Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________

FORM 10-Q

______________________________



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2015



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-13941

________________________________

AARON’S, INC.

(Exact name of registrant as specified in its charter)

_________________________________



Georgia		58-0687630
(State or other jurisdiction of incorporation or organization)		(I. R. S. Employer Identification No.)

309 E. Paces Ferry Road, N.E. Atlanta, Georgia		30305-2377
(Address of principal executive offices)		(Zip Code)

(404) 231-0011

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

___________________________________

Indicate by check mark whether registrant (l) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of l934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large Accelerated Filer	ý		Accelerated Filer	o

Non-Accelerated Filer	o	(Do not check if a smaller reporting company)	Smaller Reporting Company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Title of Each Class		Shares Outstanding as of November 2, 2015
Common Stock, $.50 Par Value		72,592,731

AARON’S, INC.

INDEX



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	3

Condensed Consolidated Balance Sheets – September 30, 2015 (Unaudited) and December 31, 2014	3

Condensed Consolidated Statements of Earnings (Unaudited) – Three and Nine Months Ended September 30, 2015 and 2014	4

Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Three and Nine Months Ended September 30, 2015 and 2014	5

Condensed Consolidated Statements of Cash Flows (Unaudited) – Nine Months Ended September 30, 2015 and 2014	6

Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3. Quantitative and Qualitative Disclosures About Market Risk	35

Item 4. Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	37

Item 1A. Risk Factors	37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3. Defaults Upon Senior Securities	38

Item 4. Mine Safety Disclosures	38

Item 5. Other Information	38

Item 6. Exhibits	39

Signatures	41

PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

AARON’S, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



	(Unaudited)
(In Thousands, Except Share Data)	September 30, 2015			December 31, 2014
ASSETS:
Cash and Cash Equivalents	$	66,912		$	3,549
Investments	22,334			21,311
Accounts Receivable (net of allowances of $36,253 in 2015 and $27,401 in 2014)	85,224			107,383
Lease Merchandise (net of accumulated depreciation of $734,934 in 2015 and $701,822 in 2014)	1,052,615			1,087,032
Property, Plant and Equipment at Cost (net of accumulated depreciation of $219,862 in 2015 and $216,065 in 2014)	212,217			219,417
Goodwill	536,121			530,670
Other Intangibles (net of accumulated amortization of $52,218 in 2015 and $33,250 in 2014)	279,187			297,471
Income Tax Receivable	12,997			124,095
Prepaid Expenses and Other Assets	60,525			59,560
Assets Held For Sale	7,542			6,356
Total Assets	$	2,335,674		$	2,456,844
LIABILITIES & SHAREHOLDERS’ EQUITY:
Accounts Payable and Accrued Expenses	$	268,521		$	270,421
Accrued Regulatory Expense	11,280			27,200
Deferred Income Taxes Payable	162,764			268,551
Customer Deposits and Advance Payments	55,586			61,069
Debt	494,161			606,082
Total Liabilities	992,312			1,233,323
Commitments and Contingencies (Note 5)
Shareholders’ Equity:
Common Stock, Par Value $.50 Per Share: Authorized: 225,000,000 Shares at September 30, 2015 and December 31, 2014; Shares Issued: 90,752,123 at September 30, 2015 and December 31, 2014	45,376			45,376
Additional Paid-in Capital	236,620			227,290
Retained Earnings	1,383,208			1,274,233
Accumulated Other Comprehensive Loss	(222		)	(90		)
	1,664,982			1,546,809
Less: Treasury Shares at Cost
Common Stock: 18,160,832 Shares at September 30, 2015 and 18,263,589 at December 31, 2014	(321,620		)	(323,288		)
Total Shareholders’ Equity	1,343,362			1,223,521
Total Liabilities & Shareholders’ Equity	$	2,335,674		$	2,456,844

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

AARON’S, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
(In Thousands, Except Per Share Data)	2015			2014			2015			2014
REVENUES:
Lease Revenues and Fees	$	661,856		$	594,455		$	2,017,610		$	1,606,765
Retail Sales	6,988			8,094			26,055			31,023
Non-Retail Sales	81,708			78,503			262,194			254,021
Franchise Royalties and Fees	15,574			15,838			48,069			50,147
Other	1,568			1,528			4,629			4,375
	767,694			698,418			2,358,557			1,946,331
COSTS AND EXPENSES:
Depreciation of Lease Merchandise	302,029			260,819			912,377			661,446
Retail Cost of Sales	4,537			5,409			17,090			19,900
Non-Retail Cost of Sales	73,567			71,403			236,882			230,537
Operating Expenses	345,514			325,148			998,989			898,963
Financial Advisory and Legal Costs	—			385			—			13,661
Restructuring Expenses	—			6,876			—			9,140
Retirement and Vacation Charges	—			9,094			—			9,094
Progressive-Related Transaction Costs	—			371			—			6,638
Regulatory Income	—			(1,200		)	—			(1,200		)
Other Operating Income, Net	(962		)	(197		)	(2,145		)	(869		)
	724,685			678,108			2,163,193			1,847,310
OPERATING PROFIT	43,009			20,310			195,364			99,021
Interest Income	483			634			1,714			2,461
Interest Expense	(5,524		)	(6,162		)	(17,115		)	(13,174		)
Other Non-Operating Expense, Net	(1,412		)	(1,583		)	(1,223		)	(837		)
EARNINGS BEFORE INCOME TAXES	36,556			13,199			178,740			87,471
INCOME TAXES	12,362			3,904			64,757			31,332
NET EARNINGS	$	24,194		$	9,295		$	113,983		$	56,139
EARNINGS PER SHARE
Basic	$	.33		$	.13		$	1.57		$	.78
Assuming Dilution	$	.33		$	.13		$	1.56		$	.77
CASH DIVIDENDS DECLARED PER SHARE:
Common Stock	$	.023		$	.021		$	.069		$	.063
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	72,586			72,340			72,558			72,350
Assuming Dilution	73,076			72,660			72,966			72,713

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

AARON’S, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
(In Thousands)	2015			2014			2015			2014
Net Earnings	$	24,194		$	9,295		$	113,983		$	56,139
Other Comprehensive Income:
Foreign Currency Translation Adjustment	(156		)	(26		)	(132		)	(19		)
Total Other Comprehensive Income	(156		)	(26		)	(132		)	(19		)
Comprehensive Income	$	24,038		$	9,269		$	113,851		$	56,120

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

AARON’S, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended September 30,
(In Thousands)	2015			2014
OPERATING ACTIVITIES:
Net Earnings	$	113,983		$	56,139
Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities:
Depreciation of Lease Merchandise	912,377			661,446
Other Depreciation and Amortization	59,659			63,087
Bad Debt Expense	117,898			62,169
Stock-Based Compensation	10,692			8,756
Deferred Income Taxes	(106,122		)	(91,376		)
Other Changes, Net	(3,835		)	2,011
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions:
Additions to Lease Merchandise	(1,234,441		)	(1,006,652		)
Book Value of Lease Merchandise Sold or Disposed	354,240			317,793
Accounts Receivable	(99,849		)	(55,627		)
Prepaid Expenses and Other Assets	(861		)	(3,654		)
Income Tax Receivable	111,098			(7,001		)
Accounts Payable and Accrued Expenses	382			(10,703		)
Accrued Regulatory Expense	(15,920		)	(1,200		)
Customer Deposits and Advance Payments	(5,991		)	(3,849		)
Cash Provided by (Used in) Operating Activities	213,310			(8,661		)
INVESTING ACTIVITIES:
Proceeds from Maturities and Calls of Investments	—			89,993
Additions to Property, Plant and Equipment	(37,418		)	(37,221		)
Acquisitions of Businesses and Contracts	(16,841		)	(695,765		)
Proceeds from Dispositions of Businesses and Contracts	13,976			15,773
Proceeds from Sale of Property, Plant and Equipment	5,941			3,357
Cash Used in Investing Activities	(34,342		)	(623,863		)
FINANCING ACTIVITIES:
Proceeds from Debt	30,151			715,554
Repayments on Debt	(142,072		)	(301,043		)
Dividends Paid	(5,008		)	(6,155		)
Excess Tax Benefits from Stock-Based Compensation	340			1,392
Issuance of Stock Under Stock Option Plans	984			4,324
Other	—			(2,238		)
Cash (Used in) Provided by Financing Activities	(115,605		)	411,834
Increase (Decrease) in Cash and Cash Equivalents	63,363			(220,690		)
Cash and Cash Equivalents at Beginning of Period	3,549			231,091
Cash and Cash Equivalents at End of Period	$	66,912		$	10,401

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

AARON’S, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


NOTE 1:	BASIS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Aaron’s, Inc. (the “Company” or “Aaron’s”) is a leading specialty retailer primarily engaged in the business of leasing and selling furniture, consumer electronics, computers, appliances and household accessories throughout the United States and Canada.

On April 14, 2014, the Company acquired a 100% ownership interest in Progressive Finance Holdings, LLC (“Progressive”), a leading virtual lease-to-own company, for merger consideration of $700.0 million, net of cash acquired. Progressive provides lease-purchase solutions in 46 states. It does so by purchasing merchandise from third-party retailers desired by those retailers' customers and, in turn, leasing that merchandise to the customers on a lease-to-own basis. Progressive consequently has no stores of its own, but rather offers lease-purchase solutions to the customers of traditional retailers.

Our major operating divisions are the Aaron’s Sales & Lease Ownership division (established as a monthly payment concept), Progressive, HomeSmart (established as a weekly payment concept) and Woodhaven Furniture Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in our stores.

The following table presents store count by ownership type for the Company's store-based operations:



Stores (Unaudited)	September 30, 2015	September 30, 2014
Company-operated stores
Sales and Lease Ownership	1,218	1,234
HomeSmart	82	82
Total Company-operated stores	1,300	1,316
Franchised stores	764	785
Systemwide stores	2,064	2,101

The following table presents active doors for the Progressive segment:



(Unaudited)	September 30, 2015	September 30, 2014
Progressive Active Doors¹	12,132	11,955

¹ An active door is a retail store location at which at least one virtual lease-to-own transaction has been completed during the trailing three month period.

Basis of Presentation

The preparation of the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information requires management to make estimates and assumptions that affect amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Generally, actual experience has been consistent with management’s prior estimates and assumptions. Management does not believe these estimates or assumptions will change significantly in the future absent unsurfaced and unforeseen events.

The accompanying unaudited condensed consolidated financial statements do not include all information required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission for the year ended December 31, 2014 (the “2014 Annual Report”). The results of operations for the nine months ended September 30, 2015 are not necessarily indicative of operating results for the full year.

Reclassifications

Certain reclassifications have been made to the prior periods to conform to the current period presentation.

The Company presents sales net of related taxes for its traditional lease-to-own (“core”) business. Prior to 2015, Progressive presented lease revenues on a gross basis with sales taxes included. Effective January 1, 2015, Progressive conformed its presentation of sales tax to that of the core business. For the three and nine months ended September 30, 2014, reclassification adjustments of $9.1 million and $19.2 million, respectively, have been made to present sales net of related taxes on a consolidated basis. These adjustments reduce lease revenues and fees and operating expenses.

Principles of Consolidation and Variable Interest Entities

The condensed consolidated financial statements include the accounts of Aaron’s, Inc. and its subsidiaries, each of which is wholly owned. Intercompany balances and transactions between consolidated entities have been eliminated.

The Company holds notes issued by Perfect Home Holdings Limited (“Perfect Home”), a privately-held lease-to-own company that is primarily financed by share capital and subordinated debt. Perfect Home is based in the U.K. and operates 70 retail stores as of September 30, 2015.

Perfect Home is a variable interest entity (“VIE”) because it does not have sufficient equity at risk. However, the Company is not the primary beneficiary and does not consolidate Perfect Home because the Company lacks the power through voting or similar rights to direct the activities that most significantly affect Perfect Home's economic performance. The Company’s maximum exposure to any potential losses associated with this VIE is equal to its total recorded investment, which is $22.3 million at September 30, 2015.

Accounting Policies and Estimates

See Note 1 to the consolidated financial statements in the 2014 Annual Report.

Income Taxes

The Company files a federal consolidated income tax return in the United States, and the Company and its subsidiaries file in various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state and local tax examinations by tax authorities for years before 2012.

As of September 30, 2015 and December 31, 2014, the amount of uncertain tax benefits that, if recognized, would affect the effective tax rate is $2.9 million and $2.1 million, respectively, including interest and penalties. The Company recognizes potential interest and penalties related to uncertain tax benefits as a component of income tax expense.

Earnings Per Share

Earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock options, restricted stock units, restricted stock awards and performance share units (collectively, “share-based awards”) as determined under the treasury stock method. The following table shows the calculation of dilutive share-based awards for the three and nine months ended September 30, 2015 and 2014:



	Three Months Ended September 30,		Nine Months Ended September 30,
(Shares In Thousands)	2015	2014	2015	2014
Weighted average shares outstanding	72,586	72,340	72,558	72,350
Effect of dilutive securities:
Dilutive effect of share-based awards	490	320	408	363
Weighted average shares outstanding assuming dilution	73,076	72,660	72,966	72,713

During the three and nine months ended September 30, 2015, there were approximately 281,000 and 431,000 weighted-average share-based awards, respectively, excluded from the computation for earnings per share assuming dilution because the awards would have been anti-dilutive for the period.

During the three and nine months ended September 30, 2014, there were approximately 166,000 and 143,000 weighted-average share-based awards, respectively, excluded from the computation for earnings per share assuming dilution because the awards would have been anti-dilutive for the period.

Lease Merchandise

All lease merchandise is available for lease or sale. On a monthly basis, all damaged, lost or unsalable merchandise identified is written off. The Company records lease merchandise adjustments on the allowance method, which estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period based on historical write-off experience. As of September 30, 2015 and December 31, 2014, the allowance for lease merchandise write-offs was $32.2 million and $27.6 million, respectively.

Lease merchandise adjustments totaled $38.8 million and $29.9 million for the three months ended September 30, 2015 and 2014, respectively, and $98.3 million and $64.6 million for the nine months ended September 30, 2015 and 2014, respectively. Lease merchandise adjustments are included in operating expenses in the accompanying condensed consolidated statements of earnings.

Cash and Cash Equivalents

The Company classifies highly liquid investments with maturity dates of three months or less when purchased as cash equivalents. The Company maintains its cash and cash equivalents in a limited number of banks. Bank balances typically exceed coverage provided by the Federal Deposit Insurance Corporation. However, due to the size and strength of the banks in which the balances are held, such exposure to loss is believed to be minimal.

Investments

The Company holds British pound-denominated notes issued by Perfect Home. The Perfect Home notes, which totaled £14.8 million ($22.3 million) and £13.7 million ($21.3 million) at September 30, 2015 and December 31, 2014, respectively, are classified as held-to-maturity securities because the Company has the positive intent and ability to hold the investments to maturity. The Perfect Home notes are carried at amortized cost in investments in the condensed consolidated balance sheets and mature on June 30, 2016. The increase in the carrying amount of the notes during the nine months ended September 30, 2015 relates to accretion of the original discount on the notes, which had a face value of £10.0 million.

The Company evaluates held-to-maturity securities for other-than-temporary impairment on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The Company does not intend to sell its remaining securities and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases.

Historically, the Company maintained investments in various corporate debt securities, or bonds, that were classified as held-to-maturity securities. During the three months ended September 30, 2014, the Company sold all of its investments in corporate bonds due to the Progressive acquisition. The amortized cost of the investments sold was $68.7 million, and a net realized gain of approximately $95,000 was recorded during the three months ended September 30, 2014.

Accounts Receivable

Accounts receivable consist primarily of receivables due from customers of Company-operated stores and Progressive, corporate receivables incurred during the normal course of business (primarily for vendor consideration and in-transit credit card transactions) and franchisee obligations.

Accounts receivable, net of allowances, consist of the following:



(In Thousands)	September 30, 2015		December 31, 2014
Customers	$	32,826	$	30,438
Corporate	15,986		32,572
Franchisee	36,412		44,373
	$	85,224	$	107,383

Assets Held for Sale

Certain properties, consisting of parcels of land and commercial buildings, met the held for sale classification criteria as of September 30, 2015 and December 31, 2014. After adjustment to fair value, the $7.5 million and $6.4 million carrying amount of these properties has been classified as assets held for sale in the condensed consolidated balance sheets as of September 30, 2015 and December 31, 2014, respectively. The Company estimated the fair values of real estate properties using the market values for similar properties. These properties are considered Level 2 assets as described in Note 3.

Deferred Compensation

The Company maintains the Aaron’s, Inc. Deferred Compensation Plan, an unfunded, nonqualified deferred compensation plan for a select group of management, highly compensated employees and non-employee directors. On a pre-tax basis, eligible employees can defer receipt of up to 75% of their base compensation and up to 100% of their incentive pay compensation, and eligible non-employee directors can defer receipt of up to 100% of both their cash and stock director fees.

Compensation deferred under the plan is credited to each participant’s deferral account and a deferred compensation liability is recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets. The deferred compensation liability was $11.6 million and $12.7 million as of September 30, 2015 and December 31, 2014, respectively. Liabilities under the plan are recorded at amounts due to participants, based on the fair value of participants’ selected investments. The Company has established a rabbi trust to fund obligations under the plan with Company-owned life insurance. The obligations are unsecured general obligations of the Company and the participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors. The cash surrender value of the insurance contracts totaled $15.1 million as of September 30, 2015 and $14.5 million as of December 31, 2014 and is included in prepaid expenses and other assets in the condensed consolidated balance sheets.

Deferred compensation expense charged to operations for the Company’s matching contributions was not significant during any of the three or nine months periods presented. Benefits of $1.0 million and $1.4 million were paid during the first nine months of 2015 and 2014, respectively.

Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2015 are as follows:



(In Thousands)	Foreign Currency			Total
Balance at January 1, 2015	$	(90	)	$	(90	)
Other comprehensive income	(132		)	(132		)
Balance at September 30, 2015	$	(222	)	$	(222	)

There were no reclassifications out of accumulated other comprehensive loss for the nine months ended September 30, 2015.

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company measures assets held for sale at fair value on a nonrecurring basis and records impairment charges when they are deemed to be impaired. The Company maintains certain financial assets and liabilities, including investments and fixed-rate long-term debt, that are not measured at fair value but for which fair value is disclosed.

The fair values of the Company’s other current financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable, approximate their carrying values due to their short-term nature.

Recent Accounting Pronouncements

Revenue Recognition. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, Deferral of the Effective Date, which deferred the effective date for ASU 2014-09 by one year to annual reporting periods, and interim periods within that period, beginning after December 15, 2017. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company has not yet determined the potential effects of adopting ASU 2014-09 on its consolidated financial statements.

Debt Issuance Costs. In April 2015, the FASB issued No. ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a deduction from the corresponding debt liability rather than as a separate asset. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company does not expect the provisions of ASU 2015-03 to have a material impact on its consolidated financial statements.

Cloud Computing. In April 2015, the FASB issued ASU No. 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. Among other things, ASU 2015-05 clarifies how a customer in a cloud computing arrangement should determine whether the arrangement includes a software license, and clarifies that the acquisition of a software license must be accounted for in the same manner as other licenses of intangible assets. ASU 2015-05 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company does not expect the provisions of ASU 2015-05 to have a material impact on its consolidated financial statements.

Measurement-Period Adjustments. In September 2015, the FASB issued No. ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. The ASU eliminates the requirement that an acquirer in a business combination account for a measurement-period adjustment retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the adjustment amounts. The adjustment amounts must include the effect on earnings of any amounts the acquirer would have recorded in previous periods if the accounting had been completed at the acquisition date. ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The ASU is applied prospectively to adjustments to provisional amounts that occur after the effective date. That is, the ASU applies to open measurement periods, regardless of the acquisition date. The Company does not expect the provisions of ASU 2015-16 to have a material impact on its consolidated financial statements.


NOTE 2.	ACQUISITIONS

During the nine months ended September 30, 2015 and 2014, net cash payments related to the acquisitions of businesses and contracts were $16.8 million and $695.8 million, respectively. Cash payments made during the nine months ended September 30, 2014 primarily related to the acquisition of Progressive. The effect of the Company's other acquisitions on the condensed consolidated financial statements for the nine months ended September 30, 2015 and 2014 was not significant.

Progressive Acquisition

On April 14, 2014, the Company acquired a 100% ownership interest in Progressive. The Company completed the acquisition accounting for this transaction during the three months ended March 31, 2015. The following table presents unaudited consolidated pro forma information as if the acquisition of Progressive had occurred on January 1, 2013:



	Nine Months Ended September 30,
	2014
(In Thousands)	As Reported		Pro Forma
Revenues	$	1,946,331	$	2,102,929
Net Earnings	56,139		61,601

The unaudited pro forma financial information presented above does not purport to represent what the actual results of the Company's operations would have been if the acquisition of Progressive had occurred on January 1, 2013, nor is it indicative of future performance. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, including, but not limited to, anticipated cost savings from operating synergies.

The unaudited pro forma financial information presented in the table above has been adjusted to give effect to adjustments that are (1) directly related to the business combination; (2) factually supportable; and (3) expected to have a continuing impact. These adjustments include, but are not limited to, amortization related to fair value adjustments to intangible assets and the adjustment of interest expense to reflect the additional borrowings of the Company in conjunction with the acquisition.


NOTE 3.	FAIR VALUE MEASUREMENT

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes financial liabilities measured at fair value on a recurring basis:



(In Thousands)	September 30, 2015							December 31, 2014
	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Deferred Compensation Liability	$	—	$	(11,600	)	$	—	$	—	$	(12,677	)	$	—

The Company maintains a deferred compensation plan as described in Note 1 to these condensed consolidated financial statements. The liability representing benefits accrued for plan participants is valued at the quoted market prices of the participants’ investment elections, which consist of equity and debt "mirror" funds. As such, the Company has classified the deferred compensation liability as a Level 2 liability.

Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table summarizes non-financial assets measured at fair value on a nonrecurring basis:



(In Thousands)	September 30, 2015						December 31, 2014
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets Held for Sale	$	—	$	7,542	$	—	$	—	$	6,356	$	—

The highest and best use of these assets held for sale is as real estate land parcels for development or real estate properties for use or lease; however, the Company has chosen not to develop or use these properties. Assets held for sale are written down to fair value less cost to sell, and the adjustment is recorded in other operating income, net.

Certain Financial Assets and Liabilities Not Measured at Fair Value

The following table summarizes the fair value of assets (liabilities) that are not measured at fair value in the condensed consolidated balance sheets, but for which the fair value is disclosed:



(In Thousands)	September 30, 2015							December 31, 2014
	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Perfect Home Notes¹	$	—	$	—		$	22,334	$	—	$	—		$	21,311
Fixed-Rate Long-Term Debt²	—		(398,286		)	—		—		(429,049		)	—


¹	The Perfect Home notes were initially measured at cost. The Company periodically reviews the carrying amount utilizing company-specific transactions or changes in Perfect Home’s financial performance to determine if fair value adjustments are necessary.


²	The fair value of fixed-rate long-term debt is estimated using the present value of underlying cash flows discounted at a current market yield for similar instruments. The carrying value of fixed-rate long-term debt was $375.0 million and $400.0 million at September 30, 2015 and December 31, 2014, respectively.

At September 30, 2015 and December 31, 2014, investments classified as held-to-maturity securities consisted of the following:



			Gross Unrealized
(In Thousands)	Amortized Cost		Gains		Losses		Fair Value
September 30, 2015
Perfect Home Notes	$	22,334	$	—	$	—	$	22,334
December 31, 2014
Perfect Home Notes	$	21,311	$	—	$	—	$	21,311

The Perfect Home notes are described in Note 1. The Company has estimated that the carrying amount of its Perfect Home notes approximates fair value and, therefore, no impairment is considered to have occurred as of September 30, 2015.


NOTE 4.	INDEBTEDNESS

See Note 6 in the consolidated financial statements in the 2014 Annual Report and Note 9 in these condensed consolidated financial statements.


NOTE 5.	COMMITMENTS AND CONTINGENCIES

Leases

The Company leases warehouse and retail store space for most of its store-based operations, call center space for Progressive's operations, and management and information technology space for corporate functions under operating leases expiring at various times through 2033. The Company also leases certain properties under capital or financing type leases that are more fully described in Note 6 to the consolidated financial statements in the 2014 Annual Report. Most of the leases contain renewal options for additional periods ranging from one to 20 years. In addition, certain properties occupied under operating leases contain normal purchase options. Leasehold improvements related to these leases are generally amortized over periods that do not exceed the lesser of the lease term or 15 years. While a majority of leases do not require escalating payments, for the leases which do contain such provisions, the Company records the related expense on a straight-line basis over the lease term. The Company also leases transportation vehicles under operating leases. These leases generally expire during the next four years. Management expects that most leases will be renewed or replaced by other leases in the normal course of business.

