Document:

Exhibit 10 (b)

 

LOAN FACILITY AGREEMENT

AND GUARANTY

 

by and among

 

AARON RENTS, INC.,

 

SUNTRUST BANK, as Servicer

 

and

 

EACH OF THE PARTICIPANTS PARTY HERETO

 

 

Dated as of May 28, 2004

 

 

Table of Contents

 

	
  ARTICLE I
  DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  1.1

  	
  DEFINITIONS

  	
   

  
	
  1.2.

  	
  ACCOUNTING TERMS AND
  DETERMINATION

  	
   

  
	
  1.3

  	
  OTHER DEFINITIONAL TERMS.

  	
   

  
	
  1.4

  	
  EXHIBITS AND SCHEDULES

  	
   

  
	
   

  	
   

  
	
  ARTICLE II
  LOAN FACILITY

  	
   

  
	
   

  	
   

  
	
  2.1

  	
  ESTABLISHMENT
  OF COMMITMENTS; TERMS OF LOANS

  	
   

  
	
  2.2

  	
  CONVEYANCE OF
  PARTICIPANT’S INTEREST

  	
   

  
	
  2.3

  	
  FUNDING
  OF ADVANCES; SWING LINE; FUNDING OF PARTICIPANT’S INTEREST IN LOANS

  	
   

  
	
  2.4

  	
  COMMITMENT FEES

  	
   

  
	
  2.5

  	
  INTEREST ON
  FUNDED PARTICIPANT’S INTEREST

  	
   

  
	
  2.6

  	
  DEFAULT INTEREST

  	
   

  
	
  2.7

  	
  VOLUNTARY
  REDUCTION OF THE UNUTILIZED COMMITMENT

  	
   

  
	
  2.8

  	
  EXTENSION OF COMMITMENTS

  	
   

  
	
  2.9

  	
  WIND-DOWN EVENTS

  	
   

  
	
  2.10

  	
  RESERVE
  REQUIREMENTS; CHANGE IN CIRCUMSTANCES; CHANGE IN LENDING OFFICES

  	
   

  
	
  2.11

  	
  PRO RATA TREATMENT

  	
   

  
	
  2.12

  	
  PAYMENTS

  	
   

  
	
  2.13

  	
  SHARING OF SETOFFS

  	
   

  
	
   

  	
   

  
	
  ARTICLE III
  SERVICER’S SERVICING OBLIGATIONS; DISTRIBUTION OF PAYMENTS

  	
   

  
	
   

  	
   

  
	
  3.1

  	
  SERVICER’S OBLIGATIONS WITH
  RESPECT TO LOANS; COLLATERAL; NON-RECOURSE

  	
   

  
	
  3.2

  	
  APPLICATION OF PAYMENTS

  	
   

  
	
  3.3

  	
  SERVICING REPORT AND BORROWER STATUS
  REPORT

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV
  LOAN DEFAULT; RIGHT TO MAKE GUARANTY DEMAND

  	
   

  
	
   

  	
   

  
	
  4.1

  	
  NOTICE OF LOAN DEFAULT

  	
   

  
	
  4.2.

  	
  WAIVER OR CURE BY THE SPONSOR OF COVENANT
  DEFAULTS AND LOAN PAYMENT DEFAULTS.

  	
   

  
	
  4.3.

  	
  OBLIGATIONS OF SPONSOR WITH RESPECT TO
  ESTABLISHED FRANCHISEE LOANS

  	
   

  
	
  4.4.

  	
  RIGHTS DURING RESPONSE PERIOD

  	
   

  
	
  4.5.

  	
  RIGHTS AFTER RESPONSE PERIOD AND FOR LOAN
  DEFAULTS OTHER THAN LOAN PAYMENT DEFAULTS

  	
   

  
	
   

  	
   

  
	
  ARTICLE V REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
   

  	
   

  
	
  5.1.

  	
  EXISTENCE; POWER

  	
   

  
	
  5.2.

  	
  ORGANIZATIONAL POWER; AUTHORIZATION

  	
   

  
	
  5.3.

  	
  GOVERNMENTAL APPROVALS; NO CONFLICTS

  	
   

  
	
  5.4.

  	
  FINANCIAL STATEMENTS

  	
   

  
	
  5.5.

  	
  LITIGATION AND ENVIRONMENTAL MATTERS

  	
   

  
	
  5.6.

  	
  COMPLIANCE WITH LAWS AND AGREEMENTS

  	
   

  
	
  5.7.

  	
  INVESTMENT COMPANY ACT, ETC.

  	
   

  
	
  5.8.

  	
  TAXES

  	
   

  
	
  5.9.

  	
  RESERVED

  	
   

  
	
  5.10.

  	
  ERISA

  	
   

  
	
  5.11.

  	
  OWNERSHIP OF PROPERTY

  	
   

  
	
  5.12.

  	
  DISCLOSURE

  	
   

  
	
  5.13.

  	
  LABOR RELATIONS

  	
   

  
	
  5.14.

  	
  SUBSIDIARIES

  	
   

  
	
  5.15.

  	
  REPRESENTATIONS AND WARRANTIES WITH
  RESPECT TO SPECIFIC LOANS

  	
   

  

 

 

	
  ARTICLE VI
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  
	
  6.1.

  	
  FINANCIAL STATEMENTS AND OTHER
  INFORMATION

  	
   

  
	
  6.2.

  	
  NOTICES OF MATERIAL EVENTS

  	
   

  
	
  6.3.

  	
  EXISTENCE; CONDUCT OF BUSINESS

  	
   

  
	
  6.4.

  	
  COMPLIANCE WITH LAWS, ETC.

  	
   

  
	
  6.5.

  	
  PAYMENT OF OBLIGATIONS

  	
   

  
	
  6.6.

  	
  BOOKS AND RECORDS

  	
   

  
	
  6.7.

  	
  VISITATION, INSPECTION, ETC.

  	
   

  
	
  6.8.

  	
  MAINTENANCE OF PROPERTIES; INSURANCE

  	
   

  
	
  6.9.

  	
  USE OF PROCEEDS AND LETTERS OF CREDIT

  	
   

  
	
  6.10.

  	
  ADDITIONAL SUBSIDIARIES

  	
   

  
	
  6.11.

  	
  POST-CLOSING
  REQUIREMENTS.

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII FINANCIAL
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  7.1.

  	
  TOTAL DEBT TO EBITDA RATIO

  	
   

  
	
  7.2.

  	
  TOTAL ADJUSTED DEBT TO TOTAL ADJUSTED
  CAPITAL RATIO.

  	
   

  
	
  7.3.

  	
  FIXED CHARGE COVERAGE RATIO

  	
   

  
	
  7.4.

  	
  MINIMUM CONSOLIDATED NET WORTH

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  
	
  8.1.

  	
  INDEBTEDNESS.

  	
   

  
	
  8.2.

  	
  NEGATIVE PLEDGE

  	
   

  
	
  8.3.

  	
  FUNDAMENTAL CHANGES

  	
   

  
	
  8.4.

  	
  INVESTMENTS, LOANS, ETC.

  	
   

  
	
  8.5.

  	
  RESTRICTED PAYMENTS

  	
   

  
	
  8.6.

  	
  SALE OF ASSETS

  	
   

  
	
  8.7.

  	
  TRANSACTIONS WITH AFFILIATES

  	
   

  
	
  8.8.

  	
  RESTRICTIVE AGREEMENTS

  	
   

  
	
  8.9.

  	
  SALE AND LEASEBACK TRANSACTIONS

  	
   

  
	
  8.10.

  	
  AMENDMENT TO MATERIAL
  DOCUMENTS

  	
   

  
	
  8.11.

  	
  ACCOUNTING CHANGES

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX CREDIT
  EVENTS AND REMEDIES

  	
   

  
	
   

  	
   

  
	
  ARTICLE X
  GUARANTY

  	
   

  
	
   

  	
   

  
	
  10.1

  	
  UNCONDITIONAL GUARANTY

  	
   

  
	
  10.2

  	
  LIMITATION ON GUARANTY OF STARTUP FRANCHISEE
  LOANS

  	
   

  
	
  10.3.

  	
  CONTINUING GUARANTY

  	
   

  
	
  10.4

  	
  WAIVERS

  	
   

  
	
  10.5

  	
  ADDITIONAL ACTIONS

  	
   

  
	
  10.6

  	
  ADDITIONAL WAIVERS

  	
   

  
	
  10.7

  	
  POSTPONEMENT OF OBLIGATIONS

  	
   

  
	
  10.8

  	
  EFFECT ON ADDITIONAL GUARANTIES

  	
   

  
	
  10.9

  	
  RELIANCE ON GUARANTY AND PURCHASE OBLIGATION;
  DISCLAIMER OF LIABILITY

  	
   

  
	
  10.10

  	
  REINSTATEMENT OF OBLIGATIONS

  	
   

  
	
  10.11

  	
  RIGHT TO BRING SEPARATE ACTION

  	
   

  
	
  10.12

  	
  SUBORDINATION OF LIENS

  	
   

  
	
  10.13

  	
  EXERCISE OF REMEDIES WITH RESPECT TO
  COLLATERAL

  	
   

  
	
  10.14

  	
  RIGHTS OF SPONSOR UPON PAYMENT;
  COOPERATION BY SERVICER

  	
   

  
	
   

  	
   

  
	
  ARTICLE XI INDEMNIFICATION

  	
   

  

 

 

	
  11.1

  	
  INDEMNIFICATION

  	
   

  
	
  11.2

  	
  NOTICE OF PROCEEDINGS; RIGHT TO DEFEND

  	
   

  
	
  11.3

  	
  THIRD PARTY BENEFICIARIES

  	
   

  
	
   

  	
   

  
	
  ARTICLE XII
  SURVIVAL OF LOAN FACILITY

  	
   

  
	
   

  	
   

  
	
  ARTICLE XIII
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
   

  
	
  13.1

  	
  RECEIPT OF DOCUMENTS

  	
   

  
	
  13.2.

  	
  TERMINATION OF
  EXISTING LOAN FACILITY AGREEMENT

  	
   

  
	
  13.3.

  	
  EFFECTIVENESS OF THIS AGREEMENT

  	
   

  
	
   

  	
   

  
	
  ARTICLE XIV
  THE SERVICER

  	
   

  
	
   

  	
   

  
	
  14.1

  	
  APPOINTMENT OF SERVICER AS AGENT

  	
   

  
	
  14.2

  	
  NATURE OF DUTIES OF SERVICER

  	
   

  
	
  14.3

  	
  LACK OF RELIANCE ON THE SERVICER

  	
   

  
	
  14.4

  	
  CERTAIN RIGHTS OF THE SERVICER

  	
   

  
	
  14.5

  	
  RELIANCE BY SERVICER

  	
   

  
	
  14.6

  	
  INDEMNIFICATION OF SERVICER

  	
   

  
	
  14.7

  	
  THE
  SERVICER IN ITS INDIVIDUAL CAPACITY

  	
   

  
	
  14.8

  	
  HOLDERS OF PARTICIPATION CERTIFICATES

  	
   

  
	
   

  	
   

  
	
  ARTICLE XV
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  15.1

  	
  NOTICES

  	
   

  
	
  15.2

  	
  AMENDMENTS, ETC

  	
   

  
	
  15.3

  	
  NO
  WAIVER; REMEDIES CUMULATIVE

  	
   

  
	
  15.4

  	
  PAYMENT OF EXPENSES, ETC.

  	
   

  
	
  15.5

  	
  RIGHT OF SETOFF

  	
   

  
	
  15.6

  	
  BENEFIT OF AGREEMENT; ASSIGNMENTS;
  PARTICIPATIONS

  	
   

  
	
  15.7

  	
  GOVERNING LAW; SUBMISSION TO JURISDICTION

  	
   

  
	
  15.8

  	
  COUNTERPARTS

  	
   

  
	
  15.9

  	
  SEVERABILITY

  	
   

  
	
  15.10

  	
  INDEPENDENCE OF COVENANTS

  	
   

  
	
  15.11

  	
  NO JOINT VENTURE

  	
   

  
	
  15.12

  	
  REPURCHASE RIGHT

  	
   

  
	
  15.13

  	
  CONFIDENTIALITY

  	
   

  
	
  15.14

  	
  HEADINGS DESCRIPTIVE; ENTIRE AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  
	
  Exhibit A - Form of Assignment and Acceptance Agreement

  	
   

  
	
  Exhibit B - Form of Established Franchisee Loan Agreement

  	
   

  
	
  Exhibit C - Form of Guaranty Agreement

  	
   

  
	
  Exhibit D - Form of Participation Certificate

  	
   

  
	
  Exhibit E - Form of Startup Franchisee Loan Agreement

  	
   

  
	
  Exhibit F - Form of Monthly Servicing Report

  	
   

  

 

 

	
  SCHEDULES

  	
   

  
	
   

  	
   

  
	
  Schedule 1.1(a) - Pricing
  Grid

  	
   

  
	
  Schedule 1.1(b) -  Participant Commitments

  	
   

  
	
  Schedule 5.5(a) -  Litigation

  	
   

  
	
  Schedule 5.5(b) -
  Environmental Matters

  	
   

  
	
  Schedule 5.14 –
  Subsidiaries

  	
   

  
	
  Schedule 8.1 - Outstanding
  Indebtedness

  	
   

  
	
  Schedule 8.2 - Existing
  Liens

  	
   

  
	
  Schedule 8.4 – Existing
  Investments

  	
   

  

 

 

LOAN FACILITY AGREEMENT AND GUARANTY

 

THIS LOAN FACILITY AGREEMENT AND GUARANTY (the “Agreement”)  made as of this 28th day of May, 2004, by and
among AARON RENTS, INC., a Georgia corporation having its principal place of
business and chief executive office at 1100 Aaron Building, 309 East Paces
Ferry Road, N.E., Atlanta, Georgia 30305 (“Sponsor”),
SUNTRUST BANK (“SunTrust”) and each of the
other lending institutions listed on the signature pages hereto (SunTrust, such
lenders, together with any assignees thereof becoming “Participants” pursuant
to the terms of this Agreement, the “Participants”)
and SUNTRUST BANK, a banking corporation organized and existing under the laws
of Georgia having its principal office in Atlanta, Georgia, as Servicer (in
such capacity, the “Servicer”).

 

W I T N E S S
E T H:

 

WHEREAS, Sponsor has established franchise relationships with certain
rental store operators (the “Franchisees”)
across the United States to own and operate rental stores under the “Aaron’s
Sale and Lease Ownership” franchise;

 

WHEREAS, in connection therewith, Sponsor has established a loan
program with the Servicer pursuant to that certain Loan Facility Agreement and
Guaranty, dated as of March 30, 2001 (as heretofore amended, the “Existing Loan Facility Agreement”),
to provide lines of credit to the Franchisees for business purposes arising in
connection with the acquisition of such franchise rights and the opening of
rental stores and ongoing inventory financing in connection therewith;

 

WHEREAS, the commitments under the Existing Loan Facility Agreement
terminate on May 30, 2004, and Sponsor wishes to establish a new loan program
with the Participants on the terms set forth herein to replace the Existing
Loan Facility Agreement, and the Participants are willing to do so subject to
the terms and conditions set forth herein;

 

WHEREAS, Sponsor is willing, subject to the limitations set forth
herein, to repurchase such loans upon the occurrence of certain events, all as
more fully set forth below;

 

THEREFORE, upon the terms and conditions hereinafter stated, and in
consideration of the mutual premises set forth above and other adequate
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:

 

 

DEFINITIONS

 

Definitions.  In addition to the
other terms defined herein, the following terms used herein shall have the
meanings herein specified (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):

 

“Aaron’s Proprietary System”
shall mean the Sponsor’s proprietary point of sale software system, as modified
from time to time, used by the Sponsor and its franchisees.

 

“Acquisition” means any
transaction in which the Sponsor or any of its Subsidiaries directly or
indirectly (i) acquires any property with which an ongoing business is
conducted or is to be conducted, (ii) acquires all or substantially all of the
assets of any Person or division thereof, whether through a purchase of assets,
merger or otherwise, (iii) acquires (in one transaction or as the most recent
transaction in a series of transactions) control of at least a majority of the
voting stock of a corporation, other than the acquisition of voting stock of a
wholly-owned Subsidiary solely in connection with the organization and
capitalization of that Subsidiary by the Sponsor or another Guarantor, or (iv)
acquires control of more than 50% ownership interest in any partnership, joint
venture or limited liability company.

 

“Adjusted LIBO Rate” shall
mean, with respect to each Payment Period, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:

 

	
  “Adjusted LIBO Rate”

  	
  =

  	
  LIBOR

  
	
   

  	
   

  	
  1.00 - LIBOR Reserve Percentage

  

 

As used herein, LIBOR Reserve Percentage shall mean, for any Payment
Period for any Funded Participant’s Interest outstanding hereunder, the reserve
percentage (expressed as a decimal) equal to the then stated maximum rate of
all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) applicable to any member
bank of the Federal Reserve System in respect of Eurocurrency liabilities as
defined in Regulation D (or against any successor category of liabilities
as defined in Regulation D).

 

“Advance” shall mean a funding
of a loan to a Borrower by the Servicer pursuant to such Borrower’s Loan
Commitment.

 

Affiliate” shall
mean, as to any Person, any other Person that directly, or indirectly through
one or more intermediaries, Controls, is Controlled by, or is under common
Control with, such Person. For purposes of this definition “Control” shall mean the power,
directly or indirectly, either to (i) vote 10% or more of securities having
ordinary voting power for the election of directors (or persons performing
similar functions) of a Person or (ii) direct or cause

 

 

the direction of the management and policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms “Controlling”, “Controlled by”, and “under common Control with” have
meanings correlative thereto.

 

“Agreement” shall mean this
Loan Facility Agreement and Guaranty, as amended, restated, supplemented or
modified from time to time.

 

“Amortization Period” shall
mean (x) 18 months with respect to any Advance to a Startup Franchisee Borrower
other than an Electronic Equipment Advance and (y) 24 months with respect to
any Electronic Equipment Advance; provided, however, in the event
any Startup Franchisee Loan Commitment to a Startup Franchisee Borrower is
terminated upon 90 days’ notice from the Servicer, all amounts due and payable
with respect to Electronic Equipment Advances shall be due and payable in full
no later than the 18-month anniversary of the termination of the Startup
Franchisee Loan Commitment.

 

“Applicable Established Margin”
shall mean, with respect to all Funded Established Franchisee Participant’s
Interest, as of any date, the percentage per annum determined by reference to
the applicable Total Debt to EBITDA Ratio in effect on such date for
Established Franchisee Loans as set forth on Schedule 1.1(a)
attached hereto; provided, that a change in the Applicable Established Margin
resulting from a change in the Total Debt to EBITDA Ratio shall be effective on
the second day after which the Sponsor has delivered the financial statements
required by Section 6.1(a) or (b) and the compliance certificate
required by Section 6.1(c); provided,  further, that
if at any time the Sponsor shall have failed to deliver such financial
statement and such certificate, the Applicable Established Margin shall be at
Level IV until such time as such financial statements and certificates are
delivered, at which time the Applicable Established Margin shall be determined
as provided above.  Notwithstanding the
foregoing, the Applicable Established Margin from the Effective Date until the
financial statement and compliance certificate for the fiscal quarter ending on
June 30, 2004 are delivered shall be at Level II.

 

“Applicable Percentage” shall
mean, with respect to the Commitment Fee, as of any date, the percentage per
annum determined by reference to the applicable Total Debt to EBITDA Ratio in
effect on such date as set forth on Schedule 1.1(a) attached
hereto; provided, that a change in the Applicable Percentage resulting from a
change in the Total Debt to EBITDA Ratio shall be effective on the second day
after which the Sponsor has delivered the financial statements required by Section 6.1(a)
or (b) and the compliance certificate required by Section 6.1(c);
provided,  further, that if at any time the Sponsor shall have
failed to deliver such financial statement and such certificate, the Applicable
Percentage shall be at Level IV until such time as such financial statements
and certificates are delivered, at which time the Applicable Percentage shall
be determined as provided above. 
Notwithstanding the foregoing, the Applicable Percentage from the
Effective Date until the financial statement and compliance certificate for the
fiscal quarter ending on June 30, 2004 are delivered shall be at Level II.

 

 

“Applicable Startup Margin”
shall mean, with respect to all Funded Startup Franchisee Participant’s
Interest, as of any date, the percentage per annum determined by reference to
the applicable Total Debt to EBITDA Ratio in effect on such date for Startup
Franchisee Loans as set forth on Schedule 1.1(a) attached hereto;
provided, that a change in the Applicable Startup Margin resulting from a
change in the Total Debt to EBITDA Ratio shall be effective on the second day
after which the Sponsor has delivered the financial statements required by Section 6.1(a)
or (b) and the compliance certificate required by Section 6.1(c);
provided,  further, that if at any time the Sponsor shall have
failed to deliver such financial statement and such certificate, the Applicable
Startup Margin shall be at Level IV until such time as such financial
statements and certificates are delivered, at which time the Applicable Startup
Margin shall be determined as provided above. 
Notwithstanding the foregoing, the Applicable Startup Margin from the
Effective Date until the financial statement and compliance certificate for the
fiscal quarter ending on June 30, 2004 are delivered shall be at Level II.

 

“Asset Disposition” shall mean
(i) all sales of Merchandise; (ii) all Rental/Purchase Contracts with
respect to Merchandise with a “same as cash option” regardless of term (i.e.,
90, 120, 180 days); (iii) all Merchandise which is determined to have been
stolen; (iv) all Merchandise that is destroyed, lost or otherwise removed
from the premises of a Borrower other than pursuant to a Rental/Purchase Contract
or by outright sale or for repair work; and (v) all “skipped” Merchandise
which is Merchandise subject to a Rental/Purchase Contract.

 

“Assignment and Acceptance”
shall mean an assignment and acceptance entered into by a Participant and an
Eligible Assignee in accordance with the terms of this Agreement and
substantially in the form of Exhibit A.

 

“Authorized Signatory” shall
mean each officer of Sponsor specified from time to time in an appropriate
certificate to the Servicer as authorized to execute Funding Approval Notices
and other such documents relating to the Loan Documents.

 

“Bankruptcy Code” shall mean
The Bankruptcy Code of 1978, as amended and in effect from time to time (11
U.S.C. §101 et  seq.).

 

“Borrower” shall mean either
an Established Franchisee Borrower or a Startup Franchisee Borrower, as the
case may be.

 

“Borrower Group” shall mean,
for any Borrower, collectively, such Borrower and each other Person directly or
indirectly controlling, controlled by, or under common control with, such Borrower,
whether through the ownership of voting securities, by contract or
otherwise.  For purposes of this
definition, “control” of any person or entity means the possession, directly or
indirectly, of the right to vote at least 25% of the issued and outstanding
shares of voting securities policies of that person or entity.

 

“Borrower Rate” shall mean,
with respect to each Loan, the Prime Rate per annum plus any additional margin
per annum specified for such Loan by Sponsor in the applicable Funding

 

 

Approval Notice, such margin not to exceed ten percent (10.0%) per
annum calculated based upon the actual number of days elapsed in a 360 day
year; provided that, at no time may there be more than two different Borrower
Rates applicable to the Startup Franchisee Loans or more than two different
Borrower Rates applicable to the Established Franchisee Loans.

 

“Business
Day” shall mean (i) any day other than a Saturday, Sunday or
other day on which commercial banks in Atlanta, Georgia are authorized or
required by law to close and  (ii) if
such day relates to Adjusted LIBOR, any day on which dealings in Dollars are
carried on in the London interbank market.

 

“Capital
Lease Obligations” of any Person shall mean all obligations of
such Person to pay rent or other amounts under any lease (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in
accordance with GAAP.

 

“Change in Control” shall mean the
occurrence of one or more of the following events: (a) any sale, lease,
exchange or other transfer (in a single transaction or a series of related
transactions) of all or substantially all of the assets of the Sponsor to any
Person or “group” (within the meaning of the Securities Exchange Act of 1934
and the rules of the Securities and Exchange Commission thereunder in effect on
the date hereof),  (b) the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person or
“group” (within the meaning of the Securities Exchange Act of 1934 and the rules
of the Securities and Exchange Commission thereunder as in effect on the date
hereof) other than the Loudermilk Family of 331/3 % or more of the
total voting power of shares of stock entitiled to vote in the election of
directors of the Sponsor; or (c) occupation of a majority of the seats (other
than vacant seats) on the board of directors of the Sponsor by Persons who were
neither (i) nominated by the current board of directors or (ii) appointed by
directors so nominated.

 

“Closing Date” shall mean, for
any Loan, the date upon which the Loan Documents with respect to such Loan are
executed and delivered and the Loan Commitment is established thereunder.

 

“Code”
shall mean the Internal Revenue Code of 1986, as amended and in effect from
time to time.

 

“Collateral” shall mean, with
respect to any Loan, all property of the Borrower and all guarantors obligated
with respect to such Loan that secures such Loan, which property shall be
designated by the Sponsor and may include all accounts receivable, inventory,
Rental/Purchase Contracts and other business assets of such Borrower and
guarantors.

 

“Collateral Agreement” shall
mean an agreement executed by a Borrower and any other Persons primarily or
secondarily liable for all or part of the Loan or granting a security interest
to the Servicer in specified Collateral as security for such Loan, including
without limitation, any Loan Agreements and any Personal Guaranties.

 

 

“Commitments” shall mean,
collectively, the Startup Franchisee Commitment and the Established Franchisee
Commitment.

 

“Commitment Fee” shall have
the meaning set forth in Section 2.4.

 

“Commitment Termination Date”
shall have the meaning set forth in Section 2.1(a).

 

“Consolidated Companies” shall
mean, collectively, Sponsor and all of its Subsidiaries.

 

“Consolidated EBITDA” shall
mean, for the Sponsor and its Subsidiaries for any period, an amount equal to
the sum of (a) Consolidated Net Income for such period plus
(b) to the extent deducted in determining Consolidated Net Income for such
period, (i) Consolidated Interest Expense, (ii) income tax expense, (iii)
depreciation (excluding depreciation of rental merchandise) and amortization
and (iv) all other non-cash charges, determined on a consolidated basis in
accordance with GAAP in each case for such period.

 

“Consolidated
EBITDAR” shall mean, for the Sponsor and its Subsidiaries for
any period, an amount equal to the sum of (a) Consolidated EBITDA and (b)
Consolidated Lease Expense.

 

“Consolidated
Fixed Charges” shall mean, for the Sponsor and its Subsidiaries
for any period, the sum (without duplication) of (a) Consolidated Interest
Expense for such period and (b) Consolidated Lease Expense for such period.

 

“Consolidated
Interest Expense” shall mean, for the Sponsor and its
Subsidiaries for any period determined on a consolidated basis in accordance
with GAAP, total cash interest expense, including without limitation the
interest component of any payments in respect of Capital Leases Obligations
capitalized or expensed during such period  (whether or
not actually paid during such period).

 

“Consolidated
Lease Expense” shall mean, for any period, the aggregate amount
of fixed and contingent rentals payable by the Sponsor and its Subsidiaries
with respect to leases of real and personal property  (excluding Capital Lease Obligations)
determined on a consolidated basis in accordance with GAAP for such period.

 

“Consolidated
Net Income” shall mean, for any period, the net income (or loss)
of the Sponsor and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, but excluding therefrom (to the
extent otherwise included therein) (i) any extraordinary gains or losses,
(ii) any gains attributable to write-ups of assets and (iii) any equity
interest of the Sponsor or any Subsidiary of the Sponsor in the unremitted
earnings of any Person that is not a Subsidiary and (iv) any income (or loss)
of any Person accrued prior to the date it becomes a Subsidiary or is merged
into or consolidated with the Sponsor or any Subsidiary on the date that such
Person’s assets are acquired by the sponsor or any Subsidiary.

 

“Consolidated Net Worth” shall
mean, as of any date of determination, the Sponsor’s total shareholders’
equity, determined in accordance with GAAP.

 

 

“Consolidated
Total Adjusted Capital” shall mean, as of any date of
determination with respect to the Sponsor, the sum of (i) Consolidated Total
Adjusted Debt as of such date and (ii) Consolidated Net Worth as of such date.

 

“Consolidated
Total Adjusted Debt” shall mean, as of any date of
determination, (i) Consolidated Total Debt, plus (ii) to
the extent not included in clause (i), all operating lease obligations of
Sponsor and its Subsidiaries measured at the present value of such obligations
(using a 10% discount rate).

 

“Consolidated
Total Debt” shall mean, at any time, all then currently
outstanding obligations, liabilities and indebtedness of the Sponsor and its
subsidiaries on a consolidated basis of the types described in the definition
of Indebtedness (other than as described in subsection (xi) thereof).  Notwithstanding anything contained herein to
the contrary, for purposes of calculating Consolidated Total Debt as of any
date, the obligations, liabilities and indebtedness of the Sponsor under this
Agreement shall be limited to fifty percent (50%) of the aggregate outstanding
principal amount of the Loans on such date.

 

“Credit Event” shall have the
meaning set forth in Article IX of this Agreement.

 

“Credit Parties” shall mean,
collectively, each of the Sponsor and the Guarantors.

 

“Default Waiver Letter” shall
mean a waiver letter sent by Sponsor to the Servicer which such waiver letter
shall (i) waive and cure a Loan Payment Default or (ii) waive a covenant
default with respect to a Loan that does not constitute a Loan Default, such
waiver letter to be substantially in the form required in the Servicing
Agreement.

 

“Defaulted Borrower” shall
mean a Borrower under a Defaulted Loan.

 

“Defaulted Loan” shall mean a
Loan evidenced by Loan Documents under the terms of which exist one or more
Loan Defaults that have not been cured or waived as permitted herein.

 

“Dollar” and “U.S. Dollar” and the sign “$”
shall mean lawful money of the United States of America.

 

“Domestic
Subsidiary” means any Subsidiary that is incorporated or
organized under the laws of any State of the United States, the District of
Columbia or Puerto Rico.

 

“Effective Date” shall mean
the date upon which all conditions precedent to the effectiveness of this
Agreement have been satisfied.

 

“Electronic Equipment” shall
mean all computers, computer equipment, big screen televisions and any other
types of inventory designated by the Sponsor from time to time.

 

“Electronic Equipment Advances”
shall mean all advances under Startup Franchisee Loan Commitments made to
purchase  Electronic Equipment for which
the Sponsor and the Startup Franchisee Borrower have agreed that the
Amortization Period shall be 24 months.

 

 

“Electronic Equipment Asset Dispositions”
shall mean all  Asset Dispositions of Electronic
Equipment for which the Sponsor and the Startup Franchisee Borrower have agreed
that the Amortization Period shall be 24 months.

 

“Electronic Rental Revenue”
shall mean, with respect to any Borrower for any period, the gross revenues of
such Borrower from rentals to the public of such Borrower’s Electronic
Equipment, including without limitation, all customer deposits, advance rental
payments, waiver fees, late fees, delivery fees, nonsufficient funds fees,
reinstatement fees, but excluding all retail sales proceeds and sales taxes.

 

“Eligible Assignee” shall mean
(i) a commercial bank organized under the laws of the United States or any
state thereof having total assets in excess of $1,000,000,000.00 or any
commercial finance or asset-based lending Affiliate of any such commercial bank
and (ii) any Participant.

 

“Environmental
Laws” shall mean all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, the management, Release or threatened Release of any
Hazardous Material or to health and safety matters.

 

“Environmental
Liability” shall mean any liability, contingent or otherwise
(including any liability for damages, costs of environmental investigation and
remediation, costs of administrative oversight, fines, natural resource
damages, penalties or indemnities), of the Sponsor or any Subsidiary directly
or indirectly resulting from or based upon (a) any actual or alleged violation
of any Environmental Law, (b) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials, (c) any actual or
alleged exposure to any Hazardous Materials, (d) the Release or threatened
Release of any Hazardous Materials or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.

 

“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended from
time to time, and any successor statute.

 

“ERISA
Affiliate” shall mean any trade or business (whether or not
incorporated), which, together with the Sponsor, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for the
purposes of Section 302 of ERISA and Section  412 of the Code, is
treated as a single employer under Section 414 of the Code.

 

“ERISA
Event” shall mean
(a) any “reportable event”, as defined in Section 4043 of ERISA or the
regulations issued thereunder with respect to a Plan (other than an event for
which the 30-day notice period is waived); (b) the existence with respect to
any Plan of an “accumulated funding deficiency” (as defined in Section 412
of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Sponsor or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Sponsor or any ERISA Affiliate
from the PBGC or a plan administrator appointed by the PBGC of any

 

 

notice relating to an intention to terminate
any Plan or Plans or to appoint a trustee to administer any Plan; (f) the
incurrence by the Sponsor or any of its ERISA Affiliates of any liability with
respect to the withdrawal or partial withdrawal from any Plan or Multiemployer
Plan; or (g) the receipt by the Sponsor or any ERISA Affiliate of any notice,
or the receipt by any Multiemployer Plan from the Sponsor or any ERISA
Affiliate of any notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA.

 

“Established Franchisee” shall
mean a Franchisee that (x) has been a Franchisee for at least 18 months; (y)
has had at least two Aaron Rents’ stores open for a minimum of 12 months; and
(z) has at least four Aaron Rents’ stores open or under executed area
development agreements.

 

“Established Franchisee Borrower”
shall mean an Established Franchisee who is primarily liable for repayment of
an Established Franchisee Loan as a result of having executed Loan Documents as
maker, or its permitted assignee.

