RENT-A-CENTER, INC. EXECUTIVE TRANSITION AGREEMENT WITH [NAME OF EXECUTIVE]
EXHIBIT 10.21
AGREEMENT made as of the ___day of , 2006, by and between RENT-A-CENTER, INC.
(“Company”) and (“Executive”).
1. Background. This Agreement is intended to provide the Executive with certain
payments and benefits upon an involuntary termination of Executive’s employment or the occurrence
of certain other circumstances that may affect the Executive. The Company believes this Agreement
will help ensure the Executive’s undivided focus on the business of the Company and thereby enhance
shareholder value.
2. Certain Defined Terms. The following terms have the following meanings when used in
this Agreement.
(a) “Accrued Compensation” means, as of any date, (1) the unpaid amount, if any, of
Executive’s previously earned base salary, (2) the unpaid amount, if any, of the bonus earned by
the Executive for the preceding year, and (3) additional payments or benefits, if any, earned by
the Executive under and in accordance with any employee plan, program or arrangement of or with the
Company or an Affiliate (other than this Agreement).
(b) “Affiliate” means an entity at least 50% of the voting, capital or profits interests of
which are owned directly or indirectly by Company.
(c) “Benefit Continuation Coverage” means continuing group health insurance coverage for
Executive and, where applicable, Executive’s covered spouse and covered eligible dependents for a
specified period following the termination of Executive’s Employment with Company and its
Affiliates at the same benefit and contribution levels that would be in effect if the Executive’s
employment had continued, if and to the extent such coverage would be permitted by the applicable
plan and applicable law. Benefit Continuation Coverage, if any, shall be in addition to and not in
lieu of COBRA coverage. Unless sooner terminated, Benefit Continuation Coverage will be subject to
early termination if and when the Executive becomes entitled to comparable coverage from another
employer.
(d) “Board” means the Board of Directors of the Company.
(e) “Cause” means (1) material act or acts of willful misconduct by Executive, whether in
violation of the Company’s policies, including, without limitation, the Company’s Code of Business
Conduct and Ethics, or otherwise; (2) Executive’s willful and repeated failure (except where due to
physical or mental incapacity) or refusal to perform in any material respect the duties and
responsibilities of Executive’s employment; (3) embezzlement or fraud committed by Executive, at
Executive’s direction, or with Executive’s prior personal knowledge; (4) Executive’s conviction of,
or plea of guilty or nolo contendere to, the commission of a felony; or (5) substance abuse
or use of illegal drugs that, in the reasonable judgment of the Compensation Committee, (A) impairs
the ability of the Executive to perform the duties of the
Executive’s employment, or (B) causes or is likely to cause harm or embarrassment to the
Company or any of its Affiliates. Except as specified, the Compensation Committee, acting in its
own discretion, will be responsible for determining whether particular conduct constitutes “Cause”
for the purposes of this Agreement.
(f) “Change in Control” means the occurrence of any of the following after September 14, 2006:
(i) any person (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (“Exchange Act”)) becomes the beneficial
owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40%
or more of the combined voting power of the then outstanding voting securities of
Company;
(ii) a consolidation, merger or reorganization of the Company, unless (1) the
stockholders of Company immediately before such consolidation, merger or
reorganization own, directly or indirectly, at least a majority of the combined
voting power of the outstanding voting securities of the corporation or other entity
resulting from such consolidation, merger or reorganization, (2) individuals who
were members of the Board immediately prior to the execution of the agreement
providing for such consolidation, merger or reorganization constitute a majority of
the board of directors of the surviving corporation or of a corporation directly or
indirectly beneficially owning a majority of the voting securities of the surviving
corporation, and (3) no person beneficially owns more than 40% of the combined
voting power of the then outstanding voting securities of the surviving corporation
(other than a person who is (A) Company or a subsidiary of Company, (B) an employee
benefit plan maintained by Company, the surviving corporation or any subsidiary, or
(C) the beneficial owner of 40% or more of the combined voting power of the
outstanding voting securities of Company immediately prior to such consolidation,
merger or reorganization);
(iii) individuals who, as of September 14, 2006, constitute the entire Board
(the “Incumbent Board”) cease for any reason to constitute a majority of the Board,
provided that any individual becoming a director subsequent to September 14, 2006
whose appointment or nomination for election by Company’s stockholders, was approved
by a vote of at least two-thirds of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the Incumbent
Board;
(iv) approval by the stockholders of the Company of a complete liquidation or
dissolution of Company, or a sale or other disposition of all or substantially all
of the assets of the Company (other than to an entity described in (f)(ii) above);
or
(v) any other event or transaction which the Board, acting in its discretion,
designates is a Change in Control.
