. The closing of the transactions
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contemplated by this Agreement (the "Closing") shall take place
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at the offices of King & Spalding, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., local time, on the
later of (a) the date of the Stockholders' meetings referred to
in Section 7.4 hereof or (b) the day on which all of the
conditions set forth in Article VIII hereof are satisfied or
waived, or at such other date, time and place as Alrenco and RTO
shall agree.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALRENCO
Except as otherwise disclosed to RTO in a letter delivered
to it prior to the execution hereof (which letter shall contain
appropriate references to identify the representations and
warranties herein to which the information in such letter
relates) (the "Alrenco Disclosure Letter"), Alrenco represents
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and warrants to RTO as follows:
Section 4.1 Organization. Alrenco is a corporation duly
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organized, validly existing and in good standing under the laws
of the State of Indiana and has the corporate power to carry on
its business as it is now being conducted or presently proposed
to be conducted. Alrenco is duly qualified as a foreign
corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held
under lease or the nature of its activities make such
qualification necessary, except where the failure to be so
qualified would not individually or in the aggregate have a
material adverse effect on the business, assets, liabilities,
results of operations or financial condition of Alrenco and the
Alrenco Subsidiaries (hereinafter defined), taken as a whole (an
"Alrenco Material Adverse Effect"). Alrenco has delivered to RTO
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prior to the execution of this Agreement complete and correct
copies of its Certificate of Incorporation and By-Laws, as
amended to date. In all material respects, the minute books of
Alrenco contain accurate records of all meetings and accurately
reflect all other actions taken by the stockholders, the Board of
Directors and all committees of the Board of Directors of Alrenco
since January 1, 1994.
Section 4.2 Capitalization. The authorized capital stock
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of Alrenco consists of 20,000,000 shares of Alrenco Common Stock,
and 1,000,000 shares of preferred stock, no par value. As of
August 31, 1997, (i) 6,076,892 shares of Alrenco Common Stock
were issued and outstanding, (ii) employee and non-employee
director stock options to acquire 113,803 shares of Alrenco
Common Stock (the "Alrenco Employee Stock Options") were
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outstanding under all Stock option plans of Alrenco (the "Alrenco
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Employee Stock Option Plans"), (iii) 450,000 shares of Alrenco
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Common Stock were reserved for issuance in connection with the
Alrenco Employee Stock Option Plans, and (iv) 105,000 shares of
Alrenco Common Stock were issued pursuant to the Restricted Stock
Agreements. Section 4.2 of the Alrenco Disclosure Letter sets
forth a complete and correct list, as of August 31, 1997, of the
number of shares of Alrenco Common Stock subject to Alrenco
Employee Stock Options, the Restricted Stock Agreements or other
rights to purchase or to receive Alrenco Common Stock granted
under the Alrenco Employee Stock Option Plans and the Restricted
Stock Agreements, the dates of grant and exercise prices thereof.
As of August 31, 1997, Alrenco had no treasury shares and no
shares of Alrenco Common Stock were held by Alrenco Subsidiaries
(hereinafter defined). All of the issued and outstanding shares
of Alrenco Common Stock are validly issued, fully paid and
nonassessable and free of preemptive rights. All of the shares
of Alrenco Common Stock issuable in exchange for Shares at the
Effective Time in accordance with this Agreement will be, when so
issued, duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights. Except as set forth
in this Agreement and except as provided in the Alrenco Option
Agreement (hereinafter defined), as of the date of this
Agreement, there are no shares of capital stock of Alrenco issued
or outstanding or any options, warrants, subscriptions, calls,
rights, convertible securities or other agreements or commitments
obligating Alrenco to issue, transfer, sell, redeem, repurchase
or otherwise acquire any shares of its capital stock or
securities. Except as set forth in this Agreement and the
Alrenco Option Agreement, after the Effective Time, Alrenco will
have no obligation to issue, transfer or sell any shares of its
capital stock pursuant to any employee benefit plan or otherwise.
Except as set forth in this Agreement and the Alrenco Option
Agreement, there are not now, and at the Effective Time there
will not be, any outstanding options, warrants, subscriptions,
calls, rights, convertible securities or other agreements or
commitments obligating Alrenco to issue, transfer or sell any
securities of Alrenco. Other than agreements contemplated by
this Agreement, there are not now, and at the Effective Time
there will not be, any voting trusts, standstill, stockholder or
other agreements or understandings to which Alrenco is a Party or
is bound with respect to the voting of, requiring the
registration of, or granting any preemptive rights or
antidilution rights with respect to, the capital stock of
Alrenco.
Section 4.3 Subsidiaries. Section 4.3 of the Alrenco
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Disclosure Letter lists all corporations, partnerships, joint
ventures and other business associations and entities, foreign
and domestic, in which Alrenco has any direct or indirect
ownership or economic interest.
Section 4.4 Authority Relative To This Agreement.
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Alrenco has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation by Alrenco of
the transactions contemplated hereby have been duly authorized by
the Board of Directors of Alrenco and, except for the approval of
Alrenco's stockholders to be sought at the stockholders' meeting
contemplated by Section 7.4(b) hereof, no other corporate action
or proceedings on the part of Alrenco are necessary to authorize
this Agreement or the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by
Alrenco and constitutes a valid and binding agreement of Alrenco,
enforceable against Alrenco in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditors' rights
generally or to general principles of equity.
Section 4.5 Consents and Approvals; No Violations.
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Except for applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), the
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Securities Act of 1933, as amended (the "Securities Act"), the
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Securities Exchange Act of 1934, as amended (the "Exchange Act"),
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state laws relating to takeovers, if applicable, state securities
or blue sky laws, and the filing of an appropriate certificate of
merger (the "Certificate of Merger") in such form as required by,
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and executed in accordance with the relevant provisions of, the
Indiana Business Corporation Law, no filing with, and no permit,
authorization, consent or approval of, any Governmental Authority
(hereinafter defined) is necessary for the consummation by
Alrenco of the transactions contemplated by this Agreement,
except for such filings, permits, authorizations, consents or
approvals the failure of which to be made or obtained would not
individually or in the aggregate have an Alrenco Material Adverse
Effect. Neither the execution and delivery of this Agreement by
Alrenco nor the consummation by Alrenco of the transactions
contemplated hereby, nor compliance by Alrenco with any of the
provisions hereof, will (a) conflict with or result in any breach
of any provisions of the Articles of Incorporation or By-Laws of
Alrenco, (b) result in a violation or breach of, or constitute
(with or without the notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation to which Alrenco is a
Party or by which any of them or any of their properties or
assets may be bound, or (c) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Alrenco or any
of its properties or assets, except in the case of clauses (b)
and (c) for violations, breaches or defaults which would not
individually or in the aggregate have an Alrenco Material Adverse
Effect.
Section 4.6 Reports and Financial Statements. Alrenco
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has timely filed all reports required to be filed with the
Securities and Exchange Commission (the "SEC") pursuant to the
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Exchange Act since January 1, 1996 (collectively, the "Alrenco
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SEC Reports"). As of their respective dates, the Alrenco SEC
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Reports complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder
applicable to such Alrenco SEC Reports. None of such Alrenco SEC
Reports, as of their respective dates, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading. Each of the audited balance sheets of
Alrenco and the related audited statements of operations,
stockholders equity and cash flows and unaudited interim
financial statements included in the Alrenco SEC Reports complied
as to form, as of their respective dates of filing with the SEC
in all material respects, with applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto and fairly presented the consolidated financial position
and the results of operations and the changes in financial
position of Alrenco and its consolidated subsidiaries as of the
respective dates or for the respective periods set forth therein,
all in conformity with generally accepted accounting principles
("GAAP") consistently applied during the periods involved, except
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as otherwise noted therein.
Section 4.7 Absence of Certain Changes or Events. Except
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as set forth in the Alrenco SEC Reports, since December 31, 1996,
Alrenco has not: (a) taken any of the actions set forth in
Section 6.2(b), 6.2(c) or 6.2(e) hereof; (b) suffered any
material adverse change in the business, financial condition,
results of operations, properties, assets or liabilities of
Alrenco; or (c) subsequent to such date, except as permitted by
Section 6.2 hereof, conducted its business and operations other
than in the ordinary course of business and consistent with past
practices.
Section 4.8 Litigation. Except for litigation disclosed
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in (i) the notes to the financial statements included in
Alrenco's Annual Report to Stockholders for the year ended
December 31, 1996 or (ii) the Alrenco SEC Reports, there is no
suit, action or proceeding pending or, to the best of Alrenco's
knowledge, threatened against or affecting Alrenco, the outcome
of which would individually or in the aggregate have an Alrenco
Material Adverse Effect; nor is there any judgment, decree,
injunction, citation, settlement agreement, rule or order of any
federal, regional, state or local political subdivision, any
governmental or administrative body, instrumentality, department
or agency or any court, administrative hearing body, commission
or similar dispute resolving panel or body, or any other body
exercising the executive, legislative, judicial, regulatory or
administrative functions of a government (collectively, a
"Governmental Authority") outstanding against Alrenco having, or
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which, insofar as can reasonably be foreseen, in the future may
have, any such effect.
Section 4.9 Contracts and Commitments. Except as
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disclosed in the Alrenco SEC Reports, Alrenco is not a Party to
and is not bound by any of the following:
(i) any "material contract" (as such term is defined
in Item 601(b)(10) of Regulation S-K of the SEC);
(ii) any non-competition agreement or any other
agreement or obligation which purports to limit in any
material respect the manner in which, or the localities in
which, the business of Alrenco (including, for purposes of
this Section 4.9, RTO and the RTO Subsidiaries, assuming the
Merger has taken place) is or would be conducted; or
(iii) any contract or other agreement which would
prohibit or materially delay the consummation of the Merger
or any of the other transactions contemplated hereby (all
such contracts of the type described in clauses (i), (ii)
and (iii) of this Section 4.9 being referred to herein as
"Alrenco Material Contracts").
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Each Alrenco Material Contract is valid and binding on Alrenco
and is in full force and effect, and Alrenco has in all material
respects performed all obligations to be performed by it to date
under each Alrenco Material Contract, except where such non-
performance, individually or in the aggregate, would not have an
Alrenco Material Adverse Effect. Alrenco does not know of, nor
has it received notice of, any violation or default under (nor,
to the knowledge of Alrenco, does there exist any condition which
with the passage of time or the giving of notice or both would
result in such a violation or default under) any Alrenco Material
Contract.
Section 4.10 Information in Disclosure Documents and
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Registration Statement. None of the information to be supplied
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by Alrenco for inclusion or incorporation by reference in (a) the
Registration Statement to be filed with the SEC by Alrenco on
Form S-4 under the Securities Act for the purpose of registering
the offering of the Alrenco Shares to be issued in the Merger
(the "Registration Statement") or (b) the joint proxy
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statement/prospectus to be distributed in connection with
Alrenco's and RTO's meetings of stockholders to vote upon this
Agreement (the "Proxy Statement") will, in the case of the
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Registration Statement, at the time it becomes effective and at
the Effective Time or, in the case of the Proxy Statement or any
amendments thereof or supplements thereto, at the time of the
mailing of the Proxy Statement and any amendments or supplements
thereto and at the time of the meetings of stockholders to be
held in connection with the Merger, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading, except that no representation or warranty is made
by Alrenco with respect to statements made or incorporated by
reference therein based on information supplied by RTO
specifically for inclusion or incorporation by reference in the
Registration Statement or the Proxy Statement. The Registration
Statement and the Proxy Statement will comply as to form in all
material respects with the provisions of the Securities Act or
the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder.
Section 4.11 Absence of Undisclosed Liabilities. Except
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for liabilities or obligations which (i) are accrued or reserved
against in Alrenco's financial statements (or reflected in the
notes thereto) included in the Alrenco SEC Reports, or (ii) were
incurred after December 31, 1996 in the ordinary course of
business and consistent in type and amount with past practices,
Alrenco does not have any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of a nature required
by GAAP to be reflected in a corporate balance sheet or the notes
thereto.
Section 4.12 No Default. Alrenco is not in default or
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violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of
any term, condition or provision of (a) its Articles of
Incorporation or By-Laws, (b) any note, bond, mortgage,
indenture, license, agreement, contract, lease, commitment or
other obligation to which Alrenco is a Party or by which it or
any of its properties or assets may be bound, or (c) any order,
writ, injunction, decree, statute, rule or regulation applicable
to Alrenco, except in the case of clauses (b) and (c) above for
defaults or violations which would not individually or in the
aggregate have an Alrenco Material Adverse Effect.
Section 4.13 Tax Returns; Taxes.
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(a) For purposes of this Agreement, "Tax" means any
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federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duty, capital
stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether
disputed or not; "Tax Return" means any return, declaration,
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report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto
and any amendment thereto.
(b) Alrenco has filed all Tax Returns that it was
required to file and all such Tax Returns were correct and
complete in all respects. All Taxes owed by Alrenco (whether or
not shown on any Tax Return) which are due and payable have been
paid. Except as set forth in the Alrenco Disclosure Letter,
Alrenco is not currently the beneficiary of any extension of time
within which to file any Tax Return. Except as set forth in the
Alrenco Disclosure Letter, no taxing authority in a jurisdiction
where Alrenco does not file Tax Returns has claimed in writing
that Alrenco is or may be subject to taxation by that
jurisdiction.
(c) Alrenco has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(d) Except as set forth in the Alrenco Disclosure
Letter, there is no dispute or claim concerning any Tax liability
of Alrenco either (i) claimed or raised by any taxing authority
in writing or (ii) as to which any shareholder or employee of
Alrenco responsible for Tax matters of Alrenco has knowledge
based upon personal contact with any agent of such authority.
(e) Alrenco has not waived any statute of limitations
with respect to Taxes or agreed to any extension of time with
respect to assessment of Taxes.
(f) All accounting periods and methods used by Alrenco
for Tax purposes are permissible periods and methods, and Alrenco
is not required to make any adjustments to its income under
Section 481 of the Code in taxable years for which Tax Returns
have not yet been filed. Alrenco has not filed a consent under
Section 341(f) of the Code concerning collapsible corporations.
Alrenco has not made nay payments, is not obligated to make any
payments, and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will
not be deductible under Section 280G of the Code. Alrenco is not
a party to any Tax allocation or sharing agreement. Alrenco (i)
has not been a member of an affiliated group filing a
consolidated federal income Tax return in any taxable year ending
after December 31, 1992 and (ii) has no liability for the Taxes
of any person other than Alrenco under Treasury Regulation
Section 1.1502-6 or any similar provision of state, local or
foreign law, as a transferee or successor, by contract, or
otherwise.
(g) The unpaid Taxes of Alrenco did not, as of
December 31, 1996, exceed the reserve for Taxes (excluding any
reserve for deferred taxes attributable to differences between
the timing of income or deductions for tax and financial
accounting purposes) set forth on the balance sheet as of
December 31, 1996 (excluding any nots thereto) contained in the
Alrenco SEC Reports.
(h) Neither Alrenco nor any of the Alrenco
Subsidiaries has taken any action or has notice of any fact,
agreement, plan or other circumstance that is reasonably likely
to prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
Section 4.14 Title to Properties; Encumbrances. Except as
---------------------------------
otherwise provided in this Section 4.14, Alrenco has good, valid
and marketable title to, or a valid leasehold interest in, all of
its properties and assets (real, personal and mixed, tangible and
intangible), including, without limitation, all the properties
and assets reflected in the balance sheet of Alrenco as of
December 31, 1996 included in Alrenco's Annual Report on Form 10-
K for the period ended on such date (except for properties and
assets disposed of in the ordinary course of business and
consistent with past practices since December 31, 1996). None of
such properties or assets are subject to any liability,
obligation, claim, lien, mortgage, pledge, security interest,
conditional sale agreement, charge or encumbrance of any kind
(whether absolute, accrued, contingent or otherwise), except for
(i) minor imperfections of title and encumbrances, if any, which
are not substantial in amount, do not materially detract from the
value of the property or assets subject thereto and do not impair
the operations of Alrenco, (ii) liens for Taxes that are not yet
due or that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established
in accordance with GAAP, and (iii) mortgages on real property in
an aggregate amount not greater than $50,000.
Section 4.15 Compliance With Applicable Law. Alrenco is
------------------------------
in compliance with all applicable laws (whether statutory or
otherwise), rules, regulations, orders, ordinances, judgments or
decrees of all governmental authorities (federal, state, local,
or otherwise) (collectively, "Applicable Law"), except where the
--------------
failure to be in such compliance would not individually or in the
aggregate have an Alrenco Material Adverse Effect.
Section 4.16 Labor Matters.
-------------
(a) Alrenco is not a Party to, or bound by, any
collective bargaining agreement with a labor union or labor
organization;
(b) There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of Alrenco,
threatened against Alrenco relating to its business, except for
such proceedings which would not individually or in the aggregate
have an Alrenco Material Adverse Effect; and
(c) To the knowledge of Alrenco, there are no
organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened
involving employees of Alrenco.
Section 4.17 Employee Benefit Plans; ERISA.
-----------------------------
(a) With respect to each material bonus, deferred
compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other
medical, life or other insurance, supplemental unemployment
benefits, profit-sharing, pension, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan,
program, agreement (including but not limited to employment
agreements) or arrangement (the "Alrenco Plans"), currently
-------------
maintained or contributed to or required to be contributed to by
(i) Alrenco or (ii) any trade or business, whether or not
incorporated (an "Alrenco ERISA Affiliate"), that together with
-----------------------
Alrenco is a "single employer" within the meaning of section 4001
of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder
("ERISA"), for the benefit of any employee or former employee of
-----
Alrenco or any Alrenco ERISA Affiliate, Alrenco has heretofore
delivered to RTO true and complete copies of each of the
following documents:
(i) a copy of each Alrenco Plan that is in writing
(including all amendments thereto), including (1) all
severance and employment agreements of Alrenco with
directors, executive officers or key employees, (2) all
severance programs and policies of Alrenco and (3) all plans
or arrangements of Alrenco relating to its employees which
contain change in control provisions;
(ii) a copy of the annual report and actuarial report,
if required under ERISA, with respect to each such Alrenco
Plan for the last two plan years ending prior to the date
hereof;
(iii) a copy of the most recent Summary Plan
Description, together with each Summary of Material
Modifications, if required under ERISA, with respect to such
Alrenco Plan;
(iv) if the Alrenco Plan is funded through a trust or
any other third Party funding vehicle, a copy of the trust
or other funding agreement (including all amendments
thereto) and the latest financial statements with respect to
the last reporting period ended immediately prior to the
date hereof; and
(v) the most recent determination letter received
prior to the date hereof from the Internal Revenue Service
with respect to each Alrenco Plan intended to qualify under
section 401 of the Code.
(b) No liability under Title IV of ERISA has been
incurred by Alrenco or any Alrenco ERISA Affiliate that has not
been satisfied in full when due, and no condition exists that
presents a material risk to Alrenco or any Alrenco ERISA
Affiliate of incurring a liability under such Title which would
individually or in the aggregate have an Alrenco Material Adverse
Effect or give rise to a lien under Title IV of ERISA.
(c) No Alrenco Plan subject to the minimum funding
requirements of section 412 of the Code or section 302 of ERISA
or any trust established thereunder has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and
section 412 of the Code), whether or not waived, as of the last
day of the most recent fiscal year of such Alrenco Plan ended
prior to the date hereof; and all contributions required to be
made with respect thereto (whether pursuant to the terms of any
such Alrenco Plan or otherwise) on or prior to the date hereof
have been timely made.
(d) No Alrenco Plan is a "multiemployer pension plan,"
as defined in section 3(37) of ERISA, nor is any Alrenco Plan a
plan described in Section 4063(a) of ERISA.
(e) Each Alrenco Plan intended to be "qualified"
within the meaning of section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service
as to its qualification and, to the knowledge of Alrenco, no
amendment has been made to any such Alrenco Plan since the date
of such letter that is likely to result in the disqualification
of such Alrenco Plan.
(f) Each of the Alrenco Plans has been operated and
administered in all respects in accordance with Applicable Law,
including, but not limited to, ERISA and the Code, except for any
failure to so operate or administer such Alrenco Plans that would
not individually or in the aggregate have an Alrenco Material
Adverse Effect.
(g) Except as expressly provided in this Agreement,
any exhibit hereto, an Alrenco Plan or as otherwise agreed in
writing by Alrenco and RTO, neither the execution and delivery of
this Agreement nor the Merger nor the consummation of any of the
other transactions contemplated by this Agreement will:
(i) entitle any current or former officer, director,
employee or consultant of Alrenco to severance pay,
unemployment compensation or any other payment, or
(ii) accelerate the time of payment or vesting, or
increase the amount of compensation due any such officer,
director, employee or consultant.
(h) With respect to each Alrenco Plan that is funded
wholly or partially through an insurance policy, Alrenco does not
have any current liability under any such insurance policy in the
nature of a retroactive rate adjustment or loss sharing
arrangement arising wholly or partially out of events occurring
prior to the Closing other than any such liability that
individually or in the aggregate would not have an Alrenco
Material Adverse Effect.
(i) There are no pending or, to the knowledge of
Alrenco, threatened claims by or on behalf of any of the Alrenco
Plans, by any employee or beneficiary covered under any such
Alrenco Plan involving any such Alrenco Plan (other than routine
claims for benefits), other than any such claims that would not
individually or in the aggregate have an Alrenco Material Adverse
Effect.
(j) Neither Alrenco nor, to the knowledge of Alrenco,
any Alrenco ERISA Affiliate, any of the Alrenco Plans, any trust
created thereunder, or any trustee or administrator thereof has
engaged in a transaction in connection with which Alrenco or, to
the knowledge of Alrenco, any Alrenco ERISA Affiliate, any of the
Alrenco Plans, any such trust, or any trustee or administrator
thereof, or any Party dealing with the Alrenco Plans or any such
trust is likely to be subject to either a civil liability under
section 409 of ERISA or section 502(i) of ERISA, or a tax imposed
pursuant to section 4975 or 4976 of the Code, other than any such
liability or tax that would not individually or in the aggregate
have an Alrenco Material Adverse Effect.
Section 4.18 Vote Required. Authorization of the Merger
-------------
and the issuance of the Alrenco Shares to be issued in the Merger
shall require the affirmative vote of the holders of a majority
of Alrenco Common Stock voted at the stockholders' meeting
referred to in Section 7.4(b). No other vote of the shareholders
of Alrenco is required by law, the Articles of Incorporation or
By-Laws of Alrenco or otherwise in order for Alrenco to
consummate the Merger and the transactions contemplated hereby.
Section 4.19 Opinion of Financial Advisor. The Board of
----------------------------
Directors of Alrenco (at a meeting duly called and held) has
unanimously determined that the transactions contemplated hereby
are fair to and in the best interests of Alrenco. The Board of
Directors of Alrenco has received the opinion of Equitable
Securities Corporation, Alrenco's financial advisor,
substantially to the effect that the Exchange Ratio is fair to
Alrenco from a financial point of view.
Section 4.20 Takeover Status. The Board of Directors of
---------------
Alrenco has taken all appropriate action so that the execution
and delivery of this Agreement and the Alrenco Option Agreement
and the consummation of the Merger and the other transactions
contemplated thereby will not be restricted by, or otherwise
subject to, the provisions of Chapter 43 of the Indiana Business
Corporation Law.
Section 4.21 Accounting Matters. To its knowledge,
------------------
Alrenco has not taken or agreed to take any action that would
prevent the business combination to be effected by the Merger
from being accounted for as a pooling of interest and Alrenco has
no reason to believe that the Merger will not qualify for pooling
of interest accounting.
Section 4.22 Brokers. Except for Equitable Securities
-------
Corporation, Alrenco's financial advisor, no broker, finder or
financial advisor is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger or the other
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Alrenco, and Alrenco's fee
arrangements with Equitable Securities Corporation have been
disclosed to RTO.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF RTO
Except as otherwise disclosed to Alrenco in a letter
delivered to it prior to the execution hereof (which letter shall
contain appropriate references to identify the representations
and warranties herein to which the information in such letter
relates) (the "RTO Disclosure Letter"), RTO represents and
---------------------
warrants to Alrenco as follows:
Section 5.1 Organization. RTO is a corporation duly
------------
organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power to carry on
its business as it is now being conducted or presently proposed
to be conducted. RTO is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease
or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect
on the business, assets, liabilities, results of operations or
financial condition of RTO and the RTO Subsidiaries (hereinafter
defined), taken as a whole (an "RTO Material Adverse Effect").
---------------------------
RTO has delivered to Alrenco prior to the execution of this
Agreement complete and correct copies of its Certificate of
Incorporation and By-laws, as amended to date. In all material
respects, the minute books of RTO contain accurate records of all
meetings and accurately reflect all other actions taken by the
stockholders, the Board of Directors and all committees of the
Board of Directors of RTO since January 1, 1994.