 

 “Established
Franchisee Borrowing Base” shall mean, with respect to each
Established Franchisee Borrower, on any date of determination, the sum of:

 

(i) $300,000 for each Aaron Rents franchisee
store operated by such Borrower where less than 7 calendar months have elapsed
since the Opening Date of such store, plus

 

(ii) an amount equal to 5.5 multiplied by the
sum of (x) the Rental Revenue from the most recently ended calendar month for
all Aaron Rents franchisee stores operated by such Borrower where at least 6
calendar months but less than 12 calendar months have elapsed since the Opening
Date of each such store, plus (y) the average monthly Rental Revenue for the
three most recently ended calendar months from all Aaron Rents franchisee
stores operated by such Borrower where at least 12 calendar months have elapsed
since the Opening Date of each such store, in each case as reported to Servicer
by Sponsor pursuant to the Servicing Agreement, plus

 

(iii) an amount equal to 11.0 multiplied by
the sum of (x) the Electronic Rental Revenues from the most recently ended
calendar month for all franchisee stores operated by such Borrower where at
least 6 calendar months but less than 12 calendar months have elapsed since the
Opening Date of each such store, plus (y) the average monthly Electronic Rental
Revenues for the three most recently ended calendar months from all Aaron Rents
franchisee stores operated by such Borrower where at least 12 calendar months
have elapsed since the Opening Date of such store, in each case as reported to
Servicer by Sponsor pursuant to the Servicing Agreement.

 

“Established Franchisee Commitment”
shall have the meaning set forth in Section 2.1(b).

 

 

“Established Franchisee Line of Credit
Commitment” shall mean a commitment to make Established
Franchisee Line of Credit Loans to an Established Franchisee Borrower pursuant
to an Established Franchisee Loan Agreement.

 

“Established Franchisee Line of Credit Loans”
shall mean Advances made to an Established Franchisee Borrower pursuant to an
Established Franchisee Line of Credit Commitment.

 

“Established Franchisee Loan” shall
mean either an Established Franchisee Term Loan or an Established Franchisee
Line of Credit Loan, as the case may be.

 

“Established Franchisee Loan Agreement” shall mean a Loan and Security Agreement setting forth
the terms and conditions, as between an Established Franchisee Borrower and the
Servicer, under which the Servicer has established a Loan Commitment to make
Advances to such Established Franchisee Borrower pursuant to the Established
Franchisee Loan Commitment, substantially in the form of Exhibit B, with
such changes as the Sponsor and the Servicer shall agree to; provided, however,
that any Established Franchisee Loan Agreement executed prior to the Effective
Date shall be substantially in the form required under the Existing Facility
Agreement.

 

“Established Franchisee Loan Commitment”
shall mean, either, an Established Franchisee Line of Credit Commitment or an
Established Franchisee Term Loan Commitment, as the case may be.

 

“Established Franchisee Master Line of Credit
Note” shall mean that certain Master Line of Credit Note,
executed by an Established Franchisee Borrower in favor of the Servicer,
evidencing such Established Franchisee Borrower’s obligation to repay all
Established Franchisee Line of Credit Loans made to it pursuant to an
Established Franchisee Line of Credit Commitment, substantially in the form of
Exhibit A-1 to the Established Franchisee Loan Agreement, with such changes as
the Sponsor and the Servicer shall agree to from time to time.

 

“Established Franchisee
Master Note” shall mean collectively, the
Established Franchisee Master Term Notes and the Established Franchisee Master
Line of Credit Notes; provided that any Established Franchisee Master
Note executed prior to the Effective Date shall be substantially in the form
required under the Existing Loan Facility Agreement.

 

“Established Franchisee Master Term Note”
shall mean that certain Master Term Note, executed by an Established Franchisee
Borrower in favor of the Servicer, evidencing such Established Franchisee
Borrower’s obligation to repay all Established Franchisee Term Loans made to it
pursuant to an Established Franchisee Term Loan Commitment, substantially in
the form of Exhibit A-2 to the Established Franchisee Loan Agreement, with such
changes as the Sponsor and the Servicer shall agree to from time to time.

 

 

“Established Franchisee Term Loan Commitment”
shall mean a commitment to make Established Franchisee Term Loans to an
Established Franchisee Borrower pursuant to an Established Franchisee Loan
Agreement.

 

“Established Franchisee Term Loans”
shall mean Advances made to an Established Franchisee Borrower pursuant to an
Established Franchisee Term Loan Commitment.

 

“Existing Commitments” means
any of the commitments to make loans made by the Servicer pursuant to the
Existing Loan Facility Agreement as in effect from time to time.

 

“Existing Loan Facility Agreement”
shall have the meaning set forth in the recitals hereof.

 

“Existing Loan” means any of
the loans made by the Servicer pursuant to the Existing Loan Facility Agreement
as in effect from time to time.

 

“Existing Note” means any of
the promissory notes from the Borrowers to the Servicer substantially in the
form attached to the Existing Loan Facility Agreement as in effect from time to
time.

 

“Facility” shall mean either
the loan facility established pursuant to the Startup Franchisee Commitment or
the loan facility established pursuant to the Established Franchisee
Commitment, as the case may be.

 

“Federal Funds Rate” shall
mean, for any day, the rate per annum (rounded upwards, if necessary, to the
next 1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with member banks of the Federal Reserve
System arranged by Federal funds brokers, as published by the Federal Reserve
Bank of New York on the next succeeding Business Day or if such rate is not so
published for any Business Day, the Federal Funds Rate for such day shall be
the average rounded upwards, if necessary, to the next 1/100th of 1% of the
quotations for such day on such transactions received by the Servicer from
three Federal funds brokers of recognized standing selected by the Servicer.

 

“Fee Letter” shall mean that
certain letter agreement dated as of even date herewith, by and between the
Sponsor and the Servicer, setting forth certain fees applicable to the loan
facility described herein, either as originally executed or as hereafter
amended or modified.

 

“Final Termination Date” shall
mean the date that is ninety (90) days after the last Maturity Date of the
Loans.

 

“Financing Statement” shall
mean, with respect to a Loan, a document that among other things, describes the
Sponsor and the Collateral, the proper filing of which perfects a security
interest in the Collateral described therein under the laws of the state in
which such document is filed.

 

 

“Fiscal
Year” shall
mean a fiscal year of the Sponsor; references to a Fiscal Year with a number
corresponding to any calendar year (e.g., the “Fiscal  Year 2004”) refers to the Fiscal Year ending
during such calendar year.

 

“Fixed
Charge Coverage Ratio” shall mean, at any date, the ratio of (a)
Consolidated EBITDAR for the four consecutive fiscal quarters of the Sponsor
ending on such date to (b) Consolidated Fixed Charges for the four consecutive
fiscal quarters of the Sponsor ending on such date.

 

“Foreign
Subsidiary” shall mean any Subsidiary that is not a Domestic
Subsidiary.

 

“Franchise Agreement” shall
mean the written agreement between Sponsor and a Franchisee whereby the
Franchisee is authorized to establish an “Aaron’s Rental Purchase” franchise.

 

“Franchisee” shall have the
meaning set forth in the recitals hereof.

 

“Franchisee Loan Program”
shall mean the transaction evidenced by (i) this Agreement wherein the Sponsor
has guaranteed, to the extent set forth herein, certain obligations of Franchisees
of the Sponsor, and (ii) the other Operative Documents executed in connection
herewith and therewith.

 

“Funded Established Franchisee Participant’s
Interest” shall mean the aggregate outstanding amount of
Advances made by a Participant hereunder with respect to the Established
Franchisee Loans, and shall include, with respect to SunTrust, the aggregate
outstanding amount of Swing Line Advances made with respect to Established
Franchisee Loans.

 

“Funded Participant’s Interest”
shall mean, with respect to any Participant, the sum of such Participant’s
Funded Startup Franchisee Participant’s Interest plus such Participant’s Funded
Established Franchisee’s Participant’s Interest.

 

“Funded Startup Franchisee Participant’s
Interest” shall mean the aggregate outstanding amount of
Advances made by a Participant hereunder with respect to the Startup Franchisee
Loans, and shall include, with respect to SunTrust, the aggregate outstanding
amount of Swing Line Advances made with respect to Startup Franchisee Loans.

 

“Funding Approval Notice”
shall mean a written notice to the Servicer from Sponsor setting forth the
conditions of a proposed Loan Commitment, consistent with the requirements
therefor as set forth in this Agreement, and containing such information and in
substantially such form as shall be agreed to by Servicer and Sponsor pursuant
to the Servicing Agreement.

 

“GAAP” shall mean generally
accepted accounting principles in the United States applied on a consistent
basis and subject to the terms of Section 1.2.

 

 

“Governmental
Authority” shall mean the government of the United States of
America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.

 

“Guarantee”
of or by any Person (the “guarantor”)
shall mean any obligation, contingent or otherwise, of the guarantor
guaranteeing or having the economic effect of guaranteeing any Indebtedness or
other obligation of any other Person (the “primary obligor”)
in any manner, whether directly or indirectly and including any obligation,
direct or indirect, of the guarantor (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation or to purchase (or to advance or supply funds for the purchase of)
any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such
Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay
such Indebtedness or other obligation or (d) as an account party in respect of
any letter of credit or letter of guaranty issued in support of such
Indebtedness or obligation; provided, that the term “Guarantee” shall
not include endorsements for collection or deposits in the ordinary course of
business. The amount of any Guarantee shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of which
Guarantee is made or, if not so stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person in good faith. The term
“Guarantee” used as a verb has a corresponding meaning.

 

“Guaranteed Obligations” shall
mean the aggregate amount of all Loan Indebtedness of all Borrowers outstanding
under all Loan Documents to include, without limitation (i) all principal,
interest and commitment fees due with respect to all Loans, including
post-petition interest in any proceeding under federal bankruptcy laws, (ii)
all fees, expenses, and amounts payable by all Borrowers for reimbursement or
indemnification under the terms of all Loan Agreements and all other Loan
Documents executed in connection with the Loan to such Borrower, (iii) all
amounts advanced by Servicer to protect or preserve the value of any security
for the Loans, and (iv) all renewals, extensions, modifications, and
refinancings (in whole or in part) of any of the amounts referred to in clauses
(i) and (ii) above).

 

“Guarantors” shall mean,
collectively, Aaron Investment Company, Aaron Rents, Inc. Puerto Rico and all
other subsidiaries of the Sponsor that from time to time become parties to the
Guaranty Agreement and their respective successors and permitted assigns.

 

“Guaranty Agreement” shall
mean the Guaranty Agreement executed by each of the Subsidiaries of the Sponsor
in favor of the Servicer and the Participants, substantially in the form of Exhibit C,
as the same may be amended, restated, supplemented or otherwise modified from
time to time

 

“Hazardous
Materials” means all
explosive or radioactive substances or wastes and all hazardous or toxic
substances, wastes or other pollutants, including petroleum or petroleum

 

 

distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

 

“Indebtedness”
of any Person shall mean, without duplication (i) all obligations of such
Person for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of the deferred purchase price of property or services
(other than trade payables incurred in the ordinary course of business; provided,
that for purposes of Section 9.6, trade payables overdue by more
than 120 days shall be included in this definition except to the extent that
any of such trade payables are being disputed in good faith and by appropriate
measures), (iv) all obligations of such Person under any conditional sale or
other title retention agreement(s) relating to property acquired by such Person,
(v) all Capital Lease Obligations of such Person, (vi) all obligations,
contingent or otherwise, of such Person in respect of letters of credit,
acceptances or similar extensions of credit, (vii) all Guarantees of such
Person of the type of Indebtedness described in clauses (i) through (vi) above,
(viii) all Indebtedness of a third party secured by any Lien on property owned
by such Person, whether or not such Indebtedness has been assumed by such
Person, (ix) all obligations of such Person, contingent or otherwise, to
purchase, redeem, retire or otherwise acquire for value any common stock of
such Person, and (x) Off-Balance Sheet Liabilities.  The Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer, except to the extent that the
terms of such Indebtedness provide that such Person is not liable therefor.

 

“Indemnity
and Contribution Agreement” shall mean the Indemnity,
Subrogation and Contribution Agreement, substantially in the form of Exhibit
H, among the Sponsor, the Guarantors and the Servicer, as amended,
restated, supplemented or otherwise modified from time to time.

 

“LIBOR”
shall mean, for each Payment Period, the offered rate for deposits in U.S.
Dollars, for a period of one month and in an amount comparable to the aggregate
outstanding Funded Participant’s Interests as of the first day of such Payment
Period, appearing on the display designated as Page 3750 on the Dow Jones
Markets Service (or such other page on that service or such other service
designated by the British Banker’s Association for the display of such
Association’s Interest Settlement Rates for Dollar deposits) as of 11:00 A.M.
(London, England time) on the day that is two Business Days prior to the first
day of the Payment Period.  If such Page
3750 is unavailable for any reason at such time, the rate which appears on the
Reuters Screen ISDA Page as of such date and such time; provided, that
if the Servicer determines that the relevant foregoing sources are unavailable
for the relevant Payment Period, LIBOR shall mean the rate of interest
determined by the Servicer to be the average (rounded upward, if necessary, to
the nearest 1/100th of 1%) of the rates per annum at which deposits
in Dollars are offered to the Servicer two (2) Business Days preceding the
first day of such Interest Period by leading banks in the London interbank
market as of 10:00 a.m. for delivery on the first day of such Payment Period,
for the number of days comprised therein and in an amount comparable to the
amount of the Funded Participant’s Interest of the Servicer.

 

“Lien” shall mean any
mortgage, pledge, security interest, lien (statutory or otherwise), charge,
encumbrance, hypothecation, assignment, deposit arrangement, or other
arrangement having the practical effect of the foregoing or any preference,
priority or other security agreement

 

 

or preferential arrangement of any kind or nature whatsoever (including
any conditional sale or other title retention agreement and any capital lease
having the same economic effect as any of the foregoing).  A covenant not to grant a Lien or a “Negative
Pledge” shall not be determined  a Lien
for purposes of this Agreement.

 

“Loan” shall mean either a
Startup Franchisee Loan, an Established Franchisee Loan or an Existing Loan, as
the case may be.

 

“Loan Agreement” shall mean
either a Startup Franchisee Loan Agreement or an Established Franchisee Loan
Agreement as the case may be.

 

“Loan Commitment” shall mean
the commitment to make Advances established by the Servicer in favor of any
Borrower in the amount not exceeding, and upon the terms described in, the
applicable Funding Approval Notice and the applicable Loan Documents, which
Loan Commitment may be either a Startup Franchisee Loan Commitment or an
Established Franchisee Loan Commitment.

 

“Loan Default” shall mean the
occurrence of one or more of the following events with respect to any Loan: (i)
a Loan Payment Default, (ii) the bankruptcy or insolvency of the Borrower or
any Guarantor of such Loan, or the appointment of a receiver, trustee,
custodian or similar fiduciary for such Borrower or Guarantor, or the
assignment for the benefit of creditors by such Borrower or Guarantor, or the
offering of settlement or composition to the unsecured creditors of such
Borrower or Guarantor generally or (iii) the termination of (or failure to
renew) the Franchise Agreement to which the Borrower of such Loan is a party.

 

“Loan Documents” shall mean,
with respect to any Loan, the Loan Agreement, the Master Note, any Personal
Guaranty, any Spousal Consent, the Collateral Agreements, in each case relating
to such Loan, any other documents relating to such Loan delivered by any
Borrower or any guarantor or surety thereof to the Servicer and any amendments
thereto (provided that such amendments are made with the consent of Sponsor,
where such consent is required under this Agreement).

 

“Loan Indebtedness” shall mean
all amounts due and payable by a Borrower under the terms of the Loan Documents
governing the Loan to such Borrower, including, without limitation, outstanding
principal, accrued interest, any commitment fees, and all reasonable costs and
expenses of any legal proceeding brought by the Servicer to collect any of the
foregoing (including without limitation, reasonable attorneys’ fees actually
incurred).

 

“Loan Payment Default” shall
mean the failure of a Borrower to make a payment of principal, accrued interest
thereon or any other amounts, within the cure period following the due date
therefor, as provided under the applicable Loan Documents.

 

“Loan Term” shall mean, with
respect to any Loan, the prescribed term of the Loan Commitment relating to
such Loan, as documented in the applicable Loan Documents, and any

 

 

term-out period thereafter; provided, however, that the
Loan Term shall not exceed (x) in the case of any Startup Franchisee Loan
Commitment, one (1) year subject to extension in accordance with the terms of
the applicable Startup Franchisee Loan Agreement, plus, in the event that the
Startup Franchisee Loan Commitment is terminated upon ninety (90) days’ prior
notice from the Servicer, the Amortization Period and (y) in the case of an
Established Franchisee Loan Commitment, four (4) years.

 

“Loudermilk Family” shall
mean, collectively, Robert Charles Loudermilk, Sr., his spouse, his children,
his grandchildren and any trust which may be now or hereafter established for
the sole benefit of any of the foregoing persons.

 

“Margin Regulations” shall
mean Regulation T, Regulation U and Regulation X of the Board of Governors of
the Federal Reserve System, as the same may be in effect from time to time.

 

“Master Note”
shall mean either a Startup Franchisee Master Note or an Established Franchisee
Master Note, as the case may be.

 

“Material
Adverse Effect” shall mean, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singularly or in conjunction with any other event or events, act or
acts, condition or conditions, occurrence or occurrences whether or not
related, a material adverse change in, or a material adverse effect on,
(i) the business, results of operations, financial condition, assets,
liabilities or prospects of the Sponsor and its Subsidiaries taken as a whole,
(ii) the ability of Sponsor or the Credit Parties taken as a whole to
perform any of their respective obligations under the Operative Documents (iii)
the rights and remedies of the Servicer and the Participants under any of the
Operative Documents or (iv) the legality, validity or enforceability of any of
the Operative Documents.

 

“Material Indebtedness”
shall mean Indebtedness of any one or more of the Sponsor and the Subsidiaries
in an aggregate principal amount exceeding $1,000,000.

 

“Maturity Date” shall mean,
with respect to any Loan, the date set forth under the applicable Loan
Documents when the related Loan Commitment has terminated and all principal and
interest with respect to such Loan shall become due and payable in full; provided
that, each Maturity Date shall be a Payment Date.

 

“Maximum Amount” shall have
the meaning set forth in Section 10.2.

 

“Maximum Commitment Amount”
shall mean $110,000,000, as such amount may be reduced pursuant to
Section 2.7, Section 2.8 or Section 15.2.

 

“Merchandise” shall mean goods
distributed or sold to Franchisees through Sponsor.

 

“Minimum Purchase Price” shall
mean, with respect to any Established Franchisee Loan, the lesser of (x) the
outstanding Loan Indebtedness thereof and (y) the sum of (i) the

 

 

Established Franchisee Borrowing Base in effect on the date of the
occurrence of the relevant Loan Default, or if greater, during the last full
calendar month preceding the date of the occurrence of the relevant Loan
Default, plus (ii) all advances made between the date that such Established
Franchisee Borrowing Base is reported to the Servicer by the Sponsor and the
date which is two Business Days thereafter.

 

“Monthly Servicing Report”
shall have the meaning set forth in Section 3.3.

 

“Moody’s”
shall mean Moody’s Investors Service, Inc.

 

“Multiemployer Plan” shall
have the meaning set forth in Section 4001(a)(3) of ERISA.

 

“Note Purchase Agreement”
shall mean that certain Note Purchase Agreement, dated as of August 15,
2002, by and among Sponsor, the other Loan Parties party thereto, The
Prudential Insurance Company of America and the other purchasers signatory
thererto, as such Note Purchase Agreement may be amended, supplemented,
restated and otherewise modified from time to time.

 

“Off-Balance Sheet Liabilities” of
any Person shall mean (i) any repurchase obligation or liability of such Person
with respect to accounts or notes receivable sold by such Person,  other than indemnity obligations for any
breach of any representation or warranty which are customary in non-recourse
sales of such assets, (ii) any liability of such Person under any sale and
leaseback transactions which do not create a liability on the balance sheet of
such Person, (iii) any liability of such Person under any so-called “synthetic”
lease transaction or (iv) any obligation arising with respect to any other
transaction which is the functional equivalent of or takes the place of
borrowing but which does not constitute a liability on the balance sheet of
such Person.

 

“Opening Date” shall mean,
with respect to each store location, the date determined by the Sponsor to be
the opening date of such location in accordance with its standard practice, as
notified to the Servicer in accordance with the terms hereof.

 

“Operative Documents” shall
mean this Agreement, the Guaranty Agreement, the Indemnity, Subrogation and
Contribution Agreement, the Servicing Agreement, the Fee Letter and any other
documents delivered by Sponsor or any Guarantor to the Servicer or the
Participants in connection herewith or therewith.

 

“Participant” shall mean
SunTrust, the other lending institutions listed on the signature pages hereof
and each assignee thereof, if any, pursuant to the terms hereof.

 

“Participating Commitment”
shall mean the commitment of each Participant to fund its Pro Rata Share of
outstanding Loans in an amount not to exceed such Participant’s Participating
Commitment Amount.

 

“Participating Commitment Amount”
shall mean the amount set forth opposite each Participant’s name on Schedule 1.1(b)
attached hereto, as such amount may be modified by

 

 

assignment pursuant to the terms hereof; provided, that,
following the termination of the Commitments, each Participant’s Participating
Commitment Amount shall be deemed to be its Pro Rata Share of the aggregate
principal amount of all Loan Commitments.

 

“Participant Funding” shall
mean a funding by the Participants of their respective Pro Rata Shares of
Advances or Loans outstanding under either or both Facilities.

 

“Participant’s Interest” shall
have the meaning set forth in Section 2.2.

 

“Participant’s Unused Commitment”
shall mean, with respect to any Participant, the difference between such
Participant’s Participating Commitment Amount and such Participant’s Funded
Participant’s Interest.

 

“Participation Certificate”
shall mean a certificate issued by the Servicer to a Participant, substantially
in the form of Exhibit D attached hereto, evidencing such Participant’s
ownership interest conveyed hereunder.

 

“Payment Date” shall mean the
last day of each calendar month; provided, however, if such day
is not a Business Day, the next succeeding Business Day

 

“Payment Period” shall mean a
period of one (1) month; provided  that (i) the first day of a
Payment Period must be a Business Day, (ii) any Payment Period that would
otherwise end on a day that is not a Business Day shall be extended to the next
succeeding Business Day, (iii) the first Payment Period hereunder shall commence
on the date hereof and shall end on the last day of the next succeeding
calendar month and (iv) the first day of any succeeding Payment Period shall be
the last day of the preceding Payment Period and shall end on the last day of
the next succeeding calendar month.

 

“PBGC”  shall mean the
Pension Benefit Guaranty Corporation referred to and defined in ERISA, and any
successor entity performing similar functions.

 

“Permitted
Acquisition” shall mean any Acquisition so long as (a)
immediately before and after giving effect to such Acquisition, no Credit Event
exists,   (b) such Acquisition has been
approved by the board of directors of the Person being acquired prior to any
public announcement thereof, (c) the total consideration (including all  cash, debt, stock and other property, and
assumption of obligations for borrowed money) of any single Acquisition or
series of related Acquisitions does not exceed $30,000,000, and (d) the total
consideration (including all cash, debt, stock and other property, and assumption
of obligations for borrowed money) of all Acquisitions during any fiscal year
does not exceed $40,000,000. As used herein, Acquisitions will be considered
related Acquisitions if the sellers under such Acquisitions are the same Person
or any Affiliate thereof.

 

“Permitted
Encumbrances” shall mean

 

 

Liens imposed by law for
taxes not yet due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves are being maintained in
accordance with GAAP;

 

statutory Liens of landlords
and Liens of carriers, warehousemen, mechanics, materialmen and other Liens
imposed by law created in the ordinary course of business for amounts not yet
due or which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves are being maintained in accordance with
GAAP;

 

pledges and deposits made in
the ordinary course of business in compliance with workers’ compensation,
unemployment insurance and other social security laws or regulations;

 

deposits to secure the
performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature, in each
case in the ordinary course of business;

 

judgment and attachment
liens not giving rise to a Credit Event 
or Liens created by or existing from any litigation or legal proceeding
that are currently being contested in good faith by appropriate proceedings and
with respect to which adequate reserves are being maintained in accordance with
GAAP; and

 

easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed
by law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property or materially interfere with the ordinary conduct of business
of the Sponsor and its Subsidiaries taken as a whole;

 

other Liens incidental to
the conduct of its business or the ownership of its property and assets which
were not incurred in connection with the borrowing of money or the obtaining of
advances or credit, and which do not in the aggregate materially detract from
the value of its property or assets or materially impair the use thereof in the
operation of its business; and

 

Liens on insurance policies
owned by the Sponsor on the lives of its officers securing policy loans
obtained from the insurers under such policies, provided that (A) the aggregate
amount borrowed on each policy shall not exceed the loan value thereof, and (B)
the Sponsor shall not incur any liability to repay any such loan;

 

provided, that the term “Permitted
Encumbrances” shall not include any Lien securing Indebtedness.

 

“Permitted Investments”
shall mean:

 

 

(v)                                 direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States (or by any agency thereof to
the extent such obligations are backed by the full faith and credit of the
United States), in each case maturing within one year from the date of
acquisition thereof;

 

commercial paper having an A
or better rating, at the time of acquisition thereof, of S&P or Moody’s and
in either case maturing within one year from the date of acquisition thereof;

 

certificates of deposit,
bankers’ acceptances and time deposits maturing within one year of the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any domestic office of any commercial
bank organized under the laws of the United States or any state thereof which
has a combined capital and surplus and undivided profits of not less than
$500,000,000;

 

fully collateralized
repurchase agreements with a term of not more than 30 days for securities
described in clause (i) above and entered into with a financial institution
satisfying the criteria described in clause (iii) above; and

 

mutual funds investing
solely in any one or more of the Permitted Investments described in clauses (i)
through (iv) above.

 

“Person” shall mean any
individual, partnership, firm, corporation, association, joint venture, limited
liability company, trust or other entity, or any Governmental Authority.

 

“Personal Guaranty” shall mean
any guaranty from a principal of a Borrower substantially in the form required
by the Servicing Agreement.

 

“Plan”
means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Sponsor or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.

 

“Prime Rate” shall mean the
per annum rate of interest designated from time to time by SunTrust to be its
prime rate.  The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate of
interest that is being offered by SunTrust to its borrowers.

 

“Pro Rata Share” shall mean,
with respect to each of the Participants at any time, the percentage determined
by dividing such Participant’s Participating Commitment at such time by the
total principal amount of all Participating Commitments at such time.

 

“Quarterly Date” shall have
the meaning set forth in Section 2.4.

 

 

“Regulation D” shall mean
Regulation D of the Board of Governors of the Federal Reserve System, as the
same may be in effect from time to time.

 

“Release” means any release,
spill, emission, leaking, dumping, injection, pouring, deposit, disposal,
discharge, dispersal, leaching or migration into the environment (including
ambient air, surface water, groundwater, land surface or subsurface strata) or
within any building, structure, facility or fixture.

 

“Rental/Purchase Contract”
shall mean a contract between a Franchisee and a customer to rent Merchandise
in the form approved by the Sponsor (and which may included purchase options).

 

“Rental Revenue” shall mean,
with respect to any Borrower for any period, the gross revenues of such
Borrower from rentals to the public of such Borrower’s furniture inventory and
rental equipment, including without limitation, all customer deposits, advance
rental payments, waiver fees, late fees, delivery fees, nonsufficient funds
fees, reinstatement fees, but excluding all Electronic Rental Revenues, all
retail sales proceeds and sales taxes.

 

“Reportable Event” shall have
the meaning assigned to such term in ERISA.

 

“Required Participants” shall
mean (x) at any time prior to termination of the Commitments, Participants
holding at least 66 2/3% of the sum of (x) the aggregate Funded Participant’s
Interests, plus (y) the Participant’s Unused Commitments, and (y) at any
time on and after the termination of the Commitments, Participants holding at
least 66 2/3% of the aggregate outstanding Funded Participant’s Interests at
such time.

 

“Requirement of Law” for any
person shall mean the articles or certificate of incorporation and by-laws or
other organizational or governing documents of such Person, and any law,
treaty, rule or regulation, or determination of an arbitrator or a court or
other governmental authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.

 

“Response Period” shall mean
(i) with respect to any Startup Franchise Loan, a period of seventy (70) days
commencing on the day next succeeding the day on which the Sponsor receives a
notice from the Servicer that a Loan Payment Default has occurred and is
continuing, and (ii) with respect to any Established Franchisee Loan, a period
of five (5) Business Days commencing on the day next succeeding the day on
which the Sponsor receives a notice from the Servicer that a Loan Payment
Default has occurred and is continuing, provided, however, that
the Response Period for any Established Franchisee Loan shall automatically
extend by an additional 60 days if the Sponsor assumes operation of the stores
operated by the Defaulted Borrower during the initial five (5) Business Day
Response Period; provided, further, no Response Period for any
Loan shall extend beyond the Final Termination Date.

 

 

“Responsible
Officer” shall mean any of the president, the chief executive
officer, the chief operating officer, the chief financial officer, the
treasurer, the controller or a vice president of the Sponsor or such other
representative of the Sponsor as may be designated in writing by any one of the
foregoing with the consent of the Servicer; and, with respect to the financial
covenants only, the chief financial officer, the treasurer or the controller of
the Sponsor.

 

“Restricted Payment” shall
have the meaning given to such term in Section 8.5.

 

“Reuters Screen” shall mean,
when used in connection with any designated page and LIBOR, the display page so
designated on the Reuters Monitor Money Rates Service (or such other page as
may replace that page on that service for the purpose of displaying rates
comparable to LIBOR).

 

“Revolving Credit Agreement”
shall mean that certain Revolving Credit Agreement, dated as of the date
hereof, by and among Sponsor, SunTrust, individually and as administrative
agent, and the other lenders named therein, as amended, restated, modified or
supplemented from time to time.

 

“Revolving Credit Documents”
shall mean, collectively, the Revolving Credit Agreement and any and all other
instruments, agreements, documents and writings executed in connection with the
foregoing.

 

“S&P” shall mean Standard
& Poor’s

 

“Servicing Agreement” shall
mean that certain Servicing Agreement, dated as of the date hereof, by and
between the Sponsor and the Servicer, as amended, restated, supplemented or
otherwise modified from time to time.

 

“Servicing Fee” shall mean the
fee payable to the Servicer pursuant to the terms of the Servicing Agreement.

 

“Servicer” shall mean SunTrust
Bank and its successors and assigns.

 

“SouthTrust
Loan Facility Agreement” means that certain Loan Facility
Agreement and Guaranty dated as of August 31, 2000, by and between the
Sponsor and SouthTrust Bank, as amended, which facility has terminated prior to
the Closing Date.

 

“Sponsor’s Fee” shall have the
meaning set forth in the Servicing Agreement.

 

“Spousal Consent” shall mean
any agreement provided by the spouse of any Person executing a Guaranty to the
extent such spouse has not personally executed a Guaranty, to be substantially
in the form provided by the Servicer.

 

“Startup Franchisee Borrower”
shall mean a Franchisee who is primarily liable for repayment of a Startup
Franchisee Loan as a result of having executed Loan Documents as maker, or its
permitted assignee.

 

 

“Startup Franchisee Commitment”
shall have the meaning set forth in Section 2.1(a).

 

“Startup Franchisee Loan”
shall mean the aggregate Advances made to a Startup Franchisee Borrower under its
Startup Franchisee Loan Commitment.

 

“Startup Franchisee Loan Agreement”
shall mean a Line of Credit and Security Agreement setting forth the terms and
conditions, as between a Startup Franchisee Borrower and the Servicer, under
which the Servicer has established a Startup Franchisee Loan Commitment to make
Advances to the Startup Franchisee Borrower, substantially in the form of Exhibit
E, with such changes as the Sponsor and the Servicer shall agree to,
subject to Section 3.1(b); provided, however, that any
Startup Franchisee Loan Agreement executed prior to the Effective Date shall be
substantially in the form required under the Existing Loan Facility Agreement.

 

“Startup Franchisee Loan Commitment”
shall mean a commitment to make Startup Franchisee Loans extended to a Startup
Franchisee Borrower pursuant to a Startup Franchisee Loan Agreement.

 

“Startup Franchisee Master Note”
shall mean that certain Master Note, executed by a Startup Franchisee Borrower
in favor of the Servicer, evidencing such Startup Franchisee Borrower’s
obligation to repay all Advances made to it pursuant to a Startup Franchisee
Loan Commitment, substantially in the form of Exhibit A to the  Startup Franchisee Loan Agreement, with such
changes as the Sponsor and the Servicer shall agree to, subject to
Section 3.1(b); provided, however, that any Startup
Franchisee Master Note executed prior to the Effective Date shall be
substantially in the form required under the Existing Facility Agreement.

 

“Store Opening Information Sheet”
shall have the meaning assigned to such term in the Servicing Agreement.

 

“Subordinated Debt” shall have
the meaning set forth in Section 10.7.

 

“Subsidiary”
shall mean, with respect to any Person (the “parent”),
any corporation, partnership, joint venture, limited liability company,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent’s consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, partnership, joint venture, limited liability
company, association or other entity of which securities  or other ownership interests representing
more than 50% of the equity  or more than
50% of  the ordinary voting power, or in
the case of a partnership, more than 50% of the general partnership interests
are, as of such date, owned, controlled or held, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent. Unless otherwise indicated, all references to “Subsidiary” hereunder
shall mean a Subsidiary of the Sponsor.

 

“Swing Line Advances” shall
have the meaning set forth in Section 2.3.

 

 

“Synthetic Lease Documents”
shall mean, collectively, the Master Agreement, dated as of September 30,
1996, among the Sponsor, SunTrust Banks, Inc., as lessor (the “Lessor”),
SunTrust Bank and SouthTrust Bank of Georgia, N.A., as lenders, and SunTrust
Bank, as agent, the Lease Agreement, dated as of September 30, 1996,
between the Lessor and the Sponsor and any supplements thereto, the
Construction Agency Agreement, dated as of September 30, 1996, among the
Lessor and the Sponsor, the Guaranty, dated as of September 30, 1996,
executed by the Sponsor in favor of the Funding Parties (as defined therein),
and any and all Security Agreements and Assignments (Construction Contract,
Architect’s Agreement, Permits, Licenses and Governmental Approvals, and Plans
and Specifications and Drawings) executed from time to time by the Sponsor in favor
of the Lessor, and any modifications of or replacements for any or all of the
foregoing.

 

“Taxes” shall mean any and all
present or future taxes, levies, imposts, duties, deductions, charges or
withholdings imposed by any Governmental Authority.

 

“Total Adjusted Debt to Total
Adjusted Capital Ratio” shall mean, at any date of
determination, the ratio of (a) Consolidated Total Adjusted Debt as of such
date to (b) Consolidated Total Adjusted Capital as of such date.