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(g) “Code” means the Internal Revenue Code of 1986, as amended.
(h) “Company” means Rent-A-Center, Inc. and any successor thereto.
(i) “Compensation Committee” means the Compensation Committee of the Board.
(j) “Disability” means the inability of Executive to substantially perform the customary
duties and responsibilities of Executive’s Employment with Company or an Affiliate for a period of
at least 120 consecutive days or 120 days in any 12-month period by reason of a physical or mental
incapacity which is expected to result in death or last indefinitely, as determined by a duly
licensed physician appointed by the Company.
(k) “Employment” means Executive’s employment with the Company and/or any of its Affiliates.
(l) “Good Reason” means the occurrence of any of the following without the written consent of
Executive: (1) a material diminution by Company or an Affiliate of Executive’s duties or
responsibilities in a manner which is inconsistent with Executive’s position or which has or is
reasonably likely to have a material adverse effect on Executive’s status or authority; (2) a
relocation by more than 50 miles of Executive’s principal place of business; or (3) a reduction by
Company or an Affiliate of Executive’s rate of salary or annual incentive opportunity or a breach
by Company or any of its Affiliates of a material provision of any written employment or other
agreement with Executive which is not corrected within 15 business days following notice thereof by
Executive to Company.
(m) “Pro Rata Bonus” means the annual bonus, if any, earned by Executive for the calendar year
preceding the year in which the Executive’s Employment terminates multiplied by a fraction, the
numerator of which is the number of days elapsed from the beginning of the calendar year in which
the Executive’s Employment terminates until the date the Executive’s Employment terminates, and the
denominator of which is 365. If the Executive’s Employment terminates before April 1 of a calendar
year, the Pro Rata Bonus for such calendar year shall be deemed to be zero.
(n) “Salary & Bonus” means, as of the effective date of the termination of Executive’s
Employment with Company and its Affiliates, the sum of: (1) Executive’s highest annual rate of
salary at any time during the preceding 24 months, and (2) Executive’s average annual bonus for the
two preceding calendar years. If the number of preceding years of Executive’s Employment is less
than two, then the bonus component of Executive’s Salary & Bonus will be equal to bonus earned
during the calendar year preceding the date of Executive’s termination of Employment; and, if the
Executive has not completed at least a full calendar year of Employment, the bonus component of
Executive’s Salary & Bonus will be zero.
3. General Severance Protection. Subject to the provisions hereof, including, without
limitation, Section 7 (relating to non-duplication of payments and benefits provided under other
agreements and arrangements) and Section 8 (relating to the execution and delivery of a release as
a condition of Executive’s (or a beneficiary’s) entitlement to payments and benefits
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hereunder), upon termination of Employment, other than a termination of Employment in
conjunction with a Change in Control to which Section 4 applies, Executive (or Executive’s
beneficiary, as the case may be) will be entitled to receive the applicable severance payments and
benefits set forth in this Section.
(a) Termination by Company or an Affiliate without Cause. If Executive’s Employment is
terminated by the Company or an Affiliate without Cause, then Executive shall be entitled to
receive the following payments and benefits:
(i) Accrued Compensation;
(ii) Pro Rata Bonus;
(iii) 1.0 times Salary & Bonus, payable to Executive in equal monthly (or, at
the option of the Company, more frequent) installments; and
(iv) Benefit Continuation Coverage for the period covered by Section 3(a)(iii).
(b) Disability or Death. If Executive’s Employment is terminated by the Company or an
Affiliate due to Executive’s Disability or if Executive’s Employment terminates by reason of death,
then Executive (or Executive’s beneficiary) shall be entitled to receive the following payments and
benefits:
(i) Accrued Compensation;
(ii) Pro Rata Bonus; and
(iii) Benefit Continuation Coverage for twelve months.
(c) Termination by Company or an Affiliate for Cause or Termination by Executive. If
Company or an Affiliate terminates Executive’s Employment for Cause or if Executive terminates such
Employment for any reason (other than death), then Executive shall be entitled to receive any
Accrued Compensation, subject to set off for amounts owed by Executive to Company or an Affiliate,
and nothing more.
(d) Restoration. Any severance payments and benefits paid under this Section 3 shall
be subject to continuing compliance with the covenants described in and repayment pursuant to
Section 9.
4. Termination in Conjunction with a Change in Control. Subject to the provisions
hereof, including, without limitation, Section 6 (relating to a reduction of severance payments and
benefits in order to avoid adverse tax consequences), Section 7 (relating to non-duplication of
payments and benefits provided under other agreements and arrangements), and Section 8 (relating to
execution and delivery of a general release as a condition of Executive’s entitlement to payments
and benefits hereunder), upon the termination of Executive’s Employment with Company and its
Affiliates in conjunction with a Change in Control, Executive (or Executive’s
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beneficiary, as the case may be) will be entitled to receive the applicable severance payments
and benefits set forth in this Section. For the purposes hereof, a termination of Employment is in
conjunction with a Change in Control if (and only if) it occurs during the period beginning six
months prior to a Change in Control (or, in the case of a Change in Control described in Section
2(f)(i) or (ii), beginning on the date of the definitive agreement pursuant to which the Change in
Control is consummated), and ending on the second anniversary of the date of the Change in Control.
If Executive is entitled to receive payments and benefits under Section 3 (due to a termination of
Employment not in conjunction with a Change in Control) and if, by reason of a subsequent Change in
Control, Executive’s termination of Employment is deemed to be in conjunction with the Change in
Control, then, in order to avoid duplication, the payments and benefits to which Executive is
entitled under this Section upon and following the Change in Control will be reduced by the
payments and benefits which Executive received under Section 3, and no further payments will be
made under Section 3.
(a) Termination by Company or an Affiliate without Cause or by Executive for Good
Reason. If Executive’s Employment is terminated by Company or an Affiliate without Cause or by
Executive for Good Reason, then Executive shall be entitled to receive the following payments and
benefits:
(i) Accrued Compensation;
(ii) Pro Rata Bonus;
(iii) an amount equal to 1.5 times Salary & Bonus, which amount shall be
payable in a lump sum in cash within 10 business days following the date of
Executive’s termination of Employment or, if later, the date of the Change in
Control; and
(iv) Benefit Continuation Coverage for 1.5 years following termination.
(b) Disability or Death. If Executive’s Employment is terminated by Company or an
Affiliate due to Executive’s Disability, or if Executive’s Employment terminates by reason of
death, then Executive (or Executive’s beneficiary) shall be entitled to receive the following
payments and benefits:
(i) Accrued Compensation;
(ii) Pro Rata Bonus; and
(iii) Benefit Continuation Coverage for twelve months.
(c) Termination by Company or an Affiliate for Cause or Termination by Executive without
Good Reason. If Executive’s Employment is terminated by Company or an Affiliate for Cause or is
terminated by Executive without Good Reason, Executive shall be entitled to receive Accrued
Compensation through the date of termination, subject to set off for amounts owed by Executive to
Company or an Affiliate, and nothing more.
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(d) Restoration. Any severance payments and benefits paid under this Section 4 shall
be subject to continuing compliance with the covenants described in and repayment pursuant to
Section 9.
5. Effect of a Change in Control on Options and Other Equity-Based Awards. All
outstanding Company stock options and other Company equity-based awards held by Executive shall
become fully vested immediately before the occurrence of a Change in Control if (a) Executive is
then still employed by Company or an Affiliate; or (b) Executive is entitled to payments and
benefits under Section 4(a) as a result of the termination of Employment during the pre-Change in
Control severance protection period described in Section 4. If Executive becomes vested in a stock
option or other equity-based award pursuant to part (b) of the preceding sentence, then, before the
Change in Control, Company will either reinstate the option or other award to the extent it would
otherwise not be vested, or make a cash payment to Executive equal to the intrinsic value of the
non-vested portion of the option or other award based upon the then value per share of Company’s
Common Stock. The vesting and other terms and conditions of Executive’s stock options and other
equity-based awards will continue to govern except as otherwise specifically provided by this
Section 5.
6. Golden Parachute Tax Limitation. If Executive is entitled to receive payments and
benefits under this Agreement and if, when combined with the payments and benefits Executive is
entitled to receive under any other plan, program or arrangement of Company or an Affiliate,
Executive would be subject to excise tax under Section 4999 of the Code or Company would be denied
a deduction under Section 280G of the Code, then the severance amounts otherwise payable to
Executive under this Agreement will be reduced by the minimum amount necessary to ensure that
Executive will not be subject to such excise tax and Company will not be denied any such deduction.
7. Effect of Other Agreements. Notwithstanding the provisions hereof, the
post-termination payment and benefit provisions of Executive’s written employment or other
agreement with Company or an Affiliate in force at the termination of Executive’s Employment (if
any) will apply in lieu of the provisions hereof if and to the extent that, with respect to
Executive’s termination of Employment, the provisions of such employment or other agreement would
provide greater payments or benefits to Executive (or to Executive’s covered dependents or
beneficiaries). If any termination or severance payments or benefits are made or provided to
Executive by Company or any or its Affiliates pursuant to a written employment or other agreement
with Company or an Affiliate, such payments and benefits shall reduce the amount of the comparable
payments and benefits payable hereunder. This Section is intended to provide Executive with the
most favorable treatment and, at the same time, avoid duplication of payments or benefits, and it
will be construed and interpreted accordingly.
8. Release of Claims. Notwithstanding anything herein to the contrary, the
Compensation Committee or the Board may condition severance payments or benefits otherwise payable
under this Agreement upon the execution and delivery by Executive (or Executive’s beneficiary) of a
general release in favor of Company, its Affiliates and their officers, directors and employees, in
such form as the Board or the Compensation Committee may specify; provided, however, that no such
release will be required as a condition of Executive’s (or the
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beneficiary’s) entitlement to Accrued Compensation. Any payment or benefit that is so
conditioned may be deferred until the expiration of the seven day revocation period prescribed by
the Age Discrimination in Employment Act of 1967, as amended, or any similar revocation period in
effect on the effective date of the termination of Executive’s Employment.
9. Restoration. The Executive has been provided and is privy to intellectual property,
trade secrets and other confidential information of the Company and its Affiliates. For two years
following the Executive’s termination of Employment, the Executive has agreed not to engage in any
activity or provide any services which are similar to or competitive with the business of the
Company and its Affiliates. For the same two year period, the Executive also agreed not to solicit
or induce, or cause or permit others to solicit or induce, any employee to terminate their
employment with the Company and its Affiliates. These covenants are set forth and agreed to in the
Loyalty and Confidentiality Agreement between the Executive and the Company (“Loyalty Agreement”).
The parties hereto understand and acknowledge that the promises in this Agreement and those in the
Loyalty Agreement, and not any employment of or services performed by the Executive in the course
and scope of that employment, constitute the sole consideration for the severance payments and
benefits provided by this Agreement. Further, it is agreed that should the Executive violate or be
in breach of any restrictions set forth herein or in the Loyalty Agreement (which determination
shall be made in the discretion of the Compensation Committee), (a) the Executive shall not be
entitled to any further severance payments and benefits under this Agreement, (b) the Executive
shall immediately return to the Company any severance payments and the value of any severance
benefits which were received hereunder, and (c) the Executive will have no further rights or
entitlements under this Agreement. This Section 9 shall not in any manner supersede or limit any
other right the Company may have to enforce or seek legal or equitable relief based on this
Agreement or the Loyalty Agreement.