Section 5.2 Capitalization. The authorized capital stock
--------------
of RTO consists of 75,000,000 Shares, and 10,000,000 shares of
preferred stock, par value $.01 per share. As of August 31,
1997, (i) 120,959.47 Shares were issued and outstanding, (ii)
employee stock options to acquire 11,333 Shares (the "RTO
---
Employee Stock Options") were outstanding under the employee
----------------------
stock option plan of RTO (the "RTO Employee Stock Option Plan"),
------------------------------
(iii) 11,348 Shares were reserved for issuance in connection with
the RTO Employee Stock Option Plan, (iv) non-employee director
stock options to acquire 564 Shares (the "RTO Director Stock
------------------
Options") were outstanding under the non-employee director stock
-------
option plan (the "RTO Director Stock Option Plan"), (v) 5,000
------------------------------
Shares are reserved for issuance under the RTO Director Stock
Option Plan, and (vi) convertible notes in the aggregate
principal amount of $5,000,000 were outstanding which are
convertible into 4,000 Shares. Section 5.2 of the RTO Disclosure
Letter sets forth a complete and correct list, as of August 31,
1997, of the number of shares of RTO Common Stock subject to RTO
Employee Stock Options, RTO Director Stock Options or other
rights to purchase or to receive RTO Common Stock granted under
the RTO Employee Stock Option Plan and the RTO Director Stock
Option Plan, the dates of grant and exercise prices thereof. As
of August 31, 1997, RTO had no treasury shares and no Shares were
held by RTO Subsidiaries (as hereinafter defined). All of the
issued and outstanding Shares are validly issued, fully paid and
nonassessable and free of preemptive rights. Except as set forth
in this Agreement and except as provided in RTO Option Agreement
(hereinafter defined), there are not now, and at the Effective
Time, there will not be, any shares of capital stock of RTO
issued or outstanding or any options, warrants, subscriptions,
calls, rights, convertible securities or other agreements or
commitments obligating RTO to issue, transfer, sell, redeem,
repurchase or otherwise acquire any shares of its capital stock.
Except as provided in this Agreement and the RTO Option
Agreement, after the Effective Time, RTO will have no obligation
to issue, transfer or sell any shares of its capital stock
pursuant to any employee benefit plan or otherwise. Other than
the agreements contemplated by this Agreement and the RTO Option
Agreement, there are not now, and at the Effective Time there
will not be, any voting trusts, standstill, stockholder or other
agreements or understandings to which RTO is a party or is bound
with respect to the voting of, requiring the registration of, or
granting any preemptive rights or antidilution rights with
respect to, the capital stock of RTO.
Section 5.3 Subsidiaries. Section 5.3 of the RTO
------------
Disclosure Letter lists all corporations, partnerships, joint
ventures and other business associations and entities, foreign
and domestic, in which RTO has any direct or indirect ownership
or economic interest. (Such corporations, partnerships, joint
ventures or other business entities of which RTO owns, directly
or indirectly, greater than 50% of the shares of capital stock or
other equity interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to cast at
least a majority of the votes that may be cast by all shares or
equity interests having ordinary voting power for the election of
directors or other governing body of such entity are hereinafter
referred to as the "RTO Subsidiaries".)
----------------
(a) Each RTO Subsidiary that is a corporation is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Each RTO
Subsidiary that is a partnership or a limited liability company
is duly formed, validly existing and in good standing under the
laws of its jurisdiction of formation.
(b) Each RTO Subsidiary has the corporate power, the
partnership power or the company power, as the case may be, to
carry on its business as it is now being conducted or presently
proposed to be conducted.
(c) Each RTO Subsidiary that is a corporation is duly
qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the
failure to be so qualified would not individually or in the
aggregate have an RTO Material Adverse Effect. Each RTO
Subsidiary that is a partnership is duly qualified as a foreign
partnership authorized to do business, and is in good standing,
in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so
qualified would not individually or in the aggregate have an RTO
Material Adverse Effect. Each RTO subsidiary that is a limited
liability company is duly qualified as a foreign limited
liability company authorized to do business, and is in good
standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the
failure to be so qualified would not individually or in the
aggregate have an RTO Material Adverse Effect.
(d) All of the outstanding shares of capital stock of
the RTO Subsidiaries that are corporations are duly authorized,
validly issued, fully paid and nonassessable and are free of
preemptive rights. All of the outstanding ownership interests of
the RTO Subsidiaries that are partnerships or limited liability
companies are duly authorized, validly issued, fully paid and
nonassessable and are free of preemptive rights.
(e) All of the outstanding shares of capital stock of,
or other ownership interests in, each of the RTO Subsidiaries
owned by RTO or an RTO Subsidiary are owned by RTO or by an RTO
Subsidiary free and clear of any liens, claims, charges or
encumbrances. Except as set forth in Section 5.2 hereof, there
are not now, and at the Effective Time there will not be, any
outstanding options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments
obligating RTO or any RTO Subsidiary to issue, transfer or sell
any securities of RTO or any RTO Subsidiary.
(f) Other than agreements contemplated by this
Agreement and except as disclosed in Schedule 5.3(f), there are
---------------
not now, and at the Effective Time there will not be, any voting
trusts, standstill, stockholder or other agreements or
understandings to which RTO or any of the RTO Subsidiaries is a
Party or is bound with respect to the voting of, requiring the
registration of, or granting any preemptive rights or
antidilution rights with respect to, the capital stock of RTO or
any of the RTO Subsidiaries.
Section 5.4 Authority Relative To This Agreement. RTO
------------------------------------
has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation by RTO of the
transactions contemplated hereby have been duly authorized by
RTO's Board of Directors and, except for the approval of RTO's
stockholders to be sought at the stockholders meeting
contemplated by Section 7.4(a) hereof, no other corporate action
or proceedings on the part of RTO are necessary to authorize this
Agreement or the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by RTO
and constitutes a valid and binding agreement of RTO, enforceable
against RTO in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally or to
general principles of equity.
Section 5.5 Consents and Approvals; No Violations.
-------------------------------------
Except for applicable requirements of the HSR Act, the Securities
Act, the Exchange Act, state laws relating to takeovers, if
applicable, state securities or blue sky laws, and the filing and
recordation of the Certificate of Merger as required by the
Delaware General Corporation Law (the "DGCL"), no filing with,
----
and no permit, authorization, consent or approval of, any
Governmental Authority is necessary for the consummation by RTO
of the transactions contemplated by this Agreement, except for
such filings, permits, authorizations, consents or approvals the
failure of which to be made or obtained would not individually or
in the aggregate have an RTO Material Adverse Effect. Neither
the execution and delivery of this Agreement by RTO, nor the
consummation by RTO of the transactions contemplated hereby, nor
compliance by RTO with any of the provisions hereof, will (a)
conflict with or result in any breach of any provisions of the
Certificate of Incorporation or By-Laws of RTO or any of the RTO
Subsidiaries, (b) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which
RTO or any of the RTO Subsidiaries is a Party or by which any of
them or any of their properties or assets may be bound, or (c)
violate any other, writ, injunction, decree, statute, rule or
regulation applicable to RTO, any of the RTO Subsidiaries or any
of their properties or assets, except in the case of clauses (b)
and (c) for violations, breaches or defaults which would not
individually or in the aggregate have an RTO Material Adverse
Effect.
Section 5.6 RTO Financial Statements. Prior to the
------------------------
execution of this Agreement, RTO has delivered to Alrenco true
and complete copies of the audited balance sheets of RTO and its
consolidated subsidiaries at December 31,1995 and 1996 and
unaudited balance sheets of RTO and its consolidated subsidiaries
at March 31, 1997, and the related audited or unaudited
consolidated statements of operations, stockholders' equity and
cash flows for each of the three year periods ended December 31,
1996, and the unaudited consolidated statements of operations for
the three months ended March 31, 1997 (the "RTO Financial
-------------
Statements"). Each of such RTO Financial Statements fairly
----------
presents the consolidated financial position and the results of
operations and changes in financial position of RTO and its
consolidated subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP
consistently applied during the periods involved, except as
otherwise noted therein.
Section 5.7 Absence of Certain Changes or Events. Except
------------------------------------
as set forth in the RTO Financial Statements or the RTO
Disclosure Letter, since December 31, 1996, neither RTO nor any
of the RTO Subsidiaries has: (a) taken any of the actions set
forth in Section 6.1(b), 6.1(c) or 6.1(e) hereof; (b) suffered
any material adverse change in the business, financial condition,
results of operations, properties, assets or liabilities of RTO
and the RTO Subsidiaries taken as a whole; or (c) subsequent to
such date, except as permitted by Section 6.1 hereof, conducted
its business and operations other than in the ordinary course of
business and consistent with past practices.
Section 5.8 Litigation. There is no suit, action or
----------
proceeding pending or, to the best of RTO's knowledge, threatened
against or affecting RTO or any of the RTO Subsidiaries, the
outcome of which would individually or in the aggregate have an
RTO Material Adverse Effect; nor is there any judgment, decree,
injunction, citation, settlement agreement, rule or order of any
Governmental Authority outstanding against RTO or any of the RTO
Subsidiaries having, or which, insofar as can reasonably be
foreseen, in the future may have, any such effect.
Section 5.9 Contracts and Commitments. Neither RTO nor
-------------------------
any RTO Subsidiary is a Party to or is bound by any of the
following:
(i) any "material contract" (as such term is defined
in Item 601(b)(10) of Regulation S-K of the SEC);
(ii) any non-competition agreement or any other
agreement or obligation which purports to limit in any
material respect the manner in which, or the localities in
which, the business of RTO and the RTO Subsidiaries
(including, for purposes of this Section 5.9, Alrenco and
the Alrenco Subsidiaries, assuming the Merger has taken
place) is or would be conducted; or
(iii) any contract or other agreement which would
prohibit or materially delay the consummation of the Merger
or any of the other transactions contemplated hereby (all
such contracts of the type described in clauses (i), (ii)
and (iii) of this Section 5.9 being referred to herein as
"RTO Material Contracts").
----------------------
Each RTO Material Contract is valid and binding on RTO (or, to
the extent that an RTO Subsidiary is a Party, such RTO
Subsidiary) and is in full force and effect, and RTO and each RTO
Subsidiary have in all material respects performed all
obligations to be performed by them to date under each RTO
Material Contract, except where such non-performance,
individually or in the aggregate, would not have an RTO Material
Adverse Effect. Neither RTO nor any RTO Subsidiary knows of, or
has received notice of, any violation or default under (nor, to
the knowledge of RTO, does there exist any condition which with
the passage of time or the giving of notice or both would result
in such a violation or default under) any RTO Material Contract.
Section 5.10 Information in Disclosure Documents and
---------------------------------------
Registration Statement. None of the information to be supplied
----------------------
by RTO for inclusion or incorporation by reference in the Proxy
Statement or the Registration Statement will, in the case of the
Registration Statement, at the time it becomes effective and at
the Effective Time or, in the case of the Proxy Statement or any
amendments or supplements thereto, at the time of the mailing of
the Proxy Statement and any amendments or supplements thereto and
at the time of the meetings of stockholders to be held in
connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they made, not
misleading, except that no representation or warranty is made by
RTO with respect to statements made or incorporated by reference
therein based on information supplied by Alrenco specifically for
inclusion or incorporation by reference in the Registration
Statement or the Proxy Statement.
Section 5.11 Absence of Undisclosed Liabilities. Except
----------------------------------
for liabilities or obligations which (i) are accrued or reserved
against in RTO's Financial Statements (or reflected in the notes
thereto), or (ii) were incurred after December 31, 1996 in the
ordinary course of business and consistent in type and amount
with past practices, neither RTO nor any RTO Subsidiary has any
liabilities or obligations (whether absolute, accrued, contingent
or otherwise) of a nature required by GAAP to be reflected in a
corporate balance sheet or the notes thereto.
Section 5.12 No Default. Neither RTO nor any of the RTO
----------
Subsidiaries is in default or violation (and no event has
occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or
provision of (a) its Certificate of Incorporation or By-Laws, (b)
any note, bond, mortgage, indenture, license, agreement,
contract, lease, commitment or other obligation to which RTO or
any of the RTO Subsidiaries is a Party or by which it or any of
its properties or assets may be bound, or (c) any order, writ,
injunction, decree, statute, rule or regulation applicable to RTO
or any of the RTO Subsidiaries, except in the case of clauses (b)
and (c) above for defaults or violations which would not
individually or in the aggregate have an RTO Material Adverse
Effect.
Section 5.13 Tax Returns; Taxes.
------------------
(a) For purposes of this Agreement, "Tax" means any
---
federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duty, capital
stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether
disputed or not; "Tax Return" means any return, declaration,
----------
report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto
and any amendment thereto.
(b) RTO has filed all Tax Returns that it was required
to file and all such Tax Returns were correct and complete in all
respects. All Taxes owed by RTO (whether or not shown on any Tax
Return) which are due and payable have been paid. Except as set
forth in the RTO Disclosure Letter, RTO is not currently the
beneficiary of any extension of time within which to file any Tax
Return. Except as set forth in the RTO Disclosure Letter, no
taxing authority in a jurisdiction where RTO does not file Tax
Returns has claimed in writing that RTO is or may be subject to
taxation by that jurisdiction.
(c) RTO has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(d) Except as set forth in the RTO Disclosure Letter,
there is no dispute or claim concerning any Tax liability of RTO
either (i) claimed or raised by any taxing authority in writing
or (ii) as to which any shareholder or employee of RTO
responsible for Tax matters of RTO has knowledge based upon
personal contact with any agent of such authority.
(e) RTO has not waived any statute of limitations with
respect to Taxes or agreed to any extension of time with respect
to assessment of Taxes.
(f) All accounting periods and methods used by RTO for
Tax purposes are permissible periods and methods, and RTO is not
required to make any adjustments to its income under Section 481
of the Code in taxable years for which Tax Returns have not yet
been filed. RTO has not filed a consent under Section 341(f) of
the Code concerning collapsible corporations. RTO has not made
nay payments, is not obligated to make any payments, and is not a
party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible
under Section 280G of the Code. RTO is not a party to any Tax
allocation or sharing agreement. RTO (or its predecessors) (i)
has not been a member of an affiliated group filing a
consolidated federal income Tax return in any taxable year ending
after December 31, 1992 and (ii) has no liability for the Taxes
of any person other than RTO under Treasury Regulation Section
1.1502-6 or any similar provision of state, local or foreign law,
as a transferee or successor, by contract, or otherwise.
(g) The unpaid Taxes of RTO did not, as of December
31, 1996, exceed the reserve for Taxes (excluding any reserve for
deferred taxes attributable to differences between the timing of
income or deductions for tax and financial accounting purposes)
set forth on the balance sheet as of December 31, 1996 (excluding
any nots thereto) contained in the RTO Financial Statements.
(h) Neither RTO nor any of the RTO Subsidiaries has
taken any action or has notice of any fact, agreement, plan or
other circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
Section 5.14 Title To Properties; Encumbrances. Except as
---------------------------------
otherwise provided in this Section 5.14, each of RTO and the RTO
Subsidiaries has good, valid and marketable title to, or a valid
leasehold interest in, all of its properties and assets (real,
personal and mixed, tangible and intangible), including, without
limitation, all the properties and assets reflected in the
consolidated balance sheet of RTO and the RTO Subsidiaries as of
December 31, 1996 for the period ended on such date (except for
properties and assets disposed of in the ordinary course of
business and consistent with past practices since December 31,
1996). None of such properties or assets are subject to any
liability, obligation, claim, lien, mortgage, pledge, security
interest, conditional sale agreement, charge or encumbrance of
any kind (whether absolute, accrued, contingent or otherwise),
except for (i) minor imperfections of title and encumbrances, if
any, which are not substantial in amount, do not materially
detract from the value of the property or assets subject thereto,
and do not impair the operations of RTO and the RTO Subsidiaries,
(ii) liens for Taxes that are not yet due or that are being
contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP,
and (iii) mortgages on real property in an aggregate amount not
greater than $50,000.
Section 5.15 Compliance with Applicable Laws. Each of RTO
-------------------------------
and the RTO Subsidiaries is in compliance with Applicable Law,
except where the failure to be in such compliance would not
individually or in the aggregate have an RTO Material Adverse
Effect.
Section 5.16 Labor Matters.
-------------
(a) Neither RTO nor any of the RTO Subsidiaries is a
Party to, or bound by, any collective bargaining agreement with a
labor union or labor organization;
(b) There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of RTO,
threatened against RTO or any of the RTO Subsidiaries relating to
their business, except for any such proceeding which would not
individually or in the aggregate have an RTO Material Adverse
Effect; and
(c) To the knowledge of RTO, there are no
organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened
involving employees of RTO or any of the RTO Subsidiaries.
Section 5.17 Employee Benefit Plans; ERISA.
-----------------------------
(a) With respect to each material bonus, deferred
compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other
medical, life or other insurance, supplemental unemployment
benefits, profit-sharing, pension, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan,
program, agreement (including, but not limited to, employment
agreements) or arrangement (the "RTO Plans"), currently
---------
maintained or contributed to or required to be contributed to by
(i) RTO, (ii) any RTO Subsidiary or (iii) any trade or business,
whether or not incorporated (a "RTO ERISA Affiliate"), that
-------------------
together with RTO or any RTO Subsidiary is a "single employer"
within the meaning of section 4001 of ERISA, for the benefit of
any employee or former employee of RTO, any RTO Subsidiary or any
RTO ERISA Affiliate, RTO has heretofore delivered to Alrenco true
and complete copies of each of the following documents:
(i) a copy of each RTO Plan that is in writing
(including all amendments thereto), including (1) all
severance and employment agreements of RTO with directors,
executive officers or key employees, (2) all severance
programs and policies of RTO and each RTO Subsidiary, and
(3) all plans or arrangements of RTO and each RTO Subsidiary
relating to its employees which contain change in control
provisions;
(ii) a copy of the annual report and actuarial report,
if required under ERISA, with respect to each such RTO Plan
for the last two plan years ending prior to the date hereof;
(iii) a copy of the most recent Summary Plan
Description, together with each Summary of Material
Modifications, if required under ERISA, with respect to such
RTO Plan;
(iv) if the RTO Plan is funded through a trust or any
other third Party funding vehicle, a copy of the trust or
other funding agreement (including all amendments thereto)
and the latest financial statements with respect to the last
reporting period ended immediately prior to the date hereof;
and
(v) the most recent determination letter received
prior to the date hereof from the Internal Revenue Service
with respect to each RTO Plan intended to qualify under
section 401 of the Code.
(b) No liability under Title IV of ERISA has been
incurred by RTO, any RTO Subsidiary or any RTO ERISA Affiliate
that has not been satisfied in full when due, and no condition
exists that presents a material risk to RTO or any RTO Subsidiary
or any RTO ERISA Affiliate of incurring a liability under such
Title which would individually or in the aggregate have an RTO
Material Adverse Effect, or give rise to a lien under Title IV of
ERISA.
(c) No RTO Plan subject to the minimum funding
requirements of section 412 of the Code or section 302 of ERISA
or any trust established thereunder has incurred any "accumulated
funding deficiency" (as defined in section 302 of ERISA and
section 412 of the Code), whether or not waived, as of the last
day of the most recent fiscal year of such RTO Plan ended prior
to the date hereof; and all contributions required to be made
with respect thereto (whether pursuant to the terms of any such
RTO Plan or otherwise) on or prior to the date hereof have been
timely made.
(d) No RTO Plan is a "multiemployer pension plan," as
defined in section 3(37) of ERISA, nor is any RTO Plan a plan
described in section 4063(a) of ERISA.
(e) Each RTO Plan intended to be "qualified" within
the meaning of section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service
as to its qualification and, to the knowledge of RTO, no
amendment has been made to any such RTO Plan since the date of
such letter that is likely to result in the disqualification of
such RTO Plan.
(f) Each of the RTO Plans has been operated and
administered in all respects in accordance with Applicable Law,
including, but not limited to, ERISA and the Code, except for any
failure to so operate or administer such RTO Plans that would not
individually or in the aggregate have an RTO Material Adverse
Effect.
(g) Except as expressly provided in this Agreement,
any exhibit hereto, a RTO Plan or as otherwise agreed in writing
by Alrenco and RTO, neither the execution and delivery of this
Agreement nor the Merger nor the consummation of any of the
transactions contemplated by this Agreement will:
(i) entitle any current or former officer, director,
employee or consultant of RTO or any RTO Subsidiary to
severance pay, unemployment compensation or any other
payment, or
(ii) accelerate the time of payment or vesting or
increase the amount of compensation due any such officer,
director, employee or consultant.
(h) With respect to each RTO Plan that is funded
wholly or partially through an insurance policy, RTO and the RTO
Subsidiaries do not have any current liability under any such
insurance policy in the nature of a retroactive rate adjustment
or loss sharing arrangement arising wholly or partially out of
events occurring prior to the Closing other than any such
liability that individually or in the aggregate would not have an
RTO Material Adverse Effect.
(i) There are no pending or, to the knowledge of RTO,
threatened claims by or on behalf of any of the RTO Plans, by any
employee or beneficiary covered under any such RTO Plan involving
any such RTO Plan (other than routine claims for benefits), other
than any such claims that would not individually or in the
aggregate have an RTO Material Adverse Effect.
(j) Neither RTO nor any RTO Subsidiary or, to the
knowledge of RTO, any RTO ERISA Affiliate, any of the RTO Plans,
any trust created thereunder, or any trustee or administrator
thereof has engaged in a transaction in connection with which RTO
or any RTO Subsidiary or, to the knowledge of RTO, any RTO ERISA
Affiliate, any of the RTO Plans, any such trust or trustee or
administrator thereof, or any Party dealing with the RTO Plans or
any such trust is likely to be subject to either a civil
liability under section 409 of ERISA or section 502(i) of ERISA,
or a tax imposed pursuant to section 4975 or 4976 of the Code
other than any such liability or tax that would not individually
or in the aggregate have an RTO Material Adverse Effect.
Section 5.18 Vote Required. Approval of the Merger by the
-------------
stockholders of RTO shall require the affirmative vote of the
holders of a majority of the outstanding Shares at the
stockholders' meeting referred to in Section 7.4(a). No other
vote of the stockholders of RTO is required by law, the
Certificate of Incorporation or By-Laws of RTO or otherwise in
order for RTO to consummate the Merger and the transactions
contemplated hereby.
Section 5.19 Vote of Board. The Board of Directors of RTO
-------------
(at a meeting duly called and held) has unanimously determined
that the transactions contemplated hereby are fair to and in the
best interests of RTO.
Section 5.20 Takeover Status. The Board of Directors of
---------------
RTO has taken all appropriate action so that Alrenco will not be
an "interested stockholder" within the meaning of Section 203 of
the DGCL by virtue of the execution and delivery of this
Agreement or the RTO Option Agreement or the consummation of the
Merger or any of the other transactions contemplated hereby.
Section 5.21 Accounting Matters. To its knowledge,
------------------
neither RTO nor any of the RTO Subsidiaries has taken or agreed
to take any action that would prevent the business combination to
be effected by the Merger from being accounted for as a pooling
of interest and RTO has no reason to believe that the Merger will
not qualify for pooling of interest accounting.
Section 5.22 Brokers. Except for ▇▇▇▇▇▇▇▇ Inc. and
-------
▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation, RTO's
financial advisors, no broker, finder or financial advisor is
entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of
RTO, and RTO's fee arrangements with ▇▇▇▇▇▇▇▇ Inc. and ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation have been disclosed to
Alrenco.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by RTO Pending the
--------------------------------------
Merger. From the date of this Agreement to the Effective Time,
------
unless Alrenco shall otherwise agree in writing, or as otherwise
contemplated by this Agreement, or any Exhibit hereto, or the RTO
Disclosure Letter:
(a) the respective businesses of RTO and the RTO
Subsidiaries shall be conducted only in the ordinary and usual
course of business and consistent with past practices, and there
shall be no material changes in the conduct of the operations of
RTO or any RTO Subsidiary.
(b) RTO shall not (i) sell or pledge or agree to sell
or pledge any stock owned by it in any of the RTO Subsidiaries;
(ii) amend its Certificate of Incorporation or By-Laws; or (iii)
split, combine or reclassify any shares of its outstanding
capital stock or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or redeem or
otherwise acquire any shares of its capital stock or shares of
the capital stock of any of the RTO Subsidiaries;
(c) neither RTO nor any of the RTO Subsidiaries shall
(i) authorize for issuance, issue or sell any additional shares
of, or rights of any kind to acquire any shares of, its capital
stock of any class (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase
or otherwise); (ii) acquire, dispose of, transfer, lease,
license, mortgage, pledge or encumber any fixed or other assets
in excess of $50,000 in any one or a series of related
transactions other than in the ordinary course of business and
consistent with past practices; (iii) incur, assume or prepay any
indebtedness or any other material liabilities other than in the
ordinary course of business and consistent with past practices;
(iv) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any person other than an RTO Subsidiary in the
ordinary course of business and consistent with past practices;
(v) make any loans, advances or capital contributions to, or
investments in, any other person, other than to RTO Subsidiaries
and other than in the ordinary course of business and consistent
with past practices; (vi) authorize capital expenditures
substantially in excess of the amount currently budgeted
therefor; (vii) permit any insurance policy naming RTO or any RTO
Subsidiary as a beneficiary or a loss payee to be canceled or
terminated other than in the ordinary course of business; or
(viii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(d) RTO shall use commercially reasonable efforts to
preserve intact the business organization of RTO and the RTO
Subsidiaries, to keep available the services of its and their
present officers and key employees, and to preserve the goodwill
of those having business relationships with it and the RTO
Subsidiaries;
(e) neither RTO nor any of the RTO Subsidiaries shall
make any change in the compensation payable or to become payable
to any of its officers, Directors or employees, enter into or
amend any employment, severance, termination or other similar
agreement, adopt any new RTO Plan or amend in any material
respect any existing RTO Plan, or make any loans to any of its
officers, Directors or employees or make any changes in its
existing borrowing or lending arrangement for or on behalf of any
of such persons, whether contingent on consummation of the Merger
or otherwise, other than (i) in the ordinary course of business
and consistent with past practices and (ii) as may be required
under Applicable Law or the terms of any existing RTO Plan; and
(f) neither RTO nor any of the RTO Subsidiaries shall
(i) knowingly take or allow to be taken any action which would
jeopardize the treatment of the Merger as a pooling of interests
for accounting purposes; or (ii) knowingly take any action that
would jeopardize qualification of the Merger as a reorganization
within the meaning of section 368(a) of the Code.