 

“Total Debt to EBITDA Ratio”
shall mean, at any date of determination, the ratio of (a) Consolidated Total
Debt as of such date to (b) Consolidated EBITDA for the four consecutive fiscal
quarters of the Sponsor ending on such date.

 

“Transaction
Documents”
shall mean, collectively, the Operative Documents and the Revolving Credit
Documents.

 

“Unmatured Credit Event” shall
mean any condition or event which, with notice or the passage of time or both,
would constitute a Credit Event.

 

“Wind-Down Event” shall mean
the event that the Commitments are not extended for any reason and the
Commitment Termination Date occurs.

 

“Withdrawal Liability” shall
mean liability to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.

 

 

Accounting Terms and
Determination.  Unless otherwise defined or specified herein,
all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required
to be delivered hereunder shall be prepared, in accordance with GAAP as in
effect from time to time, applied on a basis consistent with the most recent
audited consolidated financial statement of the Sponsor delivered pursuant to Section 6.1(a);
provided, that if the Sponsor notifies the Servicer that the Sponsor
wishes to amend any covenant in Article VII to eliminate the effect of any
change in GAAP on the operation of such covenant (or if the Servicer notifies
the Sponsor that the Required Participants wish to amend Article VII for
such purpose), then the Sponsor’s compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant
change in GAAP became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Sponsor and the Required
Participants.

 

Other Definitional Terms. The words “hereof”,
“herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Article, Section, Schedule, Exhibit and like
references are to this Agreement unless otherwise specified.

 

Exhibits and Schedules. All Exhibits and Schedules
attached hereto are by reference made a part hereof.

 

LOAN
FACILITY

 

Establishment of Commitments; Terms of Loans.

 

Startup Franchisee Commitment.  Subject to and upon the terms and conditions
set forth in this Agreement and the other Operative Documents, and in reliance
upon the guaranty and other obligations of the Sponsor set forth herein, the
Servicer hereby establishes a commitment to the Sponsor to establish Startup
Franchisee Loan Commitments and to make Advances thereunder to such Startup
Franchisee Borrowers as may be designated by the Sponsor in its Funding
Approval Notices during a period commencing on the date hereof and ending on
May 27, 2005 (as such period may be extended for one or more subsequent 364-day
periods pursuant to Section 2.8, the “Commitment Termination
Date”) in an aggregate committed amount at any one time
outstanding not to exceed ONE HUNDRED AND TEN MILLION AND NO/100 DOLLARS
($110,000,000) (the “Startup Franchisee
Commitment”); provided  that, notwithstanding any
provision of this Agreement to the contrary, at no time shall the sum of
aggregate committed amounts of all Loan Commitments outstanding pursuant to the
Commitments, or, following the termination of any such Loan Commitment,
Advances outstanding thereunder, exceed the Maximum Commitment Amount.

 

Established Franchisee Commitment.  Subject to and upon the terms and conditions
set forth in this Agreement and the other Operative Documents, and in reliance
upon the guaranty and other obligations of the Sponsor set forth herein, the
Servicer hereby establishes a commitment to the Sponsor to establish
Established Franchisee Loan Commitments and to make Advances thereunder to such
Established Franchisees as may be designated by the Sponsor in its Funding
Approval Notices during a period commencing on the date hereof and ending on
the Commitment Termination Date in an aggregate committed amount at any one
time outstanding not to exceed ONE HUNDRED AND TEN MILLION AND NO/100 DOLLARS

 

 

($110,000,000) (the “Established Franchisee
Commitment”); provided  that, notwithstanding any
provision of this Agreement to the contrary, at no time shall the sum of
aggregate committed amounts of all Loan Commitments outstanding pursuant to the
Commitments, or, following the termination of any such Loan Commitment, Advances
outstanding thereunder, exceed the Maximum Commitment Amount.

 

Authorization of Loan Commitments Pursuant to Startup Franchisee
Commitment; Loan Terms.  Within the limits of the Startup Franchisee
Commitment and in accordance with the procedures set forth in this Agreement
and the Servicing Agreement, the Sponsor may authorize the Servicer to
establish a Startup Franchisee Loan Commitment pursuant to the Startup
Franchisee Commitment in favor of a Franchisee who meets the credit criteria
established by the Sponsor.  The amount
of each Startup Franchisee Loan Commitment shall be determined by the Sponsor
but shall not be less than $100,000 for any Franchisee.  Pursuant to the Startup Franchisee Loan
Commitment, the Servicer shall agree to make Advances to the Startup Franchisee
Borrower thereunder.  Each Startup
Franchisee Loan shall bear interest at the Borrower Rate designated by Sponsor
in the applicable Funding Approval Notice, and interest shall be payable on
each Payment Date and on the Maturity Date of such Startup Franchisee Loan when
all principal and interest shall be due and payable in full.  Each Startup Franchisee Loan may be prepaid
in full or in part on any Business Day, without premium or penalty.  The Loan Term of each Startup Franchisee Loan
Commitment shall be, initially, one year, but shall automatically renew unless
terminated by ninety (90) days’ prior written notice by Servicer to the Startup
Franchisee Borrower prior to the first anniversary date and may thereafter be
terminated at any time by Servicer upon ninety (90) days’ prior written notice
by Servicer to the Startup Franchisee Borrower; provided that the
amounts outstanding thereunder shall be allowed to term out over the
Amortization Period as provided below. 
The proceeds of each Advance made pursuant to the Startup Franchisee
Loan Commitments shall be used solely to purchase inventory, and to the extent
permitted by Sponsor, to pay state sales and use taxes and freight
charges.  At the end of each month, the
aggregate Advances (other than Electronic Equipment Advances) made to each
Startup Franchisee Borrower during such month (net of any prepayments during
such month other than Electronic Equipment Asset Disposition proceeds to the
extent applied to offset Electronic Equipment Advances as provided below) shall
be amortized (in accordance with a straight-line amortization schedule) over
the Amortization Period.  At the end of
the month, the aggregate Electronic Equipment Advances made to each Startup
Franchisee Borrower during such month (net of proceeds of Electronic Equipment
Asset Dispositions received during such month) shall be amortized (in
accordance with a straight-line amortization schedule) over the Amortization
Period.  In the event that the Startup
Franchisee Loan Commitment of any Startup Franchisee Borrower is terminated by
the Servicer as provided above, such Startup Franchisee Borrower shall,
notwithstanding the other provisions of this Section 2.1(c),
amortize all outstanding Advances over the Amortization Period (in accordance
with a straight-line amortization schedule), with all Electronic Equipment
Advances due and payable in full no later than 18 months after
termination.  In the event that the
Startup Franchisee Borrower terminates the Startup Franchisee Loan Commitment,
all amounts advanced to such Startup Franchisee Borrower shall be due and
payable in full on the termination date, together with all accrued and unpaid
interest thereon.  Each Startup
Franchisee Borrower shall agree to pay a commitment fee

 

 

on its unused Startup Franchisee Loan Commitment in an amount to be
determined by the Sponsor but in any event not to exceed 1.00% per annum, such
commitment fee to be paid quarterly, in arrears.

 

Authorization of Loan Commitments Pursuant to Established Franchisee
Commitment; Loan Terms.

 

Within the limits of the
Established Franchisee Commitment and in accordance with the procedures set
forth in this Agreement and the Servicing Agreement, the Sponsor may authorize
the Servicer to establish an Established Franchisee Line of Credit Commitment
and/or an Established Franchisee Term Loan Commitment pursuant to the
Established Franchisee Commitment in favor of an Established Franchisee who
meets the credit criteria established by the Sponsor.

 

The amount of each
Established Franchisee Line of Credit Commitment shall be determined by the
Sponsor, but shall not be less than $100,000. Pursuant to the Established
Franchisee Line of Credit Commitment, the Servicer shall agree to make Advances
to the Established Franchisee Borrower thereunder.  Each Established Franchisee Line of Credit
Loan shall bear interest at the Borrower Rate designated by Sponsor in the
applicable Funding Approval Notice, and interest shall be payable on each
Payment Date and on the Maturity Date of such Established Franchisee Line of
Credit Loan when all principal and interest shall be due and payable in
full.  Each Established Franchisee Line
of Credit Loan may be prepaid in full or in part on any Business Day, without
premium or penalty.  The Loan Term of
each Established Franchisee Line of Credit Loan shall not exceed four
years.  The proceeds of each Advance made
pursuant to the Established Franchisee Line of Credit Commitments shall be used
for general corporate purposes.  Each
Established Franchisee Borrower shall agree to pay a commitment fee on the
unused Established Franchisee Line of Credit Commitment in an amount to be
determined by the Sponsor but in any event not to exceed 1.00% per annum, such
commitment fee to be paid quarterly, in arrears.  At no time, except as otherwise provided in
the form of Established Franchisee Loan Agreement, shall the aggregate
outstanding principal amount of any and all Established Franchisee Loans made
to any Borrower exceed the Established Franchisee Borrowing Base of such
Borrower as in effect at such time.

 

The amount of each
Established Franchisee Term Loan Commitment shall be determined by the Sponsor,
but shall not be less than $100,000. Pursuant to the Established Franchisee
Term Loan Commitment, the Servicer shall agree to make Established Franchisee
Term Loans to the Established Franchisee Borrower thereunder.  Each Established Franchisee Term Loan shall
bear interest at the Borrower Rate designated by Sponsor in the applicable
Funding Approval Notice, and interest shall be payable on each Payment Date and
on the Maturity Date of such Established Franchisee Term Loan. Principal on
each Established Franchisee Term Loan shall be payable on each Payment Date and
shall be amortized over a period of no more than 7 years with the balance of
all outstanding principal due and payable in full on the Maturity Date with
respect to such Established

 

 

Franchisee Term Loan.  Each Established Franchisee Term Loan may be
prepaid in full or in part on any Business Day, without premium or
penalty.  The Loan Term of each
Established Franchisee Term Loan shall not exceed four years.  The proceeds of each Established Franchisee
Term Loan shall be used for general corporate purposes.

 

Conditions to Obligation of Servicer to Establish Loan Commitments.  Servicer’s obligation to establish each Loan
Commitment under the Operative Documents is subject to the fulfillment of the
following conditions as of the Closing Date of such Loan:

 

this Agreement and each of
the other Operative Documents shall be in full force and effect;

 

the representations and
warranties of the Sponsor contained in Article 5 shall be true and correct
in all material respects with the same effect as though such representations
and warranties had been made on the Closing Date of such Loan;

 

the Servicer shall have
received from the Sponsor a Funding Approval Notice authorizing such Loan
Commitment and a Store Opening Information Sheet;

 

all conditions precedent to
the Loan Commitment specified in the Servicing Agreement, together with such
additional conditions precedent as may, at Sponsor’s election, be included in
the applicable Funding Approval Notice, shall have been completed to the
Servicer’s reasonable satisfaction; and

 

no Credit Event, Unmatured
Credit Event, Change of Control or Wind-Down Event shall have occurred and be
continuing.

 

Conveyance of Participant’s Interest.

 

The Servicer hereby sells, assigns, transfers and conveys to the
Participants, without recourse or warranty, and each Participant hereby
purchases from the Servicer, an undivided percentage ownership interest (which
percentage shall be equal to each Participant’s Pro Rata Share) in (i) the
Commitments, (ii) the Loan Commitments, including, without limitation, the
Existing Loan Commitments, (iii) the Loans, including, without limitation, the
Existing Loans, (iv) the Collateral, (v) all rights against any guarantor of
any Loan, including the Sponsor, (vi) the Loan Documents,  (vii) all rights pursuant to the Guaranty
Agreement and (viii) all right, title and interest to any payment or right to
receive payment with respect to the foregoing (collectively, the “Participant’s Interest”).  Notwithstanding the foregoing, each
Participant’s right to receive payments of interest, commitments fees or other
fees with respect to the Commitment, the Loan Commitments and the Loans shall
not exceed the amounts which such Participant is entitled to receive pursuant
to the terms of this Agreement.

 

In consideration of the entry by each Participant into this Agreement
and the obligation of each Participant hereunder, the Servicer shall issue to
each Participant on the Closing Date, a

 

 

Participation Certificate.  Each
Participation Certificate shall be in an amount equal to the relevant
Participant’s Participating Commitment Amount, and the Funded Participant’s
Interest outstanding thereunder shall bear interest as hereinafter set forth
and shall be payable as hereinafter set forth.

 

In accordance with the terms and conditions hereof, and in consideration
of the sale of the Participant’s Interest to such Participant, each Participant
severally agrees from time to time, during the period commencing on the
Effective Date and ending on the Final Termination Date, to fund its Pro Rata
Share of outstanding Loans made by the Servicer to the Borrowers in accordance
with the terms hereof in an aggregate amount at any one outstanding not to
exceed such Participant’s Participating Commitment Amount (subject to each
Participant’s obligations pursuant to Section 2.3(d)).

 

Funding of Advances; Swing Line; Funding of Participant’s Interest in
Loans.

 

Funding of Advances.  The Servicer shall fund Advances requested by
the Borrowers in accordance with the terms of the applicable Loan Documents and
the Servicing Agreement.  On the date of
any such funding, the Servicer shall elect whether or not to require the
Participants to fund their respective Pro Rata Share of the Advances to be made
on such date.  In the event that the
Servicer elects not to require the Participants to fund their Pro Rata Share of
the Advances to be made on such date, the Servicer shall make such Advances
(each, a “Swing Line Advance”) to the
Borrowers for the account of the Servicer; provided that the aggregate
amount of Swing Line Advances outstanding on any date shall not exceed
$8,000,000 and further  provided the sum of (x) the aggregate
outstanding Swing Line Advances plus (y) the aggregate outstanding Funded
Participant’s Interests (exclusive of the Swing Line Advances) shall not exceed
the Maximum Commitment Amount.  If (i)
any Credit Event, Change of Control or Wind-Down Event shall have occurred,
(ii) after giving effect to any requested Advance, the aggregate Swing Line
Advances outstanding hereunder would exceed $8,000,000, or (iii) the Servicer
otherwise determines in its sole discretion to request a Participant Funding
hereunder, then the Servicer shall notify the Participants pursuant to
subsection (b) requesting a Participant Funding.

 

Notification of Participant Funding.  In the event that the Servicer desires that
the Participants fund their respective Pro Rata Shares of Advances or Loans
made or outstanding pursuant to the Loan Documents, the Servicer shall deliver
written or telecopy notice to the Participants (or telephonic notice promptly
confirmed in writing or by telecopy) (a “Participant Funding
Request”) by no later than 10:00 a.m. (Atlanta, Georgia time) on
the date which is the requested date of the Participant Funding which shall
specify (x) the date of the Participant Funding, which shall be a Business Day,
and (y) each Participant’s Pro Rata Share of the Advances or Loans outstanding
to be funded in connection with such Participant Funding.

 

Each Participant shall make available its Pro Rata Share of the
requested Participant Funding on the proposed date thereof by wire transfer of
immediately available funds to the Servicer in Atlanta, Georgia by not later
than 2:00 P.M. (Atlanta, Georgia time). 
Unless the Servicer shall have received notice from a Participant prior
to the date of any Participant Funding that such

 

 

Participant will not make available to the Servicer such Participant’s
Pro Rata Share of such Participant Funding, the Servicer may assume that the
Participant has made such portion available to the Servicer on the date of such
Participant Funding in accordance with this subsection (c) and the
Servicer may, in reliance on such assumption, make available to the Borrowers a
corresponding amount or credit the same to Swing Line Advances.  If and to the extent that such Participant
shall not have made such portion available to the Servicer, such Participant
and the Sponsor shall severally agree to repay the Servicer forthwith (on
demand in the case of the Participant and within three (3) days of such demand
in the case of the Sponsor), without duplication, such amount with interest at
the Federal Funds Rate plus 2% per annum and, until such time as such
Participant has repaid to the Servicer such amount, such Participant shall (i)
have no right to vote regarding any issue on which voting is required or
advisable under this Agreement or the other Operative Documents, and (ii) shall
not be entitled to receive any payments of interest, fees or repayment of the
principal amount of such Advance or Loan which the Participant has failed to
pay to the Servicer.  If such Participant
shall repay to the Servicer such amount, then such amount shall constitute part
of such Participant’s Funded Participant’s Interest.

 

Each Participant’s obligations to fund its Pro Rata Share of any
requested Participant Funding shall be absolute and unconditional and shall not
be affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense, or other right which such Participant may
have against the Servicer, the Sponsor, any Borrower or any other Person for
any reason whatsoever, (ii) the occurrence of any Credit Event, Unmatured
Credit Event, Change of Control or Wind-Down Event, (iii) the occurrence of any
Loan Default or any other “event of default” under any Loan Documents, (iv) any
adverse change in the condition (financial or otherwise) of the Sponsor, any
other Credit Party or any Borrower, (v) the acceleration or maturity of any
Loan or the Sponsor’s obligations hereunder or the termination of the
Commitments, Loan Commitments or the Participating Commitments after the making
of any Swing Line Advance, (vi) any breach of this Agreement by the Sponsor or
any other Participant, or (vii) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.

 

Notwithstanding the foregoing provisions of this Section 2.3, no
Participant shall be required to fund its Pro Rata Share of any requested
Participant Funding for purposes of refunding a Swing Line Advance pursuant to
subsection (d) above if a Loan Default with respect to the relevant Loan
has occurred and is continuing and, prior to the making by the Servicer of such
Swing Line Advance, the Servicer had received written notice from Sponsor, the
relevant Borrower or any Participant specifying that such Loan Default had
occurred and was continuing (and identifying the same as a Loan Default, as the
case may be) which has not been cured or waived; provided that, in the
case of a Loan Default arising from an Unmatured Credit Event or Credit Event
where the Participants are not pursuing remedies, the Participants will be
obligated to fund their respective Pro Rata Shares of Swing Line Advances.

 

 

Commitment
Fees.

 

Each Participant will receive, from amounts paid by the Borrowers under
the Loan Documents and the Sponsor under the Operative Documents, a commitment
fee (the “Commitment Fee”) equal to the
average daily amount of its Participant’s Unused Commitment for the period
commencing on the Effective Date and ending on the Final Termination Date, or
such earlier date as the Participating Commitment shall expire or terminate,
multiplied by the Applicable Percentage per annum, such Commitment Fee to be
payable in arrears on each third Payment Date (a “Quarterly
Date”), commencing on June 30, 2004, for the preceding
Payment Period, calculated on the basis of a 360-day year and the actual number
of days elapsed.

 

All Commitment Fees shall be paid on the dates due, in immediately
available funds, to the Participants by the Servicer from amounts received from
the Borrowers and Sponsor.

 

In the event that the commitment fees received by the Servicer from the
Borrowers and the Sponsor are not sufficient on any Quarterly Date to pay the
Commitment Fees to the Participants required pursuant hereto, the Sponsor
shall, upon demand of the Servicer, immediately fund such difference to the
Servicer (with such payment allocated to specific Loan Payment Defaults as
agreed by Sponsor and Servicer, if applicable) and either, at the election of
the Sponsor,  (x) the Sponsor shall be
reimbursed by the Servicer upon receipt of such amount from a Borrower,  (y) the Loan Indebtedness shall be deemed to
be reduced by such amount for purposes of 
a repayment or purchase of such Defaulted Loan by Sponsor in accordance
with the terms of this Agreement or (z) if elected by Sponsor and if such
amount is sufficient to cure any Loan Payment Default such amount shall be
deemed to have satisfied Sponsor’s obligation to cure such Loan Payment Default
hereunder.

 

Interest on Funded Participant’s Interest.

 

Funded Startup Franchisee Participant’s Interest.  Subject to the provisions of
Section 2.6, each Participant’s Funded Startup Franchisee Participant’s
Interest shall bear interest (computed on the basis of the actual number of
days elapsed over a year of 360 days) at rate per annum equal to the Adjusted
LIBO Rate for the Payment Period in which such Funded Startup Franchisee
Participant’s Interest is outstanding (with the Adjusted LIBO Rate applicable
to all amounts outstanding during any Payment Period being automatically reset
on the first day of each Payment Period regardless of the date of any
Participant Funding hereunder) plus the Applicable Startup Margin then in
effect.

 

Funded Established Franchisee Participant’s Interest.  Subject to the provisions of
Section 2.6, each Participant’s Funded Established Franchisee
Participant’s Interest shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at rate per annum equal to the
Adjusted LIBO Rate for the Payment Period in which such Funded Established
Franchisee Participant’s Interest is outstanding (with the Adjusted LIBO Rate
applicable to all amounts outstanding during any Payment Period being
automatically reset on the first day of each Payment Period regardless of the
date of any Participant Funding hereunder) plus the Applicable Established
Margin then in effect.

 

 

Payment of Interest.  Interest on each Participant’s Funded
Participant’s Interest shall be payable by the Servicer to the Participants on
each Payment Date from interest payments received on the Loans under such
Facility on such Payment Date for the preceding Payment Period and from other
amounts received from the Sponsor.

 

Sponsor’s Obligation.  In the event that the interest received by
the Servicer from the Borrowers on any Payment Date is not sufficient to pay
the interest to the Participants required pursuant hereto, the Sponsor shall,
upon demand of the Servicer, immediately fund such difference to the Servicer
(with such payment allocated to specific Loan Payment Defaults as agreed by
Sponsor and Servicer) and if such shortfall results from Loan Payment Defaults
rather than interest rate variances, either, at the election of the Sponsor,  (x) the Sponsor shall be reimbursed by the
Servicer upon receipt of such amount from the applicable Borrower, (y) the Loan
Indebtedness of such Borrower shall be deemed to be reduced by such amount for
purposes of a repayment or purchase of such Defaulted Loan by Sponsor in
accordance with the terms of this Agreement or (z) if elected by Sponsor and if
such amount is sufficient to cure any Loan Payment Default, such amount shall
be deemed to have satisfied Sponsor’s obligation to cure such Loan Payment Default
hereunder.

 

In the event that LIBOR is not determinable by the Bank or it becomes
impossible or illegal for the Bank to determine the Funded Participants
Interest based upon LIBOR, the parties agree that in such event the Funded
Participants Interest shall bear interest at a rate per annum equal to the
Prime Rate plus a mutually agreed upon spread based upon current market
conditions.

 

Default Interest.  If any amount payable to the Servicer or the
Participants by the Sponsor under the Operative Documents is not paid on the
date due hereunder, such amount shall bear interest (to the extent permitted by
law) for each day from such date up to (but not including) the date of actual
payment (after as well as before judgment) at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) equal to
the rate set forth in Section 2.5 for each Facility plus an additional two
percent (2.0%) per annum.

 

Voluntary
Reduction of the Unutilized Commitment.  Upon at least three (3) Business Days’ prior
telephonic notice (promptly confirmed in writing) to the Servicer, Sponsor
shall have the right, without premium or penalty, to terminate the Commitments,
in part or in whole, provided that (i) any such termination shall apply to
proportionately and permanently reduce each Facility,  (ii) any such termination shall apply to
proportionately and permanently reduce the Participating Commitments of each of
the Participants, (ii) any partial termination pursuant to this
Section 2.7 shall be in an amount of at least $5,000,000 and integral
multiples of $1,000,000, and (iii) the Commitments may not be reduced if, as a
result thereof, the amount of either Facility is less than the aggregate sum of
all outstanding Loan Commitments pursuant to such Facility.

 

Extension of Commitments.

 

The Sponsor may, by written notice to the Servicer (which shall
promptly deliver a copy to each of the Participants), given not more than sixty
(60) days prior to any anniversary of the date of this Agreement while the
Commitments are effect, request that the Participants extend the then scheduled
Commitment Termination Date (the “Existing Date”)
for an additional 364-day period.  Each
Participant shall, by notice to the Sponsor and the Servicer given within fifteen
(15) Business Days after receipt of such request, advise the Sponsor and the
Servicer whether or not such Participant consents to the extension request (and
any Participant which does not respond during such 15-day period shall be
deemed to have advised the Sponsor and the Servicer that it will not agree to
such extension).

 

 

In the event that, on the 15th Business Day after receipt of the notice
delivered pursuant to subsection (a) above, all of the Participants shall
have agreed to extend their respective Participating Commitments, the
Commitment Termination Date shall be deemed to have been extended, effective as
of the Existing Date, to the date which is 364 days thereafter.

 

In the event that, on the 15th Business Day after receipt of the notice
delivered pursuant to subsection (a) above, all of the Participants shall
not have agreed to extend their respective Participating Commitments, the
Sponsor and the Servicer shall notify the consenting Participants (“Consenting Participants”) of the
aggregate Participating Commitment Amounts of the non-extending Participants (“Non-Consenting Participants”) and
such Consenting Participants shall, by notice to the Sponsor and the Servicer
given within ten (10) Business Days after receipt of such notice, advise the
Servicer and Sponsor whether or not such Participant wishes to purchase  all or a portion of the Participating
Commitments of the Non-Consenting Participants (and any Participant which does
not respond during such 10-Business Day period shall be deemed to have rejected
such offer).  In the event that more than
one Consenting Participant agrees to purchase all or a portion of such
Participating Commitments, the Sponsor and the Servicer shall allocate such
Participating Commitments among such Consenting Participants so as to preserve,
to the extent possible, the relative pro rata shares of the Consenting
Participants of the Participating Commitments prior to such extension
request.  If Consenting Participants do
not elect to assume all of the Participating Commitments of the Non-Consenting
Participants, the Sponsor shall have the right, subject to the terms and
conditions of Section 15.6, to arrange for one or more banks (any such
bank being called a “New Participant”)
to purchase the Participating Commitment of any Non-Consenting
Participant.  Each Non-Consenting
Participant shall assign its Participating Commitment and its Participant’s
Interest outstanding hereunder to the Consenting Participant or New Participant
purchasing such Participating Commitment in accordance with Section 15.6,
in return for payment in full of all principal, interest and other amounts
owing to such Non-Consenting Participant hereunder, on or before the Existing
Date and, as of the effective date of such assignment, shall no longer be a
party hereto, provided that each New Participant shall be subject to the
approval of the Servicer (which approval shall not be unreasonably
withheld).  If (and only if) Participants
(including New Participants) holding Participating Commitments representing at
least an amount equal to the greater of (x) the sum of all outstanding Loan
Commitments under both Facilities and (y) 66 2/3 % of the aggregate
Participating Commitments on the date of such extension request shall have
agreed to such extension by the Existing Date (the “Continuing Participants”),
then (i) the Commitment Termination Date shall be extended for an additional
364-day period and (ii) the Participating Commitment of any Non-Consenting
Participant which has not been assigned to a Consenting Participant or a New
Participant shall terminate (with the result that the amount of the Commitments
shall be decreased proportionately by the amount of such Participating
Commitment), and all amounts owing to such Non-Consenting Participant, together
with all interest accrued thereon and all other amounts owed to such
Non-Consenting Participant hereunder, shall be reallocated to the remaining
Participating Commitments on the Existing Date applicable to such Participant
without giving effect to any extension of the Commitment Termination Date.

 

 

Wind-Down
Events.

 

In the event a Wind Down Event occurs, then (x) the Sponsor shall not
have the right to request that any further Loan Commitments be established, and
(y) the Servicer shall, within a reasonable period of time and in any event no
later than thirty (30) days after the Commitment Termination Date, give notice
to each of the Startup Franchisee Borrowers terminating the Startup Franchisee
Loan Commitments as of the date which is ninety (90) days after delivery of
such notice, subject, in each case, to the right of the Startup Franchisee
Borrowers to term out the amounts outstanding under their Loan Commitments as
set forth in Section 2.1(c); provided, however, that the occurrence
of such Wind-Down Event shall not affect the obligation of (i) the Servicer to
make Advances pursuant to existing Startup Franchisee Loan Commitments, except
to the extent that the Startup Franchisee Loan Commitments are terminated
pursuant to clause (y) above, (ii) the Participants to fund their Participant’s
Interest as provided herein, except to the extent that the Startup Franchisee
Loan Commitments are terminated pursuant to clause (y) above or (iii) the
Credit Parties under the Operative Documents.

 

In the event that a Wind Down Event occurs, then the Sponsor shall not
have the right to request that any further Established Franchisee Loan
Commitments be established; provided, however, that the occurrence of
such Wind-Down Event shall not affect the obligation of (x) the Servicer to
make Advances pursuant to existing Established Franchisee Loan Commitments, (y)
the Participants to fund their Participant’s Interest as provided herein, or
(z) the Credit Parties under the Operative Documents.

 

Reserve Requirements; Change in Circumstances; Change in Lending Offices.

 

Notwithstanding any other provision herein, if, by reason of (i) after
the date hereof, the introduction of or any change (including any change by way
of imposition or increase of reserve requirements) in or in the interpretation
of any law or regulation, or (ii) the compliance with any guideline or request
from any central bank or other governmental authority or quasi-governmental
authority exercising control over banks or financial institutions generally (whether
or not having the force of law), any reserve (including any imposed by the
Federal Reserve Board), special deposit or similar requirement (including a
reserve, special deposit or similar requirement that takes the form of a tax)
against assets of, deposits with or for the account of, or credit extended by,
any Participant’s office through which it funds its obligations hereunder shall
be imposed or deemed applicable or any other condition affecting its obligation
to make or maintain its Funded Participant’s Interest at a rate based upon the
Adjusted LIBO Rate shall be imposed on any Participant or its office through
which it funds its obligations hereunder or the interbank Eurodollar market;
and as a result thereof there shall be any increase in the cost to such
Participant of agreeing to make or making, funding or maintaining funds its
obligations hereunder (except to the extent already included in the
determination of the applicable Adjusted LIBO Rate), or there shall be a
reduction in the amount received or receivable by that Participant or its
office through which it funds its obligations hereunder, then the Sponsor shall
from time to time, upon written notice from and demand by the Participant (with
a copy of such notice and demand to the Servicer), pay to the Servicer for the
account of that Participant within five Business Days after the date specified
in such notice and demand, additional amounts sufficient to indemnify that
Participant against such increased cost. 
A

 

 

certificate as to the amount of such increased cost submitted to the
Sponsor and the Servicer by that Participant, shall, except for manifest error,
be final, conclusive and binding for all purposes.

 

If while the Commitments or any Loan Commitments are outstanding, any
Participant (including any the Servicer) determines that the adoption of any
law, rule or regulation regarding capital adequacy or capital maintenance, or
any change in any of the foregoing or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Participant (or any lending office of such Participant) or any Participant’s
holding company with any request or directive regarding capital adequacy or
capital maintenance (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Participant’s capital or on the capital of
such Participant’s holding company, if any, as a consequence of this Agreement,
the Loan Documents or the purchases made by such Participant pursuant hereto to
a level below that which such Participant or such Participant’s holding company
could have achieved but for such adoption, change or compliance (taking into
consideration such Participant’s policies and the policies of such
Participant’s holding company with respect to capital adequacy) by an amount
reasonably deemed by such Participant to be material, then from time to time,
within 15 days after written demand by such Participant, the Sponsor pay to
such Participant such additional amount or amounts as will compensate such
Participant or such Participant’s holding company for such reduction.  A certificate as to the amount of any such
additional amount or amounts, submitted to the Sponsor and the Servicer by such
Participant, shall, except for manifest error, be final, conclusive and binding
for all purposes.

 

Each Participant agrees that, if requested by the Sponsor, it will use
reasonable efforts (subject to overall policy considerations of such
Participant) to designate an alternate lending office with respect to any of
its Funded Participant’s Interest affected by the matters or circumstances
described above to reduce the liability of the Sponsor or avoid the results
provided thereunder, so long as such designation is not disadvantageous to such
Participant as determined by such Participant, which determination if made in
good faith, shall be conclusive and binding on all parties hereto.  Nothing in this Section 2.10(c) shall
affect or postpone any of the obligations of the Sponsor or any right of any
Participant provided hereunder.

 

Pro Rata Treatment. Subject to the application
of payments pursuant to Article 3 and except as specifically provided
therein, each payment of principal of any Funded Participant’s Interest, each
payment of interest with respect to the Funded Participant’s Interest, each
payment of the Commitment Fees and each reduction of the Commitments shall be
allocated pro rata among the Participants in accordance with their respective
applicable Pro Rata Share of the applicable Facility or Commitments, as
appropriate.  Each Participant agrees
that in computing such Participant’s portion of any Funded Participant’s
Interest to be made hereunder, the Servicer may, in its discretion, round each
Participant’s percentage of such Participant Funding Request to the next higher
or lower whole dollar amount.

 

Payments.

 

The Sponsor shall make each payment required to be made by Sponsor
hereunder and under any other Operative Document to any Participant or the
Servicer not later than 1:00 p.m. (Atlanta, Georgia time), on the date when due
in dollars to the Servicer at its offices in Atlanta, Georgia in immediately
available funds.

 

 

Whenever
any payment hereunder or under any other Operative Document shall become due,
or otherwise would occur, on a day that is not a Business Day, such payment may
be made on the next succeeding Business Day, and such extension of time shall
in such case be included in the computation of interest or Commitment Fees, if
applicable.

 

Sharing of Setoffs.  Each Participant agrees that if it shall, in
accordance with applicable law, through the exercise of a right of banker’s
lien, setoff or counterclaim against the Sponsor or any Borrower, or pursuant
to a secured claim under Section 506 or Title 11 of the United States Code or
other security or interest arising from, or in lieu of, such secured claim,
received by the Participant under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by any other means, obtain payment
(voluntary or involuntary) in respect of any Funded Participant’s Interest
under this Agreement as a result of which the unpaid principal portion of its
Funded Participant’s Interest shall be proportionately less than the unpaid
principal portion of the Funded Participant’s Interest of any other
Participant, it shall be deemed simultaneously to have purchased from such
other Participant at face value, and shall promptly pay to such other
Participant the purchase price for, a participation in the Funded Participant’s
Interest of such other Participant, so that the aggregate unpaid principal
amount of the Funded Participant’s Interest and participations in Funded
Participant’s Interests held by each Participant shall be in the same
proportion to the aggregate unpaid principal amount of all Funded Participant’s
Interests then outstanding as the principal amount of its Purchases prior to
such exercise of banker’s lien, setoff or counterclaim or other event was to
the principal amount of all Funded Participant’s Interests outstanding prior to
such exercise of banker’s lien, setoff or counterclaim or other event; provided,
however, that, if any such purchase or purchases or adjustments shall be
made pursuant to this Section and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Servicer and each Participant hereby
further agrees that any set-off amount received with respect to any Borrower,
the Sponsor or any Guarantor shall first be applied to amounts outstanding
under the Franchisee Loan Program prior to application to any other obligations
of any such Person to the Servicer or such Participant. The Sponsor expressly
consents to the foregoing arrangements and agrees, to the extent permitted by
applicable law, that any Participant holding a Funded Participant’s Interest or
a participation in a Funded Participant’s Interest deemed to have been so
purchased may exercise any and all rights of banker’s lien, setoff or
counterclaim with respect to any and all moneys owing by the Sponsor to such
Participant by reason thereof.