Guarantees

The Company has guaranteed certain debt obligations of some of its franchisees under a franchisee loan program with several banks. In the event these franchisees are unable to meet their debt service payments or otherwise experience an event of default, the Company would be unconditionally liable for the outstanding balance of the franchisees’ debt obligations under the franchisee loan program, which would be due in full within 90 days of the event of default. At September 30, 2015, the maximum amount that the Company would be obligated to repay in the event franchisees defaulted was $78.0 million. The Company has recourse rights to franchisee assets securing the debt obligations, which consist primarily of lease merchandise and fixed assets. As a result, the Company has never incurred, nor does management expect to incur, any significant losses under these guarantees. The carrying amount of the franchisee-related borrowings guarantee, which is included in accounts payable and accrued expenses in the condensed consolidated balance sheets, is $1.0 million as of September 30, 2015.

The maximum facility commitment amount under the franchisee loan program is $175.0 million, including a Canadian subfacility commitment amount for loans to franchisees that operate stores in Canada of Cdn $50.0 million. The Company remains subject to the financial covenants under the franchisee loan facility.

Legal Proceedings

From time to time, the Company is party to various legal and regulatory proceedings arising in the ordinary course of business.

Certain proceedings to which we are currently a party are described below. We believe we have defenses to all of the claims described below, and intend to vigorously defend against the claims. However, these proceedings are still developing and due to the inherent uncertainty in litigation, regulatory and similar adversarial proceedings, there can be no guarantee that we will ultimately be successful in these proceedings, or in others to which we are currently a party. Substantial losses from these proceedings or the costs of defending them could have a material adverse impact upon our business, financial position and results of operations.

The Company establishes an accrued liability for legal and regulatory proceedings when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. The Company continually monitors its litigation and regulatory exposure and reviews the adequacy of its legal and regulatory reserves on a quarterly basis. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters.

At September 30, 2015, the Company had accrued $16.2 million for pending legal and regulatory matters for which it believes losses are probable, which is management's best estimate of the Company's exposure to loss. The accrual mostly related to the now-settled regulatory investigation by the California Attorney General described below. The Company estimates that the aggregate range of possible loss in excess of the amounts accrued is between $0 and $2.9 million.

At September 30, 2015, the Company estimated that the aggregate range of loss for all material pending legal and regulatory proceedings for which a loss is reasonably possible, but less likely than probable (i.e., excluding the contingencies described in the preceding paragraph), is between $125,000 and $1.3 million. Those matters for which a reasonable estimate is not possible are not included within estimated ranges and, therefore, the estimated ranges do not represent the Company's maximum possible loss exposure. The Company's estimates for legal and regulatory accruals, aggregate probable loss amounts and reasonably possible loss amounts are all subject to the uncertainties and variables described above.

Consumer

In Margaret Korrow, et al. v. Aaron's, Inc., originally filed in the Superior Court of New Jersey, Middlesex County, Law Division on October 26, 2010, plaintiff filed suit on behalf of herself and others similarly situated alleging that the Company is liable in damages to plaintiff and each class member because the Company's lease agreements issued after March 16, 2006 purportedly violated certain New Jersey state consumer statutes. Plaintiff's complaint seeks treble damages under the New Jersey Consumer Fraud Act, and statutory penalty damages of $100 per violation of all contracts issued in New Jersey, and also claims that there are multiple violations per contract. The Company removed the lawsuit to the United States District Court for the District of New Jersey on December 6, 2010 (Civil Action No.: 10-06317(JAP)(LHG)). Plaintiff on behalf of herself and others similarly situated seeks equitable relief, statutory and treble damages, pre- and post-judgment interest and attorneys' fees. Discovery on this matter is closed. On July 31, 2013, the Court certified a class comprising all persons who entered into a rent-to-own contract with the Company in New Jersey from March 16, 2006 through March 31, 2011. In August 2013, the Court of Appeals denied the Company’s request for an interlocutory appeal of the class certification issue. The Company filed a motion to allow counterclaims against all newly certified class members who may owe legitimate fees or damages to the Company or who failed to return merchandise to the Company prior to obtaining ownership. That motion was denied by the magistrate judge on June 30, 2014, but an appeal of that ruling is pending with the District Court. On August 14, 2015, the Company filed a motion for partial summary judgment seeking judicial dismissal of a portion of the claims in the case. That motion is pending.

Privacy and Related Matters

In Crystal and Brian Byrd v. Aaron's, Inc., Aspen Way Enterprises, Inc., John Does (1-100) Aaron's Franchisees and Designerware, LLC, filed on May 16, 2011, in the United States District Court, Western District of Pennsylvania (Case No. 1:11-CV-00101-SPB), plaintiffs alleged that the Company and its independently owned and operated franchisee Aspen Way Enterprises (“Aspen Way”) knowingly violated plaintiffs' privacy in violation of the Electronic Communications Privacy Act (“ECPA”) and the Computer Fraud Abuse Act and sought certification of a putative nationwide class. Plaintiffs based these claims on Aspen Way's use of a software program called “PC Rental Agent.” Although the District Court dismissed the Company from the original lawsuit on March 20, 2012, after certain procedural motions, on May 23, 2013, the Court granted plaintiffs' motion for leave to file a third amended complaint, which asserted the claims under the ECPA, common law invasion of privacy, added a request for injunction, and named additional independently owned and operated Company franchisees as defendants. Plaintiffs filed the third amended complaint, and the Company moved to dismiss that complaint on substantially the same grounds as it sought to dismiss plaintiffs' prior complaints. Plaintiffs seek monetary damages as well as injunctive relief. Plaintiffs filed their motion for class certification on July 1, 2013, and the Company's response was filed in August 2013. On March 31, 2014, the U.S. District Judge dismissed all claims against all franchisees other than Aspen Way Enterprises, LLC. The Court also dismissed claims for invasion of privacy, aiding and abetting, and conspiracy against all defendants. In addition, the Court denied the plaintiffs’ motion to certify the class. Finally, the Judge denied the Company’s motion to dismiss the violation of ECPA claims. Plaintiffs requested and received immediate appellate review of these rulings by the U.S. Third Circuit Court of Appeals. On April 10, 2015, the U.S. Third Circuit Court of Appeals reversed the denial of class certification on the grounds stated by the District Court, and remanded the case back to the District Court for further consideration of that and the other elements necessary for class certification. The District Court has not issued a new ruling on those matters.

In Michael Winslow and Fonda Winslow v. Sultan Financial Corporation, Aaron's, Inc., John Does (1-10), Aaron's Franchisees and Designerware, LLC, filed on March 5, 2013 in the Los Angeles Superior Court (Case No. BC502304), plaintiffs assert claims against the Company and its independently owned and operated franchisee, Sultan Financial Corporation (as well as certain John Doe franchisees), for unauthorized wiretapping, eavesdropping, electronic stalking, and violation of California's Comprehensive Computer Data Access and Fraud Act and its Unfair Competition Law. Each of these claims arises out of the alleged use of PC Rental Agent software. The plaintiffs are seeking injunctive relief and damages in connection with the allegations of the complaint. Plaintiffs are also seeking certification of a putative California class. Plaintiffs are represented by the same counsel as in the above-described Byrd litigation. In April 2013, the Company timely removed this matter to federal court. On May 8, 2013, the Company filed a motion to stay this litigation pending resolution of the Byrd litigation, a motion to dismiss for failure to state a claim, and a motion to strike certain allegations in the complaint. The Court subsequently stayed the case. The Company's motions to dismiss and strike certain allegations remain pending. On June 6, 2015, the plaintiffs filed a motion to lift the stay, which was denied on July 11, 2015.

In Lomi Price v. Aaron's, Inc. and NW Freedom Corporation, filed on February 27, 2013, in the State Court of Fulton County, Georgia (Case No. 13-EV-016812B), an individual plaintiff asserts claims against the Company and its independently owned and operated franchisee, NW Freedom Corporation, for invasion of privacy/intrusion on seclusion, computer invasion of privacy and infliction of emotional distress. Each of these claims arises out of the alleged use of PC Rental Agent software. The plaintiff is seeking compensatory and punitive damages of not less than $250,000. On April 3, 2013, the Company filed an answer and affirmative defenses. On that same day, the Company also filed a motion to stay the litigation pending resolution of the Byrd litigation, a motion to dismiss for failure to state a claim and a motion to strike certain allegations in the complaint. The Court stayed the proceeding pending rulings on certain motions in the Byrd case, which expired upon remand of the case back to the District Court. On April 24, 2015, the Company filed a renewed motion to stay, which was granted on June 15, 2015.

In Michael Peterson v. Aaron’s, Inc. and Aspen Way Enterprises, Inc., filed on June 19, 2014, in the United States District Court for the Northern District of Georgia (Case No. 1:14-cv-01919-TWT), several plaintiffs allege that they leased computers for use in their law practice. The plaintiffs claim that the Company and Aspen Way knowingly violated plaintiffs' privacy and the privacy of plaintiff’s legal clients in violation of the ECPA and the Computer Fraud Abuse Act. Plaintiffs seek certification of a putative nationwide class. Plaintiffs based these claims on Aspen Way's use of PC Rental Agent software. The plaintiffs claim that information and data obtained by defendants through PC Rental Agent was attorney-client privileged. The Company has filed a motion to dismiss plaintiffs' amended complaint. On June 4, 2015, the Court granted the Company’s motion to dismiss all claims except a claim for aiding and abetting invasion of privacy. Plaintiffs then filed a second amended complaint alleging only the invasion of privacy claims that survived the June 4, 2015 court order, and adding a claim for unjust enrichment. The Company filed a motion to dismiss the second amended complaint, and on September 16, 2015, the Court granted the Company’s motion to dismiss plaintiffs’ unjust enrichment claim. The only remaining claims against the Company is a claim for aiding and abetting invasion of privacy.

Regulatory Investigations

California Attorney General Investigation. The California Attorney General investigated the Company's retail transactional practices, including various leasing and marketing practices, information security and privacy policies and practices related to the alleged use of PC Rental Agent software by certain independently owned and operated Company franchisees. The Company reached a comprehensive resolution of this matter without litigation. The final settlement and consent order were announced on October 13, 2014. The Court filed the final judgment on February 10, 2015. Payments have begun under the anticipated schedule outlined in the judgment.

Pennsylvania Attorney General Investigation. There is a pending investigation by the Pennsylvania Attorney General relating to the Company's privacy practices in Pennsylvania. The privacy issues are related to the alleged use of PC Rental Agent software by certain independently owned and operated Company franchisees, and the Company's alleged responsibility for that use. The Company cooperated in the investigation and on June 18, 2015, reached a tentative settlement of the matter. The settlement documentation has been signed and is pending finalization with the Pennsylvania Attorney General.

Other Matters

In Foster v. Aaron’s, Inc., filed on August 21, 2015, in the United States District Court in Phoenix, Arizona (No. CV-15-1637-PHX-SRB), the plaintiff in this putative class action alleges that the Company violates the Telephone Consumer Protection Act (“TCPA”) by placing automated calls to customer references, or otherwise violates the TCPA in the manner in which the Company contacts customer references. The Company's initial responsive pleading was filed on October 7, 2015.

Other Commitments

At September 30, 2015, the Company had non-cancelable commitments primarily related to certain advertising and marketing programs of $9.1 million.

The Company is a party to various claims and legal and regulatory proceedings arising in the ordinary course of business. Management regularly assesses the Company’s insurance deductibles, monitors the Company's litigation and regulatory exposure with the Company's attorneys and evaluates its loss experience. The Company also enters into various contracts in the normal course of business that may subject it to risk of financial loss if counterparties fail to perform their contractual obligations.

See Note 8 to the consolidated financial statements in the 2014 Annual Report for further information.


NOTE 6.	RESTRUCTURING

On July 15, 2014, the Company announced that a rigorous evaluation of the Company-operated store portfolio had been performed. As a result of this evaluation and other cost-reduction initiatives, the Company closed 44 underperforming Company-operated stores and restructured its home office and field support under a restructuring plan to more closely align with current business conditions. The restructuring was completed during the third quarter of 2014 and total restructuring charges of $9.1 million were recorded during the year ended December 31, 2014, comprised of $4.8 million related to contractual lease obligations, $3.3 million related to the write-off and impairment of property, plant and equipment, $620,000 related to workforce reductions and $395,000 related to other charges.

During the three months ended September 30, 2014, total restructuring charges of $2.6 million were included in the Sales and Lease Ownership segment and total restructuring charges of $4.3 million were included in the Other category. During the nine months ended September 30, 2014, total restructuring charges of $4.8 million were included in the Sales and Lease Ownership segment and total restructuring charges of $4.3 million were included in the Other category.

Restructuring charges are included in the line item “Restructuring expenses” in the condensed consolidated statements of earnings. The Company does not currently anticipate any remaining costs related to this restructuring plan to be material.

The following table summarizes the change in the liability associated with the restructuring charges:



(In Thousands)	Contractual Obligations Under Canceled Leases
Balance at January 1, 2015	$	3,227
Payments	(1,501		)
Balance at September 30, 2015	$	1,726

In the ordinary course of business, we continually review, and as appropriate adjust, the amount and mix of Company-operated and franchised stores to help optimize overall performance. Costs incurred to close stores during the nine months ended September 30, 2015 were not significant.


NOTE 7.	SEGMENTS

The Aaron’s Sales & Lease Ownership division offers furniture, electronics, appliances and computers to consumers primarily on a monthly payment basis with no credit needed. Progressive is a leading virtual lease-to-own company that provides lease-purchase solutions on a variety of products, including furniture and bedding, wireless phones, consumer electronics, appliances and jewelry. The HomeSmart division offers furniture, electronics, appliances and computers to consumers primarily on a weekly payment basis with no credit needed. The Company’s Franchise operation awards franchises and supports franchisees of its sales and lease ownership concept. The Manufacturing segment manufactures upholstered furniture and bedding predominantly for use by Company-operated and franchised stores. Therefore, the Manufacturing segment's revenues and earnings before income taxes are primarily the result of intercompany transactions, substantially all of which revenues and earnings are eliminated through the elimination of intersegment revenues and intersegment profit or loss.



	Three Months Ended September 30,						Nine Months Ended September 30,
(In Thousands)	2015			2014			2015			2014
Revenues From External Customers:
Sales and Lease Ownership	$	468,794		$	481,340		$	1,479,300		$	1,525,100
Progressive	265,986			180,680			773,551			309,539
HomeSmart	15,075			15,445			47,322			48,598
Franchise	15,574			15,838			48,069			50,147
Manufacturing	24,014			20,794			78,048			75,692
Other	308			361			1,002			2,626
Revenues of Reportable Segments	789,751			714,458			2,427,292			2,011,702
Elimination of Intersegment Revenues	(23,803		)	(20,713		)	(76,783		)	(74,375		)
Cash to Accrual Adjustments	1,746			4,673			8,048			9,004
Total Revenues from External Customers	$	767,694		$	698,418		$	2,358,557		$	1,946,331
Earnings (Loss) Before Income Taxes:
Sales and Lease Ownership¹	$	30,080		$	21,415		$	113,514		$	109,166
Progressive	5,617			1,689			44,761			1,366
HomeSmart	(403		)	(986		)	8			(1,717		)
Franchise	11,327			12,542			37,218			38,173
Manufacturing	349			(17		)	2,007			441
Other²	(12,398		)	(23,945		)	(35,545		)	(62,419		)
Earnings Before Income Taxes for Reportable Segments	34,572			10,698			161,963			85,010
Elimination of Intersegment (Profit) Loss	(353		)	22			(2,019		)	(405		)
Cash to Accrual and Other Adjustments	2,337			2,479			18,796			2,866
Total Earnings Before Income Taxes	$	36,556		$	13,199		$	178,740		$	87,471

¹Sales and Lease Ownership segment earnings before income taxes were impacted by $4.8 million of restructuring charges incurred during the nine months ended September 30, 2014, related to the Company's strategic decision to close 44 Company-operated stores, of which $2.6 million was incurred during the three months ended September 30, 2014.

²Loss before income taxes in the other category for the three and nine months ended September 30, 2014 was impacted by $9.1 million due to the retirements of both the Company's Chief Executive Officer and Chief Operating Officer, $4.3 million of restructuring charges related to the closure of 44 Company-operated stores and $1.2 million of regulatory income that reduced previously recognized regulatory expense upon the resolution of the regulatory investigation by the California Attorney General.

For the nine months ended September 30, 2014, pretax losses include $13.7 million in financial and advisory costs related to addressing strategic matters, including proxy contests, of which $385,000 was incurred during the three months ended September 30, 2014, and $6.6 million in transaction costs related to the Progressive acquisition, of which $371,000 was incurred during the three months ended September 30, 2014.

Revenues in the Other category are primarily revenues attributable to (i) the RIMCO segment through the date of sale in January 2014, (ii) leasing space to unrelated third parties in the corporate headquarters building and (iii) several minor unrelated activities. The pre-tax losses or earnings in the Other category are the net result of the activity mentioned above, net of the portion of corporate overhead not allocated to the reportable segments for management purposes.



(In Thousands)	September 30, 2015		December 31, 2014
Assets:
Sales and Lease Ownership	$	1,190,224	$	1,246,325
Progressive	861,591		858,159
HomeSmart	41,939		47,585
Franchise	38,971		46,755
Manufacturing¹	27,461		23,050
Other	175,488		234,970
Total Assets	$	2,335,674	$	2,456,844


¹	Includes inventory (principally raw materials and work-in-process) that has been classified within lease merchandise in the condensed consolidated balance sheets of $18.4 million and $13.2 million as of September 30, 2015 and December 31, 2014, respectively.

The Company determines earnings (loss) before income taxes for all reportable segments in accordance with U.S. GAAP with the following adjustments:


•	Revenues in the Sales and Lease Ownership and HomeSmart segments are reported on a cash basis for management reporting purposes.


•	A predetermined amount of each reportable segment’s revenues is charged to the reportable segment as an allocation of corporate overhead.


•	Accruals related to store closures are not recorded on the reportable segments’ financial statements, but are maintained and controlled by corporate headquarters.


•	The capitalization and amortization of manufacturing variances are recorded on the consolidated financial statements as part of Cash to Accrual and Other Adjustments and are not allocated to the segment that holds the related lease merchandise.

•

Advertising expense in the Sales and Lease Ownership and HomeSmart segments is estimated at the beginning of each year and then allocated to the division ratably over time for management reporting purposes. For financial reporting purposes, advertising expense is recognized when the related advertising activities occur. The difference between these two methods is reflected as part of Cash to Accrual and Other Adjustments.


•	Sales and lease ownership lease merchandise write-offs are recorded using the direct write-off method for management reporting purposes and using the allowance method for financial reporting purposes. The difference between these two methods is reflected as part of Cash to Accrual and Other Adjustments.


•	Interest is allocated to the Sales and Lease Ownership and HomeSmart segments based a percentage of their revenues. Interest is allocated to the Progressive segment based on a percentage of the outstanding balances of its intercompany borrowings and of the debt incurred when it was acquired.


NOTE 8.	RELATED PARTY TRANSACTIONS

The Company leases certain properties under capital leases from related parties that are described in Notes 6 and 13 to the consolidated financial statements in the 2014 Annual Report.

NOTE 9: SUBSEQUENT EVENTS

Acquisition

The Company, through its subsidiary Progressive, acquired all of the outstanding shares of Dent-A-Med, Inc. and its subsidiaries (collectively, “DAMI”) on October 15, 2015 for total merger consideration of $99.7 million (the "DAMI Acquisition"). The merger consideration consisted of $54.9 million in cash and $44.8 million in debt assumed, which is described further below. DAMI offers a variety of open-end financing programs originated through a federally insured bank and, along with Progressive's existing product line, will allow the Company to provide retail partners one source for financing and leasing transactions for below-prime consumers.

Secured Revolving Credit Agreement

In connection with acquiring DAMI, the Company assumed the Loan and Security Agreement, dated as of May 18, 2011 (as so amended, the “Loan Agreement”), which provides for a secured revolving credit facility in an amount not to exceed $85.0 million in outstanding principal balance, including a letter of credit subfacility not to exceed $2.0 million. In addition, the Loan Agreement includes an accordion facility, which gives the DAMI the right to increase the maximum facility amount up to $25.0 million. The secured revolving credit facility is currently set to mature on the second anniversary of the DAMI Acquisition and contains representations, warranties and covenants consistent with those of other facilities of similar size and type. Collateral under the Loan Agreement is limited to the assets and operations of DAMI, and its wholly-owned subsidiary, HC Recovery, Inc.

Dividends

At its November 2015 meeting, our board of directors increased the quarterly dividend by 8.7%, raising it to $.025 per share from $.023 per share.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note Regarding Forward-Looking Information: Except for historical information contained herein, the matters set forth in this Form 10-Q are forward-looking statements. These statements are based on management’s current expectations and plans, which involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,”“believe,” “expect,” “forecast,” “guidance,” “intend,” “could,” “project,” “estimate,” “anticipate,” “should,” and similar terminology. Statements in this Quarterly Report that are “forward-looking” include, without limitation, statements regarding the impact of the temporary interruption in Progressive’s receipt of customer attribute data, the resolution and impact of issues relating to delinquent account classification at Progressive and the expected results of our new strategies and of the Progressive acquisition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the filing date of this Quarterly Report and which involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. These risks and uncertainties include factors such as interruptions in Progressive's receipt of customer attribute data as well as other issues that could negatively impact Progressive's algorithm used to approve customers, controls and operational issues, including those relating to the Company's financial systems, software and other information technology disruptions, the impact of increased regulation, changes in general economic conditions, including consumer confidence and demand for certain merchandise, increased competition, pricing pressures, the impact of legal proceedings faced by the Company, costs relating to protecting customer privacy and information security more generally, challenges relating to the integration of the Progressive acquisition and a failure to realize the expected benefits of the transaction, the execution and results of our operational strategies, risks related to Progressive's "virtual" lease-to-own business, deteriorations in our franchisee relationships, and the other risks and uncertainties discussed under Item 1A, “Risk Factors,” in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (the "2014 Annual Report"), as updated in this Quarterly Report on Form 10-Q and in our Quarterly Report on Form 10Q for the fiscal quarter ended June 30, 2015. Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the filing date of this Quarterly Report.

The following discussion should be read in conjunction with the condensed consolidated financial statements as of and for the three and nine months ended September 30, 2015 and 2014, including the notes to those statements, appearing elsewhere in this report. We also suggest that management’s discussion and analysis appearing in this report be read in conjunction with the management’s discussion and analysis and consolidated financial statements included in our 2014 Annual Report.

Business Overview

Aaron’s, Inc. (“we”, “our”, “us”, “Aaron’s” or the “Company”) is a leading specialty retailer of furniture, consumer electronics, computers, appliances and household accessories. On April 14, 2014, the Company acquired a 100% ownership interest in Progressive Finance Holdings, LLC (“Progressive”), a leading virtual lease-to-own company, for merger consideration of $700.0 million, net of cash acquired. Progressive provides lease-purchase solutions in 46 states on a variety of products, including furniture and bedding, wireless phones, consumer electronics, appliances and jewelry. It does so by purchasing merchandise from third-party retailers desired by those retailers' customers, and in turn leasing that merchandise to the customers on a lease-to-own basis. Progressive consequently has no stores of its own, but rather offers lease-purchase solutions to the customers of traditional retailers.

On July 15, 2014, the Company announced that a rigorous evaluation of the Company-operated store portfolio had been performed, which, along with other cost-reduction initiatives, resulted in the closure of 44 underperforming stores and the realignment of home office and field support. In the ordinary course of business, we continually review, and as appropriate adjust, the amount and mix of Company-operated and franchised stores to help optimize overall performance.

Our major operating divisions are the Aaron’s Sales & Lease Ownership division, Progressive, HomeSmart and Woodhaven Furniture Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in our stores.

Total revenues increased from $2.213 billion in 2012 to $2.695 billion in 2014, primarily as a result of the Progressive acquisition during 2014.

For the three months ended September 30, 2015, total revenues were $767.7 million, an increase of 9.9%, over the comparable period in 2014. The increase of $69.3 million was due to a $85.3 million increase in revenues from Progressive, offset by a $16.0 million decrease in revenues from our traditional lease-to-own (“core”) business primarily resulting from a 4.1% decrease in Company-operated same store revenues. Revenues from franchise royalties and fees for the three months ended September 30, 2015 were $15.6 million, a decrease of $264,000, or 1.7%, from the comparable period in 2014.

For the nine months ended September 30, 2015, total revenues were $2.4 billion, an increase of 21.2%, over the comparable period in 2014. The increase of $412.2 million was primarily due to a $464.0 million increase in revenues from Progressive, offset by a decrease of $51.8 million in revenues from our core business primarily resulting from a 4.6% decrease in Company-operated same store revenues. Revenues from franchise royalties and fees for the nine months ended September 30, 2015 were $48.1 million, a decrease of $2.1 million, or 4.1%, from the comparable period in 2014.

Same Store Revenues. We believe that changes in same store revenues are a key performance indicator of our core business. For the three months ended September 30, 2015, we calculated this amount by comparing revenues for the three months ended September 30, 2015 to revenues for the comparable period in 2014 for all stores open for the entire 15-month period ended September 30, 2015, excluding stores that received lease agreements from other acquired, closed or merged stores. For the nine months ended September 30, 2015, we calculated this amount by comparing revenues for the nine months ended September 30, 2015 to revenues for the comparable period in 2014 for all stores open for the entire 24-month period ended September 30, 2015, excluding stores that received lease agreements from other acquired, closed or merged stores. During the first quarter of 2015, the Company revised the methodology for calculating same store revenues to reflect a full lifecycle for customer retention after stores are closed. As a result, revenues for stores that have been consolidated/merged are now included in the comparable same store calculation after 24 months. Previously, merged stores were included in the same store calculation after 15 months. The change in the same store calculation had an immaterial impact on comparable store revenues for 2015 and 2014.