Section 6.2 Conduct of Business by Alrenco Pending the
------------------------------------------
Merger. From the date of this Agreement to the Effective Time,
------
unless RTO shall otherwise agree in writing, or as otherwise
contemplated by this Agreement, or any Exhibit hereto, or the
Alrenco Disclosure Letter:
(a) the business of Alrenco shall be conducted only in
the ordinary and usual course of business and consistent with
past practices, and there shall be no material changes in the
conduct of the operations of Alrenco;
(b) Alrenco shall not (i) amend its Articles of
Incorporation or By-Laws or (ii) split, combine or reclassify any
shares of its outstanding capital stock or declare, set aside or
pay any dividend or other distribution payable in cash, stock or
property, or redeem or otherwise acquire any shares of its
capital stock;
(c) Alrenco shall not (i) authorize for issuance,
issue or sell any additional shares of, or rights of any kind to
acquire any shares of, its capital stock of any class (whether
through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise);
(ii) acquire, dispose of, transfer, lease, license, mortgage,
pledge or encumber any fixed or other assets in excess of
$50,000 in any one or a series of related transactions other than
in the ordinary course of business and consistent with past
practices; (iii) incur, assume or prepay any indebtedness or any
other material liabilities other than in the ordinary course of
business and consistent with past practices; (iv) assume,
guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations
of any person in the ordinary course of business and consistent
with past practices; (v) make any loans, advances or capital
contributions to, or investments in, any other person, other than
in the ordinary course of business and consistent with past
practices; (vi) authorize capital expenditures substantially in
excess of the amount currently budgeted therefor; (vii) permit
any insurance policy naming Alrenco as a beneficiary or a loss
payee to be canceled or terminated other than in the ordinary
course of business; or (viii) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(d) Alrenco shall use commercially reasonable efforts
to preserve intact the business organization of Alrenco, to keep
available the services of its and their present officers and key
employees, and to preserve the goodwill of those having business
relationships with it;
(e) Alrenco shall not make any change in the
compensation payable or to become payable to any of its officers,
Directors or employees, enter into or amend any employment,
severance, termination or other similar agreement, adopt any new
Alrenco Plan or amend in any material respect any existing
Alrenco Plan, or make any loans to any of its officers, Directors
or employees or make any changes in its existing borrowing or
lending arrangement for or on behalf of any of such persons,
whether contingent on consummation of the Merger or otherwise,
other than (i) in the ordinary course of business and consistent
with past practices and (ii) as may be required under Applicable
Law or the terms of any existing Alrenco Plan; and
(f) Alrenco shall not (i) knowingly take or allow to
be taken any action which would jeopardize the treatment of the
Merger as a pooling of interests for accounting purposes; or (ii)
knowingly take any action that would jeopardize qualification of
the Merger as a reorganization within the meaning of section
368(a) of the Code.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. RTO and Alrenco
----------------------
shall each afford to the other and to the other's financial
advisors, legal counsel, accountants, consultants and other
agents and representatives full access at all reasonable times
throughout the period prior to the Effective Time to all of its
books, records, properties and personnel and, during such period,
each shall furnish promptly to the other (a) a copy of each
report, schedule and other document filed or received by it
pursuant to the requirements of federal or state securities laws,
and (b) all other information as such other Party may reasonably
request, provided that no investigation pursuant to this Section
--------
7.1 shall affect any representations or warranties made herein or
the conditions to the obligations of the respective Parties to
consummate the Merger. Each Party and its affiliates, advisors,
legal counsel, accountants, consultants and other agents and
representatives shall hold in confidence all nonpublic
information in accordance with the terms of the Confidentiality
Agreement dated September 9, 1997 (the "Confidentiality
---------------
Agreement") between RTO and Alrenco and, if this Agreement is
---------
terminated, each Party will deliver to the other documents, work
papers and other material (including copies) obtained by such
Party or on its behalf from the other Party as a result of this
Agreement or in connection herewith, whether so obtained before
or after the execution hereof, in accordance with the
Confidentiality Agreement.
Section 7.2 Acquisition Proposals.
---------------------
(a) Neither Party shall, nor shall they authorize or
permit any officer, director or employee of, or investment
banker, attorney or other advisor or representative or agent of,
such Party or any subsidiary of such Party to, directly or
indirectly, (i) solicit, initiate or encourage the submission of
any Acquisition Proposal (as hereinafter defined) or (ii)
participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal; provided, however, that nothing
-------- -------
contained in this Section 7.2(a) shall prohibit either Party's
Board of Directors (and its authorized representatives) from
furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited
Acquisition Proposal if, and only to the extent that (A) such
Party's Board of Directors, after consultation with and based on
the written opinion of outside legal counsel, determines in good
faith that in order for such Party's Board of Directors to comply
with its fiduciary duties to stockholders under Applicable Law it
should take such action, (B) prior to taking such action, such
Party receives from such person or entity an executed agreement
in reasonably customary form relating to the confidentiality of
information to be provided to such person or entity, and (C) the
Acquisition Proposal contains an offer of consideration that is
superior to the consideration represented by the Exchange Ratio.
Notwithstanding anything in this Agreement to the contrary, each
Party shall (i) promptly advise the other Party orally and in
writing of (A) the receipt by it (or any of the other entities or
other persons referred to above) after the date hereof of any
Acquisition Proposal, or any inquiry which could reasonably be
expected to lead to any Acquisition Proposal, (B) the material
terms and conditions of such Acquisition Proposal or inquiry and
(C) the identity of the person making any such Acquisition
Proposal or inquiry, (ii) keep the other Party reasonably
informed of the status and details of any such Acquisition
Proposal or inquiry, and (iii) negotiate with the other Party to
make such adjustments in the terms and conditions of this
Agreement as would enable such Party to proceed with the
transactions contemplated herein; provided, however, that nothing
-------- -------
in this Section 7.2(a) shall require that such Party negotiate
exclusively with the other Party. Without limiting the
foregoing, it is understood that any violation of the
restrictions set forth in the first sentence of this Section 7.2
by any officer, director or employee of either Party or its
subsidiaries or any investment banker, attorney or other advisor,
representative or agent of such Party or its subsidiaries,
whether or not such person is purporting to act on behalf of such
Party or otherwise, shall be deemed to be a breach of this
Section 7.2 by such Party. For purposes of this Agreement,
"Acquisition Proposal" means any bona fide proposal with respect
--------------------
to a merger, consolidation, share exchange or similar transaction
involving Alrenco or RTO and the RTO Subsidiaries, or any
purchase of all or any significant portion of the assets of
Alrenco or of RTO and the RTO Subsidiaries other than the
transactions contemplated hereby.
(b) Except as set forth below, neither Party's Board
of Directors shall (i) withdraw, or modify in a manner materially
adverse to the other Party, the approval or recommendation by
such Party's Board of Directors of this Agreement or the Merger,
or (ii) approve, recommend or cause such Party to enter into any
agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, if either Party receives an
unsolicited Acquisition Proposal and such Party's Board of
Directors determines in good faith, following consultation with
and based on the written opinion of outside legal counsel, that
it is necessary to do so in order to comply with its fiduciary
duties to stockholders under Applicable Law, such Party's Board
of Directors may (w) withdraw or modify its approval or
recommendation of this Agreement and the Merger, (x) approve or
recommend such Acquisition Proposal, (y) cause such Party to
enter into an agreement with respect to such Acquisition Proposal
or (z) terminate this Agreement pursuant to Section 9.3(c) or
9.4(c), as applicable; provided, however, that prior to taking
-------- -------
such action, such Party shall, and shall cause its respective
financial and legal advisors to, negotiate with the other Party
to make such adjustments in the terms and conditions of this
Agreement as would enable such Party to proceed with the
transactions contemplated herein on such adjusted terms;
provided, however, that nothing in this Section 7.2(b) shall
-------- -------
require that such Party negotiate exclusively with the other
Party. Notwithstanding anything contained in this Agreement to
the contrary, any action by the Board of Directors of either
Party permitted by this Section 7.2(b) shall not constitute a
breach of this Agreement by such Party.
(c) If the Board of Directors of either Party (such
Party, the "Withdrawing Party") takes any action described in
-----------------
clause (y) or (z) of Section 7.2(b) or the other Party exercises
its right to terminate this Agreement under Section 9.3(d) or
9.4(d), as applicable, based on the Board of Directors of the
Withdrawing Party having taken any action described in clause (w)
or (x) of Section 7.2(b), the Withdrawing Party shall,
simultaneously with the taking of such action or upon such
termination pay to the other Party upon demand the sum of
$3,000,000 plus all fees and expenses incurred by such other
Party in connection with the transactions contemplated by this
Agreement (including without limitation, investment bankers' fees
and expenses), payable in same-day funds, as liquidated damages
and not as a penalty. If the Withdrawing Party fails to pay to
the other Party any amounts due under this Section 7.2(c), the
Withdrawing Party shall pay the costs and expenses (including
reasonable legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other action,
taken by the other Party to collect payment, together with
interest on the amount of any unpaid fee at the publicly
announced prime rate of Citibank, N.A. in effect from time to
time from the date such fee was required to be paid.
Section 7.3 Registration Statement; Listing Application.
-------------------------------------------
(a) As promptly as practicable, Alrenco shall prepare
and file with the SEC the Proxy Statement and the Registration
Statement. Alrenco shall use commercially reasonable efforts to
have the Registration Statement declared effective as promptly as
practicable. Alrenco shall use commercially reasonable efforts
to take any action required to be taken under state securities or
blue sky laws in connection with the issuance of the Alrenco
Shares pursuant hereto. RTO shall furnish Alrenco with all
information concerning RTO and the holders of its capital stock
and shall take such other action as Alrenco may reasonably
request in connection with such Proxy Statement and Registration
Statement and issuance of Alrenco Shares.
(b) Alrenco shall promptly prepare and submit to the
Nasdaq National Market a listing application covering the Alrenco
Shares to be issued in connection with the Merger and this
Agreement and shall use commercially reasonable efforts to
obtain, prior to the Effective Time, approval for the listing of
such Alrenco Shares, subject to official notice of issuance.
Section 7.4 Proxy Statements; Stockholder Approvals.
---------------------------------------
(a) RTO, acting through its Board of Directors, shall,
in accordance with Applicable Law and its Certificate of
Incorporation and By-Laws:
(i) (A) promptly and duly call, give notice of,
convene and hold as soon as practicable following the date
upon which the Registration Statement becomes effective a
meeting of its stockholders for the purpose of voting to
approve and adopt this Agreement and shall use commercially
reasonable efforts to obtain such stockholder approval or
(B) obtain, as soon as practicable following the date upon
which the Registration Statement becomes effective, delivery
to RTO's principal place of business (or other method of
delivery approved by Section 228 of the DGCL) of the consent
or consents in writing, setting forth the approval of this
Agreement and the Merger, signed by the holders of
outstanding Shares having not less than the minimum number
of votes that would be necessary to authorize this Agreement
and the Merger at a meeting at which all Shares entitled to
vote thereon were present and voted; and
(ii) recommend approval and adoption of this Agreement
by the stockholders of RTO and take all lawful action to
solicit such approval.
(b) Alrenco, acting through its Board of Directors,
shall, in accordance with Applicable Law and its Certificate of
Incorporation and By-Laws:
(i) promptly and duly call, give notice of, convene
and hold as soon as practicable following the date upon
which the Registration Statement becomes effective a meeting
of its stockholders for the purpose of voting to authorize
the issuance of the Alrenco Shares to be issued in the
Merger and shall use commercially reasonable efforts to
obtain such stockholder approval; and
(ii) recommend authorization of the issuance of the
Alrenco Shares to be issued in the Merger by the
stockholders of Alrenco and include in the Proxy Statement
such recommendation and take all lawful action to solicit
such approval.
(c) Alrenco and RTO, as promptly as practicable, shall
cause the definitive Proxy Statement to be mailed to their
respective stockholders. At the stockholders' meetings, each of
Alrenco and RTO shall vote or cause to be voted in favor of
approval and adoption of this Agreement all capital stock
entitled to vote as to which it holds proxies at such time.
(d) Each of RTO's and Alrenco's obligations under this
Section 7.4 shall at all times remain subject to their fiduciary
duties imposed under Applicable Law, in the event that, if
required by such fiduciary duties as advised in writing by
outside counsel, the Board of Directors of RTO or Alrenco, as the
case may be, shall have withdrawn or modified its recommendation
that stockholders approve and adopt this Agreement, in the case
of Alrenco and RTO, or that stockholders authorize the issuance
of the Alrenco Shares to be issued in connection with the Merger,
in the case of Alrenco.
Section 7.5 Antitrust Laws. As promptly as practicable,
--------------
RTO and Alrenco shall make all filings and submissions under the
HSR Act as may be reasonably required to be made in connection
with this Agreement and the transactions contemplated hereby.
Subject to Section 7.1 hereof, RTO will furnish to Alrenco, and
Alrenco will furnish to RTO, such information and assistance as
the other may reasonably request in connection with the
preparation of any such filings or submissions. Subject to
Section 7.1 hereof, RTO will provide Alrenco, and Alrenco will
provide RTO, with copies of all correspondence, filings or
communications (or memoranda setting forth the substance thereof)
between such Party or any of its representatives, on the one
hand, and any Governmental Authority or members of its staff, on
the other hand, with respect to this Agreement and the
transactions contemplated hereby.
Section 7.6 Voting Agreements and Option Agreements.
---------------------------------------
Concurrently herewith, RTO is entering into voting agreements
with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. substantially in
the form attached hereto as Exhibit D (together, the "▇▇▇▇▇
--------- -----
Voting Agreements"); Alrenco is entering into voting agreements
-----------------
with each of GDJ, Jr. Investments, L.P., ▇▇ ▇▇▇▇▇▇▇, III ESA
Trust, ▇▇ ▇▇▇▇▇▇▇, ▇▇ Trust, A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇ ESA
Trust, ▇▇ ▇▇▇▇▇▇▇, ▇▇. Trustee for ▇▇ ▇▇▇▇▇▇, III Trust, ▇▇
▇▇▇▇▇▇▇, ▇▇. Trustee for ▇▇ ▇▇▇▇▇▇▇▇ Trust, ▇▇ ▇▇▇▇▇▇▇, ▇▇.
Trustee for ▇▇ ▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇, ▇▇. Trustee for ▇▇
▇▇▇▇▇▇ Trust, ▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, C&J
Investing Partners, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. Annuity
Trust, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Annuity Trust, Belt Family Partnership and
B&R Partnership substantially in the form attached hereto as
Exhibit E (collectively, the "RTO Voting Agreements" and together
--------- ---------------------
with the ▇▇▇▇▇ Voting Agreements referred to herein as the
"Voting Agreements"); RTO and Alrenco are entering into an option
-----------------
agreement substantially in the form attached hereto as Exhibit F
---------
(the "RTO Option Agreement"); and Alrenco and RTO are entering
--------------------
into an option agreement substantially in the form attached
hereto as Exhibit G (the "Alrenco Option Agreement" and together
--------- ------------------------
with the RTO Option Agreement referred to herein as the "Option
------
Agreements").
----------
Section 7.7 RTO Employee Stock Options and RTO Director
-------------------------------------------
Stock Options. Except as provided in this Agreement or pursuant
-------------
to the provisions of the RTO Employee Stock Option Plan or the
RTO Director Stock Option Plan as in effect on the date hereof,
from the date hereof RTO will not accelerate the vesting or
exerciseability of or otherwise modify the terms and conditions
applicable to the RTO Employee Stock Options or RTO Director
Stock Options. Except as provided in this Agreement, Alrenco
will not exercise any right under any of the Alrenco Employee
Stock Option Plans from the date hereof to accelerate the vesting
or exercisability of or otherwise modify the terms and conditions
applicable to the Alrenco Employee Stock Options. At the
Effective Time, each of the RTO Employee Stock Options and RTO
Director Stock Options which is outstanding and unexercised at
the Effective Time shall be converted automatically into an
option to purchase Alrenco Shares in an amount and at an exercise
price determined as provided below (and otherwise subject to the
terms of the RTO Employee Stock Option Plan and the RTO Director
Stock Option Plan governing the RTO Employee Stock Options and
RTO Director Stock Options):
(1) The number of Alrenco Shares to be subject to the
new option shall be equal to the product of the number of
Shares subject to the original option and the Exchange
Ratio, provided that any fractional Alrenco Shares resulting
--------
from such multiplication shall be rounded down to the
nearest share and Alrenco shall pay an amount in cash to the
holder of such RTO Employee Stock Option or RTO Director
Stock Option equal to the fair market value immediately
prior to the Effective Time of such fractional Alrenco
Shares calculated based on the average closing price on the
Nasdaq National Market for the last five trading days
immediately preceding the day prior to the Effective Time;
and
(2) The exercise price per Alrenco Share under the new
option shall be equal to the aggregate exercise price of the
original option divided by the total number of full Alrenco
Shares subject to the new option (as determined under (1)
immediately above), provided that such exercise price shall
--------
be rounded up the nearest cent.
Alrenco shall assume the obligations of RTO under the RTO
Employee Stock Option Plan and the RTO Director Stock Option Plan
in respect of each such new option. The duration and other terms
of the new option shall be the same as that of the original
option, except that all references to RTO shall be deemed to be
references to Alrenco. Alrenco shall file with the SEC a
registration statement on Form S-8 (or other appropriate form) or
a post-effective amendment to the Registration Statement as
promptly as practicable after the Effective Time for purposes of
registering all Alrenco Shares issuable after the Effective Time
upon exercise of the RTO Employee Stock Options and RTO Director
Stock Options, and shall have such registration statement or
post-effective amendment become effective and comply, to the
extent applicable, with state securities or blue sky laws with
respect thereto at the Effective Time.
Section 7.8 Public Announcements. Alrenco, on the one
--------------------
hand, and RTO, on the other hand, agree that they will not issue
any press release or otherwise make any public statement or
respond to any press inquiry with respect to this Agreement or
the transactions contemplated hereby without the prior approval
of the other Party, except as may be required by Applicable Law.
Section 7.9 Continuance of Existing Indemnification
---------------------------------------
Rights.
------
(a) From and after the Effective Time, Alrenco shall
indemnify, defend and hold harmless to the fullest extent
permitted under Applicable Law each person who is now, or has
been at any time prior to the date hereof, an officer or director
of Alrenco or RTO (individually, an "Indemnified Party" and
-----------------
collectively, the "Indemnified Parties"), against all losses,
-------------------
claims, damages, liabilities, costs or expenses (including
attorneys' fees and expenses), judgments, fines, penalties and
amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation arising out of or pertaining to
acts or omissions, or alleged acts or omissions, by them in their
capacities as such occurring at or prior to the Effective Time.
In the event of any such claim, action, suit, proceeding or
investigation (an "Action"), (i) any Indemnified Party wishing to
------
claim indemnification shall promptly notify Alrenco thereof, (ii)
Alrenco shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Party, which counsel shall be
reasonably acceptable to Alrenco, in advance of the final
disposition of any such Action to the full extent permitted by
Applicable Law, upon receipt of any undertaking required by
Applicable Law, and (iii) Alrenco will cooperate in the defense
of any such matter; provided, however, that Alrenco shall not be
-------- -------
liable for any settlement effected without its written consent
and provided, further, that Alrenco shall not be obligated
-------- -------
pursuant to this Section 7.9 to pay the fees and disbursements of
more than one counsel for all Indemnified Parties in any single
Action except to the extent that, in the opinion of counsel for
the Indemnified Parties, two of more of such Indemnified Parties
have conflicting interests in the outcome of such action.
(b) Alrenco shall keep in effect provisions in its
Certificate of Incorporation and Bylaws providing for exculpation
of director and officer liability and its indemnification of the
Indemnified Parties to the fullest extent permitted under
Applicable Law, which provisions shall not be amended except as
required by Applicable Law or except to make changes permitted by
law that would enlarge the Indemnified Parties' right of
indemnification.
(c) Alrenco shall cause to be maintained in effect for
a period ending not sooner than the sixth anniversary of the
Effective Time Directors' and officers' liability insurance
providing at least the same coverage with respect to RTO's
officers and Directors as the policies maintained on behalf of
Directors and officers of RTO as of the date hereof, and
containing terms and conditions which are no less advantageous,
with respect to matters occurring on or prior to the Effective
Time (to the extent such insurance is available with respect to
such matters).
Section 7.10 Expenses. Whether or not the Merger is
--------
consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby and
thereby shall be paid by the Party incurring such expenses except
that (a) (i) a filing fee in connection with any HSR Act filing
and (ii) the expenses incurred in connection with the printing
and mailing of the Proxy Statement shall be shared equally by
Alrenco and RTO and (b) all transfer taxes shall be paid by RTO.
Section 7.11 Additional Agreements. Subject to terms and
---------------------
conditions herein provided, each of the Parties hereto agrees to
use all commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under Applicable Law and
regulations to consummate and make effective the transactions
contemplated by this Agreement, including using all commercially
reasonable efforts to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings.
In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this
Agreement, Alrenco and RTO shall cause their respective proper
officers and/or Directors to take all such necessary action.
Section 7.12 Affiliate Agreements.
--------------------
(a) RTO shall, prior to the Effective Time, deliver to
Alrenco a list (reasonably satisfactory to counsel for Alrenco),
setting forth the names and addresses of all persons who are, at
the time of the RTO stockholder's meeting referred to in Section
7.4(a) hereof, in RTO's reasonable judgment, "affiliates" of RTO
for purposes of Rule 145 under the Securities Act or under
applicable SEC accounting releases with respect to pooling of
interests accounting treatment. RTO shall furnish such
information and documents as Alrenco may reasonably request for
the purpose of reviewing such list. RTO shall use its reasonable
best efforts to cause each person who is identified as an
"affiliate" in the list furnished pursuant to this Section 7.12
to execute a written agreement on or prior to the Effective Time,
in substantially the form of Exhibit H attached hereto (the "RTO
--------- ---
Affiliate Agreements").
--------------------
(b) Alrenco shall, prior to the Effective Time,
deliver to RTO a list (reasonably satisfactory to counsel for
RTO) setting forth the names and addresses of all persons who
are, at the time of the Alrenco stockholders meeting referred to
in Section 7.4(b) hereof, in Alrenco's reasonable judgment,
"affiliates" of Alrenco under applicable SEC accounting releases
with respect to pooling of interests accounting treatment.
Alrenco shall furnish such information and documents as RTO may
reasonably request for the purpose of reviewing such list.
Alrenco shall use its reasonable best efforts to cause each
person who is identified as an affiliate in the list furnished
pursuant to this Section 7.12 to execute a written agreement on
or prior to the Effective Time, in substantially the form of
Exhibit I attached hereto (the "Alrenco Affiliate Agreements"
--------- ----------------------------
and, together with the RTO Affiliate Agreements referred to
collectively herein as the "Affiliate Agreements").
--------------------
Section 7.13 Publication of Post Merger Financial Results.
--------------------------------------------
RTO and Alrenco agree that the Surviving Corporation shall
publish financial results covering at least thirty (30) days of
combined operations as soon as practicable after the Effective
Time; provided that if the Effective Time occurs after
--------
February 28, 1997, RTO and Alrenco agree that upon the written
request of any person who shall have executed an Affiliate
Agreement pursuant to Section 7, the Surviving Corporation shall
publish such combined financial results at the end of the first
full calendar month following the Effective Date which notice
shall be given at least thirty (30) days prior to the end of such
first full calendar month following the Effective Date.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions To Each Party's Obligation To
----------------------------------------
Effect the Merger. The respective obligations of each Party to
-----------------
effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) Any waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the
Department of Justice or Federal Trade Commission challenging or
seeking to enjoin the consummation of this transaction, which
action shall have not been withdrawn or terminated.
(b) The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act
and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceeding for
such purpose shall be pending before or threatened by the SEC.
(c) This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote
of the stockholders of RTO and the issuance of the Alrenco Shares
in connection with the Merger shall have been authorized by the
requisite vote of the stockholders of Alrenco, in each case in
accordance with Applicable Law.
(d) No preliminary or permanent injunction or other
order by any federal or state court in the United States which
prohibits the consummation of the Merger shall have been issued
and remain in effect.
(e) Each of RTO and Alrenco shall have obtained such
consents from third parties and Governmental Authorities in
addition to the HSR Act as shall be required and which are
material to Alrenco and RTO and to consummation of the
transactions contemplated hereby.
(f) Each of Alrenco and RTO shall have received a
letter of Coopers & ▇▇▇▇▇▇▇, LLP dated the Effective Time,
addressed to Alrenco and RTO stating that the Merger will qualify
as a pooling of interests transaction under Opinion No. 16 of the
Accounting Principles Board. In addition, Alrenco and RTO shall
have received a letter of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP dated the Effective
Time, addressed to Alrenco and RTO stating that Alrenco meets the
conditions to qualify as a pooling of interests transaction under
opinion No. 16 of the Accounting Principles Board, "Business
Combinations," and the related published interpretations of the
American Institute of Certified Public Accountants and the
Financial Accounting Standards Board, and the published rules and
regulations of the Securities and Exchange Commission.