 

SERVICER’S SERVICING
OBLIGATIONS; DISTRIBUTION OF PAYMENTS

 

Servicer’s Obligations with Respect to
Loans; Collateral; Non-Recourse.

 

The
Servicer shall, for itself and the benefit of all of the Participants and the
Sponsor, (i) document, close, manage, administer and collect the Loans in
accordance with the terms of this Agreement and the Servicing Agreement and
exercise all discretionary powers involved in such management, administration
and collection and (ii) shall distribute the funds received with respect to the
Loans and from the Sponsor in accordance with the terms of this Agreement.  The Servicer agrees that it will exercise the
same care in administering the Loans as it exercises with respect to loans of
similar size and type and in accordance with the terms of the Servicing
Agreement and Section 10.13 hereto.

 

The
forms of Loan Agreement and Master Note used by the Servicer as documentation
for each Loan on and after the Effective Date shall be substantially in the
forms attached hereto.  The

 

 

Sponsor
shall have the right to direct the Servicer to make modifications to such forms
and amendments thereto from time but the Sponsor may not direct the Servicer to
revise or amend such forms so as to be inconsistent with the terms of Section
2.1 (c) and (d).

 

Notwithstanding
anything in this Agreement to the contrary, each of the Participants
acknowledges and agrees that the Servicer shall have no obligation to the
Participants with respect to the obtaining or retention of any guaranties
required by the Sponsor (other than to distribute any proceeds therefrom in
accordance with the terms of this Article 3). 
The Participants acknowledge and agree that the Sponsor has the right to
release or modify the terms of, or not require, any Personal Guaranty or any  Spousal Consent.

 

In
addition, each of the Participants acknowledges and agrees that the obligations
of the Servicer with respect to the Collateral shall be expressly limited to
the filing of financing statements (but not fixture filings) in the locations
indicated in the applicable Funding Approval Notice for each Borrower and
filing continuation statements with respect thereto and taking enforcement
action in accordance with Section 10.13 hereto.

 

Each of
the Participants acknowledges and agrees that all payments made to the
Participants pursuant to this Agreement by the Servicer shall be made solely
from amounts received from the Sponsor, the Borrowers and other obligors or
Collateral under the applicable Loan Documents and the Servicer shall have no
personal liability for any amounts payable to the Participants hereunder.  Each of the Participants acknowledges and
agrees that the Servicer shall be relying solely upon the Sponsor for purposes
of calculating and ensuring compliance by Established Franchisee Borrowers with
the Established Franchisee Borrowing Base for each Established Franchisee Loan.

 

Each of
the Participants acknowledges and agrees that any payments of delinquent
payment fees received from the Borrowers pursuant to the Loan Agreements shall
be for the sole account of the Sponsor and that the Participants shall have no
right to receive such payments unless a Credit Event has occurred and is
continuing; provided that, with respect to any payments received from a
Borrower, such payments shall be first applied to pay all accrued but unpaid
interest and principal and other fees due and owing from such Borrower before
application of such payment to any delinquent payment fees.

 

Each
Participant hereby acknowledges and agrees that the Servicer has no ability to
halt an ACH transfer upon the inputting of such transfer request by Sponsor
from the Aaron’s Proprietary System into the ACH system (other than the ability
to retrieve ACH transfers which are sent to the wrong party or otherwise
manifestly erroneous as provided in the ACH Agreement with Sponsor), and
Sponsor hereby accepts full responsibility for any overadvance created by such
inputting of information and shall indemnify the Servicer and the Participants
therefor as provided herein.

 

 

Application of Payments.

 

The
Servicer and the Sponsor shall instruct each Borrower to make payments with
respect to Loans and the Loan Commitments directly to the Servicer, either by
mail, wire transfer or debit pursuant to an ACH Authorization.

 

On each
Quarterly Date, all payments of Commitment Fees shall be distributed by the
Servicer to the Participants pro rata in accordance with Section 2.4, with any
remainder to be applied as set forth in the Servicing Agreement.

 

On each
Payment Date, all payments of interest received by the Servicer from the
Borrowers under each Facility and from the Sponsor pursuant to its guaranty of
each Facility contained herein with respect to the Loans and not previously
distributed by the Servicer, shall be applied to pay all accrued but unpaid
interest on the Funded Participant’s Interest under the applicable Facility
pursuant to this Agreement, then to pay all accrued but unpaid Servicing Fees
and then to pay the Sponsor’s Fee, in accordance with the terms of the
Servicing Agreement and Fee Letter.

 

On any
Business Day on which the Servicer shall receive any payment in respect of the
principal amount of any Loan, whether from a Borrower, the Sponsor pursuant to
its guaranty contained herein, or any other obligor with respect thereto, the
Servicer may elect, in its sole discretion to (i) apply such principal payment
to fund any requested Advances, (ii) apply such amount to repay any outstanding
Swing Line Advances, or (iii) to either (x) distribute such amount to the
Participants to reduce each Participant’s Funded Participant’s Interest under
such Facility or (y) apply such amount to SunTrust’s Funded Participant’s
Interest under such Facility only (with the understanding that the Funded
Participant’s Interest of each Participant shall not be deemed to have been
repaid until such amount is actually received by such Participant); provided
that, in the event that the Servicer elects to apply any repayment to
reduce SunTrust’s Funded Participant’s Interest without a corresponding
reduction of the other Participant’s Funded Participant’s Interest, SunTrust
shall be obligated to make a payment to each Participant equal to such
Participant’s Pro Rata Share of such payment upon the earlier of (i) the next
Payment Date and (ii) the occurrence of a Credit Event hereunder.

 

If
during any period when no Credit Event has occurred and is continuing, amounts
received by Servicer are not capable of being allocated to any specific Loan
or, in the case of amounts allocable to a specific Loan, are not sufficient to
repay all obligations then due and owing with respect thereto, such amounts
shall be applied by the Servicer as follows: (i) first, to the payment of
Commitment Fees owing to the Participants hereunder, (ii) second, to the
payment of accrued interest on the Funded Participant’s Interest hereunder, pro
rata between the two Facilities, (iii) third, to the payment of the Servicing
Fees owing under the Servicing Agreement, (iv) fourth, to the repayment of the
Funded Participant’s Interests outstanding hereunder pro rata between the two
Facilities, (v) fifth, to the payment of all other amounts owing to the
Servicer or any Participant hereunder, and (vi) sixth, if all obligations of
the Sponsor pursuant to the Operative Documents have been satisfied in full, to
the Sponsor.

 

 

During
any period when a Credit Event has occurred and is continuing, any amounts
received by Servicer with respect to the Loans shall be applied, after
deduction of any expenses incurred in the collection of any such amounts, as
follows (i) first, to the payment of any accrued and unpaid Servicing Fee, (ii)
second, to each Participant in accordance with Pro Rata Share, and (iii)
thereafter, to such Persons as may be legally entitled thereto.

 

If not
sooner repaid, all amounts due and payable to the Servicer and the Participants
under the Operative Documents shall be due and payable in full on the Final
Termination Date.

 

Monthly Servicing Report.  On each Payment Date, the Servicer shall
telecopy to the Sponsor and each Participant a servicing report in the form of Exhibit
F (the “Monthly Servicing Report”) setting forth
the following information with respect the Loans:

 

the
aggregate principal balance of the Loans under each Facility as of the close of
business on the last day of the preceding Payment Period and on such Payment
Date;

 

the
aggregate amount of Loans repurchased by the Sponsor or amounts collected with
respect to the Collateral for the Loans with respect to each Facility since the
last Payment Date;

 

the
aggregate Loan Commitments under each Facility as of the close of business on
the last Business Day of the preceding Payment Period and on such Payment Date;
and

 

each
Loan which is past due (including the past due amount and the number of days past
due) under each Facility.

 

LOAN DEFAULT; RIGHT
TO MAKE GUARANTY DEMAND

 

Notice
Of Loan Default. The Servicer shall notify
the Sponsor and the relevant Borrower of a Loan Payment Default within fifteen
(15) Business Days following the occurrence thereof and of any other Loan
Default of which the Servicer has actual knowledge in accordance with the terms
of the Servicing Agreement.

 

Waiver
or Cure By The Sponsor of Covenant Defaults and Loan
Payment Defaults. 

 

Unless a
Credit Event or an Unmatured Credit Event has occurred and is continuing, the
Sponsor shall be entitled (but not obligated) to request that the Servicer
waive any default by the Borrower or any Guarantor under the Loan Documents to
which it is a party, other than a Loan Default or a default arising based upon
the action or inaction of the Sponsor or any of its Subsidiaries, by sending to
the Servicer for execution a Default Waiver Letter, which Servicer agrees to
execute and mail to the appropriate Borrower if such Default Waiver Letter is in
form and substance satisfactory to the Servicer.

 

 

Notwithstanding
the foregoing clause (a), unless a Credit Event or an Unmatured Credit Event
has occurred and is continuing, the Sponsor shall be entitled (but not
obligated) to request that the Servicer waive any Loan Payment Default
(including a Loan Payment Default resulting from the failure of a Borrower to
remain in compliance with the borrowing base requirements of the applicable
Established Franchisee Loan Agreement) by sending to the Servicer for execution
a Default Waiver Letter, which Servicer agrees to execute and mail to the
appropriate Borrower if such Default Waiver Letter is in form and substance
satisfactory to the Servicer, curing such Loan Payment Default in full; provided,
however, that (i) Sponsor shall not waive and cure more than two (2)
consecutive Loan Payment Defaults for any Loan nor more than a total of four
(4) Loan Payment Defaults in any four year period for any Loan and (ii) such
Loan Payment Default must be cured by Sponsor, and the Default Waiver Letter
for such Loan Payment Default received by Servicer, during the Response Period
for such Loan.

 

Obligations of Sponsor With
Respect to Established Franchisee Loans.

 

If
Sponsor does not waive and cure any Loan Payment Default with respect to any
Established Franchisee Loan during the Response Period, then Sponsor must use
its reasonable efforts to exercise its rights pursuant to the applicable
Franchise Agreement with such Defaulted Borrower to assume the operation of the
stores of such Defaulted Borrower during the five (5) Business Day Response
Period, and during any period that Sponsor operates the stores of any Defaulted
Borrower, Sponsor shall make all payments due and owing to the Servicer
pursuant to the applicable Operative Documents.

 

If the
Sponsor assumes operation of the stores of any such Defaulted Borrower pursuant
to paragraph (a) above, the Sponsor will use its reasonable efforts to locate a
purchaser for such stores.  In the event
that the Sponsor has not resold the franchise and inventory of such Defaulted
Borrower within the extended Response Period in accordance with the terms of
the applicable Franchise Agreement for a purchase price equal to or in excess
of the Minimum Purchase Price (which amount shall be paid directly to the
Servicer in return for the assignment to the Sponsor of the Defaulted Loan, the
related Loan Commitment and the Liens of the Servicer thereon, and applied by
the Servicer to the Sponsor’s purchase of the outstanding Loan Indebtedness of
such Defaulted Loan and related Loan Commitment, with any deficiency recovered
pursuant to the next paragraph), Sponsor shall purchase the outstanding Loan
Indebtedness of such Defaulted Loan and any related Loan Commitment from the
Servicer for the Minimum Purchase Price and any deficiency amount may be
collected by the Servicer, for the benefit of the Participants, pursuant to
subsection (c) below.

 

In the
event that (i) during the initial Response Period for any Established
Franchisee Loan of a Defaulted Borrower, the Sponsor has not waived or cured
any Loan Payment Default, and has not assumed the operation of the stores of
the Defaulted Borrower, or (ii) the Sponsor has not resold the franchise and
inventory of the Defaulted Borrower during the extended Response Period in
accordance with the terms of the applicable Franchise Agreement, or has resold
the franchise and inventory for an amount less than the Minimum Purchase Price,
then the Sponsor will purchase, upon demand by the Servicer, the Established
Franchisee Loan and the related Loan Commitment of such Defaulted Borrower for
an amount equal to the outstanding Loan

 

 

Indebtedness
of the Defaulted Loan pursuant to its guaranty set forth in Section 10.1,
subject to the limitations in Section 10.2.

 

Notwithstanding
the foregoing, to the extent that the Sponsor is prohibited by applicable law,
court order or other legal impediment from exercising the options set forth in
subsection (a) or (b) above, the Servicer may, with the consent of the Required
Participants and shall, upon the written request of the Required Participants,
require that the Sponsor promptly purchase the Loan pursuant to subsection (c)
above.

 

Rights
during Response Period.   Unless a Credit Event or an Unmatured Credit
Event has occurred and is continuing, the Servicer shall refrain during any
Response Period from taking any legal action against the Defaulted Borrower
under the Defaulted Loan which is the subject of such Response Period, and from
accelerating payment of the Loan Indebtedness under such Defaulted Loan but the
Servicer shall cease funding any further Advances pursuant to the Loan
Commitment to such Defaulted Borrower. 
If the Sponsor waives and cures any Loan Payment Default prior to the
expiration of a Response Period, then as to each Loan Payment Default so waived
and cured, the Defaulted Borrower’s and the Servicer’s respective rights and
obligations under the Loan Documents shall be restored to the same status as if
such waived Loan Payment Default never occurred.  In addition, if the Sponsor takes over the
operation of the business of an Established Franchisee Borrower as provided in
Section 4.3, the Servicer shall refrain from exercising remedies against such
Borrower for as long as the Sponsor is complying with Section 4.3, unless a
Credit Event has occurred and is continuing or the Required Participants
otherwise agree.

 

Rights
after Response Period and for Loan Defaults other than
Loan Payment Defaults.  In
the event that any Loan Default other than a Loan Payment Default occurs and is
continuing after the expiration of the Response Period, or that any Loan
Payment Default is not cured during the applicable Response Period, (i) the
Servicer shall have the right to (A) demand that Sponsor comply with its
obligations with respect to such Defaulted Loan set forth in Article 10 and (B)
administer and enforce such Loan as it deems appropriate, without regard to any
limitations or restrictions set forth herein (but subject to Article 3 in
all events) or in any other Operative Document, and (ii) notwithstanding
anything contained in this Article to the contrary, the Sponsor shall, within
five (5) Business Days of its receipt of a written demand from the Servicer
instructing it to do so, (A) purchase the Loan Indebtedness of the Defaulted
Loan and assume the Loan Commitment related thereto, subject to the limitations
in Section 10.2, or (B) at the request of the Servicer, made either at its
option or at the request of the Required Participants, exercise any or all of
the remedies set forth in Section 4.3 with respect to such Defaulted Loan
except to the extent prohibited by applicable law in the case of the bankruptcy
of the Defaulted Borrower. 
Notwithstanding any other provision of the Operative Documents to the
contrary, the repurchase by the Sponsor of any Loan or Loan Commitment upon
termination (or failure to renew) of the relevant Borrower’s Franchise
Agreement by the Sponsor for any reason other than default thereunder by such
Borrower shall not be deemed to be a payment pursuant to Article 10 and shall
not reduce the Maximum Amount thereunder.

 

REPRESENTATIONS AND WARRANTIES

 

The Sponsor represents and warrants to the Servicer and each
Participant as follows:

 

Existence; Power.  The Sponsor and each of its Subsidiaries (i)
is duly organized, validly existing and in good standing as a corporation under
the laws of the jurisdiction of its organization, (ii) has all requisite power
and authority to carry on its business as now conducted, and (iii) is duly
qualified to do business, and is in good standing, in each jurisdiction where
such qualification is required, except where a failure to be so qualified could
not reasonably be expected to result in a Material Adverse Effect.

 

Organizational Power; Authorization.  The execution, delivery and performance by
each Credit Party of the Transaction Documents to which it is a party are
within such Credit Party’s organizational powers and have been duly authorized
by all necessary organizational, and if required, stockholder, action. This
Agreement has been duly executed and delivered by the Sponsor, and  constitutes, and each other Transaction
Document to which any Credit Party is a party, when executed and delivered by
such Credit Party, will constitute, valid and binding obligations of the
Sponsor or such Credit

 

 

Party (as the case may be),
enforceable against it in accordance with their respective terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the enforcement of creditors’ rights generally and by
general principles of equity.

 

Governmental Approvals; No Conflicts.  The execution, delivery and performance by
the Sponsor of this Agreement, and by each Credit Party of the other
Transaction Documents to which it is a party (a) do not require any consent or
approval of, registration or filing with, or any action by, any Governmental
Authority, except those as have been obtained or made and are in full force and
effect or where the failure to do so, individually or in the aggregate, could
not reasonably be expected to have  a Material Adverse Effect, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of the
Sponsor or any of its Subsidiaries or any judgment or order of any Governmental
Authority binding on the Sponsor or any of its Subsidiaries, (c) will not
violate or result in a default under any indenture, material agreement or other
material instrument binding on the Sponsor or any of its Subsidiaries or any of
its assets or give rise to a right thereunder to require any payment to be made
by the Sponsor or any of its Subsidiaries and (d) will not result in the
creation or imposition of any Lien on any asset of the Sponsor or any of its
Subsidiaries, except Liens (if any) created under the Operative Documents.

 

Financial
Statements.  The Sponsor has furnished to each Participant
(i) the audited consolidated balance sheet of the Sponsor and its Subsidiaries
as of December 31, 2003, and the related consolidated statements of income,
shareholders’ equity and cash flows for the fiscal year then ended prepared by
Ernst & Young and (ii) the unaudited consolidated balance sheet of the
Sponsor and its Subsidiaries as of March 31, 2004, and the related unaudited
consolidated statements of income and cash flows for the fiscal quarter and
year-to-date period then ending, certified by a Responsible Officer.  Such financial statements fairly present the
consolidated financial condition of the Sponsor and its Subsidiaries as of such
dates and the consolidated results of operations for such periods in conformity
with GAAP consistently applied, subject to year end audit adjustments and the
absence of footnotes in the case of the statements referred to in clause (ii).
Since December 31, 2003, there have been no changes with respect to the Sponsor
and its Subsidiaries which have had or could  reasonably be expected to have, singly or in the aggregate, a Material
Adverse Effect.

 

Litigation and Environmental Matters.

 

No litigation,
investigation or proceeding of or before any arbitrators or Governmental
Authorities is pending against or, to the knowledge of the Sponsor, threatened
against or affecting the Sponsor or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination that could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect or (ii) which in any manner draws into question the
validity or enforceability of this Agreement or any other Transaction
Document.  Except as set forth on Schedule
5.5(a), as of the Closing Date, no litigation, investigation or proceeding
of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of the
Sponsor, threatened against or affecting the Sponsor or any of its Subsidiaries
that seeks damages in excess of $500,000.

 

Except
for the matters set forth on Schedule 5.5(b), neither the Sponsor nor
any of its Subsidiaries (i) has failed to comply in any material respect with
any Environmental Law or to obtain, maintain or comply with any permit, license
or other approval required under any Environmental Law, (ii) has become subject
to any Environmental Liability in excess of $500,000, (iii) has received notice
of any claim with respect to any Environmental Liability in excess of $500,000
or (iv) knows of any basis for any Environmental Liability in excess of
$500,000.

 

 

Compliance
with
Laws and Agreements.  The Sponsor
and each Subsidiary is in compliance with (a) all applicable laws, rules,
regulations and orders of any Governmental Authority, and (b) all indentures,
agreements or other instruments binding upon it or its properties, except where
non-compliance, either singly or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

 

Investment
Company
Act, Etc.  Neither the
Sponsor nor any of its Subsidiaries is (a) an “investment company”, as defined
in, or subject to regulation under, the Investment Company Act of 1940, as
amended, (b) a “holding company” as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935, as amended or (c) otherwise
subject to any other regulatory scheme limiting its ability to incur debt.

 

Taxes.  The Sponsor
and its Subsidiaries and each other Person for whose taxes the Sponsor or any
Subsidiary could become liable have timely filed or caused to be filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them, and have paid all taxes shown to be due and payable on
such returns or on any assessments made against it or its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority, except (i) to the extent the failure to do so would not
have a Material Adverse Effect or (ii)  where the same are currently being contested in good faith by
appropriate proceedings and for which the Sponsor or such Subsidiary, as the
case may be, has set aside on its books adequate reserves.  The charges, accruals and reserves on the
books of the Sponsor and its Subsidiaries in respect of such taxes are
adequate, and no tax liabilities that could be materially in excess of the
amount so provided are anticipated.

 

Reserved 

 

ERISA.  No ERISA Event
has occurred or is reasonably expected to occur that, when taken together with
all other such ERISA Events for which liability 
is reasonably expected to occur, could reasonably be expected to result
in a Material Adverse Effect.  The
present value of  all accumulated  benefit obligations under each Plan (based on
the assumptions used for purposes of Statement of Financial Standards No. 87)
did not, as of the date of the most recent financial statements reflecting such
amounts, exceed by more than $1,000,000 the fair market value of the assets of
such Plan, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of
Financial Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $1,000,000
the fair market value of the assets of all such underfunded Plans.

 

Ownership of Property.

 

Each of
the Sponsor and its Subsidiaries has good title to, or valid leasehold
interests in, all of its real and personal property material to the operation
of its business.

 

Each of
the Sponsor and its Subsidiaries owns, or is licensed, or otherwise has the
right, to use, all  patents, trademarks,
service marks, tradenames, copyrights and other intellectual property material
to its business, and the use thereof by the Sponsor and its Subsidiaries does
not infringe on the rights of any other Person, except for any such
infringements that, individually or in the aggregate, would not have a Material
Adverse Effect.

 

 

Disclosure.  The
Sponsor has disclosed to the Participants all agreements, instruments, and
corporate or other restrictions to which the Sponsor or any of its Subsidiaries
is subject, and all other matters known to any of them, that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect.  None of the reports (including
without limitation all reports that the Sponsor is required to file with the
Securities and Exchange Commission), financial statements, certificates or
other written information furnished by or on behalf of the Sponsor to the
Servicer or any Participant in connection with the negotiation or syndication
of this Agreement or any other Operative Document or delivered hereunder or
thereunder (as modified or supplemented by any other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, taken as a whole, in light of the
circumstances under which they were made, not misleading; provided, that with
respect to projected financial information, the Sponsor represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time.

 

Labor Relations.  There are no strikes, lockouts or other
material labor disputes or grievances against the Sponsor or any of its
Subsidiaries, or, to the Sponsor’s knowledge, threatened against or affecting
the Sponsor or any of its Subsidiaries, and no significant unfair labor
practice, charges or grievances are pending against the Sponsor or any of its
Subsidiaries, or to the Sponsor’s knowledge, threatened against any of them
before any Governmental Authority.  All
payments due from the Sponsor or any of its Subsidiaries pursuant to the
provisions of any collective bargaining agreement have been paid or accrued as
a liability on the books of the Sponsor or any such Subsidiary, except where
the failure to do so could not reasonably be expected to have a Material
Adverse Effect.

 

Subsidiaries.  Schedule 5.14 sets forth the name of,
the ownership interest of the Sponsor in, the jurisdiction of incorporation of,
and the type of, each Subsidiary and identifies each Subsidiary that is a
Guarantor, in each case as of the Effective Date.

 

Representations and Warranties with Respect to Specific Loans.  The Sponsor represents and warrants to the
Servicer and each Participant with respect to each Loan Commitment established
and each Advance made pursuant to the Operative Documents that:

 

The
Franchise Agreement, the Master Note, the Loan Agreement and each other Loan
Document executed in connection with such Loan Commitment each constitutes a
valid and binding agreement of each Borrower or guarantor party thereto and is
enforceable against each such party in accordance with its terms.

 

The
Master Note and accompanying Loan Documents executed in connection with such
Loan and delivered to the Servicer are the only contracts evidencing the
transaction described therein and constitute the entire agreement of the
parties thereto with respect to such transaction and Sponsor has not made any
other promises, agreements or representations and warranties with respect to
the transactions evidenced by such Master Note.

 

The
Master Note and each accompanying Loan Document executed in connection with
such Loan is genuine and all signatures, names, amounts and other facts and
statements therein and thereon are true and correct.

 

All
disclosures required to be made under applicable federal and state law in
connection with such Loan have been properly and completely made with respect
to each Master Note, the other Loan Documents and the Loan and each such Master
Note, other Loan Documents and Loan is in full compliance with all applicable
federal and state laws, including without limitation, applicable state and
federal usury laws and regulations.

 

The proceeds of each Master
Note will be solely for the purpose of financing the acquisition and expansion
of stores franchised by the Sponsor and operated by the relevant Borrower, for
the acquisition of inventory and equipment with respect to the ongoing
operations thereof, for

 

 

Sponsor-approved payment of
state use tax and freight charges and, in the case of Established Franchisee
Borrowers, for Sponsor-approved working capital purposes, but excluding in all
cases any non-business purposes

 

AFFIRMATIVE COVENANTS

 

The Sponsor covenants and agrees that it will, as long as either of the
Commitments is in effect or the Servicer is committed to make Advances under
any Loan Documents and thereafter so long as any Loans remain outstanding under
this Agreement or Sponsor has any other unsatisfied obligations under the
Operative Documents:

 

Financial Statements and Other Information.  The Sponsor will deliver to the Servicer and
each Participant:

 

as soon
as available and in any event within 90 days after the end of each fiscal year
of Sponsor, a copy of the annual audited report for such fiscal year for the
Sponsor and its Subsidiaries, containing a consolidated and unaudited
consolidating balance sheet of the Sponsor and its Subsidiaries as of the end
of such fiscal year and the related consolidated and unaudited consolidating
statements of income, stockholders’ equity and cash flows (together with all
footnotes thereto) of the Sponsor and its Subsidiaries for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and reported on by Ernst & Young or
other independent public accountants of nationally recognized standing (without
a “going concern” or like qualification, exception or explanation  and without any qualification or exception as
to scope of such audit) to the effect that such financial statements present fairly
in all material respects the financial condition and the results of operations
of the Sponsor and its Subsidiaries for such fiscal year on a consolidated
basis in accordance with GAAP and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;

 

as soon
as available and in any event within 45 days after the end of each  fiscal quarter of each fiscal year of the
Sponsor (other than the last fiscal quarter), an unaudited consolidated and
consolidating balance sheet of the Sponsor and its Subsidiaries as of the end
of such fiscal quarter and the related unaudited consolidated and consolidating
statements of income and cash flows of the Sponsor and its Subsidiaries for
such fiscal quarter and the then elapsed portion of such fiscal year, setting
forth in each case in comparative form the figures for the corresponding
quarter and the corresponding portion of Sponsor’s previous fiscal year, all certified
by the chief financial officer, treasurer  or controller
of the Sponsor as presenting fairly in all material respects the financial
condition and results of operations of the Sponsor and its Subsidiaries on a
consolidated basis in accordance with GAAP, subject to normal year-end audit
adjustments and the absence of footnotes;

 

 

concurrently
with the delivery of the financial statements referred to in clauses (a) and
(b) above, a certificate of a Responsible Officer, (i) certifying as to
whether there exists a Credit Event or an Unmatured Credit Event on the date of
such certificate, and if a Credit Event or an Unmatured Credit Event then
exists, specifying the details thereof and the action which the Sponsor has
taken or proposes to take with respect thereto, (ii) setting forth in
reasonable detail calculations demonstrating compliance with Article VII and
(iii) stating whether any change in GAAP or the application thereof has
occurred since the date of the Sponsor’s audited financial statements referred
to in Section 5.4 and, if any change has occurred, specifying the
effect  of such change on the financial
statements accompanying such certificate;

 

concurrently
with the delivery of the financial statements referred to in clause (a)
above, a certificate of the accounting firm that reported on such financial
statements stating whether they obtained any knowledge during the course of
their examination of such financial statements of any Credit Event or Unmatured
Credit Event  (which certificate may be limited
to the extent required by accounting rules or guidelines);

 

promptly after the same become publicly available,
copies of all periodic and other reports, proxy statements and other materials
filed with the Securities and Exchange Commission, or any Governmental
Authority succeeding to any or all functions of said Commission, or with any
national securities exchange, or distributed by the Sponsor to its shareholders
generally, as the case may be; and

 

promptly
following any request therefor, such other information regarding the results of
operations, business affairs and 
financial condition of the Sponsor or any Subsidiary as the Servicer or
any Participant may reasonably request; and

 

(g)           as soon as available and in any event
within 30 days after the end of each fiscal year of the Sponsor, a forecasted
income statement, balance sheet, and statement of cash flows for the following
fiscal year.

 

Notices of Material Events.  The Sponsor will furnish to the Servicer and
each Participant prompt written notice of the following:

 

the
occurrence of any Credit Event or Unmatured Credit Event;

 

the
filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or, to the knowledge of the
Sponsor, affecting the Sponsor or any Subsidiary which, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect;

 

the
occurrence of any event or any other development by which the Sponsor or any of
its Subsidiaries (i) fails to comply in any material respect with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval  required under any
Environmental Law, (ii) becomes subject to any Environmental Liability in
excess of $500,000, (iii) receives notice of any claim with respect to any
Environmental Liability in excess of $500,000, or (iv) becomes aware of any
basis for any Environmental Liability in excess of

 

 

$500,000
and in each of the preceding clauses, which individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect;

 

the
occurrence of any ERISA Event that alone, or together with any other ERISA
Events that have occurred, could reasonably be expected to result in liability
of the Sponsor and its Subsidiaries in an aggregate amount exceeding
$1,000,000; and

 

any
other development that results in, or could reasonably be expected to result
in, a Material Adverse Effect.

 

Each
notice delivered under this Section shall be accompanied by a written statement
of a Responsible Officer setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect
thereto.

 

Existence; Conduct of Business.  The Sponsor
will, and will cause each of its Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and maintain in full force and effect its
legal existence and its respective rights, licenses, permits, privileges,
franchises, patents, copyrights, trademarks and trade names material to the
conduct of its business and will continue to engage in the same business as
presently conducted or such other businesses that are reasonably related
thereto; provided, that nothing in this Section shall prohibit any
merger, consolidation, liquidation or dissolution permitted under Section
8.3.

 

Compliance with Laws, Etc. The Sponsor will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations and requirements of
any Governmental Authority applicable to its properties, except where the
failure to do so, either individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.

 

Payment of Obligations.  The Sponsor will, and will cause each of its
Subsidiaries to, pay and discharge at or before maturity, all of its
obligations and liabilities (including without limitation all tax liabilities
and claims that could result in a statutory Lien) before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) the Sponsor or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending
such contest could not reasonably be expected to result in a Material Adverse
Effect.

 

Books and Records. The Sponsor will, and will
cause each of its Subsidiaries to, keep proper  books of record and account in which full, true and correct entries
shall be made of all dealings and transactions in relation to its business and
activities to the extent necessary to prepare the consolidated financial
statements of Sponsor in conformity with GAAP.

 

Visitation, Inspection,
Etc.

 

The
Sponsor will, and will cause each of its Subsidiaries to, permit any
representative of the Servicer or any Participant, to visit and inspect its
properties, to examine its books and records and to make copies and take
extracts therefrom, and to discuss its affairs, finances and accounts with any
of its officers and with its independent certified public accountants, all at
such reasonable times and as often as the Servicer or any Participant may
reasonably request after reasonable prior notice to the Sponsor; provided, however, if a Credit Event  or Unmatured Credit Event has occurred and is
continuing, no prior notice shall be required. All reasonable expenses incurred
by the Servicer and, at any time after the occurrence and during the
continuance of a Credit Event, any Participants in connection with any such
visit, inspection, audit, examination and discussions shall be borne by the
Sponsor.

 

Maintenance
of
Properties;  Insurance.  The Sponsor
will, and will cause each of its Subsidiaries to, (a) keep and maintain all
property material to the conduct of its business in good working order and
condition, ordinary wear and tear except where the failure to do so, either
individually or it the aggregate, could not reasonably be expected to result in
a Material Adverse Effect and (b) maintain with financially sound and reputable
insurance companies, insurance with respect to its properties and business, and
the properties and business of its Subsidiaries, against loss or damage of the
kinds customarily insured against by companies in the same or similar businesses
operating in the same or similar locations. 
In addition, and not in limitation of the foregoing, the Sponsor shall
maintain and keep in force insurance coverage on its

 

 

inventory, as is consistent
with best industry practices.  The
Sponsor shall at all times cause the Servicer to be named as additional insured
on all of its casualty and liability policies.

 

Use of Proceeds and Letters of Credit.  The Sponsor will use the proceeds of all
Loans to finance working capital needs, to refinance existing debt, to finance
Permitted Acquisitions and for other general corporate purposes of the Sponsor
and its Subsidiaries. No part of the proceeds of any Loan will be used, whether
directly or indirectly, for any purpose that would violate any rule or
regulation of the Board of Governors of the Federal Reserve System, including
Regulations T, U or X.  All Letters of
Credit will be used for general corporate purposes.

 

Additional
Subsidiaries.

 

The
Sponsor may, after the Effective Date, acquire or form additional Domestic
Subsidiaries so long as the Sponsor, within ten (10) business days after any
such Domestic Subsidiary is acquired or formed, (i) notifies the Servicer and
the Participants thereof and (ii) causes such Domestic Subsidiary to become a
Guarantor by executing agreements in the form of Annex I to the Guaranty
Agreement and Annex I to Indemnity and Contribution Agreement and (iii) causes
such Domestic Subsidiary to deliver simultaneously therewith similar documents
applicable to such Domestic Subsidiary described in Section 13.1 as reasonably
requested by the Servicer.