Active Doors. We believe that active doors are a key performance indicator of our Progressive segment. Active doors represent retail store locations at which at least one virtual lease-to-own transaction has been completed during the trailing three month period.

Invoice Volume. We also believe that invoice volume is a key performance indicator of our Progressive segment. Invoice volume is defined as the retail price of lease merchandise acquired and leased by Progressive during the period, excluding returns.

Subsequent Event

On October 15, 2015, the Company acquired a 100% ownership interest in Dent-A-Med, Inc. ("DAMI"), a provider of credit solutions to credit constrained customers for $54.9 million in cash consideration and $44.8 million in assumed debt. The transaction and the assumed debt is described in Note 9 to these condensed consolidated financial statements.

Business Environment and Company Outlook

Like many industries, the lease-to-own industry has been transformed by the internet and virtual marketplace. We believe the Progressive acquisition will be strategically transformational for the Company in this respect and will strengthen our business. We also believe the lease-to-own industry has suffered in recent periods due to economic challenges faced by our core customers. In response to these changing market conditions, we are executing a strategic plan for the core business that focuses on the following items and that we believe positions us for success over the long-term:


•	Emphasizing same store revenue growth for our core portfolio, through improved execution, optimization of merchandising and pricing and an enhanced go-to-market strategy;


•	Enhancing and growing our online platform;


•	Driving cost efficiency to recapture margin, including through selling, general and administrative cost savings and rationalizing underperforming stores;


•	Moderating new Company-operated store growth to result in no net store growth after store closings; and


•	Strengthening the franchise store base.

Key Components of Earnings

In this management’s discussion and analysis section we review our consolidated results. For the nine months ended September 30, 2015, and the comparable prior year period, some of the key revenue and cost and expense items that affected earnings were as follows:

Revenues. We separate our total revenues into five components: lease revenues and fees, retail sales, non-retail sales, franchise royalties and fees, and other. Lease revenues and fees include all revenues derived from lease agreements at Company-operated stores and retail locations serviced by Progressive. Retail sales represent sales of both new and returned lease merchandise from our Company-operated stores. Non-retail sales mainly represent new merchandise sales to our Aaron’s Sales & Lease

Ownership franchisees. Franchise royalties and fees represent fees from the sale of franchise rights and royalty payments from franchisees, as well as other related income from our franchised stores. Other revenues primarily relate to revenues from leasing real estate properties to unrelated third parties, as well as other miscellaneous revenues.

Depreciation of Lease Merchandise. Depreciation of lease merchandise reflects the expense associated with depreciating merchandise held for lease and leased to customers by our Company-operated stores and Progressive.

Retail Cost of Sales. Retail cost of sales represents the depreciated cost of merchandise sold through our Company-operated stores.

Non-Retail Cost of Sales. Non-retail cost of sales primarily represents the cost of merchandise sold to our franchisees.

Operating Expenses. Operating expenses include personnel costs, selling costs, occupancy and delivery costs, bad debt expense, and lease merchandise write-offs, among other expenses.

Other Operating Income, Net. Other operating income, net consists of gains or losses on sales of Company-operated stores and delivery vehicles, fair value adjustments on assets held for sale and gains or losses on other dispositions of property, plant and equipment.

Critical Accounting Policies

Refer to the 2014 Annual Report.

Results of Operations

As of September 30, 2015, the Company had five operating and reportable segments: Sales and Lease Ownership, Progressive, HomeSmart, Franchise and Manufacturing. The results of Progressive, which are presented as a reportable segment, have been included in the Company's consolidated results from the April 14, 2014 acquisition date. In January 2014, the Company sold the 27 Company-operated RIMCO stores and the rights to five franchised RIMCO stores, which are included as part of the Other category.

The Company’s Sales and Lease Ownership, Progressive, HomeSmart and Franchise segments accounted for substantially all of the operations of the Company and, therefore, unless otherwise noted, only material changes within these four segments are discussed. The production of our Manufacturing segment, consisting of the Woodhaven Furniture Industries division, is primarily leased or sold through the Company-operated and franchised stores, and consequently, substantially all of that segment’s revenues and earnings before income taxes are eliminated through the elimination of intersegment revenues and intersegment profit or loss.

Results of Operations – Three months ended September 30, 2015 and 2014



	Three Months Ended September 30,						Change
(In Thousands)	2015			2014			$			%
REVENUES:
Lease Revenues and Fees	$	661,856		$	594,455		$	67,401		11.3	%
Retail Sales	6,988			8,094			(1,106		)	(13.7	)
Non-Retail Sales	81,708			78,503			3,205			4.1
Franchise Royalties and Fees	15,574			15,838			(264		)	(1.7	)
Other	1,568			1,528			40			2.6
	767,694			698,418			69,276			9.9
COSTS AND EXPENSES:
Depreciation of Lease Merchandise	302,029			260,819			41,210			15.8
Retail Cost of Sales	4,537			5,409			(872		)	(16.1	)
Non-Retail Cost of Sales	73,567			71,403			2,164			3.0
Operating Expenses	345,514			325,148			20,366			6.3
Financial Advisory and Legal Costs	—			385			(385		)	nmf
Restructuring Expenses	—			6,876			(6,876		)	nmf
Retirement and Vacation Charges	—			9,094			(9,094		)	nmf
Progressive-Related Transaction Costs	—			371			(371		)	nmf
Regulatory Income	—			(1,200		)	1,200			nmf
Other Operating Income, Net	(962		)	(197		)	765			388.3
	724,685			678,108			46,577			6.9
OPERATING PROFIT	43,009			20,310			22,699			111.8
Interest Income	483			634			(151		)	(23.8	)
Interest Expense	(5,524		)	(6,162		)	(638		)	(10.4	)
Other Non-Operating Expense, Net	(1,412		)	(1,583		)	(171		)	(10.8	)
EARNINGS BEFORE INCOME TAXES	36,556			13,199			23,357			177.0
INCOME TAXES	12,362			3,904			8,458			216.6
NET EARNINGS	$	24,194		$	9,295		$	14,899		160.3	%

nmf - Calculation is not meaningful

Revenues

Information about our revenues by reportable segment is as follows:



	Three Months Ended September 30,						Change
(In Thousands)	2015			2014			$			%
REVENUES:
Sales and Lease Ownership¹	$	468,794		$	481,340		$	(12,546	)	(2.6	)%
Progressive²	265,986			180,680			85,306			47.2
HomeSmart¹	15,075			15,445			(370		)	(2.4	)
Franchise³	15,574			15,838			(264		)	(1.7	)
Manufacturing	24,014			20,794			3,220			15.5
Other	308			361			(53		)	(14.7	)
Revenues of Reportable Segments	789,751			714,458			75,293			10.5
Elimination of Intersegment Revenues	(23,803		)	(20,713		)	(3,090		)	(14.9	)
Cash to Accrual Adjustments	1,746			4,673			(2,927		)	(62.6	)
Total Revenues from External Customers	$	767,694		$	698,418		$	69,276		9.9	%
¹ Segment revenue principally consists of lease revenues and fees, retail sales and non-retail sales, and is presented on a cash basis.
² Segment revenue consists of lease revenues and fees.
³Segment revenue consists of franchise royalties and fees.

Sales and Lease Ownership. Sales and Lease Ownership segment revenues decreased $12.5 million to $468.8 million primarily due to a $14.7 million decrease in lease revenues and fees and a $1.0 million decrease in retail sales, partially offset by a $3.1 million increase in non-retail sales. Lease revenues and fees within the Sales and Lease Ownership segment decreased due to a 4.1% decrease in same store revenues and the net reduction of 48 Company-operated stores during the 15-month period ended September 30, 2015.

Progressive. Progressive segment revenues increased $85.3 million to $266.0 million primarily due to increases in invoice volumes at existing active doors as well as a net increase of approximately 800 active doors during the period. Progressive segment revenues have been included in the Company's consolidated results from the April 14, 2014 acquisition date.

HomeSmart. HomeSmart segment revenues decreased $370,000 to $15.1 million primarily due to a 2.0% decrease in lease revenues and fees. Lease revenues and fees within the HomeSmart segment decreased due to a 4.0% decrease in same store revenues.

Franchise. Franchise segment revenues decreased $264,000 to $15.6 million due to a .4% decrease in same store revenues of existing franchised stores and the impact of the net reduction of 23 franchised stores during the 15-month period ended September 30, 2015.

Costs and Expenses

Depreciation of lease merchandise. Depreciation of lease merchandise increased $41.2 million, or 15.8%, to $302.0 million during the three months ended September 30, 2015, from $260.8 million during the comparable period in 2014. The Aaron's core business has continued to reduce inventory, while levels of merchandise on lease have remained consistent year over year, resulting in idle merchandise representing approximately 6% of total depreciation expense in 2015 and 2014. As a percentage of total lease revenues and fees, depreciation of lease merchandise increased to 45.6% from 43.9% in the prior year period, primarily because of Progressive's continued growth relative to our core business. Progressive's depreciation as a percentage of lease revenues is higher than our core business because, among other factors, its merchandise has a shorter average life on lease and a higher rate of early buyouts.

Retail cost of sales. Retail cost of sales decreased $872,000, or 16.1%, to $4.5 million during the three months ended September 30, 2015, from $5.4 million for the comparable period in 2014, and decreased as a percentage of sales to 64.9% from 66.8% due to the effect of a low price clearance promotional event during the three months ended September 30, 2014 that did not recur in the current year.

Non-retail cost of sales. Non-retail cost of sales increased $2.2 million, or 3.0%, to $73.6 million during the three months ended September 30, 2015, from $71.4 million for the comparable period in 2014, and as a percentage of non-retail sales, decreased to 90.0% from 91.0%.

Operating expenses. Operating expenses increased $20.4 million, or 6.3%, to $345.5 million during the three months ended September 30, 2015, from $325.1 million for the comparable period in 2014 due primarily to the continued growth of Progressive's operations. Further, there was an increase in bad debt expense and lease merchandise write-offs during the quarter that resulted primarily from the following at Progressive:

•

The impact of a temporary interruption of certain data attributes used to make our approval decisions. We lost access to the attributes in February 2015 and replaced them in April 2015. Leases generated during the period of interruption, while expected to be profitable, are charging off at higher rates than originally anticipated. Progressive’s decisioning algorithm is now operating with improved functionality and redundancy, and we expect to return to more normalized levels of bad debt expense and write-offs; and

•

Software issues that occurred during a limited period of time spanning the second and third quarters of 2015. These issues failed to identify a number of accounts as being delinquent and affected our ability to begin prompt collections activities. As a result, although not material to either period, an adjustment was recorded in the third quarter to increase bad debt expense and lease merchandise write-offs by $3.2 million.

As a percentage of total revenues, operating expenses decreased to 45.0% in 2015 from 46.6% in 2014 as a result of cost reductions in personnel, advertising, facility rent, lease merchandise-related costs and other operating costs in Aaron's core business. Also, while Progressive continues to grow, it has lower operating expenses as a percentage of total revenues than the core business primarily because it does not have store operations. Bad debt expense and lease merchandise write-offs at Progressive did increase in the third quarter, however, as described above.

Financial advisory and legal costs. Financial advisory and legal costs of $385,000 were incurred during the three months ended September 30, 2014 related to addressing now-resolved strategic matters, including an unsolicited acquisition offer, two proxy contests and certain other shareholder proposals.

Restructuring expenses. In connection with the Company's July 15, 2014 announced closure of 44 Company-operated stores and restructuring of its home office and field support, charges of $6.9 million were incurred during the three months ended September 30, 2014 and principally consist of contractual lease obligations, the write-off and impairment of property, plant and equipment and workforce reductions.

Retirement charges. Retirement charges of $9.1 million were incurred during the three months ended September 30, 2014

due to the retirements of both the Company's Chief Executive Officer and Chief Operating Officer in 2014.

Progressive-related transaction costs. Financial advisory and legal costs of $371,000 were incurred during the three months ended September 30, 2014 in connection with the acquisition of Progressive.

Regulatory income. Regulatory income of $1.2 million was recorded during the three months ended September 30, 2014 as a reduction in previously recognized regulatory expense upon the resolution of the regulatory investigation by the California Attorney General.

Other Operating Income, Net

Other operating income, net consists of gains or losses on sales of Company-operated stores and delivery vehicles, fair value adjustments on assets held for sale and gains or losses on other dispositions of property, plant and equipment. Information about the components of other operating income, net is as follows:



	Three Months Ended September 30,
(In Thousands)	2015			2014
Net gains on sales of stores	$	(892	)	$	—
Net gains on sales of delivery vehicles	(449		)	(90		)
Losses (gains) on asset dispositions and assets held for sale	379			(107		)
Other operating income, net	$	(962	)	$	(197	)

Operating Profit

Interest income. Interest income decreased to $483,000 during the three months ended September 30, 2015 compared with $634,000 for the comparable period in 2014.

Interest expense. Interest expense decreased to $5.5 million for the three months ended September 30, 2015 compared with $6.2 million for the comparable period in 2014 due to lower average debt balances.

Other non-operating expense, net. Other non-operating expense, net includes the impact of foreign currency exchange gains and losses, as well as gains and losses resulting from changes in the cash surrender value of Company-owned life insurance related to the Company’s deferred compensation plan. Foreign exchange transaction losses were $1.4 million and $1.5 million during the three months ended September 30, 2015 and 2014, respectively. Changes in the cash surrender value of Company-owned life insurance were not significant during the three months ended September 30, 2015 and September 30, 2014.

Earnings Before Income Taxes

Information about our earnings (loss) before income taxes by reportable segment is as follows:



	Three Months Ended September 30,						Change
							2015 vs. 2014
(In Thousands)	2015			2014			$			%
EARNINGS (LOSS) BEFORE INCOME TAXES:
Sales and Lease Ownership	$	30,080		$	21,415		$	8,665		40.5	%
Progressive	5,617			1,689			3,928			232.6
HomeSmart	(403		)	(986		)	583			59.1
Franchise	11,327			12,542			(1,215		)	(9.7	)
Manufacturing	349			(17		)	366			nmf
Other	(12,398		)	(23,945		)	11,547			48.2
Earnings Before Income Taxes for Reportable Segments	34,572			10,698			23,874			223.2
Elimination of Intersegment (Profit) Loss	(353		)	22			(375		)	nmf
Cash to Accrual and Other Adjustments	2,337			2,479			(142		)	(5.7	)
Total	$	36,556		$	13,199		$	23,357		177.0	%

nmf - Calculation is not meaningful

Earnings before income taxes for the three months ended September 30, 2014 were impacted by $9.1 million in charges related to the retirements of both the Company's Chief Executive Officer and Chief Operating Officer and $1.2 million of regulatory income that reduced previously recognized regulatory expense upon the resolution of the regulatory investigation by the California Attorney General, both of which have been included in the Other category. In addition, earnings before income taxes for the three months ended September 30, 2014 included $6.9 million in charges related to the closure of 44 Company-operated stores and restructuring of the Company's home office and field support, of which $2.6 million has been included in the Sales and Lease Ownership segment results and $4.3 million has been included in the Other category.

Income Tax Expense

Income tax expense increased $8.5 million to $12.4 million for the three months ended September 30, 2015, compared to $3.9 million for the comparable period in 2014, primarily due to the increase in earnings before income taxes between those two periods. The effective tax rate also increased to 33.8% for the third quarter of 2015 from 29.6% for the third quarter of 2014. This occurred primarily because of higher income before taxes during the current year period as compared to the prior year period, which was offset by the deduction of a similar amount of discrete tax items in the comparative periods.

Net Earnings

Net earnings increased $14.9 million to $24.2 million during the three months ended September 30, 2015 from $9.3 million during the three months ended September 30, 2014. As a percentage of total revenues, net earnings were 3.2% and 1.3% in 2015 and 2014, respectively.

Results of Operations – Nine months ended September 30, 2015 and 2014



	Nine Months Ended September 30,						Change
(In Thousands)	2015			2014			$			%
REVENUES:
Lease Revenues and Fees	$	2,017,610		$	1,606,765		$	410,845		25.6	%
Retail Sales	26,055			31,023			(4,968		)	(16.0	)
Non-Retail Sales	262,194			254,021			8,173			3.2
Franchise Royalties and Fees	48,069			50,147			(2,078		)	(4.1	)
Other	4,629			4,375			254			5.8
	2,358,557			1,946,331			412,226			21.2
COSTS AND EXPENSES:
Depreciation of Lease Merchandise	912,377			661,446			250,931			37.9
Retail Cost of Sales	17,090			19,900			(2,810		)	(14.1	)
Non-Retail Cost of Sales	236,882			230,537			6,345			2.8
Operating Expenses	998,989			898,963			100,026			11.1
Financial Advisory and Legal Costs	—			13,661			(13,661		)	nmf
Restructuring Expenses	—			9,140			(9,140		)	nmf
Retirement and Vacation Charges	—			9,094			(9,094		)	nmf
Progressive-Related Transaction Costs	—			6,638			(6,638		)	nmf
Regulatory Income	—			(1,200		)	1,200			nmf
Other Operating Income, Net	(2,145		)	(869		)	1,276			146.8
	2,163,193			1,847,310			315,883			17.1
OPERATING PROFIT	195,364			99,021			96,343			97.3
Interest Income	1,714			2,461			(747		)	(30.4	)
Interest Expense	(17,115		)	(13,174		)	3,941			29.9
Other Non-Operating Expense, Net	(1,223		)	(837		)	386			46.1
EARNINGS BEFORE INCOME TAXES	178,740			87,471			91,269			104.3
INCOME TAXES	64,757			31,332			33,425			106.7
NET EARNINGS	$	113,983		$	56,139		$	57,844		103.0	%

nmf - Calculation is not meaningful

Revenues

Information about our revenues by reportable segment is as follows:



	Nine Months Ended September 30,						Change
(In Thousands)	2015			2014			$			%
REVENUES:
Sales and Lease Ownership¹	$	1,479,300		$	1,525,100		$	(45,800	)	(3.0	)%
Progressive²	773,551			309,539			464,012			149.9
HomeSmart¹	47,322			48,598			(1,276		)	(2.6	)
Franchise³	48,069			50,147			(2,078		)	(4.1	)
Manufacturing	78,048			75,692			2,356			3.1
Other	1,002			2,626			(1,624		)	(61.8	)
Revenues of Reportable Segments	2,427,292			2,011,702			415,590			20.7
Elimination of Intersegment Revenues	(76,783		)	(74,375		)	(2,408		)	(3.2	)
Cash to Accrual Adjustments	8,048			9,004			(956		)	(10.6	)
Total Revenues from External Customers	$	2,358,557		$	1,946,331		$	412,226		21.2	%
¹ Segment revenue principally consists of lease revenues and fees, retail sales and non-retail sales, and is presented on a cash basis.
² Segment revenue consists of lease revenues and fees.
³Segment revenue consists of franchise royalties and fees.

Sales and Lease Ownership. Sales and Lease Ownership segment revenues decreased $45.8 million to $1.48 billion primarily due to a $49.6 million decrease in lease revenues and fees and a $4.8 million decrease in retail sales, partially offset by a $8.2 million increase in non-retail sales. Lease revenues and fees within the Sales and Lease Ownership segment decreased due to a 4.5% decrease in same store revenues and the net reduction of 24 Company-operated stores during the 24-month period ended September 30, 2015.

Progressive. Progressive segment revenues increased $464.0 million to $773.6 million primarily because Progressive was acquired on April 14, 2014 and its results have been included in the Company's consolidated results only from that date.

HomeSmart. HomeSmart segment revenues decreased $1.3 million to $47.3 million primarily due to a 2.5% decrease in lease revenues and fees. Lease revenues and fees within the HomeSmart segment decreased due to a 6.0% decrease in same store revenues, which offset the impact of the net addition of four Company-operated stores during the 24-month period ended September 30, 2015.

Franchise. Franchise segment revenues decreased $2.1 million to $48.1 million due to a 2.5% decrease in same store revenues of existing franchised stores and the net reduction of four franchised stores during the 24-month period ended September 30, 2015.

Costs and Expenses

Depreciation of lease merchandise. Depreciation of lease merchandise increased $250.9 million, or 37.9%, to $912.4 million during the nine months ended September 30, 2015, from $661.4 million during the comparable period in 2014. Levels of merchandise on lease for the Aaron's core business remained consistent year over year, resulting in idle merchandise representing approximately 6% of total depreciation expense in 2015 and 2014. As a percentage of total lease revenues and fees, depreciation of lease merchandise increased to 45.2% from 41.2% in the prior year period, primarily due to the inclusion of Progressive's results of operations from the April 14, 2014 acquisition date. Progressive's inclusion increased depreciation as a percentage of lease revenues because, among other factors, its merchandise has a shorter average life on lease and a higher rate of early buyouts than our core business.

Retail cost of sales. Retail cost of sales decreased $2.8 million, or 14.1%, to $17.1 million during the nine months ended September 30, 2015, from $19.9 million for the comparable period in 2014, and as a percentage of retail sales, increased to 65.6% from 64.1% due to continued increased discounting of pre-leased merchandise.

Non-retail cost of sales. Non-retail cost of sales increased $6.3 million, or 2.8%, to $236.9 million during the nine months ended September 30, 2015, from $230.5 million for the comparable period in 2014, and as a percentage of non-retail sales, decreased to 90.3% from 90.8%.

Operating expenses. Operating expenses increased $100.0 million, or 11.1%, to $999.0 million during the nine months ended September 30, 2015, from $899.0 million for the comparable period in 2014 due primarily to the consolidation of Progressive's results of operations from the April 2014 acquisition date. As a percentage of total revenues, operating expenses decreased to 42.4% in 2015 from 46.2% in 2014 as a result of cost reductions in personnel, advertising, facility rent, lease merchandise-related costs and other operating costs in Aaron's core business, as well as the acquisition of Progressive in April 2014. Progressive, which continues to grow as a percentage of total revenues, has lower operating expenses than the core business primarily because it does not have store operations. Bad debt expense and lease merchandise write-offs at Progressive did increase in the third quarter, however, as discussed under "Results of Operations – Three months ended September 30, 2015 and 2014."

Financial advisory and legal costs. Financial advisory and legal costs of $13.7 million were incurred during the nine months ended September 30, 2014 related to addressing now-resolved strategic matters, including an unsolicited acquisition offer, two proxy contests and certain other shareholder proposals.

Restructuring expenses. In connection with the Company's July 15, 2014 announced closure of 44 Company-operated stores and restructuring of its home office and field support, charges of $9.1 million were incurred during the nine months ended September 30, 2014 and principally consist of contractual lease obligations, the write-off and impairment of property, plant and equipment and workforce reductions.

Retirement and vacation charges. Retirement charges of $9.1 million were incurred during the nine months ended

September 30, 2014 due to the retirements of both the Company's Chief Executive Officer and Chief Operating Officer in

2014.

Progressive-related transaction costs. Financial advisory and legal costs of $6.6 million were incurred during the nine months ended September 30, 2014 in connection with the acquisition of Progressive.

Regulatory income. Regulatory income of $1.2 million was recorded during the nine months ended September 30, 2014 as a reduction in previously recognized regulatory expense upon the resolution of the regulatory investigation by the California Attorney General.

Other Operating Income, Net

Other operating income, net consists of gains or losses on sales of Company-operated stores and delivery vehicles, impairment of property, plant and equipment, fair value adjustments on assets held for sale and gains or losses on other dispositions of property, plant and equipment. Information about the components of other operating income, net is as follows:



	Nine Months Ended September 30,
(In Thousands)	2015			2014
Net gains on sales of stores	$	(2,231	)	$	(1,472	)
Net gains on sales of delivery vehicles	(1,400		)	(668		)
Losses on asset dispositions and assets held for sale	1,486			1,271
Other operating income, net	$	(2,145	)	$	(869	)

During the nine months ended September 30, 2015, losses on asset dispositions and assets held for sale included impairment charges of $757,000 on leasehold improvements related to Company-operated stores that were closed during the period and $484,000 on assets held for sale.

During the nine months ended September 30, 2014, losses on asset dispositions and assets held for sale included $838,000 in losses incurred on the sale of the 27 Company-operated RIMCO stores in January 2014. In addition, the Company recognized gains of $1.5 million from the sale of stores during the nine months ended September 30, 2014.

Operating Profit

Interest income. Interest income decreased to $1.7 million during the nine months ended September 30, 2015 compared with $2.5 million for the comparable period in 2014.

Interest expense. Interest expense increased $3.9 million to $17.1 million for the nine months ended September 30, 2015 from $13.2 million in 2014 due primarily to $491.3 million of additional debt financing incurred in connection with the April 2014 Progressive acquisition.

Other non-operating expense, net. Other non-operating expense, net includes the impact of foreign currency exchange gains and losses, as well as gains and losses resulting from changes in the cash surrender value of Company-owned life insurance related to the Company’s deferred compensation plan. Included in other non-operating expense, net were foreign exchange transaction losses of $1.7 million and $1.0 million during the nine months ended September 30, 2015 and 2014, respectively. Gains related to the changes in the cash surrender value of Company-owned life insurance were $513,000 and $188,000 during the nine months ended September 30, 2015 and September 30, 2014 respectively.