(g) Each of Alrenco and RTO shall have received an
opinion of King & Spalding, in form and substance reasonably
satisfactory to Alrenco and RTO, dated on or about the date of
the mailing of the Proxy Statement to the stockholders of Alrenco
and RTO, which opinion shall be reconfirmed as of the Effective
Time, substantially to the effect that the Merger will constitute
a reorganization for federal income tax purposes within the
meaning of section 368(a) of the Code.
Section 8.2 Conditions to Obligation of RTO to Effect the
---------------------------------------------
Merger. The obligation of RTO to effect the Merger shall be
------
subject to the satisfaction at or prior to the Effective Time of
the following additional conditions:
(a) Alrenco shall have performed in all material
respects its obligations under this Agreement required to be
performed by it at or prior to the Effective Time and the
representations and warranties of Alrenco contained in this
Agreement shall be true and correct in all material respects at
and as of the Effective Time as if made at and as of such time,
except (i) for changes specifically permitted by this Agreement
and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and
correct in all material respects as of such date, and RTO shall
have received a certificate of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman of the
Board of Directors and President of Alrenco, as to the
satisfaction of this condition.
(b) RTO shall have received an opinion from ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, counsel to Alrenco, dated the Effective Time, to the
effect that:
(i) Alrenco is a corporation validly existing under
the laws of the State of Indiana.
(ii) Alrenco has the corporate power to enter into this
Agreement and to consummate the transactions contemplated
hereby; and the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
have been duly authorized by requisite corporate action
taken on the part of Alrenco.
(iii) This Agreement has been executed and delivered by
Alrenco and is a valid and binding obligation of Alrenco,
enforceable against Alrenco in accordance with its terms,
subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and
general principles of equity.
(iv) Neither the execution and delivery of this
Agreement by Alrenco, nor the consummation by Alrenco of the
transactions contemplated hereby, will violate the Articles
of Incorporation or By-Laws of Alrenco or, to the best
knowledge of such counsel, and except as set forth in the
Alrenco Disclosure Letter without having made any
independent investigation, will constitute a violation of or
a default under (except for any such violation or default as
to which requisite waivers or consents either shall have
been obtained by Alrenco prior to the Effective Time or
shall have been waived by RTO in writing) any material
contract, agreement or instrument to which Alrenco is
subject and which has been specifically identified to such
counsel by Alrenco in connection with rendering such
opinion.
(v) The Alrenco Shares to be issued in connection with
the transactions contemplated by this Agreement are duly
authorized and reserved for issuance and, when issued as
contemplated by this Agreement, will be validly issued,
fully paid and nonassessable.
(vi) While such counsel assumes no responsibility for
any event, occurrence or statement of fact relating to
Alrenco or for the accuracy completeness or fairness of any
statements contained in or omitted from the Registration
Statement or the Proxy Statement, and while such counsel
expresses no opinion as to the financial statements or other
financial or statistical data contained therein with respect
to information in the Registration Statement or the Proxy
Statement relating to Alrenco, the Registration Statement
complies as to form in all material respects with the
requirements of the Securities Act and the applicable rules
and regulations promulgated thereunder.
In addition, in such opinion, such counsel shall state
that such counsel has no reason to believe that the
Registration Statement or the Proxy Statement, as amended or
supplemented to the date of such opinion, insofar as it
relates to Alrenco, contains any untrue statement of a
material fact or omits to state any material fact required
to be stated therein or necessary to make the statements
therein (in the light of the circumstances in which they
were made) not misleading, except such counsel expresses no
belief as to the financial statements or other financial or
statistical data contained in the Registration Statement or
the Proxy Statement.
As to any matter in such opinion which involves matters
of fact or matters relating to laws other than the laws of
the United States or the corporate laws of the State of
Indiana, such counsel may rely upon the certificates of
officers and Directors of Alrenco and of public officials
and opinions of local counsel, reasonably acceptable to RTO.
(c) The listing application referred to in Section
7.3(b) shall have been approved by the National Association of
Securities Dealers for listing on the Nasdaq National Market.
(d) From the date of this Agreement through the
Effective Time, there shall not have occurred any change in the
financial condition, business or operations of Alrenco that would
have or would be reasonably likely to have a material adverse
effect on Alrenco.
Section 8.3 Conditions to Obligations of Alrenco to
---------------------------------------
Effect the Merger. The obligations of Alrenco to effect the
-----------------
Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following additional conditions:
(a) RTO shall have performed in all material respects
its obligations under this Agreement required to be performed by
it at or prior to the Effective Time and the representations and
warranties of RTO contained in this Agreement shall be true and
correct in all material respects at and as of the Effective Time
as if made at and as of such time, except (i) for changes
specifically permitted by this Agreement and (ii) that those
representations and warranties which address matters only as of a
particular date shall remain true and correct in all material
respects as of such date and Alrenco shall have received a
Certificate of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., President and Chief Executive
Officer of RTO, as to the satisfaction of this condition.
(b) Alrenco shall have received an opinion from King &
Spalding, counsel for RTO, dated the Effective Time, to the
effect that:
(i) RTO is a corporation validly existing under the
laws of the State of Delaware.
(ii) RTO has the corporate power to enter into this
Agreement and to consummate the transactions contemplated
hereby; and the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
have been duly authorized by requisite corporate action
taken on the part of RTO.
(iii) This Agreement has been executed and delivered by
RTO and is a valid and binding obligation of RTO,
enforceable against RTO in accordance with its terms,
subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and
general principles of equity.
(iv) Neither the execution and delivery of this
Agreement by RTO, nor the consummation by RTO of the
transactions contemplated hereby, will violate the
Certificate of Incorporation or By-Laws of RTO or, to the
best knowledge of such counsel, and except as set forth in
the RTO Disclosure Letter without having made any
independent investigation, will constitute a violation of or
a default under (except for any such violation or default as
to which requisite waivers or consents either shall have
been obtained by RTO prior to the Effective Time or shall
have been waived by Alrenco in writing) any material
contract, agreement or instrument to which RTO or any of the
RTO Subsidiaries is subject and which has been specifically
identified to such counsel by RTO in connection with
rendering such opinion.
In addition, in such opinion, such counsel shall state
that such counsel has no reason to believe that the
Registration Statement or the Proxy Statement, as amended or
supplemented to the date of such opinion, insofar as it
relates to RTO, contains any untrue statement of a material
fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein
(in the light of the circumstances in which they were made)
not misleading, except such counsel expresses no belief as
to the financial statements or other financial or
statistical data contained in the Registration Statement or
the Proxy Statement.
As to any matter in such opinion which involves matters
of fact or matters relating to laws other than the laws of
the United States or the corporate laws of the State of
Delaware corporate law, such counsel may rely upon the
certificates of officers and Directors of RTO and of public
officials and opinions of local counsel, reasonably
acceptable to Alrenco.
(c) From the date of this Agreement through the
Effective Time, there shall not have occurred any change in the
financial condition, business or operations of RTO or the RTO
Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have a material adverse effect on RTO and
the RTO Subsidiaries, taken as a whole.
(d) Alrenco and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall have entered
into a Noncompetition and Consulting Agreement in the form agreed
to by Alrenco, RTO and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ on the date hereof.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination by Mutual Consent. This
-----------------------------
Agreement may be terminated at any time prior to the Effective
Time by mutual written consent of the Parties.
Section 9.2 Termination by either Alrenco or RTO. This
------------------------------------
Agreement may be terminated and the Merger may be abandoned by
action of the Board of Directors of Alrenco or RTO if:
(a) The Merger is not consummated on or before
January 31, 1998 (or such later date as shall have been approved
by Alrenco and RTO) (the "Termination Date"), provided, however,
---------------- -------- -------
that the right to terminate this Agreement under this Section
9.2(a) shall not be available to any Party whose failure to
fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on
or before the Termination Date, and provided, further, that if on
-------- -------
the Termination Date the conditions to the Closing set forth in
Section 8.1(a) or (e) shall not have been fulfilled, but all
other conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then the Termination Date shall
automatically be extended to March 31, 1998; and provided,
--------
further that if on the Termination Date the condition to the
-------
Closing set forth in Section 8.1(b) shall not have been
fulfilled, but all other conditions to the Closing shall be
fulfilled or shall be capable of being fulfilled, the Termination
Date shall automatically be extended to March 31, 1998; or
(b) A court of competent jurisdiction or Governmental
Authority shall have issued an order, decree or ruling or taken
any other action (which order, decree or ruling the parties shall
use their commercially reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and
nonappealable.
Section 9.3 Termination by RTO. This Agreement may be
------------------
terminated and the Merger may be abandoned by action of the Board
of Directors of RTO if:
(a) There shall have been any material adverse change
in the business, financial condition, results of operations,
properties, assets or liabilities of Alrenco since the date
hereof which is not cured within thirty (30) days after notice
thereof to Alrenco, or if Alrenco shall have breached
Section 7.2, 7.4 or 7.5 and, in the case of Sections 7.4 and 7.5,
such breach has not been cured within thirty (30) days' notice
thereof to Alrenco;
(b) This Agreement and the Merger shall not have been
approved and adopted by the requisite vote of the stockholders of
Alrenco;
(c) The Board of Directors of RTO shall have exercised
any of its rights set forth in Section 7.2(b); or
(d) The Board of Directors of Alrenco shall have (i)
withdrawn or modified in a manner adverse to RTO its
recommendation of this Agreement and the Merger; (ii) approved or
recommended an Acquisition Proposal; or (iii) caused Alrenco to
enter into an agreement with respect to an Acquisition Proposal.
Section 9.4 Termination by Alrenco. This Agreement may
----------------------
be terminated and the Merger may be abandoned by action of the
Board of Directors of Alrenco if:
(a) There shall have been any material adverse change
in the business, financial condition, results of operations,
properties, assets or liabilities of RTO and the RTO Subsidiaries
taken as a whole since the date hereof which is not cured within
thirty (30) days after notice thereof to RTO, or if RTO shall
have breached Section 7.2, 7.4 or 7.5 and, in the case of
Sections 7.4 and 7.5, such breach has not been cured within
thirty (30) days' notice thereof to RTO;
(b) This Agreement and the Merger shall not have been
approved and adopted by the requisite vote of the stockholders of
RTO;
(c) The Board of Directors of Alrenco shall have
exercised any of its rights set forth in Section 7.2(b); or
(d) The Board of Directors of RTO shall have (i)
withdrawn or modified in a manner adverse to Alrenco its
recommendation of this Agreement and the Merger; (ii) approved or
recommended an Acquisition Proposal; or (iii) caused RTO to enter
into an agreement with respect to an Acquisition Proposal.
Section 9.5 Effect of Termination and Abandonment. In
-------------------------------------
the event of the termination and abandonment of this Agreement
under this Article IX, this Agreement shall become void and have
no effect, without any liability on the part of any Party or its
Directors, officers or stockholders except (i) as provided in
Sections 7.1, 7.2 and 7.10 and (ii) to the extent that such
termination results from the willful breach by any Party hereto
of any material representation, warranty or covenant hereunder.
Section 9.6 Amendment. This Agreement may be amended by
---------
the Parties pursuant to a writing adopted by action taken by all
of the Parties at any time before the Effective Time, provided,
--------
however, that after approval by the stockholders of RTO or
-------
Alrenco, whichever shall occur first, no amendment may be made
which would (a) alter or change the amount or kinds of
consideration to be received by the holders of Shares upon
consummation of the Merger, (b) alter or change any term of the
Certificate of Incorporation of RTO or the Articles of
Incorporation of Alrenco, or (c) alter or change any of the terms
and conditions of this Agreement if such alteration or change
would adversely affect the holders of any class or series of
securities of RTO or Alrenco. This Agreement may not be amended
except by an instrument in writing signed by the Parties.
Section 9.7 Waiver. At any time before the Effective
------
Time, any Party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other
Parties (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant
hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a
Party to any such extension of waiver shall be valid only as
against such Party and only if set forth in an instrument in
writing signed by such Party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Survival of Representations, Warranties and
-------------------------------------------
Agreements. No representations, warranties or agreements
----------
contained herein shall survive beyond the Effective Time, except
that the representations, warranties or agreements contained in
Sections 3.1, 3.2, 3.3, 3.4, 3.5, 7.1, 7.8, 7.9, 7.10, 7.11 and
7.13 and this Article X shall survive beyond the Effective Time.
Section 10.2 Notices. All notices and other
-------
communications required or permitted by this Agreement shall be
made in writing and any such notice or communication shall be
deemed delivered when delivered in person, transmitted by telex
or telecopier, or seven (7) days after it has been sent by air
mail, as follows:
Alrenco: Alrenco, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Jr.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
RTO: RTO, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: K. ▇▇▇▇▇ ▇▇▇▇
Tel: 972/▇▇▇-▇▇▇▇
Fax: 972/▇▇▇-▇▇▇▇
with a copy to: King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Tel: 404/▇▇▇-▇▇▇▇
Fax: 404/▇▇▇-▇▇▇▇
The Parties shall promptly notify each other in the manner
provided in this Section 10.2 of any change in its address. A
notice of change of address shall not be deemed to have been
given until received by the addressee. Communications by telex
or telecopier shall also be sent concurrently by mail, but shall
in any event be effective as stated above.
Section 10.3 Assignment. No Party shall assign this
----------
Agreement or any rights, interests or obligations hereunder, or
delegate performance of any of its obligations hereunder, without
the prior written consent of the other Party.
Section 10.4 Entire Agreement. This Agreement, the
----------------
Exhibits hereto, the Alrenco Disclosure Letter, the RTO
Disclosure Letter, the Voting Agreements, the Option Agreements,
the Affiliate Agreements and the Confidentiality Agreement embody
the entire agreement and understanding of the Parties in respect
of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the
Parties with respect to such subject matter.
Section 10.5 Waiver, Amendment, etc. This Agreement may
-----------------------
not be amended or supplemented, and no waivers of or consents to
departures from the provisions hereof shall be effective, unless
set forth in a writing signed by, and delivered to, both Parties.
No failure to delay of a Party in exercising any power or right
under this Agreement will operate as a waiver thereof, nor will
any single or partial exercise of any right or power, or any
abandonment or discontinuance of steps to enforce such right or
power, preclude any other or further exercise thereof or the
existence of any other right or power.
Section 10.6 Binding Agreement; No Third Party
---------------------------------
Beneficiaries. This Agreement will be binding upon and inure to
-------------
the benefit of the Parties and their successors and permitted
assigns. Nothing expressed or implied herein is intended or will
be construed to confer upon or to give any third Party any rights
or remedies by virtue hereof.
Section 10.7 Governing Law; Dispute Resolution; Equitable
---------------------------------------------
Relief.
------
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF INDIANA (REGARDLESS
OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW).
(b) EACH PARTY IRREVOCABLY CONSENTS AND AGREES THAT
ANY LEGAL ACTION, SUIT OR PROCEEDING AGAINST IT WITH RESPECT TO
ITS OBLIGATIONS OR LIABILITIES UNDER OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT ONLY IN THE
UNITED STATES DISTRICT COURT FOR THE STATE OF INDIANA SITTING IN
THE CITY OF NEW ALBANY OR, IN THE EVENT (BUT ONLY IN THE EVENT)
SUCH COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER SUCH
ACTION, SUIT OR PROCEEDING, IN THE COURTS OF THE STATE OF INDIANA
SITTING IN THE CITY OF JEFFERSONVILLE, AND EACH PARTY HEREBY
IRREVOCABLY ACCEPTS AND SUBMITS TO THE JURISDICTION OF EACH OF
THE AFORESAID COURTS IN PERSONAM, WITH RESPECT TO ANY SUCH
ACTION, SUIT OR PROCEEDING (INCLUDING CLAIMS FOR INTERIM RELIEF,
COUNTERCLAIMS, ACTIONS WITH MULTIPLE DEFENDANTS AND ACTIONS IN
WHICH SUCH PARTY IS IMPLED). EACH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A JURY TRIAL
IN ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO, OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
(c) EACH PARTY IRREVOCABLY DESIGNATES CT CORPORATION
SYSTEM (IN SUCH CAPACITY, THE "PROCESS AGENT"), AS ITS DESIGNEE,
APPOINTEE AND AGENT TO RECEIVE, FOR AND ON ITS BEHALF, SERVICE OF
PROCESS IN SUCH JURISDICTION IN ANY LEGAL ACTION, SUIT OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT, AND SUCH SERVICE SHALL
BE DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT,
PROVIDED THAT IN THE CASE OF ANY SUCH SERVICE UPON THE PROCESS
--------
AGENT, THE PARTY EFFECTING SUCH SERVICE SHALL ALSO DELIVER A COPY
THEREOF TO THE OTHER PARTY IN THE MANNER PROVIDED IN SECTION
10.2. EACH PARTY SHALL TAKE ALL SUCH ACTION AS MAY BE NECESSARY
TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO
APPOINT ANOTHER AGENT SO THAT SUCH PARTY WILL AT ALL TIMES HAVE
AN AGENT FOR SERVICE OF PROCESS FOR THE ABOVE PURPOSES IN THE
STATE OF INDIANA. IN THE EVENT OF THE TRANSFER OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS AND BUSINESS OF THE PROCESS AGENT
TO ANY OTHER CORPORATION BY CONSOLIDATION, MERGER, SALE OF ASSETS
OR OTHERWISE, SUCH OTHER CORPORATION SHALL BE SUBSTITUTED
HEREUNDER FOR THE PROCESS AGENT WITH THE SAME EFFECT AS IF NAMED
HEREIN IN PLACE OF CT CORPORATION SYSTEM. EACH PARTY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION, SUIT OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED AIR MAIL, POSTAGE
PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN THIS
AGREEMENT, SUCH SERVICE OF PROCESS TO BE EFFECTIVE UPON
ACKNOWLEDGMENT OF RECEIPT OF SUCH REGISTERED MAIL. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW. EACH PARTY
EXPRESSLY ACKNOWLEDGES THAT THE FOREGOING WAIVER IS INTENDED TO
BE IRREVOCABLE UNDER THE LAWS OF THE STATE OF INDIANA AND OF THE
UNITED STATES OF AMERICA.
(d) EACH PARTY AGREES THAT MONEY DAMAGES WOULD NOT BE
A SUFFICIENT REMEDY FOR THE OTHER PARTY FOR ANY BREACH OF THIS
AGREEMENT BY IT, AND THAT IN ADDITION TO ALL OTHER REMEDIES THE
OTHER PARTY MAY HAVE, SUCH OTHER PARTY SHALL BE ENTITLED TO
SPECIFIC PERFORMANCE AND TO INJUNCTIVE OR OTHER EQUITABLE RELIEF
AS A REMEDY FOR ANY SUCH BREACH. EACH PARTY AGREES NOT TO OPPOSE
THE GRANTING OF SUCH RELIEF IN THE EVENT A COURT DETERMINES THAT
A BREACH HAS OCCURRED, AND AGREES TO WAIVE ANY REQUIREMENT FOR
THE SECURING OR POSTING OF ANY BOND IN CONNECTION WITH SUCH
REMEDY.
Section 10.8 Severability. The invalidity or
------------
unenforceability of any provision hereof in any jurisdiction will
not affect the validity or enforceability of the remainder hereof
in that jurisdiction or the validity or enforceability of this
Agreement, including that provision in any other jurisdiction.
To the extent permitted by Applicable Law, each Party waives any
provision of Applicable Law that renders any provision hereof
prohibited or unenforceable in any respect. If any provision of
this Agreement is held to be unenforceable for any reason, it
shall be adjusted rather than avoided, if possible, in order to
achieve the intent of the Parties to the extent possible.
Section 10.9 Counterparts. This Agreement may be executed
------------
in one or more counterparts each of which when so executed and
delivered will be deemed an original but all of which will
constitute one and the same Agreement.
Section 10.10 Interpretation. In this Agreement, unless
--------------
the context otherwise requires, words describing the singular
number shall include the plural and vice versa, and words
denoting any gender shall include all genders and words denoting
natural persons shall include corporations and partnerships and
vice versa.
Section 10.11 Incorporation of Exhibits. The Alrenco
-------------------------
Disclosure Letter, the RTO Disclosure Letter, the Voting
Agreements, the Option Agreements, the Affiliate Agreements and
the Confidentiality Agreement attached hereto or referred to
herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
IN WITNESS WHEREOF, each of the Parties hereto has caused
this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the date first above
written.
ALRENCO, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman of the Board
and President
RTO, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: President and Chief
Executive Officer
EXHIBIT A
---------
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ALRENCO, INC.
ARTICLE I
NAME
----
The name of the corporation is Alrenco, Inc. (the
"CORPORATION").
ARTICLE II
REGISTERED OFFICE AND AGENT
---------------------------
The address of the Corporation's registered office in the
State of Indiana is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇. The name of its registered agent whose business office is
identical with the registered office is ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
ARTICLE III
PURPOSES AND POWERS
-------------------
The purpose of the Corporation is to transact any and all
lawful business for which corporations may be incorporated under
the Indiana Business Corporation Law, Indiana Code Section 23-1-17
et seq. (such act, as amended from time to time, and its
successors are hereinafter referred to as the "ACT"). The
Corporation shall have the power to do all acts allowed under the
Act.
ARTICLE IV
CAPITAL STOCK
-------------
SECTION 4.1 AUTHORIZED STOCK. The total number of shares
----------- ----------------
of capital stock that may be issued by the Corporation is
85,000,000, consisting of (i) 75,000,000 shares of Common Stock,
no par value ("COMMON STOCK"), and (ii) 10,000,000 shares of
Preferred Stock ("PREFERRED STOCK").
SECTION 4.2 COMMON STOCK PROVISIONS. Subject to the
----------- -----------------------
provisions of the Act and the preferences of any Preferred Stock
then outstanding, the holders of the Common Stock shall be
entitled to receive dividends at such times and in such amounts
as may be determined by the Board of Directors of the
Corporation. The holders of the Common Stock shall have one vote
for each share on each matter submitted to a vote of the
shareholders of the Corporation. In the event of any
liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation and
the preferential amounts to which the holders of any Preferred
Stock may be entitled, the holders of the Common Stock shall be
entitled to share ratably in the remaining assets of the
Corporation.
SECTION 4.3 PREFERRED STOCK. The Board of Directors may
----------- ---------------
determine the preferences, limitations and relative rights, to
the extent permitted by the Act, of any series of shares of
Preferred Stock before the issuance of any shares of that series.
Each series shall be appropriately designated by a distinguishing
designation prior to the issuance of any shares thereof. The
shares of Preferred Stock of any series shall have preferences,
limitations and relative rights identical with those of other
shares of the same series.
SECTION 4.4 PREEMPTIVE RIGHTS. No shareholder of the
----------- -----------------
Corporation shall by reason of holding shares of any class of
capital stock of the Corporation have any preemptive or
preferential right to acquire or subscribe for any additional,
unissued or treasury shares (whether now or hereafter acquired)
of any class of capital stock of the Corporation now or hereafter
to be authorized, or any notes, debentures, bonds or other
securities convertible into or carrying any right, option or
warrant to subscribe for or acquire shares of any class of
capital stock of the Corporation now or hereafter to be
authorized, whether or not the issuance of any such shares, or
such notes, debentures, bonds or other securities, would
adversely affect the dividends or voting or other rights of such
stockholder, and the Board of Directors of the Corporation may
issue or authorize the issuance of shares of any class of capital
stock of the Corporation, or any notes, debentures, bonds or
other securities convertible into or carrying rights, options or
warrants to subscribe for or acquire shares of any class of
capital stock of the Corporation, without offering any such
shares of any such class, either in whole or in part, to the
existing shareholders of any such class.
SECTION 4.5 NO CUMULATIVE VOTING. Cumulative voting of
----------- --------------------
shares of any capital stock having voting rights is prohibited.
ARTICLE V
DIRECTORS
---------
SECTION 5.1 NUMBER. The number of directors of the
----------- ------
Corporation shall be fixed from time to time by or in the manner
provided in the Bylaws of the Corporation.
SECTION 5.2 AUTHORITY.
----------- ---------
(a) The business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors of
the Corporation. In addition to the authority and powers
conferred upon the Board of Directors of the Corporation by the
Act, these Amended and Restated Articles of Incorporation and the
Bylaws of the Corporation, the Board of Directors is hereby
authorized and empowered to exercise all such powers and do all
such acts and things as may be exercised or done by the
Corporation, subject to the provisions of the Act, these Amended
and Restated Articles of Incorporation and the Bylaws of the
Corporation.
(b) Except as provided in these Amended and Restated
Articles of Incorporation or to the extent prohibited by the Act
or the Bylaws of the Corporation, the Board of Directors shall
have the right (which, to the extent exercised, shall be
exclusive) to establish the rights, powers, duties, rules and
procedures that from time to time shall govern the Board of
Directors and each of its members, including, without limitation,
the vote required for any action by the Board of Directors, and
that from time to time shall affect the directors' power to
manage the business and affairs of the Corporation.
SECTION 5.3 REMOVAL OF DIRECTORS. Subject to any rights
----------- --------------------
of the holders of Preferred Stock then outstanding, directors of
the Corporation may be removed only for cause. Such removal for
cause may be effected only by the affirmative vote of the holders
of at least two-thirds of the voting power of all of the then
outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, voting together
as a single class. No director so removed may be reinstated so
long as the cause for removal continues to exist.