 

The
Sponsor shall not acquire or form any additional Foreign Subsidiaries;
provided, however, that the Sponsor may acquire or form additional Subsidiaries
incorporated under the laws of Canada so long as the Sponsor, within ten (10)
business days after any such Foreign Subsidiary is acquired or formed, (i)
notifies the Servicer and the Participants thereof, (ii) delivers stock
certificates and related pledge agreements, in form satisfactory to a
collateral agent acceptable to the Servicer, 
evidencing the pledge of 66% (or such greater percentage which would not
result in material adverse tax consequences) of the  issued
and outstanding capital stock entitled to vote (within the meaning of Treas.
Reg. Section 1.956-2(c)(2)) and 100% of the  issued and outstanding capital stock not
entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) of
each such Subsidiary directly owned by the Sponsor or any Domestic Subsidiary
to secure the Guaranteed Obligations, (iii) causes such  Subsidiary to deliver simultaneously
therewith similar documents applicable to such Foreign Subsidiary described in
Section 13.1 as reasonably requested by the Servicer, and (iv) the Servicer
enters into an intercreditor agreement, in form and substance satisfactory to
the Required Participants, with all other creditors of the Sponsor having a
similar covenant with the Sponsor.

 

Post-Closing Requirements.  The Sponsor will, and will cause each of
Subsidiaries to:

 

No later
than forty-five (45) days after the Closing Date, deliver to Servicer copies of
organizational papers of Aaron Rents, Inc. Puerto Rico (“ARPR”), certified as
true and correct by the Department of State of the Commonwealth of Puerto, and
a certificate from the Department of State of Puerto Rico certifying ARPR’s
good standing as a corporation in Puerto Rico.

 

(b) No later
than forty-five (45) days after the Closing Date, deliver to Servicer a
favorable written opinion Puerto Rico counsel to ARPR, in a form satisfactory
to Servicer and each Participant and covering such matters of Puerto Rico law
relating to the transactions contemplated hereby as the Servicer may reasonably
request.

 

 

FINANCIAL COVENANTS

 

The Sponsor
covenants and agrees that so long as either of the Commitments remains
outstanding or any Loans remain outstanding or the Sponsor has any obligations
under the Operative Documents, and until the full and final payment of all
indebtedness of all Borrowers incurred pursuant to the Loan Documents and
unless otherwise consented to in writing by the Required Participants:

 

Total Debt to EBITDA Ratio.  The Sponsor
and its Subsidiaries shall maintain, as of the last day of each fiscal quarter
of the Sponsor, commencing with the fiscal quarter ending June 30, 2004, a
Total Debt to EBITDA Ratio of not greater than 3.00:1.00.

 

Total Adjusted Debt to Total Adjusted Capital Ratio.  The Sponsor and its Subsidiaries shall
maintain, as of the last day of each fiscal quarter of the Sponsor, commencing with
the fiscal quarter ending June 30, 2004, a Total Adjusted Debt to Total
Adjusted Capital Ratio of not greater than 0.60:1.00.

 

Fixed
Charge Coverage
Ratio.  The Sponsor and its
Subsidiaries shall maintain, as of the last day of each fiscal quarter of the
Sponsor, commencing with the fiscal quarter ending June 30, 2004, a Fixed
Charge Coverage  Ratio of not
less than 2:00 to 1:00.

 

Minimum Consolidated Net Worth.  The Sponsor and its Subsidiaries shall
maintain a Consolidated Net Worth of an amount equal to the sum of (i)
$338,340,000, plus (ii) 50% of cumulative
positive Consolidated Net Income accrued during each fiscal quarter ending
thereafter, since the end of such fiscal quarter of the Sponsor, commencing
with the fiscal quarter ending June 30, 2004, plus
(iii) 100% of the net proceeds from any public or private offering of common
stock of the Sponsor after the Closing Date, calculated quarterly on the last
day of each fiscal quarter; provided, that if Consolidated Net Income is
negative in any fiscal quarter the amount added for such fiscal quarter shall
be zero and such negative Consolidated Net Income shall not reduce the amount
of Consolidated Net Income added from any previous fiscal quarter.  Promptly upon the consummation of any
offering of common stock of the Sponsor, the Sponsor shall notify the Servicer
in writing of the amount of the proceeds thereof.

 

NEGATIVE COVENANTS

 

The Sponsor
covenants and agrees that so long as either of the Commitments remains
outstanding or any Loans remain outstanding or the Sponsor has any obligations
under the Operative Documents, and until the full and final payment of all
indebtedness of all Borrowers incurred pursuant to the Loan Documents and
unless otherwise consented to in writing by the Required Participants:

 

Indebtedness.   The Sponsor will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness, except:

 

Indebtedness
created pursuant to the Operative Documents;

 

Indebtedness
existing on the date hereof and set forth on Schedule 8.1 and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount

 

 

thereof
(immediately prior to giving effect to such extension, renewal or replacement)
or shorten the maturity or the weighted average life thereof;

 

Indebtedness
of the Sponsor or any Subsidiary incurred after the Effective Date to finance
the acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof; provided, that such Indebtedness is incurred
prior to or within 90 days after such acquisition or the completion of such
construction or improvements or extensions, renewals, and replacements of any
such Indebtedness that do not increase the outstanding principal amount thereof
(immediately prior to giving effect to such extension, renewal or replacement)
or shorten the maturity or the weighted average life thereof; provided further,
that the aggregate principal amount of such Indebtedness does not exceed
$15,000,000 at any time outstanding;

 

Indebtedness
of the Sponsor owing to any Credit Party and of any Credit Party owing to the
Sponsor or any other Credit Party;

 

Guarantees
by the Sponsor of Indebtedness of any Credit Party and by any Credit Party of
Indebtedness of the Sponsor or any other Credit Party;

 

Indebtedness
under the Revolving Credit Agreement;

 

Indebtedness
or contingent liability under the Synthetic Lease Documents provided
that the aggregate outstanding principal amount of all such Indebtedness does
not exceed $25,000,000 at any one time;

 

Guarantees
by the Sponsor of Indebtedness of certain franchise operators of the Sponsor,
provided such guarantees are given by the Sponsor in connection with (1)  loans made pursuant to the terms of this
Agreement, (2) loans made pursuant to the SouthTrust Loan Facility Agreement in
an aggregate principal amount not to exceed $250,000, and (3) loans made by
SunTrust Bank to finance the purchase of equity interests in certain franchises
of the Sponsor in an aggregate principal amount not to exceed $10,000,000;

 

endorse
negotiable instruments for collection in the ordinary course of business;

 

Guarantees
by Sponsor of Indebtedness of Foreign Subsidiaries, provided that the amount of
such Guaranteed Indebtedness, together with the principal amount any loans to
Foreign Subsidiaries permitted to be made under clause (l) below, does not
exceed $10,000,000 at any time;

 

Loans by
Sponsor to its Foreign Subsidiaries, provided that the amount of such loans,
together with the amount of Guaranteed Indebtedness permitted to be incurred
under clause (j) above, does not exceed $10,000,000 at any time; and

 

 

Indebtedness
in the aggregate principal amount of $50,000,000 as evidenced by the 6.88%
Senior Notes of Sponsor issued pursuant to the Note Purchase Agreement,
together with any Guarantees of such Indebtedness by any Subsidiaries of
Borrower; and

 

other
unsecured Indebtedness in an aggregate principal amount not to exceed
$30,000,000 at any time outstanding.

 

Negative
Pledge.  The
Sponsor will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist any Lien on any of its assets or property now
owned or hereafter acquired or, except:

 

Permitted
Encumbrances;

 

any
Liens on any property or asset of the Sponsor or any Subsidiary existing on the
Effective Date set forth on Schedule 8.2; provided, that such
Lien shall not apply to any other property or asset of the Sponsor or any
Subsidiary;

 

purchase
money Liens upon or in any fixed or capital assets to secure the purchase price
or the cost of construction or improvement of such fixed or capital assets or
to secure Indebtedness incurred solely for the purpose of financing the
acquisition, construction or improvement of such fixed or capital assets
(including Liens securing  any Capital
Lease Obligations); provided, that (i) such Lien secures Indebtedness
permitted by Section 8.1(c), (ii) such Lien attaches to such
asset concurrently or within 90 days after the acquisition, improvement or
completion of the construction thereof; (iii) such Lien does not extend to any
other asset; and (iv) the Indebtedness secured thereby does not exceed the cost
of acquiring, constructing or improving such fixed or capital assets together
with all interest, fees and costs incurred in connection therewith;

 

any Lien
(i) existing on any asset of any Person at the time such Person becomes a
Subsidiary of the Sponsor, (ii) existing on any asset of any Person at the time
such Person is merged with or into the Sponsor or any Subsidiary of the Sponsor
or (iii) existing on any asset prior to the acquisition thereof by the Sponsor
or any Subsidiary of the Sponsor; provided, that any such Lien was not
created in the contemplation of any of the foregoing and any such Lien secures
only those obligations which it secures on the date that such Person becomes a
Subsidiary or the date of such merger or the date of such acquisition;

 

extensions,
renewals, or replacements of any Lien referred to in paragraphs (a) through (d)
of this Section; provided, that the principal amount of the
Indebtedness  secured thereby is not
increased and that any such extension, renewal or replacement is limited to the
assets originally encumbered thereby; and

 

Liens
granted under the Synthetic Lease Documents in the real or personal property
financed thereunder and in certain related rights of the Sponsor to secure the
Sponsor’s indebtedness and liabilities under the Synthetic Lease Documents to
the extent permitted under Section 8.1;

 

Liens
securing the obligations of the Sponsor under the Revolving Credit Agreement;
and

 

 

Liens on
shares of stock of any Foreign Subsidiary to the extent that the Guaranteed
Obligations are secured pari passu with any other Indebtedness or obligations
secured thereby.

 

Fundamental
Changes.

 

The
Sponsor will not, and will not permit any Subsidiary to, merge into or consolidate
into any other Person, or permit any other Person to merge into or consolidate
with it, or sell, lease, transfer or otherwise dispose of (in a single
transaction or a series of transactions) all or substantially all of its assets
(in each case, whether now owned or hereafter acquired) or all or substantially
all of the stock of any of its Subsidiaries  (in each case,
whether now owned or hereafter acquired)  or liquidate
or dissolve; provided, that if at
the time thereof and immediately after giving effect thereto, no Default or
Event of Default shall have occurred and be continuing (i) the Sponsor or any
Subsidiary may merge with a Person if the Sponsor (or such Subsidiary if the
Sponsor is not a party to such merger) is the surviving Person, (ii) any
Subsidiary may merge into another Subsidiary or the Sponsor; provided, however,
that if the Sponsor is a party to such merger, the Sponsor shall be the
surviving Person, provided, further, that if any Subsidiary to such merger is a
Guarantor, the Guarantor shall be the surviving Person, (iii) any Subsidiary
may sell, transfer, lease or otherwise dispose of all or substantially all of
its assets to the Sponsor or to a Guarantor, (iv) Aaron Rents Puerto Rico, Inc.
may liquidate or dissolve into the Sponsor if the Sponsor determines in good
faith that such liquidation or dissolution is in the best interests of the
Sponsor and is not materially disadvantageous to the Participants, (v) any
other Subsidiary may liquidate or dissolve if the Sponsor determines in good
faith that such liquidation or dissolution is in the best interests of the
Sponsor, is not materially disadvantageous to the Participants, and such
Subsidiary dissolves into another Guarantor or the Sponsor; provided, that any
such merger involving a Person that is not a wholly-owned Subsidiary
immediately prior to such merger shall not be permitted unless also permitted
by Section 8.4.

 

The
Sponsor will not, and will not permit any of its Subsidiaries to, engage in any
business other than businesses of the type conducted by the Sponsor and its
Subsidiaries on the date hereof and businesses reasonably related thereto.

 

Investments, Loans, Etc.  The Sponsor will not, and will not permit any
of its Subsidiaries to, purchase, hold or acquire (including pursuant to any
merger with any Person that was not a wholly-owned Subsidiary prior to such
merger), any common stock, evidence of indebtedness or other securities
(including any option, warrant, or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, any obligations of, or
make or permit to exist any investment or any other interest in, any other
Person (all of the foregoing being collectively called “Investments”), or purchase
or otherwise acquire (in one transaction or a series of transactions) any
assets of any other Person that constitute a business unit, or create or form
any Subsidiary, except:

 

Investments
(other than Permitted Investments) existing on the date hereof and set forth on
Schedule 8.4 (including Investments in Subsidiaries);

 

Permitted
Investments;

 

Permitted
Acquisitions;

 

Investments
made by the Sponsor in or to any other Credit Party and by any other Credit
Party to the Sponsor or in or to another Credit Party;

 

 

loans or
advances to employees, officers, directors or stockholders of the Sponsor or
any Subsidiary in the ordinary course of business; provided,
however, that the aggregate amount of all such loans and advances
does not exceed $350,000 at any time;

 

loans to
franchise operators and owners of franchises acquired or funded pursuant to
this Agreement;

 

acquire
and own stock, obligations or securities received in settlement of debts
(created in the ordinary course of business) owing to any Guarantor or any of
their Subsidiaries;

 

loans to
Foreign Subsidiaries to the extent permitted under Section 8.1;

 

loans to
franchise operators to extent permitted under Section 8.1; and

 

other
Investments not to exceed $10,000,000 at any time;

 

Restricted Payments.  The Sponsor  will not,  and will not permit its Subsidiaries to,  declare or make, or agree to pay or make, directly or indirectly, any
dividend on any class of its stock, or make any payment on account of, or set
apart assets for a sinking or other analogous fund for, the purchase, redemption,
retirement, defeasance or other acquisition of, any shares of common stock or
Indebtedness subordinated to the Guaranteed Obligations of the Sponsor or any
options, warrants, or other rights to purchase such common stock or such
subordinated Indebtedness, whether now or hereafter outstanding (each, a “Restricted Payment”), except
for  (i) dividends payable by the Sponsor
solely in shares of any class of its common stock, (ii) Restricted
Payments made by any Guarantor to the Sponsor or to another Guarantor and (iii)
so long as no Credit Event or Unmatured Credit Event has occurred and is
continuing at the time such dividend is paid or redemption or stock purchase is
made, dividends, distributions, redemptions and stock repurchases paid in cash
which do not exceed fifty percent (50%) of Consolidated Net Income of Sponsor
(if greater than $0) for the immediately preceding Fiscal Year; provided,
that if the aggregate amount of all such dividends and distributions paid in
cash in any Fiscal Year are less than the amount permitted by clause (iii)
above, the excess permitted amount for such year may be carried forward once to
the next succeeding Fiscal Year.

 

Sale of Assets.  The Sponsor will not, and will not permit any
of its Subsidiaries to, convey, sell, lease, assign, transfer or otherwise
dispose of, any of its assets, business or property, whether now owned or
hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares
of such Subsidiary’s common stock to any Person other than the Sponsor or a
Guarantor (or to qualify directors if required by applicable law), except (a)
the sale or other disposition for fair market value of obsolete or worn out
property or other property not necessary for operations disposed of in the
ordinary course of business; (b) the sale of inventory and Permitted
Investments in the ordinary course of business, (c) sales and dispositions
permitted under Section 8.3(a) and sale and leaseback transactions
permitted under Section 8.9, and (d) 
other sales of assets not to exceed $10,000,000 in book value in the
aggregate.

 

Transactions with Affiliates.  The
Sponsor will not, and will not permit any of its Subsidiaries to, sell, lease
or otherwise transfer any property or assets to, or purchase, lease or
otherwise acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except (a) in the ordinary course of
business at prices and on terms and conditions not less favorable to the
Sponsor or such Subsidiary than could be obtained on an arm’s-length basis from
unrelated third parties, (b) transactions between or among the Sponsor and its
wholly-owned Subsidiaries not involving any other Affiliates and (c) any
Restricted Payment permitted by Section 8.5.

 

Restrictive
Agreements.  The Sponsor will not, and will not permit any
Subsidiary to, directly or indirectly, enter into, incur or permit to exist any
agreement that prohibits, restricts or imposes any condition upon (a) the
ability of the Sponsor or any Subsidiary to create, incur or permit any Lien
upon any of its assets or properties, whether now owned or hereafter acquired,
or (b) the ability of any Subsidiary to pay dividends or other
distributions with respect to its common stock, to make or repay loans or
advances to the Sponsor or any other Subsidiary, to Guarantee Indebtedness of
the Sponsor or any other Subsidiary or to transfer any of its property or
assets to the Sponsor or any Subsidiary of the Sponsor; provided, that
(i) the foregoing shall not apply to restrictions or conditions imposed by law
or by this Agreement or any other Transaction Document, the SouthTrust
Loan Facility Agreement, or the Note Purchase Agreement, (ii) the
foregoing shall not apply to customary restrictions and conditions contained in
agreements relating to the sale of a Subsidiary pending such sale, provided
such restrictions and conditions apply only to the Subsidiary that is sold and
such sale is permitted hereunder, (iii) clause (a) shall not apply to
restrictions or conditions imposed by any agreement relating

 

 

to secured Indebtedness
permitted by this Agreement if such restrictions and conditions apply only to
the property or assets securing such Indebtedness, and (iv) clause (a) shall
not apply to customary provisions in leases restricting the assignment thereof.

 

Sale and
Leaseback
Transactions.  The Sponsor
will not, and will not permit any of the Subsidiaries to, enter into any
arrangement, directly or indirectly, whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned
or hereinafter acquired, and thereafter rent or lease such property or other
property that it intends to use for substantially the same purpose or purposes
as the property sold or transferred; provided, however, the
Sponsor may engage in such sale and leaseback transactions so long as the
aggregate fair market value of all assets sold and leased back does not exceed
$30,000,000 during the term of this Agreement.

 

Amendment
to
Material Documents. The Sponsor will not, and will not permit any
Subsidiary to, amend, modify or waive any of its rights in a manner materially
adverse to the Participants under its certificate of incorporation, bylaws or
other organizational documents.

 

Accounting
Changes.  The Sponsor will not, and will not permit any
Subsidiary to, make any significant change in accounting treatment or reporting
practices, except as required by GAAP, or change the fiscal year of the Sponsor
or of any Subsidiary, except to change the fiscal year of a Subsidiary to
conform its fiscal year to that of the Sponsor.

 

CREDIT EVENTS AND REMEDIES

 

In the event
that:

 

the Sponsor shall fail to pay
any amount due hereunder; or

 

any representation or
warranty made or deemed made by or on behalf of the Sponsor or any Subsidiary
in or in connection with this Agreement or any other Operative Document
(including the Schedules attached thereto) and any amendments or modifications
hereof or waivers hereunder, or in any certificate, report, financial statement
or other document submitted to the Servicer or the Participants by any Credit
Party or any representative of any Credit Party pursuant to or in connection
with this Agreement or any other Operative Document shall prove to be incorrect  in any material respect when made or deemed
made or submitted; or

 

the Sponsor shall fail to
observe or perform any covenant or agreement contained in Sections 6.1,
6.2, 6.3 (solely with respect to the Sponsor’s existence) or
Articles VII or VIII; or

 

any Credit Party shall fail
to observe or perform any covenant or agreement contained in this Agreement
(other than those referred to in clauses 9.1, 9.2 and 9.3 above), and such
failure shall remain unremedied for 30 days after the earlier of
(i) any officer of the Sponsor becomes aware of such failure, or
(ii)  notice thereof shall have been given to the Sponsor by the Servicer
or any Participant; or

 

any event of default (after
giving effect to any grace period) shall have occurred and be continuing under
the Revolving Credit Documents or, the SouthTrust Loan Facility Agreement or
all or any part of the obligations due and owing under the Revolving Credit
Agreement or the obligations due and owing under the SouthTrust Loan Facility
Agreement are accelerated, is declared to be due and payable is required to be
prepaid or redeemed, in each case prior to the stated maturity thereof;

 

the Sponsor or any Subsidiary
(whether as primary obligor or as guarantor or other surety) shall fail to pay
any principal of or premium or interest on any Material Indebtedness that is
outstanding, when and as the same shall become due and payable (whether at
scheduled maturity, required prepayment, acceleration, demand or otherwise),
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument evidencing such Indebtedness; or any
other event shall occur or condition shall exist under any agreement or
instrument relating to such Indebtedness and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, or permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable; or required to be prepaid or redeemed
(other  than by a regularly scheduled
required prepayment or redemption), purchased or defeased, or any offer to
prepay, redeem, purchase or defease such Indebtedness shall be required to be
made, in each case prior to the stated maturity thereof; or

 

the Sponsor or any Subsidiary
shall (i) commence a voluntary case or other proceeding or file any petition
seeking liquidation, reorganization or other relief under any federal, state or
foreign bankruptcy, insolvency or other similar law now or hereafter in
effect  or seeking the appointment of a
custodian, trustee, receiver, liquidator or other

 

 

similar official of it or any
substantial part of its property, (ii) consent to the institution of, or fail
to contest in a timely and appropriate manner, any proceeding or petition
described in clause (i) of this Section, (iii) apply for or consent to the
appointment of a custodian, trustee, receiver, liquidator or other similar
official for the Sponsor or any such Material Subsidiary or for a substantial part
of its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors, or (vi) take any action for the purpose of
effecting  any of the foregoing; or

 

an involuntary proceeding
shall be commenced or an involuntary petition shall be filed seeking (i)
liquidation, reorganization or other relief in respect of the Sponsor or any
Subsidiary or its debts, or any substantial part of its assets,  under any federal, state or foreign
bankruptcy, insolvency or other similar law now or hereafter in effect  or (ii) the appointment of a custodian,
trustee, receiver, liquidator or other similar official for the Sponsor or any
Subsidiary or for a substantial part of its assets, and in any such case,
such  proceeding or petition shall remain
undismissed for a period of 60 days or an order or decree approving or  ordering any of the foregoing shall be
entered; or

 

the Sponsor or any Subsidiary
shall become unable to pay, shall admit in writing its inability to pay, or
shall fail to pay, its debts as they become due; or

 

an ERISA Event shall have
occurred that when taken together with other ERISA Events that have occurred,
could reasonably be expected to result in liability to the Sponsor and the
Subsidiaries in an aggregate amount exceeding $1,000,000 or otherwise having a
Material Adverse Effect; or

 

any  judgment or order for the payment of money in
excess of $1,000,000 in the aggregate shall be rendered against the Sponsor or
any Subsidiary, and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment 
or order or (ii) there shall be a period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or

 

any  non-monetary  judgment or order shall be rendered against the Sponsor or any
Subsidiary that could reasonably be expected to have a Material Adverse Effect,
and  there shall be a period of
30 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; or

 

a Change in Control shall
occur or exist; or

 

any provision of any Guaranty
Agreement shall for any reason cease to be valid and binding on, or enforceable
against, any Guarantor, or any Guarantor shall so state in writing, or any
Guarantor shall seek to terminate its Guaranty Agreement; or

 

There shall exist or occur
any event of default as provided under the terms of any other Operative
Document, or any Operative Document ceases to be in full force and effect or
the validity or enforceability thereof is disaffirmed by or on behalf of
Sponsor or any other Credit Party, or at any time it is or becomes unlawful for
Sponsor or any other Credit Party to perform or comply with its obligations
under any Operative Document, or the obligations of Sponsor or any other Credit
Party under any Operative Document are not or cease to be legal, valid and
binding on Sponsor or any such Credit Party;

 

then upon the occurrence
and during the continuation of any such event (each, a “Credit Event”):

 

the Servicer may, with the
consent of the Required Participants, and upon the written request of the
Required Participants, shall, take any or all of the following actions, without
prejudice to the rights of the Servicer or any Participant to enforce its
claims against Sponsor, any other Credit Party, any Borrower or other obligor
with respect to any Loan: 
(i) declare the Commitments terminated, whereupon the Commitments
shall terminate immediately and any unpaid Commitment Fee shall forthwith
become due and payable without any other notice of any kind (with the express
understanding that such termination of the Commitments shall not result in a
termination of the Participating Commitments of each Participant or of the
obligation of the Servicer to fund any Loan Commitment); (ii)  demand that
the Sponsor purchase specified or all outstanding Loans and Loan Commitments by
paying to the Servicer the Loan Indebtedness of each such Loan and assuming the
Servicer’s obligations under each Loan Commitment, whereupon such amount shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Sponsor (with the
express understanding the limitations on Sponsor’s guaranty obligations set
forth in Article 10 shall not apply); and (iii) take any other action and
exercise any other remedy available by

 

 

contract or at law; provided,
that, if a Credit Event specified in Sections 9.7, 9.8 or 9.9 shall occur, the
result which would occur upon the giving of notice by the Servicer to any
Credit Party, shall occur automatically without the giving of any such notice.

 

In addition, the Servicer
may, with the consent of the Required Participants and shall, upon the written
request of the Required Participants, (A) to the extent authorized to do so
pursuant to the Established Franchisee Loan Agreements (which authorization is
limited to certain specified Credit Events), 
(x) cease funding further Advances pursuant to the Established
Franchisee Loan Commitments and (y) declare all Loan Indebtedness outstanding
pursuant to the Established Franchisee Loan Commitments to be immediately due
and payable in accordance with the terms of the applicable Operative Documents
and exercise all rights and remedies provided under the Operative Documents,
and (B) give notice to the Startup Franchisee Borrowers that the Startup
Franchisee Loan Commitments shall be terminated upon the date which is ninety
(90) days after receipt by each such Startup Franchisee Borrower of such notice
of termination, subject to such Startup Franchisee Borrower’s right to term out
advances for the Amortization Period.

 

GUARANTY

 

In addition to
its obligations upon the occurrence of a Credit Event or a Change of Control
and its other obligations pursuant to the Operative Documents, the Sponsor
hereby agrees as follows:

 

Unconditional Guaranty.  The Sponsor hereby unconditionally and
irrevocably guarantees to the Servicer, each Participant and any transferee of
the Participants, the full and prompt payment of all of the Guaranteed
Obligations relating to the Loans and all costs, charges and expenses
(including reasonable attorneys’ fees) actually incurred or sustained by the
Servicer or any Participant in enforcing the obligations of the Sponsor
hereunder or the obligations of the Borrowers under the applicable Operative
Documents, subject to the limitations set forth in Section 10.2 below.  If any portion of the Loan Indebtedness with
respect to any Defaulted Loan is not paid by the date specified herein, Sponsor
hereby agrees to and will immediately pay the same, without resort by Servicer
or any Participant  to any other person
or party.  The obligation of Sponsor to
Servicer and the Participants hereunder is primary, absolute and unconditional,
except as may be specifically set forth herein. 
This is a guaranty of payment and not of collection.  The obligations of the Sponsor pursuant to
this Article 10 constitute a guarantee that is continuing in nature.

 

The Servicer may, with
the consent of the Required Participants and shall, upon the written request of
the Required Participants, in the event that the obligations of the Sponsor
with respect to a Defaulted Loan have arisen hereunder, request that the
Sponsor purchase the Defaulted Loan and related Loan Commitment from the
Servicer prior to the acceleration of the Defaulted Loan pursuant to the terms
of the applicable Operative Documents for an amount equal to the Loan
Indebtedness with respect to such Defaulted Loan, and Sponsor shall promptly
upon receipt of such request, but subject to Section 10.2 below, purchase such
Defaulted Loan and assume the Loan Commitment related thereto, and such
purchase by the Sponsor shall be deemed to be a payment hereunder in such
amount.

 

 

Limitation
on Guaranty of Loans. The obligation of the
Sponsor pursuant to this Article 10 with respect to the Loans and Loan
Commitments shall be limited, as of any date of determination, to an amount
(the “Maximum Amount”) equal to the
greater of (a) fifty percent (50%) of the aggregate outstanding principal
amount of the Loans on such date (after giving effect to any payments,
recoveries on Collateral or other recoveries made by the Servicer or any
Participant on such date with respect to the Loans),  (b) three (3) times the largest aggregate
amount of all Loan Commitments (or if the Loan Commitments have been
terminated, all outstanding Loans) made to any Borrower and its Borrower Group
and (c) $25,000,000; provided  that, the Maximum Amount shall not
on any date of determination exceed the aggregate outstanding Loan Indebtedness
of the Loans.  As a material inducement
to the Servicer’s and each Participant’s entering into this Agreement, the
parties hereto expressly agree that the Maximum Amount shall be redetermined
(and the obligation of the Sponsor to pay such replenished Maximum Amount shall
be enforceable by the Servicer and the Participants hereunder) on each day that
any Loan Indebtedness remains outstanding pursuant to any Loan regardless of
(i) any previous payments made by the Sponsor hereunder on any prior date,
whether or not constituting the Maximum Amount payable on such prior date, or
(ii) the number of prior demands made by the Servicer or the Participants
hereunder; provided that, for purposes of calculating the Maximum
Amount, (x) any Defaulted Loan for which a demand has previously been made, or
deemed to have been made, pursuant to this Section 10.2 shall not be deemed to
be outstanding and (y) demand shall automatically be deemed to have been made
with respect to each Defaulted Loan on the date on which the Servicer is
authorized to make a demand on the Sponsor with respect to such Defaulted Loan
pursuant to Section 4.3 of this Agreement unless such Loan Default arises
solely from the occurrence of a Credit Event in which case demand shall be
deemed to be made only upon receipt of written request from the Servicer.  The foregoing limitation shall not in any way
limit the obligation of the Sponsor to purchase the Loans and assume the Loan
Commitments relating thereto upon the occurrence of a Credit Event without
regard to any limitations set forth in this Article 10.

 

Continuing
Guaranty. The obligations of the
Sponsor pursuant to this Article 10 constitute a guarantee which is continuing
in nature and shall be effective with respect to the full amount outstanding
under all Guaranteed Obligations, now existing or hereafter made or extended,
regardless of the amount, subject only to the limitations set forth in the
preceding Section 10.2.

 

Waivers. The Sponsor hereby waives notice of Servicer’s and
each Participant’s acceptance of this Agreement and the creation, extension or
renewal of any Loans or other Guaranteed Obligations. Sponsor hereby consents
and agrees that, at any time or times, without notice to or further approval
from Sponsor, and without in any way affecting the obligations of Sponsor
hereunder, Servicer and the Participants may, with or without consideration (i)
release, compromise with, or agree not to sue, in whole or in part, any
Borrower or any other obligor, guarantor, endorser or surety on any Loans or
any other Guaranteed Obligations, (ii) renew, extend, accelerate, or increase
or decrease the principal amount of any Loans or other Guaranteed Obligations,
either in whole or in part, (iii) amend, waive, or otherwise modify any of the
terms of any Loans or other Guaranteed Obligations or of any mortgage, deed of trust,
security agreement, or other undertaking of any of the Borrowers or any other
obligor, endorser, guarantor or surety in connection with any Loans or other
Guaranteed Obligations, and (iv) apply any payment received from Borrowers or
from any other obligor, guarantor, endorser or surety on the Loans or other
Guaranteed Obligations to any of the liabilities of Borrowers or of such other
obligor, guarantor, endorser, or surety which Servicer may choose, subject,
however, to the rights of Sponsor to bring a separate action for any breach of
the Operative Documents pursuant to Section 10.11.

 

Additional Actions.  Subject to
Section 10.11, Sponsor hereby consents and agrees that the Servicer may at any
time or times, either with or without consideration, surrender, release or
receive any property or other Collateral of any kind or nature whatsoever held
by it or for its account securing any Loans or other Guaranteed Obligations, or
substitute any Collateral so held by Servicer for other Collateral of like or
different kind, without notice to or further consent from Sponsor, and such
surrender, receipt, release or substitution shall not in any way affect the
obligations of Sponsor hereunder. 
Subject to Section 10.11, Servicer shall have full authority to adjust,
compromise, and receive less than the amount due upon any such Collateral, and
may enter into any accord and satisfaction agreement with respect to the same
as Servicer may deem advisable without affecting the obligations of Sponsor
hereunder.  Servicer shall be under no
duty to undertake to collect upon such Collateral or any part thereof, and
Sponsor’s obligations hereunder shall not be affected by Servicer’s alleged
negligence or mistake in judgment in handling, disposing of, obtaining, or
failing to collect upon or perfect a security interest in, any such Collateral.

 

Additional Waivers.  Sponsor
hereby waives presentment, demand, protest, and notice of dishonor of any of
the liabilities guaranteed hereby. 
Neither Servicer nor any Participant shall have any duty or obligation
(i) to proceed or exhaust any remedy against any Borrower, any other obligor,
guarantor, endorser, or surety on any Loans or other Guaranteed Obligations, or
any other security held by Servicer or any Participant for any Loans or other
Guaranteed Obligations, or (ii) to give any notice whatsoever to Borrowers,
Sponsor, or any other obligor, guarantor, endorser, or surety on any Loans or
other Guaranteed Obligations, before bringing suit, exercising rights to any
such security or instituting proceedings of any kind against Sponsor, any
Borrower, or any of them, and Sponsor hereby waives any requirement for such
actions by Servicer or any Participant. 
Upon default by any Borrower and Servicer’s demand to Sponsor

 

 

hereunder, Sponsor shall be
held and bound to Servicer and each Participant directly as principal debtor in
respect of the payment of the amounts hereby guaranteed, such liability of
Sponsor being joint and several with each Borrower and all other obligors,
guarantors, endorsers and sureties on the Loans or other Guaranteed
Obligations, subject, however, to the rights of Sponsor to bring a separate
action for any breach of the Operative Documents pursuant to Section 10.11.

 

Postponement
of Obligations.  Until the Loan and other Guaranteed
Obligations of any Borrower to the Servicer and the Participants have been paid
in full (i) all present and future indebtedness of such Borrower to Sponsor
(the “Subordinated Debt”) is hereby
postponed to the present and future indebtedness of such Borrower to Servicer
and each Participant, and all monies received from such Borrower or for its
account by Sponsor with respect to such Subordinated Debt  shall be received in trust for Servicer and
the Participants, and promptly upon receipt, shall be paid over to Servicer for
distribution to the Participants in accordance herewith until such Borrower’s
indebtedness to Servicer and the Participants is fully paid and satisfied, all
without prejudice to and without in any way affecting the obligations of
Sponsor hereunder; provided  that unless a Loan Default or Loan
Payment Default has occurred and is continuing, the Sponsor may accept and
retain any payments made by any Borrower to the Sponsor in the ordinary course
of business, and (ii) Sponsor shall not have any rights of subrogation or
otherwise to participate in any security held by the Servicer for any Loan to
such Borrower or any other Guaranteed Obligations arising therefrom, and
Sponsor hereby waives such rights until such time as such Loan and other
Guaranteed Obligations have been paid in full to the Servicer and each
Participant (whether by repurchase by the Sponsor, pursuant to this Article 10
or otherwise).