Earnings Before Income Taxes

Information about our earnings (loss) before income taxes by reportable segment is as follows:



	Nine Months Ended September 30,						Change
							2015 vs. 2014
(In Thousands)	2015			2014			$			%
EARNINGS (LOSS) BEFORE INCOME TAXES:
Sales and Lease Ownership	$	113,514		$	109,166		$	4,348		4.0	%
Progressive	44,761			1,366			43,395			nmf
HomeSmart	8			(1,717		)	1,725			100.5
Franchise	37,218			38,173			(955		)	(2.5	)
Manufacturing	2,007			441			1,566			355.1
Other	(35,545		)	(62,419		)	26,874			43.1
Earnings Before Income Taxes for Reportable Segments	161,963			85,010			76,953			90.5
Elimination of Intersegment Profit	(2,019		)	(405		)	(1,614		)	(398.5	)
Cash to Accrual and Other Adjustments	18,796			2,866			15,930			555.8
Total	$	178,740		$	87,471		$	91,269		104.3	%

nmf - Calculation is not meaningful

Earnings before income taxes for the nine months ended September 30, 2014 were impacted by $13.7 million in financial advisory and legal costs related to addressing now-resolved strategic matters, including proxy contests, $9.1 million due to the retirements of both the Company's Chief Executive Officer and Chief Operating Officer, $6.6 million in transaction costs related to the Progressive acquisition and $1.2 million of regulatory income that reduced previously recognized regulatory expense upon the resolution of the regulatory investigation by the California Attorney General, all of which have been included in the Other category. In addition, earnings before income taxes for the nine months ended September 30, 2014 included $9.1 million in charges related to the closure of 44 Company-operated stores and restructuring of the Company's home office and field support, of which $4.8 million has been included in the Sales and Lease Ownership segment results and $4.3 million has been included in the Other category.

Income Tax Expense

Income tax expense increased $33.4 million to $64.8 million for the nine months ended September 30, 2015 compared to $31.3 million for the same period in 2014. The effective tax rate also increased to 36.2% for the nine months ended September 30, 2015 from 35.8% for the nine months ended September 30, 2014.

Net Earnings

Net earnings increased $57.8 million to $114.0 million during the nine months ended September 30, 2015 from $56.1 million during the nine months ended September 30, 2014, representing a 103.0% increase. As a percentage of total revenues, net earnings were 4.8% and 2.9% in 2015 and 2014, respectively.

Overview of Financial Position

The major changes in the condensed consolidated balance sheet from December 31, 2014 to September 30, 2015 are as follows:


•	Cash and cash equivalents increased $63.4 million to $66.9 million at September 30, 2015 from $3.5 million at December 31, 2014. For additional information, refer to the “Liquidity and Capital Resources” section below.

•

Income tax receivable decreased $111.1 million because the Company received a $100.0 million refund from the Internal Revenue Service (“IRS”) during the nine months ended September 30, 2015. The enactment of the Tax Increase Prevention Act of 2014 in December 2014 extended bonus depreciation on eligible inventory held during 2014. Throughout 2014, the Company made payments based on the previously enacted law, resulting in an overpayment when the current act was signed and the Company applied for a refund at that time.


•	Deferred income taxes decreased $105.8 million due primarily to the reversal of accelerated bonus depreciation deductions on lease merchandise that were taken in prior periods.


•	Debt decreased $111.9 million due primarily to the net repayment of $106.6 million in revolving credit borrowings, term loans and private placement notes outstanding as of December 31, 2014. Refer to “Liquidity and Capital Resources” below for further details regarding the Company's financing arrangements.

Liquidity and Capital Resources

General

For the nine months ended September 30, 2015 and 2014, cash provided by operating activities was $213.3 million and cash used in operating activities was $8.7 million, respectively. The $222.0 million increase in operating cash flows during the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014 was due primarily to a $118.1 million increase related to a reduction in the Company's income tax receivable that existed as of December 31, 2014 and a $59.6 million decrease in lease merchandise, net of the effects of acquisitions and dispositions. The change in income tax receivable occurred primarily because the Company received a $100.0 million income tax refund from the IRS, as described under the "Overview of Financial Position" section above.

Purchases of sales and lease ownership stores initially have a positive impact on operating cash flows because the lease merchandise, other assets and intangibles acquired are recognized as investing cash outflows in the period of acquisition. However, the initial positive impact may not be indicative of the extent to which these stores will contribute positively to operating cash flows in future periods. The amount of lease merchandise purchased in store acquisitions and shown under investing activities was $6.5 million during the nine months ended September 30, 2015. The amount of lease merchandise purchased and shown under investing activities was $142.4 million during the nine months ended September 30, 2014, substantially all of which was the direct result of the April 14, 2014 Progressive acquisition.

Sales of Company-operated stores are an additional source of investing cash flows, and resulted in net cash proceeds of $14.0 million during the nine months ended September 30, 2015. Proceeds from such sales were $15.8 million during the nine months ended September 30, 2014 and included cash consideration of $10.0 million in connection with the sale of the 27 Company-operated RIMCO stores and the rights to five franchised RIMCO stores in January 2014. The amount of lease merchandise sold in these sales and shown under investing activities was $8.8 million and $2.7 million during the nine months ended September 30, 2015 and 2014, respectively.

Our primary capital requirements consist of buying lease merchandise for sales and lease ownership stores and Progressive's operations. As we continue to grow, the need for additional lease merchandise is expected to remain our major capital requirement. Other capital requirements include purchases of property, plant and equipment, expenditures for acquisitions and income tax payments. Beginning in the fourth quarter, our capital requirements will include funding of consumer finance receivables for DAMI. These capital requirements historically have been financed through:


•	cash flows from operations;


•	trade credit with vendors;


•	private debt offerings;


•	bank debt;


•	proceeds from the sale of lease return merchandise; and


•	stock offerings.

Debt Financing

As of September 30, 2015, $109.4 million in term loans were outstanding under the revolving credit agreement. Our current revolving credit facility matures December 9, 2019 and the total available credit on the facility as of September 30, 2015 was $225.0 million.

As of September 30, 2015, the Company had outstanding $300.0 million in aggregate principal amount of senior unsecured notes issued in a private placement in connection with the April 14, 2014 Progressive acquisition. The notes bear interest at the rate of 4.75% per year and mature on April 14, 2021. Payments of interest are due quarterly, commencing July 14, 2014, with principal payments of $60.0 million each due annually commencing April 14, 2017.

As of September 30, 2015, the Company had outstanding $75.0 million in senior unsecured notes originally issued to several insurance companies in a private placement in July 2011. Effective April 28, 2014, the notes bear interest at the rate of 3.95% per year and mature on April 27, 2018. Quarterly payments of interest commenced July 27, 2011, and annual principal payments of $25.0 million commenced April 27, 2014.

Our revolving credit and term loan agreement and senior unsecured notes, and our franchisee loan agreement discussed below, contain certain financial covenants. These covenants include requirements that the Company maintain ratios of (i) EBITDA plus lease expense to fixed charges of no less than 1.75:1.00 through December 31, 2015 and 2.00:1.00 thereafter and (ii) total debt to EBITDA of no greater than 3.25:1.00 through December 31, 2015 and 3.00:1.00 thereafter. In each case, EBITDA refers to the Company’s consolidated earnings before interest and tax expense, depreciation (other than lease merchandise depreciation), amortization expense and other non-cash charges. On September 21, 2015, the Company amended the existing revolving credit agreement and the private placement note agreements to exclude DAMI from the calculation of the financial debt covenants. If we fail to comply with these covenants, we will be in default under these agreements, and all amounts will become due immediately. We were in compliance with all of these covenants at September 30, 2015 and believe that we will continue to be in compliance in the future.

Share Repurchases

We purchase our stock in the market from time to time as authorized by our Board of Directors. As of September 30, 2015, we have the authority to purchase 10,496,421 additional shares.

Dividends

We have a consistent history of paying dividends, having paid dividends for 28 consecutive years. At its November 2014 meeting, our board of directors increased the quarterly dividend by 9.5%, raising it to $.023 per share from $.021 per share. Aggregate dividend payments for the nine months ended September 30, 2015 were $5.0 million.

At its November 2015 meeting, our board of directors increased the quarterly dividend by 8.7%, raising it to $.025 per share from $.023 per share. Subject to sufficient operating profits, any future capital needs and other contingencies, we currently expect to continue our policy of paying dividends.

If we achieve our expected level of growth in our operations, we anticipate we will supplement our expected cash flows from operations, existing credit facilities, vendor credit and proceeds from the sale of lease return merchandise by expanding our existing credit facilities, by securing additional debt financing, or by seeking other sources of capital to ensure we will be able to fund our capital and liquidity needs for at least the next 12 to 24 months.

Commitments

Income Taxes. During the nine months ended September 30, 2015, we received income tax refunds, net of payments, of $46.0 million. Within the next three months, we anticipate that we will make cash payments for federal and state income taxes of approximately $53.2 million.

The American Taxpayer Relief Act of 2012 allowed for deduction of 50% adjusted basis of qualified property for assets placed in service from January 1, 2012 through the end of 2013. The Tax Increase Prevention Act of 2014 signed into law on December 20, 2014 extended bonus depreciation and reauthorized work opportunity tax credits through the end of 2014. As a result, the Company received a $100.0 million refund from the IRS during the nine months ended September 30, 2015. Accordingly, our cash flow benefited from having a lower cash tax obligation, which, in turn, provided additional cash flow from operations. Because of our sales and lease ownership model, in which the Company remains the owner of merchandise on lease, we benefit more from bonus depreciation, relatively, than traditional furniture, electronics and appliance retailers.

In future years, we may have to make increased tax payments on our earnings as a result of expected profitability and the reversal of the accelerated depreciation deductions that were taken in 2014 and prior periods. We estimate that at December 31, 2014, the remaining tax deferral associated with the acts described above was approximately $176.0 million, of which approximately 79% is expected to reverse in 2015 and most of the remainder during 2016 and 2017.

Leases. We lease warehouse and retail store space for most of our store-based operations, call center space for Progressive's operations, and management and information technology space for corporate functions under operating leases expiring at various times through 2033. Most of the leases contain renewal options for additional periods ranging from one to 20 years. We also lease transportation vehicles under operating leases which generally expire during the next four years. We expect that most leases will be renewed or replaced by other leases in the normal course of business. Approximate future minimum rental payments required under operating leases that have initial or remaining non-cancelable terms in excess of one year as of September 30, 2015 are shown in the table below under “Contractual Obligations and Commitments.”

As of September 30, 2015, we have 20 leases classified as capital or financing, 19 of which are with a limited liability company (“LLC”) whose managers and owners are five current officers (of which four are current executive officers) and six former officers of the Company, with no individual owning more than 13.33% of the LLC. Nine of these related party leases relate to properties purchased from us in October and November of 2004 by the LLC for a total purchase price of $6.8 million. The LLC is leasing back these properties to us for a 15-year term, with a five-year renewal at our option, at an aggregate annual lease amount of $788,000. Another 10 of these related party leases relate to properties purchased from the Company in December 2002 by the LLC for a total purchase price of approximately $5.0 million. The LLC leases back these properties to the Company for a 15-year term at an aggregate annual lease amount of $1.2 million. We do not currently plan to enter into any similar related party lease transactions in the future.

In the past, we financed a small portion of our store expansion through sale-leaseback transactions. The properties were generally sold at net book value and the resulting leases qualified and are accounted for as operating leases. We do not have any retained or contingent interests in the stores nor do we provide any guarantees, other than a corporate level guarantee of lease payments, in connection with the sale-leasebacks. The operating leases that resulted from these transactions are included in the table below under “Contractual Obligations and Commitments.”

Franchise Loan Guaranty. We have guaranteed the borrowings of certain independent franchisees under a franchise loan agreement with several banks. Our franchise loan facility matures December 9, 2015 and the maximum commitment available under the facility as of September 30, 2015 was $175.0 million, including a Canadian subfacility commitment amount for loans to franchisees that operate stores in Canada of Cdn $50.0 million.

At September 30, 2015, the portion that we might be obligated to repay in the event franchisees defaulted was $78.0 million. However, due to franchisee borrowing limits, we believe any losses associated with defaults would be mitigated through recovery of lease merchandise and other assets. Since the inception of the franchise loan program in 1994, we have had no significant associated losses. We believe the likelihood of any significant amounts being funded in connection with these commitments to be remote.

Contractual Obligations and Commitments. The following table shows the approximate contractual obligations, including interest, and commitments to make future payments as of September 30, 2015:



(In Thousands)	Total		Period Less Than 1 Year		Period 1-3 Years		Period 3-5 Years		Period Over 5 Years
Debt, Excluding Capital Leases	$	484,375	$	31,250	$	195,000	$	198,125	$	60,000
Capital Leases	9,786		2,744		4,295		2,215		532
Interest Obligations	68,647		20,040		31,355		15,222		2,030
Operating Leases	476,196		108,683		160,194		104,243		103,076
Purchase Obligations	9,082		3,966		5,116		—		—
Retirement Obligations	5,205		3,562		1,591		26		26
Regulatory Obligations	11,280		11,280		—		—		—
Total Contractual Cash Obligations	$	1,064,571	$	181,525	$	397,551	$	319,831	$	165,664

For future interest payments on variable-rate debt, which are based on a specified margin plus a base rate (LIBOR), we used the variable rate in effect at September 30, 2015 to calculate these payments. Our variable rate debt at September 30, 2015 consisted of our borrowings under our revolving credit facilities. Future interest payments related to our revolving credit facilities are based on the borrowings outstanding at September 30, 2015 through their respective maturity dates, assuming such borrowings are outstanding at that time. The variable portion of the rate at September 30, 2015 ranged between 1.95% and 2.08% for all of our variable-rate debt. Future interest payments may be different depending on future borrowing activity and interest rates.

The following table shows the Company's approximate commercial commitments as of September 30, 2015:



(In Thousands)	Total Amounts Committed		Period Less Than 1 Year		Period 1-3 Years		Period 3-5 Years		Period Over 5 Years
Guaranteed Borrowings of Franchisees	$	77,975	$	77,975	$	—	$	—	$	—

Purchase obligations are primarily related to certain advertising and marketing programs. We have no long-term commitments to purchase merchandise nor do we have significant purchase agreements that specify minimum quantities or set prices that exceed our expected requirements for three months.

Retirement obligations primarily represent future payments associated with the retirement of the Company’s founder and Chairman of the Board during the year ended December 31, 2012 and both the Chief Executive Officer and the Chief Operating Officer during year ended December 31, 2014.

Regulatory obligations represent future payments associated with the resolution of the regulatory investigation by the California Attorney General.

Deferred income tax liabilities as of September 30, 2015 were $162.8 million. This amount does not directly relate to the federal and state income tax payments described above and is not included in the total contractual obligations table because we believe this presentation would not be meaningful. Deferred income tax liabilities are calculated based on temporary differences between the tax basis of assets and liabilities and their respective book basis, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, scheduling deferred income tax liabilities as payments due by period could be misleading because this scheduling would not relate to liquidity needs.

Off-Balance Sheet Arrangements

As of September 30, 2015 and December 31, 2014, we had no material off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources.

Recent Accounting Pronouncements

Refer to Note 1 to the condensed consolidated financial statements for a discussion of recently issued accounting pronouncements.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In connection with the Progressive acquisition in April 2014, the Company amended and restated its revolving credit agreement, amended certain financing agreements and entered into two new note purchase agreements, which are discussed in further detail in Note 6 to the condensed consolidated financial statements in the 2014 Annual Report.

In connection with the acquisition of Dent-A-Med, Inc. in October 2015, the Company made additional minor amendments to its revolving credit facility agreements and certain financing agreements, and assumed a new secured revolving credit agreement. Refer to Note 9 to the condensed consolidated financial statements for more information.

As of September 30, 2015, we had $375.0 million of senior unsecured notes outstanding at a weighted-average fixed rate of 4.6%. Amounts outstanding under our revolving credit agreement as of September 30, 2015 consisted of $109.4 million in term loans. Borrowings under the revolving credit agreement are indexed to LIBOR or the prime rate, which exposes us to the risk of increased interest costs if interest rates rise. Based on the Company's variable-rate debt outstanding as of September 30, 2015, a hypothetical 1.0% increase or decrease in interest rates would increase or decrease interest expense by $1.1 million on an annualized basis.

We do not use any significant market risk sensitive instruments to hedge commodity, foreign currency, or other risks, and hold no market risk sensitive instruments for trading or speculative purposes.


ITEM 4.	CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

An evaluation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, was carried out by management, with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as of the end of the period covered by this Quarterly Report on Form 10-Q. This evaluation is performed to determine if our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. Our disclosure controls and procedures, however, are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

Based on management’s evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective at a level that provides reasonable assurance that the objectives of disclosure controls and procedures are met, as of the last day of the period covered by this report due to the material weakness described below.

During the third quarter of 2015, we concluded that we do not have effective program change management controls over our Progressive lease management application and that this represents a material weakness in internal control over financial reporting as of the date of this report. Specifically, the quality assurance controls over program changes to our lease management software are not designed sufficiently to detect whether program changes have had unintended effects on data fields that are important to financial reporting. Software issues that occurred during a limited period of time spanning the second and third quarters of 2015 resulting from this deficiency caused us not to identify a number of lease accounts as being delinquent and affected our ability to begin prompt collections activities on those accounts. As a result, although not material to either period, an adjustment was recorded in the third quarter to increase bad debt expense and lease merchandise write-offs by $3.2 million.

During the third quarter, management initiated a remediation plan that includes the following actions:


•	A new quality assurance program is being designed and put in place to verify that the potential financial statement effect of all program changes is thoroughly considered when our lease management software is updated;


•	Additional resources are being allocated to ensure that our quality assurance procedures are adequately designed and are operating effectively; and


•	Additional review controls are being put in place to enhance our existing control framework and ensure that errors of this nature are detected timely.

The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed prior to December 31, 2015.

Notwithstanding the material weakness, management has concluded that the consolidated financial statements included in this Form 10-Q present fairly, in all material aspects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Changes in Internal Control Over Financial Reporting.

In addition to the new controls described above, during the three months ended September 30, 2015, we implemented a new financial reporting consolidation system which led to certain changes in the internal controls over our financial statement close process related to how we verify the completeness and accuracy of the consolidated information used in our financial reporting. From a Company-wide perspective, we also are implementing cross-functional and multi-segment disclosure and risk committees to enhance our risk identification, monitoring and disclosure processes. All new and updated controls are included in management's evaluation process for the 2015 fiscal year.

There were no other changes in the Company’s internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, during the nine months ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

From time to time, we are party to various legal proceedings arising in the ordinary course of business. While any proceedings contain an element of uncertainty, we do not currently believe that any of the outstanding legal proceedings to which we are a party will have a material adverse impact on our business, financial position or results of operations. However, an adverse resolution of a number of these items could have a material adverse impact on our business, financial position or results of operations. For further information, see Note 5 to the condensed consolidated financial statements under the heading “Legal Proceedings,” which discussion is incorporated herein by reference.


ITEM 1A.	RISK FACTORS

Aaron's business is subject to certain risks and uncertainties. The Company has added the risk factor below to the list of risk factors previously reported in the 2014 Annual Report and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015. Any of the risk factors disclosed below, in the 2014 Annual Report, and in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 could cause our actual results to differ materially from historical or anticipated results. These risks and uncertainties are not the only ones we face, but represent the risks that we believe are material. However, there may be additional risks that we currently consider not to be material or of which we are not currently aware, and any of these risks could cause our actual results to differ materially from historical or anticipated results.

We could lose our access to data sources, which could cause us competitive harm and have a material adverse effect on our business, operating results, and financial condition.

We are heavily dependent on data provided by third party providers. For example, our Progressive business employs a proprietary decisioning algorithm when making lease approval decisions for its customers. This algorithm depends extensively upon continued access to and receipt of data from external sources, such as third party data vendors. In addition, our Aarons.com and Dent-A-Med businesses are similarly dependent on customer attribute data provided by external sources. Our data providers could stop providing data, provide untimely, incorrect or incomplete data, or increase the costs for their data for a variety of reasons, including a perception that our systems are insecure as a result of a data security breach, regulatory concerns or for competitive reasons. We could also become subject to increased legislative, regulatory or judicial restrictions or mandates on the collection, disclosure or use of such data, in particular if such data is not collected by our providers in a way that allows us to legally use the data. If we were to lose access to this external data or if our access or use were restricted or were to become less economical or desirable, our Progressive, Aarons.com and Dent-A-Med businesses would be negatively impacted, which would adversely affect our operating results and financial condition. We cannot provide assurance that we will be successful in maintaining our relationships with these external data source providers or that we will be able to continue to obtain data from them on acceptable terms or at all. Furthermore, we cannot provide assurance that we will be able to obtain data from alternative sources if our current sources become unavailable.

If we fail to remediate any material weaknesses in our internal control over financial reporting or otherwise establish and maintain effective internal control over financial reporting and disclosure controls and procedures, particularly with respect to our recently acquired Progressive and Dent-A-Med businesses, we may not be able to accurately report our financial results, or report them in a timely manner.

As a public reporting company subject to the rules and regulations established from time to time by the SEC and the New York Stock Exchange, we are required to, among other things, establish and periodically evaluate procedures with respect to our disclosure controls and procedures. In addition, as a public company, we are required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 so that our management can certify, on an annual basis, that our internal control over financial reporting is effective.

Prior to their acquisition by us, our Progressive and Dent-A-Med businesses were private companies and were not required to establish disclosure controls and procedures. In particular, unlike our core business, these businesses have not historically operated under a fully documented and annually tested system for internal control over financial reporting that is required for public companies by Section 404 of the Sarbanes-Oxley Act.

During the third quarter of 2015, we concluded that Progressive did not have effective program change management controls over its lease management application and we have determined that this deficiency represented a “material weakness” in our internal control over financial reporting as of the date of this report. See “Item 4 - Controls and Procedures.” A “material weakness” is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected in a timely basis. While we expect this

material weakness will be remediated prior to December 31, 2015, it will not be considered remediated until newly installed remedial controls operate for a sufficient period of time and management has concluded, through testing, that these new controls are operating effectively.

If we fail to remediate the material weakness identified during the third quarter of 2015 or otherwise fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures - particularly in our newly acquired Progressive and Dent-A-Med businesses - we may not be able to accurately report our financial results, or report them in a timely manner, which could cause a decline in our stock price and adversely affect our results of operations and financial condition. In addition, if our senior management is unable to conclude that we have effective internal control over financial reporting, or to certify the effectiveness of such controls, or if our independent registered public accounting firm cannot render an unqualified opinion on management’s assessment and the effectiveness of our internal control over financial reporting, when required, or if additional material weaknesses in our internal controls are identified, we could be subject to increased regulatory scrutiny and a loss of public and investor confidence, which could also have a material adverse effect on our business and our stock price.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents our share repurchase activity for the three months ended September 30, 2015:



Period	Total Number of Shares Purchased ¹	Average Price Paid per Share ²	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs ³
July 1, 2015 through July 31, 2015	—	—	—	10,496,421
August 1, 2015 through August 31, 2015	—	—	—	10,496,421
September 1, 2015 through September 30, 2015	—	—	—	10,496,421
Total	—		—

¹ The total number of shares purchased includes shares surrendered, or deemed surrendered, in satisfaction of the exercise price and/or to satisfy tax withholding obligations in connection with the exercise of stock options and/or the vesting of restricted stock issued to employees.

² Average price paid per share for shares purchased as part of our share repurchase program (includes brokerage commissions).

³ As of September 30, 2015, 10,496,421 shares of common stock remained available for repurchase under the purchase authority approved by the Company's Board of Directors and publicly announced from time-to-time.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.	MINE SAFETY DISCLOSURES

None.


ITEM 5.	OTHER INFORMATION

None.


ITEM 6.	EXHIBITS



EXHIBIT NO.		DESCRIPTION OF EXHIBIT

10.1*		Second Amendment to the Third Amended and Restated Loan Facility Agreement among Aaron’s Inc. as sponsor, SunTrust Bank, as servicer, and each of the other lending institutions party thereto as participants, dated September 21, 2015.

10.2*		Second Amendment to Amended and Restated Revolving Credit and Term Loan Agreement by and among Aaron’s, Inc., as borrower, the several banks and other financial institutions from time to time party thereto and SunTrust Bank as administrative agent, dated September 21, 2015.

10.3*		Amendment No. 2 to Note Purchase Agreement by and among Aaron’s Inc. and certain other obligors and the purchasers dated as of September 21, 2015 with respect to $225 million in aggregate principal amount of the Company’s 4.75% Series A Senior Notes due April 14, 2021 and Form of Senior Note.

10.4*		Amendment No. 2 to Note Purchase Agreement by and among Aaron’s Inc. and certain other obligors and purchasers dated as of September 21, 2015 with respect to $75 million in aggregate principal amount of the Company’s 4.75% Series B Senior Notes due April 14, 2021 and Form of Senior Note.

10.5*		Amendment No. 5 to Note Purchase Agreement by and among Aaron’s Inc. and certain other obligors and the purchasers, dated as of September 21, 2015.