SECTION 5.4 VACANCIES. Subject to any rights of the
----------- ---------
holders of Preferred Stock then outstanding, (a) newly created
directorships resulting from any increase in the authorized
number of directors and (b) any vacancies in the Board of
Directors resulting from death, resignation, retirement,
disqualification, removal from office or otherwise shall, unless
otherwise required by law or provided by resolution of the Board
of Directors, be filled only by a majority vote of the directors
then in office, though less than a quorum, and not by the
shareholders. No decrease in the authorized number of directors
shall shorten the term of any incumbent director.
ARTICLE VI
INDEMNIFICATION AND CONFLICT OF INTEREST TRANSACTION
----------------------------------------------------
SECTION 6.1 INDEMNIFICATION. The Corporation shall, to
----------- ---------------
the fullest extent permitted by the Act, indemnify any director,
officer, employee or agent of the Corporation from and against
any and all reasonable costs and expense (including, without
limitation, attorneys' fees) and any liabilities (including,
without limitation, judgments, fines, penalties and reasonable
settlements) paid by or on behalf of, or imposed against, such
person in connection with any threatened, pending or completed
claim, action, suit or proceeding, whether civil, criminal,
administrative, investigative or other (including any appeal
relating thereto), whether formal or informal, and whether made
or brought by or in the right of the Corporation or otherwise, in
which such person is, was or at any time becomes a named
defendant or respondent or witness, or is threatened to be made a
named defendant or respondent or witness, or otherwise, by reason
of the fact that such person is, was or at any time becomes a
director, officer, employee or agent of the Corporation or, at
the Corporation's request, a director, officer, partner, member,
manager, trustee, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust,
employee benefit plan or other enterprise.
The indemnification authorized by this Section 6.1 shall not
be exclusive of any other right of indemnification which any such
person may have or hereafter acquire under any provision of these
Amended and Restated Articles of Incorporation or the Bylaws of
the Corporation, agreement, vote of shareholders or disinterested
directors or otherwise. The Corporation may take such steps as
may be deemed appropriate by the board of directors to provide
and secure indemnification to any such person, including, without
limitation, the execution of agreements for indemnification
between the Corporation and individual directors, officers,
employees or agents which may provide rights to indemnification
which are broader or otherwise different than the rights
authorized by this Section.
SECTION 6.2 CONFLICT OF INTEREST TRANSACTION. A conflict
----------- --------------------------------
of interest transaction, as defined in Indiana Code Section 23-1-35-
2(a), is not voidable by the Corporation provided the conflict of
interest transaction satisfies the provisions specified in
Indiana Code Section 23-1-35-2.
ARTICLE VII
BUSINESS AND AFFAIRS OF THE CORPORATION
---------------------------------------
SECTION 7.1 BYLAWS. The Board of Directors shall have
----------- ------
the power, without the assent or vote of the shareholders, to
adopt, amend or repeal any provision of the Bylaws of the
Corporation.
SECTION 7.2 AMENDMENTS TO ARTICLES OF INCORPORATION.
----------- ---------------------------------------
Notwithstanding any other provision of these Amended and Restated
Articles of Incorporation or the Bylaws of the Corporation (and
notwithstanding that some lesser percentage may be specified by
law), but in addition to any vote of the holders of any class or
series of the stock of this Corporation required by law or these
Amended and Restated Articles of Incorporation, the affirmative
vote of the holders of at least sixty-seven percent (67%) of the
voting power of all of the then-outstanding shares of the capital
stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall
be required to amend or repeal these Amended and Restated
Articles of Incorporation.
EXHIBIT B
---------
AMENDED AND RESTATED
CODE OF BYLAWS
OF
ALRENCO, INC.
---------------
ARTICLE I
SHAREHOLDERS
------------
SECTION 1. ANNUAL MEETING. The annual meeting of the
---------- --------------
shareholders for the election of directors and for the
transaction of such other business as may properly come before
the meeting shall be held at such place, either within or without
the State of Indiana, on such date, and at such time, as the
Board of Directors may by resolution provide, or if the Board of
Directors fails to provide, then such meeting shall be held at
the principal office of the Corporation at 10:00 a.m., local
time, on the second Wednesday in May of each year, if not a legal
holiday under the laws of the State of Indiana, and if a legal
holiday, on the next succeeding business day. The Board of
Directors may specify by resolution prior to any special meeting
of shareholders held within the year that such meeting shall be
in lieu of the annual meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
---------- ----------------
shareholders may be called by the Board of Directors or by the
Chairman of the Board. Such meeting may be held at such place,
either within or without the State of Indiana, as is stated in
the call and notice thereof.
SECTION 3. NOTICE OF MEETINGS. A written or printed
---------- ------------------
notice stating the place, day and hour of the meeting, and in
case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered or mailed by the Secretary
of the Corporation to each holder of record of stock of the
Corporation at the time entitled to vote, at his address as it
appears upon the records of the Corporation, not less than 10 nor
more than 60 days prior to such meeting. Notice of such meeting
may be waived in writing by any shareholder. Notice of any
adjourned meeting of the shareholders shall not be required if
the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken,
unless the Board of Directors sets a new record date for such
meeting in which case notice shall be given in the manner
provided in this Section 3.
SECTION 4. QUORUM AND SHAREHOLDER VOTE. A quorum for
---------- ---------------------------
action on any subject matter at any annual or special meeting of
shareholders shall exist when the holders of shares entitled to
vote a majority of the votes entitled to be cast on such subject
matter are represented in person or by proxy at such meeting. If
a quorum is present, the affirmative vote of such number of
shares as is required by the Indiana Business Corporation Law (as
in effect at the time the vote is taken), for approval of the
subject matter being voted upon, shall be the act of the
shareholders, unless a greater vote is required by the Articles
of Incorporation or these Bylaws. If a quorum is not present, a
meeting of shareholders may be adjourned from time to time by the
vote of shares having a majority of the votes of the shares
represented at such meeting, until a quorum is present. When a
quorum is present at the reconvening of any adjourned meeting,
and if the requirements of Section 3 of this Article I have been
observed, then any business may be transacted at such reconvened
meeting in the same manner and to the same extent as it might
have been transacted at the meeting as originally noticed.
SECTION 5. PROXIES. A shareholder may vote either in
---------- -------
person or by proxy duly executed in writing by the shareholder.
Unless written notice to the contrary is delivered to the
Corporation by the shareholder, a proxy for any meeting shall be
valid for any reconvention of any adjourned meeting.
SECTION 6. FIXING RECORD DATE. For the purpose of
---------- ------------------
determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled
to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the
Board of Directors shall have the power to fix a date, not more
than 70 days prior to the date on which the particular action
requiring a determination of shareholders is to be taken, as the
record date for any such determination of shareholders. A record
date for the determination of shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment
thereof shall not be set less than 10 days prior to such meeting.
In any case where a record date is set, under any provision of
this Section 6, only shareholders of record on the said date
shall be entitled to participate in the action for which the
determination of shareholders of record is made, whether the
action is payment of a dividend, allotment of any rights or any
change or conversion or exchange of capital stock or other such
action, and, if the record date is set for the determination of
shareholders entitled to notice of or to vote at a meeting of
shareholders, only such shareholders of record shall be entitled
to such notice or vote, notwithstanding any transfer of any
shares on the books of the Corporation after such record date.
SECTION 7. NOTICE OF SHAREHOLDER BUSINESS. At an annual
---------- ------------------------------
meeting of the shareholders, only such business shall be
conducted as shall have been brought before the meeting (a) by or
at the direction of the Board of Directors or (b) by any
shareholder of the Corporation who complies with the notice
procedures set forth in this Section 7 and only to the extent
that such business is appropriate for shareholder action under
the provisions of the Indiana Business Corporation Law. For
business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation
not later than the close of business on the 7th day following the
day on which notice of the date of the annual meeting was mailed
or delivered to such shareholder. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder
proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at
the annual meeting, (b) the name and address, as they appear on
the Corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of stock of the
Corporation which are beneficially owned by the shareholder, and
(d) any material interest of the shareholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no
business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 7. At
an annual meeting, the Chairman shall, if the facts warrant,
determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the
provisions of this Section 7, and if he should so determine, he
shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
SECTION 8. NOTICE OF SHAREHOLDER NOMINEES. Only persons
---------- ------------------------------
who are nominated in accordance with the procedures set forth in
this Section 8 shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of
the Corporation may be made at a meeting of shareholders (a) by
or at the direction of the Board of Directors or (b) by any
shareholder of the Corporation entitled to vote for the election
of Directors at the meeting who complies with the notice
procedures set forth in this Section 8. Such nominations, other
than those made by or at the direction of the Board of Directors,
shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a shareholder's
notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not later than the
close of business on the 7th day following the day on which
notice of the date of the meeting was mailed or delivered to such
shareholder. Such shareholder's notice shall set forth (a) as to
each person whom the shareholder proposes to nominate for
election or re-election as a Director, all information relating
to such person that is required to be disclosed in solicitations
of proxies for election of Directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended; and (b) as to the shareholder
giving the notice (i) the name and address, as they appear on the
Corporation's books, of such shareholder and (ii) the class and
number of shares of stock of the Corporation which are
beneficially owned by such shareholder. No person shall be
eligible for election as a Director of the Corporation unless
nominated in accordance with the procedures set forth in the
Bylaws. The Chairman shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by the Bylaws, and if
he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
ARTICLE II
DIRECTORS
---------
SECTION 1. POWERS OF DIRECTORS. The Board of Directors
---------- -------------------
shall manage the business and affairs of the Corporation and,
subject to any restrictions imposed by law, by the Articles of
Incorporation, or by these Bylaws, may exercise all the powers of
the Corporation.
SECTION 2. NUMBER AND TERM OF DIRECTORS. The Board of
---------- ----------------------------
Directors shall consist of from three (3) to eighteen (18)
natural persons, as fixed by the Board from time to time at its
discretion. No decrease in the number of Directors shall shorten
the term of an incumbent Director.
SECTION 3. MEETINGS OF THE DIRECTORS. The Board of
---------- -------------------------
Directors shall meet each year immediately following the annual
meeting of shareholders, and the Board may by resolution provide
for the time and place of other regular meetings. Special
meetings of the Directors may be called by the Chairman of the
Board or by any two of the Directors.
SECTION 4. NOTICE OF MEETINGS. Notice of each meeting
of
---------- ------------------
the Directors shall be given by the Secretary by mailing the same
at least five days before the meeting or by telephone, telegraph
or cablegram or in person at least two days before the meeting,
to each Director, except that no notice need be given of regular
meetings fixed by the resolution of the Board or of the meeting
of the Board held at the place of and immediately following the
annual meeting of the shareholders. Any Director may waive
notice, either before or after the meeting, and shall be deemed
to have waived notice if he is present at the meeting.
SECTION 5. ACTION OF DIRECTORS WITHOUT A MEETING. Any
---------- -------------------------------------
action required by law to be taken at a meeting of the Board of
Directors, or any action which may be taken at a meeting of the
Board of Directors, or of any committee thereof, may be taken
without a meeting if written consent, setting forth the action so
taken, shall be signed by all the Directors, or all the members
of the committee, as the case may be, and be filed with the
minutes of the proceedings of the Board or the committee. Such
consent shall have the same force and effect as a unanimous vote
of the Board or the committee, as the case may be.
SECTION 6. COMMITTEES. The Board of Directors may, in
its
---------- ----------
discretion, appoint committees, each consisting of one or more
Directors, which shall have and may exercise such delegated
powers as shall be conferred on or authorized by the resolutions
appointing them, except that no such committee may take any
action not allowed by the Indiana Business Corporation Law,
including: (i) authorize distributions, except a committee may
authority or approve a reacquisition of shares or other
distribution if done according to a formula or method, or within
a range, prescribed by the Board of Directors; (ii) approve or
propose to shareholders action that the Indiana Business
Corporation Law requires to be approved by shareholders;
(iii) fill vacancies on the Board or any of its committees;
(iv) except as permitted by clause (vii) below, amend the
Articles of Incorporation of the Corporation; (v) adopt, amend or
repeal these Bylaws; (vi) approve a plan of merger not requiring
shareholder approval; or (vii) authorize or approve the issuance
or sale or a contract for sale of shares, or determine the
designation and relative rights, preferences, and limitations of
a class or series of shares, except the Board may authorize a
committee to take the actions described in this clause (vii)
within limits prescribed by the Board. A majority of any such
committee may determine its action, fix the time and place of its
meetings, and determine its rules of procedure. Each committee
shall keep minutes of its proceedings and actions and shall
report regularly to the Board of Directors. The Board of
Directors shall have power at any time to fill vacancies in,
change the membership of, or discharge any such committee.
SECTION 7. COMPENSATION. The Board of Directors shall
---------- ------------
have the authority to determine from time to time the amount of
compensation that shall be paid to its members for attendance at
meetings of, or service on, the Board of Directors of any
committee of the Board, except that no such compensation shall be
paid to Directors who are also employees of the Corporation. The
Board of Directors also shall have the power to reimburse
Directors for reasonable expenses of attendance at Directors'
meetings and committee meetings.
SECTION 8. TELEPHONE CONFERENCE MEETINGS. Unless the
---------- -----------------------------
Articles of Incorporation otherwise provide, members of the Board
of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board or committee
by means of telephone conference or similar communications
equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting
pursuant to this Section 8 shall constitute presence in person at
such meeting.
ARTICLE III
OFFICERS
--------
SECTION 1. OFFICERS. The officers of the Corporation
---------- --------
shall consist of a Chairman of the Board, a Chief Executive
Officer, a President, one or more Vice-Presidents, a Secretary
and a Treasurer, and such other officers or assistant officers as
may be elected by the Board of Directors. Any two offices may be
held by the same person. The Board may designate a
Vice-President as an Executive Vice-President or a Senior Vice
President, and may designate the order in which the
Vice-Presidents may act.
SECTION 2. CHAIRMAN OF THE BOARD. The Chairman of the
---------- ---------------------
Board shall under the direction of the Board of Directors, have
responsibility for the general direction of the business,
policies and affairs of the Corporation. He shall preside at all
meetings of the shareholders and all meetings of the Board of
Directors and shall have such other duties as the Board of
Directors shall from time to time prescribe.
SECTION 3. CHIEF EXECUTIVE OFFICER. The Chief Executive
---------- -----------------------
Officer shall supervise the President and other officers of the
Corporation and shall be in charge of the overall business
strategy of the Corporation. He shall have such further powers
and duties as from time to time may be conferred on him by the
Board of Directors. In the absence of the Chairman of the Board,
he shall preside at all meetings of the shareholders and the
Board of Directors.
SECTION 4. PRESIDENT. The President shall be the chief
---------- ---------
operating officer of the Corporation. He shall, under the
direction of the Chief Executive Officer, supervise the
management of the day-to-day business of the Corporation. He
shall have such further powers and duties as from time to time
may be conferred on him by the Board of Directors or the chief
executive officer. In the absence of the Chairman of the Board
and the Chief Executive Officer, he shall preside at all meetings
of the shareholders and the Board of Directors.
SECTION 5. VICE-PRESIDENT. The Vice-President shall act
---------- --------------
in the case of the absence or disability of the Chairman of the
Board, the Chief Executive Officer and the President. If there
is more than one Vice-President, such Vice-Presidents shall act
in the order of precedence, as set out by the Board of Directors.
SECTION 6. TREASURER. The Treasurer shall be
responsible
---------- ---------
for the maintenance of proper financial books and records of the
Corporation.
SECTION 7. SECRETARY. The Secretary shall keep the
---------- ---------
minutes of the meetings of the shareholders and the Directors
(including any committees of the Board of Directors) and shall
have custody of and attest the seal of the Corporation.
SECTION 8. OTHER DUTIES AND AUTHORITIES. Each officer,
---------- ----------------------------
employee and agent shall have such other duties and authorities
as may be conferred on them by the Board of Directors.
SECTION 9. REMOVAL. Any officer may be removed at any
---------- -------
time by the Board of Directors, and such vacancy may be filled by
the Board of Directors. A contract of employment for a definite
term shall not prevent the removal of any officer, but this
provision shall not prevent the making of a contract of
employment with any officer and shall have no effect upon any
cause of action which any officer may have as a result of removal
in breach of a contract of employment or upon the enforceability
of any other provision of a contract of employment.
SECTION 10. COMPENSATION. The salaries of the officers
----------- ------------
shall be fixed from time to time by the Board of Directors,
subject to the provisions of any applicable contracts of
employment. No officer shall be prevented from receiving such
salary by reason of the fact that he is also a Director of the
Corporation.
ARTICLE IV
DEPOSITORIES, SIGNATURE AND SEAL
--------------------------------
SECTION 1. DEPOSITORIES. All funds of the Corporation
---------- ------------
shall be deposited in the name of the Corporation in such
depository or depositories as the Board may designate and shall
be drawn out on checks, drafts or other orders signed by such
officer, officers, agent or agents as the Board may from time to
time authorize.
SECTION 2. CONTRACTS. All contracts and other
instruments
---------- ---------
shall be signed on behalf of the Corporation by the Chairman of
the Board, the Chief Executive Officer, the President, any
Vice-President or by such other officer, officers, agent or
agents, as the Board of Directors, the Chief Executive Officer,
or the President designates from time to time or as the Board
from time to time may by resolution provide.
SECTION 3. SEAL. The seal of the Corporation, if it
---------- ----
elects to have one, shall be in the form of a disc, with the name
of the Corporation and "Indiana" on the periphery thereof and the
word "Seal" in the center. The seal may be manually affixed to
any document or may be lithographed or otherwise printed on any
document with the same force and effect as if it had been affixed
manually. The signature of the Secretary or Assistant Secretary
shall attest the seal and may be a facsimile if and to the extent
permitted by law.
ARTICLE V
STOCK TRANSFERS
---------------
SECTION 1. FORM AND EXECUTION OF CERTIFICATES. The
---------- ----------------------------------
certificates of shares of capital stock of the Corporation shall
be in such form as may be approved by the Board of Directors and
shall be signed by the Chairman of the Board, the Chief Executive
Officer, the President or a Vice-President and by the Secretary
or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, provided that any such certificate may be signed by
the facsimile signature of any of such officers imprinted thereon
if the same is countersigned by a transfer agent of the
Corporation, and provided further that certificates bearing the
facsimile of the signature of such officers imprinted thereon
shall be valid in all respects as if such person or persons were
still in office, even though such officer or officers shall have
died or otherwise ceased to be officers.
SECTION 2. TRANSFERS OF SHARES. Shares of stock in the
---------- -------------------
Corporation shall be transferable only on the books of the
Corporation by proper transfer signed by the holder of record
thereof or by a person duly authorized to sign for such holder of
record. The Corporation or its transfer agent or agents shall be
authorized to refuse any transfer unless and until it is
furnished such evidence as it may reasonably require showing that
the requested transfer is proper.
SECTION 3. LOST, DESTROYED OR STOLEN CERTIFICATES. Where
---------- --------------------------------------
the holder of record of a share or shares of stock of the
Corporation claims that the certificate representing said share
has been lost, destroyed or wrongfully taken, the Board shall by
resolution provide for the issuance of a certificate to replace
the original if the holder of record so requests before the
Corporation has notice that the certificate has been acquired by
a bona fide purchaser, files with the Corporation a sufficient
indemnity bond, and furnishes evidence of such loss, destruction
or wrongful taking satisfactory to the Corporation, in the
reasonable exercise of its discretion. The Board may authorize
such officer or agent as it may designate to determine the
sufficiency of such an indemnity bond and to determine reasonably
the sufficiency of the evidence of loss, destruction or wrongful
taking.
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board may
---------- ----------------------------
(but shall not be required to) appoint a transfer agent or agents
and a registrar or registrars to transfers, and may require that
all stock certificates bear the signature of such transfer agent
or of such transfer agent and registrar.
ARTICLE VI
INDEMNIFICATION
---------------
SECTION 1. INDEMNIFICATION. The Corporation shall
---------- ---------------
indemnify to the fullest extent permitted by the Indiana Business
Corporation Law, and to the extent that applicable law from time
to time in effect shall permit indemnification that is broader
than provided in these Bylaws, then to the maximum extent
authorized by law, any individual made a party to a proceeding
(as defined in the Indiana Business Corporation Law) because he
is or was a director, officer, employee or agent, against
liability (as defined in the Indiana Business Corporation Law),
incurred in the proceeding.
SECTION 2. ADVANCES FOR EXPENSES. The Corporation shall
---------- ---------------------
pay for or reimburse the reasonable expenses incurred by a
director or officer who is a party to a proceeding, and shall
have the authority to pay for or reimburse the reasonable
expenses of an employee or agent of the Company who is a party to
a proceeding, in each case in advance of the final disposition of
a proceeding if:
(a) Such person furnishes the Corporation a written
affirmation of his good faith belief that he has met the standard
set forth in Section 1 above;
(b) Such person furnishes the Corporation a written
undertaking, executed personally or on his behalf to repay any
advances if it is ultimately determined that he did not meet the
standard set forth in Section 1 above; and
(c) A determination is made that the facts then known
to those making the determination would not preclude
indemnification under the Indiana Business Corporation Law.
The written undertaking required by paragraph (b) above must
be an unlimited general obligation of such person but need not be
secured and may be accepted without reference to financial
ability to make repayment.
SECTION 3. INDEMNIFICATION NOT EXCLUSIVE. The right to
---------- -----------------------------
indemnification and the payment of expenses incurred in defending
a proceeding in advance of its final disposition conferred in
this Article VI shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, provision of these
Bylaws, agreement, vote of shareholders or disinterested
directors or otherwise.
SECTION 4. AMENDMENT OR REPEAL. Any repeal or
---------- -------------------
modification of the foregoing provisions of this Article VI shall
not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE VII
AMENDMENT OF BYLAWS
-------------------
SECTION 1. AMENDMENT. These Bylaws may be altered,
---------- ----------
amended, repealed or new Bylaws adopted by the Board of Directors
by the affirmative vote of a majority of all directors then
holding office.
EXHIBIT C
---------
ALRENCO, INC.
INITIAL DIRECTORS
-----------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Chairman
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT D
---------
FORM OF
STOCKHOLDER VOTING AGREEMENT
THIS STOCKHOLDER VOTING AGREEMENT (this "Agreement") dated
---------
as of September 28, 1997, is made by and between RTO, Inc., a
Delaware corporation ("RTO"), and the stockholder named on the
---
signature page hereto ("Stockholder"). On the date hereof the
-----------
Stockholder Beneficially Owns (as defined in Section 11(a)
hereof) the number of shares of common stock, par value $.01 per
share (the "Alrenco Shares"), of Alrenco, Inc., an Indiana
--------------
corporation ("Alrenco"), set forth next to the Stockholder's name
-------
on the signature page hereto.
W I T N E S S E T H:
--------------------
WHEREAS, RTO and Alrenco concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of September 28,
1997 (the "Merger Agreement"), providing for, among other things,
----------------
the merger (the "Merger") of RTO with and into Alrenco, with
------
Alrenco as the surviving corporation; and
WHEREAS, as an essential condition and inducement to RTO's
execution of the Merger Agreement, RTO has requested that the
Stockholder agree, and the Stockholder has agreed, to vote (or
consent with regard to) all Alrenco Shares as to which the
Stockholder has voting power in favor of the Merger as provided
herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained
herein and in the Merger Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto (each, a "Party"),
-
----
intending to be legally bound hereby, agree as follows:
1. Voting Agreement. The Stockholder agrees that at any
----------------
time the Merger Agreement remains in effect, he will vote all
Stockholder Shares (as defined below) on matters as to which the
Stockholder is entitled to vote at any annual, special or other
meeting of the Stockholders of Alrenco, and at any adjournment or
adjournments thereof, or by written consent without a meeting,
with respect to all Stockholder Shares, as follows: (i) in favor
of approval and adoption of the Merger Agreement, the terms
thereof and each of the other transactions contemplated by the
Merger Agreement; and (ii) against any action or agreement (other
than the Merger Agreement or the transactions contemplated
thereby) that would impede, interfere with, delay, postpone or
attempt to discourage the Merger, including without limitation:
(A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving Alrenco and
its subsidiaries; or (B) a sale or transfer of a material amount
of assets of Alrenco and its subsidiaries or a reorganization,
recapitalization or liquidation of Alrenco and its subsidiaries.
"Stockholder Shares" shall mean the shares of capital stock
------------------
of Alrenco (including without limitation the Alrenco Shares)
Beneficially Owned by such Stockholder as of the date hereof, or
Beneficially Owned by such Stockholder at any time hereafter
(including, without limitation, by way of exercise of options or
by way of dividend, distribution, exchange, merger,
consolidation, recapitalization, reorganization, stock split,
grant of proxy or otherwise) by such Stockholder (as adjusted as
set forth herein). The Stockholder hereby agrees to promptly
notify RTO of the number of any new Stockholder Shares acquired
by the Stockholder, if any, after the date hereof. In the event
of any change in the Alrenco Shares by reason of a stock
dividend, stock split, split up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of
shares or securities that constitute Stockholder Shares hereunder
shall be adjusted appropriately.