 

Effect
on Additional Guaranties.  The obligations of the Sponsor pursuant to this
Article 10 are in addition to, and are not intended to supersede or be a
substitute for any other guarantee, suretyship agreement, or instrument which
Servicer may hold in connection with any Loans or other Guaranteed Obligations.

 

Reliance
on Guaranty and Purchase Obligation; Disclaimer of
Liability Sponsor expressly acknowledges and agrees that each
of the Servicer and the Participants, in making its credit decision with regard
to the funding of the Loans, will rely solely upon the guaranty and purchase
obligation of Sponsor set forth above and that neither the Servicer nor any
Participant is under any obligation or duty to perform any credit analysis or
investigation with regard to the creditworthiness of any Borrower.  In addition, the Servicer expressly disclaims
any responsibility or liability for the authenticity of signatures on any of
the Loan Documents (other than the Servicer’s), the authority of the Persons
executing the Loan Documents (other than the Servicer) or the enforceability or
compliance with laws of any of the Loan Documents.

 

SPONSOR
EXPRESSLY ACKNOWLEDGES AND AGREES THAT SPONSOR’S GUARANTY OBLIGATIONS TO
PURCHASE LOANS UNDER THIS AGREEMENT ARE ABSOLUTE AND UNCONDITIONAL.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, SPONSOR’S OBLIGATION SHALL NOT BE AFFECTED BY THE EXISTENCE OF ANY
DEFAULT BY ANY BORROWER UNDER THE APPLICABLE LOAN DOCUMENTS, ANY EXCHANGE,
RELEASE OR NONPERFECTION OF ANY LIEN WITH RESPECT TO ANY COLLATERAL SECURING
PAYMENT OF ANY LOAN, THE SUBSTITUTION OR RELEASE OF ANY ENTITY PRIMARILY OR
SECONDARILY LIABLE FOR ANY LOAN, ANY LACK OF ENFORCEABILITY OF ANY LOAN
DOCUMENT, ANY LAW, REGULATION, OR ORDER OF ANY JURISDICTION AFFECTING ANY LOAN
OR LOAN DOCUMENT OR THE RIGHTS OF THE HOLDER THEREOF, ANY CHANGE IN THE CONDITION
OR PROSPECTS OF THE SPONSOR, INCLUDING WITHOUT LIMITATION, INSOLVENCY,
BANKRUPTCY, REORGANIZATION OR SIMILAR PROCEEDING, OR ANY OTHER CIRCUMSTANCE
WHICH MIGHT, BUT FOR THE PROVISIONS OF THIS PARAGRAPH, CONSTITUTE A LEGAL OR
EQUITABLE DISCHARGE OF SPONSOR’S OBLIGATIONS HEREUNDER. SPONSOR’S OBLIGATIONS
HEREUNDER SHALL NOT BE AFFECTED BY ANY SET-OFF OR CLAIM WHICH IT MIGHT HAVE
AGAINST THE SERVICER OR ANY PARTICIPANT, WHETHER ARISING OUT OF THIS AGREEMENT
OR OTHERWISE, BUT SUBJECT TO SECTION 10.12 BELOW.

 

 

Reinstatement of Obligations. The
obligations of the Sponsor pursuant to the Operative Documents shall continue
to be effective or be reinstated, as the case may be, if at any time payment or
any part thereof, of principal of, interest on or any other amount with respect
to any Loan or any obligation of Sponsor pursuant to the Operative Documents is
rescinded or must otherwise be restored by the Servicer or any Participant upon
the bankruptcy or reorganization of Sponsor, any Borrower or any guarantor or
otherwise.

 

Right
to Bring Separate Action. Nothing
contained in this Article 10 shall be construed to affect any other right that
Sponsor may otherwise have under this Agreement, or any Operative Document or
Loan Documents, at law or in equity to institute an action or assert a claim
against the Servicer or any Participant based upon a breach of Servicer’s or
such Participant’s obligations set forth in the Operative Documents or Loan
Documents or to assert a compulsory counterclaim with respect thereto and any
waiver of notice or other matter set forth in this Article 10 shall not affect
Sponsor’s right to seek damages arising from the failure of the Servicer to
give such notice otherwise required by the terms of the Operative Documents or
Loan Documents.

 

Subordination of Liens.  The Sponsor hereby subordinates the lien and
priority of the Sponsor’s existing and future liens and other interests, if
any, in and to the Collateral to the Servicer’s existing and future interest in
the Collateral under the Loan Documents notwithstanding the time of attachment
of the interests of the Sponsor or the Servicer or the time the Loan
Indebtedness or the Subordinated Debt is incurred.  Notwithstanding anything to the contrary contained
in this Agreement, under applicable law or otherwise, in the event that the
liens of the Servicer are at any time unperfected with respect to any or all of
the Collateral, the lack of perfection by the Servicer as to any such
Collateral shall not affect the validity, enforceability or priority of any
lien on the Collateral in favor of the Sponsor. 
In any such event, the liens of the Sponsor shall have priority over any
and all other Liens in favor of any third party with respect to the Collateral (including,
but not limited to any trustee under the Bankruptcy Code) and the Sponsor shall
be, and is hereby constituted, as the Servicer’s agent and bailee for purposes
of perfection of the Liens of the Servicer in the Collateral such that the Lien
in favor of the Sponsor shall be held by the Sponsor for the benefit of the
Servicer and the proceeds of any disposition of the Collateral of any Borrower
shall be and are in all respects subject to the priority of right to payment
and satisfaction of first, the Loan Indebtedness of such Borrower and then, the
Subordinated Debt with respect to such Borrower.  The lien priorities provided in this Section
shall not be altered or otherwise affected by any amendment, modification,
supplement, extension, renewal, restatement or refinancing of either the applicable
Loan Indebtedness or the Subordinated Debt, nor by any action or inaction which
either  the Servicer or the Borrowers may
take or fail to take in respect of the Collateral, except as otherwise provided
above in this subsection.

 

Exercise
of Remedies With Respect to Collateral.

 

Until the Loan Indebtedness of any Borrower has been
fully and indefeasibly paid in cash, the Sponsor shall not, without the prior
written consent of the Servicer, ask, demand, assign, declare a default under,
sue for, liquidate, sell, foreclose, set off, collect, accept a surrender,
petition, commence or otherwise initiate any bankruptcy action  (or join any other Person in so doing)
against the Borrower or its assets or otherwise realize or seek to realize upon
all or any part of the Collateral without the prior written consent of the
Servicer or as expressly authorized hereunder. In the event that following the
occurrence of a Loan Default, the Servicer may from time to time execute
releases, partial releases, terminations, reconveyances, subordinations or
other documents releasing or otherwise limiting the Servicer’s interests in the
Collateral in connection with the exercise of the Servicer’s remedies or the
refinancing of the Defaulted Loan, the Sponsor agrees to execute and deliver at
such time such further documents as the Servicer may require to effect a
corresponding change to the Sponsor’s position in the same Collateral.

 

In the
event that the Loan Indebtedness of any Defaulted Loan is not repaid or
repurchased by the Sponsor as set forth herein, the Servicer, on behalf of the
Participants, shall have the exclusive right to exercise and enforce all
privileges and rights with respect to the Collateral according to the
Servicer’s discretion and the exercise of its business judgment, including,
without limitation, the exclusive right to take or retake control or possession
of such Collateral and to hold, prepare for sale, process, sell, lease, dispose
of, or liquidate such Collateral.

 

 

Only the Servicer, acting on behalf of the
Participants, shall have the right to restrict or permit, or approve or
disapprove, the sale, transfer or other disposition of Collateral following the
occurrence of a Loan Default where the Loan Indebtedness is not repaid or
repurchased by the Sponsor in accordance with the terms hereof.  In the event the Servicer releases its Liens
on all or any part of the Collateral, the Sponsor will, immediately upon the
request of the Servicer, release its Liens upon the same Collateral, but only
to the extent such Collateral is sold or otherwise disposed of by the Borrower
with the consent of the Servicer  or in a
commercially reasonable manner by the Servicer or its agents.  The Sponsor will immediately deliver such
releases, acknowledgments and other documents as the Servicer may require in
connection therewith.

 

(i)  In
exercising its rights pursuant to this Section 10.13, the Servicer agrees that
it will not release Liens or Collateral or commence enforcement actions under
the Loan Documents without the direction of the Required Participants.  The Servicer agrees to administer the Loan
Documents and the Collateral and to make such demands and give such notices
thereunder as the Required Participants may request and to take such action to
enforce the Loan Documents and to realize upon, collect and dispose of the
Collateral as the Required Participants may direct.  The Servicer shall not be required to take
any action that is, in its opinion, contrary to law or the terms of the Loan
Documents or the Operative Documents or that would, in the opinion of the
Servicer, subject it or any of its officers, employees, agents or directors to
liability and the Servicer shall not be required to take any action unless and
until it is indemnified to its satisfaction by the Participants for any loss,
cost or liability resulting from any required action.

 

(ii)   The Servicer may at any time request
directions from the Required Participants as to any course of action or other
matter relating hereto or relating to any of the Loan Documents.  Except as otherwise provided in this
Agreement, directions of the Required Participants shall be binding on all
Participants hereunder.

 

(iii) Nothing set
forth in this Section 10.13 shall modify the rights of the Servicer set forth
in Section 3.1.

 

Rights Of Sponsor Upon Payment; Cooperation By
Servicer. Upon receipt by the Servicer of payment in full of
the Loan Indebtedness of a Defaulted Loan by Sponsor, Sponsor shall be
subrogated to the rights of the Servicer with respect to the Loan and the
Servicer shall be deemed to have assigned to Sponsor, and Sponsor shall, to the
extent permitted by applicable law, automatically, immediately and without
further action by any Person, be entitled to, all rights and remedies that the
Servicer may have had against the Defaulted Borrower and any other Persons
primarily or secondarily liable on such Defaulted Loan, including without
limitation the right to resort to any and all Collateral which secures the
Defaulted Loan, and the Sponsor shall, automatically, immediately and without
further action, be deemed to have assumed all obligations of the Servicer under
the Loan Commitment and the Operative Documents with respect to such Defaulted
Loan, and the Servicer shall be released from any further obligations with
respect thereto.  The Servicer agrees
that, upon receipt of payment in full of the Loan Indebtedness, the Servicer
shall:

 

execute on a timely basis, without recourse,
representation or warranty of any kind (except as to its own title), all such instruments
and documents as are reasonably requested in order to evidence Sponsor’s rights
hereunder or permit Sponsor to exercise such rights;

 

 

permit
Sponsor at reasonable times and as often as may be reasonably requested to
discuss with appropriate Servicer employees and officers the Servicer’s
experience, relationships, books, accounts and files and to review the
Servicer’s loan files relating to the purchased Defaulted Loan (and Sponsor
hereby agrees to keep all such information confidential); and

 

otherwise
reasonably cooperate with Sponsor in the exercise of Sponsor’s rights.

 

Sponsor shall reimburse
the Servicer for its expenses reasonably and actually incurred in complying
with this Section.

 

INDEMNIFICATION

 

Indemnification.

 

In
addition to the other rights of the Servicer and the Participants hereunder,
Sponsor hereby agrees to protect, indemnify and save harmless the Servicer,
each Participant, and the officers, directors, shareholders, employees, agents
and representatives thereof (each an “Indemnified Party”) from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs (including, without limitation, reasonable attorney
fees and costs actually incurred), expenses or disbursements of any kind or
nature whatsoever, whether direct, indirect, consequential or incidental, with
respect to or in connection with or arising out of (i) the execution and
delivery of this Agreement, any other Operative Document or any agreement or
instrument contemplated hereby or thereby, including without limitation, the
Loan Documents, the performance by the parties hereto or thereto of their
respective obligations hereunder or thereunder or the consummation of the
transactions contemplated hereby, (ii) the making or administration of the Loan
Commitments, the Loans or any of them, including any violation of federal or
state usury or other laws, provided that with respect to clauses (i) and (ii),
Sponsor shall have no obligation to indemnify the Servicer and all Participants
for more than one (1) counsel’s reasonable fees and expenses, (iii) the
enforcement, performance and administration of this Agreement or the Loan
Documents or any powers granted to the Servicer hereunder or under any Loan
Documents, (iv) any misrepresentation of the Sponsor hereunder, (v) any
matter arising pursuant to any Environmental Laws as a result of the Collateral
or (vi) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory, whether or not the Indemnified Party is a named party
thereto, except to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnified Party or arise solely from the
nonpayment of any Loan Indebtedness notwithstanding the performance by Sponsor
of all of its obligations under the Operative Documents relating to such Loan
Indebtedness.

 

 

Without
limiting the generality of the foregoing, and separate and apart from any
obligation of Sponsor pursuant to Article 10, Sponsor agrees to indemnify and
hold harmless each Indemnified Party from and against, and on demand will pay
or reimburse any Indemnified Party for, any and all (i) liabilities arising
from a breach of any representation or warranty made by Sponsor hereunder
(whether or not Sponsor’s obligations under Article 10 have been satisfied),
(ii) any breach by Sponsor of its agreements with the Borrowers, (iii) any
overadvance to any Borrower caused by the transfer of ACH transfer instructions
from the Aaron’s Proprietary System to the Servicer by Sponsor resulting in
aggregate advances to such Borrower in excess of the Loan Commitment to such
Borrower, and (iv) any breach by Sponsor of the terms of its MicroACH Service
Agreement with the Servicer or any failure by Sponsor to maintain such
agreement in full force and effect.

 

This indemnity shall survive the termination of this
Agreement.

 

Notice Of
Proceedings; Right To Defend

 

Any
Person with an indemnification claim (or potential claim) pursuant to Section
11.1 (“Potential Indemnitee”) agrees
to notify Sponsor (the “Potential Indemnitor”) in writing within a reasonable
time after receipt by it of written notice of the commencement of any
administrative, legal or other proceeding, suit or action by a Person (other
than Indemnitee or an affiliate thereof), if a claim for indemnification may be
made by the Potential Indemnitee against the Potential Indemnitor under this
Article 11.

 

Following
receipt by the Potential Indemnitor of any such notice from a Potential
Indemnitee, (an “Indemnity Notice”), the
Potential Indemnitor shall be entitled at its own cost and expense to
investigate and participate in the proceeding, suit or action referred to in
the Indemnity Notice.  At such time as
the Potential Indemnitor shall have acknowledged in writing to the Potential
Indemnitee that it will pay any judgment, damages, or losses incurred by the
Potential Indemnitee in the proceeding, suit or action referred to in the
Indemnity Notice other than those for gross negligence or willful misconduct on
the part of the Potential Indemnitee (at which time the “Potential Indemnitor”
shall be deemed to be the “Indemnitor” and the “Potential Indemnitee” shall be
deemed to be the “Indemnitee”), the Indemnitor shall be entitled, to the extent
that it shall desire, to assume the defense of such proceeding, suit or action,
with counsel reasonably satisfactory to the Indemnitee.  If the Indemnitor shall so assume the defense
of such proceeding, suit or action, the Indemnitor shall conduct such defense
with due diligence and at its own cost and expense.

 

In the
event that the Indemnitor so assumes the defense of such proceeding, suit or
action, the Indemnitor shall not be entitled to settle such proceeding, suit or
action without the written consent of the Indemnitee, provided that in
the event that the Indemnitee does not consent to such settlement not to be
unreasonably withheld or delayed (i) the Indemnitor’s indemnification
liability in connection with such proceeding, suit or action shall not exceed
the amount of such proposed settlement and (ii) Indemnitee shall assume
and pay all costs and expenses, including reasonable attorneys’ fees, incurred
by Indemnitor from the date that the Indemnitor presented the Indemnitee the
terms of the proposed settlement.  An
Indemnitor shall not be liable to an

 

 

Indemnitee
for any settlement of a claim in any proceeding, suit or other action referred
to in an Indemnity Notice, consented to by the Indemnitee without the consent
of the Indemnitor.

 

A
Potential Indemnitor shall be liable to a Potential Indemnitee for a settlement
of a claim in any proceeding, suit or other action referred to in an Indemnity
Notice consented to by such Potential Indemnitee only if (i) such
Potential Indemnitor first had a reasonable opportunity to investigate such
claim and participate in such proceeding, suit or action, (ii) the
Potential Indemnitee gave the Potential Indemnitor at least ten (10) Business
Days notice of the proposed terms of such settlement prior to entering into
such settlement and (iii) the Potential Indemnitor did not acknowledge in
writing to the Potential Indemnitee, by the expiration of such ten (10)
Business Days period, or such longer period as may be agreed to by the
Potential Indemnitee and Potential Indemnitor that it would pay any judgment,
damages or losses incurred by the Potential Indemnitee in such proceeding suit
or action.

 

Third
Party Beneficiaries  No Persons shall be deemed to be third party
beneficiaries of this Agreement.  Except
as expressly otherwise provided in this Agreement, this Agreement is solely for
the benefit of Sponsor and the Servicer, the Participants and their respective
successors and permitted assigns, and no other Person shall have any right,
benefit, priority or interest under, or because of the existence of, this
Agreement.

 

SURVIVAL OF LOAN
FACILITY

 

The terms of
this Loan Facility Agreement shall survive the termination of the Commitments
hereunder and the termination of any Loan Commitment established pursuant the
terms hereof until the indefeasible payment in full of each of the Loans outstanding
hereunder and Article 13 shall survive the termination of this Agreement upon
such repayment.

 

CONDITIONS PRECEDENT

 

This Agreement
shall not become effective, the Sponsor shall have no rights under this
Agreement and neither the Servicer nor the Participants shall be obligated to
take, fulfill or perform any action hereunder, until the following conditions
have been fulfilled to the satisfaction of the Servicer:

 

 

Receipt of Documents.

 

The Servicer shall have received the following, each dated as of the
Effective Date, in form and substance satisfactory to the Servicer and (except
in the case of the Fee Letter) the Participants:

 

Duly executed
counterparts of this Agreement.

 

Duly executed
counterparts of the Servicing Agreement and the Fee Letter.

 

Duly executed
counterparts of the Guaranty Agreement.

 

A duly executed closing
certificate of Sponsor, in form and substance satisfactory to the Servicer and
each Participant.

 

A duly executed
certificate of Sponsor identifying the Authorized Signatories, in form and
substance satisfactory to the Servicer and each Participant;

 

Copies of the
organizational papers of Sponsor and each Guarantor (other than Aaron Rents,
Inc. Puerto Rico), certified as true and correct by the Secretaries of State of
their respective States of incorporation, and certificates from the Secretaries
of State of such States of incorporation certifying Sponsor’s and each
Guarantor’s (other than Aaron Rents, Inc. Puerto Rico) good standing as a
corporation in such State.

 

A certificate of the
Secretary or Assistant Secretary of each of Sponsor and each Guarantor
certifying (i) the names and true signatures of the officers of Sponsor and
each Guarantor authorized to execute the Guaranty Agreement, this Agreement,
the Servicing Agreement and the other Operative Documents to be delivered
hereunder to which each is a party, (ii) the bylaws of Sponsor and each
Guarantor, respectively, and (iii) the resolutions of the Board of Directors of
each of Sponsor and each Guarantor, respectively, approving the Operative
Documents to which each is a party and the transactions contemplated hereby.

 

A favorable written
opinion of Kilpatrick Stockton, LLP, counsel for Sponsor and Guarantors, in a
form satisfactory to the Servicer and each Participant and covering such
matters relating to the transactions contemplated hereby as the Servicer may
reasonably request.

 

All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incident hereto or delivered in
connection therewith shall be satisfactory in form and substance to the
Servicer and the Participants.

 

In addition, each of the Participants shall have received a duly
executed Participation Certificate from the Servicer.

 

Termination of Existing Loan Facility Agreement.  Sponsor shall have terminated
the Existing Loan Facility Agreement.

 

Effectiveness of this Agreement.    Upon this Agreement becoming
effective pursuant to Sections 13.1 and 13.2, all Existing Loans, Existing Loan
Commitments and Existing Notes shall, to the extent outstanding on the
Effective Date, be deemed to be Loans, Loan Commitments and Notes,
respectively, outstanding under this Agreement and shall not be

 

 

deemed
to be paid, released, discharged or otherwise satisfied by the execution of
this Agreement, and this Agreement shall not constitute a refinancing,
substitution or novation of such Loans, Loan Commitments and Notes, or any of
the other rights, duties and obligations of the parties hereunder.

 

THE
SERVICER

 

Appointment of Servicer as Agent.  To the extent of its ownership interest in
the Loans, each Participant hereby designates Servicer as its agent to
administer all matters concerning the Loans and to act as herein
specified.  Each Participant hereby
irrevocably authorizes the Servicer to take such actions on its behalf under
the provisions of this Agreement, the other Operative Documents, and all other
instruments and agreements referred to herein or therein, and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Servicer by the terms hereof and thereof and
such other powers as are reasonably incidental thereto.  The Servicer may perform any of its duties
hereunder by or through its agents or employees.

 

Nature of Duties of Servicer.  The Servicer shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
other Operative Documents.  None of the
Servicer nor any of its respective officers, directors, employees or agents
shall be liable for any action taken or omitted by it as such hereunder or in
connection herewith, unless caused by its or their gross negligence or willful
misconduct.  The Servicer shall not have
by reason of this Agreement a fiduciary relationship in respect of any
Participant; and nothing in this Agreement, express or implied, is intended to
or shall be so construed as to impose upon the Servicer any obligations in
respect of this Agreement or the other Operative Documents except as expressly
set forth herein.

 

Lack
of Reliance on the Servicer.

 

Independently and without
reliance upon the Servicer, each Participant, to the extent it deems appropriate,
has made and shall continue to make (i) its own independent investigation of
the financial condition and affairs of the Credit Parties in connection with
the taking or not taking of any action in connection herewith, and (ii) its own
appraisal of the creditworthiness of the Credit Parties, and, except as
expressly provided in this Agreement, the Servicer shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Participant with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or at any time or
times thereafter.

 

The Servicer shall not be
responsible to any Participant for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, priority or sufficiency
of this Agreement, the Guaranty Agreement, and Loan Document or any other
documents contemplated hereby or thereby, or the financial condition of the
Credit Parties or any Borrower, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or conditions
of this Agreement, the Guaranty Agreement or the other documents contemplated
hereby or thereby, or the financial condition of the Credit Parties or any
Borrower, or the existence or possible existence of any Unmatured Credit Event
or Credit Event.

 

Certain Rights of the Servicer.  If the Servicer shall request instructions
from the Required Participants with respect to any action or actions (including
the failure to act) in connection with this Agreement, the Servicer shall be
entitled to refrain from such act or taking such act, unless and until the
Servicer shall have received instructions from the Required

 

 

Participants;
and the Servicer shall not incur liability in any Person by reason of so
refraining.  Without limiting the
foregoing, no Participant shall have any right of action whatsoever against the
Servicer as a result of the Servicer acting or refraining from acting hereunder
in accordance with the instructions of the Required Participants.

 

Reliance by Servicer.  The Servicer shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message, cable
gram, radiogram, order or other documentary, teletransmission or telephone
message believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person.  The
Servicer may consult with legal counsel (including counsel for any Credit
Party), independent public accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be taken by it in good faith
in accordance with the advice of such counsel, accountants or experts.

 

Indemnification of Servicer.  To the extent the Servicer is not reimbursed
and indemnified by the Credit Parties, each Participant will reimburse and
indemnify the Servicer, ratably according to the respective Pro Rata Shares, in
either case, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
counsel fees and disbursements) or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the
Servicer in performing its duties hereunder, in any way relating to or arising
out of this Agreement or the other Operative Documents; provided that no
Participant shall be liable to the Servicer for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Servicer’s gross
negligence or willful misconduct.

 

The Servicer in its Individual Capacity.  With respect to its obligations under this
Agreement and the amounts advanced by it, the Servicer shall have the same
rights and powers hereunder as any other Participant and may exercise the same
as though it were not performing the duties specified herein; and the terms
“Participants”, “Required Participants”, or any similar terms shall, unless the
context clearly otherwise indicates, include the Servicer in its individual
capacity.  The Servicer may accept
deposits from, lend money to, and generally engage in any kind of banking,
trust, financial advisory or other business with the Consolidated Companies or
any affiliate of the Consolidated Companies as if it were not performing the
duties specified herein, and may accept fees and other consideration from the
Consolidated Companies for services in connection with this Agreement and
otherwise without having to account for the same to the Participants.

 

Holders of Participation Certificates.  The Servicer may deem and treat the payee of
any Participation Certificate as the owner thereof for all purposes hereof
unless and until a written notice of the assignment or transfer thereof shall
have been filed with the Servicer.  Any
request, authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is the holder of any Participation
Certificate shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Participation Certificate or of any
Participation Certificate or Certificates issued in exchange therefor.

 

MISCELLANEOUS

 

Notices.  All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, telecopy or similar teletransmission or writing) and shall be given to
such party at its address or applicable teletransmission number set forth on
the signature pages hereof, or such other address or applicable
teletransmission number as such party may hereafter specify by notice to the
Servicer and Sponsor.  Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given by mail,
72 hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, (iii) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this
Section and the appropriate confirmation is received, or (iv) if given by
any other means (including, without limitation, by air courier), when delivered
or received at the address specified in this Section; provided that
notices to the Servicer shall not be effective until received.

 

Amendments, Etc.  No amendment or waiver of any provision of
this Agreement or the other Operative Documents, nor consent to any departure
by any Credit Party therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Required Participants (and in the case of
any amendment, the applicable Credit Party), and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided that no amendment, waiver or consent shall,
unless in writing and signed by all the Participants do any of the
following:  (i) waive any of the
conditions specified in Section 2.1 or 11.1, (ii) increase the Participating
Commitment Amounts or contractual obligations of the Participants to Servicer
or Sponsor under this Agreement, (iii) reduce the principal of, or

 

 

interest
on, the Participation Certificates or any fees hereunder, (iv) postpone any
date fixed for the payment in respect of principal of, or interest on, the
Participation Certificates or any fees hereunder, (v) agree to release any
Guarantor from its obligations under any Guaranty Agreement or the Sponsor from
its obligations pursuant to this Agreement, (vi) modify the definition of “Required
Participants,” or (vii) modify Section 2.9, Article 4,
Article 10 or this Section 15.2. 
Notwithstanding the foregoing, no amendment, waiver or consent shall,
unless in writing and signed by the Servicer in addition to the Participants
required hereinabove to take such action, affect the rights or duties of the
Servicer under this Agreement or under any other Operative Document or Loan
Document.  In addition, notwithstanding
the foregoing, the Servicer and the Sponsor may, without the consent of or
notice to the Participants, enter into amendments, modifications or waivers
with respect to the Servicing Agreement and the Fee Letter as long as such
amendments or modifications do not conflict with the terms of this Agreement.

 

No Waiver; Remedies Cumulative.  No failure or delay on the part of the
Servicer or any Participant in exercising any right or remedy hereunder or
under any other Operative Document, and no course of dealing between any Credit
Party and the Servicer or any Participant shall operate as a waiver thereof,
nor shall any single or partial exercise of any right or remedy hereunder or
under any other Operative Document preclude any other or further exercise
thereof or the exercise of any other right or remedy hereunder or thereunder.  The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which the
Servicer or any Participant would otherwise have.  No notice to or demand on any Credit Party
not required hereunder or under any other Operative Document in any case shall
entitle any Credit Party to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Servicer or the
Participants to any other or further action in any circumstances without notice
or demand.

 

Payment
of Expenses, Etc.  Sponsor shall:

 

whether or not the
transactions hereby contemplated are consummated, pay all reasonable,
out-of-pocket costs and expenses of the Servicer in the administration (both
before and after the execution hereof and including reasonable expenses
actually incurred relating to advice of counsel as to the rights and duties of
the Servicer and the Participants with respect thereto) of, and in connection
with the preparation, execution and delivery of, preservation of rights under,
enforcement of, and, after a Unmatured Credit Event or Credit Event,
refinancing, renegotiation or restructuring of, this Agreement and the other
Operative Documents and the documents and instruments referred to therein, and
any amendment, waiver or consent relating thereto (including, without
limitation, the reasonable fees actually incurred and disbursements of counsel
for the Servicer), and in the case of enforcement of this Agreement or any
Operative Document after a Credit Event, all such reasonable, out-of-pocket
costs and expenses (including, without limitation, the reasonable fees actually
incurred and reasonable disbursements and changes of counsel), for any of the
Participants; and

 

Pay and hold the Servicer
and each of the Participants harmless from and against any and all present and
future stamp, documentary, and other similar Taxes with respect to this
Agreement, the Participation Certificates, the Loan Documents and any other
Operative Documents, any collateral described therein, or any payments due
thereunder, and save the Servicer and each Participant harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission to pay such Taxes.

 

 

Right of Setoff.  In addition to and not in limitation of all
rights of offset that any Participant may have under applicable law, each
Participant shall, upon the occurrence of any Credit Event and whether or not
such Participant has made any demand or any Credit Party’s obligations have
matured, have the right to appropriate and apply to the payment of any Credit
Party’s obligations hereunder and under the other Operative Documents, all
deposits of any Credit Party (general or special, time or demand, provisional
or final) then or thereafter held by and other indebtedness or property then or
thereafter owing by such Participant or other holder to any Credit Party,
whether or not related to this Agreement or any transaction hereunder.

 

Benefit of Agreement; Assignments;
Participations.

 

This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that Sponsor may not
assign or transfer any of its interest hereunder without the prior written consent
of the Participants.

 

Any Participant may make,
carry or transfer Loans at, to or for the account of, any of its branch offices
or the office of an Affiliate of such Participant.

 

Each Participant
may assign all of its interests, rights and obligations under this Agreement
(including all of its Participating Commitments and the Funded Participant’s
Interest at the time owing to it and the Participation Certificates held by it)
to any Eligible Assignee; provided, however, that (i) the Sponsor
and the Servicer shall each have given its prior written consent to such
assignment (which consent shall not be unreasonably withheld or delayed) unless
such assignment is to an Affiliate of the assigning Participant or, in the case
of the Sponsor, unless a Credit Event has occurred and is continuing hereunder,
(ii) unless the Participant is assigning its entire Participating Commitment,
the Participating Commitment Amount of the assigning Participant subject to
each assignment (determined as of the date the assignment and acceptance with
respect to such assignment is delivered to the Servicer) shall not be less than
the lesser of (x) 50% of the amount of its Original Participating Commitment or
(y) $1,000,000 and shall be divided pro rata between the two Facilities, and
(iii) the parties to each such assignment shall execute and deliver to the
Servicer an Assignment and Acceptance, together with the Participation
Certificate subject to such assignment and, unless such assignment is to an
Affiliate of such Participant, a processing and recordation fee of $1,000.  Within ten (10) Business Days after receipt
of the notice and the Assignment and Acceptance, Servicer shall execute and
deliver, in exchange for the surrendered Participation Certificate, a new
Participation Certificate to the order of the assignor and such assignee in a
principal amount equal to the applicable Participating Commitment Amount
retained and assumed by it, respectively, pursuant to such Assignment and
Acceptance.  Such new Participation
Certificate shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Participation Certificate, shall be dated
the date of the surrendered Participation Certificate which it replaces, and
shall otherwise be in substantially the form attached hereto.

 

Each Participant
may, without the consent of Sponsor or the Servicer, sell participations to one
or more banks or other entities in all or a portion of its rights and
obligations under this Agreement (including all or a portion of its
Participating Commitment and the Funded Participant’s Interest owing to it), provided,
however, that (i) no Participant may sell a participation in its
Participating Commitment (after giving effect to any permitted assignment
hereof) unless it retains an aggregate exposure of 25% of its original
Participating Commitment Amount, provided, however, sales of participations to
an Affiliate of such Participant shall not be

 

 

included in such
calculation; provided, however, no such maximum amount shall be
applicable to any such participation sold at any time there exists an Credit
Event hereunder, (ii) such Participant’s obligations under this Agreement shall
remain unchanged, (iii) such Participant shall remain solely responsible to the
other parties hereto for the performance of such obligations, and (iv) the
participating bank or other entity shall not be entitled to the benefit (except
through its selling Participant) of the cost protection provisions contained in
Article 2 of this Agreement, and (v) Sponsor, Servicer and the other
Participants shall continue to deal solely and directly with each Participant
in connection with such Participant’s rights and obligations under this
Agreement and the other Operative Documents, and such Participant shall retain
the sole right to enforce the obligations of Sponsor relating to the Loans and
to approve any amendment, modification or waiver of any provisions of this
Agreement (other than an amendment requiring approval of 100% of the
Participants).  Each Participant shall
promptly notify in writing the Servicer and the Sponsor of any sale of a
participation hereunder and shall certify to Sponsor and Servicer its
compliance with the terms hereof.

 

Any Participant or
participant may, in connection with the assignment or participation or proposed
assignment or participation, pursuant to this Section, disclose to the assignee
or participant or proposed assignee or participant any information relating to
Sponsor or the other Consolidated Companies furnished to such Participant by or
on behalf of Sponsor or any other Consolidated Company.  With respect to any disclosure of
confidential, non-public, proprietary information, such proposed assignee or
participant shall agree to use the information only for the purpose of making
any necessary credit judgments with respect to this credit facility and not to
use the information in any manner prohibited by any law, including without
limitation, the securities laws of the United States.  The proposed participant or assignee shall
agree not to disclose any of such information except (i) to directors,
employees, auditors or counsel to whom it is necessary to show such
information, each of whom shall be informed of and shall acknowledge the
confidential nature of the information, (ii) in any statement or testimony
pursuant to a subpoena or order by any court, governmental body or other agency
asserting jurisdiction over such entity, or as otherwise required by law
(provided prior notice is given to Sponsor and the Servicer unless otherwise
prohibited by the subpoena, order or law), and (iii) upon the request or demand
of any regulatory agency or authority with proper jurisdiction.  The proposed participant or assignee shall
further agree to return all documents or other written material and copies
thereof received from any Participant, the Servicer or Sponsor relating to such
confidential information unless otherwise properly disposed of by such entity.