10.6		Loan and Security Agreement by and among Dent-A-Med Inc., Dent-A-Med Receivables Corporation, HC Recovery, Inc. and Wells Fargo Preferred Capital, Inc., dated as of May 18, 2011 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

10.7		First Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., Dent-A-Med Receivables Corporation, HC Recovery, Inc. and Wells Fargo Preferred Capital, Inc., dated as of August 3, 2011 (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

10.8		Second Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., Dent-A-Med Receivables Corporation, HC Recovery, Inc. and Wells Fargo Bank, N.A, dated as of July 26, 2012 (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

10.9		Third Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells Fargo Bank, N.A, dated as of June 6, 2013 (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

10.10		Fourth Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells Fargo Bank, N.A, dated as of November 7, 2013 (incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

10.11		Fifth Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells Fargo Bank, N.A, dated as of March 31, 2014 (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

10.12		Sixth Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells Fargo Bank, N.A, dated as of October 24, 2014 (incorporated by reference to Exhibit 10.7 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

10.13		Seventh Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells Fargo Bank, N.A, dated as of February 3, 2015 (incorporated by reference to Exhibit 10.8 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

10.14		Eighth Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells Fargo Bank, N.A, dated as of September 21, 2015 (incorporated by reference to Exhibit 10.9 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014, (ii) Condensed Consolidated Statements of Earnings for the nine months ended September 30, 2015 and 2014, (iii) Condensed Consolidated Statements of Comprehensive Income for the nine months ended September 30, 2015 and 2014, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014, and (v) the Notes to Condensed Consolidated Financial Statements.

*Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of l934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		AARON’S, INC.
			(Registrant)

Date:	November 9, 2015	By:	/s/ Gilbert L. Danielson
			Gilbert L. Danielson
			Executive Vice President,
			Chief Financial Officer

Date:	November 9, 2015	By:	/s/ Robert P. Sinclair, Jr.
			Robert P. Sinclair, Jr.
			Vice President,
			Corporate Controller

Exhibit 10.1

SECOND AMENDMENT TO LOAN FACILITY AGREEMENT

THIS SECOND AMENDMENT TO LOAN FACILITY AGREEMENT dated September 21, 2015 (this “Amendment”) is entered into among Aaron’s, Inc., a Georgia corporation (the “Sponsor”), the Guarantors, the Participants party hereto and SunTrust Bank, as Servicer. All capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Loan Facility Agreement (as defined below).

RECITALS

WHEREAS, the Sponsor, the Participants and SunTrust Bank, as Servicer, entered into that certain Third Amended and Restated Loan Facility Agreement dated as of April 14, 2014 (as amended by that certain First Amendment to Loan Facility Agreement dated as of December 9, 2014 and as further amended, restated, supplemented or otherwise modified from time to time, the “Loan Facility Agreement”);

WHEREAS, the Sponsor has requested certain amendments to the Loan Facility Agreement, in connection with the proposed acquisition by the Sponsor or a Domestic Subsidiary thereof of the Dent-A-Med Entities (as defined below) on or after the Second Amendment Effective Date (the “Dent-A-Med Acquisition”);

WHEREAS, the Participants agree to such requested amendments subject to the terms and conditions of this Amendment;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendments to Loan Facility Agreement. The Loan Facility Agreement is hereby amended as follows:

(a) The following definitions are added in the appropriate alphabetical order to Section 1.1 of the Loan Facility Agreement:

“DAMI Pledge Agreement” means that certain Collateral Pledge Agreement dated on or about the Second Amendment Effective Date made and executed by Progressive Finance in favor of Wells Fargo Bank, N.A.

“Dent-A-Med” means Dent-A-Med Inc., an Oklahoma corporation.

“Dent-A-Med Credit Agreement” means that certain Loan and Security Agreement dated as of May 18, 2011 by and among the Dent-A-Med Entities, as co-borrowers, the lenders party thereto and Wells Fargo Bank, N.A. (as successor by merger to Wells Fargo Preferred Capital, Inc.), as agent for the lenders thereunder as in effect on the Second Amendment Effective Date.

“Dent-A-Med Entities” means Dent-A-Med, Dent-A-Med Receivables Corporation, a Delaware corporation, HC Recovery, Inc., an Oklahoma corporation and any other direct or indirect subsidiary of Dent-A-Med formed after the Second Amendment Effective Date.

“Second Amendment to Loan Facility Agreement” means that certain Second Amendment to Loan Facility Agreement dated as of the Second Amendment Effective Date, by and among the Sponsor, the Guarantors, the Participants party thereto and the Servicer.

“Second Amendment Effective Date” means September 21, 2015.

(b) The following definitions in Section 1.1 of the Loan Facility Agreement are amended as follows:

(i) The definition of “Consolidated EBITDA” is amended to read as follows:

“Consolidated EBITDA” shall mean for the Sponsor and its Subsidiaries (other than the Dent-A-Med Entities) 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, (iv) all other non-cash charges, (v) closing costs, fees and expenses incurred during such period in connection with the Closing Date Acquisition and the transactions contemplated by the Transaction Documents and the Note Agreements, in each case paid during such period to Persons that are not Affiliates of the Sponsor or any Subsidiary, not to exceed $15,000,000 in the aggregate, (vi) one-time fees, costs and expenses (including without limitation legal and other professional fees) in connection with (x) the retirement and severance of Ronald W. Allen and David Buck and (y) the bid by Vintage Capital Management to acquire the Sponsor, and other proxy contests and shareholder proposals, including costs, expenses and fees relating to responding to, defending and settling such matters, in each case to the extent such fees, costs and expenses were incurred prior to the First Amendment Effective Date, and (vii) transaction closing costs, fees and expenses actually incurred during such period in connection with the negotiation and closing of the First Amendment to Loan Facility Agreement, and the related amendments to the Credit Agreement and the Note Agreements and the related transaction documents, in each case paid during such period to Persons that are not Affiliates of the Sponsor or any Subsidiary.

(ii) The definition of “Consolidated Interest Expense” is amended to read as follows:

“Consolidated Interest Expense” shall mean, for the Sponsor and its Subsidiaries (other than the Dent-A-Med Entities) 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).

(iii) The definition of “Consolidated Lease Expense” is amended to read as follows:

“Consolidated Lease Expense” shall mean, for any period, the aggregate amount of fixed and contingent rentals payable by the Sponsor and its Subsidiaries (other than the Dent-A-Med Entities) 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.

(iv) The definition of “Consolidated Net Income” is amended to read as follows:

“Consolidated Net Income” shall mean, for any period, the net income (or loss) of the Sponsor and its Subsidiaries (other than the Dent-A-Med Entities) 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, (iii) any equity interest of the Sponsor or any Subsidiary of the Sponsor (other than the Dent-A-Med Entities) 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 (other than the Dent-A-Med Entities) on the date that such Person’s assets are acquired by the Sponsor or any Subsidiary.

(v) The definition of “Consolidated Total Debt” is amended to read as follows:

“Consolidated Total Debt” shall mean, at any time, all then currently outstanding obligations, liabilities and indebtedness of the Sponsor and its Subsidiaries (other than the Dent-A-Med Entities) on a consolidated basis of the types described in the definition of Indebtedness.

(vi) The definition of “Material Domestic Subsidiary” is amended to read as follows:

“Material Domestic Subsidiary” means any Domestic Subsidiary of the Sponsor that has not already become a Guarantor (other than the Dent-A-Med Entities) that (a) at any time (i) accounted for five percent (5.0%) of Consolidated EBITDA for any period of four (4) Fiscal Quarters ended or (ii) holds assets with an aggregate book value equal to or greater than five percent (5.0%) of the aggregate fair market value of the total assets of the Sponsor and its Subsidiaries on a consolidated basis or (b) when taken together with other Domestic Subsidiaries that are not already Guarantors, (x) accounted for ten percent (10.0%) of Consolidated EBITDA for any period of four (4) Fiscal Quarters ended or (y) holds assets with an aggregate book value equal to or greater than ten percent (10.0%) of the aggregate fair market value of the total assets of the Sponsor and its Subsidiaries on a consolidated basis. Upon the acquisition of a new Domestic Subsidiary or the merger or consolidation of any Person with or into an existing Domestic Subsidiary (or the acquisition of other assets by an existing Domestic Subsidiary), the qualification of the affected Domestic Subsidiary as a “Material Subsidiary” pursuant to the foregoing requirements of this definition shall be determined on a pro forma basis as if such Domestic Subsidiary had been acquired or such merger, consolidation or other acquisition had occurred, as applicable, at the beginning of the relevant period of four consecutive Fiscal Quarters.

(vii) The definition of “Permitted Acquisition” is amended to read as follows:

“Permitted Acquisition” shall mean the Closing Date Acquisition, the Dent-A-Med Acquisition (as such term is defined in the Second Amendment to Loan Facility Agreement) and any other Acquisition (whether foreign or domestic) so long as, in each case with respect to the Dent-A-Med Acquisition or any such other Acquisition, (a) immediately before and after giving effect to such Acquisition, no Credit Event or Unmatured Credit Event is in existence, (b) such Acquisition has been approved by the board of directors of the Person being acquired prior to any public announcement thereof, (c) to the extent such Acquisition is of a Person or Persons that are not organized in the United States and/or of all or

substantially all of the assets of a Person located outside the United States and the aggregate EBITDA attributable to all Foreign Subsidiaries for the most recently ended twelve month period (giving pro forma effect to such Acquisition) exceeds twenty percent (20%) of Consolidated EBITDA for the most recently ended twelve month period, the Sponsor complies with Section 6.10(b) hereof and (d) immediately after giving effect to such Acquisition, the Sponsor and Subsidiaries will not be engaged in any business other than businesses of the type conducted by the Sponsor and its Subsidiaries on the Effective Date and businesses reasonably related thereto. As used herein, Acquisitions will be considered related Acquisitions if the sellers under such Acquisitions are the same Person or any Affiliate thereof.

(a) as soon as available and in any event within 90 days after the end of each Fiscal Year of the Sponsor, a copy of the annual audited report for such Fiscal Year for the Sponsor and its Subsidiaries, containing a consolidated balance sheet of the Sponsor and its Subsidiaries as of the end of such Fiscal Year and the related consolidated 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. It is understood and agreed that the requirements of this subsection (x) shall be satisfied by the delivery of the applicable annual report on Form 10-K of the Sponsor to the Securities and Exchange Commission if delivered within the applicable time period noted herein and is available to the Participants on EDGAR and (y) are effective as of the Closing Date;

(b) 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 balance sheet of the Sponsor and its Subsidiaries as of the end of such Fiscal Quarter and the related unaudited consolidated 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 the 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. It is understood and agreed that the requirements of this subsection (x) shall be satisfied by the delivery of the applicable quarterly report on Form 10-Q of the Sponsor to the Securities and Exchange Commission if delivered within the applicable time period noted herein and is available to the Participants on EDGAR and (y) are effective as of the Closing Date;

(d) Section 6.10(d) of the Loan Facility Agreement is amended as follows:

(d) The Sponsor will cause any Domestic Subsidiary or any other Domestic Controlled Affiliate (other than the Dent-A-Med Entities in the case of the Dent-A-Med Credit Agreement or Progressive Finance solely in respect of its obligations under the DAMI Pledge Agreement) that provides a Guarantee or otherwise becomes liable (including as a borrower or co-borrower) in respect of the obligations under any Note Purchase Agreement or any other agreement providing for the incurrence of Indebtedness that is pari passu with the Indebtedness under this Agreement to (1) become a Guarantor by executing agreements in the form of Exhibit D and deliver simultaneously therewith similar documents applicable to such Domestic Subsidiary described in Section 13.1 as reasonably requested by the Servicer.

(e) Section 8.1 of the Loan Facility Agreement is amended by (i) deleting the word “and” at the end of clause (k) thereof, (ii) re-labeling the existing clause (l) as a new clause (m) and (iii) inserting the following new clause (l) immediately after clause (k):

(l) secured Indebtedness in an aggregate principal amount not to exceed (including any such Indebtedness resulting from any exercise of any incremental facility provisions) $110,000,000 under the Dent-A-Med Credit Agreement, as may be amended and otherwise modified, so long as the terms of such facility are not amended to be more restrictive than those in effect on the Second Amendment Effective Date or in a manner materially adverse to the Participants and all Indebtedness incurred thereunder remains non-recourse to the Sponsor or any of its Subsidiaries (other than the Dent-A-Med Entities); and

(f) Section 8.2 of the Loan Facility Agreement is amended by (i) deleting the word “and” at the end of clause (f) thereof, (ii) replacing the “.” at the end of clause (g) with “; and” and (iii) inserting the following new clause (h) immediately after clause (g):

(h) Liens securing Indebtedness permitted by Section 8.1(l); provided that such Liens apply only to (i) the Capital Stock of Dent-A-Med and (ii) the assets of the Dent-A-Med Entities, including the Capital Stock of any Subsidiaries of Dent-A-Med.

(g) Section 8.4 of the Loan Facility Agreement is amended by (i) deleting the word “and” at the end of clause (j) thereof, (ii) re-labeling the existing clause (k) as a new clause (l) and (iii) inserting the following new clause (k) immediately after clause (j):

(k) Investments by any Dent-A-Med Entity in any other Dent-A-Med Entity; and

(h) Section 8.5 of the Loan Facility Agreement is amended by (i) re-labeling the existing clause (iv) as a new clause (v) and (ii) inserting the following new clause (iv) immediately after clause (iii):

(iv) repayment in full by the Sponsor or the Dent-A-Med Entities of any existing subordinated Indebtedness of the Dent-A-Med Entities on the Second Amendment Effective Date in connection with the Sponsor’s acquisition of the Dent-A-Med Entities and

(i) Section 8.6 of the Loan Facility Agreement is amended by (i) re-labeling the existing clause (f) as a new clause (g) and (ii) inserting the following new clause (f) immediately after clause (e):

(f) sales of receivables and other assets by the Dent-A-Med Entities to the extent permitted by the Dent-A-Med Credit Facility and

(j) Section 8.8 of the Loan Facility Agreement is amended by (i) deleting the word “and” at the end of clause (iii) thereof and (ii) inserting the following new clause (v) immediately after clause (iv):

, and (v) clauses (a) and (b) shall not apply to restrictions or conditions imposed by the Dent-A-Med Credit Agreement (in the case of clause (a), solely if such restrictions and conditions apply only to the property or assets securing such Indebtedness).

2. Conditions Precedent. This Amendment shall be effective upon satisfaction of the following conditions precedent in each case in a manner reasonably satisfactory to the Servicer and each Participant:

(a) Amendment. Receipt of a counterpart of this Amendment signed by each of the Credit Parties, the Participants and the Servicer.

(b) Amendments to Credit Documents. The Credit Agreement and the other Credit Documents shall have been amended in a manner reasonably satisfactory to the Servicer.

(c) Amendments to Note Agreements. The Note Agreements shall have been (or shall be substantially simultaneously herewith) amended in a manner reasonably satisfactory to the Servicer.

(d) Representations and Warranties. At the time of and immediately after giving effect to this Amendment on the Second Amendment Effective Date, all representations and warranties of each Credit Party set forth in the Operative Documents shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects); provided, that to the extent such representation or warranty relates to a specific prior date, such representation or warranty shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects) only as of such specific prior date.

(e) Fees and Attorney Costs. Receipt by the Servicer of all fees and other amounts due and payable on or prior to the Second Amendment Effective Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Servicer) required to be reimbursed or paid by the Sponsor hereunder, under any other Operative Document and under any agreement with the Servicer.

3. Miscellaneous.

(a) This Amendment shall be deemed to be, and is, an Operative Document.

(b) Each Credit Party (i) acknowledges and consents to all of the terms and conditions of this Amendment, (ii) agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge its obligations under the Loan Facility Agreement or the other Operative Documents or any certificates, documents, agreements and instruments executed in connection therewith, (iii) affirms all of its obligations under the Operative Documents, (iv) affirms that each of the Liens granted in or pursuant to the Operative Documents are valid and subsisting and (v) agrees that this Amendment shall in no manner impair or otherwise adversely affect any of the Liens granted in or pursuant to the Operative Documents.

(c) Effective as of the Second Amendment Effective Date, all references to the Loan Facility Agreement in each of the Operative Documents shall hereafter mean the Loan Facility Agreement as amended by this Amendment.

(d) Each of the Credit Parties hereby represents and warrants to the Servicer and the Credit Parties as follows:

(i) such Credit Party has taken all necessary action to authorize the execution, delivery and performance of this Amendment;

(ii) this Amendment has been duly executed and delivered by such Credit Party and constitutes such Credit Party’s legal, valid and binding obligations, enforceable in accordance with its terms, except as such enforceability may be subject to (A) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (B) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity); and

(iii) no consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or third party is required in connection with the execution, delivery or performance by any Credit Party of this Amendment.

(e) This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same agreement. Delivery of an executed counterpart of this Amendment by telecopy, pdf or other similar electronic transmission shall be effective as an original and shall constitute a representation that an executed original shall be delivered.

(f) This Amendment 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.

[Signature pages follow]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.



SPONSOR:	AARON’S, INC.

	By:	/s/ Gilbert L. Danielson
	Name:	Gilbert L. Danielson
	Title:	Executive Vice President and Chief Financial Officer


GUARANTORS:	AARON INVESTMENT COMPANY,
	as a Guarantor

	By:	/s/ Gilbert L. Danielson
	Name:	Gilbert L. Danielson
	Title:	Vice President and Treasurer


	AARON’S PRODUCTION COMPANY,
	as a Guarantor

	By:	/s/ Gilbert L. Danielson
	Name:	Gilbert L. Danielson
	Title:	President and Chief Executive Officer


	99LTO, LLC,
	AARON’S LOGISTICS, LLC,
	AARON’S PROCUREMENT COMPANY, LLC,
	AARON’S STRATEGIC SERVICES, LLC,
	each as a Guarantor

	By:	AARON’S, INC., as sole Manager

	By:	/s/ Gilbert L. Danielson
	Name:	Gilbert L. Danielson
	Title:	Executive Vice President, Chief Financial Officer

SECOND AMENDMENT TO LOAN FACILITY AGREEMENT

AARON’S, INC.



			PROGRESSIVE FINANCE HOLDINGS, LLC,
			as a Guarantor

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President

			Prog Finance Arizona, LLC
			Prog Finance California, LLC
			Prog Finance Florida, LLC
			Prog Finance Georgia, LLC
			Prog Finance Illinois, LLC
			Prog Finance Michigan, LLC
			Prog Finance New York, LLC
			Prog Finance Ohio, LLC
			Prog Finance Texas, LLC
			Prog Finance Mid-West, LLC
			Prog Finance North-East, LLC
			Prog Finance South-East, LLC
			Prog Finance West, LLC
			NPRTO Arizona, LLC
			NPRTO California, LLC
			NPRTO Florida, LLC
			NPRTO Georgia, LLC
			NPRTO Illinois, LLC
			NPRTO Michigan, LLC
			NPRTO New York, LLC
			NPRTO Ohio, LLC
			NPRTO Texas, LLC
			NPRTO Mid-West, LLC
			NPRTO North-East, LLC
			NPRTO South-East, LLC
			NPRTO West, LLC,
			each as a Guarantor

SECOND AMENDMENT TO LOAN FACILITY AGREEMENT

AARON’S, INC.



			By:	PROG LEASING, LLC, Sole Manager

				By: PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President

			PANGO LLC, as a Guarantor

			By:	PROGRESSIVE FINANCE HOLDINGS, LLC,
				Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President

			PROG LEASING, LLC, as a Guarantor

			By:	PROGRESSIVE FINANCE HOLDINGS, LLC,
				Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President

SECOND AMENDMENT TO LOAN FACILITY AGREEMENT

AARON’S, INC.



SERVICER:	SUNTRUST BANK,
	as Servicer and as a Participant

	By:	/s/ Garrett O’Malley
	Name:	Garrett O’Malley
	Title:	Director

SECOND AMENDMENT TO LOAN FACILITY AGREEMENT

AARON’S, INC.



PARTICIPANTS:	BRANCH BANKING AND TRUST COMPANY,
	as a lender

	By:	/s/ Bradley B. Sands
	Name:	Bradley B. Sands
	Title:	Assistant Vice President


	BANK OF AMERICA, N.A.
	as a Participant

	By:	/s/ Ryan Maples
	Name:	Ryan Maples
	Title:	Vice President


	FIFTH THIRD BANK,
	as a participant

	By:	/s/ Kenneth W. Deere
	Name:	Kenneth W. Deere
	Title:	Senior Vice President


	SYNOVUS BANK,
	as a participant

	By:	/s/ John R. Frierson
	Name:	John R. Frierson
	Title:	Senior Vice President

SECOND AMENDMENT TO LOAN FACILITY AGREEMENT

AARON’S, INC.



			CITIZENS BANK, N.A.,
			as a participant

			By:	/s/ Peter van der Horst
			Name:	Peter van der Horst
			Title:	Senior Vice President


			REGIONS BANK,
			as a participant

			By:	/s/ Ryan Hammack
			Name:	Ryan Hammack
			Title:	Vice President

SECOND AMENDMENT TO LOAN FACILITY AGREEMENT

AARON’S, INC.

Exhibit 10.2

SECOND AMENDMENT TO CREDIT AGREEMENT

THIS SECOND AMENDMENT TO CREDIT AGREEMENT dated September 21, 2015 (this “Amendment”) is entered into among Aaron’s, Inc., a Georgia corporation (the “Borrower”), the Guarantors, the Lenders party hereto and SunTrust Bank, as Administrative Agent. All capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement (as defined below).

RECITALS

WHEREAS, the Borrower, the Lenders and SunTrust Bank, as Administrative Agent, Swingline Lender and Issuing Bank, entered into that certain Amended and Restated Revolving Credit and Term Loan Agreement dated as of April 14, 2014 (as amended by that certain First Amendment to Credit Agreement dated as of December 9, 2014 and as further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”);

WHEREAS, the Borrower has requested certain amendments to the Credit Agreement, in connection with the proposed acquisition by the Borrower or a Domestic Subsidiary thereof of the Dent-A-Med Entities (as defined below) on or after the Second Amendment Effective Date (the “Dent-A-Med Acquisition”);

WHEREAS, the Lenders agree to such requested amendments subject to the terms and conditions of this Amendment;

1. Amendments to Credit Agreement. The Credit Agreement is hereby amended as follows:

(a) The following definitions are added in the appropriate alphabetical order to Section 1.1 of the Credit Agreement:

“Dent-A-Med” means Dent-A-Med Inc., an Oklahoma corporation.

“Second Amendment” means that certain Second Amendment to Credit Agreement dated as of the Second Amendment Effective Date, by and among the Borrower, the Guarantors, the Lenders party hereto and the Administrative Agent.

“Second Amendment Effective Date” means September 21, 2015.

(b) The following definitions in Section 1.1 of the Credit Agreement are amended as follows:

(i) The definition of “Consolidated EBITDA” is amended to read as follows:

“Consolidated EBITDA” shall mean for the Borrower and its Subsidiaries (other than the Dent-A-Med Entities) 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, (iv) all other non-cash charges, (v) closing costs, fees and expenses incurred during such period in connection with the Closing Date Acquisition and the transactions contemplated by the Transaction Documents and the Note Agreements, in each case paid during such period to Persons that are not Affiliates of the Borrower or any Subsidiary, not to exceed $15,000,000 in the aggregate, (vi) one-time fees, costs and expenses (including without limitation legal and other professional fees) in connection with (x) the retirement and severance of Ronald W. Allen and David Buck and (y) the bid by Vintage Capital Management to acquire the Borrower, and other proxy contests and shareholder proposals, including costs, expenses and fees relating to responding to, defending and settling such matters, in each case to the extent such fees, costs and expenses were incurred prior to the First Amendment Effective Date, and (vii) transaction closing costs, fees and expenses actually incurred during such period in connection with the negotiation and closing of the First Amendment to Credit Agreement, and the related amendments to the Loan Facility Agreement and the Note Agreements and the related transaction documents, in each case paid during such period to Persons that are not Affiliates of the Borrower or any Subsidiary.

(ii) The definition of “Consolidated Interest Expense” is amended to read as follows:

“Consolidated Interest Expense” shall mean, for the Borrower and its Subsidiaries (other than the Dent-A-Med Entities) 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).

(iii) The definition of “Consolidated Lease Expense” is amended to read as follows:

“Consolidated Lease Expense” shall mean, for any period, the aggregate amount of fixed and contingent rentals payable by the Borrower and its Subsidiaries (other than the Dent-A-Med Entities) 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.

(iv) The definition of “Consolidated Net Income” is amended to read as follows:

“Consolidated Net Income” shall mean, for any period, the net income (or loss) of the Borrower and its Subsidiaries (other than the Dent-A-Med Entities) 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, (iii) any equity interest of the Borrower or any Subsidiary of the Borrower (other than the Dent-A-Med Entities) 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 Borrower or any Subsidiary (other than the Dent-A-Med Entities) on the date that such Person’s assets are acquired by the Borrower or any Subsidiary.

(v) The definition of “Consolidated Total Debt” is amended to read as follows:

“Consolidated Total Debt” shall mean, at any time, all then currently outstanding obligations, liabilities and indebtedness of the Borrower and its Subsidiaries (other than the Dent-A-Med Entities) on a consolidated basis of the types described in the definition of Indebtedness.

(vi) The definition of “Material Domestic Subsidiary” is amended to read as follows:

“Material Domestic Subsidiary” means any Domestic Subsidiary of the Borrower that has not already become a Subsidiary Loan Party (other than the Dent-A-Med Entities) that (a) at any time (i) accounted for five percent (5.0%) of Consolidated EBITDA for any period of four (4) Fiscal Quarters ended or (ii) holds assets with an aggregate book value equal to or greater than five percent (5.0%) of the aggregate fair market value of the total assets of the Borrower and its Subsidiaries on a consolidated basis or (b) when taken together with other Domestic Subsidiaries that are not already Subsidiary Loan Parties, (x) accounted for ten percent (10.0%) of Consolidated EBITDA for any period of four (4) Fiscal Quarters ended or (y) holds assets with an aggregate book value equal to or greater than ten percent (10.0%) of the aggregate fair market value of the total assets of the Borrower and its Subsidiaries on a consolidated basis. Upon the acquisition of a new Domestic Subsidiary or the merger or consolidation of any Person with or into an existing Domestic Subsidiary (or the acquisition of other assets by an existing Domestic Subsidiary), the qualification of the affected Domestic Subsidiary as a “Material Subsidiary” pursuant to the foregoing requirements of this definition shall be determined on a pro forma basis as if such Domestic Subsidiary had been acquired or such merger, consolidation or other acquisition had occurred, as applicable, at the beginning of the relevant period of four consecutive Fiscal Quarters.

(vii) The definition of “Permitted Acquisition” is amended to read as follows:

“Permitted Acquisition” shall mean the Closing Date Acquisition, the Dent-A-Med Acquisition (as such term is defined in the Second Amendment) and any other Acquisition (whether foreign or domestic) so long as, in each case with respect to the Dent-A-Med Acquisition or any such other Acquisition, (a) immediately before and after giving effect to such Acquisition, no Default or Event of Default is in existence, (b) such Acquisition has been approved by the board of directors of the Person being acquired prior to any public announcement thereof, (c) to the extent such Acquisition is of a Person or Persons that are not organized in the United States and/or of all or substantially all of the assets of a Person

located outside the United States and the aggregate EBITDA attributable to all Foreign Subsidiaries for the most recently ended twelve month period (giving pro forma effect to such Acquisition) exceeds twenty percent (20%) of Consolidated EBITDA for the most recently ended twelve month period, the Borrower complies with Section 5.10(b) hereof and (d) immediately after giving effect to such Acquisition, the Borrower and Subsidiaries will not be engaged in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the Closing Date and businesses reasonably related thereto. As used herein, Acquisitions will be considered related Acquisitions if the sellers under such Acquisitions are the same Person or any Affiliate thereof.

(a) Immediately upon receipt by the Borrower or any of its Domestic Subsidiaries of any (i) Net Cash Proceeds of any sale or disposition by the Borrower or any of its Domestic Subsidiaries of any of its assets or (ii) any Net Cash Proceeds from any casualty insurance policies or eminent domain, condemnation or similar proceedings that, with respect to clauses (i) and (ii), exceed (A) $5,000,000 for any such single asset sale (or series of related asset sales) or for any such single casualty event or (B) $20,000,000 for all such asset sales or casualty events from the date hereof through the Maturity Date, the Borrower shall prepay the Term Loans in an amount equal to all such Net Proceeds (subject to the terms of the Intercreditor Agreement); provided, that the Borrower shall not be required to prepay the Term Loans with respect to Net Cash Proceeds from (w) so long as such Net Cash Proceeds are required to be applied to repay or provide cash collateral for Indebtedness under the Dent-A-Med Credit Agreement (regardless of permanent commitment reductions thereunder), subject to any exceptions or reinvestment rights provided for in the Dent-A-Med Credit Agreement as in effect on the Second Amendment Effective Date, (A) sales of assets by the Dent-A-Med Entities or (B) any casualty insurance policies or eminent domain, condemnation or similar proceedings are received by any Dent-A-Med Entity, (x) sales of assets in the ordinary course of business of the type described in Section 7.6(a) and (b), (y) sales of assets of the types described in Section 7.6(c), (d), (e) and (g) or (z) casualty insurance policies or eminent domain, condemnation or similar proceedings that are, in either case of clause (y) or clause (z), reinvested in assets then used or usable in the business of the Borrower and its Subsidiaries within 180 days following receipt thereof or committed to be reinvested pursuant to a binding contract prior to the expiration of such 180-day period and actually reinvested within 360 days following receipt thereof, so long as such proceeds are held in accounts at SunTrust Bank until reinvested. Any such prepayment shall be applied in accordance with subsection (c) of this Section.

(d) Clauses (a) and (b) of Section 5.1 of the Credit Agreement are amended to read as follows:

(a) as soon as available and in any event within 90 days after the end of each Fiscal Year, a copy of the annual audited report for such Fiscal Year for the Borrower and its Subsidiaries, containing a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, stockholders’ equity and cash flows (together with all footnotes thereto) of the Borrower 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 Borrower 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. It is understood and agreed that the requirements of this subsection (x) shall be satisfied by delivery of the applicable annual report on Form 10-K of the Borrower to the Securities and Exchange Commission if delivered within the applicable time period noted herein and is available to the Lenders on EDGAR and (y) are effective as of the Closing Date;

(b) as soon as available and in any event within 45 days after the end of each Fiscal Quarter of each Fiscal Year (other than the last Fiscal Quarter), an unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter and the related unaudited consolidated statements of income and cash flows of the Borrower 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 the previous Fiscal Year, all certified by the chief financial officer, treasurer or controller of the Borrower as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes. It is understood and agreed that the requirements of this subsection (x) shall be satisfied by delivery of the applicable quarterly report on Form 10-Q of the Borrower to the Securities and Exchange Commission if delivered within the applicable time period noted herein and is available to the Lenders on EDGAR and (y) are effective as of the Closing Date;

(e) Section 5.10(d) of the Credit Agreement is amended to read as follows:

(d) The Borrower will cause any Domestic Subsidiary or any other Domestic Controlled Affiliate (other than the Dent-A-Med Entities in the case of the Dent-A-Med Credit Agreement or Progressive Finance solely in respect of its obligations under the DAMI Pledge Agreement) that provides a Guarantee or otherwise becomes liable (including as a borrower or co-borrower) in respect of the obligations under any Note Purchase Agreement or any other agreement providing for the incurrence of Indebtedness that is pari passu with the Indebtedness under this Agreement to (1) become a Subsidiary Loan Party by executing agreements in the form of Annex I to the Subsidiary Guarantee Agreement and deliver simultaneously therewith similar documents applicable to such Domestic Subsidiary described in Section 3.1 as reasonably requested by the Administrative Agent.

(f) Section 7.1 of the Credit Agreement is amended by (i) deleting the word “and” at the end of clause (j) thereof, (ii) re-labeling the existing clause (k) as a new clause (l) and (iii) inserting the following new clause (k) immediately after clause (j):

(k) secured Indebtedness in an aggregate principal amount not to exceed (including any such Indebtedness resulting from any exercise of any incremental facility provisions) $110,000,000 under the Dent-A-Med Credit Agreement, as may be amended and otherwise modified, so long as the terms of such facility are not amended to be more restrictive than those in effect on the Second Amendment Effective Date or in a manner materially adverse to the Lenders and all Indebtedness incurred thereunder remains non-recourse to the Borrower or any of its Subsidiaries (other than the Dent-A-Med Entities); and

(g) Section 7.2 of the Credit Agreement is amended by (i) deleting the word “and” at the end of clause (f) thereof, (ii) replacing the “.” at the end of clause (g) with “; and” and (iii) inserting the following new clause (h) immediately after clause (g):

(h) Liens securing Indebtedness permitted by Section 7.1(k); provided that such Liens apply only to (i) the Capital Stock of Dent-A-Med and (ii) the assets of the Dent-A-Med Entities, including the Capital Stock of any Subsidiaries of Dent-A-Med.

(h) Section 7.4 of the Credit Agreement is amended by (i) deleting the word “and” at the end of clause (j) thereof, (ii) re-labeling the existing clause (k) as a new clause (l) and (iii) inserting the following new clause (k) immediately after clause (j):

(k) Investments by any Dent-A-Med Entity in any other Dent-A-Med Entity; and

(i) Section 7.5 of the Credit Agreement is amended by (i) re-labeling the existing clause (iv) as a new clause (v) and (ii) inserting the following new clause (iv) immediately after clause (iii):

(iv) repayment in full by the Borrower or the Dent-A-Med Entities of any existing subordinated Indebtedness of the Dent-A-Med Entities on the Second Amendment Effective Date in connection with the Borrower’s acquisition of the Dent-A-Med Entities and

(j) Section 7.6 of the Credit Agreement is amended by (i) re-labeling the existing clause (f) as a new clause (g) and (ii) inserting the following new clause (f) immediately after clause (e):

(f) sales of receivables and other assets by the Dent-A-Med Entities to the extent permitted by the Dent-A-Med Credit Facility and

(k) Section 7.8 of the Credit Agreement is amended by (i) deleting the word “and” at the end of clause (iii) thereof and (ii) inserting the following new clause (v) immediately after clause (iv):

2. Conditions Precedent. This Amendment shall be effective upon satisfaction of the following conditions precedent in each case in a manner reasonably satisfactory to the Administrative Agent and each Lender:

(a) Amendment. Receipt of a counterpart of this Amendment signed by each of the Loan Parties, the Lenders and the Administrative Agent.

(b) Amendments to Loan Facility Documents. The Loan Facility Agreement and the other Loan Facility Documents shall have been amended and restated in a manner reasonably satisfactory to the Administrative Agent.

(c) Amendments to Note Agreements. The Note Agreements shall have been (or shall be substantially simultaneously herewith) amended in a manner reasonably satisfactory to the Administrative Agent.

representations and warranties that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects); provided, that to the extent such representation or warranty relates to a specific prior date, such representation or warranty shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects) only as of such specific prior date.

(e) Fees and Attorney Costs. Receipt by the Administrative Agent of all fees and other amounts due and payable on or prior to the Second Amendment Effective Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Administrative Agent) required to be reimbursed or paid by the Borrower hereunder, under any other Loan Document and under any agreement with the Administrative Agent.

3. Miscellaneous.

(a) This Amendment shall be deemed to be, and is, a Loan Document.

(b) Each Loan Party (i) acknowledges and consents to all of the terms and conditions of this Amendment, (ii) agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge its obligations under the Credit Agreement or the other Loan Documents or any certificates, documents, agreements and instruments executed in connection therewith, (iii) affirms all of its obligations under the Loan Documents, (iv) affirms that each of the Liens granted in or pursuant to the Loan Documents are valid and subsisting and (v) agrees that this Amendment shall in no manner impair or otherwise adversely affect any of the Liens granted in or pursuant to the Loan Documents.

(c) Effective as of the Second Amendment Effective Date, all references to the Credit Agreement in each of the Loan Documents shall hereafter mean the Credit Agreement as amended by this Amendment.

(d) Each of the Loan Parties hereby represents and warrants to the Administrative Agent and the Loan Parties as follows:

(i) such Loan Party has taken all necessary action to authorize the execution, delivery and performance of this Amendment;

(ii) this Amendment has been duly executed and delivered by such Loan Party and constitutes such Loan Party’s legal, valid and binding obligations, enforceable in accordance with its terms, except as such enforceability may be subject to (A) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (B) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity); and

transmission shall be effective as an original and shall constitute a representation that an executed original shall be delivered.

(f) This Amendment 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.

[Signature pages follow]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.



BORROWER:	AARON’S, INC.

	By:	/s/ Gilbert L. Danielson
	Name:	Gilbert L. Danielson
	Title:	Executive Vice President and Chief Financial Officer


GUARANTORS:	AARON INVESTMENT COMPANY,
	as a Guarantor

	By:	/s/ Gilbert L. Danielson
	Name:	Gilbert L. Danielson
	Title:	Vice President and Treasurer


	AARON’S PRODUCTION COMPANY,
	as a Guarantor

	By:	/s/ Gilbert L. Danielson
	Name:	Gilbert L. Danielson
	Title:	President and Chief Executive Officer


	99LTO, LLC,
	AARON’S LOGISTICS, LLC,
	AARON’S PROCUREMENT COMPANY, LLC,
	AARON’S STRATEGIC SERVICES, LLC,
	each as a Guarantor

	By:	AARON’S, INC., as sole Manager

	By:	/s/ Gilbert L. Danielson
	Name:	Gilbert L. Danielson
	Title:	Executive Vice President, Chief Financial Officer

SECOND AMENDMENT TO CREDIT AGREEMENT

AARON’S, INC.



			PROGRESSIVE FINANCE HOLDINGS, LLC,
			as a Guarantor

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President

			Prog Finance Arizona, LLC
			Prog Finance California, LLC
			Prog Finance Florida, LLC
			Prog Finance Georgia, LLC
			Prog Finance Illinois, LLC
			Prog Finance Michigan, LLC
			Prog Finance New York, LLC
			Prog Finance Ohio, LLC
			Prog Finance Texas, LLC
			Prog Finance Mid-West, LLC
			Prog Finance North-East, LLC
			Prog Finance South-East, LLC
			Prog Finance West, LLC
			NPRTO Arizona, LLC
			NPRTO California, LLC
			NPRTO Florida, LLC
			NPRTO Georgia, LLC
			NPRTO Illinois, LLC
			NPRTO Michigan, LLC
			NPRTO New York, LLC
			NPRTO Ohio, LLC
			NPRTO Texas, LLC
			NPRTO Mid-West, LLC
			NPRTO North-East, LLC
			NPRTO South-East, LLC
			NPRTO West, LLC,
			each as a Guarantor

SECOND AMENDMENT TO CREDIT AGREEMENT

AARON’S, INC.



			By:	PROG LEASING, LLC, Sole Manager

				By: PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President

			PANGO LLC, as a Guarantor

			By:	PROGRESSIVE FINANCE HOLDINGS, LLC,
				Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President

			PROG LEASING, LLC, as a Guarantor

			By:	PROGRESSIVE FINANCE HOLDINGS, LLC,
				Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President

SECOND AMENDMENT TO CREDIT AGREEMENT

AARON’S, INC.



ADMINISTRATIVE AGENT:	SUNTRUST BANK,
	as Administrative Agent, as Issuing Bank, as
	Swingline Lender and as a Lender

	By:	/s/ Garrett O’Malley
	Name:	Garrett O’Malley
	Title:	Director

SECOND AMENDMENT TO CREDIT AGREEMENT

AARON’S, INC.



LENDERS:	BANK OF AMERICA, N.A.
	as a Lender

	By:	/s/ Ryan Maples
	Name:	Ryan Maples
	Title:	Vice President


	FIFTH THIRD BANK,
	as a Lender

	By:	/s/ Kenneth W. Deere
	Name:	Kenneth W. Deere
	Title:	Senior Vice President


	SYNOVUS BANK,
	as a Lender

	By:	/s/ John R. Frierson
	Name:	John R. Frierson
	Title:	Senior Vice President


	CITIZENS BANK, N.A.,
	as a Lender

	By:	/s/ Peter van der Horst
	Name:	Peter van der Horst
	Title:	Senior Vice President


	REGIONS BANK,
	as a Lender

	By:	/s/ Ryan Hammack
	Name:	Ryan Hammack
	Title:	Vice President

SECOND AMENDMENT TO CREDIT AGREEMENT

AARON’S, INC.



PARTICIPANTS:	BRANCH BANKING AND TRUST COMPANY,
	as a Participant

	By:	/s/ Bradley B. Sands
	Name:	Bradley B. Sands
	Title:	Assistant Vice President

SECOND AMENDMENT TO CREDIT AGREEMENT

AARON’S, INC.

Exhibit 10.3

AMENDMENT NO. 2 TO NOTE PURCHASE AGREEMENT

This AMENDMENT NO. 2 TO NOTE PURCHASE AGREEMENT (this “Agreement”), is made as of September 21, 2015, by and among (a) AARON’S, INC., a Georgia corporation (together with its successors and assigns, the “Company”) and AARON INVESTMENT COMPANY, a Delaware corporation (together with its successors and assigns, “AIC” and together with the Company, collectively, the “Issuers”), and (b) each of the Persons holding one or more Notes (as defined below) on the Second Amendment Effective Date (as defined below) (collectively, the “Noteholders”), with respect to that certain Note Purchase Agreement, dated as of April 14, 2014, as amended by that certain Amendment No. 1 to Note Purchase Agreement, dated as of December 9, 2014 (as so amended and in effect immediately prior to giving effect to this Agreement, the “Current Note Purchase Agreement” and, as amended pursuant to this Agreement and as may be further amended, restated or otherwise modified from time to time, the “Note Purchase Agreement”), by and among the Issuers and each of the Noteholders. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Current Note Purchase Agreement.

RECITALS:

A. The Issuers and Noteholders are parties to the Current Note Purchase Agreement, pursuant to which the Issuers issued and sold an aggregate principal amount of $225,000,000 of their 4.75% Series A Senior Notes due April 14, 2021 (the “Notes”) to the Noteholders;

B. The Noteholders are the holders of all outstanding Notes; and

C. The Issuers have requested, and the Noteholders have agreed to, certain amendments and modifications to the provisions of the Current Note Purchase Agreement, in connection with the proposed acquisition by the Company or a Domestic Subsidiary thereof of the Dent-A-Med Entities (as defined below) on or after the Second Amendment Effective Date (the “Dent-A-Med Acquisition”), subject to the terms and conditions set forth herein.

AGREEMENT:

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuers and the Noteholders agree as follows:


1.	AMENDMENTS TO CURRENT NOTE PURCHASE AGREEMENT.

Subject to the satisfaction of the conditions set forth in Section 3 hereof, the Current Note Purchase Agreement is hereby amended by this Agreement as follows:


1.1.	Offer to Prepay upon Sale of Assets.

Paragraph 4D(a) of the Current Note Purchase Agreement is hereby amended and restated in its entirety to read as follows:

“(a) Notice and Offer. In the event the Company or any of its Domestic Subsidiaries receives (x) Net Cash Proceeds from any Asset Disposition (other than from a sale or disposal of the types described in clauses (a) and (b) of paragraph 6E) or (y) Net Cash Proceeds from any casualty insurance policies or eminent domain, condemnation or similar proceeding (a “Casualty Event”) that, with respect to clauses (x) and (y), results in Net Cash Proceeds in excess of $5,000,000 for any such single Asset Disposition (or series of related Asset Disposition) or for any single Casualty Event or $20,000,000 for all such Asset Dispositions or Casualty Events from the date hereof through the maturity date of the Notes (each, a “Debt Prepayment Transfer”), the Company will, within ten (10) days of the occurrence thereof, give written notice of such Debt Prepayment Transfer to each holder of Notes. Subject to any required pro rata sharing of such Net Cash Proceeds with the holders of other Senior Debt in accordance with the terms of the Intercreditor Agreement and subject to the right of reinvestment set forth in the proviso below, such written notice shall (i) contain, and such written notice shall constitute, an irrevocable offer (the “Transfer Prepayment Offer”) to prepay, at the election of each holder, a portion of the Notes held by such holder equal to such holder’s Ratable Portion of the Net Cash Proceeds in respect of such Debt Prepayment Transfer, together with interest on the amount to be so prepaid accrued to the Transfer Prepayment Date and (ii) shall specify a date (the “Transfer Prepayment Date”) that is not less than thirty (30) days and not more than sixty (60) days after the date of such notice on which such prepayment is to be made. If the Transfer Prepayment Date shall not be specified in such notice, the Transfer Prepayment Date shall be the Business Day that falls on or next following the fortieth (40th) day after the date of such notice; provided that the Issuers shall not be required to make a Transfer Prepayment Offer with respect to Net Cash Proceeds from any Debt Prepayment Transfer to the extent such Net Cash Proceeds (x) to the extent required to be applied to repay or provide cash collateral for Indebtedness under the Dent-A-Med Credit Agreement (regardless of permanent commitment reductions thereunder), subject to any exceptions or reinvestment rights provided for in the Dent-A-Med Credit Agreement as in effect on the Second Amendment Effective Date, arise from (1) sales of assets by the Dent-A-Med Entities or (2) any casualty insurance policies or eminent domain, condemnation or similar proceedings if the beneficiary under any such policy or the party to any such proceedings is any Dent-A-Med Entity, or (y) are reinvested in assets then used or usable in the business of the Issuers and its Subsidiaries within 180 days following receipt thereof or committed to be reinvested pursuant to a binding contract prior to the expiration of such 180-day period and are actually reinvested within 360 days following receipt thereof.”


1.2.	Covenant Relating to Domestic Subsidiaries.

Paragraph 5H of the Current Note Purchase Agreement is hereby amended and restated in its entirety to read as follows:

“5H. Covenant Relating to Domestic Subsidiaries. The Company will not permit any Domestic Subsidiary (other than the Dent-A-Med Entities in the case of the Dent-A-Med Credit Agreement or Progressive Finance solely in respect of its obligations under the DAMI Pledge Agreement) or any other Domestic Controlled Affiliate to enter into any

Guarantee or otherwise become liable (including as a borrower or co-borrower) in respect of the obligations under the SunTrust Agreement, the SunTrust Loan Facility Agreement, the MetLife NPA, the Existing Note Purchase Agreement or any other agreement providing for the incurrence of Senior Debt by the Company or any Subsidiary, unless at the time of entering into such Guarantee, such Domestic Subsidiary or Domestic Controlled Affiliate (a “Subsidiary Guarantor”) contemporaneously therewith executes and delivers, to each of the holders of the Notes (i) a duly authorized joinder agreement to the Subsidiary Guarantee Agreement in the form of Annex 1 thereto (a “Joinder Agreement”), (ii) a duly authorized joinder to the Intercreditor Agreement in substantially the form of Schedule 1 thereto and (iii) a certificate of such Domestic Subsidiary’s or Domestic Controlled Affiliate’s secretary or another responsible officer certifying attached copies of such Domestic Subsidiary’s or Domestic Controlled Affiliate’s constitutive documents and relevant resolutions, and an opinion of counsel to such Person regarding the authorization, execution and delivery of the joinder agreements in clauses (i) and (ii) hereof and their enforceability, which opinion shall be satisfactory in all respects to the Required Holders.”


1.3.	Indebtedness.

Paragraph 6C of the Current Note Purchase Agreement is hereby amended by (i) deleting the word “and” at the end of clause (k) thereof, (ii) re-labeling the existing clause (l) as a new clause (m) and (iii) inserting the following new clause (l) immediately after clause (k):

“(l) secured Indebtedness in an aggregate principal amount not to exceed (including any such Indebtedness resulting from any exercise of any incremental facility provisions) $110,000,000 under the Dent-A-Med Credit Agreement, as may be amended and otherwise modified, so long as the terms of such facility are not amended to be more restrictive than those in effect on the Second Amendment Effective Date or in a manner that would be materially adverse to the holders of the Notes and all Indebtedness incurred thereunder remains non-recourse to the Company or any of its Subsidiaries (other than the Dent-A-Med Entities); and”


1.4.	Liens.

Paragraph 6D of the Current Note Purchase Agreement is hereby amended by (i) deleting the word “and” at the end of clause (k) thereof, (ii) replacing the “.” at the end of clause (l) with “; and” and (iii) inserting the following new clause (m) immediately after clause (l):

“(m) Liens securing Indebtedness permitted by paragraph 6C(l); provided that such Liens apply only to (i) the Capital Stock of Dent-A-Med and (ii) the assets of the Dent-A-Med Entities, including the Capital Stock of any Subsidiaries of Dent-A-Med.”


1.5.	Sale of Assets.

Paragraph 6E of the Current Note Purchase Agreement is hereby amended by (i) re-labeling the existing clause (e) as a new clause (f), (ii) deleting the word “and” at the end of clause (d) thereof, and (iii) inserting the following new clause (e) immediately after clause (d):

“(e) sales of receivables and other assets by the Dent-A-Med Entities to the extent permitted by the Dent-A-Med Credit Facility and”


1.6.	Restricted Payments.

Paragraph 6F of the Current Note Purchase Agreement is hereby amended by (i) re-labeling the existing clause (iv) as a new clause (v), (ii) deleting the word “and” at the end of clause (iii) thereof, and (iii) inserting the following new clause (iv) immediately after clause (iii):

“(iv) repayment in full by the Company or the Dent-A-Med Entities of any existing subordinated Indebtedness of the Dent-A-Med Entities on the Second Amendment Effective Date in connection with the Company’s acquisition of the Dent-A-Med Entities and”


1.7.	Restricted Investments.

Paragraph 6G of the Current Note Purchase Agreement is hereby amended by (i) deleting the word “and” at the end of clause (j) thereof, (ii) re-labeling the existing clause (k) as a new clause (l) and (iii) inserting the following new clause (k) immediately after clause (j):

“(k) Investments by any Dent-A-Med Entity in any other Dent-A-Med Entity; and”


1.8.	Restrictive Agreements.

Paragraph 6H of the Current Note Purchase Agreement is hereby amended by (i) deleting the word “and” at the end of clause (iii) thereof, (ii) replacing the “.” at the end of clause (iv) with “, and” and (iii) inserting the following new clause (v) immediately after clause (iv):

“(v) the foregoing shall not apply to restrictions or conditions imposed by the Dent-A-Med Credit Agreement (in the case of clause (a), solely if such restrictions and conditions apply only to the property or assets securing such Indebtedness).”


1.9.	Amended and Restated Defined Terms.

The following definitions set forth in paragraph 10B of the Current Note Purchase Agreement are hereby amended and restated in their entirety to read as follows:

$15,000,000 in the aggregate, (vi) one-time fees, costs and expenses (including without limitation legal and other professional fees) in connection with (x) the retirement and severance of Ronald W. Allen and David Buck and (y) the bid by Vintage Capital Management to acquire the Company, and other proxy contests and shareholder proposals, including costs, expenses and fees relating to responding to, defending and settling such matters, in each case to the extent such fees, costs and expenses were incurred prior to the First Amendment Effective Date, and (vii) transaction closing costs, fees and expenses actually incurred during such period in connection with the negotiation and closing of the First Amendment to NPA, and the related amendments to the SunTrust Loan Facility Agreement, the SunTrust Agreement, the MetLife NPA, the Existing Note Purchase Agreement, and the related transaction documents, in each case paid during such period to Persons that are not Affiliates of the Company or any Subsidiary.

“Consolidated Interest Expense” shall mean, for the Company and its Subsidiaries (other than the Dent-A-Med Entities) 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 Capitalized Lease 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 Company and its Subsidiaries (other than the Dent-A-Med Entities) with respect to leases of real and personal property (excluding Capitalized 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 Company and its Subsidiaries (other than the Dent-A-Med Entities) 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 Company and its Subsidiaries (other than the Dent-A-Med Entities) in the unremitted earnings of any Person that is not the Company or a Subsidiary, and (iv) any income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with the Company or a Subsidiary (other than the Dent-A-Med Entities).

“Consolidated Total Debt” shall mean, at any time, all then currently outstanding obligations, liabilities and indebtedness of the Company and its Subsidiaries (other than the Dent-A-Med Entities) on a consolidated basis of the types described in the definition of Indebtedness.

“Permitted Acquisitions” shall mean the Closing Date Acquisition, the Dent-A-Med Acquisition (as such term is defined in the Second Amendment to NPA) and any other Acquisition (whether foreign or domestic) so long as, in each case with respect to the Dent-A-Med Acquisition or any such other Acquisition, (a) immediately before and after giving effect to such Acquisition, no Default or Event of Default is in existence, (b) such Acquisition

has been approved by the board of directors of the Person being acquired prior to any public announcement thereof, (c) to the extent such Acquisition is of a Person or Persons that are not organized in the United States and/or of all or substantially all of the assets of a Person located outside the United States and the aggregate EBITDA attributable to all Foreign Subsidiaries for the most recently ended twelve month period (after giving pro forma effect to such Acquisition) exceeds twenty percent (20%) of Consolidated EBITDA for the most recently ended twelve month period, the Company complies with paragraph 5N hereof, and (d) immediately after giving effect to such Acquisition, the Company and its Subsidiaries will not be engaged in any business other than businesses of the type conducted by the Company and its Subsidiaries on the Date of Closing and businesses reasonably related thereto. As used herein, Acquisitions will be considered related Acquisitions if the sellers under such Acquisitions are the same Person or any affiliate thereof.


1.10.	New Defined Terms.

The following defined terms are hereby added to paragraph 10B of the Current Note Purchase Agreement in their proper alphabetical order:

“DAMI Pledge Agreement” means that certain Collateral Pledge Agreement, dated on or about the Second Amendment Effective Date, made and executed by Progressive Finance in favor of Wells Fargo Bank, N.A.

“Dent-A-Med” means Dent-A-Med Inc., an Oklahoma corporation.

“Second Amendment Effective Date” means September 21, 2015.

“Second Amendment to NPA” means that certain Amendment No. 2 to Note Purchase Agreement, dated as of the Second Amendment Effective Date, by and among the Issuers and each of the holders of the Notes party thereto.


2.	WARRANTIES AND REPRESENTATIONS.

To induce the Noteholders to enter into this Agreement, each of the Issuers represents and warrants to each of the Noteholders that as of the Second Amendment Effective Date:


2.1.	Corporate and Other Organization and Authority.

(a) Each Issuer is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or limited liability company and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and

(b) Each of the Issuers has the requisite organizational power and authority to execute and deliver this Agreement and to perform its obligations hereunder and under the Note Purchase Agreement.


2.2.	Authorization, etc.

This Agreement has been duly authorized by all necessary corporate or limited liability company action on the part of the Issuers, as applicable. Each of this Agreement and the Note Purchase Agreement constitutes a legal, valid and binding obligation of each Issuer, enforceable, in each case, against such Issuer in accordance with its terms, except as such enforceability may be limited by:

(a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and

(b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).


2.3.	No Conflicts, etc.

The execution and delivery by each Issuer of this Agreement and the performance by such Issuer of its obligations under each of this Agreement and the Note Purchase Agreement do not conflict with, result in any breach in any of the provisions of, constitute a default under, violate or result in the creation of any Lien upon any property of such Issuer under the provisions of:

(a) any charter document, constitutive document, agreement with shareholders or members, bylaws or any other organizational or governing agreement of such Issuer;

(b) any agreement, instrument or conveyance by which such Issuer or any of its Subsidiaries or any of their respective properties may be bound or affected; or

(c) any statute, rule or regulation or any order, judgment or award of any court, tribunal or arbitrator by which such Issuer or any of its Subsidiaries or any of their respective properties may be bound or affected.


2.4.	Governmental Consent.

The execution and delivery by the Issuers of this Agreement and the performance by the Issuers of their respective obligations hereunder and under the Note Purchase Agreement do not require any consents, approvals or authorizations of, or filings, registrations or qualifications with, any Governmental Authority on the part of any Issuer.


2.5.	No Defaults.

No event has occurred and is continuing and no condition exists which, immediately before or immediately after giving effect to the amendments provided for in this Agreement, constitutes or would constitute a Default or an Event of Default.

2.6. Representations in Note Purchase Agreement.

After giving effect to this Agreement, the representations and warranties contained in the Note Purchase Agreement are true and correct in all material respects as of the Second Amendment Effective Date.


3.	CONDITIONS TO EFFECTIVENESS OF AMENDMENTS.

The amendment of the Current Note Purchase Agreement as set forth in this Agreement shall become effective as of the date first written above (the “Second Amendment Effective Date”), provided that each of the following conditions shall have been satisfied:

(a) the Noteholders shall have received a fully executed copy of this Agreement executed by the Issuers and the Noteholders;

(b) the Noteholders shall have received a fully executed copy of the Reaffirmation of Guarantee attached hereto as Exhibit A executed by the Subsidiary Guarantors;

(d) the Noteholders shall have received fully executed copies of the following:

(i) that certain Amendment No. 2 to Note Purchase Agreement, dated as of the Second Amendment Effective Date, by and among, inter alios, the Company, AIC, and the MetLife Parties,

(ii) that certain Amendment No. 5 to Note Purchase Agreement, dated as of the Second Amendment Effective Date, by and among, inter alios, the Company, AIC and the Existing Noteholders,

(iii) that certain Second Amendment to Credit Agreement, dated as of the Second Amendment Effective Date (the “Credit Agreement Amendment”), by and among, inter alios, the Company, SunTrust Bank, acting as Administrative Agent (the

“Administrative Agent”) and in certain other capacities, and each of the lenders party thereto,

(iv) that certain Second Amendment to Loan Facility Agreement, dated as of the Second Amendment Effective Date (the “Loan Facility Amendment”), by and among, inter alios, the Company, SunTrust and the other financial institutions party thereto, and

(v) the Dent-A-Med Credit Agreement,

and each of the amendments referred to in the foregoing clauses (i) to (iv), inclusive, shall be in form and substance reasonably satisfactory to the Noteholders and shall have become effective prior to or concurrent with the effectiveness of this Agreement; and

(e) the Company shall have paid all reasonable fees, charges and disbursements of counsel to the Noteholders incurred in connection with this Agreement and the transactions contemplated hereby.


4.	POST-CLOSING COVENANT.

The Company shall deliver to the Noteholders, promptly upon execution thereof, a fully executed copy of the DAMI Pledge Agreement, which agreement (i) shall be in substantially the same form as the most recent draft of the DAMI Pledge Agreement (the “Draft Pledge Agreement”) provided to the Noteholders on or prior to the Second Amendment Effective Date and (ii) shall not contain any changes from the Draft Pledge Agreement that are adverse to Progressive Finance or the Noteholders.


5.	MISCELLANEOUS.


5.1.	Governing Law.

THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.


5.2.	Duplicate Originals; Electronic Signature.

Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts that, collectively, show execution by each party hereto shall constitute one duplicate original. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.


5.3.	Waiver and Amendments.

Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, or by any action or inaction, but only by an instrument in writing signed by each of the parties signatory hereto.


5.4.	Costs and Expenses.

Whether or not the amendments contemplated by this Agreement become effective, each of the Issuers confirms its obligation under paragraph 11B of the Note Purchase Agreement and agrees that, on the Second Amendment Effective Date (or if an invoice is delivered subsequent to the Second Amendment Effective Date or if such amendments do not become effective, promptly after receiving any statement or invoice therefor), it will pay all costs and expenses of the Noteholders relating to this Agreement, including, but not limited to, the statement for reasonable fees and disbursements of the Noteholders’ special counsel presented to the Company on the Second Amendment Effective Date. The Issuers will also promptly pay, upon receipt thereof, each additional statement for reasonable fees and disbursements of the Noteholders’ special counsel rendered after the Second Amendment Effective Date in connection with this Agreement.


5.5.	Successors and Assigns.

This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. The provisions hereof are intended to be for the benefit of the Noteholders and shall be enforceable by any successor or assign of any such Noteholder, whether or not an express assignment of rights hereunder shall have been made by such Noteholder or its successors and assigns.


5.6.	Survival.

All warranties, representations, certifications and covenants made by the Issuers in this Agreement shall be considered to have been relied upon by the Noteholders and shall survive the execution and delivery of this Agreement, regardless of any investigation made by or on behalf of the Noteholders.


5.7.	Part of Current Note Purchase Agreement; Future References, etc.

This Agreement shall be deemed to be, and is, a Financing Document. This Agreement shall be construed in connection with and as a part of the Note Purchase Agreement and, except as expressly amended by this Agreement, all terms, conditions and covenants contained in the Current Note Purchase Agreement are hereby ratified and shall be and remain in full force and effect. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Agreement may refer to the Current Note Purchase Agreement without making specific reference to this Agreement, but nevertheless all such references shall include this Agreement, unless the context otherwise requires.


5.8.	Affirmation of Obligations under Current Note Purchase Agreement and Notes; No Novation.

Anything contained herein to the contrary notwithstanding, this Agreement is not intended to and shall not serve to effect a novation of the obligations under the Current Note Purchase Agreement. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Current Note Purchase Agreement, as amended by this Agreement, and the Notes. The Issuers hereby acknowledge and affirm all of their respective obligations under the terms of the Current Note Purchase Agreement and the Notes. The execution, delivery and effectiveness of this Agreement shall not be deemed, except as expressly provided herein, (a) to operate as a waiver of any right, power or remedy of any of the Noteholders under the Current Note Purchase Agreement or the Notes, nor constitute a waiver or amendment of any provision thereunder, or (b) to prejudice any rights which any Noteholder now has or may have in the future under or in connection with the Note Purchase Agreement or the Notes or under applicable law.

[Remainder of page intentionally left blank. Next page is signature page.]

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No. 2 to Note Purchase Agreement to be executed on its behalf by a duly authorized officer or agent thereof.

Very truly yours,



			ISSUERS:

			AARON'S, INC.


			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer


			AARON INVESTMENT COMPANY

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Vice President and Treasurer



Accepted and Agreed:

The foregoing Agreement is hereby accepted as of the date first above written.


THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President


UNITED OF OMAHA LIFE INSURANCE COMPANY

By:	Prudential Private Placement Investors, L.P.,
	as Investment Advisor

By:	Prudential Private Placement Investors, Inc.,
	as its General Partner


By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President


LIBERTY NATIONAL LIFE INSURANCE COMPANY

By:	Prudential Private Placement Investors, L.P.,
	as Investment Advisor

By:	Prudential Private Placement Investors, Inc.,
	as its General Partner


By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President



FARMERS INSURANCE EXCHANGE

By:	Prudential Private Placement Investors, L.P.,
	as Investment Advisor

By:	Prudential Private Placement Investors, Inc.,
	as its General Partner


By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President


WILLIAM PENN LIFE INSURANCE COMPANY
OF NEW YORK

By:	Prudential Private Placement Investors, L.P.,
	as Investment Advisor

By:	Prudential Private Placement Investors, Inc.,
	as its General Partner


By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President


FARMERS NEW WORLD LIFE INSURANCE COMPANY

By:	Prudential Private Placement Investors, L.P.,
	as Investment Advisor

By:	Prudential Private Placement Investors, Inc.,
	as its General Partner


By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President



ZURICH AMERICAN INSURANCE COMPANY

By:	Prudential Private Placement Investors, L.P.,
	as Investment Advisor

By:	Prudential Private Placement Investors, Inc.,
	as its General Partner


By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President


MID CENTURY INSURANCE COMPANY

By:	Prudential Private Placement Investors, L.P.,
	as Investment Advisor

By:	Prudential Private Placement Investors, Inc.,
	as its General Partner


By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President


AMERICAN INCOME LIFE INSURANCE COMPANY

By:	Prudential Private Placement Investors, L.P.,
	as Investment Advisor

By:	Prudential Private Placement Investors, Inc.,
	as its General Partner


By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President



GLOBE LIFE AND ACCIDENT INSURANCE
COMPANY

By:	Prudential Private Placement Investors, L.P.,
	as Investment Advisor

By:	Prudential Private Placement Investors, Inc.,
	as its General Partner


By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President


FAMILY HERITAGE LIFE INSURANCE
COMPANY OF AMERICA

By:	Prudential Private Placement Investors, L.P.,
	as Investment Advisor

By:	Prudential Private Placement Investors, Inc.,
	as its General Partner


By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President

EXHIBIT A

Reaffirmation of Guarantee

Dated: September 21, 2015

Reference is made to that certain Note Purchase Agreement, dated as of April 14, 2014, as amended by that certain Amendment No. 1 to Note Purchase Agreement, dated as of December 9, 2014 (as so amended, the “Current Note Purchase Agreement”), by and among Aaron’s, Inc., a Georgia corporation (together with its successors and assigns, the “Company”), and Aaron Investment Company, a Delaware corporation (together with its successors and assigns, “AIC”, and together with the Company, collectively, the “Issuers”), and each of the Persons holdings one or more of the Company’s 4.75% Series A Senior Notes due April 14, 2021 (the “Notes”) on the date hereof (collectively, the “Noteholders”). The Current Note Purchase Agreement is being amended pursuant to the terms of that certain Amendment No. 2 to Note Purchase Agreement, of even date herewith (the “Amendment Agreement”; and the Current Note Purchase Agreement, as amended by the Amendment Agreement, shall hereinafter be referred to as the “Amended NPA”). Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Amended NPA.

Each of the undersigned Subsidiaries (each a “Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors”) is a party to that certain Subsidiary Guarantee Agreement, dated as of April 14, 2014 (the “Subsidiary Guarantee Agreement”). Each of the Subsidiary Guarantors hereby (i) acknowledges receipt of a copy of the Amendment Agreement, (ii) consents to the Issuers’ execution and delivery of the Amendment Agreement, (iii) acknowledges and affirms that nothing contained in the Amendment Agreement shall modify in any respect whatsoever its obligations under the Subsidiary Guarantee Agreement and reaffirms that the Subsidiary Guarantee Agreement shall remain in full force and effect, and (iv) acknowledges and agrees that, for the avoidance of doubt, Guaranteed Obligations (as such term is defined in the Subsidiary Guarantee Agreement) include obligations in respect of the Amended NPA. Although each of the Subsidiary Guarantors has been informed of the matters set forth herein and has acknowledged and agreed to the same, each Subsidiary Guarantor understands that the Noteholders have no obligation to inform any Subsidiary Guarantor of such matters in the future or to seek any Subsidiary Guarantor’s acknowledgment or agreement to future amendments, waivers or consents, and nothing herein shall create such a duty.

[Remainder of page intentionally left blank; next page is signature page.]



			SUBSIDIARY GUARANTORS:

			AARON'S PRODUCTION COMPANY

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	President and Chief Executive Officer


			99LTO, LLC
			By Aaron's, Inc., as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief
				Financial Officer


			AARON’S LOGISTICS, LLC
			By Aaron's, Inc., as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief
				Financial Officer


			AARON’S STRATEGIC SERVICES, LLC
			By Aaron's, Inc., as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief
				Financial Officer



			AARON'S PROCUREMENT
			COMPANY, LLC

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief
				Financial Officer


			PROGRESSIVE FINANCE HOLDINGS,
			LLC

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President



			Prog Finance Arizona, LLC
			Prog Finance California, LLC
			Prog Finance Florida, LLC
			Prog Finance Georgia, LLC
			Prog Finance Illinois, LLC
			Prog Finance Michigan, LLC
			Prog Finance New York, LLC
			Prog Finance Ohio, LLC
			Prog Finance Texas, LLC
			Prog Finance Mid-West, LLC
			Prog Finance North-East, LLC
			Prog Finance South-East, LLC
			Prog Finance West, LLC
			NPRTO Arizona, LLC
			NPRTO California, LLC
			NPRTO Florida, LLC
			NPRTO Georgia, LLC
			NPRTO Illinois, LLC
			NPRTO Michigan, LLC
			NPRTO New York, LLC
			NPRTO Ohio, LLC
			NPRTO Texas, LLC
			NPRTO Mid-West, LLC
			NPRTO North-East, LLC
			NPRTO South-East, LLC
			NPRTO West, LLC,

			By:	PROG LEASING, LLC, Sole
				Manager

			By:	PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager


			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President



			PANGO LLC

			By:	PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President


			PROG LEASING, LLC

			By:	PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President

Exhibit 10.4

AMENDMENT NO. 2 TO NOTE PURCHASE AGREEMENT

RECITALS:

A. The Issuers and Noteholders are parties to the Current Note Purchase Agreement, pursuant to which the Issuers issued and sold an aggregate principal amount of $75,000,000 of their 4.75% Series B Senior Notes due April 14, 2021 (the “Notes”) to the Noteholders;

B. The Noteholders are the holders of all outstanding Notes; and

AGREEMENT:

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuers and the Noteholders agree as follows:


1.	AMENDMENTS TO CURRENT NOTE PURCHASE AGREEMENT.

Subject to the satisfaction of the conditions set forth in Section 3 hereof, the Current Note Purchase Agreement is hereby amended by this Agreement as follows:


1.1.	Offer to Prepay upon Sale of Assets.

Paragraph 4D(a) of the Current Note Purchase Agreement is hereby amended and restated in its entirety to read as follows:


1.2.	Covenant Relating to Domestic Subsidiaries.

Paragraph 5H of the Current Note Purchase Agreement is hereby amended and restated in its entirety to read as follows:

Guarantee or otherwise become liable (including as a borrower or co-borrower) in respect of the obligations under the SunTrust Agreement, the SunTrust Loan Facility Agreement, the Prudential NPA, the Existing Note Purchase Agreement or any other agreement providing for the incurrence of Senior Debt by the Company or any Subsidiary, unless at the time of entering into such Guarantee, such Domestic Subsidiary or Domestic Controlled Affiliate (a “Subsidiary Guarantor”) contemporaneously therewith executes and delivers, to each of the holders of the Notes (i) a duly authorized joinder agreement to the Subsidiary Guarantee Agreement in the form of Annex 1 thereto (a “Joinder Agreement”), (ii) a duly authorized joinder to the Intercreditor Agreement in substantially the form of Schedule 1 thereto and (iii) a certificate of such Domestic Subsidiary’s or Domestic Controlled Affiliate’s secretary or another responsible officer certifying attached copies of such Domestic Subsidiary’s or Domestic Controlled Affiliate’s constitutive documents and relevant resolutions, and an opinion of counsel to such Person regarding the authorization, execution and delivery of the joinder agreements in clauses (i) and (ii) hereof and their enforceability, which opinion shall be satisfactory in all respects to the Required Holders.”


1.3.	Indebtedness.


1.4.	Liens.


1.5.	Sale of Assets.

“(e) sales of receivables and other assets by the Dent-A-Med Entities to the extent permitted by the Dent-A-Med Credit Facility and”


1.6.	Restricted Payments.


1.7.	Restricted Investments.

“(k) Investments by any Dent-A-Med Entity in any other Dent-A-Med Entity; and”


1.8.	Restrictive Agreements.


1.9.	Amended and Restated Defined Terms.

The following definitions set forth in paragraph 10B of the Current Note Purchase Agreement are hereby amended and restated in their entirety to read as follows:

$15,000,000 in the aggregate, (vi) one-time fees, costs and expenses (including without limitation legal and other professional fees) in connection with (x) the retirement and severance of Ronald W. Allen and David Buck and (y) the bid by Vintage Capital Management to acquire the Company, and other proxy contests and shareholder proposals, including costs, expenses and fees relating to responding to, defending and settling such matters, in each case to the extent such fees, costs and expenses were incurred prior to the First Amendment Effective Date, and (vii) transaction closing costs, fees and expenses actually incurred during such period in connection with the negotiation and closing of the First Amendment to NPA, and the related amendments to the SunTrust Loan Facility Agreement, the SunTrust Agreement, the Prudential NPA, the Existing Note Purchase Agreement, and the related transaction documents, in each case paid during such period to Persons that are not Affiliates of the Company or any Subsidiary.


1.10.	New Defined Terms.

The following defined terms are hereby added to paragraph 10B of the Current Note Purchase Agreement in their proper alphabetical order:

“Dent-A-Med” means Dent-A-Med Inc., an Oklahoma corporation.

“Second Amendment Effective Date” means September 21, 2015.


2.	WARRANTIES AND REPRESENTATIONS.

To induce the Noteholders to enter into this Agreement, each of the Issuers represents and warrants to each of the Noteholders that as of the Second Amendment Effective Date:


2.1.	Corporate and Other Organization and Authority.

(b) Each of the Issuers has the requisite organizational power and authority to execute and deliver this Agreement and to perform its obligations hereunder and under the Note Purchase Agreement.


2.2.	Authorization, etc.

(a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and

(b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).


2.3.	No Conflicts, etc.

(a) any charter document, constitutive document, agreement with shareholders or members, bylaws or any other organizational or governing agreement of such Issuer;

(b) any agreement, instrument or conveyance by which such Issuer or any of its Subsidiaries or any of their respective properties may be bound or affected; or


2.4.	Governmental Consent.


2.5.	No Defaults.

2.6. Representations in Note Purchase Agreement.


3.	CONDITIONS TO EFFECTIVENESS OF AMENDMENTS.

(a) the Noteholders shall have received a fully executed copy of this Agreement executed by the Issuers and the Noteholders;

(b) the Noteholders shall have received a fully executed copy of the Reaffirmation of Guarantee attached hereto as Exhibit A executed by the Subsidiary Guarantors;

(d) the Noteholders shall have received fully executed copies of the following:

(i) that certain Amendment No. 2 to Note Purchase Agreement, dated as of the Second Amendment Effective Date, by and among, inter alios, the Company, AIC, and the Prudential Parties,

(ii) that certain Amendment No. 5 to Note Purchase Agreement, dated as of the Second Amendment Effective Date, by and among, inter alios, the Company, AIC and the Existing Noteholders,

(v) the Dent-A-Med Credit Agreement,

(e) the Company shall have paid all reasonable fees, charges and disbursements of counsel to the Noteholders incurred in connection with this Agreement and the transactions contemplated hereby.


4.	POST-CLOSING COVENANT.


5.	MISCELLANEOUS.


5.1.	Governing Law.


5.2.	Duplicate Originals; Electronic Signature.


5.3.	Waiver and Amendments.


5.4.	Costs and Expenses.


5.5.	Successors and Assigns.


5.6.	Survival.


5.7.	Part of Current Note Purchase Agreement; Future References, etc.


5.8.	Affirmation of Obligations under Current Note Purchase Agreement and Notes; No Novation.

[Remainder of page intentionally left blank. Next page is signature page.]

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No. 2 to Note Purchase Agreement to be executed on its behalf by a duly authorized officer or agent thereof.

Very truly yours,



			ISSUERS:

			AARON'S, INC.


			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer


			AARON INVESTMENT COMPANY

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Vice President and Treasurer



Accepted and Agreed:

The foregoing Agreement is hereby accepted as of the date first above written.