2. Termination.
-----------
a. This Agreement shall terminate upon the earlier to
occur of (i) the termination of the Merger Agreement in
accordance with its terms pursuant to Section 9.1, 9.2,
9.3(a), 9.3(b), 9.3(c), 9.4(a), 9.4(b) or 9.4(d) thereof, or
(ii) the Effective Time (as defined in the Merger
Agreement).
b. Upon termination, this Agreement shall have no
further force or effect, except for Section 7 which shall
continue to apply to any case, action or proceeding relating
to the enforcement of this Agreement.
3. Representations and Warranties of Stockholder. The
---------------------------------------------
Stockholder hereby represents and warrants to RTO as follows:
a. Due Authorization. The Stockholder has the legal
-----------------
capacity and all necessary power and authority to execute
and deliver this Agreement and to consummate the
transactions contemplated hereby. As of the date hereof,
the Stockholder Beneficially Owns the number of the
Stockholder Shares listed on the signature page hereof and
specified as so owned with no restrictions on the voting
rights (except as specified in this Agreement) or rights of
disposition pertaining thereto, which constitute all Alrenco
Shares Beneficially Owned by such Stockholder. Assuming
this Agreement has been duly and validly authorized,
executed and delivered by RTO, this Agreement constitutes a
valid and binding agreement of the Stockholder, enforceable
in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights generally or by the
principles governing the availability of equitable remedies.
b. No Conflicts. Neither the execution and delivery
------------
of this Agreement nor the consummation by the Stockholder of
the transactions contemplated hereby will conflict with or
constitute a violation of or default under any contract,
commitment, agreement, arrangement or restriction of any
kind to which the Stockholder is a party or by which the
Stockholder is bound.
4. Representations and Warranties of RTO. RTO hereby
-------------------------------------
represents and warrants to the Stockholder as follows:
a. Due Authorization. RTO has the requisite
-----------------
corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate action on
the part of RTO and this Agreement has been duly executed by
a duly authorized officer of RTO. Assuming this Agreement
has been duly and validly executed and delivered by the
Stockholder, this Agreement constitutes a valid and binding
agreement of RTO, enforceable against it in accordance with
its terms, except as enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally or by the principles
governing the availability of equitable remedies.
b. No Conflicts. Neither the execution and delivery
------------
of this Agreement nor the consummation by RTO of the
transactions contemplated hereby will conflict with or
constitute a violation of or default under any contract,
commitment, agreement, arrangement or restriction of any
kind to which RTO is a party or by which RTO is bound.
5. No Transfer. Except as provided in this Agreement or
-----------
the Merger Agreement, the Stockholder hereby agrees, without the
prior written consent of RTO, except pursuant to the terms
hereof, not to (i) sell, transfer, assign, pledge or otherwise
dispose of or hypothecate any of his Stockholder Shares other
than to a "Permitted Transferee" (as defined below) and except
that the Stockholder may transfer Stockholder Shares to Alrenco
in order to pay the exercise price or withholding taxes
applicable in connection with the exercise of employee stock
options; (ii) grant any proxies, deposit any Stockholder Shares
into a voting trust or enter into a voting agreement with respect
to any Stockholder Shares; (iii) take any action that would make
any representation or warranty of the Stockholder contained
herein untrue or incorrect or have the effect of preventing or
disabling the Stockholder from performing his obligations under
this Agreement; or (iv) take any action which would jeopardize
the treatment of the Merger as a pooling of interests for
accounting purposes. For purposes of this Agreement, "Permitted
-
-------- Transferee" shall mean an organization that qualifies
for
----------
treatment under section 501(c)(3) of the Internal Revenue Code of
1986, as amended. Any Permitted Transferee of Stockholder Shares
must become a party to this Agreement and any purported transfer
of Stockholder Shares to a person or entity that has not become a
party hereto shall be null and void. In furtherance of this
Agreement, concurrently herewith the Stockholder shall and hereby
does hereby agree to authorize Alrenco to notify the Alrenco
transfer agent that there is a stop transfer order with respect
to all of the Stockholder Shares (and that this Agreement places
limits on the voting and transfer of such shares).
6. Entire Agreement. Other than the Merger Agreement
----------------
(including the exhibits, schedules and other documents and
instruments referred to therein), this Agreement (including the
documents and instruments referred to herein) (a) constitutes the
entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof; (b) shall
not be assigned by operation of law or otherwise without the
prior written consent of the other parties hereto; (c) shall not
be amended, altered or modified in any manner whatsoever, except
by a written instrument executed by the parties hereto; and (d)
shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Delaware
(without giving effect to the provisions thereof relating to
conflicts of law).
7. Remedies. The parties acknowledge that it would be
--------
impossible to fix money damages for violations of this Agreement
and that such violations will cause irreparable injury for which
adequate remedy at law is not available and, therefore, this
Agreement must be enforced by specific performance or injunctive
relief. The parties hereto agree that any party may, in its sole
discretion, apply to any court of competent jurisdiction for
specific performance or injunctive or such other relief as such
court may deem just and proper in order to enforce this Agreement
or prevent any violation hereof and, to the extent permitted by
applicable law, each party waives any objection or defense to the
imposition of such relief. Nothing herein shall be construed to
prohibit any party from bringing any action for damages in
addition to an action for specific performance or an injunction
for a breach of this Agreement.
8. Legends on Certificates. Until such time as this
-----------------------
Agreement shall terminate pursuant to Section 2 hereof, all
certificates representing Stockholder Shares shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF A STOCKHOLDER VOTING AGREEMENT,
DATED AS OF SEPTEMBER 28, 1997, BY AND BETWEEN RTO,
INC. AND THE STOCKHOLDER. ANY TRANSFEREE OF THESE
SHARES TAKES SUBJECT TO THE TERMS OF SUCH AGREEMENT,
COPIES OF WHICH ARE ON FILE AT THE OFFICES OF ALRENCO,
INC.
9. Parties in Interest. Subject to the provisions of
-------------------
Sections 5 and 6(b) hereof, this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, permitted assigns, heirs,
executors, administrators and other legal representatives, and
nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
10. Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement.
11. Definitions. The following terms shall have the
-----------
following respective meanings:
a. "Beneficial Owner" has the meaning set forth in
----------------
Rule 13d-3 of the Rules and Regulations to the Exchange Act,
and "Beneficially Owned" and "Beneficially Owns" shall have
------------------ -----------------
correlative meanings; provided, however, that for purposes
-------- -------
of this Agreement a person shall be deemed to be the
Beneficial Owner of Alrenco Shares that may be acquired
pursuant to the exercise of an option or other right
regardless of when such option is exercisable.
b. "Person" shall mean a corporation, association,
------
partnership, joint venture, organization, business,
individual, trust, estate or any other entity or group
(within the meaning of Section 13(d)(3) of the Exchange
Act).
12. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (which is confirmed) or mailed
by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
a. If to RTO to: RTO, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: 972/288-7753
Attention: K. ▇▇▇▇▇ ▇▇▇▇
with a copy to: King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: 404/572-5145
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
b. If to the Stockholder, to the address set forth on
the signature page hereto.
13. Interpretation. The headings contained in this
--------------
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
14. Severability. Any term or provision of this Agreement
------------
which is invalid or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
15. Further Assurances. The Stockholder further agrees to
------------------
execute all additional writings, consents and authorizations as
may be reasonably requested by RTO to evidence the agreements
herein.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
RTO, INC.
By:
-------------------------------
Name:
Title:
STOCKHOLDER
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Name
No. of Shares Beneficially Owned:
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Address for Notices:
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EXHIBIT E
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FORM OF
STOCKHOLDER VOTING AGREEMENT
THIS STOCKHOLDER VOTING AGREEMENT (this "Agreement") dated
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as of September 28, 1997, is made by and between Alrenco, Inc.,
an Indiana corporation ("Alrenco"), and the stockholder named on
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the signature page hereto ("Stockholder"). On the date hereof
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the Stockholder Beneficially Owns (as defined in Section 11(a)
hereof) the number of shares of common stock, par value $.01 per
share (the "RTO Shares"), of RTO, Inc., a Delaware corporation
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("RTO"), set forth next to the Stockholder's name on the
---
signature page hereto.
W I T N E S S E T H:
--------------------
WHEREAS, RTO and Alrenco concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of September 28,
1997 (the "Merger Agreement"), providing for, among other things,
----------------
the merger (the "Merger") of RTO with and into Alrenco, with
------
Alrenco as the surviving corporation; and
WHEREAS, as an essential condition and inducement to
Alrenco's execution of the Merger Agreement, Alrenco has
requested that the Stockholder agree, and the Stockholder has
agreed, to vote (or consent with regard to) all RTO Shares as to
which the Stockholder has voting power in favor of the Merger as
provided herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained
herein and in the Merger Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto (each, a "Party"),
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intending to be legally bound hereby, agree as follows:
1. Voting Agreement. The Stockholder agrees that at any
----------------
time the Merger Agreement remains in effect, he will vote all
Stockholder Shares (as defined below) on matters as to which the
Stockholder is entitled to vote at any annual, special or other
meeting of the Stockholders of RTO, and at any adjournment or
adjournments thereof, or by written consent without a meeting,
with respect to all Stockholder Shares, as follows: (i) in favor
of approval and adoption of the Merger Agreement, the terms
thereof and each of the other transactions contemplated by the
Merger Agreement; and (ii) against any action or agreement (other
than the Merger Agreement or the transactions contemplated
thereby) that would impede, interfere with, delay, postpone or
attempt to discourage the Merger, including without limitation:
(A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving RTO and its
subsidiaries; or (B) a sale or transfer of a material amount of
assets of RTO and its subsidiaries or a reorganization,
recapitalization or liquidation of RTO and its subsidiaries. The
Stockholder shall use his reasonable best efforts to cause all
other stockholders of RTO to vote in favor of approval and
adoption of the Merger Agreement, the terms thereof and each of
the other transactions contemplated by the Merger Agreement.
"Stockholder Shares" shall mean the shares of capital stock
------------------
of RTO (including without limitation the RTO Shares) Beneficially
Owned by such Stockholder as of the date hereof, or Beneficially
Owned by such Stockholder at any time hereafter (including,
without limitation, by way of exercise of options or by way of
dividend, distribution, exchange, merger, consolidation,
recapitalization, reorganization, stock split, grant of proxy or
otherwise) by such Stockholder (as adjusted as set forth herein).
The Stockholder hereby agrees to promptly notify Alrenco of the
number of any new Stockholder Shares acquired by the Stockholder,
if any, after the date hereof. In the event of any change in the
RTO Shares by reason of a stock dividend, stock split, split up,
recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities that
constitute Stockholder Shares hereunder shall be adjusted
appropriately.
2. Termination.
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a. This Agreement shall terminate upon the earlier to
occur of (i) the termination of the Merger Agreement in
accordance with its terms pursuant to Section 9.1, 9.2,
9.3(a), 9.3(b), 9.3(d), 9.4(a), 9.4(b) or 9.4(c) thereof, or
(ii) the Effective Time (as defined in the Merger
Agreement).
b. Upon termination, this Agreement shall have no
further force or effect, except for Section 7 which shall
continue to apply to any case, action or proceeding relating
to the enforcement of this Agreement.
3. Representations and Warranties of Stockholder. The
---------------------------------------------
Stockholder hereby represents and warrants to Alrenco as follows:
a. Due Authorization. The Stockholder has the legal
-----------------
capacity and all necessary power and authority to execute
and deliver this Agreement and to consummate the
transactions contemplated hereby. As of the date hereof,
the Stockholder Beneficially Owns the number of the
Stockholder Shares listed on the signature page hereof and
specified as so owned with no restrictions on the voting
rights (except as specified in this Agreement) or rights of
disposition pertaining thereto, which constitute all RTO
Shares Beneficially Owned by such Stockholder. Assuming
this Agreement has been duly and validly authorized,
executed and delivered by Alrenco, this Agreement
constitutes a valid and binding agreement of the
Stockholder, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting
creditors' rights generally or by the principles governing
the availability of equitable remedies.
b. No Conflicts. Neither the execution and delivery
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of this Agreement nor the consummation by the Stockholder of
the transactions contemplated hereby will conflict with or
constitute a violation of or default under any contract,
commitment, agreement, arrangement or restriction of any
kind to which the Stockholder is a party or by which the
Stockholder is bound.
4. Representations and Warranties of Alrenco. Alrenco
-----------------------------------------
hereby represents and warrants to the Stockholder as follows:
a. Due Authorization. Alrenco has the requisite
-----------------
corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate action on
the part of Alrenco and this Agreement has been duly
executed by a duly authorized officer of Alrenco. Assuming
this Agreement has been duly and validly executed and
delivered by the Stockholder, this Agreement constitutes a
valid and binding agreement of Alrenco, enforceable against
it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting creditors' rights generally or
by the principles governing the availability of equitable
remedies.
b. No Conflicts. Neither the execution and delivery
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of this Agreement nor the consummation by Alrenco of the
transactions contemplated hereby will conflict with or
constitute a violation of or default under any contract,
commitment, agreement, arrangement or restriction of any
kind to which Alrenco is a party or by which Alrenco is
bound.
5. No Transfer. Except as provided in this Agreement or
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the Merger Agreement, the Stockholder hereby agrees, without the
prior written consent of Alrenco, except pursuant to the terms
hereof, not to (i) sell, transfer, assign, pledge or otherwise
dispose of or hypothecate any of his Stockholder Shares other
than to a "Permitted Transferee" (as defined below) and except
that the Stockholder may transfer Stockholder Shares to RTO in
order to pay the exercise price or withholding taxes applicable
in connection with the exercise of employee stock options;
(ii) grant any proxies, deposit any Stockholder Shares into a
voting trust or enter into a voting agreement with respect to any
Stockholder Shares; (iii) take any action that would make any
representation or warranty of the Stockholder contained herein
untrue or incorrect or have the effect of preventing or disabling
the Stockholder from performing his obligations under this
Agreement; or (iv) take any action which would jeopardize the
treatment of the Merger as a pooling of interests for accounting
purposes. For purposes of this Agreement, "Permitted Transferee"
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shall mean an organization that qualifies for treatment under
section 501(c)(3) of the Internal Revenue Code of 1986, as
amended. Any Permitted Transferee of Stockholder Shares must
become a party to this Agreement and any purported transfer of
Stockholder Shares to a person or entity that has not become a
party hereto shall be null and void. In furtherance of this
Agreement, concurrently herewith the Stockholder shall and does
hereby agree to notify RTO that there is a stop transfer order
with respect to all of the Stockholder Shares (and that this
Agreement places limits on the voting and transfer of such
shares).
6. Entire Agreement. Other than the Merger Agreement
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(including the exhibits, schedules and other documents and
instruments referred to therein), this Agreement (including the
documents and instruments referred to herein) (a) constitutes the
entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof; (b) shall
not be assigned by operation of law or otherwise without the
prior written consent of the other parties hereto; (c) shall not
be amended, altered or modified in any manner whatsoever, except
by a written instrument executed by the parties hereto; and (d)
shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Delaware
(without giving effect to the provisions thereof relating to
conflicts of law).
7. Remedies. The parties acknowledge that it would be
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impossible to fix money damages for violations of this Agreement
and that such violations will cause irreparable injury for which
adequate remedy at law is not available and, therefore, this
Agreement must be enforced by specific performance or injunctive
relief. The parties hereto agree that any party may, in its sole
discretion, apply to any court of competent jurisdiction for
specific performance or injunctive or such other relief as such
court may deem just and proper in order to enforce this Agreement
or prevent any violation hereof and, to the extent permitted by
applicable law, each party waives any objection or defense to the
imposition of such relief. Nothing herein shall be construed to
prohibit any party from bringing any action for damages in
addition to an action for specific performance or an injunction
for a breach of this Agreement.
8. Legends on Certificates. Until such time as this
-----------------------
Agreement shall terminate pursuant to Section 2 hereof, all
certificates representing Stockholder Shares shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF A STOCKHOLDER VOTING AGREEMENT,
DATED AS OF SEPTEMBER 28, 1997, BY AND BETWEEN ALRENCO,
INC. AND THE STOCKHOLDER. ANY TRANSFEREE OF THESE
SHARES TAKES SUBJECT TO THE TERMS OF SUCH AGREEMENT,
COPIES OF WHICH ARE ON FILE AT THE OFFICES OF RTO, INC.
9. Parties in Interest. Subject to the provisions of
-------------------
Sections 5 and 6(b) hereof, this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, permitted assigns, heirs,
executors, administrators and other legal representatives, and
nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
10. Counterparts. This Agreement may be executed in two or
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more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement.
11. Definitions. The following terms shall have the
-----------
following respective meanings:
a. "Beneficial Owner" has the meaning set forth in
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Rule 13d-3 of the Rules and Regulations to the Exchange Act,
and "Beneficially Owned" and "Beneficially Owns" shall have
------------------ -----------------
correlative meanings; provided, however, that for purposes
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of this Agreement a person shall be deemed to be the
Beneficial Owner of RTO Shares that may be acquired pursuant
to the exercise of an option or other right regardless of
when such option is exercisable.
b. "Person" shall mean a corporation, association,
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partnership, joint venture, organization, business,
individual, trust, estate or any other entity or group
(within the meaning of Section 13(d)(3) of the Exchange
Act).
12. Notices. All notices and other communications
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hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (which is confirmed) or mailed
by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
a. If to Alrenco to: Alrenco, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Suite 1800
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Jr.
b. If to the Stockholder, to the address set forth on
the signature page hereto.
13. Interpretation. The headings contained in this
--------------
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
14. Severability. Any term or provision of this Agreement
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which is invalid or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
15. Further Assurances. The Stockholder further agrees to
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execute all additional writings, consents and authorizations as
may be reasonably requested by Alrenco to evidence the agreements
herein.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
ALRENCO, INC.
By:
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Name:
Title:
RTO STOCKHOLDER
By:
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Name:
No. of Shares Beneficially Owned:
Address for Notices:
EXHIBIT F
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STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, dated as of September 28, 1997
(this "Agreement"), by and between ALRENCO, INC., an Indiana
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corporation ("Issuer"), and RTO, INC., a Delaware corporation
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("Grantee").
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WITNESSETH:
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WHEREAS, Grantee and Issuer propose to enter into an
Agreement and Plan of Merger dated as of September 28, 1997 (the
"Merger Agreement"; capitalized terms not defined herein shall
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have the meanings set forth in the Merger Agreement), providing
for, among other things, the merger of Grantee with and into
Issuer with Issuer as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's
willingness to enter into the Merger Agreement, Grantee has
requested that Issuer agree, and Issuer has agreed, to grant
Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the premises and
the representations, warranties, covenants and agreements
contained herein and in the Merger Agreement, and for other good
and valuable consideration, the receipt of which is hereby
acknowledged, Issuer and Grantee agree as follows:
1. Grant of Option. Subject to the terms and
---------------
conditions set forth herein, Issuer hereby grants to Grantee an
irrevocable option (the "Option") to purchase up to 600,000 (as
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adjusted as set forth herein) shares (the "Option Shares") of
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Common Stock, no par value ("Issuer Common Stock"), of Issuer at
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a purchase price of $15.50 per Option Share (the "Purchase
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Price").
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2. Exercise of Option. (a) Grantee may exercise the
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Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as defined below);
provided that, except as provided in the last sentence of this
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Section 2(a), the Option shall terminate and be of no further
force and effect upon the earliest to occur of (i) the Effective
Time, (ii) twelve (12) months after the first occurrence of a
Purchase Event or (iii) termination of this Option Agreement in
accordance with Section 11(k) hereof; and provided, further that
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any purchase of shares upon exercise of the Option shall be
subject to compliance with Applicable Law. The rights set forth
in Sections 7 and 8 shall not terminate when the right to
exercise the Option terminates as set forth herein, but shall
extend to such time as is provided in Sections 7 and 8
respectively. Notwithstanding the termination of the Option,
Grantee shall be entitled to purchase those Option Shares with
respect to which it has exercised the Option in accordance with
the terms hereof prior to the termination of the Option.
(b) As used herein, a "Purchase Event" means any of
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the following events:
(i) any person (other than Grantee or any subsidiary
of Grantee) shall have commenced (as such term is defined in
Rule l4d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), or shall have filed a
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registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to, a tender
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offer or exchange offer to purchase any shares of Issuer
Common Stock such that, upon consummation of such offer,
such person would own or control 10% or more of the then
outstanding Issuer Common Stock;
(ii) Issuer or any subsidiary of Issuer, without having
received Grantee's prior written consent or except as
permitted by the Merger Agreement, shall have authorized,
recommended, proposed or publicly announced an intention to
authorize, recommend or propose, or entered into, an
agreement with any person (other than Grantee or any
subsidiary of Grantee) to (A) effect a merger, consolidation
or similar transaction involving Issuer or any subsidiary of
Issuer, (B) sell, lease or otherwise dispose of assets of
Issuer or its subsidiaries representing 15% or more of the
consolidated assets of Issuer and its subsidiaries or
(C) issue, sell or otherwise dispose of (including by way of
merger, consolidation, share exchange or any similar
transaction) securities representing 10% or more of the
voting power of Issuer or any of its Significant
Subsidiaries (any of the foregoing an "Acquisition
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Transaction");
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(iii) any person (other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Grantee,
any subsidiary of Grantee or Issuer or any of its
subsidiaries in a fiduciary capacity) shall have acquired
beneficial ownership (as such term is defined in Rule l3d-3
under the Exchange Act) or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under
the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of,
10% or more of the then outstanding Issuer Common Stock; or
(iv) the holders of Issuer Common Stock shall not have
approved and adopted the Merger Agreement at the meeting of
such stockholders held for the purpose of voting on the
Merger Agreement, such meeting shall not have been held or
shall have been canceled prior to termination of the Merger
Agreement or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect
to the Merger Agreement, in each case after any person
(other than Grantee or any subsidiary of Grantee) shall have
publicly announced a proposal, or publicly disclosed an
intention to make a proposal, to engage in an Acquisition
Transaction. As used in this Agreement, "person" shall have
the meaning specified in Sections 3(a)(9) and 13(d)(3) of
the Exchange Act.
(c) In the event Grantee wishes to exercise the
Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying
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(i) the total number of Option Shares it intends to purchase
pursuant to such exercise and (ii) a place and date not earlier
than three (3) business days nor later than fifteen (15) business
days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided that if the closing of the purchase and
------------ --------
sale pursuant to the Option cannot be consummated by reason of
any Applicable Law, the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on
which such restriction on consummation has expired or been
terminated.
(d) Notwithstanding Section 2(c), in no event shall
any Closing Date be more than eighteen (18) months after the
related Notice Date, and if the Closing Date shall not have
occurred within eighteen (18) months after the related Notice
Date the exercise of the Option effected on the Notice Date shall
be deemed to have expired. The provisions of this Section 2 and
Section 3 shall apply with appropriate adjustments to any such
exercise.
3. Payment and Delivery of Certificates. (a) On each
------------------------------------
Closing Date, Grantee shall pay to Issuer in immediately
available funds by wire transfer to a bank account designated by
Issuer an amount equal to the Purchase Price multiplied by the
Option Shares to be purchased on such Closing Date.
(b) At each closing, simultaneously with the delivery
of immediately available funds as provided in Section 3(a),
Issuer shall deliver to Grantee a certificate or certificates
representing the Option Shares to be purchased at such closing,
which Option Shares shall be free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever, and Grantee
shall deliver to Issuer a letter agreeing that Grantee shall not
offer to sell or otherwise dispose of such Option Shares in
violation of Applicable Law or the provisions of this Agreement.
(c) Certificates for the Option Shares delivered at
each closing shall be endorsed with a restrictive legend which
shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT
DATED AS OF SEPTEMBER 28, 1997. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A
WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be
removed by delivery of substitute certificate(s) without such
legend if Grantee shall have delivered to Issuer a copy of a
letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for
purposes of the Securities Act.
4. Representations and Warranties of Issuer. Issuer
----------------------------------------
hereby represents and warrants to Grantee as follows:
(a) Due Authorization. Issuer has all requisite
-----------------
corporate power and authority to enter into this Agreement and,
subject to any approvals referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Issuer. This Agreement has been
duly executed and delivered by Issuer and constitutes a valid and
binding obligation of Issuer, enforceable in accordance with its
terms.
(b) Authorized Stock. Issuer has taken all necessary
----------------
corporate and other action to authorize and reserve and, subject
to obtaining the governmental and other approvals and consents
referred to herein, to permit it to issue, and, at all times from
the date hereof until the obligation to deliver Issuer Common
Stock upon the exercise of the Option terminates, will have
reserved for issuance, upon exercise of the Option, shares of
Issuer Common Stock necessary for Grantee to exercise the Option,
and Issuer will take all necessary corporate action to authorize
and reserve for issuance all additional shares of Issuer Common
Stock or other securities which may be issued pursuant to
Section 6 upon exercise of the Option. The shares of Issuer
Common Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common Stock or other
securities which may be issuable pursuant to Section 6, upon
issuance pursuant hereto, shall be duly and validly issued, fully
paid and nonassessable, and shall be delivered free and clear of
all liens, claims, charges and encumbrances of any kind or nature
whatsoever, including any preemptive rights of any stockholder of
Issuer.
(c) No Conflicts. Except as disclosed pursuant to the
------------
Merger Agreement, the execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated
hereby will not, conflict with, or result in any violation
pursuant to any provision of the Articles of Incorporation or By-
laws of Issuer or any subsidiary of Issuer or, subject to
obtaining any approvals or consents contemplated hereby, result
in any violation of any loan or credit agreement, note, mortgage,
indenture, lease or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Issuer
or any subsidiary of Issuer or their respective properties or
assets which violation would have an Alrenco Material Adverse
Effect (as defined in the Merger Agreement).