 

Any Participant may at
any time assign all or any portion of its rights in this Agreement to a Federal
Reserve Bank; provided that no such assignment shall release the
Participant from any of its obligations hereunder.

 

Notwithstanding
any provision of this Agreement to the contrary, the Servicer, together with
its Affiliates, shall at all times retain a Participating Commitment in an
amount at least equal to 20% of the aggregate principal amount of all
outstanding Loan Commitments.

 

 

Governing
Law; Submission to Jurisdiction.

 

THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA.

 

ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT MAY
BE BROUGHT IN THE SUPERIOR COURT OF FULTON COUNTY, GEORGIA, OR ANY OTHER COURT
OF THE STATE OF GEORGIA OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN
DISTRICT OF GEORGIA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, SPONSOR
HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE
TRIAL BY JURY, AND SPONSOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.

 

Nothing herein shall
affect the right of the Servicer, any Participant, or any Credit Party to
commence legal proceedings or otherwise proceed against Sponsor in any other
jurisdiction.

 

Counterparts. This Agreement
may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which when so executed and delivered
shall be an original, but all of which shall together constitute one and the
same instrument.

 

 

Severability. In case any
provision in or obligation under this Agreement or the other Operative
Documents shall be invalid, illegal or unenforceable, in whole or in part, in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

 

Independence of Covenants. All covenants
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or be otherwise within the limitation of, another
covenant, shall not avoid the occurrence of a Unmatured Credit Event or an
Credit Event if such action is taken or condition exists.

 

No Joint Venture. Nothing in
this Agreement, the Servicing Agreement or any of the Loan Documents shall be
construed as constituting Sponsor and the Servicer or any Participant as
partners or joint venturers or as creating the relationship of employer and
employee, master and servant, principle and agent, or franchisor or franchisee
between Sponsor and the Servicer or any Participant.  Neither Sponsor nor Servicer or any
Participant shall have any right or authority to bind the other party or to
assume or create any obligation or responsibility, express or implied, on
behalf of the other party or in the other party’s name.  All rights, duties and obligations under this
Agreement and the Operative Documents are exclusively for the benefit of
Sponsor and the Servicer and Participants, as the case may be, and shall not be
deemed to affect any agreement between either of such parties and any third
party (including, without limitation, any Borrower).

 

Repurchase Right. Sponsor may at
any time (upon thirty (30) days’ prior written notice to Servicer) purchase
from Servicer all Loans and Loan Commitments and all rights, titles and
interests of the Servicer and the Participants in and to the Loan Documents and
the Collateral relating thereto for a purchase price (payable in immediately
available funds) equal to the aggregate Loan Indebtedness, plus all amounts
otherwise owing by the Sponsor pursuant to the Operative Documents, and the
Servicer shall assign, without recourse, representation or warranty (except as
to its own title), its right, title and interest therein to Sponsor upon the
Servicer’s receipt of such purchase price. 
Thereafter, Servicers shall have no responsibility with respect to any
Loans or Loan Commitments.

 

Confidentiality. Each Participant agrees
that it will maintain in confidence and will not disclose, publish or
disseminate, to any Person, any confidential information which it has or shall
acquire during the term of this Agreement relating to the business, operations
and condition, financial or otherwise of the Sponsor or any Borrower, except
that such information may be disclosed by such Participant if and to the
extent that:

 

such information is in
the public domain at the time of disclosure;

 

such information is
required to be disclosed by subpoena or similar process of applicable law or
regulations;

 

such information is
required to be disclosed to any regulatory or administrative body or commission
to whose jurisdiction such Participant or any of its Affiliates may be subject;

 

such information is
disclosed to counsel, auditors or other professional advisors to such
Participant or to affiliates of such Participant provided that such affiliates
agree to keep such information confidential as set forth herein;

 

such information is
disclosed with the prior written consent of the Sponsor or the relevant
Borrower, as the case may be, which consent shall not be unreasonably withheld
or delayed;

 

such information is
disclosed in connection with any litigation or dispute between such Participant
and the Sponsor or any Borrower concerning the Operative Documents or the Loan
Documents of such Borrower;

 

such information is
disclosed in connection with a prospective assignment, grant of a participation
interest in or other transfer by such Participant of any of its interest in the
Operative Documents, provided that the Person to whom such information shall be
disclosed shall have agreed to keep such information confidential as set forth
herein;

 

 

such information was in
the possession of such Person or such Person’s affiliates without obligation of
confidentiality prior to such Participant furnishing it to such Person; or

 

such information is
received by such Participant, without restriction as to its disclosure or use,
from a Person, who, to such Participant’s knowledge or reasonable belief, was
not prohibited from disclosing it by any duty of confidentiality.

 

Each Participant agrees
to use its best efforts to give the Sponsor prompt notice of any subpoena or
similar process referred to in clause (ii) above, provided that such
Participant shall have no liability in event such notice is not given.

 

Headings Descriptive; Entire Agreement. The headings
of the several sections and subsections of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.  This
Agreement, the other Operative Documents, and the agreements and documents
required to be delivered pursuant to the terms of this Agreement constitute the
entire agreement among the parties hereto and thereto regarding the subject
matters hereof and thereof and supersede all prior agreements, representations
and understandings related to such subject matters.

 

[Signatures Set Forth on Next Page]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

 

 

	
  Address for Notices:

  	
  AARON RENTS, INC.

  
	
   

  	
   

  
	
  309 East Paces Ferry Road, NE

  	
  By:

  	
  /s/ Gilbert L. Danielson

  	
   

  
	
  Atlanta, Georgia 30305

  	
   

  	
  Gilbert L. Danielson

  	
   

  
	
  Attn:  Gilbert L. Danielson

  	
   

  	
  Executive Vice President and

  	
   

  
	
  Telecopy:  404-240-6584

  	
   

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Corporate Seal]

  	
   

  

 

 

	
  Address for Notices:

  	
  SUNTRUST BANK, as Servicer

  
	
   

  	
   

  
	
  303 Peachtree Street NE, 2nd Floor

  	
   

  
	
  Atlanta, Georgia 30308

  	
   

  
	
  Attention: Aaron Rents Program Manager

  	
  By:

  	
  /s/ Donald M. Thompson

  	
   

  
	
  Telecopy No. (404) 724-3716

  	
   

  	
  Title:  Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  303 Peachtree Street NE, 2nd Floor

  	
   

  	
   

  	
   

  
	
  Atlanta, Georgia 30308

  	
   

  	
   

  	
   

  
	
  Attention: Don Thompson

  	
   

  	
   

  	
   

  

 

 

	
  Address for Notices:

  	
  SUNTRUST BANK

  
	
   

  	
   

  
	
  303 Peachtree Street, NE, 2nd Floor

  	
   

  
	
  Atlanta, Georgia 30308

  	
   

  
	
  Attention: Aaron Rents Program Manager

  	
  By:

  	
  /s/ Donald M. Thompson

  	
   

  
	
  Telecopy No.: (404) 724-3716

  	
   

  	
  Name:  Donald M. Thompson

  	
   

  
	
   

  	
   

  	
  Title:    Director

  	
   

  
	
  with a copy to:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  303 Peachtree Street NE, 3rd Floor

  	
   

  	
   

  	
   

  
	
  Atlanta, Georgia 30308

  	
   

  	
   

  	
   

  
	
  Attention: Don Thompson

  	
   

  	
   

  	
   

  

 

 

	
  Address for Notices:

  	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION

  
	
   

  	
   

  
	
  Global Capital Markets

  	
   

  
	
  1339 Chestnut St., PA 4843

  	
  By:

  	
  /s/ Anthony D. Braxton

  	
   

  
	
  Philadelphia, PA 19107

  	
   

  	
  Name:  Anthony D. Braxton

  	
   

  
	
  Attn:  Anthony Braxton

  	
   

  	
  Title:    Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Telecopy: (267) 321-6700

  	
   

  	
   

  	
   

  

 

 

	
  Address for Notices:

  	
  SOUTHTRUST BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
  600 West Peachtree Street

  	
  By:

  	
  /s/ R. Fontenot

  	
   

  
	
  22nd Floor

  	
  Name:

  	
  R. Fontenot

  	
   

  
	
  Atlanta, Georgia
  30308

  	
  Title:

  	
  Vice President

  	
   

  
	
  Attn:  Ronald Fontenot

  	
   

  	
   

  	
   

  
	
  Telecopy:  (404) 853-5766

  	
   

  	
   

  	
   

  
					

 

 

	
  Address for Notices:

  	
  REGIONS BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
  One Glenlake Parkway

  	
  By:

  	
  /s/  Stephen H. Lee

  	
   

  
	
  Suite 400

  	
  Name:

  	
  Stephen H. Lee

  	
   

  
	
  Atlanta, GA 30328

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
  Attn:  Stephen H. Lee

  	
   

  	
   

  	
   

  
	
  Telecopy:  (770) 481-4395

  	
   

  	
   

  	
   

  
					

 

 

	
  Address for Notices:

  	
  BRANCH BANKING & TRUST CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
  950 East Paces Ferry Rd.

  	
  By:

  	
  /s/  Paul E. McLaughlin

  	
   

  
	
  Atlanta, GA 30326

  	
  Name:

  	
  Paul E. McLaughlin

  	
   

  
	
  Attn:  Paul McLaughlin

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
  Telecopy: (404) 442-5087

  	
   

  	
   

  	
   

  
					

 

 

Schedule 1.1(a)

 

Pricing Grid

 

	
   

  	
   

  	
  Total Debt to EBITDA

  	
   

  
	
  (Basis Points Per Annum)

  Program Pricing

  	
   

  	
  Level I

  < 1.50

  	
   

  	
  Level II

  > 1.50 & < 2.00

  	
   

  	
  Level III

  > 2.00 & < 2.50

  	
   

  	
  Level IV

  > 2.50

  	
   

  
	
  Startup Franchisee
  Margin

  	
   

  	
  137.5

  	
   

  	
  150.0

  	
   

  	
  175.0

  	
   

  	
  200.0

  	
   

  
	
  Established Franchisee
  Margin

  	
   

  	
  162.5

  	
   

  	
  175.0

  	
   

  	
  200.0

  	
   

  	
  225.0

  	
   

  
	
  Applicable Percentage

  	
   

  	
  15.0

  	
   

  	
  20.0

  	
   

  	
  25.0

  	
   

  	
  30.0

  	
   

  

 

 

Schedule 1.1(b)

 

Participant Commitments

 

	
  Participant

  	
   

  	
  Commitment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SunTrust Bank

  	
   

  	
  $

  	
  29,117,647.00

  	
   

  
	
  Wachovia Bank, National Association

  	
   

  	
  $

  	
  25,882,353.00

  	
   

  
	
  SouthTrust Bank

  	
   

  	
  $

  	
  22,647,059.00

  	
   

  
	
  Regions Bank

  	
   

  	
  $

  	
  19,411,765.00

  	
   

  
	
  Branch Banking & Trust Co.

  	
   

  	
  $

  	
  12,941,176.00

  	
   

  

 

SERVICING AGREEMENT

 

THIS SERVICING AGREEMENT (this “Servicing Agreement”) dated as of this
28th day of May 2004, by and between AARON RENTS, INC., a Georgia corporation
(“Sponsor”), and SUNTRUST BANK, a Georgia banking corporation (the “Servicer”).

 

PREAMBLE

 

WHEREAS, Sponsor and Servicer, in order to establish a loan facility to
make loans to certain franchisees of Sponsor, are entering into the Loan
Facility Agreement and Guaranty, dated as of the date hereof (as hereafter
amended or modified, the “Loan Facility Agreement”), by and among Sponsor,
Servicer and the other financial institutions from time to time party thereto
(together with SunTrust, the “Participants”);

 

WHEREAS, in order to expedite the ongoing operations of the loan
facility, Sponsor and Servicer wish to enter into an agreement to set forth
certain procedures and other operational matters, as well as certain agreements
regarding fees;

 

WHEREAS, Sponsor and Servicer wish to enter into this Agreement to set
forth their understandings regarding such matters, all as more particularly set
forth below;

 

NOW, THEREFORE, upon the terms and conditions hereinafter stated, the
parties, intending to be legally bound, hereby agree as follows:

 

1.   DEFINITIONS

 

In addition to the other terms defined herein, the following terms used
herein shall have the meanings herein specified (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

 

 

“Aaron’s Proprietary System” means
Sponsor’s proprietary software point of sale system, as modified from time to
time, used by Sponsor and the Borrowers.

 

“ACH Authorization” means an
authorization from a Borrower to automatically debit Loan payments from a
deposit account of such Borrower, substantially in the form of Exhibit A.

 

“Agreement” means this Servicing
Agreement, either as originally executed or as it may hereafter be amended,
restated, modified or supplemented from time to time.

 

“Approved Invoice” means an invoice
for the aggregate purchase price of Merchandise purchased by a Franchisee
Borrower with a purchase order approved by the Sponsor as provided in this
Agreement.

 

“Asset Disposition Invoice” shall have
the meaning set forth in Section 2.5.

 

“Authorized Signatory” means an
officer of the Sponsor named in the most recent Certificate Regarding
Authorized Signatories delivered to Servicer.

 

“Calculation Period” means, initially,
the period commencing on May 28, 2004 and ending on June 30, 2004 and
thereafter, the period commencing on the last day of the preceding Calculation
Period and ending on the third Payment Date thereafter.

 

“Commitment Letter” means a letter
from Servicer to a potential Startup Franchisee named in a Funding Approval
Notice, substantially in the form of Exhibit C, whereby Servicer agrees
to establish a Loan Commitment in favor of such Franchisee upon the terms and
conditions set forth therein and in the Operative Documents.

 

“Corporate Authorization” means, with
respect to any Borrower which is a corporation, certifications as to authorized
signatories and corporate action with respect to the Loan in the form attached
hereto as Exhibit D.

 

“Debt” means (i) indebtedness for
borrowed money or for the deferred purchase price of property or services
(other than trade accounts payable on customary terms in the ordinary course of
business), (ii) financial obligations evidenced by bonds, debentures, notes or
other similar instruments, (iii) financial obligations as lessee under leases
which shall have been or should be, in accordance with GAAP, recorded as
capital leases, and (iv) obligations under direct or indirect guaranties in respect
of, and obligations (contingent or otherwise) to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of, indebtedness or
financial obligations of others of the kinds referred to in clauses (i) through
(iii) above.

 

“Debt Service” means, for any
particular Borrower and period, the aggregate amount of all payments of
principal (excluding any payments of principal required to be made under this
Servicing Agreement as a result of any Asset Disposition), interest and

 

 

fees required to be made by such Borrower with respect to its Debt
during such period to the extent that such Debt arises pursuant to such
Borrower’s Loan Agreement or any other financing arrangement with respect to
Merchandise.

 

“Default Interest Rate” means the
annual percentage interest rate applied to any principal amount outstanding
pursuant to a Loan Commitment not paid when due under the terms of the
applicable Loan Documents, which rate shall equal the sum of 2% per annum above
the Borrower Rate.

 

“Default Waiver Letter” means a waiver
letter sent to any Borrower by Servicer upon the request of Sponsor in the form
attached hereto as Exhibit B.

 

“EBIT” means, with respect to
Borrower, for any period, (i) net income of Borrower for such period, plus
(ii) to the extent deducted in determining net income, interest and taxes based
on income for such period, each as determined in accordance with GAAP
consistently applied.

 

“Financing Statement” means, with
respect to a Loan, a document which among other things, describes the Borrower
and the Collateral, the proper filing of which perfects a security interest in
the Collateral described therein under the laws of the state in which such
document is filed.

 

“Funding Approval Notice” means a
written notice to Servicer from Sponsor setting forth the conditions of a
proposed Loan Commitment, consistent with the requirements therefor as set
forth in this Agreement, and containing such information and in substantially
the form of Exhibit E.

 

“Legal Forms” shall have the meaning
set forth in Section 2.2.

 

“Loan Account” means the internal bank
loan account established by each Franchisee Borrower with the Servicer.

 

“Net Book Value” means, for any item
of Merchandise, the cost of such Merchandise less accumulated depreciation
as calculated in accordance with the Aaron’s Proprietary System.

 

“Personal Guaranty” means any guaranty
from a principal or member of a Borrower substantially in the form of Exhibit F.

 

“Prime Rate” means the per annum rate
of interest designated from time to time by Servicer to be its prime rate, with
any change in the rate of interest resulting from a change in the Prime Rate to
be effective as of the opening of business of Servicer on the day of such
change.  The Prime Rate is a reference rate
and does not necessarily represent the lowest or best rate of interest that is
being offered by Servicer to its borrowers.

 

“Servicing Fee” shall have the meaning
set forth in Section 2.14.

 

 

“Sponsor’s Fee” shall have the meaning
set forth in Section 2.14.

 

“Spousal Consent” shall mean any
agreement provided by the spouse of any Person executing a Guaranty to the
extent such spouse has not personally executed a Guaranty, to be substantially
in the form provided by the Servicer.

 

“State” means any State of the United
States of America and the District of Columbia.

 

“Store Opening Information Sheet”
shall mean a document substantially in the form of Exhibit G, completed
by Sponsor with respect to a Borrower.

 

“Subordination Agreement” shall have
the meaning set forth in Section 2.2(e).

 

“Tangible Net Worth” means, with
respect to any Borrower as of any date of determination, the excess of the
total assets of such Borrower over the Total Liabilities of such Borrower,
determined in accordance with GAAP consistently applied, excluding from the
calculation of total assets the notes receivables from shareholders of such
Borrower and including in such calculation of total assets the franchise fees,
as shown on the balance sheet of such Borrower as of such date.

 

“Total Liabilities” means, with
respect to any Borrower, as of any date of determination, total liabilities
determined in accordance with GAAP consistently applied, but excluding
therefrom, Debt of such Borrower which is subordinated to the Loan Indebtedness
owing to Servicer pursuant to a Subordination Agreement.

 

“UCC” means the Uniform Commercial
Code of the relevant State, as the same may be amended from time to time.

 

The above definitions apply equally to both the singular and the plural
of the terms defined. All terms used herein and not otherwise shall have the
meaning ascribed to such terms in the Loan Facility Agreement.

 

2.   PRE-FUNDING MATTERS; CLOSING OF LOANS

 

2.1                                 Approval Process.

 

(a)                                  In
the event that Sponsor desires that Servicer establish a Loan Commitment under
the Operative Documents, Sponsor shall forward to Servicer an appropriate
Funding Approval Notice no later than thirty (30) days prior to the anticipated
Closing Date of such Loan Commitment. 
Such Funding Approval Notice shall indicate whether the requested Loan
Commitment is a Startup Franchisee Loan Commitment or an Established Franchisee
Loan Commitment and shall contain the following information:

 

 

(i) 
the Franchisee’s legal name and State of organization;

 

(ii)  the amount of the Loan
Commitment;

 

(iii) the applicable interest rate for such Loan;

 

(iv)  the amount of the
Commitment Fee, which shall not exceed 100 basis points;

 

(v)  a
copy of the Franchisee’s executed franchise application authorizing release of
all information set forth therein or delivered in connection therewith to
Servicer;

 

(vi) 
the Franchisee’s federal tax identification number or social security
number;

 

(vii) 
the legal address(es) (including county) of the Franchisee’s residence
or principal place of business, each store location, and the site(s) where any
Collateral to be pledged as security for the Loan is stored, together with any
other corporate or tradenames used by the Franchisee in the last five (5)
years;

 

(viii) 
if the Franchisee is a corporation, copies of the Franchisee’s Articles
or Certificate of Incorporation, certified by the Secretary of State of its
incorporation, copies of the Franchisee’s by-laws and current incumbency
certificate, if the Franchisee is a partnership, a copy of the current
partnership agreement, if the Franchisee is a limited liability company, a copy
of the current operating or limited liability company agreement and if the
Franchisee is a sole proprietor, a Statement of Sole Proprietorship in the form
provided by Servicer;

 

(ix) 
good standing certificate from the Secretary of State in which the
Franchisee is organized or formed;

 

(x) 
for any Established Franchisee Loan Commitment, a detailed description
of the financial covenants to be included in the Established Franchisee Loan
Agreement, including any defined terms used in such financial covenants; and

 

(xi) such other information as Servicer shall
reasonably request, including, without limitation, a listing of all
Subsidiaries of the Franchisee, a listing of all Guarantors and a listing of
all Permitted Liens.

 

The Funding Approval Notice shall contain a statement that Sponsor has
approved the Franchisee for a franchise license and for participation in the
Franchisee Loan Program and shall also state that the Sponsor consents to the
liens in favor of Servicer provided for therein.

 

 

(b)                                 Upon
receipt of the Funding Approval Notice, Servicer shall, as soon as practicable,
notify Sponsor if the Funding Approval Notice fails to contain any of the items
described in the preceding Section, or if Servicer has any questions relating
to such Funding Approval Notice or the information submitted therewith; and

 

(c)                                  Sponsor
shall forward to Servicer a completed Store Opening Information Sheet (i)
contemporaneously with the Funding Approval Notice if the Startup Franchisee or
Established Franchisee is already a Borrower and (ii) at least ten (10)
Business Days prior to the anticipated Closing Date if the Startup Franchisee
or Established Franchisee is not presently a Borrower, in each case together
with the following additional documents:

 

(1)                                  a duly executed Landlord’s Waiver for
each leased location listed on the Store Opening Information Sheet where the
financed Merchandise is located, substantially in the form of Exhibit H;
and

 

(2)                                  complete legal descriptions for each
leased location listed on the Store Opening Information Sheet where the
financed Merchandise is located.

 

If Sponsor fails
to deliver any of the foregoing items to the Servicer, the Servicer shall have
no obligation to maintain such items in its files or to notify Sponsor that
such items have not been received by Servicer.

 

2.2                                 Loan Documentation; Collateral.

 

Upon receipt of a completed Store Opening Information Sheet, Servicer
shall proceed to document the Loan and shall forward such documentation to the
applicable Franchisee for signature within ten (10) Business Days after receipt
of the Store Opening Information.  Each
Loan made pursuant to this Agreement shall be evidenced by the following
documentation in such form as is set forth in the Exhibits to the Operative
Documents for the applicable Facility (the “Legal Forms”), with such
modifications as Sponsor and Servicer may agree upon from time to time in
accordance with the terms hereof:

 

(a)                                  the
Loan Agreement;

 

(b)                                 the
Master Note;

 

(c)                                  a
Personal Guaranty of each Person specified as a Guarantor in the Funding
Approval Notice for such Loan, and, if requested by Sponsor and to the extent
not prohibited by law, the spouse of such Person;  provided, however, that if such
spouse is not providing a Personal Guaranty, a Spousal Consent will be part of
the Legal Forms;

 

(d)                                 a
Subordination Agreement from each other debtholder of the Franchisee
substantially in the form of Exhibit I (each, a “Subordination Agreement”);

 

 

(e)                                  suitable
Financing Statements to enable Servicer to perfect the security interest
granted to it in the personal property of the Franchisee under the Loan
Agreement;

 

(f)                                    a
Corporate Authorization; and

 

(g)                                 an
ACH Authorization.

 

To the extent that any of the foregoing items (other than the Loan
Agreement or Master Note) have been provided by the relevant Franchisee in
connection with a prior Loan, Sponsor may waive the requirement that such
documents be prepared by the Servicer or executed by the Franchisee.  If the Franchisee is a Startup Franchisee, at
the request of the Sponsor set forth in the Funding Approval Notice, the
Servicer will prepare a Commitment Letter and forward such Commitment Letter
with the Legal Forms to the Franchisee.

 

In addition, Servicer shall engage a nationally recognized service to
perform searches of the Uniform Commercial Code jurisdictions listed by the
Sponsor in the Funding Approval Notice. 
Prior to the Closing Date, Servicer shall prepare appropriate UCC-1
financing statements to be filed in connection with the Loan and forward the
same to the Franchisee for execution. 
The Franchisee shall promptly execute and return such financing
statements to Servicer for filing.  Upon
receipt from Franchisee, the Servicer shall promptly file all such financing
statements in the appropriate filing office.

 

Servicer shall prepare and shall execute the Loan Documents where
required and forward copies of the executed documents to the Franchisee and, if
requested by the Sponsor, to the Sponsor. 
Franchisee shall execute and deliver the Loan Documents to the
Servicer  prior to the funding of the
initial Advance to such Borrower.  If
requested in writing by the Sponsor, the Servicer shall give copies of the
executed Loan Documents to Sponsor.   In addition, Sponsor shall cause the Borrower
to forward or to have forwarded to Servicer a Certificate of Insurance
evidencing the Borrower’s ownership of liability insurance and of property and
casualty insurance in an amount not less than the greater of (i) the Loan
Commitment, or (ii) the full replacement cost of the Collateral, which
certificate shall name Servicer as sole loss payee and additional insured and
shall also provide that Servicer shall receive thirty (30) days’ prior written
notice at

 

SunTrust Bank

Strategic Partners Program

Attn: Aaron Rents Program Manager

PO Box 4418

Mail Code 1923

Atlanta, GA 30302

 

of any lapse, termination or cancellation of the insurance policies
referenced on such certificate.  The
Servicer shall have no obligation to obtain such Certificate of Insurance

 

 

or to notify Sponsor of any Borrower’s failure to deliver such
Certificate of Insurance or to notify Sponsor of the contents thereof.

 

2.3                                 Interest on Loans; Terms of Loan
Agreements.

 

(a)                                  Each
of the Loans shall bear interest at the Borrower Rate specified by the Sponsor
in the applicable Funding Approval Notice and interest on the Loans shall be
calculated based upon the actual number of days elapsed in a 360 day year.

 

(b)                                 Each
of the Startup Franchisee Loan Agreements shall require that the applicable
Startup Franchisee Borrower thereunder comply with the following financial
covenants:

 

(i)                                     Rental Revenue
to Debt Service.  Commencing on the
first day of the calendar quarter in which the first day of the 25th month
following the Opening Date of the first store location of Borrower occurs and
measured as of the last day of the calendar quarter in which such 25th month
occurs and on the last day of each calendar quarter thereafter, the ratio of the
Borrower’s Rental Revenue to Debt Service for such quarter shall not be less
than 2.2:1.0;

 

(ii)                                  Debt to Rental
Revenue.  Commencing on the first day
of the calendar quarter in which the first day of the 19th month following the
Opening Date of the first store location of any Borrower occurs and measured as
of the last day of the calendar quarter in which such 19th month occurs and on
the last day of each calendar quarter thereafter, the ratio of the Borrower’s
Debt to the Borrower’s Rental Revenue, shall not exceed 5.5:1.0; and

 

(iii)                               Total Liabilities to
Tangible Net Worth.  Commencing on
the first day of the 13th month following the Opening Date of the first store
location of any Borrower, measured as of the last day of the calendar quarter
in which such 13th month occurs and on the last day of each calendar quarter
thereafter, the ratio of Borrower’s Total Liabilities to Tangible Net Worth,
shall not exceed 6.5:1.0.

 

With respect to the financial covenants set
forth above in subsections (i) and (ii), which are calculated based upon the
Opening Date of a store location, the financial information from store
locations that have not reached the Opening Date anniversary incorporated into
such covenants shall be excluded from such calculations.  Debt Service and Debt attributable to such
locations and deducted from the final calculations shall be deducted on a pro
rata basis calculated by dividing such stores’ aggregate Net Book Value of
Merchandise by the Net Book Value of Merchandise for all store locations.  The financial covenant set forth in
subsection (iii) above shall not be applicable to any Startup Franchisee
Borrower until the first store location operated by such Startup Franchisee
Borrower has been operating for 12 months. 
The financial covenants otherwise shall be calculated on a consolidated
basis as to all store locations.

 

 

(c)                                  Each
Established Franchisee Loan Agreement shall require that the applicable
Established Franchisee Borrower thereunder comply either with the financial
covenants specified by Sponsor in the Funding Approval Notice or with the
following financial covenants at the levels specified by Sponsor in the Funding
Approval Notice:

 

(i)                  Debt to EBIT.  Commencing on the first day of calendar
quarter in which the first day of the 19th month following the Opening Date of
the first store of such Established Franchisee Borrower occurs and measured on
the last day of the calendar quarter in which such 19th month occurs and on the
last day of each calendar quarter thereafter, the ratio of such Established
Franchisee Borrower’s Debt to EBIT for such calendar quarter shall not exceed
16:1.0;

 

(ii)               Debt to Rental Revenue.  Commencing on the first day of the calendar
quarter in which the first day of the 19th month following the Opening Date of
the first store location of any Established Franchisee Borrower occurs and
measured as of the last day of the calendar quarter in which such 19th month
occurs and on the last day of each calendar quarter thereafter, the ratio of
such Established Franchisee Borrower’s Debt to the Borrower’s Rental Revenue,
shall not exceed 5.5:1.0; and

 

(iii)            Total Liabilities to Tangible Net Worth.  Commencing on the first day of the 13th month
following the Opening Date of the first store location of any Borrower, measured
as of the last day of the calendar quarter in which such 13th month occurs and
on the last day of each calendar quarter thereafter, the ratio of Borrower’s
Total Liabilities to Tangible Net Worth, shall not exceed 5.5:1.0.

 

With respect to the financial covenants set forth above in subsections
(i) and (ii), which are calculated based upon the Opening Date of a store
location, the financial information from store locations that have not reached
the Opening Date anniversary incorporated into such covenants shall be excluded
from such calculations.  Debt
attributable to such locations and deducted from the final calculations shall
be deducted on a pro rata basis calculated by dividing such stores’ aggregate
Net Book Value of Merchandise by the Net Book Value of Merchandise for all
store locations. The financial covenants shall otherwise be calculated on a
consolidated basis as to all store locations.

 

In addition, each Established Franchisee Loan Agreement shall provide
that the aggregate outstanding principal amount of all Advances made by
Servicer with respect to any Established Franchisee Loan Commitment shall not
at any time exceed an amount equal to the relevant Established Franchisee
Borrowing Base.

 

To the extent that the financial covenants and definitions are set
forth by Sponsor in the Funding Approval Notice in lieu of specifying only the
levels at which to set the financial covenants listed in clauses (i) through
(iii) above, then the Established Franchisee Borrower shall be required to pay
at closing an upfront fee of $5,000, of which $2,500 shall be remitted upon
closing to Sponsor and $2,500 shall be retained by Servicer, in addition to the
closing fee of $500 per store.

 

 

(d)                                 Each
of the Loan Agreements shall also provide that the applicable Borrower will
submit to Sponsor on a quarterly basis a Compliance Certificate, in the form
attached as Exhibit C to the Loan Agreement, presenting the calculation of the
financial covenants set forth above, together with monthly, quarterly and
annual financial statements, and personal financial statements of all
Guarantors.

 

(e)                                  The
Sponsor shall deliver to the Servicer (x) a quarterly inventory reconciliation
report showing the amount of Inventory of each Borrower by store as of the last
day of each calendar quarter and (y) a quarterly revenue report showing the
monthly and quarterly revenues of each Borrower by store during each calendar
quarter.

 

2.4                                 Use of Loan Proceeds; Mechanics of Loan
Program for Startup Franchisee Loans.

 

(a)                                  No
later than fifteen (15) days after Servicer’s receipt of the executed Loan
Documents, Servicer shall establish a DDA Account for the Franchisee and shall
also establish Loan Account for the Franchisee.

 

(b)                                 Upon
establishment of the above-referenced accounts and receipt of the
above-referenced Loan Documents, duly executed by the Startup Franchisee
Borrower and each Guarantor, and if requested by Sponsor in writing,
confirmation by Servicer of its first-priority security interest in the
Collateral, Servicer shall notify the Startup Franchisee Borrower and Sponsor
that the Startup Franchisee Borrower may request Advances pursuant to the Loan
Commitment; provided, however, that the minimum amount of each
Advance shall be $500.  Each Advance
shall be made by Servicer for the sole purpose of honoring requests from the
Startup Franchisee Borrower, made through the Aaron’s Proprietary System, for
ACH transfers to suppliers of Merchandise in payment of Approved Invoices, for
payment of state sales and use taxes and for payment of freight charges.  The Startup Franchisee Borrowers shall not be
authorized to use the DDA Account for any other purpose.

 

(c)                                  No
more frequently than twice each calendar week, each Startup Franchisee Borrower
will submit purchase order requests for Merchandise to Sponsor.  In the event that the purchase order is
authorized pursuant to the Franchise Agreement, Sponsor will prepare the
purchase order and submit the same to the appropriate supplier requested by the
Startup Franchisee Borrower.  The
supplier will be instructed to ship all Merchandise directly to the Startup
Franchisee Borrower and the Startup Franchisee Borrower will be responsible for
inspecting all Merchandise and resolving all disputes regarding the Merchandise
with such supplier.  The supplier will
invoice the Startup Franchisee Borrower for such Merchandise in accordance with
normal industry practice.  When the
Startup Franchisee Borrower wishes to pay such invoice, the Startup Franchisee
Borrower, subject to availability of its Loan Commitment and the minimum
borrowing threshold, shall pay such invoice by directing Servicer, through the
Aaron’s Proprietary System, to pay such invoice by means of an ACH transfer
from its DDA Account.  Any directions for
ACH transfers inputted by the Startup Franchisee Borrowers into the Aaron’s
Proprietary System prior to 12:00 Midnight (Atlanta, Georgia time) on

 

 

any
Business Day, shall be forwarded to Servicer pursuant to Sponsor’s existing ACH
access by 3:30 p.m. (Atlanta, Georgia time) on the next Business Day and, if
properly forwarded to Servicer by Sponsor shall be paid by Servicer no later
than the second Business Day thereafter, unless Sponsor is otherwise notified
by Servicer.