METROPOLITAN LIFE INSURANCE COMPANY

METLIFE INSURANCE COMPANY USA
by Metropolitan Life Insurance Company, its Investment Manager

NEW ENGLAND LIFE INSURANCE COMPANY
by Metropolitan Life Insurance Company, its Investment Manager

GENERAL AMERICAN LIFE INSURANCE COMPANY
by Metropolitan Life Insurance Company, its Investment Manager


By:	/s/ John A. Wills
Name:	John A. Wills
Title:	Managing Director

EXHIBIT A

Reaffirmation of Guarantee

Dated: September 21, 2015

Reference is made to that certain Note Purchase Agreement, dated as of April 14, 2014, as amended by that certain Amendment No. 1 to Note Purchase Agreement, dated as of December 9, 2014 (as so amended, the “Current Note Purchase Agreement”), by and among Aaron’s, Inc., a Georgia corporation (together with its successors and assigns, the “Company”), and Aaron Investment Company, a Delaware corporation (together with its successors and assigns, “AIC”, and together with the Company, collectively, the “Issuers”), and each of the Persons holdings one or more of the Company’s 4.75% Series B Senior Notes due April 14, 2021 (the “Notes”) on the date hereof (collectively, the “Noteholders”). The Current Note Purchase Agreement is being amended pursuant to the terms of that certain Amendment No. 2 to Note Purchase Agreement, of even date herewith (the “Amendment Agreement”; and the Current Note Purchase Agreement, as amended by the Amendment Agreement, shall hereinafter be referred to as the “Amended NPA”). Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Amended NPA.

[Remainder of page intentionally left blank; next page is signature page.]



			SUBSIDIARY GUARANTORS:

			AARON'S PRODUCTION COMPANY

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	President and Chief Executive Officer


			99LTO, LLC
			By Aaron's, Inc., as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer


			AARON’S LOGISTICS, LLC
			By Aaron's, Inc., as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer


			AARON’S STRATEGIC SERVICES, LLC
			By Aaron's, Inc., as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer



			AARON'S PROCUREMENT
			COMPANY, LLC
			By Aaron's, Inc. as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer


			PROGRESSIVE FINANCE HOLDINGS,
			LLC

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President



			Prog Finance Arizona, LLC
			Prog Finance California, LLC
			Prog Finance Florida, LLC
			Prog Finance Georgia, LLC
			Prog Finance Illinois, LLC
			Prog Finance Michigan, LLC
			Prog Finance New York, LLC
			Prog Finance Ohio, LLC
			Prog Finance Texas, LLC
			Prog Finance Mid-West, LLC
			Prog Finance North-East, LLC
			Prog Finance South-East, LLC
			Prog Finance West, LLC
			NPRTO Arizona, LLC
			NPRTO California, LLC
			NPRTO Florida, LLC
			NPRTO Georgia, LLC
			NPRTO Illinois, LLC
			NPRTO Michigan, LLC
			NPRTO New York, LLC
			NPRTO Ohio, LLC
			NPRTO Texas, LLC
			NPRTO Mid-West, LLC
			NPRTO North-East, LLC
			NPRTO South-East, LLC
			NPRTO West, LLC,

			By:	PROG LEASING, LLC, Sole
				Manager

			By:	PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager


			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President



			PANGO LLC

			By:	PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President


			PROG LEASING, LLC

			By:	PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President

Exhibit 10.5

AMENDMENT NO. 5 TO NOTE PURCHASE AGREEMENT

This AMENDMENT NO. 5 TO NOTE PURCHASE AGREEMENT (this “Agreement”), is made as of September 21, 2015, by and among (a) AARON’S, INC., a Georgia corporation (together with its successors and assigns, the “Company”), AARON INVESTMENT COMPANY, a Delaware corporation (together with its successors and assigns, “AIC” and together with the Company, collectively, the “Issuers”), and certain Subsidiaries of the Company signatory hereto (together with the Issuers, collectively, the “Obligors”), and (b) each of the Persons holding one or more Notes (as defined below) on the Fifth Amendment Effective Date (as defined below) (collectively, the “Noteholders”), with respect to that certain Note Purchase Agreement, dated as of July 5, 2011 (the “Original Note Purchase Agreement”), as amended by that certain Amendment No. 1 to Note Purchase Agreement, dated as of December 19, 2012, that certain Amendment No. 2 to Note Purchase Agreement, dated as of October 8, 2013, that certain Amendment No. 3 to Note Purchase Agreement, dated as of April 14, 2014, and that certain Amendment No. 4 to Note Purchase Agreement, dated as of December 9, 2014 (as so amended and in effect immediately prior to giving effect to this Agreement, the “Current Note Purchase Agreement” and, as amended pursuant to this Agreement and as may be further amended, restated or otherwise modified from time to time, the “Note Purchase Agreement”), by and among the Obligors and each of the Noteholders. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Current Note Purchase Agreement.

RECITALS:

A. The Obligors and Noteholders are parties to the Current Note Purchase Agreement, pursuant to which the Obligors issued and sold an aggregate principal amount of $125,000,000 of their Amended and Restated Senior Notes due April 27, 2018 (the “Notes”) to the Noteholders;

B. The Noteholders are the holders of all outstanding Notes; and

C. The Obligors have requested, and the Noteholders have agreed to, certain amendments and modifications to the provisions of the Current Note Purchase Agreement, in connection with the proposed acquisition by the Company or a Domestic Subsidiary thereof of the Dent-A-Med Entities (as defined below) on or after the Fifth Amendment Effective Date (the “Dent-A-Med Acquisition”), subject to the terms and conditions set forth herein.

AGREEMENT:

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Obligors and the Noteholders agree as follows:


1.	AMENDMENTS TO CURRENT NOTE PURCHASE AGREEMENT.

Subject to the satisfaction of the conditions set forth in Section 3 hereof, the Current Note Purchase Agreement is hereby amended by this Agreement as follows:


1.1.	Offer to Prepay upon Sale of Assets.

Paragraph 4D(a) of the Current Note Purchase Agreement is hereby amended and restated in its entirety to read as follows:

“(a) Notice and Offer. In the event the Company or any of its Domestic Subsidiaries receives (x) Net Cash Proceeds from any Asset Disposition (other than from a sale or disposal of the types described in clauses (a) and (b) of paragraph 6E) or (y) Net Cash Proceeds from any casualty insurance policies or eminent domain, condemnation or similar proceeding (a “Casualty Event”) that, with respect to clauses (x) and (y), results in Net Cash Proceeds in excess of $5,000,000 for any such single Asset Disposition (or series of related Asset Disposition) or for any single Casualty Event or $20,000,000 for all such Asset Dispositions or Casualty Events from the date hereof through the maturity date of the Notes (each, a “Debt Prepayment Transfer”), the Company will, within ten (10) days of the occurrence thereof, give written notice of such Debt Prepayment Transfer to each holder of Notes. Subject to any required pro rata sharing of such Net Cash Proceeds with the holders of other Senior Debt in accordance with the terms of the Intercreditor Agreement and subject to the right of reinvestment set forth in the proviso below, such written notice shall (i) contain, and such written notice shall constitute, an irrevocable offer (the “Transfer Prepayment Offer”) to prepay, at the election of each holder, a portion of the Notes held by such holder equal to such holder’s Ratable Portion of the Net Cash Proceeds in respect of such Debt Prepayment Transfer, together with interest on the amount to be so prepaid accrued to the Transfer Prepayment Date and (ii) shall specify a date (the “Transfer Prepayment Date”) that is not less than thirty (30) days and not more than sixty (60) days after the date of such notice on which such prepayment is to be made. If the Transfer Prepayment Date shall not be specified in such notice, the Transfer Prepayment Date shall be the Business Day that falls on or next following the fortieth (40th) day after the date of such notice; provided that the Obligors shall not be required to make a Transfer Prepayment Offer with respect to Net Cash Proceeds from any Debt Prepayment Transfer to the extent such Net Cash Proceeds (x) to the extent required to be applied to repay or provide cash collateral for Indebtedness under the Dent-A-Med Credit Agreement (regardless of permanent commitment reductions thereunder), subject to any exceptions or reinvestment rights provided for in the Dent-A-Med Credit Agreement as in effect on the Fifth Amendment Effective Date, arise from (1) sales of assets by the Dent-A-Med Entities or (2) any casualty insurance policies or eminent domain, condemnation or similar proceedings if the beneficiary under any such policy or the party to any such proceedings is any Dent-A-Med Entity, or (y) are reinvested in assets then used or usable in the business of the Obligors and their Subsidiaries within 180 days following receipt thereof or committed to be reinvested pursuant to a binding contract prior to the expiration of such 180-day period and are actually reinvested within 360 days following receipt thereof.”


1.2.	Covenant Relating to Domestic Subsidiaries.

Paragraph 5H of the Current Note Purchase Agreement is hereby amended and restated in its entirety to read as follows:

“5H. Covenant Relating to Domestic Subsidiaries. The Company shall not permit any Domestic Subsidiary (other than the Dent-A-Med Entities in the case of the Dent-A-Med Credit Agreement or Progressive Finance solely in respect of its obligations under the DAMI Pledge Agreement) or any other Domestic Controlled Affiliate to enter into any Guarantee or otherwise become liable (including as a borrower or co-borrower) in respect of the obligations under the SunTrust Agreement, the SunTrust Loan Facility Agreement, the MetLife NPA, the 2014 Prudential NPA or any other agreement providing for the incurrence of Senior Debt by the Company or any Subsidiary, unless at the time of entering into such Guarantee, such Domestic Subsidiary or Domestic Controlled Affiliate (an “Additional Obligor”) contemporaneously therewith executes and delivers, to each of the holders of the Notes (i) a duly authorized Joinder Agreement substantially in the form of Exhibit D hereto pursuant to which such Additional Obligor shall jointly and severally assume all obligations under this Agreement and the Notes, (ii) a duly authorized joinder to the Intercreditor Agreement in substantially the form of Schedule 1 thereto and (iii) a certificate of such Domestic Subsidiary’s or Domestic Controlled Affiliate’s secretary or another responsible officer certifying attached copies of such Domestic Subsidiary’s or Domestic Controlled Affiliate’s constitutive documents and relevant resolutions, and an opinion of counsel to such Person regarding the authorization, execution and delivery of the joinder agreements in clauses (i) and (ii) hereof and their enforceability, which opinion shall be satisfactory in all respects to the Required Holders. Upon execution and delivery of a Joinder Agreement by an Additional Obligor, this Agreement and the Notes shall be deemed to be amended so that such Additional Obligor shall be an Obligor hereunder and under the Notes without any further action on the part of the Additional Obligor, the Obligors, or any other Person being necessary or required (notwithstanding paragraph 11C).”


1.3.	Indebtedness.

“(l) secured Indebtedness in an aggregate principal amount not to exceed (including any such Indebtedness resulting from any exercise of any incremental facility provisions) $110,000,000 under the Dent-A-Med Credit Agreement, as may be amended and otherwise modified, so long as the terms of such facility are not amended to be more restrictive than those in effect on the Fifth Amendment Effective Date or in a manner that would be materially adverse to the holders of the Notes and all Indebtedness incurred thereunder remains non-recourse to the Company or any of its Subsidiaries (other than the Dent-A-Med Entities); and”


1.4.	Liens.


1.5.	Sale of Assets.

“(e) sales of receivables and other assets by the Dent-A-Med Entities to the extent permitted by the Dent-A-Med Credit Facility and”


1.6.	Restricted Payments.

“(iv) repayment in full by the Company or the Dent-A-Med Entities of any existing subordinated Indebtedness of the Dent-A-Med Entities on the Fifth Amendment Effective Date in connection with the Company’s acquisition of the Dent-A-Med Entities and”


1.7.	Restricted Investments.

“(k) Investments by any Dent-A-Med Entity in any other Dent-A-Med Entity; and”


1.8.	Restrictive Agreements.


1.9.	Amended and Restated Defined Terms.

The following definitions set forth in paragraph 10B of the Current Note Purchase Agreement are hereby amended and restated in their entirety to read as follows:

“Consolidated EBITDA” shall mean, for the Company and its Subsidiaries (other than the Dent-A-Med Entities) 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, (iv) all other non-cash charges, (v) closing costs, fees and expenses incurred during such period in connection with the 2014 Acquisition and the transactions contemplated by the Financing Documents, the MetLife NPA, the SunTrust Agreement, the 2014 Prudential NPA and the SunTrust Loan Facility Agreement, in each case paid during such period to Persons that are not Affiliates of the Company or any Subsidiary, not to exceed $15,000,000 in the aggregate, (vi) one-time fees, costs and expenses (including without limitation legal and other professional fees) in connection with (x) the retirement and severance of Ronald W. Allen and David Buck and (y) the bid by Vintage Capital Management to acquire the Company, and other proxy contests and shareholder proposals, including costs, expenses and fees relating to responding to, defending and settling such matters, in each case to the extent such fees, costs and expenses were incurred prior to the First Amendment Effective Date, and (vii) transaction closing costs, fees and expenses actually incurred during such period in connection with the negotiation and closing of the First Amendment to NPA, and the related amendments to the SunTrust Loan Facility Agreement, the SunTrust Agreement, the MetLife NPA, the 2014 Prudential NPA, and the related transaction documents, in each case paid during such period to Persons that are not Affiliates of the Company or any Subsidiary.

Subsidiaries (other than the Dent-A-Med Entities) in the unremitted earnings of any Person that is not the Company or a Subsidiary, and (iv) any income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with the Company or a Subsidiary (other than the Dent-A-Med Entities).

“Consolidated Total Debt” shall mean, at any time, all then currently outstanding obligations, liabilities and indebtedness of the Obligors (other than the Dent-A-Med Entities) on a consolidated basis of the types described in the definition of Indebtedness.

“Permitted Acquisitions” shall mean the 2014 Acquisition, the Dent-A-Med Acquisition (as such term is defined in the Second Amendment to NPA) and any other Acquisition (whether foreign or domestic) so long as, in each case with respect to the Dent-A-Med Acquisition or any such other Acquisition, (a) immediately before and after giving effect to such Acquisition, no Default or Event of Default is in existence, (b) such Acquisition has been approved by the board of directors of the Person being acquired prior to any public announcement thereof, (c) to the extent such Acquisition is of a Person or Persons that are not organized in the United States and/or of all or substantially all of the assets of a Person located outside the United States and the aggregate EBITDA attributable to all Foreign Subsidiaries for the most recently ended twelve month period (after giving pro forma effect to such Acquisition) exceeds twenty percent (20%) of Consolidated EBITDA for the most recently ended twelve month period, the Company complies with paragraph 5N hereof, and (d) immediately after giving effect to such Acquisition, the Company and its Subsidiaries will not be engaged in any business other than businesses of the type conducted by the Company and its Subsidiaries on the Date of Closing and businesses reasonably related thereto. As used herein, Acquisitions will be considered related Acquisitions if the sellers under such Acquisitions are the same Person or any Affiliate thereof.


1.10.	New Defined Terms.

The following defined terms are hereby added to paragraph 10B of the Current Note Purchase Agreement in their proper alphabetical order:

“Dent-A-Med” means Dent-A-Med Inc., an Oklahoma corporation.

“Fifth Amendment Effective Date” means September 21, 2015.

“Fifth Amendment to NPA” means that certain Amendment No. 5 to Note Purchase Agreement, dated as of the Fifth Amendment Effective Date, by and among the Issuers and each of the holders of the Notes party thereto.


2.	WARRANTIES AND REPRESENTATIONS.

To induce the Noteholders to enter into this Agreement, each of the Obligors represents and warrants to each of the Noteholders that as of the Fifth Amendment Effective Date:


2.1.	Corporate and Other Organization and Authority.

(a) Each Obligor is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or limited liability company and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and

(b) Each of the Obligors has the requisite organizational power and authority to execute and deliver this Agreement and to perform its obligations hereunder and under the Note Purchase Agreement.


2.2.	Authorization, etc.

This Agreement has been duly authorized by all necessary corporate or limited liability company action on the part of the Obligors, as applicable. Each of this Agreement and the Note Purchase Agreement constitutes a legal, valid and binding obligation of each Obligor, enforceable, in each case, against such Obligor in accordance with its terms, except as such enforceability may be limited by:

(a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and

(b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).


2.3.	No Conflicts, etc.

The execution and delivery by each Obligor of this Agreement and the performance by such Obligor of its obligations under each of this Agreement and the Note Purchase Agreement do not conflict with, result in any breach in any of the provisions of, constitute a default under, violate or result in the creation of any Lien upon any property of such Obligor under the provisions of:

(a) any charter document, constitutive document, agreement with shareholders or members, bylaws or any other organizational or governing agreement of such Obligor;

(b) any agreement, instrument or conveyance by which such Obligor or any of its Subsidiaries or any of their respective properties may be bound or affected; or

(c) any statute, rule or regulation or any order, judgment or award of any court, tribunal or arbitrator by which such Obligor or any of its Subsidiaries or any of their respective properties may be bound or affected.


2.4.	Governmental Consent.

The execution and delivery by the Obligors of this Agreement and the performance by the Obligors of their respective obligations hereunder and under the Note Purchase Agreement do not require any consents, approvals or authorizations of, or filings, registrations or qualifications with, any Governmental Authority on the part of any Obligor.


2.5.	No Defaults.

2.6. Representations in Note Purchase Agreement.

After giving effect to this Agreement, the representations and warranties contained in the Note Purchase Agreement and the Joinder Agreements executed by those Obligors not signatory to the Original Note Purchase Agreement are true and correct in all material respects as of the Fifth Amendment Effective Date.


3.	CONDITIONS TO EFFECTIVENESS OF AMENDMENTS.

The amendment of the Current Note Purchase Agreement as set forth in this Agreement shall become effective as of the date first written above (the “Fifth Amendment Effective Date”), provided that each of the following conditions shall have been satisfied:

(a) the Noteholders shall have received a fully executed copy of this Agreement executed by the Obligors and the Noteholders;

(b) the representations and warranties set forth in Section 2 of this Agreement shall be true and correct on such date;

(i) that certain Amendment No. 2 to Note Purchase Agreement, dated as of the Fifth Amendment Effective Date, by and among, inter alios, the Company, AIC, and the MetLife Parties,

(ii) that certain Amendment No. 2 to Note Purchase Agreement, dated as of the Fifth Amendment Effective Date, by and among, inter alios, the Company, AIC, and the Prudential Parties,

(iii) that certain Second Amendment to Credit Agreement, dated as of the Fifth Amendment Effective Date (the “Credit Agreement Amendment”), by and among, inter alios, the Company, SunTrust Bank, acting as Administrative Agent (the “Administrative Agent”) and in certain other capacities, and each of the lenders party thereto,

(iv) that certain Second Amendment to Loan Facility Agreement, dated as of the Fifth Amendment Effective Date (the “Loan Facility Amendment”), by and among, inter alios, the Company, SunTrust and the other financial institutions party thereto, and

(v) the Dent-A-Med Credit Agreement,

(d) the Company shall have paid all reasonable fees, charges and disbursements of counsel to the Noteholders incurred in connection with this Agreement and the transactions contemplated hereby.


4.	POST-CLOSING COVENANT.

The Company shall deliver to the Noteholders, promptly upon execution thereof, a fully executed copy of the DAMI Pledge Agreement, which agreement (i) shall be in substantially the same form as the most recent draft of the DAMI Pledge Agreement (the “Draft Pledge Agreement”) provided to the Noteholders on or prior to the Fifth Amendment Effective Date and (ii) shall not contain any changes from the Draft Pledge Agreement that are adverse to Progressive Finance or the Noteholders.


5.	MISCELLANEOUS.


5.1.	Governing Law.

THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCLUDING CHOICE-

OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.


5.2.	Duplicate Originals; Electronic Signature.


5.3.	Waiver and Amendments.


5.4.	Costs and Expenses.

Whether or not the amendments contemplated by this Agreement become effective, each of the Obligors confirms its obligation under paragraph 11B of the Note Purchase Agreement and agrees that, on the Fifth Amendment Effective Date (or if an invoice is delivered subsequent to the Fifth Amendment Effective Date or if such amendments do not become effective, promptly after receiving any statement or invoice therefor), it will pay all costs and expenses of the Noteholders relating to this Agreement, including, but not limited to, the statement for reasonable fees and disbursements of the Noteholders’ special counsel presented to the Company on the Fifth Amendment Effective Date. The Obligors will also promptly pay, upon receipt thereof, each additional statement for reasonable fees and disbursements of the Noteholders’ special counsel rendered after the Fifth Amendment Effective Date in connection with this Agreement.


5.5.	Successors and Assigns.


5.6.	Survival.

All warranties, representations, certifications and covenants made by the Obligors in this Agreement shall be considered to have been relied upon by the Noteholders and shall survive the execution and delivery of this Agreement, regardless of any investigation made by or on behalf of the Noteholders.


5.7.	Part of Current Note Purchase Agreement; Future References, etc.


5.8.	Affirmation of Obligations under Current Note Purchase Agreement and Notes; No Novation.

Anything contained herein to the contrary notwithstanding, this Agreement is not intended to and shall not serve to effect a novation of the obligations under the Current Note Purchase Agreement. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Current Note Purchase Agreement, as amended by this Agreement, and the Notes. The Obligors hereby acknowledge and affirm all of their respective obligations under the terms of the Current Note Purchase Agreement and the Notes. The execution, delivery and effectiveness of this Agreement shall not be deemed, except as expressly provided herein, (a) to operate as a waiver of any right, power or remedy of any of the Noteholders under the Current Note Purchase Agreement or the Notes, nor constitute a waiver or amendment of any provision thereunder, or (b) to prejudice any rights which any Noteholder now has or may have in the future under or in connection with the Note Purchase Agreement or the Notes or under applicable law.

[Remainder of page intentionally left blank. Next page is signature page.]

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No. 5 to Note Purchase Agreement to be executed on its behalf by a duly authorized officer or agent thereof.

Very truly yours,



			AARON’S, INC.

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer


			AARON INVESTMENT COMPANY

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Vice President and Treasurer


			AARON’S PRODUCTION COMPANY

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	President and Chief Executive Officer


			99LTO, LLC
			By Aaron's, Inc., as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer



			AARON’S LOGISTICS, LLC
			By Aaron's, Inc., as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer



			AARON’S STRATEGIC SERVICES, LLC
			By Aaron's, Inc., as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer


			AARON'S PROCUREMENT COMPANY, LLC
			By Aaron's, Inc., as sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President and Chief Financial Officer


			PROGRESSIVE FINANCE HOLDINGS, LLC

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President



			Prog Finance Arizona, LLC
			Prog Finance California, LLC
			Prog Finance Florida, LLC
			Prog Finance Georgia, LLC
			Prog Finance Illinois, LLC
			Prog Finance Michigan, LLC
			Prog Finance New York, LLC
			Prog Finance Ohio, LLC
			Prog Finance Texas, LLC
			Prog Finance Mid-West, LLC
			Prog Finance North-East, LLC
			Prog Finance South-East, LLC
			Prog Finance West, LLC
			NPRTO Arizona, LLC
			NPRTO California, LLC
			NPRTO Florida, LLC
			NPRTO Georgia, LLC
			NPRTO Illinois, LLC
			NPRTO Michigan, LLC
			NPRTO New York, LLC
			NPRTO Ohio, LLC
			NPRTO Texas, LLC
			NPRTO Mid-West, LLC
			NPRTO North-East, LLC
			NPRTO South-East, LLC
			NPRTO West, LLC,

			By:	PROG LEASING, LLC, Sole
				Manager

			By:	PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager


			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President



			PANGO LLC

			By:	PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President


			PROG LEASING, LLC

			By:	PROGRESSIVE FINANCE
				HOLDINGS, LLC, Sole Manager

			By:	/s/ Gilbert L. Danielson
			Name:	Gilbert L. Danielson
			Title:	Executive Vice President



Accepted and Agreed:

The foregoing Agreement is hereby accepted as of the date first above written.


THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President


PRUDENTIAL RETIRMENT INSURANCE AND ANNUITY COMPANY

By:	Prudential Investment Management, Inc.,
	as Investment Manager

By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President


THE PRUDENTIAL LIFE INSURANCE COMPANY, LTD

By:	Prudential Investment Management (Japan), Inc.,
	as Investment Manager

By:	Prudential Investment Management, Inc.,
	as Sub-Adviser

By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President



ZURICH AMERICAN INSURANCE COMPANY

By:	Prudential Private Placement Investors,
	L.P. (as Investment Advisor)

By:	Prudential Private Placement Investors, Inc.
	(as its General Partner)

By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President


THE GIBRALTAR LIFE INSURANCE CO., LTD.

By:	Prudential Investment Management Japan
	Co., Ltd., as Investment Manager

By:	Prudential Investment Management, Inc.,
	as Sub-Adviser

By:	/s/ Ashley Dexter
Name:	Ashley Dexter
Title:	Vice President

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-



	I, John W. Robinson III, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Aaron's, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date:	November 9, 2015	/s/ John W. Robinson III
		John W. Robinson III
		Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)



	I, Gilbert L. Danielson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Aaron's, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date:	November 9, 2015	/s/ Gilbert L. Danielson
		Gilbert L. Danielson
		Executive Vice President,
		Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, John W. Robinson III Chief Executive Officer of Aaron's, Inc. and subsidiaries (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 that:

The Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:	November 9, 2015	/s/ John W. Robinson III
		John W. Robinson III
		Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Gilbert L. Danielson, Chief Financial Officer of Aaron's, Inc. and subsidiaries (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 that:

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:	November 9, 2015	/s/ Gilbert L. Danielson
		Gilbert L. Danielson
		Executive Vice President,
		Chief Financial Officer

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