(d) Board Action. The Board of Directors of Issuer
------------
has taken all necessary action to approve this Agreement and the
consummation of the transactions contemplated hereby and the
provisions of Chapters 42 and 43 of the Indiana Business
Corporation Law will not apply to this Agreement or the purchase
of shares of Issuer Common Stock pursuant to this Agreement.
5. Representations and Warranties of Grantee.
-----------------------------------------
Grantee hereby represents and warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite
-----------------
corporate power and authority to enter into this Agreement and,
subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This
Agreement has been duly executed and delivered by Grantee and
constitutes a valid and binding obligation of Grantee,
enforceable in accordance with its terms.
(b) No Conflicts. The execution and delivery of this
------------
Agreement does not, and the consummation of the transactions
contemplated hereby will not result in any violation pursuant to
any provision of the Certificate of Incorporation or By-laws of
Grantee or any subsidiary of Grantee or, subject to obtaining any
approvals or consents contemplated hereby, result in any
violation of any loan or credit agreement, note, mortgage,
indenture, lease or other agreement, obligation, instrument
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Grantee
or any subsidiary of Grantee or their respective properties or
assets which violation would have an RTO Material Adverse Effect
(as defined in the Merger Agreement).
(c) Purchase Not for Distribution. Any Option Shares
-----------------------------
or other securities acquired by Grantee upon exercise of the
Option will not be taken with a view to the public distribution
thereof and will not be transferred or otherwise disposed of
except in a transaction registered or exempt from registration
under the Securities Act.
6. Adjustment upon Changes in Capitalization, etc.
-----------------------------------------------
(a) In the event of any change in Issuer Common Stock by reason
of a stock dividend, split-up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option shall be adjusted
appropriately, and proper provision shall be made in the
agreements governing such transaction, so that Grantee shall
receive upon exercise of the Option and payment of the aggregate
Purchase Price hereunder the number and class of shares or other
securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised
in full immediately prior to such event, or the record date
therefor, as applicable. Whenever the number of shares of Issuer
Common Stock purchasable upon exercise of the Option is adjusted
as provided in this Section 6, the Purchase Price shall be
adjusted by multiplying the Purchase Price by a fraction, the
numerator of which shall be equal to the number of shares of
Issuer Common Stock purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of
Issuer Common Stock purchasable after the adjustment. If any
additional shares of Issuer Common Stock are issued after the
date of this Agreement (other than pursuant to an event described
in the first sentence of this Section 6(a) and other than in
connection with the exercise of stock options of Issuer
outstanding on the date hereof), the number of shares of Issuer
Common Stock subject to the Option shall be adjusted so that,
after such issuance, it equals 9.9% of the number of shares of
Issuer Common Stock then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter into an
agreement (i) to consolidate with or merge into any person, other
than Grantee or one of the subsidiaries of Grantee, and shall not
be the continuing or surviving corporation of such consolidation
or merger, (ii) to permit any person, other than Grantee or one
of the RTO Subsidiaries, to merge into Issuer and Issuer shall be
the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Issuer Common Stock
shall be changed into or exchanged for stock or other securities
of Issuer or any other person or cash or any other property or
then outstanding shares of Issuer Common Stock shall after such
merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any
person, other than Grantee or one of its Subsidiaries, then, and
in each such case, the agreement governing such transaction shall
make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of Grantee,
-----------------
of either (X) the Acquiring Corporation (as defined below) or
(Y) any person that controls the Acquiring Corporation.
(c) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
---------------------
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (B) Issuer in a
merger in which Issuer is the continuing or surviving
person, and (C) the transferee of all or substantially all
of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common
-----------------------
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(iii) "Average Price" shall mean the average closing
-------------
price of a share of the Substitute Common Stock for the one
year immediately preceding the consolidation, merger or sale
in question, but in no event higher than the closing price
of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that
--------
if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of
common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person,
as the Grantee may elect.
(d) The Substitute Option shall have the same terms as
the Option, provided, that if the terms of the Substitute Option
--------
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Grantee. The issuer of the Substitute Option shall also
enter into an agreement with the Grantee of the Substitute Option
in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option. Without limiting the
generality of the foregoing, the provisions of Sections 7, 8, 9
and 10 shall apply with respect to the Substitute Option and any
securities for which the Substitute Option becomes exercisable
with the same effect as if all references to "Issuer" in such
Sections were references to the "Substitute Option Issuer," all
references to "Issuer Common Stock" were references to
"Substitute Common Stock," and all references to the "Option"
were references to the "Substitute Option."
(e) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock as is equal to
the Applicable Price (as defined below) multiplied by the number
of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of
the Substitute Option per share of Substitute Common Stock shall
then be equal to the Purchase Price multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock
for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 9.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option. In the event that
the Substitute Option would be exercisable for more than 9.9% of
the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (f), the issuer of the Substitute
Option (the "Substitute Option Issuer") shall make a cash payment
------------------------
to Grantee equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (f)
over (ii) the value of the Substitute Option after giving effect
to the limitation in this clause (f). This difference in value
shall be determined by a nationally recognized investment banking
firm selected by the Grantee.
(g) Issuer shall not enter into any transaction
described in subsection (b) of this Section 6 unless the
Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
7. Repurchase at the Option of Grantee. (a) At the
-----------------------------------
request of Grantee at any time during the period commencing upon
the first occurrence of a Repurchase Event (as defined below) and
ending twelve (12) months immediately thereafter, Issuer (or any
successor entity thereof) shall repurchase from Grantee (x) the
Option, unless the Option shall have expired or been terminated
in accordance with the terms hereof, and (y) all shares of Issuer
Common Stock purchased by Grantee pursuant hereto with respect to
which Grantee then has beneficial ownership. The date on which
Grantee exercises its rights under this Section 7 is referred to
as the "Request Date". Such repurchase shall be at an aggregate
------------
price (the "Section 7 Repurchase Consideration") equal to the sum
----------------------------------
of:
(i) the aggregate exercise price paid by Grantee for
any shares of Issuer Common Stock acquired pursuant to the
Option with respect to which Grantee then has beneficial
ownership;
(ii) the excess, if any, of (x) the Applicable Price
(as defined below) for each share of Issuer Common Stock
over (y) the Purchase Price (subject to adjustment pursuant
to Section 6), multiplied by the number of shares of Issuer
Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over
the Purchase Price (subject to adjustment pursuant to
Section 6) paid (or, in the case of Option Shares with
respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Grantee for each
share of Issuer Common Stock with respect to which the
Option has been exercised and with respect to which Grantee
then has beneficial ownership, multiplied by the number of
such shares.
(b) If Grantee exercises its rights under this
Section 7, Issuer shall, within ten (10) business days after the
Request Date, pay the Section 7 Repurchase Consideration to
Grantee in immediately available funds, and Grantee shall
surrender to Issuer the Option and the certificates evidencing
the shares of Issuer Common Stock purchased thereunder with
respect to which Grantee then has beneficial ownership, and
Grantee shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and
clear of all liens, claims, charges and encumbrances of any kind
whatsoever. If any regulatory authority disapproves of any part
of Issuer's proposed repurchase pursuant to this Section 7,
Issuer shall promptly give notice of such fact to Grantee and
redeliver to Grantee the Option Shares it is then prohibited from
repurchasing, and Grantee shall have the right to exercise the
Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the number of shares as to
which payment has been made pursuant to Section 7(a)(ii);
provided that if the Option shall have terminated prior to the
--------
date of such notice or shall be scheduled to terminate at any
time before the expiration of a period ending on the thirtieth
business day after such date, Grantee shall nonetheless have the
right so to exercise the Option or exercise its rights under
Section 8 until the expiration of such period of thirty (30)
business days.
(c) For purposes of this Agreement, the "Applicable
----------
Price" means the highest of (i) the highest price per share at
-----
which a tender or exchange offer has been made for shares of
Issuer Common Stock after the date hereof and on or prior to the
Request Date, (ii) the price per share to be paid by any third
party for shares of Issuer Common Stock or the consideration per
share to be received by holders of Issuer Common Stock, in each
case pursuant to an agreement for a merger or other business
combination transaction with Issuer entered into on or prior to
the Request Date or (iii) the highest closing sales price per
share of Issuer Common Stock quoted on the New York Stock
Exchange (or, if Issuer Common Stock is not quoted on the New
York Stock Exchange, the highest bid price per share as quoted on
the National Association of Securities Dealers Automated
Quotations System or, if the shares of Issuer Common Stock are
not quoted thereon, on the principal trading market on which such
shares are traded as reported by a recognized source) during the
sixty (60) business days preceding the Request Date. If the
consideration to be offered, paid or received pursuant to either
of the foregoing clauses (i) or (ii) shall be other than in cash,
the value of such consideration shall be determined in good faith
by an independent nationally recognized investment banking firm
selected by Grantee and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, a "Repurchase Event" means any of
----------------
the following events:
(i) the occurrence of any of the Purchase Events
specified in Section 2(b)(ii), (iii) or (iv); or
(ii) there shall have occurred any of the Purchase
Events specified in Section 2(b)(i) and thereafter the
holders of Issuer Common Stock shall not have approved the
Merger Agreement at the meeting of such stockholders held
for the purpose of voting on the Merger Agreement or such
meeting shall not have been held or shall have been canceled
prior to termination of the Merger Agreement.
8. Registration Rights. Issuer shall, if requested
-------------------
by Grantee at any time and from time to time within three (3)
years of the first exercise of the Option, as expeditiously as
possible prepare and file up to two registration statements under
the Securities Act if such registration is necessary in order to
permit the sale or other disposition of any or all shares of
Issuer Common Stock or other securities that have been acquired
by or are issuable to Grantee upon exercise of the Option in
accordance with the intended method of sale or other disposition
stated by Grantee, including a "shelf" registration statement
under Rule 415 under the Securities Act or any successor
provision, and Issuer shall use its best efforts to qualify such
shares or other securities under any applicable state securities
laws. Grantee agrees to use all reasonable efforts to cause, and
to cause any underwriters of any sale or other disposition to
cause, any sale or other disposition pursuant to such
registration statement to be effected on a widely distributed
basis so that upon consummation thereof no purchaser or
transferee shall own beneficially more than 2% of the then
outstanding voting power of Issuer. Issuer shall use all
reasonable efforts to cause each such registration statement to
become effective, to obtain all consents or waivers of other
parties which are required therefor and to keep such registration
statement effective for such period not in excess of 180 days
from the day such registration statement first becomes effective
as may be reasonably necessary to effect such sale or other
disposition. The obligations of Issuer hereunder to file a
registration statement and to maintain its effectiveness may be
suspended for one or more periods of time not exceeding sixty
(60) days in the aggregate if the Board of Directors of Issuer
shall have determined that the filing of such registration
statement or the maintenance of its effectiveness would require
disclosure of nonpublic information that would materially and
adversely affect Issuer. Any registration statement prepared and
filed under this Section 8, and any sale covered thereby, shall
be at Issuer's expense except for underwriting discounts or
commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto. Grantee shall provide all
information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If during the time
period referred to in the first sentence of this Section 8 Issuer
effects a registration under the Securities Act of Issuer Common
Stock for its own account or for any other stockholders of Issuer
(other than on Form S-4 or Form S-8, or any successor form), it
shall allow Grantee the right to participate in such
registration, and such participation shall not affect the
obligation of Issuer to effect two registration statements for
Grantee under this Section 8; provided that, if the managing
--------
underwriters of such offering advise Issuer in writing that in
their opinion the number of shares of Issuer Common Stock
requested to be included in such registration exceeds the number
which can be sold in such offering, Issuer shall include the
shares requested to be included therein by Grantee pro rata with
the shares intended to be included therein by Issuer. In
connection with any registration pursuant to this Section 8,
Issuer and Grantee shall provide each other and any underwriter
of the offering with customary representations, warranties,
covenants, indemnification and contribution in connection with
such registration.
9. Listing. If Issuer Common Stock or any other
-------
securities to be acquired upon exercise of the Option are then
listed on the New York Stock Exchange or the National Association
of Securities Dealers Automated Quotation System, Issuer, upon
the request of Grantee, will promptly file an application to list
the shares of Issuer Common Stock or other securities to be
acquired upon exercise of the Option on the New York Stock
Exchange or the National Association of Securities Dealers
Automated Quotation System, as applicable, and will use its best
efforts to obtain approval of such listing as soon as
practicable.
10. Division of Option. This Agreement (and the
------------------
Option granted hereby) are exchangeable, without expense, at the
option of Grantee, upon presentation and surrender of this
Agreement at the principal office of Issuer for other Agreements
providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of
shares of Issuer Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by Issuer
of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of
loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new
Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
11. Miscellaneous. (a) Expenses. Except as otherwise
------------- --------
provided in Sections 7 and 8, each of the parties hereto shall
bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this
--------------------
Agreement may be waived at any time by the party that is entitled
to the benefits of such provision. This Agreement may not be
modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary;
---------------------------------------------
Severability, Etc. Except as otherwise set forth in the Merger
------------------
Agreement, this Agreement (including the Merger Agreement and the
other documents and instruments referred to herein and therein)
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof and (b) is not
intended to confer upon any person other than the parties hereto
any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a Federal or state regulatory agency to
be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit
Grantee to acquire, or does not require Issuer to repurchase, the
full number of shares of Issuer Common Stock as provided in
Sections 2 and 7 (as adjusted pursuant to Section 6), it is the
express intention of Issuer to allow Grantee to acquire or to
require Issuer to repurchase such lesser number of shares as may
be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed
-------------
and construed in accordance with the laws of the State of Indiana
without regard to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings
--------------------
contained herein are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(f) Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or mailed by
registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
If to Grantee to: RTO, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: K. ▇▇▇▇▇ ▇▇▇▇
with copies to: King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
If to Issuer to: Alrenco, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Jr., Esq.
(g) Counterparts. This Agreement and any amendments
------------
hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become
effective when both counterparts have been signed by each of the
parties and delivered to the other party, it being understood
that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations hereunder or under the Option
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent
of the other party, except that Grantee may assign this Agreement
to a wholly owned subsidiary of Grantee. Subject to the
preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their
respective successors and assigns.
(i) Further Assurances. In the event of any exercise
------------------
of the Option by Grantee, Issuer and Grantee shall execute and
deliver all other documents and instruments and take all other
action that may be reasonably necessary in order to consummate
the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree
--------------------
that this Agreement may be enforced by either party through
specific performance, injunctive relief and other equitable
relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
(k) Termination. This Agreement and all rights and
-----------
obligations hereunder shall terminate upon the termination of the
Merger Agreement in accordance with Section 9.1, 9.2, 9.3(a) (but
not in the event of termination by RTO under such Section 9.3(a)
because of a breach by Issuer of Section 7.2 of the Merger
Agreement), 9.3(b) (but only in the event that the Merger
Agreement and the Merger shall not have been approved and adopted
under circumstances that would not constitute a Purchase Event
under Section 2(b)(iv) of this Agreement), 9.3(c), 9.4(a), 9.4(b)
or 9.4(c) thereof; provided, however, that nothwithstanding the
-------- -------
foregoing, this Agreement shall not terminate as provided in this
Section 11(k) if a Purchase Event occurs prior to or concurrently
with the occurrence of the event that under this Section 11(k)
would have caused a termination of this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this
Stock Option Agreement to be signed by their respective officers
thereunto duly authorized, all as of the day and year first
written above.
ALRENCO, INC.
By:
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and President
RTO, INC.
By:
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: President and Chief
Executive Officer
EXHIBIT G
---------
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, dated as of September 28, 1997
(this "Agreement"), by and between RTO, INC., a Delaware
---------
corporation ("Issuer"), and ALRENCO, INC., an Indiana
------
corporation ("Grantee").
-------
WITNESSETH:
-----------
WHEREAS, Grantee and Issuer propose to enter into an
Agreement and Plan of Merger dated as of September 28, 1997 (the
"Merger Agreement"; capitalized terms not defined herein shall
----------------
have the meanings set forth in the Merger Agreement), providing
for, among other things, the merger of Grantee with and into
Issuer with Issuer as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's
willingness to enter into the Merger Agreement, Grantee has
requested that Issuer agree, and Issuer has agreed, to grant
Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the premises and
the representations, warranties, covenants and agreements
contained herein and in the Merger Agreement, and for other good
and valuable consideration, the receipt of which is hereby
acknowledged, Issuer and Grantee agree as follows:
1. Grant of Option. Subject to the terms and
---------------
conditions set forth herein, Issuer hereby grants to Grantee an
irrevocable option (the "Option") to purchase up to 11,943 (as
------
adjusted as set forth herein) shares (the "Option Shares") of
-------------
Common Stock, no par value ("Issuer Common Stock"), of Issuer at
-------------------
a purchase price of $1,400.00 per Option Share (the "Purchase
--------
Price").
-----
2. Exercise of Option. (a) Grantee may exercise the
------------------
Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as defined below);
provided that, except as provided in the last sentence of this
--------
Section 2(a), the Option shall terminate and be of no further
force and effect upon the earliest to occur of (i) the Effective
Time, (ii) twelve (12) months after the first occurrence of a
Purchase Event or (iii) termination of this Agreement in
accordance with Section 11(k); and provided, further that any
-------- -------
purchase of shares upon exercise of the Option shall be subject
to compliance with Applicable Law. The rights set forth in
Sections 7 and 8 shall not terminate when the right to exercise
the Option terminates as set forth herein, but shall extend to
such time as is provided in Sections 7 and 8 respectively.
Notwithstanding the termination of the Option, Grantee shall be
entitled to purchase those Option Shares with respect to which it
has exercised the Option in accordance with the terms hereof
prior to the termination of the Option.
(b) As used herein, a "Purchase Event" means any of
--------------
the following events:
(i) any person (other than Grantee or any subsidiary
of Grantee) shall have commenced (as such term is defined in
Rule l4d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), or shall have filed a
------------
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to, a tender
--------------
offer or exchange offer to purchase any shares of Issuer
Common Stock such that, upon consummation of such offer,
such person would own or control 10% or more of the then
outstanding Issuer Common Stock;
(ii) Issuer or any subsidiary of Issuer, without having
received Grantee's prior written consent or except as
permitted by the Merger Agreement, shall have authorized,
recommended, proposed or publicly announced an intention to
authorize, recommend or propose, or entered into, an
agreement with any person (other than Grantee or any
subsidiary of Grantee) to (A) effect a merger, consolidation
or similar transaction involving Issuer or any Subsidiary of
Issuer, (B) sell, lease or otherwise dispose of assets of
Issuer or its subsidiaries representing 15% or more of the
consolidated assets of Issuer and its subsidiaries or
(C) issue, sell or otherwise dispose of (including by way of
merger, consolidation, share exchange or any similar
transaction) securities representing 10% or more of the
voting power of Issuer or any of its Significant
Subsidiaries (any of the foregoing an "Acquisition
-----------
Transaction");
-----------
(iii) any person (other than any person or "group" (as
such term is defined under the Exchange Act) that, at the
date hereof, beneficially owns or has the right to acquire
beneficial ownership (as such term is defined in Rule l3d-3
under the Exchange Act) of 10% or more of the outstanding
shares of Issuer Common Stock, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Grantee,
any subsidiary of Grantee or Issuer or any of its
subsidiaries in a fiduciary capacity) shall have acquired
beneficial ownership or the right to acquire beneficial
ownership of, or any group shall have been formed which
beneficially owns or has the right to acquire beneficial
ownership of, 10% or more of the then outstanding Issuer
Common Stock; or
(iv) the holders of Issuer Common Stock shall not have
approved and adopted the Merger Agreement at the meeting of
such stockholders held for the purpose of voting on the
Merger Agreement, such meeting shall not have been held or
shall have been canceled prior to termination of the Merger
Agreement or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect
to the Merger Agreement, in each case after any person
(other than Grantee or any subsidiary of Grantee) shall have
publicly announced a proposal, or publicly disclosed an
intention to make a proposal, to engage in an Acquisition
Transaction. As used in this Agreement, "person" shall have
the meaning specified in Sections 3(a)(9) and 13(d)(3) of
the Exchange Act.
(c) In the event Grantee wishes to exercise the
Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date")
-----------
specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not
earlier than three (3) business days nor later than fifteen (15)
business days from the Notice Date for the closing of such
purchase (the "Closing Date"); provided that if the closing
------------ --------
of the purchase and sale pursuant to the Option cannot be
consummated by reason of any Applicable Law, the period of time
that otherwise would run pursuant to this sentence shall run
instead from the date on which such restriction on consummation
has expired or been terminated.
(d) Notwithstanding Section 2(c), in no event shall
any Closing Date be more than eighteen (18) months after the
related Notice Date, and if the Closing Date shall not have
occurred within eighteen (18) months after the related Notice
Date the exercise of the Option effected on the Notice Date shall
be deemed to have expired. The provisions of this Section 2 and
Section 3 shall apply with appropriate adjustments to any such
exercise.
3. Payment and Delivery of Certificates. (a) On each
------------------------------------
Closing Date, Grantee shall pay to Issuer in immediately
available funds by wire transfer to a bank account designated by
Issuer an amount equal to the Purchase Price multiplied by the
Option Shares to be purchased on such Closing Date.
(b) At each closing, simultaneously with the delivery
of immediately available funds as provided in Section 3(a),
Issuer shall deliver to Grantee a certificate or certificates
representing the Option Shares to be purchased at such closing,
which Option Shares shall be free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever, and Grantee
shall deliver to Issuer a letter agreeing that Grantee shall not
offer to sell or otherwise dispose of such Option Shares in
violation of Applicable Law or the provisions of this Agreement.
(c) Certificates for the Option Shares delivered at
each closing shall be endorsed with a restrictive legend which
shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT
DATED AS OF SEPTEMBER 28, 1997. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A
WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be
removed by delivery of substitute certificate(s) without such
legend if Grantee shall have delivered to Issuer a copy of a
letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for
purposes of the Securities Act.
4. Representations and Warranties of Issuer. Issuer
----------------------------------------
hereby represents and warrants to Grantee as follows:
(a) Due Authorization. Issuer has all requisite
-----------------
corporate power and authority to enter into this Agreement and,
subject to any approvals referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Issuer. This Agreement has been
duly executed and delivered by Issuer and constitutes a valid and
binding obligation of Issuer, enforceable in accordance with its
terms.
(b) Authorized Stock. Issuer has taken all necessary
----------------
corporate and other action to authorize and reserve and, subject
to obtaining the governmental and other approvals and consents
referred to herein, to permit it to issue, and, at all times from
the date hereof until the obligation to deliver Issuer Common
Stock upon the exercise of the Option terminates, will have
reserved for issuance, upon exercise of the Option, shares of
Issuer Common Stock necessary for Grantee to exercise the Option,
and Issuer will take all necessary corporate action to authorize
and reserve for issuance all additional shares of Issuer Common
Stock or other securities which may be issued pursuant to
Section 6 upon exercise of the Option. The shares of Issuer
Common Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common Stock or other
securities which may be issuable pursuant to Section 6, upon
issuance pursuant hereto, shall be duly and validly issued, fully
paid and nonassessable, and shall be delivered free and clear of
all liens, claims, charges and encumbrances of any kind or nature
whatsoever, including any preemptive rights of any stockholder of
Issuer.
(c) No Conflicts. Except as disclosed pursuant to the
------------
Merger Agreement, the execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated
hereby will not, conflict with, or result in any violation
pursuant to any provision of the Certificate of Incorporation or
By-laws of Issuer or any subsidiary of Issuer or, subject to
obtaining any approvals or consents contemplated hereby, result
in any violation of any loan or credit agreement, note, mortgage,
indenture, lease or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Issuer
or any subsidiary of Issuer or their respective properties or
assets which violation would have an RTO Material Adverse Effect
(as defined in the Merger Agreement).
(d) Board Action. The Board of Directors of Issuer
------------
has taken all necessary action to approve this Agreement and the
consummation of the transactions contemplated hereby and the
provisions of Section 243 of the Delaware General Corporation Law
will not apply to this Agreement or the purchase of shares of
Issuer Common Stock pursuant to this Agreement.
5. Representations and Warranties of Grantee.
-----------------------------------------
Grantee hereby represents and warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite
-----------------
corporate power and authority to enter into this Agreement and,
subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This
Agreement has been duly executed and delivered by Grantee and
constitutes a valid and binding obligation of Grantee,
enforceable in accordance with its terms.
(b) No Conflicts. The execution and delivery of this
------------
Agreement does not, and the consummation of the transactions
contemplated hereby will not result in any violation pursuant to
any provision of the Articles of Incorporation or By-laws of
Grantee or, subject to obtaining any approvals or consents
contemplated hereby, result in any violation of any loan or
credit agreement, note, mortgage, indenture, lease or other
agreement, obligation, instrument permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Grantee or its properties or assets
which violation would have an Alrenco Material Adverse Effect (as
defined in the Merger Agreement).
(c) Purchase Not for Distribution. Any Option Shares
-----------------------------
or other securities acquired by Grantee upon exercise of the
Option will not be taken with a view to the public distribution
thereof and will not be transferred or otherwise disposed of
except in a transaction registered or exempt from registration
under the Securities Act.