 

(d)                                 Sponsor
hereby acknowledges and agrees that Servicer has no ability to halt an ACH
transfer upon the inputting of such transfer request by Sponsor from the
Aaron’s Proprietary System into the ACH system (other than the ability to
retrieve ACH transfers which are sent to the wrong party or otherwise
manifestly erroneous as provided in the ACH Agreement with Sponsor) and Sponsor
accepts full responsibility for any overadvance created by such inputting of
information.  Upon
receipt of the request for an ACH transfer, Servicer shall honor such request
by making an Advance pursuant to the Loan Commitment in the amount of such
request into the Startup Franchisee Borrower’s DDA Account and automatically
forwarding such amount to the supplier by means of an ACH transfer in
accordance with the instructions of the Startup Franchisee Borrower passed onto
Servicer by Sponsor.

 

(e)                                  Nothing
set forth herein shall be deemed to vary the terms and conditions of the
MicroACH Service Agreement by and between Servicer and Sponsor.

 

2.5                                 Tracking of Collateral for Startup
Franchisee Borrowers; Asset Dispositions of Startup Franchisee Borrowers.

 

All
Merchandise financed by Servicer must be serialized via the Aaron’s Proprietary
System for appropriate reconciliation of Advances and receipt of Merchandise
and for purposes of tracking Asset Dispositions.  Each Startup Franchisee Borrower shall  be obligated to furnish serial numbers for
all Merchandise purchased, excluding all Electronic Equipment purchased,
directly to Sponsor on a monthly basis (and, if available, on a weekly basis)
by transmittal of Startup Franchisee Borrower’s receiving report (containing
Aaron’s Proprietary System numbers) directly to Sponsor on the Aaron’s
Proprietary System.  Each Startup
Franchisee Borrower shall be obligated to furnish serial numbers for all
Electronic Equipment purchased, directly to Sponsor on a bi-monthly basis (and,
if available, on a monthly basis) no later than the fifth business day of each
month by transmittal of such Startup Franchisee Borrower’s receiving report
(containing Aaron’s Proprietary System numbers) directly to Sponsor on the
Aaron’s Proprietary System. As set forth more fully below, Sponsor will
maintain and track such information as agent for Servicer, and Servicer shall
at all times have access to such information.

 

If an Asset Disposition occurs, the Startup Franchisee Borrower shall
immediately report such Asset Disposition to Sponsor by means of the Aaron’s
Proprietary System, such information to include the Aaron’s Proprietary System
numbers, and if assigned, the serial numbers of the Merchandise subject to the
Asset Disposition, the Net Book Value of such Merchandise and the proceeds
received by the Startup Franchisee Borrower therefrom and whether or not such
Asset Disposition constituted an Electronic Equipment Asset Disposition.  Sponsor on a monthly basis shall transmit all
such information to

 

 

Servicer in summary form to be received by Servicer no later than the
twelfth Business Day of each month. In addition, the Sponsor shall transmit to
the Servicer information as to the date and aggregate dollar amount of all
Advances during the preceding month which constituted Electronic Equipment
Advances.  Based solely on such
information provided by Sponsor to Servicer, Servicer shall prepare and forward
to each Startup Franchisee Borrower, on a monthly basis, an invoice for payment
of the aggregate outstanding amount of the Startup Franchisee Loan in an amount
equal to the Net Book Value of the Asset Dispositions during the preceding
month not applied to Advances made during such month (the “Asset Disposition
Invoice”), unless Sponsor notifies the Servicer in writing that it wishes
to waive the payment reflected in the Asset Disposition Invoice, which notice
must be received by the Servicer at least twelve (12) Business Days prior to
the date that the Asset Disposition Invoice is sent.   If the Servicer receives such notice in
writing from Sponsor at least twelve (12) Business Days prior to the date that
the Asset Disposition Invoice is otherwise to be sent, the Servicer agrees to
notify the applicable Borrower that the “Asset Disposition Prepayment” required
under its Loan Agreement is waived. 
Otherwise, the Asset Disposition Invoice shall be forwarded to the
Startup Franchisee Borrowers by Servicer by the 12th day of each calendar month
and payment thereof shall be due on the next succeeding Payment Date.

 

2.6                                 Amortization and Payment of Startup
Franchisee Loans.

 

No more than twelve (12) Business Days after the last day of each
calendar month, Sponsor shall determine and report to Servicer the aggregate
amount of (i) Electronic Equipment Advances made to each Startup Franchisee
Borrower during such month, (ii) the Asset Dispositions made by each Startup
Franchisee Borrower during such month and (iii) the Electronic Equipment Asset
Dispositions made by each Startup Franchisee Borrowing during such month.  Upon receipt of the foregoing report,
Servicer shall determine the aggregate amount of Advances made to each Startup
Franchisee Borrower during such month and shall subtract therefrom (i) the
Electronic Equipment Advances made to such Startup Franchisee Borrower, (ii)
payments received by Servicer from such Startup Franchisee Borrower with
respect to Asset Dispositions (other than Electronic Equipment Asset
Dispositions) made since the cut-off date for the last monthly invoice to such
Startup Franchisee Borrower and (iii) the Excess Electronic Equipment Proceeds
(as defined below). The remaining principal amount of Advances made during such
month shall be amortized (in accordance with a straight-line amortization
schedule) in eighteen (18) equal payments of principal due and payable on the
Payment Dates.  On the last day of each
calendar month, Servicer shall subtract the payments received by Servicer from
each Startup Franchisee Borrower with respect to Electronic Equipment Asset
Dispositions made since the cut-off date for the last monthly invoice to such
Startup Franchisee Borrower from the aggregate amount of Electronic Equipment
Advances made to each Startup Franchisee Borrower (as reported by Sponsor)
during such month.  The remaining
principal amount of Electronic Equipment Advances made during such month shall
be amortized (in accordance with a straight-line amortization schedule) in
twenty-four (24) equal payments of principal due and payable on the Payment
Dates provided however that in the event Servicer terminates the Startup
Franchisee Loan Commitment of such Startup Franchisee Borrower, the remaining
amount of such Startup

 

 

Electronic Equipment Advances shall be due and payable on the
eighteenth Payment Date thereafter.  In
the event that the amount of proceeds of Electronic Equipment Asset
Dispositions received by Servicer during any month exceeds the amount of
Electronic Equipment Advances made during such month, (“Excess Electronic
Equipment Proceeds”) such Excess Electronic Equipment Proceeds shall be applied
to the outstanding Advances.   On the
fifteenth (15th) day of each calendar month, Servicer shall mail to each
Startup Franchisee Borrower a detailed bill setting forth the total amount of
principal and interest due and summarizing all account activity during the
preceding month.  Payments of such
principal and interest amount shall be due and payable on the Payment Dates.  Servicer shall have the exclusive right to
collect and receive all such payments on the Loans from the Startup Franchisee
Borrowers which are due and owing to Servicer. 
In the event that Sponsor receives any such payment with respect to the
Loans pursuant to the Franchisee Loan Program (other than with respect to Loans
purchased by Sponsor or where Sponsor has been subrogated to the rights of
Servicer pursuant to the terms of the Sponsor Guaranty), such payments shall be
accepted by Sponsor as agent for Servicer and Sponsor shall immediately endorse
and forward the same to Servicer.

 

2.7                                 Prepayment of Startup Franchisee Loans.

 

Each Startup Franchisee Borrower shall have the right to prepay its
Loan in whole or in part upon at least two (2) Business Days’ prior notice to
Servicer.  Partial prepayments of any
Loan (other than proceeds of Asset Dispositions which shall be applied as set
forth in Section 2.5) shall be applied to reduce the current month’s
Advance(s) to such Startup Franchisee Borrower with any excess prepayment
applied to unpaid principal payments of the Loan in inverse order of maturity.

 

2.8                                 Use of Loan Proceeds; Mechanics of Loan
Program for Established Franchisee Loans.

 

(a)                                  Following
the receipt of the executed Loan Documents with respect to a proposed
Established Franchisee Borrower, but prior to the Closing Date of the proposed
Loan Commitment, Servicer shall establish a DDA Account for the Franchisee and
shall also establish Loan Account for the Franchisee.

 

(b)                                 Upon
establishment of the above-referenced accounts and receipt of the above-referenced
Loan Documents, duly executed by the Established Franchisee Borrower and each
Guarantor, and if requested by Sponsor, confirmation by Servicer of its
first-priority security interest in the Collateral, Servicer shall notify the
relevant Established Franchisee Borrower and Sponsor that the Established
Franchisee Borrower may request Advances pursuant to the Loan Commitment; provided,
however, that the minimum amount of each Advance shall be $500.  Each Advance shall be made by Servicer for
the sole purposes of (i) honoring requests from the Established Franchisee
Borrower, made through the Aaron’s Proprietary System, for ACH transfers to
suppliers of Merchandise in payment of Approved Invoices, and (ii) honoring
requests from the Established Franchisee Borrower for Advances made via ACH
transfers to an operating account or other location specified by such
Established Franchisee Borrower (and granted

 

 

a
vendor identification number by Sponsor) for working capital purposes.  The Established Franchisee Borrowers shall
not be authorized to use the DDA Account for any other purpose.

 

(c)                                  Each
Established Franchisee Borrower will submit purchase order requests for
Merchandise to Sponsor.  In the event
that the purchase order is authorized pursuant to the Franchise Agreement,
Sponsor will prepare the purchase order and submit the same to the appropriate
supplier requested by the Established Franchisee Borrower.  The supplier will be instructed to ship all
Merchandise directly to the Established Franchisee Borrower and the Established
Franchisee Borrower will be responsible for inspecting all Merchandise and
resolving all disputes regarding the Merchandise with such supplier.  The supplier will invoice the Established
Franchisee Borrower for such Merchandise in accordance with normal industry
practice.  When the Established
Franchisee Borrower wishes to pay such invoice, the Established Franchisee
Borrower, subject to availability of its Loan Commitment and the minimum
borrowing threshold, shall pay such invoice by directing Servicer, through the
Aaron’s Proprietary System, to pay such invoice by means of an ACH transfer
from its DDA Account.  Any directions for
ACH transfers inputted by the Established Franchisee Borrowers into the Aaron’s
Proprietary System prior to 12:00 Midnight (Atlanta, Georgia time) on any
Business Day, shall be forwarded to Servicer pursuant to Sponsor’s existing ACH
access by 3:30 p.m. (Atlanta, Georgia time) on the next Business Day and, if
properly forwarded to Servicer by Sponsor shall be paid by Servicer no later
than the second Business Day thereafter, unless Sponsor is otherwise notified
by Servicer.

 

(d)                                 Sponsor
hereby acknowledges and agrees that Servicer has no ability to halt an ACH
transfer upon the inputting of such transfer request by Sponsor from the
Aaron’s Proprietary System into the ACH system (other than the ability to
retrieve ACH transfers which are sent to the wrong party or otherwise
manifestly erroneous as provided in the ACH Agreement with Sponsor) and Sponsor
accepts full responsibility for any overadvance created by such inputting of
information and has agreed to indemnify Servicer and Participants therefore
pursuant to the terms of the Loan Facility Agreement.  Upon receipt of the request for an ACH
transfer, Servicer shall honor such request by making an Advance pursuant to
the Loan Commitment in the amount of such request into the Established
Franchisee Borrower’s DDA Account and automatically forwarding such amount to
the supplier by means of an ACH transfer in accordance with the instructions of
the Established Franchisee Borrower passed onto Servicer by Sponsor.

 

(e)                                  Nothing
set forth herein shall be deemed to vary the terms and conditions of the
MicroACH Service Agreement by and between Servicer and Sponsor.

 

2.9                                 Tracking of Collateral for
Established  Franchisee Borrowers.

 

All Merchandise financed by Servicer must be serialized by Sponsor via
the Aaron’s Proprietary System for appropriate reconciliation of Advances and
receipt of Merchandise and for purposes of tracking Asset Dispositions.  Each Established Franchisee Borrower shall be
obligated to furnish directly to Sponsor serial numbers for

 

 

all Merchandise purchased on a weekly basis by transmittal of the
Established Franchisee Borrower’s weekly (or, if available, daily) receiving
report (containing Aaron’s Proprietary System numbers) directly to Sponsor on
the Aaron’s Proprietary System.  As set
forth more fully below, Sponsor will maintain and track such information as
agent for Servicer, and Servicer shall at all times have access to such
information.

 

2.10                           Payments of Established Franchisee Loans;
Borrowing Base.

 

All outstanding Advances with respect to each Established Franchisee
Loan shall be due and payable in full on the Maturity Date of such Loan, if not
sooner accelerated in accordance with the terms of the applicable Loan
Documents.  In addition, the outstanding
Advances pursuant to each Established Franchisee Loan shall not exceed the
Established Franchisee Borrowing Base for such Established Franchisee Borrower,
as determined by Sponsor on the fifth Business Day of each month (as determined
on the last day of the preceding calendar month) and reported to Servicer on
such date.  Servicer shall be entitled to
rely upon the calculation of the Established Franchisee Borrowing Base for each
Established Franchisee Borrower submitted by Sponsor for all purposes
hereunder.  Upon receipt of the
Established Franchisee Borrowing Base, Servicer shall input such information
into Servicer’s loan records to be effective as of the date which is two
Business Days after receipt of such information.  The statements prepared to be delivered to
each Established Franchisee Borrower with respect to the next Payment Date shall
be prepared requiring a repayment of any Advances outstanding on the fifth
Business Day of such month in excess of relevant Established Franchisee
Borrowing Base as delivered to Servicer by Sponsor on such date.  In addition, however, Servicer, on the date
which is two Business Days after receipt of such calculation from Sponsor,
shall notify the Established Franchisee Borrowers in writing (including
facsimile) of the new Established Franchisee Borrowing Base for such Borrower
and shall require that such Established Franchisee Borrower repay on the next
Payment Date any additional Advances made since the date of the preparation of
the statement for such Payment Date if necessary to avoid any overadvance as of
such date.   Upon the earlier of one (1)
Business Day after notice from the Sponsor to the Servicer or the next Payment
Date, each Established Franchisee Borrower shall prepay its outstanding
Advances in excess of the relevant Established Franchisee Borrowing Base.

 

2.11                           Prepayment of Established Franchisee
Loans.

 

Each Established Franchisee Borrower shall have the right to prepay its
Loan in whole or in part upon at least two (2) Business Days’ prior notice to
Servicer.  Voluntary partial prepayments
of any Loan (expressly excluding mandatory prepayments required in connection
with the reduction of the applicable Established Franchisee Borrowing Base)
must be in a minimum amount of $1,000.

 

 

2.12                           Default Rate of Interest.

 

If any Borrower shall fail to pay on the due date therefor (subject to
any applicable grace period), whether by acceleration or otherwise, any
principal owing by such Borrower under any of the Loan Documents, then interest
shall accrue on such unpaid principal from the due date until and including the
date on which such principal is paid in full at a rate of interest equal to the
Default Rate.

 

2.13                           Legal Expenses

 

In the event that any requested Loan does not close, Servicer shall
charge Sponsor for its reasonable out-of-pocket expenses arising from its
review or preparation of the initial draft of the Loan Documents, Financing
Statement filings and searches.  In the
event the Loan closes, Servicer shall be entitled to charge the Borrower for
its reasonable out-of-pocket expenses incurred in connection with the closing
of the Loan, including all documentary stamp tax, filing fees, UCC search costs
and recording costs, and such amounts may be deducted from the initial Advance
of such Loan.  In the event that Servicer
has not received payment from any Borrower for the expenses permitted in this
Section 2.14 after diligent collection efforts, Sponsor shall pay Servicer
such expenses, and Servicer shall assign to Sponsor any rights it may have
against such Borrower for the payment of such expenses.

 

2.14                           Servicing Fee and Sponsor’s Fee.

 

Servicer shall be entitled to a servicing fee for each Payment Period
equal to the amount specified in the Fee Letter 
(“Servicing Fee”), and Sponsor shall be entitled to the amount
specified in the Fee Letter (the “Sponsor’s Fee”) to the extent received
by Servicer.

 

3.   SERVICING OF LOANS

 

3.1                                 Notice of Loan Defaults

 

(a)                                  Within
fifteen (15) days after the occurrence of a Loan Payment Default, Servicer
shall send a notice of such Loan Payment Default to the applicable Borrower
pursuant to Section 3.3(f) and notice to Sponsor pursuant to Section 3.2(i).

 

(b)                                 Following
the sending of such notice of Loan Payment Default, Servicer shall as soon as
is practicable, provide Sponsor with such other information relating to the
Defaulted Borrower and the Defaulted Loan as Sponsor requests.

 

(c)                                  Servicer
shall not be required to take any remedial action against any Defaulted
Borrower under a Defaulted Loan and shall not be entitled to take any remedial
action during any applicable Response Period except as expressly provided in
the Loan Facility Agreement or hereunder.

 

 

(d)                                 Sponsor
shall have sole responsibility (and Servicer shall have no responsibility) for
monitoring the Borrowers for Loan Defaults other than Loan Payment Defaults,
including without limitation, reviewing the Compliance Certificates and
financial statements to determine compliance with the financial covenants.  Sponsor shall have the right to waive any
Loan Default without the consent of Servicer; provided, however,
that (i) Sponsor may only waive Loan Payment Defaults if Sponsor simultaneously
cures such Loan Payment Defaults, (ii) Sponsor may not waive more than two
consecutive Loan Payment Defaults for any Loan or more than four Loan Payment
Defaults for any one Loan during any four-year period, (iii) Sponsor may not
waive any Loan Default arising from the bankruptcy or insolvency of a Borrower
or any Guarantor of such Loan, or the appointment of a receiver, trustee,
custodian or similar fiduciary for such Borrower or Guarantor, or the
assignment for the benefit of creditors by such Borrower or Guarantor, or the
offering of settlement or composition to the unsecured creditors of such
Borrower or Guarantor generally, (iv) Sponsor may not waive any Loan Default
arising from the termination (or non-renewal) of any Franchisee Agreement, which
Sponsor agrees to give prompt notice to the Servicer, and (v) Sponsor may not
waive a default arising based upon the action or inaction of the Sponsor or any
of its Subsidiaries.

 

3.2                                 Servicing and Administration of Loans

 

Servicer shall service and administer the Loans in accordance with the
terms of this Agreement and its usual practices and procedures for loans of
similar size and structure as determined by Servicer in its sole and absolute
discretion.  Notwithstanding the
foregoing, so long as Sponsor is not in default hereunder and has a continuing
obligation pursuant to the Loan Facility Agreement and this Agreement, Servicer
shall be responsible for the following duties in connection with the service
and administration of the Loans:

 

(a)                                  making
of Advances pursuant to each Loan Commitment as set forth above;

 

(b)                                 maintenance
of files containing the Loan Documents forwarded to Servicer by Sponsor or a
Borrower; provided, however, that the Servicer shall have no
responsibility for maintaining any documents (including, without limitation,
landlord waivers, legal descriptions, leases or certificates of insurance) that
are not actually delivered to the Bank and shall have no obligation to notify
the Sponsor that it has not received any items other than the Loan Documents
prepared by Servicer and sent to any Franchisee;

 

(c)                                  at
the request of the Sponsor, review of the Loan files and give notice to Sponsor
of any missing Loan Documents;

 

(d)                                 receipt
of loan payments via check or ACH wire transfer from the Borrowers and
maintenance of adequate records of such payments (with the

 

 

understanding
that any ACH debit made by Servicer which is rejected will be reinitiated only
once);

 

(e)                                  notification
to each Borrower, by deposit into regular U.S. Mail, ten (10) days prior to
each Payment Date, of a notice that the installment is coming due on such
Payment Date, if any, and the amount of interest due on such date (or the
amount that will be debited in the case of a Borrower who has authorized ACH
debits);

 

(f)                                    notification
to such Borrower, by deposit into regular U.S. Mail, ten (10) days after the
Payment Date with respect to any installment, of a reminder notice that
installment has not been received;

 

(g)                                 within
five (5) days from the date an installment is thirty (30) days delinquent,
notification to such Borrower, by mailing by registered U.S. Mail, of a letter
demanding immediate payment of the past due amount of principal and interest to
avoid further collection action, with a copy of such letter to be simultaneously
delivered to Sponsor;

 

(h)                                 on
each Business Day on which an Advance is made, notification to Sponsor by
telecopy, of a report at the end of such Business Day summarizing the loan
activity on such day and setting forth the available balance of the relevant
Loan Commitment;

 

(i)                                     notification
to Sponsor on weekly basis of all Defaulted Loans pursuant to a weekly
delinquency report in the form of Exhibit J, with such report to
list all Loans which are fifteen (15) days or more past due and provide (1) the
amount past due, (2) the total principal outstanding, and (3) the number of
days past due;

 

(j)                                     delivery
to the Established Franchisee Borrowers, within two Business Days after receipt
of the calculation of the Established Franchisee Borrowing Base from Sponsor,
of the amount of such Established Franchisee Borrowing Base and any additional
required payments by the Borrower on the next Payment Date; and

 

(k)                                  delivery
to Sponsor of the “Quarterly Servicing Report” required by the Fee Letter and
delivery to the Sponsor and the Participants of the Monthly Servicing Report
and the Quarterly Servicing Report required by the Loan Facility Agreement.

 

3.3                                 Waiver of Loan Defaults. 
Sponsor may waive any financial covenant Loan Default of a Borrower by
sending to the Servicer for execution a Default Waiver Letter, which Servicer
agrees to execute and mail to the appropriate Borrower if such Default Waiver
Letter is in form and substance satisfactory to the Servicer.

 

3.4                                 Preservation of Lien Priorities; Assignment
of Rights

 

Until the earlier of Servicer’s receipt of payment in full of a Loan
and termination of the applicable Loan Commitment or the purchase by Sponsor of
a Loan pursuant to the terms

 

 

of the Loan Facility Agreement, Servicer shall, if the Loan is secured,
(i) prepare and forward to the Borrowers or other required signatories for
execution amendments to financing statements promptly upon receipt of written
notice of change of name or address or location of debtors or the Collateral
thereunder and file such amendments or a new financing statement, in the case
of a change in the debtor’s location or the location of the Collateral, in the
appropriate location based on the information contained in such notice,
promptly upon return thereof by the debtor, (ii) timely file continuation
statements pertaining to such Financing Statements and (iii) take all other
reasonable action requested by Sponsor to protect the priority of liens or
security interests with respect to the Collateral securing each Loan, all at
Sponsor’s expense.  Upon the purchase by
Sponsor of a Loan pursuant to the terms of the Loan Facility Agreement, or in
the event that Sponsor reimburses Servicer or otherwise becomes obligated to
Servicer for expenses (including without limitation, funding losses) of
Servicer incurred in connection with a proposed loan which was never
consummated that have not been reimbursed by the applicable Borrower, Servicer
shall be deemed to have assigned to Sponsor all rights and remedies that
Servicer may have had against the Borrower in accordance with and subject to
the limitations of Section 10.15 of the Loan Facility Agreement.  In connection with such deemed assignment,
Servicer agrees to execute on a timely basis all such instruments and documents
as are reasonably requested in order to evidence Sponsor’s rights or to permit
Sponsor to exercise such rights, including without limitation, forms of
assignments, all without recourse to, or representation or warranty by,
Servicer.

 

3.5                                 Amendments to Loan Documents; Further
Documentation

 

Except to correct an immaterial ambiguity or manifest error, Servicer
shall not agree to any amendment of the applicable Loan Documents after closing
of any Loan without the prior written approval of Sponsor unless a Credit Event
has occurred and is continuing or the Sponsor has no further obligations
pursuant to its guaranty obligations with respect to such Loan.  Upon receipt of either such approval, or
written instructions from Sponsor directing Servicer to do so, Servicer shall
timely prepare written amendments to the Loan Documents or other documents
relating to the Loan in accordance with such approval or instructions, and
shall use its reasonable efforts to obtain on a timely basis the signatures of
the Borrower and/or other appropriate signatories to such Loan Documents or
other documents; provided that, such amendments are not inconsistent with the
terms of the Operative Documents (with the express understanding that to the
extent that Servicer has any questions regarding such consistency, Servicer
shall be entitled to refuse to prepare or execute such amendments until receipt
of approval from the Participants pursuant to the Loan Facility
Agreement).  Within fifteen (15) days
after obtaining such signatures, Servicer shall send Sponsor photocopies of the
original fully executed documents. 
Servicer shall be entitled to charge Sponsor, or upon Sponsor’s written
instructions, the applicable Borrower, reasonable attorneys’ fees actually
incurred and other expenses relating to the preparation of such amendments or
other documents.

 

 

3.6                                 Actions by Servicer

 

Unless a Credit Event has occurred and is continuing or the Sponsor has
no further obligation pursuant to its guaranty set forth in the Loan Facility
Agreement, Servicer shall at all times endeavor to comply with the requirements
set forth in this Servicing Agreement and the Loan Facility Agreement, provided
that Servicer shall not be required to take any action which it reasonably
determines would expose Servicer to unreasonable risk of liability or which is
contrary to applicable law or which is contrary to the terms of the Operative
Documents.

 

4.   SPONSOR’S AUDIT AND REPORTING OBLIGATIONS WITH
RESPECT TO FRANCHISEE LOANS.

 

Each Startup Franchisee Loan Agreement shall authorize Servicer or
representatives of Servicer, including Sponsor, to conduct periodic field
audits of each Startup Franchisee Borrower. 
Unless otherwise instructed by Servicer, Sponsor hereby covenants and
agrees with Servicer to audit each Startup Franchisee Borrower no less than
once per each six month period and more frequently at the reasonable request of
Servicer with respect to any Startup Franchisee Borrower as to whom a Loan
Default has occurred (whether or not waived by Sponsor).  In conducting the field audits of the Startup
Franchisee Borrowers, Sponsor will examine the payment receipts, bank
statements, loan statements, Rental/Purchase Contracts, inventory on hand,
computer-generated reports of Asset Dispositions, Rental Revenue and other financial
data necessary to determine the accuracy and validity of the reports,
compliance certificates, financial reports and other information forwarded to
either of Servicer or Sponsor by the Startup Franchisee Borrowers in connection
with the Startup Franchisee Loans.

 

At the request of Servicer, within thirty (30) Business Days of the
completion of each field audit, Sponsor shall forward to Servicer a written
audit report detailing the scope of Sponsor’s audit, any discrepancies or other
misstatements or misrepresentations of the relevant Startup Franchisee Borrower
discovered in the course of the audit and containing a clear concise statement
as to whether or not Sponsor believes that such Startup Franchisee Borrower is
in compliance with the terms of the Loan Documents to which it is a party and
if not, the nature of any default known to Sponsor and the course of action
planned by the Startup Franchisee Borrower to remedy such default.  The delivery of each field audit to Servicer
by Sponsor shall constitute a representation and warranty by Sponsor that the
information set forth therein is true and correct in all material respects to
the best of Sponsor’s knowledge and that Servicer shall be authorized to rely
on such information in continuing to make Advances to such Startup Franchisee
Borrower.

 

Notwithstanding the foregoing, Servicer, in its sole discretion, may
(at Servicer’s expense, unless a Credit Event has occurred and is continuing
and then at Sponsor’s expense) at any time and from time to time, undertake to
perform an independent field audit of any or all of the Startup Franchisee
Borrowers (with such audit to be performed by officers or employees of Servicer
or other persons retained by Servicer for such

 

 

purpose).  Sponsor shall
cooperate fully with Servicer in connection with any such independent audit.

 

5.   MISCELLANEOUS

 

5.1                                 Communications

 

Unless otherwise provided in the Loan Facility Agreement or under this
Servicing Agreement, all communications under this Servicing Agreement shall be
sent in accordance with the notice procedures set forth in Section 15.1 of
the Loan Facility Agreement.

 

5.2                                 Waivers.

 

No party hereto shall be deemed to have waived any of its rights under
this Servicing Agreement unless such waiver is in writing and signed by the
party for whose benefit such provision was intended.  No delay or omission on the part of any party
hereto in exercising any right shall operate as a waiver of such right or any
other right.  A waiver on any one
occasion shall not be construed as a bar to or waiver of any right on any
future occasion.

 

5.3                                 Governing Law.

 

THIS SERVICING AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PROVISIONS THEREOF).

 

5.4                                 Successors and Assigns.

 

This Servicing Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.  Neither party may assign its rights or
obligations hereunder without the prior written consent of the other party
hereto.

 

5.5                                 Amendments; Consents.

 

No amendment, modification, supplement, termination, or waiver of any
provision of this Servicing Agreement and no consent to any departure by
Sponsor therefrom, may in any event be effective unless in writing signed by
Servicer, and then only in the specific instance and for the specific purpose
given.

 

5.6                                 Indemnification by Servicer.

 

Without limiting any other rights which Sponsor may have under the
Operative Documents  or under applicable law,
and subject to the notice and other procedural requirements of
Section 11.2 of the Loan Facility Agreement, Servicer hereby agrees to

 

 

indemnify upon demand and hold Sponsor harmless from and against all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys’ fees actually incurred and disbursements as and when
incurred, awarded against or incurred by Sponsor, which directly arise out of
Servicer’s gross negligence or willful misconduct in connection with its
administration of the Franchisee Loan Program.

 

Sponsor expressly acknowledges and agrees that Servicer shall exercise
with respect to the Franchisee Loan Program the same standard of care and
diligence in the performance of its duties, responsibilities and obligations
under the Operative Documents as it generally exercises with respect to loans
of a similar size and structure in Servicer’s sole and absolute
discretion.  Notwithstanding the
foregoing, neither Servicer nor any of its directors, officers, agents or
employees shall have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with the Operative
Documents (other than any of the foregoing made by any of them), any Loan
Document or any borrowing hereunder or thereunder, (ii) the performance or
observance of any of the covenants or agreements of any Borrower;
(iii) the satisfaction of any condition specified in Article 4 of the
Loan Agreements, except receipt of the Loan Documents; or (iv) the
validity, effectiveness or genuineness of the Operative Documents or any of the
Loan Documents or any other instrument or writing furnished in connection
herewith or therewith, provided, however, that in each case
Servicer, its directors, officers, agents and employees are acting in good
faith and without actual knowledge of a defect in or invalidity of any of the
foregoing; or if Servicer, its directors, officers, agents or employees do have
knowledge of any such defect or invalidity, provided that Sponsor:  (x) has been promptly notified by Servicer of
such defect or invalidity; and (y) has expressly consented to any and all
actions to be taken by Servicer, its directors, officers, agents or employees
as a result of, which is attributable to, or otherwise relates to, such defect
or invalidity. Servicer shall not incur any liability by acting in reliance
upon any notice, consent, certificate, statement or other writing (which may be
a wire, telex or similar writing) given in accordance with other provisions of
this Agreement reasonably believed by it to be genuine or is otherwise in
accordance with the instructions of Sponsor.

 

5.7                                 Entire Agreement.

 

This Servicing Agreement and the other Operative Documents executed and
delivered contemporaneously herewith, together with the exhibits and schedules
attached hereto and thereto, constitute the entire understanding of the parties
with respect to the subject matter hereof, and any other prior or
contemporaneous agreements, whether written or oral, with respect thereto are
expressly superseded hereby.  The
execution of this Servicing Agreement and the other Operative Documents by
Sponsor was not based upon any facts or materials provided by Servicer, nor was
Sponsor induced to execute this Servicing Agreement or any other related
document by any representation, statement or analysis made by Servicer.

 

 

5.8                                 Captions.

 

The captions in this Servicing Agreement are included for convenience
only and shall not in any way affect the interpretation or construction of any
of the provisions hereof.

 

5.9                                 Severability.

 

If any one or more parts, terms, provisions, paragraphs, or Sections of
this Servicing Agreement shall be held to be illegal or in conflict with state
or federal law, the remaining shall continue in full force and effect.

 

5.10                           Counterparts.

 

This Servicing Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto where upon the same instrument.

 

 

IN WITNESS WHEREOF,
the parties hereto have caused this Servicing Agreement to be duly executed as
of the day and year first above written.

 

	
   

  	
  AARON RENTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ Gilbert L. Danielson

  	
   

  
	
   

  	
  Gilbert L. Danielson

  
	
   

  	
  Executive Vice President and

  
	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUNTRUST BANK, as Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/    Ken Bauchle

  	
   

  
	
   

  	
  Name:  Ken Bauchle

  
	
   

  	
  Title:     Vice President

  

 

 

Exhibits to Servicing Agreement

 

Exhibit A - Form of ACH Authorization

Exhibit B - Form of Default Waiver Letter

Exhibit C - Form of Commitment Letter for Startup Franchisee Loans

Exhibit D - Form of Corporate Authorization

Exhibit E - Form of Funding Approval Notice

Exhibit F - Form of Personal Guaranty

Exhibit G - Form of Store Opening Information Sheet

Exhibit H - Form of Landlord Waiver

Exhibit I - Form of Subordination Agreement

Exhibit J - Form of Weekly Delinquent ReportEXHIBIT
10.1(a)

 

July 1, 1999

 

Dr. Erik B. Nielsen

Director

Neuropharmacological
Research

H. Lundbeck, A/S

Ottiliavej 9

DK-2S00 Copenhagan-Valby

Denmark

 

Dear Dr. Nielsen:

 

Per our conversation, you
requested clarification of Lundbeck’s responsibility with regard to Section 6.5
of the Joint Research, Development and License Agreement which states “the
Parties shall maintain complete and accurate records of their respective
employee hours devoted, and expenses incurred, in connection with the Research
Program and the Development Program...” 
We concur with your suggestion that for the Research Program (all
activities unrelated to Development Compounds and/or  Programs [as defined in Section 1.11 and 1-12)], Lundbeck
discovery research will not be required to “...maintain complete and accurate
records of their respective employee hours...” for the Research Activities.  Of course, this does not supercede any
internal requirements you may have in fulfilling your obligations to Lundbeck.

 

As Lundbeck is supporting
the research program, Cephalon will be required to comply with Section 6.5 of
the Agreement.  Please note that this
“exemption” for Lundbeck Research applies only to the research program. All
costs, direct or indirect, associated with Development Compounds and/or
Programs, following approval by the JMT, need to be captured per the Agreement.

 

If you have any further
questions, please do not hesitate to call.

 

 

	
   

  	
  Best Regards,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jeffry L. Vaught

  	
   

  
	
   

  	
  Jeffry L. Vaught

  
	
   

  	
  President

  
	
   

  	
  Research and Development

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}]]