10. No Duty to Mitigate. Except as otherwise specifically provided herein with
respect to early termination of Benefit Continuation Coverage, Executive’s entitlement to payments
or benefits hereunder is not subject to mitigation or a duty to mitigate by Executive.
11. Amendment. The Board may amend this Agreement, provided, however, that, no such
action which would have the effect of reducing or diminishing Executive’s entitlements under this
Agreement shall be effective without the express written consent of the Executive.
12. Successors and Beneficiaries.
(a) Successors and Assigns of Company. Company shall require any successor or
assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of Company and its subsidiaries taken as a whole,
expressly and unconditionally to assume and agree to perform or cause to be performed Company’s
obligations under this Agreement. In any such event, the term “Company,” as used herein shall mean
Company, as defined in Section 2 hereof, and any such successor or assignee. Executive acknowledges
and agrees that this Agreement and the Loyalty Agreement shall be fully enforceable by the
Company’s successor or assignee.
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(b) Executive’s Beneficiary. For the purposes hereof, Executive’s beneficiary will be
the person or persons designated as such in a written beneficiary designation filed with the
Company, which may be revoked or revised in the same manner at any time prior to Executive’s death.
In the absence of a properly filed written beneficiary designation or if no designated beneficiary
survives Executive, Executive’s estate will be deemed to be the beneficiary hereunder.
13. Nonassignability. With the exception of Executive’s beneficiary designation,
neither Executive nor Executive’s beneficiary may pledge, transfer or assign in any way the right
to receive payments or benefits hereunder, and any attempted pledge, transfer or assignment shall
be void and of no force or effect.
14. Legal Fees to Enforce Rights after a Change in Control. If, following a Change in
Control, Company fails to comply with any of its obligations under this Agreement or Company takes
any action to declare this Agreement void or unenforceable or institutes any litigation or other
legal action designed to deny, diminish or to recover from Executive (or Executive’s beneficiary)
the payments and benefits intended to be provided, then Executive (or Executive’s beneficiary, as
the case may be) shall be entitled to select and retain counsel at the expense of Company to
represent Executive (or Executive’s beneficiary) in connection with the good faith initiation or
defense of any litigation or other legal action, whether by or against Company or any director,
officer, stockholder or other person affiliated with Company or any successor thereto in any
jurisdiction.
15. Not a Contract of Employment. This Agreement shall not be deemed to constitute a
contract of employment between Executive and Company or any of its Affiliates. Nothing contained
herein shall be deemed to give Executive a right to be retained in the employ or other service of
Company or any of its Affiliates or to interfere with the right of Company or any of its Affiliates
to terminate Executive’s employment at any time.
16. Governing Law. This Agreement shall be governed by the laws of the State of
Texas, excluding its conflict of law rules. Any suit with respect to this Agreement will be brought
in the federal or state courts in the districts, which include Dallas, Texas, and Executive hereby
agrees to submit to the personal jurisdiction and venue thereof.
17. Compliance with Section 409A of the Code. This Agreement is intended to comply
with Section 409A of the Code, if and to the extent applicable, and will be interpreted and applied
in a manner consistent with that intention. Toward that end, unless permitted sooner by Section
409A of the Code, severance amounts otherwise payable within six-months after termination of
employment will be deferred until and become payable on the first day of the seventh month
following termination of employment.
18. Withholding. Company and its Affiliates may withhold from any and all amounts
payable under this Agreement such federal, state and local taxes as may be required to be withheld
pursuant to applicable law.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
| RENT-A-CENTER, INC. | ||||
| By: | ||||
| Executive | ||||
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