6. Adjustment upon Changes in Capitalization, etc.
-----------------------------------------------
(a) In the event of any change in Issuer Common Stock by reason
of a stock dividend, split-up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option shall be adjusted
appropriately, and proper provision shall be made in the
agreements governing such transaction, so that Grantee shall
receive upon exercise of the Option and payment of the aggregate
Purchase Price hereunder the number and class of shares or other
securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised
in full immediately prior to such event, or the record date
therefor, as applicable. Whenever the number of shares of Issuer
Common Stock purchasable upon exercise of the Option is adjusted
as provided in this Section 6, the Purchase Price shall be
adjusted by multiplying the Purchase Price by a fraction, the
numerator of which shall be equal to the number of shares of
Issuer Common Stock purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of
Issuer Common Stock purchasable after the adjustment. If any
additional shares of Issuer Common Stock are issued after the
date of this Agreement (other than pursuant to an event described
in the first sentence of this Section 6(a) and other than in
connection with the exercise of stock options of Issuer
outstanding on the date hereof), the number of shares of Issuer
Common Stock subject to the Option shall be adjusted so that,
after such issuance, it equals 9.9% of the number of shares of
Issuer Common Stock then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter into an
agreement (i) to consolidate with or merge into any person, other
than Grantee or a subsidiary of Grantee, and shall not be the
continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or a
subsidiary of Grantee, to merge into Issuer and Issuer shall be
the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Issuer Common Stock
shall be changed into or exchanged for stock or other securities
of Issuer or any other person or cash or any other property or
the then outstanding shares of Issuer Common Stock shall after
such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any
person, other than Grantee or a subsidiary of Grantee, then, and
in each such case, the agreement governing such transaction shall
make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of Grantee,
-----------------
of either (X) the Acquiring Corporation (as defined below) or
(Y) any person that controls the Acquiring Corporation.
(c) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
---------------------
continuing or surviving corporation of a consolidation
or merger with Issuer (if other than Issuer),
(B) Issuer in a merger in which Issuer is the
continuing or surviving person, and (C) the transferee
of all or substantially all of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the
-----------------------
common stock issued by the issuer of the Substitute
Option upon exercise of the Substitute Option.
(iii) "Average Price" shall mean the average
-------------
closing price of a share of the Substitute Common Stock
for the one year immediately preceding the
consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer
--------
is the issuer of the Substitute Option, the Average
Price shall be computed with respect to a share of
common stock issued by the person merging into Issuer
or by any company which controls or is controlled by
such person, as the Grantee may elect.
(d) The Substitute Option shall have the same terms as
the Option, provided, that if the terms of the Substitute Option
--------
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Grantee. The issuer of the Substitute Option shall also
enter into an agreement with the Grantee of the Substitute Option
in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option. Without limiting the
generality of the foregoing, the provisions of Sections 7, 8, 9
and 10 shall apply with respect to the Substitute Option and any
securities for which the Substitute Option becomes exercisable
with the same effect as if all references to "Issuer" in such
Sections were references to the "Substitute Option Issuer," all
references to "Issuer Common Stock" were references to
"Substitute Common Stock," and all references to the "Option"
were references to the "Substitute Option."
(e) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock as is equal to
the Applicable Price (as defined below) multiplied by the number
of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of
the Substitute Option per share of Substitute Common Stock shall
then be equal to the Purchase Price multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock
for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 9.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option. In the event that
the Substitute Option would be exercisable for more than 9.9% of
the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (f), the issuer of the Substitute
Option (the "Substitute Option Issuer") shall make a cash payment
------------------------
to Grantee equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (f)
over (ii) the value of the Substitute Option after giving effect
to the limitation in this clause (f). This difference in value
shall be determined by a nationally recognized investment banking
firm selected by the Grantee.
(g) Issuer shall not enter into any transaction
described in subsection (b) of this Section 6 unless the
Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
7. Repurchase at the Option of Grantee. (a) At the
-----------------------------------
request of Grantee at any time during the period commencing upon
the first occurrence of a Repurchase Event (as defined below) and
ending twelve (12) months immediately thereafter, Issuer (or any
successor entity thereof) shall repurchase from Grantee (x) the
Option, unless the Option shall have expired or been terminated
in accordance with the terms hereof, and (y) all shares of Issuer
Common Stock purchased by Grantee pursuant hereto with respect to
which Grantee then has beneficial ownership. The date on which
Grantee exercises its rights under this Section 7 is referred to
as the "Request Date". Such repurchase shall be at an aggregate
------------
price (the "Section 7 Repurchase Consideration") equal to the sum
----------------------------------
of:
(i) the aggregate exercise price paid by Grantee
for any shares of Issuer Common Stock acquired pursuant
to the Option with respect to which Grantee then has
beneficial ownership;
(ii) the excess, if any, of (x) the Applicable
Price (as defined below) for each share of Issuer
Common Stock over (y) the Purchase Price (subject to
adjustment pursuant to Section 6), multiplied by the
number of shares of Issuer Common Stock with respect to
which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant
to Section 6) paid (or, in the case of Option Shares
with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Grantee
for each share of Issuer Common Stock with respect to
which the Option has been exercised and with respect to
which Grantee then has beneficial ownership, multiplied
by the number of such shares.
(b) If Grantee exercises its rights under this
Section 7, Issuer shall, within ten (10) business days after the
Request Date, pay the Section 7 Repurchase Consideration to
Grantee in immediately available funds, and Grantee shall
surrender to Issuer the Option and the certificates evidencing
the shares of Issuer Common Stock purchased thereunder with
respect to which Grantee then has beneficial ownership, and
Grantee shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and
clear of all liens, claims, charges and encumbrances of any kind
whatsoever. If any regulatory authority disapproves of any part
of Issuer's proposed repurchase pursuant to this Section 7,
Issuer shall promptly give notice of such fact to Grantee and
redeliver to Grantee the Option Shares it is then prohibited from
repurchasing, and Grantee shall have the right to exercise the
Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the number of shares as to
which payment has been made pursuant to Section 7(a)(ii);
provided that if the Option shall have terminated prior to the
--------
date of such notice or shall be scheduled to terminate at any
time before the expiration of a period ending on the thirtieth
business day after such date, Grantee shall nonetheless have the
right so to exercise the Option or exercise its rights under
Section 8 until the expiration of such period of thirty (30)
business days.
(c) For purposes of this Agreement, the "Applicable
----------
Price" means the highest of (i) the highest price per share at
-----
which a tender or exchange offer has been made for shares of
Issuer Common Stock after the date hereof and on or prior to the
Request Date, (ii) the price per share to be paid by any third
party for shares of Issuer Common Stock or the consideration per
share to be received by holders of Issuer Common Stock, in each
case pursuant to an agreement for a merger or other business
combination transaction with Issuer entered into on or prior to
the Request Date or (iii) the highest closing sales price per
share of Issuer Common Stock quoted on the New York Stock
Exchange (or, if Issuer Common Stock is not quoted on the New
York Stock Exchange, the highest bid price per share as quoted on
the National Association of Securities Dealers Automated
Quotations System or, if the shares of Issuer Common Stock are
not quoted thereon, on the principal trading market on which such
shares are traded as reported by a recognized source) during the
sixty (60) business days preceding the Request Date. If the
consideration to be offered, paid or received pursuant to either
of the foregoing clauses (i) or (ii) shall be other than in cash,
the value of such consideration shall be determined in good faith
by an independent nationally recognized investment banking firm
selected by Grantee and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, a "Repurchase Event" means any of
----------------
the following events:
(i) the occurrence of any of the Purchase Events
specified in Section 2(b)(ii), (iii) or (iv); or
(ii) there shall have occurred any of the Purchase
Events specified in Section 2(b)(i) and thereafter the
holders of Issuer Common Stock shall not have approved
the Merger Agreement at the meeting of such
stockholders held for the purpose of voting on the
Merger Agreement or such meeting shall not have been
held or shall have been canceled prior to termination
of the Merger Agreement.
8. Registration Rights. Issuer shall, if requested
-------------------
by Grantee at any time and from time to time within three (3)
years of the first exercise of the Option, as expeditiously as
possible prepare and file up to two registration statements under
the Securities Act if such registration is necessary in order to
permit the sale or other disposition of any or all shares of
Issuer Common Stock or other securities that have been acquired
by or are issuable to Grantee upon exercise of the Option in
accordance with the intended method of sale or other disposition
stated by Grantee, including a "shelf" registration statement
under Rule 415 under the Securities Act or any successor
provision, and Issuer shall use its best efforts to qualify such
shares or other securities under any applicable state securities
laws. Grantee agrees to use all reasonable efforts to cause, and
to cause any underwriters of any sale or other disposition to
cause, any sale or other disposition pursuant to such
registration statement to be effected on a widely distributed
basis so that upon consummation thereof no purchaser or
transferee shall own beneficially more than 2% of the then
outstanding voting power of Issuer. Issuer shall use all
reasonable efforts to cause each such registration statement to
become effective, to obtain all consents or waivers of other
parties which are required therefor and to keep such registration
statement effective for such period not in excess of 180 days
from the day such registration statement first becomes effective
as may be reasonably necessary to effect such sale or other
disposition. The obligations of Issuer hereunder to file a
registration statement and to maintain its effectiveness may be
suspended for one or more periods of time not exceeding sixty
(60) days in the aggregate if the Board of Directors of Issuer
shall have determined that the filing of such registration
statement or the maintenance of its effectiveness would require
disclosure of nonpublic information that would materially and
adversely affect Issuer. Any registration statement prepared and
filed under this Section 8, and any sale covered thereby, shall
be at Issuer's expense except for underwriting discounts or
commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto. Grantee shall provide all
information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If during the time
period referred to in the first sentence of this Section 8 Issuer
effects a registration under the Securities Act of Issuer Common
Stock for its own account or for any other stockholders of Issuer
(other than on Form S-4 or Form S-8, or any successor form), it
shall allow Grantee the right to participate in such
registration, and such participation shall not affect the
obligation of Issuer to effect two registration statements for
Grantee under this Section 8; provided that, if the managing
--------
underwriters of such offering advise Issuer in writing that in
their opinion the number of shares of Issuer Common Stock
requested to be included in such registration exceeds the number
which can be sold in such offering, Issuer shall include the
shares requested to be included therein by Grantee pro rata with
the shares intended to be included therein by Issuer. In
connection with any registration pursuant to this Section 8,
Issuer and Grantee shall provide each other and any underwriter
of the offering with customary representations, warranties,
covenants, indemnification and contribution in connection with
such registration.
9. Listing. If Issuer Common Stock or any other
-------
securities to be acquired upon exercise of the Option are then
listed on the New York Stock Exchange or the National Association
of Securities Dealers Automated Quotation System, Issuer, upon
the request of Grantee, will promptly file an application to list
the shares of Issuer Common Stock or other securities to be
acquired upon exercise of the Option on the New York Stock
Exchange or the National Association of Securities Dealers
Automated Quotation System, as applicable, and will use its best
efforts to obtain approval of such listing as soon as
practicable.
10. Division of Option. This Agreement (and the
------------------
Option granted hereby) are exchangeable, without expense, at the
option of Grantee, upon presentation and surrender of this
Agreement at the principal office of Issuer for other Agreements
providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of
shares of Issuer Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by Issuer
of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of
loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new
Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
11. Miscellaneous. (a) Expenses. Except as otherwise
------------- --------
provided in Sections 7 and 8, each of the parties hereto shall
bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this
--------------------
Agreement may be waived at any time by the party that is entitled
to the benefits of such provision. This Agreement may not be
modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary;
---------------------------------------------
Severability, Etc. Except as otherwise set forth in the Merger
------------------
Agreement, this Agreement (including the Merger Agreement and the
other documents and instruments referred to herein and therein)
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof and (b) is not
intended to confer upon any person other than the parties hereto
any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a Federal or state regulatory agency to
be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit
Grantee to acquire, or does not require Issuer to repurchase, the
full number of shares of Issuer Common Stock as provided in
Sections 2 and 7 (as adjusted pursuant to Section 6), it is the
express intention of Issuer to allow Grantee to acquire or to
require Issuer to repurchase such lesser number of shares as may
be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed
-------------
and construed in accordance with the laws of the State of Indiana
without regard to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings
--------------------
contained herein are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(f) Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or mailed by
registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
If to Issuer to: RTO, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: K. ▇▇▇▇▇ ▇▇▇▇
with copies to: King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
If to Grantee to: Alrenco, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Jr., Esq.
(g) Counterparts. This Agreement and any amendments
------------
hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become
effective when both counterparts have been signed by each of the
parties and delivered to the other party, it being understood
that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations hereunder or under the Option
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent
of the other party, except that Grantee may assign this Agreement
to a wholly owned subsidiary of Grantee. Subject to the
preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their
respective successors and assigns.
(i) Further Assurances. In the event of any exercise
------------------
of the Option by Grantee, Issuer and Grantee shall execute and
deliver all other documents and instruments and take all other
action that may be reasonably necessary in order to consummate
the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree
--------------------
that this Agreement may be enforced by either party through
specific performance, injunctive relief and other equitable
relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
(k) Termination. This Agreement and all rights and
-----------
obligations hereunder shall terminate upon the termination of the
Merger Agreement in accordance with Section 9.1, 9.2, 9.3(a),
9.3(b), 9.3(c), 9.4(a) (but not in the event of termination by
Alrenco under such Section 9.4(a) because of a breach by Issuer
of Section 7.2 of the Merger Agreement), 9.4(b) (but only in the
event that the Merger Agreement and the Merger shall not have
been approved and adopted under circumstances that would not
constitute a Purchase Event under Section 2(b)(iv) of this
Agreement) or 9.4(c) thereof; provided, however, that
-------- -------
notwithstanding the foregoing, this Agreement shall not terminate
as provided in this Section 11(k) if a Purchase Event occurs
prior to or concurrently with the occurrence of the event that
under this Section 11(k) would have caused a termination of this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this
Stock Option Agreement to be signed by their respective officers
thereunto duly authorized, all as of the day and year first
written above.
RTO, INC.
By:
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: President and Chief
Executive Officer
ALRENCO, INC.
By:
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and President
EXHIBIT H
---------
FORM OF AFFILIATE AGREEMENT
FOR AFFILIATES OF RTO
Alrenco, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Gentlemen:
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of RTO, Inc., a Delaware
Corporation ("RTO"), as the term "affiliate" is (i) defined for
---
purposes of paragraphs (c) and (d) of Rule 145 of the rules and
regulations (the "Rules and Regulations") of the Securities and
---------------------
Exchange Commission (the "SEC") under the Securities Act of 1933,
---
as amended (the "Securities Act") and/or (ii) used in and for
--------------
purposes of Accounting Series Releases 130 and 135, as amended of
the SEC. Pursuant to the terms of the Agreement and Plan of
Merger dated as of September 28, 1997 (the "Merger Agreement") by
----------------
and between RTO and Alrenco, Inc., an Indiana corporation
("Alrenco"), RTO will be merged with and into Alrenco, with
-------
Alrenco continuing as the surviving corporation (the "Merger").
------
Capitalized terms used in this letter without definition shall
have the meanings assigned to them in the Merger Agreement.
As a result of the Merger, I may receive shares of Common
Stock, no par value, of Alrenco (the "Alrenco Common Stock"). I
--------------------
will have received such Alrenco Common Stock in exchange for
shares owned by me of common stock, par value $.01 per share, of
RTO (the "Shares").
------
1. I hereby represent, warrant and covenant to Alrenco
that in the event I receive my Alrenco Common Stock as a result
of the Merger:
(a) I shall not make any sale, transfer or other
disposition of the Alrenco Common Stock in violation of the
Securities Act or the Rules and Regulations.
(b) I have carefully read this letter and the Merger
Agreement and discussed the requirements of such documents
and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of the Alrenco Common Stock,
to the extent I felt necessary, with my counsel or counsel
for RTO.
(c) I have been advised that the issuance of the
Alrenco Common Stock to me pursuant to the Merger has been
registered with the SEC under the Securities Act in a
Registration Statement on Form S-4. However, I have also
been advised that, because at the time the Merger is
submitted for a vote of the stockholders of RTO, (i) I may
be deemed to be an affiliate of RTO and (ii) the
distribution by me of the Alrenco Common Stock has not been
registered under the Securities Act, I may not sell,
transfer or otherwise dispose of the Alrenco Common Stock
issued to me in the Merger unless, (x) such sale, transfer
or other disposition is made in conformity with the volume
and other limitations of Rule 145 promulgated by the SEC
under the Securities Act, (y) such sale, transfer or other
disposition has been registered under the Securities Act, or
(z) in the opinion of counsel reasonably acceptable to
Alrenco, such sale, transfer or other disposition is
otherwise exempt from registration under the Securities Act.
(d) I understand that except as provided for in the
Merger Agreement, Alrenco is under no obligation to register
the sale, transfer or other disposition of the Alrenco
Common Stock by me or on my behalf under the Securities Act
or, except as provided in paragraph 2(a) below, to take any
other action necessary in order to make compliance with an
exemption from such registration available.
(e) I also understand that there will be placed on the
certificates for the Alrenco Common Stock issued to me, or
any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
WERE ISSUED IN A TRANSACTION TO WHICH RULE
145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED _______________, 19__ BETWEEN THE
REGISTERED HOLDER HEREOF AND ALRENCO, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF ALRENCO."
(f) I also understand that unless a sale or transfer
is made in conformity with the provisions of Rule 145 or
pursuant to a registration statement, Alrenco reserves the
right to put the following legend on the Certificates issued
to my transferee:
"THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED
SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THESE
SHARES HAVE BEEN ACQUIRED BY THE HOLDER
NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
(g) I further represent to and covenant with Alrenco
that I will not, during the thirty (30) days prior to the
Effective Time (as defined in the Merger Agreement), sell,
transfer or otherwise dispose of or reduce my risk (as
contemplated by SEC Accounting Series Release No. 135) with
respect to Shares or shares of the capital stock of RTO that
I may hold and, furthermore, that I will not sell, transfer
or otherwise dispose of or reduce my risk (as contemplated
by SEC Accounting Series Release No. 135) with respect to
the Alrenco Common Stock received by me in the Merger or any
other shares of capital stock of Alrenco until after such
time as results covering at least thirty (30) days of
combined operations of RTO and Alrenco have been published
by Alrenco, in the form of a quarterly earnings report, an
effective registration statement filed with the SEC or a
post-effective amendment to the S-4 Registration Statement
filed in connection with the Merger, a report to the SEC on
Form 10-K, 10-Q or 8-K, or any other public filing or
announcement which includes the combined results of
operations (the period commencing thirty (30) days prior to
the Effective Time and ending on the date of publication of
the post-merger financial results is referred to herein as
the "Pooling Period"). Alrenco shall notify the
--------------
"affiliates" of publications of such results.
Notwithstanding the foregoing, I understand that during the
Pooling Period, subject to providing written notice to
Alrenco, I will not be prohibited from selling up to 10% of
the Alrenco Common Stock (the "10% Shares") received by me
----------
or Shares owned by me or from making charitable
contributions or bona fide gifts of the Alrenco Common Stock
received by me or Shares owned by me, subject to the same
restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release 135 as amended
by Staff Accounting Bulletin No. 76. I covenant with
Alrenco that I will not sell, transfer or otherwise dispose
of any 10% Shares during the period commencing from the
Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the
Securities Act or pursuant to charitable contributions or
bona fide gifts.
(h) Execution of this agreement should not be
considered an admission on my part that I am an "affiliate"
of RTO as described in the first paragraph of this
agreement, nor as a waiver of any rights that I may have to
object to any claim that I am such an affiliate on or after
the date of this agreement.
2. By Alrenco's acceptance of this agreement, Alrenco
hereby agrees with me as follows:
(a) For so long as and to the extent necessary to
permit me to sell the Alrenco Common Stock pursuant to Rule
145 and, to the extent applicable, Rule 144 under the
Securities Act, Alrenco shall (i) use its reasonable best
efforts to (x) file, on a timely basis, all reports and date
of required to be filed with the SEC by it pursuant to
Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and (y) furnish to me upon
------------
request a written statement as to whether Alrenco has
complied with such reporting requirements during the twelve
(12) months preceding any proposed sale of the Alrenco
Common Stock by me under Rule 145, and (ii) otherwise used
its reasonable efforts to permit such sales pursuant to Rule
145 and Rule 144. Alrenco has filed all reports required to
be filed with the SEC under Section 13 of the Exchange Act
during the preceding twelve (12) months.
(b) It is understood and agreed that certificates with
the legends set forth in paragraphs (1)(e) and (f) above
will be substituted by delivery of certificates without such
legend if (i) one year shall have elapsed from the date the
undersigned acquired the Alrenco Common Stock received in
the Merger and the provisions of Rule 145(d)(2) are then
applicable to the undersigned, (ii) two years shall have
elapsed from the date the undersigned acquired the Alrenco
Common Stock in the Merger and the provisions of Rule
145(d)(3) are then applicable to the undersigned, or (iii)
Alrenco has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to
Alrenco, or a "no-action" letter obtained by the undersigned
from the staff of the SEC, to the effect that the
restrictions imposed by Rule 144 and 145 under the
Securities Act no longer apply to the undersigned.
(c) Pursuant to and in accordance with Section 7.13 of
the Merger Agreement, Alrenco shall publish financial
results covering at least thirty (30) days of combined
operations as soon as practicable after the Effective Time.
Very truly yours,
----------------------------
Name:
Agreed and accepted,
this day of , 19 .
-- ---------- --
ALRENCO, INC.
By:
-----------------------------
Name:
Title:
EXHIBIT I
---------
FORM OF AFFILIATE AGREEMENT
FOR AFFILIATES OF ALRENCO
RTO, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: K. ▇▇▇▇▇ ▇▇▇▇
Alrenco, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Gentlemen:
I have been advised that as of date of this agreement I may
be deemed to be an "affiliate" of Alrenco, Inc., an Indiana
corporation ("Alrenco"), as the term "affiliate" is defined for
-------
purposes of Accounting Series Releases 130 and 135, as amended,
of the Securities and Exchange Commission (the "SEC"). Pursuant
---
to the terms of the Agreement and Plan of Merger dated as of
September 28, 1997 (the "Merger Agreement") by and between
----------------
Alrenco and RTO, Inc., a Delaware corporation ("RTO"), RTO will
---
be merged with and into Alrenco, with Alrenco continuing as the
surviving corporation (the "Merger"). Capitalized terms used in
------
this Agreement without definition shall have the meanings
assigned to them in the Merger Agreement.
I represent to and covenant with RTO and Alrenco that I will
not, during the thirty (30) days prior to the Effective Time (as
defined in the Merger Agreement) and until after such time as
results covering at least thirty (30) days of combined operations
of RTO and Alrenco have been published by Alrenco, in the form of
a quarterly earnings report, an effective registration statement
filed with the SEC or a post-effective amendment to the S-4
Registration Statement filed in connection with the Merger, a
report to the SEC on Form 10-K, 10-Q or 8-K, or any other public
filing or announcement which includes the combined results of
operations, sell, transfer or otherwise dispose of or reduce my
risk (as contemplated by SEC Accounting Series Release No. 135)
with respect to any shares of the capital stock of Alrenco or RTO
that I may hold. I understand that Alrenco shall notify the
"affiliates" of the publication of such results. Notwithstanding
the foregoing, I understand that subject to providing written
notice to Alrenco and subject to SEC Accounting Series Release
No. 135 as amended by Staff Accounting Bulletin No. 76, during
the forementioned period I will not be prohibited from selling up
to 10% of the shares of capital stock of Alrenco that I hold or
from making charitable contributions or bona fide gifts of such
capital stock that I hold subject the same restrictions.
Execution of this agreement should not be considered as an
admission on my part that I am an "affiliate" of Alrenco as
described in the first paragraph of this agreement, nor as a
waiver of any rights that I may have to object to any claim that
I am such an affiliate on or after the date of this agreement.
By Alrenco's acceptance of this agreement, Alrenco hereby
agrees with me as follows:
(a) For so long as and to the extent necessary to
permit me to sell Alrenco Common Stock pursuant to Rule 144
under the Securities Act, Alrenco shall (i) use its
reasonable best efforts to (x) file, on a timely basis, all
reports required to be filed with the SEC by it pursuant to
Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and (y) furnish to me upon
------------
request a written statement as to whether Alrenco has
complied with such reporting requirements during the twelve
(12) months preceding any proposed sale of the Alrenco
Common Stock by me under Rule 144, and (ii) otherwise used
its reasonable efforts to permit such sales pursuant to Rule
144. Alrenco has filed all reports required to be filed
with the SEC under Section 13 of the Exchange Act during the
preceding twelve (12) months.
(b) It is understood and agreed that certificates with
legends required by Rule 144 will be substituted by delivery
of certificates without such legend if Alrenco has received
either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Alrenco, or a "no-
action" letter obtained by the undersigned from the staff of
the SEC, to the effect that the restrictions imposed by Rule
144 under the Securities Act no longer apply to the
undersigned.
(c) Pursuant to and in accordance with Section 7.13 of
the Merger Agreement, Alrenco shall publish financial
results covering at least thirty (30) days of combined
operations as soon as practicable after the Effective Time.
Very truly yours,
-----------------------------
Name:
Agreed and accepted,
this day of , 19 .
-- ---------- --
RTO, INC.
By:
----------------------------
Name:
Title:
ALRENCO, INC.
By:
----------------------------
Name:
Title: